<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1997
- --------------------------------------------------------------------------------
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
September 17, 1997
(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 (I.R.S. Employer
of Incorporation) 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
ACQUISITIONS
ERP Operating Limited Partnership and its subsidiaries (the "Operating
Partnership") acquired two multifamily properties on August 27, 1997. The cash
portion of this transaction was financed primarily through the June 1997 Common
Share Offerings of the Company. Descriptions of the acquired properties follow.
The Operating Partnership has also entered into a contract to acquire an
additional 17 properties which are discussed in Item 5.
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, 1996
and the Operating Partnership's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997.
PACES STATION APARTMENTS AND PACES ON THE GREEN APARTMENTS, ATLANTA, GEORGIA
On August 27, 1997, the Operating Partnership acquired two multifamily
properties located in Atlanta, Georgia ("Paces Station" and "Paces on the
Green"). Paces Station was approximately 94% occupied as of June 30, 1997. The
property consists of 400 units in 37 two and three story residential buildings
and one office/clubhouse on approximately 32 acres. Amenities include a
clubhouse, two swimming pools, jacuzzi, wood burning fireplaces with gas
starters, mini blinds, laundry facilities, microwaves, breakfast bars, pantries,
built-in bookshelves in select units, and washer/dryer connections in all units.
The property was constructed in phases from 1984-1988. Property management
services are being provided by the Operating Partnership since the date of
acquisition.
Paces on the Green was approximately 98% occupied as of June 30, 1997. The
property consists of 210 units in 14 two and three story residential buildings
and one clubhouse on approximately nine acres. Amenities include a clubhouse,
two swimming pools, jacuzzi, lighted tennis courts, croquet and putting green,
car wash facilities, microwaves, washer/dryer hook-ups in all units, mini
blinds, and fireplaces in select units. The property was constructed in 1989.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Paces Station and Paces on the Green were purchased from an unaffiliated third
party for $37.3 million.
<PAGE>
ITEM 5. OTHER EVENTS
THE AMERITECH TRANSACTION
The Operating Partnership entered into a contract with an unaffiliated third
party to acquire 17 multifamily properties. Below are the expected terms of
purchase and the descriptions of the properties which the Operating Partnership
deems to be probable acquisitions (the "Ameritech Pension Trust Probable
Properties" or the "Probable Properties").
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, 1996
and the Operating Partnership's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997.
Expected Terms of Purchase
The aggregate purchase price of the Probable Properties is $292.4 million, which
includes the assumption of approximately $136 million of mortgage indebtedness
and the issuance of Common Shares of the Company in the amount of approximately
$156.4 million.
Descriptions of Properties
AUTUMN CREEK APARTMENTS, CORDOVA, TENNESSEE
Autumn Creek Apartments ("Autumn Creek") is a 210-unit multifamily property
located in Cordova, Tennessee. Autumn Creek was approximately 92% occupied as of
July 28, 1997. The property consists of 20 two and three story buildings and a
clubhouse/leasing office on approximately 14 acres. Amenities include a leasing
office/clubhouse, lighted tennis court, swimming pool, sauna, whirlpool, fitness
center, vaulted ceilings, and washer/dryers in all units. The property was
constructed in 1991.
3
<PAGE>
BLUE SWAN APARTMENTS, SAN ANTONIO, TEXAS
Blue Swan Apartments ("Blue Swan") is a 285-unit multifamily property located in
San Antonio, Texas. Blue Swan was approximately 87% occupied as of June 20,
1997. The property consists of 28 two and three story residential buildings and
two clubhouses on approximately 12 acres. Amenities include two clubhouses, two
swimming pools, two jacuzzis, fitness room, cabana, perimeter fencing with card
operated access gates, and washer/dryer connections in 261 units. The property
was constructed between 1985 and 1994.
BROOKRIDGE APARTMENTS, CENTREVILLE, VIRGINIA
Brookridge Apartments ("Brookridge") is a 252-unit multifamily property located
in Centreville, Virginia. Brookridge was approximately 97% occupied as of June
18, 1997. The property consists of 25 three and four story residential
buildings and a clubhouse/leasing office on approximately 15 acres. Amenities
include a clubhouse, swimming pool, fitness center, lighted tennis court,
washer/dryers in each unit, fireplaces in select units, vaulted ceilings,
biking and jogging trails, and built in microwave ovens. The property was
constructed in 1989.
CHANTECLEER LAKES APARTMENTS, NAPERVILLE, ILLINOIS
Chantecleer Lakes Apartments ("Chantecleer Lakes") is a 304-unit multifamily
property located in Naperville, Illinois. Chantecleer Lakes was approximately
92% occupied as of June 19, 1997. The property consists of 16 two story
residential buildings and a single-story clubhouse on approximately 19 acres.
Amenities include a swimming pool, clubhouse, health club with spa, washers and
dryers in each unit, three spring fed lakes, sunken living rooms, built-in
microwaves in each unit, and an intercom entry system. The property was
constructed in 1986.
CRESCENT AT CHERRY CREEK APARTMENTS, DENVER, COLORADO
Crescent at Cherry Creek Apartments ("Crescent at Cherry Creek") is a 216-unit
multifamily property located in Denver, Colorado. Crescent at Cherry Creek was
approximately 93% occupied as of July 23, 1997. The property consists of nine
three-story residential buildings and a single-story clubhouse. Amenities
include a clubhouse, swimming pool, spa, exercise/fitness facility, controlled
access gates, individual garages with openers, washer/dryer connections, and
fireplaces. The property was constructed in 1994.
GOVERNOR'S POINT APARTMENTS, ROSWELL, GEORGIA
Governor's Point Apartments ("Governor's Point") is a 468-unit multifamily
property located in Roswell, Georgia. Governor's Point was approximately 93%
occupied as of July 22, 1997. The property consists of 48 two story residential
buildings and two clubhouses on approximately 34 acres. Amenities include two
clubhouses, two swimming pools, spa, four lighted tennis courts, exercise room,
tot lot, washer/dryer connections, and fireplaces. The property was constructed
between 1982 and 1986.
4
<PAGE>
HIDDEN PALMS APARTMENTS, TAMPA, FLORIDA
Hidden Palms Apartments ("Hidden Palms") is a 256-unit multifamily property
located in Tampa, Florida. Hidden Palms was approximately 88% occupied as of
July 7, 1997. The property consists of 15 two and three story residential
buildings and a single story clubhouse/leasing office on approximately 14 acres.
Amenities include a leasing office/clubhouse, swimming pool, fitness center,
two jacuzzis, washer/dryer connections in all units, washer/dryers in select
units, vaulted ceilings, and picnic areas. The property was constructed in 1986.
IDLEWOOD APARTMENTS, INDIANAPOLIS, INDIANA
Idlewood Apartments ("Idlewood") is a 320-unit multifamily property located in
Indianapolis, Indiana. Idlewood was approximately 94% occupied as of June 30,
1997. The property consists of 20 two and three story residential buildings and
a one story clubhouse on approximately 29 acres. Amenities include a clubhouse,
swimming pool, playground, exercise room, sauna, carports and garages. The
property was constructed in 1991.
JEFFERSON AT WALNUT CREEK APARTMENTS, AUSTIN, TEXAS
Jefferson at Walnut Creek ("Jefferson at Walnut Creek") is a 342-unit
multifamily property located in Austin, Texas. Jefferson at Walnut Creek was
approximately 96% occupied as of June 18, 1997. The property consists of 15
three story residential buildings, one clubhouse, and one pool house on
approximately 20 acres. Amenities include a clubhouse, two swimming pools,
fitness center, spa, covered parking and garages, perimeter fence with access
gates, intrusion alarms, microwaves, fireplaces in some units, and washer/dryer
hookups. The property was constructed in 1994.
KIRBY PLACE APARTMENTS, HOUSTON, TEXAS
Kirby Place Apartments ("Kirby Place") is a 362-unit multifamily property
located in Houston, Texas. Kirby Place was approximately 97% occupied as of June
18, 1997. The property consists of 15 three story and two four story residential
buildings on approximately nine acres. Amenities include a clubhouse with
conference/film room, business center, fitness room and aerobics room, guard
house, swimming pool, mountain bikes, nine foot ceilings, crown molding, and
washer/dryers in all units. The property was constructed in 1994.
LARKSPUR WOODS APARTMENTS, SACRAMENTO, CALIFORNIA
Larkspur Woods Apartments ("Larkspur Woods") is a 232-unit multifamily property
located in Sacramento, California. Larkspur Woods was approximately 97% occupied
as of June 20, 1997. The property consists of 27 two story residential buildings
and one clubhouse on approximately 16 acres. Amenities include a heated outdoor
swimming pool and spa, wood burning fireplaces, clubhouse with business center
and library, exercise room, gated entrance, basketball half court, full size
washer/dryers in each unit, picnic area, sauna, and attached garages. The
property was constructed in phases between 1989 and 1993.
5
<PAGE>
NORTHWOODS VILLAGE APARTMENTS, CARY, NORTH CAROLINA
Northwoods Village Apartments ("Northwoods Village") is a 228-unit multifamily
property located in Cary, North Carolina. Northwoods Village was approximately
97% occupied as of June 30, 1997. The property consists of 23 two story
residential buildings and one clubhouse/leasing office on approximately 14
acres. Amenities include a leasing office/clubhouse, two swimming pools, lighted
tennis court, sand volleyball court, full size washer/dryers in each unit,
vaulted ceilings, and fireplaces. The property was constructed in 1986.
ORCHARD OF LANDEN APARTMENTS, MAINEVILLE, OHIO
Orchard of Landen Apartments ("Orchard of Landen") is a 312-unit multifamily
property located in Maineville, Ohio. Orchard of Landen was approximately 97%
occupied as of July 25, 1997. The property consists of 39 two story residential
buildings on approximately 33 acres. Amenities include a clubhouse, swimming
pool and spa, exercise room, membership to Pine Ridge Recreation Association,
jogging trails, and washer/dryers hook ups. The property was constructed between
1985 and 1988.
PREAKNESS APARTMENTS, ANTIOCH, TENNESSEE
Preakness Apartments ("Preakness") is a 260-unit multifamily property located in
Antioch, Tennessee. Preakness was approximately 90% occupied as of June 20,
1997. The property consists of 15 three story residential buildings and one
clubhouse/leasing office on approximately 13 acres. Amenities include a leasing
office/clubhouse, swimming pool, fitness center, indoor jacuzzi, lighted tennis
court, sand volleyball court, barbecue/picnic area, woodburning fireplaces,
large private balconies, and washer/dryer connections in each unit. The property
was constructed in 1986.
RIVERSIDE PARK APARTMENTS, TULSA, OKLAHOMA
Riverside Park Apartments ("Riverside Park") is a 288-unit multifamily property
located in Tulsa, Oklahoma. Riverside Park was approximately 97% occupied as of
July 22, 1997. The property consists of 12 three story residential buildings and
one clubhouse. Amenities include a clubhouse, swimming pool, spa, washer/dryer
connections, washer/dryers and vaulted ceilings in select units, and fireplaces.
The property was constructed in 1994.
SYCAMORE CREEK APARTMENTS, SCOTTSDALE, ARIZONA
Sycamore Creek Apartments ("Sycamore Creek") is a 350-unit multifamily property
located in Scottsdale, Arizona. Sycamore Creek was approximately 86% occupied as
of July 22, 1997. The property consists of 20 two story residential buildings
and two clubhouses on approximately 19 acres. Amenities include two clubhouses,
two swimming pools, two spas, two lighted tennis courts, exercise room, sauna,
washer/dryer connections, and fireplaces. The property was constructed in 1984.
6
<PAGE>
TRINITY LAKES APARTMENTS, CORDOVA, TENNESSEE
Trinity Lakes Apartments ("Trinity Lakes") is a 330-unit multifamily property
located in Cordova, Tennessee. Trinity Lakes was approximately 97% occupied as
of July 28, 1997. The property consists of 20 three story residential buildings
and one clubhouse/leasing office on approximately 26 acres. Amenities include a
leasing office/clubhouse, swimming pool, two lighted tennis courts, jacuzzi,
sauna, racquetball court, vaulted ceilings, washer/dryers and built in
microwaves in each unit, and fireplaces in select units. The property was
constructed in 1985.
The Operating Partnership expects to provide property management services for
the Probable Properties.
The closings of the Probable Properties are subject to certain contingencies and
conditions, therefore, there can be no assurance that any or all of these
transactions will be consummated, or that the final terms thereof will not
differ in material respects from those summarized above.
7
<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.
8
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
Required under Item 7(b) of Form 8-K
9
<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 Annual Report on Form 10-K for the year ended December 31, 1996,
and the Operating Partnership's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1997 and Statements of Operations for the six months ended June 30,
1997 and for the year ended December 31, 1996 have been presented as if the June
1997 Common Share Offerings and the acquisition or probable acquisition of 19
multifamily properties had occurred on June 30, 1997 with respect to the June
30, 1997 balance sheet, January 1, 1997 with respect to the statement of
operations for the six months ended June 30, 1997 and January 1, 1996 with
respect to the statement of operations for the year ended December 31, 1996.
All of these properties are included on a pro forma basis as described in Note A
of the Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1997.
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, 1996 or January 1, 1997.
The Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the accompanying Notes to the Pro Forma Condensed Consolidated
Financial Statements, the Operating Partnership's Annual Report on Form 10-K for
the year ended December 31, 1996, the Operating Partnership's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1997 and the Combined
Statements of Revenue and Certain Expenses for the acquired and for the probable
properties (included elsewhere herein).
10
<PAGE>
<TABLE>
<CAPTION>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED)
(Amounts in thousands)
Most Recent
Probable Acquired Pro
Historical Properties (A) Properties (B) Forma
------------------- ------------------ ----------------- --------------
ASSETS
<S> <C> <C> <C> <C>
Rental property, net $ 4,124,835 $ 297,502 $ 37,940 $ 4,460,277
Real estate held for disposition 3,947 -- -- 3,947
Investment in mortgage notes, net 174,764 -- -- 174,764
Cash and cash equivalents 311,358 (5,102) (37,940) 268,316
Rents receivable 2,078 -- -- 2,078
Deposits-restricted 6,112 -- -- 6,112
Escrows deposits-mortgage 28,698 -- -- 28,698
Deferred financing costs, net 14,306 -- -- 14,306
Other assets 72,636 -- -- 72,636
------------------- ------------------ ----------------- --------------
Total assets $ 4,738,734 $ 292,400 -- $ 5,031,134
=================== ================== ================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 960,879 $ 136,000 -- $ 1,096,879
Line of credit -- -- -- --
Notes, net 754,508 -- -- 754,508
Accounts payable and accrued expenses 43,001 -- -- 43,001
Accrued interest payable 22,210 -- -- 22,210
Due to affiliates 649 -- -- 649
Rents received in advance and other liabilities 31,844 -- -- 31,844
Security deposits 19,231 -- -- 19,231
Distributions payable 64,506 -- -- 64,506
------------------- ------------------ ----------------- --------------
Total liabilities 1,896,828 136,000 -- 2,032,828
------------------- ------------------ ----------------- --------------
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
------------------- ------------------ ----------------- --------------
8.60% Series D Cumulative Redeemable
Preference Units 175,000 -- -- 175,000
------------------- ------------------ ----------------- --------------
Series E Cumulative Convertible
Preference Units 99,995 -- -- 99,995
------------------- ------------------ ----------------- --------------
9.65% Series F Cumulative Redeemable
Preference Units 57,500 -- -- 57,500
------------------- ------------------ ----------------- --------------
Partners' Capital
General Partner 1,937,189 156,400 -- 2,093,589
Limited Partners 179,222 -- -- 179,222
------------------- ------------------ ----------------- --------------
Total partners' capital 2,116,411 156,400 -- 2,272,811
------------------- ------------------ ----------------- --------------
Total liabilities and partner's
capital $ 4,738,734 $ 292,400 -- $ 5,031,134
=================== ================== ================= ==============
</TABLE>
(A) Reflects the probable acquisitions of Hidden Palms, Idlewood, Riverside
Park, Sycamore Creek, Blue Swan, Autumn Creek, Governor's Point, Northwoods
Village, Preakness, Trinity Lakes, Larkspur Woods, Brookridge, Chantecleer
Lakes, Orchard of Landen, Crescent at Cherry Creek, Jefferson at Walnut
Creek and Kirby Place (collectively the "Probable Properties"). In
connection with such probable acquisitions: (i) the amounts presented
include the initial purchase price as well as subsequent closing costs
anticipated to be incurred and capital improvements anticipated to be
required as identified in the acquisition process; (ii) the expected
assumption of $136 million of mortgage indebtedness; and (iii) the expected
issuance of Common Shares with an expected value of approximately $156.4
million.
(B) Reflects the most recent multifamily property acquisitions, which include
Paces on the Green and Paces Station (collectively thest Recent Acquired
Properties").
11
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(UNAUDITED)
(Amounts in thousands except for OP Unit data)
<TABLE>
<CAPTION>
Most Recent
Probable Acquired Pro
REVENUES Historical Properties (A) Properties(B) Adjustments (C) Forma
---------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Rental Income $ 290,799 $ 19,907 $ 2,531 $ -- $ 313,237
Fee and asset management 3,110 -- -- -- 3,110
Interest income - investment in mortgage notes 8,011 -- -- -- 8,011
Interest and other income 4,404 -- -- (2,411) 1,993
---------- -------------- ------------- ------------- -----------
Total revenues 306,324 19,907 2,531 (2,411) 326,351
---------- -------------- ------------- ------------- -----------
EXPENSES
Property and maintenance 70,760 6,409 954 (926) 77,197
Real estate taxes and insurance 29,667 2,388 254 -- 32,309
Property management 11,819 -- -- 561 12,380
Fee and asset management 1,569 -- -- -- 1,569
Depreciation 62,775 -- -- 5,032 67,807
Interest:
Expense incurred 50,924 -- -- 4,420 55,344
Amortization of deferred financing costs 1,220 -- -- -- 1,220
General and administrative 6,206 -- -- -- 6,206
--------- -------------- ------------- ------------- -----------
Total expenses 234,940 8,797 1,208 9,087 254,032
--------- -------------- ------------- ------------- -----------
Income before gain on disposition of properties 71,384 $ 11,110 $ 1,323 $ (11,498) 72,319
Gain on disposition of properties 3,632 ============== ============= ============= --
--------- -----------
Net income $ 75,016 $ 72,319
========= ===========
ALLOCATION OF NET INCOME:
9 3/8% Series A Cumulative Redeemable
Preference Units $ 7,172 $ 7,172
========= ===========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 5,704 $ 5,704
========= ===========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 5,246 $ 5,246
========= ===========
8.60% Series D Cumulative Redeemable
Preference Units $ 1,714 $ 1,714
========= ===========
Series E Cumulative Convertible
Preference Units $ 615 $ 615
========= ===========
9.65% Series F Cumulative Redeemable
Preference Units $ 488 $ 488
========= ===========
General Partner 47,732 46,278
Limited Partners 6,345 5,102
--------- -----------
$ 54,077 $ 51,380
========= ===========
Net income per weighted average OP
Unit outstanding $ 0.86 $ 0.69
========= ===========
Weighted average OP Units outstanding 62,787 (D) 74,511
========= ===========
</TABLE>
(A) Reflects the results of operations for the Probable Properties. The
amounts presented represent the historical amounts for certain revenues
and expenses for the six months ended June 30, 1997.
(B) Reflects the results of operations for the 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 Most Recent Acquired Properties for the six months ended
June 30, 1997.
12
<PAGE>
(C) Reflects the following adjustments to the Probable Properties and Most
Recent Acquired Properties results of operations as follows:
<TABLE>
<CAPTION>
<S> <C>
Interest and other income:
Reduction of interest income due to the use of working capital for property acquisitions $(2,411)
=======
Property and maintenance:
The elimination of third-party management fees where the Operating Partnership is providing
onsite property management services $ (926)
=======
Property management:
Incremental cost associated with self management of the Probable Properties and Most Recent
Acquired Properties for the six months ended June 30, 1997. $ 561
=======
Depreciation:
Reflects depreciation based on the expected total investment of $335.4 million for the Probable
Properties and Most Recent Acquired Properties less 10% allocated to land and depreciated over
a 30-year life for real property. Depreciation for the Probable Properties the Most Recent
Acquired Properties reflect amounts for the six months ended June 30, 1997. $ 5,032
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for the Probable Properties. (E) $ 4,420
=======
</TABLE>
(D) Pro Forma weighted average OP Units outstanding for the six months ended
June 30, 1997 was 74.5 million, which assumes the OP Units issued to the
Company in connection with the June 1997 Common Share Offerings and the OP
units issued to the seller in connection with the acquisition of Gates of
Redmond and Gates of Redmond II were outstanding as of January 1, 1997 and
includes approximately 3.4 million OP Units issued to the Company in
connection with Common Shares issued by the Company in connection with the
acquisition of the Probable Properties. The OP Units outstanding does not
include any 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 in an acquisition.
(E) Detail of interest expense on mortgage indebtedness for the Probable
Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
- -------------------------- ------------ -------- --------
<S> <C> <C> <C>
Hidden Palms $ 4,174 6.50% $ 136
Idlewood 6,574 6.50% 214
Riverside Park 6,900 6.50% 224
Sycamore Creek 10,093 6.50% 328
Blue Swan 4,199 6.50% 136
Autumn Creek 4,958 6.50% 161
Governor's Point 13,226 6.50% 430
Northwoods Village 6,004 6.50% 195
Preakness 4,299 6.50% 140
Trinity Lakes 7,916 6.50% 257
Larkspur Woods 9,523 6.50% 309
Brookridge 8,100 6.50% 263
Cantecleer Lakes 10,203 6.50% 332
Orchard of Landen 9,229 6.50% 300
Crescent at Cherry Creek 8,335 6.50% 271
Jefferson at Walnut Creek 8,358 6.50% 272
Kirby Place 13,909 6.50% 452
-------- ------
Totals $136,000 $4,420
======== ======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1996
(UNAUDITED)
(Amounts in thousands except for OP Unit data)
Most Recent
Probable Acquired Pro
Historical Properties (A) Properties (B) Adjustments (C) Forma
---------- -------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 454,412 $ 39,251 $ 5,368 $ -- $ 499,031
Fee and asset management 6,749 -- -- -- 6,749
Interest income - investment in mortgage notes 12,819 -- -- -- 12,819
Interest and other income 4,405 -- -- (2,942) 1,463
---------- -------------- -------------- --------------- ---------
Total revenues 478,385 39,251 5,368 (2,942) 520,062
---------- -------------- -------------- --------------- ---------
EXPENSES
Property and maintenance 127,172 12,696 1,558 (1,846) 139,580
Real estate taxes and insurance 44,128 4,531 482 -- 49,141
Property management 17,512 -- -- 1,115 18,627
Fee and asset management 3,837 -- -- -- 3,837
Depreciation 93,253 -- -- 10,063 103,316
Interest:
Expense incurred 81,351 -- -- 8,840 90,191
Amortization of deferred financing costs 4,242 -- -- -- 4,242
General and administrative 9,857 -- -- -- 9,857
---------- -------------- -------------- --------------- ---------
Total expenses 381,352 17,227 2,040 18,172 418,791
---------- -------------- -------------- --------------- ---------
Income before gain on disposition of properties 97,033 $ 22,024 $ 3,328 $ (21,114) $ 101,271
============== ============== ===============
Gain on disposition of properties 22,402 --
---------- ---------
Income before extraordinary item 119,435 101,271
Extraordinary item:
Write-off of unamortized costs on
refinanced debt (3,512) --
---------- ---------
Net Income $ 115,923 $ 101,271
========== =========
ALLOCATION OF NET INCOME:
Redeemable Preference Interests $ 263 $ --
========== =========
9 3/8% Series A Cumulative Redeemable
Preference Units $ 14,345 $ 14,345
========== =========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 11,406 $ 11,406
========== =========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 3,264 $ 3,264
========== =========
General Partner 72,609 62,451
Limited Partners 14,036 9,805
---------- ---------
$ 86,645 $ 72,256
========== =========
Net income per weighted average OP
Unit outstanding $ 1.70 $ 1.14
========== =========
Weighted average OP Units outstanding 51,108 (D)63,631
========== =========
(A) Reflects the results of operations of the Probable 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 Probable Properties
for the year ended December 31, 1996.
(B) Reflects the results of operations for the 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 Most
Recent Acquired Properties for the year ended December 31, 1996.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(C) Reflects the following adjustments to the Probable Properties and Most
Recent Acquired Properties results of operations as follows:
Interest and other income:
Reduction of interest income due to the use of working capital for
property acquisitions $ (2,942)
=====================
Property and maintenance:
The elimination of third-party management fees where the Operating
Partnership is providing onsite property management services $ (1,846)
=====================
Property management:
Incremental cost associated with self management of the Probable
Properties and the Most Recent Acquired Properties for the year ended
December 31, 1996. $ 1,115
=====================
Depreciation:
Reflects depreciation based on the expected total investment of $335.4
million for the Probable Properties and the Most Recent Acquired Properties
less amounts allocated to land, generally 10%, and depreciated over a 30-year
life for real property. $ 10,063
=====================
Interest:
Expense incurred:
Interest on mortgage indebtedness for the Probable Properties. (E) $ 8,840
=====================
</TABLE>
(D) Pro Forma weighted average OP Units outstanding for the year ended December
31, 1996 was 63.6 million, which includes 51.1 million weighted average OP
Units outstanding as of December 31, 1996 plus the issuance of 9 million OP
Units issued to the Company in connection with the June 1997 Common Share
Offerings and 112,226 OP units issued to the seller in connection with the
acquisition of Gates of Redmond and Gates of Redmond II and includes
approximately 3.4 million OP Units issued in connection with the
acquisition of the Probable Properties. The OP Units outstanding does not
include any 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.
(E) Detail of interest expense on mortgage indebtedness the Probable
Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
- -------------------------- -------------------- --------------- ------------------
<S> <C> <C> <C>
Hidden Palms $ 4,174 6.50% $ 271
Idlewoood 6,574 6.50% 427
Riverside Park 6,900 6.50% 449
Sycamore Creek 10,093 6.50% 656
Blue Swan 4,199 6.50% 273
Autumn Creek 4,958 6.50% 322
Governor's Point 13,226 6.50% 860
Northwoods Village 6,004 6.50% 390
Preakness 4,299 6.50% 279
Trinity Lakes 7,916 6.50% 515
Larkspur Woods 9,523 6.50% 619
Brookridge 8,100 6.50% 527
Cantecleer Lakes 10,203 6.50% 663
Orchard of Landen 9,229 6.50% 600
Crescent at Cherry Creek 8,335 6.50% 542
Jeferson at Walnut Creek 8,358 6.50% 543
Kirby Place 13,909 6.50% 904
------------------- -----------------
Totals $ 136,000 $ 8,840
=================== =================
</TABLE>
15
<PAGE>
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
Required under Item 7(a) of Form 8-K
16
<PAGE>
Report of Independent Auditors
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Ameritech Pension Trust Probable Properties (the Probable
Properties) described in Note 2 for the year ended December 31, 1996. This
combined Statement of Revenue and Certain Expenses is the responsibility of the
Probable Properties' management. 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 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 Statement of Revenue and
Certain Expenses. An audit also includes assessing the basis of accounting used
and significant estimates made by management, as well as evaluating the overall
presentation of the 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 Probable Properties' combined revenue and expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 1 for the year ended December 31, 1996 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 15, 1997
17
<PAGE>
AMERITECH PENSION TRUST PROBABLE PROPERTIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the
Six Months Ended For the
June 30, 1997 Year Ended
(Unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $ 19,907 $ 39,251
---------------- -----------------
CERTAIN EXPENSES
Property operating and maintenance 5,585 11,064
Real estate taxes and insurance 2,388 4,531
Management fees 824 1,632
---------------- -----------------
8,797 17,227
---------------- -----------------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $ 11,110 $ 22,024
================ =================
</TABLE>
See accompanying notes.
18
<PAGE>
AMERITECH PENSION TRUST PROBABLE 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, 1996 and the six months ended June 30, 1997
(unaudited) were prepared for purposes of complying with the rules and
regulations of the Securities and Exchange Commission. The accompanying
combined financial statements consist of 17 multifamily properties for
which ERP Operating Limited Partnership (the "Operating Partnership") made
a commitment to acquire or has reached an agreement, in principle, to
acquire these properties and the Operating Partnership is in the final
stages of completing the acquisition of these properties, (the "Ameritech
Pension Trust Probable Properties"). The closing of these pending
transactions are subject to certain contingencies and conditions;
therefore, there can be no assurance that these transactions will be
consummated.
The accompanying combined financial statements are not representative of
the actual operations of the Ameritech Pension Trust Probable 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 Ameritech Pension Trust Probable 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 Ameritech Pension Trust Probable Properties.
In the preparation of the 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 revenue 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 Ameritech Pension Trust Probable Properties are expected to be managed
by two unaffiliated management companies through the acquisition date to
maintain and manage the operations of the Probable Properties. Management
fees are based upon a percentage ranging from 2.5% to 5% of total income.
Upon acquisition of the Probable Properties by the Operating Partnership,
such management contracts will be canceled at which time the Operating
Partnership will begin to manage the properties.
19
<PAGE>
AMERITECH PENSION TRUST PROBABLE PROPERTIES
NOTES TO COMBINED STATEMENTS OF
REVENUE AND CERTAIN EXPENSES (continued)
<TABLE>
<CAPTION>
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 Seller Acquired of Units Investment (B)
-------------------------- ------------------ -------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Autumn Creek Cordova, TN (A) (C) 210 $ 11,112,170
Blue Swan San Antonio, TX (A) (C) 285 9,164,020
Brookridge Centreville, VA (A) (C) 252 18,703,016
Chantecleer Lakes Naperville, IL (A) (C) 304 23,202,100
Crescent at Cherry Creek Denver, CO (A) (C) 216 17,841,960
Governor's Point Rosewell, CO (A) (C) 468 28,971,870
Hidden Palms Tampa, FL (A) (C) 256 8,678,519
Idlewood Indianapolis, IN (A) (C) 320 14,268,800
Jefferson at Walnut Creek Austin, TX (A) (C) 342 17,392,900
Kirby Place Houston, TX (A) (C) 362 29,619,460
Larkspur Woods Sacramento, CA (A) (C) 232 20,769,400
Northwoods Village Cary, NC (A) (C) 228 13,264,424
Orchard of Landen Maineville, OH (A) (C) 312 20,475,439
Preakness Antioch, TN (A) (C) 260 10,025,100
Riverside Park Tulsa, OK (A) (C) 288 14,380,400
Sycamore Creek Scottsdale, AZ (A) (C) 350 22,495,819
Trinity Lakes Cordova, TN (A) (C) 330 17,136,700
--------- ----------------
5,015 $ 297,502,097
========= ================
</TABLE>
Notes:
(A) The Ameritech Pension Trust Probable Properties have been presented on a
combined basis because all of the Probable Properties are commonly owned by
Ameritech Pension Trust.
(B) Includes initial purchase price, closing costs and amounts specified at
date of purchase for future capital improvements.
(C) The Operating Partnership has made a commitment to acquire this property or
has reached an agreement in principle and is in the final stages of
documenting the acquisition of this property.
20
<PAGE>
Report of Independent Auditors
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of Paces on the Green and Paces Station (the Properties) for the year
ended December 31, 1996. This combined Statement of Revenue and Certain Expenses
is the responsibility of the Properties' management. 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 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 made in the Statement of Revenue and
Certain Expenses. An audit also includes assessing the basis of accounting used
and significant estimates made by management, as well as evaluating the overall
presentation of the 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 Properties' combined revenue and expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 1 for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 5, 1997
21
<PAGE>
PACES ON THE GREEN AND PACES STATION
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
from January 1, 1997 For the
to August 27, 1997 Year Ended
(Unaudited) December 31, 1996
-------------------- -----------------
<S> <C> <C>
REVENUE $ 3,430 $ 5,368
Rental Income -------------------- ----------------
CERTAIN EXPENSES
Property operating and maintenance 1,086 1,344
Real estate taxes and insurance 316 482
Management fees 137 214
-------------------- ----------------
1,539 2,040
-------------------- ----------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 1,891 $ 3,328
=================== =================
</TABLE>
See accompanying notes.
22
<PAGE>
PACES ON THE GREEN AND PACES STATION
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, 1996 and the period from January 1, 1997 to
August 27, 1997 (unaudited) were prepared for purposes of complying with
the rules and regulations of the Securities and Exchange Commission. The
accompanying combined financial statements are not representative of the
actual operations of Paces on the Green and Paces Station (the
"Properties") for the periods presented nor indicative of future operations
as certain expenses, primarily depreciation, amortization and interest
expense, which may not be comparable to the expenses expected to be
incurred by ERP Operating Limited Partnership (the "Operating Partnership")
in future operations of Properties, have been excluded.
In preparation of the 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 revenue
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 Properties were managed by an unaffiliated management company through
the acquisition date to maintain and manage the operations of the
Properties. Management fees were based on 4% of total income. Property
management services are being provided by the Operating Partnership since
the date of acquisition.
Note 2--Description of Properties
The following Properties are included in the combined Statements of Revenue
and Certain Expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Seller Acquired of Units Investment (B)
------------- ---------- ------ -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Paces on the Green Atlanta, GA (A) 8/27/97 210 $ 13,061,000
Paces Station Atlanta, GA (A) 8/27/97 400 24,879,000
-------- --------------
610 $ 37,940,000
======== ==============
</TABLE>
Notes:
(A) These Properties have been presented on a combined basis because the
Properties are commonly owned by the California Policeman and Fireman's
Fund.
(B) Includes initial purchase price, closing costs and amounts specified
at date of purchase for future capital improvements.
23
<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
September 25, 1997 By: /s/ Michael J. McHugh
------------------ -------------------------------------
(Date) Michael J. McHugh
Senior Vice President, Chief Accounting
Officer and Treasurer
24
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-12213) of ERP Operating Limited Partnership and in the related
Prospectus of our reports indicated below with respect to the financial
statements indicated below included in this Current Report of ERP Operating
Limited Partnership on Form 8-K.
<TABLE>
<CAPTION>
Financial Statements Date of Auditor's Report
-------------------- --------------------------
<S> <C>
Combined Statement of Revenue and Certain August 15, 1997
Expenses of the Ameritech Pension Trust
Probable Properties for the year ended
December 31, 1996
Combined Statement of Revenue and Certain September 5, 1997
Expenses of Paces on the Green and Paces
Station for the year ended December 31, 1996
</TABLE>
Ernst & Young LLP
Chicago, Illinois
September 18, 1997
