UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A1
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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)
5080 Spectrum Drive
Suite 1000 East
Dallas, Texas 75248
(Address of principal executive offices)
(972) 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 July 31, 1998, there were 18,152,418 shares
of Common Stock, $0.01, par value outstanding.
EXPLANATORY NOTE
Walden Residential Properties, Inc. (the "Company"), a Maryland
corporation, hereby amends its Quarterly Report on Form 10-Q, as amended,
for the fiscal period ended June 30, 1998, to indicate by check mark
that, "Yes", 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 period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
WALDEN RESIDENTIAL PROPERTIES, INC.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
(Unaudited) and December 31, 1997 . . . . . . . . . . . . 2
Condensed Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 1998
and 1997 (Unaudited). . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 (Unaudited) . . . 4
Notes to Condensed Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 12
Item 3. Quantitative and Qualitative Disclosures about Market
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 20
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 20
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 20
Item 4. Submission of Matters to a Vote of Security Holders. . . . . 20
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 21
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets, at cost
Land . . . . . . . . . . . . . . . . . $ 170,673 $ 173,635
Buildings. . . . . . . . . . . . . . . 1,326,300 1,333,978
---------- ----------
1,496,973 1,507,613
Less: Accumulated depreciation . . (98,316) (74,584)
---------- ----------
1,398,657 1,433,029
Real estate assets held for sale . . . . 43,476 --
Rent and other receivables ($1.5
million related party) . . . . . . . . 3,696 1,613
Prepaid and other assets . . . . . . . . 7,542 6,903
Deferred financing costs, net. . . . . . 8,648 6,603
Cash and cash equivalents. . . . . . . . 6,524 9,757
Restricted cash:
Escrow deposits. . . . . . . . . . . . 16,260 9,047
Additional collateral on loans . . . . 2,850 2,520
---------- ----------
Total assets. . . . . . . . . . . . $1,487,653 $1,469,472
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable . . . . . . . . $ 461,261 $ 428,354
Unsecured term loan. . . . . . . . . . 200,000 200,000
Unsecured credit facility. . . . . . . 85,000 74,000
Accrued real estate taxes. . . . . . . 18,214 22,571
Accounts payable . . . . . . . . . . . 11,054 13,648
Accrued expenses and other
liabilities. . . . . . . . . . . . . 16,113 13,377
Preferred distribution payable to
minority interests . . . . . . . . . 391 391
---------- ----------
Total liabilities . . . . . . . . . 792,033 752,341
Commitments and contingencies (Note 8)
Minority interests . . . . . . . . . . . 314,922 321,916
Stockholders' equity:
Preferred stock. . . . . . . . . . . . 57 57
Common stock . . . . . . . . . . . . . 182 180
Additional paid in capital . . . . . . 458,936 456,842
Notes receivable from Company
officers and directors . . . . . . . (8,823) (5,263)
Deferred compensation on Restricted
Stock. . . . . . . . . . . . . . . . (1,417) (1,404)
Distributions in excess of net income. (68,237) (55,197)
---------- ----------
Total stockholders' equity. . . . . 380,698 395,215
---------- ----------
Total liabilities and
stockholders' equity. . . . . . $1,487,653 $1,469,472
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Rental income. . . . . . . . $66,650 $33,071 $132,557 $64,587
Other property income. . . . 2,742 1,333 5,288 2,605
Interest income. . . . . . . 363 346 724 849
------- ------- -------- -------
Total revenues. . . . . . 69,755 34,750 138,569 68,041
------- ------- -------- -------
EXPENSES
Property operating and
maintenance. . . . . . . . 23,249 11,444 45,761 22,013
Real estate taxes. . . . . . 6,950 3,412 13,898 6,561
General and administrative . 2,866 1,972 5,701 3,394
Interest . . . . . . . . . . 13,374 5,244 26,688 10,121
Amortization . . . . . . . . 252 200 485 411
Depreciation . . . . . . . . 14,701 6,793 29,035 13,121
------- ------- -------- -------
Total expenses. . . . . . 61,392 29,065 121,568 55,621
------- ------- -------- -------
Income before extraordinary
item and income allocated
to minority interests. . . . 8,363 5,685 17,001 12,420
Extraordinary loss on debt
extinguishment . . . . . . . (80) -- (104) --
------- ------- -------- -------
Income before income
allocated to minority
interests. . . . . . . . . . 8,283 5,685 16,897 12,420
Income allocated to minority
interests. . . . . . . . . . (2,769) (395) (5,667) (800)
------- ------- -------- -------
Net income. . . . . . . . . 5,514 5,290 11,230 11,620
Preferred distributions. . . . (3,280) (3,311) (6,560) (6,623)
------- ------- -------- -------
Net income available to
common stockholders. . . . . $ 2,234 $ 1,979 $ 4,670 $ 4,997
======= ======= ======== =======
Basic net income per share . . $ 0.12 $ 0.11 $ 0.25 $ 0.29
======= ======= ======== =======
Diluted net income per share . $ 0.12 $ 0.11 $ 0.25 $ 0.29
======= ======= ======== =======
Basic weighted average number
of common shares
outstanding. . . . . . . . . 18,488 17,502 18,384 17,329
======= ======= ======== =======
Diluted weighted average
number of common shares and
common share equivalents
outstanding. . . . . . . . . 18,632 17,623 18,554 17,486
======= ======= ======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . $ 11,230 $ 11,620
Adjustments to reconcile net income to net
cash provided by operating activities:
Income allocated to minority interests. . . 5,667 800
Depreciation and amortization . . . . . . . 29,520 13,532
Amortization of deferred compensation on
restricted stock. . . . . . . . . . . . . 123 108
Amortization of prepaid interest expense. . 608 --
Extraordinary loss on debt extinguishment . 104 --
Net effect of changes in operating
accounts:
Escrow deposits. . . . . . . . . . . . . (7,213) (751)
Other assets . . . . . . . . . . . . . . (3,009) (1,301)
Accrued real estate taxes. . . . . . . . (4,357) (935)
Accounts payable . . . . . . . . . . . . (3,848) (222)
Other liabilities. . . . . . . . . . . . 2,736 397
-------- --------
Net cash provided by operating
activities. . . . . . . . . . . . . . 31,561 23,248
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets . . . . . . . (5,082) (52,371)
Real estate asset additions. . . . . . . . . (20,207) (14,926)
-------- --------
Net cash used in investing activities . (25,289) (67,297)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance, net of
issuance costs . . . . . . . . . . . . . . 12,402 15,968
Purchase of the Company's common stock . . . (14,002) --
Purchase of minority interest securities . . (130) --
Distributions paid . . . . . . . . . . . . . (37,306) (23,424)
Proceeds from mortgage notes payable and
credit facility. . . . . . . . . . . . . . 172,903 35,350
Payment of mortgage notes payable and
credit facility. . . . . . . . . . . . . . (137,155) (6,000)
Payment of financing costs . . . . . . . . . (3,240) (91)
Additional collateral on loans . . . . . . . (330) --
Principal reductions of debt . . . . . . . . (2,647) (1,656)
-------- --------
Net cash provided by (used in)
financing activities. . . . . . . . . (9,505) 20,147
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS. . . (3,233) (23,902)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD . . . . . . . . . . . . . . . . . . . 9,757 29,720
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . $ 6,524 $ 5,818
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest. . . . . . . . . . . $ 23,671 $ 9,781
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Accrued real estate asset additions . . . . $ 1,722 $ 345
======== ========
Mortgages assumed . . . . . . . . . . . . . $ 10,806 $ --
======== ========
Notes receivable for officer and director
stock purchases . . . . . . . . . . . . . $ 3,560 $ --
======== ========
Deferred compensation on restricted stock . $ 136 $ 2,571
======== ========
Distribution payable to minority interest
holders . . . . . . . . . . . . . . . . . $ 391 $ 391
======== ========
Minority interest securities issued . . . . $ 505 $ 1,050
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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 real estate company operated
as a real estate investment trust, as defined under the Internal Revenue
Code of 1986, as amended. As of June 30, 1998, the Company owned
156 multifamily properties, containing 42,858 apartment units,
located primarily in the Southwest and Southeast regions of the
United States.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the
year ended December 31, 1997, and Form 10-Q for the three months
ended March 31, 1998, which were filed with the Securities and
Exchange Commission ("SEC"). The accompanying interim unaudited
condensed consolidated 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 June 30, 1998 and
the consolidated results of their operations for the three and six months
ended June 30, 1998 and 1997 and consolidated cash flows for the
six months ended June 30, 1998 and 1997, have been included. The
consolidated results of operations for the three and six
months ended June 30, 1998 are not necessarily indicative of the
results for the full year.
As of June 30, 1998, the Company had six apartment
properties held for sale. Management has determined that such
properties do not match the Company's long-term investment strategies.
(See Note 8)
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (the "Statement"),
which establishes standards for accounting and reporting for
derivative instruments. SFAS No. 133 is effective for periods
beginning after June 15, 1999; however, earlier application is
permitted. Management is currently not planning on early adoption
of this Statement and has not had an opportunity to evaluate the
impact of the provisions of the Statement on the Company's
consolidated financial statements relating to future adoption.
2. Acquisitions
On February 18, 1998, the Company acquired two apartment
properties with a total of 376 units, located in Tampa, Florida
for approximately $15.9 million. The Company funded these
acquisitions by assuming $5.7 million of variable rate, tax-exempt
debt maturing in the year 2007, assuming $5.1 million of 7.35%
fixed rate debt maturing in the year 2005, and borrowing the
remaining amount under the Company's unsecured credit facility.
The credit enhancement on the $5.7 million variable rate debt
expires in November 1998 and is guaranteed by the Company.
3. Transactions with Affiliates
On June 22, 1998, the Company acquired the 1% general
partner interest in a limited partnership which owns a
504-unit apartment property in Austin, Texas. At that time, the Company
loaned $1.5 million to the partnership which was used to
refinance the first mortgage indebtedness on the property. The
note requires monthly payments of excess cash flow from the property and
matures on January 1, 2009.
4. Mortgage Notes Payable
During the first six months of 1998, the Company refinanced
$45.5 million and $12.5 million of the Company's variable rate,
tax-exempt mortgage indebtedness and extended the related
mortgage loan and credit enhancement maturity to February 15,
2028 and January 15, 2023, respectively.
On March 25, 1998, $78.1 million of conventional fixed-rate
mortgage notes were refinanced with $110.0 million of fixed-rate
debt, of which $80.0 million of such debt bears interest at 6.62%
and matures in March 2007 and the remaining $30.0 million bears
interest at 7.22% and matures in June 2016. Of the excess
financing proceeds, $20 million was used to repay a portion of the
Company's credit facility.
On April 14, 1998, the Company repaid $7.2 million of
variable rate indebtedness related to one property.
5. Stockholders' Equity and Minority Interests
Minority Interests
In connection with certain apartment property acquisitions,
certain partnership subsidiaries of the Company have issued
Common Operating Partnership ("OP") Units and Preferred OP Units
which are exchangeable into the Company's common stock and 9.00%
redeemable preferred stock, with detachable warrants, respectively.
The holders of the Preferred OP Units are entitled to receive
quarterly distributions of $0.5625 per unit and the holders of
the Common OP Units are entitled to receive quarterly distributions
equal to those paid on the Company's common stock. A portion of
the Common OP Units that are exchangeable into 810,128 shares of
the Company's common stock are entitled to receive quarterly
distributions of a minimum of $369,000 in the aggregate. All OP
Unit securities have been recorded as minority interests in the
accompanying balance sheets. On June 15, 1998, an additional
20,621 Common OP Units were issued at the market price of the
Company's common stock on such date ($24.50) per unit to adjust
the purchase price of the October 1, 1997 acquisition of the
assets and business of Drever Partners, Inc. and its affiliates.
On June 30, 1998, the Company purchased 5,503 minority interest
securities at $24.50 (the market price of the Company's common
stock on the purchase date). As of June 30, 1998, the Company
had 1,999,909 Preferred OP Units and 11,192,022 Common OP Units
outstanding.
Public Offering
On February 19, 1998, the Company issued 323,232 shares of
its common stock at $23.515 per share for net proceeds of
approximately $7.6 million.
Restricted Stock
In February 1997, the Company adopted a Long-Term Incentive
Plan to attract and retain individuals to serve as directors,
officers and employees of the Company. Pursuant to this plan, the
Company has issued 5,206 restricted shares of common stock
("Restricted Stock") during the six months ended June 30, 1998,
for $0.01 per share to two of its executive officers and its six outside
directors. The shares issued vest ratably over a three-year and
one-year period, respectively. Deferred compensation on Restricted
Stock was computed based upon the market value of the shares
at the date of issuance. This deferred compensation is being
amortized over the respective vesting periods.
Officer Notes for Stock Purchases
On February 17, 1998, the Company implemented a new officer
loan program allowing officers to purchase the Company's common
stock at current market prices and to exercise vested
stock options with the assistance of loans from the Company.
Under this program, officers are eligible to purchase stock on March 1
and September 1 of each year in an aggregate amount of up
to three times the officer's annual salary. A cash payment of 5%
to 15% of the purchase price is required by the officer, depending
upon the amount of the purchase, with the remainder loaned on
a full recourse basis to the officer. Each loan is evidenced by
a note with a five-year term, requiring quarterly payments of
interest only at a fixed interest rate equal to the Company's then
current interest rate under its credit facility. The loan is secured
by a pledge of the shares of common stock purchased by each officer
pursuant to such loan.
On March 2, 1998, the Company issued loans to 25 officers
under the officer loan program in the amount of approximately $3.6
million, bearing interest at 7%. Such loans related to the
issuance of 138,692 shares of the Company's common stock at
$24.75 per share (the closing price of the common stock on the
New York Stock Exchange for the previous trading day) and the
exercise of 26,192 common stock options at a stock option grant
price of $19.25 per share.
Shareholder Rights Plan
On March 26, 1998, the Company adopted a shareholder rights
plan (the "Plan") designed to assure that all stockholders receive
fair treatment in the event of a proposed acquisition. The key
provisions of the Plan is a mechanism that will distribute, for
each outstanding share of the Company's Common Stock, one right
that becomes exercisable upon the occurrence of certain events.
The Plan entails a dividend of one right for each
outstanding share of the Company's common stock. Each right will
entitle the holder to buy one one-hundredth of a share of a new
Series A Junior Participating Preferred Stock, at an exercise
price of $70.00 per share. The rights will trade with the
Company's common stock until exercisable and will expire on
April 20, 2008. The rights will not be exercisable until ten
days following a public announcement that a person or
group has acquired 15% or more of the Company's common stock or
until ten business days after a person or group begins a tender
offer that would result in ownership of 15% or more of the
Company's common stock, subject to certain extensions by the
Board. On April 20, 1998, the Company issued a dividend of one
right for each share of common stock owned by stockholders of
record as of April 7, 1998. Effective April 8, 1998, each share
of the Company's common stock has one right attached to it.
Associate Stock Purchase Plan
Effective April 1, 1998, the Company adopted an Associate
Stock Purchase Plan. This plan allows Company employees to
purchase on a quarterly basis shares of the Company's common stock
at a 15% discount.
Stock Repurchase Program
On June 4, 1998, the Company adopted a Stock Repurchase
Program. This program authorizes the Company to purchase up to
2.5 million shares of the Company's common stock. This
is in addition to the prior stock repurchase program, announced
July 11, 1997, authorizing the Company to purchase up to 1.0 million
shares of its common stock by December 31, 1998. The Company
repurchased 572,000 shares of its outstanding common stock in
May and June of 1998, leaving 2.6 million shares authorized for
repurchase under both programs at June 30, 1998.
Distributions
In March 1998 and June 1998, the Company paid distributions
of $12.0 million and $12.3 million, respectively, to stockholders
of record on February 18, 1998, and May 18, 1998, respectively.
The common stockholders were paid $0.4825 per share; the 9.16% Convertible
Redeemable Preferred Stockholders were paid $0.5725 per share and
the 9.20% Senior Preferred Stockholders were paid $0.575 per share.
The Company paid distributions of $5.4 million on the Common
OP Units (which represented $0.4825 per unit) and $1.1 million on
the Preferred OP Units (which represented $0.5625 per unit) in both
March and June.
6. Net Income per Share of Common Stock
Basic net income per share has been computed by dividing net
income available to common stockholders by the weighted average
number of common shares outstanding. Diluted net income
per share has been computed by dividing net income available to
common stockholders by the weighted average number of common
shares outstanding plus potential dilutive common share equivalents.
The following table presents information necessary to
calculate basic and diluted net income per share for the three
months and six months ended June 30, 1998 and 1997 (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income for Basic and Diluted
Computation:
Income before extraordinary
item and income allocated
to minority interests . . . $ 8,363 $ 5,685 $17,001 $12,420
Extraordinary loss on debt
extinguishment. . . . . . . (80) -- (104) --
------- ------- ------- -------
Income before income
allocated to minority
interests . . . . . . . . . 8,283 5,685 16,897 12,420
Income allocated to minority
interests . . . . . . . . . (2,769) (395) (5,667) (800)
------- ------- ------- -------
Net income. . . . . . . . . . 5,514 5,290 11,230 11,620
Preferred distributions . . . (3,280) (3,311) (6,560) (6,623)
------- ------- ------- -------
Net income available to
common stockholders (basic
and diluted net income per
share computation). . . . . $ 2,234 $ 1,979 $ 4,670 $ 4,997
======= ======= ======= =======
Basic Net Income per Share:
Before extraordinary item,
less preferred
distributions. . . . . . . . $ 0.13 $ 0.11 $ 0.26 $ 0.29
Extraordinary loss on debt
extinguishment . . . . . . . (0.01) -- (0.01) --
------- ------- ------- -------
Net income available to
common stockholders. . . . . $ 0.12 $ 0.11 $ 0.25 $ 0.29
======= ======= ======= =======
Diluted Net Income per Share:
Before extraordinary item,
less preferred
distributions. . . . . . . . $ 0.13 $ 0.11 $ 0.26 $ 0.29
Extraordinary loss on debt
extinguishment . . . . . . . (0.01) -- (0.01) --
------- ------- ------- -------
Net income available to
common stockholders. . . . . $ 0.12 $ 0.11 $ 0.25 $ 0.29
======= ======= ======= =======
Weighted Average Number of
Shares Outstanding (a):
Basic. . . . . . . . . . . . . 18,488 17,502 18,384 17,329
Dilutive effect of
outstanding options. . . . . 144 121 170 157
------- ------- ------- -------
Diluted. . . . . . . . . . . . 18,632 17,623 18,554 17,486
======= ======= ======= =======
</TABLE>
(a) Excludes the convertible preferred shares, warrants, Common OP Units
(see Note 5) and 1,658,750 stock options, which are not dilutive at
June 30, 1998.
7. Pro Forma Statements of Income
The following unaudited condensed pro forma information for
the six months ended June 30, 1998 and 1997 was prepared from the
financial statements of the Company by adjusting for the
effect of the 1997 acquisition of 21,467 apartment units at a
cost of $799.2 million, the 1998 property acquisitions described in
Note 2 herein, and debt incurred in connection with these property
acquisitions as if all of these transactions had occurred on
January 1, 1997.
The following information is not necessarily indicative of
what the performance would have been had the Company owned these
properties for the entire period, nor does it purport to represent
future results of operations of the Company. (In thousands,
except per share information.)
<TABLE>
<CAPTION>
Pro Forma
----------------
Six Months Ended
June 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . $138,905 $133,387
Expenses . . . . . . . . . . . . . . . . . . . . 121,845 119,608
-------- --------
Income before extraordinary items and income
allocated to minority interests. . . . . . . . 17,060 13,779
Extraordinary loss on debt extinguishment. . . . (104) --
-------- --------
Income before income allocated to minority
interests. . . . . . . . . . . . . . . . . . . 16,956 13,779
Income allocated to minority interests . . . . . (5,687) (4,583)
-------- --------
Net income . . . . . . . . . . . . . . . . . . . 11,269 9,196
Preferred distributions. . . . . . . . . . . . . (6,560) (6,623)
-------- --------
Net income available to common stockholders. . . $ 4,709 $ 2,573
======== ========
Basic net income per share . . . . . . . . . . . $ 0.26 $ 0.15
======== ========
Diluted net income per share . . . . . . . . . . $ 0.25 $ 0.15
======== ========
</TABLE>
8. Commitments and Contingencies
On February 27, 1998, the Company entered into a joint
venture agreement with The Grupe Company whereby The Grupe Company
will construct and the Company will later purchase, two
Sacramento, California area properties with a combined total of
616 apartment units. The Company is committed to purchase 100% of
the properties for approximately $47 million upon the completion
of construction and the achievement of certain targeted net
operating income amounts. This purchase is anticipated to occur
sometime in late 1999. As of June 30, 1998, The Grupe Company
has spent approximately $8.5 million, consisting primarily of
permits and professional fees, for both properties.
As of June 30, 1998, the Company had executed contracts to
sell four of its apartment properties held for sale, containing an
aggregate of 1,151 units, for an aggregate sales price of $37.6
million. The closing is anticipated to occur in August 1998.
9. Subsequent Events
On July 1, 1998, the Company executed a contract to purchase
South Green Apartments, a 268-unit apartment community located in
Houston, Texas. The purchase contract in the amount of
$9.5 million is anticipated to be consummated in August 1998.
On July 29, 1998, the Company entered into an agreement to
loan $5.0 million to the Greystone Group, Inc., an unrelated
third-party, to purchase 260,082 net rentable square feet of land
in Chandler, Arizona. The loan bears an interest rate of LIBOR
plus 1.50%, is secured by a mortgage loan on the property and a
guarantee by The Greystone Group, Inc., and is generally due
upon the earlier of completion of construction and subsequent
purchase by the Company or substitution of a third-party lender.
The Company anticipates entering into a purchase agreement
with the Greystone Group, Inc. in August 1998, whereby The
Greystone Group, Inc. will construct a 272-unit apartment
community on the land described herein. The Company will be
committed to purchase the property for approximately $21.3 million
upon completion of construction and the achievement of certain
targeted occupancy levels, anticipated to occur sometime in late 1999.
On July 29, 1998, the Company executed a contract to acquire
a 286-unit apartment community located in Bedford, Texas for
approximately $11.0 million. In connection with this contract, the
Company deposited $200,000 of non-refundable earnest money. The Company
has completed normal due diligence procedures; however, because
financing for the acquisition will not be funded until the closing date,
there is no assurance that the Company will purchase the property.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
- --------
This Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which
are intended to be covered by the safe harbors created therein.
These statements include the plans and objectives of management for
future operations, including plans and objectives relating to capital
expenditures and rehabilitation costs on the properties owned by
the Company. The forward-looking statements included herein are based
on current expectations that involve numerous risks and uncertainties.
Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond the
control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be
no assurance that the forward-looking statements included in this
Form 10-Q will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded
as a representation by the Company or any other person that the objectives
and plans of the Company will be achieved.
The Company has identified three strategic internal systems
that are vulnerable to Year 2000 computation problems. These are
general ledger/accounts payable, on-site property accounting, and
payroll. The Company will continue to utilize both internal and
external resources to reprogram, replace and test these systems for
the Year 2000 modifications. The conversion to a new general
ledger/accounts payable system, which is Year 2000 compliant, is
expected to occur during the fourth quarter of 1998. The on-site
property accounting system has been upgraded to a new release
that is Year 2000 compliant. Payroll system options are still
being evaluated. The Company anticipates upgrading its payroll
system during the fourth quarter of 1998 to a new release of its
current payroll software that is Year 2000 compliant. While the
Company is actively striving to address its internal Year 2000 issues,
there can be no guarantee that the systems of other companies
on which the Company's systems and processes rely will be timely
converted and will not have an adverse effect on the Company's
operations. The Company is currently surveying its strategic
vendors of services, information and products, attempting to
identify any potential exposure in this area. The cost of the new
general ledger/account payable system and the Year 2000 project is
estimated to be approximately $750,000, which will be funded
through cash flow from operations.
The cost of the Year 2000 project and the estimated date of
completion of necessary modifications is based on the Company's
best estimates, which were derived from various
assumptions of future events, including the continued
availability of certain resources, third party
modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.
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 and the Company's Form 10-K for the
year ended December 31, 1997. Such financial statements and
information included in this Form 10-Q have been prepared to reflect
the historical condensed consolidated operations of the Company
for the three and six months ended June 30, 1998 and 1997, and the
condensed consolidated balance sheet data of the Company as of
June 30, 1998 and December 31, 1997.
The changes in revenues and expenses related to property
operations during the three and six months ended June 30, 1998
and 1997 are primarily the result of the increased number of apartment
units owned due to acquisitions of additional multifamily
properties by the Company, including 78 properties with a total of
18,118 units acquired from Drever Partners, Inc. on October 1, 1997.
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 14) 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, 1997.
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(In thousands, except per share and property data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING DATA
Revenues
Rental income . . . . . . . $66,650 $33,071 $132,557 $64,587
Other property income . . . 2,742 1,333 5,288 2,605
Interest income . . . . . . 363 346 724 849
------- ------- -------- -------
Total revenues . . . . . 69,755 34,750 138,569 68,041
------- ------- -------- -------
Expenses
Property operating
and maintenance . . . . . 23,249 11,444 45,761 22,013
Real estate taxes . . . . . 6,950 3,412 13,898 6,561
General and administrative. 2,866 1,972 5,701 3,394
Interest. . . . . . . . . . 13,374 5,244 26,688 10,121
Amortization. . . . . . . . 252 200 485 411
Depreciation. . . . . . . . 14,701 6,793 29,035 13,121
------- ------- -------- -------
Total expenses . . . . . 61,392 29,065 121,568 55,621
------- ------- -------- -------
Income before extraordinary
item and income allocated
to minority interests . . . . 8,363 5,685 17,001 12,420
Extraordinary loss on debt
extinguishment. . . . . . . . (80) -- (104) --
------- ------- -------- -------
Income before income
allocated to minority
interests . . . . . . . . . . 8,283 5,685 16,897 12,420
Income allocated to
minority interests. . . . . . (2,769) (395) (5,667) (800)
------- ------- -------- -------
Net income . . . . . . . . . 5,514 5,290 11,230 11,620
Preferred distributions. . (3,280) (3,311) (6,560) (6,623)
------- ------- -------- -------
Net income available to common
stockholders. . . . . . . . . $ 2,234 $ 1,979 $ 4,670 $ 4,997
======= ======= ======== =======
Distribution per share of
common stock. . . . . . . . . $0.4825 $0.4825 $ 0.965 $ 0.965
======= ======= ======== =======
Basic weighted average number
of common shares outstanding. 18,488 17,502 18,384 17,329
======= ======= ======== =======
</TABLE>
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
PROPERTY DATA
Total properties (at end of
period) . . . . . . . . . . . 156 75 156 75
Total units (at end of period). 42,858 23,188 42,858 23,188
Total units (weighted average). 42,858 22,617 42,758 22,111
Weighted average monthly
property revenue per unit . . $ 540 $ 507 $ 537 $ 506
</TABLE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
BALANCE SHEET DATA
Real estate assets, at cost, net
(including real estate held for sale). . $1,442,133 $1,433,029
Mortgage notes payable, credit facility
and term loan. . . . . . . . . . . . . . 746,261 702,354
Minority interests . . . . . . . . . . . . 314,922 321,916
Stockholders' equity . . . . . . . . . . . 380,698 395,215
</TABLE>
Comparison of Three Months and Six Months Ended June 30, 1998 to
Three Months and Six Months Ended June 30, 1997
- ----------------------------------------------------------------
The weighted average number of units owned for the second
quarter of 1998 increased by 20,241 units, or 89.5%, from 22,617
units for the second quarter of 1997 to 42,858 units for the
second quarter of 1998 as a result of the acquisition of
additional properties. The portfolio had an average physical
occupancy of 92.6% and 93.0% for the second quarter of 1997 and 1998,
respectively.
The weighted average number of units owned for the six
months ended June 30, 1998, increased by 20,647 units, or 93.4%
from 22,111 units for the first six months of 1997 to 42,758
units for the first six months of 1998 as a result of the
acquisition of additional properties. Total
units owned at June 30, 1997 and 1998 were 23,188 and 42,858,
respectively. The portfolio had an average physical occupancy
of 92.5% and 93.1% for the first six months of 1997 and 1998,
respectively.
The Company owned 64 properties with 20,845 units throughout
both periods in 1998 and 1997 ("same store"). A summary of the
historical operating performance for "same store" properties
is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 % Change 1998 1997 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenue (in thousands). . . $32,806 $31,842 3.0% $65,457 $63,635 2.9%
Property operating expenses
(in thousands) (1). . . . . 14,133 13,679 3.3% 28,082 26,913 4.3%
------- ------- ------- -------
Property operating income
(in thousands). . . . . . . $18,673 $18,163 2.8% $37,375 $36,722 1.8%
======= ======= ======= =======
Average physical occupancy. . 91.6% 92.6% N/A 91.8% 92.4% N/A
======= ======= ======= =======
Average monthly revenue per
unit. . . . . . . . . . . . $ 525 $ 509 3.0% $ 523 $ 509 2.9%
======= ======= ======= =======
Average annualized property
operating and maintenance
expenses per unit . . . . . $ 2,082 $ 2,027 2.7% $ 2,063 $ 1,992 3.6%
======= ======= ======= =======
Average annualized real
estate taxes per unit . . . $ 630 $ 598 5.4% $ 631 $ 590 6.9%
======= ======= ======= =======
Operating expense ratio . . . 43.1% 43.0% N/A 42.9% 42.3% 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 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental and other property
revenue (in thousands). . . $36,586 $ 2,562 $72,388 $ 3,557
Property operating expenses
(in thousands) (1). . . . . 16,066 1,177 31,577 1,661
------- ------- ------- -------
Property operating income
(in thousands). . . . . . . $20,520 $ 1,385 $40,811 $ 1,896
======= ======= ======= =======
Weighted average number of
units . . . . . . . . . . . 22,013 1,772 21,913 1,266
======= ======= ======= =======
Average physical occupancy. . 94.2% 93.9% 93.5% 93.5%
======= ======= ======= =======
Average monthly revenue per
unit. . . . . . . . . . . . $ 554 $ 482 $ 551 $ 468
======= ======= ======= =======
Average annualized property
operating and maintenance
expenses per unit . . . . . $ 2,253 $ 1,984 $ 2,214 $ 1,975
======= ======= ======= =======
Average annualized real
estate taxes per unit . . . $ 667 $ 673 $ 669 $ 649
======= ======= ======= =======
Operating expense ratio . . . 43.9% 45.9% 43.6% 46.7%
======= ======= ======= =======
</TABLE>
(1) Consists of property operating and maintenance and
real estate tax expenses.
General and administrative expenses increased $894,000 for
the second quarter of 1998, or 45.3%, from $1,972,000 for the
second quarter of 1997 to $2,866,000 for the second quarter of 1998.
This represented a per unit decrease of $82, or 23.5%, on an
annualized basis. General and administrative expenses increased
$2,307,000 for the first six months of 1998, or 68.0%, from
$3,394,000 for the first six months of 1997 to $5,701,000 for the
first six months of 1998. This represents a per unit decrease of
$40, or 13.0%, on an annualized basis. This per unit decrease is
primarily due to increased operating efficiencies. The increases
in general and administrative expenses were primarily due to
increased properties owned which resulted in increased salary costs
and occupancy costs for additional corporate and regional office
space.
Interest expense increased $8,130,000 for the second quarter
of 1998, or 155.0%, from $5,244,000 for the second quarter of 1997
to $13,374,000 for the second quarter of 1998. Interest
expense increased $16,567,000 for the first six months of 1998,
or 163.7%, from $10,121,000 for the first six months of 1997 to
$26,688,000 for the first six months of 1998. The increases were
primarily due to indebtedness incurred on properties acquired
during 1997.
Depreciation expense increased $7,908,000 for the second
quarter of 1998, or 116.4%, from $6,793,000 for the second quarter
of 1997 to $14,701,000 for the second quarter of 1998.
Depreciation increased $15,914,000 for the first six months of
1998, or 121.3%, from $13,121,000 for the first six months of
1997 to $29,035,000 for the first six months of 1998. The increases were
due to depreciation on additional properties acquired and capital
improvements on existing properties.
The $104,000 extraordinary loss on debt extinguishment in
1998 was due to prepayment penalties incurred in connection with
the Company's payoff of a $7.2 million mortgage loan in April
1998, and the write off of unamortized deferred financing costs
related to the refinancing of certain of the Company's indebtedness
during the first and second quarter of 1998.
Liquidity and Capital Resources
- -------------------------------
The Company's principal demands for liquidity are
distributions to its stockholders, property operating and
maintenance costs, capital improvements to its properties,
acquisitions of properties, interest on indebtedness and debt
repayments.
During the first six months of 1998, the Company had cash
flows from operating activities of $31.6 million and proceeds
from stock offerings of $12.4 million, including $3.3 million from its
dividend reinvestment plan. These funds, in addition to $35.7
million of net proceeds from mortgage notes and the Company's
credit facility, were used during the period primarily to pay for $5.1
million of the total acquisition cost of two apartment properties
(containing 376 units), distributions to stockholders and unit holders
of $37.3 million, capital improvements to properties of $20.2
million, financing costs of $3.2 million, principal payments of
$2.6 million, and the purchase of 572,000 shares of the Company's
common stock for $14.0 million. As a result, the Company had
a net decrease in cash of $3.2 million.
The Company has a $150 million unsecured credit facility
(the "Credit Facility"), which expires in February 1999. The Credit
Facility has been used to finance property acquisitions,
including capital improvements, and to meet short-term liquidity
requirements. As of June 30, 1998, the unused amount of the Credit
Facility was $65 million. The availability of funds to the Company
under the Credit Facility is subject, however, to certain
borrowing base and other customary covenants.
Net cash provided by operating activities increased $8.3
million for the first six months of 1998 compared to the same
period in 1997. Cash flow from operating activities before changes in
operating accounts increased $21.2 million, primarily due to an
increased number of units owned, which was offset by a $12.9 million
decrease in the net effect of changes in operating accounts. The
net decrease in operating accounts resulted primarily from an
increase in the payment of real estate taxes and funding of
escrow deposits.
As of June 30, 1998, net cash used in investing activities
was $25.3 million, compared to $67.3 million for the same period in
1997. Of the $25.3 million, the Company spent $5.1 million
to purchase two apartment properties and $20.2 million for real
estate asset additions.
Net cash provided by financing activities decreased by $29.7
million for the first six months of 1998 compared to the same
period in 1997. The decrease is primarily due to the repurchase of
572,000 shares of the Company's common stock for an aggregate
price of $14.0 million in 1998 and increased distributions to
stockholders and minority interest holders.
The Company intends to meet its short-term liquidity
requirements, including capital expenditures related to maintenance
and improvements of its properties, through cash flow provided
by operations and when necessary will utilize unused portions of
its Credit Facility to meet working capital needs. Historically,
the cash provided by operating activities has been adequate to meet both
its operating requirements and distribution payments; however,
the Company's current repositioning program will require borrowings
under the Credit Facility to fund capital improvements. During the
first six months of 1998, the Company has spent $10.7 million for
recurring and non-recurring capital items, and $9.5 million for
repositioning and acquisition rehabilitation costs. Recurring and
non-recurring capital expenditures and repositioning and
rehabilitation on acquisition properties are
anticipated to be approximately $8.0 million and $16.1 million,
respectively, for the remainder of 1998.
The Company expects to meet its long-term liquidity
requirements, such as refinancing mortgage indebtedness and
property acquisitions, including capital improvements on property
acquisitions through long-term borrowings, both secured and
unsecured, and the issuance of debt or equity securities.
As of June 30, 1998, the Company had outstanding
indebtedness in the aggregate principal amount of $746.3 million,
consisting of fixed rate debt of $397.7 million and variable rate debt of
$348.6 million. The weighted average interest rate and weighted
average years to maturity on the Company's outstanding indebtedness
at June 30, 1998 were approximately 7.3% and 7.5 years, respectively.
Funds from Operations
- ---------------------
Management of the Company generally considers 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, and income allocated to minority interests. 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, investing and financing
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.
The Company calculates FFO in a manner consistent with that
recommended by the National Association of Real Estate Investment
Trusts; however, the Company's FFO is not necessarily
comparable to similarly entitled items reported by other REITs.
FFO for the three months and six months ended June 30, 1998 and 1997
are as follows (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Funds from operations:
Net income available to common
stockholders. . . . . . . . . . . $ 2,234 $ 1,979 $ 4,670 $ 4,997
Preferred distributions (1) . . . . 980 1,011 1,960 2,023
Income allocated to minority
interests (2) . . . . . . . . . . 1,644 395 3,417 800
Extraordinary loss on debt
extinguishment. . . . . . . . . . 80 -- 104 --
Depreciation of real estate assets. 14,560 6,740 28,779 13,009
------- ------- ------- -------
Funds from operations. . . . . . $19,498 $10,125 $38,930 $20,829
======= ======= ======= =======
Cash flows provided by (used in):
Operating activities. . . . . . . . $23,201 $14,525 $31,561 $23,248
Investing activities. . . . . . . . (12,394) (54,357) (25,289) (67,297)
Financing activities. . . . . . . . (12,271) 23,157 (9,505) 20,147
</TABLE>
(1) Distributions on convertible preferred stock are added back
in computing funds from operations since the conversion to
common shares has been assumed.
(2) Excludes distributions on the preferred operating partnership
units, which are not added back in computing funds from
operations ($1,125 per quarter for 1998).
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
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
(a) The Company's Annual Meeting of Stockholders was held
on June 4, 1998.
(b) (1) The stockholders elected six Directors nominated
by the Board of Directors:
Affirmative Abstentions
----------- -----------
Mark S. Dillinger 16,564,346 560,381
Maxwell B. Drever 16,560,521 564,206
Francesco Galesi 16,580,850 543,877
Robert L. Honstein 16,572,045 552,682
Michael E. Masterson 16,531,115 593,612
J. Otis Winters 16,538,726 586,001
(2) The stockholders ratified the appointment of
Deloitte & Touche LLP as independent auditors of
the Company for the year ended December 31, 1998:
Affirmative Negative Abstentions
17,017,073 47,577 60,077
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
12.1 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
27 Financial Data Schedule
(b) Reports
None.
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: /s/ Marshall B. Edwards
-----------------------
Marshall B. Edwards
President and 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.
Signatures Title Date
/s/ Michael A. Masterson Chairman of the Board of Directors August 4, 1998
- ------------------------
Michael A. Masterson
/s/ Marshall B. Edwards President, Chief Executive Officer August 4, 1998
- ------------------------ and Director (Principal Executive
Marshall B. Edwards Officer)
/s/ Mark S. Dillinger Executive Vice President, Chief August 4, 1998
- ------------------------ Financial Officer and Director
Mark S. Dillinger (Principal Financial and Accounting
Officer)
EXHIBIT INDEX
Exhibit No. Description
12.1 Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred
Stock Dividends
27 Financial Data Schedule
Exhibit 12.1
WALDEN RESIDENTIAL PROPERTIES, INC.
COMPUTATION OF NET RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DISTRIBUTIONS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before extraordinary item
and income allocated to minority
interests. . . . . . . . . . . . . . $ 8,363 $ 5,685 $17,001 $12,420
Add:
Interest on indebtedness . . . . . . 13,374 5,244 26,688 10,121
Amortization . . . . . . . . . . . . 252 200 485 411
------- ------- ------- -------
Earnings. . . . . . . . . . . . . $21,989 $11,129 $44,174 $22,952
======= ======= ======= =======
Fixed charges and preferred
distributions:
Interest on indebtedness. . . . . . $13,374 $ 5,244 $26,688 $10,121
Amortization. . . . . . . . . . . . 252 200 485 411
------- ------- ------- -------
Fixed charges. . . . . . . . . . 13,626 5,444 27,173 10,532
Add:
Preferred distributions (1). . . 4,796 3,702 9,592 7,419
------- ------- ------- -------
Combined fixed charges and
preferred distributions. . . $18,422 $ 9,146 $36,765 $17,951
======= ======= ======= =======
Ratio of earnings to fixed charges . . 1.61x 2.04x 1.63x 2.18x
Ratio of earnings to fixed charges
and preferred distributions. . . . . 1.19x 1.22x 1.20x 1.28x
</TABLE>
(1) Includes distributions on preferred stock and preferred distributions
to minority interest holders.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,524
<SECURITIES> 0
<RECEIVABLES> 3,696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,496,973
<DEPRECIATION> 98,316
<TOTAL-ASSETS> 1,487,653
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
57
<COMMON> 182
<OTHER-SE> 380,459
<TOTAL-LIABILITY-AND-EQUITY> 1,487,653
<SALES> 0
<TOTAL-REVENUES> 137,845
<CGS> 0
<TOTAL-COSTS> 59,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,688
<INCOME-PRETAX> 17,001
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,001
<DISCONTINUED> 0
<EXTRAORDINARY> (104)
<CHANGES> 0
<NET-INCOME> 4,670
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
