<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 001-12684
COLUMBUS REALTY TRUST
(Exact Name of Registrant as Specified in its Charter)
TEXAS
(State or other jurisdiction of 75-2509086
incorporation or organization) (I.R.S. Employer Identification Number)
15851 DALLAS PARKWAY, SUITE 855
DALLAS, TEXAS 75248
(Address of Principal Executive Offices)
(Registrant's Telephone Number, Including Area Code): (972) 387-1492
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered.
-------------------- ------------------------------------------
COMMON SHARES OF BENEFICIAL NEW YORK STOCK EXCHANGE
INTEREST ,$0.01 PAR VALUE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by nonaffiliates of the
registrant (based on the closing price of such stock as reported on March 6,
1997 through the New York Stock Exchange) was approximately $255,837,000. There
were 13,059,882 common shares of beneficial interest, $0.01 par value per share,
outstanding as of March 6, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held May 23, 1997, are incorporated by reference
into Part III Items 10, 11, 12 and 13.
Exhibit Index begins on Page 28.
<PAGE>
COLUMBUS REALTY TRUST
Part I
ITEM 1. BUSINESS
BACKGROUND. Columbus Realty Trust (the "Company") is a self-administered
----------
and self-managed real estate investment trust ("REIT") formed on October 12,
1993, pursuant to the Texas Real Estate Investment Trust Act. On December 29,
1993, the Company completed an initial public offering of 6,898,566 common
shares of beneficial interest (the "Initial Public Offering"), and
simultaneously, a business combination involving entities with varying common
ownership (the "Formation Transactions"). As a result of the Formation
Transactions, the Company acquired twelve multifamily residential properties,
two industrial properties and one retail property (collectively, the "Original
Properties"). The Company also acquired various rights with respect to the
acquisition and development of additional multifamily residential properties and
certain other rights, including the rights of its predecessors under certain
third party management contracts.
The Original Properties contained an aggregate of 2,356 apartments units,
and approximately 475,000 rentable square feet of industrial and retail
property, located primarily in the Dallas/Fort Worth metropolitan area. During
the period from the Company's Initial Public Offering through December 31, 1996,
the Company has acquired an additional 1,590 apartment units in six properties,
and has completed construction of an additional 1,464 in eight properties,
increasing the total residential portfolio to 5,410 units as of the end of 1996.
DEVELOPMENT ACTIVITIES. During 1996, the Company completed construction of
----------------------
five multifamily residential development properties containing a total of 874
units, continued construction on one additional property consisting of 503
units, commenced construction on four new properties to contain an additional
1,082 units and acquired one development site. The Company entered into a
redevelopment agreement for a mixed-use multifamily residential and retail
project in Houston, Texas, in February 1997. As of March 6, 1997, the
development activities completed, under construction, and proposed for
construction (collectively, the "Development Properties") are summarized in the
following chart:
DEVELOPMENT PROPERTIES
----------------------
<TABLE>
<CAPTION>
Estimated Total Actual or Estimated
Property Location No. of Units Cost (millions)(1) Completion
-------- ----------- ------------ ------------------ -------------------
Completed during 1996
- ---------------------
<S> <C> <C> <C> <C>
The Abbey Dallas, TX 34 $ 4.8 Apr, 1996
Hackberry II Dallas, TX 192 11.1 Apr, 1996
The Vineyard Dallas, TX 116 8.3 May, 1996
Winsted Village Dallas, TX 314 18.6 Aug, 1996
Columbus Square Dallas, TX 218 20.4 Sept, 1996
----- ------
874 63.2
Under construction
- ------------------
Columbus Shore Dallas, TX 503 40.5 1997
Addison Circle One Dallas, TX 460 32.1 1997
Columbus Pointe Jackson, MS 240 11.9 1997
Cole's Corner Dallas, TX 186 14.2 1997
The Rice Hotel Houston, TX 317 33.3 1997
The Heights of State
-Thomas Dallas, TX 196 16.6 1998
----- ------
1,902 148.6
Acquired Sites
- --------------
Block 580 - Uptown Dallas, TX 346 23.5 (2)
----- ------
Grand Totals 3,122 $235.3
===== ======
</TABLE>
- -----------------
(1) Includes land cost which is classified separately in the Company's
financial statements.
(2) Commencement and completion dates of construction have not yet been
determined.
2
<PAGE>
PROPERTY MANAGEMENT. The Company manages all of its properties through its
-------------------
wholly-owned subsidiary, Columbus Management Services, Inc. ("CMSI"), a Texas
corporation. CMSI provides or arranges third parties to provide leasing,
marketing, resident and tenant services, property management and maintenance,
courtesy patrols and human resource recruiting, training and development, and
reporting functions. CMSI performs similar functions for third party owners of
three residential properties, and for four condominium associations, all of
which are located in the Dallas/Fort Worth metropolitan area.
BUSINESS OBJECTIVES. The Company's primary business objectives are to: (i)
-------------------
maximize the cash flow available for distribution per common share; (ii)
maximize the capital appreciation of its property portfolio through active and
intensive property management; (iii) continue the development of high quality
multifamily residential communities in order to increase the Company's presence
as a developer, owner and operator of properties in the "renter by choice"
multifamily residential rental market in each of the Company's targeted
submarkets; (iv) continue to pursue strategic acquisition of existing
multifamily residential properties located within its submarkets, when the
qualities of such properties are consistent with its ownership criteria, and (v)
hold its income-producing properties for long-term investment.
INDUSTRY SEGMENTS. The Company is engaged in a single industry segment --
-----------------
the acquisition, ownership, development and management of income producing
properties. For the Company's fiscal year ended December 31, 1996, 91% of the
Company's consolidated net operating income was attributable to its ownership,
operation and management of residential properties, 4% of its consolidated net
operating income was attributable to its ownership, operation and management of
its industrial properties and 5% of its consolidated net operating income was
attributable to its ownership, operation and management of its retail property.
During 1996, no single residential, industrial, or retail tenant accounted for
more than 10% of the Company's consolidated gross revenue. Additionally during
1996, no single residential, industrial, or retail property accounted for more
than 10% of the Company's consolidated gross revenue.
EMPLOYEES. The Company has approximately 200 employees and officers
---------
involved in the administration and operation of its business and properties.
None of the Company's employees is subject to a collective bargaining agreement
and the Company has experienced no labor-related work stoppages. The Company
considers its relations with its personnel to be good.
COMPETITION. All of the Company's multifamily residential properties are
-----------
located in developed areas that include other competitive apartment community
properties, and eight of the residential properties as well as two of the
Development Properties under construction are located within a one-mile radius
in the Uptown District of Dallas. Other developers have constructed and may
construct additional multifamily residential properties in the Company's markets
which compete with the Company's properties and which may result in increased
competition in certain of the Company's markets. In addition, the Company
competes with other REITS as well as other real estate owners and developers
with respect to the acquisition of land for development and the acquisition of
existing multifamily properties. The Company may compete with others that have
greater resources than the Company and whose officers and directors have more
experience than the Company's officers and Trust Managers. Similar competitive
conditions exist with respect to the industrial and retail properties. In
addition, single-family housing and other forms of multifamily residential
properties provide housing alternatives to potential tenants of upscale
apartment communities.
AMERICANS WITH DISABILITIES ACT. The Properties and any newly acquired or
-------------------------------
developed properties must comply with Title III of the Americans with
Disabilities Act (the "ADA") to the extent that such properties are "public
accommodations" and/or "commercial facilities" as defined by the ADA.
Compliance with the ADA requirements could require removal of structural
barriers to handicapped access in certain public areas of the Properties where
such removal is readily achievable. The ADA does not, however, consider
residential apartment properties to be public accommodations or commercial
facilities, except to the extent portions of such facilities, such as the
leasing office, are open to the public. The Company believes that its
properties comply with all present requirements under the ADA and applicable
state laws. Noncompliance could result in imposition of fines or an award of
damages to private litigants. If required to make material additional changes,
the Company's results of operations could be adversely affected.
3
<PAGE>
ENVIRONMENTAL MATTERS. The Company is subject to Federal, state and local
---------------------
environmental regulations that apply to the development of real property,
including construction activities, the ownership of real property, and the
operation of multifamily apartment properties.
In developing properties and constructing apartments, the Company utilizes
environmental consultants to determine whether there are any flood plains,
wetlands or environmentally sensitive areas that are part of the property to be
developed. If flood plains are identified, development and construction is
planned so that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with Federal and local flood plain management
requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws
subject the owner of real property to claims or liability for the costs of
removal or remediation of hazardous substances that are disposed of on real
property in amounts that require removal or remediation. Liability under CERCLA
and applicable state superfund laws can be imposed on the owner of real property
or the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility. The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect the
owner's ability to sell real estate or borrow money using such real estate as
collateral. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.
The Company obtains an environmental investigation of each property that
it considers for purchase or that it owns and plans to develop. If there is
any indication of contamination, sampling of the property is performed by the
environmental consultant. The environmental investigation report is reviewed
by the Company and counsel prior to purchase of any property. If necessary,
remediation of contamination is undertaken prior to development.
The Company has not been notified by any governmental authority of any
noncompliance, claim, or liability in connection with any of its Properties.
The Company has not been notified of a claim for personal injury or property
damage by a private party in connection with any of the Properties in connection
with environmental conditions. The Company is not aware of any other
environmental condition with respect to any of its Properties that could be
considered to be material. With respect to the redevelopment of The Rice Hotel,
substantially all of the remediation required to remove asbestos-containing
materials had been completed prior to the Company's agreement to a land lease
arrangement with the Houston Housing Finance Corporation ("HHFC") on February
27, 1997. HHFC has financial responsibility to complete the abatement.
TAX STATUS. The Company has made an election to be taxed as a real estate
----------
investment trust under Section 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), commencing with its taxable year ending
December 31, 1993. If the Company qualifies for taxation as a REIT, the Company
generally will not be subject to federal income tax to the extent it distributes
at least 95% of its REIT taxable income to its shareholders. If the Company
fails to qualify as a REIT in any taxable year, the Company will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. Even if the Company qualifies for
taxation as a REIT, the Company may be subject to certain state and local taxes
on its income and property and to federal income and excise taxes on its
undistributed income.
4
<PAGE>
ITEM 2. PROPERTIES
As of March 6, 1997, the Company owned 37 total properties: 27 completed
multifamily residential properties (the "Residential Properties"), two
industrial properties, one retail property, six multifamily development sites in
various stages of construction (collectively, the "Properties"), and one
acquired site for future development. The Properties are owned by the Company
in fee simple, and are encumbered as follows: twenty-six properties (seventeen
multifamily residential, two industrial, one retail, five projects under
construction, and the development site) are subject to a first lien deed of
trust securing the Credit Facility, nine multifamily properties are subject to a
first lien deed of trust securing a mortgage held by Nationwide Life Insurance
Company ("Nationwide"), one multifamily residential property is subject to a
first lien deed of trust securing a loan from another third party, and one
project currently under construction is encumbered by a development and
construction loan payable to Wells Fargo Realty Advisors. The Company believes
all of the Properties are adequately insured in accordance with industry
standards and lender requirements.
RESIDENTIAL PROPERTIES
The Residential Properties as of March 6, 1997, consist of multifamily
communities in the following submarkets, as defined by the Company:
<TABLE>
<CAPTION>
Submarket Properties # of Units % of Total
- ---------------------- ---------- ---------- -----------
<S> <C> <C> <C>
Uptown District 9 1,646 29.6%
White Rock 2 522 9.4
North Dallas 5 1,201 21.6
DFW/Las Colinas 8 1,453 26.1
Jackson, Mississippi 3 742 13.3
-- ----- -----
27 5,564 100.0%
== ===== =====
</TABLE>
The Company manages all of the Residential Properties through CMSI. Eight
of the properties have at least 250 units, with the largest property having a
total of 474 units. The oldest of the properties was completed in 1983, and the
weighted average age of the portfolio at December 31, 1996, was 6.0 years. The
economic occupancy (defined in footnote 5 of the table which follows) for the
stabilized properties during 1996 was 95.6%, with an average collected rent per
unit of $735 per month, or $0.868 per square foot.
5
<PAGE>
RESIDENTIAL PROPERTY INFORMATION
The following table presents general information concerning the Residential
Properties:
<TABLE>
<CAPTION>
YEAR AVG. CURRENT 1996 1996
COMPLETED NO. UNIT MARKET RENT ECO
LOCATION OR TO BE OF SQ. FT. SIZE RENT/UNIT COLLECTED OCC
PROPERTY (1) COMPLETED UNITS (2) (SQ. FT.) (3) PER UNIT(4) (5)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Completed Properties:
The Meridian Dallas 1991 132 105,314 798 $1,015 $ 948 96.0%
The Worthington Dallas 1993 332 271,484 818 1,064 977 96.9
The Vintage Dallas 1993 160 124,909 781 817 741 96.8
The Rock Dallas 1988 208 137,120 659 649 625 95.2
Windhaven Village (6) Dallas 1991 474 391,190 825 528 462 100.0
Parkway Village Villas Dallas 1986 136 177,831 1,308 1,101 1,046 96.2
Springstead Condos (7) Dallas 1983 66 76,236 1,155 891 861 91.4
Reflections on McCallum Dallas 1986 198 157,786 797 641 623 93.1
Town Lake (9) Dallas 1987 238 207,553 872 697 670 94.4
The Parks (9) Dallas 1986 160 138,430 865 697 670 94.4
Villas at Valley Ranch (7) Dallas 1985 54 70,014 1,297 1,175 1,133 95.8
Ascension Point (7) Dallas 1985 79 73,699 933 801 767 94.3
Ascension Point II Dallas 1995 86 79,676 926 801 814 89.7
The Trace (10) Jackson, MS 1989 282 207,266 735 562 548 96.5
The Trace II (10) Jackson, MS 1995 204 149,212 731 562 548 96.5
The Residences Dallas 1986 196 146,828 749 952 910 96.4
Lakeshore Dallas 1988 404 382,588 947 877 881 94.8
Lakeside Village Dallas 1986 327 258,727 791 768 739 96.1
Hackberry Creek Dallas 1988 240 204,384 852 777 714 93.9
Hackberry Creek II (8) Dallas 1996 192 169,380 882 777 768 95.5
The Mark Jackson, MS 1984 256 253,032 988 595 583 94.6
Uptown Village Dallas 1995 300 229,971 767 799 740 97.1
The Abbey (8) Dallas 1996 34 43,384 1,276 1,775 1,604 95.7
The Vineyard (8) Dallas 1996 116 84,485 728 819 794 93.2
Winsted Village (8) Dallas 1996 314 228,473 728 677 655 94.6
Columbus Square (8) Dallas 1996 218 187,722 861 1,038 1,005 94.6
The Commons (11) Dallas 1985 158 101,977 645 685 N/A N/A
----- --------- ----- ------ ------ -----
Subtotals/Averages-Completed (27 properties) 5,564 4,658,671 837 $ 783 $ 735 95.6%
Development Properties-under construction:
Addison Circle One Dallas 1997 460 412,340 896 N/A N/A N/A
Columbus Shore Dallas 1997 503 398,998 793 N/A N/A N/A
Columbus Pointe Jackson, MS 1997 240 191,015 796 N/A N/A N/A
Cole's Corner Dallas 1997 186 148,133 796 N/A N/A N/A
The Rice Hotel Houston 1997 317 318,877 1,006 N/A N/A N/A
Heights of State-Thomas Dallas 1998 196 159,897 816 N/A N/A N/A
----- --------- ----- ------ ------ -----
Subtotals/Averages-Development (6 properties) 1,902 1,629,260 857 N/A N/A N/A
----- --------- ----- ------ ------ -----
Totals/Averages (33 properties) 7,466 6,287,931 842 N/A N/A N/A
===== ========= ===== ====== ====== =====
</TABLE>
6
<PAGE>
________________
Notes:
(1) Refers to greater metropolitan area of cities indicated.
(2) Includes only apartment units; excludes common areas and commercial space.
(3) Weighted average of monthly rates used for new leases and renewals as of
March 1, 1997.
(4) Average monthly rent collected per occupied unit for the year ended
December 31, 1996.
(5) Total rent collected divided by gross potential rent for the period,
expressed as a percentage. Gross potential rent is defined as the maximum
rent collectible, based on signed leases for occupied units and market
rates for vacant units.
(6) Windhaven Village is subject to a master lease with Electronic Data
Systems.
(7) The Company does not own all the units in these properties. Information is
provided only with respect to the units owned by the Company.
(8) Development Properties completed during 1996 reflect rental income and
occupancy performance from completion of construction through December 31,
1996.
(9) Town Lake and The Parks are operated as one property; rent and occupancy
numbers reflect combined averages.
(10) The Trace I & II are operated as one property; rent and occupancy numbers
reflect combined averages.
(11) The Company acquired the 158-unit multifamily residential property known as
The Commons at Turtle Creek in February 1997 from an unaffiliated third
party. Data relating to rent collected per unit and economic occupancy for
1996 cannot be verified by the Company.
7
<PAGE>
INDUSTRIAL PROPERTIES
The Post and Paddock Service Center ("Post and Paddock") contains 241,400
square feet and is located in the Great Southwest Industrial District in Grand
Prairie, Texas, one of the largest distribution and industrial parks in the
United States. As of December 31, 1996, Post and Paddock was 98% occupied by 24
tenants paying an average annual base rent equal to approximately $4.35 per
square foot.
The Campus Office Technology Center ("Campus Circle"), located in the Las
Colinas Business Park in Irving, Texas, contains 65,410 rentable square feet.
As of December 31, 1996, the building was 100% occupied by three tenants, CAE-
Link Corporation, Vanstar Corporation (formerly CLTX, Inc.), and PAS Financial
Group, paying average annual rents equal to approximately $9.39 per square foot.
RETAIL PROPERTY
The Towne Crossing Shopping Center ("Towne Crossing") is adjacent to Town
East Mall in the community of Mesquite, Texas, approximately 12 miles east of
the Dallas central business district. Anchor tenants occupying 10% or more of
the total 168,689 square feet of rentable space include a Kroger Food Market,
AMC Theaters, and Accent Craft Mall.
As of December 31, 1996, Towne Crossing was approximately 99% occupied.
The three anchor tenants occupy approximately 57% of the leasable area at an
average annual rent of approximately $9.92 per square foot. Twenty-eight local
tenants, including restaurants, a health club, medical professionals, personal
services and specialty shops, occupy approximately 42% of the total leasable
area at an average annual rent of approximately $10.05 per square foot.
INDUSTRIAL AND RETAIL LEASE TERMS
The Company's industrial and retail leases provide for monthly payments of
base rent in advance and the reimbursement of operating expenses. With respect
to the industrial properties, operating expenses are passed through to tenants,
subject to expense stops which are usually equal to the actual operating
expenses for the first year of the term of the lease. With respect to the
retail leases, tenants generally reimburse their pro rata share of all operating
expenses, without regard to an expense stop. The commercial and retail leases
do not provide for any free rent, nor permit tenants to abate or offset rents.
The Company's liability under the leases is limited to the Company's interest in
the property in which the leased premises are located. In the event of a
casualty, the Company generally has the right to terminate any lease or to make
repairs within 180 days before the tenant has a right to terminate.
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Properties are presently subject to any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or the 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE>
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's common shares were listed and began trading on the New York
Stock Exchange on December 22, 1993 under the symbol "CLB". The following table
sets forth the quarterly high and low sales prices per share as reported on the
New York Stock Exchange and the dividends the Company declared and paid for each
quarter during 1995 and 1996:
<TABLE>
<CAPTION>
Quarter Ended High Low Dividend per share
- -------------------- ------ ------ ------------------
<S> <C> <C> <C>
March 31, 1995 18-7/8 16 $0.375
June 30, 1995 20 17-5/8 0.375
September 30, 1995 20-1/8 18-1/8 0.375
December 31, 1995 19-7/8 17-3/4 0.375
March 31, 1996 20-3/4 18-7/8 0.375
June 30, 1996 20-1/8 18-1/4 0.395
September 30, 1996 20-3/4 18-3/4 0.395
December 31, 1996 23-1/4 20-3/8 0.395
</TABLE>
On March 6, 1997, the last reported sales price of the Company's common
shares on the New York Stock Exchange was 20-7/8 per share. On March 6, 1997,
the Company had 635 shareholders of record.
In order for the Company to maintain its qualification as a REIT, it must
make annual distributions to the shareholders of at least 95% of its taxable
income. Under certain circumstances, the Company could be required to make
distributions in order to meet such requirement in excess of its cash available
for distribution, but the Company does not expect this to occur in the
foreseeable future.
The Company presently expects to continue to pay comparable quarterly
dividends in the foreseeable future. The amount of such dividends will be
determined, based in part, on the Company's net income and funds from
operations, which will be impacted by several variables, including interest
rates and the overall performance of the Properties and the Development
Properties. In establishing and declaring future dividend payments, the Company
and its Board of Trust Managers will also evaluate, in addition to the Company's
net income and funds from operations, the distribution requirements under the
REIT provisions of the Internal Revenue Code, and any other factors deemed
relevant to such declaration, including general economic conditions.
Additionally, the Credit Facility contains certain covenants which may, in some
circumstances, restrict the Company's ability to distribute cash to its
shareholders. These covenants include a specific requirement that no more than
90% of funds from operations may be distributed as dividends related to each
calendar year after December 31, 1994. For the year ended December 31, 1996,
the Company distributed approximately 94% of its cash available for distribution
to its shareholders, such distributions representing 86% of its funds from
operations.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The succeeding three tables set forth the following information: (1)
selected financial and operating information for the Company on a consolidated
historical basis as of and for the years ended December 31, 1996, 1995 and 1994,
on a consolidated pro forma basis for the year ended December 31, 1993, on a
consolidated historical basis as of December 31, 1993, and for the period from
October 12, 1993 (inception) through December 31, 1993, and on a combined
historical basis for the Columbus Group and Texana Group (collectively, the
"Predecessors") and the Company combined as of December 28, 1993, and December
31, 1992, and for each of the years in the two-year period ended December 31,
1993. The combined historical results of the Columbus Group have been included
with the combined historical results of the Texana Group (and with the Company
for 1993) in the column entitled "Combined Historical" for the periods presented
in order to permit a meaningful comparison with the Company's historical and pro
forma financial information since the Company, on an ongoing basis, includes the
properties of the Predecessors; (2) selected financial and operating information
on a combined historical basis for the Columbus Group as of December 28, 1993,
and for the period from January 1, 1993, through December 28, 1993, and as of
and for the year ended December 31, 1992, and (3) selected financial and
operating information on a combined historical basis for the Texana Group as of
December 28, 1993, and for the period from January 1, 1993, through December 28,
1993, and as of and for the year ended December 31, 1992.
The following selected financial data should be read in conjunction with the
discussion set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and all of the financial statements and
notes thereto included elsewhere in this report.
11
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
COLUMBUS REALTY TRUST AND PREDECESSORS COMBINED
(in thousands, except share and per share information)
<TABLE>
<CAPTION>
Columbus Columbus
Realty Trust Realty
Consolidated Trust
Pro Forma October Columbus Realty Trust
(1) Year 12, 1993 and
Ended through Predecessors Combined
Columbus Realty Trust, Historical December 31, December Historical Year Ended
Year Ended December 31, 31, December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1993 1993 (2) 1992 (2)
------------ ------------ ---------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental $ 45,910 $ 39,023 $ 28,963 $ 19,365 $ 182 $ 19,365 $ 16,220
Property management 298 479 640 453 5 453 482
Interest and other 2,322 1,749 1,278 905 1 846 882
--------------------------------------------------------------------------------------------
Total revenues 48,530 41,251 30,881 20,723 188 20,664 17,584
Operating expenses:
Property operating and
maintenance (3) 12,459 10,118 7,526 5,757 20 5,757 4,613
General and
administrative (4) 5,979 5,362 4,612 3,410 21 3,183 2,694
Interest 7,884 5,596 2,848 825 9 7,795 6,520
Interest related to
amortization
of deferred financing
costs 393 515 474 428 4 357 102
Depreciation and
amortization 10,603 9,232 6,660 4,706 48 4,335 3,333
--------------------------------------------------------------------------------------------
Total expenses 37,318 30,823 22,120 15,126 102 21,427 17,262
Gain on sale of real
estate 246 - - - - - -
---------------------------------------------------------------------------------------------
Net income (loss) before
extraordinary item $ 11,458 $ 10,428 $ 8,761 $ 5,597 $ 86 $ (763) $ 322
Net income per common
share (primary and
fully diluted) $.94 $.90 $.89 $.66 $.01 - -
Dividends per common share $1.56 $1.50 $1.502 - - - -
Weighted average number of
common shares
outstanding:
Primary 12,099,291 11,536,110 9,832,417 8,500,084 8,500,084 - -
Fully diluted 12,142,069 11,556,269 9,845,759 8,500,084 8,500,084 - -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Predecessors Combined
Columbus Realty Trust Historical
December 31, December 28, December 31,
-------------------------------------------------- -------------------------------
1996 1995 1994 1993 1993 (2) 1992 (2)
----------- ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before
accumulated
depreciation $ 399,813 $ 335,046 $ 267,786 $ 158,946 $133,491 $124,249
Total assets 374,576 320,976 253,370 149,681 122,619 116,898
Total debt 179,855 145,492 79,324 28,063 101,836 104,842
Shareholders'/owners' 180,078 156,827 161,859 115,460 15,417 6,018
equity
</TABLE>
12
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING INFORMATION
THE COLUMBUS GROUP
(in thousands)
<TABLE>
<CAPTION>
Period Ended Year Ended
December 28, December 31,
1993 1992
-----------------------------
<S> <C> <C>
OPERATING DATA:
Revenues:
Rental $11,331 $ 8,103
Property management 253 254
Interest and other 265 222
------- -------
Total revenues 11,849 8,579
Operating expenses:
Property operating and maintenance 3,078 2,000
(3)
General and administrative (4) 1,896 1,383
Interest 4,960 3,765
Interest related to amortization of 201 102
deferred financing costs
Depreciation and amortization 2,776 1,864
------- -------
Total expenses 12,911 9,114
Net loss $(1,062) $ (535)
- -----------------------------------------------------------------------------
December 28, December 31,
1993 1992
-----------------------------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation $81,996 $73,490
Total assets 75,429 69,741
Total debt 67,432 58,177
Owners' equity 4,281 7,258
</TABLE>
13
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING INFORMATION
THE TEXANA GROUP
(in thousands)
<TABLE>
<CAPTION>
Period Ended Year Ended
December 28, December 31,
1993 1992
--------------------------
<S> <C> <C>
OPERATING DATA:
Revenues:
Rental $ 7,852 $ 8,117
Property management 194 228
Interest and other 580 660
------- -------
Total revenues 8,626 9,005
Operating expenses:
Property operating and maintenance 2,659 2,613
(3)
General and administrative (4) 1,266 1,311
Interest 2,826 2,755
Interest related to amortization of 152 -
deferred financing costs
Depreciation and amortization 1,511 1,469
------- -------
Total expenses 8,414 8,148
Net income before extraordinary item $ 212 $ 857
- --------------------------------------------------------------------
December 28, December 31,
1993 1992
--------------------------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation $51,495 $50,759
Total assets 47,190 47,157
Total debt 34,404 46,665
Owners' equity (deficit) 11,136 (1,240)
</TABLE>
14
<PAGE>
NOTES TO SELECTED FINANCIAL DATA:
(1) Consolidated pro forma statements of operations reflect adjustments
principally for (i) reduction of mortgage notes payable and related
interest expense due to debt repayment, (ii) additional expenses associated
with operating as a public company, (iii) the increase in basis of certain
real estate assets for the excess of purchase price over historical cost,
as well as the related increased depreciation, (iv) proceeds from draws
under the Credit Facility and the related interest expense and (v) the sale
of common shares and the application of the net proceeds therefrom (after
deducting underwriting discounts and commissions and estimated offering
expenses).
(2) Represents the audited combined historical financial statements of the
Columbus Group and the Texana Group. In 1993, the audited consolidated
financial statements of Columbus Realty Trust are also included.
(3) Property operating and maintenance includes repairs and maintenance,
utilities, real estate taxes and other property operating expenses.
(4) General and administrative includes advertising expenses, corporate general
and administrative expenses, and property general and administrative
expenses.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the "Selected
Financial Data" and all of the financial statements appearing elsewhere in this
Form 10-K.
As of December 31, 1996, the Company owned 5,410 completed residential
units in its real estate portfolio, an increase of 868 units or 19% over the
4,542 units held as of December 31, 1995, and an increase of 1,620 units or 43%
over the 3,790 units held as of December 31, 1994. During the twelve months
ended December 31, 1996, five newly-constructed multifamily residential projects
comprising 874 units were completed and added to the operating portfolio, and
six individual condominium units in one property were sold. The net growth in
the number of residential apartment units owned and operated by the Company has
had a significant impact upon the Company's operating results, as hereinafter
described.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
The Company's net income increased approximately $1.0 million to
approximately $11.5 million or $0.94 per common share for the year ended
December 31, 1996, compared with net income of approximately $10.4 million or
$0.90 per common share for the year ended December 31, 1995, primarily as a
result of operations from the multifamily construction projects which were
completed and leased during 1995 and 1996. Included in net income for the year
ended December 31, 1996, is a net gain of $246,000 from the sale of condominium
units at one of the Company's properties.
Revenues from all sources totaled approximately $48.5 million in the year
ended December 31, 1996, compared with total revenues of approximately $41.3
million in the year ended December 31, 1995. Rental revenues totaled
approximately $45.9 million during the year ended December 31, 1996, an increase
of approximately $6.9 million or 17.7% over rental revenues of approximately
$39.0 million in the previous year. During 1996 the Company received
approximately $5.9 million of additional rental income from the multifamily
development projects completed and leased in 1995 and 1996. Rental revenues
increased approximately $1.2 million due to rental rate increases at the
Company's stabilized properties operating for both twelve month periods ended
December 31. Rental revenues includes $12,000 and $15,000 of deferred rental
income in the years ended December 31, 1996 and 1995, respectively. Property
management income decreased $181,000 or 37.8% from 1995 due to a decrease in
apartment units and retail space managed for third-party owners. Interest and
other revenues increased $573,000 or 32.8% in 1996 over 1995 primarily due to
increased other income from the properties, including the incremental increase
in other 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 year ended December 31, 1996, were approximately
$37.3 million, an increase of approximately $6.5 million or 21.1% over total
expenses of approximately $30.8 million in the prior year. 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 valuations on
certain of the properties. The increase in the number of stabilized apartment
units was the primary reason for the $456,000 or 14.6% increase in repairs and
maintenance expenses and the $528,000 or 26.7% increase in other property
operating expenses. Advertising expenses increased $172,000 or 31.2% 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 $429,000 or 15.6% in the year ended December
31, 1996, over 1995 due to salary and benefits increases and additional
personnel managing the newly completed development properties. Real estate tax
expense increased approximately $1.4 million or 27.0% in 1996 compared with
1995. Approximately $687,000 of this increase relates to tax increases due to
higher tax assessments on certain of the properties in the
16
<PAGE>
operating portfolio in both years. The remainder of the increase of $706,000 is
attributable to the development properties added to the portfolio in 1995 and
1996.
General and administrative expenses incurred for the Company's corporate
activities increased $16,000 or approximately 1% in 1996. Higher personnel,
administrative, and investor communications costs were offset by lower travel,
franchise tax, and insurance costs. During the years ended December 31, 1996,
and 1995, the Company awarded restricted common shares to certain of its
executive officers who elected to forego cash-based compensation, and to certain
of its executive officers and employees as bonuses as more fully described in
the notes to financial statements included elsewhere in this Form 10-K. As a
result, the Company did not recognize compensation expense which would have been
recognized in 1996 and 1995 if such compensation and bonuses had been paid
without restrictions. However, the Company amortized a portion of the
restricted share awards as compensation and bonus expense over three year
periods from the dates of the respective grants to the extent such amortization
is allocable to operations. Accordingly, during the years ended December 31,
1996, and 1995, the Company recognized compensation expense for amortization of
restricted common share awards of $233,000 and $134,000, respectively. If the
Company continues to recognize such amortization attributable to the common
share awards granted in 1995 and 1996 on the same basis as that used in the year
ended December 31, 1996, approximately $274,000, $207,000, and $42,000 of such
amortization expense will be included in operations in the years ended December
31, 1997, 1998, and 1999, respectively. In March 1997, the Company granted
similar restricted common share awards to certain executive officers and
employees. If allocated on a basis comparable to those granted in 1996,
approximately $161,000, $214,000, $214,000, and $53,000 of amortization
attributable to operations will be recognized in the years ended December 31,
1997, 1998, 1999, and 2000, respectively.
Interest expense increased approximately $2.3 million or 40.9% in the
twelve months ended December 31, 1996, compared with 1995 as a result of an
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 $108.1 million for the year ended December
31, 1996, compared with an average non-development debt balance of $72.4 million
in the previous year. The Company's average interest rate for non-development
debt under the Credit Facility was 7.17% in 1996 compared with an average
interest rate of 7.78% on non-development debt under the Credit Facility in
1995. Interest related to amortization of deferred financing costs decreased
$122,000 or 23.7% 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 $1.4 million
or 14.9% in the year ended December 31, 1996, compared with the twelve months
ended December 31, 1995. The addition of multifamily residential properties to
the operating portfolio in 1995 and 1996 resulted in approximately $1.3 million
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
$176,000 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. In addition, the Company stopped depreciating its
real estate investments in two condominium communities in June 1996 when
marketing efforts to sell the condominium units began and the net book value of
the two properties was reclassified as real estate held for sale. The
reclassification resulted in a $121,000 decrease in depreciation expense in 1996
from 1995.
The Company invested approximately $68.2 million in its real estate
portfolio during the year ended December 31, 1996. Approximately $58.6 million
was invested in the development and construction of ten multifamily residential
apartment projects, five of which were completed as of December 31, 1996. The
Company acquired three new multifamily residential development sites for
approximately $7.1 million, in aggregate, in 1996. Additionally, the Company
invested approximately $2.5 million for capital improvements, purchases of
furniture, fixtures, and equipment, and retail leasing commissions in the year
ended December 31, 1996. The components of these capital investments were (a)
approximately $1.8 million invested in improvements to the multifamily
residential properties held in the Company's real estate portfolio for one year
or longer, (b) $358,000 invested in
17
<PAGE>
capital improvements to a property acquired in the first quarter of 1995, (c)
$333,000 invested in tenant improvements, capital expenditures, and leasing
commissions for the Company's retail and industrial properties, and (d) $81,000
invested in furniture, fixtures, and equipment for the corporate offices. More
detailed information regarding these capital investments is set forth in the
following table.
Summary of capital improvements for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Stabilized Properties (1) Acquisition Property (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 $ 175 $ 35.97 $ 19 $ 116.85 $ 194 $ 38.55
Appliances 16 3.28 25 159.01 41 8.24
Exterior repairs 701 144.41 25 155.23 726 144.76
Furniture, fixtures, & equipment 203 41.73 118 737.43 321 63.92
Other 63 12.88 3 16.54 66 12.99
------------- --------- ------- --------- ------- -------
Subtotal - recurring 1,158 238.27 190 1,185.06 1,348 268.46
Revenue generating 93 19.25 - - 93 18.64
Major renovations 503 103.48 168 1,055.15 671 133.83
------------- --------- ------ --------- ------- -------
Total multifamily residential $1,754 $361.00 $358 $2,240.21 2,112 $420.93
============= ========= ====== ========= =======
Industrial and retail properties (3) Per Sq. Ft.
- -------------------------------------- -------
Tenant improvements 208 $ 0.40
Commissions 34 .07
Other 91 .17
------ -------
Total industrial and retail 333 $ 0.64
=======
Corporate purchases of furniture, fixtures, and equipment 81
------
Total 2,526
======
</TABLE>
- -----------------------------------
(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 year ended December 31, 1996, was 4,857.
(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) 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 THE YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
- ------------------------------------------------------------------------------
The Company's net income increased approximately $1.7 million to
approximately $10.4 million or $0.90 per common share for the year ended
December 31, 1995, compared with net income of approximately $8.8 million or
$0.89 per common share in 1994. The additional rents collected from properties
added to the Company's portfolio during 1994 and 1995 is the primary reason for
this increase. During the twelve months ended December 31, 1995, rental
revenues totaled approximately $39.0 million, an increase of approximately $10.1
million or 34.8%
18
<PAGE>
over rental revenues of approximately $29.0 million in 1994. Rental revenues
generated by properties purchased since January 1, 1994, accounted for
approximately $6.0 million of this increase, while the completion of the Trace
II, Uptown Village, and Ascension Point II projects during 1995 resulted in
additional rental income of approximately $3.2 million. Rental revenues from the
remaining properties in the operating portfolio increased approximately $831,000
in 1995 over the comparable prior year due to higher average occupancy rates and
rental rate increases. The Company recognizes rental revenue from commercial
tenants on a straight-line basis over the terms of the related leases. Rental
revenues includes $15,000 and $13,000 of deferred rental income in the years
ended December 31, 1995 and 1994, respectively. Property management income
decreased $161,000 or 25.2% in 1995 from 1994 because of a decrease in apartment
units and retail space managed for third-party owners. Interest and other
revenues increased $471,000 or 36.9% in 1995 over 1994 primarily due to income
from the properties added to the Company's portfolio, and because of increased
yields earned on invested funds.
Total expenses during the year ended December 31, 1995, were approximately
$30.8 million, an increase of approximately $8.7 million or 39.4% over total
expenses of approximately $22.1 million in 1994. 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 acquisition and development activities.
The increase in the number of apartment units operated by the Company resulted
in a $771,000 or 32.9% increase in repairs and maintenance expenses, a $483,000
or 32.4% increase in other property operating expenses, and a $185,000 or 50.6%
increase in advertising expenses in 1995 compared with 1994. Property
administrative expenses increased $349,000 or 14.6% in 1995 over 1994 primarily
due to salaries and benefits for personnel managing the new properties. General
and administrative expenses incurred for the Company's corporate activities
increased $216,000 or 11.8% in 1995 over 1994 as a result of higher costs to
acquire, develop, and manage the Company's larger real estate portfolio. Real
estate tax expense increased approximately $1.3 million or 36.3% in 1995 over
1994 due to the additional properties owned in 1995, and due to increased tax
assessments on certain of the properties.
The Company's increased borrowing pursuant to the Credit Facility and other
mortgage debt incurred to fund its construction and acquisition activities in
1994 and 1995 resulted in an increase of approximately $2.7 million or 96.5% in
interest expense in the year ended December 31, 1995, over 1994. Additionally,
the Company's average cost of borrowing under the Credit Facility for completed
properties increased from 6.33% in 1994 to 7.78% in 1995. Interest related to
amortization of deferred financing costs increased $41,000 or 8.7% in 1995 over
1994 as the Company incurred additional loan fees in 1995 to obtain an amendment
to the Credit Facility.
Approximately $2.2 million of the $2.6 million or 38.7% increase in
depreciation and amortization expenses in 1995 over 1994 relates to depreciation
recognized on the additional properties held in the Company's operating
portfolio in 1995 compared with 1994. The remaining increase is related to an
increase in depreciable assets after capital improvement programs at certain of
the other properties, and investments in furniture, fixtures, office machines,
and computer equipment for the corporate offices.
The Company invested approximately $64.9 million, in total, in the real
estate portfolio during the year ended December 31, 1995. Approximately $54.3
million was invested in the development and construction of ten multifamily
residential apartment projects, three of which were completed during the year.
The Company acquired an existing multifamily residential property and two
additional units in the Ascension Point condominium community for approximately
$6.6 million, in the aggregate. Approximately $1.6 million was invested in
capital improvements to properties acquired in 1994 and 1995, and approximately
$1.2 million was invested in improvements to the multifamily residential
properties held in the Company's original real estate portfolio. Tenant
improvements and capital expenditures for the Company's retail and industrial
properties totaled $521,000, and investments in furniture, fixtures, and
equipment totaled $605,000 in 1995. The expenditures for furniture, fixtures,
and equipment were comprised of $432,000 primarily for maintenance equipment,
vehicles, and computers at the properties, and $173,000 for computers and
furnishings at the Company's corporate offices.
CASH FLOW ANALYSIS
The Company's activities resulted in a net decrease in cash and cash
equivalents of approximately $8.1 million in the year ended December 31, 1996,
compared with a net increase in cash and cash equivalents of
19
<PAGE>
approximately $6.3 million in the previous year ended December 31, 1995. Cash
inflows from the Company's operating activities totaled approximately $19.4
million in 1996, compared with approximately $22.4 million provided by
operations in the year ended December 31, 1995. The Company's investing
activities in the year ended December 31, 1996, totaled approximately $67.8
million compared with approximately $64.9 million in the prior year. The
Company's investment of approximately $68.2 for development of and improvements
to its real estate portfolio was previously described in the discussion of the
results of operations for the year ended December 31, 1996. The sale of six
condominium units at one of the Company's properties provided $520,000 in the
year ended December 31, 1996, partially offset by $84,000 used for additions to
escrow accounts. During the year ended December 31, 1995, the Company invested
approximately $64.9 million in its real estate portfolio. The components of
these investments were approximately $54.3 million invested in properties under
development and construction during the year, approximately $6.6 million for
acquisitions of existing multifamily properties, and approximately $4.0 million
for improvements to the operating portfolio, purchases of furniture and
equipment and additions to escrow accounts.
Financing activities undertaken in the year ended December 31, 1996,
provided approximately $40.2 million, compared with approximately $48.8 million
in the year ended December 31, 1995. The primary cash inflows from financing
activities in 1996 were approximately $59.2 million provided from construction
draws, approximately $23.9 million provided from the sale of 1,166,600 of the
Company's common shares, and approximately $5.8 million provided from sales of
common shares of the Company pursuant to shareholder and employee plans. The
Company's cash outflows from financing activities during 1996 were approximately
$24.8 million for payments on notes payable, approximately $23.0 million for
dividend payments to shareholders, and $793,000 in the aggregate for financing
and common share offering costs. During the year ended December 31, 1995, the
Company's primary cash inflows from financing activities were approximately
$118.3 million from construction draws and proceeds from a note payable, and
approximately $1.2 million from sales of common shares pursuant to shareholder
and employee plans. Cash outflows for financing activities in the year ended
December 31, 1995, were approximately $52.2 million for payments on notes
payable, approximately $17.2 million for dividend payments to shareholders, and
approximately $1.4 million in the aggregate for financing and offering costs.
LIQUIDITY AND CAPITAL RESOURCES
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 of new properties. 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 March 6, 1997, the Company had a total of $199.1 million in
outstanding debt, consisting of $137.7 million under the Credit Facility (of
which $70.8 million was drawn for development in progress), $59.8 million in
fixed rate debt with an average maturity of 5.1 years, and $1.6 million in
short-term, unsecured debt drawn for acquisition of a new development in
progress. Prior to its maturity date of May 1, 1997, the Company intends to
retire the $1.6 million in unsecured debt with an incremental draw on the Credit
Facility.
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 is collateralized by nine properties formerly
pledged as part of the collateral pool securing the Credit Facility. In
November 1995 the Company used the $50 million proceeds to retire an equivalent
amount of variable rate debt outstanding under the Credit Facility,
simultaneously releasing the nine 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. As of March 6, 1997, approximately $49.1 million was
outstanding under the Nationwide loan.
The Company currently has under construction a total of 1,902 units in six
multifamily residential communities, and has acquired one additional site upon
which it expects to construct approximately 346 multifamily residential units.
These seven developments are currently projected to cost approximately $172
million, of which $115 million is anticipated to be funded from the Credit
Facility and internally generated cash flow, and the remaining $57
20
<PAGE>
million from third party debt and other sources. Full use of the Company's $170
million availability in the Credit Facility is subject to the Company's ability
to provide sufficient collateral to the lenders during the term of the loan.
Such collateral is currently available to fully utilize the committed loan
amount, plus an additional $12 million of borrowing capacity under the existing
loan-to-value requirements under the terms of the Credit Facility. Additional
collateral value will become available during 1997 as existing developments in
progress are completed and become operational. This should allow the Company to
meet the funding requirements currently contemplated under the Credit Facility
to complete its planned development in progress by either (a) increasing the
facility's current commitment, subject to agreement with the existing lenders,
or (b) releasing certain collateralized assets from the facility for use in
securing additional third party debt.
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 secured debt, unsecured public debt, cash flow from
operations, and other sources of debt or equity to fund acquisitions and
development costs, or to refinance 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 various 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 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 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. The net proceeds after transaction expenses were
combined with 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.
Funds from Operations
- ---------------------
The Company believes that the presentation of funds from operations as
hereinafter defined, when considered with financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of the Company's performance. However, funds from operations 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 Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") initially
adopted a resolution defining funds from operations as net income (loss),
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. In March 1995, NAREIT approved for adoption a
"White Paper on Funds from Operations," which modified the definition of funds
from operations to limit adjustments for depreciation and amortization to those
related specifically to real estate investments, and made further
recommendations for disclosures intended to enhance the comparability and
usefulness of the operating data. In accordance with NAREIT's recommendation,
the Company implemented the modified NAREIT definition beginning in 1996.
The Company believes that presentation of funds from operations provides
investors with an industry accepted measurement which helps facilitate
understanding of the Company's ability to meet required dividend payments,
capital expenditures, and principal payments on its debt. Additionally, the
Company believes funds from operations should be disclosed in conjunction with
net income (or loss) and cash flows from operating, investing, and financing
activities determined in accordance with generally accepted accounting
principles. Although the Company calculates funds from operations in accordance
with the NAREIT approved definition, there can be no assurance that the
Company's basis for computing funds from operations is comparable with that of
other real estate investment trusts. Computed in accordance with the modified
definition as described above, funds from operations for the years ended
December 31,
21
<PAGE>
1996, 1995 and 1994, was approximately $21.9 million, $19.5 million and $15.6
million, respectively. The Company's net cash flows from its operating,
investing, and financing activities were approximately ($8.1 million),
approximately $6.3 million, and $465,000, for the years ended December 31, 1996,
1995, and 1994, respectively. More information with respect to the Company's
funds from operations is shown in the table below (in thousands). Refer to the
Company's financial statements included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Net income $ 11,458 $ 10,428 $ 8,761
Depreciation of real estate assets 10,257 8,828 6,443
Amortization of tenant allowances and 206 194 111
capitalized leasing costs
Non-cash compensation expense - - 245
-------- -------- ---------
Funds from operations, as adjusted $ 21,921 $ 19,450 $ 15,560
======== ======== =========
Net cash provided by operating $ 19,417 $ 22,423 $ 19,520
activities
Net cash used in investing activities (67,777) (64,937) (109,440)
Net cash provided by financing 40,247 48,764 90,385
activities -------- -------- ---------
Net (decrease) increase in cash and $ (8,113) $ 6,250 $ 465
cash equivalents ======== ======== =========
</TABLE>
Funds from operations for the year ended December 31, 1996, totaled
approximately $21.9 million or $1.81 per common share, compared with funds from
operations of approximately $19.5 million or $1.68 per common share in the
comparable prior period. The increase in funds from operations of approximately
$2.4 million or 12% in 1996 over 1995 is primarily attributable to the net
operating income provided by the increased number of apartment units in the
Company's portfolio, partially offset by an increase in the amount of expensed
debt service. Interest expense increased due to borrowings during 1995 and 1996
to fund property acquisitions, and completion of construction of three
multifamily projects in 1995 and five multifamily projects in 1996. Interest on
debt incurred for construction projects is capitalized prior to completion of
construction. After completion of construction, interest on such debt is
expensed.
Funds from operations for the year ended December 31, 1994, was adjusted
for a one time, non-cash compensation expense of $245,000. The adjustment gives
effect to the grant in the first quarter of 1994 of 13,200 shares at par value
($0.01) to non-executive employees under the Company's Share Bonus Plan
established in connection with the Initial Public Offering. For tax purposes
and under generally accepted accounting principles, the incremental market value
of these shares was expensed as compensation, but had no impact on the cash flow
of the Company. Management believes this adjustment to funds from operations is
necessary to accurately reflect the Company's performance for comparative
purposes and to provide the basis for payment of dividends.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This Form 10-K, together with other statements and information publicly
disseminated by the Company, contains 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 or 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 increases, 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.
22
<PAGE>
RECENT DEVELOPMENTS
On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado. The Company expects to
complete a purchase of the site when demolition of existing buildings,
remediation of the property, and certain other conditions are met.
On February 24, 1997, the Company purchased a 158-unit multifamily
residential property known as The Commons at Turtle Creek, located in Dallas,
Texas, for a purchase price of approximately $6.9 million. The purchase was
funded from the Company's Credit Facility.
On February 25, 1997, the Company filed a Registration Statement on Form S-
8, registering the issuance of 1,000,000 common shares to be issued pursuant to
the Company's Employee Incentive Plan.
On February 27, 1997, the Company executed a forty-year land lease
agreement for a redevelopment project, The Rice Hotel, located in Houston,
Texas. The Rice Hotel is an 18-story structure originally built in 1913. Under
terms of the agreement, the Company will fund redevelopment of the hotel into a
mixed-use residential and retail facility comprised of 317 loft-style apartments
and 21,000 square feet of retail space. The Company, in partnership with a
Houston development company, will manage all aspects of the renovation,
currently budgeted at approximately $33.3 million, and operations of the project
upon completion. The Houston Housing Finance Corporation (HHFC), owner of the
land, will fund approximately $6.6 million of abatement and infrastructure
costs, and the Company will provide the balance of the funding. Concurrently
with closing the lease agreement, the Company guaranteed a $20.0 million
construction loan for the project. The remainder of the Company's renovation
costs will be funded from draws on the Credit Facility, cash flow from
operations, or other short term financing.
On March 7, 1997, the Company declared a dividend of $0.395 per common
share, payable on March 25, 1997, to shareholders of record on March 21, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index to
Financial Statements and Financial Schedules appearing on Page F-1 of this Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
<PAGE>
Part III
ITEM 10. TRUST MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Trust Managers and the executive officers of the Company, their
positions and offices with the Company or its subsidiaries, and the expiration
of their current terms as Trust Managers are as follows:
<TABLE>
<CAPTION>
Name Positions and Offices Held Term
- ---- -------------------------- ----
<S> <C> <C>
Richard L. Bloch Chairman of the Board of Trust Managers 1999
Robert L. Shaw Trust Manager, Chief Executive Officer 1997
Will Cureton Trust Manager, Chief Operating Officer 1998
Roger T. Staubach Trust Manager 1997
James C. Leslie Trust Manager 1999
Amy DiGeso Trust Manager 1999
Hugh G. Robinson Trust Manager 1997
Gregg L. Engles Trust Manager 1998
Richard R. Reupke Chief Financial Officer
J. Michael Lewis Senior Vice President-Treasurer
Thomas L. Wilkes Senior Vice President-Management;
President, CMSI
Arthur E. Lomenick Senior Vice President-Development
James F. Duffy Senior Vice President-Construction
</TABLE>
Pursuant to the terms of the Amended and Restated Declaration of Trust and
Bylaws of the Company, the Board of Trust Managers will consist of no less than
two and no more than eleven persons. The Board of Trust Managers is divided into
three classes having three-year staggered terms. Trust Managers will hold office
until their successors are duly elected and qualified.
The following is a biographical summary of the experience of the executive
officers and Trust Managers of the Company:
Richard L. Bloch, age 67, has been Chairman of the Board of Trust Managers
----------------
and a Trust Manager since October 1993 and is a member of the Executive
Committee. Mr. Bloch has served as a Director of City National Bank of Beverly
Hills and its holding company, City National Bank Corporation, since 1976 and of
Cantel Corporation since 1988. Mr. Bloch served as a Director of Data
Broadcasting Corporation from 1993 through 1995. He served as Chairman of the
Board and Chief Executive Officer of Filmways, Inc. and Chairman of the Board of
two of its principal subsidiaries, Union Fidelity Insurance and Grossett &
Dunlap, Inc., from 1976 through 1982, and as a member of the board of directors
of Glenayre Technology (formerly known as NuWest Corporation) from 1987 through
1992. He is a co-founder and former principal owner of the Phoenix Suns NBA
basketball team and one of the former owners of the NBC-affiliated KVOA
television station in Tucson, Arizona. Mr. Bloch's real estate experience
includes co-developing and/or owning the Gulf & Western Building in New York
City, a Hyatt Hotel in Los Angeles, the Transamerica Building in Tucson and
several IBM and Allstate Insurance facilities.
Robert L. Shaw, age 40, has been Chief Executive Officer of the Company
--------------
and a Trust Manager since its inception, and is a member of the Executive
Committee. Mr. Shaw was a co-founder of Columbus Realty Holdings, Inc. ("CRH"),
a predecessor of the Company, and of its affiliate, Memphis Real Estate, Inc.
("Memphis Real Estate"), and served as President of CRH and Memphis Real Estate
from August 1989 to December 1993. Mr. Shaw was Executive Vice President of SBC
Development Company from September 1987 to March 1990, and Vice President from
July 1987 to September 1987. Mr. Shaw has been involved in the construction and
development of multifamily residential properties since 1981. He serves on the
Board of Directors of the Greater Dallas Chamber of Commerce and the National
Association of Real Estate Investments Trusts. He is also a member of the
Young Presidents Organization ("YPO"), the Urban Land Institute, and the
National Multifamily Housing Counsel. In addition, he serves on the University
of Texas at Dallas Advisory Board.
24
<PAGE>
Will Cureton, age 46, has been Chief Operating Officer of the Company and
------------
a Trust Manager since its inception, and is a member of the Executive Committee.
Prior to the formation of the Company, from 1987 until December 1993, Mr.
Cureton served as President and Chief Executive Officer of Texana and certain of
its affiliates (the "Texana Group"), which were merged into the Company pursuant
to the Initial Public Offering. Prior to his affiliation with the Texana Group,
Mr. Cureton was Vice President and Chief Operating Officer of The DicoGroup,
Inc., a Dallas-based oil and gas and real estate company, from 1981 through
1988. Prior to his association with The DicoGroup, Mr. Cureton joined Coopers &
Lybrand in 1974 as a Certified Public Accountant where he served as real estate
coordinator and audit manager for the Dallas office until 1981. He is a member
of the Real Estate Council and the National Association of Real Estate
Investment Trusts. Mr. Cureton has been on the Board of Directors of the East
Texas State University Athletic Association since 1989. He also serves on the
ETSU Foundation Board and its Capital Campaign Steering Committee.
Roger T. Staubach, age 55, has been a Trust Manager of the Company since
-----------------
December 1993 and is a member of the Audit Committee. Mr. Staubach is Chairman
and Chief Executive Officer of The Staubach Company, an integrated real estate
company providing services related to office, industrial and retail real estate
with a commitment to represent only the real estate user, which he formed in
1977. He is also a director of a number of affiliates and subsidiaries of The
Staubach Company, and serves as president of several of these entities. Mr.
Staubach is a director of Halliburton Company, Brinker International, and First
USA, Inc. and a trustee of American AAdvantage Funds. Mr. Staubach was
quarterback for the Dallas Cowboys professional football team from 1969 through
1979.
James C. Leslie, age 41, has been a Trust Manager of the Company since
---------------
December 1993, and is Chairman of the Audit Committee and a member of the
Executive Compensation Committee. Mr. Leslie is President-Financial Services, a
member of the Office of the President, and a director of The Staubach Company,
positions he has held since February 1996, January 1993 and October 1988,
respectively. Mr. Leslie was Chief Financial Officer of The Staubach Company
from 1982 to January 1992 and President of Staubach Financial Services from
January 1992 to February 1996. Mr. Leslie is also President and a board member
of Wolverine Holding Company, and serves on the boards of Forum Retirement
Partners, L.P., and the North Texas Chapter of the Arthritis Foundation. Mr.
Leslie is a certified public accountant.
Amy DiGeso, age 44, has been a Trust Manager of the Company since
----------
September 1996. Ms. DiGeso is currently President and Chief Executive Officer
of Mary Kay Inc., directing all operating responsibilities for Mary Kay Inc.
global business. She is also a board member of Mary Kay Inc. and of the
Cosmetic, Toiletry, and Fragrance Association. Prior to her affiliation with
Mary Kay, Ms. DiGeso was with Bankers Trust Company from 1986 to 1992, last
holding the position as Chief of Staff for the Asset and Project Financing
Group, served as Executive Director of Human Resources of Estee Lauder from 1984
to 1986, and with American Express Company from 1978 to 1984, held several
positions culminating in the Chief Administrative Officer role for their direct
marketing business. She holds an MBA in International Management from Fordham
University, and a BS in Behavioral Science from Penn State.
Hugh G. Robinson, age 64, has been a Trust Manager of the Company since
----------------
December 1993 and is a member of the Executive Compensation Committee. General
Robinson, who retired from the U.S. Army Corps of Engineers as a Major General
in 1983, has served since 1989 as Chairman of the Board and Chief Executive
Officer of The Tetra Group, Inc., which provides construction management and
business development services. From 1988 to 1995, he was Senior Vice President
and managed the Southwest office of Grigsby Brandford & Co., Inc., a minority
owned investment banking firm specializing in municipal securities. He was a
member of the board of directors of the Federal Reserve Bank of Dallas from 1985
through 1991, serving as chairman of the board in 1991. Prior to joining The
Tetra Group, General Robinson held the position of President of Cityplace
Development Corporation, a real estate development company, since its formation
in 1984. General Robinson is also a member of the boards of directors of A.H.
Belo Corporation (the owner of the Dallas Morning News), TUElectric, Smith
Environmental Technologies, Guaranty Federal Savings Bank, and Circuit City
Stores, Inc.
25
<PAGE>
Gregg L. Engles, age 39, has been a Trust Manager of the Company since
---------------
December 1993 and is the Chairman of the Executive Compensation Committee and a
member of the Audit Committee. Mr. Engles is the Chairman and Chief Executive
Officer of Suiza Foods Corporation, a New York Stock Exchange company which owns
and operates dairy processing operations in Florida, California, Nevada and
Puerto Rico and packaged ice operations throughout the United States. Until
December 1993, Mr. Engles was Chairman of the Board of The Milnot Company, a
branded and private label food products company. He is also a co-founder of SFE
Citrus Processors, Inc., which owns a Florida bulk citrus processor.
Richard R. Reupke, age 41, is Chief Financial Officer and Secretary of the
-----------------
Company, positions he has held since October 1993. From October 1993 to August
1994, Mr. Reupke also served as Treasurer of the Company. Since June 1994, he
has served as Secretary of CMSI, a wholly owned subsidiary of the Company. From
August 1988 to December 1993, Mr. Reupke served as Vice President -- Finance of
Texana RAT II Associates, Inc. where he had primary responsibility for all
accounting functions. Prior to his affiliation with the Texana Group, Mr.
Reupke was Controller for NOVA Properties Co., Controller for Dale C. Bullough &
Associates and Regional Controller for Genex Homes, Inc. He is a member of the
Apartment Association of Greater Dallas, the Apartment Association of Tarrant
County, and BOMA (Building Owners and Managers Association).
J. Michael Lewis, age 47, is Senior Vice President and Treasurer of the
----------------
Company, positions he has held since August 1994. Prior to joining the Company,
Mr. Lewis accumulated 17 years experience of service which included the
positions of Executive Vice President and Treasurer for Southland Financial
Corporation, a publicly traded financial services holding company, and its
successors, which were the owners, developers and managers of the Las Colinas
development in Irving, Texas, a suburb of Dallas. Prior to that, he was a
portfolio manager of securities for Southland Trust Company and Southland Life
Insurance Company. He is a member of the Financial Executives Institute, the
Australian American Chamber of Commerce and serves as Chairman of Providence
Christian School of Texas, and as a director of the Las Colinas Association.
Thomas L. Wilkes, age 37, is a Senior Vice President of the Company and
----------------
President of CMSI, a wholly owned subsidiary of the Company, positions he has
held since October 1993. Mr. Wilkes served as President of CRH Management
Company, a multifamily property management firm and a member of the Columbus
Group, since its formation in October 1990 to December 1993. Prior thereto, he
was a Senior Divisional Manager in the residential services division of the
Trammell Crow Residential Companies from June 1988 to October 1990 and a
Divisional Manager from December 1986 to May 1988. Before joining Trammell Crow,
Mr. Wilkes served for four years as an officer in the United States Air Force.
Mr. Wilkes is a Certified Property Manager, Registered Apartment Manager, member
of Leadership Dallas Class of 1997, member of National Association of Home &
Apartment Builders, and a member of the Institute of Real Estate Management, and
is on the board of the Apartment Association of Greater Dallas, Bryan's House
and is past President of the Uptown Dallas Association.
Arthur E. Lomenick, age 41, has been a Senior Vice President of the
------------------
Company since October 1994 and was Vice President from October 1993 to October
1994. Previously, Mr. Lomenick served as Vice President, Investments, for
Memphis Real Estate since January 1993. Prior thereto, Mr. Lomenick was
Executive Vice President of Wolverine Investment Services, a division of The
Staubach Company, from August 1992 to January 1993. Mr. Lomenick served as Vice
President of The Staubach Company from February 1990 through August 1992, and as
Vice President of divisions of The Staubach Company from 1986 through February
1990. Mr. Lomenick serves on the boards of directors of the Dallas Visual Arts
Center, the Dallas Arts District Association, and the Oaklawn Forum. He is also
a member of the International Downtown Association (IDA), the Urban Land
Institute (ULI), serving on its Gold Flight Housing Committee, and the Congress
of the New Urbanism.
26
<PAGE>
James F. Duffy, age 53, has been a Senior Vice President of the Company
--------------
since May 1996. Prior to his affiliation with the Company, Mr. Duffy was
President of the JFD Group, a business consulting firm specializing in the
commercial construction industry. Prior thereto, he was President of the W. B.
Moore Company from 1991 to 1993, Vice President-Operations of Spring Valley
Construction Company from 1981 to 1990, and Vice President-Commercial for Luther
Hill and Associates, Inc. from 1972 to 1981. He is a past president of the
Dallas Chapter of Associated General Contractors of America. He was past
Secretary/Treasurer of the Texas Building Branch-AGC. He has also served as a
member of the construction degree advisory committees at East Texas State
University, The University of North Texas, and Northlake College. Mr. Duffy was
a member of the City Council of the Town of Addison from 1986 to 1991, serving
as Mayor Pro Tem and as Chairman of both the Addison Planning and Zoning
Commission and Board of Zoning Adjustment.
No family relationships exist among any of the Trust Managers or executive
officers of the Company. No arrangement or understanding exists between any
Trust Manager or executive officer or any other person pursuant to which any
Trust Manager or executive officer was selected as a Trust Manager or executive
officer of the Company.
The information contained in the paragraph related to compliance with
Section 16(a) of the Securities and Exchange Act of 1934, under the heading
"Proposal One: Election of Trust Managers, Trust Managers Whose Terms Will
Continue After the Meeting" of the Proxy Statement for the Annual Meeting of
Shareholders to be held May 23, 1997 (the "Proxy Statement") is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" of the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Relationships and Transactions" of the Proxy
Statement is incorporated herein by reference.
27
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements - The index to the Financial Statements is
included in page F-1 of this report.
(2) Exhibits:
EXHIBIT
NO. DESCRIPTION
- ------- ------------
3.1 --Amended and Restated Declaration of Trust of the Company (9)
3.2 --Bylaws of the Company (9)
4.1 --Form of certificate representing common shares of beneficial
interest, par value $.01 per share, of the Company (3)
10.1 --Form of Registration Rights Agreement among the Company and the
persons named therein (1)
10.4+ --Employment Agreement between the Company and Richard L. Bloch (15)
10.5+ --Employment Agreement between the Company and Robert L. Shaw (15)
10.6+ --Employment Agreement between the Company and Will Cureton (15)
10.7+ --Employment Agreement between the Company and Richard R. Reupke (15)
10.8+ --Employment Agreement between the Company and Thomas L. Wilkes (15)
10.9+ --Employment Agreement between the Company and J. Michael Lewis (15)
10.10+ --Employment Agreement between the Company and Arthur E. Lomenick (15)
10.11+ --Employment Agreement between the Company and James F. Duffy (15)
10.12 --Form of Indemnification Agreement by and between the Company and
its executive officers and Trust Managers (1)
10.13 --Fourth Amendment to Master Lease Agreement between the Company and
Electronic Data Systems Corporation pertaining to Windhaven Village
(6)
10.14 --Lease Agreement between the Company and Madison Office Building,
Inc. pertaining to the Madison Office Building (2)
10.15+ --Columbus Realty Trust 1993 Share Bonus Plan (4)
10.16+ --Columbus Realty Trust 1993 Share Option Plan (4)
10.17 --Second Amended and Restated Loan Agreement between the Company, Bank
One, Texas, NA, Bank United of Texas FSB, Comerica Bank-Texas and
Bank One, Texas NA, as agent for the Banks (8)
10.18 --First Modification to the Second Amended and Restated Loan Agreement
between the Company, Bank One, Texas, NA, Bank United of Texas FSB,
Wells Fargo Realty Advisors Funding, Incorporated, Texas Commerce
Bank NA, Comerica Bank - Texas, and Bank One, Texas NA, as agent for
the Banks (14)
10.19 --Second Modification to the Second Amended and Restated Loan Agreement
between the Company, Bank One, Texas, NA, Bank United of Texas FSB,
Wells Fargo Realty Advisors Funding, Incorporated, Texas Commerce
Bank NA, Comerica Bank - Texas, and Bank One, Texas NA, as agent for
the Banks (14)
10.20 --$50,000,000 Mortgage Note between the Company and Nationwide Life
Insurance Company (14)
10.21 --Form of Assignment of Limited Partnership Interests (1)
10.22 --Form of Waiver and Contribution Agreement (3)
10.23+ --Columbus Realty Trust 401(k) Plan and Trust (5)
10.24 --Columbus Realty Trust Amended and Restated Dividend Reinvestment and
Share Purchase Plan (7)
10.25+ --Columbus Realty Trust Share Bonus Plan (No. 2) (8)
10.26+ --Columbus Realty Trust Employee Stock Purchase Plan (10)
10.27+ --Columbus Realty Trust Long Term Management Incentive Plan (11)
10.28+ --Columbus Realty Trust Long Term Employee Incentive Plan (12)
28
<PAGE>
10.29+ --Form of Long Term Management Incentive Plan Performance - Based Stock
and Dividend Equivalent Award Agreement by and between the Company
and Richard Bloch, Robert L. Shaw and Will Cureton. (15)
10.30 --Third Modification to the Second Amended and Restated Loan Agreement
between the Company, Bank One, Texas N.A., Bank United of Texas FSB,
Wells Fargo Realty Advisors Funding Incorporated, Texas Commerce Bank
N.A., Comerica Bank-Texas, and Bank One, Texas N.A., as agent for the
Banks. (15)
11 --Statement regarding computation of net income per common share (13)
21.1 --Schedule of Subsidiaries of the Company (5)
23.1* --Consent of Ernst & Young LLP
27.1 --Financial Data Schedule (15)
99.1* --Notice of Annual Meeting of Shareholders to be held May 23, 1997, and
Proxy Statement
- --------------------------------------
+ Management Contract or Compensatory Plan or Arrangement
* Filed herewith
(1) Previously filed with Amendment No. 1 to the Company's Registration
Statement on Form S-11 (Registration No. 33-70218) filed with the
Securities and Exchange Commission on November 26, 1993 and incorporated
herein by reference.
(2) Previously filed with Amendment No. 2 to the Company's Registration
Statement on Form S-11 (Registration No. 33-70218) filed with the
Securities and Exchange Commission on December 13, 1993 and incorporated
herein by reference.
(3) Previously filed with Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-11 (Registration No. 33-70218) filed
with the Securities and Exchange Commission on December 23, 1993 and
incorporated herein by reference.
(4) Previously filed with the Company's Registration Statement on Form S-11
(Registration No. 33-80544) filed with the Securities and Exchange
Commission on June 21, 1994 and incorporated herein by reference.
(5) Previously filed with Amendment No. 1 to the Company's Registration
Statement on Form S-11 (Registration No. 33-80544) filed with the
Securities and Exchange Commission on June 30, 1994 and incorporated
herein by reference.
(6) Previously filed with Amendment No. 1 to the Company's Registration
Statement on Form S-3 (Registration No. 33-88672) filed with the
Securities and Exchange Commission on January 30, 1995 and incorporated
herein by reference.
(7) Previously filed with Post Effective Amendment to the Company's
Registration Statement on Form S-3 (Registration No. 33-90146) filed
with the Securities and Exchange Commission on September 28, 1995 and
incorporated herein by reference.
(8) Previously filed with the Company's Registration Statement on Form S-8
(Registration No. 33-90492) filed with the Securities and Exchange
Commission on March 21, 1995 and incorporated herein by reference.
(9) Previously filed with the Company's Registration Statement on Form S-3
(Registration No. 333-09775) filed with the Securities and Exchange
Commission on August 8, 1996 and incorporated herein by reference.
(10) Previously filed with the Company's Registration Statement on Post
Effective Amendment No. 1 to Form S-8 (Registration No. 33-94798) filed
with the Securities and Exchange Commission on August 28, 1995 and
incorporated herein by reference.
(11) Previously filed with the Company's Registration Statement on Form S-8
(Registration No. 333-02276) filed with the Securities and Exchange
Commission on March 12, 1996 and incorporated herein by reference.
(12) Previously filed with the Company's Registration Statement on Form S-8
(Registration No. 333-22307) filed with the Securities and Exchange
Commission on February 25, 1997 and incorporated herein by reference.
29
<PAGE>
(13) Incorporated by reference to Note 6 of Item 8 - Financial Statements of
this Form 10-K
(14) Previously filed with the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
(15) Previously filed with the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
(b) Reports on Form 8-K:
None.
30
<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 behalf
of the undersigned, thereunto duly authorized.
COLUMBUS REALTY TRUST
(Registrant)
May 23, 1997 /s/ ROBERT L. SHAW
-----------------------
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Position Date
- ---- -------- ----
/s/ RICHARD L. BLOCH Trust Manager and May 23, 1997
- ------------------------
Richard L. Bloch Chairman of the Board
/s/ ROBERT L. SHAW Trust Manager and May 23, 1997
- ------------------------
Robert L. Shaw Chief Executive Officer
/s/ WILL CURETON Trust Manager and May 23, 1997
- ------------------------
Will Cureton Chief Operating Officer
/s/ ROGER T. STAUBACH Trust Manager May 23, 1997
- ------------------------
Roger T. Staubach
/s/ RICHARD R. REUPKE Chief Financial Officer and May 23, 1997
- ------------------------
Richard R. Reupke Secretary
/s/ JAMES C. LESLIE Trust Manager May 23, 1997
- ------------------------
James C. Leslie
/s/ AMY DIGESO Trust Manager May 23, 1997
- ------------------------
Amy DiGeso
/s/ HUGH G. ROBINSON Trust Manager May 23, 1997
- ------------------------
Hugh G. Robinson
/s/ GREGG L. ENGLES Trust Manager May 23, 1997
- ------------------------
Gregg L. Engles
31
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Columbus Realty Trust
Report of Independent Auditors F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 1996, and December
31, 1995 F-3
Consolidated Statements of
Operations for the years ended
December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of
Shareholders' Equity for the years
ended December 31, 1996, 1995 and
1994 F-5
Consolidated Statements of Cash
Flows for the years ended
December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial
Statements F-7
Supplementary Data:
Schedule III - Real Estate
Investments and Accumulated
Depreciation F-24
Notes to Schedule III - Real
Estate Investments and
Accumulated Depreciation F-27
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Trust Managers
Columbus Realty Trust
We have audited the accompanying consolidated balance sheets of Columbus Realty
Trust as of December 31, 1996, and 1995 and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. Our audits also included the financial
statement schedule of Columbus Realty Trust listed in the Index referenced at
Item 14(a). These financial statements and schedule are the responsibility of
management of Columbus Realty Trust. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Columbus Realty Trust as of December 31, 1996, and 1995 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
January 28, 1997, except for
Note 15, as to which the date
is March 7, 1997
F-2
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
-------------------------
1996 1995
-------------------------
<S> <C> <C>
Real estate:
Land $ 54,399 $ 48,104
Buildings and improvements 285,104 232,428
Furniture, fixtures, and equipment 4,696 4,433
Construction-in-progress 55,614 50,081
-------------------------
399,813 335,046
Less accumulated depreciation 40,492 31,667
-------------------------
Real estate held for investment 359,321 303,379
Real estate held for sale 3,980 -
-------------------------
363,301 303,379
Cash and cash equivalents 2,641 10,754
Restricted cash 554 470
Accounts receivable 663 861
Receivables from affiliates 152 418
Deferred assets, net of accumulated
amortization of $1,112 and $932
at December 31, 1996 and 1995,
respectively 420 454
Deferred financing costs, net of
accumulated amortization of $2,197 and
$1,438 at December 31, 1996 and 1995,
respectively 1,316 1,795
Other assets 5,529 2,845
-------------------------
Total assets $374,576 $320,976
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $179,855 $145,492
Accrued dividends - 4,322
Accounts payable and accrued expenses 3,536 4,912
Accrued interest 288 292
Accrued property taxes 6,727 5,203
Tenant security deposits 1,671 1,273
Prepaid rent 358 592
Minority interest 2,063 2,063
-------------------------
Total liabilities 194,498 164,149
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;
13,059,137 and 11,524,618 shares
issued at December 31, 1996
and 1995, respectively 131 115
Additional paid-in capital 206,564 176,061
Retained earnings (deficit) (26,611) (19,343)
-------------------------
180,084 156,833
Less 900 common shares in treasury,
at cost 6 6
-------------------------
Total shareholders' equity 180,078 156,827
-------------------------
Total liabilities and shareholders'
equity $374,576 $320,976
=========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Revenues:
Rental $ 45,910 $ 39,023 $ 28,963
Property management 298 479 640
Interest and other 2,322 1,749 1,278
--------------------------------------
Total revenues 48,530 41,251 30,881
Expenses:
Repairs and maintenance 3,573 3,117 2,346
Other property operating 2,504 1,976 1,493
Advertising 723 551 366
General and administrative - properties 3,183 2,754 2,405
General and administrative - corporate 2,073 2,057 1,841
Real estate taxes 6,382 5,025 3,687
Interest 7,884 5,596 2,848
Interest related to amortization of 515
deferred financing costs 393 474
Depreciation and amortization 10,603 9,232 6,660
--------------------------------------
Total expenses 37,318 30,823 22,120
--------------------------------------
Income from operations 11,212 10,428 8,761
Gain on sale of real estate 246 - -
--------------------------------------
Net income $ 11,458 $ 10,428 $ 8,761
======================================
Net income per common share, primary
and fully diluted:
Income from operations $0.92 $0.90 $0.89
Gain on sale of real estate 0.02 - -
--------------------------------------
Net income $0.94 $0.90 $0.89
======================================
Weighted average number of common shares
outstanding (including common share
equivalents):
Primary 12,099,291 11,536,110 9,832,417
Fully diluted 12,142,069 11,556,269 9,845,759
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Shares Treasury Shares
-------------------- --------------------------
Retained Total
Number Paid-in Earnings Number of Shareholders'
of Shares Amount Capital (Deficit) Shares Amount Equity
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993 8,500,084 $ 85 $121,722 $ (6,347) - $ - $115,460
Dividends declared - - - (14,962) - - (14,962)
Net adjustments to
purchase price - - (103) - - - (103)
Issuance of common shares,
net of offering costs 2,900,000 29 52,435 - - - 52,464
Issuance of common shares
under employee plan 13,200 - 245 - - - 245
Repurchase of common shares - - - - 900 (6) (6)
Net income - - - 8,761 - - 8,761
---------------------------------------------------------------------------------------------
Balance at December 31,
1994 11,413,284 114 174,299 (12,548) 900 (6) 161,859
Dividends declared - - - (17,223) - - (17,223)
Issuance of common shares
under employee and
shareholder plans 112,234 1 1,762 - - - 1,763
Net income - - - 10,428 - - 10,428
---------------------------------------------------------------------------------------------
Balance at December 31,
1995 11,525,518 115 176,061 (19,343) 900 (6) 156,827
Dividends declared - - - (18,726) - - (18,726)
Issuance of common
shares, net
of offering costs 1,166,600 12 23,477 - - - 23,489
Issuance of common shares
under employee and
shareholder plans 352,019 4 6,762 - - - 6,766
Option exercise 15,000 - 264 - - - 264
Net income - - - 11,458 - - 11,458
---------------------------------------------------------------------------------------------
Balance at December 31,
1996 13,059,137 $131 $206,564 $(26,611) 900 $(6) $180,078
=============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,458 $ 10,428 $ 8,761
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 10,603 9,232 6,660
Amortization of deferred financing
costs 393 515 474
Gain on sale of real estate (246) - -
Noncash compensation expense related
to issuance of shares to employees - - 245
Net effect of changes in operating
assets and liabilities (2,791) 2,248 3,380
---------------------------------
Net cash provided by operating
activities 19,417 22,423 19,520
INVESTING ACTIVITIES
Acquisition of properties (7,095) (6,648) (84,862)
Acquisition of ownership interests in
predecessors - - (103)
Payment of construction costs (58,592) (54,322) (20,465)
Proceeds from sale of real estate 520 - -
Improvements to real estate investments (2,214) (3,331) (2,638)
Purchase of furniture, fixtures, and
equipment (312) (605) (933)
Increase in restricted cash (84) (31) (439)
---------------------------------
Net cash used in investing activities (67,777) (64,937) (109,440)
FINANCING ACTIVITIES
Net proceeds from offerings of common
shares 23,915 - 53,114
Proceeds from employee and shareholder
plans 5,810 1,188 -
Payment of offering costs (513) (231) (2,132)
Proceeds from notes payable 59,206 118,342 103,813
Payment of financing costs (280) (1,180) (1,170)
Payment of notes payable (24,843) (52,174) (52,552)
Payment of dividends (23,048) (17,181) (10,682)
Purchase of treasury stock - - (6)
--------------------------------
Net cash provided by financing
activities 40,247 48,764 90,385
--------------------------------
Net (decrease) increase in cash and
cash equivalents (8,113) 6,250 465
Cash and cash equivalents at beginning
of period 10,754 4,504 4,039
---------------------------------
Cash and cash equivalents at end of
period $ 2,641 $ 10,754 $ 4,504
=================================
Supplemental cash flow information:
Interest payments, including $5,148,
$3,072 and $941 capitalized in 1996,
1995 and 1994, respectively $ 13,036 $ 8,619 $ 3,555
Noncash investing and financing
activities:
Issuance of shares under employee
plans $ 1,305 $ 807 $ -
Contribution of land $ - $ 2,063 $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 approximately $111.6 million before
offering costs. In connection with the offering, the Company drew $15 million on
a credit facility agreement (the Credit Facility, more fully described in Note
5), for total proceeds of approximately $126.6 million. 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 in certain properties 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
predecessors to Columbus Realty Trust in twelve multifamily residential
properties, two industrial properties 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
affiliates of the predecessors to Columbus Realty Trust 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.
The ownership interests, with a net book value of approximately $17.0 million,
and the property management contracts were acquired for a purchase price of
approximately $16.2 million, plus 1,601,518 common shares and options for
100,000 shares at an option price of $19.8375 per share.
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.
CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, CMSI, and Addison Circle One, Ltd. The formation of Addison
Circle One, Ltd. is more fully discussed in Note 3. All significant intercompany
transactions and accounts have been eliminated. Certain prior year financial
statement amounts have been reclassified to conform with current year
presentation.
USES OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statement and accompanying notes.
Actual results could differ from those estimates.
F-7
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
The Company has made an election to be taxed as a real estate investment trust
(REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the Code). As a REIT, the Company generally is not subject to federal
income tax to the extent it distributes at least 95% of its REIT taxable income
to its shareholders. Shareholders are taxed on dividends declared and must
report such dividends as either ordinary income, short term gains, long term
gains, or as return of capital. No provision for federal income taxes has been
included in the Company's financial statements as of December 31, 1996, 1995, or
1994 (see Note 6).
If the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain state
and local taxes on its income and property and to federal income and excise
taxes on its undistributed income.
Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting purposes
due to differences for federal tax purposes in the estimated useful lives used
to compute depreciation and the carrying value (basis) of the investment in
properties.
REVENUE RECOGNITION
Rental income attributable to residential leases is recorded when due from
residents. Rental income from the industrial and retail properties is recognized
on a straight-line basis over the term of the related lease.
REAL ESTATE ASSETS AND RELATED DEPRECIATION
Real estate assets held for investment are stated at depreciated cost unless the
asset is determined to be impaired. The Company records impairment losses on its
real estate assets when events and circumstances indicate that the assets might
be impaired and the expected undiscounted cash flows are less than the carrying
amounts of those assets. In cases where the Company does not expect to recover
its carrying costs, the Company reduces its carrying costs to fair value. No
such impairment losses have been recognized to date.
Real estate assets held for sale are stated at the lower of depreciated cost, or
fair market value less selling costs at the date the Company begins marketing
efforts to sell the properties. The Company records impairment losses on real
estate investments held for sale if the Company determines the fair market value
less selling costs is less than depreciated cost. No such impairment losses on
real estate held for sale have been recognized to date. In 1996, the Company
began marketing efforts with respect to certain of its condominium units (see
Note 4). No depreciation of the real estate assets held for sale has been
recognized since the inception of marketing efforts for the properties.
F-8
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REAL ESTATE ASSETS AND RELATED DEPRECIATION (CONTINUED)
Costs related directly to the acquisition, development and improvement of real
estate, including tenant improvements on the industrial and retail properties,
are capitalized. Interest costs incurred during construction periods are
capitalized.
Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterments are capitalized and depreciated over their estimated useful
lives. Depreciation is computed on a straight-line basis over the expected
useful lives of depreciable property, which is generally 15 to 40 years for
buildings and improvements, and 5 to 7 years for furniture, fixtures and
equipment.
Costs incurred in connection with resident turnover such as unit cleaning,
painting, carpet cleaning or replacement, appliance replacement, and other
associated costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less.
RESTRICTED CASH
Restricted cash includes an escrow account established for property taxes on a
property and a construction deposit for public infrastructure improvements made
on one of the Company's development projects.
DEFERRED ASSETS
Deferred assets include costs incurred in obtaining tenant leases at the
Company's industrial and retail properties. Such costs are amortized over the
term of the related lease using the straight-line method.
DEFERRED FINANCING COSTS
Loan origination costs and commitment fees are deferred and amortized on a
straight-line basis, which approximates the effective interest method, over the
initial term of the related note payable.
STOCK COMPENSATION
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and intends to continue to do so. See Note 7 for a
discussion of the Company's stock compensation arrangements and pro forma
disclosure of the effect on income from operations and earnings per share of
such arrangements pursuant to the requirements of Financial Accounting Standards
Board Statement 123, Accounting for Stock-Based Compensation (SFAS 123).
F-9
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CONCENTRATIONS
The Company invests primarily in multifamily residential properties. At December
31, 1996, the Company owned 26 multifamily residential properties, two
industrial properties, one retail property, one development site, and had five
multifamily residential properties under development. All but three of these
properties are located in the Dallas, Texas, metropolitan area. The multifamily
residential industry is highly competitive and the Company competes with other
REITs as well as other real estate owners and developers with respect to the
acquisition of land for development and the acquisition of existing multifamily
residential properties. In addition the Company's properties compete with other
multifamily residential properties for residents. The Company believes that the
location and quality of its multifamily residential properties, the management
services and amenities provided to residents, and its long-term commitment to
the ownership of its properties and to its surrounding communities are the
principal competitive factors affecting its real estate investments.
2. REAL ESTATE
YEAR ENDED DECEMBER 31, 1996
ACQUISITIONS OF DEVELOPMENT SITES
The Company purchased four multifamily residential development sites in the year
ended December 31, 1996. All of the acquisitions were funded through the
Company's Credit Facility more fully described in Note 5.
Two development sites were purchased in the Uptown district of Dallas, Texas,
for an aggregate purchase price of approximately $5.2 million in January 1996.
Construction of a 196-unit multifamily residential project, The Heights of
State-Thomas, began on one of the sites in the fourth quarter of 1996.
Development of the second site is expected to begin in 1997. A third multifamily
development site in the Uptown district was acquired in July 1996 for
approximately $1.3 million. Construction of a 186-unit multifamily residential
project, Cole's Corner, began on this site in August 1996.
The Company acquired a multifamily residential development site in Jackson,
Mississippi, for approximately $620,000 in February 1996. Construction of a 240-
unit multifamily residential project, Columbus Pointe, began on this site in the
second quarter of 1996.
COMPLETED CONSTRUCTION
The Company completed construction of five multifamily residential projects
during the year ended December 31, 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 December 31, 1996.
F-10
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. REAL ESTATE (CONTINUED)
COMPLETED CONSTRUCTION (CONTINUED)
<TABLE>
<CAPTION>
Number Development/Construction
Project Name Location of Units Completion Date Cost
------------ -------- -------- --------------- ----
<S> <C> <C> <C> <C>
(in thousands)
Hackberry Creek II Dallas, TX 192 April 1996 $ 9,617
The Abbey Dallas, TX 34 April 1996 4,364
The Vineyard Dallas, TX 116 May 1996 7,418
Winsted Village Dallas, TX 314 August 1996 15,881
Columbus Square Dallas, TX 218 September 1996 18,120
--- -------
874 $55,400
=== =======
</TABLE>
YEAR ENDED DECEMBER 31, 1995
ACQUISITIONS
In March 1995 the Company acquired a 160-unit multifamily residential property
known as The Parks, located in Coppell, Texas. The purchase price of
approximately $6.6 million was funded through the Company's Credit Facility.
The Company acquired two condominium units in the Ascension Point Phase I
condominium community located in Arlington, Texas, during the year ended
December 31, 1995, for purchases prices totaling $98,000. The purchases were
funded from the Company's cash reserves.
COMPLETED CONSTRUCTION
The Company completed construction of three apartment projects during the year
ended December 31, 1995, as set forth in the table below.
<TABLE>
<CAPTION>
Number Development/Construction
Project Name Location of Units Completion Date Cost
------------ -------- -------- --------------- ----
<S> <C> <C> <C> <C>
(in thousands)
Trace II Jackson, MS 204 January 1995 $ 7,488
Uptown Village Dallas, TX 300 May 1995 13,144
Ascension Point II Dallas, TX 86 September 1995 4,598
--- -------
590 $25,230
=== =======
</TABLE>
3. REAL ESTATE JOINT VENTURE
In December 1995 the Company executed a partnership agreement with Gaylord
Properties, Inc. for the development and construction of a 460-unit multifamily
and retail development to be known as Addison Circle One. The partnership,
Addison Circle One, Ltd., was formed pursuant to a master development agreement
between the Company and Gaylord Properties, Inc. The Company paid an affiliate
$150,000 in January 1996 upon formation of Addison Circle One, Ltd. See Note 10.
F-11
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. REAL ESTATE JOINT VENTURE (CONTINUED)
The Company, as general partner in Addison Circle One, Ltd. made an initial
capital contribution of approximately $8.6 million to the partnership, funded
through the Company's Credit Facility. Gaylord Properties, Inc., as limited
partner, contributed the development site valued at $2.1 million to the
partnership. The limited partner contribution has been reflected in the
Company's consolidated financial statements as a minority interest. The assets
and liabilities of Addison Circle One, Ltd. have been consolidated in the
Company's consolidated balance sheets as of December 31, 1996, and 1995. The
formation and operations of Addison Circle One, Ltd. had no effect on the
Company's statements of operations for the years ended December 31, 1996, and
1995.
The Company is solely responsible for the operation of the partnership,
construction and development of Addison Circle One, and management of the
property upon completion. Construction on Addison Circle One began in January
1996. Addison Circle One, Ltd., obtained a $21.3 million construction loan for
the unfunded projected development costs in June 1996, as more fully described
in Note 5.
4. REAL ESTATE HELD FOR SALE
In June 1996 the Company began marketing efforts to sell 130 condominium units
owned by it in the Springstead and Villas of Valley Ranch condominium
communities located in Dallas, Texas. The aggregate net book value of the
condominium properties totaling approximately $4.0 million has been classified
as real estate held for sale in the Company's consolidated financial statements
as of December 31, 1996.
Six units in the Villas of Valley Ranch condominium community were sold during
the year ended December 31, 1996, for net proceeds of $433,000 resulting in a
net gain of approximately $246,000.
5. NOTES PAYABLE
CREDIT FACILITY
The Company's $170 million Credit Facility is secured by a first mortgage and
assignment of rents on all of the Company's real estate portfolio, except for
the Lakeside Village Apartments and nine properties securing a loan from
Nationwide Life Insurance Company, more fully described below. The Credit
Facility, as amended in February 1995 and March 1996, bears interest at LIBOR
(5.50% at December 31, 1996) plus 165 basis points on completed property debt
and LIBOR plus 205 basis points on development property debt. When the Credit
Facility matures on December 31, 1997, the Company will be required to secure
substitute financing for the balance then outstanding.
Approximately $118.0 million and $84.7 million was outstanding under the Credit
Facility at December 31, 1996, and 1995, respectively. The unused commitment
under the Credit Facility at December 31, 1996, was approximately $52.0 million.
The Company's weighted average borrowing rates during 1996 were 7.10% on
completed property debt and 7.53% on development debt. The Company's weighted
average borrowing rates during 1995 were 7.78% on completed property debt and
8.22% on development debt. The Company's ability to draw amounts under the
Credit Facility from time to time is subject to the satisfaction of certain
conditions. The payment of dividends and capital share repurchases are
restricted to 90% of funds from operations, as defined by NAREIT, plus net
taxable gain from the sale of properties.
F-12
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. NOTES PAYABLE (CONTINUED)
CREDIT FACILITY (CONTINUED)
The Credit Facility requires the Company to maintain a minimum level of tangible
net worth and also to meet specified ratios of liabilities to market
capitalization, liquid assets and debt to market capitalization.
CONSTRUCTION LOAN
In June 1996 Addison Circle One, Ltd., an affiliated partnership, the majority
interest of which is held by 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 Note 3.
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 (7.27% at December 31, 1996).
The loan matures in June 1999 when the principal balance then outstanding is
due. Approximately $1.9 million had been drawn on the construction loan as of
December 31, 1996.
MORTGAGE LOANS
In November 1995, $50 million of variable rate debt outstanding under the Credit
Facility was retired when the Company closed on a $50 million loan from
Nationwide Life Insurance Company (Nationwide). The 7.45% fixed-rate loan
(principal balance of approximately $49.3 million at December 31, 1996) is
collateralized by nine completed multifamily residential properties. Regular
principal payments required to amortize the note are $768,000 in 1997, $828,000
in 1998, $892,000 in 1999, $960,000 in 2000, approximately $1.0 million in 2001,
and approximately $1.0 million in 2002 until the note's maturity in November
2002 when the scheduled unpaid principal balance of approximately $43.8 million
is due.
The Company obtained approximately $11 million in financing from an unaffiliated
third party in connection with the purchase of the Lakeside Village Apartments
in May 1994. The note payable (principal balance of approximately $10.7 million
at December 31, 1996) bears interest at 7% per annum, requires monthly payments
of principal and interest, and matures in May 1999 when the scheduled unpaid
principal balance of approximately $10.4 million is due. Regular principal
payments required to amortize the note are $133,000 in 1997, $143,000 in 1998,
and $62,000 in 1999.
6. SHAREHOLDERS' EQUITY
Common shareholders are entitled to one vote for each share held on all matters
presented for a vote of shareholders. There is no right of cumulative voting in
connection with the election of Trust Managers. Shareholders are entitled to
receive pro rata, such dividends, if any, as may be declared by the Board of
Trust Managers in their discretion from funds legally available. Upon
liquidation or dissolution, shareholders are entitled to share ratably in all
assets available for distribution to shareholders, subject to the rights of the
holders of the Company's creditors and to the rights of any preferred class of
the Company's securities (if any are outstanding). The common shareholders have
no redemption, preference, conversion, exchange or preemptive rights to
subscribe to any securities of the Company. The common shares issued are fully
paid and non-assessable.
F-13
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. SHAREHOLDERS' EQUITY (CONTINUED)
For the Company to qualify as a REIT under the Code, not more than 50% in value
of its outstanding common shares may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include pension funds and
certain other tax-exempt entities) during the last half of a taxable year, and
such shares must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months, or during a proportionate part of a
shorter taxable year. The Company's Declaration of Trust provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 9.8% of the total outstanding shares, subject to certain
exceptions.
EQUITY OFFERINGS
The Company sold 2,700,000 common shares in a second public offering in July
1994, receiving net proceeds of approximately $48.8 million after underwriting
commissions and offering costs. In August 1994, the Company received
approximately $3.8 million for an additional 200,000 shares sold pursuant to the
underwriters' exercise of a portion of an overallotment option. The aggregate
net proceeds of approximately $52.6 million were used to repay a portion of the
indebtedness then outstanding on the Company's Credit Facility.
In January 1995 the Company registered for resale 1,940,618 restricted common
shares issued in connection with the formation of the Company with the
Securities and Exchange Commission. Approximately $78,000 was incurred for legal
and accounting fees related to the registration, and has been reflected in the
Company's financial statements as additional paid in capital.
The Company registered an aggregate of $200 million of debt securities, common
shares, preferred shares and warrants (collectively, the Registered Securities)
pursuant to a "shelf" Registration Statement with the Securities and Exchange
Commission in August 1996. 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. In October 1996 the Company completed the sale of
1,166,600 of the Registered Securities to certain institutional investors. The
Company received net proceeds of approximately $23.5 million after expenses from
the sale of such common shares for $20.50 per share. The proceeds were used to
repay a portion of the Company's indebtedness under the Credit Facility.
INCOME PER SHARE
Income per 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. In years in which there are no
earnings, common share equivalents are not included in the computation as they
are anti-dilutive.
F-14
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. SHAREHOLDERS' EQUITY (CONTINUED)
DIVIDENDS
During the year ended December 31, 1996, the Company modified its policy
regarding the timing of its declaration and payment of quarterly dividends such
that dividends will be declared and paid in the same calendar quarter. The
following table presents the sources of the four quarterly dividends declared
during the year ended December 31, 1996 on a per common share basis. The
characterization of the dividends for federal income tax purposes has been
allocated based upon the earnings and profits of the Company for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
Long-term
Ordinary Return Capital Total
Record Payment Income of Capital Gain Dividend
Date Date (63.3%) (35.1%) (1.6%) (100%)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 25, 1996 April 15, 1996 $0.237 $0.132 $0.006 $0.375
June 28, 1996 July 15, 1996 0.250 0.139 0.006 0.395
September 30, 1996 October 15, 1996 0.250 0.139 0.006 0.395
December 23, 1996 December 26, 1996 0.250 0.139 0.006 0.395
--------------------------------------------------
$0.987 $0.549 $0.024 $1.560
--------------------------------------------------
</TABLE>
DIVIDEND REINVESTMENT PLAN
Effective with the first quarterly dividend in 1995, the Company adopted a
dividend reinvestment and share purchase plan (the Dividend Reinvestment Plan).
Under terms of the Dividend Reinvestment Plan, common shareholders are eligible
to purchase the Company's common shares directly from the Company with all or
any portion of the quarterly dividend for a purchase price of 95% of the then
current market price for the shares. Shareholders may also make additional cash
purchases of additional shares on the same terms, not to exceed $10,000 per
quarter, subject to certain other limitations. Under the Dividend Reinvestment
Plan, the Company issued 276,762 common shares for net proceeds of approximately
$5.4 million in the year ended December 31, 1996, and 63,669 common shares for
net proceeds of approximately $1.0 million in the year ended December 31, 1995.
7. SHARE OPTION PLANS
In connection with the initial public offering, the Company established the
Columbus Realty Trust 1993 Share Option Plan (the Share Option Plan). A maximum
of 1,400,000 common shares were reserved for issuance under the Share Option
Plan which provides for the grant of incentive and nonqualified options. The
plan provides for the right of an option holder to elect to receive, in lieu of
common shares issuable upon exercise of the option, cash or common shares equal
to the excess of the market price of the common shares over the exercise price
for such common shares. The share options are exercisable beginning six months
from the date they are granted and are exercisable over a period determined by
the Plan Administrators, but no longer than ten years after the date they are
granted. All common share options authorized under the plan were granted as of
December 31, 1996.
F-15
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. SHARE OPTION PLANS (CONTINUED)
In January 1996 the Company established the Long-Term Management Incentive Plan
(Management Incentive Plan) pursuant to which the Plan Administrators are
authorized to award 500,000 common shares in the form of share options, share
purchase awards and restricted and unrestricted share awards under such terms as
allowed in the plan. Pursuant to the Management Incentive Plan, the Company
awarded 228,876 nonqualified options to employee and non-employee Trust
Managers, executives and employees in the year ended December 31, 1996.
Additionally, 260,000 common shares were reserved for issuance pursuant to
performance based share performance awards to certain executive officers and
11,124 common shares were awarded as share bonuses as described in Note 8.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method of that statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model and the following assumptions: a dividend yield of 7.826%
and a volatility factor of 0.165 based on the average monthly closing price of
the Company's common shares since inception (December 29, 1993), risk free
interest rates ranging from 5.80% to 6.89% corresponding to the expected lives
of the grants, and expected lives generally corresponding to the terms of the
grants (weighted average of approximately nine years).
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of the pro forma disclosures required by SFAS 123, the estimated
fair value of options granted after December 31, 1994, is amortized to expense
over the options' vesting periods. SFAS 123 does not require pro forma
presentation for the year ended December 31, 1994, or earlier. The Company's pro
forma information follows (in thousands except for share and per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
--------------------------
<S> <C> <C>
Pro forma net income $ 11,162 $ 10,369
Pro forma earnings per share $ 0.91 $ 0.90
Pro forma fully diluted weighted
average number of common
shares outstanding 12,221,123 11,557,721
</TABLE>
F-16
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. SHARE OPTION PLANS (CONTINUED)
SUMMARY OF SHARE OPTION ACTIVITY
<TABLE>
<CAPTION>
Number of Options, Number of Options, Number of Total
Share Option Plan Incentive Plans Options, Other Options
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1993 860,000 (a) - 340,000 (b) 1,200,000
Options granted 50,000 (c) - - 50,000
Options exercised - - - -
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1994 910,000 - 340,000 1,250,000
Options granted 335,000 - - 335,000 (d)
Options exercised - - - -
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1995 1,245,000 - 340,000 1,585,000 (e)
Options granted 155,000 228,876 - 383,876 (f)
Options exercised (15,000) - - (15,000) (g)
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1996 1,385,000 228,876 340,000 1,953,876 (h)
======================================================================================
</TABLE>
_________________________
(a) Option prices range from $17.25 to $17.375 per share.
(b) Granted to affiliates and non-affiliates in connection with development site
acquisitions. Option price of $19.8375 per share.
(c) Option prices range from $17.25 to $18.375 per share.
(d) Weighted average option price of $18.60 per share. Weighted average fair
value according to the Black Scholes option valuation model of $1.15 per
share.
(e) Weighted average option price of $18.11 per share.
(f) Weighted average option price of $20.39 per share. Weighted average fair
value according to the Black Scholes option valuation model of $1.20 per
share.
(g) Weighted average option price of $17.63 per share.
(h) Weighted average option price and contractual life of $18.56 per share and
93.8 months, respectively. Option prices range from $17.25 to $20.875 per
share.
The number of common share options exercisable as of December 31, 1996, 1995,
and 1994 were 1,670,137; 1,363,781; and 965,442, respectively. The weighted
average option price of options exercisable at December 31, 1996, is $18.31.
8. SHARE BONUS AND INCENTIVE PLANS
The Company has established certain bonus and incentive plans for the purpose of
advancing the long term interests of the Company and its shareholders by
increasing the grantees' ownership in the Company, and providing additional
incentive to promote its success and growth.
F-17
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
8. SHARE BONUS AND INCENTIVE PLANS (CONTINUED)
During the year ended December 31, 1994, the Company issued all of the 13,200
common shares authorized for issuance under the Columbus Realty Trust 1993 Share
Bonus Plan to certain nonexecutive employees and other key personnel for a
purchase price equal to par value ($.01 per share). The difference between the
fair market value for the shares on the date issued and the purchase price was
$245,000 and was recognized as compensation expense in the Company's
consolidated financial statements for the year ended December 31, 1994.
During the years ended December 31, 1996, and 1995, pursuant to the Share Bonus
Plan and the Management Incentive Plan, the Company granted 34,085 and 17,649
restricted common shares, respectively, to certain executive officers at their
election in lieu of payment of annual base salary, such shares having fair
market values on the dates of grant of $652,000 and $333,000, respectively,
equal to 150% of the annual base salary otherwise payable. The determination to
grant common shares having a fair market value of 150% over the base salary
otherwise payable was based upon the risks of forfeiture of the shares awarded
and the other restrictions on transfer of the shares described below. In
addition, the Company granted 33,749 and 25,641 restricted common shares in the
years ended December 31, 1996 and 1995, (having fair market values on the dates
of grant of $646,000 and $474,000, respectively) to certain executive officers
and other employees as bonuses. The restricted common shares are generally
subject to forfeiture in the event of termination of the recipient's employment
with the Company within the three year period following the dates of grant, and
may not be transferred until the end of the three-year restricted periods.
Each of the restricted common shares was granted for a purchase price of $0.01
per share. The difference between the purchase prices of the common shares and
the aggregate fair market values of the common shares on the dates of grant
(approximately $1.3 million in 1996 and $807,000 in 1995) will, to the extent
such amounts are allocable to operations, be amortized as compensation expense
ratably over the three-year periods commencing on the dates of grant.
Accordingly, during the years ended December 31, 1996, and 1995, the Company did
not recognize the compensation expense which would have been recognized if such
annual base salaries and bonuses had been paid. However, for the years ended
December 31, 1996, and 1995, the Company recognized $107,000 and $45,000,
respectively, as amortization of deferred compensation expense, and $126,000 and
$89,000, respectively, as bonus expense, based upon the portion of the
amortization of the fair market values of restricted common shares granted in
1996 and 1995 allocable to operations.
In November 1996 the Company entered into performance based stock and dividend
equivalent award agreements with its Chairman of the Board, Chief Executive
Officer, and Chief Operating Officer. Under terms of the agreements, an
aggregate of 260,000 common shares could be issued to the three executive
officers in 2000 or 2002 if certain company performance criteria is met.
Additionally, such executive officers could receive dividend equivalent
payments, plus interest and reinvestment earnings, on the 260,000 common shares
annually for the period beginning in January 1997. The performance based stock
will be issued and the dividend equivalent payments will be made if the increase
in the total return on the Company's common shares for the applicable period
exceeds (by a specified amount) the weighted average total return per common
share of all publicly traded equity residential apartment REITs, as determined
by NAREIT indices.
F-18
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
On July 23, 1995, the Company established the Columbus Realty Trust Employee
Stock Purchase Plan whereby employees of the Company are eligible to purchase
common shares directly from the Company for a purchase price equal to 85% of the
current market price on the date of purchase. Employees are limited to purchases
aggregating a market value of no more than $25,000 per plan year based on the
market price on the first day of the plan year. Under the Employee Stock
Purchase Plan, the Company issued 7,423 common shares for net proceeds of
$121,000 in the year ended December 31, 1996, and 5,275 common shares for net
proceeds of $51,000 in the year ended December 31, 1995.
401(K) SAVINGS PLAN
Pursuant to Columbus Realty Trust 401(k) Savings Plan (the 401(k) Plan),
eligible employees (as defined in the 401(k) Plan) may join the 401(k) Plan on
semi-annual enrollment dates. Participants may elect to defer up to 15% of their
annual compensation to a maximum of $9,500 as pre-tax contributions to the plan
(subject to certain limitations for highly-compensated employees). The Company
has the option, but is not required, to make contributions to the 401(k) Plan.
In January 1997 the Company contributed $27,000 to the 401(k) Plan for the
benefit of participants contributing the 401(k) Plan during the six month period
ended December 31, 1996.
10. TRANSACTIONS WITH AFFILIATES
<TABLE>
<CAPTION>
Receivables from affiliates include the
following (in thousands): December 31,
--------------
1996 1995
--------------
<S> <C> <C>
Amounts advanced to condominium
homeowners' associations $ 54 $ 47
Amounts advanced to non-management
employees 34 12
Receivable from Employee Stock
Purchase Plan 3 1
Amounts advanced to affiliates in
ordinary course of business for third
party property management 6 353
Amounts receivable from owners of
predecessors in connection with the
acquisition of their interests 55 5
-------------
$152 $418
=============
</TABLE>
The Company provides property management services in connection with the
management of certain properties owned by affiliates. Property management fee
income relating to these contracts during the years ended December 31, 1996,
1995 and 1994, was approximately $238,000, $331,000, and $379,000, respectively.
Included in management fee income from affiliates in the year ended December 31,
1996, is $197,000 attributable to the Madison Office Building (The Madison),
which the affiliates sold in January 1996. The Company received a marketing fee
of $50,000 pursuant to the sale.
F-19
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
10. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Company paid approximately $160,000 and $106,000 in rent for office space at
The Madison in the years ended December 31, 1995 and 1994, respectively. The
Company continues to occupy the office space at The Madison pursuant to its
lease obligation more fully described in Note 11.
In January 1996 the Company paid $150,000 to Wolverine Asset Management, Inc.,
an affiliate of a Trust Manager, for real estate advisory services in connection
with the joint development agreement with Gaylord Properties, Inc. more fully
described in Note 14.
The Company entered into certain note purchase agreements pursuant to borrowing
arrangements between a bank and two of the Company's executive officers in the
year ended December 31, 1996, as more fully described in Note 14.
11. OPERATING LEASES
The Company receives rental income from the properties under operating leases
with terms ranging from less than one year to twenty years for the industrial
and retail properties, and less than one year for most of the residential
properties.
The minimum future rentals under operating leases for the industrial and retail
properties as of December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1997 $ 5,424
1998 5,052
1999 4,067
2000 1,594
2001 1,229
Thereafter 3,295
-------
$20,661
=======
</TABLE>
Included in the rentals under operating leases is one multifamily residential
property that is subject to a master lease expiring in October 1999 with
Electronic Data Systems (EDS). EDS has an option to purchase the property at the
end of each lease year with the purchase price compounding 5% each year the
option is not exercised.
The original term of Company's lease for its corporate offices at The Madison
expired December 31, 1996, subject to three one-month renewal options. The
Company expects to exercise all three renewal options for monthly base rent
payments of approximately $15,000.
F-20
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash equivalents, accounts receivable, accounts payable and accrued expenses and
other liabilities are carried at amounts that reasonably approximate their fair
values. Notes payable result from (a) draws made on the Company's Credit
Facility and the Wells Fargo loan during the years ended December 31, 1996, and
1995, which accrue interest at floating interest rates based on market rates and
(b) two first mortgage loans that accrue interest at 7.0% and 7.45%. The
carrying values of the notes payable at December 31, 1996, and 1995 reasonably
approximate their fair values.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited results of operations for 1996,
1995, and 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
-------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
- ------------------------------
Total revenues $10,934 $11,762 $12,554 $13,280
Net income 2,696 2,809 2,848 3,105
Per common share:
Net income $ 0.23 $ 0.24 $ 0.24 $ 0.24
Year ended December 31, 1995
- ------------------------------
Total revenues $ 9,414 $10,271 $10,668 $10,898
Net income 2,546 2,491 2,650 2,741
Per common share:
Net income $ 0.22 $ 0.22 $ 0.23 $ 0.24
Year ended December 31, 1994
- ------------------------------
Total revenues $ 6,237 $ 7,385 $ 8,379 $ 8,880
Net income 1,829 1,979 2,458 2,495
Per common share:
Net income $ 0.21 $ 0.23 $ 0.23 $ 0.22
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
GENERAL
The Company is subject to 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.
F-21
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
JOINT DEVELOPMENT AGREEMENT
The Company has entered into a joint development agreement with Gaylord
Properties, Inc., to develop between 2,500 and 3,500 multifamily residential
units in Addison, Texas. The first development under the agreement, Addison
Circle One, is described in Note 3. The Company has the option, but is not
obligated, to pursue additional development activities under the joint
development agreement, subject to the agreement of Gaylord.
NOTE PURCHASE AGREEMENTS
In June 1996 the Company entered into Note Purchase Agreements (Purchase
Agreements) pursuant to loans made between Bank One, Texas, N.A. (Bank One), and
two of the Company's executive officers. The loans, in the form of credit
facilities which may be drawn upon at the discretion of the borrowers up to
maximum principal amounts of $350,000 and $300,000, are secured by pledges of
36,532 and 32,066 of the Company's common shares, respectively, owned by such
executive officers. Should an event of default occur, Bank One may require the
Company to purchase the notes for a purchase price equal to the balance then
outstanding under the terms of the note agreements. If the Company is required
to purchase the notes, the Company will obtain all rights of Bank One, as a
secured party, with respect to the common shares securing the loans. Based on
the closing market price for the Company's common shares on December 31, 1996,
of $22.75, the market value of the pledged shares was approximately $831,000,
and $730,000, respectively.
Such loans require quarterly interest-only payments beginning August 1, 1996,
and mature on June 12, 1999. Interest accrues at floating rates determined by
Bank One. The applicable interest rate in effect as of December 31, 1996, was
8.25% on principal balances outstanding under the credit facilities of $150,000
and $100,000. The borrowers were current on all obligations under the loans as
of December 31, 1996.
LETTER OF CREDIT
Addison Circle One Ltd. obtained an irrevocable standby letter of credit of
approximately $3.4 million in the year ended December 31, 1996. The letter of
credit was obtained for the benefit of the Town of Addison, Texas, as a guaranty
for payment of certain public infrastructure costs required in the construction
of the Addison Circle One multifamily residential project. As of December 31,
1996, no amounts had been drawn on the letter, which expires on June 30, 1997.
15. SUBSEQUENT EVENTS
REAL ESTATE TRANSACTIONS
On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado. The Company expects to
complete a purchase of the site when demolition of existing buildings,
remediation of the properties, and certain other conditions are met.
F-22
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
15. SUBSEQUENT EVENTS (CONTINUED)
REAL ESTATE TRANSACTIONS (CONTINUED)
On February 24, 1997, the Company purchased a 158-unit multifamily residential
property known as The Commons at Turtle Creek, located in Dallas, Texas, for a
purchase price of approximately $6.9 million. The purchase was funded from the
Company's Credit Facility.
On February 27, 1997, the Company executed a forty-year land lease agreement for
a redevelopment project, The Rice Hotel, located in Houston, Texas. The Rice
Hotel is an 18-story structure originally built in 1913. Under terms of the
agreement, the Company will fund redevelopment of the hotel into a mixed-use
residential and retail facility comprised of 317 loft-style apartments and
21,000 square feet of retail space. The Company, in partnership with a Houston-
based development company, will manage all aspects of the renovation, currently
budgeted at approximately $33.3 million, and operations of the project upon
completion. The Houston Housing Finance Corporation (HHFC), owner of the land,
will fund approximately $6.6 million of abatement and infrastructure costs, and
the Company will provide the balance of the funding. Concurrently with closing
the lease agreement, the Company guaranteed a $20.0 million construction loan
for the project. The remainder of the Company's renovation costs will be funded
from draws on the Credit Facility or other short term financing.
OTHER
On February 25, 1997 the Company filed a Registration Statement on Form S-8 with
the Securities and Exchange Commission registering 1,000,000 common shares for
issuance pursuant to the Columbus Realty Trust Employee Incentive Plan.
On March 7, 1997, the Company declared a dividend of $0.395 per common share,
payable on March 25, 1997, to shareholders of record on March 21, 1997.
F-23
<PAGE>
COLUMBUS REALTY TRUST
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Costs Costs Real Carried at Close of Period(a)
--------------- Capitalized Estate ------------------------------
Related Bldgs & Subsequent Disposed Bldgs & Construction
Description Encumbrances Land Imprvmnts to Acquisition Of Land Imprvmnts In Progress Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential Properties:
- ---------------------------
High-rise Apartments:
The Residences, Dallas, TX (b) $ 638 $12,421 $ 1,233 $ - $ 638 $ 13,654 $ - $ 14,292
Mid-rise Apartments:
The Abbey, Dallas, TX (b) 385 - 4,364 - 385 4,364 - 4,749
Columbus Square, Dallas, TX (b) 1,960 - 18,122 - 1,960 18,122 - 20,082
Lakeshore, Irving, TX (b) 3,030 25,970 1,688 - 3,030 27,658 - 30,688
The Meridian, Dallas, TX (b) 2,227 - 8,537 - 2,227 8,537 - 10,764
Uptown Village, Dallas, TX (b) 2,083 - 13,244 - 2,083 13,244 - 15,327
The Vineyard, Dallas, TX (b) 864 - 7,418 - 864 7,418 - 8,282
Winsted Village, Dallas, TX (b) 2,642 - 15,881 - 2,642 15,881 - 18,523
The Worthington, Dallas, TX (b) 3,648 - 26,200 - 3,648 26,200 - 29,848
Garden Apartments:
Ascension Point, Arlington, TX (b) 410 2,633 131 - 410 2,764 - 3,174
Ascension Point II, Arlington, TX (b) 470 - 4,681 - 470 4,681 - 5,151
Hackberry Creek, Irving, TX (b) 1,800 10,200 382 - 1,800 10,582 - 12,382
Hackberry Creek II, Irving, TX (b) 1,448 - 9,617 - 1,448 9,617 - 11,065
Lakeside, Dallas, TX (c) 3,066 15,084 731 - 3,066 15,815 - 18,881
The Mark, Jackson, MS (d) 762 10,013 950 - 762 10,963 - 11,725
Parkway Village, Dallas, TX (d) 1,020 5,936 353 - 1,020 6,289 - 7,309
Reflections on McCallum,
Dallas, TX (d) 903 5,231 494 - 903 5,725 - 6,628
The Rock, Dallas, TX (d) 696 3,304 4,909 - 696 8,213 - 8,909
Town Lake/The Parks,
Coppell, TX (d), (h) 3,547 5,124 9,653 - 3,547 14,777 - 18,324
The Trace, Jackson, MS (d), (i) 1,435 - 14,862 - 1,435 14,862 - 16,297
The Vintage, Dallas, TX (b) 1,100 - 6,753 - 1,100 6,753 - 7,853
Windhaven Village, Plano, TX (d) 3,564 - 16,183 - 3,564 16,183 - 19,747
-------------------------------------------------------------------------------------
Total Residential Properties 37,698 95,916 166,386 - 37,698 262,302 - 300,000
</TABLE>
<TABLE>
<CAPTION>
Depre-
ciable
Lives
Accmltd Date of Date in
Deprec Construction Acquired Years
------- ------------ -------- ------
<S> <C> <C> <C> <C>
Residential Properties:
- -----------------------
High-rise Apartments:
The Residences, Dallas, TX $1,662 1987 12/93 5-27
Mid-rise Apartments:
The Abbey, Dallas, TX 119 12/94-4/96 4/94 5-27
Columbus Square, Dallas, TX 323 12/94-9/96 4/94 5-27
Lakeshore, Irving, TX 2,793 1987 4/94 5-27
The Meridian, Dallas, TX 1,841 5/90-6/91 4/90 5-27
Uptown Village, Dallas TX 864 1/94-5/95 1/94 5-27
The Vineyard, Dallas, TX 112 12/94-5/96 4/94 5-27
Winsted Village, Dallas, TX 144 8/94-8/96 8/94 5-27
The Worthington, Dallas, TX 4,214 6/91-2/93 8/90 5-27
Garden Apartments:
Ascension Point, Arlington, TX 766 1985 6/88 5-27
Ascension Point II, Arlington, TX 246 8/94-9/95 8/94 5-27
Hackberry Creek, Irving, TX 967 1987 8/94 5-27
Hackberry Creek II, Irving, TX 262 2/95-8/96 8/94 5-27
Lakeside, Dallas, TX 1,622 1986 5/94 5-27
The Mark, Jackson, MS 963 1984 10/94 5-27
Parkway Village, Dallas, TX 2,108 1986 6/88 5-27
Reflections on McCallum,
Dallas, TX 1,878 1986 6/88 5-27
The Rock, Dallas, TX 2,637 2/88-12/88 2/88 5-27
Town Lake/The Parks,
Coppell, TX 3,530 1/86-4/87 1/86 5-27
The Trace, Jackson, MS 2,775 5/88-7/89 4/88 5-27
The Vintage, Dallas, TX 875 1/93-10/93 1/93 5-27
Windhaven Village, Plano, 3,782 3/90-3/91 3/90 5-27
--------
Total Residential
Properties 34,483
</TABLE>
F-24
<PAGE>
COLUMBUS REALTY TRUST
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Costs Costs Real Carried at Close of Period(a)
--------------- Capitalized Estate ------------------------------
Related Bldgs & Subsequent Disposed Bldgs & Construction
Description Encumbrances Land Imprvmnts to Acquisition Of Land Imprvmnts In Progress Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial Properties:
- ----------------------
Industrial:
Post and Paddock, Grand
Prairie, TX (b) 859 5,021 2,418 - 859 7,439 - 8,298
Campus Circle, Irving, TX (b) 417 2,861 1,231 - 417 4,092 - 4,509
Shopping Centers:
Towne Crossing,
Mesquite, TX (b) 2,341 13,727 1,300 - 2,341 15,027 - 17,368
----------------------------------------------------------------------------------------
Total Commercial Properties 3,617 21,609 4,949 - 3,617 26,558 - 30,175
Construction-in-progress
- ------------------------
Addison Circle One,
Addison, TX (b),(f) 2,063 - 12,863 - 2,063 - 12,863 14,926
Coles Corner, Dallas, TX (b) 1,290 - 3,043 - 1,290 - 3,043 4,333
Columbus Shore, Irving, TX (b) 3,926 - 32,883 - 3,926 - 32,883 36,809
Columbus Pointe, Jackson, MS (b) 620 - 4,873 - 620 - 4,873 5,493
The Heights of St. Thomas,
Dallas, TX (b) 2,293 - 1,460 - 2,293 - 1,460 3,753
Uptown Block 580, Dallas, TX (b) 2,892 - 492 - 2,892 - 492 3,384
----------------------------------------------------------------------------------------
Total Construction-in-progress: 13,084 - 55,614 - 13,084 - 55,614 68,698
----------------------------------------------------------------------------------------
Total Real Estate held
for Investment 54,399 117,525 226,949 - 54,399 288,860 55,614 398,873
- ----------------------
Real Estate held for Sale: (g)
- --------------------------
Springstead Condominiums,
Dallas, TX (b) 426 2,466 114 - 426 2,580 - 3,006
Villas at Valley Ranch
Condominiums, Irving, TX (b), (g) 374 2,172 148 (260) 338 2,096 - 2,434
Total Real Estate held for
Sale 800 4,638 262 (260) 764 4,676 - 5,440
- -------------------------- ----------------------------------------------------------------------------------------
Total Real Estate
Investments $55,199 $122,163 $227,110 (260) $55,163 $293,536 55,614 404,313
- ---------------------------- ========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Depre-
ciable
Lives
Accmltd Date of in
Description Total Deprec Construction Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Properties:
- ----------------------
Industrial:
Post and Paddock, Grand
Prairie, TX 1,481 1986 6/88 5-40
Campus Circle, Irving, TX 875 1986 6/88 5-40
Shopping Centers:
Towne Crossing,
Mesquite, TX 3,272 1985 6/88 5-40
-------
Total Commercial Properties 5,628
Construction-in-progress
- ----------------------------
Addison Circle One,
Addison, TX - (f) 9/95 N/A
Coles Corner, Dallas, TX - (f) 7/96 N/A
Columbus Shore, Irving, TX - (f) 11/94 N/A
Columbus Pointe, Jackson, MS - (f) 2/96 N/A
The Heights of St. Thomas,
Dallas, TX - (f) 1/96 N/A
Uptown Block 580, Dallas, TX - (f) 1/96 N/A
-------
Total Construction-in-progress -
-------
Total Real Estate held 40,111
for Investment
- ----------------------
Real Estate held for Sale:
- --------------------------
Springstead Condominiums, 789 1983 6/88 N/A
Dallas, TX
Villas at Valley Ranch
Condominiums, Irving, TX 671 1985 6/88 N/A
-------
Total Real Estate held for
Sale 1,460
- -------------------------- -------
Total Real Estate
Investments $41,571
- ------------ =======
</TABLE>
F-25
<PAGE>
____________________________
(a) The aggregate cost of real estate investments for federal income tax
purposes is approximately $399.3 million at December 31, 1996.
(b) Denotes an operating property or property under construction which
collateralizes the Company's borrowings under its Credit Facility.
Such borrowings totaled approximately $118.0 million at December 31, 1996.
(c) Denotes a property encumbered by a first mortgage loan of approximately
$10.7 million at December 31, 1996.
(d) Denotes a property encumbered by a first mortgage loan of approximately
$49.2 million at December 31, 1996.
(e) Denotes a multifamily residential property under construction as of
December 31, 1996.
(f) In addition to the Company's borrowings under its Credit Facility, the
property is encumbered by a construction loan upon which approximately
$1.9 million had been drawn at December 31, 1996.
(g) The Company's real estate investment in two condominium communities (130
units in aggregate) were marketed for sale beginning in June 1996.
The Company sold six of the units in the year ended December 31, 1996.
Cost net of accumulated depreciation is presented as real estate held
for sale in the Company's financial statements.
(h) Management and operations of Towne Lake Apartments and The Parks
Apartments were combined for financial reporting purposes as of January 1,
1996.
(i) Management and operations of Phases I and II of the Trace Apartments
were combined for financial reporting purposes as of January 1, 1996.
F-26
<PAGE>
COLUMBUS REALTY TRUST
NOTES TO SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
Changes in real estate and accumulated depreciation for the years ended December
31, 1996, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of period $334,192 $267,061 $158,776
Real estate acquisitions (a) 7,095 8,711 84,862
Construction-in-progress 60,991 54,644 20,465
Reclassification to real estate held
for sale (5,699) - -
Additions and improvements 2,294 3,776 2,958
-----------------------------
Real estate held for investment 398,873 334,192 267,061
Reclassification to real estate held
for sale 5,699 - -
Accumulated depreciation of real
estate held for sale (1,532) - -
Net book value of real estate sold (187) - -
-----------------------------
Real estate held for sale 3,980 - -
-----------------------------
Total real estate investments $402,853 $334,192 $267,061
=============================
Accumulated depreciation:
Balance at beginning of period $ 31,411 $ 22,600 $ 16,166
Depreciation 10,232 8,811 6,434
Reclassification to real estate held (1,532) - -
for sale
-----------------------------
Balance at end of period $ 40,111 $ 31,411 $ 22,600
=============================
</TABLE>
(a) Includes the contribution of land by a limited partner pursuant to formation
of a real estate joint venture in the year ended December 31, 1995.
F-27
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
pertaining to (i) the Columbus Realty Trust 1993 Share Bonus Plan (Form S-8 No.
33-76774), (ii) the Columbus Realty Trust Bonus Plan (No. 2) (Form S-8 33-
90492), (iii) the Columbus Realty Trust 1993 Share Option Plan (Form S-8 No. 33-
95918), (iv) the Columbus Realty Trust Employee Stock Purchase Plan (Form S-8
No. 33-94798), (v) the Columbus Realty Trust Long Term Management Incentive Plan
(Form S-8 No. 333-02276), (vi) the Columbus Realty Trust Employee Incentive Plan
(Form S-8 No. 333-22307), (vii) the registration statement on Form S-3 No. 33-
88672 of Columbus Realty Trust and in the related Prospectus, (viii) the
registration statement on Form S-3 No. 33-90146 of Columbus Realty Trust and in
the related Prospectus, and (ix) the registration statement on Form S-3 No. 333-
09775 of Columbus Realty Trust and in the related Prospectus our report dated
January 28, 1997 (expect for Note 15, as to which the date is March 7, 1997)
with respect to the consolidated financial statements and schedule of Columbus
Realty Trust included in its Annual Report on Form 10-K/A for the year ended
December 31, 1996.
ERNST & YOUNG LLP
Dallas, Texas
May 21, 1997
<PAGE>
COLUMBUS REALTY TRUST
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 1997
-------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Columbus Realty Trust (the "Company") will be held at 9:00 a.m.,
local time, on Friday, May 23, 1997, at Omni Mandalay Hotel at Las Colinas, 221
E. Las Colinas Blvd., Irving, Texas 75039, for the following purposes:
1. To elect three members of the Company's Board of Trust Managers in
Class III, to serve for three-year terms expiring in 2000, and
until their successors are elected and qualified.
2. To approve the amendment of the Company's Declaration of Trust to
reflect an amendment requested by the New York Stock Exchange.
3. To ratify the appointment of Ernst & Young LLP as independent
public accountants of the Company for the year ending December 31,
1997.
4. To consider and transact such other business as may properly be
brought before the Meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 24, 1997
will be entitled to vote at the Meeting. The share transfer books will not be
closed.
By Order of the Board of Trust Managers
Richard R. Reupke
Chief Financial Officer
and Secretary
Dallas, Texas
March ___, 1997
YOUR VOTE IS IMPORTANT
To ensure that your interests will be represented at the Meeting,
whether or not you plan to attend the Meeting, please complete, date, sign and
mail the enclosed proxy promptly in the enclosed postage-paid envelope.
Shareholders who attend the Meeting in person may revoke their proxies and vote
in person if they so desire.
<PAGE>
COLUMBUS REALTY TRUST
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 1997
-------------------------------
This Proxy Statement and the enclosed proxy are furnished to shareholders
of Columbus Realty Trust, a Texas real estate investment trust (the "Company"),
in connection with the solicitation of proxies by the Board of Trust Managers of
the Company from holders of outstanding common shares of beneficial interest,
par value $.01 per share (the "Common Shares"), for use at the Annual Meeting of
Shareholders (the "Meeting") to be held at 9:00 a.m., local time, on Friday, May
23, 1997, at Omni Mandalay Hotel at Las Colinas, 221 E. Las Colinas Blvd.,
Irving, Texas 75039, and at any adjournment or postponement thereof. This Proxy
Statement and the related form of proxy are first being sent to shareholders on
or about March ___, 1997.
If the enclosed proxy is properly executed and returned, and if a
shareholder specifies a choice on the proxy, the Common Shares represented by
the proxy will be voted (or withheld from voting) in accordance with such
shareholder's choice. If the proxy is signed and returned but no specification
is made, the proxy will be voted FOR the election of each of the nominees for
Trust Manager listed herein, FOR the proposal to amend the Company's Declaration
of Trust and FOR the proposal to ratify the appointment of the independent
public accountants.
Shareholders voting by proxy with respect to the election of Trust Managers
may vote For all nominees, may Withhold Authority to vote as to all nominees or
Withhold Authority to vote as to specific nominees. With respect to each other
proposal that comes before the shareholders at the Meeting, shareholders may
vote For the proposal, may vote Against the proposal or may Abstain from voting
with respect to the proposal.
Any proxy executed and returned by a shareholder may be revoked by such
shareholder, at any time prior to its being voted, by filing with the Secretary
of the Company at its address set forth above a written notice of revocation or
a duly executed proxy bearing a later date. Any proxy also may be revoked by
the shareholder's attendance at the Meeting and voting in person. A notice of
revocation need not be on any specific form.
<PAGE>
As of the date of this Proxy Statement, the Board of Trust Managers of the
Company knows of no business that will be presented for consideration at the
Meeting other than the matters described in this Proxy Statement. If any other
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote the proxies in accordance with their
judgment.
RECORD DATE AND VOTING AT THE MEETING
The Board of Trust Managers has fixed the close of business on March 24,
1997 as the record date for the determination of the shareholders of the Company
entitled to notice of, and to vote at, the Meeting. At that date, there were
outstanding __________ Common Shares, the holders of which will be entitled to
one vote per Common Share on each matter submitted to the Meeting. No other
voting securities of the Company were outstanding on March 24, 1997.
Shareholders are not entitled to cumulate their votes.
The holders of a majority of the Common Shares entitled to vote, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at the Meeting. If such quorum shall not be present or represented at
the Meeting, the shareholders present or represented at the Meeting may adjourn
the Meeting from time to time without notice other than announcement at the
Meeting until a quorum shall be present or represented. If a quorum is present
or represented at the Meeting, the shareholders present or represented at the
Meeting may continue to transact business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum present, provided
that there remain at the Meeting, present or represented by proxy, the holders
of at least one-third of the Common Shares entitled to vote.
Pursuant to the Company's Bylaws, abstentions and broker non-votes (where a
nominee holding shares for a beneficial owner has not received voting
instructions from the beneficial owner with respect to a particular matter and
such nominee does not possess or chooses not to exercise discretionary authority
with respect thereto) will be included in the determination of the number of
Common Shares present at the Meeting for quorum purposes. Also pursuant to the
Company's Bylaws, abstentions and broker non-votes will not be deemed to be
outstanding and therefore will not be counted in the tabulations of votes cast
on proposals presented to shareholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Shares by (i) each Trust Manager, (ii) the Company's Chief
Executive Officer and the four other most highly paid executive officers of the
Company, named in the Summary Compensation Table included elsewhere herein
(collectively, the "Named Executive Officers"), (iii) all Trust Managers and
executive officers of the Company as a group, and (iv) each person who is a
shareholder of the Company owning more than a 5% interest in the Company, in
each case at March 1, 1997. Each person named in the table has sole voting and
investment power with respect to all Common Shares shown as beneficially owned
by such person, except as otherwise set forth in the notes to the table. In
each case, the number of shares includes the beneficial ownership of Common
Shares issuable upon exercise of options that are exercisable within 60 days.
-2-
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Name and Address Common Shares Outstanding
of Beneficial Owners Beneficially Owned/(1)/ Common Shares/(2)/
-------------------- ----------------------- -------------------
<S> <C> <C>
Cohen & Steers Capital Management, Inc................ 1,924,400 13.5%
757 Third Avenue
New York, New York 10017
Richard L. Bloch...................................... 577,185/(3)/ 4.0%
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
Robert L. Shaw........................................ 487,650/(4)/ 3.4%
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
Will Cureton.......................................... 386,782/(5)/ 2.7%
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
Roger T. Staubach..................................... 203,000/(6)/ 1.4%
6750 LBJ Freeway, Suite 1100
Dallas, Texas 75240
James C. Leslie....................................... 69,019/(7)/ 0.5%
6750 LBJ Freeway, Suite 1100
Dallas, Texas 75240
Amy DiGeso............................................ -- --
16251 Dallas Parkway
Dallas, Texas 75248
Hugh G. Robinson...................................... 25,000/(7)/ 0.2%
8150 North Central Expressway, Suite 550
Dallas, Texas 75204
Gregg L. Engles....................................... 28,000/(7)/ 0.2%
3811 Turtle Creek Boulevard, Suite 1950
Dallas, Texas 75219
Richard R. Reupke..................................... 84,524/(8)/ 0.6%
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
Thomas L. Wilkes...................................... 88,650/(8)/ 0.6%
15851 Dallas Parkway, Suite 855
Dallas, Texas 75248
All Trust Managers and executive officers as a group 2,039,178/(9)/ 14.3%
(12 persons).....................................
</TABLE>
_______________________
(1) Shares are deemed to be "beneficially owned" by a person if such person,
directly or indirectly, has or shares (i) voting power with respect
thereto, including the power to vote or to direct the voting of such
shares, or (ii) investment power with respect thereto, including the power
to dispose or to direct the disposition of such shares. In addition, a
person is deemed to be the beneficial owner of shares if such person has
the right to acquire beneficial ownership of such shares within 60 days.
Persons named in this
-3-
<PAGE>
table have sole voting and investment power with respect to the shares
shown unless otherwise indicated below.
(2) Calculated using a denominator of 14,294,859, based on the total number of
Common Shares outstanding plus Common Shares deemed to be outstanding upon
exercise of options exercisable within 60 days and deemed to be
beneficially owned by those named in the table.
(3) Includes 19,572 Common Shares held of record by Mr. Bloch, 251,666 Common
Shares issuable upon exercise of options held by Mr. Bloch and exercisable
within 60 days, and 305,947 Common Shares held by The Richard L. and Nancy
Bloch Family Trust. Mr. Bloch shares voting and investment power with
respect to the Common Shares held by the trust.
(4) Includes 159,714 Common Shares held of record by Mr. Shaw, 259,097 Common
Shares issuable upon exercise of options held by Mr. Shaw and exercisable
within 60 days, 8,839 Common Shares held by trusts established for the
children of Mr. Shaw, and 60,000 Common Shares issuable upon exercise of
options held by such trusts and exercisable within 60 days.
(5) Includes 66,894 Common Shares and 319,888 Common Shares issuable upon
exercise of options exercisable within 60 days.
(6) Includes 53,000 Common Shares issuable upon exercise of options exercisable
within 60 days.
(7) Includes 25,000 Common Shares issuable upon exercise of options exercisable
within 60 days.
(8) Includes 70,000 Common Shares issuable upon exercise of options exercisable
within 60 days.
(9) Includes 1,234,977 Common Shares issuable upon exercise of options
exercisable within 60 days.
-4-
<PAGE>
PROPOSAL ONE:
ELECTION OF TRUST MANAGERS
Pursuant to the Company's Amended and Restated Declaration of Trust, the
Board of Trust Managers is divided into three classes, with each class serving a
three-year term and one class being elected at each annual meeting of
shareholders. The terms of three of the present Trust Managers expire at the
Meeting, and such Trust Managers are being nominated for reelection to the Board
to serve until the 2000 Annual Meeting of Shareholders or until their successors
are elected and qualified. The remaining five Trust Managers will continue to
serve on the Board until their respective terms expire as indicated below under
the caption "Trust Managers Whose Terms Will Continue After the Meeting," and
until their successors are elected and qualified. The Bylaws of the Company
require the affirmative vote of two-thirds of the outstanding Common Shares to
elect each Trust Manager nominee. If the requisite vote is not obtained with
respect to the election of Trust Managers, then the existing Trust Managers will
continue in their capacities as such.
Messrs. Robert L. Shaw, Roger T. Staubach and Hugh G. Robinson are the
three Trust Managers whose terms are expiring and who have been nominated by the
Board for re-election to the Board of Trust Managers of the Company to serve
three-year terms expiring at the 2000 Annual Meeting of Shareholders. Unless
such authority is withheld, it is the intention of the persons named in the
enclosed proxy to vote such proxy for the election of the three nominees. If a
shareholder who executes and returns a proxy fails to designate a vote for
either of the three nominees, the person acting under the proxy will vote such
shareholder's votes for the election of the three nominees.
If for any reason any nominee for Trust Manager should become unavailable
for election, the proxies may be voted for the election of a substitute
designated by the Board of Trust Managers, unless a contrary instruction is
given on the proxy. The Board of Trust Managers has no reason to believe that
any of the nominees will be unavailable or unwilling to serve if elected, and
all nominees have expressed an intention to serve the entire term for which
election is sought.
NOMINEES FOR ELECTION TO THE BOARD
Robert L. Shaw, age 40, has been Chief Executive Officer of the Company
and a Trust Manager since its inception, and is a member of the Executive
Committee. Mr. Shaw was a co-founder of Columbus Realty Holdings, Inc. ("CRH"),
a predecessor of the Company, and of its affiliate, Memphis Real Estate, Inc.
("Memphis Real Estate"), and served as President of CRH and Memphis Real Estate
from August 1989 to December 1993. Mr. Shaw was Executive Vice President of SBC
Development Company from September 1987 to March 1990, and Vice President from
July 1987 to September 1987. Mr. Shaw has been involved in the construction and
development of multifamily residential properties since 1981. He serves on the
Board of Directors of the Greater Dallas Chamber of Commerce and the National
Association of Real Estate Investment Trusts. He is also a member of the Young
Presidents Organization ("YPO"), the Urban Land Institute, and the National
Multifamily Housing Council. In addition, he serves on the University of Texas
at Dallas Advisory Board.
Roger T. Staubach, age 55, has been a Trust Manager of the Company since
December 1993 and is a member of the Audit Committee. Mr. Staubach is Chairman
and Chief Executive Officer of The Staubach Company, an integrated real estate
company providing services related to office, industrial and retail real estate
with a commitment to represent only the real estate user, which he formed in
1977. He is also a director of a number of affiliates and subsidiaries of The
Staubach Company, and serves as
-5-
<PAGE>
president of several of these entities. Mr. Staubach is a director of
Halliburton Company, Brinker International and First USA, Inc. and a trustee of
American AAdvantage Funds. Mr. Staubach was quarterback for the Dallas Cowboys
professional football team from 1969 through 1979.
Hugh G. Robinson, age 64, has been a Trust Manager of the Company since
December 1993 and is a member of the Executive Compensation Committee. General
Robinson, who retired from the U.S. Army Corps of Engineers as a Major General
in 1983, has served since 1989 as Chairman of the Board and Chief Executive
Officer of The Tetra Group, Inc., which provides construction management and
business development services. From 1988 to 1995, he was Senior Vice President
and managed the Southwest office of Grigsby Brandford & Co., Inc., a minority-
owned investment banking firm specializing in municipal securities. He was a
member of the board of directors of the Federal Reserve Bank of Dallas from 1985
through 1991, serving as chairman of the board in 1991. Prior to joining The
Tetra Group, General Robinson held the position of President of Cityplace
Development Corporation, a real estate development company, since its formation
in 1984. General Robinson is also a member of the boards of directors of A.H.
Belo Corporation (the owner of The Dallas Morning News), TUElectric, Smith
Environmental Technologies, Guaranty Federal Savings Bank and Circuit City
Stores, Inc.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF TRUST MANAGERS
To be elected a Trust Manager, each nominee must receive the affirmative
vote of the holders of two-thirds of the outstanding shares of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH
OF THE NOMINEES.
TRUST MANAGERS WHOSE TERMS WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
Trust Manager Term to
Name Age Positions Held Since Expire
---- --- -------------- -------------- -------
<S> <C> <C> <C> <C>
Richard L. Bloch 67 Chairman of the Board, October 1993 1999
Trust Manager
Will Cureton 46 Trust Manager, October 1993 1998
Chief Operating Officer
Amy DiGeso 44 Trust Manager September 1996 1999
Gregg L. Engles 39 Trust Manager December 1993 1998
James C. Leslie 41 Trust Manager December 1993 1999
</TABLE>
Richard L. Bloch has been Chairman of the Board of Trust Managers and a
Trust Manager since October 1993 and is a member of the Executive Committee.
Mr. Bloch has served as a Director of City National Bank of Beverly Hills and
its holding company, City National Bank Corporation, since 1976 and of Cantel
Corporation since 1988. Mr. Bloch served as a Director of Data Broadcasting
Corporation from 1993 through 1995. He served as Chairman of the Board and
Chief Executive Officer of Filmways, Inc., and Chairman of the Board of two of
its principal subsidiaries, Union Fidelity Insurance and Grossett & Dunlap,
Inc., from 1976 through 1982, and as a member of the board of directors of
Glenayre Technology (formerly known as NuWest Corporation) from 1987 through
1992. He is a co-founder and former
-6-
<PAGE>
principal owner of the Phoenix Suns NBA basketball team and one of the former
owners of the NBC-affiliated KVOA television station in Tucson, Arizona. Mr.
Bloch's real estate experience includes co-developing and/or owning the Gulf &
Western Building in New York City, a Hyatt Hotel in Los Angeles, the
Transamerica Building in Tucson and several IBM and Allstate Insurance
facilities.
Will Cureton has been Chief Operating Officer and a Trust Manager of the
Company since its inception and is a member of the Executive Committee. Prior
to the formation of the Company, from 1987 until December 1993, Mr. Cureton
served as President and Chief Executive Officer of Texana-RAT II, Ltd. and
certain of its affiliates (the "Texana Group"), which were merged into the
Company pursuant to the transactions involved in the formation of the Company
(the "Formation Transactions"). Prior to his affiliation with the Texana Group,
Mr. Cureton was Vice President and Chief Operating Officer of The DicoGroup,
Inc., a Dallas-based oil and gas and real estate company, from 1981 through
1988. Prior to his association with The DicoGroup, Mr. Cureton joined Coopers &
Lybrand in 1974 as a Certified Public Accountant where he served as real estate
coordinator and audit manager for the Dallas office until 1981. He is a member
of the Real Estate Council and the National Association of Real Estate
Investment Trusts. Mr. Cureton has been on the Board of Directors of the East
Texas State University Athletic Association since 1989. He also serves on the
ETSU Foundation Board and its Capital Campaign Steering Committee.
Amy DiGeso has been a Trust Manager of the Company since September 1996.
Ms. DiGeso was elected to fill the vacancy created by the resignation of Jack
Kemp. Ms. DiGeso is currently President and Chief Executive Officer of Mary Kay
Inc., directing all operating responsibilities for Mary Kay Inc. global
business. She is also a board member of Mary Kay Inc. and of the Cosmetic,
Toiletry, and Fragrance Association. Prior to her affiliation with Mary Kay,
Ms. DiGeso was with Bankers Trust Company from 1986 to 1992, last holding the
position as Chief of Staff for the Asset and Project Financing Group, Executive
Director of Human Resources of Estee Lauder from 1984 to 1986, and with American
Express Company from 1978 to 1984, holding several positions culminating in the
Chief Administrative Officer role for their direct marketing business. She
holds an MBA in International Management from Fordham University, and a BS in
Behavorial Science from Penn State.
Gregg L. Engles has been a Trust Manager of the Company since December 1993
and is the Chairman of the Executive Compensation Committee and a member of the
Audit Committee. Mr. Engles is the Chairman and Chief Executive Officer of
Suiza Foods Corporation, a New York Stock Exchange company, which owns and
operates dairy processing operations in Florida, California, Nevada and Puerto
Rico and packaged ice operations throughout the United States. Until December
1993, Mr. Engles was Chairman of the Board of The Milnot Company, a branded and
private label food products company. Mr. Engles is also a co-founder of SFE
Citrus Processors, L.P., which owns a Florida bulk citrus processor.
James C. Leslie has been a Trust Manager of the Company since December
1993, and is Chairman of the Audit Committee and a member of the Executive
Compensation Committee. Mr. Leslie is President, Chief Operating Officer and a
director of The Staubach Company, positions he has held since March 1996 and
October 1988, respectively. Mr. Leslie was Chief Financial Officer of The
Staubach Company from 1982 to January 1992 at which time he became President of
Staubach Financial Services, a position he held until February 1996. Mr. Leslie
is also President and a board member of Wolverine Holding Company, and serves on
the boards of FM Properties, Inc., Forum Retirement Partners, L.P., Wyndham
Hotel Corporation and the North Texas Chapter of the Arthritis Foundation. Mr.
Leslie is a certified public accountant.
No family relationship exists among any of the Trust Managers or executive
officers of the Company. No arrangement or understanding exists between any
Trust Manager or executive officer or
-7-
<PAGE>
any other person pursuant to which any Trust Manager or executive officer was
selected as a Trust Manager or executive officer of the Company. All executive
officers are elected annually by, and serve at the discretion of, the Board of
Trust Managers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4, and amendments thereto, if
any, furnished to the Company with respect to the year ended December 31, 1996
and Forms 5 furnished to the Company for such year, no person failed to disclose
on a timely basis, as disclosed in such forms, reports required by Section 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
COMMITTEES OF THE BOARD OF TRUST MANAGERS
The Board of Trust Managers of the Company has three standing committees:
an Audit Committee, an Executive Committee and an Executive Compensation
Committee. The Audit Committee consists of Messrs. Leslie, Engles and Staubach
and makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls. The Executive
Committee consists of Messrs. Bloch, Shaw and Cureton and has the authority to
generally administer the business of the Company, and generally exercise all
other powers as may be delegated by the Trust Managers, except for those which
require action by the Board of Trust Managers or disinterested Trust Managers
under the Declaration of Trust or Bylaws or under applicable law. Actions
requiring approval of the Board of Trust Managers include: (i) the establishment
of share option plans, profit sharing plans or pension plans; (ii) the issuance
of shares; (iii) approval of a merger; (iv) the sale of substantially all of the
assets of the Company; (v) the election of officers; and (vi) actions outside
the ordinary course of the Company's business. Actions by the Executive
Committee require unanimous approval of the members of the Executive Committee.
The Executive Compensation Committee consists of Messrs. Engles, Robinson and
Leslie and has the authority to determine compensation for the Company's
executive officers and to administer the Company's 1993 Share Option Plan (the
"Share Option Plan"), the Company's Share Bonus Plan (No. 2), the Stock Purchase
Plan, the Management Incentive Plan and the Employee Incentive Plan. The
Company does not have a nominating committee.
COMPENSATION OF TRUST MANAGERS
The Company pays to its Trust Managers who are not employees of the Company
an annual fee of $12,000 plus a fee of $1,000 for attending each meeting (other
than telephonic meetings). An additional $2,000 fee is paid to the Chairman of
each of the Audit Committee and the Executive Compensation Committee. No
compensation is paid for attendance at committee meetings. Trust Managers who
are also officers of the Company do not receive Trust Managers' fees. The
Company may reimburse Trust Managers for expenses incurred in connection with
their activities on behalf of the Company. Each Trust Manager who is not
otherwise an employee of the Company or any of its subsidiaries or affiliates is
also entitled to receive automatically in May of each year, an annual grant of
options to purchase 10,000 Common Shares at an exercise price equal to the
market price of the Common Shares at the date of grant of such option. In
addition, pursuant to the Management Incentive Plan and the Employee Incentive
Plan, the Company may, in lieu of payment of Trust Manager fees, issue
restricted Common Shares having a fair market value equal to 150% of the Trust
Manager fees otherwise payable. Pursuant to the Management Incentive Plan, each
Trust Manager who is not an employee of the Company
-8-
<PAGE>
was awarded the right to elect to purchase, at any time prior to May 30, 1997,
up to 15,384 Common Shares for a purchase price of $19.50 per share (the fair
market value of the stock on the date of the award). Each such Trust Manager is
entitled to obtain a loan from the Company, in a maximum amount of $150,000, the
proceeds of which will be used to pay up to 50% of the purchase price of any of
such Common Shares to be purchased.
MEETINGS OF THE BOARD AND COMMITTEES
During 1996, there were nine meetings of the Board of Trust Managers,
twelve meetings of the Executive Committee, three meetings of the Audit
Committee and two meetings of the Executive Compensation Committee. No
incumbent Trust Manager attended fewer than 75% of all meetings of the Board of
Trust Managers and the committees on which such Trust Manager served during such
period. In addition, the Board of Trust Managers took action on certain
occasions by unanimous written consent.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
The Executive Compensation Committee of the Board of Trust Managers (the
"Compensation Committee"), which is entirely comprised of outside Trust
Managers, is responsible for evaluating and establishing the level of executive
compensation and administering the Company's Share Option Plan, Share Bonus Plan
(No. 2), Stock Purchase Plan, Management Incentive Plan and Employee Incentive
Plan.
OBJECTIVES AND COMPENSATION PHILOSOPHY
The Company's objectives are to enhance its financial performance and
expand its portfolio of properties. In order to meet its objectives, the
Company must attract, reward, motivate and retain key executives who are capable
of achieving the Company's objectives in a competitive industry. The Company's
philosophy is to compensate its executive officers pursuant to an incentive-
based compensation system tied to the Company's financial performance and
portfolio growth in order to best align the objectives of the Company and the
interests of its executives. In accordance with this philosophy, the Company
has adopted a compensation system designed to meet the Company's objectives by
making a significant portion of an executive's compensation dependent on the
Company's and such executive's performance.
The Company's executive compensation system consists of a base salary
(determined by the Compensation Committee based on its assessment of individual
performance, contributions to the Company and peer group comparisons) and an
annual bonus that is directly related to the performance of the executive's
business unit and the Company as a whole. In addition, the Compensation
Committee may grant share options or restricted Common Shares designed to
motivate individuals to enhance the long-term value of the Common Shares and to
more closely align the interests of the executive officers with those of the
shareholders of the Company. The Compensation Committee does not allocate a
fixed percentage of compensation to each of these three elements, nor does the
Compensation Committee use specific qualitative or quantitative measures or
factors in assessing individual performance.
BASE SALARY
During 1996, each of Messrs. Reupke, Wilkes, Hoobler, Duffy, Lomenick and
Lewis received base salaries pursuant to their respective employment agreements
with the Company.
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<PAGE>
Commencing January 1, 1996, the employment agreements of each of Messrs.
Shaw and Cureton were amended to delete the requirement for the payment of base
salary for the period from January 1, 1996 through December 31, 1996 and to
provide that Messrs. Shaw and Cureton each receive, in lieu thereof, 14,060
restricted Common Shares pursuant to the Share Bonus Plan No. 2 having a fair
market value based upon the average closing price of Common Shares on the NYSE
for the 30-day period preceding the date of grant of $272,236 (equal to 150% of
the amount of base salary which would have been payable for calendar year 1996).
Such restricted Common Shares do not vest until the third anniversary of the
date of the grant, provided that if the executive's employment with the Company
is terminated by the Company "without cause," as a result of death or
disability, or in the event the executive terminates his employment with the
Company as a result of a "family medical necessity," as defined in the
executive's award agreement, such Common Shares shall immediately vest. Such
shares may be forfeited if (i) the executive leaves the employment of the
Company prior to the expiration of such three-year term (subject to the
exceptions described above) and (ii) the executive competes with the Company
during such three year period.
Mr. Richard L. Bloch, the Chairman of the Board of Trust Managers of the
Company, waived the receipt of any salary payable to him in such capacity for
the period from January 1, 1996 through December 31, 1996. In consideration of
such waiver, on January 8, 1996, Mr. Bloch received 5,965 restricted Common
Shares having a fair market value (based on the average closing price of the
Common Shares on the NYSE for the 30-day period preceding the date of grant) of
$115,500 (equal to 150% of the amount of base salary which would have been
payable for calendar year 1996). Such restricted Common Shares do not vest
until the third anniversary of the date of grant, provided that if Mr. Bloch's
position as Chairman of the Board of the Company is terminated by the Company
without "cause," as a result of death or disability, or in the event that Mr.
Bloch terminates employment with the Company with "good reason" or as a result
of a "family medical necessity," as defined in Mr. Bloch's award agreement, such
Common Shares shall immediately vest. Such shares may be forfeited in the event
Mr. Bloch voluntarily leaves the employment of the Company (subject to the
exceptions described above) and competes with the Company prior to the
expiration of such three year period.
The annual base salaries of the other executive officers (other than
Messrs. Bloch, Shaw and Cureton) were increased effective January 1, 1996 by
10%, based generally upon such executive's experience level and position with
the Company, the market comparisons of salaries for comparable executives in
other multifamily real estate investment trusts ("REITs") and the executive's
skill and ability to influence the Company's financial performance and growth,
both currently and in the future.
BONUS COMPENSATION
The Company has a discretionary bonus program that allows payment of
bonuses based on each executive officer's performance and the Company's overall
performance. On January 8, 1996, the Compensation Committee awarded restricted
stock bonuses to the Company's Chairman of the Board, Chief Executive Officer
and Chief Operating Officer based upon the Company's overall performance for the
year ended December 31, 1995, including growth in funds from operations and
growth in the Company's portfolio of properties. Such restricted Common Shares
do not vest until the third anniversary of the date of grant, provided that if
the executive's employment with the Company is terminated by the Company
"without cause," as a result of death or disability, or in the event the
executive terminates his employment with the Company as a result of a "family
medical necessity," as defined in the executive's award agreement, such Common
Shares shall immediately vest. Such shares may be forfeited in the event the
executive leaves the employment of the Company prior to the expiration of such
three-year term
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<PAGE>
(subject to the exceptions described above) and the executive competes with the
Company during such three year period.
Similarly, on January 8, 1996, the Compensation Committee awarded
restricted stock bonuses to each of the other executive officers based upon (i)
the Company's overall performance for the year ended December 31, 1995
(including growth in funds from operations and growth in the Company's portfolio
of properties), (ii) the performance of the executive's business unit and (iii)
the individual's overall performance, attitude and self-improvement.
Consideration of these matters is subjective based upon performance, commitment
and contribution, and without the use of predetermined formulaic or weighted
calculations. Such restricted Common Shares are subject to the vesting schedule
described above. Such shares may be forfeited in the event the executive leaves
the employment of the Company prior to the expiration of such three-year term
(subject to the exceptions described above).
PERFORMANCE STOCK ISSUANCES
In order to further align the interests of the senior executive officers
with those of the Company and its shareholders, on November 15, 1996, the
Company granted Messrs. Bloch, Shaw and Cureton the right, pursuant to a Long
Term Management Incentive Plan Performance-Based Stock and Dividend Equivalent
Award Agreement (the "Performance Award Agreement") to receive 60,000, 100,000
and 100,000 Common Shares, respectively, either (i) on January 15, 2000, if,
during the applicable measurement period, the total return on the Company's
Common Shares (the "Company's Total Return") exceeds the weighted average total
return per common share for all publicly-traded equity residential apartment
REITs (the "Industry Total Return") (as determined by the National Association
of Real Estate Investment Trusts ("NAREIT")) by 2% or (ii) on January 15, 2002,
if, during the applicable measurement period the Company's Total Return exceeds
the Industry Total Return. In addition, each such executive is entitled to
receive an amount equal to certain specified percentages of the dividends
payable on an equivalent number of outstanding Common Shares, plus interest and
assumed reinvestment earnings thereon (the "Dividend Equivalents") for each
calendar years 1997 through 2001, if the Company's Total Return exceeds the
Industry Total Return in any year. All of such Common Shares will become fully
vested and issuable prior to the dates set forth above and irrespective of the
satisfaction of the performance criteria set forth above, in the event the
executive's employment is terminated without "cause" or upon the occurrence of a
"change of control." In addition, a portion of such Common Shares will become
fully vested and issuable upon the death or disability of the executive. In the
event the performance criteria set forth above is not satisfied on or before
January 15, 2002, all rights to receive the Common Shares and Dividend
Equivalents will terminate.
SHARE OPTIONS
In December, 1993, the Company adopted the Share Option Plan.
The Compensation Committee believes that by providing the executives who
have substantial responsibility for the management and growth of the Company
with an opportunity to increase their ownership of Common Shares, the best
interests of shareholders and executives will be closely aligned. Therefore,
executives are eligible to receive options from time to time, giving them the
right to purchase Common Shares. During 1996, the Compensation Committee
awarded options to purchase 270,000 Common Shares to the Company's executive
officers. In making these awards, the Compensation Committee considered the
contribution of each executive to the Company and the desires of the
Compensation Committee to further long term incentives and commitment to the
Company rather than adhering to any established formulas or schedules for the
issuance of options.
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<PAGE>
CEO PERFORMANCE EVALUATION
Commencing January 1, 1996, Mr. Shaw and the Company agreed, pursuant to an
amendment to Mr. Shaw's employment agreement, to delete the requirement for
payment of base salary for the period from January 1, 1996 through December 31,
1996 and, in lieu thereof, to award Mr. Shaw 14,060 restricted Common Shares
pursuant to the Share Bonus Plan (No. 2) having a fair market value (based upon
the average closing price of Common Shares on the NYSE for the 30 day period
preceding the date of grant) of $272,236 (equal to 150% of the amount of base
salary which would have been payable for 1996). Mr. Shaw's employment agreement
also provides for payment of discretionary bonuses, based upon such factors,
including growth in funds from operations, as the Compensation Committee shall
determine. No cash bonuses were paid to Mr. Shaw during 1996. In January,
1996, the Compensation Committee approved a discretionary bonus to Mr. Shaw of
9,296 shares of restricted Common Stock having a fair market value as of the
date of grant (based on the average closing price of the Common Shares on the
NYSE for the 30-day period preceding the date of grant) of $180,000, of which
2,622 shares were issued pursuant to the Company's Share Bonus Plan (No. 2) and
6,674 shares were issued pursuant to the Company's Management Incentive Plan.
Such bonus was determined based upon the Company's performance for the calendar
year ending December 31, 1995, particularly growth in funds from operations and
growth in the Company's portfolio of properties, both from successful
acquisitions and from developments completed or proposed for construction. The
Compensation Committee also considered a comparison of the salaries of the
Company's executive officers, including its Chief Executive Officer, to salaries
of comparable executives at other similar multifamily REITs. Such restricted
Common Shares do not vest until the third anniversary of the date of grant,
provided that if Mr. Shaw's employment with the Company is terminated by the
Company "without cause," as a result of death or disability, or in the event Mr.
Shaw terminates his employment with the Company as a result of a "family medical
necessity," as such terms are defined in Mr. Shaw's award agreement, such
restricted Common Shares shall immediately vest. Such restricted Common Shares
may be forfeited if Mr. Shaw leaves the employment of the Company prior to the
expiration of such three year term (subject to the exceptions described above)
and Mr. Shaw competes with the Company within such three year term.
In addition, as more fully discussed above, in order to further align the
interests of the Chief Executive Officer with those of the Company and its
shareholders, effective November 15, 1996, the Company and Mr. Shaw entered into
the Performance Award Agreement pursuant to which Mr. Shaw is entitled to
receive 100,000 Common Shares on either January 15, 2000 or January 15, 2002 and
certain Dividend Equivalents for calendar years 1997 through 2001, if the
Company's Total Return (as defined above) exceeds (by 2% with respect to the
measurement period ending January 15, 2000 or by any amount with respect to the
measurement period ending January 15, 2002) the Industry Total Return (as
defined above) for the applicable periods.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
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<PAGE>
The foregoing report is given by the following members of the Compensation
Committee:
Gregg L. Engles
James C. Leslie
Hugh G. Robinson
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to annual
and long-term compensation for services rendered in all capacities for the years
ended December 31, 1996, 1995 and 1994 paid to the Company's Chief Executive
Officer and to each of the Named Executive Officers and all executive officers
as a group.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term Restricted All Other
Compensation Compensation Stock Awards* Compensation
------------- ------------- ------------- ------------
Fiscal Options
Name and Principal Position Year Salary ($) (#)
--------------------------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Richard L. Bloch, 1996 $0 /(1)/ 30,000/(5)/ $ 179,495/(1)/ /(10)/
Chairman of the Board 1995 $ 5,833/(2)/ 30,000 $ 96,250/(2)/
1994 $ 70,000 0 $0
Robert L. Shaw, 1996 $0 /(3)/ 65,000/(5)/ $ 452,236/(6)/ /(10)/
Chief Executive Officer 1995 $ 96,250/(4)/ 65,000 $ 238,125/(7)/
1994 $150,000 -
Will Cureton, 1996 $0 /(3)/ 45,000/(5)/ $ 392,236/(8)/ /(10)/
Chief Operating Officer 1995 $ 96,250/(4)/ 45,000 $ 215,625/(9)/
1994 $150,000 - -
Richard R. Reupke, 1996 $116,600 10,000 $ 45,000 /(10)/
Chief Financial Officer 1995 $106,000 10,000 $ 45,000
1994 $100,000 - -
Thomas L. Wilkes, 1996 $116,600 10,000 $ 60,006 /(10)/
Senior Vice President-Management 1995 $106,000 10,000 $ 45,000
1994 $100,000 - -
All executive officers as a group 1996 $569,139 215,000 $1,267,715
(9 persons) 1995 $710,333 220,000 $ 745,000
1994 $774,708 40,000
</TABLE>
__________________________
* Dividends are payable on all restricted Common Shares reported in this table.
(1) Represents (i) $115,500 of restricted Common Shares issued pursuant to the
Share Bonus Plan (No. 2) in connection with Mr. Bloch's waiver of the
receipt of any salary payable to him in his capacity as Chairman of the
Board for the period from January 1, 1996 through December 31, 1996 (equal
to 150% of the amount of base salary which would have been payable for
calendar year 1996) and (ii) $63,995 of restricted Common Shares issued as
an incentive bonus in January 1996 pursuant to the Share Bonus Plan (No.
2). At December 31, 1996, Mr. Bloch held an aggregate of 14,754 restricted
Common Shares valued (based on the closing price of the Common Shares on
the NYSE on such date) at $335,654.
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<PAGE>
(2) Mr. Bloch received a partial salary payment of $5,833 in January 1995. Mr.
Bloch received no other base salary in 1995. On March 9, 1995, Mr. Bloch
received $96,250 of restricted Common Shares (equal to 150% of the amount
of base salary which would have been payable for the remainder of 1995)
issued pursuant to the Share Bonus Plan (No. 2) in lieu of payment of base
salary for the remainder of 1995.
(3) Pursuant to amendments to their respective employment agreements effective
January 1, 1996, each of Messrs. Shaw and Cureton agreed to receive no base
salary for the period from January 1, 1996 through December 31, 1996 and,
in lieu thereof, to receive restricted Common Shares pursuant to the
Company's Share Bonus Plan (No. 2) having a fair market value equal to 150%
of the amount of such base salary.
(4) Pursuant to amendments to their respective employment agreements effective
August 1, 1995, each of Messrs. Shaw and Cureton agreed to receive no
additional base salary for the remainder of 1995 and to receive, in lieu
thereof, restricted Common Shares pursuant to the Company's Share Bonus
Plan (No. 2) having a fair market value equal to 150% of the amount of such
base salary.
(5) The Compensation Committee approved the award of options to purchase 30,000
Common Shares, 65,000 Common Shares and 45,000 Common Shares to Messrs.
Bloch, Shaw and Cureton, respectively, pursuant to the Company's Share
Option Plan, Management Incentive Plan and Employee Incentive Plan.
(6) Represents (i) $272,236 of restricted Common Shares issued pursuant to the
Share Bonus Plan (No. 2) in connection with the amendment of Mr. Shaw's
employment agreement as described in Footnote 1 above and (ii) $180,000 of
restricted Common Shares issued as an incentive bonus in January 1996
pursuant to the Share Bonus Plan (No. 2) and the Management Incentive Plan.
At December 31, 1996, Mr. Shaw held an aggregate of 36,532 restricted
Common Shares valued (based on the closing price of the Common Shares on
the NYSE on such date) at $831,103.
(7) Represents (i) $135,000 of restricted Common Shares issued as an incentive
bonus in March 1995 pursuant to the Share Bonus Plan (No. 2) and (ii)
$103,125 of restricted Common Shares issued pursuant to the Share Bonus
Plan (No. 2) in connection with the amendment of Mr. Shaw's employment
agreement as described in Footnote 2 above.
(8) Represents (i) $272,236 of restricted Common Shares issued pursuant to the
Share Bonus Plan (No. 2) in connection with the amendment of Mr. Cureton's
employment agreement as described in Footnote 1 above and (ii) $120,000 of
restricted Common Shares issued as an incentive bonus in January 1996
pursuant to the Share Bonus Plan (No. 2) and the Management Incentive Plan.
At December 31, 1996, Mr. Cureton held an aggregate of 32,066 restricted
Common Shares valued (based on the closing price of the Common Shares on
the NYSE on such date) at $729,502.
(9) Represents (i) $90,000 of restricted Common Shares issued as an incentive
bonus in March 1995 pursuant to the Share Bonus Plan (No. 2), (ii) $103,125
of restricted Common Shares issued pursuant to the Share Bonus Plan (No. 2)
in connection with the amendment of Mr. Cureton's employment agreement as
described in Footnote 2 above and (iii) $22,500 of restricted Common Shares
issued as an incentive bonus in September 1995 pursuant to the Share Bonus
Plan (No. 2).
(10) All prerequisites and other personal benefits did not exceed 10% of the
total annual salary and bonus for the Named Executive Officer.
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<PAGE>
OPTION GRANTS
The following table sets forth certain information concerning individual
grants of stock options made to each Named Executive Officer during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Securities Percent of
Underlying Total Options Exercise Expiration
Name Options (#) Granted in 1996 Price Date Alternative Grant Date Value/(1)/
- ------------------- ------------ ---------------- -------- ---------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Bloch 30,000 11.1% $20.875 10/15/06 $37,500
Robert L. Shaw 65,000 24.1% $20.875 10/15/06 $81,250
Will Cureton 45,000 16.7% $20.875 10/15/06 $56,250
Richard R. Reupke 10,000 3.7% $20.875 10/15/06 $12,500
Thomas L. Wilkes 10,000 3.7% $20.875 10/15/06 $12,500
</TABLE>
(1) Based upon a value of $1.25 for each option to purchase one Common Share,
determined based upon a Black-Scholes pricing model, using (i) a historical
volatility of the price per Common Share of 0.165, (ii) an assumed expected
life (time of exercise) of 9 years, (iii) an expected dividend yield, based
upon the historical dividend yield on the Common Shares, of 7.82%, and (iv)
a risk-free interest rate of 6.37%, based upon the 9-year Treasury bill,
zero coupon rate as of the date of the option grant. The foregoing
calculations were made in accordance with the requirements of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
value of unexercised options held by the Named Executive Officers at December
31, 1996. No share options were exercised by any of the Named Executive Officers
during 1996.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
Name Exercisable (E)/Unexercisable (U) Exercisable (E)/Unexercisable (U)(a)
---- --------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Richard L. Bloch 251,666(E) 30,000(U) $1,203,976(E) $78,750(U)
Robert L. Shaw 319,097(E)(b) 59,862(U)(b) $1,626,244(E) $160,992(U)
Will Cureton 319,888(E) 41,443(U) $1,618,458(E) $111,456(U)
Richard R. Reupke 70,000(E) 10,000(U) $363,751(E) $26,249(U)
Thomas L. Wilkes 70,000(E) 10,000(U) $363,751(E) $26,249(U)
</TABLE>
(a) The December 31, 1996 closing market price of the Common Shares on the NYSE
of $22.75 is used in the calculation to determine the value of unexercised
options.
(b) Includes options held in trust for the benefit of Mr. Shaw's children.
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<PAGE>
LONG-TERM INCENTIVE PLANS-AWARDS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future
Performance or Payouts Under
Other Period Non-Stock
Number Until Price-Based Plan
of Maturation or -------------------
Name Shares Payout Target/(2)/
---- ------- ----------------- -------------------
<S> <C> <C> <C>
Richard L. Bloch 60,000 2000 or 2002/(1)/ $2,762,240/(3)//(4)/
Robert L. Shaw 100,000 2000 or 2002/(1)/ $4,603,733/(3)//(4)/
Will Cureton 100,000 2000 or 2002/(1)/ $4,603,733/(3)//(4)/
</TABLE>
/(1)/ Pursuant to the Performance Award Agreements, if on January 15, 2000, the
total cumulative return on the Common Shares for the three calendar years
ending on December 31, 1999 exceeds the weighted average total return per
common share for all publicly traded equity residential apartment REITs,
as determined by NAREIT (the "Industry Total Return") for such period plus
2.0%, the Company will issue to the named executive officer the number of
Common Shares reflected above. If on January 15, 2002, the total
cumulative return on the Common Shares for the five calendar years ending
on December 31, 2001 exceeds the Industry Total Return for such period by
any amount, the Company will issue to the named executive officer the
number of Common Shares reflected above. If on or before January 15, 2002,
such total cumulative return does not exceed the NAREIT Equity Apartment
Total Return Series, all rights of the named executive with respect to the
issuance of the Common Shares will terminate.
/(2)/ If the total annual return on the Common Shares for the calendar year set
forth below exceeds (by any amount) the Industry Total Return for such
calendar year, the named executive officer will be paid an amount for such
calendar year (and each succeeding calendar year) equal to the percentage
indicated below multiplied by the aggregate amount of dividends for such
calendar year, paid or payable with respect to 100,000 or 60,000
outstanding Common Shares, as applicable, plus interest and, in certain
circumstances, assumed reinvestment earnings thereon (the "Dividend
Equivalent"). If on either January 15, 2000 or January 15, 2002, the
performance based stock is issued, all Dividend Equivalents not previously
paid will, at such time, be paid in full.
1997 30%
1998 45%
1999 60%
2000 75%
2001 100%
/(3)/ The future payout amounts under the Performance Awards, if any, are
contingent and are not determinable. Any payout is dependent upon numerous
variables, including the Company's Total Return and the Industry Total
Return as well as the Company's cost of funds and dividend payments over
the applicable measurement periods. As a result, solely for purposes of
calculation of the target payout amounts reflected above, the Company has
assumed that (i) the Company's Total Return exceeds the Total Industry
Return for the five-year period ending December 31, 2001, (ii) that the
Company's dividend increases over the five-year period ending December 31,
2001 at the same rate as it increased during the period from January 1,
1994 through December 31, 1996, (iii) that the market price of the
Company's Common Shares continues to grow over the five-year period ending
December 31, 2001 at the same rate of growth experienced during the period
from January 1, 1994 through December 31, 1996, and (iv) that the
Company's cost of funds over the five-year period ending December 31, 2001
remains at the average rate of such cost of funds for 1996. The foregoing
assumptions are made solely for the purposes of the
-16-
<PAGE>
calculations made herein and are not necessarily valid assumptions nor are
such assumptions indications of the Company's belief that such events are
likely to occur. The Company believes that the Company's Total Return for
the three-year period from January 1, 1994 through December 31, 1996 is a
more appropriate basis for estimating the Company's Total Return over the
three- and five-year measurement periods contemplated by the Performance
Awards than the Company's Total Return for 1996 or any other single year.
/(4)/ Includes all Dividend Equivalents potentially payable as well as the
assumed market value of the number of Common Shares potentially issuable
on January 15, 2002, calculated as described in Footnote (3) above.
EMPLOYMENT AGREEMENTS
Effective November 15, 1996, the Company has entered into new employment
agreements with Messrs. Bloch, Shaw and Cureton pursuant to which Mr. Bloch
serves as Chairman of the Board, Mr. Shaw serves as Chief Executive Officer and
Mr. Cureton serves as Chief Operating Officer of the Company. Messrs. Bloch,
Shaw and Cureton also serve as Trust Managers. Each employment agreement is for
an initial term through December 31, 2001, which is automatically extended for
additional one year periods following the expiration of the initial term of the
agreement, unless a notice of expiration is given by the executive to the
Company or such notice is given by the Company to the executive at least nine
months prior to the expiration of the then current term. Pursuant to the terms
of the agreements, each executive is entitled to receive a base salary at the
rate of $262,000 per annum with respect to Messrs. Shaw and Cureton and $100,000
per annum with respect to Mr. Bloch, commencing January 1, 1997. Each
executive's annual base salary for 1998 and each subsequent calendar year during
the term of the agreement will be increased by ten percent (10%). The
agreements provide that if the executive is terminated for "cause" or
voluntarily terminates his employment without "good reason," he will not compete
with the Company within 20 miles of any of the Company's properties for a period
of one year after such termination. Each of the employment agreements provides
for certain severance payments in the event of death or disability, or upon
termination of executive's employment by the Company without "cause" or by the
employee with "good reason." The agreements provide that in the event of death
or disability or upon termination by the Company "without cause," an amount
equal to 2.99 times the total compensation (as defined in the agreements) for
the immediately preceding twelve-month period will be paid to the executive or
his estate. In the event of termination by the executive of his employment with
"good reason," the Company will pay to the executive the lesser of (i) two times
such executive's total compensation for the immediately preceding twelve-month
period or (ii) such executive's total compensation for the immediately preceding
twelve-month period multiplied by the number of years (or fraction thereof)
remaining in the term of the agreement. The agreements provide for automatic
termination upon the occurrence of a "change in control" of the Company. In the
event of such automatic termination upon a "change in control," the Company will
pay the executive the greater of (i) the amount of total compensation to which
such executive would have (or could reasonably have been expected to have) been
entitled had the agreement not been terminated or (ii) 2.99 times such
executive's total compensation for the immediately preceding twelve-month
period. The agreements also provide that in the event of termination by the
Company without "cause," by the executive with "good reason" or upon a "change
in control," each executive will be entitled, at his option, to exercise any
options to purchase Common Shares (whether or not then vested) granted to such
executive and to retain any Common Shares awarded to such executive (whether or
not then vested or subject to any forfeiture restrictions). In addition, the
agreements provide that in the event of termination by the Company without
"cause" or upon a "change in control," each executive may require the Company to
repurchase all or any portion of such executive's options to purchase Common
Shares (whether or not then vested).
-17-
<PAGE>
The Company also has entered into employment agreements with Messrs.
Reupke, Lewis, Wilkes, Lomenick and Duffy effective January 1, 1997 or, with
respect to Mr. Duffy, effective October 15, 1996. Pursuant to such employment
agreements, Mr. Reupke serves as Chief Financial Officer of the Company, Mr.
Lewis serves as Senior Vice President and Treasurer of the Company, Mr. Wilkes
serves as Senior Vice President-Management of the Company, Mr. Lomenick serves
as Senior Vice President-Development of the Company and Mr. Duffy serves as
Senior Vice President-Construction of the Company. Each agreement is for an
initial term through December 31, 1999, which is automatically extended to
December 31, 2000 and each December 31 thereafter unless written notice is given
by the executive to the Company or by the Company to the executive of such
party's intent not to renew or extend the agreement by a specified number of
months prior to the expiration of the then current term. Pursuant to the terms
of the respective agreements, Messrs. Reupke, Lewis, Wilkes and Lomenick are
entitled to an annual base salary of $150,000 during 1997, Mr. Duffy is entitled
to an annual base salary of $125,000 during 1997, and all are eligible for merit
raises and bonuses as determined by the Compensation Committee. In each
calendar year during the term of the agreements, the Company may issue to the
executives (other than Mr. Duffy), in satisfaction of a portion of such
executive's base salary, restricted Common Shares having a fair market value of
up to $25,000. The agreements provide that if the executive is terminated for
"cause" or voluntarily terminates his employment without "good reason," he will
not compete with the Company within 20 miles of any of the Company's properties
for a period of one year after such termination. Each of the employment
agreements provides for certain severance payments in the event of death or
disability, upon termination of the executive's employment by the Company
without "cause," by the executive with "good reason" or, with respect to the
agreements with Messrs. Wilkes, Lomenick and Duffy, by the executive without
"good reason" at any time within the twelve-month period following a "change in
control" (as defined in the agreements) of the Company. Each agreement
provides that in the event of death or disability, or upon termination by the
Company without "cause," an amount equal to 2.99 times such executive's total
compensation (as defined in the agreements) for the immediately preceding
twelve-month period will be paid to the executive or his estate. In the event
of termination by the executive with "good reason," the Company will pay to the
executive the lesser of (i) two times such executive's total compensation for
the immediately preceding twelve-month period or (ii) such executive's total
compensation for the immediately preceding twelve-month period multiplied by the
number of years (or fraction thereof) remaining in the term of the agreement.
In the event of termination by Messrs. Wilkes, Lomenick or Duffy without "good
reason" at any time within the twelve-month period following a "change in
control," the Company will pay to such executive a lump sum payment equal to the
prorata portion of the executive's base salary which would have been payable to
such executive during the three month period following the date of termination
of the agreement.
SHARE OPTION PLAN
The Company has established the Share Option Plan for the purpose of
attracting and retaining the Company's trust managers, executive officers and
other employees. The Share Option Plan provides for administration by a
committee of the Trust Managers established for such purpose. A maximum of
1,400,000 Common Shares have been reserved for issuance under the Share Option
Plan. The Share Option Plan allows for the grant of "incentive" and
"nonqualified" options (within the meaning of the Internal Revenue Code) and for
the right of an option holder to elect to receive in cash or Common Shares an
amount equal to the excess of the market price of the Common Shares subject to
an incentive or nonqualified option over the exercise price for such Common
Shares, which right can be exercised instead of (but not in addition to) its
related incentive or nonqualified option. As of October 15, 1996, all Common
Shares reserved for issuance pursuant to the Share Option Plan had been awarded.
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<PAGE>
SHARE BONUS PLAN (NO. 2)
The Company has established the Share Bonus Plan (No. 2) for the purpose of
advancing the best interests of the Company and its subsidiaries by providing
certain executive officers and other key employees with additional long-term
incentives by creating a means for such persons to acquire a proprietary
interest in the Company and a direct participation in the growth of the Company
through ownership of Common Shares. The Share Bonus Plan (No. 2) provides for
administration by a committee of the Trust Managers established for such
purpose. A maximum of 100,000 Common Shares were reserved for issuance under
the Share Bonus Plan (No. 2). As of January 8, 1996, all Common Shares reserved
for issuance pursuant to the Share Bonus Plan (No. 2) had been awarded.
EMPLOYEE STOCK PURCHASE PLAN
The Company has established the Employee Stock Purchase Plan for the
purpose of securing for the Company and its shareholders the benefits inherent
in the ownership of Common Shares by present and future employees of the Company
and its affiliates. The Employee Stock Purchase Plan provides for
administration by a committee of Trust Managers established for such purpose.
The Employee Stock Purchase Plan provides for grants to eligible employees of
options to purchase up to 100,000 Common Shares. All employees, except for an
employee who, immediately after the grant of an option under the plan, would own
5% or more of the voting power of all classes of equity of the Company, are
eligible to participate in the Employee Stock Purchase Plan. The Employee Stock
Purchase Plan provides each eligible employee the right to purchase Common
Shares at 85% of the fair market value of the Common Shares on the date of
purchase. As of March 1, 1997, 14,343 Common Shares have been purchased
pursuant to the Employee Stock Purchase Plan.
MANAGEMENT INCENTIVE PLAN
The Company has established the Management Incentive Plan for the purpose
of assisting the Company in attracting and retaining selected individuals to
serve as trust managers, officers and employees of the Company who will
contribute to the Company's success and to achieve long-term objectives which
will inure to the benefit of all shareholders through the additional incentive
inherent in the ownership of Common Shares. The Management Incentive Plan
provides for administration by a committee of Trust Managers established for
such purpose. Up to 500,000 Common Shares may be the subject of awards under the
Management Incentive Plan. As of October 15, 1996, all Common Shares reserved
for issuance pursuant to the Management Incentive Plan had been awarded.
EMPLOYEE INCENTIVE PLAN
The Company has established the Employee Incentive Plan for the purpose of
assisting the Company in attracting and retaining selected individuals to serve
as trust managers, employees and consultants of the Company who will contribute
to the Company's success and to achieve long-term objectives which will inure to
the benefit of all shareholders through the additional incentive inherent in the
ownership of Common Shares. The Employee Incentive Plan provides for
administration by a Committee of Trust Managers established for such purpose.
Up to 1,000,000 Common Shares may be the subject of awards under the Employee
Incentive Plan.
-19-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person who served as a member of the Company's Compensation Committee
during 1996 (i) was an officer or employee of the Company during such year, (ii)
was formerly an officer of the Company or (iii) was a party to any material
transaction set forth under "Certain Relationships and Transactions."
No executive officer of the Company served as a member of the compensation
or similar committee or board of directors of any other entity of which an
executive officer served on the Compensation Committee or Board of Trust
Managers of the Company.
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for the
Company, the Standard & Poor's 500 Composite Stock Index and the SNL Securities
Corporate Performance Index Value of all publicly traded residential real estate
investment trusts since December 29, 1993, the date of the consummation of the
Company's initial public offering. The stock price performance graph assumes an
investment of $100 in the Company and the two indexes on December 29, 1993, and
assumes the full reinvestment of dividends.
-20-
<PAGE>
TOTAL RETURN PERFORMANCE
[INSERT GRAPH]
<TABLE>
<CAPTION>
Period Ending
---------------------------------------------------------------------------------
Index 12/21/93 6/30/94 12/31/94 6/30/95 12/31/95 6/30/96 12/31/96
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Columbus Realty Trust 100.00 126.38 115.96 122.32 131.44 136.71 166.52
S&P 500 100.00 96.93 101.66 122.20 139.86 153.96 171.83
SNL Residential REITs Index 100.00 105.52 105.67 106.63 119.97 129.05 157.03
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company has entered into a partnership agreement with Gaylord
Properties, Inc. ("Gaylord") to own, construct, operate and manage an
approximately 445-unit multifamily development (including retail and office
space) presently under construction in Addison, Texas, a northern suburb of
Dallas. Mr. Roger Staubach, a Trust Manager of the Company, and certain
affiliates of Mr. Staubach and Mr. James Leslie, including The Staubach Company
and Wolverine Asset Management, Inc. ("Wolverine"), were instrumental in
developing the relationships with Gaylord and the City of Addison which enabled
the Company to undertake this project. In consideration of these efforts, the
Company has paid to Wolverine a fee of $150,000.
-21-
<PAGE>
In June 1996, Mr. Shaw pledged to Bank One, Texas, National Association
("Bank One") 36,532 restricted Common Shares (having a fair market value at
December 31, 1996 of $831,103) as collateral for a loan in the amount of up to
$350,000 (the "Shaw Loan"). In June 1996, Mr. Cureton pledged to Bank One 32,066
restricted Common Shares (having a fair market value at December 31, 1996 of
$729,502) as collateral for a loan in the amount of up to $300,000 (the "Cureton
Loan"). In connection with the Shaw Loan and the Cureton Loan (collectively, the
"Loans"), the Company entered into a Note Purchase Agreement with Bank One with
respect to each of the Loans. Pursuant to the terms of the Note Purchase
Agreements, the Company agreed to purchase, or cause one of its subsidiaries to
purchase, the notes evidencing such Loans upon the occurrence of an event of a
default (as defined in the Letter Loan Agreement with respect to each of the
Loans) thereunder by either of Messrs. Shaw or Cureton.
PROPOSAL TWO:
AMENDMENT OF THE DECLARATION OF TRUST
The Company's Amended and Restated Declaration of Trust ("Declaration of
Trust") provides, in Article XVIII, that no person may own 9.8% of the
outstanding Common Shares and no securities of the Company shall be accepted,
purchased or in any manner acquired by any person if such issuance or transfer
would result in that person's ownership of Common Shares exceeding 9.8% (the
"Ownership Limitations"). The Ownership Limitations are designed to ensure that
the Company satisfies the requirement of the Internal Revenue Code of 1986 (the
"Code") that, in order to maintain its qualification as a real estate investment
trust (a "REIT"), not more than 50% in value of the outstanding Common Shares be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code). In accordance with the requirements of the New York Stock Exchange (the
"NYSE"), Article XVIII of the Declaration of Trust also contains a provision
(the "NYSE Settlement Provision") which states that no transfer restrictions
contained in the Declaration of Trust will preclude the settlement of any
transaction in Common Shares entered into through the facilities of the NYSE.
Paragraph (h) of Article XVIII currently provides that the Company has the
unlimited ability to impose or to seek judicial or other imposition of
additional restrictions if deemed necessary or advisable to protect the Company
and the interests of its security holders by preservation of the Company's
status as a qualified REIT. The NYSE has requested that the Company amend its
Declaration of Trust to clarify that the power granted to the Company to impose
or to seek judicial or other imposition of additional restrictions to preserve
the Company's qualified REIT status is also subject, in all respects, to the
NYSE Settlement Provision. The Board of Trust Managers has determined that it is
in the best interests of the Company to revise paragraph (h) of the Company's
Declaration of Trust to reflect such clarification pursuant to the request of
the New York Stock Exchange.
Accordingly, paragraph (h) of Article XVIII of the Company's Declaration of
Trust is proposed to be amended by adding to the beginning of paragraph (h) the
phrase "Subject to Paragraph (b) of this Article XVIII." Paragraph (h) as it is
proposed to be amended would therefore read as follows:
(h) Subject to Paragraph (b) of this Article XVIII, nothing herein
contained shall limit the ability of the Trust to impose or to seek
judicial or other imposition of additional restrictions if deemed necessary
or advisable to protect the Trust and the interests of its security holders
by preservation of the Trust's status as a qualified real estate investment
trust under the Code.
-22-
<PAGE>
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF TRUST MANAGERS
The affirmative vote of the holders of at least eighty percent (80%) of the
Common Shares entitled to vote on the proposed amendment is required for the
adoption of the proposal to amend the Declaration of Trust.
THE BOARD OF TRUST MANAGERS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE PROPOSAL TO AMEND THE DECLARATION OF TRUST.
-23-
<PAGE>
PROPOSAL THREE:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Trust Managers
of the Company has appointed the firm of Ernst & Young LLP as the Company's
independent public accountants for the year ending December 31, 1997. A
resolution will be submitted to shareholders at the Meeting to ratify the
appointment of Ernst & Young LLP.
A representative of Ernst & Young LLP is expected to be present at the
Meeting. The representative will be afforded the opportunity to make a
statement and to respond to appropriate questions of shareholders. If the
resolution ratifying the appointment of Ernst & Young LLP as independent public
accountants is approved by the shareholders, the Board of Trust Managers
nevertheless retains the discretion to select different auditors in the future,
should the Board then deem it in the Company's best interest. Any such
selection need not be submitted to a vote of shareholders.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF TRUST MANAGERS
Ratification of the appointment of Ernst & Young LLP as the independent
public accountants of the Company requires the affirmative vote of the holders
of a majority of Common Shares present, or represented by proxy, and entitled to
vote at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF
THE COMPANY.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with regulations of the Commission. Should a
shareholder intend to present a proposal at the Company's 1998 Annual Meeting of
Shareholders, it must be received by the Secretary of the Company, 15851 Dallas
Parkway, Suite 855, Dallas, Texas 75248, not later than November ___, 1997 [120
DAYS PRIOR TO MAILING DATE], in order to be included in the Company's proxy
statement and form of proxy relating to that meeting.
SOLICITATION PROCEDURES
Officers and regular employees of the Company, without extra compensation,
may solicit the return of proxies by mail, telephone, telegram or personal
interview. Certain holders of record, such as brokers, custodians and nominees,
are being requested to distribute proxy materials to beneficial owners and to
obtain such beneficial owners' instructions concerning the voting of proxies.
The cost of solicitation of proxies (including the cost of reimbursing
banks, brokerage houses, and other custodians, nominees and fiduciaries for
their reasonable expenses in forward proxy soliciting material to beneficial
owners) will be paid by the Company.
-24-
<PAGE>
MISCELLANEOUS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1996 has previously been sent or is concurrently being sent to
shareholders of the Company. The Annual Report to Shareholders is not part of
the proxy solicitation materials.
The information set forth in this Proxy Statement under the captions
"Executive Compensation --Report of the Compensation Committee of the Board of
Trust Managers" and "-- Performance Graph" shall not be deemed to be (i)
incorporated by referenced into any filing by the Company under the Securities
Act or the Exchange Act, except to the extent that in any such filing the
Company expressly so incorporates such information by reference, and (ii)
"soliciting material" or to be "filed" with the Commission.
Where information contained in this Proxy Statement rests particularly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person or contained in filings made by such
person with the Commission.
By Order of the Board of Trust Managers
Richard R. Reupke
Chief Financial Officer
and Secretary
-25-
<PAGE>
COLUMBUS REALTY TRUST
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 23, 1997
The undersigned, revoking any proxy heretofore given, hereby appoint(s)
Robert L. Shaw and Will Cureton, or either of them, proxies of the undersigned
with full power of substitution, to vote all of the common shares of beneficial
interest of COLUMBUS REALTY TRUST (the "Company") which the undersigned is
entitled to vote at the Company's Annual Meeting to be held at 9:00 a.m., local
time, on Friday, May 23, 1997, at Omni Mandalay Hotel at Las Colinas, 221 E. Las
Colinas Blvd., Irving, Texas and at any adjournment thereof, hereby ratifying
all that said proxies or their substitutes may do by virtue hereof, and the
undersigned authorizes and instructs said proxies to vote as set forth on the
Reverse Side hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUST MANAGERS.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
THE BOARD OF TRUST MANAGERS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN
PROPOSAL 1, AND FOR PROPOSALS 2 and 3.
Please fill in, date, sign and mail this Proxy in the enclosed postage-paid
return envelope.
By signing and returning this Proxy, the undersigned acknowledges receipt
of the Notice of Annual Meeting and Proxy Statement and of the Annual Report and
financial statements of the Company preceding or accompanying the same.
Unless a contrary direction is indicated, this Proxy will be voted FOR all
nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposal 3 as more
specifically set forth in the Proxy Statement; if specific instructions are
indicated, this Proxy will be voted in accordance therewith.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
[X] PLEASE MARK YOUR
VOTES AS IN THIS EXAMPLE.
1. Election of Trust Managers Nominees:
Robert L. Shaw [ ] FOR [ ] WITHHOLD AUTHORITY
Roger T. Staubach [ ] FOR [ ] WITHHOLD AUTHORITY
Hugh G. Robinson [ ] FOR [ ] WITHHOLD AUTHORITY
2. Approval of the amendment to the Company's Declaration of Trust
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the appointment of Ernst & Young LLP
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, upon such other matters as properly come before the
meeting.
Signature___________________________________
Date________________________________________
Signature___________________________________
Date________________________________________
Please sign exactly as name appears hereon.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person. If owned jointly, each
owner should sign.
[ ] PLEASE MARK HERE IF YOU PLAN TO ATTEND THE MEETING
