<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Period Ended SEPTEMBER 30, 1998.
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.)
0-22569 (Irvine Apartment Communities, L.P.)
1-13721 (IAC Capital Trust)
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
IAC CAPITAL TRUST
----------------------------------------------------------
(Exact Name of Registrants as Specified in Their Charters)
Maryland 33-0698698
Delaware 33-0587829
Delaware 91-6452946
------------------------ ---------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
550 Newport Center Drive, Suite 300, Newport Beach, California 92660
--------------------------------------------------------------------
(Address of principal executive offices)
(949) 720-5500
----------------------------------------------------
(Registrants' 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 registrants (1) have 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) have been subject to such filing requirements for the past 90 days.
Irvine Apartment Communities, Inc.: Yes [X] No [ ]
Irvine Apartment Communities, L.P.: Yes [X] No [ ]
IAC Capital Trust: 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. Irvine Apartment
Communities, Inc.: common stock, $0.01 Par Value -- 20,129,873 shares as of
October 31, 1998; Irvine Apartment Communities, L.P.: units of common
partnership interest -- 45,156,808 units as of October 31, 1998.
================================================================================
<PAGE> 2
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements -- Irvine Apartment Communities, Inc.
-- Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 1
-- Consolidated Statements of Operations for the three and nine months ended
September 30, 1998 and 1997 2
-- Consolidated Statements of Changes in Shareholders' Equity for
the nine months ended September 30, 1998 and 1997 3
-- Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 4
Financial Statements -- Irvine Apartment Communities, L.P.
- Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 5
-- Consolidated Statements of Operations for the three and nine months ended
September 30, 1998 and 1997 6
-- Consolidated Statements of Changes in Partners' Capital for the
nine months ended September 30, 1998 and 1997 7
-- Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 8
Financial Statements -- IAC Capital Trust
-- Balance Sheet as of September 30, 1998 9
-- Statements of Operations and Equity for the three months ended
September 30, 1998 and for the period January 20, 1998 (commencement of
operations) to September 30, 1998 10
-- Statement of Cash Flows for the period January 20, 1998 (commencement
of operations) to September 30, 1998 11
Notes to Consolidated Financial Statements 12 to 17
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18 to 30
Item 3. Quantitative and Qualitative Disclosures About Market Risk 31
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART II OTHER INFORMATION
Item 1. Legal Proceedings 31
Item 2. Changes in Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 32
SIGNATURES 33
</TABLE>
<PAGE> 4
ITEM 1.
Irvine Apartment Communities, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands, except per share amounts) 1998 1997
------------- -------------
<S> <C> <C>
ASSETS (unaudited)
Real estate assets, at cost
Land $ 234,912 $ 208,687
Buildings and improvements 1,120,955 1,015,696
------------- -------------
1,355,867 1,224,383
Accumulated depreciation (272,698) (248,245)
------------- -------------
1,083,169 976,138
Under development, including land 196,646 148,424
------------- -------------
1,279,815 1,124,562
Cash and cash equivalents 6,012 4,624
Restricted cash 1,636 1,464
Deferred financing costs, net 12,510 19,079
Other assets 20,793 13,948
------------- -------------
$ 1,320,766 $ 1,163,677
============= =============
LIABILITIES
Mortgages and notes payable
Tax-exempt mortgage bond financings $ 325,644
Conventional mortgage financings $ 130,240 132,256
Mortgage notes payable to The Irvine Company 49,742 50,397
Tax-exempt assessment district debt 21,455 21,544
Unsecured tax-exempt bond financings 334,190
Unsecured notes payable 99,265 99,222
Unsecured line of credit 101,000 75,000
------------- -------------
735,892 704,063
Accounts payable and accrued liabilities 43,792 30,689
Security deposits 9,319 7,698
------------- -------------
789,003 742,450
MINORITY INTEREST - REDEEMABLE PREFERRED INTEREST OF SUBSIDIARY 144,082
MINORITY INTEREST 189,649 210,307
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;
20,130 shares and 19,901 shares issued and outstanding, respectively 201 199
Excess stock, par value $0.01 per share; 160,000 shares authorized;
no shares issued or outstanding
Additional paid-in capital 241,594 235,487
Accumulated deficit (43,763) (24,766)
------------- -------------
198,032 210,920
------------- -------------
$ 1,320,766 $ 1,163,677
============= =============
</TABLE>
Note: The balance sheet at December 31, 1997 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> 5
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
--------------------------------- --------------------------------
(unaudited, in thousands, except per share amounts) 1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 155,778 $ 133,114 $ 54,663 $ 47,673
Other income 4,401 3,093 1,753 1,152
Interest income 1,234 659 121 88
------------- ------------- ------------- -------------
161,413 136,866 56,537 48,913
------------- ------------- ------------- -------------
EXPENSES
Property expenses 36,003 32,599 12,090 11,592
Real estate taxes 12,629 10,959 4,471 4,029
Interest expense, net 20,530 21,949 7,118 8,560
Amortization of deferred financing costs 1,435 1,882 479 586
Depreciation and amortization 24,879 21,700 8,578 7,966
General and administrative 6,559 4,822 2,232 1,834
------------- ------------- ------------- -------------
102,035 93,911 34,968 34,567
------------- ------------- ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM, REDEEMABLE PREFERRED
INTEREST AND MINORITY INTEREST IN INCOME 59,378 42,955 21,569 14,346
Extraordinary item related to debt extinguishment (42,451)
------------- ------------- ------------- -------------
INCOME BEFORE REDEEMABLE PREFERRED INTEREST AND
MINORITY INTEREST IN INCOME 16,927 42,955 21,569 14,346
Redeemable preferred interest 8,628 3,094
Minority interest in income 4,617 23,556 10,249 7,867
------------- ------------- ------------- -------------
NET INCOME $ 3,682 $ 19,399 $ 8,226 $ 6,479
============= ============= ============= =============
EARNINGS PER SHARE:
Basic $ 0.18 $ 0.99 $ 0.41 $ 0.33
Diluted $ 0.18 $ 0.99 $ 0.41 $ 0.33
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 20,005 19,578 20,078 19,831
Diluted 20,099 19,680 20,152 19,935
============= ============= ============= =============
</TABLE>
See accompanying notes.
Page 2
<PAGE> 6
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
(unaudited, in thousands, except per share amounts) 1998 1997
------------- -------------
<S> <C> <C>
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Balance at beginning of period $ 199 $ 186
Common stock offering 11
Dividend reinvestment and additional cash investment plan and
stock options exercised 2 1
------------- -------------
Balance at end of period $ 201 $ 198
============= =============
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $ 235,487 $ 202,116
Net proceeds from dividend reinvestment and additional cash investment plan 5,340 450
Proceeds from stock options exercised 527 2,406
Stock awards issued 240 241
Net proceeds from common stock offering 29,589
------------- -------------
Balance at end of period $ 241,594 $ 234,802
============= =============
ACCUMULATED DEFICIT
Balance at beginning of period $ (24,766) $ (22,285)
Net income 3,682 19,399
Distributions to shareholders (22,679) (21,429)
------------- -------------
Balance at end of period $ (43,763) $ (24,315)
============= =============
TOTAL SHAREHOLDERS' EQUITY $ 198,032 $ 210,685
============= =============
SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period 19,901 18,556
Additional shares issued under the dividend reinvestment and additional cash investment plan 191 17
Stock options exercised 30 147
Stock awards issued 8 9
Additional shares issued under common stock offering 1,150
------------- -------------
Balance at end of period 20,130 19,879
============= =============
</TABLE>
See accompanying notes.
Page 3
<PAGE> 7
Irvine Apartment Communities, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
(unaudited, in thousands) 1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,682 $ 19,399
Adjustments to reconcile net income to net cash provided by operating activities:
Write-off of deferred financing costs 8,314
Amortization of deferred financing costs 1,435 1,882
Depreciation and amortization 24,879 21,700
Minority interest in income 4,617 23,556
Redeemable preferred interest 8,628
Increase (decrease) in cash attributable to changes in assets and
liabilities:
Restricted cash (172) (58)
Other assets (7,224) (4,050)
Accounts payable and accrued liabilities 13,333 5,612
Security deposits 1,621 1,391
------------- -------------
Net Cash Provided by Operating Activities 59,113 69,432
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets (3,572) (3,199)
Capital investments in real estate assets (176,081) (202,608)
------------- -------------
Net Cash Used in Investing Activities (179,653) (205,807)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under unsecured line of credit 144,000 153,000
Payments on unsecured line of credit (118,000) (34,000)
Proceeds from unsecured tax-exempt bond financings 334,190
Payments on tax-exempt mortgage bond financings (325,644) (2,679)
Principal payments (2,760) (2,559)
Additions to deferred financing costs (3,180) (417)
Net proceeds from issuance of redeemable preferred interest 144,035
Net proceeds from dividend reinvestment and additional cash investment plan 8,389 1,020
Proceeds from stock options exercised 527 2,406
Contributions from The Irvine Company 36,333
Net proceeds from common stock offering 29,969
Distributions to redeemable preferred interest holders (8,628)
Distributions to The Irvine Company and certain of its affiliates (27,891) (26,018)
Distributions to other common limited partners (431) (83)
Distributions to shareholders (22,679) (21,429)
------------- -------------
Net Cash Provided by Financing Activities 121,928 135,543
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,388 (832)
Cash and Cash Equivalents at Beginning of Period 4,624 3,205
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,012 $ 2,373
============= =============
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized $ 15,405 $ 21,348
============= =============
</TABLE>
See accompanying notes.
Page 4
<PAGE> 8
Irvine Apartment Communities, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands) 1998 1997
------------- -------------
<S> <C> <C>
ASSETS (unaudited)
Real estate assets, at cost
Land $ 234,912 $ 208,687
Buildings and improvements 1,120,955 1,015,696
------------- -------------
1,355,867 1,224,383
Accumulated depreciation (272,698) (248,245)
------------- -------------
1,083,169 976,138
Under development, including land 196,646 148,424
------------- -------------
1,279,815 1,124,562
Cash and cash equivalents 6,012 4,624
Restricted cash 1,636 1,464
Deferred financing costs, net 12,510 19,079
Other assets 20,793 13,948
------------- -------------
$ 1,320,766 $ 1,163,677
============= =============
LIABILITIES
Mortgages and notes payable
Tax-exempt mortgage bond financings $ 325,644
Conventional mortgage financings $ 130,240 132,256
Mortgage notes payable to The Irvine Company 49,742 50,397
Tax-exempt assessment district debt 21,455 21,544
Unsecured tax-exempt bond financings 334,190
Unsecured notes payable 99,265 99,222
Unsecured line of credit 101,000 75,000
------------- -------------
735,892 704,063
Accounts payable and accrued liabilities 43,792 30,689
Security deposits 9,319 7,698
------------- -------------
789,003 742,450
REDEEMABLE PREFERRED LIMITED PARTNER UNITS
Redeemable series A preferred limited partner units,
6,000 partnership units outstanding at September 30, 1998 144,082
PARTNERS' CAPITAL
General partner, 20,130 common partnership units
at September 30, 1998 and 19,901 at December 31, 1997 198,032 210,920
Common limited partners, 25,027 common partnership units
at September 30, 1998 and 24,919 at December 31, 1997 189,649 210,307
------------- -------------
387,681 421,227
------------- -------------
$ 1,320,766 $ 1,163,677
============= =============
</TABLE>
Note: The balance sheet at December 31, 1997 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 5
<PAGE> 9
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
----------------------------- ----------------------------
(unaudited, in thousands, except per unit amounts) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 155,778 $ 133,114 $ 54,663 $ 47,673
Other income 4,401 3,093 1,753 1,152
Interest income 1,234 659 121 88
--------- --------- --------- ---------
161,413 136,866 56,537 48,913
--------- --------- --------- ---------
EXPENSES
Property expenses 36,003 32,599 12,090 11,592
Real estate taxes 12,629 10,959 4,471 4,029
Interest expense, net 20,530 21,949 7,118 8,560
Amortization of deferred financing costs 1,435 1,882 479 586
Depreciation and amortization 24,879 21,700 8,578 7,966
General and administrative 6,559 4,822 2,232 1,834
--------- --------- --------- ---------
102,035 93,911 34,968 34,567
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM AND REDEEMABLE
PREFERRED INTEREST 59,378 42,955 21,569 14,346
Extraordinary item related to debt extinguishment (42,451)
--------- --------- --------- ---------
INCOME BEFORE REDEEMABLE PREFERRED INTEREST 16,927 42,955 21,569 14,346
Redeemable preferred interest 8,628 3,094
--------- --------- --------- ---------
NET INCOME $ 8,299 $ 42,955 $ 18,475 $ 14,346
========= ========= ========= =========
ALLOCATION OF NET INCOME:
General Partner $ 3,682 $ 19,399 $ 8,226 $ 6,479
Common Limited Partners $ 4,617 $ 23,556 $ 10,249 $ 7,867
========= ========= ========= =========
EARNINGS PER COMMON UNIT:
Basic $ 0.18 $ 0.99 $ 0.41 $ 0.33
Diluted $ 0.18 $ 0.99 $ 0.41 $ 0.33
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING:
Basic 44,971 43,350 45,079 43,920
Diluted 45,065 43,452 45,153 44,034
========= ========= ========= =========
</TABLE>
See accompanying notes.
Page 6
<PAGE> 10
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Irvine Apartment Limited
(unaudited, in thousands) Communities, Inc. Partners Total
---------------- ------------- -------------
<S> <C> <C> <C>
PARTNERS' CAPITAL
Balance at January 1, 1997 $ 180,017 $ 140,327 $ 320,344
Net income 19,399 23,556 42,955
Contributions 32,698 47,286 79,984
Distributions (21,429) (26,101) (47,530)
------------- ------------- -------------
Balance at September 30, 1997 $ 210,685 $ 185,068 $ 395,753
============= ============= =============
Balance at January 1, 1998 $ 210,920 $ 210,307 $ 421,227
Net income 3,682 4,617 8,299
Contributions 6,109 3,047 9,156
Distributions (22,679) (28,322) (51,001)
------------- ------------- -------------
Balance at September 30, 1998 $ 198,032 $ 189,649 $ 387,681
============= ============= =============
COMMON PARTNERSHIP UNITS OUTSTANDING
Balance at January 1, 1997 18,556 22,292 40,848
Additional common partnership units issued 1,323 1,802 3,125
------------- ------------- -------------
Balance at September 30, 1997 19,879 24,094 43,973
============= ============= =============
Balance at January 1, 1998 19,901 24,919 44,820
Additional common partnership units issued 229 108 337
------------- ------------- -------------
Balance at September 30, 1998 20,130 25,027 45,157
============= ============= =============
</TABLE>
See accompanying notes.
Page 7
<PAGE> 11
Irvine Apartment Communities, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
(unaudited, in thousands) 1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,299 $ 42,955
Adjustments to reconcile net income to net cash provided by operating activities:
Write-off of deferred financing costs 8,314
Amortization of deferred financing costs 1,435 1,882
Depreciation and amortization 24,879 21,700
Redeemable preferred interest 8,628
Increase (decrease) in cash attributable to changes in assets and liabilities:
Restricted cash (172) (58)
Other assets (7,224) (4,050)
Accounts payable and accrued liabilities 13,333 5,612
Security deposits 1,621 1,391
------------- -------------
Net Cash Provided by Operating Activities 59,113 69,432
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets (3,572) (3,199)
Capital investments in real estate assets (176,081) (202,608)
------------- -------------
Net Cash Used in Investing Activities (179,653) (205,807)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under unsecured line of credit 144,000 153,000
Payments on unsecured line of credit (118,000) (34,000)
Proceeds from unsecured tax-exempt bond financings 334,190
Payments on tax-exempt mortgage bond financings (325,644) (2,679)
Principal payments (2,760) (2,559)
Additions to deferred financing costs (3,180) (417)
Net proceeds from issuance of redeemable preferred limited partner units 144,035
Distributions to redeemable preferred limited partner unit holders (8,628)
Contributions from partners 8,916 69,728
Distributions to partners (51,001) (47,530)
------------- -------------
Net Cash Provided by Financing Activities 121,928 135,543
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,388 (832)
Cash and Cash Equivalents at Beginning of Period 4,624 3,205
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,012 $ 2,373
============= =============
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized $ 15,405 $ 21,348
============= =============
</TABLE>
See accompanying notes.
Page 8
<PAGE> 12
IAC Capital Trust
BALANCE SHEET
September 30, 1998
<TABLE>
<S> <C>
(unaudited, dollars in thousands)
ASSETS
Cash $ 5
Investment in Subsidiary 150,000
--------
$150,005
========
LIABILITIES AND EQUITY
Redeemable Preferred Securities, 25,000,000 securities authorized
Redeemable Series A Preferred Securities, 6,900,000 securities authorized,
6,000,000 securities issued and outstanding $150,000
Equity
Common Securities, 20,000 securities authorized, 200 securities issued and outstanding 5
--------
$150,005
========
</TABLE>
See accompanying notes.
Page 9
<PAGE> 13
IAC Capital Trust
STATEMENTS OF OPERATIONS AND EQUITY
<TABLE>
<CAPTION>
For the Period Three
January 20, 1998 Months
(commencement of Ended
operations) September 30,
(unaudited, in thousands, except per security amounts) to September 30, 1998 1998
--------------------- -------------
<S> <C> <C>
REVENUE
Income from investment in subsidiary $ 8,628 $ 3,094
------------- -------------
INCOME BEFORE REDEEMABLE PREFERRED INTEREST 8,628 3,094
Redeemable preferred interest 8,628 3,094
------------- -------------
NET INCOME $ -- $ --
============= =============
EARNINGS PER SECURITY:
Basic and diluted $ 0.00 $ 0.00
============= =============
Equity - beginning of period $ 5
Issuance of common securities $ 5
Net income 0 0
------------- -------------
EQUITY - END OF PERIOD $ 5 $ 5
============= =============
</TABLE>
See accompanying notes.
Page 10
<PAGE> 14
IAC Capital Trust
STATEMENT OF CASH FLOWS
For the Period January 20, 1998
(commencement of operations) to September 30, 1998
<TABLE>
<CAPTION>
(unaudited, in thousands)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ --
Adjustments to reconcile net income to net cash provided by operating activities:
Redeemable preferred interest 8,628
-------------
Net Cash Provided by Operating Activities 8,628
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary (150,000)
-------------
Net Cash Used in Investing Activities (150,000)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common securities 5
Proceeds from issuance of redeemable preferred securities 150,000
Distributions to preferred securities holders (8,628)
-------------
Net Cash Provided by Financing Activities 141,377
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5
Cash and Cash Equivalents at Inception --
-------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5
=============
</TABLE>
See accompanying notes.
Page 11
<PAGE> 15
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION
Irvine Apartment Communities, Inc., a Maryland corporation (the "Company"),
operates as a real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended. In connection with the Company's initial public
offering of common stock (the "Offering"), the Company obtained a general
partnership interest in and became the sole managing general partner of Irvine
Apartment Communities, L.P., a Delaware limited partnership (the "Operating
Partnership"). The Operating Partnership was formed on November 15, 1993 and
began operations as of December 8, 1993, the date of the Offering. In connection
with the Offering, The Irvine Company transferred 42 apartment communities and a
99% interest in a limited partnership which owns one apartment community to the
Operating Partnership. At September 30, 1998, the Company had a 44.6% general
partnership interest in and was the sole managing general partner of the
Operating Partnership. At September 30, 1998, the common limited partners had a
55.4% common limited partnership interest in the Operating Partnership, with The
Irvine Company and certain of its affiliates owning a 55.2% common limited
partnership interest in the Operating Partnership. On February 4, 1997, the
Operating Partnership acquired the assets of Thompson Residential Company, Inc.
The purchase price was paid by the issuance of 74,523 common limited partnership
units in the Operating Partnership. At September 30, 1998, Thompson Residential
Company, Inc. had a 0.2% common 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 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 is a self-administered equity REIT engaged in the operation and
development (through the Operating Partnership) of apartment communities in
Orange County, California and, beginning in 1997, other locations in California.
As of September 30, 1998, the Operating Partnership owned 62 apartment
communities representing 16,029 apartment units and 2,729 units under
development (collectively, the "Properties"). The Operating Partnership broke
ground on its first apartment community outside of the Irvine Ranch, located in
Northern California's Silicon Valley, in May 1997. On June 30, 1997, the
Operating Partnership acquired a 923-unit apartment community in the La Jolla
region of north San Diego County. In March 1998, the Operating Partnership and
Western National Property Management announced the formation of a strategic
alliance that, in April 1998, assumed all property management responsibilities
for the Operating Partnership's Southern California portfolio. The new entity,
Irvine Apartment Management Company ("IAMC"), is owned 51% by the Operating
Partnership and 49% by Western National Property Management. Until July 31,
2020, the Operating Partnership 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.
IAC Capital Trust, a Delaware business trust (the "Trust"), was formed on
October 31, 1997. The Trust is a limited purpose financing vehicle established
by the Company and the Operating Partnership. The Trust exists for the sole
purpose of issuing preferred securities and investing the proceeds thereof in
preferred limited partner units of the Operating Partnership.
Page 12
<PAGE> 16
Certain amounts in the 1997 financial statements have been reclassified to
conform with financial statement presentations in 1998.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements of the Company include the consolidated
accounts of the Operating Partnership and its financially controlled
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. The Trust's investment in subsidiary relates to the redeemable
series A preferred limited partner units in the Operating Partnership. The Trust
has less than a controlling interest and accounts for its investment in
subsidiary using the equity method.
Profits and losses of the Operating Partnership are generally allocated to the
Company and to the common limited partners based upon their respective ownership
interests in the Operating Partnership. The holders of the redeemable preferred
limited partner units and redeemable preferred securities are entitled to
dividends at an annual rate of 8 1/4% of the stated value per unit/security. The
stated value of each unit/security is $25. Under the terms of the partnership
agreement, all costs incurred by the Company relating to the ownership of its
interest in and operation of the Operating Partnership, including the
compensation of its officers and employees, stock incentive plans, director fees
and the costs and expenses of being a public company, are paid by the Operating
Partnership. In addition, The Irvine Company generally has the right, but not
the obligation, to match on the same terms and conditions any capital
contributions made by the Company and the Operating Partnership based on the pro
rata ownership interest at the time of such contribution.
The preparation of the 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 as of
September 30, 1998 and December 31, 1997, and the revenues and expenses for the
three and nine months ended September 30, 1998 and 1997. Actual results could
differ from those estimates.
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. All such adjustments are
of a normal, recurring nature. Operating results for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998. These financial statements
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto included in the Company's and the Operating Partnership's Annual
Report on Form 10-K for the year ended December 31, 1997.
NOTE 3 -- MORTGAGES AND NOTES PAYABLE
Unsecured Tax-Exempt Bond Financings: In June 1998, the Operating Partnership
completed a $334 million offering of unsecured tax-exempt debt at an average
interest rate of 4.93% in three tranches ranging from 10 to 15 years. Proceeds
from the offering were used to repay the Operating Partnership's existing
tax-exempt mortgage debt and to pay costs associated with prepayment penalties
and the unwinding of certain swap agreements. The Company recorded an
extraordinary item related to debt extinguishment of $42.5 million in June 1998
which represents a loss to earnings of $0.94 per share for the nine months ended
September 30, 1998.
Page 13
<PAGE> 17
Unsecured Line of Credit: The Operating Partnership has a $250 million unsecured
revolving credit facility that was amended in July 1998. The amended credit
facility currently bears interest at LIBOR plus 0.65% or prime and matures in
June 2001. The interest rates under the credit facility are adjusted up or down
based on credit ratings on the Operating Partnership's senior unsecured
long-term indebtedness. Under the credit facility, the Operating Partnership is
able to borrow funds from the participating banks through a competitive bid
process to obtain a lower interest rate. The Operating Partnership may also
enter into letters of credit under the facility. Borrowings under the credit
facility, which are guaranteed by the Company, are available to finance the
Operating Partnership's ongoing rental property development, possible
acquisitions and for general working capital needs. The Company and the
Operating Partnership must comply with certain affirmative and negative
covenants, including limitations on distributions, and the maintenance of
certain net worth, cash flow and financial ratios. At September 30, 1998, the
Company and the Operating Partnership were in compliance with all of these
covenants. In August 1998, the Company entered into letters of credit under the
facility totaling $10 million related to the Park Place purchase (see "Capital
Investments in New Development"). The letters of credit reduced the remaining
amount available under the line of credit by $10 million. As of September 30,
1998, $101 million was outstanding under the line of credit and $139 million was
available under the credit facility.
Shelf Registration Statements: On May 14, 1997, the Company filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of common stock, preferred
stock, and warrants to purchase common stock and preferred stock. The Company
plans to use the proceeds raised from any securities issued under its shelf
registration statement for general corporate purposes, including the development
of new apartment communities, acquisitions and the repayment of existing debt.
Availability under the Company's shelf registration statement was $350 million
at September 30, 1998. Concurrently, the Operating Partnership filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of debt securities. The
Operating Partnership plans to use the proceeds raised from any securities
issued under its shelf registration statement for general corporate purposes,
including the development of new apartment communities, acquisitions and the
repayment of existing debt. On October 1, 1997, the Operating Partnership issued
$100 million aggregate principal amount of 7% senior unsecured notes (the
"Notes") pursuant to its shelf registration statement. Availability under the
Operating Partnership's shelf registration statement was $250 million at
September 30, 1998.
$250 Million Medium-Term Notes: The Operating Partnership, pursuant to a
Prospectus Supplement dated April 9, 1998, may issue from time to time up to
$250 million aggregate initial offering price of its Medium-Term Notes, Series A
due nine months or more from the date of issue. Issuances of Medium-Term Notes
will reduce availability under the Operating Partnership's Registration
Statement by the amount of Medium-Term Notes issued. Similarly, issuances of
other debt securities under the Operating Partnership's Registration Statement
will reduce the amount of Medium-Term Notes that may be issued. As of September
30, 1998, there have been no issuances of Medium-Term Notes.
NOTE 4 -- MINORITY INTEREST; SHAREHOLDERS' EQUITY; AND PARTNERS' CAPITAL
On February 20, 1997, the Company sold, in a public offering, 1.15 million
shares of common stock at $27.50 per share. Concurrently, The Irvine Company,
pursuant to its rights under the partnership agreement, purchased 1.39 million
additional common limited partnership units at $26.06 per unit (which is equal
to the public offering price of the common stock less an amount equivalent to
the underwriting discount) which are exchangeable for common stock on a one for
one basis, subject to adjustment and certain limitations. The proceeds from the
two transactions totaled $66 million and were used to repay all indebtedness
then outstanding under the credit facility, and for general corporate purposes,
including ongoing development activities on and off the Irvine Ranch.
Page 14
<PAGE> 18
The Company and the Operating Partnership each paid cash distributions of $0.375
per share (or common partnership unit) on February 28 and May 28, 1998, and
$0.385 per share (or common partnership unit) on August 28, 1998. The Operating
Partnership and the Trust paid cash distributions of $0.42, $0.52, and $0.52 per
preferred limited partner unit (or preferred security) on March 31, 1998, June
30, 1998, and September 30, 1998, respectively. During each of the first and
second quarters of 1997, the Company and the Operating Partnership each paid a
cash dividend of $0.365 per share (or common partnership unit). During the third
quarter of 1997, the Company and the Operating Partnership each paid a cash
dividend of $0.375 per share (or partnership unit).
RECONCILIATION OF COMMON PARTNERSHIP UNITS OUTSTANDING
<TABLE>
<CAPTION>
(in thousands, except percentages) Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
--------------------------------------- ----------------------------------------
The Irvine The Irvine
Company Company
and and
certain certain
of its of its
Company affiliates Other Total Company affiliates Other Total
------- ---------- ----- ------ ------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period 19,901 24,844 75 44,820 18,556 22,292 40,848
Stock awards issued and options
exercised 38 38 156 156
Dividend reinvestment and
additional cash investment plan 191 108 299 17 20 37
Common stock offering and related
cash contribution from The
Irvine Company 1,150 1,394 2,544
Acquisition of Thompson 75 75
Residential assets
Contributions of property by
The Irvine Company and certain
of its affiliates 313 313
------ ------- -- ------ ------ ------ -- ------
Balance at end of period 20,130 24,952 75 45,157 19,879 24,019 75 43,973
------ ------ -- ------ ------ ------ -- ------
Ownership interest at end of
period 44.6% 55.2% 0.2% 100% 45.2% 54.6% 0.2% 100%
====== ====== === ====== ====== ====== === ======
</TABLE>
The following tables represent a reconciliation of the minority interest
balances and the computation of the minority interest in income.
RECONCILIATION OF MINORITY INTEREST
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
(in thousands) 1998 1997
------------- -------------
<S> <C> <C>
Balance at beginning of period $ 210,307 $ 140,327
Minority interest in income 4,617 23,556
Distributions (28,322) (26,101)
Cash contributions from The Irvine Company 36,333
Contributions of property by The Irvine Company and
certain of its affiliates 8,408
Acquisition of Thompson Residential assets 2,000
Contributions under dividend reinvestment and
additional cash investment plan 3,047 545
------------- -------------
Balance at end of period $ 189,649 $ 185,068
============= =============
</TABLE>
Page 15
<PAGE> 19
COMPUTATION OF MINORITY INTEREST IN INCOME
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
-------------------------------- --------------------------------
(in thousands) 1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income before minority interest $ 8,299 $ 42,955 $ 18,475 $ 14,346
Income allocated to the Company based
on its ownership interest (3,682) (19,399) (8,226) (6,479)
------------- ------------- ------------- -------------
Minority interest in income $ 4,617 $ 23,556 $ 10,249 $ 7,867
============= ============= ============= =============
</TABLE>
NOTE 5 -- ACQUISITION OF THOMPSON RESIDENTIAL ASSETS
On February 4, 1997, the Operating Partnership acquired for $2 million the
assets of Thompson Residential Company, Inc. ("TRC"), a privately held, Northern
California-based multi-family development company. Included in the purchase were
options to purchase three development sites located in Northern California's
Silicon Valley. The purchase price was paid by the issuance of 74,523 common
limited partnership units in the Operating Partnership, exchangeable for common
stock of the Company, with a price per unit of $26.838 which was based on the
average closing price of the Company's common stock for the 10 trading days
preceding the acquisition's closing date. In addition, TRC may be paid up to an
additional $2 million in cash or common limited partnership units if the
apartment community currently under development (The Hamptons) achieves certain
performance targets. The three senior real estate executives at TRC have also
joined the Company with primary responsibility for the Company's operations
outside of the Irvine Ranch.
NOTE 6 -- ACQUISITION OF THE VILLAS OF RENAISSANCE
On June 30, 1997 the Operating Partnership acquired a 923-unit apartment
community located in the La Jolla region of North San Diego County from an
unrelated third party for $127.0 million. $118.0 million of the purchase price
was funded by borrowings under the Operating Partnership's $250 million
unsecured credit facility (see Note 3) and $9.0 million was funded from cash on
hand. A more detailed description of the transaction is described in the
Company's Current Report on Form 8-K filed with the Securities Exchange
Commission on July 15, 1997, as amended on July 23, 1997.
NOTE 7 -- CERTAIN TRANSACTIONS WITH RELATED PARTIES
Substantially all costs incurred by the Company are borne by the Operating
Partnership. Included in general and administrative expenses are charges from
The Irvine Company pursuant to an administrative services agreement covering
services for risk management, income taxes, human resources and other services
of $142,000 and $95,000 for the nine months ended September 30, 1998 and 1997,
respectively, and $42,000 and $28,000 for the three months ended September 30,
1998 and 1997, respectively. The Irvine Company and the Company jointly purchase
employee health care insurance and property and casualty insurance. The Company
incurred rent totaling $366,000 and $264,000 for the nine months ended September
30, 1998 and 1997, respectively, and $123,000 and $92,000 for the three months
ended September 30, 1998 and 1997, respectively, related to a lease with The
Irvine Company that expires at the end of 2003. IAMC incurred rent totaling
$103,000 for the six months ended September 30, 1998, and $51,000 for the three
months ended September 30, 1998, related to a lease with The Irvine Company. For
the nine months ended September 30, 1998 and 1997, The Irvine Company
contributed $3,763,000 and $568,000, respectively, in connection with common
limited partnership unit and stock issuances under the dividend reinvestment and
additional cash investment plan.
Page 16
<PAGE> 20
On February 10, 1997, the Operating Partnership acquired a land site for $8.4
million from The Irvine Company for the development of 316 rental units pursuant
to the Land Rights Agreement between the Operating Partnership and The Irvine
Company. The Company's board committee of independent directors approved the
purchase in accordance with the Land Rights Agreement. The purchase price was
paid through the issuance of 313,439 additional common limited partnership units
in the Operating Partnership to The Irvine Company. Pursuant to the terms of the
acquisition, a portion of the common limited partnership units in the Operating
Partnership are subject to forfeiture if the apartment community developed on
the site does not achieve a 10% unleveraged return on costs for the first twelve
months following stabilized occupancy.
On October 21, 1997, the Operating Partnership acquired a land site for $5.7
million from The Irvine Company for the development of 196 rental units pursuant
to the Land Rights Agreement. The Company's board committee of independent
directors approved the purchase in accordance with the Land Rights Agreements.
The purchase price was paid through the issuance of 179,433 additional limited
partnership units in the Operating Partnership to The Irvine Company. Pursuant
to the terms of the acquisition, a portion of the limited partnership units in
the Operating Partnership are subject to forfeiture if the apartment community
developed on the site does not achieve a 10% unleveraged return on costs for the
first twelve months following stabilized occupancy.
Concurrent with the Company's common stock offering on February 20, 1997 (see
Note 4), The Irvine Company, pursuant to its rights under the partnership
agreement, purchased 1.39 million common limited partnership units at a price
equal to the public offering price of $26.06 per unit (which is equal to the
public offering price of the common stock less an amount equivalent to the
underwriting discount) which are exchangeable for common stock on a one for one
basis, subject to adjustment and certain limitations.
One of the Company's directors is president and chief executive officer of a
bank which participates in the Company's credit facility and acts as trustee for
the Notes. Based on the bank's percentage participation in the credit facility,
the Company estimates that the amount of interest and fees paid to the bank
totaled $214,000 and $113,000 in the first nine months of 1998 and the three
months ended September 30, 1998, respectively. Interest and fees for the
corresponding periods in 1997 were $271,000 and $195,000, respectively.
NOTE 8 -- SUBSEQUENT EVENT
On November 2, 1998, the Company terminated all of its outstanding treasury rate
lock agreements. These agreements were to hedge a planned debt offering and
locked into a treasury rate of 5.67% for $100 million. The debt offering has
been deferred beyond the December 15, 1998 expiration of the treasury locks. The
cost of terminating these agreements will reduce the Company's fourth quarter
net income by approximately $7.8 million.
On November 12, 1998, the Operating Partnership completed a $50 million private
placement of preferred limited partner units at 8.75%. The net proceeds will be
used to reduce the outstanding balance on the Operating Partnership's unsecured
credit facility and to fund the Company's ongoing development program.
Page 17
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion compares the activities of the Company for the three
and nine month periods ended September 30, 1998 (unaudited) with the activities
of the Company for the three and nine month periods ended September 30, 1997
(unaudited). As used in this Item 2, unless the context otherwise requires, the
term "Company" includes Irvine Apartment Communities, Inc. and the Operating
Partnership (Irvine Apartment Communities, L.P.). IAC Capital Trust (the
"Trust") is a limited purpose financing vehicle established by the Company and
exists for the sole purpose of issuing preferred securities and investing the
proceeds thereof in preferred limited partnership units of the Operating
Partnership.
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 for the year ended
December 31, 1997.
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 inherently are subject to business, economic and
competitive uncertainties and contingencies, many of which are beyond the
Company's control.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997.
The Company's income after payment of redeemable preferred interest but before
minority interest in income was $18.5 million for the three months ended
September 30, 1998, up from $14.3 million for the same period of 1997. The
Company's financial results improved in 1998 due to the contribution of newly
delivered rental units from its development program, properties that stabilized
during 1997, an increase in rental rates within its stabilized portfolio, and a
slight increase in physical occupancy partially offset by an increase in
redeemable preferred interest due to the issuance of preferred securities by the
Trust in January 1998.
Page 18
<PAGE> 22
REVENUE AND EXPENSE DATA
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------
(dollars in thousands) 1998 1997
------------- -------------
<S> <C> <C>
COMMUNITIES STABILIZED BEFORE 1997(a)
Number of communities 48 48
Number of units at end of period 13,541 13,541
Operating revenues $ 45,938 $ 43,422
Property expenses $ 9,931 $ 10,417
Real estate taxes $ 3,487 $ 3,473
Depreciation and amortization of real estate assets $ 6,484 $ 6,569
COMMUNITIES STABILIZED IN 1997(b)(c)
Number of communities 2
Number of units at end of period 527
Operating revenues $ 2,362
Property expenses $ 417
Real estate taxes $ 202
Depreciation and amortization of real estate assets $ 429
LEASE-UP AND NEWLY ACQUIRED COMMUNITIES(c)(d)
Number of communities 6
Number of units at end of period 1,961
Operating revenues $ 8,116
Property expenses $ 1,742
Real estate taxes $ 782
Depreciation and amortization of real estate assets $ 1,520
</TABLE>
- -------------
(a) Represents "same store" communities.
(b) Represents two communities (Baypointe and Santa Maria) that reached
stabilized occupancy (95%) at different dates in 1997.
(c) No year over year comparison is provided since the properties were not
all stabilized for comparable periods of 1997.
(d) Represents an apartment community acquired on June 30, 1997, one
community that became stabilized in June 1998 and four communities in
lease-up at September 30, 1998.
OPERATING REVENUES (rental and other income) increased by 15.5% to $56.4 million
in the third quarter of 1998, up from $48.8 million in the same period of 1997.
Operating revenues rose in 1998 because of higher rental rates and a larger
average number of rental units in service as a result of new development. Newly
delivered and acquired units and communities stabilized in 1997 added $10.5
million to operating revenues from eight properties in the third quarter of
1998, compared to $5.5 million from three properties in the same period of 1997.
Operating revenues generated by communities stabilized before 1997 increased
5.8% in the third quarter of 1998 due to an improvement in the average monthly
rental rate and a slight increase in average physical occupancy to 94.1% from
93.8%. The average monthly rental rate for these communities increased 4.6% to
$1,171 in the third quarter of 1998, from $1,119 in the third quarter of 1997.
PROPERTY EXPENSES increased by 4.3% to $12.1 million in the third quarter of
1998, up from $11.6 million in the same period of 1997. The 1998 increase
reflects incremental expenses from the newly delivered and acquired rental units
and communities stabilized in 1997. Property expenses for communities stabilized
before 1997 decreased by $0.5 million to $9.9 million in the third quarter of
1998. Average monthly property expenses generated by these communities decreased
to $244 per unit in the third quarter of 1998 from $256 per unit in the third
quarter of 1997. Newly delivered and acquired units and communities stabilized
in 1997 added $2.2 million to property expenses from eight properties in the
third quarter of 1998 compared to $1.2 million from three properties in the same
period of 1997. In order to improve operating efficiency and reduce operating
costs, the Company formed a 51% owned
Page 19
<PAGE> 23
subsidiary in April 1998, Irvine Apartment Management Company (IAMC), to manage
the Company's properties. Accordingly, the personnel and office costs of IAMC
are included in property expenses. For comparative purposes, prior period
management fees have been included in property expenses.
REAL ESTATE TAXES totaled $4.5 million in the third quarter of 1998 and $4.0
million in the same period of 1997. Real estate taxes increased in the third
quarter of 1998 due primarily to the addition of new rental units.
NET INTEREST EXPENSE decreased to $7.1 million in the third quarter of 1998
compared to $8.6 million in the same period of 1997. Total interest incurred was
$10.2 million in the third quarter of 1998 and $9.8 million in the same period
of 1997. Total interest incurred increased due to the impact of the Company's
unsecured notes payable which were outstanding for the entire quarter partially
offset by lower interest rates in 1998. Net interest expense declined because
the Company's increased level of development resulted in a higher level of
capitalized interest. The Company capitalizes interest on projects actively
under development using qualifying asset balances and applicable weighted
average interest rates. Capitalized interest totaled $3.1 million in the third
quarter of 1998 and $1.2 million in the same period of 1997.
AMORTIZATION OF DEFERRED FINANCING COSTS decreased to $479,000 in the third
quarter of 1998 compared to $586,000 in the same period of 1997. The $107,000
decrease in the third quarter of 1998 was due to the full amortization of
certain loan costs during the prior year and the lower amount of deferred
financing costs associated with the unsecured tax-exempt bond financings.
DEPRECIATION AND AMORTIZATION EXPENSE increased 7.7% to $8.6 million in the
third quarter of 1998, up from $8.0 million in the same period of 1997. The
increase reflects the completion and delivery of newly developed rental units.
GENERAL AND ADMINISTRATIVE EXPENSE increased to $2.2 million in the third
quarter of 1998, up from $1.8 million in the same period of 1997. The increase
was largely the result of increased salary expenses due to a new chief executive
officer and project abandonment expenses.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
The Company's income after payment of redeemable preferred interest but before
extraordinary item and minority interest in income was $50.8 million for the
nine months ended September 30, 1998, up from $43.0 million for the same period
of 1997. The Company's financial results improved in 1998 due to the
contribution of newly delivered rental units from its development program, an
acquisition, properties that stabilized during 1997, and an increase in rental
rates within its stabilized portfolio, partially offset by a decrease in
physical occupancy and an increase in redeemable preferred interest due to the
issuance of preferred securities by the Trust in January 1998.
Page 20
<PAGE> 24
REVENUE AND EXPENSE DATA
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
(dollars in thousands) 1998 1997
------------- -------------
<S> <C> <C>
COMMUNITIES STABILIZED BEFORE 1997(a)
Number of communities 48 48
Number of units at end of period 13,541 13,541
Operating revenues $ 134,612 $ 128,165
Property expenses $ 30,606 $ 30,845
Real estate taxes $ 10,349 $ 10,224
Depreciation and amortization of real estate assets $ 19,569 $ 19,741
COMMUNITIES STABILIZED IN 1997(b)(c)
Number of communities 2
Number of units at end of period 527
Operating revenues $ 6,809
Property expenses $ 1,145
Real estate taxes $ 488
Depreciation and amortization of real estate assets $ 1,291
LEASE-UP AND NEWLY ACQUIRED COMMUNITIES(c)(d)
Number of communities 6
Number of units at end of period 1,961
Operating revenues $ 18,758
Property expenses $ 4,252
Real estate taxes $ 1,792
Depreciation and amortization of real estate assets $ 3,606
</TABLE>
- -------------
(a) Represents "same store" communities.
(b) Represents two communities (Baypointe and Santa Maria) that reached
stabilized occupancy (95%) at different dates in 1997.
(c) No year over year comparison is provided since the properties were not
all stabilized for comparable periods of 1997.
(d) Represents an apartment community acquired on June 30, 1997, one
community that became stabilized in June 1998 and four communities in
lease-up at September 30, 1998.
OPERATING REVENUES (rental and other income) increased by 17.6% to $160.2
million in the first nine months of 1998, up from $136.2 million in the same
period of 1997. Operating revenues rose in 1998 because of higher rental rates
and a larger average number of rental units in service as a result of both new
development and an acquisition in June 1997. Newly delivered and acquired units
and communities stabilized in 1997 added $25.6 million to operating revenues
from eight properties in the first nine months of 1998, compared to $8.0 million
from three properties in the same period of 1997. Operating revenues generated
by communities stabilized before 1997 increased 5.0% in the first nine months of
1998 due to an improvement in the average monthly rental rate, partially offset
by a decrease in average physical occupancy to 94.1% from 94.5%. The average
monthly rental rate for these communities increased 5.3% to $1,155 in the first
nine months of 1998, from $1,097 in the first nine months of 1997.
PROPERTY EXPENSES increased by 10.4% to $36.0 million in the first nine months
of 1998, up from $32.6 million in the same period of 1997. The 1998 increase
reflects incremental expenses from the newly delivered and acquired rental units
and communities stabilized in 1997. Property expenses for communities stabilized
before 1997 decreased by $0.2 million to $30.6 million in the first nine months
of 1998. Average monthly property expenses generated by these communities
decreased to $251 per unit in the first nine months of 1998 from $253 per unit
in the same period of 1997. Newly delivered and acquired units and communities
stabilized in 1997 added $5.4 million to property expenses from eight properties
in the first nine months of 1998 compared to $1.8 million from three properties
in the same period of 1997. In order to improve operating efficiency and reduce
operating costs, the Company formed a 51% owned subsidiary in April 1998, IAMC,
to manage the Company's properties. Accordingly, the personnel and
Page 21
<PAGE> 25
office costs of IAMC are included in property expenses. For comparative
purposes, prior period management fees have been included in property expenses.
REAL ESTATE TAXES totaled $12.6 million in the first nine months of 1998 and
$11.0 million in the same period of 1997. Real estate taxes increased in the
first nine months of 1998 due primarily to the addition of new rental units.
NET INTEREST EXPENSE decreased to $20.5 million in the third quarter of 1998
compared to $21.9 million in the same period of 1997. Total interest incurred
was $29.4 million in the first nine months of 1998 and $25.6 million in the same
period of 1997. The increase in interest incurred in the first nine months of
1998 was primarily due to the unsecured notes payable which were outstanding for
the entire period partially offset by lower interest rates in 1998. Net interest
expense declined because the Company's increased level of development resulted
in a higher level of capitalized interest. The Company capitalizes interest on
projects actively under development using qualifying asset balances and
applicable weighted average interest rates. Capitalized interest totaled $8.9
million in the first nine months of 1998 and $3.7 million in the same period of
1997.
AMORTIZATION OF DEFERRED FINANCING COSTS decreased to $1.4 million in the first
nine months of 1998 compared to $1.9 million in the same period of 1997. The
$447,000 decrease in the first nine months of 1998 was due to the full
amortization of certain loan costs during the prior year and the lower amount of
deferred financing costs associated with the unsecured tax-exempt bond
financings.
DEPRECIATION AND AMORTIZATION EXPENSE increased 14.6% to $24.9 million in the
first nine months of 1998, up from $21.7 million in the same period of 1997. The
increase reflects the completion and delivery of newly developed rental units.
The 1998 amount also reflects six more months of depreciation associated with
the newly acquired property.
GENERAL AND ADMINISTRATIVE EXPENSE increased to $6.6 million in the first nine
months of 1998, up from $4.8 million in the same period of 1997. The increase
was largely the result of increased salary expenses due to a new chief executive
officer, project abandonment expenses and increased staff levels necessitated by
the Company's growth.
EXTRAORDINARY ITEM of $42.5 million in the first nine months of 1998 represents
charges associated with the Operating Partnership's June 1998 debt refinancing
transaction. The charges consisted of the write-off of deferred financing costs,
prepayment costs and costs relating to the unwinding of certain swap agreements.
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 costs, scheduled debt maturities and potential future
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, partnership units by the Operating Partnership or
preferred securities by the Trust. The Operating Partnership has a $250 million
unsecured revolving credit facility that was amended in July 1998. The amended
credit facility currently bears interest at LIBOR plus 0.65% or prime and
matures in June 2001. The interest rates under the credit facility are adjusted
up or down based on the credit ratings on the Operating Partnership's senior
unsecured long-term indebtedness. In January 1998, all outstanding borrowings
under the credit facility were repaid from the proceeds of the offering by
Page 22
<PAGE> 26
the Trust of its 8 1/4% Series A REIT Trust Originated Preferred Securities (the
"8 1/4% Series A Preferred Securities"). Availability under the credit facility
was $139 million (see Note 3) at September 30, 1998.
SHELF REGISTRATION STATEMENTS: On May 14, 1997, the Company filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of common stock, preferred
stock, and warrants to purchase common stock and preferred stock. The Company
plans to use the proceeds raised from any securities issued under its shelf
registration statement for general corporate purposes, including the development
of new apartment communities, acquisitions and the repayment of existing debt.
Availability under the Company's shelf registration statement was $350 million
at September 30, 1998. Concurrently, the Operating Partnership filed a shelf
registration statement with the Securities and Exchange Commission providing for
the issuance from time to time of up to $350 million of debt securities. The
Operating Partnership plans to use the proceeds raised from any securities
issued under its shelf registration statement for general corporate purposes,
including the development of new apartment communities, acquisitions and the
repayment of existing debt. On October 1, 1997, the Operating Partnership issued
$100 million aggregate principal amount of 7% senior unsecured notes pursuant to
its shelf registration statement. Availability under the Operating Partnership's
shelf registration statement was $250 million at September 30, 1998. The
Operating Partnership, pursuant to a Prospectus Supplement dated April 9, 1998,
may issue from time to time up to $250 million aggregate initial offering price
of its Medium-Term Notes, Series A due nine months or more from the date of
issue. Issuances of Medium-Term Notes will reduce availability under the
Operating Partnership's Registration Statement by the amount of Medium-Term
Notes issued. Similarly, issuances of other debt securities under the Operating
Partnership's Registration Statement will reduce the amount of Medium-Term Notes
that may be issued. As of September 30, 1998, there have been no issuances of
Medium-Term Notes.
IAC CAPITAL TRUST: In January 1998, the Trust issued 6.0 million 8 1/4% Series A
Preferred Securities. The proceeds of $150 million were used to purchase an
equivalent amount of 8 1/4% Series A Preferred Limited Partner Units in the
Operating Partnership. The Operating Partnership used the $150 million of
proceeds, net of costs and expenses, all of which where paid by the Operating
Partnership, to repay all outstanding borrowings under the credit facility and
to fund development and an acquisition.
DEBT: The Company's conventional and tax-exempt debt bears interest at fixed
interest rates. Interest rates on conventional mortgage debt were reduced to
then-current market rates at the time of the Company's December 1993 initial
public offering through interest rate buy-down agreements that are scheduled to
expire at various dates prior to loan maturity that range from 2000 to 2008. The
weighted average effective interest rate on the Company's debt, including the
non-cash charges of amortization of deferred financing costs, was 6.09% at
September 30, 1998. In June 1998, the Company completed a $334 million offering
of unsecured tax-exempt debt at an average interest rate of 4.93% in three
tranches ranging from 10 to 15 years. Proceeds from the offering were used to
repay the Company's existing tax-exempt mortgage debt and to pay a portion of
the costs associated with prepayment penalties and the unwinding of certain swap
agreements.
Page 23
<PAGE> 27
DEBT STRUCTURE AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Debt Weighted Average
(dollars in millions) Balance Interest Rate
------------- ---------------
<S> <C> <C>
Fixed rate debt
Conventional mortgage financings $ 130.2 7.12%
Mortgage notes payable to The Irvine 49.7 5.75%
Company 5.4 6.27%
Tax-exempt assessment district debt 334.2 4.93%
Unsecured tax-exempt bond financings
Unsecured notes payable 99.3 7.10%
------------- -------------
Total fixed rate debt 618.8 5.82%
------------- -------------
Variable rate debt
Unsecured line of credit 101.0 6.30%
Tax-exempt assessment district debt 16.1 3.27%
------------- -------------
Total variable rate debt 117.1 5.88%
------------- -------------
Total debt $ 735.9 5.83%
============= =============
</TABLE>
DEFERRED FINANCING COSTS AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Weighted Average
Balance at Remaining Term
(dollars in millions) September 30, 1998 (in years)
------------------ ----------------
<S> <C> <C>
Interest rate buy-downs on
conventional mortgage financings $ 7.2 8.4
Loan origination costs and other 5.3 10.7
------------- ---------------
Total $ 12.5 9.3
============= ==============
</TABLE>
OPERATING ACTIVITIES: Cash provided by operating activities was $59.1 million
and $69.4 million in the first nine months of 1998 and 1997, respectively. Cash
provided by operating activities decreased in the first nine months of 1998
compared to the same period in 1997 due to an extraordinary item related to debt
extinguishment, partially offset by higher revenues from newly developed and
acquired apartment units, as well as an increase in revenues within the
Company's stabilized portfolio achieved through higher rental rates.
INVESTING ACTIVITIES: Cash used in investing activities was $179.7 million and
$205.8 million in the first nine months of 1998 and 1997, respectively. This
decrease reflects the purchase of The Villas of Renaissance in 1997, partially
offset by increased development activity and several smaller acquisitions in the
first nine months of 1998.
FINANCING ACTIVITIES: Cash provided by financing activities was $121.9 million
and $135.5 million in the first nine months of 1998 and 1997, respectively. In
the first nine months of 1997, the Company received net proceeds of $30.0
million from a common stock offering and $36.3 million from a related
contribution by The Irvine Company. In addition, the Company (and the Trust)
made distributions of $8.6 million to holders of the Trust's Series A Preferred
Securities in the first nine months of 1998. Additionally, the Company paid
$51.0 million in distributions to common shareholders and common limited
partners in the first nine months of 1998 compared to $47.5 million in the first
nine months of 1997. These items were partially offset by $144.0 million in net
proceeds received by the Operating Partnership in January 1998 from the sale of
its Series A Preferred Limited Partner Units (a portion of which proceeds were
used to pay down the Company's unsecured line of credit).
Page 24
<PAGE> 28
CAPITAL EXPENDITURES
Capital expenditures consist of capital improvements and investments in real
estate assets. Capital improvements to operating real estate assets totaled $3.6
million and $3.2 million in the first nine months of 1998 and 1997,
respectively. Capital investments in real estate assets totaled $176.1 million
and $202.6 million in the first nine months of 1998 and 1997, respectively.
These investments consisted of new development, nonrecurring capital
replacements, land purchases on and off the Irvine Ranch, and, in each year, an
acquisition of an apartment community off the Irvine Ranch.
The Company has entered into agreements giving it the right, but not the
obligation, to acquire land sites for the development of apartment units,
subject to the receipt of necessary entitlements and due diligence. As of
September 30, 1998, the Company had approximately 3,000 units under option
and/or contract. Prior to buying land, the Company incurs preliminary costs for
site planning and entitlement. If a potential site is abandoned, the associated
costs are written off. For the nine months ended September 30, 1998, costs
totaling $0.4 million were written off. While the Company seeks to mitigate such
risk and has not written off significant amounts to date, no assurance can be
given that it will not be required to do so in the future.
RECURRING CAPITAL REPLACEMENTS WITHIN ALL STABILIZED COMMUNITIES: The following
table details expenditures for recurring capital replacements for all
communities for the first nine months of 1998.
<TABLE>
<CAPTION>
Nine Months Ended
(dollars in thousands) September 30, 1998
------------------
<S> <C>
Carpet replacements $ 1,277
Exterior painting, siding and stucco 593
Upgrades, renovations and major building items 120
Appliances, water heaters and air conditioning 128
Roofing, concrete and pavement 502
Equipment and other 952
-------------
Total $ 3,572
=============
</TABLE>
RECURRING CAPITAL REPLACEMENTS WITHIN COMMUNITIES STABILIZED BEFORE 1997:
Expenditures for recurring capital replacements within communities stabilized
before 1997 totaled $3.5 million and $3.2 million in the first nine months of
1998 and 1997, respectively. Average recurring capital replacements per unit
were $116 and $112 in the first nine months of 1998 and 1997, respectively.
Expenditures for recurring capital replacements for the full year 1998 are
expected to be approximately $1.0 million higher than full year 1997 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 INVESTMENTS IN NEW DEVELOPMENT: On April 30, 1998, the Company purchased
from an unrelated third party a 119-unit, high-rise apartment building under
renovation located in West Los Angeles (1221 Ocean Avenue ) for $44.1 million.
In June 1998, the Company purchased an apartment development site known as The
Villas at Bair Island Marina from an unrelated third party for $3.9 million. On
August 10, 1998, the Company purchased from an unrelated third party vacant land
(Park Place) for the development of approximately 1,200 apartment units, in
Irvine, for $40 million in cash. In addition, the Company paid $10 million in
cash for an assignment of a contract to purchase an existing 216-unit apartment
community (One Park Place) adjacent to this development parcel for the
assumption of $18 million in debt. The Company provided a letter of credit
totaling $21 million to guarantee the payment of debt and interest for one year.
The letter of credit will reduce the
Page 25
<PAGE> 29
amount available under the line of credit. The purchase of One Park Place closed
on October 8, 1998. The Company has eight apartment communities under
development that will require total expenditures of approximately $530 million,
of which $221 million had been incurred at September 30, 1998. Funding for these
developments is expected to come from the Operating Partnership's $250 million
unsecured revolving credit facility (of which $139 million was available as of
September 30, 1998), bank financings, debt offerings of the Operating
Partnership, preferred securities offerings of the Trust and cash on hand. In
addition, the Company may issue other equity securities as discussed in the
Liquidity section.
CONSTRUCTION INFORMATION
<TABLE>
<CAPTION>
Total
Estimated
Commencement Commencement Costs
of of Leasing (in
Apartment Community Location Units Construction Activity millions)
- ------------------- -------- ----- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
On Ranch:
Sonoma(1) Oak Creek, Irvine 196 11/97 8/98 $ 25
Brittany Oak Creek, Irvine 393 12/97 45
Park Place Irvine 1,226 9/98 210
Off Ranch:
The Hamptons(1) Cupertino 342 5/97 4/98 52
Arcadia at Stonecrest San Diego County 336 4/98 42
The Colony at Aventine San Diego County 232 5/98 44
The Villas at Bair Redwood City 155 6/98 37
Island Marina
1221 Ocean Avenue West Los Angeles 119 8/98 75
----- ----
Total 2,999 $530
===== ====
</TABLE>
(1) These two properties were in lease-up at September 30, 1998, with 270
units delivered and 253 units occupied.
The timing of future commencement and completion of construction, the
commencement of leasing activity and initial stabilized occupancy and estimated
costs of apartment communities that are in development are only estimates.
Actual results will depend on numerous factors, many of which are beyond the
control of the Company. 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; product design changes; entitlement decisions by local
government authorities; weather patterns; changes in interest rate levels; and
other changes in capital markets. No assurance can be given that the timing or
estimates set forth in the foregoing table will not vary substantially from
actual results.
NONRECURRING CAPITAL REPLACEMENTS: Nonrecurring capital expenditures consist of
special programs to upgrade and enhance a community to achieve higher rental
rates. Expenditures for nonrecurring capital replacements totaled $6.6 million
in the first nine months of 1998. These expenditures were made at two properties
(Promontory Point and The Villas of Renaissance). There were no such
expenditures made in the first nine months of 1997. Expenditures for
nonrecurring capital expenditures at Promontory Point and The Villas of
Renaissance are expected to total approximately $8.5 million in 1998.
SUBSEQUENT CAPITAL INVESTMENT IN NEW DEVELOPMENT: On October 15, 1998, the
Company acquired, for $4.6 million in cash, vacant land (Lonestar) in Northern
California for the development of approximately 200 units. The total investment
in this apartment community is expected to be approximately $39 million.
IRVINE RANCH MASTER PLAN
The Irvine Company is a real estate investment and community development firm
engaged in the long-term development of the Irvine Ranch. The urbanization of
the Irvine Ranch began in the 1960s with the adoption of the pioneering
comprehensive Master Plan for future community development which originally
constituted a large map
Page 26
<PAGE> 30
of the Irvine Ranch and a series of supporting maps detailing land uses.
Subsequently, The Irvine Company worked closely with the various local
jurisdictions which govern the Irvine Ranch to adopt general plans for the
future development of their jurisdictions. The Irvine Company's overall Master
Plan was refined to accord with the approved general plans and the residential,
commercial, industrial, environmental and aesthetic balance desired by each
jurisdiction. As a result, today the Irvine Ranch Master Plan is a compilation
of the various interlocking general plans described above. The Irvine Company
continuously engages in planning activities and the Master Plan refinement
process is ongoing. The Irvine Company works closely with local government
representatives, community residents and other civic and environmental groups to
obtain the necessary local support and entitlement for its developments. The
goal of the Master Plan was and remains to create innovative urban and suburban
environments through the well-planned, coordinated development of residential
communities and employment centers (which include major business and retail
centers, and research and development and industrial parks) as well as civic,
cultural, recreational, educational and other supportive facilities, all with an
emphasis on improving the quality of life and achieving long-term balanced
regional economic growth.
The success of the Irvine Ranch as a master-planned development is in the large
part attributable to the early creation of a broad employment base. The Irvine
Company has emphasized the promotion of job creation on the Irvine Ranch and has
been involved in creating four major employment centers on the Irvine Ranch,
each easily accessible by apartment residents and the surrounding area. The
Irvine Company has been the sole developer of the Irvine Spectrum, a 5,000-acre
research, technology and employment center which houses more than 2,200
companies and approximately 44,000 employees and includes 25 million square feet
of research and development and office space. The Irvine Business Complex, which
surrounds the John Wayne airport, houses over 100,000 employees and includes
more than 24 million square feet of office and other commercial space and over
14 million square feet of industrial space. Newport Center contains over 4.4
million square feet of office space, a 1.3 million square-foot regional mall
(Fashion Island), a tennis club and two country clubs. In addition, The Irvine
Company donated land to the University of California at Irvine, a 1,489-acre
campus which currently has more than 17,000 students and 6,000 employees. The
proximity of properties located on the Irvine Ranch to these employment centers
makes them attractive residential locations.
YEAR 2000 PROJECT
GENERAL: As is the case with many computer and microprocessor-based systems,
certain of the Company's systems use two digit date fields which recognize dates
using the assumption that the first two digits are "19" (i.e., the number "98"
is recognized as the year "1998"). Although, because of the nature of its
business, the Company does not believe that its business, results of operations
or financial condition would be materially adversely affected by a failure of
these systems, the Company has initiated a plan to assess (and remediate, as
necessary) its computer and microprocessor-based systems.
STATE OF YEAR 2000 READINESS: The Company's Year 2000 project is divided into
four major sections -- Infrastructure, Applications Software, third-party
suppliers and customers ("Third Parties"), and process control and
instrumentation ("PC&I"). The general phases common to all sections are: (1)
inventorying potential Year 2000--sensitive items; (2) assigning priorities to
identified items; (3) assessing the Year 2000 compliance of items determined to
be material to the Company; (4) repairing or replacing material items that are
determined not to be Year 2000 compliant; and (5) testing material items.
The Infrastructure and Applications Software sections consist of hardware and
systems software. As of September 30, 1998, the Infrastructure has been repaired
or replaced and is believed to be Year 2000 compliant. As of September 30, 1998,
approximately 90% of the Company's Applications Software had been determined to
be Year 2000 compliant. The Company expects to complete the remaining assessment
and repair or replacement, including testing, during the fourth quarter of 1998.
Page 27
<PAGE> 31
The Third Parties section consists of identifying and prioritizing critical
suppliers and communicating with them about their plans and progress in
addressing the Year 2000 problem. Detailed evaluations of the most critical
Third Parties have been completed, with follow-up review scheduled through the
remainder of 1999. The Company is not currently aware of any Third Parties
which, if one or more of their systems were to be non-Year 2000 compliant, would
have a material adverse effect on the Company's business, results of operations,
or financial condition.
Plans detailing the tasks and resources required for the PC&I section are in
place. This section includes the hardware, software and associated embedded
computer chips that are used in the operation of all facilities operated by the
Company. PC&I equipment includes systems such as security systems, lighting
systems, HVAC systems and sprinkler systems. As of September 30, 1998, the
Company had assessed the potential for Year 2000 failures in approximately 90%
of its PC&I systems. The Company believes that the repair or replacement and
testing of PC&I equipment is approximately 25% complete. The Company expects to
complete the repair or replacement of its PC&I systems by the second quarter of
1999, with all testing scheduled to be completed by year-end 1999.
The Company's satellite offices are proceeding at approximately the same
schedule as the Company as a whole.
COSTS: The Company has not incurred material costs in connection with its Year
2000 remediation efforts and does not expect its total past and future Year 2000
expenditures to be material to the Company's business, results of operations or
financial condition.
CONTINGENCY PLANNING AND RISK: Although there can be no assurance, the Company
does not believe that a Year 2000 failure of any of its internal software or
hardware systems would have a material adverse effect on its business, results
of operations and financial condition. Therefore, the Company has not
established any specific contingency plans with respect to its internal systems.
A Year 2000 failure by an important Third Party could materially disrupt the
Company's operations. For example, a Year 2000 failure by one or more of the
financial institutions with which the Company does business could cause the
Company to lose access to its funds or could restrict the Company's ability to
borrow. A Year 2000 failure by a trustee or transfer agent or by The Depository
Trust Company could restrict the Company's ability to pay interest on its bonds
or to pay dividends or distributions on its equity securities. The Company does
not have specific contingency plans in place, but, in the event of a Year 2000
failure, would take all available action to replace any failed Third Parties.
The Company's assessment of its risks, and its expectations as to future Year
2000 compliance, are forward-looking statements.
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 enters 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 generally considers funds from operations ("FFO") a useful measure
of performance for 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
Page 28
<PAGE> 32
ventures. Other REITs may not use this definition of FFO. FFO should be
considered in conjunction with net income as presented in the Company's
Consolidated Financial Statements and Notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. 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.
CALCULATION OF FFO
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
(in thousands, unaudited) 1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net income $ 3,682 $19,399 $ 8,226 $6,479
Add:
Depreciation and amortization of real estate 24,466 21,525 8,433 7,903
assets
Minority interest in income 4,617 23,556 10,249 7,867
One-time charge related to transition of IAMC 345
Extraordinary item related to debt
extinguishment 42,451
------- ------- ------- -------
Funds from operations $75,561 $64,480 $26,908 $22,249
======= ======= ======= =======
</TABLE>
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 Notes thereto
included herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. Operating results for the three or nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
Page 29
<PAGE> 33
Irvine Apartment Communities, Inc.
Irvine Apartment Communities, L.P.
IAC Capital Trust
SELECTED OPERATING DATA
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
(unaudited) 1998 1997 Difference 1998 1997 Difference
------ ------ ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
UNIT DATA
Average rentable units during the period 15,588 14,250 1,338 15,909 14,991 918
Rentable units at the end of the period 16,029 14,991 1,038 16,029 14,991 1,038
COMMUNITIES STABILIZED BEFORE 1997(a)
Average physical occupancy 94.1% 94.5% -0.4% 94.1% 93.8% 0.3%
Average economic occupancy(b) 92.5% 92.8% -0.3% 92.9% 91.9% 1.0%
Average monthly gross scheduled rent per unit(c) $1,155 $1,097 5.3% $1,171 $1,119 4.6%
Average monthly rental income per occupied unit $1,142 $1,087 5.1% $1,163 $1,110 4.8%
COMMUNITIES STABILIZED IN 1997(d)
Average physical occupancy 94.6% 96.0%
Average economic occupancy(b) 93.9% 95.4%
Average monthly gross scheduled rent per unit(c) $1,479 $1,509
Average monthly rental income per occupied unit $1,489 $1,521
LEASE-UP AND ACQUISITION COMMUNITIES(e)
Units in acquired community 923 923
Units delivered in the period 893 300
Cumulative units delivered at the end of the period 1038 1038
Units occupied in lease-up communities at the end of the period 939 939
Average units occupied in lease-up communities during the period 499 806
OTHER FINANCIAL DATA (IRVINE APARTMENT COMMUNITIES, INC.)
Dividends paid per share $1.135 $1.105 $0.385 $0.365
Funds from operations (FFO) payout ratio 67.5% 74.2% 64.5% 73.5%
</TABLE>
- --------------
Footnotes:
(a) Financial results are for 48 properties totaling 13,541 units for
comparable periods of 1998 and 1997.
(b) Rental income divided by rental income plus vacant units at market rent.
(c) Rental income plus vacant units at market rent.
(d) Financial results are for two properties totaling 527 units that
achieved stabilized occupancy during 1997. No year over year comparison
is provided since the properties were not all stabilized for comparable
periods of 1997.
(e) Financial results are for properties that started lease-up (three at
various dates in late 1997 and two in 1998) and the 923-unit Villas of
Renaissance apartment community purchased on June 30, 1997.
Page 30
<PAGE> 34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the third quarter of 1998, the Operating Partnership sold to
affiliates of The Irvine Company the following units of common limited
partnership interest ("common L.P. units") in the Operating Partnership
pursuant to Section 4(2) of the Securities Act of 1933:
An aggregate of 39,176 common L.P. units were sold in August
1998 for $1.0 million in cash at prices ranging from $25.50 to
$26.4375 per common L.P. unit, in connection with The Irvine
Company's exercise of its proportional purchase rights under the
Third Amended and Restated Agreement of Limited Partnership of
the Operating Partnership with respect to sales of the Company's
Common Stock pursuant to its Dividend Reinvestment and
Additional Cash Investment Plan.
Each of the foregoing common L.P. units is exchangeable for common stock
of the Company on a one-for-one basis, subject to adjustment and certain
limitations set forth in the Third Amended and Restated Agreement of
Limited Partnership of the Operating Partnership.
In addition, in August 1998, the Company sold to The Irvine
Company pursuant to Section 4(2) of the Securities Act of 1933,
11,605 shares of Common Stock for $0.3 million in cash at prices
ranging from $25.50 to $26.4375 per share in connection with The
Irvine Company's exercise of its proportional purchase rights
under the Miscellaneous Rights Agreement with respect to sales
of the Company's Common Stock pursuant to its Dividend
Reinvestment and Additional Cash Investment Plan.
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.
Page 31
<PAGE> 35
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. 10.11.1: First Amendment to Revolving Credit Agreement
dated as of July 10, 1998.
Exhibit No. 10.11.2: Second Amendment to Revolving Credit
Agreement dated as of July 10, 1998.
Exhibit No. 27.1: Financial Data Schedule for Irvine Apartment
Communities, Inc.
Exhibit No. 27.2: Financial Data Schedule for Irvine Apartment
Communities, L.P.
Exhibit No. 27.3: Financial Data Schedule for IAC Capital Trust.
Page 32
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
IRVINE APARTMENT COMMUNITIES, INC.
Date: November 11, 1998 By: /s/ James E. Mead
-------------------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer and Secretary
By: /s/ Shawn Howie
-------------------------------------
Shawn Howie
Vice President, Corporate Finance and
Controller
(Principal Accounting Officer)
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities, Inc.,
its sole general partner
Date: November 11, 1998 By: /s/ James E. Mead
-------------------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer and Secretary
By: /s/ Shawn Howie
-------------------------------------
Shawn Howie
Vice President, Corporate Finance and
Controller
(Principal Accounting Officer)
IAC CAPITAL TRUST
Date: November 11, 1998 By: /s/ James E. Mead
-------------------------------------
James E. Mead
Regular Trustee
Page 33
<PAGE> 37
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.11.1 First Amendment to Revolving Credit Agreement dated as of
July 10, 1998.
10.11.2 Second Amendment to Revolving Credit Agreement dated as of
July 10, 1998.
27.1 Financial Data Schedule for Irvine Apartment Communities, Inc.
27.2: Financial Data Schedule for Irvine Apartment Communities, L.P.
27.3: Financial Data Schedule for IAC Capital Trust.
</TABLE>
<PAGE> 1
EXHIBIT 10.11.1
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
dated as of July 10, 1998
among
IRVINE APARTMENT COMMUNITIES, L.P.,
THE BANKS LISTED HEREIN,
BANK OF AMERICA NT&SA,
as Administrative Agent,
and
WELLS FARGO BANK, N.A.,
as Documentation Agent
with
J.P. MORGAN SECURITIES, INC.,
as Syndication Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. THE AMENDMENTS ....................................................1
SECTION 1.1. Definitions ................................................1
SECTION 1.2. Types of Borrowings ........................................4
SECTION 1.3. Notes ......................................................4
SECTION 1.4. Facility Fee ...............................................5
SECTION 1.5. Payments ...................................................5
SECTION 1.6. Letters of Credit ..........................................6
SECTION 1.7. Non-Rata Revolving Loan Facility ...........................8
SECTION 1.8. Borrowings ................................................10
SECTION 1.9. Year 2000 .................................................10
SECTION 1.10. L/C Agreement .............................................10
SECTION 1.11. Banks .....................................................10
ARTICLE II. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT ...................11
ARTICLE III. REPRESENTATIONS OF BORROWER ....................................12
ARTICLE IV. MISCELLANEOUS ...................................................13
SECTION 4.1. Capitalized Terms .........................................13
SECTION 4.2. Ratification ..............................................13
SECTION 4.3. Counterparts ..............................................13
SECTION 4.4. Governing Law .............................................13
SECTION 4.5. Bank Funding Obligations ..................................13
</TABLE>
i
<PAGE> 3
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment")
dated as of July 10, 1998 among IRVINE APARTMENT COMMUNITIES, L.P., a Delaware
limited partnership (the "Borrower"), the BANKS listed on the signature pages
hereof ("Banks"), BANK OF AMERICA NT&SA, as Administrative Agent, and WELLS
FARGO BANK, N.A., as Documentation Agent.
WHEREAS, Borrower, the Administrative Agent, the Documentation Agent and
the banks listed on the signature pages thereof entered into that certain
Revolving Credit Agreement ("Original Agreement") dated as of June 27, 1997;
WHEREAS, Borrower, the Banks, the Administrative Agent and the
Documentation Agent wish to extend the Maturity Date from June 27, 2000 to June
27, 2001 and make certain other amendments to the Original Agreement. The
Original Agreement, as modified by this Amendment may be referred to herein as
the "Credit Agreement";
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Borrower, the Banks, the
Administrative Agent and the Documentation Agent agree as follows:
ARTICLE I.
THE AMENDMENTS
SECTION 1.1. Definitions. The following terms shall be added to Section
1.1 of the Original Agreement:
"L/C Agreement" means (a) so long as Bank of America is the
Administrative Agent and issuer of Letters of Credit pursuant to Section 2.16, a
letter of credit application and reimbursement agreement in the form of Exhibit
"L"; and (b) if Bank of America ceases to be the Administrative Agent or the
Agreement is amended to provide for a Bank other than Bank of America to be the
issuer of Letters of Credit pursuant to Section 2.16, a letter of credit
application in form and content reasonably satisfactory to the successor
Administrative Agent or such Bank, as the case may be.
"Letter of Credit" means a standby letter of credit issued for the
account of Borrower pursuant to this Agreement, either as originally issued as
the same may from time to time be supplemented, modified, amended, renewed or
extended.
"Letter of Credit Fee" means, with respect to each Letter of Credit
issued, a fee equal to the face amount of the applicable Letter of Credit
multiplied by the Letter of Credit Margin. The Letter of Credit Fee shall be
payable in advance as follows: (i) the first installment of the Letter of Credit
Fee shall be due upon the issuance, supplementation, modification, amendment,
renewal or extension, as the case may be, of any Letter of Credit; and (ii)
subsequent installments shall be due quarterly thereafter. The amount of each
installment pursuant to clause
<PAGE> 4
(i) above shall be one quarter of the product of (y) the applicable Letter of
Credit Fee for the date the payment is due and (z) the face amount of the Letter
of Credit issued, supplemented, modified, amended, renewed, or extended. The
amount of each installment pursuant to clause (ii) above shall be one quarter of
the product of (y) the applicable Letter of Credit Fee for the date the payment
is due and (z) the face amount of the Letter of Credit then outstanding.
"Letter of Credit Margin" means, with respect to each Letter of Credit,
the respective percentages per annum determined, at any time, based on the range
into which Borrower's Credit Rating falls on the date of issuance of the
applicable Letter of Credit, in accordance with the table set forth below (the
percentage set forth in the Letter of Credit Margin column is inclusive of the
percentage set forth in the Override to Administrative Agent column). In the
event that two (2) different Credit Ratings have been assigned, the lower of the
two Credit Ratings will prevail unless such Credit Ratings are more than one
Level (as shown in the table below) apart, in which case the average of the
margins corresponding to the two Credit Ratings will constitute the Letter of
Credit Margin. In the event that three (3) different Credit Ratings have been
assigned, the average of the margins corresponding to the two highest Credit
Ratings will constitute the Letter of Credit Margin. For purposes of
illustration only, if (i) two (2) different Credit Ratings were assigned and one
was Level I and the other was Level III, the Letter of Credit Margin would be
0.600 (i.e., the average of Level I (0.500) and Level III (0.700)); or (ii)
three (3) different Credit Ratings had been assigned and such levels were Level
I, Level III and Level IV, the Letter of Credit Margin would be 0.600 (i.e., the
average of Level I and Level III).
<TABLE>
<CAPTION>
Range of Letter of Override to
Borrower's Credit Margin Administrative Agent
Credit Rating (% per annum) (% per annum)
------------- ------------- -------------
<S> <C> <C> <C>
Level I A-/A3 0.500 0.100
or better
Level II BBB+/Baa1 0.600 0.100
Level III BBB/Baa2 0.700 0.100
Level IV BBB-/Baa3 0.950 0.100
Level V Below Investment 1.250 0.100
Grade
</TABLE>
"Non-Rata Revolving Loans" is defined in Section 2.17.
The following terms shall have the meaning set forth below in lieu of
the definition set forth therefor in Section 1.1 of the Original Agreement:
2
<PAGE> 5
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its LIBOR Loans, its LIBOR Lending Office, and (iii) in the case of its Money
Market Loans or Non-Rata Revolving Loans, its Money Market Lending Office.
"Applicable Margin" means, with respect to each Loan, the respective
percentages per annum determined, at any time, based on the range into which
Borrower's Credit Rating then falls, in accordance with the table set forth
below. Any change in Borrower's Credit Rating causing it to move to a different
range on the table shall effect an immediate change in the Applicable Margin
(including existing Loans). Promptly after learning of a change in the
Borrower's Credit Rating, Administrative Agent shall give notice of such change
to the Banks and include in such notice the new Applicable Margin and the
effective date of such change. In the event that two (2) different Credit
Ratings have been assigned, the lower of the two Credit Ratings will prevail
unless such Credit Ratings are more than one Level (as shown in the table below)
apart, in which case the average of the margins corresponding to the two Credit
Ratings will constitute the Applicable Margin. In the event that three (3)
different Credit Ratings have been assigned, the average of the margins
corresponding to the two highest Credit Ratings will constitute the Applicable
Margin. For purposes of illustration only, if (i) two (2) different Credit
Ratings were assigned and one was Level I and the other was Level III, the
Applicable Margin for LIBOR Loans would be 0.600 (i.e., the average of Level I
(0.500) and Level III (0.700)); or (ii) three (3) different Credit Ratings had
been assigned and such levels were Level I, Level III and Level IV, the
Applicable Margin for LIBOR Loans would be 0.600 (i.e., the average of Level I
and Level III).
<TABLE>
<CAPTION>
Applicable
Margin for Applicable
Range of Base Rate Margin for
Borrower's Loans LIBOR Loans
Credit Rating (% per annum) (% per annum)
------------- ------------- -------------
<S> <C> <C> <C>
Level I A-/A3 0.0 0.500
or better
Level II BBB+/Baa1 0.0 0.600
Level III BBB/Baa2 0.0 0.700
Level IV BBB-/Baa3 0.0 0.950
Level V Below Investment 0.50 1.25
Grade
</TABLE>
"Base Rate" means, for any day, a rate per annum equal to the greater of
(i) the rate of interest most recently publicly announced by the Administrative
Agent in San Francisco, California from time to time as its rate for domestic
commercial loans for such day minus 0.25% and (ii) the sum of 0.50% plus the
Federal Funds Rate for such day.
3
<PAGE> 6
"FMV Cap Rate" means 8.0%.
"Guaranty" means the Amended and Restated General Continuing Repayment
Guaranty, dated as of even date herewith and executed by Guarantor in favor of
Administrative Agent and the Banks.
"Loan" means a Base Rate Loan, a LIBOR Loan, a Money Market Loan, a
Swing Line Loan or a Non-Rata Revolving Loan and "Loans" means Base Rate Loans,
LIBOR Loans, Money Market Loans, Swing Line Loans or Non-Rata Revolving Loans or
any combination of the foregoing.
"Loan Documents" means this Agreement, the Facility Notes and the
Guaranty, as each of them may from time to time hereafter be modified,
supplemented or amended.
"Maturity Date" shall mean the date when all of the Obligations
hereunder shall be due and payable which shall be June 27, 2001, unless
accelerated pursuant to the terms hereof.
"Money Market Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit "F" hereto, evidencing the obligations of
the Borrower to repay the Money Market Loans and the Non-Rata Revolving Loans,
as they may be amended from time to time.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit D hereto, evidencing the obligation of the Borrower to repay the
Loans (other than Money Market Loans, Swing Line Loans and Non-Rata Revolving
Loans), and "Note" means any one of such promissory notes issued hereunder.
SECTION 1.2. Types of Borrowings. Section 1.3 is hereby deleted in its
entirety and replaced with the following:
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type (subject to
Article VIII) and, except in the case of Base Rate Loans and Non-Rata Revolving
Loans, have the same initial Interest Period. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a LIBOR Borrowing
or a Money Market Borrowing (excluding any such Borrowing consisting of Money
Market LIBOR Loans bearing interest at the Base Rate pursuant to Article VIII),
and a "LIBOR Borrowing" is a Borrowing comprised of LIBOR Loans) or by reference
to the provisions of Article 2 under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section 2.1 in which all
Banks participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.3 in which a Bank's share is
determined on the basis of its bid in accordance therewith, a "Non-Rata
Revolving Loan" is a Borrowing under Section 2.17, and a "Swing Line Loan" is a
Borrowing under Section 2.8).
SECTION 1.3. Notes. Sections 2.5(a) and 2.5(b) are hereby deleted in
their entirety and replaced with the following:
4
<PAGE> 7
(a) The Loans (other than Money Market Loans, Swing Line Loans and
Non-Rata Revolving Loans) of each Bank shall be evidenced by a single Note in
the form of Exhibit "E" payable to the order of such Bank for the account of its
Applicable Lending Office.
(b) The Money Market Loans and Non-Rata Revolving Loans of each Bank
shall be evidenced by a single Money Market Note in the form of Exhibit "F",
payable to the order of such Bank for the account of its Applicable Lending
Office.
SECTION 1.4. Facility Fee. Section 2.9(a) is hereby deleted in its
entirety and replaced with the following:
(a) Facility Fee. The Borrower shall pay to the Administrative Agent for
the account of the Banks ratably in proportion to their respective Commitments a
Facility Fee (the "Facility Fee") on the Aggregate Commitment at the respective
per annum percentages based upon the range into which the Borrower's Credit
Rating falls, in accordance with the following table. Any change in Borrower's
Credit Rating causing it to move to a different range on the table shall effect
an immediate change in the applicable Facility Fee percentage. Promptly after
learning of a change in the Borrower's Credit Rating, Administrative Agent shall
give notice of such change to the Banks and include in such notice the new
Facility Fee percentage and the effective date of such change. In the event that
two (2) different Credit Ratings have been assigned, the lower of the two Credit
Ratings will prevail unless such Credit Ratings are more than one level (as
shown in the table below) apart, in which case the average of the margins
corresponding to the two Credit Ratings will constitute the applicable Facility
Fee percentage. In the event that three (3) different Credit Ratings have been
assigned, the average of the margins corresponding to the two highest Credit
Ratings will constitute the applicable Facility Fee percentage. For purposes of
illustration only, if (i) two (2) different Credit Ratings had been assigned and
one was Level 1 and the other was Level III, the Facility Fee percentage would
be 0.1125 (i.e., the average of Level I (0.100) and Level III (0.125); or (ii)
three (3) different Credit Ratings had been assigned and such levels were Level
I, Level III and Level IV, the Facility Fee percentage would be 0.1125 (i.e.,
the average of Level I and Level III). The Facility Fee shall be payable in
arrears in quarterly installments which shall be due on each January 1, April 1,
July 1 and October 1 during the Term. The amount of each installment shall be
one quarter of the product of (i) the applicable Facility Fee for the date the
payment is due and (ii) the Aggregate Commitment.
<TABLE>
<S> <C> <C>
Level I A-/A3 or better 0.100%
Level II BBB+/Baa1 0.100%
Level III BBB/Baa2 0.125%
Level IV BBB-/Baa3 0.200%
Level V Below Investment Grade 0.250%
</TABLE>
SECTION 1.5. Payments. The following sentence shall replace the first
sentence of Section 2.12(a):
Except as otherwise provided in Section 2.17 with respect to Non-Rata
Revolving Loans, the Borrower shall make each payment of interest and principal
on the Loans and of fees
5
<PAGE> 8
hereunder, not later than 10:00 A.M. (San Francisco time) on the date when due,
in Federal or other funds immediately available in San Francisco, to the
Administrative Agent at its address referred to in Section 9.1.
SECTION 1.6 Letters of Credit. The following is hereby added as
Section 2.16:
2.16 Letters of Credit.
(a) Subject to the terms and conditions set forth in this Agreement, at
any time and from time to time from the Effective Date through the day that is
five (5) days prior to the Maturity Date, the Administrative Agent shall, as
soon as reasonably practical, issue such Letters of Credit as the Borrower may
request by submitting to Administrative Agent a properly completed and executed
Request for Letter of Credit in the form attached hereto as Exhibit K, provided
that, (i) upon issuance of such Letters of Credit, the sum of all outstanding
Loans plus outstanding Letters of Credit shall not exceed the Aggregate
Commitment, (ii) the aggregate face amount of all outstanding Letters of Credit
shall not at any time exceed Twenty-Five Million Dollars ($25,000,000) and (iii)
in no event shall Letters of Credit be issued for the benefit of any of the
Banks or for purposes of securing repayment of loans extended to the Borrower or
any Subsidiary thereof. No Letter of Credit shall have an expiration date later
than the earlier of (i) twelve (12) months after the date of the issuance of
such Letter of Credit or (ii) the Maturity Date. Unless all the Banks otherwise
consent in writing, no Letter of Credit shall contain an automatic extension or
renewal clause.
(b) Each Request for Letter of Credit shall be submitted to the
Administrative Agent, together with an L/C Agreement duly executed on behalf of
the Borrower by a Certifying Officer and addressed to the Administrative Agent,
not later than 9:00 a.m., California time, at least three (3) Domestic Business
Days prior to the date upon which the requested Letter of Credit is to be
issued. The Borrower shall further deliver to the Administrative Agent such
additional instruments and documents as the Administrative Agent may reasonably
require, in conformity with the then standard practices of its letter of credit
department, in connection with the issuance of such Letter of Credit; provided
that in no event shall the Letter of Credit Fee or Letter of Credit Margin be
altered or increased other than pursuant to an amendment of the Credit
Agreement.
(c) The Administrative Agent shall, if it approves of the proposed
wording of the Letter of Credit as set forth in the Request for Letter of Credit
and L/C Agreement (which approval shall not be unreasonably withheld), and
subject to the satisfaction of the conditions set forth in this Agreement, issue
the Letter of Credit on or before 5:00 p.m., California time, on or before the
day three (3) Domestic Business Days following receipt of the documents last due
pursuant to Section 2.16(b). Upon issuance of a Letter of Credit, the
Administrative Agent shall promptly notify the Banks of the amount and terms of
such Letter of Credit. The Administrative Agent shall deliver copies of Letters
of Credit to the Banks promptly following issuance thereof, and shall notify the
Banks of payments, reimbursements, expirations, negotiations, transfers and
other activity with respect to outstanding Letters of Credit promptly following
receipt of the same.
6
<PAGE> 9
(d) Upon the issuance of a Letter of Credit, each Bank shall be deemed
to have purchased a pro rata participation therein from the Administrative Agent
in an amount equal to that Bank's pro rata share of such Letter of Credit.
(e) If and to the extent that any amounts are drawn upon any Letters of
Credit, the amounts so drawn shall, from the date of payment thereof by the
Administrative Agent, be considered Base Rate Loans for all purposes hereunder.
(f) Promptly after payment by the Administrative Agent of any amount
drawn upon any Letter of Credit, the Administrative Agent shall, without notice
to or the consent of the Borrower, direct the Banks to remit funds to the
Administrative Agent pursuant to Section 2.4(b) of the Agreement, pro rata in
accordance with their respective pro rata shares, in an aggregate amount equal
to the amount so paid by the Administrative Agent. Such funds shall be paid to
the Administrative Agent to reimburse it for the payment made by it under the
Letter of Credit. The Administrative Agent shall give prompt written notice to
the Banks of any reduction in the amount available to be drawn under any Letter
of Credit and of any extension of the term of any Letter of Credit.
(g) On or before the Maturity Date or any earlier termination of this
Agreement, the Borrower shall provide to the Administrative Agent a standby
letter of credit issued by a bank or other financial institution reasonably
satisfactory to the Administrative Agent, in form and substance reasonably
satisfactory to the Administrative Agent, in favor of the Administrative Agent,
in a face amount equal to outstanding Letters of Credit issued for the account
of the Borrower on that date, or shall make other provisions satisfactory to the
Administrative Agent for the full collateralization, by Cash or Cash Equivalent,
of such outstanding Letter of Credit. In the event that Borrower makes a Cash or
Cash Equivalent deposit pursuant to the requirements of this Section 2.16(g),
(i) Borrower's cash deposit shall earn the rate of interest then currently paid
by the Administrative Agent on comparable deposits, taking into account the
amount deposited and the term of the deposit and (ii) promptly following the
expiration of the outstanding Letter of Credit for which the Cash or Cash
Equivalent deposit was made, Administrative Agent shall, to the extent the
Letter of Credit has not been drawn, return such deposit, together with any
interest earned thereon, to Borrower. In the event of failure of the Borrower to
comply with the requirements of this Section 2.16(g), such portion of the face
amount of all outstanding Letters of Credit as to which the Borrower has failed
to comply shall be deemed to be advanced and due and payable in accordance with
the terms hereof.
(h) The issuance of any supplement, modification, amendment, renewal or
extension to or of any Letter of Credit shall be treated in all respects the
same as the issuance of a new Letter of Credit.
(i) Borrower shall pay Administrative Agent, on written demand,
commissions and fees for amendments to the Letter of Credit, payments under the
Letter of Credit, extensions of the Letter of Credit, cancellation of the Letter
of Credit, and other services in the amounts Borrower and Administrative Agent
may agree, or, in the absence of such agreement, in the amounts customarily
charged by Administrative Agent to other similarly-rated
7
<PAGE> 10
borrowers under corporate unsecured facilities similar to this Agreement, on the
date of Administrative Agent's demand.
(j) Upon the occurrence of any of the following events, Borrower shall
deposit with Administrative Agent, on written demand and as cash security for
Borrower's obligations to Administrative Agent under this Agreement, an amount
equal to the undrawn amount of the Letter of Credit:
(i) Any Event of Default occurs under this Agreement; or
(ii) Any court order, injunction or other legal process is issued
restraining or seeking to restrain drawing or payment under the Letter of
Credit.
(k) Borrower authorizes Administrative Agent to charge any of Borrower's
accounts with Administrative Agent for all amounts then due and payable to
Administrative Agent under this Agreement.
(l) Borrower shall pay, on written demand, all actual costs, expenses
and reasonable attorneys' fees (including allocated costs for in-house legal
services) incurred by Administrative Agent in connection with (a) any dispute
concerning the Letter of Credit or this Agreement or (b) the enforcement of this
Agreement.
(m) Subject to the laws, customs and practices of the trade in the area
where the beneficiary is located, the Letter of Credit will be subject to, and
performance under the Letter of Credit by Administrative Agent, its
correspondents, and the beneficiary will be governed by, the "Uniforms Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500," or by later Uniform Customs and Practice fixed
by later Congresses of the International Chamber of Commerce as in effect on the
date the Letter of Credit is issued.
SECTION 1.7. Non-Rata Revolving Loan Facility. The following is hereby
added as Section 2.17:
SECTION 2.17. Non-Rata Revolving Loans.
(a) Non-Rata Revolving Loan Requests. Borrower may from time, on any
Business Day prior to the Maturity Date, request that any Bank make a Loan
(relative to such Bank, a "Non-Rata Revolving Loan") for a period of up to, but
not more than, 365/366 days. The Borrower shall make such request to the Money
Market Lending Office of such Bank. Such Bank may in its sole and absolute
discretion agree to make or not make such Non-Rata Revolving Loan, it being
understood and agreed that the Bank's commitments hereunder only require the
making by them of Base Rate Loans and LIBOR Loans, and the making by the
Administrative Agent of Swing Line Loans. Except as otherwise provided in this
Agreement, and subject in each case to the satisfaction of the applicable
conditions precedent set forth herein, each Non-Rata Revolving Loan shall be
made on the terms and conditions agreed to between the relevant Borrower and the
relevant Bank.
8
<PAGE> 11
(b) Limitations on Making Non-Rata Revolving Loans. No Bank shall be
permitted to make any Non-Rata Revolving Loan if, after giving effect thereto,
either the aggregate outstanding amount of all Loans of all the Banks would
exceed the Aggregate Commitment or the aggregate outstanding amount of all Money
Market Loans plus Non-Rata Revolving Loans of all the Banks would exceed
$125,000,000.
(c) Maturity of Non-Rata Revolving Loans. Each Non-Rata Revolving Loan
shall be repaid on the maturity thereof or on any earlier date agreed upon by
the Borrower and the relevant Bank or required by the other terms and conditions
of this Agreement. Borrower may prepay any Non-Rata Revolving Loan on such terms
and conditions as Borrower and the relevant Bank may agree.
(d) Non-Rata Revolving Loan Records. Each Bank's Non-Rata Revolving
Loans shall be evidenced by a loan account maintained by such Bank. Borrower
hereby irrevocably authorizes the relevant Bank to record (or cause to be
recorded) the date, amount, type and maturity of each Non-Rata Revolving Loan
made by such Bank to Borrower pursuant hereto, and may, if such Bank so elects
in connection with any transfer or enforcement of its Money Market Note, endorse
on the appropriate schedule appropriate notations to evidence the foregoing
information with respect to each such Non-Rata Revolving Loan then outstanding;
provided that the failure of any Bank to make any such recordation or
enforcement shall not effect the obligations of the Borrower hereunder or under
the Money Market Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Money Market Note and to attach to and make a part of
its Money Market Note a continuation of any such schedule as and when required.
(e) Rates. Pursuant to the terms agreed to between the Borrower and the
relevant Bank, Borrower shall pay interest on the aggregate principal amount of
any Non-Rata Revolving Loan outstanding to any Bank from time to time prior to
and at maturity at a rate agreed between Borrower and such Bank. Such interest
rate shall include any compensation for reserves or similar costs incurred in
connection with such Non-Rata Revolving Loan.
(f) Payment Dates for Non-Rata Revolving Loans. Borrower shall pay
interest on the aggregate principal amount of any Non-Rata Revolving Loan
outstanding to the relevant Bank from time to time prior to and at maturity on
such dates agreed between Borrower and such Bank in connection with the making
of such Non-Rata Revolving Loan.
(g) Non-Rata Obligations. All payments (whether in respect of principal,
interest, fees or otherwise) by Borrower pursuant to this Agreement or any other
Loan Document with respect to the Non-Rata Revolving Loan shall be made by
Borrower, in same day or immediately available funds, to the relevant Bank, (for
its own account), at an account specified by such Bank, from time to time by
notice to the Borrower. All such payments on account of Non-Rata Revolving Loans
shall be made on the date due, without setoff, deduction or counterclaim and at
the times agreed to between the Borrower and the relevant Bank. Each Bank that
has made a Non-Rata Revolving Loan agrees to give the Administrative Agent
prompt notice of Borrower's failure to pay when due of any amounts owing with
respect to each such Non-Rata Revolving Loan.
9
<PAGE> 12
(h) Non-Rata Revolving Loans. In the case of any requested Non-Rata
Revolving Loan, each of the applicable conditions referenced in Section 2.1 of
the Credit Agreement or otherwise specified by the relevant Bank in connection
with such Non-Rata Revolving Loan shall have been satisfied.
(i) Reporting of Non-Rata Revolving Loans. Borrower agrees to provide
the Administrative Agent with written notice of each Non-Rata Revolving Loan
concurrently with or promptly after the making of such Non-Rata Revolving Loan,
which notice shall set forth, among other things: (a) the date thereof; (b) the
principal amount thereof; (c) the Interest Period applicable thereto; (d) the
aggregate dollar amount of such Lender's outstanding Non-Rata Revolving Loans as
of such date; and (e) the identity of the relevant Bank.
SECTION 1.8. Borrowings. The following shall replace Section 3.2(c):
immediately after such Borrowing, the aggregate outstanding principal
amount of the Loans together with the aggregate face amount of all outstanding
Letters of Credit, to the extent the Letters of Credit have not been drawn, will
not exceed the Aggregate Commitments.
The following is hereby added as Section 2.17:
SECTION 1.9. Year 2000. The following is hereby added as Section 4.26:
Year 2000 Compliance. The Borrower and Guarantor have each conducted a
comprehensive review and assessment of the Borrower's and Guarantor's computer
applications and made inquiry of the Borrower's and Guarantor's key suppliers,
vendors and customers with respect to the "year 2000 problem" (that is the risk
that computer applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and, based on that review and inquiry,
neither the Borrower nor Guarantor believes the year 2000 problem will result in
a material adverse change in the Borrower's or Guarantor's ability to repay the
Loans.
SECTION 1.10. L/C Agreement. Exhibit F attached hereto and incorporated
herein by this reference, the Request for Letter of Credit attached hereto and
incorporated herein by this reference as Exhibit K and the L/C Agreement
attached hereto and incorporated herein by this reference as Exhibit L are
hereby added.
SECTION 1.11. Banks. Some of the Banks which were a party to the
Original Agreement have elected not to be a party to this Amendment, and another
Bank has elected to be a party to the Credit Agreement and by its signature on
this Amendment has approved the terms and conditions of the Original Agreement
and of this Amendment. In addition, the Commitment amount with respect to some
of the Banks has changed. Therefore, Schedule 1 attached to the Original
Agreement is hereby deleted and replaced by Schedule 1 attached hereto and
incorporated herein by this reference. The entities which are signatories to
this Amendment constitute the Banks.
10
<PAGE> 13
ARTICLE II.
CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT
The closing hereunder shall occur on the date when each of the following
conditions is satisfied (or waived by the Administrative Agent and the Banks),
each document to be dated the Closing Date unless otherwise indicated:
(a) the Borrower shall have executed and delivered to the Administrative
Agent duly executed original Notes and Money Market Notes for the account of
each Bank dated on or before the Closing Date complying with the provisions of
Section 2.5 of the Credit Agreement;
(b) the Borrower, the Administrative Agent, each of the Banks and any
Designated Bidders shall have executed and delivered to the Borrower and the
Administrative Agent a duly executed original of this Amendment;
(c) Guarantor shall have executed and delivered to the Administrative
Agent a duly executed original of the Guaranty;
(d) the Administrative Agent shall have received an opinion of O'Melveny
& Myers, LLP, counsel for the Borrower and the Guarantor, acceptable to the
Administrative Agent, and its counsel;
(e) the Administrative Agent shall have received all documents the
Administrative Agent may reasonably request relating to the existence of the
Borrower and Guarantor, the authority for and the validity of this Amendment and
the other Loan Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent. Such documentation shall
include, without limitation, the agreement of limited partnership of the
Borrower, as well as the certificate of limited partnership of the Borrower,
both as amended, modified or supplemented to the Closing Date, certified to be
true, correct and complete by a senior officer of the Borrower as of a date not
more than ten (10) days prior to the Closing Date, together with a long-form
certificate of good standing as to the Borrower from the Secretary of State (or
the equivalent thereof) of Delaware, a good standing certificate issued by the
Secretary of State of the State of California, each to be dated not more than
thirty (30) days prior to the Closing Date, as well as the articles of
incorporation and bylaws of Guarantor, as amended, modified or supplemented to
the Closing Date, certified to be true, correct and complete by a senior officer
of Guarantor as of a date not more than ten (10) days prior to the Closing Date,
together with a good standing certificate as to Guarantor from the Secretary of
State (or the equivalent thereof) of Maryland, to be dated not more than thirty
(30) days prior to the Closing Date;
(f) the Borrower shall have taken all actions required to authorize the
execution and delivery of this Amendment and the other Loan Documents and the
performance thereof by the Borrower;
11
<PAGE> 14
(g) the Administrative Agent shall have received, for its and any other
Bank's account, all fees due and payable pursuant to Section 2.9 of the Credit
Agreement on or before the Closing Date, and the fees and expenses accrued
through the Closing Date of Gibson, Dunn & Crutcher LLP;
(h) Borrower shall have paid to the Administrative Agent for the account
of the Banks, ratably in proportion to their respective Commitments, an
extension fee equal to One Hundred Eighty-Two Thousand Five Hundred Dollars
($182,500.00);
(i) no Default or Event of Default shall have occurred; and
(j) each of the Notes and Money Market Notes executed by Borrower in
connection with the Original Agreement shall have been surrendered by the
relevant Bank to the Administrative Agent for cancellation and return to the
Borrower simultaneously with the Closing (it being acknowledged and agreed by
the Banks that (y) the Notes and the Money Market Notes executed by Borrower in
connection with the Original Agreement shall be deemed canceled, paid in full
and of no further force and effect as of the Closing Date and (z) to the extent
any of such Notes or Money Market Notes are not surrendered or returned to
Borrower as of the Closing Date, the payee Bank of such unreturned Notes and
Money Market Notes shall indemnify, defend, and hold Borrower harmless from and
against any enforcement of such Notes and Money Market Notes, as applicable.
ARTICLE III.
REPRESENTATIONS OF BORROWER
The Borrower hereby represents and warrants to the Administrative Agent,
Documentation Agent and each of the Banks the following:
(a) All of the representations and warranties contained in the Original
Agreement are true and correct on and as of the date hereof and will be true and
correct after giving effect to this Amendment; the foregoing representation and
warranty is not intended to modify Section 6.1(d) of the Credit Agreement.
(b) No event which constitutes a Default or an Event of Default under
the Original Agreement, as amended hereby, has occurred and is continuing, or
would result from the execution and delivery of this Amendment.
(c) The Borrower has the power and authority to execute and deliver this
Amendment and to perform its obligations under the Original Agreement, as
amended hereby, and under the Notes; and all such action has been duly
authorized by all necessary proceeding on its part. The Original Agreement, this
Amendment and each Note has been duly and validly executed and delivered by the
Borrower and constitute a valid and legally binding obligation of the Borrower
enforceable in accordance with its terms, except as limited by moratorium,
bankruptcy, reorganization, insolvency or other laws affecting creditor's rights
generally or by the exercise of judicial discretion in accordance with general
principles of equity.
12
<PAGE> 15
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1 Capitalized Terms. The capitalized terms used herein which
are defined in the Original Agreement and not otherwise defined herein shall
have the meanings specified therein.
SECTION 4.2 Ratification. The Original Agreement, as hereby amended, is
in all respects ratified and confirmed, and all other rights and powers created
thereby or thereunder shall be and remain in full force and effect.
SECTION 4.3 Counterparts. This Amendment may be executed in several
counterparts, and each counterpart, when so executed and delivered, shall
constitute an original instrument, and all such separate counterparts shall
constitute one and the same instrument.
SECTION 4.4 Governing Law. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW (WITHOUT GIVING EFFECT
TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
SECTION 4.5 Bank Funding Obligations. By execution of this Amendment,
each Bank covenants and agrees that on the Closing Date, it shall have funded
its prorata share of Loans outstanding on such date.
13
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: Irvine Apartment Communities,
Inc., a Maryland corporation,
General Partner
By: /s/ JAMES E. MEAD
--------------------------------
Name: James E. Mead
Title: Senior Vice President
and Chief Financial Officer
By: /s/ SHAWN HOWIE
--------------------------------
Name: Shawn Howie
Title: Vice President
Corporate Finance and Controller
Facsimile number: (949) 720-5550
Address:
c/o Irvine Apartment Communities, Inc.
550 Newport Center Drive
Newport Beach, California 92660
Attn: Vice President, Corporate Finance and
Controller
14
<PAGE> 17
Commitment Amount
$50,000,000
LIBOR Lending Office: BANK OF AMERICA NT & SA
5 Park Plaza, Suite 500
Irvine, California 92614 By: /s/ RUSSELL RUHNKE
------------------------------------
Attn: Russell Ruhnke Name: Russell Ruhnke
Telecopy: (949) 260-5639 Title: Vice President
Domestic Lending Office:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
Money Market Lending Office:
555 California Street
10th Floor
San Francisco, California 94101
Attn: Linda Webster
Telecopy: (415) 622-2237
<PAGE> 18
Commitment Amount
$50,000,000
LIBOR Lending Office: WELLS FARGO BANK, NA
Wells Fargo Bank, NA
Disbursement and Operations Center By: /s/ KIM SURCH
2120 East Park Place, Suite 100 -------------------------------
El Segundo, California 90245 Name: Kim Surch
------------------------
Title: VP
------------------------
Attn: Anne Colvin
Telecopy: (310) 615-1014
Domestic Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (949) 851-9728
Money Market Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (949) 851-9728
<PAGE> 19
Commitment Amount
$45,000,000
LIBOR Lending Office: MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
- ------------------------------
- ------------------------------
By: /s/ TIMOTHY V. O'DONOVAN
- ------------------------------ -------------------------------------
Name: Timothy V. O'Donovan
Attn: ------------------------------
------------------------- Title: Vice President
Telecopy: ( ) ------------------------------
--- --------------
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107
Domestic Lending Office: Attention: Nancy K. Dunbar
Telecopy: (302) 634-4222
- ------------------------------
- ------------------------------
- ------------------------------ Domestic and Euro-Currency
Lending Office:
Attn: Nassau, Bahamas Office
------------------------- c/o J.P. Morgan Services Inc.
Telecopy: ( ) 500 Stanton Christiana Road
--- -------------- Newark, DE 19713-2107
Attention: Kevin M. McCann
Telecopy: (302) 634-1852/1872
Money Market Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
------------------------
Telecopy: ( )
--- --------------
<PAGE> 20
Commitment Amount
$40,000,000
LIBOR Lending Office: U.S. BANK
601 2nd Ave. S.
- ------------------------------
MPFP0509
- ------------------------------ By: /s/ LYNN GREGORY
Minneapolis, MN 55402 -------------------------------
- ------------------------------ Name: Lynn Gregory
Title: Vice President
Attn: Missy Schmidt
-------------------------
Telecopy: (612) 973-0830
--- -------------
Domestic Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
-------------------------
Telecopy: ( )
--- -------------
Money Market Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
-------------------------
Telecopy: ( )
--- -------------
<PAGE> 21
Commitment Amount
- -----------------
$25,000,000
LIBOR Lending Office:
COMMERZBANK AG
Grand Cayman Branch
C/o COMMERZBANK AG
New York Branch
2 World Financial Center
New York, NY 10281-1050
Attn. Christine Hunermund
Fax. No. (212) 266-7593
Domestic Lending Office:
COMMERZBANK AG
Grand Cayman Branch
C/o COMMERZBANK AG
New York Branch
2 World Financial Center
New York, NY 10281-1050
Attn. Christine Hunermund
Fax. No. (212) 266-7593
Money Market Lending Office:
COMMERZBANK AG
Grand Cayman Branch
C/o COMMERZBANK AG
New York Branch
2 World Financial Center
New York, NY 10281-1050
Attn. David Buettner
Fax. No. (212) 266-7565
COMMERZBANK AG
Los Angeles Branch
By: /s/ DOUGLAS P. TRAYNOR
----------------------------
Name: Douglas P. Traynor
Title: Vice President
By: /s/ CHRISTINE H. FINKEL
----------------------------
Name: Christine H. Finkel
Title: Assistant Vice President
<PAGE> 22
Commitment Amount
$20,000,000
LIBOR Lending Office: FIRST UNION BANK, N.A.
First Union National Bank
- ------------------------------
301 S. College Street NC-0166 By: /s/ RICHARD T. CALLAHAN, JR.
- ------------------------------ -------------------------------
Charlotte, N.C. 28288 Name: Richard T. Callahan, Jr.
- ------------------------------ ------------------------
Title: Vice President
Attn: Dan Sullivan ------------------------
-------------------------
Telecopy: (704) 383-6205
--- -------------
Domestic Lending Office:
(same as above)
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
-------------------------
Telecopy: ( )
--- -------------
Money Market Lending Office:
(same as above)
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
-------------------------
Telecopy: ( )
--- -------------
<PAGE> 23
Commitment Amount
$20,000,000
LIBOR Lending Office: FLEET NATIONAL BANK
Fleet National Bank
- ------------------------------
111 Westminster St., Ste. 800 By: /s/ PATRICK T. BURNS
- ------------------------------ -------------------------------
Providence, R.I. 02903 Name: Patrick T. Burns
- ------------------------------ ------------------------
Title: V.P.
------------------------
Attn: Christine Rioles
-------------------------
Telecopy: (401) 278-5166
--- -------------
Domestic Lending Office:
Fleet National Bank
- ------------------------------
111 Westminster St., Ste. 800
- ------------------------------
Providence, R.I. 02903
- ------------------------------
Attn: Christine Rioles
-------------------------
Telecopy: (401) 278-5166
--- -------------
Money Market Lending Office:
Fleet National Bank
- ------------------------------
111 Westminster St., Ste. 800
- ------------------------------
Providence, R.I. 02903
- ------------------------------
Attn: Christine Rioles
-------------------------
Telecopy: (401) 278-5166
--- -------------
<PAGE> 24
BANK OF AMERICA NT & SA,
as Administrative Agent
By: /s/ RUSSELL RUHNKE
------------------------------------
Name: Russell Ruhnke
----------------------------------
Title: Vice President
----------------------------------
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
DOMESTIC AND LIBOR LENDING OFFICE:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
<PAGE> 25
Address: WELLS FARGO BANK, N.A.,
as Documentation Agent
Wells Fargo Bank, NA
2030 Main Street, Suite 800 By /s/ RITA SWAYNE
Irvine, California 92614 -------------------------------------
Name: Rita Swayne
------------------------------
Title: Asst. Vice President
------------------------------
Attn: Office Manager
Telecopy: (949) 851-9728
<PAGE> 26
SCHEDULE 1
Bank Commitments
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
BANK COMMITMENT SHARE OF AGGREGATE
COMMITMENT
- -------------------------------------------------------------------------------
<S> <C> <C>
Bank of America NT & SA $50,000,000 20.00%
- -------------------------------------------------------------------------------
Wells Fargo Bank, NA $50,000,000 20.00%
- -------------------------------------------------------------------------------
Morgan Guaranty Trust Company $45,000,000 18.00%
of New York
- -------------------------------------------------------------------------------
U.S. Bank $40,000,000 16.00%
- -------------------------------------------------------------------------------
Commerzbank AG Los Angeles $25,000,000 10.00%
Branch
- -------------------------------------------------------------------------------
First Union Bank, N.A. $20,000,000 8.00%
- -------------------------------------------------------------------------------
Fleet National Bank $20,000,000 8.00%
- -------------------------------------------------------------------------------
Total $250,000,000 100.00%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
EXHIBIT F
Form of Money Market Note
NOTE
Irvine, California
$125,000,000 July __, 1998
For value received, IRVINE APARTMENT COMMUNITIES, L.P., a Delaware
limited partnership (the "Borrower"), promises to pay to the order of
__________________ (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Money Market Loan and Non-Rata
Revolving Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the maturity date provided for in the Credit Agreement).
The Borrower promises to pay interest on the unpaid principal amount of each
such Money Market Loan and Non-Rata Revolving Loan on the dates and at the rate
or rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office designated by Bank.
All Money Market Loans and Non-Rata Revolving Loans made by the Bank,
the respective types and maturities thereof and all repayments of the principal
thereof shall be recorded by the Bank and, if the Bank so elects in connection
with any transfer or enforcement hereof, appropriate notations to evidence the
foregoing information with respect to each such Money Market Loan and Non-Rata
Revolving Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Money Market Notes referred to in, and is
delivered pursuant to and subject to all of the terms of, that certain REVOLVING
CREDIT AGREEMENT dated as of June 27, 1997 among IRVINE APARTMENT COMMUNITIES,
L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the
signature pages thereof, BANK OF AMERICA NT&SA, as Administrative Agent, and
WELLS FARGO BANK, N.A., as Documentation Agent, as amended by that certain First
Amendment to Revolving Credit Agreement dated as of July __, 1998 among the
Borrower, the banks listed on the signature pages thereof, Bank of America
NT&SA, as Administrative Agent, and Wells Fargo Bank, N.A., as Documentation
Agent (as the same may be amended, supplemented, replaced, renewed or otherwise
modified from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for
F-1
<PAGE> 28
the prepayment hereof and the acceleration of the maturity hereof.
IRVINE APARTMENT COMMUNITIES, L.P., a
Delaware limited partnership
By: Irvine Apartment Communities,
Inc., a Maryland corporation,
its general partner
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
By:
--------------------------------
Name:
-------------------------
Title:
-------------------------
F-2
<PAGE> 29
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Notation
Date Amount of Loan Type of Loan Principal Repaid Maturity Date Made By
- ----------- ---------------- -------------- ------------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-3
<PAGE> 30
Exhibit K
EXHIBIT K
REQUEST FOR LETTER OF CREDIT
1. This REQUEST FOR LETTER OF CREDIT is executed and delivered pursuant
to that certain REVOLVING CREDIT AGREEMENT dated as of June 27, 1997 among
IRVINE APARTMENT COMMUNITIES, L.P., a Delaware limited partnership (the
"Borrower"), the banks listed on the signature pages thereof, BANK OF AMERICA
NT&SA, as Administrative Agent, and WELLS FARGO BANK, N.A., as Documentation
Agent, as amended by that certain First Amendment to Revolving Credit Agreement
dated as of July __, 1998 among the Borrower, the banks listed on the signature
pages thereof, Bank of America NT&SA, as Administrative Agent, and Wells Fargo
Bank, N.A., as Documentation Agent (as the same may be amended, supplemented,
replaced, renewed or otherwise modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings.
2. The Borrower hereby requests that Administrative Agent issue a Letter
of Credit in accordance with the L/C Application accompanying this request.
3. In connection with the Letter of Credit requested herein, the
Borrower hereby represents, warrants and certifies to the Banks that, as of the
date of the Letter of Credit requested herein, each representation and warranty
made by the Borrower in Article IV of the Credit Agreement will be true and
correct, both immediately before and after such Letter of Credit is issued, as
though such representation and warranty was made on and as of the date of such
issuance. (If the foregoing statement is not true and correct, attach a
statement specifying in detail the circumstances thereof and the actions the
Borrower is taking or proposes to take with respect thereto.)
4. This Request for Letter of Credit is executed on ________________,
19__, by a Certifying Officer of the Borrower on behalf of the Borrower. The
undersigned in such capacity, hereby certifies each and every matter contained
herein to be true and correct.
Dated:
-----------------------------------
K-1
<PAGE> 31
Exhibit L
EXHIBIT L
FORM OF L/C APPLICATION
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT
TO: Bank of America National Trust and Savings Association ("Bank").
--------------------------------------
FOR BANK USE ONLY
L/C No._______________________________
--------------------------------------
A. APPLICATION.
______________________________ ("Customer") requests Bank to issue an
irrevocable standby letter of credit ("Letter of Credit") as follows:
[ ] Full text teletransmission
[ ] Airmail with brief preliminary teletransmission advice
[ ] Airmail
[ ] Courier
For account of (Customer Name and Address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In favor of (Beneficiary Name and Address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Advising Bank
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Amount ( )
---------------------------------------------------- -------------------
(in words and figures)
Expiration Date: Drafts to be drawn on and presented at Bank's issuing
Currency
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
unit on or before: . 19 .
------------------------------------- --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Available by drafts drawn at sight on Bank's issuing unit when accompanied by
the following documentation:
1. The original standby letter of credit.
2. The signed statement of the beneficiary worded as follows (state exact
wording that is to appear in the statement accompanying the draft):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
L-1
<PAGE> 32
Special Instructions:
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Customer understands that the risk to Customer is greater if Customer
requests a standby letter of credit which requires only a draft rather than a
standby letter of credit which requires supporting documentation.
Customer understands that the final form of the Letter of Credit may be
subject to such revisions and changes as are deemed necessary or appropriate by
Bank's letter of credit issuing unit and Customer hereby consents to such
revisions and changes.
L-2
<PAGE> 1
EXHIBIT 10.11.2
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
dated as of August 4, 1998
among
IRVINE APARTMENT COMMUNITIES, L.P.,
THE BANKS LISTED HEREIN,
BANK OF AMERICA NT&SA,
as Administrative Agent,
and
WELLS FARGO BANK, N.A., as
Documentation Agent
with
J.P. MORGAN SECURITIES, INC.,
as Syndication Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. THE AMENDMENT .....................................................1
SECTION 1.1. Letters of Credit ...........................................1
ARTICLE II. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT ..............2
ARTICLE III. REPRESENTATIONS OF BORROWER .......................................2
ARTICLE IV. MISCELLANEOUS .....................................................3
SECTION 4.1. Capitalized Terms ...........................................3
SECTION 4.2. Ratification ................................................3
SECTION 4.3. Counterparts ................................................3
SECTION 4.4. Governing Law ...............................................3
</TABLE>
i
<PAGE> 3
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Second
Amendment") dated as of August 4, 1998 among IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership (the "Borrower"), the BANKS listed on the
signature pages hereof ("Banks"), BANK OF AMERICA NT&SA, as Administrative
Agent, and WELLS FARGO BANK, N.A., as Documentation Agent.
WHEREAS, Borrower, the Administrative Agent, the Documentation Agent and
the banks listed on the signature pages thereof entered into that certain
Revolving Credit Agreement ("Original Agreement") dated as of June 27, 1997;
WHEREAS, Borrower, the Banks, the Administrative Agent and the
Documentation Agent entered into that certain First Amendment to Revolving
Credit Agreement ("First Amendment") dated as of July 10, 1998. The Original
Agreement, as modified by the First Amendment shall be referred to herein as the
"Amended Agreement";
WHEREAS, Borrower, the Banks, the Administrative Agent and the
Documentation Agent wish to increase the amount of the Letter of Credit
subfacility set forth in the First Amendment. The Original Agreement, as
modified by the First Amendment and this Second Amendment may be referred to
herein as the "Credit Agreement";
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Borrower, the Banks, the
Administrative Agent and the Documentation Agent agree as follows:
ARTICLE I.
THE AMENDMENT
SECTION 1.1. Letters of Credit. Section 2.16(a) of the Amended Agreement
shall be amended to delete "Twenty-Five Million Dollars ($25,000,000)" and to
insert in lieu thereof "Fifty Million Dollars ($50,000,000)". In addition, the
following shall be inserted after the first sentence of Section 2.16(a):
"Notwithstanding anything to the contrary with respect to the foregoing
sentence, it is not the intention thereof to restrict the issuance of Letters of
Credit in connection with bond indebtedness and/or the enhancement thereof."
<PAGE> 4
ARTICLE II.
CONDITIONS TO EFFECTIVENESS OF THIS SECOND
AMENDMENT
The closing hereunder shall occur on the date when each of the following
conditions is satisfied (or waived by the Administrative Agent and the Banks),
each document to be dated the Closing Date unless otherwise indicated:
(a) the Borrower, the Administrative Agent, each of the Banks and any
Designated Bidders shall have executed and delivered to the Borrower and the
Administrative Agent a duly executed original of this Second Amendment;
(b) the Borrower shall have taken all actions required to authorize the
execution and delivery of this Second Amendment and the performance thereof by
the Borrower, and shall have supplied satisfactory evidence thereof to the
Administrative Agent;
(c) the Administrative Agent shall have received, for its and any other
Bank's account, all fees due and payable pursuant to the Credit Agreement on or
before the Closing Date, and the fees and expenses accrued through the Closing
Date of Gibson, Dunn & Crutcher LLP; and
(d) no Default or Event of Default shall have occurred.
ARTICLE III.
REPRESENTATIONS OF BORROWER
The Borrower hereby represents and warrants to the Administrative Agent,
Documentation Agent and each of the Banks the following:
(a) All of the representations and warranties contained in the Amended
Agreement are true and correct on and as of the date hereof and will be true and
correct after giving effect to this Second Amendment; the foregoing
representation and warranty is not intended to modify Section 6.1(d) of the
Credit Agreement.
(b) No event which constitutes a Default or an Event of Default under
the Amended Agreement, as amended hereby, has occurred and is continuing, or
would result from the execution and delivery of this Second Amendment.
(c) The Borrower has the power and authority to execute and deliver this
Second Amendment and to perform its obligations under the Amended Agreement, as
amended hereby, and all such action has been duly authorized by all necessary
proceeding on its part. The Credit Agreement and each of the Loan Documents has
been duly and validly executed and delivered by the Borrower and constitute a
valid and legally binding obligation of the Borrower enforceable in accordance
with its terms,
2
<PAGE> 5
except as limited by moratorium, bankruptcy, reorganization, insolvency or other
laws affecting creditor's rights generally or by the exercise of judicial
discretion in accordance with general principles of equity.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1 Capitalized Terms. The capitalized terms used herein which
are defined in the Amended Agreement and not otherwise defined herein shall have
the meanings specified therein.
SECTION 4.2 Ratification. The Amended Agreement, as hereby amended, is
in all respects ratified and confirmed, and all other rights and powers created
thereby or thereunder shall be and remain in full force and effect.
SECTION 4.3 Counterparts. This Second Amendment may be executed in
several counterparts, and each counterpart, when so executed and delivered,
shall constitute an original instrument, and all such separate counterparts
shall constitute one and the same instrument.
SECTION 4.4 Governing Law. THIS SECOND AMENDMENT AND THE OTHER LOAN
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE
OF CALIFORNIA EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW (WITHOUT GIVING
EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
3
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership
By: Irvine Apartment Communities,
Inc., a Maryland corporation,
General Partner
By: /s/ JAMES E. MEAD
-----------------------------------
Name: James E. Mead
Title: Senior Vice President
and Chief Financial Officer
By: /s/ SHAWN HOWIE
-----------------------------------
Name: Shawn Howie
Title: Vice President
Corporate Finance and Controller
Facsimile number: (949) 720-5550
Address:
c/o Irvine Apartment Communities, Inc.
550 Newport Center Drive
Newport Beach, California 92660
Attn: Vice President, Corporate Finance and
Controller
<PAGE> 7
Guarantor hereby acknowledges the foregoing Second Amendment and hereby ratifies
and reconfirms its obligations under those certain Guaranties dated as of July
10, 1998 ("Guarantied Obligations"), and expressly acknowledges that such
Guarantied Obligations refer to the obligations as set forth in the Credit
Agreement (as defined in the foregoing Second Amendment).
Irvine Apartment Communities,
Inc., a Maryland corporation
By: /s/ JAMES E. MEAD
----------------------------------------
Name: James E. Mead
Title: Senior Vice President
and Chief Financial Officer
By: /s/ SHAWN HOWIE
----------------------------------------
Name: Shawn Howie
Title: Vice President,
Corporate Finance and Controller
Facsimile number: (949) 720-5550
Address:
Irvine Apartment Communities, Inc.
550 Newport Center Drive
Newport Beach, California 92260
Attn: Vice President, Corporate Finance and
Controller
<PAGE> 8
Commitment Amount
$50,000,000
LIBOR Lending Office: BANK OF AMERICA NT & SA
5 Park Plaza, Suite 500
Irvine, California 92614 By: /s/ RUSSELL RUHNKE
------------------------------------------
Name: Russell Ruhnke
Attn: Russell Ruhnke Title: Vice President
Telecopy: (949) 260-5639
Domestic Lending Office:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
Money Market Lending Office:
555 California Street
10th Floor
San Francisco, California 94101
Attn: Linda Webster
Telecopy: (415) 622-2237
<PAGE> 9
Commitment Amount
$50,000,000
LIBOR Lending Office: WELLS FARGO BANK, NA
Wells Fargo Bank, NA
Disbursement and Operations Center By: /s/ KIM SURCH
2120 East Park Place, Suite 100 --------------------------------
El Segundo, California 90245 Name: Kim Surch
Title: Vice President
Attn: Anne Colvin
Telecopy: (310) 615-1014
Domestic Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (949) 851-9728
Money Market Lending Office:
Wells Fargo Bank, NA
2030 Main Street, Suite 800
Irvine, California 92614
Attn: Office Manager
Telecopy: (949) 851-9728
<PAGE> 10
Commitment Amount
$45,000,000
LIBOR Lending Office: MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
- ------------------------------
- ------------------------------
- ------------------------------ By: /s/ TIMOTHY V. O'DONOVAN
------------------------------------
Attn: Name: Timothy V. O'Donovan
------------------------ Title: Vice President
Telecopy: ( )
--- -------------
Domestic Lending Office:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107
- ------------------------------ Attention: Nancy K. Dunbar
Telecopy: (302) 634-4222
- ------------------------------
- ------------------------------ Domestic and Euro-Currency
Lending Office:
Attn: Nassau, Bahamas Office
------------------------ c/o J.P. Morgan Services, Inc.
Telecopy: ( ) 500 Stanton Christiana Road
--- ------------- Newark, DE 19713-2107
Attention: Kevin M. McCann
Telecopy: (302) 634-1852/1872
Money Market Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
------------------------
Telecopy: ( )
--- -------------
<PAGE> 11
Commitment Amount
$40,000,000
LIBOR Lending Office: U.S. BANK
601 2nd Ave. S.
MPFP0509 By: /s/ STEPHEN BAILEY
Minneapolis, MN 55402 ------------------------------------
Name: Stephen Bailey
Title: Vice President
Attn: Missy Schmidt
Telecopy: (612) 973-0830
Domestic Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
------------------------
Telecopy: ( )
--- -------------
Money Market Lending Office:
- ------------------------------
- ------------------------------
- ------------------------------
Attn:
------------------------
Telecopy: ( )
--- -------------
<PAGE> 12
Commitment Amount
$25,000,000
LIBOR Lending Office: COMMERZBANK AG
LOS ANGELES BRANCH
COMMERZBANK AG
Grand Cayman Branch
c/o COMMERZBANK AG By: /s/ DAVID M. SCHWARZ
New York Branch ------------------------------------
2 World Financial Center Name: David M. Schwarz
New York, NY 10281-1050 Title: Vice President
By: /s/ CHRISTINE H. FINKEL
------------------------------------
Attn: Christine Hunermund Name: Christine H. Finkel
Telecopy: (212) 266-7565 Title: Assistant Vice President
Domestic Lending Office:
COMMERZBANK AG
Grand Cayman Branch
c/o COMMERZBANK AG
New York Branch
2 World Financial Center
New York, NY 10281-1050
Attn: Christine Hunermund
Telecopy: (212) 266-7565
Money Market Lending Office:
COMMERZBANK AG
Grand Cayman Branch
c/o COMMERZBANK AG
New York Branch
2 World Financial Center
New York, NY 10281-1050
Attn: David Buettner
Telecopy: (212) 266-7565
<PAGE> 13
Commitment Amount
$20,000,000
LIBOR Lending Office: FIRST UNION BANK, N.A.
First Union National Bank
301 S. College Street NC-0166 By: /s/ RICHARD T. CALLAHAN, JR.
Charlotte, N.C. 28288 ------------------------------------
Name: Richard T. Callahan, Jr.
Title: Vice President
Attn: Dan Sullivan
Telecopy: (704) 383-6205
Domestic Lending Office:
First Union National Bank
301 S. College Street NC-0166
Charlotte, N.C. 28288
Attn: Dan Sullivan
Telecopy: (704) 383-6205
Money Market Lending Office:
First Union National Bank
301 S. College Street NC-0166
Charlotte, N.C. 28288
Attn: Dan Sullivan
Telecopy: (704) 383-6205
<PAGE> 14
Commitment Amount
$20,000,000
LIBOR Lending Office: FLEET NATIONAL BANK
Fleet National Bank
111 Westminster St., Suite 800 By: /s/ PATRICK T. BURNS
Providence, R.I. 02903 -------------------------------------
Name: Patrick T. Burns
Title: Vice President
Attn: Christina Rioles
Telecopy: (401) 278-5166
Domestic Lending Office:
Fleet National Bank
111 Westminster St., Suite 800
Providence, R.I. 02903
Attn: Christina Rioles
Telecopy: (401) 278-5166
Money Market Lending Office:
Fleet National Bank
111 Westminster St., Suite 800
Providence, R.I. 02903
Attn: Christina Rioles
Telecopy: (401) 278-5166
<PAGE> 15
BANK OF AMERICA NT & SA,
as Administrative Agent
By: /s/ RUSSELL RUHNKE
-------------------------------------
Name: Russell Ruhnke
Title: Vice President
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
DOMESTIC AND LIBOR LENDING OFFICE:
5 Park Plaza, Suite 500
Irvine, California 92614
Attn: Russell Ruhnke
Telecopy: (949) 260-5639
<PAGE> 16
Address: WELLS FARGO BANK, N.A.,
as Documentation Agent
Wells Fargo Bank, NA
2030 Main Street, Suite 800 By /s/ KIM SURCH
Irvine, California 92614 --------------------------------------
Name: Rita Swayne
Title: Assistant Vice President
Attn: Office Manager
Telecopy: (949) 851-9728
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS OF IRVINE APARTMENT COMMUNITIES, INC. FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000912084
<NAME> IRVINE APARTMENT COMMUNITIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,012
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,012
<PP&E> 1,355,867
<DEPRECIATION> 272,698
<TOTAL-ASSETS> 1,320,766
<CURRENT-LIABILITIES> 43,792
<BONDS> 735,892
0
144,082
<COMMON> 201
<OTHER-SE> 197,831
<TOTAL-LIABILITY-AND-EQUITY> 1,320,766
<SALES> 0
<TOTAL-REVENUES> 161,413
<CGS> 0
<TOTAL-COSTS> 73,511
<OTHER-EXPENSES> 6,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,965
<INCOME-PRETAX> 59,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,378
<DISCONTINUED> 0
<EXTRAORDINARY> (42,451)
<CHANGES> 0
<NET-INCOME> 3,682
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS OF IRVINE APARTMENT COMMUNITIES, L.P. FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001038358
<NAME> IRVINE APARTMENT COMMUNITIES, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,012
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,012
<PP&E> 1,355,867
<DEPRECIATION> 272,698
<TOTAL-ASSETS> 1,320,766
<CURRENT-LIABILITIES> 43,792
<BONDS> 735,892
0
144,082
<COMMON> 0
<OTHER-SE> 387,681
<TOTAL-LIABILITY-AND-EQUITY> 1,320,766
<SALES> 0
<TOTAL-REVENUES> 161,413
<CGS> 0
<TOTAL-COSTS> 73,511
<OTHER-EXPENSES> 6,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,965
<INCOME-PRETAX> 59,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,378
<DISCONTINUED> 0
<EXTRAORDINARY> (42,451)
<CHANGES> 0
<NET-INCOME> 8,229
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS OF IAC CAPITAL TRUST FOR THE PERIOD JANUARY
20, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001048922
<NAME> IAC CAPITAL TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 150,005
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
150,000
<COMMON> 5
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 150,005
<SALES> 0
<TOTAL-REVENUES> 8,628
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,628
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
