<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 MARCH 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
<TABLE>
<S> <C>
COMMISSION FILE NUMBER: 1-12478 (IRVINE APARTMENT COMMUNITIES, INC.)
0-22569 (IRVINE APARTMENT COMMUNITIES, L.P.)
1-13721 (IAC CAPITAL TRUST)
</TABLE>
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
IAC CAPITAL TRUST
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C>
MARYLAND 33-0698698
DELAWARE 33-0587829
DELAWARE 91-6452946
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
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.
<TABLE>
<S> <C> <C>
Irvine Apartment Communities,
Inc.: Yes [X] No [ ]
Irvine Apartment Communities,
L.P.: Yes [X] No [ ]
IAC Capital Trust: Yes [X] No [ ]
</TABLE>
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 -- 20,175,892 shares as of April 20, 1999;
Irvine Apartment Communities, L.P.: units of common partnership interest --
45,202,827 units as of April 20, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements -- Irvine Apartment Communities, Inc.
- Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998......................................... 1
- Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998............................. 2
- Consolidated Statements of Changes in Shareholders' Equity
for the three months ended March 31, 1999 and 1998........ 3
- Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998............................. 4
Financial Statements -- Irvine Apartment Communities, L.P.
- Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998......................................... 5
- Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998............................. 6
- Consolidated Statements of Changes in Partners' Capital
for the three months ended March 31, 1999 and 1998........ 7
- Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998............................. 8
Financial Statements -- IAC Capital Trust
- Balance Sheets as of March 31, 1999 and December 31,
1998...................................................... 9
- Statements of Operations and Equity for the three months
ended March 31, 1999 and for the period January 20, 1998
(commencement of operations) to March 31, 1998............ 10
- Statement of Cash Flows for the three months ended March
31, 1999 and for the period January 20, 1998 (commencement
of operations) to March 31, 1998.......................... 11
Notes to Consolidated Financial Statements.................. 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 18
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 28
Item 2. Changes in Securities and Use of Proceeds................... 28
Item 3. Defaults Upon Senior Securities............................. 28
Item 4. Submission of Matters to a Vote of Security Holders......... 28
Item 5. Other Information........................................... 28
Item 6. Exhibits and Reports on Form 8-K............................ 28
SIGNATURES............................................................ 29
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1.
IRVINE APARTMENT COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Real estate assets, at cost
Land...................................................... $ 253,449 $ 248,105
Buildings and improvements................................ 1,191,020 1,172,877
---------- ----------
1,444,469 1,420,982
Accumulated depreciation.................................. (290,494) (281,449)
---------- ----------
1,153,975 1,139,533
Under development, including land......................... 229,671 205,371
---------- ----------
1,383,646 1,344,904
Cash and cash equivalents................................... 4,197 4,888
Restricted cash............................................. 1,670 1,653
Deferred financing costs, net............................... 11,707 12,159
Other assets................................................ 12,615 11,020
---------- ----------
$1,413,835 $1,374,624
========== ==========
LIABILITIES
Mortgages and notes payable
Tax-exempt mortgage bond financings....................... $ 18,000 $ 18,000
Conventional mortgage financings.......................... 128,821 129,539
Mortgage notes payable to The Irvine Company.............. 49,289 49,517
Tax-exempt assessment district debt....................... 21,250 21,292
Unsecured tax-exempt bond financings...................... 334,190 334,190
Unsecured term loan....................................... 100,000 100,000
Unsecured notes payable................................... 99,295 99,280
Unsecured line of credit.................................. 28,000
---------- ----------
778,845 751,818
Accounts payable and accrued liabilities.................... 50,034 38,871
Security deposits........................................... 9,798 9,467
---------- ----------
838,677 800,156
MINORITY REDEEMABLE PREFERRED INTERESTS
Series A.................................................. 144,113 144,097
Series B.................................................. 48,693 48,692
Minority Interest........................................... 185,977 185,821
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; 20,176 shares and 20,164 shares issued and
outstanding, respectively................................. 202 202
Excess stock, par value $0.01 per share; 160,000 shares
authorized; no shares issued or outstanding...............
Additional paid-in capital.................................. 242,889 242,495
Accumulated deficit......................................... (46,716) (46,839)
---------- ----------
196,375 195,858
---------- ----------
$1,413,835 $1,374,624
========== ==========
</TABLE>
Note: The balance sheet at December 31, 1998 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.
1
<PAGE> 4
IRVINE APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
--------- ---------
(UNAUDITED, IN
THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
REVENUES
Rental income............................................... $58,020 $49,587
Other income................................................ 1,629 1,213
Interest income............................................. 129 769
------- -------
59,778 51,569
------- -------
EXPENSES
Property expenses........................................... 12,374 11,982
Real estate taxes........................................... 4,570 4,006
Interest expense, net....................................... 6,948 7,112
Amortization of deferred financing costs.................... 453 491
Depreciation and amortization............................... 9,214 8,041
General and administrative, including costs associated with
The Irvine Company acquisition offer...................... 4,348 2,158
------- -------
37,907 33,790
------- -------
INCOME BEFORE MINORITY REDEEMABLE PREFERRED INTERESTS AND
MINORITY INTEREST IN INCOME............................... 21,871 17,779
Minority redeemable preferred interests..................... 4,188 2,441
Minority interest in income................................. 9,792 8,522
------- -------
NET INCOME.................................................. $ 7,891 $ 6,816
======= =======
EARNINGS PER SHARE:
Basic....................................................... $ 0.39 $ 0.34
Diluted..................................................... $ 0.39 $ 0.34
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic....................................................... 20,172 19,932
Diluted..................................................... 20,307 20,049
======= =======
</TABLE>
See accompanying notes.
2
<PAGE> 5
IRVINE APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
(UNAUDITED, IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Balance at beginning of period.............................. $ 202 $ 199
Proceeds from stock options exercised..................... 1
-------- --------
Balance at end of period.................................... $ 202 $ 200
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period.............................. $242,495 $235,487
Net proceeds from dividend reinvestment and additional
cash investment plan................................... 1,584
Proceeds from stock options exercised..................... 349
Stock awards issued....................................... 394 240
-------- --------
Balance at end of period.................................... $242,889 $237,660
======== ========
ACCUMULATED DEFICIT
Balance at beginning of period.............................. $(46,839) $(24,766)
Net income................................................ 7,891 6,816
Distributions to shareholders............................. (7,768) (7,466)
-------- --------
Balance at end of period.................................... $(46,716) $(25,416)
======== ========
TOTAL SHAREHOLDERS' EQUITY.................................. $196,375 $212,444
======== ========
SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period.............................. 20,164 19,901
Additional shares issued under the dividend reinvestment
and additional cash investment plan.................... 53
Stock options exercised................................... 21
Stock awards issued....................................... 12 8
-------- --------
Balance at end of period.................................... 20,176 19,983
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 6
IRVINE APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 7,891 $ 6,816
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred financing costs.................. 453 491
Depreciation and amortization............................. 9,214 8,041
Minority interest in income............................... 9,792 8,522
Redeemable preferred interest............................. 4,188 2,441
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Restricted cash........................................ (17) (86)
Other assets........................................... (1,745) (1,711)
Accounts payable and accrued liabilities............... 8,710 4,474
Security deposits...................................... 331 400
-------- --------
Net Cash Provided by Operating Activities................... 38,817 29,388
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets........ (967) (726)
Capital investments in real estate assets................... (43,961) (29,641)
-------- --------
Net Cash Used in Investing Activities....................... (44,928) (30,367)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit............................ 37,000 2,000
Payments on lines of credit................................. (9,000) (77,000)
Payments on tax-exempt mortgage bond financings............. (943)
Principal payments.......................................... (988) (915)
Additions to deferred financing costs....................... (15)
Net proceeds from issuance of redeemable preferred
interest.................................................. 143,985
Net proceeds from dividend reinvestment and additional cash
investment plan........................................... 2,624
Proceeds from stock options exercised....................... 348
Distributions to redeemable preferred interest holders...... (4,188) (2,441)
Distributions to The Irvine Company and certain of its
affiliates................................................ (9,607) (9,317)
Distributions to other common limited partners.............. (29) (28)
Distributions to shareholders............................... (7,768) (7,466)
-------- --------
Net Cash Provided by Financing Activities................... 5,420 50,832
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... (691) 49,853
Cash and Cash Equivalents at Beginning of Period............ 4,888 4,624
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 4,197 $ 54,477
======== ========
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized................. $ 892 $ 5,737
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 7
IRVINE APARTMENT COMMUNITIES, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Real estate assets, at cost
Land...................................................... $ 253,449 $ 248,105
Buildings and improvements................................ 1,191,020 1,172,877
---------- ----------
1,444,469 1,420,982
Accumulated depreciation.................................. (290,494) (281,449)
---------- ----------
1,153,975 1,139,533
Under development, including land......................... 229,671 205,371
---------- ----------
1,383,646 1,344,904
Cash and cash equivalents................................... 4,197 4,888
Restricted cash............................................. 1,670 1,653
Deferred financing costs, net............................... 11,707 12,159
Other assets................................................ 12,615 11,020
---------- ----------
$1,413,835 $1,374,624
========== ==========
LIABILITIES
Mortgages and notes payable
Tax-exempt mortgage bond financings....................... $ 18,000 $ 18,000
Conventional mortgage financings.......................... 128,821 129,539
Mortgage notes payable to The Irvine Company.............. 49,289 49,517
Tax-exempt assessment district debt....................... 21,250 21,292
Unsecured tax-exempt bond financings...................... 334,190 334,190
Unsecured term loan....................................... 100,000 100,000
Unsecured notes payable................................... 99,295 99,280
Unsecured line of credit.................................. 28,000
---------- ----------
778,845 751,818
Accounts payable and accrued liabilities.................... 50,034 38,871
Security deposits........................................... 9,798 9,467
---------- ----------
838,677 800,156
REDEEMABLE PREFERRED INTERESTS
Redeemable Series A preferred limited partner units, 6,000
preferred partnership units outstanding................... 144,113 144,097
Redeemable Series B preferred limited partner units, 2,000
preferred partnership units outstanding................... 48,693 48,692
---------- ----------
192,806 192,789
---------- ----------
PARTNERS' CAPITAL
General partner, 20,176 common partnership units at March
31, 1999 and 20,164 at December 31, 1998.................. 196,375 195,858
Common limited partners, 25,027 common partnership units at
March 31, 1999 and December 31, 1998...................... 185,977 185,821
---------- ----------
382,352 381,679
---------- ----------
$1,413,835 $1,374,624
========== ==========
</TABLE>
Note: The balance sheet at December 31, 1998 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.
5
<PAGE> 8
IRVINE APARTMENT COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
--------- ---------
(UNAUDITED, IN
THOUSANDS, EXCEPT PER
UNIT AMOUNTS)
<S> <C> <C>
REVENUES
Rental income............................................... $58,020 $49,587
Other income................................................ 1,629 1,213
Interest income............................................. 129 769
------- -------
59,778 51,569
------- -------
EXPENSES
Property expenses........................................... 12,374 11,982
Real estate taxes........................................... 4,570 4,006
Interest expense, net....................................... 6,948 7,112
Amortization of deferred financing costs.................... 453 491
Depreciation and amortization............................... 9,214 8,041
General and administrative, including costs associated with
The Irvine Company acquisition offer...................... 4,348 2,158
------- -------
37,907 33,790
------- -------
INCOME BEFORE REDEEMABLE PREFERRED INTERESTS................ 21,871 17,779
Redeemable preferred interests.............................. 4,188 2,441
------- -------
NET INCOME.................................................. $17,683 $15,338
======= =======
ALLOCATION OF NET INCOME:
General Partner............................................. $ 7,891 $ 6,816
Common Limited Partners..................................... $ 9,792 $ 8,522
======= =======
EARNINGS PER COMMON UNIT:
Basic....................................................... $ 0.39 $ 0.34
Diluted..................................................... $ 0.39 $ 0.34
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING:
Basic....................................................... 45,199 44,863
Diluted..................................................... 45,334 44,980
======= =======
</TABLE>
See accompanying notes.
6
<PAGE> 9
IRVINE APARTMENT COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
IRVINE APARTMENT
COMMUNITIES, INC. LIMITED PARTNERS TOTAL
----------------- ---------------- --------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
PARTNERS' CAPITAL
Balance at January 1, 1998............................ $210,920 $210,307 $421,227
Net income.......................................... 6,816 8,522 15,338
Contributions....................................... 2,174 1,039 3,213
Distributions....................................... (7,466) (9,345) (16,811)
-------- -------- --------
Balance at March 31, 1998............................. $212,444 $210,523 $422,967
======== ======== ========
Balance at January 1, 1999............................ $195,858 $185,821 $381,679
Net income.......................................... 7,891 9,792 17,683
Contributions....................................... 394 394
Distributions....................................... (7,768) (9,636) (17,404)
-------- -------- --------
Balance at March 31, 1999............................. $196,375 $185,977 $382,352
======== ======== ========
COMMON PARTNERSHIP UNITS OUTSTANDING
Balance at January 1, 1998............................ 19,901 24,919 44,820
Additional common partnership units issued.......... 82 34 116
-------- -------- --------
Balance at March 31, 1998............................. 19,983 24,953 44,936
======== ======== ========
Balance at January 1, 1999............................ 20,164 25,027 45,191
Additional common partnership units issued.......... 12 12
-------- -------- --------
Balance at March 31, 1999............................. 20,176 25,027 45,203
======== ======== ========
</TABLE>
See accompanying notes.
7
<PAGE> 10
IRVINE APARTMENT COMMUNITIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 17,683 $ 15,338
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred financing costs.................. 453 491
Depreciation and amortization............................. 9,214 8,041
Redeemable preferred interest............................. 4,188 2,441
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Restricted cash........................................ (17) (86)
Other assets........................................... (1,745) (1,711)
Accounts payable and accrued liabilities............... 8,710 4,474
Security deposits...................................... 331 400
-------- --------
Net Cash Provided by Operating Activities................... 38,817 29,388
======== ========
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets........ (967) (726)
Capital investments in real estate assets................... (43,961) (29,641)
-------- --------
Net Cash Used in Investing Activities....................... (44,928) (30,367)
======== ========
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit............................ 37,000 2,000
Payments on lines of credit................................. (9,000) (77,000)
Payments on tax-exempt mortgage bond financings............. (943)
Principal payments.......................................... (988) (915)
Additions to deferred financing costs....................... (15)
Net proceeds from issuance of redeemable preferred limited
partner units............................................. 143,985
Distributions to redeemable preferred limited partner unit
holders................................................... (4,188) (2,441)
Contributions from partners................................. 2,972
Distributions to partners................................... (17,404) (16,811)
-------- --------
Net Cash Provided by Financing Activities................... 5,420 50,832
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... (691) 49,853
Cash and Cash Equivalents at Beginning of Period............ 4,888 4,624
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 4,197 $ 54,477
======== ========
Supplemental Disclosure of Cash Flow Information
Interest paid, net of amounts capitalized................. $ 892 $ 5,737
======== ========
</TABLE>
See accompanying notes.
8
<PAGE> 11
IAC CAPITAL TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED, DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 5 $ 5
Investment in Subsidiary.................................... 150,000 150,000
-------- --------
$150,005 $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 $150,000
Equity
Common Securities, 20,000 securities authorized, 200
securities issued and outstanding......................... 5 5
-------- --------
$150,005 $150,005
======== ========
</TABLE>
Note: The balance sheet at December 31, 1998 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.
9
<PAGE> 12
IAC CAPITAL TRUST
STATEMENTS OF OPERATIONS AND EQUITY
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 20, 1998
(COMMENCEMENT
THREE MONTHS ENDED OF OPERATIONS)
MARCH 31, 1999 TO MARCH 31, 1998
------------------ -----------------
(UNAUDITED, IN THOUSANDS,
EXCEPT PER SECURITY AMOUNTS)
<S> <C> <C>
REVENUE
Income from investment in subsidiary...................... $3,094 $2,441
------ ------
INCOME BEFORE REDEEMABLE PREFERRED INTEREST............... 3,094 2,441
Redeemable preferred interest............................. 3,094 2,441
------ ------
NET INCOME................................................ $ 0 $ 0
====== ======
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.
10
<PAGE> 13
IAC CAPITAL TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 20, 1998
(COMMENCEMENT
THREE MONTHS ENDED OF OPERATIONS)
MARCH 31, 1999 TO MARCH 31, 1998
------------------ -----------------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 0 $ 0
Adjustments to reconcile net income to net cash provided by
operating activities:
Redeemable preferred interest............................... 3,094 2,441
------- ---------
Net Cash Provided by Operating Activities................... 3,094 2,441
------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary.................................... (150,000)
------- ---------
Net Cash Used in Investing Activities....................... 0 (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............... (3,094) (2,441)
------- ---------
Net Cash Provided by Financing Activities................... (3,094) 147,564
------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 0 5
Cash and Cash Equivalents at beginning of period............ 5 0
------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 5 $ 5
======= =========
</TABLE>
See accompanying notes.
11
<PAGE> 14
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 March 31, 1999, the Company had a 44.6% general
partnership interest in and was the sole managing general partner of the
Operating Partnership. At March 31, 1999, 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. 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. In May
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 March 31, 1999, the Operating Partnership owned 65 apartment communities
representing 16,630 operating apartment units and 2,849 units under development
(collectively, the "Properties"). In May 1997, the Operating Partnership broke
ground on its first property outside of the Irvine Ranch, an apartment community
located in Northern California's Silicon Valley. 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 in preferred
limited partner units of the Operating Partnership.
Going Private Transaction
On February 1, 1999, the Company and TIC Acquisition LLC, an indirect
wholly owned subsidiary of The Irvine Company, entered into a definitive merger
agreement providing for a merger of the Company into TIC Acquisition LLC
pursuant to which the Company's shareholders will receive $34 per share in cash.
The transaction, which is subject to the approval of the holders of (i) at least
two-thirds of the outstanding shares of common stock of the Company and (ii) a
number of shares of common stock of the Company (excluding the shares held by
TIC Acquisition LLC and its affiliates) representing a majority of the total
number of shares of common stock of the Company entitled to vote, and other
customary conditions, is expected to be completed late in the second quarter or
early in the third quarter of 1999.
12
<PAGE> 15
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 2 -- BASIS OF PRESENTATION
The accompanying financial statements of the Company include the
consolidated accounts of the Operating Partnership. The accompanying financial
statements of the Operating Partnership include the consolidated accounts of 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 in the
Operating Partnership and accounts for its investment using the equity method.
During the fourth quarter of 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information
("Statement No. 131"). Statement No. 131 superseded FASB Statement No. 14,
Financial Reporting for Segments of a Business Enterprise. Statement No. 131
establishes standards for the way that public business enterprises report
information regarding reportable operating segments. The adoption of Statement
No. 131 did not affect the results of operations or financial position of the
Company.
The Company operates and develops apartment communities in California which
generated rental and other income through the leasing of apartment units to a
diverse base of renters. The Company separately evaluates the performance of
each of its apartment communities. However, because each of the apartment
communities have similar economic characteristics, facilities, services and
tenants, the apartment communities have been aggregated into a single dominant
apartment communities segment.
The Company evaluates performance and allocates resources primarily based
on the net operating income ("NOI") of individual apartment communities. NOI is
defined by the Company as rental and other income less property expenses and
real estate taxes. Accordingly, NOI excludes certain expenses included in the
determination of net income. NOI from apartment communities totaled $42,705 and
$34,812 for the three months ended March 31, 1999 and 1998, respectively. All
other segment disclosures are included in the Company's Annual Report on Form
10-K/A for the year ended December 31, 1998.
Profits and losses of the Operating Partnership are generally allocated to
the Company and to the common limited partners based on their respective
ownership interests in the Operating Partnership. The holders of the Series A
redeemable preferred limited partner units and redeemable preferred securities
are entitled to distributions/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.
The holders of the Series B redeemable preferred limited partner units are
entitled to distributions at an annual rate of 8 3/4% of the stated value per
unit. The stated value of each unit 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
March 31, 1999 and December 31, 1998, and the revenues and expenses for the
three months ended March 31, 1999 and 1998. Actual results could differ from
those estimates.
Certain amounts in the 1998 financial statements have been reclassified to
conform with financial statement presentations in 1999.
13
<PAGE> 16
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. These financial statements
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto included in the Company's, the Operating Partnership's and the
Trust's Annual Report on Form 10-K/A for the year ended December 31, 1998.
NOTE 3 -- MORTGAGES AND NOTES PAYABLE
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 March 31, 1999, the
Company and the Operating Partnership were in compliance with all of these
covenants. At March 31, 1999, the Company had letters of credit under the
facility totaling $29.1 million related to land and building purchases (see
"Capital Investments in New Development"). The letters of credit reduce the
remaining amount available under the line of credit. As of March 31, 1999, $28.0
million was outstanding under the line of credit and $192.9 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 March 31, 1999. 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. Availability under the Operating Partnership's shelf
registration statement was $250 million at March 31, 1999. 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 shelf registration statement by the amount of medium-term notes
issued. Similarly, issuances of other debt securities under the Operating
14
<PAGE> 17
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Partnership's shelf registration statement will reduce the amount of medium-term
notes that may be issued. As of March 31, 1999, there have been no issuances of
medium-term notes.
NOTE 4 -- MINORITY INTEREST; SHAREHOLDERS' EQUITY; AND PARTNERS' CAPITAL
The Company and the Operating Partnership each paid cash distributions of
$0.385 per share (or common partnership unit) on February 28, 1999. The
Operating Partnership and the Trust paid cash distributions of $0.52 per series
A preferred limited partner unit (or preferred security) on March 31, 1999. The
Operating Partnership paid cash distributions of $0.55 per Series B preferred
limited partner unit on March 31, 1999. During the first quarter of 1998, the
Company and the Operating Partnership each paid a cash dividend of $0.375 per
share (or common partnership unit). Also during the first quarter of 1998, the
Operating Partnership and the Trust each paid cash distributions/dividends of
$0.42 per series A preferred limited partner unit (or preferred security).
RECONCILIATION OF THE OPERATING PARTNERSHIP'S COMMON PARTNERSHIP UNITS
OUTSTANDING
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999 THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------- --------------------------------------
THE IRVINE THE IRVINE
COMPANY COMPANY
AND CERTAIN AND CERTAIN
OF ITS OF ITS
COMPANY AFFILIATES OTHER TOTAL COMPANY AFFILIATES OTHER TOTAL
------- ----------- ----- ------ ------- ----------- ----- ------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period.................. 20,164 24,952 75 45,191 19,901 24,844 75 44,820
Stock awards issued and options exercised....... 12 12 29 29
Dividend reinvestment and additional cash
investment plan............................... 53 34 87
------ ------ --- ------ ------ ------ --- ------
Balance at end of period........................ 20,176 24,952 75 45,203 19,983 24,878 75 44,936
------ ------ --- ------ ------ ------ --- ------
Ownership interest at end of period............. 44.6% 55.2% 0.2% 100% 44.4% 55.4% 0.2% 100%
====== ====== === ====== ====== ====== === ======
</TABLE>
The following tables represent a reconciliation of the Company's minority
interest balances and the computation of the minority interest in income.
RECONCILIATION OF MINORITY INTEREST
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period.............................. $185,821 $210,307
Minority interest in income................................. 9,792 8,522
Distributions............................................... (9,636) (9,345)
Contributions under dividend reinvestment and additional
cash investment plan...................................... 1,039
-------- --------
Balance at end of period.................................... $185,977 $210,523
======== ========
</TABLE>
15
<PAGE> 18
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
COMPUTATION OF MINORITY INTEREST IN INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Income before minority interest............................. $17,683 $15,338
Income allocated to the Company based on its ownership
interest.................................................. (7,891) (6,816)
------- -------
Minority interest in income................................. $ 9,792 $ 8,522
======= =======
</TABLE>
NOTE 5 -- MINORITY REDEEMABLE PREFERRED INTERESTS
In January 1998, the Trust issued 6.0 million of 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 offering expenses, all of which were paid by the Operating
Partnership, to repay the outstanding balance on the Operating Partnership's
credit facility and to fund development.
In November 1998, the Operating Partnership issued 2.0 million of 8 3/4%
Series B Preferred Limited Partner Units. The Operating Partnership used the net
proceeds to reduce the outstanding balance on its unsecured line of credit.
NOTE 6 -- CERTAIN TRANSACTIONS WITH RELATED PARTIES
Costs incurred by the Company are reimbursed as a cost of 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 $73,000 and $67,000 for the three months ended March 31, 1999 and 1998,
respectively. The Irvine Company and the Company jointly purchase employee
health care insurance and property and casualty insurance. The Company incurred
rent totaling $149,000 and $129,000 for the three months ended March 31, 1999
and 1998, respectively, related to leases with The Irvine Company that expire at
the end of 2003. IAMC incurred rent totaling $44,000 for the three months ended
March 31, 1999, related to a lease with The Irvine Company. For the three months
ended March 31, 1998, The Irvine Company contributed $1,039,000, in connection
with common limited partnership unit and stock issuances under the dividend
reinvestment and additional cash investment plan. The Irvine Company made no
contributions under the dividend reinvestment and additional cash investment
plan for the first three months of 1999.
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 unsecured notes payable. 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 $29,000 and $87,000 for the three months ended March
31, 1999 and 1998, respectively.
16
<PAGE> 19
IRVINE APARTMENT COMMUNITIES, INC.,
IRVINE APARTMENT COMMUNITIES, L.P. AND
IAC CAPITAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 7 -- ACQUISITION OFFER FROM THE IRVINE COMPANY
On February 1, 1999, the Company and TIC Acquisition LLC, an indirect
wholly owned subsidiary of The Irvine Company, entered into a definitive merger
agreement providing for a merger of the Company into TIC Acquisition LLC
pursuant to which the Company's shareholders will receive $34 per share in cash.
The transaction, which is subject to the approval of the holders of (i) at least
two-thirds of the outstanding shares of common stock of the Company and (ii) a
number of shares of common stock of the Company (excluding the shares held by
TIC Acquisition LLC and its affiliates) representing a majority of the total
number of shares of common stock of the Company entitled to vote, and other
customary conditions, is expected to be completed late in the second quarter or
early in the third quarter of 1999. Because the terms of the transaction are
subject to shareholder approval, there can be no assurance that the transaction
will be consummated.
17
<PAGE> 20
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 month period ended March 31, 1999 (unaudited) with the activities of the
Company for the three month period ended March 31, 1998 (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/ A for the
year ended December 31, 1998.
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 MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998.
The Company's income after payment of minority redeemable preferred
interests but before minority interest in income was $17.7 million for the three
months ended March 31, 1999, up from $15.3 million for the same period of 1998.
The Company's financial results improved in 1999 due to the contributions of
newly delivered rental units from its development program, properties that
stabilized during 1998 and an acquisition in 1998, as well as an increase in
rental rates within its stabilized portfolio and a slight increase in physical
occupancy partially offset by an increase in minority redeemable preferred
interest due to the issuance of preferred securities in January and November
1998 and costs associated with the acquisition offer by The Irvine Company.
18
<PAGE> 21
REVENUE AND EXPENSE DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
COMMUNITIES STABILIZED BEFORE 1998 (MORE THAN TWO YEARS)(a)
Number of communities..................................... 51 51
Number of units at end of period.......................... 14,991 14,991
Operating revenues........................................ $52,394 $49,524
Property expenses......................................... $10,902 $11,426
Real estate taxes......................................... $ 3,896 $ 3,955
Depreciation and amortization of real estate assets....... $ 7,735 $ 7,682
COMMUNITIES STABILIZED IN 1998 (LESS THAN TWO YEARS)(b)(c)
Number of communities..................................... 4
Number of units at end of period.......................... 984
Operating revenues........................................ $ 4,780
Property expenses......................................... $ 906
Real estate taxes......................................... $ 411
Depreciation and amortization of real estate assets....... $ 892
LEASE-UP COMMUNITIES(c)(d)
Number of communities..................................... 4
Number of units at end of period.......................... 655
Operating revenues........................................ $ 2,475
Property expenses......................................... $ 566
Real estate taxes......................................... $ 263
Depreciation and amortization of real estate assets....... $ 418
</TABLE>
- ---------------
(a) Represents "same store" communities.
(b) Represents three communities (768 units) that reached stabilized occupancy
(95%) at different dates in 1998 and a 216-unit property acquired during
1998.
(c) No year over year comparison is provided since the properties were not all
stabilized for comparable periods of 1998.
(d) Represents two communities that started lease-up at different dates in 1998
and two properties that started lease-up in 1999.
OPERATING REVENUES (rental and other income) increased by 17.3% to $59.6
million in the first quarter of 1999, up from $50.8 million in the same period
of 1998. Operating revenues rose in 1999 because of higher rental rates and a
larger average number of rental units in service, primarily as a result of new
development. Newly delivered units along with unit growth in the Company's
portfolio stabilized less than two years added $7.3 million to operating
revenues from eight properties in the first quarter of 1999. Operating revenues
generated by communities stabilized more than two years increased 5.8% in 1999
due to an improvement in the portfolio's average rental rate and an increase in
average physical occupancy to 94.3% from 93.9%. The average monthly rental rate
for these communities increased 5.4% to $1,222 in the first quarter of 1999,
from $1,159 in the first quarter of 1998.
PROPERTY EXPENSES increased by 3.3% to $12.4 million in the first quarter
of 1999, up from $12.0 million in the same period of 1998. The 1999 increase
reflects incremental expenses from newly delivered rental units and communities
stabilized during 1998. Property expenses for communities stabilized more than
two years decreased by $0.5 million to $10.9 million in the first quarter of
1999. Average monthly property expenses generated by these communities decreased
to $242 per unit in the first quarter of 1999 from $254 per unit in the first
quarter of 1998. Newly delivered units and communities stabilized less than two
years added
19
<PAGE> 22
$1.5 million to property expenses from eight properties in the first quarter of
1999. To improve operating efficiency and reduce operating costs, the Company
formed IAMC in April 1998 to manage the Company's properties. The personnel and
office costs of IAMC are included in property expenses. For comparative
purposes, management fees prior to the formation of IAMC have been included in
property expenses.
REAL ESTATE TAXES totaled $4.6 million in the first quarter of 1999 and
$4.0 million in the same period of 1998. Real estate taxes increased in the
first quarter of 1999 due primarily to the addition of new rental units.
NET INTEREST EXPENSE decreased to $6.9 million in the first quarter of 1999
compared to $7.1 million in the same period of 1998. Total interest incurred was
$11.0 million in the first quarter of 1999 and $9.8 million in the same period
of 1998. Total interest incurred increased due to the impact of the Company's
unsecured term loan which was outstanding for the entire quarter partially
offset by lower interest rates in 1999. 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 $4.0 million in the first
quarter of 1999 and $2.7 million in the same period of 1998.
AMORTIZATION OF DEFERRED FINANCING COSTS was $0.5 million in the first
quarter of 1999 and 1998.
DEPRECIATION AND AMORTIZATION EXPENSE increased 15.0% to $9.2 million in
the first quarter of 1999, up from $8.0 million in the same period of 1998. The
increase primarily reflects the completion and delivery of newly developed
rental units.
GENERAL AND ADMINISTRATIVE EXPENSE increased to $4.3 million in the first
quarter of 1999, up from $2.2 million in the same period of 1998. The increase
in the first quarter of 1999 was the result of $2.6 million of costs related to
The Irvine Company's acquisition offer, partially offset by decreased staffing
levels.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash provided by operations will be adequate to
meet both operating requirements and payment of distributions by the Company in
accordance with REIT requirements in both the short and long term.
LIQUIDITY: The Company expects to meet its short-term and 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. Availability under the
credit facility was $192.9 million at March 31, 1999.
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 March 31, 1999. 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. Availability under the Operating Partnership's shelf
registration statement was $250 million at March 31, 1999. 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
20
<PAGE> 23
of medium-term notes will reduce availability under the Operating Partnership's
shelf registration statement by the amount of medium-term notes issued.
Similarly, issuances of other debt securities under the Operating Partnership's
shelf registration statement will reduce the amount of medium-term notes that
may be issued. As of March 31, 1999, there have been no issuances of medium-term
notes.
PREFERRED INTERESTS: 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. In November 1998, the Operating
Partnership issued 2.0 million of 8 3/4% Series B Preferred Limited Partner
Units. The Operating Partnership used the net proceeds to reduce the outstanding
balance on its unsecured line of credit.
DEBT: The Company's conventional 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 6.04% at March 31,
1999.
DEBT STRUCTURE AT MARCH 31, 1999
<TABLE>
<CAPTION>
DEBT WEIGHTED AVERAGE
BALANCE INTEREST RATE
------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Fixed rate debt
Conventional mortgage financings.......................... $128.8 7.12%
Mortgage notes payable to The Irvine Company.............. 49.3 5.75%
Tax-exempt assessment district debt....................... 5.2 6.29%
Unsecured tax-exempt bond financings...................... 334.2 4.93%
Unsecured notes payable................................... 99.3 7.10%
Unsecured term loan....................................... 100.0 6.39%
------ ----
Total fixed rate debt..................................... 716.8 5.89%
------ ----
Variable rate debt
Tax-exempt mortgage bond financings....................... 18.0 3.91%
Tax-exempt assessment district debt....................... 16.0 3.61%
Unsecured line of credit.................................. 28.0 6.07%
------ ----
Total variable rate debt.................................. 62.0 4.81%
------ ----
Total debt................................................ $778.8 5.81%
====== ====
</TABLE>
OPERATING ACTIVITIES: Cash provided by operating activities was $38.8
million and $29.4 million in the first three months of 1999 and 1998,
respectively. Cash provided by operating activities increased in the first three
months of 1999 compared to the same period in 1998 due to 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
and occupancy.
INVESTING ACTIVITIES: Cash used in investing activities was $44.9 million
and $30.4 million in the first three months of 1999 and 1998, respectively. This
increase reflects increased development activity in the first three months of
1999 as compared to 1998.
FINANCING ACTIVITIES: Cash provided by financing activities was $5.4
million and $50.8 million in the first three months of 1999 and 1998,
respectively. The Operating Partnership (and the Trust) made distributions of
$3.1 million to holders of the Trust's Series A Preferred Securities in the
first three months of 1999 compared to $2.4 million in the first three months of
1998. In addition, the Operating Partnership made distributions of
21
<PAGE> 24
$1.1 million to holders of the Operating Partnership's Series B preferred
limited partner interests. Additionally, the Company paid $17.4 million in
distributions to common shareholders and common limited partners in the first
three months of 1999 compared to $16.8 million in the first three months of
1998.
CAPITAL EXPENDITURES
Capital expenditures consist of capital improvements and investments in
real estate assets. Capital improvements to operating real estate assets totaled
$1.0 million and $0.7 million in the first three months of 1999 and 1998,
respectively. Capital investments in real estate assets totaled $44.0 million
and $29.6 million in the first three months of 1999 and 1998, respectively.
These investments consisted of new development and nonrecurring capital
replacements.
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 March
31, 1999, the Company had approximately 2,000 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 three months ended March 31, 1999, there were no costs
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 IMPROVEMENTS WITHIN ALL STABILIZED COMMUNITIES: The
following table details expenditures for recurring capital improvements for all
communities for the first three months of 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Carpet replacements....................................... $362
Exterior building enhancements, siding and stucco......... 108
Upgrades, renovations and major building items............ 10
Appliances, water heaters and air conditioning............ 68
Roofing, concrete and pavement............................ 105
Equipment and other....................................... 314
----
Total........................................... $967
====
</TABLE>
RECURRING CAPITAL IMPROVEMENTS WITHIN COMMUNITIES STABILIZED BEFORE
1998: Expenditures for recurring capital improvements within communities
stabilized before 1998 totaled $1.0 million and $0.7 million in the first three
months of 1999 and 1998, respectively. Average recurring capital improvements
per unit were $64 and $49 in the first three months of 1999 and 1998,
respectively. Expenditures for recurring capital improvements for the full year
1999 are expected to be approximately $0.5 million higher than full year 1998
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.
RECURRING CAPITAL IMPROVEMENTS WITHIN COMMUNITIES STABILIZED IN OR AFTER
1998: Expenditures for recurring capital improvements within communities
stabilized in or after 1998 totaled $14,000 for the first three months of 1999.
Expenditures for recurring capital improvements are expected to be $144,000 for
the full year 1999.
NONRECURRING CAPITAL REPLACEMENTS: Nonrecurring capital replacements
consist of special programs to upgrade and enhance a community to achieve higher
rental rates. Expenditures for nonrecurring capital replacements totaled $1.2
million in the first three months of 1999. These expenditures were made at six
properties. Costs to complete the special programs at the six properties are
expected to be approximately $10 million which will be spent over the next two
years.
CAPITAL INVESTMENTS IN NEW DEVELOPMENT: Currently, the Company has eight
apartment communities under development or construction that will require total
expenditures of approximately $545 million, of which $227 million had been
incurred at March 31, 1999. Funding for these developments is expected to come
from
22
<PAGE> 25
the Operating Partnership's $250 million unsecured revolving credit facility (of
which $192.9 million was available as of March 31, 1999), debt offerings of the
Operating Partnership and preferred securities offerings of the Trust. In
addition, the Company may issue other equity securities as discussed in the
Liquidity section.
CONSTRUCTION INFORMATION
<TABLE>
<CAPTION>
COMMENCEMENT TOTAL
COMMENCEMENT OF LEASING ESTIMATED COSTS
APARTMENT COMMUNITY LOCATION UNITS OF CONSTRUCTION ACTIVITY (IN MILLIONS)
------------------- ------------ ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
On Ranch:
Brittany at Oak Creek(1)...... Irvine 393 12/97 1/99 $ 45
Park Place.................... Irvine 1,226 9/98 219
----- ----
1,619 264
----- ----
Off Ranch:
Arcadia at Stonecrest(1)...... San Diego 336 4/98 2/99 45
The Colony at Aventine........ La Jolla 232 5/98 46
The Villas at Bair Island
Marina..................... Redwood City 155 6/98 40
1221 Ocean Avenue............. Santa Monica 120 8/98 81
Lonestar...................... Redwood City 206 11/98 39
Olson Ranch................... Sunnyvale 298 11/98 41
----- ----
1,347 292
----- ----
Total................. 2,966 $556
===== ====
</TABLE>
- ---------------
(1) These two properties were in lease-up at March 31, 1999, with 17 units
delivered and 87 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.
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 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.
23
<PAGE> 26
The success of the Irvine Ranch as a master-planned development is, in
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 4.5 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 17,700 students and
6,200 employees. The proximity of the Irvine Ranch properties 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 "99" is recognized as the year "1999"). Because of the nature of its
operations, the Company does not believe that its business, results of
operations or financial condition will be materially adversely affected by a
failure of these systems. Nonetheless, 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 general exposure types--infrastructure, applications software,
third-party suppliers and customers ("third parties"), and process control and
instrumentation ("PC&I"). The general resolution phases common to all sections
are: (1) compiling 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 completion percentages of the general resolution phases are based on
the level of effort expended to date versus the level of effort estimated to be
necessary to complete the task.
The infrastructure and applications software sections consist of hardware
and systems software. As of March 31, 1999, all infrastructure has been repaired
or replaced and is believed to be Year 2000 compliant. As of March 31, 1999,
approximately 90% of the Company's applications software had been confirmed to
be Year 2000 compliant. The Company expects to complete the remaining assessment
and repair or replacement, including testing, during the second quarter of 1999.
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 issue. The state of readiness of the Company's third
parties is based primarily on representations from such parties. The Company has
queried 100% of its significant suppliers and subcontractors that do not share
information systems with the Company. The Company has received written Year 2000
status letters from all of the significant suppliers and subcontractors queried.
Of the significant suppliers and subcontractors queried, 100% had a plan to
remediate any Year 2000 issues and 100% had begun assessing their systems, but
none had completed their plan or were Year 2000 compliant. Follow-up inquiries
are scheduled through the remainder of 1999, at which time the Company will
implement contingency plans or other alternatives, as necessary, depending on
the third parties' Year 2000 readiness. To date, the Company is not aware of any
third parties with a Year 2000 issue that would materially impact the Company's
results of operations, liquidity, or capital resources. However, the Company has
no means of ensuring that third parties will be Year 2000 ready.
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 security systems, lighting systems, HVAC
systems and sprinkler systems. As of March 31, 1999, the Company had assessed
the Year 2000 readiness in approximately
24
<PAGE> 27
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.
COSTS: The Company has incurred less than $50,000 in connection with its
Year 2000 remediation efforts. The Company estimates its future costs related to
its Year 2000 remediation efforts to be less than $50,000. Overall, the Company
does not expect its Year 2000 expenditures to be material to the Company's
business, results of operations or financial condition.
RISK AND CONTINGENCY PLANNING: Management of the Company believes it has a
program in place to adequately resolve the Year 2000 issue in a timely manner.
As noted above, the Company has not yet completed all necessary resolution
phases of the Year 2000 project. In the event that the Company does not complete
any additional phases related to its infrastructure, applications software or
PC&I, the Company does not believe that there will be a material adverse effect
on its business, results of operations or financial condition. 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 or utility companies 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 or operate a property. 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. In addition, disruption in the economy generally resulting
from Year 2000 issues could also materially adversely affect the Company. The
Company could be subject to litigation relating to the adverse effects resulting
from the Year 2000 issue. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time. The Company currently has no
contingency plans in place in the event it does not complete all resolution
phases of the Year 2000 project. The Company plans to periodically evaluate the
status of completion and determine whether such a plan is necessary.
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 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/A for the year ended December 31, 1998. 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.
25
<PAGE> 28
CALCULATION OF FFO
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Net income.................................................. $ 7,891 $ 6,816
Add:
Depreciation and amortization of real estate assets....... 9,045 7,908
Minority interest in income............................... 9,792 8,522
Costs associated with The Irvine Company acquisition
offer.................................................. 2,566
------- -------
Funds from operations....................................... $29,294 $23,246
======= =======
</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/A for the year
ended December 31, 1998. Operating results for the three months ended March 31,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999.
26
<PAGE> 29
SELECTED OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998 DIFFERENCE
------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
UNIT DATA
Average rentable units during the period.................. 16,565 15,262 1,303
Rentable units at the end of the period................... 16,630 15,325 1,305
COMMUNITIES STABILIZED BEFORE 1998(A)
Average physical occupancy................................ 94.3% 93.9% 0.4%
Average economic occupancy(b)............................. 92.2% 92.0% 0.2%
Average monthly gross scheduled rent per unit(c).......... $1,222 $ 1,159 5.4%
Average monthly rental income per occupied unit........... $1,201 $ 1,146 4.8%
COMMUNITIES STABILIZED IN 1998(D)
Average physical occupancy................................ 95.9%
Average economic occupancy(b)............................. 94.2%
Average monthly gross scheduled rent per unit(c).......... $1,665
Average monthly rental income per occupied unit........... $1,646
LEASE-UP COMMUNITIES(E)
Operating revenues (rental income and other income) -- in
thousands.............................................. $2,475
Units delivered in the period............................. 191
Cumulative units delivered at the end of the period....... 655
Units occupied in lease-up communities at the end of the
period................................................. 595
Average units occupied in lease-up communities during the
period................................................. 491
OTHER FINANCIAL DATA
Dividends paid per share/unit............................. $0.385 $ 0.375
Funds from operations (FFO) payout ratio.................. 59.4% 72.4%
IAC CAPITAL TRUST
Income from investment in subsidiary...................... $3,094
</TABLE>
- ---------------
Footnotes:
(a) Financial results are for 51 properties totaling 14,991 units for comparable
periods of 1999 and 1998.
(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 three properties totaling 768 units that achieved
stabilized occupancy during 1998 and a 216-unit property acquired during
1998. No year over year comparison is provided since the properties were not
all stabilized for comparable periods of 1998.
(e) Financial results are for two properties that started lease-up at various
dates in late 1998 and two properties that started lease-up in 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Refer to the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1998 for detailed disclosure about quantitative and qualitative
disclosures about market risk. Quantitative and qualitative disclosures about
market risk have not materially changed since December 31, 1998.
27
<PAGE> 30
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
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.
28
<PAGE> 31
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.
<TABLE>
<S> <C>
IRVINE APARTMENT COMMUNITIES, INC.
Date: May 4, 1999 By: /s/ SHAWN HOWIE
----------------------------------------------------
Shawn Howie
Interim Chief Financial Officer
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities, Inc.,
its sole general partner
Date: May 4, 1999 By: /s/ SHAWN HOWIE
----------------------------------------------------
Shawn Howie
Interim Chief Financial Officer
IAC CAPITAL TRUST
Date: May 4, 1999 By: /s/ SHAWN HOWIE
----------------------------------------------------
Shawn Howie
Regular Trustee
</TABLE>
29
<PAGE> 32
EXHIBIT INDEX
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.
<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
three months ended March 31, 1999, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,197
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,197
<PP&E> 1,444,469
<DEPRECIATION> 290,494
<TOTAL-ASSETS> 1,413,835
<CURRENT-LIABILITIES> 50,034
<BONDS> 778,845
0
192,806
<COMMON> 202
<OTHER-SE> 196,375
<TOTAL-LIABILITY-AND-EQUITY> 1,413,835
<SALES> 0
<TOTAL-REVENUES> 59,778
<CGS> 0
<TOTAL-COSTS> 26,158
<OTHER-EXPENSES> 4,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,401
<INCOME-PRETAX> 21,871
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,891
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</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
three months ended March 31, 1999, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,197
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,197
<PP&E> 1,444,469
<DEPRECIATION> 290,494
<TOTAL-ASSETS> 1,413,835
<CURRENT-LIABILITIES> 50,034
<BONDS> 778,845
0
192,806
<COMMON> 0
<OTHER-SE> 382,352
<TOTAL-LIABILITY-AND-EQUITY> 1,413,835
<SALES> 0
<TOTAL-REVENUES> 59,778
<CGS> 0
<TOTAL-COSTS> 26,158
<OTHER-EXPENSES> 4,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,401
<INCOME-PRETAX> 21,871
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,891
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</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 three months
ended March 31, 1999, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<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> 3,094
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,094
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
