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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 1-12590
GABLES RESIDENTIAL TRUST
(Exact name of Registrant as specified in its charter)
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MARYLAND 58-2077868
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2859 PACES FERRY ROAD, SUITE 1450
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 436-4600
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
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Common Shares of Beneficial Interest, New York Stock Exchange
par value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
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(2) Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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As of March 20, 1997, the aggregate market value of the 19,109,575 Common
Shares held by non-affiliates of the Registrant was $508,792,434 based upon the
closing price ($26.625) on the New York Stock Exchange composite tape on such
date. (For this computation, the Registrant has excluded the market value of
all Common Shares reported as beneficially owned by executive officers and
trustees of the Registrant; such exclusion shall not be deemed to constitute
an admission that any such person is an "affiliate" of the Registrant.) As of
March 20, 1997, there were outstanding 19,329,371 Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's Proxy Statement relating to
its Annual Meeting of Shareholders to be held May 13, 1997 are incorporated by
reference in Part III, Items 10, 11, 12 and 13.
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FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
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ITEM PAGE
NO. NO.
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PART I
<S> <C> <C>
1. Business ................................................................................. 1
2. Properties ................................................................................. 9
3. Legal Proceedings ..........................................................................16
4. Submission of Matters to a Vote of Security Holders .........................................16
PART II
5. Market for Registrant's Common Shares .......................................................16
6. Selected Financial and Operating Information ................................................17
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................................................20
8. Financial Statements and Supplementary Data ................................................34
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ................................................................34
PART III
10. Directors and Executive Officers of the Registrant ..........................................34
11. Executive Compensation .....................................................................34
12. Security Ownership of Certain Beneficial Owners and Management .............................34
13. Certain Relationships and Related Transactions .............................................34
PART IV
14. Exhibits, Financial Statements and Schedule and Reports on Form 8-K .........................35
</TABLE>
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ITEM 1. BUSINESS
GENERAL
Gables Residential Trust is one of the largest owners and operators of
multifamily communities in the Southeastern and Southwestern United States.
The Company is a self-administered and self-managed real estate investment
trust ("REIT") and has elected to be treated as a REIT under the Internal
Revenue Code of 1986, as amended, beginning with its taxable year ending
December 31, 1994. The Company was formed in 1993 under Maryland law to
continue and to expand the multifamily apartment community management,
development, construction and acquisition operations of its privately owned
predecessor organization. The term "Gables Residential Group" or "Group" as
used herein refers to the privately owned predecessor organization prior to the
Company's initial public offering in January, 1994 (the "Initial Offering" or
"IPO") and the concurrent completion of the various transactions that occurred
simultaneously therewith (the "Formation Transactions"). The term "Company" or
"Gables" as used herein means Gables Residential Trust and its subsidiaries on
a consolidated basis (including Gables Realty Limited Partnership and its
subsidiaries) or, where the context so requires, Gables Residential Trust only,
and, as the context may require, their predecessors.
Substantially all of the Company's business is conducted through, and all
of the Company's interests in property are held by or through, Gables Realty
Limited Partnership (the "Operating Partnership"), of which the Company is
currently an 84.60% economic owner and which the Company controls through
Gables GP, Inc. ("GGPI"), a wholly-owned subsidiary and the sole general
partner of the Operating Partnership (this structure is commonly referred to as
an umbrella partnership REIT or "UPREIT"). At December 31, 1996 the Company
owned, through the Operating Partnership, 46 completed multifamily communities
and had an indirect 25% interest in two multifamily communities (collectively,
the "Current Communities") containing apartment homes located in the following
cities in Georgia, Texas and Tennessee: Atlanta, Houston, Dallas, San Antonio,
Austin, Nashville and Memphis. The Current Communities total 15,244 apartment
homes and had a weighted average physical occupancy rate of approximately 94%
as of December 31, 1996, excluding two communities in the final stages of
lease-up. In January, 1997, the Company sold one of these completed
communities comprising 486 apartment homes and acquired a community comprising
232 apartment homes. The Company also had nine multifamily communities under
development at December 31, 1996 (collectively, the "Development Communities"
and, with the Current Communities, the "Communities"). The Development
Communities are expected to comprise 2,515 apartment homes, including one
community expected to comprise 231 apartment homes for which the land was
acquired in January, 1997, and are expected to be completed in 1997 and 1998.
In addition to the Communities, the Company owns three sites (the "Undeveloped
Sites") on which the Company intends to develop apartment communities and has
rights (the "Development Rights") to acquire six additional sites. Although
there is no assurance that the Company will develop multifamily communities at
any of the Undeveloped Sites or pursuant to any of the Development Rights, an
estimated 2,546 apartment homes could be added to the Company's portfolio from
the successful development of all such locations.
The Company's executive offices are located at 2859 Paces Ferry Road, in
Atlanta, Georgia 30339 and its telephone number is (770) 436-4600. The
Company's common shares of beneficial interest, par value $0.01 per share
("Common Shares"), are listed on the New York Stock Exchange under the symbol
"GBP".
Management Structure. The Company has been responsible for the
development or acquisition of approximately 40,000 apartment homes since 1982
and its senior management team has, on average, approximately fifteen years
experience in the multifamily industry. The Company provides a full range of
integrated real estate services through a staff of approximately 900 employees
who have experience in property operations, development, acquisition and
construction. The Company maintains offices in Atlanta, Houston and Dallas,
each with its own fully integrated organization, including experienced in-house
management, development and acquisition staffs with specific knowledge of the
particular markets served. In addition, the Company maintains offices in San
Antonio and Memphis. The Company believes that its competitive strength and
growth potential lie in management's in-depth knowledge of the changing
opportunities available in each local market and in its locally focused
management structure, which enables highly experienced development and
acquisition personnel to pursue new opportunities in each market and highly
experienced on-site managers to make the day-to-day decisions needed to
maximize the performance of existing properties. The finance, accounting and
administrative functions for the entire Company are controlled by a central
staff located in Atlanta.
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Competitive Advantages. The Company believes that it has several
competitive advantages. These advantages include:
- Service-oriented philosophy: a service-oriented philosophy which
focuses on offering extensive resident amenities and services in quality
apartment homes to increase occupancy and rental rates and reduce resident
turnover;
- Geographic diversification: an established market presence in
multiple major markets in the Southeastern and Southwestern United
States which are geographically independent, rely on diverse economic
foundations, and during the past several years have shown job growth
substantially above national averages;
- Product focus: a portfolio concentration of Class A properties
located primarily in in-fill locations and master-planned communities,
which includes garden, townhome and higher density apartment communities that
were developed, acquired, rehabilitated or repositioned by the Company, targeted
toward a lifestyle renter segment;
- Local presence in multiple markets: a local presence for over ten
years in each of the seven cities served by the Company through an experienced
staff with superior knowledge of local markets and a culture which provides
incentives for outstanding performance at all levels;
- Fully integrated organization: a fully integrated organization
with a track record in excess of ten years in all phases of real estate
property management, development, acquisition, construction, rehabilitation,
financing (including tax-exempt bond financing) and marketing.
THE OPERATING PARTNERSHIP
Gables Realty Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), is the entity through which the Company conducts
substantially all of its business and owns (either directly or through
subsidiaries) all of its assets. The Company currently holds directly, or
indirectly through GGPI, 84.60% of the Operating Partnership's Units of limited
and general partnership. This structure is commonly referred to as an umbrella
partnership REIT or UPREIT. Through GGPI, a wholly-owned subsidiary of the
Company and the sole general partner of the Operating Partnership, the Company
controls the Operating Partnership. The board of directors of GGPI, the
members of which are the same as the members of the Board of Trustees of the
Company, manages the affairs of the Operating Partnership by directing the
affairs of the general partner of the Operating Partnership. The Company's
limited partner and indirect general partner interests in the Operating
Partnership entitle it to share in cash distributions from, and in the profits
and losses of, the Operating Partnership in proportion to its 84.60% interest
therein and entitle the Company to vote on all matters requiring a vote of the
limited partners.
The other limited partners of the Operating Partnership are persons who
contributed their direct or indirect interests in certain properties to the
Operating Partnership primarily in connection with the Formation Transactions.
The Operating Partnership is obligated to redeem each unit of limited
partnership ("Unit") at the request of the holder thereof for cash equal to the
fair market value of a Common Share at the time of such redemption, provided
that the Company at its option may elect to acquire any such Unit presented for
redemption for one Common Share or cash. The Company presently anticipates
that it will elect to issue Common Shares to acquire Units presented for
redemption, rather than paying cash. With each such redemption the Company's
percentage ownership interest in the Operating Partnership will increase. In
addition, whenever the Company issues Common Shares, the Company is obligated
to contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership is obligated to issue an equivalent number of Units to
the Company.
The Company may cause the Operating Partnership to issue additional Units
to acquire land parcels for the development of apartment communities or
operating apartment communities in transactions that in certain circumstances
defer some or all of the sellers' tax consequences. The Company believes that
many potential sellers of multifamily residential properties have a low tax
basis in their properties and would be more willing to sell the properties in
transactions that defer Federal income taxes. Offering Units instead of cash
for properties may provide potential sellers partial Federal income tax
deferral.
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THE MANAGEMENT COMPANIES
The Company's management operations with respect to properties in which
the Company does not have an interest are conducted through subsidiaries of the
Company (the "Management Companies"). The Management Companies also provide
other services to third parties, including construction and brokerage services
and the provision of corporate rental housing. Certain of these services are,
or may also be, provided by the Operating Partnership directly, to the extent
consistent with the gross income requirements for REITs under the Code. To
maintain the Company's qualifications as a REIT while realizing income from its
fee management and related service business, the Operating Partnership owns
100% of the nonvoting common stock (representing 98.99% of the total equity) of
each Management Company and 1% of the voting common stock (representing .01% of
the total equity) of each Management Company. The nonvoting common stock and
voting common stock owned by the Company together represent 99% of the equity
interests in each Management Company. Executive officers of the Company hold,
in the aggregate, the remaining 1% of the equity in each Management Company,
representing 99% of the voting interest therein. The voting common stock held
by such executive officers is subject to a provision of the by-laws of each
Management Company that is designed to ensure that the stock will be held by
officers of the Management Companies at all times. This bylaw provision of
each Management Company cannot be amended without the vote of 100% of the
outstanding voting common stock of such company.
BRAND NAME STRATEGY
The Company is continuing to pursue a strategy of brand name development
by linking the "Gables" name to its properties. This strategy is intended to
reinforce the Company's reputation and to build recognition of the Company's
multifamily communities as a high quality, recognizable brand. The Company
believes that increased consumer recognition of the "Gables" brand name in each
of its markets will enhance its ability to attract new residents, increase the
markets' perception of the Communities as high quality residential developments
and enhance the Company's relationships with local authorities.
BUSINESS OBJECTIVES AND STRATEGY OF THE COMPANY
The Company intends to grow by improving cash flow from existing
multifamily communities through innovative, proactive property management that
focuses on resident satisfaction and retention, increases in rents and
occupancy levels, and the control of operating expenses. The Company also
intends to grow through development and acquisition of Class A multifamily
communities in the Southeastern and Southwestern United States which provide
both favorable initial returns and long-term growth prospects. The Company
believes that it is well positioned to achieve these objectives as a result of
its long-established presence as a fully integrated real estate management,
development, construction and acquisition company in seven metropolitan markets
in the Southeastern and Southwestern United States. The Company has had a
significant presence in each of the Company's core markets of Atlanta, Houston,
Dallas, Nashville, Memphis, San Antonio and Austin (the "Core Markets") for the
past fifteen years. The Company believes that this long-term, local market
presence gives it a competitive advantage with regard to site selection and
market information and aids the Company in its requests for entitlements and
zoning petitions. The Core Markets are geographically independent, rely on
diverse economic foundations and have experienced job growth substantially
above national averages. Gables recently entered the Orlando market which has
the common growth characteristics of the Core Markets.
Property Operations. The property management group operates the
Communities to maximize cash flow and create long-term value. This is achieved
by aggressive marketing and leasing of apartment homes, providing the best
possible resident service and maintaining the Communities to the highest
standards. Management believes that excellent service will distinguish Gables
from the competitor as well as retain current residents and attract new
prospects. The Company has a service oriented philosophy which is reinforced
through its "College of Career Development" which the Company calls Gables
University. This comprehensive training system for the Company's employees is
overseen by full-time training coordinators and offers classes in a variety of
different schools, such as the School of Leasing, the School of People
Resources and the School of Maintenance Development. Additionally, there are
"degree" programs which are completed with graduation ceremonies. Service is
also reinforced with quarterly "I Made a Difference" recognition ceremonies,
where personal achievement by associates is acknowledged by senior management
in each of the markets where the Company operates.
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Financial and marketing information is collected and distributed through
on-site computer systems at all Communities and effectively summarizes
operating and marketing data critical for making accurate daily decisions. The
system also compiles demographic profile information on prospective and current
residents, allowing the Company to effectively target its customer base.
The property management group is strategically focused on the following
areas:
- Employees. Hiring the highest quality associates possible
through extensive screening and proactive recruiting, and
encouraging loyalty and reducing employee turnover by providing
outstanding training, career opportunities and benefit programs.
The average tenure for vice presidents and regional managers of the
group is over eight years and the average tenure of property
managers is approximately six years.
- Residents. Providing exceptional services to the Company's
relatively high-income residents, who expect a service level
commensurate with the high level rents.
- Financial Performance. Maximizing revenues from the Communities by
empowering and incenting property managers to make decisions
regarding rental rates and implementation of marketing programs to
attract and retain residents; reducing property operating expenses
by continuously evaluating vendors and service contracts, utilizing
volume discount purchasing programs and analyzing tax and utility
expenses; and monitoring overall appearance and appeal of the
Communities by ensuring cleanliness, investing wisely in major
capital expenses and ensuring the quality of the landscaping.
Development. The development team has extensive experience in the
identification of sites, land planning, product development and construction in
the Southeastern and Southwestern United Sates. In evaluating whether to
develop an apartment community, the development team analyzes current
demographics and economic data such as household formation rates, income
levels, rental rates and occupancies. The Company relies both on internal and
external market research to determine the current position of the real estate
cycle.
Successful development has been instrumental to the growth of the Company
and, since 1982, Gables has developed approximately 27,000 apartment homes.
The Company seeks to develop properties in markets where it discerns a strong
demand, which the Company anticipates will enable it to achieve its targeted
initial yields. The Company expects to continue to focus on the Southeastern
and Southwestern United States which, as a result of job growth and household
formation, have generally experienced high occupancy levels and rising rents in
recent years. The typical submarket where the Company develops its communities
is one where resident profiles, including relatively high income households,
justify the development of Class A multifamily communities offering extensive
resident amenities and services. Fundamental to the Company's development is
its in-house construction group, which allows the Company to act as its own
general contractor, which helps control quality, scheduling and cost. In
addition, the Company's development and construction expertise has enabled it
to develop a variety of multifamily communities, including Class A garden
apartments, townhomes and higher density apartments in a variety of geographic
areas.
Acquisition. The Company also focuses its efforts on the acquisition of
existing multifamily communities which management believes present
opportunities for creating value, including properties requiring extensive
renovations and market repositioning. Since 1982, Gables has acquired and
repositioned communities comprising a total of approximately 13,000 apartment
homes, of which 3,000 apartment homes were value-added acquisitions which
required substantial redevelopment, repositioning, and strong management
skills. The Company intends to continue its acquisition strategy, which
utilizes a value-added approach to real estate investment. The Company will
seek to invest in those properties that management believes are available at
prices below estimated replacement cost, are located in submarkets with a
relatively high income population with close proximity to major employment
centers, and are capable of growth in investment value through application of
the Company's management ability and strategic capital improvements.
Fee Management Business and Related Services. As of December 31, 1996,
the Company managed for third parties 35 multifamily communities comprising
approximately 12,000 apartment homes. These fee management contracts are
maintained with a total of approximately 20 owners. The Company intends to
pursue new fee management opportunities on a selective basis only, primarily
through existing customer contacts. In addition to contributing modestly to
funds from operations, engaging in fee management allows the Company to
leverage its management operations costs, provides access
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to development and acquisition opportunities and provides the Company with
additional market knowledge. In addition to its fee management business, the
Company provides other services through the Management Companies, including
construction and brokerage services and the provision of corporate rental
housing to selected multifamily real estate clients.
COMPETITION
All of the Communities are located in developed areas that include other
apartment communities. The number of competitive multifamily communities in a
particular area could have a material effect on the Company's ability to lease
apartment homes at the Communities or at any newly developed or acquired
community, as well as on the rents charged. The Company may be competing for
development and acquisition opportunities with others that have greater
resources than the Company (including other REITs). In addition, the
Communities must compete for residents with new and existing homes and
condominiums. The home affordability index in all of the Company's markets is
above the national average. This competitive environment is partially offset
by the propensity to rent for households in the Company's markets which in all
cases exceeds the national average.
The fee management business is highly competitive, and the Company faces
competition from a variety of local, regional and national firms. The Company
competes against these firms by stressing the quality and experience of its
employees, the services provided by the Company and the market presence and
experience it has developed over the past fifteen years. The Company may,
nevertheless, lose some of its third party management business, particularly
when such properties are sold.
ENVIRONMENTAL MATTERS
Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws, ordinances and regulations typically impose clean-up responsibility
and liability without regard to whether the owner knew of or caused the
presence of the contaminants, and the liability under such laws has been
interpreted to be joint and several unless the harm is divisible and there is a
reasonable basis for allocation of responsibility. The cost of investigation,
remediation or removal of such substances may be substantial, and the presence
of such substances, or the failure to properly remediate the contamination on
such property, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances also may be
liable for the costs of removal or remediation of such substances at the
disposal or treatment facility, whether or not such facility is owned or
operated by such person. In addition, some environmental laws create a lien on
the contaminated site in favor of the government for damages and costs it
incurs in connection with the contamination. Finally, the owner or operator of
a site may be subject to common law claims by third parties based on damages
and costs resulting from environmental contamination emanating from a site. In
connection with the ownership, operation, management and development of the
Communities and other real properties, the Company may be potentially liable
for such damages and costs.
Certain Federal, state and local laws, ordinances and regulations govern
the removal, encapsulation and disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws,
ordinances and regulations may impose liability for release of ACMs and may
provide for third parties to seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with its
ownership, operation, management and development of the Communities and other
real properties, the Company may be potentially liable for such costs.
In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no
state or Federal requirements regarding the monitoring for, presence of, or
exposure to, radon in indoor air, the U.S. Environmental Protection Agency
("EPA") and the Surgeon General recommend testing residences for the presence
of radon in indoor air, and the EPA further recommends that concentrations of
radon in indoor air be limited to less than 4 picocuries per liter of air
(pCi/L) (the "Recommended Action Level"). The presence of radon in
concentrations equal to or greater than the Recommended Action Level in a
Community may adversely affect the Company's ability to rent apartment homes in
that Community and the market value of the Community.
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Finally, recently-enacted Federal legislation will eventually require
owners and landlords of residential housing constructed prior to 1978 to
disclose to potential tenants or purchasers of the Communities any known
lead-paint hazards and will impose treble damages for failure to so notify. In
addition, lead-based paint in any of the Communities may result in lead
poisoning in children residing in that Community if chips or particles of such
lead-based paint are ingested, and the Company may be held liable under state
laws for any such injuries caused by ingestion of lead-based paint by children
living at the Communities.
The Company's assessments of the Communities have not revealed any
environmental liability that the Company believes would have a material adverse
effect on the Company's business, assets or results of operations, nor is the
Company aware of any such material environmental liability. Nevertheless, it
is possible that the Company's assessments do not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. Moreover, there can be no assurance that (i) future laws,
ordinances or regulations will not impose any material environmental liability
or (ii) the current environmental condition of the Communities will not be
affected by tenants, by the condition of land or operations in the vicinity of
the properties (such as the presence of underground storage tanks), or by third
parties unrelated to the Company.
The Company believes that no ACMs were used in connection with the
construction of the Communities or will be used in connection with future
construction by the Company. The Company's environmental assessments have
revealed the presence of "potentially friable" ACMs at one Current Community
and non-friable ACMs at seven Current Communities. The Company has programs in
place to maintain and monitor ACMs. The Company believes that the Communities
are in compliance in all material respects with all Federal, state and local
laws, ordinances and regulations regarding hazardous or toxic substances or
petroleum products. The Company has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance, liability
or claim relating to hazardous or toxic substances or petroleum products in
connection with any of its present properties that would involve substantial
expenditure, and the Company does not believe that compliance with applicable
environmental laws or regulations will have a material adverse effect on the
Company or its financial condition or results of operations.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS
Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain Federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Management of the Company believes that the Communities are
substantially in compliance with present requirements of the ADA, as they apply
to multifamily dwellings. A number of additional Federal, state and local laws
exist which also may require modifications to the Communities, or regulate
certain further renovations thereof, with respect to access thereto by disabled
persons. For example, the Fair Housing Amendments Act of 1988 (the "FHAA")
requires apartment communities first occupied after March 13, 1990 to be
accessible to the handicapped. Noncompliance with the FHAA could result in the
imposition of fines or an award of damages to private litigants. The Company
believes that the Communities that are subject to the FHAA are in compliance
with such law.
Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, and, while such costs are not expected to have a material effect
on the Company, such costs could be substantial. Limitations or restrictions
on the completion of certain renovations may limit application of the Company's
investment strategy in certain instances or reduce overall returns on the
Company's investments.
INSURANCE
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the Current Communities, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. The Company carries similar insurance with respect to its
other properties, but with such exceptions as are appropriate given the
undeveloped nature of certain of these properties. There are, however, certain
types of losses (such as losses arising from acts of war) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a property, as well as
the anticipated future revenues from such property and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss would adversely affect the Company.
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EMPLOYEES
The Company provides a full range of real estate services through a staff
of approximately 900 employees, including an experienced management team.
There are no collective bargaining agreements with any of the Company's
employees.
TAX MATTERS
The Company elected to be taxed as a REIT under the Internal Revenue Code
of 1986, as amended (the "Code"), commencing with the taxable year ended
December 31, 1994, and intends to maintain its qualification as a REIT in the
future. As a qualified REIT, with limited exceptions, the Company will not be
taxed under Federal and certain state income tax laws at the corporate level on
its net income.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Trustees and may be amended or revised from time to time by the Board
of Trustees without a vote of the shareholders, except that (i) the Company
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership, the Management Companies and other permitted
subsidiaries without the consent of the holders of Units as provided in the
partnership agreement of the Operating Partnership, (ii) changes in certain
policies with respect to conflicts of interest must be consistent with legal
requirements, and (iii) the Company cannot take any action intended to
terminate its qualification as a REIT without the approval of the holders of
two-thirds of the Common Shares.
Investment Policies. The Company will conduct all its investment
activities through the Operating Partnership and its subsidiaries. The
Company's investment objectives are to provide quarterly cash distributions and
achieve long-term capital appreciation through increases in the value of the
Company. The Company may purchase income-producing multifamily apartments or
other types of properties for long-term investment, expand and improve the
communities presently owned or other properties purchased, or sell such
communities or other properties, in whole or in part, when circumstances
warrant. The Company may also participate with third parties in apartment
community ownership, through joint ventures or other types of co-ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in connection
with acquiring or refinancing these investments. Debt service on such
financing or indebtedness will have a priority over the Common Shares and any
distributions thereon.
While the Company emphasizes equity real estate investments in multifamily
apartment communities, it may, in the discretion of the Board of Trustees,
invest in other types of equity real estate investments, mortgages (including
participating or convertible mortgages) and other real estate interests. The
Company currently intends to invest in or develop apartment communities in its
primary markets. However, future development or investment activities will not
be limited to any geographic area or product type or to a specified percentage
of the Company's assets. The Company will not have any limit on the amount or
percent of its assets invested in one property. Subject to the percentage of
ownership limitations and gross income and asset tests necessary for REIT
qualification, the Company also may invest in securities of other REITs, other
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities, although it
does not presently intend to do so and it has not done so in the past. The
Company may enter into joint ventures or partnerships for the purpose of
obtaining an equity interest in a particular property in accordance with the
Company's investment policies. Such investments may permit the Company to own
interests in larger assets without unduly restricting diversification and,
therefore, add flexibility in structuring its portfolio. The Company will not
enter into a joint venture or partnership to make an investment that would not
otherwise meet its investment policies. Investment in these securities is also
subject to the Company's policy not to be treated as an investment company
under the Investment Company Act of 1940.
7
<PAGE> 10
Financing Policies. The debt to total market capitalization ratio of the
Company (i.e. the total consolidated debt of the Company as a percentage of
the December 31, 1996 market value of outstanding Common Shares of the Company
and Operating Partnership Units, plus total consolidated debt) was
approximately 37% at December 31, 1996. Excluding construction related
indebtedness, this ratio was 33% at December 31, 1996. This ratio will
fluctuate with changes in the price of the Common Shares (and the issuance of
additional Common Shares, or other forms of shares of beneficial interest, if
any) and differs from the debt to book capitalization ratio, which is based
upon book values. This percentage will increase as the Company uses financing
to continue construction of the Development Communities. As the debt to book
capitalization ratio may not reflect the current income potential of a
company's assets and operations, the Company believes that the debt to total
market capitalization ratio provides an alternative indication of leverage for
a company whose assets are primarily income-producing real estate and should be
evaluated along with the debt service coverage and underlying components of the
Company's indebtedness.
The Company currently has a policy of incurring debt only if upon such
incurrence the ratio of debt to total market capitalization would be 60% or
less. The Company's Amended and Restated Declaration of Trust and Second
Amended and Restated Bylaws do not, however, limit the amount or percentage of
indebtedness that the Company may incur. In addition, the Company may from
time to time modify its debt policy in light of current economic conditions,
relative costs of debt and equity capital, market values of its communities,
general conditions in the market for debt and equity securities, fluctuations
in the market price of Common Shares, growth opportunities and other factors.
Accordingly, the Company may increase or decrease its debt to total market
capitalization ratio beyond the limits described above. To the extent that the
Board of Trustees decides to obtain additional capital, the Company may raise
such capital through additional equity offerings (including offerings of senior
securities), debt financings or retention of Funds from Operations (subject to
satisfying provisions in the Internal Revenue Code of 1986, as amended,
requiring minimum distributions of net income in order to maintain tax status
as a REIT), or a combination of these methods. The Company presently
anticipates that any additional borrowings would be made through the Operating
Partnership, although the Company might incur indebtedness, the proceeds of
which would be reloaned to the Operating Partnership. Borrowings may be
unsecured or may be secured by any or all of the assets of the Company, the
Operating Partnership or any existing or new property owning partnership and
may have full or limited recourse to all or any portion of the assets of the
Company, the Operating Partnership or any existing or new property owning
partnership. Indebtedness incurred by the Company may be in the form of bank
borrowings, tax-exempt bonds, purchase money obligations to sellers of
apartment communities or other properties, publicly or privately placed debt
instruments or financing from institutional investors or other lenders. The
proceeds from any borrowings by the Company may be used for working capital, to
refinance existing indebtedness and to finance acquisitions, expansions or
development of new communities and other properties, and for the payment of
distributions. The Company has not established any limit on the number or
amount of mortgages that may be placed on any single property or on its
portfolio as a whole.
Conflict of Interest Policies. As part of their employment agreements,
each of Messrs. Bromley, Rippel, Clark, Hammond and Banks is bound by a
non-competition covenant with the Company. These non-competition covenants
prohibit each individual from, directly or indirectly, competing with the
Company with respect to any multifamily apartment residential real estate
property development, construction, acquisition or management activities then
undertaken or being considered by the Company or from directly or indirectly
competing with the Company in any other multifamily apartment residential real
estate property within 30 miles of any of the Company's properties, for the
period of his employment by the Company plus one year thereafter. Such
employment agreements terminate on January 1, 1998 but are automatically
extended for additional one-year periods unless notice is given by the Company
or the employee, three months prior to the agreement's expiration, that the
agreement will not be renewed.
The Company has adopted a policy that, without the approval of a majority
of the trustees who are neither officers of the Company nor affiliated with the
Company, it will not (i) acquire from or sell to any trustee, officer or
employee of the Company, or any entity in which a trustee, officer or employee
of the Company beneficially owns more than a 1% interest, or acquire from or
sell to any affiliate of any of the foregoing, any of the assets or other
property of the Company, (ii) make any loan to or borrow from any of the
foregoing persons or (iii) engage in any other transaction with any of the
foregoing persons.
8
<PAGE> 11
ITEM 2. PROPERTIES
The Company's real estate holdings or interests consist exclusively of
apartment communities and can currently be segregated into the following four
categories:
The "Current Communities" are the 48 apartment communities (including two,
Arbors of Harbortown and Metropolitan Uptown) in which the Company has an
indirect 25% general partner interest) where construction was complete at
December 31, 1996. All but two of these Current Communities had reached a
stabilized occupancy level as of December 31, 1996. A community is considered
to have achieved stabilized occupancy on the earlier to occur of (i) attainment
of 93% physical occupancy or (ii) one year after the completion of
construction.
The "Development Communities" are the nine communities which were under
development at December 31, 1996. The term "Communities" is used herein to
refer to the Current Communities and the Development Communities collectively.
The "Undeveloped Sites" are the three sites which the Company purchased
with an intention to develop an apartment community thereon.
The "Development Rights" are the six sites which the Company currently has
an option to purchase.
The Company currently has no rights to acquire operating apartment
communities.
THE COMMUNITIES
The Company owns or has an interest in 48 Current Communities consisting
of 15,244 apartment homes and owns nine Development Communities, which are
expected to be completed in 1997 and 1998, consisting of 2,515 apartment homes.
The Communities, comprising a total of 17,759 apartment homes, are located in
Georgia, Texas, Tennessee and Florida. The following table shows the locations
of the Communities and the number of apartment homes in each metropolitan area:
<TABLE>
<CAPTION>
Number of Communities Number of Apartment Homes Percent of
----------------------------- ------------------------------ Total
Location Current Development Total Current Development Total Apartment Homes
- -------- ------- ----------- ------- -------- ----------- ------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta, GA (1) 15 3 18 4,603 985 5,588 31.5%
Houston, TX (2) 15 -- 15 5,363 -- 5,363 30.2%
Memphis, TN (3) 3 2 5 1,309 490 1,799 10.1%
Dallas, TX (4) 7 -- 7 1,727 -- 1,727 9.7%
Nashville, TN 4 -- 4 1,166 -- 1,166 6.6%
Austin, TX 2 2 4 532 529 1,061 5.9%
San Antonio, TX 2 -- 2 544 -- 544 3.1%
Orlando, FL (5) -- 2 2 -- 511 511 2.9%
------- ---------- ------- --------- ---------- ------ ----------------
48 9 57 15,244 2,515 17,759 100.0%
======= ========== ======= ========= ========== ====== ================
</TABLE>
(1) Includes a Current Community comprising 486 apartment homes that was sold
in January, 1997.
(2) Includes a Current Community comprising 318 apartment homes in which Gables
has a 25% general partner interest.
(3) Includes a Current Community comprising 345 apartment homes in which Gables
has a 25% general partner interest.
(4) Excludes a community comprising 232 apartment homes that was acquired in
January, 1997.
(5) Includes a Development Community comprising 231 apartment homes for which
the land was acquired in January, 1997.
Current Communities. The Company developed 32 Current Communities
(consisting of 8,991 apartment homes), and acquired 16 Current Communities
(consisting of 6,253 apartment homes). All but one (Rivercrest) of the Current
Communities are managed and operated by the Company. The Current Communities
typically are two and three story garden apartments, townhomes and
higher-density apartments. As of December 31, 1996, the Current Communities
had an average scheduled monthly rental rate per apartment home of
approximately $748 and, with the exception of two Communities in the final
lease-up phase, had a physical occupancy rate of 94%. The average age of the
Current Communities is 6.5 years and upon completion of the Development
Communities will be 6.0 years.
9
<PAGE> 12
Most of the Communities offer many attractive features designed to enhance
their market appeal, such as vaulted ceilings, fireplaces, dishwashers,
disposals, washer/dryer connections, ice-makers, patios and decks. Recreational
facilities include swimming pools, fitness facilities, playgrounds, picnic
areas and tennis and racquetball courts. In many Communities, the Company
makes amenities and services available to residents, such as aerobic classes,
resident social events, dry cleaning pick up and delivery, and the use of fax,
computer and copy equipment. In-depth market research, including periodic
focus groups with residents and feedback from on-site management personnel, is
used to refine and enhance management services and community design.
Development Communities. The Development Communities have been designed to
generally resemble the Current Communities developed by the Company and to
offer similar amenities. The Development Communities and the recently
completed Current Communities reflect the Company's continuing research of
consumer preferences for upscale multifamily rental housing and incorporate and
emphasize garage parking, increased privacy, high quality interiors and private
telephone and television systems.
Undeveloped Sites. The Company owns three Undeveloped Sites and intends to
develop multifamily communities at those sites in the future:
<TABLE>
<CAPTION>
Metropolitan Estimated Number
Undeveloped Site Area of Apartment Homes
- --------------------- -------------- ------------------
<S> <C> <C>
Gables Green Oaks II Dallas, TX 250
Gables Quail Ridge II Memphis, TN 148
Gables Colonnade II San Antonio, TX 250
---
648
===
</TABLE>
Development Rights. The Company currently has six Development Rights
which are located in three cities:
<TABLE>
<CAPTION>
Metropolitan Estimated Number
Development Right Area of Apartment Homes
- ------------------------------- ------------ ------------------
<S> <C> <C>
Gables New Territory I Houston, TX 256 (a)
Gables New Territory II Houston, TX 240 (b)
Gables at Little Lake Bryan II Orlando, FL 246 (b)
Gables at Little Lake Bryan III Orlando, FL 230 (b)
Gables at Little Lake Bryan IV Orlando, FL 207 (b)
Gables Sugarloaf II Atlanta, GA 719 (b)
-----
1,898
=====
</TABLE>
(a) The land parcel associated with this Development Right was acquired
in March, 1997.
(b) The Company has these land parcels under options with various
termination dates.
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934, as amended. The projections contained in the tables above under the
captions "Undeveloped Sites" and "Development Rights" are forward-looking
statements. These forward-looking statements involve risks and uncertainties
and actual results may differ materially from those projected in the
forward-looking statements. Risks associated with the Company's development,
construction and land acquisition activities, which could impact the
forward-looking statements made, include: development and acquisition
opportunities may be abandoned; construction costs of a community may exceed
original estimates, possibly making the community uneconomical; construction
may not be completed on schedule, resulting in increased debt service and
construction costs.
Development of the Undeveloped Sites and the Development Rights is subject
to permits and other governmental approvals, as well as ongoing business review
by the Company. There can be no assurance that the Company will decide or be
able to develop the Undeveloped Sites, to complete development of all or any of
the communities subject to the Development Rights, or to complete the number of
apartment homes shown above.
10
<PAGE> 13
COMPLETED COMMUNITIES IN LEASE-UP AND DEVELOPMENT COMMUNITIES AS OF
DECEMBER 31, 1996
Gables' current developments and lease-up activities for communities that had
not reached stabilized occupancy as of December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
Actual/ Actual/
Estimated Total Estimated
Number of Budgeted Percent Quarter
Apartment Cost Construction Percent Percent Construction
Community Homes (millions) Complete Leased Occupied Commenced
- --------- ----- -------- -------- ------ -------- ---------
(A)
<S> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES IN LEASE-UP
ATLANTA, GA
Gables Over Peachtree 263 $ 20.4 100% 75% 74% 1 Q 1995
DALLAS, TX
Gables Green Oaks I 300 16.5 100% 83% 79% 1 Q 1995
-------------------
TOTALS 563 $ 36.9
-------------------
DEVELOPMENT COMMUNITIES
ATLANTA, GA
Gables Vinings 315 $ 24.7 40% --- --- 2 Q 1996
Roswell Gables II 284 21.7 25% --- --- 2 Q 1996
Gables at Sugarloaf 386 28.6 --- --- --- 2 Q 1997
AUSTIN, TX
Gables Central Park 273 20.6 72% --- --- 2 Q 1996
Gables Bluffstone 256 19.9 -- --- --- 1 Q 1997
MEMPHIS, TN
Gables Quail Ridge 238 17.0 99% 61% 55% 1 Q 1995
Gables Germantown 252 19.6 95% 67% 56% 1 Q 1995
ORLANDO, FL
Gables at Little Lake Bryan I 280 21.7 --- --- --- 2 Q 1997
Gables Celebration (C) 231 21.3 --- --- --- 3 Q 1997
-------------------
TOTALS 2,515 $195.1
-------------------
<CAPTION>
Actual/ Actual/ Actual/
Estimated Estimated Estimated
Quarter of Quarter Quarter of
Initial Construction Stabilized
Community Occupancy Ended Occupancy
- --------- --------- ----- ---------
(B)
<S> <C> <C> <C>
COMPLETED COMMUNITIES IN LEASE-UP
ATLANTA, GA
Gables Over Peachtree N/A 2 Q 1996 2 Q 1997
DALLAS, TX
Gables Green Oaks I 1 Q 1996 3 Q 1996 2 Q 1997
TOTALS
DEVELOPMENT COMMUNITIES
ATLANTA, GA
Gables Vinings 1 Q 1997 4 Q 1997 4 Q 1997
Roswell Gables II 2 Q 1997 1 Q 1998 1 Q 1998
Gables at Sugarloaf 1 Q 1998 1 Q 1999 2 Q 1999
AUSTIN, TX
Gables Central Park 1 Q 1997 3 Q 1997 4 Q 1997
Gables Bluffstone 4 Q 1997 3 Q 1998 4 Q 1998
MEMPHIS, TN
Gables Quail Ridge 2 Q 1996 1 Q 1997 2 Q 1997
Gables Germantown 2 Q 1996 1 Q 1997 2 Q 1997
ORLANDO, FL
Gables at Little Lake Bryan I 1 Q 1998 4 Q 1998 1 Q 1999
Gables Celebration (C) 1 Q 1998 4 Q 1998 4 Q 1998
TOTALS
</TABLE>
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange
Act of 1934, as amended. The projections contained in the table above that are
not historical facts are forward-looking statements. These forward-looking
statements involve risks and uncertainties and actual results may differ
materially from those projected in such statements. Risks associated with
the Company's development, construction, and lease-up activities, which could
impact the forward-looking statements made, include: development
opportunities may be abandoned; construction costs of a community may exceed
original estimates, possibly making the community uneconomical; and
construction and lease-up may not be completed on schedule, resulting in
increased debt service and construction costs.
(A) Total Budgeted Cost includes all capitalized costs incurred and projected
to be incurred to develop the respective community presented in
accordance with generally accepted accounting principles, including land
acquisition costs, construction costs, real estate taxes, interest and
loan fees, permits, professional fees, allocated development overhead, and
other regulatory fees.
(B) Stabilized occupancy is defined as the earlier to occur of (i) 93%
physical occupancy or (ii) one year after completion of construction.
(C) The land for this development was acquired in January, 1997.
11
<PAGE> 14
COMMUNITY FEATURES AS OF 12/31/96
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE YEAR
APARTMENT RENTABLE TOTAL CONSTRUCTED/ YEAR
CURRENT COMMUNITIES (A) HOMES SQ. FT. (B) ACREAGE RENOVATED ACQUIRED
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HOUSTON, TX
Baybrook Village 776 620,428 26.4 1981 1990
Gables Bradford Place 372 320,322 13.3 1991 --
Gables Bradford Pointe 360 276,417 13.5 1990 --
Gables CityPlaza 246 217,374 7.5 1995 --
Gables Cityscape 252 214,824 6.8 1991 --
Gables CityWalk/Waterford
Square 317 255,823 8.7 1990/85 --/1992
Gables Edgewater 292 257,339 12.2 1990 --
Gables Meyer Park 345 297,054 11.0 1993 --
Gables Piney Point 246 227,880 7.5 1994 --
Gables Pin Oak Green 582 593,478 14.4 1990 1996
Gables Pin Oak Park 477 486,308 11.9 1992 1996
Gables River Oaks 228 277,908 5.7 1993 1996
Metropolitan Uptown (C) 318 290,141 8.9 1995 --
Rivercrest 140 118,020 5.1 1982 1987
Westhollow Park 412 370,640 18.3 1978-79 1990
------- ---------- -----
TOTALS/WEIGHTED AVERAGES 5,363 4,823,956 171.2
======= ========== =====
ATLANTA, GA
Briarcliff Gables 104 128,976 5.2 1995 --
Buckhead Gables 162 122,548 3.5 1994 (D) 1994
Club Candlewood (E) 486 588,072 39.5 1993 (D) 1992
Dunwoody Gables 311 290,396 10.4 1995 --
Gables Cinnamon Ridge 200 192,016 14.5 1980 1994
Gables Cityscape 192 (F) 159,360 5.5 1989 1994
Gables Over Peachtree 263 239,814 (G) 1.4 1996 (D) 1995
Gables Wood Arbor 140 127,540 9.9 1987 --
Gables Wood Crossing 268 257,012 22.3 1985-86 --
Gables Wood Glen 380 377,340 23.8 1983 --
Gables Wood Knoll 312 311,064 19.6 1984 --
Lakes at Indian Creek 603 552,384 49.8 1969-72 1993
Roswell Gables I 384 417,288 28.3 1995 --
Spalding Gables 252 249,333 11.2 1995 --
Wildwood Gables 546 619,710 37.9 1992-93 (D) 1991
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 4,603 4,632,853 282.8
====== ========== =====
DALLAS, TX
Arborstone 536 383,360 24.5 1985 1993
Gables Green Oaks I 300 286,740 12.8 1996 --
Gables Pearl Street 108 117,688 3.6 1995 --
Gables Preston 126 138,107 10.6 1995 --
Gables Spring Park 188 198,178 12.3 1996 --
Gables Turtle Creek 150 150,930 3.1 1995 1996
Gables Valley Ranch 319 325,534 14.8 1994 --
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 1,727 1,600,537 81.7
====== ========== =====
MEMPHIS, TN
Arbors of Harbortown (C) 345 341,258 15.0 1991 --
Gables Cordova 464 434,461 32.2 1986 --
Gables Stonebridge 500 439,646 34.0 1993-96 1996
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 1,309 1,215,365 81.2
====== ========== =====
NASHVILLE, TN
Brentwood Gables 254 287,594 14.5 1996 --
Gables Hendersonville 364 342,982 21.0 1991 --
Gables Hickory Hollow I 272 247,322 19.0 1988 --
Gables Hickory Hollow II 276 259,704 18.0 1987 --
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 1,166 1,137,602 72.5
====== ========== =====
SAN ANTONIO, TX
Gables Colonnade I 312 284,196 12.0 1995 --
Gables Wall Street 232 220,180 16.2 1996 --
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 544 504,376 28.2
====== ========== =====
AUSTIN, TX
Gables Great Hills 276 228,930 23.7 1993 --
Gables Town Lake 256 239,264 12.0 1996 --
------ ---------- -----
TOTALS/WEIGHTED AVERAGES 532 468,194 35.7
====== ========== =====
GRAND TOTALS/WEIGHTED AVERAGES 15,244 14,382,883 753.3
====== ========== =====
<CAPTION>
SCHEDULED RENT
AVERAGE @ 12/31/96 PER
UNIT SIZE OCCUPANCY --------------
CURRENT COMMUNITIES (A) (SQ.FT.) 12/31/96 UNIT SQ.FT.
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSTON, TX
Baybrook Village 800 96% $ 543 $0.68
Gables Bradford Place 861 94% 663 0.77
Gables Bradford Pointe 768 93% 588 0.77
Gables CityPlaza 884 94% 798 0.90
Gables Cityscape 852 98% 817 0.96
Gables CityWalk/Waterford Square 807 97% 796 0.99
Gables Edgewater 881 90% 758 0.86
Gables Meyer Park 861 97% 807 0.94
Gables Piney Point 926 97% 841 0.91
Gables Pin Oak Green 1,020 95% 894 0.88
Gables Pin Oak Park 1,020 97% 901 0.88
Gables River Oaks 1,219 88% 1,293 1.06
Metropolitan Uptown (C) 912 96% 909 1.00
Rivercrest 843 97% 682 0.81
Westhollow Park 900 98% 535 0.60
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 899 95% $ 763 $0.85
===== == ====== =====
ATLANTA, GA
Briarcliff Gables 1,240 95% 1,060 0.85
Buckhead Gables 756 93% 783 1.03
Club Candlewood (E) 1,210 92% 597 0.49
Dunwoody Gables 934 94% 798 0.85
Gables Cinnamon Ridge 960 94% 648 0.68
Gables Cityscape 830 89% (F) 810 0.98
Gables Over Peachtree 912 -- (H) 1,014 1.11
Gables Wood Arbor 911 99% 669 0.73
Gables Wood Crossing 959 96% 694 0.72
Gables Wood Glen 993 96% 659 0.66
Gables Wood Knoll 997 94% 671 0.67
Lakes at Indian Creek 916 93% 560 0.61
Roswell Gables I 1,087 94% 840 0.77
Spalding Gables 989 96% 839 0.85
Wildwood Gables 1,135 96% 801 0.71
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 1,006 94% $ 733 $0.73
===== == ====== =====
DALLAS, TX
Arborstone 715 94% 457 0.64
Gables Green Oaks I 956 -- (H) 784 0.82
Gables Pearl Street 1,090 98% 1,226 1.12
Gables Preston 1,096 87% 1,021 0.93
Gables Spring Park 1,054 87% 902 0.86
Gables Turtle Creek 1,006 95% 1,120 1.11
Gables Valley Ranch 1,020 91% 881 0.86
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 927 92% $ 787 $0.85
===== == ====== =====
MEMPHIS, TN
Arbors of Harbortown (C) 989 96% 725 0.73
Gables Cordova 936 88% 635 0.68
Gables Stonebridge 879 93% 634 0.72
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 928 92% $ 658 $0.71
===== == ====== =====
NASHVILLE, TN
Brentwood Gables 1,132 95% 865 0.76
Gables Hendersonville 942 95% 649 0.69
Gables Hickory Hollow I 909 97% 641 0.71
Gables Hickory Hollow II 941 97% 651 0.69
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 976 96% $ 695 $0.71
===== == ====== =====
SAN ANTONIO, TX
Gables Colonnade I 911 89% $ 765 0.84
Gables Wall Street 949 91% 789 0.83
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 927 90% $ 775 $0.84
===== == ====== =====
AUSTIN, TX
Gables Great Hills 829 87% $ 774 0.93
Gables Town Lake 935 97% 1,032 1.10
----- -- ------ -----
TOTALS/WEIGHTED AVERAGES 880 92% $ 898 $1.02
===== == ====== =====
GRAND TOTALS/WEIGHTED AVERAGES 944 94% $ 748 $0.79
===== == ====== =====
</TABLE>
<PAGE> 15
COMMUNITY FEATURES AS OF 12/31/96
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE YEAR AVERAGE
APARTMENT RENTABLE TOTAL CONSTRUCTED/ UNIT SIZE
DEVELOPMENT COMMUNITIES (A) HOMES SQ. FT. (B) ACREAGE RENOVATED (SQ.FT.)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ATLANTA, GA
Gables Vinings 315 336,735 15.2 1996-97 1,069
Roswell Gables II 284 334,268 28.3 1996-98 1,177
Gables at Sugarloaf 386 424,166 29.7 1997-99 1,099
----- --------- ----- -----
TOTALS/WEIGHTED AVERAGES 985 1,095,169 73.2 1,112
===== ========= ===== =====
AUSTIN, TX
Gables Central Park 273 257,043 6.9 1996-97 942
Gables Bluffstone 256 251,904 32.7 1997-98 984
----- --------- ----- -----
TOTALS/WEIGHTED AVERAGES 529 508,947 39.6 962
===== ========= ===== =====
MEMPHIS, TN
Gables Quail Ridge (H) 238 283,848 20.3 1995-97 1,193
Gables Germantown (H) 252 293,012 30.5 1995-97 1,163
----- --------- ----- -----
TOTALS/WEIGHTED AVERAGES 490 576,860 50.8 1,177
===== ========= ===== =====
ORLANDO, FL
Gables at Little Lake Bryan I 280 289,436 19.3 1997-98 1,034
Gables Celebration (I) 231 260,486 8.8 1997-98 1,128
----- --------- ----- -----
TOTALS/WEIGHTED AVERAGES 511 549,922 28.1 1,076
===== ========= ===== =====
GRAND TOTALS/WEIGHTED AVERAGES 2,515 2,730,898 191.7 1,086
===== ========= ===== =====
</TABLE>
(A) Except as noted in footnote (C) hereof, Gables holds fee
simple title to each of the Communities.
(B) In the Atlanta and Tennessee markets, rentable area is measured
including any patio or balcony. In the Texas markets,
rentable area is measured using only the heated area. In the
Florida market, rentable area is measured using only
the air conditioned area.
(C) Gables holds an indirect 25% general partner interest in
these communities.
(D) Year renovated; these communities were originally constructed
as follows: Buckhead Gables: 1964; Club Candlewood: 1969;
Gables Over Peachtree: 1969-1970; and Wildwood Gables: 1972.
(E) This community was sold in January, 1997.
(F) The stated occupancy rate does not include 14 apartment homes
which the Company did not hold available for occupancy of
December 31. 1996. The occupancy rate of all 192 apartment
homes was 83% as of December 31, 1996.
(G) This rentable area is exclusive of approximately 18,000
square feet of rentable commercial space.
(H) These communities are in the lease-up stage. As of December
31, 1996, occupancy was as follows: Gables Over Peachtree:
74%; Gables Green Oaks I: 79%; Gables Quail Ridge: 55%; and
Gables Germantown: 56%.
(I) The land for this community was acquired in January, 1997.
13
<PAGE> 16
MORTGAGE DEBT SUMMARY AS OF DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
====================================================================================================================================
PROJECTED
PROJECTED ANNUAL
PRINCIPAL PRINCIPAL INTEREST
INTEREST MATURITY BALANCE AMORTIZATION PAYMENT
PROPERTY COLLATERAL RATE DATE (1) 12/31/96 (2) 1997 1997
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE
TIAA Properties (3):
Spalding Gables 8.10% 12/31/02 $ 14,054 $ --- (4) $1,138
Roswell Gables 8.10% 12/31/02 20,743 --- (4) 1,680
Dunwoody Gables 8.10% 12/31/02 15,920 --- (4) 1,290
Gables Great Hills 8.10% 12/31/02 12,830 --- (4) 1,039
Gables Wall Street 8.10% 12/31/02 10,457 --- (4) 847
Town Lake Gables 8.10% 12/31/02 12,342 --- (4) 1,000
Gables Meyer Park 8.36% 12/31/07 16,200 --- (4) 1,354
Brentwood Gables 8.49% 12/31/07 13,481 --- (4) 1,144
-------- ------ -------
Total TIAA Properties 116,027 --- 9,492
Gables Cityscape 7.13% 02/10/04 9,214 115 653
Gables Citywalk/Waterford Sq. 7.13% 02/10/04 11,674 146 827
Gables Edgewater 7.00% 09/01/97 (5) 9,466 89 440
Gables Stonebridge 7.50% 05/01/03 19,665 246 1,465
Unencumbered Pool (6) 6.60% (6) 11/22/01 40,000 --- 2,640
NWML Properties (7) 8.77% 12/01/09 53,000 615 4,622
-------- ------ -------
SUBTOTAL 259,046 1,211 20,139
-------- ------ -------
TAX-EXEMPT FIXED RATE
Providian Properties (8) 6.38% 08/01/04 48,365 538 (9) 3,083
Club Candlewood 7.03% (10) 01/31/25 (11) 6,975 90 479
Lakes at Indian Creek 7.03% (10) 01/31/25 11,930 155 818
-------- ------ -------
SUBTOTAL 67,270 783 4,380
-------- ------ -------
TAX-EXEMPT FLOATING RATE
Gables Wood Crossing (12) 03/18/99 (13) 11,650 --- 466
Gables Wood Arbor (12) 03/18/99 (13) 7,130 --- 285
Gables Hickory Hollow I (12) 03/18/99 (13) 12,750 --- 510
Gables Hickory Hollow II (12) 03/18/99 (13) 13,400 --- 536
-------- ------ -------
SUBTOTAL 44,930 0 1,797
-------- ------ -------
CREDIT FACILITIES
Unencumbered Pool(14) LIBOR+1.50% 03/22/99 (15) 18,000 (16) --- Varies
Unsecured LIBOR+1.50% 10/09/97 (17) 1,075 (16) --- Varies
-------- ------ -------
SUBTOTAL 19,075 0 Varies
-------- ------ -------
TOTAL INDEBTEDNESS (18) $390,321 $1,994 $26,316
======== ====== =======
<CAPTION>
====================================================================================================
SCHEDULED PRINCIPAL PAYMENTS AT MATURITY
--------------------------------------------------
THERE-
PROPERTY COLLATERAL 1997 1998 1999 2000 2001 AFTER
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE
TIAA Properties (3):
Spalding Gables $ --- $--- $ --- $--- $ --- $ 13,387
Roswell Gables --- --- --- --- --- 19,759
Dunwoody Gables --- --- --- --- --- 15,164
Gables Great Hills --- --- --- --- --- 12,221
Gables Wall Street --- --- --- --- --- 9,961
Town Lake Gables --- --- --- --- --- 11,756
Gables Meyer Park --- --- --- --- --- 14,338
Brentwood Gables --- --- --- --- --- 11,978
-------------------------------------------
Total TIAA Properties 0 0 0 0 0 108,564
Gables Cityscape --- --- --- --- --- 8,191
Gables Citywalk/Waterford Sq. --- --- --- --- --- 10,377
Gables Edgewater 9,377 --- --- --- --- ---
Gables Stonebridge --- --- --- --- --- 17,746
Unencumbered Pool (6) --- --- --- --- 40,000 ---
NWML Properties (7) --- --- --- --- --- 38,940
---------------------------------------------
SUBTOTAL 9,377 0 0 0 40,000 183,818
---------------------------------------------
TAX-EXEMPT FIXED RATE
Providian Properties (8) --- --- --- --- --- 48,365
Club Candlewood --- --- --- --- --- ---
Lakes at Indian Creek --- --- --- --- --- ---
-------------------------------------------
SUBTOTAL 0 0 0 0 0 48,365
-------------------------------------------
TAX-EXEMPT FLOATING RATE
Gables Wood Crossing --- --- 11,650 --- --- ---
Gables Wood Arbor --- --- 7,130 --- --- ---
Gables Hickory Hollow I --- --- 12,750 --- --- ---
Gables Hickory Hollow II --- --- 13,400 --- --- ---
-------------------------------------------
SUBTOTAL 0 0 44,930 0 0 0
-------------------------------------------
CREDIT FACILITIES
Unencumbered Pool (14) --- --- 18,000 --- --- ---
Unsecured 1,075 --- --- --- --- ---
---------------------------------------------
SUBTOTAL 1,075 0 18,000 0 0 0
---------------------------------------------
TOTAL INDEBTEDNESS (18) $10,452 $ 0 $62,930 $ 0 $40,000 $232,183
===============================================
</TABLE>
14
<PAGE> 17
- ----------------------
(1) All of the mortgages can be prepaid at any time without penalty or premium,
except for the mortgages encumbering the Providian Properties, Club
Candlewood, Lakes at Indian Creek, Gables Cityscape, Gables
CityWalk/Waterford Square, the TIAA Properties and Gables Stonebridge.
(2) All of the debt is recourse to the Company in whole or in part except for
the mortgages encumbering Gables Edgewater, Gables Cityscape, Gables
CityWalk/Waterford Square and Gables Stonebridge.
(3) These loans represent the eight loans that funded in December, 1995, June,
1996 and December, 1996, as applicable, under the Teachers Insurance and
Annuity Association ("TIAA") financing commitment. The $14.7 million
balance of the original commitment has been terminated. At the option of
the Company, these loans become unsecured upon the attainment of a BBB or
equivalent rating by the Company.
(4) Principal amortization based on a 30-year schedule begins in January, 1998.
(5) This loan was repaid February 28, 1997.
(6) This $40 million term loan currently bears interest at LIBOR plus 1.25%.
This financing is effectively fixed at an all-in rate of 6.60% after
application of $40 million of the $44.53 million interest rate swap and cap
agreements described elsewhere herein. The unencumbered pool is comprised
of two properties that have escrowed mortgages. Upon the attainment of an
investment grade rating by the Company, the escrowed mortgages will be
released.
(7) The NWML Properties (Wildwood Gables, Gables Valley Ranch and Gables Piney
Point) together secure the $53 million mortgage loan from Northwestern
Mutual Life Insurance Co.
(8) The Providian Properties together secure the $48.4 million mortgage loan
from Providian Corporation and are comprised of three properties induced
for tax-exempt bond financing (Gables Wood Glen, Gables Wood Knoll and
Gables Cordova) and three additional properties (Gables Bradford Pointe,
Gables Hendersonville and Rivercrest).
(9) Principal amortization payments are retained in an escrow account and are
not applied to reduce the outstanding principal balance of the loan.
Interest earned on the escrow account accrues to the benefit of the
Company.
(10) The interest rate does not include credit enhancement fees of 0.60% per
annum, which fees were prepaid in January, 1995 for a period of ten
years. In addition, certain of the bond documents require the payment of
certain other customary fees ranging up to approximately 0.25% per annum.
(11) These bonds were economically defeased in January, 1997 in connection with
the sale of Club Candlewood.
(12) These bonds bear interest at a variable rate of interest, adjusted weekly
based upon a negotiated rate. The payment schedules reflect a 4% rate
which represents the Company's budgeted rate for 1997. The average rate
experienced for 1996 and 1995 were 3.5% and 3.9%, respectively. The
interest rates do not include the payment of credit enhancement fees which
are currently 1.00% per annum. In addition, certain of the bond documents
require the payment of certain other customary fees ranging up to
approximately 0.25% per annum.
(13) The maturity date noted represents the date on which credit enhancement
for the bonds expires. The stated maturity date for the loans range
from December, 2007 to August, 2024.
(14) The unencumbered pool is comprised of 15 properties and two parcels of
land that have escrowed mortgages. Upon the attainment of an investment
grade rating by the Company, the escrowed mortgages will be released.
(15) The Company has three one-year extension options.
(16) Debt service will be variable based on the principal balance which will be
outstanding under the Credit Facilities.
(17) The Company has unlimited one-year extension options.
(18) Excludes $16.4 million of tax-exempt bonds and $16.5 million of
conventional indebtedness related to joint ventures in which Gables has an
indirect 25% general partner interest.
15
<PAGE> 18
The Arbors of Harbortown apartment community secures a $16.4 million
tax-exempt bond obligation, which is recourse to the Company up to $1.0 million
(this amount is fully cash-collateralized and is held by the Arbors of
Harbortown JV), bears interest at a variable low-floater rate, has a maturity
date of April, 2013, and is payable in monthly installments of interest only.
The credit enhancement for the bond obligation expires in May, 2001. The
Metropolitan Uptown apartment community secures a conventional variable-rate
loan with $16.5 million outstanding at December 31, 1996, 25% of which has been
guaranteed by the Company. The loan has a maturity date of June 30, 1997,
subject to a three-year extension option, and currently bears interest at a
rate of 7.2% which has been locked in for a three year period expiring July,
1998.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of the Communities is presently subject to any
material litigation or, to the Company's knowledge, is any litigation
threatened against the Company or any of the Communities, other than routine
actions for negligence or other claims and administrative proceedings arising
in the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the business or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON SHARES
The Company's Common Shares began trading on the New York Stock Exchange
(the "NYSE") on January 19, 1994, under the symbol "GBP". The following table
sets forth the high and low sales prices per share of the Common Shares on the
NYSE for the periods indicated, as reported by the NYSE, as well as the
Company's quarterly per share dividends to shareholders for the period
indicated.
<TABLE>
<CAPTION> DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
------------- ---- --- --------
<S> <C> <C> <C>
March 31, 1995 $21.750 $17.500 $0.45
June 30, 1995 21.875 18.125 0.45
September 30, 1995 23.250 20.125 0.48
December 31, 1995 23.125 21.000 0.48
March 31, 1996 25.625 22.375 0.48
June 30, 1996 24.625 22.500 0.48
September 30, 1996 24.750 22.750 0.49
December 31, 1996 29.000 23.750 0.49
March 31, 1997 (through March 20, 1997) 28.750 25.250 0.49
</TABLE>
The Company has determined that, for Federal income tax purposes,
approximately 70.9% of the distributions for each of the four quarters of 1996
represented ordinary dividend income to its shareholders and the remaining
29.1% represented return of capital to its shareholders.
Distributions are declared at the discretion of the Board of Trustees and
will depend on actual funds from operations of the Company, its financial
condition, capital requirements, the annual distribution requirements under the
REIT provisions of the Code and such other factors as the Board of Trustees may
deem relevant. The Board of Trustees may modify the Company's distribution
policy from time to time.
16
<PAGE> 19
Certain of the Company's loan agreements contain customary
representations, covenants and events of default, including covenants which
restrict the ability of the Operating Partnership to make distributions in
excess of stated amounts, which in turn restricts the discretion of the Company
to declare and pay dividends. In general, during any fiscal year the Operating
Partnership may only distribute up to 95% of the Operating Partnership's
consolidated income available for distribution (as defined in the related
agreement) exclusive of distributions of capital gains for such year. The
applicable loan agreements contain exceptions to these limitations to allow the
Operating Partnership to make any distributions necessary to allow the Company
to maintain its status as a REIT. The Company does not anticipate that this
provision will adversely effect the ability of the Operating Partnership to
make distributions or the Company to declare dividends, as currently
anticipated.
On March 20, 1997 there were 280 holders of record of the Company's
19,329,371 outstanding Common Shares. This does not include beneficial owners
for whom Cede & Co. or others act as nominee.
The Company has implemented a dividend reinvestment plan under which
holders of Common Shares may elect automatically to reinvest distributions in
additional Common Shares at a 2% discount to the then current market price of
Common Shares and may purchase additional Common Shares for cash (up to $20,000
per quarter) at 100% of the then current market price.
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating
information on a historical basis for the Company and on a combined historical
and pro forma basis for the Company's predecessors as applicable. The
following information should be read in conjunction with all of the financial
statements and notes thereto included elsewhere herein. The consolidated
operating information of the Company for the years ended December 31, 1996 and
1995 and for the period from January 26, 1994 to December 31, 1994 and the
combined operating information of the Group for the period from January 1, 1994
to January 25, 1994 have been derived from the financial statements audited by
Arthur Andersen LLP, independent public accountants, whose report with respect
thereto is included elsewhere herein. The combined operating information for
the years ended December 31, 1993 and 1992 has been derived from audited
combined financial statements of the Group not included in such report.
The unaudited selected pro forma financial and operating information is
presented as if (i) the Initial Offering and Formation Transactions occurred as
of the beginning of the period presented and (ii) the Company qualified as a
REIT, distributed all of its taxable income and, therefore, incurred no income
tax expense during the period. The pro forma financial information is not
necessarily indicative of what the actual financial position and results of
operations of the Company would have been as of the date or for the period
indicated, nor does it purport to represent the Company's future financial
position and results of operations.
17
<PAGE> 20
SELECTED FINANCIAL AND OPERATING INFORMATION
<TABLE>
<CAPTION>
GABLES RESIDENTIAL TRUST AND ITS PREDECESSORS
---------------------------------------------
HISTORICAL PRO FORMA
----------
1996 1995 1994 (1)
=========================================================
(Unaudited)
(IN THOUSANDS, EXCEPT PROPERTY AND PER SHARE INFORMATION)
<S> <C> <C> <C>
OPERATING INFORMATION:
Rental revenues $ 104,543 $ 72,703 $ 57,291
Other property revenues 4,928 3,268 2,228
---------------------------------------
Total property revenues 109,471 75,971 59,519
Other revenues 6,710 5,789 7,350
---------------------------------------
Total revenues 116,181 81,760 66,869
---------------------------------------
Property operating and maintenance expenses
(exclusive of items shown separately below) 38,693 28,228 22,868
Depreciation and amortization 18,892 12,669 9,974
Property management expenses (owned and third party) 5,617 5,348 5,603
General and administrative expenses 3,045 2,869 1,779
Interest and credit enhancement fees 21,688 13,798 9,584
Amortization of deferred financing costs 1,348 932 1,057
---------------------------------------
Total expenses 89,283 63,844 50,865
---------------------------------------
Equity in income of joint ventures 280 64 270
Interest income 363 389 268
---------------------------------------
Income before minority interest and extraordinary
loss, net 27,541 18,369 16,542
Minority interest (4,640) (4,029) (3,904)
---------------------------------------
Income before extraordinary loss, net 22,901 14,340 12,638
Extraordinary loss, net of minority interest (520) (784) (148)
---------------------------------------
Net income $ 22,381 $ 13,556 $ 12,490
=======================================
Weighted average shares outstanding 16,788 11,436 10,236
=======================================
PER SHARE INFORMATION:
Income before extraordinary loss, net $ 1.36 $ 1.25 $ 1.23
Net income 1.33 1.19 1.22
Dividends paid (3) 1.93 1.83 N/A
Dividends declared (3) 1.94 1.86 N/A
OTHER INFORMATION:
Cash flows provided by (used in):
Operating activities $ 51,629 $ 29,088 $ 28,868
Investing activities (213,596) (148,234) (150,534)
Financing activities 157,823 123,619 114,245
Funds from operations (4) 46,238 30,927 26,313
Gross operating margin (5) 64.7% 62.8% 61.6%
Total completed communities (period-end) 48 38 29
Total apartment homes in completed communities
(period-end) 15,244 11,946 9,785
Average monthly revenue per apartment home $ 700 $ 620 $ 574
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation (6) $ 784,600 $ 591,233 $ 437,782
Total assets (6) 759,660 562,827 416,847
Total debt 390,321 286,259 229,305
Shareholders' equity and minority interest/
predecessor's equity 334,637 248,010 161,594
FUNDS FROM OPERATIONS RECONCILIATION:
Income before minority interest and
extraordinary loss, net * $ 27,541 $ 18,417 $ 16,542
Real estate depreciation * 18,697 12,510 9,771
---------------------------------------
Funds from operations $ 46,238 $ 30,927 $ 26,313
=======================================
<CAPTION>
GABLES RESIDENTIAL TRUST AND ITS PREDECESSORS
---------------------------------------------
HISTORICAL
---------------------------------------
1994 (2) 1993 1992
=======================================
(IN THOUSANDS, EXCEPT PROPERTY AND PER SHARE INFORMATION)
<S> <C> <C> <C>
OPERATING INFORMATION:
Rental revenues $ 57,201 $ 41,330 $ 33,616
Other property revenues 2,225 1,462 1,172
---------------------------------------
Total property revenues 59,426 42,792 34,788
Other revenues 7,396 8,373 8,946
---------------------------------------
Total revenues 66,822 51,165 43,734
---------------------------------------
Property operating and maintenance expenses
(exclusive of items shown separately below) 22,847 18,295 14,584
Depreciation and amortization 9,906 7,635 6,884
Property management expenses (owned and third party) 5,774 6,175 5,574
General and administrative expenses 1,742 1,078 1,694
Interest and credit enhancement fees 10,084 12,844 11,942
Amortization of deferred financing costs 1,127 1,132 1,112
---------------------------------------
Total expenses 51,480 47,159 41,790
---------------------------------------
Equity in income of joint ventures 270 251 187
Interest income 268 263 302
---------------------------------------
Income before minority interest and extraordinary
loss, net 15,880 4,520 2,433
Minority interest (3,768) -- --
---------------------------------------
Income before extraordinary loss, net 12,112 4,520 2,433
Extraordinary loss, net of minority interest (148) -- --
---------------------------------------
Net income $ 11,964 $ 4,520 $ 2,433
=======================================
Weighted average shares outstanding 10,243
=========
PER SHARE INFORMATION:
Income before extraordinary loss, net $ 1.19
Net income 1.18
Dividends paid (3) 1.225
Dividends declared (3) 1.675
OTHER INFORMATION:
Cash flows provided by (used in):
Operating activities $ 28,868 $ 13,407 $ 10,057
Investing activities (150,534) (67,043) (22,696)
Financing activities 114,245 54,054 17,330
Funds from operations (4) 25,561 11,749 9,355
Gross operating margin (5) 61.6% 57.3% 58.1%
Total completed communities (period-end) 29 24 17
Total apartment homes in completed communities
(period-end) 9,785 8,666 5,751
Average monthly revenue per apartment home $ 574 $ 560 $ 545
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation (6) $ 437,782 $ 290,903 $ 221,386
Total assets (6) 416,847 277,420 212,649
Total debt 229,305 261,294 200,451
Shareholders' equity and minority interest/
predecessor's equity 161,594 1,236 1,946
FUNDS FROM OPERATIONS RECONCILIATION:
Income before minority interest and
extraordinary loss, net * $ 15,880 $ 4,520 $ 2,433
Real estate depreciation * 9,681 7,229 6,922
---------------------------------------
Funds from operations $ 25,561 $ 11,749 $ 9,355
=======================================
</TABLE>
* Reflects extraordinary loss and real estate depreciation for both
wholly-owned communities and joint ventures, as applicable.
18
<PAGE> 21
NOTES TO SELECTED FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PROPERTY AND PER SHARE INFORMATION)
(1) The pro forma information reflects adjustments to the historical
information of the Company's predecessors from January 1, 1994 to January 25,
1994 related to the Initial Offering and Formation Transactions principally for
the acquisition of certain properties and additional expenses associated with
reporting as a public company, reduction of interest expense due to debt
repayment and increased depreciation.
(2) The historical information for the year ended December 31, 1994
represents the combined historical information of the Company's predecessors
from January 1, 1994 to January 25, 1994 and the consolidated historical
information of the Company from January 26, 1994 to December 31, 1994. The
weighted average number of shares outstanding and the per share information
pertains only to the period from January 26, 1994 to December 31, 1994.
(3) The Company's dividends paid and declared include the Company's first
quarterly dividend of $0.325 per share for the period January 26, 1994 to March
31, 1994. These dividends were the equivalent of a $1.80 per share dividend
for the year.
(4) The Company considers funds from operations ("FFO") to be a useful
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt
and to fund acquisitions and other capital expenditures. The Company believes
that in order to facilitate a clear understanding of its operating results,
FFO should be examined in conjunction with net income (loss) as presented in
the financial statements and data included elsewhere in this report.
FFO is defined as net income (loss) before minority interest of
unitholders in the Operating Partnership and extraordinary items plus real
estate depreciation. FFO should not be considered as an alternative to net
income as an indicator of Gables' operating performance or as an alternative to
cash flows as a measure of liquidity. FFO does not measure whether cash flow
is sufficient to fund all of the Company's cash needs including principal
amortization, capital expenditures and distributions to shareholders.
Additionally, FFO does not represent cash flows from operating, investing or
financing activities as defined by generally accepted accounting principles
("GAAP"). Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" for a discussion of the Company's cash needs and cash flows.
(5) Gross operating margin represents (i) total property revenues less
property operating and maintenance expenses (exclusive of depreciation expense)
as a percentage of (ii) total property revenues.
(6) In an UPREIT structure, the value attributed to Operating Partnership
units issued to controlling, continuing investors is not reflected because such
accounting is not allowed under GAAP. On a pro forma basis, the real estate
assets before accumulated depreciation and total assets as of December 31, 1996
would be $904,182 and $879,242, respectively, if such value (exclusive of the
effect of depreciation) was reflected.
19
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OVERVIEW
Gables is a self-administered and self-managed real estate investment
trust ("REIT") focused within the multifamily industry in the Southeastern and
Southwestern United States. Gables' operating performance relies
predominantly on net operating income from its apartment communities. Gables'
net operating income is influenced by operating expenses and rental revenues,
which are affected by the supply and demand dynamics within Gables' markets.
Gables' performance is also affected by the general availability and cost of
capital and by its ability to develop and to acquire additional apartment
communities with returns in excess of its blended cost of equity and debt
capital.
Gables owns apartment communities in seven core cities in Georgia, Texas
and Tennessee. The Company recently entered an eighth market, Orlando,
Florida, through an association with a subsidiary of the Walt Disney Company,
and in connection therewith currently has two communities under development in
Orlando. Within each city, Gables targets specific submarkets for investment.
These submarkets are generally characterized by their proximity to local
employment centers, retail and entertainment venues and traffic arteries.
Gables believes demographic trends (including job, population and household
growth) in its markets in recent years have generally led to favorable demand
and supply dynamics for multifamily communities. However, during any given
time period these demand and supply dynamics may be less favorable in certain
of the Company's markets depending on conditions influencing the specific
market. Portfolio wide occupancy levels have remained high and portfolio wide
rental rates have continued to increase during each of the last several years.
Gables expects portfolio wide rental expenses to increase at a rate slightly
ahead of inflation, but less than the increase in property revenues, for the
coming twelve months, consistent with the Company's experience during the past
few years.
As a result of the aforementioned generally favorable market conditions,
management has been successful in growing the stabilized properties' income as
well as growing earnings via a combination of new development and acquisition.
Management's extensive experience in new development (including site selection,
zoning, construction and lease-up) and in-depth local presence affords Gables
the opportunity to acquire land and develop new Class A multifamily
communities. In select markets and in certain real estate cycles, management
believes better returns can be generated from new development than from
acquisitions of comparable properties. During other real estate cycles or in
select markets, management will pursue the acquisition of existing apartment
communities, specifically when the returns on investment and the potential for
growth in net operating income are attractive. Additionally, Gables has been
able to acquire distressed or under-managed apartment communities which,
through strategic renovation and repositioning, have generally resulted in
superior returns to traditional acquisitions and new developments. Management
believes Gables' ability to compete with other companies is significantly
enhanced by its in-depth local presence and the strength of its management,
development, acquisition, and construction personnel. In certain situations,
management's evaluation of the growth prospects for a specific asset may result
in a determination to dispose of the asset. In this event, management would
intend to sell the asset and utilize the net proceeds from any such sale to
invest in new assets which are expected to have better growth prospects or to
reduce indebtedness. The Company maintains staffing levels sufficient to meet
the existing construction, acquisition, and leasing activities. If market
conditions warrant, management would anticipate adjusting staffing levels to
mitigate a negative impact on results of operations.
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the accompanying
consolidated and combined financial statements and the notes thereto.
This Report on Form 10-K contains 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. Actual results or
developments could differ materially from those projected in such statements as
a result of the risk factors set forth in the relevant paragraphs of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this report.
20
<PAGE> 23
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
FORMATION OF GABLES AND INITIAL PUBLIC OFFERING
Gables Residential Trust was formed in 1993 under Maryland law to continue
and to expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Group" as used herein refers to the privately owned
predecessor organization prior to the completion of the Company's initial
public offering in January, 1994 (the "IPO") and the concurrent completion of
the various transactions that occurred therewith (the "Formation
Transactions"). The term "Company" or "Gables" as used herein means Gables
Residential Trust and its subsidiaries on a consolidated basis (including
Gables Realty Limited Partnership and its subsidiaries), or, where the context
so requires, Gables Residential Trust only, and, as the context may require,
their predecessors. At the completion of the IPO on January 26, 1994, Gables
sold 9,430,000 common shares (including 1,230,000 shares as a result of the
exercise of an over-allotment option by the underwriters) at a price to the
public of $22.50 per share. The net proceeds to Gables from such sale totaled
approximately $190 million, the majority of which were used to reduce
indebtedness and to purchase minority interests in certain property
partnerships.
SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
SECONDARY OFFERINGS -
Since the IPO, the Company has had the following common share offerings:
<TABLE>
<CAPTION>
Number of Net
Closing Date Shares Issued Proceeds
------------ ------------- --------
<S> <C> <C>
October 7, 1994 444,500 $ 9,876
========= =======
October 31, 1995 4,600,000 $94,364
========= =======
March 25, 1996 879,068 $20,630
September 17, 1996 1,725,000 $38,600
September 27, 1996 1,435,000 $34,254
--------- -------
1996 Totals 4,039,068 $93,484
========= =======
</TABLE>
The proceeds from these offerings were generally used (i) to reduce
outstanding indebtedness under interim financing vehicles utilized to fund the
Company's development and acquisition activities and (ii) for general working
capital purposes including funding of future development and acquisition
activities.
The Company issued the common shares in its 1995 and 1996 offerings under
a $200 million shelf registration statement which is now exhausted. In
October, 1996, Gables filed a new shelf registration statement, covering the
registration of up to $300 million of debt securities, common shares,
preferred shares and warrants or other rights to purchase common shares or
preferred shares.
ISSUANCES OF OPERATING PARTNERSHIP UNITS -
On December 5, 1995, the Company acquired a parcel of land for the
development of an apartment community, financed in part through the issuance of
111,074 minority units of limited partnership interest in the Operating
Partnership ("Units").
On July 26, 1996, the Company acquired an apartment community comprising
500 apartment homes, financed in part through the issuance of 243,787 Units.
21
<PAGE> 24
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31,
1996 (THE "1996 PERIOD") TO THE YEAR ENDED DECEMBER 31, 1995 (THE "1995
PERIOD").
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is considered
by the Company to have achieved stabilized occupancy on the earlier to occur of
(i) attainment of 93% physical occupancy or (ii) one year after completion of
construction.
The operating performance for all of the Company's apartment communities
combined for the years ended December 31, 1996 and 1995 is summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 AND 1995
-----------------------------------------
$ %
1996 1995 CHANGE CHANGE
-----------------------------------------
<S> <C> <C> <C> <C>
RENTAL AND OTHER REVENUE:
Fully stabilized communities (1) $ 68,610 $66,755 $ 1,855 2.8%
Communities stabilized during the 1996 Period, but not during the 1995 Period (2) 6,495 2,626 3,869 147.3%
Development and lease-up communities (3) 23,141 5,699 17,442 306.1%
Acquired communities (4) 11,007 0 11,007 --
Sold community (5) 218 891 (673) (75.5%)
----------------------------------------
Total property revenues $109,471 $75,971 $33,500 44.1%
----------------------------------------
PROPERTY OPERATING AND MAINTENANCE EXPENSE (EXCLUSIVE OF DEPRECIATION AND
AMORTIZATION):
Fully stabilized communities (1) $ 25,088 $25,108 $ (20) (0.1%)
Communities stabilized during the 1996 Period, but not during the 1995 period (2) 1,966 869 1,097 126.2%
Development and lease-up communities (3) 7,624 1,815 5,809 320.1%
Acquired communities (4) 3,887 0 3,887 --
Sold community (5) 128 436 (308) (70.6%)
----------------------------------------
Total specified expenses $ 38,693 $28,228 $10,465 37.1%
----------------------------------------
Revenues in excess of specified expenses $ 70,778 $47,743 $23,035 48.2%
========================================
Revenues in excess of specified expenses as a percentage of total property
revenues 64.7% 62.8% -- 1.9%
========================================
</TABLE>
(1) Communities which were owned and fully stabilized throughout both the 1996
Period and 1995 Period.
(2) Communities which were owned and fully stabilized during all of the 1996
Period, but were not owned and fully stabilized during all of the 1995
Period.
(3) Communities in the development and/or lease-up phase which were not fully
stabilized during all or any of the 1996 Period.
(4) Communities which were acquired during the 1996 Period comprising: (a) Pin
Oak Green and Pin Oak Park, two communities acquired April 23, 1996,
collectively comprising 1,059 apartment homes, (b) Gables River Oaks, a
community acquired May 29, 1996, comprising 228 apartment homes, (c) Gables
Stonebridge, a community acquired July 26, 1996, comprising 500 apartment
homes and (d) Gables Turtle Creek, a community acquired August 22, 1996,
comprising 150 apartment homes.
(5) Vinings at Central community comprising 132 apartment homes, which was sold
on April 10, 1996.
22
<PAGE> 25
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS UB THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Total property revenues increased $33,500, or 44.1%, from $75,971 to
$109,471 due primarily to increases in the number of apartment homes resulting
from the development and acquisition of additional communities and to increases
in rental rates on communities stabilized throughout both periods ("same
store"). Below is additional information regarding the increases in total
property revenues for three of the five community categories presented in the
preceding table:
Fully stabilized communities ("same store"):
<TABLE>
<CAPTION>
Percent
Increase Increase
Number of (Decrease) in (Decrease) in Occupancy Increase
Apartment Percent Total Property Total Property During the (Decrease) in
Market Homes of Total Revenues Revenues 1996 Period Occupancy
- ------ --------- -------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Houston 3,512 38% $ 444 1.7% 95.2% 0.6%
Atlanta 3,289 35% 1,040 4.4% 94.3% (0.3%)
Nashville 912 10% 198 3.1% 95.9% 0.1%
Dallas 855 9% 107 1.9% 92.9% (1.3%)
Memphis 464 5% 106 3.4% 94.6% 0.6%
Austin 276 3% (40) (1.7%) 91.6% (1.2%)
--------- ------- ------------- ------------- ---------- ------------
9,308 100% $1,855 2.8% 94.6% 0.0%
========= ======= ============= ============= ========== ============
</TABLE>
Communities stabilized during the 1996 Period but not during the 1995
Period:
<TABLE>
<CAPTION>
Increase
Number of In Total Occupancy
Apartment Percent Property During the
Market Homes of Total Revenues 1996 Period
- ------ --------- -------- -------- -----------
<S> <C> <C> <C> <C>
Atlanta 356 60% $2,218 96.0%
Dallas 234 40% 1,651 94.9%
--------- ------- -------- -----------
590 100% $3,869 95.5%
========= ======= ======== ===========
</TABLE>
Development and lease-up communities:
<TABLE>
<CAPTION>
Increase
Number of In Total Occupancy
Apartment Percent Property During the
Market Homes of Total Revenues 1996 Period
- ------ --------- -------- -------- -----------
<S> <C> <C> <C> <C>
Atlanta 958 30% $ 5,364 82.8%
San Antonio 544 17% 2,904 84.7%
Memphis 490 15% 759 22.6%
Dallas 488 15% 2,405 54.1%
Austin 256 8% 2,615 89.5%
Nashville 254 8% 2,092 83.0%
Houston 246 7% 1,303 89.9%
--------- -------- -------- -----------
3,236 100% $17,442 79.4%
========= ======== ======== ===========
</TABLE>
Other revenues increased $921, or 15.9%, from $5,789 to $6,710 due to (i)
$900 of non-recurring net revenues generated from certain corporate apartment
home leases entered into in connection with the 1996 Olympic games held in
Atlanta and (ii) $557 of interest earned on an investment Gables made in an
apartment community on October 1, 1996 via a mortgage note receivable. In
January, 1997, Gables acquired the apartment community from the borrower, and
the mortgage note receivable was repaid in full. Such increases in other
revenues were offset in part by a decrease in property management
revenues of $418, or 9.8%, from $4,289 to $3,871 due primarily to a net
decrease of properties managed by Gables for third parties primarily as a
result of these properties being sold by the owners.
23
<PAGE> 26
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $10,465, or 37.1%, from $28,228 to $38,693 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities partially offset by a decrease in property operating and
maintenance expense for same store communities of 0.1%. The same store
decrease in operating expenses represents reduced health and workers
compensation expenses, offset by inflationary increases in expenses. Gables
anticipates that property operating and maintenance expense for same store
communities will generally increase at a rate slightly ahead of inflation.
Depreciation and amortization expense increased $6,223, or 49.1%, from
$12,669 to $18,892 due primarily to the completion of newly developed
communities and acquisition of other communities.
Property management expense for owned communities and third party
properties on a combined basis increased $269, or 5.0%, from $5,348 to $5,617
due primarily to increased data processing costs. Gables allocates property
management expenses to both owned communities and third/related party
properties based on the proportionate share of total apartment homes and units
managed.
General and administrative expense increased $176, or 6.1%, from $2,869 to
$3,045 due to increased personnel and administrative costs associated primarily
with the appointment of the new Chief Operating Officer and Vice President of
Portfolio Management positions effective January 1, 1996, offset in part by
certain non-recurring costs incurred during the 1995 Period that were not
incurred during the 1996 Period.
Interest expense increased $8,024, or 61.3%, from $13,088 to $21,112 due
to an increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase.
Additionally, interest costs increased due to the refinancing of certain
variable rate debt to a higher fixed rate cost structure. These increases in
interest expense have been offset in part as a result of the offerings the
Company has consummated between periods, the proceeds of which have been
primarily used to reduce indebtedness.
Extraordinary loss, net of $520 for the year ended December 31, 1996
represents the write-off of unamortized deferred financing costs totaling $631
associated with the early retirement of the Company's Original Credit Facility,
net of the $111 portion of the loss attributable to the minority interest
unitholders. The Original Credit Facility that was scheduled to mature in
January, 1997, was refinanced in March, 1996 with a new $175 million unsecured
revolving credit facility (the "New Credit Facility").
Net income increased $8,825, or 65.1%, from $13,556 to $22,381 primarily
due to the reasons discussed above.
24
<PAGE> 27
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE YEAR ENDED DECEMBER
31, 1995 (THE "1995 PERIOD") TO THE PRO FORMA OPERATING RESULTS FOR THE YEAR
ENDED DECEMBER 31, 1994 (THE "1994 PERIOD").
Gables completed its IPO on January 26, 1994 and in connection therewith
completed the Formation Transactions. The following is a comparison of the
operating results of Gables for the year ended December 31, 1995 to the pro
forma operating results of the Group for the period from January 1, 1994 to
January 25, 1994, and the historical operating results of Gables for the period
from January 26, 1994 to December 31, 1994 (together, the pro forma operating
results for the year ended December 31, 1994). Pro forma adjustments include
adjustments related to the IPO and Formation Transactions, principally for the
acquisition of certain properties, the payment of additional expenses
associated with reporting as a public company, the reduction of interest
expense due to debt repayment, and an increase in depreciation.
Rental income increased $15,412, or 26.9%, from $57,291 to $72,703 due to
increases in the number of apartment homes resulting from the development and
acquisition of additional communities and to increases in rental rates on
communities stabilized throughout both periods ("same store"). On a same store
basis, Gables' rental income increases and occupancy changes were as follows:
<TABLE>
<CAPTION>
Number of Percent Occupancy Increase
Apartment Percent Increase in Increase in During Year (Decrease) in
Market Homes of Total Rental Income Rental Income Ended 12/31/95 Occupancy
- --------- --------- -------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Atlanta 2,324 31% $1,148 7.5% 95.2% 0.2%
Dallas 536 7% 125 5.3% 94.2% (1.2%)
Houston 3,266 44% 367 1.6% 95.0% 0.9%
Nashville 912 12% 387 6.8% 96.3% 0.2%
Memphis 464 6% 157 5.7% 94.9% (1.9%)
--------- ------- ------------- ------------ ------------- -------------
7,502 100% $2,184 4.6% 95.1% 0.3%
========= ======= ============= ============ ============= =============
</TABLE>
During 1994, Gables stabilized the occupancy for communities which were in
lease-up during all or a portion of the year ended December 31, 1994 and
completed the development and acquisition of additional communities. These
communities were stabilized during all of the 1995 Period but were not
stabilized during all of the 1994 Period. These activities resulted in
increases in rental income from the 1994 Period to the 1995 Period. A summary
of these activities is as follows:
<TABLE>
<CAPTION>
Number of Apartment Homes Occupancy
--------------------------------- During
Lease-up Developed Percent Increase in Year Ended
Market Completed or Acquired Total of Total Rental Income 12/31/95
- ------- --------- ----------- --------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Atlanta 603 362 965 50% $2,357 95.7%
Austin 276 0 276 14% 122 94.2%
Dallas 132 319 451 23% 2,155 95.4%
Houston 0 246 246 13% 949 95.1%
--------- ----------- --------- ------- ------------- ---------
1,011 927 1,938 100% $5,583 95.3%
========= =========== ========= ======= ============= =========
</TABLE>
During the year ended December 31, 1995, certain wholly-owned development
communities commenced operations and lease-up which also resulted in increases
in rental income. A summary of these activities is as follows:
<TABLE>
<CAPTION>
Occupancy
Number of During
Apartment Percent Increase in Year Ended
Market Homes of Total Rental Income 12/31/95
----------- --------- -------- ------------- ----------
<S> <C> <C> <C> <C>
Atlanta 1,314 43% $4,244 37.5%
Austin 256 9% 174 6.5%
Dallas 422 14% 1,304 26.8%
Houston 246 8% 697 34.8%
San Antonio 544 18% 1,120 26.2%
Nashville 254 8% 106 5.3%
--------- ------- ------------- ---------
3,036 100% $7,645 28.4%
========= ======= ============= =========
</TABLE>
25
<PAGE> 28
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Other property revenues increased $1,040, or 46.7%, from $2,228 to $3,268
due primarily to other income from newly developed and acquired apartment
homes.
Other revenues decreased $1,561, or 21.2%, from $7,350 to $5,789 due
primarily to a decrease in property management revenues of $1,263, or 22.8%,
from $5,552 to $4,289 resulting from a net decrease of properties managed by
Gables for third/related parties primarily due to these properties being sold
by the owners throughout 1994 and 1995.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $5,360, or 23.4%, from $22,868 to $28,228 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities and an increase in property operating and maintenance
expense for same store communities of 3.5%. Operating expenses associated with
communities stabilized during all of the 1995 Period that were not stabilized
during all of the 1994 Period increased $2,022. Operating expenses associated
with communities that commenced operations and lease-up during the 1995 period
were $2,685 during the year ended December 31, 1995. Property operating and
maintenance expense as a percent of total property revenues decreased from
38.4% to 37.2%.
Depreciation and amortization expense increased $2,695, or 27.0%, from
$9,974 to $12,669 due to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third/related party
properties decreased $255, or 4.6%, from $5,603 to $5,348 due primarily to a
decrease in the number of third/related party units managed. Gables allocates
property management expenses to both owned communities and third/related party
properties based on the proportionate share of total apartment homes and units
managed.
General and administrative expense increased $1,090, or 61.3%, from $1,779
to $2,869 due to increased personnel and administrative costs associated with
annual increases in compensation and increased investor relations efforts,
additional costs associated with a public company organizational structure that
were not incurred during 1994, and certain other costs.
Interest expense and credit enhancement fees on a combined basis increased
$4,214, or 44.0%, from $9,584 to $13,798 due to an increase in interest expense
of $4,212, or 47.5%, from $8,876 to $13,088 resulting from an increase in
operating debt associated with the development and acquisition of additional
communities. Additionally, interest costs increased due to increases in
variable rates and the refinancing of certain variable rate debt to a higher
fixed rate cost structure. Such increases were offset by interest savings
associated with the repayment of debt with the $94 million net proceeds
generated from the sale of 4,600,000 common shares that closed in October,
1995.
Extraordinary loss, net of $784 for the year ended December 31, 1995
represents the write-off of unamortized deferred financing costs totaling $955
associated with the early retirement of the Company's construction loans, net
of the $171 portion of the loss attributable to the minority interest
unitholders.
Net income increased $1,066, or 8.5%, from $12,490 to $13,556 for the
reasons discussed above.
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE YEAR ENDED DECEMBER 31, 1995
TO THE HISTORICAL OPERATING RESULTS OF THE GROUP FOR THE PERIOD FROM JANUARY 1,
1994 TO JANUARY 25, 1994 AND THE HISTORICAL OPERATING RESULTS OF GABLES FOR THE
PERIOD FROM JANUARY 26, 1994 TO DECEMBER 31, 1994.
Total property revenues increased $16,545, or 27.8%, from $59,426 to
$75,971 primarily due to increases in the number of apartment homes
resulting from the development and acquisition of additional communities.
Substantially all of the increase in rental income was attributable to newly
completed and occupied apartment homes, with the balance attributable to changes
in occupancy or increased rental rates for apartment homes in communities
stabilized throughout both periods.
Other revenues decreased $1,607, or 21.7%, from $7,396 to $5,789 due
primarily to a decrease in property management revenues of $1,267, or 22.8%,
from $5,556 to $4,289 resulting from a net decrease in the number of properties
managed by Gables for third/related parties. This decrease is primarily the
result of properties being sold by the third/related party owners throughout
1994 and 1995.
26
<PAGE> 29
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $5,381, or 23.6%, from $22,847 to $28,228 due to
increases in the number of apartment homes resulting from the development and
acquisition of additional communities and an increase in property operating and
maintenance expense for communities stabilized throughout both periods.
Property operating and maintenance expense as a percent of total property
revenues decreased from 38.4% to 37.2%.
Depreciation and amortization expense increased $2,763, or 27.9%, from
$9,906 to $12,669 due to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third/related party
properties decreased $426, or 7.4%, from $5,774 to $5,348 due primarily to a
decrease in the number of third/related party units managed.
General and administrative expense increased $1,127, or 64.7%, from $1,742
to $2,869 due to the increased costs associated with a public company
organizational structure, increased personnel and administrative costs, and
certain other costs.
Interest expense increased $3,700, or 39.4%, from $9,388 to $13,088 due to
an increase in operating debt associated with the development and acquisition of
additional communities. Additionally, interest costs increased due to
increases in variable rates and the refinancing of certain variable rate debt
to a higher fixed rate cost structure. Such increases were offset by interest
savings associated with the repayment of debt with the $94 million net proceeds
generated from the sale of 4,600,000 common shares that closed in October,
1995.
Extraordinary loss, net of $784 for the year ended December 31, 1995
represents the write-off of unamortized deferred financing costs totaling $955
associated with the early retirement of the Company's construction loans, net
of the $171 portion of the loss attributable to the minority interest
unitholders.
Net income increased $1,592, or 13.3%, from $11,964 to $13,556 for the
reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Gables' net cash provided by operating activities increased from $29,088
for the year ended December 31, 1995 to $51,629 for the year ended December 31,
1996, due to (i) an increase of $15,595 in income before certain non-cash items
including depreciation, amortization, equity in income of joint ventures,
minority interest of unitholders in Operating Partnership and net extraordinary
losses and (ii) the change in other liabilities between periods of $7,639,
offset in part by the change in other assets between periods of $22 and the
change in restricted cash between periods of $671.
Gables' net cash used in investing activities increased from $148,234 for
the year ended December 31, 1995 to $213,596 for the year ended
December 31, 1996 primarily due to 1996 acquisition activities, partially offset
by the January, 1995 acquisition of Gables Over Peachtree ($11 million) and
decreased development activities in 1996 when compared to 1995. During the year
ended December 31, 1996, Gables expended approximately $120.2 million for the
acquisition of five apartment communities totaling 1,937 apartment homes,
approximately $2.6 million in renovation expenditures related primarily to
Gables Over Peachtree, approximately $68.3 million related to development
expenditures, including related land acquisitions and approximately $3.8 million
related to capital expenditures for operating apartment communities.
Additionally, Gables invested $21.5 million in an apartment community comprising
232 apartment homes on October 1, 1996 via a mortgage note receivable. In
January, 1997, Gables acquired the apartment community from the borrower, and
the mortgage note receivable was repaid in full.
Gables' net cash provided by financing activities increased from $123,619
for the year ended December 31, 1995 to $157,823 for the year ended December
31, 1996, due primarily to increased acquisition cash needs. During the year
ended December 31, 1996, Gables had net proceeds of $93.5 million from sales of
4,039,068 common shares and had net borrowings of $104.1 million which were
used primarily to fund Gables' acquisition and development activities discussed
previously. These proceeds from financing activities were offset in part by
the payment of dividends and distributions totaling $38.6 million.
27
<PAGE> 30
PG
EP G39149 31
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Gables elected to be taxed as a REIT under Section 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with its taxable year
ended December 31, 1994. REITs are subject to a number of organization and
operational requirements, including a requirement that they currently
distribute 95.0% of their ordinary taxable income. Provided Gables maintains
its qualification as a REIT, the Company generally will not be subject to
Federal income tax on distributed net income.
As of December 31, 1996, Gables had total indebtedness of $390,321, cash
and cash equivalents of $4,385 and principal escrow deposits reflected in
restricted cash of $1,440. Gables' indebtedness includes $219,046 in
conventional fixed-rate mortgages payable secured by individual properties, a
$40,000 term loan, $112,200 in tax-exempt bond indebtedness, and $19,075
borrowings outstanding under its Credit Facilities at December 31, 1996.
Gables' indebtedness has an average of 7.9 years to maturity at December 31,
1996. Excluding monthly principal amortization payments, over the next five
years Gables has the following scheduled debt maturities for indebtedness
outstanding at December 31, 1996:
<TABLE>
<S> <C>
1997 $10,452
1998 0
1999 62,930
2000 0
2001 40,000
</TABLE>
The debt maturities in 1997 of $10,452 relate to a conventional mortgage
note payable of $9,377, which was repaid February 28, 1997, and $1,075 of
outstanding indebtedness under the $20 Million Credit Facility which will be
extended pursuant to the Company's unlimited one-year extension options. The
debt maturities in 1999 consist of $44,930 related to four variable-rate notes
payables securing tax-exempt bonds and $18,000 of outstanding indebtedness
under the $175 Million Credit Facility. The bonds are subject to mandatory
redemption on the termination dates of letters of credit securing the bonds,
each of which is March, 1999. Three of the underlying bond issues mature in
December, 2007 and the fourth underlying bond issue matures in August, 2024.
Gables expects to be able to remarket such bonds on or prior to March, 1999.
The $175 Million Credit Facility has three one-year extension options.
Gables' dividends through the fourth quarter of 1996 have been paid from
cash provided by operating activities. Gables anticipates that dividends will
continue to be paid on a quarterly basis from cash provided by operating
activities.
In January, 1997, the Company sold one of its Current Communities, Club
Candlewood, comprising 486 apartment homes. The net sales proceeds were used to
(i) defease the related tax-exempt bond indebtedness which had a principal
balance of $6,975 at December 31, 1996 and (ii) paydown outstanding borrowings
under the Company's Credit Facilities.
Gables has met and expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations. Gables' net
cash provided by operations has been adequate and Gables believes that it will
continue to be adequate to meet both operating requirements and payment of
dividends in accordance with REIT requirements in both the short and the long
term. The budgeted expenditures for improvements and renovations to the
communities, in addition to monthly principal amortization payments, are also
expected to be funded from net cash provided by operations. Gables anticipates
construction and development activities and land purchases will be initially
funded primarily through borrowings under its Credit Facilities described
below.
Gables expects to meet certain of its long-term liquidity requirements,
such as scheduled debt maturities, repayment of short-term financing of
construction and development activities and possible property acquisitions,
through long-term secured and unsecured borrowings and the issuance of debt
securities or additional equity securities or through the disposition of assets
which, in management's evaluation, may no longer meet the Company's investment
requirements.
28
<PAGE> 31
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
$175 Million Credit Facility
In conjunction with the IPO, Gables closed a $175 million three-year
revolving credit facility (the "Original Credit Facility") which had an initial
maturity of January, 1997. Borrowings under the Original Credit Facility were
recourse to the Company and bore interest at LIBOR plus 1.90% (reduced from
2.25% in December, 1994). Additionally, fees associated with letters of credit
issued thereunder for the Company's tax-exempt variable-rate bonds were 1.25%
per annum (reduced from 1.50% in July, 1995).
In March, 1996, Gables closed a new $175 million unsecured revolving
credit facility (the "New Credit Facility" or "$175 Million Credit Facility")
that replaced the Original Credit Facility. Although the New Credit Facility
is unsecured, there are certain designated real estate assets that have
escrowed mortgages. Upon the attainment of an investment grade rating by the
Company, the escrowed mortgages will be released. The New Credit Facility has
an initial term of three years and three one-year extension options.
Borrowings currently bear interest at LIBOR plus 1.50% (reduced from 1.65% in
November, 1996) and letter of credit fees for the Company's tax-exempt
variable-rate bonds are 1.00% per annum. Under the New Credit Facility, up to
$50 million is available to provide credit enhancements on outstanding
tax-exempt bond issues and all remaining amounts are available for borrowings.
Gables' availability under the New Credit Facility is limited to the lesser of
the total $175 million commitment or the borrowing base. The borrowing base
available under the New Credit Facility is based on the collateral value of the
real estate assets with escrowed mortgages and the debt service coverage ratio
of communities pledged as collateral under other recourse loans. As of
December 31, 1996, the Company had approximately $45.8 million of letters of
credit issued under the New Credit Facility and had $18.0 million in borrowings
outstanding thereunder and, therefore, had $111.2 million of remaining capacity
on the $175 million available under this facility.
$20 Million Credit Facility
In November, 1996, Gables closed an unsecured revolving credit facility
that currently provides for up to $20 million in borrowings. This facility has
an initial term of one year and has unlimited one-year extension options.
Borrowings currently bear interest at LIBOR plus 1.50%. At December 31, 1996,
the Company had $1,075 in borrowings outstanding under this facility.
Restrictive Covenants
Certain of the Company's debt agreements contain customary
representations, covenants and events of default, including covenants which
restrict the ability of the Operating Partnership to make distributions in
excess of stated amounts, which in turn restricts the discretion of the Company
to declare and pay dividends. In general, during any fiscal year the Operating
Partnership may only distribute up to 95% of the Operating Partnership's
consolidated income available for distribution (as defined in the related
agreement) exclusive of distributions of capital gains for such year. The
applicable debt agreements contain exceptions to these limitations to allow
the Operating Partnership to make any distributions necessary to allow the
Company to maintain its status as a REIT. The Company does not anticipate that
this provision will adversely effect the ability of the Operating Partnership
to make distributions or the Company to declare dividends, as currently
anticipated.
29
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
COMPLETED COMMUNITIES IN LEASE-UP AND DEVELOPMENT COMMUNITIES AS OF DECEMBER
31, 1996
Gables' current developments and lease-up activities for communities that had
not reached stabilized occupancy as of December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
Actual/ Actual/ Actual/ Actual/ Actual/
Estimated Total Estimated Estimated Estimated Estimated
Number of Budgeted Percent Quarter Quarter of Quarter Quarter of
Apartment Cost Construction Percent Percent Construction Initial Construction Stabilized
Community Homes (millions) Complete Leased Occupied Commenced Occupancy Ended Occupancy
--------- --------- --------- --------- ------- -------- ------------ ---------- ------------ ----------
(A) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES IN LEASE-UP
ATLANTA, GA
Gables Over Peachtree 263 $ 20.4 100% 75% 74% 1 Q 1995 N/A 2 Q 1996 2 Q 1997
DALLAS, TX
Gables Green Oaks I 300 16.5 100% 83% 79% 1 Q 1995 1 Q 1996 3 Q 1996 2 Q 1997
-----------------
TOTALS 563 $ 36.9
-----------------
DEVELOPMENT COMMUNITIES
ATLANTA, GA
Gables Vinings 315 $ 24.7 40% --- --- 2 Q 1996 1 Q 1997 4 Q 1997 4 Q 1997
Roswell Gables II 284 21.7 25% --- --- 2 Q 1996 2 Q 1997 1 Q 1998 1 Q 1998
Gables at Sugarloaf 386 28.6 --- --- --- 2 Q 1997 1 Q 1998 1 Q 1999 2 Q 1999
AUSTIN, TX
Gables Central Park 273 20.6 72% --- --- 2 Q 1996 1 Q 1997 3 Q 1997 4 Q 1997
Gables Bluffstone 256 19.9 --- --- --- 1 Q 1997 4 Q 1997 3 Q 1998 4 Q 1998
MEMPHIS, TN
Gables Quail Ridge 238 17.0 99% 61% 55% 1 Q 1995 2 Q 1996 1 Q 1997 2 Q 1997
Gables Germantown 252 19.6 95% 67% 56% 1 Q 1995 2 Q 1996 1 Q 1997 2 Q 1997
ORLANDO, FL
Gables at Little Lake Bryan I 280 21.7 --- --- --- 2 Q 1997 1 Q 1998 4 Q 1998 1 Q 1999
Gables Celebration (C) 231 21.3 --- --- --- 3 Q 1997 1 Q 1998 4 Q 1998 4 Q 1998
-----------------
TOTALS 2,515 $195.1
-----------------
</TABLE>
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934, as amended. The projections contained in the table above that are not
historical facts are forward-looking statements. These forward-looking
statements involve risks and uncertainties and actual results may differ
materially from those projected in such statements. Risks associated with the
Company's development, construction, and lease-up activities, which could
impact the forward-looking statements made, include: development opportunities
may be abandoned; construction costs of a community may exceed original
estimates, possibly making the community uneconomical; and construction and
lease-up may not be completed on schedule, resulting in increased debt service
and construction costs.
(A) Total Budgeted Cost includes all capitalized costs incurred and projected
to be incurred to develop the respective community presented in accordance
with generally accepted accounting principles, including land acquisition
costs, construction costs, real estate taxes, interest and loan fees,
permits, professional fees, allocated development overhead, and other
regulatory fees.
(B) Stabilized occupancy is defined as the earlier to occur of (i) 93%
physical occupancy or (ii) one year after completion of construction.
(C) The land for this development was acquired in January, 1997.
30
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
Portfolio Indebtedness Summary and Interest Rate Protection Agreement Summary
A summary of Gables' portfolio indebtedness and interest rate protection
agreements as of December 31, 1996 follows:
PORTFOLIO INDEBTEDNESS SUMMARY
<TABLE>
<CAPTION>
Percentage Interest Total Years to
TYPE OF INDEBTEDNESS Balance of Total Rate (A) Rate (B) Maturity
- -------------------- ------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Conventional fixed-rate (C) $259,046 66.4% 7.88% 7.88% 7.82
Tax-exempt fixed-rate 67,270 17.2% 6.56% 6.73% 13.40
-------- ----- ---- ---- -----
Total fixed-rate $326,316 83.6% 7.61% 7.64% 8.97
-------- ----- ---- ---- -----
Tax-exempt variable-rate $ 44,930 11.5% 4.15% 5.15% 2.25
-------- ----- ---- ---- -----
Credit Facilities $ 19,075 4.9% 7.15% 7.15% 2.25
-------- ----- ---- ---- -----
TOTAL PORTFOLIO DEBT (D), (E) $390,321 100.0% 7.19% 7.33% 7.87
======== ===== ==== ==== =====
</TABLE>
(A) Interest Rate represents the weighted average interest rate incurred on
the indebtedness, exclusive of deferred financing cost amortization
and credit enhancement fees, as applicable.
(B) Total Rate represents the Interest Rate (A) plus credit enhancement
fees, as applicable.
(C) Conventional fixed-rate debt includes $40,000 of financing which bears
interest at LIBOR plus a spread of 1.25%. Such financing is effectively
fixed at an all-in rate of 6.60% after the application of $40,000 of the
$44,530 interest rate cap and swap agreements described below.
(D) Interest associated with construction activities is capitalized as a
cost of development and does not impact current earnings. The qualifying
construction expenditures at December 31, 1996 for purposes of interest
capitalization were $57,580.
(E) Excludes $16.4 million of tax-exempt bonds and $16.5 million of
outstanding conventional indebtedness related to joint ventures in
which Gables owns a 25% interest.
INTEREST RATE PROTECTION AGREEMENT SUMMARY
<TABLE>
<CAPTION>
NOTIONAL STRIKE EFFECTIVE TERMINATION
DESCRIPTION OF AGREEMTENT AMOUNT PRICE (F) DATE DATE
- ------------------------ ------- -------- --------- -----------
<S> <C> <C> <C> <C>
LIBOR, 30-day - "Rate Cap" $44,530 6.25% 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" $44,530 5.35% 08/30/96 08/30/99 (G)
LIBOR, 30-day - "Rate Cap" $50,000 6.45% 01/30/97 12/31/97
LIBOR, 30-day - "Rate Cap" $35,470 5.13% 01/27/94 01/30/97
</TABLE>
(F) The 30-day LIBOR rate in effect at December 31, 1996 was 5.66%.
(G) This is a knock-out swap agreement which fixes the Company's underlying
30-day LIBOR rate at 5.35%. The swap terminates upon the earlier to
occur of (i) the termination date or (ii) a rate reset date on which
the 30-day LIBOR rate is 6.26% or higher.
31
<PAGE> 34
MANAGEMENT'S DISCUSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
BOOK VALUE OF ASSETS AND EQUITY
The application of historical cost accounting in accordance with GAAP for
Gables' UPREIT structure results in an understatement of total assets and
equity compared to the amounts that would be recorded via the application of
purchase accounting in accordance with GAAP had Gables not been organized as an
UPREIT. Management believes it is imperative to understand this difference
when evaluating the book value of assets and equity. The understatement of
basis related to this difference in organizational structure is $119,582,
exclusive of the effect of depreciation. Accordingly, on a pro forma basis,
the real estate assets before accumulated depreciation and total assets as of
December 31, 1996 would be $904,182 and $879,242, respectively, if such
$119,582 value were reflected. In addition, on a pro forma basis, the total
equity plus minority interest as of December 31, 1996 would be $454,219 if such
$119,582 value were reflected.
INFLATION
Substantially all of the leases at the communities are for a term of one
year or less, which may enable Gables to seek increased rents upon renewal of
existing leases or commencement of new leases. The short-term nature of these
leases generally serves to reduce the risk to Gables of the adverse effects of
inflation.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Report on Form 10-K contains 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. Actual results or
developments could differ materially from those projected in such statements.
Certain factors that might cause such a difference include, but are not limited
to, the following: development opportunities may be abandoned; construction
costs of a community may exceed original estimates; construction and lease-up
may not be completed on schedule, resulting in increased debt service expense
and construction costs and reduced rental revenues; occupancy rates and rents
may be adversely affected by local economic and market conditions; financing
may not be available on favorable terms; the Company's cash flow may be
insufficient to meet required payments of principal and interest; and existing
indebtedness may not be able to be refinanced or the terms of such refinancing
may not be as favorable as the terms of existing indebtedness.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO") to be a useful
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt
and to fund acquisitions and other capital expenditures. The Company believes
that in order to facilitate a clear understanding of its operating results,
funds from operations should be examined in conjunction with net income (loss)
as presented in the financial statements and data included elsewhere in this
report.
FFO is defined as net income (loss) before minority interest of
unitholders in the Operating Partnership and extraordinary items, plus real
estate depreciation. Adjusted funds from operations is defined as funds from
operations less capital expenditures funded by operations. Funds from
operations and adjusted funds from operations should not be considered as an
alternative to net income as an indicator of Gables' operating performance or
as an alternative to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all of the Company's cash needs
including principal amortization, capital expenditures, and distributions to
shareholders. Additionally, FFO does not represent cash flows from operating,
investing or financing activities as defined by generally accepted accounting
principles. Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" for a discussion of the Company's cash needs and cash flows.
32
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
- --------------------------------------------------------------------------------
RECONCILIATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
A reconciliation of funds from operations and adjusted funds from operations
follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
RECONCILIATION:
Income before minority interest and extraordinary
loss, net $27,541 $18,369
Joint venture extraordinary loss 0 48
Real estate asset depreciation:
Wholly-owned real estate assets 18,477 12,329
Joint venture real estate assets 220 181
------- -------
Total 18,697 12,510
------- -------
FUNDS FROM OPERATIONS $46,238 $30,927
------- -------
Capital expenditures for operating apartments:
Carpet 1,245 1,026
Roofing 297 23
Exterior painting 145 66
Appliances 179 129
Other additions/improvements 1,988 1,755
------- -------
Total 3,854 2,999
------- -------
ADJUSTED FUNDS FROM OPERATIONS $42,384 $27,928
======= =======
</TABLE>
33
<PAGE> 36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item
14(a) and filed as part of this report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Directors and Executive Officers of the
Registrant required by Item 10 shall be included in the Proxy Statement to be
filed relating to the 1997 Annual Meeting of the Registrant's Shareholders and
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning Executive Compensation required by Item 11
shall be included in the Proxy Statement to be filed relating to the 1997
Annual Meeting of the Registrant's Shareholders and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning Security Ownership of Certain Beneficial Owners
and Management required by Item 12 shall be included in the Proxy Statement to
be filed relating to the 1997 Annual Meeting of the Registrant's Shareholders
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning Certain Relationships and Related Transactions
required by Item 13 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's Shareholders and is
incorporated herein by reference.
34
<PAGE> 37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON
FORM 8-K
14(A)(1)AND (2) FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated and Combined Financial Statements
Report of Independent Public Accountants 40
Consolidated Balance Sheets of Gables Residential Trust as of December
31, 1996 and December 31, 1995. 41
Consolidated Statements of Operations of Gables Residential Trust for the
years ended December 31, 1996 and 1995 and for the period from January 26,
1994 to December 31, 1994 and Combined Statement of Operations of Gables
Residential Group for the period from January 1, 1994 to January 25,
1994. 42
Consolidated Statements of Shareholders' Equity of Gables Residential
Trust for the years ended December 31, 1996 and 1995 and for the period
from January 26, 1994 to December 31, 1994 and Combined Statement of
Partners' and Owners' Equity of Gables Residential Group for the period
from January 1, 1994 to January 25, 1994. 43
Consolidated Statements of Cash Flows of Gables Residential Trust for the
years ended December 31, 1996 and 1995 and for the period from January 26,
1994 to December 31, 1994 and Combined Statement of Cash Flows of Gables
Residential Group for the period from January 1, 1994 to January 25, 1994. 44
Notes to Consolidated and Combined Financial Statements 45 to
57
Schedule III - Real Estate Investments and Accumulated Depreciation 58 to
as of December 31, 1996 60
14(a)(3) EXHIBITS
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
<S> <C> <C>
3.1(i)(a) --- Amended and Restated Declaration of Trust of the Company, incorporated herein by
reference to the Company's Registration Statement on Form S-11 (File No. 33-70570),
as amended.
3.1(ii)(a) --- Second Amended and Restated Bylaws of the Company, incorporated herein by reference
to Exhibit 3.1 to the Company's Registration Statement on Form 8-A/A-2.
10.1 --- Amended and Restated Agreement of Limited Partnership of the Operating Partnership,
incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.2 --- Registration Rights and Lock-Up Agreement by and among the Company and the
persons named therein, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
10.3 --- Articles of Incorporation of East Apartment Management, Inc., incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
10.4 --- Bylaws of East Apartment Management, Inc., incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.5 --- Articles of Incorporation of Central Apartment Management, Inc., incorporated herein
by reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
10.6 --- Bylaws of Central Apartment Management, Inc., incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.7 --- Articles of Incorporation of Gables GP, Inc., incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.8 --- Bylaws of Gables GP, Inc., incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
10.9 * --- Second Amended and Restated 1994 Share Option and Incentive Plan, as amended.
10.10 --- 1994 Credit Agreement dated as of January 26, 1994 by and among the Operating
Partnership, Gables-Tennessee Properties, NationsBank of Georgia, N.A., and other
banks which may become parties to that Agreement and NationsBank of Georgia, N.A.,
as Agent, incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.
10.11 --- Amendment to the 1994 Credit Agreement between the Operating Partnership, Gables-
Tennessee Properties, NationsBank of Georgia, N.A. and other banks which
may become parties to that Agreement, dated December 21, 1994, incorporated
herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
10.12 --- Amendment to the 1994 Credit Agreement between the Operating Partnership,
Gables- Tennessee Properties, NationsBank of Georgia, N.A. and other banks which
may become parties to that Agreement, dated August 22, 1995, incorporated herein
by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
10.13 * --- Form of Employment Agreement as signed by the Company and each of Marcus E.
Bromley (Chairman of the Board of Trustees and Chief Executive Officer; 1997 base
salary of $180,000), John T. Rippel (President and Chief Operating Officer; 1997
base salary of $160,000), William M. Hammond (Senior Vice President; 1997 base
salary of $152,000), C. Jordan Clark (Senior Vice President; 1997 base salary of
$152,000) and Marvin R. Banks, Jr. (Chief Financial Officer; 1997 base salary of
$152,000)
10.14 * --- Severance Agreement between the Company and Perry M. Parrott, Jr., dated
November 11, 1996.
10.15 --- Form of Indemnification Agreement as signed by the Company and each of Marcus E.
Bromley, John T. Rippel, Perry M. Parrott, Jr., William M. Hammond, Marvin R.
Banks, Jr., C. Jordan Clark, David M. Holland, Peter D. Linneman, Lauralee E. Martin
and John W. McIntyre, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
10.16 --- Assignment of Interests dated January 26, 1994 from the Assignors named therein to the
Operating Partnership and to Gables-Tennessee Properties pursuant to the Omnibus
Option Agreement described therein, incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.17 --- Assignment of Notes dated January 26, 1994 from the Assignors named therein to the
Company pursuant to the Omnibus Note Purchase Option Agreement described therein,
incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.18 --- Assignment of Interests dated January 26, 1994 from the Assignors named therein to the
Operating Partnership and to Gables-Tennessee Properties pursuant to the Omnibus
Cash Option Agreement described therein, incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.19 --- Assignment of Interests dated January 26, 1994 from the Assignors named therein to the
Operating Partnership pursuant to the Option Agreement described therein,
incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
10.20 ---- Assignment by Wood Properties, Inc. to the Company dated January 26, 1994,
incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
10.21 --- Form of Promissory Note from each Management Company of the Operating
Partnership, incorporated herein by reference to the Company's Registration Statement
on Form S-11 (File No. 33-70570), as amended.
10.22 --- Form of Consulting Fee Termination Agreement, incorporated herein by reference to the
Company's Registration Statement on Form S-11 (File No. 33-70570), as amended.
10.23 --- Assignment of Purchase Contracts dated as of January 26, 1994 by and among TCF
Houston 1992, Inc., TC Residential Houston Limited Partnership and Wood Properties,
Inc., incorporated herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.
10.24 --- Assignment of Purchase Contracts dated as of January 18, 1994 by and among Arbor
Properties, Inc. and Wood Properties, Inc., incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.25 --- Asset Purchase Agreement between Central RS, Inc. and Central Apartment
Management, Inc. dated as of January 26, 1994, incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.26 --- Asset Purchase Agreement between East RS, Inc. and East Apartment Management,
Inc. dated as of January 26, 1994, incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
10.27 --- Promissory Note dated November 29, 1994, for a $53,000,000 mortgage loan from the
Northwestern Mutual Life Insurance Company to Gables Realty Limited Partnership,
incorporated herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
10.28 --- Interest rate protection agreement (notional amount of $44,530,000) between Gables
Realty Limited Partnership and NationsBank of North Carolina, N.A. dated January
25, 1994, incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
10.29 --- Interest rate protection agreement (notional amount of $85,470,000) between Gables
Realty Limited Partnership and NationsBank of North Carolina, N.A. dated January
25, 1994, incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
10.30 --- Confirmation of Partial Unwind of January, 1994 interest rate protection agreement
(original notional amount of $85,470,000) between Gables Realty Limited Partnership
and NationsBank of North Carolina, N.A., dated March 19, 1996, incorporated herein
by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
10.31 * --- Interest rate protection agreement (notional amount of $44,530,000) between Gables
Realty Limited Partnership and First Union National Bank of Georgia, dated August
21, 1996.
10.32 --- Interest rate protection agreement (notional amount of $50,000,000) between Gables
Realty Limited Partnership and NationsBank, N.A., dated March 19, 1996, incorporated
herein by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
10.33 --- Loan Application and Commitment Agreement between Teachers Insurance
and Annuity Association of America ("lender") and Gables Realty Limited Partnership
and Gables-Tennessee Properties (collectively, the borrower) for a $130,689,000 loan,
incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.34 --- Loan Agreement, Conversion and Note Agreement, Security Deed Note and Deed of
Trust Notes between Teachers Insurance and Annuity Association of America ("lender")
and Gables Realty Limited Partnership and Gables-Tennessee Properties
(collectively, the borrower) for a $130,689,000 loan, dated December 29, 1995,
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
10.35 --- $175,000,000 Credit Agreement dated as of March 28, 1996 among Gables Realty
Limited Partnership (as Borrower) and Wachovia Bank of Georgia, N.A., First
Union National Bank of Georgia, Guaranty Federal Bank, AmSouth Bank of
Alabama, and Commerzbank AG, Atlanta Agency (collectively, as Lenders) and
Wachovia Bank of Georgia, N.A. (as Agent), incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
10.36 --- Guaranty Agreement dated as of March 28, 1996 among Gables GP, Inc., Gables
Residential Trust and Gables-Tennessee Properties in favor of the Agent, for the
ratable benefit of the Lenders, under the $175,000,000 Credit Agreement dated as
of March 28, 1996, incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996.
10.37* --- First Amendment to the $175,000,000 Credit Agreement dated as of November 22,
1996 among Gables Realty Limited Partnership and the Lenders.
10.38* --- Second Amendment to the $175,000,000 Credit Agreement dated as of March 18,
1997 among Gables Realty Limited Partnership and the Lenders.
10.39* --- $40,000,000 Term Loan Credit Agreement dated as of November 20, 1996 among
Gables Realty Limited Partnership (as Borrower) and Wachovia Bank of Georgia,
N.A. (as Agent and Lender).
21.1 * --- Schedule of Subsidiaries of the Company.
23.1 * --- Consent of Arthur Andersen LLP.
27 * --- Financial Data Schedule
</TABLE>
* Filed herewith
The registrant's proxy statement is to be filed with the Commission on or
about March 31, 1997.
14(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the
Company's fiscal year ended December 31, 1996.
14(C) EXHIBITS
See Item 14(a)(3) above.
38
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Gables Residential Trust certifies that it has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GABLES RESIDENTIAL TRUST
By /s/ Marcus E. Bromley
---------------------------------------
Marcus E. Bromley, Chairman of the Board of
Trustees and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of Gables Residential
Trust and in the capacities and on the dates indicated.
<TABLE>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Marcus E. Bromley Chairman of the Board of Trustees March 26 , 1997
- ------------------------ and Chief Executive Officer
Marcus E. Bromley (Principal Executive Officer)
/s/ Marvin R. Banks, Jr. Chief Financial Officer (Principal Financial March 26 , 1997
- ------------------------ Officer and Principal Accounting Officer)
Marvin R. Banks, Jr.
/s/ John T. Rippel President, Chief Operating Officer March 26 , 1997
- ------------------------ and Trustee
John T. Rippel
/s/ David M. Holland Trustee March 26 , 1997
- ------------------------
David M. Holland
/s/ Peter D. Linneman Trustee March 26 , 1997
- ------------------------
Peter D. Linneman
/s/ Lauralee E. Martin Trustee March 26 , 1997
- ------------------------
Lauralee E. Martin
/s/ John W. McIntyre Trustee March 26 , 1997
- ------------------------
John W. McIntyre
</TABLE>
39
<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of Gables Residential Trust:
We have audited the accompanying consolidated balance sheets of Gables
Residential Trust and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 1996 and 1995 and for the period January
26, 1994 to December 31, 1994. We have also audited the combined statements of
operations, partners' and owners' equity and cash flows of Gables Residential
Group for the period January 1, 1994 to January 25, 1994. These financial
statements and schedule are the responsibility of the management of Gables
Residential Trust. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated and combined financial statements referred to
above present fairly, in all material respects, the financial position of
Gables Residential Trust and subsidiaries as of December 31, 1996 and 1995 and
the results of their operations and their cash flows for the years ended
December 31, 1996 and 1995 and for the period January 26, 1994 to December 31,
1994, and the results of operations and cash flows of Gables Residential Group
for the period January 1, 1994 to January 25, 1994, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 28, 1997
40
<PAGE> 43
GABLES RESIDENTIAL TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS:
Real estate assets: (Notes 4 and 6)
Land $ 102,762 $ 73,848
Buildings 558,569 382,174
Furniture, fixtures and equipment 45,830 33,382
Construction in progress 74,690 96,015
Land held for future development 2,749 5,814
--------- ---------
Real estate assets before accumulated depreciation 784,600 591,233
Less: accumulated depreciation (74,903) (57,343)
--------- ---------
Net real estate assets 709,697 533,890
Cash and cash equivalents 4,385 8,529
Restricted cash 8,430 5,296
Deferred charges, net (Note 5) 5,412 5,995
Other assets, net 31,736 9,117
--------- ---------
Total assets $ 759,660 $ 562,827
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes payable (Note 6) $ 390,321 $ 286,259
Accrued interest payable 1,811 1,075
Dividend payable (Note 13) 9,465 7,288
Real estate taxes payable 9,785 5,110
Accounts payable and accrued expenses - construction 6,218 9,027
Accounts payable and accrued expenses - operating 5,455 4,718
Security deposits 1,968 1,340
--------- ---------
Total liabilities 425,023 314,817
--------- ---------
Minority interest of unitholders in Operating Partnership 53,143 45,700
--------- ---------
Commitments and contingencies (Notes 6 and 7)
Shareholders' equity:
Common shares, $0.01 par value, 100,000,000 shares
authorized, 19,317,098 and 15,183,306 shares issued and
outstanding at December 31, 1996 and 1995, respectively 193 152
Additional paid-in capital 315,670 255,228
Accumulated earnings (deficit) (34,369) (53,070)
--------- ---------
Total shareholders' equity 281,494 202,310
--------- ---------
Total liabilities and shareholders' equity $ 759,660 $ 562,827
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
41
<PAGE> 44
GABLES RESIDENTIAL TRUST AND GABLES RESIDENTIAL GROUP
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GABLES
GABLES RESIDENTIAL TRUST RESIDENTIAL GROUP
------------------------ -----------------
YEAR ENDED YEAR ENDED JANUARY 26 TO JANUARY 1 TO
DECEMBER 31 DECEMBER 31 DECEMBER 31 JANUARY 25
1996 1995 1994 1994
--------- -------- -------- -------
<S> <C> <C> <C> <C>
Rental revenues $ 104,543 $ 72,703 $ 53,884 $ 3,317
Other property revenues 4,928 3,268 2,041 184
--------- -------- -------- -------
Total property revenues 109,471 75,971 55,925 3,501
--------- -------- -------- -------
Property management - third party 2,960 3,324 4,034 272
Property management - related party 911 965 1,116 134
--------- -------- -------- -------
Total property management revenues 3,871 4,289 5,150 406
Non-recurring Olympic revenues, net 900 0 0 0
Other 1,939 1,500 1,752 88
--------- -------- -------- -------
Total other revenues 6,710 5,789 6,902 494
--------- -------- -------- -------
Total revenues 116,181 81,760 62,827 3,995
--------- -------- -------- -------
Property operating and maintenance (exclusive
of items shown separately below) 38,693 28,228 21,228 1,619
Depreciation and amortization 18,892 12,669 9,315 591
Amortization of deferred financing costs 1,348 932 893 234
Property management - owned (Note 8) 2,824 2,170 1,540 140
Property management - third/related party (Note 8) 2,793 3,178 3,707 387
General and administrative 3,045 2,869 1,668 74
Interest 21,112 13,088 8,345 1,043
Credit enhancement fees 576 710 661 35
--------- -------- -------- -------
Total expenses 89,283 63,844 47,357 4,123
--------- -------- -------- -------
Income (loss) before equity in income of joint
ventures and interest income 26,898 17,916 15,470 (128)
Equity in income of joint ventures 280 64 255 15
Interest income 363 389 247 21
--------- -------- -------- -------
Income (loss) before minority interest and
extraordinary loss, net 27,541 18,369 15,972 (92)
Minority interest of unitholders in
Operating Partnership (4,640) (4,029) (3,768) 0
--------- -------- -------- -------
Income (loss) before extraordinary loss, net 22,901 14,340 12,204 (92)
Extraordinary loss, net of minority interest (Note 9) (520) (784) (148) 0
--------- -------- -------- -------
Net income (loss) $ 22,381 $ 13,556 $ 12,056 $ (92)
========= ======== ======== =======
Weighted average number of shares outstanding 16,788 11,436 10,243
========= ======== ========
PER SHARE INFORMATION (NOTE 3):
Income before extraordinary loss, net $ 1.36 $ 1.25 $ 1.19
========= ======== ========
Net income $ 1.33 $ 1.19 $ 1.18
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
42
<PAGE> 45
GABLES RESIDENTIAL TRUST AND GABLES RESIDENTIAL GROUP
CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
AND PARTNERS' AND OWNERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON PAID-IN EARNINGS
SHARES CAPITAL (DEFICIT) TOTAL
---- --------- -------- ---------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 0 $ 0 $ 1,236 $ 1,236
Capital contributions 0 0 682 682
Capital distributions 0 0 (5,523) (5,523)
Net loss 0 0 (92) (92)
---- --------- -------- ---------
BALANCE, JANUARY 25, 1994 0 0 (3,697) (3,697)
Capital contributions 0 0 6,901 6,901
Capital distributions 0 0 (26,475) (26,475)
Proceeds of IPO, net of underwriting discount and
issuance costs of $21,722 101 190,352 0 190,453
Acquisition of non-controlled interests in entities
included in GRG 0 0 (9,999) (9,999)
Proceeds of offering of 444,500 shares, net of
issuance costs of $125 5 9,871 0 9,876
Adjustment for minority interest of unitholders in
Operating Partnership at IPO date and subsequent
adjustment for offering 0 0 (39,130) (39,130)
Net income 0 0 12,056 12,056
Dividends paid ($1.225 per share) 0 (12,610) 0 (12,610)
Dividends declared ($0.45 per share) 0 (4,759) 0 (4,759)
---- --------- -------- ---------
BALANCE, DECEMBER 31, 1994 106 182,854 (60,344) 122,616
Proceeds of 4,600,000 share offering, net of under-
writing discount and issuance costs of $6,261 46 94,318 0 94,364
Proceeds from Share Builder Plan 0 177 0 177
Filing costs for Share Builder Plan, Profit Sharing
Plan and $200,000 shelf registration statement 0 (237) 0 (237)
Adjustment for minority interest of unitholders in
Operating Partnership for offering, issuance of
Operating Partnership Units, and other activity 0 0 (6,282) (6,282)
Net income 0 0 13,556 13,556
Dividends paid ($1.38 per share) 0 (14,596) 0 (14,596)
Dividends declared ($0.48 per share) 0 (7,288) 0 (7,288)
---- --------- -------- ---------
BALANCE, DECEMBER 31, 1995 152 255,228 (53,070) 202,310
Proceeds of 4,039,068 share offerings, net of under-
writing discounts and issuance costs of $3,302 40 93,444 0 93,484
Proceeds from exercise of share options 1 1,429 0 1,430
Proceeds from Share Builder Plan 0 32 0 32
Filing costs for $300,000 shelf registration statement 0 (97) 0 (97)
Adjustment for minority interest of unitholders in
Operating Partnership for offerings, issuance of
Operating Partnership Units, and other activity 0 0 (3,680) (3,680)
Net income 0 0 22,381 22,381
Dividends paid ($1.45 per share) 0 (24,901) 0 (24,901)
Dividends declared ($0.49 per share) 0 (9,465) 0 (9,465)
---- --------- -------- ---------
BALANCE, DECEMBER 31, 1996 $193 $ 315,670 $(34,369) $ 281,494
==== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
43
<PAGE> 46
GABLES RESIDENTIAL TRUST AND GABLES RESIDENTIAL GROUP
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
GABLES
GABLES RESIDENTIAL TRUST RESIDENTIAL GROUP
------------------------------------------- ------------
YEAR ENDED YEAR ENDED JANUARY 26 TO JANUARY 1 TO
DECEMBER 31 DECEMBER 31 DECEMBER 31 JANUARY 25
1996 1995 1994 1994
--------- --------- --------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 22,381 $ 13,556 $ 12,056 ($ 92)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 20,240 13,601 10,208 825
Equity in income of joint ventures (280) (64) (255) (15)
Minority interest of unitholders in Operating Partnership 4,640 4,029 3,768 0
Extraordinary loss, net of minority interest 520 784 148 0
Change in operating assets and liabilities:
Restricted cash (2,366) (1,695) (1,526) 3,165
Other assets (282) (260) (6,079) 1,134
Other liabilities 6,776 (863) 8,234 (2,703)
--------- --------- --------- --------
Net cash provided by operating activities 51,629 29,088 26,554 2,314
--------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of outside partners' interests 0 0 (56,092) 0
Purchase and construction of real estate assets (194,886) (148,475) (89,124) (3,329)
Investment in mortgage note receivable (21,505) 0 0 0
Long-term land lease payments (1,500) 0 (2,300) 0
Net proceeds from sale of real estate assets 3,968 0 0 0
Distributions received from joint ventures 327 241 222 89
--------- --------- --------- --------
Net cash used in investing activities (213,596) (148,234) (147,294) (3,240)
--------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from IPO, net of issuance costs 0 0 190,453 0
Proceeds from secondary share offerings, net of issuance costs 93,484 94,364 9,876 0
Proceeds from exercise of share options 1,430 0 0 0
Proceeds from Share Builder Plan 32 177 0 0
Payments of filing costs for Share Builder Plan, Profit
Sharing Plan and shelf registration statements (97) (237) 0 0
Payments of deferred financing costs (1,668) (1,777) (8,753) 0
Net proceeds from liquidation of defeasance trusts 0 0 130 0
Payment of defeasance escrow requirements 0 0 (1,298) 0
Notes payable proceeds 282,569 281,597 189,281 2,335
Notes payable repayments (178,507) (224,643) (219,426) (4,179)
Principal escrow deposits (768) (652) (134) 0
Change in distributions payable and related party loans 0 0 (2,597) (498)
Capital contributions 0 0 6,901 682
Capital distributions 0 0 (26,475) (5,523)
Dividends paid ($1.93, $1.83 and $1.225 per share, respectively) (32,189) (19,355) (12,610) 0
Distributions paid ($1.93, $1.83 and $1.225 per Unit, respectively) (6,463) (5,855) (3,920) 0
--------- --------- --------- --------
Net cash provided by (used in) financing activities 157,823 123,619 121,428 (7,183)
--------- --------- --------- --------
Net change in cash and cash equivalents (4,144) 4,473 688 (8,109)
Cash and cash equivalents, beginning of period 8,529 4,056 3,368 11,477
--------- --------- --------- --------
Cash and cash equivalents, end of period $ 4,385 $ 8,529 $ 4,056 $ 3,368
========= ========= ========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 24,749 $ 20,669 $ 11,212 $ 1,566
Interest capitalized 4,373 7,481 3,031 54
--------- --------- --------- --------
Cash paid for interest, net of amounts capitalized $ 20,376 $ 13,188 $ 8,181 $ 1,512
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
44
<PAGE> 47
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE COMPANY
Gables Residential Trust is a self-administered and self-managed real estate
investment trust (a "REIT") formed in 1993 under Maryland law to continue and
to expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Group" as used herein refers to the privately owned
predecessor organization prior to the completion of the Company's initial
public offering on January 26, 1994 (the "IPO") and the concurrent completion
of the various transactions that occurred simultaneously therewith (the
"Formation Transactions"). The term "Company" or "Gables" as used herein means
Gables Residential Trust and its subsidiaries on a consolidated basis
(including Gables Realty Limited Partnership and its subsidiaries), or, where
the context so requires, Gables Residential Trust only, and, as the context may
require, their predecessors.
The Company currently engages in the multifamily apartment community
management, development, construction, and acquisition businesses, including
the provision of related brokerage and corporate rental housing services.
Substantially all of these businesses are conducted through Gables Realty
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"). Through its ownership of Gables GP, Inc. ("GGPI"), a Texas
corporation and wholly-owned subsidiary of the Company that is the sole general
partner of the Operating Partnership, and its ownership of a direct limited
partnership interest in the Operating Partnership, the Company was an 84.6%
economic owner of the Operating Partnership at December 31, 1996 (this
structure is commonly referred to as an umbrella partnership REIT or "UPREIT").
The Company has had certain equity transactions subsequent to the IPO that have
resulted in changes in its ownership interest in the Operating Partnership
which was 76.0% at the completion of the IPO (Note 2). The Company's third
party management businesses are conducted through two subsidiaries of the
Operating Partnership, Central Apartment Management, Inc., a Texas corporation,
and East Apartment Management, Inc., a Georgia corporation (each, a "Management
Company"). The Management Companies also provide management services to the
communities owned by the Company.
At December 31, 1996, Gables owned 46 completed multifamily apartment
communities comprising 14,581 apartment homes, of which 30 were developed and
16 were acquired by the Company, and an indirect 25% general partner interest
in two apartment communities developed by the Company, comprising 663 apartment
homes. Two of these completed communities were in the lease-up stage as of
December 31, 1996. During January, 1997, the Company sold one of these
communities comprising 486 apartment homes and acquired a community comprising
232 apartment homes. Additionally, the Company had nine multifamily apartment
communities under development expected to comprise 2,515 apartment homes,
including one community expected to comprise 231 apartment homes, for which the
land was acquired in January, 1997. The Company also owns parcels of land for
the future development of three apartment communities expected to comprise 648
apartment homes and currently has contracts or options to acquire additional
parcels of land for development of six apartment communities expected to
comprise 1,898 apartment homes.
Pursuant to the Company's Declaration of Trust, Gables is authorized to issue
100,000,000 common shares, 10,000,000 preferred shares, and 51,000,000 excess
shares, all of which have a par value of $0.01 per share. To date, no
preferred or excess shares have been issued.
At the completion of the IPO on January 26, 1994, the Company sold 9,430,000
common shares (including 1,230,000 shares as a result of the exercise of an
over-allotment option by the underwriters) at a price to the public of $22.50
per share. The net proceeds to the Company from such sale totaled
approximately $190 million. The Company issued an additional 700,555 common
shares in connection with the Formation Transactions. Also concurrently with
the IPO, the Company entered into and drew down approximately $79 million under
a secured credit facility (the "Original Credit Facility"), including
approximately $45 million in the form of letters of credit. The net proceeds
of the IPO and initial draw-down under the Original Credit Facility were
principally used (i) by the Company to acquire a 76.0% economic interest in the
Operating Partnership, (ii) by the Company and the Operating Partnership to
acquire minority interests in partnerships that directly or indirectly owned
the communities acquired by Gables in connection with the IPO and Formation
Transactions (the "IPO Communities"), (iii) by the Operating Partnership to
acquire 99% of each Management Company's capital stock, with the Management
Companies in turn using such proceeds to acquire the fee management business of
the predecessor management companies of the Group (the "Predecessor Management
Companies"), (iv) to acquire certain promissory notes issued by the Predecessor
Management Companies, (v) to repay
45
<PAGE> 48
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
or economically defease indebtedness with respect to the IPO Communities and
the Predecessor Management Companies, (vi) with respect to the Original Credit
Facility, to provide substitute letters of credit or replace backup security
for existing credit enhancements with respect to indebtedness associated with
the IPO Communities, (vii) to purchase interest rate protection agreements and
pay deferred financing costs related to new indebtedness, and (viii) to acquire
an existing apartment community, an apartment community that was substantially
renovated in 1994 and certain development rights. In connection with the IPO
and Formation Transactions, the Company wrote-off unamortized deferred
financing costs related to notes payable satisfied with proceeds of the IPO
($2,092), wrote-off unamortized organization and deferred non-compete costs as
a result of the Formation Transactions ($599), paid defeasance escrow
requirements ($1,298), wrote-off accrued interest payable related to defeased
indebtedness ($435), wrote-off deferred letter of credit fees forgiven in
connection with the IPO ($1,075) and collected settlement proceeds from certain
existing credit enhancement sources ($2,465). The net loss related to these
items of $14 has been included in general and administrative expenses in the
accompanying statement of operations for the period from January 1, 1994 to
January 25, 1994.
2. SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
SECONDARY OFFERINGS-
Since the IPO, the Company has had the following common share offerings:
<TABLE>
<CAPTION>
Number of Net
Closing Date Shares Issued Proceeds
------------------ ------------- --------
<S> <C> <C>
October 7, 1994 444,500 $ 9,876
========= =======
October 31, 1995 4,600,000 $94,364
========= =======
March 25, 1996 879,068 $20,630
September 17, 1996 1,725,000 $38,600
September 27, 1996 1,435,000 $34,254
--------- -------
1996 Totals 4,039,068 $93,484
========= =======
</TABLE>
The proceeds from these offerings were generally used (i) to reduce outstanding
indebtedness under interim financing vehicles utilized to fund the Company's
development and acquisition activities and (ii) for general working capital
purposes including funding of future development and acquisition activities.
The Company issued the common shares in its 1995 and 1996 offerings under a
$200 million shelf registration statement which is now exhausted. In October,
1996, Gables filed a new registration statement, covering the registration of
up to $300 million of debt securities, common shares, preferred shares, and
warrants or other rights to purchase common shares or preferred shares.
ISSUANCES OF OPERATING PARTNERSHIP UNITS -
On December 5, 1995, the Company acquired a parcel of land for the development
of an apartment community, financed in part through the issuance of 111,074
minority units of limited partnership interest in the Operating Partnership
("Units").
On July 26, 1996, the Company acquired an apartment community comprising 500
apartment homes, financed in part through the issuance of 243,787 Units.
46
<PAGE> 49
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Gables engages in the multifamily apartment community management, development,
construction, and acquisition businesses, including the provision of related
brokerage and corporate rental housing services. Gables' operating performance
relies predominantly on net operating income from the multifamily apartment
communities it owns which are located in seven core cities in Georgia, Texas,
and Tennessee. The Company recently entered an eighth market, Orlando,
Florida, through an association with a subsidiary of the Walt Disney Company,
and in connection therewith currently has two communities under development in
Orlando.
Basis of Presentation
The accompanying consolidated financial statements of Gables Residential Trust
include the consolidated accounts of Gables Residential Trust and its
subsidiaries (including Gables Realty Limited Partnership and its
subsidiaries). The accompanying combined financial statements of Gables
Residential Group reflect the combined accounts of the Group. As a result of
the structure of the business combination, certain partners and owners of the
entities in Gables Residential Group received common shares of the Company
and/or Units in the Operating Partnership. Pursuant to the terms of the
partnership agreement of the Operating Partnership, as of January 26, 1995, the
Operating Partnership became obligated to redeem Units at a unitholder's
request for cash equal to the fair market value of a common share of the
Company at the time of such redemption, provided that the Company at its option
may elect to acquire any such Units presented for redemption for one common
share of the Company. The Company intends to acquire such Units for common
shares of the Company rather than to cause the Operating Partnership to redeem
such Units for cash. Purchase accounting was applied to the acquisition of all
non-controlled interests. The acquisition of all other interests was accounted
for as a reorganization of entities under common control and, accordingly, was
reflected at historical cost in a manner similar to that in pooling of
interests accounting.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements of Gables Residential
Trust have been adjusted for the minority interest of unitholders in the
Operating Partnership. Since Units, if presented for redemption, are likely to
be exchanged for the common shares of the Company on a one-for-one basis,
minority interest of unitholders in the Operating Partnership is calculated
based on the weighted average of common shares and Units outstanding during
the period.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Real Estate Assets and Depreciation
Real estate assets are stated at depreciated cost. The cost of buildings and
improvements includes interest, property taxes, insurance and allocated
development overhead incurred during the construction period. Ordinary repairs
and maintenance are expensed as incurred; major replacements and betterments
are capitalized and depreciated over their useful lives. Depreciation is
computed on a straight-line basis over the useful lives of the real estate
assets (buildings and improvements 19-40 years; furniture, fixtures and
equipment 5-10 years).
The Company adopted Statement of Financial Accounting Standards No. 121 (FAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," effective January 1, 1996. FAS 121 established new
standards for determining when impairment losses on long-lived assets have
occurred and how impairment losses should be measured. There was no financial
statement impact resulting from the adoption of FAS 121.
47
<PAGE> 50
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Revenue Recognition
Rental: Gables leases its residential properties under operating leases with
terms generally equal to one year or less. Rental income is recognized when
earned which materially approximates revenue recognition on a straight-line
basis.
Property management: Gables provides property management services for
properties in which it does not own a controlling interest. Income is
recognized when earned.
Development and construction services: Gables periodically provides
development and construction services for properties in which it does not own a
controlling interest. Income is recognized when earned on a percentage of
completion basis.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all investments purchased with an
original maturity of three months or less are considered to be cash
equivalents.
Restricted Cash
Restricted cash is primarily comprised of residential security deposits, tax
escrow funds, repairs and maintenance reserve funds, and principal escrow bond
funds.
Deferred Financing Costs and Amortization
Deferred financing costs include fees and costs incurred to obtain financing
and are capitalized and amortized over the terms of the related notes payable.
Interest Rate Protection Agreements
The Company uses interest rate protection agreements to manage its exposure to
interest rate changes. These agreements are considered hedges of the Company's
borrowings. Amounts paid to purchase such agreements are capitalized and
amortized over the terms of the related agreements. Such amortization is
included in amortization of deferred financing costs in the accompanying
statements of operations.
Other Assets
The Company invested $21.5 million in an apartment community comprising 232
apartment homes on October 1, 1996 via a mortgage note receivable. The note
receivable and related costs are included in other assets in the accompanying
balance sheet at December 31, 1996 and interest income earned thereon is
included in other revenues in the accompanying statement of operations for the
year ended December 31, 1996. In January, 1997, Gables acquired the apartment
community from the borrower, and the mortgage note receivable was repaid in
full.
Investment in Joint Ventures
Gables' 25% general partner interests in Arbors of Harbortown JV and
Metropolitan Apartments JV are accounted for on the equity method of
accounting.
Per Share Data
Earnings per share with respect to the Company for the years ended December 31,
1996 and 1995 and the period from January 26, 1994 through December 31, 1994,
is computed based upon the weighted average number of shares outstanding during
the period. The impact of outstanding share options was not material (Note
14). Historical per share data with respect to periods ending prior to the IPO
are not relevant since it is a presentation of the combined operations of
partnerships and various corporations.
48
<PAGE> 51
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Reclassifications
Certain amounts have been reclassified in the 1995 and 1994 financial
statements to conform to the 1996 presentation.
4. REAL ESTATE ASSETS
Real estate assets, before accumulated depreciation, are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Basis Units Basis Units
----- ----- ----- -----
<S> <C> <C> <C> <C>
Completed properties $707,161 14,581 $489,404 11,283
Properties under development 74,690 2,284 96,015 1,983
Land held for future development 2,749 648 5,814 865
-------- ------ --------- ------
Total (a) $784,600 17,513 $591,233 14,131
======== ====== ========= ======
</TABLE>
(a) Excludes (i) costs and units attributable to Arbors of Harbortown JV and
Metropolitan Apartments JV as Gables' 25% general partner interests in these
joint ventures are accounted for on the equity method of accounting and (ii)
costs of approximately $3,700 for two prepaid long-term land leases which are
included in other assets in the accompanying balance sheets.
The change in real estate assets from December 31, 1995 to December 31, 1996
consisted of the following:
<TABLE>
<S> <C>
Balance at December 31, 1995 $591,233
Acquisitions, including renovation expenditures 128,472
Sale of real estate assets (4,826)
Development costs incurred, including related land acquisitions 65,867
Capital expenditures for completed properties 3,854
--------
Balance at December 31, 1996 $784,600
========
</TABLE>
As discussed in Note 3, purchase accounting was applied to the acquisition of
all non-controlled interests in connection with the IPO and Formation
Transactions. The increase in basis related to such acquisition was $48,090
and was allocated to the respective property's land and building accounts. The
acquisition of all other interests was accounted for as a reorganization of
entities under common control, and accordingly was reflected at historical
cost.
5. DEFERRED CHARGES, NET
Deferred charges, net consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
------- -------
<S> <C> <C>
Deferred financing costs $6,144 $6,678
Interest rate protection agreements costs 1,779 1,779
Deferred interest rate buydown costs 817 817
------ ------
8,740 9,274
Less: accumulated amortization (3,328) (3,279)
------ ------
$5,412 $5,995
====== ======
</TABLE>
The costs of the interest rate protection agreements and the interest rate
buydown on a mortgage note payable were funded with proceeds of the IPO.
Deferred financing costs associated with the Company's loans that were
refinanced from 1994 to 1996 were written off (Note 9).
49
<PAGE> 52
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
-------- --------
<S> <C> <C>
Conventional fixed-rate $259,046 $173,944
Tax-exempt fixed-rate 67,270 67,385
-------- --------
Total fixed-rate 326,316 241,329
Tax-exempt variable-rate 44,930 44,930
Credit facilities 19,075 0
-------- --------
Total notes payable $390,321 $286,259
======== ========
</TABLE>
Conventional Fixed-Rate Notes Payable
At December 31, 1995, the fixed-rate notes payable were comprised of ten loans
collateralized by twelve apartment communities included in real estate assets.
At December 31, 1995, the interest rates on these notes payable ranged from
7.00% to 8.77% (weighted average of 8.15%) and the maturity dates ranged from
September, 1997 through December, 2009.
Gables closed the final two loans during 1996 totaling $25,823 under its 1995
financing commitment from Teachers Insurance and Annuity Association. In July,
1996, the Company acquired an apartment community in Memphis, Tennessee and
assumed a $19,762 mortgage note payable in connection with that acquisition.
In November, 1996, Gables closed on a five-year unsecured $40,000 term loan
which currently bears interest at LIBOR plus 1.25%. This loan is effectively
fixed at an all-in rate of 6.60% after application of $40,000 of the $44,530
interest rate protection agreements discussed elsewhere herein. Although this
loan is unsecured, there are two designated real estate assets that have
escrowed mortgages. Upon the attainment of an investment grade rating by the
Company, the escrowed mortgages will be released.
At December 31, 1996, the fixed-rate notes payable are comprised of the $40,000
term loan described above in addition to thirteen loans collateralized by
fifteen apartment communities included in real estate assets. At December 31,
1996, the interest rates on these notes payable ranged from 6.60% to 8.77%
(weighted average of 7.88%) and the maturity dates range from September, 1997
through December, 2009. Principal amortization payments are required on a
monthly basis for all notes payable, except the $40,000 term loan, based on
amortization schedules ranging from 25 to 30 years. Additionally, certain of
the notes payable do not require the principal amortization payments to begin
until specified dates in 1997 and 1998.
Tax-Exempt Fixed-Rate Notes Payable
At December 31, 1996 and 1995, the tax-exempt, fixed-rate indebtedness
was comprised of three loans. One such loan was closed in August, 1994, has a
principal balance of $48,365, and is collateralized by three communities induced
for tax-exempt financing and three additional communities. Principal
amortization payments based on a 30 year amortization schedule are required on a
monthly basis. These payments are retained in an escrow account and are not
applied to reduce the outstanding principal balance of the loan. Principal
payments through December 31, 1996 and 1995 are included in restricted cash in
the accompanying balance sheets. The note payable bears interest at 6.38% and
matures in August, 2004. The three underlying tax-exempt bond issues mature in
August, 2024. The other two loans that closed in January, 1995 represent a
$19,020 tax-exempt bond financing secured by two apartment communities. Both
bond issues were credit enhanced for an annual fee of 0.60%. The bonds bear
interest at a weighted average rate of 7.03% on a fixed basis for 30 years.
Principal amortization payments are due in January each year pursuant to the
terms of the bond documents. Gables is required to make monthly escrow payments
each year totaling the annual principal payment due to the bondholders in the
month of January thereafter. Monthly principal escrow payments are included in
restricted cash until the January payments are made. One of these loans, with an
outstanding principal balance of $6,975 at December 31, 1996, was economically
defeased in January, 1997 in connection with the sale of the property.
50
<PAGE> 53
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
The tax-exempt bonds contain certain covenants which require minimum rentals to
individuals based upon income levels specified by U.S. government programs, as
defined.
Tax-Exempt Variable-Rate Notes Payable
At December 31, 1996 and 1995, the variable-rate mortgage notes payable
securing tax-exempt bonds were comprised of four loans, each of which is
collateralized by an apartment community included in real estate assets. The
tax-exempt bonds contain certain covenants which require minimum rentals to
individuals based upon income levels specified by U.S. government programs, as
defined. These bonds bear interest at a variable rate of interest, adjusted
weekly based upon a negotiated rate. The interest rate in effect at December
31, 1996 and 1995 was 4.2% and 5.3%, respectively. Tax-exempt variable rates
are, and historically have been, significantly higher at year-end than during
the year. The tax-exempt variable rate in effect at January 31, 1997 and 1996
was 3.6% and 3.3%, respectively. The effective interest rates were 3.5% and
3.9% for the years ended December 31, 1996 and 1995 and ranged from 3.0% to
3.2% for the year ended December 31, 1994. The bonds are currently secured by
four letters of credit provided by the New Credit Facility totaling
approximately $46 million. The fee for these letters of credit was 1.5% per
annum through June 30, 1995, 1.25% per annum through March, 1996, and is
currently 1.0% per annum. These bonds are subject to mandatory redemption on
the related letter of credit termination date, each of which is March, 1999.
Three of the underlying bond issues mature in December, 2007 and the fourth
underlying bond issue matures in August, 2024.
$175 Million Credit Facility
In conjunction with the IPO, Gables closed a $175 million three-year revolving
credit facility (the "Original Credit Facility") which had an initial maturity
of January, 1997. Borrowings under the Original Credit Facility were recourse
to the Company and bore interest at LIBOR plus 1.90% (reduced from 2.25% in
December, 1994). Additionally, fees associated with letters of credit issued
thereunder for the Company's tax-exempt variable-rate bonds were 1.25% per
annum (reduced from 1.50% in July, 1995).
In March, 1996, Gables closed a new $175 million unsecured revolving credit
facility (the "New Credit Facility" or "$175 Million Credit Facility") that
replaced the Original Credit Facility. Although the New Credit Facility is
unsecured, there are certain designated real estate assets that have escrowed
mortgages. Upon the attainment of an investment grade rating by the Company,
the escrowed mortgages will be released. The New Credit Facility has an initial
term of three years and three one-year extension options. Borrowings currently
bear interest at LIBOR plus 1.50% (reduced from 1.65% in November, 1996) and
letter of credit fees for the Company's tax-exempt variable-rate bonds are
1.00% per annum. Under the New Credit Facility, up to $50 million is available
to provide credit enhancements on outstanding tax-exempt bond issues and all
remaining amounts are available for borrowings. Gables' availability under the
New Credit Facility is limited to the lesser of the total $175 million
commitment or the borrowing base. The borrowing base available under the New
Credit Facility is based on the collateral value of the real estate assets with
escrowed mortgages and the debt service coverage ratio of communities pledged
as collateral under other recourse loans. As of December 31, 1996, the Company
had approximately $45.8 million of letters of credit issued under the New
Credit Facility and had $18.0 million in borrowings outstanding thereunder and,
therefore, had approximately $111.2 million of remaining capacity on the $175
million available under the facility.
$20 Million Credit Facility
In November, 1996, Gables closed an unsecured revolving credit facility that
currently provides for up to $20 million in borrowings. This facility has an
initial term of one year and has unlimited one-year extension options.
Borrowings currently bear interest at LIBOR plus 1.50%. At December 31, 1996,
the Company had $1,075 in borrowings outstanding under this facility.
51
<PAGE> 54
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Restrictive Covenants
Certain of the Company's debt agreements contain customary representations,
covenants and events of default, including covenants which restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restricts the discretion of the Company to declare and pay
dividends. In general, during any fiscal year the Operating Partnership may
only distribute up to 95% of the Operating Partnership's consolidated income
available for distribution (as defined in the related agreement) exclusive of
distributions of capital gains for such year. The applicable debt agreements
contain exceptions to these limitations to allow the Operating Partnership to
make any distributions necessary to allow the Company to maintain its status as
a REIT. The Company does not anticipate that this provision will adversely
effect the ability of the Operating Partnership to make distributions or the
Company to declare dividends, as currently anticipated.
Maturities
The aggregate maturities of notes payable at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 11,893(a)
1998 2,315
1999 65,511(b)
2000 2,791
2001 43,022
2002 and thereafter 264,789
--------
$390,321
========
</TABLE>
(a) Maturities in 1997 include $9,377 for the balance due on maturity of a
conventional mortgage note payable which was repaid February 28, 1997
and $1,075 related to the $20 Million Credit Facility.
(b) Maturities in 1999 include $44,930 of four variable-rate notes payable
securing tax-exempt bonds and $18,000 related to the $175 Million Credit
Facility. The bonds are subject to mandatory redemption on the termination
dates of letters of credit securing the bonds, each of which is March,
1999. Three of the underlying bond issues mature in December, 2007 and
the fourth underlying bond issue matures in August, 2024.
Interest Rate Protection Agreements
Gables has four interest rate protection agreements in place at December 31,
1996, the terms of which are discussed below:
<TABLE>
<CAPTION>
Notional Strike Effective Termination
Description of Agreement Amount Price (a) Date Date
------------------------ ------ --------- ---- ----
<S> <C> <C> <C> <C>
LIBOR, 30-day - "Rate Cap" $44,530 6.25% 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" $44,530 5.35% 08/30/96 08/30/99(b)
LIBOR, 30-day - "Rate Cap" $50,000 6.45% 01/30/97 12/31/97
LIBOR, 30-day - "Rate Cap" $35,470 5.13% 01/27/94 01/30/97
</TABLE>
(a) The 30-day LIBOR rate in effect at December 31, 1996 was 5.66%.
(b) This is a knock-out swap agreement which fixes the Company's underlying
30-day LIBOR rate at 5.35%. The swap terminates upon the earlier to
occur of (i) the termination date or (ii) a rate reset date on which the
30-day LIBOR rate is 6.26% or higher.
52
<PAGE> 55
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Joint Venture Indebtedness
The Arbors of Harbortown apartment community secures a $16.4 million tax-exempt
bond obligation, which is recourse to the Company up to $1.0 million (this
amount is fully cash-collateralized and is held by the Arbors of Harbortown
JV), bears interest at a variable low-floater rate, has a maturity date of
April, 2013, and is payable in monthly installments of interest only. The
credit enhancement for the bond obligation expires in May, 2001. The
Metropolitan Uptown apartment community secures a conventional variable-rate
loan with $16.5 million outstanding at December 31, 1996, 25% of which has been
guaranteed by the Company. The loan has a maturity date of June 30, 1997,
subject to a three year extension option, and currently bears interest at a
rate of 7.20% which has been locked-in for a three year period expiring July,
1998.
7. COMMITMENTS AND CONTINGENCIES
Purchase Contracts
The Company is under contract or option to purchase six land parcels. There can
be no assurance that the Company will acquire these land parcels, however it is
the Company's intent to develop an apartment community on each such land
parcel, if purchased. The Company is pursuing other acquisition and development
opportunities in the ordinary course of business which have not yet been, or
may never be, put under contract.
Sale Contract
In January, 1997, the Company sold one of its completed apartment communities
comprising 486 apartment homes. The net sales proceeds were used to (i)
defease the related tax-exempt bond indebtedness which had a principal balance
of $6,975 at December 31, 1996 and (ii) paydown outstanding borrowings under
the Company's credit facilities.
Office Leases
Gables is party to office operating leases with terms expiring through 1998.
Future minimum lease payments and rent expense for such leases are not
material.
Contingencies
The various entities comprising Gables are subject to various legal proceedings
and claims that arise in the ordinary course of business. These matters are
generally covered by insurance. While the resolution of these matters cannot
be predicted with certainty, management believes that the final outcome of such
matters will not have a material adverse effect on the financial position or
results of operations of Gables.
8. PROPERTY MANAGEMENT EXPENSES
The Company manages its owned properties, as well as properties owned by third
and related parties for which the Company provides services for a fee.
Property management expenses have been allocated between owned and
third/related party properties in the accompanying statements of operations
based on the proportionate number of owned and third/related party apartment
homes managed by the Company during the applicable periods.
9. EXTRAORDINARY LOSS, NET
Extraordinary loss, net of $520 for the year ended December 31, 1996 represents
the write-off of unamortized deferred financing costs totaling $631 associated
with the early retirement of the Company's Original Credit Facility, net of the
$111 portion of the loss attributable to the minority interest unitholders.
The Original Credit Facility that was scheduled to mature in January, 1997, was
refinanced in March, 1996 with the New Credit Facility.
Extraordinary loss, net of $784 for the year ended December 31, 1995
represents the write-off of unamortized deferred financing costs totaling $955
associated with the early retirement of the Company's construction loans, net
of the $171 portion of the loss attributable to the minority interest
unitholders.
53
<PAGE> 56
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Extraordinary loss, net of $148 for the period January 26, 1994 to December 31,
1994 represents extraordinary losses totaling $278 related to the write-off of
unamortized deferred financing costs associated with certain refinancings in
1994, offset in part by an extraordinary gain of $130 related to the excess
proceeds received from the liquidation of defeasance trusts established in
connection with the IPO.
10. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure about the estimated fair value of financial instruments is based on
pertinent information available to management as of December 31, 1996.
Although management is not aware of any factors that would significantly effect
the reasonableness of the fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and current estimates of fair value may differ significantly from the
amounts presented herein.
Cash equivalents
Gables estimates that the fair value of cash equivalents approximates carrying
value due to the relatively short maturity of these instruments.
Notes payable
Gables estimates that the fair value of notes payable approximates carrying
value based upon its effective current borrowing rate for issuance of debt with
similar terms and remaining maturities.
Interest rate protection agreements
Gables estimates that the fair value of its four interest rate protection
agreements approximates the $447 net carrying value of these agreements at
December 31, 1996. Estimated fair value is based on the value of cash flows
arising in the difference in the strike price per the agreement and projected
LIBOR rates. The net carrying value of these agreements is included in
deferred charges, net in the accompanying balance sheets.
11. INCOME TAXES
Periods ended after the IPO
Gables has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), commencing with the taxable year ended December
31, 1994. As a result, Gables generally will not be subject to Federal income
taxation at the corporate level to the extent it distributes annually at least
95.0% of its REIT taxable income, as defined in the Code, to its shareholders
and satisfies certain other requirements. Accordingly, no provision has been
made for Federal income taxes in the accompanying consolidated financial
statements for the years ended December 31, 1996 and 1995 and for the period
from January 26, 1994 to December 31, 1994. Additionally, certain subsidiaries
of Gables, formed to provide management and other services to third and related
parties, are taxed based on reportable income. The tax attributes of these
entities are immaterial to the accompanying consolidated financial statements.
Periods ended prior to the IPO
Gables Residential Group is not a legal entity subject to income taxes.
No federal or state income taxes are applicable to the predecessor entities that
managed and owned the multifamily apartment communities; accordingly, none have
been provided for in the accompanying financial statements. These entities were
primarily partnerships whose partners were required to include their respective
share of profits and losses in their individual income tax returns. The
Predecessor Management Companies are corporations whose net profits were subject
to federal and state income taxes; however, no income tax provision was provided
since these entities had no tax liability for the period ended January 25, 1994.
54
<PAGE> 57
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
The tax attributes of the owners' net assets flow directly to each individual
owner. Individual owners will have different investment bases depending upon
the timing and prices of their acquisition of partnership units. Further, each
owner's tax accounting, which is partially dependent upon their individual tax
position, may differ from the accounting followed in the financial statements.
Accordingly, there could be significant differences between each individual
owner's tax basis and their proportionate share of the net assets reported in
the financial statements. Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," requires a public enterprise to disclose the
aggregate difference in the basis of its net assets for financial and tax
reporting purposes. However, Gables does not have access to information about
each individual owner's tax attributes in Gables, and the aggregate tax bases
cannot be readily determined. In any event, management does not believe that,
in Gables' circumstances, the aggregate difference would be meaningful
information.
12. PROFIT SHARING PLAN
Eligible employees of Gables may participate in a profit sharing plan pursuant
to Section 401(k) of the Internal Revenue Code. Under the plan, employees may
defer a portion of their salary on a pre-tax basis. Gables also has the
discretion to make matching contributions, currently equal to 50% of an
employee's first 4% salary deferral contribution. Expenses under this plan for
the years ended December 31, 1996, 1995 and 1994 were not material.
During January, 1996, the Company added the Gables Residential Trust Stock Fund
(the "Fund") as an investment option for the plan. The Fund is comprised of
common shares of the Company. In connection therewith, 100,000 common shares
were registered for issuance under the plan. The plan trustee will purchase
common shares of the Company for the Fund, at the direction of the plan
investment committee, either on the open market or directly from the Company.
13. DIVIDENDS AND SHARE BUILDER PLAN
The Company has declared and paid dividends for the years ended December 31,
1996, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
Per Share Dividends Shareholder Tax Treatment
------------------- -------------------------
First Qtr to Fourth Return of Ordinary
Year Fourth Qtr. Qtr.(a) Capital Income
---- ---------- ------- ------- ------
<S> <C> <C> <C> <C>
1996 $1.940 $0.49 29.1% 70.9%
1995 $1.860 $0.48 28.7% 71.3%
1994 $1.675 $0.45 26.6% 73.4%
</TABLE>
(a) The fourth quarter dividends for each year were declared in December of
the related year and were paid in the January thereafter.
14. 1994 SHARE OPTION AND INCENTIVE PLAN
The Company adopted the 1994 Share Option and Incentive Plan (the "Plan") to
provide incentives to officers, employees and non-employee trustees. The Plan
provides for the grant of options to purchase a specified number of common
shares ("Options") or the grant of restricted or unrestricted common shares
("Restricted Shares" or "Unrestricted Shares"). Under the Plan, as amended,
the total number of shares available for grant is 8% of the total number of
common shares and Units (other than common shares or Units held by the Company
or its subsidiaries) outstanding at any time and the number of common shares
which may be issued as Restricted Shares or Unrestricted Shares is equal to 50%
of the number of shares available for issuance under the Plan at such time.
To date, Options have been granted in two series during each of 1994,
1995 and 1996 with an exercise price equal to the fair value of the Company's
common shares on the dates the Options were granted. The Options granted are
generally exercisable in installments over three years beginning one year after
the date of grant. At December 31, 1996, 903,687 common shares are subject to
outstanding Options granted to officers, employees and trustees of the Company,
of which Options to purchase approximately 560,000 shares are currently
exercisable.
55
<PAGE> 58
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
The total number of common shares reserved for issuance under the Plan at
December 31, 1996 is 1,827,626 which is equal to 8% of the total number of
common shares and Units outstanding at that time.
A summary of the Options activity for the years ended December 31, 1996, 1995
and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year 772,875 678,475 0
Granted 269,600 110,000 691,600
Forfeited (71,510) (15,600) (13,125)
Exercised (67,278) 0 0
------- ------- -------
Balance, end of year 903,687 772,875 678,475
======= ======= =======
Option prices:
Granted $22.750- $23.00 $19.125 - $20.375 $19.50 - $22.50
Forfeited $19.500- $22.75 $19.500 - $22.500 $22.50
Exercised $19.500- $22.50 N/A N/A
Balance, end of year $19.125- $23.00 $19.125 - $22.500 $19.50 - $22.50
</TABLE>
The Company accounts for stock options issued under the Plan in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees," under which no
compensation cost has been recognized, since all options have been granted
with an exercise price equal to the fair value of the Company's stock on the
date of grant. Had compensation cost for these plans been determined
consistent with Statement of Financial Accounting Standards No. 123 (FAS 123)
"Accounting for Stock-Based Compensation," the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C> <C>
Net income: As Reported $22,381 $13,556
Pro Forma $22,258 $13,522
Earnings per share: As Reported $ 1.33 $ 1.19
Pro Forma $ 1.33 $ 1.18
</TABLE>
Because the FAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The weighted average fair value of options granted is $1.91 and $1.45 for 1996
and 1995, respectively. The fair value of each option grant as of the date of
grant has been estimated using the Black-Scholes option pricing models with the
following weighted-average assumptions for grants in 1996 and 1995,
respectively: risk free interest rates of 6.44% and 6.42%; expected lives of
4.90 and 6.64; dividend yields of 8.43% and 8.94%, and expected volatility of
19% and 19%.
On February 21, 1997, the Company granted 22,970 Unrestricted Shares and 45,940
Restricted Shares (collectively, the "Share Grants") to certain officers and
employees of the Company. The Share Grants were awarded based on the closing
price of the Company's common shares on February 21, 1997 of $25.875. The
Company has accrued approximately $600 as of December 31, 1996 equal to the
value of the Unrestricted Shares. The Restricted Shares vest ratably over a
two-year period beginning January 1, 1998. Upon issuance of the Share Grants
in 1997, the approximate $1,800 value of the Share Grants will be recorded in
shareholders' equity and the approximate $1,200 value of the Restricted Shares
will be recorded to a deferred compensation component of shareholders' equity.
Such deferred compensation will be amortized ratably over the two-year vesting
period.
56
<PAGE> 59
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------
<S> <C> <C> <C> <C>
Revenues $24,442 $28,143 $31,768 $31,828
Income before minority interest
and extraordinary loss, net 6,326 6,549 7,005 7,661
Minority interest of unitholders
in Operating Partnership (1,126) (1,117) (1,215) (1,182)
Extraordinary loss, net of
minority interest (520) 0 0 0
Net income 4,680 5,432 5,790 6,479
Earnings per share:
Income before extraordinary
loss, net $ 0.34 $ 0.34 $ 0.35 $ 0.33
Net income $ 0.31 $ 0.34 $ 0.35 $ 0.33
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------
<S> <C> <C> <C> <C>
Revenues $18,445 $19,031 $21,133 $23,151
Income before minority interest
and extraordinary loss, net 4,225 4,276 4,306 5,562
Minority interest of unitholders
in Operating Partnership (981) (994) (1,000) (1,054)
Extraordinary loss, net of
minority interest 0 0 0 (784)
Net income 3,244 3,282 3,306 3,724
Earnings per share (a):
Income before extraordinary
loss, net $ 0.31 $ 0.31 $ 0.31 $ 0.32
Net income $ 0.31 $ 0.31 $ 0.31 $ 0.27
</TABLE>
(a) The total of the four quarterly amounts for net income per share for the
year ended December 31, 1995 does not equal the total for the year. This
difference results from the use of a weighted average to compute the number of
shares outstanding for each quarter and the year.
57
<PAGE> 60
SCHEDULE III
GABLES RESIDENTIAL TRUST
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Costs Costs Carried at Close of Period
Number of ------------------- Capitalized ----------------------------
Apartment Related Buildings and Subsequent Buildings and
Apartment Description Homes Encumbrances Land Improvements To Acquisition Land Improvements Total
--------------------- ----- ------------ ---- ------------ -------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES:
HOUSTON, TEXAS
Baybrook Village 776 $ ----(1) $2,875 $17,479 $ 2,408 $2,875 $19,887 $22,762
Gables Bradford Place 372 ----(1) 2,072 0 15,195 2,072 15,195 17,267
Gables Bradford Pointe 360 7,271(2) 1,660 0 9,521 1,660 9,521 11,181
Gables CityPlaza 246 ----(1) 2,889 0 10,466 2,889 10,466 13,355
Gables Cityscape 252 9,214 4,313 0 12,557 4,313 12,557 16,870
Gables CityWalk/Waterford Sq. 317 11,674 4,246 3,441 11,929 5,055 14,561 19,616
Gables Edgewater 292 9,466 1,607 0 11,295 1,838 11,064 12,902
Gables Meyer Park 345 16,200(3) 3,398 0 13,530 3,418 13,510 16,928
Gables Piney Point 246 11,857(4) 2,794 0 10,798 2,794 10,798 13,592
Gables Pin Oak Green 582 ----(5) 7,511 28,543 103 7,511 28,646 36,157
Gables Pin Oak Park 477 ----(5) 6,234 23,288 85 6,234 23,373 29,607
Gables River Oaks 228 ----(1) 4,935 16,200 148 4,935 16,348 21,283
Rivercrest 140 3,293(2) 500 3,706 981 582 4,605 5,187
Westhollow Park 412 ----(1) 2,000 5,790 2,615 2,000 8,405 10,405
ATLANTA, GEORGIA
Briarcliff Gables 104 ----(1) 1,322 0 6,446 1,322 6,446 7,768
Buckhead Gables 162 ---- 2,978 993 3,670 2,978 4,663 7,641
Club Candlewood 486 6,975(6) 500 3,065 5,221 674 8,112 8,786
Dunwoody Gables 311 15,920(3) 3,567 0 14,248 3,567 14,248 17,815
Gables Cinnamon Ridge 200 ----(1) 1,500 6,239 280 1,500 6,519 8,019
Gables Cityscape 192 ----(1) 2,250 5,750 312 2,250 6,062 8,312
Gables Over Peachtree 263 ----(1) 2,644 8,400 9,365 2,644 17,765 20,409
Gables Wood Arbor 140 7,130 915 0 5,988 915 5,988 6,903
Gables Wood Crossing 268 11,650 1,605 0 12,124 1,605 12,124 13,729
Gables Wood Glen 380 9,666(2) 1,323 0 16,333 1,487 16,169 17,656
Gables Wood Knoll 312 7,715(2) 1,865 10,856 1,554 1,865 12,410 14,275
Lakes at Indian Creek 603 11,930 1,400 9,100 3,155 1,392 12,263 13,655
Roswell Gables 384 20,743(3) 3,231 0 18,084 3,231 18,084 21,315
Spalding Gables 252 14,054(3) 2,292 0 13,876 2,292 13,876 16,168
Wildwood Gables 546 26,640(4) 4,810 1,100 22,049 4,810 23,149 27,959
DALLAS, TEXAS
Arborstone 536 ----(1) 1,022 7,815 1,397 1,022 9,212 10,234
Gables Green Oaks I 300 ----(1) 737 0 15,661 737 15,661 16,398
Gables at Pearl Street 108 ----(1) 1,680 0 7,474 1,680 7,474 9,154
Gables Preston 126 ----(1) 1,056 0 7,813 1,056 7,813 8,869
Gables Spring Park 188 ----(1) 901 0 11,337 901 11,337 12,238
Gables Turtle Creek 150 ---- 2,181 11,001 0 2,181 11,001 13,182
Gables Valley Ranch 319 14,503(4) 1,899 0 14,544 1,899 14,544 16,443
MEMPHIS, TENNESSEE
Gables Cordova 464 10,790(2) 1,865 0 23,776 1,865 23,776 25,641
Gables Stonebridge 500 19,665 2,312 23,674 118 2,312 23,792 26,104
NASHVILLE, TENNESSEE
Brentwood Gables 254 13,481(3) 849 0 15,636 849 15,636 16,485
Gables Hendersonville 364 9,630(2) 1,182 0 14,625 1,237 14,570 15,807
Gables Hickory Hollow I 272 12,750 974 0 11,869 974 11,869 12,843
Gables Hickory Hollow II 276 13,400 1,027 0 11,877 1,027 11,877 12,904
<CAPTION>
Year Construction
/ Substantial
Accumulated Renovation Year Acquisition
Depreciation Complete Acquired Comments
------------ -------- -------- --------
<S> <C> <C> <C> <C>
COMPLETED COMMUNITIES:
HOUSTON, TEXAS
Baybrook Village $4,148 1981 1990 (7)
Gables Bradford Place 2,407 1991 1990 (8)
Gables Bradford Pointe 2,162 1990 1989 (8)
Gables CityPlaza 599 1995 1994 (8)
Gables Cityscape 1,916 1991 1990 (8)
Gables CityWalk/Waterford Sq. 2,495 1990/1985 1989/1992 (8),(7)
Gables Edgewater 1,943 1990 1990 (8)
Gables Meyer Park 1,817 1993 1992 (8)
Gables Piney Point 1,083 1994 1992 (8)
Gables Pin Oak Green 719 1990 1996 (7)
Gables Pin Oak Park 590 1992 1996 (7)
Gables River Oaks 343 1993 1996 (7)
Rivercrest 1,130 1982 1987 (7)
Westhollow Park 1,663 1978-79 1990 (7)
ATLANTA, GEORGIA
Briarcliff Gables 353 1995 1994 (8)
Buckhead Gables 455 1964/1994 1993 (7),(9)
Club Candlewood 1,296 1969/1993 1992 (7),(9)
Dunwoody Gables 567 1995 1994 (8)
Gables Cinnamon Ridge 590 1980 1994 (7)
Gables Cityscape 745 1989 1994 (7)
Gables Over Peachtree 848 1970/1996 1995 (7),(9)
Gables Wood Arbor 1,834 1987 1985 (8)
Gables Wood Crossing 4,297 1985-86 1983 (8)
Gables Wood Glen 5,078 1983 1983 (8)
Gables Wood Knoll 2,688 1984 1990 (10)
Lakes at Indian Creek 1,746 1969-72 1993 (7)
Roswell Gables 852 1995 1994 (8)
Spalding Gables 602 1995 1994 (8)
Wildwood Gables 2,956 1972/1992-93 1991 (7),(9)
DALLAS, TEXAS
Arborstone 1,028 1985 1993 (7)
Gables Green Oaks I 239 1996 1994 (8)
Gables at Pearl Street 401 1995 1994 (8)
Gables Preston 356 1995 1994 (8)
Gables Spring Park 370 1996 1994 (8)
Gables Turtle Creek 156 1995 1996 (7)
Gables Valley Ranch 1,238 1994 1993 (8)
MEMPHIS, TENNESSEE
Gables Cordova 7,040 1986 1985 (8)
Gables Stonebridge 384 1993-96 1996 (7)
NASHVILLE, TENNESSEE
Brentwood Gables 472 1996 1994 (8)
Gables Hendersonville 2,927 1991 1989 (8)
Gables Hickory Hollow I 4,496 1988 1985 (8)
Gables Hickory Hollow II 4,939 1987 1985 (8)
</TABLE>
58
<PAGE> 61
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
GABLES RESIDENTIAL TRUST SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Costs Costs Carried at Close of Period
Number of ------------------- Capitalized ----------------------------
Apartment Related Buildings and Subsequent Buildings and
Apartment Description Homes Encumbrances Land Improvements To Acquisition Land Improvements Total
--------------------- ----- ------------ ---- --------------------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES (CONT.):
SAN ANTONIO, TEXAS
Gables Colonnade I 312 $ ------(1) $ 1,616 $ 0 $ 13,713 $ 1,616 $ 13,713 $ 15,329
Gables Wall Street 232 10,457(3) 1,223 0 11,400 1,223 11,400 12,623
AUSTIN, TEXAS
Gables Great Hills 276 12,830(3) 1,475 0 10,209 1,475 10,209 11,684
Gables Town Lake 256 12,342(3) 0 0 13,701 0 13,701 13,701
--------------------- --------------------------------------------------------------------
CATEGORY TOTAL 14,581 $ 331,246 $101,235 $186,440 $ 419,486 $102,762 $604,399 $ 707,161
===================== ====================================================================
DEVELOPMENT COMMUNITIES:
ATLANTA, GEORGIA
Gables Vinings 315 ------ 3,679 0 7,560 3,679 7,560 11,239
Roswell Gables II 284 ------ 3,275 0 4,209 3,275 4,209 7,484
Gables at Sugarloaf 386 ------ 3,249 0 357 3,249 357 3,606
AUSTIN, TEXAS
Gables Central Park 273 ------ 0 0 11,231 0 11,231 11,231
Gables Bluffstone 256 ------ 2,127 0 689 2,127 689 2,816
MEMPHIS, TENNESSEE
Gables Quail Ridge 238 ------ 1,053 0 15,228 1,053 15,228 16,281
Gables Germantown 252 ------ 1,479 0 17,450 1,479 17,450 18,929
ORLANDO, FLORIDA
Gables at Little Lake Bryan I 280 ------ 2,484 0 619 2,484 619 3,103
--------------------- --------------------------------------------------------------------
CATEGORY TOTAL 2,284 $ 0 $ 17,346 $ 0 $ 57,344 $ 17,346 $ 57,344 $ 74,690
===================== ====================================================================
LAND HELD FOR FUTURE DEVELOPMENT:
DALLAS, TEXAS
Gables Green Oaks II 250 ------(1) 600 0 0 600 0 600
SAN ANTONIO, TEXAS
Gables Colonnade II 250 ------(1) 1,549 0 0 1,549 0 1,549
MEMPHIS, TENNESSEE
Gables Quail Ridge II 148 ------ 600 0 0 600 0 600
--------------------- --------------------------------------------------------------------
CATEGORY TOTAL 648 $ 0 $ 2,749 $ 0 $ 0 $ 2,749 $ 0 $ 2,749
===================== ====================================================================
GRAND TOTALS 17,513 $ 331,246 $121,330 $186,440 $ 476,830 $122,857 $661,743 $ 784,600
===================== ====================================================================
<CAPTION>
Year Construction
/ Substantial
Accumulated Renovation Year Acquisition
Depreciation Complete Acquired Comments
------------ -------- -------- --------
<S> <C> <C> <C> <C>
COMPLETED COMMUNITIES(CONT.):
SAN ANTONIO, TEXAS
Gables Colonnade I $ 675 1995 1994 (8)
Gables Wall Street 451 1996 1994 (8)
AUSTIN, TEXAS
Gables Great Hills 1,148 1993 1992 (8)
Gables Town Lake 476 1996 1994 (8),(11)
-------
CATEGORY TOTAL $74,718
=======
DEVELOPMENT COMMUNITIES:
ATLANTA, GEORGIA
Gables Vinings 0 1997(12) 1995 (8)
Roswell Gables II 0 1998(12) 1996 (8)
Gables at Sugarloaf 0 1999(12) 1996 (8)
AUSTIN, TEXAS
Gables Central Park 0 1997(12) 1996 (8),(11)
Gables Bluffstone 0 1998(12) 1996 (8)
MEMPHIS, TENNESSEE
Gables Quail Ridge 88 1997(12) 1994 (8)
Gables Germantown 97 1997(12) 1994 (8)
ORLANDO, FLORIDA
Gables at Little Lake Bryan I 0 1998(12) 1996 (8)
-------
CATEGORY TOTAL $ 185
=======
LAND HELD FOR FUTURE DEVELOPMENT:
DALLAS, TEXAS
Gables Green Oaks II 0 Not scheduled 1994 (8)
SAN ANTONIO, TEXAS
Gables Colonnade II 0 Not scheduled 1994 (8)
MEMPHIS, TENNESSEE
Gables Quail Ridge II 0 Not scheduled 1996 (8)
-------
CATEGORY TOTAL $ 0
=======
GRAND TOTALS $74,903
=======
</TABLE>
(1) Upon the attainment of an investment grade rating by the Company, these
properties, which currently have mortgages held in escrow related to
the $175 Million Credit Facility, will be unencumbered.
(2) These properties together secure a $48,365 tax-exempt fixed rate
mortgage note payable. The principal balance outstanding under the note
has been allocated to these properties proportionately based on each
property's 1996 net operating income (equal to total property revenues
less property operating and maintenance expenses, exclusive of
depreciation expense).
(3) Upon the attainment of a BBB or equivalent rating by the Company, these
properties, which currently secure financing provided by Teachers
Insurance and Annuity Association, will be unencumbered at the
Company's option.
(4) These properties together secure a $53,000 conventional fixed rate
mortgage note payable. The principal balance outstanding under the note
has been allocated to these properties proportionately based on each
property's 1996 net operating income (equal to total property revenues
less property operating and maintenance expenses, exclusive of
depreciation expense).
(5) Upon the attainment of an investment grade rating by the Company, these
properties, which currently have mortgages held in escrow related to a
$40 million term loan, will be unencumbered.
(6) This property was sold in January, 1997, and in connection with that
sale, the bonds encumbering the property were defeased.
(7) Acquisition of existing apartment community.
(8) Acquisition of land for development.
(9) Property was substantially renovated following acquisition.
(10) Property was developed by Gables, sold and subsequently reacquired
through foreclosure.
(11) Land subject to a long-term lease.
(12) Represents the year in which construction is expected to be completed.
59
<PAGE> 62
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
GABLES RESIDENTIAL TRUST
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31,
1996 (DOLLARS IN THOUSANDS)
Depreciation of the Company's real estate assets is calculated over the
following estimated useful lives on a straight line basis:
Buildings and Improvements -- 19 to 40 years
Furniture, Fixtures and Equipment -- 5 to 10 years
A summary of activity for real estate investments and accumulated depreciation
is as follows:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Real estate investments:
Balance, beginning of year $ 591,233 $437,782 $290,903
Additions 198,193 153,451 146,879
Sales (4,826) 0 0
--------- -------- --------
Balance, end of year $ 784,600 $591,233 $437,782
========= ======== ========
Accumulated Depreciation:
Balance, beginning of year $ 57,343 $ 45,010 $ 35,594
Depreciation 18,457 12,333 9,416
Sales (897) 0 0
--------- -------- --------
Balance, end of year $ 74,903 $ 57,343 $ 45,010
========= ======== ========
</TABLE>
60
<PAGE> 1
EXHIBIT 10.9
GABLES RESIDENTIAL TRUST
SECOND AMENDED AND RESTATED 1994 SHARE OPTION AND INCENTIVE PLAN*
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Gables Residential Trust 1994 Share Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees and Trustees of Gables Residential Trust (the "Company")
and its Subsidiaries upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Share Options, Non-Qualified Share
Options, Restricted Share Awards and Unrestricted Share Awards.
"Board" means the Board of Trustees of the Company.
"Cause" means and shall be limited to a vote of the Board of Trustees
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (iii) any
material misconduct or neglect of duties by the participant in connection with
the business or affairs of the Company or any Subsidiary.
"Change of Control" is defined in Section 12.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Board or any Committee of the Board referred to in
Section 2.
- -------------------
* The 1994 Share Option and Incentive Plan was approved by the Board of
Trustees and the shareholders on January 19, 1994; the first amendment thereto
was approved by the Board of Trustees at a Meeting of the Board of Trustees on
February 20, 1995 and by the shareholders at the 1995 Annual Meeting of
Shareholders on May 16, 1995; the second amendment thereto was approved by the
Board of Trustees at a Meeting of the Board of Trustees on February 6, 1996 and
by the shareholders at the 1996 Annual Meeting of Shareholders on May 14, 1996.
At a Meeting of the Board of Trustees on December 11, 1996, the Board of
Trustees adopted Amendment No. 1 to the Second Amended and Restated 1994 Share
Option and Incentive Plan (see attached).
<PAGE> 2
"Disability" means disability as set forth in Section 22(e)(3) of the Code.
"Disinterested Person" means an Independent Trustee who qualifies as such
under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under the Act.
"Effective Date" means the date on which the Plan is approved by
shareholders as set forth in Section 14.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.
"Fair Market Value" on any given date means the last reported sale price at
which the Shares are traded on such date or, if no Shares are traded on such
date, the most recent date on which the Shares were traded, as reflected on the
New York Stock Exchange or, if applicable, any other national stock exchange on
which the Shares are traded. Notwithstanding the foregoing, the Fair Market
Value on the first day of the Company's initial public offering shall mean the
initial public price.
"Incentive Share Option" means any Share Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Trustee" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Share Option" means any Share Option that is not an
Incentive Share Option.
"Option" or "Share Option" means any option to purchase Shares granted
pursuant to Section 5.
"Restricted Share Award" means Awards granted pursuant to Section 6.
"Share" or "Shares" means one or more, respectively, of the Common Shares
of beneficial interest, par value $.01 per share, of the Company, subject to
adjustments pursuant to Section 3.
"Subsidiary" means Gables Realty Limited Partnership, Central Apartment
Management, Inc., East Apartment Management, Inc., Gables Central Construction,
Inc., and Gables East Construction, Inc., and any corporation or other entity
(other than the Company) in any unbroken chain of corporations or other
entities, beginning with the Company if each of the corporations or entities
(other than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.
"Unit" or "Units" means a unit or units of limited partnership interest in
Gables Realty Limited Partnership, a Delaware limited partnership and the entity
through which the Company principally conducts its business.
"Unrestricted Share Award" means Awards granted pursuant to Section 7.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS
(a) Committee. Prior to the closing of the Company's initial public
offering and the appointment
2
<PAGE> 3
of the Independent Trustees, the Plan shall be administered by the Board. After
the closing of the Company's initial public offering and the appointment of the
Independent Trustees, the Plan shall be administered by all of the Independent
Trustee members of the Compensation Committee of the Board, or any other
committee of not less than two Independent Trustees performing similar
functions, as appointed by the Board from time to time. Each member of the
Committee shall be a Disinterested Person after the date of the closing of the
Company's initial public offering.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers and other employees of the Company and
its Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Share Options, Non-Qualified Share Options,
Restricted Share Awards and Unrestricted Share Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of Shares to be covered by any
Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards
and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(a)(iii), to extend
the period in which Share Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Shares and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the
Committee) or dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the
administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Shares Issuable. At any time, the maximum number of Shares available
for issuance under the Plan shall be 8% of the sum of (i) the total number of
Shares outstanding at such time (which limit shall be determined without
considering as outstanding any Shares that are the subject of any unexercised
options under the Plan or any other option plan of the Company or any Shares
owned by the Company or any of its
3
<PAGE> 4
subsidiaries) and (ii) the total number of Shares issuable upon the exchange of
Units that are outstanding at such time (other than Units owned by the Company
or any of its subsidiaries); provided, however, that the maximum number of
Shares for which Incentive Share Options may be granted under the Plan shall not
exceed 1,101,960 Shares (which number is subject to adjustment as provided in
paragraph (b) below); provided, further, that at any time the total number of
Shares issued or available for issuance under the Plan in respect of Restricted
Share Awards or Unrestricted Share Awards shall not exceed 50% of the total
number of Shares available for issuance under the Plan at such time. For
purposes of this limitation, the Shares underlying any Awards which are
forfeited, cancelled, reacquired by the Company, satisfied without the issuance
of Shares or otherwise terminated (other than by exercise) shall be added back
to the Shares available for issuance under the Plan. Shares issued under the
Plan may be authorized but unissued Shares or Shares reacquired by the Company.
(b) Share Dividends, Mergers, etc. In the event of a share dividend, share
split or similar change in capitalization affecting the Shares, the Committee
shall make appropriate adjustments in (i) the number and kind of shares or
securities on which Awards may thereafter be granted, (ii) the number and kind
of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company or Gables Realty
Limited Partnership, the Committee in its sole discretion may, as to any
outstanding Awards, make such substitution or adjustment in the aggregate number
of shares reserved for issuance under the Plan and the number and purchase price
(if any) of shares subject to such Awards as it may determine and as may be
permitted by the terms of such transaction, or amend or terminate such Awards
upon such terms and conditions as it shall provide (which, in the case of the
termination of the vested portion of any Award, shall require payment or other
consideration which the Committee deems equitable in the circumstances).
(c) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and other
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Independent Trustees are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) and Section 7 below.
SECTION 5. SHARE OPTIONS
Any Share Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Share Options granted under the Plan may be either Incentive Share Options
or Non-Qualified Share Options. To the extent that any Option does not qualify
as an Incentive Share Option, it shall constitute a NonQualified Share Option.
No Incentive Share Option shall be granted under the Plan after January 18,
2004.
(a) Share Options Granted to Employees. The Committee in its discretion may
grant Share
4
<PAGE> 5
Options to employees of the Company or any Subsidiary. Share Options granted to
employees pursuant to this Section 5(a) shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Shares
covered by a Share Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than
100% of Fair Market Value on the date of grant. Notwithstanding the
foregoing, with respect to Non-Qualified Share Options which are granted in
lieu of cash bonus, the exercise price per share shall not be less than 50%
of the Fair Market Value on the date of grant. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation and
an Incentive Share Option is granted to such employee, the option price of
such Incentive Share Option shall be not less than 110% of Fair Market
Value on the grant date.
(ii) Grant of Discount Options in Lieu of Cash Bonus. Upon the request
of an employee and with the consent of the Committee, such employee may
elect each calendar year to receive a NonQualified Share Option in lieu of
cash bonus to which he may become entitled during the following calendar
year pursuant to any other plan of the Company, but only if such employee
makes an irrevocable election to waive receipt of all or a portion of such
cash bonus. Such election shall be made on or before the date set by the
Committee which date shall be no later than 15 days preceding January 1 of
the calendar year in which the cash bonus would otherwise be paid. A
Non-Qualified Share Option shall be granted to each employee who made such
an irrevocable election on the date the waived cash bonus would otherwise
be paid; provided, however, that with respect to an employee who is subject
to Section 16 of the Act, if such grant date is not at least six months and
one day from the date of the election, the grant shall be delayed until the
date which is six months and one day from the date of the election (or the
next following business day, if such date is not a business day). The
exercise price per Share Option shall be determined by the Committee but
shall not be less than 50% of the Fair Market Value of a single Share on
the date the Share Option is granted. The number of Shares subject to the
Share Option shall be determined by dividing the amount of the waived cash
bonus by the difference between the Fair Market Value of a single Share on
the date the Share Option is granted and the exercise price per Share
Option. The Share Option shall be granted for whole number of Shares so
determined; the value of any fractional share shall be paid in cash. An
employee may revoke his election under this Section 5(a)(ii) on a
prospective basis at any time; provided, however, that with respect to an
employee who is subject to Section 16 of the Act, such revocation shall
only be effective six months and one day following the date of such
revocation.
(iii) Option Term. The term of each Share Option shall be fixed by the
Committee, but no Incentive Share Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Share
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iv) Exercisability; Rights of a Shareholder. Share Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Share Options granted in lieu of cash bonus
shall be exercisable immediately. The Committee may at any time accelerate
the exercisability of all or any portion of any Share Option. An optionee
shall have the rights of a shareholder only as to shares acquired upon the
exercise of a Share Option and not as to unexercised Share Options.
5
<PAGE> 6
(v) Method of Exercise. Share Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of Shares that are not then subject to
restrictions under any Company plan and that have been held by the
optionee for at least six months, if permitted by the Committee in its
discretion. Such surrendered Shares shall be valued at Fair Market
Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event
the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection.
The delivery of certificates representing the Shares to be purchased pursuant to
the exercise of a Share Option will be contingent upon receipt from the optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Share Option) by the Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Share Option or
applicable provisions of laws.
(vi) Non-transferability of Options. No Share Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Share Options shall be exercisable, during
the optionee's lifetime, only by the optionee.
(vii) Termination by Reason of Death. If any optionee's employment by
the Company and its Subsidiaries terminates by reason of death, the Share
Option may thereafter be exercised, to the extent exercisable at the date
of death, by the legal representative or legatee of the optionee, for a
period of six months (or such longer period as the Committee shall specify
at any time) from the date of death, or until the expiration of the stated
term of the Option, if earlier.
(viii) Termination by Reason of Disability.
(A) Any Share Option held by an optionee whose employment by
the Company and its Subsidiaries has terminated by reason of
Disability may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of twelve
months (or such longer period as the Committee shall specify at any
time) from the date of such termination of employment, or until the
expiration of the stated term of the Option, if earlier.
(B) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability.
(C) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this
Section 5(a)(viii) for the exercise of a NonQualified Share Option,
shall extend such period for six months from the date of death,
subject to termination on the expiration of the stated term of the
Option, if earlier.
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(ix) Termination for Cause. If any optionee's employment by the
Company and its Subsidiaries has been terminated for Cause, any Share
Option held by such optionee shall immediately terminate and be of no
further force and effect; provided, however, that the Committee may, in its
sole discretion, provide that such Share Option can be exercised for a
period of up to 30 days from the date of termination of employment or until
the expiration of the stated term of the Option, if earlier.
(x) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by the Company and its Subsidiaries terminates
for any reason other than death, Disability, or for Cause, any Share Option
held by such optionee may thereafter be exercised, to the extent it was
exercisable on the date of termination of employment, for three months (or
such longer period as the Committee shall specify at any time) from the
date of termination of employment or until the expiration of the stated
term of the Option, if earlier.
(xi) Annual Limit on Incentive Share Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Shares with respect to which Incentive Share Options granted under this
Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000.
(xii) Form of Settlement. Shares issued upon exercise of a Share
Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
(b) Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of Shares in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Share on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of Shares equal to the number
delivered to exercise the original Option.
(c) Share Options Granted to Independent Trustees.
(i) Automatic Grant of Options. Promptly after the closing of the
Company's initial public offering and the appointment of the Independent
Trustees, each Independent Trustee shall automatically be granted a
Non-Qualified Share Option to purchase 3,000 Shares. Each Independent
Trustee who is serving as Trustee of the Company on the fifth business day
after each annual meeting of shareholders, beginning with the 1995 annual
meeting, shall automatically be granted on such day a Non-Qualified Share
Option to acquire 5,000 Shares. The exercise price per Share for the Shares
covered by a Share Option granted pursuant to the first sentence hereof
shall be equal to the greater of the initial public offering price or the
Fair Market Value of a single Share on the date the Share Option is
granted. The exercise price per Share for the Shares covered by a Share
Option granted pursuant to the second sentence hereof shall be equal to the
Fair Market Value of a single Share on the date the Share Option is
granted.
(ii) Exercise; Termination; Non-transferability.
(A) Except as provided in Section 12, no Option granted under
Section 5(c)(i) may be exercised before the first anniversary of the
date upon which it was granted; provided, however, that any Option so
granted shall become exercisable upon the termination of service of
the Independent Trustee because of Disability or death. No Option
issued under this Section
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5(c) shall be exercisable after the expiration of ten years
from the date upon which such Option is granted.
(B) The rights of an Independent Trustee in an Option
granted under Section 5(c) shall terminate six months after
such Trustee ceases to be a Trustee of the Company or the
specified expiration date, if earlier; provided, however,
that if the Independent Trustee ceases to be a Trustee for
Cause, the rights shall terminate immediately on the date on
which he ceases to be a Trustee.
(C) No Share Option granted under this Section 5(c)
shall be transferable by the optionee otherwise than by will
or by the laws of descent and distribution, and such Options
shall be exercisable, during the optionee's lifetime only by
the optionee. Any Option granted to an Independent Trustee
and outstanding on the date of his death may be exercised by
the legal representative or legatee of the optionee for a
period of six months from the date of death or until the
expiration of the stated term of the option, if earlier.
(D) Options granted under this Section 5(c) may be
exercised only by written notice to the Company specifying
the number of Shares to be purchased. Payment of the full
purchase price of the Shares to be purchased may be made by
one or more of the methods specified in Section 5(a)(v). An
optionee shall have the rights of a shareholder only as to
shares acquired upon the exercise of a Share Option and not
as to unexercised Share Options.
(iii) Limited to Independent Trustees. The provisions of
this Section 5(c) shall apply only to Options granted or to be
granted to Independent Trustees, and shall not be deemed to
modify, limit or otherwise apply to any other provision of this
Plan or to any Option issued under this Plan to a participant who
is not an Independent Trustee of the Company. To the extent
inconsistent with the provisions of any other Section of this
Plan, the provisions of this Section 5(c) shall govern the rights
and obligations of the Company and Independent Trustees
respecting Options granted or to be granted to Independent
Trustees. The provisions of this Section 5(c) which affect the
price, date of exercisability, option period or amount of Shares
under an Option shall not be amended more than once in any
six-month period, other than to comport with changes in the Code
or ERISA.
SECTION 6. RESTRICTED SHARE AWARDS
(a) Nature of Restricted Share Award. The Committee may grant Restricted
Share Awards to any employee of the Company or any Subsidiary. A Restricted
Share Award is an Award entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, Shares subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Shares"). Conditions may be based on continuing employment and/or achievement of
pre-established performance goals and objectives.
(b) Acceptance of Award. A participant who is granted a Restricted Share
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the Shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Shares in such form as the Committee shall
determine.
(c) Rights as a Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Shares including voting and dividend rights, subject
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to non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Share Award. Unless the
Committee shall otherwise determine, certificates evidencing the Restricted
Shares shall remain in the possession of the Company until such Shares are
vested as provided in Section 6(e) below.
(d) Restrictions. Restricted Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein. In the event of termination of employment by the Company and its
Subsidiaries for any reason (including death, retirement, Disability, and for
Cause), the Company shall have the right, at the discretion of the Committee, to
repurchase Restricted Shares with respect to which conditions have not lapsed at
their purchase price, or to require forfeiture of such Shares to the Company if
acquired at no cost, from the participant or the participant's legal
representative. The Company must exercise such right of repurchase or forfeiture
not later than the 90th day following such termination of employment (unless
otherwise specified in the written instrument evidencing the Restricted Share
Award).
(e) Vesting of Restricted Shares. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Shares and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the Shares
on which all restrictions have lapsed shall no longer be Restricted Shares and
shall be deemed "vested."
(f) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Restricted Share Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Shares.
SECTION 7. UNRESTRICTED SHARE AWARDS
(a) Grant or Sale of Unrestricted Shares. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Share Award to any employee of the Company or any Subsidiary which
will entitle such employee to receive Shares free of any restrictions under the
Plan ("Unrestricted Shares"). Unrestricted Shares may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation to such employee.
(b) Elections to Receive Unrestricted Shares In Lieu of Compensation. Upon
the request of an employee and with the consent of the Committee, each employee
may, pursuant to an irrevocable written election delivered to the Company no
later than the date or dates specified by the Committee, receive a portion of
the cash compensation otherwise due to him in Unrestricted Shares (valued at
Fair Market Value on the date or dates the cash compensation would otherwise be
paid, or on the effective date of the election, if later). With respect to any
employee who is subject to Section 16 of the Act, such irrevocable election
shall become effective no earlier than six months and one day following the date
of such election and the revocation of such election shall be effective six
months and one day following the date of the revocation.
(c) Elections to Receive Unrestricted Shares in Lieu of Trustees' Fees.
Each Independent Trustee may, pursuant to an irrevocable written election
delivered to the Company, receive all or a portion of his cash trustee's fees in
Unrestricted Shares (valued at Fair Market Value on the date or dates the
trustee's fees would otherwise be paid, or on the effective date of the
election, if later). Such election shall be effective no earlier than six months
and one day following the date of such election. Any revocation of such election
shall be effective six months and one day following the date of the revocation.
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SECTION 8. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Shares or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Shares. A participant may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from of Shares to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due, or (ii) transferring to the
Company Shares owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due. With respect to any participant who is subject to Section 16 of the
Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations relating to an
Award in the manner permitted by this Section 8(b) shall be made either (1)
during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of revenues of the
Company and ending on the twelfth business day following such date, or (2)
at least six months prior to the date as of which the receipt of such an
Award first becomes a taxable event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or disapproval of
the Committee; and
(D) the Shares withheld to satisfy tax withholding must pertain to an
Award which has been outstanding for at least six months.
Notwithstanding the foregoing, the first sentence of Section 8(b)(A) shall not
be applicable until the Company has been subject to the reporting requirements
of Section 13(a) of the Act for at least a year prior to the election and has
filed all reports and statements required to be filed pursuant to that Section
for that year.
SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 10. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase
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price or with no exercise or purchase price, but such price, if any, must
satisfy the requirements which would apply to the substitute or amended Award
if it were then initially granted under this Plan) for the purpose of
satisfying changes in law or for any other lawful purpose, but no such
action shall adversely affect rights under any outstanding Award without
the holder's consent. To the extent required by the Code to ensure that
Options granted hereunder qualify as Incentive Share Options and to the
extent required by the Act to ensure that Awards and Options granted under
the Plan are exempt under Rule 16b-3 promulgated under the Act, Plan
amendments shall be subject to approval by the Company's shareholders.
SECTION 11. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and
any payments in cash, Shares or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Shares or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 12. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 12:
(a) Each outstanding Share Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) Restrictions and conditions on Restricted Share Awards shall
automatically be deemed waived, and the recipients of such Awards shall become
entitled to receipt of the Shares subject to such Awards unless the Committee
shall otherwise expressly provide at the time of grant.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan of the Company or any of its Subsidiaries), together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 40% or more of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board of Trustees
("Voting Securities") or (B) the then outstanding Shares of the Company (in
either such case other than as a result of acquisition of securities
directly from the Company); or
(ii) persons who, as of the date of the closing of the Company's
initial public offering, constitute the Company's Board of Trustees (the
"Incumbent Trustees") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to the closing of
the Company's initial public offering whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Trustees shall, for purposes of this Plan, be considered an Incumbent
Trustee; or
(iii) the shareholders of the Company shall approve (A)any
consolidation or merger of
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the Company or any Subsidiary where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate 50% of the voting shares of the corporation
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all of
the assets of the Company or (C) any plan or proposal for the liquidation
or dissolution of the Company;
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
Shares or other Voting Securities outstanding, increases (x) the proportionate
number of Shares beneficially owned by any person to 40% or more of the Shares
then outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 40% or more of the combined
voting power of all then outstanding Voting Securities; provided, however, that
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other Voting Securities
(other than pursuant to a share split, stock dividend, or similar transaction),
then a "Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause(i).
SECTION 13. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.
No Shares shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange requirements have been
satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Shares and Awards as it deems
appropriate.
(b) Delivery of Share Certificates. Delivery of share certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a share transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to shareholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 14. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the holders of a majority
of the Shares of the Company present or represented and entitled to vote at a
meeting of shareholders. Subject to such approval by the shareholders, and to
the requirement that no Shares may be issued hereunder prior to such approval,
Share Options and other Awards may be granted hereunder on and after adoption of
the Plan by the Board.
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SECTION 15. GOVERNING LAW
This Plan shall be governed by Maryland law except to the extent such law
is preempted by federal law.
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AMENDMENT NO. 1 TO THE GABLES RESIDENTIAL TRUST SECOND AMENDED AND
RESTATED 1994 SHARE OPTION AND INCENTIVE PLAN
On December 11, 1996, pursuant to Section 10 of the Plan, the Board of
Trustees of the Company adopted the following amendment to the Plan:
Add the following after Section 5(a)(v)(C):
(D) By the optionee delivering to the Company a full recourse
promissory note, provided that the Board or the Compensation
Committee has (i) authorized the loan of funds to the optionee
for the purpose of enabling or assisting the optionee to effect
the exercise of the optionee's Share Options and (ii) established
the terms of such note. Such promissory note shall, at the
Company's discretion, be accompanied by a pledge agreement of the
Common Shares issued pursuant to the exercise of such Share
Options.
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the ___ day of
_________ , 199__ by and between ______________ residing at ________________
(hereinafter referred to as "Employee") and Gables Residential Trust, a Maryland
business trust, with a principal place of business at 2859 Paces Ferry Road,
Suite 1450, Atlanta, Georgia 30339 (hereinafter referred to as the "Company").
1. Term. The term of this Agreement shall commence on January 1,
1997 (the "Effective Date") and, unless earlier terminated as provided in
Paragraph 8 below, shall terminate one (1) year from the Effective Date (the
"Original Term"). The Original Term shall be extended automatically for
additional one-year periods (each a "Renewal Term"), unless notice that this
Agreement will not be extended is given by either party to the other three (3)
months prior to the expiration of the Original Term or any Renewal Term. (The
period of Employee's employment hereunder within the Original Term and any
Renewal Terms is herein referred to as the "Employment Period".)
2. Employment/Duties.
(a) During the Employment Period, Employee shall be employed
in the business of the Company and its affiliates. Employee shall serve as a
corporate officer with the title _________. Employee's duties and authority
shall be commensurate with his title and position with the Company.
(b) Employee agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his working time and
efforts to the performance of his duties under this Agreement, except as
otherwise approved by the Board of Trustees; provided that, nothing herein shall
be interpreted to preclude Employee from (i) retaining any preexisting
consulting fee contracts relating to and/or minority interests in multifamily
residential apartment properties or (ii) participating as an officer or director
of, or advisor to, any charitable or other tax exempt organization.
(c) In performing his duties hereunder, Employee shall be
available for reasonable travel as the needs of the business require. Employee
shall be based in the greater Atlanta metropolitan area.
3. Compensation/Benefits. In consideration of Employee's
services hereunder, the Company shall provide Employee the following:
<PAGE> 2
(a) Base Salary. The Company shall pay Employee an annual
salary of $__ during the Employment Period ("Base Salary"). Base Salary shall be
payable in accordance with the Company's normal business practices, but in no
event less frequently than monthly. Employee's Base Salary shall be reviewed no
less frequently than annually by the Company and may be increased but not
decreased during the Employment Period.
(b) Bonuses. At the close of each fiscal year, the Company
shall review the performance of the Company and of Employee during the prior
fiscal year, and the Company may provide Employee with additional compensation
as a bonus if the Board of Trustees, or any compensation committee thereof, in
its discretion, determines that Employee's contribution to the Company warrants
such additional payment and the Company's anticipated financial performance for
the present period permits such payment. The bonuses hereunder shall be paid as
a lump sum not later than thirty (30) days after completion of the audit of the
Company's books for the fiscal year, subject to the Employee's right to defer in
his sole discretion pursuant to separate written agreement with the Company. For
purposes of Paragraph 8(c), the bonus paid in respect of any year (x) shall
include cash bonuses paid in respect of such year, unrestricted share grants
made in respect of such year (valued as of the date of grant) and any restricted
shares, whenever granted, which vested entirely or substantially in respect of
service during such year (including, without limitation, restricted shares which
vested on January 1 of the following year) (valued as of the date of vesting)
but (y) shall not include any restricted share grants made in respect of such
year (unless subsequently vested in respect of such year in accordance with the
preceding clause (x)), option grants made in respect of such year or the
exercise of any options during such year.
(c) Medical Insurance/Physical. During the Employment Period,
the Company shall provide to Employee and Employee's immediate family a
comprehensive policy of health insurance. During the Employment Period, Employee
shall be entitled to a comprehensive annual physical performed, at the expense
of the Company, by the physician or medical group of Employee's choosing.
(d) Life Insurance/Disability Insurance. During the Employment
Period, the Company shall, to the extent reasonably available on customary terms
and rates, (i) provide Employee with term life insurance in a face amount equal
to $1,000,000, and (ii) have Employee covered by reasonably comprehensive
disability insurance policy or, at Employee's election, otherwise reimburse
Employee for the cost of such a policy in an amount not to exceed $5,000 per
year; provided that, such $5,000 amount shall be increased, as the age of the
Employee increases, for any year during the Employment Period as may be
necessary to maintain the same level of insurance as in effect during the first
year of the Employment Period. Employee agrees to submit to such medical
examinations as may be required in order to secure or maintain such policies of
insurance.
(e) Vacations. Employee shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Company
governing executives, not to exceed four weeks per annum, in the aggregate.
(f) Office/Secretary, etc. During the Employment Period,
Employee shall be
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entitled to secretarial services and a private office commensurate with his
title and duties.
(g) Stock Options. Employee shall be entitled to stock
options in an amount to be determined by the Board of Trustees, or any
compensation committee thereof, in its discretion.
(h) Fringe Benefits. During the Employment Period, the Company
shall provide Employee with professional assistance in tax return preparation
and financial planning, provided that the cost of such assistance shall not
exceed $1,000 per year (adjusted annually for inflation by the CPI Adjustment).
(i) Other Benefits. During the Employment Period, the Company
shall provide to Employee such other benefits, including the right to
participate in such retirement or pension plans, as are made generally available
to employees of the Company from time to time.
4. Automobile. The Company shall provide Employee with a monthly
car allowance of not less than $500 per month (adjusted annually for inflation
by the CPI Adjustment), provided that, the Company may instead purchase or
lease, and maintain insurance on, an automobile of comparable value for use by
Employee during the Employment Period, which automobile Employee shall operate
and maintain, at his own expense, with the same standard of care Employee
applies to his own property and as may be required under any applicable lease
agreement.
5. Expenses/Indemnification.
(a) During the Employment Period, the Company shall reimburse
Employee for the reasonable business expenses incurred by Employee in the course
of performing his duties for the Company hereunder, including but not limited to
expenses incurred in connection with out-of-town business travels, upon
submission of invoices, vouchers or other appropriate documentation, as may be
required in accordance with the policies in effect from time to time for
executive employees of the Company.
(b) To the full extent permitted by law and subject to the
Company's Amended and Restated Declaration of Trust, as amended from time to
time, and Second Amended and Restated By-Laws, as amended from time to time, the
Company shall indemnify Employee with respect to any actions commenced against
Employee in his capacity as an officer or trustee or former officer or trustee
of the Company, or any affiliate thereof for which he may serve in such
capacity, and the Company shall advance on a timely basis any expenses incurred
in defending such actions. The obligation to indemnify hereunder shall survive
the termination of this Agreement. The Company agrees to use its best efforts to
secure and maintain officers and trustees insurance with respect to Employee.
6. Employer's Authority/Policies. Employee agrees to observe and
comply with the rules and regulations of the Company as adopted by its Board
respecting the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from
3
<PAGE> 4
time to time by the Board. Employee agrees to abide by the Company's insider
trading policies and procedures and the Company's Code of Ethics, and agrees to
make annual certifications or affirmations to such effect if requested by the
Company.
7. Records/Nondisclosure/Company Policies.
(a) General. All records, financial statements and similar
documents obtained, reviewed or compiled by Employee in the course of the
performance by him of services for the Company, whether or not confidential
information or trade secrets, shall be the exclusive property of the Company.
Employee shall have no rights in such documents upon any termination of this
Agreement.
(b) Confidential Information. Employee will not disclose to
any person or entity (except as required by applicable law or in connection with
the performance of his duties and responsibilities hereunder), or use for his
own benefit or gain, any confidential information of the Company obtained by him
incident to his employment with the Company. The term "confidential information"
includes, without limitation, financial information, business plans, prospects
and opportunities which have been discussed or considered by the management of
the Company but does not include any information which has become part of the
public domain by means other than the Employee's non-observance of his
obligations hereunder. This paragraph shall survive the termination of this
Agreement.
8. Termination/Severance.
(a) At-Will Employment. Employee's employment hereunder is "at
will" and, therefore, may be terminated at any time, with or without cause, at
the option of the Company, subject only to the severance obligations under this
Paragraph 8. Upon any termination hereunder, the Employment Period shall expire.
(b) Termination For Good Reason. If (A) Employee is terminated
for Good Reason (as defined in Paragraph 8(d) below) or (B) if Employee shall
voluntarily terminate his employment hereunder (but other than by reason of a
Force Out (as defined in Paragraph 8(d) below), and other than pursuant to a
Change of Control Event (as defined in Paragraph 8(d) below)), then the
Employment Period shall end and Employee shall be entitled to receive his Base
Salary at the rate provided pursuant to Section 3(a) for the period up to and
including the date on which such termination shall take effect.
(c) Other Terminations. If (A) Employee's employment is
terminated by the Company without Employee's consent and other than for Good
Reason, or (B) Employee terminates his employment by reason of or at any time
following a Force Out, or (C) Employee's employment is terminated by reason of
his death, or (D) Employee's employment is terminated pursuant to a Change of
Control Event, Employee, or his estate, as the case may be, shall be entitled:
(i) to immediately vest in any outstanding stock options;
and
4
<PAGE> 5
(ii) to the payment of an amount (the "Severance Amount"),
equal to one times the sum of (x) his Base Salary
under Paragraph 3(a) and (y) the amount of his bonus
received in respect of the immediately preceding
fiscal year under Paragraph 3(b)(i).
The Severance Amount shall be paid as a lump sum within fifteen (15) days of
such termination. In the event that any stock option plan or option agreement of
the Company provides terms for the acceleration and/or exercise of options
following a termination of employment that vary from or are otherwise
inconsistent with the foregoing, the Company shall take such actions as may be
necessary to amend such plan or option agreement. Notwithstanding the foregoing,
in the event of a termination by reason of Employee's death, the Severance
Amount shall be zero if the life insurance proceeds payable under Paragraph
3(d)(i) equal or exceed $1,000,000. During the remaining term of the Employment
Period (or what would have been the remaining term if Employee's employment had
not been terminated), Employee shall be entitled to the benefits described in
Paragraphs 3(c) and (f).
(d) Definitions. For purposes of this Paragraph 8, the
following terms shall have the indicated definitions:
(1) "Change of Control" shall mean the
occurrence of any one of the following events:
(A) any "person," as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Act") (other than the Company, any of its Subsidiaries
(as defined below), any trustee, fiduciary or other person or entity
holding securities under any employee benefit plan of the Company or
any of its Subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act)
of such person, shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 40% or more of either (i) the
combined voting power of the Company's then outstanding securities
having the right to vote in an election of the Company's Board of
Trustees ("Voting Securities") or (ii) the then outstanding common
shares of beneficial interest, par value $.01 per share, of the
Company ("Shares") (in either such case other than as a result of
acquisition of securities directly from the Company); or
(B) persons who, as of the date hereof,
constitute the Company's Board of Trustees (the "Incumbent Trustees")
cease for any reason, including, without limitation, as a result of a
tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board, provided that any person
becoming a trustee of the Company subsequent to the date hereof whose
election or nomination for election was approved by a vote of at least
a majority of the Incumbent Trustees or was approved by a nominating
committee of the Board shall, for purposes of this Agreement, be
considered an Incumbent Trustee; or
5
<PAGE> 6
(C) the shareholders of the Company
shall approve (i) any consolidation or merger of the Company or any
Subsidiary where the shareholders of the Company, immediately prior to
the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, shares representing
in the aggregate 50% of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (iii) any plan or proposal for the
liquidation or dissolution of the Company;
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (A) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of Shares or other Voting Securities outstanding, increases (x) the
proportionate number of Shares beneficially owned by any person to 40% or more
of the Shares then outstanding or (y) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 40% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (x) or (y) of this sentence
shall thereafter become the beneficial owner of any additional Shares or other
Voting Securities (other than pursuant to a share split, stock dividend, or
similar transaction), then a "Change of Control" shall be deemed to have
occurred for purposes of the foregoing clause (A).
As used in this definition of "Change of Control," the term
"Subsidiary" means Gables Realty Limited Partnership, Central Apartment
Management, Inc., East Apartment Management, Inc., Gables Central Construction,
Inc., and Gables East Construction, Inc., and any corporation or other entity
(other than the Company) in any unbroken chain of corporations or other
entities, beginning with the Company if each of the corporations or entities
(other than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.
(2) A "Change of Control Event" shall mean any
voluntary or involuntary termination of Employee's employment occurring within
six (6) months following a Change of Control.
(3) A "Force Out" shall be deemed to have
occurred in the event of a material breach by the Company of any obligation
under this Agreement, including but not limited to those under Paragraphs 2 and
3 hereof, or in the event of a substantial diminution in the duties or
responsibilities of Employee.
(4) "Good Reason" shall mean a finding by the
Board of Trustees, that the Employee has (a) acted with gross negligence or
willful misconduct in connection with the performance of his material duties
hereunder, (b) defaulted in the performance of his material duties hereunder and
has not corrected such action within 15 days of receipt of written notice
6
<PAGE> 7
thereof; (c) acted against the best interests of the Company or committed a
material act of common law fraud against the Company or its employees, which act
in either event has had a material and adverse impact on the financial affairs
of the Company; (d) been convicted of a felony and such conviction has a
material adverse affect on the interests of the Company; or (e) the continuing
disability of Employee following the expiration of the Disability Period (as
defined in Paragraph 8(e)) under circumstances where Employee is entitled to
benefits payable under the disability insurance policy of the Company.
(e) Disability. If Employee shall become unable to efficiently
perform his duties hereunder because of any physical or mental disability or
illness, he shall be entitled to his regular compensation until (i) the period
of disability or illness (whether or not the same disability or illness) shall
exceed 180 consecutive days during the Employment Period and (ii) the Employee
has become eligible to receive benefits under the applicable disability
insurance policy referred to in Paragraph 3(d)(ii) (the "Disability Period").
This Agreement thereafter may be terminated by the Company as provided in
Paragraph 8(b), provided that, Employee shall immediately vest in any
outstanding options to the same extent as if the termination had been pursuant
to Paragraph 8(c).
(f) Arbitration in the Event of a Dispute Regarding the Nature
of Termination. In the event that the Company terminates Employee's employment
for Good Reason (as defined above), and Employee contends that Good Reason did
not exist, the Company's only obligation shall be to submit such claim to
arbitration before the American Arbitration Association ("AAA"). In such a
proceeding, the only issue before the arbitrator will be whether Employee was in
fact terminated for Good Reason. If the arbitrator determines that Employee was
not terminated for Good Reason, the only remedy that the arbitrator may award is
an amount equal to the Severance Payment specified in Paragraph 8(c), the costs
of arbitration, and Employee's attorneys' fees. If the arbitrator finds that
Employee was terminated for Good Reason, the arbitrator will be without
authority to award Employee anything, and the parties will each be responsible
for their own attorneys' fees, and they will divide the costs of arbitration
equally.
(g) No Mitigation. Without regard to the reason for the
termination of Employee's employment hereunder, Employee shall be under no
obligation to mitigate damages with respect to such termination under any
circumstances and in the event Employee is employed or receives income from any
other source, there shall be no offset against the amounts due from the Company
hereunder.
9. Non-Competition. Because Employee's services to the Company
are special and because the Employee has access to the Company's confidential
information, Employee covenants and agrees that if, during the Original Term or
any Renewal Term, his employment is terminated for Good Reason or if he
voluntarily terminates his employment (other than by reason of a Force Out or
pursuant to a Change of Control Event), for a period of twelve months from the
date of such termination he will not, directly or indirectly, either on his own
behalf or on behalf of any person, partnership, corporation or otherwise engage
in any business or undertaking directly competitive with the businesses being
carried on by the Company (a) in respect of any multifamily residential real
estate project undertaken or being considered by the Company at the time of
7
<PAGE> 8
termination or (b) in any multifamily residential rental real estate project
within 30 miles of any such project, in either case, without the prior written
consent of the Board. Restricted activities under this Paragraph 9 include, but
are not limited to, the acquisition, development, construction, operation,
management or leasing of any multifamily residential real estate project,
including contracting or agreeing to do any of the foregoing or advising or
consulting with any person regarding the foregoing. This Paragraph 9 shall not
be interpreted to prevent the Employee from retaining any interests in
multifamily residential apartment properties permitted under Paragraph 2(b)(i).
This Paragraph 9 shall survive the termination of this Agreement.
10. Conflicting Agreements. Employee hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder. The parties agree that this agreement supersedes and
replaces any prior written employment agreement between the Company and Employee
of similar scope and nature.
11. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand or by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Company or
Employee, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
12. Miscellaneous. This Agreement (i) constitutes the entire agreement
between the parties concerning the subjects hereof and supersedes any and all
prior agreements or understandings, (ii) may not be assigned by Employee without
the prior written consent of the Company, and (iii) may be assigned by the
Company and shall be binding upon, and inure to the benefit of, the Company's
successors and assigns. Headings herein are for convenience of reference only
and shall not define, limit or interpret the contents hereof.
13. Amendment. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. Specific Enforcement. The provisions of this Agreement are to be
specifically enforced if not performed according to their terms. Without
limiting the generality of the foregoing, the parties acknowledge that the
Company would be irreparably damaged and there would be no adequate remedy at
law for Employee's breach of Paragraphs 7 and 9 of this Agreement and,
accordingly, Employee hereby consents to the entry of any temporary restraining
order or preliminary or ex parte injunction, in addition to any other remedies
available at law or in equity, to enforce the provisions thereof. This Paragraph
14 shall survive the termination of this Agreement.
15. Severability. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any other
provision.
8
<PAGE> 9
16. Governing Law . This Agreement shall be construed and
regulated in all respects under the laws of the State of Maryland.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and
year first above written.
GABLES RESIDENTIAL TRUST
By:
--------------------------------------------
Marcus E. Bromley, Chief Executive Officer
By:
--------------------------------------------
Name:
<PAGE> 1
EXHIBIT 10.14
GABLES RESIDENTIAL TRUST
[LOGO]
November 11, 1996
Mr. Perry ("Peter") M. Parrott, Jr.
3501 University Blvd.
Dallas, TX 75205
Dear Peter:
In light of various changes in the operations of Gables Residential
Trust (the "Company"), the Company accepts your resignation effective November
11, 1996. Your resignation from the Board of Directors was effective October 2,
1996. Based on our review of the facts surrounding your resignation, it has been
determined that the Company will provide you with the separation package
described below. In return for your agreements contained herein, including your
release of certain claims as described below, and subject to your performance of
your obligations under this agreement, the Company agrees, upon your execution
of this letter to the following:
(1) The Company will engage your services as a consultant
effective November 12, 1996 and will continue your base salary
at your current rate, less applicable withholding and payroll
taxes, through January 26, 1997. Effective with your
resignation on November 11, 1996 and thereafter, you will no
longer serve in an executive role or as an officer for the
Company.
(2) The Company will pay you Two Hundred Seventy-Five Thousand and
No/100 Dollars ($275,000.00), in one lump sum, which amount
represents your 1996 bonus as well as severance. Such payment
will be made to you by the Company prior to December 31, 1996.
The Company will withhold applicable withholding and payroll
taxes from the payment to you pursuant to this paragraph (2).
(3) The Company will continue your car allowance at the current
rate through January 26, 1997.
(4) The Company will continue to make contributions to your
401(k) plan at the current rate through January 26, 1997.
(5) The Company will continue to provide you all benefits at the
current level through January 26, 1997. Subsequent to January
26, 1997, you will be eligible to continue to participate in
the Company's group health plan pursuant to COBRA. Such COBRA
premiums, to the extent you choose to participate, will be
your financial responsibility.
<PAGE> 2
Mr. Perry ("Peter") M. Parrott,Jr.
November 11, 1996
Page 2
(6) All stock options issued to you that have not already vested
by January 26, 1997, will become vested on January 26, 1997.
You will have until January 26, 1999 to exercise the following
stock options:
- 47,000 options dated January 26, 1994 at the exercise
price of $22.50.
- 15,000 options dated May 16, 1995 at the exercise price
of $20.375.
To the extent that the restrictions on the transferability of
your Initial Public Offering shares have elapsed as matter of
law, the Company will remove the restricted legends on the
certificates representing such shares at the Company's cost.
(7) The Company agrees to sell you the office furniture in your
office for an amount to be agreed upon between you and the
Company. In the event you elect to purchase such furniture,
you agree that the Company is authorized to set off such
amount against payments due you pursuant to this agreement.
(8) The Company agrees to release you from the terms of the
non-competition provision set forth in Section 9 of the
Employment Agreement you entered into with the Company on
January 26, 1994. However, the release of the non-competition
provision in no way releases you from your confidentiality
obligations as set forth below.
(9) The Company agrees to reimburse you for your reasonable
out-of-pocket expenses associated with your continued work on
behalf of the Company through January 26, 1997 as well as all
reasonable expenses, excluding salary, incurred by you related
to your continued assistance to the Company subsequent to
January 26, 1997.
(10) The Company agrees that should you be sued in your capacity as
a former director for the Company, that you will be entitled
to coverage under the Board of Director's errors and omissions
insurance to the extent applicable and the Company agrees to
indemnify you for all reasonable expenses incurred and any
judgments against you in your capacity as a former director to
the extent that the Company, in its discretion, determines
that your actions as a director were proper.
In consideration for the Company's agreement to provide you with the
benefits set forth in provisions (1) through (10) above, which you acknowledge
to be good and valid consideration, you voluntarily and knowingly agree as
follows:
<PAGE> 3
Mr. Perry ("Peter") M. Parrott,Jr.
November 11, 1996
Page 3
(a) You agree to cooperate with the Company in the
transitioning of your duties and responsibilities.
Beginning October 15, 1996, you agree that your
personnel management responsibilities will transition
to John Rippel who will assume the direct reporting
responsibility for the Vice Presidents and Sue Ansel.
You further agree that you will continue to be
available for work and consultation through January
26, 1997 and agree to continue to assist in the
complete transitioning of your duties and
responsibilities within the Company.
(b) You further agree to cooperate with the Company
subsequent to January 26, 1997 with respect to any
ongoing projects that remain uncompleted at the time
of your departure. You further agree to cooperate
with, assist, and provide testimony at the request of
the Company or its attorneys in any currently pending
or future litigation involving the Company.
(c) For all times hereafter, you agree to protect and
preserve the confidentiality of and safeguard the
Company's proprietary and/or confidential information
and to not use, directly or indirectly, for your
benefit or for the benefit of another, or disclose to
another, any of the Company's proprietary and/or
confidential information unless disclosures that are
deemed confidential to the Company are required by or
pursuant to a court order or the demands of a public
agency. Confidential information will include,
without limitation, information concerning the
Company's financial affairs, strategic plans and
objectives, business plans, proprietary statistics,
reports, pricing information, customer data and
contracts except to the extent that the information
is available to the public.
(d) Prior to January 26, 1997, you agree to deliver to
the Company all documents embodying any of the
Company's proprietary and/or confidential
information.
(e) Prior to January 26, 1997, you agree to deliver to
the Company all property owned by the Company and in
your possession.
As further consideration for the Company's obligations set forth
herein, you voluntarily and knowingly, fully and completely and forever release
the Company and its current or former directors, officers, stockholders,
employees, agents, attorneys and affiliates from any and all claims, actions,
demands and causes of action of whatever kind or character, whether now known or
unknown, that you may have or that you may claim to have against the Company or
its current or former directors, officers, stockholders, employees, agents,
attorneys or affiliates that are in any way connected with your employment with
the Company, your resignation from your
<PAGE> 4
Mr. Perry ("Peter") M. Parrott,Jr.
November 11, 1996
Page 4
position with the Company, or otherwise, including without limitation any
contractual claims of employment or tort claims you may have or that you may
claim to have, wrongful discharge or discrimination in employment on the basis
of race, color, sex, national origin, religion, age under the Age Discrimination
in Employment Act and related laws prohibiting age discrimination, or
disability, if any, you may have, and attorneys fees and costs, if any, and any
and all acts or failure to act in contravention of the Constitution, statutes or
regulations of the United States or the constitution or regulations of any state
or local government including, but not limited to state or federal securities
laws, claims of fraud, breach of fiduciary duty, the Texas Deceptive Trade
Practices Act (or any similar act in any other state), or the Racketeer
Influenced and Corrupt Organizations Act occurring on or before the effective
date of this agreement and release.
In addition, you covenant and agree to keep the terms, conditions and
circumstances of your resignation from the Company, including this letter,
confidential and to not aid, abet, assist or render assistance in any form to
any person or entity pursuing, or that may in the future pursue, any claim
against the Company or its directors, officers, stockholders, employees, agents,
attorneys or affiliates of any nature unless required to do by law.
This letter is intended by you and the Company to be a legally valid
and binding agreement, to be construed in accordance with the laws of the State
of Texas. You and we agree that this letter is not to be construed as an
admission of liability by the Company in any respect, and the Company expressly
denies any liability to you whatsoever. You and we agree that any legal
proceedings instituted hereunder shall be conducted and litigated in the State
of Texas and the parties hereto consent to the jurisdiction and venue in the
courts of Dallas County, Texas. Nothing herein shall in any way limit or abridge
the Company's right to seek injunctive or similar equitable relief for the
enforcement of its rights hereunder. This letter sets forth the entire agreement
between you and the Company and its directors, officers, employees, agents,
attorneys and representatives relating to the separation of your employment from
the Company and fully supersedes any and all prior agreements or understandings
between the parties hereto, including the January 26, 1996 Employment Agreement
executed by you and the Company, pertaining to the subject matter hereof.
Very truly yours,
Gables Residential Trust
By: /s/ John Rippel
--------------------------
John Rippel
<PAGE> 5
Mr. Perry ("Peter") M. Parrott,Jr.
November 11, 1996
Page 5
The law requires that you be advised and you are hereby advised to
consult with an attorney prior to executing this agreement and release. If you
accept the terms of this agreement and release, it must be signed by you and
returned to Mary Cheddie on or before twenty-one (21) days from your receipt of
this agreement and release. After the execution of this agreement and release,
you have a period of seven (7) days in which you may revoke this agreement and
release. Notification of revocation should be in writing and returned to Mary
Cheddie. The effective date of this agreement and release is eight (8) days
after you execute this agreement and release.
I have read and understood the forgoing agreement and release, have been advised
to and have had the opportunity to discuss it with anyone I desire, including an
attorney of my own choice, agree to its terms, acknowledge receipt of a copy of
same, and the sufficiency of the payments recited therein, and sign this
agreement and release voluntarily.
/s/ Perry M. Parrott, Jr.
----------------------------------
Perry ("Peter") M. Parrott, Jr.
Dated: November 11, 1996
------------------------
<PAGE> 1
EXHIBIT 10.31
SWAP TRANSACTION
DATE: August 21, 1996
TO: Mr. Marvin Banks
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Phone: (770)438-5501
Fax: (770)435-7434
FROM: First Union National Bank of Georgia
SUBJECT: Interest Rate Swap
REF. NO.: 30108/37062
- --------------------------------------------------------------------------------
Dear Mr. Banks:
The purpose of this letter agreement is to set forth the terms and
conditions of the Swap Transaction entered into between Gables Realty Limited
Partnership ("Counterparty") and First Union National Bank of Georgia ("First
Union") on the Trade Date specified below (the "Transaction"). This letter
agreement constitutes a "Confirmation" as referred to in the Master Agreement
specified below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap and Derivatives Association,
Inc.) (the "Definitions"), are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
If you and we are parties to a Master Agreement that sets forth the
general terms and conditions applicable to Swap Transactions between us (a "Swap
Agreement"), this Confirmation supplements, forms a part of, and is subject to,
such Swap Agreement. If you and we are not yet parties to a Swap Agreement, this
Confirmation will supplement, form a part of, and be subject to, a Swap
Agreement upon its execution by you and us. All provisions contained or
incorporated by reference in such Swap Agreement shall govern this Confirmation
except as expressly modified below. In addition, if a Swap Agreement has not
been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
<PAGE> 2
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in (or refrained from engaging in ) substantial
financial transactions and has taken other material actions in reliance upon the
parties' entry into the Swap Transaction to which this Confirmation relates on
the terms and conditions set forth below.
If on any Calculation Date (or if, for any Calculation Period, as
applicable), (a) the product of the Fixed Rate and the Fixed Rate Day Count
Fraction exceeds the product of the Floating Rate (plus or minus the Spread, if
applicable) and the Floating Rate Day Count Fraction, the Fixed Rate Payer shall
pay the Floating Rate Payer, on the relevant Payment Date, an amount equal to
such excess multiplied by the Notional amount, (b) the product of the Floating
Rate (plus or minus the spread, if applicable) and the Floating Rate Day Count
Fraction exceeds the product of the Fixed Rate and the Fixed Rate Day Count
Fraction, the Floating Rate Payer shall pay the Fixed Rate Payer, on the
relevant Payment Date, an amount equal to such excess multiplied by the Notional
Amount, or (c) the Product of the Fixed Rate and the Fixed Rate Day Count
Fraction is equal to the product of the Floating Rate (plus or minus the spread,
if applicable) and the Floating Rate Day Count Fraction, no amount shall be due
by either side on the relevant Payment Date. Each party's obligation to make
payment of any amount which would otherwise be due hereunder on a Payment Date
shall be automatically satisfied and discharged by payment of the net amount due
on such Payment Date, determined in the forgoing manner.
This confirmation will be governed by and construed in accordance with
the laws of the State of New York, without reference to choice of law doctrine,
provided that this provision will be superseded by any choice of law provisions
contained in the Swap Agreement.
2. The terms of the particular Transaction to which this
Confirmation relates are as follows:
<TABLE>
<S> <C>
Transaction Type: Interest Rate Swap
Trade Date: August 20, 1996
Effective Date: August 30, 1996
Termination Date: August 30, 1999, subject
to adjustment in accordance
with the Modified Following
Business Day Convention,
provided that if the
Floating Rate Option (of
the Designated Maturity,
but disregarding any
Spread) for a Calculation
Period is equal to or
greater than 6.26%, the
Termination Date shall be
the first day of that
Calculation Period.
Notional Amount: $44,530,000.00
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer Payment Dates: Monthly on the 30th day of
each month or the last
day in February commencing
September 30, 1996,
through and including the
Termination Date, subject
to the Modified
Following Business Day
Convention.
Fixed Rate: 5.3475%
Fixed Rate Day Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: First Union
Floating Rate Payer Payment Dates: Monthly on the 30th day of
each month or the last
day in February commencing
September 30, 1996,
through and including the
Termination Date, subject
to the Modified Following
Business Day Convention.
Floating Rate for Initial
Calculation
Period: To be determined 2 Business
Days prior to the
Effective Date.
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 Month
Spread: None
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Monthly on the 30th
day of each month or the last
day in February commencing
August 30, 1996, through and
including July 30, 1999, subject
to the Modified Following
Business Day Convention.
Compounding: Inapplicable
Calculation Agent: First Union
Business Days: New York
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Payments to First Union: First Union Charlotte
Capital Markets
Attention: Derivatives Desk
Fed. ABA No. 053000219
Ref. No.: 30108/37062
Payments to Counterparty: Please forward instruction to FUNB-NC.
No payments will be made prior to receipt of
Counterparty's payment instructions.
First Union Settlements: Jay Saunders
Derivatives Desk
Ph. No.: 704-383-1187
Fax No.: 701-383-9139
First Union Address: One First Union Center
301 South College Street DC4
Charlotte, NC 28288-0601
</TABLE>
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation enclosed for that purpose and
returning it to us.
Very truly yours,
FIRST UNION NATIONAL BANK
OF GEORGIA
By: /s/ Joseph M. Nenichka
--------------------------------
Name: Joseph M. Nenichka
Title: Vice President
Date: 8/21/96
By: /s/ Delene M. Travella
--------------------------------
Name: Delene M. Travella
Title: Assistant Vice President
Date: 8/21/96
Accepted and confirmed as of the
date first above written:
GABLES REALTY LIMITED PARTNERSHIP
By: /s/ Marvin R. Banks, Jr.
------------------------
Name: Marvin R. Banks, Jr.
Title: Vice President
Date: 8/23/96
<PAGE> 1
EXHIBIT 10.37
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
dated as of the 22nd day of November, 1996 among GABLES REALTY LIMITED
PARTNERSHIP (the "Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the
"Agent") and WACHOVIA BANK OF GEORGIA, N.A., FIRST UNION NATIONAL BANK OF
GEORGIA, GUARANTY FEDERAL BANK, F.S.B., AMSOUTH BANK OF ALABAMA and COMMERZBANK
AG, ATLANTA AGENCY (collectively, the "Banks");
W I T N E S S E T H :
WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of the 28th day of March, 1996 (the
"Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Termination of Swing Loan Facility. The Swing Loan facility
contained in Section 2.01 (b) of the Credit Agreement is terminated, and all
references in the Credit Agreement to "Swing Loan", "Swing Loans", "Swing Loan
Borrowing" and "Swing Loan Note" hereby are deleted.
3. Amendment to Section 2.05(a). Section 2.05 (a) of the Credit
Agreement hereby is amended by (i) deleting the reference to "Level III" in the
provisio in clause (ii) and substituting therefor a reference to "Level IV"; and
(ii) deleting the table contained therein (the "Old Table") and substituting
therefor the following table (the "New Table"); provided, however, that the Old
Table shall continue to apply as to Euro-Dollar Loans in existence on the
effective date of this First Amendment, and the New Table shall apply only as to
Euro-Dollar Loans (including Refunding Loans) made on or after the effective
date of this First Amendment.
<PAGE> 2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Rating > BBB+ BBB BBB- <BBB-
-
or or or or
> Baa1 Baa2 Baa3 <Baa3
-
- -------------------------------------------------------------------------------
Applicable Margin 0.90 1.10 1.30 1.50
- -------------------------------------------------------------------------------
</TABLE>
4. Acknowledgment of Substitution of Eligible Property. The Borrower
has requested that, pursuant to Section 6.24(b) of the Credit Agreement, the
Eligible Property known as "Gables Towne Lake" in Austin, Texas be removed from
the Borrowing Base as an Eligible Property and property known as "Gables River
Oak" in Houston, Texas be substituted therefor. The Banks hereby approve the
Gables River Oaks property as an Eligible Property and part of the Borrowing
Base, subject, however, to satisfaction of the conditions contained in Section
6.24 (b) of the Credit Agreement.
5. Restatement of Representations and Warranties. The Borrower hereby
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Loan Documents as fully as if made
on the date hereof and with specific reference to this First Amendment and all
other loan documents executed and/or delivered in connection herewith.
6. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
7. Ratification. The Borrower hereby restates, ratified and reaffirms
each and every term, covenant and condition set forth in the Credit Agreement
and other Loan Documents effective as of the date hereof.
8. Counterparts. This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instruments.
9. Section References. Section titles and references used in this
First Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.
10. No Default. To induce the Agent and the Banks to enter into this
First Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the date
hereof, and after giving effect to the terms hereof, there exists (I) no Default
or Event of Default and (ii) no right of offset, defense, counterclaim, claim or
objection in favor of the Borrower arising out of or with respect to any of the
Loans or other obligations of the Borrower owed to the Banks under the Credit
Agreement.
2
<PAGE> 3
11. Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request in connection herewith to evidence
the amendments herein contained to the Borrower.
12. Governing Law. This First Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of Georgia.
13. Conditions Precedent. This First Amendment shall become effective
only upon execution and delivery (i) of this First Amendment by each of the
parties hereto, and (ii) of the Consent and Reaffirmation of Guarantors at the
end hereof by each of the Guarantors and (iii) payment to the Agent of the fees
and expenses payable pursuant to the letter agreement between the Agent and the
Borrower dated October 11, 1996.
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this First Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first
GABLES REALTY LIMITED PARTNERSHIP (SEAL)
By: Gables GP, Inc., its sole general partner
By: /s/ Marvin R. Banks, Jr.
------------------------------------------
Marvin R. Banks, Jr., Vice President
WACHOVIA BANK OF GEORGIA, N.A., (SEAL)
as Agent and as a Bank
By: /s/ Mary Hughes
------------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF GEORGIA
as a Bank (SEAL)
By: /s/ Larry Genter
------------------------------------------
Title: Vice President
GUARANTY FEDERAL BANK, F.S.B.,
as a Bank (SEAL)
By: /s/ Phyllis Milstead
------------------------------------------
Title: Vice President
3
<PAGE> 4
AMSOUTH BANK OF ALABAMA,
as a Bank (SEAL)
By: /s/ Dean H. Burgess
------------------------------------------
Title: Vice President
COMMERZBANK AG, ATLANTA AGENCY,
as a Bank
By: /s/ Andreas Bremer
------------------------------------------
Title: SVP & Manager
By: /s/ Mark Wortmann
------------------------------------------
Title: Assistant Vice President
4
<PAGE> 5
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing First
Amendment to Credit Agreement (the "First Amendment"), (ii) parties thereto and
(iii) reaffirms all of its obligations and covenants under the Guaranty
Agreement dated as of March 28, 1996 executed by it, and agrees that none of
such obligations and covenants shall be affected by the execution and delivery
of the First Amendment. In addition, (a) the General Partner certifies that it
is authorized to execute the First Amendment on behalf of the Borrower and to
bind the Borrower thereby, that it is authorized to execute this Consent and
Reaffirmation of Guarantors on behalf of Gables-Tennessee Properties and to bind
Gables-Tennessee Properties hereby, that since March 28, 1996, there has been no
amendment to the Borrower's Certificate of Limited Partnership, the Borrowers
Partnership Agreement, the General Partner's Certificate of Incorporation or the
General Partner's Bylaws, and that each of such documents, as in effect on March
28, 1996, continues in full force and effect as of the date hereof and that
since March 28, 1996, there has been no amendment to its Partnership Agreement
and that its Partnership Agreement, as in effect on March 28, 1996 continues in
full force and effect as of the date hereof; and (b) GBP hereby certifies that
since March 28, 1996, there has been no amendment to its Declaration of Trust of
its Bylaws, except as indicated in the Secretary's Certificate to the Agent, and
that each of such documents, as in effect on March 28, 1996, and as amended as
indicated in such Secretary's Certificate, continues in full force and effect as
of the date hereof.
This Consent and Reaffirmation may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
GABLES GP, INC. (SEAL)
By: /s/ Marvin R. Banks, Jr.
----------------------------------
Marvin R. Banks, Jr.
Vice President
GABLES RESIDENTIAL TRUST (SEAL)
By: /s/ Marvin R. Banks, Jr.
----------------------------------
Marvin R. Banks, Jr.
Vice President
5
<PAGE> 6
GABLES-TENNESSEE PROPERTIES
By: Gables GP, Inc., its general
partner (SEAL)
By: /s/ Marvin R. Banks, Jr.
---------------------------------
Marvin R. Banks, Jr.,
Vice President
6
<PAGE> 1
EXHIBIT 10.38
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
dated as of the 18 day of March, 1997 among GABLES REALTY LIMITED
PARTNERSHIP (the "Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the
"Agent") and WACHOVIA BANK OF GEORGIA, N.A., FIRST UNION NATIONAL BANK OF
GEORGIA, GUARANTY FEDERAL BANK, F.S.B., AMSOUTH BANK OF ALABAMA and COMMERZBANK
AG, ATLANTA AGENCY (collectively, the "Banks");
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of the 28th day of March, 1996 and that
certain First Amendment to Credit Agreement, dated as of the 22nd day of
November, 1996 (collectively, the "Credit Agreement");
WHEREAS the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement shall
have the meaning assigned to such term in the Credit Agreement. Each reference
to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference contained in the Credit Agreement shall from and after the date
hereof refer to the Credit Agreement as amended hereby.
2. Amendment to Section 6.04. Section 6.04 of the
Credit Agreement hereby is deleted and the following is substituted therefor:
SECTION 6.04. Ratio of Total Debt to Total Assets.
<PAGE> 2
The ratio of Total Debt to Total Assets Value will
not at any time exceed 0.55 to 1.0.
3. Amendment to Section 6.24(b). Section 6.24(b) of the
Credit Agreement hereby is amended by (i) deleting the reference in the fifth
sentence thereof to "a Debt Rating of at least BBB or Baa2", and (ii)
substituting therefor "a Debt Rating of at least BBB- and Baa3".
4. Amendment to Section 6.28. Section 6.28 of the
Credit Agreement hereby is deleted and the following is substituted therefor:
SECTION 6.28. Ratio of Total Unencumbered Assets Value
to Unsecured Funded Debt. The ratio of Total
Unencumbered Assets Value to Unsecured Funded Debt will
not at any time be less than 1.75 to 1.00.
5. Amendment to Compliance Check List.
(a) Paragraph 2 of the Compliance Check List (Exhibit F to the
Credit Agreement), hereby is amended by (i) deleting the reference in the text
of Section 6.04 contained therein to "0.60 to 1.00" and substituting therefor
the reference "0.55 to 1.00" and (ii) deleting the last line of such paragraph
and substituting therefor the following:
Maximum Ratio < 0.55 to 1.00.
(b) Paragraph 10 of the Compliance Check List (Exhibit F to
the Credit Agreement) hereby is amended by (i) deleting the reference in the
text of Section 6.28 contained therein that to "1.50 to 1.00" and substituting
therefor the reference "1.75 to 1.00" and (ii) deleting the last line of such
paragraph and substituting therefor the following:
Minimum Ratio 1.75 to 1.00.
6. Restatement of Representations and Warranties. The
Borrower hereby restates and renews each and every representation and warranty
heretofore made by it in the Credit Agreement and the other Loan Documents as
fully as if made on the date hereof and with specific reference to this Second
Amendment and all other loan documents executed and/or delivered in connection
herewith.
7. Effect of Amendment. Except as set forth expressly
hereinabove, all terms of the Credit Agreement and the other Loan Documents
shall be and remain in full force and
2
<PAGE> 3
effect, and shall constitute the legal, valid, binding and enforceable
obligations of the Borrower. The amendments contained herein shall be deemed
to have prospective application only, unless otherwise specifically stated
herein.
8. Ratification. The Borrower hereby restates, ratifies
and reaffirms each and every term, covenant and condition set forth in the
Credit Agreement and the other Loan Documents effective as of the date hereof.
9. Counterparts. This Second Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
but one and the same instrument.
10. Section References. Section titles and references
used in this Second Amendment shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreements among the parties
hereto evidence hereby.
11. No Default. To induce the Agent and the Banks to
enter into this Second Amendment and to continue to make advances pursuant to
the Credit Agreement, the Borrower hereby acknowledges and agrees that, as of
the date hereof, and after giving effect to the terms hereof, there exists (i)
no Default or Event of Default and (ii) no right of offset, defense,
counterclaim, claim or objection in favor of the Borrower arising out of or
with respect to any of the Loans or other obligations of the Borrower owed to
the Banks under the Credit Agreement.
12. Further Assurances. The Borrower agrees to take such
further actions as the Agent shall reasonably request in connection herewith to
evidence the amendments herein contained to the Borrower.
13. Governing Law. This Second Amendment shall be
governed by, and construed and interpreted in accordance with, the laws
of the State of Georgia.
14. Conditions Precedent. This Second Amendment shall
become effective only upon execution and delivery of (i) this Second Amendment
by each of the parties hereto and (ii) the Consent and Reaffirmation of
Guarantors at the end hereof by each of the Guarantors.
3
<PAGE> 4
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Second Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
GABLES REALTY LIMITED PARTNERSHIP (SEAL)
By: Gables GP, Inc., its sole
general partner
By: /s/ Marvin R. Banks, Jr.
------------------------------------
Marvin R. Banks, Jr., Vice President
WACHOVIA BANK OF GEORGIA, N.A.,
As Agent and as a Bank (SEAL)
By: /s/ Mary F. Hughes
------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF GEORGIA,
as a Bank (SEAL)
By: /s/ Gary B. Butts
------------------------------------
Title: Senior Vice President
GUARANTY FEDERAL BANK, F.S.B.,
as a Bank (SEAL)
By: /s/ Phyllis Milstead
------------------------------------
Title: Vice President
AMSOUTH BANK OF ALABAMA,
as a Bank (SEAL)
By: /s/ Dean H. Burgess
------------------------------------
Title: Vice President
COMMERZBANK AG, ATLANTA AGENCY,
as a Bank (SEAL)
By: /s/ Andreas Bremer
------------------------------------
Title: SVP & Manager
By: /s/ Mark Wortmann
------------------------------------
Title: Assistant Vice President
4
<PAGE> 5
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
Second Amendment to Credit Agreement (the "Second Amendment"), (ii) consents to
the execution and delivery of the Second Amendment by the parties thereto and
(iii) reaffirms all of its obligations and covenants under the Guaranty
Agreement dated as of March 28, 1996 executed by it, and agrees that none of
such obligations and covenants shall be affected by the execution and delivery
of the Second Amendment. In addition, (a) the General Partner certifies that
it is authorized to execute the Second Amendment on behalf of the Borrower and
to bind the Borrower thereby, that it is authorized to execute this Consent and
Reaffirmation of Guarantors on behalf of Gables-Tennessee Properties and to
bind Gables-Tennessee Properties hereby, that since March 28, 1996, there has
been no amendment to the Borrower's Certificate of Limited Partnership, the
Borrower's Partnership Agreement, the General Partner's Certificate of
Incorporation or the General Partner's Bylaws, and that each of such documents,
as in effect on March 28, 1996, continues in full force and effect as of the
date hereof and that since March 28, 1996, there has been no amendment to its
Partnership Agreement and that its Partnership Agreement, as in effect on March
28, 1996 continues in full force and effect as of the date hereof; and (b) GBP
hereby certifies that since March 29, 1996, there has been no amendment to its
Declaration of Trust or its Bylaws, except as indicated in the Secretary's
Certificate to the Agent, and that each of such documents, as in effect on
March 28, 1996, and as amended as indicated in such Secretary's Certificate,
continues in full force and effect as of the date hereof.
This Consent and Reaffirmation may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
GABLES GP, INC. (SEAL)
By: /s/ Marvin R. Banks, Jr.
------------------------------------
Marvin R. Banks, Jr.,
Vice President
5
<PAGE> 6
GABLES RESIDENTIAL TRUST (SEAL)
By: /s/ MARVIN R. BANKS, JR.
---------------------------------
GABLES-TENNESSEE PROPERTIES
By: Gables GP, Inc., its general
partner (SEAL)
By: /s/ MARVIN R. BANKS, JR.
-----------------------------
Marvin R. Banks, Jr.,
Vice President
6
<PAGE> 1
EXHIBIT 10.39
$40,000,000
TERM LOAN CREDIT AGREEMENT
dated as of
November 20, 1996
among
GABLES REALTY LIMITED PARTNERSHIP
The Banks Listed Herein
and
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
TERM LOAN CREDIT AGREEMENT
<TABLE>
<CAPTION>
ARTICLE I
<S> <C> <C>
DEFINITIONS................................. 1
SECTION 1.01. Definitions....................................................... 1
SECTION 1.02. Accounting Terms and Determinations...............................19
SECTION 1.03. References........................................................20
SECTION 1.04. Use of Defined Terms..............................................20
SECTION 1.05. Terminology.......................................................20
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
<S> <C> <C>
THE CREDITS................................. 20
SECTION 2.01. Commitments to Lend...............................................20
SECTION 2.02. Method of Borrowing...............................................20
SECTION 2.03. Term Loan Notes...................................................22
SECTION 2.04. Maturity of Loans.................................................23
SECTION 2.05. Interest Rates....................................................23
SECTION 2.06. Fees..............................................................27
SECTION 2.07. Optional Prepayments..............................................27
SECTION 2.08. Mandatory Prepayments.............................................28
SECTION 2.09. General Provisions as to Payments.................................29
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 2.10. Computation of Interest and Fees..................................30
ARTICLE III
CONDITIONS TO FUNDING .......................30
SECTION 3.01. Conditions to Funding.............................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...............33
SECTION 4.01. Partnership or Corporate Existence and Power......................33
SECTION 4.02. Partnership or Corporate and Governmental
Authorization; No Contravention............................... 33
SECTION 4.03. Binding Effect....................................................33
SECTION 4.04. Financial and Property Information................................34
SECTION 4.05. No Litigation.....................................................34
SECTION 4.06. Compliance with ERISA.............................................34
SECTION 4.07. Compliance with Laws; Payment of Taxes............................35
SECTION 4.08. Subsidiaries......................................................35
SECTION 4.09. Investment Company Act............................................35
SECTION 4.10. Public Utility Holding Company Act................................35
SECTION 4.11. Ownership of Property.............................................36
SECTION 4.12. No Default........................................................36
SECTION 4.13. Full Disclosure...................................................36
SECTION 4.14. Environmental Matters.............................................36
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 4.15. Partner Interests and Capital Stock...............................37
SECTION 4.16. Margin Stock......................................................37
SECTION 4.17. Insolvency........................................................37
SECTION 4.18. Insurance.........................................................38
SECTION 4.19. Real Estate Investment Trust......................................38
SECTION 4.20. Debt of Initial Property Partnerships.............................38
ARTICLE V
COVENANTS.................................. 38
SECTION 5.01. Information.......................................................38
SECTION 5.02. Inspection of Property, Books and Records.........................40
SECTION 5.03. Total Secured Debt................................................41
SECTION 5.04. Ratio of Total Debt to Total Assets Value.........................41
SECTION 5.05. Interest Coverage.................................................41
SECTION 5.06. Restricted Payments...............................................41
SECTION 5.07. Loans or Advances.................................................41
SECTION 5.09. Investments.......................................................42
SECTION 5.10. Dissolution.......................................................42
SECTION 5.11. Consolidations, Mergers and Sales of Assets.......................43
SECTION 5.12. Use of Proceeds...................................................44
SECTION 5.13. Compliance with Laws; Payment of Taxes............................44
SECTION 5.14. Insurance.........................................................44
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 5.15. Change in Fiscal Year.............................................45
SECTION 5.16. Maintenance of Property; Principal Business;
Ownership of Certain Entities.................................. 45
SECTION 5.17. Environmental Notices.............................................45
SECTION 5.18. Environmental Matters.............................................45
SECTION 5.19. Environmental Release.............................................45
SECTION 5.20. Transactions with Affiliates......................................46
SECTION 5.21. Amendment of Other Agreements.....................................46
SECTION 5.22. Qualification as a Real Estate Investment
Trust; General Partner..........................................46
SECTION 5.24. Certain Provisions Regarding Escrowed
Mortgage Properties............................................47
SECTION 5.25. Minimum Payrate...................................................49
SECTION 5.26 Additional Guarantees; Debt of Certain
Entities........................................................49
SECTION 5.27 Maintenance of Existence..........................................49
SECTION 5.28 Ratio of Total Unencumbered Assets Value to
Unsecured Funded Debt...........................................49
ARTICLE VI
DEFAULTS.....................................49
SECTION 6.01. Events of Default.................................................50
SECTION 6.02. Notice of Default.................................................52
</TABLE>
ARTICLE VII
(iv)
<PAGE> 6
<TABLE>
<S> <C> <C>
THE AGENT.....................................52
SECTION 7.01. Appointment; Powers and Immunities................................53
SECTION 7.02. Reliance by Agent.................................................53
SECTION 7.03. Defaults..........................................................54
SECTION 7.04. Rights of Agent and its Affiliates as a Bank......................54
SECTION 7.05. Indemnification...................................................54
SECTION 7.06 Consequential Damages.............................................55
SECTION 7.07. Payee of Term Loan Note Treated as Owner..........................55
SECTION 7.08. Nonreliance on Agent and Other Banks..............................55
SECTION 7.09. Failure to Act....................................................56
SECTION 7.10. Resignation or Removal of Agent...................................56
SECTION 7.11 Agent's Right to Replace Non-Qualifying Bank.......................57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION.............................58
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair......................................................58
SECTION 8.02. Illegality........................................................58
SECTION 8.03. Increased Cost and Reduced Return.................................59
SECTION 8.04. Base Rate Loans Substituted for Affected Euro-
Dollar Loans....................................................60
SECTION 8.05. Compensation......................................................60
</TABLE>
(v)
<PAGE> 7
<TABLE>
<CAPTION>
ARTICLE IX
<S> <C> <C>
MISCELLANEOUS................................ 61
SECTION 9.01. Notices...........................................................61
SECTION 9.02. No Waivers........................................................61
SECTION 9.03. Expenses; Documentary Taxes.......................................62
SECTION 9.04. Indemnification...................................................62
SECTION 9.05. Sharing of Setoffs................................................62
SECTION 9.06. Amendments and Waivers............................................63
SECTION 9.07. No Margin Stock Collateral........................................64
SECTION 9.08. Successors and Assigns............................................64
SECTION 9.09. Confidentiality...................................................66
SECTION 9.10. Representation by Banks...........................................67
SECTION 9.11. Obligations Several...............................................67
SECTION 9.12. Georgia Law.......................................................67
SECTION 9.13. Severability......................................................67
SECTION 9.14. Interest..........................................................68
SECTION 9.15. Interpretation....................................................69
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction.....................69
SECTION 9.17. Counterparts......................................................69
SECTION 9.18. Source of Funds -- ERISA..........................................69
SECTION 9.19. Entire Agreement..................................................69
</TABLE>
(vi)
<PAGE> 8
<TABLE>
<S> <C> <C>
SECTION 9.20. More Restrictive Agreements.......................................70
EXHIBIT A Form of Term Loan Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Officer's Certificate
EXHIBIT I Form of Guaranty
EXHIBIT J Form of Contribution Agreement
EXHIBIT K Form of Non-Encumbrance Agreement
EXHIBIT L Form of Property Certificate
EXHIBIT M Form of Owner's Affidavit
EXHIBIT N Form of Agreement Regarding Environmental Activity
EXHIBIT O Form of Legal Opinion as to Initial/Substituted
Property
Schedule 4.08 Subsidiaries
</TABLE>
(vii)
<PAGE> 9
TERM LOAN CREDIT AGREEMENT
TERM LOAN CREDIT AGREEMENT dated as of November 20, 1996 among
GABLES REALTY LIMITED PARTNERSHIP, the BANKS listed on the signature pages
hereof and WACHOVIA BANK OF GEORGIA, N.A., as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment
hereto (except as herein otherwise expressly provided or unless the context
otherwise requires), have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).
"Affiliate" of any relevant Person means (i) any Person that
directly, or indirectly through one or more intermediaries, controls the
relevant Person (a "Controlling Person"), (ii) any Person (other than the
relevant Person or a Subsidiary of the relevant Person) which is controlled by
or is under common control with a Controlling Person, or (iii) any Person (other
than a Subsidiary of the relevant Person) of which the relevant Person owns,
directly or indirectly, 20% or more of the common stock or equivalent equity
interests. As used herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means Wachovia Bank of Georgia, N.A., a national
banking association organized under the laws of the United States of America, in
its capacity as agent for the Banks
<PAGE> 10
hereunder, and its successors and permitted assigns in such capacity.
"Agent's Letter Agreement" means that certain letter
agreement, dated as of October 11, 1996 between the Borrower and the Agent, but
only as it relates to certain fees from time to time payable by the Borrower to
the Agent.
"Agreement" means this Term Loan Credit Agreement, together
with all amendments and supplements hereto.
"Agreement Regarding Environmental Activity" means an
Agreement Regarding Environmental Activity in substantially the form of Exhibit
N, to be executed pursuant to Section 5.24(b) with respect to each Escrowed
Mortgage Property by the Borrower or any of the Guarantors which owns such
Escrowed Mortgage Property.
"Applicable Margin" has the meaning set forth in Section
2.05(a).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.08(c) in the form attached hereto as
Exhibit D.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as
having a Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate, or (ii)
three quarters of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate or the Federal
Funds Rate shall be effective on the date of each such change.
2
<PAGE> 11
"Base Rate Loan" means a Loan which bears or is to bear
interest at a rate based upon the Base Rate, and is to be made as a Base Rate
Loan pursuant to the applicable Notice of Borrowing, Section 2.02(f), or Article
VIII, as applicable.
"Bond Related Mortgage" means a Mortgage on a Multi-Family
Property which is granted (i) to an institutional trustee with respect to
revenue bonds or similar instruments, to which trustee a standby letter of
credit is issued under the Syndicated Revolving Credit Agreement as credit
enhancement for such revenue bonds or similar instruments, (ii) to secure
obligations which are payable with the proceeds of a draw under such letter of
credit.
"Borrower" means Gables Realty Limited Partnership, a Delaware
limited partnership, and its successors and its permitted assigns.
"Borrowing" means a borrowing hereunder consisting of the
initial advance of the Term Loans or the making of or conversion to Euro-Dollar
Loans or Base Rate Loans with respect to portions of the Term Loans pursuant
hereto. A Borrowing is a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar
Loans and a "Base Rate Borrowing" if such Loans are Base Rate Loans.
"Capital Stock" means any nonredeemable capital stock or
shares of beneficial ownership of GBP or any Consolidated Subsidiary (to the
extent issued to a Person other than GBP), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing
regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.
"Change in Control" shall mean the occurrence of any of the
following: (i) more than 50% of the outstanding voting common stock of GBP is
owned, directly or indirectly, by less than 6
3
<PAGE> 12
"individuals" (as provided in Section 542(a)(2) of the Code); or (ii) a majority
of the Persons comprising the Board of Directors of GBP shall during any 12
month period cease to serve on the Board of Directors of GBP for any reason
other than disability or death; or (iii) the Borrower or any Guarantor shall
fail to maintain their current partnership or corporate status, except as
permitted under Section 5.11 of this Agreement; or (iv) GBP shall fail to own at
least 65% of the partnership interests in the Borrower; or (v) the Borrower
shall fail to own at least 99% of the partnership interests in Gable-Tennessee
Properties and Candlewood-Indian Creek, L.P.
"Change of Law" shall have the meaning set forth in Section
8.02.
"Closing Certificate" has the meaning set forth in Section
3.01(e).
"Closing Date" means November 20, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof.
"Compliance Certificate" has the meaning set forth in Section
5.01(c).
"Consolidated Debt" means at any date the Debt of the Borrowe
and its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated Income Available for Debt Service" shall mean,
calculated on a consolidated basis, the sum of the Borrower's and its
Subsidiaries': (i) net income before minority interests and extraordinary items
in accordance with GAAP, plus (ii) depreciation and amortization, plus (iii)
losses from sales or joint ventures, plus (iv) increases in deferred taxes and
other non-cash items, minus (v) gains from sales or joint
4
<PAGE> 13
ventures, minus (vi) decreases in deferred taxes and other non-cash items, plus
(vii) interest expense and letter of credit fees on tax exempt bonds and plus
(viii) taxes (excluding ad valorem taxes).
"Consolidated Income Available for Distribution" means, in any
calendar year, the sum of the following for such calendar year, calculated on a
consolidated basis for the Borrower and its Subsidiaries: (i) Consolidated
Income Available for Debt Service, less (ii) interest expense and letter of
credit fees on tax exempt bonds (including fees payable under the Syndicated
Revolving Credit Agreement with respect to letters of credit issued thereunder),
and less (iii) taxes (excluding ad valorem taxes and taxes on gains described in
clause (v) of the definition of Consolidated Income Available for Debt Service).
"Consolidated Interest Expense" for any period means interest
in respect of Debt (excluding capitalized interest) of the Borrower or any of
its Consolidated Subsidiaries outstanding during such period.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Borrower in its consolidated financial statements
as of such date.
"Consolidated Total Assets" means, at any time, the total
assets of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis, as set forth or reflected on the most recent consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries, prepared in
accordance with GAAP.
"Contribution Agreement" means the Contribution Agreement of
even date herewith in substantially the form of Exhibit J to be executed by the
Borrower and the Guarantors.
"Construction Period Termination Date" means, with respect to
construction of Multi-Family Properties for Eligible Properties, the date which
is 3 months after the issuance of a permanent certificate of occupancy for the
last unit of such Multi-Family Property which is an Eligible Property.
5
<PAGE> 14
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Current Maturities of Long Term Debt" means all payments in
respect of Long Term Debt (other than Debt under this Agreement) that are
required to be made within one year from the date of determination, whether or
not the obligation to make such payments would constitute a current liability of
the obligor under GAAP, excluding, however, any such payment required to be made
on the ultimate maturity date of such Debt.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person to reimburse any bank or other Person
in respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid or to be paid under a letter of credit or
similar instrument, (viii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (ix) all
Debt of others Guaranteed by such Person.
"Debt Rating" means at any time whichever is the higher of the
rating of the Borrower's senior unsecured, unenhanced debt (or, if no such debt
exists, its issuer credit rating for debt of such type) by Moody's Investor
Service or Standard and Poor's (as such rating may change from time to time)
(provided, that in the event of a double or greater split rating, the rating
immediately above the lower rating shall apply), or if only one of them rates
the Borrower's senior unsecured, unenhanced debt, such rating
6
<PAGE> 15
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day,
the sum of 2% plus the interest rate (including the Applicable Margin) which is
applicable to such Loan hereunder.
"Designated Secured Loan Portfolios" means the portfolios
described below:
<TABLE>
<CAPTION>
Portfolio Total Commitment
--------- ----------------
<S> <C>
The Northwestern Mutual
Life Insurance Co. $ 53,000,000
Teachers Insurance
and Annuity
Association $130,689,000
Financial Security
Assurance Inc. $ 19,020,000
Providian Corporation $ 48,365,000
</TABLE>
"Designated Secured Loan Portfolios Payrate" means the Payrate
determined by reference only to the Net Operating Income relating to Properties
included in one of the Designated Secured Loan Portfolios.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized by law
to close (including, without limitation, any day which is a federal banking
holiday in the United States of America).
"Economically Occupied" means, with respect to any Eligible
Property or Multi-Family Property and in reference to a specified percentage,
that tenants paying rental obligations are
7
<PAGE> 16
occupying at least the specified percentage of the total number of units at such
Eligible Property or Multi-Family Property, as the case may be.
"Eligible Property" means a Multi-Family Property of the
Borrower or any of the Guarantors consisting of real estate as to which:
(i) unless the Escrowed Mortgages have been released pursuant to
Section 5.24(b) following a Debt Rating of at least BBB or Baa2, the Agent shall
have received and reviewed each of the following, each in form and substance
satisfactory to the Agent, in its reasonable business judgment: (a) an
environmental report; (b) a boundary survey or as-built survey with a site-plan,
as applicable; (c) hazard and builder's risk and liability insurance; (d) an
owner's title insurance policy, without a general survey exception or any
non-customary exclusion, supplemented by a "date down" or "nothing further"
certificate, issued by an insurer acceptable to the Agent, in its reasonable
business judgment; (e) a termite clearance report; (f) a Property Certificate;
(g) a Non-Encumbrance Agreement; (h) an Escrowed Mortgage; (i) an Agreement
Regarding Environmental Activity; (j) UCC-1 financing statements (and UCC-2 real
estate notices for Georgia properties); (k) an Owner's Affidavit; and (l) a
current legal opinion as to the Eligible Properties pursuant to Section 5.24(b)
in form and substance satisfactory to the Agent in its reasonable discretion,
the form attached hereto as Exhibit O being one such satisfactory form; and
statements relating to the physical condition or legal status of such
Multi-Family Property contained in the documents listed above in this paragraph
(i) remain true and accurate in all material respects;
(ii) there is no Mortgage in existence encumbering such Property, other
than an Escrowed Mortgage, such Multi-Family Property is subject to no other
Liens or encumbrances, other than Permitted Encumbrances, and there is no
agreement with any other creditor which would restrict or limit the right of the
Borrower or the Guarantor which owns such Multi-Family Property to execute and
deposit with the Agent an Escrowed Mortgage, or the right of the Agent to record
such Escrowed Mortgage upon the occurrence of an Event of Default;
8
<PAGE> 17
(iii) each Multi-Family Property for which the Construction Period
Termination Date has occurred is at least 80% Economically Occupied; and
(iv) the Required Banks have approved such Property as an Eligible
Property.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of the Borrower or any Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent, or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged noncompliance
with or liability under any Environmental Requirement, including without
limitation any complaints, citations, demands or requests from any Environmental
Authority or from any other person or entity for correction of any violation of
any Environmental Requirement or any investigations concerning any violation of
any Environmental Requirement.
9
<PAGE> 18
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated with any
Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to the Borrower,
any Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state and
local laws, ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.
"Escrowed Mortgage" means a Mortgage in form and substance
satisfactory to the Agent, in its reasonable business judgment, which has been
deposited with the Agent pursuant to Section 5.24(b), and which, effective upon
the occurrence of an Event of Default, conveys to the Agent, for the benefit of
the Banks, a first priority Lien on an Escrowed Mortgage Property, subject to no
Lien or other encumbrance, other than Permitted Encumbrances.
"Escrowed Mortgage Property" means (i) each Initial Property,
unless such Initial Property is replaced by a Substituted Property, and (ii)
each Substituted Property, unless such Substituted Property is replaced by
another Substituted Property, and in either such event it means such replacement
Substituted Property.
"Escrowed Mortgage Property Value" means, as of the date of
determination, with respect to each Escrowed Mortgage Property, the quotient of
(i) the Net Operating Income of such Escrowed Mortgage Property for the 12 month
period ending prior
10
<PAGE> 19
to the date of determination divided by (ii) an amount equal to 0.09.
"Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"Euro-Dollar Loan" means a Loan which bears or is to bear
interest at a rate based upon the Adjusted London Interbank Offered Rate, and to
be made as a Euro-Dollar Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Executive Officer" means any of the following officers of the
General Partner: the chairman, the president, the chief financial officer, the
chief accounting officer, any senior vice president and the secretary.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such day on
such transactions, as determined by the Agent.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
11
<PAGE> 20
"Fiscal Year" means any fiscal year of the Borrower.
"Fixed Rate Loan" means any Euro-Dollar Loan or, during the
Treasury Rate Period, all Term Loans outstanding.
"Funded Debt" means, without duplication, Long-Term Debt plus
Current Maturities of Long-Term Debt.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section 1.02, are to
be used in making the calculations for purposes of determining compliance with
the terms of this Agreement.
"GBP" means Gables Residential Trust, a Maryland trust.
"General Partner" means the sole general partner of the
Borrower (which, on the Closing Date, is Gables GP, Inc.) or, if there is more
than one such general partner, the managing general partner of the Borrower.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
12
<PAGE> 21
"Guaranty" means the Guaranty Agreement of even date herewith
in substantially the form of Exhibit I to be executed by the Guarantors,
unconditionally and jointly and severally Guaranteeing payment of the Term
Loans, the Term Loan Notes and all other obligations of the Borrower to the
Agent and the Banks hereunder, including without limitation all principal,
interest, fees, costs, and compensation and indemnification amounts.
"Guarantors" means any one or more or all of the following, as
the context shall require: (i) GBP, Gables GP, Inc., a Texas corporation,
Gables-Tennessee Properties, a Tennessee general partnership, Pin Oak Green, a
Texas general partnership, Pin Oak Park Apartments, a Texas general partnership;
(ii) any Person which owns a Substituted Property; (iii) any Significant
Subsidiary which becomes a Guarantor pursuant to Section 5.23; and (iv) any
other Subsidiary which elects to become a Guarantor pursuant to Section 5.23; in
each case subject to the provisions of the last sentence of Section 5.11.
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"Initial Properties" means, individually and collectively, as
the context shall require, the Multi-Family Properties owned by the Initial
Property Partnerships, located in Houston, Texas and known as "Pin Oak Green
Apartments" (which is
13
<PAGE> 22
owned by Pin Oak Green) and "Pin Oak Park Apartments" (which is owned by Pin Oak
Park Apartments), respectively.
"Initial Property Partnerships" means (i) Pin Oak Green, a
Texas general partnership, and (ii) Pin Oak Park Apartments, a Texas general
partnership.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third, sixth or twelfth
month thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period (subject to paragraph (c) below) which
would otherwise end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall, subject to paragraph (c) below, end on the last
Euro-Dollar Business Day of the appropriate subsequent calendar month;
and
(c) no Interest Period may be selected which begins before the
Maturity Date and would otherwise end after the Maturity Date.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (subject to paragraph (b) below) which
would otherwise end on a day which is not a Domestic Business Day shall
be extended to the next succeeding Domestic Business Day; and
14
<PAGE> 23
(b) no Interest Period which begins before the Maturity Date
and would otherwise end after the Maturity Date may be selected.
"Investment" means any investment in any Person, whether by
means of purchase or acquisition of obligations or securities of such Person,
capital contribution to such Person, loan or advance to such Person, making of a
time deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Lending Office" means, as to each Bank, its office located at
its address set forth on the signature pages hereof (or identified on the
signature pages hereof as its Lending Office) or such other office as such Bank
may hereafter designate as its Lending Office by notice to the Borrower and the
Agent.
"Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Term Loan, Base Rate Loan or Euro-Dollar Loan,
and "Loans" means Term Loans, Base Rate Loans or Euro-Dollar Loans, or any or
all of them, as the context shall require.
"Loan Documents" means this Agreement, the Term Loan Notes,
the Guaranty, the Contribution Agreement, the Non-Encumbrance Agreements, the
Property Certificates, the Owner's
15
<PAGE> 24
Affidavits, the Escrowed Mortgages, any other document evidencing, relating to
or securing the Term Loans, and any other document or instrument delivered from
time to time in connection with this Agreement, the Term Loan Notes or the Term
Loans, as such documents and instruments may be amended or supplemented from
time to time.
"London Interbank Offered Rate" has the meaning set forth i
Section 2.05(c).
"Long-Term Debt" means at any date any Consolidated Debt which
matures (or the maturity of which may at the option of the Borrower or any
Consolidated Subsidiary be extended such that it matures) more than one year
after such date.
"Margin Stock" means "margin stock" as defined in Regulations
G, T, U or X.
"Material Adverse Effect" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any of
(a) the financial condition, operations, business or properties of GBP, the
General Partner, the Borrower and its Consolidated Subsidiaries taken as a
whole, (b) the rights and remedies of the Agent or the Banks under the Loan
Documents, or the ability of the Borrower to perform its obligations under the
Loan Documents to which it is a party, as applicable, or (c) the legality,
validity or enforceability of any Loan Document.
"Maturity Date" means November 19, 2001; provided, that in the
event the Agent gives a notice requiring prepayment in full of the Term Loans
following a Change in Control pursuant to Section 2.08(a), the Maturity Date
shall be the date specified in such notice.
16
<PAGE> 25
"Mortgage" means a mortgage, deed to secure debt, deed of
trust or similar instrument.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Multi-Family Property" means residential apartment
communities and undeveloped land acquired for development thereof.
"Net Operating Income" means, for any Multi-Family Property,
the portion of Consolidated Income Available for Debt Service derived from such
Multi-Family Property (which calculation includes an assumed 4% for management
services).
"Non-Encumbrance Agreement" means a Non-Encumbrance Agreement
in substantially the form of Exhibit K, to be executed pursuant to Section
5.24(b) with respect to each Escrowed Mortgage Property by the Borrower or any
of the Guarantors which owns such Escrowed Mortgage Property.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Officer's Certificate" has the meaning set forth in Section
3.01(f).
"Operative Documents" means the Loan Documents, but excluding
each Escrowed Mortgage, Agreement Regarding Environmental Activity, UCC-1
financing statement and UCC-1 real estate notice delivered to the Agent pursuant
to Section 5.24(b), unless and until an Event of Default occurs, whereupon they
shall become Operative Documents.
"Operative Mortgage" means any Escrowed Mortgage, but only
from and after the occurrence of an Event of Default.
"Owner's Affidavit" means an owner's affidavit in
substantially the form of Exhibit M, to be executed pursuant to Section 5.24(b)
with respect to each Escrowed Mortgage Property
17
<PAGE> 26
by the Borrower or any of the Guarantors which owns such Escrowed Mortgage
Property.
"Participant" has the meaning set forth in Section 9.08(b).
"Partner Interests" means any partner interests in the
Borrower, whether limited or general.
"Payrate" means the quotient (expressed as a percentage) of:
(i) the sum of (x) the Net Operating Income for the 12 month
period ending on the last day of the month just ended prior to the date
of determination, from each Multi-Family Property which either was on
average at least 90% Economically Occupied during, or with respect to
which the Construction Period Termination Date occurred prior to the
commencement of, such 12 month period; provided, that if an Eligible
Property satisfies the criteria set forth in both this clause (x) and
in clause (y) below, it shall be included in the calculations only in
clause (y) below, plus (y) 400% of the Net Operating Income for the 3
month period ending on the last day of the month just ended prior to
the date of determination, from each Multi-Family Property with respect
to which the Construction Period Termination Date did not occur prior
to the commencement of the 12 month period ending on the last day of
the month just ended prior to the date of determination; divided by
(ii) the sum of (x) Funded Debt plus (y) the aggregate face
amount of all outstanding letters of credit (including, but not limited
to, the letters of credit issued pursuant to the Syndicated Revolving
Credit Facility).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means, with respect to any Eligible
Property (i) Liens incidental to the conduct of its
18
<PAGE> 27
business or the ownership of its assets which (x) do not secure Debt and (y) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business, and (ii) any
other Liens and encumbrances expressly consented to by the Agent.
"Performance Pricing Determination Date" has the meaning set
forth in Section 2.05(a).
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a member
of the Controlled Group for employees of any member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.
"Prepayment Premium" has the meaning given it in Section
2.07(d).
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia
lends at interest rates above and below the Prime Rate.
"Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever located.
"Property Certificate" means a Property Certificate in
substantially the form of Exhibit L, to be executed pursuant to
19
<PAGE> 28
Section 5.24(b) with respect to each Escrowed Mortgage Property by the Borrower
or any of the Guarantors which owns such Escrowed Mortgage Property.
"Rate Differential" has the meaning given it in Section
2.07(d).
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is at any time prior to the Termination Date
either (i) mandatorily redeemable for cash (by sinking fund or similar payments
or otherwise) or (ii) redeemable for cash at the option of the holder thereof.
"Redeployment Treasury Rate" has the meaning given in Section
2.07(d).
"Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing or a Base Rate Borrowing is being converted to a
Euro-Dollar Borrowing, to the extent that the proceeds thereof are used entirely
for the purpose of paying such maturing Loan or Loan being converted.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
20
<PAGE> 29
"Repayment Period" has the meaning given it in Section
2.07(d).
"Required Banks" means at any time Banks having at least 66
2/3% of the aggregate outstanding principal amount of the sum of the Term Loans.
"Restricted Payment" means (i) any distribution on any Partner
Interests (other than distributions consisting solely of additional Partner
Interests) or (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any Partner Interests or (b) any option,
warrant or other right to acquire Partner Interests.
"Significant Subsidiary" means any Subsidiary which either (x)
has assets which constitute more than 5% of Consolidated Total Assets at the end
of the most recent Fiscal Quarter, or (y) contributed more than 5% of
Consolidated Income Available for Debt Service during the most recent Fiscal
Quarter and the 3 Fiscal Quarters immediately preceding such Fiscal Quarter (or,
with respect to any Subsidiary which existed during the entire 4 Fiscal Quarter
period but was acquired by the Borrower during such period, which would have
contributed more than 5% of Consolidated Income Available for Debt Service
during such period had it been a Subsidiary for the entire period).
"Subsidiary" means (i) any corporation or other entity the
majority of the shares of the non-voting capital stock or other equivalent
ownership interests of which (except directors' qualifying shares) are at the
time directly or indirectly owned by the Borrower and/or GBP, and the majority
of the shares of the voting capital stock or other equivalent ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by the Borrower, GBP, the General Partner, another
Subsidiary, and/or one or more of Marcus E. Bromley, John T. Rippel, Marvin R.
Banks, Jr., C. Jordan Clark and William M. Hammond (or, in the event of death or
disability of any of the foregoing individuals, his respective legal
representative(s)), or such individuals' successors in office as an officer of
such Subsidiary or the Secretary of such
21
<PAGE> 30
Subsidiary, and (ii) any other entity (other than GBP or the Borrower) the
accounts of which are consolidated with the accounts of the Borrower.
"Substituted Property" means any Eligible Property which is
substituted for an Initial Property or another Substitute Property pursuant to
Section 5.24(b).
"Syndicated Revolving Credit Agreement" means the Credit
Agreement dated as of March 28, 1996 among the Borrower, the Banks parties
thereto and Wachovia, as Agent, as hereafter amended or supplemented from time
to time, pursuant to which the Banks thereunder made available to the Borrower a
revolving credit facility.
"Taxes" has the meaning set forth in Section 2.09(c).
"Term Loan Notes" means the promissory notes of the Borrower,
substantially in the form of Exhibit A, evidencing the obligation of the
Borrower to repay the Term Loans, together with all amendments, consolidations,
modifications, renewals and supplements thereto.
"Third Parties" means all lessees, sublessees, licensees and
other users of the Properties, excluding those users of the Properties in the
ordinary course of the Borrower's business and on a temporary basis.
"Total Assets Value" means the sum of:
(i) the quotient of (x) the Net Operating Income for the 12
month period ending on the last day of the month just ended prior to
the date of determination, from each Multi-Family Property which either
was on average at least 90% Economically Occupied during, or with
respect to which the Construction Period Termination Date occurred
prior to the commencement of, such 12 month period, divided by (y)
0.09; provided, that if an Eligible Property satisfies the criteria set
forth in both this clause(i) and in clause (ii) below, it shall be
included in the calculations only in clause (ii) below; plus
22
<PAGE> 31
(ii) an amount equal to the quotient of (x) 400% of the Net
Operating Income for the 3 month period ending on the last day of the
month just ended prior to the date of determination, from each
Multi-Family Property with respect to which the Construction Period
Termination Date did not occur prior to the commencement of the 12
month period ending on the last day of the month just ended prior to
the date of determination, divided by (y) 0.09; plus
(iii) an amount equal to 50% of the aggregate amount of cash
expenditures (including indirect costs internally allocated in
accordance with GAAP) as of the last day of the month just ended prior
to the date of determination on all Multi-Family Properties as to which
the Construction Period Termination Date has not occurred as of such
last day of the month just ended.
"Total Debt" shall mean the sum of (i) total liabilities of
the Borrower and the Guarantors, on a consolidated basis, plus (ii) the
aggregate amount of Debt Guaranteed by the Borrower, the Guarantors and the
other Subsidiaries (other than Guarantees which have been fully cash
collateralized), plus the face amount of all letters of credit for which any of
the Borrower or the Guarantors is the account party, determined at the end of
the Borrower's most recent Fiscal Quarter.
"Total Secured Debt" shall mean, without duplication, all Debt
of the Borrower and the Guarantors consisting of: (i) capitalized leases; (ii)
money borrowed or the deferred purchase price of real property which is also
secured by a Mortgage on any real property owned by the Borrower or any
Guarantor; or (iii) reimbursement obligations pertaining to any letter of
credit.
"Total Unencumbered Assets Value" means Total Assets Value,
but determined with reference only to Multi-Family Properties which are not
subject to a Mortgage, other than the Arbor Crest project, the Arbor Knoll
project and the Wood Arbor project.
23
<PAGE> 32
"Transferee" has the meaning set forth in Section 9.08(d).
"Treasury Rate" has the meaning set forth in Section 2.05(d).
"Treasury Rate Election" has the meaning set forth in Section
2.05(d).
"Treasury Rate Period" has the meaning set forth in Section
2.05(d).
"Unsecured Funded Debt" means any Funded Debt which is not
secured by a Mortgage on any Property, other than a Bond Related Mortgage.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association, and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of the non-voting capital stock or other equivalent ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower and/or GBP, and all of the shares of the voting
capital stock or other equivalent ownership interests of which are at the time
directly or indirectly owned by the Borrower, GBP, another Wholly Owned
Subsidiary, and/or one or more of Marcus E. Bromley, John T. Rippel, Marvin R.
Banks, Jr., C. Jordan Clark and William M. Hammond (or, in the event of death or
disability of any of the foregoing individuals, his respective legal
representative(s)), or such individuals' successors in office as an officer of
such Subsidiary or the Secretary of such Subsidiary.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared,
in accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the
24
<PAGE> 33
most recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks unless with respect to any such
change concurred in by the Borrower's independent public accountants or required
by GAAP, in determining compliance with any of the provisions of this Agreement
or any of the other Loan Documents: (i) the Borrower shall have objected to
determining such compliance on such basis at the time of delivery of such
financial statements, or (ii) the Required Banks shall so object in writing
within 30 days after the delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 5.01, shall mean the
financial statements referred to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections"
and other Subdivisions are references to articles, exhibits, schedules, sections
and other subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE II
THE CREDITS
25
<PAGE> 34
SECTION 2.01. Commitments to Lend. Each Bank severally agrees,
on the terms and conditions set forth herein, to make, ratably in proportion to
its respective Commitment, its share of the Term Loans to the Borrower. All of
the Term Loans shall be funded on the same day, and all Borrowings after the
initial advance of the Term Loans shall be Refunding Loans or shall constitute a
conversion of Base Rate Loans and Euro-Dollar Loans in connection with the
exercise of the Treasury Rate Election.
SECTION 2.02. Method of Borrowing. (a) With respect to the
initial advance of the Term Loans and thereafter until the Treasury Rate
Election, the Borrower shall give the Agent notice (a "Notice of Borrowing"),
which shall be substantially in the form of Exhibit E, prior to 10:00 A.M.
(Atlanta, Georgia time) on the same Domestic Business Day for each Base Rate
Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar
Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be
Base Rate Loans or Euro-Dollar Loans.
(iv) in the case of a Euro-Dollar Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's ratable
share of such Borrowing and such Notice of Borrowing, once received by the
Agent, shall not thereafter be revocable by the Borrower.
(c) Not later than 2:00 P.M. (Atlanta, Georgia time) on the
date of the initial advance of the Term Loans, each Bank shall (except as
provided in paragraph (d) of this Section) make
26
<PAGE> 35
available its ratable share of such advance, in Federal or other funds
immediately available in Atlanta, Georgia, to the Agent at its address
determined pursuant to Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address. Unless the Agent receives notice from a Bank, at the
Agent's address referred to in or specified pursuant to Section 9.01, no later
than 4:00 P.M. (local time at such address) on the Domestic Business Day before
the date of the initial advance of the Term Loans, stating that such Bank will
not make its ratable share of such advance, the Agent shall be entitled to
assume that such Bank will make its ratable share of such advance and, in
reliance on such assumption, the Agent may (but shall not be obligated to) make
available such Bank's ratable share of such advance to the Borrower for the
account of such Bank. If the Agent makes such Bank's ratable share available to
the Borrower as provided above and such Bank does not in fact make its ratable
share of such advance available on such date, the Agent shall be entitled to
recover such Bank's ratable share from such Bank or the Borrower (and for such
purpose shall be entitled to charge such amount to any account of the Borrower
maintained with the Agent), together with interest thereon for each day during
the period from the date of such advance until such sum shall be paid in full at
a rate per annum equal to the rate at which the Agent determines that it
obtained (or could have obtained) overnight Federal funds to cover such amount
for each such day during such period, provided that (i) any such payment by the
Borrower of such Bank's ratable share and interest thereon shall be without
prejudice to any rights that the Borrower may have against such Bank and (ii)
until such Bank has paid its ratable share of such advance together with
interest pursuant to the foregoing, it will have no interest in or rights with
respect to such advance for any purpose hereunder. If the Agent does not
exercise its option to advance funds for the account of such Bank, it shall
forthwith notify the Borrower of such decision.
(d) All Loans other than the initial advance of the Term Loans
shall be made as Refunding Loans.
27
<PAGE> 36
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived, and all Refunding Loans shall be made as Base Rate Loans
(but shall bear interest at the Default Rate, if applicable).
(f) In the event that a Notice of Borrowing fails to specify
whether the Loans comprising such Borrowing are to be Base Rate Loans or
Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower
is otherwise entitled under this Agreement to repay any Loans maturing at the
end of an Interest Period applicable thereto with the proceeds of a new
Borrowing, and the Borrower fails to repay such Loans using its own moneys and
fails to give a Notice of Borrowing in connection with such new Borrowing, a new
Borrowing shall be deemed to be made on the date such Loans mature in an amount
equal to the principal amount of the Loans so maturing, and the Loans comprising
such new Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained
herein, there shall not be more than 4 Euro-Dollar Borrowings outstanding at any
given time.
SECTION 2.03. Term Loan Notes. (a) The Term Loans of each Bank
shall be evidenced by a single Term Loan Note payable to the order of such Bank
for the account of its Lending Office in an amount equal to the original
principal amount of such Bank's Commitment.
(b) Upon receipt of each Bank's Term Loan Note pursuant to
Section 3.01, the Agent shall deliver such Term Loan Note to such Bank. Each
Bank shall record, and prior to any transfer of its Term Loan Note shall endorse
on the schedules forming a part thereof appropriate notations to evidence, the
date, amount and maturity of, and effective interest rate for, each Loan made by
it, the date and amount of each payment of principal made by the Borrower with
respect thereto, and such schedules of each such Bank's Term Loan Note shall
constitute rebuttable presumptive evidence of the respective principal amounts
owing and unpaid on such Bank's Term Loan Note; provided
28
<PAGE> 37
that the failure of any Bank to make, or any error in making, any such
recordation or endorsement shall not affect the obligation of the Borrower
hereunder or under the Term Loan Notes or the ability of any Bank to assign its
Term Loan Note. Each Bank is hereby irrevocably authorized by the Borrower so to
endorse its Term Loan Note and to attach to and make a part of any Term Loan
Note a continuation of any such schedule as and when required.
(c) In the event of loss, theft, destruction, total or partial
obliteration, mutilation or inappropriate cancellation of a Term Loan Note, the
Borrower will execute and deliver, in lieu thereof, a replacement Term Loan Note
identical in form and substance to such Term Loan Note and dated as of the date
of such Term Loan Note.
SECTION 2.04. Maturity of Loans. (a) Each Loan included in any
Borrowing shall mature, and the principal amount thereof and interest thereon
shall be due and payable, on the last day of the Interest Period applicable to
such Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal
amount of the Term Loans, together with all accrued but unpaid interest thereon,
if any, shall be due and payable on the Maturity Date.
SECTION 2.05. Interest Rates. (a) "Applicable Margin" means
(i) for the period commencing on the Closing Date to and including the first
Performance Pricing Determination Date, (x) for any Base Rate Loan, (0.25)%, and
(y) for any Euro-Dollar Loan, 1.25%; and (ii) from and after the first
Performance Pricing Determination Date, (x) for any Base Rate Loan, (0.25)% (y)
for each Euro-Dollar Loan, the percentage determined on each Performance Pricing
Determination Date by reference to the applicable table set forth below as to
the Applicable Margin for Euro-Dollar Loans and the Debt Rating for the
quarterly or annual period ending immediately prior to such Performance Pricing
Determination Date, and (z) during the Treasury Rate Period, the percentage
determined on each Performance Pricing Determination Date by reference to the
applicable table set forth below as to the Applicable Margin during the Treasury
Rate Period and
29
<PAGE> 38
the Debt Rating for the quarterly or annual period ending immediately prior to
such Performance Pricing Determination Date; provided,
30
<PAGE> 39
that if there is no Debt Rating, the Applicable Margin for Euro-Dollar Loans and
during the Treasury Rate Period shall be based upon Level III of the applicable
table below.
<TABLE>
<CAPTION>
=======================================================================
Level Level Level
I II III
=======================================================================
<S> <C> <C> <C>
Debt Rating =>BBB+ <BBB+ <=BBB-
and
or >BBB- or
=>Baa1 or <=Baa3
<Baa1
and
>Baa3
- -----------------------------------------------------------------------
Applicable
Margin for
Euro-Dollar
Loans 0.90 1.10 1.25
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
=======================================================================
Level Level Level
I II III
=======================================================================
<S> <C> <C> <C>
Debt Rating =>BBB+ <BBB+ <BBB-
and
or =>BBB- or
=>Baa1 or <Baa3
<Baa1
and
=>Baa3
- -----------------------------------------------------------------------
Applicable
Margin during
Treasury Rate
Period 1.15 1.15 1.25
=======================================================================
</TABLE>
31
<PAGE> 40
In determining the amounts to be paid by the Borrower pursuant to
Sections 2.05(c) and (d), the Borrower and the Banks shall refer to the
Borrower's Debt Rating from time to time. For purposes hereof, "Performance
Pricing Determination Date" shall mean each date on which the Debt Rating
changes. Each change in interest as a result of a change in Debt Rating shall be
effective only for Refunding Loans which are made on or after the relevant
Performance Pricing Determination Date. All determinations hereunder shall be
made by the Agent unless the Required Banks or the Borrower shall object to any
such determination. The Borrower shall promptly notify the Agent of any change
in the Debt Rating.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day less the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus the
applicable Adjusted London Interbank Offered Rate for such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than 3 months, at intervals of 3 months after
the first day thereof. Any overdue principal of and, to the extent permitted by
law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London
32
<PAGE> 41
Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the
rate per annum determined on the basis of the offered rate for deposits in
Dollars of amounts equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such Interest Period, which
rates appear on Telerate Page 3750 effective as of 11:00 A.M., London time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period,
provided that if no such offered rates appear on such page, the "London
Interbank Offered Rate" for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted
by not less than 2 major banks in New York City, selected by the Agent, at
approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, for deposits in Dollars offered by
leading European banks for a period comparable to such Interest Period in an
amount equal or comparable to the principal amount of such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
London Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
(d) So long as no Default or Event of Default is in existence,
the Borrower shall have the right to elect (the "Treasury Rate Election"), on a
one-time basis, to have all
33
<PAGE> 42
interest accrue, from the effective date of the Treasury Rate Election to the
Maturity Date (the "Treasury Rate Period") (but not for any shorter period), on
all (but not less than all) of the aggregate principal amount outstanding from
time to time of the Term Loans at a rate equal to the Treasury Rate plus the
Applicable Margin. The Treasury Rate Election shall be made by written notice
sent by facsimile transmission to the Agent (with a copy to the Banks) 5
Domestic Business Days prior to the effective date of the Treasury Rate
Election. On the effective date of the Treasury Rate Election, all accrued and
unpaid interest on all outstanding Base Rate Loans and Euro-Dollar Loans shall
be paid in full plus, in the event that such effective date is not the last day
of the Interest Period with respect to any Euro-Dollar Loans, such amount as may
be payable with respect to such Euro-Dollar Loans pursuant to Section 8.05(a).
During the Treasury Rate Period, interest shall be payable on the principal
amount outstanding on the Term Loans monthly in arrears on the first Domestic
Business Day of each month, and the option to elect a Euro-Dollar Loan or a Base
Rate Loan shall be terminated. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Euro-Dollar Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
"Treasury Rate" means a rate per annum equal to the sum of:
(i) the prevailing U.S. Treasury Rate as defined on page 500 of the
Telerate Screen at 11:00 A.M., Atlanta time, on the date on which the Agent
receives the foregoing notice of the Treasury Rate Election, for a period
comparable to the Treasury Rate Period; plus
(ii) any positive or negative amount, as the case may be, obtained by
subtracting (x) the corresponding ask side of the 5 year swap spread as quoted
on page 19901 of the Telerate Screen at 11:00 A.M., Atlanta time, on the Closing
Date from (y) the sum of (1) the corresponding ask side of the swap spread as
quoted on page 19901 of the Telerate Screen at 11:00 A.M., Atlanta time, for the
Treasury Rate Period, on the date on which the Agent receives the foregoing
notice of the Treasury Rate Election, plus
34
<PAGE> 43
(2) any additional swap cost, not to exceed 0.005% per annum up to a maximum
additional swap cost of 0.02%, determined by the Agent on the date on which the
Agent receives the foregoing notice of the Treasury Rate Election and notified
to the Borrower, of obtaining an interest rate swap due to a change in
counterparty risk since the Closing Date; provided, however, that if the Agent
determines that a source for determining the Treasury Rate and related swap
spread other than the Telerate Screen would more accurately reflect the cost of
funds, the Agent will so notify the Borrower, or if the Borrower requests that
another source be used because of it has been notified of an additional swap
cost pursuant to clause (ii)(y)(2) above, in either case, the Agent will attempt
to identify a different source, and if a different source has been approved by
the Borrower and each of the Banks, then such different source shall instead be
used in determing the Treasury Rate pursuant to the foregoing.
(e) The Agent shall determine each interest rate applicable to
the Loans hereunder and the Treasury Rate. The Agent shall give prompt notice to
the Borrower and the Banks by telecopier of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.
(f) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Loans (and, to the extent
permitted by applicable law, all accrued interest thereon) may, at the election
of the Required Banks, bear interest at the Default Rate.
SECTION 2.06. Fees. The Borrower shall pay to the Agent, for
the account and sole benefit of the Agent, such fees and other amounts at such
times as set forth in the Agent's Letter Agreement.
SECTION 2.07. Optional Prepayments. (a) The Borrower may, upon
at least 2 Domestic Business Days' notice to the Agent, prepay any Euro-Dollar
Borrowing in whole at any time, or from time to time in part in amounts
aggregating at least $3,000,000 or any larger integral multiple of $500,000, by
paying the
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principal amount to be prepaid together with accrued interest thereon to the
date of prepayment, plus the amount of compensation determined to be due
pursuant to Section 8.05, if such prepayment is not made on the last of an
Interest Period. Each such optional prepayment shall be applied to prepay
ratably the Euro-Dollar Loans of the several Banks included in such Euro-Dollar
Borrowing.
(b) The Borrower may, upon at least 1 Domestic Business Days'
notice to the Agent, prepay any Base Rate Borrowing in whole at any time, or
from time to time in part in amounts aggregating at least $ 3,000,000 or any
larger integral multiple of $500,000 (but with no minimum amount as to the Swing
Loans), by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment shall
be applied to prepay ratably the Base Rate Loans of the several Banks included
in such Base Rate Borrowing.
(c) During the Treasury Rate Period, the Borrower may, upon at
least 4 Domestic Business Days' notice to the Agent, prepay the Term Loans in
whole at any time, or from time to time in part in amounts aggregating at least
$3,000,000 or any larger integral multiple of $500,000, by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment, plus the amount of the Prepayment Premium. Each such optional
prepayment shall be applied to prepay ratably the Term Loans of the several
Banks.
The "Prepayment Premium" shall be an amount determined
pursuant to the following formula:
1.0
PP = PA x RD x RP x ----------------
(RTR x RP) + 1.0
where: PP = Prepayment Premium
PA = Prepayment Amount
RD = Rate Differential
RP = Repayment Period
RTR = Redeployment Treasury Rate
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"Prepayment Amount" means the principal amount of the
prepayment.
"Rate Differential" means the excess, if any, of: (i) the
Treasury Rate; over (ii) the Redeployment Treasury Rate.
"Repayment Period means the quotient of (i) the number of
days remaining from the date of the prepayment to the Maturity Date, divided by
(ii) 365.
"Redeployment Treasury Rate" means the rate per annum equal to
the sum of (i) the prevailing U.S. Treasury Rate as defined on page 500 of the
Telerate Screen at 11:00 A.M., Atlanta time, on the effective date of the
prepayment, for a period comparable to the Repayment Period, plus (ii) the
difference, if any, between (x) the amount determined pursuant to clause (ii) of
the definition of Treasury Rate in connection with the determination of the
Treasury Rate, and (y) the corresponding ask side of the swap spread as quoted
on page 19901 of the Telerate Screen at 11:00 A.M., Atlanta time, for the
Treasury Rate Period, on the effective date of the prepayment; provided,
however, that if a source different than the Telerate Screen was used for
determining the Treasury Rate and the related swap spread in connection with the
Treasury Rate Election pursuant to the proviso at the end of the definition of
Treasury Rate, such different source shall be used in determining the
Redeployment Treasury Rate pursuant to the foregoing.
(e) Upon receipt of a notice of prepayment pursuant to this
Section 2.07, the Agent shall promptly notify each Ba nk of the contents thereof
and of such Bank's ratable share of such prepayment and such notice, once
received by the Agent, shall not thereafter be revocable by the Borrower.
SECTION 2.08. Mandatory Prepayments. (a) In the event of a
Change in Control, the Agent (acting at the direction of the Required Banks) may
require prepayment of the Term Loans (including all outstanding principal and
accrued and unpaid interest and fees) on a date specified in a notice to the
Borrower, which date must be at least 3 Domestic Business Days
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following the date of such notice, and (ii) shall constitute the Maturity Date
for all purposes hereunder.
(b) Each such payment or prepayment under paragraph (a) above
shall be applied ratably to the Loans of the Banks outstanding on the date of
prepayment.
SECTION 2.09. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of fees hereunder, not later than 1:00 P.M. (Atlanta, Georgia time) on the
date when due, in Federal or other funds immediately available in Atlanta,
Georgia, to the Agent at its address referred to in Section 9.01. The Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks.
(b) Whenever any payment of principal of, or interest on, the
Base Rate Loans or, during the Treasury Rate Period, the Term Loans, or of fees
hereunder shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic Business
Day. Whenever any payment of principal of or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day.
(c) All payments of principal, interest and fees and all other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any tax, imposts, levies, duties, deductions, or withholdings of any
nature now or at anytime hereafter imposed by any governmental authority or by
any taxing authority thereof or therein excluding in the case of each Bank,
taxes imposed on or measured by its net income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Bank is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of
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<PAGE> 47
such Bank's applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, imposts, levies, duties, deductions or withholdings of
any nature being "Taxes"). In the event that the Borrower is required by
applicable law to make any such withholding or deduction of Taxes with respect
to any Loan or fee or other amount, the Borrower shall pay such deduction or
withholding to the applicable taxing authority, shall promptly furnish to any
Bank in respect of which such deduction or withholding is made all receipts and
other documents evidencing such payment and shall pay to such Bank additional
amounts as may be necessary in order that the amount received by such Bank after
the required withholding or other payment shall equal the amount such Bank would
have received had no such withholding or other payment been made.
Each Bank which is not organized under the laws of the United
States or any state thereof agrees, as soon as practicable after receipt by it
of a request by the Borrower to do so, to file all appropriate forms and take
other appropriate action to obtain a certificate or other appropriate document
from the appropriate governmental authority in the jurisdiction imposing the
relevant Taxes, establishing that it is entitled to receive payments of
principal and interest under this Agreement and the Term Loan Notes without
deduction and free from withholding of any Taxes imposed by such jurisdiction;
provided that if it is unable, for any reason, to establish such exemption, or
to file such forms and, in any event, during such period of time as such request
for exemption is pending, the Borrower shall nonetheless remain obligated under
the terms of the immediately preceding paragraph.
In the event any Bank receives a refund of any Taxes paid by
the Borrower pursuant to this Section 2.09(c), it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided that if at any
time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower and the
Banks contained in this
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Section 2.09(c) shall be applicable with respect to any Participant, Assignee or
other Transferee, and any calculations required by such provisions (i) shall be
made based upon the circumstances of such Participant, Assignee or other
Transferee, and (ii) constitute a continuing agreement and shall survive the
termination of this Agreement and the payment in full or cancellation of the
Term Loan Notes.
SECTION 2.10. Computation of Interest and Fees. Interest on
Base Rate Loans and interest during the Treasury Rate Period shall be computed
on the basis of a year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last day). Interest on
Euro-Dollar Loans shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed, calculated as to each Interest Period
from and including the first day thereof to but excluding the last day thereof.
Commitment fees and any other fees payable hereunder shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
ARTICLE III
CONDITIONS TO FUNDING
SECTION 3.01. Conditions to Funding. The obligation of each
Bank to make the Term Loans is subject to the satisfaction of the conditions set
forth in this Section 3.01 and receipt by the Agent of the documents described
in paragraphs (a) through (h) below, inclusive (as to the documents described in
paragraphs (a),(c), (d) and (e) below, in sufficient number of counterparts for
delivery of a counterpart to each Bank and retention of one counterpart by the
Agent):
(a) from each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a
facsimile transmission of such executed counterpart, with the original
to be sent to the Agent by overnight courier);
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(b) a duly executed Term Loan Note for the account of each
Bank complying with the provisions of Section 2.03 and a duly executed
Guaranty and Contribution Agreement;
(c) an opinion letter (i) (together with any opinions of local
counsel relied on therein) of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P., counsel for the Borrower, dated as of the Closing Date, in form
and substance satisfactory to the Agent in its reasonable discretion,
the form attached hereto as Exhibit B, and (ii) for each Initial
Property, in form and substance satisfactory to the Agent in its
reasonable discretion, the form attached hereto as Exhibit Q being one
such satisfactory form, and (iii) in each case, covering such
additional matters relating to the transactions contemplated hereby as
the Agent or any Bank may reasonably request;
(d) an opinion of Jones, Day, Reavis & Pogue, special counsel
for the Agent, dated as of the Closing Date, substantially in the form
of Exhibit C and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably request;
(e) a certificate (the "Closing Certificate") substantially in
the form of Exhibit G), dated as of the Closing Date, signed by an
Executive Officer (other than the Secretary), to the effect that (i) no
Default has occurred and is continuing on the date of the first
Borrowing and (ii) the representations and warranties of the Borrower
contained in Article IV are true on and as of the date of the first
Borrowing hereunder;
(f) all documents which the Agent or any Bank may reasonably
request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement, the Term Loan Notes
and the Guaranty, and any other matters relevant hereto, all in form
and substance satisfactory to the Agent, including, without limitation,
(i) certificates of incumbency of the General Partner and of each
Guarantor, signed by the Secretary or an Assistant Secretary of the
General Partner substantially in the form
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of Exhibit H (the "Officer's Certificate") and each Guarantor,
certifying as to the names, true signatures and incumbency of the
officer or officers of the General Partner and Guarantor authorized to
execute and deliver the Loan Documents on behalf of the Borrower or
Guarantor, and certifying, respectively, that there have been no
amendments since the date of the Syndicated Revolving Credit Agreement
to the Borrower's Certificate of Limited Partnership, the Borrower's
Partnership Agreement, the General Partner's Certificate of
Incorporation and Bylaws, GBP's Declaration of Trust and Bylaws, and
Gables - Tennessee Properties' Partnership Agreement, and certifying
the action taken by the Board of Directors of the General Partner and
each Guarantor authorizing (A) on behalf of the Borrower, the
execution, delivery and performance of this Agreement, the Term Loan
Notes and the other Loan Documents to which the Borrower is a party,
(B) on behalf of each Guarantor, the execution, delivery and
performance of the Guaranty and (C) on behalf of the Initial Property
Partnerships, the execution, delivery and performance of each of the
Loan Documents to which it is a party, (ii) for the General Partner, a
certificate of the Secretary of State of Texas as to its valid
existence as a Texas corporation, (iii) certificates of good standing
or valid existence or other equivalent certificate of the Borrower,
the General Partner, GBP, Gables - Tennessee Properties and each of
the Initial Property Partnerships, as a foreign general or limited
partnership or foreign corporation, as the case may be, in each other
jurisdiction in which it is required to be qualified;
(g) a Notice of Borrowing;
(h) the duly executed documents required by Section 5.24(b)
for the Initial Properties;
(i) receipt of the fees required to be paid on the Closing
Date pursuant to Section 2.06;
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(j) the fact that, immediately before and after such
funding, no Default shall have occurred and be continuing; and
(k) the fact that the representations and warranties of
the Borrower contained in Article IV of this Agreement shall be true
on and as of the date of such funding; and
In addition, if the Borrower desires funding of a Fixed Rate Loan on the Closing
Date, the Agent shall have received, the requisite number of days prior to the
Closing Date, a funding indemnification letter satisfactory to it, pursuant to
which (i) the Agent and the Borrower shall have agreed upon the interest rate,
amount of Borrowing and Interest Period for such Fixed Rate Loan, and (ii) the
Borrower shall indemnify the Banks from any loss or expense arising from the
failure to close on the anticipated Closing Date identified in such letter or
the failure to borrow such Fixed Rate Loan on such date.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and (by incorporation by reference in the
Guaranty) the Guarantors, as expressly stated, each represent and warrant that:
SECTION 4.01. Partnership or Corporate Existence and Power.
The Borrower is a limited partnership duly created and validly existing under
the laws of Delaware, GBP is a trust duly created, validly existing and in good
standing under the laws of Maryland, the General Partner is a corporation duly
organized, validly existing and in good standing under the laws of Texas, and
each of the Initial Property Partnerships is a general partnership duly created
and validly existing under the laws of Texas, and each of the foregoing is duly
qualified to transact business in every jurisdiction where, by the nature of its
business, such qualification is necessary, and has all partnership powers and
all governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except where any such failure does not
have and is not reasonably expected to cause a Material Adverse Effect.
SECTION 4.02. Partnership or Corporate and Governmental
Authorization; No Contravention. The execution, delivery and performance by the
Borrower of this Agreement, the Term Loan Notes and the other Loan Documents and
by the Guarantors of the Guaranty (i) are within the Borrower's partnership
powers and the Guarantor's respective corporate powers, (ii) have been duly
authorized by all necessary partnership or corporate action, (iii) require no
action by or in respect of or filing with, any governmental body, agency or
official, other than filings required by federal or state securities laws with
respect to this Agreement (iv) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of limited
partnership or partnership agreement of the Borrower or the articles of
incorporation or by-laws of any Guarantor or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower, any Guarantor or any other Subsidiaries, and (v) do not result in the
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creation or imposition of any Lien on any asset of the Borrower, any Guarantor
or any other Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower enforceable in accordance with its
terms, and the Term Loan Notes, the Guaranty and the other Loan Documents, when
executed and delivered in accordance with this Agreement (which delivery shall
not be deemed to have occurred with respect to any Escrowed Mortgages unless and
until an Event of Default has occurred), will constitute valid and binding
obligations of the Borrower and the Guarantors parties thereto, enforceable in
accordance with their respective terms, provided that the enforceability hereof
and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally.
SECTION 4.04. Financial and Property Information. (a) The
balance sheet of GBP and the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows for the Fiscal Year
then ended, in the case of GBP reported on by Arthur Andersen LLP, copies of
which have been delivered to each of the Banks, and the unaudited financial
statement of GBP and consolidated financial statements of the Borrower for the
interim period ended [JUNE] [SEPTEMBER] 30, 1996, copies of which have been
delivered to each of the Banks, fairly present, in all material respects, in
conformity with GAAP, subject in the case of quarterly statements to normal year
end audit adjustments, the consolidated financial position of GBP and the
Borrower and its Consolidated Subsidiaries, respectively, as of such dates and
their consolidated results of operations and cash flows for such periods stated.
(b) Since December 31, 1995, there has been no event, act,
condition or occurrence having a Material Adverse Effect.
(c) All material information concerning the Properties which
has been furnished to the Banks by the Borrower is true and correct in all
material respects.
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SECTION 4.05. No Litigation. There is no action, suit or
proceeding pending, or to the knowledge of the Executive Officers, threatened,
against or affecting the Borrower, any Guarantor or any other Subsidiaries
before any court or arbitrator or any governmental body, agency or official
which has or is reasonably expected to cause a Material Adverse Effect or which
in any manner draws into question the validity of or is reasonably expected to
impair the ability of the Borrower or any Guarantor to perform its obligations
under, this Agreement, the Term Loan Notes, the Guaranty or any of the other
Loan Documents.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each
member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA, except where any such failure does not
involve an aggregate amount in excess of $2,500,000.
(b) Neither the Borrower nor any member of the
Controlled Group is or ever has been obligated to contribute to any
Multiemployer Plan.
SECTION 4.07. Compliance with Laws; Payment of Taxes. The
Borrower, the Guarantors and the other Subsidiaries are in compliance with all
applicable laws, regulations and similar requirements of governmental
authorities, except where (i) such compliance is being contested in good faith
through appropriate proceedings or (ii) any failure to comply does not have and
is not reasonably expected to cause a Material Adverse Effect. There have been
filed on behalf of the Borrower, the Guarantors and the other Subsidiaries all
Federal, state and local income, excise, property and other tax returns which
are required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of the Borrower, the
Guarantors or any other Subsidiary have been paid, except: (A) ad valorem taxes
not due and payable; and (B) other liabilities, if (1) they are being contested
in good faith and
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against which the Borrower, Guarantor or Subsidiary has set up reserves in
accordance with GAAP, or (2) the aggregate amount involved is not in excess of
$2,500,000. The charges, accruals and reserves on the books of the Borrower, the
Guarantors and the other Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower and the Guarantors, adequate. United
States income tax returns of GBP for the 1994 Fiscal Year have been timely
filed. GBP has received no written communication from the Internal Revenue
Service regarding such returns.
SECTION 4.08. Subsidiaries. The Borrower has no Subsidiaries
except for those Subsidiaries listed on Schedule 4.08, as supplemented from time
to time, which accurately sets forth each such Subsidiary's complete name and
jurisdiction of incorporation.
SECTION 4.09. Investment Company Act. Neither the Borrower,
the Guarantors nor any other Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the
Borrower, any Guarantor nor any Subsidiary is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. Ownership of Property. Each of the Borrower, the
Guarantors and the Subsidiaries has title to its properties sufficient for the
conduct of its business, except where any such failure does not have and is not
reasonably expected to cause a Material Adverse Effect. The Borrower owns 99%
and the General Partner owns 1% of the partnerships interests in each of the
Initial Property Partnerships, in each case free and clear of any Liens.
SECTION 4.12. No Default. Neither the Borrower, the Guarantors
nor any of the Subsidiaries is in default under or
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with respect to any agreement, instrument or undertaking to which it is a party
or by which it or any of its property is bound which has or is reasonably
expected to cause a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
SECTION 4.13. Full Disclosure. All information heretofore
furnished by the Borrower or any Guarantor to the Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all such information hereafter furnished by the Borrower to the Agent or
any Bank will be, true, accurate and complete in all material respects or based
on reasonable estimates on the date as of which such information is stated or
certified. The Borrower and the Guarantors have disclosed to the Banks in
writing any and all facts which have had or are reasonably expected to cause a
Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Neither the Borrower,
the Guarantors nor any other Subsidiary is, to the knowledge of the Executive
Officers, subject to any Environmental Liability which has had or is reasonably
expected to cause a Material Adverse Effect and neither the Borrower, the
Guarantors nor any other Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA,
except as disclosed in writing to the Agent (and the Agent shall promptly
furnish a copy of any such disclosure to the Banks). None of the Properties has
been identified on any current or proposed (i) National Priorities List under 40
C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute
similar to CERCLA, except as disclosed in writing to the Agent.
(b) No Hazardous Materials have been permitted or are being
permitted to be used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, managed or otherwise handled at, or shipped or
transported to or from the Properties or are otherwise present at, on, in or
under the Properties, or, to the best of the knowledge of the Executive
Officers, at or from any adjacent site or facility, except for Hazardous
Materials, such as cleaning solvents, pesticides and
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other materials used, stored, disposed of, managed, or otherwise handled in all
material respects in compliance with all applicable Environmental Requirements
and except as disclosed in writing to the Agent.
(c) The Borrower, each Guarantor and each of the Subsidiaries,
has procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements (including,
to the best knowledge of the Executive Officers, with respect to any
Environmental Releases) in connection with the operation of the Properties and
the Borrower's, each Guarantor's and each other Subsidiary's respective
businesses, except where any such failure to comply does not have and is not
reasonably expected to cause a Material Adverse Effect.
SECTION 4.15. Partner Interests and Capital Stock. All Partner
Interests and Capital Stock, debentures, bonds, notes and all other securities
of the Borrower, each Guarantor and each of the other Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
applicable laws, including, but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws, except where any such failure
to comply does not and is not reasonably expected to cause a Material Adverse
Effect. The issued shares of Capital Stock of the Borrower's Wholly Owned
Subsidiaries are owned by the Borrower free and clear of any Lien or adverse
claim. At least a majority of the issued shares of non-voting Capital Stock of
each of the Borrower's other Subsidiaries is owned by the Borrower free and
clear of any Lien or adverse claim.
SECTION 4.16. Margin Stock. Neither the Borrower, any
Guarantor nor any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of purchasing or carrying any Margin
Stock, and no part of the proceeds of any Loan will be used to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock, or be used for any purpose which violates, or which
is inconsistent with, the provisions of Regulation X.
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SECTION 4.17. Insolvency. After giving effect to the execution
and delivery of the Loan Documents and the making of the Term Loans under this
Agreement: (i) neither the Borrower nor any Guarantor will (x) be "insolvent,"
within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in
ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the
"UFCA", or as defined or used in any "Other Applicable Law" (as those terms are
defined below), or (y) be unable to pay its debts generally as such debts become
due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the
UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to
engage in any business or transaction, whether current or contemplated, within
the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or
Section 5 of the UFCA; and (ii) the obligations of the Borrower under the Loan
Documents and with respect to the Loans will not be rendered avoidable under any
Other Applicable Law. For purposes of this Section 4.17, "Bankruptcy Code" means
Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer
Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable
Law" means any other applicable state law pertaining to fraudulent transfers or
acts voidable by creditors, in each case as such law may be amended from time to
time.
SECTION 4.18. Insurance. The Borrower, each Guarantor and each
of the Subsidiaries has (either in the name of the Borrower, such Guarantor or
in such other Subsidiary's own name), with financially sound and reputable
insurance companies having an A.M. Best rating of B+ or better, insurance on all
its property in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies of established
repute engaged in the same or similar business.
SECTION 4.19. Real Estate Investment Trust. GBP is qualified
under the Code as a real estate investment trust.
SECTION 4.20. Debt of Initial Property Partnerships. Neither
of the Initial Property Partnerships has incurred or is obligated on or with
respect to any Debt.
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ARTICLE V
COVENANTS
The Borrower and (by incorporation by reference in the
Guaranty) the Guarantors agree that, so long as any Bank has any amount payable
hereunder or under any Term Loan Note remains unpaid:
SECTION 5.01. Information. GBP and the Borrower will deliver
to each of the Banks:
(a) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a consolidated balance sheet of GBP and
its Consolidated Subsidiaries as of the end of its Fiscal Year and the
related consolidated statements of income, shareholders' equity and
cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all
certified by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing, with such certification
to be free of exceptions and qualifications as to the scope of the
audit or as to the going concern nature of the business;
(b) as soon as available and in any event within 45 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of GBP and its Consolidated Subsidiaries as
of the end of such Fiscal Quarter and the related statement of income
and statement of cash flows for such Fiscal Quarter and for the portion
of the Fiscal Year ended at the end of such Fiscal Quarter, setting
forth in each case in comparative form the figures for the
corresponding Fiscal Quarter and the corresponding portion of the
previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency by an
Executive Officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b)
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above, a certificate, substantially in the form of Exhibit F (a
"Compliance Certificate"), of an Executive Officer (i) setting forth
in reasonable detail the calculations required to establish whether
the Borrower was in compliance with the requirements of Sections 5.03
through 5.09, inclusive, and Sections 5.25, 5.26 and 5.28, on the date
of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto; provided,
that during such time as Wachovia is the only Bank hereunder, in lieu
of the foregoing, it may be furnished a comparable "Compliance
Certificate" pursuant to Section 6.01(c) of the Syndicated Revolving
Credit Agreement;
(d) within 5 Domestic Business Days after any Executive
Officer becomes aware of the occurrence of any Default, a certificate
of an Executive Officer setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(e) promptly upon the mailing thereof to the holders of
beneficial ownership in GBP generally, copies of all financial
statements, reports and proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports (excluding Form 4, Statement of Changes in
Beneficial Ownership, or its equivalent, unless they reflect a Change
in Control), any filing on Form 8-K, and any filing pursuant to the
Williams Act, which GBP shall have filed with the Securities and
Exchange Commission;
(g) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for
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a termination of such Plan under Title IV of ERISA, or knows that the
plan administrator of any Plan has given or is required to give notice
of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV of ERISA, a
copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice;
(h) by April 1 of each year, a report as of the end of such
Fiscal Year containing the following information: (i) a schedule of all
outstanding Debt, showing for each component of Debt, the lender, the
total commitment, the total Debt outstanding, the interest rate, if
fixed, or a statement that the interest rate floats, the term, the
required amortization (if any) and the security (if any); (ii) a
schedule of all interest rate protection agreements, showing for each
such agreement, the total dollar amount, the type of agreement (i.e.
cap, collar, swap, etc.) and the term thereof; and (iii) a development
schedule of the announced development pipeline, including for each
announced development project, the project name and location, the
number of units, the expected construction start date, the expected
date of delivery of the first units, the expected stabilization date,
and the total anticipated cost; and
(i) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The
Borrower and the Guarantors will (i) keep, and cause each other Consolidated
Subsidiary to keep, proper books of record and account in which full, true and
correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities; and (ii) permit, and
cause each other Consolidated Subsidiary to permit, representatives of any Bank
at such Bank's expense prior to the occurrence of a Default and at the
Borrower's or such Guarantor's
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expense after the occurrence and during the continuance of a Default to visit
and inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower and the Guarantors agree to
cooperate and assist in such visits and inspections, in each case at such
reasonable times, upon reasonable prior notice to the Borrower or such Guarantor
and as often as may reasonably be desired.
SECTION 5.03. Total Secured Debt. The amount of Total Secured
Debt will not at any time exceed 40% of Total Assets Value.
SECTION 5.04. Ratio of Total Debt to Total Assets Value. The
ratio of Total Debt to Total Assets Value will not at any time exceed 0.60 to
1.00.
SECTION 5.05. Interest Coverage. The ratio of (x) Consolidated
Income Available for Debt Service to (y) Consolidated Interest Expense shall at
all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter,
based on the Fiscal Quarter just ended and the immediately preceding three
Fiscal Quarters.
SECTION 5.06. Restricted Payments. The Borrower's Restricted
Payments in any calendar year shall not exceed 95% of Consolidated Income
Available for Distribution for such period, unless (i) the Borrower must pay out
an amount in excess of 95% of Consolidated Income Available for Distribution to
permit GBP to preserve its status as a real estate investment trust under the
applicable provision of the Code, or (ii) GBP declares one or more capital gains
dividends within such calendar year (in which event the amount of additional
Restricted Payments that may be made as a result of such declaration as provided
in this clause (ii) shall not exceed the greater of (A) the income tax liability
of the Borrower's partners with respect thereto and (B) $1,500,000). In the
event that the Borrower or GBP receives a public debt rating of BBB- or better
from Standard & Poors or Baa3 or better from Moody's Investor's Service and so
long as
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that rating is affirmed during each year, the Borrower's Restricted Payments in
any calendar year will be limited to 100% of Consolidated Income Available for
Distribution for such calendar year with the same exceptions contained in
clauses (i) and (ii) of this Section 5.06.
SECTION 5.07. Loans or Advances. Neither the Borrower, the
Guarantors nor any other Subsidiary shall make loans or advances to any Person
except: (i) deposits required by government agencies or public utilities; (ii)
loans and advances made by Borrower or any Guarantor to any Guarantor or to
Borrower; (iii) loans or advances to directors, officers and employees in the
ordinary course of business in the aggregate outstanding at any time not
exceeding $1,000,000; (iv) loans or advances to employees in the ordinary course
of business which are secured by stock in GBP in the aggregate outstanding at
any time not exceeding $5,000,000; and (v) other loans or advances made in the
ordinary course of business in the aggregate outstanding at any time not
exceeding 5% of the book value of the total assets of the Borrower and its
Consolidated Subsidiaries, determined in accordance with GAAP minus all amounts
outstanding under clause (iii) of this Section 5.07 and minus Investments made
and permitted pursuant to Section 5.09(D); provided that after giving effect to
the making of any loans, advances or deposits permitted by clauses (i), (ii),
(iii) or (iv), the Borrower will be in full compliance with all the provisions
of this Agreement.
SECTION 5.08. Purchases of Stock by Guarantors. Except for
purchases or acquisitions of shares of GBP's Capital Stock made for purposes of
having such shares available for purchase by GBP shareholders pursuant to GBP's
dividend reinvestment and share purchase program known as "The Share Builder
Plan", as amended as of the Closing Date and, subject to the approval of the
Required Banks (not to be unreasonably withheld), as it may thereafter be
amended, the Guarantors shall not purchase or acquire any shares of GBP's
Capital Stock during any 12 month period in excess of 10% of all GBP's Capital
Stock outstanding on the first day of such period.
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SECTION 5.09. Investments. Neither the Borrower nor the
Guarantors shall make Investments in any Person except: (A) Investments in (i)
direct obligations of the United States Government, (ii) certificates of deposit
issued by a commercial bank whose credit is satisfactory to the Agent, (iii)
commercial paper rated A1 or the equivalent thereof by Standard & Poor's
Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc.
and in either case maturing within 9 months after the date of acquisition, (iv)
tender bonds the payment of the principal of and interest on which is fully
supported by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated at least AA or the equivalent thereof by
Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's
Investors Service, Inc., (v) insured money market Investments and/or (vi)
Investments in debt or equity securities rated at least BBB+ or the equivalent
thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent
thereof by Moody's Investors Service not exceeding an aggregate amount
outstanding at any time of $5,000,000; (B) Investments permitted by clauses (i),
(ii) and (iii) of Section 5.07 or by Section 5.08; (C) Investments in
Significant Subsidiaries; and (D) other Investments not exceeding an aggregate
amount outstanding at any time 8% of the book value of the total assets of the
Borrower and its Consolidated Subsidiaries, determined in accordance with GAAP,
less loans and advances outstanding and permitted by clause (iv) of Section
5.07.
SECTION 5.10. Dissolution. Neither the Borrower,
the Guarantors nor any of the other Subsidiaries shall suffer or permit
dissolution or liquidation either in whole or in part or redeem or retire any
shares of its own stock or that of any Subsidiary, except to the extent
permitted by Section 5.11 and except for purchases by GBP of its own Capital
Stock to the extent permitted by Section 5.08, and subject to the rights of
limited partners of the Borrower to convert or exchange their Partner Interests
in the Borrower to stock in GBP.
SECTION 5.11. Consolidations, Mergers and Sales of Assets. The
Borrower and the Guarantors will not, nor will the Borrower permit any other
Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise
transfer all or any
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substantial part of its assets to, any other Person, or discontinue or
eliminate any business line or segment, provided that
(a) the Borrower, any Guarantor and any other Subsidiary may merge with
another Person if (i) such Person was organized under the laws of the United
States of America or one of its states, (ii) the Borrower or such Guarantor or
other Subsidiary is the corporation surviving such merger and (iii) immediately
after giving effect to such merger, no Default shall have occurred and be
continuing,
(b) any Guarantor may merge with or transfer assets to another
Guarantor or the Borrower (with the Borrower as the survivor of any such merger)
and any other Subsidiary may merge with or transfer assets to a Guarantor,
another Subsidiary, or the Borrower (with the Borrower as the survivor of any
such merger), and
(c) the foregoing limitation on the sale, lease or other transfer of
assets and on the discontinuation or elimination of a business line or segment
shall not prohibit, during any Fiscal Quarter, a transfer of assets or the
discontinuance or elimination of a business line or segment (in a single
transaction or in a series of related transactions) unless the aggregate assets
to be so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all other
assets utilized in all other business lines or segments discontinued, during
such Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, either (x)
constituted more than 5% of Consolidated Total Assets at the end of the Fiscal
Quarter immediately preceding such Fiscal Quarter, or (y) contributed more than
5% of Consolidated Income Available for Debt Service during the 4 Fiscal
Quarters immediately preceding such Fiscal Quarter.
In the case of any Subsidiary which transfers substantially all of its
assets pursuant to clause (c) of the preceding sentence, and in the case of any
Subsidiary the stock of which is being sold and with respect to which clause (c)
would have been satisfied if the transaction had been a sale of assets of such
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Subsidiary, such Subsidiary may dissolve and, if it is a Guarantor, such
Subsidiaries shall be entitled to obtain from the Agent a written release from
the Guaranty, provided that (A) it is not the owner of an Escrowed Mortgage
Property, and (B) it can demonstrate to the reasonable satisfaction of the Agent
that (1) it was not a Significant Subsidiary immediately prior to such transfer
of assets, and (2) it has repaid in full all Debt owed to the Borrower or any
other Guarantor which was incurred after the Closing Date (or such Debt has been
assumed by the Borrower or a Significant Subsidiary), and upon obtaining such
written release, it shall no longer be a Guarantor for any purpose hereunder.
SECTION 5.12. Use of Proceeds. The proceeds of the Loans may
be used to provide a line of credit for construction and acquisition financing
and for general corporate and partnership purposes of the Borrower and the
Guarantors. No portion of the proceeds of the Loans will be used by the Borrower
or any Guarantor (i) in connection with, whether directly or indirectly, any
tender offer for, or other acquisition of, stock of any corporation with a view
towards obtaining control of such other corporation, unless such tender offer or
other acquisition is to be made on a negotiated basis with the approval of the
Board of Directors of the Person to be acquired or (ii) for any purpose in
violation of any applicable law or regulation.
SECTION 5.13. Compliance with Laws; Payment of Taxes. The
Borrower and Guarantors will, and will cause each of the other Subsidiaries and
each member of the Controlled Group to, comply with applicable laws (including
but not limited to ERISA), regulations and similar requirements of governmental
authorities (including but not limited to PBGC), except where (i) the necessity
of such compliance is being contested in good faith through appropriate
proceedings, or (ii) any failure to comply which does not have and is not
reasonably expected to cause a Material Adverse Effect. The Borrower and
Guarantors will, and will cause each of the other Subsidiaries to, pay promptly
when due all taxes, assessments, governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a Lien
against the Property of the Borrower, any Guarantor or any other Subsidiary,
except (A) liabilities being
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contested in good faith and against which, if requested by the Agent, the
Borrower, Guarantor or Subsidiary will set up reserves in accordance with GAAP,
and (B) liabilities in an aggregate amount for all Properties not in excess of
$1,000,000.
SECTION 5.14. Insurance. The Borrower and the Guarantors will
maintain, and will cause each of the other Subsidiaries to maintain (either in
the name of the Borrower or such Guarantor's or such other Subsidiary's own
name), with financially sound and reputable insurance companies having an A.M.
Best rating of B+ or better, insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business.
SECTION 5.15. Change in Fiscal Year. The Borrower and the
Guarantors will not, and will cause the other Subsidiaries to not, change its
Fiscal Year without the consent of the Required Banks.
SECTION 5.16. Maintenance of Property; Principal Business;
Ownership of Certain Entities. The Borrower and the Guarantors shall, and shall
cause each other Subsidiary to, maintain all of its properties and assets in
good condition, repair and working order, ordinary wear and tear excepted, and
maintain all Multi-Family Property (other than Property consisting of land
acquired with existing improvements which are to be substantially demolished) in
a first class manner. The principal business operations of the Borrower and the
Subsidiaries, taken as a whole, will be directly or indirectly related to
Multi-Family Properties. The Borrower and/or the General Partner shall own all
of the partnership interests in each of the Initial Property Partnerships, or
partnership interests or common stock in the owner of any Substituted Property
which is not owned by the Borrower or the General Partner, in each case free and
clear of any Liens, so long as such Initial Property or Substituted Property is
an Escrowed Mortgage Property and subject to the provisions of Section 5.24.
SECTION 5.17. Environmental Notices. Promptly upon any
Executive Officer's becoming aware thereof, the Borrower and the
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Guarantors shall furnish to the Banks and the Agent prompt written notice of
all Environmental Liabilities, pending, threatened or anticipated Environmental
Proceedings, Environmental Notices, Environmental Judgments and Orders, and
Environmental Releases at, on, in, under or in any way affecting the Properties
or any adjacent property, which has had or is reasonably expected to cause a
Material Adverse Effect.
SECTION 5.18. Environmental Matters. The Borrower and the
Guarantors will not, and will cause the other Subsidiaries to not, and will not
permit any Third Party to, use, produce, manufacture, process, treat, recycle,
generate, store, dispose of, manage at, or otherwise handle, or ship or
transport to or from the Properties any Hazardous Materials except for Hazardous
Materials such as cleaning solvents, pesticides and other materials used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed, managed, or otherwise handled in compliance in all material respects
with all applicable Environmental Requirements.
SECTION 5.19. Environmental Release. The Borrower and the
Guarantors agree that upon any Executive Officer's becoming aware of the
occurrence of an Environmental Release at or on any of the Properties the
Borrower will act promptly to investigate the extent of, and to take appropriate
action to remediate such Environmental Release, whether or not ordered or
otherwise directed to do so by any Environmental Authority.
SECTION 5.20. Transactions with Affiliates. Neither the
Borrower, the Guarantors nor any of the other Subsidiaries shall enter into, or
be a party to, any transaction with any Affiliate of the Borrower, such
Guarantor or such other Subsidiary (which Affiliate is not GBP, the Borrower, a
Guarantor or a Wholly Owned Subsidiary), except as permitted by law and in the
ordinary course of business and pursuant to reasonable terms which are no less
favorable to Borrower or such Subsidiary than would be obtained in a comparable
arm's length transaction with a Person which is not an Affiliate.
SECTION 5.21. Amendment of Other Agreements. Within 90 days
after the Closing Date, the Borrower shall amend all other
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agreements pertaining to credit facilities with any of the Banks so as to
conform the financial covenants contained therein to those contained in this
Agreement.
SECTION 5.22. Qualification as a Real Estate Investment Trust;
General Partner. GBP shall at all times remain qualified under the Code as a
real estate investment trust and Gables GP, Inc. shall at all times be the
General Partner. The Borrower will not agree to amend or waive the requirements
of Section 3.2 of the limited partnership agreement of the Borrower, as in
effect on the date of this Agreement, as such requirements are applicable to the
General Partner, without the prior written consent of the Required Banks (which
consent the Banks hereby agree not to unreasonably withhold or delay).
SECTION 5.23. Significant Subsidiaries and Owners of
Substituted Properties to be Guarantors; Election to Become Guarantor. Any
Subsidiary or owner of a Substituted Property (whether existing on the Closing
Date or acquired or created thereafter) (i) must become a Guarantor promptly
upon becoming a Significant Subsidiary or upon substitution of the Substituted
Property, as the case may be, and (ii) may elect to become a Guarantor at any
time if it is not a Significant Subsidiary, in each case by (x) executing and
delivering to the Agent a counterpart of the Guaranty and a counterpart of the
Contribution Agreement, thereby becoming a party to each of them, (y) delivering
to the Agent an opinion of counsel to such Subsidiary, in form and substance
satisfactory to the Agent in its reasonable discretion, the form attached hereto
as Exhibit B being one such satisfactory form, but limited to such Subsidiary,
and excluding paragraph 2 thereof, and (z) delivering to the Agent documents
pertaining to the Subsidiary reasonably requested by the Agent of the types
described in paragraph (f) of Section 3.01.
SECTION 5.24. Certain Provisions Regarding Escrowed Mortgage
Properties. (a) Neither the Borrower, nor any Consolidated Subsidiary, nor any
Initial Property Partnership nor any other owner of an Escrowed Mortgage
Property will create, assume or suffer to exist any Lien on any Escrowed
Mortgage Property, except Permitted Encumbrances.
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(b) Prior to the funding of the Term Loans, the Initial
Property Partnerships shall deliver to Agent the items listed as (a) through
(e), in paragraph (i) of the definition of Eligible Property and shall execute
and deliver to the Agent a Property Certificate, a Non-Encumbrance Agreement and
deposit with the Agent an executed Agreement Regarding Environmental Activity,
UCC-1 financing statement(s) (and UCC-2 real estate notice for Georgia
property), Owner's Affidavit and Escrowed Mortgage, and cause to be delivered to
the Agent a current legal opinion, all as described in the definition of
Eligible Property. Each such Non-Encumbrance Agreement shall be recorded in the
appropriate real estate filing offices. At any time, so long as no Default or
Event of Default has occurred and is continuing or would be caused thereby, and
so long as the Escrowed Mortgage related thereto has not previously been
recorded pursuant hereto, the Borrower may request to replace any Escrowed
Mortgage Property, in order to create a Lien thereon or to sell such Escrowed
Mortgage Property to be replaced, by a replacement Substituted Property,
provided, that, in order to be accepted as an Escrowed Mortgage Property: (i)
such replacement Substituted Property is an Eligible Property; (ii) the owners
of such replacement Substituted Property have become Guarantors pursuant to
Section 5.23 and have delivered to the Agent the items listed as (a) through
(e), in paragraph (i) of the definition of Eligible Property and have executed
and delivered to the Agent a Property Certificate, a Non-Encumbrance Agreement
and deposited with the Agent an executed Agreement Regarding Environmental
Activity, UCC-1 financing statement(s) (and UCC-2 real estate notice for Georgia
property), Owner's Affidavit and Escrowed Mortgage, and caused to be delivered
to the Agent a current legal opinion, all as described in the definition of
Eligible Property; and (iii) after giving effect thereto, the aggregate amount
of the Escrowed Mortgage Property Value of all Escrowed Mortgage Property is not
less than 153.85% of the then aggregate outstanding principal amount of the Term
Loans. In the event of a Debt Rating of at least BBB or Baa2, and provided that
no Default or Event of Default is in existence, then, at the request of the
Borrower, the Agent shall cause the Non-Encumbrance Agreements to be terminated
of record and shall release from escrow all Escrowed Mortgages delivered
pursuant to this Section 5.24(b); provided, that the provisions of paragraph (a)
of this
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Section 5.24 shall survive any such termination and shall continue in full force
and effect as to the Multi-Family Property which constituted Escrowed Mortgage
Property immediately prior to such termination. The Agent shall hold in escrow
each Escrowed Mortgage, Agreement Regarding Environmental Activity, UCC
financing statement and real estate notice, and such Escrowed Mortgage,
Agreement Regarding Environmental Activity, UCC financing statement and real
estate notice, shall not be effective, or deemed to have been delivered, unless
and until an Event of Default occurs, whereupon they shall become Operative
Documents. Upon the occurrence and at any time during the continuance of an
Event of Default, the Agent, acting at the direction of the Required Banks, (A)
may request from the Borrower and the Borrower shall promptly deliver or cause
to be delivered to the Agent an updated legal opinion as to the Eligible
Properties pursuant to Section 5.24(b), in form and substance satisfactory to
the Agent in its reasonable discretion, (the form attached hereto as Exhibit O
being one such satisfactory form), and an executed Owner's Affidavit and shall
also execute and deliver or cause to be executed and delivered any other
customary documents required by a title company in order to issue mortgagee
title insurance for an Escrowed Mortgage which is recorded by the Agent as
provided in the immediately succeeding clause (C), (B) may order mortgagee title
insurance, at the Borrower's sole cost and expense, on each Escrowed Mortgage
recorded by the Agent as provided in the immediately succeeding clause (C), (C)
without any notice, shall be entitled to record any one, or more, or all of the
Escrowed Mortgages in the appropriate real estate filing offices and UCC
financing statements and real estate notices in the appropriate filing offices
(but no such recording shall constitute a waiver of such Event of Default) at
the sole cost and expense of the Borrower, which costs and expenses shall
include, without limitation, recording costs and fees, and intangible taxes or
other documentary taxes, assessments or charges which are demanded by any
Authority by reason of the recordation of the Escrowed Mortgages, financing
statements and real estate notices, and (D) may deliver documents, including,
without limitation, owner's affidavits, to a title insurance company and may
employ such title insurance company at the expense of the Borrower to perform
such functions with respect to the recording of documents and
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issuance of mortgagee title insurance as is customarily performed by title
insurance companies in the state in which the Eligible Mortgage is being
recorded. On or within 10 days after each anniversary of the Closing Date, the
Borrower and each Guarantor which has deposited an Escrowed Mortgage shall
re-execute each such Escrowed Mortgage, Owner's Affidavit, Agreement Regarding
Environmental Activity, financing statement and real estate notice which it has
so deposited. The Borrower and each Guarantor which owns an Eligible Property
agrees that it will not enter into any agreement with any other creditor which
would restrict or limit the right of the Borrower or the Guarantor which owns
such Eligible Property to execute and deposit with the Agent the Escrowed
Mortgage, financing statement and real estate notice pertaining thereto, or the
right of the Agent to record such Escrowed Mortgage, financing statement and
real estate notice upon the occurrence of an Event of Default. In the event that
(1) title insurance premiums and expenses are incurred by the Agent or the Banks
pursuant to the terms of this Section and the Borrower has not promptly paid the
same, or (2) recording costs and fees, and payment of intangible taxes or other
documentary taxes, assessments or charges are demanded by any Authority by
reason of the Escrowed Mortgages, financing statements and real estate notices,
whether such Escrowed Mortgages, financing statements and real estate notices
are or are not recorded, then, the Banks may without further request or
authorization of the Borrower, make such loans to the Borrower as may be
necessary to pay (x) any such required recording costs and fees, intangible
taxes or other documentary taxes, assessments or charges demanded by any
Authority by reason of or as a requirement for the recordation of such Escrowed
Mortgages, financing statements and real estate notices, and (y) such title
insurance premiums and expenses, and such loans shall be secured by the Escrowed
Mortgages so recorded.
SECTION 5.25. Minimum Payrate. The Borrower
shall maintain, at all times, a Payrate of not less than (x) if the Borrower has
obtained at any time a Debt Rating of at least BBB- or Baa3, and thereafter
either such Debt Rating is lowered, then unless and until it again has obtained
a Debt Rating of at least BBB- or Baa3, 15.0% and (y) for any other period,
14.5%.
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SECTION 5.26 Additional Guarantees; Debt of Certain Entities.
Neither the Borrower nor any of the Guarantors shall incur or permit to exist
any Guarantees, other than (i) those in existence on the Closing Date, (ii)
Guarantees of unsecured, non-revolving Debt having a maturity later than the
Termination Date, (iii) Guarantees of the Debt to Teachers Insurance and Annuity
Association included as part of the Designated Secured Loan Portfolios, and (iv)
other Guarantees not exceeding an aggregate principal amount outstanding at any
time of $25,000,000 or more. Neither of the Initial Partnerships, nor any other
owner of any of the Escrowed Mortgage Property, other than the Borrower or the
General Partner, shall incur or be obligated on or with respect to any Debt.
SECTION 5.27 Maintenance of Existence. The Borrower shall, and
shall cause each Subsidiary to, maintain its corporate existence and carry on
its business in substantially the same manner and in substantially the same
fields as such business is now carried on and maintained.
SECTION 5.28 Ratio of Total Unencumbered Assets Value to
Unsecured Funded Debt. The ratio of Total Unencumbered Assets Value to Unsecured
Funded Debt will not at any time be less than 1.50 to 1.00.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within 5
Domestic Business Days after such interest shall become due, or shall
fail to pay any fee or other amount payable hereunder within 5 Domestic
Business Days after such fee or other amount becomes due; or
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(b) the Borrower or any Guarantor shall fail to observe or
perform any covenant contained in Sections 5.01(c), 5.02(ii), 5.03
through 5.12, inclusive, Sections 5.22 or Sections 5.24 through 5.28,
inclusive, or in Sections 2.03, 2.10 or 3.01 of any Operative Mortgage;
or
(c) the Borrower or any Guarantor shall fail to observe or
perform any covenant or agreement contained in this Agreement or any
other Operative Document (other than those covered by paragraph (a) or
(b) above) and such failure shall not have been cured within 30 days
after the earlier to occur of (i) written notice thereof has been given
to the Borrower or such Guarantor by the Agent at the request of any
Bank or (ii) an Executive Officer or such Guarantor otherwise becomes
aware of any such failure; or
(d) any representation, warranty, certification or statement
made by the Borrower or any Guarantor in Article IV of this Agreement
or in any other Operative Document or in any certificate, financial
statement or other document delivered pursuant to this Agreement or any
other Operative Document shall prove to have been incorrect or
misleading in any material respect when made (or deemed made); or
(e) the Borrower, GBP or any Subsidiary shall fail to make any
payment in respect of Debt outstanding (other than the Term Loan Notes)
when due or within any applicable grace period, if the amount of any
such Debt of the Borrower, GBP or any Subsidiary individually is
$5,000,000 or more or if the aggregate amount of all such Debt of the
Borrower, GBP and all Subsidiaries is $10,000,000 or more; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower, GBP
or any Subsidiary (including, without limitation, any required
mandatory prepayment or "put" of such Debt to the Borrower or any
Subsidiary) or enables (or, with the giving of notice or lapse of time
or both, would enable) the holders of such Debt or commitment or any
Person acting on such holders' behalf to accelerate the maturity
thereof or terminate any such commitment (including, without
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limitation, any required mandatory prepayment or "put" of such Debt to
the Borrower or any Subsidiary), if the amount of any such Debt of the
Borrower, GBP or any Subsidiary individually is $5,000,000 or more or
if the aggregate amount of all such Debt of the Borrower, GBP and all
Subsidiaries is $10,000,000 or more; or
(g) the Borrower, any Guarantor or any Subsidiary, shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
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 any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
they become due, or shall take any corporate action to authorize any of
the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower, any Guarantor or any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts 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 any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Borrower, any
Guarantor or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a
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Plan or Plans shall be filed under Title IV of ERISA by the Borrower,
any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans to enforce Section
515 or 4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or the
Borrower or any other member of the Controlled Group shall enter into,
contribute or be obligated to contribute to, terminate or incur any
withdrawal liability with respect to, a Multiemployer Plan; or
(j) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $1,000,000 shall be rendered
against the Borrower. any Guarantor or any Subsidiary and such judgment
or order shall continue unsatisfied and unstayed for a period of 30
days; or
(k) a federal tax lien shall be filed against the Borrower or
any Subsidiary under Section 6323 of the Code or a lien of the PBGC
shall be filed against the Borrower or any Subsidiary under Section
4068 of ERISA and in either case such lien shall remain undischarged
for a period of 25 days after the date of filing.
then, and in every such event, the Agent shall, if requested by the Required
Banks, by notice to the Borrower declare the Term Loan Notes (together with
accrued interest thereon), and all other amounts payable hereunder and under the
other Loan Documents, to be, and the Term Loan Notes, together with accrued
interest thereon, and all other amounts payable hereunder and under the other
Loan Documents shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower together with interest at the Default Rate
accruing on the principal amount thereof from and after the date of such
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Event of Default; provided that if any Event of Default specified in paragraph
(g) or (h) above occurs with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the Term Loan Notes
(together with accrued interest thereon) and all other amounts payable hereunder
and under the other Loan Documents shall automatically and without notice become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower together with
interest thereon at the Default Rate accruing on the principal amount thereof
from and after the date of such Event of Default. Notwithstanding the foregoing,
the Agent shall have available to it all other remedies at law or equity, and
under any of the other Operative Documents, and shall exercise any one or all of
them at the request of the Required Banks.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Borrower of any Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment; Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. The Agent: (a)
shall have no duties or responsibilities except as expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee for any Bank; (b) shall not be
responsible to the Banks for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
Bank under, this Agreement or any other Loan Document, or for the validity,
effectiveness, genuineness, enforceability or
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sufficiency of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the Borrower
to perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Required Banks, and then only on terms and conditions satisfactory to the Agent,
and (d) shall not be responsible for any action taken or omitted to be taken by
it hereunder or under any other Loan Document or any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or wilful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The provisions of this Article VII are
solely for the benefit of the Agent and the Banks, and the Borrower shall not
have any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement and under the other
Loan Documents, the Agent shall act solely as agent of the Banks and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Borrower. The duties of the
Agent shall be ministerial and administrative in nature, and the Agent shall not
have by reason of this Agreement or any other Loan Document a fiduciary
relationship in respect of any Bank. The Agent shall administer the Loans and
the Loan Documents with a degree of care at least equal to that customarily
employed by the Agent in the administration of similar credit facilities for its
own account.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telecopier, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Loan Document,
the Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and
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thereunder in accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks in any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
nonpayment of principal of or interest on the Loans) unless the Agent has
received notice from a Bank or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default or an Event of
Default, the Agent shall give prompt notice thereof to the Banks. The Agent
shall give each Bank prompt notice of each nonpayment of principal of or
interest on the Loans whether or not it has received any notice of the
occurrence of such nonpayment. The Agent shall (subject to Section 9.06) take
such action hereunder with respect to such Default or Event of Default as shall
be directed by the Required Banks, provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
SECTION 7.04. Rights of Agent and its Affiliates as a Bank.
With respect to the Loans made by the Agent and any Affiliate of the Agent,
Wachovia in its capacity as a Bank hereunder and any Affiliate of the Agent or
such Affiliate in its capacity as a Bank hereunder shall have the same rights
and powers hereunder as any other Bank and may exercise the same as though
Wachovia were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include Wachovia in its individual
capacity and any Affiliate of the Agent in its individual capacity. The Agent
and any Affiliate of the Agent may (without having to account therefor to any
Bank) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrower (and any of the Borrower's
Affiliates) as if Wachovia were not acting as the Agent, and the Agent and any
Affiliate of the Agent may accept fees and other consideration from the Borrower
(in
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addition to any agency fees and arrangement fees heretofore agreed to between
the Borrower and the Agent) for services in connection with this Agreement or
any other Loan Document or otherwise without having to account for the same to
the Banks.
SECTION 7.05. Indemnification. Each Bank severally agrees to
indemnify the Agent, to the extent the Agent shall not have been reimbursed by
the Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is continuing,
the normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or any such other documents; provided that no Bank shall be liable for
any of the foregoing to the extent they arise from the gross negligence or
wilful misconduct of the Agent. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent, be insufficient or become impaired,
the Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished.
SECTION 7.06. Consequential Damages. THE AGENT SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY
FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07. Payee of Term Loan Note Treated as Owner. The
Agent may deem and treat the payee of any Term Loan Note as the owner thereof
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent and the provisions of
Section 9.08(c)
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have been satisfied. Any requests, authority or consent of any Person who at the
time of making such request or giving such authority or consent is the holder of
any Term Loan Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Term Loan Note or of any Term Loan Note issued in
exchange therefor or replacement thereof.
SECTION 7.08. Nonreliance on Agent and Other BanksNonreliance
on Agent and Other Banks. Each Bank agrees that it has, independently and
without reliance on the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents. The Agent shall not be
required to keep itself (or any Bank) informed as to the performance or
observance by the Borrower of this Agreement or any of the other Loan Documents
or any other document referred to or provided for herein or therein or to
inspect the properties or books of the Borrower or any other Person. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder or under the other Loan Documents,
the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Borrower or any other Person (or any of their Affiliates) which
may come into the possession of the Agent; provided, that the Agent shall make
available to any Bank, upon its request, (i) copies of the Agent's records with
respect to all sums received or expended by the Agent in connection with the
Loans and the Loan Documents, (ii) information as to the amount of the then
outstanding Loans and (iii) copies of any documents pertaining to an Eligible
Property requested by such Bank and held by the Agent pursuant to Section
5.24(b).
SECTION 7.09. Failure to Act. Except for action expressly
required of the Agent hereunder or under the other Loan Documents, the Agent
shall in all cases be fully justified in
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failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction by the Banks of their indemnification
obligations under Section 7.05 against any and all liability and expense which
may be incurred by the Agent by reason of taking, continuing to take, or failing
to take any such action.
SECTION 7.10. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Banks and the Borrower and
the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the
right to appoint a successor Agent, subject to the approval of the Borrower,
which approval shall not be unreasonably withheld or delayed; provided, however,
that no such approval of the Borrower shall be required if (i) the successor is
a Bank or (ii) a Default or Event of Default is in existence. If no successor
Agent shall have been so appointed by the Required Banks and shall have accepted
such appointment within 30 days after the retiring Agent's notice of resignation
or the Required Banks' removal of the retiring Agent, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, subject to the approval
of the Borrower, which approval shall not be unreasonably withheld or delayed;
provided, however, that no such approval of the Borrower shall be required if
(i) the successor is a Bank or (ii) a Default or Event of Default is in
existence. Any successor Agent shall be a bank which has a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder.
SECTION 7.11 Agent's Right to Replace Non-Qualifying Bank. In
the event that any Bank (a "Non-Qualifying Bank")
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shall at the end of any quarter not qualify as a "well-capitalized" bank (within
the meaning provided therefor in 12 CFR ss. 6, as amended from time to time)
under the regulations or policies of the Comptroller of the Currency, or the sum
of its non-performing assets and its "Other Real Estate Owned" shall be equal to
more than fifty percent (50%) of its tangible equity, the Agent, in its sole
discretion, may give notice to such Non-Qualifying Bank and to the other Banks,
with a copy to the Borrower (the "Replacement Notice"), that it wishes to seek
one or more assignees (which may be one or more of the Banks) to Non-Qualifying
Bank and to purchase such Non-Qualifying Bank's outstanding Loans and Term Loan
Notes, and in such event: (i) the remaining Banks may elect to purchase ratable
assignments (without any obligation so to do) from the Non-Qualifying Bank (in
the form of an Assignment and Acceptance and in accordance with Section 9.08(c))
in accordance with their respective percentage of the aggregate outstanding
principal amount of the Loans, by giving notice of such election to the Agent
and the other Banks, with a copy to the Borrower, no later than the date (the
"Initial Option Date") which is 15 days after the date of the Replacement
Notice; (ii) should any of the remaining Banks not elect on or before the
Initial Option Date to purchase such an assignment, then, such other remaining
Banks shall be entitled to purchase an assignment from Non-Qualifying Bank which
includes the ratable interest that was otherwise available to such
non-purchasing remaining Bank or Banks, by giving notice of such election to the
Agent and the other Banks, with a copy to the Borrower, within 15 days after the
Initial Option Date; and (iii) if and to the extent that the remaining Banks
have not elected to purchase such an assignment, the Agent may find another
assignee to purchase such assignment. Each Non-Qualifying Bank agrees to sell
its Loans, Term Loan Notes, by an Assignment and Acceptance in accordance with
Section 9.08(c) to any such assignee or assignees for an amount equal to the sum
of the outstanding unpaid principal of and accrued interest on such Loans and
Term Loan Notes, plus all other fees and amounts (including, without limitation,
any compensation claimed by such Non-Qualifying Bank under Section 2.09(c) or
this Section 7.11) due such Non-Qualifying Bank hereunder calculated, in each
case, to the date such Loans, Term Loan Notes and interest are purchased. Upon
such sale or prepayment such Non-Qualifying Bank shall have no
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further obligation to the Borrower hereunder or under any Term Loan Note.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in
the applicable amounts) are not being offered in the relevant market
for such Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate, as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of funding the relevant
Euro-Dollar Rate Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans specified in such notice shall be suspended. Unless the
Borrower notifies the Agent at least 2 Domestic Business Days before the date of
any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, such Borrowing shall instead be
made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the
adoption of any applicable law, rule or regulation, or any change therein or any
existing or future law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof (any
such agency being referred to as an "Authority" and any such event being
referred to as a "Change of Law"), or compliance by any Bank (or its Lending
Office) with any request or directive
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(whether or not having the force of law) of any Authority shall make it unlawful
or impossible for any Bank (or its Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to maintain and fund any
of its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each Euro-Dollar Loan of such Bank, together with accrued
interest thereon and any amount due such Bank pursuant to Section 8.05(a).
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any Authority:
(x) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office); or
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(y) shall impose on any Bank (or its Lending Office) or on the
United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans,
its Term Loan Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Lending Office) under
this Agreement or under its Term Loan Notes with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date
hereof the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any Authority, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank, the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section
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and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable
with respect to any Participant, Assignee or other Transferee, and any
calculations required by such provisions shall be made based upon the
circumstances of such Participant, Assignee or other Transferee.
SECTION 8.04. Base Rate Loans Substituted for Affected
Euro-Dollar Loans. If (i) the obligation of any Bank to make or maintain any
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank
has demanded compensation under Section 8.03, and the Borrower shall, by at
least 5 Euro-Dollar Business Days' prior notice to such Bank, through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans, and
interest and principal on such Loans shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks, and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Euro-Dollar Loans shall be applied to repay its Base Rate Loans
instead.
SECTION 8.05. Compensation. Upon the request of any Bank,
delivered to the Borrower and the Agent, the Borrower shall pay to such Bank
such amount or amounts as shall compensate such Bank for any loss, cost or
expense incurred by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.07, 2.08,
6.01, 8.02 or otherwise) of a Euro-Dollar Loan on a
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date other than the last day of an Interest Period for such Loan; or
(b) any failure by the Borrower to prepay a Euro-Dollar Loan
on the date for such prepayment specified in the relevant notice of prepayment
hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Loan
on the date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a
part specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopier
or similar writing) and shall be given to such party at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopier number as such party may hereafter specify for the purpose by
notice to each other party. Each such notice, request or other communication
shall be effective (i) if given by telecopier, when such telecopy is transmitted
to the telecopier number specified in this Section and the confirmation is
received, (ii) if given
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by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section; provided that
notices to the Agent under Article II or Article VII shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any Term
Loan Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall
pay (i) all out-of-pocket expenses of the Agent, including fees and
disbursements of Jones, Day, Reavis & Pogue, special counsel for the Banks and
the Agent, in connection with the preparation of this Agreement and the other
Loan Documents, any waiver or consent hereunder or thereunder or any amendment
hereof or thereof or any Default or alleged Default hereunder or thereunder, and
(ii) if a Default occurs, all out-of-pocket expenses incurred by the Agent and
the Banks, including fees and disbursements of counsel, in connection with such
Default and collection and other enforcement proceedings resulting therefrom,
including out-of-pocket expenses incurred in enforcing this Agreement and the
other Loan Documents. The Borrower shall indemnify the Agent and each Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this Agreement or the
other Loan Documents. The provisions of this Section 9.03 are in addition to and
not in limitation of any expense reimbursement or indemnification provision
contained in any other Operative Documents.
SECTION 9.04. Indemnification. The Borrower shall indemnify
the Agent, the Banks and each Affiliate thereof and their respective directors,
officers, employees and agents from, and hold each of them harmless against, any
and all losses, liabilities, claims or damages to which any of them may become
subject, insofar as such losses,
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liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by any
Bank hereunder or breach by the Borrower of this Agreement or any other Loan
Document or from any investigation, litigation (including, without limitation,
any actions taken by the Agent or any of the Banks to enforce this Agreement or
any of the other Loan Documents) or other proceeding (including, without
limitation, any threatened investigation or proceeding) relating to the
foregoing, and the Borrower shall reimburse the Agent and each Bank, and each
Affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including, without limitation, legal fees)
incurred in connection with any such investigation or proceeding; but excluding
any such losses, liabilities, claims, damages or expenses incurred by reason of
the gross negligence or wilful misconduct of the Person to be indemnified. The
provisions of this Section 9.04 are in addition to and not in limitation of any
expense reimbursement or indemnification provision contained in any other
Operative Documents.
SECTION 9.05. Sharing of Setoffs. Each Bank agrees that if it
shall, by exercising any right of setoff or counterclaim or resort to collateral
security or otherwise, receive payment of a proportion of the aggregate amount
of principal and interest owing with respect to the Term Loan Note held by it
which is greater than the proportion received by any other Bank in respect of
the aggregate amount of all principal and interest owing with respect to the
Term Loan Note held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Term Loan Notes held
by the other Banks owing to such other Banks, and such other adjustments shall
be made, as may be required so that all such payments of principal and interest
with respect to the Term Loan Notes held by the Banks owing to such other Banks
shall be shared by the Banks pro rata; provided that (i) nothing in this Section
shall impair the right of any Bank to exercise any right of setoff or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of the Borrower other than its indebtedness under the
Term Loan Notes, and (ii) if all
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or any portion of such payment received by the purchasing Bank is thereafter
recovered from such purchasing Bank, such purchase from each other Bank shall be
rescinded and such other Bank shall repay to the purchasing Bank the purchase
price of such participation to the extent of such recovery together with an
amount equal to such other Bank's ratable share (according to the proportion of
(x) the amount of such other Bank's required repayment to (y) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Term Loan Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of setoff
or counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.06. Amendments and Waivers. (a) Any provision of
this Agreement, the Term Loan Notes or any other Loan Documents may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed
by the Borrower and the Required Banks (and, if the rights or duties of the
Agent are affected thereby, by the Agent); provided that no such amendment or
waiver shall, unless signed by all Banks, (i) change the Commitment of any Bank
or subject any Bank to any additional obligation, (ii) change the principal of
or rate of interest on any Loan or any fees (other than fees payable to the
Agent) hereunder, (iii) change the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder, (iv) change the amount of principal,
interest or fees due on any date fixed for the payment thereof, (v) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Term Loan Notes, or the percentage of Banks, which shall be required for the
Banks or any of them to take any action under this Section or any other
provision of this Agreement, (vi) change the manner of application of any
payments made under this Agreement or the Term Loan Notes, (vii) release or
substitute all or any substantial part of the collateral (if any) held as
security for the Loans, except as expressly authorized by this
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Agreement or any of the other Loan Documents, (viii) release any Guarantee given
to support payment of the Loans, (ix) change the definition of Borrowing Base in
a such a way as to make it less restrictive, (x) change the definition of
Required Banks or (xi) change this Section 9.06.
(b) The Borrower will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement unless each Bank shall be informed thereof by the Borrower and
shall be afforded an opportunity of considering the same and shall be supplied
by the Borrower with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any waiver
or consent effected pursuant to the provisions of this Agreement shall be
delivered by the Borrower to each Bank forthwith following the date on which the
same shall have been executed and delivered by the requisite percentage of
Banks. The Borrower will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank (in its capacity as such) as consideration for or as an
inducement to the entering into by such Bank of any waiver or amendment of any
of the terms and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to all such Banks.
SECTION 9.07. No Margin Stock Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it in good faith is
not, directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each
a "Participant") participating interests in any
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Loan owing to such Bank, any Term Loan Note held by such Bank or any other
interest of such Bank hereunder. In the event of any such sale by a Bank of a
participating interest to a Participant, such Bank's obligations under this
Agreement shall remain unchanged, such Bank shall remain solely responsible for
the performance thereof, such Bank shall remain the holder of any such Term Loan
Note for all purposes under this Agreement, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. In no event shall a Bank
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree that it will
not (except as provided below), without the consent of the Participant, agree to
(i) the change of any date fixed for the payment of principal of or interest on
the related loan or loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related loan or loans, (iii) the change of the principal of the related loan
or loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or fee (as the case may be) in respect of such participation, (v) the release or
substitution of all or any substantial part of the collateral (if any) held as
security for the Loans, or (vi) the release of any Guarantee given to support
payment of the Loans. Each Bank selling a participating interest in any Loan,
Term Loan Note or other interest under this Agreement shall, within 10 Domestic
Business Days of such sale, provide the Borrower and the Agent with written
notification stating that such sale has occurred and identifying the Participant
and the interest purchased by such Participant. The Borrower agrees that each
Participant shall be entitled to the benefits of Article VIII with respect to
its participation in Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all or a proportionate part of its
rights and obligations under this Agreement, the Term Loan Notes and the other
Loan Documents, and such Assignee shall assume all such rights and obligations,
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pursuant to an Assignment and Acceptance, executed by such Assignee, such
transferor Bank and the Agent (and, in the case of an Assignee that is not then
a Bank, subject to clause (iii) below, by the Borrower); provided that (i) if a
Bank is assigning only a portion of its Term Loans, then, the amount of the Term
Loans being assigned (determined as of the effective date of the assignment)
shall be in an amount not less than $5,000,000, (ii) except during the
continuance of a Default, no interest may be sold by a Bank pursuant to this
paragraph (c) to any Assignee that is not then a Bank (or an Affiliate of a
Bank) without the consent of the Borrower and the Agent, which consent shall not
be unreasonably withheld, and (iii) a Bank may not have more than 2 Assignees
that are not then Banks at any one time. Upon (A) execution of the Assignment
and Acceptance by such transferor Bank, such Assignee, the Agent and (if
applicable) the Borrower, (B) delivery of an executed copy of the Assignment and
Acceptance to the Borrower and the Agent, (C) payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, and (D) payment of a processing and
recordation fee of $2,500 to the Agent, such Assignee shall for all purposes be
a Bank party to this Agreement and shall have all the rights and obligations of
a Bank under this Agreement to the same extent as if it were an original party
hereto, and the transferor Bank shall be released from its obligations hereunder
to a corresponding extent, and no further consent or action by the Borrower, the
Banks or the Agent shall be required. Upon the consummation of any transfer to
an Assignee pursuant to this paragraph (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required, a new
Term Loan Note is issued to each of such Assignee and such transferor Bank.
(d) Subject to the provisions of Section 9.09, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning the Borrower which
has been delivered to such Bank by the Borrower pursuant to this Agreement or
which has been delivered to such Bank by the Borrower in connection with such
Bank's credit evaluation prior to entering into this Agreement.
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(e) No Transferee shall be entitled to receive any greater
payment under Section 8.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02 or 8.03 requiring such Bank to designate a different Lending Office
under certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of the Loans
and/or obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Loans and/or obligations made by the Borrower to the assigning and/or pledging
Bank in accordance with the terms of this Agreement shall satisfy the Borrower's
obligations hereunder in respect of such assigned Loans and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Bank from its obligations hereunder.
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SECTION 9.09. Confidentiality. Each Bank agrees to exercise
commercially reasonable efforts to keep any information delivered or made
available by the Borrower to it which is clearly indicated to be confidential
information, confidential from anyone other than persons employed or retained by
such Bank who are or are expected to become engaged in evaluating, approving,
structuring or administering the Loans; provided that nothing herein shall
prevent any Bank from disclosing such information (i) to any other Bank, (ii)
upon the order of any court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over such Bank,
(iv) which has been publicly disclosed, (v) to the extent reasonably required in
connection with any litigation to which the Agent, any Bank or their respective
Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel
and independent auditors and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights hereunder which has
agreed in writing to be bound by the provisions of this Section 9.09; provided
that should disclosure of any such confidential information be required by
virtue of clause (ii) of the immediately preceding sentence, any relevant Bank
shall, to the extent permitted by law, promptly notify the Borrower of same so
as to allow the Borrower to seek a protective order or to take any other
appropriate action; provided, further, that, no Bank shall be required to delay
compliance with any directive to disclose any such information so as to allow
the Borrower to effect any such action.
SECTION 9.10. Representation by Banks. Each Bank hereby
represents that it is a commercial lender or financial institution which makes
loans in the ordinary course of its business and that it will make its Loans
hereunder for its own account in the ordinary course of such business; provided
that, subject to Section 9.08, the disposition of the Term Loan Note held by
that Bank shall at all times be within its exclusive control.
SECTION 9.11. Obligations Several. The obligations of each
Bank hereunder are several, and no Bank shall be responsible for the obligations
or commitment of any other Bank hereunder.
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Nothing contained in this Agreement and no action taken by the Banks pursuant
hereto shall be deemed to constitute the Banks to be a partnership, an
association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Bank shall be a separate and independent debt, and
each Bank shall be entitled to protect and enforce its rights arising out of
this Agreement or any other Loan Document and it shall not be necessary for any
other Bank to be joined as an additional party in any proceeding for such
purpose.
SECTION 9.12. Georgia Law. This Agreement and each Term Loan
Note shall be construed in accordance with and governed by the law of the State
of Georgia.
SECTION 9.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Term Loan Notes or any of the other
Loan Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of
interest, and all charges, amounts or fees contracted for, charged or collected
pursuant to this Agreement, the Term Loan Notes or the other Loan Documents and
deemed to be interest under applicable law (collectively, "Interest") exceed the
highest rate of interest allowed by applicable law (the "Maximum Rate"), and in
the event any such payment is inadvertently received by any Bank, then the
excess sum (the "Excess") shall be credited as a payment of principal, unless
the Borrower shall notify such Bank in writing that it elects to have the Excess
returned forthwith. It is the express intent hereof that the Borrower not pay
and the Banks not receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may legally be paid by the Borrower under
applicable law. The right to accelerate maturity of any of the Loans does not
include the right to accelerate any interest that has not otherwise accrued on
the date of such acceleration, and the Agent and the Banks do not intend to
collect any unearned interest in the event of any such acceleration. All monies
paid to the Agent or the Banks
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hereunder or under any of the Term Loan Notes or the other Loan Documents,
whether at maturity or by prepayment, shall be subject to rebate of unearned
interest as and to the extent required by applicable law. By the execution of
this Agreement, the Borrower covenants, to the fullest extent permitted by law,
that (i) the credit or return of any Excess shall constitute the acceptance by
the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any
other remedy, legal or equitable , against the Agent or any Bank, based in whole
or in part upon contracting for charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by the Agent or any Bank, all interest
at any time contracted for, charged or received from the Borrower in connection
with this Agreement, the Term Loan Notes or any of the other Loan Documents
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of the Commitments.
The Borrower, the Agent and each Bank shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment as an expense,
fee or premium rather than as Interest and (ii) exclude voluntary prepayments
and the effects thereof. The provisions of this Section shall be deemed to be
incorporated into each Term Loan Note and each of the other Loan Documents
(whether or not any provision of this Section is referred to therein). All such
Loan Documents and communications relating to any Interest owed by the Borrower
and all figures set forth therein shall, for the sole purpose of computing the
extent of obligations hereunder and under the Term Loan Notes and the other Loan
Documents be automatically recomputed by the Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 9.15. Interpretation. No provision of this Agreement
or any of the other Loan Documents shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
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SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction.
The Borrower (a) and each of the Banks and the Agent irrevocably waives, to the
fullest extent permitted by law, any and all right to trial by jury in any legal
proceeding arising out of this Agreement, any of the other Loan Documents, or
any of the transactions contemplated hereby or thereby, (b) submits to the
nonexclusive personal jurisdiction in the State of Georgia, the courts thereof
and the United States District Courts sitting therein, for the enforcement of
this Agreement, the Term Loan Notes and the other Loan Documents, (c) waives any
and all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of Georgia for the purpose of litigation to enforce this
Agreement, the Term Loan Notes or the other Loan Documents, and (d) agrees that
service of process may be made upon it in the manner prescribed in Section 9.01
for the giving of notice to the Borrower. Nothing herein contained, however,
shall prevent the Agent from bringing any action or exercising any rights
against any security and against the Borrower personally, and against any assets
of the Borrower, within any other state or jurisdiction.
SECTION 9.17. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.18. Source of Funds -- ERISA. Each of the Banks
hereby severally (and not jointly) represents to the Borrower that no part of
the funds to be used by such Bank to fund the Loans hereunder from time to time
constitutes (i) assets allocated to any separate account maintained by such Bank
in which any employee benefit plan (or its related trust) has any interest nor
(ii) any other assets of any employee benefit plan. As used in this Section, the
terms "employee benefit plan" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
SECTION 9.19. Entire Agreement. The Loan Documents and, as
between the Borrower and the Agent, the Agent's Letter
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Agreement, contain the entire agreement between the Borrower, the Agent and the
Banks relating to the credit transactions contemplated hereby and supersede
entirely any and all prior written or oral agreements with respect thereto; and
the Borrower acknowledges and agrees that there are no contemporaneous oral
agreements with respect to the subject matter hereof.
SECTION 9.20. More Restrictive Agreements. Should the Borrower
or any Guarantor, while this Agreement is in effect or any Term Loan Note
remains unpaid, enter into, refinance or modify the relevant documents
pertaining to any existing or future Debt for money borrowed which constitutes
revolving credit, in an amount exceeding $5,000,000 in aggregate amount to any
lender or group of lenders acting in concert with one another, pursuant to a
loan agreement, credit agreement, note purchase agreement, indenture or other
similar instrument, which instrument includes covenants, warranties,
representations, or defaults or events of default (or any other type of
restriction which would have the practical effect of any of the foregoing,
including, without limitation, any "put" or mandatory prepayment of such debt)
other than those set forth herein or in any of the other Loan Documents, the
Borrower shall promptly so notify the Agent and, if the Agent, in the discretion
of the Agent, shall so request by written notice to the Borrower, the Borrower,
the Agent and the Required Banks (in their sole discretion and based on their
respective independent credit judgment, and subject to Section 9.06) shall
promptly amend this Agreement to incorporate some or all of such provisions,
into this Agreement and, to the extent necessary and reasonably desirable to the
Agent and the Required Banks (in their sole discretion and based on their
respective independent credit judgment, and subject to Section 7.06), into any
of the other Loan Documents, all at the election of the Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, under seal, by their respective authorized
officers as of the day and year first above written.
GABLES REALTY LIMITED PARTNERSHIP (SEAL)
By: Gables GP, Inc., its sole
general partner
By: /s/ MARVIN R. BANKS, JR.
-----------------------------------------------------
Marvin R. Banks, Jr., Vice President
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent and as a Bank (SEAL)
Commitment:
$40,000,000
By: /s/ MARY F. HUGHES
-----------------------------------------------------
Title: Vice President
Commitment
Percentage: Lending Office
100.00% Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Real Estate Finance Division
Telecopier number: 404-332-4005
Confirmation number: 404-332-6971
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EXHIBIT I
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of November 20, 1996, by GABLES
GP, INC., a Texas corporation, GABLES RESIDENTIAL TRUST, a Maryland Trust,
GABLES-TENNESSEE PROPERTIES, a Tennessee general partnership, PIN OAK GREEN, a
Texas general partnership and PIN OAK PARK APARTMENTS, a Texas general
partnership (each a "Guarantor", and collectively, the "Guarantors", which
terms shall include any subsidiary of Gables Realty Limited Partnership and any
owner of an Escrowed Mortgage Propertywhich becomes a Guarantor pursuant to
Section 15 hereof and Sections 5.23 or 5.24(b) of the Credit Agreement referred
to below) in favor of the Agent, for the ratable benefit of the Banks, under
the Credit Agreement referred to below;
W I T N E S S E T H
WHEREAS, GABLES REALTY LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent"), and
certain other Banks from time to time party thereto have entered into a certain
Term Loan Credit Agreement dated as of even date herewith (as it may be amended
or modified further from time to time, the "Credit Agreement"), providing,
subject to the terms and conditions thereof, for extensions of credit to be
made by the Banks to the Borrower which will the benefit the Guarantors;
WHEREAS, it is required by Section 3.01(b) of the Credit Agreement, that
the Guarantors execute and deliver this Guaranty whereby the Guarantors shall
guarantee the payment when due of all principal, interest and other amounts
that shall be at any time payable by the Borrower under the Credit Agreement,
the Term Loan Notes and the other Loan Documents; and
WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors,
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whether directly or indirectly, and in order to induce the Banks and the Agent
to enter into the Credit Agreement, the Guarantors are willing to guarantee the
obligations of the Borrower under the Credit Agreement, the Term Loan Notes, and
the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. Representations and Warranties. The Guarantors incorporate
herein by reference as fully as if set forth herein all of the representations
and warranties pertaining to the Guarantors contained in Article IV of the
Credit Agreement (which representations and warranties shall be deemed to have
been renewed by the Guarantors upon each Borrowing under the Credit Agreement).
SECTION 3. Covenants. The Guarantors covenant that, so long as any Bank
has any Commitment outstanding under the Credit Agreement or any amount payable
under the Credit Agreement or any Term Loan Note shall remain unpaid, the
Guarantors will fully comply with those covenants set forth in Article V of the
Credit Agreement pertaining to the Guarantors, and the Guarantors incorporate
herein by reference as fully as if set forth herein all of such covenants.
SECTION 4. The Guaranty. The Guarantors hereby unconditionally and
jointly and severally guarantee (i) the full and punctual payment (whether at
stated maturity, upon acceleration or otherwise) of the principal of and
interest on each Term Loan Note issued by the Borrower pursuant to the Credit
Agreement, and the full and punctual payment of all other amounts payable by
the Borrower under the Credit Agreement, including, without limitation, all
Loans and interest thereon, all compensation and indemnification amounts and
fees payable pursuant to the Credit Agreement and the Agent's Letter Agreement,
and (ii) the timely performance of all other obligations of the Borrower under
the Credit Agreement and the other Loan Documents (all of the foregoing
obligations being referred to collectively as the "Guaranteed Obligations").
Upon failure by the Borrower to pay punctually any such amount or perform such
obligations, each of the Guarantors agrees that it shall forthwith on demand
pay the amount not so paid at the place and in the manner
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specified in the Credit Agreement, the relevant Term Loan Note or the relevant
Loan Document, as the case may be, or perform such obligation in accordance with
the terms and conditions therefor specified in the Credit Agreement or the other
Loan Documents, and pay all costs of collection, including reasonable attorneys
fees; provided that, notwithstanding the provisions of O.C.G.A. Section
13-1-11(a)(2) to the contrary, the Guarantor shall not be obligated to pay more
than the attorneys fees actually incurred in connection with such collection.
SECTION 5. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of the Borrower under
the Credit Agreement, any Term Loan Note, or any other Loan
Document, by operation of law or otherwise or any obligation of
any other guarantor of any of the Guaranteed Obligations;
(ii) any modification or amendment of or supplement to the
Credit Agreement, any Term Loan Note, or any other Loan
Document;
(iii) any release, nonperfection or invalidity of any
direct or indirect security, if any, for any obligation of the
Borrower under the Credit Agreement, any Term Loan Note, any
Loan Document, or any obligations of any other guarantor of any
of the Guaranteed Obligations;
144
<PAGE> 105
(iv) any change in the partnership structure or ownership
of the Borrower or corporate structure or ownership of any other
Guarantor or any other guarantor of any of the Guaranteed
Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Borrower, or any other
Guarantor or any other guarantor of the Guaranteed Obligations,
or its assets or any resulting release or discharge of any
obligation of the Borrower, or any other Guarantor or any other
guarantor of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights
which the Guarantors may have at any time against the Borrower,
any other Guarantor or any other guarantor of any of the
Guaranteed Obligations, the Agent, any Bank or any other Person,
whether in connection herewith or any unrelated transactions,
provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower, or any other Guarantor or any other guarantor of any of the
Guaranteed Obligations, for any reason related to the Credit Agreement,
any other Loan Document, or any other Guaranty, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower, or any other Guarantor or any other guarantor of the Guaranteed
Obligations, of the principal of or interest on any Term Loan Note or any
other amount payable by the Borrower under the Credit Agreement, the Term
Loan Notes, or any other Loan Document; or
(vii) any other act or omission to act or delay of any
kind by the Borrower, any other Guarantor or any other guarantor
of the Guaranteed Obligations, the Agent, any Bank or any other
Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or
equitable discharge of the Guarantor's obligations hereunder.
145
<PAGE> 106
SECTION 6. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. The Guarantors' obligations hereunder shall remain
in full force and effect until all Guaranteed Obligations shall have been
paid in full and the Commitments under the Credit Agreement shall have
terminated or expired. If at any time any payment of the principal of or
interest on any Term Loan Note or any other amount payable by the Borrower
under the Credit Agreement or any other Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, the Guarantors' obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
SECTION 7. Waiver of Notice by the Guarantors. The Guarantors
irrevocably waive acceptance hereof, presentment, demand, protest and, to
the fullest extent permitted by law, any notice not provided for herein,
as well as any requirement that at any time any action be taken by any
Person against the Borrower, any other Guarantor or any other guarantor of
the Guaranteed Obligations, or any other Person.
SECTION 8. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under the Credit Agreement,
any Term Loan Note or any other Loan Document is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of the Credit Agreement, any
Term Loan Note or any other Loan Document shall nonetheless be payable by the
Guarantors hereunder forthwith on demand by the Agent made at the request of
the Required Banks.
SECTION 9. Notices. All notices, requests and other communications
to any party hereunder shall be given or made by telecopier or other
writing and telecopied or mailed or delivered to the intended recipient at
its address or telecopier number set forth on the signature pages hereof
or such other address or telecopy number as such party may hereafter
specify for such purpose by notice to the Agent in accordance with the
provisions of Section 9.01 of the Credit Agreement. Except as otherwise
provided in this Guaranty, all such communications shall be deemed to have
been duly given when transmitted by telecopier, or personally delivered
or, in the case of a mailed notice, 3 Domestic Business Days after such
communication is deposited in
146
<PAGE> 107
the mails with first class postage prepaid, in each case given or addressed as
aforesaid.
SECTION 10. No Waivers. No failure or delay by the Agent or any
Banks in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies provided in this
Guaranty, the Credit Agreement, the Term Loan Notes, and the other Loan
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11. Successors and Assigns. This Guaranty is for the
benefit of the Agent and the Banks and their respective successors and
assigns and in the event of an assignment of any amounts payable under the
Credit Agreement, the Term Loan Notes, or the other Loan Documents, the
rights hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty may not
be assigned by the Guarantors without the prior written consent of the
Agent and the Required Banks, and shall be binding upon the Guarantors and
their respective successors and permitted assigns.
SECTION 12. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Guarantors and the Agent, with the
consent of the Required Banks.
147
<PAGE> 108
SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE GUARANTOR
AND THE AGENT HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF
ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA AND FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTORS IRREVOCABLY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
GUARANTORS AND THE Agent HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 14. Taxes, etc. All payments required to be made by the
Guarantor hereunder shall be made without setoff or counterclaim and free
and clear of and without deduction or withholding for or on account of,
any present or future taxes, levies, imposts, duties or other charges of
whatsoever nature imposed by any government or any political or taxing
authority pursuant and subject to the provisions of Section 2.09(c) of the
Credit Agreement, the terms of which are incorporated herein by reference
as to the Guarantors as fully as if set forth herein, and for such
purposes, the rights and obligations of the Borrower under such Section
shall devolve to the Guarantors as to payments required to be made by the
Guarantors hereunder.
SECTION 15. Additional Guarantors; Release of Guarantors. Section
5.23 of the Credit Agreement provides that Significant Subsidiaries must
become Guarantors, and Subsidiaries which are not Significant Subsidiaries
may elect to become Guarantors, by, among other things, executing and
delivering to the Agent a counterpart of this Guaranty. Section 5.24(b)
of the Credit Agreement requires that any owner of an Escrowed Mortgage
Property must become a Guarantor by, among other things, executing and
delivering to the Agent a counterpart of this Guaranty. Any Subsidiary or
owner of an Escrowed Mortgage Propertywhich executes and delivers to the
Agent a counterpart of this Guaranty shall be a Guarantor for all purposes
hereunder.
148
<PAGE> 109
Under certain circumstances described in the last sentence of Section 5.11 of
the Credit Agreement, Subsidiaries which are not Significant Subsidiaries may
obtain from the Agent a written release from this Guaranty pursuant to the
provisions of such sentence, and upon obtaining such written release, any such
Subsidiary shall no longer be a Guarantor hereunder. Each other Guarantor
consents and agrees to any such release and agrees that no such release shall
affect its obligations hereunder.
SECTION 16. Other Waivers by the Guarantors. The Guarantors hereby
expressly waive, renounce, and agree not to assert, any right, claim or
cause of action, including, without limitation, a claim for reimbursement,
subrogation, indemnification or otherwise, against the Borrower arising
out of or by reason of this Guaranty or the obligations of the Guarantors
hereunder, including, without limitation, the payment or securing or
purchasing of any of the Guaranteed Obligations by the Guarantors. The
waiver, renunciation and agreement contained in the immediately preceding
sentence is for the benefit of the Agent and the Banks and also for the
benefit of the Borrower who may assert the benefits thereof as a
third-party beneficiary, and the Guarantors may be released from such
waiver, renunciation and agreement only by the execution and delivery, by
the Agent, the Required Banks and the Borrower, of an instrument expressly
releasing the Guarantors therefrom.
149
<PAGE> 110
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be
duly executed, under seal, by its authorized officer as of the date first
above written.
GABLES GP, INC. (SEAL)
By:
------------------------------
Marvin R. Banks, Jr., Vice
President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES RESIDENTIAL TRUST (SEAL)
By:
------------------------------
Title:
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES-TENNESSEE PROPERTIES (SEAL)
By: Gables Realty Limited
Partnership, a general partner
By: Gables GP, Inc., its
general partner (SEAL)
150
<PAGE> 111
PIN OAK PARTNERSHIP (SEAL)
By: Gables Realty Limited
Partnership, a general partner
By: Gables GP, Inc., its
general partner(SEAL)
By:
--------------------------------
Marvin R. Banks, Jr.,
Vice President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
PIN OAK PARK APARTMENTS (SEAL)
By: Gables Realty Limited
Partnership, a general partner
By: Gables GP, Inc., its
general partner (SEAL)
By:
----------------------------
Marvin R. Banks, Jr.,
Vice President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
151
<PAGE> 112
EXHIBIT J
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
November 20, 1996 by and between GABLES REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Principal"), GABLES GP, INC., a Texas
corporation, GABLES-TENNESSEE PROPERTIES, a Tennessee general partnership,
PIN OAK GREEN, a Texas general partnership and PIN OAK PARK APARTMENTS, a
Texas general partnership (collectively, the "Guarantors" and, together
with any subsidiary of the Principal and any owner of an Escrowed Mortgage
Propertywhich becomes a Guarantor pursuant to the last paragraph hereof,
Section 15 of the Guaranty referred to below and Sections 5.23 and 5.24(b)
of the Credit Agreement referred to below). The Principal and each of the
Guarantors are sometimes hereinafter referred to individually as a
"Contributing Party" and collectively as the "Contributing Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Term Loan Credit Agreement, dated
as of even date herewith among the Principal, the Banks party thereto and
Wachovia Bank of Georgia, N.A., as Agent (such agreement, as the same may
from time to time be amended, modified, restated or extended, being
hereinafter referred to as the "Credit Agreement"; capitalized terms used
herein shall have the meanings ascribed thereto in the Credit Agreement),
the Banks have agreed to extend financial accommodations to the Principal;
WHEREAS, as a condition, among others, to the willingness of the
Agent and the Banks to enter into the Credit Agreement, they have required
that each Guarantor, along with Gables Residential Trust ("GBP"), execute
and deliver that certain Guaranty, dated as of even date herewith (such
agreement, as the same may from time to time be amended, modified,
restated or extended, being hereinafter referred to as the "Guaranty"),
pursuant to which, among other things, the Guarantors and GBP have jointly
and severally agreed to guarantee the "Guaranteed Obligations" (as defined
in the Guaranty); and
WHEREAS, each Guarantor is a direct or indirect subsidiary or
otherwise affiliated with of the Principal and is
152
<PAGE> 113
engaged in businesses related to those of the Principal and each other
Guarantor, and each of the Guarantors will derive direct or indirect economic
benefit from the effectiveness and existence of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce each Guarantor to enter into the
Guaranty, it is agreed as follows:
To the extent that any Guarantor shall, under the Guaranty, make a
payment (a "Guarantor Payment") of a portion of the Guaranteed
Obligations, then, without limiting its rights of subrogation against the
principal, such Guarantor shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Contributing
Parties in an amount, for each such Contributing Party, equal to a
fraction of such Guarantor Payment, the numerator of which fraction is
such Contributing Party's Allocable Amount and the denominator of which is
the sum of the Allocable Amounts of all of the Contributing Parties.
As of any date of determination, the "Allocable Amount" of each
Contributing Party shall be equal to the maximum amount of liability which
could be asserted against such Contributing Party hereunder with respect
to the applicable Guarantor Payment without (i) rendering such
Contributing Party "insolvent" within the meaning of Section 101(31) of
the Federal Bankruptcy Code (the "Bankruptcy Code") or Section 2 of either
the Uniform Fraudulent Transfer Act (the "UFTA") or the Uniform Fraudulent
Conveyance Act (the "UFCA"), (ii) leaving such Contributing Party with
unreasonably small capital, within the meaning of Section 548 of the
Bankruptcy Code or Section 4 of the UFTA or Section 5 of the UFCA, or
(iii) leaving such Contributing Party unable to pay its debts as they
become due within the meaning of Section 548 of the Bankruptcy Code or
Section 4 of the UFTA or Section 6 of the UFCA.
This Agreement is intended only to define the relative rights of the
Contributing Parties, and nothing set forth in this Agreement is intended
to or shall impair the obligations of the Guarantors, jointly and
severally, to pay any amounts, as and when the same shall become due and
payable in accordance with the terms of the Guaranty.
153
<PAGE> 114
The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of each
Guarantor to which such contribution and indemnification is owing.
This Agreement shall become effective upon its execution by each of
the Contributing Parties and shall continue in full force and effect and
may not be terminated or otherwise revoked by any Contributing Party until
all of the Guaranteed Obligations shall have been indefeasibly paid in full
(in lawful money of the United States of America) and discharged and the
Credit Agreement and financing arrangements evidenced and governed by the
Credit Agreement shall have been terminated. Each Contributing Party agrees
that if, notwithstanding the foregoing, such Contributing Party shall have any
right under applicable law to terminate or revoke this Agreement, and such
Contributing Party shall attempt to exercise such right, then such termination
or revocation shall not be effective until a written notice of such revocation
or termination, specifically referring hereto and signed by such Contributing
Party, is actually received by each of the other Contributing Parties and by
the Agent at its notice address set forth in the Credit Agreement. Such
notice shall not affect the right or power of any Contributing Party to
enforce rights arising prior to receipt of such written notice by each of the
other Contributing Parties and the Agent. If any Bank grants additional loans
to the Principal or takes other action giving rise to additional Guaranteed
Obligations after any Contributing Party has exercised any right to terminate
or revoke this Agreement but before the Agent receives such written notice,
the rights of each other Contributing Party to contribution and
indemnification hereunder in connection with any Guarantor Payments made with
respect to such loans or Guaranteed Obligations shall be the same as if such
termination or revocation had not occurred.
Section 5.23 of the Credit Agreement provides that Significant
Subsidiaries must become Guarantors, and Subsidiaries which are not
Significant Subsidiaries may elect to become Guarantors, by, among other
things, executing and delivering to the Agent a counterpart of the
Guaranty and of this Contribution Agreement. Section 5.24(b) of the
Credit Agreement requires that any owner of an Escrowed Mortgage
Property must become a Guarantor by, among other things, executing and
delivering to the Agent a counterpart of this Guaranty. Any Subsidiary or
owner of an Escrowed Mortgage Property which executes and delivers to the
Agent a counterpart of the Guaranty and of this Contribution Agreement
shall be a Guarantor for all purposes hereunder. Under certain
circumstances described in the last sentence of Section 5.11 of the Credit
Agreement, Subsidiaries which are not Significant Subsidiaries may obtain
from the Agent a written release from the Guaranty pursuant to the
provisions of such sentence, and upon obtaining such written release, any
such Subsidiary shall no longer be a Guarantor or Contributing Party
hereunder, and such release shall automatically and without further action
constitute a release by each other Contributing Party of all obligations
of such Subsidiary hereunder. Each other Guarantor consents and agrees to any
such release and agrees that no such release shall affect its obligations
hereunder, except as to the Subsidiary so released.
154
<PAGE> 115
IN WITNESS WHEREOF, each Contributing Party has executed and
delivered this Agreement, under seal, as of the date first above written.
GABLES REALTY LIMITED PARTNERSHIP (SEAL)
By: Gables GP, Inc., its sole
general partner
By:
------------------------------------------
Marvin R. Banks, Jr., Vice President
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES GP, INC. (SEAL)
By:
-------------------------------------------
Marvin R. Banks, Jr., Vice
President
Address:
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
155
<PAGE> 116
GABLES-TENNESSEE PROPERTIES
By: Gables Realty Limited
Partnership, a general partner
By Gables GP, Inc., its general
partner (SEAL)
By:
-------------------------------
Marvin R. Banks, Jr., Vice
President
Address:
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
PIN OAK PARTNERSHIP (SEAL)
By: Gables Realty Limited
Partnership, a general partner
By: Gables GP, Inc., its
general partner (SEAL)
By:
-------------------------------
Marvin R. Banks, Jr.,
Vice President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
156
<PAGE> 117
PIN OAK PARK APARTMENTS (SEAL)
By: Gables Realty Limited
Partnership, a general partner
By: Gables GP, Inc., its
general partner(SEAL)
By:
--------------------------
Marvin R. Banks, Jr.,
Vice President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
157
<PAGE> 1
EXHIBIT 21.1
SCHEDULE OF SUBSIDIARIES OF GABLES RESIDENTIAL TRUST
<TABLE>
<CAPTION>
JURISDICTION OF OTHER NAMES UNDER WHICH
SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS
- ---------------------------------- ------------------ ----------------------------------
<S> <C> <C>
Gables Realty Limited Partnership Delaware None
Gables GP, Inc. Texas None
Central Apartment Management, Texas Gables Residential Services and
Inc. Gables Corporate Accommodations
East Apartment Management, Inc. Georgia Gables Residential Services and
Gables Corporate Accommodations
Gables-Tennessee Properties Tennessee None
Gables Central Construction, Inc. Texas None
Gables East Construction, Inc. Georgia None
Alpha Insurance Agency, Inc. Georgia None
Candlewood Gen Par, Inc. Georgia None
Candlewood-Indian Creek Limited Georgia None
Partnership
Pin Oak Green Texas None
Pin Oak Park Apartments Texas None
GRT Villas Gen Par, Georgia None
Inc. (f.k.a. Candle Creek, Inc.)
GRT Villas Limited Partnership Texas None
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated February 28, 1997, and to all references to our
firm, included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File Nos. 333-00618 and 33-83054) and Form
S-3 (File Nos. 33-90032, 33-89000, 333-40, 333-14329 and 333-13651).
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GABLES RESIDENTIAL TRUST FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,815
<SECURITIES> 0
<RECEIVABLES> 21,505
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 784,600
<DEPRECIATION> 74,903
<TOTAL-ASSETS> 759,660
<CURRENT-LIABILITIES> 0
<BONDS> 390,321
0
0
<COMMON> 193
<OTHER-SE> 281,301
<TOTAL-LIABILITY-AND-EQUITY> 759,660
<SALES> 0
<TOTAL-REVENUES> 116,181
<CGS> 0
<TOTAL-COSTS> 66,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,036
<INCOME-PRETAX> 27,541
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,901
<DISCONTINUED> 0
<EXTRAORDINARY> 520
<CHANGES> 0
<NET-INCOME> 22,381
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 0
</TABLE>
