UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _______________
Commission File Number 0-20707
COLONIAL REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 63-1098468
(State of organization) (I.R.S. employer
identification no.)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal
executive offices)
Registrant's telephone number, including area code: (205) 250-8700 Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act: Class A Units of
Limited Partnership Interest
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 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 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. |_|
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12-b-2).
YES X NO
---- ----
Documents Incorporated by Reference
None.
This annual report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause our, and our affiliates, or the industry's
actual results, performance, achievements or transactions to be materially
different from any future results, performance, achievements or transactions
expressed or implied by such forward-looking statements. Such factors include,
among others, the following:
o National, regional and local economic and business conditions that will,
among other things, affect:
o Demand for multifamily, office and retail properties,
o The ability of the general economy to recover timely from the current
economic downturn,
o Availability and creditworthiness of tenants,
o The level of lease rents, and
o The availability of financing for both tenants and us;
o Adverse changes in the real estate markets, including, among other things:
o Competition with other companies, and
o Risks of real estate acquisition and development (including the
failure of pending developments to be completed on time and within
budget);
o Actions, strategies and performance of affiliates that we may not control
or companies in which we have made investments;
o Ability to obtain insurance at a reasonable cost;
o Ability to maintain our general partner's status as a REIT for federal
and state income tax purposes;
o Governmental actions and initiatives; and
o Environmental/safety requirements.
PART I
Item 1. Business.
As used herein, the terms "CRLP", "we", "us", "our" and "Operating Partnership"
refer to Colonial Realty Limited Partnership, a Delaware limited partnership,
and its subsidiaries and other affiliates, including, Colonial Properties
Services Limited Partnership and Colonial VRS L.L.C. or, as the context may
require, Colonial Realty Limited Partnership only. As used herein, the term
"Company" includes Colonial Properties Trust, an Alabama real estate investment
trust, and one or more of its subsidiaries and other affiliates, including CRLP,
Colonial Properties Services Limited Partnership and Colonial Properties
Services, Inc. or, as the context may require, Colonial Properties Trust only.
We are the Operating Partnership of the Company, which is one of the
largest owners, developers and operators of multifamily, office and retail
properties in the Sunbelt region of the United States. The Company is a
fully-integrated real estate company, whose activities include ownership of a
diversified portfolio of 106 properties as of December 31, 2002, located in
Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina,
Tennessee, Texas, and Virginia, development of new properties, acquisition of
existing properties, build-to-suit development, and the provision of management,
leasing, and brokerage services for commercial real estate.
As of December 31, 2002, we owned 41 multifamily apartment communities
containing a total of 14,566 apartment units (the "multifamily properties"), 21
office properties containing a total of approximately 5.2 million square feet of
office space (the "office properties"), 44 retail properties containing a total
of approximately 15.5 million square feet of retail space (the "retail
properties"), and certain parcels of land adjacent to or near certain of these
properties (the "land"). The multifamily properties, the office properties, the
retail properties and the land are referred to collectively as the "properties".
As of December 31, 2002, the multifamily properties, the office properties, and
the retail properties that had achieved stabilized occupancy were 88%, 91% and
89% leased, respectively.
Our executive offices are located at 2101 Sixth Avenue North, Suite
750, Birmingham, Alabama, 35203 and our telephone number is (205) 250-8700. We
were formed in Delaware on August 6, 1993.
Formation of the Company and the Operating Partnership
The Company and the Operating Partnership were formed to succeed to
substantially all of the interests of Colonial Properties, Inc., an Alabama
corporation ("Colonial"), its affiliates and certain other entities in a
diversified portfolio of multifamily, office, and retail properties located in
Alabama, Florida, and Georgia and to the development, acquisition, management,
leasing, and brokerage businesses of Colonial.
Acquisitions, Developments and Re-developments
The following table summarizes our acquisitions, developments and
re-developments that were completed in 2002. For the purposes of the following
table and throughout this Form 10-K, the size of a multifamily property is
measured by the number of units and the size of an office property and retail
property is measured in square feet.
Total Total
Location Units/Sq. Feet Cost
-------------------- ------------------ ---------------
Acquisitions:
Office Properties
901 Maitland Center Orlando, FL 155,669 $ 16,566
Colonnade Birmingham, AL 419,377 49,025
Heathrow International Business Center Orlando, FL 804,078 122,025
------------------ ---------------
1,379,124 187,616
------------------ ---------------
Retail Properties
Shops at Colonnade Birmingham, AL 112,186 6,600
------------------ ---------------
Total Acquisitions 194,216
---------------
Completed Developments and Re-developments:
Multifamily Properties
Colonial Grand at TownPark - Lake Mary Orlando, FL 456 37,737
Colonial Village at TownPark - Sarasota Sarasota, FL 272 21,666
------------------ ---------------
728 59,403
------------------ ---------------
Office Properties
Colonial Center at TownPark 600 Orlando, FL 199,585 27,558
------------------ ---------------
Retail Properties
Colonial Promenade Hoover Birmingham, AL 166,000 16,625
Parkway Place (1) (re-development) Huntsville, AL 630,000 34,407
------------------ ---------------
796,000 51,032
------------------ ---------------
Total Developments and Re-developments 137,993
---------------
---------------
Total Acquisitions, Developments and Re-developments $ 332,209
---------------
(1) Property is owned through a joint venture. Costs presented are 45% of
total project costs, and square footage represents the entire property.
Acquisitions
During 2002, we acquired three office properties and one retail
property as described below.
Office Properties
901 Maitland Center - During March 2002, we acquired 901 Maitland
Center, a 155,669 square foot office building located in Orlando, Florida,
within Orlando's largest suburban office park. The total purchase price was
$16.6 million and was funded through the sale of Colonial Grand at Palma Sola, a
340-unit multifamily asset located in Bradenton, Florida. See disposition
activity below for further discussion.
Colonnade - During May 2002, we acquired The Colonnade, which includes
five Class A office buildings totaling 419,377 square feet, located in the
premier suburban office park in Birmingham, Alabama. The buildings are part of a
mixed-use development, and adjacent sites include such amenities as hotels,
restaurants, banking and financial services, and shopping. The office buildings
were purchased for a total purchase price of $49.0 million, which was primarily
funded through the sale of certain multifamily properties. See disposition
activity below for further discussion.
Heathrow International Business Center - During August 2002, we
acquired Heathrow International Business Center, a seven-building office park
totaling 804,078 rentable square feet and 102 acres of land for potential future
development, located in the Lake Mary/Heathrow submarket of Orlando, Florida.
Current tenants include national and regional companies like Veritas, Bank One,
FiServ, and The United States Government. The total purchase price of the office
park was $122.0 million, which was primarily funded through our recent sales of
multifamily and retail assets and the assumption of $44.0 million of existing
debt. The remaining balance was funded through our unsecured line of credit.
Retail Property
Shops at Colonnade - During May 2002, we acquired the Shops at
Colonnade, a 112,186 square foot village style retail center, located in
Birmingham, Alabama. The property is part of a mixed-use development, and
adjacent sites include such amenities as hotels, restaurants, banking and
financial services, and office buildings. The retail property was purchased for
a total purchase price of $6.6 million, which was primarily funded through the
sale of certain multifamily properties. See disposition activity below for
further discussion.
Completed Multifamily Development Activity
During 2002, we completed the development of two multifamily properties
as described below.
Colonial Grand at TownPark - Sarasota--During the first quarter of
2002, we completed the development of Colonial Grand at TownPark - Sarasota, a
272-unit multifamily community located in Sarasota, Florida. The new apartments
include numerous luxuries, including high-speed Internet access, fitness center,
a swimming pool, and a resident business center. Project development costs,
including land acquisition costs totaled $21.7 million and were funded through
advances on our unsecured line of credit.
Colonial Grand at TownPark - Lake Mary--During the second quarter of
2002, we completed the development of Colonial Grand at TownPark - Lake Mary, a
456-unit multifamily community located in Orlando, Florida. The new apartments
include numerous luxuries, including high-speed Internet access, fitness center,
a swimming pool, and a resident business center. Project development costs,
including land acquisition costs totaled $37.7 million and were funded through
advances on our unsecured line of credit.
Completed Office Property Development Activity
Colonial Center TownPark 600--During the fourth quarter of 2002, we
completed the development of Colonial Center TownPark 600, a 199,585 square foot
Class A office building in Orlando, Florida, which is part of a mixed-use
development integrating multifamily, office, and retail products. This building
is a build-to-suit development for FiServ, Inc., a financial software company
with approximately 14,000 employees worldwide. Project development costs,
including land acquisitions totaled $27.6 million and were funded through
advances on our unsecured line of credit.
Completed Retail Development and Redevelopment Activity
Colonial Promenade Hoover--During the third quarter of 2002, we
completed the development of Colonial Promenade Hoover, a 166,000 square foot
community shopping center located in Birmingham, Alabama. The center is anchored
by a Super Wal-Mart Center. Project development costs including land
acquisitions costs totaled $16.6 million and were funded through our unsecured
line of credit.
Parkway Place--During the fourth quarter of 2002, we, together with a
joint venture partner, completed the re-development of Parkway Place, a 630,000
square foot mall located in Huntsville, Alabama. The mall is anchored by
Parisian and Dillard's Department Stores. Total project development costs
totaled $76.5 million, of which our portion was $34.4 million, which was funded
through a construction loan secured by the property, which matures in December
2003.
Continuing Development Activity
The following table summarizes our properties that are under
construction and undeveloped land at December 31, 2002:
Total Costs
Units/ Estimated Capitalized
Square Estimated Total Costs To Date
Feet Completion (in thousands) (in thousands)
----------- ------------ --------------- ----------------
Office Projects:
Colonial Center at TownPark 200 155,000 2003 $ 21,926 $ 15,835
Retail Projects:
Colonial Promenade Trussville Phase II 65,000 2003 8,400 2,084
Mixed Use Projects Infrastructure
Colonial TownPark - Lake Mary 33,168 29,458
Colonial TownPark - Sarasota 6,410 4,969
Colonial Center at Mansell 10,794 9,863
Other Projects and Undeveloped Land 20,311
----------------
$ 82,520
================
Continuing Office Property Development
Colonial Center TownPark 200--During the third quarter of 2001, we
began the development of Colonial Center TownPark 200, a 155,000 square foot
Class A office building in Orlando, Florida, which is part of a mixed-use
development integrating multifamily, office, and retail products. The building
will include the most advanced technology systems available in the market,
including high-speed internet access and fiber optic network infrastructure.
Project development costs, including land acquisitions are expected to total
$21.9 million and will be funded through advances on our unsecured line of
credit. We expect to complete the project in the fourth quarter of 2003.
New Retail Development Activity
Colonial Promenade Trussville II--During the fourth quarter of 2002, we
began the development of Colonial Promenade Trussville II, a 65,000 square foot
addition to Colonial Promenade Trussville, a community shopping center located
in Birmingham, Alabama. The center will be anchored by a Sam's and Kohl's.
Project development costs including land acquisitions costs are expected to
total $8.4 million and will be funded through our unsecured line of credit. We
expect to complete the project in the fourth quarter of 2003.
Dispositions
During 2002, we disposed of eight multifamily properties that contained
an aggregate of 1,988 units for a total consideration of $94.5 million. In
addition, we disposed of two office properties that contained an aggregate of
104,496 square feet and three retail properties that contained an aggregate of
449,443 square feet for a total consideration of $8.7 million and $35.4 million,
respectively. The following table is a summary of our disposition activity in
2002:
Total Sales Price
Property Location Units/Sq. Feet (in thousands)
- -------------------------------------------------------------------------------------------------------
Multifamily Properties
Colonial Grand at Carrollwood Tampa, FL 244 $ 15,244
Colonial Grand at Palma Sola Bradenton, FL 340 19,036
Colonial Village at Cordova Pensacola, FL 152 5,360
Colonial Village at Hillcrest Mobile, AL 104 5,178
Colonial Village at McGehee Montgomery, AL 468 18,390
Colonial Village at Monte D'Oro Birmingham, AL 200 11,166
Colonial Village at Oakleigh Pensacola, FL 176 10,955
Ski Lodge - Tuscaloosa Tuscaloosa, AL 304 9,180
-----------------------------------
1,988 94,509
Office Properties
University Park Orlando, FL 72,496 5,012
Colonnade 4100 & 4200 Birmingham, AL 32,000 3,680
-----------------------------------
104,496 8,692
Retail Properties
Colonial Promenade University Park II Orlando, FL 183,500 11,694
Colonial Promenade Madison (1) Huntsville, AL 110,712 3,163
Colonial Promenade Hoover (2) Birmingham, AL 155,231 20,530
-----------------------------------
449,443 35,387
Total $ 138,588
==================
(1) CRLP sold one-half of its 50% interest in the property.
(2) CRLP sold 90% of its interest in the property.
Recent Developments
Orlando Fashion Square Joint Venture-- In October 1998, we sold a 50%
interest in our Orlando Fashion Square retail property located in Orlando,
Florida to a third party. Subsequently, we entered into a joint venture
agreement with the third party, and the joint venture entered into an agreement
with us relating to the management of the property. The joint venture agreement
gives the third party the right, which became effective December 28, 2001, to
convert its 50% interest in the property to our common shares if specified terms
and conditions are met. The conversion value of the interest would be determined
at the time of conversion in accordance with the procedures set forth in the
joint venture agreement, and would be net of the third party's pro rata share of
any indebtedness secured by the property. The terms and conditions also include
an "accretion threshold", as defined, which must be met. At the time of the
original transaction, we considered the terms of the agreement in their entirety
(including the conversion right, the accretion threshold, and the conversion
value determination procedures) and assessed whether the third party could
compel us to repurchase the 50% interest sold. We concluded that the likelihood
of a compelled repurchase was remote, and accordingly accounted for the
transaction as a sale.
On May 31, 2002, the 50% joint venture partner elected to exercise its
option to convert its 50% interest in the property to our common shares. In
accordance with the terms of the joint venture agreement, we negotiated with our
joint venture partner and were unable to reach an agreement. Therefore, on
September 11, 2002, the joint venture partner elected to withdraw its conversion
election.
Third Party Development-- During December 2002, we entered into an
agreement with an unrelated third party in connection with the third party's
development of a $23.5 million multi-family property in Tampa, Florida. We have
agreed to loan approximately $4.0 million, which represents 17.0% of the
development costs to the third party during the development of the property.
Under the agreement, the balance of the loan matures in December 2007. At
December 31, 2002, no amount had been funded to the unrelated third party and we
have no liability recorded on our books for the potential loan amount. We have a
right of first refusal to purchase the property should the third party elect to
sell.
Investment in Partially Owned Entities and Other Arrangements-- During
August 2002, in connection with the purchase of Heathrow International Business
Center, we agreed to acquire one new office building that contains 192,000
square feet. The closing for this acquisition is anticipated to occur upon the
earlier of August 2005 or at such time that the seller achieves certain leasing
targets for the property. The purchase price will be determined based upon the
percentage of gross leasable area actually leased and the net operating income
generated by the leases at the time of acquisition.
During December 2002, we sold 90% of our interest in Colonial Promenade
Hoover for a total sales price of $20.5 million, and formed the Highway 150,
LLC, in which we maintain a 10% ownership and manage the property under contract
with the Highway 150 LLC. In connection with the formation of the Highway 150
LLC, we are serving as a guarantor of $1.0 million of the debt related of the
joint venture, which is collateralized by the Colonial Promenade Hoover retail
property. The Company's maximum guarantee of $1.0 million may be requested by
the lender, only after all of the rights and remedies available under the
associated note and security agreements have been exercised and exhausted. At
December 31, 2002, the total outstanding debt of the joint venture was
approximately $17.8 million, which matures in December 2012. At December 31,
2002, no liability was recorded on our books for the guarantee. The proceeds of
the joint venture transaction were used to repay a portion of the amount
outstanding under our unsecured line of credit.
Additionally during December 2002, we sold 25% of our interest in the
Colonial Promenade Madison Joint Venture for $3.2 million. Under the original
joint venture, we held a 50% interest in the joint venture. Therefore, we now
maintain a 25% ownership of the property and continue to manage the property.
Proceeds from the joint venture transaction were used to repay a portion of the
associated construction loan.
Financing Activity
We funded a portion of our acquisition, development and re-development
activities through the issuance of senior notes, public offerings of common
shares through the Company, proceeds received from the disposition of assets,
proceeds related to the secured financing of three properties, and advances on
our bank line of credit. On February 28, 2002, we sold 560,380 common units in
two transactions at $33.37 per unit, resulting in net proceeds of $17.6 million
to us, which were used to repay outstanding balances under our unsecured line of
credit. Salomon Smith Barney deposited 260,710 units into The Equity Focus Trust
REIT Portfolio Series, 2002-A, a newly formed unit investment trust, and 299,670
units were deposited into Cohen & Steers Quality Income Realty Fund, Inc.
On July 31, 2002, we completed a $100.0 million public debt offering of
unsecured senior. The notes, which mature in July 2012, bear a coupon rate of
6.88%, and were priced to yield an effective rate of 6.99% over the ten-year
term. We used the net proceeds of the offering to repay a $57.5 million
medium-term note that matured on August 9, 2002 and the remaining amount was
used to pay down a portion of the outstanding balance on our unsecured line of
credit. Additionally during 2002, we received proceeds of $52.8 million related
to the financing of three properties, which is collateralized by the related
properties.
We continued our asset recycling program, which allows us to maximize
our investment returns through the sale of assets that have reached their
maximum investment potential and reinvest the proceeds into opportunities with
more growth potential. During 2002, we sold assets for an aggregate sales price
of $138.6 million. See "Dispositions" above for a listing of the properties sold
during 2002. We used the proceeds to repay a portion of the borrowings under our
unsecured line of credit and to support our investment activities.
In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we record individual property sales as
discontinued operations, unless we maintain a significant continuing involvement
with the properties that have been sold. During 2002, the properties that were
sold and classified as discontinued operations were University Park, Colonial
Promenade University Park II, and Colonnade 4100 & 4200. We maintain a
significant continuing involvement through a management contract or an ownership
percentage in the remaining properties.
Business Strategy
Our business objective is to generate stable and increasing cash flow and
portfolio value for our unitholders through a strategy of:
o realizing growth in income from our existing portfolio of
properties;
o developing, expanding, and selectively acquiring additional
multifamily, office and retail properties in growth markets
located in the Sunbelt region of the United States, where we
have first-hand knowledge of growth patterns and local
economic conditions and believe we have a competitive
advantage due to our size and access to lower-cost capital;
o recycling capital by selectively disposing of assets that
have reached their maximum investment potential and
reinvesting the proceeds into opportunities with more growth
potential;
o managing our own properties, which enables us to better
control operating expenses and establish long-term
relationships with our office and retail tenants;
o maintaining our third-party property management business,
which increases cash flow and establishes additional
relationships with potential tenants; and
o employing a comprehensive capital maintenance program to
maintain properties in first-class condition.
Our business strategy and the implementation of that strategy are
determined by our Board of Trustees and may be changed from time to time.
Financing Strategy
We seek to maintain a well-balanced, conservative and flexible capital
structure by:
o maintaining conservative debt service and fixed charge
coverage ratios in order to sustain our investment grade
status;
o extending and sequencing the maturity dates of our debt;
o borrowing primarily at fixed rates; and
o generally pursuing long-term debt financings and
refinancings on an unsecured basis.
We believe that these strategies have enabled and should continue to
enable us to access the debt and equity capital markets to fund debt
refinancings and the acquisition and development of additional properties.
We have an unsecured bank line of credit providing for total borrowings
of up to $320 million. This line of credit agreement bears interest at LIBOR
plus a spread calculated from a pricing grid based on our unsecured debt
ratings. Based on our debt ratings at December 31, 2002, the spread was 105
basis points. The line of credit is renewable in November 2005 and provides for
a one-year extension. The line of credit agreement includes a competitive bid
feature that will allow us to convert up to $160 million under the line of
credit to a fixed rate, for a fixed term not to exceed 90 days. The credit
facility is primarily used to finance property acquisitions and developments and
has an outstanding balance at December 31, 2002, of $208.3 million. The interest
rate of this short-term borrowing facility, including the competitive bid
balance, was 2.38% and 3.08% at December 31, 2002 and 2001, respectively.
At December 31, 2002, our total outstanding debt balance was $1.3
billion. The outstanding balance includes fixed rate debt of $995.0 million, or
78.8%, and floating-rate debt of $267.2 million, or 21.2%. Our total market
capitalization as of December 31, 2002 was $2.7 billion and our ratio of debt to
total market capitalization was 47.1%. We calculate debt to total market
capitalization as total debt as a percentage of total debt, including preferred
units, plus the market value of our outstanding common units. Some of our loan
agreements contain restrictive covenants, which among other things require
maintenance of various financial ratios. At December 31, 2002, we were in
compliance with these covenants.
We have entered into several different hedging transactions in an
effort to manage exposure to changes in interest rates. The following table
summarizes the notional values, fair values and other characteristics of our
derivative financial instruments at December 31, 2002. The notional value at
December 31, 2002 provides an indication of the extent of our involvement in
these instruments at that time, but does not represent exposure to credit,
interest rate or market risk.
Interest Fair Value
Product Type Notional Value Rate Maturity At December 31, 2002
(in thousands)
- ------------------------------------- ------------------------- ------------- -------------- -------------------------
Interest Rate SWAP, Cash Flow $30.2 - $27.7 million 5.932% 1/01/06 $ (3,117)
Interest Rate SWAP, Cash Flow $50.0 million 2.319% 1/02/03 (38)
Interest Rate SWAP, Cash Flow $25.0 million 2.430% 1/01/03 (21)
Interest Rate SWAP, Cash Flow $50.0 million 2.113% 1/02/04 (370)
Interest Rate SWAP, Cash Flow $50.0 million 1.637% 1/02/04 (131)
Interest Rate SWAP, Cash Flow $50.0 million 1.615% 1/02/04 (119)
Interest Rate SWAP, Fair Value $50.0 million 5.015% 7/26/04 2,633
Interest Rate CAP, Cash Flow $21.1 million 6.850% 6/29/04 1
Interest Rate CAP, Cash Flow $17.9 million 6.850% 7/06/04 1
Interest Rate CAP, Cash Flow $30.4 million 11.200% 6/30/03 -
Interest Rate CAP, Cash Flow $17.1 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $27.0 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $8.7 million 4.840% 4/1/04 -
We do not use derivatives for trading or speculative purposes. Further,
we have a policy of only entering into contracts with major financial
institutions based upon their credit ratings and other factors. When viewed in
conjunction with the underlying and offsetting exposure that the derivatives are
designed to hedge, we have not sustained a material loss from those instruments
nor do we anticipate any material adverse effect on our net income or financial
position in the future from the use of derivatives.
At December 31, 2002, derivatives with a fair value of $2.6 million
were included in other assets and derivatives with a fair value of $3.8 million
were included in other liabilities. The change in net unrealized gains/losses of
$3.6 million in 2002 for derivatives designated as cash flow hedges is
separately disclosed in the statement of changes in partners' capital. Hedge
ineffectiveness of $23,000 on cash flow hedges was recognized in other income
(expense) during 2002.
Amounts reported in accumulated other comprehensive income related to
derivatives will be reclassified to interest expense as interest payments are
made on our variable-rate debt. The change in net unrealized gains/losses on
cash flow hedges reflects a reclassification of $2.2 million of net unrealized
gains/losses from accumulated other comprehensive income (loss) to interest
expense during 2002. During 2003, we estimate that an additional $2.3 million
will be reclassified to earnings from the current balance held in accumulated
other comprehensive income (loss).
We may modify our borrowing policy and may increase or decrease our
ratio of debt to total market capitalization. To the extent that the Company's
Board of Trustees determines to seek additional capital, we may raise such
capital through additional equity offerings, debt financings, asset dispositions
or retention of cash flow (subject to provisions in the Internal Revenue Code of
1986 requiring the distribution by a REIT of a certain percentage of taxable
income and taking into account taxes that would be imposed on undistributed
taxable income) or a combination of these methods.
Property Management
We are experienced in the management and leasing of multifamily, office
and retail properties and believe that the management and leasing of our own
portfolio has helped maintain consistent income growth and has resulted in
reduced operating expenses from the properties. The third-party management,
leasing and brokerage businesses conducted through the Management Corporation
have provided us both with a source of cash flow that is relatively stable and
with the benefits of economies of scale in conjunction with the management and
leasing of our own properties. These businesses also allow us to establish
additional relationships with tenants who may require additional office or
retail space and to identify potential acquisitions.
Operational Structure
We manage our business with three separate and distinct operating
divisions: multifamily, office and retail. We have centralized functions that
are common to each division, including accounting, information technology, due
diligence and administrative services. Decisions regarding acquisitions,
developments and dispositions are also centralized. Each division has an
Executive Vice President that oversees growth and operations and has a separate
management team that is responsible for acquiring, developing, and leasing
properties within each division. This structure allows us to utilize specialized
management personnel for each operating division. Although these divisions
operate independently from one another, constant communication among the
Executive Vice Presidents provides us with unique synergies allowing us to take
advantage of a variety of investment opportunities. In addition, the third-party
management, leasing and brokerage businesses have provided us both with a source
of cash flow that is relatively stable and with the benefits of economies of
scale in conjunction with the management and leasing of our own properties.
These businesses also allow us to establish additional relations with tenants
that may require additional retail or office space and to identify potential
acquisitions. See note 7 - Segment Reporting in our Notes to Consolidated
Financial Statements for information on our three segments and the
reconciliation of total segment revenues to total revenues, total segment net
operating income to income from continuing operations, and total divisional
assets to total assets for the years ended December 31, 2002, 2001 and 2000.
Additional information with respect to each of the operating divisions is set
forth below:
Multifamily Division. Our multifamily division is responsible for all
aspects of multifamily operations, including day-to-day management and leasing
of the 41 multifamily properties, as well as the provision of third-party
management services for apartment communities in which we do not have an
ownership interest or have a non-controlling ownership interest.
Office Division. Our office division is responsible for all aspects of
our commercial office operations, including the provision of management and
leasing services for the 21 office properties, as well as the provision of
third-party management services for office properties in which we do not have an
ownership interest and for brokerage services in other office property
transactions.
Retail Division. Our retail division is responsible for all aspects of
our retail operations, including the provision of management and leasing
services for the 44 retail properties, as well as the provision of third-party
management services for retail properties in which we do not have an ownership
interest and for brokerage services in other retail property transactions.
Competition
The ownership, development, operation and leasing of multifamily,
office and retail properties are highly competitive. We compete with domestic
and foreign financial institutions, other REITs, life insurance companies,
pension trusts, trust funds, partnerships and individual investors for the
acquisition of properties. In addition, we compete for tenants in our markets
primarily on the basis of property location, rent charged, services provided and
the design and condition of improvements. Our diversified business strategy of
investing in multifamily, office and retail property types that are located in
high-growth, demographically attractive cities in key Sunbelt states allows us
to shift assets within our portfolio in order to take advantage of market timing
and economic cycles, and to maximize investment returns.
Seasonality
Our multifamily properties and office properties generally are not
affected by seasonality. However, the retail shopping center industry is
seasonal in nature, with shopping center tenant sales peaking during the fourth
quarter due to the holiday season. As a result, a substantial portion of the
percentage rent at our retail properties is not recognized until the fourth
quarter. Furthermore, most new lease-up occurs towards the later part of the
year in anticipation of the holiday season and most vacancies occur toward the
beginning of the year. In addition, the majority of the temporary tenants take
occupancy in the fourth quarter. Accordingly, cash flow and occupancy levels are
generally lowest in the first quarter and highest in the fourth quarter. This
seasonality also impacts the quarter-by-quarter results of net operating income,
although this impact is largely mitigated by recognizing minimum rent on a
straight-line basis over the term of related leases in accordance with GAAP.
Environmental Matters
We believe that our properties are in compliance in all material
respects with all federal, state and local ordinances and regulations regarding
hazardous or toxic substances. We are not aware of any environmental condition
which we believe would have a material adverse effect on our financial condition
or results of operations (before consideration of any potential insurance
coverage). Nevertheless, it is possible that there are material environmental
liabilities of which we are unaware. Moreover, no assurances can be given that
(i) future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of our
properties have not been or will not be affected by tenants and occupants of our
properties, by the condition of properties in the vicinity of our properties or
by third parties unrelated to us. See "Risk Factors--Risks Associated with Our
Operations--We could incur significant costs related to environmental issues"
for a further discussion.
Insurance
We carry comprehensive liability, fire, extended coverage and rental
loss insurance on all of our properties. We believe the policy specifications
and insured limits of these policies are adequate and appropriate. There are,
however, certain types of losses, such as lease and other contract claims that
generally are not insured. We anticipate that we will review our insurance
coverage and policies from time to time to determine the appropriate level of
coverage but we cannot predict at this time if we will be able to obtain or
maintain full coverage at a reasonable cost in the future.
Employees
As of December 31, 2002, we employed approximately 950 persons,
including on-site property employees who provide services for the Properties
that we own and/or manage.
Tax Status
CRLP has no provision for income taxes since all taxable income or loss
or tax credits are passed through to the partners. The Company has made an
election to be taxed as a REIT under Sections 856 through 860 of the Code,
commencing with its taxable year ending December 31, 1993. If the Company
qualifies for taxation as a REIT, the Company generally will not be subject to
Federal income tax to the extent it distributes at least 90% of its REIT taxable
income to its shareholders. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and to federal income and excise taxes on its undistributed income.
In addition, our financial statements include the operations of a
taxable REIT subsidiary, Colonial Properties Services, Inc. (CPSI), that is not
entitled to a dividends paid deduction and is subject to federal, state and
local income taxes. CPSI provides property development, leasing and management
services for third-party owned properties and administrative services to CRLP.
We generally reimburse CPSI for payroll and other costs incurred in providing
services to CRLP. All inter-company transactions are eliminated in the
accompanying consolidated financial statements. We recognized tax expense of
$0.6 million in 2002 related to the taxable income of CPSI. No federal income
taxes were recognized in 2001 and 2000.
Available Information
Our website address is www.colonialprop.com and provides access in the
"Investor Relations" section, free of charge, to our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to these reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission.
Risk Factors
Set forth below are the risks that we believe are material to investors
who purchase or own our common or preferred units of limited partnership
interest. Our units are redeemable for cash or, at the election of Colonial
Properties Trust, on a one-for-one basis for Colonial Properties Trust's units
of beneficial interest.
Risks Associated with Real Estate
We face risks associated with numerous national, regional and local
economic conditions that are not in our control, any or all of which could
adversely affect our properties and our business.
During the last two years, we have seen a dramatic slowdown in the U.S.
economy, and the general business climate has been negatively impacted. The
Sunbelt region has similarly experienced a slowdown in its economy. The industry
slowdowns, higher unemployment rates, reduced demand for apartment homes and
declines in household formations resulting from the economic slowdown,
particularly in the Sunbelt region in which we operate, have adversely impacted,
and may continue to impact, our business.
Although each of our three business segments has been adversely
impacted by the decline in the economy, our multifamily properties, which rely
on heavily on short-term leases, have been most affected. In addition to the
general slowdown in the economy, the low interest rate environment which we have
experienced also impacted our multifamily properties as more people consider
buying their homes instead of renting. Any continuation or worsening of current
economic conditions generally and in our principal market areas may continue to
have a negative impact on our results of operation and financial condition.
As a real estate company, we face numerous risks in real estate
conditions that could adversely affect our properties.
In addition to the economic risks that we face, as a real estate
company, we are subject to various changes in the real estate conditions, any
negative trends of which may adversely affect our properties and business. These
conditions include:
o the existence and quality of the competition, such as the
attractiveness of our property as compared to our
competitors' properties based on considerations such as
convenience of location, rental rates, amenities and safety
record;
o increased operating costs, including increased real property
taxes and utilities costs;
o oversupply of multifamily, office or retail space or a
reduction in demand for real estate in the area; and
o changing trends in the demand by consumers for merchandise
offered by retailers conducting business at our retail
properties.
Moreover, other factors may affect us adversely, including changes in
government regulations and other laws, rules and regulations governing real
estate, zoning or taxes, changes in interest rate levels, the availability of
financing and potential liability under environmental and other laws and other
unforeseen events, most of which are discussed elsewhere in the following risk
factors. Any or all of these factors could materially adversely affect our
properties and our business.
Because real estate investments are illiquid, we may not be able to
sell our properties in response to economic changes.
Real estate investments generally are relatively illiquid and as a
result cannot be sold quickly in response to changes in the economy or other
conditions when it may be prudent to do so. This inability to respond quickly to
changes in the performance of our properties could adversely affect our business
and ability to meet our debt obligations and distribute earnings to our
stockholders.
We are subject to significant regulation that inhibits our activities.
Local zoning and use laws, environmental statutes and other
governmental requirements restrict our development, expansion, rehabilitation
and reconstruction activities. These regulations may prevent or delay us from
taking advantage of economic opportunities. We cannot predict what requirements
may be enacted and there can be no assurance that such enactment will not have a
materially adverse impact on us.
Risks Associated with Our Operations
Our properties may not generate sufficient income to pay our expenses,
and we may not be able to control our operating costs.
If our properties do not generate income sufficient to pay our expenses
and maintain our properties, or if we do not adequately control our operating
costs, we may not be able to pay our expenses, maintain our properties or
service our debt. A number of factors may adversely affect our ability to
generate sufficient income. These factors include:
o whether or not we can attract tenants at favorable rental
rates, which will depend on several factors, including:
o local conditions such as an oversupply of, or reduction in
demand for, multifamily, office or retail properties;
o the attractiveness of our properties to residents, shoppers
and tenants, and
o decreases in market rental rates;
o our ability to collect rent from our tenants.
Factors that may adversely affect our operating costs include:
o the need to pay for insurance and other operating costs,
including real estate taxes, which could increase over time;
o the need periodically to repair, renovate and re-lease
space;
o the cost of compliance with governmental regulation,
including zoning and tax laws;
o the potential for liability under applicable laws;
o interest rate levels; and
o the availability of financing.
Our expenses may remain constant even if our revenues decrease
The expense of owning and operating a property is not necessarily
reduced when circumstances such as market factors and competition cause a
reduction in income from the property. As a result, if revenues drop, we may not
be able to reduce our expenses accordingly. Loan payments are an example of a
cost that will not be reduced if our revenues decrease. If a property is
mortgaged and we are unable to meet the mortgage payments, the lender could
foreclose on the mortgage and take the property, resulting in a further
reduction in revenues.
We may be unable to lease our new properties or renew leases or
re-lease space at our existing properties as leases expire which may adversely
affect our operating results.
The tenants at our office properties generally enter into leases with
an initial term ranging from three to ten years and tenants at our retail
properties generally enter into leases with an initial term ranging from one to
ten years. As leases expire at our existing properties, tenants may elect not to
renew them. Even if the tenants do renew or we can re-lease the space, the terms
of renewal or re-leasing, including the cost of required renovations, may be
less favorable than current lease terms. In addition, for new properties, we may
be unable to attract enough tenants and the occupancy rates and rents may not be
sufficient to make the property profitable. If we are unable to renew the leases
or re-lease the space at our existing properties promptly or lease the space at
our new properties, or if the rental rates upon renewal or re-leasing at
existing properties are significantly lower than expected rates, our operating
results will be negatively affected.
We face risks due to lack of geographic diversity.
While our properties are diversified in three different segments, all
of our properties are located in the Sunbelt region of the United States. In
particular, we derived an aggregate of approximately 46.9% of our net operating
income in 2002 from properties located in or near three key cities: (a)
Birmingham, Alabama, which accounted for 19.4% of our 2002 net operating income;
(b) Orlando, Florida, which accounted for 16.9% of our 2002 net operating
income; and (c) Huntsville/Decatur, Alabama, which accounted for 10.6% of our
2002 net operating income. If the Sunbelt region of the United States, and in
particular the areas of or near Birmingham, Orlando and Huntsville/Decatur,
experiences a slowdown in the economy or a natural disaster, our operating
performance and our assets may be negatively affected.
We have been and may continue to be affected negatively by tenant
bankruptcies and downturns in tenants' businesses, which may adversely affect
our operating results and reduce our cash flow.
At any time, a tenant may experience a downturn in its business that
may weaken its financial condition due to a slowing economy generally or a
downturn in the retail sector. As a result, our tenants may delay lease
commencement, cease or defer making rental payments or declare bankruptcy. If a
tenant files for bankruptcy, the tenant may have the right to reject and
terminate its lease and we cannot be sure that it will affirm its leases and
continue to make rental payments in a timely manner. We also cannot be sure that
we will be able to lease vacant space in our properties on economically
favorable terms. During 2002, we were negatively impacted by the bankruptcy of
Kmart Corporation, one of our retail tenants that had stores at five of our
properties. As recently as the first quarter 2002, Kmart was our fourth largest
retail tenant, based on its annual rent payments as a percentage of our total
revenue of 0.6%. During 2002, Kmart closed three of the five stores at our
properties. Recently, we were informed that Kmart will be closing one of its two
remaining stores at our properties in the near term and we reasonably believe
that Kmart will close its last store in the near future. Any other bankruptcy or
financial difficulties of our tenants may negatively affect our operating
results.
We are subject to risks associated with the property management,
leasing and brokerage businesses.
In addition to the risks we face as a result of our ownership of real
estate, we face risks relating to the property management, leasing and brokerage
businesses of CPSI including risks that:
o management contracts or service agreements with third-party
owners will be lost to competitors;
o contracts will not be renewed upon expiration or will not be
renewed on terms consistent with current terms; and
o leasing and brokerage activity generally may decline.
Each of these developments could adversely affect our ability to pay
our expenses, maintain our properties or service our debt.
We could incur significant costs related to environmental issues.
Federal, state and local laws and regulations relating to the
protection of the environment, a current or previous owner or operator of real
property, and parties that generate or transport hazardous substances that are
disposed of on real property, may be liable for the costs of investigating and
remediating hazardous substances on or under or released from the property and
for damages to natural resources. The federal Comprehensive Environmental
Response, Compensation & Liability Act, and similar state laws, impose liability
on a joint and several basis, regardless of whether the owner, operator or other
responsible party knew of or was at fault for the release or presence of
hazardous substances. In connection with the ownership or operation of our
properties, we could be liable for costs associated with investigation and
remediation in the future. The costs of any required remediation and related
liability as to any property could be substantial under these laws and could
exceed the value of the property and/or our aggregate assets. The presence of
hazardous substances, or the failure to properly remediate those substances,
also may adversely affect our ability to sell or rent a property or to borrow
funds using the property as collateral. In addition, environmental laws may
impose restrictions on the manner in which we use our properties or operate our
business, and these restrictions may require expenditures for compliance. We
cannot assure you that a material environmental claim or compliance obligation
will not arise in the future. The costs of defending against any claims of
liability, of remediating a contaminated property, or of complying with future
environmental requirements could be substantial and affect our operating results
and financial conditions.
On December 29, 1998, we acquired Bel Air Mall in Mobile, Alabama. During
the course of our environmental due diligence, we identified several different
areas of the property in which contamination is present. One of those areas
involves drycleaner solvent; the others involve petroleum contamination. The
Alabama Department of Environmental Management (ADEM) is overseeing the
investigation and cleanup of the drycleaner contamination. Under the terms of
the purchase and sale agreement, the former owner of the property purchased a
$10 million environmental insurance policy (including paying the $275,000 up
front deductible) and established an escrow account totaling $1,000,000 to cover
any costs associated with investigation and re-mediation of the contaminated
areas not covered by the insurance policy. Under the agreement the seller will
be performing all required remediation of the drycleaner contamination until a
"no further action" status is obtained from ADEM. In addition, two locations,
which contained petroleum contamination, have now received a "no further action"
status from ADEM.
Uninsured losses could adversely affect our financial condition.
We carry comprehensive liability, fire, extended coverage and rental
loss insurance on all of our properties. We believe the policy specifications
and insured limits of these policies are adequate and appropriate. There are,
however, certain types of losses, such as lease and other contract claims that
generally are not insured. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property, which
could have a materially adverse effect on our financial conditions.
Competition for acquisitions could result in increased prices for
properties.
We compete with other major real estate investors with significant
capital for attractive investment opportunities in multifamily, office or retail
properties. These competitors include publicly traded REITs, private REITs,
investment banking firms, private institutional investment funds and national,
regional and local real estate investors. This competition could increase the
prices that we have to pay for multifamily, office or retail properties, in
which case our projected return from investment in these properties will
deteriorate.
We may be unable to successfully integrate and effectively manage the
properties we acquire.
So long as we are able to obtain capital on commercially reasonable
terms, we intend to continue to selectively acquire multifamily, office or
retail properties that meet our criteria for investment opportunities, are
consistent with our business strategies and we believe will be profitable or
will enhance the value of our portfolio. The success of these acquisitions will
depend, in part, on our ability to efficiently integrate the acquired properties
into our organization, and apply our business, operating, administrative,
financial and accounting strategies and controls to these acquired properties.
If we are unable to successfully integrate the acquired properties into our
operations, our results of operations and financial condition may be adversely
affected.
We may not be able to achieve the anticipated financial and operating
results from our acquisitions, which would adversely affect our operating
results.
We will continue to acquire multifamily, office or retail properties
only if they meet our criteria and we believe that that they will enhance our
future financial performance and the value of our portfolio. Our belief,
however, is based on and is subject to risks, uncertainties and other factors,
many of which are forward-looking and are uncertain in nature or are beyond our
control. In addition, some of these properties may have unknown characteristics
or deficiencies or may not complement our portfolio of existing properties. As a
result, some properties may be worth less or may generate less revenue than, or
simply not perform as well as, we believed at the time of the acquisition,
negatively affecting our operating results.
We may be unable to develop new properties or redevelop existing
properties successfully.
To complement our acquisition strategy, we will continue to develop new
properties or expand or redevelop existing properties as opportunities arise.
However, there are significant risks associated with our development activities
in addition to those generally associated with the ownership and operation of
developed properties. These risks include the following:
o significant expenditure of money and time on projects that
may be delayed or never be completed,
o higher than projected construction costs,
o lack of availability of debt or equity financing on
acceptable terms,
o failure to meet anticipated occupancy or rent levels,
o failure to obtain zoning, occupancy or other governmental
approvals,
o changes in applicable zoning and land use laws may require
us to abandon projects prior to their completion, resulting
in the loss of development costs incurred up to the time of
abandonment, and
o late completion because of construction delays, delays in
the receipt of zoning, occupancy and other approvals or
other factors outside of our control.
Any one or more of these risks may hinder our acquisition strategy,
which would negatively affect our overall business.
Risks Associated with Our Indebtedness and Financing
We have substantial indebtedness and we require significant cash flow
to make required payments on our indebtedness.
We rely heavily on debt financing for our business. As of December 31,
2002, we had total debt of approximately $1.34 billion, including our pro rata
share of joint venture debt. Due to our high level of debt our cash flow may be
insufficient to meet required payments of principal and interest. If a property
were mortgaged to secure payment of indebtedness and we were unable to meet
mortgage payments, the mortgagee could foreclose upon that property, appoint a
receiver and receive an assignment of rents and leases or pursue other remedies.
In addition, if principal payments due at maturity cannot be
refinanced, extended or paid with proceeds of other capital transactions, such
as new equity capital, our cash flow will not be sufficient in all years to
repay all maturing debt.
We may be unable to repay our existing indebtedness as they mature
which could adversely affect our financial condition.
Most of our indebtedness does not require significant principal
payments prior to maturity. However, we will need to raise additional equity
capital, obtain secured or unsecured debt financing, issue private or public
debt, or sell some of our assets to either refinance or repay our indebtedness
as it matures. We cannot assure you that these sources of financing or
refinancing will be available to us at reasonable terms or at all. Our inability
to obtain financing or refinancing to repay our maturing indebtedness, and our
inability to refinance existing indebtedness on reasonable terms, may require us
to make higher interest and principal payments, issue additional equity
securities, or sell some of our assets on disadvantageous terms, all or any of
which may result in foreclosure of properties, partial or complete loss on our
investment and otherwise adversely affect our financial conditions and results
of operation.
Our degree of leverage could limit our ability to obtain additional
financing which would negatively impact our business.
As of December 31, 2002, our consolidated borrowings and pro rata share
of unconsolidated borrowings totaled approximately $1.34 billion, which
represented approximately 48.6% of our total market capitalization. Total market
capitalization represents the sum of the outstanding indebtedness (including our
share of joint venture indebtedness), the total liquidation preference of all
our preferred units and the total market value of our common units, based on the
closing price of our common shares as of December 31, 2002. Our high leverage
and any future increases in our leverage could adversely affect our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, development or other general corporate purposes
which would negatively impact our business overall.
Due to the significant amount of our variable rate debt, rising
interest rates would adversely affect our results of operation.
As of December 31, 2002, we had approximately $297.0 million of
variable rate debt outstanding, including our pro rata share of variable rate
unconsolidated joint venture debt. While we have sought to refinance our
variable rate debt with fixed rate debt or cap our exposure to interest rate
fluctuations by using interest rate swap agreements where appropriate, it is not
possible for us to only have fixed rate debt. In addition, as opportunities
arise, we may borrow additional money with variable interest rates in the
future. As a result, a significant increase in interest rates would adversely
affect our results of operations.
We have entered into debt agreements that impose a number of
restrictive covenants that restrict our operating activities and violation of
these restrictive covenants carries serious consequences.
Our credit facility contains customary numerous customary restrictions,
requirements and other limitations on our ability to incur debt, including:
o debt to assets ratios;
o secured debt to total assets ratios;
o debt service coverage ratios; and
o minimum ratios of unencumbered assets to unsecured debt.
In addition, the indenture under which our senior unsecured debt is
issued contains financial and operating covenants including coverage ratios. Our
indenture also limits our ability to:
o incur secured and unsecured indebtedness;
o sell all or substantially all or our assets; and
o engage in mergers, consolidations and acquisitions.
These restrictions will continue to hinder our operational flexibility
and violations of these covenants will have result in adverse consequences to
us.
Our senior notes do not have an established trading market. As a
result, you may not be able to sell your notes.
The senior notes are a new issue of securities with no established
trading market. We do not intend to apply for listing of the notes on any
national securities exchange. The underwriters have advised us that they intend
to make a market in the notes, but they are not obligated to do so and may
discontinue market making at any time without notice. We can give no assurance
as to the liquidity of or any trading market for the notes.
Risks Associated with Our Organization
Some of our general partners' trustees and officers have conflicts of
interest and could exercise influence in a manner inconsistent with holders of
interest in CRLP
As a result of their substantial ownership of common units, Messrs.
Thomas Lowder, our Chairman of the Board, Chief Executive Officer and President,
and James Lowder, Harold Ripps, Herbert Meisler, M. Miller Gorrie, and William
Johnson, each of whom is our trustee, might seek to exert influence over our
decisions as to sales or re-financings of particular properties we own. Any such
exercise of influence might produce decisions that are not in the best interest
of all of the holders of interests in us.
The Lowder family and their affiliates, holds interests in companies
that have performed construction, management, insurance brokerage and other
services with respect to our properties. These companies may perform similar
services for us in the future. As a result, the Lowder family may realize
benefits from transactions between such companies and us that are not realized
by other holders of interests in us. In addition, Thomas and James Lowder, as
our trustees, may be in a position to influence us to do business with companies
in which the Lowder family has a financial interest. Our policies may not be
successful in eliminating the influence of conflicts. Moreover, transactions
with companies controlled by the Lowder family, if any, may not be on terms as
favorable to us as we could obtain in an arms-length transaction with a third
party.
Restrictions on the acquisition and change in control of us may have
adverse affects on the value of our common units.
Various provisions of our Declaration of Trust restrict the possibility
for acquisition or change in control of the Company, even if the acquisition or
change in control were in the shareholders' interest.
We may change our business policies in the future.
Our major policies, including our policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by our Board of Trustees. Although it has no
present intention to do so, our Board of Trustees may amend or revise these and
other policies from time to time. A change in these policies could adversely
affect our financial condition, results of operations or ability to service
debt.
Risks Associated with Income Tax Laws
Colonial Properties Trust intends to qualify as a REIT, but we cannot
guarantee that it will qualify REIT.
We believe that Colonial Properties Trust has qualified for taxation as
a REIT for federal income tax purposes commencing with our taxable year ended
December 31, 1993. If Colonial Properties Trust qualifies as a REIT, it
generally will not be subject to federal income tax on our income that it
distributes to its shareholders. Colonial Properties Trust plans to continue to
meet the requirements for taxation as a REIT, but it may not qualify. Many of
the REIT requirements are highly technical and complex. The determination that
it is a REIT requires an analysis of various factual matters and circumstances
that may not be totally within its control. For example, to qualify as a REIT,
at least 95% of its gross income must come from sources that are itemized in the
REIT tax laws. Colonial Properties Trust generally is prohibited from owning
more than 10% of the voting securities or more than 10% of the value of the
outstanding securities of any one issuer, subject to certain exceptions,
including an exception with respect to corporations electing to be "taxable REIT
subsidiaries," and it is also required to distribute to shareholders at least
90% of its REIT taxable income, excluding capital gains. The fact that it holds
most of its assets through CRLP further complicates the application of the REIT
requirements. Even a technical or inadvertent mistake could jeopardize its REIT
status. Furthermore, Congress and the Internal Revenue Service might make
changes to the tax laws and regulations, and the courts might issue new rulings
that make it more difficult, or impossible, for it to remain qualified as a
REIT. We do not believe, however, that any pending or proposed tax law changes
would jeopardize its REIT status.
If Colonial Properties Trust failed to qualify as a REIT, it would be
subject to federal income tax at regular corporate rates. Also, unless the
Internal Revenue Service granted it relief under certain statutory provisions,
it would remain disqualified as a REIT for the four years following the year it
first failed to qualify. If it failed to qualify as a REIT, it would have to pay
significant income taxes and would therefore have less money available for
investments or for distributions to shareholders. This would likely have a
significant adverse affect on the value of its common units. In addition, it
would no longer be required to make any distributions to shareholders, but it
would still be required to distribute quarterly substantially all of our net
cash revenues to our unitholders.
Proposed change in taxation of corporate dividends may adversely
affect value of REIT stock.
The federal income tax laws governing REITs and other corporations or
the administrative interpretations of those laws may be amended at any time. Any
new laws or interpretations may take effect retroactively and could adversely
affect us or you, as our shareholder. On January 7, 2003, the Bush
Administration released a proposal intended to eliminate one level of the
"double taxation" that is currently imposed on corporate income for regular C
corporations by excluding corporate dividends from an individual's taxable
income to the extent that corporate income tax has been paid on the earnings
from which the dividends are paid. REITs currently are tax-advantaged relative
to regular C corporations because they are not subject to corporate-level
federal income tax on income that they distribute to shareholders, but
shareholders do include REIT dividends in taxable income. The tax treatment of
REITs generally would not be affected by the Bush Administration's proposal in
its current form, except that a REIT that receives dividends from a C
corporation that have been subject to corporate income tax could distribute or
retain those amounts without a second tax being imposed on the REIT or its
shareholders. The Bush Administration's proposal, if enacted, could cause
individual investors to view stocks of regular C corporations as more attractive
relative to stocks of REITs than is the case currently because part or all of
the dividends on the stocks of the regular C corporation would be exempt from
tax for the individual. It is not possible to predict whether in fact this
change in relative perceived value will occur or whether, if it occurs, what the
impact will be on the value of our common shares. In any event, there can be no
assurance regarding whether the Bush Administration's proposal ultimately will
be enacted or the form in which it might in fact be enacted.
Item 2. Properties.
General
As of December 31, 2002, our real estate portfolio consisted of 106
properties consisting of whole or partial ownership interests, located in nine
states in the Sunbelt region of the United States. Additionally, we maintain
non-controlling partial interests of 15% to 50% in 15 operating properties. The
106 properties owned by us at December 31, 2002 consisted of the following:
Summary of Properties
Total 2002 Percent of
Units/ Property Total 2002 Percentage
Number of GRA/ Revenue (2) Property Occupancy at
Type of Property Properties NRA (1) (in thousands) Revenue (2) Dec. 31, 2002 (3)
- --------------------- ---------- -------------- -------------- ------------ ------------------
Multifamily 41 14,556 (4) $ 104,160 31.1% 88.1%
Office 21 5,185,170 (5) 75,436 22.5% 91.0%
Retail 44 15,475,196 (6) 155,845 46.4% 89.2%
---------- -------------- ------------
Total 106 $ 335,441 100.0%
========== ============== ============
(1) Units (in this table only) refers to multifamily units, GRA refers to gross
retail area, which includes gross leasable area and space owned by anchor
tenants and NRA refers to net rentable area of office space. Information is
presented as of December 31, 2002.
(2) Includes our proportionate share of revenue from those multifamily, office
and retail properties accounted for under the equity method, and our share
of the properties disposed of in 2002.
(3) Excludes the units/square feet of development or expansion phases of two
multifamily properties, three office properties, and one retail property
that had not achieved stabilized occupancy as of December 31, 2002.
(4) Amount includes 2,833 units at 10 multifamily properties, in which we
maintain a 15.0% ownership interest.
(5) Amount includes 29,988 square feet at one office property, in which we
maintain a 33.33% ownership interest.
(6) Amount includes 1,443,400 square feet at three retail properties, in
which we maintain a 10.0% - 50.0% ownership interest.
Multifamily Properties
The 41 multifamily properties, contain a total of 14,556 garden-style
apartments and range in size from 125 to 1,080 units. Eighteen multifamily
properties (containing a total of 6,812 units) are located in Alabama, 12
multifamily properties (containing a total of 4,778 apartment units) are located
in Florida, six multifamily properties (containing a total of 1,382 units) are
located in Georgia, two multifamily properties (containing a total of 498 units)
are located in Mississippi, two multifamily properties (containing a total of
764 units) are located in South Carolina, and one multifamily property
(containing 322 units) is located in Texas. Each of the multifamily properties
is established in its local market and provides residents with numerous
amenities, which may include a swimming pool, exercise room, jacuzzi, clubhouse,
laundry room, tennis court(s), and/or a playground. All of the multifamily
properties are managed by CRLP.
The following table sets forth certain additional information relating
to the multifamily properties as of and for the year ended December 31, 2002.
Multifamily Properties
Average Total Multifamily Percent of
Year Number Approximate Rental Property Total 2002
Multifamily Completed of Rentable Area Percent Rate Revenue for Property
Property (1) Location (2) Units (3) (Square Feet) Occupied Per Unit 2002 Revenue (4)
- ----------------------- ------------- ---------- ---------- ------------- ---------- ----------------------------- -----------
Alabama:
CV at Cahaba Heights (8) Birmingham 1992 125 131,230 96.8% 752 154,164 0.0%
CG at Edgewater Huntsville 1990 500 541,650 90.7% 712 4,159,093 1.2%
CG at Galleria Birmingham 1986/96 1,080 1,195,186 90.8% 677 7,715,537 2.3%
CG at Galleria Woods Birmingham 1994 244 260,720 95.5% 705 1,904,960 0.6%
CG at Liberty Park Birmingham 2000 300 338,684 93.3% 1,000 3,069,775 0.9%
CG at Madison Huntsville 2000 336 354,592 90.5% 771 3,056,591 0.9%
CG at Promenade Montgomery 2000 384 424,372 88.5% 822 3,201,001 1.0%
CG at Riverchase Birmingham 1984/91 468 745,840 87.9% 801 3,757,893 1.1%
CV at Ashford Place Mobile 1983 168 139,128 83.3% 559 916,014 0.3%
CV at Hillcrest (9) Mobile 1981 252,107 0.1%
CV at Huntleigh Woods Mobile 1978 233 199,052 91.0% 517 1,258,036 0.4%
CV at Inverness Birmingham 1986/87/90 586 491,072 93.5% 619 3,918,394 1.2%
CV at McGehee Place (9) Montgomery 1986/95 1,059,051 0.3%
CV at Monte D'Oro (9) Birmingham 1977 532,215 0.2%
CV at Research Park Huntsville 1987/94 736 809,343 86.9% 609 5,135,512 1.5%
CV at Trussville Birmingham 1996/97 376 410,340 92.0% 755 3,089,277 0.9%
CV at Hillwood (8) Montgomery 1984 160 150,912 83.8% 598 155,792 0.0%
CV at Inverness Lakes I Mobile 1983 186 176,460 91.4% 582 169,607 0.1%
CG at Inverness Lakes II Mobile 1996 312 329,926 91.3% 683 367,072 0.1%
CG at Mountain Brook (8) Birmingham 1987/91 392 392,700 94.9% 721 440,570 0.1%
CV at Rocky Ridge (8) Birmingham 1984 226 258,900 94.2% 688 240,092 0.1%
Ski Lodge - Tuscaloosa (9Tuscaloosa 1976/92 554,768 0.2%
---------- ------------- ---------- --------- ---------------- -----------
Subtotal - Alabama 6,812 7,350,107 90.4% 700 45,107,521 13.5%
---------- ------------- ---------- --------- ---------------- -----------
Florida:
CG at Carrollwood (9) Tampa 1966 1,216,361 0.4%
CG at Citrus Park Tampa 1999 176 200,288 82.4% 932 1,815,237 0.5%
CG at Cypress Crossing Orlando 1999 250 314,596 91.2% 1,023 2,733,289 0.8%
CG at Gainesville Gainesville 1989/93/94 560 488,624 72.5% 812 4,324,724 1.3%
CG at Heather Glen Orlando 2000 448 524,074 90.7% 925 4,136,063 1.2%
CG at Heathrow Orlando 1997 312 370,028 89.7% 978 3,137,248 0.9%
CG at Hunter's Creek Orlando 1997 496 624,464 86.7% 946 4,848,377 1.4%
CG at Lakewood Ranch Sarasota 1999 288 301,656 86.4% 960 3,259,466 1.0%
CG at Palma Sola (9) Bradenton 1992 760,333 0.2%
CG at TownPark Orlando 2002 456 584,664 (7) 1,035 2,272,317 (6) 0.7%
CV at TownPark Sarasota 2002 272 316,370 (7) 1,018 3,530,328 (6) 1.1%
CV at Cordova (9) Pensacola 1983 332,566 0.1%
CV at Lake Mary Orlando 1991/95 504 431,396 84.4% 752 3,938,808 1.2%
CV at Oakleigh (9) Pensacola 1997 574,537 0.2%
CG at Ponte Vedra (8) Jacksonville 1988 240 211,640 91.9% 793 308,333 0.1%
CG at River Hills (8) Tampa 1991/97 776 690,312 91.0% 679 857,156 0.3%
---------- ------------- ---------- --------- ---------------- -----------
Subtotal - Florida 4,778 5,058,112 85.0% 876 38,045,143 11.4%
---------- ------------- ---------- --------- --------------- -----------
Georgia:
CG at Barrington Club (8)Macon 1996 176 191,940 79.5% 743 200,977 0.1%
CG at Wesleyan Macon 1997 328 382,946 79.3% 754 2,480,420 0.7%
CV at Timothy Woods Athens 1996 204 211,444 94.1% 806 1,803,807 0.5%
CV at Vernon Marsh Savannah 1986/87 178 151,226 89.3% 662 1,339,065 0.4%
CV at Walton Way Augusta 1984 256 254,264 92.2% 638 1,802,247 0.5%
CV at Stockbridge (8) Stockbridge 1993/94 240 253,200 75.8% 766 263,519 0.1%
---------- ------------- ---------- --------- --------------- -----------
Subtotal - Georgia 1,382 1,445,020 87.1% 729 7,890,035 2.3%
---------- ------------- ---------- --------- ---------------- -----------
Mississippi:
CG at The Reservoir Jackson 2000 170 195,605 95.9% 851 1,705,801 0.5%
CV at Natchez Trace Jackson 1995/97 328 342,800 96.9% 721 2,709,853 0.8%
---------- ------------- ---------- --------- ---------------- -----------
Subtotal - Mississippi 498 538,405 96.6% 765 4,415,654 1.3%
---------- ------------- ---------- --------- ---------------- -----------
South Carolina:
CV at Ashley Plantation Bluffton 1998/2000 414 425,095 78.7% 797 2,996,593 0.9%
CV at Caledon Wood Greenville 1995/96 350 348,305 84.3% 720 2,619,956 0.8%
---------- ------------- --------- --------- ---------------- -----------
Subtotal - South Carolina 764 773,400 81.3% 762 5,616,549 1.7%
---------- ------------- ---------- --------- ---------------- -----------
Texas:
CV at Haverhill San Antonio 1997 322 326,914 86.5% 948 3,085,154 0.9%
---------- ------------- ---------- --------- ---------------- -----------
Subtotal - Texas 322 326,914 86.5% 948 3,085,154 0.9%
---------- ------------- ---------- --------- ---------------- -----------
TOTAL 14,556 15,491,958 88.1% $ 785 (5) $ 104,160,056 31.1%
========== ============= ========== ========= ================ ===========
(footnotes on next page)
(1) All multifamily properties are 100% owned by us with the exception of the
properties noted in (8) below. In the listing of multifamily property
names, CG has been used as an abbreviation for Colonial Grand and CV as an
abbreviation for Colonial Village.
(2) Year initially completed and, where applicable, year(s) in which additional
phases were completed at the Property.
(3) Units (in this table only)refers to multifamily apartment units. Number of
units includes all apartment units occupied or available for occupancy at
December 31, 2002.
(4) Percent of Total 2002 Property Revenue represents the multifamily
property's proportionate share of all revenue from our 106 properties,
including the partially owned properties.
(5) Represents weighted average rental rate per unit of the 41 multifamily
properties at December 31, 2002.
(6) Represents revenues from the date of our development of this Property in
2002 through December 31, 2002.
(7) Expanded or newly developed property currently undergoing lease-up.
(8) These properties were sold by us during 1999 or 2000 to a joint venture
formed by us and an unrelated party. We hold a 15% non-controlling
interest in these joint ventures.
(9) This property was sold during 2002.
The following table sets forth the total number of units, percent
leased and average base rental rate per unit as of the end of each of the last
five years for the multifamily properties:
Average Base
Number Percent Rental Rate
Year-End of Units (1) Leased (2) Per Unit
-------- ------------ ----------- --------
December 31, 2002 14,556 88.1% $785
December 31, 2001 16,256 92.8% $752
December 31, 2000 17,189 94.0% $707
December 31, 1999 16,415 93.9% $688
December 31, 1998 15,381 93.5% $642
(1) Units (in this table only) refers to multifamily units owned at year end,
which includes 2,833 units partially owned by us at December 31, 2002.
(2) Represents weighted average occupancy of the multifamily properties that
had achieved stabilized occupancy at the end of the respective period.
Office Properties
The 21 office properties, contain a total of approximately 5.2 million
rentable square feet. Fourteen of the office properties are located in Alabama
(representing 49% of the office portfolio's net rentable square feet) , one is
located in Atlanta, Georgia and six are located in Florida. The office
properties range in size from approximately 30,000 square feet to 863,000 square
feet. All of the office properties are managed by CRLP.
The following table sets forth certain additional information relating
to the office properties as of and for the year ended December 31, 2002.
Office Properties
Average
Base Total Percent
Net Rent Office of
Rentable Per Property Total
Year Area Total Leased Revenue 2002
Office Completed Square Percent Annualized Square for Property
Property (1) Location (2) Feet Leased Base Rent Foot 2002(3) Revenue(4)
- ------------------------------------- ----------- ----------- --------------------------- ----------- ------- -------- --------
Alabama:
Interstate Park Montgomery 1982-85/89 226,481 84.5% $ 2,881,187 15.06 $ 3,142,239 1.0%
Riverchase Center Birmingham 1984-88 303,766 84.3% 2,862,100 11.18 3,818,217 1.1%
International Park Birmingham 1987/89/99 238,983 97.8% 4,933,045 21.11 5,023,230 1.5%
Colonial Plaza Birmingham 1999 170,870 100.0% 3,165,722 18.53 3,598,053 1.1%
Colonial Center Colonnade (9) Birmingham 1989/99 419,377 91.9% 6,671,004 17.31 5,391,344(6) 1.6%
Progress Center Huntsville 1983-91 224,369 92.9% 2,337,732 11.22 2,417,569 0.7%
Colonial Center Lakeside Huntsville 1989/90 121,513 92.9% 1,692,752 15.00 1,892,163 0.6%
AmSouth Center Huntsville 1990 154,521 99.6% 2,979,499 19.36 3,323,810 1.0%
Colonial Center Research Park Huntsville 1999 133,482 94.8% 2,017,131 15.94 2,638,502 0.8%
250 Commerce St Montgomery 1904/81 37,447 100.0% 648,094 17.31 470,238 0.1%
Land Title Bldg Birmingham 1975 29,988 100.0% 402,003 13.41 169,433 0.1%
Independence Plaza Birmingham 1979 101,051 98.9% 1,982,860 19.84 1,690,039 0.5%
Emmett R. Johnson Building Birmingham 1982/95 165,144 78.7% 2,559,268 19.70 2,282,391 0.7%
Perimeter Corporate Park Huntsville 1986/89 234,667 84.4% 3,337,977 16.86 3,723,044 1.1%
------------ --------- ------------ ------ ----------- ----
Subtotal-Alabama 2,561,659 91.1% 38,470,374 16.48 39,580,272 11.9%
------------ --------- ------------ ------ ---------- ----
Florida:
Colonial Center 100 at Town Park Orlando 2001 153,569 94.9% 2,946,594 20.21 2,773,798 0.8%
Colonial Center 200 at Town Park Orlando 2002 155,240 (8) 71,666 (8) 35,370(6) 0.0%
Colonial Center 600 at Town Park Orlando 2002 199,585 (8) 3,038,500 (8) 1,277,234(6) 0.4%
Concourse Center Tampa 1981/85 292,104 94.6% 3,602,542 13.04 4,966,149 1.5%
901 Maitland Center Orlando 1985 155,669 88.1% 2,615,579 19.07 2,147,748(6) 0.6%
Colonial Center Heathrow Orlando 1988/96-00 804,078 95.4% 16,018,878 20.89 6,854,673(6) 2.0%
University Park (5) Orlando 1985 486,520 0.1%
------------ -------- ------------ ---- ---------- -----
Subtotal-Florida 1,760,245 94.4% 28,293,759 18.66 18,541,492 5.4%
------------ -------- ------------ ------- ----------- ----
Georgia:
Colonial Center at Mansell Overlook Atlanta 1987/96/97/00 700,018 84.3% 11,297,614 19.15 15,099,641 4.5%
Colonial Center at Mansell Overlook 500 Atlanta 2001 163,248 (8) 2,643,917 (8) 2,214,783(6)0.7%
------------ -------- ------------ ---- ---------- ----
Subtotal-Georgia 863,266 84.3% 13,941,531 23.84 17,314,424 5.2%
------------ -------- ------------ ------- ---------- ----
TOTAL 5,185,170 91.0% $80,705,664 $ 18.24 $ 75,436,188 22.5%
============ ======== ============ ======== ========== ====
(1) All office properties are 100% owned by us with the exception of Land
Title Building, which is 33.33% owned by us.
(2) Year initially completed and, where applicable, most recent year in
which the property was substantially renovated or in which an
additional phase of the property was completed.
(3) Total 2002 office property revenue is our share (based on its
percentage ownership of the property) of total office property
revenue, unless otherwise noted. However, amounts exclude $1,123,303
of straight-line rents reflected in our Consolidated Financial
Statements for the period ended December 31, 2002.
(4) Percent of Total 2002 Property Revenue represents the office
property's proportionate share of all revenue from our 106 properties.
(5) This property was sold during 2002.
(6) Represents revenues from the date of our acquisition or completion of
development of this property in 2002 through December 31, 2002.
(7) This property is located within an office complex and is included in
the total as one office property.
(8) This property is currently in lease-up and is not included in the
property totals.
(9) During 2002, two of the buildings located within this office complex
were sold (4100 and 4200 Colonnade).
The following table sets out a schedule of the lease expirations for
leases in place as of December 31, 2002, for the office properties (including
all lease expirations for partially-owned properties).
Net Rentable Annualized Percent of Total
Year of Number of Area Of Base Rent of Annual Base Rent
Lease Tenants with Expiring Leases Expiring Represented by
Expiration Expiring Leases (Square Feet) (1) Leases (1)(2) Expiring Leases (1)
- ------------------------------------------------------------------------------------------
2003 146 547,643 $ 8,676,124 10.8%
2004 109 702,004 10,880,192 13.5%
2005 168 794,643 11,556,398 14.3%
2006 112 691,967 12,198,100 15.1%
2007 89 897,929 16,816,478 20.8%
2008 36 361,183 6,414,324 7.9%
2009 17 199,176 3,686,170 4.6%
2010 11 140,777 2,647,838 3.3%
2011 8 84,199 1,657,774 2.1%
2012 8 254,625 5,164,292 6.4%
Thereafter 13 81,121 1,007,974 1.2%
-------------- --------------- ------------- ------------------
717 4,755,267 $ 80,705,664 100.0%
============== =============== ============= ==================
(1) Excludes approximately 430,000 square feet of space not leased as of
December 31, 2002.
(2) Annualized base rent is calculated using base rents as of December 31,
2002.
The following sets forth the net rentable area, total percent leased
and average base rent per leased square foot for each of the last five years for
the office properties:
Average Base
Rentable Area Total Rent Per Leased
Year-end (Square Feet) (2) Percent Leased Square Foot (1)
-------- ----------------- -------------- ---------------
December 31, 2002 5,185,000 91.0% $18.24
December 31, 2001 3,518,000 92.1% $18.02
December 31, 2000 3,244,000 94.6% $16.43
December 31, 1999 3,138,000 93.3% $15.29
December 31, 1998 2,707,000 92.2% $14.58
(1) Average base rent per leased square foot is calculated using base
rents as of December 31 for each respective year.
(2) Rentable square feet includes 29,988 square feet that is partially
owned by us at December 31, 2002.
Retail Properties
The 44 retail properties contain a total of approximately 15.5 million
square feet (including space owned by anchor tenants). Seventeen of the retail
properties are located in Alabama, ten are located in Florida, seven are located
in Georgia, six are located in North Carolina, one is located in South Carolina,
one is located in Tennessee, one is located in Texas, and one is located in
Virginia. The retail properties consist of 17 enclosed regional malls and 27
community shopping centers. All of the retail properties are managed by us.
The following table sets forth certain information relating to the
retail properties as of and for the year ended December 31, 2002.
Retail Properties
Average
Base
Gross Rent
Retail Per Total Retail Percent of
Year Area Number Total Leased Property Total 2002
Retail Completed (Square Of Percent Annualized Square Revenue for Property
Property (1) Location (2) Feet) (3) StoresLeased (3)Base Rent Foot (4) 2002 (9) Revenue (5)
- -------------------------------------------------------------------------------------------------------------------- ----------
Alabama:
Colonial Mall Decatur Decatur 1979/89 495,092 52 86.9% $ 3,389,640 $ 16.83 5,485,073 1.6%
Colonial Mall Decatur 80,866 (6)
Colonial Brookwood Village Birmingham 1973/91 450,769 69 91.6% 6,582,313 20.00 8,289,182 2.5%
Colonial Brookwood Village 231,953 (6)
Colonial Mall Gadsden Gadsden 1974/91 532,597 68 98.8% 3,713,758 18.42 6,314,992 1.9%
Colonial Mall Auburn/Opelika Auburn 1973/84/89 375,227 59 98.8% 2,665,999 20.36 4,787,095 1.4%
Colonial Promenade Hoover (10) Birmingham 2002 155,231 35 98.1% 1,995,492 18.19 768,434 (7) 0.2%
Colonial Promenade Hoover 215,766 (6)
Colonial Promenade Montgomery Montgomery 1990/97 273,196 38 96.8% 2,968,647 13.47 3,265,054 1.0%
Colonial Promenade Montgomery 145,830 (6)
Colonial Shoppes McGehee Montgomery 1986 98,354 14 80.1% 672,719 12.46 853,133 0.3%
Colonial Promenade Madison (10) Madison 2000 110,712 14 100.0% 1,141,597 13.82 671,180 0.2%
Colonial Shoppes Bellwood Montgomery 1988 88,482 19 94.5% 692,651 12.61 880,604 0.3%
Old Springville Birmingham 1982 63,702 10 16.5% 114,220 10.86 218,180 0.1%
Colonial Shoppes Inverness Birmingham 1984 28,243 5 49.2% 230,550 14.10 363,388 0.1%
Olde Town Montgomery 1978/90 38,814 8 48.0% 164,718 9.67 329,679 0.1%
Colonial Promenade Trussvile Birmingham 2000 388,302 26 100.0% 3,501,539 13.15 4,219,200 1.3%
Colonial Promenade Tutwiler
Farm Birmingham 2000 514,120 22 100.0% 3,115,223 15.05 3,812,752 1.1%
Colonial Mall Bel Air Mobile 1966/90/97 1,062,733 120 92.1% 9,517,818 18.25 14,602,258 4.4%
Colonial Mall Bel Air 357,538 (6)
Parkway City Mall Huntsville 1975 393,138 56 (8) 4,248,378 (8) 939,769 (7) 0.3%
Parkway City Mall 236,862 (6)
Shops at Colonnade Birmingham 1989 112,186 33 60.5% 852,299 12.80 823,605 (7) 0.2%
---------- ------------------------------------------------- ----------
Subtotal-Alabama 6,449,713 648 94.1% 45,567,561 16.70 56,623,578 16.8%
---------- ------------------------------------------------- ----------
Florida:
Colonial Promenade University
Park Orlando 1986/89 215,590 26 94.1% 1,740,007 13.77 3,113,183 0.9%
Colonial Promenade Burnt Store Punta Gorda 1990 198,802 24 45.2% 840,636 11.02 1,296,404 0.4%
Colonial Promenade Winter Haven Orlando 1986 197,472 28 93.2% 1,412,659 10.23 1,808,083 0.5%
Colonial Promenade Northdale Tampa 1988 175,917 26 98.9% 1,682,298 16.50 2,397,418 0.7%
Colonial Promenade Northdale 55,000 (6)
Colonial Promenade Bear Lake Orlando 1990 131,552 24 97.7% 1,294,912 11.95 1,356,214 0.4%
Colonial Promenade Bardmoor St. Pete. 1981 152,667 33 87.9% 1,397,910 16.19 1,784,476 0.5%
Colonial Promenade Hunter's
Creek Orlando 1993/95 222,136 29 100.0% 1,967,157 16.48 2,596,312 0.8%
Colonial Promenade Wekiva Orlando 1990 208,568 31 97.2% 2,202,003 12.29 2,762,000 0.8%
Colonial Promenade Lakewood Jacksonville1995 195,104 52 92.6% 1,888,552 13.72 2,540,632 0.8%
Orlando Fashion Square Orlando 1973/89/93 710,971 123 90.2% 9,712,550 26.44 8,798,681 2.6%
Orlando Fashion Square 361,432 (6)
---------- ------------------------------------------------- ----------
Subtotal-Florida 2,825,211 396 89.6% 24,138,684 17.60 28,453,403 8.5%
---------- ------------------------------------------------- ----------
Georgia:
Colonial Mall Macon Macon 1975/88/97 737,259 153 93.6% 10,429,402 24.70 17,835,015 5.3%
Colonial Mall Macon 682,160 (6)
Colonial Promenade Beechwood Athens 1963/92 343,569 41 76.8% 2,321,877 10.90 3,564,130 1.1%
Britt David Columbus 1990 109,630 8 67.6% 552,554 13.75 679,315 0.2%
Colonial Mall Lakeshore Gainesville 1984-97 518,290 57 91.1% 3,172,185 19.95 5,189,733 1.5%
Colonial Mall Valdosta Valdosta 1982-85 325,076 57 94.6% 3,277,744 17.99 5,939,473 1.8%
Colonial Mall Valdosta 73,723 (6)
Colonial Mall Glynn Place Brunswick 1986 281,989 62 63.4% 2,360,622 17.19 4,211,425 1.3%
Colonial Mall Glynn Place 225,558 (6)
Village at Roswell Summit Atlanta 1988 25,510 9 95.1% 474,030 15.55 477,285 (11) 0.1%
---------- ------------------------------------------------- ----------
Subtotal-Georgia 3,322,764 387 85.9% 22,588,414 19.61 37,896,376 11.3%
---------- ------------------------------------------------- ----------
North Carolina:
Colonial Mall Burlington Burlington 1969/86/94 416,117 51 96.9% 3,017,538 23.60 5,199,679 1.6%
Colonial Mayberry Mall Mount Airy 1968/86 149,016 21 97.5% 846,578 13.06 1,270,508 0.4%
Colonial Mayberry Mall 57,843 (6)
Colonial Mall Greenville Greenville 1965/89/99 403,621 61 95.2% 3,634,397 19.12 5,998,676 1.8%
Colonial Mall Greenville 46,051 (6)
Colonial Shoppes Quaker Greensboro 1968/88/97 102,426 29 93.6% 1,072,705 14.94 1,452,131 0.4%
Colonial Shoppes Yadkinville Yadkinville 1971/97 90,917 15 100.0% 718,696 7.80 857,757 0.3%
Colonial Shoppes Stanly Locust 1987/96 47,070 7 97.3% 265,798 10.03 366,792 0.1%
---------- ------------------------------------------------- ----------
Subtotal-North Carolina 1,313,061 184 96.4% 9,555,712 18.33 15,145,543 4.5%
---------- ------------------------------------------------- ----------
South Carolina:
Colonial Mall Myrtle Beach Myrtle Beach1986 494,128 69 76.9% 4,345,257 20.45 8,397,253 2.5%
---------- ------------------------------------------------- ----------
Subtotal-South Carolina 494,128 69 76.9% 4,345,257 20.45 8,397,253 2.5%
---------- ------------------------------------------------- ----------
Tennessee:
Rivermont Shopping Center Chattanooga 1986/97 73,539 8 81.2% 341,516 8.39 462,833 0.1%
---------- ------------------------------------------------- ----------
Subtotal-Tennessee 73,539 8 81.2% 341,516 8.39 462,833 0.1%
---------- ------------------------------------------------- ----------
Texas
Colonial Mall Temple Temple 1981/96 464,765 57 82.2% 2,900,844 20.16 5,546,392 1.7%
Colonial Mall Temple 108,977 (6)
---------- ------------------------------------------------- ----------
Subtotal-Texas 573,742 57 82.2% 2,900,844 20.16 5,546,392 1.7%
---------- ------------------------------------------------- ----------
Virginia:
Colonial Mall Staunton Staunton 1969/86/97 423,038 51 79.1% 1,988,302 11.38 3,319,857 1.0%
---------- ------------------------------------------------- ----------
Subtotal-Virginia 423,038 51 79.1% 1,988,302 11.38 3,319,857 1.0%
---------- ------------------------------------------------- ----------
Total 15,475,196 1,800 89.2% $ 111,426,29$ 18.36$ 155,845,235 46.4%
========== ================================================= ==========
(1) All retail properties are 100% owned by us, with the exception of
Orlando Fashion Square, Parkway City Mall, Colonial Promenade Madison,
and Colonial Promenade Hoover, which are owned 50%, 45%, 25%, and 10%,
respectively, by us at December 31, 2002.
(2) Year initially completed and, where applicable, year(s) in which the
property was substantially renovated or an additional phase of the
property was completed.
(3) Total GRA refers to gross retail area, which includes gross leasable
area and space owned by anchor tenants, but Percent Leased excludes
anchor owned space.
(4) Includes specialty store space only.
(5) Percent of Total 2002 Property Revenue represents the retail
property's proportionate share of all revenue from the 106 properties.
(6) Represents space owned by anchor tenants.
(7) Represents revenues from the date of our acquisition or completion of
development of the property in 2002 through December 31, 2002.
(8) This property is currently under redevelopment or lease-up and is not
included in the property total.
(9) Amounts exclude $990,538 of straight-line rents reflected in our
consolidated financial statements for the year ended December 31,
2002.
(10) This property, or an interest in this property was sold during 2002.
(11) This property is located adjacent to Colonial Center Mansell
Overlook, an office property, and is managed by our office management
division. Therefore, in footnote # 7 of CRLP's Notes to Consolidated
Financial Statements, this property's revenue and net operating
income is included in the office segment.
The following table sets out a schedule of the lease expirations for
leases in place as of December 31, 2002, for the retail properties:
Net Rentable Annualized Percent of Total
Year of Number of Area Of Base Rent of Annual Base Rent
Lease Tenants with Expiring Leases Expiring Represented by
Expiration Expiring Leases (Square Feet) (1)Leases (1)(2) Expiring Leases (1)
- --------------------------------------------------------------------------------------
2003 311 942,374 10,229,741 9.2%
2004 262 1,571,306 11,588,692 10.4%
2005 273 843,470 12,466,442 11.2%
2006 193 1,622,781 12,892,039 11.6%
2007 227 1,618,919 13,490,797 12.1%
2008 82 706,460 5,336,155 4.8%
2009 69 571,465 5,215,498 4.7%
2010 93 947,301 8,369,126 7.5%
2011 104 726,599 9,374,541 8.4%
2012 82 893,650 9,697,265 8.7%
Thereafter 104 3,300,765 12,765,994 11.5%
------------- ------------- -------------- ------------------
1,800 13,745,090 $ 111,426,290 100.0%
============= ============= ============== ==================
(1) Excludes 1,730,000 square feet of space not leased as of December 31, 2002.
(2) Annualized base rent is calculated using base rents as of December 31, 2002.
The following table sets forth the total gross retail area, percent
leased and average base rent per leased square foot as of the end of each of the
last five years for the retail properties:
Gross Average
Retail Area Percent Base Rent Per
Year-End (Square Feet) (1) Leased Leased Square Foot (2)
-------- ----------------- ------ ----------------------
December 31, 2002 15,475,000 89.2% $18.36
December 31, 2001 14,951,000 89.6% $18.03
December 31, 2000 15,184,000 90.2% $17.38
December 31, 1999 13,947,000 89.9% $16.66
December 31, 1998 11,105,000 91.9% $14.48
(1) Includes 2,184,112 square feet partially owned by us at December 31,
2002.
(2) Average base rent per leased square foot is calculated using specialty
store year-end base rent figures.
Undeveloped Land
We own various parcels of land, which are held for future development
(collectively, the "land"). Land adjacent to multifamily properties typically
will be considered for potential development of another phase of an existing
multifamily property if we determine that the particular market can absorb
additional apartment units. For expansions at office and retail properties, we
own parcels both contiguous to the boundaries of the properties, which would
accommodate additional office buildings, expansion of the mall or shopping
center, and outparcels which are suitable for restaurants, financial
institutions, hotels, or free standing retailers.
Property Markets
The table below sets forth certain information with respect to the
geographic concentration of the properties as of December 31, 2002.
Geographic Concentration of Properties
Percent
Units Total Of Total
(Multifamily) NRA GRA 2002 Property 2002 Property
State (1) (Office)(3) (Retail) (2) Revenue Revenue
- -------------- ---------- ----------- ----------- -------------- ---------------
Alabama 6,812 2,561,659 6,449,713 $ 141,311,371 42.2%
Florida 4,778 1,760,245 2,825,211 85,040,038 25.3%
Georgia 1,382 863,266 3,322,764 63,100,835 18.8%
Mississippi 498 -0- -0- 4,415,654 1.3%
North Carolina -0- -0- 1,313,061 15,145,543 4.5%
South Carolina 764 -0- 494,128 14,013,802 4.2%
Tennessee -0- -0- 73,539 462,833 0.1%
Texas 322 -0- 573,742 8,631,546 2.6%
Virginia -0- -0- 423,038 3,319,857 1.0%
---------- ----------- ----------- -------------- ---------------
Total 14,556 5,185,170 15,475,196 $ 335,441,479 100.0%
========== =========== =========== ============== ===============
(1) Units (in this table only) refer to multifamily apartment units.
(2) GRA refers to gross retail area, which includes gross leasable area
and space owned by anchor tenants.
(3) NRA refers to net rentable area of office space.
We believe that the demographic and economic trends and conditions in
the markets where the properties are located indicate a potential for continued
growth in property net operating income. The properties are located in a variety
of distinct submarkets within Alabama, Florida, Georgia, Mississippi, North
Carolina, South Carolina, Tennessee, Texas and Virginia. However, Birmingham and
Huntsville, Alabama, Orlando, Tampa and Sarasota/Bradenton, Florida, and Macon
and Atlanta, Georgia, are our primary markets. We believe that our markets in
these nine states, which are characterized by stable and increasing population
and employment growth, should continue to provide a steady demand for
multifamily, office, and retail properties.
Mortgage Financing
As of December 31, 2002, we had approximately $1.26 billion of secured
and unsecured indebtedness outstanding with a weighted average interest rate of
5.89% and a weighted average maturity of 5.6 years. Of this amount,
approximately $383.2 million was secured mortgage financing and $878.9 was
unsecured debt. Our mortgaged indebtedness was secured by 24 of our consolidated
properties and carried a weighted average interest rate of 5.7% and a weighted
average maturity of 9.6 years. The following table sets forth our secured and
unsecured indebtedness in more detail.
Mortgage Debt and Notes Payable
Anticipated
Annual Debt
Principal Service Estimated
Interest Balance (as of (1/1/03- Maturity Balance Due
Property (1) Rate 12/31/02) 12/31/03) Date (2) on Maturity
- --------------------------------- --------- -------------- ------------- ---------- -------------
Multifamily Properties:
CG at Edgewater 6.810% 21,541,461 1,722,840 01/01/11 18,830,199
CG at Galleria 2.560% 22,400,000 447,996 06/15/26 (2) 22,400,000
CG at Galleria Woods 6.910% 9,375,014 771,344 07/01/09 8,459,760
CG at Hunters Creek 7.980% 18,999,000 1,516,120 06/30/10 18,999,000
CG at Hunters Creek 6.590% 11,136,196 1,093,709 06/30/10 (5) 4,373,743
CG at Madison 2.191% 17,396,855 980,007 08/01/11 (2) 4,132,410
CG at Natchez Trace 8.300% 6,692,135 611,403 09/01/35 47,813
CG at Natchez Trace 8.250% 3,993,930 371,293 02/01/37 29,071
CG at Promenade 6.810% 22,471,660 1,797,238 01/01/11 19,643,321
CG at Research Park 2.160% 12,775,000 255,444 06/15/26 (2) 12,775,000
CG at Reservoir 2.474% 8,581,363 470,921 04/01/12 7,192,133
CG at Riverchase 2.191% 20,494,557 1,146,373 07/01/11 (2) 6,240,833
CV at Ashley Plantation 7.980% 15,090,000 1,204,182 06/30/10 15,090,000
CV at Ashley Plantation 6.590% 9,324,040 915,738 06/30/10 (5) 4,339,741
CV at Gainesville 2.474% 26,602,227 1,459,847 04/01/12 22,243,422
CV at Inverness 2.206% 9,900,000 218,394 06/15/26 (2) 9,900,000
CV at Lake Mary 7.980% 14,100,000 1,125,180 06/30/10 14,100,000
CV at Lake Mary 6.590% 8,621,386 846,729 06/30/10 (5) 3,620,835
CV at Timothy Woods 7.490% 9,467,303 840,849 09/01/09 8,466,599
CV at Trussville 2.474% 16,847,090 924,517 04/01/12 14,074,930
CV at Vernon Marsh 2.096% 3,400,000 71,400 07/01/26 (2) 3,400,000
Office Properties:
Interstate Park 8.500% 2,852,228 2,852,228 08/01/03 2,648,144
Colonial Center at Mansell Overlo8.250% 16,671,336 1,595,699 01/10/08 15,313,506
Village at Roswell Summit 8.930% 1,510,544 170,220 09/01/05 1,433,201
Perimeter Corporate Park 8.680% 4,822,798 4,822,798 12/01/03 4,699,141
Heathrow Internation Business Cen7.390% 32,669,916 3,202,949 12/01/04 31,272,508
Heathrow Internation Business Cen7.840% 11,000,000 862,400 12/01/04 11,000,000
Retail Properties:
Colonial Promenade Montgomery 7.490% 12,193,529 1,085,361 08/27/09 10,876,590
Colonial Promenade UPP I 7.490% 11,958,595 1,063,210 08/27/09 10,694,650
Other debt:
Land Loan 2.980% 505,064 22,051 09/30/04 493,809
Line of Credit 2.430% (3) 208,270,000 6,736,688 11/22/05 (4) 208,270,000
Unsecured Senior Notes 8.050% 65,000,000 5,202,063 07/15/06 65,000,000
Unsecured Senior Notes 7.000% 175,000,000 12,138,318 07/15/07 175,000,000
Unsecured Senior Notes 6.990% 100,000,000 6,844,763 08/15/12 100,000,000
Medium Term Notes 7.050% 50,000,000 3,525,000 12/15/03 50,000,000
Medium Term Notes 7.160% 50,000,000 3,580,000 01/17/03 50,000,000
Medium Term Notes 3.817% 75,000,000 2,862,750 07/26/04 (6) 75,000,000
Medium Term Notes 6.960% 25,000,000 1,740,000 08/01/05 25,000,000
Medium Term Notes 6.980% 25,000,000 1,745,000 09/26/05 25,000,000
Medium Term Notes 8.190% 25,000,000 2,047,500 08/01/04 25,000,000
Medium Term Notes 8.820% 25,000,000 2,205,000 02/01/05 25,000,000
Medium Term Notes 8.800% 20,000,000 1,760,000 02/01/10 20,000,000
Medium Term Notes 8.800% 5,000,000 440,000 03/01/10 5,000,000
Medium Term Notes 8.050% 10,000,000 805,000 12/01/10 10,000,000
Medium Term Notes 8.080% 10,000,000 808,000 12/01/10 10,000,000
Medium Term Notes 7.460% 10,000,000 746,000 12/01/06 10,000,000
Unamortized Discount on Senior Notes (2,024,896) (2,024,896)
Fasb 133 FV of Hedging Investments 2,554,495 2,554,495
-------------- ------------- -------------
TOTAL CONSOLIDATED DEBT $ 1,262,192,823 $ 87,654,522 $ 1,185,589,958
============== ============= =============
(footnotes on next page)
- ----------------
(1) As noted in the table, certain Properties were developed in phases and
separate mortgage indebtedness may encumber each of the various phases. In
the listing of property names, CG has been used as an abbreviation for
Colonial Grand and CV as an abbreviation for Colonial Village.
(2) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2022.
(3) This line of credit facility bears interest at a variable rate, based on
LIBOR plus a spread of 105 basis points. The facility also includes a
competitive bid feature that allows us to convert up to $160 million under
the line of credit to a fixed rate, for a fixed term not to exceed 90 days.
At December 31, 2002, we had $130.0 million outstanding under the
competitive bid feature.
(4) This credit facility is renewable in November 2005 and provides for a
one-year extension. Effective January 2003, we entered into interest rate
swap agreements of $150.0 million on our line of credit, which fixes the
rate on the floating line for one year at a blended rate of 1.79% plus a
spread of 105 basis points.
(5) Represents floating rate debt that has been swapped to a fixed rate of
6.59%.
(6) $50.0 million of this medium term fixed rate debt has been swapped to a
floating index rate of 3-mo LIBOR.
In addition, the properties in which we own partial interests (and
which therefore are not consolidated in our financial statements) also are
subject to existing mortgage indebtedness. Our pro-rata share of such
indebtedness as of December 31, 2002 were as follows:
Company's Share
Company's of Principal
Percentage Balance (as of Interest Maturity
Subsidiary Ownership 12/31/02) Rate Date
- -----------------------------------------------------------------------------------------
Barrington, LLC 15.0% $ 974,419 7.60% 10/01/09
Cahaba Heights, LLC 15.0% 812,590 7.60% 10/01/09
Mountain Brook, LLC 15.0% 2,432,184 7.60% 10/01/09
Ponte Vedra, LLC 15.0% 1,355,650 7.60% 10/01/09
River Hills, LLC 15.0% 3,860,074 7.60% 10/01/09
Stockbridge, LLC 15.0% 1,531,596 7.60% 10/01/09
Hillwood, LLC 15.0% 499,500 2.44% 12/01/30
Hillwood, LLC 15.0% 309,746 7.80% 10/01/20
Inverness Lakes I, LLC 15.0% 600,000 2.47% 08/01/22
Inverness Lakes I, LLC 15.0% 344,953 7.80% 07/01/20
Inverness Lakes II, LLC 15.0% 2,006,504 8.11% 05/01/10
Rocky Ridge, LLC 15.0% 900,000 2.69% 08/01/07
Rocky Ridge, LLC 15.0% 306,116 7.74% 10/01/16
Highway 150, LLC 10.0% 1,777,500 5.94% 01/11/13
Land Title Building 33.3% 534,512 8.10% 02/01/15
Orlando Fashion Square 50.0% 32,174,740 7.00% 12/28/05
Parkway Place 45.0% 27,880,953 3.07% 12/20/03
-----------------------------------
TOTAL SUBSIDIARY DEBT $ 78,301,037 5.59%
===================================
Item 3. Legal Proceedings.
Neither we nor the properties are presently subject to any material
litigation nor, to our knowledge, is any material litigation threatened against
us or the properties, other than routine litigation arising in the ordinary
course of business which is expected to be covered by liability insurance.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to CRLP's unitholders during the fourth
quarter of 2002.
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.
There is no established public trading market for the units. As of
February 28, 2003, there were 116 holders of record of units.
We have made consecutive quarterly distributions since its formation in
the third quarter of 1993. Our ability to make distributions depends on a number
of factors, including its net cash provided by operating activities, capital
commitments and debt repayment schedules. Holders of units are entitled to
receive distributions when, as and if declared by the Board of Trustees of the
Company, its general partner, out of any funds legally available for that
purpose.
The following table sets forth the distributions per unit paid by us
during the periods noted:
Calendar Period Distribution
2002:
First Quarter............................ $ .66
Second Quarter........................... $ .66
Third Quarter............................ $ .66
Fourth Quarter........................... $ .66
2001:
First Quarter............................ $ .63
Second Quarter........................... $ .63
Third Quarter............................ $ .63
Fourth Quarter........................... $ .63
Item 6. Selected Financial Data.
The following table sets forth selected financial and operating
information on a historical basis for CRLP for each of the five years ended
December 31, 2002.
Dollar amounts in thousands, except unit data 2002 2001 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING DATA
Total revenue $329,866 $ 314,418 $300,073 $280,066 $ 254,761
Expenses:
Depreciation and amortization 82,503 71,826 63,356 54,659 48,127
Other operating expenses 114,522 102,567 96,071 93,501 87,040
Income from operations 132,841 140,025 140,646 131,906 119,594
Interest expense 65,265 71,397 71,855 57,211 52,063
Other income (expense), net 36,810 17,154 9,865 9,489 (62)
Extraordinary loss from early
extinguishment of debt - - (418) (628) (401)
Income from continuing operations 104,386 85,782 78,238 83,556 67,068
Income from discontinued operations 6,520 617 887 1,119 1,154
Distibutions to preferred unitholders 24,438 22,280 19,813 18,531 10,938
Net income available to common unitholders 86,468 64,119 59,312 66,144 57,284
Per unit - basic and diluted:
Net income - basic 2.61 2.00 1.82 1.88 1.64
Net income - diluted 2.59 2.00 1.82 1.88 1.64
Distributions 2.64 2.52 2.40 2.32 2.20
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Land, buildings, and equipment, net $1,947,072 $ 1,756,255 $ 1,769,500 $ 1,586,332 $ 1,566,840
Total assets 2,129,773 2,014,383 1,943,547 1,864,146 1,756,548
Total debt 1,262,193 1,191,791 1,179,095 1,039,863 909,322
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total properties (at end of period) 106 108 115 111 106
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
GENERAL
CRLP is the operating partnership the Company, whose units are listed
on the New York Stock Exchange. CRLP is engaged in the ownership, development,
management, and leasing of multifamily communities, office buildings, retail
malls and shopping centers. CRLP owns and operates properties in nine states in
the Sunbelt region of the United States. As of December 31, 2002, CRLP's real
estate portfolio consisted of 41 multifamily communities, 21 office properties,
and 44 retail properties.
The following table sets forth information regarding CRLP's real estate
portfolio at December 31, 2002 and 2001:
Number of Units/Total Occupancy
Properties Square Feet (1) (2) Percentage
------------------------ ------------------------------ ------------------------
Type of Property 2002 2001 2002 2001 2002 2001
------------------------ ------------------------------ ------------------------
Multifamily 41 49 14,566 16,256 88.1% 92.8%
Office 21 17 5,185,170 3,518,276 91.0% 92.1%
Retail 44 42 15,475,196 14,950,517 89.2% 89.6%
(1) Units (in this table only) refers to multifamily units.
(2) Units and square footage in this table include all of the units and square
footage contained in the properties that CRLP maintains a partially-owned
investment.
Consistent with its diversified strategy, CRLP manages its business
with three separate and distinct operating divisions: Multifamily, Office, and
Retail. Each division has an Executive Vice President that oversees growth and
operations and has a separate management team that is responsible for acquiring,
developing, and leasing properties within each division. This structure allows
CRLP to utilize specialized management personnel for each operating division.
Although these divisions operate independently from one another, constant
communication among the Executive Vice Presidents provides CRLP with unique
synergy allowing CRLP to take advantage of a variety of investment
opportunities.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
appearing elsewhere in this report. As used herein, the terms "Colonial" or "the
Company" includes Colonial Properties Trust, and one or more of its
subsidiaries.
Any statement contained in this report which is not a historical fact,
or which might be otherwise considered an opinion or projection concerning CRLP
or its business, whether express or implied, is meant as, and should be
considered, a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. Forward-looking statements are based
upon assumptions and opinions concerning a variety of known and unknown risks,
including but not limited to changes in market conditions, the supply and demand
for leasable real estate, interest rates, increased competition, changes in
governmental regulations, and national and local economic conditions generally,
as well as other factors and risks more completely described in CRLP's filings
with the Securities and Exchange Commission. If any of these assumptions or
opinions prove incorrect, any forward-looking statements made on the basis of
such assumptions or opinions may also prove materially incorrect in one or more
respects.
RESULTS OF OPERATIONS--2002 vs. 2001
In 2002, CRLP experienced growth in revenues and operating expenses,
which is primarily the result of the acquisition and development of nine
properties and the re-development of three properties during 2002 and 2001, net
of the disposition of 22 properties during 2002 and 2001. As a result of the
acquisitions, developments, and re-developments, net of dispositions, CRLP's
income from operations decreased by $7.2 million, or 5.1%, for 2002 when
compared to 2001. On a per unite basis, diluted net income is $2.59 for 2002, a
29.5% increase, compared to $2.00 for 2001. The increase in net income available
to common unitholders, on a per unit basis, is primarily the result of the gain
recognized on the sales of thirteen properties and various parcels of land in
2002 of $41.6 million, compared to the gain of $15.7 million recognized in 2001
on the sale of nine properties.
Revenues--Total revenues from continuing operations increased by $15.4 million,
or 4.9%, during 2002 when compared to 2001. Revenues generated by properties
that were acquired, developed, or re-developed during 2002 and 2001 increased
$31.4 million during 2002 when compared to 2001. However, the increase in
revenues generated by properties that were acquired, developed, or re-developed
was offset by a decrease in revenues from properties disposed in which CRLP
maintains a continuing interest, of $19.5 million during 2002 compared to 2001.
Further, CRLP experienced a revenue increase of $2.8 million related to the
September 1, 2001 consolidation of Colonial Properties Services, Inc. (CPSI) a
wholly-owned entity that provides property management services for third-party
owned properties and administrative services to CRLP, that was previously
accounted for under the equity method of accounting. The remaining increase
primarily relates to increases in rental rates at existing properties, and lease
buyouts during 2002, net of a decrease in occupancy percentages. The office and
retail divisions account for the majority of the overall revenue increase of
$19.3 million and $7.1 million, respectively, net of a decrease in the
multifamily division of $15.2 million. The remaining increase of $4.2 million is
attributable to an increase in non-property related revenues. The divisional
revenue growth is primarily attributable to the acquisition, development, and
re-development of two multifamily properties, six office properties, and four
retail properties, net of the disposition of 14 multifamily properties, three
office properties, and five retail properties during 2002 and 2001.
Same-property revenue increased by $0.1 million during 2002 when
compared to 2001. Of this increase, $2.8 million is attributable to the retail
division, which is primarily a result of an increase in base rents, specialty
leasing income and lease buyouts. The increase in revenues from the retail
division was offset by a decrease of $2.3 million from the multifamily division,
which is a function of the continued decline in apartment fundamentals over the
past year as a result of a declining employment growth and a robust single
family housing market driven by lower interest rates. The remaining decrease of
$0.4 million is attributable to the office division and the result of an overall
slowdown in the U.S. economy and a decrease in occupancy percentages, offset by
lease buyouts that occurred in 2002.
Operating Expenses--Total operating expenses from continuing operations
increased by $22.6 million, or 13.0%, during 2002 when compared to 2001.
Operating expenses related to properties that were acquired, developed, or
re-developed during 2002 and 2001 increased $19.0 million during 2002 when
compared to 2001. However, the increase in operating expenses related to
properties that were acquired, developed, or re-developed was offset by a
decrease in operating expenses from properties disposed in which CRLP maintains
a continuing interest of $10.3 million during 2002 compared to 2001. Further, an
increase of $3.9 million relates to the consolidation of CPSI, which was
effective September 1, 2002. The remaining increase is primarily attributable to
an increase in real estate taxes and insurance rates at our existing properties
and general corporate overhead expenses. Divisional property operating expenses
increased by $11.4 million and $9.1 million for the office and retail divisions,
respectively, net of a decrease of $4.9 million for the multifamily division
during 2002 when compared to 2001. The increase in divisional property operating
expenses is primarily attributable to the acquisition, development, and
re-development of two multifamily properties, six office properties, and four
retail properties, net of the disposition of 14 multifamily properties, three
office properties, and five retail properties during 2002 and 2001. The
remaining change primarily relates to increases in operating expenses at
existing properties.
Same-property operating expenses increased by $4.9 million or 6.2%,
during 2002 when compared to 2001. Of this increase, $1.6 million is related to
the multifamily division and $3.3 million is related to the retail division,
which is primarily the result of an increase in real estate taxes and insurance
rates in our current markets during 2002 when compared to 2001. The remaining
increase is associated with the increases in general operating expenses,
utilities, and repairs and maintenance expenses.
Other Income and Expenses--Interest expense decreased by $6.1 million, or 8.6%,
during 2002 when compared to 2001. The decrease in interest expense was
primarily attributable to the decrease in the variable interest rate environment
in 2002 as compared to 2001; CRLP has $267.2 million of floating rate debt
outstanding as of December 31, 2002. Gains from sales of property in which CRLP
maintains a continuing interest increased $19.8 million during 2002 when
compared to 2001, as a result of the sale of ten properties and various parcels
of land in 2002 as compared to nine properties in 2001. The increase in gains
from sales of property is primarily the result of CRLP selling more assets in
2002 than in 2001 and selling older assets with lower recorded book values in
2002 versus the sales in 2001.
RESULTS OF OPERATIONS--2001 vs. 2000
In 2001, CRLP experienced growth in revenues and operating expenses,
which is primarily the result of the acquisition and development of 14
properties and the expansion of one property during 2001 and 2000, net of the
disposition of 15 properties during 2001 and 2000. As a result of the
acquisitions, developments, expansions, and dispositions, CRLP's income from
continuing operations decreased by $0.6 million, or 0.4%, for 2001 when compared
to 2000. On a per unit basis, diluted net income is $2.00 for 2001, an 9.9%
increase, compared to $1.82 for 2000. The increase in net income available to
common unitholders, on a per unit basis, is primarily the result of the gain
recognized on the sales of nine properties in 2001 of $15.7 million, compared to
the gain of $8.2 million recognized in 2000 on the sale of six properties.
Revenues--Total revenues increased by $14.3 million, or 4.8%, during 2001 when
compared to 2000. Of this increase, $8.1 million relates to revenues generated
by properties that were acquired, developed, or expanded during 2001 and 2000,
net of properties disposed. The remaining increase primarily relates to
increases in rental rates at existing properties, lease buyouts, and ancillary
income during 2001. The office division accounts for the majority of the overall
revenue increase, approximately $6.8 million, while the retail and multifamily
divisions account for $5.7 million and $1.5 million, respectively. The
divisional revenue growth is primarily attributable to the acquisition,
development, and expansion of eight multifamily properties, three office
properties, and four retail properties, net of the disposition of 11 multifamily
properties, one office property, and three retail properties during 2001 and
2000. The remaining increase is attributable to an increase in unallocated
corporate revenues.
Same-property revenue increased by $5.1 million or 2.1%, during 2001
when compared to 2000. Of this increase, $1.2 million, $2.6 million and $1.3
million is attributable to the multifamily, office, and retail divisions,
respectively. The increase is primarily the result of increases in rental rates
and lease buyouts, offset by a reduction in percentage rents at our retail
properties.
Operating Expenses--Total operating expenses increased by $15.0 million, or
9.4%, during 2001 when compared to 2000. Of this increase, $3.5 million relates
to additional property operating expenses and additional depreciation and
amortization of $3.6 million associated with properties that were acquired,
developed, or expanded during 2001 and 2000, net of operating expenses of
properties disposed of during 2001 and 2000. Divisional property operating
expenses increased by $1.9 million, $3.9 million, and $5.8 million for the
multifamily, office, and retail divisions, respectively, during 2001 when
compared to 2000. The increase in divisional property operating expenses is
primarily attributable to the acquisition, development, and expansion of eight
multifamily properties, three office properties, and four retail properties, net
of the disposition of 11 multifamily properties, one office property, and three
retail properties during 2001 and 2000. The remaining change primarily relates
to increases in operating expenses at existing properties.
Same-property operating expenses increased by $0.7 million or 1.0%,
during 2001 when compared to 2000. Of this increase, $0.4 million is related to
the office division and $0.8 million is related to the retail division, which is
primarily the result of an increase in real estate taxes and insurance rates in
our current markets during 2001 compared to 2000. The increases within the
office and retail divisions were offset by a decrease in the multifamily
division of $0.5 million, which was primarily the result of a decrease in
repairs and maintenance expenses.
Other Income and Expenses--Interest expense decreased by $0.5 million, or 0.6%,
during 2001 when compared to 2000. The decrease in interest expense is primarily
attributable to the decrease in the variable interest rate environment in 2001
as compared to 2000, of which CRLP has $264.1 million of floating rate debt
outstanding as of December 31, 2001. Gains from sales of property increased $7.5
million during 2001 when compared to 2000, as a result of the sale of 9
properties in 2001 as compared to 5 properties in 2000.
SUMMARY OF CRITICAL ACCOUNTING POLICIES
Management of CRLP considers the following accounting policies to be
critical to the reported operating results of CRLP:
Real Estate Development
CRLP capitalizes all costs, including interest and real estate taxes
that are associated with a development, construction, expansion, or leasing of
real estate investments as a cost of the property. All other expenditures
necessary to maintain a property in ordinary operating condition are expensed as
incurred.
CRLP evaluates its properties, at least annually or upon the occurrence
of significant changes in the operations, to assess whether any impairment
indications are present, including recurring operating losses and significant
adverse changes in legal factors or business environment that affect the
recovery of the recorded value. If any property is considered impaired, a loss
is provided to reduce the carrying value of the property to its estimated fair
value. The valuation of real estate investments involves many subjective
assumptions dependent upon future economic events that affect the ultimate value
of the property.
Principles of Consolidation
The consolidated financial statements include the accounts of CRLP,
Colonial Properties Services, Inc. (CPSI) and Colonial Properties Services
Limited Partnership (CPSLP). All significant inter-company balances and
transactions have been eliminated in the consolidated financial statements.
Investments in entities that CRLP does not control through majority voting
interest or where the other owner has substantial participating rights are not
consolidated and are reflected as investments in partially owned entities.
Revenue Recognition
CRLP, as a lessor, has retained substantially all of the risks and
benefits of ownership of its properties and accounts for its leases as operating
leases. Rental income attributable to leases is recognized on a straight-line
basis over the terms of the related lease. Certain leases contain provisions for
additional rent based on a percentage of tenant sales. Percentage rents are
recognized in the period in which sales thresholds are met. Recoveries from
tenants for taxes, insurance, and other property operating expenses are
recognized in the period the applicable costs are incurred in accordance with
the terms of the respective leases.
Other income received from long-term contracts signed in the normal
course of business are recognized in accordance with the terms of the specific
contract. Property management and development fee income is recognized when
earned for services provided to third parties.
Valuation of Receivables
CRLP is subject to tenant defaults and bankruptcies at its Office and
Retail properties that could affect the collection of outstanding receivables.
In order to mitigate these risks, CRLP performs credit review and analysis on
all commercial tenants and significant leases before they are executed. CRLP
evaluates the collectibility of outstanding receivables and records allowances
as appropriate. CRLP's policy is to record allowances for all outstanding
receivables greater than 60 days past due at its Office and Retail properties.
Due to the short-term nature of the leases at its Multifamily
properties, generally six months to one year, CRLP's exposure to tenant defaults
and bankruptcies is minimized. CRLP's policy is to record allowances for all
outstanding receivables greater than 30 days past due at its Multifamily
properties.
Accounting Policies for Derivatives
CRLP has certain involvement with derivative financial instruments but
does not use them for trading or speculative purposes. Interest rate cap
agreements and interest rate swaps are used to reduce the potential impact of
increases in interest rates on variable-rate debt. CRLP adjusts its balance
sheets on an ongoing quarterly basis to reflect current fair market value of its
derivatives. Changes in the fair value of derivatives are recorded each period
in earnings or comprehensive income, as appropriate. The ineffective portion of
the hedge is immediately recognized into earnings to the extent that the change
in value of a derivative does not perfectly offset the change in value of the
instrument being hedged. The unrealized gains and losses held in accumulated
other comprehensive income (loss) will be reclassified to earnings over time and
occurs when the hedged items are also recognized in earnings.
CRLP formally documents all relationships between hedging instruments
and hedged items, as well as its risk management objective and strategy for
undertaking the hedge. This process includes specific identification of the
hedging instrument and the hedge transaction, the nature of the risk being
hedged and how the hedging instrument's effectiveness in hedging the exposure to
the hedged transaction's variability in cash flows attributable to the hedged
risk will be assessed. Both at the inception of the hedge and on an ongoing
basis, CRLP assesses whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows or fair
values of hedged items. CRLP is required to discontinue hedge accounting if a
derivative is not determined to be highly effective as a hedge or has ceased to
be a highly effective hedge.
ACQUISITION AND DEVELOPMENT ACTIVITY
Multifamily Properties--During 2002, CRLP completed development of 288
apartment units in two multifamily communities and acquired land on which it
intends to develop additional multifamily communities. The aggregate investment
in the multifamily developments during 2002 was $9.0 million.
Office Properties--During 2002, CRLP added approximately 1,379,000
square feet of office space and certain parcels of land to be used for future
development with the acquisition of three office properties at a total cost of
$187.6 million. Additionally, CRLP increased its office portfolio by 199,585
square feet with the development of an office building. CRLP also continued
development on one office property in Orlando, Florida. The aggregate investment
in the office developments during 2002 was $32.5 million. Management estimates
that it will invest an additional $6.1 million to complete this property.
Retail Properties--During 2002, CRLP increased its retail portfolio by
approximately 112,186 square feet with the acquisition of one retail property at
a cost of $6.6 million. Additionally, CRLP completed the development of one
retail property in Birmingham, Alabama and the re-development of one retail
property in Huntsville, Alabama with a joint venture partner, which added
approximately 796,000 square feet to the retail portfolio. The aggregate
investment in the development and re-development during 2002 was $42.5 million.
CRLP also began the development of one community shopping center in Birmingham,
Alabama. Management anticipates that it will invest an additional $6.3 million
to complete the retail development.
LIQUIDITY AND CAPITAL RESOURCES
During 2002, CRLP invested $281.5 million in the acquisition,
development, and re-development of properties. This acquisition and development
activity increased CRLP's office and retail property holdings. CRLP financed the
growth through proceeds from the issuance of $100.0 million of senior notes,
public offerings of equity through the Company totaling $17.6 million during
2002, advances on its bank line of credit, proceeds received from the
disposition of assets totaling $138.6 million, proceeds from CRLP's dividend
reinvestment plan, proceeds of $52.8 million related to the secured financing of
three properties, and cash from operations.
FINANCING ACTIVITIES
On February 25, 2002, CRLP entered into a transaction in which 560,380
common units of beneficial interest were issued at $33.37 per unit, resulting in
net proceeds of $17.6 million to CRLP, which were used to repay outstanding
balances under CRLP's unsecured line of credit. Salomon Smith Barney deposited
260,710 units into The Equity Focus Trust REIT Portfolio Series, 2002-A, a newly
formed unit investment trust, and 299,670 units were deposited into Cohen &
Steers Quality Income Realty Fund, Inc. During August 2002, CRLP completed a
senior notes debt offering of $100.0 million at 6.88% with a maturity of August
2012. Additionally during 2002, CRLP received proceeds of $52.8 million related
to the financing of three properties, which is collateralized by the related
properties.
CRLP continued its asset recycling program, which allows CRLP to
maximize its investment returns through the sale of assets that have reached
their maximum investment potential and reinvest the proceeds into opportunities
with more growth potential. Following are the dispositions that occurred during
2002:
Total Sales Price
Property Location Units/Sq. Feet (in thousands)
- -------------------------------------------------------------------------------------------------------
Multifamily Properties
Colonial Grand at Carrollwood Tampa, FL 244 $ 15,244
Colonial Grand at Palma Sola Bradenton, FL 340 19,036
Colonial Village at Cordova Pensacola, FL 152 5,360
Colonial Village at Hillcrest Mobile, AL 104 5,178
Colonial Village at McGehee Montgomery, AL 468 18,390
Colonial Village at Monte D'Oro Birmingham, AL 200 11,166
Colonial Village at Oakleigh Pensacola, FL 176 10,955
Ski Lodge - Tuscaloosa Tuscaloosa, AL 304 9,180
-----------------------------------
1,988 94,509
Office Properties
University Park Orlando, FL 72,496 5,012
Colonnade 4100 & 4200 Birmingham, AL 32,000 3,680
-----------------------------------
104,496 8,692
Retail Properties
Colonial Promenade University Park II Orlando, FL 183,500 11,694
Colonial Promenade Madison (1) Huntsville, AL 110,712 3,163
Colonial Promenade Hoover (2) Birmingham, AL 155,231 20,530
-----------------------------------
449,443 35,387
-------------------
Total $ 138,588
==================
(1) CRLP sold one-half of its 50% interest in the property.
(2) CRLP sold 90% of its interest in the property.
CRLP used the proceeds to repay a portion of the borrowings under
CRLP's unsecured line of credit and to support CRLP's future investment
activities. In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, CRLP records individual property sales as
discontinued operations, unless CRLP maintains a significant continuing
involvement with the properties that have been sold. During 2002, the above
properties that were sold and classified as discontinued operations were
University Park, Colonial Promenade University Park II, and Colonnade 4100 &
4200. CRLP maintains a significant continuing involvement through a management
contract or an ownership percentage in the remaining properties.
At December 31, 2002, CRLP had an unsecured bank line of credit
providing for total borrowings of up to $320 million. This line of credit
agreement bears interest at LIBOR plus a spread calculated from a pricing grid
based on CRLP's unsecured debt ratings. Based on CRLP's debt ratings at December
31, 2002, the spread was 105 basis points. The line of credit is renewable in
November 2005, and provides for a one-year extension. The line of credit
agreement includes a competitive bid feature that will allow CRLP to convert up
to $160 million under the line of credit to a fixed rate, for a fixed term not
to exceed 90 days. The credit facility is primarily used by CRLP to finance
property acquisitions and developments and had an outstanding balance at
December 31, 2002, of $208.3 million. The interest rate of this short-term
borrowing facility, including the competitive bid balance, was 2.38% and 3.08%
at December 31, 2002 and 2001, respectively.
At December 31, 2002, CRLP's total outstanding debt balance was $1.26
billion. The outstanding balance includes fixed rate debt of $995.0 million, or
78.8%, and floating-rate debt of $267.2 million, or 21.2%. CRLP's total market
capitalization as of December 31, 2002 was $2.7 billion and its ratio of debt to
total market capitalization was 47.1%. Certain loan agreements of CRLP contain
restrictive covenants, which among other things require maintenance of various
financial ratios. At December 31, 2002, CRLP was in compliance with these
covenants.
CREDIT RATINGS
CRLP's credit ratings as of December 31, 2002 are as follows:
- -------------------------------------------------------------------
Rating Agency Rating (1) Last update
- -------------------------------------------------------------------
Standard & Poor's BBB- September 16, 2002
Moody's Baa3 July 18, 2002
Fitch BBB- July 18, 2002
(1) Ratings outlook is "stable".
CRLP's credit ratings are investment grade. If CRLP experienced a credit
downgrade, it may be limited in its access to capital in the unsecured debt
market, which CRLP has historically utilized to fund its investment activities.
In addition, CRLP's spread on its $320 million unsecured line of credit would
increase as previously discussed.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
The following tables summarize the material aspects of our future
contractual obligations and commercial commitments as of December 31, 2002:
Payments Due in Fiscal
----------------------------------------------------------------------------------------
(in thousands) Total 2003 2004 2005 2006 2007 Thereafter
----------------------------------------------------------------------------------------
Long-Term Debt:
Consolidated (1) $1,262,193 $ 107,675 $ 129,040 $ 299,916 $ 74,891 $ 174,488 $ 476,183
Partially Owned Entities (1) 78,335 28,402 490 31,719 208 225 17,291
----------------------------------------------------------------------------------------
Total Long-Term Debt 1,340,528 136,077 129,530 331,635 75,099 174,713 493,474
Ground lease commitments 7,781 113 113 113 113 113 7,216
----------------------------------------------------------------------------------------
Total $1,348,309 $ 136,190 $ 129,643 $ 331,748 $ 75,212 $ 174,826 $ 500,690
----------------------------------------------------------------------------------------
(1) Represents CRLP's pro rata share of principal maturities and excludes
net premiums and discounts.
Amounts expiring in fiscal
------------------------------------------------------------------------
Total Amounts
(in thousands) Committed 2003 2004 2005 2006 2007 Thereafter
------------------------------------------------------------------------------------------
Standby Letters of Credit $ 550 $ 550 $ - $ - $ - $ - $ -
Guarantees 13,743 3,300 - 9,443 - - 1,000
Other Commercial Commitments 4,000 - - - - 4,000 -
------------------------------------------------------------------------------------------
Total Commercial Commitments $ 18,293 $3,850 $ - $9,443 $ - $4,000 $ 1,000
==========================================================================================
GUARANTEES AND OTHER ARRANGEMENTS
During January 2000, CRLP initiated and completed an Executive Unit
Purchase Program (Unit Purchase Program), in which the Board of Trustees and
certain members of CRLP's management were able to purchase 425,925 Units of
CRLP. Under the Unit Purchase Program, the Board of Trustees and the members of
management obtained full-recourse personal loans from an unrelated financial
institution, in order to purchase the Units. The Units, which have a market
value of approximately $13.8 million at December 31, 2002, are pledged as
collateral against the loans. CRLP has provided a guarantee to the unrelated
financial institution for the personal loans, which mature in January 2005. The
value of the Units purchased under the Unit Purchase Program was approximately
$10.0 million. At December 31, 2002, no liability was recorded on CRLP's books
for the guarantee.
In August 2001, CRLP entered into an agreement to provide services to
an unrelated third party in connection with the third party's development of a
$30.0 million multifamily property in North Carolina. CRLP was engaged to serve
as development consultant and leasing and management agent for this property. In
addition, for a fee, CRLP is serving as a guarantor for a $3.3 million working
capital loan obtained by the three principals of the third party entity, which
loan is primarily collateralized jointly and severally by the personal assets of
the borrowers, and matures in August 2003. At December 31, 2002, no liability
was recorded on CRLP's books for the guarantee. CRLP has a right of first
refusal to purchase the property should the third party elect to sell. Over the
term of the agreement, CRLP expects to earn market fees for its services.
During August 2002, in connection with the purchase of Heathrow
International Business Center, CRLP entered into an agreement to acquire one new
office building that contains 192,000 square feet. The closing for this
acquisition is anticipated to occur upon the earlier of August 2005 or at such
time that the seller achieves certain leasing targets for the property. The
purchase price will be determined based upon the percentage of gross leasable
area actually leased and the net operating income generated by the leases at the
time of acquisition.
During December 2002, CRLP entered into an agreement with an unrelated
third party in connection with the third party's development of a $23.5 million
multi-family property in Tampa, Florida. CRLP has agreed to loan approximately
$4.0 million, which represents 17.0% of the development costs to the third party
during the development of the property. Under the agreement, the balance of the
loan matures in December 2007. At December 31, 2002, no amount had been funded
to the unrelated third party and CRLP has no liability recorded on its books for
the potential loan amount. CRLP has a right of first refusal to purchase the
property should the third party elect to sell.
During December 2002, CRLP sold 90% of its interest in Colonial
Promenade Hoover for a total sales price of $20.5 million, and formed the
Highway 150 LLC, in which CRLP maintains 10% ownership and manages the property.
In connection with the formation of the Highway 150 LLC, CRLP executed a
guaranty, pursuant to which CRLP would serve as a guarantor of $1.0 million of
the debt related to the joint venture, which is collateralized by the Colonial
Promenade Hoover retail property. CRLP's maximum guarantee of $1.0 million may
be requested by the lender, only after all of the rights and remedies available
under the associated note and security agreements have been exercised and
exhausted. At December 31, 2002, the total amount of debt of the joint venture
was approximately $17.8 million and matures in December 2012. At December 31,
2002, no liability was recorded on CRLP's books for the guarantee.
In connection with the contribution of certain assets to CRLP, certain
partners of CRLP have guaranteed indebtedness of CRLP totaling $27.3 million at
December 31, 2002. The guarantees are held in order for the contributing
partners to maintain their tax deferred status on the contributed assets. These
individuals have not been indemnified by CRLP. Additionally, certain unitholders
of CRLP and trustees of the Company have guaranteed indebtedness of CRLP
totaling $0.5 million at December 31, 2002. CRLP has indemnified these
individuals from their guarantees of this indebtedness.
DERIVATIVE INSTRUMENTS
In the normal course of business, CRLP is exposed to the effect of
interest rate changes. CRLP limits these risks by following established risk
management policies and procedures including the use of derivatives. CRLP's
objective in using derivatives is to add stability to interest expense and to
manage its exposure to interest rate movements or other identified risks. To
accomplish this objective, CRLP primarily uses interest rate swaps and caps as
part of its cash flow hedging strategy. Interest rate swaps designated as cash
flow hedges involve the receipt of variable-rate amounts in exchange for
fixed-rate payments over the life of the agreements without exchange of the
underlying principal amount. During 2002, such derivatives were used to hedge
the variable cash flows associated with existing variable-rate debt and existing
lines of credit. Interest rate swaps designated as fair value hedges involve the
receipt of fixed-rate payments for variable-rate payments over the life of the
agreements without exchange of the underlying principal amount.
CRLP has entered into several different hedging transactions in an
effort to manage exposure to changes in interest rates. The following table
summarizes the notional values, fair values and other characteristics of CRLP's
derivative financial instruments at December 31, 2002. The notional value at
December 31, 2002 provides an indication of the extent of CRLP's involvement in
these instruments at that time, but does not represent exposure to credit,
interest rate, or market risk.
Interest Fair Value
Product Type Notional Value Rate Maturity At December 31, 2002
(in thousands)
- ------------------------------------- ------------------------- ------------- -------------- -------------------------
Interest Rate SWAP, Cash Flow $30.2 - $27.7 million 5.932% 1/01/06 $ (3,117)
Interest Rate SWAP, Cash Flow $50.0 million 2.319% 1/02/03 (38)
Interest Rate SWAP, Cash Flow $25.0 million 2.430% 1/01/03 (21)
Interest Rate SWAP, Cash Flow $50.0 million 2.113% 1/02/04 (370)
Interest Rate SWAP, Cash Flow $50.0 million 1.637% 1/02/04 (131)
Interest Rate SWAP, Cash Flow $50.0 million 1.615% 1/02/04 (119)
Interest Rate SWAP, Fair Value $50.0 million 5.015% 7/26/04 2,633
Interest Rate CAP, Cash Flow $21.1 million 6.850% 6/29/04 1
Interest Rate CAP, Cash Flow $17.9 million 6.850% 7/06/04 1
Interest Rate CAP, Cash Flow $30.4 million 11.200% 6/30/03 -
Interest Rate CAP, Cash Flow $17.1 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $27.0 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $8.7 million 4.840% 4/1/04 -
CRLP does not use derivatives for trading or speculative purposes.
Further, CRLP has a policy of only entering into contracts with major financial
institutions based upon their credit ratings and other factors. When viewed in
conjunction with the underlying and offsetting exposure that the derivatives are
designed to hedge, CRLP has not sustained a material loss from those instruments
nor does it anticipate any material adverse effect on its net income or
financial position in the future from the use of derivatives.
At December 31, 2002, derivatives with a fair value of $2.6 million
were included in other assets and derivatives with a fair value of $3.8 million
were included in other liabilities. The change in net unrealized gains/losses of
$3.6 million in 2002 for derivatives designated as cash flow hedges is
separately disclosed in the statement of partners' capital. Hedge
ineffectiveness of $23,000 on cash flow hedges was recognized in other income
(expense) during 2002.
Amounts reported in accumulated other comprehensive income related to
derivatives will be reclassified to interest expense as interest payments are
made on CRLP's variable-rate debt. The change in net unrealized losses on cash
flow hedges reflects a reclassification of $2.2 million of net unrealized losses
from accumulated other comprehensive income (loss) to interest expense during
2002. During 2003, CRLP estimates that an additional $2.3 million will be
reclassified to earnings of the current balance held in accumulated other
comprehensive income (loss).
RELATED PARTY TRANSACTIONS
CRLP has used affiliated construction companies to manage and oversee
certain of its development, re-development and expansion projects. The
affiliated construction companies utilized by CRLP are headquartered in Alabama
and have completed numerous projects within the Sunbelt region of the United
States. Through the use of market survey data, CRLP negotiates the contract
price of each development, re-development or expansion project with the
affiliated construction companies and presents each project to the Company's
Management Committee for review and approval. Upon approval by the Management
Committee, the Management Committee presents each project to the independent
members of the Executive Committee of the Board of Trustees for final approval.
CRLP paid $1.6 million, $33.6 million, and $46.7 million for property
development costs to Lowder Construction Company, Inc., a construction company
owned by The Colonial Company (TCC) in which Mr. Thomas H. Lowder (Chairman of
the Board and Chief Executive Officer) and Mr. James K. Lowder (trustee) each
own a 50% interest, during the years ended December 31, 2002, 2001 and 2000,
respectively. Of these amounts, $1.5 million, $30.7 million, and $43.2 million
was then paid to unaffiliated subcontractors for the construction of these
development and expansion projects during 2002, 2001 and 2000, respectively.
CRLP had outstanding construction invoices and retainage payable to Lowder
Construction Company, Inc. totaling $0.4 million at December 31, 2001. There
were no outstanding construction invoices or retainage payable to Lowder
Construction Company, Inc. at December 31, 2002. In each of the following
transactions, the independent members of the Executive Committee approved such
transactions unanimously.
CRLP also paid $35.3 million, $67.0 million, and $31.3 million for
property construction costs to Brasfield & Gorrie General Contractors, Inc.
(B&G), a construction company partially-owned by Mr. M. Miller Gorrie (trustee)
during the years ended December 31, 2002, 2001 and 2000, respectively. Of these
amounts, $32.1 million, $60.3 million, and $28.2 million was then paid to
unaffiliated subcontractors for the construction of these development projects
during 2002, 2001 and 2000, respectively. CRLP had outstanding construction
invoices and retainage payable to this construction company totaling $1.8
million at December 31, 2001. There were no outstanding construction invoices or
retainage payable to B&G at December 31, 2002.
In March 2002, CPSI acquired a 20% interest in three aircraft from NRH
Enterprises, L.L.C., (NRH) an entity in which Mr. Harold Ripps (trustee)
indirectly has an approximate 33% interest, for approximately $1.4 million.
Additionally, CPSI entered into a joint ownership agreement with the other
owners of the aircraft, including NRH, under which CPSI pays NRH, as agent for
all of the owners of the aircraft, a monthly fee of $10,000, plus $1,400 per
hour of Company flight time, to cover the operating expenses of the aircraft.
Further, CPSI entered into an aircraft services agreement with MEDJET
Assistance, L.L.C., (MEDJET) an entity in which Mr. Ripps indirectly has an
approximate 40% interest. Under this agreement, CPSI is obligated to pay a
monthly fee of $5,000 to MEDJET for managing the use, maintenance, storage, and
supervision of the aircraft. NRH pays this $5,000 monthly fee to MEDJET, on
behalf of CPSI, from the $10,000 monthly fee referred to above. During 2002,
CPSI paid approximately $254,000 to NRH for usage and service of the aircraft
under the above agreements.
In July 2002, CRLP acquired three single family homes located in
Montgomery, Alabama, from Lowder New Homes, Inc., an entity owned by TCC, for a
total purchase price of approximately $0.5 million, which will be operated as
rental property. The homes were purchased as part of a corporate rental program
for an automobile manufacturer that is building a manufacturing plant near
Montgomery, Alabama. Under the corporate rental program, executives of the
automobile manufacturer will rent the homes from CRLP for an initial term of
three years, with the option to extend the lease, and have agreed to lease
additional multifamily units at Colonial Grand at Promenade located in
Montgomery, Alabama. The homes were funded through CRLP's unsecured line of
credit.
During September 2000, CRLP purchased a parcel of land from Colonial
Commercial Investments, Inc. (CCI), which is owned by James K. Lowder and Thomas
H. Lowder, through the issuance of 12,477 limited partnership units in CRLP
valued at approximately $0.3 million. Subsequently, the parcel of land was sold
in excess of cost by CRLP in June 2001.
CRLP and its subsidiaries leased space to certain entities in which Mr.
Thomas H. Lowder, Mr. James K. Lowder, and Mr. M. Miller Gorrie have an interest
and received market rent from these entities of approximately $1.0 million, $1.1
million, and $1.5 million during the years ended December 31, 2002, 2001, and
2000, respectively. Additionally, CRLP and its subsidiaries provided management
and leasing services to certain related entities and received fees from these
entities of approximately $0.3 million during the years ended December 31, 2002,
2001, and 2000.
Colonial Insurance Agency, a corporation owned by TCC, has provided
insurance brokerage services for CRLP. The aggregate amount paid by CRLP to
Colonial Insurance Agency for these services during the years ended December 31,
2002, 2001, and 2000 were $5.0 million, $4.4 million, and $3.3 million,
respectively. Of these amounts, $4.7 million, $4.2 million and $3.1 million was
then paid to unaffiliated insurance carriers for insurance premiums during 2002,
2001 and 2000, respectively.
OUTLOOK
Management intends to maintain CRLP's strength through continued
diversification, while pursuing acquisitions and developments that meet
Colonial's criteria for property quality, market strength, and investment
return. Management will continue to use its line of credit to provide short-term
financing for acquisition, development, and re-development activities and plans
to continue to replace significant borrowings under the bank line of credit with
funds generated from the sale of additional debt and equity securities and
permanent financing, as market conditions permit. Management believes that these
potential sources of funds, along with the possibility of issuing limited
partnership units of CRLP in exchange for properties, will provide CRLP with the
means to finance additional acquisitions, developments, and expansions.
In addition to the issuance of equity and debt, management is
investigating alternate financing methods and sources to raise future capital.
Private placements, joint ventures, commercial paper, and non-traditional equity
and debt offerings are some of the alternatives CRLP is contemplating.
Management anticipates that its net cash provided by operations and its
existing cash balances will provide the necessary funds on a short- and long-
term basis to cover its operating expenses, interest expense on outstanding
indebtedness, recurring capital expenditures, and dividends to shareholders in
accordance with Internal Revenue Code requirements applicable to real estate
investment trusts.
INFLATION
Leases at the multifamily properties generally provide for an initial
term of six months to one year and allow for rent adjustments at the time of
renewal. Leases at the office properties typically provide for rent adjustments
and the pass-through of certain operating expenses during the term of the lease.
Substantially all of the leases at the retail properties provide for the
pass-through to tenants of certain operating costs, including real estate taxes,
common area maintenance expenses, and insurance. All of these provisions permit
CRLP to increase rental rates or other charges to tenants in response to rising
prices and, therefore, serve to minimize CRLP's exposure to the adverse effects
of inflation.
An increase in general price levels may immediately precede, or
accompany, an increase in interest rates. At December 31, 2002, CRLP's exposure
to rising interest rates was mitigated by the existing debt level of 47.1% of
CRLP's total market capitalization, the high percentage of fixed rate debt
(78.8%), and the use of interest rate swaps to effectively fix the interest rate
on $150.0 million through January 2004, and approximately $30.0 million through
January 2006. As it relates to the short-term, increases in interest expense
resulting from increasing inflation is anticipated to be less than future
increases in income before interest.
Item 8. Financial Statements and Supplementary Data.
The following are filed as a part of this report:
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets as of December 31, 2002 and 2001
Consolidated Statements of Income and Comprehensive Income for the
years ended December 31, 2002, 2001, and 2000
Consolidated Statements of Partners' Capital for the years ended
December 31, 2002, 2001, and 2000
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31, 2002 and 2001
- -------------------------------------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------------------------------------
ASSETS
Land, buildings, & equipment, net $ 1,947,072 $ 1,756,255
Undeveloped land and construction in progress 82,520 152,084
Cash and equivalents 6,236 10,127
Restricted cash 1,481 2,255
Accounts receivable, net 10,395 12,309
Prepaid expenses 7,560 7,072
Notes receivable 1,307 12,253
Deferred debt and lease costs 23,157 18,568
Investment in partially owned entities 36,265 31,594
Other assets 13,780 11,866
----------- -----------
$ 2,129,773 $ 2,014,383
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable $ 1,262,193 $ 1,191,791
Accounts payable 15,646 18,430
Accounts payable to affiliates 1,103 2,271
Accrued interest 13,974 11,485
Accrued expenses 6,516 4,520
Tenant deposits 3,201 3,607
Unearned rent 7,736 8,343
Other liabilities 4,497 1,296
----------- -----------
Total liabilities 1,314,866 1,241,743
----------- -----------
Redeemable units, at redemption value 366,156 347,604
Preferred units:
Series A Preferred Units 125,000 125,000
Series B Preferred Units 100,000 100,000
Series C Preferred Units 50,000 50,000
Partners' capital excluding redeemable units 177,338 151,439
Accumulated other comprehensive income (loss) (3,587) (1,403)
----------- -----------
$ 2,129,773 $ 2,014,383
----------- -----------
The accompanying notes are an integral part of these financial statements
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in Thousands, Except Per Unit Data)
For the Years Ended December 31, 2002, 2001 and 2000
- ----------------------------------------------------------------------------------------------------------------
2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------
Revenue:
Base rent $ 257,770 $ 249,954 $ 237,494
Base rent from affiliates 969 1,135 1,478
Percentage rent 3,524 3,578 5,644
Tenant recoveries 41,501 37,291 36,758
Other property related revenue 19,074 18,558 17,747
Other non-property related revenue 7,028 3,902 952
--------- --------- ---------
Total revenue 329,866 314,418 300,073
--------- --------- ---------
Property operating expenses:
General operating expenses 23,165 21,337 20,877
Salaries and benefits 14,434 15,524 15,694
Repairs and maintenance 32,427 28,953 28,459
Taxes, licenses, and insurance 29,000 25,895 22,649
General and administrative 15,496 10,858 8,392
Depreciation 73,292 64,204 59,048
Amortization 9,211 7,622 4,308
--------- --------- ---------
Total operating expenses 197,025 174,393 159,427
--------- --------- ---------
Income from operations 132,841 140,025 140,646
--------- --------- ---------
Other income (expense):
Interest expense (65,265) (71,397) (71,855)
Income from partially owned entities 1,968 1,510 1,700
Other (618) (15) --
Ineffectiveness of hedging activities (23) (15) --
Gains from sales of property 35,483 15,674 8,165
--------- --------- ---------
Total other expense (28,455) (54,243) (61,990)
--------- --------- ---------
Income before extraordinary items and discontinued operations 104,386 85,782 78,656
Extraordinary loss from early extinguishment of debt -- -- (418)
--------- --------- ---------
Income from continuing operations 104,386 85,782 78,238
--------- --------- ---------
Income from discontinued operations 451 617 887
Gain on disposal of discontinued operations 6,069 -- --
--------- --------- ----------
Income from discontinued operations 6,520 617 887
--------- --------- ----------
Net income 110,906 86,399 79,125
--------- --------- ----------
Dividends to preferred unitholders (24,438) (22,280) (19,813)
--------- --------- ----------
Net income available to common unitholders $ 86,468 $ 64,119 $ 59,312
--------- --------- ----------
Net income per common unit - basic:
Income from continuing operations $ 2.41 $ 1.98 $ 1.80
Income from discontinued operations 0.20 0.02 0.03
Extraordinary loss from early extinguishment of debt -- -- (0.01)
--------- --------- ----------
Net income per common unit - basic 2.61 2.00 1.82
--------- --------- ----------
Net income per common unit - diluted:
Income from continuing operations $ 2.39 $ 1.98 $ 1.80
Income from discontinued operations 0.20 0.02 0.03
Extraordinary loss from early extinguishment of debt -- -- (0.01)
--------- --------- ----------
Net income per common unit - diluted 2.59 2.00 1.82
--------- --------- ----------
Weighted average common units outstanding - basic 33,170 32,003 32,611
Weighted average common units outstanding - diluted 33,424 32,114 32,639
--------- --------- ----------
Net income available to common unitholders $ 86,468 $ 64,119 $ 59,312
Other comprehensive income (loss)
Unrealized income (loss) on cash flow hedging activities (2,184) (1,403) --
--------- --------- ----------
Comprehensive income $ 84,284 $ 62,716 $ 59,312
--------- --------- ----------
The accompanying notes are an integral part of these financial statements
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands)
For the Years Ended December 31, 2002, 2001 and 2000
- -----------------------------------------------------------------
Total
Partners'
Capital
- -----------------------------------------------------------------
Balance, December 31, 1999 $ 530,084
Cash contributions 10,120
Distributions (79,435)
Redemption of partnership units (37,937)
Net income 59,312
Issuance of limited partnership units 337
Allocations to redeemable units (37,559)
---------
Balance, December 31, 2000 444,922
Cash contributions 4,942
Issuance of preferred units 48,125
Distributions (102,916)
Net income 86,399
Change in fair value of hedging activity (1,403)
Allocations to redeemable units (55,033)
---------
Balance, December 31, 2001 425,036
Cash contributions 27,717
Issuance of common units of beneficial interest 17,551
Distributions (111,723)
Net income 110,906
Change in fair value of hedging activity (2,184)
Allocations to redeemable units (18,552)
---------
Balance, December 31, 2002 $ 448,751
---------
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31, 2002, 2001 and 2000
- --------------------------------------------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 110,906 $ 86,399 $ 79,125
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 82,835 72,357 63,884
Income from partially owned entities (1,968) (1,510) (1,700)
Gains from sales of property (41,552) (15,674) (8,165)
Other, net 83 1,064 1,932
Decrease (increase) in:
Restricted cash 774 224 155
Accounts receivable 1,871 425 (4,621)
Prepaid expenses (87) (2,986) (1,327)
Other assets (8,666) (6,874) (11,567)
Increase (decrease) in:
Accounts payable (3,952) (1,840) (13,059)
Accrued interest 2,489 (3,051) 1,635
Accrued expenses and other (1,143) 7,346 (1,622)
--------- --------- ---------
Net cash provided by operating activities 141,590 135,880 104,670
--------- --------- ---------
Cash flows from investing activities:
Acquisition of properties (150,808) -0- (25,535)
Development expenditures (13,088) (48,744) (21,693)
Development expenditures paid to an affiliate (36,908) (89,047) (78,066)
Tenant improvements (25,556) (21,278) (24,592)
Proceeds from (issuance of) notes receivable 10,946 9,859 (2,679)
Capital expenditures (13,984) (13,582) (16,194)
Proceeds from sales of property, net of selling costs 132,241 76,190 57,771
Distributions from partnerships 5,420 2,695 3,968
Capital contributions to partnerships (8,123) (4,764) (5,775)
--------- --------- ---------
Net cash used in investing activities (99,860) (88,671) (112,795)
--------- --------- ---------
Cash flows from financing activities:
Principal reductions of debt (73,248) (84,553) (40,346)
Proceeds from additional borrowings 151,285 48,988 193,518
Net change in revolving credit balances (52,989) 46,968 (13,940)
Proceeds from preferred unit issuance, net of expenses paid -0- 48,122 -0-
Proceeds from issuance of limited partnership units, net of expenses paid 17,551
Cash contributions 27,717 4,172 10,120
Redemption of partnership units -0- -0- (37,937)
Distributions to common and preferred unitholders (111,723) (102,916) (99,248)
Payment of mortgage financing cost (4,214) (1,794) (3,979)
Other, net -0- (344) (418)
--------- --------- ---------
Net cash provided by (used in) financing activities (45,621) (41,357) 7,770
--------- --------- ---------
Increase (decrease) in cash and equivalents (3,891) 5,852 (355)
Cash and equivalents, beginning of period 10,127 4,275 4,630
--------- --------- ---------
Cash and equivalents, end of period $ 6,236 $ 10,127 $ 4,275
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest, net of amounts capitalized $ 62,776 $ 74,448 $ 70,210
--------- --------- ---------
The accompanying notes are an integral part of these financial statements
1. Organization and Basis of Presentation
Organization - Colonial Realty Limited Partnership (the "Operating
Partnership" or "CRLP"), a Delaware limited partnership, is the operating
partnership of Colonial Properties Trust (the "Company"), an Alabama real estate
investment trust ("REIT") whose shares are listed on the New York Stock Exchange
("NYSE"). CRLP is engaged in the ownership, development, management, and leasing
of multifamily housing communities, office buildings, and retail malls and
centers. CRLP also owns certain parcels of land.
Federal Income Tax Status - The Company, which is considered a
corporation for federal income tax purposes, qualifies as a REIT for federal
income tax purposes and generally will not be subject to federal income tax to
the extent it distributes its REIT taxable income to its shareholders. REITs are
subject to a number of organizational and operational requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax on its taxable income at regular corporate rates.
The Company may be subject to certain state and local taxes on its income and
property.
In addition, the Company's financial statements include the operations
of a taxable REIT subsidiary, Colonial Properties Services, Inc. (CPSI), that is
not entitled to a dividends paid deduction and is subject to federal, state and
local income taxes. CPSI provides property development, leasing and management
services for third-party owned properties and administrative services to the
Company. The Company generally reimburses CPSI for payroll and other costs
incurred in providing services to the Company. All inter-company transactions
are eliminated in the accompanying consolidated financial statements. The
Company recognized tax expense of $0.6 million in 2002 related to the taxable
income of CPSI. No federal income taxes were recognized in 2001 and 2000.
Principles of Consolidation - The consolidated financial statements
include the Operating Partnership and Colonial Properties Services Limited
Partnership (in which CRLP holds 99% general and limited partner interests).
Investments in Partially Owned Entities - Entities in which CRLP owns,
directly or indirectly, a 50% or less interest and does not control are
reflected in the consolidated financial statements as investments accounted for
under the equity method. Under this method the investment is carried at cost
plus or minus equity in undistributed earnings or losses since the date of
acquisition.
2. Summary of Significant Accounting Policies
Land, Buildings, and Equipment--Land, buildings, and equipment is
stated at the lower of cost, less accumulated depreciation, or net realizable
value. CRLP reviews its long-lived assets and certain intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of the asset
to future net cash flows expected to be generated by the asset. If an asset is
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds the asset's fair value.
Assets to be disposed of are reported at the lower of their carrying amount or
fair value less cost to sell. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which range from 3 to 40
years. Repairs and maintenance are charged to expense as incurred. Replacements
and improvements are capitalized and depreciated over the estimated remaining
useful lives of the assets. When items of land, buildings, or equipment are sold
or retired, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is recorded in accordance with Statement of
Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or
Disposal on Long-Lived Assets.
Undeveloped Land and Construction in Progress--Undeveloped land and
construction in progress is stated at the lower of cost or net realizable value.
CRLP capitalizes all costs associated with land development and construction.
Capitalization of Interest--CRLP capitalizes interest during periods in
which property is undergoing development activities necessary to prepare the
asset for its intended use.
Cash and Equivalents--CRLP includes highly liquid marketable securities
and debt instruments purchased with a maturity of three months or less in cash
equivalents.
Restricted Cash--Cash which is legally restricted as to use consists
primarily of tenant deposits.
Valuation of Receivables--CRLP is subject to tenant defaults and
bankruptcies at its Office and Retail properties that could affect the
collection of outstanding receivables. In order to mitigate these risks, CRLP
performs credit review and analysis on all commercial tenants and significant
leases before they are executed. CRLP evaluates the collectibility of
outstanding receivables and records allowances as appropriate. CRLP's policy is
to record allowances for all outstanding invoices greater than 60 days past due
at its Office and Retail properties.
Due to the short-term nature of the leases at its Multifamily
properties, generally six months to one year, CRLP's exposure to tenant defaults
and bankruptcies is minimized. CRLP's policy is to record allowances for all
outstanding receivables greater than 30 days past due at its Multifamily
properties.
Deferred Debt and Lease Costs--Amortization of debt costs is recorded
using the straight-line method, which approximates the effective interest
method, over the terms of the related debt. Direct leasing costs are amortized
using the straight-line method over the terms of the related leases.
Derivative Instruments--All derivative instruments are recognized on
the balance sheet and measured at fair value. Derivatives that do not qualify
for hedge treatment under SFAS No. 133 (subsequently amended by SFAS Nos. 137
and 138), Accounting for Derivative Instruments and Hedging Activities, must be
recorded at fair value with gains or losses recognized in earnings in the period
of change. CRLP has certain involvement with derivative financial instruments
but does not use them for trading or speculative purposes. Interest rate cap
agreements and interest rate swaps are used to reduce the potential impact of
increases in interest rates on variable-rate debt.
CRLP formally documents all relationships between hedging instruments
and hedged items, as well as its risk management objective and strategy for
undertaking the hedge. This process includes specific identification of the
hedging instrument and the hedge transaction, the nature of the risk being
hedged and how the hedging instrument's effectiveness in hedging the exposure to
the hedged transaction's variability in cash flows attributable to the hedged
risk will be assessed. Both at the inception of the hedge and on an ongoing
basis, CRLP assesses whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows or fair
values of hedged items. CRLP discontinues hedge accounting if a derivative is
not determined to be highly effective as a hedge or has ceased to be a highly
effective hedge.
Revenue Recognition--Rental income attributable to leases is recognized
on a straight-line basis over the terms of the leases. Certain leases contain
provisions for additional rent based on a percentage of tenant sales. Percentage
rents are recognized in the period in which sales thresholds are met. Recoveries
from tenants for taxes, insurance, and other property operating expenses are
recognized in the period the applicable costs are incurred in accordance with
the terms of the related lease.
Other income received from long-term contracts signed in the normal
course of business are recognized in accordance with the terms of the specific
contract. Property management and development fee income is recognized when
earned for services provided to third parties.
Net Income Per Unit--Basic net income per unit is computed by dividing
the net income available to common unitholders by the weighted average number of
common units outstanding during the period. Diluted net income per unit is
computed by dividing the net income available to common unitholders by the
weighted average number of common units outstanding during the period, adjusted
for the assumed conversion of all potentially dilutive outstanding unit options.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Segment Reporting--Reportable segments are identified based upon
management's approach for making operating decisions and assessing performance
of CRLP.
Software Development--CRLP capitalizes certain internally developed
software costs. Capitalized internal software development costs are amortized
using the straight-line method over the estimated useful lives of the software.
Recent Pronouncements of the Financial Accounting Standards Board
(FASB)--In July 2001, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 141 clarifies the criteria to recognize
intangible assets separately from goodwill and requires the purchase method of
accounting for all acquisitions. Additionally, SFAS No. 141 requires in-place
operating leases carrying rents above or below market to be valued separately
from the real estate asset. The premium or discount resulting from this
valuation is amortized into rental revenue over the lives of the related leases.
SFAS No. 141 is effective for any business combination that is completed after
June 30, 2001. SFAS No. 142 requires that goodwill is no longer amortized but is
reviewed annually, or more frequently if impairment indicators arise, for
impairment. The amortization provisions of SFAS No. 142 apply to goodwill and
intangible assets acquired by CRLP after June 30, 2001. CRLP has adopted SFAS
No. 141 and 142, with no material impact to CRLP's financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment of Disposal on Long-Lived Assets that supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of. SFAS No. 144 provides additional guidance on the accounting for
impairments of long-lived assets and updates the accounting and reporting
requirements for discontinued operations. CRLP adopted SFAS No. 144 on January
1, 2002. In accordance with the provisions of SFAS No. 144, CRLP records
individual property sales as discontinued operations, unless CRLP maintains
significant continuing involvement with properties that have been sold.
In April 2002, FASB issued SFAS 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS 4, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the criteria
in Accounting Principles Board Opinion 30, will now be used to classify those
gains and losses. SFAS 64 amended SFAS 4, and is no longer necessary because
SFAS 4 has been rescinded. SFAS 44 and the amended sections of SFAS 13 are not
applicable to CRLP and therefore have no effect on CRLP's financial statements.
SFAS 145 is effective for fiscal years beginning after May 15, 2002 with early
application encouraged. The adoption of SFAS 145 will likely not have a material
effect on CRLP as the gains and losses on the extinguishment of debt are
generally not material to CRLP's financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS No.
123. SFAS No. 148 provides additional guidance for entities that elect to
voluntarily adopt the accounting provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 148 is effective for fiscal years ending
after December 15, 2002. CRLP has elected to adopt the accounting provisions of
SFAS No. 123 under the prospective method, which allows CRLP to apply the
recognition provisions of SFAS No. 123 to all employee awards granted, modified,
or settled after the beginning of the fiscal year in which the recognition
provisions are first applied. CRLP adopted SFAS No. 123 effective January 1,
2003.
On November 25, 2002, the FASB issued FASB Interpretation No. 45 (FIN
45), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, an Interpretation of
FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34.
FIN 45 clarifies the requirements of SFAS no. 5, Accounting for Contingencies,
relating to the guarantor's accounting for, and disclosure of, the issuance of
certain types of guarantees. The disclosure provisions of the Interpretation are
effective for financial statements that end after December 15, 2002. However,
the provisions for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after December 31,
2002, irrespective of a guarantor's year end. See Note 15, Guarantees and Other
Arrangements, for additional discussion of CRLP's financial guarantees as of
December 31, 2002. The initial adoption of this standard did not have an impact
on the financial condition or results of operations. Management does not believe
the provisions of this standard will have a material impact on future operations
of CRLP.
On January 15, 2003, FASB completed its redeliberations of the project
related to the consolidation of variable interest entities which culminated with
the issuance of FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities. FIN 46 states that if a business enterprise has a controlling
financial interest in a variable interest entity, the assets, liabilities and
results of the activities of the variable interest entity should be included in
the consolidated financial statements of the business enterprise. This
Interpretation explains how to identify variable interest entities and how an
enterprise assesses its interests in a variable interest entity to decide
whether to consolidate that entity. FIN 46 also requires existing unconsolidated
variable interest entities to be consolidated by their primary beneficiaries if
the entities do not effectively disperse risks among parties involved. Variable
interest entities that effectively disperse risks will not be consolidated
unless a single party holds an interest or combination of interests that
effectively recombines risks that were previously dispersed. This Interpretation
applies immediately to variable interest entities created after January 31,
2003, and to variable interest entities in which an enterprise obtains an
interest after that date. It applies in the first fiscal year or interim period
beginning after June 15, 2003, to variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
Reclassifications--Certain reclassifications have been made to the 2000
and 2001 financial statements in order to conform them to the 2002 financial
statement presentation. These reclassifications have no impact on partners'
capital or net income.
3. Property Acquisitions and Dispositions
CRLP acquired three office properties during 2002 at an aggregate cost
of $150.8 million, no operating properties in 2001, and one retail property
during 2000 at an aggregate cost $25.5 million. CRLP funded these acquisitions
with cash proceeds from its dispositions of assets, public offerings of debt and
issuance of limited partnership units (see Notes 8 and 11), advances on bank
lines of credit, and cash from operations.
The properties acquired during 2002 and 2000 are listed below:
Effective
Location Acquisition Date
-----------------------------------
Office Properties:
901 Maitland Center Orlando, FL March 1, 2002
Colonnade Birmingham, AL May 1, 2002
Heathrow International Business Center Orlando, FL August 1, 2002
Retail Properties:
Temple Mall Temple, TX July 1, 2000
Results of operations of these properties, subsequent to their
respective acquisition dates, are included in the consolidated financial
statements of CRLP. The cash paid to acquire these properties is included in the
statements of cash flows. The acquisitions during 2002 and 2000 are comprised of
the following:
(in thousands) 2002 2001 2000
- --------------------------------------------------------------------------------
Assets purchased:
Land, buildings, and equipment $ 196,009 $ - $ 26,218
Other assets 465 - 472
- --------------------------------------------------------------------------------
196,474 - 26,690
Notes and mortgages assumed (43,993) - -
Other liabilities assumed or recorded (1,673) - (818)
Issuance of limited partnership units
of Colonial Realty Limited Partnership - - (337)
- --------------------------------------------------------------------------------
Cash paid $ 150,808 $ - $ 25,535
- --------------------------------------------------------------------------------
In addition to the acquisition of the operating mentioned above, CRLP
acquired certain parcels of land to be utilized for future development
opportunities.
During 2002, CRLP disposed of eight multifamily properties representing
1,988 units, two office properties representing 104,496 square feet, and three
retail properties representing 449,443 square feet. The multifamily, office, and
retail properties were sold for a total sales price of $138.6 million, which was
used to repay a portion of the borrowings under CRLP's unsecured line of credit
and to support CRLP's investment activities.
During 2002, CRLP sold interests in two retail properties to joint
ventures formed by CRLP and unrelated parties. CRLP continues manage the
properties and accounts for its interest in these joint ventures as equity
investments (see Note 6).
During 2001, CRLP disposed of six multifamily properties representing
1,373 units, one office property representing 34,357 square feet, and two retail
properties representing 304,168 square feet. The multifamily, office, and retail
properties were sold for a total sales price of $83.5 million, of which $4.5
million was used to repay a secured loan, $11.6 million was issued as a note
receivable, and the remaining proceeds were used to repay a portion of the
borrowings under CRLP's unsecured line of credit and to support CRLP's
investment activities.
During 2000, CRLP disposed of five multifamily properties representing
1,132 units and one retail property representing 165,684 square feet. The
multifamily and retail properties were sold for a total sales price of $67.6
million, of which $17.3 million was used to repay four secured loans, $7.2
million was issued as a note receivable, and remaining proceeds were used to
repay a portion of the borrowings under CRLP's unsecured line of credit, fund
additional acquisitions, and to support CRLP's investment activities.
During 2000, CRLP sold four of the multifamily properties to a joint
venture formed by CRLP and an unrelated party. CRLP retained a 15% interest in
the joint venture and continued to manage the properties. CRLP accounts for its
15% interest in this joint venture as an equity investment (see Note 6).
4. Land, Buildings, and Equipment
Land, buildings, and equipment consists of the following at December
31, 2002 and 2001:
(in thousands)
Useful Lives 2002 2001
-------------------------------------------- --------------------
Buildings 40 years $ 1,793,284 $ 1,635,898
Furniture and fixtures 7 years 56,973 49,965
Equipment 3 or 5 years 31,864 25,706
Land improvements 10 or 15 years 55,668 47,659
Tenant improvements Life of lease 107,041 76,919
------------------ -------------------
2,044,830 1,836,147
Accumulated depreciation (351,164) (310,447)
------------------ -------------------
1,693,666 1,525,700
Land 253,406 230,555
------------------ -------------------
$ 1,947,072 $ 1,756,255
================== ===================
5. Undeveloped Land and Construction in Progress
During 2002, CRLP completed the construction of two multifamily
development projects, one office development project, one retail development
project, and one retail re-development project at a combined total cost of
$138.0 million. The completed development and re-development projects are as
follows:
Total
Completed Developments and Re-developments: Location Units/Sq.Ft Cost
-------------- -------- --------
Multifamily Properties
Colonial Grand at TownPark - Lake Mary Orlando, FL 456 $ 37,737
Colonial Village at TownPark - Sarasota Sarasota, FL 272 21,666
-------- --------
728 59,403
-------- --------
Office Properties
Colonial Center at TownPark 600 Orlando, FL 199,585 27,558
-------- --------
Retail Properties
Colonial Promenade Hoover Birmingham, AL 166,000 16,625
Parkway Place (1) (re-development) Huntsville, AL 630,000 34,407
-------- --------
796,000 51,032
-------- --------
Total $137,993
========
(1) Property is owned through a joint venture. Costs presented are 45% of
total project costs, and square footage represents the entire property.
CRLP currently has two active development projects and three mixed-use
projects in progress, and various parcels of land available for expansion and
construction. Undeveloped land and construction in progress is comprised of the
following at December 31, 2002:
Total Costs
Units/ Estimated Capitalized
Square Estimated Total Costs To Date
Feet Completion (in thousands) (in thousands)
----------- ------------ --------------- ----------------
Office Projects:
Colonial Center at TownPark 200 155,000 2003 $ 21,926 $ 15,835
Retail Projects:
Colonial Promenade Trussville Phase II 65,000 2003 8,400 2,084
Mixed Use Projects Infrastructure
Colonial TownPark - Lake Mary 33,168 29,458
Colonial TownPark - Sarasota 6,410 4,969
Colonial Center at Mansell 10,794 9,863
Other Projects and Undeveloped Land 20,311
----------------
$ 82,520
================
Interest capitalized on construction in progress during 2002, 2001, and
2000 was $8.1 million, $10.6 million, and $9.6 million, respectively.
6. Investment in Partially Owned Entities
Investment in partially owned entities at December 31, 2002 and 2001
consists of the following:
(in thousands)
Percent
Owned 2002 2001
-------- -------- -------
Multifamily:
CMS/Colonial Joint Venture I 15.00% $ 2,142 $ 2,195
CMS/Colonial Joint Venture II 15.00% 735 745
-------- -------
2,877 2,940
Office:
600 Building Partnership, Birmingham, AL 33.33% (23) (26)
Retail:
Orlando Fashion Square Joint Venture,
Orlando, FL 50.00% 19,465 20,783
Parkway Place Limited Partnership,
Huntsville, AL 45.00% 11,375 8,052
Colonial Promenade Madison, Huntsville, AL 25.00% 2,464 (154)
Highway 150, LLC, Birmingham, AL 10.00% 85 0
-------- -------
33,389 28,681
Other:
Colonial/Polar-BEK Management Company,
Birmingham, AL 50.00% 41 39
NRH Enterprises, LLC, Birmingham, AL 20.00% 26 0
E-2 Data Technology, Birmingham, AL 50.00% (45) (40)
-------- -------
22 (1)
-------- -------
$ 36,265 $ 31,594
======== =======
(1) CRLP maintained a 50% ownership at December 31, 2001.
During December 2002, CRLP sold 90% of its interest in Colonial Promenade Hoover
for a total sales price of $20.5 million, and formed the Highway 150, LLC, in
which CRLP maintains 10% ownership and manages the property under contract with
the Highway 150 LLC. Additionally during December 2002, CRLP sold 25% of its
interest in the Colonial Promenade Madison Joint Venture for $3.2 million. Prior
to the sale of this interest, CRLP held a 50% interest in the joint venture.
Therefore, CRLP now maintains 25% ownership of the property and continues to
manage the property. The proceeds from both of the joint venture transactions
were used to repay a portion of the amount outstanding under CRLP's unsecured
line of credit.
In October 1998, CRLP sold a 50% interest in our Orlando Fashion Square
retail property located in Orlando, Florida to a third party. Subsequently, CRLP
entered into a joint venture agreement with the third party, and the joint
venture entered into an agreement with CRLP relating to the management of the
property. The joint venture agreement gives the third party the right, which
became effective December 28, 2001, to convert its 50% interest in the property
to CRLP's common units if specified terms and conditions are met. The conversion
value of the interest would be determined at the time of conversion in
accordance with the procedures set forth in the joint venture agreement, and
would be net of the third party's pro rata share of any indebtedness secured by
the property. The terms and conditions also include an "accretion threshold", as
defined, which must be met. At the time of the original transaction, CRLP
considered the terms of the agreement in their entirety (including the
conversion right, the accretion threshold, and the conversion value
determination procedures) and assessed whether the third party could compel CRLP
to repurchase the 50% interest sold. CRLP concluded that the likelihood of a
compelled repurchase was remote, and accordingly accounted for the transaction
as a sale.
On May 31, 2002, the 50% joint venture partner elected to exercise its
option to convert its 50% interest in the property to CRLP's common units. In
accordance with the terms of the joint venture agreement, CRLP negotiated with
its joint venture partner and were unable to reach an agreement. Therefore, on
September 11, 2002, the joint venture partner elected to withdraw its conversion
election and it continues to own its 50% interest.
Combined financial information for CRLP's investments in partially owned
entities for 2002 and 2001 follows:
December 31,
---------------------------------
2002 2001
---------------------------------
Balance Sheet
Assets
Land, building, & equipment, net $ 347,436 $ 243,733
Construction in progress 193 54,907
Other assets 11,028 9,878
---------------------------------
Total assets $ 358,657 $ 308,518
=================================
Liabilities and Partners' Equity
Notes payable (1) $ 251,908 $ 213,056
Other liabilities 3,950 7,647
Partners' Equity 102,799 87,815
---------------------------------
Total liabilities and partners' capital $ 358,657 $ 308,518
=================================
Statement of Operations
(for the year ended)
Revenues $ 42,943 $ 44,124
Operating expenses (17,960) (18,304)
Interest expense (13,011) (12,969)
Depreciation, amortization and other (7,689) (8,787)
---------------------------------
$ 4,283 $ 4,064
=================================
(1) The Company's portion of indebtedness, as calculated based on ownership
percentage, at December 31, 2002 and 2001 is $78.3 million and $67.3
million, respectively.
7. Segment Information
CRLP is organized into, and manages its business based on the
performance of three separate and distinct operating divisions: Multifamily,
Office, and Retail. Each division has a separate management team that is
responsible for acquiring, developing, managing, and leasing properties within
each division. The applicable accounting policies of the segments are the same
as those described in the "Summary of Significant Accounting Policies." The pro
rata portion of the revenues, net operating income (NOI), and assets of the
partially-owned entities and joint ventures that CRLP has entered into are
included in the applicable segment information. Additionally, the revenues and
NOI of properties sold that are classified as discontinued operations are also
included in the applicable segment information. In reconciling the segment
information presented below to total revenues, income from continuing
operations, and total assets, investments in partially-owned entities and joint
ventures are eliminated as equity investments and their related activity are
reflected in the consolidated financial statements as investments accounted for
under the equity method and discontinued operations are reported separately.
Management evaluates the performance of its segments and allocates resources to
them based on net operating income (NOI). NOI consists of revenues in excess of
general operating expenses, salaries and wages, repairs and maintenance, taxes,
licenses, and insurance. Segment information and the reconciliation of total
segment revenues to total revenues, total segment NOI to income from continuing
operations, and total divisional assets to total assets, for the years ended
December 31, 2002, 2001, and 2000, is presented below:
For the Year Ended
---------------------- ------------------ -----------------
(in thousands) 2002 2001 2000
---------------------- ------------------ -----------------
Revenues:
Divisional Revenues
Multifamily $ 104,160 $ 119,309 $ 118,807
Office 75,913 57,348 50,225
Retail 155,368 147,634 143,330
---------------------- ------------------ -----------------
Total Divisional Revenues: 335,441 324,291 312,362
Partially-owned subsidiaries (13,743) (13,061) (12,656)
Unallocated corporate revenues 9,434 5,082 2,648
Discontinued operations revenues (1,266) (1,894) (2,281)
---------------------- ------------------ -----------------
Total Consolidated Revenues: $ 329,866 $ 314,418 $ 300,073
---------------------- ------------------ -----------------
NOI:
Divisional NOI
Multifamily $ 68,145 $ 80,478 $ 79,756
Office 53,806 40,893 35,346
Retail 108,335 105,043 103,583
---------------------- ------------------ -----------------
Total Divisional NOI: 230,286 226,414 218,685
Partially-owned subsidiaries (7,956) (7,802) (7,478)
Unallocated corporate revenues 9,434 5,082 2,648
Discontinued operations NOI (800) (1,135) (1,459)
General and administrative expenses (15,496) (10,858) (8,392)
Depreciation (73,292) (64,204) (59,048)
Amortization (9,211) (7,622) (4,308)
Other (124) 150 (2)
---------------------- ------------------ -----------------
Income from operations 132,841 140,025 140,646
---------------------- ------------------ -----------------
Total other expense (28,455) (54,243) (61,990)
---------------------- ------------------ -----------------
Income from continuing operations $ 104,386 $ 85,782 $ 78,656
---------------------- ------------------ -----------------
(in thousands)
Assets:
Divisional Assets
Multifamily $ 645,840 $ 723,447 $ 752,249
Office 594,795 377,255 329,315
Retail 906,555 905,964 869,351
---------------------- ------------------ -----------------
Total Divisional Assets: 2,147,190 2,006,666 1,950,915
Partially-owned subsidiaries (116,375) (106,191) (94,228)
Unallocated corporate assets (1) 98,958 113,908 86,860
---------------------- ------------------ -----------------
$ 2,129,773 $ 2,014,383 $1,943,547
---------------------- ------------------ -----------------
(1) Includes CRLP's investment in joint ventures of $36,265, $31,594, and
$28,129 as of December 31, 2002, 2001, and 2000, respectively. (see Note 6)
8. Notes and Mortgages Payable
Notes and mortgages payable at December 31, 2002 and 2001 consist of
the following:
(in thousands)
2002 2001
----------------- -----------------
Revolving credit agreement $ 208,270 $ 261,365
Mortgages and other notes:
2.00% to 4.00% 213,877 0
4.01% to 6.00% 0 162,153
6.01% to 7.50% 584,423 463,390
7.51% to 9.00% 255,623 303,542
9.01% to 10.25% 0 1,341
----------------- -----------------
$ 1,191,791 $ 1,262,193
================= =================
As of December 31, 2002, CRLP has an unsecured bank line of credit
providing for total borrowings of up to $320 million. This line of credit
agreement bears interest at LIBOR plus a spread calculated from a pricing grid
based on CRLP's unsecured debt ratings. Based on CRLP's debt ratings at December
31, 2002, the spread was 105 basis points. The line of credit is renewable in
November 2005, and provides for a one-year extension. The line of credit
agreement includes a competitive bid feature that will allow CRLP to convert up
to $160 million under the line of credit to a fixed rate, for a fixed term not
to exceed 90 days. The credit facility is primarily used by CRLP to finance
property acquisitions and developments and has an outstanding balance at
December 31, 2002, of $208.3 million. The interest rate of this short-term
borrowing facility, including the competitive bid balance, is 2.38% and 3.08% at
December 31, 2002 and 2001, respectively.
During 2002 and 2001, CRLP, completed a public offering of unsecured
medium-term debt securities and a public offering of senior notes collectively
totaling $110.0 million. The proceeds of the offerings were used to fund
acquisitions, development expenditures, repay balances outstanding on CRLP's
revolving credit facility, repay certain notes and mortgages payable, and for
general corporate purposes. Details relating to these debt offerings are as
follows:
Gross
Type of Proceeds
Issue Date Note Maturity Rate (in thousands)
- ----------------- --------------- -------------------------- ---------------
December, 2001 Medium-term December, 2006 7.46% $ 10,000
August, 2002 Senior August, 2012 6.88% 100,000
---------------
$ 110,000
---------------
Additionally during 2002, CRLP secured mortgage financing on three
properties, from which CRLP received proceeds of $52.8 million. At December 31,
2002, CRLP had $878.9 million in unsecured indebtedness including balances
outstanding on its bank line of credit and certain other notes payable. The
remainder of CRLP's notes and mortgages payable are collateralized by the
assignment of rents and leases of certain properties and assets with an
aggregate net book value of $472.8 million at December 31, 2002.
The aggregate maturities of notes and mortgages payable, including
CRLP's line of credit at December 31, 2002, are as follows:
(in thousands)
2003 $ 107,675
2004 129,040
2005 299,916
2006 74,891
2007 174,488
Thereafter 476,183
------------------
$ 1,262,193
==================
Based on borrowing rates available to CRLP for notes and mortgages payable with
similar terms, the estimated fair value of CRLP's notes and mortgages payable at
December 31, 2002 and 2001 was approximately $1.26 billion and $1.16 billion,
respectively.
Certain loan agreements of CRLP contain restrictive covenants, which,
among other things, require maintenance of various financial ratios. At December
31, 2002, CRLP was in compliance with those covenants.
9. Derivative Instruments
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended and interpreted, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. As required by SFAS No.
133, CRLP records all derivatives on the balance sheet at fair value. The
accounting for changes in the fair value of derivatives depends on the intended
use of the derivative and the resulting designation. Derivatives used to hedge
the exposure to changes in the fair value of an asset, liability, or firm
commitment attributable to a particular risk, such as interest rate risk, are
considered fair value hedges. Derivatives used to hedge the exposure to
variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair
value of the derivative and the hedged item related to the hedged risk are
recognized in earnings. For derivatives designated as cash flow hedges, the
effective portion of changes in the fair value of the derivative is initially
reported in other comprehensive income and subsequently reclassified to earnings
when the hedged transaction affects earnings, and the ineffective portion of
changes in the fair value of the derivative is recognized directly in earnings.
CRLP assesses the effectiveness of each hedging relationship by comparing the
changes in fair value or cash flows of the derivative hedging instrument with
the changes in fair value or cash flows of the designated hedged item or
transaction.
CRLP's objective in using derivatives is to add stability to interest
expense and to manage its exposure to interest rate movements or other
identified risks. To accomplish this objective, CRLP primarily uses interest
rate swaps and caps as part of its cash flow hedging strategy. Interest rate
swaps designated as cash flow hedges involve the receipt of variable-rate
amounts in exchange for fixed-rate payments over the life of the agreements
without exchange of the underlying principal amount. During 2002, such
derivatives were used to hedge the variable cash flows associated with existing
variable-rate debt and existing lines of credit.
CRLP has entered into several different hedging transactions in an
effort to manage its exposure to changes in interest rates. The following table
summarizes the notional values, fair values and other characteristics of CRLP's
derivative financial instruments at December 31, 2002. The notional value at
December 31, 2002 provides an indication of the extent of CRLP's involvement in
these instruments at that time, but does not represent exposure to credit,
interest rate, or market risk.
Interest Fair Value
Product Type Notional Value Rate Maturity At December 31, 2002
(in thousands)
- ------------------------------------- ------------------------- ------------- -------------- -------------------------
Interest Rate SWAP, Cash Flow $30.2 - $27.7 million 5.932% 1/01/06 $ (3,117)
Interest Rate SWAP, Cash Flow $50.0 million 2.319% 1/02/03 (38)
Interest Rate SWAP, Cash Flow $25.0 million 2.430% 1/01/03 (21)
Interest Rate SWAP, Cash Flow $50.0 million 2.113% 1/02/04 (370)
Interest Rate SWAP, Cash Flow $50.0 million 1.637% 1/02/04 (131)
Interest Rate SWAP, Cash Flow $50.0 million 1.615% 1/02/04 (119)
Interest Rate SWAP, Fair Value $50.0 million 5.015% 7/26/04 2,633
Interest Rate CAP, Cash Flow $21.1 million 6.850% 6/29/04 1
Interest Rate CAP, Cash Flow $17.9 million 6.850% 7/06/04 1
Interest Rate CAP, Cash Flow $30.4 million 11.200% 6/30/03 -
Interest Rate CAP, Cash Flow $17.1 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $27.0 million 4.840% 4/1/04 1
Interest Rate CAP, Cash Flow $8.7 million 4.840% 4/1/04 -
CRLP does not use derivatives for trading or speculative purposes.
Further, CRLP has a policy of only entering into contracts with major financial
institutions based upon their credit ratings and other factors. When viewed in
conjunction with the underlying and offsetting exposure that the derivatives are
designed to hedge, CRLP has not sustained a material loss from those instruments
nor does it anticipate any material adverse effect on its net income or
financial position in the future from the use of derivatives.
At December 31, 2002, derivatives with a fair value of $2.6 million
were included in other assets and derivatives with a fair value of $3.8 million
were included in other liabilities. The change in net unrealized gains/losses of
$3.6 million in 2002 for derivatives designated as cash flow hedges is
separately disclosed in the statement of changes in partners' capital. Hedge
ineffectiveness of $23,000 on cash flow hedges was recognized in other income
(expense) during 2002.
Amounts reported in accumulated other comprehensive income related to
derivatives will be reclassified to interest expense as interest payments are
made on CRLP's variable-rate debt. The change in net unrealized losses on cash
flow hedges reflects a reclassification of $2.2 million of net unrealized losses
from accumulated other comprehensive income (loss) to interest expense during
2002. During 2003, CRLP estimates that an additional $2.3 million will be
reclassified to earnings of the current balance held in accumulated other
comprehensive income (loss).
9. Capital Structure
At December 31, 2002 the Company controlled CRLP as the sole general
partner and as the holder of 67.9% of the common units of CRLP and 63.6% of the
preferred units (Series A Preferred Units and Series C Preferred Units). The
limited partners of CRLP who hold common units, are those persons (including
certain officers and directors) who, at the time of the Initial Public Offering,
elected to hold all or a portion of their interest in the form of units rather
than receiving units of common stock of CRLP, or individuals from whom the
Company acquired certain properties, who elected to receive units in exchange
for the properties. Each unit may be redeemed by the holder thereof for either
one unit of Common Stock or cash equal to the fair market value thereof at the
time of such redemption, at the option of CRLP. Additionally, in 1999, CRLP
issued $100 million of Series B Cumulative Redeemable Perpetual Preferred Units
(Series B Units) in a private placement, that are exchangeable for Series B
Preferred Shares of the Company after ten years at the option of the holders of
the Series B Units. (See Note 11)
The Board of Trustees of the Company manages CRLP by directing the
affairs of CRLP. The Company's interests in CRLP entitle it to share in cash
distributions from, and in the profits and losses of, CRLP in proportion to the
Company's percentage interest therein and entitle the Company to vote on all
matters requiring a vote of the limited partners.
In 1999, the Company's Board of Trustees authorized a common unit
repurchase program under which the Company could repurchase up to $150 million
of its currently outstanding common units from time to time at the discretion of
management in open market and negotiated transactions. The Company repurchased
5,623,150 units at an all-in cost of approximately $150 million, which
represents an average purchase price of $26.70. These units are included within
treasury stock, which is a reduction of partner's capital.
11. Cash Contributions
On February 28, 2002, the Company entered into a transaction in which
560,380 common units of beneficial interest of the Company's common units were
issued at $33.37 per unit, resulting in net proceeds of $17.6 million to the
Company, which were used to repay outstanding balances under the Company's
unsecured line of credit. Related to this offering, Salomon Smith Barney
deposited 260,710 units into The Equity Focus Trust REIT Portfolio Series,
2002-A, a newly formed unit investment trust, and 299,670 units were deposited
into Cohen & Steers Quality Income Realty Fund, Inc. Subsequently, the Company
transferred the net proceeds received to CRLP, which were used to repay a
portion of the outstanding balance on CRLP's unsecured line of credit.
During June 2001, CRLP issued 2,000,000 preferred units of beneficial
interest (Series C Preferred Units). The Series C Preferred Units pay a
quarterly dividend at 9.25% per annum and may be redeemed by CRLP on or after
June 19, 2006. The Series C Preferred Units have no stated maturity, sinking
fund or mandatory redemption and are not convertible into any other securities
of CRLP. The Series C Preferred Units have a liquidation preference of $25.00
per unit. The net proceeds of the offering were approximately $48.1 million and
were used to repay outstanding balances under CRLP's unsecured line of credit.
During January 2000, CRLP initiated and completed an Executive Unit
Purchase Program (Unit Purchase Program), in which the Board of Trustees and
certain members of the Company's management were able to purchase 425,925 Units
of CRLP. Under the Unit Purchase Program, the Board of Trustees and the members
of management obtained full-recourse personal loans from an unrelated financial
institution, in order to purchase the Units. The Units are pledged as collateral
against the loans. In addition, CRLP has provided a guarantee to the unrelated
financial institution for the personal loans. The value of the Units purchased
under the Unit Purchase Program was approximately $10 million.
12. Employee Benefits
Employees of CRLP hired prior to January 1, 2002 participate in a
noncontributory defined benefit pension plan designed to cover substantially all
employees. Pension expense includes service and interest costs adjusted by
actual earnings on plan assets and amortization of prior service cost and the
transition amount. The benefits provided by this plan are based on years of
service and the employee's final average compensation. CRLP's policy is to fund
the minimum required contribution under ERISA and the Internal Revenue Code.
The table below presents a summary of pension plan status as of
December 31, 2002 and 2001, as it relates to the employees of CRLP.
(amounts in thousands) 2002 2001
- ------------------------------------------------------------------- --------------- --------------
Actuarial present value of accumulated benefit obligation
including vested benefits of $4,677 and $3,101
at December 31, 2002 and 2001, respectively $ 5,589 $ 3,826
Actuarial present value of projected benefit obligations
at year end $ 7,605 $ 6,062
Fair value of assets at year end $ 3,970 $ 4,063
Accrued pension cost $ 2,385 $ 2,077
Net pension cost for the year $ 724 $ 829
Actuarial assumptions used in determining the actuarial present value of
accumulated benefit obligations at January 1, 2002, are as follows:
2002 2001
--------------- --------------
Weighted-average interest rate 6.50% 7.25%
- --------------------------------------------------------------------------------------------------------
Increase in future compensation levels 4.00% 4.00%
CRLP participates in a salary reduction profit sharing plan covering
substantially all employees. This plan provides, with certain restrictions, that
employees may contribute a portion of their earnings with CRLP matching one-half
of such contributions, solely at CRLP discretion. Contributions by CRLP were
approximately $415,000, $321,000, and $313,000 for the years ended December 31,
2002, 2001 and 2000, respectively.
13. Leasing Operations
CRLP is in the business of leasing and managing multifamily, office,
and retail property. For properties owned by CRLP, minimum rentals due in future
periods under noncancelable operating leases extending beyond one year at
December 31, 2002, are as follows:
(in thousands)
-----------------
2003 $ 180,796
2004 166,039
2005 141,920
2006 116,623
2007 89,163
Thereafter 285,586
-----------------
$ 980,127
=================
The noncancelable leases are with tenants engaged in retail and office
operations in Alabama, Georgia, Florida, North Carolina, South Carolina,
Tennessee, Texas, and Virginia. Performance in accordance with the lease terms
is in part dependent upon the economic conditions of the respective areas. No
additional credit risk exposure relating to the leasing arrangements exists
beyond the accounts receivable amounts shown in the December 31, 2002 balance
sheet. Leases with tenants in multifamily properties are generally for one year
or less and are thus excluded from the above table. Substantially all of CRLP's
land, buildings, and equipment represent property leased under the above and
other short-term leasing arrangements.
Rental income for 2002, 2001, and 2000 includes percentage rent of $3.5
million, $3.6 million, and $5.7 million, respectively. This rental income was
earned when certain retail tenants attained sales volumes specified in their
respective lease agreements.
14. Guarantees and Other Arrangements
During January 2000, CRLP initiated and completed an Executive Unit
Purchase Program (Unit Purchase Program), in which the Board of Trustees and
certain members of CRLP's management were able to purchase 425,925 Units of
CRLP. Under the Unit Purchase Program, the Board of Trustees and the members of
management obtained full-recourse personal loans from an unrelated financial
institution, in order to purchase the Units. The Units, which have a market
value of approximately $13.8 million at December 31, 2002, are pledged as
collateral against the loans. CRLP has provided a guarantee to the unrelated
financial institution for the personal loans, which mature in January 2005. The
value of the Units purchased under the Unit Purchase Program was approximately
$10.0 million. At December 31, 2002, no liability was recorded on CRLP's books
for the guarantee.
In August 2001, CRLP entered into an agreement to provide services to
an unrelated third party in connection with the third party's development of a
$30.0 million multi-family property in North Carolina. CRLP was engaged to serve
as development consultant and leasing and management agent for this property. In
addition, for a fee, CRLP is serving as a guarantor for a $3.3 million working
capital loan obtained by the three principals of the third party entity, which
loan is primarily collateralized jointly and severally by the personal assets of
the borrowers, and matures in August 2003. At December 31, 2002, no liability
was recorded on CRLP's books for the guarantee. CRLP has a right of first
refusal to purchase the property should the third party elect to sell. Over the
term of the agreement, CRLP expects to earn market fees for its services.
During August 2002, in connection with the purchase of Heathrow
International Business Center, CRLP entered into an agreement to acquire one new
office building that contains 192,000 square feet. The closing for this
acquisition is anticipated to occur upon the earlier of August 2005 or at such
time that the seller achieves certain leasing targets for the property. The
purchase price will be determined based upon the percentage of gross leasable
area actually leased and the net operating income generated by the leases at the
time of acquisition.
During December 2002, CRLP entered into an agreement with an unrelated
third party in connection with the third party's development of a $23.5 million
multi-family property in Tampa, Florida. CRLP has agreed to loan approximately
$4.0 million, which represents 17.0% of the development costs to the third party
during the development of the property. Under the agreement, the balance of the
loan matures in December 2007. At December 31, 2002, no amount had been funded
to the unrelated third party and CRLP has no liability recorded on its books for
the potential loan amount. CRLP has a right of first refusal to purchase the
property should the third party elect to sell.
During December 2002, CRLP sold 90% of its interest in Colonial
Promenade Hoover for a total sales price of $20.5 million, and formed the
Highway 150 LLC, in which CRLP maintains 10% ownership and manages the property.
In connection with the formation of the Highway 150 LLC, CRLP executed a
guaranty, pursuant to which CRLP would serve as a guarantor of $1.0 million of
the debt related to the joint venture, which is collateralized by the Colonial
Promenade Hoover retail property. CRLP's maximum guarantee of $1.0 million may
be requested by the lender, only after all of the rights and remedies available
under the associated note and security agreements have been exercised and
exhausted. At December 31, 2002, the total amount of debt of the joint venture
was approximately $17.8 million and matures in December 2012. At December 31,
2002, no liability was recorded on CRLP's books for the guarantee.
In connection with the contribution of certain assets to CRLP, certain
partners of CRLP have guaranteed indebtedness of CRLP totaling $27.3 million at
December 31, 2002. The guarantees are held in order for the contributing
partners to maintain their tax deferred status on the contributed assets. These
individuals have not been indemnified by CRLP. Additionally, certain unitholders
of CRLP and trustees of the Company have guaranteed indebtedness of CRLP
totaling $0.5 million at December 31, 2002. CRLP has indemnified these
individuals from their guarantees of this indebtedness.
15. Related Party Transactions
CRLP has used affiliated construction companies to manage and oversee
certain of its development, re-development and expansion projects. The
affiliated construction companies utilized by CRLP are headquartered in Alabama
and have completed numerous projects within the Sunbelt region of the United
States. Through the use of market survey data, CRLP negotiates the contract
price of each development, re-development or expansion project with the
affiliated construction companies and presents each project to the Company's
Management Committee for review and approval. Upon approval by the Management
Committee, the Management Committee presents each project to the independent
members of the Executive Committee of the Board of Trustees for final approval.
CRLP paid $1.6 million, $33.6 million, and $46.7 million for property
development costs to Lowder Construction Company, Inc., a construction company
owned by The Colonial Company (TCC) in which Mr. Thomas H. Lowder (Chairman of
the Board and Chief Executive Officer) and Mr. James K. Lowder (trustee) each
own a 50% interest, during the years ended December 31, 2002, 2001 and 2000,
respectively. Of these amounts, $1.5 million, $30.7 million, and $43.2 million
was then paid to unaffiliated subcontractors for the construction of these
development and expansion projects during 2002, 2001 and 2000, respectively.
CRLP had outstanding construction invoices and retainage payable to Lowder
Construction Company, Inc. totaling $0.4 million at December 31, 2001. There
were no outstanding construction invoices or retainage payable to Lowder
Construction Company, Inc. at December 31, 2002. In each of the following
transactions, the independent members of the Executive Committee approved such
transactions unanimously.
CRLP also paid $35.3 million, $67.0 million, and $31.3 million for
property construction costs to Brasfield & Gorrie General Contractors, Inc.
(B&G), a construction company partially-owned by Mr. M. Miller Gorrie (trustee)
during the years ended December 31, 2002, 2001 and 2000, respectively. Of these
amounts, $32.1 million, $60.3 million, and $28.2 million was then paid to
unaffiliated subcontractors for the construction of these development projects
during 2002, 2001 and 2000, respectively. CRLP had outstanding construction
invoices and retainage payable to this construction company totaling $1.8
million at December 31, 2001. There were no outstanding construction invoices or
retainage payable to B&G at December 31, 2002.
In March 2002, CPSI acquired a 20% interest in three aircraft from NRH
Enterprises, L.L.C., (NRH) an entity in which Mr. Harold Ripps (trustee)
indirectly has an approximate 33% interest, for approximately $1.4 million.
Additionally, CPSI entered into a joint ownership agreement with the other
owners of the aircraft, including NRH, under which CPSI pays NRH, as agent for
all of the owners of the aircraft, a monthly fee of $10,000, plus $1,400 per
hour of Company flight time, to cover the operating expenses of the aircraft.
Further, CPSI entered into an aircraft services agreement with MEDJET
Assistance, L.L.C., (MEDJET) an entity in which Mr. Ripps indirectly has an
approximate 40% interest. Under this agreement, CPSI is obligated to pay a
monthly fee of $5,000 to MEDJET for managing the use, maintenance, storage, and
supervision of the aircraft. NRH pays this $5,000 monthly fee to MEDJET, on
behalf of CPSI, from the $10,000 monthly fee referred to above. During 2002,
CPSI paid approximately $254,000 to NRH for usage and service of the aircraft
under the above agreements.
In July 2002, CRLP acquired three single family homes located in
Montgomery, Alabama, from Lowder New Homes, Inc., an entity owned by TCC, for a
total purchase price of approximately $0.5 million, which will be operated as
rental property. The homes were purchased as part of a corporate rental program
for an automobile manufacturer that is building a manufacturing plant near
Montgomery, Alabama. Under the corporate rental program, executives of the
automobile manufacturer will rent the homes from CRLP for an initial term of
three years, with the option to extend the lease, and have agreed to lease
additional multifamily units at Colonial Grand at Promenade located in
Montgomery, Alabama. The homes were funded through CRLP's unsecured line of
credit.
During September 2000, CRLP purchased a parcel of land from Colonial
Commercial Investments, Inc. (CCI), which is owned by James K. Lowder and Thomas
H. Lowder, through the issuance of 12,477 limited partnership units in CRLP
valued at approximately $0.3 million. Subsequently, the parcel of land was sold
in excess of cost by CRLP in June 2001.
CRLP and its subsidiaries leased space to certain entities in which Mr.
Thomas H. Lowder, Mr. James K. Lowder, and Mr. M. Miller Gorrie have an interest
and received market rent from these entities of approximately $1.0 million, $1.1
million, and $1.5 million during the years ended December 31, 2002, 2001, and
2000, respectively. Additionally, CRLP and its subsidiaries provided management
and leasing services to certain related entities and received fees from these
entities of approximately $0.3 million during the years ended December 31, 2002,
2001, and 2000.
Colonial Insurance Agency, a corporation owned by TCC, has provided
insurance brokerage services for CRLP. The aggregate amount paid by CRLP to
Colonial Insurance Agency for these services during the years ended December 31,
2002, 2001, and 2000 were $5.0 million, $4.4 million, and $3.3 million,
respectively. Of these amounts, $4.7 million, $4.2 million and $3.1 million was
then paid to unaffiliated insurance carriers for insurance premiums during 2002,
2001 and 2000, respectively.
16. Subsequent Events
Distribution
On January 18, 2003, the Board of Trustees declared a cash distribution
to partners of CRLP in the amount of $.665 per partnership unit, totaling $22.4
million. The distribution was made to partners of record as of January 31, 2003,
and was paid on February 7, 2003.
Disposition
On February 28, 2003, CRLP sold Colonial Promenade Bardmoor, a 152,667
square foot retail asset located in St. Petersburg, Florida. The total sales
price was $17.1 million, which was used to repay a portion of the borrowings
under CRLP's unsecured line of credit and to support CRLP's investment
activities.
Report of Independent Accountants
To the Board of Trustees
of Colonial Properties Trust:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Colonial Realty Limited Partnership (the "Company") at December 31,
2002 and 2001, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the
accompanying index present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 2 to the financial statements, effective January
1, 2002, the Company adopted Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
January 17, 2003, except for Note 16, as
to which the date is February 28, 2003
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
We are managed by the Company, the general partner of CRLP. The
trustees of the Company are as follows:
Thomas H. Lowder, 53, has been a trustee since 1993. He has served as
our chairman of the board, president and chief executive officer since July
1993. Mr. Lowder became President of Colonial Properties, Inc., our predecessor,
in 1976, and since that time has been actively engaged in the acquisition,
development, management, leasing and sale of multifamily, office and retail
properties for Colonial Properties Trust. Mr. Lowder's most recent board
appointment was his election to the National Association of Real Estate
Investment Trust (NAREIT) Board in June 1999. He presently serves on the board
of directors of Community Foundation of Greater Birmingham, United Way of
Central Alabama, Children's Hospital, Birmingham Southern College, and Crippled
Children's Foundation. Mr. Lowder is a member of the executive committee of the
Board of Trustees. Mr. Lowder is the brother of James K. Lowder, one of our
trustees.
Carl F. Bailey, 72, has been a trustee since 1993. From 1995 to 2002,
Mr. Bailey served as President of BDI, a marketing and distribution company.
Prior to 1995, Mr. Bailey was co-chairman of BellSouth Telecommunications, Inc.,
a telecommunication company, and chairman and chief executive officer of South
Central Bell Telephone Company, a telecommunication company. From 1952 to 1992,
he worked for Southern Bell and South Central Bell in a number of capacities,
including as president and a member of the board of directors from 1982 until
1992. Mr. Bailey is chairman of TekQuest, Inc., a manufacturing company, and a
member of the board of directors of SouthTrust Corporation, a financial services
corporation. Mr. Bailey also serves on the board of trustees of Birmingham
Southern College. Mr. Bailey is chairman of the audit committee, and is a member
of the executive committee and nominating and corporate governance committee of
the board of trustees.
M. Miller Gorrie, 67, has been a trustee since 1993. Since 1995, Mr.
Gorrie has served as chairman of the board and chief executive officer of
Brasfield & Gorrie, L.L.C., a regional general contracting firm located in
Birmingham, Alabama that is ranked 24th in the ENR's "Top 50 Domestic General
Contractors". He currently serves on the boards of ACIPCO, the Metropolitan
Development Board, Economic Development Partnership of Alabama, the Alabama
Symphony Orchestra and the University of Alabama at Birmingham Civil Engineer
Advisory Board. In the past he has served as a director of AmSouth Bank, Baptist
Hospital Foundation, the Southern Research Institute, United Way of Central
Alabama, the Associated General Contractors, Alabama Chamber of Commerce, the
Building Science Advisory Board of Auburn University, and the Business Council
of Alabama. Mr. Gorrie is chairman of the executive committee and is a member of
the executive compensation committee of the board of trustees.
William M. Johnson, 56, has been a trustee since 1997. Since 1978, Mr.
Johnson has been chief executive officer and founder of Johnson Development
Company, a real estate development, construction and management firm in the
Atlanta, Georgia area. Mr. Johnson directed the development, leasing and
management of 1.2 million square feet of office, warehouse, retail and hotel
space having a value in excess of $117 million, including seven office buildings
and retail properties that we acquired from Mr. Johnson in 1997. Mr. Johnson is
a member of the board of trustees of Asbury Theological Seminary, a member of
the Board of Directors of Reach Out Youth Solutions, and is International
Director of the World Parish Ministries. Mr. Johnson also serves as a strategic
planning advisor for several para-church ministries. In 1999, Mr. Johnson
established a family foundation that provides financial assistance to
twenty-eight local, national and international ministries. Mr. Johnson is a
member of the executive compensation committee and executive committee of the
board of trustees.
James K. Lowder, 53, has been a trustee since 1993. Since 1995, Mr.
Lowder has served as chairman of the board of The Colonial Company, chairman of
the board of Lowder Construction Company, Inc., Lowder New Homes, Inc., Colonial
Insurance Agency, Inc., Lowder Realty Company, Inc., Colonial Commercial
Development, Inc., Colonial Homes, Inc., American Colonial Insurance Company,
Colonial Commercial Realty, Inc. and Colonial Commercial Investments, Inc. He is
a member of the Home Builders Association of Alabama, the Greater Montgomery
Home Builders Association and the board of directors of Alabama Power Company.
Mr. Lowder is a member of the executive compensation committee of the board of
trustees. Mr. Lowder is the brother of Thomas H. Lowder, our chairman of the
board, president and chief executive officer.
Herbert A. Meisler, 75, has been a trustee since 1995. Since 1964, Mr.
Meisler has been President of The Rime Companies, a real estate development,
construction and management firm specializing in the development of multifamily
properties that he formed with Mr. Ripps. While with The Rime Companies, Mr.
Meisler oversaw the development and construction of approximately 15,000
multifamily apartment units in the Southeastern United States. He currently
serves on the board of directors of the Community Foundation of South Alabama
and the Mobile Airport Authority and was Philanthropist of the Year in Mobile,
Alabama. He is a past director of the Alabama Eye and Tissue Bank and past
president of the Mobile Jewish Welfare Fund. Mr. Meisler is a member of the
executive compensation committee and the audit committee of the board of
trustees. Mr. Meisler is the brother-in-law of Mr. Ripps.
Claude B. Nielsen, 52, has been a trustee since 1993. Since 1990, Mr.
Nielsen has been president of Coca-Cola Bottling Company United, Inc.,
headquartered in Birmingham, Alabama. He also has served as chief executive
officer of Coca-Cola Bottling Company United, Inc. since 1991 and served as
chief operating officer from 1990 to 1991. Prior to 1990, Mr. Nielsen served as
president of Birmingham Coca-Cola Bottling Company. Mr. Nielsen is on the board
of directors of AmSouth Bank Corporation and also serves as a board member of
the Birmingham Airport Authority. Mr. Nielsen is chairman of the executive
compensation committee, and a member of the executive committee, and nominating
and corporate governance committee of the board of trustees.
Harold W. Ripps, 64, has been a trustee since 1995. Since 1969, he has
been Chief Executive Officer of The Rime Companies, a real estate development,
construction and management firm specializing in the development of multifamily
properties that he formed with Herbert A. Meisler, another member of our board
of trustees. While with The Rime Companies, Mr. Ripps oversaw the development
and construction of approximately 15,000 multifamily apartment units in the
southeastern United States. He is a member of the executive committee of the
Birmingham Council of Boy Scouts of America, the board of trustees of The Bank,
a commercial bank, Birmingham Southern College and the President's Council of
the University of Alabama in Birmingham. Mr. Ripps is a member of the executive
committee of the board of trustees. Mr. Ripps is the brother-in-law of Mr.
Herbert A. Meisler, one of our trustees.
Donald T. Senterfitt, 83, has been a trustee since 1993. Since May
2000, Mr. Senterfitt has served as chairman of the board of directors of
Colonial Bank, Central Florida. From 1991 to 2000, Mr. Senterfitt served as
president and chief executive officer of the Pilot Group, LC, a consulting
company. He is a former director and vice chairman of SunTrust Banks, Inc., a
multi-state bank holding company. From 1985 to 1986, he served as president of
the American Bankers Association, and from 1958 to 1980 he served as general
counsel to the Florida Bankers Association. Mr. Senterfitt is a member and a
1997 Laureate of the Mid-Florida Business Hall of Fame and a member of the
President's Council of the University of Florida. He is the recipient of the
Distinguished Alumnus Award from both his undergraduate school, Carson-Newman
College and his graduate school, the University of Florida. Mr. Senterfitt is a
member of the board of directors of CITE, Inc., the Center for Independence,
Technology and Education, a non-profit organization which serves the needs of
blind, visually handicapped and multi-handicapped children and adults, and
served as its president for three years. Mr. Senterfitt is chairman of the
nominating and corporate governance committee and is a member of the audit
committee of the board of trustees.
Executive Officers of the Company
The following is a biographical summary of the executive officers of
the Company:
Thomas H. Lowder, 53, has been a trustee since 1993. He has served as
our Chairman of the Board, President and Chief Executive Officer since July
1993. Mr. Lowder became president of Colonial Properties, Inc., our predecessor,
in 1976, and since that time has been actively engaged in the acquisition,
development, management, leasing and sale of multifamily, office and retail
properties for Colonial Properties Trust. Mr. Lowder's most recent board
appointment was his election to the National Association of Real Estate
Investment Trust (NAREIT) Board in June 1999. He presently serves on the board
of directors of Community Foundation of Greater Birmingham, United Way of
Central Alabama, Children's Hospital, Birmingham Southern College, and Crippled
Children's Foundation. Mr. Lowder is a member of the executive committee of the
board of trustees. Mr. Lowder is the brother of James K. Lowder, one of our
trustees.
C. Reynolds Thompson, III, 40, has been our Chief Operating Officer
since September 1999, and is responsible for the Multifamily, Office, Retail and
Mixed-Use divisions. Mr. Thompson oversees the management, acquisition, leasing
and development of properties within its three operating divisions and
development in the mixed-use division. Prior to his appointment as Chief
Operating Officer, Mr. Thompson was Chief Investment Officer, responsible for
investment strategies, market research, due diligence, mergers and acquisitions,
joint venture development and cross-divisional acquisitions. Prior to his
position as Chief Investment Officer, Thompson served as Executive Vice
President--Office Division, with responsibility for management of all office
properties owned and/or managed by us, from May 1997 to May 1998. Mr. Thompson
joined us in February 1997 as Senior Vice President--Office Acquisitions, with
responsibility for all acquisitions of office properties. Prior to joining
Colonial Properties Trust, Thompson worked for CarrAmerica Realty Corporation in
office building acquisitions and due diligence. His fourteen-year real estate
background includes acquisitions, development, leasing, and management of office
properties in the south. Mr. Thompson is a member of the Executive Committee of
the Metropolitan Development Board, an active member of the National Association
of Industrial and Office Parks, and he serves on the Board of Trustees for the
Alabama Real Estate Research and Education Center. Thompson holds a Bachelor of
Science Degree from Washington and Lee University.
Howard B. Nelson, Jr., 55, has been our Chief Financial Officer since
May 1997 and is responsible for financing matters. Mr. Nelson was our Senior
Vice President and Chief Operating Officer, with responsibility for the
day-to-day management, from September 1993 to May 1997. He joined Colonial
Properties in 1984 as Vice President and became Senior Vice President - Finance
in 1987. Nelson presently serves on the Birmingham-Southern College Edward Lee
Norton Board of Advisors for Management and Professional Education, the College
of Business Advisory Council of Auburn University and the Business Council of
Alabama's Progress PAC Board of Directors. Mr. Nelson has served in the past on
the Accounting and Technology committee of the Real Estate Roundtable, as
treasurer, vice president, president and board member of the Birmingham Chapter
of the National Association of Industrial and Office Parks (NAIOP) and on the
Board of Directors of the Children's Harbor Family Center. Mr. Nelson holds a
Bachelor of Science Degree from Auburn University.
John P. Rigrish, 54, has been our Chief Administrative Officer since
1998, and is responsible for the supervision of Accounting Operations,
Information Technology, Human Resources and Employee Services. Prior to joining
the Company, Mr. Rigrish worked for BellSouth Corporation in Corporate
Administration and Services. Mr. Rigrish holds a Bachelor of Science degree from
Samford University and did his postgraduate study at Birmingham-Southern
College. He served on the Edward Lee Norton Board of Advisors for Management and
Professional Education at Birmingham-Southern College and the Board of Directors
of Senior Citizens, Inc. in Nashville, Tennessee.
Paul F. Earle, 44, has been our Executive Vice-President-Multifamily
Division since May 1997, and is responsible for management of all multifamily
properties we own and/or manage. He joined us in 1991 and has served as Vice
President - Acquisitions, as well as Senior Vice President - Multifamily
Division. Mr. Earle serves as Chairman of the Alabama Multifamily Council and is
an active member of the National Apartment Association. He also serves as
President of the Board of Directors of Big Brother/Big Sisters and is a Board
member of the National Multifamily Housing Council. Before joining Colonial, Mr.
Earle was the President and Chief Operating Officer of American Residential
Management, Inc., Executive Vice President of Great Atlantic Management, Inc.
and Senior Vice President of Balcor Property Management, Inc.
Daryl K. Mangan, 59, has been our Executive Vice President - Retail
Division since December 2001 and is responsible for all aspects of the company's
retail portfolio. His thirty-year real estate background includes acquisitions,
dispositions, development, leasing, and management of retail properties
including his position as Executive Vice President at Equitable Real Estate
Investment Management, Inc where he was responsible for the management of a $6
billion retail portfolio consisting of 75 regional malls and 40 other retail
properties. Prior to joining us, Mr. Mangan worked for Cole National as Vice
President responsible for new store development for their 2,200-store optical
division. Mr. Mangan also worked for Safeco Properties, Inc. as Senior Vice
President responsible for its' national shopping center portfolio and for
Federated Department Stores, Inc as Senior Vice President responsible for all
new store development for 15 retail divisions. Mr. Mangan is an active member of
The International Council of Shopping Centers where he serves as chairman of the
Design and Development Awards Program. Mr. Mangan holds a Bachelor of Arts
Degree in Design and Industry as well as a Masters Degree in Business
Administration from California State University at San Francisco.
John N. Hughey, 43, has been our Executive Vice President-Retail
Development Division since December 2001 and is responsible for all retail
development. He joined us in 1982 and assumed management responsibility for an
increasing number of shopping centers until being named Senior Vice President -
Retail Division in 1991 and was named Executive Vice President in May 1997. Mr.
Hughey served as the Alabama/Mississippi State Operations Chairman for the
International Council of Shopping Centers from 1993-1995. He holds a Bachelor of
Science Degree from Auburn University.
Charles A. McGehee, 56, has been our Executive Vice President -
Mixed-Use Development Division since September 1999 and is responsible for our
development of properties with mixed-use product types. Mr. McGehee also
oversees land acquisitions and dispositions. From September 1993 to September
1999 Mr. McGehee was responsible for Land Acquisitions and Development,
Brokerage and Dispositions for us. From January 1990 to September 1993 Mr.
McGehee was Senior Vice President - Office Division. He joined us in 1976 as
Vice President of Retail Leasing and was responsible for leasing all retail
space owned and/or managed. Mr. McGehee has served as president and as a board
member of the National Association of Industrial and Office Parks (NAIOP) and is
a member of the Board of Directors of the Birmingham Area Board of Realtors. Mr.
McGehee is currently on the Board of Trustees for the Birmingham Chamber of
Commerce. He holds a Bachelor of Science Degree from Auburn University.
Robert A. "Bo" Jackson, 48, has been our Executive Vice
President-Office Division, and is responsible for management of all office
properties we own and manage. Prior to joining us, Mr. Jackson worked for Beacon
Properties as a Vice President responsible for leasing performance, new office
development and acquisitions throughout the Southeast. He has been involved in
over 10 million square feet of Atlanta urban and suburban office development.
Mr. Jackson has received professional accolades from The Atlanta Board of
Realtors, The Downtown Developers Group and The National Association of
Industrial and Office Parks (NAIOP). Mr. Jackson is active member of NAIOP and
an active member of the Urban Land Institute. He is also a member of the Board
of Directors of the Greater North Fulton Chamber of Commerce. Mr. Jackson holds
a Bachelor of Science Degree in Business Administration from the University of
Delaware.
Kenneth E. Howell, 53, has been our Senior Vice President-Chief
Accounting Officer since August 1998 and is responsible for the supervision of
accounting for all of the properties we own and/or manage. Mr. Howell joined us
in 1981, and served as Controller for us from 1986 through 1998. From 1981 to
1986 he held the position of Assistant Controller of the Colonial Company,
parent company of the then private Colonial Properties, Inc. He serves on the
Auburn University School of Accountancy Advisory Board. Mr. Howell holds a
Bachelor of Science Degree in Accounting and a minor in Finance from Auburn
University.
Item 11. Executive Compensation.
The following table sets forth certain information concerning the
annual and long-term compensation for our chief executive officer and our four
other most highly compensated executive officers, whom we refer to as the named
executive officers:
Summary of Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------- ------------------------------------------
Awards Payouts
------------------------------------------
Name and Principal Position Year Salary ($) Bonus($)(1) Other Restricted Securities LTIP All Other
Annual Share Underlying Payouts Compensation
Compensation Awards($)(1) Options(#)(+) ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas H. Lowder 2002 $340,000 $ -- $ -- $215,790 75,500 -- $ 6,598
Chairman of the Board 2001 328,269 -- -- 474,586 81,060 -- 5,100
President and Chief Executive 2000 315,000 -- -- 119,000 37,500 -- 5,062
- ------------------------------------------------------------------------------------------------------------------------------------
C. Reynolds Thompson, III 2002 $300,000 $ 23,800 $ -- $167,350 44,700 -- $ 6,338
Chief Operating Officer 2001 271,884 111,720 -- 214,988 47,988 -- 5,100
2000 248,000 40,000 -- -- 20,000 -- 5,100
- ------------------------------------------------------------------------------------------------------------------------------------
Howard B. Nelson, Jr 2002 $250,000 $ -- $ -- $ 98,505 33,200 -- $ 6,651
Chief Financial Officer and 2001 228,269 -- -- 247,448 35,666 -- 5,100
Secretary 2000 215,000 15,190 -- 22,134 12,500 -- 5,100
- ------------------------------------------------------------------------------------------------------------------------------------
John N. Hughey 2002 $210,000 $ -- $ -- $158,748 22,400 -- $ 6,388
Executive Vice President - 2001 200,000 -- -- 103,114 23,994 -- 3,803
Retail Development 2000 200,000 -- -- 17,024 22,520 -- 5,100
- ------------------------------------------------------------------------------------------------------------------------------------
Daryl K. Mangan (*) 2002 $225,000 $ -- $ -- $ 84,505 22,400 -- $ 563
Executive Vice President - 2001 17,308 -- -- -- -- -- --
Retail Division
- ------------------------------------------------------------------------------------------------------------------------------------
+ Options are reported for the year in which they are received. Options are
granted after the end of the fiscal year in which they are earned.
* Mr. Mangan became our Executive Vice President of the Retail Division on
December 1, 2001.
(1) Our incentive compensation plan permits officers to elect to receive all
or part of their annual bonus in the form of restricted common shares
instead of cash. Officers who elect to receive up to 50% of their bonus in
restricted shares receive shares having a market value on the issue date
equal to 125% of the elected amount. Officers who elect to receive more
than 50% of their annual bonus in restricted shares receive shares having
a market value on the issue date equal to 140% of the elected amount. The
value of the restricted share grants shown under the column titled
"Restricted Share Awards" includes these restricted shares issued instead
of cash bonus and other performance-based restricted share awards. The
following table shows, for each of 2002, 2001 and 2000 (a) the annual
bonus that each of our named executive officers was entitled to, (b) the
percentage of annual bonus that each named executive officer elected to
receive in the form of restricted common shares instead of cash, (c) the
portion of the annual bonus that each named executive officer received in
cash, and (d) the value of restricted common shares received instead of
cash. These restricted shares typically vest over 3 years, with 50%
vesting on the first anniversary of the issue date and the remaining
shares vesting in two equal installments on each of the second and third
anniversaries of the issue date.
Bonus Percentage Amount Paid Value of
Name Year Amount Deferred in Cash Restricted
Shares
-------------------------------- ----------- ------------- --------------- ------------- ------------------
Thomas H. Lowder.................. 2002 $ 94,600 100% $ - $ 132,440
2001 275,000 100 - 385,000
2000 85,000 100 - 119,000
C. Reynolds Thompson, III......... 2002 $ 83,800 72 % $ 23,800 $ 84,000
2001 228,000 51 111,720 162,792
2000 40,000 - 40,000 -
Howard B. Nelson, Jr.............. 2002 $ 52,500 100% $ - $ 73,500
2001 149,000 100 - 208,600
2000 31,000 51 15,190 22,134
John N. Hughey.................... 2002 $ 61,000 100% $ - $ 85,400
2001 55,000 100 - 77,000
2000 12,160 100 - 17,024
Daryl K. Mangan................... 2002 $ 42,500 100% $ - $ 59,500
2001 N/A N/A N/A N/A
2000 N/A N/A N/A N/A
In addition to the restricted shares that each of our named executive
officers received instead of cash bonus, each of our named executive
officers received discretionary awards of restricted shares in 2002 and
2001. The following table shows the number and value of these
restricted shares awarded for each of 2002, 2001 and 2000 for each of
our named executive officers. The 2002 restricted shares, granted in
2003, vest over three years in equal installments and the 2001
performance-based restricted shares, granted in 2002, vest in 8 years
but are subject to accelerated vesting based on our performance.
Number of Value of Restricted
Name Year Restricted Shares Share Awards
----------------------------------------------- ------------- ------------------ -----------------------
Thomas H. Lowder............................. 2002 2,500 $ 83,350
2001 2,765 89,586
2000 - -
C. Reynolds Thompson, III.................... 2002 2,500 $ 83,350
2001 1,611 52,196
2000 - -
Howard B. Nelson, Jr......................... 2002 750 $ 25,005
2001 1,199 38,848
2000 - -
John N. Hughey............................... 2002 2,200 $ 73,348
2001 806 26,114
2000 - -
Daryl K. Mangan.............................. 2002 750 $ 25,005
2001 N/A N/A
2000 N/A N/A
The number and value of the aggregate restricted share holdings of each
of our named executive officers at December 31, 2002 were as follows:
Number of Value of
Name Restricted Shares Restricted
Share Awards
-------------------------------------- ---------------- ---------------
Thomas H. Lowder...................... 18,650 $632,981
C. Reynolds Thompson, III............. 7,147 242,569
Howard B. Nelson, Jr.................. 9,183 306,161
John N. Hughey........................ 3,776 128,157
Daryl K. Mangan....................... - -
Dividends are paid on restricted shares at the same rate paid to all
other holders of common shares.
(2) Other Compensation consists of our contributions to the 401(k) plan
on behalf of each of our named executive officers and our payment
of premiums for long-term care polices as follows:
Long-term
401(k) Care Total All
Name Year Contribution Insurance Other
Compensation
------------------------------------------------ ----------- --------------- -------------- ----------------
Thomas H. Lowder............................. 2002 $ 5,500 $ 1,098 $ 6,598
2001 5,100 - 5,100
2000 5,062 - 5,062
C. Reynolds Thompson, III.................... 2002 $ 5,500 $ 838 $ 6,338
2001 5,100 - 5,100
2000 5,100 - 5,100
Howard B. Nelson, Jr......................... 2002 $ 5,500 $ 1,150 $ 6,651
2001 5,100 - 5,100
2000 5,00 - 5,100
John N. Hughey............................... 2002 $ 5,500 $ 888 $ 6,388
2001 3,803 - 3,808
2000 5,100 - 5,100
Daryl K. Mangan.............................. 2002 $ 563 $ - $ 563
2001 N/A N/A N/A
2000 N/A N/A N/A
The following table sets forth certain information relating to options
to purchase common shares granted to our named executive officers during 2002.
Option Grants in Last Fiscal Year
Individual Grants
------------------------------------------------------------------------------
Percent of
Name Number of Securities Total Options
Underlying Options Granted to Exercise or Grant Date
Granted (#)(1) Employees in Base Price Expiration Present
Fiscal Year ($/Share) Date Value ($)(2)
- -------------------------------------------------------------------------------------------------------------
Thomas H. Lowder 81,060 18.3% $32.40 1/18/2012 $132,938
C. Reynolds Thompson, III 47,988 10.9% 32.40 1/18/2012 78,700
Howard B. Nelson, Jr. 35,666 8.1% 32.40 1/18/2012 58,492
John N. Hughey 23,994 5.4% 32.40 1/18/2012 39,350
Daryl K. Mangan - - - - -
- -------------------------------------------------------------------------------------------------------------
(1) All options granted in 2002 become exercisable in five equal annual
installments beginning on the first anniversary of the date of grant and
have a term of ten years. This table does not include options granted in
2003 based on 2002 performance.
(2) The Black-Scholes option-pricing model was chosen to estimate the value of
the options set forth in this table. Our use of this model should not be
construed as an endorsement of its accuracy of valuing options. All option
valuation models, including the Black-Scholes model, require a prediction
about the future movement of the share price. The following assumptions were
made for the purposes of calculating the option value: an option term of 10
years, volatility of 16.50%, dividend yield at 7.70%, and interest rate of
1.23%. The real value of the options to purchase common shares in this table
depends upon the actual performance of our common shares, the option
holder's continued employment throughout the option period, and the date on
which the options are exercised.
The following table sets forth certain information concerning option
exercises during 2002 and unexercised options held by our named executive
officers at December 31, 2002:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Shares
Acquired Value Number of Securities Underlying Value of Unexercised in-the-money
on Realized Unexercised Options at Options at
Name Exercise(#) ($) December 31, 2002 (#) December 31, 2002 ($)(1)
- --------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
Thomas H. Lowder - $ - 139,725 183,620 $846,419 $559,433
C. Reynolds Thompson, III 26,862 189,738 2,520 102,183 5,304 487,769
Howard B. Nelson, Jr. 24,130 182,825 15,000 72,353 53,475 332,236
John N. Hughey 9,535 82,662 20,003 53,294 131,299 258,724
Daryl K. Mangan - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
(1) Based on the closing price of $33.94 per common share on December 31, 2002.
An option is "in-the-money" if the fair market value of the common shares
subject to the option exceeds the option exercise price.
Equity Compensation Plans
The following table summarizes information, as of December 31, 2002,
relating to our equity compensation plans pursuant to which options to purchase
our common shares and our restricted common shares may be granted from time to
time.
Number of securities Weighted-average Number of securities
be issued upon exercise price of remaining available for future
exercise of outstanding outstanding options issuance under equity
Plan Category options, warrants, and warrants and rights compensation plans
rights (a) (b) (excluding securities reflected
in column (a))
- -----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders (1) 1,621,786 (2) $28.88 (3) 1,756,028
Equity compensation plans not
approved by security holders - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,621,786 $28.88 1,756,028
(1) These plans include our Employee Share Option and Restricted Share
Plan, as amended in 1998, our Non-Employee Trustee Share Plan, as
amended in 1997, and our Trustee Share Option Plan, as amended in
1997.
(2) Includes 80,516 restricted shares and performance-based restricted
shares to be exercised at December 31, 2002.
(3) Weighted-average exercise price of outstanding options; excludes value
of outstanding restricted shares.
Defined Benefit Plan
We maintain a retirement plan for all of our employees hired before
January 1, 2002. An employee becomes eligible to participate in the plan on
January 1 or July 1 following the first anniversary of his or her employment or
when the person reaches age 21, if later. Benefits are based upon the number of
years of service (maximum 25 years) and the average of the participant's
earnings during the five highest years of compensation during the final 10 years
of employment. Each participant accrues a benefit at a specified percentage of
compensation up to the Social Security covered compensation level, and at a
higher percentage of compensation above the social security covered compensation
level. A participant receives credit for a year of service for every year in
which 1,000 hours are completed in the employment.
The following table reflects estimated annual benefits payable upon
retirement under the retirement plan as a single life annuity commencing at age
65.
Pension Plan Table
Years of Service
- ----------------------- ----------------- ----------------- ----------------- ---------------- -------------
Remuneration 5 10 15 20 25
- ----------------------- ----------------- ----------------- ----------------- ---------------- -------------
$100,000 $ 7,600 $15,200 $22,800 $30,400 $38,000
$125,000 $ 9,500 $19,000 $28,500 $38,000 $47,500
$150,000 $11,400 $22,800 $34,200 $45,600 $57,000
$200,000 or over $15,200 $30,400 $45,600 $60,800 $76,000
The benefits shown are limited by the current statutory limitations
that restrict the amount of benefits that can be paid from a qualified
retirement plan. The statutory limit on compensation that may be recognized in
calculating benefits is $200,000 for 2002 in accordance with Section 401(a)(7)
of the Internal Revenue Code. This limit is subject of cost-of living
adjustments. The amounts shown in the table are not subject to any deduction
from Social Security or other-offset amounts.
Covered compensation under the plan includes the employees' base salary
and other earnings received from us. Thomas H. Lowder has 28 years of covered
service under the plan, Howard B. Nelson, Jr. has 18 years of service, C.
Reynolds Thompson, III has 6 years of service, John N. Hughey has 20 years of
service, and Daryl K. Mangan has 1 year of service.
Employment Agreement
Thomas H. Lowder, our president and chief executive officer, entered
into an employment agreement with us in September 1993. This agreement provides
for an initial term of three years, with automatic renewals for successive
one-year terms if neither party delivers notice of non-renewal at least six
months prior to the next scheduled expiration date. The agreement provides for
annual compensation of at least $275,000 and incentive compensation on
substantially the same terms as set forth in the description of the Annual
Incentive Plan. See "Report on Executive Compensation - Annual Incentive Plan."
The agreement includes provisions restricting Mr. Lowder from competing with us
during employment and, except in certain circumstances, for two years after
termination of employment. In addition, in the event of disability or
termination by us without cause or by the employee with cause, the agreement
provides that we must pay Mr. Lowder the greater of (i) his base compensation
and benefits for the remainder of the employment term or (ii) six months' base
compensation and benefits.
None of our other named executive officers, or any of our other
executive officers, has an employment agreement with us.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The executive compensation committee was comprised of Messrs. Claude B.
Nielsen, M. Miller Gorrie, William M. Johnson, James K. Lowder and Herbert A.
Meisler during 2002. None of these five members was our employee during 2002. In
addition, no interlocking relationship existed between these members and any
member of any other company's board of directors, board of trustees or
compensation committee during that period.
However, Mr. J. Lowder is the brother of Mr. T. Lowder, our chairman
of the board, president and chief executive officer. As described below, Messrs.
Gorrie and J. Lowder, who are members of the executive compensation committee,
own interests in certain entities that engaged in transactions with us during
2002. These transactions were approved by a majority of our independent
trustees.
We engaged Lowder Construction Company, Inc., of which Mr. J. Lowder
serves as the chairman of the board and in which each of Messrs. J. Lowder and
T. Lowder indirectly owns a 50% interest, to serve as construction manager for
two multifamily development projects during 2002. We paid a total of $1.6
million during 2002, of which $1.5 million of which was then paid to
unaffiliated subcontractors for the construction of these development projects.
We had no outstanding construction invoices and retainage payable to Lowder
Construction Company, Inc. at December 31, 2002.
Brasfield & Gorrie General Contractors, Inc. ("B&G"), a corporation of
which Mr. Gorrie is a shareholder and chairman of the board, was engaged to
serve as construction manager for six office and retail development projects
during 2002. We paid B&G a total of $35.3 million during 2002, of which $32.1
million was then paid to unaffiliated subcontractors. We had no outstanding
construction invoices and retainage payable to B&G at December 31, 2002.
B&G invested $1.5 million through our dividend reinvestment plan. The
dividend reinvestment plan allows for optional cash purchase once a month with a
5% discount. A waiver is required for purchases over $25,000 per year. We
granted B & G a waiver for this investment.
We leased space to certain entities in which Mr. T. Lowder, Mr. J.
Lowder, and Mr. Gorrie have an interest and received market rent from these
entities of approximately $1.0 million, during 2002. Additionally, we provided
management and leasing services to certain related entities and received fees
from these entities of approximately $0.3 million during 2002.
Colonial Insurance Agency, a corporation indirectly owned by Messrs. J.
Lowder and T. Lowder and their family members, has provided insurance brokerage
services for us. The aggregate amount we paid to Colonial Insurance Agency for
these services during 2002 was $5.0 million. Of this amount, $4.7 million was
then paid to unaffiliated insurance carriers for insurance premiums during 2002.
In July 2002, we acquired three single-family homes located in
Montgomery, Alabama from Lowder New Homes, Inc., an entity owned by The Colonial
Company, in which Mr. T. Lowder and Mr. J. Lowder each indirectly own 50%, for a
total purchase price of approximately $0.5 million.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2002, we engaged in certain transactions with
entities in which some of our trustees and executive officers had a financial
interest. All but one of these transactions involved members of the executive
compensation committee and are described above under the caption "Compensation
Committee Interlocks and Insider Participation." The additional transaction was
approved by a majority of our independent trustees and is described below.
In 2002, one of our subsidiaries acquired a 20% interest in three
aircraft from NRH Enterprises, LLC (NRH) an entity in which Mr. Harold Ripps,
one of our trustees, owns a 33% interest, for approximately $1.4 million.
Additionally, the subsidiary entered into a joint ownership agreement with the
other owners of the aircraft, including NRH, under which the subsidiary pays
NRH, as agent for all of the owners of the aircraft, a monthly fee of $10,000,
plus $1,400 per hour of our flight time to cover the operating expenses of the
aircraft. Further, the subsidiary entered into an aircraft services agreement
with MEDJET Assistance, LLC (MEDJET), an entity in which Mr. Ripps owns a 40%
interest. Under this agreement, the subsidiary is obligated to pay a monthly fee
of $5,000 to MEDJET for managing the use, maintenance, storage, and supervision
of the aircraft. NRH pays this $5,000 to MEDJET, on behalf of the subsidiary,
from the $10,000 monthly fee referred to above. During 2002, the subsidiary paid
approximately $254,000 to NRH for usage and service of the aircraft under the
above agreements.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of Units as of February 28, 2003 for:
(1) each person known by CRLP to be the beneficial owner of more
than five percent of the CRLP's outstanding Units,
(2) each trustee of the Company and each Named Executive Officer
and
(3) the 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 Units shown as beneficially owned by such person, except as
otherwise set forth in the notes to the table. References in the table to
"Units" are to units of limited partnership interest in the Operating
Partnership. The extent to which a person held common units of Beneficial
interest of Colonial Properties Trust as of February 28, 2003, under the caption
"Voting Securities and Principal Holders Thereof", and is incorporated by
reference in this Annual Report and shall be deemed a part hereof. Unless
otherwise provided in the table, the address of each beneficial owner is
Colonial Plaza, Suite 750, 2101 Sixth Avenue North, Birmingham, Alabama 35203.
Name and Business Address Number of Percent of
of Beneficial Owner Units Units (1)
- ------------------------------------- -------- ---------
Colonial Properties Trust................... 23,431,052 69.2%
Thomas H. Lowder .. ........................ 2,938,373 (2) 8.7%
James K. Lowder ............................ 1,925,397 (3) 5.7%
2000 Interstate Parkway
Suite 400
Montgomery, Alabama 36104
Carl F. Bailey ............................. 17,595 *
M. Miller Gorrie ........................... 266,523 (4) *
William M. Johnson ......................... 628,786 (5) 1.9%
Herbert A. Meisler ......................... 619,034 (6) 1.8%
Claude B. Nielsen .......................... 17,595 *
Harold W. Ripps ............................ 1,925,975 5.7%
Donald T. Senterfitt ....................... 2,159 *
C. Reynolds Thompson, III .................. 17,595 *
Howard B. Nelson, Jr. ...................... 17,595 *
John H. Hughey ............................. 17,595 *
Daryl K. Mangan ............................ - *
All executive officers and trustees as a group
(19 persons) ........................... 7,106,936 (7) 21.0%
- ----------------------
* Less than 1%
(1) The number of units outstanding as of February 28, 2003 was
33,881,893.
(2) Includes 466,521 Units owned by Thomas Lowder, 89,285 Units owned by
Thomas Lowder Investments, LLC, 1,369,396 Units owned by CCI,
1,012,976 Units owned by EPJV and 195 Units held in trust for the
benefit of Thomas Lowder's children. Units owned by CCI are reported
twice in this table, once as beneficially owned by Thomas Lowder and
again as beneficially owned by James Lowder.
(3) Includes 466,521 Units owned by James Lowder, 89,285 Units owned by
James Lowder Investments, LLC, 1,369,396 Units owned by CCI and 195
Units held in trust for the benefit of James Lowder's children.
(4) Includes 157,140 Units owned by MJE, LLC., and 109,383 Units owned by
Mr. Gorrie.
(5) Includes 554,281 Units owned by Mr. Johnson and 74,505 Units owned by
William M. Johnson Investments I, LLP, an entity controlled by Mr.
Johnson.
(6) Includes 471,872 Units owned by Meisler Enterprises L.P., a limited
partnership of which Mr. Meisler and his wife are sole partners, and
72,657 Units directly owned by Mr. Meisler.
(7) Units held by CCI and EPJV have been counted only once for this
purpose.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Executive Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions."
Item 14. Controls and Procedures.
Within 90 days prior to the date of filing of this report, we carried
out an evaluation, under the supervision and with the participation of our
management and support from our external auditors, including the Chief Executive
Officer and the Chief Financial Officer, of the design and operation of our
disclosure controls and procedures. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective for gathering, analyzing and disclosing
the information we are required to disclose in the reports it files under the
Securities Exchange Act of 1934, within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date of this
evaluation.
Part IV
Item 15. Exhibits, Financial Schedules, and Reports on Form 8-K.
15(a)(1) and (2) Financial Statements and Schedules
Index to Financial Statements and Financial Statement Schedule
Financial Statements:
The following financial statements of CRLP are included in Part II,
Item 8 of this report:
Consolidated Balance Sheets as of December 31, 2002 and 2001
Consolidated Statements of Income and Comprehensive Income for the
years ended December 31, 2001, 2000, and 1999
Consolidated Statements of Partner's Capital for the years ended
December 31, 2002, 20001 and 2000
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements
Report of Independent Accountants
Financial Statement Schedule:
Schedule III Real Estate and Accumulated Depreciation
Report of Independent Accountants
All other schedules have been omitted because the required information
of such other schedules is not present in amounts sufficient to require
submission of the schedule or because the required information is included in
the consolidated financial statements.
15(a)(3) Exhibits
(1) 3.1 Declaration of Trust of Company.
(1) 3.2 Bylaws of the Company.
(7) 4.1 Indenture dated as of July 22, 1996, by and
between Colonial Realty Limited Partnership and
Bankers Trust Company, as amended
(8) 4.2 First Supplemental Indenture dated as of December
31, 1998, by and between Colonial Realty Limited
Partnership and Bankers Trust Company.
(9) 10.1 Third Amended and Restated Agreement of Limited
Partnership of the Operating Partnership,
as amended.
(4) 10.2.1 Registration Rights and Lock-Up
Agreement dated September 29, 1993, among the
Company and the persons named therein.
(3) 10.2.2 Registration Rights and Lock-Up
Agreement dated March 25, 1997, among the
Company and the persons named therein.
(3) 10.2.3 Registration Rights and Lock-Up
Agreement dated November 4, 1994, among the
Company and the persons named therein.
(3) 10.2.4 Registration Rights and Lock-Up
Agreement dated August 20, 1997, among the
Company and the persons named therein.
(3) 10.2.5 Registration Rights and Lock-Up
Agreement dated November 1, 1997, among the
Company and the persons named therein.
(3) 10.2.6 Registration Rights and Lock-Up
Agreement dated July 1, 1997, among the Company
and the persons named therein.
(3) 10.2.7 Registration Rights and Lock-Up
Agreement dated July 1, 1996, among the Company
and the persons named therein.
(8) 10.2.8 Registration Rights Agreement dated
February 23, 1999, among the Company, Belcrest
Realty Corporation, and Belair Real Estate
Corporation.
(8) 10.2.9 Registration Rights and Lock-Up
Agreement dated July 1, 1998, among the Company
and the persons named therein.
(8) 10.2.10 Registration Rights and Lock-Up
Agreement dated July 31, 1997, among the
Company and the persons named therein.
(8) 10.2.11 Registration Rights and Lock-Up
Agreement dated November 18, 1998, among the
Company and the persons named therein.
(8) 10.2.12 Registration Rights and Lock-Up
Agreement dated December 29, 1994, among the
Company and the persons named therein.
(9) 10.2.13 Registration Rights and Lock-Up
Agreement dated April 30, 1999, among the
Company and the persons named therein.
(4) 10.6 (5) Officers and Trustees Indemnification Agreement.
(4) 10.7 Partnership Agreement of the Management
Partnership.
(2) 10.8 Articles of Incorporation of the Management
Corporation, as amended.
(4) 10.9 Bylaws of the Management Corporation.
(6) 10.10 Credit Agreement between the Colonial Realty
Limited Partnership and SouthTrust Bank, National
Association, AmSouth Bank, N.A., Wells Fargo
Bank, National Association, Wachovia Bank, N.A.,
First National Bank of Commerce, N.A., and PNC
Bank, Ohio, National Association dated July 10,
1997, as amended on July 10, 1997 and related
promissory notes.
(8) 10.11.1 Amendment to Credit Agreement dated July 10, 1998.
(8) 10.11.2 Second Amendment to Credit Agreement dated August
21, 1998
(4) 10.12 (5) Annual Incentive Plan.
(9) 10.13 Executive Unit Purchase Program - Program Summary
(9) 10.14 Form of Promissory Note
(9) 10.15 Reimbursement Agreement dated January 25, 2000
between Colonial Realty Limited
Partnership and Employee Unit Purchase Plan
participants
12.1 Ratio of Earnings to Fixed Charges
23.1 Consent of PricewaterhouseCoopers LLP
99.1 CEO and CFO Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the Company's Form 8-K dated November 5,
1997.
(2) Incorporated by reference to the same titled and number exhibit in the
Company's Annual Report on Form 10-K dated December 31, 1994.
(3) Incorporated by reference to the same titled and number exhibit in the
Company's Annual Report on Form 10-K dated December 31, 1997.
(4) Incorporated by reference to the same titled and numbered exhibit in
the Company's Registration Statement on Form S-11, No. 33-65954.
(5) Management contract or compensatory plan required to be filed pursuant
to Item 15(c) of Form 10-K.
(6) Incorporated by reference to the same titled and number exhibit in the
Company's Quarterly Report on Form 10-Q dated June 30, 1997.
(7) Incorporated by reference to (i) Exhibit D to the Form 8-K dated July
19, 1996, filed by Colonial Realty Limited Partnership, and (ii)
Exhibit B to the Form 8-K dated December 6, 1996, filed by Colonial
Realty Limited Partnership.
(8) Incorporated by reference to the same titled and numbered exhibit in
the Company's Annual Report on Form 10-K dated December 31, 1998.
(9) Incorporated by reference to the same titled and numbered exhibit in
the Company's Annual Report on Form 10-K dated December 31, 1999.
15(b) Reports on Form 8-K
Reports on Form 8-K filed during the last quarter of 2002:
None
15(c) Exhibits
The list of Exhibits filed with this report is set forth in
response to Item 15(a)(3).
15(d) Financial Statements
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
28, 2003.
COLONIAL REALTY LIMITED PARTNERSHIP
a Delaware limited partnership
By: Colonial Properties Trust, its general
partner
By: /s/ Howard B. Nelson, Jr.
--------------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities with Colonial Properties Trust indicated on
March 28, 2003.
Signature
/s/Thomas H. Lowder Chairman of the Board,
President,
- --------------------------------------------------- and Chief Executive Officer
Thomas H. Lowder
/s/Howard B. Nelson, Jr. Chief Financial Officer
- ---------------------------------------------------
Howard B. Nelson, Jr.
/s/Kenneth E. Howell Senior Vice President-Chief
- --------------------------------------------------- Accounting Officer
Kenneth E. Howell
/s/Carl F. Bailey Trustee
- ---------------------------------------------------
Carl F. Bailey
/s/M. Miller Gorrie Trustee
- ---------------------------------------------------
M. Miller Gorrie
/s/William M. Johnson Trustee
- ---------------------------------------------------
William M. Johnson
/s/James K. Lowder Trustee
- ---------------------------------------------------
James K. Lowder
/s/Herbert A. Meisler Trustee
- ---------------------------------------------------
Herbert A. Meisler
/s/Clause B. Nielsen Trustee
- ---------------------------------------------------
Claude B. Nielsen
/s/Harold W. Ripps Trustee
- ---------------------------------------------------
Harold W. Ripps
/s/Donald T. Senterfitt Trustee
- ---------------------------------------------------
Donald T. Senterfitt
CERTIFICATIONS UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
CERTIFICATION
I, Thomas H. Lowder, certify that:
1. I have reviewed this annual report of Colonial Realty Limited Partnership;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 28, 2003
/s/ Thomas H. Lowder
- ------------------
Thomas H. Lowder
Chief Executive Officer
CERTIFICATIONS UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
CERTIFICATION
I, Howard B. Nelson Jr., certify that:
1. I have reviewed this annual report of Colonial Realty Limited Partnership;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 28, 2003
/s/ Howard B. Nelson, Jr.
- --------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
SCHEDULE III
COLONIAL REALTY LIMITED PARTNERSHIP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
Gross Amount
at Which
Initial Cost to Cost Carried at
Company Capitalized Close of Period
--------------------------------- --------------
Buildings and Subsequent to
Description Encumbrances Land Improvements Acquisition Land
- -------------------------------------- --------------- --------------- --------------- --------------- --------------
Multifamily:
CG at Citrus Park -0- 1,323,593 -0- 11,314,187 1,328,323
CG at Cypress Crossing -0- 8,781,859 -0- 12,741,309 2,125,136
CG at Edgewater 21,541,461 1,540,000 12,671,606 13,668,719 2,602,325
CG at Galleria 22,400,000 4,600,000 39,078,925 5,297,592 4,600,000
CG at Galleria II -0- 758,439 7,902,382 134,307 758,439
CG at Galleria Woods 9,375,014 1,220,000 12,480,949 669,222 1,220,000
CG at Heather Glen -0- 3,800,000 -0- 30,874,797 4,134,235
CG at Heathrow -0- 2,560,661 17,612,990 751,562 2,560,661
CG at Hunter's Creek 30,135,196 33,264,022 -0- 1,080,626 5,308,112
CG at Lakewood Ranch -0- 2,320,442 -0- 19,927,999 2,148,814
CG at Liberty Park -0- 2,296,019 -0- 25,030,078 2,296,019
CG at Madison 17,396,855 1,689,400 -0- 22,115,057 2,284,794
CG at Natchez Trace 10,686,065 1,312,000 16,568,050 603,159 1,317,995
CG at Promenade 22,471,660 1,479,352 -0- 27,074,508 1,748,879
CG at Research Park 12,775,000 3,680,000 29,322,067 3,068,180 3,680,000
CG at Reservoir 8,581,363 1,020,000 -0- 13,281,949 1,122,893
CG at Riverchase 20,494,557 2,340,000 25,248,548 2,700,423 2,340,000
Colonial Center Town Park -0- 1,391,500 -0- 35,590,903 2,647,374
CG at Wesleyan -0- 720,000 12,760,587 6,987,021 1,404,780
CV at Ashford Place -0- 537,600 5,839,838 437,367 537,600
CV at Ashley Plantation 24,414,040 1,160,000 11,284,785 14,805,254 2,215,490
CV at Caledon Wood -0- 2,100,000 19,482,210 838,787 2,108,949
CV at Gainesville 26,602,227 3,360,000 24,173,649 5,035,688 3,361,850
CV at Haverhill -0- 1,771,000 17,869,452 2,660,945 1,771,000
CV at Huntleigh Woods -0- 745,600 4,908,990 1,246,240 745,600
CV at Inverness 9,900,000 1,713,668 10,352,151 837,537 1,077,849
CV at Inverness II/III/IV -0- 635,819 5,927,265 8,803,608 1,859,142
CV at Lake Mary 22,721,386 2,145,480 -0- 20,022,703 3,634,094
CV at Timothy Woods 9,467,303 1,020,000 11,910,546 319,534 1,024,347
CV at Town Park (Sarasota) -0- 1,566,765 -0- 19,732,717 1,640,763
CV at Trussville 16,847,090 1,504,000 18,800,253 1,451,857 1,510,409
CV at Vernon Marsh 3,400,000 960,984 3,511,596 3,683,129 960,984
CV at Walton Way -0- 1,024,000 7,877,766 3,604,880 1,024,000
Office:
250 Commerce Street -0- 25,000 200,200 2,477,004 25,000
901 Maitland Center -0- 2,335,035 14,398,193 130,978 2,335,035
AmSouth Center -0- 764,961 -0- 20,215,623 764,961
Colonial Center 100 at Town Park -0- 1,391,500 -0- 18,343,674 1,515,878
Colonial Center 600 at Town Park -0- -0- -0- 25,628,259 1,915,200
Colonial Center at Mansell Overlook 16,671,336 4,540,000 44,012,971 78,289,528 2,016,812
Colonial Center Colonnade -0- 6,299,310 40,773,192 6,299,310
Colonial Center Heathrow 43,669,916 13,548,715 97,256,123 152,195 13,548,715
Colonial Center Lakeside -0- 423,451 8,313,291 1,875,795 425,255
Colonial Center Research Park -0- 1,003,865 -0- 12,438,799 1,003,865
Colonial Plaza -0- 1,001,375 12,381,023 5,882,978 1,005,642
Concourse Center -0- 4,875,000 25,702,552 1,493,134 4,875,000
Emmett R. Johnson Building -0- 1,794,672 14,801,258 1,595,930 1,794,672
Independence Plaza -0- 1,505,000 6,018,476 3,486,149 1,505,000
International Park -0- 1,279,355 5,668,186 19,633,644 3,087,151
Interstate Park 2,852,228 1,125,990 7,113,558 11,941,730 1,125,988
Perimeter Corporate Park 4,822,798 1,422,169 18,377,648 3,411,302 1,422,169
Progress Center -0- 521,037 14,710,851 3,383,192 523,258
Riverchase Center -0- 1,916,727 22,091,651 3,419,299 1,924,895
Shoppes at Mansell -0- 600,000 3,089,565 50,741 600,000
Retail:
Britt David Shopping Center -0- 1,755,000 4,951,852 499,611 1,755,000
Colonial Brookwood Village -0- 8,136,700 24,435,002 64,865,084 8,171,373
Colonial Mall Auburn-Opelika -0- 103,480 -0- 18,405,485 698,153
Colonial Mall Bel Air -0- 7,517,000 80,151,190 7,538,350 7,517,000
Colonial Mall Burlington -0- 4,120,000 25,632,587 3,084,307 4,137,557
Colonial Mall Decatur -0- 3,262,800 23,636,229 3,958,019 3,262,800
Colonial Mall Gadsden -0- 639,577 -0- 22,818,413 639,577
Colonial Mall Glynn Place -0- 3,588,178 22,514,121 2,674,305 3,603,469
Colonial Mall Greenville -0- 4,433,000 24,812,243 6,705,733 4,433,000
Colonial Mall Lakeshore -0- 4,646,300 30,973,239 3,431,412 4,666,100
Colonial Mall Mrytle Beach -0- 9,099,972 33,663,654 5,925,080 9,163,149
Colonial Mall Staunton -0- 2,895,000 15,083,542 4,486,671 2,907,337
Colonial Mall Temple -0- 2,981,736 23,503,930 6,306,683 2,981,736
Colonial Mall Valdosta -0- 5,377,000 30,239,796 4,182,494 4,478,413
Colonial Mall Macon -0- 1,684,875 -0- 95,831,980 5,508,562
Colonial Mayberry Mall -0- 862,500 3,778,590 710,721 866,175
Colonial Promenade Bardmoor -0- 1,989,019 9,047,663 770,284 1,989,019
Colonial Promenade Beechwood -0- 2,565,550 19,647,875 3,480,385 2,576,483
Colonial Promenade Burnt Store -0- 3,750,000 8,198,677 242,605 3,750,000
Colonial Promenade Hunter's Creek -0- 4,181,760 13,023,401 386,625 4,181,760
Colonial Promenade Lakewood -0- 2,984,522 11,482,512 2,944,731 2,997,240
Colonial Promenade Montgomery 12,193,529 3,788,913 11,346,754 1,566,049 4,332,432
Colonial Promenade Montgomery N -0- 2,400,000 5,664,858 588,167 2,401,182
Colonial Promenade Northdale -0- 3,059,760 8,054,090 7,130,766 3,059,760
Colonial Promenade Trussville -0- 4,201,186 -0- 28,309,788 4,213,537
Colonial Promenade Tutwiler Farm -0- 10,287,026 -0- 17,826,572 10,288,138
Colonial Promenade University Park 11,958,595 6,946,785 20,104,517 (9,766,068) 5,001,467
Colonial Promenade Wekiva -0- 2,817,788 15,302,375 493,709 2,817,788
Colonial Promenade Winter Haven -0- 1,768,586 3,928,903 4,923,825 4,045,045
Colonial Shoppes at Inverness -0- 1,680,000 1,387,055 99,257 1,687,159
Colonial Shoppes Bear Lake -0- 2,134,440 6,551,683 526,280 2,134,440
Colonial Shoppes Bellwood -0- 330,000 -0- 5,225,990 330,000
Colonial Shoppes McGehee -0- 197,152 -0- 5,939,024 197,152
Colonial Shoppes Quaker Village -0- 931,000 7,901,874 877,768 934,967
Colonial Shoppes Stanley -0- 450,000 1,657,870 117,217 433,906
Colonial Shoppes Yadkinville -0- 1,080,000 1,224,136 3,393,242 1,084,602
Old Springville Shopping Center -0- 272,594 -0- 3,411,101 277,975
Olde Town Shopping Center -0- 343,325 -0- 2,842,835 343,325
P&S Building -0- 104,089 558,646 274,623 104,089
Rivermont Shopping Center -0- 515,250 2,332,486 364,777 517,446
Shops at Colonnade -0- 2,468,092 4,034,205 27,971 2,468,092
Village at Roswell Summit 1,510,544 450,000 2,563,642 224,119 451,918
Active Development Projects:
CG at North Heathrow Phase II -0- 3,363,141 -0- 1,282,742 4,645,883
Colonial TownPark Mixed Use -0- -0- -0- 1,792,375
Colonial Center 200 at Town Park -0- -0- -0- 15,833,616 1,492,318
Colonial Promenade Trussville II -0- 1,476,871 -0- 607,237 2,084,108
Other Miscellaneous Projects -0- -0- -0- 5,469,947
Unimproved Land:
Colonial Center Mansell Overlook -0- 2,664,265 -0- 6,419,014 9,083,279
Colonial TownPark Infrastructure -0- 25,933,612 -0- (4,219,910) 21,713,702
Colonial Center Heathrow -0- 12,250,568 -0- 983,387 13,233,955
CV at Town Park Infrastructure -0- 1,184,919 -0- 3,784,017 4,968,936
CG at Wesleyan III -0- 230,643 -0- 8,691 239,334
Lakewood Ranch -0- 47,990 -0- 2,370,313 1,479,297
Twin Lakes -0- 10,117,524 -0- 3,280,431 13,397,955
Corporate Assets -0- -0- -0- 8,295,841 -0-
Other Land -0- 1,143,896 -0- (858,307) 285,589
--------------- --------------- --------------- --------------- --------------
$ 382,888,161 $ 323,928,749 $ 1,107,109,349 $ 949,710,374 $ 316,847,337
=============== =============== =============== =============== ==============
SCHEDULE III
COLONIAL REALTY LIMITED PARTNERSHIP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
Gross Amount at Which Date
Carried at Close of Period Acquired/ Depr.
---------------------------------
Buildings and Accumulated Date Placed in Lives-
Description Improvements Total Depreciation Completed Service Years
------------------------------------- --------------- ---------------- -------------- ---------- ---------- -------
Multifamily:
CG at Citrus Park 11,309,456 $ 12,637,780 2,102,857 1999 1997 7-40 Years
CG at Cypress Crossing 19,398,032 $ 21,523,168 3,377,231 1999 1998 7-40 Years
CG at Edgewater 25,278,000 $ 27,880,325 6,498,478 1990 1994 7-40 Years
CG at Galleria 44,376,517 $ 48,976,517 10,258,618 1986 1994 7-40 Years
CG at Galleria II 8,036,689 $ 8,795,128 1,837,595 1996 1996 7-40 Years
CG at Galleria Woods 13,150,171 $ 14,370,171 3,255,641 1994 1996 7-40 Years
CG at Heather Glen 30,540,563 $ 34,674,797 3,852,115 2000 1998 7-40 Years
CG at Heathrow 18,364,552 $ 20,925,213 4,420,089 1997 1994/97 7-40 Years
CG at Hunter's Creek 29,036,536 $ 34,344,648 6,829,306 1996 1996 7-40 Years
CG at Lakewood Ranch 20,099,627 $ 22,248,441 3,200,044 1999 1997 7-40 Years
CG at Liberty Park 25,030,078 $ 27,326,096 2,803,449 2000 1998 7-40 Years
CG at Madison 21,519,663 $ 23,804,457 2,722,469 2000 1998 7-40 Years
CG at Natchez Trace 17,165,215 $ 18,483,209 3,345,739 1995/97 1997 7-40 Years
CG at Promenade 26,804,981 $ 28,553,860 3,240,093 1992 1992 7-40 Years
CG at Research Park 32,390,247 $ 36,070,247 8,435,537 1987/94 1994 7-40 Years
CG at Reservoir 13,179,056 $ 14,301,949 1,533,767 2000 1998 7-40 Years
CG at Riverchase 27,948,971 $ 30,288,971 6,726,512 1984/91 1994 7-40 Years
Colonial Center Town Park 34,335,029 $ 36,982,403 1,793,468 2002 2000 7-40 Years
CG at Wesleyan 19,062,828 $ 20,467,608 3,846,366 1997 1996/97 7-40 Years
CV at Ashford Place 6,277,205 $ 6,814,805 1,170,438 1983 1996 7-40 Years
CV at Ashley Plantation 25,034,549 $ 27,250,039 3,981,565 1997 1998 7-40 Years
CV at Caledon Wood 20,312,049 $ 22,420,997 3,796,594 1995/96 1997 7-40 Years
CV at Gainesville 29,207,487 $ 32,569,337 8,653,500 1989/93/94 1994 7-40 Years
CV at Haverhill 20,530,397 $ 22,301,397 3,132,739 1998 1998 7-40 Years
CV at Huntleigh Woods 6,155,230 $ 6,900,830 1,701,092 1978 1994 7-40 Years
CV at Inverness 11,825,507 $ 12,903,356 3,169,232 1986/87/90 1986/87/907-40 Years
CV at Inverness II/III/IV 13,507,550 $ 15,366,692 5,088,884 1997 1997 7-40 Years
CV at Lake Mary 18,534,089 $ 22,168,183 6,768,047 1991/95 1991/95 7-40 Years
CV at Timothy Woods 12,225,734 $ 13,250,080 2,405,321 1996 1997 7-40 Years
CV at Town Park (Sarasota) 19,658,720 $ 21,299,482 1,290,772 2002 2000 7-40 Years
CV at Trussville 20,245,701 $ 21,756,110 4,189,662 1996/97 1997 7-40 Years
CV at Vernon Marsh 7,194,725 $ 8,155,709 2,547,600 1986/87 1986/93 7-40 Years
CV at Walton Way 11,482,646 $ 12,506,646 1,393,285 1970/88 1998 7-40 Years
Office:
250 Commerce Street 2,677,204 $ 2,702,204 2,463,667 1904/81 1980 7-40 Years
901 Maitland Center 14,529,171 $ 16,864,206 273,296 1985 2002 7-40 Years
AmSouth Center 20,215,623 $ 20,980,584 8,773,278 1990 1990 7-40 Years
Colonial Center 100 at Town Park 18,219,296 $ 19,735,174 1,215,513 2001 2000 7-40 Years
Colonial Center 600 at Town Park 23,713,059 $ 25,628,259 307,955 2002 2000 7-40 Years
Colonial Center at Mansell Overlook 124,825,687 $ 126,842,499 11,636,161 1987/96/97/00 1997 7-40 Years
Colonial Center Colonnade 40,773,192 $ 47,072,502 589,720 1989/99 2002 7-40 Years
Colonial Center Heathrow 97,408,318 $ 110,957,033 811,951 1988/96-00 2002 7-40 Years
Colonial Center Lakeside 10,187,282 $ 10,612,537 1,493,642 1989/90 1997 7-40 Years
Colonial Center Research Park 12,438,798 $ 13,442,664 1,583,578 1999 1998 7-40 Years
Colonial Plaza 18,259,734 $ 19,265,376 2,588,364 1982 1997 7-40 Years
Concourse Center 27,195,686 $ 32,070,686 3,073,410 1981/85 1998 7-40 Years
Emmett R. Johnson Building 16,397,189 $ 18,191,861 1,447,050 1982/95 1999 7-40 Years
Independence Plaza 9,504,625 $ 11,009,625 1,020,849 1981/92 1998 7-40 Years
International Park 23,494,034 $ 26,581,185 2,891,446 1987/89 1997 7-40 Years
Interstate Park 19,055,290 $ 20,181,278 7,483,848 1982-85/89 1982-85/897-40 Years
Perimeter Corporate Park 21,788,950 $ 23,211,119 2,867,238 1986/89 1998 7-40 Years
Progress Center 18,091,822 $ 18,615,080 2,758,686 1983-91 1997 7-40 Years
Riverchase Center 25,502,782 $ 27,427,677 4,047,656 1984-88 1997 7-40 Years
Shoppes at Mansell 3,140,306 $ 3,740,306 349,790 1996/97 1998 7-40 Years
Retail:
Britt David Shopping Center 5,451,463 $ 7,206,463 1,084,769 1990 1994 7-40 Years
Colonial Brookwood Village 89,265,413 $ 97,436,786 7,401,520 1973/91/00 1997 7-40 Years
Colonial Mall Auburn-Opelika 17,810,813 $ 18,508,965 11,249,030 1973/84/89 1973/84/897-40 Years
Colonial Mall Bel Air 87,689,540 $ 95,206,540 10,468,603 1966/90/97 1998 7-40 Years
Colonial Mall Burlington 28,699,338 $ 32,836,894 4,197,378 1969/86/94 1997 7-40 Years
Colonial Mall Decatur 27,594,248 $ 30,857,048 6,128,088 1979/89 1993 7-40 Years
Colonial Mall Gadsden 22,818,413 $ 23,457,990 13,316,043 1974/91 1974 7-40 Years
Colonial Mall Glynn Place 25,173,135 $ 28,776,604 4,200,172 1986 1997 7-40 Years
Colonial Mall Greenville 31,517,976 $ 35,950,976 3,805,265 1965/89/99 1999 7-40 Years
Colonial Mall Lakeshore 34,384,851 $ 39,050,951 5,551,016 1984-87 1997 7-40 Years
Colonial Mall Mrytle Beach 39,525,558 $ 48,688,706 6,915,370 1986 1996 7-40 Years
Colonial Mall Staunton 19,557,876 $ 22,465,213 3,131,979 1969/86/97 1997 7-40 Years
Colonial Mall Temple 29,810,613 $ 32,792,349 2,322,794 2000 7-40 Years
Colonial Mall Valdosta 35,320,876 $ 39,799,290 5,416,888 1982-85 1997 7-40 Years
Colonial Mall Macon 92,008,293 $ 97,516,855 29,982,448 1975/88/97 1975/88 7-40 Years
Colonial Mayberry Mall 4,485,636 $ 5,351,811 734,421 1968/86 1997 7-40 Years
Colonial Promenade Bardmoor 9,817,947 $ 11,806,966 1,699,273 1981 1996 7-40 Years
Colonial Promenade Beechwood 23,117,327 $ 25,693,810 3,714,517 1963/92 1997 7-40 Years
Colonial Promenade Burnt Store 8,441,282 $ 12,191,282 1,861,529 1990 1994 7-40 Years
Colonial Promenade Hunter's Creek 13,410,026 $ 17,591,786 2,297,568 1993/95 1996 7-40 Years
Colonial Promenade Lakewood 14,414,525 $ 17,411,765 2,141,556 1995 1997 7-40 Years
Colonial Promenade Montgomery 12,369,284 $ 16,701,716 3,943,667 1990 1993 7-40 Years
Colonial Promenade Montgomery N 6,251,843 $ 8,653,025 800,826 1997 1995 7-40 Years
Colonial Promenade Northdale 15,184,856 $ 18,244,616 1,860,270 1988/00 1995 7-40 Years
Colonial Promenade Trussville 28,297,437 $ 32,510,974 1,854,071 2000 1998 7-40 Years
Colonial Promenade Tutwiler Farm 17,825,461 $ 28,113,599 929,261 2000 1999 7-40 Years
Colonial Promenade University Park 12,283,767 $ 17,285,234 5,249,535 1986/89 1993 7-40 Years
Colonial Promenade Wekiva 15,796,084 $ 18,613,872 2,634,674 1990 1996 7-40 Years
Colonial Promenade Winter Haven 6,576,270 $ 10,621,314 1,358,098 1986 1995 7-40 Years
Colonial Shoppes at Inverness 1,479,152 $ 3,166,312 236,726 1984 1997 7-40 Years
Colonial Shoppes Bear Lake 7,077,963 $ 9,212,403 1,429,432 1990 1995 7-40 Years
Colonial Shoppes Bellwood 5,225,990 $ 5,555,990 1,743,713 1988 1988 7-40 Years
Colonial Shoppes McGehee 5,939,024 $ 6,136,176 2,039,993 1986 1986 7-40 Years
Colonial Shoppes Quaker Village 8,775,674 $ 9,710,642 1,216,063 1968/88/97 1997 7-40 Years
Colonial Shoppes Stanley 1,791,181 $ 2,225,087 304,599 1987/96 1997 7-40 Years
Colonial Shoppes Yadkinville 4,612,776 $ 5,697,378 622,689 1971/97 1997 7-40 Years
Old Springville Shopping Center 3,405,720 $ 3,683,695 2,905,191 1982 1982 7-40 Years
Olde Town Shopping Center 2,842,835 $ 3,186,160 1,108,691 1978/90 1978/90 7-40 Years
P&S Building 833,269 $ 937,358 624,702 1946/76/91 1974 7-40 Years
Rivermont Shopping Center 2,695,067 $ 3,212,513 426,654 1986/97 1997 7-40 Years
Shops at Colonnade 4,062,176 $ 6,530,268 -0- 1989 2002 7-40 Years
Village at Roswell Summit 2,785,843 $ 3,237,761 389,212 1988 1997 7-40 Years
Active Development Projects:
CG at North Heathrow Phase II $ 4,645,883 N/A 1997 N/A
Colonial TownPark Mixed Use 1,792,375 $ 1,792,375 N/A 2000 N/A
Colonial Center 200 at Town Park 14,341,298 $ 15,833,616 246,973 2002 2000 7-40 Years
Colonial Promenade Trussville II $ 2,084,108 N/A 2002 N/A
Other Miscellaneous Projects 5,469,947 $ 5,469,947 N/A 2002 N/A
Unimproved Land:
Colonial Center Mansell Overlook $ 9,083,279 N/A 1997 N/A
Colonial TownPark Infrastructure $ 21,713,702 N/A 1999 N/A
Colonial Center Heathrow $ 13,233,955 N/A 2002 N/A
CV at Town Park Infrastructure $ 4,968,936 N/A 2000 N/A
CG at Wesleyan III $ 239,334 N/A 1996 N/A
Lakewood Ranch 939,006 $ 2,418,303 N/A 1999 N/A
Twin Lakes $ 13,397,955 N/A 2000 N/A
Corporate Assets 8,295,841 $ 8,295,841 4,573,440 N/A N/A N/A
Other Land $ 285,589 N/A N/A N/A
--------------- ---------------- ------------
$ 2,063,901,135 $ 2,380,748,472 $351,163,908
=============== ================ =============
NOTES TO SCHEDULE III
COLONIAL REALTY LIMITED PARTNERSHIP
December 31, 2002
(1) The aggregate cost for Federal Income Tax purposes was approximately
$1.9 billion at December 31, 2002.
(2) See description of mortgage notes payable in Note 8 of Notes to
Consolidated Financial Statements.
(3) The following is a reconciliation of real estate to balances reported
at the beginning of the year:
Reconciliation of Real Estate
2002 2001 2000
-------------- --------------- ---------------
Real estate investments:
Balance at beginning of year $ 2,218,778,048 $ 2,106,563,153 $ 2,006,823,011
Acquisitions of new property 196,009,181 -0- 29,608,188
Improvements and development 93,660,958 194,303,821 138,186,127
Dispositions of property (127,699,715) (82,088,926) (68,054,173)
-------------- --------------- ---------------
Balance at end of year $ 2,380,748,472 $ 2,218,778,048 $ 2,106,563,153
============== =============== ===============
Reconciliation of Accumulated Depreciation
2002 2001 2000
-------------- --------------- ---------------
Accumulated depreciation:
Balance at beginning of year $ 310,439,292 $ 255,730,341 $ 206,448,061
Depreciation 73,602,948 64,692,784 59,548,811
Depreciation of disposition of property (32,886,016) (9,983,833) (10,266,531)
-------------- --------------- ---------------
Balance at end of year $351,156,224 $310,439,292 $255,730,341
============== =============== ===============