-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8Y6sx2ylNy0TabX56HqSA4zn6c01YzHjCbHmaZXCI/le1yKLlc3b5T1KYwUORLK qBcpQwY8p8cqlfprzWIPVg== 0000950131-00-003152.txt : 20000510 0000950131-00-003152.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950131-00-003152 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHSTONE COMMUNITIES TRUST/ CENTRAL INDEX KEY: 0000080737 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 746056896 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10272 FILM NUMBER: 622866 BUSINESS ADDRESS: STREET 1: 7670 SOUTH CHESTER STREET STREET 2: SUITE 100 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037085959 MAIL ADDRESS: STREET 1: 7670 SOUTH CHESTER ST CITY: ENGLEWOOD STATE: CO ZIP: 80012 FORMER COMPANY: FORMER CONFORMED NAME: SECURITY CAPITAL PACIFIC TRUST DATE OF NAME CHANGE: 19950417 FORMER COMPANY: FORMER CONFORMED NAME: PROPERTY TRUST OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EL PASO REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19700108 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 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 1-10272 ARCHSTONE COMMUNITIES TRUST (Exact name of registrant as specified in its charter) Maryland 74-6056896 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 7670 South Chester Street 80012 Englewood, Colorado (Zip Code) (Address of principal executive offices) (303) 708-5959 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) 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 for the past 90 days. Yes X No ----- ----- At May 4, 2000, there were approximately 139,200,000 of the Registrant's common shares outstanding. Archstone Communities Trust Index
Page Number ------ PART I. Condensed Financial Information Item 1. Financial Statements Condensed Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999........... 3 Condensed Statements of Earnings - Three months ended March 31, 2000 and 1999 (unaudited).......................................................................... 4 Condensed Statement of Shareholders' Equity - Three months ended March 31, 2000 (unaudited).......................................................................... 5 Condensed Statements of Cash Flows - Three months ended March 31, 2000 and 1999 (unaudited).......................................................................... 6 Notes to Condensed Financial Statements (unaudited)................................... 7 Independent Accountants' Review Report................................................ 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................................... 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................ 20 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K...................................................... 20
2 PART I - CONDENSED FINANCIAL INFORMATION Item 1. Financial Statements Archstone Communities Trust Condensed Balance Sheets (In thousands, except share data)
March 31, December 31, ASSETS 2000 1999 ------ ----------- ------------ (unaudited) Real estate................................................................................ $5,411,314 $5,217,331 Less accumulated depreciation.............................................................. 328,244 300,658 ---------- ---------- 5,083,070 4,916,673 Mortgage notes receivable, net............................................................. 246,723 210,357 ---------- ---------- Net investments.................................................................... 5,329,793 5,127,030 Cash and cash equivalents.................................................................. 9,601 10,072 Restricted cash in tax-deferred exchange escrow............................................ 9,943 68,729 Other assets............................................................................... 95,131 96,606 ---------- ---------- Total assets....................................................................... $5,444,468 $5,302,437 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Unsecured credit facilities............................................................ $ 563,664 $ 493,536 Long-Term Unsecured Debt............................................................... 1,276,494 1,276,572 Mortgages payable...................................................................... 766,201 694,948 Distributions payable.................................................................. -- 53,518 Accounts payable....................................................................... 28,804 26,677 Accrued expenses....................................................................... 57,070 74,462 Other liabilities...................................................................... 49,879 59,915 ---------- ---------- Total liabilities.................................................................. 2,742,112 2,679,628 ---------- ---------- Minority interest: Perpetual preferred units.............................................................. 73,242 41,996 Convertible operating partnership units................................................ 20,150 13,307 ---------- ---------- Total minority interest............................................................ 93,392 55,303 ---------- ---------- Shareholders' equity: Series A Convertible Preferred Shares (3,646,140 shares in 2000 and 3,705,390 in 1999; liquidation preference of $25 per share)....................................... 91,154 92,635 Series B Preferred Shares (4,200,000 shares; liquidation preference of $25 per share).. 105,000 105,000 Series C Preferred Shares (2,000,000 shares; liquidation preference of $25 per share).. 50,000 50,000 Series D Preferred Shares (2,000,000 shares; liquidation preference of $25 per share).. 50,000 50,000 Common Shares (139,132,921 shares in 2000 and 139,008,353 in 1999)..................... 139,133 139,008 Additional paid-in capital............................................................. 2,293,287 2,291,026 Unrealized holding gain................................................................ 359 394 Employee share purchase notes.......................................................... (18,050) (19,170) Distributions in excess of net earnings................................................ (101,919) (141,387) ---------- ---------- Total shareholders' equity......................................................... 2,608,964 2,567,506 ---------- ---------- Total liabilities and shareholders' equity......................................... $5,444,468 $5,302,437 ========== ==========
The accompanying notes are an integral part of the condensed financial statements. 3 Archstone Communities Trust Condensed Statements of Earnings (In thousands, except per share amounts) (Unaudited)
Three Months Ended March 31, ---------------------------------------- 2000 1999 -------- -------- Revenues: Rental revenues..................................................... $168,464 $153,254 Other income........................................................ 8,552 8,133 -------- -------- 177,016 161,387 -------- -------- Expenses: Rental expenses............................................................... 37,796 39,119 Rental expenses paid to affiliate............................................. 658 570 Real estate taxes............................................................. 15,243 14,052 Depreciation on real estate investments....................................... 36,525 32,797 Interest expense.............................................................. 34,202 27,018 General and administrative expenses........................................... 6,097 4,733 General and administrative expenses paid to affiliate......................... 188 599 Other expenses................................................................ 3,110 2,831 -------- -------- 133,819 121,719 -------- -------- Earnings from operations......................................................... 43,197 39,668 Less: minority interest - perpetual preferred units........................... 1,214 - minority interest - convertible operating partnership units............. 230 338 Plus: gains on dispositions of depreciated real estate, net................... 4,132 5,319 -------- -------- Earnings before extraordinary item............................................... 45,885 44,649 Less: extraordinary item - loss on early extinguishment of debt.............. - 1,113 -------- -------- Net earnings..................................................................... 45,885 43,536 Less: Preferred Share dividends.............................................. 6,431 5,691 -------- -------- Net earnings attributable to Common Shares - Basic............................... $ 39,454 $ 37,845 ======== ======== Weighted average Common Shares outstanding - Basic............................... 139,072 141,295 -------- -------- Weighted average Common Shares outstanding - Diluted............................. 139,099 141,300 -------- -------- Earnings before extraordinary item per Common Share: Basic......................................................................... $ 0.28 $ 0.28 ======== ======== Diluted....................................................................... $ 0.28 $ 0.28 ======== ======== Net earnings per Common Share: Basic......................................................................... $ 0.28 $ 0.27 ======== ======== Diluted....................................................................... $ 0.28 $ 0.27 ======== ======== Distributions paid per Common Share.............................................. $ 0.385 $ 0.370 ======== ========
The accompanying notes are an integral part of the condensed financial statements. 4 Archstone Communities Trust Condensed Statement of Shareholders' Equity Three Months Ended March 31, 2000 (In thousands) (Unaudited)
Series A Convertible Series B Series C Series D Preferred Preferred Preferred Preferred Shares at Shares at Shares at Shares at Employee aggregate aggregate aggregate aggregate Common Additional Unrealized share Distributions liquidation liquidation liquidation liquidation Shares at paid-in holding purchase in excess of preference preference preference preference par value capital gain/loss notes net earnings Total ---------- ---------- ---------- ---------- --------- ------- --------- ----- ------------ ----- Balances at December 31, 1999.. $92,635 $105,000 $50,000 $50,000 $139,008 $2,291,026 $394 $(19,170) $(141,387) $2,567,506 Comprehensive income: Net earnings..... - - - - - - - - 45,885 45,885 Preferred Share dividends paid.. - - - - - - - - (6,431) (6,431) Other comprehensive income.......... - - - - - - (35) - - (35) ---------- Comprehensive income attributable to Common Shares..... - - - - - - - - - 39,419 ---------- Other, net.......... (1,481) - - - 125 2,261 - 1,120 14 2,039 ------- -------- ------- ------- -------- ---------- ---- -------- --------- ---------- Balances at March 31, 2000........... $91,154 $105,000 $50,000 $50,000 $139,133 $2,293,287 $359 $(18,050) $(101,919) $2,608,964 ======= ======== ======= ======= ======== ========== ==== ======== ========= ==========
The accompanying notes are an integral part of the condensed financial statements. 5 Archstone Communities Trust Condensed Statements of Cash Flows (In thousands) (Unaudited)
Three Months Ended March 31, ------------------------ 2000 1999 --------- --------- Operating activities: Net earnings............................................................................. $ 45,885 $ 43,536 Adjustments to reconcile net earnings to net cash flow provided by operating activities: Depreciation and amortization.......................................................... 36,762 32,830 Gains on dispositions of depreciated real estate, net.................................. (4,132) (5,319) Provision for possible loss on investments............................................. -- 2,000 Loss recognized on write-down of convertible mortgage notes............................ 2,753 -- Minority interest...................................................................... 1,444 338 Change in accounts payable............................................................... 3,847 (998) Change in accrued expenses and other liabilities......................................... (28,717) (22,936) Change in other assets................................................................... 3,889 2,896 --------- --------- Net cash flow provided by operating activities......................................... 61,731 52,347 --------- --------- Investing activities: Real estate investments.................................................................. (234,684) (236,921) Proceeds from dispositions, net of closing costs......................................... 31,239 110,502 Change in tax-deferred exchange escrow................................................... 58,786 90,824 Other, net............................................................................... (3,858) 1,491 --------- --------- Net cash flow used in investing activities............................................. (148,517) (34,104) --------- --------- Financing activities: Proceeds from secured debt............................................................... 53,528 36,206 Debt issuance costs...................................................................... (2,377) (1,852) Principal prepayment of mortgages payable................................................ (5,648) (7,871) Regularly scheduled principal payments on mortgages payable.............................. (1,205) (1,733) Proceeds from unsecured credit facilities, net........................................... 70,128 123,192 Repurchase of Common Shares.............................................................. -- (88,196) Proceeds from issuance of perpetual preferred units...................................... 31,224 -- Cash distributions paid on Common Shares................................................. (53,504) (53,364) Cash dividends paid on Preferred Shares.................................................. (6,431) (5,691) Cash distributions paid to minority interests............................................ (1,444) (338) Other, net............................................................................... 2,044 774 --------- --------- Net cash flow provided by financing activities......................................... 86,315 1,127 --------- --------- Net change in cash and cash equivalents.................................................... (471) 19,370 Cash and cash equivalents at beginning of period........................................... 10,072 10,119 --------- --------- Cash and cash equivalents at end of period................................................. $ 9,601 $ 29,489 ========= ========= Significant non-cash investing and financing activities: Assumption of mortgages payable upon purchase of apartment communities................... $ 24,679 $ 9,411 Receipt of mortgage note receivable in exchange for apartment community.................. $ 35,880 $ -- Issuance of convertible operating partnership units in exchange for development site..... $ 6,843 $ -- Series A Convertible Preferred Shares converted to Common Shares......................... $ 1,481 $ 4,422
The accompanying notes are an integral part of the condensed financial statements. 6 Archstone Communities Trust Notes to Condensed Financial Statements March 31, 2000 and 1999 (Unaudited) (1) General The condensed financial statements of Archstone are unaudited and certain information and footnote disclosures normally included in financial statements have been omitted. While management believes that the disclosures presented are adequate, these interim financial statements should be read in conjunction with the financial statements and notes included in Archstone's 1999 Annual Report on Form 10-K ("1999 Form 10-K"). In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary for a fair presentation of Archstone's financial statements for the interim periods presented. The results of operations for the three month periods ended March 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the entire year. The accounts of Archstone and its controlled subsidiaries are consolidated in the accompanying condensed financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. Archstone uses the equity method to account for its investments when it does not control, but has the ability to exercise significant influence over, the operating and financial policies of the investee. For an investee accounted for under the equity method, Archstone's share of net earnings or losses of the investee is reflected in other income as earned and dividends are credited against the investment as received. The preparation of these financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Reclassifications Certain 1999 amounts have been reclassified to conform to the 2000 presentation. Per Share Data Following is a reconciliation of the denominator used to compute basic and diluted net earnings per share ("EPS"), for the periods indicated (in thousands). The numerator, net earnings attributable to Common Shares, is the same for both the basic and the diluted calculations.
Three Months Ended March 31, ---------------------------- 2000 1999 ------- ------- Weighted average number of Common Shares outstanding - Basic................. 139,072 141,295 Incremental options outstanding........................................... 27 5 ------- ------- Weighted average number of Common Shares outstanding - Diluted/(1)/.......... 139,099 141,300 ======= =======
(1) Excludes the impact of potentially dilutive equity securities during the period in which they are anti-dilutive. 7 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) (2) Real Estate Investments in Real Estate Equity investments in real estate, at cost, were as follows (dollar amounts in thousands):
March 31, 2000 December 31, 1999 --------------------------------- --------------------------------- Investment Units Investment Units --------------- --------------- --------------- --------------- Apartment Communities: Operating communities................................. $4,590,219 68,108 $4,444,289 68,255 Communities under construction (1).................... 574,915 7,712 563,020 7,830 Development communities In Planning (1) (2): Owned.............................................. 67,443 2,152 45,481 2,096 Under Control (3).................................. - 1,771 - 2,375 --------------- --------------- --------------- --------------- Total development communities In Planning......... 67,443 3,923 45,481 4,471 --------------- --------------- --------------- --------------- Total apartment communities...................... 5,232,577 79,743 5,052,790 80,556 --------------- =============== --------------- =============== Hotel asset (4)......................................... 22,870 22,870 Other real estate assets (5)............................ 155,867 141,671 --------------- --------------- Total real estate................................ $5,411,314 $5,217,331 =============== ===============
(1) Unit information is based on management's estimates and has not been audited or reviewed by Archstone's independent accountants. (2) "In Planning" is defined as parcels of land owned or Under Control upon which construction of apartments is expected to commence within 36 months. "Under Control" means Archstone has an exclusive right (through contingent contract or letter of intent) during a contractually agreed-upon time period to acquire land for future development of apartment communities at a fixed price, subject to approval of contingencies during the due diligence process, but does not currently own the land. There can be no assurance that such land will be acquired. (3) Archstone's investment as of March 31, 2000 and December 31, 1999 for developments Under Control was $5.7 million and $5.3 million, respectively, and is reflected in the "Other assets" caption of Archstone's Balance Sheets. (4) Represents Archstone's investment in a five-story Holiday Inn hotel located in the Fisherman's Wharf area of San Francisco, California. (5) Includes land that is not In Planning and our investment in an unconsolidated taxable real estate subsidiary. The change in investments in real estate, at cost, consisted of the following (in thousands): Balance at January 1, 2000........................................... $ 5,217,331 Apartment communities: Acquisition-related expenditures................................ 158,451 Redevelopment expenditures...................................... 8,376 Recurring capital expenditures.................................. 1,422 Development expenditures, excluding land acquisitions........... 60,344 Acquisition and improvement of land for development............. 21,664 Dispositions.................................................... (70,470) ------------------ Net apartment community activity............................. 5,397,118 Other: Change in other real estate assets, net............................ 14,196 ------------------ Balance at March 31, 2000............................................ $ 5,411,314 ==================
At March 31, 2000, we had unfunded contractual commitments related to real estate investment activities aggregating approximately $229.2 million. 8 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) We were committed to the sale of six apartment communities and certain other real estate assets having an aggregate carrying value of $132.4 million as of March 31, 2000. Each property's carrying value is less than or equal to its estimated fair market value, net of estimated costs to sell. The property-level earnings, after mortgage interest and depreciation, from communities under contract at March 31, 2000, which are included in our earnings from operations for the three months ended March 31, 2000 and 1999 were $2.2 million and $2.1 million, respectively. During the three months ended March 31, 1999, we concluded that the full recovery of certain real estate assets was doubtful. As a result, a provision for possible loss of $2.0 million was recorded to reduce these assets to their estimated fair value. (3) Mortgage Notes Receivable Convertible Mortgage Notes During the three months ended March 31, 2000, we concluded that for various reasons, including the proposed transaction which would eliminate the publicly- traded common shares of Homestead Village Incorporated, the conversion feature associated with our Homestead convertible mortgage notes receivable had no continuing economic value. A write-off of the net unamortized balance of the conversion feature, aggregating $2.8 million, was therefore recorded. The remaining balances associated with the convertible mortgage notes were not affected. (4) Borrowings Unsecured Credit Facilities We have a $750 million unsecured revolving line of credit provided by a group of financial institutions led by Chase Bank of Texas, National Association ("Chase"). The $750 million line of credit matures in July 2001, at which time it may be converted into a two-year term loan at our option. The line of credit bears interest at the greater of prime or the federal funds rate plus 0.50%, or at our option, LIBOR (6.1% at March 31, 2000) plus 0.65%. Under a competitive bid option contained in the credit agreement, we may be able to borrow at a lower interest rate spread over LIBOR, depending on market conditions, on up to $375 million of borrowings. Under the agreement, we pay a facility fee, which is equal to 0.15% of the commitment. The following table summarizes our unsecured credit facility borrowings (dollars in thousands):
Three Months Ended Year Ended March 31, 2000 December 31, 1999 --------------------- --------------------- Total line of credit................................................. $750,000 $750,000 Borrowings outstanding at end of period.............................. $558,000 $485,000 Weighted average daily borrowings.................................... $528,121 $387,082 Maximum borrowings outstanding during the period..................... $618,000 $485,000 Weighted average daily nominal interest rate......................... 6.8% 6.0% Weighted average daily effective interest rate....................... 6.9% 6.4%
Our $100 million short-term, unsecured borrowing agreement with Chase bears interest at an overnight rate that ranged from 6.3% to 7.1% during the three months ended March 31, 2000. At March 31, 2000, there was $5.7 million outstanding under this agreement. 9 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) Long-Term Unsecured Debt A summary of our long-term unsecured notes and unsecured tax-exempt bonds (collectively, "Long-Term Unsecured Debt") outstanding at March 31, 2000 follows (amounts in thousands):
Effective Average Coupon Interest Balance at Balance at Remaining Type of Debt Rate/(1)/ Rate/(2)/ March 31, 2000 December 31, 1999 Life (years) - ------------------------------- --------- --------- -------------- ----------------- ------------ Long-term unsecured notes/(3)/.... 7.3% 7.5% $1,200,779 $1,200,857 7.6 Unsecured tax-exempt bonds/(4)/... 4.2% 4.6% 75,715 75,715 8.2 ---- ---- ---------- ---------- --- Total/average................ 7.1% 7.3% $1,276,494 $1,276,572 7.7 ==== ==== ========== ========== ===
(1) Represents a fixed rate for the long-term unsecured notes and a variable rate for the unsecured tax-exempt bonds. See Archstone's 1999 10-K for information on our derivative financial instruments. (2) Represents the effective interest rate, including interest rate hedges, loan cost amortization and other ongoing fees and expenses, where applicable. (3) Our long-term unsecured notes generally have semi-annual interest payments and either amortizing annual principal payments or balloon payments due at maturity--see "Scheduled Debt Maturities". (4) The unsecured tax-exempt bonds require semi-annual interest payments and are due upon maturity in 2008. Mortgages Payable Archstone's mortgages payable generally feature either monthly interest and principal payments or monthly interest-only payments with balloon payments due at maturity. A summary of mortgages payable outstanding at March 31, 2000 follows (amounts in thousands):
Effective Interest Principal Balance at Type of Mortgage Rate/(1)/ March 31, 2000 December 31, 1999 - -------------------------------- ------------------ -------------- ----------------- Fannie Mae secured debt/(2)/....... 6.5% $304,265 $304,365 Conventional fixed rate............ 7.9% 163,830 110,776 Tax-exempt fixed rate.............. 6.4% 41,325 56,576 Tax-exempt floating rate........... 4.7% 232,249 192,847 Other.............................. 5.7% 24,532 30,384 ---- -------- -------- Total/average mortgage debt... 6.2% $766,201 $694,948 ==== ======== ========
(1) Includes the effect of interest rate hedges, credit enhancements, other bond-related costs and loan cost amortization, where applicable. (2) Represents a long-term secured debt agreement with Fannie Mae. The Fannie Mae secured debt matures January 2006, although Archstone has the option to extend the term of any portion of the debt for up to an additional 30-year period at any time, subject to Fannie Mae's approval. The change in mortgages payable during the three months ended March 31, 2000 consisted of the following (in thousands):
Balance at January 1, 2000....................................... $694,948 Mortgage notes assumed or originated............................. 78,207 Regularly scheduled principal amortization....................... (1,205) Prepayments, final maturities and other.......................... (5,749) -------- Balance at March 31, 2000........................................ $766,201 ========
10 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) Scheduled Debt Maturities Approximate principal payments due during each of the next five calendar years and thereafter, as of March 31, 2000 are as follows (in thousands):
Mortgages Payable ------------------------- Regularly Long-Term Scheduled Final Unsecured Principal Maturities Debt Amortization and Other Total ---------- ------------ ---------- ---------- 2000........ $ 75,232 $ 3,504 $ 2,186 $ 80,922 2001........ 70,010 5,629 5,194 80,833 2002........ 97,810 6,015 293 104,118 2003........ 171,560 6,350 20,590 198,500 2004........ 51,560 6,698 36,580 94,838 Thereafter.. 810,322 155,790 517,372 1,483,484 ---------- ------------ ---------- ---------- Total..... $1,276,494 $ 183,986 $ 582,215 $2,042,695 ========== ============ ========== ==========
The average annual principal payments due from 2005 to 2019 are $95.5 million per year. The $750 million unsecured credit facility matures in July 2001, at which time it may be converted into a two-year term loan, at our option. General Archstone's debt instruments generally contain certain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage ratios and maximum leverage ratios. We were in compliance with all financial covenants pertaining to our debt instruments at March 31, 2000. For the three months ended March 31, 2000 and 1999, the total interest paid in cash on all outstanding debt was $46.5 million and $41.3 million, respectively. We capitalize interest incurred during the construction period as part of the cost of apartment communities under development. Interest capitalized during the three months ended March 31, 2000 and 1999 was $6.6 million and $8.8 million, respectively. Amortization of loan costs included in interest expense for the three months ended March 31, 2000 and 1999 was $1.1 million and $1.4 million, respectively. Derivative Financial Instruments Our involvement with derivative financial instruments is limited and we do not use them for trading or other speculative purposes. We occasionally utilize derivative financial instruments to lower our overall borrowing costs. See Archstone's 1999 Form 10-K for additional information on Archstone's derivative financial instruments. In March, 2000, we entered into an interest rate cap agreement with a notional amount of $20.9 million, relating to a tax-exempt bond which carried a floating interest rate of 4.3% per annum as of March 31, 2000. The debt is capped at an effective interest rate of 8.9% per annum until termination in March 2005. As of March 31, 2000, marking our various interest rate agreements to market would result in a net gain of $16.7 million, prior to consideration of the associated issuance costs, if each had been terminated on such date. 11 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) (5) Minority Interest In February 2000, a consolidated subsidiary issued 680,000 Series E perpetual preferred units ($25 liquidation preference per unit) to a limited partnership in exchange for $17.0 million. The units pay cumulative quarterly distributions of $0.5234 per share ($2.09375 or 8.375% per annum), are redeemable at our option after August 13, 2004 and are exchangeable for Archstone Series E Cumulative Redeemable Perpetual Preferred shares on or after August 13, 2009. In March 2000, a consolidated subsidiary issued 600,000 Series G perpetual preferred units ($25 liquidation preference per unit) to a limited partnership in exchange for $15.0 million. The units pay cumulative quarterly distributions of $0.5391 per share ($2.15625 or 8.625% per annum), are redeemable at our option after March 3, 2005 and are exchangeable for Archstone Series G Cumulative Redeemable Perpetual Preferred shares on or after March 3, 2010. The total net proceeds of $31.2 million from the issuance of perpetual preferred units during the three months ended March 31, 2000 were used to repay borrowings under our unsecured credit facilities. In March 2000, a consolidated subsidiary acquired a development site in Los Angeles County, California in exchange for cash and 351,000 convertible operating partnership units valued at approximately $6.8 million. The units are convertible on a one for one basis into Common Shares and are generally entitled to distributions in amounts equal to those distributed on Common Shares. The units are included in minority interest in the accompanying Balance Sheets. Distributions associated with the units were equal to the income allocated to these minority interests, which is reflected as minority interest expense in the accompanying Statements of Earnings. (6) Cash Distributions/Dividends The following table summarizes the cash dividends paid per share on the Common Shares and Preferred Shares during 2000:
Three Months Ended March 31, 2000 ------------------ Common Shares................................ $ 0.3850 Series A Convertible Preferred Shares/(1)/... $ 0.5186 Series B Preferred Shares/(1)/............... $ 0.5625 Series C Preferred Shares/(1)/............... $ 0.5391 Series D Preferred Shares/(1)/............... $ 0.5469
(1) Collectively, the Series A, B, C and D Preferred Shares are referred to as the "Preferred Shares". On April 19, 2000, Archstone's Board of Trustees declared the second quarter 2000 cash distribution of $0.385 per Common Share, payable on May 26, 2000, to shareholders of record on May 12, 2000. This distribution represents our 97th consecutive Common Share distribution. (7) Shareholders' Equity During the three months ended March 31, 2000, approximately 59,200 of Series A Convertible Preferred Shares were converted, at the option of the holders, into approximately 79,800 Common Shares. This activity is included in "Other, net" in the accompanying Condensed Statement of Shareholders' Equity. At March 31, 2000, Security Capital Group Incorporated, our largest shareholder, owned approximately 39% of our Common Shares outstanding. In April 2000, Security Capital transferred 1,589,776 Common Shares to an unaffiliated party in exchange for Security Capital's convertible subordinated debentures as part of its share repurchase program. As a result of the exchange, Security Capital reduced its ownership in Archstone to approximately 38% of the outstanding Common Shares and approximately 35% on a fully diluted basis. 12 Archstone Communities Trust Notes to Condensed Financial Statements - (Concluded) (8) Segment Data We define each of our apartment communities as individual operating segments. We have determined that all of our apartment communities have similar economic characteristics and also meet the other criteria which permit the apartment communities to be aggregated into one reportable segment. We rely primarily on net operating income, defined as rental revenues less rental expenses and real estate taxes, for purposes of making decisions about allocating resources and assessing segment performance. Following are reconciliations of the reportable segment's: (i) revenues to consolidated revenues and (ii) net operating income to consolidated earnings from operations (in thousands):
Three Months Ended March 31, ------------------------------ 2000 1999 ------------ ---------- Reportable segment revenues......................................... $167,731 $152,490 Other non-reportable operating segment revenues /(1)/............... 9,285 8,897 ------------ -------- Total segment and consolidated revenues............................. $177,016 $161,387 ============ ========
Three Months Ended March 31, ------------------------------ 2000 1999 -------- -------- Reportable segment net operating income............................. $114,036 $ 98,772 Other non-reportable operating segment net operating income......... 731 741 -------- -------- Total segment net operating income................................. 114,767 99,513 -------- -------- Reconciling items: Other income....................................................... 8,552 8,133 Depreciation on real estate investments............................ (36,525) (32,797) Interest expense................................................... (34,202) (27,018) General and administrative expenses................................ (6,285) (5,332) Other expenses..................................................... (3,110) (2,831) -------- -------- Consolidated earnings from operations............................... $ 43,197 $ 39,668 ======== ========
(1) Includes $6.0 million and $5.8 million of interest income on the convertible mortgage notes receivable for the three months ended March 31, 2000 and 1999, respectively. Also includes Archstone's share of income from our unconsolidated taxable real estate subsidiary, rental revenue from a hotel and interest income on cash equivalents and other notes receivable. For the three months ended March 31, 2000, includes a $3.3 million gain on the sale of Spectrum Apartment Locators, an apartment locator service acquired in January 1998. Archstone does not derive any of our consolidated revenues from foreign countries and does not have any major customers that individually account for 10% or more of our consolidated revenues. 13 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Trustees and Shareholders of Archstone Communities Trust: We have reviewed the accompanying condensed balance sheet of Archstone Communities Trust as of March 31, 2000, and the related condensed statements of earnings for the three month periods ended March 31, 2000 and 1999, the condensed statement of shareholders' equity for the three month period ended March 31, 2000 and the condensed statements of cash flows for the three month periods ended March 31, 2000 and 1999. These condensed financial statements are the responsibility of the Trust's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, 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 condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of Archstone Communities Trust as of December 31, 1999, and the related statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 27, 2000, except as to Note 16, which is as of February 4, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1999 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. KPMG LLP Chicago, Illinois April 25, 2000 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with Archstone's 1999 Form 10-K as well as the financial statements and notes included in Item 1 of this report. Certain statements in this Form 10-Q are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations, estimates and projections about the industry and markets in which Archstone operates. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond the control of Archstone. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. Information concerning expected investment balances, expected funding sources, planned investments and revenue and expense growth assumptions are examples of forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Archstone's operating results depend primarily on income from apartment communities, which is substantially influenced by demand and supply of apartment units in Archstone's primary target markets and submarkets, operating expense levels, property level operations and the pace and price at which we can develop, acquire or dispose of apartment communities. Capital and credit market conditions which affect Archstone's cost of capital also influence operating results. See Archstone's 1999 Form 10-K "Item 1. Business" for a more complete discussion of risk factors that could impact Archstone's future financial performance. Results of Operations Three Months Ended March 31, 2000 Compared to March 31, 1999 Archstone's overall rental revenues increased $15.2 million (9.9%) and net operating income increased $15.3 million (15.3%) during the three months ended March 31, 2000 as compared to the same period in 1999. These increases were attributable to strong performance from our operating communities and the execution of our capital redeployment program, which involves the disposition of operating communities in secondary markets with less attractive growth prospects to fund new investments in targeted markets with higher barriers to entry. In addition, net earnings attributable to Common Shares increased $1.6 million during the three months ended March 31, 2000 over the same period in 1999. This net increase resulted primarily from a $3.5 million increase in earnings from operations in 2000 and a $1.1 million extraordinary item charge related to early extinguishment of debt in 1999. The increases were partially offset in 2000 by a $1.8 million increase in minority interest expense and Preferred Share dividends and a $1.2 million decrease in net gains on dispositions of depreciated real estate. Apartment Community Operations At March 31, 2000, investments in apartment communities comprised over 99% of our total real estate portfolio, based on total expected investment, including planned capital expenditures. The following table summarizes the net operating income generated from our apartment communities for each period (in thousands, except for percentages):
Three Months Ended March 31, ----------------------------------------- 2000 1999 ----------------- --------------- Rental revenues.......................................... $167,731 $152,490 Property operating expenses.............................. 53,695 53,718 ----------------- --------------- Net operating income..................................... $114,036 $ 98,772 ================= =============== Operating margin (net operating income/rental revenues).. 68.0% 64.8% ================= =============== Average occupancy during period.......................... 95.6% 94.5% ----------------- --------------- Average number of operating units........................ 68,094 69,019 ----------------- ---------------
15 The increase in net operating income for the three months ended March 31, 2000 compared to the three months ended March 31, 1999 is primarily attributable to an increase in rental revenues resulting from a changing mix of operating communities, an improvement in average occupancy and the successful lease-up of development communities. The execution of our capital redeployment program continues to improve operating margins as a result of higher rental rates and more stable revenue growth as capital is redeployed into markets with higher barriers to entry. Such markets typically achieve higher and more consistent growth in net operating income. The improved operating margin for the three months ended March 31, 2000 was also impacted by operating efficiencies, lower insurance expenses due to refinement of claim estimates and lower utility costs due to increased levels of utility reimbursements from residents. Offsetting these expense reductions were increases in personnel costs and higher real estate taxes in 2000 due to projected increases in certain property tax valuations. We anticipate that property operating expenses will increase at a rate more consistent with the rate of inflation for the remainder of the year. Other Income Other income is primarily influenced by interest income on convertible mortgage notes receivable. During the three months ended March 31, 2000, other income also included a $3.3 million gain from the sale of Spectrum Apartment Locators, a wholly-owned start-up company we acquired in January 1998. This benefit was largely offset by lower earnings from Archstone's investment in an unconsolidated taxable real estate subsidiary in 2000 as compared to 1999. Depreciation Expense The $3.7 million increase in depreciation expense resulted primarily from the increase in the cost basis of operating communities, partially offset by dispositions. Interest Expense The $7.2 million increase in interest expense is primarily attributable to higher outstanding debt balances associated with the financing of our investment activities, higher interest rates and a decrease in interest capitalization due to lower levels of investments undergoing active development. General and Administrative Expenses The overall increase in general and administrative expenses relates primarily to higher severance costs in 2000 as a result of certain staff reductions. In addition, research and development costs associated with information technology initiatives and higher expenses associated with Archstone's long-term incentive plan increased general and administrative expenses during the three months ended March 31, 2000 as compared to the same period in 1999. Other Expenses During the three months ended March 31, 2000, we concluded that for various reasons, including the proposed transaction which would eliminate the publicly- traded common shares of Homestead Village Incorporated, the conversion feature associated with our Homestead convertible mortgage notes receivable had no continuing economic value. A write-off of the net unamortized balance of the conversion feature, aggregating $2.8 million, was therefore recorded. The remaining balances associated with the convertible mortgage notes were not affected. As a result of the write-off, approximately $1.2 million in non-cash amortization, which would have been recorded as other income during the year ended December 31, 2000, will not be reflected. During the three months ended March 31, 1999, we concluded that full recovery of certain real estate investments was doubtful. As a result, a provision for possible loss of $2.0 million was recorded to reduce these assets to their estimated fair value. Both charges are included in "Other" in the accompanying Condensed Statements of Earnings. Gains on Dispositions of Depreciated Real Estate During the three months ended March 31, 2000, we disposed of five apartment communities representing gross proceeds of $68.9 million, including a $35.9 million note receivable relating to one community. We disposed of nine apartment communities and certain other real estate assets, representing gross proceeds of $113.1 million during the three months ended March 31, 1999. Aggregate net gains of $4.1 million and $5.3 million were recorded for the three months ended March 31, 2000 and 1999, respectively. 16 Preferred Share Dividends The higher level of Preferred Share dividends is attributable to an increase in the Series A Convertible Preferred Share dividend rate and the issuance of Series D Preferred Shares in August 1999, partially offset by conversions of Series A Convertible Preferred Shares into Common Shares. Liquidity and Capital Resources We believe Archstone's liquidity and financial condition are strong and we remain committed to managing our balance sheet to preserve financial flexibility. Despite the capital-constrained operating environment that exists in the real estate industry, we have continued to fund attractive new investment opportunities primarily through the use of proceeds from favorable dispositions in non-core secondary markets. We believe our solid financial position will continue to allow us to take advantage of investment opportunities that become available in the future. We consider our liquidity and ability to generate cash from operations, dispositions and financings to be adequate to meet all of our cash flow needs during the remainder of 2000. Operating Activities Net cash flow provided by operating activities increased by $9.4 million, or 17.9%, for the three months ended March 31, 2000 as compared to the same period of 1999. This increase is due primarily to cash flow growth from operating apartment communities. Investing and Financing Activities Real estate investments of $234.7 million during the three months ended March 31, 2000 were financed primarily from proceeds from property dispositions, cash held in escrow pending tax-deferred exchanges and borrowings under unsecured credit facilities. These unsecured credit facilities were partially repaid with $53.5 million in proceeds from secured debt financing, net proceeds of $31.2 million from the issuance of perpetual preferred limited partnership units and cash flow from operations. Real estate investments of $236.9 million and the repurchase of $88.2 million of Common Shares during the three months ended March 31, 1999 were financed primarily from proceeds from property dispositions, cash held in escrow pending tax-deferred exchanges and borrowings under unsecured credit facilities. These unsecured credit facilities were partially repaid with cash flow from operations and secured debt proceeds. Other significant financing activities included the payment of $61.4 million and $59.4 million in Common, Preferred Share and minority interest distributions for the three months ended March 31, 2000 and 1999, respectively. The increases are primarily attributable to the issuance of the Series D Preferred Shares in August 1999, an increase in the cash distributions paid per Common Share and an increase in the number of units issued to minority interests. We prepaid mortgages due to community dispositions of $5.6 million and $7.9 million during the three months ended March 31, 2000 and 1999, respectively. Significant non-cash investing and financing activities during the three months ended March 31, 2000 and 1999 included the assumption of mortgage debt, the issuance of a note receivable upon the disposition of an apartment community, the issuance of convertible operating partnership units and the conversion of Series A Convertible Preferred Shares into Common Shares. Scheduled Debt Maturities and Interest Payment Requirements In order to reduce refinancing risk, our long-term debt obligations are carefully structured to create a relatively level principal maturity schedule in an attempt to minimize the requirement for large payments due in any single year. As of March 31, 2000, we have only $80.9 million of long-term debt maturing during the remainder of 2000 and $80.8 million maturing during 2001. See Note 4 to the financial statements contained in Item 1 for more information on scheduled debt maturities. 17 We currently have $850 million in total borrowing capacity under our unsecured credit facilities, with $544.4 million outstanding and an available balance of $305.6 million at May 4, 2000. Archstone's unsecured credit facilities, Long- Term Unsecured Debt and mortgages payable had effective interest rates of 6.9%, 7.3% and 6.2%, respectively, as of March 31, 2000. These rates give effect to interest rate swaps and caps, as applicable. We were in compliance with all financial covenants pertaining to our debt instruments at March 31, 2000. Shareholder Dividend/Distribution Requirements Based on announced distribution levels for 2000 (assuming no changes in our dividend/distribution levels) and the number of Archstone shares outstanding as of March 31, 2000, we anticipate that Archstone will pay the following dividends/distributions during the next 12 months (in thousands, except per share amounts):
Per Share/ Unit Total ------------- ------------- Common Share distributions................................................. $1.54 $214,265 Series A Convertible Preferred Share dividends............................. 2.07 7,562 Series B Preferred Share dividends......................................... 2.25 9,450 Series C Preferred Share dividends......................................... 2.16 4,312 Series D Preferred Share dividends......................................... 2.19 4,375 Series E perpetual preferred limited partnership unit distributions /(1)/.. 2.09 3,350 Series F perpetual preferred limited partnership unit distributions /(1)/.. 2.03 1,625 Series G perpetual preferred limited partnership unit distributions /(1)/.. 2.16 1,294 Other distributions on minority interests /(1)/............................ 1.54 1,461 ------------- Total dividend/distribution requirements................................... $247,694 =============
(1) See Note 5 to the financial statements contained in Item 1 for information on the perpetual preferred limited partnership units and other minority interests. Planned Investments Following is a summary of unfunded planned investments as of March 31, 2000 (dollar amounts in thousands). The amounts labeled "Discretionary" represent future investments that we plan to make, although there is not a contractual commitment to do so. The amounts labeled "Committed" represent the approximate amount that Archstone has contractually committed to fund.
Planned Investments --------------- ----------------------------------- Units Discretionary Committed --------------- ----------------- --------------- Planned operating community improvements............. 68,108 $ 83,509 $ 2,231 Communities under construction....................... 7,712 - 226,947 Communities In Planning and owned.................... 2,152 227,263 - Communities In Planning and Under Control............ 1,771 260,889 - Operating community acquisition under contract....... 227 29,950 - --------------- ----------------- --------------- Total........................................... 79,970 $ 601,611 $ 229,178 =============== ================= ===============
We anticipate completion of most of the communities that are currently under construction and the planned operating community improvements in the remainder of 2000 and 2001 and expect to start construction on approximately $250 million, based on total expected investment, of communities that are currently in planning, during the remainder of 2000. No assurances can be given that communities we do not currently own will be acquired or that planned developments will actually occur. In addition, actual costs incurred could be greater or less than our current estimates. 18 Funding Sources We expect to finance the company's planned investment and operating needs primarily with cash flow from operating activities, disposition proceeds derived from our capital redeployment program, joint venture financing and borrowings under unsecured credit facilities prior to arranging long-term financing. We anticipate that net cash flow from operating activities during 2000 will be sufficient to fund anticipated dividend/distribution requirements and scheduled debt principal payments. To fund planned investment activities, we had $286.3 million in available capacity on our unsecured credit facilities, $9.9 million in tax-deferred exchange escrow and $132.4 million of operating communities and certain other real estate assets under contract for sale as of March 31, 2000. Subject to normal closing risks, we anticipate that we will complete the majority of these dispositions during the second or third quarter of 2000. Furthermore, we expect that additional proceeds will be generated from other dispositions during 2000 in connection with the ongoing execution of our capital redeployment program. In addition, we anticipate receiving net proceeds of approximately $95 million from the formation of a new real estate joint venture transaction, which is expected to close during the three months ended June 30, 2000. We currently have $777.2 million in shelf registered securities which can be issued in the form of Long-Term Unsecured Debt, preferred shares or Common Shares on an as-needed basis, subject to our ability to effect offerings on satisfactory terms. Other Contingencies and Hedging Activities We are a party to various claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims and litigation, individually or in aggregate, will have a material adverse effect on our business, financial position or results of operations. Our involvement with derivative financial instruments is limited and we do not use them for trading or other speculative purposes. We occasionally utilize derivative financial instruments to lower our overall borrowing costs. See Note 4 to the financial statements contained in Item 1 of this Form 10-Q and Archstone's 1999 Form 10-K for more information on derivative financial instruments currently in use. Funds From Operations Funds from operations has been a supplemental industry-wide standard to measure operating performance of a real estate investment trust ("REIT") since its adoption by the National Association of Real Estate Investment Trusts ("NAREIT") in 1991. In October 1999, NAREIT revised the definition of funds from operations. The changes involved bringing funds from operations into closer alignment with net income in accordance with GAAP. The revised measure generally calls for adjustments to net income for those items which are unique to the real estate industry or defined as "extraordinary items" under GAAP. To conform to the revised definition, Archstone's primary changes were: (i) to include in funds from operations certain non-cash components of interest income associated with our convertible mortgage notes receivable, consistent with GAAP, and (ii) to include the impact of net gains and losses associated with the disposition of undepreciated real estate. We have restated our 1999 funds from operations to conform to this revised definition. Funds from operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance or as an alternative to cash flow from operating, investing or financing activities as a measure of liquidity. The funds from operations measure presented by Archstone, while consistent with NAREIT's definition, will not be comparable to similarly titled measures of other REIT's that do not compute funds from operations in a manner consistent with Archstone. Funds from operations is not intended to represent cash available to shareholders. Anticipated cash distributions to shareholders are summarized above in "-Shareholder Dividend/Distribution Requirements". Funds from operations using the revised definition were as follows (amounts in thousands): 19
Three Months Ended March 31, ---------------------------------- 2000 1999 ------------------ -------------- (restated) Net earnings attributable to Common Shares - Basic........................... $ 39,454 $ 37,845 Add (Deduct): Depreciation on real estate investments................................... 36,525 32,797 Gains on dispositions of investments, net................................. (4,132) (5,750) Extraordinary item - loss on early extinguishment of debt................. 1,113 Other, net................................................................ 828 472 ------------------ -------------- Funds from operations attributable to Common Shares - Basic.................. 72,675 66,477 Minority Interest - convertible operating partnership units............... 230 338 Series A Convertible Preferred Share dividends............................ 1,897 2,250 ------------------ -------------- Funds from operations attributable to Common Shares - Diluted................ $ 74,802 $ 69,065 ================== ============ Weighted average Common Shares outstanding - Diluted......................... 144,700 148,419 ================== ============
Item 3. Quantitative and Qualitative Disclosures About Market Risk Archstone is exposed to interest rate changes associated with our unsecured credit facilities and other variable rate debt as well as refinancing risk on fixed-rate debt. Our involvement with derivative financial instruments is limited and we do not use them for trading or other speculative purposes. We occasionally utilize derivative financial instruments to lower our overall borrowing costs. See Archstone's 1999 Form 10-K "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a more complete discussion of our interest rate sensitive assets and liabilities. As of March 31, 2000, there have been no material changes in the fair values of assets and liabilities disclosed in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in Archstone's 1999 Form 10-K as compared to their respective fair market values at March 31, 2000. PART II-OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4.1 --Articles Supplementary dated March 3, 2000 related to the Series G Cumulative Redeemable Preferred Shares of Beneficial Interest 10.1 --Administrative Services Agreement, dated as of January 1, 2000, between Archstone and Security Capital Group Incorporated 12.1 --Computation of Earnings to Fixed Charges 12.2 --Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends 15.1 --Letter from KPMG LLP dated May 9, 2000 regarding unaudited financial information 27 --Financial Data Schedule 99.1 --Current Development Activity (b) Reports on Form 8-K: None. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARCHSTONE COMMUNITIES TRUST BY: /s/ Charles E. Mueller, Jr. ----------------------------- Charles E. Mueller, Jr. Senior Vice President and Chief Financial Officer (Principal Financial Officer) By: /s/ William Kell ------------------ William Kell Senior Vice President and Controller (Principal Accounting Officer) Date: May 9, 2000 21 EX-4.1 2 ARTICLES SUPPLEMENTARY DATED 03/03/2000 EXHIBIT 4.1 ARCHSTONE COMMUNITIES TRUST SERIES G CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST ________________ Articles Supplementary Classifying and Designating a Series of Preferred Shares as Series G Cumulative Redeemable Preferred Shares of Beneficial Interest and Fixing Distribution and Other Preferences and Rights of Such Series __________________ Archstone Communities Trust, a Maryland real estate investment trust (the "Trust"), hereby certifies to the State Department of Assessments and Taxation of Maryland pursuant to section 8-203(b) of the Corporations and Associations Article of the Annotated Code of Maryland that: FIRST: Pursuant to the authority granted and vested in the Board of Trustees of the Trust (the "Board of Trustees") by Article II, Section 1 of the Amended and Restated Declaration of Trust dated June 30, 1998, as amended (the "Declaration of Trust"), the Board of Trustees has reclassified 600,000 unissued Common Shares of Beneficial Interest of the Trust as Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, $1.00 par value per share (the "Series G Preferred Shares"). SECOND: The following is a description of the Series G Preferred Shares, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof: Section 1. Number of Shares and Designation. This class of preferred Shares shall be designated as Series G Cumulative Redeemable Preferred Shares of Beneficial Interest ("Series G Preferred Shares") and the number of shares which shall constitute such series shall be 600,000 Shares, par value $1.00 per Share. Section 2. Definitions. For purposes of the Series G Preferred Shares, the following terms shall have the meanings indicated: "Board" shall mean the Board of Trustees or any committee authorized by the Board of Trustees to perform any of its duties or exercise any of its powers with respect to the Series G Preferred Shares. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York City, New York are not required to be open. "Call Date" shall mean the date specified in the notice to holders required under Section 5 below as the Call Date. "Common Shares" shall mean the common shares of beneficial interest, par value $1.00 per share, of the Trust. "Dividend Payment Date" shall mean the 25th day of March, June, September and December in each year, commencing with the first such date to occur following the issuance of Series G Preferred Shares; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the next succeeding Business Day. "Dividend Periods" shall mean quarterly dividend periods commencing on the 26th day of March, June, September and December of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period. "Dividend Record Date" shall have the meaning set forth in Section 3. "Fully Junior Shares" shall mean the Common Shares and any other class or series of Shares of the Trust now or hereafter issued and outstanding to which the Series G Preferred Shares have preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Trust. "Series G Junior Shares" shall mean the Common Shares and any other class or series of Shares of the Trust now or hereafter issued and outstanding to which the Series G Preferred Shares have preference or priority in either (i) the payment of dividends or (ii) the distribution of assets on any liquidation, dissolution or winding up of the Trust and, unless the context clearly indicates otherwise, shall include Fully Junior Shares. "Parity Shares" shall have the meaning set forth in Section 7. "Person" shall mean any individual, firm, partnership, corporation, real estate investment trust, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Trust in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to authorization or declaration of dividends or other distribution by the Board, the allocation of funds to be so paid on any class or series of Shares of the Trust; provided, however, that if any funds for any Series G Junior Shares or any Parity Shares are placed in a separate account of the Trust or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Series G Preferred Shares shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Transfer Agent" means ChaseMellon Shareholder Services, L.L.C., New York City, New York, or such other agent or agents of the Trust as may be designated by the Board or its designee as the transfer agent for the Series G Preferred Shares. "Voting Preferred Shares" shall have the meaning set forth in Section 8. Section 3. Dividends. (a) The holders of Series G Preferred Shares shall be entitled to receive, when, as and if authorized or declared by the Board, out of funds legally available for such purpose, cash dividends in an amount per share equal to 8.625% of the liquidation preference per annum (equivalent to $2.15625 per share). Such dividends shall begin to accrue and shall be fully cumulative from and including the date of issuance of Series G Preferred Shares, whether or not in any Dividend Period or Periods there are funds of the Trust legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board, in arrears on each Dividend Payment Date. Each such dividend shall be payable in arrears to the holders of record of Series G Preferred Shares, as they appear in the Share records of the Trust at the close of business on such record date as is fixed by the Board, which shall be not less than 10 nor more than 50 days prior to the corresponding Dividend Payment Date (each, a "Dividend Record Date"). Accrued and unpaid dividends for any past Dividend Periods may be authorized or declared and paid at any time and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such record date as may be fixed by the Board, which shall be not less than 10 nor more than 50 days prior to the corresponding payment date. (b) The dividend for each full Dividend Period for the Series G Preferred Shares shall be computed by dividing the annual dividend rate by four. The dividend for any period shorter than a full Dividend Period on the Series G Preferred Shares shall be computed on the basis of a 360-day year of twelve 30- day months. Holders of Series G Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares, in excess of full cumulative dividends, as provided herein, on the Series G Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series G Preferred Shares which may be in arrears. (c) So long as any Series G Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any Parity Shares for any period unless (i) full cumulative dividends have been or contemporaneously are paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods with respect to the Series G Preferred Shares and (ii) a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of the dividend for the current Dividend Period with respect to the Series G Preferred Shares. When dividends are not paid in full, or a sum sufficient for the payment thereof is not set apart for payment, on the Series G Preferred Shares and any Parity Shares as provided above, all dividends declared on the Series G Preferred Shares and any Parity Shares shall be declared ratably in proportion to the respective amounts of dividends accrued and unpaid on the Series G Preferred Shares and on such Parity Shares. (d) So long as any Series G Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution shall be declared or made on Series G Junior Shares, nor shall any Series G Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of an employee incentive or benefit plan of the Trust or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any Series G Junior Shares) by the Trust, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), unless in each case (i) full cumulative dividends have been or contemporaneously are paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods with respect to the Series G Preferred Shares and all past dividend periods with respect to any Parity Shares and (ii) a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of the dividend for the current Dividend Period with respect to the Series G Preferred Shares and the current dividend period with respect to any Parity Shares. Any dividend payment on the Series G Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due which remains payable. (e) No distributions on Series G Preferred Shares shall be declared or paid or set apart for payment by the Trust at such time as the terms and provisions of any agreement of the Trust, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration, payment or setting apart for payment is restricted or prohibited by law. Section 4. Liquidation Preference. (a) Upon any liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary, before any payment or distribution of the assets of the Trust (whether capital or surplus) is made to or set apart for the holders of the Common Shares or any other class or series of Shares of the Trust now or hereafter issued and outstanding to which the Series G Preferred Shares have preference or priority in the distribution of assets on any liquidation, dissolution or winding up of the Trust, the holders of Series G Preferred Shares shall be entitled to receive out of assets of the Trust legally available for such purpose, liquidating distributions in the amount of $25.00 per Series G Preferred Share, plus an amount equal to all dividends (whether or not earned or authorized or declared) accrued and unpaid thereon to the date of final distribution to such holders, if any; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Trust, the assets of the Trust, or the proceeds thereof, distributable among the holders of Series G Preferred Shares are insufficient to pay in full such preferential amount with respect to the Series G Preferred Shares and the corresponding amounts with respect to all Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of Series G Preferred Shares and all such Parity Shares in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. (b) Subject to the rights of the holders of shares of any class or series of Shares ranking on a parity with or senior to the Series G Preferred Shares in the distribution of assets on any liquidation, dissolution or winding up of the Trust, upon any liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary, after payment has been made in full to the holders of Series G Preferred Shares, as provided herein, the holders of any Series G Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of Series G Preferred Shares shall not be entitled to share therein. (c) For the purposes hereof, (i) a consolidation or merger of the Trust with or into one or more corporations, real estate investment trusts or other entities, (ii) a sale, lease or transfer of all or substantially all of the Trust's assets or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary. Section 5. Redemption at the Option of the Trust. (a) Subject to Section 9 below, the Series G Preferred Shares are not redeemable by the Trust prior to March 3, 2005. On and after such date, the Trust, at its option, may redeem the Series G Preferred Shares, in whole at any time or in part from time to time, for cash at a redemption price of $25.00 per Series G Preferred Share, plus the amounts indicated in subsection (b) below. (b) Upon any redemption of Series G Preferred Shares pursuant to this Section 5, the Trust shall pay all dividends accrued and unpaid thereon, if any, in arrears for any Dividend Period ending on or prior to the Call Date. If the Call Date falls after a Dividend Record Date and prior to the corresponding Dividend Payment Date, then each holder of Series G Preferred Shares at the close of business on such Dividend Record Date shall be entitled to receive the dividend payable on such Series G Preferred Shares on the corresponding Dividend Payment Date notwithstanding the redemption of such Series G Preferred Shares before such Dividend Payment Date. Except as provided above, the Trust shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series G Preferred Shares called for redemption. (c) Unless (i) full cumulative dividends have been or contemporaneously are paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods with respect to the Series G Preferred Shares and all past dividend periods with respect to any Parity Shares and (ii) a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of the dividend for the current Dividend Period with respect to the Series G Preferred Shares and the current dividend period with respect to any Parity Shares, the Series G Preferred Shares may not be redeemed under this Section 5 in part and the Trust may not purchase or otherwise acquire Series G Preferred Shares, except pursuant to a purchase or exchange offer made on the same terms to all holders of Series G Preferred Shares or by conversion into or exchange for Fully Junior Shares or pursuant to Section 9 below. (d) The redemption price to be paid upon any redemption of the Series G Preferred Shares (other than any amounts indicated in subsection (b) above and other than a redemption pursuant to Section 9 below) shall be payable solely out of the sale proceeds of other shares of the Trust and from no other source. (e) Notice of the redemption of any Series G Preferred Shares under this Section 5 shall be mailed by registered mail, not less than 10 nor more than 60 days prior to the Call Date, to each holder of record of Series G Preferred Shares to be redeemed at the address of such holder as shown on the Trust's Share records. Neither the failure to mail any notice required by this subsection (e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to any other holder. Any notice which was mailed in the manner provided herein shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such mailed notice shall state, as appropriate: (i) the Call Date; (ii) the number of Series G Preferred Shares to be redeemed and, if fewer than all Series G Preferred Shares held by such holder are to be redeemed, the number of Series G Preferred Shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places at which certificates representing such Series G Preferred Shares are to be surrendered; and (v) that dividends on the Series G Preferred Shares to be redeemed shall cease to accrue on the Call Date except as otherwise provided herein. If notice of redemption of any Series G Preferred Shares has been mailed as provided above, then from and after the Call Date (unless the Trust fails to make available an amount of cash necessary to effect such redemption), (A) except as otherwise provided herein, dividends shall cease to accrue on the Series G Preferred Shares so called for redemption, (B) such Series G Preferred Shares shall no longer be deemed to be outstanding and (C) all rights of the holders thereof as holders of Series G Preferred Shares shall terminate (except the right to receive cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Trust's obligation to provide cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Trust deposits with a bank or trust company (which may be an affiliate of the Trust) which has an office in the Borough of Manhattan, City of New York, and which has, or is an affiliate of a bank or trust company which has, capital and surplus of at least $50,000,000, the funds necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series G Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series G Preferred Shares to be redeemed on any cash so set aside by the Trust. Subject to applicable escheat laws, any such cash unclaimed at the end of two years after the Call Date shall revert to the general funds of the Trust, after which reversion the holders of Series G Preferred Shares so called for redemption shall look only to the general funds of the Trust for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates representing any Series G Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust so requires and if the notice so states), such Series G Preferred Shares shall be exchanged for any cash (without interest thereon) for which such Series G Preferred Shares have been redeemed. If fewer than all the outstanding Series G Preferred Shares are to be redeemed, the Series G Preferred Shares to be redeemed shall be selected by the Trust from outstanding Series G Preferred Shares not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determined by the Board or the Chairman or any Co-Chairman of the Trust in its, his or her sole discretion to be equitable. If fewer than all the Series G Preferred Shares represented by any certificate are redeemed, then new certificates representing the unredeemed Series G Preferred Shares shall be issued without cost to the holder thereof. Section 6. Shares to Be Retired. All Series G Preferred Shares which are issued and reacquired in any manner by the Trust shall be restored to the status of authorized but unissued Shares of the Trust. Section 7. Ranking. Any class or series of Shares of the Trust shall be deemed to rank: (i) senior to the Series G Preferred Shares, in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Trust, if the holders of such class or series are entitled to the receipt of dividends or amounts distributable on any liquidation, dissolution or winding up of the Trust, as the case may be, in preference or priority to the holders of Series G Preferred Shares; (ii) on a parity with the Series G Preferred Shares, in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Trust, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof are different from those of the Series G Preferred Shares, if the holders of such class or series and the holders of Series G Preferred Shares are entitled to the receipt of dividends and amounts distributable on any liquidation, dissolution or winding up of the Trust in proportion to their respective amounts of dividends accrued and unpaid per share or liquidation preferences, without preference or priority to each other ("Parity Shares"); (iii) junior to the Series G Preferred Shares, in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Trust, if such class or series is Series G Junior Shares; and (iv) junior to the Series G Preferred Shares, in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Trust, if such class or series is Fully Junior Shares. Section 8. Voting. Holders of the Series G Preferred Shares will not have any voting rights, except as set forth below. (a) If at any time full distributions shall not have been timely made on any Series G Preferred Shares with respect to any six (6) prior quarterly distribution periods, whether or not consecutive (a "Preferred Distribution Default"), the holders of such Series G Preferred Shares, voting together as a single class with the holders of each class or series of Parity Shares upon which like voting rights have been conferred and are exercisable, will have the right to elect two additional Trustees to serve on the Board (the "Preferred Shares Trustees") at a special meeting called by the holders of record of at least 10% of the outstanding Series G Preferred Shares or any such class or series of Parity Shares or at the next annual meeting of shareholders, and at each subsequent annual meeting of shareholders or special meeting held in place thereof, until all such distributions in arrears and distributions for the current quarterly period on the Series G Preferred Shares and each such class or series of Parity Shares have been paid in full. (b) At any time when such voting rights shall have vested, a proper officer of the Trust shall call or cause to be called, upon written request of holders of record of at least 10% of the outstanding Series G Preferred Shares, a special meeting of the holders of Series G Preferred Shares and all the series of Parity Shares upon which like voting rights have been conferred and are exercisable (collectively, the "Voting Preferred Shares") by mailing or causing to be mailed to such holders a notice of such special meeting to be held not less than ten and not more than 45 days after the date such notice is given. The record date for determining holders of the Voting Preferred Shares entitled to notice of and to vote at such special meeting will be the close of business on the third Business Day preceding the day on which such notice is mailed. At any such special meeting, all of the holders of the Voting Preferred Shares, by plurality vote, voting together as a single class without regard to series will be entitled to elect two Trustees (the "Preferred Shares Trustees") on the basis of one vote per $25 of liquidation preference to which such Voting Preferred Shares are entitled by their terms (excluding amounts in respect of accumulated and unpaid dividends) and not cumulatively. The holder or holders of one-third of the Voting Preferred Shares then outstanding, present in person or by proxy, will constitute a quorum for the election of the Preferred Shares Trustees except as otherwise provided by law. Notice of all meetings at which holders of the Series G Preferred Shares shall be entitled to vote will be given to such holders at their addresses as they appear in the transfer records. At any such meeting or adjournment thereof in the absence of a quorum, subject to the provisions of any applicable law, a majority of the holders of the Voting Preferred Shares present in person or by proxy shall have the power to adjourn the meeting for the election of the Preferred Shares Trustees, without notice other than an announcement at the meeting, until a quorum is present. If a Preferred Distribution Default shall terminate after the notice of a special meeting has been given but before such special meeting has been held, the Trust shall, as soon as practicable after such termination, mail or cause to be mailed notice of such termination to holders of the Series G Preferred Shares that would have been entitled to vote at such special meeting. (c) If and when all accumulated distributions and the distribution for the current distribution period on the Series G Preferred Shares shall have been paid in full or a sum sufficient for such payment is irrevocably deposited in trust for payment, the holders of the Series G Preferred Shares shall be divested of the voting rights set forth in subsection (b) above (subject to revesting in the event of each and every Preferred Distribution Default) and, if all distributions in arrears and the distributions for the current distribution period have been paid in full or set aside for payment in full on all other classes or series of Parity Shares upon which like voting rights have been conferred and are exercisable, the term and office of each Preferred Shares Trustee so elected shall terminate. Any Preferred Shares Trustee may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series G Preferred Shares when they have the voting rights set forth in subsection (b) above (voting separately as a single class with all other classes or series of Parity Shares upon which like voting rights have been conferred and are exercisable). So long as a Preferred Distribution Default shall continue, any vacancy in the office of a Preferred Shares Trustee may be filled by written consent of the Preferred Shares Trustee remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding Series G Preferred Shares when they have the voting rights set forth in subsection (b) above) (voting separately as a single class with all other classes or series of Parity Shares upon which like voting rights have been conferred and are exercisable). The Preferred Shares Trustee shall each be entitled to one vote per Trustee on any matter. (d) So long as any Series G Preferred Shares remains outstanding, the Trust shall not, without the approval of the holders of at least two-thirds of the Series G Preferred Shares outstanding at the time (A) designate or create, or increase the authorized or issued amount of, any class or series of shares ranking senior to the Series G Preferred Shares with respect to payment of distributions or rights upon liquidation, dissolution or winding-up of the Trust or reclassify any authorized shares of the Trust into any such shares, or create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any such shares, (B) designate or create, or increase the authorized or issued amount of, any Parity Shares or reclassify any authorized shares of the Trust into any such shares, or create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any such shares, but only to the extent such Parity Shares are issued to an Affiliate of the Trust, or (C) either (x) consolidate, merge into or with, or convey, transfer or lease its assets substantially as an entirety, to any corporation, real estate investment trust or other entity, or (y) amend, alter or repeal the provisions of the Declaration of Trust (including these Articles Supplementary) or Bylaws, whether by merger, consolidation or otherwise, in each case that would materially and adversely affect the powers, special rights, preferences, privileges or voting power of the Series G Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of a merger, consolidation or a sale or lease of all of the Trust's assets as an entirety, so long as (1) the Trust is the surviving entity and the Series G Preferred Shares remain outstanding with the terms thereof unchanged, or (2) the resulting, surviving or transferee entity is a corporation or real estate investment trust organized under the laws of any state and substitutes the Series G Preferred Shares for other preferred shares having substantially the same terms and same rights as the Series G Preferred Shares, including with respect to distributions, voting rights and rights upon liquidation, dissolution or winding-up, then the occurrence of any such event shall not be deemed to materially and adversely affect such rights, privileges or voting powers of the holders of the Series G Preferred Shares and provided further that any increase in the amount of authorized preferred shares or the creation or issuance of any other class or series of preferred shares, or any increase in an amount of authorized shares of each class or series, in each case ranking either (m) junior to the Series G Preferred Shares with respect to payment of distributions and the distribution of assets upon liquidation, dissolution or winding-up, or (n) on a parity with the Series G Preferred Shares with respect to payment of distributions or the distribution of assets upon liquidation, dissolution or winding-up to the extent such preferred shares are not issued to an affiliate of the Trust, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. Section 9. Transfer Restrictions. The Series G Preferred Shares shall be subject to the provisions of Article 2 of the Declaration of Trust. Section 10. No Conversion Rights. The holders of the Series G Preferred Shares shall not have any rights to convert such shares into shares of any other class or series of shares or into any other securities of, or interest in, the Trust. Section 11. No Preemptive Rights. No holder of the Series G Preferred Shares shall, as such holder, have any preemptive rights to purchase or subscribe for additional shares of the Trust or any other security of the Trust which it may issue or sell. Section 12. Record Holders. The Trust and the Transfer Agent may deem and treat the record holder of any Series G Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Trust nor the Transfer Agent shall be affected by any notice to the contrary. Section 13. Sinking Fund. The Series G Preferred Shares shall not be entitled to the benefit of any retirement or sinking fund. THIRD: The Series G Preferred Shares have been classified by the Board of Trustees under the authority contained in Article II, Section 1, of the Declaration of Trust. FOURTH: These Articles Supplementary have been approved by the Board of Trustees in the manner and by the votes required by law. FIFTH: The undersigned each acknowledges these Articles Supplementary to be the act of the Trust and further, as to all matters or facts required to be verified under oath, each of the undersigned acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and this statement is made under the penalties of perjury. IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and attested to by its Assistant Secretary on this 3rd day of March, 2000. ARCHSTONE COMMUNITIES TRUST Charles E. Mueller, Jr. Senior Vice President and Chief Financial Officer ATTEST: Caroline Brower General Counsel and Secretary EX-10.1 3 ADMINISTRATIVE SERVICES AGREEMENT EXHIBIT 10.1 ADMINISTRATIVE SERVICES AGREEMENT --------------------------------- THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and entered --------- into by and between Archstone Communities Trust, a Maryland Real Estate Investment Trust ("the Company"), and SCGroup Incorporated, a Texas corporation ----------- ("SCGroup"). This Agreement shall supersede and replace the Administrative ------- Services Agreement executed by the parties on January 1, 1999 upon expiration of that earlier agreement on December 31, 1999. WHEREAS, the Company wishes to purchase from SCGroup certain administrative services designed to assist the Company in the cost-efficient management of the Company's administrative and business affairs in the manner and pursuant to terms and conditions as more specifically described herein; and WHEREAS, SCGroup desires to provide or cause to be provided those services requested by the Company under such terms and conditions; and WHEREAS, SCGroup will perform similar administrative services for other entities (collectively "SCGroup Clients") which may vary from time to time. --------------- NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: Section 1. Services -------- 1.1 Scope of Services. The specific services to be provided by ----------------- SCGroup to the Company (each a "Service" and collectively the "Services") are and shall be described in Schedule A. Except as provided in Section 3.2, the scope of such Services selected may not be expanded, reduced or otherwise modified by the Company without the written consent of SCGroup. 1.2 Access, Information, Cooperation and Assistance. The Company will ----------------------------------------------- provide SCGroup with all access, Company information, cooperation and assistance necessary for SCGroup to perform the Services in accordance with this Agreement. 1.3 Increases in Volume of Service. If the Company completes a ------------------------------ transaction, such as the acquisition of a new business unit, that will result in an increase of twenty-five (25%) percent or more in the volume of Services to be delivered in any service category (e.g., Disbursements, Cash Management, Corporate Tax) as designated on Schedule A, the Company shall promptly notify SCGroup of such change. SCGroup shall exercise commercially reasonable efforts to accommodate and deliver the increased volume of Services as soon as practicable and, in any event, within 60 days of its receipt of notice of such increased volume. 1.4 Subcontracting. SCGroup may delegate and subcontract some or all -------------- of its obligations under this Agreement to one or more third parties. If SCGroup does so, it will remain responsible for the performance of all obligations performed by such subcontractors to the same extent as if such obligations were performed by SCGroup employees. Section 2. Charges. ------- 2.1 Charges. ------- (a) The charges to be paid by the Company to SCGroup for the Services to be performed by SCGroup during the Initial Term and any extension of such Term ("Renewal Period") are and shall be set forth in Schedule B ("Charges"). Unless otherwise agreed, such Charges shall be subject to modification only in accordance with Sections 1.3 or 3.2. The Company agrees that the Charges paid by the Company in each service category during the Initial Term and any Renewal Period shall equal at least seventy-five percent (75%) of the Charges that would have been paid by the Company in such service category based upon the estimated service volume agreed upon by the parties for such period (the "Estimated Charges"). If the Charges fail to reach such level during the Initial Term or any Renewal Period, the Company shall pay to SCGroup an amount equal to the total Charges that would have been paid by the Company in such service category if the actual service volume had equaled seventy-five percent (75%) of the agreed upon estimate, less the total Charges actually paid by Company in such service category during the period in question. The Company shall pay such amount to SCGroup within fifteen (15) days after the expiration or termination of the Initial Term and thereafter within fifteen (15) days after the expiration or termination of any applicable Renewal Period. For purposes of this Section 2.1, "service volume" shall include the volumes of the Company plus the volumes of any subsidiaries of the Company that are administrative services customers of SCGroup for the applicable service category. Should this Agreement be terminated in accordance with Section 10.3, the estimated service volumes for purposes of this Section 2.1 shall be prorated through the date of termination. (b) Notwithstanding the above, if during any calendar quarter during the Initial Term or any Renewal Period the Charges paid by the Company for any service category are less than 75% or more than 125% of the Estimated Charges, the parties may renegotiate the applicable rates and minimum volumes prospectively under mutually acceptable terms; provided that if the parties are unable to reach agreement on changes to rates or minimum volumes, the Company may elect to terminate this Agreement in accordance with Section 10.3 or proceed under the existing agreement. If the Charges paid by the Company are less than 75% of the Estimated Charges and the Company elects to terminate the Agreement in accordance with Section 10.3, the Company shall pay SCGroup an amount equal to 75% of the Estimated Charges through the date of termination, less the total charges actually paid by the Company for the terminated service category during the applicable period. 2.2 Pass-Through Expenses. Pass-through expenses are listed in --------------------- Schedule C. Unless otherwise agreed by the parties, pass-through expenses shall be paid by the Company directly. SCGroup will promptly provide the Company with the original third-party invoice for such expenses, together with a statement that SCGroup has reviewed and validated the invoiced charges. SCGroup will highlight any charges that appear to be inappropriate and will work with the Company to reconcile all bills with the third-party suppliers. 2.3 Retained Expenses. The Company shall retain financial ----------------- responsibility for those functions and expense items shown as retained expenses in Schedule D. The Company will be billed directly by third parties for such services. The Company agrees to pay such expenses in a timely manner and in the ordinary course of business. 2.4 Extra Services. Any services requested by the Company beyond -------------- those set forth in Schedule A will be performed in accordance with mutually agreed terms, conditions and charges. 2.5 Payment for Services. -------------------- (a) At the beginning of each calendar month, SCGroup shall invoice the Company for the Charges specified in Schedule B for the Services received by the Company during the preceding month. Such Charges shall be payable in full within 20 days of receipt of such invoice by the Company. Any past due amounts, unless such amounts have been disputed by the Company in accordance with Section 2.5(b), shall be subject to a late payment fee equal to the Wells Fargo Bank N.A. prime lending rate plus 2 percent on the past due balance or the maximum rate allowable by law, whichever is less. The Company shall cause payment to be received by SCGroup at SCGroup's offices at 7777 Market Center Avenue, El Paso, Texas 79912, or by wire transfer in accordance with the wire instructions provided from time to time to the Company in writing by SCGroup. (b) The Company shall provide SCGroup with prompt written notification of any disputed Charges prior to the payment date of such Charges. The notification shall provide a description of the specific reasons for the dispute. No payment may be withheld for undisputed Charges. 2.6 Taxes. ----- (a) Each party will pay any real estate or personal property taxes on property it owns or leases, franchise and privilege taxes on its business, and taxes based on its net income or gross receipts. (b) SCGroup will pay all sales, use, excise, value-added, services, consumption, and other taxes and duties payable by SCGroup on any goods or services used or consumed by SCGroup in providing the Services where the tax is imposed on SCGroup's acquisition or use of such goods or services and the amount of tax is measured by SCGroup's costs in acquiring such goods or services. (c) In the case of any sales, use, excise, value-added, services, consumption, or other tax that is assessed on the provision of the Services as a whole, or on any particular hardware, software, or Service received by the Company from SCGroup, the Company will pay such taxes. (d) The Parties agree to fully cooperate with each other to enable each to more accurately determine its own tax liability and to minimize such liability to the extent legally permissible. Section 3. Term. ---- 3.1 Initial Term. Subject to Section 3.2, the term of this Agreement ------------ shall commence on January 1, 2000 and, unless terminated earlier in accordance with Section 10, shall end, other than with respect to Human Resources and Payroll services, on December 31, 2000 (the "Term"). The term of this Agreement ---- with respect to Human Resources and Payroll services shall end on July 1, 2000. 3.2 Term Extension. -------------- (a) On or before September 1 of each calendar year, SCGroup shall deliver to the Company (i) a list of the services (other than Risk Management services) to be offered by SCGroup during the succeeding calendar year ("Renewal Period"), (ii) the charges and performance standards associated with such services, (iii) any additional or different terms and conditions applicable to such service offerings, and (iv) a budget for the Renewal Period using estimated service volumes. Thereafter, on or before September 30, the Company shall provide SCGroup in writing with a nonbinding list of the services it wishes to purchase during the succeeding calendar year; provided that, for any Service that the Company is using in the then current calendar year not included in the list, this Agreement shall terminate on December 31 of that year. On or before November 30, the Company shall provide SCGroup with a written confirmation of the Services it wishes to purchase during the succeeding calendar year; provided that, if the Company fails to respond by such date, it shall be deemed to have declined to purchase such services for the succeeding calendar year and this Agreement shall terminate as to such services on the succeeding February 28 with no termination fee due SCGroup. For terminated services, SCGroup and the Company shall work together to transfer pertinent information to the Company or its designee, and the Company agrees to pay SCGroup for the SCGroup employees providing such information at their customary hourly rates and to reimburse SCGroup for any expenses reasonably incurred by SCGroup in connection with this effort. After the Company selects the Services to be provided by SCGroup during the Renewal Period, the scope of such Services may not be expanded, reduced or otherwise modified by the Company without the written consent of SCGroup. (b) With respect to Risk Management services, in March of each year SCGroup shall begin the renewal process for the then upcoming fiscal year that begins June 30. During the renewal process, SCGroup shall provide periodic updates to the Company regarding negotiations with underwriters and SCGroup's estimated fees. On or before June 1 of each year, SCGroup shall deliver a description of the services offered for the upcoming fiscal year, together with the terms, charges and performance standards for such services. On or before June 15, the Company shall notify SCGroup in writing whether the Company wishes to purchase Risk Management services from SCGroup; provided that if the Company fails to respond by June 15, it shall be deemed to have declined to purchase such services for the succeeding fiscal year and this Agreement shall terminate with respect to Risk Management services on June 30 of the then current year. (c) If the Company has chosen to purchase Services for the succeeding calendar year in accordance with Section 3.2(a), SCGroup shall prepare and deliver to the Company on or before December 15 a Schedule A describing the specific Services to be provided to the Company during the Renewal Period. SCGroup also shall revise and deliver to the Company Schedules B, C, D and E on or before that date to reflect the charges, performance standards and other terms and conditions applicable to such Services. Section 4. Audit of Services. At any time during regular business hours ----------------- and as often as reasonably requested by the Company's officers, SCGroup shall permit the Company or its authorized representatives to examine and make copies and abstracts from the records and books of SCGroup for the purpose of auditing the performance and Charges of SCGroup under the terms of this Agreement; provided, that all costs and expenses of such inspection shall be borne by the - -------- Company and provided further that the Company shall have no right and shall not -------- ------- make copies of abstracts of any SCGroup Materials (as defined in Section 9.2). Section 5. Company Data. Data obtained by SCGroup from the Company in ------------ connection with the performance of any Services ("Company Data") is and shall remain the exclusive property of the Company. SCGroup is authorized to have access to and make use of the Company Data as necessary and appropriate for the performance by or for SCGroup of its obligations under this Agreement. Upon the termination or expiration of this Agreement, SCGroup will return to the Company all Company Data then in its possession. SCGroup will not use Company Data for any purpose other than for providing the Services. Section 6. Confidentiality. Except as otherwise provided in this --------------- Agreement, SCGroup and the Company each agree that all information communicated to it by the other, whether before or after the effective date of this Agreement, will be received in strict confidence, will be used only for purposes of this Agreement, and will not be disclosed by the recipient party without the prior written consent of the other party. Each party agrees to use the same means it uses to protect its own Confidential Information, but in any event not less than reasonable means, to prevent the disclosure of such information to outside parties. However, neither party will be prevented from disclosing information to its counsel or regular public accountants, or from disclosing information which belongs to such party, or is (a) already known by the recipient party without an obligation of confidentiality; (b) publicly known or becomes publicly known through no unauthorized act of the recipient party; (c) rightfully received from a third party; (d) independently developed without use of the other party's confidential information; (e) disclosed without similar restrictions to a third party by the party owning the confidential information; or (f) required to be disclosed pursuant to a requirement of a governmental agency or legal requirement if the disclosing party provides the other party with notice of this requirement prior to disclosure. Section 7. Performance Standards --------------------- 7.1 Service Levels. SC Group shall exercise commercially reasonable -------------- efforts to perform the Services in accordance with the service levels set forth in Schedule E. To the extent any service level is determined by the parties to be unattainable using commercially reasonable efforts, SCGroup will identify the level of service which is reasonably attainable, the modifications or changes necessary to attain the higher service level and the costs associated with such modifications or changes. The parties will meet as necessary to evaluate and revise the service levels. SCGroup will measure the quality and quantity of the Services actually delivered by SCGroup. The data obtained by SCGroup will be one of the bases for evaluating and possibly revising Schedule E. All such revisions must be agreed to by the Company and SCGroup. If requested, the Company will provide copies of relevant information in its possession to SCGroup to assist in any review or revision of the service levels. 7.2 Failure to Attain Service Levels. If SCGroup fails to attain any -------------------------------- service level, SCGroup will (i) promptly investigate the cause of the problem; (ii) prepare a report identifying the cause of the problem and recommending solutions; and (iii) use commercially reasonable efforts to correct the problem and to begin meeting the service levels as soon as practicable, at no incremental cost to the Company. Section 8. Prevention of Performance. SCGroup shall not be determined to ------------------------- be in violation of this Agreement if it is prevented from performing any Services hereunder, in whole or in part, by the acts or omissions of the Company or a third party or for any other reason beyond its reasonable control, including without limitation acts of God, nature or public enemy, war, civil disturbance, labor dispute, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunication service, or limitations of law, regulations or rules of the Federal, state or local government or of any agency thereof. Section 9. Software and Other Intellectual Property. ---------------------------------------- 9.1 Company Materials. To the extent the Company possesses any ------------------ ownership, license or other right (including any patent, copyright, trademark, trade secret or other proprietary right) in any software, equipment, data, information, process or material ("Company Materials"), it shall retain such right or interest and, except as provided in this Section, SCGroup shall not acquire any right or interest in such Company Materials pursuant to this Agreement. The Company hereby grants to SCGroup, without charge, the limited nonexclusive nontransferable right to access and use Company Materials during the term of this Agreement as and to the extent necessary for the performance of the Services. 9.2 SCGroup Materials. To the extent SCGroup possesses any ownership, ----------------- license or other right (including any patent, copyright, trademark, trade secret or other proprietary right) in any software, equipment, data, information, process or material ("SCGroup Materials") used in providing the Services, it shall retain such right or interest and the Company shall not acquire any right or interest in such SCGroup Materials pursuant to this Agreement. 9.3 Intellectual Property Rights. If, in the course of providing ---------------------------- Services under this Agreement, the Company requests and SCGroup agrees to develop any Software, process or other material to the specification of the Company, not being SCGroup Materials or an enhancement of SCGroup Materials, and the Company pays all of the Charges associated with such development ("Work Product"), then all legal and beneficial ownership rights therein (including all patent, copyright, trademark, trade secret or other proprietary rights) shall belong to the Company. SCGroup hereby assigns to the Company all right, title and interest that arises in SCGroup with respect to such Work Product, including all the patent, copyright, trademark, trade secret or other proprietary rights related thereto, and SCGroup agrees to take all reasonable steps and execute all documents necessary to perfect title to such Work Product in the Company. SCGroup shall be permitted to access and use such Software, process or other material as and to the extent necessary for the provision of the Services. 9.4 SCGroup Ownership Rights. Except as provided for in Section 9.3 ------------------------- above, all patent, copyright, trademark, trade secret or other proprietary rights in any Software, process or other material created by SCGroup, its employees or agents and all legal and beneficial rights therein shall belong to SCGroup. Section 10. Termination. ----------- 10.1 Termination for Cause. Either party may terminate this --------------------- Agreement, in whole or in part, by giving written notice to the other party, if such other party materially breaches any of its duties or obligations set forth herein and fails to cure such breach within thirty (30) days of written notice of such breach. If less than all Services are terminated, the parties will equitably adjust the Charges to be paid by the Company hereunder for the remaining Services. 10.2 Terminate for Insolvency. Either party may terminate this ------------------------ Agreement, upon written notice to the other party, if such other party (a) files for bankruptcy; (b) becomes or is declared insolvent (c) is the subject of any proceedings related to its liquidation or insolvency or the appointment of a receiver or similar officer; (d) makes an assignment for the benefit of all or substantially all of its creditors; or (e) enters into an agreement for the composition, extension, or readjustment of substantially all of its obligations. 10.3 Termination for Convenience. The Company may terminate any or --------------------------- all Services covered by this Agreement at any time upon ninety (90) days prior written notice to SCGroup and the payment of a termination fee equal to the average of the monthly Charges for the terminated Services for the three months preceding the notice of termination. SCGroup and the Company shall work together to transfer pertinent information to the Company or its designee, and the Company agrees to pay SCGroup for the SCGroup employees providing such information at their customary hourly rates and to reimburse SCGroup for any expenses reasonably incurred by SCGroup in connection with this effort. Section 11. Disclaimer and Limitation of Liability and Intellectual ------------------------------------------------------- Property Claims Between Parties. ------------------------------- 11.1 DISCLAIMER. EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT, ----------- NEITHER SCGROUP NOR THE COMPANY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY MATTER, INCLUDING THE MERCHANTABILITY, SUITABILITY, ORIGINALITY, TITLE, OR FITNESS FOR A PARTICULAR USE OR PURPOSE. 11.2 LIMITATION OF LIABILITY. IN NO EVENT SHALL A PARTY BE LIABLE FOR ----------------------- INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Additionally, the total aggregate liability of either party for claims asserted by the other party under or in connection with this Agreement, regardless of the form of the action or the theory of recovery, shall be limited to the total Charges paid by the Company to SCGroup during the 12 months preceding the event which is the subject of the claim (the "Liability Cap"); provided, however, that the Liability Cap -------- shall not apply with respect to (i) claims that are the subject of the indemnification provisions set forth herein, or (ii) any failure to pay Charges due and owing to SCGroup under this Agreement. Section 12. Indemnification. ---------------- 12.1 By SCGroup. SCGroup shall indemnify, defend and hold harmless ---------- the Company and its officers, directors, employees, agents, successors, and assigns from any and all Losses attributable to third party claims arising from willful misconduct or gross negligence by SCGroup in the performance of its obligations under this Agreement. 12.2 By the Company. Except as provided in Section 12.1, the Company -------------- shall indemnify, defend and hold harmless SCGroup and its officers, directors, employees, agents, successors, and assigns from any and all Losses attributable to third party claims arising under or in connection with this Agreement. Section 13. Relationship of the Parties. --------------------------- 13.1 Independent Contractor Status. SCGroup is an Independent ----------------------------- Contractor. This Agreement will not be construed as creating any partnership, agency relationship or other form of legal association that would impose liability upon one party for the other party's actions or failure to act. Nor will this Agreement be construed as providing either party with the right, power or authority (express or implied) to create any duty for, or obligation of, the other party. 13.2 Responsibility for Employees. Each party will be responsible for ---------------------------- the management, direction and control of its employees and other agents. All SCGroup employees used in performing SCGroup's obligations under this contract shall be employed solely and exclusively by SCGroup, and all Company employees used in performing the Company's obligations under this Agreement shall be employed solely and exclusively by the Company. Thus, SCGroup and the Company shall not be considered a joint or single employer of any employee. 13.3 SCGroup Control of Services. Except where this Agreement ---------------------------- expressly provides that SCGroup will perform certain identified Services as agent for the Company, the Services will be under the control, management and supervision of SCGroup. Section 14. Notices. ------- 14.1 Manner of Delivery. Each notice, demand, request, consent, ------------------ report, approval or communication (each a "Notice") which is or may be required ------ to be given by either party to the other party in connection with this Agreement and the transactions contemplated hereby, shall be in writing, and given by telecopy, personal delivery, receipted delivery service, or by certified mail, return receipt requested, prepaid and properly addressed to the party to be served. 14.2 Addresses. Notices shall be addressed as follows: --------- If to the Company: Archstone Communities Trust 7777 Market Center Avenue El Paso, TX 79912 Attention: William Kell With a copy to: Archstone Communities Trust 7670 S. Chester Street, Suite 100 Englewood, CO 80112 Attention: Charles E. Mueller, Jr. If to SCGroup: SCGroup Incorporated 7777 Market Center Avenue El Paso, Texas 79912 Attention: Vincent L. Dodds 14.3 Effective Date of Notice. Notices shall be effective on the date ------------------------ sent via telecopy, the date delivered personally or by receipted delivery service, or three (3) days after the date mailed. 14.4 Change of Address. Each party may designate by notice to the ----------------- others in writing, given in the foregoing manner, a new address to which any notice may thereafter be so given, served or sent. Section 15. Entire Agreement. This Agreement, together with the Schedules ---------------- hereto, constitutes and sets forth the entire agreement and understanding of the parties pertaining to the subject matter hereof, and no prior or contemporaneous written or oral agreements, understandings, undertakings, negotiations, promises, discussions, warranties or covenants not specifically referred to or contained herein or attached hereto shall be valid and enforceable. No supplement, modification, termination in whole or in part, or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision hereof (whether or not similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. Section 16. Priority. If there is any apparent conflict or inconsistency -------- between the provisions set forth in this Agreement, and the provisions set forth in any schedule, exhibit, attachment or supplement attached hereto, to the extent possible such provisions will be interpreted in a manner so as to make them consistent. If it is not possible to interpret such provisions consistently, the provisions set forth in the body of this Agreement will prevail. Section 17. No Third Party Beneficiaries. The parties do not intend, nor ---------------------------- will any clause of this Agreement be interpreted to create, for any third party any obligation to or benefit from the Company or SCGroup. Section 18. Survival. All provisions of this Agreement which contemplate -------- performance or observance following the expiration or earlier termination of this Agreement, will survive any such expiration or earlier termination. Additionally, all provisions of this Agreement will survive the expiration or earlier termination of this Agreement to the fullest extent necessary to give the parties the full benefit of the bargain expressed herein. Section 19. Consents and Approvals. Where agreement, approval, permission, ---------------------- acceptance, consent or similar action by either party is required by any provision of this Agreement, such action will not be unreasonably delayed, conditioned or withheld. Section 20. Binding Effect. This Agreement shall be binding upon and shall -------------- inure to the benefit of the parties hereto, each of their respective successors and permitted assigns, but may not be assigned by either party without the prior written consent of the other party, and no other persons shall have or derive any right, benefit or obligation hereunder. Section 21. Headings. The headings and titles of the various paragraphs of -------- this Agreement are inserted merely for the purpose of convenience, and do not expressly or by implication limit, define, extend or affect the meaning or interpretation of this Agreement or the specific terms or text of the paragraph so designated. Section 22. Governing Law. This Agreement shall be governed in all ------------- respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Texas. Section 23. Severability. If any provision of this Agreement shall be held ------------- invalid by a court with jurisdiction over the parties to this Agreement, then and in that event such provision shall be deleted from the Agreement, which shall then be construed to give effect to the remaining provisions thereof. If any one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then in that event, to the maximum extent permitted by law, such invalidity, illegality or enforceability shall not affect any other provisions of this Agreement or any other such instrument. Section 24. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which taken together shall be considered one and the same instrument. Section 25. Limitation of Liability. In accordance with the Declaration ----------------------- of Trust of the Company, notice is hereby given that all persons dealing with the Company will look to the assets of the Company for the enforcement of any claim against the Company, as none if the trustees, officers, employees or shareholders of the Company assume any personal liability for obligations entered into by or on behalf of the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ARCHSTONE COMMUNITIES TRUST By: /s/ CHARLES E. MUELLER, JR. --------------------------- Charles E. Mueller, Jr. Chief Financial Officer SCGROUP INCORPORATED By: /s/ THOMAS N. KENDALL ---------------------- Thomas N. Kendall Managing Director SCHEDULE A DESCRIPTION OF SERVICES The Services to be provided by SCGroup to the Company are described in this Schedule A. Such Services shall be provided to the home office, as well as all regional offices within the United States. The Company and SCGroup shall each designate a service manager with authority to act on its behalf with respect to all matters pertaining to this Agreement. The contact information for each service manager and any related personnel may be found on Appendix 1. 1. Business Services ----------------- 1.1 General Ledger Accounting Services (NOT APPLICABLE) 1.2 Financial Reporting and Analysis (NOT APPLICABLE) 1.3 Budgeting and Forecasting (NOT APPLICABLE) 1.4 Payroll Bank Reconciliations . Reconcile Company payroll bank accounts on a monthly basis utilizing SCGroup standard bank reconciliation forms . Provide journal entries necessary to correct Company book cash balance by the end of the following month . Prepare bank reconciliations generally by the end of each subsequent month 1.5 Registrar and Transfer Agent Services (NOT APPLICABLE) 1.6 Stock Option Administration and Reporting (NOT APPLICABLE) 2. Cash Management --------------- 2.1 Bank Account Management . Set up and maintain internal controls . Open, close, and change bank or investment accounts (i.e., tax ID, legal name, certificate, resolution, signors) . Set up Mellon automated investment sweep . Maintain bank account database and files . Reconcile accounts daily and forecast cash needs . Support controlled disbursement/positive pay, investment, concentration accounts . Maintain XRT relating to accounts/folios . Provide deposit slips and endorsement stamps . Execute internal funds transfers to concentrate cash efficiently . Utilize target balance to optimize cash . Cross-train team members and create contingency plans . Prepare daily bank deposits and overnight to concentration account . Checks received in Cash Management by 3:00 pm will be sent overnight to the bank provided that the transaction costs are lower than the additional interest earnings . Research inquiries requested by companies on existing accounts . Assist with bank research on existing accounts . Process Direct Debits . Letter of Credit management services (same charge as a low maintenance account) . Balance, activity, and NSF reports will generally be provided daily . Cash optimization procedures will generally be performed daily . All investments managed by Cash Management will adhere to Company investment guidelines 2.2 Electronic Disbursements . Sort, mark and distribute Company wires . Input and transmit wires . Create and maintain XRT scripts relating to wires/ACHs . Maintain wire software and passwords . Ensure that funds are available for payment . Process for further credit wires . Facilitate payments for utilities, taxes, payroll, and mortgages . Fund utility payments daily . Fund controlled disbursement checking accounts . Set up repetitive wires/ACHs, including setup in XRT; i.e., construction draws, interest payments . Subject to receipt of accurate and timely information (noon on the business day before for U.S. wires; four business days ahead for international wires), wires will generally be sent on time. Wires are executed subject to receipt of any necessary funding. 2.3 Special Handling Electronic Disbursements . Execute late wires . Execute and monitor tentative wires . Obtain and provide Fed reference numbers . Monitor incoming wires . Execute AM wires . Morning payments are executed subject to receipt of any necessary funding . Execute cashier's checks . Execute foreign currency drafts . Execute international wires . Setup/maintenance of FX (foreign exchange) relationships . Participate in FX competitive bidding . Combine multiple wires into one payment (count as one special handling wire) . Execute tax payments - EFTPS debit notification . Late requests will be processed on a best-efforts basis . Special handling instructions will be followed provided that the instructions are included on the disbursement request form 2.4 Investing and Borrowing . Manage line of credit activities . Monitor monthly LIBOR rates . Maintain and report LOC status reports . Summarize LOC agreements . Federated investment activities - invest and redeem cash as deemed prudent or necessary consistent with Company guidelines . Maintain investment guidelines . Maintain Federated Investment Software . All investments executed by Cash Management will adhere to Company investment guidelines . Investment and borrowing decisions will be made daily and executed in time to meet financial institution deadlines 2.5 Transaction Reporting . XRT to PeopleSoft automated journal entries . Federated reports . NSF reports . Wire templates . XRT reports . Remittance information via phone/email . Hardware support . Other software support . XRT research support . Balance, activity, and NSF reports will be provided daily 2.6 Bank Fee and Relationship Management . Negotiate and review bank fees . Process fees for payment - including check requests . Utilize bank earnings credits to the extent possible or practicable . Coordinate and participate in bank visits . Process monthly account analysis statement . Set up electronic account analysis in XRT 2.7 Projects/Research (charged at an hourly rate) . Research Company inquiries not included in services above . Create XRT to PeopleSoft interface . Coordinate company mergers . Set up Direct Debit . Set up new companies in XRT and related software and databases . Special projects require Company vice president approval before execution . SCGroup performance is subject to external constraints including, but not limited to, receipt of information on transactions, Company's operational needs, bank availability schedules, bank deadlines, borrowing provisions, and transaction costs 3. Corporate Tax Administration (NOT APPLICABLE) ----------------------------- 4. Disbursements ------------- 4.1 Invoice Processing Services (paper and Web-based invoice processing) (a) General . Process all properly approved and coded invoices for payment; issue check to vendor . Enter invoices into system (paper-based only) . Enter wire transfers into system . Reclass invoices to correct G/L accounts . Generate bi-weekly check runs . Match remittances . Obtain authorized manual signature if check amount is over $10,000 . Overnight/Special Handling checks processed daily . Mail checks . File "processed" invoices (paper-based only) . Issue positive-pay bank transmissions daily . Perform back-end audits for policy compliance (paper- based only) . AP documentation generally filed within two business days of processing (paper-based only) . Checks disbursed within one business day after issuance . Customer Service Calls generally returned within two business hours; research completed and resolved within two business days . SODA's generally processed within three business days of receipt . Purchase Card Administration . Issue/change/cancel P-Cards . Issue cardholders statements monthly . Provide standard P-Card reports on an as-requested basis . Provide one custom report (excess reports to be billed at $50.00 each) . Download MasterCard transactions to G/L system monthly (more than once monthly to be billed at $50.00 each) . Prepare payment to Wells Fargo for P-Card transactions monthly . Other Services . Electronic funds validation . Recurring payment processing . Returned checks . Issue void at bank and in system . Reissue, if necessary . 1099 reporting compliance and issuance . Download CASS transactions to G/L system monthly (more than once monthly to be billed at $50.00 each) (b) Emergency (Manual) Check Services . Process emergency or manual check as requested by Company . Overnight/Special Handling processing . Emergency checks generally disbursed same business day after issuance per special handling instructions (c) AP Compliance (Reject) Program Services (for paper-based invoice processing only) . Prepare reject notification for improperly completed vouchers; return to sender . Oversee and administer the AP Compliance Program and review with Company senior management . Monitor compliance by company, property and non- compliance type . Provide monthly reports on all non-compliance issues to Company senior management (d) Stop Payments and Reissued Checks . Process stop payments; void check in system and at bank 4.2 Accounts Payable Help Desk Services (a) General . Answer general accounts payable ("A/P") Help Desk calls . Provide payment status of invoices, date paid, check numbers, etc. . Provide residents information on their refunds . Provide Signature Authorization Level information . Provide A/P Manuals/Stamps (one manual per property; additional hard copy manuals to be billed at $15.00 each and stamps to be billed at cost) . Provide information on common A/P forms . Provide information on A/P Policies and Procedures . Perform A/P research as required (b) Vendor Management . Process and enter New Vendor Setup Forms (forms received must be complete and accurate per A/P Manual) . Update vendor information in vendor database . Maintain Full-Risk/No-Risk Vendor Compliance Program . Maintain insurance certificates for full-risk vendors . Maintain filing system for full-risk/no-risk vendors . Prepare Vendor Credit Applications . Maintain filing system for credit applications . Process BCL vendor downloads 4.3 Corporate Travel Center (a) Corporate Charge and Phone Card Administration . Process corporate charge card and phone card applications, generally within one business day of receipt, and distribute cards generally within one business day of receipt from card provider(s) . Acknowledge inquiries from cardholders regarding card losses, past due accounts, and reconciliation questions generally within two business hours of receipt . Notify delinquent cardholders on a monthly basis . Assist in individual card reconciliation and credit refund research . Liaison to AMEX on behalf of cardholders . Prepare and coordinate weekly wire transfers to AMEX . Provide standard card activity reports to Management on a quarterly basis . Full charge card account reconciliation provided at a rate of $65.00 per hour . Ad hoc reports provided at a rate of $25.00 each (b) Corporate Travel . Manage relationship with Travel Agency Partner (AMEX) . Negotiate agreements with travel agency, charge card, air, car, and hotel providers for Company's use . Provide timely updates to all travelers and travel planners on travel policy and industry/vendor changes . Acknowledge inquiries regarding travel-related service issues, generally within two business hours of receipt . Track and trend all travel-related service issues . Conduct annual survey, by company, to identify opportunities for improvement . Update and maintain corporate travel policy manual . Process new Business Traveler Profiles, generally within one business day of receipt . Process, approve and reconcile Company direct billing accounts for air, car and hotel . Analyze travel data and provide standard reports to each company on a quarterly basis with benchmarking information. Reports will generally be generated by the 25th day of the month following quarter end. . Monitor travel policy compliance and provide standard exception reports to Management . Provide ad hoc reports at a rate of $25.00 each 4.4 T&E Voucher Processing Services . Process and enter New Vendor Setup Forms for employee expense reimbursements, generally within one business day of receipt . Date stamp all vouchers received . Code expense report vouchers for correct general ledger account and enter into accounting system . Perform random back-end audits for policy compliance . File and archive processed expense reports . Generate files for wire transfers to American Express on behalf of employee . Generate employee checks for out-of-pocket expenses . Process expense reimbursement emergency checks and American Express payments at a rate of $50.00 per request . Process and reconcile employee cash advances 4.5 Special Projects (subject to the Special Projects hourly rates) . Train SCGroup affiliated company employees on use of A/P system . Set up and train on P-card, utility outsourcing programs . Change in business structure and operation which requires process changes . Consult with companies for special projects . Major research projects . Copies of checks, invoices and employee expense vouchers and other documentation as requested by the Company. . Requests from external auditors . Special reports and logs . Sales and Use Tax compliance 5. Facilities Management --------------------- (Services are available only at the El Paso, Texas office at 7777 Market Center Avenue.) 5.1 National Supply/Service Agreements . Provide a centralized contact for the purchase/lease of copy, fax, and postage equipment in addition to Steelcase cube components . Assist in the purchase process and establish national purchasing agreements for the benefit of the Company 5.2 Access Control System . Maintain an access control system for the benefit of all associates and their guests . This is a 24-hour per day, 7 day a week service . Requests for visitor/guest access should be made 24 hours in advance of the required need 5.3 Reception . Receive and redirect telephone calls . Greet visitors . Receive and log in deliveries . Switchboard and lobby hours: . Main Building . 7:30 am-5:30 pm: Monday through Thursday (excluding holidays) . 7:30 am-5:00 pm: Friday, or the last workday of the week . MIS Building . 8:00 am-5:00 pm: Monday through Friday (excluding holidays) 5.4 Mail Center . Receipt and distribution of USPS mail, packages, and supplies . Prepare various items for shipment, both domestic and international, generated by the Company . Track mail . Additional requirements/service cutoffs: . All USPS mail items must be received in the mail room by 4:15 pm for delivery to the Post Office on the same day . All other shipments must be received in the mailroom by 4:45 pm for delivery to the various carriers the same day 5.5 Reprographics Center . Provide bulk copy services and booklet preparation . Assist in the maintenance of self-serve copy equipment throughout the facility 5.6 Other . Provide central facsimile services, incoming documents, to be delivered in conjunction with mail delivery (or through an automated fax mail system) . Assist in the maintenance of fax machines throughout the facility . Local purchasing responsibility for day-to-day operating needs, including office supplies. Special order items will be billed directly to the requesting department. . Provide basic new hire and associate cube supplies . Housekeeping and janitorial responsibilities in the Operations and the MIS facilities . Prepare coffee between the hours of 7:30 am - 2:00 pm . Relocation of equipment and cube renovation/modification . Conference room setup and tear-down as required . General facility maintenance as required . Replacement of printer toner cartridges . Provide ground transportation needs for guests/visitors . Provide pick up and delivery of items (non-food) and documents 6. Human Resources --------------- 6.1 Health Plan Administration (NOT APPLICABLE) 6.2 401(k) and NSP Plan Administration (NOT APPLICABLE) 6.3 Pre-Employment Services (NOT APPLICABLE) 6.4 Compliance . HR File Room Services . General Company support - retrieve information from files . Receive and facilitate orders for HR forms and supplies, including transition boxes. . Create personnel files as paperwork is received . Process all filing received, including active, terminated, and benefits filing . Maintain current state and federal posters 6.5 Performance Review & Compensation Services (NOT APPLICABLE) 6.6 Relocation Services (NOT APPLICABLE) 6.7 Database Management Services . Maintain database information on employee documentation . System Administration for human resources, benefits and payroll . Prepare and comply with government reporting: EEO-1, VETS100 and Census Bureau, as submitted by the HR Manager . Process Employment Verifications . Review hiring paperwork for Company compliance (I-9's, W- 4's, Applications, etc.) . Maintain current new hire forms via public folders, corporate service intranet . Maintain company-wide telephone directory 6.8 HRIS Reports . Standard report processing delivered by PeopleSoft as defined by the HR/Payroll Implementation Team . HRIS Custom Reports are available upon request by the Company 6.9 Recruitment Services (where services are required to be performed in a specific location, this agreement refers to the El Paso, Texas office at 7777 Market Center Avenue) (a) Resume Management . Receive resumes, log into central database and send notification cards to all applicants (b) Employment Process . Accept open position forms and post to the weekly posting . Update the Career Opportunities Jobline, Security Capital Group Incorporated Web Page . Review and screen applicants for position requirements . Schedule interviews with applicants, prepare interview packets and forward to hiring manager . If out-of-town applicant, ensure that all receipts are received and expense form is completed . In conjunction with hiring manager, make conditional offer of employment to candidate and generate offer letter . Schedule new hire for pre-employment testing . Send rejection letters to unsuccessful applicants after acceptance of offer (c) New Hire Process . File the candidate resume, offer letter and completed application in employee's file . Submit new hire to pre-employment for processing . Create new hire agenda for orientation (name, date, company, supervisor) . Send out email announcing new hire (name, title, supervisor, company, cube #) . Notify candidate of pre-employment results and new hire orientation . Conduct new hire orientation . Ensure new employees complete all required paperwork and forward to HR File Room (d) Advertisement and Recruitment Strategies . Manage, develop and implement recruiting strategies . In conjunction with hiring manager, prepare and place all advertisements for open positions . Review Monster Board Internet system for appropriate candidates . Attend Professional and College Job Fairs to source candidates . Coordinate College Relations and Recruiting activities including: on-campus interviews, Co-op/Internship Program, Mentor Program, Scholarship Program, and student/faculty relationships . Act as liaison with external search agencies. (e) Temporary Employee Requests . Coordinate with manager to discuss temporary position requirements and contact temporary agencies to request personnel . Interview temporary employee candidates . Process all temporary employee invoices 7. Business Process & Risk Assessment Services (formerly Internal ------------------------------------------- Audit) 7.1 Business Process & Risk Assessment Services provides services to Shared Service clients based upon detailed Internal Audit Plans (the "Audit Plan"). The Audit Plan will explain the type of services to be provided, specific audit objectives and cost to complete the plan. The Plan costs will be billed on a flat monthly basis and represents a minimum level of work to be performed by Business Process & Risk Assessment Services. To ensure the highest risks of the organization are adequately addressed, Audit Plans are based upon a comprehensive risk assessment model and management input. All Audit Plans are presented to client management for review and approval, and then to the Audit Committee (for publicly traded companies) for final approval. To provide the highest level of service in meeting the Audit Plan, Business Process & Risk Assessment Services takes the following steps: . Audits will be performed in an objective manner with due professional care. Audits are conducted in accordance with the Institute of Internal Auditors Professional Standards. . Significant departures from the Audit Plan will be communicated to management for approval in advance of completing the audit work . Strive to conduct the audits in the most efficient and effective manner possible, both in the utilization of audit staff and travel expenditures . For any audit requests outside the Audit Plan, prepare detailed audit proposals for management approval prior to the performance of any audit work . Coordinate work with the Company's external audit firm to ensure maximum audit coverage and prevent duplication of effort . If Business Process & Risk Assessment Services does not possess specialized skills necessary for any audit, retain professionals with the required skills to perform the work . Strive to constantly improve internal audit services, by seeking Company input and monitoring "best practice" audit techniques 8. Management Information Systems ------------------------------ 8.1 Technical Products and Services (a) Technical Consulting . Network domain architecture design and project management . Network and Operating System hardware and software refresh and/or upgrade (e.g., Novel to NT upgrade) . Purchasing program advisory services . Email services (i.e., security and server administration) . Database administration (MS SQL, Server, Oracle) . Central web server administration . Desktop software review and analysis (b) Infrastructure Usage Recovery . Recovery of cost of equipment, such as Novell and NT servers, telecom switches and datacom equipment, purchased by SCGroup but used exclusively by the Company 8.2 Telecommunications (a) Base Services . Contract management for "Consortium Model" agreements: . Long distance . Local . Data services . Teleconferencing . Calling Card . Equipment maintenance and monitor service levels, pricing, etc., in these agreements . Inter-Company Voicemail Node Maintenance . Vendor Service Trouble Escalation (Second Level Support) . Establish and maintain Telecommunications Standards . Quarterly audit of one month of invoices for the following invoices: . Qwest . NetSolve . AT&T . Local Service Providers (b) Telecommunications Consulting/Office Setup . Help Desk and telephone support . Service Level A . Questions and advice . Service Level B . Service problem ticket creation . Contact Vendor to resolve service problem on PBX or Voicemail Equipment or Network Services . Remotely correct equipment problems (if remote access to system available) . Dispatch affiliate's service vendor if problem cannot be corrected remotely (additional charges from Vendor would apply) . Consult with Vendor to resolve issue . Service Level C . MAC order tracking . MAC order creation with Vendor . Remote Administration of MAC order (if remote access to system available) . Dispatch Vendor if MAC order cannot be implemented remotely (additional charges from Vendor would apply) . Consult with Vendor to complete MAC order . Generate monthly MAC order history . Consulting services . Telecommunication Systems Audit . Telecommunications Invoices Audits (other than those covered under Basic Charge Services) . Recommendations on optimizing Telecommunications infrastructure . Equipment recommendations and procurement . Office Setup Consulting and Coordination . On-Site survey of requirements (on-site visit) . Design of wiring layout . Equipment recommendations . Coordinate purchase through selected vendors . Coordinate wiring and equipment vendors (remotely) . On-site acceptance of vendor work 8.3 Applications Integration - PeopleSoft . New technology solution planning, design, development and implementation services for the PeopleSoft application to include: . Report development . Maintenance configuration data, such as chart of accounts, departments, properties, etc. . PeopleSoft training . Implement new PeopleSoft modules and interfaces 8.4 PeopleSoft Operations . Operate and maintain the El Paso-based servers and software . Second level (after TSAs) problem escalation and resolution for desk-top issues . Capacity planning and performance tuning as related to regular growth of the . PeopleSoft production databases . Track and manage all production problems and issues. This includes working with each company's PS power user to define priorities and work with the support team to assign, status, coordinate, and communicate updates. . Maintain production PeopleSoft user IDs and production security classes . Troubleshoot and repair problems in PeopleSoft-delivered or SCG- customized software . Apply HP, Oracle and PeopleSoft patches and updates as required for maintenance of the production environments . Analyze and update SCGroup customized production software (interfaces, reports, customizations) impacted by HP, Oracle and PeopleSoft patches and updates . Also included in the PeopleSoft Operations costs is the Unix server depreciation and related vendor maintenance fees . SCGroup shall perform routine maintenance and make routine changes and upgrades to the PeopleSoft systems from time to time. During this process, the systems will be unavailable. SCGroup shall provide at least ten (10) business days prior notice of such regularly scheduled maintenance which will occur on Saturdays at any time or on business days as follows (El Paso time): System ------ PS Fin 7.0 7:00 pm to 6:00 am PS Fin 7.5 12:00 pm to 11:00 pm PS HRMS 7.5 7:00 pm to 6:00 am The Company may request that any announced maintenance activity be rescheduled, provided that the Company shall pay SCGroup $10,000 upon notification from SCGroup of such rescheduling. Any request for rescheduling must be in writing and provide at least three alternative dates and times during the aforesaid periods. The acceptance of any such request and the rescheduling of any maintenance or upgrade activity will be at the sole discretion of SCGroup. 9. Payroll ------- 9.1 Non-Web Based Input . Receive payroll batch sheets . Receive payroll bonus batch sheets . Input payroll batch sheet data 9.2 Payroll Payments . Run and calculate bi-weekly payroll information . Review bi-weekly payroll information . Audit bi-weekly exception reports and queries . Create and execute payroll interfaces, including positive pay, direct deposits, 401(k), and general ledger data . Produce and generate bi-weekly payroll data and reports . Prepare and distribute reports and funding requests . Reconcile 401(k) contributions . Prepare electronic funds request for 401(k) funding . Maintain payroll systems tables, including deduction codes and subsets, earnings code/special accumulators, holiday schedules, leave plans, new company setup, new year setup, and tax locations . Assist in external payroll audits . Audit employee transfers from affiliates . Maintain and abide by the Bureau of National Affairs (BNA) guidelines 9.3 Manual Checks (Off-Cycle) . All activities in 9.2 including the following: . Receive and input manual check requests . Produce manual check reporting . Issue manual check . Print and distribute manual check to employee . Execute special mailing instruction . Transmit positive pay files 9.4 Special Processes (i) Large: . Process garnishments and remit funds to proper agency . Generate W2C's (ii) Medium: . Execute electronic funds transfer payments . Process relocation payments . Compute and process retroactive payments . Manage tax refunds . Initiate stop payments and ACH reversals . Maintain and process vacation and sick balances by employee . Process and generate reimbursement adjustments . Process short term disability payments . Administer signing/annual/special bonuses . Process severance agreements and terminations (iii)Small: . Administer target bonus advances and salary advance payments . Special mailing instruction-checks mailed to locations other than work address . Distribute pamphlets and other documents with pay-checks . Manage imputed interest payments . Record and adjust earnings associated with stock options, loan forgiveness and taxable/non-taxable fringe benefits . Input and process housing deductions, uniform deductions and advanced repayments 9.5 Payments for Expatriates (including Canada) and Monthly Payroll (NOT APPLICABLE) 9.6 Tax Jurisdictions Maintained . Maintain payroll database, including tax and system upgrades . Review tax correspondence, reply to agency inquiries, and research tax discrepancies . Process tax deductions and remit funds to appropriate taxing agency . Ensure tax returns and government regulatory reports are filed . Complete tax applications, set up appropriate withholding, unemployment and other accounts 9.7 Pay Check Distribution . Print, stuff, and distribute bi-weekly/monthly checks and advices to employee work location 9.8 W-2 Statement Creation and Distribution . Generate and distribute W2's and duplicate W2's, as necessary 9.9 Projects/Research (hourly charge) . Research Company inquiries not included in services above . Customize non-standard reports . Special projects require Company vice president approval before execution Note: Companies will also be billed directly for expenses such as: . ProBusiness . Pre-1999 ADP Research . Postage . Tax Returns 10. Property Tax Administration (NOT APPLICABLE) ---------------------------- 11. Risk Management --------------- 11.1 Insurance Policy Procurement . Obtain new and renewal insurance quotations for all property and casualty coverages . Meet with Company to determine coverage, limit, deductible, and service requirements . Prepare underwriting submission and send to markets . Meet with key underwriters . Answer underwriting questions . Negotiate coverage, rates, policy terms and conditions, and services . Evaluate insurer reliability . Prepare insurance proposal and present to Company . Review and maintain policies . Verify policy terms and conditions are consistent with quote . Review policy endorsements for accuracy and file . Maintain original policy . Process certificate of insurance requests . Process premium invoices and provide breakdown of premium by property, company or as applicable . Prepare annual insurance budget . Review insurance contracts for compliance . Review insurance contracts and make recommendations concerning risk acceptability (the Risk Management Department does not make management decision.) . Answer coverage questions . Maintain standard SCGroup Underwriting Database for all existing properties to include: . Property name, address and location code . Building and contents values . Estimated annual rent/revenue . Square footage/number of units . Construction type . Roof composition . Year built . Flood and earthquake zones . Payroll . Vehicles . Update underwriting database on a quarterly basis to reflect newly acquired and developed properties, sales, and other activity 11.2 Claims Administration (a) Manage claim and litigation process for all insured claims and lawsuits . Report claims to appropriate carrier or third party administrator . Notify Company of losses in excess of $25,000 and keep apprised of claim status . Set up claim file . Enter claim in RMIS OMEGA system . Assist with coverage determination . Assign legal counsel on lawsuits . Coordinate discovery requests . Review and maintain copies of all correspondence and related documents associated with claim/lawsuit . Participate in claim settlement discussions . Request settlement approval from Company on general liability claims of $2,500 and above . Monitor insured claims and lawsuits to conclusion (b) Process Claim Payments . Review invoices with claim documents to ensure amounts are accurate and justified . Enter invoice data in RMIS OMEGA system (c) Issue Loss Reports . Issue monthly reports for property, casualty and quarterly reports for workers compensation claims and lawsuits (d) Maintain RMIS OMEGA claim database to include . Claimant name . Claim number . Date of loss . Property name and location code . Claim amount (paid and reserved) . Description of loss . Status of claim (open or closed) 11.3 Bond Procurement and Maintenance (a) Facilitate issuance and execution of bond indemnification agreements . Negotiate account rates annually . Process requests for bonds . Set up bond file and enter data in RMIS OMEGA system . Renew bonds as required by obligee (b) Process Bond Invoices . Review bond premium invoices for accuracy . Enter invoice information in RMIS OMEGA system . Complete check requests (c) Maintain RMIS OMEGA bond database to include the following . Bond number . Surety company . Bond amount . Bond type and description . Property name and address . Bond rate and premium . Obligee name and address . Effective dates of coverage 12. Special Projects ---------------- . Direction and support of all special projects, as requested and authorized in advance by the Company . Special projects are outside the scope of services provided by SCGroup. If SCGroup and Company determine that SCGroup has the personnel with the qualifications and time necessary to complete the special project requested by Company with due professional care and competence, SCGroup and Company will agree to an hourly billing rate for such services. APPENDIX 1 APPENDIX TO SCHEDULE A OF THE ADMINISTRATIVE SERVICES AGREEMENT BETWEEN SCGROUP INCORPORATED (SCGROUP) AND ARCHSTONE COMMUNITIES TRUST, AGREEMENT DATED JANUARY 1, 2000. SCGroup Service Manager responsible for managing the respective rights and obligations of the parties: Vincent L. Dodds SCGroup Incorporated 7777 Market Center Avenue El Paso, TX 79912 Phone: 915-877-5831 Fax: 915-877-6768 Company Service Manager responsible for managing the respective rights and obligations of the parties: William Kell Archstone Communities Trust 7777 Market Center Avenue El Paso, TX 79912 Phone: 915-877-1773 Fax: 915-877-3301 SCHEDULE B ---------- SCGroup will provide the services listed in Schedule A to be billed at the following rates:
- ---------------------------------------------------------------------------------------------------------------------------------- Service Description Cost Driver Rate / Cost Driver - ---------------------------------------------------------------------------------------------------------------------------------- Business Services: - ---------------------------------------------------------------------------------------------------------------------------------- Payroll Bank Reconciliations Hours $ 35.00 - ---------------------------------------------------------------------------------------------------------------------------------- Special Projects Hours $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Management: - ---------------------------------------------------------------------------------------------------------------------------------- Bank Account Management # of Accounts/month $ 100.00/(1)/ - ---------------------------------------------------------------------------------------------------------------------------------- Electronic Disbursements # of Wires $ 20.00 - ---------------------------------------------------------------------------------------------------------------------------------- Special Handling Electronic Disbursements # of Disbursements $ 50.00 - ---------------------------------------------------------------------------------------------------------------------------------- Investment and Borrowing $000's Bor. & Inv./month $ 0.0167/(2)/ - ---------------------------------------------------------------------------------------------------------------------------------- Transaction Reporting # of Transactions $ 0.75/(2)/ - ---------------------------------------------------------------------------------------------------------------------------------- Bank Fee and Relationship Management % of Bank Fees 10.0% - ---------------------------------------------------------------------------------------------------------------------------------- Projects/Research Hours $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------------- Disbursements: - ---------------------------------------------------------------------------------------------------------------------------------- Invoice Processing Services - ---------------------------------------------------------------------------------------------------------------------------------- Paper Invoices $ 2.50 - ---------------------------------------------------------------------------------------------------------------------------------- Web-based Invoices $ 1.50 - ---------------------------------------------------------------------------------------------------------------------------------- Web-based Invoice Processing over 200,000 per year Invoices $ 1.20 - ---------------------------------------------------------------------------------------------------------------------------------- P-Card Administration # of P-Cards $ 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- Emergency Checks Checks $ 50.00 - ---------------------------------------------------------------------------------------------------------------------------------- Rejects # of Rejects $ 20.00 - ---------------------------------------------------------------------------------------------------------------------------------- Stop Pays/Voids # of Stop Pays $ 50.00 - ---------------------------------------------------------------------------------------------------------------------------------- Accounts Payable Help Desk Services Calls $ 4.00 - ---------------------------------------------------------------------------------------------------------------------------------- Corporate Travel Center Per Transaction $ 15.00 - ---------------------------------------------------------------------------------------------------------------------------------- T&E Voucher Processing Services Vouchers $ 9.00 - ---------------------------------------------------------------------------------------------------------------------------------- Copies Per Copy $ 0.20 - ---------------------------------------------------------------------------------------------------------------------------------- Special Projects Hours $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------------- Facilities Management: - ---------------------------------------------------------------------------------------------------------------------------------- Facilities & Administration El Paso Employees $ 125.00 - ---------------------------------------------------------------------------------------------------------------------------------- Human Resources:/(3)/ - ---------------------------------------------------------------------------------------------------------------------------------- Compliance - Personnel File Administration Per Month $4,166.67 - ---------------------------------------------------------------------------------------------------------------------------------- Database Management-Maintenance Headcount/month $ 5.00 - ---------------------------------------------------------------------------------------------------------------------------------- Database Management-Set-up Fees # of Setups $ 8.00 - ---------------------------------------------------------------------------------------------------------------------------------- HRIS Standard Reports Per Report/month $ 6.00 - ---------------------------------------------------------------------------------------------------------------------------------- HRIS Custom Reports # of Reports $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------------- Recruitment Services New Hires $2,230.00 - ---------------------------------------------------------------------------------------------------------------------------------- Special Projects Hours $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------------- Business Process & Risk Assessment Services - ---------------------------------------------------------------------------------------------------------------------------------- (formerly Internal Audit) - ---------------------------------------------------------------------------------------------------------------------------------- Perform audits Hours $ 100.00 - ---------------------------------------------------------------------------------------------------------------------------------- Information Systems - ---------------------------------------------------------------------------------------------------------------------------------- Technical Products & Services: - ---------------------------------------------------------------------------------------------------------------------------------- Infrastructure Usage Recovery Per Month $9,216.00 - ---------------------------------------------------------------------------------------------------------------------------------- Telecom Voice Networks Per Line/month $ 9.00 - ---------------------------------------------------------------------------------------------------------------------------------- Telecom Consulting/Setup Hours $ 100.00 - ---------------------------------------------------------------------------------------------------------------------------------- Applications Integration: - ---------------------------------------------------------------------------------------------------------------------------------- Project Manager/DBA Hours $ 105.00 - ---------------------------------------------------------------------------------------------------------------------------------- Programmer/Analyst Hours $ 85.00 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- Service Description Cost Driver Rate / Cost Driver - ---------------------------------------------------------------------------------------------------------------------------- PeopleSoft Operations: - ---------------------------------------------------------------------------------------------------------------------------- PS Financials Per Month $ 33,882.00 - ---------------------------------------------------------------------------------------------------------------------------- PS HRMS/(3)/ Per Month $ 11,295.00 - ---------------------------------------------------------------------------------------------------------------------------- Payroll:/(3)/ - ---------------------------------------------------------------------------------------------------------------------------- On-Cycle Paychecks Checks/Direct Deposits $ 4.50 - ---------------------------------------------------------------------------------------------------------------------------- Batch Manual Inputs # of Inputs $ 1.50 - ---------------------------------------------------------------------------------------------------------------------------- Manual Checks (Off-Cycle) Checks $ 50.00/(4)/ - ---------------------------------------------------------------------------------------------------------------------------- Special Processes Per Service (large/medium/small) $90/$60/$30 - ---------------------------------------------------------------------------------------------------------------------------- Tax Jurisdictions Maintained # of Jurisdictions $ 20.00 - ---------------------------------------------------------------------------------------------------------------------------- Paycheck Distribution # of Checks/Advices $ 0.50 - ---------------------------------------------------------------------------------------------------------------------------- W-2 Statement Creation and Distribution Statements $ 6.00 - ---------------------------------------------------------------------------------------------------------------------------- Special Projects/Research Hours $ 65.00 - ---------------------------------------------------------------------------------------------------------------------------- Risk Management: - ---------------------------------------------------------------------------------------------------------------------------- Insurance Policy Procurement Per Premium $ $ 0.045/(5)/ - ---------------------------------------------------------------------------------------------------------------------------- Claims Administration Claims $ 220.00 - ---------------------------------------------------------------------------------------------------------------------------- Bond Procurement and Maintenance Per Premium $ $ 0.12 - ----------------------------------------------------------------------------------------------------------------------------
(1) Property bank accounts are counted as one quarter of corporate bank accounts. (2) The total annual charges for Investment and Borrowing services and Bank Fee and Relationship Management services shall not exceed $65,000 and $40,000, respectively; provided that, in the event the Company is a party to any merger, acquisition and/or other transaction during the year which results in an increase in the amount of time and expense required to provide these services, the Company will be responsible for any fees over and above these maximums. (3) January through June only. (4) New Hire packets received after the second Thursday of the pay period will result in a manual check charge. (5) SCGroup's fees are earned based on total premiums earned by the insurance provider during the contract. This includes premium adjustments resulting from changes in the ratable exposure base. Fees are due to SCGroup upon payment of premiums to the insurance provider. SCHEDULE C Pass-Through Expenses are expenses and costs incurred by the Company for which SCGroup has oversight responsibility for the third-party vendor and will review and validate the invoiced charges. These Pass-Through Expenses include but are not limited to the following: - Independent audit expenses - Insurance premiums and claims - Banking fees - SCGroup may withdraw funds from the Company's concentration bank account to cover the Company's share of monthly fees and expenses paid by SCGroup to the Company's banks. SCGroup shall provide the Company with a monthly statement of such charges and expenses. - External payroll processing fees - Third-party vendors hired at the direction of the Company - Out-of-pocket expenses - All out-of-pocket expenses will be billed as incurred. Applicable out-of-pocket expenses may include but are not limited to: postage, envelopes, labels, forms and stationery and delivery and freight charges - Computer hardware, software or telephone equipment purchases SCHEDULE D Retained Expenses are costs and expenses incurred by the Company from third parties which may provide the Company with administrative services in an outsource arrangement. Retained expenses include, but are not limited to, the following: . Costs and expenses of third party service providers (e.g.: IBM, CompuCom or Merrill Lynch), including fees and out-of-pocket expenses. SCHEDULE E SERVICE LEVELS 1. GENERAL PROVISIONS 1.1 General. The Service Levels set forth in this Schedule E are intended to measure SCGroup's performance of the Services. 1.2 Reporting. SCGroup shall provide, at no additional charge to Company, periodic reports describing the quality and quantity of the Services actually delivered by SCGroup during the defined measurement period and assessing SCGroup's performance during such period against the service levels. SCGroup will also be responsible for promptly investigating and correcting failures to meet the service levels in accordance with Section 7.2 of the Agreement. 1.3 Exclusions. SCGroup will be relieved of responsibility if and to the extent SCGroup's failure to meet the service level(s) is due to: 1.3.1 changes made to the in-scope environment by Company (e.g., installation of applications, which were not tested and approved for production use) 1.3.2 Company's reprioritization of tasks to be performed by SCGroup 1.3.3 circumstances specified in Section 8 of the Agreement 1.3.4 outages for preventive maintenance or the installation, upgrade or replacement of equipment or software or at other times agreed upon in advance by Company 2. SERVICE LEVELS 2.1 Disbursement Processing SCGroup shall perform disbursement processing in accordance with the following service levels: (1) SCGroup shall process third party invoices 95% of the time by the end of the third business day after the business day on which it receives approved and properly coded invoices from the Company. (2) SCGroup shall pay third party invoices 95% of the time by the end of the business day after the business day on which it completes processing of such invoices or in accordance with the third party's payment terms, whichever is later. (3) SCGroup shall process invoices correctly and shall pay the correct amount to the correct vendor 99% of the time. 2.2 Accounts Payable Help Desk SCGroup shall provide accounts payable help desk services in accordance with the following service levels: (1) The abandon rate for calls to the accounts payable help desk shall be less than 12%. Abandon rate means the percentage of times that callers who wish to talk to a help desk agent drop off the call before talking to such an agent. If a caller hangs up before the expiration of thirty (30) seconds, the call will not be considered abandoned. (2) SCGroup shall return customer service inquiries received by voice mail or electronic mail within two (2) business hours 90% of the time. Business hours shall mean 8:00 a.m. to 6:00 p.m., Mountain Time, Monday through Friday, excluding holidays. (3) Research requests shall be completed and responded to by SCGroup by the end of the second business day after the business day on which such requests are received 90% of the time. (4) Third party vendors will be added to the PeopleSoft accounts payable system by SCGroup by the end of the second business day after the business day on which properly completed requests are received 90% of the time. A properly completed request form must comply with the requirements specified in the Accounts Payable Manual. 2.3 Corporate Tax (NOT APPLICABLE) 2.4 Human Resources SCGroup shall provide human resources services in accordance with the following service levels: (1) SCGroup shall process Personnel Action Forms 90% of the time by the end of the third business day after the business day on which it receives approved and properly completed Personnel Action Forms from the Company. (2) SCGroup shall respond to employee requests for information or assistance with respect to health or retirement benefits by the end of the second business day after the business day on which such requests are received 90% of the time (provided the employee has first contacted the applicable benefits service provider and followed the escalation procedures prescribed by such service provider for problem resolution). 2.5 Management Information Systems (1) Critical (Severity 1) MIS production application support ---------------------------------- problems communicated by the Company in accordance with -------- SCGroup's established reporting process shall be acknowledged by SCGroup (via telephone, voice mail or email) and assigned an initial prioritization level within two (2) hours 90% of the time. (2) Non-critical (Severity 2-4) MIS production application -------------------------- support problems communicated by the Company in accordance ---------------- with SCGroup's established reporting process shall be acknowledged by SCGroup (via telephone, voice mail or email) and assigned an initial prioritization level by the end of the business day after the business day on which such problems are reported 90% of the time. (3) MIS application project requests communicated by the Company -------------------------------- in accordance with SCGroup's established reporting process shall be acknowledged by SCGroup (via telephone, voice mail or email) and assigned an initial prioritization level by the end of the business day after the business day on which such requests are made 90% of the time. (4) SCGroup shall complete and submit estimates in response to critical (Severity 1) MIS application project requests -------------------------------- communicated by the Company in accordance with SCGroup's established reporting process by the end of the fifth business day after the business day on which such requests are made 90% of the time. (5) SCGroup shall complete and submit estimates in response to non-critical (Severity 2-4) MIS application project requests -------------------------------- communicated by the Company in accordance with SCGroup's established reporting process by the end of the tenth business day after the business day on which such requests are made 90% of the time. For purposes of Service Levels 2.5 (1) through (5), the following severity definitions shall be applied: Severity 1 - Critical: Business process has stopped. Severity 2 - High: Business process hindered; a work-around exists but requires a substantial amount of work. Severity 3 - Normal: Annoyance; a work-around exists; nominal or no extra work required. Severity 4 - Hold: Problem is in a `wait' status. 2.6 Payroll SCGroup shall provide payroll services in accordance with the following service levels: (1) SCGroup shall prepare payroll checks in accordance with the applicable monthly or biweekly schedule for payroll processing 99% of the time, provided SCGroup receives accurate, timely and properly approved time sheets and Personnel Action Forms from the Company for the employees in question. (2) SCGroup shall deliver payroll checks on a timely basis to the last known place of business of the employees in question and such checks shall accurately reflect the approved gross to net payroll calculations from such employees 99% of the time. 2.7 Property Tax Appeals (NOT APPLICABLE) 2.8 Risk Management SCGroup shall process insurance claims 95% of the time by the end of the second business day after the business day on which it receives notice of such claim from the Company. EX-12.1 4 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 ARCHSTONE COMMUNITIES TRUST COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands) (Unaudited)
Three Months Ended March 31, Twelve Months Ended December 31, ------------------ ------------------------------------------------------- 2000 1999 1999 1998 1997(1) 1996 1995 ------- ------- -------- -------- ------- -------- -------- Earnings from operations............. $43,197 $39,668 $169,339 $134,571 $24,686 $ 94,089 $ 81,696 Add: Interest expense................... 34,202 27,018 121,494 83,350 61,153 35,288 19,584 ------- ------- -------- -------- ------- -------- -------- Earnings as adjusted................. $77,399 $66,686 $290,833 $217,921 $85,839 $129,377 $101,280 ======= ======= ======== ======== ======= ======== ======== Fixed charges: Interest expense................... $34,202 $27,018 121,494 $ 83,350 $61,153 $ 35,288 $ 19,584 Capitalized interest............... 6,570 8,838 31,912 29,942 17,606 16,941 11,741 ------- ------- -------- -------- ------- -------- -------- Total fixed charges...... ....... $40,772 $35,856 $153,406 $113,292 $78,759 $ 52,229 $ 31,325 ======= ======= ======== ======== ======= ======== ======== Ratio of earnings to fixed charges... 1.9 1.9 1.9 1.9 1.1 2.5 3.2 ======= ======= ======== ======== ======= ======== ========
(1) Earnings from operations for 1997 includes a one-time, non-cash charge of $71.7 million associated with costs incurred in acquiring the management companies from an affiliate. Excluding this charge, the ratio of earnings to fixed charges for the year ended December 31, 1997 would be 2.0. EX-12.2 5 COMPUTATION OF RATIO OF COMBINED FIXED CHARGES EXHIBIT 12.2 ARCHSTONE COMMUNITIES TRUST COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS (Dollar amounts in thousands) (Unaudited)
Three Months Ended March 31, Twelve Months Ended December 31, ------------------------------ ------------------------------------------- 2000 1999 1999 1998 1997(1) 1996 1995 ------- ------- -------- -------- ------- -------- -------- Earnings from operations.................... $43,197 $39,668 $169,339 $134,571 $24,686 $ 94,089 $ 81,696 Add: Interest expense.......................... 34,202 27,018 121,494 83,350 61,153 35,288 19,584 ------- ------- -------- -------- ------- -------- -------- Earnings as adjusted........................ $77,399 $66,686 $290,833 $217,921 $85,839 $129,377 $101,280 ======= ======= ======== ======== ======= ======== ======== Combined fixed charges and Preferred Share dividends: Interest expense......................... $34,202 $27,018 $121,494 $ 83,350 $61,153 $ 35,288 $ 19,584 Capitalized interest..................... 6,570 8,838 31,912 29,942 17,606 16,941 11,741 ------- ------- -------- -------- ------- -------- -------- Total fixed charges.................... 40,772 35,856 153,406 113,292 78,759 52,229 31,325 ------- ------- -------- -------- ------- -------- -------- Preferred Share dividends................. 6,431 5,691 23,731 20,938 19,384 24,167 21,823 ------- ------- -------- -------- ------- -------- -------- Combined fixed charges and Preferred Share dividends................................. $47,203 $41,547 $177,137 $134,230 $98,143 $ 76,396 $ 53,148 ======= ======= ======== ======== ======= ======== ======== Ratio of earnings to combined charges and Preferred Share dividends................. 1.6 1.6 1.6 1.6 0.9 1.7 1.9 ======= ======= ======== ======== ======= ======== ========
(1) Earnings from operations for 1997 includes a one-time, non-cash charge of $71.7 million associated with costs incurred in acquiring the management companies from an affiliate. Accordingly, earnings from operations were insufficient to cover combined fixed charges and Preferred Share dividends by $12.3 million. Excluding this charge, the ratio of earnings to combined fixed charges and Preferred Share dividends for the year ended December 31, 1997 would be 1.6. EX-15.1 6 LETTER FROM KPMG LLP DATED 05/08/2000 EXHIBIT 15.1 Board of Trustees Archstone Communities Trust Ladies and Gentlemen: Re: Registration Statements Nos. 333-43723, 333-44639, 333-51139, 333-60815, 333-60817, 333-60847 and 333-68591. With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated April 25, 2000 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG LLP Chicago, Illinois May 9, 2000 EX-27 7 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Form 10-Q for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 9,601 0 0 0 0 0 5,411,314 328,244 5,444,468 0 2,042,695 0 296,154 139,133 2,173,677 5,444,468 168,464 177,016 0 90,222 9,395 0 34,202 39,454 0 39,454 0 0 0 39,454 0.28 0.28
EX-99.1 8 CURRENT DEVELOPEMENT ACTIVITY EXHIBIT 99.1 Current Development Activity The following table summarizes Archstone's development communities under construction as of March 31, 2000 (dollar amounts in thousands):
Actual or Expected Number Total Expected Date for Stabilization of Archstone Expected Start Date First Units Date % Units Investment Investment(1) (Quarter/Year) (Quarter/Year)(2) (Quarter/Year) Leased(3) - ------------------------------------------------------------------------------------------------------------------------------------ Central Region: Austin, Texas: Archstone Monterey Ranch III... 448 $ 19,262 $ 31,669 Q3/98 Q2/00 Q2/01 N/A ------- -------- -------- Denver, Colorado: Cedars II, The................. 172 $ 7,956 $ 16,376 Q3/99 Q2/00 Q2/01 N/A ------- -------- -------- Salt Lake City, Utah: Archstone River Oaks........... 448 $ 34,500 $ 37,483 Q2/98 Q1/99 Q3/00 86.4% ------- -------- -------- Total Central Region.......... 1,068 $ 61,718 $ 85,528 ------- -------- -------- East Region: Birmingham, Alabama: Cameron at the Summit II....... 268 $ 17,980 $ 18,939 Q2/98 Q2/99 Q3/00 81.7% ------- -------- -------- Boston, Massachusetts: Archstone Tewksbury II......... 168 $ 20,599 $ 21,402 Q1/99 Q4/99 Q2/00 82.7% ------- -------- -------- Charlotte, North Carolina: Archstone Tyvola Centre........ 404 $ 12,952 $ 31,398 Q3/99 Q3/00 Q2/02 N/A ------- -------- -------- Indianapolis, Indiana: Archstone River Ridge.......... 202 $ 15,768 $ 16,083 Q2/98 Q2/99 Q3/00 72.3% ------- -------- -------- Raleigh, North Carolina: Archstone at Preston........... 388 $ 27,934 $ 31,289 Q2/98 Q2/99 Q4/00 71.7% ------- -------- -------- Richmond, Virginia: Archstone Swift Creek I........ 288 $ 23,067 $ 23,674 Q2/98 Q3/99 Q1/01 44.4% ------- -------- -------- Southeast Florida: Archstone at Woodbine.......... 408 $ 15,805 $ 30,722 Q3/99 Q3/00 Q4/01 N/A ------- -------- -------- Washington, D.C.: Archstone Governor's Green..... 338 $ 33,754 $ 36,446 Q3/98 Q3/99 Q3/00 72.8% Archstone Milestone II......... 132 5,027 13,615 Q4/99 Q3/00 Q1/01 N/A Cameron Woodland Park.......... 392 23,198 42,622 Q2/99 Q2/00 Q3/01 N/A ------- -------- -------- Total Washington, D.C........ 862 $ 61,979 $ 92,683 ------- -------- -------- West Coast, Florida: Archstone Rocky Creek.......... 264 $ 19,195 $ 19,750 Q3/98 Q2/99 Q2/00 92.1% ------- -------- -------- Total East Region............ 3,252 $215,279 $285,940 ------- -------- -------- West Region: Phoenix, Arizona Miralago II.................... 336 $ 3,455 $ 23,680 Q1/00 Q1/01 Q2/02 N/A ------- -------- -------- Reno, Nevada: Enclave II, The................ 180 $ 14,744 $ 16,204 Q4/98 Q3/99 Q4/00 77.8% ------- -------- -------- San Diego, California: Archstone Mission Valley....... 736 $ 40,800 $106,328 Q4/99 Q4/00 Q3/03 N/A Archstone Torrey Hills......... 340 42,386 43,139 Q1/98 Q3/99 Q3/00 61.8% ------- -------- -------- Total San Diego, California.. 1,076 $ 83,186 $149,467 ------- -------- -------- San Francisco Bay Area, California: Archstone Emerald Park......... 324 $ 48,405 $ 49,165 Q4/97 Q3/99 Q3/00 74.4% Archstone Hacienda............. 540 72,600 78,272 Q2/98 Q3/99 Q1/01 49.1% ------- -------- -------- Total San Francisco Bay Area. 864 $121,005 $127,437 ------- -------- -------- San Jose, California: Archstone Willow Glen......... 412 $ 34,375 $ 69,581 Q3/99 Q1/01 Q1/02 N/A ------- -------- -------- Seattle, Washington: Archstone Northcreek........... 524 $ 41,153 $ 44,025 Q2/98 Q2/99 Q4/00 71.0% ------- -------- -------- Total West Region............ 3,392 $297,918 $430,394 ------- -------- -------- Total Communities Under Construction......... 7,712 $574,915 $801,862 ======= ======== ========
(1) Represents total budgeted land and development costs. (2) Represents the quarter that the first completed units were made available for leasing (or are expected to be made available). Archstone begins leasing completed units prior to completion of the entire community. (3) The percentage leased is based on leased units divided by total number of units in the community (completed and under construction) as of March 31, 2000. An "n/a" indicates the communities where Lease-Up has not yet commenced. -----END PRIVACY-ENHANCED MESSAGE-----