-----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, Wbbwm4RHvbmh4XvEE7ktBX4WH8637sAm11Q9dhKJg6nz+dHHcnHvOm6jr1i5A0yV RFRvJSCrzpTm+dAFV7aw9w== 0001047469-99-027362.txt : 19990715 0001047469-99-027362.hdr.sgml : 19990715 ACCESSION NUMBER: 0001047469-99-027362 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990714 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 SEC ACT: SEC FILE NUMBER: 001-12252 FILM NUMBER: 99663901 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 1 8-K As filed with the Securities and Exchange Commission on July 14, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): JUNE 30, 1999 EQUITY RESIDENTIAL PROPERTIES TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 1-12252 13-3675988 (STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 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) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Item 5 -- Other Events On June 30, 1999, Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR"), and Lexford Residential Trust, a Maryland real estate investment trust ("Lexford"), entered into an Agreement and Plan of Merger dated as of June 30, 1999 pursuant to which Lexford will merge with and into EQR (the "Merger"). Pursuant to the Merger, each common share of beneficial interest of Lexford issued and outstanding immediately prior to the Merger will be converted into 0.463 of a common share of beneficial interest of EQR. Consummation of the Merger is subject to the approval of the Merger by the shareholders of EQR and Lexford and to specified closing conditions. In connection with the Merger, EQR is hereby filing additional information contained in Lexford's Annual Report on Form 10-K for the year ended December 31, 1998 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 regarding the business and properties of Lexford to be acquired in the Merger as follows: LEXFORD RESIDENTIAL TRUST As of December 31, 1998, Lexford had an ownership interest in 511 apartment communities (consisting of an aggregate of 36,333 apartment units) in 16 states (individually a "Property" or "community" and collectively, the "Properties" or the "Portfolio"). At December 31, 1998 Lexford owned the entire equity interest in 432 apartment communities (28,857 units) ("Rental Properties") and Lexford served as general partner, and in most cases, also owned some limited partner interest in 79 apartment communities (7,476 units) ("Unconsolidated Partnerships"). The majority of the Portfolio was constructed during the 1980s and is primarily comprised of one story garden style apartment buildings of modular construction. The Portfolio is located in urban, suburban, secondary and tertiary markets in the Midwestern and Southeastern United States. During 1998, the average economic occupancy of the Portfolio was 92.7% and the average monthly rent collected per occupied unit was $438. In the aggregate, Net Operating Income (before expenditures for major maintenance and replacement items) ("NOI") of the Portfolio increased approximately 4.1% over 1997 for apartment communities owned (in whole or in part) and operated at all times during the years ended December 31, 1998 and 1997 ("Same-Store") due primarily to an increase of approximately 2.9% in rental revenue on a Same-Store basis. The table below indicates the geographic locations of apartment communities in which Lexford had an ownership interest at December 31, 1998:
STATE SITES PROPERTIES UNITS Alabama 10 10 1,552 Florida 98 126 9,126 Georgia 61 73 5,404 Illinois 4 4 281 Indiana 51 70 4,415 Kentucky 27 33 2,026 Maryland 4 5 413 Michigan 21 25 1,720 North Carolina 1 1 187 Ohio 100 136 8,337 Pennsylvania 7 9 608 South Carolina 3 3 269 Tennessee 5 5 348 Texas 1 1 67 Virginia 4 4 1,211 West Virginia 4 6 369 ---- ---- ------- 401 511 36,333 ---- ---- ------- ---- ---- -------
As of December 31, 1998, the Portfolio consisted of 401 geographic sites. Lexford's apartment communities averaged approximately 90 units per site. The difference in the number of apartment communities versus the total number of geographic sites results from separate limited partnerships owning apartment communities constructed on contiguous parcels. As a result of Lexford's successful efforts in consolidating the ownership of a number of former syndicated limited partnerships Lexford is causing legal entities as to which it has succeeded to the entire ownership interest to consolidate ownership of the apartment communities on contiguous parcels as and when mortgage debt secured by such Rental Properties are refinanced with a single lender. This process has resulted in a reduction in the apartment community count from 515 to 511 in 1998 and may result in further consolidation of apartment communities in the future. PROPERTIES Lexford has executive and administrative offices, financial operations and a portion of property operations located in 36,120 square feet of space within a single-story office building at 6954 Americana Parkway, in Columbus, Ohio. Lexford entered into a lease for the building 1 with Americana Investment Company (an entity affiliated with an outside Trustee of Lexford who did not participate in the negotiations for Lexford's lease) in late 1992. This lease was amended and restated in February 1998 with provisions for the current premises (representing a reduction in the former leasehold space), a remodeling and rehabilitation allowance and a seven year term beginning September 1, 1998. Lexford's management believes that the lease terms are competitive with commercial lease rates in the Columbus market. In December 1998, Lexford announced its plans to close all other satellite property management and executive offices. Since December 1998, Lexford has successfully terminated its leasehold interest and respective obligations for its former regional property management offices located in Orlando, Florida and San Antonio, and Houston, Texas. Also, in April 1998, Lexford entered into an assignment and assumption transaction in connection with the sale of Lexford's business of providing management services to third party owners of multifamily apartment communities pursuant to which the buyer of the Third Party Management Business assumed Lexford's obligations for its leasehold interests in its former property management offices in suburban Dallas, Texas. Item 7 -- Financial Statements, Pro forma Financial Information and Exhibits (a) Financial Statements of Business to be Acquired FINANCIAL STATEMENTS OF LEXFORD RESIDENTIAL TRUST REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Lexford Residential Trust We have audited the accompanying consolidated balance sheets of Lexford Residential Trust as of December 31, 1998 and 1997 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedules listed in the accompanying index. These financial statements and schedules are the responsibility of Lexford's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lexford Residential Trust at December 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Columbus, Ohio January 27, 1999 2 LEXFORD RESIDENTIAL TRUST CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997 (In Thousands Except Share Data)
ASSETS 1998 1997 ---- ---- Rental Properties (Notes 2 and 5):................................................... Land............................................................................. $ 59,732 $ 23,124 Buildings, Improvements and Fixtures 544,897 138,245 -------- -------- Accumulated Depreciation............................................................. (28,564) (9,152) -------- -------- 576,065 152,217 Investments in and Advances to Unconsolidated Partnerships, Net of an allowance of $1,615 and $2,605 at December 31, 1998 and 1997, respectively (Notes 3 and 13)... 11,173 54,653 Cash................................................................................. 495 2,569 Accounts Receivable, Affiliates, Residents, Officers and Others, Net of an allowance of $550 and $942 at December 31, 1998 and 1997, respectively (Note 13)........... 1,920 4,899 Furniture, Fixtures and Other, Net of accumulated depreciation of $3,109 and $2,491 at December 31, 1998 and 1997, respectively...................................... 2,108 1,720 Funds Held in Escrow................................................................. 22,747 11,888 Intangible Assets.................................................................... 6,891 11,659 Prepaids and Other................................................................... 7,523 1,993 -------- -------- $628,922 $241,598 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Mortgages and Revolving/Term Debt.................................................... Non Recourse Mortgages (Note 5).................................................. $494,556 $142,637 Revolving/Term Debt (Note 4)..................................................... 33,186 7,362 -------- -------- 527,742 149,999 -------- -------- Accounts Payable..................................................................... 1,389 1,288 Accrued Interest, Real Estate and Other Taxes........................................ 10,315 3,719 Other Accrued Expenses............................................................... 6,196 8,241 Other Liabilities.................................................................... 7,451 3,504 Dividends Payable.................................................................... 4,122 --- Deferred Compensation (Note 8)....................................................... 12,525 --- -------- -------- Total Liabilities................................................................ 569,740 166,751 -------- -------- Commitments and Contingencies (Notes 8, 9, 11) Shareholders' Equity (Notes 8 and 15): Preferred Shares, 5,000,000 Shares Authorized, Unissued.......................... --- --- -------- -------- Common Shares, $.01 par value, 50,000,000 Shares Authorized, 9,530,013 and 8,493,648 Shares Issued and Outstanding at December 31, 1998 and 1997, respectively................................................................. 95 85 Additional Paid-in Capital........................................................... 65,833 54,138 Retained Earnings.................................................................... 7,482 20,624 Less Cost of Treasury Shares (Note 8)................................................ (14,228) -------- 59,182 74,847 -------- -------- $628,922 $241,598 -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In Thousands, Except Per Share Data)
1998 1997 1996 --------- --------- --------- Revenues Rental and Other Property Revenues..................... $137,948 $41,851 $41,277 Fee Based, primarily from Affiliates (Note 13)......... 5,532 16,517 14,143 Income from Unconsolidated Partnership (Note 13)....... 3,025 10,681 8,897 --------- --------- --------- 146,505 69,049 64,317 --------- --------- --------- Expenses: Property Operating and Maintenance..................... 45,453 12,554 14,064 Real Estate Taxes and Insurance........................ 11,359 4,060 4,148 Property Management.................................... 12,505 15,892 12,263 Administration......................................... 6,287 4,895 5,031 Performance Equity Plan (Note 8)....................... 2,488 6,280 --- Non-recurring Costs (Note 10).......................... 2,685 828 243 Interest--Non Recourse Mortgages (Note 5).............. 41,268 13,770 14,132 Interest--Revolving/Term Debt (Note 4)................. 1,656 657 1,098 Depreciation and Amortization.......................... 21,520 6,527 5,515 Real Estate Impairment Loss (Note 7)................... 1,014 --- --- Loss on Sale of Third Party Management Business (No 6). 6,300 --- --- --------- --------- --------- 152,535 65,463 56,494 --------- --------- --------- Income/(Loss) Before Gain on Disposal of Assets, Income Taxes and Extraordinary Item........................... (6,030) 3,586 7,823 Provision for Income Taxes (Note 9)................... --- (2,189) (3,416) Gain on Disposal of Assets--Net........................ 498 1,989 963 --------- --------- --------- Income/(Loss) Before Extraordinary Item................ (5,532) 3,386 5,370 Extraordinary Gain/(Loss), Net of Income Tax Benefit of $115 in 1997 and $1,015 in 1996, respectively (Note 7)........................................... 631 (180) (1,614) --------- --------- --------- Net Income/(Loss).......................................... $(4,901) $3,206 $3,756 --------- --------- --------- --------- --------- --------- Basic Earnings Per Share: Income/(Loss) before Extraordinary Item................ $(0.60) $0.42 $0.71 Extraordinary Item..................................... 0.07 (0.02) (0.21) Net Income/(Loss)...................................... $(0.53) $0.40 $0.50 --------- --------- --------- --------- --------- --------- Diluted Earnings Per Share: Income/(Loss) before Extraordinary Item................ $(0.60) $0.41 $0.69 Extraordinary Item..................................... 0.07 (0.02) (0.21) --------- --------- --------- Net Income/(Loss)...................................... $(.053) $0.39 $0.48 --------- --------- --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In Thousands, Except Per Share Data)
COST COMMON SHARES ADDL. OF ----------------------- PAID-IN RETAINED TREASURY SHARES AMOUNT CAPITAL EARNINGS SHARES TOTAL -------- -------- --------- ---------- ---------- ---------- Balance, January 1, 1996.................... 7,206 $72 $37,512 $13,662 --- $51,246 Shares issued in 1996 in connection with the claims resolution process..... 13 Shares issued in connection with Lexford Acquisition, Net of Contingent Shares (Note 6)........................ 500 5 4,995 5,0000 Exercise of options under Non-Qualified Stock Option Plan (Note 8)............................... 69 1 61 62 Restricted stock compensation awards and Director Restricted Stock Plan (Note 8)............................... 32 325 325 Less: Treasury Shares primarily from the redemption of stock held by Unconsolidated Partnership............. (3) (31) (31) Credit from utilization of pre-conformation tax benefits (Note 9) 2,151 2,151 Net Income for the year ended December 31, 1996...................... 3,756 3,756 -------- -------- --------- ---------- ---------- ---------- Balance, December 31, 1996.................. 7,817 78 45,013 17,418 62,509 Shares issued in 1997, in connection with the claims resolution process..... 22 1 1 Exercise of options under Non-Qualified Stock Option Plan (Note 8)............................... 18 37 37 Stock Compensation and Direction Restricted Stock Plan, Net of Shares subject to Vesting Restrictions (Note 8)............................... 636 6 7,394 7,400 Credits from Utilization of pre-confirmation tax benefits (Note 9) 1,694 1,694 Net Income for the year ended December 31, 1997...................... 3,206 3,206 -------- -------- --------- ---------- ---------- ---------- Balance, December 31, 1997 8,493 85 54,138 20,624 74,847 Contingent Shares Issued in Connection with Lexford Properties Acquisition Released in Exchange for Forfeiture of Balance of Unvested Shares (Note 6).... 300 3 2,997 --- 3,000 Exercise of Options Under Non-Qualified Stock Option Plan........ 305 3 1,824 1,827 Retiring Trustees and Employee Net Withdrawal From Rabbi Trust............ 583 583 Reinvestment of Dividends by Rabbi Trust.................................. (114) (114) Adjust for Shares Held in Rabbi Trust at December 31, 1997................... 276 3 4,168 (12,091) (7,920) 1998 Share Compensation, Primarily Issued to Rabbi Trust (Note 8)......... 156 1 2,706 (2,606) 101 Dividends to Common Shareholders (Note 15).............................. (8,241) (8,241) Net Loss for the year ended December 31, 1998...................... (4,901) (4,901) -------- -------- --------- ---------- ---------- ---------- Balance, December 31, 1998.................. 9,530 $95 $65,833 $7,482 $(14,228) $59,182 -------- -------- --------- ---------- ---------- ---------- -------- -------- --------- ---------- ---------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In Thousands)
1998 1997 1996 --------- --------- --------- Cash flows from Operating activities: Net Income/(Loss).............................................. $ (4,901) $ 3,206 $ 3,756 Adjustments to Reconcile Net Income/(Loss) to Net Cash provided by Operating Activities: Depreciation............................................... 20,146 5,426 5,111 Amortization............................................... 1,374 1,101 403 Provision for Losses on Accounts Receivable................ 1,670 389 503 Loss on Sale of Third Party Management Business 6,300 --- --- Real Estate Impairment Loss................................ 1,014 --- --- Gain from Disposal of Assets--Net (498) (1,989) (963) Extraordinary (Gain)/Loss.................................. (631) 295 2,629 Provision for Income Taxes credited to Additional Paid-in Capital................................................. --- 1,694 2,151 Non-Cash Share Compensation................................ 5,099 7,400 326 Changes in Operating Assets and Liabilities: Investments in and Advances to Unconsolidated Partnerships. 1,278 1,950 (94) Accounts Receivable and Other.............................. (2,704) (339) (4,339) Funds Held in Escrow....................................... 6,072 1,832 (4,857) Accounts Payable and Other Liabilities..................... (5,474) (2,880) 8,082 --------- --------- --------- Net Cash provided by Operating activities 28,745 18,085 12,708 --------- --------- --------- Cash flows from Investing activities: Proceeds from Sale of Assets and Other..................... 1,070 3,161 975 Receipts from/(Advances to) Unconsolidated Partnerships--Net 128 (992) (2,557) Investments in Unconsolidated Partnership/Joint Ventures... (3,405) (2,239) --- Purchase of 324 Unconsolidated Partnerships, Net of Cash Acquired................................................ (25,506) --- --- Investment in Management Contracts......................... --- (4,158) --- Capitalized Refinancing Costs.............................. (1,119) --- (1,687) Capital Expenditures--Real Estate.......................... (14,276) (2,386) (682) Capital Expenditures--Other................................ (1,209) (1,192) (423) --------- --------- --------- Net Cash used in Investing activities.......................... (44,317) (7,806) (4,374) --------- --------- --------- Cash Flows from Financing activities: Proceeds from the exercise of Stock Options................ 1,827 38 61 Redemption of Stock held by Unconsolidated Partnership..... --- --- (31) Proceeds from the Revolving Debt--Net...................... 27,228 --- --- Principal payments on Revolving/Term Debt and Other........ (1,403) (8,036) (7,052) Proceeds from Mortgage Debt................................ 37,930 7,429 47,443 Payments on Mortgages--Principal amortization.............. (6,835) (2,125) (2,139) Payments on Mortgages--lump sum (41,130) (8,609) (45,775) Dividends Paid............................................. (4,119) --- --- --------- --------- --------- Net Cash provided by/(used in) Financing activities................ 13,493 (11,303) (7,493) --------- --------- --------- Increase/(Decrease) in Cash........................................ (2,074) (1,024) 841 Cash at Beginning in Cash.......................................... 2,569 3,593 2,752 --------- --------- --------- Cash at End of Year................................................ $ 495 $ 2,569 $ 3,593 --------- --------- --------- --------- --------- --------- Supplemental Disclosure of Cash Flow Information: Cash Payments for Interest..................................... $42,286 $ 14,173 $ 14,665 --------- --------- --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In Thousands, Except Per Share Data) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: In 1998, Lexford acquired the entire ownership interest in 324 Unconsolidated Partnerships owning 326 apartment communities. Such acquisitions resulted in the following increases (decreases) to Lexford's balance sheet (see Note 2): Non-Cash Effects: Investments in and Advances to Unconsolidated Partnerships..... $ (47,335) Land and Building.............................................. $ 430,981 Accounts Receivable and Other Assets........................... $ 19,409 Mortgages ................................................... $ 362,610 Accounts Payable and Other Liabilities......................... $ 14,939 Cash Effects: Cash Paid to Former Partners................................... $ (33,902) Net Cash Acquired.............................................. 8,396 --------- $ (25,506) --------- ---------
Effective August 1, 1996, Lexford acquired Lexford Properties, Inc. through a merger with a wholly owned subsidiary of Lexford. Lexford issued 1,400,000 Common Shares (valued at $14 million) in consideration of the acquisition; however, 900,000 of the shares issued (valued at $9 million) were subject to forfeiture, in whole or in part, if Lexford's combined property management operations fail to achieve certain profitability criteria on or before the end of Lexford's 1999 fiscal year (see Note 6). On March 13, 1998, Lexford negotiated a settlement with the former shareholders of Lexford Properties, Inc. whereby 300,000 out of an aggregate of 900,000 of Lexford's Common Shares subject to forfeiture, per the terms of the merger agreement dated August 1, 1996 were released to such former shareholders in exchange for the forfeiture of the remaining 600,000 shares (see Note 6). In the fourth quarter of 1998, Lexford consented to an insubstance foreclosure to the mortgagee for one Rental Property. The Rental Property had an aggregate carrying value, net of a fourth quarter impairment loss of $1.0 million, of approximately $768,000. A $1.0 million extraordinary gain was recognized on the transaction (see Note 7). In 1996, Lexford granted deeds in lieu of foreclosure to the mortgagee for three Rental Properties. The Rental Properties had an aggregate carrying value of $3.9 million. No significant gain or loss was recognized on this transaction because the assets and the non-recourse mortgages on each of these Rental Properties had been recorded in equal amounts. In October 1997, Lexford sold two Rental Properties. The buyer assumed the mortgages with a carrying value of $2.3 million. No gain or loss was recognized in this transaction. In 1998, 1997 and 1996, all interest incurred was expensed. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 LEXFORD RESIDENTIAL TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business In December 1997, Lexford, Inc. announced that it would seek to qualify and elect to be taxed as a real estate investment trust ("REIT") for Federal income tax purposes in 1998. Lexford intends to continue to qualify as such, and therefore will distribute at least 95% of its real estate investment trust taxable income to its shareholders. In connection with this decision, Lexford, Inc. established a new entity known as Lexford Residential Trust (the "Company"). On March 3, 1998, the shareholders of Lexford, Inc. approved the merger of Lexford, Inc. with and into Lexford. The terms of the merger transaction provided that each share of Lexford, Inc.'s issued and outstanding common stock be canceled and converted to two common shares of beneficial interest in Lexford. The merger transaction was consummated on March 18, 1998 and Lexford has therefore acquired all of the assets and assumed all of the liabilities of the former Lexford, Inc. The consolidated financial statements include corporations, limited partnerships and other legal entities which own multifamily apartment communities (the "Rental Properties") in which Lexford, in turn, owns 100% equity interests. Lexford also holds equity ownership as well as, in certain cases, significant economic interests in multifamily apartment communities in its capacity as general partner and property manager, respectively, in various limited partnerships (the "Unconsolidated Partnerships"), which are accounted for by the equity method. The Rental Properties and the Unconsolidated Partnerships are collectively referred to as the "Properties". Lexford's general partner interests in the Unconsolidated Partnerships range from a 1.0% to 10.0% undivided equity interest, typically a 9.0% to 10.0% interest. The limited partnership interests in the Unconsolidated Partnerships are substantially all owned by unrelated third party investors. Lexford's receivables, typically in the form of second mortgages, from the Unconsolidated Partnerships generate a majority of the Income from Unconsolidated Partnerships recognized by Lexford (see Note 13). In 1998, Lexford adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131") which was effective for fiscal years beginning after December 15, 1997. SFAS No. 131 superseded Statement of Financial Accounting Standards No. 14, "Financial Reporting for Segments of an Enterprise". SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial reports. SFAS No. 131 also establishes standards for related disclosure about products and services, geographic areas, and major customers. The adoption of SFAS No. 131 did not affect results of operations or financial position of Lexford. Lexford has one reportable segment which is the ownership and operation of residential apartment communities. The majority of the Properties are located in the Midwest and southeast United States, with the heaviest concentrations in Florida, Ohio, Georgia, Indiana, Michigan and Kentucky. The concentrations of Properties within these states is as follows: Ohio (136 Properties), Florida (126 Properties), Georgia (73 Properties), Indiana (70 Properties), Kentucky (33 Properties) and Michigan (25 Properties). These concentrations of Properties accounted for 22.9%, 25.2%, 15.8%, 13.7%, 5.9%, and 6.1%, respectively, or in the aggregate approximately 90% of Lexford's total revenues for the year ended December 31, 1998. Lexford is not dependent for its revenues on any particular Property or resident and the loss of any Property would not be material to Lexford's financial position. Lexford's largest Property accounted for only 1% of Lexford's total revenues for the year ended December 31, 1998. The distribution of the properties also minimizes Lexford's exposure to local economic conditions. The typical Property is comprised of multiple single story buildings with studio, one and two bedroom apartments. Substantially all of the Properties have non-recourse first mortgage indebtedness which is owed to financial institutions or to REMICs or other vehicles holding such indebtedness for the benefit of others. Third Party Management Business In the first quarter of 1998, Lexford was also engaged in providing management services to third party owners of multifamily apartment communities (the "Third Party Management Business"). Because of Internal Revenue Code limitations on the nature and amount of non-qualified REIT income, Lexford contributed the majority of its assets related to the Third Party Management Business to a newly formed corporation in exchange for all of the preferred stock of such corporation on February 20, 1998. Effective as of April 1, 1998, Lexford sold all its preferred equity interest in the Third Party Management Business (see Note 6). 8 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of FASB Statement No. 107, "Disclosure About Fair Value of Financial Instruments". The fair value of Cash and Funds Held in Escrow is equal to their respective carrying amounts. For Investments in and Advances to Unconsolidated Partnerships, Lexford applied a capitalization rate to each Property's net operating income, less a major maintenance reserve, to estimate the value at December 31, 1998 and 1997, which value approximated $22.5 million and $140.3 million, respectively. This valuation methodology is generally based on estimates of the fair market value of the apartment communities owned by the Unconsolidated Partnerships, less related indebtedness senior to Lexford's investments and advances. The Investments in and Advances to Unconsolidated Partnerships consist substantially of second mortgage loans receivable, whose ultimate repayment is subject to a number of variables, including the performance and value of the underlying real property and the ultimate timing of repayments and receivables. Considerable judgment is required in the interpretation of market data to develop estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts (see Note 3). In 1998, Lexford acquired the third party equity interest in 324 former Unconsolidated Partnerships, which resulted in the significant decrease in Investments in and Advances to Unconsolidated Partnerships (see Note 2). The carrying values of the amounts comprising Lexford's Revolving/Term Debt as described in Note 4 approximate their fair value based upon Lexford's current borrowing rates for similar types of borrowing arrangements. The carrying amount of accrued interest approximates its fair value. As further described in Note 5, at December 31, 1998 mortgages on Lexford's Rental Properties in the amount of $494.6 million had contractual balances totaling $500.7 million (resulting in an aggregate Mortgage Deficiency of $6.1 million). Interest rates on the mortgages ranged from 6.0% to 10.7% with rates being fixed on approximately $484.2 million of the contractual balances. The fair value of Lexford's mortgage debt on Rental Properties as described in Note 5, is estimated at $531.1 million at December 31, 1998. The fair values of Lexford's long-term debt are estimated using discounted cash flow analyses, based upon Lexford's current incremental borrowing rates for similar types of borrowing arrangements. The Carrying amount of mortgages on the Rental Properties as of December 31, 1997 approximated their fair value. Basis of Presentation The consolidated financial statements include the accounts of Lexford Residential Trust and its wholly owned subsidiaries, and all entities in which Lexford has majority interest or control. All significant intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain amounts in the 1996 and 1997 Consolidated Financial Statements have been reclassified to conform to the 1998 presentation. Investments in and Advances to Unconsolidated Partnerships Investments in and Advances to Unconsolidated Partnerships represent Lexford's general partners' interests in and advances to non-controlled partnerships which own multi-family apartment communities. Lexford adopted a method of accounting referred to as fresh start ("Fresh Start") reporting as of September 11, 1992 ("The Effective Date") as a result of Lexford's judicial plan of reorganization (the "Plan of Reorganization"). Lexford prepared financial statements on the basis that a new reporting entity was created with assets and liabilities recorded at their estimated fair values as of the Effective Date. The carrying value represents the allocation of the estimated fair value of the underlying real estate assets as of the Effective Date or, if later, date of purchase or investment and, as described in Note 3, the contractual amounts of the receivables are significantly more than the recorded amounts. These receivables generally include long-term second mortgages and other receivables. In addition, subsequent to the Effective Date, Lexford has made advances to the Unconsolidated Partnerships. These advances primarily relate to operating needs and supplemental funding for refinancing transactions, and bear interest at prime plus one percent. Interest is accrued on the recorded values of the second mortgages and certain of the other receivables based upon contractual interest rates, and allowances are provided for estimated uncollectible interest based upon the underlying Properties' net cash flows. In certain instances, cash flow received in excess of accrued second mortgage interest on the recorded values of the second mortgages is recorded as income. Lexford is also entitled to receive incentive management fees and supplemental second mortgage interest based upon certain levels of cash flows of certain of the underlying Properties. Also, in the event the underlying Properties are sold or refinanced, Lexford is generally entitled to a participation interest in the net proceeds, as a general partner 9 and/or a second mortgage holder. The realization of the Investments in and Advances to Unconsolidated Partnerships is dependent on the future operating performance of the Unconsolidated Partnerships. Prior to November 1, 1997, Lexford accounted for its investments by the cost method. Effective November 1, 1997, based on Lexford's board of directors' decision to seek to acquire ownership of third party equity interests in substantially all of the Unconsolidated Partnerships (see Note 2), Lexford began accounting for its investments by the equity method. Lexford's share of net income or loss of the Unconsolidated Partnerships is classified with Income from Unconsolidated Partnerships in the Consolidated Statements of Income (see Notes 3 and 13). Real Estate and Depreciation Ordinary repairs and maintenance costs are expensed as incurred. Significant improvements, renovations and replacements related to the acquisition and improvement of real estate assets are capitalized at cost. Real estate assets are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets as follows: Buildings and Improvements 5 - 34 years Furniture, Fixtures and Equipment 3 - 10 years
Management reviews the carrying value of real estate assets using estimated future cash flows, including estimated proceeds from disposition, whenever an event or change in circumstances indicates that the asset value may not be recoverable. Funds Held in Escrow The amounts at December 31, 1998 and 1997 include funds of $22.7 million and $6.7 million, respectively, escrowed by Rental Properties for improvements and deferred maintenance, real estate taxes, insurance, resident security deposits and other funds held by mortgage lenders. In addition, Lexford was holding $2.0 million, at December 31, 1997, as funds held primarily for payment of insurance premiums which are collected from the Properties. In the second quarter of 1998, with the completion of the Consolidation Plan, (see Note 2), this voluntarily restricted cash account was closed when Lexford revised its cash management system to ensure that all available unrestricted cash is applied to Lexford's revolving credit facility. At December 31, 1998 and 1997 Lexford's Funds Held in Escrow also includes approximately $58,000 and $3.2 million, respectively, of funds received from the settlement of litigation brought against Lexford's former insurance carriers to prosecute policy claims for termite infestation losses at certain of the Properties. As a result of the settlement of such litigation (see Note 11), the majority of the funds have been distributed to the affected Properties and are being used to fund termite repairs. Revenue Recognition Rental revenue is recognized as income in the period earned. Intangible Assets Intangible Assets at December 31, 1998 and 1997 is comprised of approximately $3.0 million and $5.2 million, respectively, of management contracts and approximately $481,000 and $3.6 million, respectively, of goodwill related to the trade name, training programs and property management systems retained from the Third Party Management Business (see Note 6). The management contracts and goodwill are amortized on the straight line basis over seven and ten years, respectively, and are net of accumulated amortization of approximately $592,000 and $817,000, at December 31, 1998 and 1997, respectively. Intangible Assets also includes deferred financing costs at December 31, 1998 and 1997 of $3.3 million and $2.5 million, respectively. The costs relate to mortgage refinancings on the Rental Properties and are amortized over the terms of the respective loans. Prepaids and Other Assets Prepaids and Other assets at December 31, 1998 and 1997 is primarily comprised of approximately $3.6 million and $808,000, respectively, of deferred offering costs related to Lexford's Form S-3 "shelf" registration statement filed with the SEC , approximately $700,000 of start-up costs related to Lexford's conversion to a REIT and a $1.8 million note receivable at December 31, 1998 related to the sale of the Third Party Management Business (see Note 6). In addition, Prepaids and Other assets at December 31, 1998 and 1997 consists of approximately $895,000 and $567,000, respectively, of prepaid rent, insurance and real estate taxes, and approximately $461,000 and $618,000, respectively, of utility deposits and other prepaid expenses. 10 In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, Reporting the Costs of Start-up Activities. The SOP is effective beginning on January 1, 1999, and requires that start-up costs capitalized prior to January 1, 1999 be written-off and requires that start-up costs be expensed as incurred. The definition of start-up costs under the SOP includes organizational costs. Historically, Lexford capitalized and then amortized these costs over five years. The unamortized balance of organizational costs, approximately $700,000 (as of December 31, 1998), will be written off as a cumulative effect of an accounting change as of January 1, 1999. NOTE 2: PROPERTY ACQUISITIONS In conjunction with its determination to elect REIT status, Lexford initiated a consolidation plan, the purpose of which was to minimize third party equity interests in apartment communities owned by Unconsolidated Partnerships ("the Consolidation Plan"). In the first quarter of 1998, Lexford acquired the entire equity ownership interest in 287 former Unconsolidated Partnerships. The acquisition of the 287 former Unconsolidated Partnerships was effective as of January 31, 1998. Effective as of April 1, 1998, Lexford acquired the entire equity ownership interest in an additional 37 Unconsolidated Partnerships that owned 39 Properties, which were accounted for under the equity method in the first quarter of 1998. In connection with the Consolidation Plan, Lexford made cash payments totaling $33.9 million to the former partners of the 324 former Unconsolidated Partnerships, which are now classified as Rental Properties. The acquisition of the 324 former Unconsolidated Partnerships was accounted for under the purchase method. The purchase price of $443.8 million was comprised of $33.9 million to purchase former third party limited partners' equity interests, $47.3 million of carrying value of investments in and advances to the 324 former Unconsolidated Partnerships and the assumption of $362.6 million of non-recourse mortgage debt on the acquired Rental Properties (see Note 14). NOTE 3: INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS Lexford has direct and indirect general and limited partnership interests in, and receivables from, 79 Unconsolidated Partnerships at December 31, 1998 compared with 408 and 406 Unconsolidated Partnerships at December 31, 1997 and 1996, respectively. The decrease in the number of Unconsolidated Partnerships is primarily due to Lexford acquiring the entire ownership interest in 324 former Unconsolidated Partnerships that owned 326 Properties (see Note 2). Therefore, financial information pertaining to prior periods is not comparable. Investments in and Advances to Unconsolidated Partnerships, net of allowances of $1.6 million and $2.6 million, at December 31, 1998 and 1997, respectively, are comprised of the following major components (in thousands):
1998 1997 Second Mortgage Notes..................................... $ 4,725 $35,778 Investments in Unconsolidated Partnerships and joint venture......................................... 4,241 937 Other, including advances and accrued interest............ 2,207 17,938 $11,173 $54,653
The majority of the second mortgage notes bear interest at 6%. Interest income is accrued based upon the Fresh Start value of the second mortgage notes. Advances currently bear interest at prime plus 1%. At December 31, 1998 and 1997, the contractual obligations of the Unconsolidated Partnerships on account of second mortgages, advances and other payables, including related interest, aggregated $37.5 million and $232.5 million, respectively. Amounts due under second mortgages are collateralized by substantially all the real estate assets of the Unconsolidated Partnerships and are subordinate to the first mortgage debt. There can be no assurance that Lexford will collect the full carrying value of, or any additional contractual balances owing under, these receivables. In the first quarter of 1998, Lexford invested $3.4 million in a joint venture with a developer for the construction of an apartment community, consisting of 276 units. Such investment is accounted for under the equity method. Neither the joint venture nor the apartment units under construction are included in the numbers reported for Unconsolidated Partnerships and Properties. The community is scheduled to commence leasing in the first quarter of 1999. The following table provides selected combined financial information for Lexford's Unconsolidated Partnerships as of and for the years ended December 31, 1998, 1997 and 1996 (in thousands). The presentation does not include data for 15 Unconsolidated Partnerships for 1997 and 1996 due to Lexford making its initial investment in December 1997. 11
1998 1997 1996 Real Estate Assets, Net................. $ 132,562 $ 394,138 $ 413,430 Cash, Funds Held in Escrow and Resident Receivables................ 7,272 32,117 35,822 Other Assets............................ 3,915 12,721 14,651 --------- --------- --------- Total Assets............................ $ 143,749 $ 438,976 $ 463,903 Non Recourse Mortgage Debt.............. $ 130,829 $ 437,236 $ 456,927 Other Liabilities....................... 6,143 21,614 25,175 Amounts Due to Lexford.................. 37,535 232,511 238,677 --------- --------- --------- $ 174,507 $ 691,361 $ 720,779 --------- --------- --------- Net Deficit............................. $ (30,758) $(252,385) $(256,876) --------- --------- --------- --------- --------- --------- Rental and Other Revenues............... $ 36,117 $ 123,922 $ 122,712 --------- --------- --------- --------- --------- --------- Net Loss................................ $ (1,445) $ (5,019) $ (13,733) --------- --------- --------- --------- --------- ---------
1998 1997 ---------- ---------- Company's Share of Loss (Equity Method) for the Year Ended December 31, 1998 and the period November 1 through December 31, 1997 (in thousandths).............. $(157) $(81) ---------- ---------- ---------- ----------
Prior to November 1, 1997 and during 1996 Lexford's share of loss relating to its investment in Unconsolidated Partnerships was not recorded because Lexford accounted for the investment under the cost method (see Note 1). NOTE 4: REVOLVING/TERM DEBT Revolving/Term Debt consisted of the following at December 31, 1998 and 1997 (in thousands):
1998 1997 --------- --------- Second Amended and Restated Revolving Credit Facility principal payable March 30, 2000; interest payable monthly in arrears at prime minus 1% (6.75% at December 31, 1998)........................................ $29,800 $ 2,572 Acquisition Term Debt -- principal and interest in monthly installments of $139,435 through March 31, 2001; interest at a fixed rate of 7.25%............................................ 3,362 4,733 Other notes payable.............................................................. 24 57 --------- --------- $33,186 $ 7,362 --------- --------- --------- ---------
On September 30, 1998, Lexford entered into the Second Amended and Restated Loan and Security Agreement with The Provident Bank (the "Bank"). The amended revolving credit facility ("Facility") is for $40 million and represents an increase to and replacement of all former revolving credit facilities with the Bank. The scheduled term of the Facility expires March 30, 2000, although Lexford may elect from time to time to convert all or any portion of the principal amount outstanding under the Facility into a five year term loan. Revolving loans outstanding under the Facility bear interest at a variable interest rate equal to the Bank's prime rate of interest minus 1%. Lexford's loan agreements contain restrictive covenants, including but not limited to, the maintenance of certain net worth, financial ratios, certain restrictions on incurrence of additional debt and certain restrictions on acquisitions. As of December 31, 1998, Lexford's annual revolving/term debt maturities are as follows (in thousands): 1999.................................................... $ 1,502 2000.................................................... 31,389 2001.................................................... 295 --------- $ 33,186 --------- ---------
Lexford adopted a method of accounting referred to as Fresh Start reporting as of the Effective Date, as a result of Lexford's judicial Plan of Reorganization. Lexford prepared financial statements on the basis that a new reporting entity was created with assets and liabilities recorded at the estimated fair values as of the Effective Date. At the Effective Date, to the extent the non-recourse debt secured by a Rental Property exceeded the estimated fair value of such Rental Property, Lexford reduced the contractual amount of the related non-recourse mortgage debt by the amount of the deficiency (the "Mortgage Deficiency"). The contractual mortgage 12 balance net of any applicable Mortgage Deficiency, is referred to as the "Carrying Value" of the mortgage. The contractual principal balances of the mortgages on Rental Properties exceed the carrying values by $6.1 million and $7.7 million at December 31, 1998 and 1997, respectively. The mortgages are non recourse, are payable over periods through 2031, and are collateralized by the Rental Properties, generally on a single Rental Property by Rental Property basis. Although, a portfolio of mortgages on 26 Rental Properties are cross-collateralized and cross-defaulted and another portfolio of 25 Rental Properties are cross-collateralized and cross-defaulted within their respective states, with no more than eight Properties in one state. At December 31, 1998 contractual interest rates ranged from 6.0% to 10.7% with fixed rates on approximately $484.2 million of the outstanding contractual mortgage balances. The weighted average contractual interest rate and term to maturity on the mortgages on Rental Properties, was 8.52% and 5.8 years at December 31, 1998. The annual debt service requirement was $50.3 million at December 31, 1998. In addition, 31 Rental Properties have second mortgage debt totaling $3.2 million at December 31, 1998, that requires the application of all excess cash flow from operations to be applied to the outstanding principal on such debt. The range of interest rates and related carrying amounts of mortgages payable at December 31, 1998 is as follows (in thousands):
CONTRACTUAL CONTRACTUAL RATE BALANCE CARRYING VALUE ---------------- -------------- -------------- Less than 8.0%........................ $92,924 $91,953 8.01%--9.0%........................... 383,776 379,792 More than 9.01%....................... 23,988 22,811 -------------- -------------- $500,688 $494,556 -------------- -------------- -------------- --------------
At December 31, 1998, seven Rental Properties had first mortgage loans which had matured with an aggregate outstanding balance of $6.9 million. The Mortgage debt on one Rental Property amounting to approximately $562,000 was refinanced in January 1999. Lexford anticipates extending or refinancing the balance of the matured mortgages in 1999. At December 31, 1998, 11 Rental Properties acquired as part of the Consolidation Plan had non recourse second mortgages which in the aggregate total $3.1 million, of which $1.0 million had matured. All of the notes bear a fixed rate of interest at 6.0%, do not require any principal amortization and are subordinate to the first mortgage on the Rental Property. Lexford anticipates extending the matured second mortgages. Minimum estimated repayment requirements of mortgages for the next five years based upon the contractual principal balances are as follows ( in thousands):
CONTRACTUAL AMOUNT -------------- 1999................................................... $36,645 2000................................................... 20,060 2001................................................... 114,054 2002................................................... 13,072 2003................................................... 16,606 Thereafter............................................. 300,251 -------------- $500,688 -------------- --------------
NOTE 6: SALE OF THIRD PARTY MANAGEMENT BUSINESS Due to the non-qualified REIT income generated by the Third Party Management Business, Lexford classified this business as Held for Sale in the first quarter of 1998, and closed the sale of the business effective as of April 1, 1998. Lexford, however, retained management agreements for all of the Unconsolidated Partnerships, as well as its interest in Lexford Properties, Inc.'s training programs and property management systems and certain personnel to facilitate improved management of Lexford's Properties. As a result of the decision to sell and in order to facilitate such sale of the Third Party Management Business, Lexford took the following actions in 1998: The merger agreement governing Lexford's acquisition of Lexford Properties, Inc. (the former owner of the Third Party Management Business) included a provision that $9.0 million or 900,000 shares (valued at the time of acquisition), of the purchase price was subject to forfeiture in whole or in part in the event the Third Party Management Business did not achieve certain profitability criteria by December 31, 1999. On March 13, 1998, Lexford negotiated a settlement with the former shareholders of Lexford Properties, Inc. whereby 300,000 of the 900,000 shares subject to forfeiture were released in exchange for the forfeiture of the remaining 600,000 shares. The release of the 300,000 shares resulted in a $3.0 million charge in the first quarter of 1998. 13 Lexford adjusted the carrying value of goodwill associated with the acquisition of the Third Party Management Business by writing off $2.0 million of goodwill. Due to the reclassification of the Third Party Management Business as Held for Sale, Lexford recorded a $1.3 million reserve for sale/disposal costs associated with this sale. The above charges totaling $6.3 million have been classified as Loss on Sale of Third Party Management Business. Lexford Properties, Inc. formed a subsidiary, Lexford Property Management, Inc. ("LPM") and contributed all of its interest in its property management contracts for multifamily apartment communities owned entirely by third parties to LPM in exchange for all of LPM's issued and outstanding preferred stock. Effective as of April 1, 1998, Lexford sold its entire preferred stock interest in LPM to a company formed to acquire the Third Party Management Business by FSC Realty, LLC a company affiliated with Stanley R. Fimberg, a consultant to, and Trustee of, Lexford at the time of the sale, Ralph V. Williams a consultant to Lexford at the time of the sale and Bruce Woodward, an executive officer of Lexford at the time of the sale. As a result of the sale, each of Messrs. Fimberg, Williams and Woodward severed their respective consulting and employment relationships with Lexford. Mr. Fimberg remains a Trustee of Lexford. Each of Messrs. Fimberg, Williams and Woodward were also former beneficial equity owners of Lexford Properties, Inc. prior to Lexford's original acquisition of the Third Party Management Business in August, 1996. Lexford received a promissory note in the principal amount of $1.8 million payable over a ten year period which bears interest at 6% per annum until April 1, 2000 and 11% per annum thereafter, in exchange for all of the outstanding preferred stock of LPM. Mr. Fimberg did not participate in Lexford's decision to sell the Third Party Management Business. Management believes that the terms for the sale of the Third Party Management Business are representative of terms which would have been available from an unrelated purchaser. NOTE 7: EXTRAORDINARY ITEM AND IMPAIRMENT LOSS In accordance with Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FASB 121"), Lexford records an impairment loss on long lived assets used in operations when events and circumstances indicate that an asset might be impaired and the undiscounted cash flows estimated to be generated by an asset are less than the carrying amounts of the asset. In the fourth quarter of 1998 based upon management's intent to dispose of a Rental Property Lexford determined that an asset with a carrying value of $1.7 million was impaired and recorded a real estate impairment loss of $1.0 million to write the asset down to its estimated fair value based upon management's estimate of the net proceeds which would be received upon disposal. In the fourth quarter of 1998, Lexford consented to an insubstance foreclosure to the mortgagee of this Rental Property. As a result of this transaction Lexford recorded an extraordinary gain of $1.0 million since the mortgage debt exceeded the adjusted carrying value of the asset. In December 1998, Lexford also refinanced mortgages on 25 Rental Properties and eight properties owned by Unconsolidated Partnerships. Mortgage indebtedness on the 25 Rental Properties, with a contractual balance of approximately $38.7 million and a Carrying Value of approximately $37.8 million, was refinanced with mortgages bearing a fixed rate of interest of 7.6%, with 25 year amortization and ten year maturities. A net extraordinary gain of approximately $631,000 resulted from the mortgage debt refinancing and the insubstance foreclosure transaction. The net gain is comprised of a $1.0 million gain on the insubstance foreclosure, plus an extraordinary gain of $1.7 million generated from debt discounts received from the prior lenders to Rental Properties whose mortgage debt was refinanced. These gains were offset by a $1.2 million loss due to prepayment penalties paid to the former lenders and a loss of approximately $902,000 that arose from the mortgages being repaid from refinance proceeds at the contractual balance amounts, which exceeded the Carrying Values of the mortgages (see Note 5). The refinancing of the mortgage debt on eight properties owned by Unconsolidated Partnerships were on the same terms as the mortgages on the Rental Properties. Lexford received approximately $900,000 of excess proceeds from the refinancing as repayment of advances and other amounts due to Lexford from the Unconsolidated Partnerships. During 1997, Lexford refinanced mortgages on six Rental Properties. Mortgage indebtedness on these Rental Properties, with a contractual value of approximately $7.4 million and a Carrying Value of approximately $7.1 million, was refinanced with mortgages bearing a fixed rate of interest ranging from 7.45% to 9.03%, with 25 year amortization and ten year maturities. Annual debt service on the affected Rental Properties decreased approximately $18,000. An extraordinary loss of approximately $180,000, net of tax benefits, resulted from the mortgage debt refinancings of the Rental Properties. The loss arose from the mortgages being repaid from refinance proceeds at the contractual balance amounts, which exceeded the Carrying Values of the mortgages (see Note 5). In 1996, Lexford completed modification or refinancing transactions on Rental Properties and Unconsolidated Partnerships which resulted in an extraordinary loss of $1.6 million, net of tax benefits in 1996. The loss arose from those mortgages being repaid from refinance proceeds at the contractual balance amounts, which exceeded the Carrying Values of the mortgage (see Note 5). The refinancing of mortgages on the Unconsolidated Partnerships generated loan fee revenue of approximately $96,000 in 1998, $130,000 in 1997 and $752,000 in 1996. The fees were based upon a graduated percentage of the new loan amounts and are classified with Fee Based Revenue in the Consolidated Statements of Income. 14 NOTE 8: SHARE BASED COMPENSATION Lexford provides share based compensation to employees and non-employee trustees including share options, share awards and shares in lieu of cash payments under various plans and contractual arrangements. Rabbi Trust Lexford established the Rabbi Trust in 1996. The Rabbi Trust was established to permit executive officers and trustees to defer taxes on awards of Company shares. The Rabbi Trust is currently restricted to holding Company shares or cash equivalents. In 1998, the Emerging Issues, Task Force of the Financial Accounting Standards Board ("EITF") reached a consensus on Issue No. 97-14, Accounting for Deferred Compensation Arrangements. In accordance with that consensus, the deferred compensation liability represented in the Rabbi Trust and the securities issued to fund such deferred compensation liability must be consolidated by Lexford and carried on Lexford's balance sheet, and Lexford's common shares held in the Rabbi Trust must be accounted for as treasury shares by Lexford. Lexford has applied EITF No. 97-14 commencing with the first quarter of 1998. Performance Equity Plan In October 1997, the shareholders of Lexford approved Lexford's 1997 Performance Equity Plan (the "Performance Plan"). The Performance Plan authorized the grant of restricted share awards to certain officers and non-employee trustees. The Performance Plan, as approved, authorized awards which would vest only upon attainment of specified financial or share price targets over a three year term (1997 through 1999), with increasing performance goals associated with each year of the term. A total of 636,000 shares of restricted Common shares was available for grants, and on October 7, 1997 the Compensation Committee of Lexford's Board of Directors authorized awards of restricted grants for 636,000 shares. In 1998, the final tranche of 212,000 shares awarded under the Performance Plan vested upon achievement of the performance goals. The vesting of these shares resulted in a non-cash charge in 1998 of approximately $2.5 million. In 1997, 424,000 shares awarded under the Performance Plan vested upon achievement of the performance goals. The vesting of these shares resulted in a non-cash charge in 1997 of approximately $6.3 million. Incentive Equity Plan and Other Share Based Compensation Lexford also has an Incentive Equity Plan (the "Incentive Plan"), that was established in 1992 and amended with shareholder approval in 1995, that authorizes Lexford's issuance of shares in connection with options and restricted share awards. The Incentive Plan, which benefits officers, key employees and non-employee trustees, authorized approximately 1,182,000 shares for officers and key employees and approximately 280,400 shares for non-employee trustees. At December 31, 1998, approximately 45,000 shares remain available for officers and key employees and approximately 64,400 shares remain available for grants of options to non-employee trustees. The shares available for future options and awards may be granted at the discretion of Lexford's Board of Trustees ("Board") or the Compensation Committee of the Board. In 1998, Lexford granted to officers and key employees options for the purchase of 116,000 shares and 144,000 restricted shares which vest ratably over time contingent upon continuing service to Lexford with terms for acceleration upon a change in control of Lexford. In addition, 4,000 restricted shares were granted to the non-employee Chairman of the Board in 1998. Also during 1998, an officer received 1,579 shares in lieu of cash compensation pursuant to the terms of the officer's employment contract requiring shares in lieu of an increase in base salary. In 1997, Lexford granted to officers and key employees options for the purchase of 72,550 shares, 15,000 restricted shares, and 18,000 shares originally granted with vesting contingent on certain Company performance criteria which was modified to time vesting in 1998. In addition, options for the purchase of 32,000 shares, and 4,000 restricted shares were granted to non-employee directors in 1997. In addition, certain officers and key employees received 8,620 shares in lieu of cash compensation in 1997 and 150,800 restricted shares were issued under employment agreements. In 1996, Lexford granted options for 152,000 shares, including 32,000 to non-employee directors, restricted share awards for 99,000 shares and deferred awards for 76,000 shares. The restricted share awards included up to 35,000 shares as a Company match of shares if purchased by officers by April 1997, and 64,000 shares which vest ratably over time. The deferred share awards vest upon achievement of specified performance criteria. Awards of shares provided for in the Incentive Plan, depending on the nature of the award, may be reflected as compensation over the vesting period. Compensation expense resulting from transactions under this plan and other equity compensation arrangements was $1.6 million, $842,600 and $207,500 for 1998, 1997 and 1996, respectively, in addition to the non cash charge recorded for the Performance Plan. Weighted average per share value at grant date of the restricted and deferred equity awards was $17.42, $14.68 and $9.29 for 1998, 1997 and 1996, respectively. In 1996, the shareholders of Lexford approved Lexford's Non-Employee Trustee Restricted Stock Plan (the "Trustee Plan") that provides for compensation earned by the trustees to be paid, at the option of the trustees, in whole or in part, in shares in lieu of cash 15 fees. The Trustee Plan authorized 100,000 shares, of which approximately 56,000 shares remain available at December 31, 1998. In 1998, 1997 and 1996 Lexford recorded compensation of approximately $204,000, $277,000 and $118,000, respectively, related to the Trustee Plan. Stock Option Valuation Lexford has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for its employee and trustee stock options, because the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock Based Compensation," ("FASB 123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of Lexford's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by FASB 123, which also requires that the information be determined as if Lexford has accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of the grant using the Black-Scholes option pricing model. The following assumptions were utilized in the pricing model: a weighted average risk free interest rate of 5.22% in 1998, 5.6% in 1997 and 6.5% in 1996; dividend yield of nine percent in 1998 and one percent in 1997 and 1996; volatility factors of the expected market price of Lexford's common stock of 0.253 in 1998, 0.248 in 1997 and 0.236 in 1996; and a weighted average expected life of 6 years in 1998, 6.3 years in 1997, and 7 years in 1996. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected price volatility of Lexford's shares. Because Lexford's employee stock options have characteristics significantly different from those of unrestricted, fully transferable options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not provide a reliable measure of the fair value of its outstanding employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the options vesting period. Lexford's pro forma information follows:
1998 1997 1996 ------------- ------------ ------------ Pro forma net income/(loss) (in thousands).......... $ (5,136) $ 3,027 $ 3,630 ------------- ------------ ------------ ------------- ------------ ------------ Pro forma basic earnings per share.................. $ (0.56) $ 0.37 $ 0.48 ------------- ------------ ------------ ------------- ------------ ------------ Pro forma diluted earnings per share................ $ (0.56) $ 0.36 $ 0.46 ------------- ------------ ------------ ------------- ------------ ------------
The following table summarizes Lexford's stock option activity, and related information for the years ended December 31, 1998, 1997 and 1996 (in thousands except for exercise prices): 16
1998 1997 1996 -------------------------- ----------------------- ------------------------- WEIGHTED WEIGHTED WEIGHTED AVE. AVE. AVE. EXERCISE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE --------- ---------- -------- --------- --------- ---------- Options outstanding at beginning of year........ 434 $7.20 352 $5.45 270 $2.05 Options granted...... 116 $18.05 104 $12.27 152 $9.44 Options exercised.... (305) $5.99 (18) $2.07 (68) $0.90 Options forfeited.... (18) $9.95 (4) $9.59 (2) $1.31 --------- ---------- -------- --------- --------- ---------- Options outstanding at end of year.............. 227 $13.88 434 $7.20 352 $5.46 --------- ---------- -------- --------- --------- ---------- --------- ---------- -------- --------- --------- ---------- Options exercisable at end of year.............. 51 $9.57 234 $4.17 176 $2.60 Weighted Ave. Fair Value of Options Granted during the Year.......... $1.54 $4.15 $3.19 ---------- --------- ---------- ---------- --------- ----------
Options awarded have an exercise price equal to or greater than the market price of the Common Stock at the time of the award, and are subject to vesting schedules as determined by Lexford's Board of Trustees or its Compensation Committee. The options granted expire, if not exercised, ten years from the date on which the option was granted (subject to earlier expiration or lapse in the event of termination of employment). Exercise prices for options outstanding as of December 31, 1998 ranged from $0.71 to $19.69 per share with a weighted average remaining term of 8.3 years. At December 31, 1998, there were options outstanding to purchase approximately 14,000 shares at an exercise price less than $9 and approximately 213,000 shares at an exercise price in excess of $9. NOTE 9: INCOME TAXES 1998 Lexford intends to elect to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with its taxable year beginning January 1, 1998. Lexford will, and intends to continue to distribute at least 95% of its real estate investment trust taxable income. As a REIT, Lexford generally will not be subject to Federal Income Tax on income it distributes to shareholders as long as it distributes 100% of its REIT taxable income. Lexford will generally not be subject to state income taxes in the jurisdictions where the Properties are currently located. The Consolidated Statement of Income for the year ended December 31, 1998 does not include a provision for federal or state income taxes. Lexford made an election pursuant to Notice 88-19 with the filing of its 1997 corporate income tax return. This election enabled Lexford to avoid having to treat Lexford's conversion to real estate investment trust status as a taxable disposition of its assets as of December 31, 1997. As a former C corporation Lexford potentially remains subject to corporate level taxes for any asset disposition between January 1, 1998 through December 31, 2008. The amount of income potentially subject to corporate level tax is generally equal to the excess of the fair market value of the asset over its adjusted tax basis as of December 31, 1997 or the actual amount of taxable gain, whichever is greater. Any gains recognized during this period of time could be offset by available net operating losses ("NOLs"), passive activity losses ("PALs") and/or business tax credit carry forwards. Prior Years Lexford and its subsidiaries filed a consolidated Federal income tax return in 1997 and 1996. For financial reporting purposes, Lexford followed FASB Statement No. 109 ("FASB 109"). In accordance with FASB 109, income taxes have been provided at statutory rates in effect during the period. Tax benefits associated with net operating loss carry forwards and other temporary differences that existed at the time Fresh Start reporting was adopted are reflected as an increase to Additional Paid-in Capital in the period in which they were realized. The provision for income taxes in the Consolidated Statements of Income (including amounts applicable to extraordinary items) is as follows (in thousands): 17
YEARS ENDED 1997 1996 Current: Federal........................................................ $ 0 $ 0 State.......................................................... 380 250 Accounts Not Payable in Cash................................... 1,694 2,151 ---------- ---------- $2,074 $2,401 ---------- ---------- ---------- ----------
Lexford's actual income tax payments for the years 1997 and 1996 were significantly less than the total provision for income taxes because of available net operating loss carry forwards and other tax benefits. The amounts included in the provision for taxes for which no amounts were payable in cash are set forth in the table above. The effective income tax rates varied from the federal statutory rate as follows (in thousands):
YEARS ENDED -------------------------- 1997 1996 ---------- --------- Federal Tax Provision at Statutory Rates........................ $1,787 $2,094 State Income Taxes Net of Federal Income Tax Benefit............ 252 165 Other Permanent Differences..................................... 36 142 $2,074 $2,401 ---------- --------- Effective Income Tax Rate....................................... 39.3% 39.0% ---------- --------- ---------- ---------
Significant components of Lexford's deferred tax assets and liabilities are as follows at December 31, 1997 (in thousands).
1997 --------- Deferred Tax Assets and Other: Net Operating Loss Carry Forwards and Other Carry Forwards......... $22,000 Suspended Passive Activity Losses.................................. 34,000 Tax Basis of Assets in Excess of Fresh Start Estimated Fair Values. 11,000 --------- 67,000 Less: Valuation Allowance............................................. (31,000) --------- $36,000 --------- --------- Deferred Tax Liabilities: Negative Capital Accounts.......................................... $33,000 Tax Basis of Liabilities in Excess of Related Fresh Start Estimated Fair Values.................................................... 3,000 --------- $36,000 --------- ---------
The valuation reserve against deferred tax assets has been reduced by amounts equivalent to the portions of the tax provisions which are not payable in cash. Corresponding increases have been made to Additional Paid-in Capital. As a result of the uncertainties relating to the ultimate utilization of favorable tax attributes described below, Lexford has provided a valuation allowance for the remaining excess of the net deferred tax assets as of December 31, 1997. In addition to regular corporate income tax, corporations are subject to an alternative minimum tax liability to the extent alternative minimum tax exceeds regular tax. Lexford will record an alternative minimum tax liability in the year that events and transactions create an alternative minimum tax which is probable of being paid and can be reasonably estimated by Lexford. As of December 31, 1998, Lexford has estimated that it has NOL carry forwards for tax purposes of approximately $73.0 million which if not utilized, expire in the years 2000 through 2013. In the event that current or future 5% shareholders (as defined by the Internal Revenue Code) acquire or dispose of shares, over a defined time period, representing in the aggregate 50% or more of Lexford's outstanding shares, a limitation on the use of NOL carry forwards will occur. Lexford has also estimated that it has approximately $103.2 million in suspended PALs which may be available to offset future passive and active income. The tax basis for federal income tax purposes in Rental Properties was approximately $484 million at December 31, 1998. Lexford's ability to utilize tax carry forwards will be subject to a variety of factors including Lexford's dividend distribution policy. In general, Lexford will be entitled to utilize NOLs and business tax credit carry forwards only to the extent that real estate investment trust taxable income exceeds Lexford's deduction for dividends paid. 18 NOTE 10: NON-RECURRING COSTS Non-recurring Costs were approximately $2.7 million for the year ended December 31, 1998. Approximately $1.6 million of the charge related to the Retirement Plan ("Trustee Retirement Plan") for four Trustees who retired April 15, 1998. Each retiring Trustee received a package consisting of the right to receive a cash payment of $225,000 (the "Retirement Payment"), vesting of all non-vested common share awards and the opportunity to continue participation in Lexford's Executive Deferred Compensation Plan and the Rabbi Trust for up to five years. The retiring Trustees were also afforded the opportunity to defer receipt of all or any portion of the Retirement Payment and direct that the deferred portion be contributed to the Rabbi Trust and invested in Lexford's common shares for their benefit. In connection with their participation in the Trustee Retirement Plan, two of the retiring trustees elected to defer receipt of a total of $400,000 of Retirement Payments in such manner. The remaining $1.1 million of Non-recurring Costs relates to severance costs associated with 23 terminated employees, and costs related to the closing of satellite offices. The positions were eliminated as part of a strategic initiative implemented in 1998 to better align its organization and cost structure with planned revenue levels. The majority of the charge was incurred in the fourth quarter of 1998. In 1997, Lexford incurred Non-recurring Costs totaling approximately $828,000. Approximately $400,000 of the charge was due to costs related to the elimination of overlapping functions between Lexford Properties, Inc. and Lexford's previous management services operations. In the second half of 1997, Lexford recorded a charge of approximately $428,000 primarily related to costs incurred for the Form S-11 filing for the proposed spin-off of Lexford's Rental Properties. Lexford subsequently withdrew this filing as it has determined to maintain its ownership interests in the Rental Properties and seek to qualify as a REIT under the Internal Revenue Code. In 1995, Lexford implemented a corporate restructuring plan and initiated further restructuring in 1996. Lexford recorded a charge of approximately $243,000 in 1996 related to the costs of the restructuring, principally severance and separation costs. Approximately 26 employees were released as a result of the restructurings in 1995 and 1996. In 1996 Lexford paid $1.7 million of costs related to the 1995 and 1996 restructurings. NOTE 11: COMMITMENTS AND CONTINGENCIES Lease Commitments Minimum payments under the terms of all noncancellable operating leases in which Lexford is the lessee, principally for office space, at December 31, 1998 are as follows (in thousands): 1999................................................... $808 2000................................................... 505 2001................................................... 504 2002................................................... 517 2003................................................... 511 Thereafter............................................. 419 -------- $3,264 -------- --------
Litigation Lexford is involved in various legal actions arising out of the normal course of its business. Management of Lexford, based upon knowledge of facts and the advice of counsel, believes potential exposure to loss from legal actions should not result in a material adverse effect on Lexford's consolidated financial position. On October 30, 1998, Lexford reached a settlement in its final lawsuit related to claims for termite damage losses. Pursuant to the terms of the settlement agreement, Lexford, in its capacity as general partner of limited partnerships that own Rental Properties and Unconsolidated Partnerships and as agent for parties that have purchased apartment communities formerly owned by Unconsolidated Partnerships, has received cash payment in the gross amount of $3,075,000 and has paid contingency legal fees of $975,000 from the settlement proceeds. The net proceeds of the settlement have since been allocated among the properties (including those owned by third parties) based upon the extent of the termite damage at each such property. Lexford's portion of the proceeds from the settlements will be utilized to offset costs to be incurred for termite repairs and has been included in Other Liabilities in the amount of approximately $1.1 million and $1.9 million at December 31, 1998 and 1997, respectively. NOTE 12: RETIREMENT PLAN Lexford maintains the Lexford Residential Trust Savings Plan (the "Savings Plan") under section 401(k) of the Internal Revenue Code (the "Code"), to which participants may contribute a percentage of their base pay and overtime earnings up to limits established by the Code. The Savings Plan was amended and restated, effective January 1, 1999, to provide for a seven year 19 graduated vesting schedule for Company matching contributions. Any participant who was 100% vested prior to the effective date will remain 100% vested. Effective July 1, 1996, the Savings Plan was amended to include employees at the Properties as participants and increase Lexford match. Lexford matching contribution amounts to 1% of wages for every 2% of wages contributed by a participant up to a maximum of the lesser of 3% of wages or $2,000 per year. In 1998, 1997 and 1996, Lexford's cash contributions amounted to approximately $197,100, $126,400, and $134,000, respectively. NOTE 13: RELATED PARTY TRANSACTIONS Lexford is the sole beneficial equity owner of all Rental Properties and is a general partner in the Unconsolidated Partnerships. Lexford also serves as the management company for substantially all of the Properties and provides various ancillary services, including a Preferred Resource purchasing program to the Properties and renter's insurance to residents. Lexford's fee based revenue, and interest income are derived from Unconsolidated Partnerships. Approximately $429,000 and $2.0 million of Lexford's accounts receivables, net of an allowance of approximately $196,000 and $942,000, are due from the Unconsolidated Partnerships as of December 31, 1998 and 1997, respectively. In 1998, Lexford received a net repayment of advances from Unconsolidated Partnerships of approximately $128,000, and in 1997 and 1996 Lexford advanced to Unconsolidated Partnerships, net of amounts repaid, approximately $992,000 and $2.6 million, respectively. The majority of the advances relate to operating needs and advances to facilitate the refinancing of the mortgages on the Properties as described in Note 5. The interest rate on these advances is currently prime plus one percent. This interest rate may be adjusted in the future based on prevailing market rates. During the fourth quarter of 1998, Lexford loaned approximately $352,000 to certain key officers. The majority of the loans bear interest at the rate of 1% in excess of the prime rate of the Bank and are due in three years. The loans were made to fund the personal income tax obligations arising from the tax effect of the exercise of non-qualified stock options. At December 31, 1998, the amount of loans and related interest outstanding amounted to approximately $355,000. An independent trustee of Lexford is a partner in the law firm which serves as outside general counsel to Lexford. Legal fees paid related to services provided to Lexford by this law firm were approximately $1.1 million in 1998, $981,000 in 1997, and $286,000 in 1996. Lexford had accrued expenses of $75,000 and $176,000 to this law firm at December 31, 1998 and 1997, respectively. In addition, legal fees paid related to debt restructuring and refinancing services provided by this law firm to the Rental Properties and Unconsolidated Partnerships were approximately $118,000 in 1998, $99,000 in 1997 and $523,000 in 1996. Another independent trustee of Lexford has a minority interest in the lessor of the office facility that houses Lexford's operations. NOTE 14: UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS The following unaudited pro forma condensed consolidated income statements for the years ended December 31, 1998 and 1997 assume that all 324 former Unconsolidated Partnerships acquired in 1998 were purchased as of January 1, 1998 and 1997, respectively. The unaudited pro forma condensed consolidated income statements do not purport to present what Lexford's results of operations would actually have been had such events in fact occurred on the date or at the beginning of the periods indicated above or to project Lexford's results of operations for any future date or period. 20 PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31 --------------------------- 1998 1997 UNAUDITED UNAUDITED ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Rental and Other Property Revenues............................... $148,857 $144,657 Fee Based and Income from Unconsolidated Partnership (a)......... 7,451 10,035 ----------- ----------- $156,308 $154,692 Expenses: Property Operating and Maintenance............................... 48,733 45,150 Real Estate Taxes and Insurance.................................. 12,239 13,066 Property Management (a).......................................... 12,506 15,340 Administration................................................... 6,287 5,194 Non-recurring Costs/Performance Equity Plan (b).................. 5,173 6,681 Interest......................................................... 46,569 47,745 Depreciation and Amortization.................................... 23,274 21,545 Real Estate Impairment Loss (b).................................. 1,014 -- Loss on Sale of Third Party Management Business (c).............. 6,300 -- ----------- ----------- 162,095 154,721 Income/(Loss) before Gain on Disposal of Assets, Income Taxes and Extraordinary Items.............................................. (5,787) (29) Provision for Income Taxes....................................... -- (768) Extraordinary Gain/(Loss)........................................ 631 (180) Gain on Disposal of Assets--Net.................................. 499 1,989 ----------- ----------- Net Income/(Loss).................................................... $(4,657) $1,012 ----------- ----------- ----------- ----------- Basic Earnings/(Loss) Per Share...................................... $(.51) $.13 ----------- ----------- ----------- ----------- Diluted Earnings/(Loss) Per Share.................................... $(.50) $.12 ----------- ----------- ----------- -----------
------------------------- (a) Includes management fees received and expenses incurred in conjunction with the operation of Lexford's Third Party Management Business during 1997 and the first quarter of 1998. (See Note 6 -- "Sale of Third Party Management Business"). The decline in Fee Based revenues is primarily attributable to the sale described therein. (b) See Note 10 -- "Non-recurring Costs", Note 8 -- "Performance Equity Plan" and Note 7 -- "Extraordinary Item and Impairment Loss" (c) See Note 6 -- "Sale of Third Party Management Business" NOTE 15: EARNINGS AND DIVIDENDS PER SHARE Earnings Per Share The following table shows the amounts used in computing basic and diluted earnings per share as well as weighted average numbers of shares outstanding and the effect on income of restricted common shares and stock options with dilutive potential (in thousands except per share amounts):
1998 1997 1996 ---------- --------- --------- Numerator for Basic and Diluted Earnings Per Shares: Income before Extraordinary Items...................... $(5,532) $3,386 $5,370 Extraordinary Item..................................... 631 (180) (1,614) ---------- --------- --------- Net Income/(Loss)...................................... $(4,901) $3,206 $3,756 ---------- --------- --------- ---------- --------- --------- Denominators: Denominator for Basic Earnings Per Share-- Weighted Average Shares................................ 9,211 8,072 7,538 Effect of Dilutive Securities: Stock Options (1) --- 172 192 Time Vesting Restricted Share Awards............... 28 70 95 ---------- --------- --------- Dilutive Potential Common Shares....................... 28 242 287 ---------- --------- --------- Denominator for Diluted Earnings Per Share-- Adjusted Weighted Average Shares 9,239 8,314 7,825 ---------- --------- --------- ---------- --------- ---------
21 Basic Earnings Per Share: Income/(Loss) Before Extraordinary Item $(0.60) $0.42) $0.71 Extraordinary Item..................................... 0.07 (0.02) (0.21) ---------- --------- --------- Net Income/(Loss) $(0.53) $0.40 $0.50 ---------- --------- --------- ---------- --------- --------- Diluted Earnings Per Share: Income/(Loss) Before Extraordinary Item................ $(0.60) $0.41 $0.69 Extraordinary Item..................................... 0.07 (0.02) (0.21) ---------- --------- --------- Net Income/(Loss)...................................... $(0.53) $0.39 $0.48 ---------- --------- --------- ---------- --------- ---------
- ------------------------ (1) Options to purchase 62,877 shares were excluded from diluted earnings per share for the year ended December 31, 1998 because including the shares in the denominator for diluted earnings per share would be anti-dilutive as a result of the Net Loss the Company recognized for the year ended December 31, 1998. Weighted average shares outstanding, for diluted earnings per share, excludes options to purchase 15,000 and 8,000 shares in 1998 and 1997, respectively, because the exercise price exceeded the average share price. For additional disclosures regarding outstanding employee stock options see Note 8. In August 1996, Lexford issued 1.4 million common shares in connection with its acquisition by merger of Lexford Properties, Inc. (the original owner of the Third Party Management Business), 900,000 shares of which were subject to forfeiture in whole or in part. The 900,000 contingent shares were excluded from the weighted average shares outstanding in 1997 and 1996. On March 13, 1998, Lexford negotiated a settlement with the holders of the contingent shares whereby 300,000 of the contingent shares were released in exchange for the forfeiture and cancellation of the remaining 600,000 shares. The 300,000 shares released are included in the weighted average shares outstanding in 1998 (see Note 6). Dividends Per Share In order to qualify as a real estate investment trust, Lexford must, among other requirements, distribute at least 95% of its real estate investment trust taxable income (exclusive of capital gains) to its shareholders. Per share dividend payments by Lexford were characterized in the following manner for income tax purposes:
1998 --------- Ordinary Income........................................ $0.88 Capital Gain Income.................................... 0.00 Return of Capital 0.00 --------- Total Dividends................................... $0.88 --------- ---------
Current federal tax rules generally require that dividends declared during October, November and December of Lexford's calendar year and paid prior to January 31st of the following year be included in the income of Lexford's shareholders in the year that they are declared. NOTE 16: QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized unaudited consolidated quarterly information for 1998 and 1997 is provided below (amounts in thousands, except per share amounts).
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER REVENUES 1998.................................. $29,198 $38,387 $39,192 $39,728 1997.................................. $16,833 $17,025 $17,666 $17,525 Income/(Loss) before Extraordinary Item 1998.................................. $(6,888) $1,068 $757 $(469) 1997.................................. $1,276 $1,655 $1,841 $(1,386) Extraordinary Item, net of Income Taxes 1998.................................. $ 0 $ 0 $ 0 $631 1997.................................. $ 0 $(180) $ 0 $ 0 Net Income (Loss) 1998.................................. $(6,888) $1,068 $757 $162 1997.................................. $1,276 $1,475 $1,841 $(1,386) Earnings per share: Basic Income/(Loss) before Extraordinary Item 1998.................................. $(0.80) $0.12 $0.08 $(0.05) 1997.................................. $0.16 $0.21 $0.23 $(0.16) Extraordinary Item 1998.................................. $0.00 $0.00 $0.00 $0.07 1997.................................. $0.00 $(0.02) $0.00 $0.00 Net Income/(Loss)
22 1998.................................. $(0.80) $0.12 $0.08 $0.02 1997.................................. $0.16 $0.19 $0.23 $(0.16) Diluted Income/(Loss) before Extraordinary Item 1998.................................. $(0.80) $0.11 $0.08 $(0.05 1997.................................. $0.16 $0.20 $0.22 $(0.16) Extraordinary Item 1998.................................. $0.00 $0.00 $0.00 $0.07 1997.................................. $0.00 $(0.02) $0.00 $0.00 Net Income/(Loss) 1998.................................. $(0.80) $0.11 $0.08 $0.02 1997.................................. $0.16 $0.18 $0.22 $(0.16)
23 SCHEDULE II LEXFORD RESIDENTIAL TRUST VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS -------------------------------------- 1998 1997 1996 --------- --------- --------- Balance at Beginning of Period............................. $ 3,547 $3,691 $3,415 Add: Charged to Costs and Expenses:...................... Recovery of Allowances................................. -- (300) Other Allowances....................................... 1,670 389 803 Less: Account Charge Offs................................ (3,052) (533) (227) --------- --------- --------- Balance at End of Period................................... $2,165 $3,547 $3,691 --------- --------- --------- --------- --------- ---------
24 LEXFORD RESIDENTIAL TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION--SCHEDULE III DECEMBER 31, 1998 (IN THOUSANDS)
Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- GLENVIEW......................... AL 1,682 1,682 178 1,785 35 -- WOODVALLEY....................... AL 1,418 1,418 77 1,416 6 -- AMBERWOOD I...................... FL 404 404 18 478 15 -- APPLEWOOD I & II................. FL 2,220 2,220 292 3,523 822 -- BAYSIDE.......................... FL 653 653 85 684 39 -- BEL AIRE I....................... FL 1,418 1,418 241 1,232 11 -- BEL AIRE II...................... FL 1,132 436 81 287 17 -- BERRY PINES...................... FL 1,008 1,008 44 1,030 36 -- BLUEBERRY HILL I................. FL 751 751 64 363 409 -- BRANCHWOOD....................... FL 2,303 2,303 188 2,345 33 -- BRANDYWINE E..................... FL 525 525 64 526 17 -- CALIFORNIA GARDENS............... FL 1,139 581 96 521 20 -- CANDLELIGHT I.................... FL 606 606 69 664 17 -- CANDLELIGHT II................... FL 601 601 76 635 28 -- CANTERBURY CROSSINGS............. FL 1,281 675 78 386 51 -- CEDARWOOD I...................... FL 753 753 63 804 15 -- CEDARWOOD II..................... FL 575 575 46 484 16 -- CENTRE LAKE III.................. FL 4,821 4,821 1,211 3,117 121 -- CLEARLAKE PINES II............... FL 1,045 1,045 113 1,033 17 -- COUNTRYSIDE I.................... FL 862 862 146 842 21 -- COUNTRYSIDE II................... FL 1,502 1,502 79 1,862 21 -- CYPRESS.......................... FL 1,014 1,014 58 1,025 41 -- DEERWOOD......................... FL 682 682 67 650 68 -- DRIFTWOOD........................ FL 682 682 80 1,130 22 -- ELMWOOD I........................ FL 1,358 1,358 298 1,284 182 -- ELMWOOD II....................... FL 1,343 1,343 341 1,228 127 -- FOREST GLEN...................... FL 1,099 1,099 229 995 86 -- GARDEN TERRACE I................. FL 604 604 89 801 121 -- GARDEN TERRACE II................ FL 690 690 9 903 31 -- HERON POINTE..................... FL 1,624 1,624 368 1,441 272 -- HICKORY PLACE.................... FL 1,339 1,339 191 1,622 17 -- HIDDEN ACRES..................... FL 1,661 1,661 388 1,136 66 -- HIDDEN PINES..................... FL 887 887 59 1,017 21 -- HIGH POINTS...................... FL 1,077 1,077 129 918 20 -- HILLCREST VILLAS................. FL 980 980 79 880 29 -- HILLSIDE TRACE................... FL 1,074 1,074 197 833 19 -- HOLLY RIDGE...................... FL 2,366 2,366 625 1,906 11 -- HOLLY SANDS I.................... FL 1,395 1,395 229 1,142 55 -- HOLLY SANDS II................... FL 1,047 1,047 232 943 113 -- JEFFERSON WAY I.................. FL 1,038 1,038 116 1,063 48 -- JUPITER COVE I................... FL 1,246 1,122 220 805 25 -- JUPITER COVE III................. FL 1,308 1,308 286 1,026 27 -- MARK LANDING I................... FL 1,319 1,319 251 1,482 82 -- MEADOWOOD II..................... FL 836 836 56 1,039 14 -- MIGUEL PLACE..................... FL 1,482 1,482 237 1,125 38 -- MORNINGSIDE...................... FL 1,124 1,124 64 1,269 131 -- MOSSWOOD I....................... FL 798 798 54 768 19 -- MOSSWOOD II...................... FL 1,534 1,534 64 1,583 37 -- 25 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- NOVA GLEN I...................... FL 896 896 90 930 13 -- NOVA GLEN II..................... FL 1,309 1,309 123 1,316 17 -- NOVAWOOD I....................... FL 944 944 88 1,001 28 -- NOVAWOOD II...................... FL 835 835 78 945 21 -- OAK GARDENS...................... FL 2,574 1,845 582 1,759 18 -- OAK RIDGE........................ FL 1,218 1,218 144 1,070 19 -- OAK SHADE........................ FL 1,496 1,496 139 1,332 28 -- OAKWOOD MANOR.................... FL 1,531 1,531 278 1,365 231 -- OAKWOOD VILLAGE.................. FL 735 314 103 566 65 -- OLD ARCHER COURT................. FL 1,007 1,007 104 1,140 19 -- PALATKA OAKS I................... FL 192 192 10 218 6 -- PALATKA OAKS II.................. FL 211 211 16 221 6 -- PALM PLACE....................... FL 1,379 1,379 231 1,385 18 -- PELICAN POINTE I................. FL 1,318 1,318 221 1,205 48 -- PELICAN POINTE II................ FL 1,007 1,007 158 1,191 53 -- PINE BARRENS..................... FL 1,515 1,515 302 1,405 104 -- PINE LAKE........................ FL 298 298 59 325 9 -- PINE MEADOWS I................... FL 1,083 1,083 197 998 23 -- PINE TERRACE I................... FL 2,193 2,193 246 2,422 79 -- PINELLAS PINES................... FL 1,564 1,564 202 1,369 62 -- RANCHSIDE........................ FL 700 700 131 579 16 -- RIVERS END I..................... FL 1,293 1,293 140 1,229 26 -- RIVERS END II.................... FL 1,145 1,145 161 937 40 -- SANDPIPER II..................... FL 1,054 1,054 96 1,021 18 -- SANFORD COURT.................... FL 1,782 1,782 86 2,056 45 -- SHADOW BAY I..................... FL 1,100 1,100 119 1,160 159 -- SHADOW BAY II.................... FL 991 991 74 941 174 -- SHADOW RIDGE..................... FL 1,034 1,034 90 1,601 40 -- SHADOWOOD I...................... FL 1,432 1,432 159 1,355 29 -- SHADOWOOD II..................... FL 1,935 1,935 155 1,651 36 -- SILVER FOREST.................... FL 859 859 115 893 18 -- SKY PINES I...................... FL 1,472 1,472 311 1,226 36 -- SKY PINES II..................... FL 898 898 266 676 91 -- SPRING GATE...................... FL 990 990 52 1,036 48 -- STRAWBERRY PLACE................. FL 791 791 49 770 33 -- SUGARTREE I...................... FL 999 999 88 938 19 -- SUNSET WAY I..................... FL 1,643 1,643 621 1,354 62 -- SUNSET WAY II.................... FL 2,666 2,117 649 1,678 45 -- SUTTON PLACE..................... FL 868 868 146 715 21 -- TERRACE TRACE.................... FL 1,134 1,134 177 1,087 59 -- THE LANDINGS..................... FL 728 728 68 723 46 -- THYMEWOOD II..................... FL 1,586 835 429 732 37 -- TURKSCAP I....................... FL 570 570 55 557 35 -- TURKSCAP III..................... FL 769 769 85 658 37 -- UNIVERSITY SQUARE I.............. FL 932 932 127 1,053 18 -- WESTCREEK........................ FL 1,498 1,498 167 1,426 20 -- WHISPERING PINES II.............. FL 587 587 71 505 18 -- WINDWOOD I....................... FL 536 536 25 457 78 -- WINDWOOD II...................... FL 711 711 34 781 19 -- WINGWOOD......................... FL 1,520 1,520 90 1,761 61 -- WINTER WOODS I................... FL 966 966 134 833 201 -- WOODLAND I....................... FL 1,426 1,426 175 1,681 51 -- WOODLAND II...................... FL 1,335 1,335 91 1,330 34 -- AUTUMN COVE...................... GA 766 766 115 1,002 15 -- BARRINGTON....................... GA 1,020 1,020 118 1,095 25 -- CAMDEN WAY I..................... GA 935 935 61 1,202 12 -- CAMDEN WAY II.................... GA 774 774 37 839 7 -- 26 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- CARRIAGE HILL.................... GA 720 720 76 763 11 -- CEDARGATE........................ GA 901 901 129 1,462 25 -- COUNTRYSIDE MANOR................ GA 1,216 1,216 80 1,470 28 -- ELMWOOD.......................... GA 863 863 181 893 11 -- FOREST VILLAGE................... GA 1,315 1,315 156 1,588 18 -- GENTIAN OAKS..................... GA 1,233 1,233 165 1,257 10 -- GLEN ARM MANOR................... GA 1,184 1,184 149 1,274 106 -- GLENWOOD VILLAGE................. GA 1,110 1,110 156 1,000 18 -- GREENBRIAR GLEN.................. GA 1,561 1,561 274 1,556 34 -- HARBINWOOD....................... GA 1,653 1,653 228 1,444 20 -- HATCHERWAY....................... GA 754 754 111 1,103 41 -- HILLSIDE MANOR................... GA 637 637 33 631 19 -- HOLLY PARK....................... GA 812 812 55 963 5 -- INDIAN LAKE I.................... GA 4,390 4,390 898 5,263 83 -- IRIS GLEN........................ GA 1,785 1,785 266 1,712 111 -- KINGS COLONY..................... GA 2,089 1,495 238 1,723 45 -- LAKESHORE I...................... GA 1,247 1,247 46 995 51 -- LAUREL GLEN...................... GA 1,717 1,717 266 1,628 82 -- LINK TERRACE..................... GA 913 913 101 966 14 -- MARSH LANDING I.................. GA 814 814 28 1,222 14 -- MARSH LANDING II................. GA 963 916 30 918 29 -- MEADOWLAND....................... GA 1,002 1,002 85 997 316 -- MEADOWOOD I...................... GA 1,027 1,027 182 1,802 26 -- MEADOWOOD II..................... GA 943 943 105 908 16 -- MILL RUN......................... GA 1,538 1,538 189 1,260 120 -- MORGAN TRACE..................... GA 1,461 1,461 96 1,330 13 -- NORTHRIDGE....................... GA 1,003 1,003 113 1,058 19 -- OAKLEY WOODS..................... GA 1,145 1,145 77 1,049 11 -- OAKWOOD VILLAGE.................. GA 1,096 1,096 115 1,602 7 -- PINE KNOLL....................... GA 723 723 144 925 23 -- QUAIL CALL....................... GA 725 725 77 857 22 -- RAMBLEWOOD I..................... GA 991 991 68 944 17 -- RAMBLEWOOD II.................... GA 1,807 1,807 264 1,906 33 -- RAMBLEWOOD II.................... GA 491 491 36 463 14 -- REDAN VILLAGE I.................. GA 1,246 1,246 129 1,367 126 -- REDAN VILLAGE II................. GA 1,110 1,110 122 1,320 16 -- RIDGEWOOD I...................... GA 1,438 1,438 97 1,691 28 -- RIDGEWOOD II..................... GA 1,023 1,023 88 1,027 15 -- SHADOW TRACE..................... GA 2,032 2,032 417 2,189 49 -- SKY RIDGE........................ GA 1,930 1,930 313 3,429 28 -- STEWART WAY I & II............... GA 2,225 2,225 477 3,083 203 -- STILLWATER....................... GA 956 956 139 1,173 19 -- STRATFORD LANE I................. GA 935 935 76 923 10 -- SUNNYSIDE........................ GA 1,093 1,093 208 1,221 16 -- TIMBERWOOD....................... GA 570 570 42 615 12 -- VALLEYBROOK...................... GA 1,548 1,548 129 1,354 58 -- VALLEYFIELD I.................... GA 1,652 1,652 202 1,685 117 -- VALLEYFIELD II................... GA 1,054 1,054 166 1,438 143 -- WATERBURY........................ GA 675 675 47 867 142 -- WESTWAY.......................... GA 920 920 57 854 27 -- WHISPERWOOD...................... GA 579 579 99 591 15 -- WILCREST WOODS................... GA 1,365 1,365 247 1,189 101 -- WILLOW CREEK I................... GA 846 846 84 744 11 -- WILLOW RUN....................... GA 1,731 1,731 194 1,876 136 -- WILLOWOOD........................ GA 1,173 1,173 68 1,305 6 -- WOODCLIFF I...................... GA 1,226 1,226 119 1,264 18 -- WOODCLIFF II..................... GA 1,683 1,683 273 1,384 15 -- 27 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- WOODCREST I...................... GA 1,174 1,174 122 1,139 26 -- WOODTRAIL........................ GA 1,043 1,043 100 1,601 15 -- ANSLEY OAKS...................... IL 1,386 1,386 69 1,431 8 -- BRADFORD PLACE................... IL 1,112 1,112 216 719 16 -- BRUNSWICK........................ IL 1,413 1,413 54 1,645 41 -- HUNTER GLEN...................... IL 991 991 257 1,462 16 -- ACADIA COURT..................... IN 2,118 2,118 234 1,887 18 -- ACADIA COURT II.................. IN 1,836 1,836 398 1,669 36 -- ANNHURST......................... IN 1,275 1,275 34 1,313 15 -- APPLEGATE........................ IN 974 974 153 1,513 10 -- APPLEGATE I...................... IN 926 926 99 1,246 8 -- APPLEGATE II..................... IN 1,247 1,247 163 1,815 40 -- ARAGON WOODS..................... IN 1,121 1,121 298 1,249 66 -- ASHGROVE......................... IN 894 894 57 1,366 19 -- BECKFORD PLACE................... IN 717 717 77 947 6 -- BRANDON COURT.................... IN 1,451 1,451 113 1,500 26 -- CAMBRIDGE COMMONS I.............. IN 911 911 44 1,037 19 -- CAMBRIDGE COMMONS II............. IN 902 902 53 1,334 18 -- CAMBRIDGE COMMONS III............ IN -- -- 1 1,306 89 -- CEDARGATE........................ IN 799 799 18 1,063 15 -- CEDARGATE I...................... IN 1,159 1,159 122 1,648 11 -- CEDARGATE II..................... IN 1,124 1,124 98 1,115 13 -- CEDARWOOD I...................... IN 658 658 40 918 6 -- CEDARWOOD II..................... IN 927 927 33 894 7 -- CHERRY GLEN I.................... IN 1,343 1,343 204 1,465 30 -- CHERRY GLENN II.................. IN 1,091 1,091 4 1,731 33 -- CLEARVIEW I...................... IN 1,153 1,153 113 1,589 17 -- CLEARVIEW II..................... IN 1,310 1,310 118 1,810 15 -- CONCORD SQUARE................... IN 751 751 54 988 32 -- CONCORD SQUARE................... IN 783 783 83 1,186 8 -- DOGWOOD GLEN I................... IN 1,766 1,766 248 1,427 51 -- DOGWOOD GLEN II.................. IN 1,385 1,385 145 1,547 13 -- ELMTREE PARK I................... IN 1,177 1,177 208 1,308 75 -- ELMTREE PARK II.................. IN 947 947 46 1,108 52 -- HAMPSHIRE COURT.................. IN -- -- 30 681 36 -- HARTWICK......................... IN 752 752 61 890 2 -- HEATHMOORE....................... IN 1,173 1,173 82 1,148 35 -- HEATHMOORE I..................... IN 1,230 1,230 95 1,336 16 -- MARABOU MILLS I.................. IN 1,433 1,433 180 1,570 39 -- MARABOU MILLS II................. IN 985 985 85 1,190 18 -- MARABOU MILLS III................ IN 1,187 1,187 75 1,099 41 -- MEADOWOOD........................ IN 1,037 1,037 119 1,407 15 -- MEADOWOOD........................ IN 1,113 1,113 60 1,382 24 -- MEADOWOOD........................ IN 648 648 43 755 26 -- MEADOWOOD........................ IN 993 993 114 1,197 104 -- MEADOWOOD II..................... IN 727 727 62 1,193 37 -- OLIVEWOOD I...................... IN 957 957 102 1,496 18 -- OLIVEWOOD II..................... IN 1,292 1,292 82 1,371 33 -- PARKVILLE........................ IN 746 746 46 1,091 13 -- PLUMWOOD......................... IN 467 467 41 672 3 -- PLUMWOOD......................... IN 620 620 34 672 12 -- PRINCETON COURT.................. IN 917 917 59 908 15 -- RIDGEWOOD I...................... IN 851 851 87 879 11 -- RIDGEWOOD I...................... IN 1,190 1,190 100 1,320 22 -- RIDGEWOOD II..................... IN 883 883 95 830 8 -- RIDGEWOOD II..................... IN 1,332 1,332 101 1,565 40 -- ROSEWOOD COMMONS I............... IN 1,887 1,887 196 1,790 44 -- 28 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- ROSEWOOD COMMONS II.............. IN 1,239 1,239 121 1,173 45 -- SHERBROOK........................ IN 1,179 1,179 142 1,254 140 -- SLATE RUN........................ IN 2,030 2,030 169 2,233 17 -- SLATE RUN........................ IN 1,233 1,233 71 1,367 8 -- SPICEWOOD........................ IN 1,021 1,021 91 1,025 45 -- SPRINGWOOD....................... IN 786 786 99 978 32 -- STONEHENGE....................... IN 1,200 1,200 71 1,568 21 -- STONEHENGE....................... IN 446 446 73 470 6 -- STONEHENGE I..................... IN 1,124 1,124 122 1,358 23 -- WATERBURY........................ IN 825 825 93 924 19 -- WESTWOOD......................... IN 714 714 29 696 8 -- WILLOW RUN....................... IN 1,132 1,132 199 1,136 44 -- WILLOWOOD EAST II................ IN 800 800 20 848 18 -- WILLOWOOD I...................... IN 1,140 1,140 106 1,252 7 -- WILLOWOOD II..................... IN 1,149 1,149 150 1,310 79 -- ASHGROVE......................... KY 1,067 1,067 133 1,259 31 -- CAMELLIA COURT................... KY 622 622 56 976 8 -- CEDARGATE........................ KY 1,224 1,224 123 1,555 29 -- CEDARGATE I...................... KY 884 884 85 1,359 11 -- CEDARGATE II..................... KY 1,160 1,160 123 966 37 -- CEDARWOOD I...................... KY 748 748 143 966 13 -- CEDARWOOD II..................... KY 1,005 1,005 174 913 47 -- CEDARWOOD III.................... KY 865 865 123 967 46 -- FORSYTHIA COURT.................. KY 1,950 1,950 103 1,599 33 -- HAYFIELD PARK.................... KY 1,591 1,591 342 1,681 103 -- HEATHMOORE....................... KY 942 942 85 922 30 -- LONGWOOD......................... KY 958 958 161 1,030 11 -- MEADOWOOD........................ KY 863 863 80 1,006 17 -- MEADOWOOD........................ KY 1,403 1,403 153 1,598 26 -- RIDGEWOOD........................ KY 887 887 175 1,162 15 -- RIDGEWOOD........................ KY 763 763 85 940 10 -- RIDGEWOOD I...................... KY 1,073 1,073 261 1,557 8 -- ROSEWOOD......................... KY 1,634 1,634 248 1,565 27 -- SLATE RUN........................ KY 923 923 90 1,061 44 -- SLATE RUN........................ KY 778 778 39 808 29 -- SLATE RUN I...................... KY 902 902 102 932 29 -- SLATE RUN II..................... KY 1,168 1,168 139 1,025 16 -- SPRINGWOOD....................... KY 815 815 86 844 47 -- STONEHENGE....................... KY 790 790 71 1,042 10 -- VALLEYFIELD...................... KY 1,837 1,837 285 2,039 8 -- WILLOW RUN....................... KY 1,129 1,129 94 1,424 34 -- WILLOWOOD........................ KY 776 776 48 778 72 -- WILLOWOOD I...................... KY 1,016 1,016 127 1,168 22 -- WILLOWOOD II..................... KY 865 865 98 764 15 -- WINTHROP COURT................... KY 1,222 1,222 180 1,142 26 -- WOODLANDS........................ KY 736 736 53 849 9 -- CHERRY TREE...................... MD 2,085 2,085 623 2,711 65 -- FORSYTHIA CT I................... MD 2,088 2,088 214 1,919 27 -- FORSYTHIA CT II.................. MD 2,352 1,769 285 1,598 44 -- MERRIFIELD....................... MD 2,076 2,076 211 2,272 53 -- AMBERIDGE........................ MI 945 945 75 891 20 -- APPLE RUN........................ MI 515 515 76 757 8 -- ASHGROVE......................... MI 840 840 37 936 28 -- ASHGROVE I....................... MI 3,324 3,324 120 2,541 34 -- ASHGROVE II...................... MI 2,302 2,302 95 2,258 20 -- FOXTON........................... MI 912 912 124 1,056 28 -- GARDEN COURT..................... MI 2,150 2,150 128 2,247 63 -- 29 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- HEATHMOORE....................... MI 1,746 1,746 82 1,605 34 -- HEATHMOORE I..................... MI 1,578 1,578 129 1,330 35 -- HEATHMOORE II.................... MI 956 956 86 1,519 13 -- LAUREL BAY....................... MI 882 882 164 1,160 45 -- MEADOWOOD........................ MI 1,340 1,340 74 1,455 24 -- MEADOWOOD I...................... MI 944 944 15 1,131 34 -- MONTGOMERY COURT I............... MI 1,228 1,228 70 1,039 17 -- NEWBERRY I....................... MI 1,163 1,163 77 1,099 6 -- NEWBERRY II...................... MI 1,274 724 91 716 17 -- OLIVEWOOD........................ MI 3,421 3,421 304 4,298 72 -- RIDGEWOOD........................ MI 1,200 1,200 77 1,209 19 -- ROANOKE.......................... MI 2,071 2,071 360 2,652 79 -- STONEHENGE....................... MI 1,071 1,071 19 1,147 27 -- WATERBURY........................ MI 2,141 2,141 257 2,216 25 -- WENTWORTH........................ MI 1,868 1,868 100 1,872 37 -- AMBERWOOD........................ OH 896 896 172 1,003 31 -- AMESBURY I....................... OH 1,239 1,239 136 1,133 59 -- AMESBURY II...................... OH 1,295 1,295 169 1,621 56 -- AMHURST.......................... OH 826 826 174 980 12 -- AMHURST I........................ OH 927 927 60 978 12 -- AMHURST II....................... OH 960 960 67 1,192 14 -- ANDOVER COURT.................... OH 743 743 62 996 15 -- ANNHURST II...................... OH 1,084 1,160 123 1,007 124 -- ANNHURST III..................... OH 902 902 70 1,004 154 -- APPLE RIDGE I.................... OH 1,046 1,046 214 913 49 -- APPLE RIDGE III.................. OH 541 541 38 648 2 -- APPLE RUN II..................... OH 461 461 21 502 31 -- APPLEGATE........................ OH 530 530 36 546 34 -- APPLEGATE........................ OH 527 527 84 737 5 -- APPLERUN......................... OH 688 688 86 870 9 -- ASHFORD HILL..................... OH 1,400 1,400 360 1,261 97 -- ASHGROVE......................... OH 1,262 1,262 108 1,276 20 -- BECKFORD PLACE................... OH 625 625 49 692 11 -- BECKFORD PLACE................... OH 1,041 1,041 41 1,471 25 -- BECKFORD PLACE I................. OH 1,181 1,181 218 1,274 20 -- BECKFORD PLACE II................ OH 1,249 1,249 175 1,206 21 -- CAMELLIA COURT................... OH 575 575 40 616 11 -- CAMELLIA COURT I................. OH 1,097 1,097 21 1,179 24 -- CAMELLIA COURT I................. OH 1,052 1,052 136 1,431 14 -- CAMELLIA COURT II................ OH 801 801 43 815 8 -- CAMELLIA COURT II................ OH 946 946 107 928 9 -- CEDARGATE I...................... OH 2,264 2,264 187 2,202 137 -- CEDARGATE I...................... OH 1,237 1,237 85 1,275 12 -- CEDARGATE II..................... OH 709 709 132 777 27 -- CEDARWOOD........................ OH 436 436 37 522 42 -- CEDARWOOD I...................... OH 627 627 52 784 5 -- CHARING CROSS.................... OH 817 817 111 1,073 21 -- CHELSEA COURT.................... OH 703 703 113 1,124 22 -- CLEARWATER....................... OH 1,046 1,046 132 1,045 67 -- CONCORD SQUARE I................. OH 660 660 38 678 11 -- CONCORD SQUARE II................ OH 562 562 29 643 7 -- DANIEL COURT..................... OH 2,342 2,342 225 2,105 17 -- DARTMOUTH PLACE I................ OH 1,052 1,052 89 1,359 34 -- DARTMOUTH PLACE II............... OH 858 858 114 1,135 31 -- DOVER PLACE I.................... OH 1,157 1,157 148 2,004 36 -- DOVER PLACE II................... OH 1,625 1,625 127 1,810 34 -- DOVER PLACE III.................. OH 770 770 70 890 14 -- 30 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- DOVER PLACE IV................... OH 1,870 1,870 237 2,022 36 -- FOXHAVEN......................... OH 1,845 1,845 403 1,657 37 -- FOXTON II........................ OH 1,403 1,403 70 1,752 24 -- GREENGLEN........................ OH 1,172 1,172 100 1,404 37 -- GREENGLEN II..................... OH 893 893 89 948 23 -- GREENGLEN II..................... OH 827 827 23 1,017 13 -- HAMPSHIRE II..................... OH 860 860 98 957 13 -- HARVEST GROVE I.................. OH 1,349 1,349 225 1,276 40 -- HARVEST GROVE II................. OH 1,093 1,093 252 1,201 32 -- HICKORY MILL..................... OH 1,074 1,074 119 1,359 26 -- INDEPENDENCE VILLAGE............. OH 2,068 2,068 189 2,026 182 -- KETWOOD.......................... OH 1,648 1,648 164 2,161 24 -- LAMPLIGHT COURT.................. OH 98 98 40 727 19 -- LARKSPUR I....................... OH 460 460 36 585 12 -- LARKSPUR I....................... OH 1,038 1,038 87 1,439 8 -- LARKSPUR II...................... OH 221 221 24 246 6 -- LAUREL COURT..................... OH 1,128 1,128 174 1,209 31 -- LINDENDALE....................... OH 1,403 1,403 189 1,717 63 -- MEADOWOOD........................ OH 430 430 51 574 17 -- MEADOWOOD........................ OH 1,833 1,833 316 2,644 15 -- MEADOWOOD........................ OH 1,307 1,307 136 1,448 47 -- MEADOWOOD APTS................... OH 994 994 71 985 14 -- MEADOWOOD I...................... OH 1,053 1,053 120 1,330 20 -- MEADOWOOD II..................... OH 485 485 70 532 11 -- MELDON PLACE..................... OH 1,881 1,881 331 1,552 51 -- MILLBURN......................... OH 1,241 1,241 135 1,474 10 -- MILLBURN COURT II................ OH 910 910 137 1,138 26 -- MILLSTON I....................... OH 451 451 31 466 13 -- MILLSTON II...................... OH 336 336 7 446 9 -- MONTGOMERY COURT I............... OH 1,282 1,282 246 1,401 25 -- MONTGOMERY COURT II.............. OH 842 842 121 661 23 -- MONTROSE SQUARE.................. OH 1,741 1,741 569 2,185 102 -- PARKVILLE........................ OH 1,757 1,757 222 1,581 120 -- PARKVILLE........................ OH 604 604 76 935 18 -- PLUMWOOD I....................... OH 1,731 1,731 169 2,204 29 -- PLUMWOOD II...................... OH 456 456 38 801 3 -- RED DEER I....................... OH 1,328 1,328 183 1,751 24 -- RED DEER II...................... OH 1,206 1,206 235 1,475 30 -- RIDGEWOOD I...................... OH 1,200 1,200 85 1,142 21 -- RIDGEWOOD II..................... OH 1,160 1,160 70 1,047 23 -- RIVER GLEN I..................... OH 1,030 1,030 146 1,287 26 -- RIVER GLEN II.................... OH 1,167 1,167 179 1,230 10 -- RIVERVIEW ESTATES................ OH 1,104 1,104 74 1,609 133 -- ROSEWOOD......................... OH 1,314 1,314 139 1,452 54 -- SANDALWOOD....................... OH 1,105 1,105 179 970 34 -- SHERBROOK........................ OH 1,100 1,100 147 1,249 4 -- SLATE RUN........................ OH 875 875 118 1,012 7 -- SPRINGWOOD....................... OH 1,096 1,096 130 1,310 22 -- SPRINGWOOD II.................... OH 591 591 52 840 17 -- STONEHENGE....................... OH 567 567 30 734 9 -- STONEHENGE....................... OH 634 634 40 670 31 -- STONEHENGE....................... OH 1,201 1,201 72 1,341 19 -- SUFFOLK GROVE I.................. OH 1,223 1,223 124 1,262 8 -- SUFFOLK GROVE II................. OH 1,067 1,067 154 1,248 20 -- TABOR RIDGE...................... OH 1,742 1,742 194 1,806 19 -- THE BIRCHES...................... OH 980 980 70 1,004 19 -- THE MEADOWS I.................... OH 798 798 83 1,014 27 -- 31 Column A Column B Column C Column D - --------------------------------------------------------------------------------------------------------------------------------- Description Initial Costs Costs Capitalized (Garden Apartments) Encumbrances To the Company Subsequent to Acquisition At At Stated Contractual Carrying Buildings and Property Name State Value Value Land Improvements Improvements Carrying Cost - --------------------------------------------------------------------------------------------------------------------------------- THE MEADOWS II................... OH 1,168 1,168 151 1,200 34 -- THE WILLOWS I.................... OH 576 576 158 762 76 -- THE WILLOWS II................... OH 650 650 34 865 21 -- THE WILLOWS III.................. OH 871 871 45 871 21 -- TIMBERCREEK...................... OH 1,561 1,561 159 1,681 18 -- WATERBURY........................ OH 1,161 1,161 186 998 10 -- WEST OF EASTLAND................. OH 2,025 2,025 154 2,552 45 -- WESTWOOD......................... OH 96 96 17 104 4 -- WILLOW RUN....................... OH 865 865 56 1,015 10 -- WILLOWOOD I...................... OH 764 764 90 927 11 -- WILLOWOOD I...................... OH 948 948 91 1,114 11 -- WILLOWOOD II..................... OH 553 553 42 574 5 -- WILLOWOOD II..................... OH 869 869 71 824 17 -- WILLOWOOD II..................... OH 930 930 36 622 27 -- WINTHROP COURT II................ OH 749 749 146 825 29 -- WOODBINE......................... OH 638 638 66 698 8 -- WOODBINE......................... OH 1,063 1,063 122 1,659 9 -- WOODLANDS I...................... OH 1,824 1,824 181 1,957 146 -- WOODLANDS I...................... OH 1,460 1,460 103 1,839 24 -- WOODLANDS II..................... OH 1,319 1,319 112 1,413 146 -- WOODLANDS II..................... OH 1,590 1,590 98 1,837 50 -- WOODLANDS III.................... OH 1,939 1,939 159 2,019 32 -- ANNHURST......................... PA 1,985 1,985 77 2,004 37 -- BRUNSWICK I...................... PA 1,720 1,720 126 2,077 134 -- CARLETON COURT................... PA 1,112 1,112 143 1,226 22 -- NORTHRUP COURT I................. PA 1,377 1,377 154 1,482 28 -- NORTHRUP COURT II................ PA 902 902 88 858 80 -- VALLEYFIELD...................... PA 2,046 2,046 257 1,748 42 -- WOODLANDS I...................... PA 1,041 1,041 113 1,179 8 -- WOODLANDS II..................... PA 1,146 1,146 118 1,347 43 -- RAVENWOOD........................ SC 1,623 1,623 170 1,508 48 -- SPRINGBROOK...................... SC 1,717 1,717 120 1,762 124 -- WILLOW LAKES..................... SC 2,068 2,068 189 1,738 68 -- CEDAR HILL....................... TN 1,465 1,465 235 1,331 61 -- KNOX LANDING..................... TN 1,576 1,576 90 1,497 33 -- WATERBURY........................ TN 963 963 101 1,078 13 -- WYCLIFFE COURT................... TN 1,160 1,160 124 1,206 21 -- WALKER PLACE..................... TX 1,165 1,165 270 1,196 -- -- BRUNSWICK II..................... WV 1,304 1,304 105 1,696 135 -- CARLETON COURT................... WV 1,365 1,365 308 1,656 13 -- HICKORY MILL I................... WV 935 935 85 958 14 -- PARKVILLE........................ WV 781 781 70 883 4 -- SHERBROOK........................ WV 1,322 1,322 355 1,492 39 -- -------- -------- ------- -------- ------- ------ $500,688 $494,556 $59,755 $536,290 $17,380 $ -- -------- -------- ------- -------- ------- ------ -------- -------- ------- -------- ------- ------
32 LEXFORD RESIDENTIAL TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION--SCHEDULE III DECEMBER 31, 1998 (IN THOUSANDS)
Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- GLENVIEW................. AL 178 1,631 1,809 163 08/01/86 N/A 5-31 WOODVALLEY............... AL 77 1,422 1,499 46 03/03/86 01/31/98 5-28 AMBERWOOD I.............. FL 18 493 511 21 11/01/81 01/31/98 5-24 APPLEWOOD I & II......... FL 292 4,344 4,636 158 05/01/82 01/31/98 5-24 BAYSIDE.................. FL 85 723 808 27 05/01/82 01/31/98 5-24 BEL AIRE I............... FL 241 1,243 1,484 41 08/14/85 01/31/98 5-28 BEL AIRE II.............. FL 81 413 494 41 01/01/86 N/A 5-30 BERRY PINES.............. FL 44 1,066 1,110 37 04/01/85 01/31/98 5-27 BLUEBERRY HILL I......... FL 64 771 835 50 12/01/86 N/A 5-31 BRANCHWOOD............... FL 188 2,378 2,566 94 04/01/81 01/31/98 5-23 BRANDYWINE E............. FL 64 544 608 21 09/01/81 01/31/98 5-24 CALIFORNIA GARDENS....... FL 96 416 512 42 07/01/87 N/A 5-32 CANDLELIGHT I............ FL 69 681 750 28 10/01/82 01/31/98 5-25 CANDLELIGHT II........... FL 76 662 738 25 05/27/85 01/31/98 5-27 CANTERBURY CROSSINGS..... FL 78 597 675 64 12/01/83 N/A 5-28 CEDARWOOD I.............. FL 63 819 882 40 03/01/78 01/31/98 5-20 CEDARWOOD II............. FL 46 501 547 23 04/01/80 01/31/98 5-22 CENTRE LAKE III.......... FL 1,211 3,224 4,435 334 06/01/86 N/A 5-30 CLEARLAKE PINES II....... FL 113 1,050 1,163 37 07/01/85 01/31/98 5-27 COUNTRYSIDE I............ FL 146 862 1,008 36 04/01/82 01/31/98 5-24 COUNTRYSIDE II........... FL 79 1,883 1,962 74 04/01/82 01/31/98 5-24 CYPRESS.................. FL 58 1,066 1,124 39 03/01/85 01/31/98 5-27 DEERWOOD................. FL 67 718 785 29 08/01/82 01/31/98 5-25 DRIFTWOOD................ FL 80 1,151 1,231 42 05/15/85 01/31/98 5-27 ELMWOOD I................ FL 298 1,466 1,764 47 03/01/84 01/31/98 5-26 ELMWOOD II............... FL 341 1,354 1,695 45 10/01/84 01/31/98 5-27 FOREST GLEN.............. FL 229 989 1,218 100 01/01/86 N/A 5-30 GARDEN TERRACE I......... FL 89 921 1,010 115 09/01/81 N/A 5-26 GARDEN TERRACE II........ FL 9 934 943 37 10/01/82 01/31/98 5-25 HERON POINTE............. FL 368 1,670 2,038 162 01/01/86 N/A 5-30 HICKORY PLACE............ FL 191 1,639 1,830 60 08/01/83 01/31/98 5-26 HIDDEN ACRES............. FL 388 503 891 55 01/01/87 N/A 5-31 HIDDEN PINES............. FL 59 1,038 1,097 43 07/01/81 01/31/98 5-23 HIGH POINTS.............. FL 129 937 1,066 35 04/01/86 01/31/98 5-28 HILLCREST VILLAS......... FL 79 909 988 34 04/22/85 01/31/98 5-27 HILLSIDE TRACE........... FL 197 851 1,048 82 09/01/87 N/A 5-32 HOLLY RIDGE.............. FL 625 1,917 2,542 63 01/01/86 01/31/98 5-28 HOLLY SANDS I............ FL 229 1,197 1,426 44 04/01/85 01/31/98 5-27 HOLLY SANDS II........... FL 232 1,035 1,267 119 06/01/86 N/A 5-30 JEFFERSON WAY I.......... FL 116 1,089 1,205 106 08/01/87 N/A 5-32 JUPITER COVE I........... FL 220 903 1,123 88 09/01/87 N/A 5-32 JUPITER COVE III......... FL 286 1,052 1,338 102 09/01/87 N/A 5-32 MARK LANDING I........... FL 251 1,561 1,812 169 11/01/87 N/A 5-32 MEADOWOOD II............. FL 56 1,052 1,108 35 11/01/80 04/01/98 5-23 MIGUEL PLACE............. FL 237 1,121 1,358 109 10/01/87 N/A 5-32 33 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- MORNINGSIDE.............. FL 64 1,400 1,464 55 01/01/84 01/31/98 5-26 MOSSWOOD I............... FL 54 787 841 32 08/01/81 01/31/98 5-24 MOSSWOOD II.............. FL 64 1,620 1,684 63 05/01/82 01/31/98 5-24 NOVA GLEN I.............. FL 90 943 1,033 34 06/08/84 01/31/98 5-26 NOVA GLEN II............. FL 123 1,332 1,455 46 01/01/86 01/31/98 5-28 NOVAWOOD I............... FL 88 1,029 1,117 44 05/01/80 01/31/98 5-22 NOVAWOOD II.............. FL 78 966 1,044 41 09/01/80 01/31/98 5-23 OAK GARDENS.............. FL 582 1,267 1,849 123 01/01/88 N/A 5-32 OAK RIDGE................ FL 144 1,089 1,233 39 05/17/85 01/31/98 5-27 OAK SHADE................ FL 139 1,359 1,498 48 04/01/85 01/31/98 5-27 OAKWOOD MANOR............ FL 278 1,596 1,874 52 04/01/86 01/31/98 5-28 OAKWOOD VILLAGE.......... FL 103 275 378 31 01/01/86 N/A 5-30 OLD ARCHER COURT......... FL 104 1,160 1,264 46 08/01/77 04/01/98 5-19 PALATKA OAKS I........... FL 10 224 234 12 08/01/77 01/31/98 5-20 PALATKA OAKS II.......... FL 16 227 243 10 08/01/80 01/31/98 5-23 PALM PLACE............... FL 231 1,403 1,634 53 01/01/84 01/31/98 5-26 PELICAN POINTE I......... FL 221 1,250 1,471 122 11/01/87 N/A 5-32 PELICAN POINTE II........ FL 158 1,164 1,322 114 11/01/87 N/A 5-32 PINE BARRENS............. FL 302 1,507 1,809 158 06/01/86 N/A 5-30 PINE LAKE................ FL 59 334 393 14 10/01/82 01/31/98 5-25 PINE MEADOWS I........... FL 197 1,020 1,217 37 02/01/85 01/31/98 5-27 PINE TERRACE I........... FL 246 2,501 2,747 89 08/01/83 01/31/98 5-26 PINELLAS PINES........... FL 202 1,431 1,633 51 12/01/83 01/31/98 5-26 RANCHSIDE................ FL 131 594 725 24 08/01/85 01/31/98 5-28 RIVERS END I............. FL 140 1,255 1,395 43 02/01/86 01/31/98 5-28 RIVERS END II............ FL 161 949 1,110 98 01/01/86 N/A 5-30 SANDPIPER II............. FL 96 1,039 1,135 39 09/01/82 01/31/98 5-25 SANFORD COURT............ FL 86 2,101 2,187 104 11/01/76 01/31/98 5-19 SHADOW BAY I............. FL 119 1,320 1,439 45 04/01/84 01/31/98 5-26 SHADOW BAY II............ FL 74 1,114 1,188 39 08/01/85 01/31/98 5-28 SHADOW RIDGE............. FL 90 1,641 1,731 61 10/01/83 01/31/98 5-26 SHADOWOOD I.............. FL 159 1,384 1,543 56 01/01/82 01/31/98 5-24 SHADOWOOD II............. FL 155 1,687 1,842 60 05/01/83 01/31/98 5-25 SILVER FOREST............ FL 115 911 1,026 34 02/01/85 01/31/98 5-27 SKY PINES I.............. FL 311 1,262 1,573 44 01/01/86 01/31/98 5-28 SKY PINES II............. FL 266 766 1,032 94 06/01/86 N/A 5-30 SPRING GATE.............. FL 52 1,084 1,136 40 11/01/83 01/31/98 5-26 STRAWBERRY PLACE......... FL 49 803 852 31 06/01/82 01/31/98 5-24 SUGARTREE I.............. FL 76 957 1,033 35 06/01/84 01/31/98 5-26 SUNSET WAY I............. FL 621 1,414 2,035 140 08/01/87 N/A 5-32 SUNSET WAY II............ FL 649 1,520 2,169 147 04/27/88 N/A 5-32 SUTTON PLACE............. FL 146 737 883 28 07/01/84 01/31/98 5-26 TERRACE TRACE............ FL 177 1,146 1,323 42 05/01/85 01/31/98 5-27 THE LANDINGS............. FL 68 769 837 31 04/01/84 01/31/98 5-26 THYMEWOOD II............. FL 429 400 829 43 01/01/86 N/A 5-30 TURKSCAP I............... FL 55 591 646 29 12/01/77 01/31/98 5-20 TURKSCAP III............. FL 85 695 780 27 11/01/82 01/31/98 5-25 UNIVERSITY SQUARE I...... FL 127 1,070 1,197 39 07/01/79 04/01/98 5-21 WESTCREEK................ FL 167 1,446 1,613 48 01/01/86 01/31/98 5-28 WHISPERING PINES II...... FL 71 523 594 54 03/31/86 N/A 5-30 34 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- WINDWOOD I.............. FL 25 535 560 55 05/01/88 N/A 5-32 WINDWOOD II............. FL 34 800 834 29 12/31/87 01/31/98 5-30 WINGWOOD................ FL 90 1,822 1,912 65 11/01/80 04/01/98 5-23 WINTER WOODS I.......... FL 134 1,033 1,167 31 07/01/85 01/31/98 5-27 WOODLAND I.............. FL 175 1,732 1,907 64 07/01/84 01/31/98 5-26 WOODLAND II............. FL 91 1,363 1,454 48 08/01/85 01/31/98 5-28 AUTUMN COVE............. GA 115 1,017 1,132 34 06/26/85 01/31/98 5-27 BARRINGTON.............. GA 118 1,120 1,238 39 11/26/84 01/31/98 5-27 CAMDEN WAY I............ GA 61 1,214 1,275 42 02/01/85 01/31/98 5-27 CAMDEN WAY II........... GA 37 846 883 29 02/01/86 01/31/98 5-28 CARRIAGE HILL........... GA 76 774 850 28 04/29/85 01/31/98 5-27 CEDARGATE............... GA 129 1,487 1,616 45 03/01/83 04/01/98 5-25 COUNTRYSIDE MANOR....... GA 80 1,499 1,579 53 02/22/85 01/31/98 5-27 ELMWOOD................. GA 181 904 1,085 32 09/07/84 01/31/98 5-27 FOREST VILLAGE.......... GA 156 1,606 1,762 59 10/21/83 01/31/98 5-26 GENTIAN OAKS............ GA 165 1,267 1,432 43 05/10/85 01/31/98 5-27 GLEN ARM MANOR.......... GA 149 1,245 1,394 148 01/01/86 N/A 5-30 GLENWOOD VILLAGE........ GA 156 674 830 68 12/01/86 N/A 5-31 GREENBRIAR GLEN......... GA 274 1,536 1,810 143 03/28/88 N/A 5-32 HARBINWOOD.............. GA 228 1,464 1,692 52 08/15/85 01/31/98 5-28 HATCHERWAY.............. GA 111 1,112 1,223 78 01/01/86 N/A 5-30 HILLSIDE MANOR.......... GA 33 649 682 26 08/26/85 01/31/98 5-28 HOLLY PARK.............. GA 55 968 1,023 32 12/06/85 01/31/98 5-28 INDIAN LAKE I........... GA 898 4,957 5,855 480 08/11/87 N/A 5-32 IRIS GLEN............... GA 266 1,823 2,089 62 03/09/84 01/31/98 5-26 KINGS COLONY............ GA 238 1,272 1,510 124 11/15/87 N/A 5-32 LAKESHORE I............. GA 46 945 991 101 06/20/86 N/A 5-31 LAUREL GLEN............. GA 266 1,707 1,973 177 04/04/86 N/A 5-30 LINK TERRACE............ GA 101 980 1,081 35 08/01/84 01/31/98 5-27 MARSH LANDING I......... GA 28 1,236 1,264 45 07/01/84 01/31/98 5-26 MARSHLANDING II......... GA 30 908 938 91 12/31/86 N/A 5-31 MEADOWLAND.............. GA 85 1,313 1,398 38 06/11/84 01/31/98 5-26 MEADOWOOD I............. GA 182 1,828 2,010 57 11/01/82 04/01/98 5-25 MEADOWOOD II............ GA 105 924 1,029 34 04/02/84 01/31/98 5-26 MILL RUN................ GA 189 1,379 1,568 150 04/14/86 N/A 5-30 MORGAN TRACE............ GA 96 1,344 1,440 45 05/16/86 01/31/98 5-28 NORTHRIDGE.............. GA 113 1,077 1,190 37 08/22/85 01/31/98 5-28 OAKLEY WOODS............ GA 77 1,060 1,137 37 10/15/84 01/31/98 5-27 OAKWOOD VILLAGE......... GA 115 1,609 1,724 52 11/30/85 01/31/98 5-28 PINE KNOLL.............. GA 144 948 1,092 33 04/12/85 01/31/98 5-27 QUAIL CALL.............. GA 77 879 956 32 10/01/84 01/31/98 5-27 RAMBLEWOOD I............ GA 68 961 1,029 37 02/01/83 01/31/98 5-25 RAMBLEWOOD II........... GA 264 1,797 2,061 177 10/01/86 N/A 5-31 RAMBLEWOOD II........... GA 36 477 513 18 10/01/83 01/31/98 5-26 REDAN VILLAGE I......... GA 129 1,493 1,622 49 10/19/84 01/31/98 5-27 REDAN VILLAGE II........ GA 122 1,336 1,458 45 02/17/86 01/31/98 5-28 RIDGEWOOD I............. GA 97 1,719 1,816 50 03/04/84 04/01/98 5-26 RIDGEWOOD II............ GA 88 1,043 1,131 35 03/03/86 01/31/98 5-28 SHADOW TRACE............ GA 417 2,238 2,655 79 07/13/84 01/31/98 5-26 SKY RIDGE............... GA 313 3,457 3,770 93 05/11/87 04/01/98 5-29 35 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- STEWART WAY I & II..... GA 477 3,269 3,746 349 01/01/86 N/A 5-30 STILLWATER............. GA 139 1,192 1,331 43 05/01/83 01/31/98 5-25 STRATFORD LANE I....... GA 76 933 1,009 33 12/31/84 01/31/98 5-27 SUNNYSIDE.............. GA 208 1,237 1,445 45 06/01/84 01/31/98 5-26 TIMBERWOOD............. GA 42 627 669 23 05/25/85 01/31/98 5-27 VALLEYBROOK............ GA 129 1,409 1,538 148 10/15/86 N/A 5-31 VALLEYFIELD I.......... GA 202 1,802 2,004 60 05/18/84 01/31/98 5-26 VALLEYFIELD II......... GA 166 1,580 1,746 49 09/30/85 01/31/98 5-28 WATERBURY.............. GA 47 1,008 1,055 30 06/12/85 01/31/98 5-27 WESTWAY................ GA 57 880 937 32 12/01/84 01/31/98 5-27 WHISPERWOOD............ GA 99 605 704 24 07/15/85 01/31/98 5-27 WILCREST WOODS......... GA 247 1,257 1,504 136 12/31/86 N/A 5-31 WILLOW CREEK I......... GA 84 754 838 27 05/08/85 01/31/98 5-27 WILLOW RUN............. GA 194 2,012 2,206 59 08/22/83 04/01/98 5-25 WILLOWOOD.............. GA 68 1,311 1,379 46 04/07/84 01/31/98 5-26 WOODCLIFF I............ GA 119 1,282 1,401 45 12/31/84 01/31/98 5-27 WOODCLIFF II........... GA 273 1,399 1,672 46 01/13/86 01/31/98 5-28 WOODCREST I............ GA 122 1,166 1,288 42 12/31/84 01/31/98 5-27 WOODTRAIL.............. GA 100 1,616 1,716 55 10/15/84 01/31/98 5-27 ANSLEY OAKS............ IL 69 1,439 1,508 47 05/01/86 01/31/98 5-28 BRADFORD PLACE......... IL 216 632 848 65 07/23/86 N/A 5-31 BRUNSWICK.............. IL 54 1,648 1,702 167 04/01/86 N/A 5-30 HUNTER GLEN............ IL 257 1,331 1,588 131 03/01/87 N/A 5-31 ACADIA COURT........... IN 234 1,905 2,139 65 08/19/85 01/31/98 5-28 ACADIA COURT II........ IN 398 1,637 2,035 165 06/06/86 N/A 5-30 ANNHURST............... IN 34 1,328 1,362 49 02/15/85 01/31/98 5-27 APPLEGATE.............. IN 153 1,522 1,675 46 09/11/82 04/01/98 5-24 APPLEGATE I............ IN 99 1,254 1,353 44 03/01/84 01/31/98 5-26 APPLEGATE II........... IN 163 1,852 2,015 183 06/01/87 N/A 5-31 ARAGON WOODS........... IN 298 1,238 1,536 119 12/26/86 N/A 5-31 ASHGROVE............... IN 57 1,385 1,442 51 08/01/83 01/31/98 5-26 BECKFORD PLACE......... IN 77 953 1,030 33 06/13/84 01/31/98 5-26 BRANDON COURT.......... IN 113 1,526 1,639 54 10/01/84 01/31/98 5-27 CAMBRIDGE COMMONS I.... IN 44 1,056 1,100 37 05/01/86 01/31/98 5-28 CAMBRIDGE COMMONS II... IN 53 1,351 1,404 47 03/07/87 01/31/98 5-29 CAMBRIDGE COMMONS III.. IN 1 1,261 1,262 122 01/29/88 N/A 5-32 CEDARGATE.............. IN 18 1,078 1,096 38 11/01/83 01/31/98 5-26 CEDARGATE I............ IN 122 1,659 1,781 50 11/01/83 04/01/98 5-26 CEDARGATE II........... IN 98 1,128 1,226 39 06/01/85 01/31/98 5-27 CEDARWOOD I............ IN 40 924 964 27 03/11/83 04/01/98 5-25 CEDARWOOD II........... IN 33 901 934 25 08/03/84 04/01/98 5-26 CHERRY GLEN I.......... IN 204 1,480 1,684 149 07/10/86 N/A 5-31 CHERRY GLENN II........ IN 4 1,714 1,718 169 04/01/87 N/A 5-31 CLEARVIEW I............ IN 113 1,606 1,719 53 06/19/86 01/31/98 5-28 CLEARVIEW II........... IN 118 1,825 1,943 58 02/01/87 01/31/98 5-29 CONCORD SQUARE......... IN 54 1,020 1,074 43 05/04/82 01/31/98 5-24 CONCORD SQUARE......... IN 83 1,194 1,277 43 06/01/83 01/31/98 5-25 DOGWOOD GLEN I......... IN 248 1,335 1,583 130 07/18/86 N/A 5-31 DOGWOOD GLEN II........ IN 145 1,560 1,705 49 04/13/87 01/31/98 5-29 ELMTREE PARK I......... IN 208 1,247 1,455 121 06/08/86 N/A 5-30 ELMTREE PARK II........ IN 46 1,157 1,203 111 05/01/87 N/A 5-31 36 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- HAMPSHIRE COURT........ IN 30 717 747 29 04/04/82 01/31/98 5-24 HARTWICK............... IN 61 892 953 33 10/18/82 01/31/98 5-25 HEATHMOORE............. IN 82 1,183 1,265 45 08/03/84 01/31/98 5-27 HEATHMOORE I........... IN 95 1,353 1,448 49 08/01/83 01/31/98 5-26 MARABOU MILLS I........ IN 180 1,607 1,787 167 06/23/86 N/A 5-31 MARABOU MILLS II....... IN 85 1,162 1,247 108 N/A 10/29/93 5-33 MARABOU MILLS III...... IN 75 1,139 1,214 113 12/01/87 N/A 5-32 MEADOWOOD.............. IN 119 1,421 1,540 52 04/04/83 01/31/98 5-25 MEADOWOOD.............. IN 60 1,406 1,466 53 04/03/83 01/31/98 5-25 MEADOWOOD.............. IN 43 781 824 28 07/02/84 01/31/98 5-26 MEADOWOOD.............. IN 114 1,301 1,415 48 04/07/84 01/31/98 5-26 MEADOWOOD II........... IN 62 1,077 1,139 111 05/30/86 N/A 5-30 OLIVEWOOD I............ IN 102 1,514 1,616 53 05/09/85 01/31/98 5-27 OLIVEWOOD II........... IN 82 1,404 1,486 48 02/18/86 01/31/98 5-28 PARKVILLE.............. IN 46 1,105 1,151 41 11/01/82 01/31/98 5-25 PLUMWOOD............... IN 41 675 716 27 11/25/80 01/31/98 5-23 PLUMWOOD............... IN 34 684 718 28 05/15/81 01/31/98 5-23 PRINCETON COURT........ IN 59 923 982 32 06/07/85 01/31/98 5-27 RIDGEWOOD I............ IN 87 891 978 31 07/02/84 01/31/98 5-26 RIDGEWOOD I............ IN 100 1,342 1,442 110 N/A 08/01/96 5-30 RIDGEWOOD II........... IN 95 838 933 28 02/26/86 01/31/98 5-28 RIDGEWOOD II........... IN 101 1,455 1,556 148 03/01/86 N/A 5-30 ROSEWOOD COMMONS I..... IN 196 1,833 2,029 66 01/11/86 01/31/98 5-28 ROSEWOOD COMMONS II.... IN 121 1,216 1,337 121 06/01/87 N/A 5-31 SHERBROOK.............. IN 142 1,342 1,484 132 06/16/86 N/A 5-31 SLATE RUN.............. IN 169 2,250 2,419 66 01/25/84 04/01/98 5-26 SLATE RUN.............. IN 71 1,374 1,445 47 07/13/84 01/31/98 5-26 SPICEWOOD.............. IN 91 1,026 1,117 107 03/16/86 N/A 5-30 SPRINGWOOD............. IN 99 1,010 1,109 39 10/01/81 01/31/98 5-24 STONEHENGE............. IN 71 1,589 1,660 54 06/25/84 01/31/98 5-26 STONEHENGE............. IN 73 476 549 17 04/22/85 01/31/98 5-27 STONEHENGE I........... IN 122 1,380 1,502 49 06/30/84 01/31/98 5-26 WATERBURY.............. IN 93 942 1,035 35 05/31/84 01/31/98 5-26 WESTWOOD............... IN 29 703 732 26 05/03/84 01/31/98 5-26 WILLOW RUN............. IN 199 1,180 1,379 46 07/01/84 01/31/98 5-26 WILLOWOOD EAST II...... IN 20 865 885 29 07/08/85 01/31/98 5-27 WILLOWOOD I............ IN 106 1,259 1,365 38 07/05/83 04/01/98 5-25 WILLOWOOD II........... IN 150 1,280 1,430 128 06/01/87 N/A 5-31 ASHGROVE............... KY 133 1,290 1,423 46 08/01/84 01/31/98 5-27 CAMELLIA COURT......... KY 56 984 1,040 36 11/15/82 01/31/98 5-25 CEDARGATE.............. KY 123 1,583 1,706 56 07/01/84 01/31/98 5-26 CEDARGATE I............ KY 85 1,370 1,455 50 07/23/83 01/31/98 5-26 CEDARGATE II........... KY 123 905 1,028 94 06/01/86 N/A 5-30 CEDARWOOD I............ KY 143 979 1,122 35 06/22/84 01/31/98 5-26 CEDARWOOD II........... KY 174 929 1,103 98 01/01/86 N/A 5-30 CEDARWOOD III.......... KY 123 1,011 1,134 108 05/20/86 N/A 5-30 FORSYTHIA COURT........ KY 103 1,632 1,735 58 06/07/85 01/31/98 5-27 HAYFIELD PARK.......... KY 342 1,608 1,950 163 07/17/86 N/A 5-31 HEATHMOORE............. KY 85 952 1,037 38 09/21/83 01/31/98 5-26 LONGWOOD............... KY 161 1,041 1,202 38 08/10/85 01/31/98 5-28 MEADOWOOD.............. KY 80 1,023 1,103 37 06/01/83 01/31/98 5-25 37 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- MEADOWOOD.............. KY 153 1,624 1,777 58 11/28/83 01/31/98 5-26 RIDGEWOOD.............. KY 175 1,177 1,352 42 05/21/84 01/31/98 5-26 RIDGEWOOD.............. KY 85 950 1,035 34 06/01/84 01/31/98 5-26 RIDGEWOOD I............ KY 261 1,565 1,826 44 07/19/84 04/01/98 5-26 ROSEWOOD............... KY 248 1,592 1,840 55 09/28/84 01/31/98 5-27 SLATE RUN.............. KY 90 1,105 1,195 41 07/02/84 01/31/98 5-26 SLATE RUN.............. KY 39 836 875 30 07/19/84 01/31/98 5-26 SLATE RUN I............ KY 102 961 1,063 35 07/02/84 01/31/98 5-26 SLATE RUN II........... KY 139 1,041 1,180 38 04/29/85 01/31/98 5-27 SPRINGWOOD............. KY 86 890 976 93 01/01/86 N/A 5-30 STONEHENGE............. KY 71 1,052 1,123 39 08/01/83 01/31/98 5-26 VALLEYFIELD............ KY 285 2,047 2,332 69 08/01/85 01/31/98 5-28 WILLOW RUN............. KY 94 1,458 1,552 54 09/18/84 01/31/98 5-27 WILLOWOOD.............. KY 48 849 897 30 09/24/84 01/31/98 5-27 WILLOWOOD I............ KY 127 1,189 1,316 42 08/20/84 01/31/98 5-27 WILLOWOOD II........... KY 98 778 876 27 11/06/85 01/31/98 5-28 WINTHROP COURT......... KY 180 1,169 1,349 42 06/07/85 01/31/98 5-27 WOODLANDS.............. KY 53 858 911 32 07/01/83 01/31/98 5-25 CHERRY TREE............ MD 623 2,492 3,115 249 09/01/86 N/A 5-31 FORSYTHIA CT I......... MD 214 1,946 2,160 65 02/28/86 01/31/98 5-28 FORSYTHIA CT II........ MD 285 1,515 1,800 146 06/01/87 N/A 5-31 MERRIFIELD............. MD 211 2,250 2,461 214 01/11/88 N/A 5-32 AMBERIDGE.............. MI 75 911 986 30 12/02/85 01/31/98 5-28 APPLE RUN.............. MI 76 765 841 29 12/27/82 01/31/98 5-25 ASHGROVE............... MI 37 963 1,000 37 08/15/83 01/31/98 5-26 ASHGROVE I............. MI 120 2,575 2,695 88 11/15/85 01/31/98 5-28 ASHGROVE II............ MI 95 2,278 2,373 73 01/09/87 01/31/98 5-29 FOXTON................. MI 124 1,084 1,208 40 08/22/83 01/31/98 5-26 GARDEN COURT........... MI 128 2,223 2,351 210 04/22/88 N/A 5-32 HEATHMOORE............. MI 82 1,639 1,721 60 11/23/83 01/31/98 5-26 HEATHMOORE I........... MI 129 1,226 1,355 124 07/31/86 N/A 5-31 HEATHMOORE II.......... MI 86 1,532 1,618 49 12/12/86 01/31/98 5-29 LAUREL BAY............. MI 164 1,116 1,280 100 10/01/89 N/A 5-34 MEADOWOOD.............. MI 74 1,479 1,553 51 09/24/84 01/31/98 5-27 MEADOWOOD I............ MI 15 1,166 1,181 36 01/17/83 04/01/98 5-25 MONTGOMERY COURT I..... MI 70 1,056 1,126 39 11/26/84 01/31/98 5-27 NEWBERRY I............. MI 77 1,106 1,183 38 01/15/85 01/31/98 5-27 NEWBERRY II............ MI 91 643 734 64 12/26/86 N/A 5-31 OLIVEWOOD.............. MI 304 4,370 4,674 142 12/03/86 01/31/98 5-29 RIDGEWOOD.............. MI 77 1,228 1,305 38 11/01/83 04/01/98 5-26 ROANOKE................ MI 360 2,731 3,091 92 01/03/85 01/31/98 5-27 STONEHENGE............. MI 19 1,174 1,193 39 08/20/84 01/31/98 5-27 WATERBURY.............. MI 257 2,242 2,499 76 11/21/85 01/31/98 5-28 WENTWORTH.............. MI 100 1,908 2,008 64 09/13/85 01/31/98 5-28 AMBERWOOD.............. OH 172 1,033 1,205 99 10/01/87 N/A 5-32 AMESBURY I............. OH 136 1,077 1,213 115 02/17/86 N/A 5-30 AMESBURY II............ OH 169 1,676 1,845 174 N/A 09/26/95 5-30 AMHURST................ OH 174 992 1,166 30 03/28/83 04/01/98 5-25 AMHURST I.............. OH 60 989 1,049 36 08/24/79 04/01/98 5-21 AMHURST II............. OH 67 1,205 1,272 42 02/03/81 04/01/98 5-23 38 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- ANDOVER COURT.......... OH 62 1,011 1,073 38 02/02/82 01/31/98 5-24 ANNHURST II............ OH 123 1,253 1,376 126 07/01/86 N/A 5-31 ANNHURST III........... OH 70 1,133 1,203 108 05/05/88 N/A 5-32 APPLE RIDGE I.......... OH 214 759 973 86 01/01/87 N/A 5-28 APPLE RIDGE III........ OH 38 650 688 24 10/16/82 01/31/98 5-25 APPLE RUN II........... OH 21 533 554 24 09/26/80 01/31/98 5-23 APPLEGATE.............. OH 84 742 826 28 05/24/82 01/31/98 5-24 APPLEGATE.............. OH 36 580 616 26 09/10/81 01/31/98 5-24 APPLERUN............... OH 86 879 965 32 08/05/83 01/31/98 5-26 ASHFORD HILL........... OH 360 1,022 1,382 108 06/23/86 N/A 5-31 ASHGROVE............... OH 108 1,296 1,404 48 01/24/83 01/31/98 5-25 BECKFORD PLACE......... OH 49 703 752 28 09/29/81 01/31/98 5-24 BECKFORD PLACE......... OH 41 1,497 1,538 46 12/21/82 04/01/98 5-25 BECKFORD PLACE I....... OH 218 1,294 1,512 38 04/15/83 04/01/98 5-25 BECKFORD PLACE II...... OH 175 1,226 1,401 40 05/24/85 01/31/98 5-27 CAMELLIA COURT......... OH 40 627 667 26 05/14/81 01/31/98 5-23 CAMELLIA COURT I....... OH 21 1,203 1,224 50 07/22/81 01/31/98 5-24 CAMELLIA COURT I....... OH 136 1,445 1,581 46 12/28/81 04/01/98 5-24 CAMELLIA COURT II...... OH 43 823 866 34 09/20/82 01/31/98 5-25 CAMELLIA COURT II...... OH 107 937 1,044 33 04/14/84 01/31/98 5-26 CEDARGATE I............ OH 187 2,339 2,526 103 01/01/82 01/31/98 5-24 CEDARGATE I............ OH 85 1,287 1,372 44 06/25/84 01/31/98 5-26 CEDARGATE II........... OH 132 805 937 30 12/01/83 01/31/98 5-26 CEDARWOOD.............. OH 37 565 602 24 03/12/82 01/31/98 5-24 CEDARWOOD I............ OH 52 789 841 31 09/26/80 01/31/98 5-23 CHARING CROSS.......... OH 111 1,094 1,205 49 07/22/78 01/31/98 5-20 CHELSEA COURT.......... OH 113 1,146 1,259 39 05/15/81 04/01/98 5-23 CLEARWATER............. OH 132 1,020 1,152 109 11/01/86 N/A 5-31 CONCORD SQUARE I....... OH 38 689 727 27 08/10/81 01/31/98 5-24 CONCORD SQUARE II...... OH 29 649 678 24 02/08/83 01/31/98 5-25 DANIEL COURT........... OH 225 2,122 2,347 73 02/01/85 01/31/98 5-27 DARTMOUTH PLACE I...... OH 89 1,393 1,482 52 08/03/82 01/31/98 5-25 DARTMOUTH PLACE II..... OH 114 1,110 1,224 112 07/18/86 N/A 5-31 DOVER PLACE I.......... OH 148 2,041 2,189 62 10/04/82 04/01/98 5-25 DOVER PLACE II......... OH 127 1,845 1,972 54 11/01/83 04/01/98 5-26 DOVER PLACE III........ OH 70 905 975 26 11/23/83 04/01/98 5-26 DOVER PLACE IV......... OH 237 2,058 2,295 66 11/25/86 01/31/98 5-29 FOXHAVEN............... OH 403 1,600 2,003 162 08/18/86 N/A 5-31 FOXTON II.............. OH 70 1,776 1,846 66 02/11/83 01/31/98 5-25 GREENGLEN.............. OH 100 1,442 1,542 54 08/29/83 01/31/98 5-26 GREENGLEN II........... OH 89 971 1,060 37 12/04/81 01/31/98 5-24 GREENGLEN II........... OH 23 1,031 1,054 40 06/05/82 01/31/98 5-24 HAMPSHIRE II........... OH 98 970 1,068 39 03/15/81 01/31/98 5-23 HARVEST GROVE I........ OH 225 1,198 1,423 118 09/08/86 N/A 5-31 HARVEST GROVE II....... OH 252 1,232 1,484 125 N/A 09/26/95 5-30 HICKORY MILL........... OH 119 1,385 1,504 48 05/02/80 04/01/98 5-22 INDEPENDENCE VILLAGE... OH 189 2,208 2,397 107 10/18/78 01/31/98 5-21 KETWOOD................ OH 164 2,185 2,349 74 12/29/79 04/01/98 5-22 LAMPLIGHT COURT........ OH 40 746 786 48 10/31/72 01/31/98 5-15 LARKSPUR I............. OH 36 597 633 24 01/08/82 01/31/98 5-24 LARKSPUR I............. OH 87 1,447 1,534 45 02/11/83 04/01/98 5-25 39 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- LARKSPUR II............ OH 24 251 275 9 08/10/84 01/31/98 5-27 LAUREL COURT........... OH 174 1,240 1,414 55 08/15/78 01/31/98 5-21 LINDENDALE............. OH 189 1,696 1,885 168 03/01/87 N/A 5-31 MEADOWOOD.............. OH 51 590 641 60 01/01/86 N/A 5-30 MEADOWOOD.............. OH 316 2,659 2,975 73 08/26/85 04/01/98 5-27 MEADOWOOD.............. OH 136 1,495 1,631 51 04/08/85 01/31/98 5-27 MEADOWOOD APTS......... OH 71 999 1,070 36 04/04/83 01/31/98 5-25 MEADOWOOD I............ OH 115 1,350 1,465 48 06/01/84 01/31/98 5-26 MEADOWOOD II........... OH 64 544 608 20 04/01/85 01/31/98 5-27 MELDON PLACE........... OH 331 1,604 1,935 74 01/02/78 01/31/98 5-20 MILLBURN............... OH 135 1,484 1,619 51 08/06/84 01/31/98 5-27 MILLBURN COURT II...... OH 137 1,164 1,301 46 07/27/81 01/31/98 5-24 MILLSTON I............. OH 31 479 510 21 05/18/81 01/31/98 5-23 MILLSTON II............ OH 7 455 462 18 01/29/82 01/31/98 5-24 MONTGOMERY COURT I..... OH 246 1,426 1,672 49 07/01/85 01/31/98 5-27 MONTGOMERY COURT II.... OH 121 684 805 24 03/03/86 01/31/98 5-28 MONTROSE SQUARE........ OH 569 2,262 2,831 240 01/01/87 N/A 5-30 PARKVILLE.............. OH 222 1,701 1,923 75 07/23/78 01/31/98 5-21 PARKVILLE.............. OH 76 952 1,028 30 02/11/82 04/01/98 5-24 PLUMWOOD I............. OH 169 2,233 2,402 87 04/01/78 04/01/98 5-20 PLUMWOOD II............ OH 38 804 842 25 04/18/83 04/01/98 5-25 RED DEER I............. OH 183 1,775 1,958 58 06/16/86 01/31/98 5-28 RED DEER II............ OH 235 1,411 1,646 137 08/01/87 N/A 5-32 RIDGEWOOD I............ OH 85 1,163 1,248 41 01/06/84 01/31/98 5-26 RIDGEWOOD II........... OH 70 1,071 1,141 38 03/18/85 01/31/98 5-27 RIVER GLEN I........... OH 146 1,271 1,417 125 04/01/87 N/A 5-31 RIVER GLEN II.......... OH 179 1,206 1,385 115 11/01/87 N/A 5-32 RIVERVIEW ESTATES...... OH 74 1,555 1,629 175 01/01/87 N/A 5-28 ROSEWOOD............... OH 139 1,505 1,644 54 05/28/85 01/31/98 5-27 SANDALWOOD............. OH 179 1,003 1,182 36 02/24/84 01/31/98 5-26 SHERBROOK.............. OH 147 1,253 1,400 40 07/29/85 01/31/98 5-28 SLATE RUN.............. OH 118 1,020 1,138 36 05/13/85 01/31/98 5-27 SPRINGWOOD............. OH 130 1,332 1,462 39 03/14/83 04/01/98 5-25 SPRINGWOOD II.......... OH 52 857 909 32 10/04/82 01/31/98 5-25 STONEHENGE............. OH 30 743 773 27 08/08/83 01/31/98 5-26 STONEHENGE............. OH 40 701 741 25 04/01/84 01/31/98 5-26 STONEHENGE............. OH 72 1,360 1,432 46 10/26/85 01/31/98 5-28 SUFFOLK GROVE I........ OH 124 1,271 1,395 42 12/06/85 01/31/98 5-28 SUFFOLK GROVE II....... OH 154 1,209 1,363 118 06/01/87 N/A 5-31 TABOR RIDGE............ OH 194 1,825 2,019 52 02/24/86 04/01/98 5-28 THE BIRCHES............ OH 70 1,024 1,094 49 04/16/77 01/31/98 5-19 THE MEADOWS I.......... OH 83 1,041 1,124 36 08/12/85 01/31/98 5-28 THE MEADOWS II......... OH 151 1,233 1,384 124 N/A 03/29/95 5-30 THE WILLOWS I.......... OH 158 816 974 97 01/01/87 N/A 5-28 THE WILLOWS II......... OH 34 886 920 36 10/28/81 01/31/98 5-24 THE WILLOWS III........ OH 45 855 900 85 07/01/87 N/A 5-32 TIMBERCREEK............ OH 159 1,699 1,858 53 06/29/87 01/31/98 5-29 WATERBURY.............. OH 186 1,008 1,194 36 09/13/85 01/31/98 5-28 WEST OF EASTLAND....... OH 154 2,597 2,751 125 03/31/77 01/31/98 5-19 WESTWOOD............... OH 17 108 125 4 11/19/80 01/31/98 5-23 40 Column A Column E Column F Column G Column H Column I -------- -------- -------- -------- -------- -------- Gross Amount at Which Carried at Close of Period, Description December 31, 1998 (Garden Apartments) (Notes 1 & 2) ------------------- ------------- Life on Buildings Which and Accum. Date Date Deprec. Property Name St Land Improvements Total Deprec. Built Acquired Computed ------------- ---- ------ ------------ ------- --------- ---------- ---------- --------- WILLOW RUN............. OH 56 1,025 1,081 37 07/01/83 01/31/98 5-25 WILLOWOOD I............ OH 90 938 1,028 34 06/01/84 01/31/98 5-26 WILLOWOOD I............ OH 91 1,125 1,216 39 05/01/84 01/31/98 5-26 WILLOWOOD II........... OH 42 579 621 20 06/21/85 01/31/98 5-27 WILLOWOOD II........... OH 71 841 912 32 02/25/86 01/31/98 5-28 WILLOWOOD II........... OH 36 624 660 63 06/01/87 N/A 5-31 WINTHROP COURT II...... OH 146 852 998 89 02/25/86 N/A 5-30 WOODBINE............... OH 66 706 772 28 02/23/81 01/31/98 5-23 WOODBINE............... OH 122 1,668 1,790 51 05/24/82 04/01/98 5-24 WOODLANDS I............ OH 181 2,104 2,285 79 05/23/83 01/31/98 5-25 WOODLANDS I............ OH 103 1,863 1,966 64 10/01/84 01/31/98 5-27 WOODLANDS II........... OH 112 1,559 1,671 57 09/30/84 01/31/98 5-27 WOODLANDS II........... OH 98 1,887 1,985 64 11/18/85 01/31/98 5-28 WOODLANDS III.......... OH 159 2,051 2,210 67 06/12/87 01/31/98 5-29 ANNHURST............... PA 77 2,041 2,118 70 11/26/84 01/31/98 5-27 BRUNSWICK I............ PA 126 2,211 2,337 73 05/12/86 01/31/98 5-28 CARLETON COURT......... PA 143 1,248 1,391 41 11/08/85 01/31/98 5-28 NORTHRUP COURT I....... PA 154 1,511 1,665 52 06/24/85 01/31/98 5-27 NORTHRUP COURT II...... PA 88 937 1,025 30 10/15/85 01/31/98 5-28 VALLEYFIELD............ PA 257 1,790 2,047 63 10/15/85 01/31/98 5-28 WOODLANDS I............ PA 113 1,187 1,300 35 11/01/83 04/01/98 5-26 WOODLANDS II........... PA 118 1,325 1,443 132 03/01/87 N/A 5-31 RAVENWOOD.............. SC 170 1,553 1,723 149 05/07/87 N/A 5-31 SPRINGBROOK............ SC 120 1,816 1,936 195 06/13/86 N/A 5-30 WILLOW LAKES........... SC 189 1,822 2,011 177 12/12/86 N/A 5-31 CEDAR HILL............. TN 235 1,287 1,522 128 05/30/86 N/A 5-30 KNOX LANDING........... TN 90 1,529 1,619 50 04/04/86 01/31/98 5-28 WATERBURY.............. TN 101 1,092 1,193 36 07/05/85 01/31/98 5-27 WYCLIFFE COURT......... TN 124 1,226 1,350 44 07/29/85 01/31/98 5-28 WALKER PLACE........... TX 270 1,194 1,464 112 01/25/88 N/A 5-32 BRUNSWICK II........... WV 105 1,830 1,935 178 N/A 09/26/95 5-30 CARLETON COURT......... WV 308 1,669 1,977 57 03/21/85 01/31/98 5-27 HICKORY MILL I......... WV 85 972 1,057 36 04/15/83 01/31/98 5-25 PARKVILLE.............. WV 70 887 957 33 10/10/82 01/31/98 5-25 SHERBROOK.............. WV 355 1,467 1,822 145 12/20/86 N/A 5-31 ------ ------- -------- -------- ------- ---------- --------- ------- $59,732 $544,897 $604,629 $28,564 ------- -------- -------- ------- ------- -------- -------- -------
41 LEXFORD RESIDENTIAL TRUST NOTES TO SCHEDULE III FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS) The following shows the changes in the total amounts at which Real Estate was carried during the periods:
1998 1997 1996 ---------- ----------- ----------- Note (1) Schedule III Reconciliation: Balance as of beginning of year....................................... $161,369 $161,570 $164,334 Additions during the year: Acquisitions of Property........................................ 430,981 0 1,421 Costs Capitalized............................................... 14,276 2,355 702 Deductions during the year: Disposals....................................................... (1,997) (2,556) (4,887) ---------- ----------- ----------- Balance Rental Properties December 31, 1998, 1997, 1996, respectively........................ $604,629 $161,369 $161,570 ---------- ----------- ----------- ---------- ----------- ----------- The following shows changes in accumulated depreciation during the periods: Balance as of beginning of year....................................... $ 9,152 $ 4,478 $ 0 Depreciation during the period..................................... 19,475 4,807 4,541 Deductions for Disposals........................................... (63) (133) (63) ---------- ----------- ----------- Balance Rental Properties December 31, 1998, 1997, 1996, respectively........................ $ 28,564 $ 9,152 $ 4,478 ---------- ----------- ----------- ---------- ----------- -----------
Note (2): Tax basis of assets: The tax basis for federal income tax purposes in Rental Properties was approximately $484 million at December 31, 1998 42 LEXFORD RESIDENTIAL TRUST CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31, 1998 (AUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
March 31, 1999 December 31, 1998 -------------- ----------------- ASSETS Rental Properties (Note 2) Land $ 59,732 $ 59,732 Buildings, Improvements and Fixtures 546,656 544,897 -------------- ----------------- Accumulated Depreciation (34,386) (28,564) -------------- ----------------- 572,002 576,065 Investments in and Advances to Unconsolidated Partnerships, net of an allowance of $1,615 at March 31, 1999 and December 31, 1998 (Note 1) 10,813 11,713 Cash 785 495 Accounts Receivable, Residents, Affiliates, Officers and Other (net of an allowance of $729 and $550 at March 31, 1999 and December 31, 1998, respectively) (Note 4) 1,370 1,920 Furniture, Fixtures and Other, Net 2,141 2,108 Funds Held in Escrow (Note 1) 22,560 22,747 Intangible Assets (Note 1) 6,744 6,891 Prepaids and Other (Note 1) 6,933 7,523 -------------- ----------------- $623,348 $628,922 -------------- ----------------- -------------- ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY Mortgages and Revolving/Term Debt Mortgages (Note 3) $492,591 $494,556 Revolving/Term Debt 30,645 33,186 -------------- ----------------- 523,236 527,742 -------------- ----------------- Accounts Payable 1,204 1,389 Accrued Interest, Real Estate and Other Taxes 11,267 10,315 Other Accrued Expenses 4,313 6,196 Other Liabilities 8,431 7,451 Dividends Payable 4,132 4,122 Deferred Compensation (Note 1) 13,143 12,525 -------------- ----------------- Total Liabilities 565,726 569,740 -------------- ----------------- Shareholders' Equity (Note 1): Preferred Shares, $.01 par value, 5,000,000 Shares Authorized, None Issued Common Shares, $.01 par value, 50,000,000 Shares -- -- Authorized 9,554,028 and 9,530,013 Shares Issued and Outstanding at March 31, 1999 and December 31, 1998, respectively 96 95 Additional Paid-in Capital 66,213 65,833 Retained Earnings 6,053 7,482 Less Cost of Treasury Shares (Note 1) (14,740) (14,228) -------------- ----------------- 57,622 59,182 -------------- ----------------- $623,348 $628,922 -------------- ----------------- -------------- -----------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 43 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended ----------------------------------------- 1999 March 31, 1998 -------------- -------------- Revenues: Rental and Other Property Revenues $37,463 $25,694 Fee Based 1,051 2,398 Income from Unconsolidated Partnerships 445 1,106 -------------- -------------- 38,959 29,198 -------------- -------------- Expenses: Property Operating and Maintenance 11,219 8,306 Real Estate Taxes and Insurance 3,164 2,085 Property Management 2,767 3,923 Administration 1,235 1,515 Non-recurring Costs (Note 1) -- 1,808 Interest-Mortgages 10,574 7,887 Interest-Revolving/Term Debt 550 161 Depreciation and Amortization 6,258 4,190 Loss on Sale of Third Party Management Business (Note 1) -- 6,300 -------------- -------------- 35,767 36,175 -------------- -------------- Income/(Loss) Before Gain on Disposal of Assets, Extraordinary Gain and Cumulative Effect of Change in Accounting Principle 3,192 (6,977) Gain on Disposal of Assets-Net 22 89 -------------- -------------- Income/(Loss) Before Extraordinary Gain and Cumulative Effect of Change in Accounting Principle 3,214 (6,888) Extraordinary Gain (Note 3) 189 -- Cumulative Effect of Change in Accounting Principle (Note 1) (700) -- -------------- -------------- -------------- -------------- Net Income/(Loss) $ 2,703 $(6,888) -------------- -------------- -------------- -------------- Basic Earnings Per Share: Income/(Loss) Before Extraordinary Gain and Cumulative Effect of Change in Accounting Principle Extraordinary Gain $0.34 $ (0.80) Cumulative Effect of Change in Accounting Principle 0.02 -- (0.07) -- -------------- -------------- -------------- -------------- Net Income/(Loss) $0.29 $ (0.80) -------------- -------------- -------------- -------------- Diluted Earnings Per Share: Income/(Loss) Before Extraordinary Gain and Cumulative Effect of Change in Accounting Principle Extraordinary Gain $0.33 $ (0.80) Cumulative Effect of Change in Accounting Principle 0.02 -- (0.07) -- -------------- -------------- -------------- -------------- Net Income/(Loss) $0.28 $ (0.80)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 44 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS)
Common Shares --------------------- Additional Paid-in Retained Less Cost of Shares Amount Capital Earnings Treasury Shares Total ---------- -------- ------------ ---------- ----------------- ---------- Balance, January 1, 1999 9,530 $95 $65,833 $ 7,482 $(14,228) $59,182 Exercise of options under non-qualified stock option plan 5 -- 30 30 Trustees restricted stock plan shares 2 -- 35 (27) 8 Rabbi Trust dividends and other investments in shares, net of withdrawals (169) (169) 1999 share compensation issued to Rabbi Trust 17 1 315 (316) -- Dividends to common shareholders (4,132) (4,132) Net Income for the period 2,703 2,703 ---------- -------- ------------ ---------- ----------------- ---------- Balance, March 31, 1999 9,554 $96 $66,213 $6,053 $(14,740) $57,622 ---------- -------- ------------ ---------- ----------------- ---------- ---------- -------- ------------ ---------- ----------------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 45 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) (IN THOUSANDS)
Three Months Ended ---------------------------------------- 1999 March 31, 1998 ------------ -------------- Cash Flows from Operating activities: Net Income/(Loss) $ 2,703 $ (6,888) ------------ -------------- Adjustments to reconcile Net Income/(Loss) to Net Cash provided by Operating activities: Depreciation 5,969 3,625 Amortization 289 565 Loss on Sale of Third Party Management Business Provision for Losses on Accounts Receivable -- 6,300 Gain on Disposal of Assets - net 426 676 Extraordinary Gain Cumulative Effect of Change in Accounting Principle (22) (89) Non-Cash Share Compensation (189) -- Changes in Operating Assets and Liabilities: Investments in and Advances to Unconsolidated Partnerships 700 -- Accounts Receivable and Other Assets 489 1,163 Accounts Payable and Other Liabilities 156 2,710 188 (218) (91) 956 ------------ -------------- Net Cash provided by Operating activities 10,618 8,800 ------------ -------------- Cash Flows from Investing activities: Proceeds from Sale of Assets 22 117 Net Repayment from (Advances to) Unconsolidated Partnerships 204 (119) Investments in Unconsolidated Partnerships and Other -- (3,409) Purchase of Unconsolidated Partnerships, Net of Cash Acquired -- (10,585) Capitalized Refinancing Costs (130) -- Capital Expenditures - Other (172) (312) Capital Expenditures - Real Estate (1,767) (1,402) ------------ -------------- Net Cash (used in) Investing activities (1,843) (15,710) ------------ -------------- Cash Flows from Financing activities Proceeds from the exercise of Stock Options 30 12 Proceeds from Revolving Debt - Net -- 14,740 Principal Payments on Revolving/Term Debt and Other (2,541) (341) Proceeds from Mortgage Debt 2,787 -- Payments on Mortgages - principal amortization (1,969) (1,546) Payments on Mortgages - lump sum (2,671) (287) Dividends Paid (4,121) -- ------------ -------------- Net Cash provided by/(used in) Financing activities (8,485) 12,578 ------------ -------------- Increase in Cash 290 5,668 Cash at Beginning of Period 495 2,569 ------------ -------------- ------------ -------------- Cash at End of Period $ 785 $ 8,237 ------------ -------------- ------------ -------------- Supplemental Disclosure of Cash Flow Information Cash Payments for Interest $10,974 $ 7,991 ------------ -------------- ------------ --------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 46 LEXFORD RESIDENTIAL TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED) (IN THOUSANDS) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: In the first quarter of 1998, the Company acquired the entire ownership interest in 287 Unconsolidated Partnerships owning 287 apartment communities. Such acquisitions resulted in the following increases (decreases) to the Company's balance sheet (SEE NOTE 2):
(In Thousands) Non-cash Effects Investments in and Advances to Unconsolidated Partnerships $(44,218) Land and Building $367,771 Accounts Receivable and Other Assets $ 16,966 Mortgages $316,857 Accounts Payable and Other Liabilities $ 13,077 Cash Effects Cash Paid to Former Partner(s) $(16,962) Net Cash Acquired 6,377 ------------ $(10,585) ------------ ------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 47 LEXFORD RESIDENTIAL TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 BASIS OF PRESENTATION Lexford Residential Trust, a Maryland real estate investment trust, together with its wholly owned and controlled partnerships, limited liability companies and corporate subsidiaries ("Lexford"), is a fully integrated, self-managed real estate investment trust ("REIT") which owns, manages and invests in direct or indirect ownership interests in multifamily apartment communities. The consolidated financial statements include the accounts of Lexford Residential Trust and its wholly owned subsidiaries and partnerships. Lexford, for consolidated financial statement purposes, includes corporations, limited partnerships and other legal entities which own multifamily apartment communities (the "Rental Properties") in which Lexford, in turn, owns 100% equity interest. Lexford also holds equity ownership as well as significant economic interests (i.e. mortgage loans and management contracts entitling Lexford to a substantial portion of an apartment community's net cash flow) in multifamily apartment communities in its capacity as a partner and property manager, respectively, in various limited partnerships (the "Unconsolidated Partnerships"). The Rental Properties and the Unconsolidated Partnerships are collectively referred to as the "Properties." The accounts of the Unconsolidated Partnerships are not included within Lexford's consolidated financial statements but are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements, except for the Consolidated Balance Sheet as of December 31, 1998, are unaudited and have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for a complete financial statement presentation. The consolidated financial statements, the notes hereto and the capitalized terms included herein should be read in conjunction with Lexford's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The Properties contain 36,333 apartment units located at 401 geographic sites. At March 31, 1999, Lexford owned the entire equity interest in 432 Rental Properties and a partial equity, together with a significant economic, interest in 79 Unconsolidated Partnerships. The difference in the number of geographic sites results from separate legal entities owning apartment communities constructed on contiguous parcels. As a result of Lexford's successful efforts in acquiring the entire equity interest in a number of former Unconsolidated Partnerships (see Note 2), Lexford is combining such legal entities owning contiguous apartment communities as and when mortgage debt secured by such apartment communities are refinanced with a single lender. Lexford has one reportable segment which is the ownership and operation of residential apartment communities. The majority of the Properties are located in the midwest and southeast United States, with the heaviest concentrations in Florida, Ohio, Georgia, Indiana, Michigan and Kentucky. The concentrations of Properties within these states is as follows: Ohio (136 Properties), Florida (126 Properties), Georgia (73 Properties), Indiana (70 Properties), Kentucky (33 Properties) and Michigan (25 Properties). Lexford is not dependent for its revenues on any particular Property or resident and the loss of any Property would not be material to Lexford's financial position. Lexford's largest Property accounts for only 1% of Lexford's total revenues. The distribution of the Properties also minimizes Lexford's exposure to local economic conditions. The typical Property is comprised of multiple single story buildings with studio, one and two bedroom apartments. The interim consolidated financial statements have been prepared in accordance with Lexford's customary accounting practices. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. BUSINESS OVERVIEW Lexford is a fully integrated REIT which owns, manages and opportunistically acquires apartment communities. Lexford's Properties generally consist of relatively smaller apartment communities, averaging approximately 90 units per site. Lexford's primary mission is to become the leading multifamily REIT operating in the value-conscious segment. Lexford defines value-conscious renters as those who prefer clean, attractive living accommodations without unnecessary amenities at rental rates below the median rent in the relevant housing market. Lexford seeks to serve this segment by maintaining competitively priced rental structures, as represented by its typical monthly rent that currently ranges from $300 to $630 per apartment unit. In addition, Lexford provides ancillary services to the residents at both the Rental Properties and Unconsolidated Partnerships, including renter's insurance and telecommunication services. Lexford also enters into group buying, volume discount contracts with major vendors as agent for the Properties enabling the Properties to purchase items at a discounted price and, in the case of laundry equipment, receive a rebate based on resident usage. 48 SALE OF THIRD PARTY MANAGEMENT BUSINESS In the first quarter of 1998 Lexford was also engaged in providing management services to third party owners of multifamily apartment communities (the "Third Party Management Business"). Because of Internal Revenue Code limitations on the nature and amount of non-qualified REIT income, Lexford contributed the majority of its assets related to the Third Party Management Business to a newly formed corporation, Lexford Property Management, Inc.("LPM"), in exchange for all of the preferred stock of such corporation on February 20, 1998. Effective as of April 1, 1998, Lexford sold all its preferred equity interest in the Third Party Management Business. Due to there classification of the Third Party Management Business as Held for Sale in the first quarter of 1998, Lexford recorded a $1.3 million reserve for sale/disposal costs associated with this sale, a $3.0 million charge for the release of 300,000 contingent shares and a $2.0 million charge related to an adjustment to the value of goodwill associated with the original acquisition of the Third Party Management business. The above charges totaling $6.3 million were classified as Loss on Sale of Third Party Management Business. Lexford received a promissory note in the principal amount of $1.8 million payable over a ten year period which bears interest at 6% per annum until April 1, 2000 and11% per annum thereafter, in exchange for all of the outstanding preferred stock of LPM. Lexford has retained certain key personnel dedicated to Lexford's property management activities, its proprietary interest in property management training programs and systems, and the rights to the name "Lexford". FRESH START ACCOUNTING Lexford adopted a method of accounting referred to as fresh start("Fresh Start") reporting as of September 11, 1992 (the "Effective Date") as a result of Lexford's judicial plan of reorganization (the "Plan of Reorganization") of Cardinal Industries, Inc., Lexford's predecessor. Lexford prepared financial statements on the basis that a new reporting entity was created with assets and liabilities recorded at their estimated fair values as of the Effective Date. At the Effective Date, to the extent the non-recourse debt secured by certain assets owned by Lexford exceeded the estimated fair value of the respective Rental Property, Lexford reduced the contractual amount of the related non-recourse mortgage debt by the amount of the deficiency (the "Mortgage Deficiency"). The contractual mortgage balance net of any applicable Mortgage Deficiency, is referred to as the "Carrying Value" of the mortgage (SEE NOTE 3). FUNDS HELD IN ESCROW Funds Held in Escrow at March 31, 1999 includes funds of $21.7 million escrowed by Rental Properties for improvements and deferred maintenance, real estate taxes, insurance, resident security deposits and other funds held by mortgage lenders. INTANGIBLE ASSETS Intangible Assets at March 31, 1999 is comprised of approximately $2.9 million of management contracts and approximately $465,200 of goodwill related to the trade name, training programs and property management systems retained from the Third Party Management Business. The management contracts and goodwill are net of amortization of approximately $758,100. In addition, Intangible Assets includes deferred financing costs of $3.4 million at March 31, 1999. The deferred financing costs relate to mortgage refinancings on the Rental Properties and are amortized over the terms of the respective loans. PREPAIDS AND OTHER ASSETS Prepaids and Other assets at March 31, 1999 includes $3.7 million of deferred offering costs related to Lexford's Form S-3 "shelf" registration statement filed with the SEC and a $1.8 million note receivable related to the sale of the Third Party Management Business. In addition, Prepaids and Other assets consists of approximately $773,300 of prepaid rent, insurance and real estate taxes, and approximately $662,000 of utility deposits and other prepaid expenses. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS Investments in and Advances to Unconsolidated Partnerships represent Lexford's general partners' interest in and advances to Unconsolidated Partnerships. The carrying value represents the allocation of the estimated fair value of the underlying real estate assets as of the Effective Date or, if later, date of purchase or investment. The contractual amounts of the receivables are significantly more than the recorded carrying values. Lexford accounts for its investments on the equity method. Lexford's share of net loss of the Unconsolidated Partnerships amounted to approximately $109,500 for the first three months of 1999, and is included in Income from Unconsolidated Partnerships in the Consolidated Statements of Income. In the first quarter of 1998, Lexford invested $3.4 million in a joint venture with a developer for the construction of an apartment community, consisting of 276 units. Such investment is accounted for under the equity method. The investment is included in Investments in and Advances to Unconsolidated Partnerships at March 31, 1999. The community commenced leasing at the end of the first quarter of 1999. ACCOUNTING CHANGE - START UP COSTS In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, Reporting the Costs of Start-up Activities. The SOP is effective beginning on January 1, 1999, and requires that start-up costs capitalized prior to January 1, 49 1999 be written-off and requires that start-up costs be expensed as incurred. The definition of start-up costs under the SOP includes organizational costs. Historically, Lexford capitalized and then amortized these costs over five years. The unamortized balance of organizational costs, approximately $700,000 (as of December 31, 1998), was written off as the Cumulative Effect of Change in Accounting Principle as of January 1, 1999. PROVISION FOR INCOME TAXES Lexford intends to elect to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code, commencing with its taxable year beginning January 1, 1998. As a REIT, Lexford generally will not be subject to Federal Income Tax on income it distributes to shareholders as long as it distributes at least 95% of its REIT taxable income and satisfies a number of organizational, ownership and operational requirements. In addition, primarily due to its organization as a Maryland real estate investment trust, Lexford believes it will not be subject to state income taxes in jurisdictions where the Properties are located. Therefore, the Consolidated Statements of Income for the three months ended March 31, 1999 and 1998 do not include a provision for Federal or state income taxes. NON-RECURRING COSTS Non-recurring Costs were approximately $1.8 million for the three months ended March 31, 1998. Approximately $1.6 million of the charge related to the retirement plan ("Trustee Retirement Plan") for four Trustees who retired April 15, 1998. Each retiring Trustee received a package consisting of the right to receive a cash payment of $225,000 (the "Retirement Payment"), vesting of all non-vested common share awards and the opportunity to continue participation in Lexford's Executive Deferred Compensation Plan and the Executive Deferred Compensation Rabbi Trust (the "Rabbi Trust") for up to five years. The retiring Trustees were also afforded the opportunity to defer receipt of all or any portion of the Retirement Payment and direct that the deferred portion be contributed to the Rabbi Trust and invested in Lexford's common shares for their benefit. In connection with their participation in the Trustee Retirement Plan, two of the retiring Trustees elected to defer receipt of a total of $400,000 of Retirement Payments in such manner. The majority of the remaining $200,000 of Non-recurring Costs in 1998 relates to severance costs associated with terminated employees. RABBI TRUST Lexford established the Rabbi Trust in 1996 to permit executive officers and trustees to defer taxes on awards of Company shares. The Rabbi Trust is currently restricted to holding Company shares or cash equivalents. In 1998, the Emerging Issues Task Force of the Financial Accounting Standards Board ("EITF") reached a consensus on Issue No. 97-14, Accounting for Deferred Compensation Arrangements. The EITF concluded that the deferred compensation liability and the securities issued to fund deferred compensation must be consolidated by Lexford and carried on Lexford's balance sheet. Further, Lexford's common shares held in the Rabbi Trust should be accounted for as treasury shares by Lexford. Lexford applied EITF No. 97-14 commencing with the first quarter of 1998. EARNINGS PER SHARE The following table shows the amounts used in computing basic and diluted earnings per share as well as weighted average numbers of shares outstanding and the effect on income of restricted common shares and stock option dilutive potential (in thousands, except per share amounts):
1999 1998 --------- --------- Numerator for Basic and Diluted Earnings Per Share Net Income/(Loss) $2,703 $(6,888) --------- --------- --------- --------- Denominator Denominator for Basic Earnings per Share Weighted Average Shares 9,478 8,589 --------- --------- Effect of Dilutive Securities Stock options (1) 42 -- Time Vesting Restricted Share Awards 14 58 --------- --------- Dilutive Potential Common Shares 56 58 --------- --------- Denominator for Diluted Earnings per Share Adjusted Weighted Average Shares 9,534 8,647 --------- --------- --------- --------- Basic Earnings Per Share: Net Income/(Loss) $ 0.29 $ (0.80) Diluted Earnings Per Share: Net Income/(Loss) $ 0.28 $ (0.80) --------- --------- --------- ---------
(1) Stock Options for 257,258 shares were excluded from diluted earnings per share for the three months ended March 31, 1998 because including the shares would be anti-dilutive as a result of the net loss Lexford recognized for the first three months of 1998. 50 NOTE 2 PROPERTY ACQUISITIONS In conjunction with its determination to elect REIT status, Lexford initiated a consolidation plan, the purpose of which was to minimize third party equity interests in the Unconsolidated Partnerships owning apartment communities (the "Consolidation Plan"). In the first quarter of 1998, Lexford had acquired the entire equity ownership interest in 287 former Unconsolidated Partnerships. The acquisition of the 287 former Unconsolidated Partnerships was effective as of January 31, 1998. Effective as of April 1, 1998, Lexford acquired the entire ownership interest in an additional 37 Unconsolidated Partnerships that owned 39 Properties, which were accounted for under the equity method in the first quarter of 1998. The acquired former Unconsolidated Partnerships are now classified as Rental Properties. NOTE 3 MORTGAGE DEBT As of the Effective Date, the mortgages on 13 Rental Properties were restated to estimated fair value (the "Carrying Value") because the Fresh Start value of the respective Rental Property was less than the outstanding principal amount of its mortgage. The difference between the Carrying Value of each such mortgage and the full unpaid principal amount thereof is characterized as a "Mortgage Deficiency" for Fresh Start purposes. Interest expense is recorded based on the Carrying Value of the mortgage using the effective interest rate method. Mortgages which have been originated or assumed following the Effective Date (including non-recourse mortgages on the 326 Properties acquired pursuant to the Consolidation Plan) are recorded as liabilities on the Consolidated Balance Sheets in their full principal amount. Typically, each Rental Property is secured by a separate mortgage loan. The mortgage loans on a portfolio of 26 Rental Properties contain cross collateral and cross default provisions; and another portfolio of 25 Rental Properties are cross collateralized and cross defaulted within their respective states, with no more than eight Rental Properties in one state. However, all but three of the mortgage loans secured by the Rental Properties are non-recourse to Lexford. The outstanding mortgage debt on the Rental Properties, including the mortgage debt assumed in relation to the acquisition of the 324 former Unconsolidated Partnerships at March 31, 1999 and December 31, 1998 is as follows:
March 31, 1999 December 31, 1998 -------------- ----------------- Contractual Mortgage Payable $498,647 $500,688 Mortgage Deficiency (6,056) (6,132) -------- -------- $492,591 $494,556 -------- -------- -------- --------
Approximately $360 million, or 69%, of the combined contractual mortgage debt and Lexford's credit facility is prepayable at March 31, 1999. Any prepayment of mortgage debt at the contractual value in excess of its carrying value will result in an extraordinary charge equal to the amount of Mortgage Deficiency associated with such debt. In January 1999 Lexford completed the refinancing of the mortgage debt on three Rental Properties. Mortgage indebtedness on the three Rental Properties with a contractual and carrying value of $2.8 million, was refinanced with mortgages bearing a fixed rate of interest of 7.6%, with 25 year amortization and ten year maturities. An extraordinary gain of approximately $189,000 was recognized as a result of the refinancing due to debt discounts received from the prior lenders. NOTE 4 RELATED PARTY TRANSACTIONS The Company manages all but one of the Properties owned by the Unconsolidated Partnerships. The Company earned fee based revenues from the Unconsolidated Partnerships of approximately $694,800 and $1.5 million for the three months ended March 31, 1999 and 1998, respectively. The Company also earned a majority of its Income from Unconsolidated Partnerships in the form of interest on receivables (including second mortgages). Approximately $167,000 and $233,000 of the Company's Accounts Receivable (net of allowances) were due from the Unconsolidated Partnerships as of March 31, 1999 and December 31, 1998, respectively. The Company received net principal repayment of advances from Unconsolidated Partnerships of approximately $204,000 in the first three months of 1999 as compared to approximately $119,000 of advances made to Unconsolidated Partnerships in the first three months of 1998. These principal repayments were credited to Investments in and Advances to Unconsolidated Partnerships (SEE NOTE 1 -- "INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS"). 51 EXHIBITS
EXHIBIT NO. - ----------- 23 Consent of Ernst & Young LLP
52 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 Date: July 13, 1999 By: /s/ Bruce C. Strohm ----------------------------------------- Bruce C. Strohm Executive Vice President, General Counsel and Secretary 53 EX-23.1 2 EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Forms S-3 No. 333-80835, No. 333-72961, No. 333-45533, No. 333-39289, No. 333-12983, No. 333-06873, No. 33-97680 and No. 33-84974 and Forms S-8 No. 333-66257, No. 333-56165 and No. 333-06869) of Equity Residential Properties Trust and in the related Prospectuses of our report dated January 27, 1999, with respect to the consolidated financial statements and schedules of Lexford Residential Trust for the year ended December 31, 1998, included in the Current Report of Equity Residential Properties Trust on Form 8-K dated June 30, 1999. /s/ Ernst & Young LLP Ernst & Young LLP Columbus, Ohio July 12, 1999 -----END PRIVACY-ENHANCED MESSAGE-----