UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: Commission File Number: 0-20707
June 30, 2004
COLONIAL REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 63-1098468
(State of organization) (IRS Employer
Identification Number)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal executive offices)
(205) 250-8700
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES _x_ NO ___
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12-b-2).
YES x NO
---- ----
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as of
June 30, 2004 and December 31, 2003 3
Consolidated Condensed Statements of Income and Comprehensive 4
Income for the Three and Six Month Periods Ended June 30,
2004 and 2003
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 2004 and 2003 5
Notes to Consolidated Condensed Financial Statements 6
Report of Independent Auditors 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24
Item 4. Controls and Procedures 24
PART II: OTHER INFORMATION
Item 2. Changes in Securities 25
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
EXHIBITS 27
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
--------------------
(Unaudited) December 31,
June 30, 2004 2003
----------- -----------
ASSETS
Land, buildings, & equipment $ 2,662,131 $ 2,378,821
Undeveloped land and construction in progress 113,824 114,262
Less: Accumulated depreciation (457,842) (419,817)
Real estate assets held for sale, net 15,354 11,691
----------- -----------
Net real estate assets 2,333,467 2,084,957
Cash and equivalents 35,617 8,070
Restricted cash 2,024 1,879
Accounts receivable, net 9,313 10,260
Prepaid expenses 5,738 6,580
Notes receivable 4,166 2,504
Deferred debt and lease costs 32,204 25,832
Investment in partially owned entities 54,383 37,496
Other assets 31,754 17,289
----------- -----------
$ 2,508,666 $ 2,194,867
----------- -----------
LIABILITIES AND PARTNERS' EQUITY
Notes and mortgages payable $ 1,564,609 $ 1,050,145
Unsecured credit facility -- 205,935
Mortgages payable related to real estate held for sale 3,400 11,785
----------- -----------
Total long-term liabilities 1,568,009 1,267,865
Accounts payable 21,348 17,989
Accrued interest 16,718 14,916
Accrued expenses 18,604 6,983
Tenant deposits 3,845 3,239
Unearned rent 3,053 6,878
Other liabilities 2,805 3,715
----------- -----------
Total liabilities 1,634,382 1,321,585
----------- -----------
Redeemable units, at redemption value - 10,345,129 units
outstanding at March 31, 2004 and December 31, 2003 398,598 410,297
Limited partners' interest in consolidated partnership 1,575 --
General partner -
Common equity - 27,191,247 and 26,394,197 units outstanding at
June 30, 2004 and December 31, 2003, respectively 211,700 198,597
Preferred equity ($175,000 liquidation preference) 168,703 168,703
Limited partners' preferred equity ($100,000 liquidation preference) 97,406 97,406
Accumulated other comprehensive income (loss) (3,698) (1,721)
----------- ------------
Total partners' equity 474,111 462,985
----------- -----------
$ 2,508,666 $ 2,194,867
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(in thousands, except per unit data)
---------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenue:
Minimum rent $ 71,896 $ 64,575 $ 140,991 $ 128,558
Percentage rent 641 601 1,321 1,169
Tenant recoveries 9,512 10,077 19,158 20,121
Other property related revenue 5,282 6,471 9,798 11,570
Other non-property related revenue 1,380 1,608 2,676 2,707
--------- --------- --------- ---------
Total revenue 88,711 83,332 173,944 164,125
--------- --------- --------- ---------
Operating Expenses:
Property operating expenses:
General operating expenses 6,323 5,872 12,400 11,596
Salaries and benefits 4,348 3,814 8,356 7,407
Repairs and maintenance 9,501 8,733 17,902 16,873
Taxes, licenses, and insurance 8,109 7,726 16,301 15,502
General and administrative 5,678 5,262 11,217 10,065
Depreciation 21,649 19,862 42,415 39,104
Amortization 2,706 1,898 5,261 3,857
--------- --------- --------- ---------
Total operating expenses 58,314 53,167 113,852 104,404
--------- --------- --------- ---------
Income from operations 30,397 30,165 60,092 59,721
--------- --------- --------- ---------
Other income (expense):
Interest expense (18,320) (16,929) (34,628) (33,232)
Income from investments 312 1 561 83
Gains (losses) on hedging activities 160 (79) 80 (316)
Gains from sales of property 1,117 2,324 2,119 2,355
Minority interest of limited partners (10) -- (10) --
Other (87) 167 (107) 349
--------- --------- --------- ---------
Total other income (expense) (16,828) (14,516) (31,985) (30,761)
--------- --------- --------- ---------
Income from continuing operations 13,569 15,649 28,107 28,960
--------- --------- --------- ---------
Income from discontinued operations 352 481 765 1,275
Gain (loss) on disposal of discontinued operations 491 (47) 9,882 9,579
--------- --------- --------- ---------
Income from discontinued operations 843 434 10,647 10,854
--------- --------- --------- ---------
Net income 14,412 16,083 38,754 39,814
--------- --------- --------- ---------
Distributions to general partner preferred unitholders (3,695) (3,973) (7,391) (7,863)
Distributions to limited partner preferred unitholders (1,813) (2,218) (3,868) (4,438)
Preferred unit issuance costs -- (4,451) -- (4,451)
--------- --------- --------- ---------
Net income available to common unitholders $ 8,904 $ 5,441 $ 27,495 $ 23,062
--------- --------- --------- ---------
Net income available to common unitholders allocated to limited partners (2,463) (1,634) (7,665) (7,145)
--------- --------- --------- ---------
Net income available to common unitholders allocated to general partner $ 6,441 $ 3,807 $ 19,830 $ 15,917
--------- --------- --------- ---------
Net income per common unit - Basic:
Income from continuing operations $ 0.22 $ 0.15 $ 0.45 $ 0.36
Income from discontinued operations 0.02 0.01 0.29 0.32
--------- --------- --------- ---------
Net income per common unit - Basic $ 0.24 $ 0.16 $ 0.74 $ 0.67
--------- --------- --------- ---------
Net income per common unit - Diluted:
Income from continuing operations $ 0.22 $ 0.14 $ 0.45 $ 0.35
Income from discontinued operations 0.02 0.01 0.28 0.31
--------- --------- --------- ---------
Net income per common unit - Diluted $ 0.24 $ 0.15 $ 0.73 $ 0.66
--------- --------- --------- ---------
Average units outstanding:
Basic 37,447 34,732 37,239 34,274
Diluted 37,740 34,982 37,575 34,478
--------- --------- --------- ---------
STATEMENTS OF COMPREHENSIVE INCOME
---------
Net income $ 14,412 $ 16,083 $ 38,754 $ 39,814
Other comprehensive (loss) income
Unrealized (loss) income on cash flow hedging activities (2,157) 518 (1,977) 718
--------- --------- --------- ---------
Comprehensive income $ 12,255 $ 16,601 $ 36,777 $ 40,532
--------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
-------------------
Six Months Ended
June 30,
----------------------
2004 2003
---------- ----------
Cash flows from operating activities:
Net income $ 38,754 $ 39,814
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 48,055 43,547
Income from unconsolidated subsidiaries (555) (90)
Gains from sales of property (12,001) (11,934)
Minority interest in income of limited partners 10 --
Other -- --
Decrease (increase) in:
Restricted cash (145) (440)
Accounts receivable 1,133 2,727
Prepaid expenses 1,517 1,648
Other assets (5,858) (3,675)
Increase (decrease) in:
Accounts payable 2,295 (2,047)
Accrued interest 1,885 1,241
Accrued expenses and other 3,371 6,033
--------- ---------
Net cash provided by operating activities 78,461 76,824
--------- ---------
Cash flows from investing activities:
Acquisition of properties (136,943) --
Development expenditures (51,172) (15,301)
Tenant improvements (10,396) (9,604)
Capital expenditures (7,104) (7,071)
Proceeds from (issuance of) notes receivable, net (1,662) --
Proceeds from sales of property, net of selling costs 25,156 32,772
Distributions from unconsolidated subsidiaries 3,523 2,035
Capital contributions to unconsolidated subsidiaries (19,058) (396)
--------- ---------
Net cash (used in) provided by investing activities (197,656) 2,435
--------- ---------
Cash flows from financing activities:
Principal reductions of debt (2,651) (118,632)
Proceeds from additional borrowings 397,794 186,470
Net change in revolving credit balances (205,935) (175,410)
Cash contributions from the issuance of preferred units -- 120,718
Redemption of preferred units -- (125,000)
Cash contributions 23,739 87,151
Capital distributions (61,088) (57,372)
Other, net (5,117) (1,626)
--------- ---------
Net cash provided by (used in) financing activities 146,742 (83,701)
--------- ---------
Increase (decrease) in cash and equivalents 27,547 (4,442)
Cash and equivalents, beginning of period 8,070 6,236
--------- ---------
Cash and equivalents, end of period $ 35,617 $ 1,794
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
The consolidated financial statements of Colonial Realty Limited
Partnership have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations. The following notes, which represent
interim disclosures as required by the SEC, highlight significant changes to the
notes to the December 31, 2003 audited consolidated financial statements of
Colonial Realty Limited Partnership and should be read together with the
financial statements and notes thereto included in the Form 10-K filed on March
15, 2004.
Note 1 -- Organization and Business
Colonial Realty Limited Partnership ("CRLP") is the operating
partnership of Colonial Properties Trust ("the Trust"), an Alabama real estate
investment trust whose shares are traded on the New York Stock Exchange. The
Trust was originally formed as a Maryland real estate investment trust on July
9, 1993 and reorganized as an Alabama real estate investment trust under a new
Alabama REIT statute on August 21, 1995. The Trust is is a fully integrated,
self-administered and self-managed REIT, which means that it is engaged in the
acquisition, development, ownership, management and leasing of commercial real
estate property. The Trust's activities include ownership and operation of a
diversified portfolio of properties located in the Sunbelt region of the United
States, consisting of 54 multifamily apartment communities (including 39
wholly-owned consolidated properties and 15 properties partially-owned through
unconsolidated joint venture entities), 27 office properties (including 26
wholly-owned consolidated properties and one property partially-owned through an
unconsolidated joint venture entity) and 47 retail properties (including 43
consolidated properties and four properties partially-owned through
unconsolidated joint venture entities), as of June 30, 2004.
Note 2 -- Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include CRLP, Colonial Properties
Services Limited Partnership (in which CRLP holds 99% general and limited
partner interests), and Colonial Properties Services, Inc. ("CPSI"). CPSI is a
taxable REIT subisidiary of the Trust 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 for third-party owned properties
and administrative services to CRLP. CRLP generally reimburses CPSI for payroll
and other costs incurred in providing services to CRLP. All inter-company
transactions are eliminated in the accompanying consolidated financial
statements. Entities in which CRLP owns, directly or indirectly, a fifty percent
or less interest and does not control are reflected in the consolidated
financial statements as investments accounted for under the equity method,
except as discussed below. Under this method the investment is carried at cost
plus or minus equity in undistributed earnings or losses since the date of
acquisition. During December 2003, CRLP entered into a 10% investment in a
partnership interest of three multifamily properties that is accounted for on
the cost basis of accounting because CRLP does not control nor maintain decision
making rights of the partnership.
Use of Estimates
The preparation of consolidated condensed financial statements in
conformity with accounting principles generally accepted in the United States
("GAAP") requires management to make estimates and assumptions that effect the
reported amounts of assets and liablities and disclosure of contingent assets
and liablities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Unaudited Interim Statements
The consolidated financial statements as of and for the three and six
months ended June 30, 2004 and 2003 and related footnote disclosures are
unaudited. In the opinion of management, such financial statements reflect all
adjustments necessary for a fair presentation of the results of the interim
periods. All such adjustments are of a normal, recurring nature.
Reclassifications
Certain reclassifications have been made to the previously reported
2003 statements in order to provide comparability with the 2004 statements
reported herein. These reclassifications have no impact on partners' equity or
net income.
Recent Pronouncements of the Financial Accounting Standards Board
("FASB")
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
applied 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. In December 2003, the FASB revised FIN 46 through the
release of FIN 46R, which clarified certain aspects of FIN 46 and contained
certain provisions that deferred the effective date of FIN 46 to periods ending
after March 15, 2004 for variable interest entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003.
CRLP has identified certain relationships that it deems to be VIEs in
which it holds a significant variable interest. As disclosed in Note 9, relative
to these entities, CRLP's maximum exposure to loss is limited to the carrying
value of CRLP's investments in those entities, which is $54.4 million as of June
30, 2004. In addition to these VIEs, CRLP considers its relationship with two
other entities to also be VIEs. These other entities primarily relate to the
commitment to fund development through a mezzanine financing commitment and
other guarantees. The maximum exposure related to these other entities is
limited to the amount of the funding commitment and other guarantees and is $5.0
million as of June 30, 2004, which results in a total maximum exposure to CRLP
attributable to all VIEs in the aggregate amount of $59.4 million. The adoption
of FIN 46 and FIN 46R did not have a material effect on CRLP's consolidated
financial statements.
Note 3 -- Capital Structure
At June 30, 2004, the Trust controlled CRLP as the sole general partner
and as the holder of 72.4% of the common units of CRLP and 63.6% of the
preferred units (the "Series C Preferred Units" and "Series D Preferred Units").
The limited partners of CRLP who hold common units or "redeemable 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 shares of common stock of the Trust, or
individuals from whom CRLP acquired certain properties, who elected to receive
units in exchange for the properties. Redeemable units represent the number of
outstanding limited partnership units as of the date of the applicable balance
sheet, valued at the closing market value of the Trust's common shares. Each
redeemable unit may be redeemed by the holder thereof for either one share of
common stock of the Trust or cash equal to the fair market value thereof at the
time of such redemption, at the option of the Trust. Additionally, CRLP has
issued and outstanding $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 Trust on or after February 24, 2009 at the
option of the holders of the Series B Units.
The Board of Trustees of the Trust manages CRLP by directing the
affairs of the Trust. The Trust's interests in CRLP entitle it to share in cash
distributions from, and in the profits and losses of, CRLP in proportion to the
Trust's percentage interest therein and entitle the Trust to vote on all matters
requiring a vote of the limited partners.
Note 4 -- Acquisition and Disposition Activity
On April 2, 2004, CRLP acquired Colonial Grand at Arringdon, a 320-unit
multifamily asset located in Raleigh/Durham, North Carolina. Colonial Grand at
Arringdon was a development that was completed in the second quarter of 2003 and
was acquired with a 90.0% physical occupancy. The total purchase price was $26.8
million and was funded through borrowings on our unsecured line of credit. CRLP
served as development consultant and leasing and management agent for the
third-party developer in connection with this property. For CRLP's involvement
and a loan guarantee agreement, CRLP had a first right of refusal to purchase
the property.
On April 8, 2004, CRLP acquired Kingwood Commons, a 164,385 square-foot
retail lifestyle center located in the northeastern submarket of Houston, Texas.
The first development phase of Kingwood Commons was completed in 2001, which
positioned the property as a neighborhood grocery center, anchored by Randall's
grocery store, a division of Safeway, Inc. The property expanded and broadened
its tenants, creating a lifestyle center, through the next two phases of
development, which completed construction in 2004. Upon acquisition, Kingwood
Commons included high-end retailers such as Talbot's, Chico's, Ann Taylor Loft,
Jos. A. Banks, Bombay/Bombay Kids, James Avery, and Carrabba's Italian Grill.
The total purchase price was $34.5 million and was funded through borrowings
under CRLP's unsecured line of credit.
On May 28, 2004, CRLP disposed of its 15% interest in Colonial Grand at
Ponte Vedra, a 240-unit multifamily asset located in Jacksonville, Florida.
CRLP's interest was sold for $2.4 million, which was used to repay CRLP's
allocated portion of outstanding mortgage debt of $1.3 million and the remaining
proceeds were used to repay a portion of the borrowings under CRLP's unsecured
line of credit.
On June 2, 2004, CRLP acquired five multifamily assets located in
Atlanta, Georgia from Roberts Realty Investors, Inc. The five assets total 1,091
units and include Bradford Creek, Plantation Trace, River Oaks and Veranda Chase
located in the Gwinnett submarket, and Preston Oaks located in the Dunwoody
submarket. All five properties are class-A multifamily assets. The assets were
acquired for a total purchase price of $109.2 million, which consisted of
approximately $50.4 million of cash and the assumption of approximately $58.8
million of existing mortgage debt that bears interest at a stated rate ranging
from 5.54% to 7.38%. CRLP recorded a debt premium of $4.4 million, computed
using estimated market interest rates from 3.45% to 5.39%, since the debt
assumed was at above-market interest rates compared to similar debt instruments
at the date of acquisition. The cash portion of the acquisition was funded
through borrowings under CRLP's unsecured line of credit.
On June 15, 2004, CRLP and Dreyfuss Real Estate Advisors ("DRA")
entered into a partnership agreement, in which CRLP maintains a 20% interest and
manages The Cunningham Apartments, a 280-unit multifamily asset located in
Austin, Texas. CRLP's total investment in The Cunningham Apartments was $3.9
million, which consisted of $2.8 million of newly issued mortgage debt and $1.1
million of cash, which was funded through borrowings under CRLP's unsecured line
of credit.
On June 18, 2004, CRLP acquired a 90% partnership interest in The
Village on the Parkway, a 381,166 square foot retail lifestyle center located in
Dallas, Texas. CRLP's 90% investment in the partnership was $56.4 million, which
consisted of $14.1 million of equity investment and $42.3 million of newly
issued mortgage debt, representing CRLP's allocated portion of mortgage debt for
the property. As CRLP maintains controlling financial interest of this property,
the assets, liabilities and results of operations of the property are
consolidated within CRLP's financial statements. The third party's partnership
interest is reflected in the financial statements as a minority interest in
consolidated partnership. Under the partnership agreement, CRLP will receive a
9% preferred return on its equity investment and 65% of any remaining available
cash. The 10% third-party equity partner will receive the remaining 35% of
available cash after payment of the 9% return on CRLP's equity investment.
CRLP's equity investment was funded through borrowings under CRLP's unsecured
line of credit.
On June 25, 2004, CRLP acquired a 25% partnership interest in Colonial
Grand at Bayshore, a 376-unit multifamily asset and Colonial Grand at Palma
Sola, a 340-unit multifamily asset, both located in Bradenton, Florida. CRLP
acquired the partnership interest from CMS Entrepreneurial III and IV Partners,
a Delaware general partnership. CRLP's 25% investment in the partnership was
$11.9 million, which consisted of $3.0 million of equity investment and $8.9
million of mortgage debt, representing CRLP's allocated portion of mortgage debt
for the property. CRLP's equity investment was funded through available cash.
The results of operations of the above mentioned acquisitions have been
included in the consolidated financial statements since their respective dates
of acquisition. The following table summarizes the estimated fair values of the
assets acquired and liablities assumed as of the respective acquisition dates
during the quarter ended June 30, 2004.
For the Quarter Ended
Assets Acquired and Liabilities Assumed June 30, 2004
- ------------------------------------------------- --------------------------
(amounts in thousands)
Land, buildings, & equipment $ 223,828
Prepaid expenses 1,831
Above-market leases 51
In-place lease assets 12,646
Other assets 786
--------------------------
Total assets 239,142
Notes and morgages payable (105,765)
Debt premium (4,393)
Other liabilities (3,612)
Minority interest in consolidated partnership (1,565)
--------------------------
Net assets acquired $ 123,807
==========================
Note 5 -- Financing Activity
On April 2, 2004, CRLP completed a $100.0 million public debt offering
of unsecured senior notes. The notes, which mature in April 2011 bear a coupon
rate of 4.80%, and were priced to yield an effective rate of 4.82% over the
seven-year term. CRLP used the net proceeds of the offering to repay a portion
of the outstanding balance on its unsecured line of credit. On June 21, 2004,
CRLP entered into a reverse swap agreement on the $100.0 million senior notes,
maturing in April 2011, to a floating rate equal to the 6-month LIBOR rate,
which was 1.87% as of June 30, 2004.
On June 17, 2004, CRLP completed a $300.0 million public debt offering
of unsecured senior notes. The notes, which mature in June 2014 bear a coupon
rate of 6.25%, and were priced to yield an effective rate of 6.35% over the
ten-year term. CRLP used the net proceeds of the offering to repay the
outstanding balance on its unsecured line of credit, and the remaining amount
will be used for general corporate purposes and future acquisitions. In
anticipation of closing the above mentioned public debt offering, CRLP entered
into a $232.0 million treasury lock on June 14, 2004 with a fixed 10-year
treasury rate of 4.84%. On June 17, 2004, CRLP settled the treasury lock
agreement with a payment of approximately $2.1 million, which will be amortized
over the life of the associated debt.
Note 6 -- Net Income Per Unit
The following table sets forth the computation of basic and diluted
earnings per unit:
(amounts in thousands, except per unit data)
Three Three Six Six
Months Ended Months Ended Months Months
June 30, June 30, Ended Ended
June 30, June 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Numerator:
Net income $ 14,412 $ 16,083 $ 38,754 $ 39,814
Less: Preferred distributions (5,508) (6,191) (11,259) (12,301)
Less: Preferred unit issuance costs - (4,451) - (4,451)
------------- ------------- ------------- -------------
Income available to common unitholders $ 8,904 $ 5,441 $ 27,495 $ 23,062
------------- ------------- ------------- -------------
Denominator:
Denominator for basic net income per share -
weighted average units 37,447 34,732 37,239 34,274
Effect of dilutive securities:
Trustee and employee stock options,
treasury method 293 250 336 204
------------- ------------- ------------- -------------
Denominator for diluted net income per share -
adjusted weighted average units 37,740 34,982 37,575 34,478
------------- ------------- ------------- -------------
Basic net income per unit $ 0.24 $ 0.16 $ 0.74 $ 0.67
------------- ------------- ------------- -------------
Diluted net income per unit $ 0.24 $ 0.15 $ 0.73 $ 0.66
------------- ------------- ------------- -------------
Options to purchase 5,000 common shares at an exercise price of $37.75
per share were outstanding during 2004, but were not included in the computation
of diluted net income per share because the options' exercise price was greater
than the average market price of the common shares and, therefore, the effect
would be antidilutive.
Note 7 -- Income from Discontinued Operations
During the quarter ended June 30, 2004, CRLP sold its interest in one
multifamily asset for proceeds of approximately $2.4 million. During the quarter
ended March 31, 2004, CRLP sold one retail asset for proceeds of approximately
$21.3 million. In accordance with SFAS No. 144 Accounting for the Impairment on
Disposal of Long-Lived Assets, net income and gain (loss) on disposition of real
estate for properties sold, in which CRLP does not maintain continuing
involvement, are reflected in the consolidated statements of income as
"discontinued operations" for all periods presented. Additionally, CRLP
classifies real estate assets as held for sale, only after CRLP has received
approval by its internal investment committee, has commenced an active program
to sell the assets, and in the opinion of CRLP's management it is probable the
asset will sell within the next 12 months. At June 30, 2004, CRLP had classified
one multifamily asset, containing 178 units and three retail assets, containing
163,500 square feet as held for sale. These real estate assets are reflected in
the accompanying consolidated balance sheet at $15.4 million at June 30, 2004,
which represents the lower of depreciated cost or fair value less costs to sell.
Following is a listing of the properties CRLP disposed in 2004 and 2003 that are
classified as discontinued operations:
- ------------------------------------------- --------------------- -------------------- ---------------------
Property Location Date Units/Square Feet
- ------------------------------------------- --------------------- -------------------- ---------------------
Multifamily
Colonial Grand at Citrus Park Tampa, FL March 2003 176
Colonial Grand at Ponte Vedra (1) Jacksonville, FL May 2004 240
Office
2100 International Park Birmingham, AL September 2003 29,000
Retail
Colonial Promenade Bardmoor St. Petersburg, FL March 2003 152,667
Colonial Promenade University Park I Orlando, FL March 2004 215,485
(1) CRLP sold its 15% interest in this property. See Note 4 -
Acquisition and Disposition Activity for further discussion.
Also under the provisions of SFAS No. 144, the reserves, if any, to
write down the carrying value of the real estate assets designated and
classified as held for sale are also included in discontinued operations. All
subsequent gains and or additional losses on the sale of these assets are also
included in discontinued operations. Additionally, under SFAS No. 144, any
impairment losses on assets held for continuing use are included in continuing
operations. Below is a summary of the operations of the properties sold or
classified as held for sale during 2004 and 2003 that are classified as
discontinued operations:
Three Months Ended Six Months Ended
(amounts in thousands) June 30, June 30,
-------------------------- -------------------------
2004 2003 2004 2003
-------------------------- -------------------------
Property revenues:
Base rent $ 655 $ 1,088 $ 1,591 $ 2,937
Percentage rent - - - (6)
Tenant recoveries 71 224 246 505
Other property revenue 21 179 42 229
-------------------------- -------------------------
Total property revenues 747 1,491 1,879 3,665
Property operating and maintenance expense 217 449 548 1,089
Depreciation 150 250 359 693
Amortization 5 60 20 87
(Income) loss from investments 6 (4) 5 (7)
Interest expense 17 255 182 528
-------------------------- -------------------------
395 1,010 1,114 2,390
Income from discontinued operations before net gain
on disposition of discontinued operations 352 481 765 1,275
Net gain (loss) on disposition of discontinued operations 491 (47) 9,882 9,579
-------------------------- -------------------------
Income from discontinued operations $ 843 $ 434 $ 10,647 $ 10,854
========================== =========================
Note 8 -- 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" in CRLP's
2003 Annual Report. 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 divisional NOI. Divisional NOI is
defined as total property revenues, including unconsolidated partnerships and
joint ventures, less total property operating expenses (such items as repairs
and maintenance, payroll, utilities, property taxes, insurance, advertising).
Divisional information and the reconciliation of total divisional revenues to
total revenues, total divisional NOI to income from continuing, and total
divisional assets to total assets, for the three and six months ended June 30,
2004 and 2003, and for the periods ended June 30, 2004 and December 31, 2003 is
presented below:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------- -----------------------------
(in thousands) 2004 2003 2004 2003
----------------- ----------------- ------------- ------------
Revenues:
Divisional Revenues
Multifamily $ 28,716 $ 24,589 $ 55,264 $ 48,994
Office 24,187 25,124 48,204 47,793
Retail 39,030 37,450 77,586 76,286
----------------- ----------------- ------------- ------------
Total Divisional Revenues: 91,933 87,163 181,054 173,073
Partially-owned subsidiaries (3,874) (3,927) (7,938) (7,854)
Unallocated corporate revenues 1,399 1,587 2,707 2,571
Discontinued operations revenues (747) (1,491) (1,879) (3,665)
----------------- ----------------- ------------- ------------
Total Consolidated Revenues: $ 88,711 $ 83,332 $ 173,944 $164,125
----------------- ----------------- ------------- ------------
NOI:
Divisional NOI
Multifamily $ 17,722 $ 15,162 $ 33,897 $ 30,487
Office 17,269 18,154 34,270 34,037
Retail 26,746 25,572 53,944 52,786
----------------- ----------------- ------------- ------------
Total Divisional NOI: 61,737 58,888 122,111 117,310
Partially-owned subsidiaries (2,154) (2,211) (4,532) (4,480)
Unallocated corporate revenues 1,399 1,587 2,707 2,571
Discontinued operations NOI (530) (1,041) (1,331) (2,576)
General and administrative expenses (5,678) (5,262) (11,217) (10,065)
Depreciation (21,649) (19,862) (42,415) (39,104)
Amortization (2,706) (1,898) (5,261) (3,857)
Other (22) (36) 30 (78)
----------------- ----------------- ------------- ------------
Income from operations 30,397 30,165 60,092 59,721
----------------- ----------------- ------------- ------------
Total other expense (16,818) (14,516) (31,975) (30,761)
----------------- ----------------- ------------- ------------
Income from continuing operations $ 13,579 $ 15,649 $ 28,117 $ 28,960
----------------- ----------------- ------------- ------------
(in thousands) June 30, December 31,
Assets: 2004 2003
----------------- -----------------
Divisional Assets
Multifamily $ 824,710 $ 677,469
Office 628,041 607,154
Retail 1,056,310 931,894
----------------- -----------------
Total Divisional Assets: 2,509,061 2,216,517
Partially-owned subsidiaries (113,594) (117,271)
Unallocated corporate assets (1) 113,199 95,621
----------------- -----------------
$ 2,508,666 $ 2,194,867
----------------- -----------------
(1) Includes CRLP's investment in partially-owned entities of $54,383 as of
June 30, 2004, and $37,496 as of December 31, 2003.
Note 9 -- Investment in Partially Owned Entities
At June 30, 2004, CRLP had investments in thirteen partially-owned
entities. CRLP accounts for these investments in partially-owned entities using
the equity method, except for the DRA Partnership, which is accounted for on the
cost basis as discussed in Note 2 - Summary of Significant Accounting Policies.
The following table summarizes the investments in partially owned entities as of
June 30, 2004 and December 31, 2003:
(in thousands)
Percent June 30, December 31,
Owned 2004 2003
---------- ------------------ ---------------
Multifamily:
CMS/Colonial Joint Venture I 15.00% $ 1,552 $ 1,923
CMS/Colonial Joint Venture II 15.00% 638 689
CMS/Colonial Florida Joint Venture 25.00% 2,968 0
G&I IV Cunningham GP LLC 20.00% 1,235 0
DRA Partnership 10.00% 2,323 2,284
------------------ -------------
8,716 4,896
Office:
600 Building Partnership, Birmingham, AL 33.33% (2) (8)
Retail:
Orlando Fashion Square Joint Venture, Orlando, FL 50.00% 18,873 19,698
Parkway Place Limited Partnership, Huntsville, AL 45.00% 11,117 10,493
Turkey Creek Joint Venture, Knoxville, TN 50.00% 13,257 0
Colonial Promenade Madison, Huntsville, AL 25.00% 2,319 2,341
Highway 150, LLC, Birmingham, AL 10.00% 86 56
------------------ -------------
45,652 32,588
Other:
Colonial/Polar-BEK Management Company,
Birmingham, AL 50.00% 31 36
NRH Enterprises, LLC, Birmingham, AL 20.00% (14) (16)
------------------ -------------
17 20
-------------------- ---------------
$ 54,383 $ 37,496
==================== ===============
Note 10 -- Financial Instruments: Derivatives and Hedging
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), 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 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. For derivatives not designated as hedges, changes in fair value are
recognized in earnings.
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 the quarter ended
June 30, 2004, such derivatives were used to hedge the variable cash flows
associated with existing variable-rate debt and forecasted issuances of debt.
CRLP primarily uses interest rate swaps as part of its fair value hedging
strategy. These swaps involve the receipt of fixed rate amounts in exchange for
variable rate amounts over the life of the agreements without exchange of the
underlying principal amount. During the quarter ended June 30, 2004, such swaps
were used to hedge the change in fair value of fixed rate debt.
As of June 30, 2004, no derivatives were designated as hedges of net
investments in foreign operations. Additionally, CRLP does not use derivatives
for trading or speculative purposes. Derivatives not designated as hedges are
not speculative and are used to manage CRLP's exposure to interest rate
movements and other identified risks, but do not meet the strict hedge
accounting requirements of SFAS 133. The only swap that CRLP has that is not
designated as a hedge for SFAS 133 was acquired through the purchase of a
property and its corresponding debt.
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 June 30, 2004. The notional value at June
30, 2004 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.
Fair Value
Interest At June 30, 2004
Product Type Notional Value Rate Maturity (in thousands)
- ------------------------------------- ------------------------- ------------- -------------- -------------------------
Interest Rate SWAP, Cash Flow $30.2 - $27.7 million 5.932% 1/01/06 $ (1,335)
Interest Rate SWAP, Cash Flow $17.0 million 7.380% 5/05/06 (908)
Interest Rate SWAP, Fair Value $100.0 million 4.803% 4/01/11 778
Interest Rate CAP, Cash Flow $19.7 million 6.850% 6/29/07 35
Interest Rate CAP, Cash Flow $16.7 million 6.850% 7/03/07 29
Interest Rate CAP, Cash Flow $30.4 million 11.200% 6/30/06 -
Interest Rate CAP, Cash Flow $16.4 million 4.840% 4/1/06 15
Interest Rate CAP, Cash Flow $25.9 million 4.840% 4/1/06 24
Interest Rate CAP, Cash Flow $8.4 million 4.840% 4/1/06 8
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.
On June 21, 2004, CRLP entered into a reverse swap agreement on $100.0
million 4.80% senior notes to a floating rate equal to the 6-month LIBOR rate,
which was 1.87% as of June 30, 2004. The reverse swap agreement matures in April
2011.
At June 30, 2004, derivatives with a fair value of $2.2 million were
included in other liabilities and $0.1 were included in other assets.
Additionally, the fair value of our fair value interest rate swap of $0.8
million was included in notes and mortgages payable. The change in net
unrealized gains/losses of $2.0 million in the six months ending June 30, 2004
for derivatives designated as cash flow hedges is a component of shareholders'
equity. The change in fair value of derivatives not designated as hedges of $0.1
million is included in gains (losses) on hedging activities in the quarter ended
June 30, 2004. No hedge ineffectiveness on fair value hedges was recognized
during the quarter ended June 30, 2004. Hedge ineffectiveness of approximately
$40,000 on cash flow hedges due to index mismatches was recognized in gains
(losses) on hedging activities during the quarter ended June 30, 2004.
Note 11 -- Subsequent Events
Acquisitions
On August 2, 2004, CRLP acquired three retail assets totaling
approximately 521,000 square feet in South Florida. The 371,000 square foot
Deerfield Mall is located in Deerfield Beach, Florida, south of Boca Raton. With
a current occupancy of 95.0%, the property is anchored by Publix, Walgreens,
Marshall's, Sports Authority, TJ Maxx and OfficeMax. With 100.0% occupancy, the
82,000 square foot College Parkway property is located in Fort Myers, Florida
and includes such tenants as Office Depot and the Blue Pepper Market. Pines
Plaza, 100.0% occupied, is a 68,000 square foot center and is anchored by Comp
USA, Office Depot and Sound Advice. The assets were acquired for a total
purchase price of $81.7 million, which consisted of approximately $32.8 million
of cash and the assumption of approximately $48.9 million of existing mortgage
debt. The cash portion of the acquisition was funded through borrowings under
CRLP's unsecured line of credit.
Dispositions
On July 15, 2004, CRLP sold Colonial Shoppes Stanly, a 47,070
square-foot retail asset located in Locust, North Carolina. The total sales
price was $2.4 million, which was used for general corporate purposes and to
fund development projects.
On July 27, 2004, CRLP sold Village at Roswell Summit, a 25,510
square-foot retail asset located in Atlanta, Georgia. The total sales price was
$4.0 million, which was used to repay a portion of the outstanding borrowings
under CRLP's unsecured line of credit.
Investments held for sale
Subsequent to June 30, 2004, CRLP and its third party partner commenced
an active program to dispose of Orlando Fashion Square, a 1,080,535 square-foot
retail asset located in Orlando, Florida. CRLP's investment in the
partially-owned entity is $18.9 million as of June 30, 2004, which is reflected
within investment in partially-owned entities on CRLP's balance sheet. CRLP
expects to dispose of the asset within the next 12 months.
Distribution
On July 20, 2004, a cash distribution was declared to shareholders of
CRLP and partners of CRLP in the amount of $0.67 per share and per unit,
totaling $25.2 million. The distribution was declared to partners of record as
of July 30, 2004, and was paid on August 6, 2004.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of
Colonial Properties Trust:
We have reviewed the accompanying condensed consolidated balance sheet of
Colonial Realty Limited Partnership ("the Partnership) as of June 30, 2004, and
the related condensed consolidated statements of income for each of the
three-month and six-month periods ended June 30, 2004 and 2003 and the condensed
consolidated statement of cash flows for the six-month periods ended June 30,
2004 and 2003. These interim financial statements are the responsibility of the
Partnership's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2003, and the related consolidated statements of income, partners'
equity, and of cash flows for the year then ended (not presented herein), and in
our report dated March 1, 2004 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2003,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmigham, Alabama
August 6, 2004
COLONIAL REALTY LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The following discussion and analysis of the consolidated financial
condition and consolidated results of operations should be read together with
the consolidated financial statements of Colonial Realty Limited Partnership and
notes thereto contained in this Form 10-Q. This report on Form 10-Q 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. A number of important factors could cause actual results to differ
materially from those indicated by the forward-looking statements, including,
but not limited to, the risks described in our 2003 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 15, 2004. 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 of our general partner to maintain its status as a REIT for
federal and state income tax purposes;
o Governmental actions and initiatives; and o Environmental/safety
requirements.
General
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" or "the Trust" 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 Trust, which is a
self-administered equity real estate investment trust (a "REIT") that owns,
develops and operates multifamily, office and retail properties in the Sunbelt
region of the United States. The Trust is a fully-integrated real estate
company, which means that it is engaged in the acquisition, development,
ownership, management and leasing of commercial real estate property. The
Trust's activities include full or partial ownership of a diversified portfolio
of 128 properties as of June 30, 2004, 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 June 30, 2004, we owned or maintained a partial ownership in 54
multifamily apartment communities containing a total of 18,493 apartment units
(including 39 wholly-owned consolidated properties and 15 properties
partially-owned through unconsolidated joint venture entities aggregating 13,814
and 4,679 units, respectively) (the "multifamily properties"), 27 office
properties containing a total of approximately 5.7 million square feet of office
space (including 26 wholly-owned consolidated properties and one property
partially-owned through an unconsolidated joint-venture entity aggregating
5,685,500 and 30,000 square feet, respectively )(the "office properties"), 47
retail properties containing a total of approximately 15.7 million square feet
of retail space (including 43 consolidated properties and four properties
partailly-owned through unconsolidated joint venture entities aggregating 13.5
million and 2.2 million square feet, respectively) (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
June 30, 2004, the multifamily properties that had achieved stabilized occupancy
were 96.0% leased (96.1% for consolidated properties and 93.9% for
unconsolidated properties), the office properties that had achieved stabilized
occupancy were 90.7% leased (90.7% for consolidated properties and 100.0% for
unconsolidated properties), and the retail properties that had achieved
stabilized occupancy were 89.0% leased (89.1% for consolidated properties and
88.0% for unconsolidated properties).
As a lessor, the majority of our revenue is derived from tenants under
existing leases at our properties. Therefore, our operating cash flow is
dependent upon the rents that we are able to charge to our tenants, and the
ability of these tenants to make their rental payments. We believe that the
diversified nature of the properties in which we typically invest - multifamily,
office and retail - provides a more stable revenue flow in uncertain economic
times, in that our diversified property types generally do not have the same
economic cycles and while one property type may be experiencing difficulty, the
other property types may be maintaining their strength.
The following table summarizes certain key operating performance
measures for our properties as of and for the quarters ended June 30, 2004 and
2003:
------------------------------------------------------------------------------------
Consolidated Properties Unconsolidated Properties Total Properties
------------------------------------------------------------------------------------
As of and for the As of and for the As of and for the
Quarter Ended June 30, Quarter Ended June 30, Quarter Ended June 30,
------------------------------------------------------------------------------------
2004 2003 2004 2003 2004 2003
------------ -------------- -------------- -------------- ----------- ------------
Multifamily Properties
- ----------------------------------------------
Physical Occupancy 96.1% 93.7% 93.9% 91.7% 96.0% 93.6%
Economic Occupancy (1) 80.8% 79.1% 80.8% 80.6% 80.7% 79.2%
Same-Property NOI Growth (2) 4.4% -4.7% n/a n/a 4.4% -4.7%
End of Month Scheduled Base
Rent per Unit per Month $ 827 $ 790 $ 717 $ 706 $ 824 $ 788
Capital Expenditures per Unit $ 164 $ 134 $ 129 $ 252 $ 163 $ 130
Office Properties
- ----------------------------------------------
Physical Occupancy 90.7% 91.5% 100.0% 100.0% 90.7% 91.5%
Same-Property NOI Growth (2) -13.8% -5.9% n/a n/a -13.8% -5.9%
Base Rent per Square Foot $ 18.33 $ 19.05 $ 13.23 $ 13.48 $ 18.33 $ 19.06
Capital Expenditures per Square Foot $ 0.62 $ 0.56 $ -0- $ -0- $ 0.62 $ 0.56
Retail Properties
- ----------------------------------------------
Same-Property NOI Growth (2) 2.5% -4.8% -1.8% 4.5% 2.2% -4.5%
Regional Malls:
Physical Occupancy 91.2% 90.0% 86.9% 84.6% 90.9% 89.6%
Base Rent per Square Foot $ 22.07 $ 21.82 $ 31.04 $ 30.37 $ 22.89 $ 22.41
Tenant Gross Sales per Square Foot $ 277.43 $ 268.02 $ 267.98 $ 281.35 $ 275.56 $ 268.49
Shopping Centers:
Physical Occupancy 85.7% 81.8% 99.5% 99.4% 86.0% 82.4%
Base Rent per Square Foot $ 14.56 $ 13.17 $ 15.99 $ 16.14 $ 14.58 $ 13.21
Tenant Gross Sales per Square Foot $ 223.01 $ 220.22 $ 256.10 $ 262.55 $ 223.62 $ 221.79
-------------------------------------------------------------------------------------
(1) Economic Occupancy represents scheduled base rents, less vacancy loss
and concessions, divided by scheduled base rents.
(2) NOI amounts are based on our segment data. See Note 8 - Segment
Information in our Notes to Consolidated Condensed Financial Statements.
As a result of the recent economic downturn in the United States, our
operations have been negatively impacted. Our multifamily properties have been
impacted by a liberal supply of new apartments and a robust single-family
housing market, driven by low interest rates and weak job growth. However, our
multifamily division's physical occupancy percentage rose to 96.0% as of June
30, 2004, and our economic occupancy remained fairly stable at 80.7%, as a
result of the move-in concessions being offered to our new residents. During the
second quarter of 2004, we acquired one multifamily asset located in
Raleigh/Durham, North Carolina consisting of 320 units for $26.8 million, five
multifamily assets located in Atlanta, Georgia consisting of 1,091 units for
$109.2 million, a 25% interest in two properties located in Bradenton, Florida
consisting of 716 units for $11.9 million, and a 20% interest in one multifamily
asset located in Austin, Texas consisting of 280 units for $ 3.9 million.
Although there are signs of current job growth and discussions of rising
interest rates, we remain cautiously optimistic of how soon sustained job growth
will be, but believe these factors should allow our multifamily division to
improve its fundamentals in the quarters ahead.
Our office properties continue to be negatively impacted by the absence
of corporate hiring and a "buyers market" for office space in which increased
tenant leverage put pressure on current rental rates. As a result, our office
division's base rent per square foot decreased from $19.06 in the second quarter
of 2003 to $18.33 in the second quarter of 2004, or a -3.8% change.
Additionally, during the year ending December 31, 2003, we had approximately
183,000 square feet of early lease terminations and received lease termination
fees on a portion of the terminations of approximately $2.6 million from our
office properties. Future rental income from our office properties may be
affected by future lease terminations because we may be unable to collect the
full amount that was due under the lease and may incur additional cost in
re-leasing the space. We presently believe the office sector will remain
challenged thoughout 2004 and improved operating performance may be achieved in
2005.
For the second quarter of 2004, our retail same property net operating
income increased 2.2% over the same period in 2003. During the second quarter of
2004 our retail properties recognized lease termination fees of $0.6 million as
compared to $0.2 million in the second quarter of 2003. Excluding the effects of
lease termination fees, our retail same property net operating income for the
second quarter of 2004 would have been an increase of 0.3% over the second
quarter of 2003. During the second quarter of 2004, we acquired a 164,385
square-foot retail lifestyle center located in the northeastern submarket of
Houston, Texas for $34.5 million and a 90% partnership interest in a 381,166
square foot retail lifestyle center located in Dallas, Texas for $56.4 million,
and continued the redevelopment of two retail malls with total estimated costs
of approximately $47.7 million. As with any development, future rental income
will be affected by the timing of completion of the redevelopment projects and
the ability to timely lease the space at market rental rates. Throughout the
recent economic downturn, consumer confidence has remained strong. As a result,
we currently expect our retail division to show continued improved operating
performance throughout 2004.
Results of Operations -- Three Months Ended June 30, 2004 and 2003
Minimum rent for the quarter ended June 30, 2004 increased $7.3 million
or 11.3% as compared with the quarter ended June 30, 2003. Minimum rent
increased $6.3 million as a result of the acquisitions of Colonial Grand at
Metrowest, Colonial Village at Quarry Oaks, Colonial Center Research Place, the
DRS Building, Colonial Grand at Arringdon, Bradford Creek, Plantation Trace,
River Oaks, Veranda Chase, Preston Oaks, Kingwood Commons, and Village on the
Parkway, coupled with the completion of Colonial Center at TownPark 200, the
retail portion of Colonial TownPark and Colonial Promenade Trussville II, which
were completed developments in 2003 and 2004. The remaining increase is
primarily a result of an increase in leasing activity in our multifamily and
retail divisions.
Other property related revenue for the quarter ended June 30, 2004
decreased $1.2 million or 18.4% as compared with the quarter ended June 30,
2004. This decrease is primarily attributable to a decrease of $2.2 million in
early lease terminations within our office division in 2004 as compared to 2003,
which is offset by an increase in early lease terminations within our retail
division of $0.4 million in the quarter ended June 30, 2004 as compared to the
same period in 2003. Additionally, other income attributable to the properties
acquired or developed during the second half of 2003 and the first half of 2004
increased $0.3 million during the second quarter of 2004 as compared to the same
period in 2003.
Total operating expenses for the quarter ended June 30, 2004 increased
$5.1 million or 9.7% as compared to the quarter ended June 30, 2003. Of this
increase, $4.2 million is attributable to the properties acquired or developed
in the second half of 2003 or the first half of 2004. The remaining increase is
a result of an overall increase property operating expenses at our existing
properties, coupled with an increase in our corporate overhead expenses as a
result of the continued growth of the Company.
Interest expense for the quarter ended June 30, 2004 increased $1.4
million or 8.2% as compared to the quarter ended June 30, 2003. This increase is
primarily attributable to the issuance of $100 million of senior notes in April
2004, $300 million of senior notes in June 2004 through CRLP, and the assumption
of $105.8 million of mortgage debt related to properties acquired during the
quarter ended June 30, 2004. Additionally, our consolidated debt balance
increased from $1.15 billion at June 30, 2003 to $1.57 billion at June 30, 2004.
Gains from sales of property included in continuing operations for the
quarter ended June 30, 2004 decreased $1.2 million as compared to the quarter
ended June 30, 2003. The decrease is a result of the sale of two parcels of land
in the second quarter of 2004 as compared to the sale of three parcels of land
in the second quarter of 2003, resulting in less gains recognized in 2004. The
operating property sales that occurred in the second quarter of 2004 and 2003
are classified as discontinued operations.
Results of Operations -- Six Months Ended June 30, 2004 and 2003
Minimum rent for the six months ended June 30, 2004 increased $12.4
million or 9.7% as compared with the six months ended June 30, 2003. Minimum
rent increased $10.1 million as a result of the acquisitions of Colonial Grand
at Metrowest, Colonial Village at Quarry Oaks, Colonial Center Research Place,
the DRS Building, Colonial Grand at Arringdon, Bradford Creek, Plantation Trace,
River Oaks, Veranda Chase, Preston Oaks, Kingwood Commons, and Village on the
Parkway, coupled with the completion of Colonial Center at TownPark 200, the
retail portion of Colonial TownPark and Colonial Promenade Trussville II, which
were completed developments in 2003 and 2004. The remaining increase is
primarily a result of an increase in leasing activity in our multifamily and
retail divisions.
Other property related revenue for the six months ended June 30, 2004
decreased $1.8 million or 15.3% as compared with the six months ended June 30,
2004. This decrease is primarily attributable to a decrease of $2.0 million in
early lease terminations within our office division in 2004 as compared to 2003,
which is offset by an increase in early lease terminations within our retail
division of $0.1 million in the six month period ended June 30, 2004 as compared
to the same period in 2003. Additionally, other income attributable to the
properties acquired or developed during the second half of 2003 and the first
half of 2004 during the six month period ended June 30, 2004 increased $0.4
million as compared to the same period in 2003.
Total operating expenses for the six months ended June 30, 2004
increased $9.4 million or 9.0% as compared to the six months ended June 30,
2003. Of this increase, $6.8 million is attributable to the properties acquired
or developed in the second half of 2003 or the first half of 2004, and $1.2
million is attributable to an increase in our corporate overhead expenses as a
result of the continued growth of the Company and an increase in recruiting and
hiring costs related to the replacement of our Chief Financial Officer who
retired in the first quarter of 2004 and other new employees. The remaining
increase is a result of an overall increase property operating expenses at our
existing properties,
Interest expense for the six months ended June 30, 2004 increased $1.4
million or 4.2% as compared to the six months ended June 30, 2003. This increase
is primarily attributable to the issuance of $100 million of senior notes in
April 2004, $300 million of senior notes in June 2004 through CRLP, and the
assumption of $105.8 million of mortgage debt related to properties acquired
during the quarter ended June 30, 2004. Additionally, our consolidated debt
balance increased from $1.15 billion at June 30, 2003 to $1.57 billion at June
30, 2004.
Liquidity and Capital Resources
Short-Term Liquidity Needs
Our short-term liquidity requirements consist primarily of funds
necessary to pay for operating expenses directly associated with our portfolio
of properties (including regular maintenance items), capital expenditures
incurred to lease our space (e.g., tenant improvements and leasing commissions),
interest expense and scheduled principal payments on our outstanding debt, and
quarterly distributions that we pay to our common and preferred unitholders. In
the past, we have primarily satisfied these requirements through cash generated
from operations. We believe that cash generated from operations and borrowings
under our unsecured line of credit will be sufficient to meet our short-term
liquidity requirements. However, factors described below and elsewhere herein
may have a material adverse effect on our cash flow.
The majority of our revenue is derived from tenants under existing
leases at our properties. Therefore, our operating cash flow is dependent upon
the rents that we are able to charge to our tenants, and the ability of these
tenants to make their rental payments. We believe that the diversified nature of
the properties in which we typically invest - multifamily, office and retail -
provides a more stable revenue flow in uncertain economic times, in that our
diversified property types generally do not have the same economic cycles and
while one property type may be experiencing difficulty, the other property types
may be maintaining their strength.
Long-Term Liquidity Needs
Our long-term liquidity requirements consist primarily of funds
necessary to pay for the principal amount of our long-term debt as it matures,
significant non-recurring capital expenditures that need to be made periodically
at our properties, development projects that we undertake and costs associated
with acquisitions of properties that we pursue. Historically, we have satisfied
these requirements principally through the most advantageous source of capital
at that time, which has included the incurrence of new debt through borrowings
(through public offerings of unsecured debt and private incurrence of secured
and unsecured debt), sales of common and preferred stock through the Trust, our
general partner, capital raised through the disposition of assets, and joint
venture capital transactions. We believe these sources of capital will continue
to be available in the future to fund our long-term capital needs. However,
factors described below and elsewhere herein may have a material adverse effect
on our access to these capital sources.
Our ability to incur additional debt is dependent upon a number of
factors, including our credit ratings, the value of our unencumbered assets, our
degree of leverage and borrowing restrictions imposed by our current lenders. We
currently have investment grade ratings for prospective unsecured debt offerings
from three major rating agencies. If we experienced a credit downgrade, we may
be limited in our access to capital in the unsecured debt market, which we have
historically utilized to fund investment activities, and the interest rate we
are paying under our existing credit facility would increase.
Our general partner's ability to raise funds through sales of common
stock and preferred stock is dependent on, among other things, general market
conditions for REITs, market perceptions about the Trust and the current trading
price of the Trust's stock. We will continue to analyze which source of capital
is most advantageous to us at any particular point in time, but the equity
markets may not be consistently available on terms that are attractive.
Over the last few years, we have maintained 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 the first half of
2004, we sold one retail property representing 215,590 square-feet and our 15%
ownership interest in one multifamily property consisting of 240 units. The
aggregate sales price was $23.7 million, which was used to repay a portion of
the borrowings under our unsecured line of credit and the mortgages associated
with the properties. Additionally, during the first six months of 2004, we sold
certain outparcels of land adjacent to two of our existing properties for total
proceeds of approximately $4.5 million, which was used to repay a portion of the
borrowings under our unsecured line of credit. Our ability to generate cash from
asset sales is limited by market conditions and certain rules applicable to
REITs. Our ability to sell properties in the future to raise cash will be
limited if market conditions make such sales unattractive.
As of June 30, 2004, 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 based on our unsecured debt ratings
from time to time. Based on our current debt ratings, the spread is 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 had no outstanding balance at June 30, 2004.
At June 30, 2004, our total outstanding debt balance was $1.6 billion.
The outstanding balance includes fixed-rate debt of $1.3 billion, or 85.0% of
the total debt balance, and floating-rate debt of $235.5 million, or 15.0% of
the total debt balance. Our total market capitalization as of June 30, 2004 was
$3.3 billion and our ratio of debt to market capitalization was 47.7%. We have
certain loan agreements that contain restrictive covenants, which among other
things require maintenance of various financial ratios. At June 30, 2004, we
were in compliance with these covenants.
Investing Activities
During the second quarter of 2004, we acquired six wholly-owned
multifamily properties containing 1,411 units at a cost of approximately $136.0
million, a partial ownership interest in three multifamily assets containing 996
units for approximately $15.8 million, one wholly-owned retail asset containing
164,385 square feet at a total cost of $34.5 million and a 90% interest in one
retail property containing 381,166 square feet for approximately $54.3 million
representing our allocated portion of the purchase price. Additionally, during
the second quarter of 2004, we completed the 55,000 square foot Colonial
Promenade Trussville II for approximately $8.0 million. During the first quarter
of 2004, we acquired one office property containing 215,485 square feet at a
cost of $13.1 million and we completed the redevelopment of the 66,302 square
foot Colonial Shoppes Clay, a retail asset located in Birmingham, Alabama for a
total cost of $4.3 million.
During the second quarter of 2004, we continued the development of
three multifamily apartment communities. These communities, if developed as
expected, will contain 950 units, and the total investment, including land
acquisition costs, is projected to be approximately $74.4 million. We began the
development of one retail property and continued the redevelopment of two retail
properties. Upon completion of the retail developments and redevelopments, we
expect to have invested approximately $78.5 million, including land acquisition
costs. Additionally, we have one ongoing mixed-use project that integrates
multifamily, office and/or retail products. During the six months ended June 30,
2004, we invested an aggregate of $51.2 million of these aforementioned
development projects and certain parcels of land that were acquired for future
development.
We regularly incur significant expenditures in connection with the
re-leasing of our office and retail space, principally in the form of tenant
improvements and leasing commissions. The amounts of these expenditures can vary
significantly, depending on negotiations with tenants and the willingness of
tenants to pay higher base rents over the life of the leases. We also incur
expenditures for certain recurring capital expenses. During the six months ended
June 30 2004, we incurred approximately $13.4 million related to tenant
improvements and leasing commissions, and approximately $7.1 million of
recurring capital expenditures. We expect to pay for future re-leasing and
recurring capital expenditures out of cash from operations.
Distribution
The distribution on our common units of partnership interest was $0.67
per unit for the second quarter of 2004. We also pay regular quarterly
distributions on our preferred units. The maintenance of these distributions is
subject to various factors, including the discretion of our general partner's
Board of Trustees, our ability to pay dividends under Delaware law, the
availability of cash to make the necessary dividend payments and the effect of
REIT distribution requirements, which require at least 90% of the Trust's
taxable income to be distributed to shareholders.
Financing Transactions
On April 2, 2004, we completed a $100.0 million public debt offering of
unsecured senior notes. The notes, which mature in April 2011 bear a coupon rate
of 4.80%, and were priced to yield an effective rate of 4.82% over the seven
year term. We used the net proceeds of the offering to repay a portion of the
outstanding balance on our unsecured line of credit. On June 21, 2004, we
entered into a reverse swap agreement on the $100.0 million senior notes,
maturing in April 2011, to a floating rate equal to the 6-month LIBOR rate,
which was 1.87% as of June 30, 2004.
On June 17, 2004, we completed a $300.0 million public debt offering of
unsecured senior notes. The notes, which mature in June 2014 bear a coupon rate
of 6.25%, and were priced to yield an effective rate of 6.35% over the ten year
term. We used the net proceeds of the offering to repay the outstanding balance
on our unsecured line of credit, and the remaining amount will be used for
general corporate purposes and future acquisitions. In anticipation of closing
the above mentioned public debt offering, we entered into a $232 million
treasury lock on June 14, 2004 with a fixed 10-year treasury rate of 4.84%. On
June 17, 2004, we settled the treasury lock agreement with a payment of
approximately $2.1 million, which will be amortized over the life of the
associated debt.
Critical Accounting Policies and Estimates
Refer to our 2003 Annual Report on Form 10-K for a discussion of our
critical accounting policies, which include real estate development, principles
of consolidation, revenue recognition, valuation of receivables, and accounting
policies for derivatives. During the six months ended June 30, 2004, there were
no material changes to these policies.
Financial Instruments: Derivatives and Hedging
Our objective in using derivatives is to add stability to interest
expense and to manage our exposure to interest rate movements or other
identified risks. To accomplish this objective, we primarily use interest rate
swaps and caps as part of our 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 the quarter ended June 30,
2004, such derivatives were used to hedge the variable cash flows associated
with existing variable-rate debt and forecasted issuances of debt. We primarily
use interest rate swaps as part of our fair value hedging strategy. These swaps
involve the receipt of fixed rate amounts in exchange for variable rate amounts
over the life of the agreements without exchange of the underlying principal
amount. During the quarter ended June 30, 2004, such swaps were used to hedge
the change in fair value of fixed rate debt.
As of June 30, 2004, no derivatives were designated as hedges of net
investments in foreign operations. Additionally, we do not use derivatives for
trading or speculative purposes. Derivatives not designated as hedges are not
speculative and are used to manage our exposure to interest rate movements and
other identified risks, but do not meet the strict hedge accounting requirements
of SFAS 133. The only swap that we have that is not designated as a hedge for
SFAS 133 was acquired through the purchase of a property and its corresponding
debt.
We have 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 our
derivative financial instruments at June 30, 2004. The notional value at June
30, 2004 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.
Fair Value
Interest At June 30, 2004
Product Type Notional Value Rate Maturity (in thousands)
- ------------------------------------- ------------------------- ------------- -------------- -------------------------
Interest Rate SWAP, Cash Flow $30.2 - $27.7 million 5.932% 1/01/06 $ (1,335)
Interest Rate SWAP, Cash Flow $17.0 million 7.380% 5/05/06 (908)
Interest Rate SWAP, Fair Value $100.0 million 4.803% 4/01/11 778
Interest Rate CAP, Cash Flow $19.7 million 6.850% 6/29/07 35
Interest Rate CAP, Cash Flow $16.7 million 6.850% 7/03/07 29
Interest Rate CAP, Cash Flow $30.4 million 11.200% 6/30/06 -
Interest Rate CAP, Cash Flow $16.4 million 4.840% 4/1/06 15
Interest Rate CAP, Cash Flow $25.9 million 4.840% 4/1/06 24
Interest Rate CAP, Cash Flow $8.4 million 4.840% 4/1/06 8
On June 21, 2004, we entered into a reverse swap agreement on $100.0
million 4.80% senior notes to a floating rate equal to the 6-month LIBOR rate,
which was 1.87% as of June 30, 2004. The reverse swap agreement matures in April
2011.
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 its net
income or financial position in the future from the use of derivatives.
Inflation
Leases at our 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.
Leases at the retail properties typically 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 us to
increase rental rates or other charges to tenants in response to rising prices
and, therefore, serve to minimize our exposure to the adverse effects of
inflation.
An increase in general price levels may immediately preceed, or
accompany, an increase in interest rates. At June 30, 2004, our exposure to
rising interest rates was mitigated by the existing debt level of 47.7% of our
total market capitalization, the high percentage of fixed rate debt (85.0%), and
the use of interest rate swaps to effectively fix the interest rate on
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 3. Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 2004, we had approximately $235.5 million of outstanding
floating rate debt. We do not believe that the interest rate risk represented by
our floating rate debt is material as of June 30, 2004, in relation to our $1.6
billion of outstanding total debt, our $2.5 billion of total assets and $3.3
billion total market capitalization as of that date.
If market rates of interest on our variable rate debt increase by 1%,
the increase in annual interest expense on our variable rate debt would decrease
future earnings and cash flows by approximately $2.4 million. If market rates of
interest on our variable rate debt decrease by 1%, the decrease in interest
expense on our variable rate debt would increase future earnings and cash flows
by approximately $2.4 million. This assumes that the amount outstanding under
our variable rate debt remains approximately $235.5 million, the balance as of
June 30, 2004. If market rates of interest increase by 1%, the fair value of our
total outstanding debt would decrease by approximately $84.5 million. If market
rates of interest decreased by 1%, the fair value of our total outstanding debt
would increase by approximately $84.5 million. This assumes our total
outstanding debt remains at $1.6 billion, the balance as of June 30, 2004.
As of June 30, 2004, we had no material exposure to market risk
(including foreign currency exchange risk, commodity price risk or equity price
risk).
Item 4. Controls and Procedures.
As of the end of the period covered by this report, our management,
including the Chief Executive Officer and the Chief Financial Officer of the
Trust, carried out an evaluation of the design and operation of our disclosure
controls and procedures as defined in Rule 13a-15 of the rules promulgated under
the Securities and Exchange Act of 1934, as amended. Based on this evaluation,
the Chief Executive Officer and the Chief Financial Officer of the Trust
concluded that the design and operation of these disclosure controls and
procedures are effective. There have been no changes in our internal controls
over financial reporting identified in connection with such evaluation that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.
COLONIAL REALTY LIMITED PARTNERSHIP
PART II -- OTHER INFORMATION
Item 2. Changes in Securities.
The Trust from time to time issues common shares of beneficial interest
("Common Shares") pursuant to its Dividend Reinvestment and Share Purchase Plan,
its Non-Employee Trustee Share Option Plan, its Non-Employee Trustee Share Plan,
and its Employee Share Option and Restricted Share Plan, in transactions that
are registered under the Securities Act of 1933, as amended (the "Act").
Pursuant to CRLP's Third Amended and Restated Agreement of Limited Partnership,
each time the Trust issues Common Shares pursuant to the foregoing plans, CRLP
issues to the Trust, its general partner, an equal number of Units for the same
price at which the Common Shares were sold, in transactions that are not
registered under the Act in reliance on Section 4(2) of the Act. During the
quarter ended June 30, 2004, CRLP issued 242,141 Units in such transactions for
an aggregate of approximately $10.0 million.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
12. Ratio of Earnings to Fixed Charges
15. Letter re: Unaudited Interim Financial Information
31.1 CEO Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 CFO Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
32.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) During the period covered by this report CRLP filed or furnished,
as applicable, the following reports on Form 8-K:
Date of Event Item Reported/Financial Statements Filed
April 2, 2004 Item 5. Other Events and Required FD Disclosure
June 23, 2004 Item 5. Other Events and Required FD Disclosure
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLONIAL REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Colonial Properties Trust,
its general partner
Date: August 6, 2004 By: /s/ Weston M. Andress
---------------------
Weston M. Andress
Chief Financial Officer
Date: August 6, 2004 /s/ Kenneth E. Howell
-----------------------
Kenneth E. Howell
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)