<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
MAY 20, 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") has acquired 18 multifamily properties during the period from
January 2, 1997 through May 20, 1997. The cash portion of these transactions was
financed primarily through net proceeds received from the December 1996 Common
Share Offerings and the March 1997 Common Share Offerings. Descriptions of the
acquired properties are as follows. The Operating Partnership has also made
commitments to acquire an additional seven properties which are discussed in
Item 5 (the "1997 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 three
months ended March 31, 1997.
TOWN CENTER APARTMENTS, KINGWOOD, TEXAS
On January 2, 1997, the Operating Partnership acquired a multifamily property
located in Kingwood, Texas ("Town Center"). Town Center was approximately 95%
occupied as of May 1, 1997. The property consists of 258 units in 14 residential
buildings and one leasing office/clubhouse on approximately 10 acres. Amenities
include a clubhouse, swimming pool, picnic area with barbecue grills, covered
parking, 50 garages, full-size washers and dryers in all units, microwaves and
frost-free refrigerators in all units and fireplaces in select units. The
property was constructed in 1994. Property management services are being
provided by the Operating Partnership.
Terms of Purchase
Town Center was purchased from an unaffiliated third party for approximately
$12.8 million.
HARBORVIEW APARTMENTS, SAN PEDRO, CALIFORNIA
On January 21, 1997, the Operating Partnership acquired a multifamily property
located in San Pedro, California ("Harborview"). Harborview was approximately
100% occupied as of May 1, 1997. The property consists of 160 units in 23
residential buildings on approximately seven acres. Amenities include a
community center, swimming pool, access gates, covered parking, washer/dryer in
each unit and fireplaces in each unit. The property was constructed in 1985.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Harborview was purchased from an unaffiliated third party for approximately $19
million, which included the assumption of mortgage indebtedness of approximately
$12.7 million.
2
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THE CARDINAL APARTMENTS, GREENSBORO, NORTH CAROLINA
On January 31, 1997, the Operating Partnership acquired a multifamily property
located in Greensboro, North Carolina ("The Cardinal"). The Cardinal was
approximately 93% occupied as of May 1, 1997. The property consists of 256 units
in 11 three story residential buildings on approximately 17 acres. Amenities
include a clubhouse, swimming pool, fitness room, tennis courts, washer/dryer
hookups, microwaves, ceiling fans and mini-blinds. The property was constructed
in 1994. Property management services are being provided by the Operating
Partnership since the date of acquisition.
Terms of Purchase
The Cardinal was purchased from an unaffiliated third party for approximately
$12.8 million, which included the assumption of mortgage indebtedness of
approximately $7.5 million.
TRAILS AT DOMINION APARTMENTS, HOUSTON, TEXAS
On February 12, 1997, the Operating Partnership acquired a multifamily property
located in Houston, Texas ("Trails at Dominion"). Trails at Dominion was
approximately 91% occupied as of May 1, 1997. The property consists of 843 units
in 44 two and three story residential buildings and three one-story
office/clubhouses on approximately 55 acres. Amenities include three clubhouses,
a fitness center, five swimming pools, three spas, four tennis courts, a sand
volleyball court, fireplaces in select units, washer/dryer connections in every
unit, washer/dryers in select units and microwaves in every unit. The property
was constructed in phases between 1992 and 1995. Property management services
are being provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Trails at Dominion was purchased from an unaffiliated third party for
approximately $38.3 million, which included the assumption of mortgage
indebtedness of approximately $26.2 million.
DARTMOUTH WOODS APARTMENTS, LAKEWOOD, COLORADO
On February 25, 1997, the Operating Partnership acquired a multifamily property
located in Lakewood, Colorado ("Dartmouth Woods"). Dartmouth Woods was
approximately 96% occupied as of May 1, 1997. The property consists of 201 units
in six two, three and four story residential buildings on approximately 13
acres. Amenities include a clubhouse with fitness center, swimming pool,
jacuzzi, garages and covered parking, microwaves in every unit, washer/dryer
hookups in every unit and gas fireplaces in some units. The property was
constructed in 1990. Property management services are being provided by the
Operating Partnership since the date of acquisition.
Terms of Purchase
Dartmouth Woods was purchased from an unaffiliated third party for approximately
$12.4 million, which included the assumption of mortgage indebtedness of
approximately $4.4 million.
3
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RINCON APARTMENTS, HOUSTON, TEXAS
On February 28, 1997, the Operating Partnership acquired a multifamily property
located in Houston, Texas ("Rincon"). Rincon was approximately 100% occupied as
of May 1, 1997. The property consists of 288 units in nine three story
residential buildings, one two story clubhouse and a four-level parking
structure on approximately five acres. Amenities include a clubhouse with
business center, fitness center, spa, swimming pool, barbecue grills,
washer/dryers in all units, crown molding, microwaves and lockable storage
closets. The property was constructed in 1996. Property management services are
being provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Rincon was purchased from an unaffiliated third party for approximately $20.9
million.
WATERFORD AT THE LAKES APARTMENTS, KENT, WASHINGTON
On February 28, 1997, the Operating Partnership acquired a multifamily property
located in Kent, Washington ("Waterford at the Lakes"). Waterford at the Lakes
was approximately 97% occupied as of May 1, 1997. The property consists of 344
units in 35 two and three story residential buildings on approximately 18 acres.
Amenities include a clubhouse, two swimming pools, indoor/outdoor spa, tanning
salon, daycare center, playground, fitness room and washer/dryers in each unit.
The property was constructed in 1990. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Waterford at the Lakes was purchased from an unaffiliated third party for
approximately $18.9 million.
JUNIPERS OF YARMOUTH APARTMENTS, YARMOUTH, MAINE
On March 17, 1997, the Operating Partnership acquired a multifamily property
located in Yarmouth, Maine ("Junipers of Yarmouth"). Junipers of Yarmouth was
approximately 99% occupied as of May 1, 1997. The property consists of 225 units
in 13 two, three and four story residential buildings and one office/clubhouse
on approximately nine acres. Amenities include a clubhouse, leasing office,
swimming pool and fitness center. The property was constructed in 1970. Property
management services are being provided by the Operating Partnership since the
date of acquisition.
Terms of Purchase
Junipers of Yarmouth was purchased from an unaffiliated third party for
approximately $9.2 million.
4
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LINCOLN HARBOUR APARTMENTS, FT. LAUDERDALE, FLORIDA
On March 20, 1997, the Operating Partnership acquired a multifamily property
located in Ft. Lauderdale, Florida ("Lincoln Harbour"). Lincoln Harbour was
approximately 95% occupied as of May 1, 1997. The property consists of 324 units
in 15 three story residential buildings on approximately 14 acres. Amenities
include a clubhouse, swimming pool, fitness center, basketball court, two indoor
racquetball courts and boat dockage. The property was constructed in 1989.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Lincoln Harbour was purchased from an unaffiliated third party for approximately
$22 million, which included the assumption of mortgage indebtedness of $10
million.
SEDONA RIDGE APARTMENTS, PHOENIX, ARIZONA
On March 24, 1997, the Operating Partnership acquired a multifamily property
located in Phoenix, Arizona ("Sedona Ridge"). Sedona Ridge was approximately 94%
occupied as of May 1, 1997. The property consists of 250 units in 16 two story
residential buildings on approximately 17 acres. Amenities include two swimming
pools, two whirlpools, indoor racquetball/walleyball court, car service center,
tennis court, basketball court and sand volleyball court. The property was
constructed in 1988. Property management services are being provided by the
Operating Partnership.
Terms of Purchase
Sedona Ridge was purchased from an affiliate of the Operating Partnership,
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
("Zell/Merrill I"), for approximately $15.2 million.
KNIGHT'S CASTLE APARTMENTS, WILSONVILLE, OREGON
On March 28, 1997, the Operating Partnership acquired a multifamily property
located in Wilsonville, Oregon ("Knight's Castle"). Knight's Castle was
approximately 93% occupied as of May 1, 1997. The property consists of 296 units
in 21 two and three story residential buildings on approximately 22 acres.
Amenities include a clubhouse, fitness center, outdoor pool, whirlpool spa,
built-in closet organizer, patio/balconies, microwaves, dishwashers, free basic
cable, washer/dryers and reserved covered parking. The property was constructed
in 1991. Property management services are being provided by the Operating
Partnership since the date of acquisition.
Terms of Purchase
Knight's Castle was purchased from an unaffiliated third party for $15 million.
5
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CLUB AT THE GREEN APARTMENTS, BEAVERTON, OREGON
On March 28, 1997, the Operating Partnership acquired a multifamily property
located in Beaverton, Oregon ("Club at the Green"). Club at the Green was
approximately 93% occupied as of May 1, 1997. The property consists of 254
units in 14 two and three story residential buildings on approximately 15 acres.
Amenities include a clubhouse, indoor swimming pool, sauna, jacuzzi, weight
room, playground, washer/dryers in all units and wood burning fireplaces. The
property was constructed in 1991. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Club at the Green was purchased from an unaffiliated third party for
approximately $14.7 million.
COUNTRY GABLES APARTMENTS, BEAVERTON, OREGON
On April 4, 1997, the Operating Partnership acquired a multifamily property
located in Beaverton, Oregon ("Country Gables"). Country Gables was
approximately 95% occupied as of May 1, 1997. The property consists of 288
units in 26 residential buildings on approximately 15 acres. Amenities include
a clubhouse, indoor and outdoor swimming pools, spa, sauna, racquetball court,
fitness facility, washer/dryers, vaulted ceilings in select units and wood
burning fireplaces. The property was constructed in 1991. Property management
services are being provided by the Operating Partnership.
Terms of Purchase
Country Gables was purchased from an affiliate of the Operating Partnership,
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II
("Zell/Merrill II") for $17.0 million, which included the assumption of mortgage
indebtedness of approximately $8.6 million.
INDIGO SPRINGS APARTMENTS, KENT, WASHINGTON
On April 4, 1997, the Operating Partnership acquired a multifamily property
located in Kent, Washington ("Indigo Springs"). Indigo Springs was
approximately 99% occupied as of May 1, 1997. The property consists of 278
units in 25 two and three story residential buildings and one clubhouse on
approximately 24 acres. Amenities include a swimming pool, fitness room,
computer room, clubhouse, washer/dryers and fireplaces. The property was
constructed in 1991. Property management services are being provided by the
Operating Partnership.
Terms of Purchase
Indigo Springs was purchased from Zell/Merrill II for $12.7 million, which
included the assumption of mortgage indebtedness of approximately $8.2 million.
6
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WATERMARK SQUARE APARTMENTS, PORTLAND, OREGON
On April 4, 1997, the Operating Partnership acquired a multifamily property
located in Portland, Oregon ("Watermark Square"). Watermark Square was
approximately 95% occupied as of May 1, 1997. The property consists of 390
units in 21 garden-style residential buildings and two recreational buildings on
approximately 12 acres. Amenities include two fitness centers, two indoor
pools, spa, sauna, wood-burning fireplaces, private decks or patios and full-
size washer/dryers in each unit. The property was constructed in 1990.
Property management services are being provided by the Operating Partnership.
Terms of Purchase
Watermark Square was purchased from Zell/Merrill II for $15.8 million, which
included the assumption of mortgage indebtedness of approximately $8.7 million.
SUMMIT CHASE APARTMENTS, CORAL SPRINGS, FLORIDA
On April 29, 1997, the Operating Partnership acquired a multifamily property
located in Coral Springs, Florida ("Summit Chase"). Summit Chase was
approximately 94% occupied as of May 20, 1997. The property consists of 140
units in 10 two story garden style residential buildings on approximately nine
acres. Amenities include a leasing/management office, swimming pool, jacuzzi
and tennis court. The property was constructed in 1985. Property management
services are being provided by the Operating Partnership since the date of
acquisition.
Terms of Purchase
Summit Chase was purchased from an unaffiliated third party for approximately
$5.5 million.
WILLOW BROOK APARTMENTS, DURHAM, NORTH CAROLINA
On May 13, 1997, the Operating Partnership acquired a multifamily property
located in Durham, North Carolina ("Willow Brook"). Willow Brook was
approximately 96% occupied as of May 20, 1997. The property consists of 176
units in 13 two story and two three story residential buildings on approximately
21 acres. Amenities include a clubhouse, swimming pool, tennis courts,
basketball courts, sand volleyball courts, fireplaces and in-unit washer/dryers.
The property was constructed in 1986. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Willow Brook was purchased from an unaffiliated third party for approximately
$8.5 million.
7
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THE WILLOWS APARTMENTS, KNOXVILLE, TENNESSEE
On May 15, 1997, the Operating Partnership acquired a multifamily property
located in Knoxville, Tennessee ("The Willows"). The Willows was approximately
96% occupied as of May 1, 1997. The property consists of 250 units in 12 two
and three story residential buildings and one clubhouse on approximately 19
acres. Amenities include a swimming pool, whirlpool, tennis court, car wash,
sport court, fitness room, clubhouse and laundry facilities. The property was
constructed between 1987 and 1988. Property management services are being
provided by the Operating Partnership.
Terms of Purchase
The Willows was purchased from Zell/Merrill I for $11 million, which included
the assumption of mortgage indebtedness of approximately $8.1 million.
DISPOSITION
On March 28, 1997, the Operating Partnership sold the Plantation Apartments, a
200-unit multifamily property located in Monroe, Louisiana, for a sales price of
$4.8 million to an unaffiliated third party. For financial statement purposes,
the Operating Partnership recorded a gain of approximately $3.6 million.
8
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ITEM 5. OTHER EVENTS
On April 28, 1997, the Operating Partnership made an $88 million investment in
six mortgage loans which are collateralized by five multifamily properties.
The Operating Partnership has entered into a letter of intent to purchase an
additional seven multifamily properties from Zell Merrill I (the "1997 Probable
Properties") for an aggregate purchase price of $90.7 million, which includes
$17.1 million in cash and the assumption of mortgage indebtedness of $73.6
million. The Operating Partnership plans to fund the purchase of these
properties primarily from the Operating Partnership's working capital. The
descriptions of the 1997 Probable Properties are discussed below.
HIGHLINE OAKS APARTMENTS, DENVER, COLORADO
Highline Oaks Apartments ("Highline Oaks") is a multifamily property located in
Denver, Colorado. The property consists of 220 units in 11 residential
buildings and one community building on approximately 10 acres. Amenities
include a swimming pool, fitness room, jacuzzi, sport courts, clubhouse,
monitored alarm system, washer/dryers and fireplaces in each unit. The property
was constructed in 1986. The Operating Partnership currently provides property
management services for this property.
MOUNTAIN BROOK APARTMENTS, CHATTANOOGA, TENNESSEE
Mountain Brook Apartments ("Mountain Brook") is a multifamily property located
in Chattanooga, Tennessee. The property consists of 280 units in 19 two and
three story garden style residential buildings on approximately 43 acres.
Amenities include a clubhouse, outdoor pool and Jacuzzi, sport court, car wash,
picnic areas with grills, laundry facilities, individual alarm systems,
washer/dryer hook-ups, mountain views and wood-burning fireplaces in select
units. The property was constructed in 1987. The Operating Partnership
currently provides property management services for this property.
RIDGEMONT APARTMENTS, CHATTANOOGA, TENNESSEE
Ridgemont Apartments ("Ridgemont") is a multifamily property located in
Chattanooga, Tennessee. The property consists of 226 units in 12 two and three
story garden style residential buildings and one clubhouse on approximately 21
acres. Amenities include a swimming pool, whirlpool, fitness room, sauna,
clubhouse, tennis court, laundry facilities, washer/dryer hook-ups and wood
burning fireplaces. The property was constructed in 1988. The Operating
Partnership currently provides property management services for this property.
PRESTON BEND APARTMENTS, DALLAS, TEXAS
Preston Bend Apartments ("Preston Bend") is a multifamily property located in
Dallas, Texas. The property consists of 255 units in 10 garden style
residential buildings and one community building on approximately nine acres.
Amenities include a swimming pool, spa, car wash area, clubhouse, fitness room,
tennis court, playground, sport court, in-unit washer/dryers and fireplaces in
select units. The property was constructed in 1986. The Operating Partnership
currently provides property management services for this property.
9
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SPINNAKER COVE APARTMENTS, NASHVILLE, TENNESSEE
Spinnaker Cove Apartments ("Spinnaker Cove") is a multifamily property located
in Nashville, Tennessee. The property consists of 278 units in 16 two and three
story garden style residential buildings and one clubhouse on approximately 21
acres. Amenities include a clubhouse, fitness center, steam room, two
whirlpools, a two-level swimming pool with a fountain, two lighted tennis
courts, car wash, sand volleyball court, picnic area with grills and tables,
courtesy business center and fenced boat storage area. The property was
constructed in 1986. The Operating Partnership currently provides property
management services for this property.
WINDEMERE APARTMENTS, MESA, ARIZONA
Windemere Apartments ("Windemere") is a multifamily property located in Mesa,
Arizona. The property consists of 224 units in 18 two story residential
buildings and one clubhouse on approximately 13 acres. Amenities include a spa,
dry sauna, fitness facility, volleyball court, basketball court, playground,
clubhouse, car wash center, gas barbecue grills, two pools and two tennis
courts. The property was constructed in 1986. The Operating Partnership
currently provides property management services for this property.
WYNDRIDGE II & III APARTMENTS, MEMPHIS, TENNESSEE
Wyndridge II & III Apartments ("Wyndridge II & III") is a multifamily property
located in Memphis, Tennessee. The property consists of 568 units in 27 two and
three story residential buildings and two clubhouses on approximately 59 acres.
Amenities include three swimming pools, three whirlpools, two lighted tennis
courts, a fitness center, playground, jogging path, barbecue areas, indoor
racquetball court, sand volleyball court, car wash area and laundry facilities.
The property was constructed in 1988. The Operating Partnership currently
provides property management services for this property.
10
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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.
11
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ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
Required under Item 7(b) of Form 8-K
12
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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 three
months ended March 31, 1997.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1997 and Statements of Operations for the three months ended March 31,
1997 and for the year ended December 31, 1996 have been presented as if the
March 1997 Common Share Offerings, the acquisition of 18 multifamily properties,
the probable acquisition of seven properties and the disposition of one
multifamily property had occurred on January 1, 1997 or January 1, 1996 (or
March 31, 1997 for balance sheet purposes). Twelve of the acquired properties
are included in the Operating Partnership's Historical Balance Sheet as of March
31, 1997 and six of the properties, which were acquired subsequent to March 31,
1997, are included on a Pro Forma basis as described in Note A of the Pro Forma
Condensed Consolidated Balance Sheet as of March 31, 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 and the Operating Partnership's Quarterly
Report on Form 10-Q for the three months ended March 31, 1997 and Statements of
Revenue and Certain Expenses for certain of the acquired properties and the 1997
Probable Properties (included elsewhere herein).
13
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ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
1997
Most Recent 1997
Acquired Probable Pro
Historical Properties (A) Properties (B) Forma
---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Rental property, net $2,873,260 $ 70,914 $ 90,705 $3,034,879
Investment in mortgage notes, net 86,895 -- -- 86,895
Cash and cash equivalents 84,829 (37,262) (17,142) 30,425
Rents receivable 1,351 -- -- 1,351
Deposits--restricted 9,007 -- -- 9,007
Escrows deposits--mortgage 17,582 -- -- 17,582
Deferred financing costs, net 14,425 -- -- 14,425
Other assets 25,886 -- -- 25,886
---------- -------- -------- ----------
Total assets $3,113,235 $ 33,652 $ 73,563 $3,220,450
========== ======== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 795,723 $ 33,652 $ 73,563 $ 902,938
Line of credit -- -- -- --
Notes, net 498,918 -- -- 498,918
Accounts payable and accrued expenses 31,243 -- -- 31,243
Accrued interest payable 15,447 -- -- 15,447
Due to affiliates 656 -- -- 656
Rents received in advance and other
liabilities 18,904 -- -- 18,904
Security deposits 15,123 -- -- 15,123
Distributions payable 47,220 -- -- 47,220
---------- -------- -------- ----------
Total liabilities 1,423,234 33,652 73,563 1,530,449
---------- -------- -------- ----------
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 1,152,737 -- -- 1,152,737
Limited Partners 144,264 -- -- 144,264
---------- -------- -------- ----------
Total partners' capital 1,297,001 -- -- 1,297,001
---------- -------- -------- ----------
Total liabilities and
partners' capital $3,113,235 $ 33,652 $ 73,563 $3,220,450
========== ======== ======== ==========
</TABLE>
(A) Reflects the most recent multifamily property acquisitions, which include
Country Gables, Indigo Springs, Watermark Square, The Willows, Summit Chase
and Willow Brook (acquired in April and May 1997) (collectively the "1997
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 $33.7 million of mortgage
indebtedness secured by four of the 1997 Most Recent Acquired Properties.
(B) Reflects the probable acquisitions of Highline Oaks, Mountain Brook,
Ridgemont, Preston Bend, Spinnaker Cove, Windemere, Wyndridge II and III
(collectively the "1997 Probable Properties"). In connection with the 1997
Probable Properties the amounts presented include the initial purchase price
and the assumption of $73.6 million of mortgage indebtedness secured by the
1997 Probable Properties.
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ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 1997
(UNAUDITED)
(Amounts in thousands except for OP Unit data)
<TABLE>
<CAPTION>
1997 1997
Previously Most Recent 1997 1997
Acquired Acquired Probable Disposed Pro
Historical Properties (A) Properties (B) Properties (C) Property (D) Adjustments (E) Forma
---------- -------------- -------------- -------------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 134,235 $ 4,645 $ 2,890 $ 3,696 $ (222) $ -- $145,244
Fee and asset management 1,578 -- -- -- -- -- 1,578
Interest income - investment
in mortgage notes 3,683 -- -- -- -- -- 3,683
Interest and other income 1,891 -- -- -- -- (1,094) 797
---------- -------------- -------------- -------------- ------------ --------------- --------
Total revenues 141,387 4,645 2,890 3,696 (222) (1,094) 151,302
---------- -------------- -------------- -------------- ------------ --------------- --------
EXPENSES
Property and maintenance 32,334 1,225 935 1,186 (93) (594) 34,993
Real estate taxes and insurance 13,911 517 292 265 (14) -- 14,971
Property management 5,671 -- -- -- (12) 248 5,907
Fee and asset management 967 -- -- -- -- -- 967
Depreciation 28,877 -- -- -- (38) 2,756 31,595
Interest:
Expense incurred 23,293 -- -- -- -- 2,232 25,525
Amortization of deferred
financing costs 603 -- -- -- -- -- 603
General and administrative 2,975 -- -- -- -- -- 2,975
---------- -------------- -------------- -------------- ------------ --------------- --------
Total expenses 108,631 1,742 1,227 1,451 (157) 4,642 117,536
---------- -------------- -------------- -------------- ------------ --------------- --------
Income before gain on
disposition of properties 32,756 $ 2,903 $ 1,663 $ 2,245 $ (65) $ (5,736) 33,766
============== ============== ============== ============ ===============
Gain on disposition of
properties 3,632 --
---------- --------
Net income $ 36,388 $ 33,766
========== ========
ALLOCATION OF NET INCOME:
9 3/8 Series A Cumulative
Redeemable Preference Units $ 3,586 $ 3,586
========== ========
9 1/8 Series B Cumulative
Redeemable Preference Units $ 2,852 $ 2,852
========== ========
9 1/8 Series C Cumulative
Redeemable Preference Units $ 2,623 $ 2,623
========== ========
General Partner 23,901 21,733
Limited Partners 3,426 2,972
---------- --------
$ 27,327 $ 24,705
========== ========
Net income per weighted average
OP Unit outstanding $ 0.46 $ 0.40
========== ========
Weighted average OP Units
outstanding 59,269 (F) 61,061
========== ========
</TABLE>
/(A)/ Reflects the results of operations for Town Center, Harborview, The
Cardinal, Trails at Dominion, Dartmouth Woods, Rincon, Waterford at the
Lakes, Junipers at Yarmouth, Lincoln Harbour, Sedona Ridge, Club at the
Green and Knight's Castle (acquired from January through March 1997)
(collectively, the "1997 Previously Acquired Properties"). The amounts
presented represent the historical amounts for certain revenues and
expenses for the periods from January 1, 1997 through the respective
acquisition dates for each property.
/(B)/ Reflects the results of operations for the 1997 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 1997 Most Recent Acquired Properties for the
three months ended March 31, 1997.
/(C)/ Reflects the results of operations for the 1997 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 1997 Probable Properties for the three months ended March 31, 1997.
15
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<TABLE>
<CAPTION>
<C> <S> <C>
(D) Reflects the elimination of the results of operations for the Plantation
Apartments (the "1997 Disposed Property") for the period from January 1,
1997 through the disposition date for the property.
(E) Reflects the following adjustments to the 1997 Previously Acquired
Properties and the 1997 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. $(1,094)
=======
Property and maintenance:
The elimination of third-party management fees where the Operating
Partnership is providing onsite property management services. $ (594)
=======
Property management:
Incremental cost associated with self management of the 1997 Most Recent
Acquired Properties and the 1997 Probable Properties for the three
months ended March 31, 1997 and the 1997 Previously Acquired Properties
for the period from January 1, 1997 through the respective acquisition
dates for each property. $ 248
=======
Depreciation:
Reflects depreciation based on the expected total investment of $161.6
million for the 1997 Most Recent Acquired Properties and the 1997
Probable Properties and the expected total investment of $214.4
million for the 1997 Previously Acquired Properties less 10% allocated
to land and depreciated over a 30-year life for real property.
Depreciation for the 1997 Previously Acquired Properties reflect amounts
from January 1, 1997 through the respective acquisition dates for each
property. $ 2,756
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1997 Previously
Acquired Properties, the 1997 Most Recent Acquired Properties and the
1997 Probable Properties (G). $ 2,232
=======
(F) Pro Forma weighted average OP Units outstanding for the three months ended
March 31, 1997 was 61.1 million, which includes 61.1 million OP Units
outstanding as of March 31, 1997. The OP Units outstanding does 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.
(G) Detail of interest expense on mortgage indebtedness for certain of the 1997
Previously Acquired Properties, the 1997 Most Recent Acquired Properties and
the 1997 Probable Properties:
</TABLE>
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
-------- ------------ -------- --------
<S> <C> <C> <C>
Harborview (1) $ 12,688 8.85% $ 62
The Cardinal (1) 7,532 8.63% 52
Trails at Dominion (1) 9,100 8.78% 90
Trails at Dominion (1) 10,391 9.00% 101
Trails at Dominion (1) 6,698 7.70% 57
Dartmouth Woods (1) 4,442 8.25% 55
Lincoln Harbour (1) 10,000 6.68% 111
Highline Oaks 7,100 6.75% 120
Preston Bend 8,664 6.50% 141
Spinnaker Cove 14,205 4.45% 158
Wyndridge II & III 24,990 4.25% 265
Mountain Brook 6,553 6.25% 102
Ridgemont 5,582 6.25% 87
The Willows 8,110 9.75% 198
Country Gables 8,648 7.71% 167
Indigo Springs 8,186 8.00% 164
Watermark Square 8,708 8.68% 189
Windemere 6,469 7.00% 113
-------- ------
Totals $168,066 $2,232
======== ======
</TABLE>
(1) The amounts presented for these properties represent the historical
amounts for the periods from January 1, 1997 through the respective
acquisition dates for each property.
16
<PAGE>
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)
<TABLE>
<CAPTION>
1997 1997 1997
Acquired Probable Disposed Pro
Historical Properties (A) Properties (B) Property (C) Adjustments (D) Forma
---------- -------------- -------------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $454,412 $40,638 $14,021 $(915) $ -- $508,156
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 40,638 14,021 (915) (2,942) 529,187
-------- ------- ------- ----- -------- --------
EXPENSES
Property and maintenance 127,172 10,723 6,014 (343) (2,427) 141,139
Real estate taxes and insurance 44,128 4,841 1,112 (58) -- 50,023
Property management 17,512 -- -- (47) 1,367 18,832
Fee and asset management 3,837 -- -- -- -- 3,837
Depreciation 93,253 -- -- (156) 10,569 103,666
Interest:
Expense incurred 81,351 -- -- -- 11,873 93,224
Amortization of deferred
financing costs 4,242 -- -- -- -- 4,242
General and administrative 9,857 -- -- -- -- 9,857
-------- ------- ------- ----- -------- --------
Total expenses 381,352 15,564 7,126 (604) 21,382 424,820
-------- ------- ------- ----- -------- --------
Income before gain on
disposition of properties 97,033 $25,074 $ 6,895 $(311) $(24,324) 104,367
======= ======= ===== ========
Gain on disposition of
properties 22,402 --
-------- --------
Income before extraordinary
item 119,435 104,367
Extraordinary item:
Write-off of unamortized costs
on refinanced debt (3,512) --
-------- --------
Net income $115,923 $104,367
======== ========
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 63,009
Limited Partners 14,036 12,343
-------- --------
$ 86,645 $ 75,352
======== ========
Net income per weighted average
OP Unit outstanding $ 1.70 $ 1.42
======== ========
Weighted average OP Units
outstanding 51,108 (E) 53,029
======== ==========
</TABLE>
<PAGE>
(A) Reflects the results of operations of the 1997 Previously Acquired
Properties and the 1997 Most Recent Acquired Properties (collectively the
"1997 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 1997 Acquired Properties for the
year ended December 31, 1996.
(B) Reflects the results of operations of the 1997 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 1997 Probable Properties for the year ended December 31, 1996.
(C) Reflects the elimination of the results of operations for the 1997 Disposed
Property for the year ended December 31, 1996.
17
<PAGE>
(D) Reflects the following adjustments:
<TABLE>
<S> <C>
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 $(2,427)
=======
Property management:
Incremental cost associated with self management of the 1997
Acquired Properties and the 1997 Probable Properties for the
year ended December 31, 1996 $ 1,367
=======
Depreciation:
Reflects depreciation based on the expected total investment of
$376 million for the 1997 Acquired Properties and the 1997
Probable Properties less amounts allocated to land, generally
10%, and depreciated over a 30-year life for real property. $10,569
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1997
Acquired Properties and the 1997 Probable Properties (F) $11,873
=======
</TABLE>
(E) Pro Forma weighted average OP Units outstanding for the year ended December
31, 1996 was 53 million, which includes 51.1 million weighted average OP
Units outstanding as of December 31, 1996 plus the issuance of 1.9 million
Common Shares in connection with the March 1997 Common Share Offerings. The
OP Units outstanding does 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.
(F) Detail of interest expense on mortgage indebtedness for certain of the 1997
Acquired Properties and the 1997 Probable Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
------------------ ------------ -------- --------
<S> <C> <C> <C>
Harborview $ 12,688 8.85% $ 1,123
The Cardinal 7,532 8.63% 649
Trails at Dominion 9,100 8.78% 799
Trails at Dominion 10,391 9.00% 935
Trails at Dominion 6,698 7.70% 516
Dartmouth Woods 4,442 8.25% 366
Lincoln Harbour 10,000 6.68% 668
Highline Oaks 7,100 6.75% 479
Preston Bend 8,664 6.50% 563
Spinnaker Cove 14,205 4.45% 632
Wyndridge II & III 24,990 4.25% 1,062
Mountain Brook 6,553 6.25% 410
Ridgemont 5,582 6.25% 349
The Willows 8,110 9.75% 791
Country Gables 8,648 7.71% 667
Indigo Springs 8,186 8.00% 655
Watermark Square 8,708 8.68% 756
Windemere 6,469 7.00% 453
-------- -------
Totals $168,066 $11,873
======== =======
</TABLE>
18
<PAGE>
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
Required under Item 7(a) of Form 8-K
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying combined Statements of Revenue and Certain
Expenses of the Zell/Merrill Properties (the Properties) described in Note 2 for
each of the three years in the period ended December 31, 1996. These combined
Statements of Revenue and Certain Expenses are the responsibility of the
Properties' management. Our responsibility is to express an opinion on the
combined Statements of Revenue and Certain Expenses based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the Statements of Revenue and Certain
Expenses are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statements 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 Statements of Revenue and Certain
Expenses. We believe that our audits provide a reasonable basis for our opinion.
The accompanying combined Statements of Revenue and Certain Expenses were
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 are not
intended to be a complete presentation of the Properties' revenue and expenses.
In our opinion, the combined Statements of Revenue and Certain Expenses referred
to above present fairly, in all material respects, the revenue and certain
expenses described in Note 1 for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 25, 1997
20
<PAGE>
ZELL/MERRILL PROPERTIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the
Three Months Ended For the For the For the
March 31, 1997 Year Ended Year Ended Year Ended
(Unaudited) December 31, 1996 December 31, 1995 December 31, 1994
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUE
Rental Income $6,191 $25,212 $24,038 $23,198
------ ------- ------- -------
CERTAIN EXPENSES
Property operating and maintenance 1,744 6,899 7,018 6,782
Real estate taxes and insurance 516 2,100 2,008 2,242
Management fees 310 1,269 1,235 1,119
------ ------- ------- -------
2,570 10,268 10,261 10,143
------ ------- ------- -------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $3,621 $14,944 $13,777 $13,055
====== ======= ======= =======
</TABLE>
See accompanying notes.
21
<PAGE>
ZELL/MERRILL 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 three years ended December 31, 1996 and the three months ended March
31, 1997 (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
Zell/Merrill Properties for the periods presented as certain expenses,
which may not be comparable to the expenses to be incurred by ERP Operating
Limited Partnership and its subsidiaries (the "Operating Partnership") in
the proposed future operations of the Zell/Merrill 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 Zell/Merrill 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. Expenses are recognized in the
period in which they are incurred.
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 (A) Acquired of Units Investment (B)
------------- --------------- --------------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Sedona Ridge Phoenix, AZ Zell/Merrill I 3/24/97 250 $ 15,200,000
Country Gables Beaverton, OR Zell/Merrill II 4/4/97 288 17,000,000
Indigo Springs Kent, WA Zell/Merrill II 4/4/97 278 12,700,000
Watermark Square Portland, OR Zell/Merrill II 4/4/97 390 15,800,000
The Willows Knoxville, TN Zell/Merrill I 5/15/97 250 11,000,000
Highline Oaks Denver, CO Zell/Merrill I (C) 220 10,700,000
Mountain Brook Chattanooga, TN Zell/Merrill I (C) 280 7,600,000
Ridgemont Chattanooga, TN Zell/Merrill I (C) 226 7,600,000
Preston Bend Dallas, TX Zell/Merrill I (C) 255 11,000,000
Spinnaker Cove Nashville, TN Zell/Merrill I (C) 278 14,205,000
Windemere Mesa, AZ Zell/Merrill I (C) 224 9,600,000
Wyndridge II & III Memphis, TN Zell/Merrill I (C) 568 30,000,000
-------- --------------
3,507 $ 162,405,000
======== ==============
</TABLE>
Notes:
(A) The Zell/Merrill Properties have been presented on a combined basis because
all of the properties are commonly managed by the Operating Partnership and
because the selling entities, Zell/Merrill Lynch Real Estate Opportunity
Partners Limited Partnership ("Zell/Merrill I") and Zell/Merrill Lynch Real
Estate Opportunity Partners Limited Partnership II ("Zell/Merrill II") are
all ultimately controlled by Mr. Samuel Zell, Chairman of the Board of
Equity Residential Properties Trust (the "Company"), the general partner of
the Operating Partnership.
(B) Includes initial purchase price.
(C) The Operating Partnership has 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.
22
<PAGE>
Note 3 - Related Party Transactions
During the years ended December 31, 1996 and 1995 and during the unaudited
interim period from January 1, 1997 to March 31, 1997, the Zell/Merrill
Properties were managed by the Operating Partnership. During the year ended
December 31, 1994, all of the Zell/Merrill Properties, except for Country
Gables, Indigo Springs and Watermark Square, were managed by the Operating
Partnership. Of the management fees paid during 1994, approximately
$827,000 were paid to the Operating Partnership. The management agreements
provided for a fee based on a percentage of gross receipts, as defined by
each of the Zell/Merrill Properties' individual management agreements.
Insurance premiums of approximately $359,000, $249,000 and $268,000 for the
years ended December 31, 1994, 1995 and 1996, respectively, were incurred
from and coverage was provided by an affiliate of the Seller.
The general partner of the entities that own the Zell/Merrill Properties
are ultimately controlled by Mr. Samuel Zell, who is also Chairman of the
Board of the Company.
23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Harborview (the Property) for the year ended December 31, 1996. The Statement of
Revenue and Certain Expenses is the responsibility of the Property's management.
Our responsibility is to express an opinion on the 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 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 Property's revenue and expenses.
In our opinion, the 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
May 16, 1997
24
<PAGE>
HARBORVIEW
STATEMENT OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the
Year Ended
December 31, 1996
------------------
<S> <C>
REVENUE
Rental Income $2,325
------
CERTAIN EXPENSES
Property operating and maintenance 440
Real estate taxes and insurance 199
Management fees 74
------
713
------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $1,612
======
</TABLE>
See accompanying notes.
25
<PAGE>
HARBORVIEW
NOTES TO STATEMENT OF
REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying statement of revenue and certain expenses for the year
ended December 31, 1996 was prepared for purposes of complying with the
rules and regulations of the Securities and Exchange Commission. The
accompanying financial statement is not representative of the actual
operations of Harborview for the period presented as certain expenses,
which may not be comparable to the expenses to be incurred by ERP Operating
Limited Partnership and its subsidiaries (the "Operating Partnership") in
the proposed future operations of Harborview, have been excluded. Expenses
excluded consist of interest, depreciation and amortization, professional
fees and other costs not directly related to the future operations of
Harborview.
In preparation of the Operating Partnership's Statement 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.
Harborview had a management agreement with a management company
unaffiliated with the Operating Partnership through the acquisition date to
maintain and manage the operations of the apartment complex. Management
fees were based on 4% of gross receipts. In 1996, all of the management
fees were paid to an affiliate of the seller. Upon acquisition of
Harborview by the Operating Partnership, such management contract was
cancelled at which time the Operating Partnership began to manage
Harborview.
Note 2 - Description of Property
The following property is included in the statement of revenue and certain
expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Acquired of Units Investment (A)
---------------- ------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Harborview San Pedro, CA 1/21/97 160 $19,115,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Trails at Dominion (the Property) for the year ended December 31, 1996. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
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 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 Property's revenue and expenses.
In our opinion, the 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
May 6, 1997
27
<PAGE>
TRAILS AT DOMINION
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
February 12, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $988 $6,537
---- ------
CERTAIN EXPENSES
Property operating and maintenance 225 1,587
Real estate taxes and insurance 147 1,273
Management fees 37 326
---- ------
409 3,186
---- ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $579 $3,351
==== ======
</TABLE>
See accompanying notes.
28
<PAGE>
TRAILS AT DOMINION
NOTES TO STATEMENTS OF
REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying statements of revenue and certain expenses for the year
ended December 31, 1996 and for the period January 1, 1997 through February
12, 1997 (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
Trails at Dominion for the periods presented as certain expenses, which may
not be comparable to the expenses to be incurred by ERP Operating Limited
Partnership and its subsidiaries (the "Operating Partnership") in the
proposed future operations of Trails at Dominion, have been excluded.
Expenses excluded consist of interest, depreciation and amortization,
professional fees and other costs not directly related to the future
operations of Trails at Dominion.
In preparation of the Operating Partnership's 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.
Trails at Dominion had a management agreement with a management company
unaffiliated with the Operating Partnership through the acquisition date to
maintain and manage the operations of the apartment complex. Management
fees were based on 5% of gross receipts. In 1996, all of the management
fees were paid to an affiliate of the seller. Upon acquisition of Trails at
Dominion by the Operating Partnership, such management contract was
cancelled at which time the Operating Partnership began to manage Trails at
Dominion.
Note 2 - Description of Property
The following property is included in the statements of revenue and certain
expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Acquired of Units Investment (A)
------------------ ----------- -------- -------- --------------
<S> <C> <C> <C> <C>
Trails at Dominion Houston, TX 2/12/97 843 $38,750,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Rincon (the Property) for the year ended December 31, 1996. The Statement of
Revenue and Certain Expenses is the responsibility of the Property's management.
Our responsibility is to express an opinion on the 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 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 Property's revenue and expenses.
In our opinion, the 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
May 7, 1997
30
<PAGE>
RINCON
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
February 28, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $403 $1,183
---- ------
CERTAIN EXPENSES
Property operating and maintenance 112 425
Real estate taxes and insurance 44 123
Management fees 25 57
---- ------
181 605
---- ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $222 $ 578
==== ======
</TABLE>
See accompanying notes.
31
<PAGE>
RINCON
NOTES TO STATEMENTS OF
REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying statements of revenue and certain expenses for the year
ended December 31, 1996 and for the period January 1, 1997 through February
28, 1997 (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
Rincon for the periods presented as certain expenses, which may not be
comparable to the expenses to be incurred by ERP Operating Limited
Partnership and its subsidiaries (the "Operating Partnership") in the
proposed future operations of Rincon, have been excluded. Expenses excluded
consist of interest, depreciation and amortization, professional fees and
other costs not directly related to the future operations of Rincon.
In preparation of the Operating Partnership's 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.
Rincon had a management agreement with a management company unaffiliated
with the Operating Partnership through the acquisition date to maintain and
manage the operations of the apartment complex. Management fees were based
on 5% of gross receipts. In 1996, all of the management fees were paid to
an affiliate of the seller. Upon acquisition of Rincon by the Operating
Partnership, such management contract was cancelled at which time the
Operating Partnership began to manage Rincon.
Note 2 - Description of Property
The following property is included in the statements of revenue and certain
expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Acquired of Units Investment (A)
---------------- ----------- -------- -------- --------------
<S> <C> <C> <C> <C>
Rincon Houston, TX 2/28/97 288 $21,175,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
Rincon consists of 8 buildings which were all under development during a portion
of 1996. As a result, the accompanying statement only reflects the certain
expenses of each building subsequent to the date each building was placed in
service. The last building was placed in service in September 1996.
32
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Waterford at the Lakes (the Property) for the year ended December 31, 1996. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
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 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 Property's revenue and expenses.
In our opinion, the 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
May 12, 1997
33
<PAGE>
WATERFORD AT THE LAKES
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
February 28, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $447 $2,661
---- ------
CERTAIN EXPENSES
Property operating and maintenance 173 641
Real estate taxes and insurance 53 268
Management fees 22 132
---- ------
248 1,041
---- ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $199 $1,620
==== ======
</TABLE>
See accompanying notes.
34
<PAGE>
WATERFORD AT THE LAKES
NOTES TO STATEMENTS OF
REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying statements of revenue and certain expenses for the year
ended December 31, 1996 and for the period January 1, 1997 through
February 28, 1997 (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 Waterford at the Lakes for the periods presented as certain
expenses, which may not be comparable to the expenses to be incurred by ERP
Operating Limited Partnership and its subsidiaries (the "Operating
Partnership") in the proposed future operations of Waterford at the Lakes,
have been excluded. Expenses excluded consist of interest, depreciation and
amortization, professional fees and other costs not directly related to the
future operations of Waterford at the Lakes.
In preparation of the Operating Partnership's Statements of Revenue and
Certain Expenses in comformity 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.
Waterford at the Lakes had a management agreement with a management company
unaffiliated with the Operating Partnership through the acquisition date to
maintain and manage the operations of the apartment complex. Management
fees were based on 5% of gross receipts. In 1996, all of the management
fees were paid to an affiliate of the seller. Upon acquisition of Waterford
at the Lakes by the Operating Partnership, such management contract was
cancelled at which time the Operating Partnership began to manage Waterford
at the Lakes.
Note 2 - Description of Property
The following property is included in the statements of revenue and certain
expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Acquired of Units Investment (A)
---------------------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
Waterford at the Lakes Kent, WA 2/28/97 344 $19,152,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Lincoln Harbour (the Property) for the year ended December 31, 1996. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
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 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 Property's revenue and expenses.
In our opinion, the 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
May 16, 1997
36
<PAGE>
LINCOLN HARBOUR
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
March 20, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $817 $3,062
---- ------
CERTAIN EXPENSES
Property operating and maintenance 183 871
Real estate taxes and insurance 120 447
Management fees 27 114
---- -----
330 1,432
---- -----
REVENUE IN EXCESS OF CERTAIN
EXPENSES $487 $1,630
==== ======
</TABLE>
See accompanying notes.
37
<PAGE>
LINCOLN HARBOUR
NOTES TO STATEMENTS OF
REVENUE AND CERTAIN EXPENSES
Note 1 - Summary of Significant Accounting Policies
The accompanying statements of revenue and certain expenses for the year
ended December 31, 1996 and for the period January 1, 1997 through
March 20, 1997 (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 Lincoln Harbour for the periods presented as certain
expenses, which may not be comparable to the expenses to be incurred by ERP
Operating Limited Partnership and its subsidiaries (the "Operating
Partnership") in the proposed future operations of Lincoln Harbour, have
been excluded. Expenses excluded consist of interest, depreciation and
amortization, professional fees and other costs not directly related to the
future operations of Lincoln Harbour.
In preparation of the Operating Partnership's 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.
Lincoln Harbour had a management agreement with a management company
unaffiliated with the Operating Partnership through the acquisition date to
maintain and manage the operations of the apartment complex. Management
fees were based on 3.75% of gross receipts. In 1996, all of the management
fees were paid to an affiliate of the seller. Upon acquisition of Lincoln
Harbour by the Operating Partnership, such management contract was
cancelled at which time the Operating Partnership began to manage Lincoln
Harbour.
Note 2 - Description of Property
The following property is included in the statements of revenue and certain
expenses:
<TABLE>
<CAPTION>
Date Number Total
Property Name Location Acquired of Units Investment (A)
------------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
Lincoln Harbour Ft. Lauderdale,FL 3/20/97 324 $22,285,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
38
<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 Club at the Green and Knights Castle (the Properties) for the year
ended December 31, 1996. The 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' 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
May 9, 1997
39
<PAGE>
CLUB AT THE GREEN AND KNIGHT'S CASTLE
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the
Three Months Ended For the
March 31, 1997 Year Ended
(Unaudited) December 31, 1996
------------------ -----------------
<S> <C> <C>
REVENUE
Rental Income $1,033 $4,090
------ ------
CERTAIN EXPENSES
Property operating and maintenance 251 960
Real estate taxes and insurance 111 397
Management fees 36 142
------ ------
398 1,499
------ ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $635 $2,591
====== ======
</TABLE>
See accompanying notes.
40
<PAGE>
CLUB AT THE GREEN AND KNIGHT'S CASTLE
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 three months ended March 31, 1997
(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
Club at the Green and Knight's Castle for the periods presented as certain
expenses, which may not be comparable to the expenses to be incurred by
ERP Operating Limited Partnership and its subsidiaries (the "Operating
Partnership") in the proposed future operations of Club at the Green and
Knight's Castle, have been excluded. Expenses excluded consist of interest,
depreciation and amortization, professional fees and other costs not
directly related to the future operations of Club at the Green and Knight's
Castle.
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.
Club at the Green and Knight's Castle had a management agreement with a
management company unaffiliated with the Operating Partnership through the
acquisition dates to maintain and manage the operations of the apartment
complexes. Management fees were based on 3.5% of gross receipts. In 1996,
all of the management fees were paid to an affiliate of the seller. Upon
acquisition of Club at the Green and Knight's Castle by the Operating
Partnership, such management contract was cancelled at which time the
Operating Partnership began to manage Club at the Green and Knight's
Castle.
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 Acquired of Units Investment (A)
----------------- --------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Club at the Green Beaverton, OR 3/28/97 254 $14,925,000
Knight's Castle Wilsonville, OR 3/28/97 296 16,027,000
--- -----------
550 $30,952,000
=== ===========
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs, start up costs and amounts
specified at date of purchase for future capital improvements.
41
<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
May 29, 1997 By: /s/ Michael J. McHugh
------------ -----------------------------------------------
(Date) Michael J. McHugh
Senior Vice President, Chief Accounting Officer
and Treasurer
42
<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 Auditors Report
-------------------- -----------------------
<S> <C>
Statement of Revenue and Certain
Expenses of Harborview for the year
ended December 31, 1996 May 16, 1997
Statement of Revenue and Certain
Expenses of Trails at Dominion for the
year ended December 31, 1996 May 6, 1997
Statement of Revenue and Certain
Expenses of Rincon for the year ended
December 31, 1996 May 7, 1997
Statement of Revenue and Certain
Expenses of Waterford at the Lakes for
the year ended December 31, 1996 May 12, 1997
Statement of Revenue and Certain
Expenses of Lincoln Harbour for the
year ended December 31, 1996 May 16, 1997
Combined Statement of Revenue and
Certain Expenses of Knights Castle and
Club at the Green for the year ended
December 31, 1996 May 9, 1997
Combined Statement of Revenue and
Certain Expenses of the Zell/Merrill
Properties for the three years in the
period ended December 31, 1996 March 25, 1997
</TABLE>
Ernst & Young LLP
Chicago, Illinois
May 27, 1997
43
