<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
---------------------------------------------
Commission file number: 1-12592
WALDEN RESIDENTIAL PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 75-2506197
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
One Lincoln Centre
5400 LBJ Freeway, Suite 400
Dallas, Texas 75240
(Address of principal executive offices)
(214) 788-0510
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of May 3, there were 14,154,684 shares of Common Stock,
$0.01, par value outstanding.
<PAGE> 2
WALDEN RESIDENTIAL PROPERTIES, INC.
<TABLE>
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1996
(Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 8
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
- 2 -
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Real estate assets, at cost
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,498 $ 60,637
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,555 452,704
--------- ---------
501,053 513,341
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . (26,845) (23,734)
--------- ---------
474,208 489,607
Real estate assets held for sale (at lower of carrying amount or
estimated net realized value) . . . . . . . . . . . . . . . . . . . . . . . 11,813 --
Receivable from and investment in WDN Management . . . . . . . . . . . . . . . 908 1,005
Rent and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440 1,448
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096 1,353
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . 4,459 4,359
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,725 6,801
Restricted cash:
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,758 4,105
Additional collateral on loans . . . . . . . . . . . . . . . . . . . . . . 1,869 1,870
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 504,276 $ 510,548
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and Credit Facility . . . . . . . . . . . . . . . . $ 262,442 $ 259,015
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . 2,688 6,522
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,326 4,815
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . 4,499 4,608
Preferred distribution payable on convertible equity securities . . . . . 471 461
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 274,426 275,421
Commitments and contingencies
Stockholders' equity:
Convertible equity securities . . . . . . . . . . . . . . . . . . . . . . 18,608 18,608
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 142
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . 240,564 238,899
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,593) --
Notes receivable from Company officers and directors . . . . . . . . . . . (5,263) (4,971)
Distributions in excess of net income . . . . . . . . . . . . . . . . . . (21,609) (17,551)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 229,850 235,127
--------- ---------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . $ 504,276 $ 510,548
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
- 3 -
<PAGE> 4
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
REVENUES
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,133 $ 15,832
Other property income . . . . . . . . . . . . . . . . . . . . . . . . . . 827 637
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 153
Income from WDN Management . . . . . . . . . . . . . . . . . . . . . . . . 104 107
---------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,275 16,729
EXPENSES
Property operating and maintenance . . . . . . . . . . . . . . . . . . . . 8,642 5,916
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 1,364
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . 1,145 801
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,922 3,636
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 206
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,518 3,258
---------- ----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,755 15,181
---------- ----------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . 3,520 1,548
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . . . . (488) --
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032 1,548
Convertible equity securities preferred distribution . . . . . . . . . . . . . (471) --
---------- ----------
Net income available to common stockholders . . . . . . . . . . . . . . . . . . $ 2,561 $ 1,548
========== ==========
Income per share:
Before extraordinary item, less preferred distribution . . . . . . . . . . $ .21 $ .15
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . (.03) --
---------- ----------
Net income available to common stockholders . . . . . . . . . . . . . . . $ .18 $ .15
========== ==========
Distribution per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .465 $ .455
========== ==========
Weighted average number of common stock and common
stock equivalent shares outstanding . . . . . . . . . . . . . . . . . . . 14,207 10,070
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
- 4 -
<PAGE> 5
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,032 $ 1,548
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 4,693 3,464
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . . 488 --
Net effect of changes in operating accounts:
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . 347 (683)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 240
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . (3,834) (1,325)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (179) (887)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . (109) 168
---------- ----------
Net cash provided by operating activities . . . . . . . . . . 4,746 2,525
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets . . . . . . . . . . . . . . . . . . . . -- (8,866)
Real estate asset additions . . . . . . . . . . . . . . . . . . . . . (1,131) (1,122)
---------- ----------
Net cash used in investing activities . . . . . . . . . . . . . . (1,131) (9,988)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance, net of issuance costs . . . . . . . . . 1,760 (18)
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (3,090) --
Proceeds from mortgage notes payable and credit facility . . . . . . . 10,500 35,066
Payment of mortgage notes payable and credit facility . . . . . . . . (6,500) (24,700)
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . (709) (1,012)
Additional collateral on loans . . . . . . . . . . . . . . . . . . . . 1 (50)
Distributions paid . . . . . . . . . . . . . . . . . . . . . . . . . . (6,609) (4,582)
Preferred distributions on convertible equity securities . . . . . . . (471) --
Principal reductions of debt . . . . . . . . . . . . . . . . . . . . . (573) (180)
---------- ----------
Net cash provided by (used in) financing activities . . . . . . . (5,691) 4,524
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . (2,076) (2,939)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 6,801 4,289
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 4,725 $ 1,350
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . $ 4,857 $ 3,531
========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Notes receivable for officer and director stock purchases . . . . . . $ 292 $ --
========== ==========
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 4,582
========== ==========
Preferred distribution payable on convertible equity securities . . . $ 471 $ --
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
- 5 -
<PAGE> 6
WALDEN RESIDENTIAL PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
Walden Residential Properties, Inc. (the "Company") is a
self-administered and self-managed equity real estate investment trust, as
defined under the Internal Revenue Code of 1986, as amended. As of March 31,
1996, the Company owned 55 multifamily properties, containing 17,205 apartment
units, primarily in the Southwest and Southeast regions of the United States.
Of such properties owned, two properties consisting of 528 apartment units were
held for sale as of March 31, 1996, one of which was sold in April 1996 (see
Note 5) and one for which the Company has entered into an agreement to sell.
The accompanying unaudited financial statements should be read in
conjunction with the Company's Form S-3 dated March 19, 1996 and Form 8-K dated
April 23, 1996 and the financial statements and notes thereto included in the
Company's Forms 10-K, as amended, for the periods ended December 31, 1995 and
1994, all of which were filed with the Securities and Exchange Commission
("SEC"). The accompanying interim unaudited financial information has been
prepared pursuant to the rules and regulations of the SEC. Certain information
and footnote disclosures normally included in the annual financial statements
have been condensed or omitted pursuant to rules and regulations of the SEC.
Management believes that the disclosures contained in this Form 10-Q are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments and eliminations, consisting only of normal
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company and its subsidiaries as of March 31, 1996 and December
31, 1995 and the consolidated results of their operations and cash flows for
the three months ended March 31, 1996 and 1995, have been included. The
consolidated results of operations for the three months ended March 31, 1996
and 1995 are not necessarily indicative of the results for the full year.
2. CONVERTIBLE EQUITY SECURITIES
On June 30, 1995, the Company acquired a controlling interest in a
limited partnership (the "Partnership") which owned 11 apartment properties
(one of which was sold in December 1995). This Partnership is being accounted
for as wholly-owned since the limited partnership interests in the Partnership
which were not purchased by the Company are only exchangeable for an aggregate
of 1,012,660 shares of the Company's common stock at the option of the interest
holders, and are accounted for as convertible equity securities. The
convertible equity securities were valued at $18.375 per share, which was the
market price of the Company's common stock on June 30, 1995. Prior to
exchange, the holders of the limited partnership interests will only be
entitled to receive quarterly distributions from the Partnership equal to the
greater of the Company's actual distributions on 1,012,660 shares of common
stock, or $460,760 in the aggregate. A preferred distribution of $471,000 on
the convertible equity securities was accrued as of March 31, 1996.
- 6 -
<PAGE> 7
WALDEN RESIDENTIAL PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
3. TREASURY STOCK
As of March 31, 1996, the Company had acquired 248,800 shares of its
common stock, ("Treasury Stock") at a cost of $5,018,000, of which 122,600
shares were reissued to Company officers and directors in December 1995 and
January 1996.
4. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock has been computed by dividing net
income available to common stockholders by the weighted average number of
common stock and common stock equivalent shares outstanding. Net income
available to common stockholders is net income less the preferred distribution
on the convertible equity securities (see Note 2). Common stock equivalents
include the weighted average number of assumed equivalent shares outstanding
from stock options, if dilutive. Fully diluted net income per share of common
stock is not materially dilutive and is not presented.
5. SUBSEQUENT EVENTS
On March 19, 1996, the Company filed a shelf registration for
1,000,000 shares of common stock, issuable pursuant to a Dividend Reinvestment
and Stock Purchase Plan.
On April 24, 1996, the Company sold a 384-unit apartment property
located in Wichita, Kansas for $8.3 million. In connection with the sale, the
Company will report a gain of approximately $1.2 million.
On April 25, 1996, the Company declared a distribution of $.465 per
share of common stock and $.19 per share of preferred stock, both of which are
payable on June 3, 1996 to stockholders of record on May 15, 1996.
On April 26, 1996, the Company issued 1,800,000 shares of preferred
stock, pursuant to a shelf registration filed in June 1995. The preferred
stock was priced at $25 per share with a current distribution rate of 9.16%,
which rate increases proportionately with increases in the common stock
distributions. The preferred stock is convertible at any time into 1.1406
shares of common stock. The preferred stock is not redeemable by the Company
prior to April 30, 2006, and thereafter is redeemable at $25 per share.
In April 1996, the Company entered into contracts to acquire six
apartment properties, consisting of 1,722 units, for $52.4 million. In
connection therewith, the Company deposited $700,000 of earnest money. The
acquisition of these properties is subject to the completion of normal due
diligence procedures and there is no assurance that the Company will purchase
such properties.
- 7 -
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following discussion should be read in conjunction with the
"Supplemental Financial and Operating Data" and all of the consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q.
Such financial statements and information have been prepared to reflect the
historical condensed consolidated operations of the Company for the three
months ended March 31, 1996 and 1995, and the condensed consolidated balance
sheet data of the Company as of March 31, 1996 and December 31, 1995.
The changes in revenues and expenses related to property operations
during the first quarter of 1996 and 1995 are primarily the result of the
increased number of units owned due to acquisitions of additional multifamily
properties by the Company. Where appropriate, comparisons are made on a
dollars-per-weighted-average-unit basis in order to adjust for changes in the
number of units owned during each period.
The following financial and operating data (see Page 9) is provided as
supplemental information to all financial statements included elsewhere in this
Form 10-Q. Such supplemental information is unaudited except the balance sheet
data as of December 31, 1995.
- 8 -
<PAGE> 9
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(In thousands, except per share and property data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
OPERATING DATA 1996 1995
------------ ------------
<S> <C> <C>
Revenues
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,133 $ 15,832
Other property income . . . . . . . . . . . . . . . . . . . . . . . . 827 637
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 153
Income from WDN Management . . . . . . . . . . . . . . . . . . . . . . 104 107
-------- ---------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 25,275 16,729
-------- ---------
Expenses
Property operating and maintenance . . . . . . . . . . . . . . . . . . 8,642 5,916
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 1,364
General and administrative . . . . . . . . . . . . . . . . . . . . . . 1,145 801
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,922 3,636
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 206
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,518 3,258
-------- ---------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 21,755 15,181
-------- ---------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . 3,520 1,548
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . (488) --
-------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032 1,548
Convertible equity securities preferred distribution . . . . . . . . . . . (471) --
-------- ---------
Net income available to common stockholders . . . . . . . . . . . . . . . $ 2,561 $ 1,548
======== =========
Distribution per share . . . . . . . . . . . . . . . . . . . . . . . . . . $ .465 $ .455
======== =========
Weighted average number of common stock and common stock
equivalent shares outstanding . . . . . . . . . . . . . . . . . . . . 14,207 10,070
======== =========
- --------------------------------------------------------------------------------------------------------------------------------
PROPERTY DATA
Total properties (at end of period) . . . . . . . . . . . . . . . . . . . 55 41
Total units (at end of period) . . . . . . . . . . . . . . . . . . . . . . 17,205 12,568
Total units (weighted average) . . . . . . . . . . . . . . . . . . . . . . 17,205 12,543
Weighted average monthly property revenue per unit . . . . . . . . . . . . $ 484 $ 438
- --------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Funds from operations (new definition) . . . . . . . . . . . . . . . . . . $ 8,038 $ 4,806
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA
Real estate assets, at cost . . . . . . . . . . . . . . . . . . . . . . . $ 474,208 $ 489,607
Mortgage notes payable and Credit Facility . . . . . . . . . . . . . . . . 262,442 259,015
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,850 235,127
</TABLE>
- 9 -
<PAGE> 10
Comparison of Three Months Ended March 31, 1996 to Three Months Ended March 31,
1995
The weighted average number of units owned increased by 4,662 units,
or 37.2%, from 12,543 units for the first quarter of 1995 to 17,205 units for
the first quarter of 1996 as a result of the acquisition of additional
properties. Total units owned at March 31, 1995 and 1996 were 12,568 and
17,205, respectively. The portfolio had a weighted average occupancy of 93.6%
and 94.6% for the first three months of 1995 and 1996, respectively.
The Company owned 39 properties with 12,020 units throughout both
periods in 1996 and 1995 ("same store"). A summary of the operating
performance for same store properties is as follows:
<TABLE>
<CAPTION>
First Quarter
-------------
1996 1995 % Change
---- ---- --------
<S> <C> <C> <C>
Rental and other property revenue (in thousands) . . . . . . . $ 16,772 $ 15,695 6.86%
Property operating expenses (in thousands) (1) . . . . . . . . 7,404 6,974 6.17%
---------- ----------
Property operating income (in thousands) . . . . . . . . . . . $ 9,368 $ 8,721 7.42%
========== ==========
Weighted average physical occupancy . . . . . . . . . . . . . . 94.3% 93.6%
========== ==========
Average monthly revenue per unit . . . . . . . . . . . . . . . $ 465 $ 435 6.90%
========== ==========
Average annualized operating and maintenance
expenses per unit . . . . . . . . . . . . . . . . . . . . . $ 1,994 $ 1,894 5.28%
========== ==========
Average annualized real estate taxes per unit . . . . . . . . . $ 470 $ 427 10.07%
========== ==========
Operating expense ratio . . . . . . . . . . . . . . . . . . . . 44.1% 44.4% N/A
========== ==========
</TABLE>
(1) Consists of property operating and maintenance and real estate tax
expenses.
The operating performance of properties not owned throughout both
periods in 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
First Quarter
-------------
1996 1995
---- ----
<S> <C> <C>
Rental and other property revenue (in thousands) . . . . . . . $ 8,188 $ 774
Property operating expenses (in thousands) (1) . . . . . . . . 3,591 306
---------- ----------
Property operating income (in thousands) . . . . . . . . . . . $ 4,597 $ 468
========== ==========
Weighted average number of units . . . . . . . . . . . . . . . 5,185 523
========== ==========
Weighted average physical occupancy . . . . . . . . . . . . . . 94.9% 94.8%
========== ==========
Average monthly revenue per unit . . . . . . . . . . . . . . . $ 526 $ 493
========== ==========
Average annualized operating and maintenance
expenses per unit . . . . . . . . . . . . . . . . . . . . . $ 2,045 $ 1,728
========== ==========
Average annualized real estate taxes per unit . . . . . . . . . $ 725 $ 612
========== ==========
Operating expense ratio . . . . . . . . . . . . . . . . . . . . 43.9% 39.5%
========== ==========
</TABLE>
(1) Consists of property operating and maintenance and real estate tax
expenses.
- 10 -
<PAGE> 11
General and administrative expenses increased $344,000, or 42.9%, from
$801,000 to $1,145,000. This represented a per unit increase of $11, or 4.3%,
on an annualized basis. The increase in general and administrative expenses
was primarily the result of the increase in the executive officers'
compensation, the increase in occupancy cost due to the relocation of the
Company's corporate office, the increase in salaries resulting from additional
personnel to administer the additional properties acquired and costs associated
with the increased number of stockholders.
Interest expense increased $1,286,000, or 35.4%, from $3,636,000 to
$4,922,000 primarily due to debt incurred in connection with the acquisition of
additional properties, partially offset by a decrease in the weighted average
interest rate on debt.
Depreciation increased $1,260,000, or 38.7%, from $3,258,000 to
$4,518,000 due to depreciation on additional properties acquired.
The $488,000 extraordinary loss on debt extinguishment resulted from
the write off of unamortized deferred financing costs due to the refinancing of
the Company's credit facility in February 1996.
Liquidity and Capital Resources
The Company's principal demands for liquidity are distributions to its
stockholders, ongoing maintenance and repair of its properties, capital
improvements to its properties, acquisitions of properties, interest on
indebtedness and debt repayments.
The Company intends to meet its short-term liquidity requirements,
including capital expenditures related to the maintenance and improvements of
its properties, through cash flow provided by operations. Historically, cash
provided by the Company's operating activities has been adequate to meet both
its operating requirements and distributions to stockholders. Net cash flow
from operating activities was $4.7 million for the first three months of 1996
(including the payment of $6.2 million of 1995 real estate taxes). In the
first three months of 1996, the Company paid distributions of $6.6 million and
expended $0.3 million and $0.8 million, respectively, for capital expenditures
and acquisition rehabilitation costs. Such amounts were funded by the net cash
flow from operating activities from the first quarter of 1996 and existing
working capital from the prior year. Capital expenditures and rehabilitation
on acquisition properties are anticipated to be approximately $3.4
million and $1.5 million, respectively, for the remainder of 1996.
As of March 31, 1996, the Company had outstanding indebtedness in the
aggregate principal amount of $262.4 million, consisting of fixed rate debt of
$178.9 million and variable rate debt of $83.5 million (including $10.5 million
under the Company's credit facility). The weighted average interest rate on
the Company's outstanding indebtedness at March 31, 1996 was approximately
7.5%.
In April 1996, the Company issued 1.8 million shares of preferred
stock. A portion of the net proceeds in the amount of $13 million will be used
to pay down debt, including the outstanding balance of the Company's credit
facility. The remaining proceeds of approximately $30 million will be used to
fund potential acquisitions and for general corporate purposes.
- 11 -
<PAGE> 12
The Company's ability to meet its long-term liquidity requirements,
such as refinancing mortgages and property acquisitions, including capital
improvements on property acquisitions, is dependent upon its ability to obtain
long-term borrowings, both secured and unsecured, and to issue debt or equity
securities. The Company has a $75 million credit facility (the "Credit
Facility"), which expires in February 1998, which is currently limited to $30
million until other participants are obtained to commit to lend under the
Credit Facility. The Credit Facility has been used to finance property
acquisitions, including capital improvements. The availability of funds to the
Company under the Credit Facility is subject, however, to certain borrowing
base restrictions and other customary restrictions. As of May 3, 1996, the
Company's borrowing base was $30 million.
Investing activities of the Company used $1.1 million in the first
three months of 1996, consisting of $0.3 million of capital expenditures and
$0.8 million of acquisition rehabilitation.
Financing activities of the Company used $5.7 million in the first
three months of 1996, primarily due to $6.6 million of distributions paid to
stockholders and $3.1 million of treasury stock purchased, which amount was
offset by $1.8 million of net proceeds received from common stock issued under
the Company's dividend reinvestment plan and $4 million of borrowings under the
Credit Facility.
Funds from Operations
Industry analysts generally consider funds from operations ("FFO") an
appropriate measure of the performance of an equity real estate investment
trust. FFO is defined as net income (determined in accordance with generally
accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation of real estate assets.
The Company believes that in order to facilitate a clear understanding of its
operating results, FFO should be examined in conjunction with net income as
presented herein. FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs and cash
distributions. FFO should not be considered as an alternative to net income
(determined in accordance with generally accepted accounting principles) as an
indication of the Company's performance or as an alternative to cash flow
(determined in accordance with generally accepted accounting principles) as a
measure of liquidity. Effective January 1, 1996, the Company adopted the
modified definition of FFO as recommended by the National Association of Real
Estate Investment Trusts. FFO for the three months ended March 31, 1996 and
1995 (as restated to conform to the new definition of FFO) are as follows
(unaudited):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1996 1995
----------- ------------
<S> <C> <C>
Funds from operations:
Income before extraordinary loss . . . . . . . . . . . . . . . . . $3,520 $1,548
Depreciation of real estate assets . . . . . . . . . . . . . 4,518 3,258
------ ------
Funds from operations . . . . . . . . . . . . . . . . . $8,038 $4,806
====== ======
</TABLE>
- 12 -
<PAGE> 13
Inflation
The Company leases apartments under lease terms generally ranging from
six to 12 months. Management believes that such short-term lease contracts
lessen the impact of inflation on the cost of property operations, as well as
allows for the adjustment of rental rates to market levels as leases expire.
- 13 -
<PAGE> 14
PART 2. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Computation of Net Income per Share
27 Financial Data Schedule
(b) Reports
None.
- 14 -
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Walden Residential Properties, Inc. certifies that it has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WALDEN RESIDENTIAL PROPERTIES, INC.
By: / c / Don R. Daseke
-------------------------------
Don R. Daseke
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of Walden
Residential Properties, Inc. and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
----------- ----- ----
<S> <C> <C>
/ c / Don R. Daseke Chairman of the Board of Directors, May 7, 1996
- ------------------------------------- Chief Executive Officer and Director
Don R. Daseke (Principal Executive Officer)
/ c / Mark S. Dillinger Executive Vice President, Chief May 7, 1996
- ------------------------------------- Financial Officer and Director
Mark S. Dillinger (Principal Financial and Accounting Officer)
/ c / Marshall B. Edwards President, Chief Acquisitions Officer May 7, 1996
- ------------------------------------- and Director
Marshall B. Edwards
</TABLE>
- 15 -
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11.1 Computation of Net Income per Share
27 Financial Data Schedule
</TABLE>
- 16 -
<PAGE> 1
Exhibit 11.1
WALDEN RESIDENTIAL PROPERTIES, INC.
COMPUTATION OF NET INCOME PER SHARE (1)
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
--------------------------------------
1996 1995
---- ----
<S> <C> <C>
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . $ 3,520 $ 1,548
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . . . . (488) --
---------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032 1,548
Convertible equity securities preferred distribution . . . . . . . . . . . . . (471) --
---------- ---------
Net income available to common stockholders . . . . . . . . . . . . . . . . . . $ 2,561 $ 1,548
========== =========
Income per share -- Primary:
Before extraordinary item, less preferred distribution . . . . . . . . . . $ .21 $ .15
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . (.03) --
---------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .18 $ .15
========== =========
Income per share -- Additional Primary (2):
Before extraordinary item, less preferred distribution . . . . . . . . . . $ .21 N/A
Extraordinary loss on debt extinguishment . . . . . . . . . . . . . . . . (.03) N/A
----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .18 N/A
==========
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,207 10,070
Dilutive effect of outstanding options . . . . . . . . . . . . . . . . . . 103 --
---------- ---------
Additional Primary (2) . . . . . . . . . . . . . . . . . . . . . . . . . . 14,310 10,070
========== =========
</TABLE>
(1) Fully diluted net income per share is not presented because the
convertible equity securities are anti-dilutive.
(2) This calculation is submitted in accordance with Securities
Exchange Act of 1934 Release No. 9083, although not required by
APB Opinion No. 15 because it results in dilution of less than
three percent of those securities present.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,725
<SECURITIES> 0
<RECEIVABLES> 1,440
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 501,053
<DEPRECIATION> 26,845
<TOTAL-ASSETS> 504,276
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 143
0
0
<OTHER-SE> 229,707
<TOTAL-LIABILITY-AND-EQUITY> 504,276
<SALES> 0
<TOTAL-REVENUES> 24,960
<CGS> 0
<TOTAL-COSTS> 10,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,922
<INCOME-PRETAX> 3,520
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,520
<DISCONTINUED> 0
<EXTRAORDINARY> (488)
<CHANGES> 0
<NET-INCOME> 2,561
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
