<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997 Commission File Number 001-12684
COLUMBUS REALTY TRUST
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-2509086
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15851 DALLAS PARKWAY, SUITE 855
DALLAS, TEXAS 75248
(Address of Principal Executive Offices)
(972) 387-1492
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--------- --------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
There were 13,409,642 common shares of beneficial interest, $0.01 par value
per share, outstanding at August 1, 1997.
Index to exhibits: 20
Total pages: 23
1
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COLUMBUS REALTY TRUST
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
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<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets of Columbus Realty Trust as of
June 30, 1997 and December 31, 1996............................................ 3
Consolidated Statements of Operations of Columbus Realty Trust
for the three and six months ended June 30, 1997 and 1996...................... 4
Consolidated Statements of Cash Flows of Columbus Realty Trust
for the six months ended June 30, 1997 and 1996................................ 5
Notes to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................... 19
Item 2. Changes in Securities........................................................... 19
Item 3. Defaults Upon Senior Securities................................................. 19
Item 4. Submission of Matters to a Vote of Security Holders............................. 19
Item 5. Other Information............................................................... 19
Item 6. Exhibits or Reports on Form 8-K................................................. 20
SIGNATURES................................................................................. 23
</TABLE>
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
COLUMBUS REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------------------------
ASSETS (Unaudited)
<S> <C> <C>
Real Estate:
Land $ 58,337 $ 54,399
Buildings and improvements 328,322 285,104
Furniture, fixtures, and
equipment 4,912 4,696
Construction in progress 61,785 55,614
---------------------------
453,356 399,813
Less accumulated
depreciation 46,576 40,492
---------------------------
Real estate held for
investment 406,780 359,321
Real estate held for sale 3,058 3,980
---------------------------
409,838 363,301
Cash and cash equivalents 6,688 2,641
Restricted cash 313 554
Accounts receivable 1,186 663
Receivables from affiliates 184 152
Deferred assets, net of
accumulated amortization 1,361 1,736
Investment in unconsolidated
subsidiary 300 -
Other assets 10,843 5,529
---------------------------
Total assets $430,713 $374,576
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $231,477 $179,855
Accounts payable and
accrued expenses 7,494 3,536
Accrued interest 332 288
Accrued property taxes 4,228 6,727
Tenant security deposits 1,841 1,671
Prepaid rent 384 358
Minority interest 2,063 2,063
---------------------------
Total liabilities 247,819 194,498
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; 13,409,467
and 13,059,137 shares
issued at June 30, 1997,
and December 31, 1996,
respectively 134 131
Additional paid-in capital 213,981 206,564
Retained earnings (deficit) (30,765) (26,611)
Notes due on common stock
purchases (450) -
---------------------------
182,900 180,084
Less 900 common shares in
treasury, at cost (6) (6)
---------------------------
Total shareholders' equity 182,894 180,078
---------------------------
Total liabilities and
shareholders' equity $430,713 $374,576
===========================
The accompanying notes are an integral part of the
financial statements.
</TABLE>
3
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COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 14,018 $ 11,066 $ 26,879 $ 21,367
Property management 38 74 71 149
Interest and other 763 622 1,357 1,180
--------------------------------------------------------
Total revenue 14,819 11,762 28,307 22,696
Expenses:
Repairs and maintenance 1,030 912 1,944 1,702
Other property operating 662 601 1,279 1,191
Advertising 193 168 429 281
General and administrative
- properties 864 811 1,706 1,622
General and administrative
- corporate 685 538 1,331 1,046
Real estate taxes 2,115 1,516 4,091 2,937
Interest 2,746 1,869 4,898 3,364
Interest related to
amortization of deferred
financing costs 150 92 252 159
Depreciation and
amortization 3,245 2,488 6,201 4,931
--------------------------------------------------------
Total expenses 11,690 8,995 22,131 17,233
--------------------------------------------------------
Income from operations 3,129 2,767 6,176 5,463
Equity in earnings of
unconsolidated subsidiary - - - -
--------------------------------------------------------
Income before gain on sale of
real estate 3,129 2,767 6,176 5,463
Gain on sale of real estate 276 42 561 42
--------------------------------------------------------
Net income $ 3,405 $ 2,809 $ 6,737 $ 5,505
========================================================
Net income per common share,
primary and fully diluted:
Income before gain on sale of
real estate $0.23 $0.24 $0.46 $0.47
Gain on sale of real estate 0.02 - 0.04 -
--------------------------------------------------------
Net income $0.25 $0.24 $0.50 $0.47
========================================================
Weighted average number of
common shares outstanding
(including common share
equivalents): 13,629,781 11,767,043 13,496,035 11,723,562
d</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,737 $ 5,505
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 6,201 4,931
Amortization of deferred
financing costs 252 159
Gain on sale of real estate (561) (42)
Net effect of changes in
operating assets and
liabilities (7,171) (6,490)
-------------------------------
Net cash provided by operating
activities 5,458 4,063
INVESTING ACTIVITIES
Payment of construction costs (38,713) (32,694)
Acquisition of real estate (9,759) (5,805)
Proceeds from sale of real estate 2,113 91
Improvements to real estate
investments (1,033) (1,126)
Advances for common stock
purchases (450) -
Purchase of furniture, fixtures,
and equipment (216) (206)
Decrease in restricted cash 242 153
-------------------------------
Net cash used in investing
activities (47,816) (39,587)
FINANCING ACTIVITIES
Proceeds from notes payable 52,068 38,725
Payment of dividends (10,442) (8,678)
Proceeds from employee and
shareholder plans 5,362 1,262
Payment of notes payable (446) (414)
Payment of offering costs (89) (73)
Payment of financing costs (48) (257)
----------------------------
Net cash provided by financing
activities 46,405 30,565
----------------------------
Net increase (decrease) in cash
and cash equivalents 4,047 (4,959)
Cash and cash equivalents at
beginning of period 2,641 10,754
----------------------------
Cash and cash equivalents at end
of period $ 6,688 $ 5,795
============================
Supplemental cash flow
information:
Interest payments, including
approximately $2,720 and
$2,920 interest capitalized
in 1997 and 1996,
respectively $ 7,573 $ 6,217
Noncash investing and financing
activity:
Investment in unconsolidated
subsidiary $ 300 $ -
Issuance of shares under
compensation and bonus plans 1,698 1,305
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. BASIS 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
its credit facility, for total proceeds of approximately $126.5 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 of the Columbus Group and the Texana
Group (collectively, the predecessors to Columbus Realty Trust).
Upon consummation of the public offering, the ownership interests of the
Columbus Group in seven multifamily residential properties were transferred to
the Company. Concurrently, the ownership interests of the Texana Group in five
multifamily residential, two industrial, and one retail property were
transferred to the Company. The properties are located primarily in the greater
Dallas, Texas, metropolitan area.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of the Company, its
subsidiaries and partnerships in which the Company has a controlling interest.
The Company's investment in Armada Homes, Inc. (Armada), is accounted for using
the equity method. At June 30, 1997, the Company owned an approximate 95% non-
voting interest in Armada. The Company's share of net income of Armada is
included in the Company's statement of operations. The effects of all
significant intercompany transactions have been eliminated.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In management's opinion, the interim financial statements reflect all
adjustments necessary for a fair presentation of the financial position of the
Company. All adjustments were of a normal recurring nature except for the
adjustments to reflect real estate transactions more fully described in Note 2.
The operating results for the interim period ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 1997. For further information, refer to the financial
statements and accompanying footnotes included in the Columbus Realty Trust Form
10-K/A for the fiscal year ended December 31, 1996 (the 1996 Annual Report).
6
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. REAL ESTATE TRANSACTIONS
PROPERTY ACQUISITION
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 (the Credit Facility) more fully described in the 1996
Annual Report.
DEVELOPMENT PROJECTS
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 the seller completes demolition of certain
existing buildings and meets other conditions.
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.
Concurrently with closing the lease agreement, the Company guaranteed a $20.0
million construction loan for the project. The remainder of the partnership's
renovation costs will be funded from draws on a short term unsecured credit line
more fully described in Note 4, the Credit Facility, cash flow from operations,
or other short term financing.
On May 7, 1997, the Company purchased a redevelopment site, The American Beauty
Mill, located in Dallas, Teaxas for $565,000. The Company expects to renovate
the property, formerly a flour mill and office complex, for adaptive reuse as a
multifamily residential project. The project is budgeted at approximately $5.0
million and will include 82 loft-style residential units upon completion. The
acquisition and development costs to date have been funded from the Company's
unsecured credit line.
On May 12, 1997, the Company purchased a development site for a multifamily
residential project in the Uptown District of Dallas, Texas, for approximately
$2.3 million. The purchase was primarily funded with seller financing of
approximately $2.0 million. See Note 4.
SALES OF CONDOMINIUM UNITS
Eight units in the Villas of Valley Ranch condominium community and 19 units in
the Springstead condominium community were sold during the six months ended June
30, 1997, for net proceeds of approximately $2.1 million resulting in a net gain
of $561,000.
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The investment in unconsolidated subsidiary at June 30, 1997, reflects a
contribution of land to be used as a development site in exchange for 300 shares
of non-voting preferred stock ($1,000.00 par value per share) in Armada. In
July 1997 the Company purchased 8,999 shares of non-voting common stock ($0.01
par value per share), and an additional 100 shares of non-voting preferred stock
in Armada.
7
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE
UNSECURED CREDIT LINE
The Company obtained a short term $15 million unsecured credit line (the
Unsecured Credit Line) from Bank One, Texas, N.A. in the first quarter of 1997.
On August 1, 1997, the Company and Bank One agreed to increase the credit line
to $17 million and to extend the maturity date to September 2, 1997. The
Unsecured Credit Line will be drawn upon in increments determined by the
Company, and may be repaid at any time without penalty. Interest-only payments
are due monthly on the unpaid principal balance at LIBOR plus 205 basis points
(7.4875% at June 30, 1997). Approximately $5.2 million was outstanding on the
Unsecured Credit Line at June 30, 1997.
CONSTRUCTION LOAN
On May 1, 1997, Wells Fargo Realty Advisors Funding, Inc. (Wells Fargo) agreed
to increase the amount available under its construction loan to Addison Circle
One, Ltd., a subsidiary of the Company, by $901,000 to approximately $22.2
million. The increased borrowing capacity will be used to fund energy
management systems at the Addison Circle One multifamily residential and retail
project. No other terms of the construction loan were modified. As of June 30,
1997, Addison Circle One, Ltd. had drawn approximately $12.3 million on the
Wells Fargo loan.
MORTGAGE LOAN
In connection with the development site acquired in May 1997, the Company
obtained a first lien mortgage loan in the amount of approximately $2.0 million
from the unaffiliated seller. Monthly interest-only payments are due at 8% per
annum until December 1, 1997, when the interest rate increases to 10% per annum.
The note matures on May 12, 1998, and may be prepaid without penalty.
5. SHAREHOLDERS' EQUITY
NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding during the period presented.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128), which
specifies the computation, presentation and disclosure requirements for basic
earnings per share and diluted earnings per share. The Company believes the
adoption of SFAS 128 will not have a material effect on earnings per share of
the Company.
NOTES DUE ON COMMON STOCK PURCHASES
On May 23, 1997, the Company received proceeds of $900,000 as a result of the
purchase by three of the Company's Trust Managers of an aggregate of 46,152 of
the Company's common shares pursuant to stock purchase awards granted in May
1996 at a purchase price of $19.50 per share (the fair market value of the
common shares on the date of grant). The stock purchase awards included
provisions that allowed the Trust Managers to borrow up to 50% of the purchase
price of the common shares. Accordingly, the Company loaned an aggregate of
$450,000 to the Trust Managers on the exercise date. Quarterly interest-only
payments at 7.34% per annum are required on the notes which are secured by the
common shares purchased. The loans mature on May 30, 2007, unless accelerated
due to resignation from the Board of Trust Managers or under certain other
circumstances.
8
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SHAREHOLDERS' EQUITY, CONTINUED
DISTRIBUTIONS
The Company paid two quarterly dividends of $0.395 per common share totaling
approximately $10.4 million in the six months ended June 30, 1997. The Company
received approximately $4.4 million in proceeds from the sale of 222,073 common
shares issued concurrently with the dividend payments pursuant to the Dividend
Reinvestment Plan.
SHAREHOLDER RIGHTS PLAN
Effective May 23, 1997, the Board of Trust Managers of the Company adopted a
shareholder rights plan. Under the plan, shareholders have certain rights to
purchase Series A Junior Participating Preferred Shares, par value $.01 per
share (Series A Junior Preferred) under certain circumstances, including the
event of unsolicited attempts to acquire a controlling interest in the Company.
Each right, when exercisable, will entitle the holder to purchase from the
Company one one-hundredth of a share of Series A Junior Preferred at a price of
$70.00 or, in certain circumstances, such right will entitle the holder, other
than an acquiring person, to receive, upon exercise at the then current price of
the right, common shares of the Company having a value equal to two times the
exercise price of the right. Of the 10,000,000 preferred shares the Company is
authorized to issue, 500,000 shares have been designated Series A Junior
Preferred. The Series A Junior Preferred has certain dividend, voting and
liquidation preferences. No preferred shares have been issued.
6. SHARE BONUS AND INCENTIVE PLANS
The Company has established certain bonus 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.
During the six months ended June 30, 1997, pursuant to the Columbus Realty Trust
Employee Incentive Plan (Employee Incentive Plan), the Company granted 48,280
restricted common shares to certain executive officers, at their election, in
lieu of payment of annual base salary, such shares having a fair market value on
the date of grant of approximately $1.0 million, equal to 150% of the annual
base salary otherwise payable. In addition, the Company granted 2,464 restricted
common shares (having fair market values on the dates of grant of $50,000) to
certain Trust Managers equal to 150% of the quarterly trust manager fee
otherwise payable. The determination to grant common shares having a fair market
value of 150% of the base salary or trust manager fees otherwise payable was
based upon the risks of forfeiture of the shares awarded and the other
restrictions on transfer of the shares as described below. In addition, the
Company granted 30,264 restricted common shares having a fair market value on
the date of grant of $636,000 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 date of grant and may not be transferred
until the end of the three year restricted period.
Each of the restricted common shares was granted for a purchase price of $0.01
per share. The difference between the purchase price of the common shares and
the aggregate fair market values of the common shares on the dates of grant
(approximately $1.6 million in the aggregate) 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
three and six months ended June 30, 1997, the Company did not recognize the
compensation expense which would have been recognized if such annual base
salaries and cash bonuses had been
9
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHARE BONUS AND INCENTIVE PLANS, CONTINUED
paid. The portion of the amortization of the fair market values of restricted
common shares granted in 1997, 1996, and 1995 allocable to operations is set
forth in the following table (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
Amortization of deferred
compensation expense $ 59 $ 33 $ 88 $ 44
Amortization of deferred
bonus expense 52 37 85 53
------------------------------------------------------
$ 111 $ 70 $ 173 $ 97
======================================================
</TABLE>
7. TRANSACTIONS WITH AFFILIATES
Amounts receivable from affiliates include the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------
<S> <C> <C>
Amounts advanced to condominium homeowners'
associations $ 61 $ 54
Amounts advanced to non-management employees 38 34
Receivable from Employee Stock Purchase Plan 4 3
Amounts receivable from owners of predecessors in
connection with the acquisition of their interests 57 55
Amounts advanced to affiliates in ordinary course
of business for third party property management 24 6
--------------------
$ 184 $ 152
====================
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
GENERAL
The Company is subject to certain legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of the
Company's management, none of such proceedings is material in relation to the
Company's consolidated financial statements.
OPERATING LEASE
In March 1997 the Company executed an agreement to extend its lease for the
corporate offices. The lease agreement, which expires in December 1998, requires
minimum rent payments of $306,000 for the year ended December 31, 1997, and
$347,000 for the year ended December 31, 1998.
9. SUBSEQUENT EVENT
On August 4, 1997, the Company announced that it has entered into a definitive
agreement and plan of merger with Post Properties, Inc., a Georgia corporation
(Post), pursuant to which the Company would be merged into Post. Post, which is
one of the largest developers and operators of multifamily properties, currently
owns 21,673 apartment homes located primarily in metropolitan Atlanta, Georgia
and Tampa, Florida. Pursuant to the merger agreement, each outstanding common
share of the Company will be converted into .615 shares of common stock of Post
which will result in the issuance of approximately 8.4 million shares of common
stock of Post. The merger is expected to be completed in November 1997, subject
to the approval of the shareholders of the Company and Post and other customary
conditions.
10
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COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is based primarily on the consolidated financial
statements of Columbus Realty Trust as of June 30, 1997 and 1996, and for the
three and six month periods then ended. This information should be read in
conjunction with the accompanying consolidated financial statements and notes
thereto.
RESULTS OF OPERATIONS
As of June 30, 1997, the Company owned 6,045 completed multifamily residential
units in its real estate portfolio, a net increase of 1,162 units or
approximately 24% over the 4,883 units held as of June 30, 1996. The increase
in the number of residential units in the operating portfolio is the result of
the Company's development and acquisition programs. Five multifamily
residential projects were completed in 1996, one multifamily residential
property was acquired in the first quarter of 1997, and another multifamily
residential project was completed in the second quarter of 1997. As more fully
described below, the additions to the Company's operating portfolio in 1996 and
1997 have had a significant impact on the Company's results of operations. As
of June 30, 1997, the Company had six multifamily residential projects
comprising 1,481 apartment units under construction in the Dallas/Fort Worth,
Houston, and Jackson, Mississippi, markets.
COMPARISON OF THREE MONTH PERIOD ENDING JUNE 30, 1997 TO THREE MONTH PERIOD
- ---------------------------------------------------------------------------
ENDING JUNE 30, 1996
- --------------------
The Company's net income increased approximately $596,000 to approximately $3.4
million or $0.25 per common share for the three months ended June 30, 1997,
compared with net income of approximately $2.8 million or $0.24 per common share
for the three months ended June 30, 1996. Included in net income for the three
months ended June 30, 1997, is a net gain of $276,000 from the sale of 17
condominium units at two of the Company's properties.
During the three months ended June 30, 1997, rental revenues totaled
approximately $14.0 million, an increase of approximately $2.9 million or
approximately 26.7% over rental revenues of approximately $11.1 million in the
same three-month period of 1996. The Company's 503-unit development project,
Columbus Shores, contributed $831,000 of rental revenue in the second quarter of
1997 after completing its leasing program in April. The multifamily residential
property acquired in February 1997, The Commons at Turtle Creek, contributed
approximately $314,000 of rental revenue in the second quarter of 1997.
Additionally, two multifamily residential projects completed and leased in the
third quarter of 1996 provided approximately $1.3 million of rental revenue in
the current three-month period. The remaining rental revenue increase of
$455,000 in the three months ended June 30, 1997, over the comparable prior
period is the result of rental rate increases and slightly higher average
occupancy rates in the portfolio of same properties operated in 1997 and 1996.
Property management income decreased $36,000 or 48.6% in the three months ended
June 30, 1997, from the three months ended June 30, 1996, due to a decrease in
apartment units managed for third-party owners. Interest and other revenues
increased $141,000 or 22.7% in the three months ended June 30, 1997, over 1996
primarily due to increased non-rental income from the multifamily residential
properties, including the incremental increase in non-rental income from the
recently completed development projects, and increased investment income due to
higher average working capital balances available for investment.
Total expenses during the three months ended June 30, 1997, were approximately
$11.7 million, an increase of approximately $2.7 million or 30.0% over total
expenses of approximately $9.0 million in the three months ended June 30, 1996.
The increase in total expenses is primarily due to the growth in the size of the
Company's multifamily residential operating portfolio as a result of its
development and acquisition programs, an increase in expensed interest, and
higher property tax accruals on certain of the properties. Repairs and
maintenance and other property operating expenses increased $118,000 or 12.9%,
and $61,000 or 10.1%, respectively, in the three months ended June 30, 1997,
over the three months ended June 30, 1996, primarily as a result of the
Company's larger operating property portfolio. Advertising and property general
and administrative expenses increased $25,000 or 14.9% and $53,000 or 6.5%,
respectively, in the three months ended June 30, 1997, over 1996. The increases
in these expense categories due to the Company's development and acquisition
activities were partially offset by
11
<PAGE>
savings of $28,000 in advertising and $93,000 of property general and
administrative expenses in the same property portfolio in the current quarter
compared with 1996. Real estate tax expense increased $599,000 or 39.5% in the
three months ended June 30, 1997, over the respective prior period due to the
additional properties operated in 1997 and higher accruals for increased tax
assessments expected on certain of the properties.
General and administrative expenses incurred for the Company's corporate
activities increased $147,000 or 27.3% in the three months ended June 30, 1997,
from 1996 primarily due to increased personnel, overhead, and administrative
costs incurred for the Company's development activities. During the six months
ended June 30, 1997, and the years ended December 31, 1996, and 1995, the
Company awarded restricted common shares to certain of its executive officers
and Trust Managers in lieu of 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 10-Q and the 1996 Annual Report.
As a result, the Company did not recognize compensation expense which would have
been recognized in 1997 and 1996 if such annual base salaries and bonuses had
been paid without restrictions. However, the Company amortized a portion of the
restricted share awards as compensation and bonus expense over the three-year
periods from the dates of the respective grants to the extent such amortization
is allocable to operations. Accordingly, during the three months ended June 30,
1997, and 1996, the Company recognized compensation expense for amortization of
restricted common share awards of $111,000 and $70,000, respectively.
Interest expense increased $877,000 or 46.9% in the three months ended June 30,
1997, over 1996 as a result of the increase in non-development debt outstanding
at the end of each of the two periods. The Company's average non-development
debt outstanding under the Credit Facility (as defined below), plus other fixed-
rate debt, was approximately $147.9 million in the second quarter of 1997
compared with an average non-development debt balance of approximately $102.3
million in the second quarter of 1996. The Company's average interest rate for
non-development debt under the Credit Facility was 7.35% in the three months
ended June 30, 1997, compared with an average interest rate of 7.123% on non-
development debt under the Credit Facility in the same period of 1996. Interest
related to amortization of deferred financing costs increased $58,000 or 63% in
1997 over 1996 as a result of increased amortization attributable to loan fees
paid during the year.
Depreciation and amortization expense increased $757,000 or 30.4% in the three
months ended June 30, 1997 compared with the same three-month period of 1996
primarily due to the additional multifamily residential units added to the
Company's operating portfolio in 1996 and 1997.
The Company invested approximately $24.0 million, in total, in its real estate
portfolio during the three months ended June 30, 1997. Approximately $20.4
million was invested in the development and construction of seven multifamily
residential apartment projects. The Company invested approximately $2.9 million
to purchase two multifamily residential development sites. Additionally, the
Company invested approximately $723,000 in total for capital improvements and
purchases of furniture, fixtures, and equipment in the second three months of
1997. The components of these capital investments were (a) $411,000 invested in
improvements to the multifamily residential properties held in the Company's
real estate portfolio for one year or longer, (b) $130,000 invested in capital
improvements to a property acquired in the first quarter of 1997, (c) $104,000
invested in tenant improvements and capital expenditures for the Company's
retail and industrial properties, and (d) $78,000 invested in furniture,
fixtures, and equipment for the corporate offices, and property computer
equipment. More detailed information regarding the capital investments made in
the three months ended June 30, 1997, is set forth in the following table.
12
<PAGE>
Summary of capital improvements for the three months ended June 30, 1997:
<TABLE>
<CAPTION>
Stabilized Properties (1) Acquisition Properties (2) Totals
-------------------------- --------------------------- ---------------------------
Amount Per Unit Amount Per Unit Amount Per Unit
--------------- --------- ---------------- --------- -------------- -----------
(in thousands) (in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Multifamily residential properties
- --------------------------------------
Recurring expenditures
Floor coverings $137 $23.93 $ 4 $ 25.32 $141 $23.97
Appliances 7 1.22 1 6.33 8 1.36
Exterior repairs 129 22.53 107 677.22 236 40.11
Furniture, fixtures, & equipment 32 5.59 3 18.99 35 5.95
Other 93 16.24 15 94.94 108 18.36
-----------------------------------------------------------------------------
Subtotal - recurring 398 69.51 130 822.80 528 89.75
Revenue generating 13 2.27 - - 13 2.21
Major renovations - - - - - -
-----------------------------------------------------------------------------
Total multifamily residential $411 $71.78 130 $822.80 541 $91.96
===================================================== ===========
Industrial and retail properties (3) Per Sq. Ft.
- -------------------------------------- -----------
Tenant improvements 89 0.17
Commissions 10 0.02
Other 5 0.01
------------------------
Total industrial and retail 104 0.20
===========
Corporate purchases of furniture, fixtures, and equipment 78
-------
Total $723
=======
</TABLE>
- --------------------------------------
Notes:
(1) Multifamily residential properties owned for one year or more as of January
1, 1997, 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 for the three months ended June 30, 1997, was 5,883.
(2) Multifamily residential property acquired and owned by the Company for less
than one year as of January 1, 1997. Per unit computations are based on
158 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 SIX MONTH PERIOD ENDING JUNE 30, 1997 TO SIX MONTH PERIOD ENDING
- ------------------------------------------------------------------------------
JUNE 30, 1996
- -------------
The Company's net income increased approximately $1.2 million to approximately
$6.7 million or $0.50 per common share for the six months ended June 30, 1997,
compared with net income of approximately $5.5 million or $0.47 per common share
for the six months ended June 30, 1996, primarily as a result of operations from
Columbus Shores, a multifamily residential development completed in May 1997,
The Commons at Turtle Creek, acquired in February 1997, and the five multifamily
residential projects completed and leased during the second and third quarters
of 1996. Included in net income for the six months ended June 30, 1997, is the
aggregate net gain of $561,000 from the sale of 27 condominium units at two of
the Company's properties.
Rental revenues totaled approximately $26.9 million during the six months ended
June 30, 1997, an increase of approximately $5.5 million or 25.8% over rental
revenues of approximately $21.4 million in the comparable six
13
<PAGE>
month period of 1996. During the six months ended June 30, 1997, the Company
received approximately $4.9 million of additional rental income as a result of
its development and acquisition activities. In addition, rental revenues from
the Company's same property portfolio operated in both six-month periods ended
June 30, 1997, and 1996 increased $680,000 or 3% in 1997 over 1996 primarily as
a result of rental rate increases. Property management income decreased $78,000
or 52.3% in the six months ended June 30, 1997, from the same six-month period
of 1996 due to a decrease in apartment units managed for third-party owners.
Interest and other revenues increased $177,000 or 15% in the first six months of
1997 compared with the comparable six-month period of 1996 primarily due to the
incremental increase in non-rental income from the multifamily residential
development projects completed in 1997 and 1996, and increased investment income
due to higher average working capital balances available for investment.
Total expenses during the six months ended June 30, 1997, were approximately
$22.1 million, an increase of approximately $4.9 million or 28.4% over total
expenses of approximately $17.2 million in the same six-month period of 1996.
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
acquisition programs, an increase in expensed interest, and higher property tax
accruals on certain of the properties. The increase in the number of stabilized
apartment units was the primary reason for the $242,000 or 14.2% increase in
repairs and maintenance expenses and the $88,000 or 7.4% increase in other
property operating expenses. Advertising expenses increased $148,000 or 52.7%
in 1997 over 1996 as a result of the growth of the stabilized operating
portfolio, and in support of leasing efforts to increase and maintain occupancy
rates at all properties. Property administrative expenses increased $84,000 or
5.2% in the six months ended June 30, 1997, over 1996 primarily due to
additional staffing required at the multifamily residential properties added in
1997 and 1996. Real estate tax expense increased approximately $1.2 million or
39.3% in the first six months of 1997 over 1996 due to the increased number of
properties in the Company's stabilized operating portfolio, and due to higher
accruals for increased tax assessments expected on certain of the properties.
General and administrative expenses incurred for the Company's corporate
activities increased $285,000 or 27.3% in the six months ended June 30, 1997,
over the respective prior period primarily due to increased personnel, overhead,
and administrative costs incurred for the Company's development activities.
Included in corporate general and administrative expense during the six months
ended June 30, 1997, and 1996 is compensation expense for amortization of
restricted common share awards of $173,000 and $97,000, respectively.
Interest expense increased approximately $1.5 million or 45.6% in the six months
ended June 30, 1997, compared with the six months ended June 30, 1996, as a
result of the increase in non-development debt outstanding in the two periods.
The Company's average non-development debt outstanding under the Credit
Facility, plus other fixed-rate debt, was approximately $133.4 million for the
six months ended June 30, 1997, compared with an average non-development debt
balance of $92.1 million in the comparable six-month period of 1996. The
Company's average interest rate for non-development debt under the Credit
Facility was 7.232% in the six months ended June 30, 1997, compared with an
average interest rate of 7.093% on non-development debt under the Credit
Facility in the same period of 1996. Interest related to amortization of
deferred financing costs increased $93,000 or 58.5% in 1997 over 1996 as a
result of increased amortization attributable to loan fees paid during the year.
Depreciation and amortization expense increased approximately $1.3 million or
25.8% in the six months ended June 30, 1997, compared with the six months ended
June 30, 1996, primarily as a result of the additions to the Company's
stabilized property operating portfolio.
The Company invested approximately $49.7 million, in total, in its real estate
portfolio during the six months ended June 30, 1997. Approximately $38.7
million was invested in the development and construction of seven multifamily
residential apartment projects. The Company acquired two new multifamily
residential development sites for approximately $2.9 million, in aggregate, and
purchased one existing multifamily residential property for approximately $6.9
million in the six months ended June 30, 1997. Additionally, the Company
invested approximately $1.3 million in total for capital improvements and
purchases of furniture, fixtures, and equipment in
14
<PAGE>
the first half of 1997. The components of these capital investments were (a)
approximately $779,000 invested in improvements to the multifamily residential
properties held in the Company's real estate portfolio for one year or longer,
(b) $134,000 invested in capital improvements to a property acquired in the
first quarter of 1997, (c) $190,000 invested in tenant improvements and capital
expenditures for the Company's retail and industrial properties, and (d)
$146,000 invested in furniture, fixtures, and equipment for the corporate
offices, and property computer equipment. More detailed information regarding
the capital investments made in the six months ended June 30, 1997, is set forth
in the following table.
Summary of capital improvements for the six months ended June 30, 1997:
<TABLE>
<CAPTION>
Stabilized Properties (1) Acquisition Properties (2) Totals
-------------------------- --------------------------- ---------------------------
Amount Per Unit Amount Per Unit Amount Per Unit
--------------- --------- ---------------- --------- -------------- -----------
(in thousands) (in thousands) (in thousands)
Multifamily residential properties
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Recurring expenditures
Floor coverings $255 $ 46.26 $ 5 $ 31.65 $ 260 $ 45.85
Appliances 20 3.63 1 6.33 21 3.70
Exterior repairs 251 45.53 107 677.22 358 63.14
Furniture, fixtures, & equipment 93 16.87 5 31.65 98 17.28
Other 100 18.14 16 101.27 116 20.46
---------------------------------------------------------------------------
Subtotal - recurring 719 130.43 134 848.12 853 150.43
Revenue generating 15 2.72 - - 15 2.65
Major renovations 45 8.16 - - 45 7.94
---------------------------------------------------------------------------
Total multifamily residential $779 $141.31 $134 $848.12 913 $161.02
===========================================================================
Industrial and retail properties (3) Per Sq. Ft.
- -------------------------------------- -----------
Tenant improvements 145 $ 0.28
Commissions 31 0.06
Other 14 0.03
-------------------------
Total industrial and retail 190 $ 0.37
=======
Corporate purchases of furniture, fixtures, and equipment 146
-----------
Total $1,249
===========
</TABLE>
- --------------------------
Notes:
(1) Multifamily residential properties owned for one year or more as of January
1, 1997, 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 for the six months ended June 30, 1997, was 5,670.
(2) Multifamily residential property acquired and owned by the Company for less
than one year as of January 1, 1997. Per unit computations are based on
158 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash flow, totaling approximately $65.3 million
during the six months ended June 30, 1997, were approximately $52.1 million
provided from borrowings, approximately $5.5 million provided from operations,
approximately $5.4 million of proceeds from sales of common shares,
approximately $2.1 million from the sales of condominiums units in two of the
Company's properties, and a $242,000 net reduction in an escrow account for
15
<PAGE>
payment of property taxes. The Company's primary uses of cash, totaling
approximately $61.2 million during the same six-month period, were approximately
$38.7 million for construction costs on seven development projects,
approximately $10.4 million for payment of common share dividends, approximately
$9.8 million for acquisitions of two development sites and a multifamily
residential property, approximately $1.3 million for capital improvements and
purchases of furniture, fixtures, and equipment, $450,000 advanced for common
share purchases, $446,000 for principal payments on notes payable, and $137,000
for financing and offering costs.
The Company has historically used cash flow from operations to meet its dividend
payments and short term liquidity requirements, and a combination of equity,
mortgage debt, and credit line debt to finance its development and acquisition
activities. The Company has established a $170 million credit line (the Credit
Facility) with several lenders as the primary source of acquisition and
development capital, with a view towards replacing that debt following
acquisition (or completion, in the case of a development property) as market
conditions warrant, with either long term fixed rate debt or permanent equity.
As of August 1, 1997, the Company had a total of $237.3 million in outstanding
debt, consisting of $155.4 million under the Credit Facility (of which $44.3
million was drawn for development in progress), $59.4 million in fixed rate debt
with an average maturity of 4.7 years, $14.7 million in development debt from
Wells Fargo Realty Advisors in connection with Addison Circle One, $6.1 million
in short-term, unsecured debt drawn for development costs to date on two
redevelopment projects - The Rice Hotel located in Houston, Texas, and The
American Beauty Mill located in Dallas, Texas, and $2.0 million in seller
financed debt on a land site in the Uptown District of Dallas. Prior to its
maturity date of September 2, 1997, the Company currently contemplates full
repayment of the balance then outstanding on the short term unsecured credit
line with an incremental draw on the Credit Facility, or from other financing
sources.
The Company's long-term financing includes a $50 million loan from Nationwide
Life Insurance Company 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. As of August 1, 1997, approximately $48.8
was outstanding under the Nationwide loan.
The Company currently has under construction a total of 1,481 units in six
multifamily residential communities, and has acquired two additional sites upon
which it intends to construct approximately 528 multifamily residential units.
These eight developments are expected to cost approximately $155 million, of
which $88 million is anticipated to be funded from the Credit Facility and
internally generated cash flow. The remaining $67 million is anticipated to be
funded from third party debt and other sources. Full use of the $170 million
available under 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.
Additionally, approved collateral to secure $11 million of excess borrowing
capacity exists under the loan-to-value requirements of the Credit Facility.
Incremental collateral value will become available during the remainder of 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 developments 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. The Company and
its lenders are currently negotiating an increase in amount and extension of the
term of the Credit Facility beyond its current maturity date of December 31,
1997.
While the Company currently intends to continue to use the Credit Facility as
its primary source of development financing, it may in the future use additional
third party debt, 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 if the Company and its lenders are
unable to reach agreement on an extension of the maturity date. With respect to
its 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.
The Company believes that the presentation of funds from operations, as
hereinafter defined, when considered with the financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of the
16
<PAGE>
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 Company calculates funds from operations
in accordance with the definition approved by the Board of Governors of the
National Association of Real Estate Investment Trusts (NAREIT) in March 1995
which defines 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 real estate related depreciation
and amortization (excluding amortization of financing costs), and after
adjustments for unconsolidated partnerships and joint ventures.
The Company believes that the 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. 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 definition described above, funds from
operations for the three months ended June 30, 1997, and 1996 was approximately
$6.6 million and $5.3 million, respectively. Funds from operations for the six
months ended June 30, 1997, and 1996 was approximately $12.9 million and $10.4
million, respectively. The Company's net cash flows from its operating,
investing, and financing activities were approximately $4.0 million and
approximately ($5.0 million) for the six months ended June 30, 1997, and 1996,
respectively. More information with respect to the Company's funds from
operations is shown in the table below (in thousands). Refer also to the
Company's financial statements included elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $3,405 $2,809 $ 6,737 $ 5,505
Depreciation of real estate assets 3,173 2,409 6,056 4,770
Amortization of tenant allowances and
capitalized leasing costs 38 48 77 97
-------------------------------------------------------
Funds from operations $6,616 $5,266 $ 12,870 $ 10,372
=======================================================
Six months ended June 30,
1997 1996
--------------------------
Net cash provided by operating activities $ 5,458 $ 4,063
Net cash used in investing activities (47,816) (39,587)
Net cash provided by financing activities 46,405 30,565
--------------------------
Net increase (decrease) in cash and cash equivalents $ 4,047 $ (4,959)
==========================
</TABLE>
RECENT DEVELOPMENTS
On August 4, 1997, the Company announced that it has entered into a definitive
agreement and plan of merger with Post Properties, Inc., a Georgia corporation
(Post), pursuant to which the Company would be merged into Post. Post, which is
one of the largest developers and operators of multifamily properties, currently
owns 21,673 apartment homes located primarily in metropolitan Atlanta, Georgia
and Tampa, Florida. Pursuant to the merger agreement, each outstanding common
share of the Company will be converted into .615 shares of common stock of Post
which will result in the issuance of approximately 8.4 million shares of common
stock of Post. The merger is expected to be completed in November 1997, subject
to the approval of the shareholders of the Company and Post and other customary
conditions.
17
<PAGE>
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This Form 10-Q, together with other statements and information publicly
disseminated by the Company, contain certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based on current expectations which involve a number of risks and
uncertainties, including, but not limited to, risks due to the market
concentration of the Company's properties in Dallas, Texas, and particularly the
Uptown District; risks associated with the acquisition, construction and
development of multifamily residential properties, including the risk of
oversupply of units or a reduction in demand for apartment units, risks
associated with delays in construction and lease-up, cost overruns, and risks
that the Company's acquisition and development properties will fail to perform
as expected; and 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.
18
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor its properties are presently subject to any material
litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or its properties, other than routine litigation
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and none of which are
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Pursuant to the Company's Credit Facility, the Company is prohibited from paying
or declaring dividends in excess of the sum of 90% of the Company's funds from
operations (as defined herein) and net taxable gains realized in each year from
property sales. This restriction has not, to date, affected the distributions
declared or payable to shareholders nor does the Company anticipate that this
restriction will affect the distributions payable to shareholders in the future.
On May 23, 1997, the Board of Trust Managers of the Company adopted a
shareholder rights plan, as described in Note 5 of the Notes to the Consolidated
Financial Statements set forth above.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of shareholders was held May 23, 1997.
(c) (1) The shareholders reelected the three Trust Managers Managers to serve
three year terms: (Class III) nominated by the Board of Trust Managers
to serve three year terms:
Affirmative Negative Abstentions
----------- -------- -----------
Hugh G. Robinson 11,737,191 53,155 N/A
Robert L. Shaw 11,681,096 109,250 N/A
Roger T. Staubach 11,681,077 109,269 N/A
The terms of office of Richard L. Bloch, Will Cureton, Gregg L. Engles
and Amy DiGeso continued after the meeting.
(2) The shareholders approved an amendment of the Company's Declaration of
Trust to incorporate certain provisions of the New York Stock Exchange's
Settlement Provisions.
Affirmative Negative Abstentions
----------- -------- -----------
11,681,939 83,836 24,571
(3) The shareholders ratified the appointment of Ernst & Young LLP as
independent auditors of the Company for the year ending December 31,
1997.
Affirmative Negative Abstentions
----------- -------- -----------
11,767,171 10,048 13,127
ITEM 5. OTHER INFORMATION
None.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- ---------------------------
3.1 --Amended and Restated Declaration of Trust of the Company (9)
3.2 --Amendment No. 1 to Amended and Restated Declaration of Trust of the
Company (16)
3.3 --Bylaws of the Company (9)
3.4 --Amendment No. 1 to Bylaws of the Company (16)
4.1 --Form of certificate representing common shares of beneficial
interest, par value $.01 per share, of the Company (3)
4.2 --Rights Agreement, dated as of May 23, 1997, between the Company and
BankBoston,N.A., as Rights Agent, which includes: as Exhibit A
thereto the Form of Designation of Series A Junior Participating
Preferred Shares, par value $.01 per share; as Exhibit B thereto,
the Form of Right Certificate; and as Exhibit C thereto, the
summary of Rights to Preferred Purchase Shares (16)
4.3 --Form of Legend to be placed, pursuant to Section 3(c) of the Rights
Agreement, on all new Common Share certificates issued by the
Company after June 9, 1997 and prior to the Distribution Date, upon
transfer, exchange or new issuance (16)
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++ --Amendment No. 1 to Employment Agreement between the Company and
Richard L. Bloch (17)
10.6++ --Employment Agreement between the Company and Robert L. Shaw (15)
10.7++ --Amendment No. 1 to Employment Agreement between the Company and
Robert L. Shaw (17)
10.8++ --Employment Agreement between the Company and Will Cureton (15)
10.9++ --Amendment No. 1 to Employment Agreement between the Company and
Will Cureton (17)
10.10++ --Employment Agreement between the Company and Richard R. Reupke (15)
10.11++ --Employment Agreement between the Company and Thomas L. Wilkes (15)
10.12++ --Employment Agreement between the Company and J. Michael Lewis (15)
10.13++ --Employment Agreement between the Company and Arthur E. Lomenick
(15)
10.14++ --Employment Agreement between the Company and James F. Duffy (15)
10.15 --Form of Indemnification Agreement by and between the Company and
its executive officers and Trust Managers (1)
10.16 --Fourth Amendment to Master Lease Agreement between the Company and
Electronic Data Systems Corporation pertaining to Windhaven Village
(6)
10.17 --Lease Agreement between the Company and Madison Office Building,
Inc. pertaining to the Madison Office Building (2)
10.18 --Fifth and Sixth Amendments to Lease Agreement between the Company
and Utah State Retirement Investment Fund (17)
10.19++ --Columbus Realty Trust 1993 Share Bonus Plan (4)
10.20++ --Columbus Realty Trust 1993 Share Option Plan (4)
10.21 --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)
10.22 --First Modification to the Second Amended and Restated Loan
Agreement between the Company, Bank Incorporated, Texas Commerce
Bank NA, Comerica Bank - Texas, and Bank One, Texas NA, as agent
One, Texas, NA, Bank United of Texas FSB, Wells Fargo Realty
Advisors Funding, for the Banks (14)
10.23 --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)
10.24 --$50,000,000 Mortgage Note between the Company and Nationwide Life
Insurance Company (14)
10.25 --Form of Assignment of Limited Partnership Interests (1)
10.26 --Form of Waiver and Contribution Agreement (3)
10.27++ --Columbus Realty Trust 401(k) Plan and Trust (5)
20
<PAGE>
10.28 --Columbus Realty Trust Amended and Restated Dividend Reinvestment
and Share Purchase Plan (7)
10.29++ --Columbus Realty Trust Share Bonus Plan (No. 2) (8)
10.30++ --Columbus Realty Trust Employee Stock Purchase Plan (10)
10.31++ --Columbus Realty Trust Long Term Management Incentive Plan (11)
10.32++ --Columbus Realty Trust Long Term Employee Incentive Plan (12)
10.33 --Form of Long Term Management Incentive Plan Performance - Based
Stock and Dividend Equivalent Award Agreement by and between the
Company and Richard L. Bloch, Robert L. Shaw and Will Cureton (15)
10.34 --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 for the Banks (15)
10.35 --$15,000,000 Promissory Note between the Company and Bank One,
Texas, N.A. (17)
10.36* --Form of Promissory Note dated May 23, 1997 in the amount of
$150,000 payable to the Company by each of Roger T. Staubach, James
C. Leslie and Gregg L. Engles
10.37* --Form of Pledge and Security Agreement dated May 23, 1997 by Roger
T. Staubach, James C. Leslie and Gregg L. Engles in favor of the
Company
11 --Statement regarding computation of net income per common share (13)
27.1* --Financial Data Schedule
______________________________
++ 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.
13) Incorporated by reference to Note 5 of Item 1 - Financial Statements
of this Form 10-Q.
21
<PAGE>
14) Previously filed with the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference.
15) Previously filed with the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
16) Previously filed with the Company's Registration Statement on Form 8-A
(File No. 001-12684) and incorporated herein by reference.
17) Previously filed with the Company's Quarterly Report on Form 10-Q for
the three months ended March 31, 1997 and incorporated herein by
reference.
(b) Reports on Form 8-K
DATE OF REPORT ITEM REPORTED
-------------- -------------
May 23, 1997 The Company announced the adoption of its Shareholders
Rights Plan.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLUMBUS REALTY TRUST
(Registrant)
/s/ Robert L. Shaw 8/4/97
- ------------------------------------------------ ------------------
Robert L. Shaw Date
Chief Executive Officer and Trust Manager
(Principal Executive Officer)
/s/ Richard R. Reupke 8/4/97
- ------------------------------------------------ ------------------
Richard R. Reupke Date
Chief Financial Officer
(Principal Financial and Accounting Officer)
23
<PAGE>
EXHIBIT 10.36
PROMISSORY NOTE
---------------
$150,000.00 May 23, 1997
FOR VALUE RECEIVED, the undersigned ("BORROWER"), promises to pay to the
--------
order of COLUMBUS MANAGEMENT SERVICES, INC., a Texas corporation or its
successors or assigns ("LENDER") at its offices in Dallas County, Texas, at
------
15851 Dallas Parkway, Suite 855, Dallas, Texas 75248, or such other place as
may be designated by Lender in writing, the principal amount of $150,000.00 (the
"TOTAL PRINCIPAL AMOUNT"), or such lesser amount which is outstanding from time
----------------------
to time under this Promissory Note (the "NOTE"), together with interest on such
----
portion of the Total Principal Amount from the date advanced until paid at a
rate of 7.34% per annum, provided that in no event shall the interest payable
hereunder exceed the Maximum Rate (as hereinafter defined).
The term "MAXIMUM RATE" as used herein, means the maximum rate of interest
------------
which, under applicable law, may then be charged on this Note at the time in
question. If applicable law ceases to provide for a maximum rate of interest,
the Maximum Rate will equal eighteen percent (18%) per annum.
The principal of, and all accrued but unpaid interest on, this Note shall
be due as follows:
(a) Interest shall be due quarterly as it accrues, commencing on
October 1, 1997, and continuing on the first day of each successive January
1, April 1, July 1 and October 1 thereafter until the Maturity Date
(defined below).
(b) The entire unpaid principal balance, together with all accrued but
unpaid interest, shall be due on the earlier to occur of (i) the 90th day
following (A) the date on which Borrower shall have been removed as a Trust
Manager of Lender for "cause" or (B) the death of Borrower or (ii) the
365th day following the date Borrower shall no longer serve as Trust
Manager for any reason (or than as a result of death or removal for
"cause") or (iii) May 30, 2007 (the "MATURITY DATE").
-------------
If any interest is not paid by the tenth day after it is due, Lender
may, at its option, add such accrued interest to the principal of this Note.
Notwithstanding anything herein to the contrary, upon an Event of Default (as
hereinafter defined) or at maturity, whether by acceleration or otherwise, all
principal of this Note shall, at the option of Lender, bear interest at the
Maximum Rate until paid.
<PAGE>
This Note, the Pledge and Security Agreement dated as of the date hereof
between Borrower and Lender (the "Security Agreement") and all other documents,
now or hereafter, evidencing, securing, governing, guaranteeing or pertaining to
this Note are hereinafter collectively referred to as the "LOAN DOCUMENTS." The
--------------
holder of this Note is entitled to the benefits and security provided in the
Loan Documents.
This Note may be prepaid in whole or in part at any time without premium or
fee. All regularly scheduled payments of the indebtedness evidenced by this
Note shall be applied first to any accrued but unpaid interest then due and
payable hereunder or thereunder and then to the principal amount then due and
payable. All non-regularly scheduled payments shall be applied to such
indebtedness in such order and manner as the holder of this Note may from time
to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Note shall be made in lawful money of the
United States of America, at the address of Lender indicated above, or such
other place as the holder of this Note shall designate in writing to Borrower.
If any payment of principal of or interest on this Note shall become due on a
day which is not a Business Day (as hereinafter defined), such payment shall be
made on the next succeeding Business Day and any such extension of time shall be
included in computing interest in connection with such payment. As used herein,
the term "BUSINESS DAY" shall mean any day other than a day on which commercial
------------
banks in the State of Texas are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
----- -----
accrued and unpaid interest on this Note.
Upon the occurrence of an Event of Default, the holder of this Note may
without further notice or demand, (i) declare the outstanding principal balance
of and accrued, unpaid interest on this Note at once due, (ii) pursue any and
all other rights, remedies and recourses available to the holder hereof,
including but not limited to any such rights, remedies or recourses under the
Loan Documents, at law or in equity, or (iii) pursue any combination of the
foregoing. Any of the following events shall be considered an "Event of
Default":
(a) Default is made in the payment when due of any of the payments
hereunder or under any of the Loan Documents and the continuance thereof
for 15 days after Lender has delivered to Borrower written notice thereof;
(b) Borrower's failure to perform any of its other obligations under
any Loan Document and the continuance thereof for 30 days after Lender has
delivered to Borrower written notice thereof;
(c) Any representation or warranty by Borrower in any Loan Document or
in any certificate, request, or other document furnished pursuant to or
under any Loan Document proves to have been incorrect in any material
respect as of the date when made or deemed made;
-2-
<PAGE>
(d) An involuntary case or other proceeding shall be commenced against
Borrower which seeks liquidation, reorganization or other relief with
respect to it or its debts or other liabilities under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or of any substantial part of its property, or an order for
relief against Borrower shall be entered in any such case under the Federal
Bankruptcy Code; or
(e) Borrower shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to himself
or his debts or other liabilities under any bankruptcy, insolvency, or
other similar official for himself or any substantial part of its property,
or shall consent to any such relief or the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against him, or shall make a general assignment for the benefit
of creditors or shall fail generally to, or shall admit in writing its
inability to, pay his debts generally as they become due, or shall take any
action to authorize or effect any of the foregoing.
The failure to exercise the option to accelerate the maturity of this Note
or any other right, remedy or recourse available to the holder hereof upon the
occurrence of an Event of Default shall not waive the right of the holder of
this Note to exercise it at that time or at any subsequent time with respect to
such an Event of Default or any other Event of Default. The rights, remedies
and recourses of the holder hereof, as provided in this Note and in any of the
other Loan Documents, are cumulative and concurrent and may be pursued
separately, successively or together as often as occasion therefor arises, at
the sole discretion of the holder hereof. The acceptance by the holder hereof
of any payment under this Note which is less than the payment in full of all
amounts due when such payment is made shall not (1) constitute a waiver of or
impair, reduce, release or extinguish any right, remedy or recourse of the
holder hereof, or nullify any prior exercise of any such right, remedy or
recourse, or (2) impair, reduce, release or extinguish the obligations of any
party liable under any of the Loan Documents as originally provided herein or
therein.
This Note and all of the other Loan Documents are intended to be performed
in accordance with, and only to the extent permitted by, all applicable usury
laws. If any provision hereof or any other Loan Documents or the application
thereof to any person or circumstance shall, for any reason and to any extent,
be invalid or unenforceable, neither the application of such provision to any
other person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by laws. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Note. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under the Loan Documents,
-3-
<PAGE>
or contracted for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Note, or if Lender's exercise of the option to
accelerate the maturity of this Note, or if any prepayment by Borrower results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Lender that all excess amounts theretofore
collected by Lender shall be credited on the principal balance of this Note (or,
if this Note and all other indebtedness arising under or pursuant to the other
Loan Documents have bene paid in full, refunded to Borrower), and the provisions
of this Note and the other Loan Documents shall immediately be deemed reformed
and the amounts thereafter collectable hereunder and thereunder reduced, without
the necessity of the execution of any new document, so as to comply with the
then applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder that may be lawfully collected.
All sums paid, or agreed to be paid, by Borrower for the use, forbearance,
detention, taking, charging, receiving or reserving of the indebtedness of
Borrower to Lender under this Note or arising under or pursuant to the other
Loan Documents shall, to the maximum extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to such indebtedness for so long as such indebtedness
is outstanding. To the extent federal law permits Lender to contract for,
charge or receive a greater amount of interest, Lender will rely on federal law
instead of TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended, for the purpose
of determining the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Lender may, from time to time,
implement any other method of computing the Maximum Rate under such Article
5069.1.04, as amended, or under other applicable law by giving notice, if
required by law, to Borrower as provided by applicable law now or hereafter in
effect. Notwithstanding anything to the contrary contained herein or in any of
the other Loan Documents, it is not the intention of Lender to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
If this Note is placed in the hands of an attorney for collection, or is
collected in whole or in part by suit or through probate, bankruptcy or other
legal proceedings of any kind, Borrower shall pay, in addition to all other sums
payable hereunder, all costs and expenses of collection, including but not
limited to reasonable attorneys' fees.
Except otherwise provided in the Loan Documents, Borrower and any and all
endorsers and guarantors of this Note severally waive presentment for payment,
notice of nonpayment, protest, demand, notice of protest, notice of intent to
accelerate, notice of acceleration and dishonor, diligence in enforcement and
indulgences of every kind and without further notice hereby agree to renewals,
extensions, exchanges or releases of collateral, taking of additional
collateral, indulgences or partial payments, either before or after maturity.
-4-
<PAGE>
NOTWITHSTANDING ANY PROVISIONS OF THIS NOTE OR ANY OF THE LOAN DOCUMENTS,
BORROWER'S LIABILITY FOR THE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS
HEREUNDER OR UNDER THE SECURITY AGREEMENT SHALL BE LIMITED TO, AND LENDER SHALL
BE ENTITLED TO SEEK RECOURSE FOR PAYMENT OR PERFORMANCE THEREOF ONLY AGAINST,
THE COLLATERAL, AS DEFINED IN THE SECURITY AGREEMENT.
THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.
Executed as of the date first written above.
-------------------------------------
Name:
--------------------------------
Address:
----------------------------
----------------------------
----------------------------
-5-
<PAGE>
EXHIBIT 10.37
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (this "AGREEMENT"), dated as of May 23,
---------
1997, is made by _________________ ("PLEDGOR"), in favor of COLUMBUS MANAGEMENT
-------
SERVICES, INC., a Texas corporation, its successors and assigns ("SECURED
-------
PARTY").
- -----
RECITALS
A. Pursuant to the Columbus Realty Trust Long-Term Management Incentive
Plan, Pledgor was awarded the right to acquire up to 15,384 common shares of
beneficial interest, par value $.01 per share, of Columbus Realty Trust (the
"COMMON SHARES"), a portion of the purchase price of which would be loaned by
- --------------
Secured Party.
B. Pledgor is purchasing 15,384 Common Shares, a portion of the purchase
price of which is being funded with the proceeds of a loan from Secured Party
which loan is evidenced by the $150,000.00 promissory note executed by Pledgor
payable to the order of Secured Party (the "NOTE").
----
C. The Note, this Agreement, and all other documents executed of even date
herewith or hereafter existing which evidence or secure the Note as the same may
be amended from time to time are hereinafter collectively called the "LOAN
----
DOCUMENTS."
- ---------
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Pledgor agrees as follows:
1. PLEDGE. Pledgor hereby pledges to Secured Party and grants to Secured
------
Party a security interest in 15,384 Common Shares issued in the name of Pledgor
and purchased with the proceeds of the loan from Secured Party to Pledgor (the
"PLEDGED SHARES"), and all dividends, cash, instruments, securities and other
- ---------------
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any of the Pledged Shares (collectively, the
"COLLATERAL").
- -----------
2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of all
------------------------
amounts evidenced by the Note and all other obligations of Pledgor to Secured
Party now existing or hereafter arising under the Loan Documents (collectively,
the "OBLIGATIONS").
-----------
3. DELIVERY OF PLEDGED SHARES. All certificates or instruments
--------------------------
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of Secured Party pursuant hereto and shall be in suitable form for
transfer by delivery, or
<PAGE>
shall be accompanied by duly executed instruments of transfer or assignment in
blank. Secured Party shall have the right to register in the name of Secured
Party or any of Secured Party's nominees any or all of the Pledged Shares.
Secured Party shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations.
4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants that
------------------------------
he is the legal and beneficial owner of the Collateral free and clear of any
lien, security interest, restriction on transfer, voting rights, restriction,
option or other charge or encumbrance, and that Pledgor has full right and power
to transfer the Collateral to the Secured Party, free and clear of any interests
described herein.
5. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to
------------------
time, at the expense of Pledgor, Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, as may be
reasonably requested by Secured Party in order to perfect and protect any
security interest granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
6. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no "event of default" has occurred under the Note
(hereinafter referred to as an "EVENT OF DEFAULT"), Pledgor shall be entitled to
----------------
exercise any and all voting and other consensual rights pertaining to the
Pledged Shares or any part thereof for any purpose not inconsistent with the
terms of this Agreement, and Secured Party shall execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies and other instruments
as Pledgor may reasonably request for the purpose of enabling Pledgor to
exercise such voting and other rights.
(b) Upon the occurrence of any Event of Default, all the rights of Pledgor
to exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(a) shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon have the sole
right to exercise such voting and other consensual rights.
(c) So long as no Event of Default has occurred, any and all dividends,
distributions and interest paid in respect of the Pledged Shares shall be paid
to Pledgor. If an Event of Default exists, any and all such dividends,
distributions, and interest shall be forthwith delivered to Secured Party to be
held by Secured Party as additional Collateral, and shall, if received by
Pledgor, be received in trust for the benefit of Secured Party, be segregated
from the other property or funds of Pledgor and be forthwith delivered to
Secured Party as additional Collateral in the same form as so received (with any
necessary endorsement).
-2-
<PAGE>
7. TRANSFERS AND OTHER LIENS. Without the prior written consent of
-------------------------
Secured Party, Pledgor agrees that it will not (a) sell or otherwise dispose of,
or grant any option with respect to, any of the Collateral or (b) create or
permit to exist any lien, security interest, or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interest
created or extended by this Agreement.
8. REASONABLE CARE. Secured Party shall be deemed to have exercised
---------------
reasonable care in the custody and the preservation of the Collateral in Secured
Party's possession if the Collateral is accorded treatment substantially equal
to that which Secured Party accords Secured Party's own property, it being
understood that Secured Party shall have no responsibility for (a) ascertaining
or taking action with respect to costs, conversions, changes, maturities,
tenders or other matters relative to any Collateral, whether or not Secured
Party has or is deemed to have knowledge of such matters, or (b) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
9. REMEDIES UPON DEFAULT. If an Event of Default exists:
---------------------
(a) Secured Party may elect to declare all or any part of the Obligations
secured hereby immediately due and payable in full, without notice, demand,
presentment, notice of intent to accelerate, notice of acceleration or any other
notice, all of which Pledgor hereby expressly waives (except such notice as may
be required by law and cannot be waived).
(b) Secured Party may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to Secured
Party, all the rights and remedies of a secured party in default under all
applicable laws in effect in the State of Texas at that time and Secured Party
may also, without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels in a public or private sale, at any
exchange, broker's board, for cash, on credit or for future delivery and upon
such other terms as Secured Party may deem commercially reasonable. Pledgor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(c) Any cash held by Secured Party as Collateral and all cash proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization of all or any part of Collateral, may, in the discretion of Secured
Party, be held by Secured Party as collateral for, and/or then or at any time
thereafter applied in whole or in part by Secured Party against all or any part
of the Obligations. Any surplus of such
-3-
<PAGE>
cash or cash proceeds held by Secured Party and remaining after payment in full
of all the Obligations shall be paid over to Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
10. EXPENSES. Pledgor shall upon demand pay to Secured Party any and all
--------
reasonable expenses (including reasonable attorneys' fees and legal expenses)
incurred by Secured Party in connection with protecting Secured Party against
the claims or interests of any third person with respect to the Collateral, and
in exercising any right or remedy conferred by this Agreement or by law.
11. AMENDMENTS. No amendment or waiver of any provision of this Agreement
----------
shall in any event be effective unless the same shall be in writing and signed
by both Pledgor and Secured Party.
12. RETURN OF THE COLLATERAL. Upon the full payment and performance of
------------------------
the Obligations, this Agreement and the pledge effected hereby shall be null and
void and the Collateral shall promptly be returned to Pledgor by Secured Party.
13. CONTINUING SECURITY AGREEMENT. This Agreement shall create a
-----------------------------
continuing security interest in the Collateral and shall (a) remain in full
force and effect until payment in full of the Obligations and (b) be binding
upon Pledgor, his heirs, successors and assigns.
14. NOTICES. Any notice provided or permitted to be given under this
-------
Agreement must be in writing and may be served by: (a) depositing same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (b) by delivering the
same in person to such party; (c) by prepaid telegram or telex; or (d) by
telecopier. Notice given in accordance with option (a) above shall be effective
only upon receipt at the address of the addressee. For purposes of notice, the
addresses and telecopy numbers of Pledgor are as set forth opposite Pledgor's
signature below and the addresses and telecopy numbers of Secured Party are as
follows:
If to Secured Party, to: Columbus Management Services, Inc.
15851 Dallas Parkway, Suite 855
Dallas, TX 75248
Attention: Robert L. Shaw
Telecopy No.: (972) 770-5109
-4-
<PAGE>
With copies to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, TX 75270
Attention: Michelle P. Goolsby
Telecopy No.: (214) 745-5390
If to Pledgor, to: _______________________
_______________________
_______________________
_______________________
_______________________
15. GOVERNING LAW; TERMS. This Agreement shall be governed by, and
--------------------
construed in accordance with, the laws of Texas.
Executed and delivered as of the date first above written.
----------------------------------
Name:
-----------------------------
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,688
<SECURITIES> 0
<RECEIVABLES> 1,370
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,371
<PP&E> 406,780
<DEPRECIATION> 3,058
<TOTAL-ASSETS> 430,713
<CURRENT-LIABILITIES> 14,279
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 182,760
<TOTAL-LIABILITY-AND-EQUITY> 430,713
<SALES> 26,879
<TOTAL-REVENUES> 28,307
<CGS> 5,358
<TOTAL-COSTS> 22,131
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,150
<INCOME-PRETAX> 6,737
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,737
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
