-----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, VjhkVaN1ul2ZQrgHbjnkMk6JHdHfm4OxLUSL9cguICjxtjSQGrdxRyN918O1RxGk zQb0ic+3pHtIyR8NkQaksQ== /in/edgar/work/20000814/0000950131-00-004856/0000950131-00-004856.txt : 20000921 0000950131-00-004856.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950131-00-004856 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCHSTONE COMMUNITIES TRUST/ CENTRAL INDEX KEY: 0000080737 STANDARD INDUSTRIAL CLASSIFICATION: [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: 695900 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 0001.txt 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 June 30, 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 80112 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 August 1, 2000, there were approximately 122,039,000 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 - June 30, 2000 (unaudited) and December 31, 1999...................... 3 Condensed Statements of Earnings - Three and six months ended June 30, 2000 and 1999 (unaudited)................................................................................... 4 Condensed Statement of Shareholders' Equity - Six months ended June 30, 2000 (unaudited)........ 5 Condensed Statements of Cash Flows - Six months ended June 30, 2000 and 1999 (unaudited)................................................................................... 6 Notes to Condensed Financial Statements (unaudited)............................................. 7 Independent Accountants' Review Report.......................................................... 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................................... 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk...................................... 21 PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders............................................. 22 Item 6. Exhibits and Reports on Form 8-K................................................................ 22
2 PART I - CONDENSED FINANCIAL INFORMATION Item 1. Financial Statements Archstone Communities Trust Condensed Balance Sheets (In thousands, except share data)
June 30, December 31, ASSETS 2000 1999 ------ ----------- ----------- (unaudited) Real estate .......................................................................................... $ 5,173,627 $ 5,086,486 Less accumulated depreciation ........................................................................ 342,757 300,658 ----------- ----------- 4,830,870 4,785,828 Investments in and advances to unconsolidated entities ............................................... 135,065 130,845 Mortgage notes receivable, net ....................................................................... 207,819 210,357 ----------- ----------- Net investments ................................................................................. 5,173,754 5,127,030 Cash and cash equivalents ............................................................................ 14,294 10,072 Restricted cash in tax-deferred exchange escrow ...................................................... 71,361 68,729 Other assets ......................................................................................... 99,800 96,606 ----------- ----------- Total assets .................................................................................... $ 5,359,209 $ 5,302,437 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Unsecured credit facilities ....................................................................... $ 306,208 $ 493,536 Long-Term Unsecured Debt .......................................................................... 1,276,417 1,276,572 Mortgages payable ................................................................................. 872,868 694,948 Dividends payable ................................................................................. -- 53,518 Accounts payable .................................................................................. 30,771 26,677 Accrued expenses .................................................................................. 78,551 74,462 Other liabilities ................................................................................. 55,910 59,915 ----------- ----------- Total liabilities ............................................................................... 2,620,725 2,679,628 ----------- ----------- Minority interest: Perpetual preferred units ......................................................................... 73,223 41,996 Convertible operating partnership units ........................................................... 20,152 13,307 ----------- ----------- Total minority interest ......................................................................... 93,375 55,303 ----------- ----------- Shareholders' equity: Series A Convertible Preferred Shares (3,525,723 shares in 2000 and 3,705,390 in 1999; liquidation preference of $25 per share) ........................................................ 88,143 92,635 Series B Preferred Shares (4,187,700 shares in 2000 and 4,200,000 shares in 1999, liquidation preference of $25 per share) ........................................................ 104,693 105,000 Series C Preferred Shares (1,989,200 shares in 2000 and 2,000,000 shares in 1999, liquidation preference of $25 per share) ........................................................ 49,730 50,000 Series D Preferred Shares (1,992,200 shares in 2000 and 2,000,000 shares in 1999, liquidation preference of $25 per share) ........................................................ 49,805 50,000 Common Shares (139,398,924 shares in 2000 and 139,008,353 in 1999) ................................ 139,399 139,008 Additional paid-in capital ........................................................................ 2,297,980 2,291,026 Unrealized holding gain ........................................................................... 114 394 Employee share purchase notes ..................................................................... (9,526) (19,170) Distributions in excess of net earnings ........................................................... (75,229) (141,387) ----------- ----------- Total shareholders' equity ...................................................................... 2,645,109 2,567,506 ----------- ----------- Total liabilities and shareholders' equity ...................................................... $ 5,359,209 $ 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 Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- -------------- Revenues: Rental revenues.................................................... $175,072 $156,644 $343,536 $309,898 Income from unconsolidated entities................................ 2,314 548 1,201 2,028 Other income....................................................... 7,427 6,125 17,092 12,778 -------- -------- -------- -------- 184,813 163,317 361,829 324,704 -------- -------- -------- -------- Expenses: Rental expenses.................................................... 41,666 39,853 79,462 78,972 Rental expenses paid to affiliate.................................. 536 529 1,194 1,099 Real estate taxes.................................................. 15,533 14,006 30,776 28,058 Depreciation on real estate investments............................ 36,696 31,450 73,221 64,247 Interest expense................................................... 37,325 29,023 71,527 56,041 General and administrative expenses................................ 5,317 4,739 11,414 9,472 General and administrative expenses paid to affiliate.............. 149 433 337 1,032 Other expenses..................................................... 709 531 3,819 3,362 -------- -------- -------- -------- 137,931 120,564 271,750 242,283 -------- -------- -------- -------- Earnings from operations................................................ 46,882 42,753 90,079 82,421 Less: minority interest - perpetual preferred units................ 1,567 -- 2,781 -- minority interest - convertible operating partnership units. 366 338 596 676 Plus: gains on dispositions of investments, net................... 41,869 13,659 46,001 18,978 -------- -------- -------- -------- Earnings before extraordinary item...................................... 86,818 56,074 132,703 100,723 Less: extraordinary item - loss on early extinguishment of debt .. -- -- -- 1,113 -------- -------- -------- -------- Net earnings............................................................ 86,818 56,074 132,703 99,610 Less: Preferred Share dividends................................... 6,370 5,617 12,801 11,308 -------- -------- -------- -------- Net earnings attributable to Common Shares - Basic...................... $ 80,448 $ 50,457 $119,902 $ 88,302 ======== ======== ======== ======== Weighted average Common Shares outstanding - Basic...................... 139,232 139,046 139,152 140,180 -------- -------- -------- -------- Weighted average Common Shares outstanding - Diluted.................... 145,138 139,108 144,910 140,207 -------- -------- -------- -------- Earnings before extraordinary item per Common Share: Basic.............................................................. $ 0.58 $ 0.36 $ 0.86 $ 0.64 ======== ======== ======== Diluted............................................................ $ 0.57 $ 0.36 $ 0.86 $ 0.64 ======== ======== ======== ======== Net earnings per Common Share: Basic.............................................................. $ 0.58 $ 0.36 $ 0.86 $ 0.63 ======== ======== ======== ======== Diluted............................................................ $ 0.57 $ 0.36 $ 0.86 $ 0.63 ======== ======== ======== ======== Dividends paid per Common Share......................................... $ 0.385 $ 0.370 $ 0.770 $ 0.740 ======== ======== ======== ========
The accompanying notes are an integral part of the condensed financial statements. 4 Archstone Communities Trust Condensed Statement of Shareholders' Equity Six Months Ended June 30, 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 aggregate aggregate aggregate aggregate Common Additional Unrealized liquidation liquidation liquidation liquidation Shares at paid-in holding preference preference preference preference par value capital gain/loss ------------ ----------- ------------ ----------- ---------- ---------- ---------- Balances at December 31, 1999........ $ 92,635 $ 105,000 $ 50,000 $ 50,000 $ 139,008 $2,291,026 $ 394 Comprehensive income: Net earnings.................... - - - - - - - Preferred Share dividends paid.......................... - - - - - - - Other........................... - - - - - - (280) Comprehensive income attributable to Common Shares.. Common Share dividends............... - - - - - - - Conversion of Series A Preferred Shares into Common Shares.......... (4,492) - - - 242 4,250 - Other, net........................... - (307) (270) (195) 149 2,704 ----------- --------- ----------- --------- ---------- ---------- --------- Balances at June 30, 2000............ $ 88,143 $ 104,693 $ 49,730 $ 49,805 $ 139,399 $2,297,980 $ 114 =========== ========= =========== ========= ========== ========== ========= Employee share Distributions purchase in excess of notes net earnings Total --------- ------------- ---------- Balances at December 31, 1999........ (19,170) (141,387) $2,567,506 Comprehensive income: Net earnings.................... - 132,703 132,703 Preferred Share dividends paid.......................... - (12,801) (12,801) Other........................... - - (280) ---------- Comprehensive income attributable to Common Shares... 119,622 ---------- Common Share dividends............... - (53,744) (53,744) Conversion of Series A Preferred Shares into Common Shares.......... - - - Other, net........................... 9,644 - 11,725 --------- ---------- ---------- Balances at June 30, 2000............ (9,526) $ (75,229) $2,645,109 ========= ========== ==========
The accompanying notes are an integral part of the condensed financial statements. 5 Archstone Communities Trust Condensed Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended June 30, ---------------------------- 2000 1999 ------------ ------------ Operating activities: Net earnings.............................................................................. $ 132,703 $ 99,610 Adjustments to reconcile net earnings to net cash flow provided by operating activities: Depreciation and amortization.......................................................... 73,624 64,394 Gains on dispositions of investments, net.............................................. (46,001) (18,978) Provision for possible loss on investments............................................. 400 2,000 Loss recognized on write-down of convertible mortgage notes............................ 2,753 -- Minority interest...................................................................... 3,377 676 Change in accounts payable................................................................ 4,360 (3,623) Change in accrued expenses and other liabilities.......................................... (1,189) (10,186) Change in other assets.................................................................... (4,471) 6,363 --------- --------- Net cash flow provided by operating activities......................................... 165,556 140,256 --------- --------- Investing activities: Real estate investments................................................................... (367,469) (362,796) Investments in unconsolidated entities.................................................... 5,088 (43,451) Proceeds from dispositions, net of closing costs.......................................... 298,225 193,322 Change in tax-deferred exchange escrow.................................................... (2,632) 55,373 Principal repayments on mortgage notes receivable......................................... 39,829 1,526 Change in pursuit costs and earnest money deposits........................................ 4,615 (11,812) Other, net................................................................................ (5,298) (2,712) --------- --------- Net cash flow used in investing activities............................................. (27,642) (170,550) --------- --------- Financing activities: Proceeds from secured debt................................................................ 156,528 36,206 Debt issuance costs....................................................................... (3,367) (3,900) Proceeds from tax-exempt bond refinancing................................................. -- 16,000 Principal prepayment of mortgages payable................................................. (16,629) (7,871) Regularly scheduled principal payments on mortgages payable............................... (2,454) (3,095) Proceeds from (repayments on) unsecured credit facilities, net............................ (187,328) 197,074 Repurchase of Common and Preferred Shares................................................. (773) (94,365) Proceeds from issuance of perpetual preferred units....................................... 31,224 -- Cash dividends paid on Common Shares...................................................... (107,262) (104,764) Cash dividends paid on Preferred Shares................................................... (12,801) (11,306) Cash dividends paid to minority interests................................................. (3,377) (676) Proceeds from dividend reinvestment and repayment of share purchase loans, net............ 9,706 836 Other, net................................................................................ 2,841 1,535 --------- --------- Net cash flow provided by (used in) financing activities............................... (133,692) 25,674 --------- --------- Net change in cash and cash equivalents........................................................ 4,222 (4,620) Cash and cash equivalents at beginning of period............................................... 10,072 10,119 --------- --------- Cash and cash equivalents at end of period..................................................... $ 14,294 $ 5,499 ========= ========= Significant non-cash investing and financing activities: Assumption of mortgages payable upon purchase of apartment communities.................... $ 40,674 $ 45,756 Issuance of mortgage note receivable in exchange for apartment community.................. $ 35,880 $ -- Bond refinancing.......................................................................... $ -- $ 44,600 Issuance of convertible operating partnership units in exchange for development site...... $ 6,843 $ -- Series A Convertible Preferred Shares converted to Common Shares.......................... $ 4,492 $ 13,457 Partnership units exchanged for Common Shares............................................. $ -- $ 7,012
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 and six month periods ended June 30, 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 a real estate investee accounted for under the equity method, Archstone's share of net earnings or losses of the investee is reflected in "Income from unconsolidated entities" as earned and distributions 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 basic earnings per share ("EPS") to diluted EPS for the periods indicated (in thousands).
Three Months Ended Six Months Ended June 30, June 30, -------------------------------- -------------------------------- 2000 1999 2000 1999 --------------- ---------------- --------------- ---------------- Reconciliation of numerator between basic and diluted net earnings per Common Share /(1)/: Net earnings attributable to Common Shares - Basic............... $ 80,448 $ 50,457 $ 119,902 $ 88,302 Dividends on Series A Preferred Shares......................... 1,851 - 3,748 - Minority interest - convertible operating partnership units.... 366 - 596 - --------------- ---------------- --------------- ---------------- Net earnings attributable to Common Shares - Diluted............. $ 82,665 $ 50,457 $ 124,246 $ 88,302 =============== ================ =============== ================ Reconciliation of denominator between basic and diluted net earnings per Common Share /(1)/: Weighted average number of Common Shares outstanding - Basic..... 139,232 139,046 139,152 140,180 Assumed conversion of Series A Preferred Shares into Common Shares........................................................ 4,812 - 4,878 - Minority interest - convertible operating partnership units.... 949 - 802 - Incremental options outstanding................................ 145 62 78 27 --------------- ---------------- --------------- ---------------- Weighted average number of Common Shares outstanding - Diluted 145,138 139,108 144,910 140,207 =============== ================ =============== ================
(1) Excludes the impact of potentially dilutive equity securities during periods in which they are anti-dilutive. 7 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) (2) Real Estate Equity investments in real estate, at cost, were as follows (dollar amounts in thousands):
June 30, 2000 December 31, 1999 -------------------------------- -------------------------------- Investment Units Investment Units -------------- -------------- -------------- -------------- Apartment Communities: Operating communities.................................... $ 4,623,049 66,180 $ 4,444,289 68,255 Communities under construction/(1)/...................... 441,344 6,189 563,020 7,830 Development communities In Planning/(1) (2)/: Owned................................................. 66,536 1,374 45,481 2,096 Under Control /(3)/................................... - 3,403 - 2,375 -------------- -------------- -------------- -------------- Total development communities In Planning........... 66,536 4,777 45,481 4,471 -------------- -------------- -------------- -------------- Total apartment communities....................... 5,130,929 77,146 5,052,790 80,556 ============== ============== ============== ============== Hotel asset /(4)/.......................................... 22,870 22,870 Land held.................................................. 19,828 10,826 -------------- -------------- Total real estate................................. $ 5,173,627 $ 5,086,486 ============== ==============
(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 is no assurance that such land will be acquired. (3) Archstone's investment as of June 30, 2000 and December 31, 1999 for developments Under Control was $7.1 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. The change in investments in real estate, at cost, consisted of the following (in thousands): Balance at January 1, 2000..................................... $ 5,086,486 Apartment communities: Acquisition-related expenditures.......................... 218,631 Redevelopment expenditures................................ 18,122 Recurring capital expenditures............................ 5,270 Development expenditures, excluding land acquisitions..... 111,699 Acquisition and improvement of land for development....... 40,062 Dispositions.............................................. (315,245) Provision for possible loss on investments................ (400) ----------------- Net apartment community activity....................... 5,164,625 Other: Change in other real estate assets, net................... 9,002 ----------------- Balance at June 30, 2000....................................... $ 5,173,627 =================
At June 30, 2000, we had unfunded contractual commitments related to real estate investment activities aggregating approximately $224.1 million. 8 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) We were committed to the sale of 17 apartment communities and certain other real estate assets having an aggregate carrying value of $282.6 million as of June 30, 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 June 30, 2000, which are included in our earnings from operations for the six months ended June 30, 2000 and 1999 were $8.9 million and $7.5 million, respectively. See Note 10, Subsequent Events, for information regarding the disposition of apartment communities in connection with our joint venture transaction. During the six months ended June 30, 2000, we concluded that the full recovery of certain real estate assets was doubtful. As a result, a provision for possible loss of $400,000 was recorded to reduce these assets to their estimated fair value. A similar provision of $2.0 million was recorded during the three months ended March 31, 1999. (3) Investments in and Advances to Unconsolidated Entities Archstone has investments in affiliates that are accounted for using the equity method. The most significant of these investments is Ameriton Properties Incorporated, a corporation whose business is acquiring and developing properties to sell to third parties. Archstone owns a 95% economic interest through its investment in Ameriton's non-voting common stock. The voting common stock is owned by a limited liability company. Archstone's investment in Ameriton at June 30, 2000 and December 31, 1999 was $127.8 million and $130.8 million, respectively. In June 2000, Archstone formed a joint venture with the First Islamic Investment Bank ("FIIB"). The venture was formed through Archstone's contribution of five apartment communities with an aggregate fair value of approximately $101.2 million. FIIB contributed $28.3 million of cash for an 80% ownership interest in the venture. The venture also obtained $65.8 million in mortgage loans from Freddie Mac, secured by the five communities, which are located in Salt Lake City, San Antonio, Atlanta, Nashville and Raleigh. Archstone maintained a 20% ownership interest in the venture valued at approximately $7.1 million and received a cash distribution of $94.1 million. For financial reporting purposes, Archstone accounted for the transaction as a partial disposition of the communities, which resulted in a net gain of $5.1 million. The venture has a five-year life with flexible liquidation terms to ensure an orderly disposition of the communities, based on prevailing market conditions. Archstone will receive management fees for managing the communities and the venture. See Note 10, Subsequent Events, for information on an additional transaction with FIIB. (4) Mortgage Notes Receivable 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 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. See Note 10, Subsequent Events, for further information on the sale of the Homestead mortgage notes receivable. (5) Borrowings Unsecured Credit Facilities We have a $750 million unsecured revolving line of credit provided by a group of financial institutions led by The Chase Manhattan Bank, 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 (6.68% at June 30, 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. 9 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) The following table summarizes our unsecured revolving line of credit borrowings (dollars in thousands):
Six Months Ended Year Ended June 30, 2000 December 31, 1999 -------------------- ---------------------- Total line of credit................................................. $750,000 $750,000 Borrowings outstanding at end of period.............................. $292,000 $485,000 Weighted average daily borrowings.................................... $508,187 $387,082 Maximum borrowings outstanding during the period..................... $558,000 $485,000 Weighted average daily nominal interest rate......................... 6.9% 6.0% Weighted average daily effective interest rate....................... 7.1% 6.4%
Our $100 million short-term, unsecured borrowing agreement with Chase bears interest at an overnight rate that ranged from 6.3% to 7.6% during the six months ended June 30, 2000. At June 30, 2000 and December 31, 1999, there was $14.2 million and $8.5 million, respectively, outstanding under this agreement. Long-Term Unsecured Debt A summary of our long-term unsecured notes and unsecured tax-exempt bonds (collectively, "Long-Term Unsecured Debt") outstanding at June 30, 2000 follows (amounts in thousands):
Effective Average Coupon Interest Balance at Balance at Remaining Type of Debt Rate/(1)/ Rate /(2)/ June 30, 2000 December 31, 1999 Life (years) - ---------------------------------- ----------- ----------- --------------- ------------------- -------------- Long-term unsecured notes/(3)/.... 7.3% 7.5% $1,200,702 $1,200,857 7.4 Unsecured tax-exempt bonds/(4)/... 4.2% 5.5% 75,715 75,715 7.9 ----------- ----------- --------------- ------------------- -------------- Total/average................... 7.1% 7.4% $1,276,417 $1,276,572 7.4 =========== =========== =============== =================== ==============
(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) Includes the effect of 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". See Note 10, Subsequent Events, for information on an additional $200 million of Long-Term Unsecured Debt issued in July 2000. (4) The unsecured tax-exempt bonds require semi-annual interest payments and have a mandatory tender date of June 1, 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 June 30, 2000 follows (amounts in thousands):
Effective Interest Principal Balance at Type of Mortgage Rate /(1)/ June 30, 2000 December 31, 1999 - ----------------------------------------------- --------------------- -------------------------- ------------------------- Fannie Mae secured debt/(2)/................... 7.0% $407,163 $304,365 Conventional fixed rate........................ 7.8% 179,302 110,776 Tax-exempt fixed rate.......................... 6.4% 41,124 56,576 Tax-exempt floating rate....................... 5.2% 220,934 192,847 Other.......................................... 5.7% 24,345 30,384 --------------------- -------------------------- ------------------------- Total/average mortgage debt.................. 6.6% $872,868 $694,948 ===================== ========================== =========================
(1) Includes the effect of interest rate hedges, credit enhancement fees, other bond-related costs and loan cost amortization, where applicable. (2) Represents long-term secured debt agreements with Fannie Mae. Archstone issued $103.0 million of Fannie Mae secured debt in June 2000, which matures in June 2009. 10 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) The change in mortgages payable during the six months ended June 30, 2000 consisted of the following (in thousands): Balance at January 1, 2000.................... $694,948 Mortgage notes assumed or originated.......... 197,202 Regularly scheduled principal amortization.... (2,454) Prepayments, final maturities and other....... (16,828) -------- Balance at June 30, 2000...................... $872,868 ========
Scheduled Debt Maturities Approximate principal payments due during each of the next five calendar years and thereafter, as of June 30, 2000 are as follows (in thousands):
Mortgages Payable ----------------------------------- Regularly Long-Term Scheduled Final Unsecured Principal Maturities Debt Amortization and Other Total ------------ ------------ ------------ ------------ 2000 (July through December).......... $ 75,155 $ 2,257 $ 2,161 $ 79,573 2001.................................. 70,010 5,712 5,174 80,896 2002.................................. 97,810 6,093 280 104,183 2003.................................. 171,560 6,430 20,577 198,567 2004.................................. 51,560 6,777 36,571 94,908 Thereafter............................ 810,322 160,347 620,489 1,591,158 ------------ ------------ ------------ ------------ Total............................ $ 1,276,417 $ 187,616 $ 685,252 $ 2,149,285 ============ ============ ============ ============
The scheduled annual principal payments due from 2005 to 2019 average $103 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 June 30, 2000. For the six months ended June 30, 2000 and 1999, the total interest paid in cash on all outstanding debt was $81.4 million and $74.1 million, respectively. We capitalize interest incurred during the construction period as part of the cost of apartment communities under development. Interest capitalized during the six months ended June 30, 2000 and 1999 was $13.0 million and $17.7 million, respectively. Amortization of loan costs included in interest expense for the six months ended June 30, 2000 and 1999 was $2.4 million and $2.6 million, respectively. 11 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) 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 manage our exposure to interest rates. 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 4.9% per annum as of June 30, 2000. The debt is capped at an effective interest rate of 8.9% per annum until termination in March 2005. As of June 30, 2000, marking our various interest rate agreements to market would result in a net gain of $15.4 million, prior to consideration of the associated issuance costs, if each had been terminated on such date. (6) 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 six months ended June 30, 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 distribution 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. (7) Cash Dividends The following table summarizes the cash dividends paid per share on the Common Shares and Preferred Shares during 2000:
Three Months Ended -------------------------------------- June 30, 2000 March 31, 2000 --------------- -------------- Common Shares............................... $0.3850 $0.3850 Series A Convertible Preferred Shares (1)... $0.5186 $0.5186 Series B Preferred Shares (1)............... $0.5625 $0.5625 Series C Preferred Shares (1)............... $0.5391 $0.5391 Series D Preferred Shares (1)............... $0.5469 $0.5469
(1) Collectively, the Series A, B, C and D Preferred Shares are referred to as the "Preferred Shares". On July 18, 2000, Archstone's Board of Trustees declared the third quarter 2000 cash dividend of $0.385 per Common Share, payable on August 30, 2000, to shareholders of record on August 16, 2000. This dividend represents our 98th consecutive Common Share dividend. 12 Archstone Communities Trust Notes to Condensed Financial Statements - (Continued) (8) Shareholders' Equity During the six months ended June 30, 2000, approximately 180,000 of Series A Convertible Preferred Shares were converted, at the option of the holders, into approximately 242,000 Common Shares. At June 30, 2000, Security Capital Group Incorporated ("Security Capital"), our largest shareholder, owned approximately 36% of our Common Stock on a fully diluted basis and approximately 38% based on Common Shares outstanding. See Note 10, Subsequent Events, for an update on Security Capital's ownership. (9) 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 Six Months Ended June 30, June 30, 2000 1999 2000 1999 --------------- --------------- --------------- ------------- Reportable apartment community segment revenues........... $173,962 $155,648 $341,693 $308,138 Income from unconsolidated entities....................... 2,314 548 1,201 2,028 Income from hotel asset................................... 1,110 996 1,843 1,760 Other (1)................................................. 7,427 6,125 17,092 12,778 ------------ ------------ ------------ ------------ Total segment and consolidated revenues................... $184,813 $163,317 $361,829 $324,704 ============ ============ ============ ============
Three Months Ended Six Months Ended June 30, June 30, --------------------------- ---------------------------- 2000 1999 2000 1999 ----------- ----------- ------------ ------------ Reportable apartment community segment net operating income... $116,230 $101,254 $ 230,266 $ 200,026 Net operating income from hotel asset......................... 1,107 1,002 1,838 1,743 ----------- --------- -------- ----------- Total segment net operating income......................... 117,337 102,256 232,104 201,769 ----------- --------- -------- ----------- Reconciling items: Income from unconsolidated entities........................... 2,314 548 1,201 2,028 Other income.................................................. 7,427 6,125 17,092 12,778 Depreciation on real estate investments....................... (36,696) (31,450) (73,221) (64,247) Interest expense.............................................. (37,325) (29,023) (71,527) (56,041) General and administrative expenses........................... (5,466) (5,172) (11,751) (10,504) Other expenses................................................ (709) (531) (3,819) (3,362) ----------- -------- -------- ----------- Consolidated earnings from operations............................ $ 46,882 $ 42,753 $ 90,079 $ 82,421 =========== ======== ======== ===========
(1) Includes $11.9 million and $11.7 million of interest income on the Homestead mortgage notes receivable for the six months ended June 30, 2000 and 1999, respectively. Also includes interest income on cash equivalents and other notes receivable. For the six months ended June 30, 2000, includes a $3.3 million gain on the sale of Spectrum Apartment Locators, an apartment locator company acquired in January 1998. Archstone does not derive any of its consolidated revenues from foreign countries and does not have any major customers that individually account for 10% or more of its consolidated revenues. 13 Archstone Communities Trust Notes to Condensed Financial Statements - (Concluded) (10) Subsequent Events In July 2000, we issued $200.0 million of Long-Term Unsecured Debt. The notes have a coupon rate of 8.2% and pay interest semi-annually through maturity on July 3, 2005. The effective interest rate, including discount and issuance costs is approximately 8.4%. We used the $198.6 million of net proceeds to repay borrowings under our unsecured credit facilities. In July 2000, Archstone formed a second joint venture with FIIB. The structure of this transaction is identical to the venture transaction discussed in Note 3, Investments in and Advances to Unconsolidated Entities. The venture was formed through Archstone's contribution of six apartment communities with an aggregate fair value of approximately $135.9 million. FIIB contributed $38.4 million of cash for an 80% ownership interest in the venture. The venture also obtained $87.9 million in mortgage loans from Freddie Mac, secured by the six communities, which are located in Phoenix, Albuquerque, Houston, Richmond and two in Atlanta. Archstone maintained a 20% ownership interest in the venture valued at approximately $9.6 million and received a cash distribution of $126.3 million. For financial reporting purposes, Archstone accounted for the transaction as a partial disposition of the communities, which resulted in a net gain of $8.2 million. In July 2000, we completed a transaction to repurchase approximately 17.5 million of our Common Shares held by Security Capital in exchange for Homestead mortgage notes receivable with a face amount of $221.3 million and cash of $178.7 million. Security Capital's ownership of our Common Shares was reduced from approximately 36% to approximately 27% on a fully diluted basis (from approximately 38% to approximately 29% based on Common Shares outstanding). 14 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 June 30, 2000, and the related condensed statements of earnings for the three and six month periods ended June 30, 2000 and 1999, the condensed statement of shareholders' equity for the six month period ended June 30, 2000 and the condensed statements of cash flows for the six month periods ended June 30, 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 July 26, 2000 15 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 and Six Months Ended June 30, 2000 Compared to June 30, 1999 Archstone's overall rental revenues increased $18.4 million (11.8%) and net operating income increased $15.1 million (14.8%) during the three months ended June 30, 2000 as compared to the same period in 1999. During the six months ended June 30, 2000, rental revenues increased $33.6 million (10.9%) and net operating income increased $30.3 million (15.0%). 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 $30.0 million during the three months ended June 30, 2000 as compared to the same period in 1999. This increase resulted primarily from a $4.1 million increase in earnings from operations and a $28.2 million increase in gains on dispositions in 2000. These increases were partially offset by a $2.3 million increase in minority interest expense and Preferred Share dividends. During the six months ended June 30, 2000 net earnings attributable to Common Shares increased $31.6 million as compared to the same period in 1999. This increase resulted primarily from a $7.7 million increase in earnings from operations and a $27.0 million increase in gains on dispositions. These increases were partially offset by a $4.2 million increase in minority interest expense and Preferred Share dividends. Apartment Community Operations At June 30, 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 June 30, Six Months Ended June 30, --------------------------------- --------------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- --------------- Rental revenues................................. $173,962 $155,648 $341 693 $308,138 Property operating expenses..................... 57,732 54,394 111,427 108,112 -------------- -------------- -------------- --------------- Net operating income............................ $116,230 $101,254 $230,266 $200,026 ============== ============== ============== =============== Operating margin (NOI/rental revenues).......... 66.8% 65.1% 67.4% 64.9% ============== ============== ============== =============== Average occupancy during period................. 96.0% 94.7% 95.7% 94.5% -------------- -------------- -------------- --------------- Average number of operating units............... 67,715 69,111 67,875 69,082 -------------- -------------- -------------- ---------------
16 The increases in net operating income for the three and six months ended June 30, 2000 compared to the same periods in 1999 are primarily attributable to an increase in rental revenues from our operating communities 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 improved 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 margins for the three and six months ended June 30, 2000 were 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. Income from Unconsolidated Entities Income from unconsolidated entities is primarily influenced by Archstone's investment in Ameriton Properties Incorporated, a corporation whose business is acquiring and developing properties to sell to third parties. Archstone owns a 95% economic interest through its investment in Ameriton's non-voting common stock. The voting common stock is owned by a limited liability company. For the three and six months ended June 30, 2000 Archstone's equity in Ameriton's earnings were $2.4 million and $1.3 million, respectively. Archstone's income from unconsolidated entities in 1999 is related entirely to our investment in Ameriton. In June 2000, Archstone formed a joint venture with FIIB. The venture was formed through Archstone's contribution of five apartment communities with an aggregate fair value of approximately $101.2 million. FIIB contributed $28.3 million of cash for an 80% ownership interest in the venture. The venture also obtained $65.8 million in mortgage loans from Freddie Mac, secured by the five communities, which are located in Salt Lake City, San Antonio, Atlanta, Nashville and Raleigh. Archstone maintained a 20% ownership interest in the venture valued at approximately $7.1 million and received a cash distribution of $94.1 million. For financial reporting purposes, Archstone accounted for the transaction as a partial disposition of the communities. The venture has a five- year life with flexible liquidation terms to ensure an orderly disposition of the communities, based on prevailing market conditions. Archstone will receive management fees for managing the communities and the venture. Other Income Other income is primarily influenced by interest income on the Homestead mortgage notes receivable, other notes receivable and cash balances. During the six months ended June 30, 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. See "Liquidity and Capital Resources, Recent Events", for information on the sale of the Homestead mortgage notes receivable. Depreciation Expense The $5.2 million and the $9.0 million increases in depreciation expense for the three and six months ended June 30, 2000 as compared to 1999 resulted primarily from the increase in the cost basis of operating communities as a result of our active capital redevelopment program and the reduction in depreciable lives on certain real estate investments during 2000. Interest Expense The $8.3 million and $15.5 million increases in interest expense for the three and six months ended June 30, 2000 as compared to 1999 are 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 during the three and six months ended June 30, 2000 as compared to the same period in 1999 relates primarily to higher severance costs in 2000 as a result of certain staff reductions. In addition, research and development costs and depreciation associated with information technology initiatives and higher expenses associated with Archstone's long-term incentive plan increased general and administrative expenses. 17 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. During the six months ended June 30, 2000, we concluded that full recovery of certain real estate investments was doubtful. As a result, a provision for possible loss of $400,000 was recorded to reduce these assets to their estimated fair value. A similar provision of $2.0 million was recorded during the three months ended March 31, 1999. All of the above charges are included in "Other" in the accompanying Condensed Statements of Earnings. Gains on Dispositions of Investments During the six months ended June 30, 2000, we disposed of 18 apartment communities and certain other real estate assets representing gross proceeds of $339.1 million. We disposed of 15 apartment communities and certain other real estate assets, representing gross proceeds of $198.5 million during the six months ended June 30, 1999. Aggregate net gains of $46.0 million and $19.0 million were recorded for the six months ended June 30, 2000 and 1999, respectively. 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 has existed in the real estate industry, we have continued to fund attractive new investment opportunities primarily through the use of proceeds from 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. Recent Events During July 2000, Archstone's liquidity and financial condition were impacted by the following transactions: i) Archstone issued $200 million in Long-Term Unsecured Debt, proceeds from which were used to repay borrowings under unsecured credit facilities. ii) In July 2000, Archstone formed a second joint venture with FIIB. The structure of this transaction is identical to the venture transaction discussed in "Results of Operations, Income from Unconsolidated Entities". The venture was formed through Archstone's contribution of six apartment communities with an aggregate fair value of approximately $135.9 million. FIIB contributed $38.4 million of cash for an 80% ownership interest in the venture. The venture also obtained $87.9 million in mortgage loans from Freddie Mac, secured by the six communities, which are located in Phoenix, Albuquerque, Houston, Richmond and two in Atlanta. Archstone maintained a 20% ownership interest in the venture valued at approximately $9.6 million and received a cash distribution of $126.3 million. For financial reporting purposes, Archstone accounted for the transaction as a partial disposition of the communities. The proceeds were used to repay borrowings under unsecured credit facilities. iii) Archstone repurchased approximately 17.5 million Common Shares held by Security Capital in exchange for Homestead mortgage notes receivable which have a face amount of $221.3 million and $178.7 million in cash. Security Capital's ownership of our Common Shares was reduced from approximately 36% to approximately 27% on a fully diluted basis (from approximately 38% to approximately 29% based on Common Shares outstanding). As a result of this transaction, our leverage ratios increased temporarily although we anticipate that incremental dispositions will bring the financial ratios back to historical levels. 18 Operating Activities Net cash flow provided by operating activities increased by $25.3 million, or 18.0%, for the six months ended June 30, 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 $367.5 million during the six months ended June 30, 2000 were financed primarily from cash flow from operations, dispositions, the joint venture transaction with FIIB, cash held in escrow pending tax- deferred exchanges and borrowings under unsecured credit facilities. Unsecured credit facilities were reduced $187.3 million during the period using net proceeds from secured debt financing, mortgage notes receivable paydowns and the issuance of perpetual preferred limited partnership units. Real estate investments of $362.8 million and the repurchase of $94.4 million of Common Shares during the six months ended June 30, 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, disposition proceeds and secured debt proceeds. Other significant financing activities included the payment of $123.4 million and $116.7 million in Common Share, Preferred Share and minority interest dividends/distributions for the six months ended June 30, 2000 and 1999, respectively. The increase was primarily attributable to the issuance of the Series D Preferred Shares in August 1999, an increase in the cash dividends paid per Common Share and an increase in the number of units issued to minority interests. We prepaid mortgages due to community dispositions of $16.6 million and $7.9 million during the six months ended June 30, 2000 and 1999, respectively. Significant non-cash investing and financing activities during the six months ended June 30, 2000 and 1999 included the assumption of mortgage debt, 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 As of June 30, 2000, we have $79.6 million of long-term debt maturing during the remainder of 2000 and $80.9 million maturing during 2001. See Note 5 to the financial statements contained in Item 1 for more information on scheduled debt maturities. We currently have $850 million in total borrowing capacity under our unsecured credit facilities, with $129.2 million outstanding and an available balance of $720.8 million at August 1, 2000. Archstone's unsecured credit facilities, Long-Term Unsecured Debt and mortgages payable had effective interest rates of 7.1%, 7.4% and 6.6%, respectively, as of June 30, 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 June 30, 2000. 19 Shareholder Dividend Requirements Based on announced dividend levels for 2000 (assuming no changes in our dividend levels) and the number of Archstone shares or units outstanding as of June 30, 2000, we anticipate that Archstone will pay the following dividends/distributions during the next 12 months (in thousands, except per share amounts):
Per Share/ Total Unit --------------- ------------------ Common Share /(1)/........................................................... $ 1.54 $ 187,756 Series A Convertible Preferred Share......................................... 2.07 7,312 Series B Preferred Share..................................................... 2.25 9,422 Series C Preferred Share..................................................... 2.16 4,289 Series D Preferred Share..................................................... 2.19 4,358 Series E perpetual preferred limited partnership units/(2)/.................. 2.09 3,350 Series F perpetual preferred limited partnership units /(2)/................. 2.03 1,625 Series G perpetual preferred limited partnership units /(2)/................. 2.16 1,294 Other distributions on minority interests /(2)/.............................. 1.54 1,461 ------------------ Total dividend/distribution requirements..................................... $ 220,867 ==================
/1)/ Total anticipated Common Share dividends have been adjusted to give effect to the repurchase of 17.5 million shares from Security Capital Group Incorporated in July 2000. /2)/ See Note 6 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 June 30, 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............. 66,180 $ 58,358 $ 1,857 Communities under construction....................... 6,189 - 222,273 Communities In Planning and owned.................... 1,374 182,857 - Communities In Planning and Under Control............ 3,403 504,338 - Operating community acquisition under contract....... 280 22,500 - --------------- ----------------------- ------------------------ Total........................................... 77,426 $ 768,053 $ 224,130 =============== ======================= ========================
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 $135.0 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. 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 requirements and scheduled debt principal payments. To fund planned investment activities, we had $720.8 million in available capacity on our unsecured credit facilities and approximately $40 million in our tax-deferred exchange escrow account at August 1, 2000. Subject to normal closing risks, we expect to complete the disposition of an additional $200 million of operating communities and certain other real estate assets during the remainder of 2000. After giving effect to the $200 million Long-Term Unsecured Debt issuance in July, we have $577.2 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. 20 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 manage our exposure to interest rates. See Note 5 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 the calculation of funds from operations into closer alignment with GAAP net income. The revised measure generally calls for adjustments to net income for gains (losses) from sales of depreciated real estate, depreciation on real estate investments and items 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 Homestead 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 dividends to shareholders are summarized above in "-Shareholder Dividend Requirements". Funds from operations using the revised definition were as follows (amounts in thousands):
Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------------ 2000 1999 2000 1999 ------------ ----------- ---------- ----------- (restated) (restated) Net earnings attributable to Common Shares - Basic.................. $ 80,448 $ 50,457 $ 119,902 $ 88,302 Add (Deduct): Depreciation on real estate investments.......................... 36,696 31,450 73,221 64,247 Gains on dispositions of investments, net........................ (41,869) (13,835) (46,001) (19,585) Extraordinary item - loss on early extinguishment of debt........ -- -- 1,113 Provision for possible loss on investments....................... 400 -- 400 450 Other, net....................................................... 280 (18) 1,108 4 ------------ ----------- ---------- ----------- Funds from operations attributable to Common Shares - Basic......... 75,955 68,054 148,630 134,531 Minority interest - convertible operating partnership units...... 366 338 596 676 Series A Convertible Preferred Share dividends................... 1,851 2,179 3,748 4,429 ------------ ----------- ---------- ----------- Funds from operations attributable to Common Shares - Diluted....... $ 78,172 $ 70,571 $ 152,974 $ 139,636 ============ =========== ========== =========== Weighted average Common Shares outstanding - Diluted................ 145,138 145,872 144,910 147,149 ============ =========== ========== ===========
21 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 manage our exposure to interest rates. 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 June 30, 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 June 30, 2000. PART II-OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the annual shareholders meeting held May 17, 2000, shareholders elected the following individuals to serve on the Board:
Shares Voted Shares Voted Name in Favor Against --------------------------------- ------------------- ------------------- C. Ronald Blankenship............ 123,699,112 778,790 John T. Kelley, III.............. 123,723,481 730,052 Constance B. Moore /(1)/......... 123,714,154 748,706 John C. Schweitzer............... 123,740,288 696,438
/(1)/ Ms. Moore resigned as a Trustee on July 25, 2000. Additionally, at the annual meeting the shareholders voted to amend Archstone's Declaration of Trust to (i) provide for the issuance of uncertificated shares and electronic proxies, (ii) provide the ability of Archstone to consummate mergers without shareholder approval provided the merger does not reclassify or change the terms of any class or series of our shares and the number of shares outstanding does not increase by more than 20%, (iii) exclude agents from the mandatory limitation of liability provisions and (iv) provide for permissive rather than mandatory indemnification for agents of Archstone. At the annual meeting 103,898,803 shares voted in favor of the amendment, 11,068,836 shares voted against, 1,029,821 shares were recorded as abstentions and 23,143,970 shares were recorded as broker non-votes. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Articles of Amendment of Amended and Restated Declaration of Trust of Archstone, dated May 17, 2000 10.1 Purchase and Sale Agreement dated as of July 19, 2000 between Archstone and Security Capital (incorporated by reference to Security Capital's Schedule 13D-A filed on July 24, 2000) 10.2 Amendment No. 2, dated July 25, 2000, to the Third Amended and Restated Investor Agreement by and between Archstone and Security Capital 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 August 11, 2000 regarding unaudited financial information 27 Financial Data Schedule 99.1 Current Development Activity (b) Reports on Form 8-K: None. 22 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: August 11, 2000 23 EX-3.1 2 0002.txt AMENDED AND RESTATED DECLARATION OF TRUST EXHIBIT 3.1 ARTICLES OF AMENDMENT OF AMENDED AND RESTATED DECLARATION OF TRUST OF ARCHSTONE COMMUNITIES TRUST The undersigned, being an officer duly authorized by unanimous vote of the Trustees of Archstone Communities Trust, a Maryland real estate investment trust (the "Trust"), does hereby certify pursuant to the provisions of Article VI, ----- Section 1 of the Trust's Amended and Restated Declaration of Trust, as amended and supplemented (the "Declaration of Trust"), and Section 8-501 of the -------------------- Corporations and Associations Article of the Annotated Code of Maryland, that the Board of Trustees of the Trust has adopted a resolution declaring this amendment to the Declaration of Trust as hereinafter set forth to be advisable and that the shareholders of the Trust have approved such amendment by the affirmative vote of at least a majority of all the votes entitled to be cast on the matter. Therefore, the Declaration of Trust is hereby amended as follows: 1. Article II, Section 1 is hereby amended by adding the following proviso at the end of the second sentence thereof: "provided, however, that the Board may provide that some or all of any or -------- ------- all classes or series of Shares shall be uncertificated" 2. Article III, Section 2 is hereby amended by adding the words "in any manner permitted under Maryland law" after the word "proxy" and prior to the comma appearing in the first sentence thereof. 3. Article V, Section 3 is hereby amended by adding the following proviso at the end thereof: "; provided, however, that the Shareholders shall not be entitled to vote -------- ------- on a merger or consolidation of the Trust which Title 8 permits to be approved without a vote of the Shareholders" 4. Article VIII, Section 1 is hereby amended and restated in its entirety as follows: "Section 1. Limitation of Liability of Officers. To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of officers of a real estate investment trust, no officer of the Trust shall be liable to the Trust or to any Shareholder for money damages. Neither the amendment nor repeal of this Section 1, nor the adoption or amendment of any other provision of this Declaration of Trust inconsistent with this Section 1, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Maryland statute limiting the liability of officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any Shareholder, no officer of the Trust shall be liable to the Trust or to any Shareholder for money damages except to the extent that (i) the officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (ii) a judgment or other final adjudication adverse to the officer is entered in a proceeding based on a finding in the proceeding that the officer's action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding." 5. Article VIII, Section 2 is hereby amended and restated in its entirety as follows: "The Trust shall indemnify each officer and employee, and shall have the power to indemnify each agent, of the Trust to the fullest extent permitted by Maryland law, as amended from time to time, in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was an officer, employee or agent of the Trust or is or was serving at the request of the Trust as a director, trustee, officer, partner, manager, member, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, limited liability company, other enterprise or employee benefit plan, from all claims and liabilities to which such person may become subject by reason of service in such capacity and shall pay or reimburse reasonable expenses, as such expenses are incurred, of each officer, employee or agent in connection with any such proceedings." The undersigned officer acknowledges these Articles of Amendment to be the act of the Trust and, as to all other matters or facts required to be verified under oath, that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects, and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the undersigned officer, duly authorized by a majority of the Trustees, has executed these Articles of Amendment as of this 17/th/ day of May, 2000. /s/ Charles E. Mueller, Jr. ------------------------------------ Charles E. Mueller, Jr. Senior Vice President and Chief Financial Officer ATTEST: /s/ Caroline Brower - ------------------------- Caroline Brower Secretary EX-10.2 3 0003.txt AMENDMENT NO. 2 DATED JULY 25, 2000 EXHIBIT 10.2 AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED INVESTOR AGREEMENT THIS AMENDMENT NO. 2 (this "Amendment"), dated as of July 25, 2000, to the Third Amended and Restated Investor Agreement, dated as of September 9, 1997, as amended by Amendment No.1 thereto, dated as of July 7, 1998 (as so amended, the "Agreement"), is made by and between Archstone Communities Trust (formerly Security Capital Pacific Trust), a Maryland real estate investment trust (the "Company"), and Security Capital Group Incorporated, a Maryland corporation ("SCG"). WHEREAS, pursuant to a Purchase and Sale Agreement, dated as of July 19, 2000 (the "Purchase and Sale Agreement"), between the Company and SCG, SCG has agreed to sell to the Company certain Common Shares in exchange for the consideration described therein; and WHEREAS, as a condition to the closing of the transactions contemplated by the Purchase and Sale Agreement, the parties have agreed to amend the Agreement as herein provided. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Agreement as follows: (a) Section 5(b) of the Agreement is hereby amended and restated in its entirety as follows: " (b) File Reports. For so long as SCG shall continue to Beneficially ------------ Own any Common Shares, the Company shall file on a timely basis all annual, quarterly and other reports required to be filed by it under Sections 13 and 15(d) of the Exchange Act, and the Rules and Regulations of the Commission thereunder, as amended from time to time; provided, however, that for so long as SCG Beneficially Owns at least 10% of the outstanding Common Shares, the Company shall use its best efforts to file such reports at least two (2) business days prior to the day on which such reports would otherwise be required to be filed under Sections 13 and 15(d) of the Exchange Act, and the Rules and Regulations of the Commission thereunder, as amended from time to time." (b) The following new subsections (j) and (k) are hereby added to the end of Section 5 of the Agreement: " (j) Board Committees. For so long as SCG shall continue to be ---------------- entitled to designate one or more Nominees, the Company shall use its best efforts to cause one of such Nominees as designated by SCG to serve on each of the Executive and Investment Committee and the Management Development and Executive Compensation Committee of the Board. (k) Reports. For so long as SCG shall continue to Beneficially Own at ------- least 10% of the outstanding Common Shares, the Company shall provide SCG, on a timely basis, monthly operating and financial reports prepared in the Company's customary form." (c) Section 7(a) of the Agreement is hereby amended by adding the following sentence to the end thereof: "Without limiting the generality of the foregoing, SCG may request registration of all or any part of its Registrable Securities, which Registrable Securities are proposed to be sold or transferred by SCG upon conversion or exchange of convertible or exchangeable securities of SCG to be issued by SCG in a transaction registered under the Securities Act, and the Company will use its reasonable efforts to effect the registration of such Registrable Securities under the Securities Act, to the extent that such registration is permitted under the Securities Act and the Rules and Regulations of the Commission thereunder." (d) Sections 7(b)(i) and (b)(ii) are hereby amended and restated in their entirety as follows: " (i) prepare and file with the Commission a registration statement with respect to such securities and use its reasonable efforts to cause such registration statement to become effective and remain effective for as long as shall be necessary to complete the distribution of the Registrable Securities so registered; (ii) prepare and file with the Commission such amendments and supplements to such registration statement, and the prospectus used in connection therewith, as may be necessary to keep such registration statement effective for so long as shall be necessary to complete the distribution of the Registrable Securities so registered and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever SCG shall desire to sell or otherwise dispose of the same within such period;" (e) Section 7(i) of the Agreement is hereby amended by adding the following provisions to the end thereof: "SCG may assign without the consent of the Company, all or any portion of, its rights under this Section 7 with respect to any Registrable Securities to one or more Persons (each, a "Transferee" and together "Transferees") to whom SCG has issued or sold, in a transaction not registered or required to be registered under the Securities Act, any security convertible into or exchangeable for at least $100 million in Value of Registrable Securities. If SCG assigns its rights under this Section 7 with respect to Registrable Securities having an aggregate offering value of at least $100 million to one or more Transferees, the Transferees may request one registration of -2- all or part of the Registrable Securities having an aggregate offering value of at least $100 million on Form S-3 (or any successor form) under the Securities Act by delivering written notice to the Company specifying the number of Registrable Securities that the Transferees desire to sell and the Company shall use its reasonable efforts to effect the registration of such Registrable Securities under the Securities Act in accordance with and subject to the provisions of this Section 7. For the avoidance of doubt, and notwithstanding anything contained herein, any rights under this Section 7 not expressly assigned by SCG shall deemed to be retained by SCG, and SCG shall continue to be entitled to registration rights hereunder with respect to Registrable Securities Beneficially Owned by it, subject to the terms hereof." (f) "Executive and Investment Committee" shall mean the committee of the Board primarily responsible for acting on behalf of the entire Board between regular Board meetings, reviewing and making recommendations regarding strategic actions; pricing securities to be issued by the Company and reviewing and approving proposed investments and property dispositions, including any such successor or replacement committee. "Management Development and Executive Compensation Committee" shall mean the committee of the Board primarily responsible for reviewing and approving the Company's executive compensation arrangements and plans including any such successor or replacement committee. (g) Capitalized terms used in this Amendment but not specifically defined herein shall have the meanings ascribed thereto in the Agreement. (h) Except as otherwise specifically modified hereby, the Agreement shall remain in full force and effect. (i) This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland. (j) This Amendment may be executed in any number of counterparts, each of which may be deemed an original and all of which together shall constitute one and the same instrument. (k) The miscellaneous provisions of Section 8 of the Agreement shall apply equally to this Amendment, and to the Agreement as modified hereby. * * * * * -3- IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. ARCHSTONE COMMUNITIES TRUST By: /s/ Charles E. Mueller, Jr. --------------------------- Charles E. Mueller, Jr. Chief Financial Officer SECURITY CAPITAL GROUP INCORPORATED By: /s/ Jeffrey A. Klopf -------------------- Jeffrey A. Klopf Senior Vice President -4- EX-12.1 4 0004.txt COMPUTATION OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 ARCHSTONE COMMUNITIES TRUST COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands) (Unaudited)
Six Months Ended June 30, Twelve Months Ended December 31, ---------------------------------------------------------------------------------------------- 2000 1999 1999 1998 1997(1) 1996 1995 ------------------------------------------------------ --------------------------------------- Earnings from operations............. $ 90,079 $ 82,421 $169,339 $134,571 $ 24,686 $ 94,089 $ 81,696 Add: Interest expense................ 71,527 56,041 121,494 83,350 61,153 35,288 19,584 -------- -------- -------- -------- -------- -------- -------- Earnings as adjusted................. $161,606 $138,462 $290,833 $217,921 $ 85,839 $129,377 $101,280 ======== ======== ======== ======== ======== ======== ======== Fixed charges: Interest expense................ $ 71,527 $ 56,041 121,494 $ 83,350 $ 61,153 $ 35,288 $ 19,584 Capitalized interest............ 13,032 17,739 31,912 29,942 17,606 16,941 11,741 -------- -------- -------- -------- -------- -------- -------- Total fixed charges......... $ 84,559 $ 73,780 $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 0005.txt COMPUTATION OF RATION OF EARNINGS TO COMBINED EXHIBIT 12.2 ARCHSTONE COMMUNITIES TRUST COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS (Dollar amounts in thousands) (Unaudited)
Six Months Ended June 30, Twelve Months Ended December 31, ------------------------------------------------------------------------------- 2000 1999 1999 1998 1997(1) 1996 1995 ------------------------------------------------------------------------------- Earnings from operations.......................... $ 90,079 $ 82,421 $169,339 $134,571 $24,686 $ 94,089 $ 81,696 Add: Interest expense............................. 71,527 56,041 121,494 83,350 61,153 35,288 19,584 ------------------------------------------------------------------------------- Earnings as adjusted.............................. $ 161,606 $138,462 $290,833 $217,921 $85,839 $129,377 $101,280 =============================================================================== Combined fixed charges and Preferred Share dividends: Interest expense............................. $ 71,527 $ 56,041 $121,494 $ 83,350 $61,153 $ 35,288 $ 19,584 Capitalized interest......................... 13,032 17,739 31,912 29,942 17,606 16,941 11,741 ------------------------------------------------------------------------------- Total fixed charges...................... 84,559 73,780 153,406 113,292 78,759 52,229 31,325 ------------------------------------------------------------------------------- Preferred Share dividends.................... 12,801 11,308 23,731 20,938 19,384 24,167 21,823 ------------------------------------------------------------------------------- Combined fixed charges and Preferred Share dividends........................................ $ 97,360 $ 85,088 $177,137 $134,230 $98,143 $ 76,396 $ 53,148 =============================================================================== Ratio of earnings to combined charges and Preferred Share dividends........................ 1.7 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 0006.txt LETTER FROM KPMG LLP 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 July 26, 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 August 11, 2000 EX-27 7 0007.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 14,294 0 0 0 0 0 5,173,627 342,757 5,359,209 0 2,149,285 0 292,371 139,399 2,213,339 5,359,209 343,536 361,829 0 184,653 15,170 400 71,527 119,902 0 119,902 0 0 0 119,902 0.86 0.86
EX-99.1 8 0008.txt CURRENT DEVELOPMENT ACTIVITY EXHIBIT 99.1 Current Development Activity The following table summarizes Archstone's development communities under construction as of June 30, 2000 (dollar amounts in thousands):
Actual or Expected Total Expected Date for Stabilization Number 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 $ 25,977 $ 31,669 Q3/98 Q2/00 Q2/01 34.6% -------- -------- --------- Denver, Colorado: Cedars II, The........ 172 $ 13,690 $ 16,376 Q3/99 Q3/00 Q2/01 N/A -------- -------- --------- Total Central Region...... 620 $ 39,667 $ 48,045 -------- -------- --------- East Region: Charlotte, North Carolina: Archstone Tyvola Centre...... 404 $ 18,095 $ 31,398 Q3/99 Q3/00 Q2/02 N/A -------- -------- --------- Indianapolis, Indiana: Archstone River Ridge........ 202 $ 16,037 $ 16,150 Q2/98 Q2/99 Q3/00 92.1% -------- -------- --------- Richmond, Virginia: Archstone Swift Creek I...... 288 $ 23,502 $ 23,674 Q2/98 Q3/99 Q3/00 78.1% Archstone Swift Creek II..... 144 2,298 11,021 Q2/00 Q2/01 Q4/01 N/A -------- -------- --------- Total Richmond, Virginia.. 432 $ 25,800 $ 34,695 -------- -------- --------- Southeast Florida: Archstone at Woodbine........ 408 $ 24,893 $ 30,722 Q3/99 Q2/00 Q4/01 17.4% -------- -------- --------- Washington, D.C.: Archstone Columbia Town Center I................ 531 $ 8,092 $ 65,141 Q2/00 Q4/01 Q2/03 N/A Archstone Milestone II....... 132 9,583 13,615 Q4/99 Q3/00 Q1/01 N/A Archstone Woodland Park...... 392 23,185 42,622 Q2/99 Q2/00 Q2/01 37.3% -------- -------- --------- Total Washington, D.C....... 1,055 $ 40,860 $121,378 -------- -------- --------- Total East Region.......... 2,501 $125,685 $234,343 -------- -------- --------- West Region: Phoenix, Arizona Miralago II.................. 336 $ 7,972 $ 23,680 Q1/00 Q1/01 Q2/02 N/A -------- -------- --------- Reno, Nevada: Enclave II, The.............. 180 $ 14,837 $ 16,204 Q4/98 Q3/99 Q3/00 95.6% -------- -------- --------- San Diego, California: Archstone Mission Valley............... 736 $ 51,698 $106,328 Q4/99 Q4/00 Q2/03 N/A Archstone Torrey Hills....... 340 43,111 43,139 Q1/98 Q3/99 Q3/00 93.8% -------- -------- --------- Total San Diego, California........ 1,076 $ 94,809 $149,467 -------- -------- --------- San Francisco Bay Area, California: Archstone Hacienda........... 540 $ 76,072 $ 78,272 Q2/98 Q3/99 Q3/00 94.3% -------- -------- --------- San Jose, California: Archstone Willow Glen........ 412 $ 40,816 $ 69,581 Q3/99 Q4/00 Q1/02 N/A -------- -------- --------- Seattle, Washington: Archstone Northcreek......... 524 $ 41,486 $ 44,025 Q2/98 Q2/99 Q3/00 87.2% -------- -------- --------- Total West Region....... 3,068 $275,992 $381,229 -------- -------- --------- Total Communities Under Construction.... 6,189 $441,344 $663,617 ======== ======== =========
(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 June 30, 2000. An "n/a" indicates the communities where Lease-Up has not yet commenced. -----END PRIVACY-ENHANCED MESSAGE-----