UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number 1-12784
AMLI RESIDENTIAL PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 36-3925916
(State of Organization) (I.R.S. Employer Identification No.)
125 South Wacker Drive, Suite 3100,
Chicago, Illinois 60606
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (312) 443-1477
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes ( X ) No ( )
The number of the Registrant's Common Shares of Beneficial Interest
outstanding was 17,828,565 as of September 30, 2000.
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 . . . . 3
Consolidated Statements of Operations
for the three and nine months ended
September 30, 2000 and 1999. . . . . . . . . . . 5
Consolidated Statements of
Shareholders' Equity
for the nine months ended
September 30, 2000. . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 2000 and 1999. . . . . . . . . . . 8
Notes to Consolidated Financial Statements . . . . 10
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 33
Item 3. Quantitative and Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . . . 42
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 47
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 48
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
(Dollars in thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
ASSETS:
Rental apartments:
Land. . . . . . . . . . . . . . . $ 90,442 87,903
Depreciable property. . . . . . . 597,101 566,509
---------- ----------
687,543 654,412
Less accumulated depreciation . . (95,587) (82,626)
---------- ----------
591,956 571,786
Rental properties held for sale,
net of accumulated depreciation . -- 19,784
Properties under development. . . . 69,745 47,314
Investments in partnerships . . . . 146,926 107,518
Cash and cash equivalents . . . . . 1,520 2,318
Deferred expenses, net. . . . . . . 3,093 3,377
Security deposits . . . . . . . . . 1,491 1,541
Notes receivable from and advances
to Service Companies. . . . . . . 36,336 35,717
Other assets. . . . . . . . . . . . 17,673 15,263
---------- ----------
Total assets $ 868,740 804,618
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Debt (note 5) . . . . . . . . . . . $ 398,956 369,541
Accrued interest payable. . . . . . 1,759 1,743
Accrued real estate taxes payable . 10,860 9,999
Construction costs payable. . . . . 2,133 2,068
Security deposits and prepaid rents 2,538 2,807
Other liabilities . . . . . . . . . 3,270 3,606
---------- ----------
Total liabilities . . . . 419,516 389,764
---------- ----------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS - CONTINUED
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
Commitments and contingencies (note 6)
Minority interest . . . . . . . . . 58,130 57,813
---------- ----------
SHAREHOLDERS' EQUITY:
Series A Cumulative Convertible
Preferred shares of beneficial
interest, $0.01 par value,
1,500,000 authorized, 1,200,000
issued and 350,000 and 850,000
outstanding (aggregate liquidation
preference of $7,072 and $17,162,
respectively). . . . . . . . . . . 4 9
Series B Cumulative Convertible
Preferred shares of beneficial
interest, $0.01 par value,
3,125,000 authorized, issued
and outstanding (aggregate
liquidation preference
of $76,469 . . . . . . . . . . . . 31 31
Shares of beneficial interest,
$0.01 par value, 145,375,000
authorized, 17,828,565 and
16,996,138 common shares issued
and outstanding, respectively. . . 178 170
Additional paid-in capital. . . . . 427,541 421,989
Employees' and Trustees' notes. . . (11,423) (12,000)
Dividends paid in excess
of earnings. . . . . . . . . . . . (25,237) (53,158)
---------- ----------
Total shareholders'
equity. . . . . . . . . 391,094 357,041
---------- ----------
Total liabilities and
shareholders' equity. . $ 868,740 804,618
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(Dollars in thousands, except share data)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Property:
Rental. . . . . . . . . . . . . . . . . . . . $ 26,831 27,928 79,880 81,904
Other . . . . . . . . . . . . . . . . . . . . 1,823 1,813 5,018 5,139
Interest and share of income (loss)
from Service Companies. . . . . . . . . . . . 571 594 4,397 2,270
Other interest. . . . . . . . . . . . . . . . . 381 410 990 1,102
Income from partnerships. . . . . . . . . . . . 1,999 1,172 4,516 2,845
Other . . . . . . . . . . . . . . . . . . . . . 2,530 1,934 4,256 4,005
-------- -------- -------- --------
Total revenues. . . . . . . . . . . . . 34,135 33,851 99,057 97,265
-------- -------- -------- --------
Expenses:
Personnel . . . . . . . . . . . . . . . . . . . 2,773 2,806 8,322 8,149
Advertising and promotion . . . . . . . . . . . 667 714 1,759 1,984
Utilities . . . . . . . . . . . . . . . . . . . 975 1,110 2,474 3,038
Building repairs and maintenance
and services. . . . . . . . . . . . . . . . . 1,548 1,656 4,378 4,500
Landscaping and grounds maintenance . . . . . . 617 639 1,833 1,898
Real estate taxes . . . . . . . . . . . . . . . 3,391 3,492 10,218 10,420
Insurance . . . . . . . . . . . . . . . . . . . 211 198 669 619
Property management fees. . . . . . . . . . . . 714 743 2,120 2,177
Other operating expenses. . . . . . . . . . . . 373 326 1,028 956
Interest. . . . . . . . . . . . . . . . . . . . 6,353 5,821 18,243 16,762
Amortization of deferred costs. . . . . . . . . 101 92 340 300
Depreciation . . . . . . . . . . . . . . . . . 4,638 4,525 14,630 13,709
General and administrative. . . . . . . . . . . 842 1,225 2,700 3,219
-------- -------- -------- --------
Total expenses. . . . . . . . . . . . . 23,203 23,347 68,714 67,731
-------- -------- -------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS - Continued
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
Income before nonrecurring gains
and minority interest . . . . . . . . . . . . . 10,932 10,504 30,343 29,534
Gains on sales of residential properties. . . . . 6,807 -- 37,274 --
-------- -------- -------- --------
Income before minority interest . . . . . . . . . 17,739 10,504 67,617 29,534
Minority interest . . . . . . . . . . . . . . . . 2,497 1,514 10,353 4,175
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . . 15,242 8,990 57,264 25,359
Less income attributable to preferred shares. . . 1,766 1,789 5,424 5,451
-------- -------- -------- --------
Net income attributable to
common shares . . . . . . . . . . . . $ 13,476 7,201 51,840 19,908
======== ======== ======== ========
Net income per common share - basic . . . . . . . $ 0.77 .42 3.02 1.18
======== ======== ======== ========
Net income per common share - diluted . . . . . . $ 0.71 .42 2.70 1.17
======== ======== ======== ========
Dividends declared and paid per common share. . . $ 0.47 .45 1.40 1.35
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Dollars in thousands)
<CAPTION>
SHARES OF
BENEFICIAL INTEREST EMPLOYEES' DIVIDENDS
---------------------------------- ADDITIONAL AND PAID
PREFERRED COMMON PAID-IN TRUSTEES' IN EXCESS
SHARES SHARES AMOUNT CAPITAL NOTES OF EARNINGS TOTAL
---------- ---------- ------ --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1999 . . . 3,975,000 16,996,138 $210 421,989 (12,000) (53,158) 357,041
Shares issued in
connection with:
Executive Share
Purchase Plan . . . . -- 5,821 -- 126 -- -- 126
Options exercised . . -- 8,167 -- 168 -- -- 168
Employees' and
Trustees' notes,
net of repayments . . -- -- -- -- 577 -- 577
Units converted
to shares . . . . . . -- 318,439 3 5,437 -- -- 5,440
Preferred shares
converted to
common shares . . . . (500,000) 500,000 -- -- -- -- --
Reallocation of
minority interest . . . -- -- -- (179) -- -- (179)
Earnings in excess of
dividends paid. . . . . -- -- -- -- -- 27,921 27,921
---------- ---------- ---- ------- ------- ------- -------
Balance at
September 30, 2000. . . 3,475,000 17,828,565 $213 427,541 (11,423) (25,237) 391,094
========== ========== ==== ======= ======= ======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(Dollars in thousands)
2000 1999
-------- --------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . $ 57,264 25,359
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . 14,970 14,009
Cash distributions from partnerships
in excess of share of income. . . . 2,497 1,981
Gains on sale of residential properties
in 2000 and sale of land parcel
in 1999 . . . . . . . . . . . . . . (30,467) (281)
Share of partnership gain on sale of
residential property. . . . . . . . (6,807) --
(Income) loss from Service Companies. (883) 952
Minority interest . . . . . . . . . . 10,353 4,175
Changes in assets and liabilities:
Increase in deferred costs. . . . . . (176) (193)
Decrease (increase) in
security deposits . . . . . . . . . 50 (377)
(Increase) decrease in other assets . (3,103) 968
Increase (decrease) in accrued
real estate taxes . . . . . . . . . 774 (221)
Increase in accrued interest payable. 16 1,418
(Decrease) increase in tenant security
deposits and prepaid rents. . . . . (268) 449
(Decrease) increase in other
liabilities . . . . . . . . . . . . (336) 375
-------- -------
Net cash provided by
operating activities. . . . . . 43,884 48,614
-------- -------
Cash flows from investing activities:
Net cash proceeds from sales of
residential properties in 2000 and
sale of land parcel in 1999 . . . . . . 64,862 1,451
Investments in partnerships . . . . . . . (34,779) (20,065)
Share of partnership net cash proceeds
from sale of residential property . . . 5,904 --
Repayments from (advances to) affiliates. 5,300 (13,958)
Earnest money deposits. . . . . . . . . . (3,233) (590)
Acquisition properties. . . . . . . . . . (43,879) (520)
Capital expenditures - rehab properties . (5,641) (4,524)
Capital expenditures - other properties . (3,700) (3,365)
Properties under development, net of
co-investors' share of costs. . . . . . (25,749) (17,680)
Increase (decrease) in construction
costs payable . . . . . . . . . . . . . 65 (240)
-------- -------
Net cash used in
investing activities. . . . . . (40,850) (59,491)
-------- -------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999
-------- --------
Cash flows from financing activities:
Debt proceeds, net of financing costs . . 331,000 187,970
Debt repayments . . . . . . . . . . . . . (301,585) (145,163)
Proceeds from issuance of Executive
Share Purchase Plan shares and Option Plan
shares, net of Employees' and
Trustees' notes . . . . . . . . . . . . 871 575
Distributions to partners . . . . . . . . (4,775) (4,792)
Dividends paid. . . . . . . . . . . . . . (29,343) (28,260)
-------- -------
Net cash (used in) provided by
financing activities. . . . . . (3,832) 10,330
-------- -------
Net decrease in cash and
cash equivalents. . . . . . . . . . . . . (798) (547)
Cash and cash equivalents at
beginning of period . . . . . . . . . . . 2,318 4,546
-------- -------
Cash and cash equivalents at
end of period . . . . . . . . . . . . . . $ 1,520 3,999
======== =======
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other interest,
net of amounts capitalized. . . . . . . $ 18,227 16,983
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollars in thousands, except share data)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
AMLI Residential Properties Trust (the "Company") commenced
operations upon the completion of its initial public offering on February
15, 1994. In the opinion of management, all adjustments, which include
only normal recurring adjustments necessary to present fairly the financial
position at September 30, 2000 and December 31, 1999 and the results of
operations and cash flows for the periods presented, have been made.
Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results for the three and nine months ended September 30,
2000 are not necessarily indicative of expected results for the entire
year.
The consolidated financial statements include the accounts of the
Company and AMLI Residential Properties, L. P. (the "Operating Partnership"
which holds the operating assets of the Company). The Company is the sole
general partner and owned an 87% majority interest in the Operating
Partnership at September 30, 2000. The limited partners hold Operating
Partnership units ("OP Units") which are convertible into shares of the
Company on a one-for-one basis, subject to certain limitations. At
September 30, 2000, there are 3,249,077 OP Units held by the limited
partners and 3,475,000 convertible preferred shares issued and outstanding.
The Company's management has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, disclosure
of contingent assets and liabilities and the reported amounts of revenues
and expenses during the report periods to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual amounts realized or paid could differ from these estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets
At September 30, 2000, the Company has four communities under rehab
namely, AMLI at Riverbend, AMLI at Spring Creek, AMLI at North Dallas and
AMLI at Valley Ranch. AMLI's larger properties were built in phases, and
the rehabs of these larger properties are being done in phases. AMLI has
no current plans to proceed with the rehab of additional phases. Through
September 30, 2000, the Company has spent $12,892 on rehab of these four
properties. All costs (except costs to routinely paint the interiors of
units at turnover) associated with a rehab are capitalized and depreciated
over their policy lives.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Properties Under Development
Land being planned for development and all apartment homes in a new
community or new phase are reported as "Properties under development" until
the entire community or new phase is substantially complete and stabilized
(generally 95% occupancy). Upon stabilization, all apartment homes in the
community or new phase are reported as "Rental properties".
Regardless of whether or not 95% occupancy is achieved, a community
or new phase will be reported as "Rental properties" no later than six
months following substantial completion of construction.
At September 30, 2000, the Company's properties under development
include parcels of land in the initial phase of development on which
physical construction is anticipated to commence in 2001 or 2002.
Properties under development are as follows:
<PAGE>
<TABLE> AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
NUMBER NUMBER TOTAL
OF OF EXPENDED
COMMUNITY LOCATION ACRES UNITS THRU 9/30/00
--------- -------- ------ ------ ------------
<S> <C> <C> <C> <C>
Wholly-Owned:
Development Communities (1)(2):
AMLI:
at Bent Tree II Dallas, TX 10 200 $ 13,040
at Kings Harbor Houston, TX 15 300 6,863
--- ----- --------
Total Development Communities 25 500 19,903
--- ----- --------
Land Held for Development (1):
AMLI:
at Champions II Houston, TX 14 288 2,931
at Mesa Ridge Ft. Worth, TX 27 520 4,421
at Fossil Lake Ft. Worth, TX 19 324 3,292
at Fossil Lake II Ft. Worth, TX 15 240 2,342
at Prairie Lakes I Noblesville, IN 17 228 1,034
at Prairie Lakes II-IV Noblesville, IN 103 1,100 5,378
at Milton Park Atlanta, GA 21 449 3,968
at Anderson Mill Austin, TX 39 520 4,331
at Downtown Austin Austin, TX 2 218 6,641
at Parmer Park Austin, TX 28 480 3,525
at Vista Ridge City of Lewisville, TX 15 340 3,102
at Westwood Ridge Overland Park, KS 30 428 3,152
at Seven Bridges Woodridge, IL 13 520 5,725
--- ----- --------
Total Land Held for
Development 343 5,655 49,842
--- ----- --------
Total Wholly-Owned 368 6,155 69,745
--- ----- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NUMBER NUMBER TOTAL
OF OF EXPENDED
COMMUNITY LOCATION ACRES UNITS THRU 9/30/00
--------- -------- ------ ------ ------------
Co-Investments
(Company Ownership Percentage):
Development Communities (2):
AMLI:
at Mill Creek (25%) Gwinnett County, GA 33 400 12,977
at Lost Mountain (75%) Paulding County, GA 17 164 9,137
at Park Bridge (25%) Atlanta, GA 35 352 21,566
at Peachtree City II (20%) Peachtree City, GA 21 216 4,170
at Monterey Oaks (25%) Austin, TX 26 430 28,803
at St. Charles (25%) St. Charles, IL 25 400 42,398
Creekside (25%) Overland Park, KS 12 224 15,992
at Wynnewood Farms (25%) Overland Park, KS 20 232 18,301
at Regents Crest II (25%) Overland Park, KS 6 108 7,975
at Cambridge Square (30%) Overland Park, KS 21 408 4,155
at Castle Creek (40%) Indianapolis, IN 16 276 20,335
at Summit Ridge (25%) Lee's Summit, MO 24 432 26,095
--- ----- --------
Total Co-Investments 256 3,642 211,904
--- ----- --------
Total Wholly-Owned
and Co-Investments 624 9,797 $281,649
=== ===== ========
<FN>
(1) AMLI at Bent Tree II is substantially complete at September 2000 and is anticipated to be substantially
leased in the fourth quarter of this year. All other properties, except for AMLI at Prairie Lakes, are
anticipated to be developed in partnership with one or more institutional investors.
(2) Estimated costs to complete AMLI at Kings Harbor approximate $12,500 at September 30, 2000. Estimated
costs to complete the Co-Investment Development Communities of $70,000 at September 30, 2000 relate primarily to
AMLI at Mill Creek, AMLI at Peachtree City II and AMLI at Cambridge Square.
</TABLE>
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Acquisition
The table below summarizes the properties acquired by the Company during 1999-2000:
<CAPTION>
Company
Percen- Year
tage Number Com-
Owner- of pleted Date Purchase Total
Community ship Units (1) Acquired Price Debt Equity
--------- -------- -------- -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED:
AMLI:
at StoneHollow
Austin, TX (2). 100% 606 1997 02/13/00 $ 36,806 -- 36,806
at Towne Creek
Gainesville,
GA (2)(3) . . . 100% 150 1989 02/08/00 6,617 -- 6,617
------ -------- ------ -------
756 43,423 -- 43,423
------ -------- ------ -------
CO-INVESTMENTS:
AMLI:
on Spring Mill . 20%
Indianapolis, . (Resi-
IN (4). . . . . idual) 400 1999 06/30/99 29,475 -- 29,475
at Prestonwood
Hills
Dallas, TX. . . 45% 272 1997 08/12/99 17,650 11,649 6,001
at Windward Park
Alpharetta, GA. 45% 328 1999 08/26/99 27,485 18,183 9,302
at Oak Bend
Lewisville, TX. 40% 426 1997 10/26/99 25,250 18,834 6,416
Midtown
Houston, TX . . 45% 419 1998 01/13/00 33,250 21,945 11,305
on Frankford
Dallas, TX. . . 45% 582 1998 06/26/00 38,819 25,710 13,109
at Peachtree
City I
Fayette County,
GA (5). . . . . 20% 312 1998 06/29/00 28,630 -- 28,630
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Company
Percen- Year
tage Number Com-
Owner- of pleted Date Purchase Total
Community ship Units (1) Acquired Price Debt Equity
--------- -------- -------- -------- -------- -------- ------ --------
at Scofield Ridge
Austin, TX. . . 45% 487 2000 08/16/00 37,300 24,618 12,682
at Breckinridge
Point
Richardson, TX. 45% 440 1999 09/08/00 33,500 22,110 11,390
------ -------- ------- -------
3,666 271,359 143,049 128,310
------ -------- ------- -------
4,422 $314,782 143,049 171,733
====== ======== ======= =======
<FN>
(1) These acquisitions, coupled with new development and the dispositions of selected older communities, has
decreased the weighted average age of AMLI's wholly-owned portfolio of apartment homes.
(2) These acquisitions completed a deferred third party exchange for Federal income tax purposes.
(3) The Company acquired the 99% interest in the community that it did not already own.
(4) The Company paid $1.3 million for the general partnership interest in this partnership.
(5) The Company's 20% interest in AMLI at Peachtree City I is a result of the Company's sale of an 80%
interest in this property.
Disposition
The Company selectively sells properties and reinvests the proceeds in new communities to continually improve
the quality of its portfolio and increase the potential for growth in net operating income. The gains on sale of
residential communities are reported separately in the accompanying Statements of Operations and neither the
properties' selling prices nor related gains are included in revenues in the accompanying consolidated Statements
of Operations. Incentive compensation in the form of a promoted interest that is paid to the Company from sales
proceeds is included in revenues in the accompanying Statements of Operations.
</TABLE>
<PAGE>
<TABLE> AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The table below summarizes the properties sold by the Company during 1999-2000.
<CAPTION>
Net
Operating
Income in
Twelve
Company Months
Percen- Costs Immediately
tage Year Before Prior to
Owner- Number Acquired/ Date Depre- Sale Net Date of
Community ship of Units Developed Sold ciation Price Proceeds Gain Sale
--------- -------- -------- --------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED:
AMLI at:
Park Sheridan
Chicago, IL 100% 253 1989 10/12/99 $11,186 23,500 23,088 15,102 1,586
Crown Colony
Topeka, KS 100% 220 1994/1997 10/14/99 10,239 11,288 11,194 1,959 1,027
Sherwood
Topeka, KS 100% 300 1994 10/14/99 14,130 14,962 14,832 2,434 1,560
Sope Creek
Marietta, GA (1) 100% 695 1982/83/95 02/03/00 27,604 42,500 42,105 22,316 4,014
Peachtree
City I
Fayette
County, GA (2) 100% 312 1998 06/29/00 16,062 22,904 22,878 8,151 2,084
----- ------- ------- ------- ------- -------
1,780 79,221 115,154 114,097 49,962 10,271
----- ------- ------- ------- ------- -------
<PAGE>
Net
Operating
Income in
Twelve
Company Months
Percen- Costs Immediately
tage Year Before Prior to
Owner- Number Acquired/ Date Depre- Sale Net Date of
Community ship of Units Developed Sold ciation Price Proceeds Gain (4) Sale
--------- -------- -------- --------- -------- -------- -------- -------- -------- -----------
CO-INVESTMENTS:
AMLI at:
Park Place
Austin, TX 25% 588 1994 12/15/99 21,419 25,750 24,832 6,001 2,396
Prairie Court
Chicago, IL 1% 125 1987 08/16/99 9,129 13,500 12,850 6,717 911
Pleasant Hill
Atlanta, GA (3) 40% 502 1996 09/28/00 26,445 39,104 37,983 13,846 3,382
----- -------- ------- ------- ------- -------
1,215 56,993 78,354 75,665 26,564 6,689
----- -------- ------- ------- ------- -------
2,995 $136,214 193,508 189,762 76,526 16,960
===== ======== ======= ======= ======= =======
<FN>
(1) The net proceeds from this sale were used to acquire AMLI at StoneHollow and AMLI at Towne Creek in
completion of a deferred third party exchange for Federal income tax purposes.
(2) Costs, sale price, net proceeds and gain are stated at 80%, which represents the Company's ownership
percentage that was sold to a co-investment partnership. The Company contributed its remaining ownership in the
property for which it received a 20% partnership interest.
(3) The Company's $6,807 share of the gain is included in "Gains on sales of residential properties" in the
accompanying consolidated statements of operations. Incentive compensation of $1,181 in the form of a promoted
interest was paid to the Company from the sales proceeds and is included in "Other income" in the accompanying
consolidated statements of operation.
(4) Gains on sales of co-investment properties are shown net of disposition fees paid to the Company by the
co-investment partnerships.
</TABLE>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In addition, on April 28, 1999, the Company completed the sale of a
19.7 acre land parcel for cash of $1,477, resulting in a gain on sale of
$281. AMLI had originally planned to build an additional phase to an
existing apartment community on this land. AMLI subsequently determined
that value would be maximized through the sale of the vacant land.
Interest Rate Limitation Contracts
In order to eliminate its exposure to changes in Treasury rates with
respect to a ten year debt financing of the acquisition of a recently-
constructed apartment community (which acquisition is scheduled to close on
February 1, 2001), the Company, on behalf of a co-investment partnership,
acquired a Treasury Lock fixing the ten year Treasury rate for $29,500
notional principal at approximately 6.34%. At September 30, 2000, the cost
to terminate this interest rate hedge would have approximated $1,206. The
Company intends to complete the acquisition as scheduled.
The Company has used interest rate caps and swaps to limit its
exposure to increases in interest rates on its floating rate debt. The
Company does not use them for trading purposes.
At September 30, 2000, the Company was a party to seven interest rate
swap agreements which require the Company to pay to or receive from
counterparties on a monthly basis the amounts, if any, by which the
Company's interest costs on the fixed rate basis differs from the interest
payments required on certain floating rate debt.
The Company is exposed to credit losses in the event of
nonperformance by the counterparties to its interest rate swaps. The
Company does not obtain collateral or other security to support financial
instruments subject to credit risk but monitors the credit standing of
counterparties. The Company anticipates, however, that the counterparties
will be able to fully satisfy their obligations under the contracts.
The following summarizes certain information pursuant to interest
rate swap contracts at September 30, 2000.
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
Approximate
Value or
Cumulative (Liability) at
Notional Fixed Term of Contract Cash September 30,
Amount Rate(1) Contract Maturity Paid, Net 2000 (2)
-------- ------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
$ 75,000 7.112% 1 year 05/10/01 $136 (242)
10,000 6.216% 5 years 11/01/02 167 53
10,000 6.029% 5 years 11/01/02 114 91
20,000 6.145% 5 years 02/15/03 269 148
10,000 6.070% 5 years 02/18/03 115 91
15,000 6.405% 5 years 09/20/04 46 55
10,000 6.438% 5 years 10/04/04 30 27
-------- ---- -----
$150,000 $877 223
======== ==== =====
<FN>
(1) The fixed rate for the swaps includes the swap spread (the risk component added to the Treasury yield to
determine a fixed rate) and excludes lender's spread.
(2) Represents the approximate amount which the Company would have received or paid as of September 30, 2000 if
these contracts were terminated. This amount is not recorded as an asset or a liability in the accompanying
balance sheet as of September 30, 2000.
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as clarified by Statement of Financial Accounting Standards No. 138 on the same subject, became
effective for all fiscal quarters for fiscal years beginning after June 15, 2000. Among other things, the new
statement requires that the values of the derivative contracts be included as assets or liabilities in the balance
sheet, that changes in the values of these contracts be included in comprehensive income, and that any portion of
such change in values which is not an effective hedge be included in net income. The Company has determined that
the $150,000 notional amount of interest rate swaps were, except for $6, effective hedges of interest rate risk in
the three months ended September 30, 2000. Statement No. 133 is not expected to have a material impact on the
Company's financial statements.
</TABLE>
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
PER SHARE DATA
A reconciliation of the numerator and denominator of the basic earnings per share computation to the
numerator and denominator of the diluted earnings per share computation is as follows:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
---------- ----------- ---------- ----------
<S> <S> <S> <S> <S>
Net income. . . . . . . . . . . . . $ 15,242 8,990 57,264 25,359
Less income attributable to
preferred shares. . . . . . . . . (1,766) (1,789) (5,424) (5,451)
---------- ---------- ---------- ----------
Income before extraordinary item
attributable to common shares
- Basic . . . . . . . . . . . . . $ 13,476 7,201 51,840 19,908
========== ========== ========== ==========
Income before extraordinary items -
- Diluted . . . . . . . . . . . . $ 15,242 8,990 57,264 25,359
========== ========== ========== ==========
Weighted average common shares
- Basic . . . . . . . . . . . . . 17,538,488 16,982,763 17,240,591 16,900,265
========== ========== ========== ==========
Dilutive Options and Other Plan
shares. . . . . . . . . . . . . . 247,308 62,207 147,444 59,259
Convertible preferred shares. . . . 3,757,609 N/A (1) 3,902,007 N/A (1)
---------- ---------- ---------- ----------
Weighted average common shares
- Dilutive. . . . . . . . . . . . 21,543,405 17,044,970 21,290,042 16,959,524
========== ========== ========== ==========
Earnings per share before extra-
ordinary items:
Basic . . . . . . . . . . . . . $ .77 .42 3.02 1.18
Diluted . . . . . . . . . . . . $ .71 .42 2.70 1.17
========== ========== ========== ==========
<FN>
(1) In 1999, convertible preferred shares were anti-dilutive.
</TABLE>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
3. INVESTMENTS IN PARTNERSHIPS AND SERVICE COMPANIES
INVESTMENTS IN PARTNERSHIPS
At September 30, 2000, the Operating Partnership is a general partner
in various co-investment partnerships. The Operating Partnership and the
Service Companies receive various fees for services provided to these co-
investment partnerships, including development fees, construction fees,
acquisition fees, property management fees, asset management fees,
financing fees, administrative fees and disposition fees. The Operating
Partnership is entitled to shares of cash flow or liquidation proceeds in
excess of its stated ownership percentages, in most cases based on returns
to its partners in excess of specified rates. The Operating Partnership has
received cash flow and has recorded operating income in excess of its
ownership percentages of $668 for the nine months ended September 30, 2000.
Investments in partnerships at September 30, 2000 and the Company's 2000
share of income or loss for the nine months then ended from each are
summarized as follows:
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
Equity Total Company's Company's
Company's ------------------ Company's Net Share of Share of
Percentage Total Company's Investment Income Net Income Deprecia-
Community Ownership Assets Total Share (1) (1) (Loss) (Loss) tion
--------- ---------- ------- ----- --------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMLI:
at Greenwood
Forest 15% $ 15,886 4,065 622 592 31 5 49
at Champions
Park 15% 11,698 2,745 412 412 45 7 39
at Champions
Centre 15% 8,826 2,035 305 305 (72) (11) 29
at Windbrooke 15% 16,184 4,435 665 665 363 54 50
at Willeo Creek 30% 13,920 4,187 1,256 1,256 220 66 117
at Barrett Lakes 35% 24,878 7,979 2,792 2,898 685 240 239
at Chevy Chase 33% 41,949 12,861 4,271 4,271 1,453 516 324
at Willowbrook 40% 34,970 10,774 4,309 4,227 860 344 354
at River Park 40% 13,808 4,885 1,954 1,910 606 242 133
at Fox Valley 25% 22,989 22,529 5,632 5,811 949 237 140
at Fossil Creek 25% 20,348 19,758 4,940 5,030 1,131 283 136
at Danada Farms 10% 45,365 20,086 2,009 2,000 1,302 130 103
at Verandah 35% 22,730 5,300 1,898 1,955 (59) 18 296
at Northwinds 35% 52,400 17,378 6,082 5,924 1,330 466 466
at Regents Crest 25% 32,258 16,215 4,054 4,135 165 104 169
at Oakhurst North 25% 41,882 41,115 10,279 10,280 840 210 256
at Wells Branch 25% 33,452 32,470 8,117 7,566 1,841 460 216
on the Parkway 25% 15,186 4,262 1,063 761 92 25 108
on Timberglen 40% 10,532 3,687 1,494 56 (28) 24 144
at Castle Creek 40% 20,466 19,955 7,981 8,140 (36) (14) 153
at Lake Clear-
water 25% 16,081 15,359 3,840 3,893 161 40 92
Creekside 25% 15,996 15,764 3,941 4,067 (122) (31) 71
at Deerfield 25% 17,253 4,347 1,084 894 (254) (68) 110
at Wynnewood
Farms 25% 18,220 17,732 4,433 4,474 (48) (12) 84
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Equity Total Company's Company's
Company's ------------------- Company's Net Share of Share of
Percentage Total Company's Investment Income Net Income Deprecia-
Community Ownership Assets Total Share (1) (1) (Loss) (Loss) tion
--------- ---------- ------- ------ --------- ---------- ----- ---------- ----------
at Monterey Oaks 25% 29,080 26,571 6,643 6,744 205 51 53
at St. Charles 25% 41,850 38,627 9,657 9,663 560 140 194
at Park Bridge 25% 21,553 18,999 4,750 4,843 (117) (29) 33
at Mill Creek 25% 12,978 12,476 3,119 3,218 (26) (6) 1
at Lost Mountain 75% 10,076 671 719 824 (188) (141) 83
on Spring Mill 20%
(Residual) 29,609 28,774 -- 1,282 1,070 -- --
at Prestonwood
Hills 45% 17,971 6,013 2,727 2,721 140 95 162
at Windward Park 45% 27,797 9,323 4,055 4,209 275 164 248
at Summit Ridge 25% 26,145 5,173 1,293 1,096 (368) (75) 49
at Oak Bend 40% 25,581 6,059 2,370 2,370 144 78 198
Midtown 45% 34,209 11,511 5,457 5,225 395 258 281
on Frankford 45% 40,483 13,763 6,377 6,249 96 74 148
at Peachtree
City I 20% 29,574 29,247 5,849 3,784 441 88 34
at Peachtree
City II 20% 4,527 1,000 200 154 -- -- --
at Scofield Ridge 45% 38,723 13,363 6,069 6,044 74 47 55
at Breckinridge
Point 45% 34,922 12,014 5,461 5,439 44 26 29
at Cambridge
Square 30% 4,165 4,077 1,223 1,200 -- -- --
-------- ------- ------- ------- ------- ------ ------
996,520 547,584 149,402 146,587 14,200 4,105 5,446
Other 929 719 359 364 15,763 411 252
-------- ------- ------- ------- ------- ------ ------
$997,449 548,303 149,761 146,951 29,963 4,516 5,698
======== ======= ======= ======= ======= ====== ======
</TABLE>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) The Company's investment in partnerships differs from the
Company's share of co-investment partnerships' equity primarily due to
capitalized interest on its investments in properties under development,
purchase price basis differences and the elimination of the Company's share
of development fee income. These items are amortized over 40 years using
the straight-line method.
All but two debt financings have been obtained at fixed rates from
various insurance companies on behalf of these co-investment partnerships.
At September 30, 2000, the Company's share of co-investment's debt totaled
$143,822. The following summarizes co-investment debt at September 30,
2000:
Total Outstanding Interest
Community Commitment at 9/30/00 Rate Maturity
--------- ---------- ----------- -------- --------
AMLI:
at Champions Centre $ 6,700 6,467 8.93% January 2002
at Champions Park 9,500 8,593 7.49% January 2002
at Windbrooke 11,500 11,219 9.24% February 2002
at Greenwood Forest 11,625 11,359 8.95% May 2002
at Peachtree City II 19,170 3,256 L+1.875% June 2002
at Summit Ridge 18,954 18,954 L+1.75% December 2002
at Chevy Chase 29,767 27,991 6.67% April 2003
at Willeo Creek 10,000 9,427 6.77% May 2003
at Willowbrook 24,500 23,286 7.785% May 2003
at Regents Crest 16,500 15,542 7.50% December 2003
at Verandah 16,940 16,597 7.55% April 2004
on Timberglen 6,770 6,551 7.70% June 2004
at Prestonwood Hills 11,649 11,535 7.17% August 2006
at Windward Park 18,183 18,009 7.27% August 2006
at Oak Bend 18,834 18,713 7.81% December 2006
at Deerfield 12,600 12,524 7.56% January 2007
Midtown 21,945 21,812 7.52% January 2007
at Danada Farms 24,500 24,143 7.33% March 2007
on Frankford 25,710 25,683 8.25% June 2007
at Breckinridge Point 22,110 22,110 7.57% July 2007
at Scofield Ridge 24,618 24,618 7.70% August 2007
at River Park 9,100 8,793 7.75% June 2008
on the Parkway 10,800 10,507 6.75% January 2009
at Barrett Lakes 16,680 16,318 8.50% December 2009
at Northwinds 33,800 33,800 8.25% October 2010
at Lost Mountain 10,252 8,349 6.84% November 2040
-------- --------
$442,707 416,156
======== ========
In general, these loans provide for monthly payments of principal and
interest based on a 25 or 27 year amortization schedule and a balloon
payment at maturity. Some loans provide for payments of interest only for
an initial period, with principal amortization commencing generally within
two years.
Investments in Service Companies
Summarized combined financial information of the Service Companies at
and for the nine months ended September 30, 2000 and 1999 follows:
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2000 1999
------- -------
Income (1) $15,303 12,015
General and adminis-
trative expenses (8,916) (8,715)
------- -------
EBITDA 6,387 3,300
Interest (3,206) (2,438)
Depreciation (1,438) (1,142)
Income taxes (672) (39)
------- -------
Income (loss) (2)(3) $ 1,071 (319)
======= =======
Total assets $49,709 45,927
======= =======
(1) Net of construction and landscaping costs.
(2) Net of tax effect includes $311 in amortization of goodwill
in both years.
(3) The Company's share of income in 2000 (including the
recognition of $379 of intercompany profit previously eliminated) includes
$2,708 in after tax gains from sales of non-multi-family residential land.
Substantially all interest expense of the Service Companies results
from notes payable to the Company at interest rates ranging from 9.5% to
13.0%. Interest and share of income from Service Companies as included in
the accompanying Consolidated Statements of Operations is reconciled below:
September 30,
------------------
2000 1999
------ ------
Intercompany interest expensed . . . . . . $ 3,206 2,438
Intercompany interest capitalized. . . . . 308 784
Income (loss). . . . . . . . . . . . . . . 1,071 (319)
Intercompany eliminations and
minority interests, net. . . . . . . . . (188) (633)
------- ------
$ 4,397 2,270
======= ======
4. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2000 and 1999, the Company
accrued or paid to its affiliates fees and other costs and expenses as
follows:
2000 1999
------ -----
Management fees $2,120 2,177
General contractor fees 176 265
Interest expense 411 413
Landscaping and grounds maintenance 1,568 1,751
====== =====
In addition, at September 30, 2000 and December 31, 1999, the Company
owed Amli Residential Construction, Inc. $2,133 and $2,068, respectively,
for construction costs of communities under development.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During the nine months ended September 30, 2000 and 1999, the Company
earned or received from its affiliates fees and other income as follows:
2000 1999
------ -----
Development fees $1,353 2,228
Acquisition fees 708 149
Asset management fees 441 453
Disposition fee (1) 412 354
Promoted interest (2) 1,181 529
Accounting and administrative fees -- 4
Interest on advances to other
affiliates 214 384
Interest on notes and advances
to Service Companies 3,514 3,222
====== =====
(1) Fees from sales of AMLI at Pleasant Hill and AMLI at Prairie
Court in 2000 and 1999, respectively, net of intercompany eliminations.
(2) The Company's share of net sale proceeds representing incentive
compensation in the form of promoted interest in AMLI at Pleasant Hill and
AMLI at Prairie Court in 2000 and 1999, respectively.
In addition, during the nine months ended September 30, 2000 and
1999, total revenues of $1,954 and $1,573, respectively, were generated
from leases to AMLI Corporate Homes ("ACH"), a division of one of the
Service Companies.
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. DEBT
The table below summarizes certain information relating to the indebtedness of the Company.
<CAPTION>
Balance Balance
Original at Interest Maturity at
Encumbered Communities Amount 9/30/00 Rate Date 12/31/99
---------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BOND FINANCING:
Tax-Exempt
Unsecured (1) $ 40,750 40,750 Rate+1.23% 10/1/24 40,750
Tax-Exempt
AMLI at Poplar Creek 9,500 9,500 Rate+1.15% 2/1/24 9,500
-------- ------- -------
Total Bonds 50,250 50,250 50,250
-------- ------- -------
MORTGAGE NOTES PAYABLE TO FINANCIAL INSTITUTIONS:
AMLI at Conner Farms 13,275 12,305 7.00% 6/15/03 12,498
AMLI at Riverbend 31,000 28,875 7.30% 7/1/03 29,307
AMLI in Great Hills 11,000 10,250 7.34% 7/1/03 10,402
AMLI at Valley Ranch 11,500 10,036 7.625% 7/10/03 10,229
AMLI at Nantucket 7,735 7,484 7.70% 6/1/04 7,573
AMLI at Bishop's Gate 15,380 14,594 (2) 8/1/05 14,803
AMLI at Regents Center 20,100 19,312 (3) 9/1/05 19,463
AMLI on the Green/AMLI of North Dallas (4) 43,234 40,588 7.789% 5/1/06 41,120
AMLI at Clairmont 12,880 12,778 6.95% 2/15/08 12,880
AMLI at Park Creek 10,322 10,234 7.875% 12/1/38 10,266
-------- ------- --------
Total Mortgage Notes Payable 176,426 166,456(5) 168,541
-------- ------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Balance Balance
Original at Interest Maturity at
Encumbered Properties Amount 9/30/00 Rate Date 12/31/99
--------------------- -------- -------- -------- -------- --------
OTHER NOTES PAYABLE:
Unsecured line of credit (6)(7) 250,000 176,500 L+1.05% 10/11/02 145,000
Note payable to Service Company 5,000 5,000 10.00% 1/1/03 5,000
Unsecured note payable to Service Company 750 750 4.00% Demand 750
-------- ------- --------- ------- -------
Total Other Notes Payable 255,750 182,250 150,750
-------- ------- -------
Total $482,426 398,956 369,541
======== ======= =======
<FN>
(1) The terms of these tax-exempt bonds require that a portion of the apartment units be leased to individuals
who qualify based on income levels specified by the U.S. Government. The bonds bear interest at a variable rate
that is adjusted weekly based upon the remarketing rate for these bonds (4.39% for AMLI at Spring Creek and 4.44%
for AMLI at Poplar Creek at October 26, 2000). The credit enhancement for the AMLI at Spring Creek bonds was
provided by a $41,297 letter of credit from Wachovia Bank which expires on October 11, 2002 and the credit
enhancement for the AMLI at Poplar Creek bonds was provided by a $9,617 letter of credit from LaSalle National
Bank that expires December 18, 2002.
(2) This original $14,000 mortgage note bears interest at 9.1%. For financial reporting purposes, this mortgage
note was valued at $15,380 to reflect a 7.25% market rate of interest when assumed in connection with the
acquisition of AMLI at Bishop's Gate on October 17, 1997. The unamortized premium at September 30, 2000 is $890.
(3) $13,800 at 8.73% and $6,300 at 9.23%.
(4) These two properties secure the FNMA loan that was sold at a discount of $673. At September 30, 2000, the
unamortized discount amount is $376.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) All but $20,812 of the total is non-recourse to the partners of the Operating Partnership.
(6) The Company has used interest rate swaps on $150,000 of the outstanding amount to fix its base interest rate
(before current lender's spread) at an average of 6.67%.
(7) The Company's unsecured line of credit has been provided by a group of eight banks led by Wachovia Bank,
N.A. and Bank One, N.A. In October 1999, the Company increased the line of credit by $50,000 to $250,000,
expandible to $300,000, and extended the maturity of the line of credit by one year to October 2002 with two one-
year renewal options. In addition, the interest rate, which is based in part on the credit rating assigned to
unsecured borrowings, increased to LIBOR plus 1.05% from LIBOR plus 0.90%. The Company is in the process of
modifying and extending the maturity of this line of credit. This unsecured line of credit requires that the
Company meet various covenants typical of such an arrangement, including minimum net worth, minimum debt service
coverage and maximum debt to equity percentage. The unsecured line of credit is used for acquisition and
development activities and working capital needs.
</TABLE>
<PAGE>
<TABLE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As of September 30, 2000, the scheduled maturities of the Company's debt are as follows:
<CAPTION>
FIXED RATE
MORTGAGE NOTES
NOTES PAYABLE UNSECURED PAYABLE TO
BOND TO FINANCIAL LINES SERVICE
FINANCINGS INSTITUTIONS OF CREDIT COMPANIES TOTAL
---------- ------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
2000. . . . . . . . . . . . . . . . . $ -- 725 -- 750 1,475
2001. . . . . . . . . . . . . . . . . -- 3,039 -- -- 3,039
2002. . . . . . . . . . . . . . . . . 50,250 3,273 176,500 -- 230,023
2003. . . . . . . . . . . . . . . . . -- 60,117 -- 5,000 65,117
2004. . . . . . . . . . . . . . . . . -- 8,933 -- -- 8,933
Thereafter. . . . . . . . . . . . . . -- 90,369 -- -- 90,369
------- ------- ------- ------- -------
$50,250 166,456 176,500 5,750 398,956
======= ======= ======= ======= =======
</TABLE>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
6. COMMITMENTS AND CONTINGENCIES
The limited partnership Agreements of AMLI at Verandah L.P. and AMLI
on Timberglen provide for the redemption (at an amount determined by
formula) by the partnerships of the limited partner's entire interest, in
their sole discretion, at any time after March 25, 2002 and December 16,
2003, or at any time that there is a designated event of default on related
indebtedness of the partnerships, which event of default remains uncured
and unwaived to the time of notice of redemption election. The redemption
amount may be paid in cash or Company shares of beneficial interest, or any
combination thereof, in the sole discretion of the Company.
7. SEGMENT REPORTING
The revenues, net operating income, FFO and assets for the Company's
reportable segment are summarized as follows:
Nine Months Ended
September 30,
------------------------
2000 1999
---------- ----------
Multifamily segment revenues (1). . . . . . . $ 174,861 150,523
========== ==========
Multifamily segment net operating income (1). $ 106,628 91,794
Reconciling items to FFO:
Reduce co-investment net operating income
to Company's share (2). . . . . . . . . . (44,317) (32,034)
Interest income and share of income (loss)
from Service Companies. . . . . . . . . . 4,708 2,581
Other interest income . . . . . . . . . . . 990 1,102
Other revenues. . . . . . . . . . . . . . . 4,256 4,005
General and administrative expenses . . . . (2,700) (3,219)
Interest expense and loan cost amortization (18,583) (17,062)
---------- ----------
Consolidated FFO before minority interest . . 50,982 47,167
---------- ----------
Reconciling items to net income:
Depreciation - wholly owned properties. . . (14,630) (13,709)
Depreciation - share of co-investment
properties. . . . . . . . . . . . . . . . (5,698) (3,613)
Share of Service Company's goodwill
amortization. . . . . . . . . . . . . . . (311) (311)
Gain on sale of residential property. . . . 37,274 --
---------- ----------
Income before minority interest and
extraordinary items . . . . . . . . . . . . 67,617 29,534
Minority interest . . . . . . . . . . . . . . 10,353 4,175
---------- ----------
Net income. . . . . . . . . . . . . . . . . . $ 57,264 25,359
========== ==========
September 30, December 31,
2000 1999
------------- ------------
Segment assets (1) (3). . . . . . . . . . . . $1,600,075 1,462,051
========== ==========
(1) In 2000, represents all properties in which the Company has an
ownership interest; in 1999, excludes AMLI at Prairie Court and AMLI at
Towne Creek, in which the Company had a 1% GP interest.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(2) Represents amount required to reduce co-investment properties' net
operating income to the Company's share of net operating income from
partnerships.
(3) Represents original acquisition costs of wholly owned and co-
investment properties.
The Company derives no consolidated revenues from foreign countries nor has
any major customers that individually account for 10% or more of the
Company's consolidated revenues.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
The following discussion is based primarily on the consolidated
financial statements of Amli Residential Properties Trust (the "Company")
as of September 30, 2000 and December 31, 1999 and for the three and nine
months ended September 30, 2000 and 1999.
This information should be read in conjunction with the accompanying
unaudited consolidated financial statements and notes thereto. These
financial statements include all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the
interim periods presented, and all such adjustments are of a normal
recurring nature.
As of September 30, 2000, the Company owned an 87% general partnership
interest in AMLI Residential Properties, L.P. (the "Operating
Partnership"), which holds the operating assets of the Company. The
limited partners hold Operating Partnership units ("OP Units") that are
convertible into common shares of the Company on a one-for-one basis,
subject to certain limitations. On August 22, 2000, 500,000 Series A
Preferred shares were converted to common shares leaving 350,000 Series A
Preferred shares outstanding at September 30, 2000. At September 30, 2000,
the Company owned 21,303,565 OP Units and the limited partners owned
3,249,077 OP Units. The Company has qualified, and anticipates continuing
to qualify, as a real estate investment trust ("REIT") for Federal income
tax purposes.
RESULTS OF OPERATIONS
During the period from January 1, 1999 through September 30, 2000, the
decrease in property revenues and property operating expenses resulted from
dispositions of communities owned as of January 1, 1999, offset in part by
revenues and operating expenses from communities acquired and from the
communities newly-constructed since January 1, 1999.
Since January 1, 1999, the Company has sold five stabilized
communities containing a total of 1,780 apartment homes. During the same
period, the Company has acquired a total of 756 units in two stabilized
communities (AMLI at StoneHollow and AMLI at Towne Creek) and developed and
begun rental operations on 200 apartment homes of one community (AMLI at
Bent Tree II). Property operations from wholly-owned assets for the nine
months ended September 30, 2000 and 1999 are summarized as follows:
Increase
2000 1999 (Decrease)
------- ------ ---------
Total Wholly-Owned
Property Revenues
------------------
Same Communities . . . . . . . $75,052 73,591 1,461
New Communities. . . . . . . . 1,896 1,056 840
Development and/or Lease-up
Communities . . . . . . . . . 768 -- 768
Acquisition Communities. . . . 4,872 -- 4,872
Communities Contributed
to Ventures/Sold. . . . . . . 2,311 12,395 (10,084)
------- ------- -------
Total . . . . . . . . . . . $84,899 87,042 (2,143)
======= ======= =======
<PAGE>
Increase
2000 1999 (Decrease)
------- ------ ---------
Total Wholly-Owned
Property Operating Expenses
---------------------------
Same Communities . . . . . . . $29,109 28,870 239
New Communities. . . . . . . . 600 557 43
Development and/or Lease-up
Communities . . . . . . . . . 495 -- 495
Acquisition Communities. . . . 1,867 -- 1,867
Communities Contributed
to Ventures/Sold. . . . . . . 708 4,312 (3,604)
------- ------- -------
Total . . . . . . . . . . . $32,779 33,739 (960)
======= ======= =======
Total Wholly-Owned
Property Net Operating Income
-----------------------------
Same Communities . . . . . . . $ 45,943 44,721 1,222
New Communities. . . . . . . . 1,296 499 797
Development and/or Lease-up
Communities . . . . . . . . . 273 -- 273
Acquisition Communities . . . 3,005 -- 3,005
Communities Contributed
to Ventures/Sold. . . . . . . 1,603 8,083 (6,480)
------- ------- -------
Total . . . . . . . . . . . $52,120 53,303 (1,183)
======= ======= =======
The term "New Communities" refers to completed properties owned since
the beginning of the earliest period for which comparative financial
information is presented.
Property Net Operating Income is computed before interest, taxes,
depreciation and amortization. This performance measure is not intended as
a replacement for net income determined in accordance with generally
accepted accounting principles ("GAAP").
Since January 1999, the Company has invested in eight co-investment
partnerships which acquired eight stabilized communities containing a total
of 3,266 units: AMLI at Prestonwood Hills, a 272-unit community, AMLI at
Windward Park, a 328-unit community, AMLI at Oak Bend, a 426-unit
community, AMLI Midtown, a 419-unit community, AMLI on Frankford, a 582-
unit community, AMLI at Peachtree City I, a 312-unit community, AMLI at
Scofield Ridge, a 487-unit community, and AMLI at Breckinridge Point, a
440-unit community. In addition, the Company in joint venture with
institutional investors, completed the development or has under development
and begun rental operations of nine new communities and one additional
phase to an existing stabilized community, that contain a total of 2,834
apartment homes (AMLI at St. Charles, AMLI at Lake Clearwater, AMLI at
Castle Creek, AMLI Creekside, AMLI at Wynnewood, AMLI at Monterey Oaks,
AMLI at Park Bridge, AMLI at Lost Mountain, AMLI at Summit Ridge and AMLI
at Regents Crest II). Property operations for all co-investment properties
for the nine months ended September 30, 2000 and 1999 are summarized as
follows:
<PAGE>
Increase
2000 1999 (Decrease)
------- ------- ---------
Total Co-investment Property Revenues
-------------------------------------
Same Communities . . . . . . . $42,525 41,349 1,176
New Communities. . . . . . . . 18,967 13,471 5,496
Development and/or Lease-up
Communities . . . . . . . . . 8,016 139 7,877
Acquisition Communities. . . . 16,679 2,110 14,569
Communities Contributed
to Ventures/Sold. . . . . . . 4,804 8,876 (4,072)
------- ------- -------
Total . . . . . . . . . . . $90,991 65,945 25,046
======= ======= =======
Company's share of co-invest-
ment total revenues . . . . . $26,563 17,894 8,669
======= ======= =======
Total Co-investment
Property Operating Expenses
---------------------------
Same Communities . . . . . . . $15,505 15,370 135
New Communities. . . . . . . . 7,132 5,444 1,688
Development and/or Lease-up
Communities . . . . . . . . . 4,609 294 4,315
Acquisition Communities. . . . 6,366 944 5,422
Communities Contributed
to Ventures/Sold. . . . . . . 1,595 3,676 (2,081)
------- ------- -------
Total . . . . . . . . . . . $35,207 25,728 9,479
======= ======= =======
Company's share of co-invest-
ment property operating
expenses. . . . . . . . . . . $10,167 6,892 3,275
======= ======= =======
Total Co-investment Property
Net Operating Income
----------------------------
Same Communities . . . . . . . $27,020 25,979 1,041
New Communities. . . . . . . . 11,835 8,027 3,808
Development and/or Lease-up
Communities . . . . . . . . . 3,407 (155) 3,562
Acquisition
Communities . . . . . . . . . 10,313 1,166 9,147
Communities Contributed to
Ventures/Sold . . . . . . . . 3,209 5,200 (1,991)
------- ------- -------
Total . . . . . . . . . . . $55,784 40,217 15,567
======= ======= =======
Company's share of co-invest-
ment property NOI. . . . . . . $17,359 11,231 6,128
======= ======= =======
For the nine months ended September 30, 2000, total revenues were
$99,057 and net income was $57,264 including gains of $37,274 from sales of
AMLI at Sope Creek, 80% of the Company's ownership interest in AMLI at
Peachtree City I and share of gain on sale of AMLI at Pleasant Hill. For
the nine months ended September 30, 1999, total revenues were $97,265 and
net income was $25,359. For the nine months ended September 30, 2000,
diluted earnings per common share included gains from sales of these three
communities ($1.50 per diluted share) and increased to $2.70 from $1.17 for
the nine months ended September 30, 1999. Basic earnings per common share
for the nine months ended September 30, 2000 increased to $3.02 ($1.21
excluding the gain) from $1.18 for the nine months ended September 30,
1999.
<PAGE>
On a "same community" basis, weighted average occupancy of the
apartment homes owned wholly by the Company decreased slightly to 91.8% for
the nine months ended September 30, 2000 from 92.8% in the prior year.
Weighted average collected rental rates increased by 2.4% to $757 from $740
per unit per month for the nine months ended September 30, 2000 and 1999,
respectively. Including Co-Investment Communities, weighted average
occupancy of the Company's apartment homes decreased to 92.6% for the nine
months ended September 30, 2000 from 93.3% in the prior year, and weighted
average collected rental rates increased by 2.2% to $791 from $775 per unit
per month for the nine months ended September 30, 2000 and 1999,
respectively.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999.
Income before minority interest increased to $67,167 for the nine
months ended September 30, 2000 from $29,534 for the nine months ended
September 30, 1999. This increase was primarily attributable to a $37,274
in gains on sales of residential properties, a $1,792 increase in total
revenues and a $940 decrease in property operating expenses, reduced by a
$1,481 increase in interest expense and a $921 increase in depreciation.
The increase in total revenues was largely from the Company's share of
after tax gains of $2,708 from sales of six land parcels by a Service
Company and the $1,181 of incentive compensation the Company received from
the sale of a co-investment community. The decrease in property operating
expenses was a result of reduced utilities expense resulting from full
implementation of the Company's program to transfer the liability for
utility costs to its residents. Net income for the nine months ended
September 30, 2000 and 1999 was $57,264 and $25,359, respectively. Total
property revenues decreased by $2,145 or 2.7%. This decrease in property
revenues was primarily from the 1,780 apartment homes sold during 2000 and
1999. This decrease was offset in part by increases resulting from 756
apartment homes acquired during 2000. In addition, the Company commenced
leasing 200 apartment homes under development during 1999 and 2000.
Furthermore, moderate increases in rental rates were achieved, offset by a
decline in weighted average occupancy as discussed in the preceding
paragraph. Other property revenues include increases in various fees
charged to residents. On the same community basis total property revenues
increased by $1,460 or 2.0% and property operating income increased by
$1,222 or 2.7%.
The Company operates, owns and manages apartments in seven
metropolitan areas. During 2000, the supply/demand characteristics in the
suburban Austin and Chicago markets have enabled the Company to increase
rents at a rate in excess of the rate of inflation. Supply and demand is
generally in balance in Atlanta. A combination of a moderate over-supply
of rental apartments in Dallas, Houston, Indianapolis and Kansas City
coupled with increased vacancy rates attributable to the Company's rehabs
of four wholly-owned communities in Atlanta, Dallas and Indianapolis, has
contributed to overall growth in collected rents at less than the rate of
inflation.
Interest and share of income from Service Companies increased 93.7% to
$4,397 from $2,270 primarily as a result of $2,708 in after tax gains from
the Service Companies' sales of six land parcels in 2000, offset by
approximately $400 in after-tax expenses related to third party assessment
of business processes and related information technology initiatives. The
Service Companies have made an investment of $300 in a computer software
company which has developed software to assist in pricing rentals. This
investment is carried at cost. The Service Company is in the process of
implementing this software for a number of its managed properties.
<PAGE>
Income from partnerships increased to $4,516 from $2,845, or 58.7%.
This increase was a result of the acquisition of eight stabilized
communities containing a total of 3,266 units through eight new co-
investment partnerships. In addition, ten new co-investment partnerships
have invested in nine development communities and a second phase to an
existing stabilized community, which have a total of 2,834 apartment homes
that began rental operations in late 1999 and 2000. On the same community
basis, total property revenues increased by $1,176 or 2.8% and net
operating income increased by $1,041 or 4.0%.
Other income increased to $4,256 from $4,005, or 6.3%. This increase
is primarily due to $1,181 in incentive compensation in the form of a
promoted interest received by the Company from the sale of AMLI at Pleasant
Hill in 2000, reduced by lower development fees as the Company's
development activities have moderated in Dallas and Kansas City. For the
nine months ended September 30, 2000, the Company has included $161 of a
$230 settlement from a legal action involving siding at two of its
properties in other income. In 1999, other income includes a $281 gain on
sale of a land parcel.
Property operating expenses decreased by $940, or 2.8%. This decrease
is principally due to the decrease in utilities expense described above.
On the same community basis, property operating expenses increased by $239
or 0.8%.
Interest expense, net of the amounts capitalized, increased to $18,243
from $16,762 or 8.8%, primarily due to increased indebtedness incurred in
conjunction with investments in joint ventures which own stabilized
properties, to increased short-term borrowing rates, and to payments on
interest rate swap contracts associated with hedging an additional $75,000
of the Company's floating rate debt in 2000.
General and administrative expenses decreased to $2,700 for the nine
months ended September 30, 2000 from $3,219 for the nine months ended
September 30, 1999. Bonuses for the nine months ended September 30, 2000
were $177 less than in the same period in 1999, primarily because of a
special bonus award in 1999 following the sale of AMLI at Prairie Court.
Costs attributable to abandoned projects that were written off and lower
shareholder service expenses also contributed to the decrease.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had $1,520 in cash and cash
equivalents and $73,500 in availability under its $250,000 unsecured line
of credit. The Company is in the process of modifying and extending the
maturity of this line of credit.
At September 30, 2000, nineteen of the Company's wholly-owned
stabilized communities were unencumbered. There are no fixed rate loans on
wholly-owned communities with maturity dates prior to July 2003.
Net cash flows provided by operating activities for the nine months
ended September 30, 2000 decreased to $43,884 from $48,614 for the nine
months ended September 30, 1999. The decrease is primarily due to an
increase in notes receivable from an affiliate of a Service Company,
additional escrow for infrastructure construction and advances to
partnerships, offset in part by increased revenues from communities
acquired and developed in 1999 and 2000.
Cash flows used in investing activities for the nine months ended
September 30, 2000 decreased to $40,850 from $59,491 for the nine months
ended September 30, 1999. The decrease consisted primarily of net proceeds
from the sales of rental communities offset in part by increased
expenditures for acquisitions and development costs and increased
investments in partnerships.
Net cash flows used in financing activities for the nine months ended
September 30, 2000 were $3,832, which reflect net proceeds of additional
borrowings and dividend payments.
<PAGE>
Funds from operations ("FFO") is defined as net income (computed in
accordance with GAAP), excluding extraordinary gains (losses) from debt
restructuring and gains (losses) from sales of depreciable operating
properties, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships, joint ventures and other affiliates.
Adjustments for unconsolidated partnerships, joint ventures and other
affiliates are calculated to reflect FFO on the same basis. FFO does not
represent cash flows from operations, as defined by GAAP; is not indicative
that cash flows are adequate to fund all cash needs; and is not to be
considered an alternative to net income or any other GAAP measure as a
measurement of the results of the Company's operations or the Company's
cash flows or liquidity as defined by GAAP.
FFO is widely accepted in measuring the performance of equity REITs.
An understanding of the Company's FFO will enhance the reader's
comprehension of the Company's results of operations and cash flows as
presented in the financial statements and data included elsewhere herein.
FFO for the nine months ended September 30, 2000 and 1999 is
summarized as follows:
September 30,
-----------------------
2000 1999
------- -------
Net income before minority
interest $67,617 29,534
Depreciation 14,630 13,709
Share of co-investment partner-
ships' depreciation 5,698 3,613
Share of Service Company's
goodwill amortization 311 311
Gains on sales of residential
properties (37,274) --
------- ------
FFO $50,982 47,167
======= ======
Weighted average shares and units
including dilutive shares 24,692 24,546
======= ======
The Company expects to pay quarterly dividends from cash available for
distribution. Until distributed, funds available for distribution will be
invested in short-term investment-grade securities or used to temporarily
reduce balances outstanding on the Company's revolving lines of credit.
The Company intends to finance the majority of its future development
activities by co-investing these developments with institutional partners.
The Company expects to meet its short-term liquidity requirements by using
its working capital and any portion of net cash flow from operations not
distributed currently. The Company is of the opinion that its future net
cash flows will be adequate to meet operating requirements in both the
short and the long term and provide for payment of dividends by the Company
in accordance with REIT requirements. The Company qualifies as a REIT
under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. A REIT will generally not be subject to Federal income taxation
on that portion of its income that qualifies as REIT taxable income to the
extent that it distributes at least 95% of its taxable income to its
shareholders and complies with certain other requirements. In 1999, the
Company distributed approximately 90% of its taxable income and will
designate a portion of its dividends being paid during 2000 as a throw back
dividend to 1999. The Company's current dividend payment level equals an
annual rate of $1.88 per common share, increased on July 31, 2000 from an
annual rate of $1.84 per common share. The Company anticipates that all
dividends paid in 2000 will be fully taxable.
<PAGE>
The Company has recorded no deferred taxes on gains for financial
reporting purposes that have been deferred for income tax reporting
purposes because the Company intends to distribute to its shareholders any
deferred tax gain upon ultimate realization for income tax reporting
purposes.
The Company expects to meet certain long-term liquidity requirements
such as scheduled debt maturities, repayment of loans for construction,
development, and acquisition activities through the issuance of long-term
secured and unsecured debt and additional equity securities of the Company
(or OP Units). Through September 30, 2000, the Company has issued
preferred and common shares for an aggregate issuance price of $128,467
leaving a balance of $71,533 in shares that the Company may issue in the
future under its shelf registration statement.
COMPANY INDEBTEDNESS
The Company's debt as of September 30, 2000 includes $166,456 (41.7%
of the total) which is secured by first mortgages on eleven of the wholly-
owned communities and is summarized as follows:
SUMMARY DEBT TABLE
------------------
Type of Weighted Average Outstanding Percent
Indebtedness Interest Rate Balance of Total
------------ ---------------- ----------- --------
Fixed Rate
Mortgages 7.6% $166,456 41.7%
Tax-Exempt Tax-Exempt Rate + 1.23% 50,250 12.6%
Bonds (1) Tax-Exempt Rate + 1.15%
Lines of
Credit (2) LIBOR + 1.05% 176,500 44.2%
Notes payable
to Service
Companies Various 5,750 1.5%
-------- ------
Total $398,956 100.0%
======== ======
--------------------
(1) The tax-exempt bonds bear interest at a variable tax-exempt rate that
is adjusted weekly based on the re-marketing of these bonds (4.39% for AMLI
at Spring Creek and 4.44% for AMLI at Poplar Creek at October 26, 2000).
The AMLI at Spring Creek bonds mature on October 1, 2024 and the related
credit enhancement expires on October 15, 2002. The AMLI at Poplar Creek
bonds mature on February 1, 2024 and the related credit enhancement expires
on December 18, 2002.
(2) Amounts borrowed under lines of credit are due in 2002. The interest
rate on $150,000 has been fixed pursuant to interest rate swap contracts.
DEVELOPMENT ACTIVITIES
At September 30, 2000, the Company has made capital contributions
totaling $161,953 to its existing co-investment partnerships and
anticipates funding substantially all of its remaining commitment of
$17,346 during 2000 to complete the 3,642 apartment homes being developed
by co-investment partnerships.
<PAGE>
Currently 500 apartment homes in two wholly-owned communities are
under development. At September 30, 2000, the Company expects to incur
$13,197 in 2000 and 2001 to complete construction of these communities.
The Company owns land for the development of an additional 5,655
apartment homes in Ft. Worth, Houston and Austin, Texas; Indianapolis,
Indiana; Kansas City, Kansas, Atlanta, Georgia and Chicago, Illinois. The
Company has earnest money deposits of $5,070 for eight land parcels
anticipated to be acquired in 2000 or 2001 for development.
CAPITAL EXPENDITURES
Capital expenditures are those made for assets having a useful life in
excess of one year and include replacements (including carpeting and
appliances) and betterments, such as unit upgrades, enclosed parking
facilities and similar items.
In conjunction with acquisitions of existing properties, it is the
Company's policy to provide in its acquisition budgets adequate funds to
complete any deferred maintenance items and to otherwise make the
properties acquired competitive with comparable newly-constructed
properties. In some cases, the Company will provide in its acquisition
budget additional funds to upgrade or otherwise improve new acquisitions.
REHAB EXPENDITURES
In September 1998, AMLI initiated its first community rehab since its
initial public offering. Rehab is a capital improvement program involving
significant repairs, replacements and improvements at an aggregate cost of
at least the greater of $3 per apartment home or 5% of the value of the
entire apartment community. All costs (except costs to routinely paint the
interiors of units at turnover) associated with a rehab will be capitalized
and depreciated over their policy lives.
AMLI's larger properties were built in phases, and the rehabs of these
larger properties are being done in phases. AMLI has no current plans to
proceed with the rehab of additional phases.
At September 30, 2000, four communities were under rehab and have
incurred costs (primarily in 1999 and 2000) as follows:
AMLI:
at Riverbend $ 5,678
at Spring Creek 3,011
at North Dallas 2,842
at Valley Ranch 1,361
-------
$12,892
=======
The Company anticipates incurring approximately $3,200 (primarily
during the fourth quarter) to complete the first phases currently under
rehab.
INFLATION
Virtually all apartment leases at the wholly-owned communities and co-
investment communities are for six or twelve months' duration. This
enables the Company to pass along inflationary increases in its operating
expenses on a timely basis. Because the Company's property operating
expenses (exclusive of depreciation and amortization) average approximately
38.6% of rental and other property revenue, increased inflation typically
results in comparable increases in income before interest and general and
administrative expenses, so long as rental market conditions allow
increases in rental rates while maintaining stable occupancy.
<PAGE>
An increase in general price levels may immediately precede, or
accompany, an increase in interest rates. The Company's exposure
(including the Company's proportionate share of its co-investment
partnerships' expense) to rising interest rates is mitigated by the
existing debt level of approximately 40% of the Company's total market
capitalization at September 30, 2000 (48% including the Company's share of
co-investment partnerships' debt), the high percentage of intermediate term
fixed rate debt (42% of total debt), and the use of interest rate swaps to
effectively fix the interest rate on $75 million of floating rate debt
through May 2001, $20 million through November 2002, $30 million through
February 2003, $15 million through September 2004 and $10 million through
October 2004 (37.6% of total debt). As a result, for the foreseeable
future, increases in interest expense resulting from increasing inflation
are anticipated to be less than future increases in income before interest
and general and administrative expenses.
OTHER MATTERS
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities," as clarified by Statement
of Financial Accounting Standards No. 138 on the same subject, became
effective for all fiscal quarters for fiscal years beginning after June 15,
2000. Among other things, the new statement requires that the values of
the derivative contracts be included as assets or liabilities in the
balance sheet, that changes in the values of these contracts be included in
comprehensive income, and that any portion of such change in values which
is not an effective hedge be included in net income. Statement No. 133 is
not expected to have a material impact on the Company's financial
statements.
"Accounting for Certain Transactions involving Stock Compensation," an
interpretation of APB No. 25, became effective July 1, 2000 and is not
currently expected to have a material impact on the Company's financial
statements. The Service Companies recorded a pre-tax charge against
earnings of $42,000 for the three months ended September 30, 2000 as a
result of implementing this statement.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Certain statements set forth herein or incorporated by reference
herein from the Company's filings under the Securities Exchange Act of
1934, as amended, contain forward-looking statements, including, without
limitation, statements relating to the timing and anticipated capital
expenditures of the Company's development programs. Although the Company
believes that the expectations reflected in such forward-looking statements
are based on reasonable assumptions, the actual results may differ
materially from that set forth in the forward-looking statements. Certain
factors that might cause such differences include general economic
conditions, local real estate conditions, construction delays due to the
unavailability of construction materials, weather conditions or other
delays beyond the control of the Company. Consequently, such forward-
looking statements should be regarded solely as reflections of the
Company's current operating and development plans and estimates. These
plans and estimates are subject to revision from time to time as additional
information becomes available, and actual results may differ from those
indicated in the referenced statements.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As disclosed in ITEM 2, the Company has in 2000 been limited in its
ability to raise rents and increase occupancies at many of its wholly-owned
properties because of relative weak demand (in Dallas, Indianapolis and
Kansas City in particular) and because of the rehabs in process at its
three largest properties. With the conclusion of the rehab program early
in 2001, the Company anticipates bringing occupancies of its rehab
properties back up to a more normal level. The Company is of the opinion
that an existing slow down in the rate of new construction in Dallas,
Indianapolis and Kansas City will soon permit the Company to again raise
rents at least at the rate of inflation.
Since December 31, 1999, there have been no significant changes in the
Company's exposure to interest rate changes or other market risks.
<PAGE>
<TABLE> OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Company's Wholly-Owned
Communities and Co-Investment Communities:
<CAPTION>
2000 1999
LOCATION/COMMUNITY COMPANY'S NUMBER ----------------------------------------------------
------------------ PERCENTAGE OF AT AT AT AT AT AT AT AT
WHOLLY-OWNED COMMUNITIES OWNERSHIP UNITS 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
------------------------ ---------- ------- ----- ----- ----- ------ ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DALLAS/FT. WORTH, TEXAS
AMLI:
at AutumnChase . . . . . . 690 93% 91% 88% 92% 91% 91% 91%
at Bent Tree . . . . . . . 300 91% 97% 95% 92% 92% 93% 93%
at Bishop's Gate . . . . . 266 93% 92% 91% 93% 96% 93% 94%
at Chase Oaks. . . . . . . 250 94% 93% 95% 97% 93% 92% 92%
at Gleneagles. . . . . . . 590 95% 95% 92% 94% 95% 95% 94%
on the Green . . . . . . . 424 92% 97% 95% 94% 95% 94% 93%
at Nantucket . . . . . . . 312 95% 97% 94% 97% 95% 95% 94%
of North Dallas. . . . . . 1,032 93% 90% 90% 90% 91% 90% 92%
on Rosemeade . . . . . . . 236 95% 95% 96% 95% 97% 95% 95%
at Valley Ranch. . . . . . 460 97% 95% 97% 95% 96% 96% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
4,560 94% 93% 92% 93% 93% 93% 93%
------ ----- ----- ----- ----- ----- ----- ----- -----
AUSTIN, TEXAS
AMLI:
at the Arboretum . . . . . 231 98% 94% 95% 96% 91% 96% 97%
in Great Hills . . . . . . 344 95% 97% 97% 97% 94% 97% 93%
at Lantana Ridge . . . . . 354 97% 93% 94% 94% 97% 92% 92%
at Martha's Vineyard . . . 360 94% 97% 98% 96% 96% 98% 96%
at StoneHollow . . . . . . 606 97% 97% 98% N/A N/A N/A N/A
------ ----- ----- ----- ----- ----- ----- ----- -----
1,895 96% 96% 97% 96% 95% 96% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
ATLANTA, GEORGIA
AMLI:
at Clairmont. . . . . . . . 288 93% 96% 97% 96% 96% 95% 94%
lease lease
at Killian Creek. . . . . . 256 95% 96% 97% 98% 96% up up
at Park Creek . . . . . . . 200 95% 91% 95% 88% 90% 95% 88%
at Peachtree City . . . . . N/A N/A N/A 94% 94% 93% 97% 94%
at Sope Creek . . . . . . . N/A N/A N/A N/A 96% 95% 92% 93%
on Spring Creek . . . . . . 1,180 90% 92% 90% 92% 93% 91% 91%
at Vinings. . . . . . . . . 360 96% 95% 89% 94% 92% 96% 96%
at West Paces . . . . . . . 337 90% 95% 92% 91% 94% 95% 94%
at Towne Creek. . . . . . . 150 93% 93% 93% N/A N/A N/A N/A
------ ----- ----- ----- ----- ----- ----- ----- -----
2,771 92% 93% 92% 94% 94% 93% 93%
------ ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2000 1999
COMPANY'S NUMBER ----------------------------------------------------
PERCENTAGE OF AT AT AT AT AT AT AT AT
LOCATION/COMMUNITY OWNERSHIP UNITS 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
------------------ ---------- ------- ----- ----- ----- ------ ----- ----------- ------
EASTERN KANSAS
AMLI:
at Alvamar . . . . . . . . 152 92% 92% 86% 86% 99% 95% 93%
at Centennial Park . . . . 170 81% 89% 84% 85% 92% 94% 89%
at Crown Colony. . . . . . N/A N/A N/A N/A N/A 87% 92% 91%
at Lexington Farms . . . . 404 87% 90% 91% 84% 89% 94% 91%
at Regents Center. . . . . 424 87% 89% 92% 89% 94% 97% 97%
at Sherwood. . . . . . . . N/A N/A N/A N/A N/A 93% 92% 91%
at Town Center . . . . . . 156 87% 87% 83% 83% 88% 92% 96%
------ ----- ----- ----- ----- ----- ----- ----- -----
1,306 87% 89% 89% 86% 92% 94% 93%
------ ----- ----- ----- ----- ----- ----- ----- -----
INDIANAPOLIS, INDIANA
AMLI:
at Conner Farms. . . . . . 300 93% 94% 94% 95% 94% 95% 96%
at Eagle Creek . . . . . . 240 93% 93% 94% 91% 91% 91% 94%
at Riverbend . . . . . . . 996 89% 84% 79% 77% 79% 91% 87%
------ ----- ----- ----- ----- ----- ----- ----- -----
1,536 90% 87% 84% 83% 84% 92% 90%
------ ----- ----- ----- ----- ----- ----- ----- -----
CHICAGO, ILLINOIS
AMLI:
at Park Sheridan . . . . . N/A N/A N/A N/A N/A 96% 96% 93%
at Poplar Creek. . . . . . 196 96% 93% 99% 92% 93% 96% 90%
------ ----- ----- ----- ----- ----- ----- ----- -----
196 96% 93% 99% 92% 94% 96% 92%
------ ----- ----- ----- ----- ----- ----- ----- -----
12,264 92.5% 92.5% 91.7% 91.5% 92.2% 93.3% 92.4%
====== ===== ===== ===== ===== ===== ===== ===== =====
CO-INVESTMENT COMMUNITIES:
--------------------------
ATLANTA, GA
AMLI:
at Barrett Lakes . . . . . 35% 446 96% 95% 96% 95% 95% 94% 94%
lease lease lease
at Northwinds. . . . . . . 35% 800 94% 96% 96% 93% up up up
at Pleasant Hill . . . . . N/A N/A N/A 97% 97% 98% 95% 93% 90%
at River Park. . . . . . . 40% 222 98% 98% 93% 96% 95% 95% 93%
at Towne Creek . . . . . . N/A N/A N/A N/A N/A 95% 96% 96% 86%
at Willeo Creek. . . . . . 30% 242 96% 92% 95% 93% 96% 99% 91%
at Windward Park . . . . . 45% 328 93% 93% 93% 95% 95% N/A N/A
at Peachtree City. . . . . 20% 312 96% 92% N/A N/A N/A N/A N/A
------ ----- ----- ----- ----- ----- ----- ----- -----
2,350 95% 95% 95% 95% 95% 95% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2000 1999
COMPANY'S NUMBER ----------------------------------------------------
PERCENTAGE OF AT AT AT AT AT AT AT AT
LOCATION/COMMUNITY OWNERSHIP UNITS 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
------------------ ---------- ------- ----- ----- ----- ------ ----- ----------- ------
CHICAGO, IL
AMLI:
at Chevy Chase . . . . . . 33% 592 97% 95% 97% 92% 96% 97% 96%
at Danada Farms. . . . . . 10% 600 95% 95% 93% 96% 93% 94% 96%
at Fox Valley. . . . . . . 25% 272 95% 97% 92% 91% 88% 92% 94%
at Prairie Court . . . . . N/A N/A N/A N/A N/A N/A N/A 97% 95%
at Willowbrook . . . . . . 40% 488 95% 96% 90% 90% 91% 96% 95%
at Windbrooke. . . . . . . 15% 236 98% 95% 98% 99% 98% 97% 99%
lease lease lease lease lease
at Oakhurst North. . . . . 25% 464 91% 94% up up up up up
------- ----- ----- ----- ----- ----- ----- ----- -----
2,652 95% 95% 94% 93% 93% 96% 96%
------- ----- ----- ----- ----- ----- ----- ----- -----
INDIANAPOLIS, IN
AMLI:
on Spring Mill . . . . . . 20% lease lease lease lease
residual 400 85% 91% up up up up N/A
lease lease lease lease lease
at Lake Clearwater . . . . 25% 216 96% up up up up up N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
616 89% 91% 0% 0% 0% 0% 0%
------- ----- ----- ----- ----- ----- ----- ----- -----
EASTERN KANSAS
AMLI:
at Regents Crest . . . . . 25% 368 86% 87% 86% 87% 92% 93% 93%
------- ----- ----- ----- ----- ----- ----- ----- -----
DALLAS, TX
AMLI: lease lease lease
at Deerfield . . . . . . . 25% 240 92% 82% 93% 98% up up up
at Fossil Creek. . . . . . 25% 384 92% 97% 94% 95% 95% 96% 91%
at Oak Bend. . . . . . . . 40% 426 94% 92% 90% 93% N/A N/A N/A
on the Parkway . . . . . . 25% 240 92% 94% 95% 93% 89% 92% 95%
at Prestonwood Hills . . . 45% 272 95% 92% 93% 92% 93% N/A N/A
on Timberglen. . . . . . . 40% 260 96% 96% 94% 94% 97% 95% 92%
at Verandah. . . . . . . . 35% 538 93% 95% 95% 97% 95% 93% 95%
on Frankford . . . . . . . 45% 582 94% 90% N/A N/A N/A N/A N/A
at Breckinridge Point. . . 45% 440 91% N/A N/A N/A N/A N/A N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
3,382 93% 92% 93% 95% 94% 94% 94%
------- ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2000 1999
COMPANY'S NUMBER ----------------------------------------------------
PERCENTAGE OF AT AT AT AT AT AT AT AT
LOCATION/COMMUNITY OWNERSHIP UNITS 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
------------------ ---------- ------- ----- ----- ----- ------ ----- ----------- ------
AUSTIN, TX
AMLI:
at Park Place. . . . . . . N/A N/A N/A N/A N/A N/A 95% 96% 96%
lease
at Wells Branch. . . . . . 25% 576 94% 93% 94% 92% 93% 89% up
at Scofield Ridge. . . . . 45% 487 93% N/A N/A N/A N/A N/A N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
1,063 93% 93% 94% 92% 94% 92% 96%
------- ----- ----- ----- ----- ----- ----- ----- -----
HOUSTON, TX
AMLI:
at Champions Centre. . . . 15% 192 94% 93% 94% 93% 93% 92% 92%
at Champions Park. . . . . 15% 246 87% 93% 96% 94% 91% 95% 85%
at Greenwood Forest. . . . 15% 316 92% 96% 94% 95% 92% 96% 93%
Midtown. . . . . . . . . . 45% 419 97% 96% 94% N/A N/A N/A N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
1,173 93% 95% 94% 94% 92% 94% 90%
------- ----- ----- ----- ----- ----- ----- ----- -----
Total Co-Investment
Communities . . . . . . . . 11,604 93.5% 93.8% 93.9% 93.8% 93.8% 94.4% 93.6%
------- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL . . . . . . . . . . . . 23,868 93.0% 93.1% 92.6% 92.4% 92.8% 93.7% 92.8%
======= ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
September 30, 2000. The Exhibits filed as part of this report are listed
below.
EXHIBIT NO. DOCUMENT DESCRIPTION
27. Financial Data Schedule
99. Financial and Operating Data furnished to Shareholders
and Analysts
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMLI RESIDENTIAL PROPERTIES TRUST
Date: November 13, 2000 By: /s/ CHARLES C. KRAFT
-----------------------------------
Charles C. Kraft
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: November 13, 2000 By: /s/ GREGORY T. MUTZ
-----------------------------------
Gregory T. Mutz
Chairman of the Board of Trustees
Date: November 13, 2000 By: /s/ ALLAN J. SWEET
-----------------------------------
Allan J. Sweet
President and Trustee
Date: November 13, 2000 By: /s/ ROBERT J. CHAPMAN
-----------------------------------
Robert J. Chapman
Principal Financial Officer
Date: November 13, 2000 By: /s/ CHARLES C. KRAFT
-----------------------------------
Charles C. Kraft
Principal Accounting Officer
