01—Abstract
Summary
Summary of the 10-K/A filed April 3, 1997. Cited figures are marked; the original filing is the authoritative source.
This is Amendment No. 1 (Form 10-K/A) to Equity Residential Properties Trust's annual report for fiscal 1996, filed April 3, 1997.
It does not contain a full set of financial statements or a broad business overview. Its sole purpose is to restate the Funds From Operations (FFO) discussion in Item 7 (MD&A) to reflect the NAREIT definition of FFO that the company adopted in 1996. The restated definition no longer adds back amortization of deferred financing costs or depreciation of non-real estate assets.
The reconciliation shows FFO rising sharply, from $83.9 million in 1994 to $121.0 milliona in 1995 and $160.3 million in 1996, roughly a 32% increase in 1996. Much of that growth reflects depreciation on real estate assets, which climbed from $36.9 million in 1994 to $91.2 million in 1996 as the portfolio expanded. Net income available to Common Shares rose from $57.6 million in 1995 to $72.6 million in 1996.
Gains on property dispositions were $22.4 millionb in 1996 and $21.6 million in 1995, and these are excluded from FFO, so they do not inflate the FFO figure. Investors should read these figures with care.
The restated FFO is a non-GAAP measure, and the company notes it may not be comparable to FFO reported by other REITs. The amendment itself offers no new information on leverage, liquidity, or property portfolio details, so investors should consult the original 10-K for those topics.
02—Key points
Key Highlights
- FFO increased to $160.3 million in 1996, up from $121.0 million in 1995 (about 32% growth) and $83.9 million in 1994.
- Company adopted NAREIT's March 1995 FFO definition in 1996, which no longer adds back amortization of deferred financing costs or depreciation of non-real estate assets.
- Net income available to Common Shares was $72.6 million in 1996, compared with $57.6 million in 1995 and $34.4 million in 1994.
- Real estate depreciation rose to $91.2 million in 1996 from $70.6 million in 1995 and $36.9 million in 1994, reflecting portfolio growth.
- Gains on property dispositions of $22.4 million in 1996 and $21.6 million in 1995 were excluded from FFO.
- A $3.5 million write-off of unamortized costs on refinanced debt in 1996 was excluded from FFO.
- This amendment only restates the FFO section of MD&A and contains no full financial statements or other new disclosures.
03—Questions
Frequently Asked Questions
Why was this 10-K/A filed?
The amendment restates the Funds From Operations discussion in Item 7 (MD&A) of the 1996 Form 10-K. It explains the company's implementation of the NAREIT FFO definition adopted in March 1995, which the company began using in 1996, and provides a reconciliation of net income to FFO for 1994 through 1996.
How did the new FFO definition change the calculation?
Under the new definition, amortization of deferred financing costs and depreciation of non-real estate assets are no longer added back to net income. The only amortization still added back is for deferred financing costs related to the Predecessor Business, which was $1.1 million in 1996.
Did FFO growth in 1996 reflect operating improvement or acquisitions?
The filing does not explain the drivers directly. However, the sharp rise in real estate depreciation, from $70.6 million to $91.2 million, indicates significant growth in the depreciable asset base, which suggests acquisitions and development contributed substantially to the increase.
Is FFO a substitute for net income or cash flow under GAAP?
No. The company states that FFO does not represent cash generated from operating activities under GAAP and should not be considered an alternative to net income or to net cash flows from operating activities as a liquidity measure. It is one performance indicator among several and may not be comparable to FFO reported by other REITs.
04—Continue