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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24920
ERP OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
ILLINOIS 36-3894853
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) 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)
Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act: None
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ________
-------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates by reference the Registrant's Current Report on Form 8-K
dated March 1, 1996 and filed on March 7, 1996.
Part III incorporates by reference the Equity Residential Properties Trust
Annual Report on Form 10-K for the year ended December 31, 1996 relating to Part
III, Item 11. Executive Compensation.
Part IV incorporates by reference the following exhibits as filed with the
Equity Residential Properties Trust's Form S-11 on May 21, 1993 (Registration
No. 33-63158) and as amended thereafter: Exhibits 2.1, 2.2, 10.1, 10.1A, 10.12
and 10.14.
Part IV incorporates by reference the following exhibits as filed with the
Equity Residential Properties Trust's Form S-11 on November 23, 1993
(Registration No. 33-72080) and as amended thereafter: Exhibits 10.15, 10.15A,
10.16 and 10.16A.
Part IV incorporates by reference the following exhibits as filed with the
Registrant's Form 10 on October 7, 1994 (Registration No. 0-24920) and as
amended thereafter: Exhibits 4.1, 4.2, 10.1B, 10.13, 10.17 and 10.18.
Part IV incorporates by reference the following exhibit as filed with the
Registrant's Form 10-Q for the quarter ended September 30, 1995 on November 9,
1995 and as amended thereafter: Exhibit 10.1C.
Part IV incorporates by reference the following exhibit as filed with the
Registrant's Form 10-K for the year ended December 31, 1996 on March 18, 1996
and as amended thereafter: Exhibit 4.3.
2
ERP OPERATING LIMITED PARTNERSHIP
TABLE OF CONTENTS
PART I. PAGE
----
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 29
Item 6. Selected Financial Data 29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 41
PART III.
Item 10. Trustees and Executive Officers of the Registrant 42
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and Management 46
Item 13. Certain Relationships and Related Transactions 49
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 52
3
PART I
ITEM 1. BUSINESS
GENERAL
ERP Operating Limited Partnership, an Illinois limited partnership formed
in May 1993 (the "Operating Partnership"), is managed by Equity Residential
Properties Trust, a Maryland real estate investment trust (the "Company"), its
general partner. The Company is a self-administered and self-managed equity
real estate investment trust ("REIT"). The Company was organized in March 1993
and commenced operations on August 18, 1993 upon completion of its initial
public offering (the "IPO") of 13,225,000 common shares of beneficial interest,
$0.01 par value per share ("Common Shares"). The Company was formed to continue
the multifamily residential business objectives and acquisition strategies of
certain affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board
of Trustees of the Company. These entities had been engaged in the acquisition,
ownership and operation of multifamily residential properties since 1969.
The Company, through its subsidiaries, which include the Operating
Partnership, Equity Residential Properties Management Limited Partnership and
Equity Residential Properties Management Limited Partnership II (collectively,
the "Management Partnerships"), a series of partnerships (the "Financing
Partnerships") and limited liability companies ("LLCs") which beneficially own
certain properties encumbered by mortgage indebtedness, is the successor to the
multifamily residential property business of Equity Properties Management Corp
("EPMC"), an entity controlled by Mr. Zell and a series of other entities which
owned 69 of the multifamily residential properties contributed at the time of
the Company's IPO (the "Initial Properties").
As of December 31, 1996, the Operating Partnership owned or had interests
in 239 multifamily properties of which it controlled a portfolio of 218
multifamily properties (individually, a "Property" and collectively, the
"Properties") containing 67,705 units, including 61 of the Initial Properties.
The remaining 21 properties represent an investment in partnership interests and
subordinated mortgages collateralized by 21 properties (the "Additional
Properties") containing 3,896 units, which units are property managed by a third
party unaffiliated entity. The Operating Partnership's Properties and the
Additional Properties are located throughout the United States in the following
states: Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, Nevada, North
Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia and
Washington. In addition, Equity Residential Properties Management Corp.
("Management Corp.") and Equity Residential Properties Management Corp. II
("Management Corp. II") also provide residential property and asset management
services to 40 properties containing 13,054 units owned by affiliated entities.
The Company is, together with the Operating Partnership, one of the largest
publicly traded REITs (based on the aggregate market value of its outstanding
Common Shares) and is the largest publicly traded REIT owner of multifamily
properties (based on the number of apartment units owned and total revenues
earned).
4
PART I
Since the Company's IPO and through December 31, 1996, the Operating
Partnership has acquired direct or indirect interests in 160 properties (which
included the debt collateralized by six Properties) containing 49,679 units in
the aggregate for a total purchase price of approximately $2.4 billion,
including the assumption of approximately $554.2 million of mortgage
indebtedness. The Operating Partnership also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. Since the IPO, the Operating Partnership has disposed of
11 of its properties containing 3,699 units for a total sales price of
approximately $93.3 million and the release of mortgage indebtedness in the
amount of $20.5 million.
The Company's corporate headquarters and executive offices are located in
Chicago, Illinois. In addition, the Company has regional operations centers in
Chicago, Illinois; Dallas, Texas; Denver, Colorado; Seattle, Washington; Tampa,
Florida and Bethesda, Maryland and area offices in Atlanta, Georgia; Las Vegas,
Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio and Houston, Texas;
Ypsilanti, Michigan; Raleigh, North Carolina; Ft. Lauderdale, Florida and
Irvine, California. The Company has approximately 2,189 full-time employees
(1,944 of which are on site at the Properties). Each of the Operating
Partnership's Properties is directed by an on-site manager, who supervises the
on-site employees and is responsible for the day-to-day operations of the
Property. The manager is generally assisted by a leasing administrator and/or
property administrator. In addition, a maintenance director at each Property
supervises a maintenance staff whose responsibilities include a variety of
tasks, including responding to service requests, preparing vacant apartments for
the next resident and performing preventive maintenance procedures year-round.
BUSINESS OBJECTIVES AND OPERATING STRATEGIES
The Operating Partnership seeks to maximize both current income and long-
term growth in income, thereby increasing: (i) the value of the Properties;
(ii) distributions on a per limited partnership interest ("OP Unit") basis; and
(iii) partners' value.
The Operating Partnership's strategies for accomplishing these objectives
are:
. maintaining and increasing Property occupancy while increasing rental rates;
. controlling expenses, providing regular preventive maintenance, making
periodic renovations and enhancing amenities;
. pursuing acquisitions that: (i) are available at prices below estimated
replacement costs; (ii) have potential for rental rate and/or occupancy
increases; (iii) have attractive locations in their respective markets; and
(iv) provide anticipated total returns that will increase the Operating
Partnership's distributions per OP Unit.
The Operating Partnership is committed to tenant satisfaction by striving
to anticipate industry trends and implementing strategies and policies
consistent with providing quality tenant
5
PART I
services. In addition, the Operating Partnership continuously surveys rental
rates of competing properties and conducts satisfaction surveys of residents to
determine the factors they consider most important in choosing a particular
apartment unit.
ACQUISITION STRATEGIES
The Operating Partnership anticipates that future property acquisitions
will be located in the continental United States. Management will continue to
use market information to evaluate acquisition opportunities. The Operating
Partnership's market data base allows it to review the primary economic
indicators of the markets where the Operating Partnership currently manages
Properties and where it expects to expand its operations. Acquisitions may be
financed from various sources of capital, which may include undistributed funds
from operations ("FFO"), sales of Properties and collateralized and
uncollateralized borrowings. In addition, the Operating Partnership may acquire
additional multifamily properties in transactions that include the issuance of
OP Units as consideration for the acquired properties. Such transactions may, in
certain circumstances, partially defer the sellers' tax consequences.
When evaluating potential acquisitions, the Operating Partnership will
consider: (i) the geographic area and type of community; (ii) the location,
construction quality, condition and design of the property; (iii) the current
and projected cash flow of the property and the ability to increase cash flow;
(iv) the potential for capital appreciation of the property; (v) the terms of
resident leases, including the potential for rent increases; (vi) the potential
for economic growth and the tax and regulatory environment of the community in
which the property is located; (vii) the occupancy and demand by residents for
properties of a similar type in the vicinity (the overall market and submarket);
(viii) the prospects for liquidity through sale, financing or refinancing of the
property; and (ix) competition from existing multifamily properties and the
potential for the construction of new multifamily properties in the area. The
Operating Partnership expects to purchase multifamily properties with physical
and market characteristics similar to the Properties.
DISPOSITION STRATEGIES
Management will use market information to evaluate potential dispositions.
Factors the Operating Partnership considers in deciding whether to dispose of
its Properties include the following: (1) the amount of increases in new
construction; (2) areas where the economy is expected to decline substantially;
and (3) markets where the Operating Partnership does not intend to establish
long-term concentrations. The Operating Partnership will reinvest the proceeds
received from property dispositions to fund property acquisitions. In addition,
when feasible the Operating Partnership will structure these transactions as tax
deferred exchanges.
6
PART I
FINANCING STRATEGIES
Equity Offerings
- ----------------
In January 1994, the Company completed a public offering of 5,750,000
Common Shares (the "Second Public Offering") at $29.00 per share and contributed
net proceeds to the Operating Partnership of approximately $157.4 million in
connection therewith.
In June 1994, the Company concluded a private placement of 1,569,270 Common
Shares to six accredited institutional investors (the "Private Equity Offering")
and contributed proceeds to the Operating Partnership of approximately $47.0
million in connection therewith. The prices at which the Common Shares were
sold ranged from $29.43 to $32.87.
In July 1994, the Company completed a public offering of 9,200,000 Common
Shares (the "Third Public Offering") at $31.25 per share and contributed net
proceeds to the Operating Partnership of approximately $271.7 million in
connection therewith.
In September 1994, the Company registered 5,000,000 Common Shares pursuant
to an equity shelf registration statement (the "Equity Shelf Registration") of
which 2,735,320 registered Common Shares were sold in separate transactions
completed in October 1994 (collectively, the "Shelf Offering"). The Company
contributed net proceeds to the Operating Partnership of approximately $81
million in connection therewith. The prices at which the Common Shares were
sold ranged from $29.34 to $30.17.
In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share
(liquidation preference $25 per share) (the "Series A Preferred Shares"),
pursuant to a $250 million shelf registration (the "Preferred Shelf
Registration"), at $25 per share. The Company raised gross proceeds of $153
million from this offering (the "Series A Preferred Share Offering"). The net
proceeds of approximately $148.2 million from the Series A Preferred Share
Offering have been contributed by the Company to the Operating Partnership in
exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative
redeemable preference units (the "Series A Cumulative Redeemable Preference
Units").
On September 11, 1995, the Company filed with the Securities and Exchange
Commission (the "SEC") a Form S-3 Registration Statement to register up to $500
million of non-voting preferred shares of beneficial interest, $0.01 par value
per share ("Preferred Shares"), Common Shares and depositary shares, pursuant to
a shelf offering (the "Second Shelf Registration").
In November 1995, the Company sold 5,000,000 depositary shares (the "Series
B Depositary Shares") pursuant to the Second Shelf Registration. Each Series B
Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series B
Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value
per share (the "Series B Preferred Shares"). The liquidation preference of each
of the Series B Preferred Shares is $250.00 (equivalent to $25 per Series B
Depositary Share). The Company raised gross proceeds of $125 million from the
sale of the Series
7
PART I
B Depositary Shares. The net proceeds of approximately $121 million have been
contributed by the Company to the Operating Partnership in exchange for 500,000
of the Operating Partnership's 9 1/8% cumulative redeemable preference units
(the "Series B Cumulative Redeemable Preference Units").
In January 1996, the Company completed an offering of 1,725,000 registered
Common Shares, which were sold at a net price of $29.375 per share (the "January
1996 Common Share Offering") and contributed to the Operating Partnership net
proceeds of approximately $50.7 million in connection therewith. In February
1996, the Company completed an offering of 2,300,000 registered Common Shares,
which were sold at a net price of $29.50 per share (the "February 1996 Common
Share Offering") and contributed to the Operating Partnership net proceeds of
approximately $67.8 million in connection therewith.
On May 21, 1996, the Company completed an offering of 2,300,000 publicly
registered Common Shares, which were sold at a net price of $30.50 per share.
On May 28, 1996, the Company completed the sale of 73,287 publicly registered
Common Shares to employees of the Company and to employees of Equity Group
Investments, Inc. ("EGI") and certain of their respective affiliates and
consultants at a net price equal to $30.50 per share. On May 30, 1996, the
Company completed an offering of 1,264,400 publicly registered Common Shares,
which were sold at a net price of $30.75 per share. The Company contributed to
the Operating Partnership net proceeds of approximately $111.3 million in
connection with the sale of the 3,637,687 Common Shares mentioned above
(collectively, the "May 1996 Common Share Offerings").
In September 1996, the Company sold 4,600,000 depositary shares (the
"Series C Depositary Shares") pursuant to the Second Shelf Registration. Each
Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8%
Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par
value per share (the "Series C Preferred Shares"). The liquidation preference of
each of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C
Depositary Share). The Company raised gross proceeds of $115 million from this
offering (the "Series C Preferred Share Offering"). The net proceeds of
approximately $111.4 million from the Series C Preferred Share Offering were
contributed by the Company to the Operating Partnership in exchange for 460,000
of the Operating Partnership's 9 1/8% cumulative redeemable preference units
(the "Series C Cumulative Redeemable Preference Units").
On September 18, 1996, the Company filed with the SEC a Form S-3
Registration Statement to register $500 million of equity securities (the "1996
Equity Shelf Registration").
Also in September 1996, the Company completed the sale of 2,272,728
publicly registered Common Shares which were sold at a net price of $33 per
share. The Company contributed to the Operating Partnership net proceeds of
approximately $75 million in connection with this offering (the "September 1996
Common Share Offering").
In November, 1996, the Company issued 39,458 Common Shares pursuant to the
1996 Nonqualified Employee Share Purchase Plan at a net price of $30.44 and
received net proceeds of approximately $1.2 million.
8
PART I
In December 1996, the Company completed offerings of 4,440,000 publicly
registered Common Shares, which were sold to the public at a price of $41.25 per
share (the "December 1996 Common Share Offerings"). The Company contributed to
the Operating Partnership net proceeds of approximately $177.4 million.
Debt Offerings
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In May 1994, the Operating Partnership issued $125 million of 8 1/2%
unsecured notes due May 15, 1999 (the "1999 Notes") guaranteed by the Company in
a private placement (the "Debt Offering") to qualified institutional buyers as
defined in Rule 144A of the Securities Act of 1933, as amended (the "Securities
Act"). The Operating Partnership received net proceeds of $122.9 million in
connection with the Debt Offering.
In December 1994, the Operating Partnership registered $500 million in debt
securities pursuant to a debt shelf registration statement (the "Debt Shelf
Registration") of which $100 million of floating rate notes due December 22,
1997 (the "Floating Rate Notes") were issued by the Operating Partnership on
December 21, 1994 (the "Public Debt Offering"). The Operating Partnership
received net proceeds of $98.6 million in connection with the Public Debt
Offering. The Floating Rate Notes bear interest at three month London Interbank
Offered Rate ("LIBOR") plus 0.75%.
In April 1995, the Operating Partnership issued $125 million of 7.95%
unsecured fixed rate notes (the "2002 Notes") pursuant to the Debt Shelf
Registration in a public debt offering (the "Second Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $123.1 million in
connection with the Second Public Debt Offering.
In August 1996, the Operating Partnership issued $150 million of 7.57%
unsecured fixed rate notes (the "2026 Notes ") in connection with the Debt Shelf
Registration in a public debt offering (the "Third Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $149 million in
connection with this issuance.
On September 18, 1996, the Operating Partnership filed with the SEC a Form
S-3 Registration Statement to register $500 million of debt securities (the
"1996 Debt Shelf Registration").
CREDIT FACILITY
The Operating Partnership had a $250 million unsecured line of credit with
Wells Fargo Realty Advisors Funding Incorporated, as agent, through November 14,
1996. On November 15, 1996, the Operating Partnership completed an agreement
with Morgan Guaranty Trust Company of New York ("Morgan Guaranty") and Bank of
America Illinois ("Bank of America") to provide the Operating Partnership a $250
million unsecured line of credit. This new line of credit matures in November
1999 and borrowings generally will bear interest at a per annum rate of one,
two, three
9
PART I
and six month LIBOR, plus 0.75%, and is subject to an annual facility fee of
$500,000. As of December 31, 1996, there were no amounts outstanding on this
line of credit.
RECENT DEVELOPMENTS
In January 1997, the Operating Partnership acquired three properties from
unaffiliated third parties for a total purchase price of approximately $44.6
million, which included the assumption of mortgage indebtedness of approximately
$20.2 million. These properties were Town Center, a 258-unit property located
in Kingwood, Texas; Harborview, a 160-unit property located in San Pedro,
California, and The Cardinal, a 256-unit property located in Greensboro, North
Carolina.
On January 16, 1997 the Company entered into an Agreement and Plan of
Merger regarding the planned acquisition of the multifamily property business of
Wellsford Residential Property Trust ("Wellsford"), a Maryland real estate
investment trust, through the tax free merger of the Company and Wellsford (the
"Merger"). The transaction is valued at approximately $1 billion and includes
75 multifamily properties containing 19,004 units. In the Merger, each
outstanding common share of beneficial interest of Wellsford will be converted
into .625 of a Common Share of the Company, assuming the market price of a
Common Share remains in excess of $40. The Merger plans call for the issuance
of approximately 10.7 million new common shares valued at approximately $464
million based on the Company's January 16, 1997 closing price of $43.375 and
requires the assumption of all Wellsford outstanding debt of approximately $332
million and exchange of approximately $158 million in preferred shares.
In February 1997, the Operating Partnership acquired four properties from
unaffiliated third parties for a total purchase price of approximately $90.5
million, which included the assumption of mortgage indebtedness of approximately
$30.6 million. These properties were Trails at Dominion, a 843-unit multifamily
property located in Houston, Texas; Dartmouth Woods, a 201-unit property located
in Denver, Colorado; Rincon Apartments, a 288-unit property located in Houston,
Texas and Waterford at the Lakes, a 344-unit property located in Kent,
Washington.
In March 1997, the Operating Partnership acquired one property from an
unaffiliated third party for a total purchase price of approximately $9.15
million. This property was Junipers at Yarmouth, a 225-unit property located in
Yarmouth, Maine.
As of March 20, 1997, the Company completed offerings of 938,800 publicly
registered Common Shares, which were sold at a net price of $46 per share (the
"March 1997 Common Share Offerings") and contributed to the Operating
Partnership net proceeds of approximately $43.2 million in connection therewith.
COMPETITION
All of the Properties are located in developed areas that include other
multifamily properties. The number of competitive multifamily properties in a
particular area could have a material effect on the Operating Partnership's
ability to lease units at the Properties or at any newly acquired properties and
on the rents charged. The Operating Partnership may be competing with other
entities that have greater resources than the Operating Partnership and whose
managers have more experience than the Operating Partnership's officers and
trustees. In addition, other forms of multifamily properties, including
multifamily properties and manufactured housing controlled by Mr. Zell, and
single-family housing, provide housing alternatives to potential residents of
multifamily properties.
10
PART I
ITEM 2. THE PROPERTIES
As of December 31, 1996, the Operating Partnership controlled a portfolio
of 218 multifamily properties located in 30 states consisting of 5,198 buildings
containing 67,705 apartment units. The average number of units per Property was
approximately 311. The units are typically contained in a series of two-story
buildings. The Properties contain an aggregate of approximately 59.5 million
rentable square feet, with an average unit size of 878 square feet. The average
rent per unit was $673, and the average rent per square foot was $0.77.
As of December 31, 1996, the Properties had an average occupancy rate of
95%. Tenant leases are generally year-to-year and require security deposits.
The Properties typically provide residents with attractive amenities, which may
include a clubhouse, swimming pool, laundry facilities and cable television
access. Certain Properties offer additional amenities such as saunas,
whirlpools, spas, sports courts and exercise rooms.
The Operating Partnership believes that the Properties provide amenities
and common facilities that create an attractive residence for tenants. It is
management's role to monitor compliance with Property policies and to provide
preventive maintenance of the Properties including common areas, facilities and
amenities. The Operating Partnership holds periodic meetings of its Property
management personnel for training and implementation of the Operating
Partnership's strategies. The Operating Partnership believes that, due in part
to this strategy, the Properties historically have had high occupancy rates.
The distribution of the Properties throughout the United States reflects
the Operating Partnership's belief that geographic diversification helps
insulate the portfolio from regional and economic influences. At the same time,
the Operating Partnership has sought to create clusters of Properties within
each of its primary markets in order to achieve economies of scale in management
and operation; however, the Operating Partnership may acquire additional
multifamily properties located anywhere in the United States.
The Operating Partnership beneficially owns fee simple title to 211 of the
Properties and holds a 73-year leasehold interest with respect to one Property
(Mallgate). Direct fee simple title for certain of the Properties is owned by
single-purpose nominee corporations or land trusts that engage in no business
other than holding title to the Property for the Operating Partnership. Holding
title in such a manner is expected to make it less costly to transfer such
Property in the future in the event of a sale and should facilitate financing
since lenders often require title to a Property to be held in a single purpose
entity in order to isolate that Property from potential liabilities of other
Properties. Direct fee simple title for certain other Properties is owned by an
LLC. In addition, with respect to two Properties, the Operating Partnership
owns the debt collateralized by such Properties and with respect to four
Properties, the Operating Partnership owns an interest in the debt
collateralized by the properties.
11
PART I
As of December 31, 1996, the Operating Partnership had an investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. The Additional Properties consist of 578 buildings
containing 3,896 units, located in four states.
The following two tables set forth certain information relating to the
Properties and the Additional Properties:
12
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
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ARIZONA
Bay Club, Phoenix (1) 1976 22 13 420 257,790 614 96% $493 $0.80
Camellero, Scottsdale (1) 1979 33 15 344 311,526 906 94% $722 $0.80
Canyon Creek, Tuscan 1986 15 10 242 169,946 702 97% $473 $0.67
Canyon Sands, Phoenix (1) 1983 38 20 412 353,592 858 91% $560 $0.65
Chandler Court, Chandler 1987 33 20 311 263,338 847 95% $613 $0.72
Crystal Creek, Phoenix 1985 24 10 273 190,140 696 97% $559 $0.80
Del Coronado, Mesa (1) 1985 43 19 419 394,062 940 95% $609 $0.65
Desert Sands, Phoenix (1) 1982 39 20 412 353,592 858 91% $560 $0.65
Flying Sun, Phoenix (1) 1983 10 4 108 93,708 868 97% $553 $0.64
Fountain Creek, Phoenix 1984 20 9 186 144,374 776 94% $600 $0.77
Indian Bend, Scottsdale 1973 8 14 275 226,444 823 97% $675 $0.82
Southbank, Mesa 1985 13 5 113 99,448 880 98% $552 $0.63
Southcreek, Mesa (1) 1986-89 66 23 528 472,152 894 95% $650 $0.73
Via Ventura, Scottsdale 1980 22 19 320 279,187 872 71% $712 $0.82
Villa Madeira, Scottsdale 1971 39 17 332 291,280 877 95% $692 $0.79
Villa Manana, Phoenix 1971-85 13 8 260 212,150 816 96% $587 $0.72
ARKANSAS
Fox Run, Little Rock (1) 1974 27 14 337 303,230 900 97% $536 $0.60
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------------------------------------------------
ARKANSAS, CONTINUED
Greenwood Forest, Little Rock (1) 1975 23 10 239 191,062 799 98% $501 $0.63
Walnut Ridge, Little Rock (1) 1975 18 10 252 210,776 836 95% $477 $0.57
Williamsburg, Little Rock (1) 1974 21 10 211 184,348 874 99% $552 $0.63
CALIFORNIA
Carmel Terrace, San Diego 1988-89 27 20 384 298,588 778 98% $771 $0.99
Casa Capricorn, San Diego 1981 24 10 192 178,320 929 96% $742 $0.80
Creekside Oaks, Walnut Creek (1) 1974 5 7 316 237,952 753 97% $724 $0.96
Deerwood, San Diego 1990 37 29 315 333,079 1,057 93% $987 $0.93
Eagle Canyon, Chino Hills 1985 34 32 252 252,493 1,002 95% $907 $0.90
Emerald Place, Bermuda Dunes 1988 27 17 240 214,072 892 98% $619 $0.69
Hathaway, Long Beach 1987 41 17 385 266,805 693 95% $843 $1.22
Lakeville Resort, Petaluma (1) 1984 84 45 492 461,798 939 99% $729 $0.78
Lands End, Pacifica 1974 11 7 260 161,121 620 98% $927 $1.50
Merrimac Woods, Costa Mesa 1970 19 39 123 88,160 717 97% $744 $1.04
Mountain Terrace, Stevenson Ranch 1992 19 39 510 425,612 835 77% $852 $1.02
Oak Park North, Agoura (1) 1990 31 12 220 180,600 821 94% $1,023 $1.25
Oak Park South, Agoura (1) 1989 31 12 224 188,000 839 93% $1,006 $1.20
Park West, Los Angeles 1990 1 4 444 315,588 711 95% $962 $1.35
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA, CONTINUED
Promenade Terrace, Corona Hills (1) 1990 38 27 330 360,838 1,093
Regency Palms, Huntington Beach 1969 39 14 310 261,634 844
Summer Ridge, Riverside 1985 9 6 136 104,832 771
Summerset Village, Chatsworth 1985 29 29 280 286,752 1,024
Villa Solana, Laguna Hills 1984 17 13 272 245,104 901
Vista Del Lago, Mission Viejo (1) 1986-88 51 29 608 512,200 842
Windridge, Laguna Niguel (1) 1989 22 19 344 375,312 1,091
COLORADO
Cheyenne Crest, Colorado Springs (1) 1984 13 9 208 175,424 843
Glenridge, Colorado Springs (1) 1985 12 8 220 176,792 804
Indian Tree, Arvada (1) 1983 7 8 168 140,000 833
Trails, Aurora (1) 1986 17 11 351 286,964 818
Willow Glen, Aurora 1983 22 20 384 302,944 789
Windmill, Colorado Springs (1) 1985 15 11 304 180,640 594
Yuma Court, Colorado Springs 1985 10 5 40 37,400 935
FLORIDA
Brierwood, Jacksonville 1974 22 17 196 263,052 1,342
Casa Cordoba, Tallahassee 1972-73 32 12 168 164,336 978
Casa Cortez, Tallahassee 1970 13 4 66 74,916 1,135
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------
CALIFORNIA, CONTINUED
Promenade Terrace, Corona Hills (1) 96% $851 $0.78
Regency Palms, Huntington Beach 97% $806 $0.95
Summer Ridge, Riverside 98% $660 $0.86
Summerset Village, Chatsworth 98% $1,067 $1.04
Villa Solana, Laguna Hills 97% $827 $0.92
Vista Del Lago, Mission Viejo (1) 98% $864 $1.03
Windridge, Laguna Niguel (1) 92% $948 $0.87
COLORADO
Cheyenne Crest, Colorado Springs (1) 94% $640 $0.76
Glenridge, Colorado Springs (1) 96% $641 $0.80
Indian Tree, Arvada (1) 99% $641 $0.77
Trails, Aurora (1) 95% $614 $0.75
Willow Glen, Aurora 90% $597 $0.76
Windmill, Colorado Springs (1) 97% $503 $0.85
Yuma Court, Colorado Springs 95% $597 $0.64
FLORIDA
Brierwood, Jacksonville 97% $620 $0.46
Casa Cordoba, Tallahassee 99% $615 $0.63
Casa Cortez, Tallahassee 97% $613 $0.54
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA, CONTINUED
Chaparral, Largo (1) 1976 52 23 444 451,420 1,017
Gatehouse on the Green, Pambroke Pines 1990 12 21 312 310,140 994
Gatehouse at Pine Lake, Plantation 1990 11 25 296 293,792 993
Habitat, Orlando 1974 26 17 344 334,352 972
Hammock's Place, Miami (1) 1986 11 15 296 307,900 1,040
Heron Cove, Coral Springs 1987 13 12 198 189,932 959
Heron Landing, Lauderhill 1988 13 11 144 151,684 1,053
Heron Run, Plantation 1987 13 13 198 185,504 937
La Costa Brava, Orlando 1967 17 10 194 190,780 983
La Costa Brava, Jacksonville (1)(2) 1970-73 46 30 464 441,268 951
Marbrisa, Tampa 1984 16 37 224 188,544 842
Oaks of Lakebridge, Ormond Beach 1984 13 12 170 120,792 711
Paradise Point, Dania 1987-90 13 13 260 226,980 873
Pine Harbour, Orlando 1991 18 20 366 344,204 940
Pines of Springdale, W. Palm Beach 1986 3 5 151 126,975 841
The Place, Fort Meyers 1986 15 9 230 183,588 798
Port Royale, Fort Lauderdale 1988 10 17 252 182,380 724
Port Royale II, Fort Lauderdale 1991 3 5 161 115,025 714
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
FLORIDA, CONTINUED
Chaparral, Largo (1) 95% $582 $0.57
Gatehouse on the Green, Pambroke Pines 98% $908 $0.91
Gatehouse at Pine Lake, Plantation 92% $908 $0.92
Habitat, Orlando 95% $556 $0.57
Hammock's Place, Miami (1) 97% $739 $0.71
Heron Cove, Coral Springs 96% $754 $0.79
Heron Landing, Lauderhill 92% $769 $0.73
Heron Run, Plantation 96% $793 $0.85
La Costa Brava, Orlando 96% $615 $0.63
La Costa Brava, Jacksonville (1)(2) 95% $530 $0.56
Marbrisa, Tampa 98% $565 $0.67
Oaks of Lakebridge, Ormond Beach 97% $578 $0.81
Paradise Point, Dania 96% $810 $0.93
Pine Harbour, Orlando 93% $654 $0.70
Pines of Springdale, W. Palm Beach 95% $616 $0.73
The Place, Fort Meyers 94% $544 $0.68
Port Royale, Fort Lauderdale 98% $855 $1.18
Port Royale II, Fort Lauderdale 99% $883 $1.24
ITEM 2. PROPERTIES
PROPERTIES - CONTINUED
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- --------------------------------------------------------------------------------------------------------------
FLORIDA, CONTINUED
River Bend, Tampa 1971 32 15 296 333,580 1,127
Sabal Pointe, Coral Springs 1995 11 14 275 355,575 1,293
Sawgrass Cove, Bradenton 1991 21 28 336 342,880 1,020
Springs Colony, Altamonte Springs 1986 9 10 188 161,168 857
Stonelake Club, Ocala (1) 1986 31 15 240 194,320 810
Woodlake at Killearn, Tallahassee 1986-90 18 25 352 305,480 868
GEORGIA
Frey, Atlanta (1) 1985 29 44 489 453,760 928
Governor's Place, Augusta 1972 20 9 190 191,580 1,008
Greengate, Marietta 1971 11 11 152 157,808 1,038
Holcomb Bridge, Atlanta (1) 1985 34 36 437 419,150 959
Ivy Place, Atlanta 1978 17 15 122 180,830 1,482
Longwood, Decatur 1992 9 9 268 216,970 810
Maxwell House, Augusta 1951 1 1 216 97,173 450
Park Knoll, Marietta 1983 51 41 484 587,250 1,213
Preston Lake, Tucker 1984-86 9 32 320 338,130 1,057
Roswell, Atlanta (1) 1985 23 30 236 225,598 956
Terraces at Peachtree, Atlanta 1987 1 1 96 86,800 904
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- ---------------------------------------------------------------------------------
FLORIDA, CONTINUED
River Bend, Tampa 95% $558 $0.50
Sabal Pointe, Coral Springs 97% $895 $0.69
Sawgrass Cove, Bradenton 93% $664 $0.65
Springs Colony, Altamonte Springs 98% $573 $0.67
Stonelake Club, Ocala (1) 95% $501 $0.62
Woodlake at Killearn, Tallahassee 91% $615 $0.71
GEORGIA
Frey, Atlanta (1) 95% $697 $0.75
Governor's Place, Augusta 94% $448 $0.44
Greengate, Marietta 92% $621 $0.60
Holcomb Bridge, Atlanta (1) 95% $695 $0.72
Ivy Place, Atlanta 94% $918 $0.62
Longwood, Decatur 96% $747 $0.92
Maxwell House, Augusta 94% $370 $0.82
Park Knoll, Marietta 95% $828 $0.68
Preston Lake, Tucker 93% $708 $0.67
Roswell, Atlanta (1) 93% $720 $0.75
Terraces at Peachtree, Atlanta 93% $928 $1.03
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGIA, CONTINUED
Woodland Hills, Decatur 1985 25 19 228 266,304 1,168
IDAHO
The Seasons, Boise 1990 10 6 120 108,460 904
ILLINOIS
Bourbon Square, Palatine (1) 1984-87 102 47 612 875,160 1,430
Four Lakes III-IV, Lisle (1) 1968 31 92 942 798,245 847
Four Lakes V, Lisle (1) 1988 2 15 478 310,208 649
Spice Run, Naperville 1988 20 32 400 396,320 991
INDIANA
Diplomat South, Beech Grove (1) 1970 16 15 272 254,528 936
IOWA
3000 Grand, Des Moines 1970 1 6 186 199,530 1,073
KANSAS
Cedar Crest, Overland Park 1986 38 30 466 430,034 923
Essex Place, Overland Park (1) 1970-84 32 34 352 429,048 1,219
Rosehill Pointe, Lenexa 1984 32 35 498 459,318 922
Silverwood, Mission (1) 1986 20 15 280 234,876 839
Sunnyoak Village, Overland Park 1984 55 46 548 492,700 899
KENTUCKY
Cloisters on the Green, Lexington (1) 1974 6 12 228 196,560 862
Doral, Louisville (1) 1972 19 10 228 293,106 1,286
Occupancy, 1996 December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
GEORGIA, CONTINUED
Woodland Hills, Decatur 91% $790 $0.68
IDAHO
The Seasons, Boise 94% $623 $0.69
ILLINOIS
Bourbon Square, Palatine (1) 90% $1,018 $0.71
Four Lakes III-IV, Lisle (1) 92% $828 $0.98
Four Lakes V, Lisle (1) 90% $735 $1.13
Spice Run, Naperville 88% $872 $0.88
INDIANA
Diplomat South, Beech Grove (1) 93% $502 $0.54
IOWA
3000 Grand, Des Moines 84% $876 $0.82
KANSAS
Cedar Crest, Overland Park 96% $610 $0.66
Essex Place, Overland Park (1) 94% $767 $0.63
Rosehill Pointe, Lenexa 88% $590 $0.64
Silverwood, Mission (1) 98% $603 $0.72
Sunnyoak Village, Overland Park 93% $578 $0.64
KENTUCKY
Cloisters on the Green, Lexington (1) 97% $551 $0.64
Doral, Louisville (1) 94% $600 $0.47
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
KENTUCKY, CONTUNUED
Mallgate, Louisville 1969 46 24 540 535,444 992 92%
Sonnet Cove I-II, Lexington (1) 1972-1974 11 14 331 346,675 1,047 97%
LOUISIANA
Plantation, Monroe 1972 6 10 200 180,416 902 92%
MARYLAND
Canterbury, Germantown (1) 1986 37 23 544 481,083 884 92%
Country Club I & II, Silver Spring (1) 1980-1982 24 20 376 371,296 987 94%
Georgian Woods II, Wheaton (1) 1967 21 17 371 305,693 824 95%
Greenwich Woods, Silver Spring (1) 1967 47 12 564 514,318 912 96%
Marymont, Laurel 1987-88 12 10 308 251,264 816 94%
Northhampton I & II, Largo (1) 1977-1988 47 58 620 564,399 910 96%
Oak Mill II, Germantown (1) 1985 16 8 192 165,611 863 92%
Town Centre III & IV, Laurel (1) 1968-1969 49 30 562 553,083 984 96%
Yorktowne at Olde Mill, Millersville 1974 18 21 216 195,100 903 96%
MICHIGAN
Country Ridge, Farmington Hills 1986 26 18 252 278,060 1,103 94%
Hidden Valley, Ann Arbor 1973 6 28 324 237,348 733 97%
Lake in the Woods, Ypsilanti 1969 40 175 1,028 971,873 945 89%
Pines of Cloverlane, Pittsfield Township 1975-79 59 63 582 471,966 811 94%
December, 1996
Avg Monthly
Rental Rate Per
Property Unit Square Foot
- ----------------------------------------- -------------------------------
KENTUCKY, CONTUNUED
Mallgate, Louisville $534 $0.54
Sonnet Cove I-II, Lexington (1) $611 $0.58
LOUISIANA
Plantation, Monroe $437 $0.48
MARYLAND
Canterbury, Germantown (1) $710 $0.80
Country Club I & II, Silver Spring (1) $779 $0.79
Georgian Woods II, Wheaton (1) $766 $0.93
Greenwich Woods, Silver Spring (1) $792 $0.87
Marymont, Laurel $759 $0.93
Northhampton I & II, Largo (1) $792 $0.87
Oak Mill II, Germantown (1) $712 $0.83
Town Centre III & IV, Laurel (1) $731 $0.74
Yorktowne at Olde Mill, Millersville $681 $0.75
MICHIGAN
Country Ridge, Farmington Hills $850 $0.77
Hidden Valley, Ann Arbor $695 $0.95
Lake in the Woods, Ypsilanti $728 $0.77
Pines of Cloverlane, Pittsfield Township $633 $0.78
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN, CONTINUED
Walden Wood, Southfield (1) 1972 23 20 210 295,080 1,405
MINNESOTA
Park Place I & II, Plymouth (1) 1986 4 60 500 569,768 1,140
MISSOURI
Hunters Glen, Chesterfield 1985 8 19 192 156,489 815
Sleepy Hollow, Kansas City (1) 1987 26 33 388 325,486 839
NEVADA
Catalina Shores, Las Vegas 1989 15 13 240 211,200 880
Cypress Point, Las Vegas (1) 1989 19 9 212 179,800 848
Desert Park, Las Vegas 1987 23 15 368 172,513 469
Fountains at Flamingo, Las Vegas 1989-91 34 30 521 417,870 802
Newport Cove, Henderson 1983 35 10 140 152,600 1,090
Silver Shadow, Las Vegas 1992 13 9 200 194,656 973
Sunrise Springs, Las Vegas 1989 18 10 192 164,424 856
Trails, Las Vegas 1988 38 28 440 453,656 1,031
NEW HAMPSHIRE
Wellington Hill, Manchester (1) 1987 55 40 390 394,627 1,012
NEW JERSEY
Ravens Crest, Plainsboro (1) 1984 37 19 704 583,176 828
NEW MEXICO
Pueblo Villas, Albuquerque 1975 17 12 232 173,118 746
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
MICHIGAN, CONTINUED
Walden Wood, Southfield (1) 98% $847 $0.60
MINNESOTA
Park Place I & II, Plymouth (1) 98% $768 $0.67
MISSOURI
Hunters Glen, Chesterfield 97% $626 $0.77
Sleepy Hollow, Kansas City (1) 98% $546 $0.65
NEVADA
Catalina Shores, Las Vegas 92% $709 $0.81
Cypress Point, Las Vegas (1) 88% $675 $0.80
Desert Park, Las Vegas 92% $508 $1.08
Fountains at Flamingo, Las Vegas 96% $679 $0.85
Newport Cove, Henderson 94% $771 $0.71
Silver Shadow, Las Vegas 93% $723 $0.74
Sunrise Springs, Las Vegas 94% $678 $0.79
Trails, Las Vegas 93% $755 $0.73
NEW HAMPSHIRE
Wellington Hill, Manchester (1) 94% $729 $0.72
NEW JERSEY
Ravens Crest, Plainsboro (1) 96% $822 $0.99
NEW MEXICO
Pueblo Villas, Albuquerque 92% $559 $0.75
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA
Bainbridge, Durham 1984 15 24 216 191,240 885 90%
Bridgeport, Raleigh 1990 13 17 276 252,190 914 92%
Deerwood Meadows, Greensboro (1) 1986 49 44 297 217,757 733 93%
East Pointe, Charlotte (1) 1987 22 29 310 301,560 973 95%
Laurel Ridge, Chapel Hill 1975 28 13 160 158,964 994 99%
McAlpine Ridge, Charlotte 1989-90 16 15 320 238,125 744 93%
Pine Meadow, Greensboro (1) 1974 29 14 204 226,600 1,111 92%
Rock Creek, Corrboro 1986 20 16 188 153,548 817 89%
Winterwood, Charlotte (1) 1986 22 23 384 369,260 962 91%
Woodbridge, Cary (1) 1993-95 16 28 344 315,624 918 92%
Woodscape, Raleigh 1979 21 25 240 186,192 776 95%
Woods of North Bend, Raleigh 1983 22 30 235 243,975 1,038 98%
OHIO
Olentangy Commons, Columbus (1) 1972 95 76 827 981,190 1,186 93%
Reserve Square, Cleveland 1973 1 4 765 631,803 826 78%
University Park, Toledo 1965 1 2 99 49,950 505 99%
Village of Hampshire Heights, Toledo 1950 92 10 392 241,920 617 99%
OKLAHOMA
Brittany Square, Tulsa 1982 13 8 212 170,516 804 96%
December, 1996
Avg. Monthly
Rental Rate Per
Property Unit Square Foot
- ------------------------------------------------------------------------------
NORTH CAROLINA
Bainbridge, Durham $692 $0.78
Bridgeport, Raleigh $714 $0.78
Deerwood Meadows, Greensboro (1) $572 $0.78
East Pointe, Charlotte (1) $629 $0.65
Laurel Ridge, Chapel Hill $719 $0.72
McAlpine Ridge, Charlotte $582 $0.78
Pine Meadow, Greensboro (1) $593 $0.53
Rock Creek, Corrboro $673 $0.82
Winterwood, Charlotte (1) $658 $0.68
Woodbridge, Cary (1) $719 $0.78
Woodscape, Raleigh $570 $0.73
Woods of North Bend, Raleigh $673 $0.65
OHIO
Olentangy Commons, Columbus (1) $747 $0.63
Reserve Square, Cleveland $853 $1.03
University Park, Toledo $433 $0.86
Village of Hampshire Heights, Toledo $416 $0.67
OKLAHOMA
Brittany Square, Tulsa $508 $0.63
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA, CONTINUED
Quail Run, Oklahoma City 1978-83 13 9 208 149,408 718 99% $385 $0.54
Stonebrook, Oklahoma City 1983 21 8 360 247,088 686 93% $408 $0.59
The Lodge, Tulsa 1979 13 11 208 152,240 732 99% $413 $0.56
OREGON
Bridgecreek, Wilsonville 1987 26 22 315 274,236 871 95% $647 $0.74
Kempton Downs, Gresham 1990 17 12 278 277,536 998 95% $679 $0.68
Meadowcreek, Tigard (1) 1985 19 15 304 247,690 815 97% $628 $0.77
Tanasbourne Terrace, Hillsboro 1986-89 29 18 373 363,758 975 95% $734 $0.75
Tanglewood, Lake Oswego 1976 35 8 158 200,660 1,270 97% $798 $0.63
Woodcreek, Beaverton (1) 1982-84 28 22 440 335,120 762 96% $584 $0.77
SOUTH CAROLINA
Mallard Cove, Greenville 1983 3 14 211 264,187 1,252 88% $602 $0.48
TENNESSEE
Arbors of Hickory Hollow, Nashville (1) 1986 17 31 336 337,260 1,004 96% $634 $0.63
Arbors of Brentwood, Nashville (1) 1986-87 20 41 346 320,993 928 94% $691 $0.74
Brixworth, Nashville 1985 5 6 216 144,912 671 92% $728 $1.09
Canterchase, Nashville (1) 1985 12 22 235 170,140 724 97% $567 $0.78
TEXAS
7979 Westheimer, Houston 1973 30 15 459 401,571 875 95% $625 $0.71
Altamonte, San Antonio (1) 1985 29 17 432 322,928 748 93% $536 $0.72
22
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Acreage Average
Year(s) (approxi- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
TEXAS, CONTINUED
Arbors of Las Colinas, Irving 1985 21 15 408 334,556 820
Breton Mill, Houston (1) 1986 21 14 392 294,152 750
Celebration at Westchase, Houston (1) 1979 27 13 367 305,609 833
Champion Oaks, Houston (1) 1984 20 10 252 190,628 756
Dawntree, Carrollton 1982 53 23 400 370,152 925
Forest Ridge, Arlington 1984-85 34 29 660 555,364 841
Fountainhead I-III, San Antonio (1) 1985-87 55 23 688 457,616 665
Harbour Landing, Corpus Christi 1985 22 11 284 193,288 681
Hampton Green, San Antonio (1) 1979 32 11 293 222,341 759
Hearthstone, San Antonio (1) 1982 17 11 252 167,464 665
Hunter's Green, Fort Worth (1) 1981 17 10 248 188,720 761
Keystone, Austin (1) 1981 13 6 166 111,440 671
Kingswood Manor, San Antonio (1) 1983 12 6 129 109,996 853
Lakewood Oaks, Dallas 1987 26 12 352 257,606 732
Lincoln Green I-III, San Antonio 1984-86 54 24 680 465,664 685
Marina Club, Ft. Worth 1987 19 14 387 265,475 686
Northgate Village, San Antonio (1) 1984 23 10 264 214,928 814
Parkwest, Austin (1) 1985 50 15 196 179,046 914
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------
TEXAS, CONTINUED
Arbors of Las Colinas, Irving 96% $676 $0.82
Breton Mill, Houston (1) 98% $533 $0.71
Celebration at Westchase, Houston (1) 96% $545 $0.65
Champion Oaks, Houston (1) 97% $531 $0.70
Dawntree, Carrollton 96% $577 $0.62
Forest Ridge, Arlington 93% $600 $0.71
Fountainhead I-III, San Antonio (1) 92% $520 $0.78
Harbour Landing, Corpus Christi 96% $525 $0.77
Hampton Green, San Antonio (1) 94% $486 $0.64
Hearthstone, San Antonio (1) 96% $440 $0.66
Hunter's Green, Fort Worth (1) 92% $486 $0.64
Keystone, Austin (1) 92% $573 $0.85
Kingswood Manor, San Antonio (1) 98% $507 $0.59
Lakewood Oaks, Dallas 98% $647 $0.88
Lincoln Green I-III, San Antonio 96% $478 $0.70
Marina Club, Ft. Worth 94% $478 $0.70
Northgate Village, San Antonio (1) 94% $523 $0.64
Parkwest, Austin (1) 90% $759 $0.83
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
TEXAS, CONTINUED
Preston in Willow Bend, Plano 1985 23 13 229 233,893 1,021 97%
Ridgetree, Dallas 1983 38 17 798 597,642 749 95%
Saddle Creek, Carrollton 1980 18 16 238 244,488 1,027 95%
Songbird, San Antonio (1) 1981 29 15 262 277,720 1,060 93%
Sutton Place, Dallas 1985 16 10 456 301,440 661 94%
The Lodge, San Antonio 1979 20 10 384 259,512 676 93%
The Trails, Arlington 1984 10 9 208 141,696 681 99%
Village Oaks, Austin (1) 1984 25 13 280 199,152 711 97%
Woodmoor, Austin 1981 16 9 208 151,348 728 90%
VIRGINIA
Amberton, Manassas (1) 1986 16 7 190 143,402 755 100%
Kingsport, Alexandria 1985 73 13 416 285,793 687 97%
Saddle Ridge, Ashburn 1989 25 14 216 194,142 899 94%
Sheffield Court, Arlington 1986 36 14 597 356,822 598 97%
Tanglewood, Manassas (1) 1987 36 29 432 388,704 900 99%
Wilde Lake, Richmond (1) 1989 8 18 189 172,980 915 91%
Woodside, Lorton 1987 21 13 252 231,781 920 96%
WASHINGTON
2900 on First, Seattle 1989-91 1 1 135 87,320 647 99%
December, 1996
Average Monthly
Rental Rate Per
Property Unit Square Foot
- -------------------------------------------------------------
TEXAS, CONTINUED
Preston in Willow Bend, Plano $740 $0.72
Ridgetree, Dallas $502 $0.67
Saddle Creek, Carrollton $681 $0.66
Songbird, San Antonio (1) $643 $0.61
Sutton Place, Dallas $568 $0.86
The Lodge, San Antonio $494 $0.73
The Trails, Arlington $518 $0.76
Village Oaks, Austin (1) $660 $0.93
Woodmoor, Austin $592 $0.81
VIRGINIA
Amberton, Manassas (1) $682 $0.90
Kingsport, Alexandria $687 $1.00
Saddle Ridge, Ashburn $837 $0.93
Sheffield Court, Arlington $793 $1.33
Tanglewood, Manassas (1) $697 $0.77
Wilde Lake, Richmond (1) $672 $0.73
Woodside, Lorton $757 $0.82
WASHINGTON
2900 on First, Seattle $837 $1.29
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
WASHINGTON, CONTINUED
Brentwood, Vancouver 1990 28 14 296 286,132 967 95%
Chandler's Bay I, Kent 1989 27 36 293 278,874 952 98%
Charter Club, Everett 1991 17 12 201 172,773 860 99%
Creekside, Mountlake Terrace (1) 1987 24 43 512 407,296 796 99%
Eagle Rim, Redmond 1986-88 39 20 156 137,920 884 96%
Edgewood, Woodinville (1) 1986 15 10 203 166,299 819 98%
Fox Run, Federal Way 1988 9 5 143 127,960 895 100%
Huntington Park, Everett 1991 27 14 381 307,793 808 100%
Newport Heights, Seattle (1) 1985 12 5 80 59,056 738 99%
Orchard Ridge, Lynnwood 1988 9 6 104 86,548 832 99%
Pointe East, Redmond 1988 19 6 76 83,280 1,096 96%
Village of Newport, Federal Way (1) 1987 7 4 100 76,890 769 98%
Waterstone Place, Federal Way 1990 72 37 750 616,436 822 92%
Wellington, Silverdale (1) 1990 17 11 240 214,024 892 80%
----------------------------------------------------------------------------------
TOTAL PROPERTIES: 5,198 4,055 67,705 59,472,576
----------------------------------------------------------------------------------
AVERAGE: 24 19 311 272,810 878 95%
==================================================================================
December 1996
Avg. Monthly
Rental Rate Per
Property Unit Square Foot
- -----------------------------------------------------------------
WASHINGTON, CONTINUED
Brentwood, Vancouver $640 $0.66
Chandler's Bay I, Kent $680 $0.71
Charter Club, Everett $681 $0.79
Creekside, Mountlake Terrace (1) $656 $0.83
Eagle Rim, Redmond $743 $0.84
Edgewood, Woodinville (1) $693 $0.85
Fox Run, Federal Way $626 $0.70
Huntington Park, Everett $653 $0.81
Newport Heights, Seattle (1) $674 $0.91
Orchard Ridge, Lynnwood $649 $0.78
Pointe East, Redmond $944 $0.86
Village of Newport, Federal Way (1) $582 $0.76
Waterstone Place, Federal Way $571 $0.69
Wellington, Silverdale (1) $641 $0.72
-----------------------------
TOTAL PROPERTIES:
-----------------------------
AVERAGE: $673 $0.77
=============================
(1) Encumbered by a third party mortgage.
(2) Includes La Costa Brava (JAX) and Cedar Cove.
25
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Building imate) Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
Brookside Place, Stockton 1981 28 10 90 96,664 1,074 96%
Canyon Creek, San Ramon 1984 27 13 268 257,676 961 94%
Cobblestone Village, Fresno 1983 33 15 162 153,118 945 94%
Country Oaks, Agoura 1985 38 15 256 258,558 1,010 93%
Edgewater, Bakersfield 1984 35 15 258 240,322 931 93%
Feather River, Stockton 1981 16 8 128 97,328 760 95%
Hidden Lake, Sacramento 1985 27 17 272 261,808 963 93%
Lakeview, Lodi 1983 25 9 138 136,972 993 95%
Lantern Cove, Foster City 1985 29 17 232 228,432 985 94%
Schooner Bay I, Foster City 1985 21 12.5 168 167,345 996 95%
Schooner Bay II, Foster City 1985 18 12.5 144 143,442 996 97%
South Shore, Stockton 1979 24 8 129 141,055 1,093 93%
Waterfield Square I, Stockton 1984 22 10 170 160,100 942 95%
Waterfield Square II, Stockton 1984 24 9 158 151,488 959 96%
Willow Brook, Pleasant Hill 1985 38 12 228 234,840 1,030 95%
Willow Creek, Fresno 1984 15 7 116 118,422 1,021 91%
COLORADO
December, 1996
Avg Monthly
Rental Rate Per
Unit Square Foot
- ----------------------------------------------------------------
CALIFORNIA
Brookside Place, Stockton $ 740 $0.69
Canyon Creek, San Ramon $1,055 $1.10
Cobblestone Village, Fresno $ 563 $0.60
Country Oaks, Agoura $1,184 $1.17
Edgewater, Bakersfield $ 638 $0.68
Feather River, Stockton $ 547 $0.72
Hidden Lake, Sacramento $ 677 $0.70
Lakeview, Lodi $ 682 $0.69
Lantern Cove, Foster City $1,524 $1.55
Schooner Bay I, Foster City $1,583 $1.59
Schooner Bay II, Foster City $1,570 $1.58
South Shore, Stockton $ 749 $0.69
Waterfield Square I, Stockton $ 580 $0.62
Waterfield Square II, Stockton $ 597 $0.62
Willow Brook, Pleasant Hill $1,209 $1.17
Willow Creek, Fresno $ 668 $0.65
COLORADO
26
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate Units Footage Per Unit 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------------------------------------------------
Deerfield, Denver 1983 22 9 158 146,380 926 94% $705 $0.76
COLORADO, CONTINUED
Foxridge, Englewood 1984 27 15 300 292,992 977 92% $764 $0.78
NEW MEXICO
Mesa Del Oso, Albuquerque 1983 69 25 221 252,169 1,141 99% $893 $0.78
Tierra Antigua, Albuquerque 1985 19 9 148 152,241 1,029 93% $796 $0.77
OKLAHOMA
Lakewood, Tulsa 1985 21 9 152 157,372 1,035 95% $670 $0.65
----------------------------------------------------------------------------------------
TOTAL ADDITIONAL PROPERTIES: 578 257 3,896 3,848,724
----------------------------------------------------------------------------------------
AVERAGE: 28 12 186 183,273 988 94% $899 $0.91
========================================================================================
Note: All of these Additional Properties are encumbered by mortgages, of which
the Company has an investment in the second and third mortgages (which
are subordinate to first mortgages owned by third party unaffiliated
entities).
27
PART I
ITEM 3. LEGAL PROCEEDINGS
Richard M. Perlman, a former employee of companies controlled by Mr. Zell,
filed a legal proceeding against Mr. Zell and various partnerships and
corporations controlled by Mr. Zell claiming, inter alia, that he had an
----------
interest in 20 of 46 of the Initial Properties (the "Zell Properties") and that
he suffered damages when those Properties were transferred into the REIT. The
proceeding was filed on July 21, 1995 (Richard M. Perlman, et al. v. Samuel
------------------------------------
Zell, et al.) (United States District Court for the Northern District of
- -----------
Illinois-Eastern Division, Case No. 95 C 4242). Mr. Perlman voluntarily
dismissed the action that he previously filed in the Circuit Court of Cook
County, Illinois, which was known as Richard M. Perlman v. Samuel Zell, et al,
-----------------------------------------
Case No. 92 CH 19915. Mr. Zell believes that such claim lacks merit and is
vigorously contesting the claims. The Company and the Operating Partnership are
not currently parties to this lawsuit. Discovery is currently proceeding and
trial is currently anticipated to commence in June, 1997. Because Mr. Perlman's
entire claimed interest in these Properties, based on Mr. Perlman's pleadings,
does not exceed 1% of the value of these Properties, the Operating Partnership
has title insurance coverage, and the Operating Partnership has been indemnified
by Mr. Zell and certain of his affiliates for any actual losses incurred in
connection with such matters, the Operating Partnership believes no material
loss to the Operating Partnership could occur.
On March 20, 1996, a legal proceeding (Nick J. Miletich, Administrator of
the Estates of Dorothy Miletich and Madelyne Miletich, deceased, v. Equity
Residential Properties Trust, Equity Residential Properties Management
Corporation, Curt Vajgrt, Raymond Countryman and Darla Countryman) (Iowa
District Court, Polk Count, Iowa, Law Case No. CL 68908) was filed against the
Company. This legal proceeding arises out of the Company's ownership and
management of the apartment building known as 3000 Grand Ave. in Des Moines,
Iowa and alleges that Raymond and Darla Countryman murdered Dorothy Miletich and
Madelyne Miletich, who were residents of the apartment complex, on June 15,
1995. Raymond Countryman is a former employee of the Company. The plaintiff
alleges, inter alia, that had the Company learned of the background of Mr.
----- ----
Countryman prior to his employment, the Company would not have hired him and the
deaths of the Miletichs would have been avoided. The Company is vigorously
contesting these claims, and believes it has strong defenses to these claims,
nevertheless, there is no assurance that the Company will not be held liable for
said deaths and there is no assurance that its insurance coverage will cover all
damages that may be awarded against it.
In addition, only ordinary routine litigation incidental to the business
which is not deemed material was initiated during the year ended December 31,
1996. The Operating Partnership does not believe there is any other litigation,
except as mentioned in the previous paragraph, threatened against the Operating
Partnership other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the consolidated
financial statements of the Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
28
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
There is no established public trading market for the OP Units.
The following table sets forth for the periods indicated, the distributions
paid on the Operating Partnership's OP Units:
Distributions
-------------
Fiscal Year 1996
Fourth Quarter Ended December 31, 1996 $0.625
Third Quarter Ended September 30, 1996 $0.59
Second Quarter Ended June 30, 1996 $0.59
First Quarter Ended March 31, 1996 $0.59
Fiscal Year 1995
Fourth Quarter Ended December 31, 1995 $0.59
Third Quarter Ended September 30, 1995 $0.53
Second Quarter Ended June 30, 1995 $0.53
First Quarter Ended March 31, 1995 $0.53
In addition, on February 25, 1997, the Operating Partnership declared a
$0.625 distribution on each OP Unit payable on April 11, 1997 to OP Unit holders
of record on March 28, 1997.
The number of holders of record of OP Units in the Operating Partnership at
December 31, 1996, was 146. The number of outstanding OP Units as of December
31, 1996 was 59,013,064.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating information
on a historical basis for the Operating Partnership and the Predecessor
Business. The following information should be read in conjunction with all of
the financial statements and notes thereto included elsewhere in this Form 10-K.
The historical operating data for the years ended December 31, 1995, 1994, 1993
and 1992 have been derived from the historical Financial Statements of the
Operating Partnership and the Predecessor Business audited by Grant Thornton
LLP, independent accountants. The historical operating data for the year ended
December 31, 1996, has been derived from the historical Financial Statements of
the Operating Partnership by Ernst & Young LLP, independent auditors. Certain
capitalized terms as used herein, are defined in the Notes to the Consolidated
Financial Statements as included elsewhere in this Form 10-K.
29
ERP OPERATING LIMITED PARTNERSHIP
AND PREDECESSOR BUSINESS
CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION
(Amounts in thousands except OP Units and property data)
Year Ended December 31, (1)
---------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
Total revenues $ 478,385 $ 390,384 $ 231,034 $ 112,070 $ 92,973
========== ========== ========== ========== ==========
Income (loss) before gain on disposition of properties,
extraordinary items and allocation to Predecessor Business $ 97,033 $ 59,738 $ 45,988 $ 8,137 $ (3,281)
========== ========== ========== ========== ==========
Net income $ 115,923 $ 83,355 $ 45,988 $ 9,929 $ -
========== ========== ========== ========== ==========
Net income per weighted average OP Unit outstanding $ 1.70 $ 1.68 $ 1.34 $ 0.43 $ -
========== ========== ========== ========== ==========
Weighted average OP Units outstanding 51,108 42,749 34,150 22,939 -
========== ========== ========== ========== ==========
Distributions declared per OP Unit outstanding $ 2.40 $ 2.18 $ 2.01 $ 0.68 $ -
========== ========== ========== ========== ==========
BALANCE SHEET DATA (at end of period):
Real estate, before accumulated depreciation $2,983,510 $2,188,939 $1,963,476 $ 634,577 $ 358,212
Real estate, after accumulated depreciation $2,681,998 $1,970,600 $1,770,735 $ 478,210 $ 218,825
Total assets $2,986,127 $2,141,260 $1,847,685 $ 535,914 $ 238,878
Total debt $1,254,274 $1,002,219 $ 994,746 $ 278,642 $ 343,282
Redeemable Preference Interests, net $ - $ 24,578 $ 26,001 $ - $ -
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 $ - $ - $ - $ -
Partners' capital (deficit) $1,216,467 $ 750,902 $ 761,373 $ 229,644 $(122,094)
OTHER DATA:
Total properties (at end of period) (2) 218 174 163 79 46
Total apartment units (at end of period) (2) 67,705 53,294 50,704 24,419 15,732
Funds from operations (unaudited) (3) $ 160,267 $ 120,965 $ 83,886 $ 30,127 $ 11,975
Cash flow provided by (used for):
Operating activities $ 210,930 $ 141,534 $ 93,997 $ 25,582 $ 10,871
Investing activities $ (635,655) $ (324,018) $ (896,515) $(106,543) $ (5,917)
Financing activities $ 558,568 $ 175,874 $ 808,495 $ 94,802 $ (4,945)
PART II
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION (COMBINED HISTORICAL
(CONTINUED))
(1) Historical results for the year ended December 31, 1992 represented the
combined results for the Predecessor Business. Historical results for the year
ended December 31, 1993 included combined results of the Predecessor Business
for the period January 1, 1993 through August 17, 1993.
(2) In August 1995, the Operating Partnership also made an $89 million
investment in partnership interests and subordinated mortgages collateralized by
the Additional Properties. The Additional Properties consist of 3,896 units.
(3) The Operating Partnership generally considers FFO to be one measure of the
performance of real estate companies. The new definition of FFO adopted in
March 1995 by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation on real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect FFO on the same basis. The Operating
Partnership believes that FFO is helpful to investors as a measure of the
performance of a real estate company because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors an understanding of the ability of the Operating Partnership to incur
and service debt and to make capital expenditures. FFO does not represent cash
generated from operating activities in accordance with GAAP and therefore should
not be considered an alternative to net income as an indication of the Operating
Partnership's performance or to net cash flows from operating activities as
determined by GAAP as a measure of liquidity and is not necessarily indicative
of cash available to fund cash needs. The Operating Partnership's calculation
of FFO represents net income excluding gains on dispositions of properties,
gains on early extinguishment of debt, and write-off of unamortized costs on
refinanced debt, less allocation of income to the Redeemable Preference
Interests and the Series A, Series B and Series C Cumulative Redeemable
Preference Units, plus depreciation on real estate assets and amortization of
deferred financing costs related to the Predecessor Business. The Operating
Partnership's calculation of FFO may differ from the methodology for calculating
FFO utilized by other companies and, accordingly, may not be comparable to such
other companies. The Operating Partnership's calculation of FFO for 1995 and
1994 have been restated to reflect the effects of the new definition as
mentioned above. FFO for the year ended December 31, 1994 includes the effect of
a one-time charge of approximately $879,000 for the relocation of the property
management headquarters to Chicago. In addition, FFO for the year ended December
31, 1993 excludes the effect of refinancing costs of approximately $3.3 million
which represented costs associated with the prepayment of certain mortgage
loans.
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7. OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of the Operating Partnership should be read in conjunction
with "Selected Financial Data" and the historical Consolidated Financial
Statements thereto appearing elsewhere in this Form 10-K. Due to the Operating
Partnership's ability to control through ownership the Management Partnerships,
the Financing Partnerships and the LLCs, each such entity has been consolidated
with the Operating Partnership for financial reporting purposes.
RESULTS OF OPERATIONS
Since the Company's IPO, the Operating Partnership has acquired direct or
indirect interests in 160 properties (the "Acquired Properties"), containing
49,679 units in the aggregate for a total purchase price of approximately $2.4
billion, including the assumption of approximately $554.2 million of mortgage
indebtedness. The Operating Partnership's interest in six of the Acquired
Properties at the time of acquisition thereof consisted solely of ownership of
the debt collateralized by such Acquired Properties. The Operating Partnership
purchased ten of such Acquired Properties or 2,694 units between the IPO and
December 31, 1993 (the "1993 Acquired Properties"); 84 of such Acquired
Properties or 26,285 units in 1994 (the "1994 Acquired Properties"); 17 of such
Acquired Properties or 5,035 units in 1995 (the "1995 Acquired Properties") and
49 of such Acquired Properties consisting of 15,665 units in 1996 (the "1996
Acquired Properties"). In addition, in August 1995 the Operating Partnership
made an investment in partnership interests and subordinated mortgages
collateralized by the 21 Additional Properties. The Acquired Properties were
presented in the Consolidated and Combined Financial Statements of the Operating
Partnership from the date of each acquisition.
During 1995 the Operating Partnership also disposed of six properties
containing 2,445 units (the "1995 Disposed Properties") for a total sales price
of approximately $52 million and the release of mortgage indebtedness of $20.5
million. During 1996, the Operating Partnership disposed of five properties
containing 1,254 units (the "1996 Disposed Properties") for a total sales price
of approximately $41.3 million.
The Operating Partnership's overall results of operations for the three
years ended December 31, 1996 have been significantly impacted by the Operating
Partnership's acquisition activity. The significant changes in rental revenues,
property and maintenance expenses, real estate taxes and insurance, depreciation
expense, property management and interest expense can all primarily be
attributed to the acquisition of the Acquired Properties. The impact of the
Acquired Properties is discussed in greater detail in the following paragraphs.
Properties that the Operating Partnership owned for all of both 1996 and
1995 (the "1996 Same Store Properties") and Properties that the Operating
Partnership owned for all of both 1995 and 1994 (the "1995 Same Store
Properties") also impacted the Operating Partnership's results of operations and
are discussed as well in the following paragraphs.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
For the year ended December 31, 1996, income before gain on disposition of
properties and extraordinary items increased by $37.3 million when compared to
the year ended December 31, 1995. This increase was primarily due to increases
in rental revenues net of increases in property and maintenance expenses, real
estate taxes and insurance, property management expenses, depreciation, interest
expense and general and administrative expenses. All of the increases in the
various line item accounts mentioned above can be primarily attributed to the
1996 Acquired Properties and 1995 Acquired Properties. These increases were
partially offset by the 1996 Disposed Properties and the 1995 Disposed
Properties. Interest income earned on the Company's mortgage note investment
increased by approximately $8 million and was an additional factor that impacted
the year to year changes.
In regard to the 1996 Same Store Properties, rental revenues increased by
approximately $15.9 million or 4.8 % primarily as a result of higher rental
rates charged to new tenants and tenant renewals and higher average occupancy
levels. Overall property operating expenses which include property and
maintenance, real estate taxes and insurance and an allocation of property
management expenses increased approximately $1.7 million or 1.2%. This
increase was primarily the result of higher payroll expenses and utilities
costs. For 1996 the Operating Partnership also increased its per unit charge
for property level insurance which increased insurance expense by approximately
$0.7 million. In addition, real estate taxes increased due to reassessments on
certain of the 1996 Same Store Properties.
Property management represents expenses associated with the management of the
Operating Partnership's Properties. These expenses increased by approximately
$2.3 million primarily as a result of the expansion of the Operating
Partnership's property management with the addition of a regional operations
center ("ROC") in Seattle, Washington and during the third quarter of 1996 the
addition of two new area offices located in Raleigh, North Carolina and Ft.
Lauderdale, Florida. Other factors that impacted this increase were higher
payroll and travel costs and legal and professional fees.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Operating
Partnership that are managed for affiliates. These revenues decreased by $0.3
million primarily due to the disposition of certain of these properties.
Interest expense, including amortization of deferred financing costs,
increased by approximately $3.8 million. This increase was primarily the result
of an increase in the Operating Partnership's average indebtedness outstanding
which increased by $75.8 million. However, the Operating Partnership's
effective interest costs decreased from 8.09% in 1995 to 7.87% in 1996.
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.7 million between the years under
comparison. This increase was primarily due to adding corporate personnel,
higher salary costs and shareholder reporting costs as well as an increase in
professional fees. General and administrative expenses as a percentage of total
revenues were 2.06% for the year ended December 31, 1996, which was a slight
decrease from 2.08% in 1995.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
For the year ended December 31, 1995, income before gain from disposition
of properties and extraordinary items increased by $13.8 million when compared
to the year ended December 31, 1994. This increase was primarily due to
increases in rental revenues net of increases in interest expense, property and
maintenance expenses, real estate taxes and insurance, property management
expenses, depreciation expense and general and administrative expenses. All of
the increases in the various line item accounts mentioned above can be primarily
attributed to the 1995 Acquired Properties and 1994 Acquired Properties which
was partially offset by the 1995 Disposed Properties. Increases in fee and
asset management revenues, net of fee and asset management expenses as well as
interest income of approximately $4.9 million earned on the Operating
Partnership's mortgage note investment were additional factors that impacted the
change from 1994 to 1995.
In regard to the 1995 Same Store Properties, rental revenues increased by
approximately $5.5 million or 4% as a result of higher rental rates charged to
new tenants and tenant renewals. Overall property operating expenses which
include property and maintenance, real estate taxes and insurance and an
allocation of property management expenses increased approximately $0.9 million
or 1.5%. This increase was the result of higher leasing and advertising costs,
repair and maintenance and real estate taxes for certain of the 1995 Same Store
Properties located in Texas.
Property management represents expenses associated with the management of
the Operating Partnership's Properties. These expenses increased by
approximately $5 million primarily as a result of the expansion of the Operating
Partnership's property management with the addition of ROCs in Bethesda,
Maryland, Denver, Colorado and Seattle, Washington. These new ROCs were the
result of acquiring Artery Property Management, Inc. ("Artery") in December 1994
and assuming property management for 31 Properties in January and February 1995.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Operating
Partnership that are managed for affiliates. These revenues increased by $2.3
million and expenses increased by $1.8 million, primarily due to the management
of an additional 6,213 units for certain properties owned by various Artery
entities.
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Interest expense, including amortization of deferred financing costs, increased
by approximately $42.8 million. Of this increase, $18.1 million was due to the
interest associated with the debt assumed on the 1994 Acquired Properties and
1995 Acquired Properties, $4.1 million was due to the 1999 Notes, $7.3 million
was due to the Floating Rate Notes, $8 million was due to the Operating
Partnership's line of credit and $7.3 million was due to the 2002 Notes. This
increase was partially offset by a decrease of approximately $2 million in
interest expense due to repayment of mortgage indebtedness in the amount of
$45.5 million on seven of the Operating Partnership's Properties at various
times in 1995.
General and administrative expenses, which include corporate operating
expenses, increased by approximately $2.1 million, primarily due to an increase
in state and local income and franchise taxes, as well as adding corporate
personnel and incurring higher administrative costs associated with increasing
the size of the Operating Partnership. However, general and administrative
expenses as a percentage of total revenues decreased from 2.6% in 1994 to 2.1%
in 1995.
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of January 1, 1996, the Operating Partnership had approximately $13.4
million of cash and cash equivalents and $158 million available on its line of
credit. After taking into effect the various transactions discussed in the
following paragraphs, cash and cash equivalents at December 31, 1996 was
approximately $147.3 million and the amounts available on the Operating
Partnership's line of credit were $250 million. In addition, the Operating
Partnership had $3.6 million of proceeds from a property sale included in
deposits-restricted. The following discussion also explains the changes in net
cash provided by operating activities, net cash (used for) investing activities
and net cash provided by financing activities, all of which are presented in the
Operating Partnership's Consolidated Statements of Cash Flows.
Part of the Operating Partnership's strategy in funding the purchase of
multifamily properties is to utilize its line of credit and to subsequently
repay the line of credit from the issuance of additional equity or debt
securities. Continuing to employ this strategy, during 1996 the Company and/or
the Operating Partnership; (i) issued a total of approximately 14.4 million
Common Shares through various offerings and received total net proceeds of $483
million, (ii) completed the offering of the Series C Preferred Shares and
received net proceeds of $111.4 million, (iii) issued the 2026 Notes and
received net proceeds of $149 million and (iv) refinanced certain of its tax-
exempt bonds in two separate transactions for a total of $112.2 million of net
proceeds. All of these proceeds have been or will be utilized to purchase
additional properties and/or repay the line of credit and mortgage indebtedness
on certain properties.
With respect to Property acquisitions during the year, the Operating
Partnership purchased 49 Properties containing 15,665 units for a total
acquisition cost of $778.2 million, which included the assumption of $142.2
million of mortgage indebtedness, the forgiveness of debt of $2.7 million and
the issuance of OP Units having a value of approximately $0.4 million. These
acquisitions were primarily funded from amounts drawn on the Operating
Partnership's line of credit and a portion of the proceeds received in
connection with the transactions mentioned in the previous paragraph.
During the year ended December 31, 1996, the Operating Partnership also
disposed of five properties which generated net proceeds of approximately $40
million. Proceeds from four of the dispositions were ultimately applied to
purchase additional Properties and the remaining proceeds have been set aside
for future property acquisitions.
As of December 31, 1996, the Operating Partnership had total indebtedness
of approximately $1.3 billion, which included mortgage indebtedness of $755.4
million, of which $274 million represented tax exempt bond indebtedness, and
unsecured debt of $498.8 million (net of a $1.2 million discount). During the
year, the Operating Partnership repaid an aggregate of $57 million mortgage
indebtedness on eight of its Properties. These repayments were funded from the
Operating Partnership's line of credit or from proceeds received from the
various capital transactions mentioned in previous paragraphs. The Operating
Partnership has, from time to time, entered into interest rate protection
agreements, financial instruments, to reduce the
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
potential impact of increases in interest rates but has limited exposure to the
extent of non-performance by the counterparties of each protection agreement
since each counterparty is a major U.S. financial institution, and the Operating
Partnership does not anticipate their non-performance. No such financial
instrument has been used for trading purposes. On February 12, 1996, the
Operating Partnership entered into two interest rate protection agreements that
will hedge the Operating Partnership's interest rate risk at maturity of $175
million of indebtedness. The first agreement hedged the refinance risk of $50
million of mortgage loans scheduled to mature in September 1997 by locking the
five year Treasury Rate, commencing October 1, 1997. The second agreement hedged
the interest rate risk of the Operating Partnership's 1999 Notes by locking the
four year Treasury Rate commencing May 15, 1999. There was no current cost to
the Operating Partnership for entering into these agreements.
The Operating Partnership has a policy of capitalizing expenditures made
for new assets, including newly acquired properties and the costs associated
with placing these assets into service. Expenditures for improvements and
renovations that significantly enhance the value of existing assets or
substantially extend the useful life of an asset are also capitalized. Capital
spent for replacement-type items such as appliances, draperies, carpeting and
floor coverings, mechanical equipment and certain furniture and fixtures is also
capitalized. Expenditures for ordinary maintenance and repairs are expensed to
operations as incurred. With respect to acquired properties, the Operating
Partnership has determined that it generally spends $1,000 per unit during its
first three years of ownership to fully improve and enhance these properties to
meet the Operating Partnership's standards. In regard to capital replacements,
the Operating Partnership generally expects to spend $300 per unit on an annual
recurring basis.
During the year ended December 31, 1996, total capital expenditures for the
Operating Partnership approximated $45.9 million. Of this amount, approximately
$10.6 million related to capital improvements and major repairs for certain of
the 1994, 1995 and 1996 Acquired Properties. Capital improvements and major
repairs for all of the Operating Partnership's pre-IPO properties and Acquired
Properties approximated $13.8 million, or $232 per unit. Capital spent for
replacement-type items approximated $16.3 million, or $276 per unit, which is in
line with the Operating Partnership's expected annual recurring per unit cost.
In regard to capital spent for upgrades at certain properties and tenant
improvements with respect to the retail and commercial office space at one
Property, the amount was approximately $2.9 million. Also included in total
capital expenditures was approximately $2.3 million expended for non-real estate
additions such as computer software, computer equipment, furniture and fixtures
and leasehold improvements for the Operating Partnership's ROCs and its
corporate headquarters. Such capital expenditures were primarily funded from
working capital reserves and from net cash provided by operating activities.
Total capital expenditures for 1997 are budgeted to be approximately $48
million.
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Total distributions paid in 1996 amounted to $142.3 million, which included
the distribution declared in the fourth quarter of 1995. The fourth quarter of
1996 distributions were paid on January 10, 1997 and approximated $45.9 million.
On February 25, 1997, the Operating Partnership declared a $0.625 distribution
on each OP Unit payable to holders of record on March 28, 1997. This
distribution will be paid on April 11, 1997. The Operating Partnership also
declared a $0.585938 distribution, a $0.570313 distribution and a $0.570313
distribution to the Company as holder of the Series A Cumulative Redeemable
Preference Units, the Series B Cumulative Redeemable Preference Units and Series
C Cumulative Redeemable Preference Units, respectively. These distributions
will be paid on or about April 15, 1997.
In January 1997 the Company announced its planned Merger with Wellsford,
and upon shareholder approval by both companies, anticipates the consummation of
such Merger on or around June 1, 1997. In connection with the Merger, the
Company may have to fund up to $67 million to cover certain transaction and
termination costs, repay Wellsford's line of credit balance and fund an
investment in a Company to be spun off from Wellsford.
Subsequent to December 31, 1996, the Operating Partnership acquired eight
additional properties representing 2,575 units for a total purchase price of
approximately $144.2 million, including the assumption of approximately $50.8
million of mortgage indebtedness. These acquisitions were funded from proceeds
of the December 1996 Common Share Offering. The Operating Partnership is
actively seeking to acquire additional multifamily properties with physical and
market characteristics similar to the Properties. During the remainder of 1997,
the Operating Partnership expects to acquire between 10,000 to 15,000
multifamily units, in addition to the Merger mentioned above. However, there is
no assurance that this level of property acquisitions can be achieved since the
Operating Partnership is dependent on the capital markets in order to issue
additional equity and debt securities to permanently finance such acquisitions.
In March 1997, the Company contributed to the Operating Partnership net
proceeds of $43.2 million from the March 1997 Common Share Offerings. These
proceeds will be utilized to purchase additional properties and/or repay
mortgage indebtedness on certain properties.
The Operating Partnership anticipates that it may sell certain Properties
in the portfolio and may sell up to 2,500 multifamily units during 1997.
However, there is no assurance that this level of property dispositions may be
achieved.
The Operating Partnership expects to meet its short-term liquidity
requirements generally through its working capital and net cash provided by
operating activities. The Operating Partnership considers its cash provided by
operating activities to be adequate to meet operating requirements and payments
of distributions. The Operating Partnership also expects to meet its long-term
liquidity requirements, such as scheduled mortgage debt maturities, reduction of
outstanding amounts under its line of credit, property acquisitions and capital
improvements through the issuance of unsecured notes and debt securities
including additional OP Units as well as from undistributed FFO and proceeds
received from the disposition of certain Properties. In addition, the Operating
Partnership has certain uncollateralized Properties available for additional
mortgage borrowings in the event that the public capital markets are unavailable
to the
38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Operating Partnership or the cost of alternative sources of capital to the
Operating Partnership is too high.
In November 1996, the Operating Partnership reached an agreement with
Morgan Guaranty and Bank of America to provide the Operating Partnership a new
credit facility with potential borrowings of up to $250 million. This new line
of credit matures in November 1999 and will continue to be used for property
acquisitions and for any working capital needs. As of March 20, 1997, no
amounts were outstanding under this facility.
As of January 1, 1995, the Operating Partnership had approximately $20
million of cash and cash equivalents and $88 million available on its line of
credit. After taking into effect the various transactions discussed in the
following paragraphs, the Operating Partnership's cash and cash equivalents
balance at December 31, 1995 was approximately $13.4 million and the amounts
available on the Operating Partnership's line of credit were $158 million. In
addition, the Operating Partnership had $15 million of proceeds from various
property sales included in deposits-restricted. The following discussion also
explains the changes in net cash provided by operating activities, net cash
(used for) investing activities and net cash provided by financing activities,
all of which are presented in the Operating Partnership's Statements of Cash
Flows.
The Company completed its Second Public Debt Offering in April 1995 and
contributed to the Operating Partnership net proceeds of approximately $123.1
million, substantially all of which were applied to repay a portion of the
outstanding balance on the Operating Partnership's line of credit. In May 1995,
the Company completed its offering of the Series A Preferred Shares and
contributed to the Operating Partnership net proceeds of approximately $148.2
million. Of these proceeds, $95 million were applied to repay the remaining
outstanding balance on the Operating Partnership's line of credit. The
remaining proceeds were subsequently used to purchase additional Properties and
pay off scheduled debt maturities. In November 1995, the Company completed its
offering of the Depositary Shares and contributed to the Operating Partnership
net proceeds of approximately $121.1 million, all of which were once again
applied to repay a portion of the outstanding balance on the Operating
Partnership's line of credit.
With respect to property acquisitions during 1995, the Operating
Partnership purchased 17 Properties containing 5,035 units for a total of
$263.8 million, which included the assumption of $23.6 million of mortgage
indebtedness and the issuance of OP Units having a value of approximately $17.8
million. The Operating Partnership also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by 21 properties
containing 3,896 units. These acquisitions were primarily funded from amounts
drawn on the Operating Partnership's line of credit and a portion of the
proceeds received in connection with the Series A Preferred Shares as mentioned
in the previous paragraph.
39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During 1995, the Operating Partnership disposed of six properties which
generated net proceeds of $46.4 million and reduced mortgage indebtedness by
$20.5 million. As of December 31, 1995, approximately $15 million of such
proceeds were included in the Operating Partnership's balance sheet in its
deposits-restricted account.
As of December 31, 1995, the Operating Partnership had total indebtedness
of approximately $1 billion, which included conventional mortgages of $399.2
million, unsecured debt of $348.5 million (net of a $1.5 million discount) and
tax exempt bond indebtedness of $162.5 million and $92 million outstanding on
the Operating Partnership's line of credit. During the year, the Operating
Partnership repaid mortgage indebtedness on seven of its Properties, which
aggregated $45.5 million. These repayments were funded from the Operating
Partnership's line of credit or from proceeds received from the various capital
transactions mentioned in previous paragraphs.
During the year ended December 31, 1995, total capital expenditures for the
Operating Partnership approximated $49.8 million. Of this amount, approximately
$14.2 million, or $256 per unit, related to capital improvements and major
repairs for the Acquired Properties. Capital improvements and major repairs for
all of the Company's pre-IPO Properties approximated $13.7 million, or $247 per
unit. Capital spent for replacement-type items approximated $16.4 million, or
$296 per unit, which is in line with the Company's expected annual recurring per
unit cost. In regard to capital spent for upgrades at certain properties and
tenant improvements with respect to the retail and commercial office space at
Reserve Square, the amount was approximately $5.5 million. Also included in
total capital expenditures was approximately $3.7 million expended for non-real
estate additions such as computer software, computer equipment and furniture and
fixtures for the Operating Partnership's regional operation centers and its
corporate headquarters. Such capital expenditures were primarily funded from
working capital reserves and from net cash provided by operating activities.
FUNDS FROM OPERATIONS
Commencing in 1996, the Operating Partnership implemented the new
definition of FFO adopted by the Board of Governors of NAREIT in March 1995.
The new definition primarily eliminates the amortization of deferred financing
costs and depreciation of non-real estate as items added back to net income when
calculating FFO.
The Operating Partnership generally considers FFO to be one measure of the
performance of real estate companies. The resolution adopted by the Board of
Governors of NAREIT defines FFO as net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect FFO on the same basis.
The Operating Partnership believes that FFO is helpful to investors as a measure
of the performance of a real
40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FUNDS FROM OPERATIONS (CONTINUED)
estate company because, along with cash flows from operating activities,
financing activities and investing activities, it provides investors an
understanding of the ability of the Operating Partnership to incur and service
debt and to make capital expenditures. FFO in and of itself does not represent
cash generated from operating activities in accordance with GAAP and therefore
should not be considered an alternative to net income as an indication of the
Operating Partnership's performance or to net cash flows from operating
activities as determined by GAAP as a measure of liquidity and is not
necessarily indicative of cash available to fund cash needs. The Operating
Partnership's calculation of FFO represents net income excluding gains on
dispositions of properties, gains on early extinguishment of debt and write-off
of unamortized costs on refinanced debt, less allocation of income to the
Redeemable Preference Interests and the Series A, Series B and Series C
Cumulative Redeemable Preference Units, plus depreciation on real estate assets
and amortization of deferred financing costs related to the Predecessor
Business. The Operating Partnership's calculation of FFO may differ from the
methodology for calculating FFO utilized by other companies and, accordingly,
may not be comparable to such other companies.
For the year ended December 31, 1996 FFO increased $39.3 million
representing a 32.5% increase when compared to the year ended December 31, 1995.
For the year ended December 31, 1995, FFO, based on the Operating Partnership's
calculation of FFO, increased by $37.1 million representing a 44.2% increase
when compared to the year ended December 31, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 7, 1996, the Operating Partnership filed a Current Report on Form 8-
K, as amended, reporting the dismissal of Grant Thornton L.L.P. as its
independent public accountants that is incorporated herein by reference.
41
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a,b,c,d,e & f) TRUSTEES AND EXECUTIVE OFFICERS
-------------------------------
The Operating Partnership does not have any trustees or executive officers.
The trustees and executive officers, as of March 1, 1997, of the Company, their
ages and their positions and offices are set forth in the following table:
NAME AGE POSITIONS AND OFFICES HELD
- ---------------------------- --- ------------------------------------------------------------
Samuel Zell 55 Chairman of the Board of Trustees (term expires in 1999)
Douglas Crocker II 56 President, Chief Executive Officer and Trustee (term expires in
1998)
David J. Neithercut 41 Executive Vice President and Chief Financial Officer
Bruce C. Strohm 42 Executive Vice President, General Counsel and Secretary
Gregory H. Smith 46 Executive Vice President-Asset Management
Gerald A. Spector 50 Executive Vice President, Chief Operating Officer and Trustee
(term expires in 1997)
Frederick C. Tuomi 42 Executive Vice President-Property Management
Michael J. McHugh 41 Senior Vice President, Chief Accounting Officer and Treasurer
Alan W. George 39 Executive Vice President-Acquisitions
John W. Alexander 50 Trustee (term expires in 1999)
Henry H. Goldberg 58 Trustee (term expires in 1999)
Errol R. Halperin 56 Trustee (term expires in 1999)
James D. Harper, Jr. 63 Trustee (term expires in 1998)
Sheli Z. Rosenberg 55 Trustee (term expires in 1998)
Barry S. Sternlicht 36 Trustee (term expires in 1997)
B. Joseph White 49 Trustee (term expires in 1997)
Samuel Zell. Mr. Zell has been Chairman of the Board of Trustees of the
Company since March 1993. Mr. Zell is chairman of the board of directors of
Equity Group Investments, Inc., an owner, manager and financier of real estate
and corporations ("EGI"), American Classic Voyages Co., an owner and operator of
cruise lines ("American Classic"), and Anixter International Inc., a provider of
integrated network and cabling systems ("Anixter"). Mr. Zell is chairman of the
board and chief executive officer of both Capsure Holdings Corp., a holding
company whose principal subsidiaries are specialty property and casualty
insurers ("Capsure") and Manufactured Home Communities, Inc., a REIT
specializing in ownership and management of manufactured home communities
("MHC"). He is co-chairman of the board of directors of Revco D.S., Inc., a
drugstore chain ("Revco"), and is a director of Quality Food Centers, Inc., an
owner and operator of supermarkets, Sealy Corporation, a bedding manufacturer
("Sealy"), Ramco Energy PLC, an independent oil company based in the United
Kingdom, and TeleTech Holdings, Inc., a provider of telephone and computer based
customer care solutions.
Douglas Crocker II. Mr. Crocker has been President, Chief Executive Officer
and Trustee of the Company since March 1993. Mr. Crocker is a director of
Horizon Group, Inc., an owner,
42
PART III
developer and operator of outlet retail properties. Mr. Crocker has been
president and chief executive officer of First Capital Financial Corporation, a
sponsor of public limited real estate partnerships ("First Capital"), since
December 1992 and a director since January 1993. He has been an executive vice
president of Equity Financial and Management Company ("EF & M"), a subsidiary of
EGI, providing strategic direction and services for EGI's real estate and
corporate activities since November 1992. From September 1992 until November
1992, Mr. Crocker was a managing director of investment banking with Prudential
Securities, an investment banking firm. He was a director and president of
Republic Savings Bank, a national chartered savings and loan association
("Republic"), from December 1988 to June 1992, at which time the Resolution
Trust Corporation took control of Republic.
David J. Neithercut. Mr. Neithercut has been Executive Vice President and
Chief Financial Officer of the Company since February 1995. Mr. Neithercut had
been Vice President-Financing of the Company from September 1993 until February
1995. Mr. Neithercut was senior vice president-finance of EGI from January 1995
until February 1995. He was vice president-finance of Equity Assets Management,
Inc., a subsidiary of EGI providing real estate ownership services ("EAM"), from
October 1990 until December 1994.
Bruce C. Strohm. Mr. Strohm has been Executive Vice President and General
Counsel of the Company since March 1995 and Secretary since November 1995. Mr.
Strohm was an Assistant Secretary since March 1995 and Vice President of the
Company since its formation. From January 1988 until March 1995, Mr. Strohm
was a vice president of Rosenberg & Liebentritt, a law firm ("R & L"), most
recently serving as a member of the firm's management committee.
Gregory H. Smith. Mr. Smith has been Executive Vice President-Asset
Management of the Company since December 1994. Mr. Smith was a senior vice
president of Strategic Realty Advisors, Inc., a real estate and advisory
company, from January 1994 until December 1994. Mr. Smith had been employed at
VMS Realty Partners, a sponsor of public and private real estate limited
partnerships from June 1989 until December 1993, most recently serving as first
vice president.
Gerald A. Spector. Mr. Spector has been the Executive Vice President and
Trustee of the Company since March 1993 and Chief Operating Officer of the
Company since February 1995. Mr. Spector was the Treasurer of the Company from
March 1993 through February 1995. Mr. Spector had been an officer of EF&M since
January 1973, most recently serving as vice president from November 1994 through
January 1996. Mr. Spector was executive vice president and chief operating
officer of EF&M from September 1990 through November 1994. Mr. Spector had been
an officer of EGI since January 1988, most recently serving as vice president
from November 1994 through January 1996. Mr. Spector was executive vice
president and chief operating officer of EGI from January 1991 through January
1994.
Frederick C. Tuomi. Mr. Tuomi has been Executive Vice President-Property
Management of the Company since January 1994. Mr. Tuomi had been president of
RAM Partners, Inc., a subsidiary of Post Properties, Inc., a REIT, from March
1991 until January 1994. Mr. Tuomi was
43
PART III
president of Pilot Property Company, a property management company, from July
1988 until March 1991.
Michael J. McHugh. Mr. McHugh has been Senior Vice President of the Company
since November 1994 and Chief Accounting Officer and Treasurer of the Company
since February 1995. From May 1990 to January 1995, Mr. McHugh was senior vice
president and chief financial officer of First Capital.
Alan W. George Mr. George has been Executive Vice President-Acquisitions of
the Company since February 1997, Senior Vice President - Acquisitions of the
Company from December 1995 until February 1997 and Vice President-Acquisitions
and asset manager of the Company from December 1993 to December 1995. Mr.
George was vice president-asset management of EAM from June 1992 until December
1993. He was vice president-asset management for American Real Estate Group, a
real estate investment company, from 1990 to 1992.
John W. Alexander. Mr. Alexander became a Trustee of the Company in May
1993. He has been the president of Mallard Creek Capital Partners, Inc.,
primarily an investment company with interests in real estate and development
entities, since February 1994. He has been a partner of Meringoff Equities, a
real estate investment company and is a director of Jacor Communications, Inc.,
an owner and operator of radio stations ("Jacor").
Henry H. Goldberg. Mr. Goldberg has been a Trustee of the Company since
January 1995. Mr. Goldberg is chairman of the board, chief executive officer
and founder of Artery Properties, Inc. Founded in 1959, Artery Properties, Inc.
is a diversified real estate company. Mr. Goldberg was the direct or indirect
general partner (or an executive thereof) of seven partnerships owning
residential apartment communities and one commercial office building, each of
which filed petitions under Federal bankruptcy laws during 1991 through 1993.
Each of the partnerships is now out of bankruptcy through a reorganization plan
agreed to by the project lender.
Errol R. Halperin. Mr. Halperin became a Trustee of the Company in May 1993.
Mr. Halperin has been an attorney at Rudnick and Wolfe, a law firm, since 1979,
serving as a senior partner and a member of such firm's policy committee since
1981, specializing in Federal income tax counseling and real estate and
corporate transactions.
James D. Harper, Jr. Mr. Harper became a Trustee of the Company in May 1993.
Since 1982, Mr. Harper has been president of JDH Realty Co., a real estate
development and investment company. Since 1988 he has been a co-managing
partner in AH Development, S.E. and AH HA Investments, S.E., special limited
partnerships formed to develop over 400 acres of land in Puerto Rico.
Sheli Z. Rosenberg. Ms. Rosenberg has been a Trustee of the Company since
March 1993. She is a principal of the law firm of R&L. Ms. Rosenberg is chief
executive officer, president and a director of EGI. Ms. Rosenberg has been a
director of Jacor since 1994 and has been chairman of its board of directors
since February 1996. Ms. Rosenberg is a director of Capsure, Falcon Building
Products, Inc., a manufacturer and supplier of building products ("Falcon"),
American Classic, MHC, Anixter, Revco and Sealy.
44
PART III
Barry S. Sternlicht. Mr. Sternlicht became a Trustee of the Company in May
1993. Mr. Sternlicht has been chief executive officer and president of Starwood
Capital Group, L.P. since 1993 and president of Starwood Capital Partners, L.P.,
a privately owned real estate investment firm since its formation in 1991. Mr.
Sternlicht is chairman of the board and chief executive officer of Starwood
Lodging Trust, a REIT specializing in the ownership of hotels and co-chairman of
the board of Westin Hotels and Resorts Company, an owner and operator of hotels.
Mr. Sternlicht is a trustee of Angeles Participating Mortgage Trust, a mortgage
REIT, and a director of, U.S. Franchise Systems, a hotel franchise company and
Starwood Lodging Corporation, which manages hotels owned by Starwood Lodging
Trust.
B. Joseph White. Mr. White became a Trustee of the Company in May 1993. He
has been a professor at the University of Michigan Business School since 1987
and has served as Dean since 1991. Mr. White is a director of Falcon, Union
Pump Company, a manufacturer of pumps, and Kelly Services, Inc., an employment
agency.
Pursuant to the Company's declaration of trust, the trustees are divided into
three classes as nearly equal in number as possible, with each class having a
term of three years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Operating Partnership to
report, based on its review of reports to the SEC about transactions in its OP
Units furnished to the Operating Partnership and written representation of the
Company's trustees and executive officers and the Operating Partnership's 10%
owners.
Mr. Goldberg filed a Form 4 late to report the redemption of 300 Preference
Units and Mr. Sternlicht filed a Form 4 late to report the disposition of
325,000 OP Units.
ITEM 11. EXECUTIVE COMPENSATION
The Operating Partnership does not have any executive compensation.
Information concerning the Company's executive compensation will be contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which Annual Report is incorporated herein by reference.
45
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 1, 1997, (except as
otherwise indicated in the footnotes) regarding the beneficial ownership of the
OP Units by each person known by the Operating Partnership to be the beneficial
owner of more than five percent of the Operating Partnership's outstanding OP
Units, and in addition, each trustee of the Company, the executive officers of
the Company, and by all trustees and executive officers of the Company as a
group. Each person named in the table has sole voting and investment power with
respect to all OP Units shown as beneficially owned by such person, except as
otherwise set forth in the notes to the table.
OP Units
Beneficially Owned
-------------------------
Name and Business Percent
Address of Beneficial Owner Amount of Class
- ----------------------------------------------------- -------------- ---------
Samuel Zell (1) 3,436,060 (2) 5.81%
Partnerships and Corporations
controlled by Ann Lurie (1) 3,300,675 (3) 5.58%
Douglas Crocker II (1) -- *
Bruce C. Strohm -- *
46
PART III
Gregory H. Smith (1) -- *
Gerald A. Spector (1) 1,683 *
Frederick C. Tuomi (1) -- *
John W. Alexander (4) -- *
Henry H. Goldberg (5 & 6) 387,139 (6) *
Errol R. Halperin (7) -- *
James D. Harper Jr. (8) -- *
Sheli Z. Rosenberg (1) (9) 1,528 *
B. Joseph White (10) -- *
Barry S. Sternlicht (11) 1,899,996 (11) 3.21%
Robert A. Faith (11) 1,899,996 (11) 3.21%
Equity Residential Properties Trust (1) 51,748,007 87.55%
All trustees and officers of the Company as a group 5,723,195 9.68%
including the above-named persons (16 persons)
* Less than 1%
47
PART III
(1) The business address for each of these entities and individuals is Two
North Riverside Plaza, Chicago, Illinois 60606.
(2) Includes 3,436,060 OP Units deemed to be owned beneficially by Mr. Zell
because Mr. Zell controls or shares control of power to vote and invest
such OP Units, either as the indirect majority shareholder of a corporation
or a corporate general partner or as a general partner. Includes the
following partnerships and corporations which are under the control of Mr.
Zell: B/S Investments, First Capital Financial Corporation, FU Associates
and ROPU Associates Limited Partnership. However, Mr. Zell disclaims
ownership of 1,557,561 OP Units because the economic benefits, with respect
to such OP Units, are attributable to others. Includes 2,599,513 OP Units
which are pledged as collateral in connection with various loans. Under the
loan agreements, the lenders cannot vote (assuming exchange of the OP Units
for Common Shares) or exercise any ownership rights relating to the pledged
OP Units unless there is an event of default under the respective loan
agreements.
(3) Includes 3,300,675 OP Units deemed to be owned beneficially by Ann Lurie
because Mrs. Lurie shares control of power to vote and invest such OP
Units, either as the indirect majority shareholder of a corporation or a
corporate general partner or as a general partner. Includes the following
partnerships and corporations which are under the control of Mrs. Lurie:
B/S Investments, First Capital Financial Corporation, and ROPU Associates
Limited Partnership. However, Mrs. Lurie disclaims ownership of 1,878,499
OP Units because the economic benefits, with respect to such OP Units, are
attributable to others. Includes 2,599,513 OP Units which are pledged as
collateral in connection with various loans. Under the loan agreements, the
lenders cannot vote (assuming exchange of the OP Units for Common Shares)
or exercise any ownership rights relating to the pledged OP Units unless
there is an event of default under the respective loan agreements.
(4) Mr. Alexander's business address is c/o Mallard Creek Capital Partners, 227
North Church Street, Suite 200 - Box E, Charlotte, North Carolina 28202.
(5) The business address for Mr. Goldberg is c/o Artery Properties, Inc. Artery
Plaza West, 4733 Bethesda Avenue, Suite 400, Bethesda, Maryland 20814.
(6) Includes 48,078 OP Units held by Mr. Goldberg's spouse. Also includes
75,714 OP Units held by GGL Investment Partners #1 ("GGL"), a Maryland
general partnership. Mr. Goldberg is a general partner of GGL with a 66.67%
percentage interest. Mr. Goldberg disclaims beneficial ownership of the OP
Units held by his spouse and 33.33% of the OP Units held by GGL.
(7) Mr. Halperin's business address is Rudnick & Wolfe, 203 North LaSalle
Street, Suite 1800, Chicago, Illinois 60601.
48
PART III
(8) Mr. Harper's business address is JDH Realty Company, 3250 Mary Street,
Suite 206, Coconut Grove, Florida 33133.
(9) Ms. Rosenberg is a trustee or a co-trustee for the benefit of Mrs. Lurie
and her family and certain trusts for the benefits of Mr. Zell and his
family and accordingly may be deemed to control or share control or share
the power to vote and invest OP Units attributable to Samuel Zell and Ann
Lurie. Ms. Rosenberg disclaims beneficial ownership of all OP Units owned
by trusts for which she is a trustee or co-trustee.
(10) Mr. White's business address is Office of the Dean, School of Business
Administration, University of Michigan, 701 Tappen, Ann Arbor, Michigan
48109.
(11) The business address for Mr. Sternlicht is Three Pickwick Plaza, Suite 250,
Greenwich, Connecticut 06830 and the business address for Mr. Faith is c/o
Greystar Capital Partners, L.P., Two Riverway, Suite 850, Houston, Texas
77056. Each of Messrs. Sternlicht and Faith may be deemed to be the
beneficial owner of these 1,899,996 OP Units because each controls or
shares control of the power to vote and invest the OP Units owned by the
Starwood Original Owners. However, Mr. Sternlicht disclaims beneficial
ownership of 1,601,665 OP Units and Mr. Faith disclaims beneficial
ownership of 1,625,986 because the economic benefits, with respect to such
OP Units are attributable to other partners in the Starwood Original
Owners. Includes the following partnerships and corporations which are
under the control of Messrs. Sternlicht and Faith:
Sofistar I Limited Partnership
Breton/Hammocks Limited Partnership
SCP Nashville Partners, L.P.
Starwood Opportunity Fund I, L.P.
Starwood Opportunity Fund IA, L.P.
Starwood Mortgage Investors III, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Pursuant to the terms of the partnership agreement for the Operating
Partnership, the Operating Partnership is required to reimburse the Company for
all expenses incurred by the Company in excess of income earned by the Company
through its indirect 1% ownership of various Financing Partnerships. Amounts
paid on behalf of the Company are reflected in the Consolidated Statement of
Operations as general and administrative expenses.
During 1996, certain related entities provided services to the Operating
Partnership and the Company. These included, but were not limited to, Rosenberg
& Liebentritt, P.C., which provided legal services; Greenberg & Pociask, Ltd.,
which provided tax and accounting services; and First Capital Financial
Corporation, which provided accounting services. Fees paid to Rosenberg &
Liebentritt, P.C., of which Ms. Rosenberg has been chairman of the board since
March 1995 and was president from 1980 until March 1995,
49
PART III
amounted to approximately $0.7 million for the year ended December 31, 1996.
Fees paid to the other affiliates mentioned above amounted in the aggregate to
approximately $4,400 for the year ended December 31, 1996. In addition, The
Riverside Agency, Inc., which provided insurance brokerage services, was paid
fees and reimbursed premiums and loss claims in the amount of $4.1 million for
the year ended December 31, 1996. As of December 31, 1996, no amounts were owed
to The Riverside Agency, Inc. As of December 31, 1996, $315,700 was owed to
Rosenberg & Liebentritt, P.C. for legal fees incurred in connection with new
acquisitions and securities matters.
Equity Group Investments, Inc. ("EGI") and certain of its subsidiaries,
including EAM, Eagle Flight Services, Equity Properties & Development, L.P. and
EPMC have provided certain services to the Operating Partnership and the Company
which include, but are not limited to, financial and accounting services, tax
services, investor relations, corporate secretarial, computer and support
services, real estate tax evaluation services, financing services,
telecommunications services, information systems services and property
development services. Fees paid to EGI for these services amounted to $1.3
million for the year ended December 31, 1996. Amounts due to EGI were
approximately $0.3 million as of December 31, 1996.
Artery Property Management, Inc. ("Artery") provided consulting services
with regard to property acquisitions and additional business opportunities and
was paid approximately $0.2 million for the year ended December 31, 1996.
During 1995, the Operating Partnership engaged Rudnick & Wolfe, a law firm
in which Mr. Halperin is a partner, to perform legal services. Fees paid to
this firm amounted to approximately $4,300 for the year ended December 31, 1996.
Management Corp. has lease agreements with affiliated parties covering
office space occupied by regional operation centers located in Chicago, Illinois
("Midwest ROC") and Tampa, Florida ("Southeast ROC") and the corporate
headquarters located in Chicago, Illinois. In connection with these affiliated
lease agreements, Management Corp. paid Equity Office Holdings, L.L.C. ("EOH")
$118,919 in connection with the Midwest ROC, $137,638 in connection with the
Southeast ROC and $409,392 in connection with the space occupied by the
corporate headquarters for the year ended December 31, 1996. As of December
31, 1996, $46,435 was owed to EOH.
In addition, the Operating Partnership and the Company have provided
acquisitions, asset and property management services to certain related entities
for properties not owned by the Company. Fees received for providing such
services were approximately $6.7 million for the year ended December 31, 1996.
(b) Rosenberg and Liebentritt, P.C. provides legal services to the
Operating Partnership and the Company. Sheli Z. Rosenberg, a Trustee of the
Company, is a principal of this firm. The Operating Partnership has also
engaged Seyfarth, Shaw, Fairweather & Geraldson, a law firm in which Ms.
Rosenberg's husband is a partner, to provide legal services from time to time
relating to employee benefit issues.
(c) Mr. Goldberg is a two-thirds owner and chairman of the board of
directors of Artery Property Management, Inc. ("APMI"), a real estate property
management company. In connection with the acquisition of certain properties
from Mr. Goldberg and his affiliates during 1995, the Operating Partnership made
a loan of $15,212,000 evidenced by two notes and secured by 465,545 OP Units.
Mr. Goldberg estimates that his interest in this transaction equaled
$26,000,000. The largest aggregate amount of indebtedness outstanding under the
loan at any time during 1996 and the amount outstanding as of December 31, 1996
was $15,212,000. The first note issued in the amount of $1,056,000 accrues
interest at the prime rate plus 3-1/2% per annum. The second note issued in the
amount of $14,156,000 bears interest equal to approximately $300,000 per year
plus the amount of distributions payable on 433,230 of the OP Units pledged as
collateral for this loan.
Mr. Tuomi borrowed $100,000 from one of the Management Partnerships in 1994
related to his purchase of a home in the Chicago area. The loan bears interest
at 30-day LIBOR plus 2% with interest due quarterly. The largest principal
amount owed in 1996 was $90,000 and the principal balance at December 31, 1996
was $72,000. The loan is payable in equal principal installments of $18,000 over
five years.
Mr. Tuomi borrowed $40,000 from the Operating Partnership in 1996 related to
the payment of a tax liability incurred when the restrictions relating to 1,261
Common Shares lapsed on December 16, 1996. The loan carried interest at the rate
of 8-1/2% with the outstanding principal balance, together with any accrued and
unpaid interest due on the earlier of March 31, 1997 or the sale of Mr. Tuomi's
1,261 Common Shares. The largest principal amount owed in 1996 was $40,000 and
the principal balance at December 31, 1996 was $40,000. Payment was secured by a
pledge of Mr. Tuomi's 1,261 Common Shares. The loan was paid in full on March 5,
1997.
Mr. Crocker borrowed $78,000 from the Operating Partnership in December
1995. The loan bears interest at 30 day LIBOR plus 2%. The largest principal
amount owed in 1996 was $78,000 and the principal balance at December 31, 1996
was $78,000. Interest is due monthly with the outstanding balance due on March
31, 1997. Payment was secured by a pledge of Mr. Crocker's restricted share
awards issued in January 1996. The loan was paid in full on March 3, 1997.
Mr. Crocker borrowed $140,000 from the Operating Partnership in April 1996
related to the payment of a tax liability incurred. The loan bears interest at
30-day LIBOR plus 2%. The largest principal amount owed in 1996 was $140,000 and
the principal balance at December 31, 1996 was $140,000. Interest is due monthly
with the outstanding balance due on March 1, 1998. Payment was secured by a
pledge of Mr. Crocker's restricted share awards issued in January 1996.
Mr. Crocker borrowed $564,000 from the Operating Partnership during 1996.
The loan bears interest at monthly LIBOR plus 2% with interest due quarterly.
The largest principal amount owed in 1996 was $564,000 and the principal balance
at December 31, 1996 was $564,000. Payment is secured by a pledge of Mr.
Crocker's Common Shares. Payments of principal shall be payable annually in the
amount of $80,580 on March 15, 1997 and in the amounts $80,570 on March 15th of
each of the next six succeeding years. A payment in the amount of $80,580 was
received in February 1997 and the principal balance now is $483,420.
The executive officers listed below are indebted to the Company as a result
of purchasing Common Shares from the Company in June 1994. The loans accrue
interest, payable quarterly in arrears, at the applicable federal rate, as
defined in the Internal Revenue Code of 1986, as amended, in effect at the date
of each loan. The loans are due and payable on the first to occur of the date in
which the individual leaves the Company, other than by reason of death or
disability, or the respective loan's due date. The loans are with recourse to
the respective individuals and are collateralized by a pledge of the Common
Shares purchased. All dividends paid on pledged Common Shares in excess of the
then marginal tax rate on the taxable portion of such dividends are used to pay
interest and principal on the loans.
Largest Principal Principal
Amount Owed Balance at Interest
Name in 1996 December 31, 1996 Rate
- --------------------------------------------------------------------
Douglas Crocker II $ 878,776 $ 850,318 6.21%
Douglas Crocker II 983,171 960,748 6.15%
Douglas Crocker II 944,584 944,584 7.26%
Douglas Crocker II 1,901,807 1,901,807 7.93%
Frederick C. Tuomi 314,861 314,861 7.26%
(d) None
50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
(1 & 2) See Index to Financial Statements and Schedule on page F-1 of this
Form 10-K.
(3) Exhibits:
2.1* Property Contribution Agreement (Zell Properties and EPMC)
2.2* Property Contribution Agreement (Starwood Properties)
4.1*** Indenture, dated as of May 16, 1994, by and among the Operating
Partnership, as obligor, the Company, as guarantor and The First
National Bank of Chicago, as trustee in connection with 81/2% senior
notes due May 15, 1999
4.2*** Indenture, dated October 1, 1994, between the Operating Partnership,
as obligor and The First National Bank of Chicago, as trustee in
connection with up to $500 million of debt securities
4.3***** Registration Rights and Lock-Up Agreement (Beauchamp)
10.1* Agreement of Limited Partnership of ERP Operating Limited Partnership
10.1A* Second Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.1B*** Third Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.1C**** Fourth Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.12* Form of Property Management Agreement (REIT properties)
10.13*** Form of Property Management Agreement (Non-REIT properties)
10.14* Form of Contribution Agreement dated as of August 11, 1993
10.15** Revolving Credit Agreement by and among the Operating Partnership, the
Company, NationsBank of Texas, N.A., and Wells Fargo Realty Advisors
Funding, Incorporated.
10.15A** First Amendment to Revolving Credit Agreement by and among the
Operating Partnership, the Company, NationsBank of Texas, N.A. and
Wells Fargo Realty Advisors Funding, Incorporated
10.16** Revolving Credit Agreement by and among the Operating Partnership, the
Company, The First National Bank of Chicago and First National Bank
Association, and First Amendment to Revolving Credit Agreement
10.16A** Second Amendment to Revolving Credit Agreement by and among the
Operating Partnership, the Company, The First National Bank of
Chicago, First National Bank Association and the First National Bank
of Boston
10.17*** Credit Agreement by and among the Operating Partnership, as borrower,
the Company, Wells Fargo Realty Advisors Funding, Incorporated, as
lender, Wells Fargo Realty Advisors Funding, Incorporated, as lender,
Wells Fargo Realty Advisors Funding, as agent, and the First National
Bank of Chicago and NationsBank of Texas, N.A., as co-agents, dated
November 14, 1994
51
PART IV
10.18*** Purchase and Sale Agreement by and among Real Estate Equities Joint
Venture as Seller and EQR-EXL Vistas, Inc. and Executive Life
Insurance Company in Rehabilitation/Liquidation, dated August 17, 1994
10.19 Revolving Credit Agreement, dated as of November 15, 1996 among the
Operating Partnership and Morgan Guaranty Trust Company of New York,
as lead agent and Bank of America Illinois, as co-lead agent
10.20 Amended and Restated Master Reimbursement agreement, dated as of
November 1, 1996 by and between Federal National Mortgage Association
and EQR-Bond Partnership
12 Computation of Ratio of Earnings to Fixed Charges
21 List of Subsidiaries of the Operating Partnership
23.1 Consent of Grant Thornton LLP
23.2 Consent of Ernst & Young LLP
24.1 Power of Attorney for John W. Alexander dated February 24, 1997
24.2 Power of Attorney for James D. Harper, Jr. dated February 24, 1997
24.3 Power of Attorney for Errol R. Halperin dated February 24, 1997
24.4 Power of Attorney for B. Joseph White dated February 24, 1997
24.5 Power of Attorney for Barry S. Sternlicht dated February 24, 1997
24.6 Power of Attorney for Henry H. Goldberg dated February 24, 1997
______________________
* Included as an exhibit to the Company's Form S-11 Registration Statement,
File No. 33-63158, and incorporated herein by reference.
** Included as an exhibit to the Company's Form S-11 Registration Statement,
File No. 33-72080, and incorporated herein by reference.
*** Included as an exhibit to the Operating Partnership's Form 10/A, dated
December 12, 1994, File No. 0-24920, and incorporated herein by
reference.
**** Included as an exhibit to the Operating Partnership's Form 10-Q for the
quarter ended September 30, 1995, dated November 7, 1995, and
incorporated herein by reference.
***** Included as an exhibit to the Operating Partnership's Form 10-K for the
year ended December 31, 1995
(b) Reports on Form 8-K:
A Report on Form 8-K dated November 15, 1996 reporting information on
property acquisitions.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Index to Financial Statements attached hereto on page F-1 of this Form
10-K.
52
PART IV
SIGNATURES
----------
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
behalf by the undersigned thereunto duly authorized.
ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL PROPERTIES TRUST,
ITS GENERAL PARTNER
Date: March 20, 1997 By: /s/ Douglas Crocker II
-------------- -------------------------------------------
Douglas Crocker II
President, Chief Executive Officer,
Trustee and *Attorney-in-Fact
Date: March 20, 1997 By: /s/ David J. Neithercut
-------------- -------------------------------------------
David J. Neithercut
Executive Vice-President and
Chief Financial Officer
Date: March 20, 1997 By: /s/ Michael J. McHugh
-------------- -------------------------------------------
Michael J. McHugh
Senior Vice-President, Chief Accounting
Officer, Treasurer and *Attorney-in-fact
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 20, 1997 By: /s/ Samuel Zell
--------------- -------------------------------------------
Samuel Zell
Chairman of the Board of Trustees
Date: March 20, 1997 By: /s/ Gerald A. Spector
-------------- -------------------------------------------
Gerald A. Spector
Executive Vice-President, Chief
Operating Officer and Trustee
Date: March 20, 1997 By: /s/ Sheli Z. Rosenberg
-------------- -------------------------------------------
Sheli Z. Rosenberg
Trustee
53
PART IV
SIGNATURES-CONTINUED
--------------------
Date: March 20, 1997 By: /s/ James D. Harper
-------------- -------------------------------------------
James D. Harper
Trustee
Date: March 20, 1997 By: /s/ Errol R. Halperin
-------------- -------------------------------------------
Errol R. Halperin
Trustee
Date: March 20, 1997 By: /s/ Barry S. Sternlicht
-------------- -------------------------------------------
Barry S. Sternlicht
Trustee
Date: March 20, 1997 By: /s/ John W. Alexander
-------------- -------------------------------------------
John W. Alexander
Trustee
Date: March 20, 1997 By: /s/ B. Joseph White
-------------- -------------------------------------------
B. Joseph White
Trustee
Date: March 20, 1997 By: /s/ Henry H. Goldberg
-------------- -------------------------------------------
Henry H. Goldberg
Trustee
54
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
ERP OPERATING LIMITED PARTNERSHIP
PAGE
----
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Independent Auditors............................... F-2
Report of Independent Accountants............................ F-3
Consolidated Balance Sheets as of
December 31, 1996 and 1995................................ F-4
Consolidated Statements of Operations for
the years ended December 31, 1996, 1995 and 1994.......... F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995 and 1994.......... F-6 to F-7
Consolidated Statements of Partners' Capital
for the years ended December 31, 1996, 1995 and 1994...... F-8
Notes to Consolidated and Combined Financial Statements...... F-9 to F-31
SCHEDULE FILED AS PART OF THIS REPORT
Report of Independent Accountants............................ S-1
Schedule III - Real Estate and Accumulated Depreciation...... S-2 to S-9
F-1
REPORT OF INDEPENDENT AUDITORS
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheet of ERP Operating
Limited Partnership (the "Operating Partnership") as of December 31, 1996 and
the related consolidated statements of operations, partners' capital and cash
flows for the year then ended. Our audit also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Operating Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ERP
Operating Limited Partnership at December 31, 1996, and the consolidated results
of its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 12, 1997
except for Note 21, as to which the date is
March 20, 1997
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheets of ERP Operating
Limited Partnership (the "Operating Partnership") as of December 31, 1995, and
the related consolidated statements of operations, changes in partners' capital
and cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ERP Operating
Limited Partnership as of December 31, 1995, and the consolidated results of its
operations, and cash flows for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Chicago, Illinois
February 14, 1996
F-3
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
December 31, December 31,
1996 1995
-------------- --------------
ASSETS
Investment in rental property
Land $ 284,879 $ 210,439
Depreciable property 2,698,631 1,978,500
-------------- --------------
2,983,510 2,188,939
Accumulated depreciation (301,512) (218,339)
-------------- --------------
Investment in rental property, net of accumulated depreciation 2,681,998 1,970,600
Cash and cash equivalents 147,271 13,428
Investment in mortgage notes, net 86,596 87,154
Rents receivable 1,450 1,073
Deposits - restricted 20,637 18,272
Escrow deposits - mortgage 15,434 16,745
Deferred financing costs, net 14,555 12,653
Other assets 18,186 21,335
-------------- --------------
Total assets $ 2,986,127 $ 2,141,260
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 755,434 $ 561,695
Notes, net 498,840 348,524
Line of credit - 92,000
Accounts payable and accrued expenses 33,117 23,544
Accrued interest payable 12,737 8,354
Due to affiliates 628 1,568
Rents received in advance and other liabilities 15,838 11,138
Security deposits 14,128 10,131
Distributions payable 45,938 30,826
-------------- --------------
Total liabilities 1,376,660 1,087,780
-------------- --------------
Commitments and contingencies
Redeemable Preference Interests - 24,578
-------------- --------------
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 -
-------------- --------------
Partners' capital:
General Partner 1,065,830 606,517
Limited Partners 150,637 144,385
-------------- --------------
Total partners' capital 1,216,467 750,902
-------------- --------------
Total liabilities and partners' capital $ 2,986,127 $ 2,141,260
============== ==============
See accompanying notes.
F-4
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per OP Unit data)
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-----------------------------------
REVENUES
Rental income $ 454,412 $ 373,919 $ 220,727
Fee and asset management 6,749 7,030 4,739
Interest income - investment in mortgage notes 12,819 4,862 -
Interest and other income 4,405 4,573 5,568
--------- --------- ---------
Total revenues 478,385 390,384 231,034
--------- --------- ---------
EXPENSES
Property and maintenance 127,172 112,186 66,534
Real estate taxes and insurance 44,128 37,002 23,028
Property management 17,512 15,213 10,249
Property management - non-recurring - - 879
Fee and asset management 3,837 3,887 2,056
Depreciation 93,253 72,410 37,273
Interest:
Expense incurred 81,351 78,375 37,044
Amortization of deferred financing costs 4,242 3,444 1,930
General and administrative 9,857 8,129 6,053
--------- --------- ---------
Total expenses 381,352 330,646 185,046
--------- --------- ---------
Income before gain on disposition of properties and
extraordinary items 97,033 59,738 45,988
Gain on disposition of properties 22,402 21,617 -
--------- --------- ---------
Income before extraordinary items 119,435 81,355 45,988
Write-off of unamortized costs on refinanced debt (3,512) - -
Gain on early extinguishment of debt - 2,000 -
--------- --------- ---------
Net income $ 115,923 $ 83,355 $ 45,988
========= ========= =========
ALLOCATION OF NET INCOME:
Redeemable Preference Interests $ 263 $ 1,508 $ 108
========= ========= =========
9 3/8% Series A Cumulative Redeemable
Preference Units $ 14,345 $ 8,367 $ -
========= ========= =========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 11,406 $ 1,742 $ -
========= ========= =========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 3,264 $ - $ -
========= ========= =========
General Partner 72,609 57,610 34,418
Limited Partners 14,036 14,128 11,462
--------- --------- ---------
$ 86,645 $ 71,738 $ 45,880
========= ========= =========
Net income per weighted average OP Unit outstanding $ 1.70 $ 1.68 $ 1.34
========= ========= =========
Weighted average OP Units outstanding 51,108 42,749 34,150
========= ========= =========
See accompanying notes.
F-5
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 115,923 83,355 45,988
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 93,253 72,410 37,273
Amortization of deferred financing costs (including discount on
1999 and 2002 Notes) 4,558 3,717 2,039
Amortization of discount on investment in mortgage notes (613) - -
Gain on disposition of properties (22,402) (21,617) -
Gain on early extinguishment of debt - (2,000) -
Write-off of unamortized costs on refinanced debt 3,512 - -
Changes in assets and liabilities:
(Increase) in rents receivable (409) (259) (641)
(Increase) in deposits - restricted (556) (218) (1,849)
Decrease (increase) in other assets 158 1,913 (7,906)
(Decrease) increase in due to affiliates (857) (2,305) 1,261
Increase in accounts payable and accrued expenses 9,901 3,765 9,286
Increase in accrued interest payable 4,383 2,616 4,483
Increase in rents received in advance and other liabilities 4,079 157 4,063
--------- --------- ---------
Net cash provided by operating activities 210,930 141,534 93,997
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in rental properties, net (641,015) (239,964) (855,156)
Improvements to rental property (33,001) (32,800) (16,721)
Additions to non-rental property (2,347) (3,669) (2,417)
Proceeds from disposition of rental property 40,093 46,426 -
Purchase of contract rights - - (5,836)
Decrease (increase) in mortgage deposits 1,311 (1,299) (3,541)
Deposits (made) on rental property acquisitions (16,916) (15,107) (5,200)
Deposits applied on rental property acquisitions 15,107 5,200 -
Decrease (increase) in investment in mortgage notes 1,171 (87,154) -
Other investing activities (58) 4,349 (7,644)
--------- --------- ---------
Net cash (used for) investing activities (635,655) (324,018) (896,515)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from General Partner 597,752 270,311 557,342
Redemption of Preference Interests (1,083) (1,352) -
Distributions paid to partners (142,304) (95,875) (59,780)
Proceeds from sale of 1999 Notes, net of discount - - 124,131
Proceeds from sale of Floating Rate Notes - - 100,000
Proceeds from sale of 2002 Notes, net of discount - 124,011 -
Proceeds from sale of 2026 Notes 150,000 - -
Principal receipts on employee notes 76 143 29
Loan to seller - - (15,212)
Proceeds from refinancing of tax-exempt bonds, net 112,209 - -
Proceeds from line of credit 250,000 317,000 376,800
Repayments on line of credit (342,000) (387,000) (247,400)
Principal payments on mortgage notes payable (60,706) (47,787) (25,872)
Loan and bond acquisition costs (9,111) (4,558) (7,026)
Increase in security deposits 3,735 948 5,125
Other financing activities - 33 358
--------- --------- ---------
Net cash provided by financing activities 558,568 175,874 808,495
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 133,843 (6,610) 5,977
Cash and cash equivalents, beginning of year 13,428 20,038 14,061
--------- --------- ---------
Cash and cash equivalents, end of year $ 147,271 13,428 20,038
========= ========= =========
See accompanying notes.
F-6
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------------------------------
Supplemental information:
Cash paid during the period for interest $ 76,968 $ 75,759 $ 32,561
========= ========= =========
Mortgage loans assumed through acquisitions of rental properties $ 142,237 $ 23,554 $ 388,357
========= ========= =========
Rental property assumed through foreclosure $ 10,854 $ - $ -
========= ========= =========
Net rental properties contributed in exchange for OP units $ 440 $ 18,811 $ -
========= ========= =========
Rental property conveyed in exchange for release of mortgage
indebtedness $ - $ 20,500 $ -
========= ========= =========
Stated value of Preference Units issued for rental properties $ - $ - $ 41,213
========= ========= =========
Conversion of mortgage note receivable $ - $ - $ 25,000
========= ========= =========
See accompanying notes.
F-7
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(Amounts in thousands)
Year Ended December 31,
------------------------------------------------
1996 1995 1994
------------------------------------------------
Accumulated partners' capital, beginning of year 1,053,480 $ 787,374 $ 229,644
Net income for the year ended December 31, 115,923 83,355 45,988
Capital contributions from General Partner 598,123 271,273 556,779
Issuance of Redeemable Preference Interests, net - - 26,001
Redemption of Preference Interests (1,083) (1,352) -
Issuance of OP Units in connection with acquisitions 440 18,811 -
Distributions declared to Redeemable
Preference Interests for the year ended December 31, - (10,109) -
Distributions declared to partners for the year ended December 31, (157,416) (95,872) (71,038)
-------------- -------------- -------------
Accumulated partners' capital, end of period 1,609,467 $ 1,053,480 $ 787,374
============== ============== =============
Allocation of partners' capital:
General Partner, partner's capital, end of year 1,065,830 $ 606,517 $ 609,936
============== ============== =============
Limited Partners, partners' capital, end of year 150,637 $ 144,385 $ 151,437
============== ============== =============
Redeemable Preference Interests, end of year - $ 24,578 $ 26,001
============== ============== =============
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 $ - $ -
============== ============== =============
See accompanying notes.
F-8
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
ERP Operating Limited Partnership (the "Operating Partnership"), an Illinois
limited partnership, was formed to conduct the multifamily residential property
business of Equity Residential Properties Trust (the "General Partner" or the
"Company"). The Company is a Maryland real estate investment trust formed on
March 31, 1993. The Company conducts substantially all of its operations
through the Operating Partnership. The Company, through the Operating
Partnership, is the successor to the multifamily residential property business
of Equity Properties Management Corp. ("EPMC"), an entity controlled by Mr.
Samuel Zell, Chairman of the Board of Trustees of the Company, and a series of
other entities which owned 69 of the properties (the "Initial Properties").
Forty-six of the Initial Properties (the "Zell Properties") were contributed or
sold by entities substantially controlled by Mr. Zell and primarily owned by Mr.
Zell and trusts for the benefit of Mr. Robert Lurie, a deceased partner of Mr.
Zell. The remaining 23 of the Initial Properties (the "Starwood Properties")
were acquired from entities controlled by Starwood Capital Partners, L.P.
("Starwood") and its affiliates ("Starwood Original Owners"). Prior to the
completion of the Company's initial public offering (the "IPO") of 13,225,000
common shares of beneficial interest, $0.01 par value per share ("Common
Shares") EPMC provided multifamily residential management services (the
"Management Business") to the Zell Properties.
The Company, through the Operating Partnership, is engaged in the
acquisition, disposition, ownership, management and operation of multifamily
properties. As of December 31, 1996, the Operating Partnership controlled a
portfolio of 218 multifamily properties (individually a "Property and
collectively the "Properties") containing 67,705 apartment units. The Operating
Partnership's interest in six of these Properties at the time of acquisition
thereof consisted solely of ownership of debt collateralized by such Properties.
The Operating Partnership also has an investment in partnership interests and
subordinated mortgages collateralized by 21 properties (the "Additional
Properties"). The Properties and Additional Properties are located throughout
the United States in the following 30 states: Arizona, Arkansas, California,
Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Michigan, Minnesota, Missouri, New Hampshire, New Jersey,
New Mexico, Nevada, North Carolina, Ohio, Oklahoma, Oregon, South Carolina,
Tennessee, Texas, Virginia and Washington.
In exchange for contributing 33 of the Zell Properties and the Management
Business and the Starwood Properties, the 33 existing entities (the "Zell
Original Owners"), and entities controlled by Starwood and EPMC received a total
of 8,433,238 partnership interests ("OP Units") (including an additional 93,639
OP Units issued in August 1994 and 1,835 OP Units issued in September 1995) in
the Operating Partnership. The other 13 Zell Properties were acquired from 13
existing partnerships (the "Zell Sellers") for $43.5 million in cash. The
Management Business, the Zell Original Owners and the Zell Sellers are
collectively the "Predecessor Business."
The Company has formed a series of partnerships (the "Financing
Partnerships") which beneficially own certain Properties encumbered by mortgage
indebtedness. The Operating Partnership owns a 1% limited partner interest and a
98% general partner interest in each Financing Partnership. The remaining 1%
general partner interest in each Financing Partnership is owned by
F-9
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
various qualified REIT subsidiaries wholly owned by the Company (each a "QRS
Corporation"). Rental income from the Properties that are beneficially owned by
a Financing Partnership is used first to service the applicable mortgage debt
and pay other operating expenses and any excess is then distributed 1% to the
applicable QRS Corporation, as the general partner of such Financing
Partnership, and 99% to the Operating Partnership, as sole 1% limited partner
and as the 98% general partner. The Company has also formed a series of limited
liability companies (the "LLCs") which own certain Properties and one such LLC
which has an investment in partnership interests and subordinated mortgages
collateralized by the Additional Properties. The Operating Partnership is a 99%
managing member of each LLC and a QRS Corporation is a 1% member of each LLC.
As of December 31, 1996, all of the Properties were managed by Equity
Residential Properties Management Limited Partnership, the successor to the
Management Business contributed by EPMC contemporaneously with the IPO and
Equity Residential Properties Management Limited Partnership II (collectively,
the "Management Partnerships"). The Management Partnerships collect a property
management fee consistent with a reasonable arms-length charge for the
performance of such services. The sole general partners of the Management
Partnerships with a 1% interest is the Operating Partnership. The sole limited
partners of the Management Partnerships are Equity Residential Properties
Management Corp. ("Management Corp.") and Equity Residential Properties
Management Corp. II ("Management Corp. II"), respectively, and each has a 99%
interest in the respective partnership.
2. BASIS OF PRESENTATION
The balance sheets as of December 31, 1996 and 1995 and the statements of
operations, cash flows and partners' capital for the years ended December 31,
1996, 1995 and 1994 represent the consolidated financial information of the
Operating Partnership and its interests in its subsidiaries.
Due to the Operating Partnership's ability to control either through
ownership or by contract the Management Partnerships, the Financing
Partnerships and the LLCs, each such entity has been consolidated with the
Operating Partnership for financial reporting purposes. In regard to Management
Corp. and Management Corp. II, the Operating Partnership does not have legal
control; however, these entities are consolidated for financial reporting
purposes, the effects of which are immaterial. Certain reclassifications have
been made to the prior period's financial statements in order to conform with
the current period presentation.
Minority interests represented by the Company's indirect 1% interest in
various Financing Partnerships and LLCs are immaterial and have not been
accounted for in the Consolidated Financial Statements. In addition, certain
amounts due from the Company for its 1% interest in the Financing Partnerships
has not been reflected in the Consolidated Balance Sheets since such amounts are
immaterial to the Consolidated Balance Sheets.
F-10
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. PARTNER'S CAPITAL
In August 1995, the Company, as general partner of the Operating Partnership,
approved the addition of new limited partners (the "Beauchamp Partners") to the
Operating Partnership in connection with the acquisition of a portfolio of four
properties and issued the Beauchamp Partners OP Units in connection therewith.
In addition, in October 1995, as consideration under an earnout agreement
related to four Properties contributed to the Operating Partnership in April
1994, the Operating Partnership issued 32,153 OP Units in connection therewith
to JG Financial Management Services ("JG Financial"). JG Financial converted its
OP Units into Common Shares in January 1996.
The limited partners of the Operating Partnership as of December 31, 1996
consist primarily of the Zell Original Owners that contributed 33 of the Zell
Properties to the Operating Partnership, entities controlled by Starwood, the
Beauchamp Partners and EPMC (collectively, the "Limited Partners") and are
represented by 7,858,228 OP Units which are exchangeable on a one-for-one basis
into the Company's Common Shares. As of December 31, 1996, the General Partner
had an approximate 86.68% interest and the Limited Partners had an approximate
13.32% interest.
In regards to the General Partner, net proceeds from the various offerings of
the Company as described in the following paragraphs of this footnote, have been
contributed by the Company to the Operating Partnership in return for an
increased ownership percentage. Due to the Limited Partner's ability to convert
their interest into an ownership interest in the General Partner, the net
offering proceeds are allocated between the Company (as general partner) and the
Limited Partners (to the extent represented by OP Units) to account for the
change in their respective percentage ownership of the equity of the Operating
Partnership.
On January 26, 1994, the Company completed a second public offering of
5,750,000 additional Common Shares (the "Second Public Offering"). The Second
Public Offering price was $29 per Common Share resulting in gross proceeds of
$166.8 million. Proceeds to the Company, net of underwriters' discount and
estimated offering expenses, were approximately $157.4 million.
Between April, 1994 and June, 1994, the Company sold 1,569,270 unregistered
Common Shares to six accredited institutional investors (the "Private Equity
Offering") and contributed net proceeds to the Operating Partnership of
approximately $47 million.
On July 27, 1994, the Company completed a third public offering of 9,200,000
additional Common Shares (the "Third Public Offering"). The Third Public
Offering price was $31.25 per Common Share resulting in gross proceeds of $287.5
million. Proceeds to the Company, net of underwriters' discount and estimated
offering expenses were approximately $271.7 million.
In September 1994, the Company registered 5,000,000 Common Shares pursuant to
an equity shelf registration statement (the "Equity Shelf Registration") of
which 2,735,320 registered Common Shares were sold in separate privately
negotiated transactions completed in October 1994 (collectively, the "Shelf
Offering"). The Company received net proceeds of approximately $81
F-11
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
million in connection therewith. The prices at which the Common Shares were sold
ranged from $29.34 to $30.17.
On September 11, 1995, the Company filed with the Securities and Exchange
Commission (the "SEC") a Form S-3 Registration Statement to register up to $500
million of its non-voting preferred shares of beneficial interest, $0.01 par
value per share ("Preferred Shares"), Common Shares and depositary shares,
pursuant to a shelf offering (the "Second Shelf Registration").
In January 1996, the Company completed an offering of 1,725,000 registered
Common Shares, which were sold in a privately negotiated transaction at a net
price of $29.375 per share (the "January 1996 Common Share Offering") and
received net proceeds of approximately $50.7 million in connection therewith.
Also in January 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 1,676,423 Common Shares which may be sold by holders
thereof or by holders of OP Units upon the issuance of Common Shares in exchange
for such OP Units.
In February 1996, the Company completed an offering of 2,300,000 registered
Common Shares, which were sold in a privately negotiated transaction at a net
price of $29.50 per share (the "February 1996 Common Share Offering") and
received net proceeds of approximately $67.8 million in connection therewith.
On May 21, 1996, the Company completed an offering of 2,300,000 publicly
registered Common Shares, which were sold at a net price of $30.50 per share.
On May 28, 1996, the Company completed the sale of 73,287 publicly registered
Common Shares to employees of the Company and to employees of Equity Group
Investments, Inc. and certain of its subsidiaries ("EGI") and certain of their
respective affiliates and consultants at a price equal to $30.50 per share. On
May 30, 1996, the Company completed an offering of 1,264,400 publicly registered
Common Shares, which were sold at a net price of $30.75 per share. The Company
received net proceeds of approximately $111.3 million in connection with the
sale of the 3,637,687 Common Shares mentioned above (collectively, the "May 1996
Common Share Offerings").
On June 26, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 608,665 Common Shares which may be issued by the Company
to holders of 608,665 OP Units. The SEC declared this Registration effective on
September 6, 1996.
On September 18, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register $500 million of equity securities (the "1996 Equity Shelf
Registration"). The SEC declared the Registration effective on September 23,
1996.
F-12
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In September 1996, the Company completed the sale of 2,272,728 publicly
registered Common Shares which were sold at a price of $33 per share. The
Company received net proceeds of approximately $75 million in connection with
this offering (the "September 1996 Common Share Offering").
On September 27, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 1,182,835 Common Shares which may be issued by the Company
to holders of 1,182,835 OP Units. The SEC declared the Registration effective on
October 3, 1996.
In November 1996, the Company issued 39,458 Common Shares pursuant to the
1996 Non-qualified Employee Share Purchase Plan (the "Employee Share Purchase
Plan") at a net price of $30.44 per share and received net proceeds of
approximately $1.2 million.
In December 1996, the Company completed offerings of 4,440,000 publicly
registered Common Shares, which were sold to the public at a price of $41.25 per
share (the "December 1996 Common Share Offerings"). The Company received net
proceeds of approximately $177.4 million.
The Operating Partnership paid a $0.59, $0.59, $0.59 and $0.625 per OP Unit
distribution on April 12, July 12, and October 11, 1996 and January 10, 1997,
respectively, for the quarters ended March 31, June 30, September 30 and
December 31, 1996, to OP Unit holders of record on March 29, June 28, September
27 and December 27, 1996, respectively.
The Operating Partnership also paid a $5.859, $5.859, $5.859 and $5.8605
distribution on April 15, July 15 and October 15, 1996 and January 17, 1997,
respectively, for the quarters ended March 31, June 30, September 30, and
December 31, 1996 to the Company as holder of the Series A Cumulative Redeemable
Preference Units (as discussed in Note 11). The Operating Partnership also paid
a $5.703, $5.703, $5.703 and a $5.7035 distribution on April 15, July 15 and
October 15, 1996 and January 17, 1997, respectively, for the quarters ended
March 31, June 30, September 30 and December 31, 1996 to the Company as holder
of the Series B Cumulative Redeemable Preference Units (as discussed in Note
12). In addition, the Operating Partnership paid a $1.394 distribution, covering
the period September 9, 1996 through September 30, 1996, and a $5.703
distribution for the quarter ended December 31, 1996 on January 17, 1997 to the
Company as holder of the Series C Cumulative Redeemable Preference Units (as
discussed in Note 13).
F-13
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Rental Property
Rental property is recorded at cost less accumulated depreciation less an
adjustment, if any, for impairment. Rental properties intended to be held and
operated by the Operating Partnership over their remaining useful life are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the particular rental property may not be
recoverable. If these events or changes in circumstances are present, the
Operating Partnership estimates the sum of the expected future cash flows
(undiscounted) to result from the operations and eventual disposition of the
particular rental property, and if less than the carrying amount of the rental
property, the Operating Partnership will recognize an impairment loss. Upon
recognition of any impairment loss the Operating Partnership measures that loss
based on the amount by which the carrying amount of the rental property exceeds
the estimated fair value of the rental property.
For rental properties to be disposed of, an impairment loss is recognized
when the fair value of the rental property, less the estimated cost to sell, is
less than the carrying amount of the rental property measured at the time the
Operating Partnership has a commitment to sell the property and/or is actively
marketing the property for sale. Rental property to be disposed of is reported
at the lower of its carrying amount or its estimated fair value, less its cost
to sell. Depreciation is not recorded during the period in which assets are
held for disposal. There were no Properties held for sale as of December 31,
1996.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The Operating Partnership uses a 30-year estimated life
for buildings, a 10-year estimated life for land improvements and up to a seven-
year estimated life for furniture, fixtures and equipment. Expenditures for
ordinary maintenance and repairs are expensed to operations as incurred and
significant renovations and improvements that improve and/or extend the useful
life of the asset are capitalized over their estimated useful life. Initial
direct leasing costs are expensed as incurred and such expense approximates the
deferral and amortization of initial direct leasing costs over the lease terms.
Property sales or dispositions are recorded when title transfers and sufficient
consideration has been received by the Operating Partnership. Upon disposition,
the related costs and accumulated deprecation are removed from the respective
accounts. Any gain or loss on sale or disposition is recognized in accordance
with generally accepted accounting principles.
(b) Cash and Cash Equivalents
The Operating Partnership considers all demand deposits, money market
accounts and investments in certificates of deposit and repurchase agreements
purchased with a maturity of four months or less, at the date of purchase, to be
cash equivalents. The Operating Partnership maintains its cash and cash
equivalents at financial institutions. The combined account balances at each
institution periodically exceed the Federal Depository Insurance Corporation
("FDIC") insurance coverage, and, as a result, there is a concentration of
credit risk related to amounts on deposit in excess of FDIC insurance
F-14
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
coverage. The Operating Partnership believes that the risk is not significant as
the Operating Partnership does not anticipate their non-performance.
(c) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain the
Operating Partnership's lines of credit, long-term financing and costs for
certain interest rate protection agreements. These costs are being amortized
over the terms of the related debt. Unamortized financing costs are written-off
when debt is retired before the maturity date. As of December 31, 1996 and
1995, the accumulated amortization of such deferred financing costs was $3.8
million and $6.4 million, respectively.
(d) Interest Rate Protection Agreements
The Operating Partnership from time to time enters into interest rate
protection agreements to effectively convert floating rate debt to a fixed rate
basis, as well as to hedge anticipated financing transactions. Net amounts paid
or received under these agreements are recognized as an adjustment to interest
expense when such amounts paid are incurred or earned. Settlement amounts paid
or received in connection with terminated interest rate protection agreements
are deferred and amortized over the term of the related financing transaction on
the straight-line method. The Operating Partnership believes it has limited
exposure to the extent of non-performance by the counterparties of each
protection agreement since each counterparty is a major U.S. financial
institution, and the Operating Partnership does not anticipate their non-
performance.
(e) Fair Value of Financial Instruments
The fair values of the Operating Partnership's financial instruments,
including cash and cash equivalents, and mortgage notes payable, other notes
payable, lines of credit and other financial instruments, approximate their
carrying or contract values. With respect to the Operating Partnership's
investment in mortgage notes, the fair value as of December 31, 1996 was
estimated to be approximately $100 million compared to the Operating
Partnership's carrying value of $86.6 million. The estimated fair value of the
Operating Partnership's investment in mortgage notes represents the estimated
net present value based on the expected future property level cash flows and an
estimated current market discount rate.
(f) Revenue Recognition
Rental income attributable to leases is recorded when due from tenants and is
recognized monthly as it is earned, which is not materially different than on a
straight line basis. Interest income is recorded on an accrual basis.
F-15
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(g) Lease Agreements
A substantial portion of the leases entered into between the tenant and a
multifamily property for the rental of an apartment unit is month-to-month or
year-to-year, renewable upon consent of both parties.
(h) Income Taxes
The Operating Partnership is not liable for Federal income taxes as the
partners recognize their proportionate share of the Operating Partnership income
or loss in their tax returns, therefore, no provision for Federal income taxes
is made in the financial statements of the Operating Partnership. However, the
Operating Partnership is subject to certain state and local income, excise and
franchise taxes. The aggregate cost of land and depreciable property for Federal
income tax purposes as of December 31, 1996 was approximately $2.8 billion .
(i) Cash Distributions and Allocation of Income (Loss)
Distributions, profits and losses are generally allocated to the General
Partner and the Limited Partners in proportion to their respective percentage
interests.
(j) Use of Estimates
In preparation of the Operating Partnership's financial statements in
conformity with generally accepted accounting principles, management makes
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
5. RENTAL PROPERTY
The following summarizes the carrying amounts for the rental property as of
December 31, 1996 and 1995:
1996 1995
----------- -----------
(Amounts in thousands)
Land $ 284,879 $ 210,439
Buildings and Improvements 2,566,568 1,884,510
Furniture, Fixtures and Equipment 132,063 93,990
---------- ----------
Rental Property 2,983,510 2,188,939
Accumulated Depreciation (301,512) (218,339)
---------- ----------
F-16
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Rental Property, net $2,681,998 $1,970,600
========== ==========
During 1996, the Operating Partnership acquired the Properties listed
below. Each Property was purchased from an unaffiliated third party. The cash
portions of the acquisitions were funded from either proceeds raised through the
various offerings, amounts drawn on the Operating Partnership's line of credit
or working capital. In connection with certain of the acquisitions listed
below, the Operating Partnership assumed mortgage indebtedness of $134.1 million
and issued OP Units having a value of $440,000.
F-17
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Total
Date Number Acquisition Cost
Acquired Property Location of Units (in thousands)
- -------- -------- -------- -------- --------------
02/08/96 7979 Westheimer Houston, TX 459 $14,618
02/27/96 Sabal Pointe (formerly The Coral Springs, FL 275 19,606
Vinings at Coral Springs)
03/01/96 Woodbridge (formerly The Cary, NC 344 19,938
Plantations)
03/05/96 Heron Landing (formerly Lauderhill, FL 144 7,239
Oxford & Sussex)
03/12/96 The Pines at Cloverlane Ypsilanti, MI 582 20,982
03/14/96 Regency Palms Huntington Beach, CA 310 18,710
03/21/96 Port Royale II Ft Lauderdale, FL 161 10,468
04/16/96 2900 on First Seattle, WA 135 11,861
05/22/96 Woodland Hills Decatur, GA 228 12,420
05/31/96 Ivy Place (formerly Post Atlanta, GA 122 8,079
Place)
06/03/96 Ridgetree Dallas, TX 798 21,347
06/05/96 Country Ridge Farmington Hills, MI 252 16,388
06/07/96 Rosehill Pointe Lenexa, KS 498 21,236
06/07/96 Forest Ridge Arlington, TX 660 23,670
06/12/96 Canyon Sands Phoenix, AZ 412 14,905
06/12/96 Desert Sands Phoenix, AZ 412 14,893
06/25/96 Chandler Court Chandler, AZ 311 13,633
06/28/96 Lands End Pacifica, CA 260 18,326
07/01/96 Sunny Oak Village Overland Park, KS 548 22,523
07/01/96 Mallard Cove Greenville, SC 211 8,171
07/16/96 Pine Meadow Greensboro, NC 204 7,262
07/19/96 Summer Ridge Riverside, CA 136 6,031
07/19/96 Promenade Terrace Corona, CA 330 22,853
07/19/96 South Creek Phoenix, AZ 528 26,773
08/01/96 Pueblo Villas Albuquerque, NM 232 8,581
08/28/96 Brixworth Nashville, TN 216 11,766
08/30/96 Brierwood Jacksonville, FL 196 5,528
08/30/96 Woodscape Raleigh, NC 240 9,595
09/03/96 Park Place Plymouth, MN 500 24,472
09/19/96 Eagle Canyon Chino Hills, CA 252 18,095
09/19/96 Summerset Village Chatsworth, CA 280 26,317
09/19/96 Canterchase Nashville, TN 235 8,655
09/20/96 Songbird San Antonio, TX 262 10,854
09/20/96 Willowglen Aurora, CO 384 17,173
F-18
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
09/26/96 Merrimac Woods Costa Mesa, CA 123 6,765
09/27/96 Casa Capricorn San Diego, CA 192 12,631
09/30/96 Hunter's Glen Chesterfield, MO 192 9,166
10/11/96 Marbrisa Tampa, FL 224 8,140
10/31/96 Lakeville Resort Petaluma, CA 492 27,348
11/01/96 Cedar Crest Overland Park, KS 466 21,614
12/12/96 Rock Creek Carrboro, NC 188 8,952
12/13/96 Village Oaks Austin, TX 280 11,849
12/16/96 Creekside Oaks Walnut Creek, CA 316 21,680
12/19/96 Gatehouse on the Green Plantation, FL 312 22,268
12/19/96 Gatehouse at Pine Lake Pembroke Pines, FL 296 18,962
12/20/96 Wilde Lake Richmond, VA 189 9,452
12/20/96 Spice Run Naperville, IL 400 25,793
12/31/96 Mountain Terrace Stevenson Ranch, CA 510 39,772
------ --------
15,297 $767,360
====== ========
In addition to the Properties mentioned above, on February 1, 1996,
Management Corp. II transferred to the Operating Partnership its interest in
Desert Park, a 368-unit Property located in Las Vegas, Nevada, subject to $8.1
million of indebtedness, in exchange for the forgiveness of a $2.7 million note
payable to the Operating Partnership.
During 1996, the Company disposed of the properties listed below. Each
property was sold to an unaffiliated third party.
Number of Disposition
Date Disposed Property Location Units Price
- ------------- -------- -------- ----- -----
01/31/96 Sanddollar Tulsa, OK 328 $ 6,200
06/25/96 Deer Run Charleston, SC 152 3,950
11/22/96 Valley Park South Bethlehem, PA 384 18,500
12/09/96 Colonial Glen Harrisburg, PA 174 6,005
12/20/96 Continental Villas Lithonia, GA 216 6,600
----- -------
1,254 $41,255
===== =======
The Company recognized a total gain of approximately $22.4 million on the
disposition of these five Properties.
During the year ended December 31, 1995, the Operating Partnership recorded
a $1 million loss which represented the estimated impairment in connection with
the potential sale of University Park located in Toledo, Ohio. This Property
had a net carrying amount as of December 31, 1995 of approximately $1.1 million
after the impairment loss. The impairment loss on real estate to be disposed of
is included in gain on disposition of properties on the statement of operations
for the year ended December 31, 1995.
F-19
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. INVESTMENT IN MORTGAGE NOTES AND PARTNERSHIP INTERESTS
In 1995, the Operating Partnership made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. These Additional Properties consist of 3,896 units,
located in California, Colorado, New Mexico and Oklahoma. This included an
$87.1 million investment in second and third mortgages (net of an original
discount of approximately $12.7 million to their face value), $1.6 million
represents a one time payment for an interest rate protection agreement and $0.3
million represents an investment for primarily a 49.5% limited partnership
interest in the title-holding entities. As the Operating Partnership does not
control the general partners of the title-holding entities and substantially all
of the Operating Partnership's investment is in second and third mortgages
(which are subordinate to first mortgages owned by third party unaffiliated
entities), the $87.1 million investment is accounted for as an investment in
mortgage notes. The $1.6 million payment made for the interest rate protection
agreement is included in deferred financing costs and is being amortized over
the term of the related debt. The investment in limited partnership interests
is accounted for under the equity method and is included in other assets on the
balance sheet.
As of December 31, 1996 the second mortgage notes had a combined principal
balance of approximately $27.8 million, accrue interest at a rate of 9.45% per
annum, receive principal amortization from excess cash flow and have a stated
maturity date of December 31, 2019. The third mortgage notes had a combined
principal balance of approximately $71.1 million, accrue interest at a rate of
6.15% per annum, plus up to an additional 3% per annum to the extent of
available cash flow. Contingent interest on the third mortgage notes is
recognized to the extent it is determined to be received. The third mortgage
notes have a stated maturity of December 31, 2024. Receipt of principal and
interest on the second and third mortgage notes is subordinated to the receipt
of all interest on the first mortgage notes. With respect to the discount on
these notes, the unamortized balance at December 31, 1996 was $12.1 million.
During 1996, the Operating Partnership amortized $0.6 million, which is included
in interest income - investment in mortgage notes in the consolidated statement
of operations. This discount is being amortized utilizing the effective yield
method.
F-20
7. MORTGAGE NOTES PAYABLE
As of December 31, 1996, the Operating Partnership had outstanding mortgage
indebtedness of approximately $755.4 million encumbering 88 of the Properties.
The carrying value of such Properties (net of accumulated depreciation of $141.2
million) was approximately $1.1 billion. The mortgage notes payable are
generally due in monthly installments of interest only. In connection with the
Properties acquired during the year ended December 31, 1996, the Operating
Partnership assumed the outstanding mortgage balances on 14 Properties in the
aggregate amount of $142.2 million. In addition, during 1996, in two separate
transactions, certain indebtedness as evidenced by tax-exempt bonds encumbering
certain Properties was refinanced resulting in an increase in mortgage
indebtedness affecting these Properties of approximately $112 million. As a
result of the most recent transaction, the Operating Partnership recorded an
extraordinary loss in the amount of approximately $3.5 million, which
represented the write-off of unamortized deferred financing costs from the early
retirement of debt. Concurrent with the most recent refinanced tax-exempt bonds
and as a requirement of the credit provider of the bonds, the Financing
Partnership, which owns certain of the Properties entered into interest rate
protection agreements to fix the interest rate on the bonds, which agreements
were assigned to the credit provider as additional security. The Operating
Partnership simultaneously entered into substantially identical reverse
protection agreements in order to convert the interest rate on the tax-exempt
bonds back to a floating interest rate. As of December 31, 1996, the notional
amount of these agreements was approximately $166.8 million. The Operating
Partnership believes that it has limited exposure to the extent of non-
performance by the counterparties of the agreements since each counterparty is a
major U.S. financial institution, and the Operating Partnership does not
anticipate their non-performance.
Scheduled maturities for the Operating Partnership's outstanding mortgage
indebtedness are at various dates through August 1, 2030. During the year ended
December 31, 1996, effective interest cost on certain of these mortgage notes
was 7.87%. During the year ended December 31, 1996, the Operating Partnership
repaid the outstanding mortgage balances on eight Properties in the aggregate
amount of $57 million. Subsequent to December 31, 1996, the Operating
Partnership repaid the outstanding mortgage balance on three Properties in the
amount of approximately $19.6 million.
In February 1996, the Operating Partnership entered into an interest rate
protection agreement which hedged the interest rate risk of $50 million of
mortgage loans scheduled to mature in September 1997 by locking the five year
Treasury Rate, commencing October 1, 1997.
As of December 31, 1995, the Company had outstanding mortgage indebtedness
of approximately $561.7 million encumbering 73 of the Properties. The carrying
value of such Properties (net of accumulated depreciation of $103.4 million) was
$770.3 million. The mortgage notes payable are generally due in monthly
installments of interest only. Scheduled maturities are at various dates through
April 1, 2027. As of December 31, 1995, fixed interest rates on certain of the
mortgage notes ranged from 4.00% to 10.27% and variable interest rates on
certain of the mortgage notes ranged from 4.05% to 7.63%. During the year ended
December 31, 1995, the
F-21
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Company repaid the outstanding mortgage balance on seven Properties in the
aggregate amount of approximately $45.5 million.
During 1996 the Operating Partnership terminated two interest rate
protection agreements that were initially entered into in connection with two
mortgage loans with notional amounts totaling $64.2 million. These two
agreements effectively converted these two mortgage loans to fixed rate
instruments based on the London Interbank Offered Rate ("LIBOR"). Upon the
termination of these agreements the Operating Partnership received, or is
entitled to receive, settlement payments of approximately $230,000.
Aggregate payments of principal on mortgage notes payable for each of the
next five years and thereafter are as follows:
YEAR TOTAL
---- -----
(in thousands)
1997 $ 28,223
1998 89,497
1999 20,641
2000 13,369
2001 34,639
Thereafter 569,065
--------
Total $755,434
========
8. LINES OF CREDIT
The Operating Partnership had a $250 million unsecured line of credit with
Wells Fargo Realty Advisors Funding Incorporated, as agent, through November 14,
1996. On November 15, 1996, the Operating Partnership completed an agreement
with Morgan Guaranty Trust Company of New York and Bank of America Illinois to
provide the Operating Partnership a $250 million unsecured line of credit. This
new line of credit matures in November 1999 and borrowings generally will bear
interest at a per annum rate of one, two, three and six month LIBOR, plus 0.75%,
and is subject to an annual facility fee of $500,000. As of December 31, 1996,
there were no amounts outstanding on this line of credit.
9. NOTES
On May 16, 1994, the Operating Partnership issued $125 million of unsecured
senior notes (the "1999 Notes") in a private placement (the "Debt Offering") to
qualified institutional buyers. The 1999 Notes were issued at a discount, which
is being amortized over the life of the 1999 Notes on a straight-line basis. As
of December 31, 1996 the unamortized discount balance was approximately $0.4
million. The 1999 Notes are due May 15, 1999 and bear interest at a rate of
8.5%, which is payable semiannually in arrears on May 15 and November 15. The
Operating
F-22
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Partnership received net proceeds of approximately $122.9 million in connection
with the Debt Offering. In February 1996 the Operating Partnership entered into
an interest rate protection agreement that hedged the interest rate risk of the
1999 Notes by locking the effective four year Treasury Rate commencing May 15,
1999. There was no current cost to the Operating Partnership for entering into
this agreement.
In December 1994, the Operating Partnership registered $500 million in debt
securities pursuant to a debt shelf registration statement (the "Debt Shelf
Registration") of which $100 million of unsecured floating rate notes (the
"Floating Rate Notes") were issued by the Operating Partnership on December 22,
1994 (the "Public Debt Offering"). The Floating Rate Notes are due on December
22, 1997 and bear interest at three month LIBOR plus 0.75%, which is payable
quarterly in arrears on the third Wednesday of each February, May, August and
November of each year. The Operating Partnership received net proceeds of $98.6
million in connection with the Public Debt Offering. In connection with the
Floating Rate Notes, the Operating Partnership has entered into interest rate
protection agreements which fix the interest rate at an effective rate of 7.075%
through the term of the Floating Rate Notes.
In April 1995, the Operating Partnership issued $125 million of unsecured
fixed rate notes (the "2002 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Second Public Debt Offering"). The
2002 Notes were issued at a discount, which is being amortized over the life of
the 2002 Notes on a straight-line basis. As of December 31, 1996 the
unamortized discount balance was approximately $0.8 million. The 2002 Notes are
due on April 15, 2002 and bear interest at 7.95%, which is payable semi-annually
on each October 15 and April 15. The Operating Partnership received net
proceeds of $123.1 million in connection with the Second Public Debt Offering.
Prior to the issuance of the 2002 Notes, the Operating Partnership entered into
an interest rate protection agreement to effectively fix the interest rate cost
of such issuance. The Operating Partnership made a one time settlement payment
of this protection transaction, which was approximately $0.8 million, and is
being amortized over the term of the 2002 Notes. As of December 31, 1996 the
unamortized balance of this cost was approximately $0.6 million.
In August 1996, the Operating Partnership issued $150 million of unsecured
fixed rate notes (the "2026 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Third Public Debt Offering"). The
2026 Notes are due on August 15, 2026 and bear interest at 7.57%, which is
payable semi-annually in arrears on February 15 and August 15, commencing
February 15, 1997. The 2026 Notes are redeemable at any time after August 15,
2006 by the Operating Partnership pursuant to the terms thereof. The Operating
Partnership received net proceeds of approximately $149 million in connection
with this issuance. Prior to the issuance of the 2026 Notes, the Operating
Partnership entered into an interest rate protection agreement to effectively
reduce the overall interest rate cost of this issuance to 7.5%. The Operating
Partnership received a one time settlement payment of this transaction, which
was approximately $0.6 million,
F-23
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
which amount is being amortized over the term of the 2026 Notes. As of December
31, 1996, the unamortized balance was approximately $0.6 million.
On September 18, 1996, the Operating Partnership filed with the SEC a Form
S-3 Registration Statement to register $500 million of debt securities (the
"1996 Debt Shelf Registration"). The SEC declared this Registration effective
on September 23, 1996.
In regard to all of the interest rate protection agreements mentioned in
the previous paragraphs, the Operating Partnership believes that it has limited
exposure to the extent of non-performance by the counterparties of each
agreement since each counterparty is a major U.S. financial institution, and the
Operating Partnership does not anticipate their non-performance.
10. REDEEMABLE PREFERENCE INTERESTS
In connection with the acquisition of seven of the Properties, which closed
in December 1994, the Company, through the Operating Partnership, issued 41,213
preferred interests ("Preference Units") to certain sellers of these Properties.
The Preference Units had a stated value of $1,000 and entitled the holders
thereof to preferential distributions from the Operating Partnership (other than
liquidating distributions) before distributions to the holders of the OP Units
and the Company (provided the Company shall be entitled to receive distributions
necessary to maintain its REIT status under U.S. tax laws). The Operating
Partnership also made loans to certain of these sellers in the aggregate amount
of $15.2 million, which loans are fully collateralized by 465,545 OP Units.
During the year ended December 31, 1995 the Operating Partnership redeemed
1,423 Preference Units for a total redemption price of approximately $1,351,900.
During the year ended December 31, 1996 the operating Partnership redeemed 1,140
Preference Units for a total redemption price of approximately $1.1 million. On
March 1, 1996, the Operating Partnership exercised its option to convert all of
the Preference Units into OP Units. This conversion resulted in 1,182,835 OP
Units being issued.
F-24
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. 9 3/8% SERIES A CUMULATIVE REDEEMABLE PREFERENCE UNITS
In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share
(liquidation preference $25 per share) (the "Series A Preferred Shares"),
pursuant to a $250 million shelf registration (the "Preferred Shelf
Registration"), at $25 per share. The Company raised gross proceeds of $153
million from this offering (the "Series A Preferred Share Offering"). The net
proceeds of approximately $148.2 million from the Series A Preferred Share
Offering were contributed by the Company to the Operating Partnership in
exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative
redeemable preference units (the "Series A Cumulative Redeemable Preference
Units"). The Series A Preferred Shares are cumulative from the date of original
issue and are payable quarterly on or about the fifteenth of January, April,
July and October of each year, at the annual rate of 9 3/8% of the liquidation
preference of $25 per share. The Series A Preferred Shares are not redeemable
prior to June 1, 2000. On or after June 1, 2000, the Preferred Shares may be
redeemed for cash at the option of the Company in whole or in part, at a
redemption price of $25 per share, plus accrued and unpaid distributions, if
any, thereon.
12. 9 1/8% SERIES B CUMULATIVE REDEEMABLE PREFERENCE UNITS
In November 1995, the Company sold 5,000,000 depositary shares (the "Series
B Depositary Shares") pursuant to the Preferred Shelf Registration and the
Second Shelf Registration. Each Series B Depositary Share represents a 1/10
fractional interest in a 9 1/8% Series B Cumulative Redeemable Preferred Share
of Beneficial Interest, $0.01 par value per share (the "Series B Preferred
Shares"). The liquidation preference of each of the Series B Preferred shares is
$250.00 (equivalent to $25 per Series B Depositary Share). The Company raised
gross proceeds of $125 million from this offering (the "Series B Preferred Share
Offering"). The net proceeds of approximately $121 million from the Series B
Preferred Share Offering were contributed by the Company to the Operating
Partnership in exchange for 500,000 of the Operating Partnership's 9 1/8%
cumulative redeemable preference units (the "Series B Cumulative Redeemable
Preference Units"). The Series B Preferred Shares are cumulative from the date
of original issue and are payable quarterly on or about the fifteenth day of
January, April, July and October of each year, commencing on January 15, 1996,
at the annual rate of 9 1/8% of the liquidation preference of $25 per Series B
Depositary Share. The Series B Preferred Shares are not redeemable prior to
October 15, 2005. On and after October 15, 2005, the Series B Preferred Shares
may be redeemed for cash at the option of the Company, in whole or in part, at a
redemption price of $250 per share (equivalent to $25 per Series B Depositary
Share), plus accrued and unpaid distributions, if any, thereon.
13. 9 1/8% SERIES C CUMULATIVE REDEEMABLE PREFERENCE UNITS
In September, 1996 the Company sold 4,600,000 depositary shares (the
"Series C Depositary Shares") pursuant to the Second Shelf Registration. Each
Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8%
Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par
value share (the "Series C Preferred Shares"). The liquidation preference of
each
F-25
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C
Depositary Share). The Company raised gross proceeds of $115 million from this
offering (the "Series C Preferred Share Offering"). The net proceeds of
approximately $111.4 million from the Series C Preferred Share Offering were
contributed by the Company to the Operating Partnership in exchange for 460,000
9 1/8% cumulative preference units (the "Series C Cumulative Redeemable
Preference Units"). The Series C Preferred Shares are cumulative from the date
of original issue and are payable quarterly on or about the fifteenth day of
January, April, July and October of each year, commencing on October 15, 1996,
at the annual rate of 9 1/8% of the liquidation preference of $25 per Series C
Depositary Share. The Series C Preferred Shares are not redeemable prior to
September 9, 2006. On and after September 9, 2006, the Series C Preferred Shares
may be redeemed for cash at the option of the Company, in whole or in part, at a
redemption price of $250 per share (equivalent to $25 per Series C Depositary
Share), plus accrued and unpaid distributions, if any, thereon.
14. EMPLOYEE TRANSACTIONS
As of December 31, 1996, the outstanding principal balance on the employee
notes issued in connection with Common Shares purchased was, in the aggregate,
approximately $5.26 million. Douglas Crocker II, President and Chief Executive
Officer of the Company and four other officers had purchased an aggregate of
194,000 Common Shares at prices which range from $26 to $31.625 per Common
Share. These purchases were financed by loans made by the Company in the
aggregate amount of approximately $5.4 million. The employee notes accrue
interest, payable in arrears, at rates that range from 6.15% per annum to 7.93%
per annum. Scheduled maturities are at various dates through March 2005. The
employee notes are recourse to Mr. Crocker and the four other officers and are
collateralized by pledges of the 194,000 Common Shares purchased.
In addition, as of December 31, 1996, the outstanding principal balance on
additional notes issued to Mr. Crocker was approximately $0.8 million. These
notes accrue interest, payable in arrears at one month LIBOR plus 2% per annum.
Scheduled maturities are at various dates through March 2003. The notes are
recourse to Mr. Crocker and are collateralized by pledges of options, share
awards and Common Shares purchased.
During 1996 the Board of Trustees of the Company approved a deferred
compensation agreement (the "Agreement") for Mr. Crocker. This Agreement would
provide Mr. Crocker with a salary benefit after his termination of employment
with the Company. If Mr. Crocker's employment is terminated without cause, he
would be entitled to annual deferred compensation for a 10-year period
commencing on the termination date in an amount equal to his average annual base
compensation (before bonus) for the prior five calendar years, multiplied by a
percentage equal to 10% per year since December 31, 1995. In the event Mr.
Crocker's employment is terminated as a result of his death, permanent
disability or incapacity, he would be entitled to a similar amount except the
annual percentage would be 15% and the maximum paid per year would not exceed
100% of his average base salary. Should Mr. Crocker be terminated for cause or
should he choose to leave voluntarily without good reason, he would not be
entitled to any deferred compensation.
F-26
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Board of Trustees also approved a deferred compensation (share
distributions) agreement ("Deferred Compensation Agreement") for Mr. Crocker. On
January 18, 1996, Mr. Crocker was issued options to purchase 100,000 Common
Shares, which vest over a 3-year period and are effective for 10 years. Pursuant
to the terms of the Deferred Compensation Agreement, upon the exercise of any
options, Mr. Crocker would be entitled to an amount equal to the amount of
Common Share distributions that would have been paid on said shares being
exercised had he owned said shares for the period from January 18, 1996 until
the date of the exercise of the options in question. This agreement is not
affected by Mr. Crocker's death or termination of employment with the Company.
15. DEPOSITS-RESTRICTED
Deposits-restricted as of December 31, 1996, primarily included deposits in
the amount of approximately $16.4 million held in third party escrow accounts
which were made in connection with a January 1997 acquisition and the expected
acquisition of an additional property. In addition, approximately $3.7 million
was for tenant security and utility deposits for certain of the Operating
Partnership's Properties.
Deposits-restricted as of December 31, 1995 primarily included deposits
held in third party escrow accounts made in connection with certain of the
Operating Partnership's dispositions. Approximately $15 million was held in
these accounts and were utilized for the purchase of additional properties. In
addition, approximately $3.2 million was for tenant security and utility
deposits for certain of the Operating Partnership's Properties.
16. GAIN ON EARLY EXTINGUISHMENT OF DEBT
In June 1995, the Operating Partnership paid approximately $12.6 million in
full satisfaction of a $14.6 million mortgage note obligation relating to one of
its Properties. As a result, the Operating Partnership recognized a gain of $2
million on the extinguishment of this indebtedness.
17. SUMMARIZED PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
The following Summarized Pro Forma Condensed Statement of Operations has
been prepared as if the January 1996 Common Share Offering, the February 1996
Common Share Offering, the May 1996 Common Share Offerings, the Third Public
Debt Offering, the Series C Preferred Share Offering, the September 1996 Common
Share Offering, the December 1996 Common Share Offerings, the acquisition of 49
Properties, the assumption of $142.2 million of mortgage indebtedness, the
repayment of $57 million of mortgage indebtedness and the disposition of five
Properties (as described in Note 5, Note 7 and Note 9 of Notes to Consolidated
Financial Statements) had occurred on January 1, 1996 and all Preference Units
had been converted into OP units. This would result in 59,013,064 OP Units
outstanding. In management's opinion, the Summarized Pro Forma Condensed
Statement of Operations does not purport to present what actual results would
have been had the above transactions occurred on January 1, 1996, or to
F-27
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
project results for any future period. The amounts presented in the following
statement are in thousands except for OP Unit share amounts:
Summarized Pro Forma
Condensed Statement
of Operations
For the Year Ended
December 31, 1996
(Amounts in thousands
except per OP unit amounts)
---------------------------
Total Revenues $ 541,118
-------
Total Expenses 424,541
-------
Pro Forma net income available
for OP Units $ 80,333
=======
Pro Forma net income per OP Unit $ 1.36
=======
18. COMMITMENTS AND CONTINGENCIES
The Operating Partnership, as an owner of real estate, is subject to
various environmental laws of Federal and local governments. Compliance by the
Operating Partnership with existing laws has not had a material adverse effect
on the Operating Partnership's financial condition and management does not
believe it will have such an impact in the future. However, the Operating
Partnership cannot predict the impact of new or changed laws or regulations on
its current Properties or on properties that it may acquire in the future.
On March 20, 1996, a legal proceeding (Nick J. Miletich, Administrator of
the Estates of Dorothy Miletich and Madelyne Miletich, deceased, v. Equity
Residential Properties Trust, Equity Residential Properties Management
Corporation, Curt Vajgrt, Raymond Countryman and Darla Countryman) (Iowa
District Court, Polk Count, Iowa, Law Case No. CL 68908) was filed against the
Company. This legal proceeding arises out of the Company's ownership and
management of the apartment building known as 3000 Grand Ave. in Des Moines,
Iowa and alleges that Raymond and Darla Countryman murdered Dorothy Miletich and
Madelyne Miletich, who were residents of the apartment complex, on June 15,
1995. Raymond Countryman is a former employee of the Company. The plaintiff
alleges, inter alia, that had the Company learned of the background of Mr.
----- ----
Countryman prior to his employment, the Company would not have hired him and the
deaths of the Miletichs would have been avoided. While the Company is vigorously
contesting these claims, there is no assurance that the Company will not be held
liable for said deaths and there is no assurance that its insurance coverage
will cover all damages that may be awarded against it. At this time, an estimate
of the possible loss or range of loss that the Company may incur cannot be
determined.
The Operating Partnership does not believe there is any other litigation,
except as mentioned in the previous paragraph, threatened against the Operating
Partnership other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the consolidated
financial statements of the Operating Partnership.
F-28
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Management Corp. has lease agreements with an affiliated party covering
office space occupied by regional operating centers located in Tampa, Florida
("Southeast ROC") and Chicago, Illinois ("Midwest ROC"). The Southeast ROC
agreement, expires on October 31, 2001 and the Midwest ROC agreement expires on
September 30, 2000.
Management Corp. also has four additional lease agreements with
unaffiliated parties covering space occupied by regional operations centers
located in Dallas, Texas (the "Southwest ROC"); Bethesda, Maryland (the
"Atlantic ROC"); Denver, Colorado (the "Western ROC") and Seattle, Washington
(the "Pacific Northwest ROC"). The lease agreement for the Southwest ROC expires
on March 31, 1999; the lease agreement for the Atlantic ROC expires on November
30, 1998; the lease agreement for the Western ROC expires on November 30, 1999;
and the lease agreement for the Pacific Northwest ROC expires on November 30,
2000.
Management Corp. also has a lease with an affiliated party covering office
space occupied by the corporate headquarters located in Chicago, Illinois. This
agreement, as amended, expires on July 31, 2001. In addition, commencing
September 1, 1996, Management Corp. increased the office space occupied by its
corporate personnel. The lease agreement covering the additional office space
expires on April 29, 1998.
During the years ended December 31, 1996, 1995 and 1994, total rentals,
including a portion of real estate taxes, insurance, repairs and utilities,
aggregated $1,020,311, $1,049,731 and $403,346, respectively.
The minimum basic aggregate rental commitment under the above described
leases in years succeeding December 31, 1996 is as follows:
YEAR AMOUNT
---- ------
1997 $1,144,500
1998 1,046,800
1999 821,700
2000 684,600
2001 390,600
----------
Total $4,088,200
==========
19. TRANSACTIONS WITH RELATED PARTIES
Pursuant to the terms of the partnership agreement for the Operating
Partnership, the Operating Partnership is required to reimburse the Company for
all expenses incurred by the Company in excess of income earned by the Company
through its indirect 1% ownership of various Financing Partnerships. Amounts
paid on behalf of the Company are reflected in the Consolidated Statement of
Operations as general and administrative expenses
Certain related entities provided services to the Operating Partnership and
the Company. These included, but were not limited to, Rosenberg & Liebentritt,
P.C., which provided legal services; Greenberg & Pociask, Ltd., which provided
tax and accounting services; First Capital Financial Corporation, which provided
accounting services; and Computech Systems, Inc., which provided computer
services. Fees paid to these related entities amounted to approximately $0.7
F-29
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
million, $2.5 million and $3 million for the years ended December 31, 1996, 1995
and 1994, respectively. In addition, The Riverside Agency, Inc., which provided
insurance brokerage services, was paid fees and reimbursed premiums and loss
claims in the amount of $4.1 million, $2.6 million and $2.3 million for the
years ended December 31, 1996, 1995 and 1994, respectively. As of December 31,
1996 and 1995, $315,700 and $366,300, respectively, was owed to Rosenberg &
Liebentritt, P.C. for legal fees incurred in connection with securities
offerings, litigation matters, property acquisitions and other general corporate
matters.
F-30
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Equity Group Investments, Inc. and certain of its subsidiaries, including
Equity Assets Management, Inc., Eagle Flight Services, Equity Properties &
Development, L.P. and EPMC ("EGI"), have provided certain services to the
Operating Partnership and the Company which include, but are not limited to,
financial and accounting services, investor relations, corporate secretarial and
computer and support services, real estate tax evaluation services, market
consulting and research services, financing services, information systems
services and property development services. Fees paid to EGI for these services
amounted to $1.3 million, $3.4 million and $1.1 million for the years ended
December 31, 1996, 1995 and 1994, respectively. Amounts due to EGI were
approximately $0.3 million and $1.1 million as of December 31, 1996 and 1995,
respectively.
In connection with the affiliated lease agreements discussed in Note 18,
Management Corp. paid Equity Office Holdings, L.L.C. ("EOH") $118,919, $104,421
and $118,518 in connection with the Midwest ROC, $137,638, $9,783 and $85,466 in
connection with the Southeast ROC and $409,392, $632,725 and $19,070 in
connection with the space occupied by the corporate headquarters for the years
ended December 31, 1996, 1995 and 1994, respectively. As of December 31, 1996,
approximately $46,435 was owed to EOH and as of December 31, 1995, no amounts
were owed to EOH.
In connection with the Private Equity Offering and the Shelf Offering, the
Company paid Equity Institutional Investors, Inc. ("EII") consulting fees in the
amount of $200,000 and $680,000 for the years ended December 31, 1995 and 1994,
respectively. As of December 31, 1996 and 1995, no amounts were owed to EII for
consulting services.
Artery Property Management, Inc. ("Artery") provided the Operating
Partnership consulting services with regard to property acquisitions and
additional business opportunities. Fees paid for those services and reimbursed
expenses amounted to approximately $0.2 and $0.7 million for the years ended
December 31, 1996 and 1995.
Rudnick & Wolfe, a law firm in which Mr. Errol Halperin, a trustee of the
Company, is a partner, provided legal services to the Operating Partnership.
Fees paid to this firm amounted to approximately $4,300, $41,300 and $10,000 for
the years ended December 31, 1996, 1995 and 1994.
Genesis Merchant Group Securities ("Genesis") provided the Operating
Partnership brokerage services and was paid $18,970 during the year ended
December 31, 1994. SZRL Investments, an Illinois general partnership of which
one of its partners is a trust created for the benefit of Mr. Zell, is a limited
partner of Genesis Merchant Group, the sole general partner of Genesis.
In addition, the Operating Partnership and the Company have provided
acquisitions, asset and property management services to certain related entities
for properties not owned by the Operating Partnership. Fees received for
providing such services were approximately $6.7 million, $7 million and $4.7
million for the years ended December 31, 1996, 1995 and 1994, respectively.
F-31
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following unaudited quarterly data has been prepared on the basis of a
December 31 year end: (Amounts in thousands)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1995 3/31 6/30 9/30 12/31
- ---------------- -------- -------- -------- --------
Total revenues $ 91,882 $ 93,294 $ 99,594 $105,614
======== ======== ======== ========
Net income $ 13,220 $ 15,544 $ 17,570 $ 37,021
======== ======== ======== ========
1996
- ----------------
Total revenues $106,321 $113,267 $124,459 $134,338
======== ======== ======== ========
Net income $ 21,295 $ 23,310 $ 22,111 $ 49,207
======== ======== ========= ========
21. SUBSEQUENT EVENTS
On January 2, 1997, the Operating Partnership acquired Town Center
Apartments, a 258-unit multifamily property located in Kingwood, Texas, from an
unaffiliated third party for a purchase price of $12.8 million.
On January 16, 1997 the Company entered into an Agreement and Plan of
Merger regarding the planned acquisition of the multifamily property business of
Wellsford Residential Property Trust ("Wellsford"), a Maryland real estate
investment trust, by the Company through the tax free merger of the Company and
Wellsford. This transaction is valued at approximately $1 billion and includes
75 multifamily residential properties containing 19,004 units.
On January 21, 1997, the Operating Partnership acquired Harborview
Apartments, a 160-unit multifamily property located in San Pedro, California,
from an unaffiliated third party for a purchase price of $19 million, which
included the assumption of mortgage indebtedness of approximately $12.69
million.
On January 31, 1997, the Operating Partnership acquired The Cardinal
Apartments, a 256-unit multifamily property located in Greensboro, North
Carolina, from an unaffiliated third party for a purchase price of $12.77
million, including the assumption of mortgage indebtedness in the amount of
$7.53 million.
F-32
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On February 12, 1997, the Operating Partnership acquired Trails at Dominion
Apartments, a 843-unit multifamily property located in Houston, Texas from an
unaffiliated third party for a purchase price of $38.3 million, which included
the assumption of mortgage indebtedness of approximately $26.19 million.
On February 25, 1997, the Operating Partnership declared a $0.625
distribution per OP Unit for the quarter ended March 31, 1997 to OP Unit holders
of record on March 28, 1997. The Operating Partnership also declared a $05.85938
distribution, a $05.70313 distribution and a $05.70313 distribution to the
Company as holder of the Series A Cumulative Redeemable Preference Units, Series
B Cumulative Redeemable Preference Units and Series C Cumulative Redeemable
Preference Units, respectively.
On February 25, 1997, the Operating Partnership acquired Dartmouth Woods
Apartments, a 201-unit multifamily property located in Lakewood, Colorado, from
an unaffiliated third party for a purchase price of $12.4 million, including the
assumption of mortgage indebtedness in the amount of approximately $4.44
million.
On February 28, 1997, the Operating Partnership acquired Rincon Apartments,
a 288-unit multifamily property located in Houston, Texas, from an unaffiliated
third party for a purchase price of $20.87 million.
On February 28, 1997, the Operating Partnership acquired Waterford at the
Lakes Apartments, a 344-unit multifamily property located in Kent, Washington,
from an unaffiliated third party for a purchase price of $18.9 million.
On March 17, 1997, the Operating Partnership acquired Junipers at Yarmouth
Apartments, a 225-unit multifamily property located in Yarmouth, Maine, from an
unaffiliated third party for a purchase price of $9.15 million.
As of March 20, 1997, the Company completed offerings of 938,800 publicly
registered Common Shares, which were sold at a net price of $46 per share and
contributed to the Operating Partnership net proceeds of approximately $43.2
million in connection therewith.
F-33
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE
TO THE PARTNERS
ERP OPERATING LIMITED PARTNERSHIP
In connection with our audit of the consolidated financial statements of ERP
Operating Limited Partnership referred to in our report dated February 14, 1996,
which financial statements are included in this Form 10-K, we have also audited
the 1995 and 1994 information in the financial statement schedule listed in the
Index to the Financial Statements and Schedule. In our opinion, this financial
statement schedule presents fairly, in all material respects, the 1995 and 1994
information required to be set forth therein.
/S/ GRANT THORNTON LLP
----------------------------------------
GRANT THORNTON LLP
Chicago, Illinois
February 14, 1996
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ----------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ----------------------------------------------------------------------------------------------------------------------------
2900 on First.................Seattle, WA 0 1,176,400 10,588,096 1,200 95,180 1,177,600
3000 Grand....................Des Moines, IA 0 858,305 7,827,336 0 1,191,980 858,305
7979 Westheimer...............Houston, TX 0 1,388,400 12,495,280 1,400 733,108 1,389,800
Altamonte.....................San Antonio, TX 14,600,000 1,663,100 14,968,079 1,970 540,718 1,665,070
Amberton......................Manassas, VA 6,595,519 888,800 8,352,507 11,800 745,330 900,600
Arbors of Hickory Hollow......Nashville, TN (D) 202,285 6,594,754 700 1,071,223 202,985
Arbors of Brentwood...........Nashville, TN (D) 404,570 13,189,508 100 749,501 404,670
Arbors of Las Colinas.........Irving, TX 0 1,662,300 14,960,709 1,600 1,012,376 1,663,900
Bainbridge....................Durham, NC 0 1,042,900 9,385,579 33,400 837,173 1,076,300
Bay Club......................Phoenix, AZ (E) 828,100 5,821,759 100 1,077,580 828,200
Bourbon Square................Palatine, IL 28,150,000 3,982,600 35,843,025 2,700 2,024,772 3,985,300
Brentwood.....................Vancouver, WA 0 1,318,200 11,863,517 39,021 824,156 1,357,221
Breton Mill...................Houston, TX (F) 212,720 8,154,404 100 613,371 212,820
Bridgecreek...................Wilsonville, OR 0 1,294,600 11,651,108 5,290 536,972 1,299,890
Bridgeport....................Raleigh, NC 0 1,296,200 11,665,351 500 208,931 1,296,700
Brierwood.....................Jacksonville, FL 0 546,100 4,914,681 4,300 62,886 550,400
Brittany Square...............Tulsa, OK 0 625,000 4,220,662 0 352,527 625,000
Brixworth.....................Nashville, TN 0 1,172,100 10,549,371 1,600 42,780 1,173,700
Camellero.....................Scottsdale, AZ 11,949,595 1,923,600 17,312,869 1,300 274,238 1,924,900
Canterbury....................Germantown, MD 19,032,948 2,781,300 26,656,574 (0) 2,044,601 2,781,300
Canterchase...................Nashville, TN 5,824,040 862,200 7,759,711 1,100 32,267 863,300
Canyon Creek..................Tucson, AZ (E) 834,313 5,840,188 100 358,628 834,413
Canyon Sands..................Phoenix, AZ 8,849,680 1,475,900 13,282,737 14,550 131,988 1,490,450
Carmel Terrace................San Diego, CA 0 2,288,300 20,632,540 (0) 99,768 2,288,300
Casa Capricorn................San Diego, CA 0 1,260,100 11,341,085 2,400 27,534 1,262,500
Casa Cordoba..................Tallahassee, FL 0 307,055 2,732,177 0 787,356 307,055
Casa Cortez...................Tallahassee, FL 0 120,590 1,196,857 0 467,869 120,590
Catalina Shores...............Las Vegas, NV 0 1,222,200 10,999,974 4,800 413,277 1,227,000
Cedar Crest...................Overland Park, KS 0 2,159,800 19,438,107 500 15,521 2,160,300
Celebration at Westchase......Houston, TX (E) 2,204,590 6,312,399 100 708,272 2,204,690
Champion Oaks.................Houston, TX 7,298,817 931,900 8,519,479 (0) 146,787 931,900
Chandler Court................Chandler, AZ 0 1,352,600 12,172,974 500 107,033 1,353,100
Chandler's Bay I..............Kent, WA 0 1,503,400 13,530,223 3,500 497,871 1,506,900
Chaparral.....................Largo, FL 6,891,428 303,100 6,169,465 0 2,608,105 303,100
Charter Club..................Everett, WA 0 998,700 8,988,560 2,400 224,471 1,001,100
Cheyenne Crest................Colorado Springs, CO (E) 73,950 3,936,559 100 643,159 74,050
Cloisters on the Green........Lexington, KY 2,827,810 187,074 2,193,726 0 1,370,338 187,074
Country Club I................Silver Spring, MD 7,077,694 1,119,500 10,815,232 1,457 465,095 1,120,957
Country Club II...............Silver Spring, MD 5,966,153 850,000 8,255,502 2,294 23,886 852,294
GROSS AMOUNT CARRIED LIFE USED TO
AT CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION IN
- ----------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ------------------------------------------------------------------------------------------------------------------------------
2900 on First.................Seattle, WA 10,683,276 11,860,876 266,733 1989-91 30 Years
3000 Grand....................Des Moines, IA 9,019,316 9,877,621 4,136,718 1970 30 Years
7979 Westheimer...............Houston, TX 13,228,388 14,618,188 481,175 1973 30 Years
Altamonte.....................San Antonio, TX 15,508,797 17,173,867 1,259,430 1985 30 Years
Amberton......................Manassas, VA 9,097,837 9,998,437 679,673 1986 30 Years
Arbors of Hickory Hollow......Nashville, TN 7,665,977 7,868,962 960,405 1986 30 Years
Arbors of Brentwood...........Nashville, TN 13,939,009 14,343,679 1,657,104 1986 30 Years
Arbors of Las Colinas.........Irving, TX 15,973,085 17,636,985 1,740,888 1984/85 30 Years
Bainbridge....................Durham, NC 10,222,752 11,299,052 1,010,232 1984 30 Years
Bay Club......................Phoenix, AZ 6,899,339 7,727,539 906,957 1976 30 Years
Bourbon Square................Palatine, IL 37,867,797 41,853,097 3,931,913 1984-87 30 Years
Brentwood.....................Vancouver, WA 12,687,673 14,044,894 673,352 1990 30 Years
Breton Mill...................Houston, TX 8,767,775 8,980,595 1,003,745 1986 30 Years
Bridgecreek...................Wilsonville, OR 12,188,080 13,487,970 1,161,921 1987 30 Years
Bridgeport....................Raleigh, NC 11,874,282 13,170,982 1,331,562 1990 30 Years
Brierwood.....................Jacksonville, FL 4,977,567 5,527,967 66,571 1974 30 Years
Brittany Square...............Tulsa, OK 4,573,189 5,198,189 2,041,207 1982 30 Years
Brixworth.....................Nashville, TN 10,592,150 11,765,850 133,056 1985 30 Years
Camellero.....................Scottsdale, AZ 17,587,107 19,512,007 920,338 1979 30 Years
Canterbury....................Germantown, MD 28,701,175 31,482,475 2,155,479 1986 30 Years
Canterchase...................Nashville, TN 7,791,978 8,655,278 84,269 1985 30 Years
Canyon Creek..................Tucson, AZ 6,198,816 7,033,229 790,012 1986 30 Years
Canyon Sands..................Phoenix, AZ 13,414,725 14,905,175 283,324 1983 30 Years
Carmel Terrace................San Diego, CA 20,732,308 23,020,608 1,575,010 1988-89 30 Years
Casa Capricorn................San Diego, CA 11,368,619 12,631,119 107,033 1981 30 Years
Casa Cordoba..................Tallahassee, FL 3,519,533 3,826,588 2,322,089 1972/1973 30 Years
Casa Cortez...................Tallahassee, FL 1,664,726 1,785,316 1,039,578 1970 30 Years
Catalina Shores...............Las Vegas, NV 11,413,251 12,640,251 994,406 1989 30 Years
Cedar Crest...................Overland Park, KS 19,453,627 21,613,927 121,265 1986 30 Years
Celebration at Westchase......Houston, TX 7,020,671 9,225,361 1,056,903 1979 30 Years
Champion Oaks.................Houston, TX 8,666,266 9,598,166 712,007 1984 30 Years
Chandler Court................Chandler, AZ 12,280,007 13,633,107 237,596 1987 30 Years
Chandler's Bay I..............Kent, WA 14,028,094 15,534,994 1,106,336 1989 30 Years
Chaparral.....................Largo, FL 8,777,570 9,080,670 5,077,932 1976 30 Years
Charter Club..................Everett, WA 9,213,031 10,214,131 970,112 1991 30 Years
Cheyenne Crest................Colorado Springs, CO 4,579,718 4,653,768 663,938 1984 30 Years
Cloisters on the Green........Lexington, KY 3,564,064 3,751,138 2,349,167 1974 30 Years
Country Club I................Silver Spring, MD 11,280,327 12,401,284 804,078 1980 30 Years
Country Club II...............Silver Spring, MD 8,279,388 9,131,682 555,368 1982 30 Years
S-2
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Country Ridge................Farmington Hills, MI 0 1,605,800 14,452,066 14,750 315,877
Creekside....................Mountlake Terrace, WA 15,883,770 2,802,900 25,226,096 4,400 509,926
Creekside Oaks...............Walnut Creek, CA 11,566,208 2,167,300 19,505,628 700 6,495
Crystal Creek................Phoenix, AZ 0 952,900 8,576,084 600 162,583
Cypress Point................Las Vegas, NV 5,560,452 953,800 8,583,719 5,890 461,972
Dawntree.....................Carrollton, TX 0 1,204,600 10,841,783 900 501,107
Deerwood.....................San Diego, CA 0 2,075,700 18,680,801 6,395 2,734,498
Deerwood Meadows.............Greensboro, NC (E) 986,643 6,906,503 100 582,195
Del Coronado.................Mesa, AZ (O) 1,963,200 17,669,207 1,200 158,272
Desert Park..................Las Vegas, NV 0 1,085,400 9,401,015 0 501,594
Desert Sands.................Phoenix, AZ 8,844,182 1,464,200 13,177,336 14,550 237,114
Diplomat South...............Beech Grove, IN 2,634,919 472,414 2,267,310 0 2,138,355
Doral........................Louisville, KY 4,110,646 96,607 1,526,628 0 2,550,299
Eagle Canyon.................Chino Hills, CA 0 1,806,800 16,261,336 1,400 25,406
Eagle Rim....................Redmond, WA 0 976,200 8,785,605 1,600 292,191
East Pointe..................Charlotte, NC 9,740,000 1,364,100 12,276,563 1,800 760,279
Edgewood.....................Woodinville, WA 6,177,002 1,068,200 9,613,388 1,900 314,708
Emerald Place................Bermuda Dunes, CA 0 954,400 8,589,110 2,100 442,566
Essex Place..................Overland Park, KS 11,161,045 1,831,900 16,486,600 3,500 1,251,417
Flying Sun...................Phoenix, AZ (E) 87,120 2,035,537 100 137,450
Forest Ridge.................Arlington, TX 0 2,339,300 21,053,447 21,600 255,713
Fountain Creek...............Phoenix, AZ 0 686,000 6,173,818 500 107,826
Fountainhead Combined........San Antonio, TX 23,275,000 3,617,449 13,446,560 0 1,197,985
Fountains at Flamingo........Las Vegas, NV 0 3,180,900 28,628,533 2,200 405,159
Four Lakes...................Lisle, IL 10,344,569 2,465,000 13,178,449 0 5,443,148
Four Lakes Lisle.............Lisle, IL 39,680,000 600,000 16,530,115 0 3,012,666
Fox Run......................Little Rock, AR 5,481,038 422,014 4,053,552 0 4,563,021
Fox Run......................Federal Way, WA 0 638,500 5,746,956 1,200 313,307
Frey.........................Atlanta, GA 19,700,000 2,464,900 22,183,783 2,300 652,772
Gatehouse on the Green.......Pambroke Pines, FL 0 2,216,800 19,951,085 9,900 90,552
Gatehouse at Pine Lake.......Plantation, FL 0 1,886,200 16,975,382 9,900 90,508
Georgian Woods II............Wheaton, MD 10,618,991 2,049,000 19,287,578 4,400 1,556,763
Glenridge....................Colorado Springs, CO (F) 884,688 4,466,900 100 372,410
Governor's Place.............Augusta, GA 0 347,355 2,518,146 0 765,732
Greengate....................Marietta, GA 0 132,979 1,476,005 0 1,119,555
Greenwich Woods..............Silver Spring, MD 17,940,321 3,095,700 29,073,395 5,300 1,340,526
Greenwood Forest.............Little Rock, AR 3,562,675 559,038 1,736,549 0 2,664,879
Habitat......................Orlando, FL 0 600,000 494,032 0 5,636,708
Hammock's Place..............Miami, FL (F) 319,080 12,216,608 100 608,118
GROSS AMOUNT LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
Country Ridge................Farmington Hills, MI 1,620,550 14,767,943 16,388,493 300,193 1986 30 Years
Creekside....................Mountlake Terrace, WA 2,807,300 25,736,022 28,543,322 1,983,579 1987 30 Years
Creekside Oaks...............Walnut Creek, CA 2,168,000 19,512,122 21,680,122 30,810 1974 30 Years
Crystal Creek................Phoenix, AZ 953,500 8,738,667 9,692,167 484,560 1985 30 Years
Cypress Point................Las Vegas, NV 959,690 9,045,691 10,005,381 771,850 1989 30 Years
Dawntree.....................Carrollton, TX 1,205,500 11,342,890 12,548,390 912,733 1982 30 Years
Deerwood.....................San Diego, CA 2,082,095 21,415,299 23,497,394 1,936,782 1990 30 Years
Deerwood Meadows.............Greensboro, NC 986,743 7,488,698 8,475,441 960,160 1986 30 Years
Del Coronado.................Mesa, AZ 1,964,400 17,827,479 19,791,879 945,455 1985 30 Years
Desert Park..................Las Vegas, NV 1,085,400 9,902,609 10,988,009 361,874 1987 30 Years
Desert Sands.................Phoenix, AZ 1,478,750 13,414,450 14,893,200 283,007 1982 30 Years
Diplomat South...............Beech Grove, IN 472,414 4,405,665 4,878,079 2,482,055 1970 30 Years
Doral........................Louisville, KY 96,607 4,076,927 4,173,534 1,684,821 1972 30 Years
Eagle Canyon.................Chino Hills, CA 1,808,200 16,286,742 18,094,942 165,212 1985 30 Years
Eagle Rim....................Redmond, WA 977,800 9,077,796 10,055,596 708,488 1986-88 30 Years
East Pointe..................Charlotte, NC 1,365,900 13,036,842 14,402,742 1,403,023 1987 30 Years
Edgewood.....................Woodinville, WA 1,070,100 9,928,096 10,998,196 791,151 1986 30 Years
Emerald Place................Bermuda Dunes, CA 956,500 9,031,676 9,988,176 979,033 1988 30 Years
Essex Place..................Overland Park, KS 1,835,400 17,738,017 19,573,417 1,697,366 1970-84 30 Years
Flying Sun...................Phoenix, AZ 87,220 2,172,987 2,260,207 331,352 1983 30 Years
Forest Ridge.................Arlington, TX 2,360,900 21,309,160 23,670,060 473,229 1984/85 30 Years
Fountain Creek...............Phoenix, AZ 686,500 6,281,644 6,968,144 345,109 1984 30 Years
Fountainhead Combined........San Antonio, TX 3,617,449 14,644,545 18,261,994 4,992,983 1985/1987 30 Years
Fountains at Flamingo........Las Vegas, NV 3,183,100 29,033,692 32,216,792 2,214,423 1989-91 30 Years
Four Lakes...................Lisle, IL 2,465,000 18,621,597 21,086,597 7,916,639 1968/1988* 30 Years
Four Lakes Lisle.............Lisle, IL 600,000 19,542,781 20,142,781 5,648,085 1968/1988* 30 Years
Fox Run......................Little Rock, AR 422,014 8,616,573 9,038,587 4,506,821 1974 30 Years
Fox Run......................Federal Way, WA 639,700 6,060,263 6,699,963 500,256 1988 30 Years
Frey.........................Atlanta, GA 2,467,200 22,836,555 25,303,755 1,909,476 1985 30 Years
Gatehouse on the Green.......Pambroke Pines, FL 2,226,700 20,041,637 22,268,337 25,538 1990 30 Years
Gatehouse at Pine Lake.......Plantation, FL 1,896,100 17,065,890 18,961,990 21,910 1990 30 Years
Georgian Woods II............Wheaton, MD 2,053,400 20,844,341 22,897,741 1,458,067 1967 30 Years
Glenridge....................Colorado Springs, CO 884,788 4,839,310 5,724,098 658,422 1985 30 Years
Governor's Place.............Augusta, GA 347,355 3,283,878 3,631,233 1,967,054 1972 30 Years
Greengate....................Marietta, GA 132,979 2,595,560 2,728,539 1,215,888 1971 30 Years
Greenwich Woods..............Silver Spring, MD 3,101,000 30,413,921 33,514,921 2,216,764 1967 30 Years
Greenwood Forest.............Little Rock, AR 559,038 4,401,428 4,960,466 2,269,057 1975 30 Years
Habitat......................Orlando, FL 600,000 6,130,740 6,730,740 3,511,792 1974 30 Years
Hammock's Place..............Miami, FL 319,180 12,824,726 13,143,906 1,474,391 1986 30 Years
S-3
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT CARRIED
INITIAL COST TO ACQUISITION AT CLOSE OF
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I) PERIOD 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND FIXTURES (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Hampton Green...........San Antonio, TX (E) 1,561,830 2,962,670 0 1,894,677 1,561,830 4,857,347
Harbour Landing.........Corpus Christi, TX 0 761,600 6,854,524 3,400 758,682 765,000 7,613,206
Hathaway................Long Beach, TX 0 2,512,200 22,609,720 300 146,216 2,512,500 22,755,936
Hearthstone.............San Antonio, TX (E) 1,035,700 3,375,132 100 283,285 1,035,800 3,658,417
Heron Cove..............Coral Springs, FL 0 823,000 7,997,360 0 458,184 823,000 8,455,544
Heron Landing (K).......Lauderhill, FL 0 707,100 6,363,784 5,400 163,137 712,500 6,526,921
Heron Run...............Plantation, FL 0 917,800 8,854,001 0 564,445 917,800 9,418,446
Hidden Valley...........Ann Arbor, MI 0 915,000 7,583,653 0 723,276 915,000 8,306,929
Holcomb Bridge..........Atlanta, GA 9,545,000 2,142,400 19,281,704 900 752,903 2,143,300 20,034,607
Hunter's Glen...........Chesterfield, MO 0 913,500 8,221,026 1,600 29,842 915,100 8,250,868
Hunter's Green..........Fort Worth, TX (F) 524,200 3,404,622 100 619,907 524,300 4,024,529
Huntington Park.........Everett, WA 0 1,594,500 14,350,001 3,000 461,869 1,597,500 14,811,870
Indian Bend.............Phoenix, AZ 0 1,072,500 9,652,385 3,200 373,611 1,075,700 10,025,996
Indian Tree.............Arvada, CO (E) 881,125 4,868,332 100 352,319 881,225 5,220,651
Ivy Place (L)...........Atlanta, GA 0 793,200 7,139,200 8,450 138,033 801,650 7,277,233
Kempton Downs...........Gresham, OR 0 1,182,200 10,639,993 35,149 756,737 1,217,349 11,396,730
Keystone................Austin, TX 2,959,560 498,000 4,482,306 500 313,558 498,500 4,795,864
Kingsport...............Alexandria, VA 0 1,262,250 11,454,606 0 1,454,504 1,262,250 12,909,110
Kingswood Manor.........San Antonio, TX (E) 293,900 2,061,996 100 325,573 294,000 2,387,569
La Costa Brava (J)......Jacksonville, FL 4,741,003 835,757 4,964,681 (1) 5,751,810 835,756 10,716,491
La Costa Brava..........Orlando, FL 0 206,626 1,380,505 0 5,174,152 206,626 6,554,657
Lake in the Woods.......Ypsilanti, MI 0 1,859,625 16,314,064 0 5,349,035 1,859,625 21,663,099
Lakeville Resort........Petaluma, CA 20,776,563 2,734,100 24,773,523 0 (159,496) 2,734,100 24,614,027
Lakewood Oaks...........Dallas, TX 0 1,630,200 14,671,813 1,200 526,491 1,631,400 15,198,304
Lands End...............Pacifica, CA 0 1,824,500 16,423,435 0 77,817 1,824,500 16,501,252
Laurel Ridge............Chapel Hill, NC 0 160,000 1,752,118 0 2,779,323 160,000 4,531,441
Lincoln Green I.........San Antonio, TX 0 947,366 2,133,002 0 3,609,969 947,366 5,742,971
Lincoln Green II........San Antonio, TX 0 1,052,340 6,045,696 0 (249,429) 1,052,340 5,796,267
Lincoln Green III.......San Antonio, TX 0 536,010 2,121,295 0 (66,297) 536,010 2,054,998
Lodge - Oklahoma........Tulsa, OK 0 313,571 2,677,951 0 789,532 313,571 3,467,483
Lodge - Texas...........San Antonio, TX 0 1,363,636 5,496,784 0 3,427,219 1,363,636 8,924,003
Longwood................Decatur, GA 0 1,452,000 13,067,523 2,048 192,005 1,454,048 13,259,528
Mallard Cove............Greenville, SC 0 803,700 7,233,160 8,350 125,996 812,050 7,359,156
Mallgate................Louisville, KY 0 0 6,162,515 0 3,399,784 0 9,562,299
Marbrisa................Tampa, FL 0 811,500 7,303,334 1,500 23,966 813,000 7,327,300
Marina Club.............Fort Worth, TX 0 781,000 7,028,588 3,269 1,381,884 784,269 8,410,472
Marymont................Laurel, MD 0 1,901,800 17,116,593 2,000 462,012 1,903,800 17,578,605
Maxwell Apartments......Augusta, GA 0 216,000 1,846,772 0 681,209 216,000 2,527,981
McAlpine Ridge..........Charlotte, NC 0 1,283,400 11,550,225 600 300,938 1,284,000 11,851,163
LIFE USED IN
COMPUTE
DESCRIPTION DEPRECIATION IN
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION TOTAL(B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------
Hampton Green...........San Antonio, TX 6,419,177 676,323 1979 30 Years
Harbour Landing.........Corpus Christi, TX 8,378,206 807,403 1985 30 Years
Hathaway................Long Beach, TX 25,268,436 1,060,589 1987 30 Years
Hearthstone.............San Antonio, TX 4,694,217 527,069 1982 30 Years
Heron Cove..............Coral Springs, FL 9,278,544 661,829 1987 30 Years
Heron Landing (K).......Lauderhill, FL 7,239,421 199,030 1988 30 Years
Heron Run...............Plantation, FL 10,336,246 706,775 1987 30 Years
Hidden Valley...........Ann Arbor, MI 9,221,929 4,101,426 1973 30 Years
Holcomb Bridge..........Atlanta, GA 22,177,907 1,684,661 1985 30 Years
Hunter's Glen...........Chesterfield, MO 9,165,968 77,392 1985 30 Years
Hunter's Green..........Fort Worth, TX 4,548,829 519,924 1981 30 Years
Huntington Park.........Everett, WA 16,409,370 1,533,292 1991 30 Years
Indian Bend.............Phoenix, AZ 11,101,696 941,553 1973 30 Years
Indian Tree.............Arvada, CO 6,101,876 803,866 1983 30 Years
Ivy Place (L)...........Atlanta, GA 8,078,883 152,322 1978 30 Years
Kempton Downs...........Gresham, OR 12,614,079 610,026 1990 30 Years
Keystone................Austin, TX 5,294,364 281,085 1981 30 Years
Kingsport...............Alexandria, VA 14,171,360 942,883 1986 30 Years
Kingswood Manor.........San Antonio, TX 2,681,569 317,155 1983 30 Years
La Costa Brava (J)......Jacksonville, FL 11,552,247 5,378,546 1970/1973 30 Years
La Costa Brava..........Orlando, FL 6,761,283 3,259,968 1967 30 Years
Lake in the Woods.......Ypsilanti, MI 23,522,724 10,105,716 1969 30 Years
Lakeville Resort........Petaluma, CA 27,348,127 153,152 1984 30 Years
Lakewood Oaks...........Dallas, TX 16,829,704 1,247,503 1987 30 Years
Lands End...............Pacifica, CA 18,325,752 301,140 1974 30 Years
Laurel Ridge............Chapel Hill, NC 4,691,441 1,876,897 1975 30 Years
Lincoln Green I.........San Antonio, TX 6,690,337 2,342,894 1984/1986 30 Years
Lincoln Green II........San Antonio, TX 6,848,607 1,863,118 1984/1986 30 Years
Lincoln Green III.......San Antonio, TX 2,591,008 682,835 1984/1986 30 Years
Lodge - Oklahoma........Tulsa, OK 3,781,054 1,768,970 1979 30 Years
Lodge - Texas...........San Antonio, TX 10,287,639 2,752,127 1979(#) 30 Years
Longwood................Decatur, GA 14,713,576 1,339,222 1992 30 Years
Mallard Cove............Greenville, SC 8,171,206 139,976 1983 30 Years
Mallgate................Louisville, KY 9,562,299 5,471,136 1969 30 Years
Marbrisa................Tampa, FL 8,140,300 63,078 1984 30 Years
Marina Club.............Fort Worth, TX 9,194,741 867,288 1987 30 Years
Marymont................Laurel, MD 19,482,405 1,343,520 1987-88 30 Years
Maxwell Apartments......Augusta, GA 2,743,981 955,986 1951 30 Years
McAlpine Ridge..........Charlotte, NC 13,135,163 896,373 1989-90 30 Years
S-4
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Meadowcreek..................Tigard, OR 8,788,473 1,298,100 11,682,684 1,000 497,605
Merrimac Woods...............Costa Mesa, CA 0 673,300 6,059,722 1,600 29,948
Mountain Terrace.............Stevenson Ranch, CA 0 3,977,200 35,794,729 0 (0)
Newport Cove.................Henderson, NV 0 698,700 6,288,245 1,600 765,432
Newport Heights..............Seattle, WA 2,655,505 390,700 3,516,229 500 208,031
Northampton I................Largo, MD 13,333,122 1,843,200 17,318,363 0 1,720,009
Northampton II...............Largo, MD 0 1,494,100 14,279,723 19,400 186,486
Northgate Village............San Antonio, TX (E) 660,000 5,753,724 100 350,807
Oak Mill II..................Germantown, MD 6,475,057 854,000 8,187,169 133 689,508
Oak Park North...............Agoura Hills, CA (O) 1,706,500 15,358,942 400 44,593
Oak Park South...............Agoura Hills, CA (O) 1,683,400 15,150,835 400 82,585
Oaks of Lakebridge...........Ormond Beach, FL 0 413,700 3,742,503 2,100 270,178
Olentangy....................Columbus, OH 28,425,106 3,032,336 20,862,191 0 7,394,749
Orchard Ridge................Seattle, WA 0 482,600 4,343,826 3,000 157,534
Paradise Point...............Dania, FL 0 1,494,700 13,452,161 855,955 1,237,844
Park Knoll...................Atlanta, GA 0 2,904,500 26,140,219 4,300 1,252,945
Park Place I & II............Plymouth, MN 17,951,182 2,428,200 21,853,006 5,700 185,384
Park West....................Los Angeles, CA 0 3,033,300 27,299,323 100 236,356
Parkwest.....................Austin, TX (E) 648,605 4,541,683 100 419,923
Pine Harbour.................Orlando, FL 0 1,661,000 14,948,625 3,300 749,584
Pine Meadow..................Greensboro, NC 4,921,530 719,300 6,474,036 1,250 67,385
Pines at Cloverlane..........Pittsfield Township, MI 0 1,906,600 17,159,269 2,400 1,913,775
Pines of Springdale..........West Palm Beach, FL 0 471,200 4,240,800 2,667 385,267
Plantation...................Monroe, LA 0 210,000 3,370,715 0 (399,716)
Pointe East..................Redmond, WA 0 601,800 5,416,489 800 108,328
Port Royale..................Ft. Lauderdale, FL 0 1,752,100 15,769,281 2,100 406,225
Port Royale II...............Fort Lauderdale, FL 0 1,015,700 9,141,355 6,300 304,166
Preston in Willowbend........Plano, TX 0 872,500 7,852,675 3,000 1,261,802
Preston Lake.................Atlanta, GA 0 1,430,900 12,877,986 34,993 934,101
Promenade Terrace............Corona Hills, CA 16,490,541 2,281,000 20,529,476 1,700 40,643
Pueblo Villas................Albuquerque, NM 0 854,300 7,688,783 1,200 36,858
Quail Run....................Oklahoma City, OK 0 1,000,000 4,136,059 0 551,288
Ravens Crest.................Plainsboro, NJ (O) 4,673,000 42,057,149 2,850 1,065,442
Regency Palms................Huntington Beach, CA 0 1,856,500 16,708,950 800 143,839
Reserve Square...............Cleveland, OH 0 2,618,352 23,565,022 500 7,965,098
Ridgetree I & II.............Dallas, TX 0 2,094,600 18,851,177 19,000 382,141
River Bend...................Tampa, FL 0 602,945 2,161,915 0 1,994,175
Rock Creek...................Corrboro, NC 0 895,100 8,056,360 0 148
Rosehill Pointe..............Lenexa, KS 0 2,073,400 18,660,475 18,300 483,594
GROSS AMOUNT CARRIED LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
Meadowcreek..................Tigard, OR 1,299,100 12,180,289 13,479,389 972,673 1985 30 Years
Merrimac Woods...............Costa Mesa, CA 674,900 6,089,669 6,764,569 58,694 1970 30 Years
Mountain Terrace.............Stevenson Ranch, CA 3,977,200 35,794,729 39,771,929 3,502 1992 30 Years
Newport Cove.................Henderson, NV 700,300 7,053,677 7,753,977 844,928 1983 30 Years
Newport Heights..............Seattle, WA 391,200 3,724,260 4,115,460 300,036 1985 30 Years
Northampton I................Largo, MD 1,843,200 19,038,372 20,881,572 1,440,396 1977 30 Years
Northampton II...............Largo, MD 1,513,500 14,466,209 15,979,709 1,026,005 1988 30 Years
Northgate Village............San Antonio, TX 660,100 6,104,531 6,764,631 918,384 1984 30 Years
Oak Mill II..................Germantown, MD 854,133 8,876,677 9,730,810 616,158 1985 30 Years
Oak Park North...............Agoura Hills, CA 1,706,900 15,403,535 17,110,435 660,163 1990 30 Years
Oak Park South...............Agoura Hills, CA 1,683,800 15,233,420 16,917,220 703,216 1989 30 Years
Oaks of Lakebridge...........Ormond Beach, FL 415,800 4,012,681 4,428,481 505,544 1984 30 Years
Olentangy....................Columbus, OH 3,032,336 28,256,940 31,289,276 14,672,182 1972 30 Years
Orchard Ridge................Seattle, WA 485,600 4,501,360 4,986,960 411,431 1988 30 Years
Paradise Point...............Dania, FL 2,350,655 14,690,005 17,040,660 1,199,383 1987-90 30 Years
Park Knoll...................Atlanta, GA 2,908,800 27,393,164 30,301,964 2,838,509 1983 30 Years
Park Place I & II............Plymouth, MN 2,433,900 22,038,390 24,472,290 265,497 1986 30 Years
Park West....................Los Angeles, CA 3,033,400 27,535,679 30,569,079 1,281,092 1987/90 30 Years
Parkwest.....................Austin, TX 648,705 4,961,606 5,610,311 607,764 1985 30 Years
Pine Harbour.................Orlando, FL 1,664,300 15,698,209 17,362,509 1,558,426 1991 30 Years
Pine Meadow..................Greensboro, NC 720,550 6,541,421 7,261,971 115,437 1974 30 Years
Pines at Cloverlane..........Pittsfield
Township, MI 1,909,000 19,073,044 20,982,044 583,144 1975-79 30 Years
Pines of Springdale..........West Palm Beach, FL 473,867 4,626,067 5,099,934 485,180 1985/87(x) 30 Years
Plantation...................Monroe, LA 210,000 2,970,999 3,180,999 1,930,187 1972 30 Years
Pointe East..................Redmond, WA 602,600 5,524,817 6,127,417 421,303 1988 30 Years
Port Royale..................Ft. Lauderdale, FL 1,754,200 16,175,506 17,929,706 1,236,499 1988 30 Years
Port Royale II...............Fort Lauderdale, FL 1,022,000 9,445,521 10,467,521 264,972 1991 30 Years
Preston in Willowbend........Plano, TX 875,500 9,114,477 9,989,977 980,635 1985 30 Years
Preston Lake.................Atlanta, GA 1,465,893 13,812,087 15,277,980 1,394,584 1984-86 30 Years
Promenade Terrace............Corona Hills, CA 2,282,700 20,570,119 22,852,819 332,826 1990 30 Years
Pueblo Villas................Albuquerque, NM 855,500 7,725,641 8,581,141 122,902 1975 30 Years
Quail Run....................Oklahoma City, OK 1,000,000 4,687,347 5,687,347 1,911,096 1978/1983 30 Years
Ravens Crest.................Plainsboro, NJ 4,675,850 43,122,591 47,798,441 3,741,881 1984 30 Years
Regency Palms................Huntington Beach, CA 1,857,300 16,852,789 18,710,089 493,126 1969 30 Years
Reserve Square...............Cleveland, OH 2,618,852 31,530,120 34,148,972 2,619,824 1973 30 Years
Ridgetree I & II.............Dallas, TX 2,113,600 19,233,318 21,346,918 405,273 1983 30 Years
River Bend...................Tampa, FL 602,945 4,156,090 4,759,035 2,714,440 1971 30 Years
Rock Creek...................Corrboro, NC 895,100 8,056,508 8,951,608 16,432 1986 30 Years
Rosehill Pointe..............Lenexa, KS 2,091,700 19,144,069 21,235,769 404,389 1984 30 Years
S-5
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Roswell......................Atlanta, GA 8,100,000 1,217,500 10,957,845 2,500 442,046
Sabal Pointe (M).............Coral Springs, FL 0 1,941,900 17,477,592 9,500 177,360
Saddle Creek.................Carrollton, TX 0 703,300 6,329,899 4,800 2,939,209
Saddle Ridge.................Loudoun County, VA 0 1,351,800 12,165,984 13,000 191,045
Sawgrass Cove................Bradenton, FL 0 1,671,200 15,041,179 2,950 718,569
Sheffield Court..............Arlington, VA 0 3,349,350 30,246,228 (0) 1,991,716
Silver Shadow................Las Vegas, NV 0 952,100 8,568,921 1,340 254,165
Silverwood...................Mission, KS 11,000,000 1,244,000 11,196,244 1,700 496,371
Sleepy Hollow................Kansas City, MO 12,500,000 2,193,546 13,689,443 1 1,224,190
Songbird.....................San Antonio, TX 6,984,854 1,080,500 9,724,928 1,900 46,272
Sonnet Cove I................Lexington, KY 0 183,407 2,422,860 0 1,553,169
Sonnet Cove II...............Lexington, KY 1,495,882 100,000 1,108,405 0 821,113
Southbank....................Mesa, AZ 0 319,600 2,876,874 10,900 304,656
South Creek..................Mesa, AZ 16,541,027 2,669,300 24,023,758 1,900 78,353
Spice Run....................Naperville, IL 0 2,578,900 23,210,030 400 3,874
Springs Colony...............Orlando, FL 0 631,900 5,687,010 8,500 657,299
Stonebrook...................Oklahoma City, OK 0 1,418,887 7,528,238 0 180,721
Stonelake Club...............Ocala, FL (E) 250,000 2,024,968 100 319,301
Summer Ridge.................Riverside, CA 0 600,500 5,404,571 1,800 23,710
Summerset Village............Chatsworth, CA 0 2,628,500 23,656,668 1,900 30,377
Sunny Oak Village............Overland Park, KS 0 2,222,600 20,003,050 20,950 276,118
Sunrise Springs..............Las Vegas, NV 0 972,600 8,753,491 2,700 144,038
Sutton Place.................Dallas, TX 0 1,316,500 11,848,717 41,900 2,241,843
Tanasbourne Terrace..........Hillsboro, OR 0 1,873,000 16,857,220 3,700 695,796
Tanglewood...................Manassas, VA 15,795,420 2,103,400 19,559,772 4,895 1,576,348
Tanglewood...................Portland, OR 0 760,000 6,839,589 3,000 800,883
Terraces at Peachtree........Atlanta, GA 0 582,800 5,245,560 700 284,134
The Place....................Fort Myers, FL 0 722,900 6,506,350 3,340 350,239
The Seasons..................Boise, ID 0 604,400 5,439,624 3,600 200,077
Towne Centre III.............Laurel, MD 6,022,120 982,300 9,301,830 (0) 929,712
Towne Centre IV..............Laurel, MD 9,781,127 1,564,200 14,787,362 4,700 44,169
Trails.......................Arlington, TX 0 616,700 5,550,590 21,300 531,223
Trails.......................Las Vegas, NV 0 3,076,200 27,685,764 3,000 713,626
Trails.......................Aurora, CO (E) 1,217,800 8,525,346 100 1,142,930
University Park..............Toledo, OH 0 70,000 834,378 0 1,415,627
Via Ventura..................Phoenix, AZ 0 1,476,500 13,288,894 7,100 2,735,078
Village Oaks.................Austin, TX 5,506,970 1,184,400 10,659,432 500 4,761
Villa Madeira................Phoenix, AZ 0 1,580,000 14,219,907 2,100 403,579
Villa Manana.................Phoenix, AZ 0 951,400 8,562,443 3,900 484,091
GROSS AMOUNT LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
Roswell......................Atlanta, GA 1,220,000 11,399,891 12,619,891 965,464 1985 30 Years
Sabal Pointe (M).............Coral Springs, FL 1,951,400 17,654,952 19,606,352 531,729 1995 30 Years
Saddle Creek.................Carrollton, TX 708,100 9,269,108 9,977,208 1,175,684 1980 30 Years
Saddle Ridge.................Loudoun County, V 1,364,800 12,357,029 13,721,829 506,256 1989 30 Years
Sawgrass Cove................Bradenton, FL 1,674,150 15,759,748 17,433,898 1,471,148 1991 30 Years
Sheffield Court..............Arlington, VA 3,349,350 32,237,944 35,587,294 2,072,699 1986 30 Years
Silver Shadow................Las Vegas, NV 953,440 8,823,086 9,776,526 941,078 1992 30 Years
Silverwood...................Mission, KS 1,245,700 11,692,615 12,938,315 956,744 1986 30 Years
Sleepy Hollow................Kansas City, MO 2,193,547 14,913,633 17,107,180 4,287,699 1987 30 Years
Songbird.....................San Antonio, TX 1,082,400 9,771,200 10,853,600 103,123 1981 30 Years
Sonnet Cove I................Lexington, KY 183,407 3,976,029 4,159,436 2,577,503 1972 30 Years
Sonnet Cove II...............Lexington, KY 100,000 1,929,518 2,029,518 1,208,653 1974 30 Years
Southbank....................Mesa, AZ 330,500 3,181,530 3,512,030 347,843 1985 30 Years
South Creek..................Mesa, AZ 2,671,200 24,102,111 26,773,311 400,568 1986-89 30 Years
Spice Run....................Naperville, IL 2,579,300 23,213,904 25,793,204 27,627 1988 30 Years
Springs Colony...............Orlando, FL 640,400 6,344,309 6,984,709 587,311 1986 30 Years
Stonebrook...................Oklahoma City, OK 1,418,887 7,708,959 9,127,846 3,310,433 1983 30 Years
Stonelake Club...............Ocala, FL 250,100 2,344,269 2,594,369 344,464 1986 30 Years
Summer Ridge.................Riverside, CA 602,300 5,428,281 6,030,581 91,415 1985 30 Years
Summerset Village............Chatsworth, CA 2,630,400 23,687,044 26,317,444 236,265 1985 30 Years
Sunny Oak Village............Overland Park, KS 2,243,550 20,279,168 22,522,718 380,603 1984 30 Years
Sunrise Springs..............Las Vegas, NV 975,300 8,897,529 9,872,829 735,256 1989 30 Years
Sutton Place.................Dallas, TX 1,358,400 14,090,560 15,448,960 1,558,058 1985 30 Years
Tanasbourne Terrace..........Hillsboro, OR 1,876,700 17,553,016 19,429,716 1,491,360 1986-89 30 Years
Tanglewood...................Manassas, VA 2,108,295 21,136,120 23,244,415 1,634,125 1987 30 Years
Tanglewood...................Portland, OR 763,000 7,640,472 8,403,472 716,175 1976 30 Years
Terraces at Peachtree........Atlanta, GA 583,500 5,529,694 6,113,194 227,212 1987 30 Years
The Place....................Fort Myers, FL 726,240 6,856,589 7,582,829 608,174 1986 30 Years
The Seasons..................Boise, ID 608,000 5,639,701 6,247,701 510,392 1990 30 Years
Towne Centre III.............Laurel, MD 982,300 10,231,542 11,213,842 789,981 1969 30 Years
Towne Centre IV..............Laurel, MD 1,568,900 14,831,531 16,400,431 1,020,310 1968 30 Years
Trails.......................Arlington, TX 638,000 6,081,813 6,719,813 623,069 1984 30 Years
Trails.......................Las Vegas, NV 3,079,200 28,399,390 31,478,590 2,184,035 1988 30 Years
Trails.......................Aurora, CO 1,217,900 9,668,276 10,886,176 1,306,466 1986 30 Years
University Park..............Toledo, OH 70,000 2,250,005 2,320,005 1,235,516 1965 30 Years
Via Ventura..................Phoenix, AZ 1,483,600 16,023,972 17,507,572 1,331,620 1980 30 Years
Village Oaks.................Austin, TX 1,184,900 10,664,193 11,849,093 20,925 1984 30 Years
Villa Madeira................Phoenix, AZ 1,582,100 14,623,486 16,205,586 1,324,635 1971 30 Years
Villa Manana.................Phoenix, AZ 955,300 9,046,534 10,001,834 839,816 1971-85 30 Years
S-6
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------
Villa Solana.................Laguna Hills, CA 0 1,663,500 14,971,366 1,600 796,923
Village of Hampshire.........Toledo, OH 0 195,886 1,320,453 0 9,366,924
Village of Newport...........Federal Way, WA 3,272,574 414,900 3,733,899 1,400 248,689
Vista Del Lago...............Mission Viejo, CA 32,350,000 4,524,400 41,357,681 1,400 966,539
Walden Wood..................Southfield, MI 5,960,000 833,300 7,499,662 1,400 818,712
Walnut Ridge.................Little Rock, AR 3,654,026 196,079 2,424,631 0 2,997,627
Waterstone Place.............Seattle, WA 0 2,950,900 26,558,353 13,100 2,237,608
Wellington...................Silverdale, WA 8,349,435 1,097,300 9,876,034 2,000 382,036
Wellington Hill..............Manchester, NH 28,625,000 1,872,500 16,852,955 29,700 1,407,693
Wilde Lake...................Richmond, VA 4,440,000 934,600 8,411,613 10,600 95,472
Williamsburg Square..........Little Rock, AR 3,288,623 315,000 1,745,958 0 3,305,267
Willowglen...................Aurora, CO 0 1,708,000 15,371,641 1,100 92,270
Windmill.....................Colorado Springs, CO (E) 395,544 4,953,156 100 488,925
Windridge....................Laguna Niguel, CA (O) 2,660,800 23,947,096 2,100 293,993
Winterwood...................Charlotte, NC 12,260,000 1,720,100 15,481,455 1,700 898,560
Woodbridge (N)...............Cary, NC 4,820,441 1,981,900 17,839,380 (0) 116,484
Woodcreek....................Beaverton, OR 11,600,802 1,753,700 15,783,764 1,400 1,102,966
Woodlake at Killearn.........Tallahassee, FL 0 1,404,300 12,638,426 3,855 846,099
Woodland Hills...............Decatur, GA 0 1,223,900 11,017,542 (0) 178,798
Woodmoor.....................Austin, TX 0 649,300 5,843,200 4,500 830,321
Woods at North Bend..........Raleigh, NC 0 1,039,000 9,350,616 500 267,612
Woodscape....................Raleigh, NC 0 956,000 8,603,550 1,200 34,519
Woodside.....................Lorton, VA 0 1,308,100 12,503,220 17,900 209,155
Yorktowne....................Millersville, MD 0 216,000 1,330,710 0 4,508,939
Yuma Court...................Colorado Springs, CO 0 113,163 836,429 100 104,328
Operating Partnership........Chicago, IL 0 0 88,566 0 0
Management Business..........Chicago, IL 0 0 3,442,962 1,000 5,589,868
---------------------------- -----------------------------------------
TOTAL $680,755,447 $283,252,575 $2,486,293,619 $1,626,411 $212,337,130
============================ =========================================
GROSS AMOUNT CARRIED LIFE USED TO
AT CLOSE OF COMPUTE
DESCRIPTION PERIOD 12/31/96 DEPRECIATION IN
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ------------------------------------------------------------------------------------------------------------------------------------
Villa Solana.................Laguna Hills, CA 1,665,100 15,768,289 17,433,389 1,579,997 1984 30 Years
Village of Hampshire.........Toledo, OH 195,886 10,687,377 10,883,263 3,281,711 1950 30 Years
Village of Newport...........Federal Way, WA 416,300 3,982,588 4,398,888 326,790 1987 30 Years
Vista Del Lago...............Mission Viejo, CA 4,525,800 42,324,220 46,850,020 4,318,438 1986-88 30 Years
Walden Wood..................Southfield, MI 834,700 8,318,374 9,153,074 899,416 1972 30 Years
Walnut Ridge.................Little Rock, AR 196,079 5,422,258 5,618,337 2,659,332 1975 30 Years
Waterstone Place.............Seattle, WA 2,964,000 28,795,961 31,759,961 3,101,327 1990 30 Years
Wellington...................Silverdale, WA 1,099,300 10,258,070 11,357,370 554,721 1990 30 Years
Wellington Hill..............Manchester, NH 1,902,200 18,260,648 20,162,848 1,750,000 1987 30 Years
Wilde Lake...................Richmond, VA 945,200 8,507,085 9,452,285 10,254 1989 30 Years
Williamsburg Square..........Little Rock, AR 315,000 5,051,225 5,366,225 2,325,587 1974 30 Years
Willowglen...................Aurora, CO 1,709,100 15,463,911 17,173,011 161,468 1983 30 Years
Windmill.....................Colorado Springs, CO 395,644 5,442,081 5,837,725 856,207 1985 30 Years
Windridge....................Laguna Niguel, CA 2,662,900 24,241,089 26,903,989 1,825,518 1989 30 Years
Winterwood...................Charlotte, NC 1,721,800 16,380,015 18,101,815 1,748,890 1986 30 Years
Woodbridge (N)...............Cary, NC 1,981,900 17,955,864 19,937,764 549,380 1993-95 30 Years
Woodcreek....................Beaverton, OR 1,755,100 16,886,730 18,641,830 1,396,188 1982-84 30 Years
Woodlake at Killearn.........Tallahassee, FL 1,408,155 13,484,525 14,892,680 1,404,945 1986 30 Years
Woodland Hills...............Decatur, GA 1,223,900 11,196,340 12,420,240 250,737 1985 30 Years
Woodmoor.....................Austin, TX 653,800 6,673,521 7,327,321 694,877 1981 30 Years
Woods at North Bend..........Raleigh, NC 1,039,500 9,618,228 10,657,728 399,780 1983 30 Years
Woodscape....................Raleigh, NC 957,200 8,638,069 9,595,269 104,374 1979 30 Years
Woodside.....................Lorton, VA 1,326,000 12,712,375 14,038,375 937,395 1987 30 Years
Yorktowne....................Millersville, MD 216,000 5,839,649 6,055,649 3,740,770 1974 30 Years
Yuma Court...................Colorado Springs, C 113,263 940,757 1,054,020 128,338 1985 30 Years
Operating Partnership........Chicago, IL 0 88,566 88,566 30,113 (H)
Management Business..........Chicago, IL 1,000 9,032,830 9,033,830 5,413,107 (G)
------------ -------------- -------------- ------------
TOTAL $284,878,986 $2,698,630,748 $2,983,509,734 $301,511,545
============ ============== ============== ============
S-7
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
NOTES:
(A) The balance of furniture & fixtures included in the total amount was
$132,062,754 as of December 31, 1996.
(B) The aggregate cost for Federal Income Tax purposes as of December 31, 1996
was approximately $2.8 billion.
(C) The life to compute depreciation for furniture & fixtures is 5 years.
(D) These two properties are encumbered by $15,178,699 in bonds.
(E) These 15 properties are encumbered by a $44,000,000 note payable.
(F) These four properties are encumbered by $15,500,000 in bonds.
(G) This asset consists of various acquisition dates and represents furniture,
fixtures and equipment owned by the Management Business.
(H) This asset consists of various acquisition dates and represents furniture,
fixtures and equipment owned by the Operating Partnership.
(I) Improvements are net of write-off of fully depreciated assets which are no
longer in service.
(J) Combined with Cedar Cove
(K) Formerly Oxford & Sussex
(L) Formerly Post Place
(M) Formerly The Vinings at Coral Springs
(N) Formerly The Plantations (NC)
(O) These properties are pledged as additional collateral in connection with
the tax-exempt bond refinancing.
* Four Lakes was constructed in phases between 1968 & 1988.
(#) The Lodge-Texas was struck by a tornado that destroyed most of the property.
The property was reconstructed during 1989 & 1990.
(x) Pines of Springdale was constructed in phases between 1985 & 1987.
S-8
Schedule III
ERP OPERATING LIMITED PARTNERSHIP
Real Estate and Accumulated Depreciation (continued)
(Amounts In Thousands)
The changes in total real estate for the years ended December 31, 1996, 1995,
and 1994 are as follows:
1996 1995 1994
----------- ----------- -----------
Balance, beginning of year $2,188,939 $1,963,476 $ 634,577
Acquisitions 789,056 288,277 1,313,077
Improvements 33,001 32,800 16,721
Write-off of fully depreciated assets
which are no longer in service (20) (34,320)
Dispositions and other (27,466) (61,294) (899)
----------- ----------- -----------
Balance, end of year $2,983,510 $2,188,939 $1,963,476
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The changes in accumulated depreciation for the years ended December 31, 1996,
1995 and 1994 are as follows:
1996 1995 1994
----------- ----------- -----------
Balance, beginning of year $ 218,339 $ 192,741 $ 156,367
Depreciation 93,253 72,410 37,273
Write-off of fully depreciated assets
which are no longer in service (20) (34,320)
Dispositions and other (10,060) (12,492) (899)
----------- ----------- -----------
Balance, end of year $ 301,512 $ 218,339 $ 192,741
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