-----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, DGfmXWu+DFzcce/sznru6N5Y8ywLWuTsl1xv7bvvqMJyRp/0ErhBjc6OcYLK6h9V KloATunW0mIo6JQWtiv13g== 0000892626-02-000266.txt : 20020812 0000892626-02-000266.hdr.sgml : 20020812 20020812155603 ACCESSION NUMBER: 0000892626-02-000266 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020812 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: 02726910 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 aml_10q.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 June 30, 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 17,945,719 as of July 31, 2002. INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Independent Accountants' Review Report . . . . . . 3 Consolidated Balance Sheets as of June 30, 2002 (Unaudited) and December 31, 2001 (Audited). . . . . . . . . . . 4 Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001 (Unaudited) . . . . . . . 6 Consolidated Statements of Shareholders' Equity for the six months ended June 30, 2002 (Unaudited). . . . . . . . . . . . 9 Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 (Unaudited) . . . . . . . 11 Notes to Consolidated Financial Statements (Unaudited). . . . . . . . . . . . . . . . . . . 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . 42 Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . 59 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . 65 Item 5. Exhibits and Reports on Form 8-K . . . . . . . . . 66 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 67 Independent Accountants' Review Report Shareholders and Board of Trustee AMLI Residential Properties Trust: We have reviewed the accompanying consolidated balance sheet of AMLI Residential Properties Trust (the "Company") as of June 30, 2002, the related consolidated statements of operations for the three and six months ended June 30, 2002 and 2001, the related consolidated statement of shareholders' equity for the six month period ended June 30, 2002, and the consolidated statement of cash flows for the six-month periods ended June 30, 2002 and 2001. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of AMLI Residential Properties Trust as of December 31, 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 4, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG LLP Chicago, Illinois July 31, 2002 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS JUNE 30, 2002 AND DECEMBER 31, 2001 (Dollars in thousands, except share data) JUNE 30, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ----------- ------------ ASSETS: Rental apartments: Land. . . . . . . . . . . . . . . $ 99,013 99,784 Depreciable property. . . . . . . 636,686 644,627 -------- ---------- 735,699 744,411 Less accumulated depreciation . . (110,733) (107,139) -------- ---------- 624,966 637,272 Rental property held for sale, net of accumulated depreciation . 20,401 -- Land held for development or sale, net of provision for loss of $1,389 and $2,086, respectively . 24,372 47,611 Rental communities under development . . . . . . . . . . . 25,477 10,392 Investments in partnerships . . . . 221,487 184,270 Cash and cash equivalents . . . . . 4,129 5,892 Deferred expenses, net. . . . . . . 3,724 3,836 Notes and advances to the Service Companies . . . . . . . . 26,379 15,161 Other assets. . . . . . . . . . . . 13,865 14,568 -------- -------- Total assets $964,800 919,002 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Debt (note 5) . . . . . . . . . . . $450,268 399,309 Distributions in excess of investments in and earnings from partnerships. . . . . . . . . . . 4,514 -- Accrued interest payable. . . . . . 1,855 1,838 Accrued real estate taxes payable . 9,066 12,270 Construction costs payable. . . . . 4,092 4,079 Security deposits and prepaid rents 2,615 2,656 Other liabilities . . . . . . . . . 8,203 7,100 -------- -------- Total liabilities . . . . 480,613 427,252 -------- -------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS - CONTINUED JUNE 30, 2002 AND DECEMBER 31, 2001 (Dollars in thousands, except share data) JUNE 30, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ----------- ------------ Commitments and contingencies (note 7) Mandatorily redeemable convertible preferred shares (aggregate liquidation preference of $96,933 and $96,793, respectively. . . . . . . . . . . 93,247 93,287 Minority interest . . . . . . . . . 66,433 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 $2,022 and $7,075, respectively) . . . . 1 4 Shares of beneficial interest, $0.01 par value, 145,375,000 authorized, 18,120,296 and 17,840,368 common shares issued and outstanding, respectively . . 181 178 Additional paid-in capital. . . . . 356,450 355,728 Employees' and Trustees' notes. . . (10,537) (10,857) Accumulated other comprehensive loss. . . . . . . . . . . . . . . (3,854) (4,294) Dividends paid in excess of earnings. . . . . . . . . . . . . (17,734) (10,482) -------- -------- Total shareholders' equity. . . . . . . . . . 324,507 330,277 -------- -------- Total liabilities and shareholders' equity. . . $964,800 919,002 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Revenues: Property: Rental. . . . . . . . . . . . . . . . . . . . $ 25,825 25,838 51,612 51,379 Other . . . . . . . . . . . . . . . . . . . . 1,713 1,685 3,300 3,192 Interest and share of loss from the Service Companies. . . . . . . . . . (24) 291 (254) (112) Other interest. . . . . . . . . . . . . . . . . 83 326 316 803 Income from partnerships. . . . . . . . . . . . 2,255 2,439 4,284 4,734 Other . . . . . . . . . . . . . . . . . . . . . 1,260 569 1,978 1,193 -------- -------- -------- -------- Total revenues. . . . . . . . . . . . . . 31,112 31,148 61,236 61,189 -------- -------- -------- -------- Expenses: Personnel . . . . . . . . . . . . . . . . . . . 2,690 2,737 5,394 5,447 Advertising and promotion . . . . . . . . . . . 616 778 1,183 1,291 Utilities . . . . . . . . . . . . . . . . . . . 668 725 1,361 1,580 Building repairs and maintenance and services. . . . . . . . . . . . . . . . . 1,428 1,691 2,299 2,813 Landscaping and grounds maintenance . . . . . . 636 636 1,127 1,127 Real estate taxes . . . . . . . . . . . . . . . 3,616 3,239 7,176 6,604 Insurance . . . . . . . . . . . . . . . . . . . 477 276 957 571 Property management fees. . . . . . . . . . . . 826 688 1,647 1,364 Other operating expenses. . . . . . . . . . . . 310 264 554 579 Interest. . . . . . . . . . . . . . . . . . . . 6,084 6,352 11,884 12,779 Amortization of deferred costs. . . . . . . . . 158 309 304 445 Depreciation . . . . . . . . . . . . . . . . . 5,248 5,328 10,426 10,221 General and administrative. . . . . . . . . . . 1,213 1,151 2,753 2,669 -------- -------- -------- -------- Total expenses. . . . . . . . . . . . . . 23,970 24,174 47,065 47,490 -------- -------- -------- -------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Income from continuing operations before share of gains on sales of properties . . . . . 7,142 6,974 14,171 13,699 Gains on sales of residential properties including $605 share of gain on sale of a partnership's properties in 2002. . . . . . . . 605 9,249 605 9,249 -------- -------- -------- -------- Income from continuing operations before minority interest . . . . . . . . . . . . . . . 7,747 16,223 14,776 22,948 Minority interest . . . . . . . . . . . . . . . . 975 2,486 1,816 3,324 -------- -------- -------- -------- Income from continuing operations . . . . . . . . 6,772 13,737 12,960 19,624 Income from discontinued operations, net of minority interest . . . . . . . . . . . . . . . 519 488 991 1,006 -------- -------- -------- -------- Net income. . . . . . . . . . . . . . . . 7,291 14,225 13,951 20,630 Net income attributable to preferred shares. . . . . . . . . . . . 1,946 1,633 4,028 3,266 -------- -------- -------- -------- Net income attributable to common shares . . . . . . . . . . . . . $ 5,345 12,592 9,923 17,364 ======== ======== ======== ======== AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Income per common share - basic: From continuing operations. . . . . . . . . . . $ 0.27 0.68 0.50 0.92 ======== ======== ======== ======== From discontinued operations. . . . . . . . . . $ 0.03 0.03 0.05 0.06 ======== ======== ======== ======== Net income. . . . . . . . . . . . . . . . . . . $ 0.30 0.71 0.55 0.98 ======== ======== ======== ======== Income per common share - diluted: From continuing operations. . . . . . . . . . . $ 0.26 0.64 0.49 0.91 ======== ======== ======== ======== From discontinued operations. . . . . . . . . . $ 0.03 0.03 0.05 0.05 ======== ======== ======== ======== Net income. . . . . . . . . . . . . . . . . . . $ 0.29 0.67 0.54 0.96 ======== ======== ======== ======== Dividends declared and paid per common share. . . $ 0.48 0.47 0.96 0.94 ======== ======== ======== ======== See accompanying notes to consolidated financial statements.
AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) (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. . . . . . -- -- -- -- -- -- 13,951 13,951 Preferred share dividends paid. . . -- -- -- -- -- -- (3,941) (3,941) Net change related to derivative contracts . . . . . -- -- -- -- -- 440 -- 440 ------- Comprehensive income attributable to common shares . . . . -- -- -- -- -- -- -- 10,450 ------- Common share distributions . . . . -- -- -- -- -- -- (17,262) (17,262) AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) (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 --------- ---------- ------ --------- ---------- ---------- ----------- ------- Shares issued in connection with: Executive Share Purchase Plan . . -- 10,291 -- 248 -- -- -- 248 Units converted to shares . . . . -- 9,032 -- 166 -- -- -- 166 Options exercised . -- 10,000 -- 204 -- -- -- 204 Employees' and Trustees' notes, net of repayments -- -- -- -- 320 -- -- 320 Trustees' compen- sation. . . . . . -- 605 -- 15 -- -- -- 15 Preferred shares converted to common shares . . . . (250,000) 250,000 -- -- -- -- -- -- Reallocation of minority interest . . -- -- -- 89 -- -- -- 89 -------- ---------- ---- ------- ------- ------- ------- ------- Balance at June 30, 2002 . . . . 100,000 18,120,296 $182 356,450 (10,537) (3,854) (17,734) 324,507 ======== ========== ==== ======= ======= ======= ======= ======= See accompanying notes to consolidated financial statements.
AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands) 2002 2001 -------- -------- Cash flows from operating activities: Net income. . . . . . . . . . . . . . . . $ 13,951 20,630 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Income from discontinued operations . . (1,193) (1,207) Depreciation and amortization . . . . . 10,730 10,666 Cash distributions from partnerships in excess of share of income. . . . . 3,601 4,105 Loss from the Service Companies . . . . 826 590 Gain on sale of a residential property. -- (9,249) Share of a partnership's gains on sales of residential properties . . . (605) -- Minority interest . . . . . . . . . . . 1,816 3,324 Changes in assets and liabilities: Decrease (increase) in deferred costs . 2 (264) Decrease in other assets. . . . . . . . 2,933 3,371 Decrease in accrued real estate taxes . (2,754) (2,628) Increase (decrease) in accrued interest payable. . . . . . . . . . . 17 (551) (Decrease) increase in tenant security deposits and prepaid rents. . . . . . (36) 371 (Decrease) increase in other liabilities . . . . . . . . . . . . . (66) 2 -------- ------- Net cash provided by operating activities of continuing operations . . . . . . 29,222 29,160 Net cash provided by operating activities of discontinued operations . . . . . 1,355 1,422 -------- ------- Net cash provided by operating activities. . . . . . . 30,577 30,582 -------- ------- Cash flows from investing activities: Net cash proceeds from a sale of a residential property. . . . . . . . . . -- 39,144 Share of a partnership's net cash proceeds, in excess of return of capital, from sales of residential properties. . . . . . . . . . . . . . . 161 -- Investments in partnerships, net of $14,096 return of capital and $2,846 distribution in excess of return of capital from refinancing of partner- ships' debt in 2002 and Operating Partnership units issued in 2001. . . . (35,207) (12,600) Repayments from (advances to) affiliates, net . . . . . . . . . . . . . . . . . . 174 (7,024) (Increase) decrease in earnest money deposits. . . . . . . . . . . . . . . . (45) 470 Acquisition properties, net of Operating Partnership units issued and net of $14,444 cash in deferred exchange escrow in 2001. . . . . . . . . . . . . (13,883) (56,399) AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) (Dollars in thousands) 2002 2001 -------- -------- Capital expenditures - rehab properties and other additions . . . . . . . . . . (466) (808) Capital expenditures - other properties . (2,164) (3,369) Properties under development, net of co-investors' share of costs. . . . . . (8,664) (5,817) Increase in other liabilities . . . . . . 976 301 -------- ------- Net cash used in investing activities. . . . . . . (59,118) (46,102) -------- ------- Cash flows from financing activities: Debt proceeds, net of financing costs . . 183,361 209,893 Debt repayments . . . . . . . . . . . . . (132,614) (167,392) Proceeds from issuance of Executive Share Purchase Plan shares and Option Plan shares, net of Employees' and Trustees' notes . . . . . . . . . . . . 788 904 Repurchase of shares of beneficial interest - common shares. . . . . . . . -- (3,736) Issuance cost of preferred shares . . . . (40) -- Distributions to partners . . . . . . . . (3,514) (3,415) Dividends paid. . . . . . . . . . . . . . (21,203) (20,010) -------- ------- Net cash provided by financing activities. . . . . . . 26,778 16,244 -------- ------- Net change in cash and cash equivalents . . (1,763) 724 Cash and cash equivalents at beginning of period. . . . . . . . . . 5,892 5,106 -------- ------- Cash and cash equivalents at end of period. . . . . . . . . . . . . $ 4,129 5,830 ======== ======= Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest, net of amounts capitalized. . $ 11,867 13,330 ======== ======== 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 JUNE 30, 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 Company's financial position at June 30, 2002 and December 31, 2001 and the results of its 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 six months ended June 30, 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 June 30, 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 June 30, 2002, there are 3,655,364 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. At June 30, 2002, AMLI owned or had interests in eighty-one multi- family apartment communities comprised of 31,109 apartment homes. Seventy-three of these communities totaling 28,352 apartment homes were stabilized as of June 30, 2002 and eight communities containing 2,757 apartment homes were under development or in lease-up at that date. 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 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 June 30, 2002, the Company was continuing the rehab of the second phase of AMLI at Valley Ranch. Starting in 1999 and through June 30, 2002, the Company has spent $2,761 on the rehab of this property and expects to spend an additional $400 in 2002 to complete the rehab. The following table summarizes capital expenditures incurred in connection with the rehab of phase II of AMLI at Valley Ranch. Six Months Ended June 30, ---------------------- 2002 2001 -------- -------- Buildings - interior . . . . . . . . $ 322 164 Amenities. . . . . . . . . . . . . . -- 37 General contractor's fee . . . . . . 8 7 Overhead and general conditions. . . 69 64 Other. . . . . . . . . . . . . . . . 67 27 -------- -------- $ 466 299 ======== ======== Rental Properties Held For Sale At June 30, 2002, AMLI at Gleneagles, a 590-unit community located in Dallas, Texas, was being held for sale. During the six months ended June 30, 2002 and 2001, this community generated total revenues of $2,527 and $2,588, respectively, and operating income of $1,500 and $1,626, respectively. The Company expects to complete this sale in the third quarter of 2002. Rental Communities Under Development At June 30, 2002, the Company has eight communities under development including six 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 6/30/02 COMPLETION - --------- -------- ------ ------ ------------ ---------- Wholly-Owned: Development Communities: AMLI: Carmel Center Carmel, IN 15 322 $ 15,020 28,400 Downtown Austin Austin, TX 2 220 10,457 50,900 --- ----- -------- -------- Total wholly-owned development communities 17 542 25,477 79,300 --- ----- -------- -------- Co-Investments (Company Ownership Percentage): Development Communities: AMLI: at Milton Park (25%) Alpharetta, GA 21 461 23,480 35,000 at Kedron Village (20%) Peachtree City, GA 21 216 19,252 20,200 at Barrett Walk (25%) Cobb County, GA 26 310 8,679 22,500 at King's Harbor (25%) Houston, TX 15 300 19,576 19,800 at Cambridge Square (30%) Overland Park, KS 21 408 31,814 32,200 at Seven Bridges (20%) Woodridge, IL 13 520 36,687 82,200 --- ----- -------- -------- Total co-investment development communities 117 2,215 139,488 211,900 --- ----- -------- -------- Total wholly-owned and co-investments 134 2,757 $164,965 291,200 === ===== ======== ========
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Land Held for Development or Sale At June 30, 2002, the Company owned several parcels of land, which are currently being planned for development, being held for future development or being considered for sale.
NET NUMBER NUMBER CAPITALIZED OF OF COSTS COMMUNITY LOCATION ACRES UNITS THRU 6/30/02 - --------- -------- ------ ------ ------------ Wholly-Owned: Land Held for Development or Sale: AMLI: at Champions II (1)(2) Houston, TX 14 288 $ 2,659 at Mesa Ridge (1)(2) Ft. Worth, TX 27 460 4,172 at Anderson Mill (1)(2) Austin, TX 39 520 4,234 at Parmer Park Austin, TX 28 480 5,542 at Vista Ridge (1)(2) City of Lewisville, TX 15 340 3,199 at Westwood Ridge Overland Park, KS 30 428 3,655 at Lexington Farms II Overland Park, KS 7 104 911 --- ----- ------- Total land held for development 160 2,620 $24,372 === ===== ======= (1) The Company has expensed interest carry of $554 on these land parcels for the six months ended June 30, 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 transferred to Amrescon, an unconsolidated subsidiary of AMLI, for $5,076 their estimated market value and carrying value. In the second quarter of 2002, the Company transferred additional land parcels located in Noblesville, Indiana for their $7,599 estimated market value and carrying value. These transfers increased advances to the Service Companies by $12,675. Amrescon intends to 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 table below summarizes the properties acquired by the Company during 2001 and 2002:
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 Upper West Side . . . . . Ft. Worth, TX 194 2001 5/1/02 13,600 -- 13,600 ------ -------- ------ ------- Total wholly-owned 1,328 108,910 -- 108,910 ------ -------- ------ ------- 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 at Parks Meadows (25%) . . . . . Littleton, CO 518 2001 4/24/02 56,500 --(3) 56,500 at Bryan Place (48%) . . . . . Dallas, TX 420 1999 6/28/02 39,600 --(4) 39,600 ------ -------- ------- ------- Total co-investments 1,421 148,100 35,320 112,780 ------ -------- ------- ------- Total wholly-owned and co-investments 2,749 $257,010 35,320 221,690 ====== ======== ======= ======= AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (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. (3) On July 1, 2002, the partnership closed on a 6.25%, $28,500 first mortgage permanent loan through GMAC. This interest only loan will mature in seven years, with the balloon payment due at maturity. The loan proceeds were distributed to the partners in accordance with their ownership percentages. AMLI received a partnership distribution of $7,125 from the proceeds of this loan on July 1, 2002 (see note 8). (4) On August 1, 2002, the partnership closed on a 5.81%, $26,200 first mortgage permanent loan through GMAC. This interest only loan will mature in seven years, with the balloon payment due at maturity. The loan proceeds were distributed to the partners in accordance with their ownership percentages. AMLI received a partnership distribution of $12,576 from the proceeds of this loan on August 1, 2002 (see note 8).
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 or uses the proceeds to fund rehabs, reacquire its shares or fund development of new properties. Through December 31, 2001, the gains on sales of residential communities including share of gains on sales of partnerships' properties 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. Effective January 1, 2002, gains on sales of wholly-owned residential communities will be reported in discontinued 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 table below summarizes the properties sold by the Company during 2001 and 2002:
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 Champions Park (15%) Houston, TX 246 1994 4/18/02 13,723 13,145 12,783 1,799 1,055 Champions Centre (15%)Houston, TX 192 1994 4/18/02 10,205 10,755 10,458 2,232 777 ----- -------- ------- ------- ------- ------- Total co-investments 926 63,330 82,400 80,852 26,276 6,041 ----- -------- ------- ------- ------- ------- Total wholly-owned and co-investments 2,004 $113,096 144,280 140,651 39,969 11,434 ===== ======== ======= ======= ======= ======= AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (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 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 has restated its Consolidated Statements of Operations for the three and six months ended June 30, 2001 and Consolidated Statement of Cash Flows for the six months ended June 30, 2001 as a result of implementing SFAS 144 to reflect discontinued operations of the property held for sale as of June 30, 2002. This restatement has no impact on the Company's net income or net income per common share. Properties held for sale by co-investment partnerships accounted for using the equity method of accounting are not "discontinued operations" under the provision of SFAS 144. As of June 30, 2002, the Company had one rental property held for sale included in discontinued operations. No interest expense has been allocated to discontinued operations. Condensed financial information of the results of operations for the property held for sale is as follows: Three Months Six Months Ended Ended June 30, June 30, ----------------- ----------------- 2002 2001 2002 2001 ------- ------- ------- ------- Rental income. . . . . . $ 1,182 1,226 2,375 2,450 Other income . . . . . . 75 75 152 138 ------- ------- ------- ------- Total property revenues. . . . . . 1,257 1,301 2,527 2,588 Property operating expenses . . . . . . . 509 487 1,027 962 ------- ------- ------- ------- Net operating income. . . . . . . 748 814 1,500 1,626 Depreciation expense . . 124 227 307 419 ------- ------- ------- ------- Income from discontinued operations before minority interest . 624 587 1,193 1,207 Minority interest . . 105 99 202 201 ------- ------- ------- ------- Income from discontinued operations. . . . . $ 519 488 991 1,006 ======= ======= ======= ======= AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 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 $207 for the six months ended June 30, 2002. The Company has tested the unamortized goodwill remaining on the Service Company's books and no impairment existed as of June 30, 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. 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. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 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 control overall interest expense volatility and cost, the Company may employ 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 comparable to 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 employs an independent accountant and 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 June 30, 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 June 30, Amount Rate(1) Contract Maturity Paid, Net 2002 (2) - -------- ------- -------- --------- ---------- ------------- $10,000(3) 6.216% 5 years 11/01/02 $ 552 180 10,000(3) 6.029% 5 years 11/01/02 468 172 20,000 6.145% 5 years 02/15/03 1,045 566 10,000 6.070% 5 years 02/18/03 492 292 15,000 6.405% 5 years 09/20/04 707 1,047 10,000 6.438% 5 years 10/04/04 416 731 - ------- ------ ----- $75,000 $3,680 2,988 ======= ====== ===== (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 June 30, 2002 if these contracts were terminated. This amount was recorded as a liability in the accompanying Consolidated Balance Sheet as of June 30, 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 is no longer associated with any floating rate debt. On June 30, 2002, the derivative instruments were reported as Other Liabilities at their fair value of $2,988 which decreased by $736 from $3,724 as of December 31, 2001. The offsetting adjustments were reported as losses in Accumulated Other Comprehensive Loss of $3,854, which decreased by $440 from $4,294 as of December 31, 2001. The adjustments to the shareholders' equity include $1,331 and $1,413 of the Company's share of Other Comprehensive Loss of a co-investment partnership as of June 30, 2002 and December 31, 2001, respectively. In addition, adjustments to earnings of $53 and $29 due to an ineffectiveness on the swaps have been recorded as of June 30, 2002 and 2001, respectively. All the Company's hedges that are reported at fair value and are included in 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 relationship 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. Many of the Company's acquisitions are made on behalf of co-investments concurrent with the initial formation of the co-investment partnership, in which case the partners each make their initial cash contributions concurrent with the closing of the acquisition. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED OTHER ASSETS Other assets reported in the accompanying Consolidated Balance Sheets are as follows. June 30, December 31, 2002 2001 --------- ------------ Deferred development costs . . . . . $ 4,203 1,967 Notes receivable . . . . . . . . . . 2,086 2,925 Advances to affiliates . . . . . . . 2,105 2,413 Deposits . . . . . . . . . . . . . . 1,532 1,923 Prepaid expenses . . . . . . . . . . 802 1,497 Development fees receivable. . . . . 683 1,267 Restricted cash. . . . . . . . . . . 680 1,193 Accounts receivable. . . . . . . . . 906 705 Other. . . . . . . . . . . . . . . . 868 678 -------- -------- $ 13,865 14,568 ======== ======== 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). Three Months Ended Six Months Ended June 30, June 30, -------------------------------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Income from continuing operations . . . .$ 6,772 13,737 12,960 19,624 Income from discontinued operations . . . . 519 488 991 1,006 ---------- ---------- ---------- ---------- Net income . . . . . 7,291 14,225 13,951 20,630 Less net income attributable to preferred shares . . . . . . (1,946) (1,633) (4,028) (3,266) ---------- ---------- ---------- ---------- Net income attributable to common shares - Basic . .$ 5,345 12,592 9,923 17,364 ========== ========== ========== ========== Net income - Diluted (1). . . .$ 5,345 14,225 9,923 20,630 ========== ========== ========== ========== Weighted average common shares - Basic. . . . . .18,116,190 17,756,075 18,002,110 17,790,838 ========== ========== ========== ========== AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Three Months Ended Six Months Ended June 30, June 30, -------------------------------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Dilutive Options and Other Plan shares . . . . . . 355,579 159,981 327,813 136,011 Convertible pre- ferred shares (1). . . . . . . . -- 3,475,000 -- 3,475,000 ---------- ---------- ---------- ---------- Weighted average common shares - Dilutive . . . . .18,471,769 21,391,056 18,329,923 21,401,849 ========== ========== ========== ========== Net income per share: Basic. . . . . . .$ .30 .71 .55 .98 Diluted. . . . . .$ .29 .67 .54 .96 ========== ========== ========== ========== (1) In 2002, preferred shares are non-dilutive. 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 June 30, 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 $1,537 for the six months ended June 30, 2002. Investments in partnerships at June 30, 2002 and the Company's 2002 share of income or loss for the six 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% $ 15,335 14,996 11,732 11,716 312 195 33 at Windbrooke (3) 15% 15,902 (5,465) (868) -- 121 61 34 at Willeo Creek 30% 13,225 3,927 1,176 1,176 101 35 61 at Barrett Lakes 35% 23,301 6,933 2,427 2,527 362 187 147 at Chevy Chase (4) 33% 41,148 (8,593) (3,574) -- 641 205 199 at River Park 40% 12,900 4,074 1,620 1,578 266 126 77 at Fox Valley 25% 22,081 21,395 5,349 5,524 570 142 89 at Fossil Creek 25% 19,130 18,622 4,656 4,741 663 166 94 at Danada Farms 10% 43,319 18,200 1,820 1,811 927 93 65 at Verandah 35% 20,822 4,042 1,515 1,570 48 50 175 at Northwinds 35% 49,411 14,946 5,231 5,080 717 492 310 at Regents Crest 25% 30,702 15,265 3,816 3,893 309 133 123 at Oakhurst North 25% 39,678 38,529 9,632 9,632 808 202 155 at Wells Branch 25% 30,729 30,004 7,501 6,975 830 207 144 on the Parkway 25% 14,082 3,618 902 618 18 5 74 on Timberglen (1) 40% 9,692 3,083 1,264 -- 7 36 101 at Castle Creek 40% 19,185 18,733 7,493 7,646 578 262 132 at Lake Clearwater 25% 15,414 15,041 3,760 3,811 319 80 68 Creekside 25% 15,188 14,993 3,751 3,871 422 133 64 at Deerfield 25% 16,148 3,557 886 739 (92) (23) 76 at Wynnewood Farms 25% 17,672 17,448 4,362 4,401 519 130 74 at Monterey Oaks 25% 28,505 27,980 6,995 7,078 891 223 118 at St. Charles 25% 41,058 40,300 10,075 10,117 923 231 164 at Park Bridge 25% 23,895 23,540 5,885 5,939 673 168 113 at Mill Creek 25% 25,440 7,007 1,752 2,010 576 144 96 at Lost Mountain 75% 11,089 476 357 468 (167) (64) 154 on Spring Mill 20% (Residual) 27,871 27,109 -- 1,221 538 -- -- at Prestonwood Hills 45% 17,166 5,490 2,487 2,481 51 46 115 at Windward Park 45% 26,518 8,459 3,834 3,826 (155) (42) 174 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% 27,837 7,674 1,920 1,654 166 40 116 at Oak Bend 40% 24,361 5,271 2,109 2,109 4 46 143 Midtown 45% 32,662 10,439 4,733 4,716 258 165 207 on Frankford 45% 38,535 12,466 5,653 5,637 244 169 251 at Peachtree City I 20% 28,150 27,857 5,571 3,597 586 117 74 at Kedron Village 20% 19,202 600 120 100 (311) (62) 35 at Scofield Ridge 45% 36,916 12,006 5,445 5,427 (58) 17 230 at Breckinridge Point 45% 33,134 10,772 4,884 4,867 25 53 205 at Cambridge Square 30% 31,919 29,271 8,781 9,428 (29) (19) 67 Towne Square 45% 32,484 10,637 4,823 4,769 46 59 201 at Lowry Estates 50% 50,442 16,541 8,269 8,121 (120) (9) 343 at King's Harbor 25% 19,540 18,954 4,739 5,021 (54) (14) 86 at Milton Park 25% 23,437 21,390 5,347 5,802 (156) (39) 11 at Osprey Lake 69% 51,960 15,703 12,123 10,606 (262) (148) 488 at Seven Bridges 20% 37,773 15,702 3,242 4,148 110 22 -- at Barrett Walk 25% 8,734 7,065 1,766 1,844 -- -- -- at Park Meadows 25% 58,040 57,365 14,341 14,315 428 172 85 at Bryan Place 48% 41,146 39,527 18,973 18,857 (74) (36) 40 ---------- ------- ------- ------- ------- ------ ------ 1,282,878 712,949 218,675 221,467 12,579 4,156 5,811 Other 459 135 20 20 314(5) 128(5) 25 ---------- ------- ------- ------- ------- ------ ------ Total $1,283,337 713,084 218,695 221,487 12,893 4,284 5,836 ========== ======= ======= ======= ======= ====== ====== (1) The Company's investments in partnerships differ from the Company's share of co-investment partnerships' equity primarily due to (a) classification of the Company's deficit equity positions in the AMLI at Windbrooke and AMLI at Chevy Chase partnerships as liabilities on the Consolidated Balance Sheet as of June 30, 2002 (see (3) and (4) below); (b) capitalized interest on its investments in properties under development; (c) purchase price basis differences; and (d) eliminations of the Company's cumulative share of acquisition, financing and development fee income. These latter 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 June 30, 2002. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (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. On August 1, 2002, the property was sold and the partnership distributed $19,200 of the net proceeds to the partners, of which approximately $12,147 was the Company's share. With this distribution, the Company has received a return of the preferred $11,200 capital contribution and its original capital of $962. In addition, the Company received a $403 disposition fee from the partnership (see note 8). (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 June 30, 2002. (4) In May 2002, the loan agreement of AMLI at Chevy Chase was amended. The principal amount was increased to $48,000, the interest rate changed from 6.67% to 7.11% and maturity date was extended to June 2009. According to the new terms, the loan is structured to fund in two parts. The first part, in the amount of $21,300, was funded at the time of closing, and will co-exist with the original CIGNA loan dated March 27, 1996 (with an initial balance of $29,767). The second part of the loan, in the amount of $26,700, will fund in October 2002, the proceeds of which will be used to retire the original CIGNA loan. The $20,823 net proceeds from the first funding were distributed to the partners, including $7,594 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 June 30, 2002. (5) Excludes gains on sales of AMLI at Champions Park and AMLI at Champions Centre of $1,799 and $2,322, respectively, and the Company's share of such gains of $270 and $335, respectively, which is reported as share of gains on sales of residential properties.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED All but two debt financings have been obtained at fixed rates from various financial institutions on behalf of these co-investment partnerships. All of these fixed-rate first mortgages are non recourse debt and secured by mortgages on the respective communities. Repayment of the two floating-rate construction loans has been guaranteed by AMLI. The following summarizes co-investment debt at June 30, 2002: Total Outstand- Commitment ing at Company's Interest Community (1) 6/30/02 Share Rate Maturity - --------- ---------- --------- --------- -------- --------- AMLI: at Kedron Village (2) $ 19,170 17,716 3,543 L+1.875% Dec. 2002 at Willeo Creek 10,000 9,071 2,721 6.77% May 2003 at Regents Crest 16,500 15,002 3,751 7.50% Dec. 2003 at Verandah 16,940 16,121 5,642 7.55% Apr. 2004 on Timberglen 6,770 6,352 2,541 7.70% June 2004 at Seven Bridges (3) 50,000 14,834 2,967 L+1.80% Jan. 2005 at Prestonwood Hills 11,649 11,311 5,123 7.17% Aug. 2006 at Windward Park 18,183 17,666 8,008 7.27% Aug. 2006 at Oak Bend 18,834 18,401 7,360 7.81% Dec. 2006 Midtown 21,945 21,426 9,715 7.52% Dec. 2006 at Deerfield 12,600 12,304 3,076 7.56% Dec. 2006 at Danada Farms 24,500 23,674 2,367 7.33% Mar. 2007 on Frankford 25,710 25,303 11,475 8.25% June 2007 at Breckinridge Point22,110 21,743 9,859 7.57% July 2007 at Scofield Ridge 24,618 24,219 10,983 7.70% Aug. 2007 Towne Square 21,450 21,118 9,576 6.70% Jan. 2008 at Lowry Estates 33,900 33,458 16,729 7.12% Jan. 2008 at Summit Ridge 20,000 19,760 4,940 7.27% Feb. 2008 at River Park 9,100 8,564 3,426 7.75% June 2008 on the Parkway 10,800 10,160 2,540 6.75% Jan. 2009 at Mill Creek 18,000 17,985 4,496 6.40% May 2009 at Chevy Chase 48,000 48,220 15,913 7.11% June 2009 at Barrett Lakes 16,680 15,891 5,562 8.50% Dec. 2009 at Northwinds 33,800 33,335 11,667 8.25% Oct. 2010 at Osprey Lake 35,320 34,869 23,973 7.02% Mar. 2011 at Windbrooke 20,800 20,715 3,107 6.43% Mar. 2012 at Lost Mountain 10,252 10,183 7,637 6.84% Nov. 2040 -------- -------- ------- $577,631 529,401 198,697 ======== ======== ======= (1) 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. (2) The Company anticipates that the partners in this 20%-owned partnership will contribute capital to permit the partnership to repay its indebtedness in full at its maturity. (3) The Company on behalf of the partnership has obtained a 7.25% fixed rate mortgage loan commitment from an institutional lender and anticipates repaying its construction loan in late 2003 from a minimum $54,000 funding of this seven-year loan. INVESTMENTS IN SERVICE COMPANIES Combined financial information of the various Service Companies at and for the six months ended June 30, 2002 and 2001 is summarized as follows: AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, December 31, 2002 2001 --------- ------------ Receivables from affiliates. . . . . . $ 9,327 9,136 Land held for sale . . . . . . . . . . 15,653 4,951 Building and equipment, net of accumulated depreciation . . . . . . 2,289 2,463 Information technology costs, net of accumulated depreciation. . . 8,969 8,384 Investments and other assets . . . . . 9,090 9,911 -------- -------- Total assets . . . . . . . . . . . . . $ 45,328 34,845 ======== ======== Due to the Company . . . . . . . . . . $ 29,287 17,311 Bank debt. . . . . . . . . . . . . . . 14,000 14,000 Other. . . . . . . . . . . . . . . . . 4,412 5,733 -------- -------- Total liabilities. . . . . . . . . . . $ 47,699 37,044 ======== ======== Total deficit. . . . . . . . . . . . . $ (2,371) (2,199) ======== ======== Six Months Ended June 30, ---------------------- 2002 2001 -------- -------- Construction contract revenue. . . . . $ 44,726 25,954 Construction contract costs. . . . . . (43,489) (24,737) -------- -------- Construction gross profit. . . . . . . 1,237 1,217 Property management fees . . . . . . . 5,393 5,031 Corporate homes' gross profit. . . . . 745 733 Gain (loss) on land sales. . . . . . . (77) 194 Other income . . . . . . . . . . . . . 388 142 -------- -------- Total income . . . . . . . . . . . . . 7,686 7,317 -------- -------- General and administrative: Construction . . . . . . . . . . . . 1,068 1,017 Property management. . . . . . . . . 4,955 4,656 Corporate homes. . . . . . . . . . . 495 476 -------- -------- Total general and administrative . . . 6,518 6,149 -------- -------- EBITDA . . . . . . . . . . . . . . . . 1,168 1,168 Interest . . . . . . . . . . . . . . . (873) (984) Depreciation (1) . . . . . . . . . . . (1,470) (1,213) Income taxes . . . . . . . . . . . . . 446 397 -------- -------- Loss . . . . . . . . . . . . . . . . . $ (729) (632) ======== ======== (1) Includes $207 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 $133 for the six months ended June 30, 2002 and 2001, respectively. In 2002, the Company transferred six land parcels to a Service Company for $12,675, 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: Six Months Ended June 30, ----------------- 2002 2001 ------ ------ Intercompany interest expensed . . . . . $ 573 443 Intercompany interest capitalized. . . . -- 35 Loss . . . . . . . . . . . . . . . . . . (729) (632) Intercompany eliminations and other owners' share. . . . . . . . . . (98) 42 ------ ------ Interest and share of loss from the Service Companies. . . . . . . . . . . $ (254) (112) ====== ====== The Service Companies recorded after-tax charges against earnings of $141 and $61 for the six months ended June 30, 2002 and 2001, respectively, pursuant to FIN 44 "Accounting for Certain Transactions Involving Stock Compensation." 4. RELATED PARTY TRANSACTIONS During the six months ended June 30, 2002 and 2001, the Company accrued or paid to its affiliates fees and other costs and expenses as follows: Six Months Ended June 30, ----------------- 2002 2001 ------ ------ Management fees (1). . . . . . . . . . . $1,723 1,429 General contractor fees. . . . . . . . . 56 54 Interest expense . . . . . . . . . . . . -- 44 Landscaping and grounds maintenance (1). . . . . . . . . . . . -- 439 ====== ====== (1) Includes discontinued operations. In addition, at June 30, 2002 and December 31, 2001, the Company owed Amli Residential Construction, L.L.C. $4,092 and $4,079, respective- ly, for construction costs of communities under development or rehab. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED During the six months ended June 30, 2002 and 2001, the Company earned or received from its affiliates fees and other income as follows: Six Months Ended June 30, ----------------- 2002 2001 ------ ------ Development fees . . . . . . . . . . . . $ 960 539 Acquisition, disposition and financing fees . . . . . . . . . . . . 640 230 Asset management fees. . . . . . . . . . 247 284 Interest on notes and advances to Service Companies . . . . . . . . . 573 477 Interest on advances to other affiliates . . . . . . . . . . . . . . -- 179 ====== ===== In addition, during the six months ended June 30, 2002 and 2001, total revenues of $1,890 and $1,627 respectively, were generated from leases to AMLI Corporate Homes ("ACH"), a division of AMLI Management Company ("AMC"), one of the Service Companies. An affiliate of an AMLI Trustee is the mortgage lender to AMLI at Oak Bend, AMLI Towne Square and AMLI at Lowry Estates. These partnerships paid the affiliate loan fees totaling $276 in 2000 and $94 in 1999 relating to the origination of these loans. 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 6/30/02 Rate Date 12/31/01 - ---------------------- -------- ------- ----------- -------- -------- BOND FINANCING: Tax-Exempt Unsecured (1) $ 40,750 40,750 Rate+1.24% 10/1/24 40,750 Tax-Exempt AMLI at Poplar Creek (1) 9,500 9,500 Rate+1.25% 2/1/24 9,500 -------- ------- ------- Total Bonds 50,250 50,250 50,250 -------- ------- ------- MORTGAGE NOTES PAYABLE TO FINANCIAL INSTITUTIONS: AMLI at Riverbend 31,000 27,772 7.30% 7/1/03 28,102 AMLI in Great Hills 11,000 9,860 7.34% 7/1/03 9,977 AMLI at Nantucket 7,735 7,257 7.70% 6/1/04 7,325 AMLI at Bishop's Gate 15,380 14,079 7.25% (2) 8/1/05 14,230 AMLI at Regents Center 20,100 18,919(9) 8.90% (3) 9/1/05 19,037 AMLI on the Green/AMLI of North Dallas (4) 43,234 39,206 7.79% 5/1/06 39,621 AMLI at Valley Ranch 18,800 18,800 6.68% 5/10/07 9,688(5) AMLI at Conner Farms 14,900 14,900 6.68% 5/10/07 11,960(5) AMLI at Clairmont 12,880 12,486 6.95% 1/15/08 12,573 AMLI - various (6) (7) 140,000 138,586 6.56% 7/1/11 139,369 AMLI at Park Creek 10,322 10,153 7.88% 12/1/38 10,177 -------- ------- ------- Total Mortgage Notes Payable 325,351 312,018 302,059 -------- ------- ------- OTHER NOTES PAYABLE: Unsecured line of credit (7)(8) 200,000 88,000 L+1.05% 11/15/03 47,000 -------- ------- --------- -------- ------- Total (9) $575,601 450,268 399,309 ======== ======= ======= 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 (1.45% for AMLI at Spring Creek and for AMLI at Poplar Creek at July 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, 2003 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, 2003. (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 June 30, 2002 was $600. (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 June 30, 2002, the unamortized discount was $258. (5) These loans were refinanced with the same lender on May 7, 2002. (6) 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). (7) 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. (8) 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 June 30, 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. (9) This is the only loan which has recourse to the partners of the Operating Partnership.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED As of June 30, 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. . . . . . $ -- 2,169 -- 2,169 2003. . . . . . -- 40,766 88,000 128,766 2004. . . . . . -- 10,745 -- 10,745 2005. . . . . . -- 35,021 -- 35,021 2006. . . . . . -- 38,502 -- 38,502 Thereafter. . . 50,250 184,815 -- 235,065 ------- ------- ------- ------- $50,250 312,018 88,000 450,268 ======= ======= ======= ======= 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 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 each limited partner's entire interest, in its 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 June 30, 2002, the Company is contingently liable on the $9,678 in bank letters of credit issued to secure commitments made in the ordinary course of business by the Company and its co-investment partnerships (see note 5). 8. SUBSEQUENT EVENTS On July 1, 2002, a partnership in which AMLI owns a 25% ownership interest closed on a 6.25%, $28,500 first mortgage permanent loan through GMAC Commercial Mortgage Corporation. This interest only loan is secured by AMLI at Park Meadows and will mature in seven years, with the balloon payment due at maturity. The loan proceeds were distributed to the partners in accordance with their ownership percentages. AMLI received a partnership distribution of $7,125 from the proceeds of this loan on July 1, 2002. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED On August 1, 2002, the Company completed the sale of AMLI at Greenwood Forest, a 316-unit co-investment community located in Houston, Texas, in which AMLI had a 15% ownership interest. The community was built in 1995 and acquired by AMLI the same year for $17,685. The partnership's gain on sale was approximately $4,500, of which the Company's share was approximately $680. The $19,200 net proceeds were distributed to the partners, of which approximately $12,147 was the Company's share. With this distribution, the Company has received a return of the preferred $11,200 capital contribution and its original capital of $962. In addition, AMLI received a disposition fee from the partnership of $403. On July 29, 2002, the Company's Board of Trustees approved management's decision to change AMLI's policy for accounting for share options. In accordance with recently revised rules governing the accounting for such a change, AMLI has elected the option of reporting the value of share options awarded subsequent to January 1, 2002 as a charge against earnings and FFO. The accounting for options issued prior to 2002 is unaffected by this change, and AMLI anticipates that there will be no material effect on its 2002 results of operations as a result of making this change to what the accounting industry and the investment banking community consider a preferable method of accounting. During the period from July 25, 2002 through July 29, 2002, AMLI repurchased on the open market 130,500 of its common shares at an average price of $21.62 per share pursuant to its previously announced 500,000 Common Share Repurchase Program, so that shares repurchased under this authorization now total 350,900. On July 29, 2002, the Company's Board of Trustees replaced the remaining 149,100 share authorization with a new 1,500,000 share authorization. Through July 31, 2002, AMLI has acquired 46,200 common shares at an average price of $22.78 per share under this authorization. AMLI anticipates acquiring shares under this new authorization from time to time, as market conditions warrant. On August 1, 2002, a partnership in which AMLI owns a 48% ownership interest closed on a 5.81%, $26,200 first mortgage permanent loan with GMAC Commercial Mortgage Corporation. This interest only loan is secured by AMLI at Bryan Place and will mature in seven years, with the balloon payment due at maturity. The loan proceeds were distributed to the partners in accordance with their ownership interests. AMLI received a partnership distribution of $12,576 from the proceeds of this loan on August 1, 2002. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 9. SEGMENT REPORTING The revenues, net operating income, FFO and assets for the Company's reportable segment are summarized as follows: Six Months Ended June 30, ------------------------ 2002 2001 ---------- ---------- Multifamily segment revenues (excluding discontinued operations). . . . . . . . . . . . . . $ 137,095 137,195 ========== ========== Multifamily segment net operating income (excluding discontinued operations). . . . . . . . . . . . . . $ 82,732 84,088 Reconciling items to FFO: Reduce co-investment net operating income to Company's share (1). . . . (39,398) (40,519) Interest income and share of income (loss) from Service Companies. . . . . . . . . . . . . . (254) 95 Other interest income. . . . . . . . . 316 803 Other revenues . . . . . . . . . . . . 1,978 1,193 Discontinued operations - net operating income . . . . . . . . . . 1,500 1,626 General and administrative expenses. . (2,753) (2,669) Interest expense and loan cost amortization . . . . . . . . . . . . (12,188) (13,224) ---------- ---------- Consolidated FFO before minority interest . . . . . . . . . . . . . . . 31,933 31,393 ---------- ---------- Reconciling items to net income: Depreciation - wholly owned properties (including discontinued operations) . . . . . . (10,733) (10,640) Depreciation - share of co-investment properties . . . . . . (5,836) (5,640) Share of Service Company's goodwill amortization. . . . . . . . -- (207) Gain on sale of residential property . 605 9,249 ---------- ---------- Income before minority interest and extraordinary items. . . . . . . . 15,969 24,155 Minority interest (including discontinued operations) . . . . . . . 2,018 3,525 ---------- ---------- Net income . . . . . . . . . . . . . . . $ 13,951 20,630 ========== ========== AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, December 31, 2002 2001 ---------- ------------ Segment assets (2) . . . . . . . . . . . $2,055,484 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 June 30, 2002 and December 31, 2001 and for the three and six months ended June 30, 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 June 30, 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 June 30, 2002, the Company owned 22,145,296 OP Units including 4,025,000 Preferred OP Units and the limited partners owned 3,665,364 OP Units. The Company has qualified, and anticipates continuing to qualify, as a real estate investment trust ("REIT") for Federal income tax purposes. At June 30, 2002, AMLI owned or had interest in eighty-one multi- family apartment communities comprised of 31,109 apartment homes. Seventy- three of these communities totaling 28,352 apartment homes were stabilized as of June 30, 2002 and eight communities containing 2,757 apartment homes were under development or in lease-up at that date. 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 June 30, 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 . . . . . .$ 735,699 1,218,953 1,954,652 Accumulated depreciation. . . (110,733) (110,409) (221,142) ---------- ---------- ---------- 624,966 1,108,544 1,733,510 Rental apartments held for sale, net . . . . . . . . . 20,401 -- 20,401 Land and rental communities under development . . . . . 49,849 141,108 190,957 Investments in co-invest- ment partnerships . . . . . 221,487 (221,487) -- Other, net. . . . . . . . . . 17,752 (4,387) 13,365 ---------- ---------- ---------- 934,455 1,023,778 1,958,233 Effect of Company and Consolidated Combining Co-Investment Company Co-Investment Partnerships ("GAAP") Partnerships (Combined) ------------ ------------- ------------- Debt - Company's share. . . . (450,268) (198,697) (648,965) Debt - partners' share. . . . -- (330,703) (330,703) ---------- ---------- ---------- Total net assets. . . . . . . 484,187 494,378 978,565 Partners' share of net assets. . . . . . . . . . . -- (494,378) (494,378) ---------- ---------- ---------- Company's share of net assets. . . . . . . . .$ 484,187 -- 484,187 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value. . . . . . . . . 40.2% ========== 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 . . . . . .$ 735,699 406,948 1,142,647 Accumulated depreciation. . . (110,733) (33,030) (143,763) ---------- ---------- ---------- 624,966 373,918 998,884 Rental apartments held for sale, net . . . . . . . . . 20,401 -- 20,401 Land and rental communities under development . . . . . 49,849 34,151 84,000 Investments in co-investment partnerships. . . . . . . . 221,487 (221,487) -- Other, net. . . . . . . . . . 17,752 12,115 29,867 ---------- ---------- ---------- 934,455 198,697 1,133,152 Debt - Company's share. . . . (450,268) (198,697) (648,965) ---------- ---------- ---------- Company's share of net assets. . . . . . . . . . .$ 484,187 -- 484,187 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value. . . . . . . . . 40.2% 49.2% ========== ========== 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 June 30, 2002: AMLI's share of equity per partnerships . . . . . . . . . . . . $220,039 Negative investment balances presented in other liabilities . . . 4,514 Capitalized interest . . . . . . . . . 4,566 Eliminated fees. . . . . . . . . . . . (5,890) Other. . . . . . . . . . . . . . . . . (1,742) -------- Total investments in partnerships. . . $221,487 ======== RESULTS OF OPERATIONS For the six months ended June 30, 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 1,328 apartment homes in five stabilized communities. Four of these acquisitions completed deferred third-party exchanges for Federal income tax purposes. Property operations from wholly-owned assets for the six months ended June 30, 2002 and 2001 are summarized as follows: Six Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Total Wholly-Owned Property Revenues - ------------------ Same communities . . . . . . . $51,049 51,474 (425) Acquisition communities. . . . 6,391 1,587 4,804 Communities contributed to ventures/sold . . . . . . -- 4,098 (4,098) ------- ------- ------- Total . . . . . . . . . . . $57,440 57,159 281 ======= ======= ======= Continuing operations . . . $54,913 54,571 342 Discontinued operations . . 2,527 2,588 (61) ======= ======= ======= Total Wholly-Owned Property Operating Expenses - --------------------------- Same communities . . . . . . . $20,018 20,132 (114) Acquisition communities. . . . 2,707 463 2,244 Communities contributed to ventures/sold . . . . . . -- 1,743 (1,743) ------- ------- ------- Total . . . . . . . . . . . $22,725 22,338 387 ======= ======= ======= Continuing operations . . . $21,698 21,376 322 Discontinued operations . . 1,027 962 65 ======= ======= ======= Total Wholly-Owned Property Net Operating Income - ----------------------------- Same communities . . . . . . . $31,031 31,342 (311) Acquisition communities. . . . 3,684 1,124 2,560 Communities contributed to ventures/sold . . . . . . -- 2,355 (2,355) ------- ------- ------- Total . . . . . . . . . . . $34,715 34,821 (106) ======= ======= ======= Continuing operations . . . $33,215 33,195 20 Discontinued operations . . 1,500 1,626 (126) ======= ======= ======= 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 eight communities. Since January 1, 2001, four communities with a total of 1,460 apartment homes were stabilized and four communities, containing a total of 1,385 apartment homes, were in lease-up as of June 30, 2002 and are anticipated to reach stabilization in 2002 and 2003. In addition, in 2001 the Company invested in three co-investment partnerships which acquired three stabilized communities containing a total of 1,421 apartment homes and sold one 488-unit community. This sale and weak market conditions have contributed to a decrease in share of income from partnerships. Six Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Total Co-investment Property Revenues - ------------------- Same communities . . . . . . . $66,166 68,629 (2,463) New communities. . . . . . . . 5,270 4,596 674 Development and/or lease-up communities . . . . 3,820 538 3,282 Acquisition communities. . . . 4,020 2,394 1,626 Communities contributed to ventures/sold . . . . . . 2,908 6,467 (3,559) ------- ------- ------- Total . . . . . . . . . . . $82,184 82,624 (440) ======= ======= ======= Company's share of co-investment total revenues . . . . . . . $25,808 26,300 (492) ======= ======= ======= Total Co-investment Property Operating Expenses - --------------------------- Same communities . . . . . . . $25,848 25,631 217 New communities. . . . . . . . 1,833 1,683 150 Development and/or lease-up communities . . . . 2,144 618 1,526 Acquisition communities. . . . 1,424 841 583 Communities contributed to ventures/sold . . . . . . 1,423 2,691 (1,268) ------- ------- ------- Total . . . . . . . . . . . $32,672 31,464 1,208 ======= ======= ======= Company's share of co-invest- ment property operating expenses . . . . . . . . . . $10,220 9,909 311 ======= ======= ======= Six Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Total Co-investment Property Net Operating Income - ---------------------------- Same communities . . . . . . . $40,318 42,998 (2,680) New communities. . . . . . . . 3,437 2,913 524 Development and/or lease-up communities . . . . 1,676 (80) 1,756 Acquisition communities. . . . 2,596 1,553 1,043 Communities contributed to ventures/sold . . . . . . 1,485 3,776 (2,291) ------- ------- ------- Total . . . . . . . . . . . $49,512 51,160 (1,648) ======= ======= ======= Company's share of co-invest- ment property NOI. . . . . . $15,588 16,391 (803) ======= ======= ======= 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 six months ended June 30, 2002, total revenues, net of discontinued operations, were $61,236 and net income was $13,951 including $605 share of gains on sales of a partnership's properties. Total revenues, net of discontinued operations, for the year earlier period were $61,189 and net income was $20,630 which includes a gain of $9,249 from the sale of a wholly-owned residential property. For the six months ended June 30, 2002, basic earnings per common share were $0.55 (including $0.05 from discontinued operations) compared to $0.98 per share (including $0.06 from discontinued operations) for the comparable period of 2001. For the six months ended June 30, 2002, diluted earnings per common share were $0.54 (including $0.05 from discontinued operations) compared to $0.96 per share (including $0.05 from discontinued operations) for the comparable period of 2001. 2001 basic and diluted earnings per share include $0.43 and $0.42 per share from the sale of a residential property, respectively. On a "same community" basis (including discontinued operations), weighted average occupancy of the apartment homes owned wholly by the Company increased to 92.0% for the six months ended June 30, 2002 from 89.9% in the prior year. Weighted average collected rental rates increased by 1.0% to $785 from $778 per unit per month for the six months ended June 30, 2002 and 2001, respectively. Including co-investment communities, weighted average occupancy of the Company's apartment homes decreased to 91.3% for the six months ended June 30, 2002 from 91.9% in the prior year, and weighted average collected rental rates decreased by 1.8% to $850 from $865 per unit per month for the six months ended June 30, 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 June 30, ---------------------- 2002 2001 -------- -------- FFO (1). . . . . . . . . . . . . . . $ 31,933 31,393 Depreciation expense (1)(2). . . . . 16,569 16,487 -------- -------- Operating earnings . . . . . . . . . 15,364 14,906 Income from discontinued operations . . . . . . . . . . . . (1,193) (1,207) Gains on sales (2) . . . . . . . . . 605 9,249 -------- -------- Income from continuing operations (3) . . . . . . . . . . $ 14,776 22,948 ======== ======== (1) Including discontinued operations. (2) Including share from co-investments. (3) Before allocation to minority interest. COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 TO THREE MONTHS ENDED JUNE 30, 2001. Income from continuing operations before minority interest decreased to $7,747 for the three months ended June 30, 2002 from $16,223 for the three months ended June 30, 2001 which was primarily attributable to a large gain from the sale of a community in 2001 offset in part by a decrease in interest expense. The following table shows comparative condensed results of operations for the three months ended June 30, 2002 and 2001: Three Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Property revenues . . . . . . . $27,538 27,523 15 Other income. . . . . . . . . . 3,574 3,625 (51) ------- ------- ------- Total revenues. . . . . . . 31,112 31,148 (36) ------- ------- ------- Property operating expenses . . 11,267 11,034 233 Interest expense and amortiza- tion of financing costs . . . 6,242 6,661 (419) Depreciation. . . . . . . . . . 5,248 5,328 (80) General and administrative. . . 1,213 1,151 62 ------- ------- ------- Total expenses. . . . . . . 23,970 24,174 (204) ------- ------- ------- Income from continuing opera- tions before share of gains on sales of properties. . . . 7,142 6,974 168 Gains on sales of properties. . 605 9,249 (8,644) ------- ------- ------- Income from continuing operations before minority interest. . . . . . . . . . . 7,747 16,223 (8,476) Minority interest . . . . . . . 975 2,486 (1,511) ------- ------- ------- Three Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Income from continuing operations. . . . . . . . . . 6,772 13,737 (6,965) Income from discontinued operations, net of minority interest. . . . . . . . . . . 519 488 31 ------- ------- ------- Net income. . . . . . . . . . . $ 7,291 14,225 (6,934) ======= ======= ======= Total property revenues for the three months ended June 30, 2002 were $27,538 comparing to $27,523 for the three months ended June 30, 2001. A $15, or 0.1%, increase was primarily from the acquisition of a 194- apartment homes community in May of 2002. On a same community basis total property revenues decreased by $543, or 2.1%, and net operating income decreased by $484, or 2.1%. Interest and share of income (loss) from Service Companies decreased by $315, or 108.2%, due to higher depreciation expense relating to the information technology system, which was partially offset by no amortization of goodwill recorded in 2002 in accordance with Statement of Financial Accounting Standards No. 142 "Accounting for Goodwill and Other Intangible Assets" ("SFAS 142"). Income from partnerships decreased to $2,255 from $2,439, or 7.5%. This decrease in income was a result of sales of two communities in April of 2002 and general economic conditions. The decline in income was offset in part by the acquisition of two stabilized communities through two new co-investment partnerships and stabilization of one 400-unit community during the second quarter of 2002. On a same community basis, total property revenues decreased by $1,444, or 4.2%, and net operating income decreased by $1,516, or 7.0%. Property operating expenses increased by $233, or 2.1%, mainly due to increases in insurance and real estate tax expense. In addition, management fees increased 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 $60, or 0.6%. Interest expense, net of the amounts capitalized, decreased to $6,084 from $6,352, or 4.2%, primarily due to lower interest rates on the floating-rate bonds. General and administrative expenses increased slightly to $1,213 for the three months ended June 30, 2002 from $1,151 for the three months ended June 30, 2001. The increase is primarily due to higher personnel costs as a result of increased number of employees. COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 TO SIX MONTHS ENDED JUNE 30, 2001. Income from continuing operations before minority interest decreased to $14,776 for the six months ended June 30, 2002 from $22,948 for the six months ended June 30, 2001 which was primarily attributable to a large gain from the sale of a community in 2001 offset in part by a decrease in interest expense. The following table shows comparative condensed results of operations for the six months ended June 30, 2002 and 2001: Six Months Ended June 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Property revenues . . . . . . . $54,912 54,571 341 Other income. . . . . . . . . . 6,324 6,618 (294) ------- ------- ------- Total revenues. . . . . . . 61,236 61,189 47 ------- ------- ------- Property operating expenses . . 21,698 21,376 322 Interest expense and amortiza- tion of financing costs . . . 12,188 13,224 (1,036) Depreciation. . . . . . . . . . 10,426 10,221 205 General and administrative. . . 2,753 2,669 84 ------- ------- ------- Total expenses. . . . . . . 47,065 47,490 (425) ------- ------- ------- Income from continuing opera- tions before share of gains on sales of properties. . . . 14,171 13,699 472 Gains on sales of properties. . 605 9,249 (8,644) ------- ------- ------- Income from continuing operations before minority interest. . . . . . . . . . . 14,776 22,948 (8,172) Minority interest . . . . . . . 1,816 3,324 1,508 ------- ------- ------- Income from continuing operations. . . . . . . . . . 12,960 19,624 (6,664) Income from discontinued operations, net of minority interest. . . . . . . . . . . 991 1,006 (15) ------- ------- ------- Net income. . . . . . . . . . . $13,951 20,630 (6,679) ======= ======= ======= Total property revenues increased by $341, or 0.6%, which was primarily from the acquisition of 1,328 apartment homes during 2001 and 2002. The increase was offset by the loss of revenue from 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 decreased by $425, or 0.8%, and net operating income decreased by $106, or 0.3%. 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 the Service Companies decreased by $142, or 126.8%, due to higher depreciation expense relating to the information technology system and lower general contractor's fee income. The decrease was partially offset by higher interest income as a result of additional advances to the Service Companies to fund the 2002 acquisition cost of six land parcels and not recording amortization of goodwill in accordance with SFAS 142. 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 $4,284 from $4,734 or 9.5%. This decrease was a result of sales of three communities during 2002 and 2001 and general economic conditions. The decline in income was offset in part by the acquisition of three stabilized communities through three new co-investment partnerships and stabilization of 1,460 units of four communities under development in 2002 and 2001. On a same community basis, total property revenues decreased by $2,463, or 3.6%, and net operating income decreased by $2,680, or 6.2%. Property operating expenses increased by $322, or 1.5%. This increase is principally due to increases in insurance and real estate tax expense. In addition, management fees increased 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 $114, or 0.6%. Interest expense, net of the amounts capitalized, decreased to $11,884 from $12,779, or 7.0%, primarily due to a partial repayment of the Company's short-term borrowings and lower interest rates on the floating- rate bonds. General and administrative expenses increased moderately to $2,753 for the six months ended June 30, 2002 from $2,669 for the six months ended June 30, 2001. The increase is primarily due to higher personnel costs as a result of increased number of employees. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2002, the Company had $4,129 in cash and cash equivalents and $98,000 in availability under its $200,000 unsecured line of credit. The availability under the line of credit is based on total borrowings of $102,000, including $14,000 borrowed directly by an unconsolidated Service Company affiliate. The borrowings of the Service Company affiliate are guaranteed by the Company. Borrowings under the line of credit bear interest at a rate of LIBOR plus 1.05%. At June 30, 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 six months ended June 30, 2002 was $30,577 compared to $30,582 for the six months ended June 30, 2001. In 2002, there were no significant changes in cash flows from operating activities comparing to 2001. Cash flows used in investing activities for the six months ended June 30, 2002 increased to $59,118 from $46,102 for the six months ended June 30, 2001. The increase is primarily due to higher expenditures for development costs and higher investments in partnerships, net of $14,096 return of capital and $2,846 net distribution from refinancing of partnerships' debt as a result of loan refinancings and sales of residential properties. The increase was offset in part by lower expenditures for acquisition of new communities in 2002 and 2001 higher sale proceeds. Net cash flows used in financing activities for the six months ended June 30, 2002 were $26,778 which reflect higher borrowings on the Company's line of credit and proceeds from refinancing of two mortgages. 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 six months ended June 30, 2002 and 2001 is summarized as follows: June 30, ------------------------ 2002 2001 ---------- ---------- Income from continuing operations before minority interest . . . . . . . $ 14,776 22,948 Income from discontinued operations before minority interest . . . . . . . 1,193 1,207 Depreciation (1) . . . . . . . . . . . . 10,733 10,640 Share of co-investment partnerships' depreciation . . . . . . . . . . . . . 5,836 5,640 Share of Service Company's goodwill amortization . . . . . . . . . . . . . -- 207 Gain on sale of residential property . . (605) (9,249) ---------- ---------- FFO. . . . . . . . . . . . . . . . . . . $ 31,933 31,393 ========== ========== Weighted average shares and units including dilutive shares. . . . . . . 26,042,326 24,980,967 ========== ========== (1) Includes discontinued operations of $307 and $419 for the six months ended June 30, 2002 and 2001, respectively. 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 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 June 30, 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 June 30, 2002 includes $312,018 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% $312,018 69.3% Tax-Exempt Tax-Exempt Rate + 1.24% 50,250 11.2% Bonds (1) Tax-Exempt Rate + 1.25% Lines of Credit (2) LIBOR + 1.05% 88,000 19.5% -------- ------ Total $450,268 100.0% ======== ====== - -------------------- (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 (1.45% for AMLI at Spring Creek and for AMLI at Poplar Creek at July 25, 2002). The AMLI at Spring Creek bonds mature on October 1, 2024 and the related credit enhancement expires on October 15, 2003. The AMLI at Poplar Creek bonds mature on February 1, 2024 and the related credit enhancement expires on December 18, 2003. (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 completing the $28,400 AMLI Carmel Center within the next twelve months. AMLI has begun the development of AMLI Downtown Austin with an estimated $50,900 total costs and may obtain a partner for this development later in 2002 (note 2 to Financial Statements). At June 30, 2002, the Company has made capital contributions totaling $258,392 to its existing co-investment partnerships and anticipates funding substantially all of its remaining commitment (net of its share of co- investment debt) of $11,267 during 2002 and 2003 to complete the 2,215 apartment homes being developed by co-investment partnerships. The Company owns land in Ft. Worth, Austin and Houston, Texas; and Kansas City, Kansas, being held for the development of an additional 2,620 apartment homes, or for sale. The Company has made earnest money deposits of $500 for four 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 $554 and $531 of costs associated with carrying these land parcels for the six months ended June 30, 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. The following summarizes capital expenditures (including discontinued operations), which are primarily non-revenue enhancing expenditures, incurred in connection with existing stabilized communities for the six months ended June 30, 2002 and 2001: Six Months Ended June 30, -------------------- 2002 2001 -------- -------- Carpet . . . . . . . . . . . . . . . . . . $ 994 1,051 Roof replacements and improvements . . . . 482 570 HVAC and maintenance equipment . . . . . . 157 272 Land improvements, landscaping and irrigation . . . . . . . . . . . . . . . 139 570 Furniture, fixtures and equipment. . . . . 40 201 Major appliances . . . . . . . . . . . . . 106 152 Building improvements. . . . . . . . . . . 79 41 Clubhouse, pool and other amenities. . . . 96 362 Other. . . . . . . . . . . . . . . . . . . 71 150 -------- -------- $ 2,164 3,369 ======== ======== 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. The following summarizes capital expenditures incurred in connection with upgrading or improving newly-acquired communities for the six months ended June 30, 2002 and 2001: Six Months Ended June 30, -------------------- 2002 2001 -------- -------- Land improvements, landscaping and irrigation . . . . . . . . . . . . . . . $ 91 35 Clubhouse, pool and other amenities. . . . 100 37 HVAC and maintenance equipment . . . . . . 47 17 Other. . . . . . . . . . . . . . . . . . . 77 120 -------- -------- $ 315 209 ======== ======== The following, which excludes discontinued operations, is a summary of expenditures which have been expensed, incurred in connection with building repairs and maintenance (including contract services), and landscaping and ground maintenance for the six months ended June 30, 2002 and 2001: Six Months Ended June 30, -------------------- 2002 2001 -------- -------- BUILDING REPAIRS AND MAINTENANCE Painting (exterior and interior) . . . . $ 585 867 Carpet and vinyl . . . . . . . . . . . . 280 382 Wallpaper and mini-blinds. . . . . . . . 69 68 Carpentry, glass and hardware. . . . . . 164 180 Heating and air conditioning . . . . . . 57 73 Plumbing . . . . . . . . . . . . . . . . 122 150 Appliances . . . . . . . . . . . . . . . 58 71 Electrical . . . . . . . . . . . . . . . 67 76 Parking lots / resurfacing . . . . . . . 29 40 Swimming pools and amenity areas . . . . 176 130 Other repairs and maintenance. . . . . . 225 161 Six Months Ended June 30, -------------------- 2002 2001 -------- -------- CONTRACT SERVICES Property monitoring services . . . . . . 120 124 Rubbish collection services. . . . . . . 71 160 Cleaning services. . . . . . . . . . . . 156 193 Pest control services. . . . . . . . . . 79 87 Other services . . . . . . . . . . . . . 41 51 -------- -------- $ 2,299 2,813 ======== ======== LANDSCAPING AND GROUNDS MAINTENANCE Lawn maintenance . . . . . . . . . . . . $ 897 1,023 All other. . . . . . . . . . . . . . . . 230 104 -------- -------- $ 1,127 1,127 ======== ======== 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 June 30, 2002, the Company was continuing the rehab of the second phase of AMLI at Valley Ranch. Starting in 1999 and through June 30, 2002, the Company has spent $2,761 on the rehab of this property and expects to spend an additional $400 to complete the rehab. The following table summarizes capital expenditures incurred in connection with the rehab of phase II of AMLI at Valley Ranch. Six Months Ended June 30, -------------------- 2002 2001 -------- -------- Buildings - interior . . . . . . . . . . . $ 322 164 Amenities. . . . . . . . . . . . . . . . . -- 37 General contractor's fee . . . . . . . . . 8 7 Overhead and general conditions. . . . . . 69 64 Other. . . . . . . . . . . . . . . . . . . 67 27 -------- -------- $ 466 299 ======== ======== 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 40.9% 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 June 30, 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 40.2% of the Company's total market capitalization (49.2% including the Company's share of co-investment partnerships' debt), the high percentage of intermediate-term fixed-rate debt (69.3% 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 (12.2% 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. DISCONTINUED OPERATIONS 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 has restated its Consolidated Statements of Operations for the three and six months ended June 30, 2001 and Consolidated Statement of Cash Flows for the six months ended June 30, 2001 as a result of implementing SFAS 144 to reflect discontinued operations of the property held for sale as of June 30, 2002. This restatement has no impact on the Company's net income or net income per common share. Properties held for sale by co-investment partnerships accounted for using the equity method of accounting are not "discontinued operations" under the provision of SFAS 144. As of June 30, 2002, the Company had one rental property held for sale included in discontinued operations. No interest expense has been allocated to discontinued operations. Condensed financial information of the results of operations for the rental property held for sale is as follows: Three Months Six Months Ended Ended June 30, June 30, ------------------ ------------------ 2002 2001 2002 2001 ------- ------- ------- ------- Rental income . . . . . . . . $ 1,182 1,226 2,375 2,450 Other income. . . . . . . . . 75 75 152 138 ------- ------- ------- ------- Total property revenues . 1,257 1,301 2,527 2,588 Three Months Six Months Ended Ended June 30, June 30, ------------------ ------------------ 2002 2001 2002 2001 ------- ------- ------- ------- Property operating expenses . 509 487 1,027 962 ------- ------- ------- ------- Net operating income. . . 748 814 1,500 1,626 Depreciation expense. . . . . 124 227 307 419 ------- ------- ------- ------- Income from discontinued operations before minority interest . . . 624 587 1,193 1,207 Minority interest . . . . . . 105 99 202 201 ------- ------- ------- ------- Income from discontinued operations. . . . . . . $ 519 488 991 1,006 ======= ======= ======= ======= OTHER MATTERS Derivative instruments reported on the Consolidated Balance Sheets as liabilities totaled $2,988 and $3,724 as of June 30, 2002 and December 31, 2001, respectively, a $736 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 $3,854 and $4,294 as of June 30, 2002 and December 31, 2001, respectively, a $440 decrease. The adjustments to the shareholders' equity include $1,331 and $1,413 of the Company's share of Other Comprehensive Loss of a co- investment partnership as of June 30, 2002 and December 31, 2001, respectively. The Service Companies recorded an after-tax charge against earnings of $141 and $61 for the six months ended June 30, 2002 and 2001, respectively, pursuant to FIN 44 "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 $207 for the six months ended June 30, 2002. The Company has tested the unamortized goodwill remaining on the Service Company's books and no impairment existed as of June 30, 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. 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 half 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 most of its markets. The Company continues to be exposed to decreasing levels of rental income as a result of decreased occupancy rates and increased levels of rent concessions, particularly in its Atlanta, Austin and Denver markets. Factors contributing to these decreases include slow to negative new job creation, the overall condition of local economies, pockets of overbuilding and loss of residents to homes made more affordable by the current low interest rate environment. 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 its properties (primarily some of those 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 effects 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. The Company carries insurance to protect against this specific risk. 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 N/A 92% at Bent Tree . . . . . . . 500 93% 94% 89% 93% 92% 92% at Bishop's Gate . . . . . 266 93% 95% 92% 90% 93% 90% at Chase Oaks. . . . . . . 250 87% 97% 90% 95% 93% 96% at Gleneagles. . . . . . . 590 90% 92% 91% 92% 94% 95% on the Green . . . . . . . 424 90% 90% 91% 93% 94% 91% at Nantucket . . . . . . . 312 93% 94% 96% 94% 94% 92% of North Dallas. . . . . . 1,032 91% 92% 94% 92% 93% 95% on Rosemeade . . . . . . . N/A N/A N/A N/A N/A 93% 94% at Stonebridge Ranch . . . 250 88% 90% 90% 90% 82% N/A at Shadow Ridge. . . . . . 222 87% 89% 78% 85% N/A N/A at Valley Ranch. . . . . . 460 84% 89% 89% 90% 93% 95% Upper West Side. . . . . . 194 94% N/A N/A N/A N/A N/A ------ ----- ----- ----- ----- ----- ----- ----- ----- 4,500 90% 92% 91% 92% 93% 94% ------ ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: in Great Hills . . . . . . 344 91% 89% 94% 92% 90% 91% at Lantana Ridge . . . . . 354 93% 90% 88% 94% 89% 90% at StoneHollow . . . . . . 606 94% 93% 94% 94% 94% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,304 93% 91% 92% 93% 92% 90% ------ ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at the Medical Center. . . . 334 97% 94% 93% 94% N/A N/A at Western Ridge . . . . . . 318 94% 94% 95% 98% 95% 91% ------ ----- ----- ----- ----- ----- ----- ----- ----- 652 95% 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 89% 94% 94% 92% 95% 97% at Killian Creek. . . . . . 256 93% 95% 87% 92% 93% 97% at Park Creek . . . . . . . 200 95% 83% 85% 83% 91% 93% at Towne Creek. . . . . . . 150 90% 93% 89% 93% 90% 89% on Spring Creek . . . . . . 1,180 87% 90% 90% 90% 94% 92% at Vinings. . . . . . . . . 360 93% 93% 91% 90% 93% 95% at West Paces . . . . . . . 337 88% 91% 94% 94% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- 2,771 89% 91% 90% 91% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Alvamar . . . . . . . . N/A N/A N/A N/A N/A 93% 86% at Centennial Park . . . . 170 92% 89% 92% 96% 88% 86% at Lexington Farms . . . . 404 93% 92% 92% 92% 93% 91% at Regents Center. . . . . 424 94% 89% 88% 94% 93% 89% at Town Center . . . . . . 156 92% 94% 90% 96% 90% 87% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,154 93% 91% 90% 94% 92% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: at Conner Farms. . . . . . 300 92% 90% 89% 92% 93% 89% at Eagle Creek . . . . . . 240 93% 93% 88% 90% 93% 93% at Riverbend . . . . . . . 996 94% 94% 90% 94% 90% 83% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,536 93% 93% 90% 92% 91% 86% ------ ----- ----- ----- ----- ----- ----- ----- ----- Chicago, IL AMLI: at Poplar Creek. . . . . . 196 95% 94% 94% 95% 94% 96% ------ ----- ----- ----- ----- ----- ----- ----- ----- DENVER, CO AMLI: at Gateway Park. . . . . . 328 90% 89% 85% 91% 93% 85% ------ ----- ----- ----- ----- ----- ----- ----- ----- Total wholly-owned communities . . . . . . . . 12,441 91.2% 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 89% 93% 93% 92% 95% 86% at Fossil Creek. . . . . . 25% 384 92% 91% 87% 95% 95% 94% at Oak Bend. . . . . . . . 40% 426 91% 92% 91% 96% 94% 93% on the Parkway . . . . . . 25% 240 88% 92% 91% 94% 92% 91% at Prestonwood Hills . . . 45% 272 92% 93% 89% 95% 97% 96% on Timberglen. . . . . . . 40% 260 92% 94% 95% 94% 94% 94% at Verandah. . . . . . . . 35% 538 93% 92% 93% 96% 94% 90% on Frankford . . . . . . . 45% 582 96% 94% 92% 93% 93% 94% at Breckinridge Point. . . 45% 440 94% 90% 87% 89% 93% 93% at Bryan Place . . . . . . 48% 420 90% N/A N/A N/A N/A N/A ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,802 92% 92% 91% 94% 94% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: at Wells Branch. . . . . . 25% 576 92% 92% 88% 93% 87% 81% at Scofield Ridge. . . . . 45% 487 89% 88% 86% 90% 87% 80% at Monterey Oaks . . . . . 25% 430 92% 92% 92% 94% 88% 94% ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,493 91% 91% 88% 92% 87% 88% ------- ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at Champions Centre. . . . N/A N/A N/A 98% 94% 93% 89% 95% at Champions Park. . . . . N/A N/A N/A 91% 94% 92% 94% 90% at Greenwood Forest. . . . 15% 316 92% 92% 91% 93% 93% 87% Midtown. . . . . . . . . . 45% 419 93% 91% 90% 97% 96% 96% Towne Square . . . . . . . 45% 380 95% 90% 91% 96% 90% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,115 94% 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 93% 91% 85% 94% 92% 94% at Northwinds. . . . . . . 35% 800 92% 93% 93% 92% 95% 93% at River Park. . . . . . . 40% 222 90% 95% 94% 89% 91% 96% at Willeo Creek. . . . . . 30% 242 91% 88% 91% 84% 91% 98% at Windward Park . . . . . 45% 328 91% 91% 87% 90% 91% 88% at Peachtree City. . . . . 20% 312 86% 86% 92% 92% 94% 89% at Lost Mountain . . . . . 75% 164 91% 95% 83% 93% 95% 95% at Park Bridge . . . . . . 25% 352 94% 92% 92% 93% 96% 95% lease lease lease lease lease at Mill Creek. . . . . . . 25% 400 94% up up up up up ------ ----- ----- ----- ----- ----- ----- ----- ----- 3,266 92% 91% 90% 91% 94% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Regents Crest . . . . . 25% 476 95% 90% 86% 89% 92% 90% Creekside. . . . . . . . . 25% 224 96% 94% 91% 93% 88% 91% at Wynnewood Farms . . . . 25% 232 91% 91% 88% 93% 92% 91% lease lease lease at Summit Ridge. . . . . . 25% 432 94% 90% 91% up up up ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,364 94% 91% 89% 91% 91% 91% ------- ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: on Spring Mill . . . . . . 20% residual 400 87% 84% 80% 81% 78% 80% at Lake Clearwater . . . . 25% 216 91% 92% 84% 93% 94% 94% at Castle Creek. . . . . . 40% 276 95% 89% 91% 88% 91% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 892 90% 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 94% 93% 85% 91% 95% 95% at Danada Farms. . . . . . 10% 600 93% 93% 86% 87% 94% 96% at Fox Valley. . . . . . . 25% 272 93% 85% 83% 92% 93% 94% at Willowbrook . . . . . . N/A N/A N/A N/A N/A N/A 93% 93% at Windbrooke. . . . . . . 15% 236 95% 98% 86% 95% 97% 96% at Oakhurst North. . . . . 25% 464 93% 86% 80% 86% 90% 93% at St. Charles . . . . . . 25% 400 89% 88% 87% 84% 91% 89% at Osprey Lake . . . . . . 69% 483 90% 93% 96% 93% 92% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,047 92% 91% 86% 89% 93% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Denver, CO AMLI: at Lowry Estates . . . . . 50% 414 88% 87% 91% 91% 88% 87% at Park Meadows. . . . . . 25% 518 81% N/A N/A N/A N/A N/A ------- ----- ----- ----- ----- ----- ----- ----- ----- 932 84% 87% 91% 91% 88% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total co-investment communities . . . . . . . . 15,911 91.7% 90.9% 89.0% 91.5% 92.0% 91.7% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total . . . . . . . . . . . . 28,352 91.5% 91.3% 89.8% 91.8% 92.2% 91.5% ======= ===== ===== ===== ===== ===== ===== ===== =====
PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of AMLI Residential Properties Trust was held on April 29, 2002 for the following purposes: 1. To elect three Trustees to serve until the third subsequent annual meeting of shareholders and until their successors are elected and qualify; 2. To approve an amendment to the AMLI Residential Properties Option Plan to increase the maximum number of securities that may be subject to options under this plan from 2,850,000 to 3,450,000, and to eliminate the plan provision permitting re- pricing of options. 3. To approve the AMLI Residential Properties Senior Officer Share Acquisition Plan and the 260,000 maximum number of shares which may be issued under this plan. 4. To approve the AMLI Residential Properties Trustee Share Compensation Plan and the 30,000 maximum number of shares which may be issued under this plan. 5. To ratify the appointment of KPMG LLP as the Company's independent auditors for the fiscal year ending December 31, 2002. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of the management's nominees for trustees as listed in the proxy statement were elected with the following vote: Shares Shares Shares Voted Voted Not "For" "Against" Voted ---------- ---------- ---------- Gregory T. Mutz 10,890,303 2,729,624 -- Laura D. Gates 13,519,867 100,060 -- Marc S. Heilweil 13,523,108 96,819 -- The amendment to the Option Plan was approved by the following vote: Shares Shares Shares Voted Voted Shares Not "For" "Against" "Withheld" Voted ---------- --------- ---------- ---------- 12,402,798 1,105,331 111,798 -- The Senior Officer Share Acquisition Plan was approved by the following vote: Shares Shares Shares Voted Voted Shares Not "For" "Against" "Withheld" Voted ---------- --------- ---------- ---------- 12,574,685 930,781 114,461 -- The Trustee Share Compensation Plan was approved by the following vote: Shares Shares Shares Voted Voted Shares Not "For" "Against" "Withheld" Voted ---------- --------- ---------- ---------- 12,892,084 610,717 117,127 -- The ratification of the appointment of KPMG LLP as independent auditor was approved by the following vote: Shares Shares Shares Voted Voted Shares Not "For" "Against" "Withheld" Voted ---------- --------- ---------- ---------- 13,356,558 203,991 59,378 -- ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the quarter ended June 30, 2002. The Exhibits filed as part of this report are listed below. EXHIBIT NO. DOCUMENT DESCRIPTION - ----------- -------------------- 10.11 Fourth Amendment to AMLI Residential Properties Option Plan. 10.12 AMLI Residential Properties 2002 Senior Officer Share Acquisition Plan. 10.12(a) AMLI Residential Properties 2002 Trustee Share Compensation Plan. 15.1 Letter from Independent Auditor related to the review of interim financial information. 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 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: August 12, 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: August 12, 2002 By: /s/ ALLAN J. SWEET ----------------------------------- Allan J. Sweet President and Trustee Date: August 12, 2002 By: /s/ PHILIP N. TAGUE ----------------------------------- Philip N. Tague Executive Vice President and Trustee Date: August 12, 2002 By: /s/ ROBERT J. CHAPMAN ----------------------------------- Robert J. Chapman Principal Financial Officer Date: August 12, 2002 By: /s/ CHARLES C. KRAFT ----------------------------------- Charles C. Kraft Principal Accounting Officer EX-10.11 3 ex_1011.txt EXHIBIT 10.11 - ------------- FOURTH AMENDMENT TO AMLI RESIDENTIAL PROPERTIES OPTION PLAN WHEREAS, Amli Residential Properties Trust, a Maryland real estate investment trust (the "Trust"), has adopted and maintains the Amli Residential Properties Option Plan (the "Option Plan"); and WHEREAS, the Board of Trustees of the Trust has the authority to amend the Option Plan, subject to shareholder approval with respect to amendments that increase the number of Shares or Units (as such terms are defined in the Option Plan) eligible for awards under the Option Plan; and WHEREAS, the members of the Board of Trustees of the Trust now consider it desirable to amend the Option Plan to increase the number of Shares or Units eligible for awards under the Option Plan; NOW, THEREFORE, IT IS RESOLVED, that the Option Plan shall be, and it hereby is, amended, effective as of the date the shareholders of the Trust approve of this amendment by substituting the following for Section 4.1 of the Option Plan: "4.1.NUMBER OF SHARES AND UNITS SUBJECT TO OPTION. Subject to the adjustment provisions of Section 4.4, the aggregate number of (a) Shares which may be subject to Share Options (whether as Incentive Share Options or Non- qualified Options), and (b) Units which may be subject to Unit Options, shall not exceed 3,450,000 Shares or 3,450,000 Units, or any combination of the foregoing. If, and to the extent, that Options granted under the Plan terminate, expire or are canceled for any reason without having been exercised, the Shares or Units reserved for issuance pursuant to the terminated, expired or canceled Option (and any Shares reserved in connection with the Conversion Rights of the Units) shall again be available for the granting of Options; provided that the granting and terms of such new Options shall in all respects comply with the provisions of the Plan. No Options to purchase fractional Shares or fractional Units shall be granted or issued under the Plan." BE IT FURTHER RESOLVED, that Sections 3.2(d) and 3.3(a) of the Option Plan shall be, and it hereby is, amended, effective as of the date the shareholders of the Trust approve this amendment, by adding the following at the end of each of such provisions: "provided that no such modification or cancellation and reissue may result in a change in the original exercise price other than through the application of the adjustment provisions of this plan." EX-10.12 4 ex_1012.txt EXHIBIT 10.12 - ------------- AMLI RESIDENTIAL PROPERTIES 2002 SENIOR OFFICER SHARE ACQUISITION PLAN ------------------------------------- AMLI RESIDENTIAL PROPERTIES TRUST --------------------------------- CERTIFICATE ----------- I, ____________________, ______________________________________ of Amli Residential Properties Trust, having in my custody and possession the corporate records of said corporation, do hereby certify that attached hereto is a true and correct copy of the Amli Residential Properties 2002 Senior Officer Share Acquisition Plan, as in effect as of ________________. WITNESS my hand this ________________________________________. AMLI RESIDENTIAL PROPERTIES 2002 SENIOR OFFICER SHARE ACQUISITION PLAN ------------------------------------- SECTION 1 GENERAL ------- 1.1 ESTABLISHMENT AND PURPOSE. Amli Residential Properties Trust, a Maryland real estate investment trust (the "REIT"), is the general partner of Amli Residential Properties, L.P. (the "Partnership"), a Delaware limited partnership. The Partnership owns all of the preferred stock of Amli Management Company, a Delaware corporation which in turn owns Amrescon, LLC, a Delaware corporation, and each of such entities is referred to individually as a "Service Company" and collectively as the "Service Companies". The Partnership may from time to time acquire, directly or indirectly, a greater than 50% economic interest in other entities that may adopt the Plan and become additional Service Companies hereunder, with the consent of the Executive Compensation Committee of the REIT. The REIT, the Partnership, and the Service Companies are each referred to individually as an "Affiliated Company," and collectively as the "Affiliated Companies." The purpose of the Amli Residential Properties 2002 Senior Officer Share Acquisition Plan (the "Plan") is to enable each of the Affiliated Companies to attract, retain and motivate individuals to perform services as employees and otherwise by providing for or increasing the opportunity for such individuals to share in the growth and success of the Affiliated Companies through proprietary interests in the REIT and thereby promote the long-term financial interest of the REIT and the other Affiliated Companies. The Plan has been established by the REIT as a successor to the loan program established in 1999, under which senior management employees were given the opportunity to purchase Common Shares of the REIT in the open market using the proceeds of loans from the REIT, which loans were reimbursable to each employee by his employer, contingent upon the borrowing employee's fulfillment of certain obligations and conditions. The Plan is similarly intended to provide senior management employees the opportunity to purchase Common Shares with similarly reimbursable loans. However, in order to facilitate compliance with Section 16(b) of the Securities Exchange Act of 1934, as amended, Common Shares purchased under the Plan may be either open market purchases or acquired from the REIT's authorized but unissued shares. 1.2 PARTICIPATION. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Persons those persons who will be granted the right to purchase Common Shares under the Plan, and thereby become "Participants" in the Plan. 1.3 OPERATION, ADMINISTRATION, AND DEFINITIONS. The operation and administration of the Plan, including the grant of the right to purchase Common Shares made under the Plan, shall be subject to the provisions of Section 4 (relating to operation and administration). Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 6 of the Plan). SECTION 2 COMMON SHARE ACQUISITION PROGRAM -------------------------------- 2.1 PURCHASE OF COMMON SHARES. The Committee may, from time to time, establish one or more programs under which Participants will be granted the right to purchase Common Shares under the Plan, and shall designate the Participants eligible to participate under such share purchase programs. The purchase price for Common Shares available under such programs, and other terms and conditions of such programs, shall be established by the Committee. The purchase price may not be less than the Fair Market Value of the Common Shares at the time of purchase (or, in the Committee's discretion, the average Common Share value over a period determined by the Committee); provided, however, that the purchase price may not be less than par value of a Common Share. 2.2 RESTRICTIONS ON SHARES. The Committee may impose such restrictions with respect to Common Shares purchased under subsection 2.1 as the Committee determines to be appropriate. 2.3 PAYMENT OF PURCHASE PRICE. The purchase price of the Common Shares purchased by a Participant shall be paid at the time of the purchase in cash, or in such other form permitted by the Committee; and such form of payment may include use of the proceeds of the loan from the REIT to the Participant, which loan shall be evidenced by a promissory note, and shall be subject to such terms and restrictions imposed by the Committee, which terms may include the employer's reimbursement of the loan, contingent upon the borrowing individual's fulfillment of conditions and obligations established by the Committee. SECTION 3 OPERATION AND ADMINISTRATION ---------------------------- 3.1 EFFECTIVE DATE. Subject to the approval of the shareholders of the REIT at the REIT's 2002 annual meeting of its shareholders, the Plan shall be effective as of April 29, 2002 (the "Effective Date"); provided, however, that to the extent that rights are granted under the Plan prior to its approval by shareholders, they shall be contingent on approval of the Plan by the shareholders of the REIT. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any awards of the right to purchase Common Shares under it are outstanding. 3.2 COMMON SHARES SUBJECT TO PLAN. The Common Shares which may be purchased by Participants under the Plan shall be subject to the following: (a) The Common Shares with respect to which the right to purchase may be awarded under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company, including shares purchased in the open market, in private transactions or otherwise. (b) Subject to the following provisions of this subsection 3.2, the maximum number of Common Shares that may be delivered to Participants and their beneficiaries under the Plan shall be 260,000 Common Shares. 3.3 GENERAL RESTRICTIONS. Delivery of Common Shares or other amounts under the Plan shall be subject to the following: (a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Common Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity. (b) To the extent that the Plan provides for issuance of share certificates to reflect the issuance of Common Shares, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. 3.4 ADJUSTMENT TO SHARES. (a) In the event of any change in the outstanding Common Shares by reason of a stock dividend or split, recapitalization, merger or consolidation (whether or not the REIT is a surviving corporation), reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend paid in cash or property, the number of Common Shares (or other securities) then remaining subject to this Plan, and the maximum number of shares that may be issued to anyone pursuant to this Plan, including those that are then covered by outstanding awards of the right to purchase Common Shares, shall (i) in the event of an increase in the number of outstanding shares, be proportionately increased and the price for each share then covered by an outstanding right to purchase Common Shares shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, be proportionately reduced and the price for each share then covered by an outstanding right to purchase Common Shares shall be proportionately increased. (b) In the event the adjustments described in clauses (i) and (ii) of paragraph (a) of this subsection 3.4 are inadequate to ensure equitable treatment of any holder of the right to purchase shares, then, to the extent permissible under applicable law, the Committee shall make any further adjustments as it deems necessary to ensure equitable treatment of any such holder as the result of any transaction affecting the securities subject to the Plan or as is required or authorized under the terms of any applicable agreement relating to the award of the right to purchase Common Shares. (c) The existence of the Plan and the right to purchase shares granted hereunder shall not affect or restrict in any way the right or power of the Board of Trustees or the shareholders of the REIT to make or authorize any adjustment, recapitalization, reorganization or other capital structure of its business, any merger or consolidation of the REIT, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Shares or the rights thereof, the dissolution or liquidation of the REIT or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. 3.5 TAX WITHHOLDING. All benefits under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of Common Shares which the Participant already owns, or through the surrender of Common Shares to which the Participant is otherwise entitled under the Plan. 3.6 TRANSFERABILITY. The award of the right to purchase Common Shares under the Plan is not transferable except as designated by the Participant by will or by the laws of descent and distribution. 3.7 FORM AND TIME OF ELECTIONS. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. 3.8 AGREEMENT WITH REIT. An award of the right to purchase Common Shares under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any award of the right to purchase Common Shares to any Participant shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the Participant, and the Committee may, but need not require that the Participant sign a copy of such document. 3.9 ACTION BY REIT OR AFFILIATED COMPANY. Any action required or permitted to be taken by the REIT or any Affiliated Company shall be by resolution of its board of trustees, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company. 3.10 GENDER AND NUMBER. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. 3.11 LIMITATION OF IMPLIED RIGHTS. The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating individual the right to be retained in the employ of the REIT or any Affiliated Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no award of the right to purchase Common Shares under the Plan shall confer upon the holder thereof any rights as a shareholder of the REIT prior to the date on which the individual fulfills all conditions for receipt of such rights and purchase such Common Shares. 3.12 EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. SECTION 4 COMMITTEE --------- 4.1 SELECTION OF COMMITTEE. The Committee shall be selected by the Board, and shall consist of not less than two members of the Board. 4.2 POWERS OF COMMITTEE. The Committee shall have the authority to control and manage the operation and administration of the Plan. The Committee's administration of the Plan shall be subject to the following: (a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Persons those persons who shall receive awards to purchase Common Shares, and to establish the terms, conditions, restrictions and other provisions applicable to the right to purchase shares under the Plan, including determining the time or times of receipt, determining the number of shares which may be purchased by a Participant, and (subject to the restrictions imposed by Section 5) canceling or suspending the right to purchase shares. (b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. (c) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. (d) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to declaration of trust and by-laws of the REIT, and applicable state corporate law. 4.3 DELEGATION BY COMMITTEE. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. 4.4 INFORMATION TO BE FURNISHED TO COMMITTEE. The REIT and Affiliated Companies shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the REIT and Affiliated Companies as to an employee's or Participant's employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan. 4.5 LIABILITY AND INDEMNIFICATION OF COMMITTEE. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the REIT be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a Trustee or employee of the REIT. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the REIT, to the fullest extent permitted by law, against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act honestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance. SECTION 5 AMENDMENT AND TERMINATION The Board may, at any time, amend or terminate the Plan, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any award to purchase shares granted under the Plan prior to the date such amendment is adopted by the Board. SECTION 6 DEFINED TERMS In addition to the other definitions contained herein, the following definitions shall apply: (a) BOARD. The term "Board" shall mean the Board of Trustees of the REIT. (b) COMMON SHARE. The term "Common Share" shall mean a common share of beneficial interest, $0.01 per value per share, of the REIT. (c) ELIGIBLE PERSON. The term "Eligible Person" shall mean any employee of an Affiliated Company or any person providing or that has provided services to an Affiliated Company. An award of the right to purchase Common Shares may be granted to an individual, in connection with hiring, retention or otherwise, prior to the date the individual first performs services for the Affiliated Company, provided that such right to purchase shares shall not become vested prior to the date the individual first performs such services. (d) EXCHANGE ACT. The term "Exchange Act" means the Securities Exchange Act of 1934, as from time to time amended. (e) FAIR MARKET VALUE. The "Fair Market Value" of a Common Share shall be determined as follows: If the Common Shares are listed or admitted to trading on a securities exchange registered under the Exchange Act, the Fair Market Value of a Common Share is the average of the high and low price of the Common Shares for the day immediately preceding the date as of which Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on the principal securities exchange on which the Common Shares are listed or admitted to trading. If the Common Shares are not listed or admitted to trading on any such exchange but are listed as a national market security on the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), traded in the over-the-counter market or listed or traded on any similar system then in use, the Fair Market Value of a Common Share shall be the average of the high and low sales price for the day immediately preceding the date as of which the Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on such system. If the Common Shares are not listed or admitted to trading on any such exchange, are not listed as a national market security on NASDAQ and are not traded in the over-the- counter market or listed or traded on any similar system then in use, but are quoted on NASDAQ or any similar system then in use, the Fair Market Value of a Common Share shall be the average of the closing high bid and low asked quotations on such system for the Common Shares on the date in question. In all other cases, Fair Market Value for purposes of the Plan shall be determined by the REIT Committee in its sole discretion using appropriate criteria. EX-10.12A 5 ex_1012a.txt EXHIBIT 10.12 (a) - ----------------- AMLI RESIDENTIAL PROPERTIES 2002 TRUSTEE SHARE COMPENSATION PLAN TABLE OF CONTENTS SECTION 1 GENERAL. . . . . . . . . . . . . . . . . . . . . . 1 1.1. Purpose. . . . . . . . . . . . . . . . . 1 1.2. Operation and Administration . . . . . . 1 SECTION 2 RETAINER AWARDS. . . . . . . . . . . . . . . . . . 1 2.1. General. . . . . . . . . . . . . . . . . 1 2.2. Fractional Shares. . . . . . . . . . . . 2 SECTION 3 OPERATION AND ADMINISTRATION . . . . . . . . . . . 2 3.1. Effective Date . . . . . . . . . . . . . 2 3.2. Shares Subject to Plan . . . . . . . . . 2 3.3. Fractional Shares. . . . . . . . . . . . 2 3.4. Adjustments to Shares. . . . . . . . . . 2 3.5. Limit on Distribution. . . . . . . . . . 3 3.6. Distributions to Disabled Persons. . . . 3 3.7. Administration . . . . . . . . . . . . . 4 3.8. Form and Time of Elections . . . . . . . 4 3.9. Agreement With REIT. . . . . . . . . . . 4 3.10. Evidence . . . . . . . . . . . . . . . . 4 3.11. Action by REIT . . . . . . . . . . . . . 4 3.12. Gender and Number. . . . . . . . . . . . 4 SECTION 4 COMMITTEE. . . . . . . . . . . . . . . . . . . . . 4 4.1. Selection of Committee . . . . . . . . . 4 4.2. Powers of Committee. . . . . . . . . . . 4 4.3. Information to be Furnished to Committee . . . . . . . . . . . . . . 4 4.4. Liability and Indemnification of Committee. . . . . . . . . . . . . . . . 4 SECTION 5 AMENDMENT AND TERMINATION. . . . . . . . . . . . . 5 SECTION 6 DEFINED TERMS. . . . . . . . . . . . . . . . . . . 5 i AMLI RESIDENTIAL PROPERTIES 2002 TRUSTEE SHARE COMPENSATION PLAN ------------------------------------ SECTION 1 --------- GENERAL ------- 1.1. PURPOSE. The Amli Residential Properties 2002 Trustee Share Compensation Plan (the "Plan") has been established by Amli Residential Properties Trust (the "REIT") to promote the interests of the REIT and its shareholders by enhancing the REIT's ability to attract and retain the services of experienced and knowledgeable Trustees and by encouraging such Trustees to acquire an increased proprietary interest in the REIT. 1.2. OPERATION AND ADMINISTRATION. The operation and administration of the Plan shall be subject to the provisions of Section 3. Capitalized terms in the Plan shall be defined as set forth in Section 6 or elsewhere in the Plan. SECTION 2 --------- RETAINER AWARDS --------------- 2.1. GENERAL. (a) For each Plan Year, each Trustee who is an Eligible Trustee on the first day of that Plan Year shall be granted an "Eligible Trustee Retainer Award" for the year, which shall be in the form of Common Shares having a Fair Market Value in an amount (not in excess of $24,000) to be determined by the Board of Trustees with respect to the individual Eligible Trustee for that Plan Year, subject to the limitations of subsection 3.2. (b) Except as otherwise provided in this subsection 2.1, the Eligible Trustee Retainer Award for any Plan Year shall be made as of the first business day of that Plan Year (the "Award Date" for that Eligible Trustee Retainer Award) or, in the sole discretion of the Board of Trustees, quarterly in equal installments commencing as of the first business day of that Plan Year and every three months thereafter (with each such date being an "Award Date"), and the Fair Market Value of the Common Shares so awarded shall be determined as of that date. (c) If a Trustee becomes an Eligible Trustee during a Plan Year, on a date other than the first day of the Plan Year, he shall be granted an Eligible Trustee Retainer Award for the year, which shall be in the form of Common Shares having a Fair Market Value equal to an amount (not in excess of $24,000) to be determined by the Board of Trustees with respect to the individual, subject to a pro-rata reduction to reflect the portion of the Plan Year prior to the date on which he becomes an Eligible Trustee. An Eligible Trustee's Retainer Award under this paragraph (e) shall be made on the first business day on which he is an Eligible Trustee (the "Award Date" for that Eligible Trustee Retainer Award), and the Fair Market Value of the Common Shares so awarded shall be determined as of that date. 1 (d) The Common Shares awarded under this subsection 2.1 shall be immediately vested and nonforfeitable on the date awarded to the Participant in accordance with this subsection 2.1. Notwithstanding the foregoing, the Common Shares awarded to an Eligible Trustee who has not previously performed services for the REIT shall become vested and nonforfeitable on the 90-day anniversary of the Award Date, provided that the individual to whom the Common Shares were awarded continues to be an Eligible Trustee on such date. 2.2. FRACTIONAL SHARES. If the Eligible Trustee Retainer Award that would otherwise be made to a Participant as of any Award Date under paragraph 2.1 is not a whole number, then the number of shares otherwise awardable shall be reduced to the next lowest whole number and, instead, the Fair Market Value (determined as of the Award Date) of the shares subject to the reduction shall be paid to the Participant in cash as soon as practicable after the Award Date. SECTION 3 --------- OPERATION AND ADMINISTRATION ---------------------------- 3.1. EFFECTIVE DATE. Subject to the approval of the shareholders of the REIT at the REIT's 2002 annual meeting of its shareholders, the Plan shall be effective as of the Effective Date; provided, however, that to the extent that Awards are made under the Plan prior to its approval by shareholders, they shall be contingent on approval of the Plan by the shareholders of the REIT. The Plan shall be unlimited in duration. 3.2. SHARES SUBJECT TO PLAN. The Common Shares with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued shares, or shares currently held or subsequently acquired by the REIT, including shares purchased in the open market, in private transactions or otherwise. Subject to the provisions of subsection 3.4, the number of Common Shares which may be issued with respect to Awards under the Plan shall not exceed 30,000 shares in the aggregate. Except as otherwise provided herein, any Common Shares subject to an Award which for any reason expires or is terminated without issuance of Common Shares (whether or not cash or other consideration is paid to a Participant in respect of such shares) shall again be available for issuance under the Plan. 3.3. FRACTIONAL SHARES. No fractional Common Shares shall be distributed under the Plan and, instead, the Fair Market Value of such fractional share shall be distributed in cash, with the Fair Market Value determined as of the date the fractional share would otherwise have been distributable. 3.4. ADJUSTMENTS TO SHARES. (a) In the event of any change in the outstanding Common Shares by reason of a stock dividend or split, recapitalization, merger or consolidation (whether or not the REIT is a surviving corporation), reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend paid in cash or property, the number of Common Shares (or other securities) then remaining subject to this Plan, and the maximum number of shares that may be issued to anyone pursuant to this Plan, including those that are then covered by outstanding Awards, shall (i) in the event of an increase in the number of outstanding shares, be proportionately increased 2 and the price for each share then covered by an outstanding Award shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, be proportionately reduced and the price for each share then covered by an outstanding Award shall be proportionately increased. (b) In the event the adjustments described in clauses (i) and (ii) of paragraph (a) of this subsection 3.4 are inadequate to ensure equitable treatment of any Award holder, then, to the extent permissible under applicable law, the Committee shall make any further adjustments as it deems necessary to ensure equitable treatment of any holder of an Award as the result of any transaction affecting the securities subject to the Plan or as is required or authorized under the terms of any applicable Award Agreement. (c) The existence of the Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board of Trustees or the shareholders of the REIT to make or authorize any adjustment, recapitalization, reorganization or other capital structure of its business, any merger or consolidation of the REIT, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Shares or the rights thereof, the dissolution or liquidation of the REIT or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. 3.5. LIMIT ON DISTRIBUTION. Distribution of Common Shares or other amounts under the Plan shall be subject to the following: (a) Notwithstanding any other provision of the Plan, the REIT shall have no liability to issue any Common Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. (b) The Committee shall add such conditions and limitations to any Award to any Participant who is subject to Section 16(a) and 16(b) of the Securities Exchange Act of 1934, as is necessary to comply with Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain any exemption therefrom. (c) To the extent that the Plan provides for issuance of certificates to reflect the transfer of Common Shares, the transfer of such shares may, at the direction of the Committee, be effected on a non-certificated basis, to the extent not prohibited by the provisions of Rule 16b-3, applicable local law, the applicable rules of any stock exchange, or any other applicable rules. 3.6. DISTRIBUTIONS TO DISABLED PERSONS. Notwithstanding any other provision of the Plan, if, in the Committee's opinion, a Participant or other person entitled to benefits under the Plan is under a legal disability or is in any way incapacitated so as to be unable to manage his financial affairs, the Committee may direct that payment be made to a relative or friend of such person for his benefit until claim is made by a conservator or other person legally charged with the care of his person or his estate, and such payment or distribution shall be in lieu of any such payment to such Participant or other person. Thereafter, any benefits under the Plan to which such Participant or other person is entitled shall be paid to such conservator or other person legally charged with the care of his person or his estate. 3 3.7. ADMINISTRATION. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the "Committee") in accordance with Section 5. 3.8. FORM AND TIME OF ELECTIONS. Any election required or permitted under the Plan shall be in writing, and shall be deemed to be filed when delivered to the Secretary of the REIT. 3.9. AGREEMENT WITH REIT. Each Award of Common Shares granted under Section 2 shall be evidenced by a written document in such form as is determined by the Committee. 3.10. EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. 3.11. ACTION BY REIT. Any action required or permitted to be taken by the REIT shall be by resolution of the Board, or by action of one or more members of the Board (including a committee of the Board) who are duly authorized to act for the board, by a duly authorized officer of the Board, or (except to the extent prohibited by the provisions of Rule 16b-3, applicable local law, the applicable rules of any stock exchange, or any other applicable rules) by a duly authorized officer of the REIT. 3.12. GENDER AND NUMBER. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. SECTION 4 --------- COMMITTEE --------- 4.1. SELECTION OF COMMITTEE. The Committee shall be selected by the Board, and shall consist of not less than two members of the Board. 4.2. POWERS OF COMMITTEE. The authority to manage and control the operation and administration of the Plan shall be vested in the Committee. The Committee will have the authority to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. 4.3. INFORMATION TO BE FURNISHED TO COMMITTEE. The REIT shall furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the REIT as to the period of a Trustee's service shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan. 4.4. LIABILITY AND INDEMNIFICATION OF COMMITTEE. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the REIT be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a Trustee or employee of the REIT. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the REIT, to the fullest extent permitted by law, against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized 4 delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance. SECTION 5 AMENDMENT AND TERMINATION The Board may, at any time, amend or terminate the Plan, provided that, subject to subsection 3.4 (relating to certain adjustments to shares), no amendment or termination may adversely affect the rights of any Participant or beneficiary under any Award made under the Plan prior to the date such amendment is adopted by the Board. Notwithstanding the provisions of this Section 5, in no event shall the provisions of the Plan relating to Awards under the Plan be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder; provided, however, that the limitation set forth in this sentence shall be applied only to the extent required under SEC Rule 16b-3(c)(2)(ii)(B) or any successor provision thereof. SECTION 6 --------- DEFINED TERMS ------------- For purposes of the Plan, the terms listed below shall be defined as follows: (a) AWARD. The term "Award" shall mean the Eligible Trustee Retainer Award granted to any person under the Plan. (b) BOARD. The term "Board" shall mean the Board of Trustees of the REIT. (c) COMMON SHARES. The term "Common Shares" shall mean common shares of beneficial interest, $0.01 per value per share, of the REIT. (d) EFFECTIVE DATE. The "Effective Date" means the date on which Trustees begin their yearly term of office on the Board following their election at the REIT's 2002 annual shareholders meeting. (e) EXCHANGE ACT. The term "Exchange Act" means the Securities Exchange Act of 1934, as from time to time amended. (f) FAIR MARKET VALUE. The "Fair Market Value" of a share of Common Shares shall be determined as follows: If the shares are listed or admitted to trading on a securities exchange registered under the Exchange Act, the Fair Market Value of a share is the average of the high and low price of the shares for the day immediately preceding the date as of which Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on the principal securities exchange on which the shares are listed or admitted to trading. 5 If the shares are not listed or admitted to trading on any such exchange but are listed as a national market security on the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), traded in the over-the-counter market or listed or traded on any similar system then in use, the Fair Market Value of a share shall be the average of the high and low sales price for the day immediately preceding the date as of which the Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on such system. If the shares are not listed or admitted to trading on any such exchange, are not listed as a national market security on NASDAQ and are not traded in the over-the counter market or listed or traded on any similar system then in use, but are quoted on NASDAQ or any similar system then in use, the Fair Market Value of a share shall be the average of the closing high bid and low asked quotations on such system for the shares on the date in question. In all other cases, Fair Market Value for purposes of the Plan shall be determined by the Committee in its sole discretion using appropriate criteria. (g) ELIGIBLE TRUSTEE. The term "Eligible Trustee" means a member of the Board of Trustees of the REIT who is not an employee of the REIT. (h) PARTICIPANT. A "Participant" is any person who has received an Award under the Plan. (i) PLAN YEAR. The term "Plan Year" means the period (i) beginning on the date on which members of the Board begin their yearly term as Board members following the election of Trustees at the REIT's annual shareholders meeting and (ii) ending on the day immediately prior to the first day of the following Plan Year. The first Plan Year shall begin on the Effective Date. (j) SEC. "SEC" shall mean the Securities and Exchange Commission. (k) TRUSTEE. The term "Trustee" means a member of the Board. 6 EX-15.1 6 ex_151.txt EXHIBIT 15.1 - ------------ Shareholders and Board of Trustees AMLI Residential Properties Trust: Gentlemen: RE: Registration Statements Nos. 333-89594, 333-89598, 333-89622, 333-74300, 333-70076, 333-83923, 333-65503, 333-57327, 333-24433, 333-08819, 333-08813, 333-08815, 33-93120, 33-89508, 33-71566 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 31, 2002 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities act of 1933, such report is not considered a part of a registration prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG LLP Chicago, Illinois July 31, 2002 EX-99.1 7 ex_991.txt EXHIBIT 99.1 - ------------ WRITTEN CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICERS AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 The undersigned, the Co-Chief Executive Officers and the Chief Financial Officer of AMLI Residential Properties Trust ("the "Company"), each hereby certifies that, to the best of each of their knowledge: (a) the Company's Report on Form 10-Q for the quarterly period ending June 30, 2002 filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (b) information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company. Date: August 12, 2002 By: /s/ Allan J. Sweet ------------------------------ Allan J. Sweet Co-Chief Executive Officer Date: August 12, 2002 By: /s/ Philip N. Tague ------------------------------ Philip N. Tague Co-Chief Executive Officer Date: August 12, 2002 By: /s/ Robert J. Chapman ------------------------------ Robert J. Chapman Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. EX-99.2 8 ex_992.txt EXHIBIT 99.2 - ------------ AMLI RESIDENTIAL ------------------------------------------------------------ SECOND QUARTER 2002 SUPPLEMENTAL OPERATING AND FINANCIAL DATA ------------------------------------------------------------ [ graphics indicating property / caption reading "AMLI at Bryan Place - Dallas, Texas. Purchased in June 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 ------------ Certain matters discussed in this supplemental package and the conference call held in connection herewith 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. The Company is making forward looking statements because it believes that 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 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 risk 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. AMLI RESIDENTIAL TABLE OF CONTENTS Page ---- SUMMARY INFORMATION Company Description and Investor Information. . . . . . . . 1 Earnings Release. . . . . . . . . . . . . . . . . . . . . . 2 Selected Financial and Operating Information. . . . . . . . 6 Funds From Operations . . . . . . . . . . . . . . . . . . . 12 Statements of Operations. . . . . . . . . . . . . . . . . . 14 Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . 18 DEBT AND PREFERRED SHARES Debt and Preferred Shares Summary . . . . . . . . . . . . . 20 Debt Maturities . . . . . . . . . . . . . . . . . . . . . . 24 SAME STORE AND NOI DATA Quarterly Comparison of Same Store Communities. . . . . . . 26 Quarterly Comparison of Components of NOI . . . . . . . . . 39 OTHER DATA Co-Investment Compensation. . . . . . . . . . . . . . . . . 45 Service Companies Financial Information . . . . . . . . . . 47 PORTFOLIO Stabilized Communities. . . . . . . . . . . . . . . . . . . 50 Development Summary . . . . . . . . . . . . . . . . . . . . 54 Land Held for Development or Sale . . . . . . . . . . . . . 58 AMLI RESIDENTIAL COMPANY DESCRIPTION INVESTOR INFORMATION AMLI Residential (or AMLI) is an integrated, self-managed real estate operating company, that was formed in February 1994 to continue and expand the multifamily property business previously conducted by AMLI Realty Co., our 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 Second 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: July 30, 2002 Robert J. Chapman, Chief Financial Officer (312) 984-6845 AMLI RESIDENTIAL ANNOUNCES SECOND QUARTER 2002 OPERATING RESULTS AND DECLARES DIVIDEND (CHICAGO, IL) AMLI RESIDENTIAL PROPERTIES TRUST (NYSE: AML) announces today operating results for the second quarter ended June 30, 2002. EARNINGS - -------- Funds From Operations ("FFO") for the second quarter 2002 were $16,105,000, or $0.62 per common share, compared to $16,162,000, or $0.65 per common share, for the second quarter 2001, a per share decrease of 4.6%. FFO is consistent with First Call's current estimate and the Company's recently revised guidance. FFO for the six months ended June 30, 2002 was $31,933,000, or $1.23 per share, compared to $31,393,000, or $1.26 per share, for the six months ended June 30, 2001, a per share decrease of 2.4%. "As noted in our press release last week, results for the quarter were negatively impacted by weaker than expected property operations," commented Allan J. Sweet, AMLI President. "Several of our markets actually performed relatively well for the first six months of this year, compared to either last year's numbers or our current year's expectations; however, rental revenues in Dallas, which is our largest market, and in Austin, for example, dropped dramatically from collections in May. Continuing weakness in Atlanta, our second largest market, has been consistent with our expectations." Net income for the three and six months ended June 30, 2002 was $7,291,000 and $13,951,000, respectively, as compared to $14,225,000 and $20,630,000, respectively, in the year earlier periods. Diluted Earnings Per Share ("EPS") for the quarter ended June 30, 2002 was $0.29, compared to $0.67 for the comparable period of 2001, a decrease of 56.7%, which was primarily attributable to a large gain from the sale of a community last year. Additionally, Operating EPS was $0.26 per diluted share for the quarter ended June 30, 2002, as compared to $0.28 per diluted share for the quarter ended June 30, 2001. For the six months ended June 30, 2002, EPS was $0.54 compared to $0.96 for the comparable period of 2001, a decrease of 43.8%, and Operating EPS was $0.52 compared to $0.54 for the comparable period of 2001, a decrease of 3.7%. "Operating EPS" includes the operating results for properties whose operating results are reported as "Discontinued Operations" under GAAP. SAME COMMUNITY RESULTS - ---------------------- On a combined same community basis, which includes both wholly-owned and co-investment communities (at 100%) for the quarter ended June 30, 2002 versus the prior year's quarter, total property revenues decreased 3.3%, operating expenses increased 0.1%, and net operating income ("NOI") decreased 5.4%. Weighted average occupancy, quarter over comparable quarter, decreased from 92.2% to 92.0%, while the weighted average rental rate decreased by 2.7%. Second Quarter 2002 Page 2 Supplemental Information AMLI Residential Properties Trust OTHER OPERATING RESULTS - ----------------------- Total property revenues, including both wholly-owned communities and co- investment communities (at 100%) were $69,191,000 and $137,095,000, respectively, for the quarter and six months ended June 30, 2002, as compared with $69,676,000 and $137,195,000 for the comparable period in 2001, a 0.7% and 0.1% decrease, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter and six months ended June 30, 2002 were $25,910,000 and $51,125,000, respectively, representing decreases of 2.4% and 1.5%, respectively, from the same period last year. SECOND QUARTER ACTIVITIES - -------------------------- During the second quarter, AMLI: . Broke ground on AMLI Downtown Austin, a mixed-used development containing 220 apartment homes, a parking garage and retail space, in downtown Austin, Texas. . Purchased AMLI at Bryan Place, a 420-unit luxury apartment community in Dallas, Texas, in a joint venture with an existing institutional partner. . Acquired AMLI Upper West Side, a 194-unit community in Fort Worth, Texas. . Completed the initial lease-up and stabilization of AMLI at Mill Creek in Gwinnett County, Georgia and closed on an $18 million first mortgage permanent loan. . Sold AMLI at Champions Park and AMLI at Champions Centre in Houston, Texas. Both communities were owned in a joint venture. In addition to AMLI's 15% share of the net sale proceeds, AMLI received disposition fees of $239,000. . Increased the mortgage financing on AMLI at Chevy Chase, a 592-unit community in suburban Chicago owned by a joint venture. As a result of the refinancing, AMLI received a promoted interest distribution of approximately $725,000 in excess of its 33% ownership, which has been treated by AMLI as a return of capital and is expected to be recognized as income when the property is ultimately sold. Additionally, AMLI is now entitled to receive 40% of all future cash flow distributions and 50% of any future distributions of sale or refinancing proceeds from this partnership. . Modified mortgages on two wholly-owned communities that reduced the interest rates, extended the maturities, and provided additional proceeds of approximately $12,000,000. SUBSEQUENT EVENT - ---------------- AMLI currently expects to close the sale of AMLI at Greenwood Forest, a 316-unit co-investment community, on August 1, 2002. In connection with the sale, AMLI will receive a disposition fee of $403,000. Second Quarter 2002 Page 3 Supplemental Information AMLI Residential Properties Trust ACCOUNTING FOR SHARE OPTIONS - ---------------------------- Yesterday, AMLI's Board of Trustees approved management's decision to change AMLI's policy for accounting for share options. In accordance with the rules governing the accounting for such a change, AMLI will commence reporting the value of share options awarded subsequent to January 1, 2002 as a charge against earnings and FFO. The accounting for options issued prior to 2002 is unaffected by this change, and AMLI anticipates that there will be no material effect on its 2002 results of operations. COMMON SHARE REPURCHASE AUTHORIZATIONS - -------------------------------------- During the period from July 25, through July 29, 2002, AMLI repurchased on the open market 130,500 of its common shares at an average price of $21.62 per share pursuant to its previously announced 500,000 Common Share Repurchase Program, so that shares repurchased under this authorization now total 350,900. Yesterday, AMLI's Board of Trustees replaced the remaining 149,100 share authorization with a new 1,500,000 share authorization. AMLI anticipates acquiring shares under this new authorization from time to time as market conditions warrant. OUTLOOK - ------- As stated in the Company's revised guidance issued last week, AMLI's current expectation for full year 2002 FFO per share is in the range of $2.42 to $2.48 per share. AMLI anticipates that full year Operating EPS for 2002 will be in the range of $1.01 to $1.07. The Company anticipates that previous FFO guidance for 2003 of $2.75 to $2.85 per share is no longer likely and will issue revised guidance at a later date this year. DIVIDEND - -------- Yesterday, the Board of Trustees declared a quarterly dividend of $0.48 per common share. This dividend is payable on August 20, 2002 to all common shareholders of record as of August 9, 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, July 31, 2002 at 3:30 p.m. ET to review these results. The call may be joined by calling 877-601-5719 - -- Passcode: AMLI. A live webcast of the conference call will also be available in the 'Company Info' section on AMLI's website (www.amli.com/ comp/) and at www.streetevents.com. SUPPLEMENTAL INFORMATION - ------------------------ AMLI produces Quarterly Supplemental Information that provides detailed information regarding the Company's activities during the quarter. The Second Quarter Supplemental Information is available in the 'Company Info' section on our website (www.amli.com/comp/) under 'Shareholder Reports.' Second Quarter 2002 Page 4 Supplemental Information AMLI Residential Properties Trust ABOUT AMLI - ---------- The AMLI portfolio currently includes 73 apartment communities containing 28,352 apartment homes, with an additional 2,757 apartment homes under development or in lease-up in eight 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. 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 judgment 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. # # # # Second Quarter 2002 Page 5 Supplemental Information AMLI Residential Properties Trust AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------- June 30, March 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- REVENUES - -------- TOTAL REVENUES Consolidated (a). . . . . . . . . . . . . $ 31,112 30,124 30,829 33,003 31,148 Combined, including share of partnerships (b). . . . . . . . . . . . 42,853 41,520 41,775 44,848 43,012 TOTAL PROPERTY REVENUES Consolidated. . . . . . . . . . . . . . . 27,537 27,374 27,296 27,824 27,523 Combined, including share of partnerships. . . . . . . . . . . . . . 40,615 40,104 40,199 41,174 40,997 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 69,191 67,904 68,114 70,003 69,676 EARNINGS - -------- EBITDA Consolidated. . . . . . . . . . . . . . 22,347 21,774 20,911 23,826 22,823 Combined, including share of partnerships. . . . . . . . . . . . . 25,910 25,215 24,323 27,378 26,547 FFO . . . . . . . . . . . . . . . . . . . 16,105 15,828 14,901 16,848 16,162 AFFO. . . . . . . . . . . . . . . . . . . 14,646 14,601 13,635 15,452 13,474 Operating earnings. . . . . . . . . . . . 5,820 5,516 4,604 7,158 5,928 Net income. . . . . . . . . . . . . . . . 5,345 4,578 3,815 17,611 12,592 Dividends (c) . . . . . . . . . . . . . . 12,432 12,286 11,985 11,751 11,686 6 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------- June 30, March 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- PER SHARE DATA - DILUTED - ------------------------ FFO . . . . . . . . . . . . . . . . . . . $ 0.62 0.61 0.58 0.67 0.65 AFFO. . . . . . . . . . . . . . . . . . . 0.56 0.56 0.53 0.61 0.54 Operating earnings. . . . . . . . . . . . 0.26 0.25 0.21 0.33 0.28 Net income allocable to common shares . . 0.29 0.25 0.21 0.89 0.67 Common dividends. . . . . . . . . . . . . 0.48 0.48 0.48 0.47 0.47 FFO payout ratio (based on per share amounts). . . . . . . . . . . . . 77.7% 78.8% 82.8% 70.3% 72.8% AFFO payout ratio (based on per share amounts). . . . . . . . . . . . . 85.4% 85.6% 90.6% 76.5% 87.4% NUMBER OF APARTMENT HOMES - ------------------------- STABILIZED COMMUNITIES Wholly-owned. . . . . . . . . . . . . . . 12,441 12,247 12,247 12,247 12,079 Partnerships. . . . . . . . . . . . . . . 15,911 15,011 15,011 14,579 15,067 ---------- ---------- ---------- ---------- ---------- 28,352 27,258 27,258 26,826 27,146 ---------- ---------- ---------- ---------- ---------- COMMUNITIES UNDER DEVELOPMENT AND/OR LEASE-UP Wholly-owned. . . . . . . . . . . . . . . 542 322 322 322 -- Partnerships. . . . . . . . . . . . . . . 2,215 2,615 2,615 2,737 2,217 ---------- ---------- ---------- ---------- ---------- 2,757 2,937 2,937 3,059 2,217 ---------- ---------- ---------- ---------- ---------- Total . . . . . . . . . . . . . . . . . . 31,109 30,195 30,195 29,885 29,363 ========== ========== ========== ========== ========== See notes on following pages. 7
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ June 30, March 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- CAPITALIZATION - -------------- REAL ESTATE AT COST, BEFORE DEPRECIATION Consolidated. . . . . . . . . . . . . . . $ 735,699 745,906 744,411 743,111 696,346 Combined, including share of partnerships. . . . . . . . . . . . . . 1,142,647 1,116,239 1,114,576 1,105,640 1,074,009 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 1,954,652 1,864,965 1,862,901 1,862,901 1,822,852 TOTAL ASSETS Consolidated. . . . . . . . . . . . . . . 964,800 915,344 919,002 912,987 915,048 Combined, including share of partnerships. . . . . . . . . . . . . . 1,161,962 1,112,731 1,120,158 1,111,033 1,121,990 DEBT Consolidated. . . . . . . . . . . . . . . 450,268 405,126 399,309 408,475 429,489 Combined, including share of partnerships. . . . . . . . . . . . . . 648,965 592,300 586,137 595,174 625,061 SHARE INFORMATION common shares outstanding . . . . . . . . 18,120,296 18,110,659 17,840,368 17,847,398 17,814,037 Preferred shares outstanding (d). . . . . 4,025,000 4,025,000 4,275,000 3,475,000 3,475,000 Operating Partnership units outstanding(e). . . . . . . . . . . . . 3,655,364 3,664,396 3,664,396 3,684,866 3,602,195 ---------- ---------- ----------- ----------- ----------- Total shares and units outstanding. . . . 25,800,660 25,800,055 25,779,764 25,007,264 24,891,232 ========== ========== =========== =========== =========== Weighted average shares and units outstanding . . . . . . . . . . . . . . 25,800,241 25,787,270 25,518,607 24,960,829 24,876,109 Share price, end of period. . . . . . . . $ 26.00 25.22 25.22 23.60 24.60 8 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------ June 30, March 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- EQUITY MARKET CAPITALIZATION 670,817 650,677 650,166 590,171 612,324 MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 1,121,085 1,055,803 1,049,475 998,646 1,041,813 Combined, including shares of partnerships. . . . . . . . . . . . . . 1,319,782 1,242,977 1,236,317 1,185,359 1,237,400 Combined,including partnerships at 100% . 2,334,010 2,179,544 2,187,099 2,119,787 2,171,828 DEBT SERVICE (f) - ---------------- INTEREST EXPENSE Consolidated. . . . . . . . . . . . . . . 6,084 5,800 5,858 6,824 6,352 Combined, including share of partnerships 9,602 9,197 9,205 10,328 10,027 CAPITALIZED INTEREST Consolidated. . . . . . . . . . . . . . . 962 1,054 981 1,100 1,047 Combined, including share of partnerships . . . . . . . . . . . . 1,003 1,072 1,004 1,145 1,072 SCHEDULED PRINCIPAL PAYMENTS (normal amortization) Consolidated. . . . . . . . . . . . . . . 1,105 1,183 1,166 1,014 753 Combined, including share of partnerships 1,583 1,786 1,704 1,501 1,313 See notes on following pages. 9
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ June 30, March 31, Dec. 31, Sept. 30, June 30, 2002 2002 2001 2001 2001 ---------- ---------- ---------- ---------- ---------- OPERATIONAL RATIOS - ------------------ EBITDA, AS PERCENT OF TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 8.0% 8.2% 8.0% 9.5% 8.8% Combined, including share of unconsolidated affiliates . . . . . . . 7.9% 8.1% 7.9% 9.2% 8.6% INTEREST COVERAGE Consolidated. . . . . . . . . . . . . . . 3.7 3.8 3.6 3.5 3.6 Combined, including share of partnerships 2.7 2.7 2.6 2.7 2.6 FIXED CHARGE COVERAGE (g) Consolidated. . . . . . . . . . . . . . . 2.8 2.8 2.6 2.8 2.9 Combined, including share of partnerships 2.2 2.2 2.2 2.3 2.3 FINANCIAL RATIOS - ---------------- DEBT TO TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 40.2% 38.4% 38.0% 40.9% 41.2% Combined, including share of unconsolidated affiliates . . . . . . . 49.2% 47.7% 47.4% 50.2% 50.5% DEBT TO TOTAL ASSETS, AT COST (before depreciation) Consolidated. . . . . . . . . . . . . . . 41.9% 39.6% 38.9% 40.2% 42.5% Combined, including share of partnerships 49.7% 47.2% 46.7% 48.1% 50.3% 10 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) Included all preferred shares convertible to common shares. (e) Represents Minority Interest on the Company's Balance Sheets. (f) Excludes amortization of deferred and other financing costs. (g) Includes interest expense and preferred dividends and excludes principal amortization. 11
AMLI RESIDENTIAL FUNDS FROM OPERATIONS Unaudited (Dollars in thousands, except for share data) Three Months Ended June 30 ----------------------- 2002 2001 ---------- ---------- Company's share of communities' EBITDA (a). $ 25,804 26,408 Interest from and share of Services Companies' FFO (b). . . . . . . . . . . . (24) 394 Other interest and Other. . . . . . . . . . 83 466 Co-investment fee income (c). . . . . . . . 1,260 429 General and administrative. . . . . . . . . (1,213) (1,151) ---------- ---------- EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) . . 25,910 26,546 ---------- ---------- INTEREST EXPENSE (d) Wholly-owned communities and portfolio debt. . . . . . . . . . . . . . . . . . . (6,242) (6,661) Share of partnership communities. . . . . . (3,563) (3,723) ---------- ---------- (9,805) (10,384) ---------- ---------- FUNDS FROM OPERATIONS (FF0) . . . . . . . . 16,105 16,162 CAPITAL EXPENDITURES PAID FROM FFO Wholly-owned communities. . . . . . . . . . (1,159) (2,438) Share of partnership communities. . . . . . (300) (250) ---------- ---------- (1,459) (2,688) ---------- ---------- ADJUSTED FUNDS FROM OPERATIONS (AFFO) . . . $ 14,646 13,474 ========== ========== Notes: (a) Includes discontinued operations. See pages 40 and 43. (b) Includes share of income before goodwill amortization of $104 for the quarter ended June 30, 2001. See page 47. (c) See page 47. (d) Includes amortization of deferred and other financing costs. 12 AMLI RESIDENTIAL FUNDS FROM OPERATIONS Unaudited (Dollars in thousands, except for share data) Six Months Ended June 30 ----------------------- 2002 2001 ---------- ---------- Company's share of communities' EBITDA (a). . . . . . . . . . . . . . . . $ 51,838 52,468 Interest from and share of Services Companies' FFO (b). . . . . . . . . . . . (254) 95 Other interest and Other. . . . . . . . . . 337 943 Co-investment fee income (c). . . . . . . . 1,957 1,053 General and administrative. . . . . . . . . (2,753) (2,669) ---------- ---------- EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) . . 51,125 51,890 ---------- ---------- INTEREST EXPENSE (d) Wholly-owned communities and portfolio debt. . . . . . . . . . . . . . . . . . . (12,188) (13,224) Share of partnership communities. . . . . . (7,004) (7,273) ---------- ---------- (19,192) (20,497) ---------- ---------- FUNDS FROM OPERATIONS (FF0) . . . . . . . . 31,933 31,393 CAPITAL EXPENDITURES PAID FROM FFO Wholly-owned communities. . . . . . . . . . (2,164) (3,437) Share of partnership communities. . . . . . (522) (461) ---------- ---------- (2,686) (3,898) ---------- ---------- ADJUSTED FUNDS FROM OPERATIONS (AFFO) . . . $ 29,247 27,495 ========== ========== Notes: (a) Includes discontinued operations. See pages 40 and 43. (b) Includes share of income before goodwill amortization of $207 for the six months ended June 30, 2001. See page 47. (c) See page 47. (d) Includes amortization of deferred and other financing costs. No interest expense is associated with discontinued operations. 13 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS Three Months Ended June 30 (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- REVENUES Property revenues . . . . . . . . . . . . . . . . . . $ 27,538 27,523 40,615 40,997 Interest and share of income (loss) from the Service Companies . . . . . . . . . . . . . . . . . (24) 291 (24) 291 Other interest and Other (c). . . . . . . . . . . . . 83 326 1,133 1,153 Income from partnerships. . . . . . . . . . . . . . . 2,255 2,439 -- -- Co-investment fee income. . . . . . . . . . . . . . . 1,260 569 1,129 570 ---------- ---------- ---------- ---------- 31,112 31,148 42,853 43,011 ---------- ---------- ---------- ---------- EXPENSES Property operating expenses . . . . . . . . . . . . . 11,267 11,034 16,451 16,169 Interest and amortization of deferred and other financing costs . . . . . . . . . . . . . . . 6,242 6,661 9,805 10,415 Depreciation. . . . . . . . . . . . . . . . . . . . . 5,248 5,328 8,196 8,215 General and administrative. . . . . . . . . . . . . . 1,213 1,151 1,259 1,237 ---------- ---------- ---------- ---------- 23,970 24,174 35,711 36,037 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES. . . . . . . . 7,142 6,974 7,142 6,974 Gain on sale of residential property including share of gains on sales of partnership's properties. . . . . . . . 605 9,249 605 9,249 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 7,747 16,223 7,747 16,223 Minority interest . . . . . . . . . . . . . . . . . . 975 2,486 975 2,486 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 6,772 13,737 6,772 13,737 ---------- ---------- ---------- ---------- Income from discontinued operations, net of minority interest (d). . . . . . . . . . . . 519 488 519 488 Gain on sale of discontinued operations, net of minority interest. . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- INCOME FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST. . . . . . . . . . . . . . 519 488 519 488 ---------- ---------- ---------- ---------- 14 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS - CONTINUED Three Months Ended June 30 (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . 7,291 14,225 7,291 14,225 Net income attributable to preferred shares . . . . . 1,946 1,633 1,946 1,633 ---------- ---------- ---------- ---------- Net Income attributable to common shares. . . . . . . $ 5,345 12,592 5,345 12,592 ========== ========== ========== ========== INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 7,747 16,223 7,747 16,223 Income from discontinued operations before minority interest . . . . . . . . . . . . . . . . . 624 587 624 587 Add: Depreciation Wholly-owned communities including discontinued operations . . . . . . . . . . . . . 5,371 5,554 5,371 5,554 Share of partnership communities. . . . . . . . . . 2,968 2,944 2,968 2,944 Less: Gains on sales of rental properties Wholly-owned communities. . . . . . . . . . . . . . -- -- -- -- Share of partnership communities. . . . . . . . . . (605) (9,249) (605) (9,249) Share of Service Companies' amortization of goodwill. -- 103 -- 103 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS . . . . . . . . . . . . . . . . $ 16,106 16,162 16,106 16,162 ========== ========== ========== ========== 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. (d) No interest expense is associated with discontinued operations. 15
AMLI RESIDENTIAL STATEMENTS OF OPERATIONS Six Months Ended June 30 (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- REVENUES Property revenues . . . . . . . . . . . . . . . . . . $ 54,912 54,571 80,719 80,871 Interest and share of income (loss) from the Service Companies . . . . . . . . . . . . . . . . . (254) (112) (254) (113) Other interest and Other (c). . . . . . . . . . . . . 447 803 2,060 2,281 Income from partnerships. . . . . . . . . . . . . . . 4,284 4,734 -- -- Co-investment fee income. . . . . . . . . . . . . . . 1,847 1,193 1,847 1,194 ---------- ---------- ---------- ---------- 61,236 61,189 84,373 84,233 ---------- ---------- ---------- ---------- EXPENSES Property operating expenses . . . . . . . . . . . . . 21,698 21,376 31,932 31,435 Interest and amortization of deferred and other financing costs . . . . . . . . . . . . . . . 12,188 13,224 19,192 20,529 Depreciation. . . . . . . . . . . . . . . . . . . . . 10,426 10,221 16,233 15,814 General and administrative. . . . . . . . . . . . . . 2,753 2,669 2,845 2,756 ---------- ---------- ---------- ---------- 47,065 47,490 70,202 70,534 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES. . . . . . . . 14,171 13,699 14,171 13,699 Gains on sale of residential property including share of gains on sales of partnership's properties. . . . . . . . . . . . . . . . . . . . . 605 9,249 605 9,249 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 14,776 22,948 14,776 22,948 Minority interest . . . . . . . . . . . . . . . . . . 1,816 3,324 1,816 3,324 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 12,960 19,624 12,960 19,624 ---------- ---------- ---------- ---------- Income from discontinued operations, net of minority interest (d). . . . . . . . . . . . 991 1,006 991 1,006 Gain on sale of discontinued operations, net of minority interest. . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- INCOME FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST. . . . . . . . . . . . . . 991 1,006 991 1,006 ---------- ---------- ---------- ---------- 16 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS - CONTINUED Six Months Ended June 30 (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . 13,951 20,630 13,951 20,630 Net income attributable to preferred shares . . . . . 4,028 3,266 4,028 3,266 ---------- ---------- ---------- ---------- Net income attributable to common shares. . . . . . . $ 9,923 17,364 9,923 17,364 ========== ========== ========== ========== INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 14,776 22,948 14,776 22,948 Income from discontinued operations before minority interest . . . . . . . . . . . . . . . . . 1,193 1,207 1,193 1,207 Add: Depreciation Wholly-owned communities including discontinued operations . . . . . . . . . . . . . 10,733 10,640 10,733 10,640 Share of partnership communities. . . . . . . . . . 5,836 5,640 5,836 5,640 Less: Gains on sales of rental properties Wholly-owned communities. . . . . . . . . . . . . . -- -- -- -- Share of partnership communities. . . . . . . . . . (605) (9,249) (605) (9,249) Share of Service Companies' amortization of goodwill. -- 207 -- 207 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS . . . . . . . . . . . . . . . . $ 31,933 31,393 31,933 31,393 ========== ========== ========== ========== 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. (d) No interest expense is associated with discontinued operations. 17
AMLI RESIDENTIAL BALANCE SHEETS (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ------------------------- ------------------------- June 30, December 31, June 30, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ ASSETS Rental apartments Land. . . . . . . . . . . . . . . . . . . . $ 99,013 99,784 155,011 150,187 Depreciable property. . . . . . . . . . . . 636,686 644,627 987,635 964,389 ---------- ---------- ---------- ---------- 735,699 744,411 1,142,647 1,114,576 Less: Accumulated depreciation . . . . . . . (110,733) (107,139) (143,763) (135,052) ---------- ---------- ---------- ---------- 624,966 637,272 998,884 979,524 Rental property held for sale, net of accumulated depreciation. . . . . . . . . . 20,401 -- 20,401 -- Land held for development or sale . . . . . . 24,372 47,611 24,372 47,611 Rental apartments under development . . . . . 25,477 10,392 59,628 41,477 Investment in partnerships (c). . . . . . . . 221,487 184,270 -- -- Cash and cash equivalents . . . . . . . . . . 4,129 5,892 11,394 14,093 Notes and advances to the Service Companies . 26,379 15,161 26,379 14,824 Other assets and deferred expenses, net . . . 17,589 18,404 20,904 22,629 ---------- ---------- ---------- ---------- $ 964,800 919,002 1,161,962 1,120,158 ========== ========== ========== ========== 18 AMLI RESIDENTIAL BALANCE SHEETS - CONTINUED (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ------------------------- ------------------------- June 30, December 31, June 30, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ LIABILITIES Debt. . . . . . . . . . . . . . . . . . . . . $ 450,268 399,309 648,965 586,137 Distributions in excess of investments in and earnings from partnerships. . . . . . . $ 4,514 -- 4,514 -- Accrued expenses and other liabilities. . . . 25,831 27,943 24,296 42,272 ---------- ---------- ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . . . . . 480,613 427,252 677,775 628,408 ---------- ---------- ---------- ---------- Mandatorily redeemable convertible preferred shares. . . . . . . . . . . . . . 93,247 93,287 93,247 93,287 Minority interest . . . . . . . . . . . . . . 66,433 68,186 66,433 68,186 Total Shareholders' Equity. . . . . . . . . . 324,507 330,277 324,507 330,277 ---------- ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . . . . $ 964,800 919,002 1,161,962 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. (c) See details in the Company's SEC Form 10-Q. 19
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY June 30, 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 . . . . . $312,018 69.3% 7.1% 6.9 312,018 -- 312,018 -- Construction financing . . . . . -- -- -- -- -- -- Tax-exempt debt . . . 50,250 11.2% 2.6% 0.3 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 88,000 19.5% 5.6% 1.4 -- 88,000 -- 88,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $450,268 100.0% 6.3% 5.1 321,518 128,750 312,018 138,250 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 71.4% 28.6% 69% 31% ======= ======= ======= ======= 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 . . . . . $504,205 77.7% 7.2% 7.0 504,205 -- 504,205 -- Construction financing . . . . . 6,510 1.0% 3.8% 1.4 6,510 -- 6,510 Tax-exempt debt . . . 50,250 7.7% 2.6% 0.3 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 88,000 13.6% 5.6% 1.4 -- 88,000 -- 88,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $648,965 100.0% 6.6% 5.7 520,215 128,750 504,205 144,760 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 80.2% 19.8% 78% 22% ======= ======= ======= ======= See notes on the following page. 20
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY June 30, 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) 2,022 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 supporting tax-exempt debt, not the actual maturity dates of the bond, which are in 2024. 21
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY - CONTINUED June 30, 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% 10/4/99 - 10/4/04 ------- 75,000 ------- The following summarizes interest rate swap contracts associated with the construction financing of AMLI at Seven Bridges, in which the Company owns a 20% interest: 22
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY - CONTINUED June 30, 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. 23
AMLI RESIDENTIAL DEBT MATURITIES June 30, 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 $ 2,169 -- 2,169 0.5% 0.0% 2003 4,076 124,690(c) 128,766 28.6% 6.1% 2004 3,775 6,970 10,745 2.4% 7.7% 2005 4,015 31,006 35,021 7.8% 8.2% 2006 3,130 35,372 38,502 8.6% 7.8% Thereafter 21,643 213,422(d) 235,065 52.2% 5.7% -------- ------- ------- ------ ----- Total $ 38,808 411,460 450,268 100.0% 6.3% ======== ======= ======= ====== ===== Percent to Total 8.6% 91.4% 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 $ 3,296 3,543 6,839 1.1% 3.9% 2003 6,441 130,978(c) 137,419 21.2% 6.2% 2004 6,078 14,863 20,941 3.2% 7.6% 2005 6,436 33,973 40,409 6.2% 7.8% 2006 16,533 66,793 83,326 12.8% 7.6% Thereafter 23,077 336,954(d) 360,031 55.5% 6.4% -------- ------- ------- ------ ----- Total $ 61,861 587,104 648,965 100.0% 6.6% ======== ======= ======= ====== ===== Percent to Total 9.5% 90.5% 100.0% ======== ======= ======= 24 AMLI RESIDENTIAL DEBT MATURITIES - CONTINUED June 30, 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. 25
AMLI RESIDENTIAL SAME STORE COMMUNITIES THREE MONTHS ENDED JUNE 30
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 92.4% 93.4% -1.0% $ 781 783 -0.2% Atlanta 5,285 91.0% 93.5% -2.7% 841 879 -4.3% Austin 2,797 91.7% 89.2% 2.8% 811 892 -9.1% Houston 1,433 92.1% 93.7% -1.7% 967 915 5.7% Indianapolis 1,752 92.6% 88.7% 4.5% 718 725 -1.0% Kansas City 2,086 93.8% 90.4% 3.8% 795 860 -7.5% Chicago 2,760 92.2% 93.6% -1.5% 1,054 1,066 -1.1% Denver 414 86.6% 86.3% 0.3% 1,092 1,113 -1.9% ------- ------ ------ ------ ------ ------ ------ Total 23,743 92.0% 92.2% -0.2% $ 843 866 -2.7% ======= ====== ====== ====== ====== ====== ====== 26
AMLI RESIDENTIAL SAME STORE COMMUNITIES - CONTINUED THREE MONTHS ENDED JUNE 30
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 $ 16,534 16,815 -1.7% 7,108 6,964 2.1% 9,426 9,851 -4.3% Atlanta 12,779 13,916 -8.2% 4,683 4,980 -6.0% 8,096 8,935 -9.4% Austin 6,712 7,049 -4.8% 2,996 3,215 -6.8% 3,716 3,834 -3.1% Houston 4,058 3,855 5.3% 1,735 1,622 7.0% 2,323 2,233 4.0% Indianapolis 3,726 3,687 1.1% 1,505 1,423 5.8% 2,221 2,264 -1.9% Kansas City 4,988 5,049 -1.2% 1,752 1,718 2.0% 3,236 3,332 -2.9% Chicago 8,609 8,964 -4.0% 3,330 3,082 8.0% 5,279 5,882 -10.2% Denver 1,229 1,287 -4.5% 373 465 -19.8% 857 823 4.2% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total $ 58,636 60,623 -3.3% 23,482 23,470 0.1% 35,154 37,155 -5.4% ======== ======== ======== ======== ======== ======== ======== ======== ======== Notes: Information shown is Combined, including share of partnership communities at 100%. 27
AMLI RESIDENTIAL SAME STORE COMMUNITIES SIX MONTHS ENDED JUNE 30
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 92.0% 93.2% -1.2% $ 786 780 0.8% Atlanta 5,285 90.9% 93.4% -2.7% 851 875 -2.7% Austin 2,797 91.7% 89.0% 3.1% 825 905 -8.8% Houston 1,433 91.6% 93.2% -1.7% 966 905 6.7% Indianapolis 1,752 91.5% 87.8% 4.3% 725 724 0.2% Kansas City 2,086 91.9% 88.8% 3.5% 803 856 -6.2% Chicago 2,760 89.7% 94.2% -4.8% 1,059 1,065 -0.6% Denver 414 88.0% 86.8% 1.3% 1,100 1,134 -3.0% ------- ------ ------ ------ ------ ------ ------ Total 23,743 91.3% 91.9% -0.7% $ 850 865 -1.8% ======= ====== ====== ====== ====== ====== ====== 28
AMLI RESIDENTIAL SAME STORE COMMUNITIES - CONTINUED SIX MONTHS ENDED JUNE 30
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 $ 33,037 33,205 -0.5% 14,042 13,756 2.1% 18,995 19,448 -2.3% Atlanta 25,838 27,593 -6.4% 9,209 9,709 -5.1% 16,629 17,885 -7.0% Austin 13,552 14,218 -4.7% 5,827 6,081 -4.2% 7,725 8,137 -5.1% Houston 8,047 7,598 5.9% 3,407 3,193 6.7% 4,639 4,405 5.3% Indianapolis 7,390 7,225 2.3% 2,867 2,727 5.1% 4,523 4,498 0.6% Kansas City 9,885 9,846 0.4% 3,466 3,431 1.0% 6,419 6,415 0.1% Chicago 16,953 17,821 -4.9% 6,328 6,021 5.1% 10,625 11,801 -10.0% Denver 2,513 2,597 -3.2% 718 844 -14.9% 1,795 1,752 2.4% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total $117,215 120,103 -2.4% 45,866 45,762 0.2% 17,349 74,341 -4.0% ======== ======== ======== ======== ======== ======== ======== ======== ======== (a) Information shown is Combined, including share of partnership communities at 100%. (b) Physical occupancy at the beginning of the month. (c) Collected rent per occupied unit per month. 29
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH The following graphs present monthly rental revenue for the first six months of 2002 in black, compared to monthly rental revenue for the twelve months of 2001 in gray. Note that information shown is Combined, including partnership communities at 100%.
ALL PROPERTIES - -------------- FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Aggregate portfolio rental revenue increased each month during the first quarter. April weakened, followed by an up-tick in May, generating some optimism for the balance of the year. However, June turned down dramatically to a level approximately equaling the results for January, causing concern over the ability to meet budget expectations for the balance of the year. 30
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
DALLAS - ------ FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== DALLAS, which represents 29% of total rental revenue for the six months, experienced moderate but increasing rental revenue growth each month during the first quarter. April was essentially flat, and May experienced a modest decline; then June turned sharply and unexpectedly negative. Job layoffs in the DFW area in the second quarter affected traffic and leasing, both of which were down 15% from 2Q/2001. Conversely, the number of residents leaving to buy homes increased. Looking ahead, the biggest issues will be the lingering impact of the telecom slowdown in specific areas, the rebound of the airlines and a general return to positive job growth. 31
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
ATLANTA - ------- FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ATLANTA, which represents 22% of total rental revenue for the six months, experienced positive growth during the first quarter. April and May experienced declines with the trend continuing through June. As Atlanta's job growth continued to slip and a large number of new units entered lease-up, pressure on occupancy levels forced effective rents to fall. 32
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
CHICAGO - ------- FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== CHICAGO, which represents 14% of total rental revenue for the six months, showed significant improvement in occupancy since the beginning of the year. Although rents have been discounted, concessions have been reducing. Job growth in Chicago was negative for the quarter on the trailing twelve months but turned positive vs. the first quarter. After increasing sharply in the first quarter, traffic slowed sequentially during the second, although year to date ahead of last year. 33
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
AUSTIN - ------ FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== AUSTIN, which represents 12% of total rental revenue for the six months, is accepting a high level of new supply as a percentage of its inventory. Although occupancy was up during the second quarter compared to a year earlier, increased concessions reduced its otherwise positive impact on revenue and the trend was negative each month since the upturn in February. 34
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
KANSAS CITY - ----------- FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== KANSAS CITY, which represents 8% of total rental revenue for the six months, experienced positive growth each month this year through May, when it experienced a sharp downturn. Occupancy has improved significantly over last year, but the change was obtained with the use of concessions. Kansas City is generated positive job growth, although modest. 35
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
INDIANAPOLIS - ------------ FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== INDIANAPOLIS, which represents 6% of total rental revenue for the six months, experienced positive growth in rental revenue each month this year, except in April. Occupancy improved from both the second quarter of last year and first quarter of this year. 36
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
HOUSTON - ------- FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== HOUSTON, which represents 7% of total rental revenue for the six months, has continued to perform well and its economy has been stable, although the urban core continued to be impacted by Enron's failure. Rental revenue increased each month this year with strong growth over last year. In general, Houston's supply numbers remain under relative control, which is cushioning the impact of slowing job growth. 37
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED
DENVER - ------ FIRST SIX MONTHS OF 2002 ------------------------------------------------- Jan Feb Mar Apr May Jun ----- ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== TWELVE MONTHS OF 2001 ---------------------------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Monthly Rental Revenues ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== DENVER, AMLI's newest market, represents 2% of total rental revenue for the six months. Rental revenue showed positive growth during the second quarter; however, this same store universe includes only one community, obviously not representative of the overall market. Denver, like Atlanta, has a large supply of new units, both as a gross number and as a percentage of its inventory. In addition, Denver continues to be impacted by the tech and telecom slowdowns. 38
AMLI RESIDENTIAL COMPONENTS OF NOI THREE MONTHS ENDED JUNE 30 (Dollars in thousands)
Partnership Communities Wholly-Owned Communities Combined (g) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- REVENUES Same store communities (a). . . . 25,457 26,001 -2.1% 35,987 37,016 -2.8% 33,178 34,622 -4.2% New communities (b) . . 0 0 0.0% 752 697 7.9% 2,647 2,430 8.9% Communities under development and lease-up . . . . . . . 0 0 0.0% 550 94 483.5% 2,187 377 480.3% Acquisition communities (c). . . . 3,338 969 244.5% 4,560 1,911 138.6% 2,566 1,455 76.4% Communities sold/ contributed to ventures (d) . . . . . 0 1,854 -100.0% 24 2,592 -99.1% 1,075 3,269 -67.1% -------- -------- -------- -------- -------- -------- -------- -------- -------- 28,796 28,824 -0.1% 41,873 42,310 -1.0% 41,653 42,153 -1.2% ======== ======== ======== ======== ======== ======== ======== ======== ======== EXPENSES Same store communities (a). . . . 10,333 10,392 -0.6% 14,539 14,592 -0.4% 13,149 13,076 0.6% New communities (b) . . 0 0 0.0% 262 205 27.7% 919 756 21.5% Communities under development and lease-up . . . . . . . 0 0 0.0% 302 92 228.1% 1,203 368 226.6% Acquisition communities (c). . . . 1,444 289 399.1% 1,889 635 197.5% 875 534 64.0% Communities sold/ contributed to ventures (d) . . . . . 0 840 -100.0% 30 1,101 -97.3% 622 1,327 -53.2% -------- -------- -------- -------- -------- -------- -------- -------- -------- 11,777 11,521 2.2% 17,023 16,625 2.4% 16,767 16,062 4.4% ======== ======== ======== ======== ======== ======== ======== ======== ======== 39 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED THREE MONTHS ENDED JUNE 30 (Dollars in thousands) Partnership Communities Wholly-Owned Communities Combined (g) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME Same store communities (a). . . . 15,125 15,609 -3.1% 21,448 22,425 -4.4% 20,029 21,546 -7.0% New communities (b) . . 0 0 0.0% 490 492 -0.4% 1,728 1,674 3.3% Communities under development and lease-up . . . . . . . 0 0 0.0% 247 2 12035.4% 984 9 11382.2% Acquisition communities (c). . . . 1,894 680 178.7% 2,671 1,276 109.3% 1,691 921 83.6% Communities sold/ contributed to ventures (d) . . . . . 0 1,014 -100.0% -6 1,492 -100.4% 453 1,942 -76.7% -------- -------- -------- -------- -------- -------- -------- -------- -------- 17,019 17,303 -1.6% 24,850 25,686 -3.3% 24,886 26,091 -4.6% ======== ======== ======== ======== ======== ======== ======== Cash flow preference and promote (e). . . . 915 566 -------- -------- COMPANY'S SHARE OF NOI (f). . . . . . 25,766 26,252 COMPANY'S SHARE OF OTHER, NET. . . . . . 39 156 -------- -------- COMPANY'S SHARE OF COMMUNITIES' EBITDA . 25,804 26,408 ======== ======== COMPANY'S PERCENTAGE OF PARTNERSHIPS' NOI: Before cash flow preferences (e). . . . 31.5% 32.1% Including cash flow preferences and other (f). . . . . . . 35.1% 34.3% ======== ======== 40 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED THREE MONTHS ENDED JUNE 30 (Dollars in thousands) Notes: (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 45. (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 45. (g) Company's 100% interest in wholly-owned communities plus the Company's share of partnership communities. 41
AMLI RESIDENTIAL COMPONENTS OF NOI SIX MONTHS ENDED JUNE 30 (Dollars in thousands)
Partnership Communities Wholly-Owned Communities Combined (g) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- REVENUES Same store communities (a). . . . 51,049 51,474 -0.8% 72,064 73,298 -1.7% 66,166 68,629 -3.6% New communities (b) . . 0 0 0.0% 1,498 1,325 13.0% 5,270 4,596 14.7% Communities under development and lease-up . . . . . . . 0 0 0.0% 962 135 614.9% 3,820 538 609.5% Acquisition communities (c). . . . 6,391 1,587 302.8% 8,555 3,138 172.6% 4,020 2,394 67.9% Communities sold/ contributed to ventures (d) . . . . . 0 4,098 -100.0% 168 5,563 -97.0% 2,908 6,466 -55.0% -------- -------- -------- -------- -------- -------- -------- -------- -------- 57,439 57,159 0.5% 83,247 83,459 -0.3% 82,184 82,624 -0.5% ======== ======== ======== ======== ======== ======== ======== ======== ======== EXPENSES Same store communities (a). . . . 20,018 20,132 -0.6% 28,282 28,348 -0.2% 25,848 25,631 0.8% New communities (b) . . 0 0 0.0% 523 469 11.5% 1,833 1,683 8.9% Communities under development and lease-up . . . . . . . 0 0 0.0% 539 155 248.8% 2,144 618 246.9% Acquisition communities (c). . . . 2,707 463 484.4% 3,508 1,008 247.9% 1,424 841 69.3% Communities sold/ contributed to ventures (d) . . . . . 0 1,743 -100.0% 92 2,266 -95.9% 1,423 2,691 -47.1% -------- -------- -------- -------- -------- -------- -------- -------- -------- 22,725 22,338 1.7% 32,945 32,247 2.2% 32,672 31,464 3.8% ======== ======== ======== ======== ======== ======== ======== ======== ======== 42 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED SIX MONTHS ENDED JUNE 30 (Dollars in thousands) Partnership Communities Wholly-Owned Communities Combined (g) at 100% -------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME Same store communities (a). . . . 31,030 31,343 0.0% 43,782 44,950 0.0% 40,319 42,998 0.0% New communities (b) . . 0 0 0.0% 975 856 13.9% 3,437 2,913 18.0% Communities under development and lease-up . . . . . . . 0 0 0.0% 423 -20 -2204.4% 1,675 -80 -2198.1% Acquisition communities (c). . . . 3,684 1,123 227.9% 5,047 2,130 137.0% 2,595 1,553 67.1% Communities sold/ contributed to ventures (d) . . . . . 0 2,355 -100.0% 76 3,297 -97.7% 1,485 3,776 -60.7% -------- -------- -------- -------- -------- -------- -------- -------- -------- 34,714 34,821 -0.3% 50,302 51,212 -1.8% 49,511 51,160 -3.2% ======== ======== ======== ======== ======== ======== ======== Cash flow preference and operating promote (e). . . . . . 1,537 1,103 -------- -------- COMPANY'S SHARE OF NOI (f). . . . . . 51,839 52,315 COMPANY'S SHARE OF OTHER, NET. . . . . . -1 153 -------- -------- COMPANY'S SHARE OF COMMUNITIES' EBITDA . 51,838 52,468 ======== ======== COMPANY'S PERCENTAGE OF PARTNERSHIPS' NOI: Before cash flow preferences (e). . . . 31.5% 32.0% Including cash flow preferences and other (f). . . . . . . 34.6% 34.2% ======== ======== 43 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED SIX MONTHS ENDED JUNE 30 (Dollars in thousands) Notes: (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 45. (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 45. (g) Company's 100% interest in wholly-owned communities plus the Company's share of partnership communities. 44
AMLI RESIDENTIAL CO-INVESTMENT COMPENSATION (Dollars in thousands) Three Months Ended June 30, ----------------------- 2002 2001 ---------- ---------- FEE INCOME (a) Acquisition fees (a). . . . . . . . . . . . . $ 401 -- Asset management fees (b) . . . . . . . . . . 118 141 Disposition fees (c). . . . . . . . . . . . . 239 -- Debt/equity placement fees. . . . . . . . . . -- -- Development fees (a). . . . . . . . . . . . . 502 288 Other . . . . . . . . . . . . . . . . . . . . -- -- ---------- ---------- 1,260 429 ---------- ---------- SHARE OF CASH FLOW (d) Promoted interest from operating cash flow. . 170 27 Cash flow preferences (e) . . . . . . . . . . 745 538 ---------- ---------- 915 566 ---------- ---------- TOTAL . . . . . . . . . . . . . . . . . . $ 2,175 995 ========== ========== Six Months Ended June 30, ----------------------- 2002 2001 ---------- ---------- FEE INCOME (a) Acquisition fees (a). . . . . . . . . . . . . $ 401 118 Asset management fees (b) . . . . . . . . . . 247 284 Disposition fees (c). . . . . . . . . . . . . 239 -- Debt/equity placement fees. . . . . . . . . . -- 112 Development fees (a). . . . . . . . . . . . . 960 539 Other . . . . . . . . . . . . . . . . . . . . 110 -- ---------- ---------- 1,957 1,053 ---------- ---------- SHARE OF CASH FLOW (d) Promoted interest from operating cash flow. . 276 53 Cash flow preferences (e) . . . . . . . . . . 1,261 1,050 ---------- ---------- 1,537 1,103 ---------- ---------- TOTAL . . . . . . . . . . . . . . . . . . $ 3,494 2,156 ========== ========== 45 AMLI RESIDENTIAL CO-INVESTMENT COMPENSATION - CONTINUED (Dollars in thousands) 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 47. (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 pages 40 and 43. (e) The Company receives compensation from certain partnerships in the form of a preferential distribution of cash flow. 46 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED STATEMENTS OF OPERATIONS - ------------------------------------------- Three Months Ended June 30, ----------------------- 2002 2001 ---------- ---------- REVENUES Property management fees (a). . . . . . . . . $ 2,702 2,528 General contractor revenues, net (b). . . . . 603 701 Gross profit - corporate homes (c). . . . . . 399 429 Other income. . . . . . . . . . . . . . . . . 267 (47) ---------- ---------- 3,972 3,612 ---------- ---------- OPERATING EXPENSES Property management . . . . . . . . . . . . . 2,447 2,242 Corporate homes . . . . . . . . . . . . . . . 253 248 General contractor. . . . . . . . . . . . . . 519 511 ---------- ---------- 3,218 3,002 ---------- ---------- EBITDA. . . . . . . . . . . . . . . . . . . . 754 610 Gain (loss) on land sales . . . . . . . . . . (4) (194) Interest expense. . . . . . . . . . . . . . . (463) (277) Depreciation and amortization . . . . . . . . (754) (638) Taxes . . . . . . . . . . . . . . . . . . . . 178 52 ---------- ---------- NET INCOME (LOSS) . . . . . . . . . . . . . . (290) (447) Eliminations, interest and other. . . . . . . (205) 439 ---------- ---------- SHARE OF INCOME (LOSS) FROM SERVICE COMPANIES (D) . . . . . . . . . . . $ (495) (7) ========== ========== 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. 47 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED STATEMENTS OF OPERATIONS - ------------------------------------------- Six Months Ended June 30, ----------------------- 2002 2001 ---------- ---------- REVENUES Property management fees (a). . . . . . . . . $ 5,393 5,031 General contractor revenue, net (b) . . . . . 1,237 1,217 Gross profit - corporate homes (c). . . . . . 745 733 Other income. . . . . . . . . . . . . . . . . 388 142 ---------- ---------- 7,763 7,123 ---------- ---------- OPERATING EXPENSES Property management . . . . . . . . . . . . . 4,955 4,656 Corporate homes . . . . . . . . . . . . . . . 495 476 General contractor. . . . . . . . . . . . . . 1,068 1,017 ---------- ---------- 6,518 6,149 ---------- ---------- EBITDA. . . . . . . . . . . . . . . . . . . . 1,245 974 Gain (loss) on land sales . . . . . . . . . . (77) 194 Interest expense. . . . . . . . . . . . . . . (873) (975) Depreciation and amortization . . . . . . . . (1,470) (1,213) Taxes . . . . . . . . . . . . . . . . . . . . 446 397 ---------- ---------- NET INCOME (LOSS) . . . . . . . . . . . . . . (729) (623) Eliminations, interest and other. . . . . . . (98) 34 ---------- ---------- SHARE OF INCOME (LOSS) FROM SERVICE COMPANIES (D) . . . . . . . . . . . $ (827) (589) ========== ========== 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. 48 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED FINANCIAL POSITION - ------------------------------------- June 30, December 31, 2002 2001 ---------- ------------ ASSETS: Receivables (a) . . . . . . . . . . . . . $ 9,327 9,136 Land held for sale (b). . . . . . . . . . 15,653 4,951 Building and equipment, net (c) . . . . . 11,258 10,847 Other . . . . . . . . . . . . . . . . . . 9,090 9,911 ---------- ---------- TOTAL ASSETS. . . . . . . . . . . . . $ 45,328 34,845 ========== ========== LIABILITIES Due to the Company. . . . . . . . . . . . $ 29,287 17,311 Bank debt . . . . . . . . . . . . . . . . 14,000 14,000 Other . . . . . . . . . . . . . . . . . . 4,412 5,733 ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . $ 47,699 37,044 ========== ========== EQUITY (DEFICIT). . . . . . . . . . . . . $ (2,371) (2,199) Eliminations and other. . . . . . . . . . (774) 49 Due to Company (above). . . . . . . . . . 29,287 17,311 ---------- ---------- Investment in and receivables from the Service Companies . . . . . . . . . $ 26,141 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. 49 AMLI RESIDENTIAL STABILIZED COMMUNITIES June 30, 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 Bryan Place 48% Dallas, TX 2002 1999 420 Acquisition Community 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 Mound, 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 Upper West Side 100% Ft. Worth, TX 2002 2001 194 Acquisition Community at Valley Ranch 100% Irving, TX 1990 1985 460 Same Store at Verandah 35% Arlington, TX 1997 1986/91 538 Same Store ------ ------ 8,302 29.3% ------ ------ 50 AMLI RESIDENTIAL STABILIZED COMMUNITIES - 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 Mill Creek 25% Gwinnett County, GA Developed 2001 400 New Community 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 ------ ------ 6,037 21.3% ------ ------ 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 11.4% ------ ------ 51 AMLI RESIDENTIAL STABILIZED COMMUNITIES - 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 9.9% ------ ------ 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 8.9% ------ ------ 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 on Spring Mill (residual) 20% Carmel, IN 1999 1999 400 Other ------ ------ 2,428 8.6% ------ ------ 52 AMLI RESIDENTIAL STABILIZED COMMUNITIES - 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 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 ------ ------ 1,767 6.2% ------ ------ 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 at Park Meadows 25% Littleton, CO 2002 2001 518 Acquisition ------ ------ Community 1,260 4.4% ------ ------ TOTAL 28,352 100.0% ====== ====== Note: (a) Based on number of apartment homes. 53
AMLI RESIDENTIAL DEVELOPMENT SUMMARY June 30, 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 Kedron Village Peachtree City, GA 20% 216 3Q/00 3Q/01 2Q/02 4Q/02 216 100% 77% at Milton Park Alpharetta, GA 25% 461 4Q/00 1Q/02 1Q/03 4Q/03 109 59% 26% at Barrett Walk Kennesaw, GA 25% 310 4Q/01 3Q/02 2Q/03 1Q/04 -- 28% NA HOUSTON, TX - ----------- AMLI at Kings Harbor Lake Houston, TX 25% 300 2Q/00 1Q/01 4Q/01 3Q/02 300 100% 87% AUSTIN, TX - ---------- AMLI Downtown Austin, Block Austin, TX 100% 220 2Q/02 1Q/04 3Q/04 4Q/04 -- 1% NA KANSAS CITY, KS - --------------- AMLI at Cambridge Square Overland Park, KS 30% 408 3Q/00 3Q/01 2Q/02 2Q/03 290 96% 55% INDIANAPOLIS, IN - ---------------- AMLI Carmel Center Carmel, IN 100% 322 2Q/01 2Q/02 2Q/03 3Q/03 37 53% 3% 54 AMLI RESIDENTIAL DEVELOPMENT SUMMARY - CONTINUED (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) - ---------------- --------- ------- ------ ------- -------- ------- ------- --------- -------- ------- CHICAGO, IL - ----------- AMLI at Seven Bridges Woodridge, IL 20% 520 3Q/01 4Q/02 4Q/03 4Q/04 -- 42% N/A ----- Total 2,757 ===== 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. 55
AMLI RESIDENTIAL DEVELOPMENT SUMMARY June 30, 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 Kedron Village $ 20,200 -- 16,160 4,040 200 3,840(e) -- at Milton Park 35,000 -- 26,250 8,750 5,685 2,400 665 at Barrett Walk 22,500 -- 16,875 5,625 2,056 1,900 1,669 HOUSTON, TX - ----------- AMLI at Kings Harbor 19,800 -- 14,850 4,950 4,900 50 AUSTIN, TX - ---------- AMLI Downtown Austin 50,900 -- -- 50,900 12,273 5,815 32,812 KANSAS CITY, KS - --------------- AMLI at Cambridge Square 32,200 -- (f) 22,540 9,660 9,270 390 INDIANAPOLIS, IN - ---------------- AMLI Carmel Center 28,400 -- -- 28,400 17,024 6,597 4,779 CHICAGO, IL AMLI at Seven Bridges 82,200 60,000(g) 17,760 4,440 3,220 -- 2,420 -------- ------- ------- ------- ------- ------- ------- TOTAL $291,200 60,000 114,435 116,765 54,628 20,992 42,345 ======== ======= ======= ======= ======= ======= ======= 56 AMLI RESIDENTIAL DEVELOPMENT SUMMARY - CONTINUED June 30, 2002 (Dollars in thousands) Notes: (a) Based on the percentage of Construction Complete to date. (b) Represents number of leased apartments (not necessarily occupied) divided by the total Number of Apartment Homes. (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) Property is currently subject to a construction financing, which is anticipated to be paid off at completion. (f) Upon stabilization, the partnership will obtain a permanent loan for approximately 65% of total costs. (g) 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 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 community up to the standards established for the market position intended for that community may prove inaccurate. 57
AMLI RESIDENTIAL LAND HELD FOR DEVELOPMENT OR SALE June 30, 2002 Number of Apartment Market/Community Submarket Homes - ---------------- --------- --------- AUSTIN, TX - ---------- AMLI at: Anderson Mill Northwest Austin 520 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 Westwood Ridge Overland Park 428 ------ Total 2,620 ====== 58 -----END PRIVACY-ENHANCED MESSAGE-----