-----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, G88uBjjVtjAtDthaFwSMGjxN4umUqJQCBqGE+X2uG91PB9UwsTnvgdbLelaGLO07 wtABWarZi9EBR6npYq+/kg== 0000950137-98-003354.txt : 19980825 0000950137-98-003354.hdr.sgml : 19980825 ACCESSION NUMBER: 0000950137-98-003354 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980722 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980824 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY RESIDENTIAL PROPERTIES TRUST CENTRAL INDEX KEY: 0000906107 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363877868 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-12252 FILM NUMBER: 98696405 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: STE 400 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124741300 MAIL ADDRESS: STREET 1: TWO N RIVERSIDE PLAZA STREET 2: SUITE 450 CITY: CHICAGO STATE: IL ZIP: 60606 8-K/A 1 FORM 8-K/A 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): July 23, 1998 --------------------- EQUITY RESIDENTIAL PROPERTIES TRUST (Exact Name of Registrant as Specified in Charter) MARYLAND 1-12252 13-3675988 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation or File Number) Identification No.) organization)
TWO NORTH RIVERSIDE PLAZA, SUITE 400 CHICAGO, ILLINOIS 60606 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 474-1300 NOT APPLICABLE (Former Name or Former Address, if Changed Since Last Report) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 5 -- OTHER EVENTS On July 8, 1998, Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR"), and Merry Land & Investment Company, Inc. ("Merry Land"), a Georgia corporation, entered into an Agreement and Plan of Merger dated as of July 8, 1998 pursuant to which Merry Land will merge with and into EQR (the "Merger"). Pursuant to the Merger, the shares of common stock of Merry Land issued and outstanding immediately prior to the Merger will be converted into 0.53 of a common share of beneficial interest of EQR, Merry Land's preferred stock will be converted into preferred shares of beneficial interest of EQR with the same terms and preferences, subject to certain adjustments to the conversion prices of Merry Land's convertible preferred stock in accordance with its terms. Immediately prior to the consummation of the Merger, Merry Land will distribute to its common shareholders all of the common stock of Merry Land Properties, Inc., a newly formed Georgia corporation ("MYRP Newco"), which will own and operate certain of Merry Land's assets following the Merger (the "Spin-Off"). Consummation of the Merger and Spin-Off is subject to the approval of the Merger by the shareholders of EQR and Merry Land and to specified closing conditions. In connection with the Merger, EQR hereby amends its Current Report on Form 8-K dated July 23, 1998 by filing pro forma financial information relating to EQR giving effect to, among other things, the completion of the Merger. Capitalized terms used but not defined herein shall have the meanings ascribed to them in EQR's Annual Report on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 1997. 2 3 ITEM 7 -- FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (b) Pro Forma Financial Information. EQUITY RESIDENTIAL PROPERTIES TRUST BASIS OF PRESENTATION TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1998 The Unaudited Pro Forma Combined Balance Sheet gives effect to (i) the proposed Merger of Equity Residential Properties Trust ("EQR") and Merry Land & Investment Company, Inc. ("Merry Land") and (ii) the acquisition in July, 1998 and probable acquisition of 42 properties for a total purchase price of $645.7 million, which included the assumption of $180.5 million of mortgage indebtedness, the issuance of 2.3 million OP Units with a value of $111 million and the expected borrowings of $90 million on EQR's line of credit. All of these events have been presented as if they had occurred on June 30, 1998. The Unaudited Pro Forma Combined Balance Sheet gives effect to the Merger under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. In the opinion of management, all significant adjustments necessary to reflect the effects of the Merger have been made. The Unaudited Pro Forma Combined Balance Sheet is presented for comparative purposes only and is not necessarily indicative of what the actual combined financial position of EQR and Merry Land would have been at June 30, 1998, nor does it purport to represent the future combined financial position of EQR and Merry Land. This Unaudited Pro Forma Combined Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the respective historical financial statements and notes thereto of EQR and Merry Land included in each company's respective Annual Report on Form 10-K for the year ended December 31, 1997, as amended by Form 10-K/A, each company's respective Quarterly Report on Form 10-Q for the six months ended June 30, 1998 and the financial statements and notes thereto in EQR's Form 8-K dated June 25, 1998. 3 4 EQUITY RESIDENTIAL PROPERTIES TRUST UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 MOST RECENT ACQUIRED AND EQR PRO FORMA EQR EQR PROBABLE PRE-MERGER MERRY LAND MERGER PRO FORMA HISTORICAL PROPERTIES(A) PRO FORMA HISTORICAL(B) ADJUSTMENTS(C) COMBINED ---------- ------------- ---------- ------------- -------------- --------- ASSETS Rental property, net.......... $7,352,780 $645,684 $7,998,464 $1,601,069 $ 543,575(D) $10,143,108 Construction in progress...... 41,982 41,982 52,736 94,718 Investment in mortgage notes, net......................... 87,916 87,916 38,317(E) 126,233 Cash and cash equivalents..... 265,915 (264,275) 1,640 2,474 792(F) 4,906 Rent receivables.............. 5,127 5,127 5,127 Deposits -- restricted........ 48,692 48,692 48,692 Escrow deposits -- mortgage... 57,655 57,655 57,655 Deferred financing costs, net......................... 23,299 23,299 4,567 (4,567)(G) 23,299 Other assets.................. 116,673 116,673 8,521 (31,527)(H) 93,667 ---------- -------- ---------- ---------- --------- ----------- Total assets............ $8,000,039 $381,409 $8,381,448 $1,669,367 $ 546,590 $10,597,405 ========== ======== ========== ========== ========= =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable........ $1,775,556 $180,450 $1,956,006 $ 183,340 $ 9,948(I) $ 2,149,294 Line of credit................ 175,000 90,000 265,000 12,100 95,000(F) 372,100 Notes, net.................... 1,428,304 1,428,304 460,000 1,888,304 Accounts payable, accrued expenses.................... 78,362 78,362 17,173 (716)(I) 94,819 Accrued interest payable...... 34,952 34,952 7,169 42,121 Rents received in advance and other liabilities........... 41,822 41,822 6,316 48,138 Security deposits............. 33,800 33,800 2,081 35,881 Distributions payable......... 90,471 90,471 90,471 ---------- -------- ---------- ---------- --------- ----------- Total liabilities....... 3,658,267 270,450 3,928,717 688,179 104,232 4,721,128 ---------- -------- ---------- ---------- --------- ----------- Commitments and contingencies............... (J) ---------- -------- ---------- ---------- --------- ----------- Minority interests............ 290,770 70,857 361,627 18,769 (14,272)(K) 366,124 ---------- -------- ---------- ---------- --------- ----------- Shareholders' equity: Common shares................. 979 979 42,969 (42,750)(L) 1,198 Preferred shares: Series A...................... 153,000 153,000 4,665 (4,665)(M) 153,000 Series B...................... 125,000 125,000 100,000 (100,000)(M) 125,000 Series C...................... 115,000 115,000 114,985 (114,985)(M) 115,000 Series D...................... 175,000 175,000 50,000 (50,000)(M) 175,000 Series E convertible.......... 99,950 99,950 100,000 (100,000)(M) 99,950 Series F...................... 57,500 57,500 57,500 Series G convertible.......... 316,250 316,250 316,250 Series H...................... 4,665(M) 4,665 Series I...................... 100,000(M) 100,000 Series J...................... 114,985(M) 114,985 Series K...................... 50,000(M) 50,000 Series L...................... 100,000(M) 100,000 Employee notes................ (4,949) (4,949) (29,446) 29,446(N) (4,949) Paid in capital............... 3,194,261 40,102 3,234,363 611,068 438,112(O) 4,283,543 Distributions in excess of accumulated earnings........ (180,989) (180,989) (31,822) 31,822(P) (180,989) ---------- -------- ---------- ---------- --------- ----------- Total shareholders' equity............... 4,051,002 40,102 4,091,104 962,419 456,630 5,510,153 ---------- -------- ---------- ---------- --------- ----------- Total liabilities and shareholders' equity............... $8,000,039 $381,409 $8,381,448 $1,669,367 $ 546,590 $10,597,405 ========== ======== ========== ========== ========= ===========
4 5 EQUITY RESIDENTIAL PROPERTIES TRUST BASIS OF PRESENTATION TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 The Unaudited Pro Forma Combined Statement of Operations for the six months ended June 30, 1998 gives effect to (i) the proposed merger of EQR and Merry Land, (ii) the acquisition from January to June, 1998 of 41 properties and the acquisition in July, 1998 and probable acquisition of 42 properties for a total purchase price of $1.4 billion, which included the assumption of $412.6 million of mortgage indebtedness, the issuance of 2.5 million OP Units with a value of $127.3 million and the borrowings of $265 million on EQR's line of credit, which includes $90 million on a pro forma basis, (iii) the January 1998 Common Share Offering, the February 1998 Common Share Offerings, the March 1998 Common Share Offering and the April 1998 Common Share Offering and (iv) the issuance of the 2015 Notes. All of these events have been presented as if they occurred on January 1, 1998. The Unaudited Pro Forma Combined Statement of Operations gives effect to the Merger under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16, and the combined entity qualifying as a REIT, distributing at least 95% of its taxable income, and therefore, incurring no federal income tax liability for the period presented. In the opinion of management, all significant adjustments necessary to reflect the effects of these transactions have been made. The Unaudited Pro Forma Combined Statement of Operations is presented for comparative purposes only and is not necessarily indicative of what the actual combined results of EQR and Merry Land would have been for the six months ended June 30, 1998, nor does it purport to be indicative of the results of operations in future periods. The Unaudited Pro Forma Combined Statement of Operations should be read in conjunction with, and is qualified in its entirety by, the respective historical financial statements and notes thereto of EQR and Merry Land included in each company's respective Annual Report on Form 10-K for the year ended December 31, 1997, as amended by Form 10-K/A, each company's respective Quarterly Report on Form 10-Q for the six months ended June 30, 1998 and the financial statements included in EQR's Form 8-K dated June 25, 1998. 5 6 EQUITY RESIDENTIAL PROPERTIES TRUST UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 ACQUIRED EQR PRO FORMA EQR EQR AND PROBABLE PRE-MERGER MERRY LAND MERGER PRO FORMA HISTORICAL PROPERTIES(Q) PRO FORMA HISTORICAL(AA) ADJUSTMENTS COMBINED ---------- ------------- ---------- -------------- ----------- --------- REVENUES Rental income............................. $571,370 $70,920(R) $642,290 $126,430 $(4,867)(BB) $763,853 Fee and asset management.................. 2,790 2,790 2,790 Interest income -- investment in mortgage notes.................................... 10,221 (1,873)(S) 8,348 56 1,491(CC) 9,895 Interest and other income................. 9,010 (5,210)(T) 3,800 2,270 6,070 -------- ------- -------- -------- ------- -------- Total revenues......................... 593,391 63,837 657,228 128,756 (3,376) 782,608 -------- ------- -------- -------- ------- -------- EXPENSES Property and maintenance.................. 137,910 16,252(U) 154,162 29,796 (1,182)(DD) 182,776 Real estate taxes and insurance........... 56,484 7,320(V) 63,804 14,867 (397)(EE) 78,274 Property management....................... 25,110 1,487(W) 26,597 2,375 (835)(FF) 28,137 Fee and asset management.................. 2,240 2,240 2,240 Depreciation.............................. 131,910 17,150(X) 149,060 26,543 4,989(GG) 180,592 Interest:................................. Expense incurred......................... 105,651 24,769(Y) 130,420 18,049 1,900(HH) 150,369 Amortization of deferred financing costs.................................. 1,275 1,275 728 (728)(II) 1,275 General and administrative................ 10,271 10,271 2,394 (1,644)(JJ) 11,021 -------- ------- -------- -------- ------- -------- Total expenses......................... 470,851 66,978 537,829 94,752 2,103 634,684 -------- ------- -------- -------- ------- -------- Income before gain on disposition of properties and allocation to Minority Interest................................. 122,540 (3,141) 119,399 34,004 (5,479) 147,924 Gain on disposition of properties........ 11,092 11,092 (400) 10,692 -------- ------- -------- -------- ------- -------- Income before allocation to Minority Interests................................ 133,632 (3,141) 130,491 33,604 (5,479) 158,616 (Income) allocated to Minority Interests.............................. (8,310) (1,314) (9,624) (328) 1,765(KK) (8,187) -------- ------- -------- -------- ------- -------- Net income................................ 125,322 (4,455) 120,867 33,276 (3,714) 150,429 Preferred distributions................... (43,384) (43,384) (14,471) (919)(LL) (58,774) -------- ------- -------- -------- ------- -------- Net income available to common shares..... $ 81,938 $(4,455) $ 77,483 18,805 (4,633) $ 91,655 ======== ======= ======== ======== ======= ======== Net income per weighted average Common Shares outstanding....................... $ 0.86 $ 0.80 $ 0.77 ======== ======== ======== Net income per weighted average Common Shares outstanding -- assuming dilution................................. $ 0.85 $ 0.79 $ 0.75 ======== ======== ======== Weighted average Common Shares outstanding.............................. 95,394 97,350(Z) 21,872(MM) 119,222 ======== ======== ======= ======== Weighted average Common Shares outstanding -- assuming dilution..................... 106,195 110,351(Z) 22,738(MM) 133,089 ======== ======== ======= ========
6 7 EQUITY RESIDENTIAL PROPERTIES TRUST BASIS OF PRESENTATION TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 The Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 1997 gives effect to (i) the proposed merger of EQR and Merry Land, (ii) the acquisition from the mergers between EQR and Wellsford and EQR and Evans and other acquisitions during 1997 of 124 properties for a total purchase price of $4.1 billion, (iii) the acquisition from January to June, 1998 of 41 properties and the acquisition in July, 1998 of 42 properties for a total purchase price of $1.4 billion, which included the assumption of $412.6 million of mortgage indebtedness, the issuance of 2.5 million OP Units with a value of $127.3 million and the borrowings of $265 million on EQR's line of credit, which includes $90 million on a pro forma basis, (iv) the March 1997 Common Share Offerings, the June 1997 Common Share Offerings, the September 1997 Common Share Offering, the October 1997 Common Share Offering, the December 1997 Common Share Offerings, the January 1998 Common Share Offering, the February 1998 Common Share Offerings, the March 1998 Common Share Offering and the April 1998 Common Share Offering, and (v) the Fourth Public Debt Offering and the issuance of the 2015 Notes. All of these events have been presented as if they occurred on January 1, 1997. The Unaudited Pro Forma Combined Statement of Operations gives effect to the Merger under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16, and the combined entity qualifying as a REIT, distributing at least 95% of its taxable income, and therefore, incurring no federal income tax liability for the period presented. In the opinion, of management, all significant adjustments necessary to reflect the effects of these transactions have been made. The Unaudited Pro Forma Combined Statement of Operations is presented for comparative purposes only and is not necessarily indicative of what the actual combined results of EQR and Merry Land would have been for the year ended December 31, 1997, nor does it purport to be indicative of the results of operations in future periods. The Unaudited Pro Forma Combined Statement of Operations should be read in conjunction with, and is qualified in its entirety by, the respective historical financial statements and notes thereto of EQR and Merry Land included in each company's respective Annual Report on Form 10-K for the year ended December 31, 1997, as amended by Form 10-K/A, each company's respective Quarterly Report on Form 10-Q for the six months ended June 30, 1998 and the financial statements included in EQR's Form 8-K dated June 25, 1998. 7 8 EQUITY RESIDENTIAL PROPERTIES TRUST UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 ACQUIRED EQR PRO FORMA EQR 1997 ACQUIRED AND PROBABLE PRE-MERGER MERRY LAND MERGER HISTORICAL PROPERTIES(NN) PROPERTIES(YY) PRO FORMA HISTORICAL(AA) ADJUSTMENTS ---------- -------------- -------------- ---------- -------------- ----------- REVENUES Rental income................ $707,733 $369,160(OO) $172,852(ZZ) $1,249,745 $208,871 $ (9,185)(III) Fee and asset management..... 5,697 5,697 Interest income -- investment in mortgage notes........... 20,366 (4,907)(AAA) 15,459 84 3,011(JJJ) Interest and other income.... 13,525 (6,665)(PP) (6,666)(BBB) 194 9,006 -------- -------- -------- ---------- -------- --------- Total revenues.............. 747,321 362,495 161,279 1,271,095 217,961 (6,174) -------- -------- -------- ---------- -------- --------- EXPENSES Property and maintenance..... 176,075 98,733(QQ) 44,991(CCC) 319,799 52,847 (2,350)(KKK) Real estate taxes and insurance................... 69,520 27,091(RR) 18,652(DDD) 115,263 23,712 (793)(LLL) Property management.......... 26,793 13,320(SS) 4,321(EEE) 44,434 3,176 (1,669)(MMM) Fee and asset management..... 3,364 3,364 Depreciation................. 156,644 84,624(TT) 42,598(FFF) 283,866 42,876 20,188(NNN) Interest:.................... Expense incurred............ 121,324 91,190(UU) 63,824(GGG) 276,338 25,900 3,061(OOO) Amortization of deferred financing costs........... 2,523 66(VV) 2,589 737 (737)(PPP) General and administrative... 15,064 3,319(WW) 18,383 4,666 (3,287)(QQQ) -------- -------- -------- ---------- -------- --------- Total expenses............ 571,307 318,343 174,386 1,064,036 153,914 14,413 -------- -------- -------- ---------- -------- --------- Income before gain on disposition of properties and allocation to Minority Interests................... 176,014 44,152 (13,107) 207,059 64,047 (20,587) Gain on disposition of properties................ 13,838 13,838 1,456 -------- -------- -------- ---------- -------- --------- Income before allocation to Minority Interests.......... 189,852 44,152 (13,107) 220,897 65,503 (20,587) (Income) allocated to Minority Interests........ (13,260) 524 (12,736) 587(RRR) -------- -------- -------- ---------- -------- --------- Net income................... 176,592 44,152 (12,583) 208,161 65,503 (20,000) Preferred distributions...... (59,012) (27,756)(XX) (86,768) (23,257) (7,625)(SSS) -------- -------- -------- ---------- -------- --------- Net income available to common shares............... $117,580 $ 16,396 $(12,583) $ 121,393 $ 42,246 $ (27,625) ======== ======== ======== ========== ======== ========= Net income per weighted average Common Shares outstanding................. $ 1.79 $ 1.26 ======== ========== Net income per weighted average Common Shares outstanding -- assuming dilution.................... $ 1.76 $ 1.25 ======== ========== Weighted average Common Shares outstanding.......... 65,729 96,356 (HHH) 21,872(TTT) ======== ========== ========= Weighted average Common Shares outstanding -- assuming dilution........... 74,281 107,408 (HHH) 22,738(TTT) ======== ========== ========= EQR PRO FORMA COMBINED --------- REVENUES Rental income................ $1,449,431 Fee and asset management..... 5,697 Interest income -- investment in mortgage notes........... 18,554 Interest and other income.... 9,200 ---------- Total revenues.............. 1,482,882 ---------- EXPENSES Property and maintenance..... 370,296 Real estate taxes and insurance................... 138,182 Property management.......... 45,941 Fee and asset management..... 3,364 Depreciation................. 346,930 Interest:.................... Expense incurred............ 305,299 Amortization of deferred financing costs........... 2,589 General and administrative... 19,762 ---------- Total expenses............ 1,232,363 ---------- Income before gain on disposition of properties and allocation to Minority Interests................... 250,519 Gain on disposition of properties................ 15,294 ---------- Income before allocation to Minority Interests.......... 265,813 (Income) allocated to Minority Interests........ (12,149) ---------- Net income................... 253,664 Preferred distributions...... (117,650) ---------- Net income available to common shares............... $ 136,014 ========== Net income per weighted average Common Shares outstanding................. $ 1.15 ========== Net income per weighted average Common Shares outstanding -- assuming dilution.................... $ 1.14 ========== Weighted average Common Shares outstanding.......... 118,228 ========== Weighted average Common Shares outstanding -- assuming dilution........... 130,146 ==========
8 9 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) (A) Includes the most recent multifamily properties acquired in July 1998 and probable properties anticipated to be acquired in 1998, as reported on Form 8-K dated June 25, 1998. Lakes at Vinings, Martins Landing, Lexington Village, Alderwood Park, Bellevue Meadows, Bramblewood, Briarwood, Cedar Pointe, Chelsea Square, Creekside, Grandview I&II, Greenhaven, Lincoln Green I&II, Lincoln Village I&II, Mountain Shadows, North Creek, Olde Redmond Place, Parkside, Skylark, Southwood, Summerwood, Surrey Downs, Timberwood, Turf Club, Willowick, Woodlake, Woodleaf, Woodridge I, II, III, Broadway, Cedar Ridge, Fielder Crossing, Lakeshore at Preston, Lakewood Greens, Pleasant Ridge, River Park, Sandstone, Villas at Josey Ranch, Wimbledon Oaks, Overlook Manor I, Overlook Manor II, Tilman Place and Willows, (collectively the "1998 Most Recent Acquired and Probable Properties"). In connection with these transactions the amounts presented include the initial purchase price of $645.7 million, the assumption of $180.5 million of mortgage indebtedness, a draw on EQR's line of credit in the amount of $90 million and the issuance of approximately 2.3 million OP Units with a value of approximately $111 million. (B) Certain reclassifications have been made to Merry Land's historical balance sheet to conform to EQR's balance sheet presentation. (C) Represents adjustments to record the Merger in accordance with the purchase method of accounting, based upon the assumed purchase price of $2,206,994 assuming a market value of $46.36 per share for EQR's common shares, as follows: Issuance of 21,872 common shares of beneficial interest of EQR, based on the .53 exchange rate, in exchange for 41,268 common shares of Merry Land........................ $1,013,991 Cost of 1,701 common shares of Merry Land acquired by EQR prior to Merger........................................... 35,146 Issuance of EQR Series H Preferred Shares of Beneficial Interest.................................................. 4,665 Issuance of EQR Series I Preferred Shares of Beneficial Interest.................................................. 100,000 Issuance of EQR Series J Preferred Shares of Beneficial Interest.................................................. 114,985 Issuance of EQR Series K Preferred Shares of Beneficial Interest.................................................. 50,000 Issuance of EQR Series L Preferred Shares of Beneficial Interest.................................................. 100,000 Assumption of Merry Land's minority interests, adjusted to fair value................................................ 40,155 Assumption of Merry Land's liabilities, net of amount assumed by MYRP Newco of $716............................. 687,463 Adjustment to increase the assumed Merry Land debt to its fair value (see Note I)................................... 9,948 Merger costs (see calculation below)........................ 50,641 ---------- $2,206,994 ==========
9 10 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED) AS OF JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) The following is a calculation of the estimated fees and other expenses related to the Merger: Employee termination costs.................................. $27,250 Buyout of stock options..................................... 5,408 Advisory fees............................................... 5,700 Legal and accounting fees................................... 2,700 Other, including printing, filing, transfer and spin-off costs..................................................... 9,583 ------- Total....................................................... $50,641 =======
(D) Represents the estimated increase in Merry Land's rental property, net based upon EQR's purchase price and the adjustments to eliminate the basis of Merry Land's net assets acquired: Purchase price (see note C)................................. $2,206,994 Less: Historical basis of Merry Land's net assets acquired Rental property, net of spin-off to MYRP Newco of $42,495............................................... 1,558,574 Construction in progress.............................. 52,736 Other assets, net of spin-off of notes receivable to MYRP Newco of $1,381.................................. 9,614 ---------- Step-up to record fair value of Merry Land rental property.................................................. 586,070 Spin-off of rental properties, net to MYRP Newco............ (42,495) ---------- $ 543,575 ==========
(E) Increase in Investment in mortgage notes reflects the issuance of a one-year term loan with an initial balance of $18.3 million and a $20 million fifteen year senior subordinated term loan to MYRP Newco. (F) Increase to Cash and Cash Equivalents reflects the following: EQR's expected issuance of a fifteen year senior subordinated term loan to MYRP Newco (see Note E)......... $(20,000) EQR's expected purchase of MYRP Newco Preferred Stock (see Note H)................................................... (5,000) EQR's expected issuance of a one-year term loan at LIBOR plus 2.5% to MYRP Newco (see Note E)...................... (18,317) The expected payment for Merger (see Note C) and registration (see Note O) costs........................... (50,891) EQR's expected draw on its line of credit................... 95,000 -------- $ 792 ========
(G) Decrease due to the elimination of Merry Land's deferred loan costs in connection with the Merger. (H) Decrease in Other Assets reflects the following: EQR's purchase of MYRP Newco Preferred Stock................ $ 5,000 Reclassification of EQR's historical cost basis in common shares of Merry Land to real estate....................... (35,146) ---------- (30,146) Spin-off of Merry Land notes to MYRP Newco.................. (1,381) ---------- $ (31,527) ==========
10 11 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED) AS OF JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) (I) Increase in mortgage notes payable reflects a premium of $9,948 required to adjust Merry Land debt to its estimated fair value. Decrease in accounts payable, accrued expenses reflects the spinoff of Merry Land liabilities to MYRP Newco of $716. (J) MYRP Newco has agreed to manage the completion of several development properties for EQR in exchange for an aggregate fee of $2.4 million payable monthly on a prorata basis until each development is complete. EQR's total commitment under the one-year term loan is $25,000. (K) The pro forma allocation to the Minority Interests is based upon the percentages owned by such Minority Interests as follows: Total Shareholders' Equity and Minority Interests........... $ 5,876,277 Less: Preferred Shares...................................... (1,411,350) ----------- 4,464,927 Minority Interests percentage ownership in ERP Operating Partnership............................................... 8.2% ----------- Pro Forma Combined Minority Interests ownership in ERP Operating Partnership..................................... 366,124 EQR pre-Merger historical Minority Interest ownership in ERP Operating Partnership..................................... (361,627) Merry Land historical Minority Interest..................... (18,769) ----------- Adjustment to Minority Interests ownership in ERP Operating Partnership............................................... $ (14,272) ===========
(L) Decrease results from elimination of Merry Land common shares at $1.00 par value ($42,969) net of the issuance of EQR common shares at $.01 par value $219. (M) Elimination of $369,650 Merry Land Preferred Shares and the issuance of $369,650 EQR Preferred Shares. (N) Reflects the forgiveness of all Merry Land's employee notes as a result of the Merger. (O) Increase in paid in capital to reflect the following: Issuance of 21,872 EQR common shares at $46.36 per share.... $1,013,991 Adjustment of Merry Land's Minority Interests to fair value..................................................... 21,386 Par value of common shares issued........................... (219) Registration costs incurred in connection with the Merger... (250) Merry Land historical shareholders' equity.................. (611,068) Adjustment to Minority Interests ownership in ERP Operating Partnership (see Note K).................................. 14,272 ---------- $ 438,112 ==========
(P) Reflects the elimination of Merry Land's distribution in excess of accumulated earnings to paid in capital, as a result of the Merger. 11 12 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (Q) Reflects the historical results of operations for the 1998 Most Recent Acquired and Probable Properties (see note A) and for the following properties acquired from January through June, 1998 (collectively, the "1998 Acquired and Probable Properties"). Cityscape, 740 River Drive, Prospect Towers, Park Place, Park Westend, Emerald Bay at Winter Park, Farnham Park, Plantation, Balcones Club, Coach Lantern, Foxcroft, Yarmouth Woods, Rolido Parque, The Trails of Valley Ranch, Fairfield, Harbor Pointe, Sonterra at Foothill Ranch, Vista Pointe at the Valley, Emerson Place at Charles River Park, Sierra Canyon, Northridge, The Arboretum, Townhomes of Meadowbrook, Woodridge Apartments, Brookside, Greystone, Coconut Palm Club, Portside Towers, Defoor Village, Plantation Ridge, Wynbrook, The Gates at Carlson Center, Glengarry Club, Plum Tree I, II, and III, Ravinia, Woodlands, and Cross Creek. (R) Reflects rental income for the 1998 Acquired and Probable Properties for the periods indicated as follows: Properties acquired during the first quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from January 1, 1998 through the respective acquisition date for each property.................................... $ 4,051 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998............................... 17,825 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998................. 20,852 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from April 1, 1998 through the respective acquisition date for each property......................................... 7,340 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended June 30, 1998.................. 20,852 ------- $70,920 =======
(S) Reflects the reduction of interest income on investment in mortgage loans collateralized by five of the 1998 Previously Acquired Properties to the extent amounts are already included in EQR's historical financial results. (T) Reflects the reduction of interest income due to the use of working capital for the acquisition of the 1998 Most Recent Acquired and Probable Properties for the periods indicated as follows: For the three months ended March 31, 1998 as reported on Form 8-K dated June 25, 1998.............................. $ 791 For the three months ended June 30, 1998 as reported on Form 8-K dated June 25, 1998................................... 4,419 ------ $5,210 ======
12 13 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (U) Reflects property and maintenance expense, which includes the elimination of third party management fees where EQR is providing onsite property management services, for the 1998 Acquired and Probable Properties for the periods indicated as follows: Properties acquired during the first quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from January 1, 1998 through the respective acquisition date for each property.................................... $ 656 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998............................... 3,963 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998................. 4,981 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from April 1, 1998 through the respective acquisition date for each property......................................... 1,671 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended June 30, 1998.................. 4,981 ------- $16,252 =======
(V) Reflects real estate taxes and insurance expense for the 1998 Acquired and Probable Properties for the periods indicated as follows: Properties acquired during the first quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from January 1, 1998 through the respective acquisition date for each property.................................... $ 350 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998............................... 2,299 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998................. 1,834 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from April 1, 1998 through the respective acquisition date for each property......................................... 1,003 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended June 30, 1998.................. 1,834 ------ $7,320 ======
13 14 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (W) Reflects incremental cost associated with self management of the 1998 Acquired and Probable Properties for the periods indicated as follows: Properties acquired during the first quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from January 1, 1998 through the respective acquisition date for each property.................................... $ 47 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998............................... 446 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998................. 521 Properties acquired during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from April 1, 1998 through the respective acquisition date for each property......................................... (24) Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended June 30, 1998.................. 497 ------ $1,487 ======
(X) Reflects depreciation based on total investment of $1.4 billion for the 1998 Acquired and Probable Properties less amounts allocated to land, generally 10%, and depreciated over a 30-year life for real property for the periods indicated as follows: Properties acquired during the first quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from January 1, 1998 through the respective acquisition date for each property.................................... $ 773 Properties acquired and notes issued during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998............ 4,150 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended March 31, 1998................. 4,860 Properties acquired and notes issued during the second quarter of 1998 as reported on Form 8-K dated June 25, 1998 for the period from April 1, 1998 through the respective acquisition date for each property............. 2,507 Properties acquired or expected to be acquired subsequent to June 30, 1998 as reported on Form 8-K dated June 25, 1998 for the three months ended June 30, 1998.................. 4,860 ------- $17,150 =======
(Y) Reflects Interest Expense on the following: Mortgage indebtedness totaling $412.6 million assumed in connection with the acquisition of the 1998 Acquired and Probable Properties....................................... $10,737 $300 million associated with the issuance of the 2015 Notes..................................................... 5,558 $265 million draw on the line of credit, which includes $90 million on a pro forma basis, at a LIBOR rate of 5.71875% plus 45 basis points plus $300,000 in fees................ 8,474 ------- $24,769 =======
14 15 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (Z) Reflects the increase in pro forma Common Shares outstanding resulting from the January 1998 Common Share Offering, February 1998 Common Share Offerings, March 1998 Common Share Offering and April 1998 Common Share Offering as if they had occurred on January 1, 1998. (AA) Certain reclassifications have been made to Merry Land Historical Statement of Operations to conform to EQR's Statement of Operations presentation. (BB) Decrease results from the loss of rental income related to the spin-off of $42,495 of rental property to MYRP Newco. (CC) Increase results from $1,547 in interest income on the $18,317 one-year term loan at LIBOR plus 2.5% and on the $20,000 fifteen year senior subordinated term loan initially at 8%, net of the loss of interest income of $(56) related to the spin-off of the $1,381 mortgage notes receivable to MYRP Newco. (DD) Decrease results from the reduction of property and maintenance related to the spin-off of $42,495 of rental property to MYRP Newco. (EE) Decrease results from the reduction of property taxes and insurance related to the spin-off of $42,495 of rental property to MYRP Newco (FF) Decrease results from salary, benefits and rent costs anticipated to be eliminated or reduced. (GG) Represents the net increase in depreciation of real estate owned as a result of recording the Merry Land real estate assets at fair value versus historical cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which have a useful life of approximately 30 years. The calculation of the fair value of depreciable real estate assets at June 30, 1998 is as follows: Historical basis of Merry Land's rental property, net of $42,495 of amount spun off to MYRP Newco.................. $1,558,574 Plus: Step up to Merry Land's rental property, net (see Note D)........................................................ 543,575 ---------- Pro forma basis of Merry Land's rental property at fair value..................................................... 2,102,149 Less: Fair value allocated to land.......................... (210,215) ---------- Pro forma basis of Merry Land's depreciable rental property at fair value............................................. $1,891,934 ==========
Calculation of depreciation of rental property for the six months ended June 30, 1998 is as follows: Depreciation expense based upon an estimated useful life of approximately 30 years.................................... $31,532 Less: historical Merry Land depreciation of rental property.................................................. (26,543) ------- Pro forma adjustment........................................ $ 4,989 =======
(HH) Increase in interest expense reflects the following: Amortization of the premium required to record Merry Land's debt at its estimated fair value.......................... $(1,080) Interest expense on the $95 million draw on the line of credit at a LIBOR rate of 5.71875% plus 45 basis points plus $50,000 in fees...................................... 2,980 ------- $ 1,900 =======
15 16 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (II) Decrease results from the elimination of amortization of Merry Land's deferred financing costs, which costs would be eliminated in connection with the Merger. (JJ) Decrease in public company costs anticipated to be eliminated or reduced. (KK) A portion of income was allocated to Minority Interests representing interests in ERP Operating Partnership not owned by EQR. The pro forma allocation to Minority Interests (represented by OP Units) is based upon the percentage estimated to be owned by such Minority Interests as a result of the pro forma transactions. (LL) Reflects the allocation of net income based on the distributions payable to Series L Preferred Shares at the rate of 7.625% for the period from January 1, 1998 through date of issuance. (MM) Increase of Weighted Average Common Shares Outstanding based on the conversion of Merry Land common shares to EQR common shares at a conversion ratio of .53 Merry Land shares per EQR share. 16 17 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (NN) Reflects the results of operations for the properties acquired in the mergers between EQR and Wellsford and EQR and EWR and for the properties acquired during 1997 (collectively, the "1997 Acquired Properties") as disclosed in EQR's Annual Report on Form 10-K for the year ended December 31, 1997. (OO) Reflects rental income for the 1997 Acquired Properties for the period from January 1, 1997 through the respective acquisition date for each property. (PP) Reflects the reduction of interest income due to the use of working capital for property acquisitions. (QQ) Reflects property and maintenance expense, which includes the elimination of third party management fees where EQR is providing onsite property management services, for the 1997 Acquired Properties for the period from January 1, 1997 through the respective acquisition date for each property. (RR) Reflects real estate tax and insurance expense for the 1997 Acquired Properties for the period from January 1, 1997 through the respective acquisition date for each property. (SS) Reflects incremental cost associated with self management of the 1997 Acquired Properties for the period from January 1, 1997 through the respective acquisition date for each property. (TT) Reflects depreciation based on total investment of $4.1 billion for the 1997 Acquired Properties less amounts allocated to land, generally 10%, and depreciated over a 30-year life for real property for the period from January 1, 1997 through the respective acquisition date for each property. (UU) Reflects interest expense on mortgage indebtedness totaling $931 million assumed in connection with the 1997 Acquired Properties at various interest rates, $384 million in unsecured notes assumed in connection with the Wellsford and EWR mergers at various interest rates, a $120 million draw on the line of credit for acquisitions at a rate of LIBOR plus 45 basis points and $150 million associated with the Fourth Public Debt Offering at a rate of 7.125% per annum for the period from January 1, 1997 through the respective date of acquisition or issuance. (VV) Reflects amortization of financing costs associated with the Fourth Public Debt Offering in the amount of $1.3 million over 20 years. (WW) Reflects historical G&A costs for Wellsford and EWR for the period from January 1, 1997 through the respective merger date. (XX) Reflects the allocation of net income based on the distributions payable to Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Preferred Shares at the rates of 8.60%, 7.00%, 9.65% and 7.25%, respectively, for the period from January 1, 1997 through their respective date of issuance. (YY) Reflects the historical results of operations for the 1998 Most Recent Acquired and Probable Properties (see Note A) and for the following properties acquired from January through June, 1998 (collectively, the "1998 Acquired and Probable Properties"): Cityscape, 740 River Drive, Prospect Towers, Park Place, Park Westend, Emerald Bay at Winter Park, Farnham Park, Plantation, Balcones Club, Coach Lantern, Foxcroft, Yarmouth Woods, Rolido Parque, The Trails of Valley Ranch, Fairfield, Harbor Pointe, Sonterra at Foothill Ranch, Vista Pointe at the Valley, Emerson Place at Charles River Park, Sierra Canyon, Northridge, The Arboretum, Townhomes of Meadowbrook, Woodridge Apartments, Brookside, Greystone, Coconut 17 18 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) Palm Club, Portside Towers, Defoor Village, Plantation Ridge, Wynbrook, The Gates at Carlson Center, Glengarry Club, Plum Tree I, II, and III, Ravinia, Woodlands, and Cross Creek. (ZZ) Reflects rental income for the 1998 Acquired and Probable Properties as reported on Form 8-K dated June 25, 1998. (AAA) Reflects the reduction of interest income on investment in mortgage loans collateralized by five of the 1998 Previously Acquired Properties to the extent amounts are already included in EQR's historical financial results as reported on Form 8-K dated June 25, 1998. (BBB) Reflects the reduction of interest income due to the use of working capital for the acquisition of the 1998 Most Recent Acquired and Probable Properties as reported on Form 8-K dated June 25, 1998. (CCC) Reflects property and maintenance expense, which includes the elimination of third party management fees where EQR is providing onsite property management services, for the 1998 Acquired and Probable Properties for the year ended December 31, 1997 as reported on Form 8-K dated June 25, 1998. (DDD) Reflects real estate tax and insurance expense for the 1998 Acquired and Probable Properties for the year ended December 31, 1997 as reported on Form 8-K dated June 25, 1998. (EEE) Reflects incremental cost associated with self management of the 1998 Acquired and Probable Properties for the year ended December 31, 1997 as reported on Form 8-K dated June 25, 1998. (FFF) Reflects depreciation based on total investment of $1.4 billion for the 1998 Acquired and Probable Properties less amounts allocated to land, generally 10%, and depreciated over a 30-year life for real property for the year ended December 31, 1997 as reported on Form 8-K dated June 25, 1998. (GGG) Reflects interest expense on mortgage indebtedness totaling $412.6 million assumed in connection with the acquisition of the 1998 Acquired and Probable Properties, $300 million associated with the issuance of the 2015 Notes and a $265 million draw on the line of credit, which includes $90 million on a pro forma basis, at a LIBOR rate of 5.71875% plus 45 basis points plus $250,000 in fees for the year ended December 31, 1997 as reported on Form 8-K dated June 25, 1998. (HHH) Reflects the increase in pro forma Common Shares outstanding resulting from the March 1997 Common Share Offerings, June 1997 Common Share Offerings, September 1997 Common Share Offering, October 1997 Common Share Offering, December 1997 Common Share Offerings and the Wellsford and EWR mergers in connection with properties acquired in 1997 as if they had occurred on January 1, 1997. (III) Decrease results from the loss of rental income related to the spin-off of $42,495 of rental property to MYRP Newco. (JJJ) Increase results from $3,094 in interest income on the $18,317 one-year term loan at LIBOR plus 2.5% and on the $20,000 fifteen year senior subordinated term loan initially at 8%, net of the loss of interest income of $(83) related to the spin-off of the $1,381 mortgage notes receivable to MYRP Newco. (KKK) Decrease results from the reduction of property and maintenance related to the spin-off of $42,495 of rental property to MYRP Newco. (LLL) Decrease results from the reduction of property taxes and insurance related to the spin-off of $42,495 of rental property to MYRP Newco (MMM) Decrease in salary, benefits and rent costs anticipated to be eliminated or reduced. 18 19 EQUITY RESIDENTIAL PROPERTIES TRUST NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- (CONTINUED) (NNN) Represents the net increase in depreciation of real estate owned as a result of recording the Merry Land real estate assets at fair value versus historical cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which have a useful life of approximately 30 years. The calculation of the fair value of depreciable real estate assets at December 31, 1997 is as follows: Historical basis of Merry Land's rental property, net of $42,495 of amount spun off to MYRP Newco.................. $1,558,574 Plus: Step up to Merry Land's rental property, net (see Note D)........................................................ 543,575 ---------- Pro forma basis of Merry Land's rental property at fair value..................................................... 2,102,149 Less: Fair value allocated to land.......................... (210,215) ---------- Pro forma basis of Merry Land's depreciable rental property at fair value............................................. $1,891,934 ==========
Calculation of depreciation of rental property at December 31, 1997 is as follows: Depreciation expense based upon an estimated useful life of approximately 30 years.................................... $ 63,064 Less: historical Merry Land depreciation of rental property.................................................. (42,876) -------- Pro forma adjustment........................................ $ 20,188 ========
(OOO) Increase in interest expense reflects the following: Amortization of the premium required to record Merry Land's debt at its estimated fair value.......................... $(2,899) Interest expense on the $95 million draw on the line of credit at a LIBOR rate of 5.71875% plus 45 basis points plus $100,000 in fees..................................... 5,960 ------- $ 3,061 =======
(PPP) Decrease results from the elimination of amortization of Merry Land's deferred financing costs, which costs would be eliminated in connection with the Merger. (QQQ) Decrease in public company costs anticipated to be eliminated or reduced. (RRR) A portion of income was allocated to Minority Interests representing interests in ERP Operating Partnership not owned by EQR. The pro forma allocation to Minority Interests (represented by OP Units) is based upon the percentage estimated to be owned by such Minority Interests as a result of the pro forma transactions. (SSS) Reflects the allocation of net income based on the distributions payable to Series L Preferred Shares at the rate of 7.625% for the period from January 1, 1997 through December 31, 1997. (TTT) Decrease of Weighted Average Common Shares Outstanding based on the conversion of Merry Land common shares to EQR common shares at a conversion ratio of .53 Merry Land shares per EQR share and a par value of $1. 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EQUITY RESIDENTIAL PROPERTIES TRUST By: /s/ DAVID J. NEITHERCUT ------------------------------------ David J. Neithercut Executive Vice President and Chief Financial Officer Date: August 24, 1998 20 -----END PRIVACY-ENHANCED MESSAGE-----