-----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, THQ681fiH7IVtA5i2LVKUkFfhO+905lXN8qjxzOude38wnXd4bkeH1ggKacmUyZg Q2sAE8B7AC/JHiCWSEHA2w== 0000950131-96-003641.txt : 19960807 0000950131-96-003641.hdr.sgml : 19960807 ACCESSION NUMBER: 0000950131-96-003641 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960806 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY CAPITAL PACIFIC TRUST CENTRAL INDEX KEY: 0000080737 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 746056896 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10272 FILM NUMBER: 96604111 BUSINESS ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 BUSINESS PHONE: 9158773900 MAIL ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 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-K/A 1 AMD. #1 TO 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A NO. 1 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 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 SECURITY CAPITAL PACIFIC TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 74-6056896 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 7777 MARKET CENTER AVENUE EL PASO, TEXAS 79912 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) (915) 877-3900 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Shares of Beneficial Interest, par value New York Stock Exchange $1.00 per share Cumulative Convertible Series A Preferred Shares New York Stock Exchange of Beneficial Interest, par value $1.00 per share Series B Cumulative Redeemable Preferred Shares New York Stock Exchange of Beneficial Interest, par value $1.00 per share Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] Based on the closing price of the registrant's shares on March 20, 1996, the aggregate market value of the voting shares held by non-affiliates of the registrant was $971,468,531.25. At March 20, 1996, there were outstanding approximately 72,210,918 Common Shares of Beneficial Interest of the registrant. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for the 1996 annual meeting of its shareholders are incorporated by reference in Part III of this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
ITEM DESCRIPTION PAGE ---- ------------------------------------------------------------------- ---- PART II 6. Selected Financial Data............................................ 3 7. Management's Discussion and Analysis of Financial Condition and Re- sults of Operations............................................... 4 Overview........................................................... 4 Merger and Concurrent Subscription Offering........................ 4 Results of Operations.............................................. 4 Environmental Matters.............................................. 8 Liquidity and Capital Resources.................................... 8 REIT Management Agreement.......................................... 12 PART IV 14. Financial Statements and Schedule.................................. 14
2 PART II ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data relating to the historical financial condition and results of operations of PTR for the years ended December 31, 1995, 1994, 1993, 1992 and 1991. Such summary financial data is qualified in its entirety by, and should be read in conjunction with, the financial statements and related notes thereto incorporated by reference herein (amounts in thousands, except per share data).
YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 1992 1991 -------- -------- ------- ------- ------- OPERATIONS SUMMARY: Rental Income..................... $262,473 $183,472 $76,129 $30,970 $14,721 Total Revenues.................... 264,873 186,105 78,418 32,779 15,817 Property Management Fees Paid to Affiliates....................... 8,912 7,148 3,862 1,424 148 General and Administrative Expenses......................... 952 784 660 436 697 REIT Management Fee Paid to Affiliate........................ 20,354 13,182 7,073 2,711 793 Earnings from Operations(1)....... 81,696 46,719 23,191 9,037 2,078 Gain (loss) on Sale of Investments...................... 2,623 -- 2,302 (51) (611) Preferred Share Dividends Paid.... 21,823 16,100 1,341 -- -- Net Earnings Attributable to Common Shares.................... 62,496 30,619 24,152 8,986 1,467 Common Share Distributions Paid... $ 76,804 $ 46,121 $29,162 $13,059 $ 4,179 PER SHARE DATA: Net Earnings Attributable to Common Shares.................... $ 0.93 $ 0.66 $ 0.66 $ 0.46 $ 0.21 Common Share Distributions Paid... 1.15 1.00 0.82 0.70 0.64 Series A Preferred Share Dividends Paid............................. 1.75 1.75 0.1458 -- -- Series B Preferred Share Dividends Paid............................. $ 1.363 $ -- $ -- $ -- $ -- Weighted Average Common Shares Outstanding...................... 67,052 46,734 36,549 19,435 7,123
DECEMBER 31, ------------------------------------------------------ 1995 1994 1993 1992 1991 ---------- ---------- --------- --------- -------- FINANCIAL POSITION: Real Estate Owned, at cost.................. $1,855,866 $1,296,288 $ 872,610 $ 337,274 $117,572 Total Assets........... 1,840,999 1,295,778 890,301 342,235 141,020 Line of Credit......... 129,000 102,000 51,500 54,802 101 Long-Term Debt......... 200,000 200,000 -- -- -- Mortgages Payable...... 158,054 93,624 48,872 30,824 35,772 Total Liabilities...... 565,331 455,136 135,284 94,186 38,707 Shareholders' Equity... $1,275,668 $ 840,642 $ 755,017 $ 248,049 $102,313 Number of Common Shares Outstanding........... 72,211 50,456 44,645 27,034 13,161 YEAR ENDED DECEMBER 31, ------------------------------------------------------ 1995 1994 1993 1992 1991 ---------- ---------- --------- --------- -------- OTHER DATA: Net earnings attribut- able to Common Shares. $ 62,496 $ 30,619 $ 24,152 $ 8,986 $ 1,467 Add (Deduct): Depreciation.......... 36,685 24,614 10,513 5,311 2,886 Provision for possible loss on investments.. 420 1,600 2,270 400 400 Gain or loss on sale of investments....... (2,623) -- (2,302) 51 611 Other (primarily pro- vision for loss on receivables)......... -- -- 83 74 40 ---------- ---------- --------- --------- -------- Funds from Operations Attributable to Common Shares(2)............. $ 96,978 $ 56,833 $ 34,716 $ 14,922 $ 5,404 ========== ========== ========= ========= ======== Net Cash Provided by Operating Activities.. 121,795 94,625 49,247 20,252 6,092 Net Cash Used by In- vesting Activities.... (294,488) (368,515) (529,065) (229,489) (33,553) Net Cash Provided by Financing Activities.. $ 191,520 $ 276,457 $ 478,345 $ 185,130 $ 57,259
- -------- (1) Earnings from operations for the year ended December 31, 1995, 1994 and 1993 reflect a $420,000, $1.6 million and a $2.3 million provision, respectively, for possible losses relating to investments in non- multifamily properties. (2) Funds from operations attributable to Common Shares ("funds from operations") means net earnings computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or 3 losses) from debt restructuring and sales of property, plus certain non-cash items, principally property depreciation, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that funds from operations is helpful in understanding a property portfolio's ability to support interest payments and general operating expenses. Funds from operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity and may not be comparable to other similarly titled measures of other companies. In July 1994, PTR changed to a more conservative policy of expensing the amortization of loan costs in determining funds from operations. For comparability, funds from operations has been restated to give effect to this policy as if it had been in effect since January 1, 1991. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW PTR's operating results depend primarily upon income from multifamily properties, which is substantially influenced by (i) the demand for and supply of multifamily units in PTR's target market and submarkets, (ii) operating expense levels, (iii) the effectiveness of property level operations and (iv) the pace and price at which PTR can develop and acquire additional multifamily properties. Capital and credit market conditions which affect PTR's cost of capital also influence operating results. PTR's target market and submarkets have benefitted substantially in recent periods from demographic trends (including job and population growth) that increase the demand for multifamily units. Consequently, rental rates for multifamily units have increased more than the inflation rate for the last three years and are expected to continue experiencing such increases for 1996. Expense levels also influence operating results. Operating expenses (other than real estate taxes) as a percentage of revenues for multifamily properties have decreased slightly during 1995 and are expected to increase at approximately the rate of inflation for 1996. MERGER AND CONCURRENT SUBSCRIPTION OFFERING On March 23, 1995, PTR completed the Merger. In the Merger, each outstanding share of PACIFIC common stock was converted into the right to receive 0.611 of a Common Share. As a result, 8,468,460 Common Shares were issued in the Merger in exchange for all of the outstanding shares of PACIFIC common stock. Additionally, PTR changed its name from Property Trust of America to Security Capital Pacific Trust to more accurately reflect its newly expanded target market. The Merger expanded PTR's target market to include a six-state region of the western United States that the REIT Manager believes is expected to provide some of the most attractive multifamily growth opportunities. Concurrently with the consummation of the Merger, PTR completed a subscription offering pursuant to which PTR received net proceeds of $216.3 million (13.2 million Common Shares). The subscription offering was designed to allow shareholders of PTR to purchase Common Shares at the same price PACIFIC shareholders were acquiring Common Shares in the Merger ($16.375 per Common Share). SCG purchased $50 million (3.1 million Common Shares) in the subscription offering pursuant to the oversubscription privilege. RESULTS OF OPERATIONS 1995 COMPARED TO 1994 During 1995, PTR acquired 24 multifamily properties aggregating 7,633 units for a total purchase price, including planned renovations, of approximately $361.0 million. In addition, PTR completed development of 15 multifamily properties aggregating 2,405 units in 1995 with a completion cost of $92.6 million. At December 31, 1995, PTR had 27 multifamily properties under construction with a budgeted completion cost of $341.6 million and had in planning (see "Item 1. Business--Strategy for Cash Flow and Distribution 4 Growth") an estimated 6,150 multifamily units with an aggregate estimated investment cost of $341.0 million. During 1994, PTR acquired 20 multifamily properties aggregating 6,626 units for a total purchase price, including planned renovations, of approximately $266.0 million. In addition, PTR completed development of 15 multifamily properties aggregating 3,061 units in 1994 with a completion cost of $127.9 million. The percentage of PTR's total rental income generated by multifamily properties was 98.6% and 98.3% for the years ended December 31, 1995 and 1994, respectively. This percentage will continue to increase throughout 1996 due to past and ongoing multifamily property developments and acquisitions and the periodic sale of non-multifamily properties. Property Operations Including the newly developed and acquired assets, net earnings increased $37.6 million (80.5%) for 1995 over 1994. The increased net earnings related primarily to property revenue increases of $79.0 million (43.1%), partially offset by higher rental expenses, property management fees and real estate taxes which increased $25.0 million (31.7%) for the period. Depreciation expense increased $12.1 million (49.0%) for 1995 over 1994. These increases are due to multifamily acquisitions and multifamily developments placed in service and to rental rate increases. For operating multifamily properties, which comprise 98.1% of PTR's total operating properties based on undepreciated cost at December 31, 1995, rental expenses, property management fees and real estate taxes were 40.0% and 43.6% of rental income during the years ended December 31, 1995 and 1994, respectively. During the period prior to a property being stabilized (see "Item 1. Business--Multifamily Properties"), the REIT Manager and the property managers begin implementing expense controls, reconfigure the resident mix, supervise renovations and implement a strategy to increase rental income. The full benefits of these changes are not reflected until after the properties are stabilized. At December 31, 1995, 86.4% of PTR's operating multifamily properties, based on expected cost, were classified as stabilized as compared to 82.4% at December 31, 1994. Interest Income Interest income for 1995 decreased 8.9% primarily resulting from the payoff of a $4.6 million mortgage note receivable during the first quarter of 1995 and the sale during the fourth quarter of 1995 of PTR's investment in a $3.2 million purchase money note received from a prior year sale of a non- multifamily property. Interest Expense Interest expense increased $142,000 (0.73%) for 1995 as compared to 1994. The increase is primarily attributable to an increase of $1.5 million (11.9%) resulting from the issuance of $200 million of long-term unsecured notes in February 1994, as more fully discussed under "--Liquidity and Capital Resourses" and an increase in mortgage interest expense of $4.7 million (72.5%) for 1995 compared to 1994 offset by an increase in capitalized interest of $5.7 million (94.7%) for 1995 compared to 1994. The increase in mortgage expense is attributable to the addition of eight mortgage payable notes aggregating $66.5 million acquired upon purchase of multifamily properties or assumed in connection with the Merger. The increase in capitalized interest is attributable to increased levels of multifamily development activity and higher interest rates. Line of credit interest expense for 1995 was $348,000 (5.7%) lower than 1994, principally because of lower average outstanding balances offset by higher interest rates. Average borrowings were approximately $51.9 million (with an average interest rate of 8.0%) during 1995, as compared to average borrowings of $59.9 million (with an average interest rate of 7.0%) during 1994. 5 REIT Management Fee The REIT Management fee paid by PTR fluctuates with the level of PTR's pre- REIT Management fee cash flow and therefore increased by $7.2 million (54.4%) in 1995 as compared to 1994 because cash flow increased substantially (see "-- REIT Management Agreement" below). As PTR arranges amortizing long-term debt and nonconvertible preferred share financing as more fully described in "-- Liquidity and Capital Resources" below, the REIT Management fee will effectively decline in proportion to PTR's earnings from operations because actual or assumed regularly scheduled principal payments, as defined in such agreement, associated with the long-term debt and distributions actually paid with respect to any nonconvertible preferred shares will be deducted from the cash flow amount on which the REIT Management fee is based. Gains and Provision for Loss on Real Estate and Investments PTR develops and acquires properties with a view to effective long-term operation and ownership. Based upon PTR's market research and in an effort to optimize its portfolio composition, PTR may from time to time seek to dispose of assets that in management's view do not meet PTR's long-term investment criteria and redeploy the proceeds therefrom, preferably through like-kind exchanges, into assets that are more consistent with PTR's investment objectives. During the fourth quarter of 1995, PTR sold one multifamily property consisting of 166 units under an exchange agreement. Under the terms of the sale, cash proceeds representing the value of the property sold was placed into a trust. At the direction of PTR, a 290 unit multifamily property was acquired utilizing the cash held in trust. For federal income tax purposes, the transaction was structured as a non-taxable like-kind exchange. For financial reporting purposes, the sale qualified for profit recognition and a gain of $3.2 million was recognized in 1995. PTR also sold its investment in a mortgage note received upon sale of one of its non-multifamily properties. PTR recorded a loss of $600,000 on such sale for the year ended December 31, 1995. PTR owns a 40% interest in a partnership that in October 1995 sold its only real estate asset, an office building located in the Dallas, Texas metropolitan area. During the first quarter of 1994, the partnership adopted a strategy of disposing of the property rather than continuing to hold the property as a long-term investment. As a result, the managing partner evaluated the building for net realizable value, which resulted in a provision for possible loss of $4 million. PTR's share of the loss provision is $1.6 million as reflected in the December 31, 1994 statement of earnings. During the third quarter of 1995, the partnership approved the sale of the property and as a result, PTR recorded an additional provision of $220,000 as reflected in the December 31, 1995 statement of earnings. This provision has no impact on cash flow from operating activities nor does PTR have any financial obligation to the partnership. During 1993, PTR entered into a master lease agreement containing a purchase option for the future sale of a non-multifamily property. Under the terms of the agreement, PTR is responsible for certain maintenance items, if required, during the five year period. During 1995, it was determined that PTR could potentially be liable for expenditures estimated to aggregate $250,000, of which $50,000 had previously been recorded. Accordingly, the 1995 financial statements included a provision for such additional costs. This provision has no impact on cash flow from operating activities. PTR's strategy is to focus on the ownership of multifamily properties. Periodic sales of multifamily and non-multifamily assets may occur as opportunities arise or investment objectives change. Properties are periodically evaluated for impairment and provisions for possible losses are made if required. Statement of Financial Accounting Standard No. 121 entitled "Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of" will be adopted by PTR, as required by the Statement, effective January 1, 1996. In the opinion of management, the adoption of the Statement is not expected to have a material impact on the financial statements at the date of adoption. 6 Preferred Share Dividend In November 1993, PTR issued $230 million of Series A Preferred Shares that are entitled to receive an annual dividend of $1.75 per share (7.0% annual dividend rate), which amounted to $16.1 million for both 1995 and 1994. In May 1995, PTR issued $105 million of Series B Preferred Shares that are entitled to receive an annual dividend of $2.25 per share (9.0% annual dividend rate), which amounted to $5.7 million for 1995. The Preferred Share dividends do not reduce the amount PTR has budgeted for Common Share distributions but do increase the percentage of the Common Share distribution that constitutes a non-taxable return of capital. 1994 COMPARED TO 1993 During 1994, PTR acquired 20 multifamily properties aggregating 6,626 units for a total purchase price, including planned renovations, of approximately $266.0 million. In addition, PTR completed development of 15 multifamily properties aggregating 3,061 units in 1994 with a completion cost of $127.9 million. At December 31, 1994, PTR had 21 multifamily properties under construction with a budgeted completion cost of $205.4 million and had in planning an estimated 8,492 multifamily units with an aggregate estimated investment cost of $403.0 million. During 1993, PTR acquired 53 multifamily properties aggregating 13,772 units for a total purchase price, including planned renovations, of approximately $453.7 million, most of which was invested in the fourth quarter of 1993. In addition, PTR completed development of three multifamily properties aggregating 732 units in 1993. The percentage of PTR's total rental income generated by multifamily properties was 98.3% and 93.2% for the years ended December 31, 1994 and 1993, respectively. At December 31, 1994, 82.4% of PTR's operating multifamily properties based on expected cost were classified as stabilized as compared to 47% at December 31, 1993. Property Operations Including the newly developed and acquired assets, net earnings increased $21.2 million (83.3%) for 1994 over 1993. The increased net earnings related primarily to property revenue increases of $107.3 million (141.0%), partially offset by higher rental expenses, property management fees and real estate taxes, which increased by $48.5 million (159.2%) for the period. Depreciation expense increased $14.1 million (134.2%) for 1994 over 1993. These increases are due to multifamily acquisitions and multifamily developments placed in service and to rental rate increases. For operating multifamily properties, which comprised 97.1% of PTR's total operating properties based on cost at December 31, 1994, rental expenses, property management fees and real estate taxes were 43.6% and 42.2% of rental income during the years ended December 31, 1994 and 1993, respectively. Interest Income Interest income for 1994 increased 15.0%, primarily resulting from the addition of 4 purchase money notes aggregating $12.4 million received in 1993 in conjunction with property sales. Interest Expense Interest expense increased $15.5 million (395.6%) for 1994 as compared to 1993. The increase is primarily attributable to interest expense of $12.9 million resulting from the issuance of $200 million of long-term notes in February 1994, as more fully discussed under "--Liquidity and Capital Resources--Financing Activities." Mortgage interest expense decreased $288,000 (41.6%) for 1994, compared to 1993. The decrease is attributable to interest savings resulting from prepayments and payoffs aggregating $10.5 million on mortgages during 1994 and an increase of $3.2 million (114.0%) in capitalized interest during 1994 over 1993 due to increased levels of multifamily development activity. 7 Line of credit interest expense for 1994 was $2.9 million higher than for 1993, principally because of higher average outstanding balances, higher interest rates and amortization of additional loan costs (commitment fees, title policies and legal expenses) relating to PTR's revolving credit facility which was increased from $200 million to $275 million during 1994. Average borrowings were approximately $59.9 million (with an average interest rate of 7.0%) during 1994, as compared to average borrowings of $40.6 million (with an average interest rate of 6.3%) during 1993. REIT Management Fee The REIT Management fee paid by PTR fluctuates with the level of PTR's pre- REIT Management fee cash flow and therefore increased by $6.1 million (86.4%) in 1994 as compared to 1993 because cash flow increased substantially (see "-- REIT Management Agreement" below). As PTR arranges amortizing long-term debt and nonconvertible preferred share financing as more fully described in "-- Liquidity and Capital Resources" below, the REIT Management fee will effectively decline in proportion to PTR's earnings from operations because actual or assumed regularly scheduled principal payments, as defined in such agreement, associated with the long-term debt and distributions actually paid with respect to any nonconvertible preferred shares will be deducted from the cash flow amount on which the REIT Management fee is based. Provision for Possible Loss PTR develops and acquires properties with a view to effective long-term operation and ownership. Based upon PTR's market research and in an effort to optimize its portfolio composition, PTR may from time to time seek to dispose of assets that in management's view do not meet PTR's long-term investment criteria and redeploy the proceeds therefrom, preferably through like-kind exchanges, into assets that are more consistent with PTR's investment objectives. PTR owns a 40% interest in a partnership that in October 1995 sold its only real estate asset, an office building located in the Dallas, Texas metropolitan area. See "--1995 Compared to 1994--Gains and Provision for Loss on Real Estate and Investments" above. PTR focuses its investment and development activities on multifamily properties. PTR will continue to aggressively manage its non-multifamily properties in order to maximize cash flow, and dispositions of such non- multifamily properties may occur as opportunities arise. Properties are periodically evaluated for net realizable value and provisions for possible losses are made if required. Preferred Share Dividend In November 1993, PTR issued $230 million of Series A Preferred Shares that are entitled to receive an annual dividend of $1.75 per share (7.0% annual dividend rate), which amounted to $16.1 million for 1994 compared to $1.3 million for 1993. The preferred share dividends do not reduce the amount PTR has budgeted for Common Share distributions but do increase the percentage of the Common Share distribution that constitutes a non-taxable return of capital. ENVIRONMENTAL MATTERS PTR does not expect any environmental condition on its properties to have a material adverse affect upon its results of operations or financial position. LIQUIDITY AND CAPITAL RESOURCES The REIT Manager considers PTR's liquidity and ability to generate cash from operations and financings to be adequate and expects it to continue to be adequate to meet PTR's development, acquisition, operating, debt service and shareholder distribution requirements. 8 Operating Activities Net cash flow provided by operating activities increased by $27.2 million (28.7%) for the year ended December 31, 1995 as compared to 1994. Net cash flow provided by operating activities increased by $45.4 million (92.1%) for 1994 as compared to 1993. These increases are due primarily to multifamily property acquisitions and developments as described under "--Results of Operations" above offset partially by changes in the timing of the payment of accounts payable and accrued expenses and other liabilities in 1995 as compared to 1994 and 1994 as compared to 1993. Investing Activities During the year ended December 31, 1995, PTR invested $501.7 million for the development, acquisition (including properties acquired in the Merger) and renovation of multifamily properties and land, net of $66.5 million in mortgages assumed. During the year ended December 31, 1994, PTR invested $381.2 million for the acquisition, development and renovation of multifamily properties and land, net of $56.6 million in mortgages assumed. Except for the properties acquired in the Merger, which were financed with the issuance of Common Shares, these developments, acquisitions and renovations were financed with cash on hand and borrowings under PTR's revolving line of credit, which were repaid with the proceeds from PTR's equity and debt offerings. PTR's investing activities used $74.0 million (20.1%) less cash in 1995 as compared to 1994 as a result of lower levels of multifamily property acquisitions acquired for cash, and $160.6 million (30.3%) less cash in 1994 as compared to 1993 as a result of lower levels of multifamily investments. At January 31, 1996, PTR had unfunded development commitments for developments under construction of $152.1 million. In addition, PTR had $391.8 million of developments in planning at such date. The foregoing developments are subject to a number of conditions, and PTR cannot predict with certainty that any of them will be consummated. Financing Activities PTR's net financing activities for the year ended December 31, 1995 provided $191.5 million as compared to $276.5 million in 1994. In addition, PTR issued 8,468,460 Common Shares in March 1995 valued at $138.7 million in exchange for all of PACIFIC's common stock. The decrease in cash flow provided by financing activities is primarily due to the repayment of revolving credit balances ($302.9 million during 1995 as compared to $215.7 million in 1994) and an increase in distributions to shareholders ($98.6 million for 1995 compared to $62.2 million for 1994) offset slightly by more offering proceeds received during 1995 as compared to 1994 ($317.6 million during 1995 as compared to $301.1 million during 1994). Proceeds from the offerings were used for acquisition, development and renovation of multifamily properties, to repay revolving credit balances incurred for such purposes, and for working capital purposes. Pending additional investment in multifamily properties, PTR has invested the remaining net proceeds in short-term money market instruments. On February 23, 1996, PTR issued $50 million of 7.15% Notes due 2010 (the "2010 Notes") and $100 million of 7.90% Notes due 2016 (the "2016 Notes") which funds were used to reduce the outstanding revolving credit balance. The 2010 Notes bear interest at 7.15% per annum and require annual principal payments of $6.25 million, commencing February 15, 2003. The 2016 Notes bear interest at 7.90% per annum and require aggregate annual principal payments of $10 million in 2011, $12.5 million in 2012, $15 million in 2013, $17.5 million in 2014, $20 million in 2015 and $25 million in 2016. Collectively, the 2010 Notes and 2016 Notes are unsecured and have an average life to maturity of 15.5 years and an average effective interest cost, including offering discounts and issuance costs, of 7.84% per annum. The 2010 Notes and 2016 Notes are redeemable any time at the option of PTR, in whole or in part, at a redemption price equal to the sum of the principal amount of the Notes being redeemed plus accrued interest thereon to the redemption date plus 9 an adjustment, if any, based on the yield to maturity relative to market yields available at redemption. The 2010 Notes and 2016 Notes are governed by the terms and provisions of an indenture agreement dated February 1, 1994, as supplemented (the "Indenture"), between PTR and State Street Bank and Trust Company, as trustee. Under the terms of the Indenture, PTR can incur additional debt only if, after giving effect to the debt being incurred and application of the proceeds therefrom, (i) the ratio of debt to total assets, as defined in the Indenture, does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined in the Indenture, does not exceed 40%, and (iii) PTR's pro forma interest coverage ratio, as defined in the Indenture, for the four preceding fiscal quarters is not less than 1.5:1. PTR is in compliance with all debt covenants. On March 23, 1995, PTR increased its unsecured revolving line of credit facility to $350 million. The line of credit expires August 1997 and may annually be extended for an additional year with the approval of TCB and the other participating lenders. Borrowings bear interest at the greater of prime (8.5% at December 31, 1995) or the federal funds rate plus 0.5% or, at PTR's option, LIBOR (5.719% at December 31, 1995) plus 1.375% (7.094% at December 31, 1995) which can vary from LIBOR plus 1.0% to LIBOR plus 1.75% based upon the rating of PTR's senior unsecured debt. Additionally, there is a commitment fee on the average unfunded line of credit balance. Covenants require that PTR maintain (i) an interest coverage ratio of not less than 2:1, (ii) a debt to tangible net worth ratio no greater than 1:1, (iii) a fixed charge ratio of no less than 1.4:1, (iv) an unencumbered pool of real estate properties of which certain properties must meet certain occupancy requirements and which have an aggregate historical cost of at least 175% of unsecured indebtedness and (v) a tangible net worth of at least $1 billion at all times. PTR is in compliance with all debt covenants. PTR expects to finance developments, acquisitions and renovations with cash on hand and borrowings under its line of credit prior to arranging long-term capital in order to efficiently respond to market opportunities while minimizing the amount of cash invested in short-term investments at lower yields. PTR believes that its current conservative ratio of long-term debt to total long-term undepreciated book capitalization, the sum of long-term debt and shareholders' equity after adding back accumulated depreciation (21% at December 31, 1995 on an historical basis, and 27% at January 31, 1996, on a pro forma basis giving effect to the sale of the 2010 Notes and 2016 Notes and the application of the net proceeds therefrom), provides considerable flexibility to prudently increase its capital base by utilizing long-term debt as a financing tool in the future. PTR expects to fund additional growth for the foreseeable future primarily through the issuance of unsecured long-term, fixed rate amortizing debt securities similar to the 2010 Notes and 2016 Notes and through its asset optimization strategy. To a lesser extent, under certain circumstances, PTR may arrange for debt with different maturities in order to optimize its overall debt maturity schedule. PTR has the ability to finance a significant level of investment activity with its debt issuance capacity, asset optimization strategy and internally generated funds made available as the dividend payout ratio is reduced. Hence, PTR has no current plans to raise additional capital through the common equity markets. No assurance can be given that changes in market conditions or other factors will not affect these plans. On May 17, 1995, PTR raised net proceeds of $101.4 million from the sale of the Series B Preferred Shares. The net proceeds were used for the development and acquisition of additional multifamily properties, for the repayment of indebtedness under PTR's revolving line of credit and for working capital purposes. On March 23, 1995, PTR raised $216.3 million of net proceeds from a subscription offering of 13.2 million Common Shares at a price of $16.375 per Common Share, which was the same price per Common Shares on which the exchange ratio for the Merger was based. The subscription offering closed concurrently with the consummation of the Merger. The subscription offering was designed to allow shareholders the opportunity to purchase Common Shares at the same price at which PACIFIC shareholders acquired Common Shares in the Merger and to maintain PTR's balance sheet ratios. SCG acquired $50 million (3.1 million Common Shares) of the subscription offering pursuant to the oversubscription privilege. 10 On August 16, 1994, PTR raised $101.8 million of net proceeds from a rights offering of 5,593,718 Common Shares at a price of $18.25 per Common Share. SCG exercised in full its rights to acquire Common Shares in the offering at the same price paid by the public ($18.25 per Common Share) and acquired additional rights in the open market. Proceeds from the offering were used to fund developments and to invest in additional multifamily properties in PTR's target market and to repay borrowings under PTR's line of credit. On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008 (the "2008 Notes") and $100 million of 7.5% Senior Notes due 2014 (the "2014 Notes") which funds were used for acquisition, development and renovation of multifamily properties and to repay revolving credit balances incurred for such purposes. The 2008 Notes bear interest at 6.875% per annum and require annual principal payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear interest at 7.5% per annum and require aggregate annual principal payments of $10 million in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012, $20 million in 2013, and $25 million in 2014. Collectively, the 2008 Notes and 2014 Notes are unsecured and had an original average life to maturity of 14.25 years and an average effective interest cost, inclusive of offering discounts, issuance costs, and the interest rate protection agreement, of 7.37% per annum. The 2008 Notes and 2014 Notes are redeemable any time at the option of PTR, in whole or in part, at a redemption price equal to the sum of the principal amount of the 2008 Notes and 2014 Notes being redeemed plus accrued interest thereon to the redemption date plus an adjustment, if any, based on the yield to maturity relative to market yields available at redemption. The 2008 Notes and 2014 Notes are governed by the terms and provisions of the Indenture. Multifamily Properties Fully Operating Throughout Both Periods For the 79 multifamily properties that were fully operating throughout both 1995 and 1994, property level earnings before interest, income taxes, depreciation and amortization ("EBITDA") as a percentage of PTR's aggregate investment in these properties increased to 10.88% in 1995 from 10.22% in 1994. EBITDA is not to be construed as a substitute for "net earnings" in evaluating operating results, nor as a substitute for "cash flow" in evaluating liquidity and may not be comparable to other similarly titled measures of other companies. This increase in return on investment, which is a function of rental rate growth, occupancy levels, expense rate growth and capital expenditure levels, is attributable primarily to growth in rental rates and the control of operating expense growth. This increase in return on investment was achieved at the same time that PTR increased its investment in these properties by $8.1 million (1.1% of total investment in these properties) as a result of renovation and other capital expenditures. The 7.8% increase in net operating income resulted from a 3.7% rental revenue increase and a 1.5% decrease in operating expenses for such properties for 1995 as compared to 1994. For the 29 multifamily properties that were fully operating throughout both 1994 and 1993, property level EBITDA as a percentage of PTR's aggregate investment in these properties increased to 11.14% in 1994 from 10.68% in 1993. This increase in return on investment, was achieved at the same time that PTR increased its investment in these properties by $2.8 million (1.1% of total investment in these properties) as a result of renovation and other capital expenditures. The 6.8% increase in rental income (the majority resulting from a 6.42% rental rate increase) for such properties for 1994 as compared to 1993 was offset by increases in operating expenses, primarily due to real estate taxes and turnover expenses. EBITDA may not be comparable to other similarly titled measures of other companies. Distributions PTR's current distribution policy is to pay quarterly distributions to holders of Common Shares based upon what it believes to be a prudent percentage of cash flow. Because depreciation is a non-cash expense, cash flow typically will be greater than net earnings attributable to Common Shares. Therefore, quarterly distributions paid will generally be higher than quarterly net earnings attributable to Common Shares. 11 Distributions paid on Common Shares exceeded net earnings attributable to Common Shares by $14.3 million, $15.5 million and $5.0 million for 1995, 1994 and 1993, respectively, resulting in corresponding decreases in shareholders' equity for each of the respective periods. PTR announces the following year's projected annual distribution level after the Board's annual budget review and approval in December of each year. At its December 12, 1995 board meeting, the Board announced a projected increase in the annual distribution level from $1.15 to $1.24 per Common Share. The payment of distributions is subject to the discretion of the Board and is dependent upon the financial condition and operating results of PTR. Pursuant to the terms of the preferred shares, PTR is restricted from declaring or paying any distributions with respect to its Common Shares unless all cumulative distributions with respect to the preferred shares have been paid and sufficient funds have been set aside for distributions that have been declared for the then current distribution period with respect to the preferred shares. Funds from operations represents PTR's net earnings computed in accordance with GAAP, excluding gains (or losses) plus depreciation and provision for possible loss on investments. PTR believes that funds from operations is helpful in understanding a property portfolio's ability to support interest payments and general operating expenses. In July 1994, PTR changed to a more conservative policy of expensing the amortization of loan costs in determining funds from operations. For comparability, funds from operations have been restated to give effect to this policy as if it had been in effect since January 1, 1991. Reflecting such restatement, funds from operations attributable to Common Shares increased $40.1 million (70.6%) to $96.9 million for 1995 from $56.8 million for 1994, and increased 63.7% from $34.7 million to $56.8 million from 1993 to 1994. The increases resulted primarily from increased properties in operation. Funds from operations should not be construed as a substitute for "net earnings" in evaluating operating results nor as a substitute for "cash flow" in evaluating liquidity and may not be comparable to other similarly titled measures of other companies. See Item 6. Selected Financial Data for a reconciliation. REIT MANAGEMENT AGREEMENT Effective March 1, 1991, PTR entered into a REIT management agreement (as amended and restated, the "REIT Management Agreement") with the REIT Manager to provide management services to PTR. All officers of PTR are employees of the REIT Manager and PTR has no employees. See "Item 1. Business--The REIT Manager" for a description of the services included in the REIT Management fee. The REIT Management Agreement requires PTR to pay a base annual fee of $855,000 plus 16% of cash flow as defined in the REIT Management Agreement ("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash Flow is calculated by reference to PTR's cash flow from operations before deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the request of the independent Trustees of PTR, and (iii) 33% of any interest paid by PTR on convertible subordinated debentures (of which there have been none since inception of the REIT Management Agreement); and, after deducting (iv) actual or assumed regularly scheduled principal and interest payments for long-term debt and (v) distributions actually paid with respect to any nonconvertible preferred shares of beneficial interest of PTR. The REIT Management Agreement provides that the long-term debt described above under "-- Liquidity and Capital Resources" will be treated as having regularly scheduled principal and interest payments similar to 20-year, level monthly payment, fully amortizing mortgage, and the assumed principal and interest payments will be deducted from cash flow in determining the fee for future periods. Cash Flow does not include interest and dividend income from PTR Development Services Incorporated, realized gains from dispositions of investments or income from cash equivalent investments. The REIT Manager also receives a fee of .25% per year on the average daily balance of cash equivalent investments. REIT management fees aggregated $20,354,000, $13,182,000 and $7,073,000 for the years ended December 31, 1995, 1994 and 1993, respectively. 12 PTR is obligated to reimburse the REIT Manager for certain expenses incurred by the REIT Manager on behalf of PTR relating to PTR's operations, primarily including third party legal, accounting and similar fees paid on behalf of PTR, and travel expenses incurred in seeking financing, property acquisitions, property sales, property development, attending Board and shareholder meetings and similar activities on behalf of PTR. The REIT Management Agreement is renewable by PTR annually, subject to a determination by the independent Trustees that the REIT Manager's performance has been satisfactory and that the compensation payable to the REIT Manager is fair. PTR may terminate the REIT Management Agreement on 60 days' notice. Because of the year-to-year nature of the agreement, its maximum effect on PTR's results of operations cannot be predicted, other than that REIT Management fees will generally increase or decrease in proportion to cash flow increases or decreases. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are filed as a part of this report: (a) Financial Statements and Schedules: 1. Financial Statements: See Index to Financial Statements on page 14 of this report. 2. Financial Statement Schedules: Schedule III. (b) Exhibits: 23.1 Consent of KPMG Peat Marwick LLP All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable. 13 INDEX TO FINANCIAL STATEMENTS AND SCHEDULE SECURITY CAPITAL PACIFIC TRUST: Independent Auditors' Report............................................. 15 Balance Sheets as of December 31, 1995 and 1994.......................... 16 Statements of Earnings for the years ended December 31, 1995, 1994 and 1993.................................................................... 17 Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993........................................................... 18 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993.................................................................... 19 Notes to Financial Statements............................................ 20 Schedule III--Real Estate and Accumulated Depreciation as of December 31, 1995.................................................................... 35
14 INDEPENDENT AUDITORS' REPORT The Board of Trustees and Shareholders SECURITY CAPITAL PACIFIC TRUST: We have audited the financial statements of SECURITY CAPITAL PACIFIC TRUST as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SECURITY CAPITAL PACIFIC TRUST as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Chicago, Illinois January 31, 1996, except as to Note 12 which is as of February 23, 1996 15 SECURITY CAPITAL PACIFIC TRUST BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS DECEMBER 31, ------ ---------------------- 1995 1994 ---------- ---------- Real estate............................................ $1,855,866 $1,296,288 Less accumulated depreciation.......................... 81,979 46,199 ---------- ---------- 1,773,887 1,250,089 Mortgage notes receivable.............................. 15,844 22,597 ---------- ---------- Total investments.................................. 1,789,731 1,272,686 Cash and cash equivalents.............................. 26,919 8,092 Accounts receivable.................................... 3,318 1,657 Other assets........................................... 21,031 13,343 ---------- ---------- Total assets....................................... $1,840,999 $1,295,778 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Line of credit....................................... $ 129,000 $ 102,000 Long term debt....................................... 200,000 200,000 Mortgages payable.................................... 158,054 93,624 Distributions payable................................ 22,437 14,506 Accounts payable..................................... 21,040 17,230 Accrued expenses and other liabilities............... 34,800 27,776 ---------- ---------- Total liabilities.................................. 565,331 455,136 ---------- ---------- Shareholders' equity: Series A Preferred shares (9,200,000 convertible shares issued; stated liquidation preference of $25 per share).......................................... 230,000 230,000 Series B Preferred shares (4,200,000 shares issued; stated liquidation preference of $25 per share)..... 105,000 -- Common shares (shares issued--72,375,819 in 1995 and 50,620,516 in 1994)................................. 72,376 50,621 Additional paid-in capital........................... 952,679 622,161 Distributions in excess of net earnings.............. (82,450) (60,211) Treasury shares (164,901 in 1995 and 164,478 in 1994)............................................... (1,937) (1,929) ---------- ---------- Total shareholders' equity......................... 1,275,668 840,642 ---------- ---------- Total liabilities and shareholders' equity......... $1,840,999 $1,295,778 ========== ==========
The accompanying notes are an integral part of the financial statements. 16 SECURITY CAPITAL PACIFIC TRUST STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ------------------------- 1995 1994 1993 -------- -------- ------- Revenues: Rental income...................................... $262,473 $183,472 $76,129 Interest........................................... 2,400 2,633 2,289 -------- -------- ------- 264,873 186,105 78,418 -------- -------- ------- Expenses: Rental expenses.................................... 73,808 55,772 20,880 Real estate taxes.................................. 21,326 16,093 5,742 Property management fees paid to affiliates........ 8,912 7,148 3,862 Depreciation....................................... 36,685 24,614 10,509 Interest........................................... 19,584 19,442 3,923 REIT management fee paid to affiliate.............. 20,354 13,182 7,073 General and administrative......................... 952 784 660 Provision for possible loss on investments......... 420 1,600 2,270 Other.............................................. 1,136 751 308 -------- -------- ------- 183,177 139,386 55,227 -------- -------- ------- Earnings from operations............................. 81,696 46,719 23,191 Gain on sale of investments, net..................... 2,623 -- 2,302 -------- -------- ------- Net earnings......................................... 84,319 46,719 25,493 Less Preferred share dividends....................... 21,823 16,100 1,341 -------- -------- ------- Net earnings attributable to common shares......... $ 62,496 $ 30,619 $24,152 ======== ======== ======= Weighted average common shares outstanding........... 67,052 46,734 36,549 ======== ======== ======= Per share net earnings attributable to common shares. $ 0.93 $ 0.66 $ 0.66 ======== ======== =======
The accompanying notes are an integral part of the financial statements. 17 SECURITY CAPITAL PACIFIC TRUST STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 (IN THOUSANDS)
SHARES OF BENEFICIAL INTEREST $1 PAR VALUE ----------------------- SERIES A SERIES B PREFERRED PREFERRED SHARES AT SHARES AT COMMON AGGREGATE AGGREGATE SHARES ADDITIONAL DISTRIBUTIONS LIQUIDATION LIQUIDATION AT PAR PAID-IN IN EXCESS OF TREASURY PREFERENCE PREFERENCE VALUE CAPITAL NET EARNINGS SHARES TOTAL ----------- ----------- ------- ---------- ------------- -------- ---------- Balances at December 31, 1992................... $ -- $ -- $27,191 $247,418 $(24,745) $(1,815) $ 248,049 Net earnings........... -- -- -- -- 25,493 -- 25,493 Common share distribu- tions paid............ -- -- -- -- (29,162) -- (29,162) Net increase in Common share distributions accrued............... -- -- -- -- (11,161) -- (11,161) Preferred share divi- dends paid............ -- -- -- -- (1,341) -- (1,341) Sale of shares, net of expenses.............. 230,000 -- 17,072 267,122 -- -- 514,194 Dividend Reinvestment and Share Purchase Plan, net............. -- -- 449 7,522 -- -- 7,971 Exercise of stock op- tions, net............ -- -- 97 991 -- -- 1,088 Cost of treasury shares purchased............. -- -- -- -- -- (114) (114) -------- -------- ------- -------- -------- ------- ---------- Balances at December 31, 1993................... 230,000 -- 44,809 523,053 (40,916) (1,929) 755,017 Net earnings........... -- -- -- -- 46,719 -- 46,719 Common share distribu- tions paid............ -- -- -- -- (46,121) -- (46,121) Redemption of share- holder purchase rights................ -- -- -- -- (448) -- (448) Net increase in Common share distributions accrued............... -- -- -- (3,345) (3,345) Preferred share divi- dends paid............ -- -- -- -- (16,100) (16,100) Sale of shares, net of expenses.............. -- -- 5,594 95,482 -- -- 101,076 Dividend Reinvestment and Share Purchase Plan, net............. -- -- 216 3,607 -- -- 3,823 Exercise of stock op- tions, net............ -- -- 2 19 -- -- 21 -------- -------- ------- -------- -------- ------- ---------- Balances at December 31, 1994................... 230,000 -- 50,621 622,161 (60,211) (1,929) 840,642 Net earnings........... -- -- -- -- 84,319 -- 84,319 Common share distribu- tions paid............ -- -- -- -- (76,804) -- (76,804) Net increase in Common share distributions accrued............... -- -- -- -- (7,931) -- (7,931) Preferred share divi- dends paid............ -- -- -- -- (21,823) -- (21,823) Issuance of shares, net of expenses........... -- 105,000 21,694 329,591 -- -- 456,285 Dividend Reinvestment and Share Purchase Plan, net............. -- -- 61 927 -- -- 988 Cost of treasury shares purchased............. -- -- -- -- -- (8) (8) -------- -------- ------- -------- -------- ------- ---------- Balances at December 31, 1995................... $230,000 $105,000 $72,376 $952,679 $(82,450) $(1,937) $1,275,668 ======== ======== ======= ======== ======== ======= ==========
The accompanying notes are an integral part of the financial statements. 18 SECURITY CAPITAL PACIFIC TRUST STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- Operating activities: Net earnings................................... $ 84,319 $ 46,719 $ 25,493 Adjustments to reconcile net earnings to cash flows provided by operating activities Depreciation and amortization................ 38,228 26,517 12,219 Provision for possible loss on investments... 420 1,600 2,270 Gain on investment properties................ (2,623) -- (2,302) Other, net................................... -- -- 83 Increase in accounts payable................... 2,719 3,463 9,996 Increase in accrued real estate taxes.......... 2,167 7,874 2,156 Increase in accrued interest on long term debt.......................................... -- 5,391 -- Increase in accrued expenses and other liabil- ities......................................... 4,857 4,264 3,039 Net change in other operating assets........... (8,292) (1,203) (3,707) -------- -------- -------- Net cash flow provided by operating activi- ties........................................ 121,795 94,625 49,247 -------- -------- -------- Investing activities: Real estate investments........................ (311,619) (380,688) (536,622) Mortgage notes receivable...................... (1,538) (162) -- Proceeds from mortgage note receivable repay- ments......................................... 7,701 189 1,323 Proceeds from sale of investment properties.... 10,968 12,146 6,389 Other.......................................... -- -- (155) -------- -------- -------- Net cash flow used in investing activities... (294,488) (368,515) (529,065) -------- -------- -------- Financing activities: Proceeds from sale of shares, net of expenses.. 317,614 101,076 514,194 Proceeds from line of credit................... 278,000 266,250 282,500 Proceeds from dividend reinvestment and share purchase plan, net........................................... 988 3,823 7,971 Proceeds from long term debt................... -- 200,000 -- Proceeds from exercise of stock options, net... -- 21 1,088 Cash distributions paid on common shares....... (76,804) (46,121) (29,162) Redemption of shareholder purchase rights...... -- (448) -- Cash dividends paid on preferred shares........ (21,823) (16,100) (1,341) Debt issuance costs incurred................... (1,496) (4,422) (3,109) Principal payments on line of credit........... (251,000) (215,750) (285,802) Payoff of PACIFIC's line of credit............. (51,900) -- -- Regularly scheduled principal payments on mortgages payable............................. (1,748) (1,398) (682) Prepayment of mortgages payable................ (303) (10,474) (7,198) Other.......................................... (8) -- (114) -------- -------- -------- Net cash flow provided by financing activi- ties........................................ 191,520 276,457 478,345 -------- -------- -------- Net increase (decrease) in cash and cash equiva- lents.......................................... 18,827 2,567 (1,473) Cash and cash equivalents at beginning of year.. 8,092 5,525 6,998 -------- -------- -------- Cash and cash equivalents at end of year........ $ 26,919 $ 8,092 $ 5,525 ======== ======== ======== Non-cash investing and financing activities: Receipt of purchase money notes from sale of non-multifamily properties.................... $ -- $ -- $ 12,413 Assumption of mortgages payable upon purchase of multifamily properties..................... $ 12,078 $ 56,624 $ 26,952 Accrual of common share distributions.......... $ 22,437 $ 14,506 $ 11,161 Multifamily properties and other net assets ac- quired in connection with the Merger which were funded by: PTR common shares exchanged for all of the outstanding shares of PACIFIC's common stock (Note 2)............... $138,671 $ -- $ -- Mortgage notes assumed......................... 54,465 -- -- Repayment of the outstanding balance on PACIFIC's line of credit...................... 51,900 -- -- -------- -------- -------- Net increase in net assets related to Merger... $245,036 $ -- $ -- ======== ======== ========
The accompanying notes are an integral part of the financial statements. 19 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business SECURITY CAPITAL PACIFIC TRUST ("PTR"), formerly Property Trust of America, is an equity real estate investment trust, organized under the laws of the state of Maryland, which primarily owns, develops, acquires and operates income-producing multifamily properties in the western United States. Principles of Financial Presentation The accounts of PTR and its wholly owned subsidiaries are consolidated in the accompanying financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents PTR considers all cash on hand, demand deposits with financial institutions and short term, highly liquid investments with original maturities of three months or less to be cash equivalents. Real Estate and Depreciation Real estate is carried at cost, which is not in excess of net realizable value. Costs directly related to the acquisition (including certain renovation costs identified during PTR's pre-acquisition due diligence), development or improvement of real estate, are capitalized. Costs incurred in connection with the pursuit of unsuccessful acquisitions or developments are expensed at the time the pursuit is abandoned. Depreciation is computed over the expected useful lives of depreciable property on a straight-line basis. Properties are depreciated principally over the following useful lives: Buildings and improvements... 20-40 years Furnishings and other........ 2-10 years
Repairs and Maintenance Repairs and maintenance, other than acquisition related renovation expenditures, are expensed as incurred. PTR expenses carpet and appliance repairs and replacements after any acquisition related renovation expenditures for such items have been incurred. Interest During 1995, 1994 and 1993, the total interest paid in cash on all outstanding debt, net of interest capitalized, was $17,674,000, $11,949,000 and $2,231,000, respectively. PTR capitalizes interest as part of the cost of real estate properties in development. Interest capitalized during 1995, 1994 and 1993 aggregated $11,741,000, $6,029,000 and $2,818,000, respectively. 20 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Cost of Raising Capital Costs incurred in connection with the issuance of equity securities are deducted from shareholders' equity. Costs incurred in connection with the incurrence or renewal of debt are capitalized, included with other assets and amortized over the term of the related loan in the case of incurrence costs or twelve months in the case of renewal costs. Amortization of loan costs included in interest expense for the years ended December 31, 1995, 1994 and 1993 was $1,543,000, $1,903,000, and $1,845,000, respectively. Revenue and Gain Recognition Rental and interest income are recorded on the accrual method of accounting. A provision for possible loss is made when collection of receivables is considered doubtful. Gains on sales of real estate are recorded when the criteria set forth in Statement of Financial Accounting Standards No. 66 "Accounting for Sales of Real Estate" have been met. Rental Expenses Rental expenses include utilities, repairs and maintenance, make-ready, property insurance, marketing, landscaping, property management fees paid to unaffiliated companies, on-site personnel and other administrative costs. Federal Income Taxes PTR has made an election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended. PTR believes it qualifies as a real estate investment trust. Accordingly, no provisions have been made for federal income taxes in the accompanying financial statements. Per Share Data Per share data is computed based upon the weighted average number of Common Shares of Beneficial Interest, par value $1.00 per share ("Common Shares"), outstanding during the period. Exercise of the outstanding stock options would not have a material dilutive effect on earnings per share. The assumed conversion of Cumulative Convertible Series A Preferred Shares of Beneficial Interest, par value $1.00 per share ("Series A Preferred Shares"), is anti- dilutive in 1995, 1994 and 1993. Reclassifications Certain of the 1994 and 1993 financial statements and notes to financial statements amounts have been reclassified to conform to the 1995 presentation. (2) MERGER OF SECURITY CAPITAL PACIFIC INCORPORATED AND CONCURRENT SUBSCRIPTION OFFERING On March 23, 1995, PTR consummated a merger (the "Merger") of Security Capital Pacific Incorporated ("PACIFIC"), a Maryland corporation, with and into PTR. PACIFIC was a private multifamily REIT controlled by Security Capital Group Incorporated ("SCG"), PTR's principal shareholder. In the Merger, each outstanding share of PACIFIC common stock was converted into 0.611 of a Common Share. As a result, 8,468,460 Common Shares were issued in the Merger in exchange for all of the outstanding shares of PACIFIC common stock. The purchase price of the acquisition was $245,036,000. The Merger has been accounted for as a purchase transaction. The acquired assets and liabilities were recorded at estimated fair market value which approximated PACIFIC's net book value at the time of the acquisition. The results of operations of PACIFIC have been included in PTR's financial statements from March 23, 1995. In connection with the Merger, PTR paid off the balance outstanding ($51.9 million) on PACIFIC's line of credit and assumed $54.4 million in mortgages. The following summarized pro forma (unaudited) information assumes the Merger occurred on January 1, 1995 and January 1, 1994, respectively, and represent the combined historical operating results of PTR 21 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) and PACIFIC for the respective pro forma periods. No material pro forma adjustments to revenue and expenses were required. The weighted average Common Shares outstanding have been adjusted to reflect the Merger conversion rate (.611 of a Common Share for each PACIFIC common share). The pro forma financial information does not necessarily reflect the results of operations that would have occurred had PACIFIC and PTR constituted a single entity during such period (in thousands, except per share amounts).
DECEMBER 31, ----------------- 1995 1994 -------- -------- Rental Income.......................................... $271,091 $204,337 ======== ======== Net earnings attributable to Common Shares............. $ 64,152 $ 36,512 ======== ======== Weighted average Common Shares outstanding............. 68,955 52,846 ======== ======== Per Common Share amounts: Net earnings attributable to Common Shares........... $ 0.93 $ 0.69 ======== ========
Concurrently with the consummation of the Merger, PTR completed a subscription offering pursuant to which PTR received net proceeds of $216.3 million (13.2 million Common Shares issued). The subscription offering was designed to allow shareholders of PTR to purchase Common Shares at the same price at which PACIFIC shareholders acquired Common Shares in the Merger ($16.375 per Common Share). SCG purchased $50 million (3.1 million Common Shares issued) in the subscription offering at $16.375 per Common Share pursuant to the oversubscription privilege. (3) REAL ESTATE Investments Investments in real estate, at cost, were as follows (dollar amounts in thousands):
DECEMBER 31, -------------------------------------- 1995 1994 ----------------- ----------------- INVESTMENT UNITS INVESTMENT UNITS ---------- ------ ---------- ------ Multifamily: Operating properties......... $1,584,994 41,503 $1,121,301 31,640 Developments under construc- tion........................ 187,507 6,676(1) 100,401 4,526(1) Developments in planning: Developments owned.......... 22,933 2,328(1) 33,194 4,306(1) Developments under con- trol(2).................... -- 3,822(1) -- 4,186(1) ---------- ------ ---------- ------ Total developments in planning.................. 22,933 6,150 33,194 8,492 ---------- ------ ---------- ------ Land held for future develop- ment........................ 29,688 -- 7,977 -- ---------- ------ ---------- ------ Total multifamily.......... 1,825,122 54,329 1,262,873 44,658 ====== ====== Non-multifamily................ 30,744 33,415 ---------- ---------- Total real estate.......... $1,855,866 $1,296,288 ========== ==========
- -------- (1) Unit information is based on management's estimates and is unaudited. (2) PTR's investment as of December 31, 1995 and 1994 for developments in planning and under control was $2.2 million and $1.3 million, respectively, and is reflected in the "other asset" caption of PTR's balance sheets. 22 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) The change in investments in real estate, at cost, consisted of the following (in thousands):
1995 1994 1993 ---------- ---------- -------- Balance at January 1................... $1,296,288 $ 872,610 $337,274 Acquisitions and renovation expendi- tures................................. 370,543 270,024 449,500 Development expenditures, including land acquisitions.......................... 192,067 163,826 112,264 Capital improvements................... 5,493 3,912 1,639 Real estate sold....................... (8,402) (12,287) (24,953) Provisions for possible losses......... (220) (1,600) (2,270) Other.................................. 97 (197) (844) ---------- ---------- -------- Balance at December 31................. $1,855,866 $1,296,288 $872,610 ========== ========== ========
At January 31, 1996, PTR had contingent contracts or letters of intent, subject to PTR's final due diligence, to acquire land for the near term development of an estimated 3,995 multifamily units with an aggregate estimated development cost of $202.9 million. At the same date, PTR also had contingent contracts or letters of intent, subject to final due diligence, for the acquisition of 515 additional multifamily units with an aggregate investment cost of $14.3 million, including planned renovations. At January 31, 1996, PTR had unfunded development commitments for developments under construction of $152.1 million. Third Party Owner-Developers To enhance its flexibility in developing and acquiring multifamily properties, PTR has and will enter into presale agreements with third party owner- developers to acquire properties developed by such owner-developers where the developments meet PTR's investment criteria. PTR has and will fund such developments through development loans to such owner-developers. In addition, to provide greater flexibility for the use of land acquired for development and to dispose of excess parcels, PTR will make mortgage loans to PTR Development Services Incorporated ("PTR Development Services") to purchase land for development. PTR owns all of the preferred stock of PTR Development Services, which entitles PTR to substantially all of the net operating cash flow (95%) of PTR Development Services. SCG owned all of the common stock of PTR Development Services during 1995. Effective as of January 1, 1996, SCG transferred such stock to an unaffiliated trust. The common stock is entitled to receive the remaining 5% of net operating cash flow. As of December 31, 1995, the outstanding balance of development and mortgage loans made by PTR to third party owner-developers and PTR Development Services aggregated $41.0 million and none, respectively. The activities of PTR Development Services and development loans are consolidated with PTR's activities and all intercompany transactions have been eliminated in consolidation. Gains and Provision for Loss from Real Estate and Investments PTR develops and acquires properties with a view to effective long term operation and ownership. Based upon PTR's market research and in an effort to optimize its portfolio composition, PTR may from time to time seek to dispose of assets that in management's view do not meet PTR's long term investment criteria and redeploy the proceeds therefrom, preferably through like-kind exchanges, into assets that are more consistent with PTR's investment objectives. 23 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) PTR's strategy is to focus on the ownership of multifamily properties. Periodic sales of multifamily and non-multifamily assets may occur as opportunities arise or investment objectives change. Properties are periodically evaluated for impairment and provisions for possible losses are made if required. Statement of Financial Accounting Standards No. 121 entitled "Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of " will be adopted by PTR, as required by the Statement, effective January 1, 1996. In the opinion of management, the adoption of the Statement is not expected to have a material impact on the financial statements at the date of adoption. During the fourth quarter of 1995, PTR sold one multifamily property consisting of 166 units under an exchange agreement. Under the terms of the sale, cash proceeds representing the value of the property sold was placed into a trust. At the direction of PTR, a 290 unit multifamily property was acquired utilizing the cash held in trust. For federal income tax purposes, the transaction was structured as a non-taxable like-kind exchange. For financial reporting purposes, the sale qualified for profit recognition and a gain of $3.2 million was recognized in 1995. PTR also sold its investment in a mortgage note received upon prior year sale of one of its non-multifamily properties. PTR recorded a loss from the sale of $600,000 for the year ended December 31, 1995. In October 1995, a partnership, in which PTR owns a 40% interest, sold its only real estate asset, an office building located in the Dallas, Texas metropolitan area. During the first quarter of 1994, the partnership adopted a strategy of disposing of the property rather than continuing to hold the property as a long term investment. As a result, the managing partner evaluated the building for net realizable value which resulted in a provision for possible loss of $4 million. PTR's share of the loss provision was $1.6 million as reflected in the December 31, 1994 statement of earnings. During the third quarter of 1995 the partnership approved the sale of property and as a result PTR recorded an additional provision of $220,000. This provision has no impact on cash flow from operating activities. During 1993, PTR entered into a master lease agreement containing a purchase option for the future sale of a non-multifamily property. Under the terms of the agreement, PTR is responsible for certain maintenance items, if required, during the five year period. During 1995, it was determined that PTR could potentially be liable for expenditures estimated to aggregate $250,000, of which $50,000 had previously been recorded. Accordingly, the 1995 financial statements included a provision for such additional costs. This provision has no impact on cash flow from operating activities. (4) BORROWINGS Line of Credit Concurrent with the Merger (See Note 2), PTR increased its unsecured revolving line of credit facility with Texas Commerce Bank, National Association, as agent bank for a group of lenders ("TCB") to $350 million, and in August 1995 received a reduction in the interest rate to the greater of prime (8.5% at December 31, 1995) or the federal funds rate plus 0.50%, or at PTR's option, LIBOR (5.719% at December 31, 1995) plus 1.375% which can vary from LIBOR plus 1.0% to LIBOR plus 1.75% (7.094% at December 31, 1995) based upon the rating of PTR's senior unsecured debt. Additionally, there is a commitment fee on the average unfunded line of credit balance. The commitment fee was $501,500, $224,300 and none for the years ended December 31, 1995, 1994 and 1993, respectively. In addition, Wells Fargo Realty Advisors Funding, Incorporated was added as co-agent. The TCB line matures August 1997 and may annually be extended for an additional year with the approval of TCB and the other participating lenders. All debt incurrences are subject to covenants, as more fully described in the loan agreement. PTR was in compliance with all covenants at December 31, 1995. 24 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) A summary of PTR's line of credit borrowings is as follows (dollars in thousands):
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- Total line of credit....................... $350,000 $275,000 $200,000 Borrowings outstanding at December 31...... 129,000 102,000 51,500 Weighted average daily borrowings.......... 51,858 59,890 40,555 Maximum borrowings outstanding at any month end....................................... $138,000 $124,000 $ 83,010 Weighted average daily interest rate....... 8.0% 7.0% 6.3% Weighted average interest rate at December 31........................................ 7.3% 7.8% 6.0%
Long Term Debt On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008 (the "2008 Notes") and $100 million of 7.50% Senior Notes due 2014 (the "2014 Notes" and together with the 2008 Notes, the "2008 and 2014 Notes"). The 2008 Notes bear interest at 6.875% per annum and require annual principal payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear interest at 7.5% per annum and require annual principal payments of $10 million in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012, $20 million in 2013 and $25 million in 2014. Collectively, the 2008 and 2014 Notes are unsecured and had an original average life to maturity of 14.25 years and an average effective interest cost, including offering discounts, issuance costs and proceeds from an interest rate protection agreement, of 7.37% per annum. The 2008 and 2014 Notes are redeemable any time at the option of PTR, in whole or in part, at a redemption price equal to the sum of the principal amount of the 2008 and 2014 Notes being redeemed plus accrued interest thereon to the redemption date plus an adjustment, if any, based on the yield to maturity relative to market yields available at redemption. The 2008 and 2014 Notes are governed by the terms and provisions of a supplemental indenture agreement dated February 2, 1994 ("the Indenture") between PTR and State Street Bank and Trust Company, as trustee (See Note 12). Under the terms of the Indenture, PTR can incur additional debt only if, after giving effect to the debt being incurred and application of proceeds therefrom, (i) the ratio of debt to total assets, as defined in the Indenture, does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined in the Indenture, does not exceed 40%, and (iii) PTR's pro forma interest coverage ratio, as defined in the Indenture, for the four preceding fiscal quarters is not less than 1.5:1. As of December 31, 1995, PTR was in compliance with all debt covenants. 25 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Mortgages Payable Mortgages payable consisted of the following (dollars in thousands):
BALLOON PRINCIPAL PRINCIPAL PERIODIC PAYMENT BALANCE AT BALANCE AT INTEREST MATURITY PAYMENT DUE AT DECEMBER 31, DECEMBER 31, PROPERTY RATE DATE TERMS MATURITY 1995 1994 -------- -------- -------- ------------- -------- ------------ ------------ CONVENTIONAL FIXED RATE Tigua Village I....... 10.000% 08/01/95 (2) $ 303 $ -- $ 305 Knight's Castle(1).... 6.560 10/01/96 (2) 7,498 7,609 n/a Tigua Village II...... 9.750 05/01/97 (2) 677 694 703 Chasewood............. 6.750 06/01/97 (2) 9,303 9,485 9,612 Presidio at South Mountain............. 8.500 10/01/97 (2) 14,337 14,593 14,742 Silvercliff........... 7.650 11/10/97 (2) 7,304 7,469 7,550 Braeswood Park........ 7.500 01/01/98 (2) 6,635 6,889 7,008 Seahawk............... 8.040 01/10/98 (2) 5,350 5,505 5,577 La Tierra at the Lakes(1)............. 7.875 12/01/98 (2) 25,105 26,444 n/a Windsail.............. 8.875 02/01/99 (2) 4,675 4,843 4,888 Greenpointe(1)........ 8.500 03/01/00 (3) -- 3,696 n/a Mountain Shadow(1).... 8.500 03/01/00 (3) -- 3,394 n/a Sunterra(1)........... 8.250 03/01/00 (3) -- 8,274 n/a Brompton Court........ 8.375 09/01/00 (2) 13,340 14,543 14,750 Spring Park........... 10.125 09/27/00 (2) 4,063 4,293 4,330 Park Place I.......... 10.250 11/01/00 (2) 3,320 3,515 3,545 Park Place II......... 10.250 11/01/00 (2) 3,325 3,517 3,546 Treat Commons......... 7.500 09/14/01 (2) 6,578 7,296 n/a Double Tree Phase II.. 8.250 05/01/33 (3) -- 4,770 n/a ------ -------- ------------- -------- ------- 136,829 76,556 -------- ------- TAX EXEMPT FIXED RATE Cherry Creek(1)....... 7.995(4) 11/01/01 (2) 2,630 4,210 n/a -------- ------- TAX EXEMPT FLOATING RATE Apple Creek........... (5) 09/01/07 interest only 11,100 11,100 11,100 -------- ------- COMBINED(6) Las Flores............ 7.750 06/01/24 (3) -- 5,915 5,968 ------ -------- ------- 7.907%(7) $158,054 $93,624 ====== ======== =======
- -------- (1) Mortgage assumed in the Merger (See Note 2). (2) Amortizing monthly with a balloon payment due at maturity. (3) Fully amortizing. (4) Represents the average "all-in" rate over the remaining life of the bonds. (5) Adjusted weekly by the remarketing agent. Weighted average daily interest rate was 6.24% for 1995. (6) In 1990, the Las Flores apartments were refinanced pursuant to multifamily bonds aggregating $6.2 million. The bonds consist of $4.5 million Series A tax exempt fixed rate bonds and $1.7 million Series B taxable fixed rate bonds. The bonds are guaranteed by the GNMA mortgage-backed securities program. (7) Represents the weighted average interest rate for PTR's mortgages payable for the year ended December 31, 1995. Mortgages payable are secured by real estate with an aggregate undepreciated cost of $295,570,000 at December 31, 1995. 26 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) The mortgages which secure tax exempt housing bonds contain covenants which require that a minimum percentage of units (generally 20% to 30%) be rented to individuals whose income does not exceed levels specified by U.S. Government programs. The tax exempt floating rate mortgage is secured by a letter of credit of $11,445,000. The fee for this letter of credit is 1.25% per annum of the outstanding mortgage payable balance. This letter of credit contains certain covenants, all of which PTR was in compliance with at December 31, 1995. The change in mortgages payable consisted of the following (in thousands):
1995 1994 1993 -------- ------- ------- Balances at January 1......................... $ 93,624 $48,872 $30,824 Notes originated or assumed................... 66,481 56,624 26,952 Principal payments............................ (2,051) (11,872) (7,880) Liquidated upon sale of properties............ -- -- (1,024) -------- ------- ------- Balance at December 31........................ $158,054 $93,624 $48,872 ======== ======= =======
Scheduled Debt Maturities Approximate principal payments due during each of the years in the five-year period ending December 31, 2000 are as follows (in thousands):
LONG TERM MORTGAGES DEBT TOTAL --------- -------- -------- 1996.......................................... $ 9,639 $ -- $ 9,639 1997.......................................... 45,658 -- 45,658 1998.......................................... 26,798 -- 26,798 1999.......................................... 5,932 -- 5,932 2000.......................................... 39,125 -- 39,125 Thereafter.................................... 30,902 200,000 230,902 -------- -------- -------- $158,054 $200,000 $358,054 ======== ======== ========
(5) DISTRIBUTIONS PTR's current distribution policy is to pay quarterly distributions to holders of common shares based upon what it believes to be a prudent percentage of cash flow. Such distributions will annually aggregate at least 95% of PTR's taxable income. Because depreciation is a non-cash expense, cash flow typically will be greater than net earnings attributable to common shares. Therefore, distributions paid will generally be higher than net earnings attributable to common shares. For federal income tax purposes, the following summarizes the taxability of distributions paid on Common Shares in 1994 and 1993 and the estimated taxability for 1995:
YEAR ENDED DECEMBER 31, ----------------- 1995 1994 1993 ----- ----- ----- Per Common Share: Ordinary income....................................... $0.92 $0.68 $0.65 Capital gains......................................... -- -- 0.11 Return of capital..................................... 0.23 0.32 0.06 ----- ----- ----- Total............................................... $1.15 $1.00 $0.82 ===== ===== =====
On December 12, 1995 PTR declared a distribution of $0.31 per Common Share payable on February 15, 1996 to shareholders of record as of February 2, 1996. At the same time, PTR announced that it plans to pay a total distribution of $1.24 per Common Share in 1996. 27 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) On July 21, 1994, in addition to the distributions paid, PTR redeemed the shareholder purchase rights issued pursuant to the Rights Agreement dated as of February 23, 1990, as amended. Pursuant to the redemption, each holder of record at the close of business on July 21, 1994 was entitled to receive $0.01 per shareholder purchase right. The redemption price was paid on August 12, 1994 and is taxable as ordinary income for federal income tax purposes. For federal income tax purposes, the following summaries reflect the taxability of dividends paid on Series A Preferred Shares and Series B Cumulative Redeemable Preferred Shares ("Series B Preferred Shares"), respectively, for periods prior to 1995 and the estimated taxability for 1995.
DATE OF ISSUANCE TO 1995 1994 12/31/93 ----- ----- ----------- Per Series A Preferred Share: Ordinary income................................. $1.75 $1.75 $.1231 Capital gains................................... -- -- .0227 ----- ----- ------ Total......................................... $1.75 $1.75 $.1458 ===== ===== ======
DATE OF ISSUANCE TO 12/31/95 ----------- Per Series B Preferred Share: Ordinary income............................................. $1.3625 Capital gains............................................... -- ------- Total..................................................... $1.3625 =======
PTR's tax return for the year ended December 31, 1995 has not been filed, and the taxability information for 1995 is based upon the best available data. PTR's tax returns have not been examined by the Internal Revenue Service and, therefore, the taxability of the dividends is subject to change. (6) MORTGAGE NOTES RECEIVABLE The change in investments in mortgage notes receivable (which primarily originated in connection with PTR's sale of non-multifamily properties) consisted of the following (in thousands):
1995 1994 1993 ------- ------- ------- Balances at January 1 ......................... $22,597 $22,624 $10,981 Notes originated............................... 1,538 162 12,966 Reduction of principal......................... (8,291) (189) (1,323) ------- ------- ------- Balance at December 31......................... $15,844 $22,597 $22,624 ======= ======= =======
Interest rates on mortgage notes receivable range from 7.5% to 10.5% with a weighted average rate of 8.6%. Maturity dates on mortgage notes receivable range from 1997 to 2008. Aggregate cost for federal income tax purposes was the same as the balance at December 31 for the three years shown above. (7) SHAREHOLDERS' EQUITY Shares of Beneficial Interest At December 31, 1995, 150,000,000 Shares of Beneficial Interest, $1.00 par value per share, were authorized. PTR's Board of Trustees is authorized to issue, from the authorized but unissued shares of PTR, 28 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) preferred shares in series and to establish from time to time the number of preferred shares to be included in such series and to fix the designation and any preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the shares of each series. Preferred Shares On May 11, 1995, the Board of Trustees authorized PTR to classify and issue the Series B Preferred Shares. The net proceeds to PTR from the sale of the Series B Preferred Shares were $101.4 million. The net proceeds were used for the development and acquisition of additional multifamily properties, for the repayment of indebtedness under PTR's revolving line of credit and for working capital purposes. On and after May 24, 2000, the Series B Preferred Shares may be redeemed for cash at the option of PTR, in whole or in part at a redemption price of $25.00 per share plus accrued and unpaid distributions, if any, to the redemption date. The redemption price (other than the portion thereof consisting of accrued and unpaid distributions) is payable solely out of the sale proceeds of other capital shares of PTR, which may include shares of other series of preferred shares. The holders of the Series B Preferred Shares have no preemptive rights with respect to any shares of the capital securities of PTR or any other securities of PTR convertible into or carrying rights or options to purchase any such shares. The Series B Preferred Shares have no stated maturity and are not subject to any sinking fund or other obligation of PTR to redeem or retire the Series B Preferred Shares and are not convertible into any other securities of PTR. In addition, holders of the Series B Preferred Shares are entitled to receive, when and as declared by the Board of Trustees, out of funds legally available for the payment of distributions, cumulative preferential cash distributions at the rate of 9% of the liquidation preference per annum (equivalent to $2.25 per share). Such distributions are cumulative from the date of original issue and are payable quarterly in arrears on the last day of each March, June, September and December. The Series A Preferred Shares issued in November 1993 have a liquidation preference of $25 per share for an aggregate liquidation preference of $230 million plus any accrued but unpaid distributions. The net proceeds (after underwriting commission and other offering costs) of the Series A Preferred Shares issued was $219.7 million. Holders of the Series A Preferred Shares are entitled only to limited voting rights under certain conditions. Each Series A Preferred Share is convertible, in whole or in part, at the option of the holder at any time, unless previously redeemed, into 1.2162 of PTR's Common Shares (a conversion price of $20.56 per share). Distributions on the Series A Preferred Shares are cumulative in an amount per share equal to the greater of $1.75 per annum or the annualized quarterly PTR distribution rate on the Common Shares into which the Series A Preferred Shares are convertible, payable quarterly in arrears on the last day of March, June, September and December of each year. The Series A Preferred Shares are redeemable at the option of PTR after November 30, 2003. The Series A Preferred Shares and the Series B Preferred Shares will rank on a parity as to distributions and liquidation proceeds. Series A Preferred Shares and Series B Preferred Shares are collectively referred to as "Preferred Shares." All dividends on Preferred Shares have been accrued and paid as of the end of each fiscal year and, accordingly, are reflected in the accompanying financial statements. Option Plan In January 1987, PTR adopted its Share Option Plan for Outside Trustees (the "1987 Plan"). Under the 1987 Plan, there are 126,000 Common Shares approved which can be granted to independent Trustees. All 29 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) options granted are for a term of five years and are exercisable in whole or in part. The exercise price of the options granted may not be less than the fair market value on the date of grant. At December 31, 1995 there were 20,000 options for Common Shares outstanding and exercisable under the 1987 Plan at exercise prices ranging from $10.625 to $18.875 per Common Share. Ownership Restrictions and Significant Shareholder PTR's Restated Declaration of Trust and the Articles Supplementary restrict beneficial ownership (or ownership generally attributed to a person under the REIT tax rules) of PTR's outstanding shares by a single person, or persons acting as a group, to 9.8% of the Common Shares and 25% of the Preferred Shares. The purpose of these provisions are to assist in protecting and preserving PTR's REIT status and to protect the interests of shareholders in takeover transactions by preventing the acquisition of a substantial block of shares unless the acquiror makes a cash tender offer for all outstanding shares. For PTR to qualify as a REIT under the Internal Revenue Code of 1986, as amended, not more than 50% in value of its outstanding capital shares may be owned by five or fewer individuals at any time during the last half of PTR's taxable year. The provision permits five persons to acquire up to a maximum of 9.8% each of the Common Shares, or an aggregate of 49% of the outstanding Common Shares, and thus assists the Trustees in protecting and preserving PTR's REIT status for tax purposes. Common Shares owned by a person or group of persons in excess of the 9.8% limit are subject to redemption by PTR. The provision does not apply where a majority of the Board of Trustees, in its sole and absolute discretion, waives such limit after determining that the eligibility of PTR to qualify as a REIT for federal income tax purposes will not be jeopardized or the disqualification of PTR as a REIT is advantageous to the shareholders. The Board of Trustees has permitted SCG, the owner of the REIT Manager (see Note 8), to acquire up to 49% of PTR's fully converted Common Shares. SCG's ownership of Common Shares is attributed for tax purposes to its shareholders. SCG owned 37.93% of PTR's total outstanding Common Shares at December 31, 1995. Pursuant to an agreement between SCG and PTR, SCG has agreed to acquire no more than 49% of the fully converted Common Shares except pursuant to an all-cash tender offer for all Common Shares held open for 90 days. SCG would have no limitation on making a tender offer if an unrelated third party commences such a tender offer. Shareholder Purchase Rights On February 23, 1990, PTR declared a dividend distribution of one shareholder purchase right ("Right") for each outstanding Common Share to be distributed to all holders of record of the Common Shares on February 23, 1990. Each Right entitled the holder to purchase one Common Share for an exercise price of $32.50 per share, subject to adjustment as provided in the Rights Agreement. The Rights were exercisable only if a person or group acquired 20% or more of PTR's Common Shares (32% in the case of SCG and certain defined affiliates) or announced a tender offer for 25% or more of the Common Shares. Under certain circumstances, including a shareholder acquisition of 20% or more of the Common Shares, each Right would entitle the holder to purchase Common Shares or securities of the acquiring company, which would have a dilutive effect on the acquiring company and deter it from taking coercive actions against PTR shareholders. The Rights held by certain 20% shareholders would be exercisable. On July 11, 1994, the Board of Trustees announced the redemption, effective at the close of business on July 21, 1994, of the shareholder purchase rights issued pursuant to the Rights Agreement, dated as of February 23, 1990, as amended. Pursuant to the redemption, each holder of record at the close of business on July 21, 1994 was entitled to receive $0.01 per shareholder purchase right. The redemption price was paid on August 12, 1994. 30 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) In addition, the Board of Trustees declared a distribution of one preferred share purchase right (a "Purchase Right") for each Common Share outstanding, payable to holders of Common Shares of record at the close of business on July 21, 1994. Each Purchase Right entitles the holder under certain circumstances to purchase from PTR one one-hundredth of a share of Series B Junior Participating Preferred Share, par value $1.00 per share (the "Participating Preferred Shares"), at a price of $60.00 per one one-hundredth of a Participating Preferred Share, subject to adjustment. Purchase Rights are exercisable when a person or group of persons acquires 20% or more of the fully converted Common Shares (49% in the case of SCG and certain defined affiliates) or announces a tender offer for 25% or more of the outstanding Common Shares. Under certain circumstances, each Purchase Right entitles the holder to purchase, at the Purchase Right's then current exercise price, a number of Common Shares having a market value of twice the Purchase Right's exercise price. The acquisition of PTR pursuant to certain mergers or other business transactions would entitle each holder to purchase, at the Purchase Right's then current exercise price, a number of the acquiring company's common shares having a market value at that time equal to twice the Purchase Right's exercise price. The Purchase Rights will expire in July 2004 and are subject to redemption in whole, but not in part, at a price of $0.01 per Purchase Right payable in cash, shares of PTR or any other form of consideration determined by the Board of Trustees. Shelf Registration On May 13, 1994 and December 1, 1994, PTR filed additional shelf registration statements with the Securities and Exchange Commission. PTR registered an aggregate of $650 million of securities ($325 million of securities in each shelf registration statement) which can be issued in the form of debt securities, preferred shares of beneficial interest, common shares of beneficial interest, shareholder purchase rights or subscription rights for common shares of beneficial interest. As of December 31, 1995, $243.2 million in securities were available to be issued under PTR's shelf registrations (See Note 12). (8) REIT MANAGEMENT AND PROPERTY MANAGEMENT AGREEMENTS Effective March 1, 1991, PTR entered into a REIT management agreement (the "REIT Management Agreement") with Security Capital Pacific Incorporated (the "REIT Manager"), formerly Security Capital (Southwest) Incorporated to provide management services to PTR. The REIT Manager is a subsidiary of SCG (see Note 7). All officers of PTR are employees of the REIT Manager and PTR has no employees. The REIT Manager provides both strategic and day-to-day management of PTR, including research, investment analysis, acquisition and development, asset management, capital markets, and legal and accounting services. The REIT Management Agreement requires PTR to pay a base annual fee of $855,000 plus 16% of cash flow as defined in the REIT Management Agreement ("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash Flow is calculated by reference to PTR's cash flow from operations before deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the request of the independent Trustees of PTR, and (iii) 33% of any interest paid by PTR on convertible subordinated debentures (of which there has been none since inception of the REIT Management Agreement); and, after deducting (iv) actual or assumed regularly scheduled principal and interest payments on long term debt and (v) distributions actually paid with respect to any nonconvertible preferred shares of beneficial interest of PTR. The REIT Management Agreement has been amended so that the long term senior notes described in Note 4 and Note 12 will be treated as if they had regularly scheduled principal and interest payments similar to a 20-year level monthly payment, fully amortizing mortgage and the assumed principal and interest payments will be deducted from cash flow in determining the fee for future periods. Cash Flow does not include interest and income from PTR Development Services, realized gains from dispositions of investments or income from cash equivalent investments. The REIT Manager also receives a fee of .25% per year on the average daily balance of cash equivalent investments. 31 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) PTR is obligated to reimburse the REIT Manager for certain expenses incurred by the REIT Manager on behalf of PTR relating to PTR's operations, primarily including third party legal, accounting and similar fees paid on behalf of PTR, and travel expenses incurred in connection with financings, property acquisitions, property dispositions, property development, attending Board of Trustees and shareholder meetings and similar activities on behalf of PTR. The REIT Management Agreement is renewable by PTR annually, subject to a determination by the independent Trustees that the REIT Manager's performance has been satisfactory and that the compensation payable to the REIT Manager is fair. PTR may terminate the REIT Management Agreement on 60 days' notice. Because of the year-to-year nature of the agreement, its maximum effect on PTR's results of operations cannot be predicted, other than that REIT management fees will generally increase or decrease in proportion to cash flow increases or decreases. SCG Realty Services Incorporated ("SCG Realty Services") has managed and currently manages a substantial majority of PTR's operating multifamily properties. For the years ended December 31, 1995, 1994 and 1993, PTR paid SCG Realty Services aggregate fees of $7,894,000, $7,148,000 and $3,862,000, respectively. Homestead Realty Services Incorporated ("Homestead Realty Services") manages all of PTR's operating Homestead Village properties. For the year ended December 31, 1995, PTR paid Homestead Realty Services aggregate fees of $1,018,000. In addition to property management, SCG Realty Services has performed certain due diligence services for PTR's acquisitions. Effective October 1, 1994, SCG Realty Services no longer performed due diligence services for PTR. SCG owns each of SCG Realty Services and Homestead Realty Services. Rates for services performed by SCG Realty Services and Homestead Realty Services are subject to annual approval by PTR's independent Trustees (who receive an annual review from an independent third party) and management believes are at rates prevailing in the markets in which PTR operates. 32 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data (in thousands except for per share amounts) for 1995 and 1994 is as follows:
THREE MONTHS ENDED YEAR ------------------------------- ENDED 3-31 6-30 9-30 12-31 12-31 ------- ------- ------- ------- -------- 1995: Rental Income....................... $53,518 $65,719 $70,176 $73,060 $262,473 ======= ======= ======= ======= ======== Earnings from operations............ 14,540 20,806 23,203 23,147 81,696 Gain on sale of investments......... -- -- -- 2,623 2,623 Less preferred share dividends...... 4,025 5,023 6,387 6,388 21,823 ------- ------- ------- ------- -------- Net earnings attributable to Common Shares............................. $10,515 $15,783 $16,816 $19,382 $ 62,496 ======= ======= ======= ======= ======== Net earnings per Common Share....... $ 0.20 $ 0.22 $ 0.23 $ 0.27 $ 0.93 ======= ======= ======= ======= ======== Weighted Average Common Shares out- standing........................... 51,485 72,027 72,211 72,211 67,052 ======= ======= ======= ======= ======== 1994: Rental Income....................... $37,414 $43,390 $50,299 $52,369 $183,472 ======= ======= ======= ======= ======== Earnings from operations............ 9,512 10,765 12,727 13,715 46,719 Less preferred share dividends...... 4,025 4,025 4,025 4,025 16,100 ------- ------- ------- ------- -------- Net earnings attributable to Common Shares............................. $ 5,487 $ 6,740 $ 8,702 $ 9,690 $ 30,619 ======= ======= ======= ======= ======== Net earnings per Common Share....... $ 0.12 $ 0.15 $ 0.18 $ 0.19 $ 0.66 ======= ======= ======= ======= ======== Weighted Average Common Shares out- standing........................... 44,668 44,724 47,051 50,413 46,734 ======= ======= ======= ======= ========
(10) COMMITMENTS AND CONTINGENCIES PTR is a party to various claims and routine litigation arising in the ordinary course of business. PTR does not believe that the results of all claims and litigation, individually or in the aggregate, will have a material adverse effect on its business, financial position or results of operations. PTR is subject to environmental regulations related to the ownership, operation, development and acquisition of real estate. As part of due diligence procedures, since 1984 PTR has conducted Phase I environmental assessments on each property prior to acquisition. The cost of complying with environmental regulations was not material to PTR's results of operations for any of the years in the three year period ended December 31, 1995. PTR is not aware of any environmental condition on any of its properties which is likely to have a material adverse effect on PTR's financial condition or results of operations. See Note 3 for development and acquisition commitments. 33 SECURITY CAPITAL PACIFIC TRUST NOTES TO FINANCIAL STATEMENTS--(CONCLUDED) (11) FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents, other assets, accrued expenses and other liabilities approximates fair value as of December 31, 1995 and 1994 because of the short maturity of these instruments. Similarly, the carrying value of line of credit borrowings approximates fair value as of those dates since the interest rate fluctuates based on published market rates. In the opinion of management, the interest rates associated with the long term debt, mortgages payable and mortgage notes receivable approximate the market interest rates for these types of instruments, and as such, the carrying values approximates fair value at December 31, 1995 and 1994, in all material respects. (12) SUBSEQUENT EVENTS On February 23, 1996, PTR issued $50 million of 7.15% Notes due 2010 (the "2010 Notes") and $100 million of 7.90% Notes due 2016 (the "2016 Notes" and together with the 2010 Notes, the "2010 and 2016 Notes"). The 2010 Notes bear interest at 7.15% per annum and require annual principal payments of $6.25 million, commencing February 15, 2003. The 2016 Notes bear interest at 7.90% per annum and require aggregate annual principal payments of $10 million in 2011, $12.5 million in 2012, $15 million in 2013, $17.5 million in 2014, $20 million in 2015 and $25 million in 2016. Collectively, the 2010 and 2016 Notes are unsecured and have an average life to maturity of 15.5 years and an average effective interest cost, including offering discounts and issuance costs of 7.84% per annum. The 2010 and 2016 Notes are redeemable any time at the option of PTR, in whole or in part, at a redemption price equal to the sum of the principal amount of the Notes being redeemed plus accrued interest thereon to the redemption date plus an adjustment, if any, based on the yield to maturity relating to market yields available at redemption. The 2010 and 2016 Notes are governed by the terms and provisions of the Indenture (See Note 4). As a result of the issuance of the 2010 and 2016 Notes, $93.2 million in securities remain available to be issued under PTR's shelf registration. 34 SCHEDULE III SECURITY CAPITAL PACIFIC TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (IN THOUSANDS)
GROSS AMOUNT AT WHICH CARRIED AT INITIAL COST TO PTR COSTS DECEMBER 31, 1995 --------------------- CAPITALIZED -------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED ---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- -------- MULTIFAMILY: Albuquerque, New Mexico: Commanche Wells. $ -- $ 719 $ 4,072 $ 309 $ 719 $ 4,381 $ 5,100 $ 202 1985 1994 Corrales Pointe. -- 944 5,351 393 944 5,744 6,688 336 1986 1993 Entrada Pointe.. -- 1,014 5,744 805 1,014 6,549 7,563 326 1986 1994 Homestead Village--Osuna. -- 832 -- 3,039 840 3,031 3,871 (b) (b) 1995 La Paloma....... -- 4,135 -- 18,952 4,287 18,800 23,087 269 (b) 1993 La Ventana...... -- 2,210 -- 11,634 2,320 11,524 13,844 43 (b) 1994 Pavilions ...... -- 2,182 7,624 5,602 2,182 13,226 15,408 1,484 (a) (a) Sandia Ridge.... -- 1,339 5,358 798 1,339 6,156 7,495 686 1986 1992 Vistas at Seven Bar (i) ....... -- 2,597 -- 3,841 2,601 3,837 6,438 (b) (b) 1994 Vista del Sol... -- 1,105 4,419 427 1,105 4,846 5,951 326 1987 1993 Wellington Place.......... -- 1,881 7,523 598 1,881 8,121 10,002 479 1981 1993 Austin, Texas: Anderson Mill Oaks........... -- 1,794 10,165 267 1,794 10,432 12,226 603 1984 1993 Cannon Place.... -- 1,220 4,879 725 1,220 5,604 6,824 304 1984 1993 Hobby Horse..... -- 788 -- 303 801 290 1,091 (b) (b) 1993 Homestead Village-- Burnet......... -- 525 -- 3,543 723 3,345 4,068 66 1995 1994 Homestead Village-- Mid Town....... -- 600 -- 3,135 645 3,090 3,735 (b) (b) 1995 Homestead Village-- Pavilion (i) .. -- 693 -- 120 693 120 813 (b) (b) 1995 Hunters' Run.... -- 1,400 -- 9,982 1,816 9,566 11,382 183 1995 1993 Hunters' Run II (i)............ -- 797 -- 775 861 711 1,572 (b) (b) 1995 La Mirage....... -- 2,350 -- 14,668 2,966 14,052 17,018 843 1994 1992 Monterey Ranch Village II..... -- 1,151 -- 13,132 1,241 13,042 14,283 (b) (b) 1993 The Ridge....... -- 1,669 6,675 2,076 1,669 8,751 10,420 574 1978 1993 Rock Creek...... -- 1,311 7,431 1,419 1,311 8,850 10,161 477 1979 1993 Saddlebrook..... -- 800 -- 12,484 1,148 12,136 13,284 774 1994 1992 Shadowood....... -- 1,197 4,787 561 1,197 5,348 6,545 329 1985 1993 Spyglass........ -- 1,744 6,976 1,753 1,744 8,729 10,473 694 1981 1992 Dallas, Texas: Apple Ridge..... -- 1,986 7,942 1,124 1,986 9,066 11,052 488 1984 1993 Custer Crossing. -- 1,532 8,683 163 1,532 8,846 10,378 506 1985 1993 Homestead Village-- Coit Road...... -- 425 -- 2,961 496 2,890 3,386 301 1994 1993 Homestead Village-- Fort Worth..... -- 350 -- 2,296 372 2,274 2,646 (b) (b) 1994 Homestead Village-- Las Colinas.... -- 800 -- 3,562 805 3,557 4,362 (b) (b) 1994 Homestead Village--North Richland Hills. -- 470 -- 3,020 544 2,946 3,490 301 1994 1993 Homestead Village-- Skillman Road.. -- 400 -- 2,683 400 2,683 3,083 278 1993 1992
(see notes following table) 35
GROSS AMOUNT AT WHICH CARRIED INITIAL COST TO PTR COSTS AT DECEMBER 31, 1995 --------------------- CAPITALIZED ------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED ---------- -------- -------- ------------ ----------- -------- ------------ --------- ---------- --------- -------- Homestead Village--South Arlington...... $ $ 550 $ -- $ 3,274 $ 642 $ 3,182 $ 3,824 $ 120 1995 1994 Homestead Village-- Stemmons Freeway........ -- 356 -- 4,136 424 4,068 4,492 296 (c) (c) Homestead Village-- Tollway........ -- 275 -- 2,443 353 2,365 2,718 340 1993 1993 Homestead Village--West Arlington...... -- 585 -- 3,400 652 3,333 3,985 118 1995 1993 Indian Creek.... -- 1,582 8,962 256 1,582 9,218 10,800 520 1985 1993 Post Oak Ridge.. -- 2,137 12,111 873 2,137 12,984 15,121 724 1983 1993 Quail Run....... -- 1,613 9,140 169 1,613 9,309 10,922 533 1983 1993 Somerset........ -- 2,908 11,632 525 2,908 12,157 15,065 674 1986 1993 Summerstone..... -- 1,028 5,823 161 1,028 5,984 7,012 345 1983 1993 Timber Ridge.... -- 997 5,651 302 997 5,953 6,950 184 1984 1994 Woodland Park... -- 1,386 5,543 309 1,386 5,852 7,238 327 1986 1993 Denver, Colorado: Cambrian........ -- 2,256 9,026 719 2,256 9,745 12,001 647 1983 1993 Cedars, The..... -- 3,128 12,512 1,404 3,128 13,916 17,044 925 1984 1993 Fox Creek Phase I.............. -- 1,167 4,669 313 1,167 4,982 6,149 289 1984 1993 Fox Creek Phase II............. -- -- -- 69 -- 69 69 (b) (b) 1995 Hickory Ridge... -- 4,402 17,607 1,394 4,402 19,001 23,403 1,601 1984 1992 Homestead Village-- Belleview ..... -- 876 -- 2,622 921 2,577 3,498 (b) (b) 1994 Homestead Village--Iliff. -- 615 -- 2,910 624 2,901 3,525 (b) (b) 1994 Reflections Phase I........ -- 1,591 6,362 785 1,591 7,147 8,738 476 1980 1993 Reflections Phase II....... -- 805 -- 11,258 845 11,218 12,063 34 (b) 1993 Silvercliff..... 7,469 2,410 13,656 219 2,410 13,875 16,285 640 1991 1994 Sunwood......... -- 1,030 4,596 461 1,030 5,057 6,087 414 1981 1992 El Paso, Texas: Acacia Park..... -- 1,130 -- 12,764 1,475 12,419 13,894 298 1995 1993 Cielo Vista..... -- 1,111 4,445 1,090 1,111 5,535 6,646 324 1962 1993 The Crest....... -- 865 -- 7,112 1,026 6,951 7,977 866 1991 1992 Doubletree...... -- 1,106 4,423 626 1,106 5,049 6,155 349 1980 1993 Las Flores...... 5,915 625 6,624 861 625 7,485 8,110 3,168 (d) (d) Mountain Village........ -- 1,203 4,824 1,158 1,203 5,982 7,185 757 1982 1992 The Patriot .... -- 1,027 -- 10,837 1,103 10,761 11,864 121 (b) 1993 Park Place ..... 7,032 992 7,409 304 993 7,712 8,705 1,461 (e) (e) The Phoenix..... -- 454 -- 9,641 658 9,437 10,095 817 1993 1993 Shadow Ridge ... -- 1,524 3,993 6,727 1,668 10,576 12,244 842 (f) (f) Spring Park..... 4,293 734 4,428 77 734 4,505 5,239 917 1990 1989 Tigua Village... 694 161 146 1,976 161 2,122 2,283 1,151 (g) (g) Houston, Texas: Beverly Palms... -- 1,393 7,893 700 1,393 8,593 9,986 421 1970 1994 Braeswood Park.. 6,889 1,861 10,548 151 1,861 10,699 12,560 611 1984 1993 Brompton Court.. 14,543 4,058 22,993 3,477 4,058 26,470 30,528 967 1972 1994 Chasewood....... 9,485 2,016 11,422 102 2,016 11,524 13,540 530 1992 1994 Cranbrook Forest......... -- 1,326 5,302 258 1,326 5,560 6,886 316 1984 1993 Homestead Village-- Astrodome ..... -- 1,530 -- 3,765 1,669 3,626 5,295 18 1995 1994 Homestead Village-- Bammel- Westfield...... -- 516 -- 2,959 595 2,880 3,475 162 1994 1993 Homestead Village--Fuqua. -- 416 -- 2,929 491 2,854 3,345 250 1994 1993 Homestead Village--Park Ten............ -- 791 -- 3,102 860 3,033 3,893 172 1994 1993
(see notes following table) 36
GROSS AMOUNT AT WHICH CARRIED AT INITIAL COST TO PTR COSTS DECEMBER 31, 1995 --------------------- CAPITALIZED -------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED ---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- -------- Homestead Village-- Stafford....... $ -- $ 575 $ -- $ 3,092 $ 665 $ 3,002 $ 3,667 $ 168 1994 1993 Homestead Village--West by Northwest... -- 519 -- 2,913 568 2,864 3,432 283 1994 1993 Homestead Village-- Westheimer..... -- 796 -- 3,205 897 3,104 4,001 208 1994 1993 Homestead Village-- Willowbrook.... -- 575 -- 3,350 669 3,256 3,925 51 1995 1994 Memorial Heights Phase I........ -- 3,169 -- 9,150 3,348 8,971 12,319 (b) (b) 1994 Memorial Heights Phase II....... -- 4,190 -- 2,039 4,427 1,802 6,229 (b) (b) 1994 Oaks at Medical Center Phase I. -- 4,210 -- 11,744 4,260 11,694 15,954 3 (b) 1994 Pineloch........ -- 1,980 11,221 397 1,980 11,618 13,598 659 1984 1993 Plaza Del Oro... -- 1,713 9,706 488 1,713 10,194 11,907 414 1984 1994 Seahawk......... 5,505 1,258 7,125 224 1,257 7,350 8,607 335 1984 1994 Weslayan Oaks... -- 581 3,293 105 581 3,398 3,979 198 1984 1993 Woodside Village........ -- 710 2,811 3,039 710 5,850 6,560 2,347 1972 1975 Las Vegas, Nevada Hamptons, The .. -- 2,959 16,790 935 2,959 17,725 20,684 337 1989 1995 Horizons at Peccole Ranch.. -- 3,173 18,048 113 3,173 18,161 21,334 362 1990 1995 King's Crossing ............... -- 2,860 16,272 202 2,860 16,474 19,334 327 1991 1995 La Tierra at the Lakes.......... 26,444 5,904 33,561 1,502 5,904 35,063 40,967 673 1986 1995 Sunterra ....... 8,274 2,086 11,867 51 2,086 11,918 14,004 236 1986 1995 Los Angeles, Cal- ifornia: Miramonte....... -- 2,357 13,364 -- 2,357 13,364 15,721 -- 1989 1995 Oklahoma City, Oklahoma: Cimarron Trails. -- 981 5,591 181 981 5,772 6,753 233 1984 1994 Warrington...... -- 882 4,883 221 882 5,104 5,986 303 1984 1993 Omaha, Nebraska: Apple Creek..... 11,100 1,953 11,069 550 1,953 11,619 13,572 464 1987 1994 Oak Brook ...... -- 1,108 6,307 74 1,108 6,381 7,489 127 1994 1995 Phoenix, Arizona: 22nd & Dunlap Phase I (i).... -- 3,062 -- 555 3,080 537 3,617 (b) (b) 1995 Arrowhead Phase I (i).......... -- 2,019 -- 11 2,019 11 2,030 (b) (b) 1995 Bay Club........ -- 2,797 11,188 933 2,797 12,121 14,918 704 1985 1993 Foxfire......... -- 1,055 5,976 246 1,055 6,222 7,277 284 1985 1994 Homestead Vil- lage--Baseline (i)............ -- 808 -- 1,692 830 1,670 2,500 (b) (b) 1995 Homestead Vil- lage--Dunlap (i)............ -- 915 -- 1,153 933 1,135 2,068 (b) (b) 1995 Homestead Vil- lage--Scotts- dale........... -- 883 -- 3,376 975 3,284 4,259 37 1995 1994 Miralago Phase I (i) ........... -- 2,743 -- 517 2,830 430 3,260 (b) (b) 1995 Moorings at Mesa Cove........... -- 3,261 13,045 846 3,261 13,891 17,152 1,090 1985 1992 North Mountain Village........ -- 2,704 15,323 330 2,704 15,653 18,357 754 1986 1994 Papago Crossing. -- 630 2,519 659 630 3,178 3,808 246 1980 1992 Peaks at Papago Park Phase I... -- 4,131 23,408 589 4,131 23,997 28,128 1,114 1988 1994 Peaks at Papago Park Phase II.. -- 1,000 -- 3,388 1,001 3,387 4,388 (b) (b) 1994
(see notes following table) 37
GROSS AMOUNT AT WHICH INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995 --------------------- CAPITALIZED -------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED ---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- -------- Pheasant Run.... $ -- $ 1,607 $ 6,428 $ 597 $ 1,607 $ 7,025 $ 8,632 $ 408 1985 1993 Presidio at South Mountain. 14,593 4,638 26,280 438 4,638 26,718 31,356 1,530 1989 1993 The Ridge....... -- 1,852 10,492 318 1,852 10,810 12,662 614 1987 1993 San Antigua..... -- 4,200 -- 19,599 4,705 19,094 23,799 1,053 1994 1991 San Marin....... -- 3,332 -- 14,607 3,798 14,141 17,939 1,365 1993 1993 San Marina...... -- 1,208 4,831 852 1,208 5,683 6,891 810 1986 1992 San Marquis North.......... -- 1,215 -- 8,673 1,556 8,332 9,888 285 1994 1993 San Marquis South.......... -- 2,312 -- 11,137 2,665 10,784 13,449 608 1994 1993 San Palmera (i) ............... -- 3,515 -- 794 3,682 627 4,309 (b) (b) 1995 Scottsdale Greens......... -- 3,489 19,774 4,422 3,489 24,196 27,685 1,069 1980 1994 Sunstone........ -- 1,542 8,738 315 1,542 9,053 10,595 512 1986 1993 Superstition Park........... -- 2,340 9,362 796 2,341 10,157 12,498 792 1985 1992 Portland, Oregon: Club at the Green.......... -- 1,640 9,327 109 1,640 9,436 11,076 193 1991 1995 Double Tree Phase I........ -- 1,548 8,810 28 1,548 8,838 10,386 177 1990 1995 Double Tree Phase II....... 4,770 991 5,611 13 991 5,624 6,615 100 1994 1995 Knight's Castle. 7,609 1,963 11,164 10 1,963 11,174 13,137 223 1989 1995 Meridian at Murrayhill..... -- 2,517 14,320 59 2,517 14,379 16,896 287 1990 1995 Preston's Cross- ing (i)........ -- 851 -- 3,283 852 3,282 4,134 (b) (b) 1995 Riverwood Heights........ -- 1,479 8,410 126 1,479 8,536 10,015 169 1990 1995 Squire's Court . -- 1,630 9,249 28 1,630 9,277 10,907 186 1989 1995 Reno, Nevada: Vista Ridge..... -- 2,002 -- 1,760 2,057 1,705 3,762 (b) (b) 1995 Salt Lake City, Utah: Cherry Creek.... 4,210 1,290 7,330 299 1,290 7,629 8,919 147 1986 1995 Greenpointe..... 3,696 891 5,050 115 891 5,165 6,056 102 1985 1995 Mountain Shadow ............... 3,394 832 4,730 74 832 4,804 5,636 95 1985 1995 Plum Tree ...... -- 2,091 11,892 263 2,091 12,155 14,246 239 1979 1995 Remington ...... -- 2,324 -- 2,627 2,359 2,592 4,951 (b) (b) 1995 San Antonio, Tex- as: Applegate....... -- 1,455 8,248 282 1,455 8,530 9,985 489 1983 1993 Austin Point.... -- 1,728 9,725 452 1,728 10,177 11,905 579 1982 1993 Camino Real..... -- 1,084 4,338 774 1,084 5,112 6,196 383 1979 1993 Cobblestone Vil- lage........... -- 786 3,120 645 786 3,765 4,551 513 1984 1992 Contour Place... -- 456 1,829 317 456 2,146 2,602 331 1984 1992 The Crescent.... -- 1,145 -- 14,454 1,647 13,952 15,599 912 1994 1992 Dymaxion Phase I.............. -- 683 3,740 132 683 3,872 4,555 115 1984 1994 The Gables...... -- 1,025 5,809 226 1,025 6,035 7,060 343 1983 1993 Homestead Vil- lage-- Bitters........ -- 1,000 -- 3,729 1,198 3,531 4,729 66 1995 1994 Homestead Vil- lage--DeZavala ............... -- 844 -- 3,587 983 3,448 4,431 55 1995 1994 Homestead Vil- lage-- Fredricksburg.. -- 800 -- 3,238 892 3,146 4,038 171 1994 1993 Lakeside Villas. -- 2,597 10,388 666 2,597 11,054 13,651 926 1986 1992 Marbach Park.... -- 1,122 6,361 504 1,123 6,864 7,987 393 1985 1993 Oakhampton Place.......... -- 2,292 9,170 712 2,292 9,882 12,174 834 1984 1992 Palisades Park.. -- 1,167 6,613 364 1,167 6,977 8,144 396 1983 1993 Panther Spring.. -- 585 3,317 80 585 3,397 3,982 196 1985 1993 Rancho Mirage... -- 724 2,871 1,259 724 4,130 4,854 243 1974 1993 Stanford Heights........ -- 1,631 -- 11,534 1,693 11,472 13,165 56 (b) 1993 Sterling Heights........ -- 1,644 -- 10,348 2,212 9,780 11,992 197 1995 1993 St. Tropez Phase I.............. -- 2,013 8,054 796 2,013 8,850 10,863 741 1982 1992 St. Tropez Phase II ............ -- 605 -- 361 632 334 966 (b) (b) 1994 Towne East Vil- lage........... -- 350 1,985 148 350 2,133 2,483 119 1983 1993
(see notes following table) 38
GROSS AMOUNT AT WHICH INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995 --------------------- CAPITALIZED -------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED ---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- -------- Villas of Castle Hills.......... $ -- $ 1,037 $ 4,148 $ 691 $ 1,037 $ 4,839 $ 5,876 $ 289 1971 1993 The Waters of Northern Hills. -- 1,251 7,105 690 1,251 7,795 9,046 377 1982 1994 San Diego, Cali- fornia: Scripps Landing. -- 1,332 7,550 240 1,332 7,790 9,122 421 1985 1994 Tierrasanta Ridge.......... -- 2,859 16,130 492 2,859 16,622 19,481 717 1994 1994 San Francisco (Bay Area), Cal- ifornia: Homestead Vil- lage-- San Mateo...... -- 1,510 -- 142 1,510 142 1,652 (b) (b) 1995 Homestead Vil- lage-- Sunnyvale ..... -- 1,274 -- 87 1,277 84 1,361 (b) (b) 1995 Treat Commons... 7,296 5,788 32,802 -- 5,788 32,802 38,590 -- 1988 1995 Santa Fe, New Mexico: Enclave, The.... -- 1,810 7,242 696 1,810 7,938 9,748 630 1986 1992 Foothills of Santa Fe Phase I.............. -- 1,396 -- 760 1,401 755 2,156 (b) (b) 1995 The Meadows of Santa Fe....... -- 760 -- 11,711 992 11,479 12,471 675 1994 1993 Rancho Vizcaya.. -- 1,906 9,458 729 1,906 10,187 12,093 1,241 1990 1991 Seattle, Washing- ton: Logan's Ridge... -- 1,950 11,118 80 1,950 11,198 13,148 223 1987 1995 Mantanza Creek.. -- 1,016 5,814 98 1,016 5,912 6,928 117 1991 1995 Millwood Es- tates.......... -- 1,593 9,200 260 1,593 9,460 11,053 184 1987 1995 Pebble Cove .... -- 1,895 -- 2,342 2,026 2,211 4,237 (b) (b) 1995 Remington Park.. -- 2,795 15,593 539 2,795 16,132 18,927 249 1990 1995 Walden Pond..... -- 2,033 11,535 168 2,033 11,703 13,736 232 1990 1995 Tucson, Arizona: Ashton Meadows.. -- 966 5,474 701 966 6,175 7,141 348 1979 1993 Cobble Creek.... -- 1,422 5,690 616 1,422 6,306 7,728 802 1980 1992 Craycroft Gar- dens........... -- 348 1,392 201 348 1,593 1,941 179 1963 1992 Rio Cancion..... -- 2,854 16,175 364 2,854 16,539 19,393 797 1984 1994 San Ventana (i). -- 3,177 -- 7,444 3,271 7,350 10,621 (b) (b) 1993 Sonoran Terrac- es............. -- 3,020 14,150 648 3,020 14,798 17,818 2,001 1986 1992 Sundown Village ............... -- 2,009 6,424 4,491 2,110 10,814 12,924 611 (h) (h) Tierra Antigua.. -- 992 3,967 507 992 4,474 5,466 518 1979 1992 Villa Caprice... -- 1,279 7,248 274 1,279 7,522 8,801 427 1972 1993 Windsail........ 4,843 1,852 7,407 616 1,852 8,023 9,875 549 1986 1993 Tulsa, Oklahoma: Southern Slope.. -- 779 4,413 141 779 4,554 5,333 270 1982 1993 -------- -------- ---------- -------- -------- ---------- ---------- ------- Total Multifamily.... $158,054 $299,981 $1,040,137 $455,316 $309,025 $1,486,409 $1,795,434 $77,433 -------- -------- ---------- -------- -------- ---------- ---------- -------
(see notes following table) 39
GROSS AMOUNT AT WHICH INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995 --------------------- CAPITALIZED -------------------------------- BUILDINGS SUBSE- BUILDINGS ACCUMU- CON- ENCUM- AND QUENT TO AND LATED DE- STRUCTION PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- --------- LAND HELD FOR FU- TURE MULTIFAMILY DEVELOPMENT: Austin, Texas: Homestead Village--Round Rock (j)....... $ -- $ 808 $ -- $ 84 $ 828 $ 64 $ 892 $ -- N/A Monterey Ranch Village I (k).. -- 424 -- 1,241 457 1,208 1,665 -- N/A Monterey Ranch Village III (l)............ -- 1,131 -- 4,694 1,219 4,606 5,825 -- N/A El Paso, Texas: West Ten (m).... -- 1,523 -- 74 1,544 53 1,597 -- N/A Houston, Texas: Oaks at Medical Center Phase II (n)............ -- 3,368 -- 1,861 3,408 1,821 5,229 -- N/A Phoenix, Arizona: 22nd & Dunlap Phase II (o)... -- 1,647 -- 173 1,647 173 1,820 -- N/A Arrowhead Phase II (p)......... -- 1,601 -- -- 1,601 -- 1,601 -- N/A San Antonio, Texas: Dymaxion Phase II (q)......... -- 546 -- 10 545 11 556 -- N/A Indian Trails Phase II (r)... -- 864 -- 18 870 12 882 -- N/A Walker Ranch Phase I (s).... -- 2,230 -- 1,156 2,373 1,013 3,386 -- N/A Walker Ranch Phase II (t)... -- 1,481 -- 501 1,575 407 1,982 -- N/A Walker Ranch Phase III (u). -- 555 -- 228 591 192 783 -- N/A Santa Fe, New Mexico: Foothills of Santa Fe Phase II (v)......... -- 1,114 -- 35 1,114 35 1,149 -- N/A St. Francis (w). -- 1,941 -- 380 1,986 335 2,321 -- N/A -------- -------- ---------- -------- -------- ---------- ---------- ------- Total Development Land........... $ -- $ 19,233 $ -- $ 10,455 $ 19,758 $ 9,930 $ 29,688 $ -- -------- -------- ---------- -------- -------- ---------- ---------- ------- HOTEL: San Francisco, California: Wharf Holiday Inn (x)........ $ -- $ 12,861 $ 1,935 $ 8,074 $ 12,861 $ 10,009 $ 22,870 $ 3,139 1972 -------- -------- ---------- -------- -------- ---------- ---------- ------- OFFICE/INDUSTRIAL: Dallas, Texas: Irving Blvd..... $ -- $ 109 $ 303 $ 128 $ 109 $ 431 $ 540 $ 234 1968 El Paso, Texas: Vista Industrial..... -- 567 2,504 63 567 2,567 3,134 437 1987 Ontario, California: Ontario Industrial Building....... -- 1,200 3,828 (891)(y) 1,200 2,937 4,137 696 1987 -------- -------- ---------- -------- -------- ---------- ---------- ------- Total Office/Industrial. $ -- $ 1,876 $ 6,635 $ (700) $ 1,876 $ 5,935 $ 7,811 $ 1,367 -------- -------- ---------- -------- -------- ---------- ---------- ------- OTHER: -- 16 46 1 16 47 63 38 1971 -------- -------- ---------- -------- -------- ---------- ---------- ------- TOTAL OTHER..... $ -- $ 16 $ 46 $ 1 $ 16 $ 47 $ 63 $ 38 -------- -------- ---------- -------- -------- ---------- ---------- ------- TOTAL........... $158,054 $333,967 $1,048,753 $473,146 $343,536 $1,512,330 $1,855,866 $81,977 ======== ======== ========== ======== ======== ========== ========== ======= YEAR PROPERTIES ACQUIRED ---------- -------- LAND HELD FOR FU- TURE MULTIFAMILY DEVELOPMENT: Austin, Texas: Homestead Village--Round Rock (j)....... 1995 Monterey Ranch Village I (k).. 1993 Monterey Ranch Village III (l)............ 1993 El Paso, Texas: West Ten (m).... 1994 Houston, Texas: Oaks at Medical Center Phase II (n)............ 1994 Phoenix, Arizona: 22nd & Dunlap Phase II (o)... 1995 Arrowhead Phase II (p)......... 1995 San Antonio, Texas: Dymaxion Phase II (q)......... 1994 Indian Trails Phase II (r)... 1994 Walker Ranch Phase I (s).... 1994 Walker Ranch Phase II (t)... 1994 Walker Ranch Phase III (u). 1994 Santa Fe, New Mexico: Foothills of Santa Fe Phase II (v)......... 1995 St. Francis (w). 1994 Total Development Land........... HOTEL: San Francisco, California: Wharf Holiday Inn (x)........ 1975 OFFICE/INDUSTRIAL: Dallas, Texas: Irving Blvd..... 1977 El Paso, Texas: Vista Industrial..... 1989 Ontario, California: Ontario Industrial Building....... 1987 Total Office/Industrial. OTHER: 1972 TOTAL OTHER..... TOTAL...........
- ------- (a) Phase I (118 units) was acquired in 1991 and Phase II (122 units) was developed in 1992. (b) As of 12/31/95, property was undergoing development. (c) Phase I (132 units) was developed in 1992 and Phase II (57 units) was developed in 1995. (d) Phase I (120 units) was developed in 1980, Phase II (60 units) was developed in 1981 and Phase III (288 units) was developed in 1983. (e) Phase I (160 units) was developed in 1989 and Phase II (132 units) was developed in 1991. 40 (f) Phase I (208 units) was acquired in 1991 and Phase II (144 units) was developed in 1994. (g) Phase I (84 units) was developed in 1970 and Phase II (100 units) was developed in 1978. (h) Phase I (250 units) was acquired in 1993 and Phase II (80 units) was developed in 1995. (i) Represents properties owned by third party owner-developers that are subject to presale agreements with PTR to acquire such properties. PTR's investment as of December 31, 1995 represents development loans made by PTR to such owner-developers. (j) 3.7 acres of undeveloped land. (k) 19.9 acres of undeveloped land. (j) 53.1 acres of undeveloped land. (m) 25.3 acres of undeveloped land. (n) 13.2 acres of undeveloped land. (o) 7.6 acres of undeveloped land. (p) 11.6 acres of undeveloped land. (q) 18.0 acres of undeveloped land. (r) 25.6 acres of undeveloped land. (s) 38.7 acres of undeveloped land. (t) 30.5 acres of undeveloped land. (u) 10.3 acres of undeveloped land. (v) 19.2 acres of undeveloped land. (w) 10.4 acres of undeveloped land. (x) PTR owns the building and land leased to Holiday Inns of America, Inc. at Fishermann's Wharf in San Francisco. The lease with Holiday Inns expires in 2018. (y) The Ontario Industrial property was written down by $1,100,000 in June 1993 to more properly reflect the property's net realizable value. The following is a reconciliation of the carrying amount and related accumulated depreciation of PTR's investment in real estate, at cost (in thousands):
DECEMBER 31, -------------------------------- CARRYING AMOUNTS 1995 1994 1993 ---------------- ---------- ---------- -------- Balance at January 1......................... $1,296,288 $ 872,610 $337,274 Acquisitions, including renovation expendi- tures....................................... 370,543 270,024 449,500 Development expenditures, including land ac- quisition................................... 192,067 163,826 112,264 Capital improvements......................... 5,493 3,912 1,639 Real estate sold............................. (8,402) (12,287) (24,953) Provision for possible losses................ (220) (1,600) (2,270) Other........................................ 97 (197) (844) ---------- ---------- -------- Balance at December 31....................... $1,855,866 $1,296,288 $872,610 ========== ========== ======== DECEMBER 31, -------------------------------- ACCUMULATED DEPRECIATION 1995 1994 1993 ------------------------ ---------- ---------- -------- Balance at January 1......................... $ 46,199 $ 22,022 $ 19,360 Depreciation for the year.................... 36,685 24,614 10,241 Accumulated depreciation of real estate sold. (646) (151) (7,429) Other........................................ (259) (286) (150) ---------- ---------- -------- Balance at December 31....................... $ 81,979 $ 46,199 $ 22,022 ========== ========== ========
As of December 31, 1995, the aggregate cost and net investment cost for federal income tax purposes of PTR's investment in real estate amounted to $1,796,983,000 and $1,714,221,000, respectively. 41 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Pacific Trust, a Maryland real estate investment trust, and the undersigned Trustees and officers of Security Capital Pacific Trust, hereby constitutes and appoints C. Ronald Blankenship, James W. Kluber, Jeffrey A. Klopf, Ariel Amir, Edward J. Schneidman and Michael T. Blair its or his true and lawful attorneys-in-fact and agents, for it or him and in its or his name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this report, and to file each such amendment to this report, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as it or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them may lawfully do or cause to be done by virtue hereof. 42 EX-23.1 2 INDEPENDENT AUDITOR'S CONSENT Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Trustees Security Capital Pacific Trust: We consent to incorporation by reference in the registration statements No. 33-86444 (Form S-3), No. 33-78402 (Form S-3), No. 33-71040 (Form S-3), No. 33- 44631 (Form S-3) and No. 33-25317 (Form S-8) of Security Capital Pacific Trust of our report dated January 31, 1996 except as to note 12, which is as of February 23, 1996, relating to the balance sheets of Security Capital Pacific Trust as of December 31, 1995 and 1994 and the related statements of earnings, shareholders' equity, and cash flows and related schedule for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995 annual report on Form 10-K/A No. 1 of Security Capital Pacific Trust. KPMG PEAT MARWICK LLP El Paso, Texas August 5, 1996 -----END PRIVACY-ENHANCED MESSAGE-----