Gables Residential (NYSE:GBP) (the "Company") today reported
earnings for the second quarter. Net income available to common
shareholders was $0.54 per diluted share. Funds from operations
("FFO") available to common shareholders was $0.40 per diluted
share and adjusted funds from operations ("AFFO") available to
common shareholders was $0.88 per diluted share. Each of these
metrics includes expenses of approximately $0.09 per diluted share
associated with the Company's previously announced plan of merger.
Excluding the impact of these merger-related expenses, the
Company's FFO was in line with its previous earnings guidance for
the quarter. Net income available to common shareholders for the
quarter was $15.8 million, or $0.54 per diluted share, compared to
$15.3 million, or $0.52 per diluted share, for the comparable
period of 2004. The second quarter 2005 results included gains from
real estate asset sales of $18.7 million, or $16.6 million, net of
$2.1 million of minority interest, or $0.56 per diluted share. The
second quarter 2004 results included gains from real estate asset
sales of $14.2 million, or $12.4 million, net of $1.8 million of
minority interest, or $0.42 per diluted share. For the first six
months of 2005, net income available to common shareholders was
$55.6 million, or $1.89 per diluted share, compared to $20.4
million, or $0.70 per diluted share, for the comparable period of
2004. For the first six months of 2005, results included gains from
real estate asset sales of $53.4 million, or $47.1 million, net of
$6.3 million of minority interest, or $1.60 per diluted share. For
the first six months of 2004, results included gains from real
estate asset sales of $17.0 million, or $14.9 million, net of $2.1
million of minority interest, or $0.51 per diluted share. FFO
available to common shareholders for the quarter was $13.3 million,
or $0.40 per diluted share. FFO available to common shareholders
for the second quarter of 2004 was $18.5 million, or $0.55 per
diluted share, after a supplemental adjustment of $1.0 million to
exclude debt extinguishment costs associated with the sale of real
estate assets, or $17.5 million, or $0.52 per diluted share,
including such costs. FFO available to common shareholders for the
first six months of 2005 was $37.8 million, or $1.14 per diluted
share, after a supplemental adjustment of $0.1 million to exclude
debt extinguishment costs associated with the sale of real estate
assets, or $37.7 million, or $1.13 per diluted share, including
such costs. FFO available to common shareholders for the first six
months of 2004 was $36.1 million, or $1.08 per diluted share, after
a supplemental adjustment of $1.0 million to exclude debt
extinguishment costs associated with the sale of real estate
assets, or $35.1 million, or $1.05 per diluted share, including
such costs. The FFO metric excludes gain on sale of operating real
estate assets and real estate asset depreciation and amortization.
A reconciliation of net income to FFO is included on page 14. AFFO
available to common shareholders, which treats recurring value
retention capital expenditures as period costs and includes
economic gains and losses on asset sales, was $29.1 million, or
$0.88 per diluted share, for the quarter, compared to $22.2
million, or $0.66 per diluted share, for the comparable period of
2004. AFFO available to common shareholders for the first six
months of 2005 was $42.3 million, or $1.27 per diluted share,
compared to $35.5 million, or $1.06 per diluted share, for the
comparable period of 2004. Economic gains and losses represent the
gains and losses on sales of assets in accordance with GAAP, less
accumulated depreciation through the date of sale. A reconciliation
of net income to FFO and to AFFO is included on page 14. A summary
of the Company's results over the last five years, including AFFO
is included on page 15. This earnings release is available on
Gables Residential's website at www.gables.com. Please click on
"Investor Relations" then "Financial Information/Earnings Releases"
or go directly to this web address:
www.gables.com/q205earningsrelease. The Company produces Earnings
Release Supplements ("the Supplements") that provide detailed
information regarding the financial position and operating results
of the Company. These Supplements are available via the Company's
website and through e-mail distribution. Access to the Supplements
through the Company's website is available at
www.gables.com/financialreports. If you would like to receive
future press releases via e-mail, please register through the
Company's website at www.gables.com/mailalerts. Some items
referenced in the earnings release may require Adobe Acrobat 6.0
Reader. If you do not have Adobe Acrobat 6.0 Reader, you may
download it at the following website:
www.adobe.com/products/acrobat/readstep2.html. The Company will not
host an earnings conference call this quarter due to its previously
announced plan of merger. Same-Store Operating Results for the
Second Quarter 2005 On a year-over-year basis, total property
revenues increased 2.9% and property operating and maintenance
expenses increased 4.9%, resulting in a 1.7% increase in property
net operating income ("NOI") for the second quarter. On a
sequential-quarter basis, total property revenues increased 0.9%
and property operating and maintenance expenses increased 2.1%,
resulting in a 0.1% increase in property NOI. The number of
apartment homes included in the year-over-year and sequential
same-store results as a percentage of the Company's total
stabilized portfolio at June 30, 2005 is 68% and 75%, respectively.
The Company does not include its proportionate share of joint
venture results in its same-store pool of assets. A detail of the
year-over-year and sequential-quarter same-store results by market
is presented on pages 16 and 17, respectively. Investment and
Disposition Activity During the quarter, the Company acquired seven
communities comprising 945 apartment homes in three markets for a
total of $80 million. In its Dallas EPN zones, the Company acquired
Gables Katy Trail (158 apartment homes), Gables Uptown Tower (196
apartment homes), Carlisle on the Creek (176 apartment homes) and
Saltillo (79 apartment homes). In the Buckhead EPN of Atlanta, the
Company acquired two adjacent communities, Northmoor and Lindview,
comprising a total of 224 apartment homes. The Company also
acquired Memorial Hills (112 apartment homes) in the River Oaks EPN
of Houston. On a year-to-date basis, the Company has acquired nine
communities comprising 1,660 apartment homes located in EPN zones
in four of its markets for a total of $172 million. The Company has
$323 million of assets in various stages of development with
approximately $167 million of costs remaining to be incurred at
June 30, 2005. In addition, the Company has development rights for
the future development of an estimated 2,305 apartment homes in ten
communities for total budgeted costs estimated to be approximately
$400 million as outlined in page 30 of the press release including
the Supplements. During the quarter, the Company sold its remaining
asset in Tampa, Gables Beach Park (166 apartment homes), to a
condominium converter for $41.2 million. The related gain on sale
of real estate assets in accordance with GAAP was $18.7 million, or
$0.56 per diluted share. The economic gain for this sale
transaction was $17.8 million, or $0.54 per diluted share, after
taking into account $0.9 million of accumulated depreciation. On a
year-to-date basis, the Company has sold seven real estate assets
comprising 2,045 apartment homes in four markets for a total of
$168.5 million. The related gain on sale of real estate assets in
accordance with GAAP was $53.4 million, or $1.60 per diluted share.
The economic gain for these transactions was $8.3 million, or $0.25
per diluted share, after taking into account $0.1 million of
associated debt extinguishment costs and $45.0 million of
accumulated depreciation. Promotion of Sue Ansel to COO During the
quarter, the Company announced that Sue Ansel was promoted to Chief
Operating Officer. Ms. Ansel previously served as a Senior Vice
President with responsibility for the Company's apartment
operations and asset management functions in Dallas, Austin,
Houston, San Diego and the Inland Empire, which includes a
portfolio of over 15,000 apartment homes. In addition to her
operating experience, she has been involved in the development,
acquisition and ancillary service businesses during her 18- year
tenure with the Company. Agreement and Plan of Merger with ING
Clarion On June 7, 2005, the Company entered into an agreement and
plan of merger pursuant to which a newly formed affiliate of ING
Clarion Partners, LLC, an indirect wholly owned subsidiary of ING
Groep, N.V., will acquire the Company and its subsidiaries through
the mergers of Gables Residential Trust and Gables Realty Limited
Partnership with merger subsidiaries of the ING Groep, N.V. (the
"merger"). Pursuant to the terms of the agreement and plan of
merger, each issued and outstanding common share of beneficial
interest of the Company will be converted into the right to receive
$43.50 in cash, without interest. In addition, holders of common
shares will receive additional merger consideration that represents
a pro-rata portion of the monthly dividend allocable to the month
in which the mergers are closed and will be based on the number of
days having elapsed in such monthly period (the "pro-rata
dividend"). Each existing common unit of limited partnership in the
Company's Operating Partnership (other than common units held by
the Company) will be converted into and cancelled in exchange for
the right to receive (1) $43.50 in cash, without interest, plus a
distribution equal to the pro-rata dividend or (2) if the holder so
elects, a Class A common unit of limited partnership interest in
the surviving partnership and a distribution equal to the pro-rata
dividend, provided that the issuance of Class A common units would
be exempt from registration under the Securities Act and applicable
state securities laws. Holders of not more than $75 million of
existing common units in the Operating Partnership in the aggregate
may elect to receive Class A common units (any excess will be
subject to pro-rata reduction among all holders electing to receive
Class A common units). Completion of the merger, which is expected
to occur by the end of the third quarter of 2005, is subject to
approval by the Company's common shareholders and certain other
customary closing conditions. The merger has been unanimously
approved by the Company's Board of Trustees, which will recommend
that the common shareholders approve the merger. Gables expects to
continue to pay regular monthly dividends at an annualized rate of
$2.41 per share through the closing of the merger, including a
pro-rated dividend for the month in which the merger closes.
Earnings Guidance The Company is not providing earnings guidance
this quarter due to the pending merger. Discontinued Operations The
Company adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," effective January 1, 2002. This
standard requires, among other things, that operating results of
certain real estate assets sold or held for sale subsequent to
January 1, 2002, be reflected as discontinued operations in the
statements of operations for all periods presented. The Company
evaluates, in the ordinary course of its business, the continued
ownership of its assets relative to available opportunities to
acquire and develop new assets and relative to available equity and
debt capital financing. The Company sells assets if it determines
that such sales are the most attractive sources of capital for
redeployment in its business, for repayment of debt, for
repurchases of stock, and for other uses. The Company expects to
reclassify historical operating results whenever necessary in order
to comply with the requirements of SFAS No. 144. Non-GAAP Financial
Measures and Other Terms This release, including the Supplements,
contains certain non-GAAP financial measures and other terms. The
Company's definition and calculation of these non-GAAP financial
measures and other terms may differ from the definitions and
methodologies used by other REITs and, accordingly, may not be
comparable. The non-GAAP financial measures referred to below
should not be considered as alternatives to net income or other
GAAP measures as indicators of the Company's performance.
Additional information regarding these items and other non-GAAP
financial measures and terms used in this release, including the
Supplements, can be found elsewhere herein. Funds From Operations
(FFO) is used by industry analysts and investors as a supplemental
operating performance measure of an equity real estate investment
trust ("REIT"). The Company calculates FFO in accordance with the
definition that was adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT").
FFO, as defined by NAREIT, represents net income (loss) determined
in accordance with generally accepted accounting principles
("GAAP"), excluding extraordinary items as defined under GAAP and
gains or losses from sales of previously depreciated operating real
estate assets as defined under GAAP, plus certain non-cash items,
such as real estate asset depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate assets
diminishes predictably over time. Since real estate values instead
have historically risen or fallen with market conditions, many
industry investors and analysts have considered presentation of
operating results for real estate companies that use historical
cost accounting to be insufficient by themselves. Thus, NAREIT
created FFO as a supplemental measure of REIT operating performance
that excludes historical cost depreciation, among other items, from
GAAP net income. The use of FFO, combined with the required primary
GAAP presentations, has improved the understanding of operating
results of REITs among the investing public and made comparisons of
REIT operating results more meaningful. Management generally
considers FFO to be a useful measure for reviewing the comparative
operating and financial performance of the Company (although it
should be reviewed in conjunction with net income which remains the
primary measure of performance) because by excluding gains or
losses related to sales of previously depreciated operating real
estate assets and excluding real estate asset depreciation and
amortization, FFO can help users compare the operating performance
of a company's real estate between periods or as compared to
different companies. The Company presents FFO with a supplemental
adjustment to exclude debt extinguishment costs associated with the
sale of real estate assets. These debt extinguishment costs are
incurred when the sale of an asset encumbered by debt requires the
Company to pay the extinguishment costs prior to the debt's stated
maturity and to write-off unamortized loan costs at the date of the
extinguishment. Such costs are excluded from the gain on sale of
real estate assets reported in accordance with GAAP. However, the
Company views the debt extinguishment costs associated with the
sale of real estate assets as an incremental cost of the sale
transaction because the Company extinguished the debt in connection
with the consummation of the sale transaction and the Company had
no intent to extinguish the debt absent such transaction. The
Company believes that this supplemental adjustment more
appropriately reflects the results of its operations exclusive of
the impact of its sale transactions. Adjusted Funds From Operations
(AFFO) represents FFO less recurring value retention capital
expenditures, plus economic gains and losses from sales of
previously depreciated operating real estate assets. The Company
believes AFFO is a useful supplemental operating performance metric
because AFFO results in a more comprehensive evaluation of the way
the Company operates its business. The Company modified its
definition of AFFO for reporting purposes in the second quarter of
2004 to include economic gains and losses from sales of previously
depreciated operating real estate assets because the Company
believes inclusion of economic gains and losses on asset sales
reflects the results of its investment activities which are a
fundamental component of its business strategy. Prior period
presentation of AFFO has been conformed accordingly. Management
generally considers AFFO to be a useful measure for reviewing the
comparative operating and financial performance of the Company
(although it should be reviewed in conjunction with net income
which remains the primary measure of performance) because by
including gains or losses related to sales of previously
depreciated operating real estate assets and excluding real estate
asset depreciation and amortization, AFFO can help users understand
the financial performance of a company's operating and investment
results over time. Economic Gains and Losses on Sale of Real Estate
Assets represent the gains or losses on sale in accordance with
GAAP, less accumulated depreciation through the date of sale. As
such, economic gains and losses reflect the cash proceeds from a
sale less the cash invested in the sold community. The Company
treats debt extinguishment costs associated with the sale as a
reduction to the economic gains and losses because it believes such
costs represent an incremental cost of the sale transaction.
Recurring Value Retention Capital Expenditures represent costs
typically incurred every year during the life of a community, such
as expenditures for carpet, vinyl flooring, appliances, mechanical
equipment and fixtures. To the extent such costs are incurred in
connection with a major renovation of a community, they are
excluded from this category. Non-recurring Capital Expenditures
represent costs that are generally incurred in connection with a
major project impacting an entire community, such as roof
replacement, parking lot resurfacing, exterior painting and siding
replacement. These costs are not incurred on a regular basis and
may not occur or reoccur during the anticipated hold period of an
asset. To the extent such costs are incurred in connection with a
major renovation of a community, they are excluded from this
category. Value Enhancing Capital Expenditures represent costs for
which an incremental value is expected to be achieved from
increasing the NOI potential for a community or recharacterizing
the quality of the income stream with an anticipated reduction in
potential sales cap rate for items such as replacement of wood
siding with a masonry-based Hardi-Board product, amenity upgrades
and additions, installation of security gates and additions of
covered parking. To the extent such costs are incurred in
connection with a major renovation of a community, they are
excluded from this category. Property Net Operating Income (NOI) is
used by industry analysts, investors and Company management to
measure operating performance of the Company's properties. NOI
represents total property revenues less property operating and
maintenance expenses (as reflected in the accompanying statements
of operations). Accordingly, NOI excludes certain expenses included
in the determination of net income such as property management and
other indirect operating expenses, interest expense and
depreciation and amortization expense. These items are excluded
from NOI in order to provide results that are more closely related
to a property's results of operations. Certain items, such as
interest expense, while included in FFO and net income, do not
affect the operating performance of a real estate asset and are
often incurred at the corporate level as opposed to the property
level. As a result, management uses only those income and expense
items that are incurred at the property level to evaluate a
property's performance. Real estate asset depreciation and
amortization is excluded from NOI for the same reasons that it is
excluded from FFO pursuant to NAREIT's definition. Stabilized
Occupancy is defined as the earlier to occur of (i) 93% physical
occupancy or (ii) one year after completion of construction. For
purposes of evaluating comparative operating performance, the
Company categorizes its operating communities based on the period
each community reaches a stabilized occupancy and operating expense
level. For purposes of the period-end community charts, once a
development community has reached a stabilized occupancy level, it
is reclassified from the Development/Lease-up Communities chart to
the Stabilized Communities chart. Physical Occupancy represents
gross potential rent less physical vacancy loss as a percentage of
gross potential rent. Economic Occupancy represents actual rent
revenue collected divided by gross potential rent. Thus, economic
occupancy differs from physical occupancy in that it takes into
account concessions, non-revenue producing apartment homes and
delinquencies. Gross Potential Rent is determined by valuing
occupied apartment homes at contract rates and vacant units at
market rates. Income Available for Debt Service and Preferred
Dividends represents net income available to common shareholders
before interest expense and credit enhancement fees, preferred
dividends, original issuance costs associated with redemption of
preferred shares, income taxes, depreciation, amortization,
minority interest, gain on sale of real estate assets, debt
extinguishment costs associated with the sale of real estate
assets, long-term compensation expense, extraordinary items and
unusual items, all from both continuing and discontinued
operations, as applicable. Management generally considers income
available for debt service and preferred dividends to be an
appropriate supplemental measure to net income of the operating
performance of the Company because it helps investors to understand
the ability of the Company to incur and service its debt and
preferred stock obligations. Forward-Looking Statements Safe Harbor
Statement under the Private Securities Litigation Reform Act of
1995: This release, including the Supplements, contains
forward-looking statements within the meaning of federal securities
laws. These forward-looking statements reflect the Company's
current views with respect to the future events or financial
performance discussed in this release, based on management's
beliefs and assumptions and information currently available. When
used, the words "believe," "anticipate," "estimate," "project,"
"should," "expect," "plan," "assume" and similar expressions that
do not relate solely to historical matters identify forward-looking
statements. Forward-looking statements in this release include,
without limitation, statements relating to the Company's ability to
produce total returns through monthly dividends and share price
changes that exceed the NAREIT apartment sector index and the
anticipated closing of the Company's proposed merger by the end of
the third quarter of 2005. Forward-looking statements are subject
to risks, uncertainties and assumptions and are not guarantees of
future events or performance, which may be affected by known and
unknown risks, trends and uncertainties. Should one or more of
these risks or uncertainties materialize, or should the Company's
assumptions prove incorrect, actual results may vary materially
from those anticipated, projected or implied in the forward-looking
statements. Factors that may cause such a variance include, among
others: the delay in or failure to close the merger; local and
national economic and market conditions, including changes in
occupancy rates, rental rates, and job growth; the demand for
apartment homes in the Company's markets; the uncertainties
associated with the Company's current real estate development,
including actual costs exceeding the Company's budgets; changes in
construction costs; construction delays due to the unavailability
of materials or weather conditions; the failure to sell assets on
favorable terms, in a timely manner or at all; the failure of
acquisitions to yield anticipated results; the cost and
availability of financing; changes in interest rates; competition;
the effects of the Company's accounting and other policies; and
additional factors discussed from time to time in the Company's
filings with the Securities and Exchange Commission. The Company
expressly disclaims any responsibility to update forward-looking
statements to reflect changes in underlying assumptions or factors,
new information, future events or otherwise. About Gables With a
mission of Taking Care of the Way People Live(R), Gables
Residential has received national recognition for excellence in the
management, development, acquisition and construction of luxury
multifamily communities in high job growth markets. The Company's
strategic objective is to produce total returns through monthly
dividends and share price changes that exceed the NAREIT apartment
sector index. The Company has a research-driven strategy focused on
markets characterized by high job growth and resiliency to national
economic downturns. Within these markets, the Company targets
Established Premium Neighborhoods(TM) ("EPN's"), generally defined
as areas with high per square foot prices for single-family homes.
By investing in resilient, demand-driven markets and EPN(TM)
locations with barriers to entry, the Company expects to achieve
its strategic objective. The Company is one of the largest
apartment operators in the nation and currently manages 41,029
apartment homes in 158 communities. The Company owns or has an
interest in 84 communities with 21,163 stabilized apartment homes
located primarily in Atlanta, Houston, South Florida, Austin,
Dallas, Washington, D.C. and San Diego/Inland Empire and has an
additional 11 communities with 2,673 apartment homes under
development or lease-up. For further information, please contact
Gables Investor Relations at (800) 371-2819 or access Gables
Residential's website at www.gables.com. -0- *T GABLES RESIDENTIAL
Consolidated Statements of Operations June 30, 2005 (Unaudited and
amounts in thousands, except for per share data) Three months ended
Six months ended June 30, June 30, ------------------
------------------- 2005 2004 2005 2004 --------- ---------
--------- --------- Revenues: Rental revenues $ 51,941 $ 45,380
$101,004 $ 90,139 Other property revenues 4,334 3,829 7,939 7,191
--------- --------- --------- --------- Total property revenues
56,275 49,209 108,943 97,330 --------- --------- ---------
--------- Property management revenues 2,176 2,078 4,410 4,232
Ancillary services revenues 817 1,337 1,896 2,551 Interest income
123 32 210 40 Other revenues 87 453 385 859 --------- ---------
--------- --------- Total other revenues 3,203 3,900 6,901 7,682
--------- --------- --------- --------- Total revenues 59,478
53,109 115,844 105,012 --------- --------- --------- ---------
Expenses: Property operating and maintenance (exclusive of items
shown below) 21,446 17,897 41,301 35,621 Real estate asset
depreciation and amortization 12,905 11,412 25,161 23,165 Property
management (owned and third party) 4,165 4,113 8,741 8,399
Ancillary services 845 1,010 1,710 2,074 Interest expense and
credit enhancement fees 12,228 9,485 23,625 18,827 Amortization of
deferred financing costs 382 426 874 840 General and administrative
2,925 2,751 6,075 5,725 Corporate asset depreciation and
amortization 953 714 1,878 1,212 Unusual items 2,828 - (472) -
--------- --------- --------- --------- Total expenses 58,677
47,808 108,893 95,863 --------- --------- --------- ---------
Income from continuing operations before equity in income of joint
ventures, gain on sale and minority interest 801 5,301 6,951 9,149
Equity in income of joint ventures 476 60 961 544 Gain on sale of
technology investment - - 5,838 - Minority interest of common
unitholders in Operating Partnership 100 (399) (1,115) (674)
--------- --------- --------- --------- Income from continuing
operations 1,377 4,962 12,635 9,019 Operating income from
discontinued operations, net of minority interest (2) 983 350 2,088
Gain on sale of discontinued operations, net of minority interest
16,588 12,419 47,127 14,498 Debt extinguishment costs associated
with the sale of real estate assets, net of minority interest -
(862) (137) (862) --------- --------- --------- --------- Income
from discontinued operations, net of minority interest 16,586
12,540 47,340 15,724 Net income 17,963 17,502 59,975 24,743
Dividends to preferred shareholders (2,193) (2,193) (4,387) (4,387)
--------- --------- --------- --------- Net income available to
common shareholders $ 15,770 $ 15,309 $ 55,588 $ 20,356 ---------
--------- --------- --------- Weighted average number of common
shares outstanding - basic 29,283 29,258 29,351 29,119 Weighted
average number of common shares outstanding - diluted 33,128 33,548
33,302 33,487 Per Common Share Information- Basic: Income (loss)
from continuing operations (net of preferred dividends) $ (0.03) $
0.09 $ 0.28 $ 0.16 Income from discontinued operations, net of
minority interest $ 0.57 $ 0.43 $ 1.61 $ 0.54 Net income available
to common shareholders $ 0.54 $ 0.52 $ 1.89 $ 0.70 Per Common Share
Information- Diluted: Income (loss) from continuing operations (net
of preferred dividends) $ (0.03) $ 0.09 $ 0.28 $ 0.16 Income from
discontinued operations $ 0.56 $ 0.43 $ 1.61 $ 0.54 Net income
available to common shareholders $ 0.54 $ 0.52 $ 1.89 $ 0.70 *T -0-
*T GABLES RESIDENTIAL Funds From Operations and Adjusted Funds From
Operations June 30, 2005 (Unaudited and amounts in thousands,
except for per share data) Three months ended Six months ended June
30, June 30, -------------------- ------------------ 2005 2004 2005
2004 --------- --------- --------- --------- Net income available
to common shareholders $ 15,770 $ 15,309 $ 55,588 $ 20,356 Minority
interest of common unitholders in Operating Partnership: Continuing
operations (100) 399 1,115 674 Discontinued operations 2,126 1,795
6,312 2,263 --------- --------- --------- --------- Total 2,026
2,194 7,427 2,937 --------- --------- --------- --------- Real
estate asset depreciation and amortization: Wholly-owned real
estate assets - continuing operations 12,905 11,412 25,161 23,165
Wholly-owned real estate assets - discontinued operations 67 2,268
370 4,739 Joint venture real estate assets 1,271 495 2,525 886
--------- --------- --------- --------- Total 14,243 14,175 28,056
28,790 --------- --------- --------- --------- Gain on sale of
operating real estate assets: Wholly-owned real estate assets -
discontinued operations (18,714) (14,198) (53,411) (16,580) Joint
venture real estate assets - - - (432) --------- ---------
--------- --------- Total (18,714) (14,198) (53,411) (17,012)
--------- --------- --------- --------- FFO available to common
shareholders - diluted (a) $ 13,325 $ 17,480 $ 37,660 $ 35,071
--------- --------- --------- --------- Debt extinguishment costs
associated with the sale of real estate assets - 986 156 986
--------- --------- --------- --------- FFO available to common
shareholders, after a supplemental adjustment to exclude debt
extinguishment costs associated with the sale of real estate assets
- diluted (b) $ 13,325 $ 18,466 $ 37,816 $ 36,057 ---------
--------- --------- --------- Recurring value retention capital
expenditures: Carpet and flooring (1,179) (1,261) (2,174) (2,306)
Appliances (135) (173) (251) (339) Other additions and improvements
(742) (1,193) (1,436) (2,066) --------- --------- ---------
--------- Total (2,056) (2,627) (3,861) (4,711) --------- ---------
--------- --------- Economic gain on sale of operating real estate
assets: Gain on sale of operating real estate assets 18,714 14,198
53,411 17,012 Less: accumulated depreciation (907) (6,866) (44,957)
(11,912) Less: debt extinguishment costs associated with the sale
of real estate assets - (986) (156) (986) --------- ---------
--------- --------- Economic gain on sale of operating real estate
assets 17,807 6,346 8,298 4,114 --------- --------- ---------
--------- AFFO available to common shareholders - diluted (c) $
29,076 $ 22,185 $ 42,253 $ 35,460 --------- --------- ---------
--------- Average common shares outstanding - basic (d) 29,283
29,258 29,351 29,119 Incremental shares from assumed conversions
of: Common units 3,724 4,203 3,840 4,250 Stock options 100 73 91
104 Other 21 14 20 14 --------- --------- --------- ---------
Average common shares outstanding - diluted (e) 33,128 33,548
33,302 33,487 --------- --------- --------- --------- Ownership of
Operating Partnership's average common units outstanding: Gables
Residential (f) 88.72% 87.44% 88.43% 87.26% Minority interest
11.28% 12.56% 11.57% 12.74% --------- --------- --------- ---------
Total 100.00% 100.00% 100.00% 100.00% --------- --------- ---------
--------- Per common share data - basic: FFO available to common
shareholders ((a)*(f))/(d) $ 0.40 $ 0.52 $ 1.13 $ 1.05 FFO
available to common shareholders, after a supplemental adjustment
to exclude debt extinguishment costs associated with the sale of
real estate assets ((b)*(f))/(d) $ 0.40 $ 0.55 $ 1.14 $ 1.08 AFFO
available to common shareholders ((c)*(f))/(d) $ 0.88 $ 0.66 $ 1.27
$ 1.06 Per common share data - diluted: FFO available to common
shareholders (a)/(e) $ 0.40 $ 0.52 $ 1.13 $ 1.05 FFO available to
common shareholders, after a supplemental adjustment to exclude
debt extinguishment costs associated with the sale of real estate
assets (b)/(e) $ 0.40 $ 0.55 $ 1.14 $ 1.08 AFFO available to common
shareholders (c)/(e) $ 0.88 $ 0.66 $ 1.27 $ 1.06 *T -0- *T GABLES
RESIDENTIAL Net Income, FFO, AFFO and Dividends - Five Year History
June 30, 2005 (Unaudited and amounts in thousands, except for per
share data) Years ended December 31, -----------------------------
2000 2001 2002 --------- --------- --------- Net income available
to common shareholders $ 57,579 $ 55,074 $ 45,661 Add: Minority
interest of common unitholders in Operating Partnership 16,359
14,249 11,077 Add: Real estate asset depreciation and amortization
45,289 49,313 49,400 Less: Gain on sale of operating real estate
assets (28,622) (34,110) (30,346) --------- --------- --------- FFO
available to common shareholders - diluted 90,605 84,526 75,792
Add: Debt extinguishment costs associated with the sale of real
estate assets - - - --------- --------- --------- FFO available to
common shareholders, after a supplemental adjustment to exclude
debt extinguishment costs associated with the sale of real estate
assets - diluted 90,605 84,526 75,792 Less: Recurring value
retention capital expenditures (10,910) (11,797) (13,077) Add:
Economic gain on sale of operating real estate assets: Gain on sale
of operating real estate assets per GAAP 28,622 34,110 30,346 Less:
accumulated depreciation (19,232) (13,114) (13,393) Less: debt
extinguishment costs associated with the sale of real estate assets
- - - --------- --------- --------- Economic gain on sale of
operating real estate assets 9,390 20,996 16,953 ---------
--------- --------- AFFO available to common shareholders - diluted
$ 89,085 $ 93,725 $ 79,668 --------- --------- --------- Average
common shares outstanding - diluted 30,439 30,314 30,684 Per common
share data - diluted: Net income available to common shareholders $
2.43 $ 2.29 $ 1.85 FFO available to common shareholders $ 2.98 $
2.79 $ 2.47 FFO available to common shareholders, after a
supplemental adjustment to exclude debt extinguishment costs
associated with the sale of real estate assets $ 2.98 $ 2.79 $ 2.47
Recurring value retention capital expenditures $ (0.36) $ (0.39) $
(0.43) Economic gain on sale of operating real estate assets $ 0.31
$ 0.69 $ 0.55 --------- --------- --------- AFFO available to
common shareholders $ 2.93 $ 3.09 $ 2.60 --------- ---------
--------- Dividends $ 2.20 $ 2.34 $ 2.41 --------- ---------
--------- AFFO available to common shareholders less dividends $
0.73 $ 0.75 $ 0.19 --------- --------- --------- Six months Years
ended ended December 31, June 30, ------------------- ---------
2003 2004 2005 --------- --------- --------- Net income available
to common shareholders $ 49,062 $ 82,892 $ 55,588 Add: Minority
interest of common unitholders in Operating Partnership 9,690
11,901 7,427 Add: Real estate asset depreciation and amortization
53,989 57,991 28,056 Less: Gain on sale of operating real estate
assets (37,693) (73,341) (53,411) --------- --------- --------- FFO
available to common shareholders - diluted 75,048 79,443 37,660
Add: Debt extinguishment costs associated with the sale of real
estate assets - 1,623 156 --------- --------- --------- FFO
available to common shareholders, after a supplemental adjustment
to exclude debt extinguishment costs associated with the sale of
real estate assets - diluted 75,048 81,066 37,816 Less: Recurring
value retention capital expenditures (10,498) (9,775) (3,861) Add:
Economic gain on sale of operating real estate assets: Gain on sale
of operating real estate assets per GAAP 37,693 73,341 53,411 Less:
accumulated depreciation (20,725) (49,981) (44,957) Less: debt
extinguishment costs associated with the sale of real estate assets
- (1,623) (156) --------- --------- --------- Economic gain on sale
of operating real estate assets 16,968 21,737 8,298 ---------
--------- --------- AFFO available to common shareholders - diluted
$ 81,518 $ 93,028 $ 42,253 --------- --------- --------- Average
common shares outstanding - diluted 31,452 33,559 33,302 Per common
share data - diluted: Net income available to common shareholders $
1.87 $ 2.82 $ 1.89 FFO available to common shareholders $ 2.39 $
2.37 $ 1.13 FFO available to common shareholders, after a
supplemental adjustment to exclude debt extinguishment costs
associated with the sale of real estate assets $ 2.39 $ 2.42 $ 1.14
Recurring value retention capital expenditures $ (0.33) $ (0.29) $
(0.12) Economic gain on sale of operating real estate assets $ 0.54
$ 0.65 $ 0.25 --------- --------- --------- AFFO available to
common shareholders $ 2.59 $ 2.77 $ 1.27 --------- ---------
--------- Dividends $ 2.41 $ 2.41 $ 1.21 --------- ---------
--------- AFFO available to common shareholders less dividends $
0.18 $ 0.36 $ 0.06 --------- --------- --------- *T -0- *T GABLES
RESIDENTIAL Results of Property Operations - Year-over-Year
Comparisons - Second Quarter June 30, 2005 (Unaudited and amounts
in thousands, except for property data) The combined operating
performance for all of the Company's wholly-owned communities that
are included in continuing operations for the three months ended
June 30, 2005 ("2Q 2005") and June 30, 2004 ("2Q 2004") is as
follows: Number of 2Q 2005 Apt. Homes 2Q 2005 2Q 2004 $ Change %
Change ------- -------- -------- -------- -------- Rental and other
property revenues: Same-store communities (1) 13,454 $41,182
$40,020 $ 1,162 2.9% (A) Triple net master lease communities 728
1,864 1,862 2 0.1% Communities stabilized in 2Q 2005, but not in 2Q
2004 1,337 4,721 1,702 3,019 177.4% Communities not stabilized in
2Q 2005 (2) 3,335 8,508 3,170 5,338 168.4% Sold communities (3) - -
2,455 (2,455) -100.0% ------- -------- -------- -------- --------
Total property revenues 18,854 $56,275 $49,209 $ 7,066 14.4%
------- -------- -------- -------- -------- Property operating and
maintenance expenses (4): Same-store communities (1) $15,877
$15,140 $ 737 4.9% (A) Triple net master lease communities 218 216
2 0.9% Communities stabilized in 2Q 2005, but not in 2Q 2004 2,054
626 1,428 228.1% Communities not stabilized in 2Q 2005 (2) 3,297
951 2,346 246.7% Sold communities (3) - 964 (964) -100.0% --------
-------- -------- -------- Total property operating and maintenance
expenses $21,446 $17,897 $ 3,549 19.8% -------- -------- --------
-------- Property net operating income (NOI) (5): Same-store
communities (1) $25,305 $24,880 $ 425 1.7% (A) Triple net master
lease communities 1,646 1,646 - 0.0% Communities stabilized in 2Q
2005, but not in 2Q 2004 2,667 1,076 1,591 147.9% Communities not
stabilized in 2Q 2005 (2) 5,211 2,219 2,992 134.8% Sold communities
(3) - 1,491 (1,491) -100.0% -------- -------- -------- --------
Total property net operating income (NOI) $34,829 $31,312 $ 3,517
11.2% -------- -------- -------- -------- Total property NOI as a
percentage of total property revenues 61.9% 63.6% - -1.7% --------
-------- -------- -------- (1) Communities that were owned and
fully stabilized throughout both 2Q 2005 and 2Q 2004
("same-store"). (2) Communities that were under
development/lease-up, in renovation or not fully operational,
acquired, or had not reached a stabilized operating expense level
subsequent to April 1, 2005, as applicable. Includes the results of
Belmar, Carlisle on the Creek, Gables Camino Real, Gables Floresta,
Gables Grandview, Gables Katy Trail, Gables Lenox Hills, Gables
Rock Springs I, II and III, Gables Town Place, Gables Uptown Tower,
Lindview, Memorial Hills, Northmoor and Saltillo. (3) Communities
that were sold subsequent to April 1, 2004. Includes the results of
Gables Palma Vista, Gables Wellington and Gables Woodley Park which
are now owned by the Company's NYSTRS joint ventures that were
formed during 2004. (4) Represents direct property operating and
maintenance expenses as reflected in the Company's consolidated
statements of operations and excludes certain expenses included in
the determination of net income such as property management and
other indirect operating expenses, interest expense and
depreciation and amortization expense. (5) Calculated as total
property revenues less property operating and maintenance expenses
as reflected above. (A) Additional information for the 53
same-store communities by market is as follows: Number of % of
Physical Economic Apartment 2Q 2005 Occupancy Occupancy Market
Homes NOI in 2Q 2005 in 2Q 2005 -------------------- ------------
------------ ------------ ---------- Houston 3,857 23.4% 95.1%
93.8% South Florida 2,398 22.8% 95.9% 94.8% Atlanta 3,322 21.2%
93.6% 91.7% Dallas 1,879 16.0% 95.5% 94.1% Austin 1,916 14.7% 91.3%
90.3% Washington, D.C. 82 1.9% 97.0% 96.8% ------------
------------ ------------ ---------- Totals 13,454 100.0% 94.5%
93.1% ------------ ------------ ------------ ---------- % Change
from 2Q 2004 to 2Q 2005 in
------------------------------------------------- Economic Market
Occupancy Revenues Expenses NOI -------------------- ------------
------------ ------------ ---------- Houston 3.2% 1.5% 5.6% -1.2%
South Florida 2.1% 5.2% 5.3% 5.2% Atlanta 2.8% 2.4% 0.8% 3.5%
Dallas 2.2% 2.1% 7.6% -1.1% Austin 2.5% 3.5% 5.6% 2.1% Washington,
D.C. 0.5% 3.0% 15.9% -1.7% ------------ ------------ ------------
---------- Totals 2.6% 2.9% 4.9% 1.7% ------------ ------------
------------ ---------- *T -0- *T GABLES RESIDENTIAL Results of
Property Operations - Sequential-Quarter Comparisons June 30, 2005
(Unaudited and amounts in thousands, except for property data) The
combined operating performance for all of the Company's
wholly-owned communities that are included in continuing operations
for the three months ended June 30, 2005 ("2Q 2005") and March 31,
2005 ("1Q 2005") is as follows: Number of 2Q 2005 Apt. Homes 2Q
2005 1Q 2005 $ Change % Change ------- -------- -------- --------
-------- Rental and other property revenues: (6) Same-store
communities (1) 14,791 $45,903 $45,498 $ 405 0.9% (A) Triple net
master lease communities 728 1,864 1,864 - 0.0% Communities
stabilized in 2Q 2005, but not in 1Q 2005 - - - - - Communities not
stabilized in 2Q 2005 (2) 3,335 8,508 5,306 3,202 60.3% Sold
communities (3) - - - - - ------- -------- -------- --------
-------- Total property revenues 18,854 $56,275 $52,668 $ 3,607
6.8% ------- -------- -------- -------- -------- Property operating
and maintenance expenses (4): Same-store communities (1) $17,931
$17,566 $ 365 2.1% (A) Triple net master lease communities 218 218
- 0.0% Communities stabilized in 2Q 2005, but not in 1Q 2005 - - -
- Communities not stabilized in 2Q 2005 (2) 3,297 2,071 1,226 59.2%
Sold communities (3) - - - - -------- -------- -------- --------
Total property operating and maintenance expenses $21,446 $19,855 $
1,591 8.0% -------- -------- -------- -------- Property net
operating income (NOI) (5): Same-store communities (1) $27,972
$27,932 $ 40 0.1% (A) Triple net master lease communities 1,646
1,646 - 0.0% Communities stabilized in 2Q 2005, but not in 1Q 2005
- - - - Communities not stabilized in 2Q 2005 (2) 5,211 3,235 1,976
61.1% Sold communities (3) - - - - -------- -------- --------
-------- Total property net operating income (NOI) $34,829 $32,813
$ 2,016 6.1% -------- -------- -------- -------- Total property NOI
as a percentage of total property revenues 61.9% 62.3% - -0.4%
-------- -------- -------- -------- (1) Communities that were owned
and fully stabilized throughout both 2Q 2005 and 1Q 2005
("same-store"). (2) Communities that were under
development/lease-up, in renovation or not fully operational,
acquired, or had not reached a stabilized operating expense level
subsequent to April 1, 2005, as applicable. Includes the results of
Belmar, Carlisle on the Creek, Gables Camino Real, Gables Floresta,
Gables Grandview, Gables Katy Trail, Gables Lenox Hills, Gables
Rock Springs I, II and III, Gables Town Place, Gables Uptown Tower,
Lindview, Memorial Hills, Northmoor and Saltillo. (3) Communities
that were sold subsequent to January 1, 2005. (4) See (4) on page
16. (5) Calculated as total property revenues less property
operating and maintenance expenses as reflected above. (6) The
results reported for 1Q 2005 in the earnings release dated May 3,
2005 have been restated to reflect the results of Gables Beach Park
as discontinued operations pursuant to SFAS No. 144. Gables Beach
Park was sold in 2Q 2005 and contributed $757 in total property
revenues, $248 in property operating and maintenance expenses and
$509 in property NOI to the 1Q 2005 results. (A) Additional
information for the 60 same-store communities by market is as
follows: Number of % of Physical Economic Apartment 2Q 2005
Occupancy Occupancy Market Homes NOI in 2Q 2005 in 2Q 2005
-------------------- ------------ ------------ ------------
---------- Houston 4,169 23.0% 94.7% 91.8% Atlanta 3,918 22.9%
93.8% 90.2% South Florida 2,398 20.6% 95.9% 94.8% Dallas 2,308
18.5% 94.4% 93.0% Austin 1,916 13.3% 91.3% 90.3% Washington, D.C.
82 1.7% 97.0% 96.8% ------------ ------------ ------------
---------- Totals 14,791 100.0% 94.2% 92.1% ------------
------------ ------------ ---------- % Change from 1Q 2005 to 2Q
2005 in ------------------------------------------------- Economic
Market Occupancy Revenues Expenses NOI --------------------
------------ ------------ ------------ ---------- Houston 0.4% 1.1%
-2.1% 3.4% Atlanta -0.5% -0.5% 3.8% -3.2% South Florida -0.7% 0.7%
4.5% -1.2% Dallas 2.2% 3.4% -0.4% 6.1% Austin -3.8% -0.4% 7.7%
-5.1% Washington, D.C. 1.1% 3.2% 4.6% 2.4% ------------
------------ ------------ ---------- Totals -0.2% 0.9% 2.1% 0.1%
------------ ------------ ------------ ---------- *T
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