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
September 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 October 27, 2000, Colonial Properties Trust had 20,742,264 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
September 30, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Income for the
Three Months and for the Nine Months Ended
September 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 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>
<TABLE>
<CAPTION>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
--------------------
September 30, December 31,
2000 1999
(Unaudited)
------------ ------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net $ 1,760,509 $ 1,586,333
Undeveloped land and construction in progress 93,138 214,043
Cash and equivalents 2,674 4,640
Restricted cash 2,539 2,634
Accounts receivable, net 12,771 10,606
Notes receivable 3,091 366
Prepaid expenses 3,222 2,476
Deferred debt and lease costs 14,440 10,500
Investment in unconsolidated subsidiaries 26,774 24,167
Other assets 10,938 7,753
------------ ------------
$ 1,930,096 $ 1,863,518
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable $ 1,150,517 $ 1,039,863
Accounts payable 10,309 18,215
Accrued interest 16,440 12,901
Accrued expenses 16,466 4,444
Tenant deposits 4,179 4,011
Unearned rent 1,223 2,820
------------ ------------
Total liabilities 1,199,134 1,082,254
------------ ------------
Minority interest:
Preferred units 100,000 100,000
Common units 179,174 187,689
------------ ------------
Total minority interest 279,174 287,689
------------ ------------
Preferred shares of beneficial interest, $.01 par value,
10,000,000 shares authorized; 5,000,000 shares issued
and outstanding at September 30, 2000 and
December 31, 1999, respectively 50 50
Common shares of beneficial interest, $.01 par value,
65,000,000 shares authorized; 26,362,025 and 26,326,458 shares
issued at September 30, 2000 and December 31, 1999, respectively 263 263
Additional paid-in capital 677,888 673,373
Cumulative earnings 235,508 196,302
Cumulative distributions (311,558) (257,948)
Treasury shares, at cost; 5,623,150 shares at September 30, 2000
and 4,454,250 shares at December 31, 1999 (150,163) (117,863)
Deferred compensation on restricted shares (200) (602)
------------ ------------
Total shareholders' equity 451,788 493,575
------------ ------------
$ 1,930,096 $ 1,863,518
============ ============
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
<TABLE>
<CAPTION>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
---------------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2000 1999 2000 1999
---------- --------- --------- ---------
Revenue:
<S> <C> <C> <C> <C>
Minimum rent $ 60,374 $ 57,798 $ 175,425 $ 168,620
Percentage rent 864 483 2,258 2,103
Tenant recoveries 9,147 7,908 26,263 24,176
Other 5,535 3,946 14,841 12,596
--------- --------- --------- ---------
Total revenue 75,920 70,135 218,787 207,495
--------- --------- --------- ---------
Property operating expenses:
General operating expenses 5,566 5,243 15,549 15,402
Salaries and benefits 3,975 3,936 11,712 10,977
Repairs and maintenance 7,523 6,982 21,064 20,407
Taxes, licenses, and insurance 4,924 6,036 16,749 17,909
General and administrative 1,700 1,801 6,697 6,608
Depreciation 15,289 13,292 43,566 39,213
Amortization 1,067 563 2,938 1,645
--------- --------- --------- ---------
Total operating expenses 40,044 37,853 118,275 112,161
--------- --------- --------- ---------
Income from operations 35,876 32,282 100,512 95,334
--------- --------- --------- ---------
Other income (expense):
Interest expense (18,958) (14,829) (52,097) (42,288)
Income from unconsolidated subsidiaries 906 1,319 678 2,173
Gains (losses) from sales of property (140) 2,161 3,374 5,639
Minority interest in consolidated operating property -- -- -- (82)
--------- --------- --------- ---------
Total other expense (18,192) (11,349) (48,045) (34,558)
--------- --------- --------- ---------
Income before extraordinary item and
minority interest in CRLP 17,684 20,933 52,467 60,776
Extraordinary loss -- (742) (418) (628)
--------- --------- --------- ---------
Income before minority interest in CRLP 17,684 20,191 52,049 60,148
Minority interest in income of CRLP (4,468) (4,682) (12,844) (13,855)
Distribution to preferred unitholders of CRLP (2,219) (2,219) (6,656) (5,374)
--------- --------- --------- ---------
Net income $ 10,997 $ 13,290 $ 32,549 $ 40,919
Dividends to preferred shareholders (2,735) (2,735) (8,204) (8,204)
--------- --------- --------- ---------
Net income available to common shareholders $ 8,262 $ 10,555 $ 24,345 $ 32,715
========= ========= ========= =========
Net income per share after consideration of minority interest:
Income before extraordinary items $ 0.40 $ 0.46 $ 1.15 $ 1.32
Extraordinary income (loss) -0- (0.02) (0.01) (0.02)
--------- --------- --------- ---------
Net income per common share - basic $ 0.40 $ 0.44 $ 1.14 $ 1.30
========= ========= ========= =========
Net income per common share - diluted $ 0.40 $ 0.44 $ 1.14 $ 1.30
========= ========= ========= =========
Weighted average common shares outstanding 20,818 24,027 21,419 25,183
========= ========= ========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
<TABLE>
<CAPTION>
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
-------------------
Nine Months Ended
September 30,
----------------------
2000 1999
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 32,549 $ 40,919
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 46,504 40,858
Income from unconsolidated subsidiaries (678) (2,173)
Distribution to preferred unitholders of CRLP 6,656 5,374
Minority interest 12,844 13,937
Gains from sales of property (3,374) (5,639)
Other 1,071 1,513
Decrease (increase) in:
Restricted cash 95 21
Accounts receivable and notes receivable (5,459) (218)
Prepaid expenses (509) 633
Other assets (7,869) (98)
Increase (decrease) in:
Accounts payable (7,906) 2,531
Accrued interest 3,539 (370)
Accrued expenses and other 10,724 10,764
--------- ---------
Net cash provided by operating activities 88,187 108,052
--------- ---------
Cash flows from investing activities:
Acquisition of properties (26,512) (48,648)
Development expenditures (78,151) (132,742)
Tenant improvements (17,784) (6,956)
Capital expenditures (11,952) (12,622)
Proceeds from sales of property, net of selling costs 40,615 120,795
Distributions from subsidiaries 3,489 8,084
Capital contributions to subsidiaries (5,418) (5,227)
--------- ---------
Net cash used in investing activities (95,713) (77,316)
--------- ---------
Cash flows from financing activities:
Proceeds from CRLP preferred units issuance, net of expenses paid -0- 97,403
Proceeds from additional borrowings 128,568 136,200
Proceeds from Employee Unit Purchase Plan, net of expenses paid 9,280 -0-
Principal reductions of debt (32,302) (59,156)
Proceeds from dividend reinvestment -0- 3,784
Net change in revolving credit balances 14,257 (31,564)
Dividends paid to common and preferred shareholders (53,610) (57,688)
Purchase of treasury stock (32,300) (96,069)
Purchase of common units (5,575) (3,509)
Distributions to minority partners in CRLP (20,474) (18,773)
Payment of debt financing cost (1,791) (1,472)
Other (493) (628)
--------- ---------
Net cash provided by (used in) financing activities 5,560 (31,472)
--------- ---------
Decrease in cash and equivalents (1,966) (736)
Cash and equivalents, beginning of period 4,640 4,583
--------- ---------
Cash and equivalents, end of period $ 2,674 $ 3,847
========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
COLONIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
September 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 quarters ended
March 31 and June 30, 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 -- Acquisition
Temple Mall - 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 $26.2
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>
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 Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 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 $ 8,262 $ 10,555 $ 24,345 $ 32,715
============ ============ ============ ============
Denominator:
Denominator for basic net income Effect of dilutive securities:
Trustee and employee stock options 53 21 32 21
------------ ------------ ------------ ------------
Denominator for diluted net income
per share - adjusted weighted
average common shares 20,871 24,048 21,451 25,204
============ ============ ============ ============
Basic net income per share $ .40 $ .44 $ 1.14 $ 1.30
============ ============ ============ ============
Diluted net income per share $ .40 $ .44 $ 1.14 $ 1.30
============ ============ ============ ============
</TABLE>
Options to purchase 388,083 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,
Office, and Retail. 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 nine months ended September 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
September 30, 2000 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Total Divisional Revenues $ 29,882 $ 12,566 $ 35,496 $ 77,944
NOI 20,287 8,910 25,529 54,726
Divisional assets 756,686 322,839 859,078 1,938,603
------------------------------------------------------------------------------------------------------------
Three Months Ended
September 30, 1999 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 30,329 $ 10,435 $ 31,637 $ 72,401
NOI 19,351 7,258 22,543 49,152
------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 2000 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 87,949 $ 36,564 $ 101,538 $ 226,051
NOI 58,475 25,790 72,902 157,167
------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1999 Multifamily Office Retail Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 87,632 $ 30,105 $ 96,348 $ 214,085
NOI 56,837 21,040 68,575 146,452
------------------------------------------------------------------------------------------------------------
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 nine months ended September
30, 2000 and 1999, and total divisional assets to total assets, for the periods
ended September 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 Nine Months Ended Nine Months Ended
(in thousands) September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
Revenues
----------------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Total divisional revenues $ 77,944 $ 72,401 $ 226,051 $ 214,085
Unallocated corporate revenues 1,149 220 2,115 961
Partially-owned subsidiaries (3,173) (2,486) (9,379) (7,551)
----------------------------------------------------------------------------------- ---------------------- --------------------
Total Revenues $ 75,920 $ 70,135 $ 218,787 $ 207,495
----------------------------------------------------------------------------------- ---------------------- --------------------
NOI
----------------------------------------------------------------------------------- ---------------------- --------------------
Total divisional NOI $ 54,726 $ 49,152 $ 157,167 $ 146,452
Unallocated corporate revenues 1,149 220 2,115 961
Partially-owned subsidiaries (1,898) (1,448) (5,532) (4,531)
General and administrative expenses (1,700) (1,801) (6,697) (6,608)
Depreciation (15,289) (13,292) (43,566) (39,213)
Amortization (1,067) (563) (2,938) (1,645)
Other (45) 14 (37) (82)
----------------------------------------------------------------------------------- ---------------------- --------------------
Income from operations $ 35,876 $ 32,282 $ 100,512 $ 95,334
---------------------------------------------------------------------------------------------------------------------------------
For the Period Ended For the Period Ended
Assets September 30, 2000 December 31, 1999
-----------------------------------------------------------------------------------
Total divisional assets $ 1,938,603 $ 1,865,090
Unallocated corporate assets (1) 80,755 65,914
Partially-owned subsidiaries (89,262) (67,486)
-----------------------------------------------------------------------------------
Total assets $ 1,930,096 $ 1,863,518
-----------------------------------------------------------------------------------
</TABLE>
[FN]
(1) Includes the Company's investment in partially owned entities of $26,774 as
of September 30, 2000, and $24,166 as of December 31, 1999.
</FN>
Note 5 -- Subsequent Events
Quarterly Distribution
On October 17, 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 $19.2 million. The
distribution was declared to shareholders of record as of October 27, 2000, and
was paid on November 3, 2000.
Interest Rate SWAP Transactions
On October 25, 2000, the Company terminated its two reverse interest
rate swap agreements totaling $50 million on its medium-term notes. With the
termination, the Company received approximately $1.5 million, which will be
amortized over the remaining life of the original swap agreement. Additionally,
subsequent to September 30, 2000, the Company entered into an interest rate swap
agreement for $125 million of its line of credit at a fixed one-year LIBOR rate
of 6.456% plus 115 basis points, with a one-year term. Also, the Company entered
into a forward treasury rate lock of $25 million on its future financings at a
fixed rate of 5.778% for a term of 45 days.
Disposition
On October 27, 2000, the Company sold its interest in the Anderson
Block Properties Partnership, of which the Company maintained a 33.33% ownership
interest. The entire partnership was sold for a total purchase price of $1.1
million, of which $1.0 million was used to repay outstanding secured loans. The
remaining proceeds retained by the Company were used to repay a portion of the
borrowings under 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 September 30, 2000, and the
related consolidated condensed statements of income for the three-month and
nine-month periods ended September 30, 2000 and 1999, and the consolidated
condensed statements of cash flows for the nine-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
November 3, 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 September 30, 2000,
Colonial's real estate portfolio consisted of 54 multifamily communities, 18
office properties, and 43 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 September 30, 2000 and 1999
Revenue -- Total revenue increased by $5.8 million, or 8.3%, for the
third quarter of 2000 when compared to the third quarter of 1999. The majority
of this increase, $3.1 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 third quarter of 2000.
Operating Expenses -- Total operating expenses increased by $2.2
million, or 5.8%, for the third quarter of 2000 when compared to the third
quarter of 1999. The majority of this increase, $1.6 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 $4.1 million,
or 27.8%, for the third quarter of 2000 when compared to the third 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, and the Company's Common Share
Repurchase Program, and the issuance of $132.5 million of unsecured medium term
notes through its subsidiary CRLP during the third quarter of 1999 and first
quarter of 2000.
Results of Operations -- Nine Months Ended September 30, 2000 and 1999
Revenue -- Total revenue increased by $11.3 million, or 5.4%, for the
nine months ended September 30, 2000 when compared to the nine months ended
September 30, 1999. This majority of this increase, $9.5 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 $6.1
million, or 5.5%, for the nine months ended September 30, 2000 when compared to
the nine months ended September 30, 1999. The majority of this increase, $4.5
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 $9.8 million,
or 23.2%, for the nine months ended September 30, 2000 when compared to the nine
months ended September 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 during the third quarter
of 1999 and first quarter of 2000.
Liquidity and Capital Resources
During the third quarter of 2000, the Company invested $56.5 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, financing of certain properties, and cash from operations. As of
September 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 April 14, 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 September 30, 2000, was
$242.6 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 third quarter
of 2000, the Company repurchased 597,100 shares at an all-in cost of
approximately $16.7 million, which completed the Company's current common share
repurchase program. To date, the Company has repurchased 5,623,150 shares at an
all-in cost of approximately $150 million, which represents an average purchase
price of $26.70 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 third quarter of 2000 and 1999 and nine months ended
September 30, 2000 and 1999 was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
(in thousands) 2000 1999 2000 1999
--------------------------------------------------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income available to common shareholders $8,262 $10,555 $24,345 $32,715
Adjustments:
Minority interest in CRLP 4,468 4,682 12,844 13,855
Real estate depreciation and amortization (1) 16,233 14,166 46,184 41,039
Straight-line rents (1) (420) 0 (1,191) 0
(Gains) losses from sales of property (1) 205 (2,161) (2,720) (5,639)
Extraordinary (income) loss 0 742 418 627
------ -------------------------------------------------- ----------- ------------ ------------- ------------
Funds From Operations $28,748 $ 27,984 $79,880 $ 82,597
--------------------------------------------------------- ----------- ------------ ------------- ------------
</TABLE>
[FN]
(1) Includes pro-rata share of adjustments for subsidiaries.
</FN>
<PAGE>
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 September 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 $ 7,772 78,031 58,090 108,914 100,000 471,810 824,617 818,028
Average interest rate
at September 30, 2000 7.9% 7.7% 7.9% 7.2% 7.3% 7.6% 7.5% -
Variable Debt $ - - - 242,594 - 83,307 325,901 325,901
Average interest rate
at September 30, 2000 - - - 7.6% - 5.9% 7.2% -
Interest Rate SWAPs
Fixed to variable $ - - - - - 50,000 50,000 1,240
Average pay rate - - - - - 1 month 1 month -
LIBOR LIBOR
Interest Rate Cap $ - - - 30,379 - - 30,379 1
Interest Rate - - - 11.2% - - 11.2% -
</TABLE>
The table incorporates only those exposures that exist as of September 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.
None
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: November 13, 2000 /s/ Howard B. Nelson, Jr.
-------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial Officer)
Date: November 13, 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 November 3, 2000 on our review of interim
financial information of Colonial Properties Trust for the three-month and
nine-month periods ended September 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; Form S-8 related to the Second Amended and Restated
Employee Share Option and Restricted Share Plan filed on July 31, 1998; and Form
S-3 related to the Dividend Reinvestment Plan filed on October 23, 2000.
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
November 13, 2000
