XNYS:CLP Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2012
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number:
1-12358 (Colonial Properties Trust)
0-20707 (Colonial Realty Limited Partnership)
COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Alabama (Colonial Properties Trust)
 
59-7007599
Delaware (Colonial Realty Limited Partnership)
 
63-1098468
(State or other jurisdiction
 
(IRS Employer
of incorporation or organization)
 
Identification Number)
2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip code)
(205) 250-8700
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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.
Colonial Properties Trust
 
YES R    NO o
Colonial Realty Limited Partnership
 
YES R    NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Colonial Properties Trust
 
YES þ     NO o
Colonial Realty Limited Partnership
 
YES þ     NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Colonial Properties Trust
 
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
 
 
(Do not check if smaller
reporting company)
 
 
 
 
 
 
 
 
 
 
 
Colonial Realty Limited
Partnership
 
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer R
 
Smaller reporting company o
 
 
 
 
 
 
(Do not check if smaller
reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Colonial Properties Trust
 
YES o     NO R
Colonial Realty Limited Partnership
 
YES o     NO R
As of August 6, 2012, Colonial Properties Trust had 88,027,609 Common Shares of Beneficial Interest outstanding.



COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
 
Page
 
 
 
 
 
 
Colonial Properties Trust
 
 
 
 
 
 
 
 
 
 
 
Colonial Realty Limited Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Explanatory Note

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2012 of Colonial Properties Trust and Colonial Realty Limited Partnership. References to “the Trust” or “Colonial” mean to Colonial Properties Trust, an Alabama real estate investment trust (“REIT”), and its consolidated subsidiaries, and references to “CRLP” mean Colonial Realty Limited Partnership, a Delaware limited partnership, and its consolidated subsidiaries. The term “the Company” refers to the Trust and CRLP, collectively.
The Trust is the sole general partner of, and, as of June 30, 2012, owned a 92.5% limited partner interest in, CRLP. The remaining limited partner interests are held by persons (including certain officers and trustees of the Trust) who, at the time of the Trust's initial public offering, elected to hold all or a portion of their interest in the form of units rather than receiving common shares of the Trust, or individuals from whom CRLP acquired certain properties and who received units in exchange for such properties. The Trust conducts all of its business and owns all of its properties through CRLP and CRLP's various subsidiaries and, as the sole general partner of CRLP, is vested with managerial control and authority over the business and affairs of CRLP.
The Company believes combining the quarterly reports on Form 10-Q of the Trust and CRLP, including the notes to the consolidated condensed financial statements, into this single report results in the following benefits:
enhances investors' understanding of the Trust and CRLP by enabling investors to view the business as a whole in the same manner that management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this report applies to both the Trust and CRLP; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between the Trust and CRLP in the context of how the Trust and CRLP operate as a consolidated company. The Trust and CRLP are structured as an "umbrella partnership REIT," or UPREIT. The Trust's interest in CRLP entitles the Trust to share in cash distributions from, and in the profits and losses of, CRLP in proportion to the Trust's percentage interest therein and entitles the Trust to vote on all matters requiring a vote of the limited partners. The Trust's only material asset is its ownership of limited partner interests in CRLP; therefore, the Trust does not conduct business itself, other than acting as the sole general partner of CRLP, issuing public equity from time to time and guaranteeing certain debt of CRLP. The Trust itself is not directly obligated under any indebtedness, but guarantees some of the debt of CRLP. CRLP holds all the real estate assets of the Company. Except for net proceeds from public equity issuances by the Trust, which are contributed to CRLP in exchange for limited partner interests, CRLP generates the capital required by the Company's business through CRLP's operations, direct or indirect incurrence of indebtedness and issuance of partnership units.

The presentation of the Trust's shareholders' equity and CRLP's equity are the principal areas of difference between the consolidated financial statements of the Trust and those of CRLP. The Trust's shareholders' equity includes common shares, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interest, preferred units, treasury shares, accumulated other comprehensive loss and redeemable common units. CRLP's equity includes common equity of the general partner (the Trust), limited partners' preferred equity, limited partners' noncontrolling interest, accumulated other comprehensive income (loss) and redeemable common units. Redeemable common units represent the number of outstanding limited partnership units as of the date of the applicable balance sheet, valued at the greater of the closing market price of the Trust's common shares or the aggregate value of the individual partners' capital balances. Each redeemable unit may be redeemed by the holder thereof for either cash equal to the fair market value of one common share of the Trust at the time of such redemption or, at the option of the Trust, one common share of the Trust.

In order to highlight the material differences between the Trust and CRLP, this report includes sections that separately present and discuss areas that are materially different between the Trust and CRLP, including:
 
the consolidated condensed financial statements in Item 1 of this report;
certain accompanying notes to the financial statements, including Note 5 - Net Income (Loss) Per Share of the Trust and Note 6 - Net Income (Loss) Per Unit of CRLP; Note 7 - Equity of the Trust and Note 8 - Capital Structure of CRLP; and Note 9 - Redeemable Noncontrolling Interests of the Trust and Note 10 - Redeemable Partnership Units of CRLP;
the controls and procedures in Item 4 of this report; and
the certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31 and 32 to this report.


1


In the sections that combine disclosure for the Trust and CRLP, this report refers to actions or holdings as being actions or holdings of the Company. Although CRLP (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues debt, management believes this presentation is appropriate for the reasons set forth above and because the business is one enterprise and the Company operates the business through CRLP.



2




COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
 
 
(unaudited)
 
(audited)
 
 
June 30, 2012
 
December 31, 2011
ASSETS
 
 
 
 
Land, buildings & equipment
 
$
3,386,946

 
$
3,445,455

Undeveloped land and construction in progress
 
340,530

 
306,826

Less: Accumulated depreciation
 
(773,631
)
 
(731,894
)
Real estate assets held for sale, net
 
148,412

 
10,543

Net real estate assets
 
3,102,257

 
3,030,930

Cash and cash equivalents
 
7,009

 
6,452

Restricted cash
 
23,416

 
43,489

Accounts receivable, net
 
25,432

 
26,762

Notes receivable
 
42,761

 
43,787

Prepaid expenses
 
17,412

 
19,912

Deferred debt and lease costs
 
25,778

 
22,408

Investment in partially-owned entities
 
9,293

 
12,303

Other assets
 
49,305

 
52,562

Total assets
 
$
3,302,663

 
$
3,258,605

LIABILITIES, NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
 
 
 
 
Notes and mortgages payable
 
$
1,724,789

 
$
1,575,727

Unsecured credit facility
 
117,243

 
184,000

Total debt
 
1,842,032

 
1,759,727

Accounts payable
 
33,193

 
50,266

Accrued interest
 
12,030

 
11,923

Accrued expenses
 
33,730

 
15,731

Investment in partially-owned entities
 
6,795

 
31,577

Other liabilities
 
33,185

 
25,208

Total liabilities
 
1,960,965

 
1,894,432

Redeemable noncontrolling interest:
 
 
 
 
Common units
 
167,310

 
159,582

Equity:
 
 
 
 
Common shares of beneficial interest, $0.01 par value, 125,000,000 shares authorized; 93,649,262 and 93,096,722 shares issued at June 30, 2012 and December 31, 2011, respectively
 
936

 
931

Additional paid-in capital
 
1,962,373

 
1,964,881

Cumulative earnings
 
1,278,359

 
1,267,958

Cumulative distributions
 
(1,894,461
)
 
(1,862,838
)
Noncontrolling interest
 
707

 
728

Treasury shares, at cost; 5,623,150 shares at June 30, 2012 and December 31, 2011
 
(150,163
)
 
(150,163
)
Accumulated other comprehensive loss
 
(23,363
)
 
(16,906
)
Total shareholders' equity
 
1,174,388

 
1,204,591

Total liabilities, noncontrolling interest and shareholders' equity
 
$
3,302,663

 
$
3,258,605



The accompanying notes are an integral part of these consolidated financial statements.
3


COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
 
$
81,582

 
$
73,093

 
$
161,628

 
$
143,168

Tenant recoveries
 
2,120

 
1,928

 
4,437

 
3,935

Other property related revenue
 
14,430

 
12,711

 
28,070

 
24,580

Other non-property related revenue
 
1,471

 
2,173

 
2,815

 
3,984

Total revenues
 
99,603

 
89,905

 
196,950

 
175,667

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expense
 
27,335

 
25,131

 
53,894

 
48,990

Taxes, licenses and insurance
 
11,115

 
10,045

 
22,339

 
20,291

Property management expense
 
3,001

 
2,181

 
5,847

 
4,603

General and administrative expense
 
5,446

 
5,188

 
11,213

 
10,390

Management fees and other expenses
 
1,769

 
1,884

 
3,814

 
3,653

Investment and development expense
 
205

 
393

 
592

 
979

Depreciation
 
30,472

 
29,130

 
60,818

 
57,874

Amortization
 
1,324

 
1,773

 
3,142

 
3,584

Impairment and other losses
 
395

 
148

 
895

 
2,244

Total operating expenses
 
81,062

 
75,873

 
162,554

 
152,608

Income from operations
 
18,541

 
14,032

 
34,396

 
23,059

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(23,277
)
 
(20,394
)
 
(46,330
)
 
(41,272
)
Debt cost amortization
 
(1,402
)
 
(1,146
)
 
(2,835
)
 
(2,298
)
Interest income
 
556

 
336

 
1,550

 
668

Income (loss) from partially-owned unconsolidated entities
 
21,349

 
(134
)
 
22,022

 
(474
)
(Loss) gain on sales of property
 
(9
)
 
23

 
(235
)
 
(56
)
Income taxes and other
 
(277
)
 
(271
)
 
(465
)
 
(519
)
Total other income (expense)
 
(3,060
)
 
(21,586
)
 
(26,293
)
 
(43,951
)
Income (loss) from continuing operations
 
15,481

 
(7,554
)
 
8,103

 
(20,892
)
Income from discontinued operations
 
2,250

 
1,510

 
3,177

 
3,092

Loss on disposal of discontinued operations
 
(12
)
 

 
(14
)
 

Net income from discontinued operations
 
2,238

 
1,510

 
3,163

 
3,092

Net income (loss)
 
17,719

 
(6,044
)
 
11,266

 
(17,800
)
Noncontrolling interest
 
 
 
 
 
 
 
 
Continuing Operations
 
 
 
 
 
 
 
 
Noncontrolling interest in CRLP — common unitholders
 
(1,166
)
 
673

 
(609
)
 
1,847

Noncontrolling interest in CRLP — preferred unitholders
 

 
(906
)
 

 
(1,813
)
Noncontrolling interest of limited partners
 
(8
)
 
(41
)
 
(17
)
 
(43
)
Discontinued Operations
 
 
 
 
 
 
 
 
Noncontrolling interest in CRLP
 
(168
)
 
(119
)
 
(239
)
 
(251
)
Income attributable to noncontrolling interest
 
(1,342
)
 
(393
)
 
(865
)
 
(260
)
Net income (loss) available to common shareholders
 
$
16,377

 
$
(6,437
)
 
$
10,401

 
$
(18,060
)
Net income (loss) per common share — basic:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.16

 
$
(0.09
)
 
$
0.08

 
$
(0.26
)
Discontinued operations
 
0.03

 
0.01

 
0.04

 
0.04

Net income (loss) per common share — basic
 
$
0.19

 
$
(0.08
)
 
$
0.12

 
$
(0.22
)
Net income (loss) per common share — diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.16

 
$
(0.09
)
 
$
0.08

 
$
(0.26
)
Discontinued operations
 
0.03

 
0.01

 
0.04

 
0.04

Net income (loss) per common share — diluted
 
$
0.19

 
$
(0.08
)
 
$
0.12

 
$
(0.22
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
87,201

 
83,588

 
87,106

 
81,562

Diluted
 
87,490

 
83,588

 
87,382

 
81,562

Net income (loss)
 
$
17,719

 
$
(6,044
)
 
$
11,266

 
$
(17,800
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Changes in fair value of qualifying hedges
 
(10,750
)
 
537

 
(10,585
)
 
537

Adjust for amounts included in net income (loss)
 
1,800

 
120

 
3,332

 
240

Comprehensive income (loss)
 
$
8,769

 
$
(5,387
)
 
$
4,013

 
$
(17,023
)

The accompanying notes are an integral part of these consolidated financial statements.
4


COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
Six Months Ended
 
 
June 30,
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
11,266

 
$
(17,800
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
67,272

 
68,614

(Income) loss from partially-owned unconsolidated entities
 
(22,022
)
 
474

Loss on sale of property
 
249

 
56

Impairment and other losses
 
1,166

 
2,244

Distributions of income from partially-owned unconsolidated entities
 
471

 
2,072

Share-based compensation expense
 
4,120

 
2,998

Other, net
 
511

 
1,529

Change in:
 
 
 
 
Restricted cash
 
221

 
(368
)
Accounts receivable
 
876

 
(93
)
Prepaid expenses
 
2,500

 
(3,259
)
Other assets
 
2,550

 
1,244

Accounts payable
 
(12,001
)
 
(4,385
)
Accrued interest
 
107

 
(894
)
Accrued expenses and other
 
13,175

 
17,786

Net cash provided by operating activities
 
70,461

 
70,218

Cash flows from investing activities:
 
 
 
 
Acquisition of properties
 
(78,215
)
 
(96,837
)
Development expenditures
 
(45,444
)
 
(12,941
)
Capital expenditures, tenant improvements and leasing commissions
 
(13,106
)
 
(9,942
)
Proceeds from sale of property, net of selling costs
 
1,862

 
4,157

Restricted cash
 
19,852

 

Issuance of notes receivable
 

 
(17,941
)
Repayments of notes receivable
 
1,666

 
963

Distributions from partially-owned unconsolidated entities
 
3,029

 

Capital contributions to partially-owned unconsolidated entities
 
(54
)
 
(186
)
Net cash used in investing activities
 
(110,410
)
 
(132,727
)
Cash flows from financing activities:
 
 
 
 
Proceeds from additional borrowings
 
150,000

 

Proceeds from dividend reinvestment plan and exercise of stock options
 
3,575

 
1,667

Proceeds from common share issuance, net of expenses
 

 
156,250

Principal reductions of debt
 
(1,139
)
 
(57,775
)
Payment of debt issuance costs
 
(5,264
)
 

Proceeds from borrowings on revolving credit lines
 
305,000

 
978,000

Payments on revolving credit lines and overdrafts
 
(377,463
)
 
(981,205
)
Dividends paid to common shareholders
 
(31,623
)
 
(26,176
)
Distributions to noncontrolling partners in CRLP
 
(2,580
)
 
(2,181
)
Net cash provided by financing activities
 
40,506

 
68,580

Increase in cash and cash equivalents
 
557

 
6,071

Cash and cash equivalents, beginning of period
 
6,452

 
4,954

Cash and cash equivalents, end of period
 
$
7,009

 
$
11,025

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid during the period for interest, including amounts capitalized
 
$
46,758

 
$
43,015

Cash received during the period for income taxes
 
$

 
$
(729
)
 
 
 
 
 
Supplemental disclosure of non-cash transactions:
 
 
 
 
Change in accrual of construction expenses and capital expenditures
 
$
(633
)
 
$
(283
)
Consolidation of Colonial Grand at Traditions joint venture (principally a multifamily property)
 
$

 
$
17,615


The accompanying notes are an integral part of these consolidated financial statements.
5


COLONIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(in thousands, except per share data)
Six months ended June 30, 2012 and 2011
Common Shares
Additional Paid-In Capital
Cumulative Earnings
Cumulative Distributions
Noncontrolling Interest
Preferred Units
Treasury Shares
Accumulated Other Comprehensive Loss
 Total Shareholders’ Equity
Redeemable Common Units
Balance, December 31, 2010
$
840

$
1,808,298

$
1,260,944

$
(1,808,700
)
$
769

$
50,000

$
(150,163
)
$
(2,231
)
$
1,159,757

$
145,539

Net income (loss)
 
 
(16,236
)
 
43

 
 
 
(16,193
)
$
(1,607
)
Reclassification adjustment for amounts included in net income (loss)
 
 
 
 
 
 
 
777

777

 
Distributions on common shares ($0.30 per share)
 
 
 
(24,363
)
 
 
 
 
(24,363
)
(2,181
)
Distributions on preferred units of CRLP
 
 
 
(1,813
)
 
 
 
 
(1,813
)
 
Issuance of restricted common shares of beneficial interest
3

285

 
 
 
 
 
 
288

 
Amortization of stock based compensation
 
2,998

 
 
 
 
 
 
2,998

 
Cancellation of vested restricted shares to pay taxes
(1
)
(1,619
)
 
 
 
 
 
 
(1,620
)
 
Issuance of common shares from options exercised

636

 
 
 
 
 
 
636

 
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan
2

2,646

 
 
 
 
 
 
2,648

 
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership

751

 
 
 
 
 
 
751

(751
)
Equity Offering Programs, net of cost
81

156,169

 
 
 
 
 
 
156,250

 
Change in interest of limited partners
 
 
 
 
(45
)
 
 
 
(45
)
 
Change in redemption value of common units
 
(18,208
)
 
 
 
 
 
 
(18,208
)
18,208

Balance, June 30, 2011
$
925

$
1,951,956

$
1,244,708

$
(1,834,876
)
$
767

$
50,000

$
(150,163
)
$
(1,454
)
$
1,261,863

$
159,208

 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2011
$
931

$
1,964,881

$
1,267,958

$
(1,862,838
)
$
728

$

$
(150,163
)
$
(16,906
)
$
1,204,591

$
159,582

Net income (loss)
 
 
10,401

 
17

 
 
 
10,418

$
848

Reclassification adjustment for amounts included in net income (loss)
 
 
 
 
 
 
 
3,332

3,332

 
Changes in fair value of qualifying hedges
 
 
 
 
 
 
 
(9,789
)
(9,789
)
(796
)
Distributions on common shares ($0.36 per share)
 
 
 
(31,623
)
 
 
 
 
(31,623
)
(2,580
)
Issuance of restricted common shares of beneficial interest
4

57

 
 
 
 
 
 
61

 
Amortization of stock based compensation
 
4,120

 
 
 
 
 
 
4,120

 
Cancellation of vested restricted shares to pay taxes
(1
)
(1,179
)
 
 
 
 
 
 
(1,180
)
 
Issuance of common shares from options exercised

771

 
 
 
 
 
 
771

 
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan
2

3,979

 
 
 
 
 
 
3,981

 
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership

336

 
 
 
 
 
 
336

(336
)
Change in interest of limited partners
 
 
 
 
(38
)
 
 
 
(38
)
 
Change in redemption value of common units
 
(10,592
)
 
 
 
 
 
 
(10,592
)
10,592

Balance, June 30, 2012
$
936

$
1,962,373

$
1,278,359

$
(1,894,461
)
$
707

$

$
(150,163
)
$
(23,363
)
$
1,174,388

$
167,310



The accompanying notes are an integral part of these consolidated financial statements.
6



COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except unit data)
 
 
(unaudited)
 
(audited)
 
 
June 30, 2012
 
December 31, 2011
ASSETS
 
 
 
 
Land, buildings & equipment
 
$
3,386,943

 
$
3,445,441

Undeveloped land and construction in progress
 
340,530

 
306,826

Less: Accumulated depreciation
 
(773,629
)
 
(731,880
)
Real estate assets held for sale, net
 
148,412

 
10,543

Net real estate assets
 
3,102,256

 
3,030,930

Cash and cash equivalents
 
7,009

 
6,452

Restricted cash
 
23,416

 
43,489

Accounts receivable, net
 
25,432

 
26,762

Notes receivable
 
42,761

 
43,787

Prepaid expenses
 
17,412

 
19,912

Deferred debt and lease costs
 
25,778

 
22,408

Investment in partially-owned entities
 
9,293

 
12,303

Other assets
 
49,205

 
52,385

Total assets
 
$
3,302,562

 
$
3,258,428

LIABILITIES AND EQUITY
 
 
 
 
Notes and mortgages payable
 
$
1,724,789

 
$
1,575,727

Unsecured credit facility
 
117,243

 
184,000

Total debt
 
1,842,032

 
1,759,727

Accounts payable
 
33,092

 
50,090

Accrued interest
 
12,030

 
11,923

Accrued expenses
 
33,730

 
15,731

Investment in partially-owned entities
 
6,795

 
27,432

Other liabilities
 
33,185

 
25,174

Total liabilities
 
1,960,864

 
1,890,077

Redeemable units, at redemption value - 7,153,752 and 7,169,388 units outstanding at June 30, 2012 and December 31, 2011, respectively
 
167,310

 
159,582

General partner —
 
 
 
 
Common equity - 88,026,112 and 87,473,572 units outstanding at June 30, 2012 and December 31, 2011, respectively
 
1,197,044

 
1,224,947

Limited partners’ noncontrolling interest in consolidated partnership
 
707

 
728

Accumulated other comprehensive loss
 
(23,363
)
 
(16,906
)
Total equity
 
1,174,388

 
1,208,769

Total liabilities and equity
 
$
3,302,562

 
$
3,258,428




The accompanying notes are an integral part of these consolidated financial statements.
7


COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands, except per unit data)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
 
Minimum rent
 
$
81,582

 
$
73,093

 
$
161,628

 
$
143,168

Tenant recoveries
 
2,120

 
1,928

 
4,437

 
3,935

Other property related revenue
 
14,430

 
12,711

 
28,070

 
24,580

Other non-property related revenue
 
1,471

 
2,173

 
2,815

 
3,984

Total revenues
 
99,603

 
89,905

 
196,950

 
175,667

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expense
 
27,335

 
25,131

 
53,894

 
48,990

Taxes, licenses and insurance
 
11,115

 
10,045

 
22,339

 
20,291

Property management expense
 
3,001

 
2,181

 
5,847

 
4,603

General and administrative expense
 
5,446

 
5,188

 
11,213

 
10,390

Management fees and other expenses
 
1,769

 
1,884

 
3,814

 
3,653

Investment and development expense
 
205

 
393

 
592

 
979

Depreciation
 
30,472

 
29,130

 
60,818

 
57,874

Amortization
 
1,324

 
1,773

 
3,142

 
3,584

Impairment and other losses
 
395

 
148

 
895

 
2,244

Total operating expenses
 
81,062

 
75,873

 
162,554

 
152,608

Income from operations
 
18,541

 
14,032

 
34,396

 
23,059

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(23,277
)
 
(20,394
)
 
(46,330
)
 
(41,272
)
Debt cost amortization
 
(1,402
)
 
(1,146
)
 
(2,835
)
 
(2,298
)
Interest income
 
556

 
336

 
1,550

 
668

Income (loss) from partially-owned unconsolidated entities
 
17,204

 
(134
)
 
17,877

 
(474
)
(Loss) gain on sales of property
 
(9
)
 
23

 
(235
)
 
(56
)
Income taxes and other
 
(277
)
 
(271
)
 
(465
)
 
(519
)
Total other income (expense)
 
(7,205
)
 
(21,586
)
 
(30,438
)
 
(43,951
)
Income (loss) from continuing operations
 
11,336

 
(7,554
)
 
3,958

 
(20,892
)
Income from discontinued operations
 
2,250

 
1,510

 
3,177

 
3,092

Loss on disposal of discontinued operations
 
(12
)
 

 
(14
)
 

Net income from discontinued operations
 
2,238

 
1,510

 
3,163

 
3,092

Net income (loss)
 
13,574

 
(6,044
)
 
7,121

 
(17,800
)
Noncontrolling interest of limited partners — continuing operations
 
(8
)
 
(41
)
 
(17
)
 
(43
)
Net income (loss) attributable to CRLP
 
13,566

 
(6,085
)
 
7,104

 
(17,843
)
Distributions to limited partner preferred unitholders
 

 
(906
)
 

 
(1,813
)
Net income (loss) available to common unitholders
 
$
13,566

 
$
(6,991
)
 
$
7,104

 
$
(19,656
)
Net (income) loss available to common unitholders allocated to limited partners — continuing operations
 
(1,166
)
 
673

 
(609
)
 
1,847

Net income available to common unitholders allocated to limited partners — discontinued operations
 
(168
)
 
(119
)
 
(239
)
 
(251
)
Net income (loss) available to common unitholders allocated to general partner
 
$
12,232

 
$
(6,437
)
 
$
6,256

 
$
(18,060
)
Net income (loss) per common unit — basic:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.12

 
$
(0.09
)
 
$
0.04

 
$
(0.26
)
Discontinued operations
 
0.03

 
0.01

 
0.04

 
0.04

Net income (loss) per common unit — basic
 
$
0.15

 
$
(0.08
)
 
$
0.08

 
$
(0.22
)
Net income (loss) per common unit — diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.12

 
$
(0.09
)
 
$
0.04

 
$
(0.26
)
Discontinued operations
 
0.03

 
0.01

 
0.04

 
0.04

Net income (loss) per common unit — diluted
 
$
0.15

 
$
(0.08
)
 
$
0.08

 
$
(0.22
)
Weighted average common units outstanding:
 
 
 
 
 
 
 
 
Basic
 
94,363

 
90,847

 
94,272

 
88,833

Diluted
 
94,652

 
90,847

 
94,548

 
88,833

Net income (loss) attributable to CRLP
 
$
13,566

 
$
(6,085
)
 
$
7,104

 
$
(17,843
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Changes in fair value of qualifying hedges
 
(10,750
)
 
537

 
(10,585
)
 
537

Adjust for amounts included in net income (loss)
 
1,800

 
120

 
3,332

 
240

Comprehensive income (loss)
 
$
4,616

 
$
(5,428
)
 
$
(149
)
 
$
(17,066
)


The accompanying notes are an integral part of these consolidated financial statements.
8


COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
Six Months Ended
 
 
June 30,
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
7,121

 
$
(17,800
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
67,272

 
68,614

(Income) loss from partially-owned unconsolidated entities
 
(17,877
)
 
474

Loss on sale of property
 
249

 
56

Impairment and other losses
 
1,166

 
2,244

Distributions of income from partially-owned unconsolidated entities
 
471

 
2,072

Share-based compensation expense
 
4,120

 
2,998

Other, net
 
511

 
1,529

Change in:
 
 
 
 
Restricted cash
 
221

 
(368
)
Accounts receivable
 
876

 
(93
)
Prepaid expenses
 
2,500

 
(3,259
)
Other assets
 
2,550

 
1,244

Accounts payable
 
(12,001
)
 
(4,385
)
Accrued interest
 
107

 
(894
)
Accrued expenses and other
 
13,175

 
17,786

Net cash provided by operating activities
 
70,461

 
70,218

Cash flows from investing activities:
 
 
 
 
Acquisition of properties
 
(78,215
)
 
(96,837
)
Development expenditures
 
(45,444
)
 
(12,941
)
Capital expenditures, tenant improvements and leasing commissions
 
(13,106
)
 
(9,942
)
Proceeds from sales of property, net of selling costs
 
1,862

 
4,157

Restricted cash
 
19,852

 

Issuance of notes receivable
 

 
(17,941
)
Repayments of notes receivable
 
1,666

 
963

Distributions from partially-owned unconsolidated entities
 
3,029

 

Capital contributions to partially-owned unconsolidated entities
 
(54
)
 
(186
)
Net cash used in investing activities
 
(110,410
)
 
(132,727
)
Cash flows from financing activities:
 
 
 
 
Proceeds from additional borrowings
 
150,000

 

Proceeds from dividend reinvestment plan and exercise of stock options
 
3,575

 
1,667

Proceeds from issuance of common units
 

 
156,250

Principal reductions of debt
 
(1,139
)
 
(57,775
)
Payment of debt issuance costs
 
(5,264
)
 

Proceeds from borrowings on revolving credit lines
 
305,000

 
978,000

Payments on revolving credit lines and overdrafts
 
(377,463
)
 
(981,205
)
Dividends paid to common shareholders
 
(31,623
)
 
(26,176
)
Distributions to noncontrolling partners in CRLP
 
(2,580
)
 
(2,181
)
Net cash provided by financing activities
 
40,506

 
68,580

Increase in cash and cash equivalents
 
557

 
6,071

Cash and cash equivalents, beginning of period
 
6,452

 
4,954

Cash and cash equivalents, end of period
 
$
7,009

 
$
11,025

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid during the period for interest, including amounts capitalized
 
$
46,758

 
$
43,015

Cash received during the period for income taxes
 
$

 
$
(729
)
 
 
 
 
 
Supplemental disclosure of non-cash transactions:
 
 
 
 
Change in accrual of construction expenses and capital expenditures
 
$
(633
)
 
$
(283
)
Consolidation of Colonial Grand at Traditions joint venture (principally a multifamily property)
 
$

 
$
17,615


The accompanying notes are an integral part of these consolidated financial statements.
9


COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(in thousands)
 
General Partner Common Equity
Limited Partners’ Preferred Equity
Limited Partners’ Noncontrolling Interest
Accumulated Other Comprehensive Loss
Total
Redeemable Common Units
For the six months ended June 30, 2012 and 2011
Balance, December 31, 2010
$
1,118,086

$
48,724

$
769

$
(2,231
)
$
1,165,348

$
145,539

Net income (loss)
(18,049
)
1,813

43

 
(16,193
)
(1,607
)
Reclassification adjustment for amounts included in net income (loss)
 
 
 
777

777

 
Distributions to common unitholders
(24,363
)
 
 
 
(24,363
)
(2,181
)
Distributions to preferred unitholders
 
(1,813
)
 
 
(1,813
)
 
Change in interest of limited partners
 
 
(45
)
 
(45
)
 
Contributions from partners and the Company related to employee stock purchase, dividend reinvestment plans and equity offerings
159,866

 
 
 
159,866

 
Redemption of partnership units for shares
751

 
 
 
751

(751
)
Change in redeemable noncontrolling interest
(18,208
)
 
 
 
(18,208
)
18,208

Balance, June 30, 2011
$
1,218,083

$
48,724

$
767

$
(1,454
)
$
1,266,120

$
159,208

 
 
 
 
 
 
 
Balance, December 31, 2011
$
1,224,947

$

$
728

$
(16,906
)
$
1,208,769

$
159,582

Net income (loss)
6,256


17

 
6,273

848

Reclassification adjustment for amounts included in net income (loss)
 
 
 
3,332

3,332

 
Changes in fair value of qualifying hedges
 
 
 
(9,789
)
(9,789
)
(796
)
Distributions to common unitholders
(31,623
)
 
 
 
(31,623
)
(2,580
)
Change in interest of limited partners
 
 
(38
)
 
(38
)
 
Contributions from partners and the Company related to employee stock purchase, dividend reinvestment plans and equity offerings
7,720

 
 
 
7,720

 
Redemption of partnership units for shares
336

 
 
 
336

(336
)
Change in redeemable noncontrolling interest
(10,592
)
 
 
 
(10,592
)
10,592

Balance, June 30, 2012
$
1,197,044

$

$
707

$
(23,363
)
$
1,174,388

$
167,310



The accompanying notes are an integral part of these consolidated financial statements.
10


COLONIAL PROPERTIES TRUST AND COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2012
(Unaudited)
The consolidated condensed financial statements of Colonial Properties Trust (the “Trust”) and Colonial Realty Limited Partnership ("CRLP") have been prepared pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. The following notes, which represent interim disclosures as required by the SEC, highlight significant changes to the notes included in the December 31, 2011 audited consolidated financial statements of Colonial Properties Trust and Colonial Realty Limited Partnership and should be read together with the consolidated financial statements and notes thereto included in the Colonial Properties Trust and Colonial Realty Limited Partnership 2011 Annual Report on Form 10-K.

Note 1 — Organization and Business
As used herein, "Colonial" or the "Trust" means Colonial Properties Trust, an Alabama real estate investment trust (“REIT”), together with its subsidiaries, including Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP”), Colonial Properties Services, Inc. (“CPSI”), Colonial Properties Services Limited Partnership (“CPSLP”) and CLNL Acquisition Sub, LLC (“CLNL”). The term "the Company" refers to the Trust and CRLP, collectively. The Trust was originally formed as a Maryland REIT on July 9, 1993 and reorganized as an Alabama REIT under a new Alabama REIT statute on August 21, 1995. The Trust is the sole general partner of, and, as of June 30, 2012, owned a 92.5% limited partner interest in CRLP. The Trust and CRLP are structured as an "umbrella partnership REIT", or UPREIT, and the Trust's only material asset is its ownership of limited partnership interests in CRLP. The Trust conducts all of its business and owns all of its properties through CRLP and CRLP's various subsidiaries and, as the sole general partner of CRLP, is vested with managerial control and authority over the business and affairs of CRLP.
The Trust is a multifamily-focused self-administered and self-managed equity REIT, which means that it is engaged in the acquisition, development, ownership, management and leasing of multifamily apartment communities and other commercial real estate properties. The Company’s activities include full or partial ownership and operation of a portfolio of 136 properties, consisting of multifamily and commercial properties located in 11 states (Alabama, Arizona, Florida, Georgia, Louisiana, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia).
As of June 30, 2012, the Company owned or maintained a partial ownership in:
 
 
 
 
 
 
 
 
 
 
 
Total
 
Consolidated
 
Units/Sq.
 
Unconsolidated
 
Units/Sq.
 
Total
 
Units/Sq.
 
Properties
 
Feet (1)
 
Properties
 
Feet (1)
 
Properties
 
Feet (1)
Multifamily apartment communities
112

(2) 
34,051

 
3

 
1,016

 
115

 
35,067

Commercial properties (3)
9

 
2,415,000

 
12

 
2,046,000

 
21

 
4,461,000

______________________________
(1)
Units refer to multifamily apartment units. Square feet refers to commercial space and excludes spaced owned by anchor tenants.
(2)
Includes one property partially-owned through a joint venture entity.
(3)
The Company's remaining 15% interest in the DRA/CLP joint venture, which was comprised of 18 commercial assets representing approximately 5.2 million square feet, was redeemed by the joint venture, effective as of June 30, 2012. See Note 12 - "Investment in Partially-Owned Entities". As a result of the redemption, these 18 assets are not included in the table above.

Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The notes included in this Form 10-Q apply to both the Trust and CRLP, unless specifically noted otherwise. Specifically Note 5 - "Net Income (Loss) Per Share of the Trust", Note 7 - "Equity of the Trust" and Note 9 - "Redeemable Noncontrolling Interests of the Trust" pertain only to the Trust. Note 6 - "Net Income (Loss) Per Unit of CRLP", Note 8 - "Capital Structure of CRLP" and Note 10 - "Redeemable Partnership Units of CRLP" pertain only to CRLP.
Unaudited Interim Consolidated Condensed Financial Statements
The accompanying unaudited interim consolidated condensed financial statements of the Trust and CRLP have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, including rules and regulations of the SEC. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments

11


(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The Consolidated Condensed Balance Sheets at December 31, 2011 of the Trust and CRLP have been derived from the respective audited financial statements at that date, but do not include all of the information and footnotes required by GAAP for complete financial statements.
Federal Income Tax Status
The Trust, which is considered a corporation for federal income tax purposes, qualifies as a REIT and generally will not be subject to federal income tax to the extent it distributes its REIT taxable income to its shareholders. REITs are subject to a number of organizational and operational requirements. If the Trust fails to qualify as a REIT in any taxable year, the Trust will be subject to federal income tax on its taxable income at regular corporate rates. Even if the Trust does qualify as a REIT, the Trust may be subject to certain federal, state and local taxes on its income and property and to federal income and excise taxes on its undistributed income. For example, the Trust will be subject to federal income tax to the extent it distributes less than 100% of its REIT taxable income (including undistributed net capital gains) and the Trust has certain gains that, if recognized, will be subject to corporate tax because it acquired the assets in tax-free acquisitions of non-REIT corporations.
CRLP is a partnership for federal income tax purposes. As a partnership, CRLP is not subject to federal income tax on its income. Instead, each of CRLP's partners, including the Trust, is responsible for paying tax on such partner's allocable share of income.
The Company’s consolidated financial statements include the operations of a taxable REIT subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities result from temporary differences. Temporary differences are differences between tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future periods. CPSI provides property development, construction services, leasing and management services for joint venture and third-party owned properties and administrative services to the Company and engages in for-sale development activity. The Company generally reimburses CPSI for payroll and other costs incurred in providing services to the Company. All inter-company transactions are eliminated in the accompanying consolidated condensed financial statements. CPSI’s consolidated provision for income taxes and effective income tax rate were zero for each of the three and six months ended June 30, 2012 and 2011. As of June 30, 2012 and December 31, 2011, the Company had no net deferred tax asset after the effect of the valuation allowance.
Tax years 2003 through 2011 are subject to examination by the federal taxing authorities. Generally, tax years 2008 through 2011 are subject to examination by state taxing authorities. There are no state tax examinations currently in process.
The Company may from time to time be assessed interest or penalties by federal and state tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company's financial results. When the Company has received an assessment for interest and/or penalties, it has been classified in the financial statements as "Income taxes and other".
Notes Receivable
Notes receivable consists primarily of promissory notes representing loans by the Company to third parties. The Company records notes receivable at cost. The Company evaluates the collectability of both interest and principal for each of its notes to determine whether they are impaired. A note is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the allowance is calculated by comparing the recorded investment to either the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the value of the collateral if the note is collateral-dependent. As of June 30, 2012, the Company did not have any impaired notes receivable.
As of June 30, 2012, the Company had notes receivable of $42.8 million consisting primarily of:
$24.8 million outstanding on the construction note, which is secured by the property, for the Colonial Promenade Smyrna joint venture, which the Company acquired from the lender in May 2010. On January 31, 2012, the Company and the joint venture amended the note and related loan documents to extend the maturity date to December 2012, fix the annual interest rate at 5.25%, provide for two additional one-year extension options and reduce the joint venture partner's guarantee to $1.3 million.


12


$16.7 million outstanding on a seller-financing note with a five-year term at an annual interest rate of 5.60% associated with the disposition of Colonial Promenade at Fultondale in February 2009.

The Company had accrued interest related to its outstanding notes receivable of $0.3 million as of June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012 and December 31, 2011, the Company had no reserve recorded against its outstanding notes receivable. The weighted average interest rate on the notes receivable outstanding at June 30, 2012 and December 31, 2011 was approximately 5.4% and 4.9%, respectively. Interest income is recognized on an accrual basis.

Fair Value Measures

The Company applies the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC")820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between willing market participants. Additional disclosures focusing on the methods used to determine fair value are also required using the following hierarchy:

Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2 Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3 Unobservable inputs for the assets or liability.

The Company applies ASC 820 in relation to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets (see Note 3 - "Real Estate Activity"), to its disclosure of the fair value of financial instruments, which principally consists of indebtedness (see Note 13 - "Financing Activities"), to its disclosure of fair value of derivative financial instruments (see Note 14 - "Derivatives and Hedging") and to notes receivable (see below). The following table presents the Company's real estate assets and derivative financial instruments reported at fair market value and the related level in the fair value hierarchy as defined by ASC 820 used to measure those assets, liabilities and disclosures:
 
 
Fair value measurements as of
($ in thousands)
 
June 30, 2012
Assets (Liabilities)
 
Total
 
Level 1
 
Level 2
 
Level 3
Real estate assets, including land held for sale
 
$
6,213

 
$

 
$

 
$
6,213

Derivative financial instruments
 
$
(24,112
)
 
$

 
$
(24,112
)
 
$


Real estate assets

Real estate assets, including land held for sale, were valued using sales activity for similar assets, current contracts and using inputs management believes are consistent with those that market participants would use. The fair values of these assets are determined using widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among other things, units sales assumptions, cost structure and discount rates and (ii) comparable sales activity. The valuation technique and related inputs vary with the specific facts and circumstances of each project.

Derivative financial instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company, in conjunction with the FASB's fair value measurement guidance, made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.




13


Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2012, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Indebtedness

At June 30, 2012, the estimated fair value of fixed rate debt was approximately $1.80 billion (carrying value of $1.71 billion) and the estimated fair value of the Company’s variable rate debt, including the Company’s unsecured credit facility, is consistent with the carrying value of $129.9 million. The Company has determined that the fair value of its fixed and variable rate debt is classified as Level 2 of the fair value hierarchy.

Notes Receivable

The estimated fair value of the Company’s notes receivable at June 30, 2012 and December 31, 2011 was consistent with the carrying values of approximately $42.8 million and $43.8 million, respectively, based on market rates and similar financing arrangements. The Company has determined that the fair value of its notes receivable is classified as Level 3 of the fair value hierarchy.
The disclosure of estimated fair values was determined by management using available market information, considering market participant assumptions and appropriate valuation methodologies available to management at June 30, 2012. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, there can be no assurance that the estimates presented above are indicative of the amounts the Company could realize on disposition of the real estate assets or financial instruments. The use of different market assumptions and/or estimation methodologies could have material effect on the estimated fair value amounts.
Accounting Pronouncements Recently Adopted
In May 2011, the FASB issued ASU 2011-04, an update to ASC 820, Fair Value Measurement. ASU 2011-04 was issued to further explain how to measure fair value and improve the comparability of fair value measurements presented and disclosed in financial statements. The amendments expand the disclosures about fair value measurements categorized within Level 3 of the fair value hierarchy including the valuation process used by the reporting entity and the sensitivity of the fair value measurement to changes in unobservable inputs. The amendment also requires expanded disclosure about the reporting entity's use of a nonfinancial asset in a way that differs from the asset's highest and best use and the categorization by level of the fair value hierarchy for items that are not measured at fair value in the financial statements but for which fair value is required to be disclosed. ASU 2011-04 was adopted by the Company for the fiscal years beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on the Company's consolidated financial statements.

Note 3 — Real Estate Activity
Acquisition Activity
During the six months ended June 30, 2012, the Company acquired the following multifamily apartment communities:
 
 
 
 
 
 
Effective
 
 
Acquisition
 
Location
 
Units
 
Acquisition Date
 
Purchase Price
 
 
 
 
 
 
 
 
(in millions)
Colonial Grand at Brier Falls
 
Raleigh, NC
 
350
 
January 10, 2012
 
$
45.0

Colonial Grand at Fairview
 
Dallas, TX
 
256
 
May 30, 2012
 
$
29.8

The results of operations of the above mentioned acquisitions have been included in the consolidated financial statements since the date of acquisition. These acquisitions were funded with proceeds from asset dispositions and borrowings on the Company's unsecured credit facility.
The following unaudited pro forma financial information for the three and six months ended June 30, 2012 and 2011, gives effect to the above operating property acquisitions as if they had occurred at the beginning of the periods presented. The information for the three and six months ended June 30, 2012, includes pro forma results for the portion of the period prior to

14


the acquisition date and actual results from the date of acquisition through the end of the period. The information for the three and six months ended June 30, 2011, also includes pro forma results for eight acquisitions completed in 2011. The pro forma results are not intended to be indicative of the results of future operations.
 
 
** Pro Forma (Unaudited) **
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
($ in thousands, except per share data)
 
2012
 
2011
 
2012
 
2011
Total revenue
 
$
99,760

 
$
93,790

 
$
197,462

 
$
187,305

Net income (loss) available to common shareholders
 
$
16,316

 
$
(6,765
)
 
$
10,236

 
$
(19,024
)
Net income (loss) per common share — dilutive
 
$
0.19

 
$
(0.08
)
 
$
0.12