Maryland (Equity Residential) | 1-12252 (Equity Residential) | 13-3675988 (Equity Residential) | ||
Illinois (ERP Operating Limited Partnership) | 0-24920 (ERP Operating Limited Partnership) | 36-3894853 (ERP Operating Limited Partnership) | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Two North Riverside Plaza Chicago, Illinois | 60606 | |
(Address of principal executive offices) | (Zip Code) |
Exhibit Number | Exhibit | |||||
99.1 | Pro Forma Financial Information | |||||
Equity Residential | ||||||
Pro Forma Condensed Consolidated Statement of Operations for the quarter ended March 31, 2013 (unaudited) | ||||||
ERP Operating Limited Partnership | ||||||
Pro Forma Condensed Consolidated Statement of Operations for the quarter ended March 31, 2013 (unaudited) | ||||||
Notes to Pro Forma Condensed Consolidated Statements of Operations for Equity Residential and ERP Operating Limited Partnership. |
EQUITY RESIDENTIAL | ||||
Date: | June 25, 2013 | By: | /s/ Mark J. Parrell | |
Name: | Mark J. Parrell | |||
Its: | Executive Vice President and Chief Financial Officer | |||
(Principal Financial Officer) | ||||
Date: | June 25, 2013 | By: | /s/ Ian S. Kaufman | |
Name: | Ian S. Kaufman | |||
Its: | Senior Vice President and Chief Accounting Officer | |||
(Principal Accounting Officer) | ||||
ERP OPERATING LIMITED PARTNERSHIP | ||||
BY: EQUITY RESIDENTIAL | ||||
ITS GENERAL PARTNER | ||||
Date: | June 25, 2013 | By: | /s/ Mark J. Parrell | |
Name: | Mark J. Parrell | |||
Its: | Executive Vice President and Chief Financial Officer | |||
(Principal Financial Officer) | ||||
Date: | June 25, 2013 | By: | /s/ Ian S. Kaufman | |
Name: | Ian S. Kaufman | |||
Its: | Senior Vice President and Chief Accounting Officer | |||
(Principal Accounting Officer) |
• | the historical Consolidated Statements of Operations of the Company; |
• | the historical operations of properties acquired for Archstone's period of ownership including the pro forma loss from investments in unconsolidated entities for Archstone's period of ownership with respect to the unconsolidated entities and the Company's 60% ownership interest in the unconsolidated joint ventures with AVB; |
• | the pro forma details of the transaction including the adjusted depreciation and interest expense; and |
• | the Pro Forma Condensed Consolidated Statements of Operations of the Company. |
(1) | (2) | (3) | ||||||||||||||
Equity Residential Historical | Archstone Historical | Transaction | Pro Forma Amounts | |||||||||||||
Revenues | ||||||||||||||||
Rental income | $ | 537,002 | $ | 99,201 | $ | 136 | (3a) | $ | 636,339 | |||||||
Fee and asset management | 2,160 | — | — | 2,160 | ||||||||||||
Total revenues | 539,162 | 99,201 | 136 | 638,499 | ||||||||||||
Expenses | ||||||||||||||||
Property and maintenance | 107,083 | 22,070 | 762 | (3b) | 129,915 | |||||||||||
Real estate taxes and insurance | 68,647 | 12,603 | — | 81,250 | ||||||||||||
Property management | 22,489 | 2,068 | — | 24,557 | ||||||||||||
Fee and asset management | 1,646 | — | — | 1,646 | ||||||||||||
Depreciation | 205,272 | — | 132,043 | (3c) | 337,315 | |||||||||||
General and administrative | 16,496 | — | — | 16,496 | ||||||||||||
Total expenses | 421,633 | 36,741 | 132,805 | 591,179 | ||||||||||||
Operating income (loss) | 117,529 | 62,460 | (132,669 | ) | 47,320 | |||||||||||
Interest and other income | 256 | — | — | 256 | ||||||||||||
Other expenses | (2,564 | ) | — | — | (2,564 | ) | ||||||||||
Merger expenses | (19,092 | ) | — | 19,092 | (3d) | — | ||||||||||
Interest: | ||||||||||||||||
Expense incurred, net | (195,685 | ) | — | (19,394 | ) | (3e) | (215,079 | ) | ||||||||
Amortization of deferred financing costs | (7,023 | ) | — | (1,869 | ) | (3f) | (6,413 | ) | ||||||||
2,479 | (3g) | |||||||||||||||
(Loss) income before income and other taxes, (loss) from investments | ||||||||||||||||
in unconsolidated entities and discontinued operations | (106,579 | ) | 62,460 | (132,361 | ) | (176,480 | ) | |||||||||
Income and other tax (expense) benefit | (407 | ) | — | — | (407 | ) | ||||||||||
(Loss) from investments in unconsolidated entities due to operations | (355 | ) | (419 | ) | (2a)(2b) | (831 | ) | (3h) | (1,605 | ) | ||||||
(Loss) from investments in unconsolidated entities due to merger | (46,011 | ) | — | 46,011 | (3i) | — | ||||||||||
(Loss) income from continuing operations | (153,352 | ) | 62,041 | (87,181 | ) | (178,492 | ) | |||||||||
Net loss (income) from continuing operations attributable to Noncontrolling Interests: | ||||||||||||||||
Operating Partnership, net | 6,345 | (2,516 | ) | (4) | 3,515 | (4) | 7,344 | |||||||||
Partially Owned Properties | (25 | ) | (537 | ) | (5) | 1,245 | (5) | 683 | ||||||||
Net (loss) income from continuing operations attributable to controlling interests | (147,032 | ) | 58,988 | (82,421 | ) | (170,465 | ) | |||||||||
Preferred distributions | (1,036 | ) | — | — | (1,036 | ) | ||||||||||
(Loss) income from continuing operations available to Common Shares | $ | (148,068 | ) | $ | 58,988 | $ | (82,421 | ) | $ | (171,501 | ) | |||||
Earnings per share - basic: | ||||||||||||||||
(Loss) from continuing operations available to Common Shares | $ | (0.44 | ) | $ | (0.48 | ) | ||||||||||
Weighted average Common Shares outstanding | 337,532 | (3j) | 359,362 | |||||||||||||
Earnings per share – diluted: | ||||||||||||||||
(Loss) from continuing operations available to Common Shares | $ | (0.44 | ) | $ | (0.48 | ) | ||||||||||
Weighted average Common Shares outstanding | 337,532 | (3j) | 359,362 |
(1) | (2) | (3) | ||||||||||||||
ERP Operating Limited Partnership Historical | Archstone Historical | Transaction | Pro Forma Amounts | |||||||||||||
Revenues | ||||||||||||||||
Rental income | $ | 537,002 | $ | 99,201 | $ | 136 | (3a) | $ | 636,339 | |||||||
Fee and asset management | 2,160 | — | — | 2,160 | ||||||||||||
Total revenues | 539,162 | 99,201 | 136 | 638,499 | ||||||||||||
Expenses | ||||||||||||||||
Property and maintenance | 107,083 | 22,070 | 762 | (3b) | 129,915 | |||||||||||
Real Estate taxes and insurance | 68,647 | 12,603 | — | 81,250 | ||||||||||||
Property management | 22,489 | 2,068 | — | 24,557 | ||||||||||||
Fee and asset management | 1,646 | — | — | 1,646 | ||||||||||||
Depreciation | 205,272 | — | 132,043 | (3c) | 337,315 | |||||||||||
General and administrative | 16,496 | — | — | 16,496 | ||||||||||||
Total expenses | 421,633 | 36,741 | 132,805 | 591,179 | ||||||||||||
Operating income (loss) | 117,529 | 62,460 | (132,669 | ) | 47,320 | |||||||||||
Interest and other income | 256 | — | — | 256 | ||||||||||||
Other expenses | (2,564 | ) | — | — | (2,564 | ) | ||||||||||
Merger expenses | (19,092 | ) | — | 19,092 | (3d) | — | ||||||||||
Interest: | ||||||||||||||||
Expense incurred, net | (195,685 | ) | — | (19,394 | ) | (3e) | (215,079 | ) | ||||||||
Amortization of deferred financing costs | (7,023 | ) | — | (1,869 | ) | (3f) | (6,413 | ) | ||||||||
2,479 | (3g) | |||||||||||||||
(Loss) income before income and other taxes, (loss) from investments | ||||||||||||||||
in unconsolidated entities and discontinued operations | (106,579 | ) | 62,460 | (132,361 | ) | (176,480 | ) | |||||||||
Income and other tax (expense) benefit | (407 | ) | — | — | (407 | ) | ||||||||||
(Loss) from investments in unconsolidated entities due to operations | (355 | ) | (419 | ) | (2a)(2b) | (831 | ) | (3h) | (1,605 | ) | ||||||
(Loss) from investments in unconsolidated entities due to merger expenses | (46,011 | ) | 46,011 | (3i) | — | |||||||||||
(Loss) income from continuing operations | (153,352 | ) | 62,041 | (87,181 | ) | (178,492 | ) | |||||||||
Net (income) loss from continuing operations attributable to | ||||||||||||||||
Noncontrolling Interests – Partially Owned Properties | (25 | ) | (537 | ) | (5) | 1,245 | (5) | 683 | ||||||||
Net (loss) income from continuing operations attributable to | ||||||||||||||||
controlling interests | $ | (153,377 | ) | $ | 61,504 | $ | (85,936 | ) | $ | (177,809 | ) | |||||
ALLOCATION OF INCOME FROM CONTINUING OPERATIONS: | ||||||||||||||||
Preference Units | $ | 1,036 | $ | — | $ | — | $ | 1,036 | ||||||||
(Loss) income from continuing operations available to Units | $ | (154,413 | ) | $ | 61,504 | $ | (85,936 | ) | $ | (178,845 | ) | |||||
Earnings per Unit - basic: | ||||||||||||||||
(Loss) from continuing operations available to Units | $ | (0.44 | ) | $ | (0.48 | ) | ||||||||||
Weighted average Units outstanding | 351,255 | (3j) | 373,085 | |||||||||||||
Earnings per Unit - diluted: | ||||||||||||||||
(Loss) from continuing operations available to Units | $ | (0.44 | ) | $ | (0.48 | ) | ||||||||||
Weighted average Units outstanding | 351,255 | (3j) | 373,085 |
1) | Historical Amounts – Represents the consolidated statement of operations of the Company as contained in the historical consolidated financial statements included in its Form 10-Q as of and for the quarter ended March 31, 2013 previously filed with the Securities and Exchange Commission. |
2) | Archstone Historical – Represents the historical operations of the properties acquired for Archstone's period of ownership (1/1/13 - 2/27/13) during the quarter ended March 31, 2013 attributable to the acquisition of the Archstone Portfolio as if the acquisition had occurred on January 1, 2013. This number includes: |
a) | Unconsolidated Assets – $(0.3) million (loss) from investments in unconsolidated entities. The (loss) from investments in unconsolidated entities recorded is attributable to the acquisition of the interests in various unconsolidated assets. Represents the pro forma (loss) from investments in unconsolidated entities for Archstone's period of ownership during the quarter ended March 31, 2013. |
b) | Joint Venture – $(0.1) million (loss) from investments in unconsolidated entities. The Company has an unconsolidated 60% interest in joint ventures with AVB. These joint ventures hold certain assets neither partner intends to own and these assets are held for sale. Represents the pro forma (loss) from investments in unconsolidated entities for Archstone's period of ownership during the quarter ended March 31, 2013. |
3) | Transaction – In connection with the transaction, we made the following adjustments for Archstone's period of ownership (1/1/13 - 2/27/13) during the quarter ended March 31, 2013: |
a) | Rental income of $0.1 million relates to the amortization of $5.7 million in net below market retail leases assumed in the transaction. The below market retail leases are amortized over a weighted average life of seven years. |
b) | Property and maintenance expense of $0.8 million relates to the amortization of $191.6 million in net below market ground leases assumed in the transaction. The below market ground leases are amortized over the term of the respective ground leases to which they relate having expirations ranging from 2042 - 2103. |
c) | Depreciation expense of $132.0 million is calculated based on the fair value of the real estate related assets purchased as detailed below (amounts in thousands except for depreciable lives): |
Quarter Ended 3/31/13 | |||||||
Asset | Basis | Weighted Average Depreciable Life | Pro Forma Adjustment | ||||
Building | $ | 5,530,913 | 30 Years | $ | 30,727 | ||
Site Improvements | 75,280 | 8 Years | 1,569 | ||||
FF&E | 59,910 | 5 Years | 1,997 | ||||
In-Place Leases | 293,250 | 6 Months | 97,750 | ||||
Total | $ | 5,959,353 | $ | 132,043 |
d) | Merger expenses of $19.1 million reflect the elimination of historical charges related to this transaction that are not expected to recur. |
e) | Reflects the $19.4 million of interest expense related to debt that was assumed or incurred as a result of or to finance this transaction. The components of interest expense are detailed below (amounts in thousands except for interest rates): |
Quarter Ended | |||||||
Debt Type | Principal | Interest Rate Range | 3/31/13 Pro Forma Adjustment | ||||
Fixed Rate Mortgages Assumed | $ | 2,568,347 | 0.10% - 6.26% | $ | 24,710 | ||
Variable Rate Mortgages Assumed | 380,656 | SIFMA + 0.865% -1.402% | 812 | ||||
LIBOR + 1.75% | |||||||
Net Premium on Mortgages Assumed | 127,873 | n/a | (8,789 | ) | |||
Line of Credit | 395,000 | LIBOR +1.05% | 918 | ||||
Delayed Draw Term Loan | 750,000 | LIBOR + 1.20% | 1,743 | ||||
Total | $ | 3,841,220 | $ | 19,394 |
f) | Reflects $1.9 million of amortization of estimated financing costs applicable to assuming mortgages and draws on the revolving line of credit and delayed draw term loan. Financing costs are amortized to interest expense over the expected life of the respective loan agreements (weighted average of 6.6 years) using the straight-line method, which approximates the effective interest method. |
g) | Amortization of deferred financing costs of $2.5 million reflects the elimination of 2013 unamortized loan costs written off in the historical financial statements related to a $2.5 billion bridge loan facility commitment that was obtained in preparation for the transaction and has since been canceled in 2013 and is not expected to recur. |
h) | Reflects $0.6 million of accrued but unpaid distributions related to preferred shares assumed as part of this transaction of which the Company's unconsolidated obligation is 60%. Also includes $0.2 million (loss) from investments in unconsolidated entities of which the Company has an unconsolidated 60% interest in joint ventures with AVB. Represents the pro forma (loss) from investments in unconsolidated entities for Archstone's period of ownership during the quarter ended March 31, 2013. |
i) | (Loss) from investments in unconsolidated entities due to merger expenses of $46.0 million reflect the elimination of historical charges related to this transaction that are not expected to recur. |
j) | Historical basic and diluted weighted average common shares outstanding of 337.5 million for Equity Residential should be adjusted to include a weighting for the full period of the 34.5 million shares issued to affiliates of LBHI in order to complete the transaction. We did not adjust the number of diluted shares outstanding as it would be antidilutive. |
4) | Reflects the allocation of results between the controlling interests and the Noncontrolling Interests – Operating Partnership based on the Noncontrolling Interests – Operating Partnership weighted average ownership of 4.09% of Equity Residential for the quarter ended March 31, 2013. |
5) | Reflects the noncontrolling interest in operations for a partially owned property for Archstone's period of ownership (1/1/13 - 2/27/13) during the quarter ended March 31, 2013. |