-----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, RgB9KMOpMLZWTeAp7hT3nKg9OnIESVUXsspU8jAfHqk2thuFuhn3h2tjEj5HLhrS 6R6+pq6tVnUdLLsj/tWEyw== 0000892626-02-000195.txt : 20020515 0000892626-02-000195.hdr.sgml : 20020515 20020515122828 ACCESSION NUMBER: 0000892626-02-000195 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES TRUST CENTRAL INDEX KEY: 0000914724 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363925916 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12784 FILM NUMBER: 02649761 BUSINESS ADDRESS: STREET 1: 125 S WACKER DR STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124431477 MAIL ADDRESS: STREET 1: 125 S WACKER DR STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES INC DATE OF NAME CHANGE: 19931112 10-Q 1 amli_302.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2002 Commission File Number 1-12784 AMLI RESIDENTIAL PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland 36-3925916 (State of Organization) (I.R.S. Employer Identification No.) 125 South Wacker Drive, Suite 3100, Chicago, Illinois 60606 (Address of principal executive office) (Zip code) Registrant's telephone number, including area code: (312) 443-1477 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) The number of the Registrant's Common Shares of Beneficial Interest outstanding was 18,110,659 as of April 30, 2002. INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 . . . . . . . 3 Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001 . . . . 5 Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2002. . . . . 6 Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001 . . . . 7 Notes to Consolidated Financial Statements . . . . . 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . 32 Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . 43 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 49 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 50 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND DECEMBER 31, 2001 (Dollars in thousands, except share data) MARCH 31, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ----------- ------------ ASSETS: Rental apartments: Land . . . . . . . . . . . . . . . . $ 99,784 99,784 Depreciable property . . . . . . . . 646,122 644,627 -------- ---------- 745,906 744,411 Less accumulated depreciation. . . . (112,501) (107,139) -------- ---------- 633,405 637,272 Rental community under development. . . . . . . . . . . . . 13,254 10,392 Land held for development or sale, net of provision for loss of $1,389 and $2,086, respectively. . . 43,160 47,611 Investments in partnerships. . . . . . 187,327 184,270 Cash and cash equivalents. . . . . . . 2,417 5,892 Deferred expenses, net . . . . . . . . 4,025 3,836 Investment in and receivables from the Service Companies. . . . . . . . 19,048 15,161 Other assets . . . . . . . . . . . . . 12,708 14,568 -------- -------- Total assets $915,344 919,002 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Debt (note 5). . . . . . . . . . . . . $405,126 399,309 Accrued interest payable . . . . . . . 1,822 1,838 Accrued real estate taxes payable. . . 6,257 12,270 Construction costs payable . . . . . . 3,164 4,079 Security deposits and prepaid rents. . 2,713 2,656 Other liabilities. . . . . . . . . . . 7,978 7,100 -------- -------- Total liabilities. . . . . . 427,060 427,252 -------- -------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS - CONTINUED MARCH 31, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ----------- ------------ Commitments and contingencies (note 6) Mandatorily redeemable convertible preferred shares . . . . . . . . . . 93,287 93,287 Minority interest. . . . . . . . . . . 67,339 68,186 -------- -------- SHAREHOLDERS' EQUITY (note 2): Series A Cumulative Convertible Preferred shares of beneficial interest, $0.01 par value, 1,500,000 authorized, 1,200,000 issued and 100,000 and 350,000 outstanding, respectively (aggregate liquidation preference of $2,021 and $7,075, respectively) . . . . . . 1 4 Shares of beneficial interest, $0.01 par value, 145,375,000 authorized, 18,110,659 and 17,840,368 common shares issued and outstanding, respectively . . . . 181 178 Additional paid-in capital . . . . . . 356,205 355,728 Employees' and Trustees' notes . . . . (10,821) (10,857) Accumulated other comprehensive loss . . . . . . . . . . . . . . . . (3,559) (4,294) Dividends paid in excess of earnings . . . . . . . . . . . . . . (14,349) (10,482) -------- -------- Total shareholders' equity . . . . . . . . . . . 327,658 330,277 -------- -------- Total liabilities and shareholders' equity . . . . $915,344 919,002 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data) 2002 2001 -------- -------- Revenues: Property: Rental . . . . . . . . . . . . . . . . . . $ 26,981 26,765 Other. . . . . . . . . . . . . . . . . . . 1,664 1,570 Interest and share of loss from the Service Companies . . . . . . . . (230) (403) Other interest . . . . . . . . . . . . . . . 233 477 Income from partnerships . . . . . . . . . . 2,029 2,295 Other. . . . . . . . . . . . . . . . . . . . 718 624 -------- -------- Total revenues . . . . . . . . . . . 31,395 31,328 -------- -------- Expenses: Personnel. . . . . . . . . . . . . . . . . . 2,841 2,837 Advertising and promotion. . . . . . . . . . 592 532 Utilities. . . . . . . . . . . . . . . . . . 718 888 Building repairs and maintenance and services . . . . . . . . . . . . . . . 926 1,178 Landscaping and grounds maintenance. . . . . 498 500 Real estate taxes. . . . . . . . . . . . . . 3,762 3,540 Insurance. . . . . . . . . . . . . . . . . . 501 307 Property management fees . . . . . . . . . . 859 708 Other operating expenses . . . . . . . . . . 252 326 Interest . . . . . . . . . . . . . . . . . . 5,800 6,427 Amortization of deferred costs . . . . . . . 146 136 Depreciation . . . . . . . . . . . . . . . . 5,362 5,086 General and administrative . . . . . . . . . 1,540 1,518 -------- -------- Total expenses . . . . . . . . . . . 23,797 23,983 -------- -------- Income before minority interest. . . . . . . . 7,598 7,345 Minority interest. . . . . . . . . . . . . . . 938 940 -------- -------- Net income . . . . . . . . . . . . . 6,660 6,405 Less income attributable to preferred shares . . . . . . . . . . . . . . 2,082 1,633 -------- -------- Net income attributable to common shares . . . . . . . . . $ 4,578 4,772 ======== ======== Net income per common share - basic . . . . . $ 0.26 0.27 ======== ======== Net income per common share - diluted. . . . . $ 0.26 0.27 ======== ======== Dividends declared and paid per common share . . . . . . . . . . . . . . $ 0.48 0.47 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 2002 (Dollars in thousands)
SHARES OF BENEFICIAL INTEREST EMPLOYEES' ACCUMULATED ------------------------------ ADDITIONAL AND OTHER DIVIDENDS PREFERRED COMMON PAID-IN TRUSTEES' COMPREHEN- IN EXCESS SHARES SHARES AMOUNT CAPITAL NOTES SIVE LOSS OF EARNINGS TOTAL --------- ---------- ------ --------- ---------- ---------- ----------- ------- Balance at December 31, 2001. . . . . 350,000 17,840,368 $182 355,728 (10,857) (4,294) (10,482) 330,277 Comprehensive income: Net income . . . . . . . . -- -- -- -- -- -- 6,660 6,660 Preferred share dividends paid. . . . . . -- -- -- -- -- -- (1,961) (1,961) Net gain on derivative contracts . . . . . . . . -- -- -- -- -- 735 -- 735 ------- Comprehensive income attributable common shares. . . . . . . . . . . 5,434 ------- Common share distributions. . . . . . . -- -- -- -- -- -- (8,566) (8,566) Shares issued in connection with: Executive Share Purchase Plan . . . . . . -- 10,291 -- 248 -- -- -- 248 Options exercised. . . . . -- 10,000 -- 204 -- -- -- 204 Employees' and Trustees' notes, net of repayments . . . . -- -- -- -- 36 -- -- 36 Preferred shares con- verted to common shares . . (250,000) 250,000 -- -- -- -- -- -- Reallocation of minority interest . . . . . -- -- -- 25 -- -- -- 25 -------- ---------- ---- ------- ------- ------- ------- ------- Balance at March 31, 2002 . . . . . . 100,000 18,110,659 $182 356,205 (10,821) (3,559) (14,349) 327,658 ======== ========== ==== ======= ======= ======= ======= ======= See accompanying notes to consolidated financial statements.
AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (UNAUDITED) (Dollars in thousands) 2002 2001 -------- -------- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . $ 6,660 6,405 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . 5,508 5,222 Cash distributions from partnerships in excess of share of income . . . . . . 2,538 2,067 Loss from the Service Companies. . . . . . 495 583 Minority interest. . . . . . . . . . . . . 938 940 Changes in assets and liabilities: Increase in deferred costs . . . . . . . . (346) (51) Decrease in other assets . . . . . . . . . 322 1,181 Decrease in accrued real estate taxes. . . (5,680) (4,920) Decrease in accrued interest payable . . . (16) (282) Increase in tenant security deposits and prepaid rents. . . . . . . . . . . . 57 507 Increase in other liabilities. . . . . . . 572 61 -------- ------- Net cash provided by operating activities . . . . . . . . 11,048 11,713 -------- ------- Cash flows from investing activities: Investments in partnerships, net of Operating Partnership units issued in 2001. . . . . . . . . . . . . . . . . (5,173) (9,150) Repayments from affiliates . . . . . . . . . 2,692 3,226 (Increase) decrease in earnest money deposits . . . . . . . . . . . . . . . . . (460) 520 Acquisition properties, net of Operating Partnership units issued and net of $14,444 cash in deferred exchange escrow . . . . . . . . . . . . . . . . . . -- (16,975) Capital expenditures - rehab properties and other additions. . . . . . . . . . . . (490) (406) Capital expenditures - other properties. . . (1,005) (999) Properties under development, net of co-investors' share of costs . . . . . . . (4,096) (2,104) Decrease in construction costs payable . . . (915) (151) -------- ------- Net cash used in investing activities . . . . . . . . (9,447) (26,039) -------- ------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 2002 2001 -------- -------- Cash flows from financing activities: Debt proceeds, net of financing costs. . . . 24,000 49,858 Debt repayments. . . . . . . . . . . . . . . (18,183) (23,597) Cash distribution from refinancing of a partnership's debt . . . . . . . . . . . . 905 -- Proceeds from issuance of Executive Share Purchase Plan shares and Option Plan shares, net of Employees' and Trustees' notes. . . . . . . . . . . . . . 488 113 Repurchase of shares of beneficial interest - common shares . . . . . . . . . -- (3,312) Distributions to partners. . . . . . . . . . (1,759) (1,717) Dividends paid . . . . . . . . . . . . . . . (10,527) (10,022) -------- ------- Net cash (used in) provided by financing activities . . . . . . . . (5,076) 11,323 -------- ------- Net change in cash and cash equivalents. . . . (3,475) (3,003) Cash and cash equivalents at beginning of period . . . . . . . . . . . 5,892 5,106 -------- ------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 2,417 2,103 ======== ======= Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest, net of amounts capitalized . . . $ 5,816 6,709 ======== ======== Supplemental disclosure of non-cash investing and financing activities: OP units issued for the acquisition of properties. . . . . . . . . . . . . . . $ -- 2,764 OP units issued for the acquisition of a property in a co-investment partnership . . . . . . . . . . . . . . -- 7,576 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 AND 2001 (Unaudited) (Dollars in thousands, except share data) 1. ORGANIZATION AND BASIS OF PRESENTATION Organization AMLI Residential Properties Trust (the "Company" or "AMLI") commenced operations upon the completion of its initial public offering on February 15, 1994. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the financial position at March 31, 2002 and December 31, 2001 and the results of operations and cash flows for the periods presented, have been made. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2001 Annual Report and in Form 10-K filed with the Securities and Exchange Commission. The results for the three months ended March 31, 2002 are not necessarily indicative of expected results for the entire year. The consolidated financial statements include the accounts of the Company and AMLI Residential Properties, L. P. (the "Operating Partnership" which holds the operating assets of the Company). The Company is the sole general partner and owned an 86% majority interest in the Operating Partnership at March 31, 2002. The limited partners hold Operating Partnership units ("OP Units") which are convertible into shares of the Company on a one-for-one basis, subject to certain limitations. At March 31, 2002, there are 3,664,396 OP Units held by the limited partners. The Company owns 5% of the voting control and 95% of economic benefit of unconsolidated subsidiaries which provide property management, construction, and institutional advisory services for the Company and its co-investment partnerships. These Service Company subsidiaries elected taxable REIT subsidiary status for IRS reporting purposes as of January 1, 2001. This election has not affected the ownership structure of the Service Company subsidiaries and, accordingly, the Company's use of the equity method to account for these subsidiaries continues to be applied consistently with prior years. The Company's management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the report periods to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual amounts realized or paid could differ from these estimates. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Real Estate Assets At March 31, 2002, the Company was continuing the rehab of the second phase of AMLI at Valley Ranch. Starting in 1999 and through March 31, 2002, the Company has spent $2,542 on the rehab of this property and expects to spend an additional $620 in 2002 to complete the rehab. Rental Communities Under Development At March 31, 2002, the Company has eight communities under development including seven in joint ventures with co-investment partners as follows: AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
TOTAL NUMBER NUMBER TOTAL ESTIMATED OF OF EXPENDED COSTS UPON COMMUNITY LOCATION ACRES UNITS THRU 3/31/02 COMPLETION - --------- -------- ------ ------ ------------ ---------- Wholly-Owned: Development Communities: AMLI: at Carmel Center Carmel, IN 15 322 $ 13,254 28,400 --- ----- -------- -------- Co-Investments (Company Ownership Percentage): Development Communities: AMLI: at Mill Creek (25%) Gwinnett County, GA 33 400 25,775 25,800 at Milton Park (25%) Alpharetta, GA 21 461 19,553 35,000 at Kedron Village (20%) Peachtree City, GA 21 216 18,336 20,200 at Barrett Walk (25%) Cobb County, GA 26 310 5,629 22,500 at King's Harbor (25%) Houston, TX 15 300 19,570 19,800 at Cambridge Square (30%) Overland Park, KS 21 408 30,902 32,200 at Seven Bridges (20%) Woodridge, IL 13 520 24,554 82,200 --- ----- -------- -------- Total co-investment development communities 150 2,615 144,319 237,700 --- ----- -------- -------- Total wholly-owned and co-investments 165 2,937 $157,573 266,100 === ===== ======== ========
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Land Held for Development or Sale At March 31, 2002, the Company owns several parcels of land, which are currently being planned for development, being held for future development or being considered for sale.
NUMBER NUMBER TOTAL OF OF EXPENDED COMMUNITY LOCATION ACRES UNITS THRU 3/31/02 - --------- -------- ------ ------ ------------ Wholly-Owned: Land Held for Development or Sale: AMLI: at Champions II (1)(2) Houston, TX 14 288 $ 2,610 at Mesa Ridge (1)(2) Ft. Worth, TX 27 460 4,158 at Prairie Lakes I Noblesville, IN 17 228 1,183 at Prairie Lakes II-IV Noblesville, IN 103 1,100 6,417 at Anderson Mill (1)(2) Austin, TX 39 520 4,154 at Downtown Austin Austin, TX 2 220 11,594 at Parmer Park Austin, TX 28 480 5,470 at Vista Ridge (1)(2) City of Lewisville, TX 15 340 3,172 at Westwood Ridge Overland Park, KS 30 428 3,581 at Lexington Farms II Overland Park, KS 7 104 821 --- ----- -------- Total land held for development 282 4,168 $ 43,160 === ===== ======== (1) The Company has expensed interest carry of $275 on these land parcels for the three months ended March 31, 2002. (2) Amounts are shown net of an allowance for loss totaling $1,389 on these land parcels in Texas. An additional provision of $697 had been made in December 2001 to state the value of two parcels of land in Dallas, Texas at the lower costs or market, and as of January 2002 these parcels were sold to Amrescon for their estimated $5,076 market value and carrying value. The Company financed 100% of the selling price. Amrescon intends to develop and sell this land over the next 2-3 years and use the proceeds from sale to repay the financing provided by the Company.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Acquisition The Company acquired no properties during the three months ended March 31, 2002. The table below summarizes the properties acquired by the Company during 2001:
Number Year of Com- Date Purchase Total Community Location Units pleted Acquired Price Debt Equity - --------- -------- -------- -------- -------- -------- ------ -------- WHOLLY-OWNED: AMLI: at Gateway Park (1) . . . . . . Denver, CO 328 2000 1/29/01 33,050 -- 33,050 at Stonebridge Ranch (1) . . . McKinney, TX 250 2001 6/11/01 17,110 -- 17,110 at the Medical Center (1). . . Houston, TX 334 2000 8/7/01 27,150 -- 27,150 at Shadow Ridge (1) . . . . . . Flower Mound, TX 222 2000 8/31/01 18,000 -- 18,000 ------ -------- ------ ------- Total wholly-owned 1,134 95,310 -- 95,310 ------ -------- ------ ------- CO-INVESTMENTS (Company ownership percentage): AMLI at Osprey Lake (69%) (2). . Gurnee, IL 483 1997/99 2/1/01 52,000 35,320 16,680 ------ -------- ------- ------- Total wholly-owned and co-investments 1,617 $147,310 35,320 111,990 ====== ======== ======= ======= (1) These acquisitions completed deferred third party exchanges for Federal income tax purposes. The Company issued 86,494 and 109,748 OP Units as part of the total payment for the acquisition of AMLI at Gateway Park and AMLI at the Medical Center, respectively. (2) The Company issued 333,610 OP Units for a 43% interest in this property which was contributed to a joint venture with a private real estate investment trust in which AMLI owned a 44% interest.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DISPOSITION The Company selectively sells properties and reinvests the proceeds in new communities to continually improve the quality of its portfolio and increase the potential for growth in net operating income. The gains on sales of residential communities are reported separately in the Consolidated Statements of Operations and neither the properties' selling prices nor related gains are included in revenues in the Consolidated Statements of Operations. Incentive compensation received from co- investment partnerships in the form of a promoted interest that is paid to the Company from sales proceeds is included in other revenues in the Consolidated Statements of Operations. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The Company sold no properties during the three months ended March 31, 2002 and 2001. The table below summarizes the properties sold by the Company during 2001:
Net Operating Income in Twelve Months Costs Immediately Year Before Prior to Number Acquired/ Date Depre- Sale Net Date of Community Location of Units Developed Sold ciation Price Proceeds Gain (3) Sale - --------- -------- -------- --------- -------- -------- -------- -------- -------- ----------- WHOLLY-OWNED: AMLI at: AutumnChase (1) Carrollton, TX 690 87/96/99 6/5/01 29,850 40,550 39,144 9,249 3,608 Alvamar Lawrence, KS 152 1994 7/27/01 8,263 8,900 8,794 2,036 740 Rosemeade (2) Dallas, TX 236 1990 8/24/01 11,653 12,430 11,861 2,408 1,045 ----- ------- ------- ------- ------- ------- Total wholly-owned 1,078 49,766 61,880 59,799 13,693 5,393 ----- ------- ------- ------- ------- ------- CO-INVESTMENTS (Company owner- ship percentage): AMLI at Willowbrook (40%) Willowbrook, IL 488 1996 7/31/01 39,402 58,500 57,611 22,245 4,209 ----- -------- ------- ------- ------- ------- Total wholly-owned and co-investments 1,566 $ 89,168 120,380 117,410 35,938 9,602 ===== ======== ======= ======= ======= ======= (1) The net proceeds from the sale of Phase I of this community were used to acquire AMLI at Stonebridge Ranch in a deferred third-party exchange for Federal income tax purposes. The remaining proceeds were used for the acquisition of AMLI at the Medical Center to complete the deferred third party exchange for Federal income tax purposes. (2) The net proceeds from this sale were used to fund the acquisition of AMLI at Shadow Ridge in completion of a deferred third-party exchange for Federal income tax purposes. (3) Gains on sales of co-investment properties are shown net of disposition fees and promoted interests paid to the Company by the co-investment partnerships.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED STANDARDS IMPLEMENTED AND TRANSITION ADJUSTMENT On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). Adoption of SFAS 144 is required for fiscal years beginning after December 15, 2001, and interim periods within those years. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed of," ("SFAS 121") and related literature and establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale. The Company's adoption of SFAS 144 had no impact on its consolidated financial statements. On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 "Accounting for Goodwill and Other Intangible Assets" ("SFAS 142"), which requires, among other things, that effective January 1, 2002 goodwill resulting from a business combination accounted for as a purchase no longer be amortized, but be subjected to ongoing impairment review. The only goodwill included in the accounts of the Company and its unconsolidated subsidiaries is $3,300 recorded on the books of an unconsolidated subsidiary. This amount was being amortized using the straight-line method over the five year period, and at December 31, 2001, the remaining unamortized goodwill was $668. As a result of implementing SFAS 142, whereby no amortization will be recorded in 2002, the Company's share of income, net of tax effect, from the unconsolidated subsidiary is increased by approximately $100 for the three months ended March 31, 2002. Pro-forma share of income, net of tax, from this unconsolidated subsidiary will be increased by approximately $400 for the year ended December 31, 2002. DERIVATIVES AND HEDGING FINANCIAL INSTRUMENTS In the normal course of business, the Company uses a variety of derivative financial instruments to manage or hedge interest rate risks. The Company requires that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Some derivative instruments are associated with the hedge of an anticipated transaction. In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market each period. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The Company is exposed to the effect of interest rate changes. The Company limits these risks by following established risk management policies and procedures including the use of derivatives. For interest rate exposures, derivatives are used primarily to align rate movements between interest rates associated with the Company's rental income and other financial assets with interest rates on related debt, and manage the cost of borrowing obligations. The Company does not enter into derivative contracts for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives. To manage interest rate risk, the Company may employ options, forwards, interest rate swaps, caps and floors or a combination thereof depending on the underlying exposure. The Company undertakes a variety of borrowings: from lines of credit, to medium- and long-term financings. To reduce overall interest cost, the Company uses interest rate instruments, typically interest rate swaps, to convert a portion of its variable rate debt to fixed rate debt, or even a portion of its fixed-rate debt to variable rate. Interest rate differentials that arise under these swap contracts are recognized in interest expense over the life of the contracts. The resulting cost of funds is usually lower than that which would have been available if debt with matching characteristics was issued directly. The Company also employs forwards or purchase options to hedge qualifying anticipated transactions. Gains and losses are deferred and recognized in net income in the same period that the underlying transaction occurs, expires or is otherwise terminated. To determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost, and termination costs are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may or may not actually be realized. The following table summarizes the notional amounts and approximate fair value of the Company's interest rate swap contracts. The notional amounts at March 31, 2002 provide an indication of the extent of the Company's involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Approximate Cumulative Liability at Notional Fixed Term of Contract Cash March 31, Amount Rate(1) Contract Maturity Paid, Net 2002 (2) - -------- ------- -------- --------- ---------- ------------- $10,000(3) 6.216% 5 years 11/01/02 $ 436 262 10,000(3) 6.029% 5 years 11/01/02 357 250 20,000 6.145% 5 years 02/15/03 826 632 10,000 6.070% 5 years 02/18/03 382 322 15,000 6.405% 5 years 09/20/04 533 788 10,000 6.438% 5 years 10/04/04 335 556 - ------- ------ ----- $75,000 $2,869 2,810 ======= ====== ===== (1) The fixed rate for the swaps includes the swap spread (the risk component added to the Treasury yield to determine a fixed rate) and excludes lender's spread. (2) Represents the approximate amount which the Company would have paid as of March 31, 2002 if these contracts were terminated. This amount was recorded as a liability in the accompanying Consolidated Balance Sheet as of March 31, 2002. (3) These contracts were marked-to-market in 2002 and 2001.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED As a result of a reduced level of borrowings under the Company's unsecured line of credit following a $140,000 fixed rate financing and a sale of a co-investment property, $20,000 of the total $75,000 in interest rate swap contracts held by the Company no longer hedge any exposure to floating rate debt. On March 31, 2002, the derivative instruments were reported at their fair value as Other Liabilities of $2,810 which decreased by $914 from $3,724 as of December 31, 2001. The offsetting adjustments were reported as losses in Accumulated Other Comprehensive Loss of $3,559, which decreased by $735 from $4,294 as of December 31, 2001. The adjustments to the shareholders' equity include $1,369 and $1,413 of the Company's share of Other Comprehensive Loss of a co-investment partnership as of March 31, 2002 and December 31, 2001, respectively. In addition, adjustments to earnings of $19 and $17 due to a small ineffectiveness on the swaps have been recorded as of March 31, 2002 and 2001, respectively. All the Company's hedges that are reported at fair value and are represented on the Consolidated Balance Sheets are characterized as cash flow hedges. These transactions hedge the future cash flows of debt transactions. Interest rate swaps that convert variable payments to fixed payments, interest rate caps, floors, collars, and forwards are cash flow hedges. The unrealized gains/losses in the fair value of these hedges are reported on the Consolidated Balance Sheets with a corresponding adjustment to either Accumulated Other Comprehensive Income or in earnings--depending on the type of hedging relationship. If the hedging transaction is a cash flow hedge, then the offsetting gains and losses are reported in Accumulated Other Comprehensive Income. If the hedging transaction is characterized as a fair value hedge, then the changes in fair value of the hedge and the hedged item are reflected in earnings. If the fair value hedging relationships is fully effective, there is no net effect reflected in income or funds from operations ("FFO"). Over time, the unrealized gains and losses held in Accumulated Other Comprehensive Income will be reclassified to earnings. This reclassification is consistent with when the hedged items are also recognized in earnings. The Company hedges its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 12 months. During the forecasted period, unrealized gains and losses in the hedging instrument will be reported in Accumulated Other Comprehensive Income. Once the hedged transaction takes place, the hedge gains and losses will be reported in earnings during the same period in which the hedged item is recognized in earnings. TRANSACTIONS WITH CO-INVESTMENT PARTNERSHIPS The Company's co-investment partnerships are generally formed by the Company contributing its interest in property and receiving credit or reimbursement based on its cost, in which case no gain or loss is recognized upon partnership formation. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED PER SHARE DATA The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated (in thousands, except per share amounts). 2002 2001 ---------- ---------- Net income. . . . . . . . . . . . . . . . $ 6,660 6,405 Less income attributable to preferred shares. . . . . . . . . . . (2,082) (1,633) ---------- ---------- Net income attributable to common shares - basic . . . . . . . . . $ 4,578 4,772 ========== ========== Net income attributable to common shares - diluted . . . . . . . . $ 6,660 6,405 ========== ========== Weighted average common shares - basic . . . . . . . . . . . . . . . . 17,886,763 17,825,987 Dilutive options and other plan shares. . . . . . . . . . . . . . . . . 299,739 111,775 Convertible preferred shares. . . . . . . 4,156,832 3,475,000 ---------- ---------- Weighted average common shares - Diluted . . . . . . . . . . . . . . . 22,343,334 21,412,762 ========== ========== Net income per common share: Basic . . . . . . . . . . . . . . . . $ 0.26 0.27 Diluted . . . . . . . . . . . . . . . $ 0.26 0.27 ========== ========== RECLASSIFICATIONS Certain amounts in the consolidated 2001 financial statements of the Company have been reclassified to conform with the current presentation. 3. INVESTMENTS IN PARTNERSHIPS AND SERVICE COMPANIES INVESTMENTS IN PARTNERSHIPS At March 31, 2002, the Operating Partnership was a general partner in various co-investment partnerships. The Operating Partnership and the Service Companies receive various fees for services provided to these co- investment partnerships, including development fees, construction fees, acquisition fees, property management fees, asset management fees, financing fees, administrative fees and disposition fees. The Operating Partnership is entitled to shares of cash flow or liquidation proceeds in excess of its stated ownership percentages based, in part, on cumulative returns to its partners in excess of specified rates. The Operating Partnership received cash flow and recorded operating income in excess of its ownership percentages of $622 for the three months ended March 31, 2002. Investments in partnerships at March 31, 2002 and the Company's 2002 share of income or loss for the three months then ended from each are summarized as follows: AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Equity Total Company's Company's Company's ------------------ Company's Net Share of Share of Percentage Total Company's Investment Income Net Income Deprecia- Community Ownership Assets Total Share (1) (1) (Loss) (Loss) tion - --------- ---------- ---------- ------ --------- ---------- ------ ---------- --------- AMLI: at Greenwood Forest (2) 15% $ 15,284 3,852 578 561 25 4 16 at Champions Park 15% 11,150 11,005 1,651 1,651 200 30 13 at Champions Centre 15% 8,370 8,229 1,234 1,234 160 24 10 at Windbrooke (3) 15% 16,101 (5,403) (810) -- 60 18 17 at Willeo Creek 30% 13,310 4,007 1,202 1,202 71 21 30 at Barrett Lakes 35% 23,392 7,096 2,484 2,585 220 88 76 at Chevy Chase 33% 40,960 12,240 4,024 4,024 382 102 100 at River Park 40% 12,901 4,108 1,630 1,591 149 79 41 at Fox Valley 25% 22,273 21,495 5,374 5,550 290 73 46 at Fossil Creek 25% 19,046 18,751 4,688 4,774 301 75 48 at Danada Farms 10% 43,717 18,244 1,824 1,816 441 44 34 at Verandah 35% 20,862 4,190 1,560 1,615 11 17 91 at Northwinds 35% 49,580 15,314 5,360 5,207 393 182 154 at Regents Crest 25% 30,990 15,371 3,843 3,937 117 72 61 at Oakhurst North 25% 40,211 38,897 9,724 9,663 288 72 121 at Wells Branch 25% 31,037 30,527 7,632 7,048 447 112 72 on the Parkway 25% 14,129 3,701 922 636 9 2 37 on Timberglen (1) 40% 9,727 3,164 1,296 -- 13 38 51 at Castle Creek 40% 19,599 19,046 7,618 7,772 288 131 66 at Lake Clearwater 25% 15,685 15,216 3,804 3,855 144 36 34 Creekside 25% 15,321 15,080 3,770 3,891 207 65 32 at Deerfield 25% 16,253 3,708 924 775 (25) (6) 38 at Wynnewood Farms 25% 17,812 17,527 4,382 4,421 243 61 37 at Monterey Oaks 25% 28,544 28,240 7,060 7,143 461 115 59 at St. Charles 25% 41,662 40,652 10,163 10,196 445 111 82 at Park Bridge 25% 23,999 23,791 5,948 6,002 395 99 45 at Mill Creek 25% 25,540 25,253 6,313 6,573 344 86 48 at Lost Mountain 75% 11,179 590 443 554 (52) 21 56 on Spring Mill 20% (Residual) 28,327 27,462 -- 1,229 265 -- -- at Prestonwood Hills 45% 17,173 5,586 2,530 2,525 43 31 57 at Windward Park 45% 26,590 8,580 3,902 3,894 (128) (46) 87 AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Equity Total Company's Company's Company's ------------------ Company's Net Share of Share of Percentage Total Company's Investment Income Net Income Deprecia- Community Ownership Assets Total Share (1) (1) (Loss) (Loss) tion - --------- ---------- ---------- ------ --------- ---------- ------ ---------- --------- at Summit Ridge 25% 28,027 7,813 1,953 1,686 59 15 58 at Oak Bend 40% 24,310 5,374 2,150 2,150 16 31 71 Midtown 45% 32,594 10,605 4,809 4,791 145 90 103 on Frankford 45% 38,564 12,685 5,753 5,737 143 95 125 at Peachtree City I 20% 28,449 28,243 5,649 3,625 311 62 37 at Kedron Village 20% 18,447 751 150 127 (160) (32) 18 at Scofield Ridge 45% 36,952 12,183 5,525 5,506 (35) 9 115 at Breckinridge Point 45% 33,192 10,938 4,959 4,942 9 25 103 at Cambridge Square 30% 31,046 26,776 8,033 8,563 (28) (18) 23 Towne Square 45% 32,447 10,779 4,887 4,833 26 32 100 at Lowry Estates 50% 50,909 16,856 8,428 8,278 (18) 18 170 at King's Harbor 25% 19,385 18,955 4,739 5,023 (54) (13) 43 at Milton Park 25% 19,621 17,701 4,425 4,317 (33) (8) -- at Osprey Lake 69% 52,464 15,918 10,940 10,752 (133) (74) 243 at Seven Bridges 20% 25,826 16,364 3,220 4,021 -- -- -- at Barrett Walk 25% 5,732 4,836 1,209 1,253 -- -- -- ---------- ------- ------- ------- ------- ------ ------ 1,188,689 662,296 187,902 187,528 6,455 1,989 2,868 Other -- -- -- (201) -- 40 -- ---------- ------- ------- ------- ------- ------ ------ Total $1,188,689 662,296 187,902 187,327 6,455 2,029 2,868 ========== ======= ======= ======= ======= ====== ====== (1) The Company's investments in partnerships differ from the Company's share of co-investment partnerships' equity primarily due to capitalized interest on its investments in properties under development, purchase price basis differences and the elimination of the Company's share of acquisition, financing and development fee income. These items are amortized over forty years using the straight-line method. The purchase price basis difference of AMLI on Timberglen resulted in a negative investment balance which is included in other liabilities in the accompanying Consolidated Balance Sheet as of March 31, 2002. (2) In April 2002, the Company made a preferred $11,200 capital contribution to AMLI at Greenwood Forest Limited Partnership to enable it to repay the existing 8.95% first mortgage loan. The Company will receive a 6.75% preferential allocation of cash flow on its preferred capital until this partnership's property is sold or refinanced. (3) On February 4, 2002, the balance of the AMLI at Windbrooke loan was refinanced with a new loan from GMAC Commercial Mortgage Corporation. The net proceeds were distributed to the partners, including $1,545 to the Company. With this distribution, the partners have received a return of all their original capital plus a targeted yield, which resulted in a negative investment balance that is included in other liabilities in the accompanying Consolidated Balance Sheet as of March 31, 2002.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED All but two debt financings have been obtained at fixed rates from various insurance companies on behalf of these co-investment partnerships. All of these first mortgages are non-recourse debt and secured by mortgages on the respective communities. The following summarizes co-investment debt at March 31, 2002: Outstand- Total ing at Company's Interest Community Commitment 3/31/02 Share Rate Maturity - --------- ---------- --------- --------- -------- --------- AMLI: at Greenwood Forest $ 11,625 11,156 1,673 8.95% May 2002 at Kedron Village 19,170 16,160 3,232 L+1.875% June 2002 at Chevy Chase 29,767 27,073 8,934 6.67% Apr. 2003 at Willeo Creek 10,000 9,125 2,737 6.77% May 2003 at Regents Crest 16,500 15,081 3,770 7.50% Dec. 2003 at Verandah 16,940 16,193 5,667 7.55% Apr. 2004 on Timberglen 6,770 6,382 2,553 7.70% June 2004 at Seven Bridges 50,000 5,420 1,084 L+1.80% Jan. 2005 at Prestonwood Hills 11,649 11,343 5,137 7.17% Aug. 2006 at Windward Park 18,183 17,714 8,030 7.27% Aug. 2006 at Oak Bend 18,834 18,448 7,379 7.81% Dec. 2006 Midtown 21,945 21,480 9,740 7.52% Dec. 2006 at Deerfield 12,600 12,335 3,084 7.56% Dec. 2006 at Danada Farms 24,500 23,745 2,375 7.33% Mar. 2007 on Frankford 25,710 25,356 11,500 8.25% June 2007 at Breckinridge Point 22,110 21,794 9,882 7.57% July 2007 at Scofield Ridge 24,618 24,275 11,009 7.70% Aug. 2007 Towne Square 21,450 21,179 9,603 7.60% Jan. 2008 at Lowry Estates 33,900 33,533 16,766 7.12% Jan. 2008 at Summit Ridge 20,000 19,807 4,952 7.27% Feb. 2008 at River Park 9,100 8,599 3,440 7.75% June 2008 on the Parkway 10,800 10,210 2,553 6.75% Jan. 2009 at Barrett Lakes 16,680 15,952 5,583 8.50% Dec. 2009 at Northwinds 33,800 33,403 11,691 8.25% Oct. 2010 at Osprey Lake 35,320 34,963 24,037 7.02% Mar. 2011 at Windbrooke 20,800 20,773 3,116 6.43% Mar. 2012 at Lost Mountain 10,252 10,197 7,647 6.84% Nov. 2040 -------- -------- ------- $553,023 491,696 187,174 ======== ======== ======= In general, these loans provide for monthly payments of principal and interest based on a 25 or 27 year amortization schedule and a balloon payment at maturity. Some loans provide for payments of interest only for an initial period, with principal amortization commencing generally within two years. INVESTMENTS IN SERVICE COMPANIES Combined financial information of the various Service Companies at and for the three months ended March 31, 2002 and 2001 is summarized as follows: AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Three Months Ended March 31, ---------------------- 2002 2001 -------- -------- Construction contract revenue . . . . . . $ 20,122 11,683 Construction contract costs . . . . . . . (19,489) (11,168) -------- -------- Construction gross profit . . . . . . . . 633 515 Property management fees. . . . . . . . . 2,691 2,502 Corporate homes' gross profit . . . . . . 346 305 Loss on a land sale . . . . . . . . . . . (73) -- Other income. . . . . . . . . . . . . . . 122 190 -------- -------- Total income. . . . . . . . . . . . . . . 3,719 3,512 -------- -------- General and administrative: Construction. . . . . . . . . . . . . . 550 506 Property management . . . . . . . . . . 2,508 2,414 Corporate homes . . . . . . . . . . . . 242 227 -------- -------- Total general and administrative. . . . . 3,300 3,147 -------- -------- EBITDA. . . . . . . . . . . . . . . . . . 419 365 Interest. . . . . . . . . . . . . . . . . (409) (698) Depreciation (1). . . . . . . . . . . . . (716) (575) Income taxes. . . . . . . . . . . . . . . 268 345 -------- -------- Net loss. . . . . . . . . . . . . . . . . $ (438) (563) ======== ======== March 31, December 31, 2002 2001 --------- ------------ Receivables from affiliates . . . . . . . $ 7,771 9,136 Land held for sale. . . . . . . . . . . . 8,005 4,951 Building and equipment, net of accumulated depreciation. . . . . . . . 2,398 2,463 Information technology costs, net of accumulated depreciation . . . . 8,900 8,384 Investments and other assets. . . . . . . 10,625 9,911 -------- -------- Total assets. . . . . . . . . . . . . . . $ 37,699 34,845 ======== ======== Due to the Company. . . . . . . . . . . . $ 21,692 17,311 Bank debt . . . . . . . . . . . . . . . . 14,000 14,000 Other . . . . . . . . . . . . . . . . . . 4,348 5,733 -------- -------- Total liabilities . . . . . . . . . . . . $ 40,040 37,044 ======== ======== Total deficit . . . . . . . . . . . . . . $ (2,341) (2,199) ======== ======== (1) Includes $104 in amortization of goodwill in 2001. No amortization of goodwill was recorded in 2002 in accordance with SFAS 142. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED For 2001, substantially all interest expense of the Service Companies resulted from direct borrowings from banks under the Company's line of credit, with interest at LIBOR + 1.05%. Amounts borrowed from the banks by the Service Companies are guaranteed by the Company for which it received a guaranty fee from the Service Companies totaling $35 and $68 for the three months ended March 31, 2002 and 2001, respectively. In 2002, the Company sold two land parcels to a Service Company for $5,076, which increased advances to the Service Companies that bear interest at a rate of prime plus 1%. Interest and share of income (loss) from the Service Companies as included in the accompanying Consolidated Statements of Operations are reconciled below: March 31, ----------------- 2002 2001 ------ ------ Intercompany interest expensed . . . . . . . $ 265 159 Intercompany interest capitalized. . . . . . -- 21 Net income (loss). . . . . . . . . . . . . . (438) (563) Intercompany eliminations and other owners' share. . . . . . . . . . . . (57) (20) ------ ------ Interest and share of income from the Service Companies. . . . . . . . . . . . . $ (230) (403) ====== ====== The Service Companies recorded an after-tax charge against earnings of $72 and $14 for the three months ended March 31, 2002 and 2001, respectively, pursuant to APB Opinion No. 25 "Accounting for Certain Transactions Involving Stock Compensation." 4. RELATED PARTY TRANSACTIONS During the three months ended March 31, 2002 and 2001, the Company accrued or paid to its affiliates fees and other costs and expenses as follows: 2002 2001 ------ ------ Management fees $ 859 708 General contractor fees 202 13 Interest expense -- 140 Landscaping and grounds maintenance -- 439 ====== ====== In addition, at March 31, 2002 and December 31, 2001, the Company owed Amli Residential Construction, Inc. $3,164 and $4,079, respectively, for construction costs of communities under development or rehab. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED During the three months ended March 31, 2002 and 2001, the Company earned or received from its affiliates fees and other income as follows: 2002 2001 ------ ----- Development fees $ 458 251 Acquisition, disposition and financing fees -- 231 Asset management fees 129 143 Interest on notes and advances to Service Companies 265 142 Interest on advances to other affiliates -- 180 ====== ===== In addition, during the three months ended March 31, 2002 and 2001, total revenues of $918 and $820, respectively, were generated from leases to AMLI Corporate Homes ("ACH"), a division of one of the Service Companies. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 5. DEBT The table below summarizes certain information relating to the indebtedness of the Company.
Balance Balance Original at Interest Maturity at Encumbered Communities Amount 3/31/02 Rate Date 12/31/01 - ---------------------- -------- ------- ----------- -------- -------- BOND FINANCING: Tax-Exempt Unsecured (1) $ 40,750 40,750 Rate+1.25% 10/1/24 40,750 Tax-Exempt AMLI at Poplar Creek (1) 9,500 9,500 Rate+1.26% 2/1/24 9,500 -------- ------- ------- Total Bonds 50,250 50,250 50,250 -------- ------- ------- MORTGAGE NOTES PAYABLE TO FINANCIAL INSTITUTIONS: AMLI at Conner Farms 13,275 11,888 7.00% 6/15/03 11,960 AMLI at Riverbend 31,000 27,938 7.30% 7/1/03 28,102 AMLI in Great Hills 11,000 9,919 7.34% 7/1/03 9,977 AMLI at Valley Ranch 11,500 9,615 7.63% 7/10/03 9,688 AMLI at Nantucket 7,735 7,291 7.70% 6/1/04 7,325 AMLI at Bishop's Gate 15,380 14,155 7.25% (2) 8/1/05 14,230 AMLI at Regents Center 20,100 18,979 8.90% (3) 9/1/05 19,037 AMLI on the Green/AMLI of North Dallas (4) 43,234 39,416 7.79% 5/1/06 39,621 AMLI at Clairmont 12,880 12,530 6.95% 1/15/08 12,573 AMLI - various (5) (6) 140,000 138,980 6.56% 8/17/11 139,369 AMLI at Park Creek 10,322 10,165 7.88% 12/1/38 10,177 -------- ------- ------- Total Mortgage Notes Payable 316,426 300,876 302,059 -------- ------- ------- OTHER NOTES PAYABLE: Unsecured line of credit (6)(7) 200,000 54,000 L+1.05% 11/15/03 47,000 -------- ------- --------- -------- ------- Total (8) $566,676 405,126 399,309 ======== ======= ======= AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (1) The terms of these tax-exempt bonds require that a portion of the apartment units be leased to individuals who qualify based on income levels specified by the U.S. Government. The bonds bear interest at a variable rate that is adjusted weekly based upon the remarketing rate for these bonds (1.70% for AMLI at Spring Creek and 1.73% for AMLI at Poplar Creek at April 25, 2002). The credit enhancement for the AMLI at Spring Creek bonds was provided by a $41,297 letter of credit from Wachovia Bank which expires on October 15, 2002 and the credit enhancement for the AMLI at Poplar Creek bonds was provided by a $9,617 letter of credit from LaSalle National Bank that expires December 18, 2002. (2) This original $14,000 mortgage note bears interest at 9.1%. For financial reporting purposes, this mortgage note was valued at $15,380 to reflect a 7.25% market rate of interest when assumed in connection with the acquisition of AMLI at Bishop's Gate on October 17, 1997. The unamortized premium at March 31, 2002 was $645. (3) $13,800 at 8.73% and $6,300 at 9.23%. (4) These two properties secure the FNMA loan that was sold at a discount of $673. At March 31, 2002, the unamortized discount was $275. (5) This loan is secured by seven previously unencumbered properties (AMLI at Bent Tree, AMLI at Lantana Ridge, AMLI at StoneHollow, AMLI at Western Ridge, AMLI at Killian Creek, AMLI at Eagle Creek and AMLI at Gateway Park). (6) The Company has used interest rate swaps on $55,000 of the outstanding amount to fix its base interest rate (before current lender's spread) at an average of 6.22%. The Company paid the outstanding balance down in June 2001 by $140,000 from the proceeds of a ten-year mortgage loan secured by seven of its wholly-owned properties. Additionally, AMLI concurrently reduced the commitment amount under its current line of credit by $50,000 to $200,000. (7) The Company's unsecured line of credit has been provided by a group of eight banks led by Wachovia Bank, N.A. and Bank One, N.A. In November 2000, the maturity date was extended to November 2003 with a one-year renewal option. In addition, AMC and Amrescon were added as borrowers under this line of credit, and such borrowings by the Service Companies ($14,000 at March 31, 2002) are guaranteed by the Company and count against the Company's total availability under this line of credit. This unsecured line of credit requires that the Company meet various covenants typical of such an arrangement, including minimum net worth, minimum debt service coverage and maximum debt to equity percentage. The unsecured line of credit is used for acquisition and development activities and working capital needs. (8) All but $20,479 is non-recourse to the partners of the Operating Partnership.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED As of March 31, 2002, the scheduled maturities of the Company's debt are as follows: Fixed Rate Mortgage Notes Payable Unsecured Bond to Financial Lines Financings Institutions of Credit Total ---------- ------------- --------- ------- 2002 . . . . . . $ -- 3,679 -- 3,679 2003 . . . . . . -- 61,814 54,000 115,814 2004 . . . . . . -- 10,745 -- 10,745 2005 . . . . . . -- 34,812 -- 34,812 2006 . . . . . . -- 38,123 -- 38,123 Thereafter . . . 50,250 151,703 -- 201,953 ------- ------- ------- ------- $50,250 300,876 54,000 405,126 ======= ======= ======= ======= 6. INCOME TAXES The Company qualifies as a REIT under Section 856 through 860 of the Internal Revenue Code of 1986, as amended. A REIT will generally not be subject to Federal income taxation on that portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 90% of its taxable income to its shareholders and complies with certain other requirements. In 2000, the Company distributed approximately 90% of its taxable income and has designated a portion of its dividends paid during 2001 as a throw back dividend to 2000. The Company's current dividend payment level equals an annual rate of $1.92 per common share, increased on October 29, 2001 from an annual rate of $1.88 per common share. The Company anticipates that all dividends paid in 2002 will be fully taxable (primarily as ordinary income), and absent property sales, it will distribute at least 100% of the taxable income. 7. COMMITMENTS AND CONTINGENCIES The limited partnership Agreements of AMLI at Verandah L.P. and AMLI on Timberglen provide for the redemption (at an amount determined by formula) by the partnerships of the limited partner's entire interest, in their sole discretion, at any time after March 25, 2002 and December 16, 2003, or at any time that there is a designated event of default on related indebtedness of the partnerships, which event of default remains uncured and unwaived to the time of notice of redemption election. The redemption amount may be paid in cash or Company shares of beneficial interest, or any combination thereof, in the sole discretion of the Company. At March 31, 2002, the Company is contingently liable on $9,828 in bank letters of credit issued to secure commitments made in ordinary course of business by the Company and its co-investment partnerships. 8. SUBSEQUENT EVENTS On April 8, 2002, $11,156 balance of the AMLI at Greenwood Forest loan was repaid. The payment was funded from an additional capital contribution made by AMLI. In exchange, the Company will receive a 6.75% preferential allocation of cash flow on its additional capital until the sale or refinancing of the partnership's property. The Company anticipates receiving the return of this additional capital contribution later in 2002. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED On April 15, 2002, a partnership in which AMLI owns a 25% ownership interest closed on a 6.40%, $18,000 first mortgage permanent loan with The Northwestern Mutual Life Insurance Company. The loan is secured by AMLI at Mill Creek, will mature in seven years and is amortized based on a thirty- year amortization schedule. AMLI received a partnership distribution of $4,500 from the proceeds of this loan. On April 18, 2002, the Company completed the sales of two Houston, Texas communities, in which AMLI had a 15% ownership interest. AMLI at Champions Park, which contains 246 apartment homes, was built in 1991 and acquired by AMLI in 1994 for $9,900. AMLI at Champions Centre, which contains 192 apartment homes, was built in 1994 and purchased by AMLI in 1994 for $12,958. The partnership's gains on these sales totaled approximately $3,243, of which the Company's share was approximately $486. AMLI received approximately $3,463 in cash as its 15% share of the net sales proceeds. In addition, AMLI received a disposition fee of $239. On April 24, 2002, the Company, through a joint venture with the AFL- CIO Building Investment Trust, acquired AMLI at Park Meadows, a 518- apartment home community located in Littleton, Colorado. AMLI and AFL-CIO contributed approximately 25% and 75%, respectively, of the equity capital. Approximately 50% of the $56,500 acquisition costs will be financed by a permanent loan provided by GMAC Commercial Mortgage Corporation. The interest rate on the loan is 6.25%, and provides for interest only payments for a loan term of seven years. The loan is anticipated to close in June 2002 and the proceeds will be distributed to the partners in accordance with their ownership percentage. On May 1, 2002, the Company acquired AMLI Upper West Side, a 194- apartment home community located in Fort Worth, Texas. This wholly- owned community was acquired without debt for $13,600. On May 7, 2002, the Company refinanced two loans from Nationwide Life Insurance secured by two of its wholly-owned properties, AMLI at Conner Farms and AMLI at Valley Ranch, with new loans from the same lender. The 7.00%, $11,863 balance of the AMLI at Corner Farms loan was refinanced with a 6.68%, $14,900 loan. The balance of the 7.70%, AMLI at Valley Ranch loan of $9,590 was refinanced with a 6.68%, $18,800 loan. For the first three years of the five-year term, these loans will be interest only and thereafter they will be amortized for five years based on 30-year amortization schedules. 9. SEGMENT REPORTING The revenues, net operating income, FFO and assets for the Company's reportable segment are summarized as follows: Three Months Ended March 31, ------------------------ 2002 2001 ---------- ---------- Multifamily segment revenues . . . . . . . . . . $ 69,175 68,807 ========== ========== AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Three Months Ended March 31, ------------------------ 2002 2001 ---------- ---------- Multifamily segment net operating income . . . . $ 42,161 42,455 Reconciling items to FFO: Reduce co-investment net operating income to Company's share (1). . . . . . . . (19,568) (19,945) Interest income and share of income (loss) from Service Companies . . . . (230) (299) Other interest income. . . . . . . . . . . . . 233 477 Other revenues . . . . . . . . . . . . . . . . 718 624 General and administrative expenses. . . . . . (1,540) (1,518) Interest expense and loan cost amortization. . (5,946) (6,563) ---------- ---------- Consolidated FFO before minority interest. . . . 15,828 15,231 Reconciling items to net income: Depreciation - wholly owned properties . . . . (5,362) (5,086) Depreciation - share of co-investment properties . . . . . . . . . . . . . . . . . (2,868) (2,696) Share of Service Company's goodwill amortization . . . . . . . . . . . . . . . . -- (104) ---------- ---------- Income before minority interest and extraordinary items. . . . . . . . . . . . . . 7,598 7,345 Minority interest. . . . . . . . . . . . . . . . 938 940 ---------- ---------- Net income . . . . . . . . . . . . . . . . . . . $ 6,660 6,405 ========== ========== March 31, December 31, 2002 2001 ---------- ------------ Segment assets (2) . . . . . . . . . . . . . . . $1,953,877 1,935,423 ========== ========== (1) Represents amount required to reduce co-investment properties' net operating income to the Company's share of net operating income from partnerships. (2) Represents original acquisition costs of wholly owned and co investment properties. The Company derives no consolidated revenues from foreign countries nor has any major customers that individually account for 10% or more of the Company's consolidated revenues. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) The following discussion is based primarily on the consolidated financial statements of Amli Residential Properties Trust (the "Company" or "AMLI") as of March 31, 2002 and December 31, 2001 and for the three months ended March 31, 2002 and 2001. This information should be read in conjunction with the accompanying unaudited consolidated financial statements and notes thereto. These financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. As of March 31, 2002, the Company owned an 86% general partnership interest in AMLI Residential Properties, L.P. (the "Operating Partnership"), which holds the operating assets of the Company. The limited partners hold Operating Partnership units ("OP Units") that are convertible into common shares of the Company on a one-for-one basis, subject to certain limitations. At March 31, 2002, the Company owned 22,135,659 OP Units including 4,025,000 Preferred OP Units and the limited partners owned 3,664,396 OP Units. The Company has qualified, and anticipates continuing to qualify, as a real estate investment trust ("REIT") for Federal income tax purposes. ACCOUNTING FOR INVESTMENTS IN AND TRANSACTIONS WITH UNCONSOLIDATED PARTNERSHIPS The Company has differentiated itself from other publicly-owned multifamily residential REIT's in the manner and to the extent it conducts its business through co-investment with institutional investors. The condensed combined financial information for the Company and its co- investment partnerships at March 31, 2002, as shown below, is presented as supplementary information intended to provide a better understanding of the Company's financial position. The information presented in the following table includes the unconsolidated co-investment partnerships at 100%. Effect of Company and Consolidated Combining Co-Investment Company Co-Investment Partnerships ("GAAP") Partnerships (Combined) ------------ ------------- ------------- Rental apartments. . . . . . . $ 745,906 1,119,059 1,864,965 Accumulated depreciation . . . (112,501) (106,135) (218,636) ---------- ---------- ---------- 633,405 1,012,924 1,646,329 Land and rental communities under development. . . . . . 56,414 144,319 200,733 Investments in co-investment partnerships . . . . . . . . 187,327 (187,327) -- Other, net . . . . . . . . . . 16,264 (3,250) 13,014 ---------- ---------- ---------- 893,410 966,666 1,860,076 Effect of Company and Consolidated Combining Co-Investment Company Co-Investment Partnerships ("GAAP") Partnerships (Combined) ------------ ------------- ------------- Debt - Company's share . . . . (405,126) (187,174) (592,300) Debt - partners' share . . . . -- (304,522) (304,522) ---------- ---------- ---------- Total net assets . . . . . . . 488,284 474,970 963,254 Partners' share of net assets . . . . . . . . . . . -- (474,970) (474,970) ---------- ---------- ---------- Company's share of net assets . . . . . . . . . $ 488,284 -- 488,284 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value . . . . . . . . . 38.4% ========== The information presented in the following table includes AMLI's proportionate share of unconsolidated co-investment partnerships. Company and Share of Consolidated Share of Co-Investment Company Co-Investment Partnerships ("GAAP") Partnerships (Combined) ------------ ------------- ------------- Rental apartments. . . . . . . $ 745,906 370,334 1,116,240 Accumulated depreciation . . . (112,501) (30,781) (143,282) ---------- ---------- ---------- 633,405 339,553 972,958 Land and rental communities under development. . . . . . 56,414 35,480 91,894 Investments in co-investment partnerships . . . . . . . . 187,327 (187,327) -- Other, net . . . . . . . . . . 16,264 (532) 15,732 ---------- ---------- ---------- 893,410 187,174 1,080,584 Debt - Company's share . . . . (405,126) (187,174) (592,300) ---------- ---------- ---------- Company's share of net assets . . . . . . . . . $ 488,284 -- 488,284 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value . . . . . . . . . 38.4% 48.3% ========== ========== Details of the differences between the Company's aggregate investment in partnerships and its aggregate share of equity as recorded on the books of these partnerships, net of accumulated amortization, are as follows at March 31, 2002: Total equity per partnerships. . . . . . $191,074 Capitalized interest . . . . . . . . . 4,291 Eliminated fees. . . . . . . . . . . . (5,572) Other. . . . . . . . . . . . . . . . . (2,466) -------- Total investments in partnerships. . . . $187,327 ======== RESULTS OF OPERATIONS For the three months ended March 31, 2002, property revenues and property operating expenses moderately increased from the same period a year ago. The increases from acquisitions of new communities were offset by sales of older communities during 2001. Since January 1, 2001, the Company has sold three stabilized communities containing a total of 1,078 apartment homes. During the same period, the Company has acquired a total of 1,134 units in four stabilized communities. All of these acquisitions completed deferred third-party exchanges for Federal income tax purposes. Property operations from wholly-owned assets for the three months ended March 31, 2002 and 2001 are summarized as follows: Increase 2002 2001 (Decrease) ------- ------- --------- Total Wholly-Owned Property Revenues - ------------------ Same communities. . . . . . . . $25,592 25,474 118 Acquisition communities . . . . 3,053 618 2,435 Communities contributed to ventures/sold . . . . . . . -- 2,243 (2,243) ------- ------- ------- Total. . . . . . . . . . . . $28,645 28,335 310 ======= ======= ======= Total Wholly-Owned Property Operating Expenses - --------------------------- Same communities. . . . . . . . $ 9,685 9,739 (54) Acquisition communities . . . . 1,264 174 1,090 Communities contributed to ventures/sold . . . . . . . -- 903 (903) ------- ------- ------- Total. . . . . . . . . . . . $10,949 10,816 133 ======= ======= ======= Total Wholly-Owned Property Net Operating Income - ----------------------------- Same communities. . . . . . . . $15,907 15,735 172 Acquisition communities . . . . 1,789 444 1,345 Communities contributed to ventures/sold . . . . . . . -- 1,340 (1,340) ------- ------- ------- Total. . . . . . . . . . . . $17,696 17,519 177 ======= ======= ======= Property Net Operating Income is computed before interest, taxes, depreciation and amortization. This performance measure is not intended as a replacement for net income determined in accordance with generally accepted accounting principles ("GAAP"). The Company, through joint ventures with institutional investors, has completed or has under development and begun rental operations of seven communities. Since January 1, 2001, three communities with a total of 1,060 apartment homes were stabilized and four communities, containing a total of 1,324 apartment homes, were in lease-up as of March 31, 2002 and are anticipated to reach stabilization in 2002 and 2003. In addition, in 2001 the Company invested in one co-investment partnership which acquired a 483-unit stabilized community and sold one 488-unit community. This sale and weak market conditions have contributed to a decrease in share of income from partnerships. Increase 2002 2001 (Decrease) ------- ------- --------- Total Co-investment Property Revenues - ------------------------------------- Same communities. . . . . . . . . $33,948 34,854 (906) New communities . . . . . . . . . 2,623 2,166 457 Development and/or lease-up communities. . . . . . . . . . . 1,633 162 1,471 Acquisition communities . . . . . 1,453 940 513 Communities contributed to ventures/sold . . . . . . . . 874 2,350 (1,476) ------- ------- ------- Total. . . . . . . . . . . . . $40,531 40,472 59 ======= ======= ======= Company's share of co-invest- ment total revenues. . . . . . . $13,087 13,159 (72) ======= ======= ======= Total Co-investment Property Operating Expenses - --------------------------- Same communities. . . . . . . . . $13,111 13,020 91 New communities . . . . . . . . . 915 927 (12) Development and/or lease-up communities. . . . . . . . . . . 942 250 692 Acquisition communities . . . . . 550 308 242 Communities contributed to ventures/sold . . . . . . . . 388 898 (510) ------- ------- ------- Total. . . . . . . . . . . . . $15,906 15,403 503 ======= ======= ======= Company's share of co-invest- ment property operating expenses . . . . . . . . . . . . $ 5,114 4,935 179 ======= ======= ======= Total Co-investment Property Net Operating Income - ---------------------------- Same communities. . . . . . . . . $20,837 21,834 (997) New communities . . . . . . . . . 1,708 1,239 469 Development and/or lease-up communities. . . . . . . . . . . 691 (88) 779 Acquisition communities . . . . . 903 632 271 Communities contributed to ventures/sold. . . . . . . . . . 486 1,452 (966) ------- ------- ------- Total. . . . . . . . . . . . . $24,625 25,069 (444) ======= ======= ======= Company's share of co-invest- ment property NOI . . . . . . . . $ 7,973 8,224 (251) ======= ======= ======= The term "New Communities" refers to completed properties that were stabilized after the beginning of the earliest period for which comparative financial information is presented. For the three months ended March 31, 2002, total revenues were $31,395 and net income was $6,660. Total revenues for the year earlier period were $31,328 and net income was $6,405. Basic and diluted earnings per common share were $0.26 compared to $0.27 for the comparable period of 2001. On a "same community" basis, weighted average occupancy of the apartment homes owned wholly by the Company increased to 91.8% for the three months ended March 31, 2002 from 89.5% in the prior year. Weighted average collected rental rates decreased by 0.5% to $773 from $776 per unit per month for the three months ended March 31, 2002 and 2001, respectively. Including Co-Investment Communities, weighted average occupancy of the Company's apartment homes decreased to 90.7% for the three months ended March 31, 2002 from 91.6% in the prior year, and weighted average collected rental rates decreased by 0.8% to $854 from $861 per unit per month for the three months ended March 31, 2002 and 2001, respectively. OPERATING EARNINGS Operating earnings is a supplemental earnings measurement which is an alternative to funds from operations ("FFO"). It resembles GAAP net income, although it excludes gains or losses on sales of investment properties. The following shows the relationship among FFO, operating earnings and net income. As of March 31, ------------------- 2002 2001 ------- ------ FFO. . . . . . . . . . . . . . $15,828 15,231 Depreciation expense (1) . . . 8,230 7,886 ------- ------ Operating earnings . . . . . . 7,598 7,345 Gains on sales . . . . . . . . -- -- ------- ------ Net income (2) . . . . . . . . $ 7,598 7,345 ======= ====== (1) Including shares from co-investments. (2) Before allocation to minority interest. COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED MARCH 31, 2001. Income before minority interest increased to $7,598 for the three months ended March 31, 2002 from $7,345 for the three months ended March 31, 2001 as follows: Increase 2002 2001 (Decrease) ------- ------- --------- Property revenues. . . . . . . . . $28,645 28,335 310 Other income . . . . . . . . . . . 2,750 2,993 (243) ------- ------- ------- Total revenues . . . . . . . . 31,395 31,328 67 ------- ------- ------- Property operating expenses. . . . 10,949 10,816 133 Interest expense . . . . . . . . . 5,800 6,427 (627) Amortization and depreciation. . . 5,508 5,222 286 General and administrative . . . . 1,540 1,518 22 ------- ------- ------- Total expenses . . . . . . . . 23,797 23,983 (186) ------- ------- ------- Income before minority interest. . 7,598 7,345 253 Minority interest. . . . . . . . . 938 940 (2) ------- ------- ------- Net Income . . . . . . . . . . . . $ 6,660 6,405 255 ======= ======= ======= Total property revenues increased by $310, or 1.1% which was primarily from the acquisition of 1,134 apartment homes during 2001. The increase was offset by 1,078 apartment homes sold during the period from June to August of 2001. Other property revenues include increases in various fees charged to residents. On a same community basis total property revenues increased by $118 or 0.5% and net operating income increased by $172 or 1.1%. The Company operates, owns and manages apartments in eight metropolitan areas. A combination of a moderate over-supply of rental apartments in the Company's markets coupled with a general business slow- down has contributed to overall growth in collected rents at less than the rate of inflation. Interest and share of income (loss) from Service Companies increased by $173, or 42.9% as a result of additional advances to the Service Companies to fund the 2002 acquisition cost of two land parcels and not recording amortization of goodwill in accordance with Statement of Financial Accounting Standards No. 142 "Accounting for Goodwill and Other Intangible Assets." During 2001 the Service Companies commenced or continued a variety of information technology system initiatives, most notably the implementation of an Enterprise Resource Planning ("ERP") system using the Oracle database. Information technology expenditures incurred and capitalized are being depreciated over five years. Primarily because of increased expenditures by AMLI Management Company ("AMC") for information technology such as the ERP and other systems applications, AMC increased the management fee it charges the Company for managing its wholly-owned properties to 3% from 2.5% effective July 1, 2001. Income from partnerships decreased to $2,029 from $2,295 or 11.6%. This decrease was a result of a sale of a 488 apartment homes community in the third quarter of 2001 and general economic conditions, which was offset in part by stabilization of 1,060 units of three communities under development in 2001. On a same community basis, total property revenues decreased by $906 or 2.6% and net operating income decreased by $997, or 4.6%. Property operating expenses increased by $133, or 1.2%. This increase is principally due to increases in real estate tax expense and management fees as a result of higher fees charged by AMC for managing the Company's wholly-owned properties. On a same community basis, property operating expenses decreased by $54 or 0.6%. Interest expense, net of the amounts capitalized, decreased to $5,800 from $6,427 or 9.8%, primarily due to repayment of the Company's short-term borrowings. General and administrative expenses increased moderately to $1,540 for the three months ended March 31, 2002 from $1,518 for the three months ended March 31, 2001. The increase is primarily due to higher personnel costs as a result of increased number of employees. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2002, the Company had $2,417 in cash and cash equivalents and $132,000 in availability under its $200,000 unsecured line of credit. The availability under the line of credit is based on total borrowings of $68,000, including $14,000 borrowed directly by unconsolidated Service Company affiliates. The borrowings of the Service Company affiliates are guaranteed by the Company. Borrowings under the line of credit bear interest at a rate of LIBOR plus 1.05%. At March 31, 2002, twelve of the Company's wholly-owned stabilized communities were unencumbered. There are no fixed rate loans on wholly- owned communities with maturity dates prior to July 2003. Net cash flows provided by operating activities for the three months ended March 31, 2002 decreased to $11,048 from $11,713 for the three months ended March 31, 2001. The decrease is primarily due to increased distributions from co-investment partnerships offset in part by higher real estate taxes. Cash flows used in investing activities for the three months ended March 31, 2002 decreased to $9,447 from $26,039 for the three months ended March 31, 2001. The decrease is primarily due to lower investments in partnerships, expenditures incurred in connection with the purchase of a property in 2001 and nothing acquired in 2002, offset in part by higher expenditures for development costs. Net cash flows used in financing activities for the three months ended March 31, 2002 were $5,076 which reflect lower borrowings on the Company's line of credit offset by slightly higher dividend payments. FFO is defined as net income (computed in accordance with GAAP), excluding extraordinary gains (losses) from debt restructuring and gains (losses) from sales of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. FFO does not represent cash flows from operations, as defined by GAAP; is not indicative that cash flows are adequate to fund all cash needs; and is not to be considered an alternative to net income or any other GAAP measure as a measurement of the results of the Company's operations or the Company's cash flows or liquidity as defined by GAAP. FFO is widely accepted in measuring the performance of equity REITs. An understanding of the Company's FFO will enhance the reader's comprehension of the Company's results of operations and cash flows as presented in the financial statements and data included elsewhere herein. FFO for the three months ended March 31, 2002 and 2001 is summarized as follows: March 31, -------------------------- 2002 2001 ---------- --------- Income before minority interest $ 7,598 7,345 Depreciation 5,362 5,086 Share of co-investment partner- ships' depreciation 2,868 2,696 Share of Service Company's goodwill amortization -- 104 ---------- ---------- FFO $ 15,828 15,231 ========== ========== Weighted average shares and units including dilutive shares 26,007,730 24,925,231 ========== ========== The Company expects to pay quarterly dividends from cash available for distribution. Until distributed, funds available for distribution are used to temporarily reduce outstanding balances on the Company's revolving lines of credit. The Company intends to finance the majority of its future acquisition and development activities by co-investing these acquisitions and developments with institutional partners. In addition, the Company is selectively selling older communities and using proceeds of such sales to buy newly-constructed properties. The Company expects to meet its short- term liquidity requirements by using its working capital and any portion of net cash flow from operations not distributed currently. The Company believes that its future net cash flows will be adequate to meet operating requirements in both the short and the long term and provide for payment of dividends by the Company in accordance with REIT requirements. The Company qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. A REIT will generally not be subject to Federal income taxation on that portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 90% of its taxable income to its shareholders and complies with certain other requirements. In 2000, the Company distributed approximately 90% of its taxable income and has designated a portion of its dividends paid during 2001 as a throw back dividend to 2000. The Company's current dividend payment level equals an annual rate of $1.92 per common share, increased on October 29, 2001 from an annual rate of $1.88 per common share. The Company anticipates that all dividends paid in 2002 will be fully taxable (primarily as ordinary income), and absent property sales, it will distribute at least 100% of the taxable income. The Company has recorded no deferred taxes on gains for financial reporting purposes that have been deferred for income tax reporting purposes because the Company intends to distribute to its shareholders any deferred tax gain upon ultimate realization for income tax reporting purposes. The Company expects to meet certain long-term liquidity requirements such as scheduled debt maturities, repayment of loans for construction, development, and acquisition activities through the issuance of long-term secured and unsecured debt and additional equity securities of the Company or OP Units. Through March 31, 2002, the Company has issued preferred and common shares for an aggregate issuance price of $128,467 leaving a balance of $71,533 in shares that the Company may issue in the future under its shelf registration statement. COMPANY INDEBTEDNESS The Company's debt as of March 31, 2002 includes $300,876 which is secured by first mortgages on eighteen of the wholly-owned communities and is summarized as follows: SUMMARY DEBT TABLE ------------------ Type of Weighted Average Outstanding Percent Indebtedness Interest Rate Balance of Total - ------------ ---------------- ----------- -------- Fixed Rate Mortgages 7.1% $300,876 74.3% Tax-Exempt Tax-Exempt Rate + 1.25% 50,250 12.4% Bonds (1) Tax-Exempt Rate + 1.26% Lines of Credit (2) LIBOR + 1.05% 54,000 13.3% -------- ------ Total $405,126 100.0% ======== ====== - -------------------- (1) The tax-exempt bonds bear interest at a variable tax-exempt rate that is adjusted weekly based on the re-marketing of these bonds (1.70% for AMLI at Spring Creek and 1.73% % for AMLI at Poplar Creek at April 25, 2002). The AMLI at Spring Creek bonds mature on October 1, 2024 and the related credit enhancement expires on October 15, 2002. The AMLI at Poplar Creek bonds mature on February 1, 2024 and the related credit enhancement expires on December 18, 2002. (2) Amounts borrowed under lines of credit are due in 2003. The interest rate on $55,000 has been fixed pursuant to interest rate swap contracts. Additional interest rate swap contracts on $20,000 have been marked to the value of the related liability in 2001 for payment which will extend through November 2002. DEVELOPMENT ACTIVITIES The Company anticipates incurring the estimated $15,100 completed costs for AMLI at Carmel Center (note 2 to Financial Statements) over the next twelve months. At March 31, 2002, the Company has made capital contributions totaling $215,037 to its existing co-investment partnerships and anticipates funding substantially all of its remaining commitment (net of its share of co- investment debt) of $13,851 during 2002 and 2003 to complete the 2,937 homes being developed by co-investment partnerships. The Company owns land in Ft. Worth, Austin and Houston, Texas; Indianapolis, Indiana; and Kansas City, Kansas, being held for the development of an additional 4,168 apartment homes, or for sale. The Company has made earnest money deposits of $915 for eight land parcels for development anticipated to be acquired in future years. The Company has postponed active development planning for some of its land parcels in Houston and Forth Worth, Texas, until conditions in those particular submarkets are more favorable for development. The Company expensed $274 and $229 of costs associated with carrying these land parcels for the three months ended March 31, 2002 and 2001, respectively. CAPITAL EXPENDITURES Capital expenditures are those made for assets having a useful life in excess of one year and include replacements (including carpeting and appliances) and betterments, such as unit upgrades, enclosed parking facilities and similar items. In conjunction with acquisitions of existing properties, it is the Company's policy to provide in its acquisition budgets adequate funds to complete any deferred maintenance items and to otherwise make the properties acquired competitive with comparable newly-constructed properties. In some cases, the Company will provide in its acquisition budget additional funds to upgrade or otherwise improve new acquisitions. REHAB EXPENDITURES In September 1998, AMLI initiated its first community rehab since its initial public offering. Rehab is a capital improvement program involving significant repairs, replacements and improvements at an aggregate cost of at least the greater of $3 per apartment home or 5% of the value of the entire apartment community. All costs (except costs to routinely paint the interiors of units at turnover) associated with a rehab will be capitalized and depreciated over their policy lives. At March 31, 2002, the Company was continuing the rehab of the second phase of AMLI at Valley Ranch. Starting in 1999 and through March 31, 2002, the Company has spent $2,542 on the rehab of this property and expects to spend an additional $620 to complete the rehab. INFLATION Inflation has been low. Virtually all apartment leases at the wholly- owned communities and co-investment communities are for six or twelve months' duration. This enables the Company to pass along inflationary increases in its operating expenses on a timely basis. Because the Company's property operating expenses (exclusive of depreciation and amortization) are approximately 38.2% of rental and other revenues, increased inflation typically results in comparable increases in income before interest and general and administrative expenses, so long as rental market conditions allow increases in rental rates while maintaining stable occupancy. An increase in general price levels may immediately precede, or accompany, an increase in interest rates. At March 31, 2002, the Company's exposure (including the Company's proportionate share of its co-investment partnerships' expense) to rising interest rates is mitigated by the existing debt level of approximately 38.4% of the Company's total market capitalization (48.3% including the Company's share of co-investment partnerships' debt), the high percentage of intermediate-term fixed-rate debt (74.3% of total debt), and the use of interest rate swaps to effectively fix the interest rate on $30,000 of floating-rate debt through February 2003, $15,000 through September 2004 and $10,000 through October 2004 (13.6% of total debt). As a result, for the foreseeable future, increases in interest expense resulting from increasing inflation are anticipated to be less than future increases in income before interest and general and administrative expenses. OTHER MATTERS On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments. Specifically SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. Derivative instruments reported on the Consolidated Balance Sheets as liabilities totaled $2,810 and $3,724 as of March 31, 2002 and December 31, 2001, respectively, a $914 decrease. The derivative instruments reported on the Consolidated Balance Sheets as "Accumulated Other Comprehensive Income (Loss)", which are gains and losses not affecting retained earnings in the Consolidated Statement of Shareholders' Equity totaled $3,559 and $4,294 as of March 31, 2002 and December 31, 2001, respectively, a $735 decrease. The adjustments to the shareholders' equity include $1,369 and $1,413 of the Company's share of Other Comprehensive Loss of a co- investment partnership as of March 31, 2002 and December 31, 2001, respectively. The Service Companies recorded an after-tax charge against earnings of $72 and $14 for the three months ended March 31, 2002 and 2001, respectively, pursuant to APB Opinion No. 25 "Accounting for Certain Transactions Involving Stock Compensation." On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 "Accounting for Goodwill and Other Intangible Assets" ("SFAS 142"), which requires, among other things, that effective January 1, 2002 goodwill resulting from a business combination accounted for as a purchase no longer be amortized, but be subjected to ongoing impairment review. The only goodwill included in the accounts of the Company and its unconsolidated subsidiaries is $3,300 recorded on the books of an unconsolidated subsidiary. This amount was being amortized using the straight-line method over the five year period, and at December 31, 2001, the remaining unamortized goodwill was $668. As a result of implementing SFAS 142, whereby no amortization will be recorded in 2002, the Company's share of income, net of tax effect, from the unconsolidated subsidiary is increased by approximately $100 for the three months ended March 31, 2002. Pro-forma share of income, net of tax, from this unconsolidated subsidiary will be increased by approximately $400 for the year ended December 31, 2002. On July 19, 2001, the SEC issued interpretative guidance relating to the "Classification and Measurement of Redeemable Securities". This ruling requires, among other things, that preferred shares subject to redemption upon change in control (as is the case with both the Company's Series B Preferred Shares issued on February 20, 1998 and its Series D Preferred Shares issued on October 31, 2001) be classified outside of permanent equity. In accordance with the required implementation of this new requirement, the Company restated its balance sheets from prior periods to reflect its Series B Preferred Shares outside of its permanent capital, starting with its annual report on Form 10-K reporting its financial position as of December 31, 2001 and 2000. This restatement of the Company's balance sheets had no effect on its income reported during these periods. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements set forth herein or incorporated by reference herein from the Company's filings under the Securities Exchange Act of 1934, as amended, contain forward-looking statements, including, without limitation, statements relating to the timing and anticipated capital expenditures of the Company's development programs. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results may differ materially from that set forth in the forward-looking statements. Certain factors that might cause such differences include general economic conditions, local real estate conditions, construction delays due to the unavailability of construction materials, weather conditions or other delays beyond the control of the Company. Consequently, such forward- looking statements should be regarded solely as reflections of the Company's current operating and development plans and estimates. These plans and estimates are subject to revision from time to time as additional information becomes available, and actual results may differ from those indicated in the referenced statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the first quarter of 2002 the Company was limited in its ability to raise rents and increase occupancies at many of its wholly-owned properties because of relative weak demand (in Austin in particular and, more recently, also in Atlanta). Since December 31, 2000, the Company has reduced its exposure to risks associated with interest rate charges and has significantly extended the average maturities of its fixed rate debt portfolio by refinancing $140,000 in borrowings under its floating rate line of credit with a new ten year secured 6.56% fixed interest rate refinancing. In response to a nationwide economic slowdown, the Company has slowed or curtailed its development of new apartment properties, and has acquired fewer additional properties than in prior years in anticipation of better acquisition pricing. The September 11, 2001 attack on the World Trade Center has had, among other things, the effect of increasing the cost of insurance. The Company preliminarily anticipates that its insurance costs for 2002 will increase by at least 50% even with increased deductibles. The Company has discovered that some of the properties located in Texas have problems with mold caused by excessive moisture which accumulates in buildings or on building materials. Some molds are known to produce potent toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold can cause a variety of health effect and symptoms in certain individuals, including severe allergic or other reactions. As a result, the presence of mold at the Company's properties could require undertaking a costly remediation program to contain or remove the mold from the affected properties. Such a remediation program could necessitate the temporary relocation of some or all of the properties' tenants or the complete rehabilitation of the properties. There have been no other significant changes in the Company's exposure to market risks. OCCUPANCY The following is a listing of approximate physical occupancy levels by quarter for the Company's Wholly-Owned Communities and Co-Investment Communities:
2002 2001 Location/Community Company's Number -------------------------- -------------------------- - ------------------ Percentage of at at at at at at at at Wholly-owned Communities Ownership Units 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31 - ------------------------ ---------- ------- ----- ----- ----- ----- ----- ----- ------ ------ Dallas/Ft. Worth, TX AMLI: at AutumnChase. . . . . . . N/A N/A N/A N/A N/A 92% at Bent Tree. . . . . . . . 500 94% 89% 93% 92% 92% at Bishop's Gate. . . . . . 266 95% 92% 90% 93% 90% at Chase Oaks . . . . . . . 250 97% 90% 95% 93% 96% at Gleneagles . . . . . . . 590 92% 91% 92% 94% 95% on the Green. . . . . . . . 424 90% 91% 93% 94% 91% at Nantucket. . . . . . . . 312 94% 96% 94% 94% 92% of North Dallas . . . . . . 1,032 92% 94% 92% 93% 95% on Rosemeade. . . . . . . . N/A N/A N/A N/A 93% 94% at Stonebridge Ranch. . . . 250 90% 90% 90% 82% N/A at Shadow Ridge . . . . . . 222 89% 78% 85% N/A N/A at Valley Ranch . . . . . . 460 89% 89% 90% 93% 95% ------ ----- ----- ----- ----- ----- ----- ----- ----- 4,306 92% 91% 92% 93% 94% ------ ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: in Great Hills. . . . . . . 344 89% 94% 92% 90% 91% at Lantana Ridge. . . . . . 354 90% 88% 94% 89% 90% at StoneHollow. . . . . . . 606 93% 94% 94% 94% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,304 91% 92% 93% 92% 90% ------ ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at the Medical Center . . . . 334 94% 93% 94% N/A N/A at Western Ridge. . . . . . . 318 94% 95% 98% 95% 91% ------ ----- ----- ----- ----- ----- ----- ----- ----- 652 94% 94% 96% 95% 91% ------ ----- ----- ----- ----- ----- ----- ----- ----- 2002 2001 Company's Number -------------------------- -------------------------- Percentage of at at at at at at at at Location/Community Ownership Units 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31 - ------------------ ---------- ------- ----- ----- ----- ----- ----- ----- ------ ------ Atlanta, GA AMLI: at Clairmont . . . . . . . . 288 94% 94% 92% 95% 97% at Killian Creek . . . . . . 256 95% 87% 92% 93% 97% at Park Creek. . . . . . . . 200 83% 85% 83% 91% 93% at Towne Creek . . . . . . . 150 93% 89% 93% 90% 89% on Spring Creek. . . . . . . 1,180 90% 90% 90% 94% 92% at Vinings . . . . . . . . . 360 93% 91% 90% 93% 95% at West Paces. . . . . . . . 337 91% 94% 94% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- 2,771 91% 90% 91% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Alvamar. . . . . . . . . N/A N/A N/A N/A 93% 86% at Centennial Park. . . . . 170 89% 92% 96% 88% 86% at Lexington Farms. . . . . 404 92% 92% 92% 93% 91% at Regents Center . . . . . 424 89% 88% 94% 93% 89% at Town Center. . . . . . . 156 94% 90% 96% 90% 87% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,154 91% 90% 94% 92% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: at Conner Farms . . . . . . 300 90% 89% 92% 93% 89% at Eagle Creek. . . . . . . 240 93% 88% 90% 93% 93% at Riverbend. . . . . . . . 996 94% 90% 94% 90% 83% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,536 93% 90% 92% 91% 86% ------ ----- ----- ----- ----- ----- ----- ----- ----- Chicago, IL AMLI: at Poplar Creek . . . . . . 196 94% 94% 95% 94% 96% ------ ----- ----- ----- ----- ----- ----- ----- ----- DENVER, CO AMLI: at Gateway Park . . . . . . 328 89% 85% 91% 93% 85% ------ ----- ----- ----- ----- ----- ----- ----- ----- Total wholly-owned communities. . . . . . . . . 12,247 91.8% 90.7% 92.1% 92.4% 91.3% ====== ===== ===== ===== ===== ===== ===== ===== ===== 2002 2001 Company's Number -------------------------- -------------------------- Percentage of at at at at at at at at Location/Community Ownership Units 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31 - ------------------ ---------- ------- ----- ----- ----- ----- ----- ----- ------ ------ Co-investment Communities: - -------------------------- Dallas, TX AMLI: at Deerfield. . . . . . . . 25% 240 93% 93% 92% 95% 86% at Fossil Creek . . . . . . 25% 384 91% 87% 95% 95% 94% at Oak Bend . . . . . . . . 40% 426 92% 91% 96% 94% 93% on the Parkway. . . . . . . 25% 240 92% 91% 94% 92% 91% at Prestonwood Hills. . . . 45% 272 93% 89% 95% 97% 96% on Timberglen . . . . . . . 40% 260 94% 95% 94% 94% 94% at Verandah . . . . . . . . 35% 538 92% 93% 96% 94% 90% on Frankford. . . . . . . . 45% 582 94% 92% 93% 93% 94% at Breckinridge Point . . . 45% 440 90% 87% 89% 93% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,382 92% 91% 94% 94% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: at Wells Branch . . . . . . 25% 576 92% 88% 93% 87% 81% at Scofield Ridge . . . . . 45% 487 88% 86% 90% 87% 80% at Monterey Oaks. . . . . . 25% 430 92% 92% 94% 88% 94% ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,493 91% 88% 92% 87% 88% ------- ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at Champions Centre . . . . 15% 192 98% 94% 93% 89% 95% at Champions Park . . . . . 15% 246 91% 94% 92% 94% 90% at Greenwood Forest . . . . 15% 316 92% 91% 93% 93% 87% Midtown . . . . . . . . . . 45% 419 91% 90% 97% 96% 96% Towne Square. . . . . . . . 45% 380 90% 91% 96% 90% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,553 92% 92% 94% 93% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- 2002 2001 Company's Number -------------------------- -------------------------- Percentage of at at at at at at at at Location/Community Ownership Units 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31 - ------------------ ---------- ------- ----- ----- ----- ----- ----- ----- ------ ------ Atlanta, GA AMLI: at Barrett Lakes. . . . . . 35% 446 91% 85% 94% 92% 94% at Northwinds . . . . . . . 35% 800 93% 93% 92% 95% 93% at River Park . . . . . . . 40% 222 95% 94% 89% 91% 96% at Willeo Creek . . . . . . 30% 242 88% 91% 84% 91% 98% at Windward Park. . . . . . 45% 328 91% 87% 90% 91% 88% at Peachtree City . . . . . 20% 312 86% 92% 92% 94% 89% at Lost Mountain. . . . . . 75% 164 95% 83% 93% 95% 95% at Park Bridge. . . . . . . 25% 352 92% 92% 93% 96% 95% ------ ----- ----- ----- ----- ----- ----- ----- ----- 2,866 91% 90% 91% 94% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Regents Crest. . . . . . 25% 476 90% 86% 89% 92% 90% Creekside . . . . . . . . . 25% 224 94% 91% 93% 88% 91% at Wynnewood Farms. . . . . 25% 232 91% 88% 93% 92% 91% lease lease lease at Summit Ridge . . . . . . 25% 432 90% 88% up up up ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,364 91% 91% 91% 91% 91% ------- ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: on Spring Mill. . . . . . . 20% residual 400 84% 80% 81% 78% 80% at Lake Clearwater. . . . . 25% 216 92% 84% 93% 94% 94% at Castle Creek . . . . . . 40% 276 89% 91% 88% 91% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 892 87% 84% 86% 86% 88% ------- ----- ----- ----- ----- ----- ----- ----- ----- 2002 2001 Company's Number -------------------------- -------------------------- Percentage of at at at at at at at at Location/Community Ownership Units 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31 - ------------------ ---------- ------- ----- ----- ----- ----- ----- ----- ------ ------ Chicago, IL AMLI: at Chevy Chase. . . . . . . 33% 592 93% 85% 91% 95% 95% at Danada Farms . . . . . . 10% 600 93% 86% 87% 94% 96% at Fox Valley . . . . . . . 25% 272 85% 83% 92% 93% 94% at Willowbrook. . . . . . . N/A N/A N/A N/A N/A 93% 93% at Windbrooke . . . . . . . 15% 236 98% 86% 95% 97% 96% at Oakhurst North . . . . . 25% 464 86% 80% 86% 90% 93% at St. Charles. . . . . . . 25% 400 88% 87% 84% 91% 89% at Osprey Lake. . . . . . . 69% 483 93% 96% 93% 92% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,047 91% 86% 89% 93% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Denver, CO AMLI: at Lowry Estates. . . . . . 50% 414 87% 91% 91% 88% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total co-investment communities. . . . . . . . . 15,011 90.9% 89.0% 91.5% 92.0% 91.7% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total. . . . . . . . . . . . . 27,258 91.3% 89.8% 91.8% 92.2% 91.5% ======= ===== ===== ===== ===== ===== ===== ===== =====
PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the quarter ended March 31, 2002. The Exhibits filed as part of this report are listed below. EXHIBIT NO. DOCUMENT DESCRIPTION - ----------- -------------------- 99. Financial and Operating Data furnished to Shareholders and Analysts SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMLI RESIDENTIAL PROPERTIES TRUST Date: May 15, 2002 By: /s/ CHARLES C. KRAFT ----------------------------------- Charles C. Kraft Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: May 15, 2002 By: /s/ ALLAN J. SWEET ----------------------------------- Allan J. Sweet President and Trustee Date: May 15, 2002 By: /s/ ROBERT J. CHAPMAN ----------------------------------- Robert J. Chapman Principal Financial Officer Date: May 15, 2002 By: /s/ CHARLES C. KRAFT ----------------------------------- Charles C. Kraft Principal Accounting Officer EX-99 3 exh_99.txt EXHIBIT 99 - ---------- AMLI RESIDENTIAL ------------------------------------------------------------ FIRST QUARTER 2002 SUPPLEMENTAL OPERATING AND FINANCIAL DATA ------------------------------------------------------------ [ graphics indicating property / caption reading "AMLI at Park Meadows - Denver, Colorado. A co-investment community purchased in April 2002." ] AMLI RESIDENTIAL PROPERTIES TRUST 125 South Wacker Drive Suite 3100 Chicago, Illinois 60606 Phone: (312) 443-1477 Fax: (312) 443-0909 www.amli.com ------------ The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. The projections contained in this table that are not historical facts are forward-looking statements. Risks associated with the Company's development, construction and lease-up activities, which could impact the forward-looking statements may include: development opportunities may be abandoned; construction costs of a community may exceed original estimates, possibly making the community uneconomical; construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs; estimates of the costs of improvements to bring an acquired property up to the standards established for the market position intended for that property may prove inaccurate. AMLI RESIDENTIAL TABLE OF CONTENTS Page ---- SUMMARY INFORMATION Company Description and Investor Information. . . . . . . . 1 Earnings Release. . . . . . . . . . . . . . . . . . . . . . 2 Selected Financial and Operating Information. . . . . . . . 5 Funds From Operations . . . . . . . . . . . . . . . . . . . 11 Statements of Operations. . . . . . . . . . . . . . . . . . 12 Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . 14 DEBT AND PREFERRED SHARES Debt and Preferred Shares Summary . . . . . . . . . . . . . 16 Debt Maturities . . . . . . . . . . . . . . . . . . . . . . 20 SAME STORE AND NOI DATA Quarterly Comparison of Same Store Communities. . . . . . . 22 Quarterly Comparison of Components of NOI . . . . . . . . . 24 OTHER DATA Co-Investment Compensation. . . . . . . . . . . . . . . . . 27 Service Companies Financial Information . . . . . . . . . . 28 PORTFOLIO Stabilized Communities. . . . . . . . . . . . . . . . . . . 30 Development Summary . . . . . . . . . . . . . . . . . . . . 34 Communities in Planning . . . . . . . . . . . . . . . . . . 37 AMLI RESIDENTIAL COMPANY DESCRIPTION INVESTOR INFORMATION AMLI Residential (or AMLI) is an integrated, self-managed real estate operating company, which was formed in February 1994 to continue and expand the multifamily property business previously conducted by AMLI Realty Co. (ARC), AMLI's predecessor company, which has been in business since 1980. AMLI is structured as an UPREIT, or umbrella partnership real estate investment trust, and we own interests in properties and conduct our business through AMLI Residential Properties, L.P., (the Operating Partnership or OP). The sole general partner of the OP is AMLI Residential Properties Trust, a public company whose shares of beneficial interest are traded on the NYSE under the symbol "AML." Our business is the development, acquisition and management of upscale apartment communities in the Southeast, Southwest, Midwest and Mountain regions of the United States. We also serve as an institutional advisor and asset manager for domestic and international, tax-exempt and taxable investors in connection with our joint venture co-investment business. A summary schedule of our investment communities is included in this Supplement. We operate all of our communities under the AMLI brand name, representing our commitment to high quality, exceptional service and superior value. We have corporate offices in Atlanta, Dallas, Indianapolis and Kansas City, in addition to our main office in Chicago. We employ approximately 875 people who are dedicated to our mission ... TO PROVIDE AN OUTSTANDING LIVING ENVIRONMENT FOR OUR RESIDENTS. For additional information on AMLI, please visit our website at www.amli.com. The following information is presented as a supplement to our other public reporting, including our Form 10-Q and Form 10-K, both or which can be found on our website or through the SEC's EDGAR database. We hope that the information contained herein is helpful to you. We encourage your feedback and any suggestions, which you believe will help us provide better disclosure to you. Please contact either of: Robert Chapman Executive Vice President & CFO 312.984.6845 rchapman@amli.com Sue Bersh Vice President - Corporate Communications 312.984.2607 sbersh@amli.com Thank you for your interest in AMLI Residential. AML LISTED NYSE First Quarter 2002 Page 1 Supplemental Information AMLI Residential Properties Trust AMLI Residential 125 South Wacker Drive Chicago, Illinois 60606 Phone: 312.443.1477 Fax: 312.443.0909 www.amli.com PRESS RELEASE For Immediate Release For More Information, Contact: April 30,2002 Robert J. Chapman, Chief Financial Officer (312) 984-6845 AMLI RESIDENTIAL ANNOUNCES FIRST QUARTER 2002 OPERATING RESULTS AND DECLARES DIVIDEND AMLI RESIDENTIAL PROPERTIES TRUST (NYSE: AML) announces today operating results for the first quarter ended March 31, 2002. FUNDS FROM OPERATIONS, NET INCOME AND OPERATING EPS - --------------------------------------------------- Funds From Operations ("FFO") for the first quarter 2002 were $15,828,000, or $0.61 per common share, compared to $15,231,000, or $0.61 per common share, for the first quarter 2001. FFO is in line with First Call's current estimate and $0.01 higher than the Company's previous guidance. "We were satisfied with property operations this quarter, particularly expense savings, in a challenging economic environment," commented Allan J. Sweet, AMLI President. "Although we did not complete any major transactions during the first quarter, we began the second quarter by welcoming a new co-investment partner and adding a beautiful community to our Denver portfolio. We expect additional transactions during the second quarter." Net income for the quarter ended March 31, 2002 was $6,660,000, as compared to $6,405,000 in the year earlier period. Diluted Earnings Per Share ("EPS") for the quarter ended March 31, 2002 was $0.26, compared to $0.27 for the comparable period of 2001, a decrease of 3.7%. Additionally, Operating EPS was $0.26 per diluted share for the quarter ended March 31, 2002 as compared to $0.27 per diluted share for the quarter ended March 31, 2001. SAME COMMUNITY RESULT - --------------------- On a combined same community basis, which includes both wholly-owned and co-investment communities (at 100%) for the quarter ended March 31, 2002 versus the prior year's quarter, total property revenues decreased 1.3%, operating expenses increased 0.2%, and net operating income ("N0I") decreased 2.2%. Weighted average occupancy, quarter over comparable quarter, decreased from 91.6% to 90.7%, while the weighted average rental rate decreased by 0.8%. OTHER OPERATING RESULTS - ----------------------- Total property revenues, including both wholly-owned communities and co-investment communities (at 100%) were $69,175,000 for the quarter ended March 31, 2002, as compared with $68,807,000 for the comparable period in 2001, an increase of 0.5%. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter ended March 31, 2002 were $21,774,000, a slight decrease from the same period last year. Excluding the Company's share of co-investment partnerships' interest expense, which has historically been included in the Company's disclosure, EBITDA for the quarter ended March 31, 2002 was $25,232,000, representing a decrease of 0.6% from same period last year. First Quarter 2002 Page 2 Supplemental Information AMLI Residential Properties Trust OUTLOOK - ------- AMLI's current expectation for full year 2002 FFO per share remains consistent with prior guidance in the range of $2.60 to $2.66. Although property operations may be weaker than we anticipated three months ago, the company is currently anticipating that fee activity from its co-investments and other factors will improve to maintain the guidance amount. AMLI anticipates that full year Operating EPS for 2002 will be in the range of $1.15 to $1.20. Additionally, the Company currently expects full year 2003 FFO per share to be in the range of $2.75 to $2.85 and full year 2003 Operating EPS to be in the range of $1.20 to $1.30. DIVIDEND - -------- Yesterday, the Board of Trustees declared a quarterly dividend of $0.48 per common share. This dividend is payable on May 21, 2002 to all common shareholders of record as of May 10, 2002 and is based on an annual dividend rate of $1.92 per common share. CONFERENCE CALL - --------------- AMLI will hold a conference call on Wednesday, May 1, 2002 at 2:30 p.m. ET to review these results. The call may be joined by calling 877-601-5719 - Passcode: AMLI. A live webcast and replay of the call can be accessed at www.amli.com/company_info or at www.streetevents.com. SUPPLEMENTAL INFORMATION - ------------------------ AMLI produces Quarterly Supplemental Information that provides detailed information regarding the Company's activities during the quarter. The First Quarter Supplemental Information is available on AMLI's website at www.amli.com/company_info/share_report.html. ABOUT AMLI - ---------- The AMLI portfolio currently includes 71 apartment communities containing 27,738 apartment homes, with an additional 2,537 apartment homes under development or in lease-up in seven locations. AMLI is focused on the development, acquisition and management of institutional quality multifamily communities in the Southeast, Southwest, Midwest and Mountain Regions areas of the U.S. AMLI Residential also serves as institutional advisor and asset manager for large pension funds, tax-exempt foundations and other financial institutions through AMLI's co-investment business. AMLI employs approximately 875 people who are dedicated to achieving AMLI's mission--Provide An Outstanding Living Environment For Our Residents. More Information on AMLI is available at www.amli.com. FORWARD LOOKING STATEMENTS - -------------------------- Certain matters discussed in this press release are forward looking statements within the meaning of Federal Securities Law. Although the Company believes expectations reflected in such forward looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking statements can be identified by the Company's use of the words "project," "believe," "expect," "anticipate," "intend," "estimate," "assume," and other similar expressions that predict or indicate future events, achievements or trends or that do not relate to historical matters. First Quarter 2002 Page 3 Supplemental Information AMLI Residential Properties Trust The Company does not assure the future results or outcome of the matters described in forward-looking statements; rather, these statements merely reflect the Company's current expectations of the approximate outcomes of the matters discussed. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond the Company's control. The reader is cautioned to make his/her own judgement with regard to the statements discussed in this press release and the assumption noted by the Company herein. The Company is making forward-looking statements because it believes investors, analysts and others, many of whom prepare models and projections of the Company's performance, are interested in the Company's current estimates of its future activities. The Company advises such parties to make their own determination of any relevant or material assumption used by them. Many factors may cause the Company's actual performance in any period or periods to differ materially from the anticipated future performance expressed or implied by these forward-looking statements. Certain of the factors that could cause the Company's actual performance to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, general economic conditions, local real estate conditions, the timely development and lease-up of communities, other risks detailed from time to time in the Company's SEC reports, including the annual report on Form 10-K for the year ended December 31, 2001. # # # # First Quarter 2002 Page 4 Supplemental Information AMLI Residential Properties Trust AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- REVENUES - -------- TOTAL REVENUES Consolidated (a). . . . . . . . . . . . . $ 31,395 32,097 34,298 32,449 31,328 Combined, including share of partnerships (b). . . . . . . . . . . . 42,976 45,254 42,938 44,428 42,701 COMBINED TOTAL PROPERTY REVENUES Consolidated. . . . . . . . . . . . . . . 28,645 28,563 29,120 28,823 28,335 Combined, including share of partnerships. . . . . . . . . . . . . . 41,731 41,830 42,842 42,681 41,488 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 69,175 69,382 71,298 70,976 68,807 EARNINGS - -------- EBITDA Consolidated. . . . . . . . . . . . . . 21,774 20,911 23,826 22,823 21,794 Combined, including share of partnerships. . . . . . . . . . . . . 25,232 24,471 27,391 26,530 25,390 FFO . . . . . . . . . . . . . . . . . . . 15,828 14,901 16,848 16,162 15,231 AFFO. . . . . . . . . . . . . . . . . . . 14,601 13,635 15,452 13,474 14,022 Operating earnings. . . . . . . . . . . . 7,598 6,660 8,792 7,561 7,345 Net income. . . . . . . . . . . . . . . . 6,660 5,872 19,244 14,225 6,405 Dividends (c) . . . . . . . . . . . . . . 12,286 11,985 11,751 11,686 11,740 PER SHARE DATA - DILUTED - ------------------------ FFO . . . . . . . . . . . . . . . . . . . $ 0.61 0.58 0.67 0.65 0.61 AFFO. . . . . . . . . . . . . . . . . . . 0.56 0.53 0.61 0.54 0.56 Operating earnings. . . . . . . . . . . . 0.26 0.21 0.33 0.28 0.27 Net income allocable to common shares . . 0.26 0.21 0.89 0.67 0.27 Common dividends. . . . . . . . . . . . . 0.48 0.48 0.47 0.47 0.47 FFO payout ratio (based on per share amounts). . . . . . . . . . . . . 78.8% 82.8% 70.3% 72.8% 76.9% AFFO payout ratio (based on per share amounts). . . . . . . . . . . . . 85.6% 90.6% 76.5% 87.4% 83.5% 5 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- DEBT SERVICE (h) - ---------------- INTEREST EXPENSE Consolidated. . . . . . . . . . . . . . . 5,800 5,858 6,824 6,352 6,427 Combined, including share of partnerships. . . . . . . . . . . . . . 9,213 9,352 10,341 10,012 9,968 CAPITALIZED INTEREST Consolidated. . . . . . . . . . . . . . . 1,054 981 1,100 1,047 973 Combined, including share of partnerships. . . . . . . . . . . . . . 1,072 1,004 1,145 1,072 992 SCHEDULED PRINCIPAL PAYMENTS (normal amortization) Consolidated. . . . . . . . . . . . . . . 1,183 1,166 1,014 753 739 Combined, including share of partnerships. . . . . . . . . . . . . . 2,653 1,704 1,501 1,313 1,217 See notes on following pages. 6
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- CAPITALIZATION - -------------- REAL ESTATE AT COST, BEFORE DEPRECIATION Consolidated. . . . . . . . . . . . . . . $ 745,906 744,411 743,111 696,346 696,302 Combined, including share of partnerships. . . . . . . . . . . . . . 1,116,239 1,114,576 1,105,640 1,074,009 1,073,501 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 1,864,965 1,862,901 1,832,040 1,822,852 1,821,441 TOTAL ASSETS Consolidated. . . . . . . . . . . . . . . 914,347 919,002 912,987 915,048 890,174 Combined, including share of partnerships. . . . . . . . . . . . . . 1,111,304 1,120,158 1,111,033 1,121,990 1,074,400 DEBT Consolidated. . . . . . . . . . . . . . . 405,126 399,309 408,475 429,489 412,242 Combined, including share of partnerships. . . . . . . . . . . . . . 592,300 586,137 595,174 625,061 608,153 Combined, including share of Service Companies . . . . . . . . . . . 606,300 600,137 609,174 639,061 622,153 EQUITY Operating Partnerships Units (d). . . . . 67,339 68,186 69,658 66,272 67,039 Preferred Shares. . . . . . . . . . . . . 95,343 100,362 81,218 81,218 81,218 Common Equity (e) . . . . . . . . . . . . 325,602 323,202 327,903 318,002 311,353 ---------- ---------- ---------- ---------- ---------- $ 488,284 491,750 478,779 465,492 459,610 ========== ========== ========== ========== ========== 7 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------ March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- SHARE INFORMATION Shares and units Outstanding (f). . . . . 25,800,055 25,779,764 25,007,264 24,891,232 24,873,832 Weighted average shares and units outstanding . . . . . . . . . . . . . . 25,707,991 25,465,180 24,960,829 24,876,109 24,813,456 Share price, end of period. . . . . . . . $ 25.22 25.22 23.60 24.60 22.30 NUMBER OF APARTMENT HOMES - ------------------------- STABILIZED COMMUNITIES Wholly-owned. . . . . . . . . . . . . . . 12,247 12,247 12,247 12,079 12,519 Partnerships. . . . . . . . . . . . . . . 15,011 15,011 14,579 15,067 15,067 ---------- ---------- ---------- ---------- ---------- 27,258 27,258 26,826 27,146 27,586 ---------- ---------- ---------- ---------- ---------- COMMUNITIES UNDER DEVELOPMENT AND/OR LEASE-UP Wholly-owned. . . . . . . . . . . . . . . 322 322 322 -- -- Partnerships. . . . . . . . . . . . . . . 2,615 2,615 2,737 2,217 2,217 ---------- ---------- ---------- ---------- ---------- 2,937 2,937 3,059 2,217 2,217 ---------- ---------- ---------- ---------- ---------- Total . . . . . . . . . . . . . . . . 30,195 30,195 29,885 29,363 29,803 ========== ========== ========== ========== ========== See notes on following pages. 8
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ March 31, Dec. 31, Sept. 30, June 30, March 31, 2002 2001 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- OPERATIONAL RATIOS - ------------------ EBITDA, AS PERCENT OF TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 8.2% 8.0% 9.5% 8.8% 9.0% Combined, including share of partnerships and Service Companies. . . 8.0% 7.8% 9.1% 8.5% 8.5% INTEREST COVERAGE Consolidated. . . . . . . . . . . . . . . 3.8 3.6 3.5 3.6 3.4 Combined, including share of partnerships. . . . . . . . . . . . . . 2.7 2.6 2.6 2.7 2.5 FIXED CHARGE COVERAGE (g) Consolidated. . . . . . . . . . . . . . . 2.4 2.3 2.5 2.6 2.5 Combined, including share of partnerships. . . . . . . . . . . . . . 1.9 2.5 2.3 2.4 2.0 FINANCIAL RATIOS - ---------------- DEBT TO TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 38.4% 38.0% 40.9% 41.2% 42.6% Combined, including share of partnerships. . . . . . . . . . . . . . 48.2% 48.0% 50.8% 51.1% 53.4% DEBT TO TOTAL ASSETS, AT COST (before depreciation) Consolidated. . . . . . . . . . . . . . . 44.3% 43.5% 44.7% 46.9% 46.3% Combined, including share of partnerships. . . . . . . . . . . . . . 53.3% 52.3% 53.6% 55.7% 56.6% SECURED DEBT TO TOTAL ASSETS, AT COST (before depreciation) Consolidated. . . . . . . . . . . . . . . 33.9% 33.9% 34.3% 34.3% 19.6% Combined, including share of partnerships. . . . . . . . . . . . . . 44.8% 44.5% 45.0% 45.4% 34.5% 9 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Notes: (a) All references to "Consolidated" refer to disclosures that are derived from numbers directly on the Company's consolidated financial statements, which are prepared in accordance with GAAP and reflect the Company's interest in unconsolidated partnerships on the equity method. (b) All references to "Combined", "Combined, including share of partnerships" or the like refer to calculations derived by combining the Company's consolidated financial information with the Company's pro rata share of its partnerships' financial information. (c) Includes dividends paid on all common and preferred shares. (d) Represents Minority Interest on the Company's Balance Sheet. (e) Represents Shareholders' Equity on the Company's Balance Sheet less Preferred Shares (f) Includes all preferred shares convertible to common shares. (g) Includes interest expense and preferred dividends. (h) Excludes amortization of deferred and other financing costs. 10
AMLI RESIDENTIAL FUNDS FROM OPERATIONS Unaudited (Dollars in thousands, except for share data) Three Months Ended March 31 ----------------------- 2002 2001 ---------- ---------- WHOLLY-OWNED COMMUNITIES' NOI (a) . . . . . $ 17,696 17,519 ---------- ---------- Partnership communities' NOI at 100% (a). . 24,625 25,069 Partners' share of partnership communities' NOI and Other (e). . . . . . (16,270) (16,482) ---------- ---------- COMPANY'S SHARE OF PARTNERSHIP EBITDA . . . 8,355 8,587 ---------- ---------- Interest from and share of Service Companies' FFO (b). . . . . . . . . . . . (230) (299) Other interest and Other. . . . . . . . . . 364 477 Co-investment fee income (c). . . . . . . . 587 624 General and administrative. . . . . . . . . (1,540) (1,518) ---------- ---------- EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) . . 25,232 25,390 ---------- ---------- INTEREST EXPENSE (d) Wholly owned communities and portfolio debt. . . . . . . . . . . . . . . . . . . (5,946) (6,563) Share of partnership communities. . . . . . (3,458) (3,596) ---------- ---------- (9,404) (10,159) ---------- ---------- FUNDS FROM OPERATIONS (FF0) . . . . . . . . 15,828 15,231 CAPITAL EXPENDITURES PAID FROM FFO Wholly-owned communities. . . . . . . . . . (1,005) (999) Share of partnership communities. . . . . . (222) (210) ---------- ---------- (1,227) (1,209) ---------- ---------- ADJUSTED FUNDS FROM OPERATIONS (AFFO) . . . $ 14,601 14,022 ========== ========== Notes: (a) See page 26. (b) Includes share of income before goodwill amortization of $104 for the quarter ended March 31,2001. See page 28. (c) See page 27. (d) Includes amortization of deferred and other financing costs. (e) See footnote (f) on page 26. 11 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS Three Months Ended March 31 (Unaudited dollars in thousands)
Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- REVENUES Property revenues . . . . . . . . . . . . . . . . . . $ 28,645 28,335 41,731 41,488 Interest and share of income (loss) from the Service Companies . . . . . . . . . . . . . . . . . (230) (403) (230) (403) Other interest and Other (c). . . . . . . . . . . . . 364 477 887 992 Income from partnerships. . . . . . . . . . . . . . . 2,029 2,295 -- -- Co-investment fee income. . . . . . . . . . . . . . . 587 624 587 624 ---------- ---------- ---------- ---------- 31,395 31,328 42,976 42,701 ---------- ---------- ---------- ---------- EXPENSES Property operating expenses . . . . . . . . . . . . . 10,949 10,816 16,204 15,897 Interest and amortization of deferred and other financing costs . . . . . . . . . . . . . . . 5,946 6,563 9,404 10,159 Depreciation. . . . . . . . . . . . . . . . . . . . . 5,362 5,086 8,230 7,782 General and administrative. . . . . . . . . . . . . . 1,540 1,518 1,540 1,518 ---------- ---------- ---------- ---------- 23,797 23,983 35,378 35,356 ---------- ---------- ---------- ---------- INCOME BEFORE DISCONTINUED OPERATIONS AND MINORITY INTEREST. . . . . . . . . . . . . . . . . . 7,598 7,345 7,598 7,345 Discontinued operations . . . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- INCOME BEFORE MINORITY INTEREST . . . . . . . . . . . 7,598 7,345 7,598 7,345 Minority interest . . . . . . . . . . . . . . . . . . 938 940 938 940 ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . 6,660 6,405 6,660 6,405 Net income attributable to preferred shares . . . . . 2,082 1,633 2,082 1,633 ---------- ---------- ---------- ---------- NET INCOME ATTRIBUTABLE TO COMMON SHARES. . . . . . . 4,578 4,772 4,578 4,772 ADD: Minority interest . . . . . . . . . . . . . . . . . . 938 940 938 940 Discontinued operations . . . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- 12 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS - CONTINUED Three Months Ended March 31 (Dollars in thousands) Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- OPERATING EARNINGS. . . . . . . . . . . . . . . . . . 7,598 7,345 7,598 7,345 ADD: Depreciation Wholly-owned communities. . . . . . . . . . . . . . 5,362 5,086 5,362 5,086 Share of partnership communities. . . . . . . . . . 2,868 2,696 2,868 2,696 Gains on sales of rental properties . . . . . . . . . -- -- -- -- Share of Service Companies' amortization of goodwill. -- 104 -- 104 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS . . . . . . . . . . . . . . . . $ 15,828 15,231 15,828 15,231 ========== ========== ========== ========== Notes: (a) All references to "Consolidated" refer to disclosures that are derived from numbers directly on the Company's consolidated financial statements, which are prepared in accordance with GAAP and reflect the Company's interest in unconsolidated partnerships on the equity method. (b) All references to "Combined", "Combined, including share of partnerships" or the like refer to calculations derived by combining the Company's consolidated financial information with the Company's pro rata share of its partnerships' financial information. (c) Combined includes other items of partnership operations such as interest income on invested funds, legal, audit and other costs of partnership administration including asset management fees paid to the Company, compensation received in the form of cash flow preference and share of income in excess of the Company's ownership percentage. 13
AMLI RESIDENTIAL BALANCE SHEETS (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ------------------------- ------------------------- March 31, December 31, March 31, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ ASSETS Rental apartments Land. . . . . . . . . . . . . . . . . . . . $ 99,784 99,784 150,081 150,187 Depreciable property. . . . . . . . . . . . 646,122 644,627 966,158 964,389 ---------- ---------- ---------- ---------- 745,906 744,411 1,116,239 1,114,576 Less: Accumulated depreciation . . . . . . . (112,501) (107,139) (143,282) (135,052) ---------- ---------- ---------- ---------- 633,405 637,272 972,957 979,524 Rental property held for sale, net of accumulated depreciation. . . . . . . . . . -- -- -- -- Rental apartments under development . . . . . 13,254 10,392 47,327 41,477 Land held for development or sale . . . . . . 43,160 47,611 43,160 47,611 Investment in partnerships. . . . . . . . . . 186,330 184,270 -- -- Cash and cash equivalents . . . . . . . . . . 2,417 5,892 8,530 14,093 Investment in and receivables from the Service Companies . . . . . . . . . . . . . 19,048 15,161 18,914 14,824 Other assets and deferred costs, net. . . . . 16,733 18,404 20,415 22,629 ---------- ---------- ---------- ---------- $ 914,347 919,002 1,111,303 1,120,158 ========== ========== ========== ========== 14 AMLI RESIDENTIAL BALANCE SHEETS - CONTINUED (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ------------------------- ------------------------- March 31, December 31, March 31, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ LIABILITIES Debt. . . . . . . . . . . . . . . . . . . . . $ 405,126 399,309 592,300 586,137 Accrued expenses and other liabilities. . . . 20,937 27,943 30,906 42,272 ---------- ---------- ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . . . . . 426,063 427,252 623,206 628,408 ---------- ---------- ---------- ---------- Mandatorily redeemable convertible preferred shares. . . . . . . . . . . . . . 93,287 93,287 93,287 93,287 Minority interest . . . . . . . . . . . . . . 67,339 68,186 67,339 68,186 Total Shareholders' Equity. . . . . . . . . . 327,658 330,277 327,658 330,277 ---------- ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . . . . $ 914,347 919,002 1,111,490 1,120,158 ========== ========== ========== ========== Notes: (a) All references to "Consolidated" refer to disclosures that are derived from numbers directly on the Company's consolidated financial statements, which are prepared in accordance with GAAP and reflect the Company's interest in unconsolidated partnerships on the equity method. (b) All references to "Combined", "Combined, including share of partnerships" or the like refer to calculations derived by combining the Company's consolidated financial information with the Company's pro rata share of its partnerships' financial information. 15
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY March 31, 2002 (Unaudited, dollars in thousands)
CONSOLIDATED DEBT (a) - --------------------- Weighted Average Years to Type of Percent Interest Maturity Variable of Indebtedness Balance of Total Rate (c) (d) Secured Unsecured Fixed (e) - --------------- -------- -------- -------- -------- -------- --------- -------- -------- Conventional mortgages . . . . . $300,876 74.3% 7.1% 7.0 300,876 -- 300,876 -- Construction financing . . . . . -- 0% 0% 0.0 -- -- Tax-exempt debt . . . 50,250 12.4% 2.5% 0.6 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 54,000 13.3% 7.3% 1.6 -- 54,000 -- 54,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $405,126 100.0% 6.6% 5.4 310,376 94,750 300,876 104,250 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 76.6% 23.4% 74% 26% ======= ======= ======= ======= COMBINED DEBT, INCLUDING SHARE OF PARTNERSHIPS (b) - -------------------------------------------------- Weighted Average Years to Type of Percent Interest Maturity Variable of Indebtedness Balance of Total Rate (c) (d) Secured Unsecured Fixed (e) - --------------- -------- -------- -------- -------- -------- --------- -------- -------- Conventional mortgages . . . . . $483,734 81.7% 7.3% 7.0 483,734 -- 483,734 -- Construction financing . . . . . 4,316 0.7% 3.8% 0.0 4,316 -- 4,316 Tax-exempt debt . . . 50,250 8.5% 2.5% 0.6 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 54,000 9.1% 7.3% 1.6 -- 54,000 -- 54,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $592,300 100.0% 6.8% 5.9 497,550 94,750 483,734 108,566 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 84.0% 16.0% 82% 18% ======= ======= ======= ======= See notes on the following page. 16
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY March 31, 2002 (Unaudited, dollars in thousands)
PREFERRED SHARES - ---------------- Number of Out- Current Date Original Shares at standing Dividend Liquidation Security of Issue Issue Issuance Shares Rate Preference - ---------------------- --------- -------- --------- -------- -------- ----------- Convertible Preferred Series A 1/30/96 $ 20,000 1,200,000 100,000 (g) 2,021 Convertible Preferred Series B (h) 75,000 3,125,000 3,125,000 (i) 76,500 Convertible Preferred Series D (j) 10/31/01 20,000 800,000 800,000 (k) 20,433 Notes: (a) All references to "Consolidated" refer to disclosures that are derived from numbers directly on the Company's consolidated financial statements, which are prepared in accordance with GAAP and reflect the Company's interest in unconsolidated partnerships on the equity method. (b) All references to "Combined", "Combined, including share of partnerships" or the like refer to calculations derived by combining the Company's consolidated financial information with the Company's pro rata share of its partnerships' financial information. (c) The Weighted Average Interest Rate for variable rate debt reflects (i) the variable rate in effect on the last day of the period (ii) the effective fixed interest rates on swaps and (iii) each financing's respective lender credit spread. (d) Years to Maturity reflects the expiration date of the credit enhancements, not the actual maturity dates of the bond, which are in 2024. 17
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY - CONTINUED March 31, 2002 (Unaudited, dollars in thousands) (e) The following summarizes interest rate limitation and swap contracts associated with the Credit Facilities:
Fixed Rate, Excluding Lender Type of Notional Credit Term of Contract Counterparty Amount Spread Contract -------- ------------ -------- ----------- --------------- Swap Merrill Lynch Capital Services, Inc. 10,000 6.216% 11/2/97 - 11/1/02 Swap Merrill Lynch Capital Services, Inc. 10,000 6.029% 11/2/97 - 11/1/02 Swap Merrill Lynch Capital Services, Inc. 20,000 6.145% 2/16/98 - 2/15/03 Swap Wachovia Bank, N.A. 10,000 6.070% 2/19/98 - 2/18/03 Swap Harris Trust & Savings Bank 15,000 6.405% 9/21/99 - 9/20/04 Swap Harris Trust & Savings Bank 10,000 6.438% 3/3/99 - 10/2/04 ------- 75,000 ------- The following summarizes interest rate swap contracts associated with construction financing of AMLI at Seven Bridges, in which the Company owns a 20% interest: 18
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY - CONTINUED March 31, 2002 (Unaudited, dollars in thousands)
Fixed Rate, Excluding Lender Type of Notional Credit Term of Contract Counterparty Amount Spread Contract -------- ------------ -------- ----------- ---------------- Swap PNC Bank, N.A. $30,000 4.670% 1/10/03 - 7/10/03 Swap PNC Bank, N.A. 50,000 4.670% 7/10/03 - 8/01/04 (f) The Credit Facilities provide for one additional one-year extension option. The Company's unconsolidated subsidiaries have $14,000 borrowed under the Credit Facilities, which is not reflected in the amount above. Such borrowings are guaranteed by the Company and reduce total availability under the line of credit. (g) The dividend per share is equal to the common share dividend. (h) Funded in three installments of $25 million each on 3/9/98, 6/30/98 and 9/30/98. (i) The dividend per share is the greater of an annualized (i) $1.84 per share or (ii) the amount payable on the common shares. (j) 800,000 preferred shares were issued at $25 per share. These shares may be converted to 720,721 common shares, reflecting a conversion price of $27.75 per common share. (k) The dividend per share is the greater of an annualized (i) $2.1625 per share or (ii) the amount payable on the common shares. 19
AMLI RESIDENTIAL DEBT MATURITIES March 31, 2002 (Unaudited, dollars in thousands)
CONSOLIDATED DEBT (a) - --------------------- Wtd. Average Interest Rate on Scheduled Due at Percent to Maturing Year Amortization Maturity Total Total Debt - ---------- ------------ ----------- ----------- ----------- ------------ 2002 $ 3,679 -- 3,679 0.9% 0.0% 2003 4,367 111,447(c) 115,814 28.6% 7.3% 2004 3,775 6,970 10,745 2.7% 7.7% 2005 3,806 31,006 34,812 8.6% 8.2% 2006 2,751 35,372 38,123 9.4% 7.8% Thereafter 21,493 180,460(d) 201,953 49.8% 6.7% -------- ------- ------- ------ ----- Total $ 39,871 365,255 405,126 100.0% 6.6% ======== ======= ======= ====== ===== Percent to Total 9.8% 90.2% 100.0% ======== ======= ======= COMBINED DEBT, INCLUDING SHARE OF PARTNERSHIPS (b) - -------------------------------------------------- Wtd. Average Interest Rate on Scheduled Due at Percent to Maturing Year Amortization Maturity Total Total Debt - ---------- ------------ ----------- ----------- ----------- ------------ 2002 $ 5,309 4,904 10,213 1.7% 5.6% 2003 6,497 126,450(c) 132,947 22.5% 7.2% 2004 5,767 14,863 20,630 3.5% 7.6% 2005 5,894 32,090 37,984 6.4% 8.1% 2006 5,026 66,793 71,819 12.1% 7.6% Thereafter 32,715 285,992(d) 318,707 53.8% 7.0% -------- ------- ------- ------ ----- Total $ 61,208 531,092 592,300 100.0% 6.8% ======== ======= ======= ====== ===== Percent to Total 10.3% 89.7% 100.0% ======== ======= ======= 20 AMLI RESIDENTIAL DEBT MATURITIES - CONTINUED March 31, 2002 (Unaudited, dollars in thousands) Notes: (a) All references to "Consolidated" refer to disclosures that are derived from numbers directly on the Company's consolidated financial statements, which are prepared in accordance with GAAP and reflect the Company's interest in unconsolidated partnerships on the equity method. (b) All references to "Combined", "Combined, including share of partnerships" or the like refer to calculations derived by combining the Company's consolidated financial information with the Company's pro rata share of its partnerships' financial information. (c) The Company's primary unsecured line of credit, which has a current maturity of November, 2003, provides for one additional one-year extension option. (d) Includes Bonds which mature in 2024. The credit enhancements on $40,750 and $9,500 expire on October 15, 2002 and on December 18, 2002, respectively. 21
AMLI RESIDENTIAL SAME STORE COMMUNITIES FIRST QUARTER COMPARISONS
OCCUPANCY AND RENTAL RATES - -------------------------- Weighted Average Occupancy Weighted Average Rental Rate -------------------------------- -------------------------------- Apartment Percent Percent Market Homes 2002 2001 Change 2002 2001 Change - ------ --------- -------- -------- -------- -------- -------- -------- Dallas 7,216 91.6% 92.9% -1.4% $ 790 777 1.7% Atlanta 5,285 90.8% 93.4% -2.8% 861 871 -1.2% Austin 2,797 91.7% 88.7% 3.4% 839 917 -8.5% Houston 1,871 91.8% 91.8% 0.0% 908 851 6.7% Indianapolis 1,752 90.4% 86.9% 4.1% 732 722 1.3% Kansas City 2,086 90.0% 87.1% 3.3% 811 853 -5.0% Chicago 2,760 87.1% 94.8% -8.1% 1,063 1,063 0.0% Denver 414 89.4% 87.3% 2.4% 1,109 1,155 -4.0% ------- ------ ------ ------ ------ ------ ------ Total 24,181 90.7% 91.6% -1.0% 854 861 -0.8% ======= ====== ====== ====== ====== ====== ====== 22
AMLI RESIDENTIAL SAME STORE COMMUNITIES - CONTINUED FIRST QUARTER COMPARISONS
REVENUES EXPENSES AND NET OPERATING INCOME (dollars in thousands) - ------------------------------------------ Revenues Expenses Net Operating Income ---------------------------- ---------------------------- ---------------------------- Percent Percent Percent Market 2002 2001 Change 2002 2001 Change 2002 2001 Change - ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- Dallas $ 16,503 16,390 0.7% 6,934 6,793 2.1% 9,568 9,598 -0.3% Atlanta 13,059 13,677 -4.5% 4,526 4,728 -4.3% 8,533 8,949 -4.7% Austin 6,840 7,169 -4.6% 2,831 2,866 -1.2% 4,009 4,303 -6.8% Houston 4,948 4,590 7.8% 2,085 2,037 2.4% 2,863 2,554 12.1% Indianapolis 3,664 3,538 3.6% 1,362 1,305 4.4% 2,302 2,233 3.1% Kansas City 4,897 4,797 2.1% 1,714 1,713 0.0% 3,183 3,084 3.2% Chicago 8,344 8,857 -5.8% 2,999 2,939 2.0% 5,346 5,919 -9.7% Denver 1,284 1,309 -1.9% 346 380 -9.0% 938 930 0.9% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total $ 59,539 60,328 -1.3% 22,797 22,761 0.2% 36,742 37,570 -2.2% ======== ======== ======== ======== ======== ======== ======== ======== ======== Notes: Information shown is Combined, including share of partnership communities at 100%. 23
AMLI RESIDENTIAL COMPONENTS OF NOI QUARTERLY COMPARISONS (Dollars in thousands)
Partnership Communities Wholly-Owned Communities Combined (e) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent Market 2002 2001 Change 2002 2001 Change 2002 2001 Change - ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- REVENUES Same store communities (a). . . . 25,592 25,474 0.5% 36,504 36,696 -0.5% 33,948 34,854 -2.6% New communities (b) . . 0 0 0.0% 763 644 18.4% 2,623 2,166 21.1% Communities under development and lease-up . . . . . . . 0 0 0.0% 412 40 921.3% 1,633 162 911.1% Acquisition communities (c). . . . 3,053 618 394.3% 4,051 1,264 220.7% 1,453 940 54.7% Communities sold/ contributed to ventures (d) . . . . . 0 2,244 -100.0% -- 2,844 -100.0% 874 2,350 -62.8% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total. . . . . . . . 28,645 28,336 1.1% 41,731 41,488 0.6% 40,531 40,472 0.1% ======== ======== ======== ======== ======== ======== ======== ======== ======== EXPENSES Same store communities (a). . . . 9,685 9,739 -0.6% 13,917 13,936 -0.1% 13,111 13,020 0.7% New communities (b) . . 0 0 0.0% 268 270 -1.0% 915 927 -1.3% Communities under development and lease-up . . . . . . . 0 0 0.0% 237 63 279.3% 942 250 276.8% Acquisition communities (c). . . . 1,264 174 626.3% 1,642 385 325.6% 550 308 78.6% Communities sold/ contributed to ventures (d) . . . . . 0 904 -100.0% -- 1,095 -100.0% 388 898 -56.8 -------- -------- -------- -------- -------- -------- -------- -------- -------- Total. . . . . . . . 10,949 10,817 1.2% 16,064 15,749 2.0% 15,906 15,403 3.3% ======== ======== ======== ======== ======== ======== ======== ======== ======== 24 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED QUARTERLY COMPARISONS (Dollars in thousands) Partnership Communities Wholly-Owned Communities Combined (e) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent Market 2002 2001 Change 2002 2001 Change 2002 2001 Change - ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME Same store communities (a). . . . 15,907 15,735 1.1% 22,587 22,760 -0.8% 20,837 21,834 -4.6% New communities (b) . . 0 0 0.0% 495 374 32.4% 1,708 1,239 37.9% Communities under development and lease-up . . . . . . . 0 0 0.0% 175 (22) -892.5% 691 (88) -881.8% Acquisition communities (c). . . . 1,789 444 303.5% 2,412 878 174.6% 903 632 43.0% Communities sold/ contributed to ventures (d) . . . . . 0 1,340 -100.0% -- 1,749 -100.0% 486 1,452 -66.6% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total. . . . . . . . 17,696 17,519 1.0% 25,669 25,739 -0.3% 24,625 25,069 -1.8% ======== ======== ======== ======== ======== ======== ======== Cash flow preference and promote (e). . . . 622 537 -------- -------- COMPANY'S SHARE OF NOI (f). . . . . . 26,291 26,276 ======== ======== COMPANY'S PERCENTAGE OF PARTNERSHIPS' NOI: Before cash flow preferences (e). . . . 60.7% 60.4% Including cash flow preferences (f). . . . 62.1% 61.7% ======== ======== 25 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED QUARTERLY COMPARISONS (Dollars in thousands) Note (a) Same store communities are communities that have had stabilized operations and were owned by the Company as of January 1, 2001. (b) New communities are communities that were developed by the Company and began stabilized operations after January 1, 2001. (c) Acquisition communities are communities having stabilized operations that were acquired by the Company after January 1, 2001. (d) Reflects operations through the date of sale. Prior to the date of contribution of the community to a joint venture, the operating results of such communities were disclosed under wholly-owned communities. (e) The terms of certain partnership agreements provide that the Company is entitled to an additional share of such partnership's NOI in addition to the Company's proportionate ownership percentage. See page 24. (f) Based on Company's ownership share of each partnership's NOI. Reflect only property operations. Excludes other items of partnership operations such as interest income on invested funds, legal, accounting, audit and other costs of partnership administration, including asset management fees paid to the Company. see page 24. (g) Company's 100% interest in wholly-owned communities plus the Company's share of partnership communities. 26
AMLI RESIDENTIAL CO-INVESTMENT COMPENSATION (Dollars in thousands) Three Months Ended March 31, ----------------------- 2002 2001 ---------- ---------- FEE INCOME (a) Acquisition fees (a). . . . . . . . . . . . . $ -- 118 Asset management fees (b) . . . . . . . . . . 129 143 Disposition fees (c). . . . . . . . . . . . . -- -- Debt/equity placement fees. . . . . . . . . . -- 113 Development fees (a). . . . . . . . . . . . . 458 251 ---------- ---------- 587 624 ---------- ---------- SHARE OF CASH FLOW (d) Promoted interest from operating cash flow. . 106 26 Cash flow preferences (e) . . . . . . . . . . 516 511 ---------- ---------- 622 537 ---------- ---------- Promoted interest from sale or refinancing. . 110 -- ---------- ---------- TOTAL . . . . . . . . . . . . . . . . . . $ 1,319 1,161 ========== ========== Notes: (a) Acquisition, debt/equity placement and development fees are shown net of elimination of Company's share. Property management, construction and certain asset management fees are earned by the Company's subsidiaries. See page 28. (b) Asset management fees are shown at 100%. The Company's share of partnerships' EBITDA is reduced by its share of this fee. (c) Disposition fees are shown at 100% as reported gains on sale have been reduced for this cost. (d) See page 25. (e) The Company receives compensation from certain partnerships in the form of a preferential distribution of cash flow. 27 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED STATEMENTS OF OPERATIONS - ------------------------------------------- Three Months Ended March 31, ----------------------- 2002 2001 ---------- ---------- REVENUES Property management fees (a). . . . . . . . . $ 2,691 2,502 General contract revenue, net (b) . . . . . . 633 515 Gross profit - corporate homes (c). . . . . . 346 305 Other income. . . . . . . . . . . . . . . . . 122 190 ---------- ---------- 3,792 3,512 OPERATING EXPENSES Property management . . . . . . . . . . . . . 2,508 2,414 Corporate homes . . . . . . . . . . . . . . . 242 227 General contractor. . . . . . . . . . . . . . 550 506 Other expenses. . . . . . . . . . . . . . . . -- -- ---------- ---------- 3,300 3,147 EBITDA. . . . . . . . . . . . . . . . . . . . 492 365 Gain (loss) on land sales . . . . . . . . . . (73) -- Interest expense. . . . . . . . . . . . . . . (409) (698) Depreciation and amortization . . . . . . . . (716) (575) Taxes . . . . . . . . . . . . . . . . . . . . 268 345 ---------- ---------- NET INCOME (LOSS) . . . . . . . . . . . . . . (438) (563) Eliminations, interest and other. . . . . . . 208 160 ---------- ---------- SHARE OF INCOME (LOSS) FROM SERVICE COMPANIES (D) . . . . . . . . . . . (230) (403) ========== ========== Notes: (a) Includes a 3% fee from wholly-owned communities. (b) General contractor revenues are shown net of gross billings and payments to subcontractors. (c) Gross revenues from customers less payments to communities and cost of sales. (d) See Company's Consolidated Statements of Operations. 28 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED FINANCIAL POSITION - ------------------------------------- March 31, December 31, 2002 2001 ---------- ------------ ASSETS: Receivables (a) . . . . . . . . . . . . . $ 7,771 9,136 Land held for sale (b). . . . . . . . . . 8,005 4,951 Building and equipment, net (c) . . . . . 11,298 10,847 Other . . . . . . . . . . . . . . . . . . 10,625 9,911 ---------- ---------- TOTAL ASSETS. . . . . . . . . . . . . $ 37,699 34,845 ========== ========== LIABILITIES Due to the Company. . . . . . . . . . . . $ 21,692 17,311 Bank debt . . . . . . . . . . . . . . . . 14,000 14,000 Other . . . . . . . . . . . . . . . . . . 4,348 5,733 ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . $ 40,040 37,044 ========== ========== EQUITY (DEFICIT). . . . . . . . . . . . . $ (2,341) (2,199) Eliminations and other. . . . . . . . . . (303) 49 Due to Company (above). . . . . . . . . . 21,692 17,311 ---------- ---------- Investment in and receivables from the Service Companies . . . . . . . . . $ 19,048 15,161 ========== ========== Notes: (a) Primarily fee income from affiliates. (b) Represents non-apartment land holdings. (c) Includes $8,384 in capitalized computer hardware and software cost, of which approximately $6,500 (including $800 of internal costs) was incurred in 2001. Amounts are generally amortized over five years. 29 AMLI RESIDENTIAL STABILIZED March 31, 2002
Percent AMLI's Number of of Ownership Year Year Apartment Portfolio Components Market/Community Percentage Location Acquired Completed Homes (a) of NOI - ---------------- ---------- -------- ---------- --------- --------- --------- ---------- DALLAS/ FT. WORTH, TX - ------------- AMLI: at Bent Tree 100% Dallas, TX 1997 1996/2000 500 Same Store at Bishop's Gate 100% Plano, TX 1997 1997 266 Same Store at Breckinridge Point 45% Richardson, TX 2000 1999 440 Same Store at Chase Oaks 100% Plano, TX 1994 1986 250 Same Store at Deerfield 25% Plano, TX Developed 2000 240 Same Store at Fossil Creek 25% Ft. Worth, TX Developed 1998 384 Same Store on Frankford 45% Dallas, TX 2000 1998 582 Same Store at Gleneagles 100% Dallas, TX 1998 1987/97 590 Same Store on the Green 100% Ft. Worth, TX 1994 1990/93 424 Same Store at Nantucket 100% Dallas, TX 1988 1986 312 Same Store of North Dallas 100% Dallas, TX 1989/90 1985/86 1,032 Same Store at Oak Bend 40% Dallas, TX 1999 1997 426 Same Store on the Parkway 25% Dallas, TX Developed 1999 240 Same Store at Prestonwood Hills 45% Dallas, TX 1999 1997 272 Same Store at Shadow Ridge 100% Flower Mount, TX 2001 2000 222 Acquisition Community at Stonebridge Ranch 100% McKinney, TX 2001 2001 250 Acquisition Community on Timberglen 40% Dallas, TX 1990 1985 260 Same Store at Valley Ranch 100% Irving, TX 1990 1985 460 Same Store at Verandah 35% Arlington, TX 1997 1986/91 538 Same Store ------ 7,688 28.2% ------ 30 AMLI RESIDENTIAL STABILIZED - CONTINUED (Dollars in thousands) Percent AMLI's Number of of Ownership Year Year Apartment Portfolio Components Market/Community Percentage Location Acquired Completed Homes (a) of NOI - ---------------- ---------- -------- ---------- --------- --------- --------- ---------- ATLANTA, GA - ------------ AMLI: at Barrett Lakes 35% Kennesaw, GA Developed 1997 446 Same Store at Clairmont 100% Atlanta, GA 1988 1988 288 Same Store at Killian Creek 100% Snellville, GA Developed 1999 256 Same Store at Lost Mountain 75% Paulding County, GA Developed 2000 164 Same Store at Northwinds 35% Alpharetta, GA Developed 1999 800 Same Store at Park Bridge 25% Alpharetta, GA Developed 2000 352 New Community at Park Creek 100% Gainesville, GA Developed 1998 200 Same Store at Peachtree City 20% Fayette County, GA Developed 1998 312 Same Store at River Park 40% Norcross, GA Developed 1997 222 Same Store at Spring Creek 100% Atlanta, GA Developed 1985/86 /87/89 1,180 Same Store at Towne Creek 100% Gainesville, GA Developed 1989 150 Same Store at Vinings 100% Smyrma, GA 1992/97 1985 360 Same Store at West Paces 100% Atlanta, GA 1993 1992 337 Same Store at Willeo Creek 30% Roswell, GA 1995 1989 242 Same Store at Windward Park 45% Alpharetta, GA 1999 1999 328 Same Store ------ 5,637 20.7% ------ CHICAGO, IL - ----------- AMLI: at Chevy Chase 33% Buffalo Grove, IL 1996 1988 592 Same Store at Danada Farms 10% Wheaton, IL 1997 1989/91 600 Same Store at Fox Valley 25% Aurora, IL Developed 1998 272 Same Store at Oakhurst North 25% Aurora, IL Developed 2000 464 Same Store at Osprey Lake 69% Gurnee, IL 2001 1997/99 483 Acquisition Community at Poplar Creek 100% Schaumburg, IL 1997 1985 196 Same Store at St. Charles 25% St. Charles, IL Developed 2000 400 Same Store at Windbrooke 15% Buffalo Grove, IL 1995 1987 236 Same Store ------ 3,243 11.9% ------ 31 AMLI RESIDENTIAL STABILIZED - CONTINUED (Dollars in thousands) Percent AMLI's Number of of Ownership Year Year Apartment Portfolio Components Market/Community Percentage Location Acquired Completed Homes (a) of NOI - ---------------- ---------- -------- ---------- --------- --------- --------- ---------- AUSTIN, TX - ---------- AMLI: in Great Hills 100% Austin, TX 1991 1985 344 Same Store at Lantana Ridge 100% Austin, TX 1997 1997 354 Same Store at Monterey Oaks 25% Austin, TX Developed 2000 430 Same Store at Scofield Ridge 45% Austin, TX 2000 2000 487 Same Store at StoneHollow 100% Austin, TX 2000 1997 606 Same Store at Wells Branch 25% Austin, TX Developed 1999 576 Same Store ------ 2,797 10.3% ------ KANSAS CITY, KS - --------------- AMLI: at Centennial Park 100% Overland Park, KS 1998 1997 170 Same Store Creekside 25% Overland Park, KS Developed 2000 224 Same Store at Lexington Farms 100% Overland Park, KS 1998 1998 404 Same Store at Regents Center 100% Overland Park, KS 1994 1991/95 /97 424 Same Store at Regents Crest 25% Overland Park, KS 1997 1997/2000 476 Same Store at Summit Ridge 30% Lees Summit, MO Developed 2001 432 New Community at Town Center 100% Overland Park, KS 1997 1997 156 Same Store at Wynnewood Farms 25% Overland Park, KS Developed 2000 232 Same Store ------ 2,518 9.2% ------ INDIANAPOLIS, IN - ---------------- AMLI: at Castle Creek 40% Indianapolis, IN Developed 2000 276 New Community at Conner Farms 100% Fishers, IN 1997 1993 300 Same Store at Eagle Creek 100% Indianapolis, IN 1998 1998 240 Same Store at Lake Clearwater 25% Indianapolis, IN Developed 1999 216 Same Store at Riverbend 100% Indianapolis, IN 1992/93 1983/85 996 Same Store at Spring Mill (residual) 20% Carmel, IN 1999 1999 400 Other ------ 2,428 8.9% ------ 32 AMLI RESIDENTIAL STABILIZED - CONTINUED (Dollars in thousands) Percent AMLI's Number of of Ownership Year Year Apartment Portfolio Components Market/Community Percentage Location Acquired Completed Homes (a) of NOI - ---------------- ---------- -------- ---------- --------- --------- --------- ---------- HOUSTON, TX - ----------- AMLI: at Champions Centre* 15% Houston, TX 1994 1994 192 Same Store at Champions Park* 15% Houston, TX 1994 1991 246 Same Store at Greenwood Forest* 15% Houston, TX 1995 1995 316 Same Store at the Medical Center 100% Houston, TX 2001 2000 334 Acquisition Community Midtown 45% Houston, TX 2000 1998 419 Same Store Towne Square 45% Houston, TX 2000 1999 380 Same Store at Western Ridge 100% Houston, TX 2000 2000 318 Same Store ------ 2,205 8.1% ------ DENVER, CO - ---------- AMLI: at Lowry Estates 50% Denver, CO 2000 2000 414 Same Store at Gateway Park 100% Denver, CO 2000 2000 328 Acquisition ------ Community 742 2.7% ------ ------ TOTAL 27,258 100.0% ====== ====== Note: (a) Based on number of apartment homes. 33
AMLI RESIDENTIAL DEVELOPMENT SUMMARY March 31, 2002 (Dollars in thousands)
Number Percen- of Con- Anti- Anti- Number of tage of Apart- struc- First pated pated Apartment Percent Percent Owner- ment tion Units Comple- Stabil- Homes Complete Leased Market/Community Submarket ship Homes Started Occupied tion ization Delivered (a) (b) - ---------------- --------- ------- ------ ------- -------- ------- ------- --------- -------- ------- ATLANTA, GA - ----------- AMLI: at Mill Creek Gwinnett County, GA 25% 400 3Q/99 3Q/00 4Q/01 2Q/02 400 100% 100% at Kedron Village Peachtree City, GA 20% 216 3Q/00 3Q/01 2Q/02 4Q/02 158 97% 47% at Milton Park Alpharetta, GA 25% 461 4Q/00 1Q/02 1Q/03 4Q/03 38 46% 9% at Barrett Walk Kennesaw, GA 25% 310 4Q/01 4Q/02 2Q/03 1Q/04 0 11% N/A HOUSTON, TX - ----------- AMLI at Kings Harbor Lake Houston, TX 25% 300 2Q/00 1Q/01 4Q/01 3Q/02 300 100% 81% KANSAS CITY, KS - --------------- AMLI at Cambridge Square Overland Park, KS 30% 408 3Q/00 3Q/01 2Q/02 2Q/03 198 90% 38% INDIANAPOLIS, IN - ---------------- AMLI Carmel Center Carmel, IN 100% 322 2Q/01 2Q/02 2Q/03 3Q/03 -- 35% N/A CHICAGO, IL - ----------- AMLI at Seven Bridges Woodridge, IL 20% 520 3Q/01 4Q/02 4Q/03 4Q/04 -- 25% N/A ----- Total 2,937 ===== 34
AMLI RESIDENTIAL DEVELOPMENT SUMMARY - CONTINUED March 31, 2002 (Dollars in thousands)
Joint Venture Company's Share of Required Equity Capital Partners' -------------------------------------------- Total Fully Equity Development Funded Capital Funded Balance Market/Community Costs (c) Debt (d) (e) Total to Date of 2002 2003 - ---------------- ----------- ---------- --------- -------- -------- ---------- -------- ATLANTA, GA - ----------- AMLI: at Mill Creek $ 25,800 18,000(e) 5,850 1,950 6,450 (4,500) at Kedron Village 20,200 -- 16,160 4,040 200 3,840(f) 600 at Milton Park 35,000 -- 26,250 8,750 4,900 3,250 600 at Barrett Walk 22,500 -- 16,875 5,625 1,400 2,125 2,100 HOUSTON, TX - ----------- AMLI at Kings Harbor 19,800 -- 14,850 4,950 4,900 50 KANSAS CITY, KS - --------------- AMLI at Cambridge Square 32,200 -- (g) 22,540 9,660 9,270 390 INDIANAPOLIS, IN - ---------------- AMLI Carmel Center 28,400 -- -- 28,400 13,250 10,250 4,900 CHICAGO, IL AMLI at Seven Bridges 82,200 60,000(h) 22,560 5,640 3,220 -- 2,420 -------- ------- ------- ------- ------- ------- ------- TOTAL $266,100 78,000 125,085 69,015 43,590 15,405 10,620 ======== ======= ======= ======= ======= ======= ======= 35 AMLI RESIDENTIAL DEVELOPMENT SUMMARY - CONTINUED March 31, 2002 (Dollars in thousands) Notes: (a) Represents costs to date divided by Total Development Costs. (b) Represents number of leased apartments (not necessarily occupied) divided by the Number of Apartment Homes Delivered. (c) Includes anticipated costs of development and initial lease-up, of which certain amounts may not be capitalized. (d) Represents anticipated fully funded permanent loan, which will encumber the property upon completion and stabilization. (e) Subsequent to the end of the quarter, the partnership funded a 6.4%, 7-year permanent loan. (f) Property is currently subject to a construction financing, which is anticipated to be paid off at completion. (g) Upon stabilization, the partnership will obtain a permanent loan for approximately 65% of total costs. (h) The partnership has obtained a commitment to fund a 7.25%, 7-year permanent loan upon completion of development. The following is a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995 and Section 21 E of the Securities Exchange Act of 1934. The projections contained in this table that are not historical facts are forward-looking statements. Risks associated with the Company's development, construction and lease-up activities, which could impact the forward looking statements may include: development opportunities may be abandoned; construction costs of a community may exceed original estimates, possibly making the community uneconomical; construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs of improvements to bring an acquired property up to the standards established for the market position intended for that property may prove inaccurate. 36
AMLI RESIDENTIAL LAND HELD FOR DEVELOPMENT OR SALE Number of Apartment Market/Community Submarket Homes - ---------------- --------- --------- INDIANAPOLIS, IN - ---------------- AMLI: at Prairie Lakes Noblesville 228 at Prairie Lakes (Phase II-IV) Noblesville 1,100 AUSTIN, TX - ---------- AMLI at Anderson Mill Northwest Austin 520 Downtown Austin - Block 20 CBD 220 AMLI at Parmer Park North Austin 480 FORT WORTH, TX - -------------- AMLI at Mesa Ridge North Fort Worth 460 DALLAS, TX - ---------- AMLI at Vista Ridge Lewisville, TX 340 HOUSTON, TX - ----------- AMLI at Champions II Northwest Houston 288 KANSAS CITY, KS - --------------- AMLI: at Lexington Farms - Phase II Overland Park 104 at Westwood Ridge Overland Park 428 ------ Total 4,168 ====== 37 -----END PRIVACY-ENHANCED MESSAGE-----