<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
NOVEMBER 15, 1996
(Date of Report)
ERP OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
0-24920
(Commission File No.)
Illinois 36-3894853
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer
Identification No.)
Two North Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 474-1300
(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Capitalized terms not defined herein are used as defined in the Operating
Partnership's Annual Report on Form 10-K for the year ended December 31, 1995,
as amended by Form 10-K/A, and the Operating Partnership's Quarterly Report on
Form 10-Q for the three months ended September 30, 1996.
ACQUISITIONS
ERP Operating Limited Partnership and its subsidiaries (the "Operating
Partnership") has acquired 31 multifamily residential properties during the
period from May 31, 1996 through November 15, 1996. The cash portion of these
transactions was financed primarily through the Operating Partnership's line of
credit and net proceeds received from the Third Public Debt Offering, the Series
C Preferred Share Offering and the September 1996 Common Share Offering.
Descriptions of the acquired properties are as follows except for 16 properties
which were included in the Current Report on Form 8-K dated May 23, 1996.
CHANDLER COURT APARTMENTS, CHANDLER, ARIZONA
On June 25, 1996, the Operating Partnership acquired a multifamily residential
property located in Chandler, Arizona ("Chandler Court"). Chandler Court was
approximately 86% occupied as of November 1, 1996. The property consists of 311
units in 35 townhouses and single-story flats on approximately 20 acres.
Amenities include a clubhouse, washer/dryer hookups in each unit, two spas,
barbecues, playground, fireplaces, billiard table, two swimming pools and an
aerobics room. The property was constructed in 1987. Property management
services are being provided by the Operating Partnership since the date of
acquisition.
TERMS OF PURCHASE
Chandler Court was purchased from an unaffiliated third party for approximately
$13.5 million.
PINE MEADOW APARTMENTS, GREENSBORO, NORTH CAROLINA
On July 16, 1996, the Operating Partnership acquired a multifamily residential
property located in Greensboro, North Carolina ("Pine Meadow"). Pine Meadow was
approximately 98% occupied as of November 1, 1996. The property consists of 204
units in 29 three story residential buildings and one maintenance shop/leasing
office on approximately 14 acres. Amenities include a swimming pool, tennis
courts, washer/dryer connections and playground. The property was constructed in
1974. Property management services are being provided by the Operating
Partnership since the date of acquisition.
TERMS OF PURCHASE
Pine Meadow was purchased from an unaffiliated third party for approximately
$7.19 million, which included the assumption of mortgage indebtedness of
approximately $4.9 million.
2
<PAGE>
PUEBLO VILLAS APARTMENTS, ALBUQUERQUE, NEW MEXICO
On August 1, 1996, the Operating Partnership acquired a multifamily residential
property located in Albuquerque, New Mexico ("Pueblo Villas"). Pueblo Villas was
approximately 94% occupied as of November 1, 1996. The property consists of 232
units in 17 residential buildings on approximately 12 acres. Amenities include
two lighted tennis courts, heated jacuzzi, sauna, clubhouse, covered parking and
on-site coin operated laundry facilities. The property was constructed in 1975.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
TERMS OF PURCHASE
Pueblo Villas was purchased from an unaffiliated third party for approximately
$8.5 million.
BRIXWORTH APARTMENTS, NASHVILLE, TENNESSEE
On August 28, 1996, the Operating Partnership acquired a multifamily residential
property located in Nashville, Tennessee ("Brixworth"). Brixworth was
approximately 92% occupied as of November 1, 1996. The property consists of 216
units in 19 three-story residential buildings on approximately six acres.
Amenities include a clubhouse with swimming pool, covered parking, washer/dryers
in select units and woodburning fireplaces in select units. The property was
constructed in 1985. Property management services are being provided by the
Operating Partnership since the date of acquisition.
TERMS OF PURCHASE
Brixworth was purchased from an unaffiliated third party for approximately $11.7
million.
WOODSCAPE APARTMENTS, RALEIGH, NORTH CAROLINA
On August 30, 1996, the Operating Partnership acquired a multifamily residential
property located in Raleigh, North Carolina ("Woodscape"). Woodscape was
approximately 97% occupied as of November 1, 1996. The property consists of 240
units in 21 two story residential buildings on approximately 25 acres. Amenities
include two lighted tennis courts, swimming pool, volleyball court and weight
room. The property was constructed in 1979. Property management services are
being provided by the Operating Partnership since the date of acquisition.
TERMS OF PURCHASE
Woodscape was purchased from an unaffiliated third party for approximately $9.55
million.
CANTERCHASE APARTMENTS, NASHVILLE, TENNESSEE
On September 19, 1996, the Operating Partnership acquired a multifamily
residential property located in Nashville, Tennessee ("Canterchase").
Canterchase was approximately 91% occupied as of November 1, 1996. The property
consists of 235 units in 12 two and three-story garden style residential
buildings and 1 one-story office/clubhouse on approximately 22 acres. Amenities
include a clubhouse, jacuzzi, lighted tennis courts, basketball court, laundry
facilities, swimming pool, fitness center, sand volleyball court and playground.
The property was constructed in 1985.
3
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Property management services are being provided by the Operating Partnership
since the date of acquisition.
TERMS OF PURCHASE
Canterchase was purchased from an unaffiliated third party for approximately
$8.55 million, which included the assumption of mortgage indebtedness of
approximately $5.8 million.
EAGLE CANYON APARTMENTS, CHINO HILLS, CALIFORNIA
On September 19, 1996, the Operating Partnership acquired a multifamily
residential property located in Chino Hills, California ("Eagle Canyon"). Eagle
Canyon was approximately 96% occupied as of November 1, 1996. The property
consists of 252 units in 34 two-story residential buildings on approximately 32
acres. Amenities include two swimming pools, tennis court, washer/dryer
connections and garages. The property was constructed in 1985. Property
management services are being provided by the Operating Partnership since the
date of acquisition.
TERMS OF PURCHASE
Eagle Canyon was purchased from an unaffiliated third party for approximately
$17.3 million.
SUMMERSET VILLAGE APARTMENTS, CHATSWORTH, CALIFORNIA
On September 19, 1996, the Operating Partnership acquired a multifamily
residential property located in Chatsworth, California ("Summerset Village").
Summerset Village was approximately 97% occupied as of November 1, 1996. The
property consists of 280 units in 29 two-story residential buildings on
approximately 29 acres. Amenities include two swimming pools, tennis courts,
washer/dryer connections, fireplaces and garages. The property was constructed
in 1985. Property management services are being provided by the Operating
Partnership since the date of acquisition.
TERMS OF PURCHASE
Summerset Village was purchased from an unaffiliated third party for
approximately $25.5 million.
SONGBIRD APARTMENTS, SAN ANTONIO, TEXAS
On September 20, 1996, the Operating Partnership acquired a multifamily
residential property located in San Antonio, Texas ("Songbird"). Songbird was
approximately 85% occupied as of November 1, 1996. The property consists of 262
units in 29 two and three story residential buildings and 1 one story
office/laundry on approximately 15 acres. Amenities include a clubhouse, two
swimming pools, fireplaces in select units and washer/dryer connections in
select units. The property was constructed in 1981. Property management services
are being provided by the Operating Partnership since the date of acquisition.
4
<PAGE>
Terms of Purchase
Songbird was purchased from an unaffiliated third party for approximately $10.7
million, which included the assumption of mortgage indebtedness of approximately
$7 million.
WILLOWGLEN APARTMENTS, AURORA, COLORADO
On September 20, 1996, the Operating Partnership acquired a multifamily
residential property located in Aurora, Colorado ("Willowglen"). Willowglen was
approximately 87% occupied as of November 1, 1996. The property consists of 384
units in 24 residential buildings and two clubhouses on approximately 17 acres.
Amenities include washer/dryer hook-ups, clubhouse, fitness center, swimming
pool and spa, fireplaces, tennis court, volleyball and basketball courts and
lighted covered parking. The property was constructed in 1983. Property
management services are being provided by the Operating Partnership since the
date of acquisition.
Terms of Purchase
Willowglen was purchased from an unaffiliated third party for approximately
$17.1 million.
MERRIMAC WOODS APARTMENTS, COSTA MESA, CALIFORNIA
On September 26, 1996, the Operating Partnership acquired a multifamily
residential property located in Costa Mesa, California ("Merrimac Woods").
Merrimac Woods was approximately 97% occupied as of November 1, 1996. The
property consists of 123 units in six three-story residential elevator buildings
and one clubhouse on approximately three acres. Amenities include a clubhouse,
swimming pool, spa, billiards, recreation room, fitness center, barbecues,
streams and ponds and enclosed garages. The property was constructed in 1970.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Merrimac Woods was purchased from an unaffiliated third party for approximately
$6.73 million.
CASA CAPRICORN APARTMENTS, SAN DIEGO, CALIFORNIA
On September 27, 1996, the Operating Partnership acquired a multifamily
residential property located in San Diego, California ("Casa Capricorn"). Casa
Capricorn was approximately 98% occupied as of November 1, 1996. The property
consists of 192 units in 24 residential buildings on approximately eight acres.
Amenities include swimming pools, spas and covered and open parking. The
property was constructed in 1981. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Casa Capricorn was purchased from an unaffiliated third party for approximately
$12.47 million.
HUNTER'S GLEN APARTMENTS, CHESTERFIELD, MISSOURI
On September 30, 1996, the Operating Partnership acquired a multifamily
residential property
5
<PAGE>
located in Chesterfield, Missouri ("Hunter's Glen"). Hunter's Glen was
approximately 95% occupied as of November 1, 1996. The property consists of 192
units in 8 two and three-story residential buildings and one office/clubhouse on
approximately 10 acres. Amenities include ceiling fans, fireplaces in some
units, indoor/outdoor pool with spa, tennis courts, covered parking, volleyball
court, laundry facilities, full size washer/dryer connections and fitness room.
The property was constructed in 1985. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Hunter's Glen was purchased from an unaffiliated third party for approximately
$9.1 million.
MARBRISA APARTMENTS, TAMPA, FLORIDA
On October 11, 1996, the Operating Partnership acquired a multifamily
residential property located in Tampa, Florida ("Marbrisa"). Marbrisa was
approximately 95% occupied as of November 1, 1996. The property consists of 224
units in 16 two-story residential buildings on approximately 37 acres. Amenities
include a swimming pool with cabana, two lighted tennis courts, one laundry
building, car wash area, washer/dryer connections in all two bedroom units and
fireplaces in 32 of the two bedroom units. The property was constructed in 1984.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Marbrisa was purchased from an unaffiliated third party for approximately $7.8
million.
CEDAR CREST APARTMENTS, OVERLAND PARK, KANSAS
On November 1, 1996, the Operating Partnership acquired a multifamily
residential property located in Overland Park, Kansas ("Cedar Crest"). Cedar
Crest was approximately 97% occupied as of November 1, 1996. The property
consists of 466 units in 73 two and three story garden style residential
buildings on approximately 37 acres. Amenities include a fully equipped
clubhouse, game tables, two saunas, whirlpools, exercise room, lighted tennis
courts, heated swimming pools, tanning beds, woodburning fireplaces,
washer/dryer hookups and attached garages. The property was constructed in 1986.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Cedar Crest was purchased from an unaffiliated third party for approximately
$21.55 million.
DISPOSITION
On June 25, 1996, the Operating Partnership sold Deer Run, a 152 unit
multifamily residential property located in Charleston, South Carolina, for a
sales price of $3.95 million to an unaffiliated third party. For financial
statement purposes, the Operating Partnership recorded a gain of approximately
$1 million.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
C. EXHIBITS
--------
24.1 Consent of Ernst & Young LLP
No information is required under Items 1, 3, 4, and 6, and these items
have therefore been omitted.
7
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
Required under Item 7(b) of Form 8-K
8
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Capitalized terms not defined herein are used as defined in the Operating
Partnership's Form 10-K for the year ended December 31, 1995, as amended by Form
10-K/A, and the Operating Partnership's Quarterly Report on Form 10-Q for the
three months ended September 30, 1996.
The following unaudited Pro Forma Condensed Balance Sheet as of September 30,
1996 and Statement of Operations for the nine months ended September 30, 1996
have been presented as if the January 1996 Common Share Offering, the February
1996 Common Share Offering, the May 1996 Common Share Offerings, the Third
Public Debt Offering, the Series C Preferred Share Offering, the September 1996
Common Share Offering, the refinancing of certain tax-exempt bonds, the
acquisition of 41 multifamily residential properties (10 from January 1, 1996
through May 30, 1996 and 31 from May 31, 1996 through the date of this Form
8-K), the disposition of two multifamily residential properties and the
repayment of mortgage indebtedness for six properties had occurred on January 1,
1996 (or September 30, 1996 for balance sheet purposes). Thirty-eight of the
acquired properties are included in the Historical Balance Sheet as of September
30, 1996 and three of the properties which were acquired subsequent to September
30, 1996 are included on a Pro Forma basis as described in Note A of the Pro
Forma Condensed Consolidated Balance Sheet as of September 30, 1996.
The following unaudited Pro Forma Statement of Operations for the year ended
December 31, 1995 has been presented as if the January 1996 Common Share
Offering, the February 1996 Common Share Offering, the May 1996 Common Share
Offerings, the Second Public Debt Offering, the Series A Preferred Share
Offering, the Series B Preferred Share Offering, the Third Public Debt Offering,
the Series C Preferred Share Offering, the September 1996 Common Share Offering,
the refinancing of certain tax-exempt bonds, the acquisition of 58 multifamily
residential properties, the disposition of eight multifamily residential
properties, the repayment of mortgage indebtedness for 12 properties and the
investment in partnership interests and subordinated mortgages collateralized by
21 multifamily residential properties had occurred on January 1, 1995.
The unaudited Pro Forma Condensed Consolidated Financial Statements are not
necessarily indicative of the results of future operations, nor the results of
historical operations, had all the transactions occurred as described above on
either January 1, 1995 or January 1, 1996.
The unaudited Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the accompanying Notes to Pro Forma Condensed
Consolidated Financial Statements, Quarterly Report on Form 10-Q for the three
months ended September 30, 1996 and Combined Statements of Revenue and Certain
Expenses (included elsewhere herein).
9
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
1996
Most Recent 1996
Acquired Mortgage Note Pro
Historical Properties (A) Repayments (B) Forma
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Rental property, net $2,473,686 $ 58,065 $ -- $2,531,751
Real Estate held for disposition 11,260 -- -- 11,260
Investment in mortgage notes, net 86,486 -- -- 86,486
Cash and cash equivalents 152,545 (37,269) (11,816) 103,460
Rents receivable 2,126 -- -- 2,126
Deposits-restricted 5,501 -- -- 5,501
Escrows deposits-mortgage 14,953 -- -- 14,953
Deferred financing costs, net 13,062 -- -- 13,062
Other assets 25,247 -- -- 25,247
---------- -------- -------- ----------
Total assets $2,784,866 $ 20,796 $(11,816) $2,793,846
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 738,862 $ 20,796 $(11,816) $ 747,842
Line of credit -- -- -- --
Notes, net 498,761 -- -- 498,761
Accounts payable and accrued expenses 36,063 -- -- 36,063
Accrued interest payable 14,682 -- -- 14,682
Due to affiliates 778 -- -- 778
Rents received in advance and other
liabilities 16,813 -- -- 16,813
Security deposits 12,945 -- -- 12,945
Distributions payable 39,233 -- -- 39,233
---------- -------- -------- ----------
Total liabilities 1,358,137 20,796 (11,816) 1,367,117
---------- -------- -------- ----------
Commitments and Contingencies
9 3/8 Series A Cumulative Redeemable
Preference Units 153,000 -- -- 153,000
---------- -------- -------- ----------
9 1/8 Series B Cumulative Redeemable
Preference Units 125,000 -- -- 125,000
---------- -------- -------- ----------
9 1/8 Series C Cumulative Redeemable
Preference Units 115,000 -- -- 115,000
---------- -------- -------- ----------
Partners' Capital
General Partner 878,890 -- -- 878,890
Limited Partners 154,839 -- -- 154,839
---------- -------- -------- ----------
Total partners' capital 1,033,729 -- -- 1,033,729
---------- -------- -------- ----------
Total liabilities and partners'
capital $2,784,866 $ 20,796 $(11,816) $2,793,846
========== ======== ======== ==========
</TABLE>
(A) Reflects the most recent multifamily residential property acquisitions,
which include Marbrisa, Cedar Crest and Lakeville Resort (acquired October
and November, 1996) (collectively the "1996 Most Recent Acquired
Properties"). In connection with such acquisitions the amounts presented
include the initial purchase price as well as subsequent closing costs
incurred and capital improvements required as identified in the acquisition
process and the assumption of $20.8 million of mortgage indebtedness
secured by one of the 1996 Most Recent Acquired Properties.
(B) Reflects the repayment of mortgage indebtedness of $11.8 million secured by
two properties.
10
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended September 30, 1996
(UNAUDITED)
(Amounts in thousands except for OP Unit data)
<TABLE>
<CAPTION>
1996 1996
Previously Most Recent 1996
Acquired Acquired Mortgage Note
Historical Properties (A) Properties (B) Repayments (C)
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $327,749 $41,949 $6,524 $ --
Fee and asset management 4,982 -- -- --
Interest income - investment in mortgage notes 9,084 -- -- --
Interest and other income 2,232 -- -- --
-------- ------- ------ ------
Total revenues 344,047 41,949 6,524 --
-------- ------- ------ ------
EXPENSES
Property and maintenance 93,128 11,024 1,720 --
Real estate taxes and insurance 32,301 4,421 623 --
Property management 13,136 -- -- --
Fee & asset management 3,037 -- -- --
Depreciation 66,759 -- -- --
Interest:
Expense incurred 58,632 -- -- (2,284)
Amortization of deferred financing costs 2,860 -- -- (152)
General and administrative 6,690 -- -- --
-------- ------- ------ ------
Total expenses 276,543 15,445 2,343 (2,436)
-------- ------- ------ ------
Income before gain on disposition of properties and
extraordinary items 67,504 $26,504 $4,181 $2,436
======= ====== ======
Gain on disposition of properties 2,346
--------
Income before extraordinary items 69,850
Write-off of unamortized costs on refinanced debt (3,134)
--------
Net income $ 66,716
========
ALLOCATION OF NET INCOME:
9 3/8 Series A Cumulative Redeemable
Preference Units $ 10,758
========
9 1/8 Series B Cumulative Redeemable
Preference Units $ 8,554
========
9 1/8 Series C Cumulative Redeemable
Preference Units $ 641
========
General Partner 38,337
Limited Partners 8,426
--------
$ 46,763
========
Net income per weighted average OP
Unit outstanding $ 0.94
========
Weighted average OP Units outstanding 49,620
========
</TABLE>
<TABLE>
<CAPTION>
1996
Disposed Pro
Properties (D) Adjustments (E) Forma
-------------- --------------- --------
<S> <C> <C> <C>
REVENUES
Rental income $(505) $ -- $375,717
Fee and asset management -- -- 4,982
Interest income - investment in mortgage notes -- -- 9,084
Interest and other income -- (1,168) 1,064
----- ------- --------
Total revenues (505) (1,168) 390,847
----- ------- --------
EXPENSES
Property and maintenance (226) (324) 105,322
Real estate taxes and insurance (43) -- 37,302
Property management (22) 922 14,036
Fee & asset management -- -- 3,037
Depreciation (82) 8,915 75,592
Interest:
Expense incurred (1) 12,963 69,310
Amortization of deferred financing costs -- 86 2,794
General and administrative -- -- 6,690
----- ------- --------
Total expenses (374) 22,562 314,083
----- ------- --------
Income before gain on disposition of properties and
extraordinary items $(131) $(23,730) 76,764
===== =======
Gain on disposition of properties --
--------
Income before extraordinary items 76,764
Write-off of unamortized costs on refinanced debt --
--------
Net income
$ 76,764
========
ALLOCATION OF NET INCOME:
9 3/8 Series A Cumulative Redeemable
Preference Units $ 10,758
========
9 1/8 Series B Cumulative Redeemable
Preference Units $ 8,555
========
9 1/8 Series C Cumulative Redeemable
Preference Units $ 7,870
========
General Partner 41,643
Limited Partners 7,938
--------
$ 49,581
========
Net income per weighted average OP
Unit outstanding $ 0.91
========
Weighted average OP Units outstanding
(F) 54,499
========
</TABLE>
(A) Reflects the results of operations for Desert Park, 7979 Westheimer, Sabal
Pointe (fka: Vinings at Coral Springs), Woodbridge (fka: The Plantations),
Heron Landing (fka: Oxford & Sussex), The Pines of Cloverlane, Regency
Palms, Port Royale II, 2900 on First, Woodland Hills, Ivy Place (fka: Post
Place), Ridgetree, Country Ridge, Rosehill Pointe, Forest Ridge, Canyon
Sands Village, Desert Sands Village, Chandler Court, Lands End, Mallard
Cove, Sunny Oak Village, Pine Meadow, Summer Ridge, Promenade Terrace, South
Creek, Pueblo Villas, Brixworth, Brierwood, Woodscape, Park Place,
Canterchase, Eagle Canyon, Summerset Village, Songbird, Willowglen, Merrimac
Woods, Casa Capricorn and Hunter's Glen (acquired from February through
September, 1996) (collectively the "1996 Previously Acquired Properties").
The amounts presented represent the historical amounts for certain revenues
and expenses for the periods from January 1, 1996 through the respective
acquisition dates for each property.
(B) Reflects the results of operations for the 1996 Most Recent Acquired
Properties. The amounts presented for rental revenues, property and
maintenance and real estate taxes and insurance are based on the revenues
and certain expenses of the 1996 Most Recent Acquired Properties for the
nine months ended September 30, 1996 as contained in the Combined Statement
of Revenues and Certain Expenses included elsewhere herein.
11
<PAGE>
(C) Reflects the elimination of interest expense and amortization of deferred
financing costs related to the repayment of mortgage indebtedness for six
properties.
(D) Reflects the elimination of the results of operations for Sanddollar and
Deer Run (the "1996 Disposed Properties") for the period from January 1,
1996 through the respective disposition dates for each property.
(E) Reflects the following adjustments to the 1996 Previously Acquired
Properties and the 1996 Most Recent Acquired Properties results of
operations:
<TABLE>
<S> <C>
Interest and other income:
Reduction of interest income due to the use of working capital for
property acquisitions $(1,168)
=======
Property and maintenance:
The elimination of third-party management fees where the Operating
Partnership is providing onsite property management services $ (324)
=======
Property management:
Incremental cost associated with self management of the 1996 Most Recent
Acquired Properties for the nine months ended September 30, 1996 and the
1996 Previously Acquired Properties for the period from January 1, 1996
through the respective acquisition dates for each property $ 922
=======
Depreciation:
Reflects depreciation based on the expected total investment of $58.1 million
for the 1996 Most Recent Acquired Properties and the expected total
investment of $570.9 million for the 1996 Previously Acquired Properties less
10% allocated to land and depreciated over a 30-year life for real property.
Depreciation for the 1996 Previously Acquired Properties reflect amounts from
January 1, 1996 through the respective acquisition dates for each property. $ 8,915
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1996 Previously Acquired Properties and the
1996 Most Recent Acquired Properties (G) $ 5,352
Interest on refinancing $138.4 million of tax-exempt bonds at an average interest cost of 4.4%
for the nine months ended September 30, 1996 4,567
Interest on refinancing $77.1 million of tax-exempt bonds at a blended average interest cost of
6.88% for the nine months ended September 30, 1996 3,977
Non-usage fee on the Operating Partnership's unused portion of its line of credit equal to 20
basis points on $250 million 375
Interest on the Third Public Debt Offering in the amount of $150 million at 7.57% for the nine
months ended September 30, 1996 8,516
Amortization of a swap settlement amount associated with the Third Public Debt Offering for the
nine months ended September 30, 1996 (43)
Reduction of interest associated with refinancing $138.4 million of tax-exempt bonds to the extent
amounts are already included in the Operating Partnership's historical financial results (4,164)
Reduction of interest associated with refinancing $77.1 million of tax-exempt bonds to the extent
amounts are already included in the Operating Partnership's historical financial results (1,332)
Reduction of interest associated with amounts borrowed on the Operating Partnership's line of
credit and the Third Public Debt Offering to the extent amounts are already included in the
Operating Partnership's historical financial results (4,285)
-------
$12,963
=======
Amortization of financing costs:
Amortization of financing costs on $150 million Debt Offering of $1,275,000 over 10 years for the
nine months ended September 30, 1996 96
Reduction of amortization associated with the Third Public Debt Offering to the extent amounts are
already included in the Operating Partnership's historical financial results (10)
-------
$ 86
=======
</TABLE>
(F) Pro Forma weighted average OP Units outstanding for the nine months ended
September 30, 1996 was 54.5 million, which includes 54.5 million OP Units
outstanding as of September 30, 1996. The OP Units outstanding do not
include any shares or OP Units issued in a private or public offering that
have not been used or are not intended to be used for acquisitions or
repayment of debt directly incurred in an acquisition.
12
<PAGE>
(G) Detail of interest expense on mortgage indebtedness for certain of the 1996
Previously Acquired Properties and the 1996 Most Recent Acquired
Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Woodbridge (fka: The Plantations)(1) $ 4,862 8.25% $ 68
Desert Sands Village (1) 8,957 6.50% 262
Canyon Sands Village (1) 8,952 6.50% 260
Pine Meadow (1) 4,948 8.33% 223
Promenade Terrace (1) 16,588 7.70% 703
South Creek (1) 16,651 8.00% 733
Park Place I (1) 8,996 8.50% 515
Park Place II (1) 8,996 8.70% 528
Canterchase (1) 5,838 7.66% 320
Songbird (1) 7,015 7.63% 383
Lakeville Resort 20,796 8.70% 1,357
-------- ------
Totals $112,599 $5,352
======== ======
</TABLE>
(1) The amounts presented for these properties represent the historical
amounts for the periods from January 1, 1996 through the respective
acquisition dates for each property.
13
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(UNAUDITED)
(Amounts in thousands except for OP Unit data)
<TABLE>
<CAPTION>
1995 1996 1995 & 1996
Acquired Acquired Disposed Pro
Historical Properties (A) Properties (B) Properties (C) Adjustments (D) Forma
---------- ------------- ------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 372,447 $ 23,598 $ 95,679 $ (12,608) $ -- $ 479,116
Fee and asset management 7,030 -- -- -- -- 7,030
Interest income - investment in
mortgage notes 4,862 5,404 -- -- -- 10,266
Interest and other income 4,573 (28) -- (347) (1,243) 2,955
-------- -------- -------- --------- ------- --------
Total revenues 388,912 28,974 95,679 (12,955) (1,243) 499,367
-------- -------- -------- --------- ------- --------
EXPENSES
Property and maintenance 110,714 5,595 33,058 (4,324) (4,304) 140,739
Real estate taxes and insurance 37,002 2,386 10,629 (1,057) -- 48,960
Property management 15,213 -- -- (602) 2,860 17,471
Fee & asset management 3,887 -- -- -- -- 3,887
Depreciation 72,410 -- -- (1,923) 23,379 93,866
Interest:
Expense incurred 78,375 -- -- (823) 15,288 92,840
Amortization of deferred financing costs 3,444 -- -- -- (19) 3,425
General and administrative 8,129 -- -- -- -- 8,129
-------- -------- -------- --------- ------- --------
Total expenses 329,174 7,981 43,687 (8,729) 37,204 409,317
-------- -------- -------- --------- ------- --------
Income before gain on disposition
of properties and extraordinary
items 59,738 $ 20,993 $ 51,992 $ (4,226) $ (38,447) 90,050
Gain on disposition of properties 21,617 ======== ======== ======== ======== --
-------- --------
Income before extraordinary items 81,355 90,050
Extraordinary item:
Gain on early extinguishment of
debt 2,000 --
-------- --------
Net income $ 83,355 $ 90,050
======== ========
ALLOCATION OF NET INCOME:
Redeemable Preference Interests $ 1,508 $ --
======== ========
9 3/8 Series A Cumulative Redeemable
Preference Units $ 8,367 $ 14,344
======== =========
9 1/8 Series B Cumulative Redeemable
Preference Units $ 1,742 $ 11,406
======== =========
9 1/8 Series C Cumulative Redeemable
Preference Units $ -- $ 10,494
======== =========
General Partner 57,610 45,192
Limited Partners 14,128 8,614
-------- --------
$ 71,738 $ 53,806
======== =========
Net income per weighted average OP
Unit outstanding $ 1.68 $ 1.01
======== =========
Weighted average OP Units
outstanding 42,749 (E) 53,474
======== =========
</TABLE>
(A) Reflects the results of operations for the 1995 Acquired Properties. The
amounts presented represent the historical amounts for certain revenues and
expenses for the periods from January 1, 1995 through the respective
acquisition dates for each property.
(B) Reflects the results of operations of the 1996 Previously Acquired
Properties and the 1996 Most Recent Acquired Properties (collectively the
"1996 Acquired Properties"). The amounts presented for rental revenues,
property and maintenance and real estate taxes and insurance are based on
the revenues and certain expenses of the 1996 Acquired Properties for the
year ended December 31, 1995 as contained in the Combined Statement of
Revenue and Certain Expenses included elsewhere herein.
14
<PAGE>
(C) Reflects the elimination of the results of operations for the 1995 Disposed
Properties and the 1996 Disposed Properties for the year ended December 31,
1995.
<TABLE>
<CAPTION>
(D) Reflects the following adjustments:
<S> <C>
Interest and other income:
Reduction of interest income due to the use of working capital for property acquisitions $ (1,313)
Interest income earned on loans made to the Company's Chief Executive Officer and other officers 70
--------
$ (1,243)
========
Property and maintenance:
The elimination of third-party management fees where the Operating Partnership is providing onsite
property management services $ (4,304)
========
Property management:
Incremental cost associated with self management of the 1996 Acquired Properties for the year ended
December 31, 1995 and the 1995 Acquired Properties for the period from January 1, 1995 through the
respective acquisition dates for each property. $ 2,860
========
Depreciation:
Reflects depreciation based on the expected total investment of $629 million for the 1996 Acquired
Properties and the expected total investment of $265.7 million for the 1995 Acquired Properties less 10%
allocated to land and depreciated over a 30-year life for real property. Depreciation for the 1995
Acquired Properties reflect amounts from January 1, 1995 through the respective acquisition dates for
each property $ 23,379
========
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1996 Acquired Properties and the 1996 Acquired
Properties (F) $ 10,174
Interest on refinancing $138.4 million of tax-exempt bonds at an average interest cost of 4.4% 6,090
Interest on refinancing $77.1 million of tax-exempt bonds at a blended average interest cost of 6.88% 5,302
Reduction of interest associated with the refinancing of $138.4 million tax-exempt bonds to the extent
amounts are already included in the Operating Partnership's historical financial results (6,171)
Reduction of interest associated with the refinancing of $77.1 million tax-exempt bonds to the extent
amounts are already included in the Operating Partnership's historical financial results (167)
Reduction of interest on mortgage indebtedness on twelve properties for which the loans were paid down
during 1995 to the extent the amounts are already included in the Operating Partnership's historical
financial results (4,774)
Interest associated with the Second Public Debt Offering in the amount of $125 million at an interest
rate of 7.95% per annum 9,937
Interest associated with the Public Debt Offering in the amount of $100 million at an interest rate of
7.075% per annum 7,075
Interest associated with the Third Public Debt Offering in the amount of $150 million at an interest rate
of 7.57% per annum 11,355
Reflects amortization of discounts associated with the Second Public Debt Offering and the treasury rate
lock costs associated with the Second Public Debt Offering 253
Reflects amortization of a swap settlement amount associated with the Third Public Debt Offering (58)
Reduction of interest and amortization associated with the Public Debt Offering and the Second Public
Debt Offering to the extent the amounts are already included in the Operating Partnership's historical
financial results (14,350)
Non-usage fee on the Operating Partnership's unused portion of its line of credit equal to 20 basis
points on $250 million 500
Reduction of interest associated with amounts borrowed on the Operating Partnership's line of credit to
the extent amounts are already included in the Operating Partnership's historical financial results (9,878)
--------
$ 15,288
========
Amortization of deferred financing costs:
Reduction of amortization of deferred financing costs on ten properties for which the loans were repaid
during 1995 to the extent the amounts are already included in the Operating Partnership's historical
financial results $ (349)
Reflects amortization of deferred financing costs associated with the Public Debt Offering and the
investment in mortgage notes. 405
Reflects amortization of deferred financing costs associated with the Third Public Debt Offering 127
Reduction of amortization of deferred financing costs associated with the Public Debt Offering and the
investment in mortgage notes to the extent amounts are already included in the Operating Partnership's
historical financial results (202)
--------
$ (19)
========
</TABLE>
(E) Pro Forma weighted average OP Units outstanding for the year ended
December 31, 1995 was 53.5 million, which includes 43.7 million OP Units
outstanding as of December 31, 1994, including the conversion of 39,790
Preference Units into 1,261,272 OP Units and reflects the following
transactions as if they had been completed on January 1, 1995: the issuance
of 4,025,000 Common Shares related to the January and February 1996 Common
Share Offerings, the issuance of 3,476,390 Common Shares in connection with
the May 1996 Common Share offerings and the issuance of 2,272,728 Common
Shares in connection with the September 1996 Common Share Offering. The OP
Units outstanding do not include any shares or OP Units issued in a private
or public offering that have not been used or are not intended to be used
for acquisitions or repayment of debt directly incurred in an acquisition.
15
<PAGE>
(F) Detail of interest expense on mortgage indebtedness for certain of the 1995
Acquired Properties and the 1996 Acquired Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
- --------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Camellero (1) $ 12,086 8.96% $ 642
Keystone (1) 3,023 8.00% 152
Wellington (1) 8,453 8.33% 455
Woodbridge (fka: The Plantations) 4,862 8.25% 401
Desert Sands Village 8,957 6.50% 582
Canyon Sands Village 8,952 6.50% 582
Pine Meadow 4,948 8.33% 412
Promenade Terrace 16,588 7.70% 1,277
South Creek 16,651 8.00% 1,332
Park Place I 8,996 8.50% 765
Park Place II 8,996 8.70% 783
Canterchase 5,838 7.66% 447
Songbird 7,015 7.63% 535
Lakeville Resort 20,796 8.70% 1,809
------------ --------
Totals $136,161 $10,174
============ ========
</TABLE>
(1) The amounts presented for these properties represent the historical amounts
for the periods from January 1, 1995 through the respective acquisition
dates for each property.
16
<PAGE>
1996 ACQUIRED PROPERTIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
Required under Item 7(a) of Form 8-K
17
<PAGE>
1996 ACQUIRED PROPERTIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Auditors 1
Combined Statements of Revenue and Certain
Expenses for the year ended December 31, 1995
and for the nine months ended September 30, 1996 2
Notes to Combined Statements of Revenue and
Certain Expenses 3
</TABLE>
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying combined statement of revenue and
certain expenses for certain residential properties (the "1996 Acquired
Properties") described in Note 2 for the year ended December 31, 1995. The
combined statement of revenue and certain expenses is the responsibility of the
managements of the 1996 Acquired Properties. Our responsibility is to express
an opinion on the combined statement of revenue and certain expenses based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement of revenue and certain expenses. An audit also includes assessing the
basis of accounting principles used and the significant estimates made by
management, as well as evaluating the overall presentation of the combined
statement of revenue and certain expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying combined statement of revenue and certain expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in ERP Operating Limited
Partnership's Current Report on Form 8-K as described in Note 1, and is not
intended to be a complete presentation of the 1996 Acquired Properties' revenues
and expenses.
In our opinion, the combined statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses described in Note 1 of the 1996 Acquired Properties
for the year ended December 31, 1995, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
November 7, 1996
1
<PAGE>
1996 ACQUIRED PROPERTIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the
For the Nine Months Ended
Year Ended September 30, 1996
December 31, 1995 (Unaudited)
-------------------- ---------------------
<S> <C> <C>
REVENUE
Rental Income $ 25,770 $ 19,522
-------------------- ---------------------
CERTAIN EXPENSES
Property operating and maintenance 7,847 5,303
Real estate taxes and insurance 2,711 2,029
Management fees 1,159 842
-------------------- ---------------------
11,717 8,174
-------------------- ---------------------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $ 14,053 $ 11,348
==================== =====================
</TABLE>
See accompanying notes.
-2-
<PAGE>
1996 ACQUIRED PROPERTIES
NOTES TO COMBINED STATEMENTS
OF REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying combined statements of revenue and certain expenses for
the year ended December 31, 1995 and the nine months ended September 30,
1996 (unaudited) were prepared for purposes of complying with the rules and
regulations of the Securities and Exchange Commission. The accompanying
financial statements are not representative of the actual operations of the
1996 Acquired Properties for the periods presented as certain expenses,
which may not be comparable to the expenses to be incurred by the Operating
Partnership in the proposed future operations of the properties, have been
excluded. Expenses excluded consist of interest, depreciation and
amortization, professional fees and other costs not directly related to the
future operations of the properties.
In preparation of the Operating Partnership's Combined Statements of
Revenue and Certain Expenses in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
effect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Rental income attributable to residential leases is recorded when due from
tenants, generally on a straight line basis.
The 1996 Acquired Properties had management agreements with various
management companies unaffiliated with the Operating Partnership through
the acquisition dates to maintain and manage the operations of the
apartment complexes. Management fees were based on a range of 3% to 5% of
gross receipts. Of the management fees paid in 1995, approximately $462,000
were paid to affiliates of the property owners. Upon acquisition of the
properties by the Operating Partnership, such management contracts were
cancelled at which time the Operating Partnership began to manage the
properties.
Note 2 - Description of Properties
The following properties are included in the combined statements of
revenue and certain expenses:
Date Number Total
Property Name Location Acquired of Units Investment (A)
----------------- ----------------- -------- -------- --------------
Chandler Court Chandler, AZ 6/25/96 311 $ 13,958,000
Pine Meadow Greensboro, NC 7/16/96 204 7,416,000
Pueblo Villas Albuquerque, NM 8/1/96 232 8,716,000
Brixworth Nashville, TN 8/28/96 216 11,956,000
Woodscape Raleigh, NC 8/30/96 240 9,758,000
Canterchase Nashville, TN 9/19/96 235 8,801,000
Eagle Canyon Chino Hills, CA 9/19/96 252 18,143,000
Summerset Village Chatsworth, CA 9/19/96 280 26,442,000
Songbird San Antonio, TX 9/20/96 262 11,236,000
Merrimac Woods Costa Mesa, CA 9/26/96 123 6,914,000
Casa Capricorn San Diego, CA 9/27/96 192 12,730,000
Hunter's Glen Chesterfield, MO 9/30/96 192 9,198,000
Marbrisa Tampa, FL 10/11/96 224 8,175,000
Cedar Crest Overland Park, KS 11/1/96 466 22,406,000
-------- --------------
3,429 $175,849,000
======== ==============
Notes:
(A) Includes initial purchase price, closing costs, start up costs and
amounts specified at date of purchase for future capital improvements.
-3-
<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.
ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL PROPERTIES TRUST,
ITS GENERAL PARTNER
November 18, 1996 By: /s/ Michael J. McHugh
----------------- ---------------------------------------
(Date) Michael J. McHugh
Senior Vice President, Chief Accounting
Officer and Treasurer
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement of
ERP Operating Limited Partnership on Form S-3, as amended (File No. 33-84892),
and the related Prospectus, of our report dated November 7, 1996 with respect to
the Combined Statement of Revenue and Certain Expenses of the 1996 Acquired
Properties for the year ended December 31, 1995, in the Current Report of ERP
Operating Limited Partnership on Form 8-K, dated November 15, 1996.
Ernst & Young LLP
Chicago, Illinois
November 18, 1996
