SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 1-12590
GABLES RESIDENTIAL TRUST
(Exact name of Registrant as specified in its Charter)
MARYLAND 58-2077868
(State of Incorporation) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road, Suite 1450
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
(770) 436 - 4600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year,
if changed since last report)
Common shares of beneficial interest, par value $0.01 per share,
22,086,382 shares
The number of shares outstanding of each of the registrant's classes of
common stock, as of April 30, 1998
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 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) (X) YES ( ) NO
(2) (X) YES ( ) N0
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Page-2
GABLES RESIDENTIAL TRUST
FORM 10 - Q INDEX
Part I - Financial Information Page
Item 1: Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II - Other Information 24
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signature 26
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Page-3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GABLES RESIDENTIAL TRUST
CONSOLIDATED BALANCE SHEETS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS:
- -------
Real estate assets:
Land ............................................................. $ 150,894 $ 150,894
Buildings ........................................................ 772,078 770,305
Furniture, fixtures and equipment ................................ 61,526 60,015
Construction in progress ......................................... 74,594 53,240
Land held for future development ................................. 27,816 21,774
---------- ----------
Real estate assets before accumulated depreciation ............ 1,086,908 1,056,228
Less: accumulated depreciation .................................. (105,699) (98,236)
---------- ----------
Net real estate assets ......................................... 981,209 957,992
Cash and cash equivalents ........................................... 5,924 3,179
Restricted cash ..................................................... 3,862 4,498
Deferred charges, net ............................................... 4,615 4,194
Other assets, net ................................................... 14,725 11,304
---------- ----------
Total assets ................................................... $ 1,010,335 $ 981,167
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Notes payable ....................................................... $ 479,117 $ 435,362
Accrued interest payable ............................................ 2,182 1,999
Preferred dividend payable .......................................... 424 424
Real estate taxes payable ........................................... 5,018 13,568
Accounts payable and accrued expenses - construction ................ 7,612 8,505
Accounts payable and accrued expenses - operating ................... 5,303 5,552
Security deposits ................................................... 2,276 2,260
---------- ----------
Total liabilities .............................................. 501,932 467,670
---------- ----------
Minority interest of unitholders in Operating Partnership ........... 61,024 62,059
---------- ----------
Commitments and contingencies
Shareholders' equity:
Excess shares, $0.01 par value, 51,000 shares authorized .......... -- --
Preferred shares at $25.00 liquidation preference, $0.01 par value,
10,000 shares authorized, 4,600 shares issued and outstanding
at March 31, 1998 and December 31, 1997 ......................... 115,000 115,000
Common shares, $0.01 par value, 100,000 shares authorized,
22,073 and 21,991 shares issued and outstanding at March
31, 1998 and December 31, 1997, respectively .................... 221 220
Additional paid-in capital ........................................ 333,533 339,009
Deferred long-term compensation ................................... (1,375) (594)
Accumulated earnings (deficit) .................................... 0 (2,197)
---------- ----------
Total shareholders' equity ..................................... 447,379 451,438
---------- ----------
Total liabilities and shareholders' equity ..................... $ 1,010,335 $ 981,167
========== ==========
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
Page-4
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
--------- --------
<S> <C> <C>
Rental revenues .................................................... $ 38,561 $ 29,483
Other property revenues ............................................ 1,789 1,338
---------- ----------
Total property revenues ....................................... 40,350 30,821
---------- ----------
Property management revenues ....................................... 667 799
Other .............................................................. 473 612
---------- ----------
Total other revenues .......................................... 1,140 1,411
---------- ----------
Total revenues ................................................ 41,490 32,232
---------- ----------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 13,630 11,058
Depreciation and amortization ...................................... 7,596 5,337
Amortization of deferred financing costs ........................... 222 281
Property management - owned ........................................ 1,076 828
Property management - third party .................................. 578 640
General and administrative ......................................... 1,060 881
Interest ........................................................... 6,335 5,815
Credit enhancement fees ............................................ 121 128
Loss on treasury lock extension .................................... 1,811 --
---------- ----------
Total expenses ................................................ 32,429 24,968
---------- ----------
Income before equity in income of joint ventures and interest income 9,061 7,264
Equity in income of joint ventures ................................. 75 66
Interest income .................................................... 62 122
---------- ----------
Income before gain on sale of real estate assets ................... 9,198 7,452
Gain on sale of real estate assets ................................. -- 4,858
---------- ----------
Income before minority interest and extraordinary loss, net ........ 9,198 12,310
Minority interest of unitholders in Operating Partnership .......... (1,059) (1,900)
---------- ----------
Income before extraordinary loss, net .............................. 8,139 10,410
Extraordinary loss, net of minority interest ....................... -- (602)
---------- ----------
Net income ......................................................... 8,139 9,808
Dividends to preferred shareholders ................................ (2,386) --
---------- ----------
Net income available to common shareholders ........................ $ 5,753 $ 9,808
========== ==========
Weighted average number of common shares outstanding - basic ....... 22,021 19,328
Weighted average number of common shares outstanding - diluted ..... 26,227 23,016
Per Common Share Information:
Income before extraordinary loss, net - basic ...................... $ 0.26 $ 0.54
Extraordinary loss, net - basic .................................... -- ($ 0.03)
Net income - basic ................................................. $ 0.26 $ 0.51
Income before extraordinary loss, net - diluted .................... $ 0.26 $ 0.53
Extraordinary loss, net - diluted .................................. -- ($ 0.03)
Net income - diluted ............................................... $ 0.26 $ 0.50
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-5
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income ....................................................... $ 8,139 $ 9,808
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ................................. 7,818 5,618
Equity in income of joint ventures ............................ (75) (66)
Minority interest of unitholders in Operating Partnership ..... 1,059 1,900
Gain on sale of real estate assets ............................ -- (4,858)
Long-term compensation expense ................................ 255 144
Loss on treasury lock extension ............................... 1,811 --
Extraordinary loss, net of minority interest .................. -- 602
Change in operating assets and liabilities:
Restricted cash ............................................. 810 2,416
Other assets ................................................ (2,588) 457
Other liabilities, net ...................................... (10,361) (7,339)
---------- ----------
Net cash provided by operating activities .............. 6,868 8,682
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchase and construction of real estate assets .................. (31,233) (23,748)
Net proceeds from sale of real estate assets ..................... -- 12,333
Long-term land lease payments .................................... (1,000) --
Distributions received from joint ventures ....................... 99 63
---------- ----------
Net cash used in investing activities ....................... (32,134) (11,352)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Proceeds from the exercise of share options ...................... 552 249
Share Builder Plan contributions ................................. 18 11
Payments of deferred financing costs ............................. (692) (20)
Notes payable proceeds ........................................... 147,500 29,237
Notes payable repayments ......................................... (103,745) (16,945)
Principal escrow deposits ........................................ (174) (171)
Preferred dividends paid ......................................... (2,386) --
Common dividends paid ($0.50 and $0.49 per share, respectively) .. (11,036) (9,465)
Common distributions paid ($0.50 and $0.49 per Unit, respectively) (2,026) (1,729)
---------- ----------
Net cash provided by financing activities ................... 28,011 1,167
---------- ----------
Net change in cash and cash equivalents .......................... 2,745 (1,503)
Cash and cash equivalents, beginning of period ................... 3,179 4,385
---------- ----------
Cash and cash equivalents, end of period ......................... $ 5,924 $ 2,882
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest ...................................... $ 7,697 $ 7,019
Interest capitalized ........................................ 1,545 1,275
---------- ----------
Cash paid for interest, net of amounts capitalized .......... $ 6,152 $ 5,744
========== ==========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and 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 "Gables Residential 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"). 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.
Gables 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 (the
"Operating Partnership"). The Company controls the Operating Partnership 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 March 31, 1998, the Company was an
84.5% economic owner of the Operating Partnership (excluding the Company's
ownership of 100% of the Operating Partnership's Series A Preferred Units).
Gables' 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.
As of March 31, 1998, Gables owned 59 completed multifamily apartment
communities comprising 17,816 apartment homes, of which 35 were developed and 24
were acquired by Gables, and an indirect 25% general partner interest in two
apartment communities developed by Gables comprising 663 apartment homes. Gables
also owned five multifamily apartment communities that were under construction
at March 31, 1998 that are expected to comprise 1,409 apartment homes upon
completion. As of March 31, 1998, Gables owned parcels of land for the future
development of eight apartment communities expected to comprise an estimated
1,992 apartment homes. Additionally, Gables has contracts or options to acquire
additional parcels of land. There can be no assurance that Gables will acquire
these land parcels, however it is Gables' intent to develop an apartment
community on each such land parcel, if purchased.
On April 1, 1998, Gables acquired the properties and operations of Trammell Crow
Residential South Florida ("TCR/SF"), which consisted of 15 multifamily
apartment communities (the "South Florida Communities") containing a total of
4,197 apartment homes (assuming completion of two South Florida Communities
currently under construction), and all of TCR/SF's residential construction and
development and third party management activities in South Florida
(collectively, the "South Florida Transaction"). In consideration for such
properties and operations, Gables (i) paid $155.0 million in cash, (ii) assumed
approximately $135.9 million of tax-exempt debt and (iii) issued approximately
2,348 Units. In addition, up to $12.5 million of the purchase price was deferred
by Gables until January 1, 2000, at which time Gables will issue a number of
Units equal in value to such deferred amount. The South Florida Communities are
located in Palm Beach County, Broward County and Dade County and encompass the
metropolitan areas of Palm Beach, Ft. Lauderdale and Miami, respectively.
In April, 1998, Gables acquired four multifamily apartment communities
comprising a total of 913 apartment homes located in Houston, Texas (the
"Greystone Transaction"). In connection with such acquisition, Gables assumed
approximately $28.2 million of indebtedness and issued approximately 647 Units.
In addition, up to $2.0 million of the purchase price was deferred by Gables for
up to two years from the April, 1998 closing date, at which time Gables will
issue a number of Units, based on the prior two years' economic performance,
equal in value to such deferred amount.
<PAGE>
Page-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
As of April 30, 1998, Gables had contracts to acquire three multifamily
apartment communities comprising a total of 599 apartment homes. There can be no
assurance that such acquisitions will close as contemplated, or that such
acquisitions will be consummated at all. Gables is pursuing other acquisition
opportunities in the ordinary course of business which have not yet been, or may
never be, put under contract.
2. SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
Secondary Common Share Offerings
- --------------------------------
Since the IPO, the Company has issued a total of 11,521 common shares in seven
offerings generating $260,241 in net proceeds which were generally used (i) to
reduce outstanding indebtedness under interim financing vehicles utilized to
fund Gables' development and acquisition activities and (ii) for general working
capital purposes including funding of future development and acquisition
activities.
Preferred Share Offering
- ------------------------
On July 24, 1997, the Company issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series A Preferred Shares"). The net proceeds from this offering of
approximately $111 million were used to reduce outstanding indebtedness under
the interim financing vehicles discussed above. The Series A Preferred Shares,
which may be redeemed by the Company at $25.00 per share, plus accrued and
unpaid dividends, on or after July 24, 2002, have no stated maturity, sinking
fund or mandatory redemption and are not convertible into any other securities
of the Company.
Issuances of Operating Partnership Units
- ----------------------------------------
On December 5, 1995, Gables acquired a parcel of land for the development of an
apartment community, financed in part through the issuance of 111 Units. On July
26, 1996, Gables acquired an apartment community comprising 500 apartment homes,
financed in part through the issuance of 244 Units. On August 21, 1997, Gables
acquired an apartment community comprising 82 apartment homes, financed in part
through the issuance of 95 Units. On October 17, 1997, Gables acquired an
apartment community comprising 295 apartment homes, financed in part through the
issuance of 453 Units. On April 1, 1998, Gables issued 2,348 Units in connection
with the South Florida Transaction. On April 14 and 22, 1998, Gables issued 535
and 112 Units, respectively, in connection with the Greystone Transaction.
3. 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).
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 Unit presented for redemption for one common share of the
Company. The Company currently 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.
<PAGE>
Page-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
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. Because 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 applicable
period.
The accompanying interim unaudited financial statements have been prepared by
Gables' management in accordance with generally accepted accounting principles
("GAAP") for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normally recurring adjustments) considered necessary for a fair
presentation for these interim periods have been included. The results of
operations for the interim period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the full year. These
financial statements should be read in conjunction with the financial statements
of Gables Residential Trust included in the Gables Residential Trust Form 10-K
for the year ended December 31, 1997.
4. PER SHARE INFORMATION
Basic earnings per share are computed based on net income available to common
shareholders and the weighted average number of common shares outstanding.
Diluted earnings per share reflect the assumed issuance of common shares under
share option and incentive plans and upon conversion of Units. In February,
1997, the FASB issued SFAS No. 128, "Earnings Per Share," which specifies the
computation, presentation and disclosure requirements for earnings per share.
Gables adopted SFAS No. 128 for the year ended December 31, 1997. All prior
period earnings per share data were restated to conform with the provisions of
SFAS No. 128. The per share amounts reported under SFAS No. 128 are not
materially different from those calculated and presented under APB Opinion No.
15. Reconciliations of income available to common shareholders and weighted
average common shares used in the basic and diluted earnings per share
computations are detailed below.
Three Months Ended March 31,
1998 1997
---- ----
BASIC AND DILUTED INCOME AVAILABLE TO
COMMON SHAREHOLDERS (NUMERATOR):
Income before extraordinary loss, net - basic $5,753 $10,410
Minority interest of unitholders in Operating Partnership 1,059 1,900
------ ------
Income before extraordinary loss, net - diluted $6,812 $12,310
====== ======
Net income - basic $5,753 $9,808
Minority interest of unitholders in Operating Partnership 1,059 1,790
------ ------
Net income - diluted $6,812 $11,598
====== ======
COMMON SHARES (DENOMINATOR):
Average shares outstanding - basic 22,021 19,328
Incremental shares from assumed conversions of stock options 150 160
Incremental shares from assumed conversions of Units 4,056 3,528
--------- --------
Average shares outstanding-diluted 26,227 23,016
========= ========
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Page-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
5. EXTRAORDINARY LOSS, NET
Extraordinary loss, net for the three months ended March 31, 1997 represents (i)
the write-off of unamortized deferred financing costs and prepaid credit
enhancement fees associated with the defeasance of the tax-exempt bond financing
encumbering the Club Candlewood property that was sold in January, 1997 and (ii)
the write-off of unamortized deferred financing costs associated with the
February 28, 1997 retirement of a conventional mortgage note payable that was
scheduled to mature on September 1, 1997. The extraordinary loss totaling $712
is presented net of the $110 portion of the loss attributable to the minority
interest unitholders.
6. INTEREST RATE PROTECTION AGREEMENTS
Gables uses interest rate protection agreements in the form of "rate caps" and
"rate swaps" to manage its exposure to interest rate changes. These agreements
are considered hedges of Gables' borrowings. Upfront amounts paid to purchase
rate cap agreements are capitalized and amortized over the terms of the related
agreements and are written off upon the expiration thereof. Such amortization is
included in amortization of deferred financing costs in the accompanying
statements of operations. Monthly amounts paid or received under rate cap and
rate swap agreements are recognized as adjustments to interest expense.
In certain situations, Gables uses forward treasury lock agreements to mitigate
the potential effects of changes in interest rates for prospective transactions.
Cash payments made or received upon settlement of such hedge agreements are
deferred and amortized as an adjustment to interest expense over the life of the
related debt instrument. In the first quarter of 1998, Gables amended two such
agreements to extend the termination date. In connection with such extension,
Gables recorded a $1,811 loss in accordance with GAAP. The market rate in effect
on the date of extension is used as the "locked-in" rate for purposes of
recording interest expense over the life of the debt instrument the treasury
lock hedged.
<PAGE>
Page-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
- --------
Gables is a self-administered and self-managed real estate investment trust (a
"REIT") focused within the multifamily industry in the Southwestern and
Southeastern region of the United States (the "Sunbelt" or "Sunbelt Region").
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' objective is to increase shareowner value by being a dominant owner and
operator of Class A multifamily communities in the Sunbelt Region. To achieve
its objective, Gables employs a number of strategies including operating high
quality, well-located assets in a diverse set of select Sunbelt markets which
have similar demographic characteristics such as diverse economies with
projected job growth. Gables' primary target customer is the more affluent
renter-by-choice, which requires a focus on customer service through highly
trained associates and the maintenance of Gables' assets to a high standard.
Gables intends to grow cash flow from operating 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 through improved economies of scale. Due to the cyclical nature of the
real estate markets, Gables has adopted an investment strategy based on strong
local presence and expertise which will allow for growth in assets through both
acquisition and development as warranted by underlying market fundamentals, and
that will provide for both favorable initial returns and long-term growth
prospects. Gables believes the successful execution of these operating and
investment strategies will result in consistent high quality growth in operating
cash flow.
Gables believes that it is well positioned to achieve its objective as a result
of its long-established presence as a fully integrated real estate management,
development, construction and acquisition company in each of Gables' core
markets for the past fifteen years. Gables believes that this long-term, local
market presence gives it a competitive advantage with regard to its ability to
generate increased cash flow from property operations during different economic
cycles and to new investment opportunities that involve site selection, market
information and 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 and South Florida markets which have the common growth
characteristics of the core markets.
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. 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. Gables 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
financial statements and the notes thereto. This Report on Form 10-Q 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 certain factors set forth in the
section entitled "Certain Factors Affecting Future Operating Results" on Page 22
of this Form 10-Q and elsewhere in this report.
<PAGE>
Page-11
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and 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 "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. At the completion of the Company's
initial public offering on January 26, 1994 (the "IPO"), Gables sold 9,430
common shares (including 1,230 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 Common Share Offerings
- --------------------------------
Since the IPO, the Company has issued a total of 11,521 common shares in seven
offerings generating $260,241 in net proceeds which were generally used (i) to
reduce outstanding indebtedness under interim financing vehicles utilized to
fund Gables' development and acquisition activities and (ii) for general working
capital purposes including funding of future development and acquisition
activities.
Preferred Share Offering
- ------------------------
On July 24, 1997, the Company issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series A Preferred Shares"). The net proceeds from this offering of
approximately $111 million were used to reduce outstanding indebtedness under
the interim financing vehicles discussed above. The Series A Preferred Shares,
which may be redeemed by the Company at $25.00 per share, plus accrued and
unpaid dividends, on or after July 24, 2002, have no stated maturity, sinking
fund or mandatory redemption and are not convertible into any other securities
of the Company.
Issuances of Operating Partnership Units
- ----------------------------------------
On December 5, 1995, Gables acquired a parcel of land for the development of an
apartment community, financed in part through the issuance of 111 minority units
of limited partnership interest in the Operating Partnership ("Units"). On July
26, 1996, Gables acquired an apartment community comprising 500 apartment homes,
financed in part through the issuance of 244 Units. On August 21, 1997, Gables
acquired an apartment community comprising 82 apartment homes, financed in part
through the issuance of 95 Units. On October 17, 1997, Gables acquired an
apartment community comprising 295 apartment homes, financed in part through the
issuance of 453 Units. On April 1, 1998, Gables issued 2,348 Units in connection
with the acquisition of the properties and operations of Trammell Crow
Residential South Florida ("TCR/SF") consisting of 15 apartment communities
comprising 4,197 apartment homes and all of TCR/SF's residential construction
and development and third party management activities in South Florida. On April
14 and 22, 1998, Gables issued 535 and 112 Units, respectively, in connection
with the acquisition of four apartment communities comprising 913 apartment
homes.
<PAGE>
Page-12
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
Results of Operations
- ---------------------
Comparison of operating results of Gables for the three months ended March 31,
1998 (the "1998 Period") to the three months ended March 31, 1997 (the "1997
Period").
Gables' net income is generated primarily from the operation of its apartment
communities. For purposes of evaluating comparative operating performance,
Gables categorizes its operating communities based on the period each community
reaches stabilized occupancy. A community is considered by Gables 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 Gables' apartment communities combined for the
three months ended March 31, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------- ---------- ---------- -----------
$ %
1998 1997 Change Change
----------- --------- --------- ----------
RENTAL AND OTHER REVENUE:
<S> <C> <C> <C> <C>
Same store communities (1) $29,287 $27,879 $1,408 5.1%
Communities stabilized during the 1998 Period, but not during the 1997 4,812 2,713 2,099 77.4%
Period (2)
Development and lease-up communities (3) 831 54 777 1438.9%
Acquired communities (4) 5,420 0 5,420 ---
Sold communities (5) 0 175 (175) -100.0%
--------- --------- --------- ----------
Total property revenues $40,350 $30,821 $9,529 30.9%
--------- --------- --------- ----------
PROPERTY OPERATING AND MAINTENANCE EXPENSE (EXCLUSIVE OF DEPRECIATION
AND AMORTIZATION):
Same store communities (1) $9,835 $9,907 ($72) -0.7%
Communities stabilized during the 1998 Period, but not during the 1997 1,650 1,027 623 60.7%
Period (2)
Development and lease-up communities (3) 265 9 256 2844.4%
Acquired communities (4) 1,880 0 1,880 --
Sold communities (5) 0 115 (115) -100.0%
--------- ---------- ---------- ----------
Total specified expenses $13,630 $11,058 $2,572 23.3%
--------- ---------- ---------- ----------
Revenues in excess of specified expenses $26,720 $19,763 $6,957 35.2%
--------- ---------- ---------- ----------
Revenues in excess of specified expenses as a percentage of total
property revenues 66.2% 64.1% --- 2.1%
--------- --------- ---------- ----------
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1998
Period and 1997 Period.
(2) Communities which were completed and fully stabilized during all of the
1998 Period, but were not completed and fully stabilized during all of the
1997 Period.
(3) Communities in the development/lease-up phase which were not fully
stabilized during all or any of the 1998 Period.
(4) Communities which were acquired subsequent to January 1, 1997.
(5) Communities which were sold subsequent to January 1, 1997.
</FN>
</TABLE>
Total property revenues increased $9,529, or 30.9%, from $30,821 to $40,350 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:
<PAGE>
Page-13
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
Same store communities:
<TABLE>
<CAPTION>
Percent
Increase Increase
(Decrease) (Decrease) Increase
Number of in Total in Total Occupancy (Decrease)
Number of Apartment Percent Property Property During the in
Market Properties Homes of Total Revenues Revenues 1998 Period Occupancy
-------- ----------- ---------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston 14 5,045 37.7% $841 8.0% 95.6% 1.0%
Atlanta 12 3,470 25.9% 171 2.4% 95.4% 2.4%
Dallas 7 1,659 12.4% 281 7.2% 94.5% 0.4%
Nashville 4 1,166 8.7% -32 -1.4% 95.6% -0.6%
Memphis 2 964 7.2% 99 6.0% 95.3% 4.6%
San Antonio 2 544 4.1% 25 2.2% 91.8% -0.7%
Austin 2 532 4.0% 23 1.8% 91.8% -1.1%
----- ------ ------ ------ ------ -------- -------
43 13,380 100.0% $1,408 5.1% 95.1% 1.2%
===== ====== ====== ====== ====== ======== =======
</TABLE>
Communities stabilized during the 1998 Period but not during the 1997 Period:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ----------- --------- --------- --------- ------------
Atlanta 4 1,246 61.2% $1,675 93.6%
Memphis 2 490 24.1% 310 91.4%
Dallas 1 300 14.7% 114 93.7%
--- ------ ------ ------ -----
7 2,036 100.0% $2,099 93.1%
=== ====== ====== ====== =====
Development and lease-up communities:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ------------ --------- -------- -------- -----------
Austin 2 529 57.8% $772 51.6%
Atlanta 1 386 42.2% 5 0.3%
--- ---- ------ ---- ------
3 915 100.0% $777 32.2%
=== ==== ====== ==== ======
Other revenues decreased $271, or 19.2%, from $1,411 to $1,140 due primarily to
a decrease in property management revenues of $132, or 16.5%, from $799 to $667
resulting from a net decrease of properties managed by Gables for third parties
primarily due to these properties being sold by the owners.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $2,572, or 23.3%, from $11,058 to $13,630 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities. Such increase was offset in part by a decrease in
property operating and maintenance expense for same store communities of 0.7%.
The same store decrease in operating expenses represents reduced utilities and
marketing expenses, offset in part by increased payroll costs and property
taxes.
<PAGE>
Page-14
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
Depreciation and amortization expense increased $2,259, or 42.3%, from $5,337 to
$7,596 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 $186, or 12.7%, from $1,468 to $1,654 due primarily
to inflationary increases in expenses, and certain non-recurring expense savings
in the 1997 Period. Gables allocates property management expenses to both owned
communities and third party properties based on the proportionate share of total
apartment homes and units managed.
General and administrative expense increased $179, or 20.3%, from $881 to $1,060
due primarily to (i) increases in certain costs associated with increases in
Gables' size, (ii) increased compensation costs and (iii) inflationary increases
in expenses.
Interest expense increased $520, or 8.9%, from $5,815 to $6,335 due to an
increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase. 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.
Loss on treasury lock extension of $1,811 in the 1998 Period represents the loss
recorded, in accordance with generally accepted accounting principles ("GAAP"),
in connection with the amendment of two forward treasury lock agreements to
extend the termination date. The market rate in effect on the date of extension
is used as the "locked-in rate" for purposes of recording interest expense over
the life of the debt instrument the treasury lock hedged.
Gain on sale of real estate assets of $4,858 in the 1997 Period represents the
gain generated in connection with the January, 1997 sale of Club Candlewood, a
community comprised of 486 apartment homes.
Extraordinary loss, net in the 1997 Period represents (i) the write-off of
unamortized deferred financing costs and prepaid credit enhancement fees
associated with the defeasance of the tax-exempt bond financing encumbering the
Club Candlewood property that was sold in January, 1997 and (ii) the write-off
of unamortized deferred financing costs associated with the February 28, 1997
retirement of a conventional mortgage note payable that was scheduled to mature
on September 1, 1997. The extraordinary loss totaling $712 is presented net of
the $110 portion of the loss attributable to the minority interest unitholders
in the Operating Partnership.
Net income available to common shareholders decreased $4,055, or 41.3%, from
$9,808 to $5,753 primarily due to the reasons discussed above.
Liquidity and Capital Resources
- -------------------------------
Gables' net cash provided by operating activities decreased from $8,682 for the
three months ended March 31, 1997 to $6,868 for the three months ended March 31,
1998, due to (i) the change in restricted cash between periods of $1,606, (ii)
the change in other assets between periods of $3,045, and (iii) the change in
other liabilities between periods of $3,022. Such decreases were offset in part
by an increase of $5,859 in income before certain non-cash items including
depreciation, amortization, equity in income of joint ventures, minority
interest of unitholders in Operating Partnership, gain on sale of real estate
assets, long-term compensation expense, loss on treasury lock extension and net
extraordinary losses.
Gables' net cash used in investing activities increased from $11,352 for the
three months ended March 31, 1997 to $32,134 for the three months ended March
31, 1998, due primarily to increased development and acquisition activities in
1998 when compared to 1997, and the net proceeds from the sale of real estate
assets in 1997. During the three months ended March 31, 1998, Gables expended
approximately $28.8 million related to development expenditures, including
related land acquisitions; approximately $1.1 million related to capital
expenditures for operating apartment communities; and approximately $2.2 million
related to renovation expenditures.
<PAGE>
Page-15
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
Gables' net cash provided by financing activities increased from $1,167 for the
three months ended March 31, 1997 to $28,011 for the three months ended March
31, 1998. During the three months ended March 31, 1998, Gables had net
borrowings of $43.8 million which were used primarily to fund Gables'
development and acquisition activities discussed previously. These proceeds from
financing activities were offset in part by the payment of dividends and
distributions totaling approximately $13.1 million.
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 organizational and
operational requirements, including a requirement that they currently distribute
95% 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.
In March, 1998, Gables closed a $100.0 million offering of the Operating
Partnership's senior unsecured notes and used the net proceeds of approximately
$98.8 million to reduce borrowings under its Credit Facilities. The notes bear
interest at 6.80%, were priced to yield 6.85% and mature in March, 2005.
As of March 31, 1998, Gables had total indebtedness of $479,117, cash and cash
equivalents of $5,924 and principal escrow deposits reflected in restricted cash
of $1,921. Gables' indebtedness includes $95,810 in conventional fixed-rate
mortgage notes payable secured by individual properties, $258,382 in unsecured
fixed-rate indebtedness, $104,925 in tax-exempt bond indebtedness and $20,000 in
borrowings outstanding under its Credit Facilities. Gables' indebtedness has an
average of 7.1 years to maturity at March 31, 1998. Excluding monthly principal
amortization payments, over the next five years Gables has the following
scheduled debt maturities for indebtedness outstanding at March 31, 1998:
1998 $ 0
1999 0
2000 20,000
2001 40,000
2002 127,322
The debt maturities in 2000 of $20,000 relate to outstanding indebtedness under
the $175 Million Credit Facility. In May, 1998, the maturity date of such
facility was extended to May, 2001 with two one-year extension options. The debt
maturities in 2002 include $44,930 of tax-exempt bond indebtedness
credit-enhanced through a letter of credit facility which has unlimited one-year
extension options.
Gables' dividends through the first quarter of 1998 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.
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. 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.
<PAGE>
Page-16
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
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 Gables' investment requirements.
$175 Million Credit Facility
- ----------------------------
In March, 1996, Gables closed a $175 million unsecured revolving credit
facility. Gables' availability under the facility is limited to the lesser of
the total $175 million commitment or the borrowing base. The borrowing base
available under the facility is based on the value of Gables' unencumbered real
estate assets as compared to the amount of Gables' unsecured indebtedness. As of
March 31, 1998, Gables had $20 million in borrowings outstanding under the
facility and, therefore, had $155 million of remaining capacity on the $175
million available commitment. Borrowings bore interest at LIBOR plus 1.50%
(reduced from 1.65% in November, 1996) through April, 1997. In April, 1997,
Gables' borrowing costs under the facility were reduced to LIBOR plus 1.10% in
connection with the attainment of the senior unsecured debt ratings of BBB from
Standard and Poor's and Baa2 from Moody's Investors Service (the "Credit
Ratings"). In August, 1997, Gables' borrowing costs were renegotiated and were
reduced to LIBOR plus 0.80%. Additionally, a competitive bid option was added
for up to 50% of the total commitment. In May, 1998, the $175 million commitment
level was increased to $225 million and the maturity date was extended to May,
2001 with two one-year extension options.
$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. Gables
has exercised the first of its one-year extension options resulting in a
maturity date for the facility of October, 1998. Borrowings bore interest under
this facility at LIBOR plus 1.50% through April, 1997. In April, 1997, Gables'
borrowing costs were reduced to LIBOR plus 1.10% in connection with the
attainment of the Credit Ratings. In August, 1997, Gables' borrowing costs were
renegotiated and were reduced to LIBOR plus 0.80%. As of March 31, 1998, Gables
had no borrowings outstanding under this facility. In May, 1998, the $20 million
commitment was increased to $25 million.
Restrictive Covenants
- ---------------------
Certain of Gables' 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.
Gables 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.
<PAGE>
Page-17
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- -------------------------------------------------------------
Acquisitions - South Florida
- ----------------------------
On April 1, 1998, Gables acquired the properties and operations of Trammell Crow
Residential South Florida ("TCR/SF"), which consisted of 15 multifamily
apartment communities (the "South Florida Communities") containing a total of
4,197 apartment homes (assuming completion of two South Florida Communities
currently under construction), and all of TCR/SF's residential construction and
development and third party management activities in South Florida. In
consideration for such properties and operations, Gables(i) paid $155.0 million
in cash, (ii) assumed approximately $135.9 million of tax-exempt debt and (iii)
issued approximately 2,348 Units. The cash portion of the purchase price was
funded through borrowings under the Credit Facilities. In addition, up to $12.5
million of the purchase price was deferred by Gables until January 1, 2000, at
which time Gables will issue a number of Units equal in value to such deferred
amount.
Acquisitions - Houston
- ----------------------
In April, 1998, Gables acquired four multifamily apartment communities located
in Houston, comprising a total of 913 apartment homes. In connection with such
acquisition, Gables assumed approximately $28.2 million of indebtedness and
issued approximately 647 Units. In addition, up to $2.0 million of the purchase
price was deferred by Gables for up to two years from the April, 1998 closing
date, at which time Gables will issue a number of Units, based on the prior two
years' economic performance, equal in value to such deferred amount.
<PAGE>
Page-18
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
DEVELOPMENT COMMUNITIES AT MARCH 31, 1998
Certain information regarding Gables' communities under development at March 31,
1998 is presented below.
<TABLE>
<CAPTION>
Actual or Estimated Quarter of
Number of Total Percent at March 31, 1998 ---------------------------------------------------------
Apartment Budgeted ------------------------- Construction Initial Construction Stabilized
Community Name Homes Cost Complete Leased Occupied Start Occupancy End Occupancy
- ------------------- ------- ---- -------- ------ -------- ------- --------- ----------- ------------
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATLANTA, GA
Gables at Sugarloaf 386 $28.7 59% 8% 3% 2 Q 1997 1 Q 1998 1 Q 1999 2 Q 1999
AUSTIN, TX
Gables Bluffstone 256 20.5 96% 29% 22% 1 Q 1997 4 Q 1997 2 Q 1998 1 Q 1999
HOUSTON, TX
Gables New Territory 256 15.2 70% 10% --- 3 Q 1997 2 Q 1998 4 Q 1998 2 Q 1999
ORLANDO, FL
The Commons at
Little Lake Bryan I 280 21.7 79% 100% 28% 2 Q 1997 1 Q 1998 3 Q 1998 3 Q 1998
Gables Celebration 231 23.4 38% 37% --- 3 Q 1997 2 Q 1998 4 Q 1998 4 Q 1998
------- ------
Totals 1,409 $109.5
======= ======
<FN>
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 and estimates contained in the table above 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 Gables' 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.
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.
Stabilized occupancy is defined as the earlier to occur of (i) 93% physical
occupancy or (ii) one year after completion of construction.
</FN>
</TABLE>
<PAGE>
Page-19
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
STABILIZED APARTMENT COMMUNITIES AT MARCH 31, 1998
<TABLE>
<CAPTION>
Number of March 31, 1998 Scheduled Rent Per
Apartment March 31, 1998 ---------------------------------
Community Name Homes Occupancy Unit Square Foot
- -------------- ----- --------- ---- -----------
<S> <C> <C> <C> <C>
Houston, TX
- -----------
Baybrook Village 776 99% $570 $0.71
Gables Bradford Place 372 96% 735 0.85
Gables Bradford Pointe 360 96% 638 0.83
Gables Champions 404 96% 798 0.88
Gables CityPlaza 246 98% 876 0.99
Gables Cityscape 252 98% 902 1.06
Gables CityWalk/Waterford Sq. 317 98% 891 1.10
Gables Edgewater 292 94% 818 0.93
Gables Meyer Park 345 97% 852 0.99
Gables of First Colony 324 92% 925 0.93
Gables Piney Point 246 96% 916 0.99
Gables Pin Oak Green 582 97% 944 0.93
Gables Pin Oak Park 477 96% 975 0.96
Gables River Oaks 228 97% 1,367 1.12
Metropolitan Uptown (JV) 318 97% 1,010 1.11
Rivercrest 140 99% 716 0.85
Westhollow Park 412 96% 608 0.68
-------- ------- ------ ------
6,091 97% 829 0.92
Atlanta, GA
- -----------
Briarcliff Gables 104 98% 1,081 0.87
Buckhead Gables 162 98% 783 1.03
Dunwoody Gables 311 97% 798 0.85
Gables Cinnamon Ridge 200 97% 649 0.68
Gables Cityscape 192 97% 805 0.97
Gables Northcliff 82 100% 1,113 0.71
Gables Over Peachtree 263 91% 1,009 1.11
Gables Vinings 315 98% 955 0.89
Gables Walk 310 95% 985 0.83
Gables Wood Arbor 140 97% 685 0.75
Gables Wood Crossing 268 97% 714 0.75
Gables Wood Glen 380 96% 677 0.68
Gables Wood Knoll 312 98% 679 0.68
Gables Mill 438 95% 804 0.87
Lakes at Indian Creek 603 95% 563 0.62
Rock Springs Estates 295 97% 879 0.87
Roswell Gables I 384 94% 818 0.75
Roswell Gables II 284 94% 818 0.69
Spalding Gables 252 94% 844 0.85
Wildwood Gables 546 97% 840 0.74
----- ----- ---- ------
5,841 96% 798 0.79
Dallas, TX
- ----------
Arborstone 536 94% 482 0.67
Gables at Pearl Street 108 98% 1,411 1.30
Gables CityPlace 232 95% 1,365 1.30
Gables Green Oaks 300 92% 832 0.87
Gables Mirabella 126 99% 1,214 1.33
Gables Preston 126 94% 1,063 0.97
Gables Spring Park 188 88% 952 0.90
Gables Turtle Creek 150 97% 1,203 1.20
Gables Valley Ranch 319 96% 933 0.91
----- ----- ----- ------
2,085 94% 922 0.98
</TABLE>
<PAGE>
Page-20
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
STABILIZED APARTMENT COMMUNITIES AT MARCH 31, 1998
(continued from previous page)
<TABLE>
<CAPTION>
Number of March 31, 1998 Scheduled Rent Per
Apartment March 31, 1998 ---------------------------------
Community Name Homes Occupancy Unit Square Foot
- -------------- ----- --------- ---- -----------
<S> <C> <C> <C> <C>
Memphis, TN
- -----------
Arbors of Harbortown (JV) 345 95% $840 $0.85
Gables Cordova 464 96% 675 0.72
Gables Germantown 252 94% 906 0.78
Gables Quail Ridge 238 92% 794 0.67
Gables Stonebridge 500 96% 634 0.72
----- ----- ----- ------
1,799 95% 744 0.75
Nashville, TN
- -------------
Brentwood Gables 254 96% 856 0.76
Gables Hendersonville 364 96% 638 0.68
Gables Hickory Hollow I 272 97% 616 0.68
Gables Hickory Hollow II 276 97% 616 0.65
----- ----- ----- ------
1,166 97% 675 0.69
Austin, TX
- ----------
Gables Central Park 273 91% 1,087 1.15
Gables Great Hills 276 93% 793 0.96
Gables Park Mesa 148 95% 1,092 1.00
Gables Town Lake 256 97% 1,092 1.17
----- ----- ----- ------
953 94% 1,004 1.08
San Antonio, TX
- ---------------
Gables Colonnade I 312 93% 786 0.86
Gables Wall Street 232 90% 800 0.84
----- ----- ----- ------
544 92% 792 0.85
TOTALS 18,479 96% $819 $0.86
====== ===== ===== ======
</TABLE>
<PAGE>
Page-21
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands)
- --------------------------------------
Portfolio Indebtedness Summary and Interest Rate Protection Agreement Summary
A summary of Gables' portfolio indebtedness and interest rate protection
agreements as of March 31, 1998 follows:
PORTFOLIO INDEBTEDNESS SUMMARY
Percentage Interest Total Years to
Type of Indebtedness Balance of Total Rate (A) Rate (B) Maturity
- -------------------- ------- -------- -------- -------- --------
Fixed-rate:
Secured notes $95,810 20.0% 8.14% 8.14% 9.58
Unsecured notes (C) 258,382 53.9% 7.40% 7.40% 6.20
Tax-exempt 59,995 12.5% 6.50% 6.62% 10.38
-------- ------- ------- ------ ------
Total fixed-rate $414,187 86.4% 7.44% 7.46% 7.59
-------- ------- ------- ------ ------
Tax-exempt variable-rate $44,930 9.4% 3.65% 4.60% 4.42
-------- ------- ------- ------ ------
Unsecured credit facilities $20,000 4.2% 6.19% 6.19% 2.00
-------- ------- ------- ------ ------
Total portfolio debt(D),(E) $479,117 100.0% 7.03% 7.14% 7.06
======== ======= ======= ====== ======
(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) Unsecured conventional fixed-rate debt includes $40,000 of financing which
bears interest at LIBOR plus a spread of 0.80%. Such financing is
effectively fixed at an all-in rate of 6.15% after the application of
$40,000 of the $44,530 interest rate cap and swap arrangements 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 March 31, 1998 for purposes of interest
capitalization were $93,351.
(E) Excludes $16.4 million of tax-exempt bonds and $17.9 million of outstanding
conventional indebtedness related to joint ventures in which Gables owns a
25% interest.
INTEREST RATE PROTECTION AGREEMENT SUMMARY
Notional Strike/Swap/ Effective Termination
Description of Agreement Amount Lock Price Date Date
- ------------------------ ------ ---------- ---- ----
LIBOR, 30-day - "Rate Cap" $44,530 6.25% (F) 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" $44,530 5.35% (F) 08/30/96 08/30/99(G)
LIBOR, 30-day - "Rate Swap" $25,000 5.76% (F) 02/27/98 02/27/00(H)
Treasury, 7-year-"Treasury Lock" $50,000 6.18% 09/22/97 05/28/98
(F) The 30-day LIBOR rate in effect at March 31, 1998 was 5.69%.
(G) This is a knock-out swap agreement which fixes Gables' 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.
(H) This is a knock-out swap agreement which fixes Gables' underlying 30-day
LIBOR rate at 5.76%. 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 6.70% or higher.
<PAGE>
Page-22
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------
Book Value of Assets and Shareholders' Equity
- --------------------------------------------
The application of historical cost accounting in accordance with GAAP for
Gables' UPREIT structure results in an understatement of total assets and
shareholders' 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 shareholders' equity.
The understatement of basis related to this difference in organizational
structure at March 31, 1998 is $112,494, exclusive of the effect of
depreciation. Accordingly, on a pro forma basis, the real estate assets before
accumulated depreciation, total assets and total shareholders' equity plus
minority interest as of March 31, 1998 would be $1,199,402, $1,122,829, and
$620,897, respectively, if such $112,494 value were reflected.
Inflation
- ---------
Substantially all of Gables' 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 in times of rising prices. The
short-term nature of these leases generally serves to lessen the impact of cost
increases arising from inflation.
Certain Factors Affecting Future Operating Results
- --------------------------------------------------
This Report on Form 10-Q 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. The words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" and other similar expressions which
are predictions of or indicate future events and trends and which do not relate
solely to historical matters identify forward-looking statements. Reliance
should not be placed on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors, which are in some cases
beyond the control of Gables and may cause the actual results, performance or
achievements of Gables to differ materially from anticipated future results,
performance or achievements expressed or implied by such forward-looking
statements.
Factors that might cause such a difference include, but are not limited to, the
following: Gables may fail to secure or abandon development opportunities;
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 market rents may be adversely affected by local economic and market
conditions which are beyond management's control; financing may not be
available, or may not be available on favorable terms; Gables' cash flow may be
insufficient to meet required payments of principal and interest; and existing
indebtedness may mature in an unfavorable credit environment, preventing such
indebtedness from being refinanced, or, if financed, causing such refinancing to
occur on terms that are not as favorable as the terms of existing indebtedness.
Other Matters
- -------------
Gables has assessed the impact of the year 2000 issue on its computer systems
and is in the process of remediating the affected hardware and software. The
year 2000 issue is the result of many computer programs recognizing a date
ending with "00" as the year 1900 rather than the year 2000, causing potential
system failures or miscalculations which could result in disruptions of normal
business operations. Gables' primary financial and operating systems are
supplied by third party suppliers and its hardware and software systems are
either currently year 2000 compliant or will be compliant well in advance of
January 1, 2000. Gables' costs of addressing the year 2000 issue are not
expected to be material and will relate primarily to costs of existing
information system personnel.
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------
SUPPLEMENTAL DISCUSSION - Funds From Operations and Adjusted Funds From
Operations
Gables 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. Gables believes that in order to
facilitate a clear understanding of its operating results, FFO should be
examined in conjunction with net income as presented in the financial statements
and data included elsewhere in this report. Gables computes FFO in accordance
with standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"). FFO as defined by NAREIT represents net income (loss)
determined in accordance with GAAP, excluding gains or losses from sales of
assets or debt restructuring, plus certain non-cash items, primarily real estate
depreciation, and after adjustments for unconsolidated partnerships and joint
ventures. FFO presented herein is not necessarily comparable to FFO presented by
other real estate companies due to the fact that not all real estate companies
use the same definition. However, Gables' FFO is comparable to the FFO of real
estate companies that use the NAREIT definition. Adjusted funds from operations
("AFFO") is defined as FFO less capital expenditures funded by operations. FFO
and AFFO should not be considered as alternatives to net income as indicators of
Gables' operating performance or as alternatives to cash flows as measures of
liquidity. FFO does not measure whether cash flow is sufficient to fund all of
Gables' cash needs including principal amortization, capital expenditures, and
distributions to shareholders and unitholders. Additionally, FFO does not
represent cash flows from operating, investing or financing activities as
defined by 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 Gables' cash needs and cash flows. A reconciliation of funds
from operations and adjusted funds from operations follows:
Three months ended March 31,
1998 1997
---- ----
Net income available to common shareholders $5,753 $9,808
Extraordinary loss, net of minority interest 0 602
Minority interest of unitholders in Operating
Partnership 1,059 1,900
Loss on treasury lock extension (1) 1,811 0
Amortization of loss on treasury lock extension (1) (4) 0
Gain on sale of real estate assets 0 (4,858)
Real estate asset depreciation:
Wholly-owned real estate assets 7,484 5,233
Joint venture real estate assets 56 55
------ --------
Total 7,540 5,288
------- --------
FUNDS FROM OPERATIONS $16,159 $12,740
------- --------
Capital expenditures for operating apartment communities:
Carpet 443 371
Roofing 16 24
Exterior painting 0 0
Appliances 48 47
Other additions and improvements 617 473
-------- --------
Total 1,124 915
-------- --------
ADJUSTED FUNDS FROM OPERATIONS $15,035 $11,825
======== ========
(1) Gables recorded a loss upon extension of its forward teasury lock
agreements. The loss recognized for GAAP purposes in connection with such
extension is added back for FFO purposes as Gables intends to account for
such amount for FFO purposes as a finance cost which will be amortized over
the life of the debt transaction for which the treasury lock hedged.
<PAGE>
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Part II - OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Indenture, dated as of March 23, 1998, between the Operating
Partnership and First Union National Bank. (1)
4.2 Supplemental Indenture No. 1, dated March 23, 1998, between
the Operating Partnership and First Union National Bank,
including a form of the 6.80% Senior Note due 2005. (1)
4.3 The Operating Partnership Senior Note due 2005. (1)
10.1 Contribution Agreement with an effective date of March 16,
1998 between the Company, the Operating Partnership and
specified representatives of Trammell Crow Residential
("TCR") executed in connection with the April 1, 1998
acquisition of 15 multifamily apartment communities and
TCR's residential construction and development and third
party management activities in South Florida. (2)
10.2* Form of Restricted Share Award Agreement as signed by the
Company and each of Marcus E. Bromley (with respect to 1,000
Unrestricted Shares and 3,000 Restricted Shares), John T.
Rippel (with respect to 1,000 Unrestricted Shares and 3,000
Restricted Shares), and Marvin R. Banks, Jr. (with respect
to 1,000 Unrestricted Shares and 3,000 Restricted Shares).
10.3* Employment Agreement between the Company and Chris D.
Wheeler dated March 16, 1998.
27 * Financial Data Schedule
------------
* Filed herewith
(1) Incorporated herein by reference to the Operating
Partnership's Current Report on Form 8-K dated March
23, 1998 (File No. 000-22683).
(2) Incorporated herein by reference to the Company's
Current Report on Form 8-K dated March 16, 1998.
<PAGE>
Page-25
(b) Reports on Form 8-K
(i) A Form 8-K dated March 16, 1998 was filed with the
Securities and Exchange Commission with the Contribution
Agreement between the Company, the Operating Partnership and
specified representatives of TCR executed in connection with
Gables' April 1, 1998 acquisition of 15 multifamily
apartment communities and TCR's residential construction and
development and third party management activities in South
Florida.
(ii) A Form 8-K dated March 23, 1998 was filed with the
Securities and Exchange Commission with the underwriting
agreement, indenture and other related items executed in
connection with the Operating Partnership's issuance of $100
million of 6.8% Senior Unsecured Notes due March 2005.
<PAGE>
Page-26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1998 GABLES RESIDENTIAL TRUST
/s/ Marvin R. Banks, Jr.
-----------------------------
Marvin R. Banks, Jr.
Senior Vice President and Chief
Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
FORM OF RESTRICTED SHARE AWARD AGREEMENT
UNDER THE GABLES RESIDENTIAL TRUST SECOND
AMENDED AND RESTATED 1994 SHARE OPTION AND INCENTIVE PLAN
Name of Grantee: [ENTER NAME]
No. of Shares: [ENTER NO. SHARES]
Purchase Price per Share: $.01 (i.e., par value)
Grant Date: April 1, 1998
Final Acceptance Date: May 31, 1998
[60 days after Grant Date]
Pursuant to the Gables Residential Trust Second Amended and Restated 1994
Share Option and Incentive Plan (as the same may be hereafter amended, the
"Plan"), and in accordance with authority granted to the undersigned officer
pursuant to a duly adopted resolution of the Committee (as defined in Section 2
of the Plan), Gables Residential Trust (the "Company") hereby grants a
Restricted Share Award (an "Award") to the Grantee named above.
1. ACCEPTANCE OF AWARD. The Grantee shall have no rights with respect to
this Award unless he or she shall have accepted this Award prior to the close of
business on the Final Acceptance Date specified above by signing and delivering
to the Company a copy of this Award Agreement.
2. ISSUANCE OF SHARES. The Company shall issue the number of Shares set
forth above (the "Shares") promptly after payment by the Grantee to the Company
in cash or by check or other instrument acceptable to the Committee of the
Purchase Price per Share times the number of Shares to be accepted. Upon payment
for Shares by the Grantee, (i) certificates evidencing the Shares that vest
immediately pursuant to Paragraph 4 shall be issued in the name of the Grantee
and delivered to the Grantee, (ii) certificates evidencing the remaining
Restricted Shares, as set forth in Paragraph 3 and Paragraph 4, shall be issued
in the name of the Grantee but delivered to the Company to hold for the benefit
of the Grantee, and (iii) the Grantee's name shall be entered as the shareholder
of record on the books of the Company with respect to all of the Shares.
Thereupon, the Grantee shall have all the rights of a shareholder with respect
to the Shares, including voting and dividend rights, subject, however, to the
restrictions and conditions specified in Paragraph 3 below.
3. RESTRICTIONS AND CONDITIONS
(a) As set forth in Paragraph 4, upon receipt of Shares hereunder,
three-fourths of such Shares shall be Restricted Shares that are subject to the
restrictions set forth in this Paragraph 3. Such shares shall remain Restricted
Shares until such shares vest pursuant to this Paragraph 3 or Paragraph 4. The
balance of such Shares are unrestricted and shall be deemed vested on the date
of issuance.
<PAGE>
Page-2
(b) As set forth in Paragraph 2, the certificates representing the
Restricted Shares shall be held by the Company for the benefit of the Grantee,
until such time that such shares vest pursuant this Paragraph 3 or Paragraph 4.
Upon each such vesting date, the Company shall promptly deliver to the Grantee a
certificate representing the number of Shares that vest as of such date. The
Company may staple or clip a legend to the effect set forth in Exhibit A hereto
to the certificates representing the Restricted Shares while the Company has
possession of such certificates.
(c) Restricted Shares granted herein may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of by the Grantee prior
to vesting.
(d) If, prior to vesting of the Restricted Shares granted herein, the
Grantee's employment with the Company and its Subsidiaries is voluntarily or
involuntarily terminated, the Company shall have the right to repurchase from
the Grantee or the Grantee's legal representative any unvested Restricted Shares
held by the Company for the benefit of the Grantee at the time of such
termination. Any Restricted Shares so purchased by the Company shall be
purchased for their original purchase price set forth above. The Company must
exercise such right of repurchase by written notice to the Grantee or the
Grantee's legal representative not later than 90 days following such termination
of employment. In the event such right of repurchase is not exercised, all such
Restricted Shares shall vest.
4. VESTING OF RESTRICTED SHARES
(a) Upon issuance of the Shares in accordance with Paragraph 2, [ENTER
NUMBER OF SHARES] of such Shares (such amount being equal to one-fourth of the
total number of Shares granted herein) shall be immediately vested and
unrestricted and the remainder shall be restricted and shall vest in accordance
with the following schedule:
Fraction of Number of
Vesting Date Restricted Shares Vesting Restricted Shares Vesting
- ------------ ------------------------- -------------------------
April 1, 1999 1/4 of Total Shares [ENTER NUMBER]
April 1, 2000 1/4 of Total Shares [ENTER NUMBER]
April 1, 2001 1/4 of Total Shares [ENTER NUMBER]
provided, however, that the Committee may at any time accelerate, waive or,
subject to Section 10 of the Plan, amend the vesting schedule specified in this
Paragraph 4. Subsequent to any Vesting Date or Dates set forth above, the Shares
on which all restrictions and conditions have lapsed shall no longer be deemed
Restricted Shares.
(b) If (i) the Grantee's employment with the Company and its Subsidiaries
is involuntarily terminated due to death or Disability (as defined in Section 1
of the Plan) or (ii) there is a Change of Control of the Company (as defined in
Section 12 of the Plan), any restrictions and conditions on Restricted Shares
shall be deemed waived by the Committee, and such shares shall automatically
become fully vested.
<PAGE>
Page-3
5. DIVIDENDS. Dividends on Restricted Shares shall be paid immediately to
the Grantee.
6. INCORPORATION OF PLAN. Notwithstanding anything herein to the contrary,
this Agreement shall be subject to and governed by all the terms and conditions
of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
7. TRANSFERABILITY. This Agreement is personal to the Grantee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution.
8. TAX WITHHOLDING. The Grantee shall, not later than the date as of which
the receipt of this Award becomes a taxable event for Federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Committee
for payment of any Federal, state and local taxes required by law to be withheld
on account of such taxable event.
9. MISCELLANEOUS
(a) Notice hereunder shall be given to the Company at its principal place
of business, and shall be given to the Grantee at the address set forth below,
or in either case at such other address as one party may subsequently furnish to
the other party in writing.
(b) This Agreement does not confer upon the Grantee any rights with respect
to continuance of employment by the Company or any Subsidiary.
(c) Pursuant to Section 10 of the Plan, the Committee may at any time amend
or cancel any portion of this Award, but no such action may be taken which
adversely affects the Grantee's rights under this Agreement without the
Grantee's consent.
GABLES RESIDENTIAL TRUST
By: /s/ Marcus E. Bromley
--------------------------------
Name: Marcus E. Bromley
Title: Chief Executive Officer
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
<PAGE>
Page-4
Dated: [ENTER DATE] [ENTER NAME]
------------------------------- ----------------------------------
Grantee's Signature
Grantee's Name and Address:
[ENTER INFORMATION]
----------------------------------
----------------------------------
----------------------------------
Receipt of Certificates by Grantee
Shares; (date); (initials)
- --------- -------- --------
Shares; (date); (initials)
- --------- -------- --------
Shares; (date); (initials)
- --------- -------- --------
Shares; (date); (initials)
- --------- -------- --------
<PAGE>
Page-5
EXHIBIT A
Legend to be stapled or clipped to certificates representing Restricted Shares
while such shares are in the possession of the Company prior to vesting:
"The Shares represented by the attached certificate are subject to a
Restricted Share Award Agreement between the registered holder thereof and
the issuer and pursuant thereto are subject to forfeiture and restrictions
on transfer. This attachment shall only be removed by a duly authorized
officer of the issuer."
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the 16th day of March,
1998 by and between Chris D. Wheeler (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. EFFECTIVENESS; TERM. This Agreement is executed and delivered
concurrently with the execution and delivery of that certain Contribution
Agreement by and among the TCR Parties (as defined therein), on the one hand,
and the Company and Gables Realty Limited Partnership, on the other hand (the
"Contribution Agreement"), but the effectiveness of this Agreement is
conditioned upon the consummation of the transactions contemplated by the
Contribution Agreement. If the transactions contemplated by the Contribution
Agreement are not consummated or the Contribution Agreement is terminated, this
Agreement shall be null and void and have no force or effect. The term of this
Agreement shall commence on the Closing Date (as defined in the Contribution
Agreement), which is referred to herein as the "Effective Date", and, unless
earlier terminated as provided in Paragraph 8 below, shall terminate eighteen
(18) months after the Effective Date (the "Original Term"). The Original Term
shall be extended automatically as follows: (i) for an additional period
beginning at the end of the Original Term and ending on the next following
December 31 and (ii) thereafter for additional one-year periods (each additional
period described in clauses (i) and (ii) above, 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 of Senior Vice President. 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 of the Company (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.
<PAGE>
Page-2
(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 Boca Raton metropolitan area.
3. COMPENSATION/BENEFITS. In consideration of Employee's services
hereunder, the Company shall provide Employee the following:
(a) Base Salary. The Company shall pay Employee an annual salary of
$160,000 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 (i) 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 at the date of vesting), but (ii)
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 (i)), option grants made in respect of such year or the
exercise of any options during such year.
(c) Medical Insurance. During the Employment Period, the Company shall
provide to Employee and Employee's immediate family a comprehensive policy of
health insurance.
(d) Life Insurance/Disability Insurance. Beginning on the first anniversary
of the Effective Date and for the balance of 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 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 second 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.
<PAGE>
Page-3
(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. During the Employment Period, Employee shall be
entitled to secretarial services and a private office commensurate with his
title and duties.
(g) Stock and Stock Options.
(i) The Company will grant Employee between 8,000 and 10,000 common
shares of beneficial interest, par value $.01 per share, of the Company
("Shares"), such grant to vest one-third (1/3) on each of the first
anniversary of the Effective Date, the second anniversary of the Effective
Date and the third anniversary of the Effective Date, if Employee continues
to be employed by the Company on the applicable vesting date (except as
otherwise provided in Paragraph 8 hereof). In the event of any change in
the Shares by reason of share dividends, share splits, spin-offs, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the
like or the issuance of Shares, the number of Unrestricted Shares shall be
appropriately adjusted.
(ii) Employee shall also be eligible for the grant of stock options in
an amount to be determined by the Board of Trustees, or any compensation
committee thereof, in its discretion from time to time.
(iii) After the first anniversary of the Effective Date, Employee
shall be eligible for the grant of additional Shares, as determined by the
Board of Trustees, or any compensation committee thereof, in its
discretion, with such grant, if any, to be in an amount and on terms and
conditions (including without limitation vesting) comparable to those
applicable to other executives of the Company with duties and
responsibilities analogous to those of Employee.
(h) Fringe Benefits. During the Employment Period, the Company shall
provide Employee with (i) memberships (including initiation fees, annual dues
and other recurring expenses) for each YPO, NMHC, ULI and Bell Leadership
Roundtable and (ii) professional assistance in tax preparation and financial
planning not to exceed $1,000 per year of the Employment Period (in each case
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. Employee's service with Trammell Crow Residential or
any of its affiliates shall be taken into account for purposes of vesting and
eligibility with respect to all of the Company's employee benefit plans or
arrangements (including, without limitation, vacation policies) and the accrual
of benefits thereunder.
<PAGE>
Page-4
4. AUTOMOBILE. The Company shall provide Employee with a monthly car
allowance of not less than $572 per month (adjusted annually for inflation on
the basis of changes in the CPI), provided that, with Employee's consent, 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 and related
cellular phone usage, 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 the Board of
Trustees respecting the performance of his duties and to carry out and perform
orders, directions and policies communicated to him from 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, with the Company's consent 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.
<PAGE>
Page-5
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 by the Company For Good Reason or Voluntarily by Employee.
If (A) Employee is terminated by the Company 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 grants of
Shares; and
(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) at the rate
then in effect, and (y) the amount equal to the greater of (1) his bonus
received in respect of the immediately preceding fiscal year under
Paragraph 3(b) or (2) any bonus award that the Board of Trustees or any
committee thereof has approved for any period that has closed prior to the
date of termination but has not yet been paid.
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
<PAGE>
Page-6
Amount shall be zero if the life insurance proceeds payable under
Paragraph (3)(d) 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), the Company shall provide Employee with the
benefits described in Paragraph 3(c).
(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 Board of Trustees ("Voting Securities") or
(ii) the then outstanding 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 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
(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;
<PAGE>
Page-7
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: (1) a
material breach by the Company of any obligation under this Agreement, including
but not limited to those under Paragraphs 2 and 3 hereof, (2) a substantial
diminution in the duties or responsibilities of Employee, (3) a relocation of
Employee to any location outside of the greater Boca Raton metropolitan area
during the first twelve months after the Effective Date without the Employee's
consent, or (4) failure by the Board of Trustees to nominate Employee for
election as a member of the Board of Trustees.
(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 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.
<PAGE>
Page-8
(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. 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 and stock grants to the same
extent as if the termination had been pursuant to Paragraph 8(c)(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. Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. This Paragraph 8(f) shall be specifically
enforceable. Notwithstanding the foregoing, this Paragraph 8(f) shall not
preclude the Company from pursuing a court action for the sole purpose of
obtaining a temporary restraining order or a preliminary injunction in
circumstances in which such relief is appropriate, provided that any other
relief shall be pursued through an arbitration proceeding pursuant to this
Paragraph 8(f).
(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 business, corporation, partnership, association, agency, or other
person or other entity with which Employee may be associated, or otherwise
engage in any business or undertaking directly competitive with the businesses
being carried on by the Company in respect of any multifamily residential real
estate project undertaken or being considered by the Company at the time of
termination without prior written consent of the Board of Trustees. Restricted
<PAGE>
Page-9
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. NON-SOLICITATION. During the Original Term or any Renewal Term and for
a period of twelve months from the date of any termination of employment,
Employee covenants and agrees that Employee (a) will not, directly or
indirectly, solicit or induce any present or future employee of the Company or
any Subsidiary to accept employment with Employee or with any business,
corporation, partnership, association, agency, or other person or other entity
with which Employee may be associated, (b) will not employ or cause any
business, corporation, partnership, association agency, or other person or
entity with which Employee may be associated to employ any present or future
employee of the Company or any Subsidiary without providing the Company with ten
(10) days' prior written notice of such proposed employment and (c) will not,
directly or indirectly, either for himself or for any other business, operation,
corporation, partnership, association, agency, or other person or entity, call
upon, compete for or solicit the third party property owners with whom the
Company or any of its subsidiaries has an existing property management agreement
as of the Effective Date as set forth in any of the schedules to the
Contribution Agreement. This Paragraph 10 shall survive the termination of this
Agreement. Notwithstanding the foregoing, effective on the first anniversary of
the Effective Date this Section 10 shall be amended to reflect the terms of the
non-solicitation clause then included in the standard employment agreement used
by the Company for other executive officers.
11. LITIGATION AND REGULATORY COOPERATION. During and after the Employee's
employment, the Employee shall cooperate fully with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while the Employee was employed by the Company. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Company at
mutually convenient times. During or after the Employee's employment, the
Employee also shall cooperate fully with the Company in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Company. The Company shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in
connection with the Employee's performance of obligations pursuant to this
Paragraph 11. This Paragraph 11 shall survive the termination of this Agreement.
If at a time when Employee is no longer employed by the Company he is required
to devote more than one-half (1/2) of a business day to cooperation with the
Company pursuant to this Paragraph 11, the Company shall compensate Employee on
a per diem basis at a daily rate calculated as 1/365th of the Base Salary in
effect pursuant to Paragraph 3(a) as of the time Employee's employment with the
Company terminated.
<PAGE>
Page-10
12. 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.
13. 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).
14. 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.
15. 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. 16. 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, 9
and 10 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.
17. SEVERABILITY. The provisions of this Agreement are severable. The
invalidity of any provision shall not affect the validity of any other
provision.
18. 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: /s/ Marcus E. Bromley
-----------------------------
Marcus E. Bromley, Chief Executive Officer
EMPLOYEE
/s/ Chris D. Wheeler
------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF GABLES RESIDENTIAL TRUST FOR THE THREE MONTHS ENDED MARCH
31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000913782
<NAME> GABLES RESIDENTIAL TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,786
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,086,908
<DEPRECIATION> 105,699
<TOTAL-ASSETS> 1,010,335
<CURRENT-LIABILITIES> 0
<BONDS> 479,117
0
115,000
<COMMON> 221
<OTHER-SE> 332,158
<TOTAL-LIABILITY-AND-EQUITY> 1,010,335
<SALES> 0
<TOTAL-REVENUES> 41,490
<CGS> 0
<TOTAL-COSTS> 23,940
<OTHER-EXPENSES> 1,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,678
<INCOME-PRETAX> 8,139
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,139
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
