<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): OCTOBER 3, 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 2. Property Acquisitions
- ------- ---------------------
On October 3, 1997, Charles E. Smith Residential Realty L.P. ("the
Operating Partnership"), of which Charles E. Smith Residential Realty, Inc.
("the Company") is the sole general partner, acquired a 714-unit, luxury high-
rise apartment property located in Ballston, Virginia ("Lincoln Towers") for a
total cost of approximately $88.7 million in cash. Lincoln Towers was built in
1992 and consists of twin 22 story towers above a three level parking garage.
The acquisition was funded in part by the sale of 1.45 million shares of common
stock and 1.22 million shares of preferred stock to the Prudential Insurance
Company of America ("Prudential") for approximately $76 million.
On October 8, 1997, the Operating Partnership acquired a 306-unit
luxury high-rise property in downtown Chicago, Illinois ("One East Delaware")
for approximately $42.5 million in cash. Built in 1989, the property consists of
a 36 story tower over an enclosed parking garage. The Company funded the
acquisition with proceeds from its line of credit.
On October 10, 1997, the Operating Partnership acquired a 188-unit,
luxury high-rise property in Boston, Massachusetts ("2000 Commonwealth") for a
total cost of approximately $27.6 million consisting of 464,667 limited
partnership units of the Operating Partnership valued at $14.1 million, assumed
debt of $13.3 million, and acquisition related costs of approximately $0.2
million. Built in 1986, the property is a sixteen story, brick structure over
below grade parking .
On October 8, 1997, the Operating Partnership acquired a 564-unit,
luxury high-rise property under construction in Arlington, Virginia for $17.5
million consisting of $3.6 million cash and approximately 450,000 limited
partnership units of the Operating Partnership valued at $13.9 million. The
total expected project cost is approximately $65 million. The balance of
construction costs is expected to be funded through a construction loan.
Management expects to initially deliver apartment units in October 1998.
Item 5. Other Events
- ------- -------------
On October 3, 1997, the Company issued 1,450,000 shares of common
stock, $0.01 par value per share (the "Common Stock") and 1,216,666 shares of
Series B Cumulative Convertible Redeemable Preferred Stock, par value $0.01 per
share, (the "Series B Preferred Shares") to The Prudential Insurance Company of
America ("Prudential") and two of its affiliates, Strategic Value Investors, LLC
("SVI-US") and Strategic Value Investors International, LLC
2
<PAGE>
("SVI-International;" Prudential, SVI-US and SVI-International, collectively,
the "Investors"), for a total of $75,999,981 in gross proceeds to the Company,
pursuant to a Purchase Agreement dated as of September 17, 1997 (the
"Prudential Purchase Agreement").
The Company contributed net proceeds of $75,999,981 from the
Prudential offering to the Operating Partnership in exchange for 1,450,000
common units and 1,216,666 Series B Cumulative Convertible Redeemable Preferred
Units ("Series B Preferred Units"). The Operating Partnership used the resulting
net proceeds from the issuance of Operating Partnership Units to acquire a 714-
unit, luxury highrise apartment ("Lincoln Towers").
Certain material terms of the Purchase Agreement and the Series B
Preferred Units are more fully described below
THE SERIES B PREFERRED UNITS
The following summary of certain material terms of the Series B
Preferred Units does not purport to be complete and is qualified in its entirety
by reference to the Tenth Amendment to First Amended and Restated Agreement of
Limited Partnership of Charles E. Smith Residential Realty L.P. (the "Tenth
Amendment") classifying and designating the Series B Preferred Units and fixing
the distribution and other preferences and rights of such series.
Distributions
-------------
The Series B Preferred Units will be payable at the greater of (i)
$2.02 per unit per annum or (ii) the ordinary cash distributions (determined on
each Distribution Date) paid on the number of Class A Units, or portion thereof,
into which a Series B Preferred Unit is convertible. Distributions will be
payable quarterly, when, as and if declared by the General Partner, in the
arrears on Distribution Dates, beginning on the Distribution Date with respect
to the quarter ended September 30, 1997, for which a full Distribution will be
paid on the Series B Preferred Units, notwithstanding the fact that they were
not issued until October 3, 1997. So long as any Series B Preferred Units are
outstanding, no distributions, except as described below, will be declared or
paid on any class or series of Parity Units, unless full cumulative
Distributions have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Series B Preferred Units.
3
<PAGE>
Liquidation Rights
------------------
The holders of the Series B Preferred Units will be entitled to receive a
liquidation preference equal to the sum of $28.50 per unit, plus an amount
equal to any distributions (whether or not earned or declared) accumulated,
accrued and unpaid thereon to the date of final distribution to such holders in
the event of any liquidation, dissolution or winding up of the Operating
Partnership, subject to the proper rights of any series or class of units
ranking senior to the Series B Preferred Units. Until the holders of Series B
Preferred Units have been paid their Liquidation Preference in full, no payment
will be made to holders of any other series or class that ranks junior to the
Series B Preferred Units as to liquidation rights. After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of Series B Preferred Units will have no right or claim to any of the remaining
assets of the Operating Partnership.
Redemption
----------
The General Partner may redeem the Series B Preferred Units, at its option, in
whole or in part, by issuing for each Series B Preferred Unit to be redeemed the
number of Common Units as equals $28.50 divided by the Conversion Price in
effect as of the opening of business on the call date (which Conversion Price
initially is $28.50, and is subject to adjustment as described below), provided
that the Operating Partnership may not issue to any holder a number of Common
Units that would result in such holder exceeding the Common Unit Ownership Limit
(as defined below) then applicable to such holder.
Conversion
----------
A holder of Series B Preferred Units shall have the right, on or after January
1, 1998, to convert such units into the number of Common Units obtained by
multiplying the number of Series B Preferred Units to be converted by $28.50 and
dividing such product by the Conversion Price in effect on the date such units
are surrendered and notice is received by the Operating Partnership.
The Conversion Price initially is $28.50 (equivalent to a conversion rate of
one Common Unit for each Series B Preferred Unit) and is subject to
adjustment in the event of certain Common Unit distributions, subdivisions,
combinations, recapitalizations, issuances of certain rights, options, or
warrants to purchase Common Units to all holders of Common Units, distributions
of securities or assets to all holders of Common Units, and other events
specified in the Tenth Amendment.
4
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Ranking
-------
The Series B Preferred Units will, with respect to distribution rights and
distributions upon liquidation, dissolution, and winding up of the Operating
Partnership, rank senior to any class or series of Partnership Units other than
any series the terms of which specifically provide that such series ranks senior
to or on a parity with the Series B Preferred Units with respect to
distributions and distributions upon liquidation, dissolution or winding up
(such units ranking on a parity with the Series B Preferred Units, the "Parity
Units"). The outstanding Series A Cumulative Convertible Redeemable Preferred
Units of the Company are Parity Units.
Voting
------
Except as required by law, the General Partner, in its capacity as the holder
of the Series B Preferred Units, shall not be entitled to vote at any meeting of
the Partners or for any other purpose or otherwise to participate in any action
taken by the Partnership or the Partners, or to receive notice of any meeting of
the Partners.
THE PRUDENTIAL PURCHASE AGREEMENT
Information and Consultation Rights
-----------------------------------
Until the earlier of (i) January 1, 2003 and (ii) the first date on which the
number of shares of Common Stock issuable upon conversion of Series B Preferred
Shares then held by the Investors have an aggregate Market Value (as defined in
the Purchase Agreement) of less than $30 million (the "QUALIFICATION PERIOD"),
the Investors will have certain information and consultation rights as follows:
(i) the right to receive copies of all documents (or any amendments to such
documents) required to be filed by the Company and/or the Operating Partnership
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended, (ii) the right to inspect the Operating Partnership's
books and records, (iii) the right to consult with the management of the
Operating Partnership regarding operating and financial matters of the Operating
Partnership and its Subsidiaries and (iv) the right to receive non-confidential
operating information of the Operating Partnership of the same general nature as
provided to financial analysts, substantially with the provision of such
information to financial analysts.
Maintenance of REIT Status
--------------------------
The Purchase Agreement provides that until the earlier of (i) the end of the
Qualification Period or (ii) December 31, 2002, the Company shall use its
reasonable best efforts to continue to be taxed as a real estate investment
trust ("REIT"), subject to the right of the Company to voluntarily terminate its
status as a REIT by stockholder vote. The Company has agreed not to voluntarily
terminate its status as a REIT for a period of 24 months after September 17,
1997. If the Company's Board of Directors adopts a resolution recommending that
the Company terminate its status as a REIT, the Company will, within 10 days of
such resolution, provide each Investor with notice of the
5
<PAGE>
record date for the annual or special meeting of stockholders called for the
approval of such action.
Ownership Limitations
---------------------
The Series B Preferred Units shall be owned and held solely by the General
Partner.
Standstill
----------
The Investors have agreed, and any Permitted Transferees will agree, not to,
directly or indirectly, (i) sell or transfer any Series B Preferred Shares or
Common Stock to any person if such transfer would violate the ownership limits
in the Company's Articles of Incorporation, (ii) purchase or acquire shares of
Common Stock or other securities of the Company which would cause them
collectively to own in excess of 19.998% of the outstanding Common Stock, (iii)
solicit, propose or effect any business combination, liquidation or sale of the
Company or similar extraordinary transaction, (iv) seek board representation or
participate in any proxy contest, or (v) take certain other actions, for a
period of time ending on the earlier of (i) January 1, 2003 or (ii) first date
following the date on which the Investor, any Permitted Transferees, and their
respective affiliates (as a group) own less than 9.8% of the outstanding Common
Stock (treating shares of Common Stock issuable upon conversion of the Series B
Preferred Shares as outstanding for this purpose). Such period may be terminated
earlier upon the occurrence of certain extraordinary events.
6
<PAGE>
Registration Rights
-------------------
The Company has granted the Investors and any Permitted Transferees certain
registration rights under the Securities Act of 1933, as amended, with respect
to the resale of shares of Common Stock issued or issuable upon conversion of
Series B Preferred Shares.
The press release announcing the transaction is attached hereto as Exhibit
99.1.
7
<PAGE>
ISSUANCE OF SERIES A CUMULATIVE CONVERTIBLE REDEEMABLE STOCK AND UNITS
On May 15, 1997, Charles E. Smith Residential Realty, Inc. (the "Company")
entered into an agreement (the "Security Capital Purchase Agreement") to sell
2,640,325 shares of Series A Cumulative Convertible Redeemable Stock (the
"Series A Preferred Shares") at a price of $27.08 per share to Security Capital
Preferred Growth, Inc ("Security Capital") an accredited investor, for a total
of $71,500,000 in gross proceeds to the Company. The initial closing relating to
the sale of approximately $20 million of Series A Preferred Shares occurred on
June 30, 1997, and the remainder of the Series A Preferred Shares will be issued
and sold in amounts determined by the Company on or before May 14, 1998.
Security Capital may assign its rights under the Purchase Agreement to certain
of its affiliates who agree to be bound by the terms thereof (such affiliates,
the "Permitted Transferees").
The Company contributed the net proceeds of the $20 million from the Preferred
Offering to the Operating Partnership in exchange for .7 million Series A
Cumulative Convertible Redeemable Preferred Units ("Preferred Units"). The
Operating Partnership used the resulting net proceeds for repayment of
approximately $20 million on its line of credit.
Certain material terms of the Purchase Agreement and the Series A Preferred
Units are more fully described below.
TERMS OF SERIES A PREFERRED UNITS
The following summary of certain material terms of the Series A Preferred
Units does not purport to be complete and is qualified in its entirety by
reference to the Ninth Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Ninth Amendment") classifying and
designating the Series A Preferred Units and fixing the distribution and other
preferences and rights of such series filed as an exhibit to the Operating
Partnership's Form 10-Q for the second quarter of 1997.
Distribution. The Series A Preferred Units will have a distribution rate equal
------------
to the greater of $2.02 per annum or the ordinary cash distributions paid on the
number of Class A Units, and will be payable quarterly, when, as and if declared
by the General Partner, in arrears.
Liquidation Rights. The holders of the Series A Preferred Units will be
------------------
entitled to receive a liquidation preference equal to the sum of $27.08 per
Unit, plus accrued and unpaid distributions thereon to the date of final
distribution to such holders in the event of any liquidation, dissolution or
winding up of the Operating Partnership, subject to the rights of any series or
class ranking senior to the Series A Preferred Units.
Redemption. The Series A Preferred Units will not be redeemable by the
----------
Operating Partnership prior to May 15, 2003. On and after May 15, 2003, the
Operating Partnership, at its option, may redeem the Series A Preferred Units,
in whole or in part, for cash at the redemption price per unit of $27.08 (plus
all accumulated, accrued and unpaid distributions) or by issuing for each Series
A Preferred Units to be redeemed the number of units of Common Unit as equals
$27.08 divided by the Conversion Price in effect as of the opening of business
on the call date (which Conversion Price initially is $27.08, and is subject to
adjustment as described below); provided, however, that the Operating
Partnership may redeem Series A Preferred Units for units of Common Unit, rather
than cash, only if the weighted average trading price of the Common Unit for 20
of the last 30 trading days immediately before the date of the notice of
redemption, equals or exceeds 108% of the Conversion Price in effect on the date
of the notice and at least 1,000,000 shares of Common Unit were traded during
those 30 trading days.
8
<PAGE>
Conversion. A holder of Series A Preferred Units shall have the right to
----------
convert such units into the number of units of Common Unit obtained by
multiplying the number of Series A Preferred Units to be converted by $27.08 and
dividing such product by the Conversion Price in effect on the date such units
are surrendered and notice is received by the Operating Partnership. The
Conversion Price initially is $27.08 (equivalent to a conversion rate of one
unit of Common Unit for each Series A Preferred Unit) and is subject to
adjustment in the event of certain Common Unit distributions, subdivisions,
combinations, recapitalizations, issuances of certain rights, options, or
warrants to purchase Common Unit to all holders of Common Unit, distributions of
securities or assets to all holders of Common Unit, and other events specified
in the Ninth Amendment.
Ranking. The Series A Preferred Units will rank senior, with respect to
-------
distribution rights and distributions upon liquidation, dissolution, and winding
up of the Operating Partnership, to the Common Unit and all other outstanding
units of the Operating Partnership other than any series the terms of which
specifically provide that such series ranks senior to or on a parity with the
Series A Preferred Units.
Voting. Except as required by law, the General Partner in its capacity as the
------
holder of the Series A Preferred Units, shall not be entitled to vote at any
meeting of the Partners or for any other purpose or otherwise to participate in
any action taken by the Partnership or the Partners, or to receive notice of any
meeting of the Partners.
9
<PAGE>
THE SECURITY CAPITAL PURCHASE AGREEMENT
Consultation Rights. Until January 31, 1999, Security Capital will have
-------------------
information rights and the right to be consulted concerning certain significant
decisions of the Company. The Company will not have any obligation to accept or
comply with any advice offered in any such consultation.
Purchase Offer for Shares in Certain Events. The Purchase Agreement provides
-------------------------------------------
that if, prior to January 31, 1999, the Company (a) fails to continue to be
taxed as a real estate investment trust ("REIT"), or (b) experiences a "Change
in Control," Security Capital may compel the Company to repurchase the Series A
Preferred Shares for a cash amount equal to 105% of the liquidation preference
value of the Series A Preferred Shares ($27.08) plus all accumulated, accrued
and unpaid dividends. ff a Change of Control occurs after January 31, 1999,
Security Capital may request that the Company repurchase the Series A Preferred
Shares at the price specified above but the Company may elect not to repurchase
such shares, in which event the Series A Preferred Shares will be immediately
convertible into Common Stock in accordance with their terms as set forth above.
Fixed Charge Coverage; Limitations on Issuance of Additional Preferred Shares
-----------------------------------------------------------------------------
and Indebtedness. The Company has agreed that, so long as Security Capital
- -----------------
and any Permitted Transferees (as a group) own at least 1,330,000 Series A
Preferred Shares, that it will not, without the consent of the holders of a
majority of the Series A Preferred Shares, issue any additional preferred shares
or incur any additional indebtedness for borrowed money if, immediately
following such issuance and the application of the net proceeds therefrom the
Company's ratio of Consolidated EBITDA to Consolidated Fixed Charges for the
four fiscal quarters immediately preceding such issuance would be less than 1.5
to 1.0.
Ownership Limitations. The Company has granted to Security Capital
---------------------
a limited and conditional waiver of the 9.8% limitation on ownership of Common
Stock contained in the Articles of Incorporation of the Company to permit
Security Capital and any Permitted Transferees (as a group) to own the Series A
Preferred Shares; provided however, that such waiver will terminate (i) if at
any time Security Capital, any Permitted Transferees, and their respective
affiliates own a number of shares of Common Stock (including shares of Common
Stock issuable upon conversion of the Series A Preferred Shares) in excess of
19.9% of the outstanding shares of Common Stock or (ii) if Security Capital, any
Permitted Transferees, and their respective affiliates (as a group) own more
than 9.8% of the outstanding shares of Common Stock at any time prior to the
earliest to occur of (i) May 15, 2002 or (ii) the occurrence of a Change of
Control, a Change of Ownership, or a REIT Termination Event.
Standstill. Security Capital has agreed, and any Permitted Transferees will
----------
agree, not to, directly or indirectly, (i) sell or transfer any Series A
Preferred Shares or Common Stock to any person if such transfer would result in
a violate the ownership limits in the Company's Articles of Incorporation, (ii)
purchase or acquire shares of Common Stock or other securities of the Company
which would cause them collectively to own in excess of 19.9% of the outstanding
shares of Common Stock, (iii) solicit, propose or effect any business
combination, liquidation or sale of the Company or similar extraordinary
transaction, (iv) seek board representation (other than as provided in the terms
of the Series A Preferred Stock when dividends thereon are in arrears) or
participate in any proxy contest, or (v) take certain other actions, for a
period of time ending on later of May 15, 2002 or the date on which the
Investor, any Permitted Transferees ' and their respective affiliates (as a
group) own less than 9.8% of the outstanding Common Stock (treating shares of
Common Stock issuable upon conversion of the Series A Preferred Shares as
outstanding for this purpose). Such period may be terminated earlier upon the
occurrence of certain extraordinary events.
Registration Rights. The Company has granted Security Capital and any
-------------------
Permitted Transferees certain registration rights with respect to the resale of
shares of Common Stock issued or issuable upon conversion of Series A Preferred
Shares.
The press release announcing the transaction is attached hereto as Exhibit 99.
2.
10
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ------- ------------------------------------------------------------------
(A) Pro forma and historical financial information ( Lincoln Towers) -
beginning at page F-6
Pro forma and historical financial information (One East Delaware and
2000 Commonwealth) - to be filed within 60 days of this filing.
(B) Exhibits
99.1 Press Release dated September 17, 1997
99.2 Press Release dated October 15, 1997
99.3 Consent of Independent Public Accountants dated November 6, 1997
11
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
Pro Forma (unaudited) Consolidated Balance Sheet F-5
as of June 30, 1997
Pro Forma (unaudited) Consolidated Statement of F-6
Operations for the six months ended June 30, 1997
Pro Forma (unaudited) Consolidated Statement of F-7
Operations for the year ended December 31, 1996
Notes and Management's Assumptions to Unaudited Pro Forma
Consolidated Financial Information F-8
ACQUISITION PROPERTIES
Report of Independent Public Accountants - Lincoln Towers F-10
Statements of Revenues and Certain Expenses of Lincoln Towers F-11
for the six months ended June 30, 1997 (unaudited) and
the year ended December 31, 1996 (audited)
</TABLE>
F-1
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Charles E. Smith Residential Realty, Inc. (the "Company"), a Maryland
Corporation, is a self-managed real estate investment trust and is the sole
general partner of Charles E. Smith Residential Realty L.P. ("the Operating
Partnership"). 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 June 30, 1994, the Company raised equity through an initial public offering
and a private placement which was used to acquire the sole general partnership
and a proportionate limited partnership interest in the Operating Partnership.
Simultaneous with the initial public offering and private placement, the
entities that owned the properties and the related service businesses
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, limited partnership units in the Operating Partnership. The assets
and liabilities transferred were recorded at predecessor cost.
The Operating Partnership has recently acquired the following properties:
. Lincoln Towers On October 3, 1997, the Operating Partnership acquired
---------------
this 714-unit, luxury high-rise apartment property located in Ballston, Virginia
for a total cost of $88.7 million cash. The acquisition was funded in part by
the sale of 1.45 million shares of common stock and 1.22 million shares of
preferred stock to the Prudential Insurance Company of America ("Prudential")
for approximately $76 million ("the Offerings"). Historical and pro forma
financial information for Lincoln Towers is included in this Form 8-K.
. One East Delaware On October 7, 1997, the Operating Partnership acquired
------------------
this 306-unit luxury high-rise property in downtown Chicago, Illinois for
approximately $42.5 million cash. The Operating Partnership funded the
acquisition with proceeds from its line of credit. Historical and pro forma
financial information for One East Delaware will be provided in an amended Form
8-K within 60 days of this filing.
<PAGE>
. 2000 Commonwealth On October 10, 1997, the Operating Partnership acquired
-----------------
this 188-unit, luxury high rise property in Boston, Massachusetts for a total
cost of approximately $27.4 million consisting of 0.5 million limited
partnership units of the Operating Partnership valued at $14.1 million, assumed
debt of $13.1 million, and acquisition related costs of approximately $0.2
million. Historical and pro forma financial information for 2000 Commonwealth
will be provided in an amended Form 8-K within 60 days of this filing.
. Courthouse Hill On October 8, 1997, the Operating Partnership acquired
----------------
this 564-unit, luxury high rise property under construction in Arlington,
Virginia for $17.5 million consisting of $3.6 million cash and 450,000 limited
partnership units of the Operating Partnership valued at $13.9 million. Total
expected project cost is approximately $65 million. The balance of construction
costs is expected to be funded through a construction loan. Management expects
to initially deliver apartment units in October 1998.
The following sets forth the Pro Forma (unaudited) Consolidated Balance Sheet
as of June 30, 1997, the Pro Forma (unaudited) Consolidated Statement of
Operations for the six months ended June 30, 1997, and the Pro Forma (unaudited)
Consolidated Statement of Operations for the year ended December 31, 1996 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 historical financial statements and notes related
thereto appearing in the Operating Partnership's Form 10-K and 10-Q.
The unaudited pro forma consolidated financial statements as of June 30, 1997
and for the six months ended June 30, 1997 and the year ended December 31, 1996
are presented as if the Lincoln Towers acquisition and related offerings of
common and preferred stock to Prudential had occurred by June 30, 1997 for the
Pro Forma Consolidated Balance Sheet and at the beginning of the period for the
Pro Forma Consolidated Statement of Operations for the six months ended June 30,
1997 and the year ended December 31, 1996.
The pro forma consolidated financial information is unaudited and is not
necessarily indicative
<PAGE>
of the results which actually would have occurred if the Lincoln Towers
acquisition and the related Offerings had been consummated as of June 30, 1997
for the pro forma consolidated balance sheet and at the beginning of the periods
for the pro forma consolidated statements of operations, 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-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Lincoln Towers
---------------------------------
ASSETS Historical Offerings (A) Acquisition (B) Pro Forma
---------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
Rental property, at predecessor cost, net $263,786 $263,786
Rental property, acquired and developed, net 329,856 88,728 418,584
Rental property under development 12,742 12,742
Cash and cash equivalents 7,290 75,900 (76,728) 6,462
Tenants' security deposits 3,112 117 3,229
Escrow funds 8,998 8,998
Investment in and advances to Property Service
Businesses and other 14,356 14,356
Deferred charges, net 16,274 16,274
Other assets 12,501 12,501
---------- ---------
Total assets $668,915 $756,932
========== =========
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $487,342 $487,342
Notes payable 56,000 12,000 68,000
Accounts payable and accrued expenses 12,934 12,934
Tenants' security deposits 3,112 117 3,229
---------- ---------
Total liabilities 559,388 571,505
---------- ---------
Other Limited Partners' Interest 387,291 76,667 (C) 463,958
---------- ---------
Partners' Equity
General Partner's General and Limited Partnership Interest
Preferred units
Series A Cumulative Convertible Redeemable
Preferred Units 19,772 19,772
Series B Cumulative Convertible Redeemable
Preferred Units - 34,629 34,629
Common units (297,536) 41,271 (332,932)
(76,667) (C)
---------- ---------
Total partner's equity (277,764) (278,531)
---------- ---------
Total liabilities and equity $668,915 $756,932
========== =========
</TABLE>
F-5
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Lincoln
Towers Other
Historical Acquisition Adjustments Pro Forma
RENTAL PROPERTIES ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 94,259 5,463 $ 99,722
Expenses
Operating 33,766 1,769 (177)(A) 35,358
Real estate taxes 5,998 353 6,351
Depreciation and amortization 10,146 - 953 (B) 11,099
----------- ----------- ----------- ---------
Total expenses 49,910 2,122 776 52,808
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 1,705 - 1,705
Corporate general and administrative expenses (3,039) - (3,039)
Interest income 532 - - 532
Interest expense (22,683) - (425)(C) (23,108)
----------- ----------- ----------- ---------
Net income $ 20,864 3,341 (1,201) $ 23,004
=========== =========
Net income per unit $ 0.82 $ 0.82
=========== =========
Weighted average units outstanding 25,514 28,181
=========== =========
</TABLE>
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Lincoln
Towers Other
Historical Acquisition Adjustments Pro Forma
RENTAL PROPERTIES ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 166,283 11,001 $ 177,284
Expenses
Operating 65,350 3,575 (355)(A) 68,570
Real estate taxes 10,429 669 11,098
Depreciation and amortization 17,931 - 1,906 (B) 19,837
----------- ----------- ----------- ---------
Total expenses 93,710 4,244 1,551 99,505
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 7,846 - 7,846
Corporate general and administrative expenses (3,025) - (3,025)
Interest income 1,029 - 1,029
Interest expense (43,606) - (860)(C) (44,466)
----------- ----------- ----------- ---------
Net income $ 34,817 6,757 (2,411) $ 39,163
=========== =========
Net income per unit $ 1.59 $ 1.59
=========== =========
Weighted average units outstanding 21,908 24,574
=========== =========
</TABLE>
<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 June 30, 1997 and
unaudited Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1997 and the year ended December 31, 1996 are based on the
historical financial statements of the Operating Partnership and the Company.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1997 is
presented as if the Lincoln Towers acquisition and related offerings of
common and preferred stock to Prudential had occurred by June 30, 1997. The
unaudited Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1997 and the year ended December 31, 1996 are presented as if
the Lincoln Towers acquisition and related offerings of common and preferred
stock to Prudential had occurred at the beginning of the periods. 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 Form 10-Q and 10-K.
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 would have occurred if the Lincoln Towers acquisition and
related offerings of common and preferred stock to Prudential 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.
2. Adjustments to Pro Forma Consolidated Balance Sheet
(A) Issuance of 1,450,000 Common Operating Partnership Units ($28.50 unit
price)
Issuance of 1,216,666 Preferred Operating Partnership Units ($28.50
unit price)
Proceeds from Offering $76,000
Costs associated with Offering (100)
-------
Net proceeds $75,900
=======
Value of Common Operating Partnership
Units issued $41,271
Value of Preferred Operating Partnership
Units issued 34,629
-------
$75,900
=======
(B) Acquisition of Lincoln Towers
Purchase price of rental property $88,500
Acquisition costs 228
-------
Cost basis of rental property $88,728
=======
Cash paid for rental property ($76,728)
Proceeds from line of credit (12,000)
-------
($88,728)
=======
(C) To adjust the redemption value of Other Limited Partners' Interest
for the issuance of Common and Preferred Operating Partnership Units
in connection with the acquisition of Lincoln Towers.
3. Adjustments to Pro Forma Consolidated Statements of Operations
(A) Operating expenses have been adjusted to eliminate management fees
related to the Lincoln Towers property
(B) Depreciation and amortization has been adjusted based on the
allocated purchase price of the assets
<PAGE>
acquired and an estimated useful life of 40 years, as if the
purchases occurred on January 1, 1997 for the six months ended June
30, 1997 and January 1, 1996 for the year ended December 31, 1996.
(C) Increase in interest expense for draws on the line-of-credit to fund
the Lincoln Towers acquisition (assuming a weighted average interest
rate of 7.09% for the six months ended June 30, 1997 and 7.17% for
the year ended December 31, 1996)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charles E. Smith Residential Realty L.P.
We have audited the accompanying statement of revenues and certain expenses of
Lincoln Towers ("the Property") for the year ended December 31, 1996. This
statement is the responsibility of the Property's management. Our responsibility
is to express an opinion on this statement based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was 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 statement
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
statement is not intended to be a complete presentation of the revenues and
expenses of this property.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses of Lincoln Towers for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
Washington, D.C.,
October 17, 1997
F-10
<PAGE>
LINCOLN TOWERS
--------------
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
-------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -----------------
<S> <C> <C>
REVENUES:
Rental income $5,331,378 $10,620,399
Other income 131,323 380,174
---------- -----------
Total Revenue 5,462,701 11,000,573
CERTAIN EXPENSES:
Payroll and related costs 340,682 643,127
Utilities 429,658 851,251
Repairs and maintenance 259,049 462,786
Real estate taxes 353,130 668,880
Administrative 214,010 522,678
Management fees 177,174 355,339
Other expenses 348,036 739,827
---------- -----------
Total Expenses 2,121,739 4,243,888
---------- -----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $3,340,962 $ 6,756,685
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
LINCOLN TOWERS
--------------
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
----------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
--------------------------------------------------
AND FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of Lincoln Towers (the "Property") which is a residential
apartment complex in Arlington, VA. The Property consists of two apartment
buildings containing 714 residential units. The Property was acquired by
Charles E. Smith Residential Realty L.P. (the "Operating Partnership") on
October 3, 1997.
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.
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 accruals.
The statements of revenues and certain expenses for interim periods will
not necessarily be indicative of the operating results of the fiscal year.
<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 10th day of
November 1997.
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
By: Charles E. Smith Residential Realty,
Inc., its General Partner
By: /s/ W. D. Minami
------------------------------------------------
W. D. Minami
Senior Vice President and Chief Financial
Officer of Charles E. Smith Residential
Realty, Inc. (on behalf of the
Registrant and as Principal Financial Officer)
By: /s/ S. E. Gulley
------------------------------------------------
Steve E. Gulley
Vice President and Controller
of Charles E. Smith Residential Realty, Inc.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- ---------- -------
99.1 Press Release dated September 17, 1997 of the Company
99.2 Press Release dated October 15, 1997 of the Company
99.3 Consent of Independent Public Accountants
<PAGE>
NEWS RELEASE
[LOGO OF CHARLES E. SMITH APPEARS HERE]
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
FOR IMMEDIATE RELEASE: Contact: Investors - Bruce Snyder
September 17, 1997 (703) 769-1029
Media - John Kurtz
(703) 769-1153
Prudential - Rick Matthews
(201) 802-4874
CHARLES E. SMITH RESIDENTIAL AND PRUDENTIAL ANNOUNCE
ACQUISITION AND STOCK PURCHASE TRANSACTIONS
SMITH TO ACQUIRE 714-UNIT LUXURY HIGH-RISE
IN NORTHERN VIRGINIA FOR $88.5 MILLION
PRUDENTIAL TO ACQUIRE $76 MILLION IN CHARLES E. SMITH STOCK
ARLINGTON, VA -- Charles E. Smith Residential Realty, Inc (NYSE:SRW)
announced today that it has contracted to acquire a luxury high-rise apartment
property from the Prudential Insurance Company of America for $88.5 million.
The 714-unit Lincoln Towers property, completed in 1992, is located in Northern
Virginia's fast growing Rosslyn-Ballston corridor. The transaction is subject
to final due diligence and is expected to close within 30 days.
In a separate transaction, Prudential will purchase new Charles E. Smith
Residential Realty stock in a combination of 1.45 million common shares and 1.22
million shares of non-voting convertible preferred stock with net proceeds to
Charles E. Smith Residential Realty of $76 million. Prudential can convert
preferred shares into common shares, on a 1 to 1 basis, subject to a ceiling of
9.8% ownership of common stock outstanding. The Smith REIT can redeem preferred
shares for common shares at any time. Prudential's stock purchase may include
an investment made on behalf of one or more of its institutional clients, as
well as the company's own General Account.
-more-
<PAGE>
page - 2
Ernest A. Gerardi, Jr., President of Charles E. Smith Residential Realty,
commented: "These transactions clearly demonstrate our accelerated external
growth strategy -- continuing to invest in urban high-rise "renters by choice"
properties in key growth submarkets, and using stock as acquisition currency to
increase our equity and further strengthen our balance sheet. Lincoln Towers
is an outstanding property, and together with our nearby Arlington Courthouse
Plaza property, provides us with a critical mass of Class A apartments in the
rapidly growing Rosslyn-Ballston corridor submarket."
Added Gerardi: "Prudential will become one of our largest shareholders
through the stock purchase transaction, which is important as it demonstrates
the confidence of another major institutional investor in our company and its
aggressive growth strategy."
For Prudential, the transactions continue its successful real estate
portfolio transformation -- fundamentally changing the way it invests in
commercial real estate for its General Account. In late 1996, Prudential
disclosed plans to sharply reduce its direct property holdings during the next
three years, while investing in REITs and other vehicles that will provide
greater liquidity and the opportunity for higher yields. Prudential also has
said it would offer its institutional clients new opportunities to make such
investments alongside its General Account.
David Twardock, Senior Managing Director in charge of Prudential's General
Account real estate portfolio said, "We are pleased that we -- and potentially
our clients -- will have this opportunity to invest in an outstanding company.
This is just what we had in mind when we launched our new portfolio strategy."
The Lincoln Towers property contains 714 apartments, 65% one bedroom and
35% two bedroom units. Built in 1992, it consists of twin 22 story towers above
a three level 721-car parking garage. Located in the Ballston submarket, it is
less than two blocks from the Ballston Metrorail stop. Extensive amenities
include a swimming pool with a landscaped deck, a fitness center, conference
room, large party room, card access security, and full-sized washers and dryers
in all units. All apartments have oversized windows and balconies -- some with
dramatic views of the Washington skyline. The property also includes over
12,000 square feet of convenience retail space, with tenants including a deli,
gourmet grocery, hair salon, yogurt shop, travel agency
-more-
<PAGE>
page - 3
and dry cleaners. Because of the extensive office employment nearby in the
Rosslyn-Ballston corridor, there is a strong demand for corporate furnished
rentals at the property.
Charles E. Smith Residential Realty, Inc. is a self-managed real estate
investment trust listed on the New York Stock Exchange (SRW). The Company and
its subsidiaries and affiliates own, acquire, develop, and manage multi-family
residential properties for its own account, and provide a full range of real
estate services to other property owners. With this transaction the Company
will own a portfolio of 17,742 apartment units and manage an additional 4,000+
units for other owners, and the total market capitalization of the Company --
Charles E. Smith Residential Realty, including its Operating Partnership --
will be approximately $1.5 billion. Investor information including press
releases about Charles E. Smith Residential Realty is available on the Company's
Web site at:HTTP://WWW.SMITHREIT.COM, and also through PR Newswire "News on
Call" by fax 800-758-5804, ext. 101271, or at: HTTP://WWW.PRNEWSWIRE.COM.
Prudential has long been one of the leading investors in commercial real
estate. In addition to its $5.5 billion General Account portfolio, the Newark,
N.J.-based insurer manages over $8 billion in assets for more than 400 clients
worldwide through Prudential Real Estate Investors and its affiliated units.
Certain items discussed in this press release may be deemed to be forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although Charles E. Smith Residential Realty, Inc. believes
that such statements are based on reasonable expectations and assumptions, it
can give no assurance that its expectations will be attained. Factors that
could cause actual results to differ materially from the Company's expectations
include real estate market conditions, information determined in the course of
due diligence review, changes in local economic conditions and other risks
detailed from time to time in the Company's reports and filings with the
Securities and Exchange Commission. The Company assumes no obligation to
update or supplement forward looking statements that become untrue because of
subsequent events. Because the described transaction is subject to satisfactory
completion of due diligence and documentation, there can be no assurance at this
time that the transaction will be completed.
# # #
<PAGE>
NEWS RELEASE
[LOGO OF CHARLES E. SMITH APPEARS HERE]
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
FOR IMMEDIATE RELEASE: Contacts: Investors - Bruce Snyder
- --------------------- (703) 769-1029
October 15, 1997
Media - John Kurtz
(703) 769-1153
Sard Verbinnen & Company, Inc.
Judy Brennan/Heather Reeves
(212) 687-8080
CHARLES E. SMITH RESIDENTIAL BEGINS NATIONAL EXPANSION
WITH ACQUISITIONS IN CHICAGO AND BOSTON
IDENTIFIES SECURITY CAPITAL AFFILIATE AS INVESTOR
IN $71.5 MILLION PRIVATE PLACEMENT ANNOUNCED IN MAY
ARLINGTON, VA -- Charles E. Smith Residential Realty, Inc. (NYSE:SRW), a
Northern Virginia-based real estate investment trust specializing in urban
multifamily rental properties, announced the acquisition of luxury high-rise
apartment properties in Chicago and Boston with a total value of approximately
$70 million. The two transactions are part of the first phase of the Company's
program to diversify geographically from its substantial base in the Washington
D.C./Northern Virginia metro area into other strong metropolitan area markets.
The Company also announced that Security Capital Preferred Growth
Incorporated, a private affiliate of Security Capital Group Incorporated, is the
investor with which the Company arranged the private placement of $71.5 million
in convertible preferred stock in May, 1997. Security Capital Preferred Growth
is a private REIT that invests in private and public real estate operating
companies with strong intermediate-term prospects for growth.
(more)
<PAGE>
page - 2
Ernest Gerardi, Jr., president of Smith Residential said, "Our national
expansion strategy is being funded in part with capital supplied by major
institutional investors with significant experience investing in publicly traded
real estate operating companies. Security Capital Group has been one of the
most successful investors in the securitized real estate market, and we welcome
their affiliate's stock ownership in our Company. Their investment, in addition
to a separate stock purchase by Prudential of $76 million in September,
demonstrates the strong confidence shown by two major institutional investors in
our Company."
Daniel F. Miranda, managing director for Security Capital Preferred Growth
stated, "We believe that the real estate industry is still in the early stages
of fundamental change and that securitization of the industry will continue to
grow at a rate similar to what has already taken place in the 1990's." Mr.
Miranda added, "Within this environment, a number of exciting opportunities
exist to invest in well-managed growth companies, such as Charles E. Smith
Residential, and to facilitate their future growth."
Gerardi continued, "The transactions in Chicago and Boston are initial
steps in the implementation of the geographic expansion strategy we announced
earlier this year, focusing on acquisitions in urban locations in growing
metropolitan areas. With these investments in place, we are continuing to work
on an existing pipeline of additional opportunities in key national markets."
"Consistent with our current asset profile, both of these acquisitions are
high quality urban high-rise properties in strong metropolitan areas," Gerardi
added. "Chicago and Boston each have excellent long-term economic growth
outlooks and substantial opportunities for additional investment. Together with
our portfolio in Northern Virginia and Washington D.C., we now operate in three
of the premier urban markets in the country."
In Chicago, Smith Residential acquired a 36-story 306-unit luxury high-rise
apartment property -- One East Delaware -- in the desirable Near North submarket
just north of downtown Chicago, and two blocks west of Michigan Avenue. The
property was completed in 1989 and was 99% occupied on October 1, 1997. It also
includes 41,726 square feet of commercial space. The
(more)
<PAGE>
page - 3
property was acquired from Near North Properties, a private Chicago
developer/manager, in a transaction valued at approximately $43 million using
funds from a Smith Residential bank credit line. Chicago is forecast to have the
largest total job growth of all U.S. cities by 2005, according to the U.S.
Department of Commerce's Bureau of Economic Analysis, and also has a large,
vibrant 24-hour downtown and a long-term tradition of downtown high-rise living.
In Boston, the Company used Operating Partnership units to complete an
exchange for a 188-unit luxury high-rise property -- the Company's first "unit
swap" outside its core Northern Virginia/Washington D.C. markets. The 16-story
property -- 2000 Commonwealth Avenue -- is located in the fashionable Chestnut
Hill section of Boston, overlooking the Chestnut Hill reservoir. It was built
in 1986, and was 98% occupied on October 1, 1997. The property was acquired
from Charles River Management, a Boston owner/manager, in a transaction valued
at approximately $27 million, including assumption of $13 million of debt and
issuance of 465,000 Operating Partnership units.
Smith Residential also noted that in early October it completed settlement
of two high-rise acquisitions announced last month -- the 714-unit Lincoln
Towers property in the Ballston submarket of Arlington County, Virginia for
$88.5 million, and the 564-unit Courthouse Hill property currently under
construction in the Arlington Courthouse section of Arlington County, Virginia,
which upon completion will be valued at over $64 million. The Company also
completed the sale of a combination of common and preferred stock to the
Prudential Insurance Company for a total of $76 million.
With completion of these transactions, in 1997 Smith Residential has
completed acquisitions totaling 3,036 units, bringing its total owned portfolio
to 18,236 units -- an increase of 20%, and $286 million since the first of the
year. In addition, the Company currently has 1,195 units under construction as
part of its development pipeline.
Charles E. Smith Residential Realty, Inc. is a self-managed real estate
investment trust listed on the New York Stock Exchange (SRW). The Company and
its subsidiaries and affiliates own, acquire, develop, and manage multifamily
residential properties in addition to providing a full
(more)
<PAGE>
page - 4
range of real estate services to other property owners. The Company owns a
portfolio of over 18,000 apartment units and manages an additional 4,000+ units
for other owners. The total market capitalization of the Company -- Charles E.
Smith Residential Realty, including its Operating Partnership -- is
approximately $1.6 billion. Investor information including press releases about
Charles E. Smith Residential Realty is available on the Company's Web site at:
HTTP://WWW.SMITHREIT.COM ... and also through PR Newswire Company's "News on
Call" by fax 800-758-5804, ext. 101271, or at: HTTP://WWW.PRNEWSWIRE.COM.
Certain items discussed in this press release may be deemed to be forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although Charles E. Smith Residential Realty, Inc. believes
that such statements are based on reasonable expectations and assumptions, it
can give no assurance that its expectations will be attained. Factors that
could cause actual results to differ materially from the company's expectations
include real estate market conditions, information determined in the course of
due diligence review, changes in local economic conditions and other risks
detailed from time to time in the company's reports and filings with the
Securities and Exchange Commission. The company assumes no obligation to
update or supplement forward looking statements that may become untrue because
of subsequent events.
# # #
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K, into Charles E. Smith Residential Realty
L.P.'s previously filed Registration Statement File No. 33-82382.
ARTHUR ANDERSEN LLP
Washington, D.C.
November 6, 1997
