-----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, Rc/4YjeQhUYJ3N7yefAd8HSrC54b7R60YHRW1Iz5Cy1Ny3XH9ynDU20O6zbQaofe 9HbZECYVtaM0mnkL4Cb3sw== 0000950131-98-002096.txt : 19980331 0000950131-98-002096.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950131-98-002096 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERP OPERATING LTD PARTNERSHIP CENTRAL INDEX KEY: 0000931182 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363894853 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-24920 FILM NUMBER: 98577260 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: STE 400 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124741300 MAIL ADDRESS: STREET 1: TWO N RIVERSIDE PLAZA STREET 2: SUITE 450 CITY: CHICAGO STATE: IL ZIP: 60606 10-K 1 ERP OPERATING LIMITED PARTNERSHIP FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended DECEMBER 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-24920 ERP OPERATING LIMITED PARTNERSHIP (Exact Name of Registrant as Specified in Its Charter) Illinois 36-3894853 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) Two North Riverside Plaza, Chicago, Illinois 60606 (Address of Principal Executive Offices) (Zip Code) (312) 474-1300 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: 7.57% Notes due August 15, 2026 New York Stock Exchange (Title of Class) (Name of Each Exchange on Which Registered) Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] DOCUMENTS INCORPORATED BY REFERENCE Part II incorporates by reference the Registrant's Current Report on Form 8-K dated March 1, 1996 and filed on March 7, 1996. Part III incorporates by reference the Equity Residential Properties Trust definitive proxy statement relating to Part III, Item 11. Executive Compensation. Part IV incorporates by reference the following exhibit as filed with Equity Residential Properties Trust's Form S-11 on May 21, 1993 (Registration No. 33- 63158) and as amended thereafter: Exhibit 10.2. Part IV incorporates by reference the following exhibits as filed with the Registrant's Form 10 on October 7, 1994 (Registration No. 0-24920) and as amended thereafter: Exhibits 4.1, 4.2 and 10.3. Part IV incorporates by reference the following exhibit as filed with the Registrant's Form 10-Q for the quarter ended September 30, 1995 on November 9, 1995 and as amended thereafter: Exhibit 10.1. Part IV incorporates by reference the following exhibit as filed with the Registrant's Form 10-K for the year ended December 31, 1996 filed on March 20, 1997: Exhibit 10.4. Part IV incorporates by reference the following exhibit as filed with the Registrant's Form 8-K dated October 9, 1997 filed on October 9, 1997: Exhibit 10.5. 2 ERP OPERATING LIMITED PARTNERSHIP TABLE OF CONTENTS
PART I. PAGE ---- Item 1. Business 4 Item 2. Properties 16 Item 3. Legal Proceedings 45 Item 4. Submission of Matters to a Vote of Security Holders 45 PART II. Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters 46 Item 6. Selected Financial Data 46 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 49 Item 8. Financial Statements and Supplementary Data 61 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 61 PART III. Item 10. Trustees and Executive Officers of the Registrant 62 Item 11. Executive Compensation 66 Item 12. Security Ownership of Certain Beneficial Owners and Management 67 Item 13. Certain Relationships and Related Transactions 69 PART IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 72
3 PART I Item 1. Business General ERP Operating Limited Partnership, an Illinois limited partnership formed in May 1993 (the "Operating Partnership"), is managed by Equity Residential Properties Trust ("EQR"), a Maryland real estate investment trust (the "Company"), its general partner. The Company is a self-administered and self- managed equity real estate investment trust ("REIT"). EQR was organized in March 1993 and commenced operations on August 18, 1993 upon completion of its initial public offering (the "EQR IPO") of 13,225,000 common shares of beneficial interest, $0.01 par value per share ("Common Shares"). EQR was formed to continue the multifamily residential business objectives and acquisition strategies of certain affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board of Trustees of the Company. These entities had been engaged in the acquisition, ownership and operation of multifamily residential properties since 1969. As used herein, the term "Company" includes EQR and those entities owned or controlled by it, as the survivor of the mergers between EQR and each of Wellsford Residential Property Trust ("Wellsford") (the "Wellsford Merger") and Evans Withycombe Residential, Inc. ("EWR") (the "EWR Merger"). The Company's subsidiaries include the Operating Partnership, Evans Withycombe Residential, L.P. (the "EWR Operating Partnership"), Equity Residential Properties Management Limited Partnership and Equity Residential Properties Management Limited Partnership II (collectively, the "Management Partnerships"), a series of partnerships (the "Financing Partnerships") and limited liability companies ("LLCs") which beneficially own certain properties encumbered by mortgage indebtedness. As of December 31, 1997, the Operating Partnership owned or had interests in 489 multifamily properties of which it controlled a portfolio of 463 multifamily properties (individually, a "Property" and collectively, the "Properties") containing 135,200 units. The remaining 26 properties represent an investment in partnership interests and subordinated mortgages collateralized by 21 properties and mortgage loans collateralized by five properties (collectively, the "Additional Properties") containing 5,267 units. Of the 5,267 units, 1,371 units are property managed by third party unaffiliated entities. The Operating Partnership's Properties and the Additional Properties are located throughout the United States in the following states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and Wisconsin. In addition, Equity Residential Properties Management Corp. ("Management Corp.") and Equity Residential Properties Management Corp. II ("Management Corp. II") also provide residential property and asset management services to 29 properties containing 9,295 units owned by affiliated entities. The Company is, together with the Operating Partnership, one of the largest publicly traded REITs (based on the aggregate market value of its outstanding Common Shares) and is the largest publicly traded REIT owner of multifamily properties (based on the number of apartment units owned and total revenues earned). 4 PART I Since the EQR IPO and through December 31, 1997, the Operating Partnership has acquired direct or indirect interests in 412 properties (which included the debt collateralized by six Properties) containing 118,510 units in the aggregate for a total purchase price of approximately $6.5 billion, including the assumption of approximately $1.5 billion of mortgage indebtedness. The Operating Partnership also made an $89 million investment in partnership interests and subordinated mortgages collateralized by 21 of the Additional Properties (its "$89 Million Mortgage Note Investment") and an $88 million investment in mortgage loans collateralized by five of the Additional Properties (its "$88 Million Mortgage Note Investment"). Since the EQR IPO and through December 31, 1997, the Operating Partnership has disposed of 18 properties and a portion of one Property, containing 5,035 units, and a vacant land parcel for a total sales price of approximately $129.8 million and the release of mortgage indebtedness in the amount of $20.5 million. The Company's corporate headquarters and executive offices are located in Chicago, Illinois. In addition, the Company has 29 management offices in the following cities: Chicago, Illinois; Dallas, Houston and San Antonio, Texas; Denver, Colorado; Bethesda, Maryland; Atlanta, Georgia; Las Vegas, Nevada; Scottsdale and Tucson, Arizona; Portland, Oregon; Ypsilanti, Michigan; Charlotte and Raleigh, North Carolina; Tampa, Jacksonville and Ft. Lauderdale, Florida; Irvine, Pleasant Hill and Stockton, California; Kansas City, Kansas; Minneapolis, Minnesota; Louisville, Kentucky; Tulsa, Oklahoma; Boston, Massachusetts; Federal Way, Redmond and Seattle, Washington; and Nashville and Memphis, Tennessee. The Company has approximately 4,200 employees. Each of the Operating Partnership's Properties is directed by an on-site manager, who supervises the on-site employees and is responsible for the day-to-day operations of the Property. The manager is generally assisted by a leasing administrator and/or property administrator. In addition, a maintenance director at each Property supervises a maintenance staff whose responsibilities include a variety of tasks, including responding to service requests, preparing vacant apartments for the next resident and performing preventive maintenance procedures year-round. Business Objectives and Operating Strategies The Operating Partnership seeks to maximize both current income and long- term growth in income, thereby increasing: (i) the value of the Properties; (ii) distributions on a per limited partnership interest ("OP Unit") basis; and (iii) partners' value. The Operating Partnership's strategies for accomplishing these objectives are: . maintaining and increasing Property occupancy while increasing rental rates; . controlling expenses, providing regular preventive maintenance, making periodic renovations and enhancing amenities; . pursuing acquisitions that: (i) are available at prices below estimated replacement costs; (ii) have potential for rental rate and/or occupancy increases; (iii) have attractive locations in their 5 PART I respective markets; and (iv) provide anticipated total returns that will increase the Operating Partnership's distributions per OP Unit. . purchasing newly developed as well as co-investing in the development of multifamily communities in the Operating Partnership's existing target markets where the market conditions warrant such development. The Operating Partnership is committed to tenant satisfaction by striving to anticipate industry trends and implementing strategies and policies consistent with providing quality tenant services. In addition, the Operating Partnership continuously surveys rental rates of competing properties and conducts satisfaction surveys of residents to determine the factors they consider most important in choosing a particular apartment unit. Acquisition Strategies The Operating Partnership anticipates that future property acquisitions will be located in the continental United States. Management will continue to use market information to evaluate acquisition opportunities. The Operating Partnership's market data base allows it to review the primary economic indicators of the markets where the Operating Partnership currently manages Properties and where it expects to expand its operations. Acquisitions may be financed from various sources of capital, which may include undistributed funds from operations ("FFO"), issuances of additional equity securities by the Company and debt securities by the Operating Partnership, sales of Properties and collateralized and uncollateralized borrowings. In addition, the Operating Partnership may acquire additional multifamily properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, partially defer the sellers' tax consequences. When evaluating potential acquisitions, the Operating Partnership will consider: (i) the geographic area and type of community; (ii) the location, construction quality, condition and design of the property; (iii) the current and projected cash flow of the property and the ability to increase cash flow; (iv) the potential for capital appreciation of the property; (v) the terms of resident leases, including the potential for rent increases; (vi) the potential for economic growth and the tax and regulatory environment of the community in which the property is located; (vii) the occupancy and demand by residents for properties of a similar type in the vicinity (the overall market and submarket); (viii) the prospects for liquidity through sale, financing or refinancing of the property; and (ix) competition from existing multifamily properties and the potential for the construction of new multifamily properties in the area. The Operating Partnership expects to purchase multifamily properties with physical and market characteristics similar to the Properties. Development Strategies The Operating Partnership seeks to acquire newly constructed properties and make investments towards the development of properties in markets where it discerns strong demand, which the Operating Partnership believes will enable it to achieve superior rates of return. The Operating Partnership's current communities under development and future developments are in 6 PART I markets or will be in markets where certain market demographics justify the development of high quality multifamily communities. In evaluating whether to develop an apartment community in a particular location, the Operating Partnership analyzes relevant demographic, economic and financial data. Specifically, the Operating Partnership considers the following factors, among others, in determining the viability of a potential new apartment community: (i) income levels and employment growth trends in the relevant market, (ii) uniqueness of location, (iii) household growth and net migration of the relevant market's population, (iv) supply/demand ratio, competitive housing alternatives, sub-market occupancy and rent levels (v) barriers to entry that would limit competition, and (vi) the purchase price and yields of available existing stabilized communities, if any. Disposition Strategies Management will use market information to evaluate potential dispositions. Factors the Operating Partnership considers in deciding whether to dispose of its Properties include the following: (i) potential increases in new construction; (ii) areas where the economy is expected to decline substantially; and (iii) markets where the Operating Partnership does not intend to establish long-term concentrations. The Operating Partnership will reinvest the proceeds received from property dispositions to fund property acquisitions. In addition, when feasible the Operating Partnership will structure these transactions as tax deferred exchanges. Financing Strategies It is the Company's policy that EQR shall not incur indebtedness other than short-term trade, employee compensation, dividends payable or similar indebtedness that will be paid in the ordinary course of business, and that indebtedness shall instead be incurred by the Operating Partnership to the extent necessary to fund the Operating Partnership and its subsidiaries. Equity Offerings For the Years Ended December 31, 1997, 1996 and 1995 In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (liquidation preference $25 per share) (the "Series A Preferred Shares"), at $25 per share. The Company raised gross proceeds of $153 million from this offering (the "Series A Preferred Share Offering"). The net proceeds of approximately $148.2 million from the Series A Preferred Share Offering have been contributed by the Company to the Operating Partnership in exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative redeemable preference units (the "Series A Cumulative Redeemable Preference Units"). In November 1995, the Company sold 5,000,000 depositary shares (the "Series B Depositary Shares"). Each Series B Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series B Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value per share (the "Series B Preferred Shares"). The liquidation preference of each of the Series B Preferred Shares is $250.00 (equivalent to $25 per Series B Depositary Share). The Company raised gross proceeds of $125 million from the sale of the Series B Depositary Shares. The net proceeds of approximately $121 million have been contributed by the Company to the Operating Partnership in exchange for 500,000 of the Operating Partnership's 9 1/8% cumulative redeemable preference units (the "Series B Cumulative Redeemable Preference Units"). 7 PART I In January 1996, the Company completed an offering of 1,725,000 registered Common Shares, which were sold at a net price of $29.375 per share (the "January 1996 Common Share Offering"), and contributed to the Operating Partnership net proceeds of approximately $50.7 million in connection therewith in exchange for OP Units. In February 1996, the Company completed an offering of 2,300,000 registered Common Shares, which were sold at a net price of $29.50 per share (the "February 1996 Common Share Offering"), and contributed to the Operating Partnership net proceeds of approximately $67.8 million in connection therewith in exchange for OP Units. On May 21, 1996, the Company completed an offering of 2,300,000 publicly registered Common Shares, which were sold at a net price of $30.50 per share. On May 28, 1996, the Company completed the sale of 73,287 publicly registered Common Shares to employees of the Company and to employees of Equity Group Investments, Inc. ("EGI") and certain of their respective affiliates and consultants at a net price equal to $30.50 per share. On May 30, 1996, the Company completed an offering of 1,264,400 publicly registered Common Shares, which were sold at a net price of $30.75 per share. The Company contributed to the Operating Partnership net proceeds of approximately $111.3 million in connection with the sale of the 3,637,687 Common Shares mentioned above (collectively, the "May 1996 Common Share Offerings") in exchange for OP Units. In September 1996, the Company sold 4,600,000 depositary shares (the "Series C Depositary Shares"). Each Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value per share (the "Series C Preferred Shares"). The liquidation preference of each of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C Depositary Share). The Company raised gross proceeds of $115 million from this offering (the "Series C Preferred Share Offering"). The net proceeds of approximately $111.4 million from the Series C Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 460,000 of the Operating Partnership's 9 1/8% cumulative redeemable preference units (the "Series C Cumulative Redeemable Preference Units"). Also in September 1996, the Company completed the sale of 2,272,728 publicly registered Common Shares which were sold at a net price of $33 per share. The Company contributed to the Operating Partnership net proceeds of approximately $75 million in connection with this offering (the "September 1996 Common Share Offering") in exchange for OP Units. In November, 1996, the Company issued 39,458 Common Shares pursuant to the 1996 Nonqualified Employee Share Purchase Plan (the "Employee Share Purchase Plan") at a net price of $30.44. The Company contributed to the Operating Partnership net proceeds of approximately $1.2 million in exchange for OP Units. In December 1996, the Company completed offerings of 4,440,000 publicly registered Common Shares, which were sold to the public at a price of $41.25 per share (the "December 1996 Common Share Offerings"). The Company contributed to the Operating Partnership net proceeds of approximately $177.4 million in exchange for OP Units. 8 PART I In March 1997, the Company completed three separate public offerings relating to an aggregate of 1,921,000 publicly registered Common Shares, which were sold to the public at a price of $46 per share (the "March 1997 Common Share Offerings"). The Company contributed to the Operating Partnership net proceeds of approximately $88.3 million in exchange for OP Units. On May 14, 1997, the Company filed with the SEC a Form S-3 Registration Statement to register $500 million of equity securities (the "June 1997 Equity Shelf Registration"). The SEC declared this registration statement effective on June 5, 1997. In May 1997, the Company sold 7,000,000 depositary shares (the "Series D Depositary Shares") pursuant to the June 1997 Equity Shelf Registration. Each Series D Depositary Share represents a 1/10 fractional interest in a 8.60% Series D Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value per share (the "Series D Preferred Shares"). The liquidation preference of each of the Series D Preferred shares is $250.00 (equivalent to $25 per Series D Depositary Share). The Company raised gross proceeds of approximately $175 million from this offering (the "Series D Preferred Share Offering"). The net proceeds of approximately $169.5 million from the Series D Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 700,000 of the Operating Partnership's 8.60% cumulative redeemable preference units (the "Series D Cumulative Redeemable Preference Units"). In June 1997, the Company completed five separate public offerings comprising an aggregate of 8,992,023 publicly registered Common Shares, which were sold to the public at prices ranging from $44.06 to $45.88 per share (the "June 1997 Common Share Offerings"). The Company contributed to the Operating Partnership net proceeds of approximately $398.9 million therewith in exchange for additional OP Units. On July 28, 1997, the Company filed with the SEC a Form S-3 Registration Statement to register $750 million of equity securities (the "August 1997 Equity Shelf Registration"). The SEC declared this registration statement effective on August 4, 1997. In September 1997, the Company completed the sale of 498,000 publicly registered Common Shares which were sold to the public at a price of $51.125 per share. The Company contributed to the Operating Partnership net proceeds of approximately $24.2 million in connection with this offering (the "September 1997 Common Share Offering") in exchange for OP Units. In September 1997, the Company sold 11,000,000 depositary shares (the "Series G Depositary Shares") pursuant to the August 1997 Equity Shelf Registration. Each Series G Depositary Share represents a 1/10 fractional interest in a 7 1/4% Series G Convertible Cumulative Preferred Share of Beneficial Interest, $0.01 par value per share (the "Series G Preferred Shares"). Series G Depositary Shares representing Series G Preferred Shares are convertible at the option of the holder thereof at any time into Common Shares at a conversion price of $58.58 per Common Share (equivalent to a conversion rate of approximately .4268 Common Shares for each Series G Depositary Share). The liquidation preference of each of the Series G Preferred Shares is $250.00 per share (equivalent to $25 per Series G Depositary Share). In addition, in October 1997, the Company sold 1,650,000 additional Series G Depositary Shares pursuant to an 9 PART I over-allotment option granted to the underwriters. The Company contributed to the Operating Partnership the net proceeds of approximately $303.6 million in connection with this offering (the "Series G Preferred Share Offering") in exchange for 1,265,000 of the Operating Partnership's 7 1/4% convertible cumulative preference units (the "Series G Convertible Cumulative Preference Units"). In October 1997, in connection with the acquisition of a portfolio of Properties, the Company issued 3,315,500 publicly registered Common Shares, which were issued at a price of $45.25 per share with a value of approximately $150 million (the "October 1997 Common Share Offering"). The Company contributed its interest in the portfolio of Properties acquired with Common Shares to the Operating Partnership in exchange for additional OP Units. On November 3, 1997, the Company filed with the SEC a Form S-3 Registration Statement to register 7,000,000 Common Shares pursuant to a Distribution Reinvestment and Share Purchase Plan. This registration statement was declared effective on November 25, 1997. The Distribution Reinvestment and Share Purchase Plan (the "DRIP Plan") of the Company provides holders of record and beneficial owners of Common Shares, Preferred Shares, and limited partnership interests in the Operating Partnership with a simple and convenient method of investing cash distributions in additional Common Shares. Common Shares may also be purchased on a monthly basis with optional cash payments made by participants in the Plan and interested new investors, not currently shareholders of the Company, at the market price of the Common Shares less a discount ranging between 0% and 5% (as determined in accordance with the DRIP Plan). In December 1997, in connection with an acquisition of a Property, the Company issued 736,296 publicly registered Common Shares, which were issued at a price of $48.85 per share with a value of approximately $36 million. The Company contributed the Property acquired with Common Shares to the Operating Partnership in exchange for additional OP Units. Also in December 1997, the Company completed the sale of 467,722 publicly registered Common Shares, which were sold at a price of $51.3125 per share. The Company contributed to the Operating Partnership net proceeds of approximately $22.8 million in connection with this offering (the "December 1997 Common Share Offering") in exchange for additional OP Units. During 1997, the Company issued 84,183 Common Shares pursuant to the Employee Share Purchase Plan at net prices which ranged from $35.63 per share to $42.08 per share and contributed to the Operating Partnership proceeds in the amount of approximately $3.2 million in connection therewith in exchange for additional OP Units. Debt Offerings For the Years Ended December 31, 1997, 1996 and 1995 - ------------------------------------------------------------------- In April 1995, the Operating Partnership issued $125 million of 7.95% unsecured fixed rate notes (the "2002 Notes") in a public debt offering (the "Second Public Debt Offering"). The Operating Partnership received net proceeds of approximately $123.1 million in connection with the Second Public Debt Offering. In August 1996, the Operating Partnership issued $150 million of 7.57% unsecured fixed rate notes (the "2026 Notes") in a public debt offering (the "Third Public Debt Offering"). The 10 PART I Operating Partnership received net proceeds of approximately $149 million in connection with this issuance. On September 18, 1996, the Operating Partnership filed with the SEC a Form S-3 Registration Statement to register $500 million of debt securities (the "1996 Debt Shelf Registration"). In October 1997, the Operating Partnership issued $150 million of unsecured fixed rate notes (the "2017 Notes") pursuant to the 1996 Debt Shelf Registration in a public debt offering (the "October 1997 Public Debt Offering"). The 2017 Notes are due on October 15, 2017 and bear interest at 7.125%, which is payable semiannually in arrears on April 15 and October 15, commencing April 15, 1998. The 2017 Notes are redeemable at any time by the Operating Partnership pursuant to the terms thereof. The Operating Partnership received net proceeds of approximately $147.4 million in connection with this issuance. In November 1997, the Operating Partnership issued $200 million of unsecured fixed rate notes pursuant to the 1996 Debt Shelf Registration in a public debt offering (the "November 1997 Public Debt Offering"). Of the $200 million issued, $150 million of these notes are due November 15, 2001 (the "2001 Notes") and bear interest at a rate of 6.55%, which is payable semiannually in arrears on May 15 and November 15, commencing on May 15, 1998. The remaining $50 million of these notes are due November 15, 2003 (the "2003 Notes") and bear interest at a rate of 6.65%, which is payable semiannually in arrears on May 15 and November 15, commencing on May 15, 1998. The Operating Partnership received net proceeds of approximately $198.5 million in connection with the 2001 Notes and the 2003 Notes. Credit Facility On November 15, 1996, the Operating Partnership completed an agreement with Morgan Guaranty Trust Company of New York ("Morgan Guaranty") and Bank of America Illinois ("Bank of America") to provide the Operating Partnership a $250 million unsecured line of credit. In September 1997, this agreement was amended to increase the potential borrowings to $500 million. This line of credit matures in November 1999 and borrowings generally will bear interest at a per annum rate of one, two, three or six month London Interbank Offered Rate ("LIBOR"), plus a certain rate dependent upon the Operating Partnership's credit rating, which rate is currently at 0.45%, and is subject to an annual facility fee of $750,000. As of December 31, 1997, $235 million of borrowings were outstanding on this line of credit, bearing interest at a weighted average rate of 6.46%. Business Combinations On May 30, 1997, the Company completed the acquisition of the multifamily property business of Wellsford through the tax-free Wellsford Merger. The transaction was valued at approximately $1 billion and included 72 Properties of Wellsford containing 19,004 units which were contributed to the Operating Partnership. The purchase price consisted of 10.8 million Common Shares issued by the Company with a market value of $443.7 million, the liquidation value of $157.5 million for the Wellsford Series A Cumulative Convertible Preferred Shares of Beneficial Interest and the Wellsford Series B 11 PART I Cumulative Redeemable Preferred Shares of Beneficial Interest, the assumption of mortgage indebtedness and unsecured notes in the amount of $345 million, the assumption of other liabilities of approximately $33.5 million and other merger related costs of approximately $23.4 million. In the Wellsford Merger, each outstanding common share of beneficial interest of Wellsford was converted into .625 of a Common Share. In addition, Wellsford Series A Cumulative Convertible Preferred Shares of Beneficial Interest were redesignated as the Company's 3,999,800 Series E Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par value per share (the "Series E Preferred Shares") and Wellsford's Series B Cumulative Redeemable Preferred Shares of Beneficial Interest were redesignated as the Company's 2,300,000 9.65% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (the "Series F Preferred Shares"). On December 23, 1997, the Company completed the acquisition of the multifamily property business of EWR, through the tax-free EWR Merger. The transaction was valued at approximately $1.2 billion and included 53 Properties of EWR containing 15,331 units and three Properties under construction expected to contain 953 units. The purchase price consisted of the Company's contribution of the EWR Operating Partnership OP Units to the Operating Partnership at a market value of approximately $501.6 million, issuance of approximately 2.2 million Operating Partnership OP Units in exchange for approximately 4.4 million EWR Operating Partnership OP Units at a market value of approximately $107.3 million, the assumption of mortgage indebtedness and unsecured notes in the amount of $498 million, the assumption of other liabilities of approximately $28.2 million and other EWR Merger related costs of approximately $16.7 million. In the EWR Merger, each outstanding common share of beneficial interest of EWR was converted into .50 of a Common Share. Recent Transactions From January 1, 1998 through March 13, 1998, the Operating Partnership acquired 12 properties from unaffiliated third parties for a total purchase price of approximately $158.2 million, which included the assumption of mortgage indebtedness of approximately $50.8 million. These properties were Cityscape, a 156-unit property located in St. Louis Park, Minnesota; 740 River Drive, a 162- unit property located in St. Paul, Minnesota; Prospect Towers, a 157-unit property located in Hackensack, New Jersey; Park Westend, a 312-unit property located in Richmond, Virginia; Park Place, a 229-unit property located in Houston, Texas; Emerald Bay at Winter Park, a 431-unit property located in Winter Park, Florida; Farnham Park, a 216-unit property located in Houston, Texas; Plantation, a 232-unit property located in Houston, Texas; Balcones Club, a 312-unit property located in Austin, Texas; Coach Lantern, a 90-unit property located in Scarborough, Maine; Foxcroft, a 104-unit property located in Scarborough, Maine; and Yarmouth Woods, a 138-unit property located in Yarmouth, Maine. In January 1998, the Company completed the sale of 4,000,000 publicly registered Common Shares which were sold to the public at a price of $50.4375 per share. The Company contributed to the Operating Partnership net proceeds of approximately $195.3 million in connection with this offering (the "January 1998 Common Share Offering") in exchange for additional OP Units. In February 1998, the Company completed offerings in the aggregate of 1,988,340 publicly registered Common Shares which were sold to the public at prices ranging from $48 to $50.625 12 PART I per share (the "February 1998 Common Share Offerings"). The Company contributed to the Operating Partnership net proceeds of approximately $95 million therefrom in exchange for additional OP Units. Through February 1998, the Company sold approximately 639,000 Common Shares pursuant to the DRIP Plan and contributed to the Operating Partnership proceeds of approximately $31.7 million therefrom in exchange for additional OP Units. On February 3, 1998, the Company filed with the SEC a Form S-3 Registration Statement to register $1 billion of equity securities. The SEC declared this registration statement effective on February 27, 1998. On February 3, 1998, the Operating Partnership filed a Form S-3 Registration Statement to register $1 billion of debt securities. The SEC declared this registration statement effective on February 27, 1998. On March 12, 1998, the Operating Partnership disposed of two Properties for a total sales price of $16.7 million. Competition All of the Properties are located in developed areas that include other multifamily properties. The number of competitive multifamily properties in a particular area could have a material effect on the Operating Partnership's ability to lease units at the Properties or at any newly acquired properties and on the rents charged. The Operating Partnership may be competing with other entities that have greater resources than the Operating Partnership and whose managers have more experience than the Operating Partnership's officers and trustees. In addition, other forms of multifamily properties, including multifamily properties and manufactured housing controlled by Mr. Zell, and single-family housing, provide housing alternatives to potential residents of multifamily properties. Risk Factors The Operating Partnership's results of operations are subject to certain risks and uncertainties relating to the operations of its Properties. Investors should carefully consider, among other factors, the matters described below prior to making an investment decision regarding the securities of the Operating Partnership. Adverse Consequences of Debt Financing and Preferred Shares General Risks. As of December 31, 1997, the Properties were subject to approximately $1.6 billion of mortgage indebtedness and the Operating Partnership's total debt equaled approximately $2.9 billion. Of the total debt outstanding, $912.7 million, including the line of credit balance of $235 million, represented floating rate debt, of which approximately $611 million was issued at tax exempt rates. In addition, from June 1995 through October 1997, the Company issued Preferred Shares and Depositary Shares pursuant to offerings previously mentioned and utilized the proceeds to repay indebtedness and to acquire additional Properties. The Operating Partnership is subject to 13 PART I the risks normally associated with debt or preferred equity financing, including the risk that the Operating Partnership's cash flow will be insufficient to meet required payments of principal and interest, the risk that existing indebtedness may not be refinanced or that the terms of such refinancing will not be as favorable as the terms of current indebtedness and the risk that necessary capital expenditures for such purposes as renovations and other improvements may not be financed on favorable terms or at all. If the Operating Partnership were unable to refinance its indebtedness on acceptable terms, or at all, the Operating Partnership might be forced to dispose of one or more of the Properties on disadvantageous terms, which might result in losses to the Operating Partnership and might adversely affect the cash available to meet required payments of principal and interest and for distributions to unitholders. If interest rates or other factors at the time of the refinancing result in higher interest rates upon refinancing, the Operating Partnership's interest expense would increase, which would affect the Operating Partnership's ability to meet required payments of principal and interest and to make distributions to its unitholders. Furthermore, if a Property is mortgaged to secure payment of indebtedness and the Operating Partnership is unable to meet mortgage payments, the mortgagee could foreclose upon the Property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value to the Operating Partnership. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering the Company's ability to meet the REIT distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). Restrictions on the Operating Partnership's Activities. A substantial portion of the Operating Partnership's debt has been issued pursuant to certain indentures (the "Indentures") which restrict the amount of indebtedness (including acquisition financing) the Operating Partnership may incur. Accordingly, if the Company or the Operating Partnership is unable to raise additional equity or borrow money, respectively, because of the debt restrictions in the Indentures, the Operating Partnership's ability to acquire additional properties may be limited. If the Operating Partnership is unable to acquire additional properties, its ability to increase funds from operations, and thereby cash available to meet required payments of principal and interest, will be limited to increasing funds from operations of the existing Properties in the Operating Partnership's portfolio at such time. Bond Compliance Requirements. Certain of the Operating Partnership's Properties are subject to restrictive covenants or deed restrictions relating to current or previous tax-exempt bond financing and owns the bonds collateralized by several additional Properties. The Operating Partnership has retained an independent outside consultant to monitor compliance with the restrictive covenants and deed restrictions that affect these Properties. The bond compliance requirements may have the effect of limiting the Operating Partnership's income from these Properties if the Operating Partnership is required to lower its rental rates to attract low or moderate income tenants, or eligible/qualified tenants. Potential Environmental Liability Affecting the Operating Partnership Under various federal, state and local environmental laws, ordinances and regulations, an owner of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose environmental liability without regard 14 PART I to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure properly to remediate such substances, may adversely affect the owner's ability to sell or rent the property or to borrow using the property as collateral. 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 such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain laws impose liability for release of asbestos-containing materials ("ACMs") into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Operating Partnership or the Subsidiaries, as the case may be, may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. All of the Properties have been the subject of a Phase I, and in certain cases a supplemental, environmental assessment completed by qualified independent environmental consultant companies. The most recent environmental assessments for each of the Properties were conducted within the last five years. Environmental assessments were obtained prior to the acquisition by the Operating Partnership of each of the Properties. These environmental assessments have not revealed, nor is the Operating Partnership aware of, any environmental liability that the Operating Partnership's management believes would have a material adverse effect on the Operating Partnership's business, results of operations, financial condition or liquidity. No assurance can be given that existing environmental assessments with respect to any of the Properties reveal all environmental liabilities, that any prior owner of a Property did not create any material environmental condition not known to the Operating Partnership, or that a material environmental condition does not otherwise exist as to any one or more Properties. General Real Estate Investment Considerations, Changes in Laws General. Real property investments are subject to varying degrees of risk and are relatively illiquid. Income from real property investments and the Operating Partnership's resulting ability to make expected interest payments on debt securities may be adversely affected by the general economic climate, local conditions such as oversupply of apartment units or a reduction in demand for apartment units in the area, the attractiveness of the Properties to tenants, zoning or other regulatory restrictions, the ability of the Operating Partnership to provide adequate maintenance and insurance, and increased operating costs (including insurance premiums and real estate taxes). The Operating Partnership's income would also be adversely affected if tenants were unable to pay rent or the Operating Partnership were unable to rent apartment units on favorable terms. If the Operating Partnership were unable to promptly relet or renew the leases for a significant number of apartment units, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then the Operating Partnership's income and ability to meet required payments of principal and interest and to make expected distributions to unitholders may be adversely affected. In addition, certain expenditures associated with each equity investment 15 PART I (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the investment. The Operating Partnership intends to purchase newly developed, as well as invest in the development of multifamily communities. Such projects generally require the expenditure of capital, and consequently there can be no assurance that any of such projects will be completed or that such projects will prove to be profitable. The failure of the Operating Partnership to complete or to profitably operate planned development projects may have an adverse affect on the Operating Partnership's results of operations and financial position. Furthermore, real estate investments are relatively illiquid and, therefore, will tend to limit the ability of the Operating Partnership to vary its portfolio promptly in response to changes in economic or other conditions. Changes in Laws. Increases in real estate taxes, income taxes and service or other taxes generally are not passed through to tenants under existing leases and may adversely affect the Operating Partnership's cash provided by operations and its ability to make interest payments on debt securities. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect the Operating Partnership's income and its ability to make interest payments on debt securities. Dependence on Key Personnel The Operating Partnership is dependent on the efforts of the Company's executive officers. While the Operating Partnership believes that it could find replacements for these key personnel, the loss of their services could have a temporary adverse effect on the operations of the Operating Partnership. Only one of these officers has entered into an employment agreement with the Company. Distribution Requirements Potentially Increasing Indebtedness of the Operating Partnership The Operating Partnership may be required from time to time, under certain circumstances, to accrue as income for tax purposes, interest and rent earned but not yet received. In such event, or upon the repayment by the Operating Partnership or its subsidiaries of principal on debt, the Company could have taxable income without sufficient cash to enable the Company to meet the distribution requirements of a REIT. Accordingly, the Operating Partnership could be required to borrow funds or liquidate investments on adverse terms in order to allow the Company to meet such distribution requirements. Item 2. The Properties As of December 31, 1997, the Operating Partnership controlled a portfolio of 463 multifamily properties located in 34 states containing 135,200 apartment units. The average number of units per Property was approximately 293. The units are typically contained in a series of two-story buildings. The Properties contain an aggregate of approximately 118.9 million rentable square feet, with an average unit size of 886 square feet. The average rent per unit was $696, and the average rent per square foot was $0.79. As of December 31, 1997, the Properties had an average occupancy rate of 95%. Tenant leases are generally year-to-year and require security deposits. The Properties typically provide residents with attractive amenities, which may include a clubhouse, swimming pool, laundry facilities and cable television access. Certain Properties offer additional amenities such as saunas, whirlpools, spas, sports courts and exercise rooms. 16 PART I The Operating Partnership believes that the Properties provide amenities and common facilities that create an attractive residence for tenants. It is management's role to monitor compliance with Property policies and to provide preventive maintenance of the Properties including common areas, facilities and amenities. The Operating Partnership holds periodic meetings of its Property management personnel for training and implementation of the Operating Partnership's strategies. The Operating Partnership believes that, due in part to this strategy, the Properties historically have had high occupancy rates. The distribution of the Properties throughout the United States reflects the Operating Partnership's belief that geographic diversification helps insulate the portfolio from regional and economic influences. At the same time, the Operating Partnership has sought to create clusters of Properties within each of its primary markets in order to achieve economies of scale in management and operation; however, the Operating Partnership may acquire additional multifamily properties located anywhere in the United States. The Operating Partnership beneficially owns fee simple title to 456 of the Properties and holds a 73-year leasehold interest with respect to one Property (Mallgate). Direct fee simple title for certain of the Properties is owned by single-purpose nominee corporations or land trusts that engage in no business other than holding title to the Property for the Operating Partnership. Holding title in such a manner is expected to make it less costly to transfer such Property in the future in the event of a sale and should facilitate financing since lenders often require title to a Property to be held in a single purpose entity in order to isolate that Property from potential liabilities of other Properties. Direct fee simple title for certain other Properties is owned by an LLC. In addition, with respect to two Properties, the Operating Partnership owns the debt collateralized by such Properties and with respect to four Properties, the Operating Partnership owns an interest in the debt collateralized by the properties. As of December 31, 1997, the Operating Partnership had an investment in partnership interests and subordinated mortgages and mortgage loans collateralized by the Additional Properties. The Additional Properties contain 5,267 units, located in seven states. The following two tables set forth certain information relating to the Properties and the Additional Properties: 17 Item 2. Properties PROPERTIES- Continued
Acreage Average Year(s) (approx- Square Square Footage Property Constructed imate) Units Footage Per Unit - ------------------------------------------------------------------------------------------------------------------------------------ ALABAMA Meadows on the Lake/Park, Birmingham (2 properties) 1986/1987 37 400 418,452 1,046 ARIZONA Bay Club, Phoenix 1976 13 420 257,790 614 Camellero, Scottsdale (1) 1979 15 344 311,526 906 Canyon Creek, Tucson 1986 10 242 169,946 702 Canyon Sands, Phoenix (1) 1983 20 412 353,592 858 Chandler Court, Chandler 1987 20 311 263,338 847 Crystal Creek, Phoenix 1985 10 273 190,140 696 Del Coronado, Mesa (1) 1985 19 419 394,062 940 Desert Sands, Phoenix (1) 1982 20 412 353,592 858 Flying Sun, Phoenix 1983 4 108 93,708 868 Fountain Creek, Phoenix 1984 9 186 144,374 776 Indian Bend, Scottsdale 1973 14 275 226,444 823 Southbank, Mesa 1985 5 113 99,448 880 Southcreek, Mesa (1) 1986-89 23 528 472,152 894 Via Ventura, Scottsdale 1980 19 320 279,187 872 Villa Madeira, Scottsdale 1971 17 332 291,280 877 Villa Manana, Phoenix 1971-85 8 260 212,150 816 Copper Creek, Phoenix 1984 8 144 146,024 1,014 Crown Court, Phoenix 1987 27 416 464,582 1,117
Occupancy December, 1997 As of Avg. Monthly Year(s) December 31, Rental Rate Per Property Constructed 1997 Unit Square Foot - --------------------------------------------------------------------------------------------------------------------------------- ALABAMA Meadows on the Lake/Park, Birmingham (2 properties) 1986/1987 94% $570 $0.54 ARIZONA Bay Club, Phoenix 1976 95% $526 $0.86 Camellero, Scottsdale (1) 1979 95% $723 $0.80 Canyon Creek, Tucson 1986 96% $488 $0.69 Canyon Sands, Phoenix (1) 1983 92% $557 $0.65 Chandler Court, Chandler 1987 92% $641 $0.76 Crystal Creek, Phoenix 1985 96% $571 $0.82 Del Coronado, Mesa (1) 1985 93% $671 $0.71 Desert Sands, Phoenix (1) 1982 92% $557 $0.65 Flying Sun, Phoenix 1983 98% $590 $0.68 Fountain Creek, Phoenix 1984 96% $603 $0.78 Indian Bend, Scottsdale 1973 93% $692 $0.84 Southbank, Mesa 1985 96% $573 $0.65 Southcreek, Mesa (1) 1986-89 93% $663 $0.74 Via Ventura, Scottsdale 1980 97% $728 $0.83 Villa Madeira, Scottsdale 1971 95% $700 $0.80 Villa Manana, Phoenix 1971-85 93% $619 $0.76 Copper Creek, Phoenix 1984 97% $789 $0.78 Crown Court, Phoenix 1987 99% $857 $0.77
18 Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA, continued Dos Caminos, Phoenix 1983 16 264 265,884 1,007 98% $781 $0.78 The Pointe ASM, Phoenix 1988 14 364 309,548 850 93% $666 $0.78 San Tropez, Phoenix 1989 13 316 332,080 1,051 98% $886 $0.84 Misson Palms, Tucson 1980 35 360 372,918 1,036 99% $669 $0.65 Skyline Gateway, Tucson 1985 8 246 179,422 729 98% $568 $0.78 Sedona Ridge, Phoenix 1988 17 250 235,345 941 95% $728 $0.77 Windemere, Mesa (1) 1986 18 224 187,192 836 95% $591 $0.71 Sycamore Creek, Scottsdale (1) 1984 19 350 335,420 958 91% $759 $0.79 Villa Serenas, Tucson (1) 1973 18 611 452,751 741 87% $506 $0.68 Acacia Creek, Scottsdale 1988-1994 20 508 462,280 910 95% $765 $0.84 Bayside at the Islands, Gilbert (1) 1989 15 272 236,640 870 93% $736 $0.85 Country Brook, Chandler (1) 1986-1996 24 396 380,556 961 95% $739 $0.77 Gateway Villas, Scottsdale 1995 18 180 179,664 998 97% $836 $0.84 Greenwood Village, Tempe (1) 1984 13 270 238,768 884 92% $670 $0.76 Superstition Vista, Mesa 1987 16 316 300,510 951 93% $649 $0.68 Heritage Point, Mesa 1986 7 148 114,436 773 91% $797 $1.03 La Mariposa, Mesa (1) 1986 11 222 206,052 928 96% $645 $0.69 Little Cottonwoods, Tempe (1) 1984 20 379 389,012 1,026 94% $766 $0.75 Miramonte, Scottsdale 1983 4 151 118,568 785 96% $666 $0.85
19 Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA, continued Morningside, Scottsdale (1) 1989 10 160 163,116 1,019 98% $802 $0.79 Mountain Park, Phoenix (1) 1994 12 240 230,560 961 92% $800 $0.83 Park Meadow, Gilbert (1) 1986 7 224 197,120 880 97% $691 $0.79 Rancho Murietta, Tempe 1983 14 292 253,016 866 95% $698 $0.81 Scottsdale Courtyards, Scottsdale (1) 1993 18 274 284,175 1,037 99% $895 $0.86 Scottsdale Meadows, Scottsdale 1984 7 168 149,520 890 95% $727 $0.82 Shadow Brook, Scottsdale (1) 1984 17 224 226,296 1,010 98% $863 $0.85 Shores at Andersen Springs, Chandler (1) 1989 11 299 265,218 887 95% $776 $0.87 Sonoran, Phoenix (1) 1995 15 429 413,344 964 93% $770 $0.80 The Enclave, Tempe (1) 1994 25 204 194,142 952 98% $850 $0.89 The Meadows, Mesa 1984 15 306 247,378 808 92% $575 $0.71 Towne Square, Chandler 1987-1996 16 584 560,640 960 96% $683 $0.71 Villa Encanto, Phoenix 1983 21 382 309,982 811 93% $631 $0.78 Village at Lakewood, Phoenix (1) 1988 12 240 205,752 857 95% $754 $0.88 Harrison Park, Tucson (1) 1985 6 360 291,240 809 90% $623 $0.77 La Reserve Villas, Tucson (1) 1988 12 240 216,008 900 97% $619 $0.69 Orange Grove Village, Tucson (1) 1986-1995 17 400 285,600 714 90% $561 $0.79 Suntree Village, Tucson (1) 1986 16 424 345,761 815 92% $529 $0.65 Arboretum, Tucson (1) 1987 14 496 439,456 886 97% $569 $0.64
20 Item 2. Properties PROPERTIES- Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------- ARIZONA, continued Village at Tanque Verde, Tucson (1) 1984-1994 9 217 174,668 805 91% $571 $0.71 Legends at La Paloma, Tucson 1995 20 312 325,648 1,044 95% $783 $0.75 Bear Canyon, Tucson 1996 14 238 231,640 973 92% $726 $0.75 Promontory Pointe I&II, Phoenix (1) 1984-1996 27 424 421,446 994 96% $772 $0.78 The Hawthorne, Phoenix 1996 10 276 259,784 941 91% $782 $0.83 Isle at Arrowhead Ranch, Glendale 1996 18 256 244,608 956 95% $839 $0.88 Ladera, Phoenix 1995 15 248 243,312 981 96% $832 $0.85 Ingleside, Phoenix 1995 5 120 118,664 989 98% $865 $0.87 The Heritage, Phoenix (1) 1995 8 204 198,276 972 91% $797 $0.82 Sun Creek, Glendale (1) 1985 7 175 129,661 741 94% $601 $0.81 Silver Creek, Phoenix (1) 1986 5 174 134,820 775 95% $614 $0.79 Preserve at Squaw Park, Phoenix (1) 1990 4 108 92,168 853 94% $836 $0.98 The Palms, Phoenix (1) 1990 5 132 135,460 1,026 98% $924 $0.90 Mirador, Phoenix 1995 16 316 311,928 987 92% $817 $0.83 La Valencia, Mesa 1997 18 361 342,946 950 94% $664 $0.70 ARKANSAS Combined Little Rock Properties (1)(3) 1974-1975 44 1,039 889,416 856 93% $520 $0.61 CALIFORNIA Carmel Terrace, San Diego 1988-89 20 384 298,588 778 97% $816 $1.05 Casa Capricorn & Pardee Casas, San Diego 1976-1986 19 388 346,720 894 97% $800 $0.90 Creekside Oaks, Walnut Creek (1) 1974 7 316 237,952 753 92% $850 $1.13
Item 2. Properties PROPERTIES-Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- CALIFORNIA, continued Deerwood, San Diego 1990 29 316 333,079 1,054 95% $1,072 $1.02 Eagle Canyon, Chino Hills 1985 32 252 252,493 1,002 93% $975 $0.97 Emerald Place, Bermuda Dunes 1988 17 240 214,072 892 97% $622 $0.70 Hathaway, Long Beach 1987 17 385 266,805 693 95% $885 $1.28 Lakeville Resort, Petaluma (1) 1984 45 492 461,798 939 98% $806 $0.86 Lands End, Pacifica 1974 7 260 161,121 620 97% $1,062 $1.71 Merrimac Woods, Costa Mesa 1970 39 123 88,160 717 98% $807 $1.13 Mountain Terrace, Stevenson Ranch 1992 39 510 425,612 835 93% $878 $1.05 Oak Park North & South, Agoura (1) 1989-1990 24 444 368,600 830 96% $1,078 $1.30 Park West, Los Angeles 1990 4 444 315,588 711 95% $1,015 $1.43 Promenade Terrace, Corona Hills (1) 1990 27 330 360,838 1,093 99% $882 $0.81 Regency Palms, Huntington Beach 1969 14 310 261,634 844 91% $866 $1.03 Summer Ridge, Riverside 1985 6 136 104,832 771 99% $695 $0.90 Summerset Village, Chatsworth 1985 29 280 286,752 1,024 96% $1,098 $1.07 Villa Solana, Laguna Hills 1984 13 272 245,104 901 97% $915 $1.02 Vista Del Lago, Mission Viejo (1) 1986-88 29 608 512,200 842 92% $941 $1.12 Windridge, Laguna Niguel (1) 1989 19 344 375,312 1,091 95% $1,046 $0.96 Bay Ridge, San Pedro 1987 2 60 46,836 781 95% $908 $1.16 La Mirage, San Diego 1988-1992 75 1,070 972,689 909 94% $1,094 $1.20
Item 2. Properties PROPERTIES-Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ CALIFORNIA, continued Harborview, San Pedro (1) 1985 7 160 171,800 1,074 89% $1,351 $1.26 Wood Creek, Pleasant Hill 1987 16 256 257,632 1,006 95% $1,253 $1.25 Geary Courtyard, San Francisco (1) 1990 0.4 164 85,675 522 86% $1,123 $2.15 Deerwood, Corona 1992 15 316 338,345 1,071 94% $871 $0.81 Larkspur Woods, Sacramento (1) 1989/1993 16 232 253,134 1,091 95% $959 $0.88 Ridgewood Village, San Diego 1997 9 192 163,336 851 95% $907 $1.07 The Ashton, Corona (1) 1986 24 492 457,184 929 90% $717 $0.77 Canyon Crest Views, Riverside 1982-1983 11 178 212,292 1,193 97% $945 $0.79 Canyon Ridge, San Diego 1989 8 162 126,000 778 99% $854 $1.10 Marquessa, Corona (1) 1992 14 336 299,744 892 94% $770 $0.86 Portofino, Chino Hills 1989 11 176 153,708 873 99% $860 $0.98 Parkview Terrace, Redlands (1) 1986 32 558 446,856 801 96% $699 $0.87 Redlands Lawn and Tennis Club, Redland (1) 1986 27 496 394,560 795 93% $658 $0.83 COLORADO Cheyenne Crest, Colorado Springs 1984 9 208 175,424 843 96% $659 $0.78 Glenridge, Colorado Springs (1) 1985 8 220 176,792 804 96% $648 $0.81 Indian Tree, Arvada 1983 8 168 140,000 833 95% $666 $0.80 Trails, Aurora 1986 11 351 286,964 818 93% $633 $0.77 Willow Glen, Aurora 1983 20 384 302,944 789 94% $614 $0.78
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ----------------------------------------------------------------------------------------------------------------------------- COLORADO, continued Windmill, Colorado Springs 1985 11 304 180,640 594 97% $523 $0.88 Yuma Court, Colorado Springs 1985 5 40 37,400 935 100% $620 $0.66 Village at Bear Creek, Denver 1987-1996 31 472 464,558 984 93% $848 $0.86 Cimmaron Ridge, Denver 1984 10 296 229,048 774 93% $586 $0.76 Colinas Pointe, Denver 1986 13 272 213,984 787 92% $647 $0.82 Highland Pointe, Denver 1984 14 318 237,886 748 97% $568 $0.76 Ironwood at the Ranch, Denver (1) 1986 9 226 184,081 815 97% $732 $0.90 The Marks, Denver (1) 1987-1996 24 616 520,712 845 93% $741 $0.88 The Registry, Denver 1987 9 208 156,558 753 98% $695 $0.92 Sterling Point, Denver 1979 9 143 130,120 910 94% $732 $0.80 Warwick Station, Denver (1) 1986 18 332 250,432 754 96% $689 $0.91 Parkwood East, Fort Collins 1986 25 259 215,064 830 92% $676 $0.81 Dartmouth Woods, Lakewood (1) 1990 13 201 165,777 825 97% $708 $0.86 Highline Oaks, Denver (1) 1986 10 220 170,756 776 94% $679 $0.88 Crescent at Cherry Creek, Denver (1) 1994 6 216 189,191 876 94% $821 $0.94 Cierra Crest, Denver 1996 22 480 439,498 916 95% $808 $0.88 CONNECTICUT The Classic, Stamford 1990 1 144 165,727 1,151 97% $1,981 $1.72 FLORIDA Brierwood, Jacksonville 1974 17 196 263,052 1,342 99% $642 $0.48
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ FLORIDA, continued Casa Cordoba, Tallahassee 1972-73 12 168 164,336 978 95% $605 $0.62 Casa Cortez, Tallahassee 1970 4 66 74,916 1,135 94% $628 $0.55 Chaparral, Largo 1976 23 444 451,420 1,017 95% $613 $0.60 Gatehouse on the Green, Pembroke Pines 1990 21 312 310,140 994 90% $944 $0.95 Gatehouse at Pine Lake, Plantation 1990 25 296 293,792 993 97% $861 $0.87 Habitat, Orlando 1974 17 344 334,352 972 93% $589 $0.61 Hammock's Place, Miami (1) 1986 15 296 307,900 1,040 93% $740 $0.71 Heron Cove, Coral Springs 1987 12 198 189,932 959 98% $786 $0.82 Heron Landing, Lauderhill 1988 11 144 151,684 1,053 94% $771 $0.73 Heron Run, Plantation 1987 13 198 185,504 937 93% $814 $0.87 La Costa Brava, Orlando 1967 10 194 190,780 983 98% $639 $0.65 La Costa Brava, Jacksonville (2) 1970-73 30 464 441,268 951 92% $556 $0.58 Marbrisa, Tampa 1984 37 224 188,544 842 97% $589 $0.70 Oaks of Lakebridge, Ormond Beach 1984 12 170 120,792 711 99% $598 $0.84 Paradise Point, Dania 1987-90 13 260 226,980 873 99% $832 $0.95 Pine Harbour, Orlando 1991 20 366 344,204 940 95% $690 $0.73 Pines of Springdale, W. Palm Beach 1986 5 151 126,975 841 95% $632 $0.75 The Place, Fort Meyers 1986 9 230 183,588 798 96% $556 $0.70 Combined Ft. Lauderdale Properties (4) 1988-1991 36 737 528,591 717 97% $878 $1.22
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ FLORIDA, continued River Bend, Tampa 1971 15 296 333,580 1,127 96% $565 $0.50 Sabal Pointe, Coral Springs 1995 14 275 355,575 1,293 96% $896 $0.69 Sawgrass Cove, Bradenton 1991 28 336 342,880 1,020 94% $678 $0.66 Springs Colony, Altamonte Springs (1) 1986 10 188 161,168 857 96% $589 $0.69 Stonelake Club, Ocala 1986 15 240 194,320 810 95% $511 $0.63 Woodlake at Killearn, Tallahassee 1986-90 25 352 305,480 868 91% $610 $0.70 Banyan Lake, Boynton Beach 1986 30 288 264,636 919 94% $712 $0.77 Boynton Place, Boynton Beach 1989 12 192 195,840 1,020 95% $715 $0.70 Crosswinds, St. Petersburg 1986 17 208 154,224 741 97% $567 $0.77 Sabal Palm, Pompano Beach 1989 23 416 384,032 923 96% $762 $0.83 Summit Chase, Coral Springs 1985 9 140 134,586 961 94% $714 $0.74 Mariners Wharf, Orange Park 1989 28 272 305,392 1,123 95% $753 $0.67 Northlake, Jacksonville 1989 20 240 193,832 808 94% $596 $0.74 Ocean Walk, Key West (1) 1990 16 296 208,256 704 97% $828 $1.18 Silver Springs, Jacksonville 1985 25 432 361,372 836 95% $547 $0.65 Tivoli Lakes, Deerfield Beach 1991 15 278 247,336 890 96% $789 $0.89 Westwood Pines, Tamarac 1991 15 208 204,460 983 96% $799 $0.81 Hidden Palms, Tampa (1) 1986 14 256 201,518 787 97% $542 $0.69 Vinings at Ashley Lake, Boynton Beach (1) 1990 36 440 432,756 984 93% $649 $0.66
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ GEORGIA Frey, Atlanta (1) 1985 44 489 453,760 928 90% $704 $0.76 Governor's Place, Augusta 1972 9 190 191,580 1,008 91% $449 $0.45 Greengate, Marietta 1971 11 152 157,808 1,038 92% $646 $0.62 Holcomb Bridge, Atlanta (1) 1985 36 437 419,150 959 96% $703 $0.73 Ivy Place, Atlanta 1978 15 122 180,830 1,482 94% $919 $0.62 Longwood, Decatur 1992 9 268 216,970 810 96% $742 $0.92 Maxwell House, Augusta 1951 1 216 97,173 450 96% $371 $0.82 Park Knoll, Marietta 1983 41 484 587,250 1,213 97% $821 $0.68 Preston Lake, Tucker 1984-86 32 320 338,130 1,057 97% $698 $0.66 Roswell, Atlanta (1) 1985 30 236 225,598 956 98% $731 $0.76 Terraces at Peachtree, Atlanta 1987 1 96 86,800 904 98% $913 $1.01 Woodland Hills, Decatur 1985 19 228 266,304 1,168 97% $788 $0.67 Paces (combined), Atlanta (8) 1984-1989 41 610 592,936 972 94% $768 $0.79 North Hill, Atlanta (1) 1984 30 420 481,150 1,146 93% $764 $0.67 The Clarion, Decatur 1990 9 217 211,582 975 94% $756 $0.78 Garden Lake, Riverdale 1991 19 278 274,256 986 91% $645 $0.65 Highland Grove, Stone Mountain 1988 20 268 243,360 908 94% $671 $0.74 Governor's Point, Roswell (1) 1982/1986 34 468 587,176 1,255 94% $783 $0.62 The Arboretum, Atlanta 1970 18 312 301,139 965 94% $790 $0.82
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ IDAHO The Seasons, Boise 1990 6 120 108,460 904 97% $631 $0.70 ILLINOIS Bourbon Square, Palatine (1) 1984-87 47 612 875,160 1,430 98% $1,034 $0.72 Four Lakes III-V, Lisle (1) 1968-1988 107 1,420 1,108,45 781 93% $819 $1.05 Spice Run, Naperville 1988 32 400 396,320 991 98% $862 $0.87 Chantecleer Lakes, Naperville (1) 1986 19 304 280,536 923 97% $894 $0.97 Glenlake Club, Glendale Heights (1) 1988 17 336 268,560 799 91% $767 $0.96 INDIANA Idlewood, Indianapolis (1) 1991 28 320 262,355 820 90% $621 $0.76 IOWA 3000 Grand, Des Moines 1970 6 186 199,530 1,073 94% $829 $0.77 Regency Woods, West Des Moines (1) 1986 11 200 165,880 829 97% $515 $0.62 KANSAS Cedar Crest, Overland Park 1986 30 466 430,034 923 98% $632 $0.68 Essex Place, Overland Park 1970-84 34 352 429,048 1,219 96% $792 $0.65 Rosehill Pointe, Lenexa 1984 35 498 459,318 922 93% $611 $0.66 Silverwood, Mission (1) 1986 15 280 234,876 839 98% $632 $0.75 Sunnyoak Village, Overland Park 1984 46 548 492,700 899 98% $588 $0.65 Concorde Bridge, Overland Park 1973 26 248 403,808 1,628 94% $798 $0.49 KENTUCKY Cloisters on the Green, Lexington 1974 12 228 196,560 862 97% $576 $0.67 Doral, Louisville 1972 10 228 293,106 1,286 95% $618 $0.48
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ KENTUCKY, continued Mallgate, Louisville 1969 24 540 535,444 992 93% $551 $0.56 Sonnet Cove I-II, Lexington 1972-1974 14 331 346,675 1,047 94% $627 $0.60 Breckinridge Court, Lexington (1) 1986-1987 16 382 276,010 723 95% $464 $0.64 River Oak, Louisville 1989 16 268 200,056 746 95% $516 $0.69 MAINE Junipers of Yarmouth, Yarmouth 1970 9 225 188,000 836 97% $662 $0.79 Tamarlane, Portland 1986 19 115 101,801 885 98% $716 $0.81 MARYLAND Canterbury, Germantown (1) 1986 23 544 481,083 884 97% $719 $0.81 Country Club I & II, Silver Spring (1) 1980-1982 20 376 371,296 987 95% $770 $0.78 Georgian Woods II, Wheaton (1) 1967 17 371 305,693 824 98% $777 $0.94 Greenwich Woods & Hollyview, Silver Springs (6) 1965-1967 14 606 546,518 902 97% $755 $0.84 Marymont, Laurel 1987-88 10 308 251,264 816 96% $771 $0.95 Northhampton I & II, Largo (1) 1977-1988 58 620 564,399 910 96% $806 $0.89 Oak Mill II, Germantown (1) 1985 8 192 165,611 863 96% $716 $0.83 Town Centre III & IV, Laurel (1) 1968-1969 30 562 553,083 984 98% $721 $0.73 Yorktowne at Olde Mill, Millersville 1974 21 216 195,100 903 97% $691 $0.77 MASSACHUSETTS Lincoln Heights, Quincy 1991 16 336 266,590 793 93% $1,079 $1.36 Crystal Village, Attleboro 1974 7 91 92,880 1,021 100% $871 $0.85 Mill Village, Randolph 1971-77 11 310 237,755 767 97% $735 $0.96
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- MICHIGAN Country Ridge, Farmington Hills 1986 18 252 278,060 1,103 92% $838 $0.76 Hidden Valley, Ann Arbor 1973 28 324 237,348 733 96% $717 $0.98 Lake in the Woods, Ypsilanti 1969 175 1,028 971,873 945 95% $736 $0.78 Pines of Cloverlane, Pittsfield Townsh 1975-79 63 582 471,966 811 96% $624 $0.77 Walden Wood, Southfield (1) 1972 20 210 295,080 1,405 95% $879 $0.63 Arbor Glen, Pittsfield Township 1990 22 220 195,996 891 95% $600 $0.67 Burwick Farms, Howell 1991 37 264 274,540 1,040 95% $786 $0.76 Woodcrest Villa, Westland 1970 26 458 425,200 928 93% $561 $0.60 Woodland Meadows, Ann Arbor 1987-1989 34 306 392,930 1,284 89% $1,075 $0.84 MINNESOTA Park Place I & II, Plymouth (1) 1986 60 500 569,768 1,140 94% $800 $0.70 Fountain Place I, Eden Prairie (1)(7) 1989 22 332 382,170 1,151 97% $768 $0.67 Fountain Place II, Eden Prairie (1)(7) 1989 158 162,598 1,029 97% $771 $0.75 Royal Oaks, Eagan (1) 1989 20 231 209,384 906 98% $740 $0.82 Trailway Pond I, Burnsville (1)(7) 1988 21 75 70,283 937 95% $684 $0.73 Trailway Pond II, Burnsville (1)(7) 1988 165 155,395 942 95% $675 $0.72 Valley Creek I, Woodbury (1)(7) 1989 40 225 212,100 943 92% $713 $0.76 Valley Creek II, Woodbury (1)(7) 1990 177 168,258 951 96% $717 $0.75 White Bear Woods I, White Bear Lake (1) 1989 4 225 211,992 942 96% $736 $0.78 Woodlane Place I, Woodbury (1) 1989 32 216 297,902 1,379 95% $870 $0.63 Woodlands of Minnetonka, Minnetonka 1988 14 248 268,640 1,083 98% $880 $0.81
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- MISSOURI Hunters Glen, Chesterfield 1985 19 192 156,489 815 98% $654 $0.80 Sleepy Hollow, Kansas City (1) 1987 33 388 325,486 839 93% $566 $0.67 Hunters Ridge, St. Louis (1) 1987 13 198 178,448 901 95% $616 $0.68 South Pointe, St. Louis (1) 1986 8 192 155,520 810 92% $602 $0.74 Ethan's Ridge I, Kansas City (1)(7) 1988 316 283,944 899 92% $542 $0.60 Ethan's Ridge II, Kansas City (1)(7) 1990 52 242 196,614 812 89% $534 $0.66 Ethan's Glen III, Kansas City (1)(7) 1990 48 33,600 700 88% $484 $0.69 NEVADA Catalina Shores, Las Vegas 1989 13 240 211,200 880 93% $716 $0.81 Cypress Point, Las Vegas 1989 9 212 179,800 848 97% $698 $0.82 Desert Park, Las Vegas 1987 15 368 172,513 469 87% $519 $1.11 Fountains at Flamingo, Las Vegas 1989-91 30 521 417,870 802 94% $687 $0.86 Newport Cove, Henderson 1983 10 140 152,600 1,090 96% $777 $0.71 Silver Shadow, Las Vegas 1992 9 200 194,656 973 90% $716 $0.74 Sunrise Springs, Las Vegas 1989 10 192 164,424 856 94% $681 $0.80 Trails, Las Vegas 1988 28 440 453,656 1,031 94% $757 $0.73 Catalina Shores, Las Vegas (Wellsford) 1989 14 256 230,872 902 97% $651 $0.72 Crossing at Green Valley, Las Vegas 1986 15 384 330,714 861 96% $654 $0.76 Reflections at the Lakes, Las Vegas 1989 16 326 274,992 844 98% $669 $0.79 NEW HAMPSHIRE Wellington Hill, Manchester (1) 1987 40 390 394,627 1,012 96% $753 $0.74
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- NEW JERSEY Ravens Crest, Plainsboro (1) 1984 19 704 583,176 828 96% $854 $1.03 NEW MEXICO Pueblo Villas, Albuquerque 1975 12 232 173,118 746 94% $557 $0.75 Mountain Run, Albuquerque 1985 16 472 335,744 711 95% $554 $0.78 NORTH CAROLINA Bainbridge, Durham 1984 24 216 191,240 885 94% $705 $0.80 Bridgeport, Raleigh 1990 17 276 252,190 914 95% $724 $0.79 Deerwood Meadows, Greensboro 1986 44 297 217,757 733 94% $562 $0.77 East Pointe, Charlotte (1) 1987 29 310 301,560 973 97% $650 $0.67 Laurel Ridge, Chapel Hill 1975 13 160 158,964 994 98% $727 $0.73 McAlpine Ridge, Charlotte 1989-90 15 320 238,125 744 96% $580 $0.78 Pine Meadow, Greensboro (1) 1974 14 204 226,600 1,111 95% $633 $0.57 Rock Creek, Corrboro 1986 16 188 153,548 817 97% $682 $0.84 Winterwood, Charlotte (1) 1986 23 384 369,260 962 96% $675 $0.70 Woodbridge, Cary (1) 1993-95 28 344 315,624 918 95% $733 $0.80 Woodscape & Woods of North Bend, Raleigh 1979-1983 55 475 430,167 906 96% $640 $0.71 The Cardinal, Greensboro (1) 1994 17 256 237,727 913 93% $574 $0.63 Willow Brook, Durham 1986 21 176 139,860 795 91% $681 $0.86 The Atrium, Durham 1989 16 208 196,596 945 95% $645 $0.68 The Cedars, Charlotte 1983 32 360 312,400 868 92% $548 $0.63 The Chimneys, Charlotte 1974 16 214 150,152 702 95% $505 $0.72 Creekwood, Charlotte 1987-1990 23 384 322,868 841 93% $792 $0.94 Hidden Oaks & Northwoods Village, Cary (5) 1986-1988 26 444 345,358 778 95% $660 $0.85
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- OHIO Olentangy Commons, Columbus 1972 76 827 981,190 1,186 99% $773 $0.65 Reserve Square, Cleveland 1973 4 765 631,803 826 86% $917 $1.11 University Park, Toledo 1965 2 99 49,950 505 95% $456 $0.90 Village of Hampshire Heights, Toledo 1950 10 304 187,624 617 83% $431 $0.70 Eastland on the Lake, Columbus 1973 32 376 274,704 724 90% $431 $0.60 Orchard of Landen, Maineville (1) 1985-1988 33 312 288,514 925 96% $695 $0.75 OKLAHOMA Brittany Square, Tulsa 1982 8 212 170,516 804 92% $524 $0.65 The Lodge, Tulsa 1979 11 208 152,240 732 97% $432 $0.59 Augusta, Oklahoma City 1986 7 197 153,308 778 95% $531 $0.68 Heritage Park, Oklahoma City 1983 23 452 392,218 868 95% $410 $0.47 Invitational, Oklahoma City 1983 10 344 254,976 741 97% $440 $0.59 Raindance, Oklahoma City 1984 22 504 327,248 649 94% $358 $0.55 Windrush, Oklahoma City 1982 10 160 130,112 813 99% $501 $0.62 Wellsford Oaks, Tulsa 1991 9 300 216,368 721 96% $529 $0.73 Huntington Hollow, Tulsa 1981 9 288 180,648 627 96% $371 $0.59 One Eton Square, Tulsa 1985 17 448 313,904 701 95% $531 $0.76 Silver Springs & Woodland Oaks, Tulsa 1983-1984 24 428 323,977 757 99% $503 $0.66
Item 2. Properties PROPERTIES-Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- OKLAHOMA, continued Riverside Park, Tulsa (1) 1994 9 288 237,283 824 93% $576 $0.70 OREGON Bridgecreek, Wilsonville 1987 22 315 274,236 871 92% $677 $0.78 Kempton Downs, Gresham 1990 12 278 277,536 998 88% $698 $0.70 Meadowcreek, Tigard (1) 1985 15 304 247,690 815 94% $661 $0.81 Tanasbourne Terrace, Hillsboro 1986-89 18 373 363,758 975 95% $747 $0.77 Tanglewood, Lake Oswego 1976 8 158 200,660 1,270 88% $847 $0.67 Woodcreek, Beaverton (1) 1982-84 22 440 335,120 762 95% $598 $0.79 Knight's Castle, Wilsonville 1991 22 296 251,627 850 92% $649 $0.76 Club at Tanasbourne, Hillsboro 1990 19 352 302,902 861 91% $698 $0.81 Club at the Green, Beaverton 1991 15 254 238,850 940 92% $692 $0.74 Country Gables, Beaverton (1) 1991 15 288 275,463 956 92% $720 $0.75 Watermark Square, Portland (1) 1990 12 390 350,945 900 95% $637 $0.71 SOUTH CAROLINA Mallard Cove, Greenville 1983 14 211 264,187 1,252 99% $583 $0.47 Carolina Crossing, Greenville 1967 6 156 121,200 777 94% $432 $0.56 Gleneagle, Greenville 1990 14 192 177,264 923 94% $544 $0.59 Greyeagle, Greenville 1991 11 156 154,624 991 96% $549 $0.55 Hickory Ridge, Greenville 1968 4 90 72,392 804 98% $446 $0.55 Tamarind at Stoneridge, Columbia 1985 15 240 200,976 837 88% $534 $0.64 TENNESSEE Arbors of Hickory Hollow, Nashville (1) 1986 31 336 337,260 1,004 95% $637 $0.63
Item 2. Properties PROPERTIES--Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- TENNESSEE, continued Arbors of Brentwood, Nashville (1) 1986-87 41 346 320,993 928 92% $690 $0.74 Brixworth, Nashville 1985 6 216 144,912 671 92% $745 $1.11 Canterchase, Nashville (1) 1985 22 235 170,140 724 97% $542 $0.75 Ridgemont, Chattanooga 1988 21 280 236,530 845 97% $506 $0.60 Mountain Brook, Chattanooga 1987 43 226 192,200 850 95% $476 $0.56 Spinnaker Cove, Nashville (1) 1986 21 278 238,524 858 95% $676 $0.79 Wyndridge II , Memphis (1)(7) 1988 59 284 263,962 929 95% $616 $0.66 Wyndridge III, Memphis (1)(7) 1988 284 263,962 929 94% $613 $0.66 The Willows, Knoxville (1) 1987-1988 19 250 219,760 879 91% $612 $0.70 Farmington Gates, Germantown 1976 11 182 192,428 1,057 93% $610 $0.58 Ridgeway Commons, Memphis 1970 12 127 168,650 1,328 87% $623 $0.47 Village of Sycamore Ridge, Memphis 1977 14 114 148,560 1,313 93% $624 $0.48 Cambridge at Hickory Hollow, Nashville 1997 24 360 358,776 997 73% $717 $0.72 Trinity Lakes & Autumn Creek, Cordova(1) 1985-1991 40 540 484,374 897 94% $603 $0.67 Preakness, Antioch (1) 1986 13 260 193,500 744 96% $548 $0.74 TEXAS 7979 Westheimer, Houston 1973 15 459 401,571 875 94% $646 $0.74 Altamonte, San Antonio (1) 1985 17 432 322,928 748 97% $527 $0.70 Arbors of Las Colinas, Irving 1985 15 408 334,556 820 99% $679 $0.83 Breton Mill, Houston (1) 1986 14 392 294,152 750 99% $564 $0.75 Celebration at Westchase, Houston 1979 13 367 305,609 833 98% $565 $0.68
Item 2. Properties PROPERTIES-Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ---------------------------------------------------------------------------------------------------------------------------------- TEXAS, continued Champion Oaks, Houston (1) 1984 10 252 190,628 756 97% $561 $0.74 Dawntree, Carrollton 1982 23 400 370,152 925 96% $604 $0.65 Forest Ridge, Arlington 1984-85 29 660 555,364 841 94% $614 $0.73 Fountainhead I-III, San Antonio (1) 1985-87 23 688 457,616 665 96% $515 $0.77 Harbour Landing, Corpus Christi 1985 11 284 193,288 681 96% $543 $0.80 Hampton Green, San Antonio 1979 11 293 222,341 759 94% $483 $0.64 Hearthstone, San Antonio 1982 11 252 167,464 665 95% $434 $0.65 Hunter's Green, Fort Worth (1) 1981 10 248 188,720 761 98% $491 $0.65 Keystone, Austin (1) 1981 6 166 111,440 671 97% $570 $0.85 Kingswood Manor, San Antonio 1983 6 129 109,996 853 91% $523 $0.61 Lakewood Oaks, Dallas 1987 12 352 257,606 732 97% $678 $0.93 Lincoln Green I-III, San Antonio 1984-86 24 680 465,664 685 98% $480 $0.70 Marina Club, Ft. Worth 1987 14 387 265,475 686 95% $477 $0.70 Northgate Village, San Antonio 1984 10 264 214,928 814 98% $509 $0.63 Parkwest, Austin 1985 15 196 179,046 914 97% $736 $0.81 Preston in Willow Bend, Plano 1985 13 229 233,893 1,021 95% $768 $0.75 Ridgetree, Dallas 1983 17 798 597,642 749 93% $527 $0.70 Saddle Creek, Carrollton 1980 16 238 244,488 1,027 95% $690 $0.67 Songbird, San Antonio (1) 1981 15 262 277,720 1,060 91% $633 $0.60 Sutton Place, Dallas 1985 10 456 301,440 661 98% $601 $0.91
Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ TEXAS, continued The Lodge, San Antonio 1979 10 384 259,512 676 93% $493 $0.73 The Trails, Arlington 1984 9 208 141,696 681 98% $528 $0.78 Village Oaks, Austin (1) 1984 13 280 199,152 711 99% $667 $0.94 Woodmoor, Austin 1981 9 208 151,348 728 99% $580 $0.80 Burn Brae, Dallas 1984 12 282 221,966 787 97% $556 $0.71 Calais, Dallas 1986 13 264 206,210 781 94% $593 $0.76 Copperfield, San Antonio 1984 10 258 197,736 766 95% $498 $0.65 Countryside, San Antonio 1980 9 220 159,214 724 95% $475 $0.66 Forest Valley, San Antonio 1983 8 185 149,493 808 95% $531 $0.66 Landera, San Antonio 1983 9 184 168,176 914 96% $571 $0.62 The Overlook, San Antonio 1985 16 411 298,133 725 97% $461 $0.64 Regatta, San Antonio 1983 10 200 171,634 858 98% $574 $0.67 Trails End, San Antonio 1983 19 308 202,376 657 96% $458 $0.70 Villas of Oak Creste, San Antonio 1979 10 280 208,446 744 91% $464 $0.62 Waterford, San Antonio 1983 5 133 87,376 657 93% $495 $0.75 Foxchase, Grand Prairie 1983 15 260 243,218 935 94% $584 $0.62 Cambridge Village, Lewisville 1987 10 200 160,036 800 95% $668 $0.84 Rincon, Houston 1996 5 288 240,787 836 96% $894 $1.07 Trails at Dominion, Houston (1) 1992-1995 55 843 766,592 909 94% $684 $0.75 Town Center, Kingwood 1994 10 258 220,630 855 94% $757 $0.89 Preston Bend, Dallas (1) 1986 9 255 185,364 727 93% $636 $0.87
37 Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ TEXAS, continued Blue Swan, San Antonio (1) 1985-1994 12 285 226,036 793 92% $540 $0.68 Jefferson at Walnut Creek, Austin (1) 1994 20 342 286,188 837 95% $776 $0.93 Kirby Place, Houston (1) 1994 9 362 359,931 994 95% $991 $1.00 Parkridge Place, Irving 1985 23 536 455,496 850 98% $625 $0.74 Chartwell Court, Houston 1995 14 243 253,553 1,043 96% $764 $0.73 UTAH Quail Cove, Salt Lake City 1987 17 420 362,580 863 93% $581 $0.67 Settlers Point, Salt Lake City 1986 16 288 263,040 913 93% $639 $0.70 Springs of Country Woods, Salt Lake City 1982 24 590 486,648 825 94% $614 $0.74 Brookfield, Salt Lake City 1985 6 128 101,424 792 95% $603 $0.76 VIRGINIA Amberton, Manassas (1) 1986 7 190 143,402 755 96% $706 $0.94 Kingsport, Alexandria 1985 13 416 285,793 687 99% $700 $1.02 Saddle Ridge, Ashburn 1989 14 216 194,142 899 92% $862 $0.96 Sheffield Court, Arlington 1986 14 597 356,822 598 98% $839 $1.40 Tanglewood, Manassas (1) 1987 29 432 388,704 900 93% $729 $0.81 Wilde Lake, Richmond (1) 1989 18 189 172,980 915 94% $695 $0.76 Woodside, Lorton 1987 13 252 231,781 920 96% $789 $0.86 Cascade at Landmark, Alexandria 1990 5 277 272,720 985 96% $934 $0.95 Brookridge, Centreville (1) 1989 15 252 252,353 1,001 96% $810 $0.81 WASHINGTON 2900 on First, Seattle 1989-91 1 135 87,320 647 98% $879 $1.36
38 Item 2. Properties PROPERTIES- Continued
Occupancy December, 1997 Acreage Average As of Avg. Monthly Year(s) (approx- Square Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ------------------------------------------------------------------------------------------------------------------------------------ WASHINGTON, continued Brentwood, Vancouver 1990 14 296 286,132 967 94% $663 $0.69 Chandler's Bay I, Kent 1989 36 293 278,874 952 94% $740 $0.78 Charter Club, Everett 1991 12 201 172,773 860 97% $736 $0.86 Creekside, Mountlake Terrace (1) 1987 43 512 407,296 796 94% $714 $0.90 Eagle Rim, Redmond 1986-88 20 156 137,920 884 94% $807 $0.91 Edgewood, Woodinville (1) 1986 10 203 166,299 819 98% $743 $0.91 Fox Run, Federal Way 1988 5 143 127,960 895 96% $670 $0.75 Huntington Park, Everett 1991 14 381 307,793 808 96% $705 $0.87 Newport Heights, Seattle 1985 5 80 59,056 738 99% $721 $0.98 Orchard Ridge, Lynnwood 1988 6 104 86,548 832 97% $707 $0.85 Pointe East, Redmond 1988 6 76 83,280 1,096 91% $1,027 $0.94 Village of Newport, Federal Way 1987 4 100 76,890 769 94% $616 $0.80 Waterstone Place, Federal Way 1990 37 750 616,436 822 94% $611 $0.74 Wellington, Silverdale (1) 1990 11 240 214,024 892 88% $635 $0.71 North Creek Heights, Seattle 1990 9 114 104,306 915 97% $832 $0.91 Panther Ridge, Seattle 1980 20 260 221,000 850 94% $569 $0.67 Highland Creste, Seattle 1989 10 198 192,556 973 98% $646 $0.66 Ridgegate, Seattle 1990 9 153 141,594 925 96% $690 $0.75 Whitedove Pointe, Seattle 1992 5 96 102,834 1,071 96% $783 $0.73 Cherry Hill, Seattle 1991 7 108 101,390 939 97% $801 $0.85
39 Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - ----------------------------------------------------------------------------------------------------------------------------- WASHINGTON, continued Plum Tree Park, Seattle 1991 8 196 174,310 889 96% $723 $0.81 Firdale Village, Seattle 1986 23 386 323,522 838 95% $730 $0.87 Martha Lake, Seattle 1991 8 155 135,662 875 100% $694 $0.79 Country Club Village, Seattle 1991 7 151 157,898 1,046 92% $889 $0.85 2300 Elliott, Seattle 1992 0.5 91 67,403 741 93% $892 $1.20 Metropolitan Park, Seattle 1991 0.4 82 49,702 606 92% $836 $1.38 Seventh and James, Seattle 1992 0.7 96 61,282 638 93% $827 $1.30 Merrill Creek, Tacoma 1994 15 149 138,867 932 95% $662 $0.71 Stoney Creek, Tacoma 1990 16 231 211,580 916 93% $646 $0.71 Windridge, Tacoma 1989 4 80 65,111 814 90% $563 $0.69 Surprise Lake Village, Tacoma 1986 32 338 328,032 971 93% $699 $0.72 Chestnut Hills, Tacoma 1991 8 157 143,236 912 98% $580 $0.64 The Hamptons, Tacoma (1) 1991 11 230 202,324 880 95% $955 $1.09 Gold Pointe, Tacoma 1990 5 84 88,422 1,053 92% $812 $0.77 The Village at Seeley Lake, Tacoma 1990 17 522 469,180 899 92% $634 $0.71 Westridge, Tacoma 1987-1991 38 714 686,675 962 94% $667 $0.69 The Ridgetop, Tacoma 1988 13 221 197,250 893 78% $635 $0.71 Gates of Redmond I & II, Redmond (1) 1979-1989 15 280 249,728 892 92% $892 $1.00 Summit at Lake Union 1995-1997 1 150 109,352 729 92% $959 $1.32 Indigo Springs, Kent (1) 1991 24 278 255,360 919 96% $727 $0.79
Item 2. Properties PROPERTIES--Continued
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December Rental Rate Per Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot - -------------------------------------------------------------------------------------------------------------------------------- WASHINGTON, continued Waterford at the Lakes, Kent 1990 18 344 313,514 911 89% $730 $0.80 James Street Crossing, Kent (1) 1989 21 300 250,368 835 99% $641 $0.77 --------------------------------------------------------------------------- TOTAL PROPERTIES: 7,873 134,247 118,928,676 --------------------------------------------------------------------------- AVERAGE: 17 293 259,670 886 95% $696 $0.79 ===========================================================================
(1) Encumbered by a third party mortgage. (2) Includes La Costa Brava (JAX) and Cedar Cove. (3) Includes Fox Run, Greenwood Forest, Walnut Ridge, Williamsburg (4) Includes Port Royale I, Port Royale II, and Lincoln Harbor. Lincoln Harbor is encumbered by a third party mortgage (5) Northwoods Village is encumbered by a third party mortgage. (6) Greenwich Woods is encumbered by a third party mortgage. (7) Acreage is for combined phases. (8) Includes Paces Station and Paces on the Green. Item 2. Properties PROPERTIES--Continued Development and Construction Activity The apartment communities under construction and in lease up are listed below:
Actual Actual or Average Estimated Date of Estimated Estimated Total Unit Size Construction Cost Construction Commencement Date of Stabilized Name City Units (Sq. Ft.) (Millions) Commencement of Lease-Up Occupancy - ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA Montierra Scottsdale 249 1,052 $21 3:97 2:98 1:99 The Retreat, Phase I Phoenix 240 973 14 1:97 3:97 2:98 The Retreat, Phase II Phoenix 240 973 17 3:97 2:98 1:99 Vista Grove Mesa 224 911 14 1:97 3:97 2:98 --- --- TOTAL 953 $66 === ===
42 Item 2. Properties (continued) ADDITIONAL PROPERTIES
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December 31, Rental Rate Per Property Constructed imate) Units Footage Per Unit 1997 Unit Square Foot - -------------------------------------------------------------------------------------------------------------------------------- CALIFORNIA Brookside Place, Stockton (9) 1981 10 90 96,664 1,074 98% $738 $0.69 Canyon Creek, San Ramon (9) 1984 13 268 257,676 961 91% $1,155 $1.20 Cobblestone Village, Fresno (9) 1983 15 162 153,118 945 96% $559 $0.59 Country Oaks, Agoura (9) 1985 15 256 258,558 1,010 94% $1,245 $1.23 Edgewater, Bakersfield (9) 1984 15 258 240,322 931 95% $659 $0.71 Feather River, Stockton (9) 1981 8 128 97,328 760 94% $550 $0.72 Hidden Lake, Sacramento (9) 1985 17 272 261,808 963 95% $704 $0.73 Lakeview, Lodi (9) 1983 9 138 136,972 993 97% $706 $0.71 Lantern Cove, Foster City (9) 1985 17 232 228,432 985 87% $1,614 $1.64 Schooner Bay I, Foster City (9) 1985 12.5 168 167,345 996 91% $1,747 $1.75 Schooner Bay II, Foster City (9) 1985 12.5 144 143,442 996 94% $1,734 $1.74 South Shore, Stockton (9) 1979 8 129 141,055 1,093 94% $752 $0.70 Waterfield Square I, Stockton (9) 1984 10 170 160,100 942 93% $581 $0.62 Waterfield Square II, Stockton (9) 1984 9 158 151,488 959 98% $601 $0.63 Willow Brook, Pleasant Hill (9) 1985 12 228 234,840 1,030 93% $1,281 $1.24 Willow Creek, Fresno (9) 1984 7 116 118,422 1,021 94% $670 $0.66 COLORADO Deerfield, Denver (9) 1983 9 158 146,380 926 96% $728 $0.79 Foxridge, Englewood (9) 1984 15 300 292,992 977 96% $789 $0.81 ILLINOIS Glengarry Club, Bloomingdale (10) 1990 16 250 215,098 860 99% $880 $1.02
Item 2. Properties (continued) ADDITIONAL PROPERTIES
Average Occupancy December, 1997 Acreage Square As of Avg. Monthly Year(s) (approx- Square Footage December 31, Rental Rate Per Property Constructed imate) Units Footage Per Unit 1997 Unit Square Foot - ----------------------------------------------------------------------------------------------------------------------------------- MINNESOTA The Gates at Carlson, Minnetonka (10) 1989 17 435 396,300 911 96% $807 $0.89 NEW MEXICO Mesa Del Oso, Albuquerque (9) 1983 25 221 252,169 1,141 94% $902 $0.79 Tierra Antigua, Albuquerque (9) 1985 9 148 152,241 1,029 96% $762 $0.74 OKLAHOMA Lakewood, Tulsa (9) 1985 9 152 157,372 1,035 98% $676 $0.65 WISCONSIN Plum Tree I, II & III, Hales Corner (10) 1987-1989 27 332 355,074 1,070 96% $942 $0.88 Ravinia, Greenfield (10) 1991 19 206 219,932 1,068 96% $832 $0.78 Woodlands of Brookfield, Brookfield (10) 1990 35 148 185,320 1,252 97% $1,260 $1.01 ------------------------------------------------------------------------ TOTAL ADDITIONAL PROPERTIES: 371 5,267 5,220,448 ------------------------------------------------------------------------ AVERAGE: 14 203 200,786 991 95% $931 $0.94 ========================================================================
(9) All of these Additional Properties are encumbered by mortgages, of which the Company has an investment in the second and third mortgages (which are subordinate to first mortgages owned by third party unaffiliated entities). (10) The Company has an investment in six mortgage loans collateralized by these Additional Properties. 44 PART I Item 3. Legal Proceedings Richard M. Perlman, a former employee of companies controlled by Mr. Zell, filed a legal proceeding against Mr. Zell and various partnerships and corporations controlled by Mr. Zell claiming, inter alia, that he had an ---------- interest in 20 of 46 of the initial properties (the "Zell Properties") and that he suffered damages when those Properties were transferred into the REIT. The proceeding was filed on July 21, 1995 (Richard M. Perlman, et al. v. Samuel ------------------------------------ Zell, et al.) (United States District Court for the Northern District of - ------------ Illinois-Eastern Division, Case No. 95 C 4242). The Company and the Operating Partnership were not parties to this lawsuit. This action has proceeded to a jury verdict and the Company has incurred no liability and will incur no losses in connection with such action. In addition, only ordinary routine litigation incidental to the business which is not deemed material was initiated during the year ended December 31, 1997. The Operating Partnership does not believe there is any other litigation, except as mentioned in the previous paragraph, threatened against the Operating Partnership other than routine litigation arising out of the ordinary course of business, some of which is expected to be covered by liability insurance, none of which is expected to have a material adverse effect on the consolidated financial statements of the Operating Partnership. Item 4. Submission of Matters to a Vote of Security Holders None. 45 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters There is no established public trading market for the OP Units. The following table sets forth for the periods indicated, the distributions paid on the Operating Partnership's OP Units:
Distributions ------------- Fiscal Year 1997 Fourth Quarter Ended December 31, 1997 $ 0.67 Third Quarter Ended September 30, 1997 $ 0.625 Second Quarter Ended June 30, 1997 $ 0.625 First Quarter Ended March 31, 1997 $ 0.625 Fiscal Year 1996 Fourth Quarter Ended December 31, 1996 $ 0.625 Third Quarter Ended September 30, 1996 $ 0.59 Second Quarter Ended June 30, 1996 $ 0.59 First Quarter Ended March 31, 1996 $ 0.59
In addition, on March 2, 1998, the Operating Partnership declared a $0.67 distribution on each OP Unit payable on April 10, 1998 to OP Unit holders of record on March 27, 1998. The number of holders of record of OP Units in the Operating Partnership at December 31, 1997, was 153. The number of outstanding OP Units as of December 31, 1997 was 98,677,855. Item 6. Selected Financial Data The following table sets forth selected financial and operating information on a historical basis for the Operating Partnership and EQR's Predecessor Business. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 10-K. The historical operating data for the years ended December 31, 1995, 1994, and 1993 have been derived from the historical Financial Statements of the Operating Partnership and EQR's Predecessor Business audited by Grant Thornton LLP, independent accountants. The historical operating data for the years ended December 31, 1997 and 1996 have been derived from the historical Financial Statements of the Operating Partnership audited by Ernst & Young LLP, independent auditors. The net income per weighted average OP Unit amounts have been presented and, where appropriate, restated as required to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. For a further discussion of net income per weighted average OP Unit and the impact of Statement No. 128, see Note 9 of Notes to the Consolidated Financial Statements as included elsewhere in this Form 10-K. Certain capitalized terms as used herein, are defined in the Notes to the Consolidated Financial Statements. 46 ERP OPERATING LIMITED PARTNERSHIP AND EQR'S PREDECESSOR BUSINESS CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION (Amounts in thousands except per OP Unit and property data)
Year Ended December 31, (1) --------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- OPERATING DATA: Total revenues $ 747,321 $ 478,385 $ 390,384 $ 231,034 $ 112,070 =========== =========== =========== =========== =========== Income before gain on disposition of properties, extraordinary items and allocation to EQR's to Predecessor Business $ 176,014 $ 97,033 $ 59,738 $ 45,988 $ 8,137 =========== =========== =========== =========== =========== Net income $ 189,852 $ 115,923 $ 83,355 $ 45,988 $ 9,929 =========== =========== =========== =========== =========== Net income per weighted average OP Unit outstanding $ 1.79 $ 1.70 $ 1.68 $ 1.34 $ 0.43 =========== =========== =========== =========== =========== Net income per weighted average OP Unit outstanding -- assuming dilution $ 1.76 $ 1.69 $ 1.67 $ 1.34 $ 0.43 =========== =========== =========== =========== =========== Weighted average OP Units outstanding 73,182 51,108 42,749 34,150 22,939 =========== =========== =========== =========== =========== Weighted average OP Units outstanding -- assuming dilution 74,281 51,520 42,865 34,274 22,986 =========== =========== =========== =========== =========== Distributions declared per OP Unit outstanding $ 2.55 $ 2.40 $ 2.18 $ 2.01 $ 0.68 =========== =========== =========== =========== =========== BALANCE SHEET DATA (at end of period): Real estate, before accumulated depreciation (2) $ 7,121,435 $ 2,983,510 $ 2,188,939 $ 1,963,476 $ 634,577 Real estate, after accumulated depreciation (2) $ 6,676,673 $ 2,681,998 $ 1,970,600 $ 1,770,735 $ 478,210 Total assets $ 7,094,631 $ 2,986,127 $ 2,141,260 $ 1,847,685 $ 535,914 Total debt $ 2,948,323 $ 1,254,274 $ 1,002,219 $ 994,746 $ 278,642 9 3/8% Series A Cumulative Redeemable Preference Units $ 153,000 $ 153,000 $ 153,000 $ - $ - 9 1/8% Series B Cumulative Redeemable Preference Units $ 125,000 $ 125,000 $ 125,000 $ - $ - 9 1/8% Series C Cumulative Redeemable Preference Units $ 115,000 $ 115,000 $ - $ - $ - 8.60% Series D Cumulative Redeemable Preference Units $ 175,000 $ - $ - $ - $ - Series E Cumulative Convertible Preference Units $ 99,963 $ - $ - $ - $ - 9.65% Series F Cumulative Redeemable Preference Units $ 57,500 $ - $ - $ - $ - 7 1/4% Series G Convertible Cumulative Preference Units $ 316,250 $ - $ - $ - $ - Partners' capital $ 2,921,682 $ 1,216,467 $ 750,902 $ 761,373 $ 229,644 OTHER DATA: Total properties (at end of period) (3) 463 218 174 163 79 Total apartment units (at end of period) (3) 135,200 67,705 53,294 50,704 24,419 Funds from operations (4) $ 270,763 $ 160,267 $ 120,965 $ 83,886 $ 30,127 Cash flow provided by (used for): Operating activities $ 331,135 $ 210,930 $ 141,534 $ 93,997 $ 25,582 Investing activities $(1,543,324) $ (635,655) $ (324,018) $ (896,515) $ (106,543) Financing activities $ 1,098,213 $ 558,568 $ 175,874 $ 808,495 $ 94,802
47 PART II Item 6. Selected Financial Data (Consolidated and Combined Historical (continued)) (1) Historical results for the year ended December 31, 1993 included combined results of EQR's Predecessor Business for the period January 1, 1993 through August 17, 1993. (2) Includes approximately $36 million of construction in progress as of December 31, 1997. (3) In August 1995, the Operating Partnership also made an $89 million Mortgage Note Investment collateralized by 21 of the Additional Properties. In addition, in April 1997, the Operating Partnership made its $88 Million Mortgage Note Investment collateralized by five of the Additional Properties. The Additional Properties consist of 5,267 units. (4) The Operating Partnership generally considers funds from operations ("FFO")to be one measure of the performance of real estate companies. The new definition of FFO adopted in March 1995 by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Operating Partnership believes that FFO is helpful to investors as a measure of the performance of a real estate company because, along with cash flows from operating activities, financing activities and investing activities, it provides investors an understanding of the ability of the Operating Partnership to incur and service debt and to make capital expenditures. FFO does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indication of the Operating Partnership's performance or to net cash flows from operating activities as determined by GAAP as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. The Operating Partnership's calculation of FFO represents net income, excluding gains on dispositions of properties, gains on early extinguishment of debt, and write-off of unamortized costs on refinanced debt, less an allocation of net income to preference unit holders, plus depreciation on real estate assets and amortization of deferred financing costs related to EQR's Predecessor Business. The Operating Partnership's calculation of FFO may differ from the methodology for calculating FFO utilized by other companies and, accordingly, may not be comparable to such other companies. The Operating Partnership's calculation of FFO for 1995 and 1994 have been restated to reflect the effects of the new definition as mentioned above. FFO for the year ended December 31, 1994 includes the effect of a one-time charge of approximately $879,000 for the relocation of the property management headquarters to Chicago. In addition, FFO for the year ended December 31, 1993 excludes the effect of refinancing costs of approximately $3.3 million which represented costs associated with the prepayment of certain mortgage loans. 48 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7. Overview The following discussion and analysis of the results of operations and financial condition of the Operating Partnership should be read in conjunction with "Selected Financial Data" and the historical Consolidated Financial Statements thereto appearing elsewhere in this Form 10-K. Due to the Operating Partnership's ability to control the EWR Operating Partnership, the Management Partnerships, the Financing Partnerships and the LLCs, each entity has been consolidated with the Operating Partnership for financial reporting purposes. Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believes", "expects" and "anticipates" and other similar expressions which are predictions of or indicate future events and trends and which do not relate solely to historical matters, identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results, performance, or achievements of the Operating Partnership to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, the following: the alternative sources of capital to the Operating Partnership are too high; occupancy levels and market rents may be adversely affected by local economic and market conditions, which are beyond the Operating Partnership's control; and additional factors as discussed in Part I of the Annual Report as filed on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Operating Partnership undertakes no obligation to publicly release any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Results of Operations Since the EQR IPO and through December 31, 1997, the Operating Partnership has acquired direct or indirect interests in 412 properties (the "Acquired Properties"), containing 118,510 units in the aggregate for a total purchase price of approximately $6.5 billion, including the assumption of approximately $1.5 billion of mortgage indebtedness and $0.4 billion of unsecured notes. The Operating Partnership's interest in six of the Acquired Properties at the time of acquisition thereof consisted solely of ownership of the debt collateralized by such Acquired Properties. The Operating Partnership purchased ten of such Acquired Properties or 2,694 units between the IPO and December 31, 1993 (the "1993 Acquired Properties"); 84 of such Acquired Properties or 26,285 units in 1994 (the "1994 Acquired Properties"); 17 of such Acquired Properties or 5,035 units in 1995 (the "1995 Acquired Properties"); 49 of such Acquired Properties consisting of 15,665 units in 1996 (the "1996 Acquired Properties"); and 252 of such Acquired Properties consisting of 68,830 units in 1997 (the "1997 Acquired Properties"), which include the Properties acquired in connection with the Wellsford Merger and the EWR Merger (collectively, the "Mergers"). The Acquired Properties are presented in the Consolidated and Combined Financial Statements of the Operating Partnership from the date of each acquisition or the closing dates of the Mergers. In addition, in August 1995 the Operating Partnership made its $89 Million Note Investment collateralized by 21 of the 49 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations (Continued) Additional Properties. Also in April 1997, the Operating Partnership made its $88 Million Mortgage Note Investment collateralized by five of the Additional Properties. During 1995 the Operating Partnership disposed of six properties containing 2,445 units (the "1995 Disposed Properties"). During 1996, the Operating Partnership disposed of five properties containing 1,254 units (the "1996 Disposed Properties"). During 1997 the Operating Partnership disposed of seven properties, a portion of one property and a vacant land parcel containing 1,336 units (the "1997 Disposed Properties"). The Operating Partnership's overall results of operations for the three years ended December 31, 1997 have been significantly impacted by the Operating Partnership's acquisition activity. The significant changes in rental revenues, property and maintenance expenses, real estate taxes and insurance, depreciation expense, property management and interest expense can all primarily be attributed to the acquisition of the Acquired Properties. The impact of the Acquired Properties is discussed in greater detail in the following paragraphs. Properties that the Operating Partnership owned for all of both 1997 and 1996 representing 49,805 units (the "1997 Same Store Properties") and Properties that the Operating Partnership owned for all of both 1996 and 1995 representing 45,699 units (the "1996 Same Store Properties") also impacted the Operating Partnership's results of operations and are discussed as well in the following paragraphs. Comparison of the year ended December 31, 1997 to the year ended December 31, 1996 For the year ended December 31, 1997, income before gain on disposition of properties and extraordinary items increased by $79 million when compared to the year ended December 31, 1996. This increase was primarily due to increases in rental revenues net of increases in property and maintenance expenses, real estate taxes and insurance, property management expenses, depreciation, interest expense and general and administrative expenses. All of the increases in the various line item accounts mentioned above can be primarily attributed to the 1997 Acquired Properties and 1996 Acquired Properties. These increases were partially offset by the 1997 Disposed Properties and the 1996 Disposed Properties. The increase in interest income of $7.5 million earned on the Operating Partnership's mortgage note investments is primarily attributable to its $88 Million Mortgage Note Investment as well as an increase in interest income earned on its $89 Million Mortgage Note Investment. In regard to the 1997 Same Store Properties, rental revenues increased by approximately $11.9 million or 3.1% primarily as a result of higher rental rates charged to new tenants and tenant renewals and higher average occupancy levels. Overall property operating expenses which include property and maintenance, real estate taxes and insurance and an allocation of property management expenses decreased approximately $1.5 million or 0.9%. This decrease was primarily the result of lower medical and health care insurance costs, which resulted in lower payroll costs. 50 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations (Continued) In addition, the Operating Partnership was also successful in reducing its costs for leasing and advertising as well as building, maintenance and grounds costs by consolidating its vendor services in selected submarkets in order to obtain volume discounts and by consolidating its personnel in selected submarkets where Properties were centrally located. With respect to the lower medical and health care insurance costs, the Operating Partnership believes this is not a sustainable trend but only benefited the 1997 results. Property management represents expenses associated with the management of the Operating Partnership's Properties. These expenses increased by approximately $9.3 million primarily due to the continued expansion of the Operating Partnership's property management business to facilitate the management of the Operating Partnership's additional properties. During 1997, the Operating Partnership opened new management offices in Houston, Texas; Ypsilanti, Michigan; Kansas City, Kansas City; Irvine, California; Minneapolis, Minnesota; Charlotte, North Carolina; and Louisville, Kentucky. In addition, the Operating Partnership assumed a management office in Tulsa, Oklahoma, related to the Wellsford Merger and significantly expanded a management office in Scottsdale, Arizona related to the EWR Merger. Fee and asset management revenues and fee and asset management expenses are associated with the management of properties not owned by the Operating Partnership that are managed for affiliates. These revenues decreased by $0.5 million primarily due to the disposition of certain of these properties, resulting in the Operating Partnership no longer providing fee and asset management services to such properties. Interest expense, including amortization of deferred financing costs, increased by approximately $38.3 million. This increase was primarily the result of an increase in the Operating Partnership's average indebtedness outstanding which increased by $564.5 million, primarily due to the Wellsford Merger. However, the Operating Partnership's effective interest costs decreased from 7.87% in 1996 to 7.5% in 1997. General and administrative expenses, which include corporate operating expenses, increased approximately $5.2 million between the years under comparison. This increase was primarily due to adding corporate personnel, higher salary costs and shareholder reporting costs as well as an increase in professional fees. General and administrative expenses as a percentage of total revenues were 2.02% for the year ended December 31, 1997, which was a slight decrease from 2.06% in 1996. Comparison of the year ended December 31, 1996 to the year ended December 31, 1995 For the year ended December 31, 1996, income before gain on disposition of properties and extraordinary items increased by $37.3 million when compared to the year ended December 31, 1995. This increase was primarily due to increases in rental revenues net of increases in property and maintenance expenses, real estate taxes and insurance, property management expenses, 51 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations (Continued) depreciation, interest expense and general and administrative expenses. All of the increases in the various line item accounts mentioned above can be primarily attributed to the 1996 Acquired Properties and 1995 Acquired Properties. These increases were partially offset by the 1996 Disposed Properties and the 1995 Disposed Properties. Interest income earned on the Company's mortgage note investment increased by approximately $8 million and was an additional factor that impacted the year to year change. In regard to the 1996 Same Store Properties, rental revenues increased by approximately $15.9 million or 4.8% primarily as a result of higher rental rates charged to new tenants and tenant renewals and higher average occupancy levels. Overall property operating expenses which include property and maintenance, real estate taxes and insurance and an allocation of property management expenses increased approximately $1.7 million or 1.2%. This increase was primarily the result of higher payroll expenses and utilities costs. For 1996 the Operating Partnership also increased its per unit charge for property level insurance which increased insurance expense by approximately $0.7 million. In addition, real estate taxes increased due to reassessments on certain of the 1996 Same Store Properties. Property management represents expenses associated with the management of the Operating Partnership's Properties. These expenses increased by approximately $2.3 million primarily as a result of the expansion of the Operating Partnership's property management business with the addition of a management office in Seattle, Washington and during the third quarter of 1996 the addition of two new management offices located in Raleigh, North Carolina and Ft. Lauderdale, Florida. Other factors that impacted this increase were higher payroll and travel costs and legal and professional fees. Fee and asset management revenues and fee and asset management expenses are associated with the management of properties not owned by the Operating Partnership that are managed for affiliates. These revenues decreased by $0.3 million primarily due to the disposition of certain of these properties. Interest expense, including amortization of deferred financing costs, increased by approximately $3.8 million. This increase was primarily the result of an increase in the Operating Partnership's average indebtedness outstanding which increased by $75.8 million. However, the Operating Partnership's effective interest costs decreased from 8.09% in 1995 to 7.87% in 1996. General and administrative expenses, which include corporate operating expenses, increased approximately $1.7 million between the years under comparison. This increase was primarily due to adding corporate personnel, higher salary costs and shareholder reporting costs as well as an increase in professional fees. General and administrative expenses as a percentage of total revenues were 2.06% for the year ended December 31, 1996, which was a slight decrease from 2.08% in 1995. 52 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources For the Year Ended December 31, 1997 As of January 1, 1997, the Operating Partnership had approximately $147.3 million of cash and cash equivalents and $250 million available on its line of credit. After taking into effect the various transactions discussed in the following paragraphs, cash and cash equivalents at December 31, 1997 was approximately $33.3 million and the amounts available on the Operating Partnership's line of credit were $265 million, of which $24.7 million is restricted. In addition, the Operating Partnership had $6.6 million of proceeds from a property sale included in deposits-restricted. The following discussion also explains the changes in net cash provided by operating activities, net cash (used for) investing activities and net cash provided by financing activities, all of which are presented in the Operating Partnership's Consolidated Statements of Cash Flows. Part of the Operating Partnership's strategy in funding the purchase of multifamily properties excluding those Properties acquired through the Mergers, is to utilize its line of credit and to subsequently repay the line of credit from the issuance of additional equity or debt securities. Continuing to employ this strategy, during 1997 the Company and/or the Operating Partnership; (i) issued a total of approximately 11.9 million Common Shares through various offerings, other than issuances in connection with the acquisitions of Properties and received total net proceeds of approximately $536.8 million, (ii) completed the offerings of the Series D Preferred Shares and Series G Preferred Shares and received net proceeds of approximately $473.1 million and (iii) issued the 2017 Notes, the 2001 Notes and the 2003 Notes and received net proceeds of approximately $345.9 million. All of these proceeds have been or will be utilized to purchase additional properties and/or repay the line of credit and mortgage indebtedness on certain Properties. With respect to Property acquisitions during the year, including the effects of the Mergers, the Operating Partnership purchased 252 Properties containing 68,830 units for a total purchase price of approximately $4.1 billion, including the issuances of 25.1 million of Common Shares, the assumption of EWR's minority interest with a market value of approximately $107.3 million, the liquidation value of $157.5 million for the Series E Preferred Shares and Series F Preferred Shares, the assumption of mortgage indebtedness and unsecured notes of approximately $1.3 billion and issuance of OP Units with a value of approximately $5.3 million. The cash portion of these acquisitions were primarily funded from amounts drawn on the Operating Partnership's line of credit and proceeds received in connection with the transactions mentioned in the previous paragraph. During the year ended December 31, 1997, the Operating Partnership also disposed of seven properties, a portion of one Property and a vacant land parcel which generated net proceeds of approximately $35.8 million. Proceeds from the dispositions were ultimately applied to purchase additional Properties. 53 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) As of December 31, 1997, the Operating Partnership had total indebtedness of approximately $2.9 billion, which included mortgage indebtedness of $1.6 billion (including premiums of $3.9 million), of which $723 million represented tax exempt bond indebtedness, and unsecured debt of $1.4 billion (including net discounts and premiums in the amount of $5.7 million). During the year, the Operating Partnership repaid an aggregate of $113.4 million of mortgage indebtedness on 29 of its Properties. In addition, unsecured floating rate notes in the amount of $100 million were repaid at maturity on December 22, 1997. These repayments were funded from the Operating Partnership's line of credit or from proceeds received from the various capital transactions mentioned in previous paragraphs. The Operating Partnership has, from time to time, entered into interest rate protection agreements (financial instruments) to reduce the potential impact of increases in interest rates but has limited exposure to the extent of non-performance by the counterparties of each protection agreement since each counterparty is a major U.S. financial institution, and the Operating Partnership does not anticipate their non-performance. No such financial instrument has been used for trading purposes. In February 1996, the Operating Partnership entered into two interest rate protection agreements that were intended to hedge the Operating Partnership's interest rate risk at maturity of $175 million of indebtedness. The first agreement hedged the interest rate risk of $50 million of mortgage loans scheduled to mature in September 1997 by locking the five year Treasury Rate, commencing October 1, 1997. This agreement was cancelled in July 1997, at no cost to the Operating Partnership, in conjunction with a new interest rate agreement discussed below. The second agreement hedged the interest rate risk of $125 million of unsecured senior notes issued in 1994 by the Operating Partnership by locking the four year Treasury Rate commencing May 15, 1999. There was no current cost to the Operating Partnership for entering into these agreements. In July 1997, the Operating Partnership entered into two interest rate protection agreements to effectively fix the interest rate cost of the Operating Partnership's 2001 Notes and 2003 Notes. One agreement was for a notional amount of $100 million with a locked in treasury rate at 6.134%. The second agreement was for a notional amount of $75 million with a locked in treasury rate of 6.287%. The fair value of these instruments as of December 31, 1997 approximated their carrying or contract values. The Operating Partnership has a policy of capitalizing expenditures made for new assets, including newly acquired properties and the costs associated with placing these assets into service. Expenditures for improvements and renovations that significantly enhance the value of existing assets or substantially extend the useful life of an asset are also capitalized. Capital spent for replacement-type items such as appliances, draperies, carpeting and floor coverings, mechanical equipment and certain furniture and fixtures is also capitalized. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. With respect to acquired properties, the Operating Partnership has determined that it generally spends $1,000 per unit during its first three years of ownership to fully improve and enhance these properties to meet the Operating Partnership's standards. In regard to capital replacements, the Operating Partnership generally expects to spend $300 per unit on an annual recurring basis. 54 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) During the year ended December 31, 1997, total capital expenditures for the Operating Partnership approximated $60 million. Of this amount, approximately $9.5 million related to capital improvements and major repairs for certain of the 1995, 1996 and 1997 Acquired Properties. Capital improvements and major repairs for all of the Operating Partnership's pre-EQR IPO properties and certain Acquired Properties approximated $19.4 million, or $217 per unit. Capital spent for replacement-type items approximated $21.4 million, or $239 per unit, which is in line with the Operating Partnership's expected annual recurring per unit cost. Also included in total capital expenditures was $9.7 million expended for non-real estate additions such as computer software, computer equipment, furniture and fixtures and leasehold improvements for the Operating Partnership's property management offices and its corporate headquarters. Such capital expenditures were primarily funded from working capital reserves and from net cash provided by operating activities. Total capital expenditures for 1998 are budgeted to be approximately $94.5 million, which includes approximately $29.7 million related to capital improvements and major repairs for certain of the 1995, 1996 and 1997 Acquired Properties. Total distributions paid in 1997 amounted to $292.1 million, which included the distribution declared in the fourth quarter of 1996. The fourth quarter of 1997 distributions to OP Unit holders were paid on December 30, 1997. On March 2, 1998, the Operating Partnership declared a $0.67 distribution per OP Unit payable to holders of record on March 27, 1998. The OP Unit distribution will be paid on April 10, 1998. Also, on March 2, 1998, the Operating Partnership declared a $0.585938 distribution, a $0.570313 distribution, a $0.570313 distribution, a $0.5375 distribution, a $0.603125 distribution and a $0.453125 distribution to the Company as holder of the Series A Cumulative Redeemable Preference Units, the Series B Cumulative Redeemable Preference Units, the Series C Cumulative Redeemable Preference Units, the Series D Cumulative Redeemable Preference Units, the Series F Cumulative Redeemable Preference Units and the Series G Convertible Cumulative Preference Units, respectively, payable to holders of record on March 27, 1998. These distributions will be paid on April 15, 1998. In addition, the Operating Partnership declared on March 2, 1998, a $0.4375 distribution to the Company as holder of the Series E Cumulative Convertible Preference Units. This distribution will be paid on April 1, 1998. Subsequent to December 31, 1997, the Operating Partnership acquired 12 additional properties representing 2,539 units for a total purchase price of approximately $158.2 million, including the assumption of approximately $50.8 million of mortgage indebtedness. These acquisitions were funded from proceeds of the January 1998 Common Share Offering. The Operating Partnership is actively seeking to acquire additional multifamily properties with physical and market characteristics similar to the Properties. During the remainder of 1998, the Operating Partnership expects to acquire between 10,000 to 15,000 multifamily units. However, there is no assurance that this level of property acquisitions can be achieved. 55 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) In January 1998, the Company contributed to the Operating Partnership net proceeds of $195.3 million from the January 1998 Common Share Offering. These proceeds were utilized to repay a portion on the line of credit, to purchase additional properties and/or repay mortgage indebtedness on one Property. In February 1998, the Company contributed to the Operating Partnership net proceeds of $95 million from the February 1998 Common Share Offerings. These net proceeds were utilized to repay the remaining balance outstanding on the line of credit and to purchase additional properties. Through February 1998, the Company contributed to the Operating Partnership net proceeds of $31.7 million from the DRIP Plan. The Operating Partnership anticipates that it may sell certain Properties in the portfolio and may sell up to 2,500 multifamily units during 1998. However, there is no assurance that this level of property dispositions may be achieved. In March 1998, the Operating Partnership disposed of two Properties for a total sales price of $16.7 million. These proceeds will be utilized to purchase additional Properties. The Operating Partnership expects to meet its short-term liquidity requirements, including capital expenditures relating to maintaining its existing Properties, generally through its working capital, net cash provided by operating activities and borrowings under its line of credit. The Operating Partnership considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Operating Partnership also expects to meet its long-term liquidity requirements, such as scheduled mortgage debt maturities, reduction of outstanding amounts under its line of credit, property acquisitions, financing of construction and development activities and capital improvements through the issuance of unsecured notes and equity securities including additional OP Units as well as from undistributed FFO and proceeds received from the disposition of certain Properties. In addition, the Operating Partnership has certain uncollateralized Properties available for additional mortgage borrowings in the event that the public capital markets are unavailable to the Operating Partnership or the cost of alternative sources of capital to the Operating Partnership is too high. In November 1996, the Operating Partnership reached an agreement with Morgan Guaranty and Bank of America to provide the Operating Partnership a new credit facility with potential borrowings of up to $250 million. In September 1997, this agreement was amended whereby the potential borrowings were increased to $500 million. This line of credit matures in November 1999 and will continue to be used for property acquisitions and for any working capital needs. As of March 13, 1998, no amounts were outstanding under this facility. 56 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) In connection with the Wellsford Merger, the Operating Partnership has provided a standby obligation in the amount of $30 million pursuant to an agreement entered into with Wellsford Real Properties, Inc., a Maryland corporation ("WRP"), for the construction financing for a multifamily development project located in Denver, Colorado. In addition, the Operating Partnership has provided a $14.8 million credit enhancement with respect to bonds issued to finance certain public improvements at the multifamily development project. In December 1997, the Operating Partnership entered into a joint venture agreement with a multifamily residential real estate developer whereby the Operating Partnership will make investments in a limited partnership to fund its portion of the project cost. As of December 31, 1997, the Operating Partnership funded approximately $6.9 million in connection with this agreement. In addition, the Operating Partnership also funded $20 million to guarantee third party construction financing and will be obligated to fund an additional $20 million in 1998. Subsequent to December 31, 1997, the Operating Partnership has also funded approximately $9.9 million and anticipates to fund up to an additional $85 million in 1998. The Operating Partnership has conducted a review of its computer operating systems and has identified those areas that could be affected by the "Year 2000" issue and has developed a plan to resolve this issue. The Operating Partnership believes that by modifying certain existing hardware and software and, in other cases, converting to new application systems, the Year 2000 problem can be resolved without significant operational difficulties. The Operating Partnership has initiated formal communications with all of its significant suppliers to determine the extent to which the Operating Partnership's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. The Operating Partnership has also identified the cost of the Year 2000 issue and does not expect the financial impact to be material to the Operating Partnership's results of operations or financial position. For the Year Ended December 31, 1996 As of January 1, 1996, the Operating Partnership had approximately $13.4 million of cash and cash equivalents and $158 million available on its line of credit. After taking into effect the various transactions discussed in the following paragraphs, cash and cash equivalents at December 31, 1996 was approximately $147.3 million and the amounts available on the Operating Partnership's line of credit were $250 million. In addition, the Operating Partnership had $3.6 million of proceeds from a property sale included in deposits-restricted. The following discussion also explains the changes in net cash provided by operating activities, net cash (used for) investing activities and net cash provided by financing activities, all of which are presented in the Operating Partnership's Consolidated Statements of Cash Flows. During 1996 the Company and/or the Operating Partnership: (i) issued a total of approximately 14.4 million Common Shares through various offerings and received total net proceeds of $483 million, (ii) completed the offering of the Series C Preferred Shares and 57 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) received net proceeds of $111.4 million, (iii) issued the 2026 Notes and received net proceeds of $149 million and (iv) refinanced certain of its tax- exempt bonds in two separate transactions for a total of $112.2 million of net proceeds. All of these proceeds were utilized to purchase additional properties and/or repay the line of credit and mortgage indebtedness on certain Properties. With respect to Property acquisitions during 1996, the Operating Partnership purchased 49 Properties containing 15,665 units for a total acquisition cost of $778.2 million, which included the assumption of $142.2 million of mortgage indebtedness, the forgiveness of debt of $2.7 million and the issuance of OP Units having a value of approximately $0.4 million. These acquisitions were primarily funded from amounts drawn on the Operating Partnership's line of credit and a portion of the proceeds received in connection with the transactions mentioned in the previous paragraph. During the year ended December 31, 1996, the Operating Partnership also disposed of five properties which generated net proceeds of approximately $40 million. Proceeds from the dispositions were ultimately applied to purchase additional Properties. As of December 31, 1996, the Operating Partnership had total indebtedness of approximately $1.3 billion, which included mortgage indebtedness of $755.4 million, of which $274 million represented tax exempt bond indebtedness, and unsecured debt of $498.8 million (net of a $1.2 million discount). During the year, the Operating Partnership repaid an aggregate of $57 million mortgage indebtedness on eight of its Properties. These repayments were funded from the Operating Partnership's line of credit or from proceeds received from the various capital transactions mentioned in previous paragraphs. During the year ended December 31, 1996, total capital expenditures for the Operating Partnership approximated $45.9 million. Of this amount, approximately $10.6 million related to capital improvements and major repairs for certain of the 1994, 1995 and 1996 Acquired Properties. Capital improvements and major repairs for all of the Operating Partnership's pre-EQR IPO properties and Acquired Properties approximated $13.8 million, or $232 per unit. Capital spent for replacement-type items approximated $16.3 million, or $276 per unit, which is in line with the Operating Partnership's expected annual recurring per unit cost. In regard to capital spent for upgrades at certain properties and tenant improvements with respect to the retail and commercial office space at one Property, the amount was approximately $2.9 million. Also included in total capital expenditures was approximately $2.3 million expended for non-real estate additions such as computer software, computer equipment, furniture and fixtures and leasehold improvements for the Operating Partnership's management offices and its corporate headquarters. Such capital expenditures were primarily funded from working capital reserves and from net cash provided by operating activities. 58 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Funds From Operations Commencing in 1996, the Operating Partnership implemented the new definition of FFO adopted by the Board of Governors of NAREIT in March 1995. The new definition primarily eliminates the amortization of deferred financing costs and depreciation of non-real estate as items added back to net income when calculating FFO. The Operating Partnership generally considers FFO to be one measure of the performance of real estate companies. The resolution adopted by the Board of Governors of NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Operating Partnership believes that FFO is helpful to investors as a measure of the performance of a real estate company because, along with cash flows from operating activities, financing activities and investing activities, it provides investors an understanding of the ability of the Operating Partnership to incur and service debt and to make capital expenditures. FFO in and of itself does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indication of the Operating Partnership's performance or to net cash flows from operating activities as determined by GAAP as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. The Operating Partnership's calculation of FFO represents net income, excluding gains on dispositions of properties, gains on early extinguishment of debt, and write-off of unamortized costs on refinanced debt, plus depreciation on real estate assets, amortization of deferred financing costs related to EQR's Predecessor Business, less an allocation of net income to preference unit holders. The Operating Partnership's calculation of FFO may differ from the methodology for calculating FFO utilized by other companies and, accordingly, may not be comparable to such other companies. For the year ended December 31, 1997 FFO increased $110.5 million representing a 69% increase when compared to the year ended December 31, 1996. For the year ended December 31, 1996, FFO, based on the Operating Partnership's calculation of FFO, increased by $39.3 million representing a 32.5% increase when compared to the year ended December 31, 1995. 59 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a reconciliation of net income to FFO for the years ended December 31, 1997, 1996 and 1995:
(Amounts in thousands) Year Year Year Ended Ended Ended 12/31/97 12/31/96 12/31/95 -------- -------- -------- Net income $189,852 $115,923 $ 83,355 Adjustments: Depreciation on real estate assets 153,526 91,174 70,581 Amortization of deferred financing costs related to predecessor business 235 1,075 755 Allocation of net income to preference unit holders (59,012) (29,015) (10,109) Write-off of unamortized costs on refinanced debt (0) 3,512 (0) Gain on early extinguishment of debt (0) (0) (2,000) Gain on disposition of properties (13,838) (22,402) (21,617) -------- -------- -------- FFO $270,763 $160,267 $120,965 ======== ======== ========
60 PART II Item 8. Financial Statements and Supplementary Data See Index to Consolidated Financial Statements on page F-1 of this Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On March 7, 1996, the Operating Partnership filed a Current Report on Form 8-K, as amended, reporting the dismissal of Grant Thornton L.L.P. as its independent public accountants that is incorporated herein by reference. 61 PART II Item 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT (a,b,c,d,e & f) TRUSTEES AND EXECUTIVE OFFICERS The Operating Partnership does not have any trustees or executive officers. The trustees and executive officers, as of March 1, 1998, of the Company, their ages and their positions and offices are set forth in the following table:
Name Age Positions and Offices Held - ---------------------- --- ----------------------------------------------------------------- Samuel Zell 56 Chairman of the Board of Trustees (term expires in 1999) Douglas Crocker II 57 President, Chief Executive Officer and Trustee (term expires in 1998) John W. Alexander 51 Trustee (term expires in 1999) Stephen O. Evans 52 Executive Vice President--Strategic Investments and Trustee (term expires in 2000) Henry H. Goldberg 59 Trustee (term expires in 1999) Errol R. Halperin 57 Trustee (term expires in 1999) James D. Harper, Jr. 64 Trustee (term expires in 1998) Edward Lowenthal 53 Trustee (term expires in 2000) Jeffrey H. Lynford 50 Trustee (term expires in 2000) Sheli Z. Rosenberg 56 Trustee (term expires in 1998) Gerald A. Spector 51 Executive Vice President, Chief Operating Officer and Trustee (term expires in 1998) Barry S. Sternlicht 37 Trustee (term expires in 2000) B. Joseph White 50 Trustee (term expires in 2000) Richard G. Berry 53 Executive Vice President--Development Alan W. George 40 Executive Vice President--Acquisitions Edward J. Geraghty 48 Executive Vice President--Development and Asset Management Michael J. McHugh 42 Executive Vice President, Chief Accounting Officer and Treasurer David J. Neithercut 42 Executive Vice President and Chief Financial Officer Gregory H. Smith 46 Executive Vice President--Asset Management Bruce C. Strohm 43 Executive Vice President, General Counsel and Secretary Frederick C. Tuomi 43 Executive Vice President--Property Management
The following is a biographical summary of the experience of the trustees and executive officers of the Company. Officers serve at the pleasure of the Board of Trustees. Samuel Zell. Mr. Zell has been Chairman of the Board of the Company since March 1993. Mr. Zell is chairman of the board of directors of Equity Group Investments, Inc., an owner, manager and financier of real estate and corporations ("EGI"), Jacor Communications, Inc., an owner and operator of radio stations ("Jacor"), American Classic Voyages Co., an owner and operator of cruise lines ("American Classic") and Anixter International Inc., a provider of integrated network and cabling systems ("Anixter") and Manufactured Home Communities, Inc., a REIT specializing in the ownership and management of manufactured home communities ("MHC"). Mr. Zell is chairman of the board of trustees of Equity Office Properties Trust, a REIT specializing in the ownership and management of office buildings ("EOP") and Capital Trust, a specialized finance company. He is a director of Fred Meyer, Inc., an owner and operator of supermarkets, Chart House Enterprises, Inc., an owner and operator of restaurants, Ramco Energy plc, an independent 62 PART III oil company based in the United Kingdom, and TeleTech Holdings, Inc., a provider of telephone and computer based customer care solutions. Douglas Crocker II. Mr. Crocker II has been a Trustee, Chief Executive Officer and President of the Company since March 1993. Mr. Crocker is a director of Horizon Group Inc., an owner, developer and operator of outlet retail properties and has been a director of WRP, a publicly traded real estate merchant banking firm since its formation in June 1997. Mr. Crocker has been President and Chief Executive Officer of First Capital Financial Corporation, previously a sponsor of public limited real estate partnerships ("First Capital"), since December 1992 and a director of First Capital since January 1993. He was an Executive Vice President of Equity Financial and Management Company ("EF&M"), a subsidiary of EGI, providing strategic direction and services for EGI's real estate and corporate activities from November 1992 until March 1997. John W. Alexander. Mr. Alexander has been a Trustee of the Company since May 1993 and is the President of Mallard Creek Capital Partners, Inc., an investment company with interests in real estate and development entities. He is also a partner of Meringoff Equities, a real estate investment and development company, and is a director of Jacor. Stephen O. Evans. Mr. Evans has been Executive Vice President - Strategic Investments and Trustee of the Company since December 23, 1997, the date of the EWR Merger. Prior to the EWR Merger, Mr. Evans served as the Chairman of the Board and Chief Executive Officer of EWR since its formation in May 1994. Mr. Evans founded Evans Withycombe, Inc., the predecessor of EWR, in 1977 and served as its Chairman of the Board and Chief Executive Officer from 1977 to 1994. Mr. Evans is a member of the National Multi-Housing Counsel, NAREIT, Lambda Alpha, a national land economic fraternity, and the Urban Land Institute. Henry H. Goldberg. Mr. Goldberg has been a Trustee of the Company since January 1995. Mr. Goldberg is Chairman of the Board, Chief Executive Officer and founder of The Artery Group, L.L.C., a diversified real estate company. Mr. Goldberg was the direct or indirect general partner (or an executive thereof) of four partnerships owning residential apartment communities and one commercial office building, each of which filed petitions under the Federal bankruptcy laws during 1993. Each of the partnerships is now out of bankruptcy through a reorganization plan agreed to by the project lender. Errol R. Halperin. Mr. Halperin has been a Trustee of the Company since May 1993. Mr. Halperin has been an attorney at Rudnick & Wolfe, a law firm, since 1979, serving as a senior partner and a member of such firm's policy committee since 1981, specializing in Federal income tax counseling and real estate and corporate transactions. 63 PART III James D. Harper, Jr. Mr. Harper has been a Trustee of the Company since May 1993. Mr. Harper is the President of JDH Realty Co., a real estate development and investment company, and is the principal partner in AH Development, S.E. and AH HA Investments, S.E., special limited partnerships formed to develop over 400 acres of land in Puerto Rico. He is a Trustee of EOP, and a director of Burnham Pacific Properties Inc., a REIT that owns, develops and manages commercial real estate properties in California and American Health Properties, Inc., a REIT specializing in health care facilities. Mr. Harper is also a trustee of the Urban Land Institute. Edward Lowenthal. Mr. Lowenthal has been a Trustee of the Company since June 1997. Mr. Lowenthal has been the President, Chief Executive Officer and director of WRP since its formation in January 1997 and had been the President and Chief Executive Officer and a trustee of Wellsford, a multifamily property REIT, since its formation in July 1992 until the Wellsford Merger on May 30, 1997. Mr. Lowenthal is a director of United American Energy Corporation, a developer, owner and operator of hydroelectric and other alternative energy facilities, Corporate Renaissance Group, Inc., a mutual fund, Omega Healthcare, Inc., a healthcare REIT, and Great Lakes REIT, Inc., an office building REIT. He is also a member of the Board of Governors of NAREIT and a member of the New York bar. Jeffrey H. Lynford. Mr. Lynford has been a Trustee of the Company since June 1997. Mr. Lynford has been the Chairman of the Board, Secretary and Director of WRP since its formation in January 1997 and had been the Chairman of the Board and Secretary of Wellsford since its formation in July 1992 until the Wellsford Merger, and was the Chief Financial Officer of Wellsford from July 1992 until December 1994. Mr. Lynford currently serves as a trustee emeritus of the National Trust for Historic Preservation and as a director of five mutual funds: Cohen & Steers Total Return Realty Fund, Inc., Cohen & Steers Realty Shares, Inc., Cohen & Steers Realty Income Fund, Inc., Cohen & Steers Special Equity Fund, Inc. and Cohen & Steers Equity Income Fund, Inc. He is also a member of the New York bar. Sheli Z. Rosenberg. Ms. Rosenberg has been a Trustee of the Company since March 1993. Ms. Rosenberg is Chief Executive Officer, President and a director of EGI and was a principal of the law firm of Rosenberg & Liebentritt, P.C., a law firm ("R & L") from 1980 to 1997. Ms. Rosenberg is a trustee of Capital Trust and EOP and is a director of Jacor, American Classic, MHC, Anixter, CVS Corporation, a drugstore chain, Illinois Power Co., a supplier of electricity and natural gas in Illinois, and its parent holding company, Illinova Corp. Gerald A. Spector. Mr. Spector has been a Trustee and Executive Vice President of the Company since March 1993 and Chief Operating Officer of the Company since February 1995. Mr. Spector was Treasurer of the Company from March 1993 through February 1995. From January 1973 until January 1996, Mr. Spector was an officer of EF&M, most recently serving as Vice President from November 1994 through January 1996. Mr. Spector was Executive Vice President and Chief Operating Officer of EF&M from September 1990 through November 1994. From January 1988 until January 1996, Mr. Spector was an officer of EGI, most recently serving as Vice President from November 1994 through January 1996. Mr. Spector was Executive Vice President and Chief Operating Officer of EGI from January 1991 through January 1994. Barry S. Sternlicht. Mr. Sternlicht has been a Trustee of the Company since May 1993. Mr. Sternlicht is Chief Executive Officer and President of Starwood Capital Group, L.P., a privately owned real estate investment firm. Mr. Sternlicht is Chairman of the Board and Chief Executive Officer of Starwood Hotels & Resorts Trust, a REIT specializing in the ownership of hotels. Mr. Sternlicht is Chairman of the Board of Starwood Financial Trust, a mortgage REIT, and a director of U.S. Franchise Systems, a hotel franchise company, and Starwood Hotel & Resorts Worldwide, which manages hotels owned by Starwood Hotels & Resorts Trust. B. Joseph White. Mr. White has been a Trustee of the Company since May 1993. Mr. White is the Dean of the University of Michigan Business School. Mr. White is a director of Kelly Services, Inc., a temporary services firm, Gordon Food Service, Inc., a midwestern food distribution company, and the Cummins Engine Foundation, the philanthropic arm of Cummins Engine Co., a heavy duty engine manufacturer. 64 PART III Richard G. Berry. Mr. Berry has been Executive Vice President-Development of the Company since the EWR Merger. Mr. Berry was a director of EWR since its formation in May 1994 until the EWR Merger and had been President and Chief Operating Officer of EWR from January 1997 until the EWR Merger. Mr. Berry had been Executive Vice President of EWR since May 1994 until December 1997 and served as the Executive Vice President of Evans Withycombe, Inc., (the predecessor of EWR) from 1992 until 1994. Alan W. George. Mr. George has been Executive Vice President-Acquisitions of the Company since February 1997, Senior Vice President-Acquisitions of the Company from December 1995 until February 1997 and Vice President-Acquisitions and asset manager of the Company from December 1993 until December 1995. Mr. George was Vice President-asset management of Equity Assets Management, Inc. ("EAM"), a subsidiary of EGI providing real estate ownership services, from June 1992 to August 1993. Edward G. Geraghty. Mr. Geraghty has been Executive Vice President- Development and Asset Management since March 1, 1998. Mr. Geraghty was a Managing Director-Real Estate of The Travelers Insurance Company from January 1995 to March 1998. Mr. Geraghty was an officer of The Travelers Realty Investment Company, a subsidiary of The Travelers Insurance Company, from July 1989 to January 1995, most recently serving as an Executive Vice President from December 1992 to January 1995. Michael J. McHugh. Mr. McHugh has been Executive Vice President of the Company since January 1998 and Chief Accounting Officer and Treasurer of the Company since February 1995. Mr. McHugh was Senior Vice President of the Company from November 1994 until January 1998 and, from May 1990 until January 1995, Mr. McHugh was a Senior Vice President and Chief Financial Officer of First Capital. David J. Neithercut. Mr. Neithercut has been Executive Vice President and Chief Financial Officer of the Company since February 1995. Mr. Neithercut had been Vice President--Financing of the Company from September 1993 until February 1995. Mr. Neithercut was a Senior Vice President--Finance of EGI from January 1995 until February 1995. He was a Vice President--Finance of EAM from October 1990 until December 1994. Gregory H. Smith. Mr. Smith has been Executive Vice President--Asset Management of the Company since December 1994. Mr. Smith was a Senior Vice President of Strategic Realty Advisors, Inc., a real estate and advisory company, from January 1994 until December 1994. Mr. Smith was employed at VMS Realty Partners, a sponsor of public and private real estate limited partnerships, from June 1989 until December 1993, most recently serving as First Vice President. Bruce C. Strohm. Mr. Strohm has been Executive Vice President and General Counsel of the Company since March 1995 and Secretary since November 1995. Mr. Strohm was a Vice President of the Company from March 1993 through March 1995 and an Assistant Secretary of the Company from March 1995 through November 1995. Mr. Strohm was a Vice President of R & L from January 1988 to March 1995, most recently serving as a member of the firm's management committee. 65 PART III Frederick C. Tuomi. Mr. Tuomi has been Executive Vice President--Property Management of the Company since January 1994. Mr. Tuomi had been President of RAM Partners, Inc., a subsidiary of Post Properties, Inc., a REIT, from March 1991 to January 1994. Pursuant to the Company's declaration of trust, the trustees are divided into three classes as nearly equal in number as possible, with each class having a term of three years. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Operating Partnership to report, based on its review of reports to the SEC, about transactions in its OP Units furnished to the Operating Partnership and written representations of the Company's trustees and executive officers and the Operating Partnership's 10% owners. Mr. Sternlicht filed a Form 4 late to report the exchange of 25,023 OP Units for 25,023 Common Shares and the distribution of such Common Shares to the beneficial owners thereof. Item 11. Executive Compensation The Operating Partnership does not have any executive compensation. Information concerning the Equity Residential Properties Trust's executive compensation is contained in its definitive proxy statement relating to the 1998 Annual Meeting of Shareholders to be held on May 14, 1998, which proxy statement is incorporated herein by reference. 66 Item 12. Security Ownership of Certain Beneficial Owners and Management PART III The following table sets forth information, as of March 1, 1998, (except as otherwise indicated in the footnotes) regarding the beneficial ownership of the OP Units by each person known by the Operating Partnership to be the beneficial owner of more than five percent of the Operating Partnership's outstanding OP Units, and in addition, each trustee of the Company, the executive officers of the Company, and by all trustees and executive officers of the Company as a group. Each person named in the table has sole voting and investment power with respect to all OP Units shown as beneficially owned by such person, except as otherwise set forth in the notes to the table.
OP Units Beneficially Owned ------------------------- Name and Business Percent Address of Beneficial Owner Amount of Class - ------------------------------------------ -------------- -------- Samuel Zell and Ann Lurie and entities controlled by or established for the benefit of Samuel Zell and/or Ann Lurie (1) 3,436,060 (2) 3.23% Douglas Crocker II (1) -- * Bruce C. Strohm (1) -- * Gregory H. Smith (1) -- * Gerald A. Spector (1) 1,683 * Frederick C. Tuomi (1) -- * John W. Alexander (3) -- * Stephen O. Evans (4) 904,066 * Henry H. Goldberg (5&6) 387,139 (6) * Errol R. Halperin (7) -- * James D. Harper Jr. (8) -- * Sheli Z. Rosenberg (1) (9) 1,528 * B. Joseph White (10) -- * Barry S. Sternlicht (11) 1,831,943 (11) 1.74% Equity Residential Properties Trust (1) 95,790,005 90.90% All trustees and executive officers of the 5,657,684 5.37% Company as a group including the above- named persons (21 persons)
* Less than 1% 67 PART III (1) The business address for each of these entities and individuals is Two North Riverside Plaza, Chicago, Illinois 60606. (2) Includes 3,436,060 OP Units deemed to be owned beneficially by Mr. Zell and Ms. Lurie because Mr. Zell and Ms. Lurie control or share control of power to vote and invest such OP Units, either as the indirect majority shareholder of a corporation or a corporate general partner or as a general partner. However, Mr. Zell disclaims ownership of 1,541,966 OP Units because the economic benefits, with respect to such OP Units, are attributable to others. Ms. Lurie disclaims of 1,894,763 OP Units because the economic benefits, with respect to such OP Units, are attributable to others. (3) Mr. Alexander's business address is c/o Mallard Creek Capital Partners, 229 North Church Street, Suite 200 - Box E, Charlotte, North Carolina 28202. (4) The business address for Mr. Evans is c/o Evans Withycombe Residential, Inc., 6991 East Camelback Road, Suite A200, Scottsdale, Arizona 85251. (5) The business address for Mr. Goldberg is c/o Artery Properties, Inc. Artery Plaza West, 4733 Bethesda Avenue, Suite 400, Bethesda, Maryland 20814. (6) Includes 48,078 OP Units held by Mr. Goldberg's spouse. Also includes 75,714 OP Units held by GGL Investment Partners #1 ("GGL"), a Maryland general partnership. Mr. Goldberg is a general partner of GGL with a 66.67% percentage interest. Mr. Goldberg disclaims beneficial ownership of the OP Units held by his spouse and 33.33% of the OP Units held by GGL. (7) Mr. Halperin's business address is Rudnick & Wolfe, 203 North LaSalle Street, Suite 1800, Chicago, Illinois 60601. (8) Mr. Harper's business address is JDH Realty Company, 3250 Mary Street, Suite 206, Coconut Grove, Florida 33133. (9) Ms. Rosenberg is a trustee or a co-trustee for the benefit of Ms. Lurie and her family and certain trusts for the benefits of Mr. Zell and his family and accordingly may be deemed to control or share control or share the power to vote and invest OP Units attributable to Samuel Zell and Ann Lurie. Ms. Rosenberg disclaims beneficial ownership of all OP Units owned by trusts for which she is a trustee or co-trustee. 68 PART III (10) Mr. White's business address is Office of the Dean, School of Business Administration, University of Michigan, 701 Tappen, Ann Arbor, Michigan 48109. (11) The business address for Mr. Sternlicht is Three Pickwick Plaza, Suite 250, Greenwich, Connecticut 06830. Mr. Sternlicht may be deemed to be the beneficial owner of these 1,831,943 OP Units because each controls or shares control of the power to vote and invest the OP Units. However, Mr. Sternlicht disclaims beneficial ownership of 1,555,955 OP Units. Item 13. Certain Relationships and Related Transactions (a) Pursuant to the terms of the partnership agreement for the Operating Partnership, the Operating Partnership is required to reimburse the Company for all expenses incurred by the Company in excess of income earned by the Company through its indirect 1% ownership of various Financing Partnerships. Amounts paid on behalf of the Company are reflected in the Consolidated Statement of Operations as general and administrative expenses. During 1997, certain related entities provided services to the Operating Partnership and the Company. These included, but were not limited to, Rosenberg & Liebentritt, P.C., which provided legal services; Greenberg & Pociask, Ltd., which provided tax and accounting services; and First Capital Financial Corporation, which provided accounting services. Fees paid to Rosenberg & Liebentritt, P.C., of which Ms. Rosenberg was a principal through September 1997, amounted to approximately $1.3 million for the year ended December 31, 1997. Fees paid to the other affiliates mentioned above amounted in the aggregate to approximately $22,600 for the year ended December 31, 1997. In addition, The Riverside Agency, Inc., which provided insurance brokerage services, was reimbursed loss claims in the amount of $0.3 million for the year ended December 31, 1997. As of December 31, 1997, no amounts were owed to The Riverside Agency, Inc. As of December 31, 1997, $0.6 million was owed to Rosenberg & Liebentritt, P.C. for legal fees incurred in connection with new acquisitions and securities matters. Equity Group Investments, Inc. ("EGI") provided certain services to the Operating Partnership and the Company which include, but are not limited to, real estate tax evaluation services, due diligence, financial services, telecommunication services and market consulting and research information services. Fees paid to EGI for these services amounted to $1.1 million for the year ended December 31, 1997. Amounts due to EGI were approximately $0.1 million as of December 31, 1997. Management Corp. has lease agreements with affiliated parties covering office space occupied by regional operation centers located in Chicago, Illinois (the "Chicago Office") and Tampa, Florida (the "Tampa Office") and the corporate headquarters located in Chicago, Illinois. In connection with these affiliated lease agreements, Management Corp. paid Equity Office Holdings, 69 PART III L.L.C. ("EOH") $145,511 in connection with the Chicago Office, $177,793 in connection with the Tampa Office and $632,693 in connection with the space occupied by the corporate headquarters for the year ended December 31, 1997. As of December 31, 1997, $59,675 was owed to EOH. In addition, the Operating Partnership and the Company have provided acquisitions, asset and property management services to certain related entities for properties not owned by the Company. Fees received for providing such services were approximately $5.7 million for the year ended December 31, 1997. (b) Rosenberg and Liebentritt, P.C. provides legal services to the Operating Partnership and the Company. Sheli Z. Rosenberg, a Trustee of the Company, was a principal of this firm through September 1997. The Operating Partnership has also engaged Seyfarth, Shaw, Fairweather & Geraldson, a law firm in which Ms. Rosenberg's husband is a partner, and Rudnick & Wolfe, a law firm in which Mr. Halperin is a partner, to perform legal services for it from time to time. (c) Mr. Goldberg is a two-thirds owner and chairman of the board of directors of Artery Property Management, Inc. ("APMI"), a real estate property management company. In connection with the acquisition of certain properties from Mr. Goldberg and his affiliates during 1995, the Operating Partnership made a loan of $15,212,000 evidenced by two notes and secured by 465,545 OP Units. The largest aggregate amount of indebtedness outstanding under the loan at any time during 1997 and the amount outstanding as of December 31, 1996 was $15,212,000. The first note issued in the amount of $1,056,000 accrues interest at the prime rate plus 3-1/2% per annum. The second note issued in the amount of $14,156,000 bears interest equal to approximately $300,000 per year plus the amount of distributions payable on 433,230 of the OP Units pledged as collateral for this loan. Mr. Tuomi borrowed $100,000 from one of the Management Partnerships in 1994 related to his purchase of a home in the Chicago area. The loan bears interest at 30-day LIBOR plus 2% with interest due quarterly. The largest principal amount owed in 1997 was $72,000 and the principal balance at December 31, 1997 was $72,000. The loan is payable in equal principal installments of $18,000 over five years. Mr. Crocker borrowed $140,000 from the Operating Partnership in April 1996 related to the payment of a tax liability incurred. The loan bears interest at 30-day LIBOR plus 2%. The largest principal amount owed in 1997 was $140,000 and the principal balance at December 31, 1997 was $140,000. The loan was paid in full in February 1998. Mr. Crocker borrowed $564,000 from the Operating Partnership during 1996. The loan bears interest at 30-day LIBOR plus 2% with interest due quarterly. The largest principal amount owed in 1997 was $564,000 and the principal balance at December 31, 1997 was $483,420. Payment is secured by a pledge of Mr. Crocker's Common Shares. The loan is payable in equal principal installments of $80,570 over seven years commencing March 15, 1997. Mr. George borrowed $100,000 from the Operating Partnership in December 1997 related to home improvements. The loan bears interest at 30-day LIBOR plus 2% with interest due 70 PART III monthly in 1998. The largest principal amount owed in 1997 was $100,000 and the principal balance due at December 31, 1997 was $100,000. Payment is secured by a pledge of Mr. George's Common Shares and options to purchase Common Shares. Payments of principal are due in the amount of $30,000 on each April 1, 1999 and April 1, 2000; and $40,000 on April 1, 2001. The executive officers listed below are indebted to the Company as a result of purchasing Common Shares from the Company in June 1994. The loans accrue interest, payable quarterly in arrears, at the applicable federal rate, as defined in the Internal Revenue Code in effect at the date of each loan. The loans are due and payable on the first to occur of the date in which the individual leaves the Company, other than by reason of death or disability, or the respective loan's due date. The loans are with recourse to the respective individuals and are collateralized by a pledge of the Common Shares purchased. All distributions paid on pledged Common Shares in excess of the then marginal tax rate on the taxable portion of such distributions are used to pay interest and principal on the loans.
Largest Principal Principal Amount Owed Balance at Interest Name in 1997 December 31, 1997 Rate ------------------ ----------------- ----------------- -------- Douglas Crocker II $ 850,318 $ 814,909 6.21% Douglas Crocker II 960,748 931,755 6.15% Douglas Crocker II 944,584 941,415 7.26% Douglas Crocker II 1,901,807 1,864,148 7.93% Frederick C. Tuomi 314,861 313,799 7.26% Alan W. George 79,062 79,062 7.26%
(d) None 71 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1 & 2) See Index to Financial Statements and Schedule on page F-1 of this Form 10-K. (3) Exhibits: 4.1** Indenture, dated as of May 16, 1994, by and among the Operating Partnership, as obligor, the Company, as guarantor and The First National Bank of Chicago, as trustee in connection with 8 1/2% senior notes, due May 15, 1999 4.2*** Indenture, dated October 1, 1994, between the Operating Partnership, as obligor and The First National Bank of Chicago, as trustee in connection with up to $500 million of debt securities 10.1*** Fourth Amended and Restated Agreement of Limited Partnership of ERP Operating Limited Partnership 10.2* Form of Property Management Agreement (REIT properties) 10.3** Form of Property Management Agreement (Non-REIT properties) 10.4**** Amended and Restated Master Reimbursement agreement, dated as of November 1, 1996 by and between Federal National Mortgage Association and EQR-Bond Partnership 10.5+ Second Amended and Restated Revolving Credit Agreement, dated as of September 9, 1997 among the Operating Partnership and Morgan Guaranty Trust Company of New York, as lead agent, Bank of America National Trust and Savings Association, as co-lead agent, The First National Bank of Chicago, as co-agent, U.S. Bank National Association f/k/a and d/b/a First Bank National Association, as co-agent and NationsBank of Texas, N.A., as co-agent 10.6 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Evans Withycombe Residential, L.P. 12 Computation of Ratio of Earnings to Fixed Charges 21 List of Subsidiaries of the Operating Partnership 23.1 Consent of Grant Thornton LLP 23.2 Consent of Ernst & Young LLP 24.1 Power of Attorney for John W. Alexander dated March 2, 1998 24.2 Power of Attorney for James D. Harper, Jr. dated March 2, 1998 24.3 Power of Attorney for Errol R. Halperin dated March 2, 1998 24.4 Power of Attorney for B. Joseph White dated March 2, 1998 24.5 Power of Attorney for Barry S. Sternlicht dated March 4, 1998 24.6 Power of Attorney for Henry H. Goldberg dated March 2, 1998 24.7 Power of Attorney for Edward Lowenthal dated March 2, 1998 24.8 Power of Attorney for Jeffrey H. Lynford dated March 2, 1998 24.9 Power of Attorney for Stephen O. Evans dated March 2, 1998 * Included as an exhibit to the Company's Form S-11 Registration Statement, File No. 33-63158, and incorporated herein by reference. 72 PART IV ** Included as an exhibit to the Operating Partnership's Form 10/A, dated December 12, 1994, File No. 0-24920, and incorporated herein by reference. *** Included as an exhibit to the Operating Partnership's Form 10-Q for the quarter ended September 30, 1995, dated November 7, 1995, and incorporated herein by reference. **** Included as an exhibit to the Operating Partnership's Form 10-K for the year ended December 31, 1996. + Included as an exhibit to the Operating Partnership's Form 8-k dated September 10, 1997, filed on September 10, 1997. (b) Reports on Form 8-K: A Report on Form 8-K dated October 3, 1997 filed on October 9, 1997, reporting information in connection with the issuance of debt securities. A Report on Form 8-K dated October 9, 1997 filed on October 21, 1997, reporting information on property acquisitions. A Report on Form 8-K/A dated October 9, 1997 filed on November 13, 1997, reporting information on property acquisitions. (c) Exhibits: See Item 14(a)(3) above. (d) Financial Statement Schedules: See Index to Financial Statements attached hereto on page F-1 of this Form 10-K. 73 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.
ERP OPERATING LIMITED PARTNERSHIP BY: EQUITY RESIDENTIAL PROPERTIES TRUST, ITS GENERAL PARTNER Date: March 13, 1998 By: /s/ Douglas Crocker II ------------------------------------- Douglas Crocker II President, Chief Executive Officer, Trustee and *Attorney-in-Fact Date: March 13, 1998 By: /s/ David J. Neithercut ------------------------------------- David J. Neithercut Executive Vice-President and Chief Financial Officer Date: March 13, 1998 By: /s/ Michael J. McHugh ------------------------------------- Michael J. McHugh Executive Vice-President, Chief Accounting Officer, Treasurer and *Attorney-in-fact
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 13, 1998 By: /s/ Samuel Zell ------------------------------------- Samuel Zell Chairman of the Board of Trustees Date: March 13, 1998 By: /s/ Gerald A. Spector ------------------------------------- Gerald A. Spector Executive Vice-President, Chief Operating Officer and Trustee Date: March 13, 1998 By: /s/ Sheli Z. Rosenberg ------------------------------------- Sheli Z. Rosenberg Trustee
74 SIGNATURES-CONTINUED -------------------- Date: March 13, 1998 By: /s/ James D. Harper ----------------------------------- James D. Harper Trustee Date: March 13, 1998 By: /s/ Errol R. Halperin ----------------------------------- Errol R. Halperin Trustee Date: March 13, 1998 By: /s/ Barry S. Sternlicht ----------------------------------- Barry S. Sternlicht Trustee Date: March 13, 1998 By: /s/ John W. Alexander ----------------------------------- John W. Alexander Trustee Date: March 13, 1998 By: /s/ B. Joseph White ----------------------------------- B. Joseph White Trustee Date: March 13, 1998 By: /s/ Henry H. Goldberg ----------------------------------- Henry H. Goldberg Trustee Date: March 13, 1998 By: /s/ Jeffrey H. Lynford ----------------------------------- Jeffrey H. Lynford Trustee Date: March 13, 1998 By: /s/ Edward Lowenthal ----------------------------------- Edward Lowenthal Trustee Date: March 13, 1998 By: /s/ Stephen O. Evans ----------------------------------- Stephen O. Evans Trustee 75 INDEX TO FINANCIAL STATEMENTS AND SCHEDULE ERP OPERATING LIMITED PARTNERSHIP
PAGE ---- FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT Report of Independent Auditors.............................................................. F-2 Report of Independent Accountants........................................................... F-3 Consolidated Balance Sheets as of December 31, 1997 and 1996............................................................... F-4 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995......................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995......................................... F-6 to F-7 Consolidated Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995..................................... F-8 Notes to Consolidated Financial Statements.................................................. F-9 to F-45 SCHEDULE FILED AS PART OF THIS REPORT Report of Independent Accountants........................................................... S-1 Schedule III - Real Estate and Accumulated Depreciation..................................... S-2 to S-12
F-1 REPORT OF INDEPENDENT AUDITORS To the Partners ERP Operating Limited Partnership We have audited the accompanying consolidated balance sheets of ERP Operating Limited Partnership (the "Operating Partnership") as of December 31, 1997 and 1996 and the related consolidated statements of operations, partners' capital and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Operating Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ERP Operating Limited Partnership at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP Chicago, Illinois February 26, 1998 except for Note 31, as to which the date is March 12, 1998 F-2 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners ERP Operating Limited Partnership We have audited the accompanying consolidated statements of operations, changes in partners' capital and cash flows for the year ended December 31, 1995, of ERP Operating Limited Partnership (the "Operating Partnership"). These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of its operations, and cash flows for the year ended December 31, 1995, of ERP Operating Limited Partnership for the year ended in conformity with generally accepted accounting principles. /s/ GRANT THORNTON LLP GRANT THORNTON LLP Chicago, Illinois February 14, 1996 F-3 ERP OPERATING LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
December 31, December 31, 1997 1996 ------------ ------------ ASSETS Investment in real estate Land $ 791,980 $ 284,879 Depreciable property 6,293,415 2,698,631 Construction in progress 36,040 - ---------- ---------- 7,121,435 2,983,510 Accumulated depreciation (444,762) (301,512) ---------- ---------- Investment in real estate, net of accumulated depreciation 6,676,673 2,681,998 Cash and cash equivalents 33,295 147,271 Investment in mortgage notes, net 176,063 86,596 Rents receivable 3,302 1,450 Deposits - restricted 36,374 20,637 Escrow deposits - mortgage 44,864 15,434 Deferred financing costs, net 23,092 14,555 Other assets 100,968 18,186 ---------- ---------- Total assets $7,094,631 $2,986,127 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage notes payable $1,582,559 $ 755,434 Notes, net 1,130,764 498,840 Line of credit 235,000 - Accounts payable and accrued expenses 67,699 33,117 Accrued interest payable 28,048 12,737 Rents received in advance and other liabilities 38,750 16,466 Security deposits 28,193 14,128 Distributions payable 20,223 45,938 ---------- ---------- Total liabilities 3,131,236 1,376,660 ---------- ---------- Commitments and contingencies 9 3/8% Series A Cumulative Redeemable Preference Units 153,000 153,000 ---------- ---------- 9 1/8% Series B Cumulative Redeemable Preference Units 125,000 125,000 ---------- ---------- 9 1/8% Series C Cumulative Redeemable Preference Units 115,000 115,000 ---------- ---------- 8.60% Series D Cumulative Redeemable Preference Units 175,000 - ---------- ---------- Series E Cumulative Convertible Preference Units 99,963 - ---------- ---------- 9.65% Series F Cumulative Redeemable Preference Units 57,500 - ---------- ---------- 7 1/4% Series G Convertible Cumulative Preference Units 316,250 - ---------- ---------- Partners' capital: General Partner 2,648,278 1,065,830 Limited Partners 273,404 150,637 ---------- ---------- Total partners' capital 2,921,682 1,216,467 ---------- ---------- Total liabilities and partner's capital $7,094,631 $2,986,127 ========== ==========
See accompanying notes. F-4 ERP OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per OP Unit data)
Year Ended December 31, ----------------------------- 1997 1996 1995 ----------------------------- REVENUES Rental income $707,733 $454,412 $373,919 Fee and asset management 5,697 6,749 7,030 Interest income - investment in mortgage notes 20,366 12,819 4,862 Interest and other income 13,525 4,405 4,573 -------- -------- -------- Total revenues 747,321 478,385 390,384 -------- -------- -------- EXPENSES Property and maintenance 176,075 127,172 112,186 Real estate taxes and insurance 69,520 44,128 37,002 Property management 26,793 17,512 15,213 Fee and asset management 3,364 3,837 3,887 Depreciation 156,644 93,253 72,410 Interest: Expense incurred 121,324 81,351 78,375 Amortization of deferred financing costs 2,523 4,242 3,444 General and administrative 15,064 9,857 8,129 -------- -------- -------- Total expenses 571,307 381,352 330,646 -------- -------- -------- Income before gain on disposition of properties and extraordinary items 176,014 97,033 59,738 Gain on disposition of properties 13,838 22,402 21,617 -------- -------- -------- Income before extraordinary items 189,852 119,435 81,355 Write-off of unamortized costs on refinanced debt - (3,512) - Gain on early extinguishment of debt - - 2,000 -------- -------- -------- Net income $189,852 $115,923 $ 83,355 ======== ======== ======== ALLOCATION OF NET INCOME: Redeemable Preference Interests $ - $ 263 $ 1,508 ======== ======== ======== 9 3/8% Series A Cumulative Redeemable Preference Units $ 14,344 $ 14,345 $ 8,367 ======== ======== ======== 9 1/8% Series B Cumulative Redeemable Preference Units $ 11,406 $ 11,406 $ 1,742 ======== ======== ======== 9 1/8% Series C Cumulative Redeemable Preference Units $ 10,494 $ 3,264 $ - ======== ======== ======== 8.60% Series D Cumulative Redeemable Preference Units $ 9,238 $ - $ - ======== ======== ======== Series E Cumulative Convertible Preference Units $ 4,143 $ - $ - ======== ======== ======== 9.65% Series F Cumulative Redeemable Preference Units $ 3,284 $ - $ - ======== ======== ======== 7 1/4% Series G Convertible Cumulative Preference Units $ 6,103 $ - $ - ======== ======== ======== General Partner $117,580 $ 72,609 $ 57,610 Limited Partners 13,260 14,036 14,128 -------- -------- -------- Net income available to OP Unit holders $130,840 $ 86,645 $ 71,738 ======== ======== ======== Net income per weighted average OP Unit outstanding $ 1.79 $ 1.70 $ 1.68 ======== ======== ======== Weighted average OP Units outstanding 73,182 51,108 42,749 ======== ======== ======== Net income per weighted average OP Unit outstanding - assuming dilution $ 1.76 $ 1.69 $ 1.67 ======== ======== ========
See accompanying notes. F-5 ERP OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
Year Ended December 31, -------------------------------------------- 1997 1996 1995 -------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 189,852 $ 115,923 $ 83,355 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 156,644 93,253 72,410 Amortization of deferred financing costs (including discounts and premiums on debt) 2,170 4,558 3,717 Amortization of discount on investment in mortgage notes (3,100) (613) - Gain on disposition of properties (13,838) (22,402) (21,617) Write-off of unamortized costs on refinanced debt - 3,512 - Gain on early extinguishment of debt - - (2,000) Changes in assets and liabilities: (Increase) in rents receivable (1,373) (409) (259) (Increase) decrease in deposits-restricted (23,183) (556) (218) (Increase) decrease in other assets (20,608) 158 1,913 Increase in accounts payable and accrued expenses 20,235 9,901 3,765 Increase in accrued interest payable 12,224 4,383 2,616 Increase (decrease) in rents received in advance and other liabilities 12,112 3,222 (2,148) ----------- ----------- ----------- Net cash provided by operating activities 331,135 210,930 141,534 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in real estate, net (1,190,380) (641,015) (239,964) Improvements to real estate (50,246) (33,001) (32,800) Additions to non-real estate (9,754) (2,347) (3,669) Proceeds from disposition of rental property, net 35,758 40,093 46,426 Purchase of management contract rights (5,000) - - (Increase) decrease in mortgage deposits (25,521) 1,311 (1,299) Deposits (made) on real estate acquisitions (8,815) (16,916) (15,107) Deposits applied on real estate acquisitions 16,761 15,107 5,200 (Increase) decrease in investment in mortgage notes (86,367) 1,171 (87,154) EWR Merger costs and related activities (114,654) - - Wellsford Merger costs and related activities (62,254) - - Other investing activities, net (42,852) (58) 4,349 ----------- ----------- ----------- Net cash (used for) investing activities (1,543,324) (635,655) (324,018) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital contributions from General Partner 1,013,789 597,752 270,311 Redemption of Preference Interests - (1,083) (1,352) Distributions paid to partners (292,082) (142,304) (95,875) Proceeds from sale of 2002 Notes, net of discount - - 124,011 Proceeds from sale of 2026 Notes - 150,000 - Proceeds from sale of 2001 Notes, net of discount 149,684 - - Proceeds from sale of 2003 Notes, net of discount 49,916 - - Proceeds from sale of 2017 Notes, net of discount 148,703 - - Principal repayment on the Floating Rate Notes (100,000) - - Principal receipts on employee notes 269 76 143 Proceeds from restructuring of tax-exempt bond investments 9,350 112,209 - Proceeds from line of credit 442,500 250,000 317,000 Repayments on line of credit (207,500) (342,000) (387,000) Principal payments on mortgage notes payable (120,546) (60,706) (47,787) Deferred financing costs (10,799) (9,111) (4,558) Increase in security deposits 7,819 3,735 948 Other financing activities 7,110 - 33 ----------- ----------- ----------- Net cash provided by financing activities 1,098,213 558,568 175,874 ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents (113,976) 133,843 (6,610) Cash and cash equivalents, beginning of year 147,271 13,428 20,038 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 33,295 $ 147,271 $ 13,428 =========== =========== ===========
See accompanying notes. F-6 ERP OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Amounts in thousands)
Year Ended December 31, -------------------------------- 1997 1996 1995 -------------------------------- Supplemental information: Cash paid during the period for interest $ 109,100 $ 76,968 $75,759 ========== ======== ======= Mortgage loans assumed through Mergers $ 333,966 $ - $ - ========== ======== ======= Mortgage loans assumed through acquisitions of real estate $ 597,245 $142,237 $23,554 ========== ======== ======= Unsecured notes assumed through Mergers $ 383,954 $ - $ - ========== ======== ======= Real estate assumed through foreclosure $ - $ 10,854 $ - ========== ======== ======= Net real estate contributed in exchange for OP units $ 191,329 $ 440 $18,811 ========== ======== ======= Fair market value of OP Units issued in connection with Mergers $1,052,582 $ - $ - ========== ======== ======= Real estate conveyed in exchange for release of mortgage indebtedness $ - $ - $20,500 ========== ======== ======= Liquidation value of Preferred Shares redesignated through Wellsford Merger $ 157,463 $ - $ - ========== ======== ======= Net liabilities assumed through Mergers $ 33,237 $ - $ - ========== ======== =======
See accompanying notes F-7 ERP OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (Amounts in thousands)
Year Ended December 31, --------------------------------------- 1997 1996 1995 --------------------------------------- Accumulated partners' capital, beginning of year $1,609,467 $1,053,480 $ 787,374 Net income for the year ended December 31, 189,852 115,923 83,355 Capital contributions from General Partner 1,014,604 598,123 271,273 Liquidation Value of Preferred Shares redesignated through Wellsford Merger 157,463 - - Redemption of Preference Interests - (1,083) (1,352) Issuance of OP Units in connection with acquisitions 191,329 440 18,811 Issuance of OP Units in connection with Mergers 1,052,582 - - Distributions declared to Redeemable Preference Interests for the year ended December 31, - - (10,109) Distributions declared to partners for the year ended December 31, (251,902) (157,416) (95,872) ---------- ---------- ---------- Accumulated partners' capital, end of year $3,963,395 $1,609,467 $1,053,480 ========== ========== ========== Allocation of partners' capital: General Partner, partner's capital, end of year $2,648,278 $1,065,830 $ 606,517 ========== ========== ========== Limited Partners, partners' capital, end of year $ 273,404 $ 150,637 $ 144,385 ========== ========== ========== Redeemable Preference Interests, end of year $ - $ - $ 24,578 ========== ========== ========== 9 3/8% Series A Cumulative Redeemable Preference Units $ 153,000 $ 153,000 $ 153,000 ========== ========== ========== 9 1/8% Series B Cumulative Redeemable Preference Units $ 125,000 $ 125,000 $ 125,000 ========== ========== ========== 9 1/8% Series C Cumulative Redeemable Preference Units $ 115,000 $ 115,000 $ - ========== ========== ========== 8.60% Series D Cumulative Redeemable Preference Units $ 175,000 $ - $ - ========== ========== ========== Series E Cumulative Convertible Preference Units $ 99,963 $ - $ - ========== ========== ========== 9.65% Series F Cumulative Redeemable Preference Units $ 57,500 $ - $ - ========== ========== ========== 7 1/4% Series G Convertible Cumulative Preference Units $ 316,250 $ - $ - ========== ========== ==========
See accompanying notes. F-8 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization ERP Operating Limited Partnership (the "Operating Partnership"), an Illinois limited partnership, was formed to conduct the multifamily residential property business of Equity Residential Properties Trust ("EQR"). EQR is a Maryland real estate investment trust formed on March 31, 1993. As used herein, the term "Company" means EQR, and its subsidiaries, as the survivor of the mergers between EQR and each of Wellsford Residential Property Trust ("Wellsford") (the "Wellsford Merger") and Evans Withycombe Residential, Inc. ("EWR") (the "EWR Merger"). The Company conducts substantially all of its operations through the Operating Partnership. EQR, through the Operating Partnership, is the successor to the multifamily residential property business of Equity Properties Management Corp. ("EPMC"), an entity controlled by Mr. Samuel Zell, Chairman of the Board of Trustees of the Company, and a series of other entities which owned 69 of the properties (the "Initial Properties"). Forty-six of the Initial Properties (the "Zell Properties") were contributed or sold by entities substantially controlled by Mr. Zell and primarily owned by Mr. Zell and trusts for the benefit of Mr. Robert Lurie, a deceased partner of Mr. Zell. The remaining 23 of the Initial Properties (the "Starwood Properties") were acquired from entities controlled by Starwood Capital Partners, L.P. ("Starwood") and its affiliates ("Starwood Original Owners"). Prior to the completion of the Company's initial public offering (the "EQR IPO") of 13,225,000 common shares of beneficial interest, $0.01 par value per share ("Common Shares"), EPMC provided multifamily residential management services (the "Management Business") to the Zell Properties. The Company, through the Operating Partnership, is engaged in the acquisition, disposition, ownership, management and operation of multifamily properties. As of December 31, 1997, the Operating Partnership controlled a portfolio of 463 multifamily properties (individually a "Property" and collectively the "Properties") containing 135,200 apartment units. The Operating Partnership's interest in six of these Properties at the time of acquisition thereof consisted solely of ownership of debt collateralized by such Properties. The Operating Partnership also has an investment in partnership interests and subordinated mortgages collateralized by 21 properties and mortgage loans collateralized by five properties (collectively, the "Additional Properties"). The Properties and Additional Properties are located throughout the United States in the following 35 states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and Wisconsin. In exchange for contributing 33 of the Zell Properties and the Management Business and the Starwood Properties, the 33 existing entities (the "Zell Original Owners"), and entities controlled by Starwood and EPMC received a total of 8,433,238 partnership interests ("OP Units") (including an additional 93,639 OP Units issued in August 1994 and 1,835 OP Units issued in September 1995) in the Operating Partnership. The other 13 Zell Properties were acquired from 13 existing partnerships (the "Zell Sellers") for $43.5 million in cash. The Management Business, the Zell Original Owners and the Zell Sellers are collectively "EQR's Predecessor Business." F-9 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company has formed a series of partnerships (the "Financing Partnerships") which beneficially own certain Properties encumbered by mortgage indebtedness. The Operating Partnership owns a 1% limited partner interest and a 98% general partner interest in each Financing Partnership. The remaining 1% general partner interest in each Financing Partnership is owned by various qualified REIT subsidiaries wholly owned by the Company (each a "QRS Corporation"). Rental income from the Properties that are beneficially owned by a Financing Partnership is used first to service the applicable mortgage debt and pay other operating expenses and any excess is then distributed 1% to the applicable QRS Corporation, as the general partner of such Financing Partnership, and 99% to the Operating Partnership, as the sole 1% limited partner and as the 98% general partner. The Company has also formed a series of limited liability companies (the "LLCs") which own certain Properties and one such LLC which has an investment in partnership interests and subordinated mortgages collateralized by 21 of the Additional Properties. The Operating Partnership is a 99% managing member of each LLC and a QRS Corporation is a 1% member of each LLC. In addition, the Company also owns a 1% general partner interest and a 81.1% limited partner interest in Evans Withycombe Residential, L. P. (the "EWR Operating Partnership") and the Operating Partnership owns a 16.1% limited partner interest and a 1% managing general partner interest in the EWR Operating Partnership. As of December 31, 1997, 451 Properties were managed by either Equity Residential Properties Management Limited Partnership, the successor to the Management Business contributed by EPMC contemporaneously with the EQR IPO and Equity Residential Properties Management Limited Partnership II (collectively, the "Management Partnerships"). The Management Partnerships collect a property management fee consistent with a reasonable arms-length charge for the performance of such services. The sole general partners of the Management Partnerships with a 1% interest is the Operating Partnership. The sole limited partners of the Management Partnerships are Equity Residential Properties Management Corp. ("Management Corp.") and Equity Residential Properties Management Corp. II ("Management Corp. II"), respectively, and each has a 99% interest in the respective partnership. 2. Basis of Presentation The Wellsford Merger and the EWR Merger (collectively, the "Mergers") were treated as purchases in accordance with Accounting Principles Board Opinion No. 16. The fair value of the consideration given by the Company in the Mergers was used as the valuation basis for each of the combinations. The assets acquired and the liabilities assumed of Wellsford were recorded at their relative fair values as of May 30, 1997 (the "Wellsford Closing Date"). The assets acquired and the liabilities assumed of EWR were recorded at their relative fair values as of December 23, 1997 (the "EWR Closing Date"). The accompanying consolidated statements of operations and cash flows include the results of both Wellsford and EWR from their respective closing dates. Due to the Operating Partnership's ability to control, either through ownership or by contract, the Management Partnerships, the Financing Partnerships, the LLCs and the EWR Operating Partnership, each such entity has been consolidated with the Operating Partnership for F-10 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) financial reporting purposes. In regard to Management Corp., Management Corp. II and Evans Withycombe Management, Inc., the Operating Partnership does not have legal control; however, these entities are consolidated for financial reporting purposes, the effects of which are immaterial. Certain reclassifications have been made to the prior year's financial statements in order to conform to the current year presentation. Minority interests represented by the Company's indirect 1% interest in various Financing Partnerships and LLCs are immaterial and have not been accounted for in the Consolidated Financial Statements. In addition, certain amounts due from the Company for its 1% interest in the Financing Partnerships has not been reflected in the Consolidated Balance Sheets since such amounts are immaterial to the Consolidated Balance Sheets. 3. Business Combinations In connection with the Wellsford Merger each outstanding common share of beneficial interest of Wellsford was converted into .625 of a Common Share of the Company. In addition, Wellsford's Series A Cumulative Convertible Preferred Shares of Beneficial Interest were redesignated as the Company's 3,999,800 Series E Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par value per share (the "Series E Preferred Shares") and Wellsford's Series B Cumulative Redeemable Preferred Shares of Beneficial Interest were redesignated as the Company's 2,300,000 9.65% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (the "Series F Preferred Shares"). On the Wellsford Closing Date, 72 Properties containing 19,004 units and other related assets were acquired for a total purchase price of approximately $1 billion. The purchase price consisted of 10.8 million Common Shares issued by the Company with a market value of $443.7 million, the liquidation value of $157.5 million for the Series E Preferred Shares and the Series F Preferred Shares, the assumption of mortgage indebtedness and unsecured notes in the amount of $345 million, the assumption of other liabilities of approximately $33.5 million and other merger related costs of approximately $23.4 million. Upon contribution of the net assets by the Company to the Operating Partnership, the Operating Partnership issued 10.8 million OP Units to the Company. On the EWR Closing Date, 53 Properties containing 15,331 units and three Properties under construction or expansion expected to contain 953 units and other related assets were acquired for a total purchase price of approximately $1.2 billion. In connection with the EWR Merger, as of the EWR Closing Date, each outstanding common share of beneficial interest of EWR was converted into .50 of a Common Share of the Company. The purchase price consisted of the Operating Partnership's contribution of the EWR Operating Partnership OP Units to the Operating Partnership at a market value of approximately $501.6 million, issuance of approximately 2.2 million Operating Partnership OP Units, in exchange for approximately 4.4 million EWR Operating Partnership OP Units at a market value of approximately $107.3 million, the assumption of mortgage indebtedness and unsecured notes in the amount of $498 million, the assumption of other liabilities of approximately $28.2 million and other EWR Merger related costs of approximately $16.7 million. F-11 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Partner's Capital The limited partners of the Operating Partnership as of December 31, 1997 include various individuals and entities that contributed their properties to the Operating Partnership in exchange for a partnership interest (the "Limited Partners") and are represented by 9,592,590 OP Units which are exchangeable, subject to certain restrictions, on a one-for-one basis into the Company's Common Shares. As of December 31, 1997, the General Partner had an approximate 90.28% interest and the Limited Partners had an approximate 9.72% interest. In regards to the General Partner, net proceeds from the various equity offerings of the Company have been contributed by the Company to the Operating Partnership in return for an increased ownership percentage. Due to the Limited Partner's ability to convert their interest into an ownership interest in the General Partner, the net offering proceeds are allocated between the Company (as general partner) and the Limited Partners (to the extent represented by OP Units) to account for the change in their respective percentage ownership of the equity of the Operating Partnership. F-12 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Operating Partnership paid a $0.625, $0.625, $0.625 and $0.67 per OP Unit distribution on April 11, July 11, October 10 and December 30, 1997, respectively, for the quarters ended March 31, June 30, September 30 and December 31, 1997, to OP Unit holders of record on March 28, June 27, September 26 and December 15, 1997, respectively. F-14 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the distributions paid to the Company as holder of the various Preference Units listed below related to the year ended December 31, 1997:
For the Quarter or Period Distribution Amount Date Paid ended ------------------- --------- ----- Series A Cumulative Redeemable Preference Units $0.585938 04/15/97 03/31/97 0.585937 07/15/97 06/30/97 0.585938 10/15/97 09/30/97 0.585937 01/15/98 12/31/97 Series B Cumulative Redeemable Preference Units $0.570313 04/15/97 03/31/97 0.570312 07/15/97 06/30/97 0.570313 10/15/97 09/30/97 0.570312 01/15/98 12/31/97 Series C Cumulative Redeemable Preference Units $0.570313 04/15/97 03/31/97 0.570312 07/15/97 06/30/97 0.570313 10/15/97 09/30/97 0.570312 01/15/98 12/31/97 Series D Cumulative Redeemable Preference Units (A) $0.334400 07/15/97 06/30/97 0.537500 10/15/97 09/30/97 0.537500 01/15/98 12/31/97 Series E Cumulative Convertible Preference Units $0.437500 07/01/97 06/30/97 0.437500 10/01/97 09/30/97 0.437500 01/02/98 12/31/97 Series F Cumulative Redeemable Preference Units $0.603125 07/15/97 06/30/97 0.603125 10/15/97 09/30/97 0.603125 01/15/98 12/31/97 Series G Convertible Cumulative Preference Units (B) $0.110800 10/15/97 09/30/97 0.453125 01/15/98 12/31/97
(A) Partial distribution of $0.3344 covers the period May 21 through July 15, 1997. (B) Partial distribution of $0.1108 covers the period September 24 through October 15, 1997. 5. Summary of Significant Accounting Policies (a) Real estate assets and depreciation Real estate is recorded at cost less accumulated depreciation less an adjustment, if any, for impairment. Real estate intended to be held and operated by the Operating Partnership over their remaining useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the particular real estate may not be recoverable. If these events or changes in circumstances are present, the Operating Partnership estimates the sum of the F-15 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) expected future cash flows (undiscounted) to result from the operations and eventual disposition of the particular real estate, and if less than the carrying amount of the real estate, the Operating Partnership will recognize an impairment loss. Upon recognition of any impairment loss the Operating Partnership measures that loss based on the amount by which the carrying amount of the real estate exceeds the estimated fair value of the real estate. For rental properties to be disposed of, an impairment loss is recognized when the fair value of the real estate, less the estimated cost to sell, is less than the carrying amount of the real estate measured at the time the Operating Partnership has a commitment to sell the property and/or is actively marketing the property for sale. Real estate to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Depreciation is not recorded during the period in which assets are held for disposal. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Operating Partnership uses a 30-year estimated life for buildings, a 10-year estimated life for land improvements and up to a seven- year estimated life for furniture, fixtures and equipment. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life. Initial direct leasing costs are expensed as incurred and such expense approximates the deferral and amortization of initial direct leasing costs over the lease terms. Property sales or dispositions are recorded when title transfers and sufficient consideration has been received by the Operating Partnership. Upon disposition, the related costs and accumulated deprecation are removed from the respective accounts. Any gain or loss on sale or disposition is recognized in accordance with generally accepted accounting principles. The Operating Partnership classifies developments and lease-up properties as construction-in-progress until construction on the apartment community has been completed and the apartment community has reached stabilized occupancy. The Operating Partnership generally considers a property stabilized when it first reaches 93% physical occupancy. The Operating Partnership also classifies land relating to construction-in-progress as land on its balance sheet. Land associated with construction-in-progress was $8.3 million as of December 31, 1997. (b) Cash and Cash Equivalents The Operating Partnership considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less, at the date of purchase, to be cash equivalents. The Operating Partnership maintains its cash and cash equivalents at financial institutions. The combined account balances at each institution periodically exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Operating Partnership believes that the risk is not significant, as the Operating Partnership does not anticipate their non-performance. F-16 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (c) Deferred Financing Costs Deferred financing costs include fees and costs incurred to obtain the Operating Partnership's lines of credit, long-term financing and costs for certain interest rate protection agreements. These costs are amortized over the terms of the related debt. Unamortized financing costs are written-off when debt is retired before the maturity date. As of December 31, 1997 and 1996, the accumulated amortization of such deferred financing costs was $4.2 million and $3.8 million, respectively. (d) Interest Rate Protection Agreements The Operating Partnership from time to time enters into interest rate protection agreements to effectively convert floating rate debt to a fixed rate basis, as well as to hedge anticipated financing transactions. Net amounts paid or received under these agreements are recognized as an adjustment to interest expense when such amounts are incurred or earned. Settlement amounts paid or received in connection with terminated interest rate protection agreements are deferred and amortized over the remaining term of the related financing transaction on the straight-line method. The Operating Partnership believes it has limited exposure to the extent of non-performance by the counterparties of each protection agreement since each counterparty is a major U.S. financial institution, and the Operating Partnership does not anticipate their non- performance. (e) Fair Value of Financial Instruments The fair values of the Operating Partnership's financial instruments, including cash and cash equivalents, and mortgage notes payable, other notes payable, lines of credit and other financial instruments, approximate their carrying or contract values. With respect to the Operating Partnership's investment in mortgage notes, the fair value as of December 31, 1997 was estimated to be approximately $184.8 million compared to the Operating Partnership's carrying value of $176.1 million. The estimated fair value of the Operating Partnership's investment in mortgage notes represents the estimated net present value based on the expected future property level cash flows and an estimated current market discount rate. (f) Revenue Recognition Rental income attributable to leases is recorded when due from tenants and is recognized monthly as it is earned, which is not materially different than on a straight-line basis. Interest income is recorded on an accrual basis. (g) Lease Agreements A substantial portion of the leases entered into between the tenant and a multifamily property for the rental of an apartment unit is month-to-month or year-to-year, renewable upon consent of both parties. F-17 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (h) Income Taxes The Operating Partnership is not liable for Federal income taxes as the partners recognize their proportionate share of the Operating Partnership income or loss in their tax returns, therefore, no provision for Federal income taxes is made in the financial statements of the Operating Partnership. However, the Operating Partnership is subject to certain state and local income, excise and franchise taxes. The aggregate cost of land and depreciable property for Federal income tax purposes as of December 31, 1997 was approximately $6.2 billion. (i) Income per OP Unit In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share ("Statement 128"). Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All net income per weighted average OP Unit and net income per weighted average OP Unit--assuming dilution amounts for all periods have been presented and, where appropriate, restated to conform to the Statement 128 requirements. (j) Cash Distributions and Allocation of Income (Loss) Distributions, profits and losses are generally allocated to the General Partner and the Limited Partners in proportion to their respective percentage interests. (k) Use of Estimates In preparation of the Operating Partnership's financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. F-18 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Real Estate The following summarizes the carrying amounts for the real estate as of December 31, 1997 and 1996:
1997 1996 ---- ---- (Amounts in thousands) Land $ 791,980 $ 284,879 Buildings and Improvements 6,060,779 2,566,568 Furniture, Fixtures and Equipment 232,636 132,063 Construction in Progress 36,040 - ---------- ---------- Real estate 7,121,435 2,983,510 Accumulated Depreciation (444,762) (301,512) ---------- ---------- Real estate, net $6,676,673 $2,681,998 ========== ==========
In addition to the Mergers, during the year ended December 31, 1997, the Operating Partnership acquired the 124 Properties listed below. Each Property was purchased from an unaffiliated third party, except for 12 of the Properties, which were purchased from affiliates of the Operating Partnership, Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership ("Zell/Merrill I") and subsidiaries of Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II ("Zell/Merrill II"). The total purchase price for the Properties acquired from Zell/Merrill I and Zell/Merrill II was approximately $162.2 million. In connection with certain of the acquisitions listed below, the Operating Partnership assumed mortgage indebtedness of approximately $597.2 million and issued OP Units having a value of approximately $191.3 million. The cash portion of these transactions was funded primarily from proceeds raised from the various equity offerings of the Company as well as from proceeds raised from the issuances of debt securities as discussed in Note 13. F-19 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total Acquisition Date Number Cost (in Acquired Property Location of Units thousands) - -------- -------- -------- -------- ------------ 01/02/97 Town Center Kingwood, TX 258 $ 12,874 01/21/97 Harborview San Pedro, CA 160 19,109 01/31/97 The Cardinal Greensboro, NC 256 13,180 02/12/97 Trails at Dominion Houston, TX 843 38,525 02/25/97 Dartmouth Woods Lakewood, CO 201 12,489 02/28/97 Rincon Houston, TX 288 21,157 02/28/97 Waterford at the Lakes Kent, WA 344 19,443 03/17/97 Junipers at Yarmouth Yarmouth, ME 225 9,326 03/20/97 Lincoln Harbor Ft. Lauderdale, FL 324 22,325 03/24/97 Sedona Ridge Phoenix, AZ 250 15,262 03/28/97 Club at the Green Beaverton, OR 254 14,906 03/28/97 Boulder Creek (formerly Knight's Castle) Wilsonville, OR 296 15,239 04/04/97 Country Gables Beaverton, OR 288 16,030 04/04/97 Watermark Square Portland, OR 390 15,984 04/04/97 Indigo Springs Kent, WA 278 12,903 04/29/97 Summit Chase Coral Springs, FL 140 5,613 05/13/97 Willow Brook Durham, NC 176 8,553 05/15/97 The Willows Knoxville, TN 250 11,064 05/21/97 Cascade at Landmark Alexandria, VA 277 23,322 05/21/97 Sabal Palm Club Pompano Beach, FL 416 23,913 05/21/97 Tamarlane Portland, ME 115 5,861 05/22/97 Spinnaker Cove Hermitage, TN 278 14,700 05/29/97 Banyan Lake Boynton Beach, FL 288 14,031 05/30/97 Wyndridge III Memphis, TN 284 15,204 06/06/97 Wyndridge II Memphis, TN 284 15,285 06/13/97 Windemere Mesa, AZ 224 9,641 06/13/97 Preston Bend Dallas, TX 255 11,062 06/13/97 Highline Oaks Denver, CO 220 10,782 06/17/97 Hunter's Ridge/South Pointe St. Louis, MO 390 19,603 06/19/97 Club at Tanasbourne Hillsboro, OR 352 20,098 06/26/97 Wood Creek Pleasant Hill, CA 256 32,816 07/02/97 Ridgemont/Mountain Brook Chattanooga, TN 506 15,105 07/11/97 Foxchase Grand Prairie, TX 260 8,528 07/18/97 La Mirage San Diego, CA 1,070 128,988 07/31/97 Bay Ridge San Pedro, CA 60 4,581 08/07/97 Boynton Place Boynton Beach, FL 192 9,425 08/07/97 Gates of Redmond I Redmond, WA 180 14,445 08/12/97 Cambridge Village Lewisville, TX 200 9,614 08/12/97 Crosswinds St. Petersburg, FL 208 7,351 08/15/97 Gates of Redmond II Redmond, WA 100 8,025 08/27/97 Paces Station/Paces on the Green Atlanta, GA 610 37,432
F-20 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total Acquisition Date Number Cost (in Acquired Property Location of Units thousands) - -------- -------- -------- -------- ------------ 09/05/97 North Hill Atlanta, GA 420 21,093 09/05/97 Casa Camino Ruiz (formerly Pardee Casas) San Diego, CA 196 13,345 09/29/97 The Classic Stamford, CT 144 22,776 09/30/97 Cambridge at Hickory Hollow Nashville, TN 360 21,155 10/02/97 Brookfield Salt Lake City, UT 128 6,833 10/09/97 Atrium Durham, NC 208 11,233 10/09/97 Burwick Farms Howell, MI 264 11,026 10/09/97 Carolina Crossing Greenville, SC 156 5,481 10/09/97 Chimneys Charlotte, NC 214 9,051 10/09/97 Clarion Decatur, GA 217 15,026 10/09/97 Concorde Bridge Overland Park, KS 248 19,737 10/09/97 Creekwood Charlotte, NC 384 18,599 10/09/97 Eastland on the Lake Columbus, OH 376 8,183 10/09/97 Garden Lake Riverdale, GA 278 14,645 10/09/97 Glen Eagle Greenville, SC 192 8,340 10/09/97 Grey Eagle Greenville, SC 156 7,255 10/09/97 Hickory Ridge Greenville, SC 90 2,858 10/09/97 Hidden Oaks Cary, NC 216 11,770 10/09/97 Highland Grove Stone Mt., GA 268 16,662 10/09/97 Mariners Wharf Orange Park, FL 272 18,594 10/09/97 Northlake Jacksonville, FL 240 11,660 10/09/97 Silver Springs Jacksonville, FL 432 18,310 10/09/97 Tamarind at Stoneridge Columbia, SC 240 10,545 10/09/97 Tivoli Lakes Club Deerfield Beach, FL 278 18,051 10/09/97 Village of Sycamore Ridge Memphis, TN 114 6,228 10/09/97 Woodland Meadows Ann Arbor, MI 306 20,045 10/17/97 Deerwood Corona, CA 316 25,073 10/21/97 Autumn Creek Cordova, TN 210 11,024 10/21/97 Blue Swan San Antonio, TX 285 9,018 10/21/97 Brookridge Centreville, VA 252 18,541 10/21/97 Chantecleer Lakes Naperville, IL 304 23,038 10/21/97 Crescent at Cherry Creek Denver, CO 216 17,721 10/21/97 Governor's Pointe Roswell, GA 468 28,258 10/21/97 Hidden Palms Tampa, FL 256 8,427 10/21/97 Idlewood Indianapolis, IN 320 14,043 10/21/97 Jefferson at Walnut Creek Austin, TX 342 17,343 10/21/97 Kirby Place Houston, TX 362 29,533 10/21/97 Larkspur Woods Sacramento, CA 232 20,335 10/21/97 Northwoods Village Cary, NC 228 12,830 10/21/97 Orchard of Landen Maineville, OH 312 20,236 10/21/97 Preakness Antioch, TN 260 9,237
F-21 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total Acquisition Date Number Cost (in Acquired Property Location of Units thousands) - -------- -------- -------- -------- ------------ 10/21/97 Riverside Park Tulsa, OK 288 13,828 10/21/97 Sycamore Creek Scottsdale, AZ 350 22,232 10/21/97 Trinity Lakes Cordova, TN 330 16,944 11/21/97 Parkridge Place Irving, TX 536 23,503 11/21/97 Villa Serenas Tucson, AZ 611 16,843 12/05/97 Hollyview Silver Spring, MD 42 1,684 12/11/97 Cierra Crest Denver, CO 480 39,632 12/11/97 Arbor Glen Ypsilanti, MI 220 10,922 12/11/97 Breckenridge Lexington, KY 382 16,458 12/11/97 Ethans Ridge I Kansas City, MO 316 19,459 12/11/97 Ethans Ridge II Kansas City, MO 242 14,655 12/11/97 Ethans Glen III Kansas City, MO 48 2,441 12/11/97 Farmington Gates Germantown, TN 182 9,697 12/11/97 Fountain Place I Eden Prairie, MN 332 23,999 12/11/97 Fountain Place II Eden Prairie, MN 158 12,265 12/11/97 Geary Court Yard San Francisco, CA 164 17,194 12/11/97 James Street Crossing Kent, WA 300 20,786 12/11/97 Ocean Walk Key West, FL 296 28,353 12/11/97 Regency Woods West Des Moines, IA 200 7,451 12/11/97 Ridgeway Commons Memphis, TN 127 5,684 12/11/97 River Oak Louisville, KY 268 12,539 12/11/97 Royal Oak Eagan, MN 231 15,982 12/11/97 The Cedars Charlotte, NC 360 20,253 12/11/97 Trailway Pond I Burnsville, MN 75 4,768 12/11/97 Trailway Pond II Burnsville, MN 165 11,047 12/11/97 Valley Creek I Woodbury, MN 225 16,226 12/11/97 Valley Creek II Woodbury, MN 177 12,295 12/11/97 Westwood Pines Tamarac, FL 208 15,261 12/11/97 White Bear Woods White Bear Lake, MN 225 16,213 12/11/97 Wood Crest Villa Westland, MI 458 9,260 12/11/97 Wood Lane Place Woodbury, MN 216 20,033 12/17/97 Crystal Village Attleboro, MA 91 6,349 12/17/97 Mill Village Randolph, MA 310 19,584 12/18/97 Ridgewood Village San Diego, CA 192 19,779 12/18/97 Meadows in the Park Birmingham, AL 200 9,525 12/18/97 Meadows on the Lake Birmingham, AL 200 9,521 12/18/97 Vinings at Ashley Lake Boynton Beach, FL 440 26,860 12/23/97 Chartwell Court Houston, TX 243 14,036 12/30/97 Glenlake Club Glendale Heights, IL 336 21,708 12/31/97 Arboretum Atlanta, GA 312 20,607 ------ ---------- 33,542 $1,982,828 ====== ==========
F-22 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Investment in Limited Partnerships - Development Properties In December 1997, the Operating Partnership entered into a joint venture agreement with a multifamily residential real estate developer whereby the Operating Partnership will make investments in a limited partnership to fund a portion of the total project development cost of new multifamily developments in certain of the Operating Partnership's target markets (the "Joint Venture Agreement"). As of December 31, 1997, the Operating Partnership has funded approximately $6.9 million in connection with this agreement. The amounts invested are included in other assets on the balance sheet. 8. Real Estate Dispositions During 1997, the Operating Partnership disposed of the properties listed below. Each property was sold to an unaffiliated third party.
Disposition Number Price (in Date Disposed Property Location of Units thousands) - ------------- -------------------- ----------------- -------- ----------- 03/28/97 Plantation Monroe, LA 200 $ 4,800 08/25/97 Paradise Pointe Land Hollywood, FL N/A 712 11/19/97 Quail Run Oklahoma City, OK 208 5,000 11/19/97 Stonebrook Oklahoma City, OK 360 8,850 12/11/97 Cambridge Tacoma, WA 96 3,665 12/11/97 Crown Pointe Tacoma, WA 76 2,542 12/11/97 Windemere Tacoma, WA 36 1,342 12/11/97 Diplomat South Beech Grove, IN 272 7,000 12/18/97 Village of Hampshire Heights (Partial) Toledo, OH 88 2,600 ----- ------- 1,336 $36,511 ===== =======
The Operating Partnership recognized a total gain of approximately $13.8 million on the disposition of these seven properties, the portion of one Property and the vacant land parcel. During the year ended December 31, 1995, the Operating Partnership recorded a $1 million loss which represented the estimated impairment in connection with the potential sale of University Park located in Toledo, Ohio. This Property had a net carrying amount as of December 31, 1995 of approximately $1.1 million after the impairment loss. The impairment loss on real estate to be disposed of is included in gain on disposition of properties on the statement of operations for the year ended December 31, 1995. 9. Calculation of Net Income Per Weighted Average OP Unit The following tables set forth the computation of net income per weighted average OP Unit outstanding and net income per weighted average OP Unit outstanding - assuming dilution. F-23
Year Ended December 31, ------------------------------------ 1997 1996 1995 --------- --------- --------- (Amounts in thousands except per share amounts) Numerator: Income before gain on disposition of properties, extraordinary items and allocation of income to Redeemable Preference Interests and Redeemable Preference Units $ 176,014 $ 97,033 $ 59,738 Income allocated to Redeemable Preference Interests -- (263) (1,508) Income allocated to Redeemable Preference Units (59,012) (29,015) (10,109) --------- --------- --------- Income before gain on disposition of properties and extraordinary items 117,002 67,755 48,121 Gain on disposition of properties 13,838 22,402 21,617 Extraordinary items -- (3,512) 2,000 --------- --------- --------- Numerator for net income per weighted average OP Unit outstanding $ 130,840 $ 86,645 $ 71,738 ========= ========= ========= Effect of dilutive securities: Series E Cumulative Convertible Preference Units -- -- -- Series G Convertible Cumulative Preference Units -- -- -- --------- --------- --------- Numerator for net income per weighted average OP Unit outstanding - assuming dilution $ 130,840 $ 86,645 $ 71,738 ========= ========= ========= Denominator: Denominator for net income per weighted average OP Unit outstanding 73,182 51,108 42,749 Effect of dilutive securities (1): OP Units issuable upon exercise of the Company's share options (2) 1,099 412 116 --------- --------- --------- Denominator for net income per weighted average OP Unit outstanding - assuming dilution 74,281 51,520 42,865 ========= ========= ========= Net income per weighted average OP Unit outstanding $ 1.79 $ 1.70 $ 1.68 ========= ========= ========= Net income per weighted average OP Unit outstanding - assuming dilution $ 1.76 $ 1.69 $ 1.67 ========= ========= =========
F-24
Year ended December 31, ------------------------------------- 1997 1996 1995 --------- --------- --------- Net income per weighted average OP Unit outstanding: Income before gain on disposition of properties and extraordinary items per weighted average OP Unit outstanding $ 1.60 $ 1.33 $ 1.12 Gain on disposition of properties 0.19 0.44 0.51 Extraordinary items -- (0.07) 0.05 --------- --------- --------- Net income per weighted average OP Unit outstanding $ 1.79 $ 1.70 $ 1.68 ========= ========= ========= Net income per weighted average OP Unit outstanding - assuming dilution: Income before gain on disposition of properties and extraordinary items per weighted average OP Unit outstanding - assuming dilution $ 1.58 $ 1.33 $ 1.12 Gain on disposition of properties 0.18 0.43 0.50 Extraordinary items -- (0.07) 0.05 --------- --------- --------- Net income per weighted average OP Unit Share outstanding - assuming dilution $ 1.76 $ 1.69 $ 1.67 ========= ========= =========
(1) Convertible Preference Units that could be converted into 2,763,898 Common Shares which would be contributed to the Operating Partnership in exchange for OP Units were outstanding at December 31, 1997 but were not included in the computation of diluted earnings per OP Unit because it would be anti- dilutive. (2) Pursuant to the Company's share option plan, the Company has offered the opportunity to acquire Common Shares through the grant of share options ("Options") to officers, directors, key employees and consultants of the Company for 4.1 million, 2.3 million and 1.4 million Common Shares at a weighted average exercise price of $36.22, $28.76 and $26.97 per Common Share as of December 31, 1997, 1996 and 1995, respectively. As of December 31, 1997, 1996 and 1995, 1.3 million, .9 million, and .7 million Common Shares were exercisable, respectively. Any Common Shares issued pursuant to the Company's share option plan will result in the Operating Partnership issuing OP Units to the Company on a one-for-one basis. Accordingly, the dilutive effect of the Company's Options have been included in the number of OP Units outstanding - assuming dilution. F-25 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Investment in Mortgage Notes and Partnership Interests In 1995, the Operating Partnership made an $89 million investment in partnership interests and subordinated mortgages collateralized by 21 of the Additional Properties. These 21 Additional Properties consist of 3,896 units, located in California, Colorado, New Mexico and Oklahoma. This included an $87.1 million investment in second and third mortgages (net of an original discount of approximately $12.7 million to their face value), $1.6 million represents a one time payment for an interest rate protection agreement and $0.3 million represents an investment for primarily a 49.5% limited partnership interest in the title-holding entities. As the Operating Partnership does not control the general partners of the title-holding entities and substantially all of the Operating Partnership's investment is in second and third mortgages (which are subordinate to first mortgages owned by third party unaffiliated entities), the $87.1 million investment is accounted for as an investment in mortgage notes. The $1.6 million payment made for the interest rate protection agreement is included in deferred financing costs and is being amortized over the term of the related debt. The investment in limited partnership interests is accounted for under the equity method and is included in other assets on the balance sheet. As of December 31, 1997 the second mortgage notes had a combined principal balance of approximately $25.5 million, accrue interest at a rate of 9.45% per annum, receive principal amortization from excess cash flow and have a stated maturity date of December 31, 2019. The third mortgage notes had a combined principal balance of approximately $71.1 million, accrue interest at a rate of 6.15% per annum, plus up to an additional 3% per annum to the extent of available cash flow. Contingent interest on the third mortgage notes is recognized to the extent it is determined to be received. The third mortgage notes have a stated maturity of December 31, 2024. Receipt of principal and interest on the second and third mortgage notes is subordinated to the receipt of all interest on the first mortgage notes. With respect to the discount on these notes, the unamortized balance at December 31, 1997 was $9 million. During 1997 and 1996, the Operating Partnership amortized $3.1 million and $0.6 million, respectively, which is included in interest income - investment in mortgage notes in the consolidated statement of operations. This discount is being amortized utilizing the effective yield method. On April 28, 1997, the Operating Partnership made an $88 million investment in six mortgage loans collateralized by five multifamily properties. These five multifamily properties are included in the Additional Properties. As of December 31, 1997, these six mortgage loans had a combined principal balance of approximately $88 million and accrue interest at a rate of 8.25%. These six mortgage loans are scheduled to mature on January 1, 2006. 11. Mortgage Notes Payable As of December 31, 1997, the Operating Partnership had outstanding mortgage indebtedness of approximately of $1.6 billion encumbering 152 of the Properties. The carrying value of such Properties (net of accumulated depreciation of $145.1 million) was approximately $2.6 billion. The mortgage notes payable are generally due in monthly installments of interest only. In connection F-26 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) with the Properties acquired during the year ended December 31, 1997, including the effects of the Mergers, the Operating Partnership assumed the outstanding mortgage balances on 90 Properties in the aggregate amount of $931 million, which includes a premium of approximately $3.9 million recorded in connection with the EWR Merger. Concurrent with the refinancing of certain tax-exempt bonds and as a requirement of the credit provider of the bonds, the Financing Partnership, which owns certain of the Properties, entered into interest rate protection agreements, which were assigned to the credit provider as additional security. The Financing Partnership pays interest based on a fixed interest rate and the counterparty of the agreement pays interest to the Operating Partnership at a floating rate that is calculated based on the Public Securities Association Index for municipal bonds ("PSA Municipal Index"). As of December 31, 1997 and 1996, the aggregate notional amounts of these agreements were approximately $174.3 million and $166.8 million, respectively. The fixed interest rates for these agreements were 4.81%, 4.528% and 4.90%. The termination dates are October 1, 2003, January 1, 2004 and April 1, 2004. The Operating Partnership simultaneously entered into substantially identical reverse interest rate protection agreements. Under these agreements the Operating Partnership pays interest monthly at a floating rate based on the PSA Municipal Index and the counterparty pays interest to the Operating Partnership based on a fixed interest rate. As of December 31, 1997 and 1996, the aggregate notional amount of these agreements was approximately $174.3 million and $166.8 million, respectively. The fixed interest rates received by the Operating Partnership in exchange for paying interest based on the PSA Municipal Index for these agreements were 4.74%, 4.458% and 4.83%. The termination dates are October 1, 2003, January 1, 2004 and April 1, 2004. Collectively, these agreements effectively cost the Operating Partnership 0.07% per annum on the current outstanding aggregate notional amount. The Operating Partnership believes that it has limited exposure to the extent of non-performance by the counterparties of the agreements since each counterparty is a major U.S. financial institution, and the Operating Partnership does not anticipate their non-performance. Furthermore, any non-performance by the counterparty is offset by non- performance by the Operating Partnership. The Operating Partnership also has an interest rate cap agreement for a notional amount of $228,000,000, for which it will receive payments if the PSA index exceeds 5.75%, that terminates on December 1, 1999. Any payments by the counterparty under this agreement have been collaterally assigned to the provider of certain sureties related to the tax exempt bonds secured by certain of it's Properties. The Operating Partnership has no payment obligations to the counterparty with respect to this agreement. As of December 31, 1997, scheduled maturities for the Operating Partnership's outstanding mortgage indebtedness are at various dates through October 1, 2030. During the year ended December 31, 1997, effective interest cost on certain of these mortgage notes was 7.5%. During the year ended December 31, 1997, the Operating Partnership repaid the outstanding mortgage balances on 29 Properties in the aggregate amount of $113.4 million. Subsequent to December 31, 1997, the Operating Partnership repaid the outstanding mortgage balance on one Property in the amount of approximately $18.2 million. In February 1996, the Operating Partnership entered into an interest rate protection agreement, which hedged the interest rate risk of $50 million of mortgage loans, scheduled to mature in September 1997 by locking the five year Treasury Rate, commencing October 1, 1997 through October 1, 2002. This agreement was cancelled in July 1997, at no cost to the Operating Partnership, in conjunction with the Operating Partnership entering into another interest rate protection agreement to effectively fix the cost of the Operating Partnership's unsecured notes issued in November 1997. F-27 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 1996, the Operating Partnership had outstanding mortgage indebtedness of approximately $755.4 million encumbering 88 of the Properties. The carrying value of such Properties (net of accumulated depreciation of $141.2 million) was $1.1 billion. The mortgage notes payable are generally due in monthly installments of interest only. In connection with the Properties acquired during the year ended December 31, 1996, the Operating Partnership assumed the outstanding mortgage balances on 14 Properties in the aggregate amount of $142.2 million. In addition, during 1996, in two separate transactions, certain indebtedness evidenced by tax-exempt bonds encumbering certain Properties was refinanced resulting in an increase in mortgage indebtedness affecting these Properties of approximately $112 million. In connection with one of these transactions, the Operating Partnership also recorded an extraordinary loss in the amount of approximately $3.5 million, which represented the write-off of unamortized deferred financing costs from the early retirement of debt. During the year ended December 31, 1996, the effective interest cost on these mortgage notes was 7.87%. During the year ended December 31, 1996, the Operating Partnership repaid the outstanding mortgage balances on eight Properties in the aggregate amount of $57 million. During 1996 the Operating Partnership terminated two interest rate protection agreements that were initially entered into in connection with two mortgage loans with notional amounts totaling $64.2 million. These two agreements effectively converted these two mortgage loans to fixed rate instruments based on the London Interbank Offered Rate ("LIBOR"). Upon the termination of these agreements the Operating Partnership received settlement payments of approximately $230,000. Aggregate payments of principal on mortgage notes payable for each of the next five years and thereafter are as follows:
Year Total ------------ --------- (in thousands) 1998 $ 61,109 1999 18,130 2000 37,154 2001 185,550 2002 178,797 Thereafter 1,101,819 ---------- Total $1,582,559 ==========
12. Lines of Credit On November 15, 1996, the Operating Partnership completed an agreement with Morgan Guaranty Trust Company of New York and Bank of America Illinois to provide the Operating Partnership a $250 million F-28 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) unsecured line of credit. In September 1997, this agreement was amended to increase the potential borrowings to $500 million. This line of credit matures in November 1999 and borrowings generally will bear interest at a per annum rate of one, two, three or six month LIBOR, plus a certain rate dependent upon the Operating Partnership's credit rating, which rate is currently 0.45%, and is subject to an annual facility fee of $750,000. As of December 31, 1997, $235 million was outstanding on this line of credit, bearing interest at a weighted average rate of 6.46%. F-29 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Notes On May 16, 1994, the Operating Partnership issued $125 million of unsecured senior notes (the "1999 Notes") in a private placement (the "Debt Offering") to qualified institutional buyers. The 1999 Notes were issued at a discount, which is being amortized over the life of the 1999 Notes on a straight-line basis. As of December 31, 1997 the unamortized discount balance was approximately $0.2 million. The 1999 Notes are due May 15, 1999 and bear interest at a rate of 8.5%, which is payable semiannually in arrears on May 15 and November 15. In February 1996, the Operating Partnership entered into an interest rate protection agreement that hedged the interest rate risk of the 1999 Notes by locking the effective four year Treasury Rate commencing May 15, 1999. There was no current cost to the Operating Partnership for entering into this agreement. In December 1994, the Operating Partnership registered $500 million in debt securities pursuant to a debt shelf registration statement (the "Debt Shelf Registration") of which $100 million of unsecured floating rate notes (the "Floating Rate Notes") were issued by the Operating Partnership on December 22, 1994 (the "Public Debt Offering"). The Floating Rate Notes were repaid at maturity on December 22, 1997. In April 1995, the Operating Partnership issued $125 million of unsecured fixed rate notes (the "2002 Notes") in connection with the Debt Shelf Registration in a public debt offering (the "Second Public Debt Offering"). The 2002 Notes were issued at a discount, which is being amortized over the life of the 2002 Notes on a straight-line basis. As of December 31, 1997 the unamortized discount balance was approximately $0.6 million. The 2002 Notes are due on April 15, 2002 and bear interest at 7.95%, which is payable semi-annually on each October 15 and April 15. The Operating Partnership received net proceeds of $123.1 million in connection with the Second Public Debt Offering. Prior to the issuance of the 2002 Notes, the Operating Partnership entered into an interest rate protection agreement to effectively fix the interest rate cost of such issuance. The Operating Partnership made a one-time settlement payment of this protection transaction, which was approximately $0.8 million, which amount is being amortized over the term of the 2002 Notes. As of December 31, 1997 the unamortized balance of this cost was approximately $0.5 million. In August 1996, the Operating Partnership issued $150 million of unsecured fixed rate notes (the "2026 Notes") in connection with the Debt Shelf Registration in a public debt offering (the "Third Public Debt Offering"). The 2026 Notes are due on August 15, 2026 and bear interest at 7.57%, which is payable semi-annually in arrears on February 15 and August 15, commencing February 15, 1997. The 2026 Notes are redeemable at any time after August 15, 2006 by the Operating Partnership pursuant to the terms thereof. The Operating Partnership received net proceeds of approximately $149 million in connection with this issuance. Prior to the issuance of the 2026 Notes, the Operating Partnership entered into an interest rate protection agreement to effectively fix the interest rate cost of this issuance to 7.5%. The Operating Partnership received a one-time settlement payment from this transaction, which was approximately $0.6 million, which amount is being amortized over the term of the 2026 Notes on a straight-line basis. As of December 31, 1997, the unamortized balance was approximately $0.5 million. F-30 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On September 18, 1996, the Operating Partnership filed with the SEC a Form S-3 Registration Statement to register $500 million of debt securities (the "1996 Debt Shelf Registration"). The SEC declared this Registration effective on September 23, 1996. In October 1997, the Operating Partnership issued $150 million of unsecured fixed rate notes (the "2017 Notes") in connection with the 1996 Debt Shelf Registration in a public debt offering (the "October 1997 Public Debt Offering"). The 2017 Notes were issued at a discount, which is being amortized over the life of the 2017 Notes on a straight-line basis. As of December 31, 1997 the unamortized discount balance was approximately $1.2 million. The 2017 Notes are due on October 15, 2017 and bear interest at 7.125%, which is payable semiannually in arrears on April 15 and October 15, commencing April 15, 1998. The 2017 Notes are redeemable at any time by the Operating Partnership pursuant to the terms thereof. The Operating Partnership received net proceeds of approximately $147.4 million in connection with this issuance. In November 1997, the Operating Partnership issued $200 million of unsecured fixed rate notes in connection with the 1996 Debt Shelf Registration in a public debt offering (the "November 1997 Public Debt Offering"). Of the $200 million issued, $150 million of these notes are due November 15, 2001 (the "2001 Notes") and bear interest at a rate of 6.55%, which is payable semiannually in arrears on May 15 and November 15, commencing on May 15, 1998. The remaining $50 million of these notes are due November 15, 2003 (the "2003 Notes") and bear interest at a rate of 6.65%, which is payable semiannually in arrears on May 15 and November 15, commencing on May 15, 1998. The 2001 Notes were issued at a discount, which is being amortized over the life of the 2001 Notes on a straight-line basis. As of December 31, 1997 the unamortized discount balance was approximately $0.3 million. The Operating Partnership received net proceeds of approximately $148.9 million in connection with the 2001 Notes. The 2003 Notes were issued at a discount, which is being amortized over the life of the 2003 Notes on a straight-line basis. As of December 31, 1997 the unamortized discount balance was approximately $0.1 million. The Operating Partnership received net proceeds of approximately $49.6 million in connection with the 2003 Notes. Prior to the issuance of the 2001 and 2003 Notes, the Operating Partnership entered into two interest rate protection agreements to effectively fix the interest rate costs of such issuances. The Operating Partnership made a one time settlement payment for each protection transaction, which was approximately $5 million and $1.7 million, respectively, which are being amortized over the term of the Notes on a straight-line basis. As of December 31, 1997 the unamortized balance of these costs were approximately $4.9 million and $1.6 million, respectively. Included in the note balance are four unsecured note issuances assumed in connection with the Wellsford Merger. These are discussed in the following three paragraphs. In January 1995, $100 million of senior unsecured notes due February 1, 2002 (the "2002-A Notes") were issued. The 2002-A Notes bear interest at a rate of 9.375%, which is payable semiannually in arrears on August 1 and February 1. In connection with the assumption of the 2002-A Notes, the Operating Partnership recorded a premium in the amount of $5.6 million, which is being amortized over the remaining life of the notes on a straight-line basis. As of December 31, 1997, the unamortized premium balance relating to the 2002-A Notes was approximately $4.9 million. F-31 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In August 1995, $125 million of senior unsecured notes were issued. Of the $125 million issued, $55 million of these notes are due August 15, 2000 (the "2000 Notes") and bear interest at a rate of 7.25%, which is payable semiannually in arrears on February 15 and August 15. The remaining $70 million of these notes are due August 15, 2005 (the "2005 Notes") and bear interest at a rate of 7.75%, which is payable semiannually in arrears on February 1 and August 1. In November 1996, $25 million of medium term unsecured floating rate notes due November 24, 1999 (the "1999-A Notes") were issued. The 1999-A Notes bear interest at 90 day LIBOR plus 0.32%, which is payable quarterly in arrears on the 25th day of each February, May, August and November. Also included in the note balance are two unsecured note issuances assumed in connection with the EWR Merger. These are discussed in the following two paragraphs. In April 1997, $75 million of senior unsecured notes due April 15, 2004 (the "2004 Notes") were issued. The 2004 Notes bear interest at a rate of 7.5%, which is payable semiannually in arrears on October 15 and April 15. In connection with the assumption of the 2004 Notes, the Operating Partnership recorded a premium in the amount of $1.7 million, which is being amortized over the remaining life of the notes on a straight-line basis. As of December 31, 1997, the unamortized premium balance relating to the 2004 Notes was approximately $1.7 million. In April 1997, $50 million of senior unsecured notes due April 15, 2007 (the "2007 Notes") were issued. The 2007 Notes bear interest at a rate of 7.625%, which is payable semiannually in arrears on October 15 and April 15. In connection with the assumption of the 2007 Notes, the Operating Partnership recorded a premium in the amount of $1.6 million, which is being amortized over the remaining life of the notes on a straight-line basis. As of December 31, 1997, the unamortized premium balance relating to the 2007 Notes was approximately $1.6 million. In regard to all of the interest rate protection agreements mentioned in the previous paragraphs, the Operating Partnership believes that it has limited exposure to the extent of non-performance by the counterparties of each agreement since each counterparty is a major U.S. financial institution and the Operating Partnership does not anticipate their non-performance. 14. Redeemable Preference Interests In connection with the acquisition of seven of the Properties which closed in December 1994, the Company, through the Operating Partnership, issued 41,213 preferred interests ("Preference Units") to certain sellers of these Properties. The Preference Units had a stated value of $1,000 and entitled the holders thereof to preferential distributions from the Operating Partnership (other than liquidating distributions) before distributions to the holders of the OP Units and the Company (provided the Company shall be entitled to receive distributions necessary to maintain its REIT status under U.S. tax laws). The Operating Partnership also made loans to certain of these sellers in the aggregate amount of $15.2 million, which loans are fully collateralized by 465,545 OP Units. F-32 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During the year ended December 31, 1995, the Operating Partnership redeemed 1,423 Preference Units for a total redemption price of approximately $1,351,900. During the year ended December 31, 1996 the Operating Partnership redeemed 1,140 Preference Units for a total redemption price of approximately $1.1 million. On March 1, 1996, the Operating Partnership exercised its option to convert all of the Preference Units into OP Units. This conversion resulted in 1,182,835 OP Units being issued. 15. 9 3/8% Series A Cumulative Redeemable Preference Units In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (liquidation preference $25 per share) (the "Series A Preferred Shares"), at $25 per share. The Company raised gross proceeds of $153 million from this offering (the "Series A Preferred Share Offering"). The net proceeds of approximately $148.2 million from the Series A Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative redeemable preference units (the "Series A Cumulative Redeemable Preference Units"). The Series A Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth of January, April, July and October of each year, at the annual rate of 9 3/8% of the liquidation preference of $25 per share. The Series A Preferred Shares are not redeemable prior to June 1, 2000. On or after June 1, 2000, the Preferred Shares may be redeemed for cash at the option of the Company in whole or in part, at a redemption price of $25 per share, plus accrued and unpaid distributions, if any, thereon. 16. 9 1/8% Series B Cumulative Redeemable Preference Units In November 1995, the Company sold 5,000,000 depositary shares (the "Series B Depositary Shares"). Each Series B Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series B Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value per share (the "Series B Preferred Shares"). The liquidation preference of each of the Series B Preferred shares is $250.00 (equivalent to $25 per Series B Depositary Share). The Company raised gross proceeds of $125 million from this offering (the "Series B Preferred Share Offering"). The net proceeds of approximately $121 million from the Series B Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 500,000 of the Operating Partnership's 9 1/8% cumulative redeemable preference units (the "Series B Cumulative Redeemable Preference Units"). The Series B Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth day of January, April, July and October of each year, commencing on January 15, 1996, at the annual rate of 9 1/8% of the liquidation preference of $25 per Series B Depositary Share. The Series B Preferred Shares are not redeemable prior to October 15, 2005. On and after October 15, 2005, the Series B Preferred Shares may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price of $250 per share (equivalent to $25 per Series B Depositary Share), plus accrued and unpaid distributions, if any, thereon. F-33 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. 9 1/8% Series C Cumulative Redeemable Preference Units In September 1996, the Company sold 4,600,000 depositary shares (the "Series C Depositary Shares"). Each Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value share (the "Series C Preferred Shares"). The liquidation preference of each of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C Depositary Share). The Company raised gross proceeds of $115 million from this offering (the "Series C Preferred Share Offering"). The net proceeds of approximately $111.4 million from the Series C Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 460,000 of the Operating Partnership's 9 1/8% Series C cumulative redeemable preference units (the "Series C Cumulative Redeemable Preference Units"). The Series C Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth day of January, April, July and October of each year, commencing on October 15, 1996, at the annual rate of 9 1/8% of the liquidation preference of $25 per Series C Depositary Share. The Series C Preferred Shares are not redeemable prior to September 9, 2006. On and after September 9, 2006, the Series C Preferred Shares may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price of $250 per share (equivalent to $25 per Series C Depositary Share), plus accrued and unpaid distributions, if any, thereon. 18. 8.60% Series D Cumulative Redeemable Preference Units In May 1997, the Company sold 7,000,000 depositary shares (the "Series D Depositary Shares"). Each Series D Depositary Share represents a 1/10 fractional interest in a 8.60% Series D Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value share (the "Series D Preferred Shares"). The liquidation preference of each of the Series D Preferred Shares is $250.00 (equivalent to $25 per Series D Depositary Share). The Company raised gross proceeds of $175 million from this offering (the "Series D Preferred Share Offering"). The net proceeds of approximately $169.5 million from the Series D Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 700,000 of the Operating Partnership's 8.60% Series D cumulative redeemable preference units (the "Series D Cumulative Redeemable Preference Units"). The Series D Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth day of January, April, July and October of each year, commencing on June 15, 1997, at the annual rate of 8.60% of the liquidation preference of $25 per Series D Depositary Share. The Series D Preferred Shares are not redeemable prior to July 15, 2007. On and after July 15, 2007, the Series D Preferred Shares may be redeemed at the option of the Company, in whole or in part, at a redemption price of $250 per share (equivalent to $25 per Series D Depositary Share), plus accrued and unpaid distributions, if any, thereon. F-34 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Series E Cumulative Convertible Preference Units In May 1997, the Company assumed the Wellsford Series A Cumulative Convertible Preferred Shares of Beneficial Interest and redesignated them as the Company's 3,999,800 Series E Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par value per share (liquidation preference $25 per share) (the "Series E Preferred Shares"). Series E Preferred Shares are convertible at the option of the holder thereof at any time into Common Shares at a conversion price of $44.93 per Common Share (equivalent to a conversion rate of approximately .5564 Common Shares for each Series E Preferred Share). As of December 31, 1997, 1,300 Series E Preferred Shares had been converted into Common Shares. The Series E Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the first of January, April, July and October of each year, at the annual rate of 7.00% of the liquidation preference of $25 per share. 20. 9.65% Series F Cumulative Redeemable Preference Units In May 1997, the Company assumed the Wellsford Series B Cumulative Redeemable Preferred Shares of Beneficial Interest and redesignated them as the Company's 2,300,000 Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (liquidation preference $25 per share) (the "Series F Preferred Shares"). The Series F Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth of January, April, July and October of each year, at the annual rate of 9.65% of the liquidation preference of $25 per share. The Series F Preferred Shares are not redeemable prior to August 24, 2000. On and after August 24, 2000, the Series F Preferred Shares may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price of $25 per share, plus accrued and unpaid distributions, if any, thereon. 21. 7 1/4% Series G Convertible Cumulative Preference Units In September 1997, the Company sold 11,000,000 depositary shares (the "Series G Depositary Shares"). Each Series G Depositary Share represents a 1/10 fractional interest in a 7 1/4% Series G Convertible Cumulative Preferred Share of Beneficial Interest, $0.01 par value share (the "Series G Preferred Shares"). Series G Depositary Shares representing Series G Preferred Shares are convertible at the option of the holder thereof at any time into Common Shares at a conversion price of $58.58 per Common Share (equivalent to a conversion rate of approximately .4268 Common Shares for each Series G Depositary Share). The liquidation preference of each of the Series G Preferred Shares is $250.00 per share (equivalent to $25 per Series G Depositary Share). The Company raised gross proceeds of $275 million from this offering (the "Series G Preferred Share Offering"). The net proceeds of approximately $264 million from the Series G Preferred Share Offering were contributed by the Company to the Operating Partnership in exchange for 1,100,000 of the Operating Partnership's 7 1/4% Series G convertible cumulative preference units (the "Series G Convertible Cumulative Preference Units"). In addition, in October 1997, the Company sold 1,650,000 additional Series G Depositary Shares pursuant to an over-allotment option granted to the underwriters and contributed F-35 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) to the Operating Partnership net proceeds of approximately $39.6 million in exchange for 165,000 of the Operating Partnership's 7 1/4% Series G Convertible Cumulative Preference Units. The Series G Preferred Shares are cumulative from the date of original issue and are payable quarterly on or about the fifteenth day of January, April, July and October of each year, commencing on October 15, 1997, at the annual rate of 7 1/4% of the liquidation preference of $25 per Series G Depositary Share. 22. Employee Transactions As of December 31, 1997, the outstanding principal balance on the employee notes issued in connection with Common Shares purchased was, in the aggregate, approximately $5.14 million. Douglas Crocker II, President and Chief Executive Officer of the Company and four other officers had purchased an aggregate of 194,000 Common Shares at prices which range from $26 to $31.625 per Common Share. These purchases were financed by loans made by the Company in the aggregate amount of approximately $5.4 million. The employee notes accrue interest, payable in arrears, at rates that range from 6.15% per annum to 7.93% per annum. Scheduled maturities are at various dates through March 2005. The employee notes are recourse to Mr. Crocker and the four other officers and are collateralized by pledges of the 194,000 Common Shares purchased. Subsequent to December 31, 1997, one of the four other officers repaid his note in full. In addition, as of December 31, 1997, the outstanding principal balance on additional notes issued to Mr. Crocker and one other officer was approximately $0.7 million. These notes accrue interest, payable in arrears, at one month LIBOR plus 2% per annum. Scheduled maturities are at various dates through March 2003. The notes are recourse to Mr. Crocker and the other officer and are collateralized by pledges of options, share awards and Common Shares purchased. Mr. Crocker has a deferred compensation agreement (the "Deferred Compensation Agreement") which Deferred Compensation Agreement will provide Mr. Crocker with a salary benefit after his termination of employment with the Operating Partnership. If Mr. Crocker's employment is terminated by the Company, without cause or voluntarily by Mr. Crocker after age 65, he would be entitled to annual deferred compensation for a 10-year period commencing on the termination date in an amount equal to his average annual base compensation (before bonus) for the prior five calendar years, multiplied by a percentage equal to 10% per year since December 31, 1995. In the event Mr. Crocker's employment is terminated as a result of his death, permanent disability or incapacity, he would be entitled to a similar amount except the annual percentage would be 15%, not 10%. Should Mr. Crocker be terminated for cause or should he choose to leave voluntarily prior to age 65, without good reason, he would not be entitled to any deferred compensation. The Operating Partnership recognized approximately $0.5 million of compensation expense for both 1997 and 1996 related to this Deferred Compensation Agreement. In addition, Gerald Spector, Executive Vice President and Chief Operating Officer of the Company, entered into a Deferred Compensation Agreement in 1997, which agreement provides Mr. Spector with a salary benefit after his termination of employment with the Company. If Mr. Spector's employment is terminated, by the Company, without cause or voluntarily by Mr. Spector after age 65, he would be entitled to annual deferred F-36 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) compensation for a 15-year period commencing on the termination date in an amount equal to 75% of his average annual base compensation (before bonus) for the prior five calendar years, multiplied by a percentage equal to 6.67% per each year since December 31, 1996. In the event Mr. Spector's employment is terminated as a result of his death, permanent disability or incapacity, he would be entitled to a similar amount except that the annual percentage would be 10%, not 6.67%. Should Mr. Spector be terminated for cause or should he choose to leave voluntarily prior to age 65, without good reason, he would not be entitled to any deferred compensation. The Operating Partnership recognized approximately $0.2 million of compensation expense in 1997 related to this Deferred Compensation Agreement. The Board of Trustees also approved a share distributions agreement (the "Share Distributions Agreement") for Mr. Crocker. On January 18, 1996, Mr. Crocker was issued options to purchase 100,000 Common Shares at the then current market price of the Common Shares, which vest over a 3-year period and are effective for 10 years. Pursuant to the terms of the Share Distributions Agreement, upon the exercise of any of these options, Mr. Crocker would be entitled to an amount equal to the amount of Common Share distributions that would have been paid on said shares being exercised had he owned said shares for the period from January 18, 1996 until the date of the exercise of the options in question. Mr. Crocker's death or termination of employment would not affect this agreement with the Company. In May 1997, Jeffrey Lynford and Edward Lowenthal (trustees of the Company) each executed a consulting agreement with the Company. Each consulting agreement has a term of five years from May 30, 1997, the closing date of the Wellsford Merger. Pursuant to the consulting agreements, each of Messrs. Lynford and Lowenthal will serve as a senior management consultant to the Company and will receive compensation at the rate of $200,000 per year plus reimbursement for reasonable out-of-pocket expenses. In connection with the EWR Merger, in December 1997, Stephen Evans executed a consulting agreement with an affiliate of the Company. The consulting agreement has a term of two years and expires on December 31, 1999. Pursuant to the consulting agreement, Mr. Evans will serve as a senior management consultant to the Company and will receive compensation at the rate of $225,000 per year. Mr. Evans also received an option to purchase 115,500 Common Shares that will vest in three equal annual installments and will have an exercise price equal to $50.125 per Common Share. Mr. Evans will also be eligible to participate in all of the Company's employee benefit plans in which persons in comparable positions participate, treating Mr. Evans as an employee. Also in connection with the EWR Merger, in December 1997, Richard Berry executed an employment agreement with an affiliate of the Company which expires on December 31, 2000 and provides for cash compensation of $250,000 per annum. Pursuant to the agreement, Mr. Berry exchanged all unvested restricted shares of Evans common shares at the time of the EWR Merger into 18,747 restricted Common Shares of the Company, which will vest on December 31, 2000. Mr. Berry also received an option to purchase 77,500 Common Shares that will vest in three equal annual installments and will have an exercise price equal to $50.125 per Common Share. The F-37 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) agreement also provided that Mr. Berry will be eligible to participate in all of the Company's employee benefit plans which persons in comparable positions participate. In December 1997, Mr. Berry also entered into a Deferred Compensation Agreement with the Company, which will pay benefits only in the event Mr. Berry's employment with the Company is terminated prior to January 1, 2000. In such a case, the amount payable under Mr. Berry's agreement will equal the value of any restricted Common Shares received in exchange for EWR common shares which are forfeited upon his termination of employment. The payment will be made in two semi-annual installments over the one-year period following termination of employment, and interest of 9% per annum will accrue on the balance over the one-year payment period. The Company has established a defined contribution plan (the "401(k) Plan") that provides retirement benefits for employees that meet minimum employment criteria. The Company contributes 100% of the first 4% of eligible compensation that a participant contributes to the 401(k) Plan. Participants are vested in the Company's contributions over five years. The Operating Partnership made contributions in the amount of $0.8 million for the year ended December 31, 1996 and expects to make contributions in the amount of approximately $1.5 million for the year ended December 31, 1997. 23. Deposits-restricted Deposits-restricted as of December 31, 1997, primarily included a deposit in the amount of $20 million held in a third party escrow account made to provide third party construction financing in connection with the Joint Venture Agreement. Also, approximately $8.8 million was held in third party escrow accounts made in connection with the Operating Partnership's disposition of Diplomat South and for several expected 1998 acquisitions. In addition, approximately $7.6 million was for tenant security and utility deposits for certain of the Operating Partnership's Properties. Deposits-restricted as of December 31, 1996, primarily included deposits in the amount of approximately $16.4 million held in third party escrow accounts which were made in connection with five Properties acquired in 1997. In addition, approximately $3.7 million was for tenant security and utility deposits for certain of the Operating Partnership's Properties. 24. Gain on Early Extinguishment of Debt In June 1995, the Operating Partnership paid approximately $12.6 million in full satisfaction of a $14.6 million mortgage note obligation related to one of its Properties. As a result, the Operating Partnership recognized a gain of $2 million on the extinguishment of this indebtedness. F-38 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 25. Summarized Pro Forma Condensed Statement of Operations (unaudited) The following Summarized Pro Forma Condensed Statement of Operations has been prepared as if the March 1997 Common Share Offerings, the Series D Preferred Share Offering, the June 1997 Common Share Offerings, the Wellsford Merger, the September 1997 Common Share Offering, the Series G Preferred Share Offering, the Fourth Pubic Debt Offering, the October 1997 Common Share Offering, the Fifth Pubic Debt Offering, the December 1997 Common Share Offerings, the EWR Merger, the acquisition of an additional 124 Properties, including the related assumption of $597.2 million of mortgage indebtedness, the repayment of $113.4 million of mortgage indebtedness and the disposition of seven Properties (as described in Note 3, Note 4, Note 6, Note 8, Note 11 and Note 13 of Notes to Consolidated Financial Statements) had occurred on January 1, 1997. This would result in 98,677,855 Units outstanding. In management's opinion, the Summarized Pro Forma Condensed Statement of Operations does not purport to present what actual results would have been had the above transactions occurred on January 1, 1997, or to project results for any future period. The amounts presented in the following statement are in thousands except for OP Unit amounts:
Summarized Pro Forma Condensed Statement of Operations For the Year Ended December 31, 1997 -------------------- Total Revenues $1,107,581 ========== Total Expenses 878,989 ========== Pro Forma net income available for OP Units $ 141,824 ========== Pro Forma net income per OP Unit $ 1.44 ==========
26. Employee Share Purchase Plan Under the Company's Employee Share Purchase Plan certain eligible officers, trustees and employees of the Company may annually acquire up to $100,000 of Common Shares of the Company. The aggregate number of Common Shares available under the Employee Share Purchase Plan shall not exceed 1,000,000, subject to adjustment by the Board of Trustees. The Common Shares may be purchased quarterly at a price equal to 85% of the lessor of: (a) the closing price for a share on the first day of such quarter, and (b) the greater of: (i) the closing price for a share on the first day of such quarter, and (ii) the average closing price for a share for all the business days in the quarter. During 1996, the Company issued 39,458 Common Shares at a net price of $30.44 per share. During 1997, the Company issued 84,183 Common Shares at F-39 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) net prices that ranged from $35.63 per share to $42.08 per share and raised approximately $3.2 million in connection therewith. The net proceeds were contributed to the Operating Partnership in exchange for OP Units. 27. Distribution Reinvestment and Share Purchase Plan On November 3, 1997, the Company filed with the SEC a Form S-3 Registration Statement to register 7,000,000 Common Shares pursuant to a Distribution Reinvestment and Share Purchase Plan. The registration statement was declared effective on November 25, 1997. The Distribution Reinvestment and Share Purchase Plan (the "DRIP Plan") of the Company provides holders of record and beneficial owners of Common Shares, Preferred Shares, and limited partnership interests in the Operating Partnership with a simple and convenient method of investing cash distributions in additional Common Shares. Common Shares may also be purchased on a monthly basis with optional cash payments made by participants in the Plan and interested new investors, not currently shareholders of the Company, at the market price of the Common Shares less a discount ranging between 0% and 5% (as determined in accordance with the DRIP Plan). The proceeds from the sale were contributed to the Operating Partnership in exchange for OP Units. 28. Commitments and Contingencies The Operating Partnership, as an owner of real estate, is subject to various environmental laws of Federal and local governments. Compliance by the Operating Partnership with existing laws has not had a material adverse effect on the Operating Partnership's financial condition and results of operations. However, the Operating Partnership cannot predict the impact of new or changed laws or regulations on its current Properties or on properties that it may acquire in the future. The Operating Partnership does not believe there is any other litigation, except as mentioned in the previous paragraph, threatened against the Operating Partnership other than routine litigation arising out of the ordinary course of business, some of which is expected to be covered by liability insurance, none of which is expected to have a material adverse effect on the consolidated financial statements of the Operating Partnership. In connection with the Joint Venture Agreement, as discussed in Note 7, the Operating Partnership is obligated to fund an additional $20 million in connection with the third party construction financing. In connection with the Wellsford Merger, the Operating Partnership has provided a standby obligation in the amount of $30 million pursuant to an agreement entered into with Wellsford Real Properties, Inc., a Maryland corporation ("WRP"), for the construction financing for a multifamily development project located in Denver, Colorado. In addition, the Operating Partnership has provided a $14.8 million credit enhancement with respect to bonds issued to finance certain public improvements at the multifamily development project. F-40 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Management Corp. has lease agreements with an affiliated party covering office space occupied by the management offices located in Tampa, Florida (the "Tampa Office") and Chicago, Illinois (the "Chicago Office"). The Tampa Office agreement, expires on October 31, 2001 and the Chicago Office agreement expires on July 31, 2000. Management Corp. also has seven additional lease agreements with unaffiliated parties covering space occupied by the management offices located in Dallas, Texas (the "Dallas Office"); Bethesda, Maryland (the "Bethesda Office"); Denver, Colorado (the "Denver Office"); Seattle, Washington (the "Seattle Office"); Atlanta, Georgia (the "Atlanta Office"); Scottsdale, Arizona (the "Scottsdale Office") and Irvine, California (the "Irvine Office"). The lease agreement for the Dallas Office expires on February 28, 1999; the lease agreement for the Bethesda Office expires on November 30, 1998; the lease agreement for the Denver Office expires on December 31, 2002; the lease agreement for the Seattle Office expires on November 30, 2000; the lease agreement for the Atlanta Office expires on May 14, 2001; the lease agreement for the Scottsdale Office expires on July 31, 1999 and the lease agreement for the Irvine Office expires on July 31, 1998. Management Corp. also has a lease with an affiliated party covering office space occupied by the corporate headquarters located in Chicago, Illinois. This agreement, as amended, expires on July 31, 2001. In addition, commencing September 1, 1996, Management Corp. increased the office space occupied by its corporate personnel. The lease agreement covering the additional office space expires on April 29, 1998. During the years ended December 31, 1997, 1996 and 1995, total rentals, including a portion of real estate taxes, insurance, repairs and utilities, aggregated $1,491,766, $1,020,311 and $1,049,731, respectively. The minimum basic aggregate rental commitment under the above described leases in years succeeding December 31, 1997 is as follows:
Year Amount ---- ------ 1998 $1,755,789 1999 1,324,472 2000 1,125,808 2001 710,376 2002 208,318 ------- Total $5,124,763 ==========
F-41 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 29. Transactions with Related Parties Pursuant to the terms of the partnership agreement for the Operating Partnership, the Operating Partnership is required to reimburse the Company for all expenses incurred by the Company in excess of income earned by the Company through its indirect 1% ownership of various Financing Partnerships. Amounts paid on behalf of the Company are reflected in the Consolidated Statement of Operations as general and administrative expenses. Certain related entities provided services to the Operating Partnership and the Company. These included, but were not limited to, Rosenberg & Liebentritt, P.C., which provided legal services and Greenberg & Pociask, Ltd., which provided tax and accounting services. Fees paid to these related entities amounted to approximately $1.3 million, $0.7 million and $2.5 million for the years ended December 31, 1997, 1996 and 1995, respectively. In addition, The Riverside Agency, Inc., which provided insurance brokerage services, was paid fees and reimbursed premiums and loss claims in the amount of $0.3 million, $4.1 million and $2.6 million for the years ended December 31, 1997, 1996 and 1995, respectively. As of December 31, 1997, 1996 and 1995, $643,500, $315,700 and $366,300, respectively, was owed to Rosenberg & Liebentritt, P.C. for legal fees incurred in connection with securities offerings, litigation matters, property acquisitions and other general corporate matters. Equity Group Investments, Inc. and certain of its subsidiaries, including Equity Assets Management, Inc., Eagle Flight Services, Equity Properties & Development, L.P. and EPMC ("EGI"), have provided certain services to the Operating Partnership and the Company which include, but are not limited to, financial and accounting services, investor relations, corporate secretarial, computer and support services, real estate tax evaluation services, market consulting and research services, financing services, information systems services and property development services. Fees paid to EGI for these services amounted to $1.1 million, $1.3 million and $3.4 million for the years ended December 31, 1997, 1996 and 1995, respectively. Amounts due to EGI were approximately $74,600, $0.3 million and $1.1 million as of December 31, 1997, 1996 and 1995, respectively. In connection with the affiliated lease agreements discussed in Note 28, Management Corp. paid Equity Office Holdings, L.L.C. ("EOH") $145,511, $118,919 and $104,421 in connection with the Chicago Office, $177,793, $137,638 and $9,783 in connection with the Tampa Office and $632,693, $409,392 and $632,725 in connection with the space occupied by the corporate headquarters for the years ended December 31, 1997, 1996 and 1995, respectively. Amounts due to EOH were approximately $59,675 and $46,435 as of December 31, 1997 and 1996, respectively. As of December 31, 1995, no amounts were owed to EOH. In connection with the Private Equity Offering and the Shelf Offering, the Operating Partnership paid Equity Institutional Investors, Inc. ("EII") consulting fees in the amount of $200,000 for the year ended December 31, 1995. As of December 31, 1997 and 1996, no amounts were owed to EII for consulting services. Artery Property Management, Inc. ("Artery") provided the Operating Partnership consulting services with regard to property acquisitions and additional business opportunities. Fees paid for those services and reimbursed expenses amounted to approximately $0.2 and $0.7 million for the years ended December 31, 1996 and 1995. F-42 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Rudnick & Wolfe, a law firm in which Mr. Errol Halperin, a trustee of the Company, is a partner, provided legal services to the Operating Partnership. Fees paid to this firm amounted to approximately $2.3 million, $4,300 and $41,300 for the years ended December 31, 1997, 1996 and 1995. In addition, the Operating Partnership and the Company have provided acquisition, asset and property management services to certain related entities for properties not owned by the Operating Partnership. Fees received for providing such services were approximately $5.7 million, $6.7 million and $7 million for the years ended December 31, 1997, 1996 and 1995, respectively. 30. Quarterly Financial Data (Unaudited): The following unaudited quarterly data has been prepared on the basis of a December 31 year end. The 1997 and 1996 net income per weighted average OP Unit amounts have been presented and, where appropriate, restated to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. For further discussion of net income per weighted average OP Unit outstanding and impact of Statement No. 128, see Note 5 of Notes to Consolidated Financial Statements. (Amounts are in thousands):
First Second Third Fourth Quarter Quarter Quarter Quarter 1997 3/31 6/30 9/30 12/31 ---- -------- -------- -------- -------- Total revenues $141,387 $164,937 $203,354 $237,643 ======== ======== ======== ======== Net income $ 36,388 $ 38,628 $ 50,320 $ 64,516 ======== ======== ======== ======== Weighted average OP Units outstanding 59,269 66,266 81,134 85,682 ======== ======== ======== ======== Net income per weighted average OP Unit outstanding $ 0.46 $ 0.40 $ 0.42 $ 0.50 ======== ======== ======== ======== Net income per weighted averge OP Unit outstanding - assuming dilution $ 0.45 $ 0.40 $ 0.41 $ 0.49 ======== ======== ======== ======== First Second Third Fourth Quarter Quarter Quarter Quarter 1996 3/31 6/30 9/30 12/31 ---- -------- -------- -------- -------- Total revenues $106,321 $113,267 $124,459 $134,338 ======== ======== ======== ======== Net income $ 21,295 $ 23,310 $ 22,111 $ 49,207 ======== ======== ======== ======== Weighted average OP Units outstanding 46,210 50,034 52,583 55,540 ======== ======== ======== ======== Net income per weighted average OP Unit outstanding $ 0.32 $ 0.34 $ 0.29 $ 0.72 ======== ======== ======== ======== Net income per weighted averge OP Unit outstanding - assuming dilution $ 0.31 $ 0.34 $ 0.28 $ 0.71 ======== ======== ======== ========
31. Subsequent Events On January 7, 1998, the Operating Partnership acquired Cityscape Apartments, a 156-unit multifamily property located in St. Louis Park, Minnesota, from an unaffiliated third party for a purchase price of approximately $12.3 million. On January 9, 1998, the Operating Partnership acquired 740 River Drive Apartments, a 162-unit multifamily property located in St. Paul, Minnesota, from an unaffiliated third party for a purchase price of approximately $12.8 million, which included the assumption of mortgage indebtedness of approximately $7 million. F-43 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On January 13, 1998, the Operating Partnership acquired Prospect Towers Apartments, a 157-unit multifamily property, including a vacant parcel of land, located in Hackensack, New Jersey, from an unaffiliated third party for a purchase price of approximately $36.3 million, which included the assumption of mortgage indebtedness of approximately $14.9 million. On January 16, 1998, the Operating Partnership acquired Park Place Apartments, a 229-unit multifamily property located in Houston, Texas, from an unaffiliated third party for a purchase price of approximately $13.6 million, which included the assumption of mortgage indebtedness of approximately $10.2 million. On January 16, 1998, the Operating Partnership acquired Park Westend Apartments, a 312-unit multifamily property located in Richmond, Virginia, from an unaffiliated third party for a purchase price of approximately $13.3 million, which included the assumption of mortgage indebtedness of approximately $7.2 million. On January 27, 1998, the Company completed an offering of 4,000,000 publicly registered Common Shares, which were sold at a price of $50.4375 per share and contributed to the Operating Partnership net proceeds of approximately $195.3 million in connection therewith in exchange for OP Units. On January 29, 1998, the Operating Partnership acquired Emerald Bay at Winter Park Apartments, a 431-unit multifamily property located in Winter Park, Florida, from an unaffiliated third party for a purchase price of approximately $15.7 million. On February 3, 1998, the Operating Partnership filed with the SEC a Form S-3 Registration Statement to register $1 billion of debt securities. The SEC declared this Registration effective on February 27, 1998. On February 5, 1998, the Operating Partnership acquired Farnham Park Apartments, a 216-unit multifamily property located in Houston, Texas, from an unaffiliated third party for a purchase price of approximately $15.7 million, which included the assumption of mortgage indebtedness of approximately $11.5 million. On February 18, 1998, the Company completed offerings of 988,340 publicly registered Common Shares, which were sold at a price of $50.625 per share and contributed to the Operating Partnership net proceeds of approximately $47.5 million in connection therewith in exchange for OP Units. On February 23, 1998, the Company completed an offering of 1 million publicly registered Common Shares, which were sold at a price of $48 per share and contributed to the Operating Partnership net proceeds of approximately $47.5 million in connection therewith in exchange for OP Units. On February 25, 1998, the Operating Partnership acquired Plantation Apartments, a 232-unit multifamily property located in Houston, Texas, from an unaffiliated third party for a purchase price of approximately $10 million. On February 27, 1998, the Operating Partnership acquired Balcones Club Apartments, a 312-unit multifamily property located in Austin, Texas, from an unaffiliated third party for a purchase price of approximately $12.3 million. F-44 ERP OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Through February 1998, the Company sold approximately 639,000 Common Shares pursuant to the DRIP Plan and contributed to the Operating Partnership net proceeds of approximately $31.7 million in connection therewith in exchange for OP Units. On March 2, 1998, the Operating Partnership acquired Coach Lantern Apartments, a 90-unit multifamily property located in Scarborough, Maine, from an unaffiliated third party for a purchase price of approximately $4.7 million. On March 2, 1998, the Operating Partnership acquired Foxcroft Apartments, a 104-unit multifamily property located in Scarborough, Maine, from an unaffiliated third party for a purchase price of approximately $4.9 million. On March 2, 1998, the Operating Partnership acquired Yarmouth Woods Apartments, a 138-unit multifamily property located in Yarmouth, Maine, from an unaffiliated third party for a purchase price of approximately $6.6 million. On March 2, 1998, the Operating Partnership declared a $0.67 distribution per OP Unit for the quarter ended March 31, 1998 to OP Unit holders of record on March 27, 1998. The Operating Partnership also declared a $0.585938 distribution, a $0.570313 distribution, a $0.5375 distribution, a $0.603125 distribution, a $0.4375 distribution and a $0.453125 distribution to the Company as holder of the Series A Cumulative Redeemable Preference Units, Series B Cumulative Redeemable Preference Units, Series C Cumulative Redeemable Preference Units, Series D Cumulative Redeemable Preference Units, Series E Cumulative Convertible Preference Units, Series F Cumulative Redeemable Preference Units and Series G Convertible Cumulative Preference Units. On March 12, 1998, the Operating Partnership disposed of two Properties for a total sales price of $16.7 million. F-45 REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE To the Partners ERP Operating Limited Partnership In connection with our audit of the consolidated financial statements of ERP Operating Limited Partnership referred to in our report dated February 14, 1996, which financial statements are included in this Form 10-K, we have also audited the 1995 information in the financial statement schedule listed in the Index to the Financial Statements and Schedule. In our opinion, this financial statement schedule presents fairly, in all material respects, the 1995 information required to be set forth therein. /s/ GRANT THORNTON LLP GRANT THORNTON LLP Chicago, Illinois February 14, 1996 S-1 ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997
Cost Capitalized Subsequent to Acquisition Description Initial Cost to Company (Improvements, net)(1) - -------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - -------------------------------------------------------------------------------------------------------------------------- 2300 Elliot Seattle, WA 0 796,700 7,170,461 0 52,545 2900 on First Seattle, WA 0 1,176,400 10,588,096 1,300 204,426 3000 Grand Des Moines, IA 0 858,305 7,827,336 0 1,256,198 7979 Westheimer Houston, TX 0 1,388,400 12,495,280 1,700 964,639 Acacia Creek Scottsdale, AZ 0 6,121,856 35,300,728 0 0 Altamonte San Antonio, TX 14,600,000 1,663,100 14,968,079 1,970 664,704 Amberton Manassas, VA 10,597,067 888,800 8,352,507 11,800 862,260 Arbor Glen Pittsfield Twp, MI 0 1,092,300 9,830,191 0 (0) Arboretum (GA) Atlanta, GA 0 4,679,400 15,927,313 0 1 Arbors of Brentwood Nashville, TN (D) 404,570 13,189,508 100 918,181 Arbors of Hickory Hollow Nashville, TN (D) 202,285 6,594,754 700 1,613,873 Arbors of Las Colinas Irving, TX 0 1,662,300 14,960,709 1,600 1,119,028 Ashton, The Corona Hills, CA 17,300,000 2,594,264 33,012,228 0 0 Atrium Durham, NC 0 1,122,600 10,103,027 0 7,769 Augusta (WRP) Oklahoma City, OK 0 873,200 7,866,622 0 31,204 Autumn Creek Cordova, TN (E) 1,680,000 9,330,921 1,300 11,719 Bainbridge Durham, NC 0 1,042,900 9,385,579 33,400 918,181 Banyan Lake Boynton Beach, FL 0 2,736,000 11,204,508 2,600 96,561 Bay Club Phoenix, AZ 0 828,100 5,821,759 100 1,222,091 Bay Ridge San Pedro, CA 0 2,385,399 2,180,081 15,701 0 Bayside at the Islands Gilbert, AZ (P) 3,306,484 15,541,586 0 0 Bear Canyon (Evans) Tucson, AZ 0 1,660,608 11,203,464 0 0 Bear Creek Village Denver, CO 0 4,519,700 40,677,102 0 60,349 Blue Swan San Antonio, TX (E) 1,424,800 7,589,821 0 4,359 Bourbon Square Palatine, IL 27,846,353 3,982,600 35,843,025 2,700 2,647,335 Breckenridge Lexington, KY 9,592,152 1,645,800 14,812,310 0 0 Brentwood Vancouver, WA 0 1,318,200 11,863,517 39,021 944,655 Breton Mill Houston, TX (F) 212,720 8,154,404 100 708,380 Bridgecreek Wilsonville, OR 0 1,294,600 11,651,108 5,290 1,079,812 Bridgeport Raleigh, NC 0 1,296,200 11,665,351 500 366,851 Brierwood Jacksonville, FL 0 546,100 4,914,681 5,800 181,788 Brittany Square Tulsa, OK 0 625,000 4,220,662 0 417,992 Brixworth Nashville, TN 0 1,172,100 10,549,371 1,700 116,540 Brookfield Salt Lake City, UT 0 1,152,000 5,673,250 300 7,652 Brookridge Centreville, VA (E) 2,520,000 15,993,105 900 26,748 Burn Brae Dallas, TX 0 1,255,000 11,294,815 0 73,217 Burwick Farms Howell, MI 0 1,102,200 9,919,799 0 3,672 Calais Dallas, TX 0 1,118,900 10,070,076 0 83,333 Cambridge at Hickory Hollow Nashville, TN 0 3,240,000 17,908,952 0 5,763 Cambridge Village Lewisville, TX 0 800,000 8,751,405 800 62,113 Camellero Scottsdale, AZ 11,842,927 1,923,600 17,312,869 1,300 512,137 Canterbury Germantown, MD 31,363,911 2,781,300 26,656,574 0 2,173,671 Canterchase Nashville, TN 5,765,286 862,200 7,759,711 1,400 333,999 Canyon Creek Tucson, AZ 0 834,313 5,840,188 100 405,082 Canyon Crest Views Riverside, CA 0 1,744,640 17,355,155 0 0 Canyon Ridge San Diego, CA 0 4,869,448 11,969,198 0 0 Canyon Sands Phoenix, AZ 8,624,067 1,475,900 13,838,616 16,850 153,409 Cardinal, The Greensboro, NC 7,472,027 1,280,000 11,898,277 1,200 60,113 Carmel Terrace San Diego, CA 0 2,288,300 20,632,540 0 175,737 Carolina Crossing Greensville, SC 0 547,800 4,930,347 0 3,171 Casa Camino Ruiz San Diego, CA 0 3,920,000 9,390,192 2,300 32,792 Casa Capricorn San Diego, CA 0 1,260,100 11,341,085 2,600 89,786
Gross Amount Carried at Close of Period 12/31/97 - ------------------------------------------------------------------------------------------------------------------------------------ Building & Apartment Name Location Land Fixtures(A) Total (B) - ------------------------------------------------------------------------------------------------------------------------------------ 2300 Elliot Seattle, WA 796,700 7,223,006 8,019,706 2900 on First Seattle, WA 1,177,700 10,792,522 11,970,222 3000 Grand Des Moines, IA 858,305 9,083,534 9,941,839 7979 Westheimer Houston, TX 1,390,100 13,459,919 14,850,019 Acacia Creek Scottsdale, AZ 6,121,856 35,300,728 41,422,584 Altamonte San Antonio, TX 1,665,070 15,632,783 17,297,853 Amberton Manassas, VA 900,600 9,214,767 10,115,367 Arbor Glen Pittsfield Twp, MI 1,092,300 9,830,191 10,922,491 Arboretum (GA) Atlanta, GA 4,679,400 15,927,313 20,606,713 Arbors of Brentwood Nashville, TN 404,670 14,107,689 14,512,359 Arbors of Hickory Hollow Nashville, TN 202,985 8,208,627 88,411,612 Arbors of Las Colinas Irving, TX 1,663,900 16,079,737 17,743,637 Ashton, The Corona Hills, CA 2,594,264 33,012,228 35,606,492 Atrium Durham, NC 1,122,600 10,110,796 11,233,396 Augusta (WRP) Oklahoma City, OK 873,200 7,897,826 8,771,026 Autumn Creek Cordova, TN 1,681,300 9,342,640 11,023,940 Bainbridge Durham, NC 1,076,300 10,303,760 11,380,060 Banyan Lake Boynton Beach, FL 2,738,600 11,301,069 14,039,669 Bay Club Phoenix, AZ 828,200 7,043,850 7,872,050 Bay Ridge San Pedro, CA 2,401,100 2,180,081 4,581,181 Bayside at the Islands Gilbert, AZ 3,306,484 15,541,586 18,848,070 Bear Canyon (Evans) Tucson, AZ 1,660,608 11,203,464 12,864,072 Bear Creek Village Denver, CO 4,519,700 40,737,451 45,257,151 Blue Swan San Antonio, TX 1,424,800 7,594,180 9,018,980 Bourbon Square Palatine, IL 3,985,300 38,490,360 42,475,660 Breckenridge Lexington, KY 1,645,800 14,812,310 16,458,110 Brentwood Vancouver, WA 1,357,221 12,808,172 14,165,393 Breton Mill Houston, TX 212,820 8,862,784 9,075,604 Bridgecreek Wilsonville, OR 1,299,890 12,730,920 14,030,810 Bridgeport Raleigh, NC 1,296,700 12,032,202 13,328,902 Brierwood Jacksonville, FL 551,900 5,096,469 5,648,369 Brittany Square Tulsa, OK 625,000 4,638,654 5,263,654 Brixworth Nashville, TN 1,173,800 10,665,911 11,839,711 Brookfield Salt Lake City, UT 1,152,300 5,680,902 6,833,202 Brookridge Centreville, VA 2,520,900 16,019,853 18,540,753 Burn Brae Dallas, TX 1,255,000 11,368,032 12,623,032 Burwick Farms Howell, MI 1,102,200 9,923,471 11,025,671 Calais Dallas, TX 1,118,900 10,153,409 11,272,309 Cambridge at Hickory Hollow Nashville, TN 3,240,000 17,914,715 21,154,715 Cambridge Village Lewisville, TX 800,800 8,813,518 9,614,318 Camellero Scottsdale, AZ 1,924,900 17,825,006 19,749,906 Canterbury Germantown, MD 2,781,300 28,830,245 31,611,545 Canterchase Nashville, TN 863,600 8,093,710 8,957,310 Canyon Creek Tucson, AZ 834,413 6,245,270 7,079,683 Canyon Crest Views Riverside, CA 1,744,640 17,355,155 19,099,795 Canyon Ridge San Diego, CA 4,869,448 11,969,198 16,838,646 Canyon Sands Phoenix, AZ 1,492,750 13,436,146 14,928,896 Cardinal, The Greensboro, NC 1,281,200 11,898,729 13,179,929 Carmel Terrace San Diego, CA 2,288,300 20,808,277 23,096,577 Carolina Crossing Greensville, SC 547,800 4,933,518 5,481,318 Casa Camino Ruiz San Diego, CA 3,922,300 9,422,984 13,345,284 Casa Capricorn San Diego, CA 1,262,700 11,430,871 12,693,571
Life Used to Compute - ------------------------------------------------------------------------------------ Depreciation in Accumulated Date of Latest Income Apartment Name Location Depreciation Construction Statement - ----------------------------------------------------------------------------------------------------- 2300 Elliot Seattle, WA 150,310 1992 30 Years 2900 on First Seattle, WA 666,232 1989-91 30 Years 3000 Grand Des Moines, IA 4,532,177 1970 30 Years 7979 Westheimer Houston, TX 1,133,263 1973 30 Years Acacia Creek Scottsdale, AZ 32,729 1988-1994 30 Years Altamonte San Antonio, TX 1,914,056 1985 30 Years Amberton Manassas, VA 998,358 1986 30 Years Arbor Glen Pittsfield Twp, MI 21,111 1990 30 Years Arboretum (GA) Atlanta, GA 1,598 1970 30 Years Arbors of Brentwood Nashville, TN 2,223,819 1986 30 Years Arbors of Hickory Hollow Nashville, TN 1,414,692 1986 30 Years Arbors of Las Colinas Irving, TX 2,360,743 1984/85 30 Years Ashton, The Corona Hills, CA 28,361 1986 30 Years Atrium Durham, NC 85,311 1989 30 Years Augusta (WRP) Oklahoma City, OK 172,697 1986 30 Years Autumn Creek Cordova, TN 68,100 1991 30 Years Bainbridge Durham, NC 1,434,370 1984 30 Years Banyan Lake Boynton Beach, FL 250,216 1986 30 Years Bay Club Phoenix, AZ 1,233,244 1976 30 Years Bay Ridge San Pedro, CA 52,595 1987 30 Years Bayside at the Islands Gilbert, AZ 15,060 1989 30 Years Bear Canyon (Evans) Tucson, AZ 10,494 1996 30 Years Bear Creek Village Denver, CO 837,574 1987 30 Years Blue Swan San Antonio, TX 59,138 1985-1994 30 Years Bourbon Square Palatine, IL 5,536,065 1984-87 30 Years Breckenridge Lexington, KY 32,070 1986-1987 30 Years Brentwood Vancouver, WA 1,231,183 1990 30 Years Breton Mill Houston, TX 1,355,393 1986 30 Years Bridgecreek Wilsonville, OR 1,705,010 1987 30 Years Bridgeport Raleigh, NC 1,755,355 1990 30 Years Brierwood Jacksonville, FL 275,998 1974 30 Years Brittany Square Tulsa, OK 2,234,419 1982 30 Years Brixworth Nashville, TN 532,581 1985 30 Years Brookfield Salt Lake City, UT 52,370 1985 30 Years Brookridge Centreville, VA 113,182 1989 30 Years Burn Brae Dallas, TX 248,625 1984 30 Years Burwick Farms Howell, MI 86,052 1991 30 Years Calais Dallas, TX 225,361 1986 30 Years Cambridge at Hickory Hollow Nashville, TN 166,041 1997 30 Years Cambridge Village Lewisville, TX 122,405 1987 30 Years Camellero Scottsdale, AZ 1,622,709 1979 30 Years Canterbury Germantown, MD 3,159,698 1986 30 Years Canterchase Nashville, TN 405,797 1985 30 Years Canyon Creek Tuscon, AZ 1,042,284 1986 30 Years Canyon Crest Views Riverside, CA 14,860 1982-1983 30 Years Canyon Ridge San Diego, CA 13,122 1989 30 Years Canyon Sands Phoenix, AZ 826,111 1983 30 Years Cardinal, The Greensboro, NC 382,792 1994 30 Years Carmel Terrace San Diego, CA 2,338,102 1988-89 30 Years Carolina Crossing Greensville, SC 43,718 1988-89 30 Years Casa Camino Ruiz San Diego, CA 111,041 1976-1986 30 Years Casa Capricorn San Diego, CA 522,582 1981 30 Years
S-2
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997 Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net)(1) - --------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - --------------------------------------------------------------------------------------------------------------------------- Casa Cordoba Tallahassee, FL 0 307,055 2,732,177 0 846,277 Casa Cortez Tallahassee, FL 0 120,590 1,196,857 0 494,584 Cascade at Landmark Alexandria, VA 0 3,601,000 19,649,825 1,600 69,440 Catalina Shores Las Vegas, NV 0 1,222,200 10,999,974 4,800 484,568 Catalina Shores (WRP) Las Vegas, NV 0 1,427,200 12,844,577 0 15,045 Cedar Crest Overland Park, KS 0 2,159,800 19,438,107 900 846,386 Cedars, The Charlotte, NC 0 2,025,300 18,139,423 0 88,336 Celebration Westchase Houston, TX 0 2,204,590 6,312,399 100 866,081 Champion Oaks Houston, TX 7,050,922 931,900 8,519,479 0 203,859 Chandler Court Chandler, AZ 0 1,352,600 12,172,974 500 408,378 Chandler's Bay Kent, WA 0 1,503,400 13,530,223 3,500 666,513 Chantecleer Lakes Naperville, IL (E) 6,688,000 16,327,809 900 21,615 Chaparral Largo, FL 0 303,100 6,169,465 0 2,749,681 Charter Club Everett, WA 0 998,700 8,988,560 2,400 252,157 Chartwell Court Houston, TX 0 1,215,000 12,820,142 400 95 Cherry Hill Seattle, WA 0 700,100 6,301,194 0 10,087 Chestnut Hills Tacoma, WA 0 756,300 6,806,382 0 59,907 Cheyenne Crest Colorado Springs, CO 0 73,950 3,936,559 100 802,593 Chimneys Charlotte, NC 0 904,700 8,141,844 0 4,184 Cierra Crest Denver, CO 0 4,800,000 34,825,500 600 5,619 Cimarron Ridge Denver, CO 0 1,591,100 14,319,997 0 77,597 Clarion Decatur, GA 0 1,501,900 13,517,171 0 6,665 Classic, The Stamford, CT 0 2,880,000 19,881,820 900 12,854 Cloisters On The Green Lexington, KY 0 187,074 2,193,726 0 1,484,959 Club at Tanasbourne Hillsboro, OR 0 3,520,000 16,259,589 800 317,522 Club at the Green Beaverton, OR 0 2,030,150 12,601,596 0 274,120 Colinas Pointe Denver, CO 0 1,587,400 14,287,051 0 43,001 Concorde Bridge Overland Park, KS 0 1,972,400 17,751,898 0 12,979 Copper Creek (WRP) Phoenix, AZ 0 1,017,400 9,156,964 0 29,668 Copperfield (WRP) San Antonio, TX 0 791,200 7,121,171 0 144,095 Country Brook Chandler, AZ (P) 1,505,219 29,485,866 0 0 Country Club I Silver Spring, MD 7,051,066 1,119,500 10,815,232 1,457 556,907 Country Club II Silver Spring, MD 5,817,446 850,000 8,255,502 2,294 23,886 Country Club Village (WRP) Seattle, WA 0 1,150,500 10,354,697 0 19,629 Country Gables Beaverton, OR 8,538,246 1,580,500 14,240,626 0 209,183 Country Ridge Farmington Hills, MI 0 1,605,800 14,452,066 16,150 449,918 Countryside (WRP) San Antonio, TX 0 667,500 6,007,294 100 141,248 Creekside Oaks Walnut Creek, CA 11,394,343 2,167,300 19,505,628 3,300 575,111 Creekside Village Mountlake Terrace, WA 15,536,616 2,802,900 25,226,096 4,700 664,333 Creekwood Charlotte, NC 0 1,859,300 16,733,418 0 6,559 Crescent at Cherry Creek Denver, CO (E) 2,592,000 15,119,233 900 8,552 Crossing at Green Valley (WRP) Las Vegas, NV 0 2,408,500 21,676,899 0 45,437 Crosswinds St. Petersburg, FL 0 1,561,200 5,789,894 0 0 Crown Court (WRP) Phoenix, AZ 0 3,156,600 28,409,516 0 193,587 Crystal Creek Phoenix, AZ 0 952,900 8,576,084 600 366,894 Crystal Village Attleboro, MA 0 1,365,000 4,956,700 2,700 24,183 Cypress Point Las Vegas, NV 0 953,800 8,583,719 5,890 530,211 Dartmouth Woods Denver, CO 4,396,157 1,608,000 10,815,913 1,800 63,769 Dawntree Carrollton, TX 0 1,204,600 10,841,783 900 1,054,940 Deerwood (Corona) Corona, CA 0 4,740,000 20,295,433 600 37,163 Deerwood (SD) San Diego, CA 0 2,075,700 18,680,801 6,395 2,903,044 Deerwood Meadows Greensboro, NC 0 986,643 6,906,503 100 749,467
Gross Amount Carried at Close of Description Period 12/31/97 - ---------------------------------------------------------------------------------------------------------------- Building & Accumulated Apartment Name Location Land Fixtures(A) Total(B) Depreciation - ---------------------------------------------------------------------------------------------------------------- Casa Cordoba Tallahassee, FL 307,055 3,578,454 3,885,509 2,527,797 Casa Cortez Tallahassee, FL 120,590 1,691,441 1,812,031 1,129,397 Cascade at Landmark Alexandria, VA 3,602,600 19,719,265 23,321,865 431,609 Catalina Shores Las Vegas, NV 1,227,000 11,484,542 12,711,542 1,461,633 Catalina Shores (WRP) Las Vegas, NV 1,427,200 12,859,622 14,286,822 274,961 Cedar Crest Overland Park, KS 2,160,700 20,284,492 22,445,192 887,080 Cedars, The Charlotte, NC 2,025,300 18,227,759 20,253,059 38,641 Celebration Westchase Houston, TX 2,204,690 7,178,480 9,383,170 1,385,691 Champion Oaks Houston, TX 931,900 8,723,338 9,655,238 1,075,300 Chandler Court Chandler, AZ 1,353,100 12,581,352 13,934,452 747,295 Chandler's Bay Kent, WA 1,506,900 14,196,736 15,703,636 1,685,964 Chantecleer Lakes Naperville, IL 6,688,900 16,349,424 23,038,324 117,084 Chaparral Largo, FL 303,100 8,919,146 9,222,246 5,573,973 Charter Club Everett, WA 1,001,100 9,240,717 10,241,817 1,315,175 Chartwell Court Houston, TX 1,215,400 12,820,237 14,035,637 11,536 Cherry Hill Seattle, WA 700,100 6,311,281 7,011,381 133,334 Chestnut Hills Tacoma, WA 756,300 6,866,289 7,622,589 150,043 Cheyenne Crest Colorado Springs, CO 74,050 4,739,152 4,813,202 864,281 Chimneys Charlotte, NC 904,700 8,146,028 9,050,728 70,526 Cierra Crest Denver, CO 4,800,600 34,831,119 39,631,719 71,391 Cimarron Ridge Denver, CO 1,591,100 14,397,594 15,988,694 308,253 Clarion Decatur, GA 1,501,900 13,523,836 15,025,736 111,794 Classic, The Stamford, CT 2,880,900 19,894,674 22,775,574 175,445 Cloisters On The Green Lexington, KY 187,074 3,678,685 3,865,759 2,536,077 Club at Tanasbourne Hillsboro, OR 3,520,800 16,577,111 20,097,911 322,537 Club at the Green Beaverton, OR 2,030,150 12,875,716 14,905,866 335,656 Colinas Pointe Denver, CO 1,587,400 14,330,052 15,917,452 304,668 Concorde Bridge Overland Park, KS 1,972,400 17,764,877 19,737,277 145,402 Copper Creek (WRP) Phoenix, AZ 1,017,400 9,186,632 10,204,032 193,496 Copperfield (WRP) San Antonio, TX 791,200 7,265,266 8,056,466 169,373 Country Brook Chandler, AZ 1,505,219 29,485,866 30,991,085 24,552 Country Club I Silver Spring, MD 1,120,957 11,372,139 12,493,096 1,239,522 Country Club II Silver Spring, MD 852,294 8,279,388 9,131,682 838,309 Country Club Village (WRP) Seattle, WA 1,150,500 10,374,326 11,524,826 216,195 Country Gables Beaverton, OR 1,580,500 14,449,809 16,030,309 397,356 Country Ridge Farmington Hills, MI 1,621,950 14,901,984 16,523,934 868,662 Countryside (WRP) San Antonio, TX 667,600 6,148,542 6,816,142 143,873 Creekside Oaks Walnut Creek, CA 2,170,600 20,080,738 22,251,338 768,339 Creekside Village Mountlake Terrace, WA 2,807,600 25,890,429 28,698,029 2,981,611 Creekwood Charlotte, NC 1,859,300 16,739,977 18,599,277 142,811 Crescent at Cherry Creek Denver, CO 2,592,900 15,127,785 17,720,685 106,269 Crossing at Green Valley (WRP) Las Vegas, NV 2,408,500 21,722,336 24,130,836 459,509 Crosswinds St. Petersburg, FL 1,561,200 5,789,894 7,351,094 77,892 Crown Court (WRP) Phoenix, AZ 3,156,600 28,603,103 31,759,703 602,508 Crystal Creek Phoenix, AZ 953,500 8,942,978 9,896,478 864,913 Crystal Village Attleboro, MA 1,367,700 4,980,883 6,348,583 7,413 Cypress Point Las Vegas, NV 959,690 9,113,930 10,073,620 1,165,833 Dartmouth Woods Denver, CO 1,609,800 10,879,682 12,489,482 316,417 Dawntree Carrollton, TX 1,205,500 11,896,723 13,102,223 1,434,699 Deerwood (Corona) Corona, CA 4,740,600 20,332,596 25,073,196 151,497 Deerwood (SD) San Diego, CA 2,082,095 21,583,845 23,665,940 2,905,131 Deerwood Meadows Greensboro, NC 986,743 7,655,970 8,642,713 1,298,270
Life Used to Description Compute - ---------------------------------------------------------------------- Depreciation in Date of Latest Income Apartment Name Location Construction Statement(C) - ----------------------------------------------------------------------------------------- Casa Cordoba Tallahassee, FL 1972/1973 30 Years Casa Cortez Tallahassee, FL 1970 30 Years Cascade at Landmark Alexandria, VA 1990 30 Years Catalina Shores Las Vegas, NV 1989 30 Years Catalina Shores (WRP) Las Vegas, NV 1989 30 Years Cedar Crest Overland Park, KS 1986 30 Years Cedars, The Charlotte, NC 1983 30 Years Celebration Westchase Houston, TX 1979 30 Years Champion Oaks Houston, TX 1984 30 Years Chandler Court Chandler, AZ 1987 30 Years Chandler's Bay Kent, WA 1989 30 Years Chantecleer Lakes Naperville, IL 1986 30 Years Chaparral Largo, FL 1976 30 Years Charter Club Everett, WA 1991 30 Years Chartwell Court Houston, TX 1995 30 Years Cherry Hill Seattle, WA 1991 30 Years Chestnut Hills Tacoma, WA 1991 30 Years Cheyenne Crest Colorado Springs, CO 1984 30 Years Chimneys Charlotte, NC 1974 30 Years Cierra Crest Denver, CO 1996 30 Years Cimarron Ridge Denver, CO 1984 30 Years Clarion Decatur, GA 1990 30 Years Classic, The Stamford, CT 1990 30 Years Cloisters On The Green Lexington, KY 1974 30 Years Club at Tanasbourne Hillsboro, OR 1990 30 Years Club at the Green Beaverton, OR 1991 30 Years Colinas Pointe Denver, CO 1986 30 Years Concorde Bridge Overland Park, KS 1973 30 Years Copper Creek (WRP) Phoenix, AZ 1984 30 Years Copperfield (WRP) San Antonio, TX 1984 30 Years Country Brook Chandler, AZ 1986-1996 30 Years Country Club I Silver Spring, MD 1980 30 Years Country Club II Silver Spring, MD 1982 30 Years Country Club Village (WRP) Seattle, WA 1991 30 Years Country Gables Beaverton, OR 1991 30 Years Country Ridge Farmington Hills, MI 1986 30 Years Countryside (WRP) San Antonio, TX 1980 30 Years Creekside Oaks Walnut Creek, CA 1974 30 Years Creekside Village Mountlake Terrace, WA 1987 30 Years Creekwood Charlotte, NC 1987-1990 30 Years Crescent at Cherry Creek Denver, CO 1994 30 Years Crossing at Green Valley (WRP) Las Vegas, NV 1986 30 Years Crosswinds St. Petersburg, FL 1986 30 Years Crown Court (WRP) Phoenix, AZ 1987 30 Years Crystal Creek Phoenix, AZ 1985 30 Years Crystal Village Attleboro, MA 1974 30 Years Cypress Point Las Vegas, NV 1989 30 Years Dartmouth Woods Denver, CO 1990 30 Years Dawntree Carrollton, TX 1982 30 Years Deerwood (Corona) Corona, CA 1992 30 Years Deerwood (SD) San Diego, CA 1990 30 Years Deerwood Meadows Greensboro, NC 1986 30 Years
S-3 ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997
Cost Capitalized Subsequent to Acquisition Description Initial Cost to Company (Improvements, net)(1) - ---------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - ---------------------------------------------------------------------------------------------------------------------- Del Coronado Mesa, AZ (O) 1,963,200 17,669,207 1,200 360,176 Desert Park Las Vegas, NV 0 1,085,400 9,401,015 0 631,659 Desert Sands Phoenix, AZ 8,618,262 1,464,200 13,177,336 16,850 765,588 Doral Louisville, KY 0 96,607 1,526,628 0 2,665,189 Dos Caminos (WRP) Phoenix, AZ 0 1,727,900 15,551,044 0 74,234 Eagle Canyon Chino Hills, CA 0 1,806,800 16,261,336 2,100 133,967 Eagle Rim Redmond, WA 0 976,200 8,785,605 1,600 370,746 East Pointe Charlotte, NC 9,634,931 1,364,100 12,276,563 1,800 869,258 Eastland on the Lake Columbus, OH 0 817,400 7,356,350 0 8,979 Edgewood Woodinville, WA 6,041,999 1,068,200 9,613,388 1,900 362,053 Emerald Place Bermuda Dunes, CA 0 954,400 8,589,110 2,100 539,453 Essex Place Overland Park, KS 0 1,831,900 16,486,600 3,500 1,503,929 Ethans Glen III Kansas City, MO 2,366,364 244,100 2,197,138 0 (0) Ethans Ridge II Kansas City, MO 10,991,981 1,465,500 13,189,192 0 0 Ethans Ridge I Kansas City, MO 16,232,216 1,945,900 17,513,216 0 0 Farmington Gates Germantown, TN 0 969,700 8,727,328 0 0 Firdale Village (WRP) Seattle, WA 0 2,279,400 20,514,917 0 92,426 Flying Sun Phoenix, AZ 0 87,120 2,035,537 100 178,012 Forest Ridge Arlington, TX 0 2,339,300 21,053,447 23,400 893,265 Forest Valley (WRP) San Antonio, TX 0 590,000 5,310,328 0 33,906 Fountain Creek Phoenix, AZ 0 686,000 6,173,818 500 233,154 Fountain Place I Eden Prairie, MN 24,676,652 2,399,900 21,599,215 0 0 Fountain Place II Eden Prairie, MN 12,612,600 1,226,500 11,038,139 0 0 Fountainhead Combined San Antonio, TX 23,275,000 3,617,449 13,446,560 0 1,317,395 Fountains at Flamingo Las Vegas, NV 0 3,180,900 28,628,533 2,200 543,785 Four Lakes Lisle, IL 10,344,569 2,465,000 13,178,449 0 6,778,000 Four Lakes 5 Lisle, IL 39,680,000 600,000 16,530,115 0 3,193,317 Fox Run (AR) Little Rock, AR 5,481,038 422,014 4,053,552 0 4,873,142 Fox Run (WA) Federal Way, WA 0 638,500 5,746,956 1,200 430,801 Foxchase Grand Prairie, TX 0 781,500 7,559,700 0 187,368 Frey Road Atlanta, GA 19,700,000 2,464,900 22,183,783 2,300 957,611 Garden Lake Riverdale, GA 0 1,464,500 13,180,548 0 182 Gatehouse at Pine Lake Plantation, FL 0 1,886,200 16,975,382 10,400 303,635 Gatehouse on the Green Pembroke Pines, FL 0 2,216,800 19,951,085 11,400 336,832 Gates of Redmond Combined Redmond, WA 9,974,725 3,603,100 18,867,454 0 (0) Gateway Villas (Evans) Scottsdale, AZ 0 1,431,048 14,901,923 0 0 Geary Court Yard San Francisco, CA 17,709,692 1,719,400 15,474,355 0 0 Georgian Woods II Wheaton, MD 10,507,869 2,049,000 19,287,578 4,400 1,573,039 Glen Eagle Greenville, SC 0 833,500 7,503,698 0 2,898 Glenlake Glendale Heights, IL 15,045,000 5,040,000 16,663,439 500 4,136 Glenridge Colorado Springs, CO (F) 884,688 4,466,900 100 577,000 Gold Pointe (WRP) Tacoma, WA 0 528,800 4,759,015 0 3,634 Governor's Place Augusta, GA 0 347,355 2,518,146 0 845,541 Governor's Pointe Roswell, GA (E) 3,744,000 24,480,337 1,300 32,433 Greengate Marietta, GA 0 132,979 1,476,005 0 1,186,277 Greenwich Woods Silver Spring, MD 17,752,586 3,095,700 29,073,395 5,300 1,686,629 Greenwood Forest Little Rock, AR 3,562,675 559,038 1,736,549 0 2,705,648 Greenwood Village (Evans) Tempe, AZ (P) 2,118,781 17,222,332 0 0 Grey Eagle Greenville, SC 0 725,200 6,527,253 0 2,105 Habitat Orlando, FL 0 600,000 494,032 0 5,792,585 Hammock's Place Miami, FL (F) 319,080 12,216,608 100 699,083 Hampton Green San Antonio, TX 0 1,561,830 2,962,670 0 1,997,624
Gross Amount Carried at Description Close of Period 12/31/97 - ---------------------------------------------------------------------------------------------------------------- Building & Accumulated Apartment Name Location Land Fixtures (A) Total (B) Depreciation - ---------------------------------------------------------------------------------------------------------------- Del Coronado Mesa, AZ 1,964,400 18,029,383 19,993,783 1,641,724 Desert Park Las Vegas, NV 1,085,400 10,032,674 11,118,074 782,460 Desert Sands Phoenix, AZ 1,481,050 13,942,924 15,423,974 826,194 Doral Louisville, KY 96,607 4,191,817 4,288,424 1,937,083 Dos Caminos (WRP) Phoenix, AZ 1,727,900 15,625,277 17,353,177 328,887 Eagle Canyon Chino Hills, CA 1,808,900 16,395,303 18,204,203 758,955 Eagle Rim Redmond, WA 977,800 9,156,351 10,134,151 1,077,791 East Pointe Charlotte, NC 1,365,900 13,145,821 14,511,721 1,966,632 Eastland on the Lake Columbus, OH 817,400 7,365,329 8,182,729 70,714 Edgewood Woodinville, WA 1,070,100 9,975,441 11,045,541 1,195,349 Emerald Place Bermuda Dunes, CA 956,500 9,128,563 10,085,063 1,350,476 Essex Place Overland Park, KS 1,835,400 17,990,529 19,825,929 2,450,711 Ethans Glen III Kansas City, MO 244,100 2,197,138 2,441,238 4,694 Ethans Ridge II Kansas City, MO 1,465,500 13,189,192 14,654,692 27,725 Ethans Ridge I Kansas City, MO 1,945,900 17,513,216 19,459,116 36,736 Farmington Gates Germantown, TN 969,700 8,727,328 9,697,028 18,719 Firdale Village (WRP) Seattle, WA 2,279,400 20,607,343 22,886,743 440,440 Flying Sun Phoenix, AZ 87,220 2,213,549 2,300,769 424,499 Forest Ridge Arlington, TX 2,362,700 21,946,712 24,309,412 1,328,842 Forest Valley (WRP) San Antonio, TX 590,000 5,344,234 5,934,234 122,414 Fountain Creek Phoenix, AZ 686,500 6,406,972 7,093,472 606,748 Fountain Place I Eden Prairie, MN 2,399,900 21,599,215 23,999,115 44,795 Fountain Place II Eden Prairie, MN 1,226,500 11,038,139 12,264,639 22,795 Fountainhead Combined San Antonio, TX 3,617,449 14,763,955 18,381,404 5,588,082 Fountains at Flamingo Las Vegas, NV 3,183,100 29,172,318 32,355,418 3,311,794 Four Lakes Lisle, IL 2,465,000 19,956,449 22,421,449 9,091,003 Four Lakes 5 Lisle, IL 600,000 19,723,432 20,323,432 6,372,664 Fox Run (AR) Little Rock, AR 422,014 8,926,694 9,348,708 4,858,010 Fox Run (WA) Federal Way, WA 639,700 6,177,757 6,817,457 769,830 Foxchase Grand Prairie, TX 781,500 7,747,067 8,528,567 141,655 Frey Road Atlanta, GA 2,467,200 23,141,394 25,608,594 2,841,384 Garden Lake Riverdale, GA 1,464,500 13,180,730 14,645,230 111,552 Gatehouse at Pine Lake Plantation, FL 1,896,600 17,279,017 19,175,617 653,865 Gatehouse on the Green Pembroke Pines, FL 2,228,200 20,287,917 22,516,117 760,545 Gates of Redmond Combined Redmond, WA 3,603,100 18,867,454 22,470,554 259,422 Gateway Villas (Evans) Scottsdale, AZ 1,431,048 14,901,923 16,332,971 12,822 Geary Court Yard San Francisco, CA 1,719,400 15,474,355 17,193,755 31,439 Georgian Woods II Wheaton, MD 2,053,400 20,860,617 22,914,017 2,317,407 Glen Eagle Greenville, SC 833,500 7,506,596 8,340,096 64,798 Glenlake Glendale Heights, IL 5,040,500 16,667,575 21,708,075 3,350 Glenridge Colorado Springs, CO 884,788 5,043,900 5,928,688 867,818 Gold Pointe (WRP) Tacoma, WA 528,800 4,762,649 5,291,449 100,860 Governor's Place Augusta, GA 347,355 3,363,687 3,711,042 2,157,305 Governor's Pointe Roswell, GA 3,745,300 24,512,770 28,258,070 149,002 Greengate Marietta, GA 132,979 2,662,282 2,795,261 1,392,136 Greenwich Woods Silver Spring, MD 3,101,000 30,760,024 33,861,024 3,449,631 Greenwood Forest Little Rock, AR 559,038 4,442,197 5,001,235 2,447,887 Greenwood Village (Evans) Tempe, AZ 2,118,781 17,222,332 19,341,113 15,417 Grey Eagle Greenville, SC 725,200 6,529,358 7,254,558 55,944 Habitat Orlando, FL 600,000 6,286,617 6,886,617 3,869,251 Hammock's Place Miami, FL 319,180 12,915,691 13,234,871 1,988,058 Hampton Green San Antonio, TX 1,561,830 4,960,294 6,522,124 963,905
Life Used to Description Compute - ------------------------------------------------------------------ Depreciation in Date of Latest Income Apartment Name Location Construction Statement - ------------------------------------------------------------------------------------- Del Coronado Mesa, AZ 1985 30 Years Desert Park Las Vegas, NV 1987 30 Years Desert Sands Phoenix, AZ 1982 30 Years Doral Louisville, KY 1972 30 Years Dos Caminos (WRP) Phoenix, AZ 1983 30 Years Eagle Canyon Chino Hills, CA 1985 30 Years Eagle Rim Redmond, WA 1986-88 30 Years East Pointe Charlotte, NC 1987 30 Years Eastland on the Lake Columbus, OH 1973 30 Years Edgewood Woodinville, WA 1986 30 Years Emerald Place Bermuda Dunes, CA 1988 30 Years Essex Place Overland Park, KS 1970-84 30 Years Ethans Glen III Kansas City, MO 1990 30 Years Ethans Ridge II Kansas City, MO 1990 30 Years Ethans Ridge I Kansas City, MO 1988 30 Years Farmington Gates Germantown, TN 1976 30 Years Firdale Village (WRP) Seattle, WA 1986 30 Years Flying Sun Phoenix, AZ 1983 30 Years Forest Ridge Arlington, TX 1984/85 30 Years Forest Valley (WRP) San Antonio, TX 1983 30 Years Fountain Creek Phoenix, AZ 1984 30 Years Fountain Place I Eden Prairie, MN 1989 30 Years Fountain Place II Eden Prairie, MN 1989 30 Years Fountainhead Combined San Antonio, TX 1985/1987 30 Years Fountains at Flamingo Las Vegas, NV 1989-91 30 Years Four Lakes Lisle, IL 1968/1988* 30 Years Four Lakes 5 Lisle, IL 1968/1988* 30 Years Fox Run (AR) Little Rock, AR 1974 30 Years Fox Run (WA) Federal Way, WA 1988 30 Years Foxchase Grand Prairie, TX 1983 30 Years Frey Road Atlanta, GA 1985 30 Years Garden Lake Riverdale, GA 1991 30 Years Gatehouse at Pine Lake Plantation, FL 1990 30 Years Gatehouse on the Green Pembroke Pines, FL 1990 30 Years Gates of Redmond Combined Redmond, WA 1979/1982-1989 30 Years Gateway Villas (Evans) Scottsdale, AZ 1995 30 Years Geary Court Yard San Francisco, CA 1990 30 Years Georgian Woods II Wheaton, MD 1967 30 Years Glen Eagle Greenville, SC 1990 30 Years Glenlake Glendale Heights, IL 1988 30 Years Glenridge Colorado Springs, CO 1985 30 Years Gold Pointe (WRP) Tacoma, WA 1990 30 Years Governor's Place Augusta, GA 1972 30 Years Governor's Pointe Roswell, GA 1982-1986 30 Years Greengate Marietta, GA 1971 30 Years Greenwich Woods Silver Spring, MD 1967 30 Years Greenwood Forest Little Rock, AR 1975 30 Years Greenwood Village (Evans) Tempe, AZ 1984 30 Years Grey Eagle Greenville, SC 1991 30 Years Habitat Orlando, FL 1974 30 Years Hammock's Place Miami, FL 1986 30 Years Hampton Green San Antonio, TX 1979 30 Years
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997
Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net) (1) - --------------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - --------------------------------------------------------------------------------------------------------------------------------- Hamptons (WRP) Tacoma, WA 6,025,964 1,119,200 10,072,905 0 62,118 Harborview San Pedro, CA 12,510,709 6,400,000 12,608,900 2,400 97,863 Harbour Landing Corpus Christi, TX 0 761,600 6,854,524 3,400 844,168 Harrison Park (Evans) Tucson, AZ (P) 1,265,094 16,314,580 0 0 Hathaway Long Beach, CA 0 2,512,200 22,609,720 300 362,145 Hawthorne (Evans) Phoenix, AZ 0 2,697,050 15,669,963 0 0 Hearthstone San Antonio, TX 0 1,035,700 3,375,132 100 358,136 Heritage Park (WRP) Oklahoma City, OK 0 1,325,600 11,941,770 0 52,391 Heron Cove Coral Springs, FL 0 823,000 7,997,360 0 529,581 Heron Landing (K) Lauderhill, FL 0 707,100 6,363,784 4,700 336,641 Heron Pointe Boynton Beach, FL 0 1,546,700 7,883,775 0 0 Heron Run Plantation, FL 0 917,800 8,854,001 0 647,809 Hickory Ridge Greenville, SC 0 285,800 2,571,956 0 596 Hidden Oaks Cary, NC 0 1,176,200 10,593,460 0 0 Hidden Palms Tampa, FL (E) 2,048,000 6,365,313 900 12,391 Hidden Valley Club Ann Arbor, MI 0 915,000 7,583,653 0 821,697 Highland Creste (WRP) Seattle, WA 0 935,200 8,416,381 0 207,838 Highland Grove Stone Mt., GA 0 1,665,700 14,996,293 0 (0) Highland Point (WRP) Denver, CO 0 1,631,900 14,686,971 0 39,774 Highline Oaks Denver, CO 7,100,000 1,055,000 9,651,649 2,400 72,496 Holcomb Bridge Atlanta, GA 9,545,000 2,142,400 19,281,704 900 946,475 Hollyview Silver Springs, MD 0 189,000 1,484,475 1,000 9,281 Hunter's Glen Chesterfield, MO 0 913,500 8,221,026 1,700 306,971 Hunter's Green Fort Worth, TX (F) 524,200 3,404,622 100 748,534 Hunters Ridge/South Pointe St. Louis, MO 18,890,250 1,950,000 17,521,575 4,200 126,860 Huntington Hollow Tulsa, OK 0 668,600 6,017,211 0 28,729 Huntington Park Everett, WA 0 1,594,500 14,350,001 3,000 532,840 Idlewood Indianapolis, IN (E) 2,560,000 11,456,641 900 25,500 Indian Bend Phoenix, AZ 0 1,072,500 9,652,385 3,200 528,384 Indian Tree Arvada, CO 0 881,125 4,868,332 100 437,701 Indigo Springs Kent, WA 8,075,846 1,270,000 11,438,562 500 193,475 Invitational (WRP) Oklahoma City, OK 0 1,153,000 10,385,325 0 56,332 Ironwood at the Ranch Wesminster, CO 5,985,000 1,493,300 13,439,783 0 105,395 Isle at Arrowhead Ranch Glendale, AZ 0 1,650,237 19,733,360 0 0 Ivy Place (L) Atlanta, GA 0 793,200 7,139,200 9,750 259,057 James Street Crossing Kent, WA 16,395,379 2,078,600 18,707,436 0 0 Jefferson at Walnut Creek Austin, TX (E) 2,736,000 14,581,785 900 24,307 Junipers at Yarmouth Yarmouth, ME 0 1,350,000 7,807,113 3,200 166,009 Kempton Downs Gresham, OR 0 1,182,200 10,639,993 35,149 859,655 Keystone Austin, TX 2,907,322 498,000 4,482,306 500 469,658 Kingsport Alexandria, VA 0 1,262,250 11,454,606 0 1,576,439 Kingswood Manor San Antonio, TX 0 293,900 2,061,996 100 365,009 Kirby Place Houston, TX (E) 3,620,000 25,898,825 900 12,991 Knight's Castle (Boulder Creek) Wilsonville, OR 0 3,552,000 11,462,403 1,500 222,776 La Costa Brava (Jax) Jacksonville, FL (J) 0 835,757 4,964,681 0 5,955,711 La Costa Brava (ORL) Orlando, FL 0 206,626 1,380,505 0 5,329,782 La Mariposa (Evans) Mesa, AZ (P) 2,047,539 12,426,243 0 0 La Mirage San Diego, CA 0 6,005,200 122,982,486 0 0 La Reserve (Evans) Oro Valley, AZ (P) 3,264,562 4,923,865 0 0 La Valencia (Evans) Mesa, AZ 0 3,553,350 20,498,635 0 0 Ladera (Evans) Mesa, AZ 0 2,978,879 20,598,113 0 0 Lake in The Woods (MI) Ypsilanti, MI 0 1,859,625 16,314,064 0 5,853,066
Gross Amount Carried at Close of Period 12/31/97 - ------------------------------------------------------------------------------------------------------------- Building & Apartment Name Location Land Fixtures (A) Total (B) - ------------------------------------------------------------------------------------------------------------- Hamptons (WRP) Tacoma, WA 1,119,200 10,135,023 11,254,223 Harborview San Pedro, CA 6,402,400 12,706,763 19,109,163 Harbour Landing Corpus Christi, TX 765,000 7,698,692 8,463,692 Harrison Park (Evans) Tucson, AZ 1,265,094 16,314,580 17,579,674 Hathaway Long Beach, CA 2,512,500 22,971,865 25,484,365 Hawthorne (Evans) Phoenix, AZ 2,697,050 15,669,963 18,367,013 Hearthstone San Antonio, TX 1,035,800 3,733,268 4,769,068 Heritage Park (WRP) Oklahoma City, OK 1,325,600 11,994,161 13,319,761 Heron Cove Coral Springs, FL 823,000 8,526,941 9,349,941 Heron Landing (K) Lauderhill, FL 711,800 6,700,425 7,412,225 Heron Pointe Boynton Beach, FL 1,546,700 7,883,775 9,430,475 Heron Run Plantation, FL 917,800 9,501,810 10,419,610 Hickory Ridge Greenville, SC 285,800 2,572,552 2,858,352 Hidden Oaks Cary, NC 1,176,200 10,593,460 11,769,660 Hidden Palms Tampa, FL 2,048,900 6,377,704 8,426,604 Hidden Valley Club Ann Arbor, MI 915,000 8,405,350 9,320,350 Highland Creste (WRP) Seattle, WA 935,200 8,624,219 9,559,419 Highland Grove Stone Mt., GA 1,665,700 14,996,293 16,661,993 Highland Point (WRP) Denver, CO 1,631,900 14,726,745 16,358,645 Highline Oaks Denver, CO 1,057,400 9,724,145 10,781,545 Holcomb Bridge Atlanta, GA 2,143,300 20,228,179 22,371,479 Hollyview Silver Springs, MD 190,000 1,493,756 1,683,756 Hunter's Glen Chesterfield, MO 915,200 8,527,997 9,443,197 Hunter's Green Fort Worth, TX 524,300 4,153,156 4,677,456 Hunters Ridge/South Pointe St. Louis, MO 1,954,200 17,648,435 19,602,635 Huntington Hollow Tulsa, OK 668,600 6,045,940 6,714,540 Huntington Park Everett, WA 1,597,500 14,882,841 16,480,341 Idlewood Indianapolis, IN 2,560,900 11,482,141 14,043,041 Indian Bend Phoenix, AZ 1,075,700 10,180,769 11,256,469 Indian Tree Arvada, CO 881,225 5,306,033 6,187,258 Indigo Springs Kent, WA 1,270,500 11,632,037 12,902,537 Invitational (WRP) Oklahoma City, OK 1,153,000 10,441,657 11,594,657 Ironwood at the Ranch Wesminster, CO 1,493,300 13,545,178 15,038,478 Isle at Arrowhead Ranch Glendale, AZ 1,650,237 19,733,360 21,383,597 Ivy Place (L) Atlanta, GA 802,950 7,398,257 8,201,207 James Street Crossing Kent, WA 2,078,600 18,707,436 20,786,036 Jefferson at Walnut Creek Austin, TX 2,736,900 14,606,092 17,342,992 Junipers at Yarmouth Yarmouth, ME 1,353,200 7,973,121 9,326,321 Kempton Downs Gresham, OR 1,217,349 11,499,648 12,716,997 Keystone Austin, TX 498,500 4,951,964 5,450,464 Kingsport Alexandria, VA 1,262,250 13,031,045 14,293,295 Kingswood Manor San Antonio, TX 294,000 2,427,005 2,721,005 Kirby Place Houston, TX 3,620,900 25,911,816 29,532,716 Knight's Castle (Boulder Creek) Wilsonville, OR 3,553,500 11,685,178 15,238,678 La Costa Brava (Jax) Jacksonville, FL (J) 835,757 10,920,392 11,756,149 La Costa Brava (ORL) Orlando, FL 206,626 6,710,287 6,916,913 La Mariposa (Evans) Mesa, AZ 2,047,539 12,426,243 14,473,782 La Mirage San Diego, CA 6,005,200 22,982,486 128,987,686 La Reserve (Evans) Oro Valley, AZ 3,264,562 4,923,865 8,188,427 La Valencia (Evans) Mesa, AZ 3,553,350 20,498,635 24,051,985 Ladera (Evans) Mesa, AZ 2,978,879 20,598,113 23,576,992 Lake in The Woods (MI) Ypsilanti, MI 1,859,625 22,167,130 24,026,755
Life Used to Compute - ---------------------------------------------------------------------------------------------- Depreciation Accumulated Date of Latest Income Apartment Name Location Depreciation Construction Statement (C) - ------------------------------------------------------------------------------------------------------------- Hamptons (WRP) Tacoma, WA 222,665 1991 30 Years Harborview San Pedro, CA 411,773 1985 30 Years Harbour Landing Corpus Christi, TX 1,164,132 1985 30 Years Harrison Park (Evans) Tucson, AZ 14,484 1985 30 Years Hathaway Long Beach, CA 1,913,780 1987 30 Years Hawthorne (Evans) Phoenix, AZ 14,721 1996 30 Years Hearthstone San Antonio, TX 682,606 1982 30 Years Heritage Park (WRP) Oklahoma City, OK 278,231 1983 30 Years Heron Cove Coral Springs, FL 1,009,310 1987 30 Years Heron Landing (K) Lauderhill, FL 470,034 1988 30 Years Heron Pointe Boynton Beach, FL 115,301 1989 30 Years Heron Run Plantation, FL 1,097,027 1987 30 Years Hickory Ridge Greenville, SC 23,136 1968 30 Years Hidden Oaks Cary, NC 90,488 1988 30 Years Hidden Palms Tampa, FL 42,474 1986 30 Years Hidden Valley Club Ann Arbor, MI 4,474,589 1973 30 Years Highland Creste (WRP) Seattle, WA 199,033 1989 30 Years Highland Grove Stone Mt., GA 125,202 1988 30 Years Highland Point (WRP) Denver, CO 317,666 1984 30 Years Highline Oaks Denver, CO 192,711 1986 30 Years Holcomb Bridge Atlanta, GA 2,525,354 1985 30 Years Hollyview Silver Springs, MD 4,178 1965 30 Years Hunter's Glen Chesterfield, MO 402,678 1985 30 Years Hunter's Green Fort Worth, TX 731,261 1981 30 Years Hunters Ridge/South Pointe St. Louis, MO 350,101 1986-1987 30 Years Huntington Hollow Tulsa, OK 145,857 1981 30 Years Huntington Park Everett, WA 2,087,851 1991 30 Years Idlewood Indianapolis, IN 72,537 1991 30 Years Indian Bend Phoenix, AZ 1,368,573 1973 30 Years Indian Tree Arvada, CO 1,041,993 1983 30 Years Indigo Springs Kent, WA 322,845 1991 30 Years Invitational (WRP) Oklahoma City, OK 237,275 1983 30 Years Ironwood at the Ranch Wesminster, CO 287,752 1986 30 Years Isle at Arrowhead Ranch Glendale, AZ 16,870 1996 30 Years Ivy Place (L) Atlanta, GA 432,030 1978 30 Years James Street Crossing Kent, WA 38,781 1989 30 Years Jefferson at Walnut Creek Austin, TX 90,510 1994 30 Years Junipers at Yarmouth Yarmouth, ME 220,554 1970 30 Years Kempton Downs Gresham, OR 1,120,921 1990 30 Years Keystone Austin, TX 526,567 1981 30 Years Kingsport Alexandria, VA 1,476,716 1986 30 Years Kingswood Manor San Antonio, TX 422,154 1983 30 Years Kirby Place Houston, TX 153,938 1994 30 Years Knight's Castle (Boulder Creek) Wilsonville, OR 311,992 1991 30 Years La Costa Brava (Jax) Jacksonville, FL (J) 5,943,831 1970/1973 30 Years La Costa Brava (ORL) Orlando, FL 3,556,803 1967 30 Years La Mariposa (Evans) Mesa, AZ 11,619 1986 30 Years La Mirage San Diego, CA 1,942,975 1988-1992 30 Years La Reserve (Evans) Oro Valley, AZ 7,043 1988 30 Years La Valencia (Evans) Mesa, AZ 19,275 1988 30 Years Ladera (Evans) Mesa, AZ 18,460 1995 30 Years Lake in The Woods (MI) Ypsilanti, MI 11,131,520 1969 30 Years
S-5
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Acculated Depreciation December 31, 1997 Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net)(1) - --------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - --------------------------------------------------------------------------------------------------------------- Lakeville Resort Petaluma, CA 20,655,022 2,734,100 24,773,523 2,400 109,861 Lakewood Oaks Dallas, TX 0 1,630,200 14,671,813 1,400 648,829 Landera (WRP) San Antonio, TX 0 766,300 6,896,811 0 45,632 Lands End Pacifica, CA 0 1,824,500 16,423,435 1,200 450,898 Larkspur Woods Sacramento, CA (E) 5,800,000 14,512,065 1,300 21,647 Laurel Ridge Chapel Hill, NC 0 160,000 1,752,118 0 2,938,512 Lincoln Green I San Antonio, TX 0 947,366 2,133,002 0 3,711,030 Lincoln Green II San Antonio, TX 0 1,052,340 5,828,311 0 (0) Lincoln Green III San Antonio, TX 0 536,010 2,069,688 0 0 Lincoln Harbor Ft. Lauderdale, FL 10,000,000 7,454,900 14,879,369 0 (0) Lincoln Heights Quincy, MA 0 5,925,000 33,575,000 0 0 Little Cottonwoods Tempe, AZ (P) 3,050,133 26,981,993 0 0 Lodge (OK), The Tulsa, OK 0 313,571 2,677,951 0 893,076 Lodge (TX), The San Antonio, TX 0 1,363,636 5,496,784 0 3,582,672 Longwood Decatur, GA 0 1,452,000 13,067,523 2,048 364,818 Mallard Cove Greenville, SC 0 803,700 7,233,160 9,650 282,242 Mallgate Louisville, KY 0 0 6,162,515 0 3,857,169 Marbrisa Tampa, FL 0 811,500 7,303,334 2,000 210,354 Marina Club Fort Worth, TX 0 781,000 7,028,588 3,269 1,581,230 Mariners Wharf Orange Park, FL 0 1,858,800 16,733,097 0 2,285 Marks (WRP) Denver, CO 21,085,000 4,928,500 44,356,994 0 419,868 Marquessa (Evans) Corona Hills, CA 18,169,122 6,888,500 21,767,775 0 0 Martha Lake (WRP) Seattle, WA 0 823,200 7,409,199 0 17,730 Marymont (MD) Laurel, MD 0 1,901,800 17,116,593 2,000 539,218 Maxwell House Augusta, GA 0 216,000 1,846,772 0 723,153 McAlpine Ridge Charlotte, NC 0 1,283,400 11,550,225 600 589,390 Meadow Creek Tigard, OR 8,595,327 1,298,100 11,682,684 1,000 750,229 Meadows in the Park Birmingham, AL 0 1,000,000 8,525,000 0 0 Meadows on the Lake Birmingham, AL 0 1,000,000 8,521,175 0 0 Merril Creek (WRP) Tacoma, WA 0 814,200 7,327,478 0 11,830 Merrimac Woods Costa Mesa, CA 0 673,300 6,059,722 2,400 138,194 Metropolitan Park (WRP) Seattle, WA 0 493,200 4,438,977 0 34,772 Mill Village Randolph, MA 0 6,200,000 13,249,725 2,900 131,810 Mirador (Evans) Phoenix, AZ 0 2,597,518 23,368,137 0 0 Miramonte Scottsdale, AZ 0 1,132,500 8,846,622 0 0 Mission Palms Tucson, AZ 0 2,023,400 18,210,383 0 89,971 Morningside (Evans) Scottsdale, AZ (P) 670,470 12,591,349 0 0 Mountain Park Ranch Phoenix, AZ (Q) 1,662,332 18,223,755 0 0 Mountain Run (WRP) Albuquerque, NM 0 2,023,400 20,735,983 280,600 82,948 Mountain Terrace Stevenson Ranch, CA 0 3,977,200 35,794,729 1,800 209,401 Newport Cove Henderson, NV 0 698,700 6,288,245 1,600 840,955 Newport Heights Seattle, WA 0 390,700 3,516,229 500 233,100 North Creek Heights Seattle, WA 0 753,800 6,784,170 0 40,015 North Hill Atlanta, GA 16,428,599 2,520,000 18,501,949 5,000 65,715 Northampton 1 Largo, MD 13,194,809 1,843,200 17,318,363 0 1,398,297 Northampton 2 Largo, MD 0 1,494,100 14,279,723 19,400 1,134,141 Northgate Village San Antonio, TX 0 660,000 5,753,724 100 428,995 Northlake (FL) Jacksonville, FL 0 1,166,000 10,494,125 0 (0) Northwoods Village Cary, NC (E) 1,368,000 11,443,857 900 17,260 Oak Mill 2 Germantown, MD 9,507,486 854,000 8,187,169 133 748,473 Oak Park North Agoura Hills, CA (O) 1,706,500 15,358,942 400 90,433 Oak Park South Agoura Hills, CA (O) 1,683,400 15,150,835 400 144,685 - ----------------------------------------------------------------------------------------------------------------- Gross Amount Carried at Close of Life Used to Description Period 12/31/97 Compute - ----------------------------------------------------------------------------------------------------------------- Depreciation in Building & Accumulated Date of Latest Income Apartment Name Location Land Fixtures (A) Total (B) Depreciation Construction Statement (C) - ------------------------------------------------------------------------------------------------------------------------------------ Lakeville Resort Petaluma, CA 2,736,500 24,883,384 27,619,884 1,073,613 1984 30 Years Lakewood Oaks Dallas, TX 1,631,600 15,320,642 16,952,242 1,887,694 1987 30 Years Landera (WRP) San Antonio, TX 766,300 6,942,443 7,708,743 153,078 1983 30 Years Lands End Pacifica, CA 1,825,700 16,874,333 18,700,033 936,029 1974 30 Years Larkspur Woods Sacramento, CA 5,801,300 14,533,712 20,335,012 102,811 1989/1993 30 Years Laurel Ridge Chapel Hill, NC 160,000 4,690,630 4,850,630 2,145,136 1975 30 Years Lincoln Green I San Antonio, TX 947,366 5,844,032 6,791,398 2,613,354 1984/1986 30 Years Lincoln Green II San Antonio, TX 1,052,340 5,828,311 6,880,651 2,132,722 1984/1986 30 Years Lincoln Green III San Antonio, TX 536,010 2,069,688 2,605,698 781,318 1984/1986 30 Years Lincoln Harbor Ft. Lauderdale, FL 7,454,900 14,879,369 22,334,269 405,336 1989 30 Years Lincoln Heights Quincy, MA 5,925,000 33,575,000 39,500,000 30,600 1991 30 Years Little Cottonwoods Tempe, AZ 3,050,133 26,981,993 30,032,126 23,773 1984 30 Years Lodge (OK), The Tulsa, OK 313,571 3,571,027 3,884,598 1,958,126 1979 30 Years Lodge (TX), The San Antonio, TX 1,363,636 9,079,456 10,443,092 3,068,584 1979(#) 30 Years Longwood Decatur, GA 1,454,048 13,432,341 14,886,389 1,832,622 1992 30 Years Mallard Cove Greenville, SC 813,350 7,515,402 8,328,752 438,174 1983 30 Years Mallgate Louisville, KY 0 10,019,684 10,019,684 5,986,361 1969 30 Years Marbrisa Tampa, FL 813,500 7,513,688 8,327,188 356,644 1984 30 Years Marina Club Fort Worth, TX 784,269 8,609,818 9,394,087 1,212,618 1987 30 Years Mariners Wharf Orange Park, FL 1,858,800 16,735,382 18,594,182 138,521 1989 30 Years Marks (WRP) Denver, CO 4,928,500 44,776,862 49,705,362 935,337 1987 30 Years Marquessa (Evans) Corona Hills, CA 6,888,500 21,767,775 28,656,275 22,579 1992 30 Years Martha Lake (WRP) Seattle, WA 823,200 7,426,929 8,250,129 159,637 1991 30 Years Marymont (MD) Laurel, MD 1,903,800 17,655,811 19,559,611 2,040,482 1987-88 30 Years Maxwell House Augusta, GA 216,000 2,569,925 2,785,925 1,098,947 1951 30 Years McAlpine Ridge Charlotte, NC 1,284,000 12,139,615 13,423,615 1,381,439 1989-90 30 Years Meadow Creek Tigard, OR 1,299,100 12,432,913 13,732,013 1,511,374 1985 30 Years Meadows in the Park Birmingham, AL 1,000,000 8,525,000 9,525,000 12,178 1986 30 Years Meadows on the Lake Birmingham, AL 1,000,000 8,521,175 9,521,175 12,178 1987 30 Years Merril Creek (WRP) Tacoma, WA 814,200 7,339,308 8,153,508 157,161 1994 30 Years Merrimac Woods Costa Mesa, CA 675,700 6,197,915 6,873,615 291,450 1970 30 Years Metropolitan Park (WRP) Seattle, WA 493,200 4,473,749 4,966,949 94,680 1991 30 Years Mill Village Randolph, MA 6,202,900 13,381,535 19,584,435 20,408 1971/1977 30 Years Mirador (Evans) Phoenix, AZ 2,597,518 23,368,137 25,965,655 20,506 1995 30 Years Miramonte Scottsdale, AZ 1,132,500 8,846,622 9,979,122 8,002 1983 30 Years Mission Palms Tucson, AZ 2,023,400 18,300,354 20,323,754 392,022 1980 30 Years Morningside (Evans) Scottsdale, AZ 670,470 12,591,349 13,261,819 10,468 1989 30 Years Mountain Park Ranch Phoenix, AZ 1,662,332 18,223,755 19,886,087 15,697 1994 30 Years Mountain Run (WRP) Albuquerque, NM 2,304,000 20,818,931 23,122,931 451,625 1985 30 Years Mountain Terrace Stevenson Ranch, CA 3,979,000 36,004,130 39,983,130 1,297,678 1992 30 Years Newport Cove Henderson, NV 700,300 7,129,200 7,829,500 1,194,422 1983 30 Years Newport Heights Seattle, WA 391,200 3,749,329 4,140,529 468,798 1985 30 Years North Creek Heights Seattle, WA 753,800 6,824,185 7,577,985 144,788 1990 30 Years North Hill Atlanta, GA 2,525,000 18,567,664 21,092,664 220,601 1984 30 Years Northampton 1 Largo, MD 1,843,200 18,716,660 20,559,860 2,346,885 1977 30 Years Northampton 2 Largo, MD 1,513,500 15,413,864 16,927,364 1,559,004 1988 30 Years Northgate Village San Antonio, TX 660,100 6,182,719 6,842,819 1,176,859 1984 30 Years Northlake (FL) Jacksonville, FL 1,166,000 10,494,125 11,660,125 89,530 1989 30 Years Northwoods Village Cary, NC 1,368,900 11,461,117 12,830,017 82,552 1986 30 Years Oak Mill 2 Germantown, MD 854,133 8,935,642 9,789,775 923,107 1985 30 Years Oak Park North Agoura Hills, CA 1,706,900 15,449,375 17,156,275 1,184,275 1990 30 Years Oak Park South Agoura Hills, CA 1,683,800 15,295,520 16,979,320 1,265,504 1989 30 Years
S-6
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997 Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net)(1) - ---------------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - ---------------------------------------------------------------------------------------------------------------------------------- Oaks of Lakebridge Ormond Beach, FL 0 413,700 3,742,503 2,100 451,071 Ocean Walk Key West, FL 21,099,078 2,834,900 25,517,673 0 (0) Olentangy Joint Venture Columbus, OH 0 3,032,336 20,862,191 0 8,151,199 One Eton Square Tulsa, OK 0 1,570,100 14,130,762 0 199,151 Orange Grove Village Tucson, AZ (P) 1,813,154 14,867,839 0 0 Orchard of Landen Maineville, OH (E) 2,496,000 17,720,225 1,300 18,489 Orchard Ridge Seattle, WA 0 482,600 4,343,826 3,000 186,875 Overlook San Antonio, TX 0 1,100,000 9,900,000 200 59,744 Paces Station/Paces on the Green Atlanta, GA 0 4,801,500 32,630,170 0 0 Panther Ridge (WRP) Seattle, WA 0 1,055,800 9,501,841 0 94,493 Paradise Pointe Dania, FL 0 1,493,800 13,452,161 0 1,369,517 Park Knoll Atlanta, GA 0 2,904,500 26,140,219 4,300 1,390,997 Park Meadow (Evans) Gilbert, AZ (P) 835,217 15,094,226 0 0 Park Place I & II Plymouth, MN 17,820,599 2,428,200 21,853,006 7,400 649,815 Park West Austin, TX 0 648,605 4,541,683 100 543,341 Park West (CA) Los Angeles, CA 0 3,033,300 27,299,323 100 425,857 Parkridge Place Las Colinas, TX 0 6,430,800 17,073,584 0 (O) Parkview Terrace Redlands, CA 22,650,000 4,969,200 35,650,329 0 0 Parkwood East (WRP) Fort Collins, CO 0 1,644,000 14,796,301 0 26,384 Pine Harbour Orlando, FL 0 1,661,000 14,948,625 3,300 837,768 Pine Meadow Greensboro, NC 4,852,620 719,300 6,474,036 1,350 254,030 Pines at Cloverlane Pittsfield Township, MI 0 1,906,600 17,159,269 1,200 2,825,711 Pines of Springdale West Palm Beach, FL 0 471,200 4,240,800 2,667 457,139 Plum Tree Park (WRP) Seattle, WA 0 1,133,400 10,200,420 0 42,215 Pointe at South Mountain Phoenix, AZ 0 2,228,800 20,058,955 0 80,664 Pointe East Redmond, WA 0 601,800 5,416,489 800 135,313 Port Royale Ft. Lauderdale, FL 0 1,752,100 15,769,281 2,100 521,095 Port Royale II Ft. Lauderdale, FL 0 1,015,700 9,141,355 6,500 298,668 Portofino (Evans) Chino Hills, CA 0 3,572,400 14,627,241 0 0 Preakness Antioch, TN (E) 1,560,000 7,653,521 1,300 21,698 Preserve at Squaw Peak Phoenix, AZ (P) 517,788 8,518,393 0 0 Preston Bend Dallas, TX 8,719,000 1,083,000 9,925,055 2,200 52,194 Preston in Willowbend Plano, TX 0 872,500 7,852,675 0 1,355,716 Preston Lake Atlanta, GA 0 1,430,000 12,877,986 34,993 1,027,970 Promenade Terrace Corona Hills, CA 16,221,259 2,281,000 20,529,476 1,800 191,484 Promontory Pointe 1 & 2 Phoenix, AZ (P) 2,355,509 30,388,237 0 0 Pueblo Villas Albuquerque, NM 0 854,300 7,688,783 1,300 188,040 Quail Cove (WRP) Salt Lake City, UT 0 2,271,800 20,446,430 0 88,480 Raindance (WRP) Oklahoma City, OK 0 1,147,600 10,341,301 0 45,344 Rancho Murietta (Evans) Tempe, AZ 0 1,766,282 17,548,512 0 0 Ravens Crest Plainsboro, NJ (O) 4,673,000 42,057,149 2,850 1,590,420 Redlands Lawn and Tennis Redlands, CA 24,050,000 4,822,320 26,312,144 0 0 Reflections at the Lakes Las Vegas, NV 0 1,896,000 17,063,715 0 42,277 Regatta (WRP) San Antonio, TX 0 818,500 7,366,677 0 25,844 Regency Palms Huntington Beach, CA 0 1,856,500 16,708,950 900 315,425 Regency Woods Des Moines, IA 6,351,345 745,100 6,705,430 0 0 Registry (WRP) Denver, CO 0 1,303,100 11,727,649 0 22,556 Reserve Square Combined Cleveland, OH 0 2,618,352 23,565,022 500 9,291,751 Ridgegate (WRP) Seattle, WA 0 805,800 7,251,986 0 107,187 Ridgemont/Mountain Brook Chattanooga, TN 0 1,472,000 13,505,272 5,200 122,414 Ridgetop (WRP) Tacoma, WA 0 811,500 221,000 0 7,097,213 Ridgetree I & II Dallas, TX 0 2,094,600 18,851,177 20,600 1,125,099
Gross Amount Carried at Close of Description Period 12/31/97 - -------------------------------------------------------------------------------------------------------------------- Building & Apartment Name Location Land Fixtures(A) Total(B) - -------------------------------------------------------------------------------------------------------------------- Oaks of Lakebridge Ormond Beach, FL 415,800 4,193,574 4,609,374 Ocean Walk Key West, FL 2,834,900 25,517,673 28,352,573 Olentangy Joint Venture Columbus, OH 3,032,336 29,013,390 32,045,726 One Eton Square Tulsa, OK 1,570,100 14,329,913 15,900,013 Orange Grove Village Tucson, AZ 1,813,154 14,867,839 16,680,993 Orchard of Landen Maineville, OH 2,497,300 17,738,714 20,236,014 Orchard Ridge Seattle, WA 485,600 4,530,701 5,016,301 Overlook San Antonio, TX 1,100,200 9,959,744 11,059,944 Paces Station/Paces on the Green Atlanta, GA 4,801,500 32,630,170 37,431,670 Panther Ridge (WRP) Seattle, WA 1,055,800 9,596,334 10,652,134 Paradise Pointe Dania, FL 1,493,800 14,821,678 16,315,478 Park Knoll Atlanta, GA 2,908,800 27,531,216 30,440,016 Park Meadow (Evans) Gilbert, AZ 835,217 15,094,226 15,929,443 Park Place I & II Plymouth, MN 2,435,600 22,502,821 24,938,421 Park West Austin, TX 648,705 5,085,024 5,733,729 Park West (CA) Los Angeles, CA 3,033,400 27,725,180 30,758,580 Parkridge Place Las Colinas, TX 6,430,800 17,073,584 23,504,384 Parkview Terrace Redlands, CA 4,969,200 35,650,329 40,619,529 Parkwood East (WRP) Fort Collins, CO 1,644,000 14,822,685 16,466,685 Pine Harbour Orlando, FL 1,664,300 15,786,393 17,450,693 Pine Meadow Greensboro, NC 720,650 6,728,066 7,448,716 Pines at Cloverlane Pittsfield Township, MI 1,907,800 19,984,980 21,892,780 Pines of Springdale West Palm Beach, FL 473,867 4,697,939 5,171,806 Plum Tree Park (WRP) Seattle, WA 1,133,400 10,242,635 11,376,035 Pointe at South Mountain Phoenix, AZ 2,228,800 20,139,619 22,368,419 Pointe East Redmond, WA 602,600 5,551,802 6,154,402 Port Royale Ft. Lauderdale, FL 1,754,200 16,290,376 18,044,576 Port Royale II Ft. Lauderdale, FL 1,022,200 9,440,023 10,462,223 Portofino (Evans) Chino Hills, CA 3,572,400 14,627,241 18,199,641 Preakness Antioch, TN 1,561,300 7,675,219 9,236,519 Preserve at Squaw Peak Phoenix, AZ 517,788 8,518,393 9,036,181 Preston Bend Dallas, TX 1,085,200 9,977,249 11,062,449 Preston in Willowbend Plano, TX 872,500 9,208,391 10,080,891 Preston Lake Atlanta, GA 1,465,893 13,905,956 15,371,849 Promenade Terrace Corona Hills, CA 2,282,800 20,720,960 23,003,760 Promontory Pointe 1 & 2 Phoenix, AZ 2,355,509 30,388,237 32,743,746 Pueblo Villas Albuquerque, NM 855,600 7,876,823 8,732,423 Quail Cove (WRP) Salt Lake City, UT 2,271,800 20,534,910 22,806,710 Raindance (WRP) Oklahoma City, OK 1,147,600 10,386,645 11,534,245 Rancho Murietta (Evans) Tempe, AZ 1,766,282 17,548,512 19,314,794 Ravens Crest Plainsboro, NJ 4,675,850 43,647,569 48,323,419 Redlands Lawn and Tennis Redlands, CA 4,822,320 26,312,144 31,134,464 Reflections at the Lakes Las Vegas, NV 1,896,000 17,105,992 19,001,992 Regatta (WRP) San Antonio, TX 818,500 7,392,520 8,211,020 Regency Palms Huntington Beach, CA 1,857,400 17,024,375 18,881,775 Regency Woods Des Moines, IA 745,100 6,705,430 7,450,530 Registry (WRP) Denver, CO 1,303,100 11,750,205 13,053,305 Reserve Square Combined Cleveland, OH 2,618,852 32,856,773 35,475,625 Ridgegate (WRP) Seattle, WA 805,800 7,359,173 8,164,973 Ridgemont/Mountain Brook Chattanooga, TN 1,477,200 13,627,686 15,104,886 Ridgetop (WRP) Tacoma, WA 811,500 7,318,213 8,129,713 Ridgetree I & II Dallas, TX 2,115,200 19,976,276 22,091,476
Life Used to Description Compute - ------------------------------------------------------------------------------------------------- Depreciation in Accumulated Date of Latest Income Apartment Name Location Depreciation Construction Statement(C) - --------------------------------------------------------------------------------------------------------------------- Oaks of Lakebridge Ormond Beach, FL 691,385 1984 30 Years Ocean Walk Key West, FL 51,779 1990 30 Years Olentangy Joint Venture Columbus, OH 16,047,783 1972 30 Years One Eton Square Tulsa, OK 321,009 1985 30 Years Orange Grove Village Tucson, AZ 13,983 1986/1995 30 Years Orchard of Landen Maineville, OH 126,481 1985/1988 30 Years Orchard Ridge Seattle, WA 595,509 1988 30 Years Overlook San Antonio, TX 234,278 1985 30 Years Paces Station/Paces on the Green Atlanta, GA 411,876 1984-1988/1989 30 Years Panther Ridge (WRP) Seattle, WA 212,607 1980 30 Years Paradise Pointe Dania, FL 1,864,192 1987-90 30 Years Park Knoll Atlanta, GA 3,979,207 1983 30 Years Park Meadow (Evans) Gilbert, AZ 12,704 1986 30 Years Park Place I & II Plymouth, MN 1,130,133 1986 30 Years Park West Austin, TX 819,900 1985 30 Years Park West (CA) Los Angeles, CA 2,327,056 1987-90 30 Years Parkridge Place Las Colinas, TX 72,945 1985 30 Years Parkview Terrace Redlands, CA 32,340 1986 30 Years Parkwood East (WRP) Fort Collins, CO 314,010 1986 30 Years Pine Harbour Orlando, FL 2,228,205 1991 30 Years Pine Meadow Greensboro, NC 391,654 1974 30 Years Pines at Cloverlane Pittsfield Township, MI 1,526,711 1975-79 30 Years Pines of Springdale West Palm Beach, FL 675,625 1985/87(x) 30 Years Plum Tree Park (WRP) Seattle, WA 218,141 1991 30 Years Pointe at South Mountain Phoenix, AZ 427,547 1988 30 Years Pointe East Redmond, WA 631,778 1988 30 Years Port Royale Ft. Lauderdale, FL 1,855,727 1988 30 Years Port Royale II Ft. Lauderdale, FL 648,784 1991 30 Years Portofino (Evans) Chino Hills, CA 14,186 1989 30 Years Preakness Antioch, TN 58,736 1986 30 Years Preserve at Squaw Peak Phoenix, AZ 7,128 1990 30 Years Preston Bend Dallas, TX 199,067 1986 30 Years Preston in Willowbend Plano, TX 1,380,925 1985 30 Years Preston Lake Atlanta, GA 2,017,909 1984-86 30 Years Promenade Terrace Corona Hills, CA 1,088,860 1990 30 Years Promontory Pointe 1 & 2 Phoenix, AZ 25,964 1984/1996 30 Years Pueblo Villas Albuquerque, NM 431,289 1975 30 Years Quail Cove (WRP) Salt Lake City, UT 441,451 1987 30 Years Raindance (WRP) Oklahoma City, OK 251,597 1984 30 Years Rancho Murietta (Evans) Tempe, AZ 15,488 1983 30 Years Ravens Crest Plainsboro, NJ 5,422,677 1984 30 Years Redlands Lawn and Tennis Redlands, CA 25,069 1986 30 Years Reflections at the Lakes Las Vegas, NV 364,317 1989 30 Years Regatta (WRP) San Antonio, TX 163,257 1983 30 Years Regency Palms Huntington Beach, CA 1,135,696 1969 30 Years Regency Woods Des Moines, IA 14,880 1986 30 Years Registry (WRP) Denver, CO 248,875 1987 30 Years Reserve Square Combined Cleveland, OH 4,271,742 1973 30 Years Ridgegate (WRP) Seattle, WA 158,777 1990 30 Years Ridgemont/Mountain Brook Chattanooga, TN 248,558 1987/1988 30 Years Ridgetop (WRP) Tacoma, WA 164,208 1988 30 Years Ridgetree I & II Dallas, TX 1,175,476 1983 30 Years
S-7
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997 Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net)(1) - --------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - --------------------------------------------------------------------------------------------------------------------------- Ridgeway Commons Memphis, TN 0 568,400 5,115,501 0 0 Ridgewood Village San Diego, CA 0 5,760,000 14,019,345 0 0 Rincon Houston, TX 0 4,400,000 16,725,229 1,700 29,725 River Bend Tampa, FL 0 602,945 2,161,915 0 2,070,955 River Oak Louisville, KY 0 1,253,900 11,285,573 0 0 Riverside Park Tulsa, OK (E) 1,440,000 12,374,977 900 12,033 Rock Creek Corrboro, NC 0 895,100 8,056,360 600 77,277 Rosehill Pointe Lenexa, KS 0 2,073,400 18,660,475 19,600 1,281,269 Roswell Atlanta, GA 8,100,000 1,217,500 10,957,845 2,500 646,187 Royal Oak Eagan, MN 13,148,135 1,598,200 14,383,478 0 (0) Sabal Palm Pompano Beach, FL 0 3,536,000 20,167,175 2,000 219,699 Sabal Pointe (M) Coral Springs, FL 0 1,941,900 17,477,592 9,700 247,208 Saddle Creek Carrollton, TX 0 703,300 6,329,899 4,800 2,989,706 Saddle Ridge Loudoun County, VA 0 1,351,800 12,165,984 13,000 255,748 San Tropez (WRP) Phoenix, AZ 0 2,738,000 24,641,839 0 68,367 Sawgrass Cove Bradenton, FL 0 1,671,200 15,041,179 2,950 950,843 Scottsdale Courtyards Scottsdale, AZ (P) 2,979,269 25,007,146 0 0 Scottsdale Meadows Scottsdale, AZ 0 1,512,000 11,382,507 0 0 Sedona Ridge Ahwatukee, AZ 0 5,508,000 9,700,530 0 53,410 Settler's Pointe (WRP) Salt Lake City, UT 0 1,715,100 15,436,275 0 40,529 Seventh & James (WRP) Seattle, WA 0 663,800 5,974,099 0 32,273 Shadow Brook Phoenix, AZ (P) 3,065,496 18,328,501 0 0 Sheffield Court Arlington, VA 0 3,349,350 30,246,228 0 2,064,923 Shores at Andersen Springs Chandler, AZ (P) 2,743,816 22,732,844 0 0 Silver Creek Phoenix, AZ (P) 712,102 6,688,724 0 0 Silver Shadow Las Vegas, NV 0 952,100 8,568,921 1,340 302,146 Silver Springs (FL) Jacksonville, FL 0 1,828,700 16,458,192 0 23,594 Silver Springs Tulsa, OK 0 672,500 6,052,669 0 8,702 Silverwood Mission, KS 11,000,000 1,230,000 11,196,244 0 453,320 Skyline Gateway Tucson, AZ 0 1,128,400 10,155,997 0 49,230 Sleepy Hollow Kansas City, MO 12,500,000 2,193,547 13,689,443 0 1,561,709 Songbird San Antonio, TX 6,844,309 1,080,500 9,724,928 2,000 254,902 Sonnet Cove I Lexington, KY 0 183,407 2,422,860 0 1,813,961 Sonnet Cove II Lexington, KY 0 100,000 1,108,405 0 821,113 Sonoran (Evans) Phoenix, AZ (P) 2,361,922 31,760,934 0 0 South Creek Mesa, AZ 16,236,161 2,669,300 24,023,758 2,000 316,264 Southbank Mesa, AZ 0 319,600 2,876,874 10,900 344,878 Spice Run Naperville, IL 0 2,578,900 23,210,030 800 442,721 Spinnaker Cove Hermitage, TN 14,205,000 1,420,500 12,789,873 41,231 448,527 Springs Colony Orlando, FL 9,350,000 631,900 5,687,010 8,500 710,248 Springs of Country Woods Salt Lake City, UT 0 3,547,400 31,926,882 0 71,221 Sterling Point Denver, CO 0 935,500 8,419,865 0 30,474 Stonelake Club Ocala, FL 0 250,000 2,024,968 100 388,685 Stoney Creek Tacoma, WA 0 1,215,200 10,937,144 0 12,395 Summer Ridge Riverside, CA 0 600,500 5,404,571 1,900 65,362 Summerset Village Chatsworth, CA 0 2,628,500 23,656,668 2,200 125,536 Summit at Lake Union Seattle, WA 0 1,424,600 12,821,002 0 81,917 Summit Chase Coral Springs, FL 0 1,120,000 4,413,035 1,700 82,165 Sun Creek (Evans) Glendale, AZ (P) 896,929 7,044,103 0 0 Sunny Oak Village Overland Park, KS 0 2,222,600 20,003,050 22,350 1,228,997 Sunrise Springs Las Vegas, NV 0 972,600 8,753,491 2,700 249,026 Suntree Village (Evans) Oro Valley, AZ (P) 1,571,745 13,067,845 0 0
Gross Amount Carried at Close of Description Period 12/31/97 - ------------------------------------------------------------------------------------------------------------------ Building & Accumulated Apartment Name Location Land Fixtures(A) Total(B) Depreciation - ------------------------------------------------------------------------------------------------------------------ Ridgeway Commons Memphis, TN 568,400 5,115,501 5,683,901 11,509 Ridgewood Village San Diego, CA 5,760,000 14,019,345 19,779,345 19,152 Rincon Houston, TX 4,401,700 16,754,954 21,156,654 486,390 River Bend Tampa, FL 602,945 4,232,870 4,835,815 3,002,362 River Oak Louisville, KY 1,253,900 11,285,573 12,539,473 24,275 Riverside Park Tulsa, OK 1,440,900 12,387,010 13,827,910 90,734 Rock Creek Corrboro, NC 895,700 8,133,637 9,029,337 320,980 Rosehill Pointe Lenexa, KS 2,093,000 19,941,744 22,034,744 1,238,431 Roswell Atlanta, GA 1,220,000 11,604,032 12,824,032 1,447,662 Royal Oak Eagan, MN 1,598,200 14,383,478 15,981,678 29,864 Sabal Palm Pompano Beach, FL 3,538,000 20,386,874 23,924,874 459,000 Sabal Pointe (M) Coral Springs, FL 1,951,600 17,724,799 19,676,399 1,185,004 Saddle Creek Carrollton, TX 708,100 9,319,605 10,027,705 1,925,906 Saddle Ridge Loudoun County, VA 1,364,800 12,421,732 13,786,532 972,500 San Tropez (WRP) Phoenix, AZ 2,738,000 24,710,205 27,448,205 512,245 Sawgrass Cove Bradenton, FL 1,674,150 15,992,022 17,666,172 2,143,633 Scottsdale Courtyards Scottsdale, AZ 2,979,269 25,007,146 27,986,415 21,828 Scottsdale Meadows Scottsdale, AZ 1,512,000 11,382,507 12,894,507 10,229 Sedona Ridge Ahwatukee, AZ 5,508,000 9,753,940 15,261,940 265,997 Settler's Pointe (WRP) Salt Lake City, UT 1,715,100 15,476,804 17,191,904 329,025 Seventh & James (WRP) Seattle, WA 663,800 6,006,372 6,670,172 125,673 Shadow Brook Phoenix, AZ 3,065,496 18,328,501 21,393,997 16,746 Sheffield Court Arlington, VA 3,349,350 32,311,151 35,660,501 3,231,742 Shores at Andersen Springs Chandler, AZ 2,743,816 22,732,844 25,476,660 20,075 Silver Creek Phoenix, AZ 712,102 6,688,724 7,400,826 6,190 Silver Shadow Las Vegas, NV 953,440 8,871,067 9,824,507 1,262,807 Silver Springs (FL) Jacksonville, FL 1,828,700 16,481,786 18,310,486 142,541 Silver Springs Tulsa, OK 672,500 6,061,371 6,733,871 137,860 Silverwood Mission, KS 1,230,000 11,649,564 12,879,564 1,452,746 Skyline Gateway Tucson, AZ 1,128,400 10,205,227 11,333,627 223,810 Sleepy Hollow Kansas City, MO 2,193,547 15,251,152 17,444,699 4,866,627 Songbird San Antonio, TX 1,082,500 9,979,830 11,062,330 485,613 Sonnet Cove I Lexington, KY 183,407 4,236,821 4,420,228 2,837,430 Sonnet Cove II Lexington, KY 100,000 1,929,518 2,029,518 1,333,319 Sonoran (Evans) Phoenix, AZ 2,361,922 31,760,934 34,122,856 27,005 South Creek Mesa, AZ 2,671,300 24,340,022 27,011,322 1,316,091 Southbank Mesa, AZ 330,500 3,221,752 3,552,252 499,946 Spice Run Naperville, IL 2,579,700 23,652,751 26,232,451 882,510 Spinnaker Cove Hermitage, TN 1,461,731 13,238,400 14,700,131 291,074 Springs Colony Orlando, FL 640,400 6,397,258 7,037,658 902,698 Springs of Country Woods Salt Lake City, UT 3,547,400 31,998,103 35,545,503 680,475 Sterling Point Denver, CO 935,500 8,450,339 9,385,839 178,681 Stonelake Club Ocala, FL 250,100 2,413,653 2,663,753 467,496 Stoney Creek Tacoma, WA 1,215,200 10,949,539 12,164,739 235,210 Summer Ridge Riverside, CA 602,400 5,469,933 6,072,333 297,826 Summerset Village Chatsworth, CA 2,630,700 23,782,203 26,412,903 1,080,473 Summit at Lake Union Seattle, WA 1,424,600 12,902,919 14,327,519 266,259 Summit Chase Coral Springs, FL 1,121,700 4,495,200 5,616,900 114,037 Sun Creek (Evans) Glendale, AZ 896,929 7,044,103 7,941,032 6,593 Sunny Oak Village Overland Park, KS 2,244,950 21,232,047 23,476,997 1,197,980 Sunrise Springs Las Vegas, NV 975,300 9,002,517 9,977,817 1,077,228 Suntree Village (Evans) Oro Valley, AZ 1,571,745 13,067,845 14,639,590 12,572
Life Used to Description Compute - ---------------------------------------------------------------------- Depreciation in Date of Latest Income Apartment Name Location Construction Statement(C) - ---------------------------------------------------------------------------------------- Ridgeway Commons Memphis, TN 1970 30 Years Ridgewood Village San Diego, CA 1997 30 Years Rincon Houston, TX 1996 30 Years River Bend Tampa, FL 1971 30 Years River Oak Louisville, KY 1989 30 Years Riverside Park Tulsa, OK 1994 30 Years Rock Creek Corrboro, NC 1986 30 Years Rosehill Pointe Lenexa, KS 1984 30 Years Roswell Atlanta, GA 1985 30 Years Royal Oak Eagan, MN 1989 30 Years Sabal Palm Pompano Beach, FL 1989 30 Years Sabal Pointe (M) Coral Springs, FL 1995 30 Years Saddle Creek Carrollton, TX 1980 30 Years Saddle Ridge Loudoun County, VA 1989 30 Years San Tropez (WRP) Phoenix, AZ 1989 30 Years Sawgrass Cove Bradenton, FL 1991 30 Years Scottsdale Courtyards Scottsdale, AZ 1993 30 Years Scottsdale Meadows Scottsdale, AZ 1984 30 Years Sedona Ridge Ahwatukee, AZ 1988 30 Years Settler's Pointe (WRP) Salt Lake City, UT 1986 30 Years Seventh & James (WRP) Seattle, WA 1992 30 Years Shadow Brook Phoenix, AZ 1984 30 Years Sheffield Court Arlington, VA 1986 30 Years Shores at Andersen Springs Chandler, AZ 1989 30 Years Silver Creek Phoenix, AZ 1986 30 Years Silver Shadow Las Vegas, NV 1992 30 Years Silver Springs (FL) Jacksonville, FL 1985 30 Years Silver Springs Tulsa, OK 1984 30 Years Silverwood Mission, KS 1986 30 Years Skyline Gateway Tucson, AZ 1985 30 Years Sleepy Hollow Kansas City, MO 1987 30 Years Songbird San Antonio, TX 1981 30 Years Sonnet Cove I Lexington, KY 1972 30 Years Sonnet Cove II Lexington, KY 1974 30 Years Sonoran (Evans) Phoenix, AZ 1995 30 Years South Creek Mesa, AZ 1986-89 30 Years Southbank Mesa, AZ 1985 30 Years Spice Run Naperville, IL 1988 30 Years Spinnaker Cove Hermitage, TN 1986 30 Years Springs Colony Orlando, FL 1986 30 Years Springs of Country Woods Salt Lake City, UT 1982 30 Years Sterling Point Denver, CO 1979 30 Years Stonelake Club Ocala, FL 1986 30 Years Stoney Creek Tacoma, WA 1990 30 Years Summer Ridge Riverside, CA 1985 30 Years Summerset Village Chatsworth, CA 1985 30 Years Summit at Lake Union Seattle, WA 1995-1997 30 Years Summit Chase Coral Springs, FL 1985 30 Years Sun Creek (Evans) Glendale, AZ 1985 30 Years Sunny Oak Village Overland Park, KS 1984 30 Years Sunrise Springs Las Vegas, NV 1989 30 Years Suntree Village (Evans) Oro Valley, AZ 1986 30 Years
S-8 ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997
Cost Capitialized Subsequent Gross Amount Carried Initial Cost Acquisition at Close of Description to Company (Improvements, net)(1) Period 12/31/97 - ------------------------------------------------------------------------------------------------------------------------------------ Building & Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures Land Fixtures(A) - ------------------------------------------------------------------------------------------------------------------------------------ Superstition Vista/Heritage Point Mesa, AZ 0 2,307,357 28,479,012 0 0 2,307,357 28,479,012 Surprise Lake Village Tacoma, WA 0 1,830,200 16,471,470 0 85,303 1,830,200 16,556,773 Sutton Place Dallas, TX 0 1,316,500 11,848,717 41,900 2,512,250 1,358,400 14,360,967 Sycamore Creek Scottsdale, AZ (E) 3,150,000 19,068,201 900 13,124 3,150,900 19,081,325 Tamarind at Stoneridge Columbia, SC 0 1,053,800 9,490,859 0 (0) 1,053,800 9,490,859 Tamarlane Portland, ME 0 690,000 5,143,970 900 26,507 690,900 5,170,477 Tanasbourne Terrace Hillsboro, OR 0 1,873,000 16,857,220 3,700 844,799 1,876,700 17,702,019 Tanglewood (OR) Portland, OR 0 760,000 6,839,589 3,000 1,073,753 763,000 7,913,342 Tanglewood (VA) Manassas, VA 24,855,587 2,103,400 19,559,772 4,895 1,698,051 2,108,295 21,257,823 Terraces at Peachtree Atlanta, GA 0 582,800 5,245,560 700 399,025 583,500 5,644,585 The Arboretum Tucson, AZ (Q) 3,453,446 18,978,563 0 0 3,453,446 18,978,563 The Enclave Tempe, AZ (Q) 1,500,192 19,262,528 0 0 1,500,192 19,262,528 The Heritage Phoenix, AZ (P) 1,211,205 13,104,261 0 0 1,211,205 13,104,261 The Ingleside Phoenix, AZ 0 1,203,600 10,662,988 0 0 1,203,600 10,662,988 The Legends Tucson, AZ 0 2,729,788 17,866,476 0 0 2,729,788 17,866,476 The Meadows Mesa, AZ 0 650,000 15,408,042 0 0 650,000 15,408,042 The Palms Phoenix, AZ (P) 3,285,226 11,242,231 0 0 3,285,226 11,242,231 Place, The Fort Myers, FL 0 722,900 6,506,350 3,340 463,261 726,240 6,969,611 Seasons, The Boise, ID 0 604,400 5,439,624 3,600 296,957 608,000 5,736,581 The Trails at Dominion Houston, TX 25,859,751 2,259,000 35,693,699 2,800 299,173 2,531,800 35,992,872 The Willows Knoxville, TN 8,068,889 1,100,000 9,906,909 500 56,479 1,100,500 9,963,388 Tivoli Lakes Club Deerfield Beach, FL 0 1,804,200 16,237,641 0 17,450 1,804,200 16,255,091 Town Centre III Laurel, MD 6,042,201 982,300 9,301,830 0 1,337,232 982,300 10,639,062 Town Centre IV Laurel, MD 9,595,674 1,564,200 14,787,362 4,700 44,169 1,568,900 14,831,531 Towne Centre Kingwood, TX 0 1,290,000 11,517,230 1,300 65,714 1,291,300 11,582,944 Towne Square Chandler, AZ 0 1,924,710 36,366,334 0 0 1,924,710 36,366,334 Trails (CO), The Aurora, CO 0 1,217,800 8,525,346 100 1,316,571 1,217,900 9,841,917 Trails (NV), The Las Vegas, NV 0 3,076,200 27,685,764 3,000 846,263 3,079,200 28,532,027 Trails (TX), The Arlington, TX 0 616,700 5,550,590 21,300 606,375 638,000 6,156,965 Trail's End (WRP) San Antonio, TX 0 951,300 8,561,640 0 32,719 951,300 8,594,359 Trailway Pond I Burnsville, MN 4,913,909 476,800 4,291,344 0 (0) 476,800 4,291,344 Trailway Pond II Burnsville, MN 11,365,354 1,104,700 9,942,611 0 0 1,104,700 9,942,611 Trinity Lakes Cordova, TN (E) 1,980,000 14,937,161 1,200 25,292 1,981,200 14,962,453 University Park Toledo, OH 0 70,000 834,378 0 1,437,570 70,000 2,271,948 Valley Creek I Woodbury, MN 12,827,815 1,622,600 14,603,730 0 0 1,622,600 14,603,730 Valley Creek II Woodbury, MN 10,110,100 1,229,500 11,065,355 0 0 1,229,500 11,065,355 Via Ventura Phoenix, AZ 0 1,476,500 13,288,894 9,600 4,442,615 1,486,100 17,711,509 Villa Encanto Phoenix, AZ 0 2,884,447 22,092,558 0 0 2,884,447 22,092,558 Villa Madeira Phoenix, AZ 0 1,580,000 14,219,907 2,100 604,467 1,582,100 14,824,374 Villa Manana Phoenix, AZ 0 951,400 8,562,443 3,900 594,025 955,300 9,156,468 Villa Serenas Tucson, AZ 9,274,638 2,424,900 14,418,493 0 0 2,424,900 14,418,493 Villa Solana Laguna Hills, CA 0 1,663,500 14,971,366 1,600 894,305 1,665,100 15,865,671 Village at Lakewood Phoenix, AZ (Q) 3,166,411 13,811,768 0 0 3,166,411 13,811,768 Village at Seeley Lake Tacoma, WA 0 2,760,400 24,843,439 0 42,914 2,760,400 24,886,353 Village at Tanque Verde Tucson, AZ (Q) 1,434,838 7,126,993 0 0 1,434,838 7,126,993 Village Oaks Austin, TX 5,348,183 1,184,400 10,659,432 1,600 333,504 1,186,000 10,992,936 Village of Hampshire Toledo, OH 0 151,912 1,320,453 0 7,039,152 151,912 8,359,605 Village of Newport Federal Way, WA 0 414,900 3,733,899 1,400 273,557 416,300 4,007,456 Village of Sycamore Ridge Memphis, TN 0 621,300 5,591,828 200 14,910 621,500 5,606,738 Villas of Oak Creste San Antonio, TX 0 905,800 8,151,738 0 41,733 905,800 8,193,471 Vinings at Ashley Boynton Lake Beach, FL 24,150,000 3,519,900 23,340,219 0 0 3,519,900 23,340,219 Vista Del Lago Mission Viejo, CA 32,003,439 4,524,400 41,357,681 1,400 1,146,126 4,525,800 42,503,807
Life Used to Description Compute - ---------------------------------------------------------------------------------------------------- Depreciation in Accumulated Date of Legal Income Apartment Name Location Total(B) Depreciation Construction Statement (c) - ------------------------------------------------------------------------------------------------------------------------ Superstition Vista/Heritage Point Mesa, AZ 30,786,369 24,680 1987 30 Years Surprise Lake Village Tacoma, WA 18,386,973 356,880 1986 30 Years Sutton Place Dallas, TX 15,719,367 2,281,510 1985 30 Years Sycamore Creek Scottsdale, AZ 22,232,225 136,570 1984 30 Years Tamarind at Stoneridge Columbia, SC 10,544,659 82,084 1985 30 Years Tamarlane Portland, ME 5,861,377 101,568 1986 30 Years Tanasbourne Terrace Hillsboro, OR 19,578,719 2,219,894 1986-89 30 Years Tanglewood (OR) Portland, OR 8,676,342 1,111,520 1976 30 Years Tanglewood (VA) Manassas, VA 23,366,118 2,379,284 1987 30 Years Terraces at Peachtree Atlanta, GA 6,228,085 467,119 1987 30 Years The Arboretum Tucson, AZ 22,432,009 18,632 1987 30 Years The Enclave Tempe, AZ 20,762,720 16,197 1994 30 Years The Heritage Phoenix, AZ 14,315,466 11,428 1995 30 Years The Ingleside Phoenix, AZ 11,866,588 9,271 1995 30 Years The Legends Tucson, AZ 20,596,264 16,518 1995 30 Years The Meadows Mesa, AZ 16,058,042 13,136 1984 30 Years The Palms Phoenix, AZ 14,527,457 11,289 1990 30 Years Place, The Fort Myers, FL 7,695,851 923,559 1986 30 Years Seasons, The Boise, ID 6,344,581 745,408 1990 30 Years The Trails at Dominion Houston, TX 38,524,672 1,127,962 1992 30 Years The Willows Knoxville, TN 11,063,888 235,907 1987-1988 30 Years Tivoli Lakes Club Deerfield Beach, 30 Years FL 18,059,291 134,957 1991 30 Years Town Centre III Laurel, MD 11,621,362 1,268,507 1969 30 Years Town Centre IV Laurel, MD 16,400,431 1,554,184 1968 30 Years Towne Centre Kingwood, TX 12,874,244 408,693 1994 30 Years Towne Square Chandler, AZ 38,291,044 30,725 1987-1996 30 Years Trails (CO), The Aurora, CO 11,059,817 1,759,465 1986 30 Years Trails (NV), The Las Vegas,, NV 31,611,227 3,302,624 1988 30 Years Trails (TX), The Arlington, TX 6,794,965 888,529 1984 30 Years Trail's End (WRP) San Antonio, TX 9,545,659 197,375 1983 30 Years Trailway Pond I Burnsville, MN 4,768,144 8,964 1988 30 Years Trailway Pond II Burnsville, MN 11,047,311 20,688 1988 30 Years Trinity Lakes Cordova, TN 16,943,653 108,814 1985 30 Years University Park Toledo, OH 2,341,948 1,297,134 1965 30 Years Valley Creek I Woodbury, MN 16,226,330 30,187 1989 30 Years Valley Creek II Woodbury, MN 12,294,855 22,949 1990 30 Years Via Ventura Phoenix, AZ 19,197,609 2,185,107 1980 30 Years Villa Encanto Phoenix, AZ 24,977,005 20,046 1983 30 Years Villa Madeira Phoenix, AZ 16,406,474 1,921,248 1971 30 Years Villa Manana Phoenix, AZ 10,111,768 1,250,094 1971-85 30 Years Villa Serenas Tucson, AZ 16,843,393 65,839 1973 30 Years Villa Solana Laguna Hills, CA 17,530,771 2,196,894 1984 30 Years Village at Lakewood Phoenix, AZ 16,978,179 13,546 1988 30 Years Village at Seeley Lake Tacoma, WA 27,646,753 534,825 1990 30 Years Village at Tanque Verde Tucson, AZ 8,561,831 7,225 1984-1994 30 Years Village Oaks Austin, TX 12,178,936 433,603 1984 30 Years Village of Hampshire Toledo, OH 8,511,517 2,903,527 1950 30 Years Village of Newport Federal Way, WA 4,423,756 504,348 1987 30 Years Village of Sycamore Ridge Memphis, TN 6,228,238 47,175 1977 30 Years Villas of Oak Creste San Antonio, TX 9,099,271 187,591 1979 30 Years Vinings at Ashley Lake Boynton Beach, FL 26,860,119 32,655 1990 30 Years Vista Del Lago Mission Viejo, 30 Years CA 47,029,607 5,926,549 1986-88 30 Years
ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997
Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net)(1) - ---------------------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - ---------------------------------------------------------------------------------------------------------------------------------- Walden Wood Southfield, MI 5,895,724 833,300 7,499,662 1,400 951,415 Walnut Ridge Little Rock, AR 3,654,026 196,079 2,424,631 0 3,061,884 Warwick Station(WRP) Denver, CO 10,223,000 2,281,900 20,537,450 100 56,889 Waterford(WRP) San Antonio, TX 0 457,000 4,112,840 0 5,740 Waterford at the Lakes Kent, WA 0 3,100,200 16,343,191 0 0 Watermark Square Portland, OR 8,548,333 1,580,000 14,239,426 500 164,414 Waterstone Place Seattle, WA 0 2,950,900 26,558,353 13,100 2,482,718 Wellington(Salant) Silverdale, WA 8,264,153 1,097,300 9,876,034 2,000 460,910 Wellington Hill Manchester, NH 28,625,000 1,872,500 16,852,955 17,700 1,700,778 Wellsford Oaks(WRP) Tulsa, OK 0 1,310,500 11,794,290 0 41,827 Westridge(WRP) Tacoma, WA 0 3,501,900 31,517,540 0 85,539
Gross Amount Carried at Close of Period 12/31/97 - --------------------------------------------------------------------------------------------- Building & Apartment Name Location Land Fixtures Total (B) - ---------------------------------------------------------------------------------------------- Walden Wood Southfield, MI 834,700 8,451,077 9,285,777 Walnut Ridge Little Rock, AR 196,079 5,486,515 5,682,594 Warwick Station(WRP) Denver, CO 2,282,000 20,594,339 22,876,339 Waterford(WRP) San Antonio, TX 457,000 4,118,581 4,575,581 Waterford at the Lakes Kent, WA 3,100,200 16,343,191 19,443,391 Watermark Square Portland, OR 1,580,500 14,403,840 15,984,340 Waterstone Place Seattle, WA 2,964,000 29,041,071 32,005,071 Wellington(Salant) Silverdale, WA 1,099,300 10,336,944 11,436,244 Wellington Hill Manchester, NH 1,890,200 18,553,733 20,443,933 Wellsford Oaks(WRP) Tulsa, OK 1,310,500 11,836,117 13,146,617 Westridge(WRP) Tacoma, WA 3,501,900 31,603,079 35,104,979
Life Used to Description Compute - ----------------------------------------------------------------------------- Depreciation in Accumulated Date of Latest Income Apartment Name Location Depreciation Construction Statement(C) - ---------------------------------------------------------------------------------------------- Walden Wood Southfield, MI 1,285,958 1972 30 Years Walnut Ridge Little Rock, AR 2,883,808 1975 30 Years Warwick Station(WRP) Denver, CO 433,103 1986 30 Years Waterford(WRP) San Antonio, TX 93,042 1983 30 Years Waterford at the Lakes Kent, WA 480,862 1990 30 Years Watermark Square Portland, OR 405,091 1990 30 Years Waterstone Place Seattle, WA 4,408,853 1990 30 Years Wellington(Salant) Silverdale, WA 1,007,298 1990 30 Years Wellington Hill Manchester, NH 2,506,313 1987 30 Years Wellsford Oaks(WRP) Tulsa, OK 259,729 1991 30 Years Westridge(WRP) Tacoma, WA 686,050 1987/1991 30 Years
S-10 ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997 Cost Capitalized Subsequent to Initial Cost to Acquisition Description Company (Improvements, net) (I) - ------------------------------------------------------------------------------------------------------------------- Building & Building & Apartment Name Location Encumbrances Land Fixtures Land Fixtures - ------------------------------------------------------------------------------------------------------------------- Westwood Pines Tamarac, FL 0 1,526,200 13,735,152 0 0 White Bear Woods White Bear Lake, MN 14,184,170 1,621,300 14,591,904 0 0 Whitedove Pointe (WRP) Seattle, WA 0 605,300 5,447,856 0 14,340 Wilde Lake Richmond, VA 4,440,000 934,600 8,411,613 12,600 193,734 Williamsburg Square Little Rock, AR 3,288,623 315,000 1,745,958 0 3,371,274 Willow Brook (NC) Durham, NC 0 1,408,000 7,105,081 1,500 38,550 Willowglen Aurora, CO 0 1,708,000 15,371,641 1,200 572,196 Windemere Mesa, AZ 6,244,353 949,000 8,653,152 300 38,442 Windmill Colorado Springs, CO 0 395,544 4,953,156 100 561,634 Windridge Laguna Niguel, CA (O) 2,660,800 23,947,096 2,100 414,946 Windridge (WRP) Tacoma, WA 0 322,700 2,904,779 0 6,113 Windrush Oklahoma City, OK 0 588,800 5,311,532 0 54,821 Winterwood Charlotte, NC 12,127,756 1,720,100 15,481,455 1,700 1,123,101 Wood Creek (CA) Pleasant Hill, CA 0 9,728,000 22,992,918 1,900 93,025 Wood Crest Villa Westland, MI 0 925,900 8,333,827 0 (O) Wood Lane Place Woodbury, MN 14,014,000 2,003,300 18,029,538 0 0 Woodbridge (N) Cary, NC 4,766,485 1,981,900 17,839,380 100 217,126 Woodcreek Beaverton, OR 11,345,849 1,753,700 15,783,764 2,100 1,308,090 Woodlake at Killearn Tallahassee, FL 0 1,404,300 12,638,426 3,855 953,291 Woodland Hills Decatur, GA 0 1,223,900 11,017,542 700 294,522 Woodland Meadows Ann Arbor, MI 0 2,003,600 18,032,640 0 8,575 Woodland Oaks Tulsa, OK 0 893,100 8,038,166 0 55,909 Woodlands of Minnetonka Minnetonka, MN 0 2,392,500 13,557,500 0 0 Woodmoor Austin, TX 0 649,300 5,843,200 4,500 932,671 Woods at North Bend Raleigh, NC 0 1,039,000 9,350,616 500 700,511 Woodscape Raleigh, NC 0 956,000 8,603,550 1,300 60,098 Woodside Lorton, VA 0 1,308,100 12,503,220 17,900 281,207 Wyndridge 2 Memphis, TN 14,135,000 1,486,000 13,586,157 2,000 210,964 Wyndridge 3 Memphis, TN 10,855,000 1,500,000 13,505,510 2,500 196,045 Yorktowne at Olde Mill Millersville, MD 0 216,000 1,330,710 0 4,632,854 Yuma Court Colorado Springs, CO 0 113,163 836,429 100 117,614 Development Properties (R) 0 8,271,910 36,040,199 0 0 Operating Partnership Chicago, IL 0 0 88,566 0 0 Management Business Chicago, IL 0 0 3,442,962 1,000 14,414,292 -------------- ------------ -------------- ---------- ------------ TOTAL $1,232,242,100 $790,764,741 $6,054,502,781 $1,215,488 $274,952,132 ============== ============ ============== ========== ============
Gross Amount Carried at Close of Life Used Period 12/31/97 to Compute - ---------------------------------------------------------------------------------------------------------------------- Depreciation in Latest Income Building & Accumulated Date of Statement Land Fixtures (A) Total (B) Depreciation Construction (C) - ------------------------------------------------------------------------------------------------------------------------------------ Westwood Pines Tamarac, FL 1,526,200 13,735,152 15,261,352 28,369 1991 30 Years White Bear Woods White Bear Lake, MN 1,621,300 14,591,904 16,213,204 30,180 1989 30 Years Whitedove Pointe (WRP) Seattle, WA 605,300 5,462,196 6,067,496 115,546 1992 30 Years Wilde Lake Richmond, VA 947,200 8,605,347 9,552,547 329,313 1989 30 Years Williamsburg Square Little Rock, AR 315,000 5,117,232 5,432,232 2,529,820 1974 30 Years Willow Brook (NC) Durham, NC 1,409,500 7,143,631 8,553,131 170,045 1986 30 Years Willowglen Aurora, CO 1,709,200 15,943,837 17,653,037 783,226 1983 30 Years Windemere Mesa, AZ 949,300 8,691,593 9,640,893 169,704 1986 30 Years Windmill Colorado Springs, CO 395,644 5,514,790 5,910,434 1,135,695 1985 30 Years Windridge Laguna Niguel, CA 2,662,900 24,362,042 27,024,942 2,728,806 1989 30 Years Windridge (WRP) Tacoma, WA 322,700 2,910,892 3,233,592 64,341 1989 30 Years Windrush Oklahoma City, OK 588,800 5,366,353 5,955,153 119,419 1982 30 Years Winterwood Charlotte, NC 1,721,800 16,604,556 18,326,356 2,431,640 1986 30 Years Wood Creek (CA) Pleasant Hill, CA 9,729,900 23,085,943 32,815,843 416,329 1987 30 Years Wood Crest Villa Westland, MI 925,900 8,333,827 9,259,727 21,418 1970 30 Years Wood Lane Place Woodbury, MN 2,003,300 18,029,538 20,032,838 36,704 1989 30 Years Woodbridge (N) Cary, NC 1,982,000 18,056,506 20,038,506 1,229,658 1993-95 30 Years Woodcreek Beaverton, OR 1,755,800 17,091,854 18,847,654 2,198,878 1982-84 30 Years Woodlake at Killearn Tallahassee, FL 1,408,155 13,591,717 14,999,872 1,951,520 1986 30 Years Woodland Hills Decatur, GA 1,224,600 11,312,064 12,536,664 702,025 1985 30 Years Woodland Meadows Ann Arbor, MI 2,003,600 18,041,215 20,044,815 149,772 1987-1989 30 Years Woodland Oaks Tulsa, OK 893,100 8,094,075 8,987,175 178,918 1983 30 Years Woodlands of Minnetonka Minnetonka, MN 2,392,500 13,557,500 15,950,000 12,818 1988 30 Years Woodmoor Austin, TX 653,800 6,775,871 7,429,671 1,012,769 1981 30 Years Woods at North Bend Raleigh, NC 1,039,500 10,051,127 11,090,627 840,918 1983 30 Years Woodscape Raleigh, NC 957,300 8,663,648 9,620,948 416,109 1979 30 Years Woodside Lorton, VA 1,326,000 12,784,427 14,110,427 1,402,458 1987 30 Years Wyndridge 2 Memphis, TN 1,488,000 13,797,121 15,285,121 277,559 1988 30 Years Wyndridge 3 Memphis, TN 1,502,500 13,701,555 15,204,055 298,409 1988 30 Years Yorktowne at Olde Mill Millersville, MD 216,000 5,963,564 6,179,564 4,010,721 1974 30 Years Yuma Court Colorado Springs, CO 113,263 954,043 1,067,306 170,222 1985 30 Years Development Properties (R) 8,271,910 36,040,199 44,312,109 0 (R) Operating Partnership Chicago, IL 0 88,566 88,566 42,766 (H) Management Business Chicago, IL 1,000 17,857,254 17,858,254 8,109,998 (G) ------------ -------------- -------------- ------------ TOTAL $791,980,229 $6,329,454,913 $7,121,435,142 $444,761,975 ============ ============== ============== ============
S-11 SCHEDULE III ERP OPERATING LIMITED PARTNERSHIP Real Estate and Accumulated Depreciation December 31, 1997 NOTES: (A) The balance of furniture & fixtures included in the total amount was $232,636,142 as of December 31, 1997. (B) The aggregate cost for Federal Income Tax purposes as of December 31, 1997 was approximately $6.2 billion. (C) The life to compute depreciation for furniture & fixtures is 7 years. (D) These two properties are encumbered by $14,947,187 in bonds. (E) These seventeen properties are encumbered by $136,000,000 in bonds. (F) These four properties are encumbered by $15,500,000 in bonds. (G) This asset consists of various acquisition dates and represents furniture, fixtures and equipment owned by the Management Business. (H) This asset consists of various acquisition dates and represents furniture, fixtures and equipment owned by the Operating Partnership. (I) Improvements are net of write-off of fully depreciated assets which are no longer in service. (J) Combined with Cedar Cove. (K) Formerly known as Oxford & Sussex. (L) Formerly known as Post Place. (M) Formerly known as The Vinings at Coral Springs. (N) Formerly known as The Plantations (NC). (O) These five properties are pledged as additional collateral in connection with the tax-exempt bond refinancing. (P) These twenty-one properties are encumbered by $133,669,779 in bonds. (Q) These five properties are encumbered by a $50,200,125 note payable. (R) Balances represent development properties Montierra, The Retreat and Vista Grove. These apartment communities are currently under construction and/or are in the process of being leased up. * Four Lakes was constructed in phases between 1968 & 1988. (#) The Lodge-Texas was struck by a tornado that destroyed most of the property. The property was reconstructed during 1989 & 1990. (x) Pines of Springdale was constructed in phases between 1985 & 1987. S-11 EX-10.6 2 AMENDMENT # 1 TO AMENDED & RESTATED AGREEMENT Exhibit 10.6 AMENDMENT NO. 1 TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EVANS WITHYCOMBE RESIDENTIAL, L.P. THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EVANS WITHYCOMBE RESIDENTIAL, L.P. (this "Amendment"), effective as of the Effective Time (as defined in the Agreement and Plan of Merger dated as of August 27, 1997 ("Merger Agreement") between Equity Residential Properties Trust and Evans Withycombe Residential, Inc.). RECITALS: A. Evans Withycombe Residential, L.P., a Delaware limited partnership (the "Partnership"), is governed by that certain Amended and Restated Agreement of Limited Partnership of Evans Withycombe Residential, L.P. dated as of August 17, 1994 (the "Agreement"). B. Evans Withycombe Residential, Inc., a Maryland corporation ("EWR") and the general partner of the Partnership, and Equity Residential Properties Trust, a Maryland real estate investment ("EQR"), have merged pursuant to the Merger Agreement (the "Merger"). C. Pursuant to the Merger Agreement, the limited partners of the Partnership have approved the contribution of all the assets of the Partnership, subject to its liabilities, to ERP Operating Partnership, an Illinois limited partnership, on the terms and conditions provided for in the Merger Agreement (the "Asset Contribution"). D. In connection with the Merger and the Asset Contribution, the limited partners of the Partnership desire to amend the Agreement as hereinafter set forth. E. The limited partners of the Partnership further desire to ratify and confirm the decision of the Board of Directors of Evans Withycombe Residential, Inc., in its capacity as general partner of the Partnership, not to present for consideration by the limited partners of the Partnership that certain proposed Amendment to the Agreement dated as of June 18, 1997 (the "11.2 Amendment"). AGREEMENTS: 1. AMENDMENTS TO ARTICLE 1: PROVISIONS RELATING TO DEFINED TERMS. (a) Article 1 of the Partnership Agreement is hereby amended by adding thereto the following definitions: "ASSET CONTRIBUTION AGREEMENT" means the Asset Contribution Agreement dated August 27, 1997 between the Partnership and ERP. "EFFECTIVE TIME" means the time the State Department of Assessments and Taxation of Maryland accepts for record the Articles of Merger between EQR and Evans Withycombe Residential, Inc. "EQR" means Equity Residential Properties Trust, a Maryland real estate investment trust, as successor by merger to Evans Withycombe Residential, Inc., a Maryland corporation. "ERP" means ERP Operating Limited Partnership, an Illinois limited partnership of which EQR is the general partner. "ERP COMMON UNITS" mean units of common partnership interest in ERP. "ERP UNITS" mean units of partnership interest in ERP. (b) The definitions of "Option Plans", "Partnership Record Date" and "Value" are hereby amended to change the references therein to "General Partner" to "EQR." (c) The definition of "Common Shares" is hereby amended to read as follows: "COMMON SHARES" mean common shares of beneficial interest, $.01 par value per share, of EQR. 1 (d) The definition of "General Partner" is hereby amended to read as follows: "GENERAL PARTNER" means EQR and ERP, as co-general partners, and their respective successors as co-general partners of the Partnership. (e) The definition of "Transaction" in Article I is hereby deleted. (f) The definition of "Unit Adjustment Factor" is hereby amended to read as follows: "UNIT ADJUSTMENT FACTOR" means 1.00 until the Effective Time and from and after the Effective Time 0.50; provided that in the event that EQR (a) declares or pays a dividend on its outstanding Common Shares in Common Shares or makes a distribution to all holders of its outstanding Common Shares in Common Shares, (b) subdivides its outstanding Common Shares or (c) combines its outstanding Common Shares into a smaller number of Common Shares, the Unit Adjustment Factor shall be adjusted by multiplying the Unit Adjustment Factor by a fraction, the numerator of which shall be the number of Common Shares issued and outstanding on the record date (assuming for such purpose that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of Common Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, contribution, subdivision or combination. In addition, while Section 7.5 hereof provides that EQR shall not directly or indirectly enter into or conduct any business except as permitted in said Section, if an event were to occur that would significantly affect the economic relationship between a Partnership Unit and a Common Share, the Unit Adjustment Factor shall also be appropriately adjusted. Any such adjustment to the Unit Adjustment Factor shall be determined by the Board of Trustees of EQR, whose determination as to whether an adjustment is necessary and the amount of such adjustment shall be conclusive absent manifest error. Any adjustment to the Unit Adjustment Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 2. CHANGE OF PRINCIPAL OFFICE. The second sentence of Section 2.3 of the Agreement is hereby amended to read as follows: "The principal office of the Partnership is located at Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, or such other place as the General Partner may from time to time designate by notice to the Limited Partners." 3. AMENDMENTS TO CHANGE REFERENCES FROM GENERAL PARTNER TO EQR. The following Sections of the Agreement are hereby amended to change references therein to "General Partner" to references to "EQR." (a) Section 3.1; (b) Section 3.2; (c) Section 4.2(e) (renumbered pursuant to this Amendment as Section 4.2(b)); (d) the last sentence of Section 4.5; (e) Section 7.1(a)(1); (f) the penultimate sentence of Section 7.7(a); (g) Section 8.3(a); (h) Section 9.3; (i) Section 10.3; and (j) Section 14.1(b)(6). 4. GENERAL PARTNERSHIP INTERESTS. The last sentence of Section 4.1(a) is hereby amended to read as follows: "A number of Partnership Units held by EQR equal to one percent (1%) of all outstanding Partnership Units shall be deemed to be a General Partnership Interest and a number of Partnership Units held by ERP equal to one percent (1%) of all outstanding Partnership Units shall be deemed to be a General Partnership Interest." 5. DELETION OF REQUIREMENT TO CONTRIBUTE FUNDS. Section 4.1(b)(2) of the Agreement is hereby deleted in its entirety. 6. EQR'S SHARES NOT EQUATED TO PARTNERSHIP UNITS. Sections 4.2(b), 4.2(c) and 4.2(d) of the Agreement are hereby deleted in their entirety and paragraph (e) of Section 4.2 is hereby redesignated as paragraph (b) of Section 4.2. 7. DISTRIBUTION OF ERP COMMON UNITS IN LIQUIDATION. The Agreement is hereby amended by adding thereto a new Section 5.5, which shall read as follows: "5.5 DISTRIBUTION OF ERP COMMON UNITS. Notwithstanding anything to the contrary in this Agreement, the ERP Common Units which may be received by the Partnership pursuant to the Asset Contribution Agreement may 2 be distributed to the Partners in liquidation of the Partnership on the basis of one ERP Common Unit for each Partnership Unit then outstanding." 8. CONFORMING AMENDMENT. The proviso at the end of Section 7.1(a)(3) is hereby amended to read as follows: "provided, further, that the sale of all or substantially all of the assets of the Partnership shall require the Consent of a majority of the Percentage Interests of the Limited Partnership Interests (including Limited Partnership Interests held by the General Partner)." 9. SALE OF ALL ASSETS PERMITTED. Section 7.2(a) of the Agreement is hereby amended to read as follows: "(a) take any action which would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement (it being understood and agreed that, subject to Section 7.1(a)(3), a sale of any or all of the assets of the Partnership, for example, would be an ordinary part of the Partnership's business and affairs and is specifically permitted hereby);" 10. OUTSIDE ACTIVITIES OF EQR. Section 7.5 of the Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: "Section 7.5 INTENTIONALLY OMITTED." 11. ASSET CONTRIBUTION AGREEMENT PERMITTED. Section 7.6(c) of the Agreement is hereby amended to read as follows: "(c) CONTRACT WITH GENERAL PARTNER. Except as expressly permitted by this Agreement and except as contemplated by the Asset Contribution Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are on terms that are fair and reasonable and no less favorable to the Partnership than would be obtained from an unaffiliated third party in connection therewith." 12. ACTION TO MAINTAIN REIT STATUS OF EQR. Section 7.9(d) of the Agreement is hereby amended to read as follows: "(d) ACTIONS TO MAINTAIN REIT STATUS OR AVOID TAXATION OF EQR. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of EQR to continue to qualify as a REIT or (ii) to avoid the incurrence of any taxes by EQR under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners." 13. TITLE TO PARTNERSHIP ASSETS TRANSFERRED TO ERP PURSUANT TO ASSET CONTRIBUTION AGREEMENT. The third sentence of Section 7.10 of the Agreement is hereby amended to read as follows: "The General Partner hereby declares and warrants that, except for Partnership assets contributed to ERP pursuant to the Asset Contribution Agreement, any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable." 14. ADJUSTMENT TO OUTSTANDING UNITS. Section 8.5(b) of the Agreement is hereby amended to read as follows: "(b) ADJUSTMENTS TO OUTSTANDING PARTNERSHIP UNITS AND NOTIFICATION OF CHANGES IN UNIT ADJUSTMENT FACTOR. The number of outstanding Partnership Units shall be subject to adjustment from time to time by the Unit Adjustment Factor. The Partnership shall notify each Limited Partner in writing of any change made to the Unit Adjustment Factor within ten (10) Business Days of the date such change becomes effective." 15. TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST. (a) Section 11.2(a) of the Agreement is hereby amended to read as follows: "(a) GENERAL. In no event may the General Partner at any time assign, sell, transfer, pledge, hypothecate or otherwise dispose of all or any portion of its General Partnership Interest except by operation of law." (b) Section 11.2(c) of the Agreement is hereby deleted in its entirety. 3 16. NO REQUIREMENT TO SELL ERP UNITS RECEIVED UPON LIQUIDATION. Section 13.2 of the Agreement is hereby amended by adding at the end thereof a new sentence which reads as follows: "Notwithstanding anything to the contrary contained herein (including, without limiting the generality of the foregoing, Section 13.2(a)(4)), the General Partner shall cause the Partnership to distribute the ERP Common Units received by the Partnership pursuant to the Asset Contribution Agreement in liquidation of the Partnership Units on the basis of one ERP Unit for each outstanding Partnership Unit. The General Partner shall be under no obligation to sell such ERP Common Units. The Partnership may remain in existence and undertake the activities as contemplated by Section 6 of the Asset Contribution Agreement as part of its winding up." 17. NO PRIOR AMENDMENT. The Limited Partners of the Partnership hereby ratify, approve and confirm in all respects the decision of the Board of Directors of Evans Withycombe Residential, Inc. not to present the 11.2 Amendment to the Limited Partners of the Partnership, with the same force and effect as if the Limited Partners of the Partnership had voted against the adoption of the 11.2 Amendment. 18. ELIMINATION OF CERTIFICATES FOR UNIT. (a) The definition of Partnership Unit is hereby amended by deleting the second sentence thereof. (b) The Agreement is hereby amended by deleting Exhibit D thereof in its entirety. 19. REFERENCE TO AND EFFECT ON THE PARTNERSHIP AGREEMENT. (a) At and after the Effective Time, each reference in the Partnership Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Partnership Agreement shall mean and be a reference to the Partnership Agreement as amended by this Amendment. (b) The Partnership Agreement as amended and restated as of August 17, 1994 and as amended by this Amendment shall remain in full force and effect and is hereby ratified and confirmed. 20. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. 21. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 22. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. 4 IN WITNESS WHEREOF, the Partners have executed this Amendment as of the Effective Time. GENERAL PARTNERS: EQUITY RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust, General Partner By: Shelley Dunck -------------------------------------- Title: Vice President --------------------------------- ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: EQUITY RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust, its general partner By: Shelley Dunck ----------------------------------- Title: Vice President ------------------------------ LIMITED PARTNERS: EQUITY RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust, Limited Partner, as attorney-in-fact for the Limited Partners By: Shelley Dunck -------------------------------------- Title: Vice President -------------------------------- ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership, Limited Partner, as attorney-in-fact for the Limited Partners By: EQUITY RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust, its general partner By: Shelley Dunck ----------------------------------- Title: Vice President ------------------------------ 5 EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ERP OPERATING LIMITED PARTNERSHIP Consolidated and Combined Historical, Including Predecessor Business Earnings to Combined Fixed Charges and Preferred Distributions Ratio
Historical -------------------------------------------------------- 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 -------- -------- -------- -------- -------- (Amounts in thousands) REVENUES Rental income $707,733 $454,412 $373,919 $220,727 $104,388 Fee income - outside managed 5,697 6,749 7,030 4,739 4,651 Interest income - investment in mortgage notes 20,366 12,819 4,862 - - Interest and other income 13,525 4,405 4,573 5,568 3,031 -------- -------- -------- -------- -------- Total revenues 747,321 478,385 390,384 231,034 112,070 -------- -------- -------- -------- -------- EXPENSES Property and maintenance 176,075 127,172 112,186 66,534 35,324 Real estate taxes and insurance 69,520 44,128 37,002 23,028 11,403 Property management 26,793 17,512 15,213 10,249 3,491 Property management - non-recurring - - - 879 - Fee and asset management 3,364 3,837 3,887 2,056 2,524 Depreciation 156,644 93,253 72,410 37,273 15,384 Interest: Expense incurred 121,324 81,351 78,375 37,044 26,042 Amortization of deferred financing costs 2,523 4,242 3,444 1,930 3,322 Refinancing costs - - - - 3,284 General and administrative 15,064 9,857 8,129 6,053 3,159 -------- -------- -------- -------- -------- Total expenses 571,307 381,352 330,646 185,046 103,933 -------- -------- -------- -------- -------- Income (loss) before extraordinary items $176,014 $ 97,033 $ 59,738 $ 45,988 $ 8,137 ======== ======== ======== ======== ======== Combined Fixed Charges and Preferred Distributions: Interest and other financing costs $121,324 $ 81,351 $ 78,375 $ 37,044 $ 26,042 Refinancing costs - - - - 3,284 Amortization of deferred financing costs 2,523 4,242 3,444 1,930 3,322 Preferred distributions 59,012 29,015 10,109 - - -------- -------- -------- -------- -------- Total Combined Fixed Charges and Preferred Distributions $182,859 $114,608 $ 91,928 $ 38,974 $ 32,648 ======== ======== ======== ======== ======== Earnings before combined fixed charges and preferred distributions $299,861 $182,626 $141,557 $ 84,962 $ 40,785 ======== ======== ======== ======== ======== Funds from operations before combined fixed charges and preferred distributions $456,505 $275,879 $213,967 $123,114 $ 56,169 ======== ======== ======== ======== ======== Ratio of earnings before combined fixed charges and preferred distributions to combined fixed charges and preferred distributions 1.64 1.59 1.54 2.18 1.25 ======== ======== ======== ======== ======== Ratio of funds from operations before combined fixed charges and preferred distributions to combined fixed charges and preferred distributions 2.50 2.41 2.33 3.16 1.72 ======== ======== ======== ======== ========
EX-21 4 LIST OF SUBSIDIARIES OF THE OPERATING PARTNERSHIP EXHIBIT 21 EQUITY RESIDENTIAL PROPERTIES TRUST SUBSIDIARIES ------------ 1. ERP Operating Limited Partnership 2. Equity Residential Properties Management Limited Partnership 3. Equity Residential Properties Management Limited Partnership II 4. Equity Residential Properties Management Corp. I (own preferred stock only, not common) 5. Equity Residential Properties Management Corp. II (own preferred stock only, not common) 6. EQR-BS Financing Limited Partnership 7. EQR-Chaparral Creek GP Limited Partnership 8. EQR-Lincoln Green I and II GP Limited Partnership 9. EQR-Lodge (OK) GP Limited Partnership 10. EQR-Stonebrook GP Limited Partnership 11. EQR-Sleepy Hollow Financing Limited Partnership 12. EQR-EOI Financing Limited Partnership 13. EQR-Continental Villas Financing Limited Partnership 14. EQR-Doral Financing Limited Partnership 15. EQR-Governor's Place Financing Limited Partnership 16. EQR-Plantation Financing Limited Partnership 17. EQR-Valley Park South Financing Limited Partnership 18. EQR-Yorktowne Financing Limited Partnership 19. EQR-SWN Line Financing Limited Partnership 20. EQR-Arbors Financing Limited Partnership 21. EQR-Breton Hammocks Financing Limited Partnership 22. EQR-Emerald Place Financing Limited Partnership 23. EQR-Essex Place Financing Limited Partnership 24. EQR-Met Financing Limited Partnership 25. EQR-Met CA Financing Limited Partnership 26. EQR-Wellington Hill Financing Limited Partnership - (New Hampshire) 27. EQR-Tanasbourne Terrace Financing Limited Partnership 28. EQR-Reserve Square Limited Partnership - (Ohio) 29. EQR-Fountainhead I Financing General Partnership 30. EQR-Fountainhead II Financing General Partnership 31. EQR-Fountainhead III Financing General Partnership 32. E-Chaparral Associates Limited Partnership 33. Equity-Chaparral Venture Limited Partnership 34. E-G-One Associates 35. Equity Green I Venture 36. E-G-Two Associates 37. Equity-Green II Venture 38. E-Stonebrook Associates 39. Equity-Stonebrook Venture Limited Partnership 40. E-Lodge Associates Limited Partnership 41. Equity-Lodge Venture Limited Partnership 42. Country Club Associates Limited Partnership 43. Second Country Club Associates Limited Partnership 44. Second Georgian Woods Limited Partnership 45. Greenwich Woods Associates Limited Partnership 46. Artery Northampton Limited Partnership 47. Third Towne Centre Limited Partnership 48. Fourth Towne Centre Limited Partnership 49. Georgian Woods Annex Associates 50. EQR-Keystone Financing General Partnership 51. EQR-Camellero Financing Limited Partnership 52. EQR-Arizona, L.L.C. - (Delaware) 53. EQR-Washington, L.L.C. - (Delaware) 54. EQR-Wellington, L.L.C. - (Delaware) 55. EQR-Oregon, L.L.C. - (Delaware) 56. EQR-Waterfall, L.L.C. - (Delaware) 57. EQR-Virginia, L.L.C. - (Delaware) 58. Multifamily Portfolio LP Limited Partnership 59. EQR-Plantation, L.L.C. - (Delaware) 60. EQR-California, L.L.C.; 61. EQR-ArtBHolder, L.L.C.; 62. EQR-ArtCapLoan, L.L.C.; 63. EQR-Keystone Financing G.P.; 64. Country Ridge General Partnership; 65. Rosehill Pointe General Partnership; 66. EQR-Canter Chase General Partnership; 67. Hunter's Glen General Partnership; 68. Sunny Oak Village General Partnership; 69. EQR-Pine Meadows Garden General Partnership; 70. EQR-Bond Partnership; 71. EQR-Park Place I General Partnership; 72. EQR-Park Place II General Partnership; 73. Songbird General Partnership; 74. Cedar Crest General Partnership; 75. EQR-Creekside Oaks General Partnership; 76. EQR-Village Oaks General Partnership; 77. EQR-Lakeville Resort General Partnership; 78. EQR-Trails at Dominion General Partnership; 79. EQR-Virginia, L.L.C.; 80. EQR-Dartmouth Woods General Partnership 81. Wadlington Investments General Partnership 82. EQR-Warwick, L.L.C.; 83. EQR-Ironwood, L.L.C.; 84. EQR-Spinnaker Cove, L.L.C.; 85. EQR-Wyndridge II, L.L.C. 86. EQR-Wyndridge III, L.L.C.; 87. EQR-Highline Oaks, L.L.C.; 88. EQR-Marks A, L.L.C.; 89. EQR-Missouri, L.L.C.; 90. EQR-Ridgemont/Mountain Brook, L.L.C.; 91. EQR-Marks B, L.L.C.; 92. EQR-Coach Lantern, L.L.C.; 93. EQR-Foxcroft, L.L.C.; 94. EQR-Yarmouth, L.L.C.; 95. EQR-Chardonnay Park, L.L.C.; 96. EQR-Preston Bend General Partnership; 97. EQR-Villa Serenas General Partnership; 98. The Gates of Redmond, L.L.C.; 99. EQR-North Hill, L.L.C.; 100. EQR-Watson General Partnership; 101. CAPREIT Woodland Meadows Limited Partnership; 102. CAPREIT Burwick Farms Limited Partnership; 103. CAPREIT Mariner's Wharf Limited Partnership; 104. CAPREIT Silver Springs Limited Partnership; 105. CAPREIT Northlake Limited Partnership; 106. CAPREIT Tivoli Lakes Club Limited Partnership; 107. CAPREIT Eastland on the Lake Limited Partnership; 108. CAPREIT Concorde Bridge Limited Partnership; 109. CAPREIT Garden Lake Limited Partnership; 110. CAPREIT Highland Grove Limited Partnership; 111. CAPREIT Clarion Limited Partnership; 112. CAPREIT Atrium Limited Partnership; 113. CAPREIT Chimneys Limited Partnership; 114. CAPREIT Creekwood Limited Partnership; 115. CAPREIT Hidden Oaks Limited Partnership; 116. CAPREIT Botany Arms Limited Partnership; 117. CAPREIT Hampton Arms Limited Partnership; 118. CAPREIT Gleneagle Limited Partnership; 119. CAPREIT Greyeagle Limited Partnership; 120. CAPREIT Tarmarind at Stonebridge Limited Partnership; 121. CAPREIT Sycamore Ridge Limited Partnership; 122. Capital Realty Investors Tax Exempt Fund Limited Partnership; 123. CRICO of Fountain Place Limited Partnership; 124. CRICO of Woodland Place Limited Partnership; 125. CRICO of Royal Oaks Limited Partnership; 126. CRICO of Trailway Pond I Limited Partnership; 127. CRICO of Valley Creek I Limited Partnership; 128. CRICO of Valley Creek II Limited Partnership; 129. CRICO of White Bear Woods I Limited Partnership; 130. CRICO of James Street Crossing Limited Partnership 131. CRICO of Regency Woods Limited Partnership 132. CRICO of Ocean Walk Limited Partnership 133. CRICO of Trailway Pond II Limited Partnership; 134. CRICO of Ethan's I Limited Partnership; 135. CRICO of Ethans II Limited Partnership; 136. FPAII Limited Partnership; 137. CAPREIT Arbor Glen Limited Partnership; 138. CAPREIT Woodcrest Villa Limited Partnership; 139. CAPREIT Farmington Gates Limited Partnership; 140. CAPREIT Ridgeway Commons Limited Partnership; 141. CAPREIT River Oak Limited Partnership; 142. CAPREIT Cedars Limited Partnership; 143. CAPREIT Westwood Pines Limited Partnership; 144. Geary Courtyard Associates; 145. EQR-Vinings at Ashley Lake, L.L.C.; 146. EQR-Flatlands, L.L.C.; 147. EQR-Fairfield, L.L.C.; 148. Evans Withycombe Residential, L.P.; 149. McKinley Hills Partners-85; 150. EW Chandler Limited Partnership; 151. Evans Withycombe Finance Partnership, L.P.; 152. EQR-740 River Drive, L.L.C.; 153. Rolido Park General Partnership; 154. EQR/Lincoln Guaranty Credit Limited Partnership; 155. EQR/Lincoln No. One Master Limited Partnership; and 156. Evans Withycombe Residential, L.P. EX-23.1 5 CONSENT OF GRANT THORNTON LLP Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation of our reports on page F-3 and S-1 of this Form 10-K by reference in the prospectus constituting part of the Registration Statements on Form S-3 (No. 333-45557) of ERP Operating Limited Partnership. /s/ Grant Thornton LLP GRANT THORNTON LLP Chicago, Illinois March 25, 1998 EX-23.2 6 CONSENT OF ERNST & YOUNG Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-45557) of ERP Operating Limited Partnership and in the related Prospectus of our report dated February 26, 1998, except for Note 31, as to which the date is March 12, 1998, with respect to the consolidated financial statements and schedule of ERP Operating Limited Partnership included in this Annual Report (Form 10-K) for the year ended December 31, 1997. /s/ Ernst & Young LLP Ernst & Young LLP Chicago, Illinois March 25, 1998 EX-24.1 7 POWER OF ATTORNEY FOR JOHN ALEXANDER 3/2/98 EXHIBIT 24.1 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that John W. Alexander, having an address at 229 N. Church St., Suite 200-Box E Charlotte, NC 28202, has made, constituted - ------------------------------------------------------ and appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, John W. Alexander, has hereunto set his hand this 2nd day of March, 1998. - --- ----- /s/ John W. Alexander --------------------- John W. Alexander I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that John W. Alexander, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie ______________________________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.2 8 POWER OF ATTORNEY FOR JAMES D. HARPER 3/2/98 EXHIBIT 24.2 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that James D. Harper, Jr., having an address at 3250 Mary Street, Suite 206, Coconut Grove, FL 33133, has made, constituted ---------------------------------------------------- and appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, James D. Harper, Jr., has hereunto set his hand this 2nd day of March, 1998. - ---- ----- /s/ James D. Harper, Jr. ------------------------ James D. Harper, Jr. I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that James D. Harper, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie _____________________________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.3 9 POWER OF ATTORNEY FOR ERROL R. HALPERIN 3/2/98 EXHIBIT 24.3 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that Errol R. Halperin, having an address at 203 N. LaSalle St., Suite 1800, Chicago, IL 60601-1293, has made, constituted - ------------------------------------------------------ and appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Errol R. Halperin, has hereunto set his hand this 2nd day of March, 1998. - --- ----- /s/ Errol R. Halperin --------------------- Errol R. Halperin I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that Errol R. Halperin, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie ______________________________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.4 10 POWER OF ATTORNEY FOR B. JOSEPH WHITE 3/2/98 EXHIBIT 24.4 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that B. Joseph White, having an address at 701 Tappan, Ann Arbor, MI 48109-1234, has made, constituted and appointed and BY - ------------------------------------ THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in- Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, B. Joseph White, has hereunto set his hand this 2nd --- day of March, 1998. ----- /s/ B. Joseph White ------------------- B. Joseph White I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that B. Joseph White, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie ______________________________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.5 11 POWER OF ATTORNEY FOR BARRY S. STERNLICHT 3/2/98 EXHIBIT 24.5 POWER OF ATTORNEY ----------------- STATE OF CONNECTICUT COUNTY OF FAIRFIELD ------------- KNOW ALL MEN BY THESE PRESENTS that Barry S. Sternlicht, having an address at Three Pickwick Plaza, Suite 250, Greenwich, CT 06830 , has made, --------------------------------------------------------------- constituted and appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Barry S. Sternlicht, has hereunto set his hand this 4th day of March , 1998. - ----- ----------- /s/ Barry S. Sternlicht ----------------------- Barry S. Sternlicht I, Karen B. Murray , a Notary Public in and for said County in the ---------------------- State of aforesaid, do hereby certify that Barry S. Sternlicht, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 4th day of March , 1998. ----- ----------- Karen B. Murray --------------------------- (Notary Public) My Commission Expires: February 28, 2002 ----------------------- EX-24.6 12 POWER OF ATTORNEY FOR HENRY H. GOLDBERG 3/2/98 EXHIBIT 24.6 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that Henry H. Goldberg, having an address at 4733 Bethesda Ave., Suite 400, Bethesda, MD 20814, has made, constituted and - ------------------------------------------------- appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Henry H. Goldberg, has hereunto set his hand this 2nd day of March, 1998. - --- ----- /s/ Henry H. Goldberg --------------------- Henry H. Goldberg I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that Henry H. Goldberg, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie _______________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.7 13 POWER OF ATTORNEY FOR EDWARD LOWENTHAL 3/2/98 EXHIBIT 24.7 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that Edward Lowenthal, having an address at 610 Fifth Avenue, 7th Floor, New York, NY 11020, has made, constituted and - ----------------------------------------------- appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Edward Lowenthal, has hereunto set his hand this 2nd --- day of March, 1998. ----- /s/ Edward Lowenthal -------------------- Edward Lowenthal I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that Edward Lowenthal, personally known to me to be he same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie _______________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.8 14 POWER OF ATTORNEY FOR JEFFREY H. LYNFORD 3/2/98 EXHIBIT 24.8 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that Jeffrey H. Lynford, having an address at 610 Fifth Avenue, 7th Floor, New York, NY 10020, has made, constituted and ----------------------------------------------- appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in- Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Jeffrey H. Lynford, has hereunto set his hand this 2nd day of March, 1998. - --- ----- /s/ Jeffrey H. Lynford ---------------------- Jeffrey H. Lynford I, Lisa Currie, a Notary Public in and for said County in the State of ----------- aforesaid, do hereby certify that Jeffrey H. Lynford, personally known to me to be the same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie _______________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-24.9 15 POWER OF ATTORNEY FOR STEPHEN O. EVANS 3/2/98 EXHIBIT 24.9 POWER OF ATTORNEY ----------------- STATE OF ILLINOIS COUNTY OF COOK KNOW ALL MEN BY THESE PRESENTS that Stephen O. Evans, having an address at 6991 East Camelback Road, Suite A200, Scottsdale, AZ 85251, has made, - ---------------------------------------------------------- constituted and appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael J. McHugh, or either of them, having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and his name, place and stead to sign and execute in any and all capacities this Annual Report on Form 10-K and any or all amendments to this Annual Report granting unto each of such, Attorney-in-Fact, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in an about the premises, as fully, to all intents and purposes as he might or could do if personally present at the doing thereof, with full power of substitution and revocation, hereby ratifying and confirming all that each of such Attorney-in-Fact or his substitutes shall lawfully do or cause to be done by virtue hereof. This Power of Attorney shall remain in full force and effect until terminated by the undersigned through the instrumentality of a signed writing. IN WITNESS WHEREOF, Stephen O. Evans, has hereunto set his hand this 2nd --- day of March, 1998. ----- /s/ Stephen O. Evans -------------------- Stephen O. Evans I, Lisa Currie, a Notary Public in and for said County in the State of aforesaid, do hereby certify that Stephen O. Evans, personally known to me to be he same person whose name is subscribed to the foregoing instrument appeared before me this day in person and acknowledged that he signed and delivered said instrument as his own free voluntary act for the uses and purposes therein set forth. Given under my hand and notarial seal this 2nd day of March, 1998. --- ----- Lisa Currie ___________________ (Notary Public) My Commission Expires: February 7, 2001 ---------------- EX-27 16 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 33,295 0 3,302 0 0 205,521 7,121,435 (444,762) 7,094,631 182,913 2,948,323 0 1,041,713 0 2,921,682 7,094,631 733,796 747,321 0 272,388 15,064 0 123,847 176,014 0 176,014 13,838 0 0 130,840 1.79 1.76
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