<PAGE>
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 Commission File Number 001-12684
September 30, 1996
COLUMBUS REALTY TRUST
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-2509086
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15851 DALLAS PARKWAY, SUITE 855
DALLAS, TEXAS 75248
(Address of Principal Executive Offices)
(972) 387-1492
(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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 12,979,333 common shares of beneficial interest, $0.01 par value per
share, outstanding at November 7, 1996.
Index to exhibits: 20
Total pages: 21
1
<PAGE>
COLUMBUS REALTY TRUST
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Consolidated Balance Sheets of Columbus Realty Trust as
of September 30, 1996 and December 31, 1995................... 3
Consolidated Statements of Operations of Columbus Realty Trust
for the three and nine months ended September 30, 1996 and
1995.......................................................... 4
Consolidated Statements of Cash Flows of Columbus Realty Trust
for the nine months ended September 30, 1996 and 1995......... 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 20
Item 2. Changes in Securities....................................... 20
Item 3. Defaults Upon Senior........................................ 20
Item 4. Submission of Matters to a Vote of Security Holders......... 20
Item 5. Other Information........................................... 20
Item 6. Exhibits or Reports on Form 8-K............................. 20
SIGNATURES............................................................. 21
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
COLUMBUS REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------------------------
ASSETS (Unaudited)
<S> <C> <C>
Real estate:
Land $ 54,399 $ 48,104
Buildings and improvements 284,027 232,428
Furniture, fixtures, and equipment 4,649 4,433
Construction in progress 43,351 50,081
----------------------------
386,426 335,046
Less accumulated depreciation (37,505) (31,667)
----------------------------
Real estate held for investment 348,921 303,379
Real estate held for sale 4,106 -
----------------------------
353,027 303,379
Cash and cash equivalents 4,833 11,224
Accounts receivable 515 861
Receivables from affiliates 135 418
Deferred charges, net of accumulated
amortization 1,940 2,249
Other assets 4,713 2,845
----------------------------
Total assets $365,163 $320,976
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $193,750 $145,492
Accrued dividends 4,635 4,322
Accounts payable and accrued
expenses 2,018 4,912
Accrued interest 375 292
Accrued property taxes 4,963 5,203
Tenant security deposits 1,630 1,273
Prepaid rent 470 592
Minority interest 2,063 2,063
----------------------------
Total liabilities 209,904 164,149
Shareholders' equity:
Preferred shares, $ .01 par value;
10,000,000 shares authorized;
none issued or outstanding - -
Common shares, $ .01 par value;
100,000,000 shares authorized;
11,733,571 and 11,524,618 shares
issued at September 30, 1996, and
December 31, 1995, respectively 117 115
Additional paid-in capital 179,737 176,061
Retained earnings (deficit) (24,589) (19,343)
----------------------------
155,265 156,833
Less 900 common shares in treasury,
at cost (6) (6)
----------------------------
Total shareholders' equity 155,259 156,827
----------------------------
Total liabilities and shareholders'
equity $365,163 $320,976
============================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1996 1995 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 11,953 $ 10,103 $ 33,320 $ 28,753
Property management 75 115 223 409
Interest and other 526 450 1,706 1,191
----------------------------------------------------------------------
Total revenue 12,554 10,668 35,249 30,353
Expenses:
Repairs and maintenance 935 840 2,637 2,304
Other property operating 717 541 1,908 1,449
Advertising 222 151 503 409
General and administrative - properties 733 700 2,355 2,048
General and administrative - corporate 523 466 1,569 1,532
Real estate taxes 1,607 1,271 4,544 3,700
Interest 2,276 1,525 5,640 4,040
Interest related to amortization of
deferred financing costs 114 139 272 413
Depreciation and amortization 2,617 2,385 7,549 6,771
----------------------------------------------------------------------
Total expenses 9,744 8,018 26,977 22,666
----------------------------------------------------------------------
Income from operations 2,810 2,650 8,272 7,687
Gain on sale of real estate (Note 2) 38 - 81 -
----------------------------------------------------------------------
Net income $ 2,848 $ 2,650 $ 8,353 $ 7,687
======================================================================
Net income per common share, primary
and fully diluted:
Income from operations $0.24 $0.23 $0.70 $0.67
Gain on sale of real estate - - .01 -
----------------------------------------------------------------------
Net income $0.24 $0.23 $0.71 $0.67
======================================================================
Weighted average number of common
shares outstanding (including common
share equivalents):
Primary 11,827,147 11,573,109 11,754,744 11,517,888
Fully diluted 11,895,042 11,574,090 11,781,269 11,530,966
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,353 $ 7,687
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 7,549 6,771
Amortization of deferred financing
costs 272 413
Gain on sale of real estate (81) -
Net effect of changes in operating
assets and liabilities (4,502) 137
-------------------------------
Net cash provided by operating
activities 11,591 15,008
INVESTING ACTIVITIES
Payment of construction costs (46,335) (37,082)
Acquisition of property (7,095) (6,648)
Improvements to real estate investments (1,542) (2,548)
Purchase of furniture, fixtures, and
equipment (265) (459)
Proceeds from sale of real estate 171 -
-------------------------------
Net cash used in investing activities (55,066) (46,737)
FINANCING ACTIVITIES
Proceeds from notes payable 48,884 43,249
Payment of notes payable (626) (87)
Payment of financing costs (262) (490)
Payment of dividends (13,285) (12,870)
Proceeds from employee and shareholder
plans 2,538 735
Payment of offering costs (165) (227)
-------------------------------
Net cash provided by financing
activities 37,084 30,310
-------------------------------
Net decrease in cash and cash
equivalents (6,391) (1,419)
Cash and cash equivalents at beginning
of period 11,224 4,943
-------------------------------
Cash and cash equivalents at end of
period $ 4,833 $ 3,524
===============================
Supplemental cash flow information:
Interest payments, including
approximately $4,135 and $2,070
interest capitalized in 1996 and 1995,
respectively $ 9,692 $ 5,923
Noncash financing activity:
Issuance of shares under employee plans $ 1,305 $ 807
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND FORMATION
Columbus Realty Trust (the Company) was organized as a Texas real estate
investment trust on October 12, 1993, to continue the multifamily operations of
Columbus Realty Holdings, Inc. (CRH) and certain of its affiliates and
predecessors (collectively, the Columbus Group). The Company commenced
operations December 29, 1993, upon completion of an initial public offering of
6,898,566 common shares at a price of $17.25 per share.
Net proceeds from the public offering were $111,549,812 (before offering costs)
and, in connection with the offering, the Company had drawn $15,000,000 on the
credit facility, for total proceeds of $126,549,812. The proceeds were
primarily used to pay off mortgage notes payable and the related debt prepayment
penalties of the Columbus Group and of Texana-RAT II Associates, Inc. and
certain of its affiliates (collectively, the Texana Group), and for the
acquisition of the ownership interests of the Columbus Group and the Texana
Group (collectively, the predecessors to Columbus Realty Trust).
Upon consummation of the public offering, the ownership interests of the
Columbus Group in seven multifamily residential properties were transferred to
the Company. Concurrently, the ownership interests of the Texana Group in five
multifamily residential, two industrial, and one retail property were
transferred to the Company. The properties are located primarily in the greater
Dallas, Texas, metropolitan area.
In addition, the property management contracts of Single Star Realty, Inc. (an
affiliate of the Texana Group) and CRH Management (an affiliate of the Columbus
Group), were transferred to Columbus Management Services, Inc. (CMSI), a wholly
owned subsidiary of the Company. CMSI manages the properties of the Company, as
well as properties owned by other parties.
For financial reporting purposes, the ownership interests acquired were recorded
by the Company at their historical values, with the exception of the payments
made to the third-party owners, which have been accounted for under the purchase
method of accounting. The payments made to third-party owners have been
allocated to the related real estate based on their estimated fair values.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and accounts have
been eliminated.
6
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited 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 management's opinion, the interim financial statements reflect all
adjustments necessary for a fair presentation of the financial position of the
Company. All adjustments were of a normal recurring nature except for the
adjustments to reflect real estate transactions more fully described in Note 2.
The operating results for the interim period ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1996. For further information, refer to the financial
statements and accompanying footnotes included in the Columbus Realty Trust Form
10-K for the fiscal year ended December 31, 1995 (the "1995 Annual Report").
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. REAL ESTATE TRANSACTIONS
ACQUISITIONS OF DEVELOPMENT SITES
On January 23, 1996, the Company purchased two tracts of land as multifamily
residential development sites in the Uptown district of Dallas, Texas, for
approximately $5.0 million. Two smaller tracts of land adjacent to one of the
sites were purchased during the second quarter of 1996 for approximately
$185,000. The aggregate purchase prices for the sites were funded through the
Company's Credit Facility, more fully described in the 1995 Annual Report.
Another multifamily development site in the Uptown district was acquired on July
18, 1996, for approximately $1.3 million. The purchase was funded from the
Company's working capital reserves and will be included in a development cost
draw on the Credit Facility in the fourth quarter of 1996. Construction of a
182-unit multifamily residential project began on the latter site in August,
1996.
The Company acquired a multifamily residential development site in Ridgeland,
Mississippi, for approximately $620,000 on February 23, 1996. The purchase was
funded through the Company's Credit Facility. Construction of a 240-unit
apartment project, Columbus Pointe, began in the second quarter of 1996.
COMPLETED CONSTRUCTION
The Company completed construction of five multifamily apartment projects during
the nine months ended September 30, 1996. The aggregate development and
construction costs of the projects as set forth in the table below have been
reclassified from construction in progress to buildings and improvements in the
Company's consolidated financial statements as of September 30, 1996.
<TABLE>
<CAPTION>
Development/
Number Construction
Project Name Location of Units Completion Date Cost
- -------------------- ---------- -------- --------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Hackberry Creek II Dallas, TX 192 April 1996 $ 9,563
The Abbey Dallas, TX 34 April 1996 4,344
The Vineyard Dallas, TX 116 May 1996 7,359
Winsted Village Dallas, TX 314 July 1996 15,907
Columbus Square Dallas, TX 218 September 1996 17,699
--- -------
874 $54,872
=== =======
</TABLE>
7
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. REAL ESTATE TRANSACTIONS (CONTINUED)
REAL ESTATE HELD FOR SALE
On June 1, 1996, the Company began marketing efforts to sell 130 condominium
units owned in the Springstead and Villas of Valley Ranch condominium
communities located in Dallas, Texas. The aggregate net book value of the
condominium properties (cost, net of accumulated depreciation) totaling
approximately $4.1 million has been classified as real estate held for sale in
the Company's consolidated financial statements as of September 30, 1996, in
accordance with Statement of Financial Accounting Standards No. 121, Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Two units in the Villas of Valley Ranch condominium community were sold in the
nine months ended September 30, 1996 for a net gain of approximately $81,000, as
shown in the following table (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Sales prices $171
Costs of sales:
Net book value of real estate (61)
Closing costs (14)
Marketing and sales costs (15)
----
Net gain on sales $ 81
====
</TABLE>
3. SHAREHOLDERS' EQUITY
NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding during the periods presented.
SHARE OPTION PLANS
The Company had 1,696,920 share options outstanding at September 30, 1996, under
share option plans established for Trust Managers, officers and employees as
summarized in the following table:
<TABLE>
<CAPTION>
Share Option Management Total
Plan Incentive Plan Other Options
------------ -------------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1995 (a) 1,245,000 - 340,000 1,585,000
Options granted (b) - 126,920 - 126,920
Options exercised (c) (15,000) - - (15,000)
--------- ------- ------- ---------
Outstanding, September 30, 1996 1,230,000 126,920 340,000 1,696,920
========= ======= ======= =========
</TABLE>
(a) Exercise prices range from $17.25 to $19.8375 per share.
(b) Exercise prices range from $19.125 to $19.50 per share. See also
"Management Incentive Plan".
(c) Exercise prices ranged from $17.25 to $18.25 per share.
8
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SHAREHOLDERS' EQUITY (CONTINUED)
SHARE BONUS PLAN NO. 2
On March 15, 1996, the Company issued 56,710 shares to certain employees under
the Company's Share Bonus Plan No. 2 for a purchase price equal to par value
($.01 per share). The Share Bonus Plan No. 2 is more fully described in the
1995 Annual Report. The difference between the purchase price and the market
price on the issuance date is approximately $1.1 million and will be recognized
as compensation expense ratably over a three-year vesting period beginning on
the issuance date. The issuance of the shares has been reflected in the
Company's consolidated financial statements as noncash increases in other assets
and paid-in capital.
MANAGEMENT INCENTIVE PLAN
On January 30, 1996, the Company established the Long-Term Management Incentive
Plan (the "Management Incentive Plan") for the purpose of attracting and
retaining individuals who will contribute to the Company's success while serving
as Trust Managers, officers, and employees. The Management Incentive Plan will
be administered by a committee of the Trust Managers, which will have the
authority to grant maximum awards of 500,000 common shares or options to
purchase common shares under the plan.
The Company issued 11,124 common shares to executive employees for a purchase
price equal to par value ($.01 per share) under the Management Incentive Plan on
March 15, 1996. The difference between the purchase price and the market price
on the grant date is approximately $214,000 and will be recognized as
compensation expense ratably over a three-year vesting period beginning on the
issuance date. The issuance of the shares has been reflected in the Company's
consolidated financial statements as noncash increases in other assets and paid-
in capital.
The Company entered into Nonqualified Option Agreements (the "Option
Agreements") with each of the Company's five non-employee Trust Managers
pursuant to the Management Incentive Plan on May 20, 1996. The Option
Agreements grant each Trust Manager the right to purchase up to 10,000 common
shares at a purchase price of $19.125 per share. The options vest six months
after the grant date and expire ten years after the grant date.
On May 30, 1996, the Company entered into Share Purchase Award Agreements (the
"Award Agreements") with each of the Company's five non-employee Trust Managers
pursuant to the Management Incentive Plan. The Award Agreements grant the non-
employee Trust Managers the right to purchase up to 15,384 common shares for a
purchase price of $19.50 per share and expire one year from the grant date.
Such purchases under the Award Agreements may, at the option of the participant,
and subject to certain other restrictions, be funded with proceeds from a loan
from the Company. The maximum loan amount under each of the Award Agreements is
$150,000. Any such loans made pursuant to the Award Agreements will be
evidenced by promissory notes bearing interest at a rate equal to the Company's
cost of funds, with a maximum term of ten years and shall be secured by the
stock purchased.
9
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SHAREHOLDERS' EQUITY (CONTINUED)
DISTRIBUTIONS
Three quarterly distributions, totaling approximately $13.3 million, had been
paid to shareholders as of September 30, 1996. As summarized in the following
table, the Company received proceeds of approximately $2.2 million for common
shares issued concurrently with the distributions pursuant to the Dividend
Reinvestment Plan.
<TABLE>
<CAPTION>
Proceeds From Shares Issued
Dividend Under Dividend
Record Payment Distribution Total Reinvestment Reinvestment
Date Date Per Share Distribution Plan Plan
- -------- ------- ------------ -------------- -------------- --------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
12/29/95 1/16/96 $0.375 $ 4,322 $ 419 22,447
3/25/96 4/15/96 0.375 4,357 780 44,065
6/28/96 7/15/96 0.395 4,606 997 55,054
------ ------- ------ -------
$1.145 $13,285 $2,196 121,566
====== ======= ====== =======
</TABLE>
4. NOTES PAYABLE
On June 7, 1996, Addison Circle One, Ltd., a subsidiary of the Company, obtained
a $21.3 million construction loan from Wells Fargo Realty Advisors Funding, Inc.
(Wells Fargo). The loan will be funded in increments corresponding to the
development and construction costs incurred to complete the Addison Circle One
multifamily residential and retail project more fully described in the 1995
Annual Report. The Company, as general partner of Addison Circle One, Ltd.,
funded the initial development and construction costs of the project with a
capital contribution of approximately $8.6 million in the fourth quarter of
1995. Construction of the project began in the first quarter of 1996.
The Wells Fargo loan is secured by a first lien deed of trust on the land and
improvements comprising the project and a security interest in its rents and
leases. Interest is due and payable monthly at LIBOR plus 165 basis points
applied to the daily principal balance outstanding. The loan matures in June
1999 when the principal balance then outstanding is due. There were no draws on
the construction loan as of September 30, 1996.
5. TRANSACTIONS WITH AFFILIATES
Receivables from affiliates include the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------------------------
<S> <C> <C>
Advanced to condominium homeowners'
associations $ 58 $ 47
Advanced to non-management employees 29 12
Receivable from Employee Stock Purchase
Plan - 1
Receivable from owners of predecessors
in connection with the acquisition of
their interests 42 5
Advanced to affiliates in ordinary
course of business for third-party ----- -----
property management 6 353
----- -----
$ 135 $ 418
===== =====
</TABLE>
10
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. TRANSACTIONS WITH AFFILIATES (CONTINUED)
During the nine months ended September 30, 1996, the Company received payments
totaling approximately $247,000 from an affiliate for commissions and prepaid
management fees related to the sale of a commercial property formerly managed by
CMSI. The management fee portion of approximately $197,000 will be recognized
ratably as income during the twelve month period ending December 31, 1996.
6. CONTINGENCIES
The Company is subject to certain legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of the
Company, none of such proceedings is material in relation to the Company's
consolidated financial statements.
7. SUBSEQUENT EVENTS
REGISTRATION STATEMENT AND EQUITY OFFERING
On August 8, 1996, the Company filed a "shelf" Registration Statement with the
Securities and Exchange Commission on Form S-3 pursuant to Rule 415 of the
Securities Act of 1933. The Registration Statement registered an aggregate of
$200 million of debt securities, common shares, preferred shares and warrants
(collectively, the "Registered Securities"). The Registered Securities may be
issued separately or together, in separate series, and in amounts and at prices
and terms to be determined by the Company.
On October 10, 1996, the Company sold 1,166,600 common shares pursuant to the
Registration Statement, at a price of $20.50 per share, for an aggregate
purchase price of approximately $23.9 million, to certain institutional
investors. After deducting transaction expenses of approximately $300,000, the
net proceeds of $23.6 million were combined with approximately $400,000 of
working capital to retire $24.0 million of debt outstanding under the Credit
Facility.
DISTRIBUTIONS
On October 15, 1996, the Company paid a quarterly dividend of approximately $4.6
million, or $0.395 per common share, to shareholders of record on September 30,
1996. The Company received approximately $1.6 million in proceeds for 78,663
common shares issued concurrently with the dividend payment pursuant to the
Dividend Reinvestment Plan.
SHARE OPTION PLANS
On October 15, 1996, the Company granted 256,956 options to purchase common
shares to certain executive officers and other employees, 155,000 of which were
awarded under the 1993 Share Option Plan, and 101,956 of which were awarded
under the Management Incentive Plan. The options are exercisable at a price of
$20.875 per share for a period of ten years from the grant date, and vest one-
third at issuance, one-third at the first anniversary of the grant date, and
one-third at the second anniversary of the grant date.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is based primarily on the consolidated financial
statements of Columbus Realty Trust as of September 30, 1996 and 1995, and for
the three and nine month periods then ended. This information should be read in
conjunction with the accompanying consolidated financial statements and notes
thereto.
As of September 30, 1996, the Company owned 5,414 completed residential units in
its real estate portfolio, a net increase of 872 units or approximately 19% over
the 4,542 units held as of September 30, 1995. The increase in the number of
residential units in the operating portfolio is the result of the Company's
development and construction programs. One multifamily residential project was
completed in the third quarter of 1995, and five additional multifamily
residential projects were completed through the third quarter of 1996. As more
fully described below, the projects completed in 1995 and 1996 have had a
significant impact on the Company's results of operations upon completion of
their leasing programs and stabilization of operations. The five projects
completed in the second and third quarters of 1996 had an average occupancy rate
of 98.5% as of September 30, 1996. As of September 30, 1996, the Company had
four multifamily residential projects comprising 1,368 apartment units under
construction.
Management believes that the presentation of funds from operations ("FFO")
provides an appropriate measure of the Company's performance relative to other
real estate investment trusts. The Company's calculation of FFO has been made
in accordance with the definition of FFO approved by the National Association of
Real Estate Investment Trusts (NAREIT) (i.e., net income, computed in accordance
with generally accepted accounting principles, excluding gains and losses from
debt restructuring and sales of property, plus depreciation and amortization of
real estate investments, and after adjustments for unconsolidated partnerships
and joint ventures). FFO does not represent cash flow and is not necessarily
indicative of cash flow or liquidity available to the Company, nor should it be
considered as an alternative to net income as an indicator of operating
performance. The Company believes that in order to facilitate a clear
understanding of the historical operating results of the Company, FFO should be
disclosed in conjunction with net income as presented in the financial
statements and data included elsewhere in this Form 10-Q.
Funds from operations for the third quarter of 1996 totaled approximately $5.4
million or $0.46 per common share, compared with funds from operations of
approximately $5.0 million or $0.43 per common share in the comparable prior
period. During the nine-month period ended September 30, 1996, funds from
operations totaled approximately $15.8 million, or $1.34 per common share,
compared with funds from operations of approximately $14.3 million or $1.24 per
common share for the nine months ended September 30, 1995. The increases in
funds from operations of approximately $445,000 or 9% in the three month period
ended September 30, 1996, over the same three month period of 1995, and
approximately $1.5 million or 10% in the nine months ended September 30, 1996,
over the comparable prior period are primarily attributable to the net operating
income provided by the increased number of apartment units in the Company's
portfolio, partially offset by increases in the amount of expensed debt service
in the current three and nine-month periods. Interest expense increased due to
the completion of two construction projects in the second and third quarters of
1995 and five construction projects in 1996. Interest on debt incurred for
construction projects is capitalized prior to completion of construction. After
construction is concluded, interest on such debt is expensed. The Company's
operating results are more fully described below under "Results of Operations."
The following table reflects a reconciliation of net income as reported in the
Company's consolidated financial statements to funds from operations for each of
the three and nine month periods ended September 30, 1996, and 1995.
<TABLE>
<CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
----------------------------------------------------
<S> <C> <C> <C> <C>
(in thousands)
Net income $2,848 $2,650 $ 8,353 $ 7,687
Depreciation of real
property 2,526 2,284 7,295 6,483
Amortization related to
real property 54 49 152 146
------ ------ ------- -------
Funds from operations (1) $5,428 $4,983 $15,800 $14,316
====== ====== ======= =======
</TABLE>
(1) Computed in accordance with NAREIT guidelines effective January 1, 1996.
12
<PAGE>
The Company recognizes rental revenue from commercial tenants on a straight-line
basis over the terms of the related leases. Net income includes the recognition
of ($7,000) and $9,000 of deferred rental income (charges) in the three months
ended September 30, 1996, and 1995, respectively, and ($5,000) and $14,000 of
deferred rental income (charges) in the nine months ended September 30, 1996,
and 1995, respectively.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTH PERIOD ENDING SEPTEMBER 30, 1996 TO THREE MONTH PERIOD
- --------------------------------------------------------------------------------
ENDING SEPTEMBER 30, 1995
- -------------------------
The Company's net income increased approximately $198,000 to approximately $2.9
million or $0.24 per common share for the three months ended September 30, 1996,
compared with net income of approximately $2.7 million or $0.23 per common share
for the three months ended September 30, 1995. Five multifamily apartment
projects which were under construction in the third quarter of 1995 are now
completed and have contributed to the Company's operating results in the third
quarter of 1996 as more fully described below. Included in net income for the
three months ended September 30, 1996, is a net gain of $38,000 from the sale of
a condominium unit at one of the Company's properties.
During the three months ended September 30, 1996, rental revenues totaled
approximately $12.0 million, an increase of approximately $1.9 million or
approximately 18% over rental revenues of approximately $10.1 million in the
same three-month period of 1995. The completion of five multifamily residential
development projects in the second and third quarters of 1996 resulted in
additional rental revenues of approximately $1.6 million for the three months
ended September 30, 1996 over 1995. The Ascension Point II multifamily
residential project, completed and leased in September 1995, generated rental
revenues of approximately $190,000 in the third quarter of 1996, an increase of
$128,000 over the third quarter of 1995. Rental revenues from the Company's
stabilized real estate portfolio increased $245,000 or 3% in the third quarter
of 1996 over 1995 primarily due to rental rate increases. Property management
income decreased $40,000 or 35% in the third quarter of 1996 from the third
quarter of 1995 due to a decrease in apartment units and retail space managed
for third-party owners. Interest and other revenues increased $76,000 or 17% in
the three months ended September 30, 1996 over 1995 primarily due to increased
non-rental income from the multifamily residential properties, including the
incremental increase in non-rental income from the recently completed
multifamily development projects.
Total expenses during the three months ended September 30, 1996, were
approximately $9.7 million, an increase of approximately $1.7 million or 22%
over total expenses of approximately $8.0 million in the three months ended
September 30, 1995. The increase in total expenses is primarily due to the
growth in the size of the Company's multifamily residential operating portfolio,
an increase in expensed interest, and higher property tax expense on certain of
the properties. The increase in the number of stabilized multifamily apartment
units was the primary reason for the $95,000 or 11% increase in repairs and
maintenance expenses during the third quarter of 1996 compared with 1995. The
$176,000 or 33% increase in other property operating expenses in 1996 over 1995
is due to the additional apartments operating in 1996, as well as increased
utilities and contract services costs at certain of the properties. Advertising
expenses increased $71,000 or 47% in the third quarter of 1996 over 1995
primarily as a result of increased advertising and marketing incurred to support
the leasing programs at the newly completed multifamily development projects and
to maintain high occupancies at the remaining multifamily properties. Property
administrative expenses increased $33,000 or 5% in the three months ended
September 30, 1996, over 1995 primarily due to salaries and benefits for
personnel managing the newly completed properties. General and administrative
expenses incurred for the Company's corporate activities increased $57,000 or
12% in the third quarter of 1996 over 1995 primarily due to increased
promotional and travel costs. Real estate tax expense increased $336,000 or 26%
in the three months ended September 30, 1996, over the respective prior period
due to the additional properties operated in 1996 and higher accruals for
increased tax assessments expected on certain of the properties.
Interest expense increased $751,000 or 49% in the third quarter of 1996 compared
with 1995 as a result of the increase in non-development debt outstanding at the
end of each of the two periods. The Company's average non-development debt
outstanding under the Credit Facility (as defined below), plus other fixed-rate
debt, was
13
<PAGE>
approximately $124.6 million in the third quarter of 1996 compared with an
average non-development debt balance of approximately $78.7 million in the third
quarter of 1995. The Company's average interest rate for non-development debt
under the Credit Facility was 7.108% in the three months ended September 30,
1996, compared with an average interest rate of 7.444% on non-development debt
under the Credit Facility in the same period of 1995. Interest related to
amortization of deferred financing costs decreased $25,000 or 18% in 1996 from
1995 primarily due to a decrease in amortization of capitalized bank fees. The
Company incurred deferred bank commitment fees of approximately $800,000 in
fiscal 1993 when it obtained its original $80 million Credit Facility. The fees
became fully amortized in the fourth quarter of 1995, corresponding to the
Credit Facility's original maturity date.
Depreciation and amortization expense increased approximately $232,000 or 10% in
the three months ended September 30, 1996, compared with the same three month
period of 1995. The additional apartment units added to the Company's operating
portfolio in 1995 and 1996 resulted in $252,000 of additional depreciation and
amortization expense. This increase was partially offset by decreases in
depreciation of computer equipment and furnishings which have become fully
depreciated at certain properties and at the Company's corporate offices.
The Company invested approximately $15.4 million in its real estate portfolio
during the three months ended September 30, 1996. Approximately $13.6 million
was invested in the development and construction of nine multifamily residential
apartment projects. The Company invested approximately $1.3 million for a
multifamily residential development site in the third quarter of 1996.
Additionally, the Company invested approximately $516,000 for capital
improvements and purchases of furniture, fixtures, and equipment in the third
quarter of 1996. The components of these capital investments were (a) $188,000
invested in improvements to the multifamily residential properties held in the
Company's real estate portfolio for one year or longer, (b) $115,000 invested in
capital improvements to a property acquired in the first quarter of 1995, (c)
$202,000 invested in tenant improvements, capital expenditures, and leasing
commissions for the Company's retail and industrial properties, and (d) $11,000
invested in furniture, fixtures, and equipment for the corporate offices. More
detailed information regarding the capital investments made in the three months
ended September 30, 1996, is set forth in the following table.
Summary of capital improvements for the three months ended September 30, 1996:
<TABLE>
<CAPTION>
Stabilized Properties (1) Acquisition Properties (2) Totals
------------------------- -------------------------- -------------------------
Amount Per Unit Amount Per Unit Amount Per Unit
-------------- -------- -------------- --------- -------------- --------
(in thousands) (in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Multifamily residential properties
- ----------------------------------
Recurring expenditures
Floor coverings (3) $ 40 $ 7.98 $ 6 $ 37.68 $ 46 $ 8.88
Appliances 10 1.81 12 77.21 22 4.10
Exterior repairs 97 19.18 3 17.01 100 19.11
Furniture, fixtures, & equipment 21 4.00 12 79.21 33 6.29
Other 7 1.39 - - 7 1.35
---- ------ ---- ------- ---- ------
Subtotal - recurring 175 34.36 33 211.11 208 39.73
Revenue generating 6 1.13 - - 6 1.10
Major renovations 7 1.31 82 508.89 89 16.72
---- ------ ---- ------- --- ------
Total multifamily residential $188 $36.80 $115 $720.00 303 $57.55
==== ====== ==== ======= ==== ======
Industrial and retail properties (4) Per Sq. Ft.
- ------------------------------------ -----------
Tenant improvements 124 $ 0.24
Commissions 27 .05
Other 51 .10
------------------
Total industrial and retail 202 $ 0.39
======
Corporate purchases of furniture, fixtures, and equipment 11
----
Total $516
====
</TABLE>
14
<PAGE>
Summary of capital improvements for the three months ended September 30, 1996,
- ------------------------------------------------------------------------------
continued:
- ----------
Notes:
(1) Multifamily residential properties owned for one year or more as of January
1, 1996, and multifamily development projects completed and stabilized
subsequent to the Company's initial public offering (December 29, 1993). Per
unit computations are based on the average monthly stabilized and completed
apartment units during the period. The average number of completed units during
the three months ended September 30, 1996, was 5,269.
(2) Multifamily residential property acquired and owned by the Company for less
than one year as of January 1, 1996. Per unit computations are based on 160
units.
(3) Carpet additions of $11,000 at Windhaven Apartments are included, but have
been charged against an escrow established pursuant to a master lease on the
property.
(4) Total leasable retail and industrial square footage totals approximately
525,300 sq. ft. Includes one retail shopping center, two industrial properties,
and retail space integrated into four primarily multifamily residential
properties.
COMPARISON OF NINE MONTH PERIOD ENDING SEPTEMBER 30, 1996 TO NINE MONTH PERIOD
- ------------------------------------------------------------------------------
ENDING SEPTEMBER 30, 1995
- -------------------------
The Company's net income increased $666,000 to approximately $8.4 million or
$0.71 per common share for the nine months ended September 30, 1996, compared
with net income of approximately $7.7 million or $0.67 per common share for the
nine months ended September 30, 1995, primarily as a result of operations from
the seven multifamily construction projects that were completed and leased
during 1995 and 1996. Included in net income for the nine months ended
September 30, 1996, is a net gain of $81,000 from the sale of condominium units
at one of the Company's properties.
Rental revenues totaled approximately $33.3 million during the nine months ended
September 30, 1996, an increase of approximately $4.6 million or 16% over rental
revenues of approximately $28.7 million in the comparable nine month period of
1995. During the nine months ended September 30, 1996, the Company received
approximately $3.5 million of additional rental income from the seven
multifamily development projects completed and leased in 1995 and 1996. Rental
revenues increased approximately $1.0 million or 4% due to rental rate increases
at the Company's stabilized properties operating for both nine month periods
ended September 30. Property management income decreased $186,000 or 45% in the
nine months ended September 30, 1996 from the same nine month period of 1995 due
to a decrease in apartment units and retail space managed for third-party
owners. Interest and other revenues increased $515,000 or 43% in 1996 over 1995
primarily due to increased non-rental income from the properties, including the
incremental increase in non-rental income from the recently completed
development projects, increased yields earned on invested funds, and a $50,000
nonrecurring marketing commission earned pursuant to the sale of a commercial
property formerly managed for an affiliate of the Company.
Total expenses during the nine months ended September 30, 1996, were
approximately $27.0 million, an increase of approximately $4.3 million or 19%
over total expenses of approximately $22.7 million in the same nine month period
of 1995. The increase in total expenses is primarily due to the growth in the
size of the Company's residential operating portfolio as a result of its
development and construction program, an increase in expensed interest, and
higher property tax accruals on certain of the properties. The increase in the
number of stabilized apartment units was the primary reason for the $333,000 or
14% increase in repairs and maintenance expenses and the $459,000 or 32%
increase in other property operating expenses. Advertising expenses increased
$94,000 or 23% in 1996 over 1995 primarily as a result of increased advertising
and marketing incurred to support the leasing programs at the newly completed
development projects and to maintain high occupancies at the remaining
properties. Property administrative expenses increased $307,000 or 15% in the
nine months ended September 30, 1996, over 1995 due to annual salary and
benefits increases and the additional salaries and benefits for personnel
managing the newly completed development properties. General and administrative
expenses incurred for the Company's corporate activities increased $37,000 or 2%
in the nine months ended September 30, 1996, primarily as a result of higher
promotion and travel costs. Real estate tax expense increased $844,000 or 23%
in the first nine months of 1996 over the comparable prior period due to the
additional properties operated in 1996 and due to higher accruals for increased
tax assessments expected on certain of the properties.
15
<PAGE>
Interest expense increased approximately $1.6 million or 40% in the nine months
ended September 30, 1996 compared with the nine months ended September 30, 1995
as a result of the increase in non-development debt outstanding in the two
periods. The Company's average non-development debt outstanding under the
Credit Facility, plus other fixed-rate debt, was approximately $102.9 million
for the nine months ended September 30, 1996, compared with an average non-
development debt balance of $69.2 million in the comparable nine-month period of
1995. The Company's average interest rate for non-development debt under the
Credit Facility was 7.098% in the nine months ended September 30, 1996, compared
with an average interest rate of 7.765% on non-development debt under the Credit
Facility in the same period of 1995. Interest related to amortization of
deferred financing costs decreased $141,000 or 34% in 1996 from 1995 because
certain deferred commitment fees became fully amortized in the fourth quarter of
1995, and as a result of increased proportionate borrowings under the Credit
Facility for development activities, which decreased the pro-rata share of
amortization attributable to operating activities.
Depreciation and amortization expense increased approximately $778,000 or 11% in
the nine months ended September 30, 1996, compared with the nine months ended
September 30, 1995. The addition of seven multifamily residential properties to
the operating portfolio in 1995 and 1996 resulted in $603,000 of additional
depreciation and amortization expense. Depreciation and amortization of the
real property and fixed assets on the remaining operating portfolio and on
furnishings and equipment at the corporate offices increased $175,000 overall.
The increased depreciation and amortization due to capital improvements
undertaken at certain properties in 1995 and 1996 more than offset decreases in
depreciation and amortization of short-lived equipment and furnishings which
have become fully depreciated at certain properties and at the Company's
corporate offices.
The Company invested approximately $55.3 million in its real estate portfolio
during the nine months ended September 30, 1996. Approximately $46.3 million
was invested in the development and construction of nine multifamily residential
apartment projects, five of which were completed as of September 30, 1996. The
Company acquired three new multifamily residential development sites for
approximately $7.1 million, in aggregate, in the nine months ended September 30,
1996. Additionally, the Company invested approximately $1.9 million for capital
improvements, purchases of furniture, fixtures, and equipment, and retail
leasing commissions in the first nine months of 1996. The components of these
capital investments were (a) approximately $1.2 million invested in improvements
to the multifamily residential properties held in the Company's real estate
portfolio for one year or longer, (b) $348,000 invested in capital improvements
to a property acquired in the first quarter of 1995, (c) $264,000 invested in
tenant improvements, capital expenditures, and leasing commissions for the
Company's retail and industrial properties, and (d) $61,000 invested in
furniture, fixtures, and equipment for the corporate offices. More detailed
information regarding the capital investments made in the nine months ended
September 30, 1996, is set forth in the following table.
16
<PAGE>
Summary of capital improvements for the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
Stabilized Properties(1) Acquisition Properties(2) Totals
------------------------- -------------------------- -------------------------
Amount Per Unit Amount Per Unit Amount Per Unit
-------------- -------- -------------- --------- -------------- --------
(in thousands) (in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Multifamily residential properties
- ----------------------------------
Recurring expenditures
Floor coverings (3) $ 131 $ 27.78 $ 16 $ 101.40 $ 147 $ 30.19
Appliances 20 4.16 25 159.01 45 9.23
Exterior repairs 319 67.62 24 151.08 343 70.36
Furniture, fixtures, & equipment 156 32.97 112 702.82 268 54.91
Other 63 13.31 3 16.54 66 13.42
------ ------- ---- --------- ------ ------
Subtotal - recurring 689 145.84 180 1,130.85 869 178.11
Revenue generating 54 11.40 - - 54 11.03
Major renovations 451 95.40 168 1,048.26 619 126.60
------ ------- ---- --------- ----- -------
Total multifamily residential $1,194 $252.64 $348 $2,179.11 1,542 $315.74
====== ======= ==== ========= =======
Industrial and retail properties (4) Per Sq. Ft.
- ------------------------------------ -----------
Tenant improvements 157 $ 0.30
Commissions 30 .06
Other 77 .15
------ -------
Total industrial and retail 264 $ 0.51
=======
Corporate purchases of furniture, fixtures, and equipment 61
------
Total $1,867
======
</TABLE>
- --------------------------------
Notes:
(1) Multifamily residential properties owned for one year or more as of January
1, 1996, and multifamily development projects completed and stabilized
subsequent to the Company's initial public offering (December 29, 1993). Per
unit computations are based on the average monthly stabilized and completed
apartment units during the period. The average number of completed units during
the nine months ended September 30, 1996, was 4,885.
(2) Multifamily residential property acquired and owned by the Company for less
than one year as of January 1, 1996. Per unit computations are based on 160
units.
(3) Carpet additions of $30,000 at Windhaven Apartments are included, but have
been charged against an escrow established pursuant to a master lease on the
property, and are reflected in the net effect of changes in other assets and
liabilities in the Company's statements of cash flows.
(4) Total leasable retail and industrial square footage totals approximately
525,300 sq. ft. Includes one retail shopping center, two industrial properties,
and retail space integrated into four primarily multifamily residential
properties.
During the nine-month period ended September 30, 1995, the Company invested
approximately $46.7 million in total for the acquisition of and improvements to
real estate investments. Included in this total are: (a) approximately $37.1
million of incremental costs on nine projects under development and
construction, (b) the March 1995 acquisition of a multifamily residential
property for approximately $6.6 million, and (c) approximately $3.0 million
incurred for capital improvements and purchases of furnishings and equipment at
the Company's operating properties, principally those acquired during 1994 and
1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash flow, totaling approximately $63.2 million
during the nine months ended September 30, 1996, were approximately $48.9
million provided from borrowings on the Credit Facility more fully described
below, approximately $11.6 million provided by operations, approximately $2.5
million of proceeds from sales of common shares through employee purchase and
shareholder dividend reinvestment plans, and $171,000 provided from the sale of
two condominium units. The Company's primary uses of cash, totaling
approximately $69.6 million during the same nine-month period, were
approximately $46.3 million for construction costs on nine development projects,
approximately $13.3 million for payments of dividends, approximately $7.1
million for acquisition of real estate development sites, approximately $1.8
million for capital improvements and purchases of
17
<PAGE>
furniture, fixtures, and equipment, $626,000 for principal payments on notes
payable, and $427,000, in aggregate, for financing and offering costs.
The Company has historically used cash flow from operations to meet its dividend
payments and short term liquidity requirements, and a combination of equity,
mortgage debt, and credit line debt to finance its development and acquisition
activities. The Company has established a $170 million credit line (the "Credit
Facility") with several lenders as the primary source of acquisition and
development capital, with a view towards replacing that debt following
acquisition (or completion, in the case of a development property) as market
conditions warrant, with either long term fixed rate debt or permanent equity.
As of November 5, 1996, the Company had a total of $171.2 million in outstanding
debt, consisting of $111.1 million under the Credit Facility (of which $51.2
million was drawn for development in progress) and $60.1 million in fixed rate
debt with an average maturity of 5.4 years.
Long-term Financing Arrangements
- --------------------------------
The Company's long-term financing includes a $50 million loan from Nationwide
Life Insurance Company ("the Nationwide Loan") which bears interest at a fixed
rate of 7.45% and matures in December 2002, with a 25-year principal
amortization schedule. The loan has a current outstanding balance of $49.4
million, and is collateralized by eight properties formerly pledged as part of
the collateral pool securing the Credit Facility. In November 1995 the Company
used the gross proceeds from the Nationwide Loan to retire an equivalent amount
of variable rate debt outstanding under the Credit Facility, simultaneously
releasing the eight properties as collateral for the Nationwide Loan. The
Company completed the refinancing with the goal of fixing its cost on a
significant portion of the Company's debt and reducing exposure to future
interest rate increases.
The Company currently has under construction a total of 1,368 units in four
multifamily residential communities, and has acquired two additional sites upon
which it expects to construct approximately 441 multifamily residential units.
These six developments are presently projected to cost approximately $142.7
million, of which $119.3 million is anticipated to be funded from the Credit
Facility and internally generated cash flow, and $23.4 million from other third
party development debt or joint venture partner equity. All except two of the
identified developments are expected to be completed and funded prior to
December 31, 1997, the maturity date of the Credit Facility.
In order to fund the remaining cost of its developments in progress, and to
start and complete new developments on the acquired sites, the Company will
require funds of approximately $6.6 million in excess of that available under
the Credit Facility. Because of this, while the Company currently intends to
continue to use the Credit Facility as its primary source of development
financing, it may in the future use additional third party debt, cash flow from
operations, and other sources of debt or equity to fund acquisitions and
development costs, or to refinance a portion of the Credit Facility before
maturity when deemed appropriate. With respect to any development properties,
the Company intends to fund interest payments through additional draws on the
Credit Facility or other loan sources until such properties are completed and
begin to provide sufficient income to satisfy debt service requirements and
operating expenses. When the Credit Facility matures on December 31, 1997, the
Company will be required to secure substitute financing for any balance then
outstanding.
On June 7, 1996, Addison Circle One, Ltd., a subsidiary of the Company, obtained
a $21.3 million construction loan from Wells Fargo Realty Advisors Funding, Inc.
The loan will be funded in increments corresponding to the development and
construction costs incurred to complete the Addison Circle One multifamily and
retail project. The Company, as general partner of Addison Circle One, Ltd.,
funded the initial development and construction costs of the project with a
capital contribution of approximately $8.6 million funded from the Credit
Facility in the fourth quarter of 1995. Construction of the project began in
the first quarter of 1996. The loan is secured by a first lien deed of trust on
the land and improvements comprising the project and a security interest in its
rents and leases. Interest is due and payable monthly at LIBOR plus 165 basis
points applied to the daily principal balance outstanding. The loan matures in
June 1999 when the principal then outstanding is due. There had been no draws
on the construction loan as of November 5, 1996.
On August 8, 1996, the Company filed a "shelf" Registration Statement with the
Securities and Exchange Commission on Form S-3 to register an aggregate of $200
million of debt securities, common shares, preferred shares and warrants
(collectively, the "Registered Securities"). The Registered Securities may be
issued separately or
18
<PAGE>
together, in separate series, and in amounts and at prices and terms to be
determined by market conditions at the time of offering.
On October 10, 1996, the Company sold 1,166,600 common shares of beneficial
interest pursuant to the Registration Statement, at a price of $20.50 per share,
or an aggregate purchase price of approximately $23.9 million, to certain
institutional investors. After deducting transaction expenses of approximately
$300,000, the net proceeds of $23.6 million were combined with approximately
$400,000 of working capital to retire $24.0 million of debt outstanding under
the Credit Facility. The proceeds from any future sales of the Registered
Securities under the Registration Statement may be used for general Company
purposes, including the development and acquisition of multifamily residential
properties and further repayment of secured or unsecured indebtedness.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This Form 10-Q, together with other statements and information publicly
disseminated by the Company, contain certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based on current expectations which involve a number of risks and
uncertainties, including, but not limited to, risks due to the market
concentration of the Company's properties in Dallas, Texas and particularly the
Uptown District; risks associated with the acquisition, construction and
development of multifamily residential properties, including the risk of
oversupply of units or a reduction in demand for apartment units, risks
associated with delays in construction and lease-up, cost overruns, and risks
that the Company's acquisition and development properties will fail to perform
as expected; real estate financing risks such as availability of debt or equity
financing in the future and the risk of increasing rates for such financing as
well as other risks listed from time to time in the Company's reports filed with
the SEC.
19
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor its properties are presently subject to any material
litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or its properties, other than routine litigation
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and none of which are
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Pursuant to the Credit Facility described more fully in the Company's 1995
Annual Report, the Company is prohibited from paying or declaring dividends in
excess of the sum of 90% of the Company's funds from operations (as defined
therein) and net taxable gains realized in each year from property sales. This
restriction has not, to date, affected the distributions declared or payable to
shareholders nor does the Company anticipate that this restriction will affect
the distributions payable to shareholders in the future.
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:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
Date Description
---- -----------
September 5, 1996 Reporting the resignation of Jack F. Kemp as
member of the Board of Trust Managers
September 19, 1996 Reporting the appointment of Amy DiGeso as
member of the Board of Trust Managers
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COLUMBUS REALTY TRUST
(Registrant)
/s/ Robert L. Shaw November 12, 1996
- -------------------------------------------- ------------------
Robert L. Shaw Date
Chief Executive Officer and Trust Manager
(Principal Executive Officer)
/s/ Richard R. Reupke November 12, 1996
- -------------------------------------------- ------------------
Richard R. Reupke Date
Chief Financial Officer
(Principal Financial and Accounting Officer)
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS OF COLUMBUS REALTY TRUST FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,833
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,483
<PP&E> 390,532
<DEPRECIATION> 37,505
<TOTAL-ASSETS> 365,163
<CURRENT-LIABILITIES> 14,091
<BONDS> 0
0
0
<COMMON> 117
<OTHER-SE> 155,142
<TOTAL-LIABILITY-AND-EQUITY> 365,163
<SALES> 0
<TOTAL-REVENUES> 35,249
<CGS> 0
<TOTAL-COSTS> 13,516
<OTHER-EXPENSES> 13,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,640
<INCOME-PRETAX> 8,353
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,353
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
