<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>aml_603.txt
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2003
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 ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ( X ) No ( )
The number of the Registrant's Common Shares of Beneficial Interest
outstanding was 16,933,140 as of July 31, 2003.
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Review Report . . . . . . 3
Consolidated Balance Sheets as of
June 30, 2003 (Unaudited) and
December 31, 2002 (Audited). . . . . . . . . . . 4
Consolidated Statements of Operations
for the three and six months ended
June 30, 2003 and 2002 (Unaudited) . . . . . . . 6
Consolidated Statement of Shareholders'
Equity for the six months ended
June 30, 2003 (Unaudited). . . . . . . . . . . . 8
Consolidated Statements of Cash Flows
for the six months ended
June 30, 2003 and 2002, (Unaudited). . . . . . . 10
Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . 35
Item 3. Quantitative and Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . . . 61
Item 4. Controls and Procedures. . . . . . . . . . . . . . 61
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . 67
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 68
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 69
CERTIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . 70
<PAGE>
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 June 30, 2003, and the
related consolidated statements of operations for the three and six month
periods ended June 30, 2003 and 2002, the related consolidated statement of
shareholders' equity for the six month period ended June 30, 2003, and the
consolidated statements of cash flows for the six month periods ended
June 30, 2003 and 2002. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 reviews, 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, 2002, 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 3, 2003, 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, 2002, is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
KPMG LLP
Chicago, Illinois
July 29, 2003, except for
note 10, which is as of
August 11, 2003
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
(Dollars in thousands, except share data)
JUNE 30, DECEMBER 31,
2003 2002
(UNAUDITED) (AUDITED)
----------- ------------
ASSETS:
Rental communities:
Land. . . . . . . . . . . . . . . $105,098 97,700
Depreciable property. . . . . . . 677,232 631,480
-------- ----------
782,330 729,180
Less accumulated depreciation . . (131,332) (120,268)
-------- ----------
650,998 608,912
Rental communities under
development . . . . . . . . . . . -- 24,943
Land held for development or sale,
net of allowance for loss of
$1,221 and $1,580, respectively . 12,604 14,158
Investments in partnerships . . . . 193,244 197,517
Cash and cash equivalents . . . . . 5,357 2,422
Deferred financing costs, net . . . 4,982 3,962
Service Companies' assets . . . . . 61,978 52,774
Other assets. . . . . . . . . . . . 24,384 16,166
-------- --------
Total assets $953,547 920,854
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Debt. . . . . . . . . . . . . . . . $462,781 421,554
Distributions in excess of
investments in and earnings from
partnerships. . . . . . . . . . . 5,969 4,806
Other liabilities . . . . . . . . . 35,497 33,391
-------- --------
Total liabilities . . . . 504,247 459,751
-------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS - CONTINUED
JUNE 30, 2003 AND DECEMBER 31, 2002
(Dollars in thousands, except share data)
JUNE 30, DECEMBER 31,
2003 2002
(UNAUDITED) (AUDITED)
----------- ------------
Commitments and contingencies (note 11)
Mandatorily redeemable convertible
preferred shares with an aggregate
liquidation preference of $96,933
and $96,949, respectively . . . . 93,247 93,247
Minority interest . . . . . . . . . 61,579 65,728
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 outstanding,
(aggregate liquidation preference
of $2,022 and $2,019, respectively) 1 1
Shares of beneficial interest,
$0.01 par value, 145,375,000
authorized, 16,928,640 and
16,695,250 common shares issued
and outstanding, respectively . . 169 167
Additional paid-in capital. . . . . 328,439 324,139
Unearned compensation . . . . . . . (924) --
Employees' and Trustees' notes. . . (5,214) (6,828)
Accumulated other comprehensive
loss. . . . . . . . . . . . . . . (2,514) (3,283)
Dividends paid in excess of
earnings. . . . . . . . . . . . . (25,483) (12,068)
-------- --------
Total shareholders'
equity. . . . . . . . . . 294,474 302,128
-------- --------
Total liabilities and
shareholders' equity. . . $953,547 920,854
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(Dollars in thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Rental operations:
Revenue:
Rental . . . . . . . . $ 25,441 25,018 50,838 49,992
Other. . . . . . . . . 2,040 1,662 3,726 3,210
-------- -------- -------- --------
27,481 26,680 54,564 53,202
-------- -------- -------- --------
Expenses:
Rental . . . . . . . . 11,974 10,913 23,295 20,998
Interest and amorti-
zation of deferred
costs . . . . . . . . 6,253 6,242 12,745 12,188
Depreciation . . . . . 5,546 5,110 11,064 10,150
-------- -------- -------- --------
23,773 22,265 47,104 43,336
-------- -------- -------- --------
3,708 4,415 7,460 9,866
Income from partnerships. 1,469 2,255 2,926 4,284
-------- -------- -------- --------
Income from rental
operations. . . . . . . 5,177 6,670 10,386 14,150
-------- -------- -------- --------
Other income:
Fee income. . . . . . . 512 1,260 968 1,847
Other income. . . . . . 188 83 384 447
-------- -------- -------- --------
700 1,343 1,352 2,294
-------- -------- -------- --------
Service Companies'
Operations:
Revenue . . . . . . . . 14,041 -- 36,194 --
Expenses. . . . . . . . 14,290 -- 36,485 --
Interest and share of
loss from the Service
Companies . . . . . . -- (24) -- (254)
-------- -------- -------- --------
(249) (24) (291) (254)
-------- -------- -------- --------
General and administra-
tive. . . . . . . . . . 1,310 1,213 3,050 2,753
-------- -------- -------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 - CONTINUED
(UNAUDITED)
(Dollars in thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Income from continuing
operations before share
of gains on sales of
rental communities and
impairment of an invest-
ment in a partnership . 4,318 6,776 8,397 13,437
Share of gains on sales
of partnership
communities . . . . . . -- 605 -- 605
Impairment of an invest-
ment in a partnership . 1,191 -- 1,191 --
-------- -------- -------- --------
Income from continuing
operations before
minority interest . . . 3,127 7,381 7,206 14,042
Minority interest . . . . 199 913 570 1,692
-------- -------- -------- --------
Income from continuing
operations, net of
minority interest . . . 2,928 6,468 6,636 12,350
Income from discontinued
operations, net of
minority interest . . . -- 823 -- 1,601
-------- -------- -------- --------
Net income. . . . . . . . 2,928 7,291 6,636 13,951
Net income attributable
to preferred shares . . 1,980 1,946 3,961 4,028
-------- -------- -------- --------
Net income attributable
to common shares. . . . $ 948 5,345 2,675 9,923
======== ======== ======== ========
Income per common share -
basic:
From continuing
operations. . . . . . $ 0.06 0.27 0.16 0.50
From discontinued
operations. . . . . . -- 0.03 -- 0.05
-------- -------- -------- --------
Net income. . . . . . . $ 0.06 0.30 0.16 0.55
======== ======== ======== ========
Income per common share -
diluted:
From continuing
operations. . . . . . $ 0.06 0.26 0.16 0.49
From discontinued
operations. . . . . . -- 0.03 -- 0.05
-------- -------- -------- --------
$ 0.06 0.29 0.16 0.54
======== ======== ======== ========
Dividend declared and
paid per common share . $ 0.48 0.48 0.96 0.96
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
<table>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
(Dollars in thousands)
<caption>
SHARES OF
BENEFICIAL INTEREST EMPLOYEES'ACCUMULATED DIVIDENDS
------------------------------ ADDITIONAL UNEARNED AND OTHER PAID IN
PREFERRED COMMON PAID-IN COMPEN- TRUSTEES'COMPREHEN- EXCESS OF
SHARES SHARES AMOUNT CAPITAL SATION NOTES SIVE LOSS EARNINGS TOTAL
--------- ---------- ------ --------- -------- -------------------- ----------- -------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance at
December 31, 2002 . 100,000 16,695,250 $ 168 324,139 -- (6,828) (3,283) (12,068) 302,128
--------
Comprehensive income:
Net income. . . . . -- -- -- -- -- -- -- 6,636 6,636
Preferred share
dividends paid. . -- -- -- -- -- -- -- (3,961) (3,961)
Current period
income on deriva-
tive contracts. . -- -- -- -- -- -- 769 -- 769
-------
Comprehensive income
attributable to
common shares . . . -- -- -- -- -- -- -- -- 3,444
-------
Common share
distributions . . . -- -- -- -- -- -- -- (16,090) (16,090)
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - CONTINUED
SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
(Dollars in thousands)
SHARES OF
BENEFICIAL INTEREST EMPLOYEES'ACCUMULATED DIVIDENDS
------------------------------ ADDITIONAL UNEARNED AND OTHER PAID IN
PREFERRED COMMON PAID-IN COMPEN- TRUSTEES'COMPREHEN- EXCESS OF
SHARES SHARES AMOUNT CAPITAL SATION NOTES SIVE LOSS EARNINGS TOTAL
--------- ---------- ------ --------- -------- -------------------- ----------- -------
Shares issued in
connection with:
Executive Share
Purchase Plan . -- 20,466 -- 415 -- -- -- -- 415
Options exercised -- 94,300 1 1,593 -- -- -- -- 1,594
Units converted
to shares . . . -- 72,810 1 1,321 -- -- -- -- 1,322
Repayments of
employees' and
Trustees' notes -- -- -- -- -- 1,614 -- -- 1,614
Trustees' compen-
sation. . . . . -- 2,414 -- 51 -- -- -- -- 51
Senior Officer
Share Acquisi-
tion Plan . . . -- 43,400 -- 962 (924) -- -- -- 38
Reallocation of
minority interest . -- -- -- (42) -- -- -- -- (42)
-------- ---------- ---- ------- ------- ------- ------- ------- -------
Balance at
June 30, 2003 . . . 100,000 16,928,640 $170 328,439 (924) (5,214) (2,514) (25,483) 294,474
======== ========== ==== ======= ======= ======= ======= ======= =======
<fn>
See accompanying notes to consolidated financial statements.
</table>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(Dollars in thousands)
2003 2002
-------- --------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . $ 6,636 13,951
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . 13,141 11,114
Share of income from partnerships . . . . (2,690) (4,284)
Cash distributions from partnerships -
operating cash flow . . . . . . . . . . 8,924 7,885
Loss from the Service Companies . . . . . -- 254
Gain on sale of a land parcel . . . . . . (123) --
Share of a partnership's gains on sales
of rental communities . . . . . . . . . -- (605)
Impairment of an investment in a
partnership . . . . . . . . . . . . . . 1,191 --
Minority interest . . . . . . . . . . . . 570 2,018
Other . . . . . . . . . . . . . . . . . . (128) (76)
Changes in assets and liabilities:
(Increase) decrease in deferred costs . . (16) 2
Decrease in other assets. . . . . . . . . 3,104 2,186
Decrease in accrued real estate taxes . . (2,622) (3,127)
Increase in accrued interest payable. . . 189 17
Increase (decrease) in tenant security
deposits and prepaid rent . . . . . . . 123 (43)
Decrease in other liabilities . . . . . . (413) (72)
-------- --------
Net cash provided by
operating activities. . . . . . . . 27,886 29,220
-------- --------
Cash flows from investing activities:
Net proceeds from sale of a land parcel . . 2,094 --
Share of a partnership's net proceeds
from sales of rental communities in
excess of return of capital . . . . . . . -- 161
Investments in partnerships . . . . . . . . (5,183) (51,698)
Distributions from partnerships -
return of capital . . . . . . . . . . . . 2,371 3,301
Distributions from partnerships -
refinancing proceeds. . . . . . . . . . . -- 13,639
Loan to a partnership . . . . . . . . . . . (8,942) --
Collections from affiliates, net of
advances. . . . . . . . . . . . . . . . . (868) 1,083
Decrease (increase) in earnest money
deposits. . . . . . . . . . . . . . . . . 492 (45)
Acquisition communities . . . . . . . . . . (6,453) (13,883)
Other capital expenditures. . . . . . . . . (3,277) (2,630)
Communities under development, net of
co-investors' share of costs. . . . . . . (11,870) (8,663)
Increase in other liabilities . . . . . . . 2,483 976
-------- --------
Net cash used in investing activities (29,153) (57,759)
-------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(Dollars in thousands)
2003 2002
-------- --------
Cash flows from financing activities:
Debt proceeds, net of financing costs . . . 273,127 183,361
Debt repayments`. . . . . . . . . . . . . . (249,146) (132,614)
Proceeds from issuance of Executive Share
Purchase Plan shares, options exercised
and collection of Employees' and
Trustees' notes . . . . . . . . . . . . 3,712 788
Issuance cost of preferred shares . . . . . -- (40)
Distributions to minority interest. . . . . (3,440) (3,514)
Dividends paid. . . . . . . . . . . . . . . (20,051) (21,205)
-------- --------
Net cash provided by
financing activities. . . . . . . . 4,202 26,776
-------- --------
Net increase (decrease) cash and
cash equivalents. . . . . . . . . . 2,935 (1,763)
Cash and cash equivalents at
beginning of period . . . . . . . . 2,422 5,892
-------- --------
Cash and cash equivalents at
end of period . . . . . . . . . . . $ 5,357 4,129
======== ========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other interest,
net of amounts capitalized. . . . . . . . $ 12,020 11,867
======== ========
Supplemental disclosure of non-cash investing
and financing activities:
OP units converted to common shares . . . . $ 1,322 --
Elimination of investment in a partnership
upon acquisition of a co-investor's
interest. . . . . . . . . . . . . . . . . 1,571 --
Acquisition of other assets and assumption
of mortgage debt and other liabilities
in connection with the acquisition of a
partner's ownership interest in a
partnership community:
Real estate tax escrow. . . . . . . . . 735 --
Other assets. . . . . . . . . . . . . . 80 --
Mortgage debt, net of deferred financing 15,946 --
Accrued real estate taxes . . . . . . . 728 --
Accrued interest payable. . . . . . . . 100 --
Tenant security deposits and
prepaid rents . . . . . . . . . . . . 168 --
Other liabilities . . . . . . . . . . . 119 --
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
(Unaudited)
(Dollars in thousands, except share data)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
AMLI Residential Properties Trust ("AMLI" or the "Company") is a
self-administered and self-managed real estate investment trust
("REIT") engaged in the acquisition, development, co-investment and
management of upscale, institutional quality multifamily apartment
communities in eight major metropolitan markets in the Southeast,
Southwest, Midwest and Mountain regions of the United States.
The Company is the sole general partner and owned an approximate 86%
general partnership interest in AMLI Residential Properties, L.P.
(the "Operating Partnership" or "OP") at June 30, 2003. The 14% not
owned by the Company is owned by the limited partners that hold
Operating Partnership units ("OP Units") which are convertible into
common shares of the Company on a one-for-one basis, subject to
certain limitations. At June 30, 2003, the Company owned 20,953,640
OP Units (including 4,025,000 Preferred OP Units) and the limited
partners owned 3,545,993 OP Units. The Company has qualified, and
anticipates to qualify, as a real estate investment trust for Federal
income tax purposes.
At June 30, 2003, AMLI owned or had interests in eighty multifamily
apartment communities comprised of 30,348 apartment homes. Seventy
five of these communities totaling 28,531 apartment homes were
stabilized and five communities containing 1,817 apartment homes were
under development or in lease-up. In addition, the Service Companies
(defined below) owned two communities containing 551 apartment homes
and had interests in two other communities containing 548 apartment
homes, all of which are currently being developed for sale.
BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements are prepared using
accounting principles generally accepted in the United States of
America ("GAAP"), and include the accounts of the Company, the
Operating Partnership, AMLI Management Company ("AMC") and AMLI
Institutional Advisors, Inc. ("AIA"). Previously accounted for using
the equity method of accounting, AMC and AIA have been consolidated
subsidiaries since the Company acquired voting control of both
entities effective December 31, 2002.
AMC provides property management and leasing services, and its
wholly-owned affiliates, AMLI Corporate Homes ("ACH") and AMLI
Residential Construction LLC ("Amrescon"), provide corporate home
rental services and construction contracting and management services,
respectively. AIA provides institutional advisory services. AMC,
Amrescon and AIA collectively are referred as the Service Companies.
In the opinion of management, all adjustments, which include only
normal recurring adjustments necessary to present fairly the
Company's financial position at June 30, 2003 and December 31, 2002
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
GAAP have been condensed or omitted. These consolidated financial
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's December 31,
2002 Annual Report and in Form 10-K filed with the Securities and
Exchange Commission. The results for the three and six months ended
June 30, 2003 are not necessarily indicative of expected results for
the entire year.
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 revenue and expenses to prepare these financial statements
in conformity with GAAP. Actual amounts realized or paid could
differ from these estimates.
All significant inter-entity balances and transactions have been
eliminated in the consolidation.
THE SERVICE COMPANIES
The assets of the Service Companies consisted of the following for
the periods presented:
June 30, December 31,
2003 2002
-------- ------------
Receivables. . . . . . . . . . . . . $ 12,453 11,532
Land held for sale . . . . . . . . . 12,816 12,732
Rental communities under
development and held for sale . . 20,434 8,864
Office building, net of
accumulated depreciation . . . . . 2,352 2,486
Information technology costs,
net of accumulated depreciation. . 8,287 8,329
Deferred income tax. . . . . . . . . 2,064 1,605
Other assets . . . . . . . . . . . . 3,572 7,226
-------- --------
Total assets . . . . . . . . . . . . $ 61,978 52,774
======== ========
The Service Companies' operations are included in the Company's
Consolidated Statements of Operations in 2003 and are accounted for
using the equity method of accounting in 2002, as follows:
Periods Ended
June 30, 2002
--------------------
Three Six
Months Months
-------- --------
Construction contract revenue. . . . . . $ 24,604 44,726
Construction contract costs. . . . . . . (24,000) (43,489)
-------- --------
Construction gross profit. . . . . . . . 604 1,237
Property management fees . . . . . . . . 2,571 5,137
Corporate homes' gross profit. . . . . . 399 745
Loss on land sales and other income. . . 393 567
-------- --------
Total income . . . . . . . . . . . . . . 3,967 7,686
Total expenses . . . . . . . . . . . . . 4,258 8,415
-------- --------
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Periods Ended
June 30, 2002
--------------------
Three Six
Months Months
-------- --------
Loss . . . . . . . . . . . . . . . . . . (291) (729)
Intercompany interest expensed . . . . . 308 573
Intercompany eliminations. . . . . . . . (41) (98)
-------- --------
Interest and share of loss from the
Service Companies. . . . . . . . . . . $ (24) (254)
======== ========
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DISCONTINUED OPERATIONS
The Company reports in discontinued operations the operating results
of wholly-owned communities sold or held for sale. There were no
wholly-owned communities sold or held for sale during the six months
ended June 30, 2003. Communities held for sale by co-investment
partnerships accounted for using the equity method of accounting are
not "discontinued operations" under the provisions of SFAS 144. No
interest expense has been allocated to discontinued operations. Two
rental communities were sold in 2002; condensed financial information
of the results of operations for these communities for the periods
indicated is as follows.
Periods Ended
June 30, 2002
--------------------
Three Six
Months Months
-------- --------
Rental income. . . . . . . . . . . . . . $ 1,989 3,996
Other income . . . . . . . . . . . . . . 126 242
-------- --------
Total community revenue. . . . . . . . . 2,115 4,238
Community operating expenses . . . . . . 864 1,728
-------- --------
Net operating income . . . . . . . . . . 1,251 2,510
Depreciation expense . . . . . . . . . . 261 583
-------- --------
Income from discontinued operations
before minority interest . . . . . . . 990 1,927
Minority interest. . . . . . . . . . . . 167 326
-------- --------
Income from discontinued operations. . . $ 823 1,601
======== ========
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
GOODWILL
As of June 30, 2003, $3,300 of goodwill, incurred upon completion of
a 1997 acquisition, is included in the accounts of the Service
Company's consolidated subsidiary. This amount had been amortized
using the straight-line method over a five-year period through
December 31, 2001. The remaining unamortized goodwill of $668 on the
Service Company's books has been tested and no impairment existed as
of June 30, 2003. In addition, as of December 31, 2002, the Company
allocated $434 (of the acquisition cost of the Service Company
subsidiaries' controlling interests not already owned) to the cost of
property management contracts, which the Company is amortizing over a
five-year period.
DERIVATIVES AND HEDGING FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses a variety of
derivative financial instruments to reduce its exposure to changes in
interest rates. The Company limits these risks by following
established risk management policies and procedures. The Company
does not enter into derivative contracts for trading or speculative
purposes. Furthermore, the Company has a policy of only entering
into contracts with major financial institutions based upon their
credit rating and other factors.
All the Company's hedges are characterized as cash flow hedges and
are thus reported at fair value in the Consolidated Balance Sheets.
The Company engages a third-party consultant to determine the fair
values of derivative instruments at each balance sheet date. The
unrealized gains/losses in the fair value of these hedges are
reported in the Consolidated Balance Sheets in Other assets or Other
liabilities with a corresponding adjustment to either Accumulated
other comprehensive income (loss), a component of shareholders'
equity, or earnings--depending on the type of hedging relationship.
Gains and losses from cash flow hedges are reported in Accumulated
other comprehensive income or loss.
The following table summarizes the notional amounts and approximate
fair value of the Company's liability under existing interest rate
swap contracts. The notional amounts at June 30, 2003 provide an
indication of the extent of the Company's involvement in these
instruments at that time, but do not represent exposure to credit,
interest rate or market risks.
Cumula-
tive Approxi-
Fixed Cash mate
Notional Rate Term of Contract Paid, Liability
Amount (1) Contract Maturity Net (2)
-------- ------ -------- -------- ------ ---------
$15,000 6.405% 5 years 09/20/04 $1,446 968
10,000 6.438% 5 years 10/04/04 944 669
------- ------ -----
$25,000 $2,390
======= ======
At June 30, 2003 1,637
At December 31, 2002 2,379
-----
Net change $(742)
=====
(1) The fixed rate for the swaps includes the swap spread (the risk
component added to the Treasury yield to determine a fixed
rate; excludes lender's spread).
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(2) Represents the approximate amount which the Company would have
paid as of June 30, 2003 and December 31, 2002, respectively,
if these contracts were terminated. These amounts were
recorded as liabilities in the accompanying Consolidated
Balance Sheets as of June 30, 2003 and December 31, 2002.
On June 30, 2003, all of the Company's derivative instruments were
reported as Other liabilities at their fair value and the offsetting
adjustments were reported as losses in Accumulated other
comprehensive loss as follows:
At At
June 30, December 31,
2003 2002 Change
-------- ------------ ------
Company's derivative
contracts:
Interest rate swaps
(1)(4) . . . . . . . .$ (1,609) (2,299) 690
Treasury lock (2). . . . 431 507 (76) (3)
-------- -------- ------
(1,178) (1,792) 614
-------- -------- ------
Share of partnerships'
derivative contracts:
AMLI at Osprey Lake
(2). . . . . . . . . . (1,177) (1,253) 76 (3)
AMLI at Seven Bridges
(4). . . . . . . . . . (159) (238) 79 (3)
-------- -------- ------
(1,336) (1,491) 155
-------- -------- ------
Total. . . . . . . . . . .$ (2,514) (3,283) 769
======== ======== ======
(1) Adjustments to earnings of $52 and $53 due to an
ineffectiveness on the interest rate swap contracts were
recorded for the six months ended June 30, 2003 and 2002,
respectively.
(2) The Company cash-settled the Treasury lock and the AMLI at
Osprey Lake hedge prior to 2002.
(3) This change is reflected in earnings for the six months ended
June 30, 2003.
(4) The AMLI at Seven Bridges hedge and the Company's interest rate
swaps are being settled by the Company making monthly payments
through December 2003 and October 2004, respectively.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
PER SHARE DATA
The following table presents information necessary to calculate basic
and diluted earnings per share for the periods indicated.
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Income from
continuing
operations . . . .$ 2,928 6,468 6,636 12,350
Income from
discontinued
operations . . . . -- 823 -- 1,601
---------- ---------- ---------- ----------
Net income . . . . . 2,928 7,291 6,636 13,951
Less net income
attributable
to preferred
shares . . . . . . (1,980) (1,946) (3,961) (4,028)
---------- ---------- ---------- ----------
Net income
attributable
to common
shares - Basic . .$ 948 5,345 2,675 9,923
========== ========== ========== ==========
Net income -
Diluted (1). . . .$ 948 5,345 2,675 9,923
========== ========== ========== ==========
Weighted average
common shares
- Basic. . . . . .16,831,014 18,116,190 16,780,322 18,002,110
========== ========== ========== ==========
Dilutive Options
and Other Plan
shares . . . . . . 113,667 355,579 79,371 327,813
Convertible pre-
ferred shares
(1). . . . . . . . -- -- -- --
---------- ---------- ---------- ----------
Weighted average
common shares -
Dilutive . . . . .16,944,681 18,471,769 16,859,693 18,329,923
========== ========== ========== ==========
Net income per
share:
Basic. . . . . . .$ .06 .30 .16 .55
Diluted. . . . . .$ .06 .29 .16 .54
========== ========== ========== ==========
(1) Preferred shares are non-dilutive.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SHARE OPTIONS
The Company commenced reporting the value of awarded share options as
a charge against earnings for options awarded subsequent to
January 1, 2002. The Company awarded a total of 380,750 options, net
of cancellations, to employees since January 1, 2002 and will record
the associated $293 in expense ratably over the five years ended
December 31, 2007.
If the Company had commenced recording option expense as of the
January 1, 1996 effective date of Statement of Financial Standards
No. 123, pro forma net income, including option expense, and earnings
per share would have been as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income, as reported:
Net income. . . . . . .$ 2,928 7,291 6,636 13,951
Net income attributable
to Preferred shares . (1,980) (1,946) (3,961) (4,028)
---------- ---------- ---------- ----------
Net income attributable
to Common shares. . . . 948 5,345 2,675 9,923
Stock-based compensation
expense included in
reported net income,
net of related tax
effects . . . . . . . 14 -- 30 --
Total stock-based
employee compensa-
tion expense deter-
mined under fair
value based method
for all awards,
net of related
tax effects . . . . . . (67) (94) (134) (188)
---------- ---------- ---------- ----------
Pro forma net income
- Basic . . . . . . .$ 895 5,251 2,571 9,735
========== ========== ========== ==========
Pro forma net income
- Diluted . . . . . . .$ 895 5,251 2,571 9,735
========== ========== ========== ==========
Earnings per share:
Basic - as reported . .$ 0.06 0.30 0.16 0.55
Basic - pro forma . . .$ 0.05 0.29 0.15 0.54
Diluted - as reported .$ 0.06 0.29 0.16 0.54
Diluted - pro forma . .$ 0.05 0.28 0.15 0.53
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
GUARANTEES OF INDEBTEDNESS TO OTHERS
The Company is contingently liable with respect to letters of credit
and guarantees issued to secure undertakings made by various
unconsolidated affiliates. The Company anticipates that no such
contingent liability will be realized, and that the various letters
of credit and guarantees will eventually expire. The Company has
computed the aggregate fair value of all such letters of credit and
guarantees and estimates such fair value to be less than $200.
No new or modified guarantees were entered into during the six months
ended June 30, 2003, except that in connection with the formation of
AMLI at Museum Gardens in June 2003 the Company became contingently
liable on its $2,053 share of a letter of credit issued to secure
this partnership's obligation to complete certain improvements. The
Company has valued this contingent liability at $10 and has included
this amount in Other assets and Other liabilities in the accompanying
Consolidated Balance Sheet at June 30, 2003. The Company anticipates
that this contingent liability will terminate in 2005 following
completion of these certain improvements.
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
AMLI conducts a portion of its multifamily investment activities
through joint ventures. Since its Initial Offering and through
June 30, 2003, AMLI has formed 54 joint ventures with sixteen
investors in which AMLI's ownership has ranged from 10% to 75%. The
Company has concluded that none of its interests in unconsolidated
partnerships qualifies for consolidation under FASB Interpretation
No. 46, "Consolidation of Variable Interest Entities," governing the
accounting for interests in variable interest entities.
RECLASSIFICATIONS
Certain amounts in the consolidated 2002 financial statements of the
Company have been reclassified to conform with the current
presentation.
3. INVESTMENTS IN PARTNERSHIPS
At June 30, 2003, the Operating Partnership was a general partner or
a managing member in various partnerships or limited liability
companies ("Partnerships"). Under the term of each Partnership, the
Company is entitled to receive its proportionate share of
distributions from operations, sales or refinancings. In addition,
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, disposition fees and promoted interests
(additional share of operating cash flows or liquidation proceeds in
excess of its stated ownership percentages based, in part, on the
Partnerships generating cumulative returns to its partners in excess
of specified rates).
The Company's investment in partnerships differ from the Company's
share of partnerships' equity primarily due to capitalized interest
on its investments in communities under development, purchase/sale
price basis differences and the elimination of the Company's share of
acquisition, financing and development fee income. Such differences
are amortized using the straight-line method over 40 years.
Investments in partnerships at June 30, 2003 and the Company's 2003
share of income or loss for the six months then ended from each are
summarized as follows:
<PAGE>
<table>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<caption>
Equity Total Company's Company's
Company's ------------------ Net Share of Share of
Percentage Total Company's Company's Income Net Income Deprecia-
Community Ownership Assets Total Share Investment (Loss) (Loss) (1) tion
--------- ---------- ---------- ------ --------- ---------- ------ ---------- ---------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
AMLI:
at Willeo Creek 30% $ 13,218 4,012 1,202 1,202 174 52 62
at Barrett Lakes 35% 22,776 6,638 2,323 2,273 371 161 127
at Fox Valley 25% 21,092 20,400 5,100 5,221 588 147 72
at Fossil Creek 25% 18,280 17,744 4,436 4,381 657 164 77
at Danada Farms 10% 42,265 17,416 1,742 1,733 708 71 63
at Northwinds 35% 47,778 13,708 4,798 4,394 531 351 296
at Regents Crest 25% 29,900 14,782 3,696 3,741 303 129 114
at Oakhurst North 25% 37,454 36,347 9,087 9,008 868 217 174
at Wells Branch 25% 29,088 28,373 7,093 6,404 610 153 142
on the Parkway 25% 13,393 3,127 779 446 (69) (17) 77
at Castle Creek 40% 18,614 17,873 7,149 7,219 476 217 133
at Lake Clearwater 25% 14,821 14,235 3,559 3,549 400 100 68
Creekside 25% 14,648 14,472 3,618 3,676 322 104 65
at Deerfield 25% 15,224 2,756 686 488 (152) (38) 77
at Wynnewood Farms 25% 17,036 16,786 4,197 4,176 429 107 75
at Monterey Oaks 25% 27,282 26,680 6,670 6,602 653 163 119
at St. Charles 25% 39,584 38,734 9,683 9,666 996 249 163
at Park Bridge 25% 22,922 22,654 5,663 5,589 683 171 96
at Mill Creek 25% 24,849 6,620 1,655 1,767 268 67 99
at Lost Mountain 75% 10,757 180 133 197 (144) (106) 124
on Spring Mill (2) 26,582 25,774 -- -- 555 -- --
at Prestonwood
Hills 45% 16,499 4,962 2,247 2,242 59 50 117
at Windward Park 45% 25,820 7,990 3,637 3,629 (72) (2) 178
at Summit Ridge 25% 26,723 6,757 1,689 1,289 41 10 117
at Oak Bend 40% 23,723 4,856 1,960 1,960 (58) 14 146
Midtown 45% 31,332 9,412 4,270 4,253 127 101 211
on Frankford 45% 37,078 11,176 5,069 5,053 138 117 255
at Peachtree City 20% 27,380 27,050 5,410 3,457 521 104 74
at Kedron Village 20% 18,827 18,642 3,728 3,657 484 91 68
at Scofield Ridge 45% 35,977 11,218 5,111 5,093 (124) (15) 232
at Breckinridge
Point 45% 31,908 9,824 4,456 4,439 48 64 208
at Cambridge Square 30% 31,460 31,108 9,333 9,977 604 181 139
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Equity Total Company's Company's
Company's ------------------ Net Share of Share of
Percentage Total Company's Company's Income Net Income Deprecia-
Community Ownership Assets Total Share Investment (Loss) (Loss) (1) tion
--------- ---------- ---------- ------ --------- ---------- ------ ---------- ---------
Towne Square 45% 31,651 10,051 4,558 4,506 86 78 205
at Lowry Estates 50% 49,118 15,491 7,744 7,599 (296) (102) 350
at King's Harbor 25% 18,674 18,255 4,564 4,757 198 50 86
at Milton Park 25% 33,662 31,728 7,932 8,539 331 83 104
at Osprey Lake 69% 50,799 14,801 11,376 10,018 (458) (286) 492
at Seven Bridges 20% 76,115 18,148 3,788 4,801 (1,127) (225) 100
at Barrett Walk 25% 21,446 20,450 5,112 5,214 (25) (6) 71
at Park Meadows 25% 56,688 27,362 6,855 6,766 (83) 56 190
at Bryan Place 48% 39,579 13,009 6,245 6,132 73 77 254
Downtown 30% 21,664 18,983 5,695 5,943 (9) 8 --
at Museum Gardens 25% 8,392 6,196 1,549 2,189 -- -- --
---------- ------- -------- ------- ------- ------ ------
1,222,078 686,780 195,597 193,245 9,685 2,910 5,820
Other -- -- -- (1) -- 112 --
---------- ------- -------- ------- ------- ------ ------
1,222,078 686,780 195,597 193,244 9,685 3,022 5,820
---------- ------- -------- ------- ------- ------ ------
AMLI:
at Windbrooke (3) 15% 15,351 (5,818) (955) (955) (57) (18) 35
at Chevy Chase (3) 33% 40,058 (9,164) (3,803) (3,803) (279) (112) 203
at River Park (3) 40% 12,536 (2,117) (847) (965) 88 60 73
on Timberglen (4) 40% 9,127 2,660 1,095 (246) (65) (26) 105
---------- ------- -------- ------- ------- ------ ------
77,072 (14,439) (4,510) (5,969) (313) (96) 416
---------- ------- -------- ------- ------- ------ ------
Total as of
June 30, 2003 $1,299,150 672,341 191,087 187,275 9,372 2,926 6,236
========== ======= ======== ======= ======= ====== ======
Total as of
June 30, 2002 $1,283,337 713,084 218,695 221,487 12,893 4,284 5,836
========== ======= ======== ======= ======= ====== ======
<PAGE>
<fn>
(1) The Operating Partnership received cash flow and recorded operating income of $1,350 and $1,537 in excess of
its ownership percentages for the six months ended June 30, 2003 and 2002, respectively.
(2) The Company's investment in AMLI at Spring Mill is, unlike all of the Company's investments in partnerships,
subordinated to the return of its partner's investment. Following its regular quarterly review of
impairment of asset values, the Company determined that recovery of its investment was unlikely;
accordingly, the Company wrote off its $1,191 investment as a non-cash charge for impairment of value and
has included this charge in the accompanying Consolidated Statements of Operations for the three and six
months ended June 30, 2003.
(3) The partners of these partnerships have received a return of their original capital; it resulted in the
negative investment balances that are included in Distributions in excess of investments in and earnings
from partnerships in the accompanying Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002.
(4) The purchase/sale price basis difference in this partnership resulted in a negative investment balance which
is included in Other liabilities in the accompanying Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002.
</table>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
All but three of the Company's debt financings have been obtained at fixed
rates from various financial institutions on behalf of these partnerships.
All of these fixed-rate first mortgages are non-recourse debt secured by
mortgage notes on the respective communities. At June 30, 2003,
partnership debt was as follows:
Total Outstand-
Commitment ing at Company's Interest
Community (1) 6/30/03 Share (2) Rate Maturity
--------- ---------- --------- --------- -------- ---------
AMLI:
at Willeo Creek (3)$ 8,942 8,942 2,683 L+2.50% Oct. 2003
at Regents Crest 16,500 14,663 3,666 7.50% Dec. 2003
on Timberglen 6,770 6,225 2,490 7.70% June 2004
at Seven Bridges (4) 50,000 50,000 10,000 L+1.80% Jan. 2005
Downtown 30,920 679 204 L+2.00% June 2006
at Prestonwood Hills 11,649 11,172 5,060 7.17% Aug. 2006
at Windward Park 18,183 17,452 7,911 7.27% Aug. 2006
at Oak Bend 18,834 18,202 7,281 7.81% Dec. 2006
Midtown 21,945 21,184 9,605 7.52% Dec. 2006
at Deerfield 12,600 12,166 3,041 7.56% Dec. 2006
at Danada Farms 24,500 23,379 2,338 7.33% Mar. 2007
on Frankford 25,710 25,064 11,367 8.25% June 2007
at Scofield Ridge 24,618 23,969 10,870 7.70% Aug. 2007
at Breckinridge Point22,110 21,513 9,755 7.57% Sep. 2007
Towne Square 21,450 20,912 9,482 6.70% Jan. 2008
at Lowry Estates 33,900 33,123 16,561 7.12% Jan. 2008
at Summit Ridge 20,000 19,549 4,887 7.27% Feb. 2008
at River Park 15,100 14,391 5,757 6.86%(5) June 2008
on the Parkway 10,800 9,944 2,486 6.75% Jan. 2009
at Mill Creek 18,000 17,779 4,445 6.40% May 2009
at Chevy Chase 48,000 47,524 15,683 7.11% June 2009
at Park Meadows (6) 28,500 28,500 7,125 6.25% July 2009
at Bryan Place (6) 26,200 26,200 12,576 5.81% Aug. 2009
at Barrett Lakes 16,680 15,619 5,467 8.50% Dec. 2009
at Northwinds 33,800 33,027 11,559 8.25% Oct. 2010
at Osprey Lake 35,320 34,479 23,704 7.02% Mar. 2011
at Windbrooke 20,800 20,501 3,075 6.43% Mar. 2012
at Lost Mountain 10,252 10,128 7,596 6.84% Nov. 2040
-------- -------- -------
$632,083 586,286 216,674
======== ======== =======
(1) In general, these loans provide for monthly payments of principal and
interest based on a 25 or 30 year amortization schedules and a
balloon payment at maturity. Some loans provide for payments of
interest only.
(2) Based upon percentage ownership of debt outstanding at June 30, 2003.
(3) This loan is a mortgage loan from AMLI.
(4) The Company has guaranteed repayment of up to $4,000 of this
construction loan and the Company's partner has guaranteed repayment
of up to $16,000. The partnership has obtained a $60,000 7.25%
fixed-rate mortgage loan commitment from a third-party lender and
anticipates repaying its construction loan in late 2003 from a
funding of this seven-year loan.
(5) $9,100 at 7.75% and $6,000 at 5.50%.
(6) These loans provide for payment of interest only through maturity.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. OTHER ASSETS
Other assets reported in the accompanying Consolidated Balance Sheets
are as follows.
June 30, December 31,
2003 2002
--------- ------------
Short-term working capital assets:
Advances to affiliates . . . . . . $ 4,655 2,381
Accounts receivable. . . . . . . . 724 794
Development fees receivable. . . . 372 649
Prepaid expenses . . . . . . . . . 1,244 1,868
-------- --------
6,995 5,692
-------- --------
Other:
Deferred development costs . . . . 3,738 4,557
Notes receivable (1) . . . . . . . 10,960 2,179
Deposits . . . . . . . . . . . . . 1,704 2,516
Restricted cash. . . . . . . . . . 475 500
Other. . . . . . . . . . . . . . . 512 722
-------- --------
17,389 10,474
-------- --------
Total. . . . . . . . . . . . . . . . $ 24,384 16,166
======== ========
(1) In 2003, includes a note receivable of $8,942 from AMLI at
Willeo Creek, a 30% owned partnership, which the Company expects
to be repaid this year.
<PAGE>
<table>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. DEBT
The table below presents certain information relating to the indebtedness of the Company.
<caption>
Balance Balance
Original at Interest Maturity at
Amount 6/30/03 Rate Date 12/31/02
-------- ------- ----------- -------- --------
<s> <c> <c> <c> <c> <c>
BOND FINANCING:
Tax-Exempt
Unsecured (1) $ 40,750 40,750 Rate+1.24% 10/1/24 40,750
Tax-Exempt
AMLI at Poplar Creek (1) 9,500 9,500 Rate+1.26% 2/1/24 9,500
-------- ------- -------
Total Bonds 50,250 50,250 50,250
-------- ------- -------
MORTGAGE NOTES PAYABLE TO
FINANCIAL INSTITUTIONS:
AMLI at Verandah (2) 16,940 15,819 7.55% 4/1/04 --
AMLI at Nantucket 7,735 7,113 7.70% 6/1/04 7,186
AMLI at Bishop's Gate 15,380 13,768 7.25% (3) 8/1/05 13,925
AMLI at Regents Center 20,100 18,665 (4) 8.90% (5) 9/1/05 18,795
AMLI on the Green/AMLI of North Dallas (6) 43,234 38,320 7.79% 5/1/06 38,772
AMLI at Valley Ranch 18,800 18,800 6.68% 5/10/07 18,800
AMLI at Conner Farms 14,900 14,900 6.68% 5/10/07 14,900
AMLI at Clairmont 12,880 12,303 6.95% 1/15/08 12,396
AMLI - various (7) 140,000 136,942 6.56% 7/1/11 137,778
AMLI at Park Creek 10,322 10,101 7.88% 12/1/38 10,127
-------- ------- -------
Total Mortgage Notes Payable 300,291 286,731 272,679
-------- ------- -------
OTHER NOTES PAYABLE:
Unsecured lines of credit (8) (9) 211,000 119,000 L+1.00% 5/19/06 92,000
Other (10) 6,625 6,800 L+0.675% on demand 6,625
-------- ------- -------
217,625 125,800 98,625
-------- ------- -------
Total $568,166 462,781 421,554
======== ======= =======
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<fn>
(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 (0.85% for AMLI at Spring Creek
and 0.86% for AMLI at Poplar Creek at July 24, 2003). The credit enhancement for the AMLI at Spring Creek
bonds was provided by a $41,297 letter of credit from a financial institution that 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 a financial institution that expires December 18, 2004.
(2) Represents debt assumed by the Company as a result of the acquisition of a 65% interest in the community
that the Company did not already own.
(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 June 30, 2003 was
$432.
(4) This loan provides for partial recourse to the partners of the Operating Partnership.
(5) $13,800 at 8.73% and $6,300 at 9.23%.
(6) These two properties secure a loan that was sold at a discount of $673. At June 30, 2003, the unamortized
discount was $191.
(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). On December 20, 2002, AMLI at Western Ridge was sold. In connection with the sale, AMLI obtained a
release of the mortgage on AMLI at Western Ridge by substituting another wholly-owned community, AMLI at the
Medical Center.
(8) The Company has used interest rate swaps on $25,000 of the outstanding amount to fix its base interest rate
(before current lender's spread) at an average of 6.42% through September 2004.
(9) The Company's $200,000 unsecured line of credit has been provided by a group of seven banks. In May 2003,
the Company replaced an existing line of credit, scheduled to mature in November 2003, with a new line of
credit which will mature in May 2006. The Company has an option to extend the maturity by one year. The
new line carries an interest rate of LIBOR plus 1.00% (.05% less than the rate on the previous line of
credit) and provides for an annual facility fee of 20 basis points. The Company uses the unsecured line of
credit for acquisition and development activities and working capital needs. 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. An $11,000 unsecured line of
credit with one of the lenders, pursuant to which the Company may issue letters of credit and pursuant to
which the Company has borrowed $1,000 at the prime rate as of June 30, 2003, is anticipated to be increased
to $16,000 in August 2003, with new terms and conditions substantially the same as exists under the
Company's primary $200,000 unsecured line of credit.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(10) Starting in December 2002, AMLI has initiated a short-term investment program with several of its co
investment partnerships. As a result, short-term cash balances are invested by each partnership with AMLI.
Each partnership withdraws funds from this investment account on an "as needed basis" to fund its
disbursements, which could be daily. The investment earns interest at a rate (2.12140% average rate for the
six months ended June 30, 2003) based on the formula relating to AMLI's borrowing rate.
</table>
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As of June 30, 2003, the scheduled maturities of the Company's debt
are as follows:
Fixed Rate Notes
Mortgage Payable
Notes Payable Unsecured to
Bond to Financial Lines Joint
Financings Institutions of Credit Ventures Total
---------- ------------- --------- -------- -------
2003. . . . . $ -- 1,989 -- 6,800 8,789
2004. . . . . -- 26,404 -- -- 26,404
2005. . . . . -- 35,021 -- -- 35,021
2006. . . . . -- 38,502 119,000 -- 157,502
2007. . . . . -- 35,642 -- -- 35,642
Thereafter. . 50,250 149,173 -- -- 199,423
------- ------- ------- ------ -------
$50,250 286,731 119,000 6,800 462,781
======= ======= ======= ====== =======
At June 30, 2003, 14 of the Company's 32 wholly-owned stabilized
communities are unencumbered. There are no fixed-rate loans on
wholly-owned communities with maturity dates prior to April 2004.
6. OTHER LIABILITIES
Other liabilities reported in the accompanying Consolidated Balance
Sheets are as follows:
June 30, December 31,
2003 2002
-------- ------------
Short-term working capital
liabilities:
Accrued interest payable . . . . . $ 1,859 1,670
Accrued real estate taxes payable. 9,586 12,430
Accrued general and administra-
tive expenses. . . . . . . . . . 2,063 1,790
Accrued community rental expenses. 4,676 5,090
-------- --------
18,184 20,980
-------- --------
Other:
Construction costs payable . . . . 9,225 3,652
Security deposits and
prepaid rents. . . . . . . . . . 3,181 3,058
Interest rate swap liability . . . 1,637 2,379
Accrued employee benefits. . . . . 2,793 2,914
Other. . . . . . . . . . . . . . . 477 408
-------- --------
17,313 12,411
-------- --------
Total. . . . . . . . . . . . . . $ 35,497 33,391
======== ========
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. 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. The Company anticipates that all dividends paid in 2003 will
be fully taxable and it will distribute at least 100% of the taxable
income. The Company anticipates that some portion of total dividends
paid during 2003 will be characterized as income taxable at capital
gains rate for Federal income tax purposes.
8. RENTAL EXPENSES
Rental expenses reported in the accompanying Consolidated Statements
of Operations for the three and six months ended June 30, 2003 and
2002, respectively, are as follows.
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Personnel. . . . . . $ 3,042 2,611 5,803 5,234
Advertising and
promotion. . . . . 609 603 1,213 1,155
Utilities. . . . . . 809 641 1,648 1,313
Building repairs
and maintenance. . 1,460 1,409 2,663 2,264
Landscaping and
grounds
maintenance. . . . 689 623 1,180 1,103
Real estate taxes. . 3,683 3,459 7,488 6,861
Insurance. . . . . . 525 463 1,044 929
Property management
fees . . . . . . . 846 801 1,680 1,596
Other rental
expenses . . . . . 311 303 576 543
-------- -------- -------- --------
Total. . . . . . . . $ 11,974 10,913 23,295 20,998
======== ======== ======== ========
9. SEGMENT REPORTING
The Service Companies comprise a reportable segment following the
Company's acquisition of their voting control as of December 31,
2002.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The revenue, net operating income ("NOI"), funds from operations
("FFO") and assets for the Company's reportable segments are
summarized as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Segment revenue:
Multifamily rental
operations:
Wholly owned
communities . . $ 27,481 26,680 54,564 53,202
Partnership
communities
at 100% . . . . 42,893 41,653 84,024 82,183
-------- -------- -------- --------
70,374 68,333 138,588 135,385
Service Companies'
Operations . . . . 23,359 27,971 50,722 51,252
-------- -------- -------- --------
Total segment
revenue . . . . 93,733 96,304 189,310 186,637
Discontinued
operations . . . . -- (8) -- 2,115
-------- -------- -------- --------
Total revenue . . $ 93,733 96,296 189,310 188,752
======== ======== ======== ========
NOI:
Multifamily rental
operations:
Wholly owned
communities. . . $ 15,507 15,767 31,269 32,204
Partnership
communities
at 100%. . . . . 24,754 25,053 49,132 49,518
-------- -------- -------- --------
40,261 40,820 80,401 81,722
Service Companies . 228 708 791 1,070
-------- -------- -------- --------
Total segment
NOI . . . . . . 40,489 41,528 81,192 82,792
Discontinued
operations. . . . -- 1,251 -- 2,510
-------- -------- -------- --------
Total NOI . . . . 40,489 42,779 81,192 85,302
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Reconciling items
to FFO:
Reduce co-invest-
ment NOI to
Company's share
(1) . . . . . . (20,169) (19,830) (39,970) (39,398)
Other income. . . 188 83 384 447
Co-investment fee
income. . . . . 512 1,260 968 1,847
General and admin-
istrative
expenses. . . . (1,310) (1,213) (3,050) (2,753)
Interest expense
and loan cost
amortization. . (6,253) (6,398) (12,745) (12,488)
Depreciation -
non-real estate
- Service
Companies . . . (780) (754) (1,540) (1,470)
Income taxes -
Service
Companies . . . 303 178 458 446
-------- -------- -------- --------
Consolidated FFO
before minority
interest. . . . . 12,980 16,105 25,697 31,933
Reconciling items to
net income:
Depreciation -
wholly-owned
communities . . (5,546) (5,371) (11,064) (10,733)
Depreciation -
share of
co-investment
communities . . (3,116) (2,968) (6,236) (5,836)
Gains on sales
of rental
communities . . -- 605 -- 605
Impairment of an
investment in
a partnership . (1,191) -- (1,191) --
-------- -------- -------- --------
Income before
minority interest. 3,127 8,371 7,206 15,969
Minority interest. . 199 1,080 570 2,018
-------- -------- -------- --------
Net income . . . . . $ 2,928 7,291 6,636 13,951
======== ======== ======== ========
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
June 30, December 31,
2003 2002
---------- ------------
Segment assets:
Multifamily rental communities:
Total wholly-owned . . . . . . . . . $ 794,934 768,281
Total partnerships . . . . . . . . . 1,410,167 1,402,502
---------- ----------
Total multifamily. . . . . . . . . 2,205,101 2,170,783
Service Companies' assets. . . . . . . 61,978 52,774
Non-segment assets . . . . . . . . . . 34,723 22,550
---------- ----------
Total. . . . . . . . . . . . . . . 2,301,802 2,246,107
Reconciling items to total assets:
Reduce partnership communities
to Company's share (1) . . . . . . . (1,216,923) (1,204,985)
Accumulated depreciation
- wholly-owned . . . . . . . . . . . (131,332) (120,268)
---------- ----------
Total assets . . . . . . . . . . . $ 953,547 920,854
========== ==========
(1) Represents amount required to reduce partnership communities to
the Company's share from partnerships.
The Company does not derive any of its consolidated revenue from
foreign countries and does not have any major customers that
individually account for 10% or more of the Company's consolidated
revenue.
10. RELATED PARTY TRANSACTIONS AND SUBSEQUENT EVENTS
During the six months ended June 30, 2003, the Company accrued or
paid to partnerships $79 interest on short-term investments made by
the partnerships. During the six months ended June 30, 2002, the
Company accrued or paid to the Service Companies other costs and
expenses as follows:
Management fees (including discontinued operations) $1,723
General contractor fees. . . . . . . . . . . . . . 56
======
During the six months ended June 30, 2003, the Company and the
Service Companies earned and received from partnerships other income
as follows:
Development fees . . . . . . . . . . . . . . . . . $ 750
Management fees. . . . . . . . . . . . . . . . . . 3,475
Asset management fees. . . . . . . . . . . . . . . 236
General contractor fees. . . . . . . . . . . . . . 733
Promoted interest. . . . . . . . . . . . . . . . . 271
Interest on notes and advances to affiliates . . . 342
======
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In addition, during the six months ended June 30, 2003, total revenue
of $1,920 was generated from leases of apartment homes of partnership
communities through ACH.
During the six months ended June 30, 2002, the Company earned or
received from partnerships and the Service Companies other income as
follows:
Development fees . . . . . . . . . . . . . . . . . $ 960
Acquisition, disposition and financing fees. . . . 640
Asset management fees. . . . . . . . . . . . . . . 247
Promoted interest. . . . . . . . . . . . . . . . . 276
Interest on notes and advances to affiliates . . . 573
======
In addition, during the six months ended June 30, 2002, total revenue
of $740 was generated from leases of apartment homes of wholly-owned
communities through ACH.
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. On July 10,
2003, the Company was named as beneficiary to a software sales
agreement, pursuant to which AMC will receive a minimum of $1,000 and
a maximum of $1,500 in royalties over the five-year period ending
December 31, 2007. Through June 30, 2003 no income or loss has been
recognized as a result of this agreement. AMC will recognize royalty
income as it is earned over the remaining 4.5-year term of the
agreement.
On July 28, 2003, the Compensation Committee of the Company's Board
of Trustees approved the payment of compensation (1) in the amount of
$90 to each of the Company's Co-Chief Executive Officers to
facilitate their acquisition of the Company's interest in their
split-dollar life insurance policies; and (2) in the amount of
approximately $1,200 to terminate the participation of all but five
senior officers in the Company's Performance Incentive Plan ("PIP").
The Company is selling its interest in the split-dollar policies to
avoid any possibility that continued payments of premiums on these
policies might be considered a violation of the Sarbanes-Oxley Act.
These are the only split-dollar life insurance policies in which the
Company has an interest. The $180 which will be paid to the two Co-
Chief Executive Officers will be charged to expense in July 2003.
Through June 30, 2003, the Company has continued to provide for its
liability under the PIP assuming that the targeted growth will
eventually be achieved over the maximum ten-year measurement periods
which expire December 31, 2007 through December 31, 2011. This
liability of approximately $1,400 at June 30, 2003 is anticipated to
grow to approximately $1,800 by December 31, 2003. By redeeming for
cash the interests of the 43 employees who are not the five most
senior officers, the Company will improve the transparency of its
compensation plans, will reduce the exposure to earnings and
liability volatility that results from the "mark-to-market"
accounting used to account for benefits payable under the PIP, and
will reward key employees for their performance in a difficult
operating environment. Except for a portion of the approximate $400
increase in liability described above, there is no earnings impact in
2003 from this future payment of approximately $1,200.
<PAGE>
AMLI RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
On July 31, 2003, the Company hedged an additional $30,000 in
floating-rate borrowings under its unsecured line of credit. The
Company paid $927 to cap the 30-day LIBOR rate on $15,000 of
borrowings at 4.0% for five years beginning April 1, 2004 (which will
limit its maximum "all-in" cost over this period to 5.0% plus the
cost of the cap). The Company also obtained a forward-starting swap
beginning April 1, 2004 on another $15,000 of borrowings at 4.38%,
fixing its "all-in" cost at 5.38% over this period.
On August 7, 2003, the Company agreed to issue an additional
2,415,000 common shares under its existing shelf registration
statement. The issuance includes a 315,000 share underwriters' over
allotment. This equity issuance was offered to the public at $24.40
per share by Morgan Stanley & Co. Net proceeds totaling $58,100
based on net value per share of $24.10 less expenses of the offering
are anticipated to be received on August 13, 2003. Of the total net
proceeds of the offering, approximately $57,000 (including the
partner's $11,000 share of the Regents Crest mortgage loan due in
December 2003) will be used to acquire the equity interests of AMLI's
partner in AMLI at Regents Crest, AMLI Creekside and AMLI at Castle
Creek. This acquisition is anticipated to close on August 14, 2003.
Remaining net proceeds of the offering will be used for future
property acquisition and development, and for general corporate
purposes.
11. COMMITMENTS AND CONTINGENCIES
The limited partnership agreement of AMLI on Timberglen L.P. provides
for the redemption (at an amount determined by formula) by the
partnership of the limited partner's entire interest, in the limited
partner's sole discretion, at any time after December 16, 2003 or at
any time that there is a designated event of default on related
indebtedness of the partnership, 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 the Company common
shares of beneficial interest, or any combination thereof, in the
sole discretion of the Company. The Company is of the opinion that
the fair value of this property is substantially in excess of the
value which would be the basis for determining the redemption price
and the fair value of this purchase obligation is nominal.
At June 30, 2003, the Company is contingently liable with respect to
$8,282 in bank letters of credit issued to secure commitments made in
the ordinary course of business by the Company and its partnerships
and with respect to its guarantee of $4,000 of the construction loan
for the AMLI at Seven Bridges community. Of these amounts, the
Company anticipates that its contingent liabilities under all but
approximately $4,000 of the bank letters of credit and under the
$4,000 construction loan guarantee will expire later in 2003 as
criteria are achieved and the construction loan is repaid (see
note 5).
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
The following discussion is based primarily on the Consolidated
Financial Statements of Amli Residential Properties Trust (the "Company" or
"AMLI") as of June 30, 2003 and December 31, 2002 and for the three and six
months ended June 30, 2003 and 2002. The terms "we", "us" or "our" when
used in this discussion and analysis mean AMLI Residential Properties
Trust.
This information should be read in conjunction with the accompanying
unaudited Consolidated Financial Statements and notes thereto. These
financial statements include all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the
interim periods presented, and all such adjustments are of a normal
recurring nature.
As of June 30, 2003, the Company owned an approximate 86% general
partnership interest in AMLI Residential Properties, L.P. (the "Operating
Partnership" or "OP"), which holds the operating assets of the Company.
The 14% not owned by the Company is owned by the limited partners that hold
Operating Partnership units ("OP Units") which are convertible into common
shares of the Company on a one-for-one basis, subject to certain
limitations. At June 30, 2003, the Company owned 20,953,640 OP Units
(including 4,025,000 Preferred OP Units) and the limited partners owned
3,545,993 OP Units. The Company has qualified, and anticipates continuing
to qualify, as a real estate investment trust ("REIT") for Federal income
tax purposes.
GROWTH STRATEGIES
The Company primarily seeks to maximize earnings by increasing the
net operating income ("NOI") from its portfolio of operating communities
(internal growth) and by adding additional NOI by expanding the portfolio
through its acquisition and development activities (external growth), net
of dispositions. In addition, the Company employs a third external growth
strategy, co-investment, whereby the Company forms partnerships with
primarily institutional partners for the purpose of acquiring and
developing multifamily communities.
CO-INVESTMENT
Because 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 partnerships with institutional investors,
the following condensed combined financial information for the Company and
its partnerships at June 30, 2003, 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 partnerships at 100%.
Company and
Consolidated Unconsolidated Unconsolidated
Company Partnerships Partnerships
("GAAP") at 100% (Combined)
------------ -------------- --------------
Rental communities. . . . . $ 782,330 1,271,001 2,053,331
Accumulated depreciation. . (131,332) (138,921) (270,253)
---------- ---------- ----------
650,998 1,132,080 1,783,078
Land and rental communities
under development . . . . 12,604 139,166 151,770
Investments in partnerships 193,244 (193,244) --
Other, net. . . . . . . . . 55,235 (12,619) 42,616
---------- ---------- ----------
912,081 1,065,383 1,977,464
<PAGE>
Company and
Consolidated Unconsolidated Unconsolidated
Company Partnerships Partnerships
("GAAP") at 100% (Combined)
------------ -------------- --------------
Debt - Company's share. . . (462,781) (211,592) (674,373)
Debt - partners' share. . . -- (358,952) (358,952)
---------- ---------- ----------
Total net assets. . . . . . 449,300 494,839 944,139
Partners' share of net
assets. . . . . . . . . . -- (494,839) (494,839)
---------- ---------- ----------
Company's share of
net assets. . . . . . . . $ 449,300 -- 449,300
========== ========== ==========
The information presented in the following table includes AMLI's
proportionate share of unconsolidated partnerships.
Company and
Consolidated Share of
Company Share of Partnerships
("GAAP") Partnerships (Combined)
------------ ------------- -------------
Rental communities. . . . . .$ 782,330 420,140 1,202,470
Accumulated depreciation. . . (131,332) (42,736) (174,068)
---------- ---------- ----------
650,998 377,404 1,028,402
Land and rental communities
under development . . . . . 12,604 32,071 44,675
Investments in partnerships . 193,244 (193,244) --
Other, net. . . . . . . . . . 55,235 (4,639) 50,596
---------- ---------- ----------
912,081 211,592 1,123,673
Debt - Company's share. . . . (462,781) (211,592) (674,373)
---------- ---------- ----------
Company's share of net
assets. . . . . . . . . . .$ 449,300 -- 449,300
========== ========== ==========
Details of the differences between the Company's aggregate investment
in partnerships and its aggregate share of equity as recorded on the books
of these partnerships, net of accumulated amortization, are as follows at
June 30, 2003:
AMLI's share of equity in
partnerships . . . . . . . . . . . . $191,087
Negative investment balances
presented in other liabilities . . . 5,969
Capitalized interest . . . . . . . . . 5,172
Eliminated fees. . . . . . . . . . . . (6,381)
Eliminated construction profits. . . . (2,511)
Other comprehensive loss . . . . . . . (1,335)
Other, net . . . . . . . . . . . . . . 1,243
--------
Total investments in partnerships. . . $193,244
========
<PAGE>
<table>
ACQUISITIONS, DEVELOPMENT AND DISPOSITIONS
ACQUISITIONS
AMLI acquires interests in institutional quality multifamily communities, with a focus on newer communities,
having high-quality construction, amenities, location and market position. AMLI currently operates in eight
markets, but will consider expanding into additional markets depending on the market, product type, perceived
risks and portfolio objectives.
During 2003 and 2002, the Company has been less aggressive in acquiring interests in operating communities
than it would have liked primarily due to pricing. No communities were acquired during the six months ended
June 30, 2003. The table below summarizes the communities acquired during 2002:
<caption>
Number Year
of Com- Date Purchase Total
Community Location Units pleted Acquired Price Debt Equity
--------- -------- -------- -------- -------- -------- ------ --------
<s> <c> <c> <c> <c> <c> <c> <c>
WHOLLY-OWNED:
AMLI:
Upper West Side. Ft. Worth, TX 194 2001 5/1/02 13,600 -- 13,600
7th Street
Station. . . . Ft. Worth, TX 189 2000 10/17/02 13,700 -- 13,700
------ -------- ------ -------
Total wholly-owned 383 27,300 -- 27,300
------ -------- ------ -------
PARTNERSHIPS:
(Company ownership
percentage):
AMLI:
at Parks Meadows
(25%) . . . . . Littleton, CO 518 2001 4/24/02 56,500 28,500 28,000
at Bryan Place
(48%) . . . . . Dallas, TX 420 1999 6/28/02 39,600 26,200 13,400
------ -------- ------- -------
Total partnerships 938 96,100 54,700 41,400
------ -------- ------- -------
Total . . . . 1,321 $123,400 54,700 68,700
====== ======== ======= =======
</table>
<PAGE>
<table>
COMMUNITIES UNDER DEVELOPMENT OR IN LEASE-UP AND LAND HELD FOR DEVELOPMENT OR SALE
COMMUNITIES UNDER DEVELOPMENT OR IN LEASE-UP
At June 30, 2003, the Company had interests in seven communities under development or in lease-up including
four owned in partnerships, as follows:
<caption>
TOTAL
EXPENDED TOTAL
NUMBER NUMBER THROUGH ESTIMATED
OF OF JUNE 30, COSTS UPON
COMMUNITY LOCATION ACRES UNITS 2003 COMPLETION
--------- -------- ------ ------ --------- ----------
<s> <c> <c> <c> <c> <c>
Wholly-owned (in lease-up):
AMLI at Carmel Center Carmel, IN 15 322 $ 27,271 28,400
--- ----- -------- --------
Partnerships:
(Company ownership percentage):
AMLI:
at Milton Park (25%) Alpharetta, GA 21 461 33,754 35,000
at Seven Bridges (20%) Woodridge, IL 13 520 75,726 82,200
Downtown (30%) Austin, TX 2 220 21,320 50,920
Museum Gardens (25%) Vernon Hills, IL 17 294 8,366 60,100
--- ----- -------- --------
Total partnerships 53 1,495 139,166 228,220
--- ----- -------- --------
Service Companies (being
developed for sale):
Walnut Creek (100%) Austin, TX 28 460 17,518 31,370
Old Town Carmel (100%) Carmel, IN 5 91 2,916 11,400
--- ----- -------- -------
Total Service Companies 33 551 20,434(1) 42,770
--- ----- -------- -------
Total 101 2,368 $186,871 299,390(2)
=== ===== ======== =======
<fn>
(1) Reported in Service Companies' assets in the Consolidated Balance Sheet as of June 30, 2003.
(2) Of AMLI's share of completion costs (excluding Service Companies), $30,526 is
anticipated to be funded from existing loan commitments and $6,471 is expected to be paid
in cash during 2003 and 2004.
</table>
<PAGE>
<table>
LAND HELD FOR DEVELOPMENT OR SALE
At June 30, 2003, the Company's land held for future development or sale is as follows:
<caption>
CARRYING
VALUE
TOTAL COSTS NET OF
CAPITALIZED ALLOWANCE
NUMBER POTENTIAL THROUGH FOR LOSS AT
OF NUMBER OF JUNE 30, JUNE 30,
COMMUNITY LOCATION ACRES UNITS 2003 2003
--------- -------- ------ --------- ----------- ------------
<s> <c> <c> <c> <c> <c>
Land held for development
or sale (1) (2) Texas and
Kansas 117 1,800 $13,825 12,604
Service Companies' land held
for sale (1) (3) (4) Carmel, IN and
Ft. Worth, TX 154 -- 13,513 12,816
--- ----- ------- ------
Total 271 1,800 $27,338 25,420
=== ===== ======= ======
<fn>
(1) The Company has expensed interest carry on these land parcels in 2003 and 2002.
(2) Amounts are shown net of an allowance for loss totaling $1,221 on land parcels in Texas.
(3) Amounts are shown net of an allowance for loss totaling $697 on a land parcel in Texas.
(4) Reported in Service Companies' assets in the accompanying Consolidated Balance Sheet.
</table>
<PAGE>
At June 30, 2003, the Company has substantially completed the $28,400
development of AMLI Carmel Center. The community is currently under lease-
up and at June 30, 2003 it was 50% leased.
At June 30, 2003, the Company has made capital contributions totaling
$19,623 to co-investment partnerships currently having development of
communities underway, and anticipates funding substantially all of its
remaining commitment (net of its share of co-investment debt) of $5,342
during 2003 to complete the 1,495 apartment homes being developed by co-
investment partnerships.
The Service Companies currently have two communities under
development with an estimated development cost of $42,770 which the Company
is funding from its cash flow or line of credit borrowings. The Service
Companies intend to sell these two communities containing a total of 551
apartment homes. In addition, the Service Companies have an investment in
two partnerships which own two communities currently in lease-up and for
sale.
The Company's pipeline of new developments is continuing to decrease;
one development commenced in June 2003 immediately after the closing of the
partnership. The Company is continuing to pursue development opportunities
and anticipates expanding its development activities at some future date.
The Company owns land in Ft. Worth, Austin and Houston, Texas and
Kansas City, Kansas, being held for the development of an additional 1,800
apartment homes, or for sale. In addition, the Service Companies own a
total of 154 acres of land in Indiana and Texas that are held for sale.
The Company has made earnest money deposits for land parcels anticipated to
be acquired and developed 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 costs associated with carrying these land parcels for the six
months ended June 30, 2003 and 2002.
DISPOSITIONS
The Company sells communities which no longer meet the Company's
investment objectives. The proceeds from such sales are typically invested
in the acquisition or development of new communities as a way to
continually improve the quality of its portfolio and increase the potential
for growth in NOI, reacquire its common shares, pay down debt or for other
working capital purposes.
During the six months ended June 30, 2003, the Company did not have
any wholly-owned communities sold or held for sale. As of June 30, 2003,
the Company, on behalf of the partnership, has entered into a contract for
the sale of AMLI at Willeo Creek (a community in which the Company owns a
30% interest) for the price of $19,500 in cash. Closing is anticipated to
occur in late August 2003. AMLI is expected to earn an approximate $325
and $372 disposition fee and promoted interest, respectively. AMLI's share
of net sale proceeds is anticipated to be approximately $12,280 including
repayment of its mortgage note of $8,942.
<PAGE>
<table>
The table below summarizes the rental communities sold during 2002:
<caption>
Costs
Year Before
Number Acquired/ Date Depre- Sale Net
Community Location of Units Developed Sold ciation Price Proceeds Gain (1)
--------- -------- -------- --------- -------- -------- -------- -------- --------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
WHOLLY-OWNED:
AMLI at:
Gleneagles Dallas, TX 590 88/97 8/14/02 $27,613 35,675 34,720 14,247
Western
Ridge Houston, TX 318 2000 12/20/02 20,317 24,600 23,998 4,659
----- ------- ------- ------- -------
Total wholly-owned 908 47,930 60,275 58,718 18,906
----- ------- ------- ------- -------
PARTNERSHIPS
(Company owner-
ship percentage):
AMLI at:
Champions
Park (15%) Houston, TX 246 1994 4/18/02 13,723 13,145 12,783 1,799
Champions
Centre (15%)Houston, TX 192 1994 4/18/02 10,205 10,755 10,458 2,232
Greenwood
Forest (15%)Houston, TX 316 1995 8/1/2002 18,202 20,150 19,407 4,524
----- ------- ------- ------- -------
Total partnerships 754 42,130 44,050 42,648 8,555
----- ------- ------- ------- -------
Total 1,662 $90,060 104,325 101,366 27,461
===== ======= ======= ======= =======
<fn>
(1) Gains on sales of partnership communities are shown net of disposition fees and promoted interests paid
to the Company by such partnerships.
</table>
<PAGE>
RESULTS OF COMMUNITY OPERATIONS
GENERAL
At June 30, 2003, AMLI owned interest in 80 communities containing
30,348 apartment homes, of which seventy-five containing 28,531 apartment
homes were stabilized and five containing 1,817 apartment homes were under
development or in lease-up. Stabilized communities are communities that
are fully completed and have, in the opinion of management, completed their
initial lease-up. Thirty-three of the communities are wholly-owned and
their operating results are reflected in the Company's Consolidated
Statements of Operations under Rental Operations as well as under Income
from discontinued operations. Forty-seven are owned in partnerships, and
the Company's share of operating results are included in Income from
partnerships.
The Company distinguishes between stabilized communities (which
include Same Store communities, New communities and Acquisition
communities) from Development and lease-up communities and Communities sold
or contributed to ventures, each of which are defined as follows:
. Same Store communities - communities that have had stabilized
operations and were owned by the Company as of January 1, 2002.
. New communities - communities that were developed by the
Company and began stabilized operations after January 1, 2002.
. Acquisition communities - communities having stabilized
operations that were acquired by the Company after January 1,
2002.
. Development and lease-up communities - communities being
developed by the Company that are not yet stabilized.
. Communities sold or contributed to ventures - reflects
operations through the date a community was sold or
contributed to a venture.
Community revenue comprises that portion of total revenue collected or
due from leases of apartment homes and includes any such amounts as may be
reported as discontinued operations.
Community rental expenses comprise that portion of total expenses that
exclude losses from sales or valuation of land, expenses of the Service
Companies, general and administrative expenses, and interest, taxes,
depreciation and amortization. Community rental expenses include amounts
reported as personnel, advertising and promotion, utilities, building
repairs and maintenance and services, landscaping and grounds maintenance,
real estate taxes, property management, and other expenses, and such
amounts as may be included in discontinued operations.
The Company uses NOI to measure the operating results of its
communities. NOI represents community revenue less community operating
expenses, and excludes interest, taxes, general and administrative expenses
and depreciation and amortization expenses. 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 six months ended June 30, 2003, NOI from wholly-owned
communities decreased from the same period a year ago. The decrease by
approximately 10% was primarily attributable to lower revenue in the
Company's same store portfolio. NOI generated by acquisition and
development activity was approximately equal to NOI lost from sold
communities.
<PAGE>
Revenue, rental expenses and NOI from wholly-owned communities for
the six months ended June 30, 2003 and 2002 are summarized as follows:
Six Months Ended
June 30,
---------------------- Increase
2003 2002 (Decrease)
-------- ------- ---------
Total Wholly-Owned
Community Revenue
------------------
Same Store communities . . . . $ 49,646 52,871 (3,225)
Development and lease-up
communities. . . . . . . . . 598 1 597
Acquisition communities. . . . 4,320 330 3,990
Communities sold or contri-
buted to ventures. . . . . . -- 4,238 (4,238)
-------- ------- -------
Total . . . . . . . . . . . $ 54,564 57,440 (2,876)
======== ======= =======
Continuing operations . . . $ 54,564 53,202 1,362
Discontinued operations . . -- 4,238 (4,238)
======== ======= =======
Total Wholly-Owned
Community Rental Expenses
-------------------------
Same Store communities . . . . $ 20,908 20,791 117
Development and lease-up
communities. . . . . . . . . 398 64 334
Acquisition communities. . . . 1,989 143 1,846
Communities sold or contri-
buted to ventures. . . . . . -- 1,728 (1,728)
-------- ------- -------
Total . . . . . . . . . . . $ 23,295 22,726 569
======== ======= =======
Continuing operations . . . $ 23,295 20,998 2,297
Discontinued operations . . -- 1,728 (1,728)
======== ======= =======
Total Wholly-Owned
Community NOI
-------------------
Same Store communities . . . . $ 28,738 32,080 (3,342)
Development and lease-up
communities. . . . . . . . . 200 (63) 263
Acquisition communities. . . . 2,331 187 2,144
Communities sold or contri-
buted to ventures. . . . . . -- 2,510 (2,510)
-------- ------- -------
Total . . . . . . . . . . . $ 31,269 34,714 (3,445)
======== ======= =======
Continuing operations . . . $ 31,269 32,204 (935)
Discontinued operations . . -- 2,510 (2,510)
======== ======= =======
<PAGE>
Six Months Ended
June 30,
----------------------
2003 2002 (Change)
-------- ------- --------
Reconciliation of Income
from Rental Operations
------------------------
Community rental revenue
(1) . . . . . . . . . . . . $ 54,564 57,440 (2,876)
Community rental expenses
(1) . . . . . . . . . . . . (23,295) (22,726) (569)
-------- ------- -------
Community NOI (1) . . . . . . 31,269 34,714 (3,445)
Income from partnerships. . . 2,926 4,284 (1,358)
Interest expense and
amortization. . . . . . . . (12,745) (12,188) (557)
Depreciation. . . . . . . . . (11,064) (10,150) (914)
Income from discontinued
operations. . . . . . . . . -- (2,510) 2,510
-------- ------- -------
Income from rental operations
(excluding discontinued
operations) . . . . . . . . $ 10,386 14,150 (3,764)
======== ======= =======
(1) Including discontinued operations.
PARTNERSHIP COMMUNITIES
For the six months ended June 30, 2003, NOI from partnership
communities was virtually unchanged from the same period in 2002. In
general, the loss in revenue in the Same Store portfolio was offset by net
investing activity.
Rental revenue, rental expenses and NOI from partnership communities,
at 100%, for the six months ended June 30, 2003 and 2002 are summarized as
follows:
Six Months Ended
June 30,
---------------------- Increase
2003 2002 (Decrease)
-------- ------- ---------
Total Partnership
Community Revenue
-------------------
Same Store communities . . . . $ 68,563 70,703 (2,140)
New communities. . . . . . . . 4,469 3,207 1,262
Development and lease-up
communities. . . . . . . . . 4,484 613 3,871
Acquisition communities. . . . 4,648 1,075 3,573
Communities sold or contri-
buted to ventures. . . . . . 1,859 6,586 (4,727)
-------- ------- -------
Total . . . . . . . . . . . $ 84,023 82,184 1,839
======== ======= =======
<PAGE>
Six Months Ended
June 30,
---------------------- Increase
2003 2002 (Decrease)
-------- ------- ---------
Total Partnership Community
Rental Expenses
---------------------------
Same Store communities . . . . $ 27,761 27,201 560
New communities. . . . . . . . 1,814 1,611 203
Development and lease-up
communities. . . . . . . . . 2,476 544 1,932
Acquisition communities. . . . 1,678 296 1,382
Communities sold or contri-
buted to ventures. . . . . . 856 3,035 (2,179)
-------- ------- -------
Total . . . . . . . . . . . $ 34,585 32,687 1,898
======== ======= =======
Total Partnership
Community NOI
-----------------
Same Store communities . . . . $ 40,802 43,502 (2,700)
New communities. . . . . . . . 2,655 1,596 1,059
Development and lease-up
communities. . . . . . . . . 2,008 69 1,939
Acquisition communities. . . . 2,970 779 2,191
Communities sold or contri-
buted to ventures. . . . . . 1,003 3,551 (2,548)
-------- ------- -------
Total . . . . . . . . . . . $ 49,438 49,497 (59)
======== ======= =======
Company's share of partnership
community NOI and cash
flows in excess of ownership
interest . . . . . . . . . . $ 17,012 17,127 (115)
======== ======= =======
Six Months Ended
June 30,
----------------------
2003 2002 (Change)
-------- ------- --------
Reconciliation of
Share of Income from
Partnerships
--------------------
Community rental revenue. . . $ 84,023 82,184 1,839
Community rental expenses . . (34,585) (32,687) (1,898)
-------- ------- -------
Community NOI . . . . . . . . 49,438 49,497 (59)
Sale of rental communities. . -- 23,900 (23,900)
Cost of rental communities
sold. . . . . . . . . . . . -- (19,869) 19,869
Other income. . . . . . . . . 85 172 (87)
Other expenses. . . . . . . . (798) (842) 44
Interest expense and
amortization. . . . . . . . (20,059) (18,042) (2,017)
Depreciation. . . . . . . . . (19,294) (17,898) (1,396)
-------- ------- -------
Net income. . . . . . . . . . 9,372 16,918 (7,546)
Co-investment partners' share 6,446 12,634 (6,188)
-------- ------- -------
Share of income from
partnerships. . . . . . . . $ 2,926 4,284 (1,358)
======== ======= =======
<PAGE>
SAME STORE COMMUNITIES
As of June 30, 2003, 24,658 apartment homes, or 86.4% of total
apartment homes in the Company's stabilized communities, were categorized
as Same Store communities, of which 11,399 were wholly-owned and 13,319
were owned in partnerships. 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 generally provide a
better perspective of market conditions affecting the Company's portfolio.
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
For the second quarter 2003 compared to the same quarter a year ago,
rental revenue for the same community portfolio declined 4.7%. The change
was attributable to a 4.5% decline in collected rent per occupied unit and
a modest 0.2% decline in occupancy, reflecting some stabilization. On a
sequential basis, rental revenue began to trend up this quarter for the
first time since third quarter 2001, increasing by 0.7%. Collected rent
per occupied unit was down from last quarter by 1.4%; however, occupancy
has begun to increase and was up 1.9%.
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
SAME STORE COMMUNITIES
Quarter Ended
---------------------------------------
2003 2002
----------------- ------------------
Jun 30 Mar 31 Dec 31 June 30
------ ------ ------ -------
Dallas. . . . . . . . . . . 91.4% 88.3% 88.4% 91.8%
Atlanta . . . . . . . . . . 90.8% 90.3% 90.5% 90.2%
Austin. . . . . . . . . . . 91.4% 90.7% 92.1% 91.4%
Houston . . . . . . . . . . 91.0% 89.0% 91.1% 92.2%
Indianapolis. . . . . . . . 91.1% 89.4% 91.3% 91.5%
Kansas City . . . . . . . . 90.7% 89.5% 91.1% 93.0%
Chicago . . . . . . . . . . 92.1% 88.6% 88.4% 92.1%
Denver. . . . . . . . . . . 88.5% 86.8% 89.4% 87.1%
------ ------ ------ ------
Total Portfolio (a) . . . . 91.2% 89.3% 90.0% 91.4%
====== ====== ====== ======
(a) Occupied apartments exclude community models and apartments
not in service due to fire, flood or otherwise.
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 quoted 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 data, AMLI prefers to measure
total revenue earned per each occupied apartment. As 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 revenue per unit, another metric
used by some in the apartment industry.
<PAGE>
The following chart shows weighed average total revenue per occupied
apartment home for the Company's Same Store communities for each of its
markets and for the portfolio in total:
WEIGHTED AVERAGE TOTAL REVENUE EARNED
PER OCCUPIED APARTMENT HOME
SAME STORE COMMUNITIES
Quarter Ended
---------------------------------------
2003 2002
----------------- ------------------
Jun 30 Mar 31 Dec 31 June 30
------ ------ ------ -------
Dallas. . . . . . . . . . . $ 817 831 824 849
Atlanta . . . . . . . . . . 862 862 864 898
Austin. . . . . . . . . . . 817 819 826 875
Houston . . . . . . . . . . 1,063 1,068 1,077 1,095
Indianapolis. . . . . . . . 805 811 794 798
Kansas City . . . . . . . . 844 835 835 855
Chicago . . . . . . . . . . 1,100 1,112 1,111 1,146
Denver. . . . . . . . . . . 1,021 1,035 1,024 1,075
------ ------ ------ ------
Total Portfolio (a) . . . . $ 884 889 887 917
====== ====== ====== ======
(a) 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 revenue) by the weighted average number of
apartments occupied during the month.
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 second quarter of
2003, compared to the second quarter of 2002 and the first quarter of 2003.
DALLAS rental revenue declined by 5.7% compared to the second quarter
of 2002, as collected rent per occupied unit fell by 5.1%, and occupancy
fell by 0.5%. On a sequential basis, compared to the first quarter, rental
revenue increased by 1.1%, as a result of a 3.0% increase in occupancy, and
a 2.2% decline in collected rent per occupied unit, which was the largest
quarterly sequential drop the last four quarters. The Dallas/Ft. Worth
market continued to experience demand pressure, with job losses totaling
28,000 for the 12-month period ending May 31, 2003. On the supply side,
permit activity remains fairly strong with 11,277 new multifamily units
authorized for the 12 months ended May 31, 2003, representing 2.2% of
existing apartment stock.
ATLANTA rental revenue declined 4.9% compared to the second quarter
2002, driven by a 5.6% decline in collected rent per occupied unit and a
0.7% increase in occupancy. On a sequential basis, rental revenue declined
by 0.8% compared to the first quarter as collected rent per occupied unit
continued to fall, down 1.4%. Occupancy increased 0.6% as traffic and
rentals increased by 34.4% and 39.9%, respectively. The challenge in
Atlanta remains absorption of new supply, with 11,505 multifamily units
permitted for the 12 months ended May 31, 2003, which represents a 3.1% of
the existing apartment stock. The good news in Atlanta is that annualized
permits have fallen by 27.5% versus the same period a year ago, and job
growth has turned positive. Atlanta generated 8,000 new jobs for the 12
months ended May 31, 2003.
<PAGE>
CHICAGO rental revenue declined 3.6% compared to the same quarter a
year ago, driven entirely by a 3.6% decrease in collected rent per occupied
unit, as occupancy remained unchanged at 92.1%. Sequentially, rental
revenue increased by 2.6% over the first quarter after three consecutive
quarterly decreases. This increase was due to a 3.5% gain in occupancy.
While occupancy was increasing, collected rent per occupied unit continued
to trend downward, dropping 1.3% in the second quarter compared to last
quarter. In general, employment losses in Chicago, which were 28,300 for
the twelve months ended May 31, 2003, continue to depress apartment demand
and put downward pressure on rental rates in this market. On the supply
side, the Chicago metro issued permits for 9,133 new multifamily units,
representing 1.4% of existing apartment stock, for the 12 months ended
May 31, 2003, a 10% decrease from the previous period.
AUSTIN rental revenue declined 6.9% compared to the second quarter of
2002 due to a decrease in collected rent per occupied unit of 6.8%, as
occupancy was unchanged year over year at 91.4%. On a sequential basis,
compared to the first quarter, rental revenue fell by 0.4% despite an
increase in occupancy of 0.7% as collected rent per occupied unit continued
to fall, decreasing by 1.0%. Austin is one of the few markets reporting
job gains, as approximately 4,700 jobs were added for the twelve months
ended May 31, 2003. Despite the positive employment trend, roughly 7,000
multifamily units will be delivered in 2003, which will continue to
challenge this market in the near future. On a positive note, permits are
down significantly, decreasing by 49% on a year over year basis as of
May 31, 2003.
KANSAS rental revenue declined 4.5% compared to the same period of a
year ago due to decreases in both collected rent per occupied unit and
occupancy of 2.0% and 2.3%, respectively. Sequentially, rental revenue
increased 1.2%, driven by improving occupancy that was up 1.2% compared to
the first quarter, while collected rent per occupied unit remained
essentially unchanged. Kansas continues to be challenged by weak demand
fundamentals exhibited by declining job growth. For the 12 months ended
May 31, 2003, the Kansas City metro area lost 19,800 jobs, a negative 2.1%
growth rate. In addition, multifamily permits are trending up. For the 12
months ended May 31, 2003, authorized permits totaled 2,998 units, an 86.2%
increase over the same period of a year ago, representing a 2.4% increase
to the existing apartment stock.
INDIANAPOLIS rental revenue for the second quarter 2003 declined 0.4%
compared to the same quarter a year ago as a result of minor declines in
both occupancy and collected rent per occupied unit of 0.4% and 0.2%,
respectively. Sequentially, rental revenue grew 1.6% from the first
quarter on the strength of improving occupancy, which increased 1.7%, and
stability in collected rent per occupied unit, which remained relatively
unchanged, down 0.2%. Demand and supply fundamentals in Indianapolis
continue to be a concern as evidenced by a loss of 25,300 jobs, or a
negative 2.8% growth rate for the 12 months ended May 31, 2003. In
addition, 2,661 multifamily permits have been authorized over the past
year, up 6.4% from the same period of a year ago, which represents a 2.2%
increase to the existing apartment stock.
HOUSTON rental revenue declined by 4.6% in the second quarter of 2003
compared to the second quarter 2002. Both occupancy and collected rent per
occupied unit fell from the same period a year earlier, decreasing 1.1% and
3.6%, respectively. On a sequential basis, rental revenue increased by
0.4% over the first quarter, mainly due to a 2.0% increase in occupancy.
The increase in occupancy, however, was offset in part by a 1.9% decrease
in collected rent per occupied unit. Houston is faced with challenging
supply and demand fundamentals in the near term. Permit activity has
increased dramatically as 14,987 multifamily permits, 3.3% of existing
stock, were issued for the 12 months ended May 31, 2003, an increase of
111% over last May. On the demand side, Houston has lost 15,500 jobs for
the twelve months ended May 31, 2003.
<PAGE>
DENVER second quarter rental revenue fell 4.6% on a year over year
basis due to continued weakness in the market, which pushed collected rent
per occupied unit down 6.4% over the same period last year, while occupancy
improved by 1.4%. On a sequential basis, rental revenue declined 0.8% from
the first quarter due to further deterioration of collected rent per
occupied unit, which fell 3.0%. The decline in rental revenue was limited
by a 1.7% improvement in occupancy during the period. The Denver/Boulder
metro area continues to display weak demand/supply fundamentals driven by
negative job growth and significant new supply. For the 12 months ended
May 31, 2003, the metro experienced a loss of 16,000 jobs, a negative 1.2%
growth rate. On a positive note, for the 12 months ended May 31, 2003,
authorized permits totaled 6,227 units a 47.6% decrease over the same
period of a year ago.
OTHER COMMUNITY REVENUE
Includes non-rental income items such as revenue 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 RENTAL COSTS PER SAME STORE APARTMENT HOME
The following summarizes the combined cost of rental expenses and
capital expenditures (excluding acquisition capital expenditures, as
described below) per apartment home for the Company's Same Store wholly-
owned and partnership communities, at 100%, for the six months ended June
30, 2003 and 2002:
Six Months Ended June 30, 2003
---------------------------------------------------
Wholly-owned Partnership Per Unit
Communities Communities Total (annualized)
------------ ----------- --------- ------------
Community rental
expenses. . . . . . $ 20,908 27,761 48,669 3,948
Capital expenditures. 1,808 1,693 3,501 284
======== ======== ======== ========
Number of Same Store
apartment homes . . 11,339 13,319 24,658
======== ======== ========
Number of Same Store
communities . . . . 30 36 66
======== ======== ========
Six Months Ended June 30, 2002
---------------------------------------------------
Wholly-owned Partnership Per Unit
Communities Communities Total (annualized)
------------ ----------- --------- ------------
Community rental
expenses. . . . . . $ 20,791 27,200 47,991 3,893
Capital expenditures. 2,017 1,381 3,398 276
======== ======== ======== ========
Number of Same Store
apartment homes . . 11,339 13,319 24,658
======== ======== ========
Number of Same Store
communities . . . . 30 36 66
======== ======== ========
<PAGE>
SAME STORE RENTAL EXPENSES
The following shows detail of rental expenses for the Company's Same
Store wholly-owned and partnership communities, at 100%, for the six months
ended June 30, 2003 and 2002:
Per Unit
Six Months Ended (annualized)
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
RENTAL EXPENSES
Personnel. . . . . . . . . . $ 11,510 11,382 934 923
Advertising and promotion. . 2,260 2,311 183 188
Utilities. . . . . . . . . . 3,288 3,141 267 255
Building repairs and
maintenance and contract
services. . . . . . . . . . 5,403 4,784 438 388
Landscaping and grounds
maintenance . . . . . . . . 2,429 2,334 197 189
Real estate taxes. . . . . . 16,101 16,421 1,306 1,332
Insurance. . . . . . . . . . 2,075 1,970 168 160
Property management fees . . 4,308 4,365 350 354
Other rental expenses. . . . 1,295 1,283 105
104
-------- -------- ------- -------
Total . . . . . . . . . . $ 48,669 47,991 3,948 3,893
======== ======== ======= =======
The following provides additional detail for certain of the above
expenditures for the six months ended June 30, 2003 and 2002. Note that
actual expenses in some categories for the full year ended December 31,
2003 and 2002 will be different than the annualized per unit amounts shown
due to seasonal effects.
Per Unit
Six Months Ended (annualized)
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
BUILDING REPAIRS AND MAINTENANCE
Painting . . . . . . . . . . $ 1,221 1,204 99 98
Carpet, vinyl, wallpaper
and mini-blinds . . . . . . 877 798 71 65
Carpentry, glass and
hardware. . . . . . . . . . 302 285 24 23
HVAC, plumbing and
electrical. . . . . . . . . 479 431 39 35
Appliances . . . . . . . . . 144 110 12 9
Parking lots and amenity
areas . . . . . . . . . . . 544 302 44 24
Other repairs and
maintenance . . . . . . . . 629 507 51 41
-------- -------- -------- --------
Total. . . . . . . . . . . 4,196 3,637 340 295
-------- -------- -------- --------
CONTRACT SERVICES
Property monitoring services 323 276 26 22
Rubbish collection and
cleaning services . . . . . 524 553 43 45
Snow removal . . . . . . . . 198 137 16 11
Pest control and other
services. . . . . . . . . . 162 181 13 15
-------- -------- -------- --------
Total. . . . . . . . . . . 1,207 1,147 98 93
-------- -------- -------- --------
Total building repairs
and maintenance and
services . . . . . . . . $ 5,403 4,784 438 388
======== ======== ======== ========
<PAGE>
Per Unit
Six Months Ended (annualized)
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
LANDSCAPING AND
GROUND MAINTENANCE
Lawn maintenance . . . . . . $ 1,774 1,840 144 149
All other. . . . . . . . . . 655 494 53 40
-------- -------- -------- --------
Total . . . . . . . . . . $ 2,429 2,334 197 189
======== ======== ======== ========
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 and partnership communities,
at 100%, for the six months ended June 30, 2003 and 2002.
Six Months Ended June 30, 2003
---------------------------------------------------
Wholly-owned Partnership Per Unit
Communities Communities Total (annualized)
------------------------- ----------------------
CAPITAL EXPENDITURES
Carpet . . . . . . . $ 896 862 1,758 143
Land and building
improvements. . . . 518 486 1,004 81
HVAC and maintenance
equipment . . . . . 182 211 393 32
Major appliances
and furniture,
fixtures and
equipment . . . . . 156 70 226 18
Other. . . . . . . . 56 64 120 10
-------- -------- -------- -------
Total . . . . . . $ 1,808 1,693 3,501 284
======== ======== ======== =======
Six Months Ended June 30, 2002
---------------------------------------------------
Wholly-owned Partnership Per Unit
Communities Communities Total (annualized)
------------------------- ----------------------
CAPITAL EXPENDITURES
Carpet . . . . . . . $ 917 884 1,801 146
Land and building
improvements. . . . 735 225 960 78
HVAC and maintenance
equipment . . . . . 151 141 292 24
Major appliances
and furniture,
fixtures and
equipment . . . . . 141 86 227 18
Other. . . . . . . . 73 45 118 10
-------- -------- -------- -------
Total . . . . . . $ 2,017 1,381 3,398 276
======== ======== ======== =======
<PAGE>
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 budgets 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, at 100%, for the six months ended June 30, 2003 and 2002:
Six Months Ended June 30, 2003
----------------------------------------
Wholly-owned Partnership
Communities Communities Total
------------ ----------- ----------
Land and building improve-
ments. . . . . . . . . . . . $ 202 168 370
HVAC and maintenance equipment 31 13 44
Other . . . . . . . . . . . . 38 89 127
-------- -------- --------
$ 271 270 541
======== ======== ========
Six Months Ended June 30, 2002
----------------------------------------
Wholly-owned Partnership
Communities Communities Total
------------ ----------- ---------
Land and building improve-
ments. . . . . . . . . . . . $ 208 12 220
HVAC and maintenance equipment 47 1 48
Other . . . . . . . . . . . . 59 52 111
-------- -------- --------
$ 314 65 379
======== ======== ========
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2003 TO THREE MONTHS ENDED
JUNE 30, 2002.
Income from continuing operations before share of gains on sales of
rental communities, impairment of an investment in a partnership and
minority interest decreased to $4,318 for the three months ended June 30,
2003 from $6,776 for the three months ended June 30, 2002 which was
primarily attributable to lower other income, higher operating expenses and
depreciation, offset in part by higher rental income.
<PAGE>
The following table shows comparative condensed results of operations
for the three months ended June 30, 2003 and 2002:
Three Months Ended
June 30,
--------------------- Increase
2003 2002 (Decrease)
-------- -------- ---------
Community revenue . . . . . . . . $ 27,481 26,680 801
Other income. . . . . . . . . . . 1,920 3,574 (1,654)
-------- -------- -------
Total revenue . . . . . . . . 29,401 30,254 (853)
-------- -------- -------
Community rental expenses . . . . 11,974 10,913 1,061
Interest expense and amortiza-
tion of financing costs . . . . 6,253 6,242 11
Depreciation. . . . . . . . . . . 5,546 5,110 436
General and administrative. . . . 1,310 1,213 97
-------- -------- -------
Total expenses. . . . . . . . 25,083 23,478 1,605
-------- -------- -------
Income from continuing operations
before share of gains on sales
of a partnership's rental
communities . . . . . . . . . . 4,318 6,776 (2,458)
Gains on sales of rental
communities . . . . . . . . . . -- 605 (605)
Impairment of an investment in
a partnership . . . . . . . . . (1,191) -- (1,191)
------- -------- -------
Income from continuing operations
before of minority interest . . 3,127 7,381 (4,254)
Minority interest . . . . . . . . 199 913 (714)
------- -------- -------
Income from continuing
operations, net of minority
interest. . . . . . . . . . . . 2,928 6,468 (3,540)
Income from discontinued
operations, net of minority
interest. . . . . . . . . . . . -- 823 (823)
------- -------- -------
Net income. . . . . . . . . . . . $ 2,928 7,291 (4,363)
======= ======== =======
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 revenue.
Total community revenue increased by $801, or 3.0%. This increase
was primarily from the two communities acquired during 2002 and one
community acquired by redemption of our partner's interest in 2003. On a
same community basis, total community revenue decreased by $1,399, or 5.3%
and NOI decreased by $1,465, or 9.4%.
Other income decreased by $1,654, or 46.3%, primarily due to lower
share of income from partnerships and development fees earned from
partnerships. Income from partnerships decreased by $786, or 34.9%. This
decrease was a result of the decline in general economic conditions. The
decrease in income was offset in part by the stabilization during the
second quarter of 2003 of 698 units of two communities in lease-up. On a
same community basis, total community revenue decreased by $794, or 2.2%,
and NOI decreased by $1,294, or 6.0%.
<PAGE>
Community rental expenses increased by $1,061, or 9.7%. This
increase was principally due to increases in interior painting, personnel
costs and real estate tax expense as a result of the redemption of our
partner's interest in a partnership in 2003. On a same community basis,
community rental expenses increased by $66, or 0.6%.
Interest expense, including amortization of financing costs, net of
the amounts capitalized, increased to $6,253 from $6,242, or 0.2%. The
increase was primarily due to a loan assumed by AMLI upon redemption of its
partner's interest in AMLI at Verandah in accordance with the partnership
agreement.
General and administrative expenses increased by $97, or 8.0%. The
increase was due primarily to higher compensation costs and increased
accounting fees.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2003 TO SIX MONTHS ENDED JUNE 30,
2002.
Income from continuing operations before share of gains on sales of
rental communities, impairment of an investment in a partnership and
minority interest decreased to $8,397 for the six months ended June 30,
2003 from $13,437 for the six months ended June 30, 2002 which was
primarily attributable to lower other income, higher rental expenses,
interest expense, depreciation, and general and administrative expenses,
offset in part by higher community revenue.
The following table shows comparative condensed results of rental
operations for the six months ended June 30, 2003 and 2002:
Six Months Ended
June 30,
--------------------- Increase
2003 2002 (Decrease)
-------- -------- ---------
Community revenue . . . . . . . . $ 54,564 53,202 1,362
Other income. . . . . . . . . . . 3,987 6,324 (2,337)
-------- -------- -------
Total revenue . . . . . . . . 58,551 59,526 (975)
-------- -------- -------
Community rental expenses . . . . 23,295 20,998 2,297
Interest expense and amortiza-
tion of financing costs . . . . 12,745 12,188 557
Depreciation. . . . . . . . . . . 11,064 10,150 914
General and administrative. . . . 3,050 2,753 297
-------- -------- -------
Total expenses. . . . . . . . 50,154 46,089 4,065
-------- -------- -------
Income from continuing operations
before share of gains on sales
of rental communities . . . . . 8,397 13,437 (5,040)
Gains on sales of a partnership's
rental communities. . . . . . . -- 605 (605)
Impairment of an investment in
a partnership . . . . . . . . . (1,191) -- (1,191)
------- -------- -------
Income from continuing operations
before minority interest. . . . 7,206 14,042 (6,836)
Minority interest . . . . . . . . 570 1,692 (1,122)
------- -------- -------
Income from continuing
operations, net of minority
interest. . . . . . . . . . . . 6,636 12,350 (5,714)
Income from discontinued
operations, net of minority
interest. . . . . . . . . . . . -- 1,601 (1,601)
------- -------- -------
Net income. . . . . . . . . . . . $ 6,636 13,951 (7,315)
======= ======== =======
<PAGE>
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 revenue.
Total community revenue increased by $1,362, or 2.6%. This increase
was primarily from the two communities acquired during 2002 and one
community acquired by redemption of our partner's interest in 2003. In
addition, leasing commenced on 322 apartment homes developed by the
Company, which is substantially completed as of June 30, 2003. On a same
community basis, total community revenue decreased by $3,225, or 6.1%, and
NOI decreased by $3,342, or 10.4%.
Other income decreased by $2,337, or 37.0%, primarily due to lower
income from partnerships, lower development fees earned from partnerships
and higher loss from the Service Companies. Income from partnerships
decreased by $1,358, or 31.7%. This decrease was a result of the sales of
three communities during 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 1,614 units in five communities under development in
2003 and 2002. On a same community basis, total community revenue
decreased by $2,140, or 3.0%, and NOI decreased by $2,700, or 6.2%.
Community rental expenses increased by $2,297, or 10.9%. This
increase was principally due to increases in interior painting, carpet
repairs, snow removal, safety services and apartment cleaning, personnel
expenses, and real estate tax expense partially as a result of the
acquisition of two communities in 2002 and redemption of our partner's
interest in a partnership in 2003. On a same community basis, community
rental expenses increased by $117, or 0.6%.
Interest expense, including amortization of financing costs, net of
the amounts capitalized, increased to $12,745 from $12,188, or 4.6%. The
increase was primarily due to increased borrowings from the unsecured line
of credit (to fund a Service Company's wholly-owned development costs) and
a loan assumed by AMLI upon redemption of its partner's interest in AMLI at
Verandah in accordance with the partnership agreement.
General and administrative expenses increased by $297, or 10.8%. The
increase was due primarily to higher compensation costs and increased
accounting fees.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, the Company had $5,357 in cash and cash equivalents
and $82,000 in availability under its $200,000 unsecured line of credit.
Borrowings under the line of credit bear interest at a rate of LIBOR plus
1.00%. The Company has fixed the rate on up to $25,000 of borrowings on
its line of credit at an average rate of 6.42% plus 1.00% under interest
rate swap contracts expiring in September and October 2004.
At June 30, 2003, fourteen of the Company's wholly-owned stabilized
communities are unencumbered. There are no fixed-rate loans on wholly-
owned communities with maturity dates prior to April 2004.
Net cash flows provided by operating activities for the six months
ended June 30, 2003 were $27,886 compared to $29,220 for the six months
ended June 30, 2002. The decrease was primarily due to an increase in
rental expenses, lower fee income from partnerships and lower income from
partnerships.
<PAGE>
Cash flows used in investing activities for the six months ended
June 30, 2003 decreased to $29,153 from $57,759 for the six months ended
June 30, 2002. The decrease is primarily due to lower investments in
partnerships as a result of reduced acquisition and development activities,
and fewer acquisitions of wholly-owned communities. The decrease was
offset by lower distributions from partnerships and higher expenditures for
development costs and a loan to a partnership.
Net cash flows provided by financing activities for the six months
ended June 30, 2003 decreased to $4,202 from $26,776 for the six months
ended June 30, 2002. This change resulted from the Company's higher
repayments of borrowings in 2003 compared to 2002.
DIVIDENDS AND DISTRIBUTIONS
The Company expects to pay quarterly dividends primarily from cash
available for distribution and other cash on hand. Until distributed,
funds available for distribution are used to temporarily reduce outstanding
balances on the Company's revolving lines of credit.
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 2002, the Company distributed approximately 100% of
its taxable income, comprised of $1.92 per share from 2002 and $0.17 per
share representing the portion of the 2003 distribution as a throwback
dividend to 2002. The Company's current dividend payment level equals an
annual rate of $1.92 per common share. The Company anticipates that all
dividends paid in 2003 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.
FUNDS FROM OPERATIONS
Funds from operations ("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.
<PAGE>
FFO for the six months ended June 30, 2003 and 2002 is summarized as
follows:
June 30,
------------------------
2003 2002
---------- ----------
Net income . . . . . . . . . . . . . . . $ 6,636 13,951
Income from discontinued operations,
net of minority interest . . . . . . . -- (1,601)
Minority interest. . . . . . . . . . . . 570 1,692
---------- ----------
Income from continuing operations
before minority interest . . . . . . . 7,206 14,042
Income from discontinued operations
before minority interest . . . . . . . -- 1,927
Depreciation (1) . . . . . . . . . . . . 11,064 10,733
Share of partnerships' depreciation. . . 6,236 5,836
Share of gains on sales of partnership
communities. . . . . . . . . . . . . . -- (605)
Impairment of investment in a partnership 1,191 --
---------- ----------
FFO. . . . . . . . . . . . . . . . . . . $ 25,697 31,933
========== ==========
Weighted average shares and units
including dilutive shares. . . . . . . 24,425,721 26,042,326
========== ==========
(1) Includes discontinued operations of $583 for the six months
ended June 30, 2002.
The Company expects to meet certain long-term liquidity requirements
such as scheduled debt maturities and 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 June 30, 2003, 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 June 30, 2003 includes $286,731 which is
secured by first mortgages on seventeen 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% $286,731 62.0%
Tax-Exempt Tax-Exempt Rate + 1.24% 50,250 10.9%
Bonds (1) Tax-Exempt Rate + 1.26%
Lines of
Credit (2) LIBOR + 1.00% 119,000 25.7%
Other (3) 2.1% 6,800 1.4%
-------- ------
Total $462,781 100.0%
======== ======
--------------------
<PAGE>
(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 (0.85%
for AMLI at Spring Creek and for 0.86% AMLI at Poplar Creek at July
24, 2003). 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, 2004.
(2) Amounts borrowed under lines of credit are due in 2006. The interest
rate on $25,000 has been fixed pursuant to interest rate swap
contracts.
(3) Excess cash balances of the partnerships invested with AMLI at AMLI's
borrowing rate under its unsecured line of credit, less 37.5 basis
points to cover costs of administration. The average interest rate
for the six months ended June 30, 2003 was 2.12140%.
INFLATION
Inflation has been low for the past several years. Virtually all
apartment leases at the wholly-owned and partnership communities are for
six or twelve months' duration. Absent other market influences, this
enables the Company to pass along inflationary increases in its rental
expenses on a timely basis. Because the Company's community rental
expenses (exclusive of depreciation and amortization) are approximately
42.7% of rental and other revenue for the six months ended June 30, 2003,
increased inflation typically results in comparable increases in income
before interest and general and administrative expenses. However, since
2002, the increases in costs and expenses combined with decreases in income
resulted in decreased income before interest and general and administrative
expenses. It appears likely that this trend will continue through 2003.
An increase in general price levels may be accompanied by an increase
in interest rates. Most recently, although short-term rates have remained
low, the ten-year Treasury rate has increased to approximately 4.4% from
its recent low of 3.1% on June 13, 2003. At June 30, 2003, the Company's
exposure to rising interest rates (including the Company's proportionate
share of its partnerships' expense) was mitigated by the existing debt
level of approximately 44.5% of the Company's total market capitalization
(53.9% including the Company's share of partnerships' debt), the high
percentage of intermediate-term fixed-rate debt (62.0% of total debt), and
the use of interest rate swaps to effectively fix the interest rate on
$15,000 of floating-rate borrowings through September 2004 and on $10,000
through October 2004 (5.4% of total debt).
DISCONTINUED OPERATIONS
There was no community sold or held for sale during the six months
ended June 30, 2003. Two rental communities were sold in 2002 (no interest
expense has been allocated to discontinued operations); condensed financial
information of the results of operations for these communities for the six
months ended June 30, 2002 is as follows:
Total community revenue . . . . . . . . . . . . . . $ 4,238
-------
Community operating expenses. . . . . . . . . . . . 1,728
Depreciation expense. . . . . . . . . . . . . . . . 583
-------
Total expenses. . . . . . . . . . . . . . . . . . . 2,311
-------
Income from discontinued operations before
minority interest . . . . . . . . . . . . . . . . 1,927
Minority interest . . . . . . . . . . . . . . . . . 326
-------
Income from discontinued operations,
net of minority interest. . . . . . . . . . . . . $ 1,601
=======
<PAGE>
OTHER MATTERS
Derivative instruments reported as liabilities on the Consolidated
Balance Sheets totaled $1,637 and $2,379 as of June 30, 2003 and
December 31, 2002, respectively, a $742 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 $2,514 and $3,283 as of June 30, 2003 and December 31, 2002,
respectively, a $769 decrease. The adjustments to the Shareholders' equity
include $1,336 and $1,491 of the Company's share of Other comprehensive
loss of two co-investment partnerships as of June 30, 2003 and December 31,
2002, respectively. In addition, the unamortized deferred gain of $431 and
$507 from a Treasury lock contract was included in Other comprehensive
income adjustments as of June 30, 2003 and December 31, 2002, respectively.
As of June 30, 2003, $668 of unamortized goodwill (of $3,300 total
incurred upon completion of a 1997 acquisition) is included in the accounts
of the Service Company's consolidated subsidiary. The Company has tested
this goodwill and no impairment existed at June 30, 2003. In addition, as
of December 31, 2002, the Company allocated $434 (of the acquisition cost
of the Service Company subsidiaries' controlling interests not already
owned) to the cost of property management contracts, which the Company is
amortizing over a five-year period.
The Company commenced reporting the value of stock options as a charge
against earnings for options awarded subsequent to January 1, 2002. Since
then, there were 380,750 options, net of cancellations, awarded to
employees, the value of which the Company will expense over five years.
The Company is contingently liable with respect to letters of credit
and guarantees issued to secure undertakings made by various unconsolidated
affiliates. The Company anticipates that no such contingent liability will
be realized, and that the various letters of credit and guarantees will
eventually expire. The Company has computed the aggregate fair value of
all such letters of credit and guarantees and estimates such fair value to
be less than $200.
In connection with the formation of AMLI at Museum Gardens in June
2003 the Company became contingently liable on its $2,053 share of a letter
of credit issued to secure this partnership's obligation to complete
certain improvements. The Company has valued this contingent liability at
$10. The Company anticipates that this contingent liability will terminate
in 2005 following completion of these certain improvements.
AMLI acquires and develops multifamily communities in co-investment
joint ventures with partners, primarily institutional investors such as
insurance companies, endowments, foundations, and public and corporate
pension funds. AMLI's ownership interests in these unconsolidated
partnerships range from 10% to 75%. As of December 31, 2002, there were 46
partnerships and one was entered into by the Company during the six months
ended June 30, 2003.
NEW ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity," requires financial instruments within its scope to be classified
as a liability. Statement 150 is generally effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after
June 15, 2003. The Company has determined that none of its financial
instruments fall within the scope of Statement 150.
<PAGE>
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 communities could require undertaking a costly remediation
program to contain or remove the mold from the affected communities. Such
a remediation program could necessitate the temporary relocation of some or
all of the communities' residents or the complete rehabilitation of the
communities. 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 made in this report, and other written or oral
statements made by or on behalf of the Company, may constitute "forward-
looking statements" within the meaning of the federal securities laws.
Statements regarding future events and developments and the Company's
future performance, as well as management's expectations, beliefs, plans,
estimates or projections relating to the future, are forward-looking
statements within the meaning of these laws. 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. Although the Company believes
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the actual results may differ materially from that
set forth in the forward-looking statements. 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. The Company undertakes no
obligation to publicly update or revise any forward-looking statement,
whether as a result of future events, new information or otherwise.
Additional information concerning the risk or uncertainties listed above,
and other factors that you may wish to consider, is contained elsewhere in
the Company's filings with the Securities and Exchange Commission.
The following are some of the factors that could cause the Company's
actual results to differ materially from those expressed or implied by
these forward-looking statements include, but are not limited to, the
following:
. future local and national economic conditions, including
changes in job growth, interest rates, the availability of
financing and other factors;
. demand for apartments in the Company's markets and the effect
on occupancy and rental rates;
. the Company's ability to obtain financing or self-fund the
development of additional apartment communities;
. the uncertainties associated with the Company's current real
estate development, including actual costs exceeding the
Company's budgets, or development periods exceeding
expectations;
<PAGE>
. conditions affecting ownership of residential real estate and
general conditions of the multifamily residential real estate
market;
. the effects of change in accounting policies and other
regulatory matters detailed in the Company's filings with the
Securities and Exchange Commission and uncertainties of
litigation; and
. the Company's ability to continue to qualify as a real estate
investment trust under the Code.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result
of its line of credit used to maintain liquidity and fund capital
expenditures and expansion of the Company's real estate investment
portfolio and operations. The Company's interest rate risk management
objective is to limit the impact of interest rate changes on earnings and
cash flows and to lower its overall borrowing costs. To achieve its
objectives, the Company borrows primarily at fixed rates and may enter into
derivative financial instruments such as interest rate swaps, caps and
Treasury locks in order to mitigate its interest rate risk on a related
financial instrument. The Company does not enter into derivative or
interest rate transactions for speculative purposes. 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 ten-year secured 6.56% fixed
interest rate loan.
There have been no other significant changes in the Company's
exposure to market risks.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14 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. 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.
<PAGE>
<table>
OCCUPANCY
The following is a listing of approximate physical occupancy levels at the end of each quarter for the
Company's wholly-owned and partnership communities:
<caption>
2003 2002
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
------------------------ ---------- ------- ----- ----- ----- ----- ----- ----------- ------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Dallas/Ft. Worth, TX
AMLI:
at Bent Tree . . . . . . . 100% 500 94% 88% 88% 87% 93% 94%
at Bishop's Gate . . . . . 100% 266 93% 88% 89% 91% 93% 95%
at Chase Oaks. . . . . . . 100% 250 95% 93% 85% 88% 87% 97%
at Gleneagles. . . . . . . N/A N/A N/A N/A N/A N/A 90% 92%
on the Green . . . . . . . 100% 424 94% 90% 90% 95% 90% 90%
at Nantucket . . . . . . . 100% 312 87% 94% 91% 85% 93% 94%
of North Dallas. . . . . . 100% 1,032 94% 88% 85% 87% 91% 92%
at Stonebridge Ranch . . . 100% 250 90% 88% 72% 80% 88% 90%
at Shadow Ridge. . . . . . 100% 222 86% 83% 82% 93% 87% 89%
at Valley Ranch. . . . . . 100% 460 94% 90% 89% 90% 84% 89%
Upper West Side. . . . . . 100% 194 91% 94% 95% 96% 94% N/A
7th Street Station . . . . 100% 189 93% 87% 92% N/A N/A N/A
at Verandah. . . . . . . . 100% 538 94% 92% N/A N/A N/A N/A
------ ----- ----- ----- ----- ----- ----- ----- -----
4,637 93% 89% 87% 90% 90% 92%
------ ----- ----- ----- ----- ----- ----- ----- -----
Austin, TX
AMLI:
in Great Hills . . . . . . 100% 344 94% 90% 90% 92% 91% 89%
at Lantana Ridge . . . . . 100% 354 92% 88% 89% 91% 93% 90%
at StoneHollow . . . . . . 100% 606 94% 93% 93% 95% 94% 93%
------ ----- ----- ----- ----- ----- ----- ----- -----
1,304 93% 91% 91% 93% 93% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
Houston, TX
AMLI:
at the Medical Center. . . . 100% 334 90% 86% 88% 94% 97% 94%
at Western Ridge . . . . . . N/A N/A N/A N/A N/A 92% 94% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
334 90% 86% 88% 93% 95% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2003 2002
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. . . . . . . . 100% 288 93% 92% 89% 92% 89% 94%
at Killian Creek. . . . . . 100% 256 95% 89% 91% 92% 93% 95%
at Park Creek . . . . . . . 100% 200 94% 87% 90% 91% 95% 83%
at Towne Creek. . . . . . . 100% 150 95% 86% 86% 81% 90% 93%
on Spring Creek . . . . . . 100% 1,180 90% 86% 90% 88% 87% 90%
at Vinings. . . . . . . . . 100% 360 88% 89% 89% 91% 93% 93%
at West Paces . . . . . . . 100% 337 89% 94% 94% 95% 88% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
2,771 91% 88% 90% 90% 89% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
Kansas City, KS
AMLI:
at Centennial Park . . . . 100% 170 93% 91% 87% 91% 92% 89%
at Lexington Farms . . . . 100% 404 92% 91% 92% 91% 93% 92%
at Regents Center. . . . . 100% 424 95% 90% 91% 91% 94% 89%
at Town Center . . . . . . 100% 156 91% 87% 94% 91% 92% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
1,154 93% 90% 91% 91% 93% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
Indianapolis, IN
AMLI:
at Conner Farms. . . . . . 100% 300 91% 87% 87% 88% 92% 90%
at Eagle Creek . . . . . . 100% 240 94% 88% 90% 96% 93% 93%
at Riverbend . . . . . . . 100% 996 93% 88% 91% 93% 94% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
1,536 93% 88% 90% 92% 93% 93%
------ ----- ----- ----- ----- ----- ----- ----- -----
Chicago, IL
AMLI:
at Poplar Creek. . . . . . 100% 196 92% 95% 88% 91% 95% 94%
------ ----- ----- ----- ----- ----- ----- ----- -----
Denver, CO
AMLI:
at Gateway Park. . . . . . 100% 328 88% 88% 92% 92% 90% 89%
------ ----- ----- ----- ----- ----- ----- ----- -----
Total wholly-owned
communities . . . . . . . . 12,260 92.1% 89.1% 89.1% 90.7% 91.2% 91.8%
====== ===== ===== ===== ===== ===== ===== ===== =====
<PAGE>
2003 2002
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
------------------ ---------- ------- ----- ----- ----- ----- ----- ----------- ------
Partnership Communities:
-----------------------
Dallas, TX
AMLI:
at Deerfield . . . . . . . 25% 240 93% 89% 85% 91% 89% 93%
at Fossil Creek. . . . . . 25% 384 88% 91% 92% 94% 92% 91%
at Oak Bend. . . . . . . . 40% 426 84% 92% 88% 91% 91% 92%
on the Parkway . . . . . . 25% 240 94% 92% 87% 87% 88% 92%
at Prestonwood Hills . . . 45% 272 93% 92% 89% 94% 92% 93%
on Timberglen. . . . . . . 40% 260 87% 96% 84% 89% 92% 94%
at Verandah. . . . . . . . N/A N/A N/A N/A 90% 93% 93% 92%
on Frankford . . . . . . . 45% 582 93% 94% 91% 91% 96% 94%
at Breckinridge Point. . . 45% 440 92% 92% 92% 91% 94% 90%
at Bryan Place . . . . . . 48% 420 91% 85% 80% 86% 90% N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
3,264 91% 91% 88% 91% 92% 92%
------- ----- ----- ----- ----- ----- ----- ----- -----
Austin, TX
AMLI:
at Wells Branch. . . . . . 25% 576 90% 89% 87% 91% 92% 92%
at Scofield Ridge. . . . . 45% 487 89% 89% 92% 91% 89% 88%
at Monterey Oaks . . . . . 25% 430 92% 90% 94% 95% 92% 92%
------- ----- ----- ----- ----- ----- ----- ----- -----
1,493 91% 89% 91% 92% 91% 91%
------- ----- ----- ----- ----- ----- ----- ----- -----
Houston, TX
AMLI:
at Champions Centre. . . . N/A N/A N/A N/A N/A N/A N/A 98%
at Champions Park. . . . . N/A N/A N/A N/A N/A N/A N/A 91%
at Greenwood Forest. . . . N/A N/A N/A N/A N/A N/A 92% 92%
Midtown. . . . . . . . . . 45% 419 96% 93% 88% 90% 93% 91%
Towne Square . . . . . . . 45% 380 94% 91% 89% 89% 95% 90%
lease lease lease lease
at Kings Harbor. . . . . . 25% 300 91% 84% up up up up
------- ----- ----- ----- ----- ----- ----- ----- -----
1,099 94% 90% 88% 90% 94% 92%
------- ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2003 2002
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 98% 94% 94% 94% 93% 91%
at Northwinds. . . . . . . 35% 800 92% 92% 90% 91% 92% 93%
at River Park. . . . . . . 40% 222 94% 93% 93% 95% 90% 95%
at Willeo Creek. . . . . . 30% 242 94% 95% 86% 88% 91% 88%
at Windward Park . . . . . 45% 328 95% 92% 96% 93% 91% 91%
at Peachtree City. . . . . 20% 312 92% 95% 90% 89% 86% 86%
at Lost Mountain . . . . . 75% 164 96% 94% 87% 92% 91% 95%
at Park Bridge . . . . . . 25% 352 94% 89% 89% 94% 94% 92%
lease
at Mill Creek. . . . . . . 25% 400 95% 94% 95% 90% 94% up
lease lease lease
at Kedron Village. . . . . 20% 216 91% 91% 92% up up up
lease lease lease
at Barrett Walk. . . . . . 25% 290 97% up up up N/A N/A
------ ----- ----- ----- ----- ----- ----- ----- -----
3,772 94% 93% 91% 92% 92% 91%
------ ----- ----- ----- ----- ----- ----- ----- -----
Kansas City, KS
AMLI:
at Regents Crest . . . . . 25% 476 95% 87% 88% 92% 95% 90%
Creekside. . . . . . . . . 25% 224 94% 88% 92% 90% 96% 94%
at Wynnewood Farms . . . . 25% 232 91% 90% 89% 89% 91% 91%
at Summit Ridge. . . . . . 25% 432 94% 86% 90% 93% 94% 90%
lease lease lease lease lease
at Cambridge Square. . . . 30% 408 92% up up up up up
------- ----- ----- ----- ----- ----- ----- ----- -----
1,772 88% 89% 92% 94% 91%
------- ----- ----- ----- ----- ----- ----- ----- -----
Indianapolis, IN
AMLI:
on Spring Mill . . . . . . 20%
residual 400 90% 91% 90% 89% 87% 84%
at Lake Clearwater . . . . 25% 216 90% 91% 88% 91% 91% 92%
at Castle Creek. . . . . . 40% 276 91% 84% 89% 92% 95% 89%
------- ----- ----- ----- ----- ----- ----- ----- -----
892 90% 89% 89% 91% 90% 87%
------- ----- ----- ----- ----- ----- ----- ----- -----
<PAGE>
2003 2002
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 92% 90% 91% 93% 94% 93%
at Danada Farms. . . . . . 10% 600 92% 90% 89% 90% 93% 93%
at Fox Valley. . . . . . . 25% 272 93% 91% 83% 97% 93% 85%
at Windbrooke. . . . . . . 15% 236 98% 91% 88% 90% 95% 98%
at Oakhurst North. . . . . 25% 464 94% 91% 86% 89% 93% 86%
at St. Charles . . . . . . 25% 400 93% 88% 87% 89% 89% 88%
at Osprey Lake . . . . . . 69% 483 91% 88% 81% 86% 90% 93%
------- ----- ----- ----- ----- ----- ----- ----- -----
3,047 93% 89% 87% 90% 92% 91%
------- ----- ----- ----- ----- ----- ----- ----- -----
Denver, CO
AMLI:
at Lowry Estates . . . . . 50% 414 90% 88% 86% 89% 88% 87%
at Park Meadows. . . . . . 25% 518 89% 73% 76% 80% 81% N/A
------- ----- ----- ----- ----- ----- ----- ----- -----
932 90% 79% 80% 84% 84% 87%
------- ----- ----- ----- ----- ----- ----- ----- -----
Total partnership
communities . . . . . . . . 16,271 92.3% 88.4% 88.5% 90.6% 91.7% 90.9%
------- ----- ----- ----- ----- ----- ----- ----- -----
Total . . . . . . . . . . . . 28,531 92.2% 89.5% 88.7% 90.6% 91.5% 91.3%
======= ===== ===== ===== ===== ===== ===== ===== =====
</table>
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of AMLI Residential Properties
Trust was held on April 28, 2002 for the following purposes:
1. To elect three Trustees to serve until the third subsequent
annual meeting of shareholders and until their successors are
elected and qualify, and to elect one successor Trustee until
the first subsequent annual meeting of shareholders and until
his successor is elected.
2. To approve Amendment No. 1 to the AMLI Residential Properties
Senior Officer Share Acquisition Plan.
3. To ratify the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending December 31,
2003.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in opposition
to management's solicitations.
All of the management's nominees for trustees as listed in the proxy
statement were elected with the following vote:
Shares
Voted Shares
"For" "Withheld"
---------- ----------
Stephen G. McConahey . . . 14,093,751 363,454
Adam S. Metz . . . . . . . 14,321,395 135,810
John G. Schreiber. . . . . 14,093,751 363,454
Allan J. Sweet . . . . . . 14,325,726 131,479
The amendment to the Senior Officer Share Acquisition Plan was
approved by the following vote:
Shares Shares Shares
Voted Voted Shares Not
"For" "Against" "Withheld" Voted
---------- --------- ---------- --------
13,396,648 959,959 100,598 175,750
The ratification of the appointment of KPMG LLP as independent
auditor was approved by the following vote:
Shares Shares Shares
Voted Voted Shares Not
"For" "Against" "Withheld" Voted
---------- --------- ---------- --------
14,314,730 100,026 42,449 175,750
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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 the 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.
(b) Reports on Form 8-K.
Current Report on Form 8-K filed on April 29, 2003, to furnish
the following as exhibits:
1. The Company's press release dated April 29, 2003,
announcing the first quarter 2003 operating results
and a dividend declaration.
2. The Company's first quarter 2003 Supplemental
Operating and Financial Data.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMLI RESIDENTIAL PROPERTIES TRUST
Date: August 12, 2003 By: /s/ CHARLES C. KRAFT
-----------------------------------
Charles C. Kraft
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: August 12, 2003 By: /s/ ALLAN J. SWEET
-----------------------------------
Allan J. Sweet
President and Trustee
Date: August 12, 2003 By: /s/ PHILIP N. TAGUE
-----------------------------------
Philip N. Tague
Executive Vice President
and Trustee
Date: August 12, 2003 By: /s/ ROBERT J. CHAPMAN
-----------------------------------
Robert J. Chapman
Principal Financial Officer
Date: August 12, 2003 By: /s/ CHARLES C. KRAFT
-----------------------------------
Charles C. Kraft
Principal Accounting Officer
<PAGE>
CERTIFICATION
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 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 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 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-15(e) and 15d-15(e)) for the
registrant and we have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of trustees (or persons performing
the equivalent function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; 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 over financial reporting.
Date:August 12, 2003 /s/ ALLAN J. SWEET
------------------------
Allan J. Sweet
President and Trustee
<PAGE>
CERTIFICATION
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 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 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 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-15(e) and 15d-15(e)) for the
registrant and we have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of trustees (or persons performing
the equivalent function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; 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 over financial reporting.
Date:August 12, 2003 /s/ PHILIP N. TAGUE
------------------------
Philip N. Tague
Executive Vice President
and Trustee
<PAGE>
CERTIFICATION
I, Robert J. 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 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 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 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-15(e) and 15d-15(e)) for the
registrant and we have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of trustees (or persons performing
the equivalent function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; 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 over financial reporting.
Date:August 12, 2003 /s/ ROBERT J. CHAPMAN
---------------------------
Robert J. Chapman
Principal Financial Officer
</TEXT>
</DOCUMENT>