<PAGE>
As filed with the Securities and Exchange Commission on August 20, 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
AUGUST 15, 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, in addition to the Properties acquired in connection
with the Merger, which closed on May 30, 1997 and in addition to the Properties
reported in the Current Report on Form 8-K, dated May 20, 1997, 16 multifamily
properties during the period from May 21, 1997 through August 15, 1997. The cash
portion of these transactions was financed primarily through the Series D
Preferred Share Offering and the June 1997 Common Share Offerings. Descriptions
of the acquired properties are as follows.
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.
CASCADE AT LANDMARK APARTMENTS, ALEXANDRIA, VIRGINIA
On May 21, 1997, the Operating Partnership acquired a multifamily property
located in Alexandria, Virginia ("Cascade at Landmark"). Cascade at Landmark was
approximately 94% occupied as of August 1, 1997. The property consists of 277
units in a 16 story high-rise building and one story clubroom/leasing office on
approximately five acres. Amenities include a clubroom, swimming pool with
jacuzzi and deck area, tennis court, 24-hour front desk service with secured
access, garage parking with secured access, laundry rooms, storage area, walk-in
closets and mini-blinds. The property was constructed in 1990. Property
management services are being provided by the Operating Partnership since the
date of acquisition.
Terms of Purchase
Cascade at Landmark was purchased from an unaffiliated third party for
approximately $23.3 million.
TAMARLANE APARTMENTS, PORTLAND, MAINE
On May 21, 1997, the Operating Partnership acquired a multifamily property
located in Portland, Maine ("Tamarlane"). Tamarlane was approximately 99%
occupied as of August 1, 1997. The property consists of 115 units in 23 two-
story residential buildings and a single-story clubhouse/leasing office on
approximately 19 acres. Amenities include a clubhouse, swimming pool,
washer/dryer hook-ups in each unit. The property was constructed in 1986.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Tamarlane was purchased from an unaffiliated third party for approximately $5.8
million.
2
<PAGE>
SABAL PALM CLUB APARTMENTS, POMPANO BEACH, FLORIDA
On May 21, 1997, the Operating Partnership acquired a multifamily property
located in Pompano Beach, Florida ("Sabal Palm Club", formerly known as Post
Crossing). Sabal Palm Club was approximately 88% occupied as of August 1, 1997.
The property consists of 416 units in 18 two story residential buildings and a
single-story clubhouse on approximately 23 acres. Amenities include two swimming
pools, two lighted tennis courts, car wash facility, detached garages, laundry
facilities and controlled access gates. The property was constructed in 1989.
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Sabal Palm Club was purchased from an unaffiliated third party for approximately
$23.6 million.
BANYAN LAKE APARTMENTS, BOYNTON BEACH, FLORIDA
On May 29, 1997, the Operating Partnership acquired a multifamily property
located in Boynton Beach, Florida ("Banyan Lake"). Banyan Lake was approximately
86% occupied as of August 1, 1997. The property consists of 288 units in 36 two
story residential buildings and a single-story leasing office on approximately
30 acres. Amenities include swimming pool with wading pool, one basketball
court, three racquetball courts, two tennis courts, a children's playground,
picnic/barbecue area, washer/dryer hook-ups in every unit, free basic cable, and
screened-in patios. The property was constructed in 1986. Property management
services are being provided by the Operating Partnership since the date of
acquisition.
Terms of Purchase
Banyan Lake was purchased from an unaffiliated third party for approximately
$13.9 million.
CLUB AT TANASBOURNE APARTMENTS, HILLSBORO, OREGON
On June 19, 1997, the Operating Partnership acquired a multifamily property
located in Hillsboro, Oregon ("Club at Tanasbourne"). Club at Tanasbourne was
approximately 97% occupied as of August 1, 1997. The property consists of 352
units in 34 two-story residential buildings and a single-story clubhouse/leasing
office on approximately 19 acres. Amenities include a clubhouse, pool/spa/sauna,
laundry center, mini-theater, computer/home office area, washer/dryer hook-ups
in every unit, fireplaces and dual vanities in some units, walk-in closets,
mirrored closet doors and vaulted ceilings and fans in the upstairs 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
Club at Tanasbourne was purchased from an unaffiliated third party for
approximately $19.8 million.
3
<PAGE>
WOOD CREEK APARTMENTS, PLEASANT HILL, CALIFORNIA
On June 26, 1997, the Operating Partnership acquired a multifamily property
located in Pleasant Hill, California ("Wood Creek"). Wood Creek was
approximately 95% occupied as of August 1, 1997. The property consists of 256
units in 49 two story residential buildings, a single story clubhouse and one
bathhouse on approximately 16 acres. Amenities include a clubhouse with lounge,
two swimming pools, wood burning fireplaces, dishwashers, washer/dryers, and
vertical and mini blinds. The property was constructed in 1987. Property
management services are being provided by the Operating Partnership since the
date of acquisition.
Terms of Purchase
Wood Creek was purchased from an unaffiliated third party for approximately
$32.3 million.
LA MIRAGE APARTMENTS, SAN DIEGO, CALIFORNIA
On July 18, 1997, the Operating Partnership acquired a multifamily property,
including adjacent undeveloped land, located in San Diego, California ("La
Mirage"). La Mirage was approximately 95% occupied as of August 1, 1997. The
property consists of 1,070 units in 58 three and four story residential
buildings and a two story office/clubhouse on approximately 75 acres. Amenities
include a two story clubhouse, a 5,000 square foot swimming pool, six spas and
three private pools, a health club/social center including a weight room,
cardiovascular facilities, and a jogging track. Other amenities include vaulted
ceilings, vertical and mini blinds, wood burning fireplaces, walk-in closets,
mirrored walls, central heating and air conditioning, washer/dryers, eight
tennis courts, three sand volleyball courts, and three pool cabanas. The
property was constructed in phases from 1988-1992. Property management services
are being provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
La Mirage was purchased from an unaffiliated third party for approximately
$128.8 million.
HUNTERS RIDGE APARTMENTS AND SOUTH POINTE APARTMENTS
ST. LOUIS, MISSOURI
On June 17, 1997, the Operating Partnership acquired two multifamily properties
located in St. Louis, Missouri ("Hunters Ridge" and "South Pointe"). Hunters
Ridge was approximately 91% occupied as of August 1, 1997. This property
consists of 198 units in 7 three story residential buildings and one
office/clubhouse on approximately 13 acres. Amenities include a clubhouse,
swimming pool, walk-in closets, patio/balconies, microwaves, vaulted ceilings in
some units, fireplaces, and washer/dryer hookups. This property was constructed
in 1987. Property management services are being provided by the Operating
Partnership since the date of acquisition.
South Pointe was approximately 97% occupied as of August 1, 1997. This property
consists of 192 units in 10 three story residential buildings on approximately
eight acres. Amenities include a clubhouse, swimming pool, walk-in closets,
patio/balconies, microwaves, dishwashers, fireplaces washer/dryer hookups, and
storage space. This property was constructed in 1986.
4
<PAGE>
Property management services are being provided by the Operating Partnership
since the date of acquisition.
Terms of Purchase
Hunters Ridge and South Pointe were purchased from an unaffiliated third party
for approximately $19.5 million, which included the assumption of mortgage
indebtedness of $11.8 million.
FOXCHASE APARTMENTS, GRAND PRAIRIE, TEXAS
On July 11, 1997, the Operating Partnership acquired a multifamily property
located in Grand Prairie, Texas ("Foxchase"). Foxchase was approximately 93%
occupied as of August 1, 1997. The property consists of 260 units in 9 two and
three story residential buildings and one office/clubhouse on approximately 15
acres. Amenities include two swimming pools, a hot tub, lighted tennis courts,
playground, fitness center, full size washer/dryer in all units, free basic
cable, cathedral ceilings in some units, fireplaces, and video rental service.
The property was constructed in 1983. Property management services are being
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Foxchase was purchased from an unaffiliated third party for approximately $8.3
million.
BAY RIDGE APARTMENTS, SAN PEDRO, CALIFORNIA
On July 31, 1997, the Operating Partnership acquired a multifamily property
located in San Pedro, California ("Bay Ridge"). Bay Ridge was approximately 98%
occupied as of August 1, 1997. The property consists of 60 units in a three
story residential building over a two story subterranean on approximately two
acres. Amenities include elevator service to all floors, a swimming pool,
laundry facilities, recreation room/lounge, covered parking, patio/balconies,
and a fitness center. The property was constructed in 1987. Property management
services are being provided by the Operating Partnership since the date of
acquisition.
Terms of Purchase
Bay Ridge was purchased from an unaffiliated third party for $4.5 million.
BOYNTON PLACE APARTMENTS, BOYNTON BEACH, FLORIDA
On August 7, 1997, the Operating Partnership acquired a multifamily property
located in Boynton Beach, Florida ("Boynton Place"). Boynton Place was
approximately 89% occupied as of August 8, 1997. The property consists of 192
units in eight three story residential buildings and one clubhouse on
approximately 12 acres. Amenities include a leasing office/fitness center,
swimming pool, lighted tennis court, full size washer/dryer rental/connections,
barbeque/picnic area, playground, half-court basketball, carwash area,
dishwashers, disposals and laundry facilities. The property was constructed in
1989. Property management services are being
5
<PAGE>
provided by the Operating Partnership since the date of acquisition.
Terms of Purchase
Boynton Place was purchased from an unaffiliated third party for $9.2 million.
THE GATES OF REDMOND APARTMENTS, REDMOND, WASHINGTON
On August 7, 1997, the Operating Partnership acquired a multifamily property
located in Redmond, Washington ("Gates of Redmond"). Gates of Redmond was
approximately 98% occupied as of August 1, 1997. The property consists of 180
units in 18 two and three story residential buildings and one office/clubhouse
on approximately nine acres. Amenities include a clubhouse, swimming pool,
woodburning fireplaces in select units, washer/dryers in all units, dishwashers,
disposals, trash compactors, and microwaves. The property was constructed in
phases from 1982-1989. Property management services are being provided by the
Operating Partnership since the date of acquisition.
Terms of Purchase
Gates of Redmond was purchased from an unaffiliated third party for $14.4
million, which included the assumption of mortgage indebtedness of $6.5 million
and the issuance of OP units with a value of $2.8 million.
THE CAMBRIDGE VILLAGE APARTMENTS, LEWISVILLE, TEXAS
On August 12, 1997, the Operating Partnership acquired a multifamily property
located in Lewisville, Texas ("Cambridge Village"). Cambridge Village was
approximately 99% occupied as of August 1, 1997. The property consists of 200
units in 23 two story residential buildings and one office/clubhouse on
approximately ten acres. Amenities include a clubhouse, swimming pool, sun deck,
picnic area, washer/dryers in all units, microwaves, large walk-in closets, wood
burning fireplaces, and Euro-style kitchens. The property was constructed in
1987. Property management services are being provided by the Operating
Partnership since the date of acquisition.
Terms of Purchase
Cambridge Village was purchased from an unaffiliated third party for $9.5
million.
THE CROSSWINDS APARTMENTS, ST. PETERSBURG, FLORIDA
On August 12, 1997, the Operating Partnership acquired a multifamily property
located in St. Petersburg, Florida ("Crosswinds"). Crosswinds was approximately
95% occupied as of August 18, 1997. The property consists of 208 units in 13 two
story residential buildings and one office/clubhouse on approximately 17 acres.
Amenities include a clubhouse with party area, swimming pool, heated jacuzzi,
lighted tennis courts, raquetball court, three acres of lake,
dishwashers/disposals, walk-in closets, and mini and vertical blinds in all
units. The property was constructed in 1986. Property management services are
being provided by the Operating Partnership since the date of acquisition.
6
<PAGE>
Terms of Purchase
Crosswinds was purchased from an unaffiliated third party for $7.3 million.
THE GATES OF REDMOND II APARTMENTS, REDMOND, WASHINGTON
On August 15, 1997, the Operating Partnership acquired a multifamily property
located in Redmond, Washington ("Gates of Redmond II"). Gates of Redmond II was
approximately 98% occupied as of August 1, 1997. The property consists of 100
units in 17 two story residential buildings and one office/clubhouse on
approximately seven acres. Amenities include a clubhouse, heated swimming pool,
playground, and fireplaces in selected units. The property was constructed in
1979. Property management services are being provided by the Operating
Partnership since the date of acquisition.
Terms of Purchase
Gates of Redmond II was purchased from an unaffiliated third party for $8
million, which included the assumption of mortgage indebtedness of $3.5 million
and the issuance of OP units with a value of $2.3 million.
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
Series D Preferred Share Offering, the June 1997 Common Share Offerings and the
acquisition of 16 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. Eight of the acquired properties are included in the Operating
Partnership's Historical Balance Sheet as of June 30, 1997 and eight of the
properties, which were acquired subsequent to June 30, 1997, 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
Statements of Revenue and Certain Expenses for certain of the acquired
properties (included elsewhere herein).
10
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
1997
Most Recent
Acquired Pro
Historical Properties (A) Forma
------------ --------------- ---------------
<S> <C> <C> <C>
ASSETS
Rental property, net $ 4,124,835 $ 191,715 $ 4,316,550
Real estate held for disposition 3,947 -- 3,947
Investment in mortgage notes, net 174,764 -- 174,764
Cash and cash equivalents 311,358 (176,556) 134,802
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 $ 15,159 $ 4,753,893
============ --------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 960,879 $ 10,025 $ 970,904
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 10,025 1,906,853
------------ --------------- ---------------
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 -- 1,937,189
Limited Partners 179,222 5,134 184,356
------------ --------------- ---------------
Total partners' capital 2,116,411 5,134 2,121,545
------------ --------------- ---------------
Total liabilities and partners'
capital $ 4,738,734 $ 15,159 $ 4,753,893
============ =============== ===============
</TABLE>
(A) Reflects the most recent multifamily property acquisitions, which include
Foxchase, La Mirage, Bay Ridge, Boynton Place, Gates of Redmond, Cambridge
Village, Crosswinds and Gates of Redmond II (acquired in July and August
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.
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>
1997 1997
Previously Most Recent
Acquired Acquired Pro
Historical Properties (A) Properties (B) Adjustments (C) Forma
---------- -------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 290,799 $ 8,187 $ 11,475 $ -- $ 310,461
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 8,187 11,475 (2,411) 323,575
---------- -------------- -------------- --------------- ---------
EXPENSES
Property and maintenance 70,760 2,460 3,449 (751) 75,918
Real estate taxes and insurance 29,667 763 1,124 -- 31,554
Property management 11,819 -- -- 492 12,311
Fee and asset management 1,569 -- -- -- 1,569
Depreciation 62,775 -- -- 4,706 67,481
Interest:
Expense incurred 50,294 -- -- 801 51,725
Amortization of deferred financing costs 1,220 -- -- 1,220
General and administrative 6,206 -- -- -- 6,206
---------- -------------- -------------- --------------- ---------
Total expenses 234,940 3,223 4,573 5,248 247,984
---------- -------------- -------------- --------------- ---------
Income before gain on disposition of properties 71,384 $ 4,964 $ 6,902 $ (7,659) 75,591
============== ============== ===============
Gain on disposition of properties 3,632 --
---------- ---------
Net income $ 75,016 $ 75,591
========== =========
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 (D) 7,525
========== =========
Series E Cumulative Convertible
Preference Units $ 615 615
========== =========
9.65% Series F Cumulative Redeemable
Preference Units $ 488 488
========== =========
General Partner $ 47,732 43,688
Limited Partners $ 6,345 5,153
---------- ---------
$ 54,077 $ 48,841
========== =========
Net income per weighted average OP
Unit outstanding $ 0.86 $ 0.69
========== =========
Weighted average OP Units outstanding 62,787 (E) 71,205
========== =========
</TABLE>
(A) Reflects the results of operations for Cascade at Landmark, Sabal Palm
Club, Tamarlane, Banyan Lake, Hunters Ridge, South Pointe, Club at
Tanasbourne and Wood Creek (acquired May and June 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
six months ended June 30, 1997.
12
<PAGE>
(C) 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 $(2,411)
=======
Property and maintenance:
The elimination of third-party management fees where the
Operating Partnership is providing onsite property management
services $ (751)
=======
Property management:
Incremental cost associated with self management of the 1997 Most
Recent Acquired Properties for the six months ended June 30,
1997 and the 1997 Previously Acquired Properties for the
period from January 1, 1997 through the respective acquisition
dates for each property. $ 492
=======
Depreciation:
Reflects depreciation based on the expected total investment of
$191.7 million for the 1997 Most Recent Acquired Properties and
the 1997 Probable Properties and the expected total investment
of $139.7 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. $ 4,706
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1997
Previously Acquired Properties and the 1997 Most Recent
Acquired Properties. (F) $ 801
=======
(D) Allocation of net income represents amounts payable to the Company as holder
of the Series D Cumulative Redeemable Preference Units for the year ended
December 31, 1996.
(E) Pro Forma weighted average OP Units outstanding for the six months ended
June 30, 1997 was 71.2 million, which assumes the OP Units issued in
connection with the June 1997 Common Share Offerings and the OP units issued
to the Seller in connection with the acquisiton of Gates of Redmond and
Gates of Redmond II were outstanding as of January 1, 1997. The OP Units
outstanding does not include any shares or OP Unit 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
Previously Acquired Properties and the 1997 Most Recent Acquired Properties.
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
---------------------------- ------------ -------- --------
<S> <C> <C> <C>
Hunters Ridge/South Pointe $11,840 7.88% $ 417
Gates of Redmond 6,507 7.35% 239
Gates of Redmond II 3,518 8.25% 145
------- ------
Totals $21,865 $ 801
======= ======
</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.
13
<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
Acquired Pro
Historical Properties (A) Adjustments (B) Forma
----------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 454,412 $ 40,694 $ -- $ 495,106
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 40,694 (2,942) 516,137
----------- -------------- --------------- ---------
EXPENSES
Property and maintenance 127,172 12,312 (1,498) 137,986
Real estate taxes and insurance 44,128 4,111 -- 48,239
Property management 17,512 -- 1,017 18,529
Fee and asset management 3,837 -- -- 3,837
Depreciation 93,253 -- 9,942 103,195
Interest:
Expense incurred 81,351 -- 1,701 83,052
Amortization of deferred financing costs 4,242 -- -- 4,242
General and administrative 9,857 -- -- 9,857
----------- -------------- --------------- ---------
Total expenses 381,352 16,423 11,162 408,937
----------- -------------- --------------- ---------
Income before gain on disposition of properties 97,033 $ 24,271 $ (14,104) 107,200
============== ===============
Gain on disposition of properties 22,402 --
----------- ---------
Income before extraordinary item 119,435 107,200
Extraordinary item:
Write-off of unamortized costs on refinanced
debt (3,512) --
----------- ---------
Net income $ 115,923 $ 107,200
=========== =========
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
=========== =========
8.6% Series D Cumulative Redeemable
Preference Units $ -- (C) $ 15,050
=========== =========
General Partner 72,609 54,081
Limited Partners 14,036 9,054
----------- ---------
$ 86,645 $ 63,135
=========== =========
Net income per weighted average OP
Unit outstanding $ 1.70 $ 1.05
=========== =========
Weighted average OP Units outstanding 51,108 (C) 60,212
=========== =========
</TABLE>
(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.
14
<PAGE>
(B) Reflects the following adjustments:
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 $(1,498)
=======
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 $ 1,017
=======
Depreciation:
Reflects depreciation based on the expected total investment of
$331.4 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. $ 9,942
=======
Interest:
Expense incurred:
Interest on mortgage indebtedness for certain of the 1997
Acquired Properties. (E) $ 1,701
=======
(C) Allocation of net income represents amounts payable to the Company as holder
of the Series D Cumulative Redeemable Preference Units for the year ended
December 31, 1996.
(D) Pro Forma weighted average OP Units outstanding for the year ended December
31, 1996 was 60.2 million, which includes 51.1 million weighted average OP
Units outstanding as of December 31, 1996 plus the issuance of 9 million
Common Shares 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. 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.
(E) Detail of interest expense on mortgage indebtedness for certain of the 1997
Acquired Properties:
<TABLE>
<CAPTION>
Mortgage Interest Interest
Property Indebtedness Rate Expense
---------------------------- ------------ -------- --------
<S> <C> <C> <C>
Hunters Ridge / South Pointe $11,840 7.88% $ 933
Gates of Redmond 6,507 7.35% 478
Gates of Redmond II 3,518 8.25% 290
------- ------
Totals $21,865 $1,701
======= ======
</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 Statement of Revenue and Certain Expenses of
Cascade at Landmark (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
principles 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
July 17, 1997
17
<PAGE>
CASCADE AT LANDMARK
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
May 21, 1997 Year Ended
(Unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $1,212 $3,001
------ ------
CERTAIN EXPENSES
Property operating and maintenance 384 981
Real estate taxes and insurance 96 256
Management fees 61 160
------ ------
541 1,397
------ ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $ 671 $1,604
====== ======
</TABLE>
See accompanying notes.
18
<PAGE>
CASCADE AT LANDMARK
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 the period from January 1, 1997 through May 21,
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
Cascade at Landmark 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 Cascade at Landmark, have been excluded.
Expenses excluded consist of interest, depreciation and amortization,
professional fees and other costs not directly related to the future
operations of Cascade at Landmark.
In preparation of the Property'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 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.
Cascade at Landmark 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 total income. Of the management fees paid in 1996,
$160,288 were paid to an affiliate of the property owner. Upon acquisition
of Cascade at Landmark by the Operating Partnership, such management
contract was cancelled at which time the Operating Partnership began to
manage Cascade at Landmark.
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>
Cascade at Landmark Alexandria, VA 5/21/97 277 $23,334,250
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs and amounts
specified at date of purchase for future capital improvements.
19
<PAGE>
Report of Independent Auditors
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Sabal Palm Club (formerly known as Post Crossing (Pompano)) (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
July 2, 1997
20
<PAGE>
SABAL PALM CLUB
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
May 21, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $1,596 $3,844
------ ------
CERTAIN EXPENSES
Property operating and maintenance 431 1,075
Real estate taxes and insurance 229 548
Management fees 79 188
------ ------
739 1,811
------ ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $ 857 $2,033
====== ======
</TABLE>
See accompanying notes.
21
<PAGE>
SABAL PALM CLUB
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 the period from January 1, 1997 through May 21,
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
Sabal Palm Club 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 Sabal Palm Club, have been excluded. Expenses
excluded consist of interest, depreciation and amortization, professional
fees and other costs not directly related to the future operations of Sabal
Palm Club.
In preparation of the Property'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 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.
Sabal Palm Club 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 total income. Of the management fees paid in 1996,
$188,092 were paid to an affiliate of the property owner. Upon acquisition
of Sabal Palm Club by the Operating Partnership, such management contract
was cancelled at which time the Operating Partnership began to manage Sabal
Palm Club.
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>
Sabal Palm Club Pompano Beach, FL 5/21/97 416 $23,840,350
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs and amounts specified at
date of purchase for future capital improvements.
22
<PAGE>
Report of Independent Auditors
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
Wood Creek (Pleasant Hill) (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
July 23, 1997
23
<PAGE>
WOOD CREEK
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
(amounts in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1997 - For the
June 26, 1997 Year Ended
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
REVENUE
Rental Income $1,718 $3,385
------ ------
CERTAIN EXPENSES
Property operating and maintenance 378 655
Real estate taxes and insurance 157 318
Management fees 62 119
------ ------
597 1,092
------ ------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $1,121 $2,293
====== ======
</TABLE>
See accompanying notes.
24
<PAGE>
WOOD CREEK
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 from January 1, 1997 through
June 26, 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 Wood Creek 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 Wood Creek, have been excluded. Expenses
excluded consist of interest, depreciation and amortization, professional
fees and other costs not directly related to the future operations of Wood
Creek.
In preparation of the Property'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 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.
Wood Creek 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 total income. Of the management fees paid in 1996,
$119,000 were paid to an affiliate of the property owner. Upon acquisition
of Wood Creek by the Operating Partnership, such management contract was
cancelled at which time the Operating Partnership began to manage Wood
Creek.
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>
Wood Creek Pleasant Hill, CA 6/26/97 256 $32,393,000
</TABLE>
Notes:
(A) Includes initial purchase price, closing costs and amounts specified at
date of purchase for future capital improvements.
25
<PAGE>
Report of Independent Auditors
The Partners of
ERP Operating Limited Partnership
We have audited the accompanying Statement of Revenue and Certain Expenses of
LaMirage (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
July 25, 1997
26
<PAGE>
LA MIRAGE
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 $6,604 $12,760
------ -------
CERTAIN EXPENSES
Property operating and maintenance 1,690 3,461
Real estate taxes and insurance 581 1,012
Management fees 189 371
------ -------
2,460 4,844
------ -------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $4,144 $ 7,916
====== =======
</TABLE>
See accompanying notes.
27
<PAGE>
LA MIRAGE
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 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 financial
statements are not representative of the actual operations of La Mirage 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 La Mirage, have been excluded. Expenses excluded consist of
interest, depreciation and amortization, professional fees and other costs
not directly related to the future operations of La Mirage.
In preparation of the Property'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 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.
La Mirage 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% of total income. Of the management fees paid in 1996, $353,393 were
paid to an affiliate of the property owner. Upon acquisition of La Mirage
by the Operating Partnership, such management contract was cancelled at
which time the Operating Partnership began to manage La Mirage.
Note 2 - Description of Property
The following property is included in the statements of revenue and
certain expenses:
Date Number Total
Property Name Location Acquired of Units Investment(A)
------------------- -------------- -------- -------- -------------
La Mirage San Diego, CA 7/18/97 1,070 $129,300,000
Notes:
(A) Includes initial purchase price, closing costs and amounts specified
at date of purchase for future capital improvements.
28
<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
August 19, 1997 By: /s/ Michael J. McHugh
--------------- -------------------------------
(Date) Michael J. McHugh
Senior Vice President, Chief Accounting
Officer and Treasurer
29
<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 Cascade at
Landmark for the year ended December 31, 1996 July 17, 1997
Statement of Revenue and Certain Expenses of Sabal Palm
Club (formerly known as Post Crossing (Pompano)) for the July 2, 1997
year ended December 31, 1996
Statement of Revenue and Certain Expenses of Wood Creek
(Pleasant Hill) for the year ended December 31, 1996 July 23, 1997
Statement of Revenue and Certain Expenses of LaMirage for
the year ended December 31, 1996 July 25, 1997
</TABLE>
Ernst & Young LLP
Chicago, Illinois
August 15, 1997
