-----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, KEYyBoRXUMxx/wOFVmZtYqKy41FNnzIZXvS4jOds5CgUwgtzqf/HQ7g81qlP3WhK Hz53Shs7ooWSSy/SPqcULg== 0000892626-02-000362.txt : 20021113 0000892626-02-000362.hdr.sgml : 20021113 20021113154352 ACCESSION NUMBER: 0000892626-02-000362 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 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: 02819953 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_902.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 September 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 17,183,478 as of October 29, 2002. INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Independent Accountants' Review Report. . . . . . . 3 Consolidated Balance Sheets as of September 30, 2002 (Unaudited) and December 31, 2001 (Audited) . . . . . . . . . . . 4 Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and 2001 (Unaudited) . . . . . 6 Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2002 (Unaudited). . . . . . . . . . 9 Consolidated Statements of Cash Flows for the nine months ended September 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 . . 41 Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . 65 Item 4. Controls and Procedures . . . . . . . . . . . . . . 65 PART II OTHER INFORMATION Item 5. Exhibits and Reports on Form 8-K. . . . . . . . . . 71 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 72 CERTIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 73 INDEPENDENT ACCOUNTANTS' REVIEW REPORT -------------------------------------- Shareholders and Board of Trustees AMLI Residential Properties Trust: We have reviewed the accompanying consolidated balance sheet of AMLI Residential Properties Trust (the "Company") as of September 30, 2002, and the related consolidated statements of operations for the three and nine months ended September 30, 2002 and 2001, the related consolidated statement of shareholders' equity for the nine month period ended September 30, 2002, and the consolidated statements of cash flows for the nine-month periods ended September 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 October 31, 2002 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 (Dollars in thousands, except share data) SEPTEMBER 30, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ------------- ------------ ASSETS: Rental communities: Land. . . . . . . . . . . . . . . . . $ 98,641 99,784 Depreciable property. . . . . . . . . 636,350 644,627 -------- ---------- 734,991 744,411 Less accumulated depreciation . . . . (116,039) (107,139) -------- ---------- 618,952 637,272 Land held for development or sale, net of provision for loss of $1,389 and $2,086, respectively . . . 24,036 47,611 Rental communities under development . . . . . . . . . . . . . 34,532 10,392 Investments in partnerships . . . . . . 192,734 184,270 Cash and cash equivalents . . . . . . . 3,639 5,892 Deferred financing costs, net . . . . . 3,568 3,836 Investment in and notes and advances to the Service Companies. . . . . . . 26,719 15,161 Other assets. . . . . . . . . . . . . . 15,669 14,568 -------- -------- Total assets $919,849 919,002 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Debt (note 5) . . . . . . . . . . . . . $403,193 399,309 Distributions in excess of investments in and earnings from partnerships. . . . . . . . . . . . . 4,685 -- Accrued interest payable. . . . . . . . 1,842 1,838 Accrued real estate taxes payable . . . 12,028 12,270 Construction costs payable. . . . . . . 3,945 4,079 Security deposits and prepaid rents . . 2,663 2,656 Other liabilities . . . . . . . . . . . 7,986 7,100 -------- -------- Total liabilities . . . . . . 436,342 427,252 -------- -------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS - CONTINUED SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 (Dollars in thousands, except share data) SEPTEMBER 30, DECEMBER 31, 2002 2001 (UNAUDITED) (AUDITED) ------------- ------------ Commitments and contingencies (note 7) Mandatorily redeemable convertible preferred shares with an aggregate liquidation preference of $96,949 and $96,793, respectively . . . . . . 93,247 93,287 Minority interest . . . . . . . . . . . 67,428 68,186 SHAREHOLDERS' EQUITY: 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, 17,557,178 and 17,840,368 common shares issued and outstanding, respectively . . . . 176 178 Additional paid-in capital. . . . . . . 344,350 355,728 Employees' and Trustees' notes. . . . . (7,042) (10,857) Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . (4,009) (4,294) Dividends paid in excess of earnings. . . . . . . . . . . . . . . (10,644) (10,482) -------- -------- Total shareholders' equity. . . . . . . . . . . . 322,832 330,277 -------- -------- Total liabilities and shareholders' equity. . . . . $919,849 919,002 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Revenues: Community: Rental. . . . . . . . . . . . . . . . . . . . . $ 25,562 26,049 77,174 77,428 Other . . . . . . . . . . . . . . . . . . . . . 1,818 1,775 5,118 4,967 Interest and share of loss from the Service Companies. . . . . . . . . . . 80 (169) (174) (281) Other interest and Other. . . . . . . . . . . . . 242 349 579 1,299 Income from partnerships. . . . . . . . . . . . . 1,569 2,173 5,853 6,907 Co-investment fee income. . . . . . . . . . . . . 1,094 2,826 3,051 3,872 -------- -------- -------- -------- Total revenues. . . . . . . . . . . . . . . 30,365 33,003 91,601 94,192 -------- -------- -------- -------- Expenses: Personnel . . . . . . . . . . . . . . . . . . . . 2,696 2,783 8,090 8,230 Advertising and promotion . . . . . . . . . . . . 775 794 1,958 2,085 Utilities . . . . . . . . . . . . . . . . . . . . 898 1,016 2,259 2,596 Building repairs and maintenance and services. . . . . . . . . . . . . . . . . . 1,853 1,747 4,152 4,560 Landscaping and grounds maintenance . . . . . . . 608 642 1,735 1,769 Real estate taxes . . . . . . . . . . . . . . . . 3,590 3,297 10,766 9,901 Insurance . . . . . . . . . . . . . . . . . . . . 496 272 1,453 843 Property management fees. . . . . . . . . . . . . 822 827 2,469 2,191 Other operating expenses. . . . . . . . . . . . . 290 250 844 829 Interest. . . . . . . . . . . . . . . . . . . . . 6,065 6,824 17,949 19,603 Amortization of deferred costs. . . . . . . . . . 170 154 474 599 Depreciation . . . . . . . . . . . . . . . . . . 5,307 4,960 15,733 15,181 General and administrative. . . . . . . . . . . . 1,138 1,221 3,891 3,890 -------- -------- -------- -------- Total expenses. . . . . . . . . . . . . . . 24,708 24,787 71,773 72,277 -------- -------- -------- -------- AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Income from continuing operations before share of gains on sales of rental communities . . 5,657 8,216 19,828 21,915 Gains on sales of rental communities: Wholly-owned. . . . . . . . . . . . . . . . . . . -- 4,444 -- 13,693 Partnership . . . . . . . . . . . . . . . . . . . 678 9,603 1,283 9,603 -------- -------- -------- -------- Income from continuing operations before minority interest . . . . . . . . . . . . . . . . 6,335 22,263 21,111 45,211 Minority interest . . . . . . . . . . . . . . . . . 739 3,498 2,555 6,822 -------- -------- -------- -------- Income from continuing operations . . . . . . . . . 5,596 18,765 18,556 38,389 -------- -------- -------- -------- Income from discontinued operations, net of minority interest. . . . . . . . . . . . . 229 479 1,220 1,485 Gain on disposition of discontinued operations, net of minority interest. . . . . . . 11,827 -- 11,827 -- -------- -------- -------- -------- Income from discontinued operations . . . . . . . . 12,056 479 13,047 1,485 -------- -------- -------- -------- Net income. . . . . . . . . . . . . . . . . . . . . 17,652 19,244 31,603 39,874 Net income attributable to preferred shares . . . . 1,980 1,633 6,008 4,899 -------- -------- -------- -------- Net income attributable to common shares. . . . . . $ 15,672 17,611 25,595 34,975 ======== ======== ======== ======== AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands, except share data) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Income per common share - basic: From continuing operations. . . . . . . . . . . . $ 0.20 0.96 0.70 1.88 ======== ======== ======== ======== From discontinued operations. . . . . . . . . . . $ 0.68 0.03 0.72 0.09 ======== ======== ======== ======== Net income. . . . . . . . . . . . . . . . . . . . $ 0.88 0.99 1.42 1.97 ======== ======== ======== ======== Income per common share - diluted: From continuing operations. . . . . . . . . . . . $ 0.20 0.87 0.69 1.79 ======== ======== ======== ======== From discontinued operations. . . . . . . . . . . $ 0.67 0.02 0.71 0.07 ======== ======== ======== ======== Net income. . . . . . . . . . . . . . . . . . . . $ 0.87 0.89 1.40 1.86 ======== ======== ======== ======== Dividends declared and paid per common share. . . . $ 0.48 0.47 1.44 1.41 ======== ======== ======== ======== See accompanying notes to consolidated financial statements.
AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (Dollars in thousands)
SHARES OF BENEFICIAL INTEREST EMPLOYEES' ACCUMULATED DIVIDENDS ------------------------------ ADDITIONAL AND OTHER PAID IN PREFERRED COMMON PAID-IN TRUSTEES' COMPREHEN- EXCESS OF SHARES SHARES AMOUNT CAPITAL NOTES SIVE LOSS 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. . . . . . . -- -- -- -- -- -- 31,603 31,603 Preferred share dividends paid. . . . -- -- -- -- -- -- (5,922) (5,922) Net change related to derivative contracts . . . . . . -- -- -- -- -- 285 -- 285 ------- Comprehensive income attributable to common shares . . . . . -- -- -- -- -- -- -- 25,966 ------- Common share distributions . . . . . -- -- -- -- -- -- (25,843) (25,843) AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - CONTINUED NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (Dollars in thousands) SHARES OF BENEFICIAL INTEREST EMPLOYEES' ACCUMULATED DIVIDENDS ------------------------------ ADDITIONAL AND OTHER PAID IN PREFERRED COMMON PAID-IN TRUSTEES' COMPREHEN- EXCESS OF SHARES SHARES AMOUNT CAPITAL NOTES SIVE LOSS EARNINGS TOTAL --------- ---------- ------ --------- ---------- ---------- ----------- ------- Shares issued in connection with: Executive Share Purchase Plan . . . -- 10,291 -- 248 -- -- -- 248 Units converted to shares . . . . . -- 12,231 -- 224 -- -- -- 224 Options exercised . . -- 10,000 -- 204 -- -- -- 204 Employees' and Trustees' notes, net of repay- ments . . . . . . . -- -- -- -- 3,815 -- -- 3,815 Trustees' compen- sation. . . . . . . -- 3,388 -- 72 -- -- -- 72 Shares repurchased. . . . -- (569,100) (5) (12,613) -- -- -- (12,618) Preferred shares converted to common shares . . . . . (250,000) 250,000 -- -- -- -- -- -- Reallocation of minority interest . . . -- -- -- 487 -- -- -- 487 -------- ---------- ---- ------- ------- ------- ------- ------- Balance at September 30, 2002. . . 100,000 17,557,178 $177 344,350 (7,042) (4,009) (10,644) 322,832 ======== ========== ==== ======= ======= ======= ======= ======= See accompanying notes to consolidated financial statements.
AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands) 2002 2001 -------- -------- Cash flows from operating activities: Net income. . . . . . . . . . . . . . . . . . $ 31,603 39,874 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Depreciation and amortization . . . . . . . 16,207 15,780 Cash distributions from partnerships in excess of share of income. . . . . . . 7,070 (1,854) Loss from the Service Companies . . . . . . 1,090 1,022 Gain on sale of a rental community. . . . . -- (13,693) Share of partnerships' gains on sales of rental communities . . . . . . . (1,283) (9,603) Minority interest - continuing operations . 2,555 6,822 Income from discontinued operations . . . . (1,469) (1,783) Gain on disposition of discontinued operations. . . . . . . . . . . . . . . . (14,247) -- Minority interest - discontinued operations 2,668 298 Changes in assets and liabilities: Increase in deferred costs. . . . . . . . . (2) (251) Decrease (increase) in other assets . . . . 2,757 (22) Increase (decrease) in accrued real estate taxes. . . . . . . . . . . . . . . 310 (112) Increase in accrued interest payable. . . . 4 122 Increase (decrease) in tenant security deposits and prepaid rents. . . . . . . . 105 (303) (Decrease) increase in other liabilities. . (329) 139 -------- ------- Net cash provided by operating activities of continuing operations . . . . . . . . 47,039 36,436 Net cash provided by operating activities of discontinued operations . . . . . . . 995 2,165 -------- ------- Net cash provided by operating activities. . . . . . . . . 48,034 38,601 -------- ------- Cash flows from investing activities: Net cash proceeds from a sale of a rental community. . . . . . . . . . . . . . 34,720 59,799 Share of a partnership's net cash proceeds, in excess of return of capital, from sales of rental communities . . . . . . . . 459 10,467 Investments in partnerships, net of $45,915 and $5,144 return of capital in 2002 and 2001, respectively, and $2,846 distribution in excess of return of capital from refinancing of partnerships' debt in 2002 and Operating Partnership units issued in 2001. . . . . . . . . . . . (9,107) 1,451 Repayments from (advances to) affiliates, net . . . . . . . . . . . . . . . . . . . . 101 (6,621) (Increase) decrease in earnest money deposits. . . . . . . . . . . . . . . . . . (195) 590 AMLI RESIDENTIAL PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) (Dollars in thousands) 2002 2001 -------- -------- Acquisition communities, net of Operating Partnership units issued and net of $14,444 cash in deferred exchange escrow in 2001. . . . . . . . . . . . . . . (14,045) (76,866) Capital expenditures - rehab communities and other additions . . . . . . . . . . . . (892) (1,110) Capital expenditures - other communities. . . (3,257) (4,584) Communities under development, net of co-investors' share of costs. . . . . . . . (17,029) (8,661) (Decrease) increase in other liabilities. . . (134) 1,634 -------- ------- Net cash used in investing activities. . . . . . . . . (9,379) (23,901) -------- ------- Cash flows from financing activities: Debt proceeds, net of financing costs . . . . 255,481 256,893 Debt repayments . . . . . . . . . . . . . . . (251,816) (235,406) Proceeds from issuance of Executive Share Purchase Plan shares and Option Plan shares and collection of Employees' and Trustees' notes, net of additional Employees' and Trustees' notes. . . . . . 4,340 1,394 Repurchase of shares of beneficial interest - common shares. . . . . . . . . . (11,839) (3,737) Issuance cost of preferred shares . . . . . . (40) -- Distributions to partners . . . . . . . . . . (5,269) (5,147) Dividends paid. . . . . . . . . . . . . . . . (31,765) (30,029) -------- ------- Net cash used in financing activities. . . . . . . . . (40,908) (16,032) -------- ------- Net change in cash and cash equivalents . . . . (2,253) (1,332) Cash and cash equivalents at beginning of period. . . . . . . . . . . . 5,892 5,106 -------- ------- Cash and cash equivalents at end of period. . . . . . . . . . . . . . . $ 3,639 3,774 ======== ======= Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest, net of amounts capitalized. . . . $ 17,945 19,481 ======== ======== Supplemental disclosure of non-cash investing and financing activities: OP units converted to common shares . . . . . $ 224 2,164 Advances to the Service Companies for land parcels sold . . . . . . . . . . . . . 12,675 -- OP units issued for the acquisition of communities . . . . . . . . . . . . . . . . -- 2,764 OP units issued for the acquisition of a property in a partnership . . . . . . . . -- 7,576 ======== ======== See accompanying notes to consolidated financial statements. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 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 September 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 ("GAAP") 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 nine months ended September 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 September 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 September 30, 2002, there were 3,652,165 OP Units held by the limited partners. During the third quarter and through October 28, 2002, AMLI repurchased on the open market 924,200 of its Common Shares at prices ranging from $19.52 to $22.97 pursuant to its previously announced Common Share Repurchase Programs. On November 4, 2002 the Board of Trustees increased the number of shares in the current Repurchase Program, so that the Company is authorized to repurchase 987,700 additional Common Shares as of that date. The Company is continuing to repurchase shares in November pursuant to this authorization. The Company owns 5% of the voting control and 95% of the economic benefit of unconsolidated subsidiaries which provide property management, construction, and institutional advisory services for the Company and its co-investment partnerships. These Service Company subsidiaries elected taxable REIT subsidiary status for IRS reporting purposes as of January 1, 2001. This election has not affected the ownership structure of the Service Company subsidiaries and, accordingly, the Company's use of the equity method to account for these subsidiaries continues to be applied consistently with prior years. The Company has agreed to acquire from UICI its 95% voting control and approximate 5% economic interest in the Service Companies. The $700 cash consideration is supported by a fairness opinion from a third-party consultant engaged jointly by the Company and UICI. The transaction was approved by the Boards of both companies and is anticipated to close on or about December 31, 2002. Following this transaction, the financial position and results of operations of the Service Companies will be included prospectively in AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED the Consolidated Financial Statements of the Company and its Consolidated Subsidiaries. At September 30, 2002, AMLI owned or had interests in seventy-nine multi-family apartment communities comprised of 30,203 apartment homes. Seventy-one of these communities totaling 27,446 apartment homes were stabilized as of September 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 GAAP. Actual amounts realized or paid could differ from these estimates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Real Estate Assets At September 30, 2002, the Company was continuing the rehab of the second phase of AMLI at Valley Ranch. Starting in 1999 and through September 30, 2002, the Company has spent $2,990 on the rehab of this property, of which $695 has been incurred in 2002, and expects to spend an additional $170 in 2002 to complete the rehab of the second phase. Rental Communities Under Development At September 30, 2002, the Company had 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 9/30/02 COMPLETION - --------- -------- ------ ------ ------------ ---------- Wholly-Owned: Development Communities: AMLI: Carmel Center Carmel, IN 15 322 $ 22,125 28,400 Downtown Austin (1) Austin, TX 2 220 12,407 50,920 --- ----- -------- -------- Total wholly-owned development communities 17 542 34,532 79,320 --- ----- -------- -------- Partnerships (Company Ownership Percentage): Development Communities: AMLI: at Milton Park (25%) Alpharetta, GA 21 461 29,335 35,000 at Kedron Village (20%) Peachtree City, GA 21 216 19,045 20,200 at Barrett Walk (25%) Cobb County, GA 26 310 13,584 22,500 at King's Harbor (25%) Houston, TX 15 300 19,578 19,800 at Cambridge Square (30%) Overland Park, KS 21 408 32,112 32,200 at Seven Bridges (20%) Woodridge, IL 13 520 50,990 82,200 --- ----- -------- -------- Total partnership development communities 117 2,215 164,644 211,900 --- ----- -------- -------- Total wholly-owned and partnerships 134 2,757 $199,176 291,220 === ===== ======== ======== (1) On October 8, 2002, this community was contributed at cost to a newly-formed limited partnership in which AMLI has a 30% general partnership interest.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Land Held for Development or Sale At September 30, 2002, the Company owned several parcels of land, which are being held for future development or sale.
NET NUMBER NUMBER CAPITALIZED OF OF COSTS COMMUNITY LOCATION ACRES UNITS THRU 9/30/02 - --------- -------- ------ ------ ------------ Wholly-Owned: Land Held for Development or Sale: AMLI: at Champions II (1)(2) Houston, TX 14 288 $ 1,339 at Mesa Ridge (1)(2) Ft. Worth, TX 27 460 4,182 at Anderson Mill (1)(2) Austin, TX 39 520 4,257 at Walnut Creek (3) Austin, TX 28 480 6,261 at Vista Ridge (1)(2) City of Lewisville, TX 15 340 3,220 at Westwood Ridge Overland Park, KS 30 428 3,839 at Lexington Farms II Overland Park, KS 7 104 938 --- ----- ------- Total land held for development or sale 160 2,620 $24,036 === ===== ======= (1) The Company has expensed interest carry of $837 on these land parcels for the nine months ended September 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 two parcels were sold to Amrescon, an unconsolidated subsidiary of AMLI, for their $5,076 estimated market value and carrying value. In the second quarter of 2002, the Company sold additional land parcels located in Noblesville, Indiana for their $7,600 estimated market value and carrying value. The sales of land to Amrescon were financed entirely with additional interest bearing advances from the Company. 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. (3) As of October 1, 2002, this land parcel, previously known as Parmer Park, was sold to Amrescon for its $6,261 estimated market and carrying value. Amrescon intends to break ground on the construction of the Walnut Creek development later in 2002.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Acquisition The table below summarizes the communities 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 ------ -------- ------ ------- PARTNERSHIPS (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 -- 56,500 at Bryan Place (48%) . . . . . . Dallas, TX 420 1999 6/28/02 39,600 -- 39,600 ------ -------- ------- ------- Total partnerships 1,421 148,100 35,320 112,780 ------ -------- ------- ------- Total wholly-owned and partnerships 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 owns a 44% interest.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Dispositions The Company selectively sells communities 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, reacquire its shares or fund development of new properties. Through December 31, 2001, the gains on sales of rental 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 rental communities are 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 Co-investment fee income in the Consolidated Statements of Operations. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The table below summarizes the rental communities 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 Gleneagles Dallas, TX 590 88/97 8/14/02 27,613 35,675 34,720 14,247 3,005 ----- ------- ------- ------- ------- ------- Total wholly-owned 1,668 77,379 97,555 94,519 27,940 8,398 ----- ------- ------- ------- ------- ------- PARTNERSHIPS (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 Greenwood Forest (15%) Houston, TX 316 1995 8/1/2002 18,202 20,150 19,407 4,524 1,310 ----- -------- ------- ------- ------- ------- Total partnerships 1,242 81,532 102,550 100,259 30,800 7,351 ----- -------- ------- ------- ------- ------- Total wholly-owned and partnerships 2,910 $158,911 200,105 194,778 58,740 15,749 ===== ======== ======= ======= ======= ======= 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 partnership communities are shown net of disposition fees and promoted interests paid to the Company by such partnerships.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED STANDARDS IMPLEMENTED AND TRANSITION ADJUSTMENT 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 nine months ended September 30, 2001 and Consolidated Statement of Cash Flows for the nine months ended September 30, 2001 as a result of implementing SFAS 144 to reflect discontinued operations of the wholly-owned property sold as of September 30, 2002. This restatement has no impact on the Company's net income or net income per common share. Communities 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 September 30, 2002, one rental community sold in 2002 was included in discontinued operations. No interest expense has been allocated to discontinued operations. Condensed financial information of the results of operations for this community is as follows: Three Months Nine Months Ended Ended September 30, September 30, ----------------- ----------------- 2002 2001 2002 2001 ------- ------- ------- ------- Rental income . . . . . . $ 529 1,214 2,904 3,664 Other income. . . . . . . 42 81 194 219 ------- ------- ------- ------- Total community revenues . . . . . . 571 1,295 3,098 3,883 Community operating expenses. . . . . . . . 295 521 1,322 1,483 ------- ------- ------- ------- Net operating income . . . . . . . 276 774 1,776 2,400 Depreciation expense. . . -- 198 307 617 ------- ------- ------- ------- Income from discontinued operations before minority interest. . 276 576 1,469 1,783 Minority interest. . . 47 97 249 298 ------- ------- ------- ------- Income from discontinued operations, net of minority interest . . . 229 479 1,220 1,485 ------- ------- ------- ------- AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Three Months Nine Months Ended Ended September 30, September 30, ----------------- ----------------- 2002 2001 2002 2001 ------- ------- ------- ------- Gain on disposition of discontinued operations. . . . . . . 14,247 -- 14,247 -- Minority interest . . . . 2,420 -- 2,420 -- ------- ------- ------- ------- Gain on disposition of discontinued operations, net of minority interest . . . 11,827 -- 11,827 -- ------- ------- ------- ------- Income from discontinued operations . . . . . $12,056 479 13,047 1,485 ======= ======= ======= ======= GOODWILL 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 $311 for the nine months ended September 30, 2002. The Company has tested the unamortized goodwill remaining on the Service Company's books and no impairment existed as of September 30, 2002. Pro forma share of income from this unconsolidated subsidiary will be approximately $400 greater for the year ended December 31, 2002 than it was for the year ended December 31, 2001. DERIVATIVES AND HEDGING FINANCIAL INSTRUMENTS In the normal course of business, the Company uses a variety of derivative financial instruments to manage or hedge interest rate risks. The Company requires that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Some derivative instruments are associated with the hedge of an anticipated transaction. In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to market each period. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The Company is exposed to the effect of interest rate changes. The Company attempts to limit these risks by following established risk management policies and procedures including the use of derivatives. For interest rate exposures, derivatives are used primarily to align rate movements between interest rates associated with the Company's rental income and other financial assets with interest rates on related debt, and manage the cost of borrowing obligations. The Company does not enter into derivative contracts for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives. To manage interest rate risk, the Company may employ options, forwards, interest rate swaps, caps and floors or a combination thereof depending on the underlying exposure. The Company undertakes a variety of borrowings: from lines of credit, to medium- and long term financings. To 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 consultant 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 September 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 September 30, Amount Rate(1) Contract Maturity Paid, Net 2002 (2) - -------- ------- -------- --------- ---------- ------------- $10,000(3) 6.216% 5 years 11/01/02 $ 661 73 10,000(3) 6.029% 5 years 11/01/02 573 69 20,000 6.145% 5 years 02/15/03 1,268 385 10,000 6.070% 5 years 02/18/03 599 204 15,000 6.405% 5 years 09/20/04 883 1,314 10,000 6.438% 5 years 10/04/04 569 917 - ------- ------ ----- $75,000 $4,553 2,962 ======= ====== ===== (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 September 30, 2002 if these contracts were terminated. This amount is recorded as a liability in the accompanying Consolidated Balance Sheet as of September 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 partnership community, $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 September 30, 2002, the derivative instruments were reported as Other Liabilities at their fair value of $2,962 which decreased by $762 from $3,724 as of December 31, 2001. The offsetting adjustments were reported as losses in Accumulated Other Comprehensive Loss of $4,009, which decreased by $285 from $4,294 as of December 31, 2001. The adjustments to the shareholders' equity include $1,292 and $1,413 of the Company's share of Other Comprehensive Loss of a co-investment partnership as of September 30, 2002 and December 31, 2001, respectively. In addition, adjustments to earnings of $48 and $76 due to an ineffectiveness on the swaps have been recorded as of September 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 in the Consolidated Balance Sheets with a corresponding adjustment to either Accumulated Other Comprehensive Income or 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 Certain of the Company's co-investment partnerships are formed by the Company contributing its interest in land or a rental community 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 concurrent with the initial formation of a co-investment partnership, in which case the partners each typically 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. September 30, December 31, 2002 2001 ------------- ------------ Deferred development costs. . . . . . $ 4,380 1,975 Accounts receivable . . . . . . . . . 2,484 1,141 Deposits. . . . . . . . . . . . . . . 2,330 2,216 Notes receivable. . . . . . . . . . . 2,132 2,925 Advances to affiliates. . . . . . . . 1,704 2,413 Development fees receivable . . . . . 758 1,267 Restricted cash . . . . . . . . . . . 500 963 Prepaid expenses. . . . . . . . . . . 403 1,464 Other . . . . . . . . . . . . . . . . 978 204 -------- -------- $ 15,669 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 Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Income from continuing operations. . . . .$ 5,596 18,765 18,556 38,389 Income from discontinued operations. . . . . 12,056 479 13,047 1,485 ---------- ---------- ---------- ---------- Net income. . . . . . 17,652 19,244 31,603 39,874 Less net income attributable to preferred shares. . . . . . . (1,980) (1,633) (6,008) (4,899) ---------- ---------- ---------- ---------- Net income attributable to common shares - Basic. . .$ 15,672 17,611 25,595 34,975 ========== ========== ========== ========== Net income - Diluted (1) . . . .$ 15,672 19,244 25,595 39,874 ========== ========== ========== ========== Weighted average common shares - Basic . . . . . .17,863,593 17,843,476 17,981,811 17,799,804 ========== ========== ========== ========== AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Dilutive Options and Other Plan shares . . . . . . . 139,808 206,362 264,456 159,719 Convertible pre- ferred shares (1). . -- 3,475,000 -- 3,475,000 ---------- ---------- ---------- ---------- Weighted average common shares - Dilutive . . . . . .18,003,401 21,524,838 18,246,267 21,434,523 ========== ========== ========== ========== Net income per share: Basic . . . . . . .$ 0.88 0.99 1.42 1.97 Diluted . . . . . .$ 0.87 0.89 1.40 1.86 ========== ========== ========== ========== (1) In 2002, preferred shares are non-dilutive. On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." Pursuant to its provisions, the Company may either record additional compensation expense each year based on the fair value of the Options granted in that year, or, as the Company has elected under APB No. 25, record no such additional compensation costs in its consolidated financial statements and disclose pro forma effects as if SFAS No. 123 had been applied. Had the Company determined compensation costs based upon the fair value at the grant date for these Options under SFAS No. 123, the charge against the Company's net income would have been $303 and $256 for the nine months ended September 30, 2002 and 2001, respectively. In accordance with the new rules regarding Options awarded to the Company's employees, the Company will commence reporting the value of such Options as a charge against earnings for Options awarded subsequent to January 1, 2002. There were no Options awarded during the nine months ended September 30, 2002, and no charge against earnings was recorded during the same period. 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 September 30, 2002, the Operating Partnership was a general partner in various partnerships. The Operating Partnership and the Service Companies receive various fees for services provided to these 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 $2,257 for the nine months ended September 30, 2002. Investments in AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED partnerships at September 30, 2002 and the Company's 2002 share of income or loss for the nine months then ended from each are summarized as follows:
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 Windbrooke (2) 15% $ 15,588 (5,715) (922) -- 70 28 51 at Willeo Creek 30% 13,308 3,990 1,195 1,195 164 54 91 at Barrett Lakes 35% 23,277 6,878 2,407 2,507 565 268 213 at Chevy Chase (3) 33% 40,732 (8,689) (3,613) -- 646 207 299 at River Park 40% 12,887 4,037 1,599 1,558 378 171 113 at Fox Valley 25% 21,473 20,861 5,215 5,389 906 227 129 at Fossil Creek 25% 18,680 17,982 4,496 4,581 923 231 137 at Danada Farms 10% 43,139 18,222 1,822 1,814 1,340 134 97 at Verandah 35% 20,784 3,894 1,460 1,514 72 59 261 at Northwinds 35% 49,209 14,594 5,108 4,957 989 680 465 at Regents Crest 25% 30,644 15,128 3,782 3,859 462 199 185 at Oakhurst North 25% 38,644 37,687 9,422 9,372 1,171 293 241 at Wells Branch 25% 30,189 29,222 7,305 6,716 1,185 296 216 on the Parkway 25% 13,986 3,463 863 581 (35) (9) 111 on Timberglen (1) 40% 9,605 2,970 1,219 -- (29) 22 153 at Castle Creek 40% 19,080 18,479 7,392 7,543 833 378 199 at Lake Clearwater 25% 15,090 14,629 3,657 3,707 551 138 102 Creekside 25% 15,096 14,829 3,707 3,827 599 190 97 at Deerfield 25% 15,794 3,140 782 637 (195) (49) 114 at Wynnewood Farms 25% 17,385 17,093 4,273 4,312 726 181 111 at Monterey Oaks 25% 27,934 27,164 6,791 6,873 1,225 306 177 at St. Charles 25% 40,339 39,670 9,918 9,959 1,463 366 227 at Park Bridge 25% 23,759 23,245 5,811 5,865 1,058 265 161 at Mill Creek 25% 25,154 6,840 1,710 1,967 715 179 144 at Lost Mountain 75% 11,012 388 287 403 (255) (129) 216 on Spring Mill 20% (Residual) 27,382 26,460 -- 1,213 769 -- -- at Prestonwood Hills 45% 17,172 5,401 2,446 2,441 81 71 173 at Windward Park 45% 26,492 8,359 3,790 3,782 (167) (32) 262 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% 27,587 7,421 1,855 1,594 224 56 173 at Oak Bend 40% 24,305 5,159 2,064 2,064 (17) 56 215 Midtown 45% 32,758 10,296 4,669 4,652 335 223 311 on Frankford 45% 38,548 12,274 5,567 5,551 326 234 377 at Peachtree City I 20% 27,936 27,615 5,523 3,524 877 176 111 at Kedron Village (7) 20% 19,555 19,087 3,817 3,805 (321) (64) 54 at Scofield Ridge 45% 36,904 11,804 5,353 5,335 (139) 1 346 at Breckinridge Point 45% 33,134 10,623 4,817 4,800 69 94 309 at Cambridge Square 30% 32,373 30,093 9,028 9,728 (93) (38) 147 Towne Square 45% 32,486 10,487 4,755 4,702 130 118 302 at Lowry Estates 50% 50,197 16,302 8,150 8,002 (360) (128) 516 at King's Harbor 25% 19,127 18,386 4,597 4,877 38 9 129 at Milton Park 25% 29,297 24,053 6,013 6,676 (159) (40) 35 at Osprey Lake 69% 51,767 15,467 11,923 10,445 (493) (292) 732 at Seven Bridges 20% 52,145 15,036 3,219 4,253 (7) (1) -- at Barrett Walk 25% 13,596 10,657 2,664 2,802 (72) (18) -- at Park Meadows (5) 25% 57,523 27,636 6,909 6,838 390 181 171 at Bryan Place (6) 48% 40,424 13,532 6,495 6,428 132 111 167 ---------- ------- ------- ------- ------- ------ ------ 1,283,496 656,149 189,340 192,648 17,070 5,402 8,840 Other 708 574 86 86 746(4) 451(4) 63 ---------- ------- ------- ------- ------- ------ ------ Total $1,284,204 656,723 189,426 192,734 17,816 5,853 8,903 ========== ======= ======= ======= ======= ====== ====== (1) The Company's investments in partnerships differ from the Company's share of partnerships' equity primarily due to (a) classification of the Company's deficit equity positions in the AMLI at Timberglen, AMLI at Windbrooke and AMLI at Chevy Chase partnerships as liabilities on the Consolidated Balance Sheet as of September 30, 2002 (see (3) and (4) below); (b) capitalized interest on its investments in communities 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 September 30, 2002. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (2) 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 Distributions in excess of investments in and earnings from partnerships in the accompanying Consolidated Balance Sheet as of September 30, 2002. (3) 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 Distributions in excess of investments in and earnings from partnerships in the accompanying Consolidated Balance Sheet as of September 30, 2002. (4) The amounts shown relate to operating results of the properties sold during the nine months ended September 30, 2002, AMLI at Champions Park, AMLI at Champions Centre and AMLI at Greenwood Forest, and exclude gains on sales of these properties of $1,799, $2,322 and $4,524, respectively, and the Company's share of such gains of $270, $335 and $678, respectively, which is reported as share of gains on sales of rental communities. (5) On July 1, 2002, the Company, on behalf of AMLI at Park Meadows, closed on a 6.25%, $28,500 first mortgage permanent loan with GMAC. The total amount of the loan was distributed to the partners, of which the Company received $7,125 as a return of capital. (6) On August 1, 2002, the Company, on behalf of AMLI at Bryan Place, closed on a 5.81%, $26,200 first mortgage permanent loan with GMAC. The total amount of the loan was distributed to the partners, of which the Company received $12,576 as a return of capital. (7) On September 26, 2002, the construction loan of $16,997 was paid in full from additional contributions of $3,399 and $13,598 made by the Company and its partner, respectively.
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED All but one of the Company's debt financings have been obtained at fixed rates from various financial institutions on behalf of these partnerships. All of these fixed-rate first mortgages are non recourse debt and secured by mortgages on the respective communities. Repayment of the floating-rate construction loan has been guaranteed by AMLI. Partnership debt was as follows at September 30, 2002: Total Outstand- Commitment ing at Company's Interest Community (1) 9/30/02 Share (2) Rate Maturity - --------- ---------- --------- --------- -------- --------- AMLI: at Willeo Creek $ 10,000 9,017 2,705 6.77% May 2003 at Regents Crest 16,500 14,922 3,731 7.50% Dec. 2003 at Verandah 16,940 16,047 5,616 7.55% Apr. 2004 on Timberglen 6,770 6,321 2,528 7.70% June 2004 at Seven Bridges (3) 50,000 28,239 5,648 L+1.80% Jan. 2005 at Prestonwood Hills 11,649 11,279 5,108 7.17% Aug. 2006 at Windward Park 18,183 17,616 7,985 7.27% Aug. 2006 at Oak Bend 18,834 18,352 7,341 7.81% Dec. 2006 Midtown 21,945 21,370 9,690 7.52% Dec. 2006 at Deerfield 12,600 12,272 3,068 7.56% Dec. 2006 at Danada Farms 24,500 23,603 2,360 7.33% Mar. 2007 on Frankford 25,710 25,249 11,451 8.25% June 2007 at Scofield Ridge 24,618 24,162 10,957 7.70% Aug. 2007 at Breckinridge Point 22,110 21,690 9,835 7.57% Sep. 2007 Towne Square 21,450 21,057 9,548 6.70% Jan. 2008 at Lowry Estates 33,900 33,381 16,691 7.12% Jan. 2008 at Summit Ridge 20,000 19,712 4,928 7.27% Feb. 2008 at River Park 9,100 8,529 3,412 7.75% June 2008 on the Parkway 10,800 10,109 2,527 6.75% Jan. 2009 at Mill Creek 18,000 17,937 4,484 6.40% May 2009 at Chevy Chase 48,000 48,056 15,858 7.11% June 2009 at Park Meadows 28,500 28,500 7,125 6.25% July 2009 at Bryan Place 26,200 26,200 12,576 5.81% Aug. 2009 at Barrett Lakes 16,680 15,828 5,540 8.50% Dec. 2009 at Northwinds 33,800 33,266 11,643 8.25% Oct. 2010 at Osprey Lake 35,320 34,774 23,907 7.02% Mar. 2011 at Windbrooke 20,800 20,672 3,101 6.43% Mar. 2012 at Lost Mountain 10,252 10,170 7,628 6.84% Nov. 2040 -------- -------- ------- $613,161 578,330 216,991 ======== ======== ======= (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) Based upon percentage ownership of debt outstanding at September 30, 2002. (3) The partnership has obtained a 7.25% fixed-rate mortgage loan commitment from TIAA and anticipates repaying its construction loan in late 2003 from a $60,000 funding of this seven-year loan. INVESTMENTS IN SERVICE COMPANIES Combined financial information of the various Service Companies at September 30, 2002 and December 31, 2001 and for the nine months ended September 30, 2002 and 2001 is summarized as follows: AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, December 31, 2002 2001 ------------- ------------ Receivables from affiliates . . . . . . $ 11,621 9,136 Land held for sale. . . . . . . . . . . 14,004 4,951 Building and equipment, net of accumulated depreciation. . . . . . . 3,668 2,463 Information technology costs, net of accumulated depreciation . . . 7,448 8,384 Investments and other assets. . . . . . 10,289 9,911 -------- -------- Total assets. . . . . . . . . . . . . . $ 47,030 34,845 ======== ======== Due to the Company. . . . . . . . . . . $ 29,928 17,311 Bank debt . . . . . . . . . . . . . . . 14,000 14,000 Other . . . . . . . . . . . . . . . . . 5,621 5,733 -------- -------- Total liabilities . . . . . . . . . . . $ 49,549 37,044 ======== ======== Total deficit . . . . . . . . . . . . . $ (2,519) (2,199) ======== ======== Nine Months Ended September 30, ---------------------- 2002 2001 -------- -------- Construction contract revenue . . . . . $ 75,634 42,780 Construction contract costs . . . . . . (73,827) (40,651) -------- -------- Construction gross profit . . . . . . . 1,807 2,129 Property management fees. . . . . . . . 8,109 7,696 Corporate homes' gross profit . . . . . 1,267 1,267 Gain (loss) on land sales . . . . . . . (242) 194 Other income. . . . . . . . . . . . . . 524 323 -------- -------- Total income. . . . . . . . . . . . . . 11,465 11,609 -------- -------- General and administrative: Construction. . . . . . . . . . . . . 1,584 1,580 Property management . . . . . . . . . 7,273 7,406 Corporate homes . . . . . . . . . . . 741 736 -------- -------- Total general and administrative. . . . 9,598 9,722 -------- -------- EBITDA. . . . . . . . . . . . . . . . . 1,867 1,887 Interest. . . . . . . . . . . . . . . . (1,351) (1,486) Depreciation (1). . . . . . . . . . . . (2,133) (1,978) Income taxes. . . . . . . . . . . . . . 614 599 -------- -------- Loss. . . . . . . . . . . . . . . . . . $ (1,003) (978) ======== ======== (1) Includes $311 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%) and from advances from the Company. 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 $105 and $168 for the nine months ended September 30, 2002 and 2001, respectively. In 2002, the Company sold six land parcels to a Service Company for $12,675, which was financed by the Service Company through increased advances that bear interest at a rate of prime plus 1%. In October 2002, the Company sold an additional land parcel to the Service Company for its $6,261 estimated market and carrying value, which also was financed by the Service Company through an increase in advances from the Operating Partnership at the same rate as earlier advances. Interest and share of loss from the Service Companies as included in the accompanying Consolidated Statements of Operations are reconciled below: Nine Months Ended September 30, ----------------- 2002 2001 ------ ------ Intercompany interest expensed. . . . . . $ 916 677 Intercompany interest capitalized . . . . -- 64 Loss. . . . . . . . . . . . . . . . . . . (1,003) (978) Intercompany eliminations and other owners' share . . . . . . . . . . (87) (44) ------ ------ Interest and share of loss from the Service Companies . . . . . . . . . . . $ (174) (281) ====== ====== The Service Companies recorded after-tax charges against earnings of $259 and $121 for the nine months ended September 30, 2002 and 2001, respectively, pursuant to FIN 44 "Accounting for Certain Transactions Involving Stock Compensation." 4. RELATED PARTY TRANSACTIONS During the nine months ended September 30, 2002 and 2001, the Company accrued or paid to its affiliates fees and other costs and expenses as follows: Nine Months Ended September 30, ----------------- 2002 2001 ------ ------ Management fees (1) . . . . . . . . . . . $2,562 2,294 General contractor fees . . . . . . . . . 146 150 Interest expense. . . . . . . . . . . . . -- 44 Landscaping and grounds maintenance (1) . . . . . . . . . . . . -- 439 ====== ====== (1) Includes discontinued operations. In addition, at September 30, 2002 and December 31, 2001, the Company owed Amli Residential Construction, L.L.C. $3,944 and $4,079, respectively, for construction costs of communities under development or rehab. AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED During the nine months ended September 30, 2002 and 2001, the Company earned or received from its affiliates fees and other income as follows: Nine Months Ended September 30, ----------------- 2002 2001 ------ ------ Development fees. . . . . . . . . . . . . $1,539 1,297 Acquisition, disposition and financing fees. . . . . . . . . . . . . 1,043 546 Asset management fees . . . . . . . . . . 359 416 Promoted interest . . . . . . . . . . . . -- 1,796 Interest on notes and advances to Service Companies. . . . . . . . . . 916 741 Interest on advances to other affiliates. . . . . . . . . . . . . . . -- 216 ====== ===== In addition, during the nine months ended September 30, 2002 and 2001, total revenues of $3,124 and $2,452, respectively, were generated from leases to AMLI Corporate Homes ("ACH"), a division of AMLI Management Company ("AMC"), one of the Service Companies. In September 2002, the Company entered into an agreement with an affiliate of one of the Company's Executive Vice Presidents to test and possibly implement a software application developed by this entity, in which the Company has no ownership interest. The Company's maximum commitment under this agreement is $300. The Company is entitled to share in any proceeds from the successful marketing and sale of this software application to third parties. It is unclear whether such right will result in any future payment to the Company. Through September 30, 2002 no income or loss has been recognized as a result of this agreement. 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. On October 8, 2002, an affiliate of an AMLI Trustee co-invested with the Company in the development of AMLI Downtown Austin. In October, the Company's new partner reimbursed AMLI for 70% of the costs incurred to date. AMLI will fully fund its $6,000 share of the total $20,000 in equity, and its partner will fully fund its $14,000 share, by December 31, 2002. The remainder of the $50,920 in total development costs will be financed with a $30,920 construction loan from a bank. 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 Amount 9/30/02 Rate Date 12/31/01 -------- ------- ----------- -------- -------- BOND FINANCING: Tax-Exempt Unsecured (1) $ 40,750 40,750 Rate+1.23% 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 27,603 7.30% (2) 7/1/03 28,102 AMLI in Great Hills 11,000 9,801 7.34% (2) 7/1/03 9,977 AMLI at Nantucket 7,735 7,222 7.70% 6/1/04 7,325 AMLI at Bishop's Gate 15,380 14,003 7.25% (3) 8/1/05 14,230 AMLI at Regents Center 20,100 18,857(10) 8.90% (4) 9/1/05 19,037 AMLI on the Green/AMLI of North Dallas (5) 43,234 38,991 7.79% 5/1/06 39,621 AMLI at Valley Ranch 18,800 18,800 6.68% 5/10/07 9,688(6) AMLI at Conner Farms 14,900 14,900 6.68% 5/10/07 11,960(6) AMLI at Clairmont 12,880 12,441 6.95% 1/15/08 12,573 AMLI - various (7) (8) 140,000 138,185 6.56% 7/1/11 139,369 AMLI at Park Creek 10,322 10,140 7.88% 12/1/38 10,177 -------- ------- ------- Total Mortgage Notes Payable 325,351 310,943 302,059 -------- ------- ------- OTHER NOTES PAYABLE: Unsecured line of credit (8)(9) 200,000 42,000 L+1.05% 11/15/03 47,000 -------- ------- --------- -------- ------- Total $575,601 403,193 399,309 ======== ======= ======= 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 homes 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 (1.80% for AMLI at Spring Creek and 1.84% for AMLI at Poplar Creek at October 24, 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) The Company intends to exercise its option to prepay these loans without penalty on January 2, 2003. (3) 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 September 30, 2002 was $556. (4) $13,800 at 8.73% and $6,300 at 9.23%. (5) These two properties secure the FNMA loan that was sold at a discount of $673. At September 30, 2002, the unamortized discount was $241. (6) These loans were refinanced with the same lender on May 7, 2002. (7) This loan is secured by seven previously unencumbered communities (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). (8) 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. (9) 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 unconsolidated Service Companies ($14,000 at September 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. (10) 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 September 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. . . . . . . $ -- 1,094 -- 1,094 2003. . . . . . . -- 40,766 42,000 82,766 2004. . . . . . . -- 10,745 -- 10,745 2005. . . . . . . -- 35,021 -- 35,021 2006. . . . . . . -- 38,502 -- 38,502 Thereafter. . . . 50,250 184,815 -- 235,065 ------- ------- ------- ------- $50,250 310,943 42,000 403,193 ======= ======= ======= ======= 6. INCOME TAXES 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. 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 and it will distribute at least 100% of the taxable income. The Company anticipates that at least 50% of total dividends paid during 2002 will be characterized as income taxable at capital gains return for Federal income tax purposes. 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 September 30, 2002, the Company is contingently liable on $7,352 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). AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 8. SEGMENT REPORTING The revenues, net operating income, FFO and assets for the Company's reportable segment are summarized as follows: Nine Months Ended September 30, ------------------------ 2002 2001 ---------- ---------- Multifamily segment revenues (excluding discontinued operations) . . . . . . . . . . . . . . $ 207,282 207,199 ========== ========== Multifamily segment net operating income (excluding discontinued operations) . . . . . . . . . . . . . . $ 122,896 125,094 Reconciling items to FFO: Reduce partnership net operating income to Company's share (1) . . . . (59,575) (60,362) Interest income and share of income (loss) from the Service Companies . . . . . . . . . . . . . . (174) 30 Other interest income and Other . . . . 579 1,299 Other revenues. . . . . . . . . . . . . 3,051 3,872 Discontinued operations - net operating income. . . . . . . . . . . 1,776 2,400 General and administrative expenses . . (3,891) (3,890) Interest expense and loan cost amortization. . . . . . . . . . . . . (18,423) (20,202) ---------- ---------- Consolidated FFO before minority interest. . . . . . . . . . . . . . . . 46,239 48,241 ---------- ---------- Reconciling items to net income: Depreciation - wholly-owned communities (including discontinued operations). . . . . . . (16,040) (15,798) Depreciation - share of partnership communities . . . . . . . (8,902) (8,434) Share of Service Company's goodwill amortization . . . . . . . . -- (311) Gains on sales of rental communities. . 1,283 23,296 Gain on disposition of discontinued operations. . . . . . . . . . . . . . 14,247 -- ---------- ---------- Income before minority interest and extraordinary items . . . . . . . . 36,827 46,994 Minority interest (including discontinued operations). . . . . . . . 5,224 7,120 ---------- ---------- Net income. . . . . . . . . . . . . . . . $ 31,603 39,874 ========== ========== AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, December 31, 2002 2001 ------------- ------------ Segment assets (2). . . . . . . . . . . . $2,045,455 1,935,423 ========== ========== (1) Represents amount required to reduce partnership communities' net operating income to the Company's share of net operating income from partnerships. (2) Represents original acquisition costs of wholly-owned and partnership communities. 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. 9. SUBSEQUENT EVENTS On October 1, 2002, the Company sold Walnut Creek, a 28-acre land parcel, to Amrescon for its estimated market and carrying value of $6,261. Amrescon will develop this parcel located in Austin, Texas, into 480 apartment homes and currently expects to sell the community upon completion and stabilization in 2004. On October 17, 2002, the Company acquired the 189-unit AMLI 7th Street Station for $13,700. The Company intends to operate this property in conjunction with the nearby 194-unit AMLI Upper West Side, which it acquired in May 2002. 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 September 30, 2002 and December 31, 2001 and for the three and nine months ended September 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 September 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 September 30, 2002, the Company owned 21,582,178 OP Units including 4,025,000 Preferred OP Units and the limited partners owned 3,652,165 OP Units. The Company has qualified, and anticipates continuing to qualify, as a real estate investment trust ("REIT") for Federal income tax purposes. During the third quarter and through October 28, 2002, AMLI repurchased on the open market 924,200 of its Common Shares at prices ranging from $19.52 to $22.97 pursuant to its previously announced Common Share Repurchase Programs. On November 4, 2002 the Board of Trustees increased the number of shares in the current Repurchase Program, so that the Company is authorized to repurchase 987,700 additional Common Shares as of that date. The Company is continuing to repurchase shares in November pursuant to this authorization. The Company owns 5% of the voting control and 95% of the economic benefit of unconsolidated subsidiaries which provide property management, construction, and institutional advisory services for the Company and its co-investment partnerships. These Service Company subsidiaries elected taxable REIT subsidiary status for IRS reporting purposes as of January 1, 2001. This election has not affected the ownership structure of the Service Company subsidiaries and, accordingly, the Company's use of the equity method to account for these subsidiaries continues to be applied consistently with prior years. The Company has agreed to acquire from UICI its 95% voting control and approximate 5% economic interest in the Service Companies. The $700 cash consideration is supported by a fairness opinion from a third-party consultant engaged jointly by the Company and UICI. The transaction was approved by the Boards of both companies and is anticipated to close on or about December 31, 2002. Following this transaction, the financial position and results of operations of the Service Companies will be included prospectively in the Consolidated Financial Statements of the Company and its Consolidated Subsidiaries. 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 September 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 communities. . . . . . . $ 734,991 1,201,722 1,936,713 Accumulated depreciation. . . . (116,039) (116,391) (232,430) ---------- ---------- ---------- 618,952 1,085,331 1,704,283 Land and rental communities under development . . . . . . 58,568 164,644 223,212 Investments in co-invest- ment partnerships . . . . . . 192,734 (192,734) -- Other, net. . . . . . . . . . . 16,446 (14,923) 1,523 ---------- ---------- ---------- 886,700 1,042,318 1,929,018 Debt - Company's share. . . . . (403,193) (216,991) (620,184) Debt - partners' share. . . . . -- (361,339) (361,339) ---------- ---------- ---------- Total debt. . . . . . . . . . . (403,193) (578,330) (981,523) ---------- ---------- ---------- Total net assets. . . . . . . . 483,507 463,988 947,495 Partners' share of net assets. . . . . . . . . . . . -- (463,988) (463,988) ---------- ---------- ---------- Company's share of net assets. . . . . . . . . . $ 483,507 -- 483,507 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value. . . . . . . . . . 42.0% ========== 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 communities. . . . . . . $ 734,991 404,531 1,139,522 Accumulated depreciation. . . . (116,039) (35,597) (151,636) ---------- ---------- ---------- 618,952 368,934 987,886 Land and rental communities under development . . . . . . 58,568 39,265 97,833 Investments in co-investment partnerships. . . . . . . . . 192,734 (192,734) -- Other, net. . . . . . . . . . . 16,446 1,526 17,972 ---------- ---------- ---------- Company and Share of Consolidated Share of Co-Investment Company Co-Investment Partnerships ("GAAP") Partnerships (Combined) ------------ ------------- ------------- 886,700 216,991 1,103,691 Debt - Company's share. . . . . (403,193) (216,991) (620,184) ---------- ---------- ---------- Company's share of net assets. . . . . . . . . . . . $ 483,507 -- 483,507 ========== ========== ========== Debt to total capitaliza- tion - undepreciated book value. . . . . . . . . . 42.0% 52.7% ========== ========== 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 September 30, 2002: AMLI's share of equity per partnerships . . . . . . . . . . . . $189,426 Negative investment balances presented in other liabilities . . . 4,685 Capitalized interest, net of amorti- zation . . . . . . . . . . . . . . . 4,785 Eliminated fees, net of amortization . (5,996) Other comprehensive loss, net of amortization . . . . . . . . . . . . (1,292) Other, net . . . . . . . . . . . . . . 1,126 -------- Total investments in partnerships. . . $192,734 ======== RESULTS OF COMMUNITY OPERATIONS GENERAL At September 30, 2002, AMLI owned thirty-three apartment properties ("Wholly-owned communities") and owned interests in forty-six apartment properties ("Partnership communities") that, in the aggregate, were comprised of 30,203 apartment homes. Seventy-one of these communities containing 27,446 apartment homes were stabilized as of September 30, 2002 and eight communities containing 2,757 apartment homes were under development or in lease-up at that date. Operating results for the Company's Wholly-owned communities are reflected on the Company's Consolidated Statements of Operations under Revenues and Expenses as well as under Income from Discontinued Operations in accordance with SFAS 144. The Company's share of operating results from all Partnership communities is included in Income from partnerships. The Company distinguishes between stabilized communities, that include Same Store communities, New communities and Acquisition communities, from Development and lease-up communities, each of which are defined as follows: . Same Store communities - stabilized communities that were owned as of January 1, 2001. . New communities - stabilized communities developed by the Company after January 1, 2001. . Acquisition communities - stabilized communities acquired by the Company after January 1, 2001. . Development and lease-up communities - communities being developed by the Company that are not stabilized. . Communities sold or contributed to ventures - reflects operations through the date a community was sold or contributed to ventures. The Company uses Net Operating Income ("NOI") to measure the operating results of its communities. NOI is computed before interest, taxes, depreciation and amortization and is the result of deducting property operating expenses from rental and other property revenues. This performance measure is not intended as a replacement for net income determined in accordance with generally accepted accounting principles ("GAAP"). WHOLLY-OWNED COMMUNITIES For the nine months ended September 30, 2002, revenues from Wholly- owned communities decreased from the same period a year ago, while operating expenses increased. The overall decrease in NOI was the result of weak market conditions and the Company's owning less wholly-owned apartment homes during 2002 than in 2001. Since January 1, 2001, the Company has sold four stabilized communities containing a total of 1,668 apartment homes. During the same period, the Company has acquired a total of 1,328 apartment homes in five stabilized communities. Revenues, operating expenses and NOI from Wholly-owned communities for the nine months ended September 30, 2002 and 2001 are summarized as follows: Nine Months Ended September 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Total Wholly-Owned Community Revenues - ------------------ Same Store communities . . . . . $ 72,317 74,058 (1,741) Development and lease-up communities. . . . . . . . . . 56 -- 56 Acquisition communities. . . . . 9,919 3,853 6,066 Communities sold or contri- buted to ventures. . . . . . . 3,098 8,367 (5,269) ------- ------- ------- Total . . . . . . . . . . . . $85,390 86,278 (888) ======= ======= ======= Continuing operations . . . . $82,292 82,394 (102) Discontinued operations . . . 3,098 3,884 (786) ======= ======= ======= Nine Months Ended September 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Total Wholly-Owned Community Operating Expenses - ---------------------------- Same Store communities . . . . . $29,408 29,653 (245) Development and lease-up communities. . . . . . . . . . 189 -- 189 Acquisition communities. . . . . 4,131 1,387 2,744 Communities sold or contri- buted to ventures. . . . . . . 1,322 3,447 (2,125) ------- ------- ------- Total . . . . . . . . . . . . $35,050 34,487 563 ======= ======= ======= Continuing operations . . . . $33,728 33,003 725 Discontinued operations . . . 1,322 1,484 (162) ======= ======= ======= Total Wholly-Owned Community Net Operating Income - ------------------------------ Same Store communities . . . . . $42,909 44,405 (1,496) Development and lease-up communities. . . . . . . . . . (133) -- (133) Acquisition communities. . . . . 5,788 2,466 3,322 Communities sold or contri- buted to ventures. . . . . . . 1,776 4,920 (3,144) ------- ------- ------- Total . . . . . . . . . . . . $50,340 51,791 (1,451) ======= ======= ======= Continuing operations . . . . $48,564 49,391 (827) Discontinued operations . . . 1,776 2,400 (624) ======= ======= ======= PARTNERSHIP COMMUNITIES For the nine months ended September 30, 2002, both revenues and operating expenses from Partnership communities increased from the same period a year ago. The increases were primarily the result of the Company's owning more partnership apartment homes during 2002 than in 2001. 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 Partnership communities with a total of 1,460 apartment homes were stabilized. Four Partnership communities, containing a total of 1,385 apartment homes, were in lease-up as of September 30, 2002 and are anticipated to reach stabilization in 2002 and 2003. In addition, the Company invested in three co-investment partnerships, which acquired three stabilized communities containing a total of 1,421 apartment homes, and sold four communities containing a total of 1,242 apartment homes. These sales and weak market conditions have contributed to a decrease in Partnership communities' NOI and the Company's share thereof. Revenues, operating expenses and NOI from Partnership communities for the nine months ended September 30, 2002 and 2001 are summarized as follows: Nine Months Ended September 30, --------------------- Increase 2002 2001 (Decrease) -------- ------- --------- Total Co-investment Community Revenues - ------------------- Same Store communities . . . . . $ 96,937 101,594 (4,657) New communities. . . . . . . . . 7,911 7,180 731 Development and lease-up communities. . . . . . . . . . 6,741 1,344 5,397 Acquisition communities. . . . . 7,845 3,863 3,982 Communities sold or contri- buted to ventures. . . . . . . 5,557 10,822 (5,265) -------- ------- ------- Total . . . . . . . . . . . . $124,991 124,803 188 ======== ======= ======= Company's share of co-investment total revenues . . . . . . . . $ 39,412 39,651 (239) ======== ======= ======= Total Co-investment Community Operating Expenses - ---------------------------- Same Store communities . . . . . $ 38,576 38,437 139 New communities. . . . . . . . . 2,787 2,590 197 Development and lease-up communities. . . . . . . . . . 3,787 1,243 2,544 Acquisition communities. . . . . 2,949 1,363 1,586 Communities sold or contri- buted to ventures. . . . . . . 2,561 4,830 (2,269) -------- ------- ------- Total . . . . . . . . . . . . $ 50,660 48,463 2,197 ======== ======= ======= Company's share of co-invest- ment property operating expenses . . . . . . . . . . . $ 15,898 15,218 680 ======== ======= ======= Total Co-investment Community Net Operating Income - ----------------------------- Same Store communities . . . . . $58,361 63,157 (4,796) New communities. . . . . . . . . 5,124 4,590 534 Development and lease-up communities. . . . . . . . . . 2,954 101 2,853 Acquisition communities. . . . . 4,896 2,500 2,396 Communities sold or contri- buted to ventures. . . . . . . 2,996 5,992 (2,996) ------- ------- ------- Total . . . . . . . . . . . . $74,331 76,340 (2,009) ======= ======= ======= Company's share of co-invest- ment property NOI. . . . . . . $23,514 24,433 (919) ======= ======= ======= SAME STORE COMMUNITIES As of September 30, 2002, 22,837 apartment homes, or 83.1% of total apartment homes in the Company's stabilized communities, were categorized as Same Store communities, of which 10,523 apartment homes were in Wholly- owned communities and 12,314 apartment homes were in Partnership communities. The following commentary is based primarily on an analysis of the AMLI's Same Store portfolio since the operating results of stabilized communities owned over comparable periods provides a valid perspective of market conditions affecting the Company's portfolio, as a whole. For purposes of this discussion and analysis, 100% of the results of operations of the Company's Partnership communities is combined with the Company's Wholly-owned communities. RENTAL REVENUE The Company experienced a reduction in rental revenue during the third quarter by 1.6% and in total revenue of 1% versus the second quarter of 2002. Neither sequential decline was unexpected given the disequilibrium of supply/demand factors being experienced in the multifamily sector. Both total and rental revenue have remained essentially flat through the first three quarters of 2002, although substantially below comparable levels of a year ago. The third quarter has historically been the strongest quarter for leasing activity in the Company's portfolio. Unfortunately, this normal trend in rental revenue growth did not materialize during this past quarter. Effective rental rates on both new rentals and renewals continued to be under pressure as the U.S. apartment industry continues to be negatively impacted by (a) the lack of any meaningful job creation, (b) the delivery of new supply, and (c) the availability of low interest rates and low down payment programs siphoning off renters to all types of for sale housing. However, physical occupancies at the Company's communities generally remained in the low 90%'s providing evidence of a level of underlying demand. Occupancy for Same Store communities averaged 91.3% for the three months ended September 30, 2002, a decrease of 1.6% compared to 92.8% for the same period in 2001. A number of key metrics that provide information on the Company and the industry are concessions, traffic, bad debt and turnover trends. During the third quarter, traffic at Same Store communities declined slightly from this year's second quarter by 2.7% but was up slightly from the third quarter last year by 3.7%. As noted earlier, the third quarter should show the highest level of traffic and leases, and the decline from the second quarter is symptomatic of the sluggish economy. Additionally, as less traffic visited communities, apartment operators generally emphasized maintaining occupancy levels through the use of concessions. The Company saw an increase of 9% in concessions versus the second quarter. Although this increase was lower than in the previous two quarters, the need to increase incentives to maintain occupancy still existed due to weak demand and increased supply. Across AMLI's portfolio, concessions granted averaged approximately one month of free rent, with market-to-market variations above and below the average at individual communities. New residents are typically paying less than those who have just moved out of the same apartment home. Concessions are being granted to both new residents as well as those residents wishing to renew their leases. As conditions have weakened and new residents move in on a rate that is less than that of the departing residents, current residents who renew want to be granted the same new effective rent, thus pulling down average total revenue earned. Throughout the industry, operators are collecting less today due to this situation. As employment conditions continued to be weak, bad debt costs increased. Residents who lost jobs or faced severe salary reductions were unable to continue to pay their rent. The Company's bad debt (calculated as % of revenue collections and not gross potential rent) rose 6% to 1.85%. Finally, annualized turnover rates remained flat at 70%, with 25% of those leaving doing so to buy homes, townhouses or condominiums. OCCUPANCY The following chart shows weighted average physical occupancy, calculated on a daily basis, for all Same Store communities for each of AMLI's markets and for the AMLI portfolio in total: DAILY WEIGHTED AVERAGE OF PHYSICAL OCCUPANCY (A) SAME STORE COMMUNITIES Quarter Ended -------------------------------------------------- 2002 2001 ------------------------------------------------ Sept 30 Jun 30 Mar 31 Dec 31 Sept 30 -------- ------- ------- ------- ------- Dallas 90.8% 92.0% 91.2% 91.0% 93.5% Atlanta 89.8% 90.0% 90.1% 89.9% 93.0% Austin 92.9% 91.4% 91.7% 90.6% 90.6% Houston 92.9% 91.6% 91.1% 95.3% 95.5% Indianapolis 93.4% 91.7% 90.0% 89.4% 92.0% Kansas City 91.9% 93.2% 89.5% 89.9% 92.6% Chicago 92.5% 92.0% 87.6% 86.3% 92.9% Denver 83.8% 85.4% 88.5% 89.4% 89.2% ------ ------ ------ ------ ------ Total Portfolio 91.3% 91.4% 90.3% 90.1% 92.8% ====== ====== ====== ====== ====== Additional physical occupancy information for each community in the AMLI portfolio is shown as of the end of the quarter in the Occupancy section below. In addition to physical occupancy as an indicator of market conditions, some in the apartment industry measure economic occupancy as well. Because the calculation of economic occupancy typically adjusts the value of vacancies and concessions, among other items from market rents, many believe that it is a better indicator of market fundamentals. Since there is no consistent industry measurement of economic occupancy and the calculation is derived from many variable inputs, AMLI prefers to measure total revenue earned per each occupied apartment. Since the Company's policy is to reserve as a bad debt any rent or other payments due from a resident that is more than 30 days delinquent, revenue earned for purposes of this analysis is essentially equal to collected rent per unit, another metric used by some in the apartment industry. The following chart shows weighed average total revenue per occupied apartment home for Same Store communities for each of AMLI's markets and for the AMLI portfolio in total: WEIGHTED AVERAGE TOTAL REVENUE EARNED (B) PER OCCUPIED APARTMENT HOME SAME STORE COMMUNITIES Nine Months Ended --------------- 2002 2001 2002 2001 ------------------------ ---------------- ------- ------- Sept 30 Jun 30 Mar 31 Dec 31 Sept 30 Sept 30 Sept 30 ------- ------- ------- ------- ------- ------- ------- Dallas $ 830 $ 835 $ 841 $ 846 $ 850 $ 836 $ 841 Atlanta 884 895 914 928 945 897 940 Austin 857 875 890 918 942 874 961 Houston 1,069 1,076 1,070 1,065 1,048 1,072 1,013 Indianapolis 780 774 776 782 786 777 785 Kansas City 846 855 874 883 879 858 889 Chicago 1,136 1,152 1,173 1,197 1,195 1,154 1,177 Denver 1,168 1,158 1,168 1,196 1,183 1,165 1,206 ------ ------ ------ ------ ------ ------ ------ Total Portfolio $ 898 $ 907 $ 919 $ 932 $ 938 $ 908 $ 934 ====== ====== ====== ====== ====== ====== ====== (a) Occupied apartments include community models and exclude apartments not in service due to fire, flood or otherwise. (b) Calculated by taking the simple average of each of the three months in the quarter. Each month's calculation is made by dividing that month's accrual basis rental and other income (total community revenues) by the weighted average number of apartments occupied during the month. AMLI'S MARKETS The following provides commentary about each of AMLI's markets. Statistical information relates to Same Store communities, including Wholly-owned and Partnership communities at 100%, for the first nine months of 2002, compared to actual monthly rental revenue for the twelve months of 2001. DALLAS/FORTH WORTH, which represented 27% of total revenue in the third quarter, showed deteriorating fundamentals as new supply and reduced demand impacted operations. Traffic was essentially flat quarter to quarter and year over year, but rental revenue declined by 2.3% for the nine months ended September 30, 2002 compared to a year ago, as concessions increased by 15%. Market-wide absorption was negative for the quarter and occupancy dropped by 2.9% from a year earlier. Ft. Worth held up better than Dallas due to less supply. The DFW economy continued to be battered by telecom and high-tech layoffs as well as problems at American Airlines. Unemployment as of August 30, 2002 stood at 7%, down slightly from a peak of 7.5% in June. With 13,000 new units under construction, Dallas will struggle until the economic rebound starts to produce jobs. ATLANTA, which represented 22% of total revenue in the third quarter, experienced a continued decline in revenue over the second quarter but at a slower pace. Revenue, after dropping steadily since March, showed a slight pick up in September. Market wide, occupancies seem to have stabilized and the growth in the magnitude of concessions has also slowed. Unfortunately, with 13,000 new units still in the pipeline, the Atlanta market will continue to be under pressure, especially those stabilized communities that compete with new lease-ups. Given that Atlanta experienced some job growth during the first nine months, there is reason to believe that even if the market has not hit bottom, it's fall has slowed. CHICAGO, which represented 15% of total revenue for the quarter, slipped slightly by 0.8% versus the second quarter after showing increased revenue the first two quarters. Two factors continue to impact Chicago - the highest level of move-outs due to home purchases (33% during the quarter) and a very weak economy. Traffic has fallen every month since March, dropping 14.8% from this year's second quarter. With continuing job layoffs creating a fear of a long delayed recovery or double dip recession in Chicago, future occupancy gains will be made only at the expense of effective rent. AUSTIN, which represented 12% of total revenue for the quarter, continued to experience revenue deterioration, albeit at a slower pace. Total revenue declined by 0.5% from the second quarter after a 1.9% decline from the first to the second quarter. This improvement was created by a 1.6% occupancy increase and deceleration in the growth of concessions. After increasing 17.6% in the second quarter, concessions increased only 2.7%. Austin also experienced its first positive job growth (1,600 jobs on a trailing twelve month non-seasonally adjusted basis). During the third quarter, Austin experienced positive absorption of new units, but with 11,000 units still under construction, future improvements in collected revenue will depend on a continued improvement in the economy. KANSAS CITY, which represented 9% of total revenue during the third quarter, experienced a 2.7% decrease in rental revenue from the second quarter, after a 2.3% increase from the first to the second quarter. The economy in Kansas City has slowed, reversing job growth over the past ten months. September's BLS numbers showed a year over year loss of 5,400 jobs and a continued increase in the unemployment rate. At the same time, the market is still trying to absorb a large amount of new supply introduced in the past 9-12 months. Occupancy declined to 91.9% in the quarter from 93.2% in the second quarter and 92.6% a year ago. Going forward, while multifamily permits have flattened and are down from a year ago, without job growth, absorption of new units will be a challenge. INDIANAPOLIS, which represented 7% of total revenue during the quarter, showed a sequential increase of 2.6% in revenue. Occupancy for competing properties in the Indianapolis area was 90.4% versus the Company's 93.4%. Concessions were reduced by 18% versus the second quarter, a positive sign. Although annualized permits have trended up over the past nine months, a little job growth should keep this market in balance. HOUSTON, which represented 6% of total revenue during the third quarter, continued to experience revenue growth, albeit at a slowing pace. After maintaining strong job growth through most of 2001, Houston began to lose jobs during the first two quarters of 2002 while staying relatively flat in the third quarter when measured on a year over year basis. Additionally, new construction is heavily concentrated within the 610 Loop submarket, which contains three of the Company's four Same Store communities. Market wide, Houston metro experienced negative absorption during the quarter. Relatively moderate new supply (7,000+ units) over the next twelve months may be the saving grace for this market if job growth remains flat. However, if job losses begin to persist, this market could follow the same decline in revenue experienced in some of the Company's other markets. DENVER, which represented 2% of total revenue during the third quarter, continued to be much challenged due to the combination of weak job growth and too much supply. Average occupancies in "A" (1990+) product in the Company's three submarkets averaged below 90% for the quarter. With 5,000-7,000 new units still in the pipeline, over 3% of stabilized inventory, continued weak job growth and a reasonably high amount of home purchases, Denver will be challenged merely to maintain current levels of revenues. OTHER COMMUNITY REVENUES Includes non-rental income items such as revenues from parking garages and carports, laundry facilities, washer/dryer rentals, phone and cable, vending, application fees, late fees, termination fees, month-to- month fees, pet charges and other such items. TOTAL OPERATING COSTS PER SAME STORE APARTMENT HOME The following summarizes the combined cost of operating expenses and capital expenditures (excluding acquisition and rehab capital expenditures, as described below) per apartment home for the Company's Same Store Wholly- owned communities and Partnership communities (at 100%) for the nine months ended September 30, 2002 and 2001: Nine Months Ended September 30, 2002 -------------------------------------------------- Partnership Wholly-owned Communities Per Unit Communities at 100% Total (annualized) ------------ ------------ ---------------------- Community operating expenses. . . . . . . $ 29,408 38,576 67,984 3,969 Capital expenditures. . 2,922 2,195 5,117 299 ======== ======== ======== ======== Number of Same Store apartment homes . . . 10,523 12,314 22,837 ======== ======== ======== Number of Same Store communities . . . . . 26 32 58 ======== ======== ======== Nine Months Ended September 30, 2001 -------------------------------------------------- Partnership Wholly-owned Communities Per Unit Communities at 100% Total (annualized) ------------ ------------ ---------------------- Community operating expenses. . . . . . . $ 29,653 38,436 68,089 3,975 Capital expenditures. . 3,895 1,846 5,741 335 ======== ======== ======== ======== SAME STORE OPERATING EXPENSES The following shows detail of operating expenses for the Company's Same Store Wholly-owned communities and Partnership communities (at 100%) for the nine-month periods ended September 30, 2002 and 2001: Per Unit Nine Months Ended (annualized) ------------------- ------------------- 2002 2001 2002 2001 -------- -------- -------- -------- OPERATING EXPENSES Personnel. . . . . . . . . . . $ 15,526 16,117 906 941 Advertising and promotion. . . 3,361 3,764 196 220 Utilities. . . . . . . . . . . 4,606 5,098 269 298 Building repairs and maintenance and services. . . 7,823 8,121 457 474 Landscaping and grounds maintenance . . . . . . . . . 3,355 3,334 196 195 Real estate taxes. . . . . . . 22,831 22,213 1,333 1,297 Insurance. . . . . . . . . . . 2,714 1,680 158 98 Property management fees . . . 6,005 5,962 351 348 Other operating expenses . . . 1,763 1,800 103 104 -------- -------- ------- ------- Total . . . . . . . . . . . $ 67,984 68,089 3,969 3,975 ======== ======== ======= ======= The following provides additional detail for certain of the above expenditures for the nine months ended September 30, 2002 and 2001. Note that actual expenses in some categories for the full year ended December 31, 2002 and 2001 will be less then the annualized Per Unit amounts shown due to seasonal effects. Per Unit Nine Months Ended (annualized) ------------------- ------------------- 2002 2001 2002 2001 -------- -------- -------- -------- BUILDING REPAIRS AND MAINTENANCE Painting (interior). . . . . . $ 1,672 1,691 98 99 Painting (exterior). . . . . . 515 766 30 45 Carpet and vinyl . . . . . . . 1,169 1,270 68 74 Wallpaper and mini-blinds. . . 179 158 10 9 Carpentry, glass and hardware. 436 404 26 24 Heating and air conditioning . 198 194 12 11 Plumbing . . . . . . . . . . . 304 306 18 18 Appliances . . . . . . . . . . 162 179 9 10 Electrical . . . . . . . . . . 188 218 11 13 Parking lots/resurfacing . . . 186 156 11 9 Swimming pools and amenity areas . . . . . . . . . . . . 395 354 23 21 Other repairs and maintenance . . . . . . . . . 736 439 43 26 -------- -------- -------- -------- Total building repairs and maintenance. . . . . . . . 6,140 6,135 359 359 -------- -------- -------- -------- CONTRACT SERVICES Property monitoring services . 480 398 28 23 Rubbish collection services. . 235 511 14 30 Cleaning services. . . . . . . 594 691 34 40 Pest control services. . . . . 222 229 13 13 Other services . . . . . . . . 152 157 9 9 -------- -------- -------- -------- Total contract services. . . 1,683 1,986 98 115 -------- -------- -------- -------- Total building repairs and maintenance and services . . . . . . . . . $ 7,823 8,121 457 474 ======== ======== ======== ======== LANDSCAPING AND GROUND MAINTENANCE Lawn maintenance . . . . . . . $ 2,731 3,081 160 180 All other. . . . . . . . . . . 624 253 36 15 -------- -------- -------- -------- Total . . . . . . . . . . . $ 3,355 3,334 196 195 ======== ======== ======== ======== CAPITAL EXPENDITURES General Capital expenditures are those made for assets having a useful life in excess of one year and include replacements, including carpeting and appliances, and betterments, such as unit upgrades, enclosed parking facilities and similar items. In general, the Company expenses any expenditure less than $2.5. The following summarizes capital expenditures incurred in connection with the Company's portfolio of Same Store Wholly-owned communities and Partnership communities (at 100%) for the nine months ended September 30, 2002 and 2001. Nine Months Ended September 30, 2002 -------------------------------------------------- Partnership Wholly-owned Communities Per Unit Communities at 100% Total (annualized) ------------ ------------ ---------------------- CAPITAL EXPENDITURES Carpet . . . . . . . . $ 1,471 1,419 2,890 169 Roof replacements and improvements. . . 616 17 633 37 HVAC and maintenance equipment . . . . . . 267 204 471 28 Land improvements, landscaping and irrigation. . . . . . 56 103 159 9 Building improve- ments . . . . . . . . 101 36 137 8 Clubhouse, pool and other amenities . . . 93 141 234 14 Major appliances . . . 182 75 257 15 Furniture, fixtures and equipment . . . . 41 63 104 6 Other. . . . . . . . . 95 137 232 13 -------- -------- -------- ------- Total . . . . . . . $ 2,922 2,195 5,117 299 ======== ======== ======== ======= Nine Months Ended September 30, 2001 -------------------------------------------------- Partnership Wholly-owned Communities Per Unit Communities at 100% Total (annualized) ------------ ------------ ---------------------- CAPITAL EXPENDITURES Carpet . . . . . . . . $ 1,465 1,263 2,728 159 Roof replacements and improvements. . . 446 32 478 28 HVAC and maintenance equipment . . . . . . 344 205 549 32 Land improvements, landscaping and irrigation. . . . . . 578 53 631 37 Building improve- ments . . . . . . . . 73 6 79 5 Clubhouse, pool and other amenities . . . 389 110 499 29 Major appliances . . . 221 63 284 17 Furniture, fixtures and equipment . . . . 200 65 265 15 Other. . . . . . . . . 179 49 228 13 -------- -------- -------- ------- Total . . . . . . . $ 3,895 1,846 5,741 335 ======== ======== ======== ======= ACQUISITION COMMUNITIES In conjunction with acquisitions of communities, 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 communities acquired competitive with comparable newly constructed communities. 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 Wholly-owned and Partnership communities for the nine months ended September 30, 2002 and 2001: Nine Months Ended September 30, 2002 ---------------------------------------- Partnership Wholly-owned Communities Communities at 100% Total ------------ ------------ ---------- Land improvements, landscaping and irrigation. . . . . . . . $ 99 45 144 Signage . . . . . . . . . . . . 30 13 43 Clubhouse, pool and other amenities . . . . . . . . . . 115 29 144 HVAC and maintenance equipment. 48 4 52 Other . . . . . . . . . . . . . 86 50 136 -------- -------- -------- $ 378 141 519 ======== ======== ======== Nine Months Ended September 30, 2001 ---------------------------------------- Partnership Wholly-owned Communities Communities at 100% Total ------------ ------------ --------- Building improvements . . . . . $ 38 74 112 Land improvements, landscaping and irrigation. . . . . . . . 80 430 510 Parking lot . . . . . . . . . . 42 61 103 Signage . . . . . . . . . . . . -- 97 97 Clubhouse, pool and other amenities . . . . . . . . . . 50 136 186 HVAC and maintenance equipment. 20 52 72 Furniture, fixture and equipment . . . . . . . . . . 14 87 101 Other . . . . . . . . . . . . . 55 93 148 -------- -------- -------- $ 299 1,030 1,329 ======== ======== ======== REHAB EXPENDITURES The Company defines a renovation and rehabilitation of a community ("Rehab") as 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. During the period 1999-2001, the Company undertook four Rehabs, AMLI at Spring Creek, AMLI at Riverbend, AMLI of North Dallas and AMLI at Valley Ranch. All, except for AMLI at Valley Ranch, were completed in 2001. At September 30, 2002, the Company was continuing the Rehab of the second phase of AMLI at Valley Ranch; the community's first phase Rehab commenced in 1999 and was completed in 2001. The second phase was begun immediately thereafter with completion expected to occur in late 2002. Starting in 1999 and through September 30, 2002, the Company has spent an aggregate $2,990 on the Rehab of this property, of which $695 has been incurred in 2002, and expects to spend an additional $170 in 2002 to complete the Rehab of the second phase. COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2002 TO THREE MONTHS ENDED SEPTEMBER 30, 2001. Income from continuing operations before minority interest decreased to $6,335 for the three months ended September 30, 2002 from $22,263 for the three months ended September 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 September 30, 2002 and 2001: Three Months Ended September 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Community revenues. . . . . . . . $27,380 27,824 (444) Other income. . . . . . . . . . . 2,985 5,179 (2,194) ------- ------- ------- Total revenues. . . . . . . . 30,365 33,003 (2,638) ------- ------- ------- Community operating expenses. . . 12,028 11,628 400 Interest expense and amortiza- tion of financing costs . . . . 6,235 6,978 (743) Depreciation. . . . . . . . . . . 5,307 4,960 347 General and administrative. . . . 1,138 1,221 (83) ------- ------- ------- Total expenses. . . . . . . . 24,708 24,787 (79) ------- ------- ------- Income from continuing opera- tions before share of gains on sales of rental communities . . . . . . . . . . 5,657 8,216 (2,559) Gains on sales of rental communities . . . . . . . . . . 678 14,047 (13,369) ------- ------- ------- Income from continuing operations before minority interest. . . . . . . . . . . . 6,335 22,263 (15,928) Minority interest . . . . . . . . 739 3,498 (2,759) ------- ------- ------- Income from continuing operations. . . . . . . . . . . 5,596 18,765 (13,169) ------- ------- ------- Income from discontinued operations, net of minority interest. . . . . . . . . . . . 229 479 (250) Gain on sale of discontinued operations, net of minority interest. . . . . . . . . . . . 11,827 -- 11,827 ------- ------- ------- Income from discontinued operations, net of minority interest. . . . . . . . . . . . 12,056 479 11,577 ------- ------- ------- Net income. . . . . . . . . . . . $17,652 19,244 (1,592) ======= ======= ======= A $2,638, or 8.7%, decrease in total revenues was due to the disposition of a 590-apartment homes community in August of 2002 and the decline in general economic conditions. On a same community basis, total community revenues decreased by $1,375, or 5.5%, and NOI decreased by $1,310, or 8.9%. Interest and share of income from Service Companies increased in 2002 as a result of 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"), which was partially offset by higher depreciation expense relating to the information technology system. Income from partnerships decreased to $1,569 from $2,173, or 27.8% This decrease in income was due to the sales of two communities in April of 2002 and a community in August 2002, and the decline in general economic conditions. The decrease 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 community revenues decreased by $2,033, or 5.9%, and net operating income decreased by $1,941 or 9.3%. Community operating expenses increased by $400, or 3.4%, mainly due to increases in insurance and real estate tax expense. In addition, the decrease in management fees as a result of lower revenues was offset by an increased rate charged by AMC for managing the Company's wholly-owned properties. On a same community basis, community operating expenses decreased by $65, or 0.6%. Interest expense, net of the amounts capitalized, decreased to $6,065 from $6,824, or 11.1%, primarily due to lower interest rates on the Company's floating-rate bonds. General and administrative expenses decreased slightly for the three months ended September 30, 2002 compared to the three months ended September 30, 2001. The decrease is primarily due to lower deal costs written off in 2002, offset in part by higher personnel costs as a result of increased number of employees. In 2001, the Company had written-off its investment in broad band technology. COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2002 TO NINE MONTHS ENDED SEPTEMBER 30, 2001. Income from continuing operations before minority interest decreased to $21,111 for the nine months ended September 30, 2002 from $45,211 for the nine months ended September 30, 2001 which was primarily attributable to a large gain from the sale of a rental community in 2001, lower income from partnerships and lower promoted interests in 2002, offset in part by a decrease in interest expense. The following table shows comparative condensed results of operations for the nine months ended September 30, 2002 and 2001: Nine Months Ended September 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Community revenues. . . . . . . . $82,292 82,395 (103) Other income. . . . . . . . . . . 9,309 11,797 (2,488) ------- ------- ------- Total revenues. . . . . . . . 91,601 94,192 (2,591) ------- ------- ------- Nine Months Ended September 30, -------------------- Increase 2002 2001 (Decrease) ------- ------- --------- Property operating expenses . . . 33,726 33,004 722 Interest expense and amortiza- tion of financing costs . . . . 18,423 20,202 (1,779) Depreciation. . . . . . . . . . . 15,733 15,181 552 General and administrative. . . . 3,891 3,890 1 ------- ------- ------- Total expenses. . . . . . . . 71,773 72,277 (504) ------- ------- ------- Income from continuing opera- tions before share of gains on sales of rental communities . . . . . . . . . . 19,828 21,915 (2,087) Gains on sales of rental communities . . . . . . . . . . 1,283 23,296 (22,013) ------- ------- ------- Income from continuing operations before minority interest. . . . . . . . . . . . 21,111 45,211 (24,100) Minority interest . . . . . . . . 2,555 6,822 (4,267) ------- ------- ------- Income from continuing operations. . . . . . . . . . . 18,556 38,389 (19,833) ------- ------- ------- Income from discontinued operations, net of minority interest. . . . . . . . . . . . 1,220 1,485 (265) Gain on sale of discontinued operations, net of minority interest. . . . . . . . . . . . 11,827 -- 11,827 ------- ------- ------- Income from discontinued operations, net of minority interest. . . . . . . . . . . . 13,047 1,485 11,562 ------- ------- ------- Net income. . . . . . . . . . . . $31,603 39,874 (8,271) ======= ======= ======= Total community revenues remained flat as increases from properties acquired were offset by reductions from the sale of a large community. Other community revenues include increases in various fees charged to residents. On a same community basis total community revenues decreased by $1,741, or 2.4%, and net operating income decreased by $1,496, or 3.4%. The Company operates, owns and manages apartments in eight metropolitan areas. A combination of an over-supply of rental apartments in the Company's markets coupled with a general business slow-down has contributed to overall decline in collected revenues. Interest and share of loss from the Service Companies decreased by $107, or 38.1%, a result of not recording amortization of goodwill in accordance with SFAS 142. The decrease in loss was partially offset by higher depreciation expense relating to the information technology system and lower general contractor's fee income. Information technology expenditures incurred by AMLI Management Company ("AMC") are capitalized and are being depreciated over five years. Primarily because of increased expenditures for information technology for corporate and on-site systems, 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 by $1,054 or 15.3%. This decrease was a result of sales of three communities during 2002 and one large community in 2001 and the decline in general economic conditions. The decrease 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 community revenues decreased by $4,657, or 4.6%, and net operating income decreased by $4,796 or 7.6%. Community operating expenses increased by $722, or 2.2%. 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 communities. On a same community basis, community operating expenses decreased by $245, or 0.8%. Interest expense, net of the amounts capitalized, decreased to $17,949 from $19,603 or 8.4%. The decrease was primarily due to a partial repayment of the Company's short-term borrowings from proceeds of the sale of one community in August 2002 and lower interest rates on the floating- rate bonds. General and administrative expenses remained flat for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001. The increase in personnel costs as a result of increased number of employees was offset by lower dead deal costs. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2002, the Company had $3,639 in cash and cash equivalents and $144,000 in availability under its $200,000 unsecured line of credit. The availability under the line of credit is based on total borrowings of $56,000, 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 September 30, 2002, thirteen 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 nine months ended September 30, 2002 were $48,034 compared to $38,601 for the nine months ended September 30, 2001. The increase was primarily due to higher distributions from co-investment partnerships and lower interest expense as a result of partial repayment of the Company's short-term borrowings. Cash flows used in investing activities for the nine months ended September 30, 2002 decreased to $9,379 from $23,901 for the nine months ended September 30, 2001. The decrease is primarily due to $45,915 distribution as a return of capital and $2,846 additional distribution from refinancing of partnerships' debt and sales of rental communities. The decrease was offset in part by higher expenditures for development costs. Net cash flows used in financing activities for the nine months ended September 30, 2002 were $40,908, $24,876 higher than in 2001. The increase was due to $11,839 used to repurchase 569,100 of the Company's common shares of beneficial interest and $16,410 used for repayments of the Company's borrowings. 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 nine months ended September 30, 2002 and 2001 is summarized as follows: September 30, ------------------------ 2002 2001 ---------- ---------- Income from continuing operations before minority interest . . . . . . . $ 21,111 45,211 Income from discontinued operations before minority interest. . . . . . . . 15,716 1,783 Depreciation (1). . . . . . . . . . . . . 16,040 15,798 Share of co-investment partnerships' depreciation. . . . . . . . . . . . . . 8,902 8,434 Share of Service Company's goodwill amortization. . . . . . . . . . . . . . -- 311 Gains on sales of rental communities including share of gains on sales of partnerships' rental communities. . . . (1,283) (23,296) Gain on disposition of discontinued operations. . . . . . . . . . . . . . . (14,247) -- ---------- ---------- FFO . . . . . . . . . . . . . . . . . . . $ 46,239 48,241 ========== ========== Weighted average shares and units including dilutive shares . . . . . . . 25,920,811 25,043,390 ========== ========== (1) Includes discontinued operations of $307 and $616 for the nine months ended September 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 has access to private institutional capital as a way to finance selected future acquisition and development activities. In addition, the Company is selectively selling communities. 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, and 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 or through sales of assets. As of September 30, 2002, the Company has a balance of $71,533 that it may issue as common shares or preferred shares in the future under its shelf registration statement. COMPANY INDEBTEDNESS The Company's debt as of September 30, 2002 includes $310,943 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% $310,943 77.1% Tax-Exempt Tax-Exempt Rate + 1.23% 50,250 12.5% Bonds (1) Tax-Exempt Rate + 1.25% Lines of Credit (2) LIBOR + 1.05% 42,000 10.4% -------- ------ Total $403,193 100.0% ======== ====== - -------------------- (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 (1.80% for AMLI at Spring Creek and for 1.84% AMLI at Poplar Creek at October 24, 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 nine months. AMLI has begun the development of AMLI Downtown Austin with an estimated $50,920 total costs and had closed on a 30% owned co-investment partnership for this development in October 2002 (note 4 to Financial Statements). At September 30, 2002, the Company has made capital contributions totaling $29,887 to the co-investment partnerships currently having development underway, and anticipates funding substantially all of its remaining commitment (net of its share of co-investment debt) of $9,350 during 2002 and 2003 to complete the 2,215 apartment homes being developed by co-investment partnerships. There are approximately 45 individuals employed in the Company's construction and development operations at September 30, 2002, which is 70 fewer than were employed at September 30, 2001. The Company's development pipeline of new developments will continue to shrink; no more than three new developments are anticipated to commence in 2003. 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. As of October 1, 2002, the Company sold a 28-acre land parcel to Amrescon. This land parcel located in Austin, Texas, was held by the Company for the development of 480 apartment homes. The Company has made earnest money deposits of $650 for five 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 $837 and $1,147 of costs associated with carrying these land parcels for the nine months ended September 30, 2002 and 2001, respectively. 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 September 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 42.0% of the Company's total market capitalization (52.7% including the Company's share of co-investment partnerships' debt), the high percentage of intermediate-term fixed-rate debt (77.1% of total debt), and the use of interest rate swaps to effectively fix the interest rate on $30,000 of floating-rate debt through February 2003, $15,000 through September 2004 and $10,000 through October 2004 (13.6% of total debt). As a result, for the foreseeable future, increases in interest expense resulting from increasing inflation are anticipated to be less than future increases in income before interest and general and administrative expenses. 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 nine months ended September 30, 2001 and Consolidated Statement of Cash Flows for the nine months ended September 30, 2001 as a result of implementing SFAS 144 to reflect discontinued operations of the property sold as of September 30, 2002. This restatement has no impact on the Company's net income or net income per common share. Communities 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 September 30, 2002, one rental community sold in 2002 was included in discontinued operations. No interest expense has been allocated to discontinued operations. Condensed financial information of the results of operations for this community is as follows: Three Months Nine Months Ended Ended September 30, September 30, ------------------ ------------------ 2002 2001 2002 2001 ------- ------- ------- ------- Rental income . . . . . . . . . $ 529 1,214 2,904 3,664 Other income. . . . . . . . . . 42 81 194 219 ------- ------- ------- ------- Total community revenues. . 571 1,295 3,098 3,883 Community operating expenses. . 295 521 1,322 1,483 ------- ------- ------- ------- Net operating income. . . . 276 774 1,776 2,400 Depreciation expense. . . . . . -- 198 307 617 ------- ------- ------- ------- Income from discontinued operations before minority interest . . . . 276 576 1,469 1,783 Minority interest . . . . . . . 47 97 249 298 ------- ------- ------- ------- Income from discontinued operations, net of minority interest . . . . 229 479 1,220 1,485 ------- ------- ------- ------- Gain on disposition of discontinued operations . . . 14,247 -- 14,247 -- Minority interest . . . . . . . 2,420 -- 2,420 -- ------- ------- ------- ------- Gain on disposition of discontinued operations, net of minority interest. . . 11,827 -- 11,827 -- ------- ------- ------- ------- Income from discontinued operations. . . . . . . . . . $12,056 479 13,047 1,485 ======= ======= ======= ======= OTHER MATTERS Derivative instruments reported on the Consolidated Balance Sheets as liabilities totaled $2,962 and $3,724 as of September 30, 2002 and December 31, 2001, respectively, a $762 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 $4,009 and $4,294 as of September 30, 2002 and December 31, 2001, respectively, a $285 decrease. The adjustments to the shareholders' equity include $1,292 and $1,413 of the Company's share of Other Comprehensive Loss of a co-investment partnership as of September 30, 2002 and December 31, 2001, respectively. The Service Companies recorded an after-tax charge against earnings of $259 and $121 for the nine months ended September 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 $311 for the nine months ended September 30, 2002. The Company has tested the unamortized goodwill remaining on the Service Company's books and no impairment existed as of September 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. On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." Pursuant to its provisions, the Company may either record additional compensation expense each year based on the fair value of the Options granted in that year, or, as the Company has elected under APB No. 25, record no such additional compensation costs in its consolidated financial statements and disclose pro forma effects as if SFAS No. 123 had been applied. Had the Company determined compensation costs based upon the fair value at the grant date for these Options under SFAS No. 123, the charge against the Company's net income would have been $303 and $256 for the nine months ended September 30, 2002 and 2001, respec- tively. In accordance with the new rules regarding Options awarded to the Company's employees, the Company will commence reporting the value of such Options as a charge against earnings for Options awarded subsequent to January 1, 2002. There were no Options awarded during the nine months ended September 30, 2002, and no charge against earnings was recorded during the same period. OTHER CONTINGENCIES The Company has discovered that some of its communities (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. Based on existing known facts, the Company is unaware of any specific circumstance which could result in the Company incurring any significant costs as a result of problems with mold. 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 nine months of 2002 the Company was limited in its ability to raise rents and increase occupancies at many of its communities because of relative weak demand in most of its markets. The Company continues to be exposed to potentially decreasing levels of rental income as a result of future declines in occupancy rates, increased levels of rent concessions, lower net effective rents, and possible higher delinquencies. Additional factors potentially contributing to future declines in community revenues include slow to negative new job creation, the overall condition of local economies, pockets of overbuilding, and loss of residents to home ownership made more affordable by the current low interest rate environment. In general, operating expenses are continuing to increase, adding to the negative impact on net operating income from reduced revenue. Management is of the opinion that the Company's current access to debt and equity capital is adequate to fund its near-term growth objectives. The achievement of the Company's longer-term growth objectives will be dependent upon future access to debt and equity capital, including co-investment debt and equity. Since December 31, 2000, the Company has reduced its exposure to risks associated with interest rate changes 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 communities, and has acquired fewer additional communities than in prior years in anticipation of better acquisition pricing prospectively. Although the Company has recently moved to reduce its construction and development overhead, the reduced number of new developments may not be sufficient in future years to support this reduced level of overhead. 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 anticipates no significant additional increase in its insurance costs for 2003. There have been no other significant changes in the Company's exposure to market risks. ITEM 4. CONTROLS AND PROCEDURES Within the 90 days prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Co-Chief Executive Officers and the Company's Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Co-Chief Executive Officers and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the Company's periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the Security and Exchange Commission rules and forms. There were no significant changes made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. 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 N/A 92% at Bent Tree . . . . . . . . 500 87% 93% 94% 89% 93% 92% 92% at Bishop's Gate . . . . . . 266 91% 93% 95% 92% 90% 93% 90% at Chase Oaks. . . . . . . . 250 88% 87% 97% 90% 95% 93% 96% at Gleneagles. . . . . . . . N/A N/A 90% 92% 91% 92% 94% 95% on the Green . . . . . . . . 424 95% 90% 90% 91% 93% 94% 91% at Nantucket . . . . . . . . 312 85% 93% 94% 96% 94% 94% 92% of North Dallas. . . . . . . 1,032 87% 91% 92% 94% 92% 93% 95% on Rosemeade . . . . . . . . N/A N/A N/A N/A N/A N/A 93% 94% at Stonebridge Ranch . . . . 250 80% 88% 90% 90% 90% 82% N/A at Shadow Ridge. . . . . . . 222 93% 87% 89% 78% 85% N/A N/A at Valley Ranch. . . . . . . 460 90% 84% 89% 89% 90% 93% 95% Upper West Side. . . . . . . 194 96% 94% N/A N/A N/A N/A N/A ------ ----- ----- ----- ----- ----- ----- ----- ----- 3,910 90% 90% 92% 91% 92% 93% 94% ------ ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: in Great Hills . . . . . . . 344 92% 91% 89% 94% 92% 90% 91% at Lantana Ridge . . . . . . 354 91% 93% 90% 88% 94% 89% 90% at StoneHollow . . . . . . . 606 95% 94% 93% 94% 94% 94% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,304 93% 93% 91% 92% 93% 92% 90% ------ ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at the Medical Center. . . . . 334 94% 97% 94% 93% 94% N/A N/A at Western Ridge . . . . . . . 318 92% 94% 94% 95% 98% 95% 91% ------ ----- ----- ----- ----- ----- ----- ----- ----- 652 93% 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 92% 89% 94% 94% 92% 95% 97% at Killian Creek. . . . . . . 256 92% 93% 95% 87% 92% 93% 97% at Park Creek . . . . . . . . 200 91% 95% 83% 85% 83% 91% 93% at Towne Creek. . . . . . . . 150 81% 90% 93% 89% 93% 90% 89% on Spring Creek . . . . . . . 1,180 88% 87% 90% 90% 90% 94% 92% at Vinings. . . . . . . . . . 360 91% 93% 93% 91% 90% 93% 95% at West Paces . . . . . . . . 337 95% 88% 91% 94% 94% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- 2,771 90% 89% 91% 90% 91% 93% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Alvamar . . . . . . . . . N/A N/A N/A N/A N/A N/A 93% 86% at Centennial Park . . . . . 170 91% 92% 89% 92% 96% 88% 86% at Lexington Farms . . . . . 404 91% 93% 92% 92% 92% 93% 91% at Regents Center. . . . . . 424 91% 94% 89% 88% 94% 93% 89% at Town Center . . . . . . . 156 91% 92% 94% 90% 96% 90% 87% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,154 91% 93% 91% 90% 94% 92% 89% ------ ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: at Conner Farms. . . . . . . 300 88% 92% 90% 89% 92% 93% 89% at Eagle Creek . . . . . . . 240 96% 93% 93% 88% 90% 93% 93% at Riverbend . . . . . . . . 996 93% 94% 94% 90% 94% 90% 83% ------ ----- ----- ----- ----- ----- ----- ----- ----- 1,536 92% 93% 93% 90% 92% 91% 86% ------ ----- ----- ----- ----- ----- ----- ----- ----- Chicago, IL AMLI: at Poplar Creek. . . . . . . 196 91% 95% 94% 94% 95% 94% 96% ------ ----- ----- ----- ----- ----- ----- ----- ----- Denver, CO AMLI: at Gateway Park. . . . . . . 328 92% 90% 89% 85% 91% 93% 85% ------ ----- ----- ----- ----- ----- ----- ----- ----- Total wholly-owned communities . . . . . . . . . 11,851 90.7% 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 91% 89% 93% 93% 92% 95% 86% at Fossil Creek. . . . . . . 25% 384 94% 92% 91% 87% 95% 95% 94% at Oak Bend. . . . . . . . . 40% 426 91% 91% 92% 91% 96% 94% 93% on the Parkway . . . . . . . 25% 240 87% 88% 92% 91% 94% 92% 91% at Prestonwood Hills . . . . 45% 272 94% 92% 93% 89% 95% 97% 96% on Timberglen. . . . . . . . 40% 260 89% 92% 94% 95% 94% 94% 94% at Verandah. . . . . . . . . 35% 538 93% 93% 92% 93% 96% 94% 90% on Frankford . . . . . . . . 45% 582 91% 96% 94% 92% 93% 93% 94% at Breckinridge Point. . . . 45% 440 91% 94% 90% 87% 89% 93% 93% at Bryan Place . . . . . . . 48% 420 86% 90% N/A N/A N/A N/A N/A ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,802 91% 92% 92% 91% 94% 94% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Austin, TX AMLI: at Wells Branch. . . . . . . 25% 576 91% 92% 92% 88% 93% 87% 81% at Scofield Ridge. . . . . . 45% 487 91% 89% 88% 86% 90% 87% 80% at Monterey Oaks . . . . . . 25% 430 95% 92% 92% 92% 94% 88% 94% ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,493 92% 91% 91% 88% 92% 87% 88% ------- ----- ----- ----- ----- ----- ----- ----- ----- Houston, TX AMLI: at Champions Centre. . . . . N/A N/A N/A N/A 98% 94% 93% 89% 95% at Champions Park. . . . . . N/A N/A N/A N/A 91% 94% 92% 94% 90% at Greenwood Forest. . . . . N/A N/A N/A 92% 92% 91% 93% 93% 87% Midtown. . . . . . . . . . . 45% 419 90% 93% 91% 90% 97% 96% 96% Towne Square . . . . . . . . 45% 380 89% 95% 90% 91% 96% 90% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 799 90% 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 94% 93% 91% 85% 94% 92% 94% at Northwinds. . . . . . . . 35% 800 91% 92% 93% 93% 92% 95% 93% at River Park. . . . . . . . 40% 222 95% 90% 95% 94% 89% 91% 96% at Willeo Creek. . . . . . . 30% 242 88% 91% 88% 91% 84% 91% 98% at Windward Park . . . . . . 45% 328 93% 91% 91% 87% 90% 91% 88% at Peachtree City. . . . . . 20% 312 89% 86% 86% 92% 92% 94% 89% at Lost Mountain . . . . . . 75% 164 92% 91% 95% 83% 93% 95% 95% at Park Bridge . . . . . . . 25% 352 94% 94% 92% 92% 93% 96% 95% lease lease lease lease lease at Mill Creek. . . . . . . . 25% 400 90% 94% up up up up up ------ ----- ----- ----- ----- ----- ----- ----- ----- 3,266 92% 92% 91% 90% 91% 94% 93% ------ ----- ----- ----- ----- ----- ----- ----- ----- Kansas City, KS AMLI: at Regents Crest . . . . . . 25% 476 92% 95% 90% 86% 89% 92% 90% Creekside. . . . . . . . . . 25% 224 90% 96% 94% 91% 93% 88% 91% at Wynnewood Farms . . . . . 25% 232 89% 91% 91% 88% 93% 92% 91% lease lease lease at Summit Ridge. . . . . . . 25% 432 93% 94% 90% 91% up up up ------- ----- ----- ----- ----- ----- ----- ----- ----- 1,364 92% 94% 91% 89% 91% 91% 91% ------- ----- ----- ----- ----- ----- ----- ----- ----- Indianapolis, IN AMLI: on Spring Mill . . . . . . . 20% residual 400 89% 87% 84% 80% 81% 78% 80% at Lake Clearwater . . . . . 25% 216 91% 91% 92% 84% 93% 94% 94% at Castle Creek. . . . . . . 40% 276 92% 95% 89% 91% 88% 91% 95% ------- ----- ----- ----- ----- ----- ----- ----- ----- 892 91% 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 93% 94% 93% 85% 91% 95% 95% at Danada Farms. . . . . . . 10% 600 90% 93% 93% 86% 87% 94% 96% at Fox Valley. . . . . . . . 25% 272 97% 93% 85% 83% 92% 93% 94% at Willowbrook . . . . . . . N/A N/A N/A N/A N/A N/A N/A 93% 93% at Windbrooke. . . . . . . . 15% 236 90% 95% 98% 86% 95% 97% 96% at Oakhurst North. . . . . . 25% 464 89% 93% 86% 80% 86% 90% 93% at St. Charles . . . . . . . 25% 400 89% 89% 88% 87% 84% 91% 89% at Osprey Lake . . . . . . . 69% 483 86% 90% 93% 96% 93% 92% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- 3,047 90% 92% 91% 86% 89% 93% 93% ------- ----- ----- ----- ----- ----- ----- ----- ----- Denver, CO AMLI: at Lowry Estates . . . . . . 50% 414 89% 88% 87% 91% 91% 88% 87% at Park Meadows. . . . . . . 25% 518 80% 81% N/A N/A N/A N/A N/A ------- ----- ----- ----- ----- ----- ----- ----- ----- 932 84% 84% 87% 91% 91% 88% 87% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total co-investment communities . . . . . . . . . 15,595 90.6% 91.7% 90.9% 89.0% 91.5% 92.0% 91.7% ------- ----- ----- ----- ----- ----- ----- ----- ----- Total . . . . . . . . . . . . . 27,446 90.6% 91.5% 91.3% 89.8% 91.8% 92.2% 91.5% ======= ===== ===== ===== ===== ===== ===== ===== =====
PART II. OTHER INFORMATION ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the quarter ended September 30, 2002. The Exhibits filed as part of this report are listed below. EXHIBIT NO. DOCUMENT DESCRIPTION - ----------- -------------------- 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: November 13, 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: November 13, 2002 By: /s/ ALLAN J. SWEET ----------------------------------- Allan J. Sweet President and Trustee Date: November 13, 2002 By: /s/ PHILIP N. TAGUE ----------------------------------- Philip N. Tague Executive Vice President and Trustee Date: November 13, 2002 By: /s/ ROBERT J. CHAPMAN ----------------------------------- Robert J. Chapman Principal Financial Officer Date: November 13, 2002 By: /s/ CHARLES C. KRAFT ----------------------------------- Charles C. Kraft Principal Accounting Officer CERTIFICATIONS I, Allan J. Sweet certify that: 1. I have reviewed this quarterly report on Form 10-Q of AMLI Residential Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ ALLAN J. SWEET ------------------------ Allan J. Sweet President and Trustee CERTIFICATIONS I, Philip N. Tague, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AMLI Residential Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ PHILIP N. TAGUE ------------------------ Philip N. Tague Executive Vice President and Trustee CERTIFICATIONS I, Robert S. Chapman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AMLI Residential Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ ROBERT J. CHAPMAN --------------------------- Robert J. Chapman Principal Financial Officer EX-15.1 3 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 October 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 October 31, 2002 EX-99.1 4 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 September 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 presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2002 By: /s/ Allan J. Sweet ------------------------------ Allan J. Sweet Co-Chief Executive Officer Date: November 13, 2002 By: /s/ Philip N. Tague ------------------------------ Philip N. Tague Co-Chief Executive Officer Date: November 13, 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 5 ex_992.txt EXHIBIT 99.2 - ------------ AMLI RESIDENTIAL ------------------------------------------------------------ THIRD QUARTER 2002 SUPPLEMENTAL OPERATING AND FINANCIAL DATA ------------------------------------------------------------ [ graphics indicating property / caption reading "AMLI at Kedron Village - Peachtree City, Georgia Joint venture development - stabilized in October 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. . . . . . . . 2 Earnings Release. . . . . . . . . . . . . . . . . . . . . . 3 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 . . . . . . . . . 34 OTHER DATA Co-Investment Compensation. . . . . . . . . . . . . . . . . 40 Service Companies Financial Information . . . . . . . . . . 42 PORTFOLIO Stabilized Communities. . . . . . . . . . . . . . . . . . . 45 Development Summary . . . . . . . . . . . . . . . . . . . . 49 Land Held for Development or Sale . . . . . . . . . . . . . 53 Third Quarter 2002 Page 1 Supplemental Information AMLI Residential Properties Trust 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 conduced 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 upscale apartment communities 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 Supplemental. We operate all of our communities under the AMLI [registered trademark] 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 of 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 Third Quarter 2002 Page 2 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 - --------------------- November 4, 2002 For More Information, Contact: Robert J. Chapman, Chief Financial Officer (312) 984-6845 AMLI RESIDENTIAL ANNOUNCES THIRD QUARTER 2002 OPERATING RESULTS AND DECLARES DIVIDEND --------------------------------------------- (CHICAGO, IL) AMLI RESIDENTIAL PROPERTIES TRUST (NYSE: AML) announces today operating results for the third quarter ended September 30, 2002. EARNINGS - -------- Funds from Operations ("FFO") for the third quarter 2002 were $14,306,000, or $0.56 per common share, compared to $16,848,000, or $0.67 per common share, for the third quarter 2001, a per share decrease of 16.4%. FFO is consistent with First Call's current estimate and the Company's recently revised guidance, which was issued on October 21, 2002. FFO for the nine months ended September 30, 2002 was $46,239,000, or $1.79 per share, compared to $48,241,000, or $1.93 per share, for the nine months ended September 30, 2001, a per share decrease of 7.3%. "As noted in our press release two weeks ago, the weak conditions in the apartment markets continue to negatively impact our earnings, both on an absolute basis and compared to last year," commented Allan J. Sweet, AMLI President. "Our FFO for the third quarter of 2001 also included significant fee income from the sale of one of our co-investment communities, which did not occur in this year's third quarter." Net income for the three and nine months ended September 30, 2002 was $17,652,000 and $31,603,000, respectively, as compared to $19,244,000 and $39,874,000, respectively, in the year earlier periods. Diluted Earnings Per Share ("EPS") for the quarter ended September 30, 2002 was $0.87, compared to $0.89 for the comparable period of 2001, a decrease of 2.2%. Additionally, Operating EPS was $0.18 per diluted share for the quarter ended September 30, 2002, as compared to $0.33 per diluted share for the quarter ended September 30, 2001. For the nine months ended September 30, 2002, EPS was $1.40 compared to $1.86 for the comparable period of 2001, a decrease of 24.7%, and Operating EPS was $0.70 compared to $0.87 for the comparable period of 2001, a decrease of 19.5%. "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 September 30, 2002 versus the prior year's quarter, total property revenues decreased 5.7%, operating expenses decreased 0.7%, and net operating income ("NOI") decreased 9.1%. Weighted average occupancy, quarter over comparable quarter, decreased to 91.3% from 92.8%, or 1.6%, while the weighted average collected revenues per occupied unit decreased by 4.2%. 3 OTHER OPERATING RESULTS - ----------------------- Total property revenues (excluding Discontinued Operations), including both wholly-owned communities and co-investment communities (at 100%), were $70,187,000 and $207,282,000, respectively, for the quarter and nine months ended September 30, 2002, as compared with $70,003,000 and $207,198,000 for the comparable period in 2001, a 0.3% and 0.04% increase, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter and nine months ended September 30, 2002 were $24,437,000 and $75,562,000, respectively, representing decreases of 10.7% and 4.7%, respectively, from the same period last year. THIRD QUARTER ACTIVITIES - ------------------------ During the third quarter, AMLI sold AMLI at Greenwood Forest, a 316-unit joint venture community and received a disposition fee of $403,000 in addition to its 15% proportionate share of net sale proceeds. AMLI also sold AMLI at Gleneagles, a wholly-owned community containing 590 apartment homes, and realized net proceeds from the sale of approximately $34.7 million. SUBSEQUENT EVENTS - ----------------- In October, AMLI entered into a joint venture with Capri Select Income, a private investment fund sponsored by Capri Capital Advisors LLC, a privately-held institutional real estate advisory firm, to develop and own AMLI Downtown in Austin, Texas. AMLI Downtown will be comprised of a seven-story building containing 220 apartment homes, 45,000 square feet of ground floor retail and restaurant space, and 336 underground parking spaces. Also in October, AMLI purchased the 189-unit AMLI 7th Street Station (formerly the Gates of 7th Street Station) in Forth Worth, Texas. COMMON SHARE REPURCHASE AUTHORIZATIONS - -------------------------------------- During the third quarter and in the month of October, AMLI repurchased on the open market 924,200 of its Common Shares at prices ranging from $19.52 to $22.97 pursuant to its previously announced 1,500,000 Common Share Repurchase Program. AMLI anticipates that it will continue buying its common shares in the fourth quarter. OUTLOOK - ------- As stated in the Company's revised guidance issued on October 21, 2002, AMLI's current expectation for full year 2002 FFO per share is in the range of $2.36 to $2.38 per share. Additionally, the Company anticipates that 2003 FFO per share will be in the range of $2.25 to $2.40 per share. DIVIDEND - -------- Today, the Board of Trustees declared a quarterly dividend of $0.48 per common share. This dividend is payable on November 26, 2002 to all common shareholders of record as of November 15, 2002 and is based on an annual dividend rate of $1.92 per common share. CONFERENCE CALL - --------------- AMLI will hold a conference call on Tuesday, November 5, 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. 4 SUPPLEMENTAL INFORMATION - ------------------------ AMLI produces Quarterly Supplemental Information that provides detailed information regarding the Company's activities during the quarter. The Third Quarter Supplemental Information is available in the 'Company Info' section on our website (www.amli.com/comp/) under 'Shareholder Reports.' ABOUT AMLI - ---------- The AMLI[registered trademark] portfolio currently includes 73 apartment communities containing 27,851 apartment homes, with an additional 2,541 apartment homes under development or in lease-up in seven locations. AMLI is focused on the development, acquisition and management of institutional quality multifamily communities in the Southeast, Southwest, Midwest and Mountain regions 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 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 form time to time in the Company's SEC reports, including the annual report on form 10-K for the year ended December 31, 2001. # # # # 5 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2002 2002 2002 2001 2001 ---------- ---------- ---------- ---------- ---------- REVENUES - -------- TOTAL REVENUES Consolidated (a). . . . . . . . . . . . . $ 30,365 31,112 30,124 30,829 33,003 Combined, including share of partnerships (b). . . . . . . . . . . . 43,248 42,853 41,520 41,775 44,848 TOTAL PROPERTY REVENUES Consolidated. . . . . . . . . . . . . . . 27,380 27,537 27,374 27,296 27,824 Combined, including share of partnerships. . . . . . . . . . . . . . 40,984 40,615 40,104 40,199 41,174 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 70,187 69,191 67,904 68,114 70,003 EARNINGS - -------- EBITDA Consolidated. . . . . . . . . . . . . . 20,541 22,347 21,774 20,911 23,826 Combined. . . . . . . . . . . . . . . . 24,437 25,910 25,215 24,323 27,378 FFO . . . . . . . . . . . . . . . . . . . 14,306 16,105 15,828 14,901 16,848 AFFO. . . . . . . . . . . . . . . . . . . 12,926 14,646 14,601 13,635 15,452 Operating earnings. . . . . . . . . . . . 3,953 5,820 5,516 4,604 7,158 Net income. . . . . . . . . . . . . . . . 17,652 7,291 6,660 5,871 19,244 Dividends (c) . . . . . . . . . . . . . . 12,316 12,432 12,286 11,985 11,751 6 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2002 2002 2002 2001 2001 ---------- ---------- ---------- ---------- ---------- PER SHARE DATA - DILUTED - ------------------------ FFO . . . . . . . . . . . . . . . . . . . $ 0.56 0.62 0.61 0.58 0.67 AFFO. . . . . . . . . . . . . . . . . . . 0.51 0.56 0.56 0.53 0.61 Operating earnings. . . . . . . . . . . . 0.18 0.26 0.25 0.21 0.33 Net income allocable to common shares . . 0.87 0.29 0.25 0.21 0.89 Common dividends. . . . . . . . . . . . . 0.48 0.48 0.48 0.48 0.47 FFO payout ratio (based on per share amounts). . . . . . . . . . . . . 85.9% 77.7% 78.8% 82.8% 70.3% AFFO payout ratio (based on per share amounts). . . . . . . . . . . . . 95.1% 85.4% 85.4% 90.6% 76.5% NUMBER OF APARTMENT HOMES - ------------------------- STABILIZED COMMUNITIES Wholly-owned. . . . . . . . . . . . . . . 11,851 12,441 12,247 12,247 12,247 Partnerships. . . . . . . . . . . . . . . 15,595 15,911 15,011 15,011 14,579 ---------- ---------- ---------- ---------- ---------- 27,446 28,352 27,258 27,258 26,826 ---------- ---------- ---------- ---------- ---------- COMMUNITIES UNDER DEVELOPMENT AND/OR LEASE-UP Wholly-owned. . . . . . . . . . . . . . . 542 542 322 322 322 Partnerships. . . . . . . . . . . . . . . 2,215 2,215 2,615 2,615 2,737 ---------- ---------- ---------- ---------- ---------- 2,757 2,757 2,937 2,937 3,059 ---------- ---------- ---------- ---------- ---------- Total . . . . . . . . . . . . . . . . . . 30,203 31,109 30,195 30,195 29,885 ========== ========== ========== ========== ========== See notes on following pages. 7
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2002 2002 2002 2001 2001 ---------- ---------- ---------- ---------- ---------- CAPITALIZATION - -------------- REAL ESTATE AT COST, BEFORE DEPRECIATION Consolidated. . . . . . . . . . . . . . . $ 734,991 735,699 745,906 744,411 743,111 Combined, including share of partnerships. . . . . . . . . . . . . . 1,139,522 1,152,130 1,116,239 1,114,576 1,105,640 Combined, including partnerships at 100% . . . . . . . . . . . . . . . . 1,936,713 1,954,652 1,864,965 1,862,901 1,832,040 TOTAL ASSETS Consolidated. . . . . . . . . . . . . . . 919,849 964,800 915,344 919,002 912,987 Combined, including share of partnerships. . . . . . . . . . . . . . 1,146,244 1,170,959 1,112,731 1,120,158 1,111,033 DEBT Consolidated. . . . . . . . . . . . . . . 403,193 450,268 405,126 399,309 408,475 Combined, including share of partnerships. . . . . . . . . . . . . . 620,184 648,965 592,300 586,137 595,174 SHARE INFORMATION Common shares outstanding . . . . . . . . 17,557,178 18,120,296 18,110,659 17,840,368 17,847,398 Preferred shares outstanding (d). . . . . 4,025,000 4,025,000 4,025,000 4,275,000 3,475,000 Operating Partnership units outstanding(e). . . . . . . . . . . . . 3,652,165 3,655,364 3,664,396 3,664,396 3,684,866 ---------- ---------- ----------- ----------- ----------- Total shares and units outstanding. . . . 25,234,343 25,800,660 25,800,055 25,779,764 25,007,264 ========== ========== =========== =========== =========== Weighted average shares and units outstanding . . . . . . . . . . . . . . 25,542,933 25,800,241 25,787,270 25,518,607 24,960,829 Share price, end of period. . . . . . . . $ 22.08 26.00 25.22 25.22 23.60 8 AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION - CONTINUED Unaudited (Dollars in thousands, except for share data) Quarter Ended ------------------------------------------------------------ Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2002 2002 2002 2001 2001 ---------- ---------- ---------- ---------- ---------- EQUITY MARKET CAPITALIZATION 557,174 670,817 650,677 650,166 590,171 MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 960,367 1,121,085 1,055,803 1,049,475 998,646 Combined, including shares of partnerships. . . . . . . . . . . . . . 1,177,358 1,319,782 1,242,977 1,236,317 1,185,359 Combined,including partnerships at 100% . 2,113,925 2,334,010 2,179,544 2,187,099 2,119,787 DEBT SERVICE (f) - ---------------- INTEREST EXPENSE Consolidated. . . . . . . . . . . . . . . 6,065 6,084 5,800 5,858 6,824 Combined, including share of partnerships 9,907 9,602 9,197 9,205 10,328 CAPITALIZED INTEREST Consolidated. . . . . . . . . . . . . . . 1,013 962 1,054 981 1,100 Combined, including share of partnerships . . . . . . . . . . . . 1,051 985 1,072 1,004 1,145 SCHEDULED PRINCIPAL PAYMENTS (normal amortization) Consolidated. . . . . . . . . . . . . . . 1,075 1,105 1,183 1,166 1,014 Combined, including share of partnerships 1,603 1,634 1,735 1,704 1,501 See notes on following pages. 9
AMLI RESIDENTIAL SELECTED FINANCIAL AND OPERATING INFORMATION Unaudited (Dollars in thousands, except for share data)
Quarter Ended ------------------------------------------------------------ Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2002 2002 2002 2001 2001 ---------- ---------- ---------- ---------- ---------- OPERATIONAL RATIOS - ------------------ EBITDA, AS PERCENT OF TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 8.6% 8.0% 8.2% 8.0% 9.5% Combined, including share of unconsolidated affiliates . . . . . . . 8.3% 7.9% 8.1% 7.9% 9.2% INTEREST COVERAGE Consolidated. . . . . . . . . . . . . . . 3.4 3.7 3.8 3.6 3.5 Combined, including share of partnerships 2.5 2.7 2.7 2.6 2.7 FIXED CHARGE COVERAGE (g) Consolidated. . . . . . . . . . . . . . . 2.6 2.8 2.8 2.6 2.8 Combined, including share of partnerships 2.1 2.2 2.2 2.2 2.3 FINANCIAL RATIOS - ---------------- DEBT TO TOTAL MARKET CAPITALIZATION Consolidated. . . . . . . . . . . . . . . 42.0% 40.2% 38.4% 38.0% 40.9% Combined, including share of unconsolidated affiliates . . . . . . . 52.7% 49.2% 47.7% 47.4% 50.2% DEBT TO TOTAL ASSETS, AT COST (before depreciation) Consolidated. . . . . . . . . . . . . . . 38.9% 41.9% 39.6% 38.9% 40.2% Combined, including share of partnerships 47.8% 49.4% 47.2% 46.7% 48.1% 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 September 30, ----------------------- 2002 2001 ---------- ---------- Company's share of communities' EBITDA (a). $ 24,159 25,489 Interest from and share of Service Companies' FFO (b). . . . . . . . . . . . 80 (65) Other interest and Other. . . . . . . . . . 242 356 Co-investment fee income (c). . . . . . . . 1,094 2,819 General and administrative. . . . . . . . . (1,138) (1,221) ---------- ---------- EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) . . 24,437 27,378 ---------- ---------- INTEREST EXPENSE (d) Wholly-owned communities and portfolio debt. . . . . . . . . . . . . . . . . . . (6,235) (6,978) Share of partnership communities. . . . . . (3,895) (3,552) ---------- ---------- (10,131) (10,530) ---------- ---------- FUNDS FROM OPERATIONS (FF0) . . . . . . . . 14,306 16,848 CAPITAL EXPENDITURES PAID FROM FFO (e) Wholly-owned communities. . . . . . . . . . (1,093) (1,147) Share of partnership communities. . . . . . (287) (249) ---------- ---------- (1,380) (1,396) ---------- ---------- ADJUSTED FUNDS FROM OPERATIONS (AFFO) . . . $ 12,926 15,452 ========== ========== Notes: (a) Includes discontinued operations. See pages 34 and 37. (b) Includes share of income before goodwill amortization of $104 for the quarter ended September 30, 2001. (c) See page 40. (d) Includes amortization of deferred and other financing costs. (e) For details, refer to the Company's Management Discussion and Analysis in the Form 10-Q filed with the SEC for this reporting period. 12 AMLI RESIDENTIAL FUNDS FROM OPERATIONS Unaudited (Dollars in thousands, except for share data) Nine Months Ended September 30, ----------------------- 2002 2001 ---------- ---------- Company's share of communities' EBITDA (a). . . . . . . . . . . . . . . . $ 75,997 77,957 Interest from and share of Services Companies' FFO (b). . . . . . . . . . . . (174) 30 Other interest and Other. . . . . . . . . . 579 1,299 Co-investment fee income (c). . . . . . . . 3,051 3,872 General and administrative. . . . . . . . . (3,891) (3,890) ---------- ---------- EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) . . 75,562 79,268 ---------- ---------- INTEREST EXPENSE (d) Wholly-owned communities and portfolio debt. . . . . . . . . . . . . . . . . . . (18,423) (20,202) Share of partnership communities. . . . . . (10,900) (10,825) ---------- ---------- (29,323) (31,027) ---------- ---------- FUNDS FROM OPERATIONS (FF0) . . . . . . . . 46,239 48,241 CAPITAL EXPENDITURES PAID FROM FFO Wholly-owned communities. . . . . . . . . . (3,257) (4,584) Share of partnership communities. . . . . . (809) (710) ---------- ---------- (4,066) (5,294) ---------- ---------- ADJUSTED FUNDS FROM OPERATIONS (AFFO) . . . $ 42,173 42,947 ========== ========== Notes: (a) Includes discontinued operations. See pages 34 and 37. (b) Includes share of income before goodwill amortization of $311 for the nine months ended September 30, 2001. (c) See page 40. (d) Includes amortization of deferred and other financing costs. No interest expense is associated with discontinued operations. (e) For details, refer to the Company's Management Discussion and Analysis in the Form 10-Q filed with the SEC for this reporting period. 13 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS Three Months Ended September 30 (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- REVENUES Property revenues . . . . . . . . . . . . . . . . . . $ 27,380 27,824 40,984 41,174 Interest and share of income (loss) from the Service Companies . . . . . . . . . . . . . . . . . 80 (169) 80 (169) Other interest and Other (c). . . . . . . . . . . . . 242 349 947 1,017 Income from partnerships. . . . . . . . . . . . . . . 1,569 2,173 -- -- Co-investment fee income. . . . . . . . . . . . . . . 1,094 2,826 1,237 2,826 ---------- ---------- ---------- ---------- 30,365 33,003 43,248 44,848 ---------- ---------- ---------- ---------- EXPENSES Property operating expenses . . . . . . . . . . . . . 12,028 11,628 17,898 17,012 Interest and amortization of deferred and other financing costs . . . . . . . . . . . . . . . 6,235 6,978 10,130 10,530 Depreciation. . . . . . . . . . . . . . . . . . . . . 5,307 4,960 8,362 7,746 General and administrative. . . . . . . . . . . . . . 1,138 1,221 1,199 1,344 ---------- ---------- ---------- ---------- 24,708 24,787 37,589 36,632 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES. . . . . . . . 5,657 8,216 5,657 8,216 Gain on sale of residential property including share of gains on sales of partnership's properties. . . . . . . . 678 14,047 678 14,047 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 6,335 22,263 6,335 22,263 Minority interest . . . . . . . . . . . . . . . . . . 739 3,498 739 3,498 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 5,596 18,765 5,596 18,765 ---------- ---------- ---------- ---------- Income from discontinued operations, net of minority interest (d). . . . . . . . . . . . 229 479 229 479 Gain on disposition of discontinued operations, net of minority interest. . . . . . . . . . . . . . 11,827 -- 11,827 -- ---------- ---------- ---------- ---------- INCOME FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST. . . . . . . . . . . . . . 12,056 479 12,056 479 ---------- ---------- ---------- ---------- 14 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS - CONTINUED Three Months Ended September 30 (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . 17,652 19,244 17,652 19,244 Net income attributable to preferred shares . . . . . 1,980 1,633 1,980 1,633 ---------- ---------- ---------- ---------- Net Income attributable to common shares. . . . . . . $ 15,672 17,611 15,672 17,611 ========== ========== ========== ========== INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . $ 6,335 22,263 6,335 22,263 Income from discontinued operations before minority interest . . . . . . . . . . . . . . . . . 14,523 576 14,523 576 Add: Depreciation Wholly-owned communities. . . . . . . . . . . . . . 5,307 5,158 5,307 5,158 Share of partnership communities. . . . . . . . . . 3,066 2,794 3,066 2,794 Less: Gains on sales of rental properties Wholly-owned communities. . . . . . . . . . . . . . (14,247) -- (14,247) -- Share of partnership communities. . . . . . . . . . (678) (14,047) (678) (14,047) Share of Service Companies' amortization of goodwill. -- 104 -- 104 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS . . . . . . . . . . . . . . . . $ 14,306 16,848 14,306 16,848 ========== ========== ========== ========== 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 Nine Months Ended September 30 (Unaudited, dollars in thousands)
Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- REVENUES Property revenues . . . . . . . . . . . . . . . . . . $ 82,292 82,395 121,703 122,045 Interest and share of income (loss) from the Service Companies . . . . . . . . . . . . . . . . . (174) (281) (174) (281) Other interest and Other (c). . . . . . . . . . . . . 579 1,299 3,040 3,445 Income from partnerships. . . . . . . . . . . . . . . 5,853 6,907 -- -- Co-investment fee income. . . . . . . . . . . . . . . 3,051 3,872 3,051 3,872 ---------- ---------- ---------- ---------- 91,601 94,192 127,620 129,081 ---------- ---------- ---------- ---------- EXPENSES Property operating expenses . . . . . . . . . . . . . 33,726 33,004 49,829 48,445 Interest and amortization of deferred and other financing costs . . . . . . . . . . . . . . . 18,423 20,202 29,324 31,027 Depreciation. . . . . . . . . . . . . . . . . . . . . 15,733 15,181 24,595 23,592 General and administrative. . . . . . . . . . . . . . 3,891 3,890 4,044 4,102 ---------- ---------- ---------- ---------- 71,773 72,277 107,792 107,166 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES . . . . . . . . . . 19,828 21,915 19,828 21,915 Gain on sale of residential property including share of gains on sales of partnership's properties 1,283 23,296 1,283 23,296 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . . . . . . . . . 21,111 45,211 21,111 45,211 Minority interest . . . . . . . . . . . . . . . . . . 2,555 6,822 2,555 6,822 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 18,556 38,389 18,556 38,389 ---------- ---------- ---------- ---------- Income from discontinued operations, net of minority interest (d) . . . . . . . . . . . . . . . 1,220 1,485 1,220 1,485 Gain on sale of discontinued operations, net of minority interest . . . . . . . . . . . . . . . . . 11,827 -- 11,827 -- ---------- ---------- ---------- ---------- TOTAL INCOME FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST . . . . . . . . . . . . . . . . . 13,047 1,485 13,047 1,485 ---------- ---------- ---------- ---------- 16 AMLI RESIDENTIAL STATEMENTS OF OPERATIONS - CONTINUED Nine Months Ended September 30 (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . 31,603 39,874 31,603 39,874 Net income attributable to preferred shares . . . . . 6,008 4,899 6,008 4,899 ---------- ---------- ---------- ---------- Net income attributable to common shares. . . . . . . $ 25,595 34,975 25,595 34,975 ========== ========== ========== ========== INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST. . . . . . . . . . . . . . 21,111 45,211 21,111 45,211 Income from discontinued operations before minority interest . . . . . . . . . . . . . . . . . 15,716 1,783 15,716 1,783 Add: Depreciation Wholly-owned communities. . . . . . . . . . . . . . 16,040 15,798 16,040 15,798 Share of partnership communities. . . . . . . . . . 8,902 8,434 8,902 8,434 Less: Gains on sales of rental properties Wholly-owned communities. . . . . . . . . . . . . . (14,247) -- (14,247) -- Share of partnership communities. . . . . . . . . . (1,283) (23,296) (1,283) (23,296) Share of Service Companies' amortization of goodwill. -- 311 -- 311 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS . . . . . . . . . . . . . . . . $ 46,239 48,241 46,239 48,241 ========== ========== ========== ========== 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) ------------------------- ------------------------- Sept. 30, December 31, Sept. 30, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ ASSETS Rental apartments Land. . . . . . . . . . . . . . . . . . . . $ 98,641 99,784 154,160 150,187 Depreciable property. . . . . . . . . . . . 636,350 644,627 985,362 964,389 ---------- ---------- ---------- ---------- 734,991 744,411 1,139,522 1,114,576 Less: Accumulated depreciation . . . . . . . (116,039) (107,139) (151,636) (135,052) ---------- ---------- ---------- ---------- 618,952 637,272 987,886 979,524 Rental property held for sale, net of accumulated depreciation. . . . . . . . . . -- -- -- -- Land held for development or sale . . . . . . 24,036 47,611 24,036 47,611 Rental apartments under development . . . . . 34,532 10,392 73,797 41,477 Investment in partnerships (c). . . . . . . . 192,734 184,270 -- -- Cash and cash equivalents . . . . . . . . . . 3,639 5,892 11,593 14,093 Notes and advances to the Service Companies . 26,719 15,161 26,718 14,824 Other assets and deferred expenses, net . . . 19,237 18,404 22,214 22,629 ---------- ---------- ---------- ---------- Total assets. . . . . . . . . . . . . . . $ 919,849 919,002 1,146,244 1,220,158 ========== ========== ========== ========== 18 AMLI RESIDENTIAL BALANCE SHEETS - CONTINUED (Unaudited, dollars in thousands) Consolidated (a) Combined (b) ------------------------- ------------------------- Sept. 30, December 31, Sept. 30, December 31, 2002 2001 2002 2001 ---------- ------------ ---------- ------------ LIABILITIES Debt. . . . . . . . . . . . . . . . . . . . . $ 403,193 399,309 620,184 586,137 Distributions in excess of investments in and earnings from partnerships. . . . . . . $ 4,685 -- -- -- Accrued expenses and other liabilities. . . . 28,464 27,943 42,553 42,272 ---------- ---------- ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . . . 436,342 427,252 662,737 628,408 ---------- ---------- ---------- ---------- Mandatorily redeemable convertible preferred shares. . . . . . . . . . . . . . 93,247 93,287 93,247 93,287 Minority interest . . . . . . . . . . . . . . 67,428 68,186 67,428 68,186 TOTAL SHAREHOLDERS' EQUITY. . . . . . . . 322,832 330,277 322,832 330,277 ---------- ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . . . $ 919,849 919,002 1,146,244 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 September 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 . . . . . $310,943 77.1% 7.1% 6.7 310,943 -- 310,943 -- Construction financing . . . . . -- -- -- -- -- -- Tax-exempt debt . . . 50,250 12.5% 2.6% 1.0 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 42,000 10.4% 6.9% 1.1 -- 42,000 -- 42,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $403,193 100.0% 6.5% 5.4 320,443 82,750 310,943 92,250 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 79.5% 20.5% 77.1% 22.9% ======= ======= ======= ======= 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 . . . . . $522,286 84.2% 7.2% 6.8 522,286 -- 522,286 -- Construction financing . . . . . 5,648 0.9% 3.6% 2.3 5,648 -- 5,648 Tax-exempt debt . . . 50,250 8.1% 2.6% 1.0 9,500 40,750 -- 50,250 Credit facilities (f) . . . . . . . . 42,000 6.8% 6.9% 1.1 -- 42,000 -- 42,000 -------- ------- ------- ------- ------- ------- ------- ------- Total . . . . . . $620,184 100.0% 6.7% 5.9 537,434 82,750 522,286 97,898 ======== ======= ======= ======= ======= ======= ======= ======= Percent of total. . 86.7% 13.3% 84.2% 15.8% ======= ======= ======= ======= See notes on the following page. 20
AMLI RESIDENTIAL DEBT AND PREFERRED SHARES SUMMARY September 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 September 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 September 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 -12/10/03 (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 September 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 $ 1,094 -- 1,094 0.3% 0.0% 2003 4,076 78,690(c) 82,766 20.5% 7.1% 2004 3,775 6,970 10,745 2.7% 7.7% 2005 3,997 31,024 35,021 8.7% 8.2% 2006 3,130 35,372 38,502 9.5% 7.8% Thereafter 21,384 213,681(d) 235,065 58.3% 5.8% -------- ------- ------- ------ ----- Total $ 37,456 365,737 403,193 100.0% 6.5% ======== ======= ======= ====== ===== Percent to Total 9.3% 90.7% 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 $ 1,672 -- 1,672 0.3% 0.0% 2003 6,433 84,986(c) 91,419 14.7% 7.1% 2004 6,072 14,863 20,935 3.4% 7.6% 2005 6,417 36,672 43,089 6.9% 7.5% 2006 5,623 66,794 72,417 11.7% 7.6% Thereafter 33,735 356,917(d) 390,652 63.0% 7.0% -------- ------- ------- ------ ----- Total $ 59,952 560,232 620,184 100.0% 6.7% ======== ======= ======= ====== ===== Percent to Total 9.7% 90.3% 100.0% ======== ======= ======= 24 AMLI RESIDENTIAL DEBT MATURITIES - CONTINUED September 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, 2003 and on December 18, 2003, respectively. 25
AMLI RESIDENTIAL SAME STORE COMMUNITIES THREE MONTHS ENDED SEPTEMBER 30
PHYSICAL OCCUPANCY AND COLLECTED REVENUES PER OCCUPIED UNIT (a) - -------------------------------- Weighted Average Weighted Average Occupancy (b) Collected Revenues (c) --------------------------------- --------------------------------- Apartment Percent Percent Market Homes 2002 2001 Change 2002 2001 Change - ------ --------- -------- -------- -------- -------- -------- -------- Dallas 6,626 90.8% 93.5% -2.9% $ 830 850 -2.2% Atlanta 5,285 89.8% 93.0% -3.4% 884 945 -6.4% Austin 2,797 92.9% 90.6% 2.5% 857 942 -9.0% Houston 1,117 92.9% 95.5% -2.7% 1,069 1,048 2.0% Indianapolis 1,752 93.4% 92.0% 1.4% 780 786 -0.8% Kansas City 2,086 91.9% 92.6% -0.8% 846 879 -3.7% Chicago 2,760 92.5% 92.9% -0.5% 1,136 1,195 -5.0% Denver 414 83.8% 89.2% -6.1% 1,168 1,183 -1.2% ------- ------ ------ ------ ------ ------ ------ Total 22,837 91.3% 92.8% -1.6% $ 898 938 -4.2% ======= ====== ====== ====== ====== ====== ====== 26
AMLI RESIDENTIAL SAME STORE COMMUNITIES - CONTINUED THREE MONTHS ENDED SEPTEMBER 30
REVENUES, EXPENSES AND NET OPERATING INCOME (a) (dollars in thousands) - ----------------------------------------------- Revenues Expenses Net Operating Income ---------------------------- ---------------------------- ----------------------------- Percent Percent Percent Market 2002 2001 Change 2002 2001 Change 2002 2001 Change - ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- Dallas $ 15,004 15,785 -4.9% 6,920 6,832 1.3% 8,084 8,953 -9.7% Atlanta 12,595 13,931 -9.6% 4,973 4,933 0.8% 7,622 8,998 -15.3% Austin 6,680 7,159 -6.7% 3,146 3,627 -13.3% 3,534 3,532 0.1% Houston 3,327 3,353 -0.8% 1,415 1,408 0.5% 1,912 1,946 -1.7% Indianapolis 3,823 3,805 0.5% 1,596 1,493 6.9% 2,227 2,311 -3.7% Kansas City 4,866 5,094 -4.5% 1,799 1,877 -4.2% 3,068 3,217 -4.6% Chicago 8,541 9,024 -5.3% 3,397 3,246 4.7% 5,144 5,778 -11.0% Denver 1,215 1,310 -7.3% 491 479 2.6% 723 831 -12.9% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total $ 56,051 59,460 -5.7% 23,737 23,894 -0.7% 32,314 35,566 -9.1% ======== ======== ======== ======== ======== ======== ======== ======== ======== Notes: (a) Information shown is Combined, including share of partnership communities at 100%. (b) Represents average daily physical occupancy, which was changed from beginning of the month physical occupancy. (c) Represents amounts collected for rent and other income. Previously reported average rental rate per occupied unit. 27
AMLI RESIDENTIAL SAME STORE COMMUNITIES NINE MONTHS ENDED SEPTEMBER 30
PHYSICAL OCCUPANCY AND COLLECTED REVENUES PER OCCUPIED UNIT (a) - -------------------------------- Weighted Average Weighted Average Occupancy (b) Collected Revenues (c) --------------------------------- --------------------------------- Apartment Percent Percent Market Homes 2002 2001 Change 2002 2001 Change - ------ --------- -------- -------- -------- -------- -------- -------- Dallas 6,626 91.3% 92.6% -1.3% $ 836 841 -0.7% Atlanta 5,285 90.0% 92.9% -3.1% 897 940 -4.5% Austin 2,797 92.0% 88.4% 4.0% 874 961 -9.0% Houston 1,117 91.9% 94.4% -2.7% 1,072 1,013 5.8% Indianapolis 1,752 91.7% 88.8% 3.3% 777 785 -1.0% Kansas City 2,086 91.5% 89.6% 2.2% 858 889 -3.5% Chicago 2,760 90.7% 93.6% -3.1% 1,154 1,177 -2.0% Denver 414 85.9% 87.0% -1.2% 1,165 1,206 -3.4% ------- ------ ------ ------ ------ ------ ------ Total 22,837 91.0% 91.7% -0.7% $ 908 934 -2.8% ======= ====== ====== ====== ====== ====== ====== 28
AMLI RESIDENTIAL SAME STORE COMMUNITIES - CONTINUED NINE MONTHS ENDED SEPTEMBER 30
REVENUES, EXPENSES AND NET OPERATING INCOME (a) (dollars in thousands) - ----------------------------------------------- Revenues Expenses Net Operating Income ---------------------------- ---------------------------- ---------------------------- Percent Percent Percent Market 2002 2001 Change 2002 2001 Change 2002 2001 Change - ------ -------- -------- -------- -------- -------- -------- -------- -------- -------- Dallas $ 45,513 46,402 -1.9% 19,934 19,627 1.6% 25,579 26,775 -4.5% Atlanta 38,433 41,524 -7.4% 14,183 14,641 -3.1% 24,251 26,883 -9.8% Austin 20,232 21,377 -5.4% 8,973 9,708 -7.6% 11,259 11,669 -3.5% Houston 9,890 9,628 2.7% 4,231 3,995 5.9% 5,658 5,633 0.4% Indianapolis 11,212 11,030 1.7% 4,463 4,221 5.7% 6,749 6,809 -0.9% Kansas City 14,751 14,940 -1.3% 5,265 5,308 -0.8% 9,487 9,632 -1.5% Chicago 25,494 26,845 -5.0% 9,725 9,266 5.0% 15,769 17,579 -10.3% Denver 3,728 3,906 -4.6% 1,210 1,323 -8.6% 2,518 2,583 -2.5% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total $169,254 175,652 -3.6% 67,984 68,090 -0.2% 101,270 107,563 -5.9% ======== ======== ======== ======== ======== ======== ======== ======== ======== (a) Information shown is Combined, including share of partnership communities at 100%. (b) Represents average daily physical occupancy, which was changed from beginning of the month physical occupancy. (c) Represents amounts collected for rent and other income. Previously reported average rental rate per occupied unit. 29
AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH The following graphs present monthly rental revenue for the first nine 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 - -------------- ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- The Company experienced a reduction in rental revenue during the third quarter by 1.6% and in total revenue by 1% versus the second quarter of 2002. Neither sequential decline was unexpected given the disequilibrium of supply/demand factors being experienced in the multifamily sector. Both total and rental revenue have remained essentially flat through the first three quarters of 2002, although substantially below levels of a year ago. The third quarter has historically been the strongest quarter for leasing activity and thus rental revenue growth; unfortunately, during the past quarter this normal trend did not materialize. DALLAS - ------ ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Dallas, which represented 27% of total revenue in the third quarter, showed deteriorating fundamentals as new supply and reduced demand impacted operations. Traffic was essentially flat quarter to quarter and year over year, but rental revenue declined by 2.3% for the nine months ended September 30, 2002 compared to a year ago, as concessions increased by 15%. Market-wide absorption was negative for the quarter and occupancy dropped by 2.9% from a year earlier. Ft. Worth held up better than Dallas due to less supply. The DFW economy continued to be battered by telecom and high- tech layoffs as well as problems at American Airlines. Unemployment as of August 30, 2002 stood at 7%, down slightly from a peak of 7.5% in June. With 13,000 new units under construction, Dallas will struggle until the economic rebound starts to produce jobs. 30 AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED ATLANTA - ------- ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Atlanta, which represented 22% of total revenue in the third quarter, experienced a continued decline in revenue over the second quarter but at a slower pace. Revenue, after dropping steadily since March, showed a slight pick up in September. Market wide, occupancies seem to have stabilized and the growth in the magnitude of concessions has also slowed. Unfortunately, with 13,000 new units still in the pipeline, the Atlanta market will continue to be under pressure, especially those stabilized communities that compete with new lease-ups. Given that Atlanta experienced some job growth during the first nine months, there is reason to believe that even if the market has not hit bottom, its fall has slowed. CHICAGO - ------- ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Chicago, which represented 15% of total revenue for the quarter, slipped slightly (0.8%) versus the second quarter after showing increased revenue in the first two quarters. Two factors continue to impact Chicago - the highest level of move-outs due to home purchases (33% during the quarter) and a very weak economy. Traffic has fallen every month since March, dropping 14.8% from this year's second quarter. With continuing job layoffs creating a fear of a long delayed recovery or double dip recession in Chicago, future occupancy gains will be made only at the expense of effective rent. AUSTIN - ------ ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Austin, which represented 12% of total revenue for the quarter, continued to experience revenue deterioration, albeit at a slower pace. Total revenue declined by 0.5% from the second quarter after a 1.9% decline from the first to the second quarter. This improvement was created by a 1.6% occupancy increase and deceleration in the growth of concessions. After increasing 17.6% in the second quarter, concessions increased only 2.7%. Austin also experienced its first positive job growth (1,600 jobs on a trailing twelve month non-seasonally adjusted basis). During the third quarter, Austin experienced positive absorption of new units, but with 11,000 units still under construction, future improvements in collected revenue will depend on a continued improvement in the economy. 31 AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED KANSAS CITY - ----------- ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Kansas City, which represented 9% of total revenue during the third quarter, experienced a 2.7% decrease in rental revenue from the second quarter, after a 2.3% increase from the first to the second quarter. The economy in Kansas City has slowed, reversing job growth over the past ten months. September's BLS numbers showed a year over year loss of 5,400 jobs and a continued increase in the unemployment rate. At the same time, the market is still trying to absorb a large amount of new supply introduced in the past 9-12 months. Occupancy declined to 91.9% in the quarter from 93.2% in the second quarter and 92.6% a year ago. Going forward, while multifamily permits have flattened and are down from a year ago, without job growth, absorption of new units will be a challenge. INDIANAPOLIS - ------------ ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Indianapolis, which represented 7% of total revenue during the quarter, showed a sequential increase of 2.6% in total revenue. Occupancy for competing properties in the Indianapolis area was 90.4% versus the Company's 93.4%. Concessions were reduced by 18% versus the second quarter, a positive sign. Although annualized permits have trended up over the past nine months, a little job growth should keep this market in balance. HOUSTON - ------- ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Houston, which represented 6% of total revenue during the third quarter, continued to experience revenue growth, albeit at a slowing pace. After maintaining strong job growth through most of 2001, Houston began to lose jobs during the first two quarters of 2002 while staying relatively flat in the third quarter when measured on a year over year basis. Additionally, new construction is heavily concentrated within the 610 Loop submarket, which contains three of our four Same Store communities. Market wide, Houston metro experienced negative absorption during the quarter. Relatively moderate new supply (7,000+ units) over the next twelve months may be the saving grace for this market if job growth remains flat. However, if job losses begin to persist, this market could follow the same decline in revenue experienced in some of our other markets. 32 AMLI RESIDENTIAL SAME COMMUNITY RENTAL REVENUE GROWTH - CONTINUED DENVER - ------ ACT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - -------------------------------------------------------------------------- 2001 2002 - -------------------------------------------------------------------------- Denver, which represented 2% of total revenue during the third quarter, continued to be much challenged due to the combination of weak job growth and too much supply. Average occupancies in "A" (1990+) product in the Company's three submarkets averaged below 90% for the quarter. With 5,000- 7,000 new units still in the pipeline, over 3% of stabilized inventory, continued weak job growth and a reasonably high amount of home purchases, Denver will be challenged to merely maintain current levels of revenues. 33 AMLI RESIDENTIAL COMPONENTS OF NOI THREE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands)
Partnership Communities Wholly-Owned Communities (a) Combined (g)(h) at 100% ---------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- REVENUES Same store communities (a). . . . 23,797 25,172 -5.5% 34,168 36,190 -5.6% 32,255 34,288 -5.9% New communities (b) . . 0 0 0.0% 749 737 1.7% 2,641 2,584 2.2% Communities under development and lease-up . . . . . . . 55 0 0.0% 787 202 289.9% 2,922 806 262.6% Acquisition communities (c). . . . 3,529 2,266 55.7% 5,243 3,218 62.9% 3,825 1,469 160.5% Communities sold/ contributed to ventures (d) . . . . . 570 1,682 -66.1% 607 2,123 -71.4% 1,165 3,032 -61.6% -------- -------- -------- -------- -------- -------- -------- -------- -------- 27,950 29,120 -4.0% 41,554 42,469 -2.2% 42,807 42,178 1.5% ======== ======== ======== ======== ======== ======== ======== ======== ======== EXPENSES Same store communities (a). . . . 10,418 10,483 -0.6% 14,716 14,808 -0.6% 13,319 13,411 -0.7% New communities (b) . . 0 0 0.0% 274 260 5.3% 954 907 5.2% Communities under development and lease-up . . . . . . . 124 0 0.0% 532 159 235.0% 1,632 625 161.2% Acquisition communities (c). . . . 1,488 924 61.0% 2,170 1,262 71.9% 1,525 522 192.2% Communities sold/ contributed to ventures (d) . . . . . 294 744 -60.4% 305 970 -68.5% 543 1,532 -64.6% -------- -------- -------- -------- -------- -------- -------- -------- -------- 12,325 12,150 1.4% 17,997 17,459 3.1% 17,973 16,997 5.7% ======== ======== ======== ======== ======== ======== ======== ======== ======== 34 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED THREE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands) Partnership Communities Wholly-Owned Communities (a) Combined (g) (h) at 100% ---------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME Same store communities (a). . . . 13,378 14,689 -8.9% 19,452 21,382 -9.0% 18,936 20,877 -9.3% New communities (b) . . 0 0 0.0% 475 477 -0.3% 1,687 1,677 0.6% Communities under development and lease-up . . . . . . . -70 0 0.0% 255 43 492.4% 1,289 181 612.4% Acquisition communities (c). . . . 2,041 1,342 52.1% 3,072 1,956 57.1% 2,300 947 143.0% Communities sold/ contributed to ventures (d) . . . . . 276 938 -70.6% 302 1,153 -73.8% 622 1,500 -58.5% -------- -------- -------- -------- -------- -------- -------- -------- -------- 15,626 16,970 -7.9% 23,556 25,011 -5.8% 24,834 25,182 -1.4% ======== ======== ======== ======== ======== ======== ======== Cash flow preference and operating promote (e). . . . . . 720 563 -------- -------- COMPANY'S SHARE OF NOI (f). . . . . . 24,277 25,573 COMPANY'S SHARE OF OTHER, NET. . . . . . -118 -84 -------- -------- COMPANY'S SHARE OF COMMUNITIES' EBITDA . 24,159 25,489 ======== ======== COMPANY'S PERCENTAGE OF PARTNERSHIPS' NOI: Before cash flow preferences (e). . . . 31.9% 31.9% Including cash flow preferences and other (f). . . . . . . 34.8% 34.2% ======== ======== 35 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED THREE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands) Notes: (a) Includes communities that were sold and reported as Discontinued Operations in the Company's Statements of Operations. (b) Same store communities are communities that have had stabilized operations and were owned by the Company as of January 1, 2001. (c) New communities are communities that were developed by the Company and began stabilized operations after January 1, 2001. (d) Acquisition communities are communities having stabilized operations that were acquired by the Company after January 1, 2001. (e) 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. (f) 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 40. (g) 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 40. (h) Company's 100% interest in wholly-owned communities plus the Company's share of partnership communities. 36
AMLI RESIDENTIAL COMPONENTS OF NOI NINE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands)
Partnership Communities Wholly-Owned Communities (a) Combined (g) (h) at 100% ---------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- REVENUES Same store communities (a). . . . 72,317 74,058 -2.4% 103,481 106,701 -3.0% 96,937 101,594 -4.6% New communities (b) . . 0 0 0.0% 2,247 2,062 9.0% 7,911 7,180 10.2% Communities under development and lease-up . . . . . . . 56 0 0.0% 1,751 336 420.3% 6,741 1,344 401.5% Acquisition communities (c). . . . 9,919 3,853 157.4% 13,796 6,356 117.1% 7,845 3,863 103.1% Communities sold/ contributed to ventures (d) . . . . . 3,098 8,367 -63.0% 3,526 10,472 -66.3% 5,557 10,822 -48.6% -------- -------- -------- -------- -------- -------- -------- -------- -------- 85,390 86,278 -1.0% 124,801 125,929 -0.9% 124,991 124,803 0.2% ======== ======== ======== ======== ======== ======== ======== ======== ======== EXPENSES Same store communities (a). . . . 29,408 29,653 -0.8% 41,882 42,104 -0.5% 38,576 38,437 0.4% New communities (b) . . 0 0 0.0% 797 729 9.3% 2,787 2,590 7.6% Communities under development and lease-up . . . . . . . 189 0 0.0% 1,139 313 263.2% 3,787 1,243 204.7% Acquisition communities (c). . . . 4,131 1,387 197.8% 5,614 2,271 147.3% 2,949 1,363 116.3% Communities sold/ contributed to ventures (d) . . . . . 1,322 3,447 -61.6% 1,515 4,288 -64.7% 2,561 4,830 -47.0% -------- -------- -------- -------- -------- -------- -------- -------- -------- 35,050 34,487 1.6% 50,947 49,706 2.5% 50,660 48,463 4.5% ======== ======== ======== ======== ======== ======== ======== ======== ======== 37 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED NINE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands) Partnership Communities Wholly-Owned Communities (a) Combined (g) (h) at 100% ---------------------------- -------------------------- -------------------------- Percent Percent Percent 2002 2001 Change 2002 2001 Change 2002 2001 Change -------- -------- -------- -------- -------- -------- -------- -------- -------- NET OPERATING INCOME Same store communities (a). . . . 42,909 44,405 -3.4% 61,599 64,597 -4.6% 58,361 63,157 -7.6% New communities (b) . . 0 0 0.0% 1,450 1,333 8.8% 5,124 4,590 11.6% Communities under development and lease-up . . . . . . . -133 0 0.0% 612 23 2563.6% 2,954 101 2821.3% Acquisition communities (c). . . . 5,788 2,466 134.7% 8,182 4,085 100.3% 4,896 2,500 95.9% Communities sold/ contributed to ventures (d) . . . . . 1,776 4,920 -63.9% 2,011 6,185 -67.5% 2,996 5,992 -50.0% -------- -------- -------- -------- -------- -------- -------- -------- -------- 50,340 51,791 -2.8% 73,854 76,223 -3.1% 74,331 76,340 -2.6% ======== ======== ======== ======== ======== ======== ======== Cash flow preference and operating promote (e). . . . . . 2,257 1,665 -------- -------- COMPANY'S SHARE OF NOI (f). . . . . . 76,111 77,888 COMPANY'S SHARE OF OTHER, NET. . . . . . -114 69 -------- -------- COMPANY'S SHARE OF COMMUNITIES' EBITDA . 75,997 77,957 ======== ======== COMPANY'S PERCENTAGE OF PARTNERSHIPS' NOI: Before cash flow preferences (e). . . . 31.6% 32.0% Including cash flow preferences and other (f). . . . . . . 34.7% 34.2% ======== ======== 38 AMLI RESIDENTIAL COMPONENTS OF NOI - CONTINUED NINE MONTHS ENDED SEPTEMBER 30 (Dollars in thousands) Notes: (a) Includes communities that were sold and reported as Discontinued Operations in the Company's Statements of Operations. (b) Same store communities are communities that have had stabilized operations and were owned by the Company as of January 1, 2001. (c) New communities are communities that were developed by the Company and began stabilized operations after January 1, 2001. (d) Acquisition communities are communities having stabilized operations that were acquired by the Company after January 1, 2001. (e) 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. (f) 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 40. (g) 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 40. (h) Company's 100% interest in wholly-owned communities plus the Company's share of partnership communities. 39
AMLI RESIDENTIAL CO-INVESTMENT COMPENSATION (Dollars in thousands) Three Months Ended September 30, ----------------------- 2002 2001 ---------- ---------- FEE INCOME (a) Acquisition fees (a). . . . . . . . . . . . . $ -- -- Asset management fees (b) . . . . . . . . . . 112 132 Disposition fees (c). . . . . . . . . . . . . 403 234 Debt/equity placement fees. . . . . . . . . . -- -- Development fees (a). . . . . . . . . . . . . 579 657 Promoted interest from sales and other. . . . -- 1,796 ---------- ---------- 1,094 2,819 ---------- ---------- SHARE OF CASH FLOW (d) Promoted interest from operating cash flow. . 185 29 Cash flow preferences (e) . . . . . . . . . . 535 534 ---------- ---------- 720 563 ---------- ---------- TOTAL . . . . . . . . . . . . . . . . . . $ 1,814 3,381 ========== ========== Nine Months Ended September 30, ----------------------- 2002 2001 ---------- ---------- FEE INCOME (a) Acquisition fees (a). . . . . . . . . . . . . $ 401 118 Asset management fees (b) . . . . . . . . . . 359 416 Disposition fees (c). . . . . . . . . . . . . 642 234 Debt/equity placement fees. . . . . . . . . . -- 112 Development fees (a). . . . . . . . . . . . . 1,539 1,196 Promoted interest from sales and other. . . . 110 1,796 ---------- ---------- 3,051 3,872 ---------- ---------- SHARE OF CASH FLOW (d) Promoted interest from operating cash flow. . 461 82 Cash flow preferences (e) . . . . . . . . . . 1,796 1,583 ---------- ---------- 2,257 1,665 ---------- ---------- TOTAL . . . . . . . . . . . . . . . . . . $ 5,308 5,537 ========== ========== 40 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 42. (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 34 and 37. (e) The Company receives compensation from certain partnerships in the form of a preferential distribution of cash flow. 41 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED STATEMENTS OF OPERATIONS - ------------------------------------------- Three Months Ended September 30, ----------------------- 2002 2001 ---------- ---------- REVENUES Property management fees (a). . . . . . . . . $ 2,716 2,665 General contractor revenues, net (b). . . . . 570 912 Gross profit - corporate homes (c). . . . . . 522 534 Other income. . . . . . . . . . . . . . . . . 136 181 ---------- ---------- 3,944 4,292 ---------- ---------- OPERATING EXPENSES Property management . . . . . . . . . . . . . 2,318 2,750 Corporate homes . . . . . . . . . . . . . . . 246 260 General contractor. . . . . . . . . . . . . . 517 563 Other expenses. . . . . . . . . . . . . . . . -- -- ---------- ---------- 3,081 3,573 ---------- ---------- EBITDA. . . . . . . . . . . . . . . . . . . . 863 719 Gain (loss) on land sales . . . . . . . . . . (165) -- Interest expense. . . . . . . . . . . . . . . (478) (508) Depreciation and amortization . . . . . . . . (663) (765) Taxes . . . . . . . . . . . . . . . . . . . . 169 202 ---------- ---------- NET INCOME (LOSS) . . . . . . . . . . . . . . (274) (352) Eliminations, interest and other. . . . . . . 10 (80) ---------- ---------- SHARE OF INCOME (LOSS) FROM THE SERVICE COMPANIES (d) . . . . . . . . . . . $ (264) (433) ========== ========== 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. 42 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED STATEMENTS OF OPERATIONS - ------------------------------------------- Nine Months Ended September 30, ----------------------- 2002 2001 ---------- ---------- REVENUES Property management fees (a). . . . . . . . . $ 8,109 7,696 General contractor revenue, net (b) . . . . . 1,807 2,129 Gross profit - corporate homes (c). . . . . . 1,267 1,267 Other income. . . . . . . . . . . . . . . . . 524 323 ---------- ---------- 11,707 11,415 ---------- ---------- OPERATING EXPENSES Property management . . . . . . . . . . . . . 7,273 7,406 Corporate homes . . . . . . . . . . . . . . . 741 736 General contractor. . . . . . . . . . . . . . 1,584 1,580 Other expenses. . . . . . . . . . . . . . . . -- -- ---------- ---------- 9,598 9,722 ---------- ---------- EBITDA. . . . . . . . . . . . . . . . . . . . 2,109 1,693 Gain (loss) on land sales . . . . . . . . . . (242) 194 Interest expense. . . . . . . . . . . . . . . (1,351) (1,486) Depreciation and amortization . . . . . . . . (2,133) (1,978) Taxes . . . . . . . . . . . . . . . . . . . . 614 599 ---------- ---------- NET INCOME (LOSS) . . . . . . . . . . . . . . (1,003) (978) Eliminations, interest and other. . . . . . . (87) (44) ---------- ---------- SHARE OF INCOME (LOSS) FROM SERVICE COMPANIES (d) . . . . . . . . . . . $ (1,090) (1,022) ========== ========== 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. 43 AMLI RESIDENTIAL SERVICE COMPANIES FINANCIAL INFORMATION (Dollars in thousands) COMBINED CONDENSED FINANCIAL POSITION - ------------------------------------- Sept. 30, December 31, 2002 2001 ---------- ------------ ASSETS: Receivables (a) . . . . . . . . . . . . . $ 11,621 9,136 Land held for sale (b). . . . . . . . . . 14,004 4,951 Building and equipment, net (c) . . . . . 11,116 10,847 Other (d) . . . . . . . . . . . . . . . . 10,289 9,911 ---------- ---------- TOTAL ASSETS. . . . . . . . . . . . . $ 47,030 34,845 ========== ========== LIABILITIES Due to the Company. . . . . . . . . . . . $ 29,928 17,311 Bank debt . . . . . . . . . . . . . . . . 14,000 14,000 Other . . . . . . . . . . . . . . . . . . 5,621 5,733 ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . $ 49,549 37,044 ========== ========== EQUITY (DEFICIT). . . . . . . . . . . . . $ (2,519) (2,199) Eliminations and other. . . . . . . . . . (690) 49 Due to Company (above). . . . . . . . . . 29,928 17,311 ---------- ---------- Investment in and receivables from the Service Companies . . . . . . . . . $ 26,719 15,161 ========== ========== Notes: (a) Primarily fee income from affiliates. (b) Represents non-apartment land holdings: Number of Carrying Acres Value --------- --------- Prairie Lakes, Carmel, IN . . 120 $ 7,641 Fossil Lakes, Fort Worth, TX. 34 5,170 Park Bridge, Atlanta, GA. . . 3 1,193 --- ------- 157 $14,004 === ======= (c) Includes $8,251 in net capitalized computer hardware and software costs, of which approximately $6,500 (including $800 of internal costs) were incurred in 2001. Amounts are generally amortized over five years. (d) Represented by: Cash. . . . . . . . . . . . . . . . . . . . $ 3,874 Investments in partnerships . . . . . . . . 2,988 Land held for development . . . . . . . . . 966 Deferred income tax . . . . . . . . . . . . 1,298 Unamortized goodwill. . . . . . . . . . . . 668 Other . . . . . . . . . . . . . . . . . . . 495 ------- $10,289 ======= 44 AMLI RESIDENTIAL STABILIZED COMMUNITIES September 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 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 ------ ------ 7,712 28.1% ------ ------ 45 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 22.0% ------ ------ 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 11.8% ------ ------ 46 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 10.2% ------ ------ KANSAS CITY, KS - --------------- AMLI: at Centennial Park 100% Overland Park, KS 1998 1997 170 Same Store Creekside 25% Overland Park, KS Developed 2000 224 Same Store at Lexington Farms 100% Overland Park, KS 1998 1998 404 Same Store at Regents Center 100% Overland Park, KS 1994 1991/95 /97 424 Same Store at Regents Crest 25% Overland Park, KS 1997 1997/2000 476 Same Store at Summit Ridge 30% Lees Summit, MO Developed 2001 432 New Community at Town Center 100% Overland Park, KS 1997 1997 156 Same Store at Wynnewood Farms 25% Overland Park, KS Developed 2000 232 Same Store ------ ------ 2,518 9.2% ------ ------ INDIANAPOLIS, IN - ---------------- AMLI: at Castle Creek 40% Indianapolis, IN Developed 2000 276 New Community at Conner Farms 100% Fishers, IN 1997 1993 300 Same Store at Eagle Creek 100% Indianapolis, IN 1998 1998 240 Same Store at Lake Clearwater 25% Indianapolis, IN Developed 1999 216 Same Store at Riverbend 100% Indianapolis, IN 1992/93 1983/85 996 Same Store on Spring Mill (residual) 20% Carmel, IN 1999 1999 400 Other ------ ------ 2,428 8.8% ------ ------ 47 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 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 ------ ------ 1,451 5.3% ------ ------ 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 4.6% ------ ------ TOTAL 27,446 100.0% ====== ====== Note: (a) Based on number of apartment homes. 48
AMLI RESIDENTIAL DEVELOPMENT SUMMARY September 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% 90% at Milton Park Alpharetta, GA 25% 461 4Q/00 1Q/02 1Q/03 4Q/03 241 75% 42% at Barrett Walk Kennesaw, GA 25% 310 4Q/01 3Q/02 2Q/03 1Q/04 34 53% 15% HOUSTON, TX - ----------- AMLI at Kings Harbor Lake Houston, TX 25% 300 2Q/00 1Q/01 4Q/01 4Q/02 300 100% 86% AUSTIN, TX - ---------- AMLI Downtown Austin, Block, Block 20 Austin, TX 100% 220 2Q/02 1Q/04 3Q/04 4Q/04 -- 12% NA KANSAS CITY, KS - --------------- AMLI at Cambridge Square Overland Park, KS 30% 408 3Q/00 3Q/01 2Q/02 2Q/03 408 100% 69% INDIANAPOLIS, IN - ---------------- AMLI Carmel Center Carmel, IN 100% 322 2Q/01 2Q/02 2Q/03 4Q/03 138 74% 18% 49 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 3Q/02 4Q/03 4Q/04 29 55% 9% ----- 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 total Number of Apartment Homes. 50
AMLI RESIDENTIAL DEVELOPMENT SUMMARY September 30, 2002 (Dollars in thousands)
Joint Venture Company's Share of Required Equity Capital Partners' ---------------------------------------------- Total Equity Development Capital Funded Balance 2003/ Market/Community Costs (c) Debt (d) (e) Total to Date of 2002 2004 - ---------------- ----------- ---------- --------- -------- -------- ---------- -------- ATLANTA, GA - ----------- AMLI: at Kedron Village $ 20,200 -- 16,160 4,040 3,900 140 -- at Milton Park 35,000 -- (e) 26,250 8,750 7,334 1,025 391 at Barrett Walk 22,500 -- (e) 16,875 5,625 3,400 975 1,250 HOUSTON, TX - ----------- AMLI at Kings Harbor 19,800 -- 14,850 4,950 4,900 50 AUSTIN, TX - ---------- AMLI Downtown Austin (f) 50,920 30,920(f) 14,000 6,000 12,407 (6,407) -- KANSAS CITY, KS - --------------- AMLI at Cambridge Square 32,200 -- (e) 22,540 9,660 9,660 -- INDIANAPOLIS, IN - ---------------- AMLI Carmel Center 28,400 -- -- 28,400 22,126 3,300 2,974 CHICAGO, IL AMLI at Seven Bridges 82,200 60,000(g) 17,760 4,440 3,220 -- 1,220 -------- ------- ------- ------- ------- ------- ------- TOTAL $291,220 90,920 128,435 71,865 66,947 (917) 5,835 ======== ======= ======= ======= ======= ======= ======= 51 AMLI RESIDENTIAL DEVELOPMENT SUMMARY - CONTINUED September 30, 2002 (Dollars in thousands) Notes: (a) Based on the percentage of Construction Completed 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 existing fully funded loan commitment. (e) Upon stabilization, the partnership is expected to seek a permanent loan for approximately 65% of total costs. (f) Subsequent to the end of the quarter, AMLI formed a joint venture partnership with an institutional investor for the purpose of developing and owning this asset, and has obtained a commitment for a $30,920 construction loan from a bank. (g) Currently, the project is subject to a $50,000 construction loan. The partnership has obtained a commitment to fund a $60,000, 7.25%, 7-year permanent loan upon completion of development. 52
AMLI RESIDENTIAL LAND HELD FOR DEVELOPMENT OR SALE September 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 ====== 53 -----END PRIVACY-ENHANCED MESSAGE-----