<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended MARCH 31, 1996.
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: 1-12478
IRVINE APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland 33-0698698
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification Number)
550 Newport Center Drive, Suite 300, Newport Beach, California, 92660
(Address of principal executive offices)
(714) 720-5500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter time as required), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date. Common Stock, $0.01 Par
Value - 16,985,000 shares as of May 8, 1996.
<PAGE> 2
IRVINE APARTMENT COMMUNITIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
The Company hereby amends and restates with this Form 10-Q/A its Quarterly
Report for the three months ended March 31, 1996 on Form 10-Q, dated May 13,
1996. The principal changes from the Form 10-Q, dated May 13, 1996 are as
follows:
-- Management's Discussion and Analysis and related Selected Operating Data
have been modified eliminating the presentation of "operating expenses",
"net operating income" and "gross operating margin" and separately
disclosing the significant changes in property expenses and real estate taxes.
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 1
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 2
Consolidated Statements of Changes in Shareholders' Equity
for the three months ended March 31, 1996 and 1995 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Stockholders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1.
Irvine Apartment Communities, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except per March 31, December 31,
share amounts) 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
ASSETS
Real estate assets, at cost
Land $172,974 $163,169
Buildings and improvements 800,922 768,737
- ----------------------------------------------------------------------------
973,896 931,906
Accumulated depreciation (198,699) (192,106)
- ----------------------------------------------------------------------------
775,197 739,800
Under development, including land 48,726 73,727
- ----------------------------------------------------------------------------
823,923 813,527
Cash and cash equivalents 3,080 4,392
Restricted cash 1,185 1,181
Deferred financing costs 22,152 22,814
Other assets 11,422 11,316
- ----------------------------------------------------------------------------
$861,762 $853,230
- ----------------------------------------------------------------------------
LIABILITIES
Mortgages and notes payable
Line of credit $30,000 $22,000
Tax-exempt mortgage bond financings 331,786 332,602
Conventional mortgage financings 136,508 136,960
Mortgage notes payable to The Irvine
Company 51,819 52,011
Tax-exempt assessment district debt 22,452 19,713
- ----------------------------------------------------------------------------
572,565 563,286
Accounts payable and accrued liabilities 23,033 20,254
Security deposits 5,405 5,124
- ----------------------------------------------------------------------------
601,003 588,664
MINORITY INTEREST 107,205 109,133
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per
share; 10,000 shares authorized;
no shares issued or outstanding
Common stock, par value $0.01 per share;
150,000 shares authorized;
16,985 shares and 16,975 shares
issued and outstanding, respectively 170 170
Excess stock, par value $0.01 per share;
160,000 shares authorized;
no shares issued or outstanding
Additional paid-in capital 170,947 170,747
Retained earnings (deficit) (17,563) (15,484)
- ----------------------------------------------------------------------------
153,554 155,433
- ----------------------------------------------------------------------------
$861,762 $853,230
- ----------------------------------------------------------------------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
Page 1
<PAGE> 4
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
(unaudited, in thousands, except per share amounts) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Rental income $36,418 $32,082
Other income 568 466
Interest income 103 36
- ----------------------------------------------------------------------------------
37,089 32,584
- ----------------------------------------------------------------------------------
EXPENSES
Property expenses 7,805 7,492
Real estate taxes 3,369 2,989
Property management fees 1,063 928
Interest expense, net 7,302 6,477
Amortization of deferred financing costs 662 4,075
Depreciation and amortization 6,618 5,387
General and administrative 1,582 1,429
- ----------------------------------------------------------------------------------
28,401 28,777
- ----------------------------------------------------------------------------------
Income before minority interest 8,688 3,807
Minority interest in income 4,741 1,705
- ----------------------------------------------------------------------------------
NET INCOME $3,947 $2,102
- ----------------------------------------------------------------------------------
SHARE DATA:
Weighted average number of shares outstanding 16,977 11,800
Net income per share $0.23 $0.18
Cash dividends declared and paid per share $0.355 $0.340
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
Page 2
<PAGE> 5
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(unaudited, in thousands, except per share Three Months Ended March 31,
amounts) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Balance at beginning of period $170 $118
Stock awards issued
- --------------------------------------------------------------------------------
Balance at end of period $170 $118
- --------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $170,747 $87,345
Stock awards issued 200
- --------------------------------------------------------------------------------
Balance at end of period $170,947 $87,345
- --------------------------------------------------------------------------------
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period ($15,484) ($5,710)
Net income 3,947 2,102
Distributions to shareholders (6,026) (4,012)
- --------------------------------------------------------------------------------
Balance at end of period ($17,563) ($7,620)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $153,554 $79,843
- --------------------------------------------------------------------------------
SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period 16,975 11,800
Stock awards issued 10
- --------------------------------------------------------------------------------
Balance at end of period 16,985 11,800
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
Page 3
<PAGE> 6
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
(unaudited, in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $3,947 $2,102
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred financing costs 662 4,075
Depreciation and amortization 6,618 5,387
Minority interest in income 4,741 1,705
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Restricted cash (4) (67)
Other assets (131) 318
Accounts payable and accrued liabilities 3,268 3,501
Security deposits 281 189
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 19,382 17,210
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real
estate assets (634) (470)
Investment in real estate assets, net of
construction payables (13,193) (30,098)
- --------------------------------------------------------------------------------
Net Cash Used in Investing Activities (13,827) (30,568)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit 26,100 22,567
Payments on line of credit (18,100)
Payments on tax-exempt mortgage bond
financings (816)
Principal payments on mortgage notes
payable and tax-exempt debt (560) (750)
Principal payments on notes payable to The
Irvine Company (192) (181)
Principal payments on assessment district
liens (32) (29)
Distributions to The Irvine Company (7,241) (6,272)
Distributions to shareholders (6,026) (4,012)
- --------------------------------------------------------------------------------
Net Cash (Used in) Provided by Financing
Activities (6,867) 11,323
- --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,312) (2,035)
Cash and Cash Equivalents at Beginning of
Period 4,392 3,468
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,080 $1,433
- --------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized $7,399 $6,299
Tax-exempt assessment district debt assumed $2,771 $4,184
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
Page 4
<PAGE> 7
IRVINE APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Irvine Apartment Communities, Inc. (the "Company") was incorporated in Delaware
on September 10, 1993. On May 2, 1996, the Company changed its state of
incorporation from Delaware to Maryland. The Company operates as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended.
At March 31, 1996 the Company had a 45.4% general partnership interest in and
was the sole managing general partner of Irvine Apartment Communities, L.P.
(the "Operating Partnership") which began operations as of December 8, 1993,
the date of the Company's initial public offering of common stock (the
"Offering"). In connection with the Offering, The Irvine Company (the "Limited
Partner") transferred 42 apartment communities and a 99% interest in a limited
partnership which owned one apartment community to the Operating Partnership.
At March 31, 1996, The Irvine Company had a 54.6% limited partnership interest
in the Operating Partnership. The Operating Partnership's management and
operating decisions are under the unilateral control of the Company.
The Company is a self-administered equity REIT engaged in the operation and
development of apartment communities in Orange County, California. As of March
31, 1996 the Operating Partnership owned and operated the original 43
properties containing 11,334 apartment units, had delivered 1,850 apartment
units from five properties started in 1994 and had two additional apartment
communities under construction (collectively, the "Properties"). Until July
31, 2020, the Company has the exclusive right, but not the obligation, to
acquire land from The Irvine Company for development of additional apartment
communities on the Irvine Ranch.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. These
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K/A for the year ended December 31, 1995.
Certain amounts in the 1995 financial statements have been reclassified to
conform with financial statement presentations in 1995.
NOTE 2 - EQUITY
Shelf Registration Statement: On May 8, 1995 the Company filed a shelf
registration statement with the Securities and Exchange Commission providing
for the issuance from time to time of up to $250 million of common stock,
preferred stock, debt securities, and warrants to purchase common stock,
preferred stock and debt securities. The Company plans to use the proceeds
raised from any securities issued under the shelf registration statement
Page 5
<PAGE> 8
for general corporate purposes, including the development of new apartment
communities and the repayment of existing debt. Subsequent to a follow-on
common stock offering on August 8, 1995, discussed in the Annual Report on Form
10-K/A for the year ended December 31, 1995, availability under the shelf
registration is $160.7 million.
On February 2, 1996 the Company declared a cash dividend of $0.355 per common
share that was paid on February 29, 1996. On April 30, 1996 the Company
declared a cash dividend of $0.355 per common share that is payable on May 31,
1996. During the first quarter of 1995, the Company paid a cash dividend of
$0.34 per common share.
The computation of primary earnings per share is based on a weighted average of
16,977,088 shares of common stock outstanding during the period. The weighted
average number of shares excludes the effect of the conversion of Operating
Partnership units into shares. Such a conversion would increase the weighted
average number of shares outstanding to 37,382,617 for the quarter ended March
31, 1996.
NOTE 3 - CERTAIN TRANSACTIONS WITH RELATED PARTIES
Included in general and administrative expenses are charges from the Limited
Partner pursuant to an administrative service agreement covering services for
risk management, income taxes and other services of $28,000 for the first
quarter of 1996 and $30,000 for the first quarter of 1995. In addition, the
Company incurred rent totaling $59,000 in the first quarter of 1996 and $49,000
in the first quarter of 1995 related to a lease with the Limited Partner that
expires in 1998. In November 1995, a retail space lease was signed with the
Limited Partner for the Company's Apartment Leasing and Information Center.
Rent on that space for the first quarter of 1996 was $14,000.
In the quarter ended March 31, 1996 the Company acquired a land site for the
development of 227 rental units from The Irvine Company, pursuant to the Land
Rights Agreement between the Company and The Irvine Company for approximately
$3.3 million. The Independent Directors Committee approved the purchase in
accordance with the Land Rights Agreement as discussed in the Annual Report on
Form 10-K/A for the year ended December 31, 1995. As partial financing for the
acquisition of the site, the Company elected to assume $2.8 million in
tax-exempt assessment district debt. This debt represents a lien on the
property resulting from debt issued by municipal government authorities to
finance the construction of infrastructure. The debt obligations are repaid
through annual assessments. The balance of the purchase price was paid through
the issuance of 28,358 additional limited partnership units in the Operating
Partnership to The Irvine Company.
One of the Company's directors is chairman of a bank which participates in the
Company's line of credit. Based on this bank's percentage participation in the
credit facility, the Company estimates that the amount of interest and fees
paid to this bank totaled $57,000 and $38,000 in the first quarter of 1996 and
1995, respectively.
Page 6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with all the financial
statements appearing elsewhere in this report, as well as the information
presented in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1995.
CERTAIN INFORMATION SET FORTH BELOW IS FORWARD LOOKING AND INVOLVES VARIOUS
RISKS AND UNCERTAINTIES. SUCH INFORMATION IS BASED UPON A NUMBER OF ESTIMATES
AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO BUSINESS, ECONOMIC AND
COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
COMPANY'S CONTROL.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1995.
The Company's income before minority interest was $8.7 million in the first
quarter of 1996, up from $3.8 million in the first quarter of 1995. The
Company's financial results improved in the first quarter of 1996 due to the
contribution of newly delivered rental units from its development program, as
well as cost reductions in property expenses within its stabilized portfolio.
OPERATING REVENUES increased to $37.0 million in the first quarter of 1996, up
from $32.5 million in the first quarter of 1995. Operating revenues rose in
1996 largely as a result of the contribution of newly delivered rental units
from five properties in their lease-up phase. In total, these new units added
$4.5 million to operating revenues in the first quarter of 1996 compared to
$0.1 million in the first quarter of 1995. Within the Company's stabilized
portfolio, operating revenues increased 0.1% in the first quarter of 1996, as
modest increases in rental rates were largely offset by a decline in average
economic occupancy to 93.4% from 94.5% in the first quarter of 1995. Average
monthly rental rates increased 0.9% to $1,000 in the first quarter of 1996,
from $991 in the first quarter of 1995.
PROPERTY EXPENSES increased to $7.8 million in the first quarter of 1996 from
$7.5 million in the first quarter of 1995. This increase was due to newly
delivered rental units from five lease-up properties. Property expenses in the
stabilized portfolio decreased by $0.3 million from $7.4 million in the first
quarter of 1995 to $7.1 million in 1996. Over the past two years, the Company
has achieved sustained reductions in its property expenses per unit through
aggressive bidding of external service and purchase contracts and a series of
initiatives to enhance the efficiency of customer service and property
maintenance operations. In the first quarter of 1996, average monthly property
expenses per rental unit within the Company's stabilized portfolio property
decreased to $208 from $219 in the first quarter of 1995. Lease-up properties
added $0.7 million to property expenses in 1996 compared to $0.1 million in the
same period of 1995.
REAL ESTATE TAXES totaled $3.4 million in the first quarter of 1996 and $3.0
million in the first quarter of 1995. Taxes
Page 7
<PAGE> 10
increased in 1996 due to the addition of rental units in lease-up properties.
PORTFOLIO REVENUE AND EXPENSE DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
STABILIZED PORTFOLIO
Operating revenues $32,495 $32,460
Property expenses $ 7,071 $ 7,445
Real estate taxes $ 2,823 $ 2,980
Property management fees $ 940 $ 927
Depreciation and amortization $ 5,159 $ 5,348
LEASE-UP PORTFOLIO
Operating revenues $4,491 $88
Property expenses $ 734 $47
Real estate taxes $ 546 $ 9
Property management fees $ 123 $ 1
Depreciation and amortization $1,439 $22
- -----------------------------------------------------------------------------
</TABLE>
NET INTEREST EXPENSE increased to $7.3 million in the first quarter of 1996
from $6.5 million in the first quarter of 1995. The increase was largely due
to a lower level of capitalized interest from decreased construction activity.
The Company capitalizes interest on projects actively under development using
qualifying asset balances and applicable weighted average interest rates. The
average monthly qualifying asset balance for projects under development was
approximately $52.4 million and $77.2 million in the first quarters of 1996 and
1995, respectively. Interest capitalized totaled $1.0 million in 1996 compared
to $1.6 million in the first quarter of 1995. Interest incurred was $8.3
million in the first quarter of 1996 compared to $8.0 million in the first
quarter of 1995 primarily due to higher debt balances.
AMORTIZATION OF DEFERRED FINANCING COSTS decreased to $0.7 million in the first
quarter of 1996 from $4.1 million in the first quarter of 1995. In May 1995,
the Company refinanced all of its tax-exempt mortgage debt and eliminated the
related deferred financing costs through an extraordinary charge of $23.4
million.
DEPRECIATION AND AMORTIZATION EXPENSE increased to $6.6 million in the first
quarter of 1996, up from $5.4 million in the first quarter of 1995. This
increase reflected the completion and delivery of newly developed rental units
from the Company's lease-up properties.
GENERAL AND ADMINISTRATIVE EXPENSE increased to $1.6 million in the first
quarter of 1996, up from $1.4 million in the first quarter of 1995. This
increase was largely the result of increased staffing levels.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash provided by operations will be adequate to meet
both operating requirements and payment of distributions by the Company in
accordance with REIT requirements in both the short and long term.
LIQUIDITY: The Company expects to meet its long-term liquidity requirements,
such as construction, scheduled debt maturities and possible property
acquisitions, through the issuance or refinancing of long-term debt, borrowings
from financial institutions, or the issuance of additional equity securities of
the Company and/or
Page 8
<PAGE> 11
Operating Partnership units. The Operating Partnership has a $175 million
unsecured credit facility. The facility is used primarily to finance an
ongoing rental property development program. As of March 31, 1996, $145
million was available under the credit facility.
SHELF REGISTRATION STATEMENT: On May 8, 1995 the Company filed a shelf
registration statement with the Securities and Exchange Commission providing
for the issuance from time to time of up to $250 million of common stock,
preferred stock, debt securities, and warrants to purchase common stock,
preferred stock and debt securities. The Company plans to use the proceeds
raised from any securities issued under the shelf registration statement for
general corporate purposes, including the development of new apartment
communities and the repayment of existing debt. Subsequent to a follow-on
common stock offering on August 8, 1995, discussed in the Annual Report on Form
10-K/A for the year ended December 31, 1995, availability under the shelf
registration is approximately $160.7 million.
DEBT STRUCTURE AT MARCH 31, 1996
<TABLE>
<CAPTION>
DEBT
BALANCE WEIGHTED AVERAGE
(IN MILLIONS) INTEREST RATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed rate debt
Conventional mortgage financings $136.5 6.45%
Mortgage notes payable to The Irvine Company 51.8 5.75%
Tax-exempt mortgage bond financings 331.8 5.75%
Tax-exempt assessment district debt 6.1 6.86%
- ---------------------------------------------------------------------------------------------------------
Total fixed rate debt 526.2 5.94%
- ---------------------------------------------------------------------------------------------------------
Variable rate debt
Line of credit 30.0 7.24%
Tax-exempt assessment district debt 16.4 3.65%
- ---------------------------------------------------------------------------------------------------------
Total variable rate debt 46.4 5.97%
- ---------------------------------------------------------------------------------------------------------
Total debt $572.6 5.95%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
DEBT: The Company's conventional and tax-exempt mortgage debt bears interest at
fixed interest rates, or variable rates that have been effectively fixed
through interest rate swap agreements. Interest rates on conventional mortgage
debt were reduced to then-current market rates at the time of the Offering in
December 1993 through interest rate buy-down agreements that are scheduled to
expire at various dates prior to loan maturity. A buy-down agreement relating
to $13.1 million of conventional mortgage debt expired on January 1, 1996, when
the fixed rate increased from 5.29% to 7.75%. The weighted average effective
interest rate on the Company's debt, including the non-cash charges of
amortization of deferred financing costs, was 6.41% at March 31, 1996.
OPERATING ACTIVITIES: Cash flow provided by operating activities was $19.4
million for the first quarter of 1996 and $17.2 for the first quarter of 1995.
Cash provided by operating activities increased in 1996 primarily due to higher
revenues.
INVESTING ACTIVITIES: Cash flow used in investing activities was $13.8 million
and $30.6 million for the first quarters of 1996 and 1995, respectively. This
decrease resulted from a reduction in development activity as
Page 9
<PAGE> 12
construction on five apartment communities begun in 1994 neared completion (see
Capital Expenditures below.)
FINANCING ACTIVITIES: Cash flow (used in) provided by financing activities was
($6.9) million and $11.3 million in the first quarters of 1996 and 1995,
respectively. Net borrowings from lines of credit decreased to $8.0 million in
1996 from $22.6 million in 1995.
CAPITAL EXPENDITURES
CAPITAL REPLACEMENTS ON STABILIZED PROPERTIES: Expenditures for capital
replacements on stabilized properties totaled $0.6 million and $0.5 million in
the first quarters of 1996 and 1995, respectively. Average capital
replacements per unit for stabilized properties were $54 and $41 per unit in
the first quarter of 1996 and 1995, respectively. Expenditures for capital
replacements during the remainder of 1996 are expected to be similar to 1995
levels. The Company has a policy of capitalizing expenditures related to new
assets, acquisitions, the material enhancement of the value of an existing
asset, or the substantial extension of an existing asset's useful life.
Capital replacements for the quarter ended March 31, 1996 were as follows:
<TABLE>
<CAPTION>
TOTAL
THREE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS) PER UNIT
- ------------------------------------------------------------------------------
<S> <C> <C>
Carpet replacements $256 $23
Exterior painting, siding and stucco 4 0
Upgrades, renovations and major building items 103 9
Appliances, water heaters and air conditioning 126 11
Roofing, concrete and pavement 11 1
Equipment and other 115 10
- ------------------------------------------------------------------------------
Total $615 $54
- ------------------------------------------------------------------------------
</TABLE>
CAPITAL EXPENDITURES ON NEW DEVELOPMENT: The Company's major cash requirements
in the next twelve months are expected to be for the construction of new
apartment communities. At March 31, 1996, $202.4 million of capital
expenditures had been incurred on apartment communities the Company began
constructing in 1994. The remaining $4.1 million will be incurred by December
31, 1996. The Company began construction on one apartment community in 1995
and one in the first quarter of 1996. These two apartment communities will
require total expenditures of approximately $58.4 million, of which $14.3
million had been incurred at March 31, 1996. The Company plans to start three
additional communities in 1996. Initial funding for these developments is
expected to come from the Company's $175 million unsecured revolving credit
facility.
Page 10
<PAGE> 13
LEASE-UP INFORMATION
Status at March 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
TOTAL UNITS PERCENTAGE UNITS OF DELIVERED UNITS OF DELIVERED
APARTMENT COMMUNITY UNITS DELIVERED DELIVERED OCCUPIED UNITS OCCUPIED LEASED UNITS LEASED
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Villa Coronado 513 483 94% 396 82% 414 86%
Santa Rosa 368 368 100% 299 81% 319 87%
Santa Clara 378 378 100% 279 74% 293 78%
Rancho Monterey 436 323 74% 234 72% 260 80%
Newport Ridge 512 298 58% 234 79% 291 98%
- -------------------------------------------------------------------------------------------------------------------------
Total 2,207 1,850 84% 1,442 78% 1,577 85%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONSTRUCTION INFORMATION
Status at March 31, 1996
<TABLE>
<CAPTION>
ESTIMATED TOTAL
COMMENCEMENT INITIAL ESTIMATED
APARTMENT COMMENCEMENT OF LEASING STABILIZED COSTS
COMMUNITY VILLAGE, CITY UNITS OF CONSTRUCTION ACTIVITY OCCUPANCY (IN MILLIONS)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Villa Coronado Westpark I, Irvine 513 6/94 12/94 2Q '96 $44.2
Santa Rosa Westpark II, Irvine 368 6/94 2/95 2Q '96 31.2
Santa Clara Westpark II, Irvine 378 9/94 3/95 3Q '96 35.2
Rancho Monterey Tustin Ranch, Tustin 436 9/94 5/95 4Q '96 41.1
Newport Ridge Newport Ridge,
Unincorporated 512 12/94 7/95 4Q '96 54.8
Baypointe Newport North,
Newport Beach 300 11/95 1Q '97 4Q '97 33.4
Santa Maria Westpark II, Irvine 227 3/96 1Q '97 4Q '97 25.0
- --------------------------------------------------------------------------------------------------------------------------
Total 2,734 $264.9
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PROJECTED 1996 STARTS
Status at March 31, 1996
<TABLE>
<CAPTION>
Total
Estimated Estimated
Estimated Commencement Costs
Apartment Community Village, City Units of Construction (in millions)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Colony Newport Center, Newport Beach 245 2Q '96 $42
Santa Rosa II Westpark II, Irvine 210 4Q '96 26
Rancho Santa Fe Tustin Ranch, Tustin 350 4Q '96 39
- -------------------------------------------------------------------------------------------------------------
Total 805 $107
- -------------------------------------------------------------------------------------------------------------
</TABLE>
THE TIMING OF COMMENCEMENT AND COMPLETION OF CONSTRUCTION AND INITIAL
STABILIZED OCCUPANCY, NUMBER OF UNITS, AND ESTIMATED COSTS OF APARTMENT
COMMUNITIES THAT ARE IN DEVELOPMENT OR ARE EXPECTED TO BE DEVELOPED ARE ONLY
ESTIMATES. ACTUAL RESULTS WILL DEPEND ON NUMEROUS FACTORS, MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY.
Page 11
<PAGE> 14
THESE INCLUDE THE EXTENT AND TIMING OF ECONOMIC GROWTH IN THE COMPANY'S RENTAL
MARKETS; FUTURE TRENDS IN THE PRICING OF CONSTRUCTION MATERIALS AND LABOR;
ENTITLEMENT DECISIONS BY LOCAL GOVERNMENT AUTHORITIES; AND CHANGES IN INTEREST
RATE LEVELS. NO ASSURANCE CAN BE GIVEN THAT THE TIMING, NUMBER OF UNITS, OR
ESTIMATES SET FORTH IN THE FOREGOING TABLES WILL NOT VARY SUBSTANTIALLY FROM
ACTUAL RESULTS. THE COMPANY HAS MADE NO COMMITMENTS TO BUILD THE PROJECTED
ADDITIONAL 1996 CONSTRUCTION STARTS AND NO ASSURANCE CAN BE MADE THAT SUCH
PROPERTIES WILL BE ACQUIRED OR BUILT.
IMPACT OF INFLATION
The Company's business is affected by general economic conditions, including
the impact of inflation and interest rates. Substantially all of the company's
leases allow, at time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek increases in rents.
Substantially all leases are for a period of one year or less. The short-term
nature of these leases generally serves to minimize the risk to the Company of
the adverse effects of inflation. For construction, the Company has entered
into various contracts for the development and construction of new apartment
communities. These are fixed-fee contracts and thus partially insulate the
Company from inflationary risk.
FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO") as a useful measure of
performance of an equity REIT. The Company computes FFO in accordance with
standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"). FFO is defined as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization of
real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures. Other REIT's may not use this definition of FFO. FFO should
be examined in conjunction with net income as presented in the Company's
consolidated financial statements and footnotes thereto. FFO should not be
considered an alternative to net income as an indication of the Company's
performance and is not indicative of cash available to fund all cash flow
needs. FFO does not represent cash flows from operating, investing or
financing activities as defined by generally accepted accounting principles.
Page 12
<PAGE> 15
CALCULATION OF FFO AND RECONCILIATION TO THE "OLD" DEFINITION OF FFO (a)
(unaudited, in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net income $3,947 $2,102
Minority interest 4,741 1,705
Depreciation and amortization of real estate assets 6,602 5,375
- ---------------------------------------------------------------------------------------
FFO (a) 15,290 9,182
- ---------------------------------------------------------------------------------------
Amortization of deferred financing costs related to
adjustment of interest rates to market at IPO:
Tax-exempt debt 0 3,069
Conventional debt 527 594
Amortization of loan origination and other costs 135 412
Depreciation and amortization of non-real estate assets 16 12
- ---------------------------------------------------------------------------------------
678 4,087
- ---------------------------------------------------------------------------------------
"OLD" FFO (a) $15,968 $13,269
- ---------------------------------------------------------------------------------------
Average shares outstanding (b) 37,383 30,363
=======================================================================================
</TABLE>
Footnotes:
(a) Funds from Operations (FFO) is calculated according to the new NAREIT
definition which the company adopted in 1996. "Old" FFO assumes a
calculation methodology used by NAREIT through 1995.
(b) Assumes conversion into common stock of Operating Partnership units.
SUPPLEMENTAL INFORMATION
The following section provides supplemental operating information. The
information is unaudited and is provided as a supplement to the accompanying
financial statements and management's discussion and analysis. It should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Annual Report on Form 10-K/A for the year ended December
31, 1995. Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
Page 13
<PAGE> 16
IRVINE APARTMENT COMMUNITIES, INC.
SELECTED OPERATING DATA
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------
UNIT DATA
- ----------------------------------------------------------------------------
Average rentable units during the period 13,028 11,385
Rentable units at the end of the period 13,184 11,479
Average units in stabilized properties during
the period 11,334 11,334
- -----------------------------------------------------------------------------
STABILIZED COMMUNITIES - FINANCIAL DATA (a)
- -----------------------------------------------------------------------------
Average physical occupancy 94.3% 95.1%
Average economic occupancy (rental revenue
divided by gross scheduled rent (b)) 93.4% 94.5%
Average monthly gross scheduled rent per unit $1,000 $991
Rental and other income - in thousands $32,495 $32,460
- -----------------------------------------------------------------------------
LEASE-UP COMMUNITIES - FINANCIAL DATA
- -----------------------------------------------------------------------------
Rental and other income - in thousands $4,491 $88
Units delivered in the period 408 121
Cumulative units delivered at the end of the period 1,850 145
Units occupied at the end of the period 1,442 47
Average units occupied during the period 1,303 26
- -----------------------------------------------------------------------------
</TABLE>
Footnotes:
(a) Financial results are for stabilized communities which include 43
properties totaling 11,334 units for comparable periods of 1996 and
1995.
(b) Gross scheduled rent represents rental revenue plus vacant units at
market rent.
Page 14
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGE IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any reports on Form 8-K
during the three months ended March 31, 1996.
Page 15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IRVINE APARTMENT COMMUNITIES, INC.
Date: February 11, 1997 By: /s/ JAMES E. MEAD
---------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer
and Secretary
By: /s/ SHAWN HOWIE
---------------------------
Shawn Howie
Vice President and Controller
(Principal Accounting Officer)
Page 16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IRVINE APARTMENT COMMUNITIES, INC. FOR THE QUARTER
ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,080
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 973,896
<DEPRECIATION> 198,699
<TOTAL-ASSETS> 861,762
<CURRENT-LIABILITIES> 0
<BONDS> 572,565
0
0
<COMMON> 170
<OTHER-SE> 153,384
<TOTAL-LIABILITY-AND-EQUITY> 861,762
<SALES> 0
<TOTAL-REVENUES> 37,089
<CGS> 0
<TOTAL-COSTS> 12,237
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,302
<INCOME-PRETAX> 8,688
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,947
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
