-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QsUQzrV7j5BTtUcffThUnMLD94rmYe3D5VfY2XqmdXmtevPGnDsltHk5ehRhDcla /Xa4Zw1WxTN/wQ5uQDRJ4g== 0000892626-03-000416.txt : 20031121 0000892626-03-000416.hdr.sgml : 20031121 20031121144442 ACCESSION NUMBER: 0000892626-03-000416 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20030814 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES TRUST CENTRAL INDEX KEY: 0000914724 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363925916 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12784 FILM NUMBER: 031017786 BUSINESS ADDRESS: STREET 1: 125 S WACKER DR STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124431477 MAIL ADDRESS: STREET 1: 125 S WACKER DR STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES INC DATE OF NAME CHANGE: 19931112 8-K 1 aml_4424.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 14, 2003 AMLI RESIDENTIAL PROPERTIES TRUST ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Maryland ---------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-12784 36-3925916 ------------------------ ------------------------------------ (Commission File Number) (I.R.S. Employer Identification No.) 125 South Wacker Drive, Suite 3100, Chicago, Illinois 60606 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (312) 443-1477 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable ------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 1 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 14, 2003, AMLI Residential Properties Trust acquired the partnership interests it did not already own in three apartment communities from Endowment Realty Investors II ("ERI"), a private REIT managed by Commonfund Realty. AMLI paid $57,172,500 for ERI interests in AMLI at Regents Crest, AMLI Creekside and AMLI at Castle Creek. AMLI funded the acquisition by assuming ERI's interest in a mortgage note of $10,974,206 and from proceeds of sale of its common stock issued to the public in August 2003. AMLI at Regents Crest contains 476 apartment homes and was built in two phases in 1997 and 2000. The community is set on 13-acre site located just west of the southwest corner of 119th Street and Quivira Road in Overland Park, Kansas. It contains 451,238 rentable square feet in 29 buildings, with 156 (33%) one-bedroom, 10 (2%) one-bedroom with den, 254 (53%) two-bedroom and 56 (12%) three-bedroom apartment homes. The apartment homes average 948 square feet in size. AMLI Creekside contains 224 apartment homes and was constructed in 2000. The community, set on a 24-acre site located just west of the southwest corner of 119th Street and Quivira Road and adjacent to AMLI at Regents Crest, contains 182,192 rentable square feet in 16 buildings, with 104 (46%) one-bedroom, 96 (43%) two-bedroom and 24 (11%) three-bedroom apartment homes. The apartment homes average 813 square feet in size. AMLI at Castle Creek is set on a 16-acre site located on the southeast corner of 91st Street and Allisonville Road in Indianapolis, Indiana. The community contains 276 apartment homes with 269,904 rentable square feet in 14 buildings, with 96 (35%) one-bedroom, 36 (13%) one- bedroom with den, 120 (44%) two-bedroom and 24 (8%) three-bedroom apartment homes. The apartment homes average 978 square feet in size. On August 25, 2003 AMLI acquired the partnership interests it did not already own in two apartment communities from Prudential Real Estate Investors ("Prudential"). AMLI paid $67,500,000 for Prudential's interest in AMLI at Oakhurst North and AMLI on Spring Mill. AMLI at Oakhurst North, which is located in Aurora, Illinois, a western suburb of Chicago, contains 464 apartment homes and is set on a 29- acre site located at the northwest quadrant of the intersection of Eola Road and Liberty Street within the prestigious Oakhurst North master planned residential community. The community contains 470,003 rentable square feet in 29 buildings, with 174 (38%) one-bedroom and 290 (62%) two- bedroom apartment homes, of which 203 are two stories. The apartment homes average 1,013 square feet in size. AMLI on Spring Mill, which is located in a northern suburb of Indianapolis, contains 400 apartment homes and is set on a 40-acre site located at Spring Mill Road and 146th Street. The community contains 406,640 rentable square feet in 25 buildings, with 190 (47%) one-bedroom, 168 (42%) two-bedroom and 42 (11%) three-bedroom apartment homes. The apartment homes average 1,017 square feet in size. On October 31, 2003 AMLI acquired the partnership interest it did not already own in AMLI at Danada Farms from Ohio State Teacher's Retirement System ("OSTRS") for $63,900,000. AMLI financed the acquisition by assuming OSTRS's interest in a mortgage note of $20,947,342 and from borrowing on its primary line of credit. AMLI at Danada Farms is a 600-unit luxury apartment community set on over 34 acres located in Wheaton, Illinois, a western suburb of Chicago. The community was constructed in two phases in 1990 and 1991. AMLI at Danada Farms contains 521,500 square feet in 27 two and three-story buildings, with 340 (57%) one-bedroom and 260 (43%) two-bedroom apartment homes. The apartment homes average 869 square feet in size. The community offers many amenities such as a resident activity clubhouse, two state-of- the-art fitness centers, two swimming pools, a sauna, a tennis court and two sand volleyball courts. 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements. (b) Pro Forma Financial Information. (c) Risk Factors. (d) Exhibits. 10.1 Assignment and Assumption of Membership Interests between ERI Regents Crest, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI Regents Crest to the Assignee. 10.2 Assignment and Assumption of Membership Interests between ERI Creekside, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI Creekside to the Assignee. 10.3 Assignment and Assumption of Membership Interests between ERI Castle Creek, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 60% of the membership interests in AMLI Castle Creek to the Assignee. 10.4 Assignment and Assumption of Membership Interests between The Prudential Insurance Company of America, a New Jersey corporation ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI at Oakhursts, LLC to the Assignee. 10.5 Assignment and Assumption of Membership Interests between The Prudential Insurance Company of America, a New Jersey corporation ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 80% of the membership interests in AMLI on Spring Mill LLC to the Assignee. 10.6 Assignment and Assumption of Membership Interests between OTR, an Ohio general partnership acting as duly authorized nominee on behalf of the State Teachers Retirement Board of Ohio ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 90% of the membership interests in AMLI at Danada L.L.C. to the Assignee. 23.1 Independent Auditors' Consent 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMLI RESIDENTIAL PROPERTIES TRUST Dated: November 21, 2003 By: /s/ ROBERT J. CHAPMAN ----------------------------- Robert J. Chapman Chief Financial Officer 4 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (With Independent Auditors' Report Thereon) 5 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Trustees AMLI Residential Properties Trust: We have audited the accompanying Combined Historical Statement of Revenue in Excess of Certain Expenses ("Historical Statement") of the Communities Acquired from Endowment Realty Investors in 2003 ("Communities") for the year ended December 31, 2002. This Historical Statement is the responsibility of the management of AMLI Residential Properties Trust. Our responsibility is to express an opinion on the Historical Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K for AMLI Residential Properties Trust) as described in note 2. This presentation is not intended to be a complete presentation of the Communities' revenue and expenses. In our opinion, the Historical Statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in note 2 of the Communities Acquired from Endowment Realty Investors in 2003 for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Chicago, Illinois November 19, 2003 6 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) Period from January 1 through August 14, Year ended 2003 December 31, (unaudited) 2002 ----------- ----------- Revenue: Rent. . . . . . . . . . . . . . . . . . $ 5,083 8,369 Other . . . . . . . . . . . . . . . . . 408 650 ---------- ---------- 5,491 9,019 ---------- ---------- Certain expenses: Personnel . . . . . . . . . . . . . . . 551 807 Building repairs and maintenance. . . . 295 281 Landscaping and grounds maintenance . . 156 222 Advertising and promotion . . . . . . . 154 183 Utilities . . . . . . . . . . . . . . . 157 197 Property management fees. . . . . . . . 225 361 Real estate taxes . . . . . . . . . . . 536 904 Insurance . . . . . . . . . . . . . . . 102 148 Other operating expenses. . . . . . . . 84 74 ---------- ---------- 2,260 3,177 ---------- ---------- Revenue in excess of certain expenses $ 3,231 5,842 ========== ========== See accompanying notes to Combined Historical Statements of Revenue in Excess of Certain Expenses 7 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) (1) COMMUNITIES ACQUIRED The communities acquired from Endowment Realty Investors in 2003 ("Communities") consist of the following apartment communities: NO. OF COMMUNITY UNITS LOCATION --------- ------ -------- AMLI at Regents Crest 476 Overland Park, KS AMLI Creekside 224 Overland Park, KS AMLI at Castle Creek 276 Indianapolis, IN The Communities listed above were formerly acquired or developed by AMLI Residential Properties Trust (the "Company" or "AMLI") in partnership with Endowment Realty Investors ("ERI") in three separate partnerships. AMLI owned a 25% general partner interest in AMLI at Regents Crest ("Regents Crest") and ERI owned a 75% limited partner interest. The partnership that acquired Regents Crest, a 368 apartment home community, developed a 108 apartment home additional phase immediately after its acquisition. AMLI Creekside ("Creekside") was developed by another partnership in which AMLI owned a 25% general partner interest and ERI owned a 75% limited partner interest. The Company acquired ERI's respective 75% limited partnership interests in Regents Crest and Creekside in August 2003 for a total price of $42,862 and assumed the balance of the first mortgage on Regents Crest, of which ERI's share was $10,974. The balance of the acquisition price was paid in cash, which was provided from proceeds of sale of the Company's common stock issued to the public in August 2003. AMLI at Castle Creek ("Castle Creek") was developed by the Company in partnership with ERI. AMLI owned a 40% general partner interest in the partnership and acquired ERI's 60% limited partner interest in August 2003 for $14,310. AMLI paid cash for this acquisition, which was funded from the proceeds of sale of the Company's common stock issued to the public in August 2003. (2) BASIS OF PRESENTATION The Combined Historical Statements of Revenue in Excess of Certain Expenses have been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K for the Company and are not intended to be a complete presentation of the Communities' revenue and expenses. The Combined Historical Statements of Revenue in Excess of Certain Expenses are presented at 100% on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Combined Historical Statements of Revenue in Excess of Certain Expenses are not representative of the actual operations for the periods presented as certain expenses, which may not be comparable to the expenses expected to be incurred in the proposed future operations of the Communities, have been excluded. Expenses excluded consist of interest, depreciation and amortization and other expenses not directly related to the future operations of the Communities. 8 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Apartment homes are rented under lease agreements with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. PROPERTY MANAGEMENT FEES The Communities were managed by AMLI Management Company ("AMC"), an affiliate of the Company, pursuant to the terms of a management agreement for a property management fee of 4.0% of total revenue. Subsequent to the Company's acquisition of its partner's interest in the Communities, this management agreement ceased and the Communities will be subject to the Master Property Management Agreement between the Company and AMC, under which the Communities will be managed by AMC for a property management fee of 3.0% of total revenue. USE OF ESTIMATES Management has made a number of estimates and assumptions relating to the reporting of revenue and certain expenses for the periods presented to prepare these Combined Historical Statements of Revenue in Excess of Certain Expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. UNAUDITED INTERIM COMBINED HISTORICAL STATEMENT The Combined Historical Statement of Revenue in Excess of Certain Expenses for the period from January 1, 2003 through August 25, 2003 is unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Combined Historical Statements of Revenue in Excess of Certain Expenses for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year for the Communities. 9 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) COMBINING INFORMATION Following is a summary of each Community acquired for the period from January 1, 2003 through August 14, 2003 (unaudited) and for the year ended December 31, 2002: Period from January 1, 2003 through August 14, 2003 (unaudited) ---------------------------------- Regents Creek- Castle Crest side Creek Total ------- ------- ------- ------- Revenue: Rent . . . . . . . . . . . . $2,374 1,111 1,598 5,083 Other. . . . . . . . . . . . 185 109 114 408 ------ ------ ------ ------ 2,559 1,220 1,712 5,491 ------ ------ ------ ------ Certain expenses: Personnel. . . . . . . . . . 249 138 164 551 Building repairs and maintenance. . . . . . . . 116 59 120 295 Landscaping and grounds maintenance. . . . . . . . 76 46 34 156 Advertising and promotion. . 65 38 51 154 Utilities. . . . . . . . . . 61 49 47 157 Property management fees . . 105 50 70 225 Real estate taxes. . . . . . 251 116 169 536 Insurance. . . . . . . . . . 46 24 32 102 Other operating expenses . . 34 28 22 84 ------ ------ ------ ------ 1,003 548 709 2,260 ------ ------ ------ ------ Revenue in excess of certain expenses . . . $1,556 672 1,003 3,231 ====== ====== ====== ====== 10 COMMUNITIES ACQUIRED FROM ENDOWMENT REALTY INVESTORS IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 14, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) Year ended December 31, 2002 ---------------------------------- Regents Creek- Castle Crest side Creek Total ------- ------- ------- ------- Revenue: Rent . . . . . . . . . . . . $3,844 1,905 2,620 8,369 Other. . . . . . . . . . . . 282 181 187 650 ------ ------ ------ ------ 4,126 2,086 2,807 9,019 ------ ------ ------ ------ Certain expenses: Personnel. . . . . . . . . . 355 211 241 807 Building repairs and maintenance. . . . . . . . 119 46 116 281 Landscaping and grounds maintenance. . . . . . . . 108 72 42 222 Advertising and promotion. . 77 50 56 183 Utilities. . . . . . . . . . 76 61 60 197 Property management fees . . 165 84 112 361 Real estate taxes. . . . . . 352 179 373 904 Insurance. . . . . . . . . . 67 35 46 148 Other operating expenses . . 33 21 20 74 ------ ------ ------ ------ 1,352 759 1,066 3,177 ------ ------ ------ ------ Revenue in excess of certain expenses . . . $2,774 1,327 1,741 5,842 ====== ====== ====== ====== 11 COMMUNITIES ACQUIRED FROM PRUDENTIAL INSURANCE COMPANY OF AMERICA IN 2003 Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 25, 2003 (unaudited) and year ended December 31, 2002 (With Independent Auditors' Report Thereon) 12 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Trustees AMLI Residential Properties Trust: We have audited the accompanying Combined Historical Statement of Revenue in Excess of Certain Expenses ("Historical Statement") of the Communities Acquired from Prudential Insurance Company of America in 2003 ("Communities") for the year ended December 31, 2002. This Historical Statement is the responsibility of the management of AMLI Residential Properties Trust. Our responsibility is to express an opinion on the Historical Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K for AMLI Residential Properties Trust) as described in note 2. This presentation is not intended to be a complete presentation of the Communities' revenue and expenses. In our opinion, the Historical Statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in note 2, of the Communities Acquired from Prudential Insurance Company of America in 2003 for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Chicago, Illinois November 19, 2003 13 COMMUNITIES ACQUIRED FROM PRUDENTIAL INSURANCE COMPANY OF AMERICA IN 2003 Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 25, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) Period from January 1 through August 25, Year ended 2003 December 31, (unaudited) 2002 ----------- ------------ Revenue: Rent. . . . . . . . . . . . . . . . . . $ 5,469 8,204 Other . . . . . . . . . . . . . . . . . 466 653 ---------- ---------- 5,935 8,857 ---------- ---------- Certain expenses: Personnel . . . . . . . . . . . . . . . 507 749 Building repairs and maintenance. . . . 462 630 Landscaping and grounds maintenance . . 99 98 Advertising and promotion . . . . . . . 119 157 Utilities . . . . . . . . . . . . . . . 187 242 Property management fees. . . . . . . . 232 336 Real estate taxes . . . . . . . . . . . 943 1,407 Insurance . . . . . . . . . . . . . . . 114 156 Other operating expenses. . . . . . . . 71 96 ---------- ---------- 2,734 3,871 ---------- ---------- Revenue in excess of certain expenses $ 3,201 4,986 ========== ========== See accompanying notes to Combined Historical Statements of Revenue in Excess of Certain Expenses 14 COMMUNITIES ACQUIRED FROM PRUDENTIAL INSURANCE COMPANY OF AMERICA IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 25, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) (1) COMMUNITIES ACQUIRED The communities acquired from Prudential Insurance Company of America in 2003 ("Communities") consist of AMLI at Oakhurst North ("Oakhurst"), a 464 apartment home community located in Aurora, Illinois and AMLI at Spring Mill ("Spring Mill"), a 400 apartment home community located in Carmel, Indiana. Oakhurst was developed by AMLI Residential Properties Trust (the "Company" or "AMLI") in partnership with Prudential Insurance Company of America ("Prudential"). AMLI owned a 25% interest in the partnership and acquired Prudential's 75% partnership interest in August 2003 for $37,500. AMLI had a general partner residual interest in Spring Mill and Prudential's limited partner's interest entitled it to 100% distribution of cash flow until it has received a certain return amount and all of its contributions. Prudential's partnership interest in Spring Mill was also acquired by AMLI in August 2003 for $30,000. AMLI paid cash for these acquisitions, which was funded from borrowings under its primary line of credit. (2) BASIS OF PRESENTATION The Combined Historical Statements of Revenue in Excess of Certain Expenses have been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K for the Company and are not intended to be a complete presentation of the Communities' revenue and expenses. The Combined Historical Statements of Revenue in Excess of Certain Expenses are presented at 100% on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Combined Historical Statements of Revenue in Excess of Certain Expenses are not representative of the actual operations for the periods presented as certain expenses, which may not be comparable to the expenses expected to be incurred in the proposed future operations of the Communities, have been excluded. Expenses excluded consist of interest, depreciation and amortization and other expenses not directly related to the future operations of the Communities. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Apartment homes are rented under lease agreements with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. PROPERTY MANAGEMENT FEES The Communities were managed by AMLI Management Company ("AMC"), an affiliate of the Company, pursuant to the terms of a management agreement for a property management fee. Property management fee rates for Oakhurst and Spring Mill were 4.0% and 3.5%, respectively. Subsequent to the Company's acquisition of its partner's interest in the Communities, this management agreement ceased and the Communities will be subject to the Master Property Management Agreement between the Company and AMC, under which the Communities will be managed by AMC for a property management fee of 3.0% of total revenue. 15 COMMUNITIES ACQUIRED FROM PRUDENTIAL INSURANCE COMPANY OF AMERICA IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 25, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) USE OF ESTIMATES Management has made a number of estimates and assumptions relating to the reporting of revenue and certain expenses for the periods presented to prepare these Combined Historical Statements of Revenue in Excess of Certain Expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. UNAUDITED INTERIM COMBINED HISTORICAL STATEMENT The Combined Historical Statement of Revenue in Excess of Certain Expenses for the period from January 1, 2003 through August 25, 2003 is unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Combined Historical Statement of Revenue in Excess of Certain Expenses for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year for the Communities. COMBINING INFORMATION Following is a summary of each Community acquired for the period from January 1, 2003 through August 25, 2003 (unaudited) and for the year ended December 31, 2002: Period from January 1, 2003 through August 25, 2003 (unaudited) --------------------------- Oakhurst Spring North Mill Total ------- ------- ------- Revenue: Rent . . . . . . . . . . . . . . . $3,233 2,236 5,469 Other. . . . . . . . . . . . . . . 262 204 466 ------ ------ ------ 3,495 2,440 5,935 ------ ------ ------ Certain expenses: Personnel. . . . . . . . . . . . . 289 218 507 Building repairs and maintenance . 221 241 462 Landscaping and grounds maintenance. . . . . . . . . . . 43 56 99 Advertising and promotion. . . . . 57 62 119 Utilities. . . . . . . . . . . . . 103 84 187 Property management fees . . . . . 145 87 232 Real estate taxes. . . . . . . . . 552 391 943 Insurance. . . . . . . . . . . . . 67 47 114 Other operating expenses . . . . . 45 26 71 ------ ------ ------ 1,522 1,212 2,734 ------ ------ ------ Revenue in excess of certain expenses . . . . . . $1,973 1,228 3,201 ====== ====== ====== 16 COMMUNITIES ACQUIRED FROM PRUDENTIAL INSURANCE COMPANY OF AMERICA IN 2003 Notes to Combined Historical Statements of Revenue in Excess of Certain Expenses Period from January 1, 2003 through August 25, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) Year ended December 31, 2002 --------------------------- Oakhurst Spring North Mill Total ------- ------- ------- Revenue: Rent . . . . . . . . . . . . . . . $4,891 3,313 8,204 Other. . . . . . . . . . . . . . . 357 296 653 ------ ------ ------ 5,248 3,609 8,857 ------ ------ ------ Certain expenses: Personnel. . . . . . . . . . . . . 428 321 749 Building repairs and maintenance . 349 281 630 Landscaping and grounds maintenance. . . . . . . . . . . 48 50 98 Advertising and promotion. . . . . 74 83 157 Utilities. . . . . . . . . . . . . 144 98 242 Property management fees . . . . . 210 126 336 Real estate taxes. . . . . . . . . 782 625 1,407 Insurance. . . . . . . . . . . . . 91 65 156 Other operating expenses . . . . . 70 26 96 ------ ------ ------ 2,196 1,675 3,871 ------ ------ ------ Revenue in excess of certain expenses . . . . . . $3,052 1,934 4,986 ====== ====== ====== 17 AMLI AT DANADA FARMS Historical Statements of Revenue in Excess of Certain Expenses Nine months ended September 30,2003 (unaudited) and year ended December 31, 2002 (With Independent Auditors' Report Thereon) 18 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Trustees AMLI Residential Properties Trust: We have audited the accompanying Historical Statement of Revenue in Excess of Certain Expenses ("Historical Statement") of AMLI at Danada Farms ("Community") for the year ended December 31, 2002. This Historical Statement is the responsibility of the management of AMLI Residential Properties Trust. Our responsibility is to express an opinion on the Historical Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K for AMLI Residential Properties Trust) as described in note 2. This presentation is not intended to be a complete presentation of the Community's revenue and expenses. In our opinion, the Historical Statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in note 2 of the Community for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America Chicago, Illinois November 19, 2003 19 AMLI AT DANADA FARMS Historical Statements of Revenue in Excess of Certain Expenses Nine months ended September 30, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) Nine months ended September 30, Year ended 2003 December 31, (unaudited) 2002 -------------- ------------ Revenue: Rent. . . . . . . . . . . . . . . . . . $ 4,913 6,801 Other . . . . . . . . . . . . . . . . . 467 528 ---------- ---------- 5,380 7,329 ---------- ---------- Certain expenses: Personnel . . . . . . . . . . . . . . . 430 517 Building repairs and maintenance. . . . 293 350 Landscaping and grounds maintenance . . 31 52 Advertising and promotion . . . . . . . 50 64 Utilities . . . . . . . . . . . . . . . 206 217 Property management fees. . . . . . . . 192 256 Real estate taxes . . . . . . . . . . . 767 1,053 Insurance . . . . . . . . . . . . . . . 58 30 Other operating expenses. . . . . . . . 33 38 ---------- ---------- 2,060 2,577 ---------- ---------- Revenue in excess of certain expenses $ 3,320 4,752 ========== ========== See accompanying notes to Historical Statements of Revenue in Excess of Certain Expenses 20 AMLI AT DANADA FARMS Notes to Historical Statements of Revenue in Excess of Certain Expenses Nine months ended September 30, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) (1) ACQUISITION COMMUNITY AMLI Residential Properties Trust (the "Company" or "AMLI") in partnership with Ohio State Teachers' Retirement System ("OSTRS") acquired AMLI at Danada Farms ("Danada" or "Acquisition Community"), a 600 apartment home community located in Wheaton, Illinois in February 1997. AMLI owned a 10% general partner interest and OSTRS owned a 90% limited partner interest in the partnership. In October 2003, OSTRS assigned all of its interest in the partnership to AMLI for $63,900 less $20,947 and $1,107, representing its 90% share of the first mortgage debt and net other liabilities, respectively, assumed by the Company. AMLI paid cash for the balance of the acquisition price, which was funded from borrowings under its primary line of credit. (2) BASIS OF PRESENTATION The Historical Statements of Revenue in Excess of Certain Expenses have been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K for the Company and are not intended to be a complete presentation of the Acquisition Community's revenue and expenses. The Historical Statements of Revenue in Excess of Certain Expenses are presented at 100% on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Historical Statements of Revenue in Excess of Certain Expenses are not representative of the actual operations for the periods presented as certain expenses, which may not be comparable to the expenses expected to be incurred in the proposed future operations of the Community, have been excluded. Expenses excluded consist of interest, depreciation and amortization and other expenses not directly related to the future operations of the Acquisition Community. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Apartment homes are rented under lease agreements with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. PROPERTY MANAGEMENT FEES The Acquisition Community was managed by AMLI Management Company ("AMC"), an affiliate of the Company, pursuant to the terms of a management agreement for a property management fee of 3.5% of total revenue. Subsequent to the Company's purchase of its partner's interest in the Acquisition Community, this management agreement ceased and the Acquisition Community will be subject to the Master Property Management Agreement between the Company and AMC, under which the Acquisition Community will be managed by AMC for a property management fee of 3.0% of total revenue. 21 AMLI AT DANADA FARMS Notes to Historical Statements of Revenue in Excess of Certain Expenses Nine months ended September 30, 2003 (unaudited) and year ended December 31, 2002 (Dollars in thousands) USE OF ESTIMATES Management has made a number of estimates and assumptions relating to the reporting of revenue and certain expenses for the periods presented to prepare these Historical Statements of Revenue in Excess of Certain Expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. UNAUDITED INTERIM HISTORICAL STATEMENT The Historical Statement of Revenue in Excess of Certain Expenses for the nine months ended September 30, 2003 is unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Historical Statement of Revenue in Excess of Certain Expenses for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results to be expected for the fall year for the Acquisition Community. 22 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET September 30, 2003 (Unaudited) This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if the acquisition of AMLI at Danada Farms occurred as of September 30, 2003. This unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been at September 30, 2003, nor does it purport to represent the future financial position of the Company. 23 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET September 30, 2003 (Unaudited) (Dollars in thousands) September 30, 2003 -------------------------------------- Acquisition Historical Community (A) Pro Forma ---------- ---------- --------- ASSETS Rental apartments Land. . . . . . . . . . . . $ 125,222 11,984 137,206 Depreciable property. . . . 810,666 57,930 868,596 ---------- -------- ---------- 935,888 69,914 1,005,802 Less: Accumulated depreciation. . . . . . . (138,343) -- (138,343) ---------- -------- ---------- 797,545 69,914 867,459 Land held for development or sale . . . . . . . . . . 12,644 -- 12,644 Investments in partnerships . 169,363 (1,729) (B) 167,634 Cash and cash equivalents . . 6,090 -- 6,090 Service Companies' assets . . 66,930 -- 66,930 Other assets and deferred costs, net. . . . . . . . . 16,615 311 (C) 16,926 ---------- -------- ---------- Total Assets. . . . . . . $1,069,187 68,496 1,137,683 ========== ======== ========== LIABILITIES Debt. . . . . . . . . . . . . $ 522,672 66,955 (D) 589,627 Distributions in excess of investments in and earnings from partnerships . . . . . 6,175 -- 6,175 Accrued expenses and other liabilities . . . . . . . . 38,069 1,541 (E) 39,610 ---------- -------- ---------- Total Liabilities . . . . 566,916 68,496 635,412 ---------- -------- ---------- Mandatorily redeemable convertible preferred shares. . . . . . . . . . . 93,247 -- 93,247 Minority interest . . . . . . 61,718 -- 61,718 Total Shareholders' Equity. . 347,306 -- 347,306 ---------- -------- ---------- Total Liabilities and Shareholders' Equity. . $1,069,187 68,496 1,137,683 ========== ======== ========== See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet. 24 AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET September 30, 2003 (Unaudited) (Dollars in thousands) (A) The Acquisition Community column reflects the purchase of Ohio State Teachers Retirement System's ("OSTRS") 90% partnership interest in AMLI at Danada Farms ("Danada") that the Company did not already own. Danada is a 600 apartment home community located in Wheaton, Illinois. In October 2003, OSTRS assigned all of its interest in the partnership to AMLI for $63,900 less $20,947 and $1,107, representing its 90% share of the first mortgage debt and net other liabilities, respectively, assumed by the Company. AMLI paid cash for the balance of the acquisition price, which was funded from borrowings under its primary line of credit. (B) The adjustment reflects the elimination of the Company's investment in Danada upon acquisition of its partner's interest in the Acquisition Community. (C) The adjustment represents tenant security deposits and miscellaneous receivables transferred to the Company in conjunction with the acquisition. (D) The adjustment represents the balance of the existing first mortgage of $23,275, which bears an interest rate of 7.33%, assumed by the Company in conjunction with the acquisition. The Company has re-valued OSTRS 90% share of the loan based on its current borrowing rate of 4.16% and accordingly increased the cost basis of the Acquisition Community and the debt amount by the premium of $1,915. In addition, the Company borrowed $41,765 from its primary line of credit to fund the balance of the acquisition cost. The aggregate maturities of the pro forma debt are as follows: 2003. . . . . . . . . . . . . . . $ 23,680 2004. . . . . . . . . . . . . . . 26,404 2005. . . . . . . . . . . . . . . 35,021 2006. . . . . . . . . . . . . . . 244,267 2007. . . . . . . . . . . . . . . 60,832 Thereafter. . . . . . . . . . . . 199,423 -------- $589,627 ======== (E) The amount represents liabilities assumed by the Company for accrued real estate taxes, accrued operating expenses, tenant security deposits and other liabilities for which the Company received credit against the purchase price paid for the Community. 25 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2002 (Unaudited) (Dollars in thousands - except per share data) These unaudited Pro Forma Condensed Consolidated Statements of Operations are presented as if the Company acquired the Acquisition Community and the other Communities as of January 1, 2002. These unaudited Pro Forma Condensed Consolidated Statements of Operations are not necessarily indicative of what the actual results of operations would have been for the nine months ended September 30, 2003 and for the year ended December 31, 2002 assuming the purchase of the Acquisition Community and the other Communities had been consummated at the beginning of each period presented, nor does it purport to represent the future operations of the Company. 26 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended September 30, 2003 (Unaudited) --------------------------------------------------------------------- Operations of Communities prior to Acquisition Historical Acquisition Community Pro Forma (A) (B) (C) Adjustments Pro Forma ---------- ------------- ----------- ----------- ---------- RENTAL OPERATIONS Revenue: Rental. . . . . . . . . . . . . . . . . . $ 78,819 10,552 4,913 94,284 Other . . . . . . . . . . . . . . . . . . 6,038 874 467 7,379 ---------- ---------- ---------- ---------- ---------- 84,857 11,426 5,380 -- 101,663 ---------- ---------- ---------- ---------- ---------- Expenses: Rental. . . . . . . . . . . . . . . . . . 37,132 4,994 2,060 (144)(D) 44,042 Depreciation. . . . . . . . . . . . . . . 18,076 -- -- 4,360 (E) 22,436 ---------- ---------- ---------- ---------- ---------- 55,208 4,994 2,060 4,216 66,478 ---------- ---------- ---------- ---------- ---------- 29,649 6,432 3,320 (4,216) 35,185 Income from partnerships (b). . . . . . . . 4,235 (933)(F) 3,302 ---------- ---------- ---------- ---------- ---------- Income from rental operations . . . . . . . 33,884 6,432 3,320 (5,149) 38,487 ---------- ---------- ---------- ---------- ---------- OTHER INCOME AND EXPENSES Fee income from unconsolidated partnerships. . . . . . . . . . . . . . 2,175 -- -- -- 2,175 Other income. . . . . . . . . . . . . . . 577 -- -- -- 577 Interest and amortization of deferred financing costs . . . . . . . . . . . . (19,282) -- -- (3,070)(G) (22,352) ---------- ---------- ---------- ---------- ---------- (16,530) -- -- (3,070) (19,600) ---------- ---------- ---------- ---------- ---------- SERVICE COMPANIES' OPERATIONS Total revenue . . . . . . . . . . . . . . 55,338 -- -- (683)(H) 54,655 Total expenses. . . . . . . . . . . . . . 54,900 -- -- (505)(H) 54,395 ---------- ---------- ---------- ---------- ---------- 438 -- -- (178) 260 ---------- ---------- ---------- ---------- ---------- 27 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Nine months ended September 30, 2003 (Unaudited) --------------------------------------------------------------------- Operations of Communities prior to Acquisition Historical Acquisition Community Pro Forma (A) (B) (C) Adjustments Pro Forma ---------- ------------- ----------- ----------- ---------- General and administrative. . . . . . . . . 4,655 -- -- -- 4,655 ---------- ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES . . 13,137 6,432 3,320 (8,397) 14,492 Share of gain on sale of a partnership's community . . . . . . . . . . . . . . . . 1,959 -- -- -- 1,959 Impairment of an investment in a partnership (1,191) -- -- -- (1,191) ---------- ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST . . . . . . . . . 13,905 6,432 3,320 (8,397) 15,260 Minority interest . . . . . . . . . . . . 1,334 -- -- 231 (I) 1,565 ---------- ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . 12,571 6,432 3,320 (8,628) 13,695 Net income attributable to preferred shares 5,942 -- -- -- 5,942 ---------- ---------- ---------- ---------- ---------- NET INCOME ATTRIBUTABLE TO COMMON SHARES. . $ 6,629 6,432 3,320 (8,628) 7,753 ========== ========== ========== ========== ========== NET INCOME PER COMMON SHARE Basic . . . . . . . . . . . . . . . . . . $ 0.38 $ 0.45 Diluted . . . . . . . . . . . . . . . . . $ 0.38 $ 0.45 ========== ========== Weighted Average Common Shares - Basic. . . 17,263,803 17,263,803 Weighted Average Common Share - Diluted . . 17,382,046 17,382,046 ========== ========== See accompanying notes to Pro Forma Condensed Consolidated Statement of Operations. 28
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended September 30, 2003 (Unaudited) (Dollars in thousands) (A) The "Historical" column reflects the historical consolidated statement of operations of AMLI Residential Properties Trust (the "Company" or "AMLI") for the nine months ended September 31, 2003. (B) These adjustments relate to communities acquired ("Communities") subsequent to December 31, 2002 to include the operations AMLI at Regents Crest ("Regents Crest"), AMLI Creekside, AMLI at Castle Creek, AMLI at Oakhurst and AMLI on Spring Mill for the period from January 1, 2003 through the respective dates of acquisition. (C) The "Acquisition Community" column reflects the historical revenue and certain operating expenses of the AMLI at Danada Farms ("Danada"), which was not owned by the Company as of September 30, 2003. (D) The pro forma adjustment reflects the reduction in property management fees that will be charged at a reduced rate of 3% of total revenue subsequent to purchase of the Acquisition Community and the Communities based on the Master Property Management Agreement between the Company and AMLI Management Company, a consolidated affiliate of AMLI. (E) The pro forma adjustment reflects the depreciation relating to the Acquisition Community and the increased depreciation of the Communities acquired subsequent to December 31, 2002. In-place lease intangible asset related to the acquisition of the communities has been fully depreciated as of December 31, 2002. (F) The pro forma adjustment reflects the reduction of the Company's share of income from partnerships as a result of AMLI's acquisition of its partners' entire interest in six partnerships that owned the Communities and the purchase of its partner's interest in the Acquisition Community. (G) The pro forma adjustment reflects the net increase in interest expense as a result of mortgages assumed by the Company relating to the acquisition of Danada and Regents Crest and additional borrowings on the Company's primary line of credit to fund the balance of the acquisition costs of the Acquisition Community and the Communities. The pro forma increase in interest expense was offset in part by the reduction of interest on the two mortgages assumed as a result of imputing lower interest rates based on the Company's current borrowing rate. (H) The pro forma adjustment reflects the reduction of property management fees and asset management fees earned from the Communities by a consolidated affiliate, and the corresponding elimination of the related costs. (I) The pro forma adjustment reflects the minority holders' 17.1% share of the pro forma net income of the Company. 29 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2002 --------------------------------------------------------------------- Operations of Communities prior to Acquisition Historical Acquisition Community Pro Forma (A) (B) (C) Adjustments Pro Forma ---------- ------------- ----------- ----------- ---------- RENTAL OPERATIONS Revenue: Rental. . . . . . . . . . . . . . . . . . $ 99,290 22,816 6,801 -- 128,907 Other . . . . . . . . . . . . . . . . . . 6,461 1,737 528 -- 8,726 ---------- ---------- ---------- ---------- ---------- 105,751 24,553 7,329 -- 137,633 ---------- ---------- ---------- ---------- ---------- Expenses: Rental. . . . . . . . . . . . . . . . . . 43,146 10,085 2,577 (285)(D) 55,523 Depreciation. . . . . . . . . . . . . . . 20,523 -- -- 12,809 (E) 33,332 ---------- ---------- ---------- ---------- ---------- 63,669 10,085 2,577 12,524 88,855 ---------- ---------- ---------- ---------- ---------- 42,082 14,468 4,752 (12,524) 48,778 Income from partnerships. . . . . . . . . . 7,604 -- -- (1,489)(F) 6,115 ---------- ---------- ---------- ---------- ---------- Income from rental operations . . . . . . . 49,686 14,468 4,752 (14,013) 54,893 ---------- ---------- ---------- ---------- ---------- OTHER INCOME AND EXPENSES Interest and share of loss from the Service Companies . . . . . . . . . . . 298 -- -- (336)(G) (38) Fee income from unconsolidated partnerships. . . . . . . . . . . . . . 3,875 -- -- -- 3,875 Other income. . . . . . . . . . . . . . . 888 -- -- -- 888 Interest and amortization of deferred financing costs . . . . . . . . . . . . (25,207) -- -- (5,688)(H) (30,895) ---------- ---------- ---------- ---------- ---------- (20,146) -- -- (6,024) (26,170) ---------- ---------- ---------- ---------- ---------- General and administrative. . . . . . . . . 5,129 -- -- -- 5,129 Provision for loss on land held for development or sale . . . . . . . . . . . 550 -- -- -- 550 ---------- ---------- ---------- ---------- ---------- 30 AMLI RESIDENTIAL PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Year ended December 31, 2002 ---------------------------------------------------------------------- Operations of Communities prior to Acquisition Historical Acquisition Community Pro Forma (A) (B) (C) Adjustments Pro Forma ---------- ------------- ----------- ----------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE SHARE OF GAINS ON SALES OF PROPERTIES . . 23,861 14,468 4,752 (20,037) 23,044 Share of gains on sales of partnerships' communities . . . . . . . . . . . . . . . 1,283 -- -- -- 1,283 ---------- ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST . . . . . . . . . 25,144 14,468 4,752 (20,037) 24,327 Minority interest . . . . . . . . . . . . 2,926 -- -- (140)(I) 2,786 ---------- ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS . . . . . 22,218 14,468 4,752 (19,897) 21,541 ---------- ---------- ---------- ---------- ---------- INCOME FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST Income from discontinued operations, net of minority interest. . . . . . . . 2,473 -- -- -- 2,473 Gain on sale of discontinued operations, net of minority interest. . . . . . . . 15,664 -- -- -- 15,664 ---------- ---------- ---------- ---------- ---------- 18,137 -- -- -- 18,137 ---------- ---------- ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . 40,355 14,468 4,752 (19,897) 39,678 Net income attributable to preferred shares 7,989 -- -- -- 7,989 ---------- ---------- ---------- ---------- ---------- NET INCOME ATTRIBUTABLE TO COMMON SHARES. . $ 32,366 14,468 4,752 (19,897) 31,689 ========== ========== ========== ========== ========== NET INCOME PER COMMON SHARE Basic . . . . . . . . . . . . . . . . . . $ 1.83 $ 1.79 Diluted . . . . . . . . . . . . . . . . . $ 1.80 $ 1.77 ========== ========== Weighted Average Common Shares - Basic. . . 17,730,995 17,730,995 Weighted Average Common Shares - Diluted. . 17,940,355 17,940,355 ========== ========== See accompanying notes to Pro Forma Condensed Consolidated Statement of Operations. 31
AMLI RESIDENTIAL PROPERTIES TRUST NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2002 (Unaudited) (Dollars in thousands) (A) The "Historical" column reflects the historical consolidated statement of operations of AMLI Residential Properties Trust (the "Company" or "AMLI") for the year ended December 31, 2002. (B) These adjustments relate to communities acquired ("Communities") subsequent to December 31, 2001 to include the operations of AMLI at Verandah ("Verandah"), AMLI 7th Street Station and AMLI Upper West Side for the period from January 1, 2002 through the respective dates of acquisition. In addition, the pro forma adjustments include the operations of AMLI at Regents Crest ("Regents Crest"), AMLI Creekside, AMLI at Castle Creek, AMLI at Oakhurst and AMLI on Spring Mill for the year ended December 31, 2002. (C) The "Acquisition Community" column reflects the historical revenue and certain operating expenses of the AMLI at Danada Farms ("Danada") for the year ended December 31, 2002, which was not owned by the Company during 2002. (D) The pro forma adjustment reflects the reduction in property management fees that will be charged at a reduced rate of 3% of total revenue subsequent to the purchase of the Acquisition Community and the Communities based on the Master Property Management Agreement between the Company and AMLI Management Company, an unconsolidated affiliate of AMLI. (E) The pro forma adjustment reflects the depreciation relating to the Acquisition Community and the increased depreciation relating to the Communities acquired subsequent to December 31, 2001 and 2002, and also includes $6,490 of depreciation of cost allocated to the value of existing leases on the dates of acquisitions. As of December 31, 2002 this allocated cost has been fully depreciated. (F) The pro forma reflects the reduction of the Company's share of income from partnerships as a result of AMLI's acquisition of its partners' entire interest in six partnerships that owned the Communities and its partner's entire interest in the Acquisition Community. (G) The pro forma adjustment reflects the reduction of property management fees and asset management fees earned from the Communities by an unconsolidated affiliate. (H) The pro forma adjustment reflects the net increase in interest expense as a result of mortgages assumed by the Company relating to the acquisition of Danada and Regents Crest and additional borrowings on the Company's primary line of credit to fund the balance of the acquisition costs of the Acquisition Community and the Communities. The pro forma increase in interest expense was offset in part by the reduction of interest on the two mortgages assumed as a result of imputing lower interest rates based on the Company's current borrowing rate. (I) The pro forma adjustment reflects the minority holders' 17.1% share of pro forma net income of the Company. 32 RISK FACTORS Before making an investment in our common shares, you should carefully consider the following Risk Factors. In that case, the trading price of our securities could fall, and you may lose all or part of the money you paid to buy our securities. WE MAY NOT BE ABLE TO MAINTAIN OUR SHAREHOLDER DISTRIBUTIONS AT THEIR CURRENT LEVEL. We base the level of our cash distributions to shareholders on numerous assumptions and projections that we make regarding our future performance, any of which may prove to be incorrect, and our own decisions to reinvest rather than distribute available cash. Our assumptions and projections relate, among other things, to: . property occupancy; . the amount of future capital expenditures and expenses relating to our communities; . the level of leasing activity and future rental rates at our communities; . the strength of the real estate market in the areas in which we own communities; and . competition in the markets in which we own communities. While we expect to maintain or increase our current level of distributions over time, we cannot guarantee that we will be able to do so. WE WOULD INCUR ADVERSE TAX CONSEQUENCES IF WE FAIL TO QUALIFY AS A REIT. If we fail to qualify as a REIT we will incur substantial additional tax liabilities. We intend to operate so as to qualify as a REIT for federal income tax purposes, but we do not intend to request a ruling from the Internal Revenue Service that we do in fact qualify as a REIT. We have received an opinion from our legal counsel that we are organized in conformity with the requirements for qualification as a REIT beginning with our taxable year ended December 31, 1994 and that our actual and proposed method of operation that we have described to our counsel will enable us to continue to satisfy the requirements for REIT qualification. Our counsel's opinion, however, is not binding on the Internal Revenue Service and is based on our representations as to factual matters and on our counsel's review and analysis of existing law, which includes no controlling precedent. If we were to fail to qualify as a REIT for any taxable year, we would not be permitted to deduct the amount we distribute to shareholders from our taxable income and we would be subject to federal income tax, including any alternative minimum tax, on our taxable income at regular corporate tax rates. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of, and trading prices for, our shares. Unless entitled to relief under certain provisions of the Internal Revenue Code of 1986, as amended, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which our REIT qualification was lost. Our board of trustees is authorized to revoke our REIT election at any time in response to future economic, market, legal, tax or other considerations. 33 WE MAY NEED TO BORROW FUNDS TO MEET OUR REIT MINIMUM DISTRIBUTION REQUIREMENTS. To qualify as a REIT, we are generally required to distribute at least 90% of our annual net taxable income, excluding any net capital gain, to our shareholders. In addition, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for such year, (b) 95% of our capital gain net income for such year, and (c) any of our undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed, plus (ii) retained amounts on which corporate level tax is paid by us. We derive our income primarily from our share of AMLI, L.P.'s income and the cash available for distribution to our shareholders comes primarily from cash distributions from AMLI, L.P. We may have to borrow funds to meet the distribution of taxable income test described above and thereby avoid being required to pay the non-deductible excise tax referred to above. This is due to differences in timing between when we actually receive cash income and pay deductible expenses and when the income and expenses are included in our taxable income. DIVIDENDS PAYABLE BY REITS DO NOT QUALIFY FOR THE REDUCED TAX RATES UNDER RECENTLY ENACTED TAX LEGISLATION. Recently enacted tax legislation generally reduces the maximum tax rate for dividends payable by individuals to 15% through 2008. Dividends payable by REITs, however, generally continue to be taxed at the normal rate applicable to the individual recipient, rather than the preferential rates applicable to other dividends. Although this legislation does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common shares. WE CAN CHANGE OUR FINANCING, INVESTMENT, DISTRIBUTION AND OTHER BUSINESS POLICIES WITHOUT YOUR APPROVAL. Our board of trustees establishes our financing, investment, distribution and other business policies based on management's recommendations and our board of trustees' evaluation of business and general economic conditions and other relevant factors. Our board of trustees may change these policies without your consent. OUR BUSINESS CONSISTS PRIMARILY OF ACQUIRING, DEVELOPING AND OPERATING REAL ESTATE AND IS THEREFORE SUBJECT TO REAL ESTATE INVESTMENT AND OPERATING RISKS. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of our properties. These factors include changes in the national, regional and local economic climate, local conditions such as an oversupply of properties or a reduction in demand for our properties, the attractiveness of our properties to residents, competition from other available property owners and changes in market rental rates. Our performance depends on our ability to collect rent from residents and to pay for adequate maintenance, insurance and other operating costs, including real estate taxes, which could increase over time. Also, the expenses of owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property. 34 Resident defaults may reduce our income and cash flow. If a significant number of residents fail to meet their lease obligations, our revenues and cash flow will decrease and we may be unable to make expected distributions to our shareholders. Defaulting residents may seek bankruptcy protection, which could result in payment delays or in the rejection and termination of the residents' leases. This would reduce our income, cash flow and amounts available to distribute to our shareholders. THE GEOGRAPHIC CONCENTRATION OF OUR RESIDENTIAL COMMUNITIES AND FLUCTUATIONS IN LOCAL MARKETS MAY ADVERSELY IMPACT OUR FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS. We derived significant amounts of rental revenues for the year ended December 31, 2002 and the six months ended June 30, 2003 from communities concentrated in Atlanta, Georgia and Dallas, Texas. As a result of this geographic concentration, if a local community market performs poorly, the income from the communities in that market could decrease. The performance of the economy in each of these areas affects occupancy, market rental rates and expenses and, consequently impacts the income generated from the communities and their underlying values. Economic downturns in the local markets in which we own communities could have a negative impact on our financial condition and results form operations. WE MAY BE ADVERSELY AFFECTED BY INCREASES IN REAL ESTATE OPERATING COSTS. If our properties do not generate revenues sufficient to meet our operating expenses, including debt service and other capital expenditures, we may have to borrow additional amounts to cover our fixed costs, and our cash flow and ability to make distributions to shareholders may be adversely affected. Residential communities are subject to increases in operating expenses such as maintenance, insurance and administrative costs, and other general costs associated with security, landscaping, repairs and maintenance. If operating expenses increase, competition in the local rental market may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates. WE ARE SUBJECT TO REAL ESTATE FINANCING RISKS. Potential adverse effects of the costs of and possible difficulties in obtaining debt financing may adversely affect our cash flows and distributions to shareholders. As a result of, among other things, the annual income distribution requirements applicable to REITs under the Internal Revenue Code, we rely to a significant extent on borrowings to fund acquisitions, capital expenditures and other items and expect to continue to do so. We are therefore subject to real estate and general financing risks, including changes from period to period in the availability of financing, the risk that our cash flow may not cover both required debt service payments and distributions to our shareholders, and the risk that we will not be able to refinance existing indebtedness or that the refinancing terms will be unfavorable. If we do not make mortgage payments, the community or communities subject to the mortgage indebtedness could be foreclosed upon by or transferred to the lender. RISING INTEREST RATES WILL GENERALLY INCREASE OUR BORROWING COSTS. We have a bank credit facility that permits us to borrow up to $200 million for community acquisitions and other purposes that provides for interest at variable rates, and we may incur additional variable rate indebtedness in the future. Variable-rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect our cash flow and the amounts available to distribute to our shareholders. 35 WE MAY ENCOUNTER SIGNIFICANT DELAYS IN RENEWING LEASES OR RE-LETTING VACANT APARTMENT HOMES AND RESULTING LOSSES OF INCOME. When leases of apartment homes in our communities expire, the leases may not be renewed, the related apartment home may not be re-let promptly or the terms of renewal or re-letting, may be less favorable than the terms of the expiring leases. If we are unable to promptly renew the leases or re-let the units or if the rental rates upon renewal or re-letting are significantly lower than expected rates, then our results of operations and financial condition would be adversely affected. Consequently, our cash flow and ability to make distributions to shareholders would be reduced. WE MAY NOT BE ABLE TO MEET OUR TARGETED LEVELS OF LEASING ACTIVITY, ACQUISITIONS AND DEVELOPMENT DUE TO THE HIGHLY COMPETITIVE NATURE OF THE RESIDENTIAL COMMUNITY MARKETS. Numerous residential communities compete with our communities in attracting residents to lease apartment homes and additional communities can be expected to be built in the markets in which our communities are located. The number and quality of competitive communities in a particular area will have a material effect on our ability to lease apartment homes at our existing communities or at newly acquired communities and on the rents charged. OUR ESTIMATES OF CURRENT AND FUTURE BUSINESS CONDITIONS MAY BE INACCURATE. In formulating our annual business plans, we make estimates of turnover re-letting costs that take into consideration our views of both current and expected future business conditions in our markets. Our estimates may prove to be inaccurate. If we are unable promptly to re-let or renew the leases for all or a substantial portion of our apartment homes, if the rental rates upon the renewal or re-letting are significantly lower than expected rates or if our cost estimates prove inadequate, then our cash flow and ability to make expected distributions to shareholders may be adversely affected. WE MAY INCUR SIGNIFICANT ENVIRONMENTAL REMEDIATION COSTS OR LIABILITIES. As an owner and operator of real properties, we are subject to various federal, state and local environmental laws, ordinances and regulations that impose liability on current and previous owners and operators of real property for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. Some of these laws impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous substances at the disposal or treatment facility, whether or not the facility is or ever was owned or operated by the person. In addition, the presence of hazardous or toxic substances, or the failure to remediate the property properly, may adversely affect the owner's ability to borrow using the real property as collateral. Environmental laws and common law principles could be used to impose liability for release into the air of, and exposure to, hazardous substances, including asbestos-containing materials, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to the released hazardous substances. As an owner of real properties, we could be liable for these types of costs. 36 Over the past few years, there have been an increasing number of lawsuits against owners and managers of properties other than us alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in substantial monetary damages or settlements. Insurance carriers have reacted to these liability awards by excluding mold related claims from standard policies and pricing mold endorsements at prohibitively high rates. We cannot be assured that any prior owner of any of our properties did not create a material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any one or more of our properties. WE MAY BE ADVERSELY AFFECTED BY CHANGES IN LAWS. Our communities are subject to various federal, state and local regulatory requirements, including state and local fire and life-safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. We believe that our communities are in material compliance with all current regulatory requirements. However, new requirements may be imposed that would require us to make significant unanticipated expenditures and that could have an adverse effect on our cash flow and ability to make expected distributions to our shareholders. INSURANCE COVERAGE IS BECOMING MORE EXPENSIVE AND MORE DIFFICULT TO OBTAIN. The current insurance market is characterized by rising premium rates, increased deductibles, and more restrictive coverage language. Recent developments have resulted or are expected to result in significant increases in our insurance premiums and have made or are expected to make it more difficult to obtain certain types of insurance. Insurance policy coverage continues to narrow. Furthermore, we may not be able to purchase policies in the future with deductibles similar to those previously available to us. Continued deterioration in insurance marketplace conditions may have a negative impact on our operating results. WE COULD BE ADVERSELY AFFECTED IF HAZARD LOSSES ON OUR COMMUNITIES EXCEED THE AMOUNT OF OUR INSURANCE COVERAGE OR ARE NOT COVERED BY INSURANCE. We carry commercial general liability insurance, standard "all-risk" property insurance, flood and rental loss insurance with respect to our properties with policy terms and conditions customarily carried for similar communities. We believe that our current insurance coverage is adequate. However, our insurance is subject to normal limitations on the amounts of coverage and some types of losses may be uninsurable or may only be insurable at a cost that we believe outweighs the value of obtaining insurance. Should an uninsured loss or a loss in excess of the amount of our insurance coverage occur, we could lose the capital invested in a property, as well as the anticipated future revenue from that community, and we would continue to be obligated on any mortgage indebtedness or other obligations related to the community. 37 WE ARE SUBJECT TO LAWS BENEFITING DISABLED PERSONS, WHICH MAY RESULT IN OUR INCURRING UNANTICIPATED EXPENSES. Our apartment communities must comply with Title III of the Americans with Disabilities Act, or the ADA, to the extent that the apartment communities are or contain public accommodations and/or commercial facilities as defined by the ADA. The ADA does not consider apartment communities to be public accommodations or commercial facilities, except for portions of the facilities which are open to the public, such as the leasing office. Noncompliance could result in the imposition of fines or an award of damages to private litigants. We believe our apartment communities comply with the present requirements under the Americans with Disabilities Act and applicable state laws. However, we cannot assure you that we will not incur unanticipated expenses to comply with the ADA. EQUITY REAL ESTATE INVESTMENTS ARE RELATIVELY ILLIQUID WHICH COULD ADVERSELY AFFECT OUR BUSINESS. The relative illiquidity of our real estate investments may limit our ability to adjust our community portfolio to respond to market changes. In addition, the Internal Revenue Code limits a REIT's ability to sell certain types of communities held for fewer than four years, which may affect our ability to sell communities without adversely affecting returns to common shareholders. These factors will tend to limit our ability to vary our portfolio promptly in response to changes in market or general economic or other conditions. NEW ACQUISITIONS OR DEVELOPMENTS MAY FAIL TO PERFORM AS EXPECTED AND COMPETITION FOR ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR COMMUNITIES. We intend to continue to selectively acquire and develop new communities. Newly acquired or developed communities may fail to perform as expected. We may underestimate the costs necessary to bring an acquired community up to standards established for its intended market position or to develop a community. Additionally, we expect that other major real estate investors and significant capital will compete with us for attractive investment opportunities or may also develop communities in markets where we focus our development efforts. This competition may increase prices for communities. We may not be in a position or have the opportunity in the future to make suitable community acquisitions on favorable terms. WE MAY SUFFER LOSSES FROM OUR DEVELOPMENT AND CONSTRUCTION ACTIVITIES. We intend to grow through the selective development and construction of communities, including build-to-suit communities and speculative development, as suitable opportunities arise. The risks associated with real estate development and construction activities include the following: . we may find it necessary to abandon development project activities after expending significant resources to determine their feasibility; . the construction cost of a project may exceed original estimates; . occupancy rates and rents at a newly completed community may not be sufficient to make the community profitable; . financing may not be available on favorable terms for development of a community; 38 . the construction and lease up of a community may not be completed on schedule, resulting in increased debt service and construction costs; and . we may fail to obtain, or may experience delays in obtaining, necessary zoning, land-use, building occupancy and other required governmental permits and authorizations. These risks may reduce the funds available for distribution to our shareholders. Further, the development of communities is also subject to the general risks associated with real estate investments. PROVISIONS OF OUR DECLARATION OF TRUST AND BYLAWS, AND OUR SHAREHOLDER RIGHTS PLAN, MAY DISCOURAGE ACQUISITION PROPOSALS AND ATTEMPTS TO CHANGE OUR BOARD OF TRUSTEES. Our Declaration of Trust generally prohibits any person from owning more than 5% of our outstanding shares. To remain qualified as a real estate investment trust, or REIT, for federal income tax purposes under the federal Internal Revenue Code, five or fewer persons cannot own or be deemed to own more than 50% in value of our outstanding shares at any time during the last half of any taxable year, other than our first taxable year. To preserve our qualification as a REIT, our Declaration of Trust provides that, subject to specified exceptions, no person may own more than 5% in number or value of our issued and outstanding shares of beneficial interest. Our board of trustees has the power to exempt a proposed transferee from this ownership limit based on an Internal Revenue Service ruling, an opinion of counsel or other satisfactory evidence that the proposed ownership of common shares by the transferee would not result in the termination of our REIT status. If the proposed transfer would violate the ownership limit, the transfer will be void. This ownership limit may delay, defer or prevent a transaction or a change in control which could involve an offer for your shares that is above the then prevailing market price or that you may for other reasons consider to be in your best interest. STAGGERED ELECTIONS OF TRUSTEES LENGTHEN THE TIME NEEDED TO ELECT A MAJORITY OF OUR BOARD OF TRUSTEES WHICH COULD DISCOURAGE OR PREVENT A CHANGE OF CONTROL. Our board of trustees is divided into three classes, with only one class being elected each year. These staggered terms may lengthen to two years the time needed to change a majority of the members of our board of trustees and may thereby delay or prevent an acquisition of control of AMLI. OUR DUTIES TO OUR SHAREHOLDERS MAY CONFLICT WITH OUR DUTIES TO THE PARTNERS OF AMLI, L.P. As the general partner of AMLI, L.P., we owe fiduciary duties to AMLI, L.P.'s limited partners. Discharging these fiduciary duties could conflict with our shareholders' interests. Pursuant to AMLI, L.P.'s limited partnership agreement, the limited partners have acknowledged that we are acting both on behalf of our shareholders and, in our capacity as general partner of AMLI, L.P., on behalf of the limited partners. The limited partners have further agreed in the partnership agreement that we are under no obligation to consider the separate interests of the limited partners in deciding whether to cause AMLI, L.P. to take, or to decline to take, any actions. 39 INCREASES IN MARKET INTEREST RATES MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES. One of the factors that influence the market price of our common shares is the annual rate of distributions that we pay on the common shares, as compared with market interest rates. An increase in market interest rates may lead purchasers of REIT shares to demand higher annual distribution rates, which could adversely affect the market price of the common shares unless we are able to increase our distributions on outstanding common shares and elect to do so. SHARES THAT BECOME AVAILABLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES. Substantial sales of common shares, or the perception that substantial sales of common shares may occur, could adversely affect the prevailing market prices of the common shares. Following this offering, we will have 19,033,140 outstanding common shares. In addition, we may acquire additional properties in exchange for units of limited partnership interest in AMLI, L.P. that will be exchangeable for our common shares unless we exercise our right to purchase the units for cash instead of issuing our common shares. We are not able to assess the extent to which perceptions of possible future sales of any of the above described common shares have affected the prevailing market prices of the common shares to date or may do so from time to time in the future. WE DEPEND ON OUR KEY PERSONNEL. Our success depends on our ability to attract and retain the services of executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us. 40 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Assignment and Assumption of Membership Interests between ERI Regents Crest, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI Regents Crest to the Assignee. 10.2 Assignment and Assumption of Membership Interests between ERI Creekside, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI Creekside to the Assignee. 10.3 Assignment and Assumption of Membership Interests between ERI Castle Creek, Inc., a Delaware corporation ("Assignor") and AMLI Residential Properties, LLC, a Delaware limited liability company ("Assignee") to assign the Assignor's 60% of the membership interests in AMLI Castle Creek to the Assignee. 10.4 Assignment and Assumption of Membership Interests between The Prudential Insurance Company of America, a New Jersey corporation ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 75% of the membership interests in AMLI at Oakhursts, LLC to the Assignee. 10.5 Assignment and Assumption of Membership Interests between The Prudential Insurance Company of America, a New Jersey corporation ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 80% of the membership interests in AMLI on Spring Mill LLC to the Assignee. 10.6 Assignment and Assumption of Membership Interests between OTR, an Ohio general partnership acting as duly authorized nominee on behalf of the State Teachers Retirement Board of Ohio ("Assignor") and AMLI Residential Properties, L.P., a Delaware limited partnership ("Assignee") to assign the Assignor's 90% of the membership interests in AMLI at Danada L.L.C. to the Assignee. 23.1 Independent Auditors' Consent 41 EX-10.1 3 exh_101.txt EXHIBIT 10.1 - ------------ ASSIGNMENT AND ASSUMPTION OF LIMITED PARTNERSHIP INTERESTS ----------------------------------------------------------- THIS ASSIGNMENT (this "Assignment") is made and entered into as of the 14th day of August, 2003, by and between ERI REGENTS CREST, INC., a Delaware corporation ("Assignor"), and AMLI RESIDENTIAL PROPERTIES, LLC, a Delaware limited liability company ("Assignee"). RECITALS -------- A. Assignor is the sole limited partner in AMLI at Regents Crest, L.P., a Delaware limited partnership (the "Partnership"), pursuant to that certain Agreement of Limited Partnership of AMLI at Regents Crest, L.P., dated as of December 29, 1998, as amended (the "Partnership Agreement"; capitalized terms used herein and not defined herein shall have the meanings given them in the Partnership Agreement). B. The Partnership owns real property located in Overland Park, Kansas, upon which the Partnership owns, operates and manages an apartment community known as Amli at Regents Crest (the "Community"). C. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's limited partnership interests in the Partnership (the "Assigned Interests") and all interests, rights and obligations under the Partnership Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of, the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Partnership relating or allocable to the Assigned Interests. 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon the execution hereof Assignee shall (a) pay to Assignor cash in the amount of $17,826,160, determined in accordance with Schedule A hereto and as adjusted in accordance with Section 4 below (the "Purchase Price") and (b) assume existing mortgage debt on the Community allocable to the Assigned Interests outstanding as of the Effective Date. The Purchase Price shall be paid not later than 11:00 a.m., Chicago time, on the Effective Date by wire transfer to such account as shall be provided in writing by Assignor. 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment (the "Effective Date"). For all periods up to, but not including, the Effective Date, that portion of the net profits or net losses of the Partnership that are allocable to the Assigned Interests in accordance with the Partnership Agreement shall be credited, charged or distributed, as the case may be, to Assignor and not to Assignee and, for all periods from and after the Effective Date, that portion of the net profits or net losses of the Partnership allocable to the Assigned Interests shall be credited, charged or distributed, as the case may be, to Assignee and not to Assignor. 1 4. PRORATIONS. (a) On or prior to October 31, 2003, Assignor and Assignee shall agree upon the prorations set forth in this Section 4. Any payments owing as a result of such prorations shall be made as soon as reasonably practicable after such agreement is reached. For purposes of making the prorations, the Effective Date shall belong to Assignee and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to Assignee and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to Assignor. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated; provided, however, that an initial estimated proration of Taxes for all periods prior to the Effective Date has been reflected in the Purchase Price as set forth on Schedule A hereto. If a final tax bill for any period is available prior to the proration under this Section 4(a), the Taxes for such period shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration, with a final and complete proration of Taxes for all other tax periods, for which final tax bills are not available prior to the proration under this Section 4(a), to be made pursuant to Section 4(b); provided, that, if the final tax bills for all periods are available prior to the proration under this Section 4(a), the Taxes and all other items to be prorated shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration. 2. REVENUES. All revenues and income, including, but not limited to, collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases in effect on the Effective Date, shall be prorated. Assignee and AMLI Residential Properties, L.P., a Delaware limited partnership ("AMLI"), agree to make all reasonable efforts to collect, and to cause the Partnership to collect, any rents applicable to the period prior to the Effective Date. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 3. UTILITIES. Utilities, including water, sewer, electric, and gas, based upon the last reading of meters prior to the Effective Date shall be prorated. The Partnership shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Partnership based upon the periods to which such service contracts relate shall be prorated. 5. DEBT SERVICE. All costs and expenses related to the outstanding debt obligations of the Partnership, including interest expense and amortization of the principal balance, shall be prorated. 2 6. EXPENSES. All other costs and expenses of the Partnership not otherwise specifically set forth in this Section 4(a) shall be prorated. 7. DEPOSITS. Non-refundable deposits held by the Partnership which would be available for distribution to the Partners if the Partnership were to be liquidated shall be prorated. (b) If a final proration with respect to any Taxes cannot be made under this Section 4 on or before October 31, 2003, then Assignee and Assignor agree to perform a final proration of such Taxes and any other remaining undetermined items on a fair and equitable basis as soon as the applicable tax bills for such tax periods are available, with final adjustment to be made as soon as reasonably possible thereafter. Payments in connection with the final adjustment shall be made as soon as reasonably practicable after such final adjustment is agreed upon. (c) Assignor shall have reasonable access to, and the right to inspect and audit, the Partnership's books to confirm the prorations. Any such audit shall be at Assignor's sole cost and expense; provided, however, that in the event any such audit reveals an underpayment to Assignor in excess of $5,000, then Assignee shall pay for the cost and expense of such audit. 5. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party. The Assigned Interests represent all of Assignor's ownership interest in the Partnership. (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 6. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. 3 (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 7. ASSUMPTION BY ASSIGNEE. Assignee hereby (i) accepts the Assigned Interests and all rights of Assignor under the Partnership Agreement in respect thereof and (ii) assumes (A) all of the liabilities of the Partnership as they relate to the Assigned Interests accruing on or after the date of this Assignment and (B) all obligations of Assignor under the Partnership Agreement in respect of the Assigned Interests, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Partnership or the Assigned Interests incurred or accrued, whether known or unknown, as of the date hereof. 8. GUARANTOR. AMLI hereby confirms its agreement to act as guarantor of all of Assignee's payment obligations to Assignor under this Assignment. 9. SALE OF COMMUNITY. For a period of two (2) years from the Effective Date, neither AMLI nor any of its Affiliates shall cause the Partnership to sell or otherwise dispose of the Community (other than with respect to any condemnation or other involuntary disposition). 10. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. 11. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 12. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignee, the Partnership, AMLI or their Affiliates, as the case may be, Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignee, the Partnership and AMLI and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. 4 (b) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignor or its Affiliates, as the case may be, each of Assignee, the Partnership and AMLI, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, the Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Partnership, AMLI or the other Assignee Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. 13. INDEMNIFICATION. (a) Assignee hereby agrees to indemnify and hold Assignor free and harmless from and against any and all actions, causes of action, or suits brought against it by third parties (each, a "Third Party Claim") for losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Damages") arising from any such Third Party Claim, incurred by Assignor as a result of or relating to Assignor's status as a limited partner of the Partnership, except to the extent such Damages are caused by the gross negligence, willful misconduct or fraud of Assignor. (b) Assignor shall give notice as promptly as practicable to Assignee of the assertion of any Third Party Claim; provided, that the failure of Assignor to give notice shall not relieve Assignee of its obligations under this Section 14 except to the extent (if any) that Assignee shall have been prejudiced thereby. Assignee may, at its election and own expense, upon notice to Assignor, assume the defense thereof. If Assignee assumes such defense, Assignor shall have the right (but not the obligation) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Assignee. Whether or not Assignee chooses to defend or prosecute any such Third Party Claim, each of the parties hereto shall cooperate in the defense or prosecution thereof. 14. TAX MATTERS. Pursuant to Section 708(b)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), the sale of the Assigned Interests pursuant to this Assignment will cause the Partnership to terminate for federal income tax purposes only on the Effective Date and the taxable year of the Partnership to end. AMLI shall (i) cause to be prepared all federal and state income and franchise tax returns of the Partnership for its taxable year ending on the Effective Date (the "Pre-Termination Tax Returns") and (ii) provide all such Pre-Termination Tax Returns to Assignor for its review and approval, which approval shall not be unreasonably withheld or delayed, at least 5 business days prior to the proposed filing date of such Pre-Termination Tax Returns. The costs of preparing the Pre-Termination Tax Returns shall be borne by the Partnership. AMLI shall continue to act as the "tax matters partner," as such term is defined in Section 6231(a)(7) of the Code, of the Partnership for all taxable years of the Partnership ending on or prior to the Effective Date. AMLI shall promptly notify Assignor of any administrative or judicial tax proceeding with respect to any Pre-Termination Tax Returns of the Partnership. In its capacity as the tax matters partner of the Partnership, AMLI shall not (i) take any action which could have an adverse 5 effect on Assignor without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed, or (ii) refrain from taking any action, which failure to act could have an adverse effect on Assignor, without giving Assignor prompt and timely advance notice thereof and the opportunity to act Without limitation on the foregoing, AMLI shall not file or permit the Partnership to file any amended federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date, or make or revoke or permit the Partnership to make or revoke any tax election or other determination with respect thereto, without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed. AMLI shall, and shall cause the Partnership (as constituted after the Effective Date) to, cooperate fully with Assignor, to the extent reasonably requested by Assignor and at Assignor's cost and expense (only to the extent such cooperation with Assignor results in incremental costs and expenses to be incurred by AMLI and/or the Partnership), in connection with any audit, litigation or other tax proceeding involving Assignor with respect to any federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date. 15. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 16. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants, indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 17. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 18. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said State. 19. RECOURSE TO AMLI. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF AMLI AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF AMLI, ASSIGNEE OR THE PARTNERSHIP. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. * * * * * 6 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- ERI REGENTS CREST, INC. By: /s/ Hugh Scott ------------------------------ Name: Hugh Scott Title: President ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, LLC By: AMLI Residential Properties, L.P., Its managing member By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 12(b) only: ---------------------------------- AMLI AT REGENTS CREST, L.P. By: AMLI Residential Properties, L.P., Its general partner By: AMLI Residential Properties Trust, Its general partner By: ------------------------------ Name: Fred Shapiro Title: Senior Vice President 7 For purposes of Sections 4(a)(2), 8, 9, 12(b) and 14 only: ---------------------------------------------- AMLI RESIDENTIAL PROPERTIES, L.P. By: AMLI Residential Properties Trust Its general partner By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President 8 SCHEDULE A Calculation of Purchase Price Partnership Value $38,650,000 LESS: Partnership debt 14,632,275 Adjusted Partnership Value $24,017,725 Assignor's percentage interest 75% Value of Assignor's partnership interest $18,013,294 LESS: Assignor's share of unpaid real estate taxes accrued by the Partnership and relating to all periods prior to the Effective Date (1) $ 187,134 Purchase Price to be paid to Assignor by Assignee on the Effective Date $17,826,160 (1) This amount reflects the Assignor's pro rata portion of the Partnership's estimated real estate taxes for all periods prior to the Effective Date and which the Partnership has not yet paid as of the Effective Date. Because the Partnership makes distributions to its partners on a cash basis, this amount reflects the excess distributions received by Assignor from the Partnership as a result of non-payment of the taxes. The Purchase Price is, therefore, reduced by this amount. A final proration of the real estate taxes will be completed in accordance with Section 4 of the Assignment upon receipt by the Partnership of the final tax bill. 9 EX-10.2 4 exh_102.txt EXHIBIT 10.2 - ------------ ASSIGNMENT AND ASSUMPTION OF LIMITED PARTNERSHIP INTERESTS ---------------------------------------------------------- THIS ASSIGNMENT (this "Assignment") is made and entered into as of the 14th day of August, 2003, by and between ERI CREEKSIDE, INC., a Delaware corporation ("Assignor"), and AMLI RESIDENTIAL PROPERTIES, LLC, a Delaware limited liability company ("Assignee"). RECITALS -------- A. Assignor is the sole limited partner in AMLI at Creekside, L.P., a Delaware limited partnership (the "Partnership") pursuant to that certain Agreement of Limited Partnership of AMLI at Creekside, L.P., dated as of December 29, 1998 (the "Partnership Agreement"; capitalized terms used herein and not defined herein shall have the meanings given them in the Partnership Agreement). B. The Partnership owns real property located in Overland Park, Kansas, upon which the Partnership owns, operates and manages an apartment community known as Amli Creekside (the "Community"). C. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's limited partnership interests in the Partnership (the "Assigned Interests") and all interests, rights and obligations under the Partnership Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of, the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Partnership relating or allocable to the Assigned Interests. 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon the execution hereof Assignee shall pay to Assignor cash in the amount of $13,789,630, determined in accordance with Schedule A hereto and as adjusted in accordance with Sections 4 and 5 below (the "Purchase Price"). The Purchase Price shall be paid not later than 11:00 a.m., Chicago time, on the Effective Date by wire transfer to such account as shall be provided in writing by Assignor. 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment (the "Effective Date"). For all periods up to, but not including, the Effective Date, that portion of the net profits or net losses of the Partnership that are allocable to the Assigned Interests in accordance with the Partnership Agreement shall be credited, charged or distributed, as the case may be, to Assignor and not to Assignee and, for all periods from and after the Effective Date, that portion of the net profits or net losses of the Partnership allocable to the Assigned Interests shall be credited, charged or distributed, as the case may be to Assignee and not to Assignor. 1 4. PRORATIONS. (a) On or prior to October 31, 2003, Assignor and Assignee shall agree upon the prorations set forth in this Section 4. Any payments owing as a result of such prorations shall be made as soon as reasonably practicable after such agreement is reached. For purposes of making the prorations, the Effective Date shall belong to Assignee and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to Assignee and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to Assignor. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated; provided, however, that an initial estimated proration of Taxes for all periods prior to the Effective Date has been reflected in the Purchase Price as set forth on Schedule A hereto. If a final tax bill for any period is available prior to the proration under this Section 4(a), the Taxes for such period shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration, with a final and complete proration of Taxes for all other tax periods, for which final tax bills are not available prior to the proration under this Section 4(a), to be made pursuant to Section 4(b); provided, that, if the final tax bills for all periods are available prior to the proration under this Section 4(a), the Taxes and all other items to be prorated shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration. 2. REVENUES. All revenues and income, including, but not limited to collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases in effect on the Effective Date, shall be prorated. Assignee and AMLI Residential Properties, L.P., a Delaware limited partnership ("AMLI"), agree to make all reasonable efforts to collect, and to cause the Partnership to collect, any rents applicable to the period prior to the Effective Date. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 3. UTILITIES. Utilities, including water, sewer, electric, and gas, based upon the last reading of meters prior to the Effective Date shall be prorated. The Partnership shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Partnership based upon the periods to which such service contracts relate shall be prorated. 5. EXPENSES. All other costs and expenses of the Partnership not otherwise specifically set forth in this Section 4(a) shall be prorated. 2 6. DEPOSITS. Nonrefundable deposits held by the Partnership which would be available for distribution to the Partners if the Partnership were to be liquidated shall be prorated. (b) If a final proration with respect to any Taxes cannot be made under this Section 4 on or before October 31, 2003, then Assignee and Assignor agree to perform a final proration of such Taxes and any other remaining undetermined items on a fair and equitable basis as soon as the applicable tax bills for such tax periods are available, with final adjustment to be made as soon as reasonably possible thereafter. Payments in connection with the final adjustment shall be made as soon as reasonably practicable after such final adjustment is agreed upon. (c) Assignor shall have reasonable access to, and the right to inspect and audit, the Partnership's books to confirm the prorations. Any such audit shall be at Assignor's sole cost and expense; provided, however, that in the event any such audit reveals an underpayment to Assignor in excess of $5,000, then Assignee shall pay for the cost and expense of such audit. 5. EARNOUT. (a) For purposes of this Section 5, the terms set forth below shall have the following meanings. "Actual Revenues" means the actual Total Property Revenues for the Earnout Period. "Calculated NOI" means Actual Revenues less Projected Expenses. "Earnout Period" means the 12-month period beginning on the one-year anniversary of the first day of the first month following the Effective Date. "Projected Expenses" means $856,739. "Projected NOI" means $1,320,201. (b) Within 30 days after the end of the Earnout Period, Assignor and Assignee shall determine the earnout, if any, to be paid by Assignee to Assignor. If the Calculated NOI is equal to or less than the Projected NOI, then no payment under this Section 5(b) is required and the parties shall have no further obligations to each other under this Assignment. If the Calculated NOI exceeds the Projected NOI, then the value of the earnout (the "Earnout") shall equal (i) the difference between the Calculated NOI and the Projected NOI divided by (ii) 0.09. The payment by Assignee to Assignor shall equal the Earnout multiplied by 0.375. 3 (c) In no event shall the Earnout calculated pursuant to Section 5(b) of this Assignment, together with the earnout calculated pursuant to Section 5(b) of the Assignment and Assumption of Limited Partnership Interests (the "Castle Creek Agreement") of even date herewith between ERI Castle Creek, Inc. and AMLI Residential Properties, LLC (the "Castle Creek Earnout"), exceed $2,200,000. In the event that the Earnout plus the Castle Creek Earnout exceeds $2,200,000, the Earnout and the Castle Creek Earnout shall each be reduced in proportion to the actual earnouts calculated so that the total earnouts determined pursuant to this Section 5(b) and Section 5(b) of the Castle Creek Agreement equal $2,200,000. For example, if the Earnout as calculated equals $1,000,000 and the Castle Creek Earnout as calculated equals $1,500,000, then the Earnout would be reduced to $880,000 ($1000/$2500 x $2,200,000) and the Castle Creek Earnout would be reduced to $1,320,000 ($1500/$2500 x $2,200,000). The resulting payment to Assignor under this example with respect to Creekside would equal $880,000 x 0.375 or $330,000. 6. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party. The Assigned Interests represent all of Assignor's ownership interest in the Partnership. (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 7. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 4 8. ASSUMPTION BY ASSIGNEE. Assignee hereby (i) accepts the Assigned Interests and all rights of Assignor under the Partnership Agreement in respect thereof and (ii) assumes (A) all of the liabilities of the Partnership as they relate to the Assigned Interests accruing on or after the date of this Assignment and (B) all obligations of Assignor under the Partnership Agreement in respect of the Assigned Interests, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Partnership or the Assigned Interests incurred or accrued, whether known or unknown, as of the date hereof. 9. GUARANTOR. AMLI hereby confirms its agreement to act as guarantor of all of Assignee's payment obligations to Assignor under this Assignment. 10. SALE OF COMMUNITY. For a period of two (2) years from the Effective Date, neither AMLI nor any of its Affiliates shall cause the Partnership to sell or otherwise dispose of the Community (other than with respect to any condemnation or other involuntary disposition). 11. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. 12. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 13. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignee, the Partnership, AMLI or their Affiliates, as the case may be, Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignee, the Partnership and AMLI and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. (b) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignor or its Affiliates, as the case may be, each of Assignee, the Partnership and AMLI, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, the Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Partnership, AMLI or the other Assignee Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. 5 14. INDEMNIFICATION. (a) Assignee hereby agrees to indemnify and hold Assignor free and harmless from and against any and all actions, causes of action, or suits brought against it by third parties (each, a "Third Party Claim") for losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Damages") arising from any such Third Party Claim, incurred by Assignor as a result of or relating to Assignor's status as a limited partner of the Partnership, except to the extent such Damages are caused by the gross negligence, willful misconduct or fraud of Assignor. (b) Assignor shall give notice as promptly as practicable to Assignee of the assertion of any Third Party Claim; provided, that the failure of Assignor to give notice shall not relieve Assignee of its obligations under this Section 14 except to the extent (if any) that Assignee shall have been prejudiced thereby. Assignee may, at its election and own expense, upon notice to Assignor, assume the defense thereof. If Assignee assumes such defense, Assignor shall have the right (but not the obligation) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Assignee. Whether or not Assignee chooses to defend or prosecute any such Third Party Claim, each of the parties hereto shall cooperate in the defense or prosecution thereof. 15. TAX MATTERS. Pursuant to Section 708(b)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), the sale of the Assigned Interests pursuant to this Assignment will cause the Partnership to terminate for federal income tax purposes only on the Effective Date and the taxable year of the Partnership to end. AMLI shall (i) cause to be prepared all federal and state income and franchise tax returns of the Partnership for its taxable year ending on the Effective Date (the "Pre-Termination Tax Returns") and (ii) provide all such Pre-Termination Tax Returns to Assignor for its review and approval, which approval shall not be unreasonably withheld or delayed, at least 5 business days prior to the proposed filing date of such Pre-Termination Tax Returns. The costs of preparing the Pre-Termination Tax Returns shall be borne by the Partnership. AMLI shall continue to act as the "tax matters partner," as such term is defined in Section 6231(a)(7) of the Code, of the Partnership for all taxable years of the Partnership ending on or prior to the Effective Date. AMLI shall promptly notify Assignor of any administrative or judicial tax proceeding with respect to any Pre-Termination Tax Returns of the Partnership. In its capacity as the tax matters partner of the Partnership, AMLI shall not (i) take any action which could have an adverse effect on Assignor without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed, or (ii) refrain from taking any action, which failure to act could have an adverse effect on Assignor, without giving Assignor prompt and timely advance notice thereof and the opportunity to act. Without limitation on the foregoing, AMLI shall not file or permit the Partnership to file any amended federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date, or make or revoke or permit the Partnership to make or revoke any tax election or other determination with respect thereto, without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed. AMLI shall, and shall cause the Partnership (as constituted after the Effective Date) to, cooperate fully with Assignor, to the extent reasonably requested by Assignor and at Assignor's cost and expense (only to the extent such cooperation with Assignor results in incremental costs and expenses to be incurred by AMLI and/or the Partnership), in connection with any audit, litigation or other tax proceeding involving Assignor with respect to any federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date. 6 16. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 17. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants, indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 18. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 19. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said state. 20. RECOURSE TO AMLI. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF AMLI, AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF AMLI, ASSIGNEE OR THE PARTNERSHIP. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. * * * * * 7 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- ERI CREEKSIDE, INC. By: /s/ Hugh Scott ------------------------------ Name: Hugh Scott Title: President ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, LLC By: AMLI Residential Properties, L.P., Its managing member By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 13(b) only: ---------------------------------- AMLI AT CREEKSIDE, L.P. By: AMLI Residential Properties, L.P., Its general partner By: AMLI Residential Properties Trust, Its general partner By: ------------------------------ Name: Fred Shapiro Title: Senior Vice President 8 For purposes of Sections 4(a)(2), 9, 10, 13(b) and 15 only: ---------------------------------------------- AMLI RESIDENTIAL PROPERTIES, L.P. By: AMLI Residential Properties Trust Its general partner By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President 9 SCHEDULE A Calculation of Purchase Price Partnership Value $18,500,000 Assignor's percentage interest 75% Value of Assignor's partnership interest $13,875,000 LESS: Assignor's share of unpaid real estate taxes accrued by the Partnership and relating to all periods prior to the Effective Date (1) $ 85,370 Purchase Price to be paid to Assignor by Assignee on the Effective Date $13,789,630 (1) This amount reflects the Assignor's pro rata portion of the Partnership's estimated real estate taxes for all periods prior to the Effective Date and which the Partnership has not yet paid as of the Effective Date. Because the Partnership makes distributions to its partners on a cash basis, this amount reflects the excess distributions received by Assignor from the Partnership as a result of non-payment of the taxes. The Purchase Price is, therefore, reduced by this amount. A final proration of the real estate taxes will be completed in accordance with Section 4 of the Assignment upon receipt by me Partnership of the final tax bill. 10 EX-10.3 5 exh_103.txt EXHIBIT 10.3 - ------------ ASSIGNMENT AND ASSUMPTION OF LIMITED PARTNERSHIP INTERESTS ---------------------------------------------------------- THIS ASSIGNMENT (this "Assignment") is made and entered into as of the 14th day of August, 2003, by and between ERI CASTLE CREEK, INC., a Delaware corporation ("Assignor"), and AMLI RESIDENTIAL PROPERTIES, LLC, a Delaware limited liability company ("Assignee"). RECITALS -------- A. Assignor is the sole limited partner in AMLI at Castle Creek, L.P., a Delaware limited partnership (the "Partnership"), pursuant to that certain Agreement of Limited Partnership of AMLI at Castle Creek, L.P., dated as of December 29, 1998, as amended (the "Partnership Agreement"; capitalized terms used herein and not defined herein shall have the meanings given them in the Partnership Agreement). B. The Partnership owns real property located in Indianapolis, Indiana, upon which the Partnership owns, operates and manages an apartment community known as Amli at Castle Creek (the "Community"). C. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's limited partnership interests in the Partnership (the "Assigned Interests") and all interests, rights and obligations under the Partnership Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of, the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Partnership relating or allocable to the Assigned Interests. 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon the execution hereof Assignee shall pay to Assignor cash in the amount of $14,069,527, determined in accordance with Schedule A hereto and as adjusted in accordance with Sections 4 and 5 below (the "Purchase Price"). The Purchase Price shall be paid not later than 11:00 a,m., Chicago time, on the Effective Date by wire transfer to such account as shall be provided in writing by Assignor. 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment (the "Effective Date"). For all periods up to, but not including, the Effective Date, that portion of the net profits or net losses of the Partnership that are allocable to the Assigned Interests in accordance with the Partnership Agreement shall be credited, charged or distributed, as the case may be, to Assignor and not to Assignee and, for all periods from and after the Effective Date, that portion of the net profits or net losses of the Partnership allocable to the Assigned Interests shall be credited, charged or distributed, as the case may be, to Assignee and not to Assignor. 1 4. PRORATIONS. (a) On or prior to October 31, 2003, Assignor and Assignee shall agree upon the prorations set forth in this Section 4. Any payments owing as a result of such prorations shall be made as soon as reasonably practicable after such agreement is reached. For purposes of making the prorations, the Effective Date shall belong to Assignee and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to Assignee and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to Assignor. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated; provided, however, that an initial estimated proration of Taxes for all periods prior to the Effective Date has been reflected in the Purchase Price as set forth on Schedule A hereto. If a final tax bill for any period is available prior to the proration under this Section 4(a), the Taxes for such period shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration, with a final and complete proration of Taxes for all other tax periods, for which final tax bills are not available prior to the proration under this Section 4(a), to be made pursuant to Section 4(b); provided, that, if the final tax bills for all periods are available prior to the proration under this Section 4(a), the Taxes and all other items to be prorated shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration. 2. REVENUES. All revenues and income, including, but not limited to, collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases in effect on the Effective Date, shall be prorated. Assignee and AMLI Residential Properties, L,P., a Delaware limited partnership ("AMLI"), agree to make all reasonable efforts to collect, and to cause the Partnership to collect, any rents applicable to the period prior to the Effective Date. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 3. UTILITIES. Utilities, including water, sewer, electric, and gas, based upon the last reading of meters prior to the Effective Date shall be prorated. The Partnership shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Partnership based upon the periods to which such service contracts relate shall be prorated. 5. EXPENSES. All other costs and expenses of the Partnership not otherwise specifically set forth in this Section 4(a) shall be prorated. 2 6. DEPOSITS. Nonrefundable deposits held by the Partnership which would be available for distribution to the Partners if the Partnership were to be liquidated shall be prorated. (b) If a final proration with respect to any Taxes cannot be made under this Section 4 on or before October 31, 2003, then Assignee and Assignor agree to perform a final proration of such Taxes and any other remaining undetermined items on a fair and equitable basis as soon as the applicable tax bills for such tax periods are available, with final adjustment to be made as soon as reasonably possible thereafter. Payments in connection with the final adjustment shall be made as soon as reasonably practicable after such final adjustment is agreed upon. (c) Assignor shall have reasonable access to, and the right to inspect and audit, the Partnership's books to confirm the prorations. Any such audit shall be at Assignor's sole cost and expense; provided, however, that in the event any such audit reveals an underpayment to Assignor in excess of $5,000, then Assignee shall pay for the cost and expense of such audit. 5. EARNOUT. (a) For purposes of this Section 5, the terms set forth below shall have the following meanings. "Actual Revenues" means the actual Total Property Revenues for the Earnout Period. "Calculated NOI" means Actual Revenues less Projected Expenses. "Earnout Period" means the 12-month period beginning on the one-year anniversary of the first day of the first month following the Effective Date. "Projected Expenses" means $1,197,740. "Projected NOI" means $1,761,853. (b) Within 30 days after the end of the Earnout Period, Assignor and Assignee shall determine the earnout, if any, to be paid by Assignee to Assignor. If the Calculated NOI is equal to or less than the Projected NOI, then no payment under this Section 5(b) is required and the parties shall have no further obligations to each other under this Assignment. If the Calculated NOI exceeds the Projected NOI, then the value of the earnout (the "Earnout") shall equal (i) the difference between the Calculated NOI and the Projected NOI divided by (ii) 0.09. The payment by Assignee to Assignor shall equal the Earnout multiplied by 0.30. 3 (c) In no event shall the Earnout calculated pursuant to Section 5(b) of this Assignment, together with the earnout calculated pursuant to Section 5(b) of the Assignment and Assumption of Limited Partnership Interests (the "Creekside Agreement") of even date herewith between ERI Creekside, Inc. and AMLI Residential Properties, LLC (the "Creekside Earnout"), exceed $2,200,000. In the event that the Earnout plus the Creekside Earnout exceeds $2,200,000, the Earnout and the Creekside Earnout shall each be reduced in proportion to the actual earnouts calculated so that the total earnouts determined pursuant to this Section 5(b) and Section 5(b) of the Creekside Agreement equal $2,200,000. For example, if the Earnout as calculated equals $1,000,000 and the Creekside Earnout as calculated equals $1,500,000, then the Earnout would be reduced to $880,000 ($1000/$2500 x $2,200,000) and the Creekside Earnout would be reduced to $1,320,000 ($1500/$2500 x $2,200,000). The resulting payment to Assignor under this example with respect to Castle Creek would equal $880,000 x 0.30 or $264,000. 6. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby, This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party. The Assigned Interests represent all of Assignor's ownership interest in the Partnership. (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 7. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby, This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority. 4 8. ASSUMPTION BY ASSIGNEE. Assignee hereby (i) accepts the Assigned Interests and all rights of Assignor under the Partnership Agreement in respect thereof and (ii) assumes (A) all of the liabilities of the Partnership as they relate to the Assigned Interests accruing on or after the date of this Assignment and (B) all obligations of Assignor under the Partnership Agreement in respect of the Assigned Interests, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Partnership or the Assigned Interests incurred or accrued, whether known or unknown, as of the date hereof. 9. GUARANTOR. AMLI hereby confirms its agreement to act as guarantor of all of Assignee's payment obligations to Assignor under this Assignment. 10. SALE OF COMMUNITY. For a period of two (2) years from the Effective Date, neither AMLI nor any of its Affiliates shall cause the Partnership to sell or otherwise dispose of the Community (other than with respect to any condemnation or other involuntary disposition). 11. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. 12. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 13. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignee, the Partnership, AMLI or their Affiliates, as the case may be, Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignee, the Partnership and AMLI and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. (b) As of the Effective Date, except as explicitly provided in this Assignment or except where such liabilities arise from or are caused by the gross negligence, willful misconduct or fraud of Assignor or its Affiliates, as the case may be, each of Assignee, the Partnership and AMLI, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, the Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Partnership, AMLI or the other Assignee Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification) in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. 5 14. INDEMNIFICATION. (a) Assignee hereby agrees to indemnify and hold Assignor free and harmless from and against any and all actions, causes of action, or suits brought against it by third parties (each, a "Third Party Claim") for losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Damages") arising from any such Third Party Claim, incurred by Assignor as a result of or relating to Assignor's status as a limited partner of the Partnership, except to the extent such Damages are caused by the gross negligence, willful misconduct or fraud of Assignor. (b) Assignor shall give notice as promptly as practicable to Assignee of the assertion of any Third Party Claim; provided, that the failure of Assignor to give notice shall not relieve Assignee of its obligations under this Section 14 except to the extent (if any) that Assignee shall have been prejudiced thereby. Assignee may, at its election and own expense, upon notice to Assignor, assume the defense thereof. If Assignee assumes such defense, Assignor shall have the right (but not the obligation) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Assignee. Whether or not Assignee chooses to defend or prosecute any such Third Party Claim, each of the parties hereto shall cooperate in the defense or prosecution thereof. 15. TAX MATTERS. Pursuant to Section 708(b)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), the sale of the Assigned Interests pursuant to this Assignment will cause the Partnership to terminate for federal income tax purposes only on the Effective Date and the taxable year of the Partnership to end. AMLI shall (i) cause to be prepared all federal and state income and franchise tax returns of the Partnership for its taxable year ending on the Effective Date (the "Pre-Termination Tax Returns") and (ii) provide all such Pre-Termination Tax Returns to Assignor for its review and approval, which approval shall not be unreasonably withheld or delayed, at least 5 business days prior to the proposed filing date of such Pre-Termination Tax Returns. The costs of preparing the Pre-Termination Tax Returns shall be borne by the Partnership. AMLI shall continue to act as the "tax matters partner," as such term is defined in Section 6231(a)(7) of the Code, of the Partnership for all taxable years of the Partnership ending on or prior to the Effective Date. AMLI shall promptly notify Assignor of any administrative or judicial tax proceeding with respect to any Pre-Termination Tax Returns of the Partnership. In its capacity as the tax matters partner of the Partnership, AMLI shall not (i) take any action which could have an adverse effect on Assignor without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed, or (ii) refrain from taking any action, which failure to act could have an adverse effect on Assignor, without giving Assignor prompt and timely advance notice thereof and the opportunity to act. Without limitation on the foregoing, AMLI shall not file or permit the Partnership to file any amended federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date, or make or revoke or permit the Partnership to make or revoke any tax election or other determination with respect thereto, without the prior written consent of Assignor, which consent shall not be unreasonably withheld or delayed. AMLI shall, and shall cause the Partnership (as constituted after the Effective Date) to, cooperate fully with Assignor, to the extent reasonably requested by Assignor and at Assignor's cost and expense (only to the extent such cooperation with Assignor results in incremental costs and expenses to be incurred by AMLI and/or the Partnership), in connection with any audit, litigation or other tax proceeding involving Assignor with respect to any federal or state income or franchise tax return of the Partnership for any taxable year of the Partnership ending on or prior to the Effective Date. 6 16. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 17. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants, indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 18. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 19. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said state. 20. RECOURSE TO AMLI. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF AMLI, AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF AMLI, ASSIGNEE OR THE PARTNERSHIP. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. * * * * * 7 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- ERI CASTLE CREEK, INC. By: /s/ Hugh Scott ------------------------------ Name: Hugh Scott Title: President ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, LLC By: AMLI Residential Properties, L.P., Its managing member By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 13(b) only: ---------------------------------- AMLI AT CASTLE CREEK, L.P. By: AMLI Residential Properties, L.P., Its general partner By: AMLI Residential Properties Trust, Its general partner By: ------------------------------ Name: Fred Shapiro Title: Senior Vice President 8 For purposes of Sections 4(a)(2), 9, 10, 13(b) and 15 only: ---------------------------------------------- AMLI RESIDENTIAL PROPERTIES, L.P. By: AMLI Residential Properties Trust Its general partner By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President 9 SCHEDULE A Calculation of Purchase Price Partnership Value $23,850,000 Assignor's percentage interest 60% Value of Assignor's partnership interest $14,310,000 LESS: Assignor's share of unpaid real estate taxes accrued by the Partnership and relating to all periods prior to the Effective Date (1) $ 240,473 Purchase Price to be paid to Assignor by Assignee on the Effective Date $14,069,527 (1) This amount reflects the Assignor's pro rata portion of the Partnership's estimated real estate taxes for all periods prior to the Effective Date and which the Partnership has not yet paid as of the Effective Date. Because the Partnership makes distributions to its partners on a cash basis, this amount reflects the excess distributions received by Assignor from the Partnership as a result of non-payment of the taxes. The Purchase Price is, therefore, reduced by this amount. A final proration of the real estate taxes will be completed in accordance with Section 4 of the Assignment upon receipt by the Partnership of the final tax bill. 10 EX-10.4 6 exh_104.txt EXHIBIT 10.4 - ------------ ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS ------------------------------------------------- THIS ASSIGNMENT (this "Assignment" is made and entered into as of the 25th day of August, 2003, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Assignor"), and AMLI RESIDENTIAL PROPERTIES L.P., a Delaware limited partnership ("Assignee"). RECITALS -------- A. Assignor owns 75% of the membership interests, and Assignee owns 25% of the membership interests, in AMLI at Oakhurst, LLC. a Delaware limited liability company (the "Company"), pursuant to that certain Operating Agreement of AMLI at Oakhurst, LLC, dated as of August 25, 2003 (the "Operating Agreement"; capitalized terms used herein and not defined herein shall have the meanings given them in the Operating Agreement). B. The Company owns real property located in Aurora, Illinois, upon which the Company owns, operates and manages an apartment community known as AMLI at Oakhurst North (the "Community"). C. Prior to the date hereof, the Community was owned by Wells Oakhurst, L.P., a Delaware limited partnership (the "Partnership"). D. On the date hereof, the Partnership contributed the Community to the Company in exchange for 100% of the membership interests in the Company, and immediately thereafter distributed such membership interests to Assignor and Assignee in the relative proportions identified in Recital A above. E. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's membership interests in the Company (the "Assigned Interests") and all interests, rights and obligations under the Operating Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of, the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Company relating or allocable to the Assigned Interests. 1 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon execution hereof Assignee shall pay to Assignor cash in the amount of $37,500,000 (the "Purchase Price"). The Purchase Price, plus or minus, as applicable, the amount of the estimated prorations determined in accordance with Section 5(a) below and as set forth on Schedule A hereto, shall be paid by wire transfer to such account as shall be provided in writing by Assignor; provided, however, that such payment shall be deposited to Assignor's designated account no later than 11:00 a.m., Chicago Time, on the Effective Date; and provided further, that if such payment is not received by Assignor prior to 11:00 a.m., Chicago Time, on the Effective Date, the parties shall recalculate the proration amounts pursuant to Section 5(a) as of the day following the Effective Date, and such later date shall be the "Effective Date" for purposes of this Assignment. 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment, as may be adjusted pursuant to Section 2 above (the "Effective Date"). 4. CASH FLOW DISTRIBUTIONS. On or before the Effective Date, all Net Cash Flow (as defined in the Partnership Agreement) and Capital Event Proceeds (as defined in the Partnership Agreement) of the Partnership for periods ending prior to the Effective Date and which have not previously been distributed, shall be distributed to Assignor and Assignee, in their capacities as partners in the Partnership, in accordance with the Agreement of Limited Partnership of Wells Oakhurst, L.P., dated as of June 9, 1998 (the "Partnership Agreement"), between Assignor and Assignee. 5. PRORATIONS. (a) On the Effective Date, Assignor and Assignee shall agree upon the estimated proration amounts with respect to the Community determined in accordance with Section 5(b), and such estimated proration amounts shall be, as applicable, added to or deducted from the Purchase Price as set forth in Schedule A hereto. (b) On or before October 31, 2003, and in accordance with Sections 5(c), 5(d) and 5(e) below, Assignor and Assignee shall agree upon final proration amounts with respect to the Community for the items set forth in Sections 5(b)(2), 5(b)(3) and 5(b)(4) below. As soon as practicable after final bills for Taxes (as defined below) become available for the Community, but in no event later than August 31, 2004. Assignor and Assignee shall agree upon the final proration amounts for Taxes, as determined in accordance with Section 5(b)(1) below. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority on the Community and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated, based upon the number of days in the applicable period. 2 2. COLLECTED RENT. All collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases for the Community in effect on the Effective Date shall be prorated based upon the number of days in the month. Uncollected rent and other income shall not be prorated; provided, however, that rent collected after the Effective Date which relates to periods prior to the Effective Date shall be prorated. Assignee agrees to make all reasonable efforts to collect, and to cause the Company to collect, any rents applicable to the period prior to the Effective Date. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 3. UTILITIES. Utilities, including water, sewer, electric and gas, for the Community shall be prorated based upon usage of such utilities, as shown by the last reading of meters prior to the Effective Date. The Company shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Partnership for the Community based upon the periods to which such service contracts relate (e.g., telephone, internet services, lawn maintenance, cleaning, etc.) shall be prorated based upon the number of days in the applicable period. Fees and charges for services not in the nature of regular or periodic services (e.g., building repairs) shall not be prorated. 5. DEPOSITS. Nonrefundable deposits held by the Partnership in connection with the Community which have not yet been recognized as income by the Partnership (i.e., amounts received in the current month) shall be prorated based upon the number of days in the month. Items already recognized as income by the Partnership in prior periods shall not be prorated. (c) The proration amounts in this Section 5 shall be calculated as if such prorations were being made between the Partnership and the Company as of the Effective Date and only with respect to those items directly related to the Community. For purposes of making the prorations, the Effective Date shall belong to the Company and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to the Company and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to the Partnership. (d) After each of the final prorations is completed and agreed upon by the parties, the final proration amounts shall be reconciled with the estimated proration amounts that were added to or deducted from the Purchase Price on the Effective Date pursuant to Section 2. If as a result of such reconciliation: (i) amounts are owed by Assignor to Assignee in excess of the estimated proration amounts, then Assignor shall pay 75% of such amounts to Assignee; or (ii) if amounts are owed by Assignee to Assignor in excess of the estimated proration amounts, then Assignee shall pay 75% of such amounts to Assignor. In either case, payment shall be made as soon as practicable (but in no event later than 15 days) after such agreement is reached. 3 (e) With respect to the final proration of Taxes, in the event Assignee shall decide to appeal a final tax bill with the appropriate governmental agency, the parties shall nonetheless agree upon the proration of such final tax bill and shall reconcile such proration in accordance with Section 5(d) above. Thereafter, notwithstanding anything to the contrary contained in this Section 5, if such appeal results in a refund of Taxes paid by the Company, then such refund shall be prorated as agreed upon by the parties, and payment of Assignor's prorated portion of such refund shall be made as soon as practicable (but in no event later than 15 days) after such agreement is reached. (f) Assignor shall have reasonable access to, and the right to inspect and audit, at its own cost and expense, the books of the Company, with respect to the Community, to confirm the final prorations, and Assignee shall cooperate, and shall cause the Company to cooperate, with Assignor in good faith with respect to such inspections and audits. 6. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party. The Assigned Interests represent all of Assignor's ownership interest in the Company. (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority, which has not previously been obtained. (d) (i) Assignor meets the requirements of a "qualified professional asset manager" as defined in Part V(a) of Prohibited Transaction Exemption 84-14 granted by the U.S. Department of Labor ("PTE 84-14"); (ii) Assignor is entering into this Assignment on behalf of an "investment fund" as described in Part V(b) of PTE 84- 14; (iii) the terms of this Assignment have been negotiated on behalf of the investment fund by the Assignor and the Assignor has made the decision on behalf of the investment fund to enter into this Assignment; (iv) the terms of this Assignment have been negotiated and determined at arm's length, as such terms would be negotiated and determined by unrelated parties; and (v) neither the Assignor nor any affiliate (as defined in Part V(d) of PTE 84-14) thereof, nor any owner, direct or indirect, of a five percent or more interest in the Assignor, has, within the previous ten years, been convicted or released from imprisonment as a result of the crimes set forth in Part I(g) of PTE 84-14. 4 7. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority, which has not previously been obtained. (c) Neither Assignee nor any of its affiliates (within the meaning of Part V(c) of PTE 84-14) has, or during the immediately preceding year has exercised, the authority to appoint or terminate Assignor as investment manager of any assets of the employee benefit plans whose assets are held by Assignor or to negotiate the terms of any management agreement with Assignor on behalf of any such plan. (d) The transaction contemplated by this Assignment is not specifically excluded by Part I(b) of PTE 84-14. (e) Assignee is not a related party of Assignor (as defined in V(h) of PTE 84-14). (f) The term of this Assignment have been negotiated and determined at arm's length, as such terms would be negotiated and determined by unrelated parties. 8. ASSUMPTION BY ASSIGNEE. Assignee hereby: (i) accepts the Assigned Interests and all rights of Assignor under the Operating Agreement in respect thereof; and (ii) assumes (A) all of the liabilities, obligations and duties of Assignor and the Company as they relate to the Assigned Interests accruing on or after the Effective Date and (B) all of the liabilities, obligations and duties of Assignor and the Company under the Operating Agreement in respect of the Assigned Interests, accruing on or after the Effective Date, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities, obligations or duties assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Company or the Assigned Interests incurred or accrued, whether known or unknown, as of the Effective Date. 9. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. 10. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 5 11. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment, Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever. Assignee, the Company and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever, fixed or contingent, known or unknown, asserted or unasserted (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement. (b) As of the Effective Date, except as explicitly provided in this Assignment, each of Assignee and the Company, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Company or the other Assignee Parties of any kind and nature whatsoever, fixed or contingent, known or unknown, asserted or unasserted (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement. (c) Notwithstanding anything to the contrary in paragraphs (a) and (b) above, nothing in this Section 11 shall be construed as a waiver or release by or in favor of either party with respect to any rights either of them may have pursuant to this Assignment. 12. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 13. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants, indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 14. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 15. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said state. 16. RECOURSE TO ASSIGNEE. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF ASSIGNEE AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS' OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF ASSIGNEE OR THE COMPANY. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. 6 17. INDEMNIFICATION. (a) Assignee shall indemnify, defend and hold Assignor harmless for, from and against any and all actions, causes of action or suits brought against it by third parties (each, a "Third Party Claim") for liabilities, losses, costs, damages and expenses, including, without limitation, reasonable attorneys fees and other reasonable costs incurred in the investigation, defense and settlement of the matter (collectively, the "Damages") arising from such Third Party Claim, suffered or incurred by Assignor in respect of any facts, events, circumstances or conditions occurring, arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement, except to the extent such Damages are caused by the gross negligence, willful misconduct or fraud of Assignor. (b) Assignor shall notify Assignee in writing of a Third Party Claim as promptly as practicable; provided, that the failure of Assignor to give notice shall not relieve Assignee of its obligations under this Section 17 except to the extent (if any) that Assignee shall have been prejudiced thereby. Assignee may, at its election and own expense, upon notice to Assignor, assume the defense thereof. If Assignee assumes such defense, Assignor shall have the right (but not the obligation) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Assignee. If Assignee assumes such defense, Assignor agrees to give Assignee full authority to defend the Third Party Claim; provided, however, that Assignee shall have no authority to enter into any settlement without Assignor's express prior written consent. Whether or not Assignee chooses to defend or prosecute any such Third Party Claim, each of the parties hereto shall cooperate in the defense or prosecution thereof. 18. DISCLAIMER. Assignor has not made, and Assignee acknowledges that Assignor has not made, any warranty or representation, express or implied, written or oral, statutory or otherwise concerning or relating to the Company or Community, including, but not limited to, the following: (i) the condition of title to the Community; (ii) the nature, physical condition, safety or other aspect of the Community or any component thereof, including without limitation, plumbing, sewer, heating, ventilation, electrical systems, roofing, air conditioning, foundations, soils and geology; (iii) the income or expense as generated, paid or incurred in connection with the Community or Company, or other economic status of the Community or the Company; (iv) the accuracy of any statements, calculations or conditions stated or set forth in any documents, instruments, agreements to which Company is a party, which are binding on Company or the Community, or which relate or are applicable to the Community or Company, including, but not limited to, title policies, surveys, floor plans, leases, service contracts, vendor agreements, reports, environmental assessments, soils reports, rent rolls, pro formas, revenue and expense projections and other Company and Community books and records (the "Company Material"); (v) the suitability of the Community for any intended use, including, without limitations, as depicted on the Company Materials; (vi) the dimensions of the Community or lot size; (vii) the status or compliance of the Company or Community with any of the Company Materials; (viii) the status of and compliance with the current zoning or governmental approvals of the Community; (ix) the compliance of the Company with any federal, state or local laws, ordinances, statutes, rules and regulations; (x) the existence or absence of Hazardous Materials (as defined below) or mold or other microbial agent or matter in, on, about, under or affecting the Community; (xi) the compliance of the Community with Hazardous Waste Laws (as defined below) or any other federal, state or local laws, ordinances, statutes, rules or regulations including, without limitation, the Fair Housing Act Amendments of 1988 and 7 the Americans with Disabilities Act; or (xii) the merchantability, habitability or fitness of the Community or any portion thereof for any particular purpose. The term "Hazardous Materials" shall mean any substance, chemical, waste or material that is or becomes regulated by any federal, state or local governmental authority because of its toxicity. infectiousness, radioactivity, explosiveness, ignitability, corrosiveness or reactivity including, without limitation, those substances regulated by any hazardous waste laws. For purposes of this agreement, "Hazardous Materials Laws" means any local, federal or state statute, ordinance, code, law, rule or regulation relating to environmental contamination, petroleum products, asbestos and pollutants. As a result, Assignee is acquiring the Assigned Interests with the understanding that the Community and other assets of the Company are in their "AS IS," "WHERE IS" and "WITH ALL FAULTS" condition. 19. ATTORNEYS FEES. If any suit is brought by either party to this Assignment against the other regarding the subject matter hereof, the prevailing party shall be entitled to recover, in addition to any other relief granted, reasonable attorneys fees and expenses of litigation. 20. ENTIRE AGREEMENT. This Assignment contains all of the understandings and agreements of whatsoever kind and nature existing between Assignor and Assignee with respect to the subject matter hereof, and any and all other prior agreements between the parties with respect to such subject matter are hereby superseded. 21. HEADINGS. All headings used herein are inserted for convenience and ease of reference only and shall not be considered in the construction or interpretation of any provision of this Assignment. 22. SEVERABILITY. If any provisions of this Assignment shall be held by a court of competent jurisdiction to be contrary to law or public policy, or otherwise unenforceable, the remaining provisions shall remain in full force and effect and a court of competent jurisdiction shall supply a provision or provisions to replace the affected provision(s) which most closely approximates the original intent of the parties. * * * * * 8 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Damian P. Manolis ------------------------------ Name: Damian P. Manolis Title: Vice President ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, L.P. By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 11(b) only: ---------------------------------- AMLI AT OAKHURST, LLC By: AMLI Residential Properties, L.P, Its managing member By: AMLI Residential Properties Trust, Its general partner By: ------------------------------ Name: Fred Shapiro Title: Senior Vice President 9 SCHEDULE A Calculation of Purchase Price Company Value $50,000,000.00 Assignor's percentage interest 75% Purchase Price for Assignor's membership interest $37,500,000.00 LESS: Assignor's estimated pro rata share of the Partnership's income and expenses related to the Community as of the Effective Date determined in accordance with Section 5(a) of the Assignment $ 417,062.33 Net cash amount to be paid to Assignor by Assignee on the Effective Date $37,082,937.68 10 EX-10.5 7 exh_105.txt EXHIBIT 10.5 - ------------ ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS ------------------------------------------------- THIS ASSIGNMENT (this "Assignment") is made and entered into as of the 25th day of August, 2003, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Assignor"), and AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership ("Assignee"). RECITALS -------- A. Assignor owns 80% of the membership interests, and Assignee owns 20% of the membership interests, in Landmark on Spring Mill LLC, a Delaware limited liability company (the "Company"), pursuant to that certain Operating Agreement of Landmark on Spring Mill LLC dated as of April 15, 1999 (the "Operating Agreement"; capitalized terms used herein and not defined herein shall have the meanings given them in the Operating Agreement). B. The Company owns real property located in Washington Township, Hamilton County, Indiana, upon which the Company owns, operates and manages an apartment community known as Landmark on Spring Mill (the "Community"). C. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's membership interests in the Company (the "Assigned Interests") and all interests, rights and obligations under the Operating Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of, the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Company relating or allocable to the Assigned Interests. 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon execution hereof Assignee shall pay to Assignor cash in the amount of $30,000,000 (the "Purchase Price"). The Purchase Price, plus or minus, as applicable, the amount of the estimated prorations determined in accordance with Section 5(a) below and as set forth on Schedule A. shall be paid by wire transfer to such account as shall be provided in writing by Assignor; provided, however, that such payment shall be deposited to Assignor's designated account no later than 11:00 a.m., Chicago Time, on the Effective Date; and provided further, that if such payment is not received by Assignor prior to 11 a.m., Chicago Time, on the Effective Date, the parties shall recalculate the proration amounts pursuant to Section 5(a) as of the day following the Effective Date, and such later date shall be the "Effective Date" for purposes of this Assignment. 1 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment, as may be adjusted pursuant to Section 2 above (the "Effective Date"). 4. CASH FLOW DISTRIBUTIONS. On or before the Effective Date, all Operating Cash Flow and Extraordinary Cash Flow of the Company for periods ending prior to the Effective Date and which have not previously been distributed, shall be distributed to Assignor in accordance with the Operating Agreement. 5. PRORATIONS. (a) On the Effective Date, Assignor and Assignee shall agree upon the estimated proration amounts determined in accordance with Section 5(b), and such estimated proration amounts shall be, as applicable, added to or deducted from, the Purchase Price as set forth in Schedule A hereto. (b) On or before October 31, 2003, and in accordance with Sections 5(c) below, Assignor and Assignee shall agree upon final proration amounts for the items set forth in Sections 5(b)(2), 5(b)(3) and 5(b)(4) below. As soon as practicable after final bills for Taxes (as defined below) become available, but in no event later than August 31, 2004, Assignor and Assignee shall agree upon the final proration amounts for Taxes, as determined in accordance with Section 5(b)(1) below. For purposes of making the prorations, the Effective Date shall belong to Assignee and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to Assignee and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to Assignor. Assignor shall have reasonable access to, and the right to inspect and audit, at its own cost and expense, the Company's books to confirm the final prorations, and Assignee shall cooperate, and shall cause the Company to cooperate, with Assignor in good faith with respect to such inspections and audits. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated, based upon the number of days in the applicable period. 2. COLLECTED RENT. All collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases in effect on the Effective Date shall be prorated based upon the number of days in the month. Uncollected rent and other income shall not be prorated; provided, however, that rent collected after the Effective Date which relates to periods prior to the Effective Date shall be prorated. Assignee agrees to make all reasonable efforts to collect, and to cause the Company to collect, any rents applicable to the period prior to the Effective Date. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 2 3. UTILITIES. Utilities, including water, sewer, electric, and gas shall be prorated based upon usage of such utilities, as shown by the last reading of meters prior to the Effective Date. The Company shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Company based upon the periods to which such service contracts relate (e.g., telephone, internet services, lawn maintenance, cleaning, etc.) shall be prorated based upon the number of days in the applicable period. Fees and charges for services not in the nature of regular or periodic services (e.g., building repairs) shall not be prorated. 5. DEPOSITS. Nonrefundable deposits held by the Company which have not yet been recognized as income by the Company (i.e., amounts received in the current month) shall be prorated based upon the number of days in the month. Items already recognized as income by the Company in prior periods shall not be prorated. (c) After each of the final prorations is completed and agreed upon by the parties, the final proration amounts shall be reconciled with the estimated proration amounts that were added to or deducted from the Purchase Price on the Effective Date pursuant to Section 2. If as a result of such reconciliation: (i) amounts are owed by Assignor to Assignee in excess of the estimated proration amounts, then Assignor shall pay such amounts to Assignee; or (ii) if amounts are owed by Assignee to Assignor in excess of the estimated proration amounts, then Assignee shall pay such amounts to Assignor. In either case, payment shall be made as soon as practicable (but in no event later than 15 days) after such agreement is reached. (d) With respect to the final proration of Taxes, in the event Assignee shall decide to appeal a final tax bill with the appropriate governmental agency, the parties shall nonetheless agree upon the proration of such final tax bill and shall reconcile such proration in accordance with Section 5(c) above. Thereafter, notwithstanding anything to the contrary contained in this Section 5, if such appeal results in a refund of Taxes paid by the Company, then such refund shall be prorated as agreed upon by the parties, and payment of Assignor's prorated portion of such refund shall be made as soon as practicable (but in no event later than 15 days) after such agreement is reached. 6. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. 3 (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party, except as expressly provided in the Operating Agreement. The Assigned Interests represent all of Assignor's ownership interest in the Company. (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority, which has not previously been obtained. (d) (i) Assignor meets the requirements of a "qualified professional asset manager" as defined in Part V(a) of Prohibited Transaction Exemption 84-14 granted by the U.S. Department of Labor ("PTE 84-14"); (ii) Assignor is entering into this Assignment on behalf of an "investment fund" as described in Part V(b) of PTE 84-14; (iii) the terms of this Assignment have been negotiated on behalf of the investment fund by the Assignor and the Assignor has made the decision on behalf of the investment fund to enter into this Assignment; (iv) the terms of this Assignment have been negotiated and determined at arm's length, as such terms would be negotiated and determined by unrelated parties; and (v) neither the Assignor nor any affiliate (as defined in Part V(d) of PTE 84-14) thereof, nor any owner, direct or indirect, of a five percent or more interest in the Assignor, has, within the previous ten years, been convicted or released from imprisonment as a result of the crimes set forth in Part I(g) of PTE 84-14. 7. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or regulatory body or judicial authority, which has not previously been obtained. (c) Neither Assignee nor any of its affiliates (within the meaning of Part V(c) of PTE 84-14) has, or during the immediately preceding year has exercised, the authority to appoint or terminate Assignor as investment manager of any assets of the employee benefit plans whose assets are held by Assignor or to negotiate the terms of any management agreement with Assignor on behalf of any such plan. (d) The transaction contemplated by this Assignment is not specifically excluded by Part I(b) of PTE 84-14. 4 (e) Assignee is not a related party of Assignor (as defined in V(h) of PTE 84-14). (f) The terms of this Assignment have been negotiated and determined at arm's length, as such terms would be negotiated and determined by unrelated parties. 8. ASSUMPTION BY ASSIGNEE. Assignee hereby: (i) accepts the Assigned Interests and all rights of Assignor under the Operating Agreement in respect thereof; and (ii) assumes (A) all of the liabilities, obligations and duties of Assignor and the Company as they relate to the Assigned Interests accruing on or after the Effective Date and (B) all of the liabilities, obligations and duties of Assignor and the Company under the Operating Agreement in respect of the Assigned Interests, accruing on or after the Effective Date, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities, obligations or duties assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Company or the Assigned Interests incurred or accrued, whether known or unknown, as of the Effective Date. 9. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from, Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. 10. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 11. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment, Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignee, the Company and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever, fixed or contingent, known or unknown, asserted or unasserted (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement. (b) As of the Effective Date, except as explicitly provided in this Assignment, each of Assignee and the Company, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Company or the other Assignee Parties of any kind and nature whatsoever, fixed or contingent, known or unknown, asserted or unasserted (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement. 5 (c) Notwithstanding anything to the contrary in paragraphs (a) and (b) above, nothing in this Section 11 shall be construed as a waiver or release by or in favor of either party with respect to any rights either of them may have pursuant to this Assignment. 12. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 13. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants, indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 14. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 15. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said state. 16. RECOURSE TO AMLI. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF ASSIGNEE, AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF ASSIGNEE OR THE COMPANY. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. 17. TAX MATTERS. On the Effective Date, there shall be an interim closing of the Company's books and all items of the Company's Profits and Losses for the current fiscal year up to (but not including) the Effective Date shall be allocated to Assignor and Assignee in accordance with the Operating Agreement. Assignee shall cause the Company to prepare the tax return of the Company for the portion of the current fiscal year up to (but not including) the Effective Date (the "Termination Tax Return") as a result of the termination of the Company for tax purposes under Section 708(b)(l)(B) of the Internal Revenue Code of 1986, as amended. Assignee shall provide Assignor with a copy of the Termination Tax Return for Assignee's review and approval (which shall not be unreasonably withheld or delayed) prior to filing such return with the Internal Revenue Service. Assignor and Assignee shall each file all required federal, state and local income tax returns and related returns and reports in a manner consistent with the foregoing and as required by law. Assignee hereby waives its right to indemnification under Section 10.1(c) of the Operating Agreement with respect to the transfer of the Assigned Interests contemplated by this Assignment. 18. OPERATING AGREEMENT PROVISIONS. Assignor and Assignee and agree that the assignment of the Assigned Interests contemplated by this Assignment is not pursuant to Section 10.3, 10.4 or 10.5(d) of the Operating Agreement, and that the provisions of Section 10.7 of the Operating Agreement shall not apply to the assignment of the Assigned Interests. With respect to the assignment of the Assigned Interests, in the event of any inconsistency or conflict between the terms of the Operating Agreement and the express terms of this Assignment, the terms of this Assignment shall control. 6 19. INDEMNIFICATION. (a) Assignee shall indemnify, defend and hold Assignor harmless for, from and against any and all actions, causes of action or suits brought against it by third parties (each, a "Third Party Claim") for liabilities, losses, costs, damages and expenses, including, without limitation, reasonable attorneys fees and other reasonable costs incurred in the investigation, defense and settlement of the matter (collectively, the "Damages") arising from such Third Party Claim, suffered or incurred by Assignor in respect of any facts, events, circumstances or conditions occurring, arising from or relating to the Company, the Assigned Interests, the Community or the Operating Agreement, except to the extent such Damages are caused by the gross negligence, willful misconduct or fraud of Assignor. (b) Assignor shall notify Assignee in writing of a Third Party Claim as promptly as practicable; provided, that the failure of Assignor to give notice shall not relieve Assignee of its obligations under this Section 19 except to the extent (if any) that Assignee shall have been prejudiced thereby. Assignee may, at its election and own expense, upon notice to Assignor, assume the defense thereof. If Assignee assumes such defense, Assignor shall have the right (but not the obligation) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by Assignee. If Assignee assumes such defense, Assignor agrees to give Assignee full authority to defend the Third Party Claim; provided, however, that Assignee shall have no authority to enter into any settlement without Assignor's express prior written consent. Whether or not Assignee chooses to defend or prosecute any such Third Party Claim, each of the parties hereto shall cooperate in the defense or prosecution thereof. 20. DISCLAIMER. Assignor has not made, and Assignee acknowledges that Assignor has not made, any warranty or representation, express or implied, written or oral, statutory or otherwise concerning or relating to the Company or Community, including, but not limited to, the following: (i) the condition of title to the Community; (ii) the nature, physical condition, safety or other aspect of the Community or any component thereof, including without limitation, plumbing, sewer, heating, ventilation, electrical systems, roofing, air conditioning, foundations, soils and geology; (iii) the income or expense as generated, paid or incurred in connection with the Community or Company, or other economic status of the Community or the Company; (iv) the accuracy of any statements, calculations or conditions stated or set forth in any documents, instruments, agreements to which Company is a party, which are binding on Company or the Community, or which relate or are applicable to the Community or Company, including, but not limited to, title policies, surveys, floor plans, leases, service contracts, vendor agreements, reports, environmental assessments, soils reports, rent rolls, pro formas, revenue and expense projections and other Company and Community books and records (the "Company Materials"); (v) the suitability of the Community for any intended use, including, without limitations, as depicted on the Company Materials; (vi) the dimensions of the Community or lot size; (vii) the status or compliance of the Company or Community with any of the Company Materials; (viii) the status of and compliance with the current zoning or governmental approvals of the Community; (ix) the compliance of the Company with any federal, state or local laws, ordinances, statutes, rules and regulations; (x) the existence or absence of Hazardous Materials (as defined below) or mold or other microbial agent or matter in, on, about, under or affecting the Community; (xi) the compliance of the Community with Hazardous Waste Laws (as defined below) or any other federal, state or local laws, ordinances, statutes, rules or regulations including, without limitation the Fair Housing Act Amendments of 1988 and 7 the Americans with Disabilities Act; or (xii) the merchantability, habitability or fitness of the Community or any portion thereof for any particular purpose. The term "Hazardous Materials" shall mean any substance, chemical, waste or material that is or becomes regulated by any federal, state or local governmental authority because of its toxicity, infectiousness, radioactivity, explosiveness, ignitability, corrosiveness or reactivity including, without limitation, those substances regulated by any hazardous waste laws. For purposes of this agreement, "Hazardous Materials Laws" means any local, federal or state statute, ordinance, code, law, rule or regulation relating to environmental contamination, petroleum products, asbestos and pollutants. As a result. Assignee is acquiring the Assigned Interests with the understanding that the Community and other assets of the Company are in their "AS IS," "WHERE IS" and "WITH ALL FAULTS" condition. 21. ATTORNEYS FEES. If any suit is brought by either party to this Assignment against the other regarding the subject matter hereof, the prevailing party shall be entitled to recover, in addition to any other relief granted, reasonable attorneys fees and expenses of litigation. 22. ENTIRE AGREEMENT. This Assignment contains all of the understandings and agreements of whatsoever kind and nature existing between Assignor and Assignee with respect to the subject matter hereof, and any and all other prior agreements between the parties with respect to such subject matter are hereby superseded. 23. HEADINGS. All headings used herein are inserted for convenience and ease of reference only and shall not be considered in the construction or interpretation of any provision of this Assignment. 24. SEVERABILITY. If any provisions of this Assignment shall be held by a court of competent jurisdiction to be contrary to law or public policy, or otherwise unenforceable, the remaining provisions shall remain in full force and effect and a court of competent jurisdiction shall supply a provision or provisions to replace the affected provision(s) which most closely approximates the original intent of the parties. * * * * * 8 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Damian P. Manolis ------------------------------ Name: Damian P. Manolis Title: Vice President ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, L.P. By: AMLI Residential Properties Trust, Its general member By: AMLI Residential Properties Trust, Its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 11(b) only: ---------------------------------- LANDMARK ON SPRING MILL LLC By: The Prudential Insurance Company of America, A member By: ------------------------------ Name: Damian P. Manolis Title: Vice President 9 SCHEDULE A Calculation of Purchase Price Company Value $30,000,000.00 Assignor's economic interest (1) 100% Purchase Price for Assignor's membership interest $30,000,000.00 LESS: Assignor's estimated pro rata share of the Company's income and expenses as of the Effective Date determined in accordance with Section 5(a) of the Assignment $ 669,476.96 Net cash amount to be paid to Assignor by Assignee on the Effective Date $29,330,523.04 (1) Assignor's percentage interest equals 80%. 10 EX-10.6 8 exh_106.txt EXHIBIT 10.6 - ------------ ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS ------------------------------------------------- THIS ASSIGNMENT (this "Assignment") is made and entered into as of the 31st day of October, 2003, by and between OTR, an Ohio general partnership acting as duly authorized nominee on behalf of the State Teachers Retirement Board of Ohio ("Assignor"), and AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership ("Assignee"). RECITALS -------- A. Assignor owns 90% of the membership interests, and Assignee owns 10% of the membership interests, in Amli at Danada L.L.C, an Illinois limited liability company (the "Company"), pursuant to that certain Operating Agreement of Amli at Danada L.L.C. dated as of February 28, 1997 (the "Operating Agreement"); capitalized terms used herein and not defined herein shall have the meanings given them in the Operating Agreement). B. The Company owns real property located in Wheaton, Illinois, upon which the Company owns, operates and manages an apartment community known as Amli at Danada Farms (the "Community"). C. Assignor desires to assign and Assignee desires to acquire all of Assignor's right, title and interest in Assignor's membership interests in the Company (the "Assigned Interests") and all interests, rights and obligations under the Operating Agreement with respect to the Assigned Interests only, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing Recitals, and the warranties and mutual covenants set forth herein, Assignor and Assignee hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTERESTS. Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee, free and clear from any liens, encumbrances or defects of title, and Assignee hereby accepts, acquires and takes assignment and delivery of the Assigned Interests, including, but not limited to, all right, title and interest in and to the properties (real and personal), capital, cash flow distributions, profits and losses of the Company relating or allocable to the Assigned Interests. 2. PURCHASE PRICE. In consideration of the sale, assignment, transfer, conveyance and delivery of the Assigned Interests, upon the execution hereof Assignee shall pay to Assignor cash in the amount of $41,890,453.10, determined in accordance with SCHEDULE A hereto (the "Purchase Price"). The Purchase Price is based upon a total Company value of $71,000,000, less outstanding debt as of the Effective Date and Assignor's pro rata portion of real estate taxes and certain other costs that relate to periods prior to the Effective Date that have been incurred but not yet paid by the Company. The Purchase Price shall be paid by wire transfer to such account as shall be provided in writing by Assignor. 3. EFFECTIVE DATE. The assignment herein made is effective as of the date of this Assignment (the "Effective Date"), For all periods up to, but not including, the Effective Date, that portion of the net profits or net losses of the Company that are allocable to the Assigned Interests in accordance with the Operating Agreement shall be credited, charged or distributed, as the case may be, to Assignor and not to Assignee and, for all periods from and after the Effective Date, that portion of the net profits or net losses of the Company allocable to the Assigned Interests shall be credited, charged or distributed, as the case may be, to Assignee and not to Assignor. 1 4. PRORATIONS. (a) On or prior to February 26, 2004, Assignor and Assignee shall agree upon the prorations set forth in this Section 4. Any payments owing as a result of such prorations shall be made as soon as reasonably practicable after such agreement is reached. For purposes of making the prorations, the Effective Date shall belong to Assignee and all prorations hereinafter provided to be made as of the Effective Date shall each be made as of the end of the day before the Effective Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of the Effective Date shall be credited or charged to Assignee and the portion thereof applicable to periods ending immediately prior to the Effective Date shall be credited or charged to Assignor. 1. TAXES AND ASSESSMENTS. General real estate taxes and assessments imposed by governmental authority and any assessments imposed by private covenant constituting a lien or charge on the Community for all tax periods through and including the then current calendar year or other current tax period (collectively, "Taxes") not yet due and payable shall be prorated; provided, however, that an initial estimated proration of Taxes for all periods prior to the Effective Date has been reflected in the Purchase Price as set forth on Schedule A hereto. If a final tax bill for any period is available prior to the proration under this Section 4(a), the Taxes for such period shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration, with a final and complete proration of Taxes for all other tax periods, for which final tax bills are not available prior to the proration under this Section 4(a), to be made pursuant to Section 4(b); provided, that, if the final tax bills for all periods are available prior to the proration under this Section 4(a), the Taxes and all other items to be prorated shall be allocated on a fair and equitable basis according to this Section 4(a) as a final proration. 2. COLLECTED RENT. All collected rent and other collected income (and any applicable state or local tax on rent) under apartment leases in effect on the Effective Date shall be prorated. Uncollected rent and other income shall not be prorated. Assignee agrees to make all reasonable efforts to collect, and to cause the Company to collect, any rents applicable to the period prior to the Effective Date. Such rents paid by tenants on or after the Effective Date relating to their occupancy of the Community prior to the Effective Date shall be prorated on an if, as and when collected basis. Any amount collected by Assignee on or after the Effective Date from tenants who owe rent for periods prior to the Effective Date shall be applied (i) first, in payment of rent for the period (if any) after the month in which the Effective Date occurs through the end of the month in which such amount is collected if the rent for such month is then due and payable (ii) second, in payment of rent for the month in which the Effective Date occurs, and (iii) third, in payment of rent for the months preceding the month in which the Effective Date occurs to the extent rent for such months preceding the Effective Date remains unpaid. Any prepaid rents for the period on or after the Effective Date shall be credited to Assignee. 3. UTILITIES. Utilities, including water, sewer, electric, and gas based upon the last reading of meters prior to the Effective Date shall be prorated. The Company shall endeavor to obtain meter readings on the day before the Effective Date, and if such readings are obtained, the proration of such items shall be based upon such readings. 2 4. FEES AND CHARGES UNDER SERVICE CONTRACTS. Fees and charges under contracts for the provision of services to the Company based upon the periods to which such service contracts relate shall be prorated. 5. DEPOSITS. Nonrefundable deposits or other cash held by the Company which would be available for distribution to the Members if the Company were to be liquidated shall be prorated. (b) If a final proration with respect to any Taxes cannot be made under this Section 4 on or before February 26, 2004, then Assignee and Assignor agree to perform a final proration of such Taxes and any other remaining undetermined items on a fair and equitable basis as soon as the applicable tax bills for such tax periods are available, with final adjustment to be made as soon as reasonably possible thereafter. Payments in connection with the final adjustment shall be made as soon as reasonably practicable after such final adjustment is agreed upon. (c) Assignor shall have reasonable access to, and the right to inspect and audit, the Company's books to confirm the prorations. Any such audit shall be at Assignor's sole cost and expense. 5. REPRESENTATIONS OF ASSIGNOR. Assignor hereby represents and warrants to Assignee that: (a) Assignor is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. (b) Assignor is the record and beneficial owner of all of the Assigned Interests, free and clear of any lien, claim, option, call, right of first refusal, charge, encumbrance, restriction on transfer (other than any restriction under the Securities Act of 1933, as amended, or state securities or "blue sky" laws) or other right of any other party. The Assigned Interests represent all of Assignor's ownership interest in the Company, (c) Assignor's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm, or any public, governmental or regulatory body or judicial authority, which has not previously been obtained, provided that Assignor makes no representation or warranty regarding any consent required to be obtained from the Prudential Insurance Company of America with respect to this Agreement. 6. REPRESENTATIONS OF ASSIGNEE. Assignee hereby represents and warrants to Assignor that: (a) Assignee is duly organized and validly existing under the laws of the state of its organization and has been duly authorized by all necessary and appropriate action to enter into this Assignment and to consummate the transactions contemplated hereby. This Assignment is a valid and binding obligation of Assignee, enforceable against Assignee in accordance with its terms, except insofar as enforceability may be affected by bankruptcy, insolvency or similar laws affecting creditor's rights generally and the availability of any particular equitable remedy. 3 (b) Assignee's execution and delivery of this Assignment, its performance of its obligations hereunder and its consummation and the validity of the transactions contemplated hereby do not require it to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm, including without limitation, The Prudential Insurance Company of America, the holder of a mortgage encumbering title to the Community, or any public, governmental or regulatory body or judicial authority, which has not previously been obtained. (c) Assignee has obtained all consents required to be obtained from The Prudential Insurance Company of America with respect to this Agreement. 7. ASSUMPTION BY ASSIGNEE; INDEMNITY. Assignee hereby: (i) accepts the Assigned Interests and all rights of Assignor under the Operating Agreement in respect thereof; and (ii) assumes (A) all of the liabilities of the Company as they relate to the Assigned Interests accruing on or after the Effective Date and (B) all obligations of Assignor under the Operating Agreement in respect of the Assigned Interests, accruing on or after the Effective Date, and agrees to be bound by the provisions thereof with respect thereto. In no event shall the liabilities or obligations assumed by Assignee include any federal or state income tax liabilities of Assignor relating to the Company or the Assigned Interests incurred or accrued, whether known or unknown, as of the Effective Date. Assignee does hereby indemnify, defend, protect, save, and hold forever harmless Assignor, its partners, affiliates, employees, and agents from and against, any and all claims, demands, suits, causes of action, controversies, liabilities, costs, expenses, and losses, including, without limitation, reasonable attorneys' fees and expenses, arising from or relating to any obligation whatsoever under the Operating Agreement due and payable, or arising or accruing from events occurring, on the Effective Date or at any time thereafter. 8. NO BROKERS. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker's, finder's or similar fee or other commission from Assignor or Assignee or any of their respective Affiliates in connection with this Assignment or the transactions contemplated hereby. Assignor agrees to indemnify and hold Assignee free and harmless, and Assignee agrees to indemnify and hold Assignor free and harmless, from and against any and all claims, demands, suits, causes of action, controversies, liabilities, costs expenses, and losses, including, without limitation, reasonable attorneys' fees and expenses that the indemnified party may suffer as a result of any claims made or suits brought by any broker, salesperson, agent or finder who claims to have introduced or to have been retained by the indemnifying party in connection with this transaction. 9. FURTHER ASSURANCES. Each party, at its sole cost and expense, upon request of the other party, shall execute and deliver such further instruments and do or cause to be done such further acts as may be reasonably necessary to be done by such party to effectuate and confirm the assignment of the Assigned Interests. 10. MUTUAL RELEASE. (a) As of the Effective Date, except as explicitly provided in this Assignment Assignor, on its behalf and on behalf of each of its Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignor Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignee, the Company and each of their Affiliates from any and all liabilities to Assignor or the other Assignor Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. 4 (b) As of the Effective Date, except as explicitly provided in this Assignment, each of Assignee and the Company, on its behalf and on behalf of each of their respective Affiliates and each of their respective representatives, agents, successors, assigns, officers, directors, members, managers, employees and each of them (collectively, the "Assignee Parties") hereby irrevocably waives, releases and discharges, absolutely and forever, Assignor and each of its Affiliates, from any and all liabilities to Assignee, the Company or the other Assignee Parties of any kind and nature whatsoever (including in respect of any rights of contribution or indemnification), in respect of facts, events, circumstances or conditions occurring or arising prior to the Effective Date. (c) Notwithstanding anything to the contrary in paragraphs (a) and (b) above, nothing in this Section 10 shall be construed as a waiver or release by or in favor of either party with respect to any rights either of them may have pursuant to this Assignment. 11. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and the respective heirs, legal representatives, successors and assigns of each. 12. SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants indemnities and agreements of the parties contained in this Assignment are the only such terms made or relied upon by the parties and shall survive the consummation of the transactions contemplated hereby. 13. MODIFICATION AND WAIVER. No supplement, modification, waiver or termination of this Assignment or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. No waiver of any of the provisions of this Assignment shall constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 14. GOVERNING LAW. This Assignment shall be construed and enforced in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within said state. 15. RECOURSE TO AMLI. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PARTNERS OF ASSIGNEE, AGAINST THE TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF ASSIGNEE OR THE COMPANY. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW. 16. RECOURSE TO OTR. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINST ANY PRESENT OR FUTURE (A) PARTNERS OF ASSIGNOR, (B) BOARD MEMBERS OR OFFICERS OF THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO, (C) RETIRANT, BENEFICIARY, INTERNAL INVESTMENT CONTRACTOR, ATTORNEY OR AGENT THEREOF, (D) TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, PARTNERS, SHAREHOLDERS OR PRINCIPALS OF SUCH PARTNERS, OR (E) ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF ASSIGNOR. NOTHING CONTAINED ABOVE SHALL LIMIT THE REMEDIES AGAINST ANY PERSON FOR SUCH PERSON'S FRAUD OR INTENTIONAL MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED BY APPLICABLE LAW, AND THE FOREGOING SHALL NOT RELEASE THE BOARD OF THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO FROM LIABILITY FOR THE OBLIGATIONS OF OTR HEREUNDER. 5 17. TAX MATTERS. On the Effective Date, there shall be an interim closing of the Company's books and all items of the Company's Profits and Losses for the current fiscal year up to (but not including) the Effective Date shall be allocated to Assignor and Assignee in accordance with the Operating Agreement. Assignee shall cause the Company to prepare the tax return of the Company for the portion of the current fiscal year up to (but not including) the Effective Date (the "Termination Tax Return") as a result of the termination of the Company for tax purposes under Section 708(b)(1)(B) of the Internal Revenue Code of 1986, as amended. Assignee shall provide Assignor with a copy of the Termination Tax Return for Assignee's review and approval (which shall not be unreasonably withheld or delayed) prior to filing such return with the Internal Revenue Service. Assignor and Assignee shall each file all required federal, state and local income tax returns and related returns and reports in a timely manner consistent with the foregoing and as required by law. 18. ENTIRE AGREEMENT. This Assignment contains all of the understandings and agreements of whatsoever kind and nature existing between Assignor and Assignee with respect to the subject matter hereof, and any and all other prior agreements between the parties with respect to such subject matter are hereby superseded. 19. HEADINGS. All headings used herein are inserted for convenience and ease of reference only and shall not be considered in the construction or interpretation of any provision of this Assignment. 20. SEVERABILITY. If any provisions of this Assignment shall be held by a court of competent jurisdiction to be contrary to law or public policy, or otherwise unenforceable the remaining provisions shall remain in full force and effect and a court of competent jurisdiction shall supply a provision or provisions to replace the affected provision(s) which most closely approximates the original intent of the parties. * * * * * 6 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: -------- OTR, an Ohio general partnership By: /s/ Stephen A. Mitchell ------------------------------ Name: Stephen A. Mitchell Title: General Partner ASSIGNEE: -------- AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership By: AMLI Residential Properties Trust, a Maryland real estate investment trust, its general partner By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President For purposes of Section 10(b) only: ---------------------------------- AMLI AT DANADA L.L.C., an Illinois limited liability company By: /s/ Fred Shapiro ------------------------------ Name: Fred Shapiro Title: Senior Vice President 7 SCHEDULE A Calculation of Purchase Price Company Value $ 71,000,000 LESS: Outstanding debt of the Company as of the Effective Date $ 23,274,824 ------------- Company Equity Value $ 47,725,176 Assignor's percentage interest 90% Value of Assignor's membership interest $ 42,952,658 LESS: Assignor's share of unpaid real estate taxes accrued by the Company and relating to all periods prior to the Effective Date (1) $ 784,479 LESS: Assignor's share of accrued principal and interest $ 123,826 LESS: Assignor's share of contractually committed cost for painting of portions of the Community $ 153,900 ------------- Total Deductions $ 1,062,205 ------------- Purchase Price to be paid to Assignor by Assignee on the Effective Date $ 41,890,453 (1) This amount reflects the Assignor's pro rata portion of the Company's estimated real estate taxes for all periods prior to the Effective Date and which the Company has not yet paid as of the Effective Date. Because the Company makes distributions to its members on a cash basis, this amount reflects the excess distributions received by Assignor from the Company as a result of non-payment of the taxes. The Purchase Price is, therefore, reduced by this amount. A final proration of the real estate taxes will be completed in accordance with Section 4 of the Assignment upon receipt by the Company of the final tax bill. 8 EX-23.1 9 exh_231.txt EXHIBIT 23.1 - ------------ INDEPENDENT AUDITORS' CONSENT ----------------------------- The Board of Trustees AMLI Residential Properties Trust: We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-89594, 333-89598, 333-89622, 333-08813, and 333- 08815) and on Form S-3 (Nos. 333-83923, 333-74300, 333-70076, 333-83923, 333-65503, 333-57327, 333-24433, 333-08819, 33-93120, and 33-89508) of AMLI Residential Properties Trust of our report dated November 19, 2003 with respect to the historical statement of revenue in excess of certain expenses of AMLI at Danada Farms for the year ended December 31, 2002, our report dated November 19, 2003 with respect to the combined historical statement of revenue in excess of certain expenses of the Communities Acquired from Prudential Insurance Company of America in 2003 for the year ended December 31, 2002, and our report dated November 19, 2003 with respect to the combined historical statement of revenue in excess of certain expenses of the Communities Acquired from Endowment Realty Investors in 2003 for the year ended December 31, 2002, which reports appear in the November 21, 2003 report on Form 8-K of AMLI Residential Properties Trust. Our reports dated November 19, 2003 each include a paragraph that states that the historical statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 2, and is not intended to be a complete presentation of the revenue and expenses of AMLI at Danada Farms, Communities Acquired from Prudential Insurance Company of America in 2003, or Communities Acquired from Endowment Realty Investors in 2003. Chicago, Illinois November 21, 2003 -----END PRIVACY-ENHANCED MESSAGE-----