UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter ended June 30, 1996 Commission File Number 1-13256
-----------------------------
EVANS WITHYCOMBE RESIDENTIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland 86-0766008
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
6991 East Camelback Road, Suite A200, Scottsdale, Arizona 85251
(Address of principal executive offices)
Registrant's telephone number, including area code: (602) 840-1040
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
As of July 31, 1996 there were 18,271,318 shares of the registrant's common
stock, $0.01 par value outstanding.
Page 1 of 24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
----------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION Page
- ------ --------------------- ----
<S> <C>
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 (Unaudited) ............................................... 3
Consolidated Statements of Income for the three and six months
ended June 30, 1996 and 1995 (Unaudited) .................................... 4
Consolidated Statement of Stockholders' Equity as of June 30, 1996
(Unaudited) ................................................................. 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 (Unaudited) .................................... 6
Notes to Consolidated Financial Statements .................................. 7
Item 2 Management's Discussion
and Analysis of Financial
Condition and Results of
Operations ......................................................... 12
Part II OTHER INFORMATION
- ------- -----------------
Item 4 Submission of Matters to Vote by Security Holders................... 22
Item 6 Exhibits and Reports on Form 8-K.................................... 23
Signatures ............................................................................. 24
</TABLE>
Page 2 of 24
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. - Financial Statements
------------------------------
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for number of shares)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS
Real Estate:
Land.................................................. $ 100,212 $ 95,908
Buildings and improvements............................ 445,885 389,846
Furniture and fixtures................................ 26,861 23,736
Construction-in-progress.............................. 74,794 77,693
------------------------ ------------------------
647,752 587,183
Less accumulated depreciation......................... (27,100) (17,511)
------------------------ ------------------------
620,652 569,672
Cash and cash equivalents............................... 1,788 3,634
Restricted cash......................................... 959 522
Accounts and notes receivable........................... 2,506 2,065
Deferred costs, net of accumulated amortization
of $827 and $507 at June 30, 1996
and December 31, 1995, respectively .................. 2,941 2,946
Other assets ........................................... 1,450 1,656
------------------------ ------------------------
Total assets ........................................... $ 630,296 $ 580,495
======================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and notes payable.............................. $ 311,806 $ 297,456
Accounts payable and other liabilities ................. 8,496 9,379
Dividends payable ...................................... 7,126 6,127
Accrued interest ....................................... 541 605
Accrued property taxes ................................. 3,259 2,358
Resident security deposits ............................. 1,499 1,497
Prepaid rent ........................................... 426 438
------------------------ ------------------------
Total liabilities ...................................... 333,153 317,860
Minority interest ...................................... 62,187 64,487
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized - none issued and outstanding........... - -
Common stock, $.01 par value, 100,000,000 shares
authorized 18,271,318 and 16,123,279 issued and
outstanding at June 30, 1996 and
December 31, 1995, respectively .................... 183 161
Additional paid-in capital ........................... 251,129 208,646
Accumulated deficit .................................. (16,356) (10,659)
------------------------ ------------------------
Total stockholders' equity ............................. 234,956 198,148
------------------------ ------------------------
Total liabilities and stockholders' equity ............. $ 630,296 $ 580,495
======================== ========================
</TABLE>
See accompanying notes
Page 3 of 24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts and number of shares)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental...........................$ 22,078 $ 16,162 $ 44,214 $ 31,037
Third party management fees ..... 664 302 951 697
Interest and other .............. 1,364 1,083 3,120 2,120
----------------- ---------------- ----------------- ----------------
Total revenues ................ 24,106 17,547 48,285 33,854
Expenses:
Repairs and maintenance ......... 2,719 2,150 5,275 3,966
Property operating .............. 2,865 1,914 5,548 3,823
Advertising ..................... 599 318 1,032 505
Real estate taxes ............... 1,615 1,150 3,264 2,101
Property management ............. 824 754 1,708 1,559
General and administrative ...... 463 424 960 877
Interest ........................ 5,469 2,712 10,893 4,546
Depreciation and amortization ... 4,870 3,257 9,640 6,003
----------------- ---------------- ----------------- ----------------
Total expenses ................ 19,424 12,679 38,320 23,380
----------------- ---------------- ----------------- ----------------
Income before minority interest 4,682 4,868 9,965 10,474
Minority interest .................. (1,027) (1,095) (2,239) (2,268)
----------------- ---------------- ----------------- ----------------
Net income.........................$ 3,655 $ 3,773 $ 7,726 $ 8,206
================= ================ ================= ================
Earnings per share ................$ 0.22 $ 0.23 $ 0.47 $ 0.51
================= ================ ================= ================
Weighted average shares
outstanding ........................ 16,933,771 16,021,078 16,535,454 16,021,078
================= ================ ================= ================
</TABLE>
See accompanying notes
Page 4 of 24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except for number of shares)
(Unaudited)
<TABLE>
<CAPTION>
Additional Accumu-
Number of Common Paid-in lated
Shares Stock Capital Deficit Total
---------------- ------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Stockholders' equity, December 31, 1995........ 16,123,279 $ 161 $ 208,646 $(10,659) $198,148
Net income................................. - - - 7,726 7,726
Dividends on common stock ($.78 per
share)..................................... - - - (13,423) (13,423)
Proceeds of second offering, net of
underwriting discount and offering costs
of $3,021............................... 2,088,889 21 41,086 - 41,107
Conversion of units to common stock........ 44,355 1 887 - 888
Exercise of stock options.................. 8,000 - 160 - 160
Issuance of restricted stock, net of
unamortized deferred compensation of
$110..................................... 6,795 - 38 - 38
Amortization of deferred compensation...... - - 312 - 312
---------- ------- --------- -------- --------
Stockholders' equity, June 30, 1996............ 18,271,318 $ 183 $ 251,129 $(16,356) $234,956
========== ======= ========= ======== ========
</TABLE>
See accompanying notes
Page 5 of 24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended June 30,
------------------------------------------------
1996 1995
---------------------- --------------------
<S> <C> <C>
Cash flows from operating activities
Net income ................................................. $ 7,726 $ 8,206
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................ 9,960 6,193
Amortization of executive deferred compensation
expense (noncash)..................................... 350 356
Minority interest ........................................ 2,239 2,268
Write-off of real estate assets .......................... 39 64
Decrease (increase) in assets
Restricted cash .......................................... (437) 277
Accounts and notes receivable ............................ (441) 25
Other assets ............................................. 206 502
(Decrease) increase in liabilities
Accounts payable and other liabilities ................... (883) 668
Accrued interest ......................................... (64) 219
Accrued property taxes ................................... 901 549
Resident security deposits ............................... 2 83
Prepaid rent ............................................. (12) (378)
---------------------- --------------------
Net cash provided by operating activities .................. 19,586 19,032
Cash flows from investing activities
Purchase of real estate assets ............................. (60,643) (61,054)
---------------------- --------------------
Net cash used in investing activities ...................... (60,643) (61,054)
Cash flows from financing activities
Proceeds from second offering............................... 41,107 -
Proceeds from exercise of stock options .................... 160 -
Proceeds from mortgage notes and credit facility ........... 176,221 69,183
Principal payments on mortgage notes and
credit facility .......................................... (161,887) (11,869)
Payment for loan costs ..................................... (315) (625)
Dividends paid ............................................. (12,424) (11,856)
Minority interest distributions ............................ (3,651) (3,064)
---------------------- --------------------
Net cash provided by financing activities .................. 39,211 41,769
---------------------- --------------------
Net decrease in cash and cash equivalents .................. (1,846) (253)
Cash and cash equivalents, beginning of period ............. 3,634 2,439
====================== ====================
Cash and cash equivalents, end of period ................... $ 1,788 $ 2,186
====================== ====================
Supplemental information
Cash paid during the period for interest ................... $ 10,645 $ 4,091
====================== ====================
Supplemental disclosure of noncash activity
Assumption of debt related to the acquisition of
apartment communities .................................... $ - $ 26,193
====================== ====================
Acquisition of apartment communities through
issuance of units in the Operating Partnership ........... $ - $ 10,736
====================== ====================
Conversion of units to common stock......................... $ 888 $ -
====================== ====================
</TABLE>
See accompanying notes
Page 6 of 24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)
(Unaudited)
1. Organization and Formation of the Company
Evans Withycombe Residential, Inc. (the "Company") is one of the largest
developers and managers of upscale apartment communities in Arizona and is
expanding its operation into selected sub-markets in Southern California. The
Company owns and manages 45 stabilized multifamily apartment communities
containing 12,027 units, of which 43 stabilized multifamily apartment
communities are located in Phoenix and Tucson, Arizona, containing a total of
11,357 units and two stabilized multifamily apartment communities are located in
Riverside and Corona Hills, California containing a total of 670 units (an
apartment community is considered stabilized when it reaches 93 percent physical
occupancy). The Company is also in the process of developing or expanding nine
multifamily apartment communities comprising 1,726 units in its Arizona markets.
The Company is fully integrated with expertise in development, acquisitions,
construction and management of apartment communities. The Company had
approximately 535 employees at June 30, 1996.
The Company was incorporated on May 24, 1994 to develop, own and manage upscale
multifamily apartment communities. On August 17, 1994, the Company completed an
initial public offering and engaged in various formation transactions designed
to transfer ownership of the communities and other assets of the predecessor
company to Evans Withycombe Residential, L. P. (the "Operating Partnership") or
Evans Withycombe Finance Partnership, L.P. (the "Financing Partnership"). The
Company is the sole general partner of and owned a 79.31 percent and 77.51
percent interest in the Operating Partnership at June 30, 1996 and 1995
respectively. The Company also holds a noncontrolling interest in Evans
Withycombe Management, Inc. (the "Management Company").
The Company elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes. A corporate REIT is a legal entity which holds real
estate interests and, through payments of dividends to shareholders, is
permitted to reduce or avoid the payment of federal income taxes at the
corporate level.
2. Basis of Presentation
The accompanying consolidated financial statements of Evans Withycombe
Residential, Inc. include the consolidated accounts of the Company, the
Operating Partnership, the Financing Partnership and the Management Company.
In fourth quarter 1995, the Company adopted Emerging Issues Task Force (EITF)
Issue Number 95-6 Accounting by a Real Estate Investment Trust for an Investment
in a Service Corporation, which requires the Company to report the operations of
its Management Company on a consolidated basis. Prior to the issuance of EITF
95-6, the Company reported the Management Company on a cost basis. The adoption
of EITF 95-6 has no impact on net income, but does increase third party
management fees, interest and other revenue, property management expenses,
depreciation expense and reduce advertising expense through the elimination of
intercompany marketing fees paid to the Management Company. The Company has
restated the statements of income and cash flows for the three and the six
months ended June 30, 1995 for the retroactive application of the change.
The accompanying unaudited consolidated financial statements have been prepared
by the Company's management in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission (SEC). Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
accounts and transactions have been eliminated in consolidation. In the opinion
of management, all adjustments (consisting only of normally recurring accruals)
considered necessary for a fair
Page 7 of 24
<PAGE>
presentation have been included. The results of operations for the six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996.
These consolidated financial statements should be read in conjunction with the
Company's December 31, 1995 audited consolidated financial statements and
accompanying notes included in the Evans Withycombe Residential, Inc. Form 10-K.
Reclassification
Certain amounts in the statements of income and cash flows for 1995 have been
reclassified to conform to the 1996 presentation.
3. Summary of Significant Accounting Policies
Real Estate Assets and Depreciation
Real estate assets are stated at the lower of depreciated cost or net realizable
value. Costs related directly to the acquisition and improvement of real estate
are capitalized. Interest costs incurred during construction periods are
capitalized. Interest capitalized was $1,464 and $2,800, for the six months
ended June 30, 1996 and 1995, respectively.
Ordinary repairs, maintenance and costs incurred in connection with resident
turnover such as unit cleaning, painting, and carpet cleaning are expensed as
incurred; major replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation is computed on a straight-line
basis over the expected useful lives of depreciable property, which ranges from
10 to 40 years for buildings and improvements and five to eight years for
furnishings and equipment.
The Company reports developments and lease-up properties as
construction-in-progress until construction on the apartment community has been
completed and the apartment community has reached stabilized occupancy.
The Company also reports land relating to construction-in-progress as land on
its balance sheet. Land associated with construction-in-progress was $12,060 and
$17,622 at June 30, 1996 and 1995, respectively.
Revenue Recognition
Rental income attributable to residential leases is recorded when due from
residents. Leases are for periods of up to one year, with rental payments due
monthly.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less, primarily consisting of demand
deposits in banks.
Restricted Cash
Restricted cash includes restricted deposits for property taxes and escrow
accounts.
Deferred Costs
Costs incurred in obtaining long-term financing are deferred. These costs are
amortized on the effective interest method over the terms of the related debt
agreements.
Page 8 of 24
<PAGE>
Income Taxes
The Company has made an election to be taxed as a REIT and accordingly, no
federal or state income taxes have been provided in the accompanying
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Earnings Per Share
Earnings per share has been computed by dividing net income for the three and
the six months ended June 30, 1996 and 1995, respectively, by the weighted
average number of shares outstanding during the period.
New Financial Accounting Standards Board Statements
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121 (SFAS No. 121) Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of which requires the Company to review for
possible impairment assets to be held for use and assets held for disposal,
whenever events or changes in circumstances indicate the carrying amount may not
be recoverable, and in such event, to record an impairment loss. The Company has
adopted SFAS No. 121 in 1996. The Company does not hold any assets that meet the
impairment criteria of SFAS No. 121.
In October 1995, FASB issued SFAS No. 123 Accounting for Stock-Based
Compensation which establishes a fair-value based method of accounting for
employee stock-based compensation plans, and encourages but does not require
companies to adopt that method. The Company has chosen to continue to report
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees, but will, beginning in the
fourth quarter of 1996 provide pro forma disclosure of the effects of applying
the fair value method to all applicable awards granted.
4. Dividends Payable
On July 10, 1996, the Company paid a dividend of $7,126 ($0.39 per share) to
stockholders and distributions of $1,859 ($0.39 per unit) to unitholders of
record as of June 28, 1996.
5. Mortgage and Notes Payable
The Company's mortgage notes and notes payable consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Mortgage note payable at fixed interest rate of 7.2 percent, monthly principal and
interest payments through August 18, 1996, remaining balance due on August 18, $ 5,370 $ 5,457
1996.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal and
interest payments through July 1, 1998, remaining balance due on July 1, 1998. 5,418 5,463
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal and
interest payments through July 1, 1998, remaining balance due on July 1, 1998. 4,370 4,406
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal
and interest payments through October 1, 2001, remaining balance due on October 1, 9,008 9,063
2001.
</TABLE>
Page 9 of 24
<PAGE>
5. Mortgage and Notes Payable (continued)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Mortgage note payable at fixed interest rate of 8.28 percent, monthly principal
and interest payments through June 1, 1998, remaining balance due on June 1, 1998. $ 6,278 $ 6,339
Mortgage note payable at fixed interest rate of 9.95 percent, monthly principal
and interest payments through September 15, 1997, remaining balance due on 12,127 12,184
September 15, 1997.
Mortgage note payable at fixed interest rate of 9.3 percent, monthly principal and
interest payments through September 15, 1997, remaining balance due on September 3,197 3,212
15, 1997.
$50 million securitized debt at a fixed interest rate of 7.17 percent, monthly
principal and interest payments through January 1, 2006, remaining balance due
January 1, 2006. Secured by first mortgage liens on 5 communities. 49,759 50,000
Securitized debt at a fixed stated interest rate of 7.98 percent, with an
effective interest rate of 8.05 percent, monthly interest only payments through
August 1, 2001, balance of $131 million due August 1, 2001, secured by first
mortgage liens on 22 communities, net of unamortized discount of $521 and $560
at June 30, 1996 and December 31, 1995, respectively. 130,479 130,439
$13 million short term note payable at a fixed interest rate of 6 percent.
Interest only payments with the unpaid principal balance due on January 5, 1996
(repaid on January 5, 1996). - 13,000
$17.3 million tax free bonds with a floating interest rate based on the tax
exempt note rate set by the remarketing agent, or at the option of the Company
can convert to a fixed rate as determined by the remarketing agent. Secured by a
$17.8 million direct pay letter of credit, annual principal payments beginning
December 1, 1996 through December 1, 2006 ranging from $250,000 to $550,000 with
the remaining unpaid principal balance due December 1, 2007 (effective interest 17,300 17,300
rate of 5.6 percent at June 30, 1996).
$125 million unsecured Revolving Credit Facility with floating interest rate
based on LIBOR plus 1.75 percent or at the option of the Company at prime,
interest payments only. Matures December 1, 1997 (effective interest rate of 7.2 68,500 40,593
percent at June 30, 1996).
-------------- --------------
$311,806 $297,456
============== ==============
</TABLE>
Each of the mortgage notes payable is secured by a first mortgage on separate
communities.
6. Stock Incentive Plan
The Company established a stock incentive plan to enable directors, executive
officers and other key employees of the Company to participate in the ownership
of the Company. Initially 1,830,000 shares of the Company's common stock were
reserved for issuance under the plan. Options to purchase 850,675 and 1,130,825
shares of common stock were available for grant under the plan at June 30, 1996
and December 31, 1995, respectively. Information with respect to stock options
granted during 1996 is as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price
Shares Per Share
-------------------- --------------------
<S> <C> <C>
Options outstanding at December 31, 1995 699,175 $19.98
Exercised (8,000) 20.00
Granted 332,000 22.02
-------------------- --------------------
Forfeited (43,850) 20.07
Options outstanding at June 30, 1996 ==================== ====================
979,325 $20.67
Options exercisable: ==================== ====================
December 31, 1995 175,300 $20.00
June 30, 1996 201,763 $20.04
</TABLE>
Page 10 of 24
<PAGE>
7. Minority Interest
Minority interest, at June 30, 1996 is comprised of the following:
Number of Units Dollars
--------------- ---------------
Balance at December 31, 1995 4,810,603 $ 64,487
Conversion of units to common stock (44,355) (888)
Allocation of net income - 2,239
Distributions paid - (3,651)
--------------- ---------------
Balance at June 30, 1996 4,766,248 $ 62,187
=============== ===============
The Units can be redeemed for shares of common stock of the Company on a
one-for-one basis at the Company's option. Minority interest of unitholders in
the Operating Partnership is calculated based on the weighted average number of
shares of common stock and Units outstanding during the period.
8. Second Offering
On May 28, 1996, the Company registered and completed a public offering of
4,500,000 shares of its Common Stock of which 2,000,000 shares were sold by the
Company and an aggregate of 2,500,000 shares were sold by two institutional
stockholders. In connection with the offering, the Company and the institutional
stockholders granted the underwriters an over-allotment option to purchase
675,000 additional shares. On June 25, 1996 the underwriters exercised their
over-allotment option for 200,000 shares and the Company issued an additional
88,889 shares of its Common Stock and the institutional stockholders sold an
additional 111,111 shares bringing the total number of shares sold by the
Company and the institutional stockholders to 2,088,889 and 2,611,111,
respectively. The Company used its net proceeds from the Second Offering of
approximately $41,100,000 to pay down the Revolving Credit Facility.
9. Other
The Company terminated its management contracts on nine apartment communities
comprised of 1,298 units in exchange for receiving a termination fee of
$500,000, which has been reported as third party management fees on the
consolidated statements of income for the three and the six months ended June
30, 1996. The Company's third party fee managed portfolio is now comprised of
six apartment communities containing 1,254 units.
Page 11 of 24
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion, which is based on the consolidated financial
statements of Evans Withycombe Residential, Inc., should be read in conjunction
with the consolidated financial statements appearing elsewhere in this report.
The consolidated financial statements of the Company consist of the communities
owned and under development and the Management Company.
When used in the following discussion, the words "believes," "anticipates,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected, including,
but not limited to, the actual timing of the Company's planned acquisitions and
developments, the strength of the local economies in the sub-markets in which
the Company operates, and the Company's ability to successfully manage its
planned expansion into Southern California. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations - Consolidated Financial Statements
The results of operations for the three and six months ended June 30, 1996, as
compared to the three and six months ended June 30, 1995, were significantly
affected by acquisitions, developments and expansions.
Comparison of Results of Operations for the Three and Six Months Ended June 30,
1996 to the Three and Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ Percentage ----------------------------- Percentage
1996 1995 Change 1996 1995 Change
-------------- --------------- ---------- -------------- -------------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income $ 22,078 $ 16,162 36.6% $ 44,214 $ 31,037 42.5%
Third party management
fees 664 302 119.9 951 697 36.4
Interest and other 1,364 1,083 25.9 3,120 2,120 47.2
-------------- -------------- ---------- ------------- ------------- -----------
Total revenues 24,106 17,547 37.4 48,285 33,854 42.6
Property operating and
maintenance (1) 6,183 4,382 41.1 11,855 8,294 42.9
Real estate taxes 1,615 1,150 40.4 3,264 2,101 55.4
Property management 824 754 9.3 1,708 1,559 9.6
General and
administrative 463 424 9.2 960 877 9.5
Interest 5,469 2,712 101.7 10,893 4,546 140.0
Depreciation and
amortization 4,870 3,257 50.0 9,640 6,003 60.3
-------------- -------------- ---------- ------------- ------------- -----------
Total expenses 19,424 12,679 53.2 38,320 23,380 63.9
-------------- -------------- ---------- ------------- ------------- -----------
Income before minority
interest $ 4,682 $ 4,868 (3.8)% $ 9,965 $ 10,474 (4.9)%
============== ============== ========== ============= ============= ===========
Weighted average
monthly rental
revenue per unit $ 714 $ 647 $ 712 $ 635
============== ============== ============= =============
Weighted average number
of units 12,308 9,474 12,116 8,958
============== ============== ============= =============
Economic occupancy (2) 88.6% 89.0% 90.3% 91.4%
============== ============== ============= =============
</TABLE>
Page 12 of 24
<PAGE>
(1) The Company defines property operating and maintenance expense as repairs
and maintenance, other property operating and advertising expense.
(2) Stabilized properties only.
Rental revenues increased by $5,900 and $13,200 or 36.6 percent and 42.5 percent
for the three and six months ended June 30, 1996 as compared to the similar
periods in 1995, respectively as a result of increases in the weighted average
number of apartments and weighted average monthly revenue per occupied
apartment. The Company believes that the increase in rental income was largely
attributable to the acquisitions and stabilization of properties developed by
the Company in its rental markets.
The increase in third party management fees is primarily due to the receipt of a
one time $500,000 termination fee.
Interest and other income increased $281 and $1,000 for the three and six months
ended June 30, 1996 compared to the three and six months ended June 30, 1995 as
a result of the sale of telephone servicing rights on certain properties and an
increase in ancillary income such as redecoration and application fees as a
result of the increase in the weighted average number of apartments.
Property operating and maintenance expense increased due to the increase in the
weighted average number of apartments for the three and six month period ended
June 30, 1996 as compared to the same periods in 1995, respectively. Real estate
taxes increased primarily due to the increase in the number of properties and
higher values placed on properties as a result of improved market conditions for
the three and six month period ended June 30, 1996, respectively.
Interest expense increased due to an increase in debt resulting from
acquisitions and the increase in weighted average number of units in the
portfolio. The Company capitalized $744 and $1,464 of interest for the three and
six months ended June 1996 compared to $1,500 and $2,800 for a similiar periods
in 1995 due to a decrease in construction activity. Interest costs incurred
during construction of a new property is capitalized until completion of
construction on a building-by-building basis.
"Same Store" Portfolio
The Company defines same store portfolio as those communities that reached
stabilized occupancy prior to January 1, 1995. Same store portfolio consists of
32 stabilized properties containing 7,924 apartment units that were owned by the
Company for the three and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ Percentage ------------------------------ Percentage
1996 1995 Change 1996 1995 Change
-------------- ------------- ------------- -------------- ------------- -------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income $ 13,688 $ 13,482 1.5% $ 27,756 $ 27,386 1.4%
Other income 820 637 28.7 1,641 1,373 19.5
-------------- ------------- ------------- -------------- ------------- -------------
14,508 14,119 2.8 29,397 28,759 2.2
Property operating and
maintenance (1) 4,094 3,595 13.9 7,827 7,251 7.9
Real estate taxes 977 947 3.2 2,012 1,864 8.0
-------------- ------------- ------------- -------------- ------------- -------------
5,071 4,542 11.6 9,839 9,115 7.9
-------------- ------------- ------------- -------------- ------------- -------------
Property net operating
income $ 9,437 $ 9,577 (1.5)% $ 19,558 $ 19,644 (0.4)%
============== ============= ============= ============== ============= =============
Weighted average
monthly rental
revenue per unit
$ 655 $ 640 $ 654 $ 634
============== ============= ============== =============
Economic occupancy 88.6% 89.1% 90.3% 91.4%
============== ============= ============== =============
</TABLE>
Page 13 of 24
<PAGE>
Rental income for the three and the six months ended June 30, 1996 increased as
a result of an increase in the weighted average monthly revenue per occupied
unit, compared to the same period in 1995. This was offset by a decline in the
average economic occupancy during the three and six months ended June 30, 1996
as compared to the three and six months ended June 30, 1995. Other income for
the three and six months ended June 30, 1996 increased as a result of gains from
the sale of telephone servicing rights at various communities. Real estate taxes
increased for the three and the six months ended June 30, 1996 due to higher
values placed on properties as a result of improved market conditions and
property values.
Communities Stabilized Less Than Two Years
Communities stabilized less than two years consist of the development of five
new apartment communities and the expansion of two existing apartment
communities by the Company, containing 1,521 apartment units that reached
stabilized occupancy during the year ended December 31, 1995. Increases in the
three and the six month periods ended June 30, 1996 as compared to the three and
the six month periods ended June 30, 1995 are the result of the increase in the
weighted average number of apartments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1996 1995 1996 1995
------------- -------------- ------------- -------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Rental income $ 3,106 $ 1,208 $ 6,326 $ 1,896
Other income 176 93 358 152
------------- -------------- ------------- -------------
3,282 1,301 6,684 2,048
Property operating and maintenance 618 395 1,266 616
Real estate taxes 225 112 466 112
------------- -------------- ------------- -------------
843 507 1,732 728
------------- -------------- ------------- -------------
Property net operating income $ 2,439 $ 794 $ 4,952 $ 1,320
============= ============== ============= =============
Weighted average number of
apartments 1,521 713 1,521 518
============= ============== ============= =============
</TABLE>
Development and Lease Up Properties
Development and lease up properties consist of the development of 13 new
apartment communities or the expansion of existing apartment communities
containing 2,522 apartment units that were in the "construction," "development,"
or "lease up" stage during 1996 and therefore, not considered to have achieved
stabilized occupancy for all of the periods presented. Increases in the three
and the six month periods ended June 30, 1996 as compared to the three and six
month periods ended June 30, 1995 are the result of there being an increase in
the weighted average number of apartments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1996 1995 1996 1995
------------- -------------- ------------- -------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Rental income $ 2,388 $ 33 $ 4,284 $ 33
Other income 150 5 286 5
------------- -------------- ------------- -------------
2,538 38 4,570 38
Property operating and maintenance 656 70 1,153 70
Real estate taxes 222 5 394 5
------------- -------------- ------------- -------------
878 75 1,547 75
------------- -------------- ------------- -------------
Property net operating income (loss) $ 1,660 $ (37) $ 3,023 $ (37)
============= ============== ============= =============
Weighted average number of
apartments in lease-up 1,249 37 1,063 19
============= ============== ============= =============
</TABLE>
Page 14 of 24
<PAGE>
Acquisitions
Acquisitions consist of five properties containing 1,786 apartment units, which
have been acquired by the Company since January 1, 1995, including the
acquisition of Canyon Crest Views apartments, a 178 unit apartment community
located in Riverside, California on June 27, 1996. Increases in the three and
six month periods ended June 30, 1996, as compared to the three and six months
ended June 30, 1995, are the result of the increase in the weighted average
number of apartments.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1996 1995 1996 1995
------------- -------------- ------------- -------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Rental income $ 2,897 $ 1,439 $ 5,849 $ 1,722
Other income 141 65 311 68
------------- -------------- ------------- -------------
3,038 1,504 6,160 1,790
Property operating and maintenance 815 322 1,609 357
Real estate taxes 191 86 392 120
------------- -------------- ------------- -------------
1,006 408 2,001 477
------------- -------------- ------------- -------------
Property net operating income $ 2,032 $ 1,096 $ 4,159 $ 1,313
============= ============== ============= =============
Weighted average number of
apartments 1,614 800 1,608 497
============= ============== ============= =============
</TABLE>
Liquidity and Capital Resources
Liquidity
The Company's net cash provided by operating activities increased from $19.0
million for the six months ended June 30, 1995 to $19.6 million for the six
months ended June 30, 1996 principally due to increased rental operations from
additional properties acquired and developed subsequent to June 30, 1995. Net
cash used in investing activities decreased from $61.1 million for the six
months ended June 30, 1995 to $60.6 million for the six months ended June 30,
1996. Cash used in investing activities largely relates to the Company's
development and construction of new apartment communities in Phoenix and Tucson,
Arizona and acquisitions of apartment communities in its markets. Net cash
provided by financing activities decreased from $41.8 million for the six months
ended June 30, 1995 to $39.2 million for the six months ended June 30, 1996 due
to principal payments made on the Revolving Credit Facility and an increase in
distributions.
The Company elected to be taxed as a REIT under Sections 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 percent of their ordinary taxable income.
The Company expects to meet its short-term liquidity requirements, including
capital expenditures relating to maintaining stabilized properties, generally
through its net cash provided by operations and borrowings under its credit
arrangements and anticipates meeting long-term liquidity requirements, such as
scheduled debt maturities, financing of construction and development activities
and possible acquisitions through long-term unsecured borrowings, issuance of
debt securities or additional equity securities of the Company, or, possibly in
connection with acquisitions of land or existing properties, Units of the
Operating Partnership. The Company believes that its net cash provided by
operations will be adequate and anticipates that it will continue to be adequate
to meet both operating requirements and payment of dividends by the Company in
accordance with REIT requirements in both the short and the long-term.
Page 15 of 24
<PAGE>
The information in the immediately preceding paragraph is forward looking and
involves risks and uncertainties that could significantly impact the Company's
expected liquidity requirements in the short and long term. While it is
impossible to itemize the many factors and specific events that could affect the
Company's outlook for its liquidity requirements, such factors would include the
actual timing of the Company's planned development of new, and expansion of
existing, communities; acquisitions of existing apartment communities; the
actual costs associated with such developments and acquisitions; and the
strength of the local economies in the sub-markets in which the Company
operates. The Company is further subject to risks relating to the limited
geographic area in which it operates and its ability to successfully manage its
planned expansion into Southern California, a market in which it does not have
any operating history prior to 1995. Higher than expected costs, delays in
development of communities, a downturn in the local economies and/or the lack of
growth of such economies could reduce the Company's revenues and increase its
expenses, resulting in a greater burden on the Company's liquidity than that
which the Company has described above.
Capital Resources
At June 30, 1996, the Company's total debt was approximately $311.8 million and
the Company's total debt-to-total-market capitalization (Market Equity plus
Debt) was approximately 39.3 percent.
Conventional Mortgage Loans
Conventional mortgage loans were comprised of 7 fixed rate loans at June 30,
1996, each of which is collateralized by a first mortgage lien on an apartment
community included in real estate assets. The mortgages are payable in monthly
installments of principal and interest and mature at various dates through 2001.
The conventional mortgage loans aggregated $45.8 million at June 30, 1996 with
interest rates ranging from 7.2 percent to 9.95 percent (weighted averate rate
of 8.6 percent at June 30, 1996).
In December 1995, the Company entered into a ten year $50 million fixed rate
loan from an insurance company that bears interest at 7.17 percent, with
principal and interest due monthly based on a 25-year amortization schedule
beginning January 1, 1996 through January 1, 2006, and the remaining unpaid
principal balance due January 1, 2006. The loan is secured by a first deed of
trust on five apartment communities. Proceeds from the loan were used to pay
down outstanding balances on the Revolving Credit Facility. The outstanding debt
was $49.8 million at June 30, 1996. The loan is convertible to unsecured upon
the Company acheiving an investment grade rating of BBB or better.
Mortgage Loan Certificates
The Company, through the Financing Partnership, borrowed $102.0 million under a
securitized loan in August 1994. During January 1995, the Company borrowed the
balance of $29.0 million (increasing the total to $131.0 million). The loan is
secured by the first mortgage liens on 22 of the communities. The $102.0 million
was issued at 99.97 percent of its face amount and the $29.0 million was issued
at 97.9375 percent of its face amount and will mature on August 1, 2001.
Although both amounts bear interest at 7.98 percent, the $29.0 million has an
effective interest rate of 8.40 percent due to the discount. The weighted
average effective interest rate of the total $131 million loan is 8.05 percent.
The bonds have been rated "AA" by Standard and Poors.
Tax-Free Bonds
On December 12, 1995, the Company assumed $17.3 million of tax free bonds with a
floating interest rate based on the tax exempt note rate set by the remarketing
agent (or at the option of the Company at a fixed rate as determined by the
remarketing agent). The bonds are secured by a $17.8 million direct pay letter
of credit which is secured by first deeds of trust on two apartment communities.
The debt matures December 1, 2007. The bonds had an effective interest rate of
5.6 percent at June 30, 1996.
Page 16 of 24
<PAGE>
Revolving Credit Facility
The $125 million unsecured Revolving Credit Facility (Credit Facility) bears
interest at a floating rate of LIBOR plus 175 basis points (or, at the option of
the Company, at the prime rate announced by the bank). The Credit Facility, has
a term of two years, with an option to extend for one year and provides for
monthly payments of interest only. It will be used to finance acquisitions, to
fund construction and development and renovation costs, and for working capital
purposes. At June 30, 1996, there was $68.5 million outstanding on the Credit
Facility, with an effective interest rate of 7.2 percent. The Credit Facility
contains customary representations, covenants and events of default, including a
limitation which restricts dividends to 95 percent of Funds From Operations, as
defined. The Company does not expect that the covenants will affect its ability
to pay dividends in accordance with its current dividend policy or its ability
to maintain a REIT status.
The table below outlines the Company's debt structure as of June 30, 1996
(amounts in thousands, unaudited).
<TABLE>
<CAPTION>
Outstanding Weighted Average
Balance Interest Rate
---------------- ----------------
<S> <C> <C>
Fixed Rate Debt:
Mortgage Debt.....................................................
Conventional.................................................... $ 95,527 7.83%
Mortgage Loan Certificates...................................... 130,479 8.05
---------------- ----------------
Total Fixed Rate Debt....................................... 226,006 7.96
Variable Rate Debt:
Tax Free Bonds.................................................... 17,300 5.60
Revolving Credit Facility......................................... 68,500 7.20
---------------- ----------------
Total Variable Rate Debt.................................... 85,800 6.85
---------------- ----------------
Total Debt.................................................. $ 311,806 7.65%
================ ================
</TABLE>
Second Offering
In September 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission (SEC) for up to $200 million of debt
securities, common stock, preferred stock, and warrants, which will provide the
Company with the ability to issue and sell a portion of such securities from
time to time.
On May 28, 1996, the Company registered and completed a public offering of
4,500,000 shares of its Common Stock of which 2,000,000 shares were sold by the
Company and an aggregate of 2,500,000 were sold by two institutional
stockholders. The Company and the institutional stockholders granted the
underwriters an over-allotment option to purchase 675,000 additional shares of
common stock. On June 25, 1996, the underwriters exercised their over-allotment
option for 200,000 shares and the Company issued an additional 88,889 shares of
its Common Stock and the institutional stockholders sold an additional 111,111
shares. Net proceeds to the Company from the Second Offering was approximately
$41,100,000. The Company used the proceeds from the sale of common stock to pay
down its Revolving Credit Facility.
Page 17 of 24
<PAGE>
Inflation
Most of the leases at the communities are for a term of one year or less, which
may enable the Company to seek increased rents upon renewal of existing leases
or commencement of new leases. The short-term nature of the leases generally
serves to reduce the risk to the Company of the adverse effects of inflation.
Funds From Operations
The Company considers Funds From Operations ("FFO") an appropriate measure of
performance of an equity REIT because it is predicated on cash flow analyses
which the Company and analysts believe is more reflective of the value of real
estate companies such as the Company rather than a measure predicated on
generally accepted accounting principles ("GAAP"), which gives effect to noncash
items, such as depreciation and amortization.
In May 1995, the National Association of Real Estate Investment Trusts (NAREIT)
issued a white paper, which defines FFO, beginning in 1996, to exclude certain
items, such as amortization of deferred loan costs and depreciation on corporate
fixed assets from FFO. The Company has implemented the new method of calculating
FFO. FFO should not be considered an alternative to net income (as determined in
accordance with GAAP) as a measure of the Company's operating performance or to
cashflows from operating activities (as determined in accordance with GAAP) as a
measure of the Company's liquidity nor is it necessarily indicative of
sufficient cash flow to fund all of the Company's needs. The Company believes
that in order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO should be examined in conjunction with net
income, as presented in the consolidated financial statements and data included
elsewhere in this report.
The following table presents the Company's FFO under both methods of
calculation.
<TABLE>
<CAPTION>
Current Method Previous Method Current Method Previous Method
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
------------------ ------------------ ---------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before minority interest....$ 4,682 $ 4,868 $ 4,682 $ 4,868 $ 9,965 $ 10,474 $ 9,965 $ 10,474
Depreciation and amortization....... 4,831 3,230 4,870 3,257 9,562 5,957 9,640 6,003
Amortization of deferred loan costs. - - 164 129 - - 320 236
Executive deferred compensation
expense (noncash)................... 180 178 180 178 350 356 350 356
--------- --------- --------- --------- --------- -------- --------- ---------
Funds from operations..............$ 9,693 $ 8,276 $ 9,896 $ 8,432 $ 19,877 $ 16,787 $ 20,275 $ 17,069
========= ========= ========= ========= ========= ======== ========= =========
</TABLE>
Number of common shares and units
The Company had 21,700,019 and 21,320,722 weighted average number of shares and
units for the three and six months ended June 30, 1996 and 20,670,695 and
20,427,581 for the three and six months ended June 30, 1995, respectively.
Page 18 of 24
<PAGE>
Development and Construction Activity
The apartment communities under construction and in lease-up are listed below:
<TABLE>
<CAPTION>
Actual Actual or
Average Estimated Date of Estimated Estimated
Unit Construction Construction Commence- Date of
Total Size Cost Commence- ment of Stabilized
Name City Units (Sq. Ft.) (Millions) ment Lease-Up Occupancy
- --------------------------------------------------------------------------------------------------------------------
Quarter
------------------------------------------
Phoenix
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Country Brook III Expansion Chandler 120 1,089 $ 8 4:95 3:96 1:97
The Hawthorne Phoenix 276 904 17 4:95 3:96 3:97
The Isle at Arrowhead Ranch Glendale 256 940 17 2:96 4:96 4:97
Mirador Phoenix 316 1,012 23 4:94 3:95 3:96
Park Meadow II Expansion Gilbert 68 906 4 4:95 2:96 4:96
Promontory Pointe II
Expansion Phoenix 120 1,013 8 4:95 3:96 2:97
------- -----------
1,156 77
Tucson
- ------
Bear Canyon Tucson 238 973 15 3:95 2:96 2:97
Orange Grove II Expansion Tucson 144 1,007 8 2:95 3:95 3:96
Harrison Park II Expansion Tucson 188 974 10 3:95 2:96 2:97
------- -----------
570 33
------- -----------
Total 1,726 $110
======= ===========
</TABLE>
The Company owns, or has rights to acquire, sites intended for the development
of four additional multifamily apartment communities, which, if completed, are
expected to contain approximately 1,114 apartments. There can be no assurance
that, in connection with the sites that it has the rights to acquire, the
Company will succeed in obtaining any necessary governmental approvals or any
financing required to develop these projects, or that the Company will decide to
develop any particular project.
The information set forth in the table above is based upon a number of estimates
and assumptions that are inherently subject to business, economic and
competitive uncertainties and contingencies, many of which are beyond the
Company's control. While all apartment communities previously developed by the
Company have been developed on schedule and within budget, the actual
development cost, completion date and stabilization date of any project will be
dependent upon a variety of factors beyond the control of the Company including,
for example, labor and other personnel costs, material costs, weather
conditions, government fees and leasing rates.
Page 19 of 24
<PAGE>
Acquisition Activity
On June 27, 1996, the Company acquired Canyon Crest Views, a 178 unit apartment
community located in Riverside, California, for a total purchase price of
approximately $12.9 million cash.
The Company has also entered into agreements to purchase three apartment
communities containing 1,059 units in the Riverside/San Bernardino, California
market.
The Company is actively pursuing and in preliminary negotiations regarding
additional properties in Riverside/San Bernardino and San Diego, California, but
no assurance can be given that it will continue to pursue or consummate any
acquisitions as a result of these negotiations.
Page 20 of 24
<PAGE>
Apartment Communities
The following sets forth certain information regarding the current apartment
communities at June 30, 1996. All of the communities are owned 100 percent in
fee by the Company.
<TABLE>
<CAPTION>
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
--------------------- ---- ---------- -------- --------
<S> <C> <C> <C> <C>
Same Store
Arizona
- -------
Phoenix:
Bayside at the Islands Gilbert 272 Developed 1988
Country Brook Chandler 276 Acq/Dev 1991/1993
Deer Creek Village Phoenix 308 Acquired 1991
Greenwood Village Tempe 270 Acquired 1993
Heritage Point Mesa 148 Acquired 1994
La Mariposa Mesa 222 Acquired 1990
La Valencia Mesa 361 Acquired 1990
Little Cottonwoods Tempe 379 Acq/Acq/Dev 1989/89/90
Los Arboles Chandler 232 Developed 1985
Miramonte Scottsdale 151 Developed 1983
Morningside Scottsdale 160 Acquired 1992
Park Meadow Gilbert 156 Acquired 1992
Preserve at Squaw Peak Phoenix 108 Acquired 1991
Promontory Pointe Phoenix 304 Acquired 1988
Scottsdale Courtyards Scottsdale 274 Developed 1993
Scottsdale Meadows Scottsdale 168 Developed 1984
Shadow Brook Phoenix 224 Acquired 1993
Shores at Andersen Springs Chandler 299 Developed 1989/1993
Silver Creek Phoenix 174 Acquired 1991
Sun Creek Glendale 175 Acquired 1993
The Meadows Mesa 306 Acquired 1987
The Palms Phoenix 132 Developed 1990
The Pines Mesa 194 Acquired 1992
Towne Square Chandler 348 Acq/Dev 1992/1995
Villa Encanto Phoenix 382 Developed 1983
Village at Lakewood Phoenix 240 Developed 1988
----------------
6,263
Tucson:
Harrison Park Tucson 172 Acquired 1991
La Reserve Oro Valley 240 Developed 1988
Orange Grove Village Tucson 256 Acquired 1991
Suntree Village Oro Valley 424 Acquired 1992
The Arboretum Tucson 352 Acq/Dev 1992/1995
Village at Tanque Verde Tucson 217 Acq/Dev 1990/1994
----------------
1,661
----------------
Total Same Store 7,924
================
Communities Stabilized Less than Two Years
Arizona
- -------
Phoenix:
Gateway Villas Phoenix 180 Developed 1995
Mountain Park Ranch Phoenix 240 Developed 1995
Sonoran Phoenix 429 Developed 1995
The Enclave Tempe 204 Developed 1995
The Heritage Phoenix 204 Developed 1995
Towne Square Expansion Phase II Chandler 120 Developed 1995
----------------
1,377
Tucson:
Arboretum Expansion Phase II Tucson 144 Developed 1995
----------------
Total Communities Stabilized Less than Two Years 1,521
================
</TABLE>
Page 21 of 24
<PAGE>
<TABLE>
<CAPTION>
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
--------------------- ---- ---------- -------- --------
<S> <C> <C> <C> <C>
Developments and Lease-Up Properties
Arizona
- -------
Phoenix:
Country Brook Expansion Phase III (2) Chandler 120 Developed 1995/96
The Hawthorne (2) Phoenix 276 Developed 1995/96
Ingleside (1) Phoenix 120 Developed 1995/96
The Isle at Arrowhead Ranch Glendale 256 Developed 1996
Ladera (1) Phoenix 248 Developed 1995/96
Mirador (2) Phoenix 316 Developed 1995/96
Park Meadow Expansion Phase II (2) Gilbert 68 Developed 1995/96
Promontory Pointe Expansion Phase II Phoenix 120 Developed 1995/96
Towne Square Expansion Phase III (3) Chandler 116 Developed 1995/96
----------------
1,640
Tucson:
Bear Canyon (2) Tucson 238 Developed 1995/96
Harrison Park Expansion Phase II (2) Tucson 188 Developed 1995/96
The Legends (1) Tucson 312 Developed 1995/96
Orange Grove Expansion Phase II (2) Tucson 144 Developed 1995/96
----------------
882
================
Total Developments and Lease-Up Properties 2,522
================
Acquisitions
Arizona
-------
Phoenix:
Acacia Creek Scottsdale 508 Acquired 1995
Rancho Murietta Tempe 292 Acquired 1995
Superstition Vista Mesa 316 Acquired 1995
----------------
1,116
California
----------
Canyon Crest Views Riverside 178 Acquired 1996
The Ashton Corona Hills 492 Acquired 1995
----------------
670
----------------
Total Acquisitions 1,786
================
Total 13,753
================
</TABLE>
(1) Community reached stabilized occupancy in the first quarter 1996
(2) Community is in lease-up
(3) Community reached stabilized occupancy in the second quarter 1996
PART II OTHER INFORMATION
Item 4 - Submission of Matters to Vote by Security Holders.
On June 6, 1996 at the Annual Meeting of Stockholders, two directors were
re-elected to the Board of Directors for a three year term to expire at the 1999
Annual Meeting of Stockholders. The stockholders voted to elect both nominees,
voting as follows:
<TABLE>
<CAPTION>
Total Votes For Total Votes Against
Each Director Each Director
---------------------------------------------------
<S> <C> <C>
F. Keith Withycombe 13,990,705 29,997
G. Peter Bidstrup 13,990,705 29,997
</TABLE>
The second item of business conducted at the meeting was, as described in the
Proxy Statement dated May 3, 1996, the approval of a Non-Employee Directors
Stock Plan ("Directors Plan"). The stockholders were asked to approve a
Directors Plan that will allow non-employee directors to elect to receive their
quarterly directors' retainer (including meeting fees) in the form of Common
Stock or options to purchase Common Stock in lieu of the cash they would
otherwise be entitled to receive.
Page 22 of 24
<PAGE>
The Non-Employee Director Stock Plan was approved based on the votes set forth
below:
Number of Votes Number of Votes
For Against
--------------------------- -------------------------
13,164,270 856,432
Item 6 - Exhibits and Reports on Form 8-K.
(b) No current reports on Form 8-K were filed during the quarter ended June 30,
1996.
Page 23 of 24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EVANS WITHYCOMBE RESIDENTIAL, INC.
July 30, 1996 /s/ Stephen O. Evans
- ----------------------- ------------------------------
(Date) Stephen O. Evans,
Chairman of the Board and
Chief Executive Officer
July 30, 1996 /s/ Paul R. Fannin
- ----------------------- ------------------------------
(Date) Paul R. Fannin,
Senior Vice President and
Chief Financial Officer
Page 24 of 24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,747
<SECURITIES> 0
<RECEIVABLES> 2,506
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 647,752
<DEPRECIATION> 27,100
<TOTAL-ASSETS> 630,296
<CURRENT-LIABILITIES> 0
<BONDS> 311,806
0
0
<COMMON> 183
<OTHER-SE> 234,773
<TOTAL-LIABILITY-AND-EQUITY> 630,296
<SALES> 0
<TOTAL-REVENUES> 48,285
<CGS> 0
<TOTAL-COSTS> 15,119
<OTHER-EXPENSES> 12,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,893
<INCOME-PRETAX> 9,965
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,965
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
