UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: Commission File Number: 1-12358
June 30, 2000
COLONIAL PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Alabama 59-7007599
(State of organization) (IRS Employer
Identification Number)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal
executive offices)
(205) 250-8700
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ___
As of July 28, 2000, Colonial Properties Trust had 20,817,535 Common
Shares of Beneficial Interest outstanding.
<PAGE>
COLONIAL PROPERTIES TRUST
INDEX TO FORM 10-Q
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as of
June 30, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Income for the
Three Months and for the Six Months Ended
June 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Condensed Financial Statements 6
Report of Independent Accountants 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 16
PART II: OTHER INFORMATION
Item 2. Changes in Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT 19
<PAGE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
--------------------
<TABLE>
<CAPTION>
June 30, 2000 December 31,
(Unaudited) 1999
------------ ------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net $ 1,561,081 $ 1,586,333
Undeveloped land and construction in progress 248,438 214,043
Cash and equivalents 7,489 4,640
Restricted cash 2,651 2,634
Accounts receivable, net 14,190 10,972
Prepaid expenses 3,578 2,476
Deferred debt and lease costs 13,279 10,500
Investment in unconsolidated subsidiaries 23,528 24,167
Other assets 9,264 7,753
------------ ------------
$ 1,883,498 $ 1,863,518
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable $ 1,068,833 $ 1,039,863
Accounts payable 23,084 18,215
Accrued interest 14,801 12,901
Accrued expenses 14,152 4,444
Tenant deposits 4,352 4,011
Unearned rent 955 2,820
------------ ------------
Total liabilities 1,126,177 1,082,254
------------ ------------
Minority interest:
Preferred units 100,000 100,000
Common units 187,120 187,689
------------ ------------
Total minority interest 287,120 287,689
------------ ------------
Preferred shares of beneficial interest, $.01 par value, 10,000,000 shares
authorized; 5,000,000 shares issued and outstanding at June 30, 2000 and
December 31, 1999, respectively 50 50
Common shares of beneficial interest, $.01 par value,
65,000,000 shares authorized; 26,357,709 and 26,326,458
shares issued at June 30, 2000 and December 31, 1999, respectively 263 263
Additional paid-in capital 675,464 673,373
Cumulative earnings 222,292 196,302
Cumulative distributions (294,115) (257,948)
Treasury shares, at cost; 5,026,050 shares at June 30, 2000 and
4,454,250 shares at December 31, 1999 (133,468) (117,863)
Deferred compensation on restricted shares (285) (602)
------------ ------------
Total shareholders' equity 470,201 493,575
------------ ------------
$ 1,883,498 $ 1,863,518
============ ============
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
---------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
2000 1999 2000 1999
--------------------- ----------------------
Revenue:
<S> <C> <C> <C> <C>
Minimum rent 58,255 $ 56,145 115,051 $ 110,822
Percentage rent 703 724 1,394 1,621
Tenant recoveries 8,477 7,844 17,116 16,268
Other 5,654 5,188 9,306 8,649
--------- --------- --------- ---------
Total revenue 73,089 69,901 142,867 137,360
--------- --------- --------- ---------
Property operating expenses:
General operating expenses 4,990 5,038 9,983 10,158
Salaries and benefits 3,995 3,565 7,737 7,042
Repairs and maintenance 7,068 6,845 13,541 13,425
Taxes, licenses, and insurance 5,970 5,753 11,824 11,872
General and administrative 2,162 2,540 4,997 4,807
Depreciation 14,296 13,033 28,278 25,921
Amortization 1,024 557 1,871 1,082
--------- --------- --------- ---------
Total operating expenses 39,505 37,331 78,231 74,307
--------- --------- --------- ---------
Income from operations 33,584 32,570 64,636 63,053
--------- --------- --------- ---------
Other income (expense):
Interest expense (17,096) (13,505) (33,139) (27,459)
Income (loss) from unconsolidated subsidiaries (387) 302 (228) 854
Gains from sales of property 3,569 473 3,514 3,478
Minority interest in consolidated operating property -- (22) -- (82)
--------- --------- --------- ---------
Total other expense (13,914) (12,752) (29,853) (23,209)
--------- --------- --------- ---------
Income before extraordinary item and
minority interest in CRLP 19,670 19,818 34,783 39,844
Extraordinary income (loss) (418) 115 (418) 115
--------- --------- --------- ---------
Income before minority interest in CRLP 19,252 19,933 34,365 39,959
Minority interest in income of CRLP (4,913) (4,406) (8,376) (9,136)
Distribution to preferred unitholders of CRLP (2,219) (2,268) (4,437) (3,156)
--------- --------- --------- ---------
Net income $ 12,120 $ 13,259 $ 21,552 $ 27,667
Dividends to preferred shareholders (2,735) (2,735) (5,469) (5,469)
--------- --------- --------- ---------
Net income available to common shareholders $ 9,385 $ 10,524 $ 16,083 $ 22,198
========= ========= ========= =========
Net income per share after consideration of minority interest:
Income before extraordinary items $ 0.45 $ 0.42 $ 0.75 $ 0.86
Extraordinary income (loss) (0.01) 0.00 (0.01) 0.00
--------- --------- --------- ---------
Net income per common share - basic $ 0.44 $ 0.42 $ 0.74 $ 0.86
========= ========= ========= =========
Net income per common share - diluted $ 0.44 $ 0.41 $ 0.74 $ 0.86
========= ========= ========= =========
Weighted average common shares outstanding 21,566 25,353 21,722 25,770
========= ========= ========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
-------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
2000 1999
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 21,552 $ 27,667
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 30,149 27,003
(Income) loss from unconsolidated subsidiaries 228 (854)
Distribution to preferred unitholders of CRLP 4,437 3,156
Minority interest 8,376 9,136
Gains from sales of property (3,514) (3,478)
Other 802 547
Decrease (increase) in:
Restricted cash (17) (68)
Accounts receivable (3,602) (3,857)
Prepaid expenses (1,102) 375
Other assets (4,269) (1,073)
Increase (decrease) in:
Accounts payable 4,869 (1,777)
Accrued interest 1,900 (26)
Accrued expenses and other 8,272 8,333
--------- ---------
Net cash provided by operating activities 68,081 65,084
--------- ---------
Cash flows from investing activities:
Acquisition of properties -0- (19,451)
Development expenditures (55,022) (83,526)
Tenant improvements (13,196) (4,224)
Capital expenditures (6,354) (8,315)
Proceeds from sales of property, net of selling costs 40,665 23,586
Distributions from subsidiaries 2,351 6,752
Capital contributions to subsidiaries (1,940) (1,402)
--------- ---------
Net cash used in investing activities (33,496) (86,580)
--------- ---------
Cash flows from financing activities:
Proceeds from CRLP preferred units issuance, net of expenses paid -0- 97,413
Proceeds from additional borrowings 128,568 9,750
Proceeds from Employee Unit Purchase Plan, net of expenses paid 9,292 -0-
Principal reductions of debt (31,814) (10,050)
Proceeds from dividend reinvestment -0- 3,675
Net change in revolving credit balances (67,872) 8,473
Dividends paid to common and preferred shareholders (36,167) (38,543)
Purchase of treasury stock (15,605) (33,743)
Purchase of common units (2,462) (3,509)
Distributions to minority partners in CRLP (13,678) (12,588)
Payment of mortgage financing cost (1,574) (383)
Other (424) 115
--------- ---------
Net cash provided by (used in) financing activities (31,736) 20,610
--------- ---------
Increase (decrease) in cash and equivalents 2,849 (886)
Cash and equivalents, beginning of period 4,640 4,583
--------- ---------
Cash and equivalents, end of period $ 7,489 $ 3,697
========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
COLONIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Note 1 -- Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
of Colonial Properties Trust (the "Company") have been prepared by management in
accordance with generally accepted accounting principles for interim financial
reporting and in conjunction with the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the information included in the
Company's Annual Report as filed with the Securities and Exchange Commission on
Form 10-K for the year ended December 31, 1999, and with the information filed
with the Securities and Exchange Commission on Form 10-Q for the quarter ended
March 31, 2000. The December 31, 1999 balance sheet data presented herein was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles.
In July 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities, which addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. Under SFAS 133, the Company will be
required to account for derivative financial instruments, if any, at their fair
market value, and make certain required disclosures. The Company is required to
adopt SFAS 133 for all periods beginning after January 1, 2001.
Note 2 -- Joint Venture
CMS II Joint Venture -- During the second quarter, the Company sold
four multifamily properties, representing 884 apartment units, which included
Colonial Village at Rocky Ridge, Colonial Village at Hillwood, Colonial Grand at
Inverness Lakes, and Colonial Village at Inverness Lakes. The properties were
purchased by a joint venture formed by CMS Companies, a private investment
banking firm, and the Company. The Company will maintain a 15% interest in the
joint venture and serve as manager of the properties.
The properties were sold for a total purchase price of $42.0 million, of which
$17.3 million was used to repay three secured loans, and the remaining proceeds
were used to repay a portion of the borrowings under the Company's unsecured
line of credit, and to support the Company's future investment activities.
<PAGE>
Note 3 -- Net Income Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
(Amounts in thousands,
except per share data)
------------------------------------------------------------
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Numerator:
Numerator for basic and diluted net
income per share - net income
<S> <C> <C> <C> <C>
available to common shareholders $ 9,385 $ 10,524 $ 16,083 $ 22,198
============ ============ ============ ============
Denominator:
Denominator for basic net income
Effect of dilutive securities:
Trustee and employee stock options 30 22 28 22
------------ ------------ ------------ ------------
Denominator for diluted net income
per share - adjusted weighted
average common shares 21,596 25,375 21,750 25,792
============ ============ ============ ============
Basic net income per share $ .44 $ .42 $ .74 $ .86
============ ============ ============ ============
Diluted net income per share $ .44 $ .41 $ .74 $ .86
============ ============ ============ ============
</TABLE>
Options to purchase 388,633 Common Shares at a weighted average exercise price
of $28.79 per share were outstanding during 2000 but were not included in the
computation of diluted net income per share because the options' exercise price
was greater than the average market price of the common shares and, therefore,
the effect would be antidilutive.
Note 4 -- Segment Information
The Company is organized into, and manages its business based on the
performance of, three separate and distinct operating divisions: Multifamily,
Retail, and Office. Each division has a separate management team that is
responsible for acquiring, developing, managing, and leasing properties within
each division. The applicable accounting policies of the segments are
substantially the same as those described in the "Summary of Significant
Accounting Policies" in the Company's 1999 Annual Report. However, the pro rata
portion of the revenues, net operating income ("NOI"), and assets of the
partially owned entities and joint ventures that the Company has entered into
are included in the applicable segment information. Subsequently, in the
reconciliation to total revenues, total NOI, and total assets, the amounts are
eliminated, as the investment in the partially owned entities and joint ventures
are reflected in the consolidated financial statements as investments accounted
for under the equity method. Management evaluates the performance of its
segments and allocates resources to them based on NOI. NOI consists of revenues
in excess of general operating expenses, salaries and wages, repairs and
maintenance, taxes, licenses, and insurance. Segment information as of and for
the three months and six months ended June 30, 2000 and 1999, and for the period
ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
As of and for the
Three Months Ended
June 30, 2000 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Total Divisional Revenues $ 29,429 $ 12,717 $ 33,487 $ 75,633
NOI 19,266 9,073 23,921 52,260
Divisional assets 765,868 316,077 816,929 1,898,874
-------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30, 1999 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 29,232 $ 9,758 $ 32,769 $ 71,759
NOI 19,321 6,728 23,598 49,647
-------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, 2000 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 58,067 $ 23,997 $ 66,042 $ 148,106
NOI 38,188 16,879 47,373 102,440
-------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, 1999 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 57,303 $ 19,671 $ 64,711 $ 141,685
NOI 37,486 13,783 46,031 97,300
-------------------------------------------------------------------------------------------------------------
For the Period Ended
December 31, 1999
(in thousands) Multifamily Office Retail Total
--------------------------------------------------------------------
Divisional assets $ 777,436 $ 293,545 $ 794,109 $ 1,865,090
-------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of total segment revenues to total revenues, total segment NOI
to income from operations, for the three months and six months ended June 30,
2000 and 1999, and total divisional assets to total assets, for the periods
ended June 30, 2000 and December 31, 1999 is presented below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
As of and for the As of and for the As of and for the As of and for the
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
(in thousands) June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
Revenues
--------------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Total divisional revenues $ 75,633 $ 71,759 $ 148,106 $ 141,685
Unallocated corporate revenues 569 541 978 742
Partially-owned subsidiaries (3,113) (2,399) (6,217) (5,067)
--------------------------------------------------------------------------------- --------------------- --------------------
Total Revenues $ 73,089 $ 69,901 $ 142,867 $ 137,360
--------------------------------------------------------------------------------- --------------------- --------------------
NOI
--------------------------------------------------------------------------------- --------------------- --------------------
Total divisional NOI $ 52,260 $ 49,647 $ 102,440 $ 97,300
Unallocated corporate revenues 569 541 978 742
Partially-owned subsidiaries (1,766) (1,540) (3,644) (3,129)
General and administrative expenses (2,162) (2,540) (4,997) (4,807)
Depreciation (14,296) (13,033) (28,278) (25,921)
Amortization (1,024) (557) (1,871) (1,082)
Other 3 52 8 (50)
--------------------------------------------------------------------------------- --------------------- --------------------
--------------------------------------------------------------------------------- --------------------- --------------------
Income from operations $ 33,584 $ 32,570 $ 64,636 $ 63,053
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended
Assets June 30, 2000 December 31, 1999
---------------------------------------------------------------------------------
<S> <C> <C>
Total divisional assets $ 1,898,874 $ 1,865,090
Unallocated corporate assets (1) 69,723 65,914
Partially-owned subsidiaries (85,099) (67,486)
---------------------------------------------------------------------------------
Total assets $ 1,883,498 $ 1,863,518
---------------------------------------------------------------------------------
</TABLE>
[FN]
(1) Includes the Company's investment in partially owned entities of $23,528 as
of June 30, 2000, and 24,166 as of December 31, 1999.
</FN>
<PAGE>
Note 5 -- Increase in Revolving Credit Agreement
On April 14, 2000, the Company increased the borrowing capacity under
its unsecured line of credit from $250 million to $300 million. The credit
facility, which is used by the Company primarily to finance property acquisition
and development activities, bears interest at LIBOR plus 115 basis points, is
renewable on March 31, 2003, and provides for a two-year amortization in the
case of non-renewal. The line of credit agreement includes a competitive bid
feature that will allow the Company to convert up to $150 million under the line
of credit to a fixed rate, for a fixed term not to exceed 90 days. At June 30,
2000 and December 31, 1999, the Company had an outstanding balance on its
unsecured line of credit of $160.4 million and $228.3 million, respectively.
Note 6 -- Subsequent Events
Quarterly Distribution
On July 18, 2000, a cash distribution was declared to shareholders of
the Company and partners of Colonial Realty Limited Partnership in the amount of
$0.60 per share and per unit, respectively, totaling $19.3 million. The
distribution was declared to shareholders of record as of July 28, 2000, and was
paid on August 4, 2000.
Acquisition
On August 1, 2000, the Company acquired the Temple Mall, a 575,000
square-foot mall in Temple, Texas for a total purchase price of $25.7 million.
The mall anchors include JC Penney, Dillards, Foley's, and Stein Mart. The
purchase price was partially funded through the proceeds received from the
disposition of assets, and an advance on the Company's unsecured line of credit.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Colonial Properties Trust:
We have reviewed the accompanying consolidated condensed balance sheet of
Colonial Properties Trust (the "Company") as of June 30, 2000, and the related
consolidated condensed statements of income for the three-month and six-month
periods ended June 30, 2000 and 1999, and the consolidated condensed statements
of cash flows for the six-month periods ended June 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
January 17, 2000, except for Note 16, as to which the date is February 29, 2000,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of December 31, 1999, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
July 14, 2000
<PAGE>
COLONIAL PROPERTIES TRUST
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Colonial Properties Trust (Colonial or the Company) is engaged in the
ownership, development, management, and leasing of multifamily communities,
office buildings, retail malls and shopping centers. Colonial is organized as a
real estate investment trust (REIT) and owns and operates properties in nine
states in the Sunbelt region of the United States. As of June 30, 2000,
Colonial's real estate portfolio consisted of 54 multifamily communities, 18
office properties, and 42 retail properties.
Colonial is one of the largest diversified REITs in the United States.
Consistent with its diversified strategy, Colonial manages its business with
three separate and distinct operating divisions: Multifamily, Office, and
Retail. Each division has an Executive Vice President that oversees growth and
operations and has a separate management team that is responsible for acquiring,
developing, and leasing properties within each division. This structure allows
Colonial to utilize specialized management personnel for each operating
division. Constant communication among the Executive Vice Presidents and
centralized functions of accounting, information technology, due diligence and
administrative services provide the Company with unique synergy allowing the
Company to take advantage of a variety of investment opportunities. Decisions
for investments in acquisitions and developments and for dispositions are also
centralized.
The following discussion should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations and all of the other information appearing in the Company's 1999
Annual Report as filed with the Securities and Exchange Commission on Form 10-K
and with the financial statements included therein and the notes thereto. As
used herein, the terms "Colonial" or "the Company" include Colonial Properties
Trust, and one or more of its subsidiaries including, among others, Colonial
Realty Limited Partnership ("CRLP").
Any statement contained in this report which is not a historical fact,
or which might be otherwise considered an opinion or projection concerning the
Company or its business, whether express or implied, is meant as, and should be
considered, a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. Forward-looking statements are based
upon assumptions and opinions concerning a variety of known and unknown risks,
including but not limited to changes in market conditions, the supply and demand
for leasable real estate, interest rates, increased competition, changes in
governmental regulations, and national and local economic conditions generally,
as well as other risks more completely described in the Company's prospectuses
and annual reports filed with the Securities and Exchange Commission. If any of
these assumptions or opinions prove incorrect, any forward-looking statements
made on the basis of such assumptions or opinions may also prove materially
incorrect in one or more respects.
Results of Operations -- Three Months Ended June 30, 2000 and 1999
Revenue -- Total revenue increased by $3.2 million, or 4.6%, for the
second quarter of 2000 when compared to the second quarter of 1999. The majority
of this increase, $2.8 million, represents revenues generated by properties
acquired or developed during 2000 and the second half of 1999, net of revenues
from properties disposed. The remaining increase primarily relates to increases
in rental rates at existing properties and certain lease cancellations that
occurred during the second quarter of 2000.
Operating Expenses -- Total operating expenses increased by $2.2
million, or 5.8%, for the second quarter of 2000 when compared to the second
quarter of 1999. The majority of this increase, $1.3 million, relates to
additional operating expenses associated with properties that were acquired or
developed during 2000 and the second half of 1999, net of operating expenses
associated with properties disposed. The remaining increase primarily relates to
increases in operating expenses at existing properties.
Other Income and Expense -- Interest expense increased by $3.6 million,
or 26.6%, for the second quarter of 2000 when compared to the second quarter of
1999. The increase in interest expense is primarily attributable to the
increased usage of the Company's revolving credit agreement in conjunction with
the financing of acquisitions, developments, the Company's Common Share
Repurchase Program, and the issuance of $132.5 million of unsecured medium term
notes through its subsidiary CRLP since the second quarter of 1999.
Results of Operations -- Six Months Ended June 30, 2000 and 1999
Revenue -- Total revenue increased by $5.5 million, or 4.0%, for the
six months ended June 30, 2000 when compared to the six months ended June 30,
1999. This majority of this increase, $4.6 million, represents revenues
generated by properties acquired or developed during 2000 and the second half of
1999, net of revenues from properties disposed. The remaining increase primarily
relates to increases in rental rates at existing properties and certain lease
cancellations that occurred during 2000.
Operating Expenses -- Total operating expenses increased by $3.9
million, or 5.3%, for the six months ended June 30, 2000 when compared to the
six months ended June 30, 1999. The majority of this increase, $2.3 million,
relates to additional operating expenses associated with properties that were
acquired or developed during 2000 and the second half of 1999, net of operating
expenses associated with properties disposed. The remaining increase primarily
relates to increases in operating expenses at existing properties and overall
increases in corporate overhead and personnel costs associated with the
Company's continued growth.
Other Income and Expense -- Interest expense increased by $5.7 million,
or 20.7%, for the six months ended June 30, 2000 when compared to the six months
ended June 30, 1999. The increase in interest expense is primarily attributable
to the increased usage of the Company's revolving credit agreement in
conjunction with the financing of acquisitions, developments, and the Company's
Common Share Repurchase Program, and the issuance of $132.5 million of unsecured
medium term notes through its subsidiary CRLP since the second quarter of 1999.
Liquidity and Capital Resources
During the second quarter of 2000, the Company invested $32.7 million
in the acquisition and development of properties. The Company financed this
growth through advances on its unsecured bank line of credit, sale of certain
properties, securing of certain properties, and cash from operations. As of June
30, 2000, the Company had an unsecured bank line of credit providing for total
borrowings of $300 million. The line, which is used by the Company primarily to
finance property acquisitions and development, bears interest at LIBOR plus 115
basis points, and is renewable on March 31, 2003 and provides for a two-year
amortization in the case of non-renewal. The line of credit agreement includes a
competitive bid feature that will allow the Company to convert up to $150
million under the line of credit to a fixed rate, for a fixed term not to exceed
90 days. The balance outstanding on this line at June 30, 2000, was $160.4
million.
Management intends to replace significant borrowings that may
accumulate under the bank line of credit with funds generated from the sale of
additional equity securities and/or permanent financing, as market conditions
permit. Management believes that these potential sources of funds, along with
the possibility of issuing limited partnership units of Colonial Realty Limited
Partnership in exchange for properties, will provide the Company with the means
to finance additional acquisitions. Management anticipates that its net cash
provided by operations and its existing cash balances will provide the necessary
funds on a short- and long-term basis to cover its operating expenses, interest
expense on outstanding indebtedness, recurring capital expenditures, and
dividends to shareholders in accordance with Internal Revenue Code requirements
applicable to real estate investment trusts.
Common Share Repurchase Program
During 1999, the Board of Trustees authorized a share repurchase
program under which the Company may repurchase up to $150 million of its
currently outstanding common shares from time to time at the discretion of
management in open market and negotiated transactions. During the second quarter
of 2000, the Company repurchased 571,800 shares at an all-in cost of
approximately $15.6 million. To date, the Company has repurchased 5,026,050
shares at an all-in cost of approximately $133.5 million, which represents an
average purchase price of $26.56 per share.
<PAGE>
Funds from Operations
The Company considers Funds From Operations ("FFO") a widely accepted
and appropriate measure of performance for an equity REIT that provides a
relevant basis for comparison among REITs. FFO, as defined by the National
Association of Real Estate Investment Trusts (NAREIT), means income (loss)
before minority interest (determined in accordance with GAAP), excluding gains
(losses) from debt restructuring and sales of property, plus real estate related
depreciation and after adjustments for unconsolidated partnerships and joint
ventures. FFO is presented to assist investors in analyzing the performance of
the Company. The Company's method of calculating FFO may be different from
methods used by other REITs and, accordingly, may not be comparable to such
other REITs. FFO (i) does not represent cash flows from operations as defined by
GAAP, (ii) is not indicative of cash available to fund all cash flow needs and
liquidity, including its ability to make distributions, and (iii) should not be
considered as an alternative to net income (as determined in accordance with
GAAP) for purposes of evaluating the Company's operating performance. The
Company's FFO for the second quarter of 2000 and 1999 and six months ended June
30, 2000 and 1999 was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
(in thousands) 2000 1999 2000 1999
--------------------------------------------------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income available to common shareholders $9,385 $10,524 $16,083 $22,198
Adjustments:
Minority interest in CRLP 4,913 4,406 8,376 9,136
Real estate depreciation and amortization (1) 15,158 13,520 29,950 26,871
Straight-line rents (1) (435) 0 (770) 0
Gains from sales of property (1) (2,979) (473) (2,925) (3,478)
Extraordinary (income) loss 418 (115) 418 (115)
------ -------------------------------------------------- ----------- ------------ ------------- ------------
Funds From Operations $26,460 $ 27,862 $51,132 $ 54,612
--------------------------------------------------------- ----------- ------------ ------------- ------------
</TABLE>
[FN]
(1) Includes pro-rata share of adjustments for subsidiaries.
</FN>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to interest rate changes primarily as a result
of its line of credit and long-term debt used to maintain liquidity and fund
capital expenditures and expansion of the Company's real estate investment
portfolio and operations. The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows and
to lower its overall borrowing costs. To achieve its objectives, the Company
borrows primarily at fixed rates and may enter into derivative financial
instruments such as interest rate swaps, caps and treasury locks in order to
mitigate its interest rate risk on a related financial instrument. The Company
does not enter into derivative or interest rate transactions for speculative
purposes.
The table below presents the principal amounts, weighted average
interest rates, fair values and other terms required by year of expected
maturity to evaluate the expected cash flows and sensitivity to interest rate
changes. Also included is a summary of the Company's swap contracts and rate
caps at June 30, 2000.
<TABLE>
<CAPTION>
Estimated
Fair
(amounts in thousands) 2000 2001 2002 2003 2004 Thereafter Total Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $ 7,843 78,095 57,500 109,028 100,000 471,952 824,418 818,622
Average interest rate
at June 30, 2000 7.9% 7.7% 7.9% 7.2% 7.3% 7.6% 7.5% -
Variable Debt $ 595 - 160,465 - - 83,354 244,414 244,414
Average interest rate
at June 30, 2000 7.9% - 7.5% - - 5.3% 6.8% -
Interest Rate SWAPs
Fixed to variable $ - - - - - 50,000 50,000 440
Average pay rate - - - - - 1 month 1 month -
LIBOR LIBOR
Interest Rate Cap $ - - - 30,379 - - 30,379 2
Interest Rate - - - 11.2% - - 11.2% -
</TABLE>
The table incorporates only those exposures that exist as of June 30, 2000; it
does not consider those exposures or positions, which could arise after that
date. Moreover, because firm commitments are not presented in the table above,
the information presented therein has limited predictive value. As a result, the
Company's ultimate realized gain or loss with respect to interest rate
fluctuations will depend on the exposures that arise during the period, the
Company's hedging strategies at that time, and interest rates.
<PAGE>
COLONIAL PROPERTIES TRUST
PART II -- OTHER INFORMATION
Item 2. Changes in Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of Colonial Properties Trust was
held on April 18, 2000. The following is a tabulation of the voting on each
proposal presented at the Annual Meeting and a listing of trustees whose term of
office as a trustee continued after the meeting:
Proposal 1 - Election of Trustees
Term Expires Votes For Votes Withheld
--------------- ---------------- -----------------
Elected Trustees:
Carl F. Bailey 2003 17,663,630 425,661
Thomas H. Lowder 2003 17,660,700 422,591
Harold W. Ripps 2003 17,670,952 418,339
Continuing Trustees:
M. Miller Gorrie 2001
James K. Lowder 2001
Herbert A. Meisler 2001
William M. Johnson 2002
Claude B. Nielsen 2002
Donald T. Senterfitt 2002
Proposal 2 - Ratification of Appointment of Independent Auditors
Votes For 17,851,606
Votes Against 166,580
Votes Withheld 71,104
Broker Non-Votes 0
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
15. Letter re: Unaudited Interim Financial Information
27. Financial Data Schedule (EDGAR Version Only)
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
COLONIAL PROPERTIES TRUST
Date: August 14, 2000 /s/ Howard B. Nelson, Jr.
-------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial Officer)
Date: August 14, 2000 /s/ Kenneth E. Howell
---------------------
Kenneth E. Howell
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE>
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Colonial Properties Trust
(File No. 1-12358)
Registrations on Form S-8
Registrations on Form S-3
We are aware that our report dated July 14, 2000 on our review of interim
financial information of Colonial Properties Trust for the three-month and
six-month periods ended June 30, 2000 and 1999 and included in the Company's
quarterly report on Form 10-Q for the quarters then ended, is incorporated by
reference in the registration statements on Form S-8 related to certain
restricted shares and stock options filed on September 29, 1994, Form S-8
related to the Employee Share Option and Restricted Share Plan filed on
September 29, 1994; Form S-3 related to the Shelf Registration filed on November
20, 1997; Form S-3 related to the Dividend Reinvestment Plan filed on April 11,
1995, as amended; Form S-8 related to the registration of common stock issuable
under the Colonial Properties Trust 401(K)/Profit-Sharing Plan filed on October
15, 1996; Form S-8 related to the Employee Share Purchase Plan filed on May 15,
1997; Form S-8 related to the Non-employee Trustee Share Plan filed on May 15,
1997; Form S-8 related to changes to the First Amended and Restated Employee
Share Option and Restricted Share Plan and the Non-employee Trustee Share Option
Plan filed on May 15, 1997; and Form S-8 related to the Second Amended and
Restated Employee Share Option and Restricted Share Plan filed on July 31, 1998.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
August 14, 2000
