UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _______________
Commission File Number 1-12358
COLONIAL PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Alabama 59-7007599
(State of organization) (I.R.S. employer
identification no.)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal
executive offices)
Registrant's telephone number, including area code: (205) 250-8700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Shares of New York Stock Exchange
Beneficial Interest,
$.01 par value per share
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such
filing requirements for the past 90 days. YES __X__ NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of the 21,177,481 Common Shares held by
non-affiliates of the Registrant was approximately $505,612,000 based on the
closing price on the New York Stock Exchange for such Common Shares on March 8,
2000.
Number of the Registrant's Common Shares of Beneficial Interest
outstanding as of March 8, 2000: 21,893,242.
Documents Incorporated by Reference
Portions of the Annual Report to Shareholders for the year ended
December 31, 1999, are incorporated by reference into Part II. Portions of the
Proxy Statement for the annual shareholders meeting to be held in 2000 are
incorporated by reference into Part III.
<PAGE>
PART I
Item 1. Business.
As used herein, the term "Company" includes Colonial Properties Trust, an
Alabama real estate investment trust, and one or more of its subsidiaries and
other affiliates (including, Colonial Realty Limited Partnership, Colonial
Properties Services Limited Partnership and Colonial Properties Services, Inc.)
or, as the context may require, Colonial Properties Trust only or Colonial
Realty Limited Partnership only. As used herein, the terms "we", "us", and "our"
refer to Colonial Properties Trust only.
This annual report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including but not limited to anticipated timetables for acquisitions,
developments and expansions, expected economic growth in geographic markets
where the Company owns or expects to own properties, and plans for continuing
the Company's diversified strategy. These statements involve risks and
uncertainties that may cause actual results to be materially different from
those anticipated. Prospective investors should specifically consider, in
connection with these forward-looking statements, the various risk factors
identified herein and in the Company's other filings with the SEC which could
cause actual results to differ, including downturns in local or national
economies, competitive factors, the availability of suitable properties for
acquisition at favorable prices, and other risks inherent in the real estate
business.
The Company is one of the largest owners, developers and operators of
multifamily, office and retail properties in the Sunbelt region of the United
States. It is a fully-integrated real estate company, whose activities include
ownership of a diversified portfolio of 111 properties as of December 31, 1999,
located in Alabama, Florida, Georgia, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, and Virginia, development of new properties,
acquisition of existing properties, build-to-suit development, and the provision
of management, leasing, and brokerage services for commercial real estate. The
Company is a self-administered equity real estate investment trust (a "REIT")
that, as of December 31, 1999, owned 52 multifamily apartment communities
containing a total of 16,415 apartment units (the "Multifamily Properties"), 18
office properties containing a total of approximately 3.1 million square feet of
office space (the "Office Properties"), 41 retail properties containing a total
of approximately 13.9 million square feet of retail space (the "Retail
Properties"), and certain parcels of land adjacent to or near certain of these
properties (the "Land"). The Multifamily Properties, the Office Properties, the
Retail Properties and the Land are referred to collectively as the "Properties".
As of December 31, 1999, the Multifamily Properties, the Office Properties, and
the Retail Properties that had achieved stabilized occupancy were 93.9%, 93.3%
and 89.9% leased, respectively.
The Company is the direct general partner of, and holds approximately
66.5% of the interests in, Colonial Realty Limited Partnership, a Delaware
limited partnership ("Colonial Realty", the "Operating Partnership", or "CRLP").
The Operating Partnership owns all of the Properties (or interests therein). The
Company conducts all of its business through the Operating Partnership and
Colonial Properties Services Limited Partnership (the "Management Partnership"),
which provides management services for the Properties, and Colonial Properties
Services, Inc. (the "Management Corporation"), which provides management
services for properties owned by third parties.
The Company's executive offices are located at 2101 Sixth Avenue North,
Suite 750, Birmingham, Alabama, 35203 and its telephone number is (205)
250-8700. The Company was formed in Maryland on July 9, 1993. On August 21,
1995, the Company reorganized as an Alabama real estate investment trust under a
new Alabama REIT statute.
Formation of the Company
The Company and the Operating Partnership were formed to succeed to
substantially all of the interests of Colonial Properties, Inc., an Alabama
corporation ("Colonial"), its affiliates and certain others in a diversified
portfolio of multifamily, office, and retail properties located in Alabama,
Florida, and Georgia and to the development, acquisition, management, leasing,
and brokerage businesses of Colonial.
On September 29, 1993, (i) the Company consummated an initial public
offering (the "IPO") of 8,480,000 of its common shares of beneficial interest,
$.01 par value per share ("Common Shares"), (ii) the Operating Partnership
assumed ownership of 36 Properties (or interests therein) held by Thomas H.
Lowder, James K. Lowder, Robert E. Lowder, and their mother, Catherine Lowder
(the "Lowder family"), and third-party partners of the Lowder family, and the
operating businesses of Colonial, (iii) the Company transferred the net proceeds
from the IPO through Colonial Properties Holding Company, Inc. ("CPHC"), which
was dissolved in 1998, to the Operating Partnership, in exchange for 8,480,000
units of limited partnership interest in the Operating Partnership ("OP Units"),
(iv) the Operating Partnership repaid approximately $150.2 million of
indebtedness and prepayment penalties associated therewith secured by certain of
the Properties, and (v) the Operating Partnership established a $35.0 million
line of credit with SouthTrust Bank, which has since been increased to $250.0
million, to fund development activities and property acquisitions and for
general corporate purposes (collectively, the "Formation Transactions"). On
October 28, 1993, the underwriters of the IPO exercised an over-allotment option
to purchase an additional 686,200 shares.
The Company owns substantially all of the economic interests in the
Management Corporation, but in order to permit the Company to qualify as a REIT,
voting control of the Management Corporation is held by an affiliate of the
Lowder family.
Recent Developments
Since the IPO, the Company has significantly expanded its portfolio of
Properties and its operating businesses. Acquisitions by the Company of new
properties represent a total investment of over $1.3 billion. The Company has
also completed the expansion and development of 17 multifamily properties since
the IPO, adding a total of 3,474 units to its multifamily portfolio. The Company
currently has seven active expansion, development, and redevelopment projects in
progress for Multifamily Properties, one Office Property development, and five
Retail Property developments and redevelopments. The Company has also disposed
of 13 Multifamily Properties representing 4,783 apartment units, and one Office
Property representing 25,000 square feet of office space, and has entered into
three joint ventures.
The following is a summary of the Company's acquisition, disposition,
joint venture, and development activity in 1999.
Acquisition and Disposition Activity
The Company disposed of seven Multifamily Properties, including three
in Florida, two in Alabama, and two in Georgia, representing 2,319 units for a
total sale price of $119.8 million.
The Company acquired one Office Property, in Alabama, containing
163,000 square feet of office space for a total purchase price of $16.5 million.
The Company also added 468,000 square feet of retail shopping space
through the acquisition of an enclosed mall at a net cost of $29.3 million.
Joint Ventures
During the third quarter of 1999, the Company entered into a joint
venture with CMS, a Delaware general partnership. In connection with this joint
venture, Colonial sold the following six properties: Colonial Village at
Stockbridge, Colonial Grand at Barrington Club, Colonial Grand at Ponte Vedra,
Colonial Village at River Hills, Colonial Grand at Mountain Brook, and Colonial
Village at Cahaba Heights. CMS acquired an 85% interest in the joint venture
from Colonial for $80.6 million. The Company acquired a 15% interest in the
joint venture and will serve as manager of the properties. Subsequent to
formation, the joint venture leveraged the properties for a total of $73.6
million of nonrecourse notes, and the proceeds were distributed proportionately
to the joint venture partners. At December 31, 1999, Colonial had an ending net
investment in the joint venture of $2.8 million.
Development Activity
During 1999, the Company completed development of 1,404 new apartment
units in 10 multifamily communities and acquired land on which it intends to
develop additional multifamily communities during 2000 and 2001. The aggregate
cost of this multifamily development activity was $105.1 million. As of December
31, 1999, the Company had 1,290 apartment units in seven multifamily communities
under development, redevelopment, or expansion. Management anticipates that the
seven multifamily projects will be completed during 2000 and 2001. Management
expects to invest an additional $15.5 million over this period to complete these
multifamily projects.
During 1999, the Company completed development of two office
properties, and began development of one office property in Atlanta, Georgia.
The aggregate investment in the office developments during 1999 was $30.8
million. Management estimates that it will invest an additional $14.0 million to
complete these projects.
During 1999, the Company continued development of a community shopping
center in Birmingham, Alabama, and began construction of two new community
shopping centers, and began the redevelopment of an enclosed mall and community
shopping center. The Company's aggregate investment in these retail developments
during 1999 was $32.0 million. Management anticipates that it will invest an
additional $68.6 million to complete these retail developments.
The table below provides an overview of the Company's acquisition,
development, expansion, and redevelopment activity during 1999:
<PAGE>
Summary of 1999
Acquisition and Development
Activity
<TABLE>
<CAPTION>
Completion or Type of Units (M) Cost or
Anticipated Name of Property GLA (R/O) Anticipated
Completion Date Property (1) Location (2) (3) Cost (4)
- ------------------- ------------------------------------------ --------------------- ----------- ------------- --------------
Acquisitions:
<S> <C> <C> <C> <C> <C>
2nd Qtr 99 Emmett R. Johnson Building Birmingham, AL O 163,000 $ 16,500
3rd Qtr 99 The Plaza Mall Greenville, NC R 468,000 29,300
Developments:
1st Qtr 99 CG at Cypress Crossing Orlando, FL M 250 21,600
2nd Qtr 99 CG at Inverness Lakes II (expansion) Birmingham, AL M 132 8,300
2nd Qtr 99 CG at Edgewater II (expansion) Huntsville, AL M 192 12,800
2nd Qtr 99 CG at Citrus Park Tampa, FL M 176 12,700
2nd Qtr 99 CG at Lakewood Ranch Sarasota, FL M 288 22,600
3rd Qtr 99 CG at Wesleyan II (expansion) Macon, GA M 88 7,000
1st Qtr 00 CV at Ashley Plantation (expansion) Bluffton, SC M 214 13,100
1st Qtr 00 CV at Walton Way (redevelopment) Augusta, GA M 256 2,900
2nd Qtr 00 CV at Heather Glen Orlando, FL M 448 34,200
2nd Qtr 00 CG at Madison Huntsville, AL M 336 23,000
2nd Qtr 00 CG at Promenade Montgomery, AL M 384 27,200
4th Qtr 00 CG at Reservoir Jackson, MS M 170 13,600
1st Qtr 01 CG at Liberty Park Birmingham, AL M 300 26,500
2nd Qtr 99 Colonial Plaza (redevelopment) Birmingham, AL O 179,000 1,900
3rd Qtr 99 1800 International Park Birmingham, AL O 146,000 13,800 (5)
3rd Qtr 99 Colonial Center at Research Park Huntsville, AL O 133,000 11,500 (5)
3rd Qtr 00 Colonial Center 300 at Mansell Overlook Atlanta, GA O 162,000 23,400
2nd Qtr 00 Colonial Promenade Trussville Birmingham, AL R 388,000 33,300
4th Qtr 00 Colonial Promenade at Tutwiler Farm Birmingham, AL R 213,000 26,200
4th Qtr 00 Colonial Promenade Madison Huntsville, AL R 111,000 10,000
4th Qtr 00 Northdale Court (redevelopment) Tampa, FL R 193,000 3,200
2nd Qtr 01 Brookwood Village Mall (redevelopment) Birmingham, AL R 751,000 35,000
--------------
Total $ 429,600
==============
<FN>
(1) In the listing of Multifamily Property names, CG has been used as an
abbreviation for Colonial Grand and CV has been used as an abbreviation for
Colonial Village.
(2) M refers to Multifamily Properties, O refers to Office Properties, and R
refers to Retail Properties.
(3) Units (in this table only) refers to multifamily apartment units and GLA
refers to gross leasable area of office and retail space.
(4) Amounts in thousands.
(5) Amounts represent costs to complete the noted buildings, however,
additional tenant improvement costs will be incurred to complete the
projects.
</FN>
</TABLE>
Multifamily Property Acquisitions
Colonial Village at Haverhill--On May 1, 1999, the Company acquired
the remaining 20.2% ownership interest in Colonial Village at Haverhill, a
322-unit apartment complex on approximately 19 acres of land in San Antonio,
Texas. On July 1, 1998, the Company had acquired a 79.8% ownership interest in
Colonial Village at Haverhill. The purchase of the remaining 20.2% interest was
funded through the issuance of 157,140 limited partnership units in the
Operating Partnership, valued at approximately $4.2 million.
The Company intends to continue to pursue acquisitions in the Sunbelt
region of the United States that meet the Company's acquisition criteria for
property quality, market strength, and investment return.
Completed Multifamily Expansion and Development Activity
Colonial Grand at Cypress Crossing-- The Company completed construction
on a 250-unit development located in Orlando, Florida during the first quarter
of 1999. The new apartments feature numerous luxuries, including a security
system, automated climate control, high-speed Internet access, and home theatre
pre-wiring. Project development costs, including land acquisition costs, totaled
$21.6 million and were funded through advances on the Company's line of credit.
Colonial Grand at Inverness Lakes II--The Company completed
construction on a 132-unit expansion of Colonial Grand at Inverness Lakes
located in Mobile, Alabama during the second quarter of 1999. This expansion
phase offers the same amenities as the existing community. Project development
costs, including land acquisition costs, totaled $8.3 million and were funded
through advances on the Company's line of credit.
Colonial Grand at Edgewater II--The Company completed construction on
a 192-unit expansion of Colonial Grand at Edgewater in Huntsville, Alabama
during the second quarter of 1999. This expansion phase offers the same
amenities as the existing community. Project development costs, including land
acquisition costs, totaled $12.8 million and were funded through advances on the
Company's line of credit.
Colonial Village at Citrus Park--The Company completed construction on
a 176-unit development located in Tampa, Florida during the second quarter of
1999. The new apartment community offers a variety of amenities, including a
swimming pool, fitness center, resident business center, garages and a gated
entry. Project development costs, including land acquisition costs, totaled
$12.7 million and were funded through advances on the Company's line of credit.
Colonial Grand at Lakewood Ranch--The Company completed construction
on a 288-unit development located in Sarasota, Florida during the second quarter
of 1999. The new apartments feature numerous luxuries, including a security
system, automated climate control, high-speed Internet access, and home theatre
pre-wiring. Amenities include a swimming pool, fitness center, tennis courts and
a gated entry. Project development costs, including land acquisition costs,
totaled $22.6 million and were funded through advances on the Company's line of
credit.
Colonial Grand at Wesleyan II--The Company completed construction on
an 88-unit expansion of Colonial Grand at Wesleyan located in Macon, Georgia
during the third quarter of 1999. This expansion phase offers the same amenities
as the existing community. Project development costs, including land acquisition
costs, totaled $7.0 million and were funded through advances on the Company's
line of credit.
Continuing Multifamily Expansion and Development Activity
Colonial Village at Ashley Plantation--The Company began construction
on a 214-unit expansion of Colonial Village at Ashley Plantation located in
Bluffton, South Carolina during the second quarter of 1998. Project development
costs, including land acquisition costs, are expected to total $13.1 million and
will be funded through advances on the Company's line of credit. The Company
expects to complete construction in the first quarter of 2000.
Colonial Village at Walton Way--The Company began the redevelopment of
Colonial Village at Walton Way, a 256-unit multifamily community located in
Augusta, Georgia. Project redevelopment costs are expected to total $2.9 million
and will be funded through advances on the Company's line of credit. The Company
expects to complete the redevelopment in the first quarter of 2000.
Colonial Village at Heather Glen-- The Company began construction on a
448-unit development located in Orlando, Florida during the third quarter of
1998. The new apartments will offer a variety of amenities, including a
clubhouse, car-care center, fitness center with a child play area, two swimming
pools, tennis courts, and a picnic area. Project development costs, including
land acquisition costs, are expected to total $34.2 million and will be funded
through advances on the Company's line of credit. The Company expects to
complete construction in the second quarter of 2000.
Colonial Grand at Madison-- The Company began construction on a
336-unit development located in Huntsville, Alabama. The new apartments will
offer a variety of amenities, including a swimming pool, an exercise room,
tennis courts, and a car wash. Project development costs, including land
acquisition costs, are expected to total $23.0 million and will be funded
through advances on the Company's line of credit. The Company expects to
complete construction in the first quarter of 2000.
Colonial Grand at Promenade-- The Company began construction on a
384-unit development located in Montgomery, Alabama. The new apartments will
feature numerous luxuries, including a security system, automated climate
control, high-speed Internet access, and home theatre pre-wiring. Project
development costs, including land acquisition costs, are expected to total $27.2
million and will be funded through advances on the Company's line of credit. The
Company expects to complete construction in the second quarter of 2000.
Colonial Grand at Reservoir-- The Company began construction on a
170-unit development located in Jackson, Mississippi. The new apartments will
offer a variety of amenities, including a fitness center, swimming pool,
garages, and tennis courts. Project development costs, including land
acquisition costs, are expected to total $13.6 million and will be funded
through advances on the Company's line of credit. The Company expects to
complete construction in the first quarter of 2000.
Colonial Grand at Liberty Park-- The Company began construction on a
300-unit development located in Birmingham, Alabama during the third quarter of
1998. The new apartments will feature numerous luxuries, including a security
system, automated climate control, high-speed Internet access, and home theatre
pre-wiring. Project development costs, including land acquisition costs, are
expected to total $26.5 million and will be funded through advances on the
Company's line of credit. The Company expects to complete construction in the
second quarter of 2000.
Office Property Acquisitions
Emmett R. Johnson Building--In June 1999, the Company acquired the
Emmett R. Johnson Building, a 163,000 square-foot Class A office building
located in Birmingham, Alabama. The property was built in 1982, renovated in
1995, and was 90% occupied at the time of acquisition. The Emmett R. Johnson
Building was acquired for a total purchase price of $16.5 million, which were
funded through an advance on the Company's line of credit.
Completed Office Property Development and Redevelopment Activity
1800 International Park--In October 1999, the Company completed
development of a six-story multi-tenant office building in Birmingham, Alabama
with a total of 146,000 square feet of leasable area. Project development costs,
including land acquisition costs, totaled $13.8 million and were funded through
advances on the Company's line of credit. The Company expects to incur an
additional $4.5 million in tenant improvements during the lease-up of this
property.
Colonial Center at Research Park--Also in October 1999, the Company
completed development of two office buildings in Huntsville, Alabama with a
total of 133,000 square feet of leasable area. Colonial Center at Research Park
features Class A office space with first-class amenities. Project development
costs, including land acquisitions, totaled $11.5 million and were funded
through advances on the Company's line of credit. The Company expects to incur
an additional $1.7 million in tenant improvements during the lease-up of this
property.
Colonial Plaza--During 1999, the Company began and completed the
redevelopment of Colonial Plaza, a 179,000 square foot office building located
in Birmingham, Alabama. The renovation included a new exterior finish, the
relocation and modernization of the building lobby, the renovation of all
common areas, common conference facilities, and a new fitness center. Project
redevelopment costs were approximately $1.9 million, and were funded through
the Company's line of credit.
<PAGE>
New Office Property Development
Colonial Center 300 at Mansell Overlook--During the third quarter of
1999, the Company began the development of Colonial Center 300 at Mansell
Overlook, a 162,000 square foot Class A office building located in Atlanta,
Georgia. The building will include the most advanced technology systems
available in the market, including high-speed Internet access, fiber optic
network infrastructure, and state-of-the art, customer controlled energy
management system. Project development costs, including land acquisitions are
expected to total $23.4 million and will be funded through advances on the
Company's line of credit. The Company expects to complete the project in the
third quarter of 2000.
Retail Property Acquisitions
The Plaza Mall--In August 1999, the Company acquired the Plaza Mall, a
468,000 square foot mall in Greenville, North Carolina for a total purchase
price of $29.3 million. The mall anchors include two Belk stores, a recently
expanded and renovated JC Penney, and Proffitt's. 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.
Retail Development and Redevelopment Activity
Colonial Promenade Trussville--During the third quarter of 1998, the
Company began the development of a 388,000 square foot retail shopping center in
Birmingham, Alabama. The shopping center development will be anchored by a
Wal-Mart Supercenter, Regal Cinemas, Marshall's Department Store, and Goody's
Family Clothing. Project expansion costs are expected to total $33.3 million and
will be funded through advances on the Company's line of credit. The Company
expects to complete the development during the second quarter of 2000.
Colonial Promenade at Tutwiler Farm--During the third quarter of 1999,
the Company began the development of a 516,000 square foot retail shopping
center in Birmingham, Alabama. The shopping center development will be anchored
by a Home Depot, Target, and Michaels. Project expansion costs are expected to
total $26.2 million and will be funded through advances on the Company's line of
credit and the issuance of units of CRLP. The Company expects to complete the
development during the fourth quarter of 2000.
Colonial Promenade Madison--During the third quarter of 1999, the
Company began the development of an 111,000 square foot retail shopping center
in Huntsville, Alabama. The shopping center development will be anchored by a
Publix Supermarket, and will include approximately 30,000 square feet of small
shop space. Project expansion costs are expected to total $10.0 million and will
be funded through advances on the Company's line of credit. The Company expects
to complete the development during the fourth quarter of 2000.
Brookwood Village Mall--During the third quarter of 1999, the Company
began the redevelopment and expansion of Brookwood Village Mall, an enclosed
mall located in Birmingham, Alabama. The renovations will include a grand
entrance offering valet parking, natural lighting through the use of skylights,
custom light fixtures, stone flooring, and plush area carpeting. The mall will
also offer an upscale selection of merchants as new tenants, restaurants, and
entertainment venues are added. Project redevelopment and expansion costs are
expected to total $35.0 million and will be funded through the Company's
unsecured line of credit. The Company expects to complete the redevelopment and
expansion during the second quarter of 2001.
Northdale Court--During the fourth quarter of 1999, the Company began
the redevelopment of Northdale Court, a 193,000 square foot strip center located
in Tampa, Florida. Project redevelopment costs are expected to total $3.2
million and will be funded through advances on the Company's unsecured line of
credit. The Company expects to complete the redevelopment during the fourth
quarter of 2000.
Financing Activity
During 1999, the Company funded a large portion of its acquisitions
and developments through the issuance by CRLP of preferred units and debt
securities. During 1999, the Company completed the following equity and debt
transactions:
<PAGE>
Preferred Unit Offering
(in thousands)
----------------------------------
Number of Price Per Gross Offering Net
Date Preferred Units Unit Proceeds Costs Proceeds
- ------------ -------------- ---------- ---------- ---------- ------------
February 2,000,000 $ 50.000 $ 100,000 $ 2,600 $ 97,400
Debt Offerings
Gross
Type of Proceeds
Date Note Maturity Rate (in thousands)
- ----------------- ------------------- -------------------------- --------------
August Medium-term August, 2002 7.93% $ 57,500
August Medium-term August, 2004 8.19% $ 25,000
The Company's current borrowing capacity under its unsecured line of
credit is $250 million. The credit facility, which is used by the Company
primarily to finance additional property investments, bears interest at a rate
ranging between 80 and 135 basis points above LIBOR and is renewable in July
2000. The line of credit agreement includes a competitive bid feature that will
allow the Company to convert up to $125 million under the line of credit to a
fixed rate, for a fixed term not to exceed 90 days. As of December 31, 1999, the
balance outstanding on the Company's line of credit was $228.3 million.
Business Strategy
The general business strategy of the Company is to generate stable and
increasing cash flow and portfolio value for its shareholders. The Company has
implemented this strategy principally by (i) realizing growth in income from its
existing portfolio of properties, (ii) developing, expanding, and selectively
acquiring additional multifamily, office, and retail properties in growth
markets located in the Sunbelt region of the United States, where the Company
has first-hand knowledge of growth patterns and local economic conditions, (iii)
managing its own properties, which has enabled it to better control operating
expenses and establish long-term relationships with its office and retail
tenants, (iv) maintaining its third-party property management business, which
has increased cash flow and established additional relationships with tenants,
and (v) employing a comprehensive capital maintenance program to maintain
properties in first-class condition. The Company's business strategy and the
implementation of that strategy are determined by the Company's board of
trustees and may be changed from time to time.
Financing Strategy
The Company's strategy is to maintain coverage ratios in order to
sustain its investment grade status. The Company's total market capitalization
as of December 31, 1999, was $2.0 billion, and its ratio of debt to total market
capitalization was 51.3%. We calculate debt to total market capitalization as
total debt as a percentage of total debt, including preferred shares and units,
plus the market value of our outstanding common shares and the outstanding units
of CRLP.At December 31, 1999, the Company's total debt included fixed-rate debt
of $758.0 million, or 72.9% of total debt, and floating-rate debt of $281.9
million, or 27.1% of total debt. The Company has obtained interest rate
protection for $50.0 million of the floating-rate debt.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Interest rate cap
agreements and interest rate swaps are used to reduce the potential impact of
increases in interest rates on variable-rate debt. Treasury lock agreements are
used by CRLP to lock in interest rates in connection with public debt offerings.
On January 4, 1999, Colonial entered into an interest rate swap for $50 million
of its line of credit at 4.97% plus 80 to 135 basis points and on January 15,
1999, Colonial entered into an interest rate swap for $52 million of tax exempt
bonds at a rate of 3.23%. Additionally, on May 4, 1999, Colonial entered into an
interest rate swap agreement for $25 million of its line of credit at a rate of
5.07%. All of these interest rate swap agreements have one-year terms and any
payments made or received under the agreements are recognized as adjustments to
interest expense as incurred. On February 10, 2000, Colonial entered into two
reverse interest rate swap agreements for a total of $50 million of its
medium-term notes. Under the terms of the agreements, Colonial will receive a
fixed interest rate of 7.37% and will be required to pay a floating rate equal
to one month LIBOR that is compounded and paid semi-annually. Both of these
agreements have five-year terms, and any payments made or received under the
agreements are recognized as adjustments to interest expense. Colonial is
exposed to credit losses in the event of nonperformance by the counterparties to
its interest rate cap and nonderivative financial assets but has no
off-balance-sheet credit risk of accounting loss. The Company anticipates,
however, that counterparties will be able to fully satisfy their obligations
under the contracts. Colonial does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit
standing of counterparties.
The Company may from time to time reevaluate its borrowing policies in
light of then current economic conditions, relative costs of debt and equity
capital, market values of properties, growth and acquisition opportunities, and
other factors. The Company may modify its borrowing policy and may increase or
decrease its ratio of debt to total market capitalization. To the extent that
the board of trustees of the Company determines to seek additional capital, the
Company may raise such capital through additional equity offerings, debt
financings, asset dispositions, or retention of cash flow (subject to provisions
in the Code requiring the distribution by a REIT of a certain percentage of
taxable income and taking into account taxes that would be imposed on
undistributed taxable income) or a combination of these methods.
Property Management
The Company is experienced in the management and leasing of
multifamily, office, and retail properties and believes that the management and
leasing of its own portfolio has helped the Properties maintain consistent
income growth and has resulted in reduced operating expenses from the
Properties. The third-party management, leasing, and brokerage businesses
conducted through the Management Corporation have provided the Company both with
a source of cash flow that is relatively stable and with the benefits of
economies of scale in conjunction with the management and leasing of its own
properties. These businesses also allow the Company to establish additional
relationships with tenants who may require additional office or retail space and
to identify potential acquisitions.
Operational Structure
Multifamily Division--The Company's multifamily division is
responsible for all aspects of the Company's multifamily operations, including
day-to-day management and leasing of the 52 Multifamily Properties, as well as
the provision of third-party management services for apartment communities in
which the Company does not have an ownership interest or has a non-controlling
ownership interest. The multifamily division utilizes centralized functions of
accounting, information technology, due diligence and administrative services.
Decisions for investments in acquisitions and developments and for dispositions
are also centralized. The multifamily division has regional offices in
Birmingham, Alabama, Orlando, Pensacola, and Tampa, Florida, Macon, Georgia, and
Greenville, South Carolina.
Office Division--The Company's office division is responsible for all
aspects of the Company's commercial office operations, including the provision
of management and leasing services for the 18 Office Properties, as well as the
provision of third-party management services for office properties in which the
Company does not have an ownership interest and for brokerage services in other
office property transactions. The office division utilizes centralized functions
of accounting, information technology, due diligence and administrative
services. Decisions for investments in acquisitions and developments and for
dispositions are also centralized. The office division has regional offices in
Birmingham, Alabama and Atlanta, Georgia.
Retail Division--The Company's retail division is responsible for all
aspects of the Company's retail operations, including the provision of
management and leasing services for the 41 Retail Properties, as well as the
provision of third-party management services for retail properties in which the
Company does not have an ownership interest and for brokerage services in other
retail property transactions. The retail division utilizes centralized functions
of accounting, information technology, due diligence and administrative
services. Decisions for investments in acquisitions and developments and for
dispositions are also centralized. The retail division has regional offices in
Birmingham, Alabama, Orlando, Florida, Macon, Georgia and Burlington, North
Carolina.
Employees
The Company employs approximately 1,000 persons, including on-site
property employees who provide services for the Properties that the Company owns
and/or manages.
Tax Status
The Company has made an election to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ending December 31, 1993. If the Company
qualifies for taxation as a REIT, the Company generally will not be subject to
Federal income tax to the extent it distributes at least 95% of its REIT taxable
income to its shareholders. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and to federal income and excise taxes on its undistributed income.
<PAGE>
Executive Officers of the Company
The following is a biographical summary of the executive officers of
the Company:
Thomas H. Lowder, 50, has been President and Chief Executive Officer of
the Company and a trustee of the Company, since 1993. Mr. Lowder became
President of Colonial Properties Inc., the Company's predecessor, in 1976 and
since that time has been actively engaged in the acquisition, development,
management, leasing, and sale of multifamily, office, and retail properties for
Colonial Properties. Mr. Lowder's most recent board appointment was his election
to the National Real Estate Investment Trust (NAREIT) board in June 1999. He is
a current member of the National Association of Industrial and Office Parks, the
International Council of Shopping Centers and the National Association of the
Real Estate Investment Trusts (NAREIT). He is also a member and past president
of the Alabama Chapter of the Realtors National Marketing Institute through
which he successfully completed commercial real estate investment courses to
receive the CCIM (Certified Commercial Investment Member) designation. He is
presently a member of the Board of the following organizations: University of
Alabama-Birmingham President's Council, McWane Center, United Way, Children's
Hospital, Birmingham Southern College, The Colonial Company, Supporters Board of
the UAB Comprehensive Cancer Center and the Crippled Children's Foundation. Mr.
Lowder is also a member and past captain for the Monday Morning Quarterback
Club. He currently serves as Chairman of the Birmingham Area Chapter of the
American Red Cross. Mr. Lowder served as Co-Chairman of the 1994 United Way
Campaign for Central Alabama and as Chairman of the Alexis de Tocqueville
Society in 1995 for the United Way Campaign. He has also been nominated to serve
as Chairman for the United Way Campaign in 2001. He graduated with honors from
Auburn University with a Bachelor of Science Degree.
C. Reynolds Thompson, III, 37, Chief Operating Officer of the Company
since September 1999, responsible for the Multifamily, Office, Retail and Mixed
Use divisions. Thompson oversees the management, acquisition, leasing and
development of properties within the Company's three operating divisions and
development in the Mixed-Use Division. Prior to his appointment as Chief
Operating Officer, Mr. Thompson was Chief Investment Officer, responsible for
investment strategies, market research, due diligence, mergers and acquisitions,
joint venture development and cross-divisional acquisitions. Prior to his
position as Chief Investment Officer, Thompson served as Executive Vice
President - Office Division, with responsibility for management of all office
properties owned and/or managed by the Company, from May 1997 to May 1998. Mr.
Thompson joined Colonial Properties in February 1997 as Senior Vice President -
Office Acquisitions, with responsibility for all acquisitions of office
properties. Prior to joining Colonial, Mr. Thompson worked for CarrAmerica
Realty Corporation in office building acquisitions and due diligence. Mr.
Thompson's twelve-year real estate background includes acquisitions,
development, leasing, and management of office properties in the south. He is an
active member of the National Association of Industrial and Office Parks, serves
on the Board of Trustees for the Alabama Real Estate and Education Center, and
holds a Bachelor of Science Degree from Washington and Lee University.
Howard B. Nelson, Jr., 52, has been Chief Financial Officer of the
Company, with general responsibility for financing matters, since May 1997. Mr.
Nelson was Senior Vice President and Chief Operating Officer of the Company,
with responsibility for the day-to-day management of the Company, from September
1993 to May 1997. He joined Colonial in 1984 as a vice president and became
Senior Vice President-Finance in 1987. Mr. Nelson has served as treasurer, vice
president, president, and board member of the Birmingham Chapter of the National
Association of Industrial and Office Parks as well as vice president and board
member of the Building Owners and Managers Association of Metropolitan
Birmingham. He also serves on the Board of Directors of the College of Business
Advisory Council of Auburn University. He holds a Bachelor of Science Degree
from Auburn University.
John P. Rigrish, 51, Executive Vice President-Administration, with
responsibilities for the supervision of Accounting Operations, Management
Information Systems, Human Resources and Employee Services since 1998. Prior to
joining Colonial, Mr. Rigrish worked for BellSouth in Corporate Administration
and Services. John holds a Bachelors degree from Samford University and did his
postgraduate study at Birmingham-Southern College. He served on the Edward Lee
Norton Board of Advisors for Management and Professional Education at
Birmingham-Southern College and the Board of Directors of Senior Citizens, Inc.
in Nashville, Tennessee.
Paul F. Earle, 41, Executive Vice-President-Multifamily Division of
the Company, with responsibility for management of all multifamily properties
owned and/or managed by Colonial, since May 1997. He joined Colonial in 1991 and
has served as Vice President-Acquisitions, as well as Senior Vice President -
Multifamily Division. Mr. Earle serves as Chairman of the Alabama Multifamily
Council and is an active member of the National Apartment Association. He also
serves on the Board of Directors of Big Brother/Big Sisters and is a Board
member of the National Multifamily Housing Council. Before joining Colonial, Mr.
Earle was the President and Chief Operating Officer of American Residential
Management, Inc., Executive Vice President of Great Atlantic Management, Inc.
and Senior Vice President of Balcor Property Management, Inc.
John N. Hughey, 40, has been Executive Vice President-Retail Division
of the Company, with responsibility for all retail properties owned and/or
managed by the Company, since May 1997. He joined Colonial in 1982 and assumed
responsibility for an increasing number of shopping centers until being named to
Senior Vice President-Retail Division of Colonial in 1991. Mr. Hughey served as
the Alabama/Mississippi State Operations Chairman for the International Council
of Shopping Centers from 1993-1995. He holds a Bachelor of Science Degree from
Auburn University.
Charles A. McGehee, 53, has been Executive Vice President-Mixed Use
Division and has had responsibility for the Company's acquisitions and
dispositions and the sales brokerage departments, since October 1999. Mr.
McGehee was Senior Vice President--Multifamily Acquisitions/Development from
September 1993 to September 1999 and Senior Vice President--Office Division from
January 1990 to September 1993. He joined Colonial in 1976 as vice president of
retail leasing and was responsible for leasing all retail space owned and/or
managed by Colonial. Mr. McGehee has served as president and a board member of
the National Association of Industrial and Office Parks as well as a member of
the Board of Directors of the Birmingham Board of Realtors. He holds a Bachelor
of Science Degree from Auburn University.
Robert A. "Bo" Jackson, 45, has been Executive Vice President-Office
Division of the Company, with general responsibility for management of all
office properties owned and/or managed by the Company since May 1998. Prior to
joining the Company, Mr. Jackson worked for Beacon Properties as a vice
president responsible for leasing performance, new office development and
acquisitions. He has received professional accolades from The Atlanta Board of
Realtors, The Downtown Developers Group and NAIOP. He holds a Bachelor of
Science Degree in Business Administration from the University of Delaware.
Kenneth E. Howell, 50, has been Senior Vice President-Chief Accounting
Officer of the Company, with general responsibility for the supervision of
accounting for all of the properties owned and/or managed by the Company, since
August 1998. He joined the Company in 1981 and was Vice President, Controller
from 1981 to 1998. Mr. Howell holds a Bachelor of Science Degree in Business
Administration from Auburn University.
<PAGE>
RISK FACTORS
Set forth below are the risks that we believe are material to investors
who purchase or own our common or preferred shares of beneficial interest or
units of limited partnership interest in Colonial Realty Limited Partnership,
which is our "operating partnership."
Our performance and share value are subject to risks associated with
the real estate industry. If our assets do not generate income sufficient to pay
our expenses, service our debt or maintain our properties, we may not be able to
make expected distributions to our shareholders. Whether our properties will
generate sufficient revenue to pay our expenses and permit us to make
distributions to our shareholders will depend on whether we can attract tenants
at favorable rental rates and whether we can adequately control our costs.
Factors that may adversely affect our ability to attract tenants or to generate
sufficient revenue include:
o local conditions such as an oversupply of multifamily, retail or
office properties or a reduction in demand for multifamily, office or
retail properties;
o the attractiveness of our properties to residents, shoppers and
tenants;
o decreases in market rental rates; and
o our ability to collect rent from our tenants.
Factors that may adversely affect our operating costs include:
o the need to pay for adequate insurance and other operating costs,
including real estate taxes, which could increase over time; and
o the need to periodically repair, renovate and re-lease space.
Our expenses may remain constant even if our revenues drop. The
expenses of owning and operating a property are not necessarily reduced when
circumstances such as market factors and competition cause a reduction in income
from the property. As a result, if revenues drop, we may not be able to reduce
our expenses accordingly. Loan payments are an example of a cost that will not
be reduced if our revenues drop. If a property is mortgaged and we are unable to
meet the mortgage payments, the lender could foreclose on the mortgage and take
the property, resulting in a further reduction in revenues.
We may be unable to renew leases or re-lease space as leases expire.
When our tenants decide not to renew their leases upon their expiration, we may
not be able to re-lease the space. Even if the tenants do renew or we can
re-lease the space, the terms of renewal or re-leasing, including the cost of
required renovations, may be less favorable than current lease terms. If we are
unable to promptly renew the leases or re-lease the space, or if the rental
rates upon such renewal or re-leasing are significantly lower than expected
rates, then our cash flow and ability to service debt and make distributions to
shareholders would be adversely affected.
We depend on local economic conditions in our primary markets. All of
our properties are located in the Sunbelt region of the United States and 45 of
our properties are located in Birmingham and Montgomery, Alabama, Orlando,
Florida and Macon, Georgia. Our performance and ability to make debt service
payments or distributions to shareholders could be adversely affected by
economic conditions in the Sunbelt region and in Birmingham, Montgomery, Orlando
and Macon in particular.
New acquisitions may fail to perform as expected. Assuming we are able
to obtain capital on commercially reasonable terms, we intend to selectively
acquire multifamily, retail or office properties where we perceive strategic
opportunities consistent with our strategy. Newly acquired properties may fail
to perform as expected. We may underestimate the costs necessary to bring an
acquired property up to the standards we have established for its intended
market position. In addition, we may not be in a position or have the
opportunity in the future to make suitable property acquisitions on favorable
terms. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources", incorporated by
reference under Item 7 of this Form 10-K.
Competition for acquisitions could result in increased prices for
properties. We expect other major real estate investors with significant capital
to compete with us for attractive investment opportunities. These competitors
include publicly traded REITs, private REITs, investment banking firms and
private institutional investment funds. This competition could increase prices
for multifamily, retail or office properties.
Our development and expansion activities subject us to risks. We intend
to continue to develop new properties and expand existing properties where we
believe that development or expansion is consistent with our business
strategies. New projects subject us to a number of risks, including risks that:
o construction delays or cost overruns may increase project costs;
o permanent debt or equity financing may not be available on acceptable
terms to finance new development or expansion projects;
o we may fail to meet anticipated occupancy or rent levels;
o we may fail to secure required zoning, occupancy or other governmental
permits and authorizations; and
o changes in applicable zoning or land use laws may require us to abandon
projects prior to their completion, resulting in the loss of
development costs incurred prior to abandonment.
Because real estate investments are illiquid, we may not be able to
sell properties when appropriate. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. This inability to respond to changes in the
performance of our investments could adversely affect our ability to service
debt and make distributions to our shareholders.
Scheduled debt payments could adversely affect our financial condition.
Our business is subject to risks normally associated with debt financing. If
principal payments due at maturity cannot be refinanced, extended or paid with
proceeds of other capital transactions, such as new equity capital, our cash
flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors at the time of refinancing, such as
the possible reluctance of lenders to make commercial real estate loans, result
in higher interest rates, increased interest expense would adversely affect cash
flow and our ability to service our debt and make distributions to shareholders.
Our obligation to comply with financial covenants in our debt
agreements could restrict our range of operating activities. Our credit facility
contains customary restrictions, requirements and other limitations on our
ability to incur indebtedness, including:
o debt to assets ratios;
o secured debt to total assets ratios;
o debt service coverage ratios; and
o minimum ratios of unencumbered assets to unsecured debt.
The indenture under which our senior unsecured indebtedness is issued
contains financial and operating covenants including coverage ratios. Our
indenture also limits our ability to (1) incur secured and unsecured
indebtedness, (2) sell all or substantially all or our assets and (3) engage in
mergers, consolidations and acquisitions.
Our degree of leverage could limit our ability to obtain additional
financing. Our "debt to market capitalization" ratio, which we calculate as
total debt as a percentage of total debt plus the market value of our
outstanding common shares and the outstanding units of Colonial Realty, was
approximately 51.3% as of December 31, 1999. Increases in our leverage could
adversely affect our ability to obtain additional financing in the future for
(1) working capital, (2) capital expenditures, (3) acquisitions, (4) development
or (5) other general corporate purposes, and may make us more vulnerable to a
downturn in business or the economy generally.
Rising interest rates could adversely affect our cash flow. Advances
under our credit facility bear interest at a variable rate ranging between 80
and 135 basis points above LIBOR. We may borrow additional money with variable
interest rates in the future, and may enter into other transactions to limit our
exposure to rising interest rates as appropriate and cost effective. Increases
in interest rates, or the loss of the benefits of hedging agreements, would
increase our interest expense, which would adversely affect cash flow and our
ability to service our debt and make distributions to shareholders.
Environmental problems are possible and can be costly. Federal, state
and local laws and regulations relating to the protection of the environment may
require a current or previous owner or operator of real property to investigate
and clean up hazardous or toxic substances or petroleum product releases at the
property, without regard to whether the owner or operator knew or caused the
presence of the contaminants. If unidentified environmental problems arise at
one of our properties, we may have to make substantial payments to a
governmental entity or third parties for property damage and for investigation
and clean-up costs. Even if more that one person may have been responsible for
the contamination, we may be held responsible for all of the clean-up costs
incurred. Our liability under environmental laws could adversely affect our cash
flow and our ability to make distributions to our shareholders.
At one of our properties, the Gadsden Mall in Gadsden, Alabama, four
underground storage tanks were removed in 1989. In connection with the removal
of these gasoline storage tanks, associated petroleum contamination was
discovered in the soil and groundwater. We are currently working with the state
regulatory agency to remediate the contamination in accordance with applicable
requirements. Because the tanks were registered with the Alabama Department of
Environmental Management and the facility was in compliance with regulations
prior to the incident, we have been reimbursed under the Alabama Underground
Storage Tank Trust Fund for the costs incurred to date in connection with the
ongoing cleanup, and expect to be reimbursed for the remaining costs as well. We
have received a "no further action" letter from the Alabama Department of
Environmental Management.
On December 29, 1998, we acquired Bel Air Mall in Mobile, Alabama.
During the course of our environmental due diligence, we identified several
different areas of the property in which contamination is present. One of those
areas involves drycleaner solvent; the others involve petroleum contamination.
The Alabama Department of Environmental Management is overseeing the
investigation and cleanup of the drycleaner contamination. It is possible that a
claim could be asserted against us, as owner of the property, for the
investigation and remediation of the contamination. Pursuant to the purchase and
sale agreement, the former owner of the property purchased a $10 million
insurance policy and established escrow accounts totaling $1,275,000 to cover
the costs associated with investigating and remediating the contaminated areas.
In addition, subject to limitations, the seller will be performing all required
remediation of the drycleaner contamination.
Some of our trustees and officers have conflicts of interest and could
exercise influence in a manner inconsistent with shareholders' best interests.
As a result of their substantial ownership of our common shares and units of
Colonial Realty, Messrs. Thomas Lowder, our Chairman of the Board, Chief
Executive Officer and President, and James Lowder, Harold Ripps, Herbert Meisler
and William Johnson, each of whom is a trustee, might seek to exert influence
over our decisions as to sales or refinancings of particular properties we own.
Any such exercise of influence might produce decisions which are not in the best
interest of all of our shareholders.
The Lowder family, which includes Thomas, James, Robert and Catherine
Lowder and their affiliates, holds interests in companies that have performed
construction management, insurance brokerage and other services with respect to
our properties. These companies may perform similar services for us in the
future. As a result, the Lowder family may realize benefits from transactions
between such companies and us that are not realized by other shareholders. In
addition, Thomas Lowder and his brother, James Lowder, as trustees, may be in a
position to influence us to do business with companies in which the Lowder
family has a financial interest. Our policies may not be successful in
eliminating the influence of conflicts. Moreover, transactions with companies
controlled by the Lowder family, if any, may not be on terms as favorable to us
as we could obtain in an arms-length transaction with a third party.
We do not control our management, leasing and brokerage businesses. To
facilitate maintenance of our REIT qualification, we have a "non-controlled
subsidiary" which conducts management, leasing and brokerage business for
properties we do not wholly own. While we own 99% of the economic interest in
the non-controlled subsidiary, 99% of its voting stock is owned by members of
the Lowder family. We therefore do not control the timing or amount of
distributions or the management and operation of the non-controlled subsidiary.
We also lack the ability to set the business policies and operations of the
non-controlled subsidiary.
We are subject to risks associated with the property management,
leasing and brokerage businesses. In addition to the risks we face as a result
of our ownership of real estate, we face risks relating to the property
management, leasing and brokerage businesses of our "non-controlled subsidiary,"
including risks that:
<PAGE>
o management contracts or service agreements with third-party owners will
be lost to competitors;
o contracts will not be renewed upon expiration or will not be renewed
on terms consistent with current terms; and
o leasing and brokerage activity generally may decline.
Each of these developments could adversely affect our ability to make
debt service payments or expected distributions to shareholders.
The large number of our shares available for future sale could
adversely affect the market price of our publicly traded securities. We have
reserved a large number of common shares for future issuance upon redemption of
units of Colonial Realty. These common shares may be sold in the public market
pursuant to registration rights or pursuant to Rule 144 under the Securities Act
or other available exemptions from registration. We cannot predict the effect
that future sales of these common shares, or the perception that sales could
occur, will have on the market prices of our equity securities. In addition, we
have reserved a number of common shares for issuance pursuant to our employee
benefit plans, and these common shares will be available for sale from time to
time. We have granted options to purchase additional common shares to executive
officers, employees and trustees. To the extent we issue any common shares upon
exercise of options, the interests of our shareholders will be further diluted.
Our earnings and cash distributions will affect the market price of our
publicly traded securities. We believe that the market value of a REIT's equity
securities depends primarily on the market's perception of the REIT's growth
potential and its current and potential future cash distributions, and is
secondarily based on the real estate market value of the underlying assets. For
that reason, our shares may trade at prices that are higher or lower than our
net asset value per share. To the extent we retain operating cash flow for
investment purposes, working capital reserves or other purposes, these retained
funds, while increasing the value of our underlying assets, may not
correspondingly increase the market price of our shares. Our failure to meet the
market's expectations with regard to future earnings and cash distributions
would likely adversely affect the market price of our publicly traded
securities.
Market interest rates may have an effect on the value of our publicly
traded securities. One of the factors that investors consider important in
deciding whether to buy or sell shares of a REIT is the distribution rate on the
shares, considered as a percentage of the price of the shares, relative to
market interest rates. If market interest rates go up, prospective purchasers of
REIT shares may expect a higher distribution per share, causing the market price
of our publicly traded securities to go down.
We are dependent on external sources of capital. To qualify as a REIT,
we must distribute to our shareholders each year at least 95% (90% for taxable
years beginning after December 31, 2000) of our net taxable income, excluding
any net capital gain. Because of these distribution requirements, it is not
likely that we will be able to fund all future capital needs from income from
operations. We therefore will have to rely on third-party sources of capital
which may or may not be available on favorable terms or at all. Our access to
third-party sources of capital depends on a number of things, including the
market's perception of our growth potential and our current and potential future
earnings. Moreover, additional equity offerings may result in substantial
dilution of shareholders' interests, and additional debt financing may
substantially increase our leverage.
If we fail to qualify as a REIT our shareholders would be adversely
affected. We believe that we have qualified for taxation as a REIT for federal
income tax purposes commencing with our taxable year ended December 31, 1993. We
plan to continue to meet the requirements for taxation as a REIT, but we cannot
assure shareholders that we will qualify as a REIT. Many of the REIT
requirements are highly technical and complex. The determination that we are a
REIT requires an analysis of various factual matters and circumstances that may
not be totally within our control. For example, to qualify as a REIT, at least
95% of our gross income must come from certain sources that are itemized in the
REIT tax laws. We also are required to distribute to shareholders at least 95%
(90% for taxable years beginning after December 31, 2000) of our REIT taxable
income, excluding capital gains. The fact that we hold our assets through
Colonial Realty further complicates the application of the REIT requirements.
Even a technical or inadvertent mistake could jeopardize our REIT status.
Furthermore, Congress and the IRS might make changes to the tax laws and
regulations, and the courts might issue new rulings that make it more difficult,
or impossible, for us to remain qualified as a REIT. We do not believe, however,
that any pending or proposed tax law changes would jeopardize our REIT status.
If we fail to qualify as a REIT, we would be subject to federal income
tax at regular corporate rates. Also, unless the IRS granted us relief under
certain statutory provisions, we would remain disqualified as a REIT for the
four years following the year we first failed to qualify. If we failed to
qualify as a REIT, we would have to pay significant income taxes. This would
likely have a significant adverse affect on the value of our securities. In
addition, we would no longer be required to make any distributions to
shareholders.
We pay some taxes. Even if we qualify as a REIT, we are required to pay
certain federal, state and local taxes on our income and property. In addition,
any net taxable income earned directly by our noncontrolled subsidiary is
subject to federal and state corporate income tax.
We have a share ownership limit for REIT tax purposes. Primarily to
facilitate maintenance of our REIT qualification, our Declaration of Trust
generally prohibits ownership by any single shareholder, other than members of
the Lowder family, of more than (a) 5% of our issued and outstanding common
shares, and (b) 9.8% in value or number of shares, whichever is more
restrictive, of any class or series of our outstanding shares. We refer to this
as the "ownership limit." The federal tax laws include complex stock ownership
and attribution rules that apply in determining whether a shareholder exceeds
the ownership limit. These rules may cause a shareholder to be treated as owning
the shares that are actually owned by others, including family members and
entities in which a shareholder has an ownership interest. In limited
circumstances, our Declaration of Trust permits the Board of Trustees to waive
or modify the ownership limit with respect to a shareholder. Absent any such
modification or waiver, shares acquired or held in violation of the ownership
limit will be transferred to a trust for the exclusive benefit of a designated
charitable beneficiary, and the shareholder's rights to distributions and to
vote with respect to such shares would terminate.
Provisions of our charter may inhibit changes in control. Various
provisions of our Declaration of Trust restrict the possibility for acquisition
or change in control, even if such acquisition or change in control were in our
shareholders' interest. These provisions include:
o the ownership limit;
o the staggered terms of our trustees; and
o the ability of our Board of Trustees to classify and issue new
series of our authorized preferred shares.
We have adopted a shareholder rights plan which could delay or prevent
a change of control. Our rights plan provides, among other things, that upon the
occurrence of certain events, shareholders will be entitled to purchase shares
of our stock, subject to the ownership limit. These purchase rights would cause
substantial dilution to a person or group that acquires or attempts to acquire
15% or more of our common shares on terms not approved by the Board of Trustees
and, as a result, could delay or prevent a change in control or other
transaction that could provide our shareholders with a premium over the
then-prevailing market price of their shares or which might otherwise be in
their best interests.
REIT Modernization Act changes to the REIT asset tests. Currently, a
REIT may not own securities in any one issuer if the value of those securities
exceeds 5% of the value of the REIT's total assets or the securities owned by
the REIT represent more than 10% of the issuer's outstanding voting securities.
As a result of the REIT Modernization Act, after December 31, 2000, the 5% value
test and the 10% voting security test will be modified in two respects. First,
the 10% voting securities test will be expanded so that REITs also will be
prohibited from owning more than 10% of the value of the outstanding securities
of any one issuer. Second, an exception to these tests that will allow a REIT to
own securities of a subsidiary that exceed the 5% value test and the new 10%
vote or value test if the subsidiary elects to be a "taxable REIT subsidiary,"
which would be a fully taxable corporation. The expanded 10% vote or value test,
however, will not apply to an existing subsidiary unless it engages in a
substantial new line of business or acquires any substantial asset or the
Company acquires any securities in that subsidiary after July 12, 1999. Under a
new asset test, for taxable years beginning after December 31, 2000, the Company
will not be able to own securities of taxable REIT subsidiaries that represent
in the aggregate more than 20% of the value of the Company's total assets. At
the present time, no decision has been made as to whether Colonial Property
Services, Inc. will elect to be treated as a taxable REIT subsidiary.
Several provisions of the new law will ensure that a taxable REIT
subsidiary will be subject to an appropriate level of federal income taxation.
For example, a taxable REIT subsidiary will be limited in its ability to deduct
interest payments made to an affiliated REIT. In addition, the REIT will have to
pay a 100% penalty tax on some payments that it receives if the economic
arrangements between the REIT, the REIT's tenants, and the taxable REIT
subsidiary are not comparable to similar arrangements between unrelated parties.
<PAGE>
Item 2. Properties.
General
As of December 31, 1999, the Company's real estate portfolio consisted
of 111 operating properties consisting of whole or partial ownership interests,
located in nine states in the Sunbelt region of the United States. The Company
acquired 36 properties in connection with the Formation Transactions, and
acquired or developed 84 properties since the Company's initial public offering
("IPO"). Since the Company's IPO, the Company has developed 17 additional
Multifamily Properties, and two Office Properties, and has disposed of nine
properties, all through tax-deferred, like-kind exchanges. Additionally, the
Company maintains non-controlling partial interests of 15% to 50% in ten
operating properties. The 111 Properties owned by the Company at December 31,
1999 consisted of 52 Multifamily Properties, 18 Office Properties, and 41 Retail
Properties, as described in more detail below.
Summary of Properties
<TABLE>
<CAPTION>
Units/ Property Total 1999 Percentage
Number of GLA/ Revenue (2) Property Occupancy at
Type of Property Properties NRA (1) (in thousands) Revenue (2) Dec. 31, 1999 (3)
- ---------------------- ----------- ------------- --------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Multifamily 52 16,415 (4) $ 116,330 40.0% 93.9%
Office 18 3,137,509 (5) 41,067 14.1% 93.3%
Retail 41 13,947,410 (6) 133,752 45.9% 89.9%
----------- --------------- ------------
Total 111 $ 291,149 100.0%
=========== =============== ============
<FN>
(1) Units (in this table only) refers to multifamily apartment units, GLA
refers to gross leasable area of retail space and NRA refers to net
rentable area of office space. Information is presented as of December 31,
1999.
(2) Includes the Company's proportionate share of revenue from those
Multifamily, Office and Retail Properties accounted for under the equity
method, and the Company's share of the properties disposed of in 1999.
(3) Excludes the units/square feet of development or expansion phases of six
Multifamily Properties, two Office Properties, and three Retail Properties
that had not achieved stabilized occupancy as of December 31, 1999.
(4) Amount includes 1,949 units which the Company maintains a 15.0% ownership
interest.
(5) Amount includes 65,840 square feet which the Company maintains a 33.33%
ownership interest.
(6) Amount includes 1,124,291 square feet which the Company maintains a 50.0%
ownership interest.
</FN>
</TABLE>
Multifamily Properties
The 52 Multifamily Properties owned by the Company at December 31,
1999, contain a total of 16,415 garden-style apartments and range in size from
104 to 1,080 apartment units. Fourteen of the Multifamily Properties were
acquired by the Company in connection with the Formation Transactions, and 29
Multifamily Properties have been acquired since the IPO. Also, since its IPO,
the Company has developed 17 additional Multifamily Properties and disposed of
eight Multifamily Properties. Twenty-three Multifamily Properties (containing a
total of 7,697 apartment units) are located in Alabama, 16 Multifamily
Properties (containing a total of 5,366 apartment units) are located in Florida,
nine Multifamily Properties (containing a total of 1,938 apartments units) are
located in Georgia, one Multifamily Property (containing a total of 328
apartment units) is located in Mississippi, two Multifamily Properties
(containing a total of 764 apartment units) are located in South Carolina, and
one Multifamily Property (containing 322 apartment units) is located in Texas.
Each of the Multifamily Properties is established in its local market and
provides residents with numerous amenities, which may include a swimming pool,
exercise room, jacuzzi, clubhouse, laundry room, tennis court(s), and/or a
playground. All of the Multifamily Properties are managed by the Company.
The following table sets forth certain additional information relating
to the Multifamily Properties as of and for the year ended December 31, 1999.
<PAGE>
Multifamily Properties
<TABLE>
<CAPTION>
Average Total Multifamily Percent of
Year Number Approximate Rental Property Total 1999
Multifamily Completed of Rentable Area Percent Rate Revenue for Property
Property (1) Location (2) Units (3)(Square Feet) Occupied Per Unit 1999 Revenue (4)
- ----------------------- -------------- ---------- -------- ------------- -------- -------------------------- -----------
Alabama:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CG at Edgewater Huntsville 1990 500 541,650 90.2% 680 3,568,657 1.2%
CG at Galleria Birmingham 1986/96 1,080 1,195,186 89.3% 666 7,549,207 2.6%
CG at Galleria Woods Birmingham 1994 244 260,720 96.3% 658 1,791,054 0.6%
CG at Liberty Park Birmingham 1999 44 43,780 (7) 987 64,856 (6) 0.0%
CG at Madison Huntsville 1999 200 199,000 (7) 753 534,509 (6) 0.2%
CG at Mountain Brook (8)Birmingham 1987/91 392 392,700 94.4% 680 2,226,957 (8) 0.8%
CG at Promenade Montgomery 1999 144 143,280 (7) 796 367,458 (6) 0.1%
CG at Riverchase Birmingham 1984/91 468 745,840 90.8% 776 3,989,662 1.4%
CG/CV at Inverness LakesMobile 1983/96 498 506,386 94.6% 614 3,502,926 1.2%
Colony Park Mobile 1975 201 129,600 91.5% 400 835,892 0.3%
CV at Ashford Place Mobile 1983 168 139,128 92.3% 517 1,000,381 0.3%
CV at Cahaba Heights (8)Birmingham 1992 125 131,230 98.4% 705 784,884 (8) 0.3%
CV at Hillcrest Mobile 1981 104 114,400 100.0% 619 788,737 0.3%
CV at Hillwood Montgomery 1984 160 150,912 97.5% 562 990,881 0.3%
CV at Huntleigh Woods Mobile 1978 233 199,052 94.4% 460 1,218,201 0.4%
CV at Inverness Birmingham 1986/87/90 586 491,072 97.4% 588 3,924,860 1.3%
CV at McGehee Place Montgomery 1986/95 468 404,188 89.3% 559 2,688,016 0.9%
CV at Monte D'Oro Birmingham 1977 200 295,840 99.5% 658 1,607,116 0.6%
CV at Research Park Huntsville 1987/94 736 809,344 86.3% 610 4,567,061 1.6%
CV at Rocky Ridge Birmingham 1984 226 258,900 98.7% 640 1,529,280 0.5%
CV at Trussville Birmingham 1996/97 376 410,340 94.7% 699 2,891,258 1.0%
Patio Auburn 1966/83/84 240 179,040 92.1% 421 1,105,853 0.4%
Ski Lodge Tuscaloosa Tuscaloosa 1976/92 304 273,056 97.0% 413 1,544,765 0.5%
-------- ------------- -------- -------- -------------- -----------
Subtotal - Alabama (23 Properties) 7,697 8,014,644 92.5% 624 49,072,471 16.8%
-------- ------------- -------- -------- -------------- -----------
Florida:
CG at Bayshore Bradenton 1997 376 368,870 97.9% 731 3,269,156 1.1%
CG at Carrollwood Tampa 1966 244 286,080 99.6% 835 2,295,220 0.8%
CG at Citrus Park Tampa 1999 176 200,288 94.3% 878 1,480,260 (6) 0.5%
CG at Cypress Crossing Orlando 1999 250 314,596 93.6% 975 2,566,739 (6) 0.9%
CG at Gainesville Gainesville 1989/93/94 560 488,624 97.7% 750 4,793,642 1.6%
CG at Heather Glen Orlando 1999 228 226,860 (7) 866 572,414 (6) 0.2%
CG at Heathrow Orlando 1997 312 370,028 93.3% 910 3,337,699 1.1%
CG at Hunter's Creek Orlando 1997 496 624,464 96.0% 889 5,057,741 1.7%
CG at Kirkman (9) Orlando 1991 - - - - 805,462 (9) 0.3%
CG at Lakewood Ranch Sarasota 1999 288 301,656 95.8% 907 1,992,614 (6) 0.7%
CG at Palm Aire Sarasota 1991 248 251,504 97.2% 814 2,307,676 0.8%
CG at Palma Sola Bradenton 1992 340 291,796 91.2% 709 2,593,782 0.9%
CG at Ponte Vedra (8) Jacksonville 1988 240 211,640 93.3% 705 1,358,704 (8) 0.5%
CV at Cordova Pensacola 1983 152 116,400 97.4% 522 926,026 0.3%
CV at Lake Mary Orlando 1991/95 504 431,396 98.4% 679 4,200,380 1.4%
CV at Oakleigh Pensacola 1997 176 185,680 91.0% 722 1,509,376 0.5%
CV at River Hills (8) Tampa 1991/97 776 690,312 91.3% 632 4,253,500 (8) 1.5%
-------- ------------- -------- -------- -------------- -----------
Subtotal - Florida (16 Properties) 5,366 5,360,194 95.8% 770 43,320,391 14.8%
-------- ------------- -------- -------- -------------- -----------
Georgia:
CG at Barrington (8) Macon 1996 176 191,940 99.4% 688 1,015,579 (8) 0.3%
CG at Spring Creek Macon 1992/94 296 328,032 93.2% 637 2,165,618 0.7%
CG at Wesleyan Macon 1997 328 382,946 94.2% 724 2,225,918 0.8%
CV at North Ingle Macon 1983 140 133,338 88.6% 562 804,267 0.3%
CV at Stockbridge (8) Stockbridge 1993/94 240 253,200 91.3% 744 1,338,734 (8) 0.5%
CV at Timothy Woods Athens 1996 204 211,444 98.0% 752 1,665,469 0.6%
CV at Vernon Marsh Savannah 1986/87 178 151,226 97.2% 629 1,321,736 0.5%
CV at Walton Way Augusta 1984 256 254,264 (7) 560 1,391,302 (6) 0.5%
CV at White Bluff Savannah 1986 120 108,288 95.8% 640 930,903 0.3%
-------- ------------- -------- -------- -------------- -----------
Subtotal - Georgia (9 Properties) 1,938 2,014,678 97.0% 665 12,859,526 4.5%
-------- ------------- -------- -------- -------------- -----------
-------- ------------- -------- -------- -------------- -----------
Mississippi:
CG at Natchez Trace Jackson 1995/97 328 342,800 98.2% 658 2,493,318 0.9%
-------- ------------- -------- -------- -------------- -----------
Subtotal - Mississippi (1 Property) 328 342,800 98.2% 658 2,493,318 0.9%
-------- ------------- -------- -------- -------------- -----------
South Carolina:
CV at Ashley Plantation Bluffton 1998 414 425,095 (7) 777 2,918,196 (6) 1.0%
CV at Caledon Wood Greenville 1995/96 350 348,305 94.6% 709 2,609,160 0.9%
-------- ------------- -------- -------- -------------- -----------
Subtotal - South Carolina (2 Properties) 764 773,400 94.6% 746 5,527,356 0.9%
-------- ------------- -------- -------- -------------- -----------
-------- ------------- -------- -------- -------------- -----------
Texas:
CV at Haverhill San Antonio 1997 322 326,914 88.5% 884 3,056,624 1.0%
-------- ------------- -------- -------- -------------- -----------
Subtotal - Texas (1 Property) 322 326,914 88.5% 884 3,056,624 1.0%
-------- ------------- -------- -------- -------------- -----------
--------
TOTAL (52 Properties) 16,415 16,832,630 93.9% $ 688 (5) $ 116,329,686 40.0%
======== ============= ======== ======== ============== ===========
(footnotes on next page)
<FN>
(1) All Multifamily Properties are 100% owned by the Company with the exception
of the properties noted in (8) below. In the listing of Multifamily
Property names, CG has been used as an abbreviation for Colonial Grand and
CV as an abbreviation for Colonial Village.
(2) Year initially completed and, where applicable, year(s) in which additional
phases were completed at the Property.
(3) Units (in this table only) refers to multifamily apartment units. Number of
Units includes all apartment units occupied or available for occupancy at
December 31, 1999.
(4) Percent of Total 1999 Property Revenue represents the Multifamily
Property's proportionate share of all revenue from the Company's 111
Properties, including the partially owned properties.
(5) Represents weighted average rental rate per unit of the 52 Multifamily
Properties at December 31, 1999.
(6) Represents revenues from the date of the Company's development/ expansion
of this Property in 1999 through December 31, 1999.
(7) Expanded or newly developed property currently undergoing lease-up.
(8) These properties were sold by the Company during 1999 to a joint venture
formed by the Company and an unrelated party. The Company holds a 15%
non-controlling interest in this joint venture.
(9) This property was sold during 1999.
</FN>
</TABLE>
The following table sets forth the total number of apartment units,
percent leased and average base rental rate per apartment unit as of the end of
each of the last five years for the Multifamily Properties:
<TABLE>
<CAPTION>
Average Base
Number Percent Rental Rate
Year-End of Units (1) Leased (2) Per Unit
-------- ------------ ----------- --------
<S> <C> <C> <C>
December 31, 1999 16,415 93.9% $688
December 31, 1998 15,381 93.5% $642
December 31, 1997 13,759 93.8% $631
December 31, 1996 13,617 94.8% $579
December 31, 1995 11,239 95.7% $552
<FN>
(1) Units (in this table only) refers to multifamily apartment units owned at
year end, which includes 1,949 units partially owned by the Company at
December 31, 1999.
(2) Represents weighted average occupancy of the Multifamily Properties that
had achieved stabilized occupancy at the end of the respective period.
</FN>
</TABLE>
Office Properties
The 18 Office Properties owned by the Company at December 31, 1999,
contain a total of approximately 3.1 million rentable square feet. Fifteen of
the Office Properties are located in Alabama (representing 71% of the office
portfolio's net rentable square feet) , one is located in Atlanta, Georgia and
two are located in Florida. The Office Properties range in size from
approximately 30,000 square feet to 536,000 square feet. Five of the Office
Properties were developed by Colonial, four of the Properties were acquired at
various times between 1980 and 1990, eight of the Properties were acquired in
1997 and 1998, and one of the Properties was acquired in 1999. All of the Office
Properties are managed by the Company.
The following table sets forth certain additional information relating
to the Office Properties as of and for the year ended December 31, 1999.
<PAGE>
Office Properties
<TABLE>
<CAPTION>
Average
Base
Net Rent
Rentable Per Total Office Percent of
Year Area Total Leased Property Total 1999
Office Completed Square Percent Annualized Square Revenue for Property
Property (1) Location (2) Feet Leased Base Rent(2) Foot 1999 (3) Revenue (4)
- ----------------------------------- ------------ ---------- -------- ------- ------------ ----------- -------------- -------
Alabama:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interstate Park Montgomery 1982-85/89 226,992 97.3% $ 2,950,332 $ 13.86 $ 3,126,350 1.0%
Riverchase Center Birmingham 1984-88 304,731 92.6% 2,818,325 9.98 3,355,926 1.1%
International Park Birmingham 1987/89 109,810 99.6% 1,377,267 14.97 1,390,077 0.5%
1800 International Park (8) Birmingham 1999 146,128 (7) (7) (7) 23,615(6) 0.0%
Colonial Plaza Birmingham 1982 178,617 69.3% 1,950,429 16.62 1,776,589 0.6%
Progress Center Huntsville 1983-91 224,329 98.1% 2,088,741 9.48 2,231,219 0.8%
Lakeside Office Park Huntsville 1989/90 121,520 91.8% 1,454,016 13.07 1,522,745 0.5%
AmSouth Center Huntsville 1990 154,421 94.5% 2,588,088 17.73 3,192,903 1.1%
Colonial Center at Research Park Huntsville 1999 131,686 (7) (7) (7) 214,887(6) 0.1%
250 Commerce St Montgomery 1904/81 36,935 100.0% 401,544 10.86 427,112 0.1%
Anderson Block (5) Montgomery 1981/83 33,589 97.7% 110,101 10.06 124,109 0.0%
Land Title Bldg Birmingham 1975 32,251 100.0% 131,481 12.23 149,381 0.1%
Independence Plaza Birmingham 1979 105,805 89.4% 1,313,797 13.89 1,491,927 0.5%
Shades Brook Building Birmingham 1979 34,410 83.9% 444,969 15.42 433,696 0.1%
Emmett R. Johnson Building Birmingham 1982/95 162,763 94.4% 2,535,499 16.51 1,436,632(6) 0.5%
Perimeter Corporate Park Huntsville 1986/89 234,465 85.1% 2,858,070 14.33 3,400,453 1.2%
------- -------- ------------ ---------- ------------- ----
Subtotal-Alabama (15 Properties) 2,238,452 91.4% 23,022,659 13.21 24,297,621 8.2%
------- -------- ------------ ---------- ------------- ----
Florida:
Concourse Center Tampa 1981/85 291,400 97.2% 4,567,104 16.12 4,690,782 1.6%
University Park Plaza Orlando 1985 71,945 90.5% 950,796 14.93 1,015,187 0.3%
------- -------- ------------ --------- ------------- ----
Subtotal-Florida (2 Properties) 363,345 95.9% 5,517,900 15.90 5,705,969 1.9%
------- -------- ----------- --------- ------------- ----
Georgia:
Colonial Center at Mansell Overlook Atlanta 1987/96/97 535,712 98.4% 10,787,855 22.53 11,063,385 3.8%
------- -------- ------------ --------- ------------- ----
Subtotal-Georgia (1 Property) 535,712 98.4% 10,787,855 22.53 11,063,385 3.8%
------- -------- ------------ --------- ------------- ----
TOTAL (18 Properties) 3,137,509 93.3% $39,328,414 $ 15.29 $41,066,975 14.1%
======= ======== ============ ========= ============= ====
<FN>
(1) All Office Properties are 100% owned by the Company with the exceptions of
Anderson Block and Land Title Building, which are each 33.33% owned by the
Company.
(2) Year initially completed and, where applicable, most recent year in which
the Property was substantially renovated or in which an additional phase of
the Property was completed.
(3) Total 1999 Office Property revenue is the Company's share (based on its
percentage ownership of the property) of total Office Property revenue,
unless otherwise noted. However, amounts exclude $530,544 of straight-line
rents reflected in the Company's Consolidated Financial Statements for the
period ended December 31, 1999.
(4) Percent of Total 1999 Property Revenue represents the Office Property's
proportionate share of all revenue from the Company's 111 Properties.
(5) The Company has a leasehold interest in this Property.
(6) Represents revenues from the date of the Company's acquisition of this
Property in 1999 through December 31, 1999.
(7) These properties were recently developed and are currently undergoing
lease-up.
(8) This property is located within the International Park office complex and
is included in the property total with International Park.
</FN>
</TABLE>
<PAGE>
The following table sets out a schedule of the lease expirations for
leases in place as of December 31, 1999, for the Office Properties (including
all lease expirations for partially-owned Properties).
<TABLE>
<CAPTION>
Net Rentable Annualized Percent of Total
Year of Number of Area Of Base Rent of Annual Base Rent
Lease Tenants with Expiring Leases Expiring Represented by
Expiration Expiring Lease(Square Feet) (1Leases (1)(2) Expiring Leases(1)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 161 632,280 8,095,029 20.6%
2001 73 400,515 5,705,864 14.5%
2002 81 424,057 6,115,747 15.6%
2003 54 438,179 6,654,753 16.9%
2004 56 365,716 5,565,872 14.2%
2005 18 274,475 3,084,551 7.8%
2006 7 133,015 1,695,560 4.3%
2007 5 58,397 959,765 2.4%
2008 3 26,486 503,363 1.3%
2009 6 52,749 899,910 2.3%
Thereafter 4 35,000 48,000 0.1%
--------- ------------ -------------- -----------
468 2,840,869 $39,328,414 100.0%
========= ============ ============== ===========
<FN>
(1) Excludes 297,000 square feet of space not leased as of December 31, 1999.
(2) Annualized base rent is calculated using base rents as of December 31, 1999.
</FN>
</TABLE>
The following sets forth the net rentable area, total percent leased
and average base rent per leased square foot for each of the last five years for
the Office Properties:
<TABLE>
<CAPTION>
Average Base
Rentable Area Total Rent Per Leased
Year-end (Square Feet)(2) Percent Leased Square Foot (1)
-------- ------------- -------------- ---------------
<S> <C> <C> <C>
December 31, 1999 3,138,000 93.3% $15.29
December 31, 1998 2,707,000 92.2% $14.58
December 31, 1997 1,859,000 95.5% $12.18
December 31, 1996 1,009,000 97.4% $13.80
December 31, 1995 1,009,000 94.0% $13.52
- -----------------
<FN>
(1) Average base rent per leased square foot is calculated using base rents as
of December 31 for each respective year.
(2) Rentable square feet includes 65,840 square feet that is partially owned by
the Company at December 31, 1999.
</FN>
</TABLE>
Retail Properties
The 41 Retail Properties owned by the Company at December 31, 1999,
contain a total of approximately 13.9 million square feet (including space owned
by anchor tenants). Twelve of the Retail Properties are located in Alabama,
twelve are located in Florida, seven are located in Georgia, six are located in
North Carolina, one is located in South Carolina, one is located in Tennessee,
and two are located in Virginia. The Retail Properties consist of 16 enclosed
regional malls, two power centers, and 23 neighborhood shopping centers. Nine of
the 40 Retail Properties were originally developed by the Company, 31 were
acquired between 1994 and 1998, and one was acquired in 1999. All of the Retail
Properties are managed by the Company.
The following table sets forth certain information relating to the
Retail Properties as of and for the year ended December 31, 1999.
<PAGE>
Retail Properties
<TABLE>
<CAPTION>
Average
Base
Gross Rent
Leasable Per Total Retail % of
Year Area Number Total Leased Property Total 1999
Retail Completed (Square Of Percent Annualized Square Revenue for Property
Property (1) Location (2) Feet) (3) Stores Leased (3)Base Rent Foot(4) 1999(10)Revenue(5)
- ---------------------------------------------------------------------------------------------------------------------------- -----
Alabama:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Colonial Mall Decatur Decatur 1979/89 494,895 59 86.9% $ 3,507,389 $ 16.92 5,541,189 1.9%
80,866 (6)
Brookwood Village Mall Birmingham 1973/91 460,599 66 (8) 3,824,878 14.66 6,831,926 2.3%
231,953 (6)
Colonial Mall Gadsden Gadsden 1974/91 490,898 62 94.5% 3,004,299 16.54 5,049,928 1.7%
Colonial Mall Auburn/Opelika Auburn 1973/84/89 399,889 61 89.5% 2,668,936 17.61 4,349,120 1.5%
Colonial Promenade Montgomery Montgomery 1990/97 273,196 40 92.7% 2,588,512 3,170,784 1.1%
146,121 (6)
Colonial Shoppes McGehee Montgomery 1986 54,638 17 61.9% 426,509 12.58 567,512 0.2%
50,000 (6)
Colonial Shoppes Bellwood Montgomery 1988 42,762 20 82.3% 456,145 11.83 590,142 0.2%
50,000 (6)
Old Springville Birmingham 1982 63,707 12 46.1% 214,559 8.29 257,573 0.1%
Colonial Shoppes Inverness Birmingham 1984 28,243 5 100.0% 432,188 12.66 537,287 0.2%
Olde Town Montgomery 1978/90 38,822 16 86.4% 322,033 10.22 420,136 0.1%
Colonial Promenade Tutwiler Farm(8)Birmingham Development - - - - - 134,836 0.0%
Bel Air Mall Mobile 1966/90/97 1,099,041 106 87.2% 7,859,254 14.97 11,998,379 4.1%
333,990 (6)
Parkway City Mall Huntsville 1975 415,440 44 (8) 1,329,513 11.35 1,518,461 0.5%
P&S Building (9) Gadsden 1946/76/91 39,560 1 100.0% 178,020 4.50 178,020 0.1%
----------- -------------------------------------------------- -----
Subtotal-Alabama (12 Properties) 4,794,620 509 87.5% 26,812,235 15.03 41,145,293 14.1%
----------- -------------------------------------------------- -----
Florida:
Colonial Promenade University Park Orlando 1986/89 399,111 36 81.4% 2,483,362 14.98 3,857,249 1.3%
Colonial Promenade Tuskawilla Orlando 1990 217,209 27 94.1% 1,320,904 13.19 1,840,898 0.6%
Colonial Promenade Burnt Store Punta Gorda 1990 198,918 29 92.2% 1,368,434 12.38 1,581,461 0.5%
Colonial Promenade Winter Haven Orlando 1986 197,472 23 86.4% 1,296,058 12.68 1,829,071 0.6%
Northdale Court Tampa 1988 192,726 24 (8) 981,663 12.50 1,339,272 0.5%
55,000 (6)
Colonial Promenade Bear Lake Orlando 1990 131,552 20 46.4% 745,046 13.14 984,413 0.3%
Colonial Shoppes Paddock Park Ocala 1988 87,136 17 96.8% 709,143 12.97 916,052 0.3%
Colonial Promenade Bardmoor VillageSt. Petersbur1981 152,667 30 75.3% 1,201,320 15.46 1,729,879 0.6%
Colonial Promenade Hunter's Creek Orlando 1993/95 222,485 26 95.8% 1,871,614 14.71 2,543,897 0.9%
Colonial Promenade Wekiva Orlando 1990 209,398 26 90.8% 1,825,929 12.97 2,569,181 0.9%
Colonial Promenade Lakewood Jacksonville 1995 193,833 50 96.2% 1,685,106 11.39 2,312,432 0.8%
Orlando Fashion Square Orlando 1973/89/93 708,851 131 92.6% 9,997,980 25.87 8,584,676 2.9%
361,432 (6)
----------- -------------------------------------------------- -----
Subtotal-Florida (12 Properties) 3,327,790 439 87.6% 25,486,559 18.07 30,088,481 10.3%
----------- -------------------------------------------------- -----
Georgia:
Macon Mall Macon 1975/88/97 758,399 158 90.6% 10,546,232 22.81 17,743,446 6.1%
682,160 (6)
Colonial Promenade Beechwood Athens 1963/92 343,569 47 90.7% 2,415,421 10.24 2,977,491 1.0%
Britt David Columbus 1990 109,630 9 98.5% 273,458 12.73 941,410 0.3%
Colonial Mall Lakeshore Gainesville 1984-97 518,115 69 91.9% 3,663,564 18.26 5,989,399 2.1%
Colonial Mall Valdosta Valdosta 1982-85 327,249 57 95.1% 3,042,992 16.69 5,972,488 2.1%
73,723 (6)
Colonial Mall Glynn Place Brunswick 1986 281,901 57 84.2% 2,800,795 17.49 4,117,877 1.4%
225,549 (6)
Village at Roswell Summit Atlanta 1988 25,510 9 100.0% 293,071 14.56 470,679 0.2%
----------- -------------------------------------------------- -----
Subtotal-Georgia (7 Properties) 3,345,805 406 90.7% 23,035,533 18.56 38,212,790 13.2%
----------- -------------------------------------------------- -----
North Carolina:
Colonial Mall Burlington Burlington 1969/86/94 412,697 57 94.6% 2,772,983 16.26 5,406,600 1.9%
Mayberry Mall Mount Airy 1968/86 150,823 22 97.1% 806,451 10.91 1,148,697 0.4%
57,843 (6)
Plaza Mall Greenville 1965/89/99 421,453 61 96.7% 3,531,909 17.22 1,924,725(7) 0.7%
46,051 (6)
Colonial Shoppes Quaker Greensboro 1968/88/97 103,548 29 93.7% 964,165 12.97 1,422,639 0.5%
Colonial Shoppes Yadkin Yadkinville 1971/97 90,917 11 90.7% 609,923 7.00 707,123 0.2%
Colonial Shoppes Stanly Locust 1987/96 46,970 8 100.0% 255,445 7.84 285,951 0.1%
----------- -------------------------------------------------- -----
Subtotal-North Carolina (6 Properties) 1,330,302 188 95.6% 8,940,876 14.51 10,895,735 3.7%
----------- -------------------------------------------------- -----
South Carolina:
Colonial Mall Myrtle Beach Myrtle Beach 1986 486,493 72 92.5% 4,261,940 20.28 8,346,881 2.9%
----------- -------------------------------------------------- -----
Subtotal-South Carolina (1 Property) 486,493 72 92.5% 4,261,940 20.28 8,346,881 2.9%
----------- -------------------------------------------------- -----
Tennessee:
Rivermont Shopping Center Chattanooga 1986/97 73,539 10 95.4% 385,290 6.43 503,190 0.2%
----------- -------------------------------------------------- -----
Subtotal-Tennessee (1 Property) 73,539 10 95.4% 385,290 6.43 503,190 0.2%
----------- -------------------------------------------------- -----
Virginia:
Colonial Mall Staunton Staunton 1969/86/97 423,177 50 91.8% 1,925,376 10.98 3,289,907 1.1%
Colonial Promenade Abington Abingdon 1987/96 165,684 18 100.0% 1,015,969 10.31 1,270,073 0.4%
----------- -------------------------------------------------- -----
Subtotal-Virginia (2 Properties) 588,861 68 94.1% 2,941,345 10.78 4,559,980 1.6%
----------- -------------------------------------------------- -----
Total (41 Properties) 13,947,410 1,692 89.9% $91,863,778 $ 16.66 $133,752,350 45.9%
=========== ================================================== =====
(footnotes on next page)
<FN>
(1) All Retail Properties are 100% owned by the Company, with the exception of
Orlando Fashion Square and Parkway City mall, which are owned 50% by the
Company.
(2) Year initially completed and, where applicable, year(s) in which the
Property was substantially renovated or an additional phase of the Property
was completed.
(3) Total GLA includes space owned by anchor tenants, but Percent Leased
excludes such space.
(4) Includes specialty store space only.
(5) Percent of Total 1999 Property Revenue represents the Retail Property's
proportionate share of all revenue from the 111 Properties.
(6) Represents space owned by anchor tenants.
(7) Represents revenues from the date of the Company's acquisition of the
Property in 1999 through December 31, 1999.
(8) This property is currently under development and is not included in the
property total.
(9) This property is located on the premises of the Colonial Mall Gadsden and
is included in the property total with Colonial Mall Gadsden.
(10) Amount excludes $710,400 of straight-line rents reflected in the Company's
Consolidated Financial Statements for the period ended December 31, 1999.
</FN>
</TABLE>
The following table sets forth the total gross leasable area, percent
leased and average base rent per leased square foot as of the end of each of the
last five years for the Retail Properties:
<TABLE>
<CAPTION>
Gross Average
Leasable Area Percent Base Rent Per
Year-End (Square Feet) (1) Leased Leased Square Foot(2)
-------- ----------------- ------ ---------------------
<S> <C> <C> <C>
December 31, 1999 13,947,000 89.9% $16.66
December 31, 1998 11,105,000 91.9% $14.48
December 31, 1997 8,880,000 93.3% $14.38
December 31, 1996 4,856,000 93.8% $14.66
December 31, 1995 3,758,000 93.1% $13.23
<FN>
(1) Excludes 2,395,000 square feet of space owned by anchor tenants.
(2) Average base rent per leased square foot is calculated using specialty
store year-end base rent figures.
</FN>
</TABLE>
The following table sets out a schedule of the lease expirations for
leases in place as of December 31, 1999, for the Retail Properties:
<TABLE>
<CAPTION>
Net Rentable Annualized Percent of Total
Year of Number of Area Of Base Rent of Annual Base Rent
Lease Tenants with Expiring Leases Expiring Represented by
Expiration Expiring Leases (Square Feet) (1) Leases (1)(2) Expiring Leases (1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 375 1,217,885 12,565,084 13.7%
2001 208 744,002 8,024,893 8.7%
2002 247 770,532 10,017,682 10.9%
2003 170 802,113 7,520,417 8.2%
2004 174 1,361,508 9,137,176 9.9%
2005 100 322,579 5,671,149 6.2%
2006 101 1,167,922 7,818,020 8.5%
2007 113 1,171,862 8,365,703 9.1%
2008 66 508,596 5,272,415 5.7%
2009 59 560,417 4,959,719 5.4%
Thereafter 79 3,546,539 12,511,520 13.6%
-------------- --------------- ------------- ----------
1,692 12,173,955 $ 91,863,778 100.0%
============== =============== ============= ==========
<FN>
(1) Excludes 2,395,000 square feet of space owned by anchor tenants and
1,883,000 square feet of space not leased as of December 31, 1999.
(2) Annualized base rent is calculated using base rents as of December 31, 1999.
</FN>
</TABLE>
Undeveloped Land
The Company owns nine undeveloped land parcels consisting of
approximately 175.0 acres (collectively, the "Land"). Land adjacent to
Multifamily Properties typically will be considered for potential development of
another phase of an existing Multifamily Property if the Company determines that
the particular market can absorb additional apartment units. The Company
currently owns one such parcel. For expansions at Retail Properties, the Company
owns parcels both contiguous to the boundaries of Retail Properties, which would
accommodate expansion of the mall or shopping center, and outparcels which are
suitable for restaurants, financial institutions or free standing retailers. The
Company owns two such parcels.
Property Markets
The table below sets forth certain information with respect to the
geographic concentration of the Properties as of December 31, 1999.
Geographic Concentration of Properties
<TABLE>
<CAPTION>
Percent
Units Total Of Total
(Multifamily) GLA NRA 1999 Property 1999 Property
State (1) (Retail) (2) (Office)(3) Revenue Revenue
- -------------- ---------- ------------ ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Alabama 7,697 4,794,620 2,238,452 $ 114,515,385 39.4%
Florida 5,366 3,327,790 363,345 79,114,841 27.2%
Georgia 1,938 3,345,805 535,712 61,635,459 21.2%
Mississippi 328 -0- -0- 2,493,318 0.9%
North Carolina -0- 1,330,302 -0- 10,895,735 3.7%
South Carolina 764 486,493 -0- 13,874,237 4.8%
Tennessee -0- 73,539 -0- 503,190 0.2%
Texas 322 -0- -0- 3,056,624 1.0%
Virginia -0- 588,861 -0- 4,559,980 1.6%
---------- ------------ ------------ --------------- -----------
Total 16,415 13,947,410 3,137,509 $ 290,648,769 100.0%
========== ============ ============ =============== ===========
<FN>
(1) Units (in this table only) refer to multifamily apartment units.
(2) GLA refers to gross leaseable area of retail space.
(3) NRA refers to net rentable area of office space.
</FN>
</TABLE>
The Company believes that the demographic and economic trends and
conditions in the markets where the Properties are located indicate a potential
for continued growth in property net operating income. The Properties are
located in a variety of distinct submarkets within Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Tennessee, Texas and Virginia.
However, Birmingham, Huntsville and Montgomery, Alabama, Orlando, Tampa and
Sarasota/Bradenton, Florida, and Macon and Atlanta, Georgia, are the Company's
primary markets. The Company believes that its markets in these nine states,
which are characterized by stable and increasing population and employment
growth, should continue to provide a steady demand for multifamily, office, and
retail properties.
Mortgage Financing
Certain of the Properties are subject to mortgage indebtedness. The
Properties whose financial results are consolidated in the financial statements
of the Company are subject to existing mortgage indebtedness and other notes
payable in an aggregate amount as of December 31, 1999, of approximately $1.04
billion carrying a weighted average interest rate of 7.15% and a weighted
average maturity of 7.0 years. The mortgage indebtedness on the Properties as of
December 31, 1999, is set forth in the table below:
<PAGE>
Mortgage Debt and Notes Payable
<TABLE>
<CAPTION>
Anticipated
Annual Debt
Principal Service Estimated
Interest Balance (as of (1/1/00- Maturity Balance Due
Property (1) Rate 12/31/99) 12/31/00) Date (2) on Maturity
- ----------------------------------- ---------- -------------- -------------- ---------- ------------
Multifamily Properties:
<S> <C> <C> <C> <C> <C> <C>
CG at Carrollwood 7.490% 10,200,000 $ 763,980 08/27/09 $10,200,000
CG at Natchez Trace 7.950% 6,795,394 612,387 09/01/35 47,813
CG at Natchez Trace 8.000% 4,050,445 371,424 02/01/37 29,071
CV at Rocky Ridge 5.900% 6,000,000 354,000 08/01/02 (4) 6,000,000
CV at Rocky Ridge 7.625% 1,146,667 208,731 08/01/02 841,667
CG at Galleria Woods 6.910% 9,708,854 771,155 07/01/09 8,459,760
CV at Inverness 3.980% 9,900,000 495,587 07/01/26 (5) 9,900,000
CV at Inverness Lakes 5.900% 4,000,000 236,000 08/01/02 (4) 4,000,000
CV at Inverness Lakes 7.625% 1,495,000 197,022 08/01/02 1,234,167
CG at Galleria 3.980% 22,400,000 1,041,395 07/01/26 (5) 22,400,000
CG at Research Park 3.980% 12,775,000 592,942 07/01/26 (5) 12,775,000
CV at White Bluff 3.980% 4,500,000 212,175 07/01/26 (5) 4,500,000
CV at Vernon Marsh 3.980% 3,400,000 165,201 07/01/26 (5) 3,400,000
CV at Hillwood 5.900% 3,330,000 196,470 08/01/02 (4) 3,300,000
CV at Hillwood 7.625% 1,430,000 211,436 08/01/02 1,179,167
Retail Properties:
Colonial Promenade Hunter's Creek 8.800% 9,925,950 1,060,640 10/01/01 9,578,044
Mayberry Mall 9.220% 3,294,223 362,823 10/01/01 3,237,064
Colonial Promenade Montgomery 7.490% 12,250,000 917,525 07/01/00 12,250,000
Rivermont Shopping Center 10.125% 1,587,738 270,113 09/01/08 52,091
Colonial Promenade Unversity Park 7.490% 21,500,000 1,617,050 03/05/05 21,500,000
Village at Roswell Summit 8.930% 1,603,043 159,515 09/01/05 1,401,860
Office Properties:
Interstate Park 8.500% 3,910,807 643,623 08/01/03 2,648,144
Riverchase Center 7.880% 7,981,452 8,621,945 12/01/00 7,766,043
Colonial Center 100 at Mansell
Overlook 8.625% 13,732,487 1,305,949 01/10/08 15,285,811
Colonial Center at Mansell Overlook8.250% 17,255,156 15,149,832 06/01/00 13,692,324
Perimeter Corporate Park 8.680% 5,347,697 610,230 12/01/03 4,858,772
Other debt:
Land Loan 7.580% 610,772 610,722 09/30/00 610,722
Line of Credit 7.430% (7) 228,337,000 13,434,213 07/10/00 (8)228,337,000
Unsecured Senior Notes 7.500% 65,000,000 4,868,724 07/15/01 65,000,000
Unsecured Senior Notes 8.050% 65,000,000 5,213,989 07/15/06 65,000,000
Unsecured Senior Notes 7.000% 175,000,000 12,250,008 07/15/06 65,000,000
Medium Term Notes 7.050% 50,000,000 3,525,000 12/15/03 50,000,000
Medium Term Notes 7.160% 50,000,000 3,580,000 01/17/03 50,000,000
Medium Term Notes 6.960% 75,000,000 5,220,000 07/26/04 75,000,000
Medium Term Notes 6.960% 25,000,000 1,740,000 08/01/05 25,000,000
Medium Term Notes 6.980% 25,000,000 1,745,000 09/26/05 25,000,000
Medium Term Notes 8.190% 25,000,000 2,047,500 08/01/05 25,000,000
Medium Term Notes 7.930% 57,500,000 4,559,750 09/26/05 25,000,000
Unamortized Discount on Senior Notes (1,104,853) (1,104,853)
-------------- -------------- ------------
TOTAL $ 1,039,862,832 $ 95,944,056 $878,379,667
============== ============== ============
<FN>
(1) As noted in the table, certain Properties were developed in phases and
separate mortgage indebtedness may encumber each of the various phases. In
the listing of property names, CG has been used as an abbreviation for
Colonial Grand and CV as an abbreviation for Colonial Village.
(2) All of the mortgages can be prepaid at any time, subject to prepayment
penalties calculated typically on a percentage basis, except for the
mortgages encumbering CV at Rocky Ridge, CV at Inverness Lakes, and CV at
Hillwood, which are closed to prepayment for varying lengths of time.
(3) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2007.
(4) These loans are financed through tax-exempt bonds which are credit enhanced
by Fannie Mae. The loans, which bear interest at a weekly variable interest
rate, require monthly interest payments through June 2006 and principal and
interest payments from July 2006 through June 2026. The weighted average
interest rate of these three was 3.93% at December 31, 1999. On February
15, 1999, the Company entered into an interest rate swap for these bonds at
a rate of 3.23%.
(5) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2022.
(6) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2010.
(7) This line of credit facility bears interest at a variable rate, based on
LIBOR plus a spread that ranges from 80 to 135 basis points. At December
31, 1999, the line of credit facility bore interest at a rate of 95 basis
points above LIBOR. The facility also includes a competitive bid feature
that allows the Company to convert up to $125 million under the line of
credit to a fixed rate, for a fixed term not to exceed 90 days. At December
31, 1999, there were no amounts outstanding under the competitive bid
feature.
(8) This credit facility has a term of two years beginning in July 1998 and
provides for a two-year amortization in the event of non-renewal. On
January 4, 1999, the Company entered into an interest rate swap for $50.0
million of its line of credit at 4.97% plus 80 to 135 basis points.
Additionally, on May 4, 1999, the Company entered into an interest rate
swap for $25.0 million on its line of credit at a rate of 5.07%.
</FN>
</TABLE>
In addition to the foregoing mortgage debt, the six Multifamily
Properties, two Office Properties and two Retail Properties in which the Company
owns partial interests (and which therefore are not consolidated in the
financial statements of the Company) also are subject to existing mortgage
indebtedness. The Company's pro-rata share of such indebtedness as of December
31, 1999, was $49,027,000, which carried a weighted average interest rate of
7.1%. The maturity dates of these loans range from February 1, 2000 to October
1, 2009 and as of December 31, 1999, the loans had a weighted average maturity
of 9.9 years.
Item 3. Legal Proceedings.
Neither the Company nor the Properties are presently subject to any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or the Properties, other than routine litigation
arising in the ordinary course of business which is expected to be covered by
liability insurance.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the Company's shareholders during the
fourth quarter of 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters.
The following sets forth the high and low sale prices for the Common
Shares for each quarter in the two-year period ended December 31, 1999, as
reported by the New York Stock Exchange Composite Tape, and the dividends paid
by the Company with respect to each such period.
<TABLE>
<CAPTION>
Calendar Period High Low Distribution
1999:
<S> <C> <C> <C>
First Quarter.................$ 28.125..........$ 24.438 $ .58
Second Quarter................$ 28.875..........$ 25.563 $ .58
Third Quarter.................$ 28.563..........$ 26.313 $ .58
Fourth Quarter................$ 27.125..........$ 21.750 $ .58
1998:
First Quarter.................$ 31.875..........$ 29.438 $ .55
Second Quarter................$ 32.188..........$ 29.188 $ .55
Third Quarter.................$ 31.188..........$ 24.000 $ .55
Fourth Quarter................$ 29.000..........$ 24.625 $ .55
</TABLE>
On March 8, 2000, the last reported sale price of the Common Shares on
the NYSE was $23.875. On March 8, 2000, the Company had approximately 657
shareholders of record.
Item 6. Selected Financial Data.
The information required by this item is hereby incorporated by
reference to the material appearing in the 1999 annual report to shareholders
(the "Annual Report to Shareholders"), filed as Exhibit 13.1 hereto, under the
caption "Selected Financial Information."
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by this item is hereby incorporated by
reference to the material appearing in the Annual Report to Shareholders, filed
as Exhibit 13.1 hereto, under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Company are hereby incorporated by
reference to the Consolidated Financial Statements of Colonial Properties Trust
appearing in the Annual Report to Shareholders, filed as Exhibit 13.1 hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Trustees and Executive Officers of the Registrant.
The information required by this item with respect to trustees and
compliance with the Section 16(a) reporting requirements is hereby incorporated
by reference to the material appearing in the Company's definitive proxy
statement for the annual meeting of shareholders to be held in 2000 (the "Proxy
Statement") under the captions "Election of Trustees" and "Section 16(a)
Beneficial Ownership Reporting Compliance." Information required by this item
with respect to executive officers is provided in Item 1 of this report. See
"Executive Officers of the Company."
Item 11. Executive Compensation.
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Voting Securities and Principal Holders Thereof."
Item 13. Certain Relationships and Related Transactions.
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Executive Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions."
<PAGE>
Part IV
Item 14. Exhibits, Financial Schedule, and Reports on Form 8-K.
14(a)(1) and (2) Financial Statements and Schedule
Index to Financial Statements and Financial Statement Schedule
Financial Statements:
The following financial statements of the Company are hereby
incorporated by reference to the Consolidated Financial Statements of Colonial
Properties Trust appearing in the Annual Report to Shareholders:
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31,
1999, 1998, and 1997
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998, and 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants
Financial Statement Schedule:
Schedule III Real Estate and Accumulated Depreciation
Report of Independent Accountants
All other schedules have been omitted because the required information
of such other schedules is not present in amounts sufficient to require
submission of the schedule or because the required information is included in
the consolidated financial statements.
14(a)(3) Exhibits
* 3.1 Declaration of Trust of Company.
* 3.2 Bylaws of the Company.
(phi) 4.1 Articles Supplementary of 83/4% Series A
Cumulative Redeemable Preferred Shares
of Beneficial Interest of the Company.
4.2 Articles Supplementary of Series 1998 Junior
Participating Preferred Shares of
Beneficial Interest of the Company.
4.3 Articles Supplementary of 8.875% Series B
Cumulative Redeemable Perpetual
Preferred Shares of the Company.
10.1 Third Amended and Restated Agreement of
Limited Partnership of the Operating
Partnership, as amended.
+ 10.2.1 Registration Rights and Lock-Up
Agreement dated September 29, 1993, among the
Company and the persons named therein.
(psi) 10.2.2 Registration Rights and Lock-Up
Agreement dated March 25, 1997, among the
Company and the persons named therein.
(psi) 10.2.3 Registration Rights and Lock-Up
Agreement dated November 4, 1994, among the
Company and the persons named therein.
(psi) 10.2.4 Registration Rights and Lock-Up
Agreement dated August 20, 1997, among the
Company and the persons named therein.
(psi) 10.2.5 Registration Rights and Lock-Up
Agreement dated November 1, 1997, among the
Company and the persons named therein.
(psi) 10.2.6 Registration Rights and Lock-Up
Agreement dated July 1, 1997, among the Company
and the persons named therein.
(psi) 10.2.7 Registration Rights and Lock-Up
Agreement dated July 1, 1996, among the Company
and the persons named therein.
(psi)(psi) 10.2.8 Registration Rights Agreement dated February
23, 1999, among the Company, Belcrest Realty
Corporation, and Belair Real Estate Corporation
(psi)(psi) 10.2.9 Registration Rights and Lock-Up Agreement dated
July 1, 1998, among the Company and the persons
named therein.
(psi)(psi) 10.2.10 Registration Rights and Lock-Up Agreement dated
July 31, 1997, among the Company and the
persons named therein.
(psi)(psi) 10.2.11 Registration Rights and Lock-Up Agreement dated
November 18, 1998, among the Company and the
persons named therein.
(psi)(psi) 10.2.12 Registration Rights and Lock-Up Agreement dated
December 29, 1994, among the Company and the
persons named therein.
10.2.13 Registration Rights and Lock-Up Agreement dated
April 30, 1999, among the Company and the
persons named therein.
@ 10.3.1++ Second Amended and Restated Employee Share
Option and Restricted Share Plan.
+/- 10.3.2++ Non-employee Trustee Share Option Plan.
+/-+/-10.3.3++ Non-employee Trustee Share Plan.
@ 10.3.4++ Employee Share Purchase Plan.
+ 10.4++ Non-employee Trustee Option Agreement.
+ 10.5++ Employment Agreement between the Company and
Thomas H. Lowder.
+ 10.6++ Officers and Trustees Indemnification Agreement
+ 10.7 Partnership Agreement of the Management
Partnership.
** 10.8 Articles of Incorporation of the Management
Corporation, as amended.
+ 10.9 Bylaws of the Management Corporation.
++ 10.10 Credit Agreement between the Colonial Realty
Limited Partnership and SouthTrust Bank,
National Association, AmSouth Bank, N.A., Wells
Fargo Bank, National Association, Wachovia
Bank, N.A., First National Bank of Commerce,
N.A., and PNC Bank, Ohio, National Association
dated July 10, 1997, as amended on July 10,
1997 and related promissory notes.
(psi)(psi)10.11.1 Amendment to Credit Agreement dated July 10,
1998.
(psi)(psi)10.11.2 Second Amendment to Credit Agreement dated
August 21, 1998.
+ 10.12++ Annual Incentive Plan.
++++10.13 Indenture dated as of July 22, 1996, by and
between Colonial Realty Limited Partnership and
Bankers Trust Company, as amended
(psi)(psi)10.13.1 First Supplemental Indenture dated as of
December 31, 1998, by and between Colonial
Realty Limited Partnership and Bankers Trust
Company.
(psi)(psi) 10.14 Rights Agreement dated as of November 2, 1998
between Colonial Properties Trust and
BankBoston, N.A.
10.15 Executive Unit Purchase Program - Program
Summary
10.16 Form of Master Promissory Note
10.17 Form of Reimbursement Agreement dated January
25, 2000 between Colonial Realty Limited
Partnership and Employee Unit Purchase Plan
participants.
13.1 Portions of the Annual Report to Shareholders
incorporated by reference in Part II of this
Form 10-K.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedules
- --------------------
* Incorporated by reference to the Company's Form 8-K dated November 5, 1997.
** Incorporated by reference to the same titled and number exhibit in the
Company's Annual Report on Form 10-K dated December 31, 1994.
(psi)Incorporated by reference to the same titled and number exhibit in the
Company's Annual Report on Form 10-K dated December 31, 1997.
+ Incorporated by reference to the same titled and numbered exhibit in the
Company's Registration Statement on Form S-11, No. 33-65954.
++ Management contract or compensatory plan required to be filed pursuant
to Item 14(c) of Form 10-K.
++ Incorporated by reference to the same titled and number exhibit in the
Company's Quarterly Report on Form 10-Q dated June 30, 1997.
++++Incorporated by reference to (i) Exhibit D to the Form 8-K dated July 19,
1996, filed by Colonial Realty Limited Partnership, and (ii) Exhibit B to
the Form 8-K dated December 6, 1996, filed by Colonial Realty Limited
Partnership.
@ Incorporated by reference to Exhibit 99.1 to the Company's Registration
Statement on Form S-8, No. 333-60333.
+/- Incorporated by reference to the Company's Registration Statement on Form
S-8, No. 333-27203.
+/-+/-Incorporated by reference to the Company's Registration Statement on Form
S-8, No. 333-27205.
@@ Incorporated by reference to the Company's Registration Statement on Form
S-8, No. 333-27201.
(phi)Incorporated by reference to the Company's Registration Statement Amendment
No. 1 on Form S-3 dated November 20, 1997.
(psi)(psi)Incorporated by reference to the same titled and number exhibit in the
Company's Annual Report on Form 10-K dated December 31, 1998.
14(b) Reports on Form 8-K
Reports on Form 8-K filed during the last quarter of 1999:
None.
14(c) Exhibits
The list of Exhibits filed with this report is set forth in
response to Item 14(a)(3).
14(d) Financial Statements
None.
<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, thereunto duly authorized, on March
30, 2000.
Colonial Properties Trust
By: /s/ Thomas H. Lowder
---------------------
Thomas H. Lowder
Chairman of the Board,
President, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and the capacities indicated on March 30, 2000.
Signature
/s/ Thomas H. Lowder Chairman of the Board,
President, and Chief
- --------------------------------------------------- Executive Officer
Thomas H. Lowder
/s/ Howard B. Nelson, Jr. Chief Financial Officer
- ---------------------------------------------------
Howard B. Nelson, Jr.
Senior Vice President-
Chief Accounting
/s/ Kenneth E. Howell Officer
- ---------------------------------------------------
Kenneth E. Howell
/s/ Carl F. Bailey Trustee
- ---------------------------------------------------
Carl F. Bailey
/s/ M. Miller Gorrie Trustee
- ---------------------------------------------------
M. Miller Gorrie
/s/ William M. Johnson Trustee
- ---------------------------------------------------
William M. Johnson
/s/ James K. Lowder Trustee
- ---------------------------------------------------
James K. Lowder
/s/ Herbert A. Meisler Trustee
- ---------------------------------------------------
Herbert A. Meisler
/s/ Claude B. Nielsen Trustee
- ---------------------------------------------------
Claude B. Nielsen
/s/ Harold W. Ripps Trustee
- ---------------------------------------------------
Harold W. Ripps
/s/ Donald T. Senterfitt Trustee
- ---------------------------------------------------
Donald T. Senterfitt
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
COLONIAL PROPERTIES TRUST
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1999
Gross Amount
at Which
Initial Cost to Carried at
Company Cost Close of Period
----------------------------------- Capitalized --------------
Buildings and Subsequent to
Description Encumbrances Land Improvements Acquisition Land
- --------------------------------------- ---------------- ---------------- ---------------- ---------------- --------------
Multifamily:
<S> <C> <C> <C> <C> <C>
CG at Bayshore -0- 1,265,561 10,196,833 9,576,866 2,433,387
CG at Carrollwood 10,200,000 1,464,000 10,657,840 1,472,780 1,464,000
CG at Citrus Park -0- 1,323,593 -0- 11,232,173 1,328,323
CG at Cypress Crossing -0- 8,781,859 -0- 12,588,090 2,125,136
CG at Edgewater -0- 1,540,000 12,671,606 13,335,474 2,602,325
CG at Galleria 22,400,000 4,600,000 39,078,925 2,688,756 4,600,000
CG at Galleria II -0- 758,439 7,902,382 33,228 758,439
CG at Galleria Woods 9,708,854 1,220,000 12,480,949 492,655 1,220,000
CG at Heathrow -0- 2,560,661 17,612,990 399,383 2,560,661
CG at Hunter's Creek -0- 33,264,022 -0- 596,637 5,308,112
CG at Inverness Lakes -0- 641,334 8,873,906 (2,934,787) 1,136,762
CG at Lakewood Ranch -0- 2,320,442 -0- 19,718,710 2,148,814
CG at Natchez Trace 10,845,839 1,312,000 16,568,050 252,514 1,317,591
CG at Palm Aire -0- 1,488,000 13,515,075 430,430 1,489,500
CG at Palma Sola -0- 1,479,352 -0- 12,893,516 1,479,352
CG at Research Park 12,775,000 3,680,000 29,322,067 2,059,134 3,680,000
CG at Riverchase -0- 2,340,000 25,248,548 1,582,306 2,340,000
CG at Spring Creek -0- 1,184,000 13,243,975 393,612 1,184,000
CG at Wesleyan -0- 720,000 12,760,587 6,807,102 1,404,780
Colony Park -0- 409,401 4,345,599 748,351 409,406
CV at Ashford Place -0- 537,600 5,839,838 219,748 537,600
CV at Ashley Plantation -0- 1,160,000 11,284,785 1,438,602 1,160,000
CV at Caledon Wood -0- 2,100,000 19,482,210 436,694 2,108,949
CV at Cordova -0- 134,000 3,986,304 497,812 134,000
CV at Gainesville -0- 3,360,000 24,173,649 3,518,545 3,361,850
CV at Haverhill -0- 1,771,000 17,869,452 2,312,028 1,771,000
CV at Hillcrest -0- 332,800 4,310,671 284,138 332,800
CV at Hillwood 4,760,000 511,700 5,508,300 646,060 511,700
CV at Huntleigh Woods -0- 745,600 4,908,990 925,863 745,600
CV at Inverness 9,900,000 1,713,668 10,352,151 2,966,563 1,713,668
CV at Inverness II/III/IV -0- 635,819 5,927,265 5,876,219 1,255,323
CV at Inverness Lakes 5,495,000 735,080 7,254,920 437,915 735,080
CV at Lake Mary -0- 2,145,480 -0- 19,556,037 3,634,094
CV at McGehee Place -0- 795,627 -0- 17,415,968 842,321
CV at Monte D'Oro -0- 1,000,000 6,994,227 1,631,049 1,000,000
CV at North Ingle -0- 497,574 4,122,426 489,100 497,574
CV at Oakleigh -0- 880,000 9,685,518 297,797 1,028,699
CV at Rocky Ridge 7,146,667 644,943 8,325,057 968,544 644,943
CV at Timothy Woods -0- 1,020,000 11,910,546 112,737 1,024,347
CV at Trussville -0- 1,504,000 18,800,253 993,844 1,510,409
CV at Vernon Marsh 3,400,000 960,984 3,511,596 3,247,476 960,984
CV at Walton Way -0- 1,024,000 7,877,766 135,691 1,024,000
CV at White Bluff 4,500,000 699,128 4,920,872 371,619 699,128
Patio I, II & III -0- 249,876 3,305,124 2,082,751 366,717
Ski Lodge - Tuscaloosa -0- 1,064,000 6,636,685 1,163,784 1,064,000
Retail:
Bel Air Mall -0- 7,517,000 80,151,190 2,172,946 7,517,000
Britt David Shopping Center -0- 1,755,000 4,951,852 29,014 1,755,000
Brookwood Village Mall -0- 8,136,700 24,435,002 2,929,623 8,171,373
Colonial Mall Auburn-Opelika -0- 103,480 -0- 16,743,709 723,715
Colonial Mall Burlington -0- 4,120,000 25,632,587 626,918 4,137,557
Colonial Mall Decatur -0- 3,262,800 23,636,229 2,186,023 3,262,800
Colonial Mall Gadsden -0- 639,577 -0- 20,166,769 639,577
Colonial Mall Glynn Place -0- 3,588,178 22,514,121 2,116,976 3,603,469
Colonial Mall Lakeshore -0- 4,646,300 30,973,239 2,438,202 4,666,100
Colonial Mall Mrytle Beach -0- 9,099,972 33,663,654 198,953 7,799,976
Colonial Mall Staunton -0- 2,895,000 15,083,542 3,149,387 2,907,337
Colonial Mall Valdosta -0- 5,377,000 30,239,796 1,390,702 4,478,413
Colonial Promenade Abingdon -0- 2,051,250 6,687,616 168,201 2,059,991
Colonial Promenade Bardmoor -0- 1,989,019 9,047,663 392,218 1,989,019
Colonial Promenade Beechwood -0- 2,565,550 19,647,875 1,310,590 2,576,483
Colonial Promenade Burnt Store -0- 3,750,000 8,198,677 163,204 3,750,000
Colonial Promenade Hunter's Creek 9,925,950 4,181,760 13,023,401 200,377 4,181,760
Colonial Promenade Lakewood -0- 2,984,522 11,482,512 2,115,066 2,997,240
Colonial Promenade Montgomery 12,250,000 3,788,913 11,346,754 1,241,305 4,332,432
Colonial Promenade Montgomery N -0- 2,400,000 5,664,858 570,889 2,400,000
Colonial Promenade Tuskawilla -0- 3,659,040 6,783,697 163,622 3,659,040
Colonial Promenade University Park 21,500,000 6,946,785 20,104,517 544,189 6,946,785
Colonial Promenade Wekiva -0- 2,817,788 15,302,375 223,891 2,817,788
Colonial Promenade Winter Haven -0- 1,768,586 3,928,903 4,736,078 4,045,045
Colonial Shoppes at Inverness -0- 1,680,000 1,387,055 93,216 1,687,159
Colonial Shoppes Bear Lake -0- 2,134,440 6,551,683 182,596 2,134,440
Colonial Shoppes Bellwood -0- 330,000 -0- 3,233,886 330,000
Colonial Shoppes McGehee -0- 197,152 -0- 3,945,503 197,152
Colonial Shoppes Paddock Park -0- 1,532,520 3,754,879 207,346 1,532,520
Colonial Shoppes Quaker Village -0- 931,000 7,901,874 255,047 934,967
Colonial Shoppes Stanley -0- 450,000 1,657,870 101,073 451,918
Colonial Shoppes Yadkin -0- 1,080,000 1,224,136 3,234,400 1,084,602
Macon Mall -0- 1,684,875 -0- 92,885,313 5,508,562
Mayberry Mall 3,294,223 862,500 3,778,590 410,796 866,175
Northdale Court -0- 3,059,760 8,054,090 1,146,506 3,059,760
Old Springville Shopping Center -0- 272,594 -0- 3,377,049 277,975
Olde Town Shopping Center -0- 343,325 -0- 2,819,202 343,325
P&S Building -0- 104,089 558,646 214,930 104,089
The Plaza Mall -0- -0- 29,245,243 1,291,655 -0-
Rivermont Shopping Center 1,587,738 515,250 2,332,486 349,675 517,446
Village at Roswell Summit 1,603,043 450,000 2,563,642 171,468 451,918
Office:
250 Commerce Street -0- 25,000 200,200 2,312,429 25,000
AmSouth Center -0- 764,961 -0- 18,617,541 764,961
Colonial Center at Research Park -0- 1,003,865 -0- 10,553,933 1,003,865
Colonial Plaza -0- 1,001,375 12,381,023 4,424,521 1,005,642
Concourse Center -0- 4,875,000 25,702,552 562,445 4,875,000
Emmett R. Johnson Bldg. -0- 1,794,672 14,801,258 93,437 1,794,672
Independence Plaza -0- 1,505,000 6,018,476 285,288 1,505,000
International Park -0- 1,279,355 5,668,186 13,941,500 3,087,151
Interstate Park 3,910,807 1,125,990 7,113,558 9,457,866 1,125,988
Lakeside Office Park -0- 423,451 8,313,291 324,751 425,255
Colonial Center @ Mansell Overlook 30,987,643 4,540,000 44,012,971 29,628,976 6,740,981
Perimeter Corporate Park 5,347,697 1,422,169 18,377,648 505,535 1,422,169
Progress Center -0- 521,037 14,710,851 955,644 523,258
Riverchase Center 7,981,452 1,916,727 22,091,651 1,171,576 1,924,895
Shades Brook Building -0- 873,000 2,240,472 129,539 873,000
Shoppes at Mansell -0- 600,000 3,089,565 87,246 600,000
University Park -0- 396,960 2,971,049 1,680,413 396,959
Active Development Projects:
CG at Heather Glen -0- 3,800,000 -0- 28,518,483 3,800,000
CG at Liberty Park -0- 2,293,348 -0- 18,018,403 2,293,348
CG at North Heathrow -0- 3,972,240 -0- (1,697,538) 3,972,240
CG at North Lakewood Ranch -0- 1,059,046 -0- 489,822 1,059,046
CG at Promenade -0- 1,531,860 -0- 22,780,678 1,531,860
CG at Reservoir -0- 1,020,000 -0- 9,765,908 1,020,000
CG at Town Park -0- 3,555,408 -0- 898,949 3,555,408
CG at Wesleyan III -0- 225,021 -0- 9,520 225,021
Colonial Center Town Park -0- -0- -0- 25,816 -0-
Colonial Promenade Trussville -0- 4,201,186 -0- 18,380,064 4,201,186
Colonial Promenade Tutwiler Farm -0- 10,287,026 -0- 1,215,392 10,287,026
CV at Ashley Plantation -0- 930,900 -0- 11,973,834 930,900
CG at Madison -0- 1,689,400 -0- 19,793,967 1,689,400
CV at McGehee Place -0- 90,733 -0- 23,433 90,733
CV at Walton Way -0- -0- -0- 2,856,038 -0-
Colonial Center 300 @ Mansell Overlook -0- -0- -0- 9,471,387 -0-
Other Miscellaneous Projects -0- -0- -0- 1,380,906 -0-
Unimproved Land:
Colonial Mall Briarcliffe -0- 1,433,596 -0- 114,624 1,548,220
Colonial Mall Valdosta -0- 975,506 -0- 70,300 1,045,806
McGehee Place Land 668,364 436,471 -0- 175,442 611,913
North Heathrow Land -0- 9,553,734 -0- 4,249,004 13,802,738
Other Land -0- 13,829,213 -0- -0- 13,829,213
---------------- ---------------- ---------------- ---------------- -------------
$ 200,188,277 $ 289,200,519 $ 1,120,670,943 $ 585,539,100 $ 274,143,134
================ ================ ================ ================ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
COLONIAL PROPERTIES TRUST
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1999
Gross Amount Which Carried
at Close of Period Date
----------------------------------- Acquired/
Buildings and Accumulated Date Placed in Depreciable
Description Improvements Total Depreciation Completed Service Lives-Years
- --------------------------------------- ---------------- ----------- ------------- ------------ --------- ------------
Multifamily:
<S> <C> <C> <C> <C> <C> <C>
CG at Bayshore 18,605,872 $ 21,039,260 1,933,042 1997 1985/97/98 7-40 Years
CG at Carrollwood 12,130,620 $ 13,594,620 2,565,432 1966 1994 7-40 Years
CG at Citrus Park 11,227,443 $ 12,555,766 445,214 1999 1997 7-40 Years
CG at Cypress Crossing 19,244,813 $ 21,369,949 912,798 1999 1998 7-40 Years
CG at Edgewater 24,944,755 $ 27,547,080 3,417,721 1990 1994 7-40 Years
CG at Galleria 41,767,681 $ 46,367,681 5,580,156 1986 1994 7-40 Years
CG at Galleria II 7,935,610 $ 8,694,049 963,777 1996 1996 7-40 Years
CG at Galleria Woods 12,973,604 $ 14,193,604 1,717,835 1994 1996 7-40 Years
CG at Heathrow 18,012,373 $ 20,573,034 2,275,460 1997 1994/97 7-40 Years
CG at Hunter's Creek 28,552,547 $ 33,860,659 2,919,285 1996 1996 7-40 Years
CG at Inverness Lakes 16,860,115 $ 17,996,877 1,807,199 1996 1996 7-40 Years
CG at Lakewood Ranch 19,890,338 $ 22,039,152 643,120 1999 1997 7-40 Years
CG at Natchez Trace 16,814,973 $ 18,132,564 1,444,823 1995/97 1997 7-40 Years
CG at Palm Aire 13,944,005 $ 15,433,505 2,741,981 1991 1994 7-40 Years
CG at Palma Sola 12,893,517 $ 14,372,868 4,652,309 1992 1992 7-40 Years
CG at Research Park 31,381,201 $ 35,061,201 4,830,402 1987/94 1994 7-40 Years
CG at Riverchase 26,830,854 $ 29,170,854 3,938,847 1984/91 1994 7-40 Years
CG at Spring Creek 13,637,587 $ 14,821,587 1,762,091 1992/94 1996 7-40 Years
CG at Wesleyan 18,882,910 $ 20,287,689 1,395,736 1997 1996/97 7-40 Years
Colony Park 5,093,946 $ 5,503,351 862,251 1975 1993 7-40 Years
CV at Ashford Place 6,059,586 $ 6,597,186 587,358 1983 1996 7-40 Years
CV at Ashley Plantation 12,723,387 $ 13,883,387 749,921 1997 1998 7-40 Years
CV at Caledon Wood 19,909,955 $ 22,018,904 1,562,750 1995/96 1997 7-40 Years
CV at Cordova 4,484,115 $ 4,618,116 2,511,257 1983 1983 7-40 Years
CV at Gainesville 27,690,344 $ 31,052,194 5,430,854 1989/93/94 1994 7-40 Years
CV at Haverhill 20,181,480 $ 21,952,480 976,970 1998 1998 7-40 Years
CV at Hillcrest 4,594,809 $ 4,927,609 469,168 1981 1996 7-40 Years
CV at Hillwood 6,154,360 $ 6,666,060 1,009,364 1984 1993 7-40 Years
CV at Huntleigh Woods 5,834,853 $ 6,580,453 900,909 1978 1994 7-40 Years
CV at Inverness 13,318,714 $ 15,032,382 3,553,644 1986/87/90 1986/87/90 7-40 Years
CV at Inverness II/III/IV 11,183,980 $ 12,439,303 1,879,058 1997 1997 7-40 Years
CV at Inverness Lakes 7,692,835 $ 8,427,915 1,287,345 1983/96 1993 7-40 Years
CV at Lake Mary 18,067,423 $ 21,701,517 4,886,742 1991/95 1991/95 7-40 Years
CV at McGehee Place 17,369,274 $ 18,211,595 4,900,711 1986/95 1986/95 7-40 Years
CV at Monte D'Oro 8,625,276 $ 9,625,276 1,276,291 1977 1994 7-40 Years
CV at North Ingle 4,611,526 $ 5,109,100 781,980 1983 1983 7-40 Years
CV at Oakleigh 9,834,616 $ 10,863,315 895,599 1997 1997 7-40 Years
CV at Rocky Ridge 9,293,601 $ 9,938,544 1,453,138 1984 1993 7-40 Years
CV at Timothy Woods 12,018,936 $ 13,043,283 1,068,048 1996 1997 7-40 Years
CV at Trussville 19,787,688 $ 21,298,097 1,940,382 1996/97 1997 7-40 Years
CV at Vernon Marsh 6,759,072 $ 7,720,056 1,879,136 1986/87 1986/93 7-40 Years
CV at Walton Way 8,013,457 $ 9,037,457 297,317 1970/88 1998 7-40 Years
CV at White Bluff 5,292,491 $ 5,991,619 879,959 1986 1993 7-40 Years
Patio I, II & III 5,271,034 $ 5,637,751 863,184 1966/83/84 1994/93/93 7-40 Years
Ski Lodge - Tuscaloosa 7,800,469 $ 8,864,469 1,205,284 1976/92 1994 7-40 Years
Retail:
Bel Air Mall 82,324,136 $ 89,841,136 2,321,116 1966/90/97 1998 7-40 Years
Britt David Shopping Center 4,980,866 $ 6,735,866 640,478 1990 1994 7-40 Years
Brookwood Village Mall 27,329,952 $ 35,501,325 1,913,505 1973/91 1997 7-40 Years
Colonial Mall Auburn-Opelika 16,123,475 $ 16,847,189 8,853,685 1973/84/89 1973/84/89 7-40 Years
Colonial Mall Burlington 26,241,948 $ 30,379,505 1,494,609 1969/86/94 1997 7-40 Years
Colonial Mall Decatur 25,822,252 $ 29,085,052 3,116,954 1979/89 1993 7-40 Years
Colonial Mall Gadsden 20,166,769 $ 20,806,346 9,998,539 1974/91 1974 7-40 Years
Colonial Mall Glynn Place 24,615,806 $ 28,219,275 1,560,913 1986 1997 7-40 Years
Colonial Mall Lakeshore 33,391,641 $ 38,057,741 2,163,476 1984-87 1997 7-40 Years
Colonial Mall Mrytle Beach 35,162,603 $ 42,962,579 3,057,274 1986 1996 7-40 Years
Colonial Mall Staunton 18,220,592 $ 21,127,929 972,665 1969/86/97 1997 7-40 Years
Colonial Mall Valdosta 32,529,084 $ 37,007,498 2,031,493 1982-85 1997 7-40 Years
Colonial Promenade Abingdon 6,847,076 $ 8,907,067 401,325 1987/96 1997 7-40 Years
Colonial Promenade Bardmoor 9,439,881 $ 11,428,900 799,502 1981 1996 7-40 Years
Colonial Promenade Beechwood 20,947,532 $ 23,524,015 1,503,346 1963/92 1997 7-40 Years
Colonial Promenade Burnt Store 8,361,881 $ 12,111,881 1,151,711 1990 1994 7-40 Years
Colonial Promenade Hunter's Creek 13,223,778 $ 17,405,538 1,167,577 1993/95 1996 7-40 Years
Colonial Promenade Lakewood 13,584,860 $ 16,582,100 752,956 1995 1997 7-40 Years
Colonial Promenade Montgomery 12,044,540 $ 16,376,972 2,807,103 1990 1993 7-40 Years
Colonial Promenade Montgomery N 6,235,747 $ 8,635,747 307,190 1997 1995 7-40 Years
Colonial Promenade Tuskawilla 6,947,319 $ 10,606,359 799,458 1990 1995 7-40 Years
Colonial Promenade University Park 20,648,706 $ 27,595,491 6,965,246 1986/89 1993 7-40 Years
Colonial Promenade Wekiva 15,526,266 $ 18,344,054 1,330,561 1990 1996 7-40 Years
Colonial Promenade Winter Haven 6,388,522 $ 10,433,567 681,147 1986 1995 7-40 Years
Colonial Shoppes at Inverness 1,473,112 $ 3,160,271 111,276 1984 1997 7-40 Years
Colonial Shoppes Bear Lake 6,734,279 $ 8,868,719 800,890 1990 1995 7-40 Years
Colonial Shoppes Bellwood 3,233,886 $ 3,563,886 1,187,275 1988 1988 7-40 Years
Colonial Shoppes McGehee 3,945,503 $ 4,142,655 1,421,364 1986 1986 7-40 Years
Colonial Shoppes Paddock Park 3,962,225 $ 5,494,745 427,397 1988 1995 7-40 Years
Colonial Shoppes Quaker Village 8,152,954 $ 9,087,921 489,158 1968/88/97 1997 7-40 Years
Colonial Shoppes Stanley 1,757,025 $ 2,208,943 108,475 1987/96 1997 7-40 Years
Colonial Shoppes Yadkin 4,453,933 $ 5,538,536 221,299 1971/97 1997 7-40 Years
Macon Mall 89,061,626 $ 94,570,188 21,155,929 1975/88/97 1975/88 7-40 Years
Mayberry Mall 4,185,710 $ 5,051,886 232,747 1968/86 1997 7-40 Years
Northdale Court 9,200,596 $ 12,260,356 849,752 1988 1995 7-40 Years
Old Springville Shopping Center 3,371,668 $ 3,649,643 2,756,976 1982 1982 7-40 Years
Olde Town Shopping Center 2,819,202 $ 3,162,527 777,410 1978/90 1978/90 7-40 Years
P&S Building 773,576 $ 877,665 487,410 1946/76/91 1974 7-40 Years
The Plaza Mall 30,536,898 $ 30,536,898 247,626 1965/89/99 1999 7-40 Years
Rivermont Shopping Center 2,679,965 $ 3,197,411 149,693 1986/97 1997 7-40 Years
Village at Roswell Summit 2,733,192 $ 3,185,110 142,712 1988 1997 7-40 Years
Office:
250 Commerce Street 2,512,629 $ 2,537,629 2,363,374 1904/81 1980 7-40 Years
AmSouth Center 18,617,540 $ 19,382,502 6,853,112 1990 1990 7-40 Years
Colonial Center at Research Park 10,553,933 $ 11,557,798 33,434 1999 1998 7-40 Years
Colonial Plaza 16,801,278 $ 17,806,919 669,208 1982 1997 7-40 Years
Concourse Center 26,264,997 $ 31,139,997 927,653 1981/85 1998 7-40 Years
Emmett R. Johnson Bldg 14,894,696 $ 16,689,368 185,016 1982/95 1999 7-40 Years
Independence Plaza 6,303,764 $ 7,808,764 313,828 1981/92 1998 7-40 Years
International Park 17,801,890 $ 20,889,041 448,105 1987/89 1997 7-40 Years
Interstate Park 16,571,426 $ 17,697,414 5,403,053 1982-85/89 1982-85/89 7-40 Years
Lakeside Office Park 8,636,238 $ 9,061,493 572,243 1989/90 1997 7-40 Years
Colonial Center @ Mansell Overlook 71,440,966 $ 78,181,947 3,629,675 1987/96/97 1997 7-40 Years
Perimeter Corporate Park 18,883,183 $ 20,305,352 906,328 1986/89 1998 7-40 Years
Progress Center 15,664,275 $ 16,187,532 1,020,500 1983-91 1997 7-40 Years
Riverchase Center 23,255,059 $ 25,179,954 1,741,421 1984-88 1997 7-40 Years
Shades Brook Building 2,370,011 $ 3,243,011 81,188 1979 1998 7-40 Years
Shoppes at Mansell 3,176,811 $ 3,776,811 110,681 1996/97 1998 7-40 Years
University Park 4,651,463 $ 5,048,422 2,026,828 1985 1985 7-40 Years
Active Development Projects:
CG at Heather Glen 28,518,483 $ 32,318,483 148,929 N/A 1998 N/A
CG at Liberty Park 18,018,403 $ 20,311,751 404 N/A 1998 N/A
CG at North Heathrow (1,697,538) $ 2,274,702 -0- N/A 1997 N/A
CG at North Lakewood Ranch 489,822 $ 1,548,868 -0- N/A 1997 N/A
CG at Promenade 22,780,678 $ 24,312,538 119,808 N/A 1998 N/A
CG at Reservoir 9,765,908 $ 10,785,908 -0- N/A 1998 N/A
CG at Town Park 898,949 $ 4,454,357 -0- N/A 1997 N/A
CG at Wesleyan III 9,520 $ 234,541 -0- N/A 1996 N/A
Colonial Center Town Park 25,816 $ 25,816 -0- N/A 1997 N/A
Colonial Promenade Trussville 18,380,064 $ 22,581,250 -0- N/A 1998 N/A
Colonial Promenade Tutwiler Farm 1,215,392 $ 11,502,418 -0- N/A 1999 N/A
CV at Ashley Plantation 11,973,834 $ 12,904,734 181,457 N/A 1998 N/A
CG at Madison 19,793,967 $ 21,483,367 170,187 N/A 1998 N/A
CV at McGehee Place 23,433 $ 114,166 -0- N/A 1987 N/A
CV at Walton Way 2,856,038 $ 2,856,038 -0- N/A 1998 N/A
Colonial Center 300 @ Mansell Overlook 9,471,387 $ 9,471,387 -0- N/A 1999 N/A
Other Miscellaneous Projects 1,380,906 $ 1,380,906 129,982 N/A 1999 N/A
Unimproved Land:
Colonial Mall Briarcliffe -0- $ 1,548,220 N/A 1996 N/A
Colonial Mall Valdosta -0- $ 1,045,806 N/A 1997 N/A
McGehee Place Land -0- $ 611,913 N/A 1981 N/A
North Heathrow Land -0- $ 13,802,738 N/A 1997 N/A
Other Land -0- $ 13,829,213 N/A 1999 N/A
------------ ------------ -------------
$1,732,683,852 $2,006,826,986 $206,451,470
============ ============ =============
</TABLE>
<PAGE>
NOTES TO SCHEDULE III
COLONIAL PROPERTIES TRUST
December 31, 1999
(1) The aggregate cost for Federal Income Tax purposes was approximately
$1,603,837,000 at December 31, 1999.
(2) See description of mortgage notes payable in Note 7 of Notes to
Consolidated Financial Statements.
(3) The following is a reconciliation of real estate to balances reported at
the beginning of the year:
<TABLE>
<CAPTION>
Reconciliation of Real Estate
1999 1998 1997
--------------- ---------------- ----------------
Real estate investments:
<S> <C> <C> <C>
Balance at beginning of year $ 1,863,798,665 $ 1,489,114,015 $ 1,017,009,315
Acquisitions of new property 48,577,019 346,267,522 451,256,964
Improvements and development 222,517,447 134,804,450 97,564,705
Dispositions of property (128,066,145) (106,387,322) (76,716,969)
--------------- ---------------- ----------------
Balance at end of year $ 2,006,826,986 $ 1,863,798,665 $ 1,489,114,015
=============== ================ ================
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of Accumulated Depreciation
1999 1998 1997
--------------- ---------------- ----------------
Accumulated depreciation:
<S> <C> <C> <C>
Balance at beginning of year $ 169,451,798 $ 124,236,057 $101,541,658
Depreciation 52,912,745 46,787,982 31,945,960
Depreciation of disposition of property (15,913,073) (1,572,241) (9,251,561)
--------------- ---------------- ----------------
Balance at end of year $206,451,470 $169,451,798 $124,236,057
=============== ================ ================
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Trustees of
Colonial Properties Trust:
Our audits of the consolidated financial statements referred to in our report
dated January 17, 2000 (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers L.L.P.
PricewaterhouseCoopers L.L.P.
Birmingham, Alabama
January 17, 2000
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
COLONIAL REALTY LIMITED PARTNERSHIP
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF COLONIAL REALTY LIMITED PARTNERSHIP ("Agreement"), dated as of
October 19, 1999, is entered into by and among Colonial Properties Trust, an
Alabama real estate investment trust, as the General Partner ("Colonial
Properties" or the "General Partner"), and the Persons whose names are set forth
on Exhibit A as attached hereto who were admitted as limited partners in
accordance with the provisions of the Second Amended and Restated Agreement of
Limited Partnership, dated as of October 27, 1994, and the First Amended and
Restated Agreement of Limited Partnership, dated as of September 29, 1993
(collectively, the "Prior Agreements"), as the Limited Partners, together with
any other Persons who become Partners in the Partnership as provided herein, for
certain limited purposes set forth in this Agreement.
In consideration of the mutual covenants set forth herein, and
for other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to continue the
Partnership as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. ss. 17-101, et seq.), as amended from time to time
(the "Act"), as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.2 hereof and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each Partnership Year (i) increased
by any amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), l.704-l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property
is deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is further adjusted pursuant to Exhibit B
hereof.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests, or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.
"Agreed Value" means (i) in the case of any Contributed
Property set forth in Exhibit D and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit D; (ii)
in the case of any Contributed Property not set forth in Exhibit D and as of the
time of its contribution to the Partnership, the 704(c) Value of such property,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (iii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"Agreement" means this Third Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time to
time.
"Assignee" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which
such calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the
case may be) for such period (without regard to adjustments
resulting from allocations described in Sections 1.A through
1.E of Exhibit C);
(b) Depreciation and all other noncash charges
deducted in determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of
the Partnership referred to in clause (ii) (f) below
(including, without limitation, reductions resulting because
the General Partner determines such amounts are no longer
necessary);
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such
period over the gain recognized from such sale, exchange,
disposition, or refinancing during such period (excluding
Terminating Capital Transactions); and
(e) all other cash received by the Partnership
for such period that was not included in determining Net
Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made by the
Partnership during such period ;
(b) capital expenditures made by the Partnership
during such period;
(c) investments made by the Partnership during such
period in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in
clause (ii) (a) or (ii)(b);
(d) all other expenditures and payments not
deducted in determining Net Income or Net Loss for such period;
(e) any amount included in determining Net
Income or Net Loss for such period that was not received by
the Partnership during such period;
(f) the amount of any increase in reserves
during such period which the General Partner determines to be
necessary or appropriate in its sole and absolute discretion;
and
(g) the amount of any working capital accounts and
other cash or similar balances which the General Partner
determines to be necessary or appropriate, in its sole and
absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
"Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Section 4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed
Property or Adjusted Property, the 704(c) Value of such property, reduced (but
not below zero) by all Depreciation with respect to such Property charged to the
Partners' Capital Accounts following the contribution of or adjustment with
respect to such Property, and (ii) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax purposes,
all as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Exhibit B hereof, and to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash Amount" means an amount of cash equal to the Value on
the Valuation Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the Delaware Secretary of
State, as amended from time to time in accordance with the terms hereof and the
Act.
"Class A" means the Partners who are holders of Class A Units.
"Class A Share" means that portion of Available Cash for a
Distribution Period to be distributed with respect to Class A as determined by
multiplying the amount of Available Cash for such Distribution Period by the
fraction set forth in Section 5.1.B.1 hereof.
"Class A Unit" means any Partnership Unit other than a Class B
Unit, a Preferred Unit, or any other Partnership Unit that is specifically
designated by the General Partner pursuant to Section 4.2 as being another class
of Partnership Units.
"Class B" means the Partners who are holders of Class B Units.
"Class B Share" means that portion of Available Cash for a
Distribution Period to be distributed with respect to Class B as determined by
multiplying the amount of Available Cash for such Distribution Period by the
fraction set forth in Section 5.1.B.2 hereof (as such fraction may be adjusted
in accordance with Section 5.1.B hereof).
"Class B Unit" means a Partnership Unit with such
designations, preferences, rights, powers and duties as are described in or
pursuant to Section 4.2.C.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Common Unit" means a Partnership Unit that is not a Preferred
Unit. The Class A Units and Class B Units, and any other Partnership Units that
may be issued from time to time by the General Partner as set forth in Section
4.2 and designated as Common Units, are Common Units.
"Common Unit Available Cash" has the meaning set forth in
Section 5.1.B.
"Consent" means the consent or approval of a proposed action
by a Partner given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in
such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that
the General Partner (i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares or makes a distribution to all holders of its outstanding
REIT Shares in REIT Shares; (ii) subdivides its outstanding REIT Shares; or
(iii) combines its outstanding REIT Shares into a smaller number of REIT Shares,
the Conversion Factor shall be adjusted by multiplying the Conversion Factor by
a fraction, the numerator of which shall be the number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time, and the denominator of
which shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services; (ii) all amounts owed by such
Person to banks or other Persons in respect of reimbursement obligations under
letters of credit, surety bonds and other similar instruments guaranteeing
payment or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any lien on any property owned by such Person, to the
extent attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person which, in accordance with generally accepted
accounting principles, should be capitalized.
"Declaration of Trust" means the Declaration of Trust of the
General Partner filed in the State of Alabama on August 21, 1995, as amended or
restated from time to time.
"Depreciation" means, for each fiscal year an amount equal to
the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Distribution Period" means any calendar quarter or shorter
period with respect to which a distribution of Available Cash is to be made to
the Partners by the Partnership.
"Effective Date" means the date of closing of the initial public
offering of shares of the General Partner pursuant to that certain agreement
among the Former General Partner, the Partnership, the General Partner, and
Lehman Brothers Inc., Bear, Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and The Robinson-Humphrey Company, Inc. as agents for the
underwriters.
"Exercise Percentage" has the meaning set forth in Section
4.4.
"Former General Partner" means Colonial Properties Holding
Company, Inc., an Alabama corporation formed by Colonial Properties as a wholly
owned subsidiary of Colonial Properties to serve as the general partner of the
Partnership. The separate existence of the Former General Partner terminated on
December 31, 1998, when the Former General Partner merged with and into Colonial
Properties, whereupon Colonial Properties became the General Partner.
"General Partner" means Colonial Properties Trust, an Alabama
real estate investment trust, in its capacity as the general partner of the
Partnership, or its successors as general partner of the Partnership, and shall
also be deemed to refer to, where the context so requires, the Former General
Partner, in its capacity as the predecessor to Colonial Properties.
"General Partner Interest" means a Partnership Interest held
by the General Partner that is a general partnership interest. A General Partner
Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person,
such natural Person's spouse and such natural Person's natural or adoptive
parents, descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief of or against
such Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90) days of such appointment, or (h) an
appointment referred to in clause (g) which has been stayed is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of his status as (A) the General Partner, (B) a director or officer of
the Partnership or the General Partner, or (C) a guarantor, pursuant to a loan
guarantee or any other guarantee given to a third party in connection with any
partnership property or loan (other than in connection with the transfer of
properties to the Partnership in connection with the initial public offering of
REIT Shares), including without limitation, environmental indemnities,
reimbursements agreements or guaranties to credit enhancers under bond issues,
undertakings or indemnities to title companies, or otherwise, for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken assets subject to), and (ii) such other
Persons (including Affiliates of the General Partner or the Partnership) as the
General Partner may designate from time to time (whether before or after the
event giving rise to potential liability), in its sole and absolute discretion.
"Limited Partner" means any Person named as a Limited Partner
in Exhibit A attached hereto, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner in the Partnership.
"Limited Partner Interest" means a Partnership Interest of a
Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Partners and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partner Interest may be expressed as
a number of Partnership Units.
"Liquidation Preference Amount" means, with respect to any
Preferred Unit as of any date of determination, the amount (including accrued
and unpaid distributions to the date of determination) payable with respect to
such Preferred Unit (as established by the instrument designating such Preferred
Unit) upon the voluntary or involuntary dissolution or winding up of the
Partnership as a preference over distributions to Partnership Units ranking
junior to such Preferred Unit.
"Liquidator" has the meaning set forth in Section 13.2.
"Management Corporation" means Colonial Properties Services,
Inc.
"Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period over
the Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Nonrecourse Built-in Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable gain
that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if
such properties were disposed of in a taxable transaction in full satisfaction
of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption
substantially in the form of Exhibit E to this Agreement.
"Original Limited Partner" means a Limited Partner who is a
Partner on the date of this Agreement and who owns one or more Original Limited
Partnership Units on the date action is called for under Section 13.1.
"Original Limited Partnership Unit" means a Partnership Unit
held by an Original Limited Partner on the date of this Agreement and held by
such Original Limited Partner on the date action is called for under Section
18.3.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-2
(i)(2).
"Partnership" means the limited partnership formed under the
Act and continued by this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the
Partnership representing a Capital Contribution by either a Limited Partner or
the General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash for a Distribution
period pursuant to Section 5.1 hereof, which record date shall be the same as
the record date established by the General Partner for a distribution to its
shareholders of some of all of its portion of such distribution.
"Partnership Unit" means a fractional undivided share of a
class or series of Partnership Interests. The ownership of Partnership Units
shall be evidenced by such form of certificate as the General Partner may adopt
from time to time on behalf of the Partnership. Without limitation on the
authority of the General Partner as set forth in Section 4.2 hereof (but subject
to the limitations thereof), the General Partner may designate any Partnership
Units, when issued, as Common Units or as Preferred Units, may establish any
other class of Partnership Units, and may designate one or more series of any
class of Partnership Units.
"Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.
"Percentage Interest" means, as to a Partner, with respect to
any class or series of Partnership Units held by such Partner, its interest in
such class or series of Partnership Units as determined by dividing the number
of Partnership Units in such class or series owned by such Partner by the total
number of Partnership Units in such class or series then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time. For purposes of determining the rights and relationships among the
various classes and series of Partnership Units, Preferred Units shall not be
considered to have any share of the aggregate Percentage Interest in the
Partnership unless, and only to the extent, provided otherwise in the instrument
creating such class or series of Preferred Units.
"Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.
"Preferred REIT Share" means a preferred share of beneficial
interest in the General Partner.
"Preferred Unit" means Series A Preferred Units, Series B
Preferred Units and any other Partnership Unit issued from time to time pursuant
to Section 4.2 hereof that is specifically designated by the General Partner at
the time of its issuance as a Preferred Unit. Each class or series of Preferred
Units shall have such designations, preferences, and relative, participating,
optional, or other special rights, powers, and duties, including rights, powers,
and duties senior to the Common Units, all as determined by the General Partner,
subject to compliance with the requirements of Section 4.2 hereof.
"Prior Agreements" mean the Second Amended and Restated
Agreement of Limited Partnership, dated October 27, 1994, which is amended and
restated in its entirety by this Agreement and which amended the First Amended
and Restated Agreement of Limited Partnership, dated as of September 29, 1993.
"Recapture Income" means any gain recognized by the
Partnership upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A
hereof.
"Redemption Right" shall have the meaning set forth in Section
8.6.A hereof.
"Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856
of the Code.
"REIT Share" shall mean a common share of beneficial interest
in the General Partner.
"REIT Shares Amount" means a number of REIT Shares equal to
the product of the number of Common Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor; provided that in the event the
General Partner issues to all holders of REIT Shares rights, options, warrants
or convertible or exchangeable securities entitling the shareholders to
subscribe for or purchase REIT Shares, or any other securities or property
(collectively, the "rights") and if the Partnership does not issue to all of the
holders of Common Units at such time (other than the General Partner)
corresponding rights to subscribe for or purchase Common Units or other
securities or property corresponding to the securities or property covered by
the rights granted by the General Partner, then the REIT Shares Amount shall
also include such rights that a holder of that number of REIT Shares would be
entitled to receive had it owned such REIT Shares at the time such rights were
issued, provided further that, if the rights issued by the General Partner are
issued pursuant to a shareholder rights plan (or other arrangement having the
same objective and substantially the same effect), then the REIT Shares Amount
shall include such rights only to the extent that (i) the Common Units offered
for redemption were issued other than pursuant to Section 4.4 of this Agreement,
and (ii) such rights have not been exercised by the holders thereof (and have
not otherwise terminated or been redeemed or eliminated).
"Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate
Book-Tax Disparities.
"Series A Preferred Unit" has the meaning set forth in Section
4.2.D.
"Series B Preferred Unit" has the meaning set forth in Section
4.2.E.
"704(c) Value" of any Contributed Property means the value of
such property as set forth in Exhibit D or if no value is set forth in Exhibit
D, the fair market value of such property or other consideration at the time of
contribution as determined by the General Partner using such reasonable method
of valuation as it may adopt; provided, however, that the 704(c) Value of any
property deemed contributed to the Partnership for federal income tax purposes
upon termination and reconstitution thereof pursuant to Section 708 of the Code
shall be determined in accordance with Exhibit B hereof. Subject to Exhibit B
hereof, the General Partner shall, in its sole and absolute discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate of the
704(c) Values of Contributed Properties in a single or integrated transaction
among the separate properties on a basis proportional to their respective fair
market values.
"Specified Redemption Date" means the tenth (10th) Business
Day after receipt by the General Partner of a Notice of Redemption; provided
that no Specified Redemption Date shall occur before one (1) year from the date
of this Agreement, provided further that if the General Partner combines its
outstanding REIT Shares, no Specified Redemption Date shall occur after the
record date and prior to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which a majority of (i) the voting
power of the voting equity securities or (ii) the outstanding equity interests
is owned, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership Pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i) the
fair market value of such property (as determined under Exhibit B hereof) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
Exhibit B hereof) as of such date, over (ii) the fair market value of such
property (as determined under Exhibit B hereof) as of such date.
"Valuation Date" means the date of receipt by the General
Partner of a Notice of Redemption or, if such date is not a Business Day, the
first Business Day thereafter.
"Value" means, with respect to a REIT Share, the average of
the daily market price for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (i) if the REIT Shares are listed or admitted to trading on any securities
exchange or the NASDAQ- National Market System, the closing price, regular way,
on such day, or if not such sale takes place on such day, the average of the
closing bid and asked prices on such day; (ii) if the REIT Shares are not listed
or admitted to trading on any securities exchange or the NASDAQ-National Market
System, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner; or
(iii) if the REIT Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten (10) days prior to the date
in question) for which prices have been so reported; provided that if there are
no bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the REIT Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes rights that a holder of REIT Shares would
be entitled to receive, then the Value of such rights shall be determined by the
General Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation
The Partnership is a limited partnership organized pursuant to
the provisions of the Act and upon the terms and conditions set forth in the
Prior Agreement. The Partners hereby continue the Partnership and amend and
restate the Prior Agreement in its entirety. Except as expressly provided herein
to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name
The name of the Partnership shall be Colonial Realty Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The General Partner in its sole and absolute discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the
State of Delaware shall be located at 1013 Centre Road, County of New Castle,
Wilmington, Delaware 19805, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be
Corporation Service Company. The principal office of the Partnership shall be
Colonial Plaza, Suite 900, 2101 Sixth Avenue North, Birmingham, Alabama 35203,
or such other place as the General Partner may from time to time designate by
notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the States of Delaware and Alabama as
the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (a) all
certificates, documents and other instruments
(including, without limitation, this Agreement and
the Certificate and all amendments or restatements
thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or
continue the existence or qualification of the
Partnership as a limited partnership (or a
partnership in which the limited Partners have
limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may
or plans to conduct business or own property; (b) all
instruments that the General Partner deems
appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement
in accordance with its terms; (c) all conveyances and
other instruments or documents that the General
Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation
of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments
relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other
events described in, Article 11, 12 or 13 hereof or
the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments
relating to the determination of the rights,
preferences and privileges of Partnership Interests;
and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates
and other instruments appropriate or necessary, in
the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by
the Partners hereunder or is consistent with the
terms of this Agreement or appropriate or necessary,
in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on August 9, 1993, the
date the Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act and shall continue until December 31, 2092,
unless, the Partnership is dissolved sooner pursuant to the provisions of
Article l3 or as otherwise provided by law.
<PAGE>
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT, unless the General
Partner ceases to qualify as a REIT for reasons other than the conduct of the
business of the Partnership, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or to own
interests in any entity engaged in any of the foregoing, and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the General Partner's right, in its sole
discretion, to cease qualifying as a REIT, the Partners acknowledge the General
Partner's current status as a REIT inures to the benefit of all of the Partners
and not solely to the benefit of the General Partner.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, provided that the Partnership
shall not take any action which, in the judgment of the General Partner, in its
sole and absolute discretion, (i) could adversely affect the ability of the
General Partner to continue to qualify as a REIT, (ii) could subject the General
Partner to any additional taxes under Section 857 or Section 4981 of the Code,
or (iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner or its securities, unless such
action shall have been specifically consented to by the General Partner in
writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Limited Partners
and the Former General Partner
On the Effective Date, certain of the Limited Partners and the
Former General Partner made the Capital Contributions described in the section
captioned "Formation of the Company" in the final Prospectus dated September 24,
1993 of the General Partner in connection with the initial public offering of
the REIT Shares. To the extent the Partnership acquires any property by the
merger of any other Person into the Partnership, Persons who receive Partnership
Interests in exchange for their interests in the Person merging into the
Partnership shall become Partners and shall be deemed to have made Capital
Contributions as provided in the applicable merger agreement. The Partners shall
own Partnership Units in the amounts set forth for such Partner in Exhibit A and
shall have a Percentage Interest in the Partnership as set forth Exhibit A,
which Percentage Interest shall be adjusted in Exhibit A from time to time by
the General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional Partnership Units (pursuant to
any merger or otherwise), or similar events having an effect on a Partner's
Percentage Interest. The Capital Contributions of the Partners shall be at all
times as shown on the books and records of the General Partner. The number of
Partnership Units held by the General Partner equal to one percent (1%) of all
outstanding Partnership Units from time to time shall be deemed to be the
general partner Partner Units and shall be the General Partnership Interest.
Except as provided in Sections 4.2 and 10.5, the Partners shall have no
obligation to make any additional Capital Contributions or loans to the
Partnership.
Section 4.2 Issuances of Additional Partnership Interests
A. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to the Partners (including the General
Partner) or other Persons additional Partnership Units or other Partnership
Interests in one or more classes, or one or more series of any of such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and duties
senior to Limited Partner Interests, all as shall be determined by the General
Partner in its sole and absolute discretion subject to Delaware law, including,
without limitation, (i) the allocations of items of Partnership income, gain,
loss, deduction and credit to each such class or series of Partnership
Interests; (ii) the right of each such class or series of Partnership Interests
to share in Partnership distributions; and (iii) the rights of each such class
or series of Partnership Interests upon dissolution and liquidation of the
Partnership; provided that no such additional Partnership Units or other
Partnership Interests shall be issued to the General Partner unless either
(a)(1) the additional Partnership Interests are issued in connection with an
issuance of additional REIT Shares or Preferred REIT Shares of the General
Partner, which shares have designations, preferences and other rights such that
the economic interests attributable to such shares are substantially similar to
the designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner in accordance with this Section 4.2.A,
and (2) the General Partner shall make a Capital Contribution to the Partnership
in an amount equal to the net proceeds raised in connection with the issuance of
such additional REIT Shares or Preferred REIT Shares of the General Partner, or
(b) the additional Partnership Interests in the applicable class or series are
issued to all Partners in proportion to their respective Percentage Interests in
such class or series.
B. The General Partner shall not issue any additional REIT
Shares or Preferred REIT Shares (other than REIT Shares issued pursuant to
Section 8.6), or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase REIT Shares or
Preferred REIT Shares (collectively "New Securities") other than to all holders
of REIT Shares unless (i) the General Partner shall cause the Partnership to
issue to the General Partner Partnership Interests or rights, options, warrants
or convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the New Securities, and (ii) the General
Partner contributes the net proceeds from the issuance of such New Securities
and from the exercise of rights contained in such New Securities to the
Partnership. Without limiting the foregoing, the General Partner is expressly
authorized to issue New Securities for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
General Partner corresponding Partnership Interests, so long as (x) the General
Partner concludes in good faith that such issuance is in the interests of the
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of REIT Shares and corresponding Partnership Units pursuant to an
employee stock purchase plan providing for employee purchases of REIT Shares at
a discount from fair market value or employee stock options that have an
exercise price that is less than the fair market value of the REIT Shares,
either at the time of issuance or at the time of exercise), and (y) the General
Partner contributes all proceeds from such issuance and exercise to the
Partnership.
C. Under the authority granted to it by Section 4.2.A, the
General Partner hereby establishes an additional class of Partnership Units
entitled "Class B Units" that is available to be issued in lieu of Class A
Units, at the election of the General Partner, in its sole and absolute
discretion, to newly admitted Partners in exchange for the contribution by such
Partners of cash, real estate partnership interests, stock, notes or other
assets or consideration. Except as otherwise provided below and in Section 5.1.B
hereof, each Class B Unit shall have the same designations, rights, preferences,
powers and duties as each Class A Unit:
(1) The amount of Available Cash distributable with respect to
Class B Units shall be determined in accordance with Section
5.1.B hereof.
(2) Each Class B Unit shall be converted automatically into a
Class A Unit on the day immediately following the
Partnership Record Date for the Distribution Period (as
defined in Section 5.1.B) in which the Class B Unit was
issued, without the requirement for any action by either the
Partnership or the Partner holding the Class B Unit.
(3) A holder of Class B Units will not have the Redemption Right
under Section 8.6 with respect to its Class B Units. The
Redemption Right for a holder of Class A Units into which
Class B Units have been converted pursuant to clause (2)
above shall be the same as set forth in Section 8.6 except
that such Redemption Right shall not be exercisable for a
period of one (1) year following the issuance of such Class
B Units (or such longer or shorter period as may be set
forth in the contribution agreement or amendment to this
Agreement pursuant to which such Class B Units were issued).
(4) A holder of either Class B Units or Class A Units into which
Class B Units have been converted pursuant to clause (2)
above shall be subject to the restrictions on transfer
imposed by Sections 11.3.C through 11.3.E of this Agreement
(in addition to any other restrictions on transfer as may be
set forth in the contribution agreement or amendment to this
Agreement pursuant to which such Class B Units were issued).
(5) The General Partner shall cause Class B Units to be issued
by the Partnership only pursuant to an amendment to this
Agreement under the authority granted to the General Partner
by Section 14.1.B.3 hereof, which amendment shall designate
that the newly issued Partnership Units are Class B Units.
The General Partner shall have the right, in its sole and
absolute discretion, subject to Section 4.2.A above, to
determine whether the Partnership should issue Class A
Units, Class B Units (or one or more series thereof), or
another class of Partnership Interests in connection with a
contribution of property, other assets, or other
consideration to the Partnership.
D. Series A Preferred Units. Under the authority granted to it
by Section 4.2.A hereof, the General Partner hereby establishes an additional
class of Partnership Units entitled "Series A Cumulative Redeemable Preferred
Units" (the "Series A Preferred Units"). Series A Preferred Units shall have the
designations, preferences, rights, powers and duties as set forth in Exhibit G
hereto.
E. Series B Preferred Units. Under the authority granted to it
by Section 4.2.A hereof, the General Partner hereby establishes an additional
class of Partnership Units entitled "Series B Cumulative Redeemable Preferred
Units" (the "Series B Preferred Units"). Series B Preferred Units shall have the
designations, preferences, rights, powers and duties as set forth in Exhibit H
hereto.
F. Series 1998 Preferred Units. Under the authority granted to
it by Section 4.2.A hereof, the General Partner hereby establishes an additional
class of Partnership Units entitled "Series 1998 Junior Participating Preferred
Units" (the "Series 1998 Preferred Units"). Series 1998 Preferred Units shall
have the designations, preferences, rights, powers and duties as set forth in
Exhibit I hereto.
Section 4.3 Contribution of Proceeds of Issuance of REIT
Shares
In connection with the issuance of REIT Shares or Preferred
REIT Shares pursuant to Section 4.2, the General Partner shall contribute any
net proceeds raised in connection with such issuance the Partnership; provided
that if the net proceeds actually received by the General Partner are less than
the gross proceeds of such issuance as a result of any underwriter's discount or
other expenses paid or incurred in connection with such issuance, then the
General Partner shall be deemed to have made a Capital Contribution to the
Partnership in the amount equal to the sum of the net proceeds of such issuance
plus the amount of such underwriter's discount and other expenses paid by the
General Partner.
Section 4.4 "Flip-in" Preemptive Rights
If the General Partner acquires any Class A Units using the
proceeds from any exercise of any rights (as defined in the definition of REIT
Shares Amount) issued under a shareholder rights plan (or other arrangement
having the same objective and substantially the same effect), then (a) the
holders of Common Units at such time (other than the General Partner) as a group
shall have the right to acquire, at the same price per Class A Unit paid by the
General Partner, a total number of additional Class A Units equal to the product
of (i) the total number of Common Units held by such holders, multiplied by (ii)
a fraction, the numerator of which is the number of Class A Units issued to the
General Partner as a result of the exercise of such rights and the denominator
of which is the total number of Class A Units held by the General Partner
immediately prior to such issuance (which fraction is referred to as the
"Exercise Percentage"), and (b) each holder of a Class A Unit or Class B Unit at
such time shall have the right to acquire, at the same price per Class A Unit
paid by the General Partner, a number of Class A Units equal to the product of
(iii) the aggregate number of Common Units that such holder holds at such time,
multiplied by (iv) the Exercise Percentage.
Thus, for example, if the General Partner were to acquire
2,000,000 Class A Units at $5 per Unit from the proceeds of the exercise of
outstanding rights issued under a shareholder rights plan at a time when the
General Partner already owned 8,000,000 Class A Units out of a total of
12,000,000 outstanding Common Units (which would represent a 25% increase in the
number of Class A Units held by the General Partner), then the other holders of
Common Units as a group would have the right to purchase a total of 1,000,000
Class A Units at $5 per Class A Unit, and each holder of a Class A Unit or Class
B Unit would be entitled to purchase his proportionate share of such Class A
Units, or .25 Class A Units for each Class A Unit or Class B Unit then held by
such holder.
In the event Partnership Units or Partnership Interests other
than Class A Units (including, without limitation, Series 1998 Preferred Units)
are issued to the General Partner using proceeds of any exercise of rights
issued under a shareholder rights plan (or other arrangement), the holders of
Common Units shall be granted the right to acquire such other Partnership Units
or Partnership Interests at the same price as paid by the General Partner and in
such amounts as would be comparable to their rights had Class A Units been
issued instead. The General Partner shall provide prompt written notice to the
holders of Common Units of its acquisition of Class A Units (or other
Partnership Units or Partnership Interests) using such proceeds and shall
establish in good faith such procedures as it deems appropriate (including,
without limitation, procedures to eliminate the issuance of fractional
Partnership Units if the General Partner deems appropriate) to effectuate the
rights of the holders of Common Units under the preceding provisions of this
Section 4.4. Except to the extent expressly granted by the Partnership pursuant
to this Section 4.4 or another agreement, no person shall have any preemptive,
preferential or other similar right with respect to (i) additional Capital
Contributions or loans to the Partnership; or (ii) issuance or sale of any
Partnership Units or other Partnership Interests.
<PAGE>
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of
Distributions
A. The General Partner shall distribute at least
quarterly an amount equal to 100% of Available Cash generated by the
Partnership during such quarter or shorter period to the Partners who
are Partners on the Partnership Record Date with respect to such
quarter or shorter period in the following order of priority:
(i) First, to the holders of Preferred Units in such
amount as is required for the Partnership to pay all
distributions with respect to such Preferred Units
due or payable in accordance with the instruments
designating such Preferred Units through the last day
of such quarter or shorter period; such distributions
shall be made to such Partners in such order of
priority and with such preferences as have been
established with respect to such Preferred Units as
of the last day of such calendar quarter or shorter
period; and then
(ii) To the holders of Common Units in proportion to their
respective Percentage Interests in the Common Units
on such Partnership Record Date, subject to the
provisions of Sections 5.1.B and 5.1.C;
provided that in no event may a Partner receive a distribution of
Available Cash with respect to a Partnership Unit if such Partner is
entitled to receive a distribution out of such Available Cash with
respect to a REIT Share for which such Partnership Unit has been
redeemed or exchanged. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and
consistent with its qualification as a REIT, to distribute Available
Cash to the Limited Partners so as to preclude any such distribution or
portion thereof from being treated as part of a sale of property to the
Partnership by a Limited Partner under Section 707 of the Code or the
Regulations thereunder; provided that the General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner
being so treated.
B. If for any quarter or shorter period with respect
to which a distribution is to be made (a "Distribution Period") Class B
Units are outstanding on the Partnership Record Date for such
Distribution Period, the General Partner shall allocate the Available
Cash with respect to such Distribution Period available for
distribution pursuant to Section 5.1.A(ii) above after distributions to
all Preferred Units provided for in Section 5.1.A(i) above have been
made ("Common Unit Available Cash") between the Partners who are
holders of Class A Units ("Class A") and the Partners who are holders
of Class B Units ("Class B") as follows:
1) Class A shall receive that portion of the Common
Unit Available Cash (the "Class A Share") determined by
multiplying the amount of Common Unit Available Cash by the
following fraction:
A x Y
----------------
(A x Y)+(B x X)
2) Class B shall receive that portion of the Common
Unit Available Cash (the "Class B Share") determined by
multiplying the amount of Common Unit Available Cash by the
following fraction:
B x X
------------------
(A x Y)+(B x X)
3) For purposes of the foregoing formulas, (i) "A"
equals the number of Class A Units outstanding on the
Partnership Record Date for such Distribution Period; (ii) "B"
equals the number of Class B Units outstanding on the
Partnership Record Date for such Distribution Period; (iii)
"Y" equals the number of days in the Distribution Period; and
(iv) "X" equals the number of days in the Distribution Period
for which the Class B Units were issued and outstanding.
The Class A Share shall be distributed among Partners holding
Class A Units on the Partnership Record Date for the Distribution
Period in accordance with the number of Class A Units held by each
Partner on such Partnership Record Date; provided that in no event may
a Partner receive a distribution of Available Cash with respect to a
Class A Unit if a Partner is entitled to receive a distribution out of
such Available Cash with respect to a REIT Share for which such Class A
Unit has been redeemed or exchanged. The Class B Share shall be
distributed among the Partners holding Class B Units on the Partnership
Record Date for the Distribution Period in accordance with the number
of Class B Units held by each Partner on such Partnership Record Date.
In no event shall any Class B Units be entitled to receive any
distribution of Available Cash for any Distribution Period ending prior
to the date on which such Class B Units are issued.
C. In the event that Class B Units which have been
issued on different dates are outstanding on the Partnership Record
Date for any Distribution Period, then the Class B Units issued on each
particular date shall be treated as a separate series of Common Units
for purposes of making the allocation of Common Unit Available Cash for
such Distribution Period among the holders of Common Units (and the
formula for making such allocation, and the definitions of variables
used therein, shall be modified accordingly). Thus, for example, if two
series of Class B Units are outstanding on the Partnership Record Date
for any Distribution Period, the allocation formula for each series,
"Series B1" and "Series B2," would be as follows:
1) Series B1 shall receive that portion of the Common
Unit Available Cash determined by multiplying the amount of
Common Unit Available Cash by the following fraction:
B1 x X1
-----------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
<PAGE>
2) Series B2 shall receive that portion of the Common
Unit Available Cash determined by multiplying the amount of
Common Unit Available Cash by the following fraction:
B2 x X2
-----------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
3) For purposes of the foregoing formulas the
definitions set forth in Section 5.1.B.3 remain the same
except that (i) "B1" equals the number of Common Units in
Series B1 outstanding on the Partnership Record Date for such
Distribution Period; (ii) "B2" equals the number of Common
Units in Series B2 outstanding on the Partnership Record Date
for such Distribution Period; (iii) "X1" equals the number of
days in the Distribution Period for which the Partnership
Units in Series B1 were issued and outstanding; and (iv) "X2"
equals the number of days in the Distribution Period for which
the Common Units in Series B2 were issued and outstanding.
D. Notwithstanding anything to the contrary contained
herein, in no event shall a Partner receive a distribution of Available
Cash with respect to any Common Unit with respect to any quarter or
shorter period until such time as the Partnership has distributed to
the holders of Preferred Units an amount sufficient to pay all
distributions payable with respect to such Preferred Units through the
last day of such quarter or shorter period, in accordance with the
instruments designating such Preferred Units.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners, or Assignees pursuant to Section 5.1 for all purposes under
this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other
cash received or reductions in reserves made after commencement of the
liquidation of the Partnership shall be distributed to the Partners in
accordance with Section 13.2.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof); shall
be allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special
allocations set forth in Section 1 of Exhibit C (including Section 1.F thereof),
Net Income shall be allocated:
(i) first, to the General Partner to
the extent that Net Losses previously allocated to
the General Partner pursuant to Section 6.1B(iii)
below exceed Net Income previously allocated to the
General Partner pursuant to this Section 6.1A(i);
(ii) second, to Partners holding
Preferred Units (and if there are Preferred Units
with different priorities in preference in
distribution, then in the order of their preference
in distribution) to the extent that Net Losses
previously allocated to such Partners pursuant to
Section 6.1B(ii) below exceed Net Income previously
allocated to such Partners pursuant to this Section
6.1A(ii);
(iii) third, to Partners holding
Common Units to the extent that Net Losses previously
allocated to such Partners pursuant to Section
6.1.B(i) below exceed Net Income previously allocated
to such Partners pursuant to this Section 6.1A(iii);
(iv) fourth, to Partners holding
Series B Preferred Units until each such Partner has
been allocated Net Income equal to the excess of (x)
the amount of the cumulative Priority Return such
Partner is entitled to the last day of the current
taxable year or to the date of redemption, to the
extent such Series B Preferred Units are redeemed
during such taxable year, over (y) the cumulative Net
Income allocated to such Partners pursuant to this
Section 6.1A(iv) for all prior taxable years; and
(v) fifth, to the Partners in
accordance with their respective Percentage Interests
in Common Units.
B. Net Losses. After giving effect to the special
allocations set forth in Section 1 of Exhibit C
(including Section 1.F thereof), Net Losses shall be
allocated:
(i) first, to the Partners holding
Common Units in accordance with their respective
Percentage Interests in Common Units, until the
Adjusted Capital Account (ignoring for this purpose
any amounts a Partner is obligated to contribute to
the capital of the Partnership or is deemed obligated
to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2)) of each Partner is reduced
to zero;
(ii) second, to Partners holding
Preferred Units in accordance with each such
Partner's respective percentage interests in the
Preferred Units determined under the respective terms
of the Preferred Units (and if there are Preferred
Units with different priorities in preference in
distribution, then in the reverse order of their
preference in distribution), until the Adjusted
Capital Account (modified in the same manner as in
clause (i)) of each such holder is reduced to zero;
and
(iii) third, to the General Partner.
To the extent permitted under Sections 704(b) and 704(c) of
the Code and the Regulations thereunder, solely for purposes of allocating Net
Income or Net Losses in any taxable year (or a portion thereof) to the Partners
holding Series B Preferred Units with respect to such Units pursuant to Section
6.1 hereof, items of Net Income or Net Losses, as the case may be, shall not
include Depreciation with respect to properties that are "ceiling limited" in
respect of holders of Series B Preferred Units. For purposes of the preceding
sentence, Partnership property shall be considered "ceiling limited" in respect
of a holder of Series B Preferred Units if Depreciation attributable to such
Partnership property which would otherwise be allocable to such holder, without
regard to this paragraph, exceeds depreciation determined for federal income tax
purposes attributable to such Partnership property which would otherwise be
allocable to such holder by more than 5%. Notwithstanding the foregoing
sentences in this paragraph, in applying this paragraph, the General Partner
may, in its discretion for administrative ease and convenience, calculate Net
Income or Net Loss in any taxable year (or a portion thereof) allocable to the
Partners holding Series B Preferred Units by excluding Depreciation with respect
to all properties of the Partnership.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs the Partnership are and
shall be exclusively vested in the General Partner, and no Limited Partner shall
have any right to participate in or exercise control or management power over
the business and affairs of the Partnership. The General Partner may not be
removed by the Limited Partners with or without cause. In addition to the powers
now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner, subject to Section 7.3 hereof,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set forth
in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit
the General Partner (so long as the General Partner
qualifies as a REIT) to avoid the payment of any federal
income tax (including, for this purpose, any excise tax
pursuant to Section 4981 of the Code) and to make
distributions to the General Partner such that the General
Partner can distribute to its shareholders amounts
sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the
securing of same by deed to secure debt, mortgage, deed of
trust or other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations it deems
necessary for the conduct of the activities of the
Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the
Partnership) or the merger or other combination of the
Partnership with or into another entity (all of the
foregoing subject to any prior approval only to the extent
required by Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct
of the operations of the General Partner, the Partnership or
any of the Partnership's Subsidiaries, the lending of funds
to other Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the General Partner)
and the repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity
investment, and the making of capital contributions to its
Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary
of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the
Partnership, any division of the Partnership, or the General
Partner (including, without limitation, employees having
titles such as "president," "vice president," "secretary"
and "treasurer" of the Partnership, any division of the
Partnership, or the General Partner), and agents, outside
attorneys, accountants, consultants and contractors of the
General Partner or the Partnership or any division of the
Partnership, and the determination of their compensation and
other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners
as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of
property to, its Subsidiaries and any other Person in which
it has an equity investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of
dispute resolution, or abandonment of, any claim, cause of
action, liability, debt or damages, due or owing to or from
the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration or
other forms of dispute, resolution, and the representation
of the Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or other forms of
dispute resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as it may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of
attorney, any right, including the right to vote,
appurtenant to any asset or investment held by the
Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person
in which the Partnership has a direct or indirect interest,
or jointly with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership does not have an interest pursuant to
contractual or other arrangements with such Person; and
(19) the making, execution and delivery of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or
legal instruments or agreements in writing necessary or
appropriate in the judgment of the General Partner for the
accomplishment of any of the powers of the General Partner
enumerated in this Agreement.
B. Each of the Limited Partners agrees that the General
Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provision of
this Agreement (except as provided in Section 7.3), the Act or any applicable
law, rule or regulation, to the fullest extent permitted under the Act or other
applicable law. The execution, delivery or performance by the General Partner or
the Partnership of any agreement authorized or permitted under this Agreement
shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnitees hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain at any and all times
working capital accounts and other cash or similar balances in such amounts as
the General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner of any action taken by it; provided that, if the
General Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use reasonable
efforts to structure such refinancing in a manner that minimizes any adverse tax
consequences therefrom to the Limited Partners, and provided further that, in
deciding whether or not to dispose of any property that represents more than one
percent of the Partnership's total assets, the General Partner shall consider in
good faith the income tax consequences of such disposition for both the General
Partners and the Limited Partners. The General Partner and the Partnership shall
not have liability to a Limited Partner under any circumstances as a result of
an income tax liability incurred by such Limited Partner as a result of an
action (or inaction) by the General Partner pursuant to its authority under this
Agreement.
Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate with
the Secretary of State of Delaware as required by the Act. The General Partner
shall use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and any other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. To the extent that such
action is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other state or the
District of Columbia in which the Partnership may elect to do business or own
property. Subject to the terms of Section 8.5.A(4) hereof, the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner's Authority
A. The General Partner may not take any action in
contravention of an express prohibition or limitation of this Agreement without
the written Consent of all of the Limited Partners (including Limited Partner
Interests held by the General Partner) (or such lower percentage of the Limited
Partners as may be specifically provided for under a provision of this Agreement
or the Act).
B. Except as provided in Article l3 hereof, the General
Partner may not sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions (including by way of merger, consolidation or
other combination with any other Person) without the Consent of holders of
three-fourths (3/4) of the outstanding Common Units held by Limited Partners
(including Common Units held by the General Partner as Limited Partner
Interests).
Section 7.4 Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
B. The General Partner shall be reimbursed on a monthly basis,
or such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses that it incurs relating to the ownership
and operation of, or for the benefit of, the Partnership; provided that the
amount of any such reimbursement shall be reduced by any interest earned by the
General Partner with respect to bank accounts or other instruments or accounts
held by it on behalf of the Partnership as permitted in Section 7.5.A. The
Limited Partners acknowledge that, for purposes of this Section 7.4.B, all
expenses of the General Partner are deemed incurred for the benefit of the
Partnership. Such reimbursements shall be in addition to any reimbursement to
the General Partner as a result of indemnification pursuant to Section 7.7
hereof.
C. As set forth in Section 4.3, the General Partner shall be
treated as having made a Capital Contribution in the amount of all expenses that
it incurs relating to any issuance of additional Partnership Interests or REIT
Shares pursuant to Section 4.2 hereof.
D. In the event that the General Partner shall elect to
purchase REIT Shares from its shareholders for the purpose of delivering such
REIT Shares to satisfy an obligation under any dividend reinvestment program
adopted by the General Partner, any employee stock purchase plan adopted by the
General Partner, or any similar obligation or arrangement undertaken by the
General Partner in the future, the purchase price paid by the General Partner
for such REIT Shares and any other expenses incurred by the General Partner in
connection with such purchase shall be considered expenses of the Partnership
and shall be reimbursed to the General Partner, as the case may be, subject to
the condition that: (i) if such REIT Shares subsequently are to be sold by the
General Partner, the General Partner shall pay to the Partnership any proceeds
received by the General Partner for such REIT Shares (provided that a transfer
of REIT Shares for Units pursuant to Section 8.6 would not be considered a sale
for such purposes); and (ii) if such REIT Shares are not retransferred by the
General Partner within 30 days after the purchase thereof, the General Partner
shall cause the Partnership to cancel a number of Class A Units held by the
General Partner equal to the product obtained by multiplying the Conversion
Factor by the number of such REIT Shares.
Section 7.5 Outside Activities of the General Partner
A. The General Partner shall not directly or indirectly enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests as a General Partner or Limited Partner
and the management of the business of the Partnership, the ownership of the
stock of the Management Corporation and such activities as are incidental
thereto. The General Partner shall not incur any debts other than that for which
the General Partner may be liable in its capacity as General Partner of the
Partnership and other than a debt incurred by the General Partner pursuant to
Article III of the Declaration of Trust. The assets of the General Partner shall
be limited to Partnership Interests and stock of the Management Corporation. The
General Partner shall not hold any assets other than (i) Partnership Interests
as a General Partner or Limited Partner, (ii) stock of the Management
Corporation, and (iii) other than such bank accounts or similar instruments or
accounts as it deems necessary to carry out its responsibilities contemplated
under this Agreement and its organizational documents. The General Partner and
any Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
B. Except as provided in Section 7.4.D, in the event the General
Partner exercises its rights under Article VI of the Declaration of Trust to
purchase REIT Shares, then the General Partner shall cause the Partnership to
purchase from it that number of Class A Units equal to the product obtained by
multiplying the number of REIT Shares to be purchased by the General Partner
times the Conversion Factor on the same terms and for the same aggregate price
that the General Partner purchased such REIT Shares.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other
assets to its Subsidiaries, other Persons in which it has an equity investment,
or the Management Corporation and such Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.5.A, the Partnership may
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable.
C. Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the General
Partner in good faith to be fair and reasonable and no less favorable to the
Partnership than would be obtained from an unaffiliated third party.
D. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans, stock option plans, and
similar plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any of
the Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification
A. The Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, attorneys fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to) except as set forth in Exhibit F, and the General Partner is hereby
authorized and empowered, on behalf of the Partnership, to enter into one or
more indemnity agreements consistent with the provisions of this Section 7.7 in
favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A with respect to the subject
matter of such proceeding. The termination of any proceeding by conviction of an
Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee,
or an entry of an order of probation against an Indemnitee prior to judgment,
creates a rebuttable presumption that such Indemnitee acted in a manner contrary
to that specified in this Section 7.7.A. Any indemnification pursuant to this
Section 7.7 shall be made only out of the assets of the Partnership, and neither
the General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a
party to a proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities is indemnified.
D. The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of the Indemnitees and such other
Persons as the General Partner shall determine, against any liability that may
be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of Section 7.7; and actions taken or
omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the
Partners to personal liability by reason of the indemnification provisions set
forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification, or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
<PAGE>
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership, any Partners or any Assignees for losses sustained or liabilities
incurred as a result of errors in judgment or of any act or omission if the
General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership, and its shareholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that the General
Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.8 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers selected
by it, and any act taken or omitted to be taken in reliance upon the opinion of
such Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any
of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order to (i) protect the ability of the General
Partner to continue to qualify as a REIT or (ii) avoid the General Partner's
incurring any taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner or one or more nominees, as the General Partner
may determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without consent or approval of any
other Partner or Person to encumber, sell or otherwise use in any manner any and
all assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this
Agreement except as expressly provided in this Agreement, including Section 10.5
hereof, or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, employee, partner,
agent or trustee of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such) shall take part in the operation,
management or control (within the meaning of the Act) of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section
7.6.E hereof and any other agreements entered into by a Limited Partner or its
Affiliates with the Partnership or a Subsidiary, any Limited Partner (other than
the General Partner) and any officer, director, employee, agent, trustee,
Affiliate or shareholder of any Limited Partner (other than the General Partner)
shall be entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership, including business
interests and activities that are in direct competition with the Partnership or
that are enhanced by the activities of the Partnership. Neither the Partnership
nor any Partners shall have any rights by virtue of this Agreement in any
business ventures of any Limited Partner or Assignee. None of the Limited
Partners (other than the General Partner) nor any other Person shall have any
rights by virtue of this Agreement or the Partnership relationship established
hereby in any business ventures of any other Person (other than the General
Partner to the extent expressly provided herein) and such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such business
ventures to the Partnership, any Limited Partner or any such other Person, even
if such opportunity is of a character which, if presented to the Partnership,
any Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in
Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of
its Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. Except
to the extent provided by Exhibit C hereof or as permitted by Section 4.2.B, or
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
A. In addition to other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and
Exchange Commission by the General Partner pursuant
to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership
Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each
Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with
executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any
other property or services contributed by each
Partner and which each Partner has agreed to
contribute in the future, and the date on which each
became a Partner.
B. The Partnership shall notify each Limited Partner
upon request of the then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other information
the disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or could damage the Partnership or its
business or (ii) the Partnership is required by law or by agreements with an
unaffiliated third party to keep confidential.
Section 8.6 Redemption Right
A. Subject to Sections 4.2.C.3 and 8.6.C, on or after the date
one (1) year after the closing of the initial public offering of REIT Shares by
the General Partner, each Limited Partner, other than the General Partner, shall
have the right (the "Redemption Right") to require the Partnership to redeem on
a Specified Redemption Date all or a portion of the Class A Units held by such
Limited Partner at a redemption price equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the General Partner) by the Limited Partner who is exercising the redemption
right (the "Redeeming Partner"). A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Class A Units or, if such
Limited Partner holds less than one thousand (1,000) Class A Units, all of the
Class A Units held by such Limited Partner. The Redeeming Partner shall have no
right, with respect to any Partnership Units so redeemed, to receive any
distributions paid after the Specified Redemption Date. The Assignee of any
Limited Partner may exercise the rights of such Limited Partner pursuant to this
Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Limited Partner's Assignee. In connection with any exercise of such rights
by such Assignee on behalf of such Limited Partner, the Cash Amount shall be
paid by the Partnership directly to such Assignee and not to such Limited
Partner.
B. Notwithstanding the provisions of Section 8.6.A, the
General Partner may, in its sole and absolute discretion, elect to assume
directly and satisfy a Redemption Right by either paying to the Redeeming
Partner the Cash Amount or issuing to the Redeeming Partner the REIT Shares
Amount, as elected by the General Partner (in its sole and absolute discretion)
on the Specified Redemption Date, whereupon the General Partner shall acquire
the Partnership Units offered for redemption by the Redeeming Partner and shall
be treated for all purposes of this Agreement as the owner of such Class A
Units. Unless the General Partner (in its sole and absolute discretion) shall
exercise its right to assume directly and satisfy the Redemption Right, the
General Partner shall not have any obligation to the Redeeming Partner or the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. In the event the General Partner shall exercise its right to satisfy the
Redemption Right in the manner described in the first sentence of this Section
8.6.B, the Partnership shall have no obligation to pay any amount to the
Redeeming Partner with respect to such Redeeming Partner's exercise of the
Redemption Right, and each of the Redeeming Partner, the Partnership, and the
General Partner shall treat the transaction between the General Partner, and the
Redeeming Partner for federal income tax purposes as a sale of the Redeeming
Partner's Class A Units to the General Partner. Each Redeeming Partner agrees to
execute such documents as the General Partner may reasonably require in
connection with the issuance of REIT Shares upon exercise of the Redemption
Right.
C. Notwithstanding the provisions of Section 8.6.A and Section
8.6.B, a Partner shall not be entitled to exercise the Redemption Right pursuant
to Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the General Partner pursuant to Section 8.6.B (regardless of
whether or not the General Partner or would in fact exercise its rights under
Section 8.6.B) would be prohibited under the Declaration of Trust. Without
limitation on the preceding sentence, the following restrictions shall apply to
the exercise of a Redemption Right by a Partner: (i) neither a Person who is an
"Excluded Holder" as defined in the Declaration of Trust, nor any Person related
to an "Excluded Holder" by either blood or marriage, nor any Person whose
ownership of REIT Shares would be attributed to an "Excluded Holder" under
Section 318 of the Code, nor any Person who would be considered by reason of the
application of Section 318 of the Code to own REIT Shares actually or
constructively owned by an "Excluded Holder" shall be permitted to exercise the
Redemption Right if (A) after giving effect to such exercise, The Colonial
Company or any direct or indirect Subsidiary of The Colonial Company would be
regarded as a "related party tenant" of the General Partner for purposes of
Section 856(d)(2)(B) of the Code and (B) the total rental income considered
derived by the General Partner from all "related party tenants" could reasonably
be expected to exceed one percent (1%) of the gross income of the General
Partner (as determined for the purposes of Section 856(c)(2) of the Code); and
(ii) neither an "Excluded Holder", nor any Person related to an "Excluded
Holder" by either blood or marriage, nor any Person whose ownership of REIT
Shares would be attributed to an "Excluded Holder" under Section 544(a) of the
Code, nor any Person who would be considered by reason of the application of
Section 544(a) of the Code to own REIT Shares actually or constructively owned
by an "Excluded Holder" shall be permitted to exercise the Redemption Right if,
after giving effect to such exercise (A) any single Person described above would
be considered to own more than 29 percent of the outstanding REIT Shares (as
determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code); (B)
any two Persons described above would be considered to own more than 34 percent
of the outstanding REIT Shares (as determined for purposes of Sections 542(a)(2)
and 856(a)(6) of the Code); (C) any three Persons described above would be
considered to own more than 39 percent of the outstanding REIT Shares (as
determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code); or (D)
any four Persons described above would be considered to own more than 44 percent
of the outstanding REIT Shares (as determined for purposes of Sections 542(a)(2)
and 856(a)(6) of the Code).
D. Notwithstanding anything contained in Sections 8.6.A,
8.6.B, or 8.6.C, no Partner shall be entitled to exercise the Redemption Right
pursuant to Section 8.6.A with respect to any Preferred Unit unless (i) such
Preferred Unit has been issued to and is held by a Partner other than the
General Partner, and (ii) the General Partner has expressly granted to such
Partner the right to redeem such Preferred Units pursuant to Section 8.6.A.
E. Preferred Units shall be redeemed, if at all, only in
accordance with such redemption rights or options as are set forth with respect
to such Preferred Units (or class or series thereof) in the instruments
designating such Preferred Units (or class or series thereof).
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the
principal office of the Partnership those records and documents required to be
maintained by the Act and other books and records deemed by the General Partner
to be appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 9.3 hereof. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than one
hundred five (105) days after the close of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one
hundred five (105) days after the close of each calendar quarter (except the
last calendar quarter of each year), the General Partner shall cause to be
mailed to each Limited Partner as of the last day of the calendar quarter, a
report containing unaudited financial statements of the Partnership, or of the
General Partner, if such statements are prepared solely on a consolidated basis
with the General Partner, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and
timely filing of all returns of Partnership income, gains, deductions, losses
and other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety (90)
days of the close of each taxable year, the tax information reasonably required
by Limited Partners for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the General
Partner shall make the election under Section 754 of the Code in accordance with
applicable regulations thereunder. The General Partner shall have the right to
seek to revoke any such election (including, without limitation, the election
under Section 754 of the Code) upon the General Partner's determination in its
sole and absolute discretion that such revocation is in the best interests of
the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. Pursuant to Section 6230(e) of
the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number, and profit interest of each of the Limited Partners and the Assignees;
provided, however, that such information is provided to the Partnership by the
Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or (ii) who
is a "notice partner" (as defined in Section 6231(a)(8) of
the Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to
be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the tax matters partner, to
seek judicial review of such final adjustment, including the
filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States
Claims Court or the District Court of the United States for
the district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final
adjustment;
(4) to file a request for an administrative adjustment with the
IRS and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint)
for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period
for assessing any tax which is attributable to any item
required to be taken account by a Partner for tax purposes,
or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of the
tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any,
incurred by it in organizing the Partnership ratably over a sixty (60) month
period as provided in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within fifteen (15) days after notice from the
General Partner that such payment must be made unless (i) the Partnership
withholds such payment from a distribution which would otherwise be made to the
Limited Partner or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points, or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
<PAGE>
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports to assign all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise. The term "transfer" when
used in this Article 11 does not include any redemption of Partnership Units by
a Limited Partner or acquisition of Partnership Units from a Limited Partner by
the General Partner pursuant to Section 8.6.
B. No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of General Partner's Partnership
Interest
A. The General Partner may not transfer any of its General
Partner Interest or Limited Partnership Interests or withdraw as General Partner
except as provided in Section 11.2.B or in connection with a transaction
described in Section 11.2.C.
B. The General Partner may transfer Limited Partner Interests
held by it either to the Partnership in accordance with Section 7.5.B hereof or
to a purported holder of REIT Shares in accordance with the provisions of
Section 6.6 of the Declaration of Trust.
C. Except as otherwise provided in Section 11.2.D, the General
Partner shall not engage in any merger, consolidation or other combination with
or into another Person or sale of all or substantially all of its assets, or any
reclassification, or recapitalization or change of outstanding REIT Shares
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Transaction"), unless (i) the Transaction also includes a
merger of the Partnership or sale of substantially all of the assets of the
Partnership which has been approved by the requisite Consent of the Partners
pursuant to Section 7.3 and as a result of which all Limited Partners will
receive for each Common Unit an amount of cash, securities, or other property
equal to the product of the Conversion Factor and the greatest amount of cash,
securities or other property paid to a holder of one REIT Share in consideration
of one REIT Share at any time during the period from and after the date on which
the Transaction is consummated, provided that if, in connection with the
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of more than fifty percent (50%) of the outstanding REIT
Shares, each holder of Common Units shall receive the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised the Redemption Right and received REIT Shares in exchange for its
Common Units immediately prior to the expiration of such purchase, tender or
exchange offer and had thereupon accepted such purchase, tender or exchange
offer; and (ii) no more than forty-nine percent (49%) of the equity securities
of the acquiring Person in such transaction shall be owned, after consummation
of such Transaction, by the General Partner or Persons who are Affiliates of the
Partnership or the General Partner immediately prior to the date on which the
Transaction is consummated.
D. Notwithstanding Section 11.2.C, the General Partner may
merge with another entity if immediately after such merger substantially all of
the assets of the surviving entity, other than Partnership Units held by the
General Partner (whether such Partnership Units constitute the General Partner
Interest or a Limited Partner Interest), are contributed to the Partnership as a
Capital Contribution in exchange for Partnership Units with a fair market value,
as reasonably determined by the General Partner, equal to the 704(c) Value of
the assets so contributed.
Section 11.3 Limited Partners' Rights to Transfer
A. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, and 11.4, a Limited Partner may transfer, with or without the consent of
the General Partner, all or any portion of its Partnership Interest, or any of
such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited
Partner of its Partnership Units if, in the opinion of legal counsel to the
Partnership, such transfer would require filing of a registration statement
under the Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Unit.
D. No transfer by a Limited Partner of its Partnership Units
may be made to any Person if (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an association
taxable as a corporation, or (ii) such transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code.
E. No transfer of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose
loan constitutes a Nonrecourse Liability, without the consent of the General
Partner, in its sole and absolute discretion, provided that as a condition to
such consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to exchange or redeem for the Cash Amount or
REIT Shares Amount, at the election of the Partnership, any Partnership Units in
which a security interest is held simultaneously with the time at which such
lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
A. The General Partner's failure or refusal to permit a
transferee of any such interests to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited Partner
under this Agreement.
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
as a Substituted Limited Partner, as described in Section 11.4, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote (such
Partnership Units being deemed to have been voted on such matter in the same
proportion as all other Partnership Units of the same class or series held by
Limited Partners are voted, to the extent such Partnership Units are entitled to
vote on such matter). In the event any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11 or pursuant to redemption
of all of its Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its
Partnership Units in a transfer permitted pursuant to this Article 11 shall
cease to be a Limited Partner upon the admission of all Assignees of such
Partnership Units as Substitute Limited Partners. Similarly, any Limited Partner
who shall transfer all of its Partnership Units pursuant to a redemption of all
of its Partnership Units under Section 8.6 of this Agreement, Section 4 of
Exhibit I and Section 4 of Exhibit J shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on
the first day of a month, unless the General Partner otherwise agrees; provided,
however, that a transfer of Partnership Units pursuant to exercise of rights by
a secured party in connection with a pledge of such Partnership Units may occur
at any time.
D. If any Partnership Interest is transferred or assigned
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or redeemed or transferred pursuant to Section
8.6 of this Agreement, Section 4 of Exhibit G or Section 4 of Exhibit H, or any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor Partner
and the transferee Partner by taking into account their varying interests during
the Partnerships year in accordance with Section 706(d) of the Code, using the
interim closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption occurs shall be allocated to
the Redeeming Partner. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date or the Series
B Preferred Unit Partnership Record Date, as the case may be, is before the date
of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner, effective
upon such transfer. Any such transferee shall carry on the business of the
Partnership without dissolution. In each case, the admission shall be subject to
the successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
A. A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items allocable among
Partners and Assignees for such Partnership Year shall be allocated among such
Additional Limited Partner and all other Partners and Assignees by taking into
account their varying interests during the Partnership Year in accordance with
Section 706(d) of the Code, using the interim closing of the books method.
Solely for purposes of making such allocations, each of such item for the
calendar month in which an admission of any Additional Limited Partner occurs
shall be allocated among all the Partners and Assignees including such
Additional Limited Partner. All distributions of Available Cash with respect to
which the Partnership Record Date is before the date of such admission shall be
made solely to Partners and Assignees other than the Additional Limited Partner,
and all distributions of Available Cash thereafter shall be made to all of the
Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership
For the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the admission
of a successor General Partner in accordance with the terms of this Agreement.
Upon the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
A. the expiration of its term as provided in Section
2.5 hereof;
B. an event of withdrawal of the General Partner, as defined
in the Act (other than an event of bankruptcy), unless, within ninety (90) days
after such event of withdrawal all the remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of withdrawal, of a successor General Partner;
C. from and after the Effective Date through December 31,
2013, an election to dissolve the Partnership made by the General Partner,
unless any Original Limited Partner who holds one or more Original Limited
Partnership Units objects in writing to such dissolution within thirty (30) days
of receiving written notice of such election from the General Partner;
D. from and after January 1, 2014 through December 31, 2043,
an election to dissolve the Partnership made by the General Partner, unless
Original Limited Partners holding at least five percent (5%) of the Original
Limited Partnership Units object in writing to such dissolution within thirty
(30) days of receiving written notice of such election from the General Partner;
E. on or after January 1, 2043 an election to dissolve the
Partnership made by the General Partner, in its sole and absolute discretion;
F. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
G. the sale of all or substantially all of the assets and
properties of the Partnership; or
H. a final and non-appealable judgment is entered by a court
of competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in
effect, unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner, or, in the event there is no remaining General
Partner, any Person elected by a majority in interest of the Limited Partners
(the General Partner or such other Person being referred to herein as the
"Liquidator"), shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of stock in the General Partner) shall be applied and distributed
in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other Partners;
and
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their Capital Accounts, after
giving effect to all contributions, distributions,
adjustments, and allocations for all periods, and subject to
the rights of the holders of Preferred Units to receive a
liquidation preference, with an appropriate adjustment to
the Capital Accounts of such holders entitled to receive a
liquidation preference to reflect the payment of any such
liquidation preference.
Prior to the foregoing distributions, the General Partner shall have made
adjustments to Capital Accounts of the Partners to reflect the fair market value
of the Partnership assets as of the date of the Partnership's liquidation in a
manner consistent with Regulations Section 1.704-1(b)(2)(iv)(f).
The General Partner shall not receive any additional
compensation for any services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the General Partner
and Limited Partners pursuant to this Article l3 may be:
(1) distributed to a trust established for the benefit of
the General Partner and Limited Partners for the
purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General
Partner arising out of or in connection with the
Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited
Partners from time to time, in the reasonable
discretion of Liquidator, in the same proportions as
the amount distributed to such trust by the
Partnership would otherwise have been distributed to
the General Partner and Limited Partners Pursuant to
this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve
for Partnership liabilities (contingent or otherwise)
and to reflect the unrealized portion of any
installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall
be distributed to the General Partner and Limited
Partners in the manner and order of priority set
forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of
Regulations
In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-l(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such liquidation occurs),
such Partner shall have no obligation to make any contribution to the capital of
the Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
Section 13.4. Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the
event the Partnership is considered liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged, and the Partnership's affairs shall not be
wound up. Instead, for federal income tax purposes and for purposes of
maintaining Capital Accounts pursuant to Exhibit B hereto, the Partnership shall
be deemed to have distributed the property in kind to the General Partner and
Limited Partners, who shall be deemed to have assumed and taken such property
subject to all Partnership liabilities, all in accordance with their respective
Capital Accounts. Immediately thereafter, the General Partner and Limited
Partners shall be deemed to have recontributed the Partnership property in kind
to the Partnership, which shall be deemed to have assumed and taken such
property subject to all such liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return of its
Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership. Except as otherwise provided in
this Agreement, no Limited Partner shall have priority over any other Partner as
to the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs
that would, but provisions of an election or objection by one or more Partners
pursuant to Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners.
Section 13.7 Termination of Partnership and Cancellation
of Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash
and property as provided in Section 13.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up
of the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the
Partnership property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners holding twenty percent (20%) or more of the
outstanding Common Units. Following such proposal, the General Partner shall
submit any proposed amendment to the Limited Partners. The General Partner shall
seek the written vote of the Partners on the proposed amendment or shall call a
meeting to vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General Partner may
require a response within a reasonable specified time, but not less than fifteen
(15) days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner's recommendation with respect to
the proposal. Except as provided in Section 14.1.B, 14.1.C or 14.,1.D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Partners
holding a majority of the outstanding Common Units (including Common Units held
by the General Partner).
B. Notwithstanding Section 14.1.A, the General Partner shall
have the power, without the consent of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.2.A hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that
will not be inconsistent with law or with the provisions of
this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this
Agreement shall not be amended without the Consent of each Partner adversely
affected if such amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner interest, (ii) modify the limited liability
of a Limited Partner in a manner adverse to such Limited Partner, (iii) alter
rights of the Partner to receive distributions pursuant to Article 5, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2
and Section 14.1.B(3) hereof), (iv) alter or modify the Redemption Right and
REIT Shares Amount as set forth in Sections 8.6 and 11.2.B, and the related
definitions, in a manner adverse to such Partner, (v) cause the termination of
the Partnership prior to the time set forth in Sections 2.5 or 13.1, or (vi)
amend this Section 14.1.C. Further, no amendment may alter the restrictions on
the General Partner's authority set forth in Section 7.3 without the Consent
specified in that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof,
the General Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2
without the Consent of a majority of the Percentage Interests in Common Units
held by the Limited Partners, excluding Limited Partner Interests held by the
General Partner in Common Units.
Section 14.2 Meetings of the Partners
A. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding twenty percent (20%) or more of the
outstanding Common Units. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1.A hereof. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests in Common Units held by Limited Partners
(including Limited Partnership Interests held by the General Partner) shall
control.
B. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent may be in one instrument or in several instruments, and
shall have the same force and effect as a vote of a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly required by
this Agreement). Such consent shall be filed with the General Partner. An action
so taken shall be deemed to have been taken at a meeting held on the effective
date so certified.
C. Each Limited Partner may authorize any Person or Persons to
act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of or written notice
such revocation from the Limited Partner executing such proxy.
D. Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate. Without limitation, meetings of Partners may be conducted in
the same manner as meetings of the shareholders of the General Partner and may
be held at the same time, and as part of, meetings of the shareholders of the
General Partner.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to
be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A or such other
address of which the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement
are for convenience only. They shall not be deemed part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the
Indemnitees, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement
among the Partners with respect to the subject matter hereof and supersedes the
Prior Agreement and any other prior written or oral understandings or agreements
among them with respect thereto.
Section 15.12 HUD Limitations
As long as the Secretary of Housing and Urban Development, or
his successors or assigns ("HUD"), is the insurer or holder of the mortgage
loans (the "HUD Mortgages") relating to the real property consisting of the two
apartment projects known as Pointe West Apartments and Ashford Place Apartments
located at 1601 Hillcrest Road, Mobile, Alabama and 6075 Grelot Road, Mobile,
Alabama, respectively (the "Mitchell Properties"), that are encumbered by the
two Regulatory Agreements for Multi-Family Housing Projects that are recorded in
Book 2179, Page 760 and Book 2617, Page 207 in the Probate Office of Mobile
County, Alabama (the "Regulatory Agreements"), no amendment to the Partnership
Agreement which results in any of the following shall be of force and effect,
without the prior written consent of HUD: (i) any amendment which modifies the
duration of the Partnership Agreement; (ii) any amendment which results in the
requirement that a Form 92530 HUD Prior Participation Certificate be obtained
for any additional party; and (iii) any amendment which in any way impacts or
affects the HUD Mortgages or the
<PAGE>
Regulatory Agreements. In addition, as long as HUD is the insurer or holder of
the HUD Mortgages relating to the Mitchell Properties, upon any dissolution of
the Partnership, no title or right to possession and control of the Mitchell
Properties, and no right to collect the rents therefrom, shall pass to any
person who is not bound by the terms of the HUD Mortgages or the Regulatory
Agreements in a manner satisfactory to HUD.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
Colonial Properties Trust,
an Alabama real estate investment trust
/s/ Howard B. Nelson, Jr.
----------------------------
By: Howard B. Nelson, Jr.
Title: Chief Financial Officer and Secretary
LIMITED PARTNERS:
By: Colonial Properties Trust
as Attorney-in-Fact for the
Limited Partners
/s/ Howard B. Nelson, Jr.
----------------------------
By: Howard B. Nelson, Jr.
Title: Chief Financial Officer and Secretary
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
Dated as of April 30, 1999
by and among
COLONIAL PROPERTIES TRUST,
COLONIAL REALTY LIMITED PARTNERSHIP
and
MJE, L.L.C.
<PAGE>
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this
"Agreement") is made and entered into as of April 30, 1999, by and among
Colonial Properties Trust, an Alabama real estate investment trust (the
"Company"), Colonial Realty Limited Partnership, a Delaware limited partnership
(the "Operating Partnership"), and MJE, L.L.C., an Alabama limited liability
company (the "Holder").
WHEREAS, on the date hereof the Operating Partnership is the
acquiring from the Holder its 20.2% minority interest in certain property known
as the "Colonial Village at Haverhill", and in connection therewith the Holder
will receive Class B Units of limited partnership interest in the Operating
Partnership (these Class B Units and the Class A Units of limited partnership
interest into which the Class B Units will be converted being referred to
hereinafter as the "Units");
WHEREAS, in order to induce the Holder to consummate the
closing contemplated hereunder, the Company has agreed to grant the Holder the
registration rights set forth in Section 3 hereof; and
WHEREAS, in order to induce the Operating Partnership to
consummate the closing contemplated hereunder, the Holder has agreed to the
Lock-up (as defined in Section 2(a) hereof).
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"Common Shares" shall mean common shares of beneficial
interest, par value $ .01 per share, in the Company.
"Company" shall have the meaning set forth in the Preamble and
also shall include the Company's successors.
"Dispose of" shall have the meaning set forth in Section 2(a)
hereof.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Holder(s)" shall have the meaning set forth in the Preamble
and also shall include any Holder's heirs, executors, administrators, successors
and permitted assigns.
"Lock-up" shall have the meaning set forth in Section 2(a)
hereof.
"Lock-up Period" shall have the meaning set forth in Section
2(a) hereof.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Operating Partnership" shall have the meaning set forth in
the Preamble and also shall include the Operating Partnership's successors.
"Person" shall mean an individual, partnership, corporation,
trust, estate, or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, including post-effective amendments, and in each
case including all material incorporated by reference therein.
"Registrable Securities" shall mean the Shares, excluding (i)
Shares for which a Registration Statement relating to the sale thereof shall
have become effective under the Securities Act and that have been disposed of
under such Registration Statement and (ii) Shares sold pursuant to Rule 144
under the Securities Act or Shares that, when combined with all other Shares
then owned by the Holder(s), are eligible for sale pursuant to Rule 144 during a
single 90-day period.
<PAGE>
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance with this Agreement, including, without
limitation: (i) all SEC, stock exchange or NASD registration and filing fees;
(ii) all fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with "blue sky" qualification of any of the Registrable
Securities and the preparation of a Blue Sky Memorandum) and compliance with the
rules of the NASD; (iii) all expenses of any Persons in preparing or assisting
in preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to the
performance of and compliance with this Agreement; (iv) all fees and expenses
incurred in connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges pursuant to Section 4(1)
hereof; and (v) the fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance. Registration Expenses shall specifically exclude
underwriting discounts and commissions, the fees and disbursements of counsel
representing the Holder(s), and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by the Holder(s), all of which shall be
borne by the Holder(s) in all cases.
"Registration Notice" shall have the meaning set forth in
Section 3(a) hereof.
"Registration Statement" or "Shelf Registration Statement"
shall mean a "shelf" registration statement of the Company and any other Person
required to be a registrant with respect to such shelf registration statement
pursuant to the requirements of the Securities Act which covers the issuance or
resale of the Registrable Securities on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Shares" shall mean any Common Shares issued or to be issued
to the Holder(s) upon redemption of their Units.
"Shelf Registration" shall mean a registration required to be
effected pursuant to Section 3 hereof.
"Units" shall have the meaning set forth in the Preamble.
2. Lock-up Agreement.
2(a) The Holder hereby agrees that, except as set
forth in Section 2(b) below, for one year following the date hereof (the "Lock-
up Period"), such Holder will not, without the prior written consent of the
Company, offer, pledge, sell, contract to sell, grant any options for the sale
of or otherwise dispose of, directly or indirectly (collectively, "Dispose of")
, any Units (the "Lock-up").
2(b) The following transfers of Units shall not
be subject to the Lock-up set forth in Section 2(a):
<PAGE>
(i) a Holder may Dispose of Units as a gift or other transfer without
consideration;
(ii) a Holder who is a natural person may Dispose of Units (x) to his or
her spouse, siblings, parents or any natural or adopted children or
other descendants or to any personal trust in which such family
members or such Holder retain the entire beneficial interest or (y)
pursuant to the terms of any will or trust or by intestacy;
(iii) a Holder may Dispose of Units to any entity or person that controls,
is controlled by, or is under common control with such Holder;
(iv) a Holder that is a partnership or limited liability company may
Dispose of Units to any partner or member of such Holder in redemption
of such partner's or member's interest in such Holder or as a
distribution to such partner or member, provided, in either case, that
such partner or member is then an "accredited investor" as that term
is defined in Regulation D under the Securities Act; and
(v) a Holder may Dispose of Units pursuant to a pledge, grant of security
interest or other encumbrance effected in a bona fide transaction with
an unrelated and unaffiliated pledgee.
In the event that a Holder Disposes of Units as permitted by this Section 2(b),
such Units shall remain subject to this Agreement and, as a condition of the
validity of such disposition, the transferee shall be required to execute and
deliver a counterpart of this Agreement (except that a pledgee shall not be
required to execute and deliver a counterpart of this Agreement until it
forecloses upon such Units). Thereafter, such transferee shall be deemed to be a
Holder for purposes of this Agreement.
3. Shelf Registration Under the Securities Act.
<PAGE>
3(a) Filing of Shelf Registration Statement.
Beginning after the expiration of the
Lock-up Period, each Holder shall be entitled to offer for sale pursuant to a
Registration Statement any Registrable Securities held by such Holder, subject
to the terms and conditions hereof. Upon receipt by the Company of a written
notice (a "Registration Notice") from one or more Holders that such Holder(s)
propose to make a registered offer of a specified number of Registrable
Securities (which number shall not be less than 50,000 or, if less, all of the
Registrable Securities owned by the Holder(s)), the Company shall cause to be
filed within 60 days of receipt by the Company of the Registration Notice a
Shelf Registration Statement providing for the sale by such Holder(s) of the
Registrable Securities specified in such Registration Notice (and, if the
Company so elects, any Registrable Securities held by any other Holder or
Holders) in accordance with the terms hereof and will use its reasonable efforts
to cause such Shelf Registration Statement to be declared effective by the SEC
as soon as practicable. The Company agrees to use its reasonable efforts to keep
the Shelf Registration Statement continuously effective for a period expiring on
the date on which all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or have become eligible for sale pursuant to Rule 144 under the
Securities Act during a single 90-day period and, subject to Section 4(b) and
Section 4(i), further agrees to supplement or amend the Shelf Registration
Statement, if and as required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that the
Company shall not be deemed to have used its reasonable efforts to keep a
Registration Statement effective during the applicable period if it voluntarily
takes any action that would result in the selling Holder(s) covered thereby not
being able to sell such Registrable Securities during that period, unless such
action is required under applicable law or the Company has filed a
post-effective amendment to the Registration Statement and the SEC has not
declared it effective. Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration Statement
effective if the negotiation or consummation of a transaction is pending or an
event has occurred, which negotiation, consummation or event would require
additional disclosure by the Company in the Registration Statement of material
information which the Company has a bona fide business purpose for keeping
confidential and the nondisclosure of which in the Registration Statement might
cause the Registration Statement to fail to comply with applicable disclosure
requirements, and the Company so advises the affected Holder(s) in a writing
signed by an executive officer of the Company; provided, however, that the
Company may not delay, suspend or withdraw a Registration Statement for such
reason for more than 60 days or more often than twice during any period of 12
consecutive months.
3(b) Expenses. The Company shall pay all
Registration Expenses in connection with
any registration pursuant to Section 3(a). Each Holder shall pay all
underwriting discounts, if any, sales commissions, fees and disbursements of
counsel representing such Holder, and transfer taxes, if any, relating to the
sale or disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144 under the Securities Act.
3(c) Inclusion in Shelf Registration Statement.
Any Holder who does not timely
provide the information reasonably requested by the Company in connection with
the Shelf Registration Statement shall not be entitled to have such Holder's
Registrable Securities included in the Shelf Registration Statement.
<PAGE>
3(d) Repurchase Option. In lieu of registering
Registrable Securities that a
Holder seeks to register pursuant to Section 3(a) hereof, the Company may, by
delivery of written notice to such Holder within 30 days after receipt of a
Registration Notice from such Holder, elect to repurchase such Registrable
Securities for cash, in an amount per Share equal to the average of the closing
prices of the Common Shares on the New York Stock Exchange (or on such other
exchange or in such other market as the Common Shares are then listed or traded)
on the ten trading days preceding the Company's receipt of such Registration
Notice (or, if the Common Shares have not traded on all ten of such trading
days, in an amount equal to the fair value of such Registrable Securities as
determined in good faith by the Board of Trustees of the Company).
4. Registration Procedures.
In connection with the obligations of the Company with respect
to the Registration Statement pursuant to Section 3 hereof, the Company shall:
4(a) prepare and file with the SEC, within the time period set forth
in Section 3 hereof, a Shelf Registration Statement, which Shelf Registration
Statement (i) shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution by the Holder(s)
thereof and (ii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith;
4(b) subject to the last three sentences of this Section 4(b) and
Section 4(i) hereof, (i) prepare and file with the SEC such amendments and
post-effective amendments to each such Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period; (ii) cause each such Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
or any similar rule that may be adopted under the Securities Act; (iii) respond
as promptly as practicable to any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment, post-effective amendment or
supplement relating thereto; and (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the Holder(s) thereof.
Notwithstanding anything to the contrary contained herein, the Company shall not
be required to take any of the actions described in subsections (i), (ii) or
(iii) above with respect to a Holder unless and until the Company has received a
notice from such Holder that such Holder intends to make offers or sales under
the Registration Statement as specified in such Registration Notice; provided,
however, that the Company shall have ten business days to prepare and file any
such amendment or supplement after receipt of such notice. Once a Holder has
delivered a Registration Notice to the Company, such Holder shall promptly
provide to the Company such information as the Company reasonably requests in
order to identify such Holder and the method of distribution in a Registration
Statement or post-effective amendment to the Registration Statement or a
supplement to the Prospectus. Such Holder also shall notify the Company in
writing upon completion of such offer or sale or at such time as such Holder no
longer intends to make offers or sales under the Registration Statement;
<PAGE>
4(c) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, as many copies
of each Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder may reasonably
request, in order to facilitate the public sale or other disposition of the
Registrable Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or the preliminary Prospectus;
4(d) use its reasonable efforts to register or qualify the Registrable
Securities by the time the applicable Registration Statement is declared
effective by the SEC under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing, keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective or during the period offers or sales
are being made by any such Holder, whichever is shorter, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
each such Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such jurisdiction where it
would not otherwise be required to qualify but for this Section 4(d), (ii)
subject itself to taxation in any such jurisdiction, or (iii) submit to the
general service of process in any such jurisdiction;
4(e) notify each Holder of Registrable Securities that has delivered a
Registration Notice to the Company promptly and, if requested by any such
Holder, confirm such advice in writing (i) when a Registration Statement has
become effective and when any post-effective amendments and supplements thereto
become effective, (ii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iii) if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (iv) of the happening of any
event during the period a Registration Statement is effective which is of a type
specified in the last sentence of Section 3(a) hereof or as a result of which
such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the Prospectus), not
misleading;
4(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment;
<PAGE>
4(g) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, at least one
conformed copy of each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference or exhibits
thereto, unless requested);
4(h) cooperate with the selling Holder(s) of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for such
numbers of Shares and registered in such names as the selling Holder(s may
reasonably request at least two business days prior to any sale of Registrable
Securities;
4(i) subject to the last sentence of Section 3(a) hereof and the last
three sentences of Section 4(b) hereof, upon the occurrence of any event
contemplated by Section 4(e)(iv) hereof, use its reasonable efforts promptly to
prepare and file a supplement or prepare, file and obtain effectiveness of a
post-effective amendment to a Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
4(j) make available for inspection by representatives of the Holder(s)
of Registrable Securities and any counsel or accountant retained by such
Holder(s), all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by the representatives,
counsel or accountants unless (i) the disclosure of such records, documents or
information is necessary to avoid or correct a material misstatement or omission
in a Registration Statement, (ii) the release of such records, documents or
information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, or (iii) such records, documents or information have
been generally made available to the public;
4(k) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
any Holder of Registrable Securities that has provided a Registration Notice to
the Company;
<PAGE>
4(l) use its reasonable efforts to cause all Registrable Securities
covered by a Registration Statement to be listed on any securities exchange on
which similar securities issued by the Company are then listed;
4(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of a Registration Statement;
4(n) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
4(o) use its reasonable efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the selling Holder(s) to
consummate the disposition of such Registrable Securities.
The Company may require each Holder of Registrable Securities
to furnish to the Company in writing such information regarding the proposed
distribution by such Holder of such Registrable Securities as the Company may
from time to time reasonably request in writing.
In connection with and as a condition to the Company's
obligations with respect to the Registration Statement pursuant to Section 3
hereof and this Section 4, each Holder agrees that (i) such Holder will not
offer or sell such Holder's Registrable Securities under the Registration
Statement until such Holder has provided a Registration Notice pursuant to
Section 4(b) hereof and has received copies of the supplemental or amended
Prospectus contemplated by Section 4(b) hereof and received notice that any
post-effective amendment has become effective, (ii) upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
4(e)(iv) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder
receives copies of the supplemented or amended Prospectus contemplated by
Section 4(i) hereof and receives notice that any post-effective amendment has
become effective, and, if so directed by the Company, such Holder will deliver
to the Company (at the expense of the Company) all copies in their possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice, and (iii) all offers and sales under the Registration Statement
shall be completed within sixty (60) days after the first date on which offers
or sales can be made pursuant to clause (i) above, and upon expiration of such
sixty (60) day period such Holder will not offer or sell such Holder's
Registrable Securities under the Registration Statement until such Holder has
again complied with the provisions of clause (i) above.
<PAGE>
5. Indemnification; Contribution.
5(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Holder and its members as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue
statement of a material fact contained in any
Registration Statement (or any amendment thereto)
pursuant to which Registrable Securities were
registered under the Securities Act, including all
documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to
make the statements therein not misleading or arising
out of any untrue statement or alleged untrue
statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto),
including all documents incorporated therein by
reference, or the omission or alleged omission
therefrom of a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to
the extent of the aggregate amount paid in settlement
of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such
alleged untrue statement or omission, if such
settlement is effected with the written consent of
the Company; and
(iii) against any and all expense
whatsoever, as incurred (including reasonable fees
and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened,
in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not
paid under subparagraph (i) or (ii) above;
<PAGE>
provided, however, that the indemnity provided pursuant to this Section 5(a)
does not apply to any Holder with respect to any loss, liability, claim, damage
or expense to the extent arising out of (x) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) or (y) such Holder's failure to deliver an
amended or supplemental Prospectus if such loss, liability, claim, damage or
expense would not have arisen had such delivery occurred.
5(b) Indemnification by Holders. Each Holder agrees to indemnify and
hold harmless the Company and its trustees and officers (including each trustee
and officer of the Company who signed the Registration Statement), and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, to the same extent as the indemnity contained in Section 5(a)
hereof (except that any settlement described in Section 5(a)(ii) shall be
effected with the written consent of such Holder), but only insofar as such
loss, liability, claim, damage or expense arises out of or is based upon any
untrue statement or omission, or alleged untrue statements or omissions, made in
a Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in such
Registration Statement (or any amendment thereto) or such Prospectus (or any
amendment or supplement thereto).
<PAGE>
5(c) Conduct of Indemnification Proceedings. Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in Section 5(a) or 5(b) above, unless and to the extent it did not otherwise
learn of such action and the lack of notice by the indemnified party results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided under Section 5(a) or 5(b) above. If the indemnifying party so elects
within a reasonable time after receipt of such notice, the indemnifying party
may assume the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved by the
indemnified parties defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties reasonably determine that a conflict of interest exists where it is
advisable for such indemnified party or parties to be represented by separate
counsel or that, upon advice of counsel, there may be legal defenses available
to them which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to assume
such defense and the indemnified party or parties shall be entitled to one
separate counsel at the indemnifying party's or parties' expense. If an
indemnifying party is not entitled to assume the defense of such action or
proceeding as a result of the proviso to the preceding sentence, such
indemnifying party's counsel shall be entitled to conduct such indemnifying
party's defense and counsel for the indemnified party or parties shall be
entitled to conduct the defense of such indemnified party or parties, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently as possible. If an
indemnifying party is not so entitled to assume the defense of such action or
does not assume such defense, after having received the notice referred to in
the first sentence of this paragraph, the indemnifying party or parties will pay
the reasonable fees and expenses of counsel for the indemnified party or
parties. In such event, however, no indemnifying party will be liable for any
settlement effected without the written consent of such indemnifying party. If
an indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action or proceeding.
5(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 5 is for any reason held to be unenforceable although applicable in
accordance with its terms, the Company and the selling Holder(s) shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company and
such Holder(s), in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and such Holder on the other (in such
proportions that the Holder(s) are severally, not jointly, responsible for the
balance), in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether the action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
the indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no selling
Holder shall not be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such Holder were
offered to the public exceeds the amount of any damages which such Holder would
otherwise have been required to pay by reason of such untrue statement or
omission. The liability of any Holder selling Registrable Securities for
contribution shall not exceed an amount equal to the offering price per share of
the Registrable Securities, multiplied by the number of Registrable Securities
sold by such Holder.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5(d), each trustee of
the Company, each officer of the Company who signed the Registration Statement
and each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as the
Company.
<PAGE>
6. Rule 144 Sales.
6(a) The Company covenants that it will file the reports required to
be filed by the Company under the Securities Act and the Exchange Act so as to
enable the Holder(s) to sell Shares pursuant to Rule 144 under the Securities
Act.
6(b) In connection with any sale, transfer or other disposition by a
Holder of any Shares pursuant to Rule 144 under the Securities Act, the Company
shall cooperate with such Holder to facilitate the timely preparation and
delivery of certificates representing Shares to be sold and not bearing any
Securities Act legend, and enable certificates for such Shares to be for such
number of shares and registered in such names as such Holder may reasonably
request at least two business days prior to any sale of Shares.
7. Miscellaneous.
7(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holder(s) of
a majority in amount of the outstanding Registrable Securities. Notice of any
amendment, modification or supplement to this Agreement adopted in accordance
with this Section 7(a) shall be provided by the Company to the Holder(s) at
least thirty (30) days prior to the effective date of such amendment,
modification or supplement.
7(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, to the parties at their respective addresses set forth opposite their
signatures below or at such other address as a party may indicate by written
notice to the other party or parties.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
(3) business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; or
at the time delivered, if delivered by an air courier guaranteeing overnight
delivery.
<PAGE>
7(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be entitled to receive the benefits hereof and
shall be conclusively deemed to have agreed to be bound by all of the terms and
provisions hereof.
7(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
7(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
7(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PROVISIONS THEREOF.
7(g) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
7(h) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement, or caused this Agreement to be duly executed on its behalf, as
of the date first written above.
Address:
- -------
2101 6th Avenue North, COLONIAL PROPERTIES TRUST
Suite 750
Birmingham, Alabama 35203 By: /s/ Thomas H. Lowder
-----------------------
Thomas H. Lowder
Its: Chairman of the Board, President and
Chief Executive Officer
2101 6th Avenue North, COLONIAL REALTY LIMITED
Suite 750 PARTNERSHIP
Birmingham, Alabama 35202
By: Colonial Properties Trust
Its: General Partner
By: /s/ Thomas H. Lowder
-----------------------
Thomas H. Lowder
Its: Chairman of the Board, President
and Chief Executive Officer
729 30th Street South MJE, L.L.C.
Birmingham, Alabama 35233
By: /s/ M.Miller Gorrie
----------------------
M. Miller Gorrie
Its: Managing Member
Exhibit 10.15
Executive Unit Purchase
Program Summary
Overview
o The Colonial Realty Limited Partnership Executive Unit Purchase Program
(the "Program") is a voluntary program under which a limited group of
management employees of Colonial Realty Limited Partnership ("Colonial
Realty" or the "Company") and trustees of Colonial Properties Trust
("Colonial Properties") are being provided the opportunity to purchase
operating partnership units (the "OP Units") of Colonial Realty,
redeemable under certain circumstances for cash or for an equal number
of common shares of beneficial interest ("Common Shares") in Colonial
Properties. The OP Units are more fully described in the Summary of OP
Units located in Tab II of Volume II of this Offering Memorandum.
o The Program is designed to closely align the economic interests of
Colonial Realty's key managers and Colonial Properties' trustees with
those of Colonial Properties' shareholders.
Minimum and Maximum Amounts
To participate in the Program, you must purchase OP Units in an amount of at
least $100,000. The maximum amount of OP Units you may purchase will depend on
your position within the Company. Your personalized cover memo to this Offering
Memorandum describes your potential maximum purchase under the Program. Within
the Program as a whole, maximum purchases will range from $100,000 to
$1,500,000.
Restrictions on Transfer
If you elect to purchase OP Units through the program, your ability to transfer
or redeem your OP Units will be restricted for a period of up to five years. The
terms of these restrictions are contained in the Registration Rights and Lock-Up
Agreement, a sample of which is contained in Tab IX of Volume II of this
Offering Memorandum.
<PAGE>
The Program Loan
o To assist you in purchasing your OP Units, Colonial Realty will make
arrangements for you to obtain a personal loan for 100% of the value of
the OP Units you elect to purchase (the "Program Loan"). Your Program
Loan will be made by a syndicate of banks (collectively, the "Banks")
for which Bank One, NA (Main Office Chicago) ("Bank One") will act as
agent.
o The proceeds of your Program Loan will be transferred to the Company
via your signature on a Letter of Direction. A sample Letter of
Direction is contained in Tab IV of Volume II of this Offering
Memorandum.
o The term of your Program Loan will be five years. At the end of the
term, the entire amount of your Program Loan will be due and payable,
together with any accrued or deferred interest through the date of
payment in full. There will be no required reduction in principal until
the entire amount of your Program Loan becomes due and payable. You may
also be required to prepay your Program Loan under certain
circumstances, which are described in more detail later in this
document.
o You will be personally liable for payment in full of your Program Loan,
including all principal, interest and fees, and you will be obligated
to repay the entire amount of your Program Loan, regardless of the
value of the OP Units on the date your Program Loan becomes due.
o In order to obtain your Program Loan, you will be required to provide
the Banks with a personal financial statement and to sign a Master
Promissory Note. A form for your personal financial statement is
contained in Tab V of Volume II of this Offering Memorandum. A sample
of a Master Promissory Note is contained in Tab VII of Volume II of
this Offering Memorandum. You will also be required to provide other
documentation to the Company, as described elsewhere in this Offering
Memorandum.
Your Reimbursement Obligations
Colonial Properties and Colonial Realty have agreed to guaranty your obligations
to the Banks under your Program Loan. In consideration of this guaranty, you
will be required to pledge your interest in your OP Units to Colonial Properties
and Colonial Realty for as long as your Program Loan is outstanding. Your pledge
will serve as security for your obligation to reimburse Colonial Properties and
Colonial Realty if either of them is required to make good on the guaranty as a
result of your having failed to repay your Program Loan or any other amounts
owed by you to the Banks. Your obligation to reimburse Colonial Properties and
Colonial Realty and your pledge of your OP Units will be governed by a
Reimbursement Agreement, a sample of which is contained in Tab VIII of Volume II
of this Offering Memorandum.
Your Program Account
o In connection with your Program Loan, you will be provided with a
special interest-bearing account (your "Program Account") at Bank One.
Your Program Account will be the bank account into which distributions
on your OP Units are paid and into which you may be required to deposit
funds to meet principal, interest and other charges and from which your
interest and other payments to the Banks will be deducted. The Program
Account is provided at no cost to you while your Program Loan is
outstanding.
o In order to open your Program Account, you will need to complete the
Bank One Private Banking forms contained in Tab V of Volume II of this
Offering Memorandum.
Use of Proceeds by Colonial Realty
The Company will use the net proceeds of your purchase of OP Units to fund
repurchases of Common Shares by Colonial Properties, to repay indebtedness or
for other general partnership purposes. The Company currently expects proceeds
from the Program to total up to $39.1 million, after deducting expenses incurred
under the Program.
Eligibility to Participate
In the event that your employment is terminated before your purchase of OP Units
has actually become effective (or, if you are a Trustee Participant, you are no
longer a trustee of Colonial Properties), you will not be eligible to
participate in the Program, and any of the documents you or the Company may have
signed will become null and void, and of no force or effect.
FORM OF
MASTER PROMISSORY NOTE
Chicago, Illinois
$__________________ January 25, 2000
FOR VALUE RECEIVED, the undersigned (the "Borrower"), HEREBY PROMISES
TO PAY to the order of BANK ONE, NA, a national banking association with its
principal office in Chicago, Illinois, as Agent, for the benefit of all of the
Lenders (as defined below), the principal sum of $__________ in accordance
herewith, but in no event later than January 25, 2005 (the "Final Payment
Date"). The Advances evidenced by this Note are being made pursuant to the
Facility and Guaranty Agreement, dated as of December 17, 1999, by and among
Colonial Realty Limited Partnership, a Delaware limited partnership (the
"Company"), Colonial Properties Trust, an Alabama trust (the "REIT"), Bank One,
NA, in its individual capacity (including any successor thereto, "Bank One") and
as agent for all the Lenders party thereto (the "Agent"), and the financial
institutions party thereto (the "Lenders") (as the same shall be amended,
supplemented, restated or otherwise modified from time to time, the "Facility
Agreement"). Capitalized terms defined in the Facility Agreement are used herein
with their defined meanings therein unless otherwise defined herein.
1. Interest. (a) The Borrower promises to pay interest to each Lender
(based on each Lender's Pro-rata share of the outstanding principal amount
hereof) on the outstanding principal amount hereof from the date on which funds
are advanced to the Borrower hereunder (the "Closing Date") until such principal
amount is paid in full, payable to the Agent, for the benefit of the Lenders, at
an interest rate per annum equal to 8.810% (the "Interest Rate"). Accrued
interest shall be due and payable quarterly in arrears on each of the interest
payment dates set forth on Schedule 1 to this Note, with the first such payment
date being February 14, 2000 (each an "Interest Payment Date").
(b) Upon the occurrence and during the continuance of a
Borrower Event of Repayment described in Section 6(i) below, the outstanding
principal amount hereof shall bear interest, payable on each Interest Payment
Date and upon demand, at the Corporate Base Rate plus two percent (2%) per
annum. "Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by Bank One from time to time, changing when and as
said corporate base rate changes. The Corporate Base Rate is a reference rate
and does not necessarily represent the lowest or best rate of interest actually
charged to any customer. Bank One may make loans at rates of interest at, above
or below the Corporate Base Rate.
(c) Interest and fees shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest payable with respect to this
Note or any portion hereof which is paid or prepaid shall be payable for the day
the Loan evidenced by this Note is made but not for the day of any payment on
the amount paid if payment is received by the Agent prior to 12:00 noon (Chicago
time) at the place of payment.
2. Scheduled Repayment; Voluntary Prepayment.
(a) The aggregate principal amount of and all accrued
interest and other amounts owing under this Note shall be repayable in full
on the earlier to occur of (i) the Final Payment Date and (ii) the occurrence of
a Change of Control (the "Maturity Date").
(b) During the term of this Note, the Borrower may, on at
least five (5) Business Days' prior notice by the Borrower to the Agent stating
the aggregate principal amount of the prepayment and the name of the Borrower,
prepay (subject to the terms of Section 7 hereof) on any Interest Payment Date
the outstanding principal amount of this Note in whole or in part; provided,
however, that any such partial prepayment shall be in a minimum principal amount
of $25,000, or any integral multiple of $5,000 in excess thereof. All
prepayments (voluntary or otherwise) shall be made together with (i) all
interest accrued at the Interest Rate from the Closing Date to the date of
payment (less the amount of interest paid prior to such date based on the
applicable Current Payment Rates) on the amounts prepaid, (ii) to the extent the
amount thereof has been communicated to the Borrower, any Early Payment Fee as
required under Section 7 hereof and (iii) a prepayment administrative fee of
$375 payable to the Agent for its own account.
3. Method of Payment. All payments of principal, interest and other
amounts owing hereunder shall be made, without setoff, deduction or
counterclaim, in funds which are available on the Interest Payment Date to the
Agent at the Agent's address at 1 Bank One Plaza, Chicago, Illinois 60670, or at
any other office of the Agent specified in writing by the Agent to the Borrower,
by 12:00 noon (Chicago time) on the date when due and shall be applied by the
Agent among the Lenders based on each Lender's Pro-rata share of the outstanding
principal amount of this Note. Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type of funds that the Agent received at its address specified above or
at any office specified in a notice received by the Agent from such Lender.
Whenever any payment to be made hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
4. Borrower Account. At all times while this Note remains outstanding,
the Borrower shall be required to maintain an interest-bearing deposit account
at Bank One (the "Borrower Account") to facilitate administration of the Loan.
No later than two Business Days prior to each Interest Payment Date, the
Borrower shall deposit funds, if necessary, in the Borrower Account sufficient
in amount to cover any difference between (a) the amount then on deposit in such
account giving effect to the amount of dividends or distributions (net of taxes
required to be withheld by the Company or the REIT, as applicable, under
applicable law) to be paid by the Company, the REIT, or the REIT's transfer
agent, as applicable, to the Agent in respect of the Borrower's Class A Units or
Common Shares on the next scheduled dividend or distribution payment date
pursuant to the Borrower's Letter of Direction and (b) the amount of interest
payable by the Borrower hereunder on such Interest Payment Date. Bank One is
hereby irrevocably authorized to charge the Borrower Account for each payment of
principal, interest and other charges as such amounts become due hereunder. To
the extent that at any time the balance in the Borrower Account is insufficient
to make payment in full of amounts due hereunder when due, then Bank One may, in
its sole discretion, provide such funds to the Borrower by way of a new loan in
the form of an overdraft on the Borrower Account (an "Overdraft"), which
Overdraft shall be governed by the terms of the account application for the
Borrower Account. The provisions of this Section 4 shall in no way diminish the
unconditional obligation of the Borrower to make payment in full when due of all
amounts owing under the Note.
5. Loan Proceeds. The Borrower hereby irrevocably directs the Lenders
to disburse the proceeds of the Loans evidenced hereby directly to the Company
for the account of the Borrower in payment (whether in whole or in part) of the
Class A Units and agrees that any funds so disbursed (regardless of how applied
by the Company) shall be considered received by the Borrower upon the receipt of
such funds by the Company.
6. Borrower Event of Repayment. If any Program Event of
Default shall occur and be continuing or any of the following events (each such
event, a "Borrower Event of Repayment") shall occur and be continuing:
(i) The Borrower shall fail to pay any amount of principal on
this Note when due, or the Borrower shall fail to pay any amount of
interest on, or other amount due under, this Note when due and such
failure to pay shall continue for five days;
(ii) The Borrower shall generally not pay his or her debts as
such debts become due, or shall admit in writing his or her inability
to pay his or her debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by
or against the Borrower seeking to adjudicate him or her a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of him or
her or his or her debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee, or
other similar official for him or her or for any substantial part of
his or her property;
(iii) Any representation or warranty made, or any financial or
other information provided by, the Borrower to the Agent or any Lender
shall prove to have been incorrect in any material respect when made;
(iv) The Borrower shall fail to perform or observe any term,
covenant or agreement set forth in this Note and such failure (other
than any failure or event described in clauses (i) - (iii) above) shall
continue for ten days after written notice thereof from the Agent;
(v) The Borrower's employment shall be terminated by the
Company or the REIT or the Borrower shall otherwise cease to be an
employee of the Company or the REIT for any reason, other than as a
result of death, permanent disability (as certified by a REIT-approved
physician) ("Disability") or retirement at normal retirement age as
specified under the Colonial Properties Trust Defined Benefit Pension
Plan ("Retirement"), it being understood that this subsection (v) shall
not be applicable to any act or event of any nature whatsoever which
causes or has the result of the Borrower no longer being a member of
the Board of Trustees of the REIT ("Cessation of Board Service");
(vi) The Borrower shall die; or
(vii) The Agent shall receive a written notice from the
Company to the effect that the Borrower has breached or is otherwise in
default under his/her Reimbursement Agreement;
then the Agent, upon written direction from (or with the consent of) the
Required Lenders, may, by notice to the Company and the Borrower, declare the
principal amount and interest and other amounts outstanding under this Note
owing by the Borrower, to be forthwith due and payable, whereupon such principal
amount, all such interest and all such other amounts shall become and be
forthwith due and payable, without presentment, demand, protest or notice of any
kind by any Lender, all of which are hereby expressly waived by the Borrower;
provided, however, that if a Borrower Event of Repayment described in clause
(ii) above occurs with respect to the Borrower, the principal amount and
interest and other amounts outstanding under this Note shall immediately become
due and payable without any election or action on the part of the Agent or any
Lender. The Borrower shall, as soon as possible, and in any event within five
(5) Business Days after becoming aware of the occurrence of a Borrower Event of
Repayment or an event which, with notice or lapse of time or both, could
constitute a Borrower Event of Repayment, deliver to the Agent a statement
setting forth details of such Borrower Event of Repayment.
7. Early Payment Fee. In the event of any voluntary or mandatory
(whether as a result of acceleration, a Change of Control or otherwise)
repayment of all or any portion of the principal of this Note prior to the Final
Payment Date, the Borrower will indemnify each Lender upon demand for any loss
or cost incurred by it resulting therefrom, including, without limitation, any
loss or cost incurred in liquidating or employing deposits acquired to fund or
maintain its Loan or in terminating or unwinding any interest rate exchange or
similar arrangement entered into by such Lender in connection with this Loan.
The Borrower acknowledges that, in order to permit such Lender(s) to extend the
Interest Rate to the Borrower, and in reliance upon this Section 7, one or more
of the Lenders has entered into, or in connection with accepting an assignment
of the Loans or otherwise, will enter into such arrangements (including, without
limitation, an interest compensation agreement pursuant to which the Lenders
other than Bank One fund the Loans on a three-month LIBOR basis). The amount
payable pursuant to this Section is referred to as the "Early Payment Fee". The
obligations of the Borrower under this Section 7 shall survive payment of the
principal, interest and other amounts under this Note. With respect to the
payment of an Early Payment Fee to Bank One only (and not with respect to any
other Lender), the amount of such Early Payment Fee shall be calculated pursuant
to Section 2.05 and Schedules 2.05(A) and 2.05(B) to the Facility Agreement. The
Borrower acknowledges that he or she has had the opportunity to review Section
2.05 and Schedules 2.05(A) and 2.05(B) of the Facility Agreement and has done so
to the extent he or she felt necessary to understand the calculation of the
Early Payment Fee (which may be substantial). Promptly after any full or partial
prepayment of this Note prior to the Final Payment Date, each Lender will
deliver to the Agent, and the Agent shall deliver to the Borrower, with a copy
to the Company, a written statement showing in reasonable detail the calculation
of the amount of loss or cost suffered by such Lender, which statement shall,
absent manifest error, be conclusive and binding on the Borrower, the Company
and the REIT. Notwithstanding the foregoing, (i) in the event of any repayment
of all or any portion of the principal of this Note prior to the Final Payment
Date and after the occurrence of a Program Event of Default or a Borrower Event
of Repayment described in Section 6(vi) or (ii) in the event of a voluntary
repayment in full of the principal of this Note prior to the Final Payment Date
following the Borrower's election within 30 days after the Borrower's Disability
or Retirement to make such repayment, then in either such event no Early Payment
Fee shall be payable by the Borrower (such Early Payment Fee otherwise due shall
instead be paid by the Company or the REIT).
8. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Program Event of Default or Borrower Event
of Repayment occurs, any and all deposits (including all account balances,
whether provisional or final and whether or not collected or available) and any
other indebtedness and other obligations at any time held or owing by any Lender
to or for the credit or account of the Borrower may be offset and applied toward
the payment of the principal, interest and other amounts owing under this Note
to such Lender, whether or not the principal, interest or other amounts, or any
part thereof, shall then be due.
9. Taxes. Any taxes (excluding income taxes on the overall net income
of the Agent or any Lender imposed by the jurisdiction in which the Agent or
such Lender is incorporated or has its principal place of business) or other
similar assessments or charges payable or ruled payable by any governmental
authority in respect of this Note or any of the other Loan Documents pertaining
to the Borrower shall be paid by the Borrower, together with interest and
penalties, if any. Any payments made by the Borrower under this Note shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (excluding taxes
imposed on its overall net income and franchise taxes imposed on it by the
jurisdiction in which the Agent or such Lender is incorporated or has its
principal place of business) ("Taxes"). If any such Taxes are required to be
withheld from any amounts payable to the Agent or any Lender hereunder, the
amounts so payable to the Agent or such Lender shall be increased to the extent
necessary to yield to the Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in or pursuant to this Note. Whenever any Taxes are payable by
the Borrower, as promptly as practicable thereafter the Borrower shall send to
the Agent for its own account or for the account of such Lender, as the case may
be, a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties that may become payable
by the Agent or any Lender as a result of any such failure. The agreements in
this Section 9 shall survive the payment in full of all amounts payable under
this Note.
10. Agreements; Representations and Warranties. The Borrower hereby (i)
acknowledges that he or she has had the opportunity to review a copy of the
Facility Agreement and has done so to the extent he or she felt necessary in
connection with the Loan evidenced hereby, (ii) consents to be governed by the
terms of the Facility Agreement to the extent the terms thereof are applicable
to the Loan evidenced hereby, (iii) represents that such Borrower's name,
address, home phone number and social security number or similar number is
correct as listed below, (iv) agrees that any notice permitted or required to be
given by the Agent or the Lenders to the Borrower pursuant hereto shall be
deemed given upon the earlier of actual receipt by the Borrower and three (3)
Business Days after posting in the U.S. first class mail addressed to the
Borrower at the address set forth below or at such other address as specified in
writing by the Borrower to the Agent, (v) agrees that the Agent and the Lenders
may from time to time disclose to the Company or the REIT any information with
respect to the Borrower Account, this Note or any default by the Borrower
hereunder (or any failure of the Borrower to pre-fund interest payments as
contemplated by Section 4 above), and may from time to time disclose information
regarding the Borrower to "Transferees" as described in Section 10.04 of the
Facility Agreement, and waives and releases any claims arising out of any such
disclosure, (vi) agrees that assignments of and participations in this Note may
be effected as set forth in Article X of the Facility Agreement, (vii) agrees
that the Facility Agreement is not intended to, and shall not be construed to,
create any rights (contractual, equitable, pursuant to law or otherwise) in
favor of the Borrower against the Agent, any Lender, any Other Guarantor or the
Company, and the Borrower in his or her individual capacity shall have no right
to enforce any rights of the Company or any Other Guarantor thereunder, (viii)
acknowledges that he or she is accepting the Loan and acquiring the Class A
Units for the purpose of investment or profit and that the Loan is intended to
be a "business loan" under the Illinois General Interest Act, (ix) represents
and warrants that he/she has no present intention of redeeming his/her Class A
Units being acquired pursuant to the Program into Common Shares or for a cash
amount, and (x) represents and agrees that he/she has not caused the Borrower's
obligations hereunder or any Reimbursement Obligations to be secured or
"indirectly secured" (as defined in Regulation U) by any Margin Stock and will
not cause any such obligations or Reimbursement Obligations to be so secured or
"indirectly secured" if and to the extent such circumstances would cause any
Guarantor or any Lender to be in violation of Regulation U.
11. Changes in Capital Adequacy Regulations. (a) If a Lender determines
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change (as defined below), then, within fifteen
(15) days of demand by such Lender, the Borrower shall pay such Lender the
amount necessary to compensate for any shortfall (a "Shortfall") in the rate of
return on the portion of such increased capital which such Lender determines is
attributable to this Note or its Loan to the Borrower (after taking into account
such Lender's policies as to capital adequacy). "Change" means (a) any change
after the date hereof in the Risk-Based Capital Guidelines (as defined below),
or (b) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date hereof which
affects the amount of capital required or expected to be maintained by any
Lender or any Lending Installation or any corporation controlling any Lender.
"Lending Installation" means, with respect to a Lender, any office, branch,
subsidiary or affiliate of such Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States of America
on the date hereof and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States of America implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices entitled "International Convergence of Capital Measurements and
Capital Standards" including transition rules, and any amendments to such
regulations adopted prior to the date hereof. Before making any demand for
payment pursuant to this Section 11, each Lender shall, if possible, designate a
different Lending Installation if such designation will avoid the need for
making such demand and is not disadvantageous to such Lender.
(b) Each Lender shall promptly notify the Borrower, with a
copy to the Agent and the Company, upon becoming aware that the Borrower may be
required to make any payment pursuant to this Section 11. When requesting
payment pursuant to this Section 11, each Lender shall provide to the Borrower,
with a copy to the Agent and the Company, a certificate, signed by an officer of
such Lender, setting forth the amount required to be paid by the Borrower to
such Lender and the computations made by such Lender to determine such amount.
12. Amendments. This Note may not be amended orally but only in
writing signed by the Borrower and signed or consented to in writing by the
Agent with the consent of the Required Lenders (or all the Lenders if so
required by Section 12.01 of the Facility Agreement), the Company and the Other
Guarantors.
13. Preservation of Rights; Survival. No delay or omission of the
Lenders or the Agent to exercise any right under this Note shall impair such
right or be construed to be a waiver of any Program Event of Default or Borrower
Event of Repayment or an acquiescence therein. Any single or partial exercise of
any such right shall not preclude other or further exercise thereof or the
exercise of any other right. All remedies contained in the Loan Documents or by
law afforded shall be cumulative and all shall be available to the Agent and the
Lenders until this Note has been paid in full. All representations and
warranties of the Borrower contained in this Note and any other Loan Document
shall survive delivery of this Note and the making of the Loan herein
contemplated.
14. Headings; Entire Agreement. Section headings in this Note are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Note. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Other Guarantors, the Company, the Agent
and the Lenders and supersede all prior agreements and understandings among the
Borrower, the Company, the Agent and the Lenders relating to the subject matter
thereof.
15. Benefits of this Agreement. This Note shall be binding upon the
Borrower and the Borrower's personal representatives, heirs and assigns and,
subject to the following sentence, shall not be construed so as to confer any
right or benefit upon any Person other than the Borrower and his or her personal
representatives, heirs and assigns. This Note shall inure to the benefit of the
Agent, the Lenders and their respective successors and assigns, it being
understood that any Lender may, subject to the provisions of Article X of the
Facility Agreement, from time to time assign, or grant participations in, its
rights hereunder in whole or in part. Except as provided in Section 12.02 of the
Facility Agreement, the Borrower shall not have the right to assign his or her
rights or obligations hereunder.
16. Expenses; Indemnification. The Borrower agrees to reimburse the
Agent and the Lenders for any costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Agent and the Lenders, which attorneys may be employees of the Agent or the
Lenders) paid or incurred by the Agent or any Lender in connection with the
collection or enforcement of this Note. The Borrower further agrees to indemnify
the Agent and each Lender, its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Agent or any Lender is a party thereto) which any of
them may pay or incur arising out of or relating to this Note, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of the Loan evidenced hereby except to the extent
that they arise out of the gross negligence or willful misconduct of the party
seeking indemnification. The obligations of the Borrower under this Section
shall survive the repayment of this Note.
17. Replacement Notes. The Borrower agrees that upon the occurrence and
during the continuance of any Program Event of Default or Borrower Event of
Repayment, upon the request of the Agent and in exchange for this single master
Note, the Borrower will execute and deliver substitute multiple notes (in
substantially the form hereof) (each a "Replacement Note"), one for each Lender
in the principal amount of such Lender's Pro-rata share of the Loan evidenced
hereby.
18. Severability of Provisions. Any provision in this Note that is held
to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to
that jurisdiction, be inoperative, unenforceable, or invalid without affecting
the remaining provisions in that jurisdiction or the operation, enforceability,
or validity of that provision in any other jurisdiction, and to this end the
provisions of this Note are declared to be severable. If any interest payment or
other charge or fee payable by the Borrower under this Note to any Lender
exceeds the maximum amount then permitted to be paid to such Lender by
applicable law, the Borrower shall be obligated to pay, and such Lender shall be
entitled to receive, only the maximum amount permitted by applicable law. If any
Lender has collected interest or other charges in excess of such maximum
permitted amount, the Borrower's only remedy will be that such Lender will apply
such excess interest or other amounts as a full or partial prepayment of the
unpaid balance of the principal amount to the extent of the unpaid principal
balance and refund any additional excess amount to the Borrower.
19. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (INCLUDING 735 ILCS 105/5-1 ET SEQ., BUT OTHERWISE
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKING ASSOCIATIONS,
FEDERAL AGENCIES, BRANCHES OF FOREIGN BANKS AND OTHER FINANCIAL INSTITUTIONS.
20. CONSENT TO JURISDICTION. THE AGENT, EACH LENDER AND THE BORROWER
HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE AND THE PARTIES HEREBY IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE ANY OBJECTION THEY MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN CHICAGO, ILLINOIS.
21. WAIVER OF JURY TRIAL. THE BORROWER AND, BY ACCEPTANCE HEREOF, THE
AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS NOTE.
IN WITNESS WHEREOF, the undersigned Borrower has executed this Note as
of the day and year first above written.
Print/Type
Name of Borrower
Home Address:
Home Phone Number:
Social Security Number:
Or other taxpayer identification
number, if any, as applicable
Exhibit 10.17
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement is made and entered into as of the 25th
day of January, 2000 by (NAME), having an address at (HOME) (the "Participant"),
in favor of Colonial Realty Limited Partnership, a Delaware limited partnership
("Colonial"), and Colonial Properties Trust, an Alabama real estate investment
trust (the "REIT") (Colonial and the REIT are referred to herein individually
and collectively as the "Guarantors").
Preliminary Statements
A. The Participant applied for and obtained a loan from the Lenders (as
hereinafter defined) in the original principal amount of (DLRSWORDS) ($DLRS) for
the purpose of purchasing (UNITSWORDS) (UNITS) Class A Units (the "Purchased
Units") of Colonial (the "Participant Loan").
B. In order to induce the Lenders to make the Participant Loan,
Colonial and the REIT executed and delivered a Facility and Guaranty Agreement
dated as of December 17, 1999 among Colonial, the REIT, the financial
institutions named therein (the "Lenders") and Bank One, NA, individually and as
Agent for the Lenders (the "Guaranty"; capitalized terms used in this Agreement
and not otherwise defined shall have the respective meanings used therein).
C. In order to induce Colonial and the REIT to execute and deliver the
Guaranty, the Participant has agreed to execute and deliver this Agreement in
favor of Colonial, the REIT and the Other Guarantors pursuant to which the
Participant will reimburse Colonial, the REIT and the Other Guarantors on demand
in accordance with the provisions set forth hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Participant hereby agrees as follows:
Section 1. Absolute and Unconditional Reimbursement Obligation.
(a) The Participant hereby absolutely and unconditionally agrees,
subject to subsection (b) of this Section 1, (i) to reimburse the Guarantors
fully and promptly, upon demand, for all amounts paid by the Guarantors to the
Lenders pursuant to the Guaranty with respect to the Participant Loan, (ii) to
pay any and all expenses incurred by the Guarantors in enforcing their rights
under this Agreement, and (iii) to pay to the Guarantors interest accrued on all
such amounts and expenses referred to in the foregoing clauses (i) and (ii),
from the date such amounts and expenses were paid or incurred by the Guarantors
until the date the Participant makes all such reimbursements and payments
hereunder, at the rate set forth in the Note executed by the Participant in
connection with the Participant Loan (the "Note") (whether or not the
Participant Loan is then outstanding).
(b) Notwithstanding the provisions of Section 1(a), the parties hereto
agree that under the circumstances set forth below, the Guarantors will pay
certain amounts (set forth below) in respect of the Note that the Participant
would be obligated to pay but for the provisions of this Section 1(b), and the
Participant shall have no obligation to reimburse the Guarantors on account of
such payments.
(i) Upon the (x) death of the Participant at a time when the
Participant Loan is still outstanding, or (y) (i) the Disability or
Retirement (as such terms are defined in that certain Registration
Rights and Lock-up Agreement of even date herewith between the parties
hereto (the "Lock-up Agreement")) of the Participant at a time when the
Participant Loan is still outstanding, and (ii) the election by the
Participant within 30 days after such Disability or Retirement to
exercise his or her Redemption Right (as defined in the Lock-up
Agreement) pursuant to Section 2(b) of the Lock-up Agreement, the
Guarantors agree to pay the Early Payment Fee owed by the Participant
to the Lenders and the prepayment administrative fee of $375 owed by
the Participant to Bank One, NA for its own account (the
"Administrative Fee") pursuant to the terms of the Note. In such cases,
the Guarantors also agree to pay to the Lenders all principal and
interest due on the Participant Loan, to the extent that such sums are
not paid out of the proceeds of the redemption of the Purchased Units
pursuant to the provisions of the Lock-up Agreement and the letter of
direction referred to therein, and the Participant shall have no
obligation to reimburse the Guarantors on account of such payments. The
Participant agrees that it is a condition precedent to the obligations
of the Guarantors under this paragraph that the Participant shall have
exercised his or her Redemption Right as aforesaid and that all of the
proceeds of such redemption (or so much thereof as may be necessary)
shall have been applied to the payment in full of the principal and
interest (including without limitation the deferred interest) under the
Note, or in the event the proceeds of such redemption are insufficient
to pay such principal and interest in full, then to the payment of so
much of such principal and interest as can be paid with such proceeds.
The Participant further agrees that in the event the Guarantors make
payment of any of the sums contemplated by this paragraph prior to the
time that the proceeds of such redemption are available, the proceeds
of such redemption shall be paid directly to the Guarantors and the
Guarantors shall keep all or so much of such proceeds as is necessary
to reimburse the Guarantors for all amounts paid by the Guarantors to
the Lenders on account of the principal and interest (including without
limitation the deferred interest) of the Note and return the unused
balance, if any, of such proceeds to the Participant.
(ii) In the event that the Accelerated Maturity Date (as
defined in the Lock-up Agreement) occurs as a result of a Program Event
of Default, the Guarantors agree to pay the Early Payment Fee and the
Administrative Fee required under the terms of the Note, and the
Participant shall have no obligation to reimburse the Guarantors on
account of such payment.
(c) This Agreement shall be a continuing agreement and the liability of
the Participant hereunder shall be absolute and unconditional, shall be
performed strictly in accordance with the terms of this Agreement and shall not
be affected, modified or diminished by reason of: (i) any assignment, renewal,
modification or extension of the Participant Loan or the Guaranty; (ii) any
modification or waiver of or change in any of the terms, covenants, conditions
or provisions of the Participant Loan or of the Guaranty; (iii) any dealings or
transactions occurring between the Lenders and the Guarantors whether or not
notice thereof is given to the Participant; (iv) any default or failure of the
Participant fully to perform any of its obligations, covenants or agreements
with respect to the Participant Loan or as set forth in this Agreement; (v) any
substitution of a new guaranty for the Guaranty; (vi) the invalidity or lack of
enforceability of the Participant Loan or the Guaranty or any provision of any
thereof, or (vii) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Participant in respect of the
Participant Loan or this Agreement.
(d) This Agreement shall continue to be effective or be restated, as
the case may be, if at any time any payment of the principal of or interest on
the Participant Loan is rescinded or must otherwise be returned by the Lenders
upon the insolvency or bankruptcy of the Participant or otherwise, all as though
such payment had not been made.
Section 2. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Guarantors are authorized at any time
and from time to time, without notice to the Participant (any such notice being
expressly waived by the Participant) to set off and apply any and all amounts
owing by the Guarantors to the Participant (including, without limitation, base
salary, bonuses, performance units, distributions payable on the Purchased Units
and dividends payable on any Common Shares issued in connection with the
redemption thereof, but excluding the Purchased Units themselves and any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) against any and all of the obligations of the Participant now or
hereafter existing under this Agreement, irrespective of whether or not the
Guarantors shall have made any demand under this Agreement and although such
obligations may be unmatured. The Guarantors agree promptly to notify the
Participant after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of the Guarantors under this Section are in addition to the other
rights and remedies which the Guarantors may have.
Section 3. Indemnification. The Participant hereby agrees to indemnify,
defend and hold the Guarantors harmless from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including without limitation, interest penalties and reasonable
attorneys' fees and expenses (collectively "Damages") asserted against,
resulting to, imposed upon or incurred directly or indirectly by the Guarantors
by reason of or resulting from a breach of any representation, warranty,
covenant or agreement of the Participant contained in or made pursuant to this
Agreement.
Section 4. Full Disclosure. No representation or warranty of the
Participant in or pursuant to this Agreement, including any financial or other
information provided by Participant, contains any untrue statement of a material
fact, or omits to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they are made, not misleading.
Section 5. Representations and Warranties. The Participant represents
and warrants to the Guarantors as follows:
(a) The Participant has all right and power to enter into this
Agreement, perform its obligations hereunder and consummate
the transactions contemplated hereby.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Participant, enforceable against the
Participant in accordance with its terms.
(c) Neither the execution and delivery of this Agreement, nor
compliance with the terms and provisions hereof, by the
Participant will violate any statute, regulation or ordinance
of any governmental authority or conflict with or result in
the breach of any term, condition or provision of any
agreement, contract, order or instrument to which the
Participant is a party or by which its assets or properties
are bound or constitute a default (or an event which, with the
lapse of time or the giving of notice or both, would
constitute a default) thereunder.
(d) There is not pending or, to the best of the Participant's
knowledge, threatened any suit, claim, action, litigation or
proceeding, administrative or judicial, or any governmental
investigation against the Participant or involving any of his
or her properties or assets, and there is no reasonable basis
upon which any such suit, claim, action, litigation,
proceeding or investigation could be brought or initiated.
(e) The financial statements, investor questionnaire and other
financial information, if any, delivered by the Participant to
the Guarantors prior to the date hereof are complete and
accurate in all material respects and are in compliance with
the requirements of Section 4 hereof.
(f) The Participant has not granted to any person a security interest in
his or her general intangibles.
Section 6. Covenants of the Participant. The Participant hereby agrees
that:
(a) so long as any portion of the Participant Loan remains
outstanding and unpaid, in whole or in part, or the Guaranty
remains in effect, or any amount is owing to the Guarantors
hereunder:
(i) the net worth of the Participant shall not be less than
the original principal amount of the Participant Loan;
and
(ii) the Participant shall provide promptly such financial
information to the Guarantors as the Guarantors may,
from time to time, reasonably require.
(b) The Participant shall use the proceeds of the Participant
Loan solely to purchase the Purchased Units.
Section 7. Pledge of Class A Units. (a) As security for the prompt and
complete payment and performance of all of his or her obligations under this
Agreement, the Participant hereby pledges to and grants to the Guarantors a
security interest in the following, in each case whether now owned or hereafter
acquired (the "Collateral"):
(i) all of the Participant's right, title and interest in and
to the Purchased Units, together with all shares, all dividends and other
distributions and all other rights and properties which the Participant shall
receive or shall become entitled to receive for any reason whatsoever with
respect to, upon redemption of, in substitution for or in exchange for any of
such Purchased Units (including, without limitation, all cash amounts payable
upon redemption of the Purchased Units, all shares issuable upon redemption of
the Purchased Units, and all cash or other property received or receivable upon
the sale or other disposition of any or all of the foregoing, including, without
limitation, all cash or other property received or receivable upon the sale or
disposition of any or all of the foregoing pursuant to the Lock-up Agreement and
the letter of direction referred to therein); and
(ii) all proceeds of any and all of the foregoing
(including proceeds that constitute property of the
types described above).
(b) In connection with the foregoing, the Participant hereby authorizes
and directs Colonial, on his or her behalf, to deliver to the Guarantors the
certificates evidencing such Purchased Units and is delivering to the Guarantors
herewith irrevocable unit powers duly executed in blank and undated with respect
thereto and appropriate executed UCC-1 financing statements.
(c) At any time and from time to time, upon the written request of the
Guarantors, the Participant will promptly execute and deliver any and all such
further instruments and documents and take such further actions as the
Guarantors may reasonably deem necessary or desirable to obtain the full
benefits of the security interest granted hereby and of the rights and powers
herein granted, including the execution and filing of any financing or
continuation statement under the Uniform Commercial Code as in effect from time
to time in the applicable jurisdictions (the "Code").
(d) Except as set forth below, the Participant shall be entitled to
receive all dividends and distributions payable with respect to the Collateral.
Upon the occurrence of any Event of Default, Colonial is hereby authorized to
remit all dividends and other distributions payable with respect to the
Collateral directly to the Guarantors for application against all amounts due to
the Lenders under the Note and against the Participant's obligations hereunder.
When the Note is paid in full and all obligations of the Participant under this
Agreement have been fully paid and satisfied, the Guarantors shall remit any
such remaining dividends and other distributions to the Participant.
(e) The Participant agrees that he or she will not redeem the Purchased
Units, or sell, assign, exchange or otherwise transfer, or grant any rights in
respect of, any of the Collateral, except in full compliance with the provisions
of the Partnership Agreement and the Lock-up Agreement. In the event of any such
sale of the Purchased Units that is made in compliance with the foregoing
provisions, the Guarantors shall, subject to the payment in full of the Note and
all of the Participant's obligations under this Agreement, release the
Collateral from the security interest created hereby.
(f) Upon the occurrence of any Event of Default, the Guarantors may
exercise as to any or all of the Collateral all the rights, powers and remedies
of a secured party under the Code or other applicable law, and may elect to sell
the Collateral in one or more public or private sales in compliance with
applicable law and exercise any and all other rights and remedies which they may
have by contract or otherwise. The Participant should be obligated to pay all
sums payable hereunder even if the Guarantors do not exercise any of such
rights, powers and remedies; in the event the Guarantors do exercise any of such
rights, powers and remedies, the Participant shall remain obligated to pay all
sums payable hereunder that are not recovered by the Guarantors as a result of
such exercise.
(g) Except as expressly provided in the Code, the Guarantors shall have
no additional duty as to any Collateral in their possession or control or in the
possession or control of any agent or nominee or as to any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. The Guarantors shall be under no duty or obligation
whatsoever (i) to make or give any presentments, demands for performances,
notices of nonperformance, protests, notices of protest or notices of dishonor
in connection with any obligation or evidences of indebtedness which constitute
in whole or in part the indebtedness or other obligations secured hereunder or
(ii) to give the Participant notice of, or to exercise any subscription rights
or privileges, any rights or privileges to exchange, convert or redeem or any
other rights or privileges relating to or affecting any Collateral.
(h) The pledge and security interest created hereby shall terminate
when all obligations of the Participant under this Agreement shall have been
fully paid and satisfied, at which time the Guarantors shall deliver to the
Participant all collateral and related documents then in the custody or
possession of the Guarantors, all without recourse upon, or warranty whatsoever
by, the Guarantors.
Section 8. Remedies. All of the Guarantors' rights and remedies under
this Agreement are intended to be distinct, separate and cumulative and no such
right or remedy is intended to be to the exclusion of or be a waiver of any
other right or remedy.
Section 9. Amendments, Etc. No amendment or waiver of any provision of
this Agreement shall be effective unless it is in writing and signed by the
Participant and the Guarantors, and any such waiver shall be effective only in
the specific instance and for the specific purpose for which given.
Section 10. Waiver of Notice, Etc. The Participant hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
this Agreement and any requirement that the Guarantors protect, secure, perfect
or insure any security interest or lien or any property subject thereto or
exhaust any right or take any action against any person or entity.
Section 11. Governing Law. This Agreement and the rights and
remedies of the Guarantors and the Participant shall be governed by and
construed in accordance with the laws of the State of Alabama.
Section 12. Binding Effect. This Agreement shall inure to the benefit
of each of the Guarantors and their respective successors and assigns and shall
be fully binding upon the Participant, and his or her heirs, executors and legal
or personal representatives.
Section 13. Expenses. The Participant will, upon demand, pay to the
Guarantors the amount of any and all reasonable expenses, including the
reasonable fees and expenses of counsel and of any experts and agents, which the
Guarantors may incur in connection with (i) the exercise or enforcement of any
of the rights of the Guarantors hereunder or (ii) the failure by the Participant
to perform or observe any of the provisions hereof. The Participant also shall
be solely responsible for his or her own costs for accounting, tax, legal and
investment banking advice and all other services that the Participant may
receive with respect to this Agreement and the matters contemplated herein.
Section 14. Taxes. The Participant shall be solely responsible and
hereby agrees to pay any and all taxes applicable with respect to Purchased
Units that may be sold, including but not limited to ordinary income taxes,
capital gains taxes or any other taxes levied by any relevant taxing authority.
Section 15. Term. This Agreement shall remain in full force and effect
until all obligations under this Agreement and the Guaranty have been fully
performed, regardless of any invalidity or unenforceability of any provision of
this Agreement or the Guaranty.
Section 16. Events of Default. For purposes of this Agreement, any
breach by the Participant of or default by the Participant under this Agreement,
or any representation or warranty made, or any financial or other information
provided by, the Participant to the Guarantors in connection with this Agreement
shall prove to have been incorrect in any material respect when made or
provided, or the occurrence of any Borrower Event of Repayment, shall be an
"Event of Default" under this Agreement.
Section 17. Notices. All notices and other communications permitted or
required pursuant to this Agreement shall be in writing and shall be deemed
given when delivered in person, or five (5) days after being deposited in the
United States mail, postage prepaid, as certified mail, return receipt
requested, properly addressed to the party for whom intended at the addresses
set forth below, or to such other address as any party hereto may designate for
itself by notice in accordance herewith to the others:
The Guarantors: Colonial Properties Trust
2101 Sixth Avenue North, Suite 900
Birmingham, AL 35203
Attn.: Howard B. Nelson, Jr.
With a copy to: Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, DC 20004-1109
Attn.: Alan L. Dye
The Participant: (BUSINESSADD)
Section 18. No Waiver. No delay or omission of the Guarantors to
exercise any right, remedy or power hereunder shall impair the same or be
construed to be a waiver of any Event of Default or an acquiescence therein. No
waiver of any Event of Default shall extend to or affect any subsequent Event of
Default, nor shall it impair any right, remedy or power available to the
Guarantors. No single or partial exercise of any right, remedy or power shall
preclude any other or further exercise thereof by the Guarantors.
Section 19. Severability. Any provision of this Agreement that is
legally determined to be unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the unenforceability only without
invalidating the remaining provisions hereof, but no unenforceability in any
jurisdiction shall invalidate or render unenforceable the same or any other
provision in any other jurisdiction.
Section 20. Entire Agreement. This Agreement, including the schedules
referenced herein, constitutes the entire agreement of the parties hereto with
respect to the matters referred to herein and supersedes any and all other
understandings, negotiations, or agreements among the Participant and the
Guarantors with respect to the subject matter hereof.
Section 21. Arbitration. Any dispute, claim or controversy arising out
of or in connection with this Agreement shall be resolved through binding
arbitration in the Birmingham, Alabama metropolitan area under the commercial
arbitration rules of the American Arbitration Association (the "AAA") then in
force. The Guarantors and the Participant shall each appoint one person from a
list furnished by the AAA, and the two persons so appointed shall jointly select
a neutral third person who shall serve as the sole arbitrator. The arbitrator
shall provide a written decision stating its findings. The arbitration award
shall be final and binding among the parties, and judgment thereon may be
entered by any court having jurisdiction. In any arbitration to enforce or
construe any provision of this Agreement or otherwise arising hereunder, the
prevailing party shall be entitled to recover, in addition to any other
available relief, its reasonable attorney fees and costs incurred. If neither
party prevails on all issues, the parties' total attorney fees and costs
(including arbitrator's fees) may be allocated in the arbitrator's discretion.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, and made delivery thereof, as of the date first written above.
(CAPNAME)
-----------------------------
COLONIAL REALTY LIMITED
PARTNERSHIP
By: Colonial Properties Trust,
its General Partner
By: /s/ Howard B. Nelson Jr.
-----------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
COLONIAL PROPERTIES TRUST
By: /s/ Howard B. Nelson Jr.
-----------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
<TABLE>
<CAPTION>
Dollar amounts in thousands,
except per share data 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
OPERATING DATA
<S> <C> <C> <C> <C> <C>
Total revenue ..................... $ 282,564 $ 257,367 $ 184,126 $ 134,881 $ 110,890
Expenses:
Depreciation and amortization .. 55,185 48,647 33,278 23,534 20,490
Other operating ................ 94,354 87,972 63,581 46,819 41,772
Income from operations ............ 133,025 120,748 87,267 64,529 48,628
Interest expense .................. 57,211 52,063 40,496 24,584 24,060
Other income (expense), net ....... 7,872 (1,597) 3,187 1,303 736
Income before extraordinary items
and minority interest .......... 83,686 67,088 49,958 41,248 25,479
Dividends to preferred shareholders 10,943 10,938 1,671 -- --
Distributions to preferred unitholders 7,588 -- -- -- --
Net income available to
common shareholders ............ 44,833 39,284 30,277 27,506 14,936
Per share - basic and diluted:
Income before extraordinary items . $ 1.85 $ 1.60 $ 1.66 $ 1.60 $ 1.29
Extraordinary loss from early
extinguishment of debt ......... (0.02) (0.01) (0.13) (0.02) --
Net income ........................ 1.83 1.46 1.53 1.58 1.29
Dividends declared ................ 2.32 2.20 2.08 2.00 1.90
- ---------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Land, buildings, and equipment, net $ 1,586,333 $ 1,566,841 $ 1,268,432 $ 801,800 $ 624,517
Total assets ...................... 1,863,518 1,755,449 1,397,078 948,105 681,122
Total debt ........................ 1,039,863 909,322 702,044 506,435 354,100
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Funds from operations(1) .......... $ 113,872 $ 103,746 $ 77,493 $ 62,999 $ 44,015
Total market capitalization(2) .... 2,027,036 2,013,084 1,764,810 1,298,946 894,342
Interest coverage ratio ........... 3.20x 3.20x 3.00x 3.60x 2.90x
Cash flow provided by (used in):
Operating activities ........... $ 131,964 $ 115,528 $ 72,065 $ 62,873 $ 47,004
Investing activities ........... (134,049) (365,347) (346,379) (224,076) (95,592)
Financing activities ........... 2,143 249,870 275,504 162,957 29,443
Total properties (at end of year) . 111 106 93 73 62
<FN>
(1) The Company generally considers Funds from Operations ("FFO") a widely used
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.
(2) Total market capitalization is the market value of all outstanding Common
Shares of the Company plus total debt. This amount was calculated assuming the
conversion of 10,997,794, 10,613,966, 9,976,419, 8,431,198, and 8,141,023 units
of minority interest in Colonial Realty Limited Partnership into the Company's
Common Shares for 1999, 1998, 1997, 1996, and 1995, respectively.
</FN>
</TABLE>
<PAGE>
COLONIAL PROPERTIES TRUST
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 December 31, 1999, Colonial's
real estate portfolio consisted of 52 multifamily communities, 18 office
properties, and 41 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. Although these divisions operate independently from one another,
constant communication among the Executive Vice Presidents provides the Company
with unique synergy allowing the Company to take advantage of a variety of
investment opportunities.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements appearing
elsewhere in this report. As used herein, the terms "Colonial" or "the Company"
includes 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 filings 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--1999 vs. 1998
In 1999, the Company experienced growth in revenues, operating expenses, and net
income, is the result of the acquisition and development of 21 properties and
the expansion of 6 properties during 1999 and 1998. As a result of the
acquisitions, developments, and expansions, the Company's net income before
dividends to preferred shareholders increased by $5.6 million, or 11.1%, for
1999 when compared to 1998. On a per share basis, net income is $1.83 for 1999,
a 15.1% increase, compared to $1.59 for 1998. The increase in net income
available to common shareholders, on a per share basis, is directly attributable
to the acquisition, development, and expansion of properties.
Revenues--Total revenues increased by $25.2 million, or 9.8%, during 1999 when
compared to 1998. Of this increase, $ 18.1 million relates to revenues generated
by properties that were acquired, developed, or expanded during 1999 and 1998.
The remaining increase primarily relates to increases in rental rates at
existing properties and lease buyouts during 1999. The multifamily division
accounts for the majority of the overall revenue increase, approximately $11.3
million, while the office and retail divisions account for $6.6 million and $7.3
million, respectively. The divisional revenue growth is primarily attributable
to the acquisition, development, and expansion of 15 multifamily properties, 8
office properties, and 4 retail properties during 1999 and 1998.
Operating Expenses--Total operating expenses increased by $12.9 million, or
9.5%, during 1999 when compared to 1998. The majority of this increase relates
to additional property operating expenses of $3.5 million and additional
depreciation of $3.9 million associated with properties that were acquired,
developed, or expanded during 1999 and 1998, net of operating expenses of
properties disposed of during 1998. Depreciation expense on existing properties
increased by $2.2 million during 1999 when compared to 1998. Divisional property
operating expenses increased by $7.2 million, $3.5 million, and $1.3 million for
the multifamily, office, and retail divisions, respectively, during 1998 when
compared to 1998. The increase in divisional property operating expenses is
primarily attributable to the acquisition and development of 15 multifamily
properties, 8 office properties, and 4 retail properties during 1999 and 1998.
The remaining change 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 Expenses--Interest expense increased by $5.1 million, or 9.9%,
during 1999 when compared to 1998. The increase in interest expense is primarily
attributable to the issuance of $82.5 million in Medium Term Notes, and the
increased usage of the Company's line of credit in conjunction with the
financing of acquisitions, developments, expansions, and investment activities.
Results of Operations--1998 vs. 1997
In 1998, the Company experienced growth in revenues, operating expenses, and net
income which primarily resulted from the acquisition and development of 53
properties during 1998 and 1997. As a result of the acquisitions and
developments, the Company's net income before dividends to preferred
shareholders increased by $18.3 million, or 57.2%, for 1998 when compared to
1997. On a per share basis, net income was $1.59 for 1998, a 3.9% increase,
compared to $1.53 for 1997. The increase in net income available to common
shareholders, on a per share basis, is primarily attributable to the
acquisition, development, and expansion of properties.
Revenues--Total revenues increased by $73.2 million, or 39.8%, during 1998 when
compared to 1997. Of this increase, $61.7 million relates to revenues generated
by properties that were acquired or developed during 1998 and 1997, net of
revenues of properties disposed of in 1997. The retail division accounted for
the majority of the overall revenue increase, approximately $46.4 million, while
the multifamily and office division accounted for $9.0 million and $18.2
million, respectively. The divisional revenue growth was primarily attributable
to the acquisition and development of 21 retail properties, 22 multifamily
properties, and 10 office properties during 1998 and 1997. The remaining
increase relates to increases in rental rates at existing properties and lease
buyouts during 1998.
Operating Expenses--Total operating expenses increased by $39.8 million, or
41.1%, during 1998 when compared to 1997. The majority of this increase relates
to additional property operating expenses of $20.3 million and additional
depreciation of $13.4 million associated with properties that were acquired or
developed during 1998 and 1997, net of operating expenses of properties disposed
of during 1997. Depreciation expense on existing properties increased by $1.5
million during 1998 when compared to 1997. Divisional property operating
expenses increased by $2.8 million, $5.5 million, and $14.8 million for
multifamily, office, and retail divisions, respectively, during 1998 when
compared to 1997. The increase in divisional property operating expenses was
primarily attributable to the acquisition and development of 22 multifamily
properties, 10 office properties, and 21 retail properties during 1998 and 1997.
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 Expenses--Interest expense increased by $11.6 million, or
28.6%, during 1998 when compared to 1997. The increase in interest expense is
primarily attributable to the assumption of $5.7 million of debt, the issuance
of $175 million in Medium Term Notes, and the net increased usage of the
Company's line of credit in conjunction with the financing of acquisitions and
developments.
LIQUIDITY AND CAPITAL RESOURCES
During 1999, the Company invested $225.8 million in the acquisition,
development, and expansion of properties. This acquisition and development
activity increased the Company's multifamily, office, and retail property
holdings. The Company financed the growth through proceeds from public and
private offerings of equity and debt totaling $182.5 million during 1999,
advances on its bank line of credit, the issuance of limited partnership units
in CRLP, the proceeds from joint ventures, disposition of assets, and cash from
operations.
During 1999, the Company's Board of Trustees authorized a common 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 1999, the Company
repurchased 4,454,250 shares at an all in cost of $117.8 million, which
represents an average purchase price of $26.45 per share.
Acquisition and Development Activities
Multifamily Properties--During 1999, the Company completed development of 1,404
apartment units in 10 multifamily communities and acquired land on which it
intends to develop additional multifamily communities during 1999. The aggregate
investment in the multifamily developments during 1999 was $105.1 million. As of
December 31, 1999, the Company has 1,290 apartment units in seven multifamily
communities under development or expansion. Management anticipates that the
seven multifamily projects will be completed during 2000 and 2001. Management
estimates that it will invest an additional $15.5 million to complete these
multifamily communities.
Office Properties--During 1999, the Company increased its office portfolio by
approximately 443,000 square feet with the acquisition of one office property at
a cost of $16.5 million, and the development of two office properties. In
addition, the Company began development on one office property in Atlanta,
Georgia. The aggregate investment in the office developments during 1999 was
$30.8 million. Management estimates that it will invest an additional $14.0
million to complete these properties.
Retail Properties--During 1999, the Company added approximately 467,000 square
feet of retail shopping space through the acquisition of an enclosed mall at a
net cost of $29.3 million. In addition, the company continued the development of
a community shopping center, began construction of two new community shopping
centers, and began the redevelopment of an enclosed mall and community shopping
center. The aggregate investment in the retail developments during 1999 was
$32.0 million. Management anticipates that it will invest an additional $68.6
million to complete the retail developments.
Joint Ventures
During the third quarter of 1999, the Company entered into a joint venture with
CMS. In connection with this joint venture, Colonial sold the following six
properties: Colonial Village at Stockbridge, Colonial Grand at Barrington Club,
Colonial Grand at Ponte Vedra, Colonial Village at River Hills, Colonial Grand
at Mountain Brook, and Colonial Village at Cahaba Heights. CMS acquired an 85%
interest in the joint venture from Colonial for $80.6 million. The Company
acquired a 15% interest in the joint venture and will serve as manager of the
properties. Subsequent to formation, the joint venture leveraged the properties
for a total of $73.6 million of nonrecourse notes, and the proceeds were
distributed proportionately to the joint venture partners. At December 31, 1999,
Colonial had an ending net investment in the joint venture of $2.8 million. The
joint venture is accounted for using the equity method.
Financing Activities
The Company funded a large portion of its acquisitions, developments, and
expansions through the issuance of preferred units and debt securities. During
1999, the Company completed the following equity and debt transactions:
Preferred Unit Offering
-------------------------------------------------------------------------------
(in thousands)
-------------------------------------
Number of Price Per Gross Offering Net
Date Preferred Units Unit Proceeds Costs Proceeds
- --------- ---------------- ---------- ------------- ---------- ---------
February 2,000,000 $ 50.00 $ 100,000 $ 2,600 $ 97,400
<PAGE>
Debt Offering
------------------------------------------------------------------------------
Gross
Type of Proceeds
Date Note Maturity Rate (in thousands)
- ----------------- --------------- -------------------------- ---------------
August Medium-term August, 2002 7.93% $ 57,500
August Medium-term August, 2004 8.19% 25,000
On July 10, 1998, the Company increased the borrowing capacity under its
unsecured line of credit from $200 million to $250 million. The credit facility,
which is used by the Company primarily to finance additional property
investments, bears interest at a rate ranging between 80 and 135 basis points
above LIBOR and is renewable in July 2000. The line of credit agreement includes
a competitive bid feature that will allow the Company to convert up to $125
million under the line of credit to a fixed rate, for a fixed term not to exceed
90 days. As of December 31, 1999, the balance outstanding on the Company's line
of credit was $228.3 million.
At December 31, 1999, the Company's total outstanding debt balance was $1.04
billion. The outstanding balance includes fixed rate debt of $758.0 million, or
72.9%, and floating-rate debt of $281.9 million, or 27.1%. The Company has
obtained interest rate protection for $50.0 million of the floating-rate debt
through the purchase of an interest rate cap agreement. The cap agreement limits
the debt to an interest rate of 8.00% through May 2, 2000. The Company's total
market capitalization as of December 31, 1999 was $2.0 billion and its ratio of
debt to total market capitalization was 51.3%. Certain loan agreements of the
Company contain restrictive covenants which, among other things, require
maintenance of various financial ratios. At December 31, 1999, the Company was
in compliance with these covenants.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. Interest rate cap agreements and
interest rate swaps are used to reduce the potential impact of increases in
interest rates on variable-rate debt. Treasury lock agreements are used by CRLP
to lock in interest rates in connection with public debt offerings. On January
4, 1999, Colonial entered into an interest rate swap for $50 million of its line
of credit at 4.97% plus 80 to 135 basis points and on January 15, 1999, Colonial
entered into an interest rate swap for $52 million of tax exempt bonds at a rate
of 3.23%. Additionally, on May 4, 1999, Colonial entered into an interest rate
swap agreement for $25 million of its line of credit at a rate of 5.07%. All of
these interest rate swap agreements have one-year terms and any payments made or
received under the agreements are recognized as adjustments to interest expense
as incurred. On February 10, 2000, Colonial entered into two reverse interest
rate swap agreements for a total of $50 million of its medium-term notes. Under
the terms of the agreements, Colonial will receive a fixed interest rate of
7.37% and will be required to pay a floating rate equal to one month LIBOR that
is compounded and paid semi-annually. Both of these agreements have five-year
terms, and any payments made or received under the agreements are recognized as
adjustments to interest expense. Colonial is exposed to credit losses in the
event of nonperformance by the counterparties to its interest rate cap and
nonderivative financial assets but has no off-balance-sheet credit risk of
accounting loss. The Company anticipates, however, that counterparties will be
able to fully satisfy their obligations under the contracts. Colonial does not
obtain collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of counterparties.
YEAR 2000 ISSUE
The Year 2000 or "Y2K" problem refers to the inability of many existing computer
programs having time-sensitive software to recognize a date using "00" as the
year 2000. Instead, the computer programs interpret such data as the year 1900.
This failure to accurately recognize the year 2000 and other key dates could
have resulted in a variety of problems ranging from data miscalculations to the
failure of entire systems.
In order to address the Y2K problem, the Company reviewed all of their property
management and informational systems, and replaced, upgraded, or modified the
systems as needed to minimize the risks associated with the Y2K problem. The
Year 2000 issue did not have a material impact on the Company's business,
results of operations, or financial condition.
<PAGE>
OUTLOOK
Management intends to maintain the Company's strength through continued
diversification, while pursuing acquisitions and developments that meet
Colonial's criteria for property quality, market strength, and investment
return. Management will continue to use its line of credit to provide short-term
financing for acquisition, development, and expansion activities and plans to
continue to replace significant borrowings under the bank line of credit with
funds generated from the sale of additional equity securities and permanent
financing, as market conditions permit. Management believes that these potential
sources of funds, along with the possibility of issuing limited partnership
units of CRLP in exchange for properties, will provide the Company with the
means to finance additional acquisitions, developments, and expansions.
In addition to the issuance of equity and debt, management is investigating
alternate financing methods and sources to raise future capital. Private
placements, joint ventures, and non-traditional equity and debt offerings are
some of the alternatives the Company is contemplating. Colonial continues to
work diligently to improve its credit rating, in order to reduce its cost of
raising future capital.
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.
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for
Derivative Instruments and Hedging Activities, 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 periods beginning January 1, 2001.
INFLATION
Leases at the multifamily properties generally provide for an initial term of
six months to one year and allow for rent adjustments at the time of renewal.
Leases at the office properties typically provide for rent adjustments and the
pass-through of certain operating expenses during the term of the lease.
Substantially all of the leases at the retail properties provide for the
pass-through to tenants of certain operating costs, including real estate taxes,
common area maintenance expenses, and insurance. All of these provisions permit
the Company to increase rental rates or other charges to tenants in response to
rising prices and, therefore, serve to minimize the Company's exposure to the
adverse effects of inflation.
<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 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 years ended December 31, 1999, 1998, and 1997 was computed as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income $ 44,833 $ 39,284 $ 30,277
Adjustments:
Minority interest in CRLP 19,694 16,465 14,360
Depreciation and amortization (1) 55,334 47,189 32,288
Sales of property (1) (5,280) 21 (3,082)
Straight-line rents (1) (1,337) -0- -0-
Debt prepayment penalties 628 401 3,650
Write-off of development costs
charged to net income -0- 386 -0-
--------- --------- ---------
Funds from operations $ 113,872 $ 103,746 $ 77,493
--------- --------- ---------
</TABLE>
(1) Includes pro-rata share of adjustments for subsidiaries.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
COLONIAL PROPERTIES TRUST
(Amounts in Thousands, Except Share Data)
December 31, 1999 and 1998
------------ ------------
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net $ 1,586,333 $ 1,566,841
Undeveloped land and construction in progress 214,043 128,336
Cash and equivalents 4,640 4,583
Restricted cash 2,634 2,897
Accounts receivable, net 10,972 9,428
Prepaid expenses 2,476 3,224
Deferred debt and lease costs 10,500 9,644
Investment in partially owned entities 24,167 25,181
Other assets 7,753 5,315
------------ ------------
$ 1,863,518 $ 1,755,449
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable $ 1,039,863 $ 909,322
Accounts payable 11,399 8,614
Accounts payable to affiliates 6,816 5,540
Accrued interest 12,901 12,051
Accrued expenses 4,444 3,456
Tenant deposits 4,011 4,272
Unearned rent 2,820 2,800
------------ ------------
Total liabilities 1,082,254 946,055
------------ ------------
Minority interest:
Preferred units 100,000 -0-
Common units 187,689 198,947
------------ ------------
Total minority interest 287,689 198,947
------------ ------------
Preferred shares of beneficial interest, $.01 par value, 10,000,000 shares
authorized; 5,000,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively 50 50
Common shares of beneficial interest, $.01 par value, 65,000,000 shares
authorized; 26,326,458 and 26,147,054 shares issued at
December 31, 1999 and 1998, respectively 263 261
Additional paid-in capital 673,373 659,641
Cumulative earnings 196,302 132,938
Cumulative distributions (257,948) (182,135)
Treasury shares, at cost; 4,454,250 and 0 shares at
December 31, 1999 and 1998, respectively (117,863) -0-
Deferred compensation on restricted shares (602) (308)
------------ ------------
Total shareholders' equity 493,575 610,447
------------ ------------
$ 1,863,518 $ 1,755,449
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
COLONIAL PROPERTIES TRUST
(Amounts in Thousands, Except Per Share Data)
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
--------- --------- ---------
Revenue:
<S> <C> <C> <C>
Base rent $ 225,781 $ 206,234 $ 154,063
Base rent from affiliates 1,460 1,027 879
Percentage rent 4,683 4,002 2,161
Tenant recoveries 32,913 31,573 17,349
Other 17,727 14,531 9,674
--------- --------- ---------
Total revenue 282,564 257,367 184,126
--------- --------- ---------
Property operating expenses:
General operating expenses 20,324 20,590 12,603
Salaries and benefits 14,547 12,600 10,283
Repairs and maintenance 27,664 24,795 18,669
Taxes, licenses, and insurance 23,061 22,312 15,578
General and administrative 8,758 7,675 6,448
Depreciation 52,913 46,841 31,956
Amortization 2,272 1,806 1,322
--------- --------- ---------
Total operating expenses 149,539 136,619 96,859
--------- --------- ---------
Income from operations 133,025 120,748 87,267
--------- --------- ---------
Other income (expense):
Interest expense (57,211) (52,063) (40,496)
Income (loss) from partially owned entities 428 (1,578) 620
Gains (losses) from sales of property 7,444 (19) 2,567
--------- --------- ---------
Total other expense (49,339) (53,660) (37,309)
--------- --------- ---------
Income before extraordinary items and minority
interest 83,686 67,088 49,958
Extraordinary loss from early extinguishment of debt (628) (401) (3,650)
--------- --------- ---------
Income before minority interest in CRLP 83,058 66,687 46,308
Minority interest in income of CRLP (19,694) (16,465) (14,360)
Distribution to preferred unitholders of CRLP (7,588) -0- -0-
--------- --------- ---------
Net income 55,776 50,222 31,948
Dividends to preferred shareholders (10,943) (10,938) (1,671)
--------- --------- ---------
Net income available to common shareholders $ 44,833 $ 39,284 $ 30,277
--------- --------- ---------
Net income per share after consideration of minority interest:
Income before extraordinary item $ 1.85 $ 1.60 $ 1.66
Extraordinary loss from early extinguishment of debt (0.02) (0.01) (0.13)
--------- --------- ---------
Net income per common share - basic 1.83 1.59 1.53
Net income per common share - diluted 1.83 1.59 1.53
--------- --------- ---------
Weighted average common shares outstanding 24,478 24,641 19,808
--------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COLONIAL PROPERTIES TRUST
(Amounts in Thousands)
For the Years Ended December 31, 1999, 1998, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred Shares of Common Shares of Additional Deferred Total
Beneficial Interest Beneficial Interest Paid-In Cumulative Cumulative Treasury Comp.on Share-
Shares Par Value Shares Par Value Capital Earnings Distributions Shares Restricted holders'
Shares Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 17,660 $ 177 $302,304 $ 50,768 $ (73,387) $ -0- $(358)$279,504
Distributions on common shares
($2.08 per share) (41,710) (41,710)
Distributions on preferred shares
($0.3342 per share) (1,671) (1,671)
Net income 31,948 31,948
Issuance of Restricted Common Shares of
Beneficial Interest 8 -0- 261 (261) -0-
Amortization of deferred compensation 223 223
Public offering of preferred shares
of beneficial interest, net of offering
costs of $4,451 5,000 $ 50 120,499 120,549
Public offerings of common shares
of beneficial interest, net of offering
costs of $4,732 3,366 34 97,640 97,674
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan 95 1 2,475 2,476
Issuance of common shares of beneficial
interest through options exercised 24 -0- 570 570
Adjustments to minority interest in
Colonial Realty Limited Partnership
at dates of capital transactions 856 856
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 5,000 50 21,153 212 524,605 82,716 (116,768) -0- (396) 490,419
Distributions on common shares
($2.20 per share) (54,429) (54,429)
Distributions on preferred shares
($2.19 per share) (10,938) (10,938)
Net income 50,222 50,222
Issuance of Restricted Common Shares of
Beneficial Interest 0 -0- 13 (13) -0-
Amortization of deferred compensation 101 101
Public offerings of common shares
of beneficial interest, net of offering
costs of $4,973 4,609 46 132,159 132,205
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan 369 3 9,284 9,287
Issuance of common shares of beneficial
interest through options exercised 15 -0- 359 359
Adjustments to minority interest in
Colonial Realty Limited Partnership
at dates of capital transactions (6,779) (6,779)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 5,000 50 26,147 261 659,641 132,938 (182,135) -0- (308) 610,447
Distributions on common shares
($2.32 per share) (57,282) (57,282)
Distributions on preferred shares
($2.19 per share) (10,943) (10,943)
Distributions on preferred units of
Colonial Realty Limited Partnership (7,588) (7,588)
Income before preferred unit distributions 63,364 63,364
Issuance of Restricted Common Shares of
Beneficial Interest 25 -- 693 (693) -0-
Amortization of deferred compensation 399 399
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan and Employee Stock
Purchase Plan 151 2 3,763 3,765
Cost of issuance of preferred units of
Colonial Realty Limited Partnership (2,604) (2,604)
Issuance of common shares of beneficial
interest through options exercised 3 -- 70 70
Purchase of treasury shares (117,863) (117,863)
Adjustments to minority interest in
Colonial Realty Limited Partnership
at dates of capital transactions 11,810 11,810
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 5,000 50 26,326 $ 263 $ 673,373 $196,302 ($257,948) ($117,863)($602)$493,575
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
COLONIAL PROPERTIES TRUST
(Amounts in Thousands)
For the Years Ended December 31, 1999, 1998, 1997
--------- --------- ---------
1999 1998 1997
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 55,776 $ 50,222 $ 31,948
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 55,185 48,647 33,278
Loss (income) from partially owned entities (428) 1,578 (620)
Minority interest in CRLP 19,694 16,465 14,360
Losses (gains) from sales of property (7,444) 19 (2,567)
Distributions on preferred units of CRLP 7,588 -0- -0-
Other, net 1,767 1,105 4,204
Decrease (increase) in:
Restricted cash 263 (232) (215)
Accounts receivable (2,682) (4,437) (2,743)
Prepaid expenses 808 (57) 867
Other assets (3,559) 749 565
Increase (decrease) in:
Accounts payable 4,061 (872) (2,646)
Accrued interest 850 5,525 1,061
Accrued expenses and other 85 (3,184) (5,427)
--------- --------- ---------
Net cash provided by operating activities 131,964 115,528 72,065
--------- --------- ---------
Cash flows from investing activities:
Acquisition of properties (45,164) (312,585) (301,931)
Development expenditures (98,414) (62,075) (37,589)
Development expenditures paid to affiliates (84,256) (40,347) (46,481)
Tenant improvements (8,424) (4,140) (2,792)
Capital expenditures (18,867) (24,967) (12,325)
Proceeds from sales of property, net of selling costs 119,552 52,238 54,092
Distributions from partially owned entities 8,678 32,379 788
Capital contributions to partially owned entities (7,154) (5,850) (141)
--------- --------- ---------
Net cash used in investing activities (134,049) (365,347) (346,379)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from common stock issuances, net of expenses paid -0- 132,205 97,674
Proceeds from preferred stock issuance, net of expenses paid -0- -0- 120,549
Proceeds from preferred unit issuance, net of expenses paid 97,396 -0- -0-
Principal reductions of debt (59,507) (31,725) (122,880)
Proceeds from additional borrowings 136,200 173,976 175,246
Net change in revolving credit balances 53,848 57,403 68,271
Dividends paid to common and preferred shareholders,
and distributions to preferred unitholders (75,813) (65,367) (43,381)
Repurchase of treasury stock (117,863) -0- -0-
Repurchase of common units (4,273) -0- -0-
Distributions to common unitholders (29,175) (22,133) (17,956)
Payment of mortgage financing cost (1,607) (3,734) (1,417)
Proceeds from dividend reinvestments, including
stock options exercised 3,835 9,646 3,048
Other, net (898) (401) (3,650)
--------- --------- ---------
Net cash provided by financing activities 2,143 249,870 275,504
--------- --------- ---------
Increase in cash and equivalents 58 51 1,190
Cash and equivalents, beginning of period 4,583 4,532 3,342
--------- --------- ---------
Cash and equivalents, end of period $ 4,641 $ 4,583 $ 4,532
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 56,361 $ 46,538 $ 39,435
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLONIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
COLONIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------
1. Organization and Basis of Presentation
Organization--Colonial Properties Trust (Colonial or the Company), a
real estate investment trust (REIT), was originally formed as a Maryland real
estate investment trust on July 9, 1993 and reorganized as an Alabama real
estate investment trust under a new Alabama REIT statute on August 21, 1995.
The Company is engaged in the ownership, development, management, and leasing
of multifamily housing communities, office buildings, and retail malls and
centers. The Company also owns certain parcels of land.
Federal Income Tax Status--The Company, which is considered a
corporation for federal income tax purposes, qualifies as a REIT for federal
income tax purposes and generally will not be subject to federal income tax to
the extent it distributes its REIT taxable income to its shareholders. REITs are
subject to a number of organizational and operational requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax on its taxable income at regular corporate rates.
The Company may be subject to certain state and local taxes on its income and
property. No provision for income taxes is included in the financial statements.
Distributions to shareholders are partially taxable to shareholders as ordinary
income and unrecaptured section 1250 gains, and partially non-taxable to
shareholders as return of capital. During 1997, 1998, and 1999 the Company's
distributions had the following characteristics:
Distribution Ordinary Return of Unrecaptured
Per Share Income Capital Sec. 1250 Gains
--------------- --------------- ------------ ---------------
1997 $2.08 74.02% 25.98% 0.00%
1998 $2.20 81.37% 18.63% 0.00%
1999 $2.32 78.78% 17.35% 3.87%
Principles Of Consolidation--The Company's consolidated financial
statements include the Company, Colonial Realty Limited Partnership (CRLP) (in
which the Company held 66.53%, 71.12%, and 67.94% general and limited partner
interests at December 31, 1999, 1998, and 1997, respectively), and Colonial
Properties Services Limited Partnership (in which CRLP holds 99% general and
limited partner interests). The minority limited partner interests in CRLP and
Colonial Properties Services Limited Partnership are included as minority
interest in the Company's consolidated financial statements.
Investments In Partially Owned Entities--Partnerships and corporations
in which the Company owns a fifty percent or less interest and does not control
are reflected in the consolidated financial statements as investments accounted
for under the equity method. Under this method the investment is carried at cost
plus or minus equity in undistributed earnings or losses since the date of
acquisition.
Also included in investments in partially-owned entities is the
Company's 99% nonvoting, equity interest in Colonial Properties Services, Inc.
(CPSI). Colonial holds a one percent voting interest in CPSI. The Company
accounts for its 99% equity interest on the equity method. CPSI provides
property management services for third-party owned properties and administrative
services to the Company. Colonial generally reimburses CPSI for payroll and
other costs incurred in providing services to the Company.
2. Summary of Significant Accounting Policies
Land, Buildings, and Equipment--Land, buildings, and equipment is
stated at the lower of cost, less accumulated depreciation, or net realizable
value. Where an impairment of a property's value is determined to be other than
temporary, an allowance for the estimated potential loss is established to
record the property at its net realizable value. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from 7 to 40 years. Repairs and maintenance are charged to expense as
incurred. Replacements and improvements are capitalized and depreciated over the
estimated remaining useful lives of the assets. When items of land, buildings,
or equipment are sold or retired, the related cost and accumulated depreciation
are removed from the accounts and any gain or loss is included in the results of
operations.
Undeveloped Land and Construction in Progress--Undeveloped land and
construction in progress is stated at the lower of cost or net realizable value.
The Company capitalizes all costs associated with land development and
construction.
Capitalization of Interest--The Company capitalizes interest during
periods in which property is undergoing development activities necessary to
prepare the asset for its intended use.
Cash and Equivalents--The Company includes highly liquid marketable
securities and debt instruments purchased with a maturity of three months or
less in cash equivalents.
Restricted Cash--Cash which is legally restricted as to use consists
primarily of tenant deposits.
Deferred Debt and Lease Costs--Amortization of debt costs is recorded
using the straight-line method, which approximates the effective interest
method, over the terms of the related debt. Leasing commissions and fees are
amortized using the straight-line method over the terms of the related leases.
Derivatives--The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes. Interest rate
cap agreements and interest rate swaps are used to reduce the potential impact
of increases in interest rates on variable-rate debt. Premiums paid for
purchased interest rate cap agreements are amortized to expense over the terms
of the caps. Unamortized premiums are included in other assets in the balance
sheets. Amounts receivable under cap agreements are accrued as a reduction of
interest expense. Payments under interest rate swap agreements are recognized as
adjustments to interest expense as incurred. Treasury lock agreements are used
by CRLP to set interest rates in anticipation of public debt offerings. Any
gains or losses related to treasury locks are included in deferred debt and
lease cost on the balance sheet and amortized over the life of the related debt
to the extent that such treasury locks are utilized. All unutilized treasury
locks are expensed when their future utility expires. All treasury locks were
utilized during 1999 and 1998.
Deferred Compensation on Restricted Shares--Deferred compensation on
restricted shares relates to the issuance of restricted shares to employees of
the Company. Deferred compensation is amortized to compensation expense based on
the passage of time and certain performance criteria.
Revenue Recognition--Rental income attributable to leases is recognized
on a straight-line basis over the terms of the leases. Anticipated losses, if
any, are recognized when such amounts become known, or estimated.
Net Income Per Share--Basic net income per share is calculated by
dividing the net income available to common shareholders by the weighted average
numbers of common shares outstanding during the periods. Diluted net income per
share is calculated by dividing the net income available to common shareholders
by the weighted average number of common shares outstanding during the periods,
adjusted for the assumed conversion of all potentially dilutive share options.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
Segment Reporting--Reportable segments are identified based upon
management's approach for making operating decisions and assessing performance
of the Company.
Software Development--The Company capitalizes certain internally
developed software costs. Capitalized internal software development costs are
amortized using the straight-line method over the estimated useful lives of the
software.
Treasury Stock--During 1999, the Company's Board of Trustees authorized
a common 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
1999, the Company repurchased 4,454,250 shares at an all in cost of $117.8
million, which represents an average purchase price of $26.45 per share. These
shares are included within treasury stock which is a reduction of shareholders'
equity.
Reclassifications--Certain immaterial reclassifications have been made
to the 1997 and 1998 financial statements in order to conform them to the 1999
financial statement presentation. These reclassifications have no impact on
shareholders' equity or net income.
Recently Issued Accounting Standard--Statement of Financial Accounting
Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities, addresses the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging
activity. 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 periods
beginning January 1, 2001.
3. Property Acquisitions and Dispositions
The Company acquired two operating properties during 1999, 12
properties during 1998, and 25 properties during 1997 at aggregate costs of
$45.8 million, $348.6 million, and $430.6 million, respectively. The Company
funded these acquisitions with cash proceeds from its public offerings of equity
(see Note 10) and debt (see Note 8), advances on bank lines of credit, the
issuance of limited partnership units in CRLP, the proceeds received from the
formation of joint ventures (see Note 6), the proceeds received from the
issuance of preferred units in CRLP (see Note 9), and cash from operations.
<PAGE>
The properties acquired during 1999, 1998, and 1997 are listed below:
Effective
Acquisition
Location Date
--------------------------------
Multifamily Properties:
Colonial Village at Trussville Birmingham, AL April 1, 1997
Colonial Village at Timothy Woods Athens, GA July 1, 1997
Colonial Grand at Oakleigh Pensacola, FL July 1, 1997
Colonial Grand at Natchez Trace Jackson, MS August 1, 1997
Colonial Village at Caledon Wood Greenville, SC October 1, 1997
Colonial Village at Ashley Plantation Bluffton, SC May 1, 1998
Colonial Village at Haverhill San Antonio, TX July 1, 1998
Colonial Village at Walton Way Augusta, GA July 1, 1998
Colonial Village at River Hills I Tampa, FL July 1, 1998
Office Properties:
Riverchase Center Birmingham, AL January 1, 1997
Lakeside Office Park Huntsville, AL May 23, 1997
Progress Center Huntsville, AL June 24, 1997
Colonial Center at Mansell Overlook Atlanta, GA July 31, 1997
Perimeter Corporate Park Huntsville, AL January 1, 1998
Independence Plaza Birmingham, AL January 1, 1998
Shades Brook Building Birmingham, AL July 1, 1998
Colonial Center 200 Mansell Overlook Atlanta, GA July 1, 1998
Concourse Center Tampa, FL July 1, 1998
Emmett R. Johnson Building Birmingham, AL June 1, 1999
Retail Properties:
Colonial Shoppes Inverness Birmingham, AL March 24, 1997
Colonial Promenade Beechwood Athens, GA March 27, 1997
Brookwood Village Birmingham, AL May 13, 1997
Colonial Promenade Lakewood Jacksonville, FL October 1, 1997
Colonial Mall Glynn Place Brunswick, GA November 1, 1997
Colonial Mall Lakeshore Gainesville, GA November 1, 1997
Colonial Shoppes Yadkin Yadkinville, NC November 1, 1997
Colonial Mall Valdosta Valdosta, GA November 1, 1997
Colonial Mall Burlington Burlington, NC November 1, 1997
Mayberry Mall Mount Airy, NC November 1, 1997
Colonial Shoppes Quaker Village Greensboro, NC November 1, 1997
Colonial Shoppes Stanly Locust, NC November 1, 1997
Rivermont Shopping Center Chattanooga, TN November 1, 1997
Colonial Mall Staunton Staunton, VA November 1, 1997
Colonial Promenade Abingdon Abingdon, VA November 1, 1997
Village at Roswell Summit Atlanta, GA December 31,1997
Orlando Fashion Square Orlando, FL May 29, 1998
Shoppes at Mansell Atlanta, GA July 1, 1998
Colonial Mall Bel Air Mobile, AL December 29,1998
The Plaza Mall Greenville, NC August 1, 1999
In addition to the acquisition of the operating properties mentioned
above, the Company also acquired a parcel of land in October 1999 through the
issuance of 388,898 limited partnership units in CRLP valued at $10.3 million.
Results of operations of these properties, subsequent to their
respective acquisition dates, are included in the consolidated financial
statements of the Company. The cash paid to acquire these properties is included
in the statements of cash flows. The acquisitions during 1999, 1998, and 1997
are comprised of the following:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
--------- --------- ---------
Assets purchased:
<S> <C> <C> <C>
Land, buildings, and equipment $ 56,026 $ 348,564 $ 430,614
Other assets 60 0 4
--------- --------- ---------
56,086 348,564 430,618
Notes and mortgages assumed 0 (7,509) (74,910)
Other liabilities assumed or recorded (660) (5,070) (8,716)
Issuance of limited partnership units
of Colonial Realty Limited Partnership (10,262) (23,400) (45,061)
--------- --------- ---------
Cash paid $ 45,164 $ 312,585 $ 301,931
--------- --------- ---------
</TABLE>
During 1999, Colonial disposed of seven multifamily properties,
representing 2,319 units, which included Colonial Grand at Kirkman, Colonial
Village at Stockbridge, Colonial Grand at Barrington Club, Colonial Grand at
Ponte Vedra, Colonial Village at River Hills, Colonial Grand at Mountain Brook,
and Colonial Village at Cahaba Heights. The properties were sold for a total
purchase price of $119.8 million, of which $15.0 million was used to repay two
secured loans, and the remaining proceeds were used to repay a portion of the
borrowings under the Company's unsecured line of credit, fund additional
acquisitions, and to support the Company's future investment activities.
The Company sold six of these properties to a joint venture formed by
the Company and an unrelated party. The Company will maintain a 15% interest in
the joint venture and serve as manager of the properties. The Company accounts
for its 15% interest in this joint venture as an equity investment (see Note 6).
During 1998, Colonial sold Orlando Fashion Square to a joint venture
equally owned by Colonial and an unrelated party. Proceeds received from this
contribution were used to fund additional acquisitions and developments. The
Company accounts for its 50% interest in this joint venture as an equity
investment (see Note 6).
The Company's unaudited pro forma results of operations, assuming these
acquisitions and dispositions had been effected by the Company prior to January
1, 1998, are as follows:
For the Year For the Year
Ended December Ended December
December 31, 1999 December 31, 1998
(in thousands) (unaudited) (unaudited)
- -------------------------------------------------------------------------------
Revenues $ 279,953 $ 260,382
- -------------------------------------------------------------------------------
Income before minority interest $ 82,355 $ 75,116
- -------------------------------------------------------------------------------
Net income available to common shareholders $ 39,557 $ 42,490
- -------------------------------------------------------------------------------
Net income per share - basic and diluted $ 1.81 $ 1.63
- -------------------------------------------------------------------------------
4. Land, Buildings, and Equipment
Land, buildings, and equipment consists of the following at December
31, 1999 and 1998:
<TABLE>
(in thousands)
1999 1998
----------- -----------
<S> <C> <C>
Buildings $ 1,464,149 $ 1,416,937
Furniture and fixtures 46,108 43,074
Equipment 14,106 12,027
Land improvements 36,631 35,580
Tenant improvements 23,290 18,733
----------- -----------
1,584,284 1,526,351
Accumulated depreciation (206,451) (169,522)
----------- -----------
1,377,833 1,356,829
Land 208,500 210,012
----------- -----------
$ 1,586,333 $ 1,566,841
=========== ===========
</TABLE>
5. Undeveloped Land and Construction in Progress
During 1999 the Company completed the construction of six multifamily
development projects, two office development projects, and one office
redevelopment project at a combined total cost of $112.0 million. The
multifamily development projects produced 1,126 new apartment units that were
completed during 1999 and 1998, and the office development projects produced
279,540 square feet of new office space, which was also completed in 1999 and
1998. The completed development projects are as follows:
<TABLE>
<CAPTION>
Total
Units/ Total
Completed Developments Location Sq. Feet Cost
and Redevelopments: -------------- ------- --------
Multifamily Properties
<S> <C> <C>
Colonial Grand at Citrus Park Tampa, FL 176 $ 12,706
Colonial Grand at Cypress Crossing Orlando, FL 250 21,585
Colonial Grand at Edgewater II Huntsville, AL 192 12,770
Colonial Grand at Inverness Lakes II Mobile, AL 132 8,317
Colonial Grand at Lakewood Ranch Bradenton, FL 288 22,552
Colonial Grand at Wesleyan II Macon, GA 88 6,958
------- --------
1,126 $ 84,888
------- --------
Office Properties
1800 International Park Birmingham, AL 146,128 13,744
Colonial Center at Research Park Huntsville, AL 133,412 11,494
------- --------
279,540 $ 25,238
------- --------
Redevelopment
Colonial Plaza Birmingham, AL 178,617 1,852
--------
Total $111,978
========
</TABLE>
The Company currently has 13 active expansion, development, and
redevelopment projects in progress and various parcels of land available for
expansion, construction, or sale. During 1999 the Company completed construction
on 1,404 apartment units (including the remaining units completed in the
projects mentioned above), and the Company has an additional 1,290 apartment
units in progress at December 31, 1999. Also, the Company has 161,637 and
712,233 square feet of new office and retail space, respectively, in progress at
December 31, 1999. Undeveloped land and construction in progress is comprised of
the following at December 31, 1999:
<PAGE>
<TABLE>
<CAPTION>
Total Costs
Units/ Estimated Capitalized
Square Estimated Total Costs To Date
Feet Completion (in thousands) (in thousands)
----------- ------------ ------------- ------------
Multifamily Projects:
<S> <C> <C> <C> <C>
Colonial Grand at Heather Glen 448 2000 $ 34,171 $ 32,318
Colonial Grand at Liberty Park 300 2001 26,492 20,312
Colonial Grand at Promenade 384 2000 27,189 24,310
Colonial Grand at Madison 336 2000 22,983 21,476
Colonial Grand at Reservoir 170 2000 13,552 10,786
Colonial Village at Ashley Plantation II 214 2000 13,147 12,905
(expansion)
Colonial Village at Walton Way (redevelopment) 256 2000 2,900 2,856
---- -------- --------
Total Multifamily Projects 2,108 140,434 124,963
Office Projects:
Colonial Center 300 at Mansell Overlook 161,637 2001 23,435 9,471
---- -------- --------
Total Office Projects 161,637 23,435 9,471
Retail Projects:
Colonial Promenade at Trussville 388,302 2000 33,300 21,879
Colonial Promenade at Tutwiler Farm 213,111 2000 26,221 11,502
Colonial Promenade Madison 110,820 2000 9,988 2,891
Brookwood Village Mall (redevelopment) 750,754 2001 34,950 1,692
Northdale Court (redevelopment) 192,726 2000 3,166 1,084
---- -------- --------
Total Retail Projects 1,655,713 107,625 39,048
Other Projects and Undeveloped Land 40,561
-------- --------
$271,494 $214,043
======== ========
</TABLE>
Interest capitalized on construction in progress during 1999, 1998, and
1997 was $8.7 million, $3.7 million, and $4.1 million, respectively.
6. Investment in Partially Owned Entities
Investment in partially owned entities at December 31, 1999 and 1998
consists of the following:
<TABLE>
<CAPTION>
(in thousands)
Percent
Owned 1999 1998
--------- --------- --------
Multifamily:
<S> <C> <C> <C>
CMS/Colonial Joint Venture 15.00% $ 2,789 $ 0
Office:
600 Building Partnership, Birmingham, AL 33.33% (16) (30)
Anderson Block Properties Partnership,
Montgomery, AL 33.33% (2) (24)
------- ------
(18) (54)
Retail:
Orlando Fashion Square Joint Venture, Orlando, FL 50.00% 19,777 20,241
Parkway Place Limited Partnership, Huntsville, AL 50.00% 2,035 5,858
------- ------
21,812 26,099
Other:
Colonial/Polar-BEK Management Company,
Birmingham, AL 50.00% 40 33
Colonial Properties Services, Inc.,
Birmingham, AL 99.00% (456) (897)
------- ------
(416) (864)
------- ------
$ 24,167 $ 25,181
======= ======
</TABLE>
During September 1999, the Company entered into a joint venture with
CMS. The CMS/Colonial Joint Venture owns and operates six multifamily properties
consisting of the following properties: Colonial Village at Stockbridge,
Colonial Grand at Barrington Club, Colonial Grand at Ponte Vedra, Colonial
Village at River Hills, Colonial Grand at Mountain Brook, and Colonial Village
at Cahaba Heights. The Company's net investment in the joint venture at December
31, 1999 is $2.8 million. The joint venture is accounted for using the equity
method.
During December 1998, the Company entered into two joint ventures. The
Parkway Place Limited Partnership owns and operates the Parkway City Mall in
Huntsville, Alabama. At December 31, 1999 and 1998, the Company had a net ending
investment of $2.0 million and $5.9 million, respectively. The Orlando Fashion
Square Joint Venture owns and operates the Orlando Fashion Square in Orlando,
Florida. The Company's net ending investment in this joint venture at December
31, 1999 and 1998 is $19.8 million and $20.2 million, respectively. Both joint
ventures are accounted for using the equity method.
The summarized financial information related to the significant joint
ventures is as follows:
December 31,
1999
------------------
Balance Sheet
Assets
Land, building, & equipment, net $ 211,045
Construction in progress 6,399
Other assets 3,855
------------------
Total assets $ 221,299
==================
Liabilities and Partners' Equity
Notes payable $ 150,893
Other liabilities 11,446
Partners' Equity 58,960
------------------
Total liabilities and partners' capital $ 221,299
==================
Statement of Operations
(for the year ended)
Revenues $ 27,207
Operating expenses (12,061)
Interest expense (7,093)
Depreciation and amortization (4,811)
------------------
Net income $ 3,242
==================
7. 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 the same
as those described in the "Summary of Significant Accounting Policies."
Management evaluates the performance of its segments and allocates resources to
them based on net operating income (NOI). NOI consists of revenues in excess of
general operating expenses, salaries and wages, repairs and maintenance, taxes,
licenses, and insurance. Segment information for the years ended December 31,
1999, 1998, and 1997 is as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 Multifamily Office Retail Total
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Divisional revenues $115,724 $ 40,988 $124,845 $ 281,557
NOI 75,929 29,005 90,967 195,901
Divisional assets 768,798 289,288 739,518 1,797,604
1998
- -----------------------------------------------------------------
Divisional revenues $104,462 $ 34,409 $117,572 $ 256,443
NOI 68,789 24,307 83,059 176,155
Divisional assets 783,097 240,161 683,042 1,706,300
1997
- -----------------------------------------------------------------
Divisional revenues $ 95,503 $ 16,224 $ 71,179 $ 182,906
NOI 62,658 11,615 51,500 125,773
Divisional assets 652,923 147,974 577,954 1,378,851
</TABLE>
A reconciliation of total segment revenues to total revenues, total
segment NOI to income from operations, and total divisional assets to total
assets, for the years ended December 31, 1999, 1998, and 1997, is presented
below:
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
Revenues 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Divisional revenues $ 281,557 $ 256,443 $ 182,906
Unallocated corporate revenues 1,007 924 1,220
- -----------------------------------------------------------------------------------------------
Total revenues $ 282,564 $ 257,367 $ 184,126
- -----------------------------------------------------------------------------------------------
NOI 1999 1998 1997
- -----------------------------------------------------------------------------------------------
Total divisional NOI $ 195,901 $ 176,155 $ 125,773
Unallocated corporate revenues 1,007 924 1,220
General and administrative (8,758) (7,675) (6,448)
Depreciation (52,913) (46,841) (31,956)
Amortization (2,272) (1,806) (1,322)
Other 60 (9) -
- -----------------------------------------------------------------------------------------------
Income from operations $ 133,025 $ 120,748 $ 87,267
- -----------------------------------------------------------------------------------------------
Assets 1999 1998 1997
- -----------------------------------------------------------------------------------------------
Total divisional assets $ 1,797,604 $ 1,706,300 $ 1,378,851
Unallocated corporate assets (1) 65,914 49,149 18,227
- -----------------------------------------------------------------------------------------------
Total assets $ 1,863,518 $ 1,755,449 $ 1,397,078
- -----------------------------------------------------------------------------------------------
<FN>
(1) Includes the Company's investment in joint ventures of $24,167 and $25,181
as of December 31, 1999 and 1998, respectively. (see Note 6)
</FN>
</TABLE>
8. Notes and Mortgages Payable
Notes and mortgages payable at December 31, 1999 and 1998 consist of
the following:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---------- --------
<S> <C> <C>
Revolving credit agreement $ 228,337 $174,489
Mortgages and other notes:
3.98% to 6.00% 66,305 66,305
6.01% to 7.50% 517,554 471,694
7.51% to 9.00% 222,785 179,187
9.01% to 10.25% 4,882 17,647
---------- --------
$1,039,863 $909,322
========== ========
</TABLE>
As of December 31, 1999, the Company has an unsecured bank line of
credit providing for total borrowings of up to $250 million. This line of credit
agreement bears interest at LIBOR plus 80 to 135 basis points, is renewable in
July 2000, 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 $125 million under the line of credit to a fixed
rate, for a fixed term not to exceed 90 days. The credit facility is primarily
used by the Company to finance property acquisitions and development and has an
outstanding balance at December 31, 1999, of $228.3 million. The interest rate
of this short-term borrowing facility, including the competitive bid balance, is
7.43% and 6.42% at December 31, 1999 and 1998, respectively.
During 1999 and 1998, the Company completed three public offerings of
unsecured medium term and senior debt securities totaling $257.5 million through
its subsidiary CRLP. The proceeds of the offerings were used to fund
acquisitions, development expenditures, repay balances outstanding on the
Company's revolving credit facility, repay certain notes and mortgages payable,
and for general corporate purposes. Details relating to these debt offerings are
as follows:
<TABLE>
<CAPTION>
Gross
Type of Proceeds
Date Note Maturity Rate (in thousands)
- ----------------- --------------- -------------------------- ----------------
<S> <C> <C> <C> <C>
July, 1998 Senior July, 2007 7.00% $175,000
August, 1999 Medium-term August, 2002 7.93% 57,500
August, 1999 Medium-term August, 2004 8.19% 25,000
</TABLE>
Colonial has entered into an interest rate cap agreement which limits
debt of $50 million to an interest rate of 8.00% through May 2, 2000. The
Company paid $227,500 for the interest rate cap, which is being amortized over
the life of the agreement. On January 4, 1999, Colonial entered into an interest
rate swap for $50 million of its line of credit at 4.97% plus 80 to 135 basis
points, and on January 15, 1999, Colonial entered into an interest rate swap for
$52 million of tax exempt bonds at a rate of 3.23%. Additionally, on May 4,
1999, Colonial entered into an interest rate swap agreement for $25 million of
its line of credit at a rate of 5.07%. All of these interest rate swap
agreements have one-year terms and any payments made or received under the
agreements are recognized as adjustments to interest expense as incurred. On
February 10, 2000, Colonial entered into two reverse interest rate swap
agreements for a total of $50 million of its medium-term notes. Under the terms
of the agreements, Colonial will receive a fixed interest rate of 7.37% and will
be required to pay a floating rate equal to one month LIBOR that is compounded
and paid semi-annually. Both of these agreements have five-year terms, and any
payments made or received under the agreements are recognized as adjustments to
interest expense. Treasury lock agreements are used by CRLP to set interest
rates in anticipation of public debt offerings. Colonial is exposed to credit
losses in the event of nonperformance by the counterparties to its interest rate
cap and nonderivative financial assets but has no off-balance-sheet credit risk
of accounting loss. The Company anticipates, however, that counterparties will
be able to fully satisfy their obligations under the contracts. Colonial does
not obtain collateral or other security to support financial instruments subject
to credit risk but monitors the credit standing of counterparties.
At December 31, 1999, the Company had $839.8 million in unsecured
indebtedness including balances outstanding on its bank line of credit and
certain other notes payable. The remainder of the Company's notes and mortgages
payable are collateralized by the assignment of rents and leases of certain
properties and assets with an aggregate net book value of $266.2 million at
December 31, 1999.
The aggregate maturities of notes and mortgages payable, including the
Company's line of credit at December 31, 1999, are as follows:
(in thousands)
2000 $ 250,662
2001 78,220
2002 74,902
2003 109,259
2004 100,000
Thereafter 426,820
------------------
$ 1,039,863
==================
Based on borrowing rates available to the Company for notes and
mortgages payable with similar terms, the estimated fair value of the Company's
notes and mortgages payable at December 31, 1999 and 1998 was approximately
$1.05 billion and $912.6 million, respectively.
Certain loan agreements of the Company contain restrictive covenants
which, among other things, require maintenance of various financial ratios. At
December 31, 1999, the Company was in compliance with those covenants.
Certain shareholders and trustees of the Company have guaranteed
indebtedness of the Company totaling $1.4 million at December 31, 1999. The
Company has indemnified these individuals from their guarantees of this
indebtedness. Certain partners of CRLP have guaranteed indebtedness of the
Company totaling $26.0 million at December 31, 1999. These individuals have not
been indemnified by the Company.
9. Capital Structure
Company ownership is maintained through common shares of beneficial
interest (Common Shares) and minority interest in the Operating Partnership
(Units). Common shareholders represent public equity owners and common
unitholders represent minority interest owners. Each Unit may be redeemed for
either one Common Share or, at the option of the Company, cash equal to the fair
market value of a Common Share at the time of redemption. When a common
unitholder redeems a Unit for a Common Share or cash, minority interest is
reduced. In addition, the Company has acquired properties since its formation by
issuing distribution paying and non-distribution paying Units. The
non-distribution paying Units convert to distribution paying Units at various
dates subsequent to their original issuance. At December 31, 1999 and 1998,
10,997,794 and 10,613,966 units were outstanding, respectively, all of which
were distribution paying Units.
In November 1997, the Company completed its first public offering of
preferred stock totaling 5,000,000 preferred shares of beneficial interest
(Preferred Shares). The Series A Preferred Shares pay a quarterly dividend at
8.75% per annum and may be called by the Company on or after November 6, 2002.
The Preferred Shares have no stated maturity, sinking fund or mandatory
redemption and are not convertible into any other securities of the Company. The
preferred shares have a liquidation preference of $25.00 per share.
In October 1998, the Company's Board of Trustees approved a Shareholder
Rights Plan (the Rights Plan). Under this plan, the Board declared a dividend of
one Right for each Common Share outstanding on the record date. The Rights
become exercisable only if an individual or group acquires a 15% or more
beneficial ownership in the Company. Ten days after a public announcement that
an individual or group has become the beneficial owner of 15% or more of the
Common Shares, each holder of a Right, other than the acquiring individual or
group, would be entitled to purchase one Common Share for each Right outstanding
at one-half of the Company's current market price. Also, if the Company is
acquired in a merger, or if 50% or more of the Company's assets are sold in one
or more related transactions, each Right would entitle the holder thereof to
purchase common stock of the acquiring company at one-half of the then-current
market price of the acquiring company's common stock.
10. Equity Offerings
During 1999, 1998 and 1997, the Company completed seven public
offerings of common stock totaling 7,975,070 common shares of beneficial
interest and one public offering of preferred stock of 5,000,000 shares. The
proceeds of the offerings were used to fund acquisition and development
expenditures, repay balances outstanding on the Company's revolving credit
agreement, repay certain notes and mortgages payable, and for general corporate
purposes. Details relating to these equity offerings are as follows:
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
------------------------------------------
Type of Number of Price Per Gross Offering Net
Date Offering Shares Share Proceeds Costs Proceeds
- ----------------- --------------- -------------------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January, 1997 Common 1,500,000 $ 29.8750 $ 44,812 $ 1,457 $ 43,355
July, 1997 Common 1,700,000 $ 30.9375 $ 52,594 $ 2,945 $ 49,649
November, 1997 Preferred 5,000,000 $ 25.0000 $ 125,000 $ 4,451 $ 120,549
December, 1997 Common 165,632 $ 30.1875 $ 5,000 $ 330 $ 4,670
February, 1998 Common 375,540 $ 30.0000 $ 11,266 $ 627 $ 10,639
March, 1998 Common 806,452 $ 31.0000 $ 25,000 $ 1,389 $ 23,611
March, 1998 Common 381,046 $ 31.0000 $ 11,812 $ 656 $ 11,156
April, 1998 Common 3,046,400 $ 30.1250 $ 91,773 $ 4,973 $ 86,800
</TABLE>
In February 1999, through CRLP, the Company issued 2.0 million units of
$50 par value 8.875% Series B Cumulative Redeemable Perpetual Preferred Units
(Preferred Units), valued at $100 million in a private placement. CRLP has the
right to redeem the Preferred Units, in whole or in part, after five years at
the cost of the original capital contribution plus the cumulative priority
return, whether or not declared. The Preferred Units are exchangeable for 8.875%
Series B Preferred Shares of the Company after ten years at the option of the
holders of the Preferred Units. The proceeds of the issuance, net of offering
costs of $2.6 million were used to repay balances outstanding on the Company's
revolving credit agreement and to fund development, acquisition, and expansion
expenditures.
<PAGE>
11. Share Option and Restricted Share Plans
In September 1993 the Company adopted an Employee Share Option and
Restricted Share Plan (the Employee Plan) designed to attract, retain, and
motivate executive officers of the Company and other key employees. The Employee
Plan, as amended in April 1998, authorizes the issuance of up to 3,200,000
common shares of beneficial interest (as increased from time to time to equal
10% of the number of common shares and Operating Partnership units outstanding)
pursuant to options or restricted shares granted or issued under this plan,
provided that no more than 750,000 restricted shares may be issued. In
connection with the grant of options under the Employee Plan, the Executive
Compensation Committee of the Board of Trustees determines the option exercise
period and any vesting requirements. In September 1993 the Company also adopted
a Trustee Share Option Plan (the Trustee Plan). The Trustee Plan authorizes the
issuance of up to 125,000 options to purchase common shares of beneficial
interest. In April 1997, the Company increased the number of options to purchase
common shares authorized under the Trustee Plan from 125,000 common shares to
500,000 common shares. In April 1997, the Company also adopted a Non-Employee
Trustee Share Plan (Share Plan). The Share Plan permits non-employee trustees of
the Company to elect to receive common shares in lieu of all or a portion of
their annual trustee fees, board fees and committee fees. The Share Plan
authorizes the issuance of 50,000 common shares under the Plan. The Company
issued 4,914 common shares pursuant to the Share Plan during 1999. In October
1997 the Company adopted an Employee Share Purchase Plan (Purchase Plan). The
Purchase Plan permits eligible employees of the Company, through payroll
deductions, to purchase common shares at a 5% discount to the market price. The
Purchase Plan has no limit on the number of common shares that may be issued
under the plan. The Company issued 1,268 common shares pursuant to the Purchase
Plan during 1999.
The Company applies Accounting Principles Board Opinion 25 (APB 25) and
related Interpretations in accounting for its plans. In accordance with APB 25,
no compensation expense has been recognized for its stock option plans. Had
compensation expense for the Company's stock option plans been determined based
on the fair value at the grant dates for awards under those plans consistent
with the methods prescribed in Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
For the Year Ending December 31,
(in thousands, except per share data)
-----------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
Net income available to common shareholders:
<S> <C> <C> <C>
As reported $44,833 $39,284 $30,277
Pro forma 44,475 $39,117 $30,020
- --------------------------------------------------- -- --------------- --------------- ---------------
Net income per share - basic and diluted:
As reported $1.83 $1.59 $1.53
Pro forma $1.82 $1.59 $1.52
- --------------------------------------------------- -- --------------- --------------- ---------------
</TABLE>
The Company uses the Black-Scholes pricing model to calculate the fair values of
the options awarded, which are included in the pro forma results above. The
following assumptions were used to derive the fair values: a 10-year option
term; an annualized volatility rate of 17.05%, 26.13%, and 15.24% for 1999, 1998
and 1997, respectively; a risk-free rate of return of 6.80%, 4.93%, and 5.86%
for 1999, 1998 and 1997, respectively; and a dividend yield of 9.17%, 7.62%, and
7.11% for 1999, 1998 and 1997, respectively.
The Company issued 24,938, 900, and 8,450 restricted shares under the
Employee Plan during 1999, 1998, and 1997, respectively. The value of
outstanding restricted shares is being charged to compensation expense based
upon the earlier of satisfying the vesting period (2-8 years) or satisfying
certain performance targets.
Option activity under both the Employee Plan and the Trustee Plan
combined is presented in the table below:
<PAGE>
<TABLE>
<CAPTION>
Shares Weighted-
Available average
for future Price per
Option Grant Shares Share
----------------- ------------ -------------
<S> <C> <C> <C>
Balance, December 31, 1996 539,655 260,345 $ 23.540
Addition to shares authorized 375,000
Options granted (119,000) 119,000 $ 31.113
Options terminated 12,255 (12,255) $ 24.781
Options exercised (24,130) $ 23.263
----------------- ------------ -------------
Balance, December 31, 1997 807,910 342,960 $ 26.136
Addition to shares authorized 2,525,000
Options granted (60,000) 60,000 $ 30.294
Options terminated 12,362 (12,362) $ 28.959
Options exercised (15,384) $ 23.359
----------------- ------------ -------------
Balance, December 31, 1998 3,285,272 375,214 $ 26.733
Options granted (250,166) 250,166 $ 27.425
Options terminated 11,503 (11,503) $ 28.219
Options exercised (2,916) $ 24.197
----------------- ------------ -------------
Balance, December 31, 1999 3,046,609 610,961 $ 27.046
================= ============ =============
</TABLE>
All options granted to date have a term of ten years and may be exercised in
equal installments, based on a 3-5 year vesting schedule, of the total number of
options issued to any individual on each of the applicable 3-5 year anniversary
dates of the grant of the option. The balance of options that are exercisable
total 293,667, 213,691, and 132,345 at December 31, 1999, 1998, and 1997,
respectively.
12. Employee Benefits
Employees of the Company and CPSI participate in a noncontributory
defined benefit pension plan designed to cover substantially all employees.
Pension expense includes service and interest costs adjusted by actual earnings
on plan assets and amortization of prior service cost and the transition amount.
The benefits provided by this plan are based on years of service and the
employee's final average compensation. The Company's policy is to fund the
minimum required contribution under ERISA and the Internal Revenue Code.
The table below presents a summary of pension plan status as of
December 31, 1999 and 1998, as it relates to the employees of the Company and
CPSI.
Actuarial assumptions used in determining the actuarial present value
of accumulated benefit obligations at January 1, 1999, are as follows:
<TABLE>
<CAPTION>
(amounts in thousands) 1999 1998
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
including vested benefits of $1,030 and $1,193 $ 1,312 $ 1,368
at December 31, 1999 and 1998, respectively
Actuarial present value of projected benefit obligations
at year end $ 2,538 $ 2,593
Fair value of assets at year end $ 1,030 $ 981
Accrued pension cost $ 1,481 $ 868
Net pension cost for the year $ 613 $ 393
</TABLE>
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Weighted-average interest rate 8.00% 6.75%
- -------------------------------------------------------------------------------
Increase in future compensation levels 4.25% 4.00%
</TABLE>
The Company and CPSI participate in a salary reduction profit sharing
plan covering substantially all employees. This plan provides, with certain
restrictions, that employees may contribute a portion of their earnings with the
Company and CPSI matching one-half of such contributions, solely at the Company
and CPSI's discretion. Contributions by the Company and CPSI were approximately
$275,000, $178,000, and $159,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
<PAGE>
13. Leasing Operations
The Company is in the business of leasing and managing multifamily,
office, and retail property. For properties owned by the Company, minimum
rentals due in future periods under noncancelable operating leases extending
beyond one year at December 31, 1999, are as follows:
(in thousands)
-----------------
2000 $ 119,773
2001 106,511
2002 93,974
2003 78,644
2004 65,065
Thereafter 220,648
-----------------
$ 684,615
=================
The noncancelable leases are with tenants engaged in retail and office
operations in Alabama, Georgia, Florida, North Carolina, South Carolina,
Tennessee, and Virginia. Performance in accordance with the lease terms is in
part dependent upon the economic conditions of the respective areas. No
additional credit risk exposure relating to the leasing arrangements exists
beyond the accounts receivable amounts shown in the December 31, 1999 balance
sheet. Leases with tenants in multifamily properties are generally for one year
or less and are thus excluded from the above table. Substantially all of the
Company's land, buildings, and equipment represent property leased under the
above and other short-term leasing arrangements.
Rental income for 1999, 1998, and 1997 includes percentage rent of $4.7
million,$4.0 million and $2.2 million, respectively. This rental income was
earned when certain retail tenants attained sales volumes specified in their
respective lease agreements.
14. Related Party Transactions
The Company has generally used affiliated construction companies to
manage and oversee its development and expansion projects. The Company paid
$62.8 million, $40.0 million and $41.3 million for property development costs to
Lowder Construction Company, Inc., a construction company owned by The Colonial
Company ("TCC") (an affiliate of certain shareholders, trustees and minority
interest holders), during the years ended December 31, 1999, 1998, and 1997,
respectively. Of these amounts, $58.5 million, $37.3 million, and $39.8 million
was then paid to unaffiliated subcontractors for the construction of these
development and expansion projects during 1999, 1998, and 1997, respectively.
The Company had outstanding construction invoices and retainage payable to
Lowder Construction Company, Inc. totaling $5.7 million and $4.3 million at
December 31, 1999 and 1998, respectively. The Company also paid $21.5 million,
$0.4 million and $5.2 million for property construction costs to a construction
company owned by a trustee during the years ended December 31, 1999, 1998, and
1997, respectively. Of these amounts, $19.4 million, $0.4 million, and $4.7
million was then paid to unaffiliated subcontractors for the construction of
these development projects during 1999, 1998, and 1997, respectively. The
Company had outstanding construction invoices and retainage payable to this
construction company totaling $0.7 million and $1.2 million at December 31, 1999
and 1998, respectively.
Colonial Commercial Investments, Inc. ("CCI"), which is owned by
trustees James K. Lowder and Thomas H. Lowder has guaranteed indebtedness
totaling $1.1 million at December 31, 1999 for Anderson Block Properties, which
is a partnership accounted for by the Company under the equity method (listed in
Note 6). The Company has indemnified CCI from its guarantees of this
indebtedness.
On July 1, 1998, the Company acquired a 79.8% interest in Colonial
Village at Haverhill. Effective May 1999, the Company purchased the remaining
20.2% interest in this property by issuing 157,140 limited partnership units in
Colonial Realty Limited Partnership ("CRLP Units") to the seller. The seller is
a trustee of the Company.
In connection with the Riverchase Center acquisition, the Company
initially acquired a 73% interest in a portion of the office complex. Effective
November 1, 1997, the Company purchased the remaining 27% interest in the
property by issuing 114,798 CRLP Units to the seller. The seller is a trustee of
the Company.
In November 1997, the Company purchased Polar BEK's 50% interest in
Polar BEK/Colonial Partnership I (a partnership previously accounted for under
the equity method of accounting), a partnership which owned a 168,000 square
foot office building in Birmingham for $7.4 million. This purchase increased the
Company's ownership from 50% to 100%.
Following is a summary of property acquisitions from entities for which
trustees of the Company are involved as a partner or shareholder:
<TABLE>
<CAPTION>
Date Property and Land Acquired Purchase Price Units Issued
- ----------------------- ------------------------------------------ ------------------- ----------------------
<S> <C> <C> <C>
May 1999 Colonial Village at Haverhill $4.2 million(1) 157,140 CRLP Units
November 1998 Colonial Center at Research Park $1.0 million 36,647CRLP Units
September 1998 1800 International Park $1.8 million (2)
October 1998 Colonial Grand at Promenade $1.5 million 34,700 CRLP Units
July 1998 Colonial Center 100 at Mansell Overlook $27.7 million 396,365 CRLP Units
July 1998 Shoppes at Mansell $3.7 million 76,809 CRLP Units
March 1997 Colonial Shoppes Inverness $3.0 million 16,303 CRLP Units
April 1997 Colonial Village at Trussville $20.5 million 57,072 CRLP Units
July 1997 Colonial Village at Timothy Woods $12.8 million 27,275 CRLP Units
August 1997 Colonial Grand at Inverness Lakes II $0.5 million 10,822 CRLP Units
November 1997 Riverchase Center $3.4 million 114,798 CRLP Units
December 1997 Village at Roswell Summit $3.0 million 34,777 CRLP Units
<FN>
(1) Represents the remaining 20.2% interest in the property.
(2) In connection with purchase, the Company issued a $1.8 million note payable
to a related entity, which was repaid in 1999.
</FN>
</TABLE>
During 1997 the Company, through CPSI, exercised options to purchase
land from a related party in the amount of $366,000. As of December 31, 1998,
all options to purchase land from a related party had expired. In December 1997,
CPSI acquired a parcel of land from CCI and sold the land, along with an
adjoining parcel of land, to an unaffiliated third party for a net gain of
$60,000. Also in December 1997, CPSI sold a separate parcel of land to CCI,
which resulted in a net gain of $120,000.
The Company and its subsidiaries provide certain services to and
received certain services from related entities, which resulted in the following
income (expense) included in the accompanying statements of income:
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands)
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Rental income $1,460 $1,027 $879
Management/leasing fee income 262 289 368
Insurance brokerage expense (167) (131) (182)
Rental expense 0 0 (156)
</TABLE>
15. 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)
--------------------------------------------- -----------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted net
income per share - net income available
to common shareholders $ 44,833 $ 39,284 $ 30,277
============ =========== ===========
Denominator:
Denominator for basic net income per
share - weighted average common shares 24,493 24,641 19,808
Effect of dilutive securities:
Trustee and employee stock options 15 37 46
------------ ----------- -----------
Denominator for diluted net income per
shares - adjusted weighted average
common shares 24,508 24,678 19,854
============ =========== ===========
Basic and Diluted net income per share $ 1.83 $ 1.59 $ 1.53
============ =========== ===========
</TABLE>
Options to purchase 409,930 Common Shares at a weighted average exercise price
of $28.755 per share were outstanding during 1999 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.
16. Subsequent Events
On January 22, 2000, the Board of Trustees declared a cash distribution
to shareholders of the Company and partners of Colonial Realty Limited
Partnership in the amount of $.60 per share and per partnership unit, totaling
$19.9 million. The distribution was made to shareholders and partners of record
as of January 31, 2000, and was paid on February 7, 2000.
During January 2000, the Company initiated and completed an Executive
Unit Purchase Program (Unit Purchase Program), in which the Board of Trustees
and certain members of the Company's management were able to purchase Units of
CRLP. Under the Unit Purchase Program, the Board of Trustees and the members of
management were able to take out full-recourse personal loans from an unrelated
financial institution, in order to purchase the Units. The Units are pledged as
collateral against the loans. In addition, the Company has provided a guarantee
to the unrelated financial institution for the personal loans. The value of the
Units purchased under the Unit Purchase Program was approximately $10 million.
On February 7, 2000, the Company completed an offering of unsecured
Medium-Term Notes by CRLP for $25.0 million at 8.82%, which mature on February
7, 2005. Additionally, on February 29, 2000 the Company completed an offering of
unsecured Medium-Term Notes by CRLP for $20.0 million at 8.80%, which mature on
February 1, 2010. The Company used the net proceeds from both offerings to repay
a portion of the outstanding balance on its unsecured line of credit.
17. Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 1999 and 1998:
<PAGE>
<TABLE>
<CAPTION>
1999
- -------------------------------------------------------------------------------
(Amounts in thousands, except per share data)
- -------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues $67,459 $69,901 $70,135 $75,069
Income before minority interest 20,025 19,933 20,191 22,909
Minority interest (4,731) (4,406) (4,682) (5,875)
Net income 14,406 13,259 13,290 14,821
Preferred Dividends (2,734) (2,735) (2,735) (2,740)
Net income available to common
shareholders $11,672 $10,524 $10,555 $12,082
Net income per share:
Basic $0.45 $0.42 $0.44 $0.54
Diluted $0.45 $0.41 $0.44 $0.54
Weighted average common
shares outstanding 26,192 25,353 24,027 22,387
</TABLE>
<TABLE>
<CAPTION>
1998
- -------------------------------------------------------------------------------
(Amounts in thousands, except per share data)
- -------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $58,310 $59,583 $68,162 $71,292
Income before minority interest 14,045 16,913 17,201 18,528
Minority interest (4,479) (5,122) (5,125) (4,993)
Net income 9,566 11,791 12,076 13,535
Preferred Dividends (2,734) (2,735) (2,735) (2,734)
Net income available to common
shareholders $6,832 $9,056 $9,341 $10,801
Net income per share:
Basic $0.32 $0.36 $0.36 $0.43
Diluted $0.32 $0.36 $0.36 $0.42
Weighted average common
shares outstanding 21,411 24,984 26,000 26,104
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Colonial Properties Trust
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Colonial Properties
Trust (the "Company") at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principals generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Birmingham, Alabama January 17, 2000, except for Note 16, as to which the date
Exhibit 21.1
Colonial Properties Trust
List of Subsidiaries
Ownership
Colonial Realty Limited Partnership 66.5% GP and LP
Colonial Properties Services
Limited Partnership 99.0% GP and LP
Colonial VRS, L.L.C. 100.0%
Colonial Properties Services, Inc. 100.0% Common Stock (non-voting)
1.0% Common Stock (voting)
99.0% of Equity
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Colonial Properties Trust on Form S-8 related to certain restricted shares and
stock options filed on September 29, 1994; Form S-8 related to the Non-employee
Trustee Share Plan filed on May 15, 1997; Form S-8 related to the Employee Share
Purchase 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-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; and 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, of our
report dated January 17, 2000, except for Note 16, as to which the date is
February 29, 2000, on our audits of the Consolidated Financial Statements and
Financial Statement Schedules of Colonial Properties Trust as of December 31,
1999 and 1998, and for the years ended December 31, 1999, 1998, and 1997, which
report is incorporated by reference in this Form 10-K.
/s/ PricewaterhouseCoopers L.L.P.
PricewaterhouseCoopers L.L.P.
Birmingham, Alabama
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Amounts in thousands
</LEGEND>
<CIK> 0000909111
<NAME> Colonial Properties Trust
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.0
<CASH> 4,640
<SECURITIES> 0
<RECEIVABLES> 10,972
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,792,784
<DEPRECIATION> (206,451)
<TOTAL-ASSETS> 1,863,518
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
50
<COMMON> 263
<OTHER-SE> 493,262
<TOTAL-LIABILITY-AND-EQUITY> 1,863,518
<SALES> 282,564
<TOTAL-REVENUES> 282,564
<CGS> 149,539
<TOTAL-COSTS> 149,539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,211
<INCOME-PRETAX> 83,686
<INCOME-TAX> 0
<INCOME-CONTINUING> 83,686
<DISCONTINUED> 0
<EXTRAORDINARY> (628)
<CHANGES> 0
<NET-INCOME> 44,833
<EPS-BASIC> 1.83
<EPS-DILUTED> 1.83
</TABLE>
