| Note 1–Description of Business and Summary of Significant Accounting Policies (a) Business We are a fully integrated, self-administered and self-managed publicly traded real estate investment trust ("REIT"). We focus on the acquisition, development, ownership and operation of office properties, located primarily in selected suburban markets across the United States. Until June of 2000, we also operated an executive suites business. As discussed in note 3, we disposed of a substantial portion of our interest in this business on June 1, 2000, and we present the executive suites business as a discontinued operation. Our principal shareholder at December 31, 2000 was Security Capital-U.S. Realty, which owned approximately 44% of our outstanding common stock. In January 2001, Security Capital-U.S. Realty merged with Security Capital Group International, and, as a result, Security Capital Group International ("Security Capital") now owns these shares. (b) Basis of Presentation Our accounts and those of our majority-owned/controlled subsidiaries and affiliates are consolidated in the financial statements. We use the equity or cost methods, as appropriate in the circumstances, to account for our investments in and our share of the earnings or losses of unconsolidated entities. These entities are not majority-owned or controlled by us. Management has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and the disclosure of contingent assets and liabilities. Estimates are required in order for us to prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. Significant estimates are required in a number of areas, including the evaluation of impairment of long-lived assets, determination of useful lives of assets subject to depreciation or amortization and evaluation of the collectibility of accounts and notes receivable. Actual results could differ from these estimates. (c) Rental Property Properties to be developed or held and used in rental operations are carried at cost less accumulated depreciation and impairment losses, where appropriate. Properties held for sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and impairment losses, where appropriate) or estimated fair value less costs to sell. Properties are considered held for sale when they are subject to a contract of sale meeting criteria specified by senior management (e.g., contingencies are met or waived, a nonrefundable deposit is paid, etc.). Depreciation on these properties is discontinued at that time, but operating revenues, other operating expenses and interest continue to be recognized until the date of sale. At December 31, 2000, rental properties with a net book value of $203.0 million and land with a carrying value of $12.0 were held for sale. The sale of the majority of the rental properties closed in February 2001 (see note 13) and all of the land is expected to be sold in 2001. Depreciation of rental properties is computed on a straight-line basis over the estimated useful lives of the assets. The estimated lives of our assets by class are as follows:
Specifically identifiable costs associated with properties and land in development are capitalized. Capitalized costs may include salaries and related costs, real estate taxes, interest, pre-construction costs essential to the development of a property, development costs, construction costs and external acquisition costs. Costs of significant improvements, renovations and replacements to rental properties are capitalized. Expenditures for maintenance and repairs are charged to operations as they are incurred. If events or changes in circumstances indicate that the carrying value of a rental property or land held for development may be impaired, we perform a recoverability analysis based on estimated undiscounted cash flows to be generated from the property in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property is written down to estimated fair value and an impairment loss is recognized. We recognize gains from sales of rental properties and land at the time of sale using the full accrual method, provided that various criteria related to the terms of the transactions and any subsequent involvement by us with the properties sold are met. If the criteria are not met, we defer the gains and recognize them when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. (d) Tenant Leasing Costs We defer fees and initial direct costs incurred in the negotiation of completed leases. They are amortized on a straight-line basis over the term of the lease to which they apply. (e) Deferred Financing Costs We defer fees and costs incurred to obtain financing. They are amortized using the interest method over the term of the loan to which they apply. (f) Real Estate Service Contracts and Other Intangibles The costs of real estate service contracts and other identified intangible assets are amortized on a straight-line basis over the expected lives of the assets. (g) Fair Values of Financial Instruments The carrying amounts of cash and cash equivalents, accounts and notes receivable and accounts payable and accrued expenses approximate their fair values because of their short-term maturities. Fair value information relating to mortgages and notes payable is provided in Note 2. (h) Revenue Recognition We recognize minimum base rental revenue under tenant leases on a straight-line basis over the terms of their respective leases. Accrued straight-line rents represent the rental revenue recognized in excess of rents due under the lease agreements at the balance sheet date. Accrued straight-line rents is net of an allowance for estimated uncollectible amounts. The allowance is based on the expected future cash flows determined based on current information and management's assessment of the tenants' ability to fulfill their lease obligations. We recognize revenues for recoveries from tenants of real estate taxes, insurance and other costs in the period in which the related expenses are incurred. We recognize revenue for services on properties we manage, lease or develop for unconsolidated entities or third parties when the services are performed. Revenue for development and leasing services to affiliates is reduced to eliminate profit to the extent of our ownership interest. (i) Income and Other Taxes In general, a REIT which meets certain requirements and distributes at least 90 percent of its REIT taxable income to its shareholders in a taxable year will not be subject to income tax to the extent of the income it distributes. We qualify and intend to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. As a result, we have made no provision for federal income taxes on income from continuing operations, except for taxes on certain property sales. The REIT Modernization Act ("RMA") was included in the Tax Relief Extension Act of 1999 ("the Act"), which was enacted into law on December 17, 1999. The RMA includes numerous amendments to the provisions governing the qualification and taxation of REITs. These amendments were effective January 1, 2001. One of the principal provisions included in the Act was the creation of the taxable REIT subsidiary ("TRS"). A TRS is a corporation that, among other things, is permitted to provide services to tenants that previously were allowed to be provided only by independent third parties or through a corporation in which we had less than 10% of the voting power. We and some of our subsidiaries made a joint election to treat these subsidiaries as TRS's for federal and state income tax purposes as of January 1, 2001. The net operating losses carried forward from December 31, 2000, for federal income tax purposes aggregate approximately $10.4 million and will begin to expire in 2012. We have subsidiaries which are organized as partnerships which are subject to District of Columbia franchise tax. This tax is included in income taxes. (j) Hedging Transactions We sometimes use interest rate lock and collar agreements to hedge against the impact of interest rate fluctuations on our existing debt or anticipated financing transactions. These agreements are designed as hedges and, as a result, changes in their fair values are not recognized in the financial statements, provided that they meet defined correlation and effectiveness criteria at inception and thereafter. Instruments that cease to qualify for hedge accounting are marked-to-market with gains and losses recognized in the statement of operations. (k) Earnings Per Share and Dividends Our basic earnings per share (EPS) is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding. Our diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all dilutive potential common shares outstanding during the period. The dilutive effects of convertible securities are computed using the "if-converted" method. The dilutive effects of options, warrants and their equivalents (including fixed awards and nonvested shares issued under stock compensation plans) are computed using the "treasury stock" method. The following table sets forth information relating to the computations of our basic and diluted EPS for income from continuing operations:
Income from continuing operations has been reduced by preferred dividends of $35,206, $35,448 and $35,571 for 2000, 1999 and 1998, respectively. The effects of convertible units in CarrAmerica Realty L.P. and Carr Realty L.P. and Series A Convertible Preferred Stock are not included in the calculation of diluted EPS for any year in which their effect is antidilutive. The tax status of our common stock dividends paid during the last three years is as follows:
(l) Cash Equivalents We consider all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents except that any such investments purchased with funds on deposit in escrow or similar accounts are classified as restricted deposits. (m) Accumulated Other Comprehensive Income We currently do not have any items of other comprehensive income. Prior to the merger of HQ Global with VANTAS (see note 3), we had foreign currency translation adjustments due to HQ Global's foreign affiliates. Our historic translation adjustments are included in net assets of discontinued operations at December 31, 1999. Our comprehensive income represented net income and translation adjustments. Comprehensive income was $179.5 million in 2000, $141.7 million in 1999 and $127.0 million in 1998. (n) Segment Information We have two reportable business segments: real estate property operations and development operations. Business activities and operating segments that are not reportable are included in other operations. (o) Stock/Unit Compensation Plans We use the intrinsic value method to account for our stock option and unit plans. Under this method, we record compensation expense for awards of stock, options or units to employees only if the market price of the unit or stock on the grant date exceeds the amount the employee is required to pay to acquire the unit or stock. (p) New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet. The derivatives must be measured at fair value. We have adopted this statement as of January 1, 2001. Because we use derivatives on only a limited basis and in a manner that will qualify for treatment as cash flow hedges under SFAS No. 133, adoption of SFAS No. 133 will not have a material impact on our financial statements. (q) Reclassifications Some prior years' amounts have been reclassified to conform to the current year's presentation. Note 2–Mortgages and Notes Payable Our mortgages and notes payable are summarized as follows:
Mortgages payable are collateralized by properties and generally require monthly principal and/or interest payments. Mortgages payable mature at various dates from August 2001 through July 2019. The weighted average interest rate of mortgages payable was 8.09% at December 31, 2000 and 8.04% at December 31, 1999. We have a $450.0 million unsecured credit facility with Morgan Guaranty Trust Company of New York (Morgan), as agent for a group of banks. The credit facility bears an interest rate, based on our choice, of either the higher of the prime rate or the Federal Funds Rate or 70 basis points above the 30-day London Interbank Offered Rate (LIBOR). We usually select the interest rate equal to 70 basis points above the 30-day LIBOR rate for initial draws and when LIBOR contracts expire. The credit facility matures in August 2001 and we are in the process of negotiating the terms of renewal. Based on the progress of the negotiations, we expect that we will continue to have credit available to meet our needs on satisfactory terms. At December 31, 2000, we had $270.3 million available for draw under the credit facility. Our unsecured credit facility contains financial and other covenants with which we must comply. Some of these covenants include:
We had senior unsecured notes outstanding of $475.0 million at December 31, 2000. These notes are as follows:
Debt maturities at December 31, 2000 are as follows (in thousands):
Restricted deposits consist primarily of escrow deposits. These deposits are required by lenders to be used for future building renovations or tenant improvements or as collateral for letters of credit. The estimated fair value of our mortgages payable at December 31, 2000 and 1999 was approximately $582.3 million and $659.0 million, respectively. The estimated fair value is based on the borrowing rates available to us for fixed rate mortgages payable with similar terms and average maturities. The fair value of the unsecured credit facility at December 31, 2000 and 1999 approximates book value. The estimated fair value of our senior unsecured notes at December 31, 2000 and 1999 was approximately $468.7 million and $584.8 million, respectively. The estimated fair value is based on the borrowing rates available to us for debt with similar terms and maturities. Note 3–Discontinued Operations On January 20, 2000, we, along with HQ Global Workplaces, Inc. (HQ Global), VANTAS Incorporated (VANTAS) and FrontLine Capital Group, entered into several agreements that contemplated several transactions including (i) the merger of VANTAS with and into HQ Global, (ii) the acquisition by FrontLine Capital Group of shares of HQ Global common stock from us and other stockholders of HQ Global, and (iii) the acquisition by VANTAS of our debt and equity interests in OmniOffices (UK) Limited and OmniOffices LUX 1929 Holding Company S.A. On June 1, 2000, we consummated the transactions. We recognized an after tax gain of $31.9 million. Our investment in the merged entity at December 31, 2000 was $42.2 million and is accounted for using the cost method. We own approximately 16% of the equity of the merged entity on a fully diluted basis. In connection with the HQ Global merger, a $200.0 million credit facility that HQ Global had with Morgan Guaranty Trust Company was retired. Approximately $140.5 million of HQ Global debt (which we guaranteed) was repaid at that time. As part of the HQ Global/VANTAS transaction, we received put rights with respect to our continuing interest in HQ Global. These rights can be exercised at specified times at our option if HQ Global has not completed an initial public offering. A portion of the put is exercisable in late 2001, with the balance exercisable in June 2002. Payment for our HQ Global stock will be based on the fair market value of our investment and can be made either in cash, a short-term note (in the case of the 2001 put right) or delivery of common stock of FrontLine Capital Group, a NASDAQ-listed company and the majority shareholder of HQ Global. Note 4–Minority Interest At the time we were incorporated and our majority-owned subsidiary, Carr Realty, L.P. was formed, those who contributed interests in properties to Carr Realty, L.P. had the right to elect to receive either our common stock or units of limited partnership interest in Carr Realty, L.P. In addition, we have acquired assets since our formation by issuing distribution paying units and non-distribution paying units of Carr Realty, L.P. and CarrAmerica Realty, L.P. The non-distribution paying units cannot receive any distributions until they automatically convert into distribution paying units in the future. During the year ended December 31, 2000, 163,598 non-distribution paying units were converted to distribution paying units. A distribution paying unit, subject to restrictions, may be redeemed for either one share of our common stock, or, at our option, cash equal to the fair market value of a share of our common stock at the time of redemption. When a Unitholder redeems a distribution paying unit for a share of common stock or cash, minority interest is reduced and our investment in Carr Realty, L.P. or CarrAmerica Realty, L.P., as appropriate, is increased. During the years ended December 31, 2000 and 1999, 292,739 and 38,430 distribution paying units, respectively, of Carr Realty, L.P. were redeemed for our common stock. Minority interest in the financial statements relates primarily to Unitholders. The following table summarizes the outstanding shares of our common stock, preferred stock which is convertible into our common stock and outstanding units of Carr Realty, L.P. and CarrAmerica Realty, L.P.:
Note 5–Other Investments in Unconsolidated Entities and Affiliate Transactions We own interest ranging from 15% to 50% in real estate property operations and development operations through unconsolidated entities. We had eleven investments in 2000, six investments in 1999 and eight investments in 1998 in these entities. The combined condensed financial information for the unconsolidated entities accounted for under the equity method is as follows:
In addition to making investments in these entities, we provided construction management, leasing, development and architectural and other services to them. We earned fees for these services of $8.9 million in 2000, $7.9 million in 1999 and $6.1 million in 1998. Accounts receivable from our affiliates were $4.8 million at December 31, 2000 and $6.1 million at December 31, 1999. At December 31, 1999, these receivables included a leasing commission receivable of $2.1 million. In December 2000, the building to which this receivable related was sold and the balance of the receivable was collected. A subsidiary of Clark Enterprises, Inc., a Unitholder, has provided construction management services to us. We have paid $1.7 million in 2000, $3.1 million in 1999 and $19.6 million in 1998 for these services. During 1999 and 1998, payments of $0.2 million and $0.3 million, respectively, were made to Security Capital Investment Research Incorporated, an affiliate of Security Capital, for research. Payments to Security Capital in 2000 were less than $30,000. The research was related to the acquisition of operating properties, executive office suites businesses and development properties. Note 6–Lease Agreements Space in our rental properties is leased to approximately 1,350 tenants. In addition to minimum rents, the leases typically provide for other rents which reimburse us for specific property operating expenses. The future minimum base rent to be received under noncancellable tenant leases and the percentage of total rentable space under leases expiring each year, as of December 31, 2000 are summarized as follows:
Leases also provide for additional rent based on increases in the Consumer Price Index (CPI) and increases in operating expenses. Increases are generally payable in equal installments throughout the year. We lease land for two office properties located in metropolitan Washington, D.C. and one office property located in Santa Clara, California. We also lease land adjacent to an office property in Chicago, Illinois. The initial terms of these leases range from 5 years to 99 years. The longest lease matures in 2086. The minimum base annual rental payment for these leases is $2.6 million. Note 7–Common and Preferred Stock In 2000, our Board of Directors has authorized us to spend up to $225 million to repurchase our common shares. During 2000, we acquired approximately 3.2 million shares for $90.2 million, an average price of $28.41 per share. We are authorized to issue 35 million shares of preferred stock. On October 25, 1996, we issued 1,740,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock ("Series A Preferred Stock") at $25 per share. Dividends for the Series A Preferred Stock are cumulative from the date of issuance. The dividends are payable quarterly in arrears in an amount per share equal to the greater of $1.75 per share per year or the cash dividend paid on the number of shares of our common stock into which a share of Series A Preferred Stock is convertible. Series A Preferred Stock has a liquidation preference of $25 per share. Each share of Series A Preferred Stock is convertible into one share of common stock (subject to conversion adjustments), at the option of the holder. As of December 31, 2000, 1,260,000 shares of Series A Preferred Stock had been converted into common stock. After October 25, 1999, each outstanding share of Series A Preferred Stock became redeemable at our option. The redemption price is $25 per share plus accrued and unpaid dividends. As of December 31, 2000, we had the following additional preferred stock issued and outstanding:
The Series C and D shares are Depositary Shares. They each represent a 1/10 fractional interest in a share of preferred stock. Dividends for the Series B, C and D shares are cumulative from the date of issuance and are payable quarterly in arrears on the last day of February, May, August and November. These preferred shares are redeemable at our option after the following dates:
Note 8–Stock/Unit Compensation Plans As of December 31, 2000, we had three option plans. Two plans are for the purpose of attracting and retaining executive officers and other key employees (1997 Employee Stock Option and Incentive Plan and the 1993 Carr Realty Option Plan). The other plan is for the purpose of attracting and retaining directors who are not employees (1995 Non-Employee Director Stock Option Plan). The 1997 Employee Stock Option and Incentive Plan ("Stock Option Plan") allows for the grant of options to purchase our common stock at an exercise price equal to the fair market value of the common stock at the date of grant. At December 31, 2000, we had options and units to purchase 10,000,000 shares of common stock and units reserved so we could issue them under the Stock Option Plan. At December 31, 2000, 6,281,703 options were outstanding. All of the outstanding options have a 10-year term from the date of grant. 3,606,375 options vest over a four-year period, 25% per year, and 450,000 options vest at the end of five years. The balance of the options vest over a five-year period, 20% per year. The 1993 Carr Realty Option Plan allows for the grant of options to purchase units of Carr Realty, L.P. (unit options). These options are exercisable at the fair market value of the units at the date of grant, which is equivalent to the fair market value of our common stock on that date. Units (following exercise of unit options) are redeemable for cash or common stock, at our option. At December 31, 2000, we had options to purchase 1,266,900 units authorized for grant under the 1993 Carr Realty Option Plan, of which 238,522 were outstanding. All of the outstanding options have a 10-year term from the date of grant and vest over five years, 20% per year. The 1995 Non-Employee Director Stock Option Plan provides for the grant of options to purchase our common stock at an exercise price equal to the fair market value of the common stock at the date of grant. Under this plan, newly elected non-employee directors are granted options to purchase 3,000 shares of common stock when they start serving as a director. In connection with each annual election of directors, a continuing non-employee director will receive options to purchase 7,500 shares of common stock. The stock options have a 10-year term from the date of grant and vest over three years, 33 1/3% per year. At December 31, 2000, we had 270,000 options on shares of common stock authorized for grant under this plan with 231,225 outstanding. The per share weighted-average fair values of Unit options and stock options granted during 2000, 1999 and 1998 were $2.24, $2.25 and $2.38, respectively, on the date of grant. This value is determined using the Black-Scholes option-pricing model. The following assumptions were used:
If we had applied a fair-value based method (rather than the intrinsic value method) to recognize compensation cost for our unit and stock options, our net income and earnings per share of common stock would have been adjusted as indicated below:
Unit and stock option activity during 2000, 1999 and 1998 is summarized as follows:
The following table summarizes information about our stock options outstanding at December 31, 2000:
We have also granted to key executives 726,294 restricted stock units under the 1997 Stock Option Plan. The stock units were granted at a zero exercise price. The fair market values of the units at the dates of grant range from $20.69 to $28.94 per unit. The units vest over five years, at 20% per year. We recognize the fair value of the units awarded at dates of grant as compensation cost on a straight-line basis over the terms of the awards. Compensation expense related to these awards was $2.9 million in 2000, $2.0 million in 1999 and $0.3 million in 1998. Note 9–Gain on Sale of Assets and Other Provisions, Net The following table summarizes our gain on sale of assets and other provisions, net:
We dispose of assets (sometimes using tax-deferred exchanges) that are inconsistent with our long-term strategic or return objectives or where market conditions for sale are favorable. During 2000, we disposed of 16 properties (including one property in which we held an interest through an unconsolidated entity) and four parcels of land that were being held for development. We recognized a net gain of $24.1 million on these transactions, net of taxes of $5.6 million, including a net gain of $8.8 million relating to our share of the gain on sale of a property in which we held an interest through an unconsolidated entity. On August 17, 2000, we closed on a joint venture transaction with New York State Teachers' Retirement System (NYSTRS). At closing, we and some affiliates contributed properties to the joint venture, Carr Office Park, L.L.C., and NYSTRS contributed cash of approximately $255.1 million. The joint venture encompasses five suburban office parks (including 26 rental properties and land held for development of additional properties) in four markets. We received approximately $249.6 million in cash and a 35% interest in the joint venture in exchange for the properties contributed and recognized a gain on the partial sale of $20.1 million, net of taxes of $13.1 million. During the fourth quarter of 2000, we recognized an impairment loss of $7.9 million on land. For various reasons, we determined that we would not proceed with planned development of rental properties on certain of our land holdings and decided to market the land for sale. As a result, we evaluated the recoverability of the carrying amounts of the land. We determined that the carrying amounts would not be recovered from estimated net sale proceeds in certain cases and, in those cases, we recognized impairment losses. During 1999, we disposed of 63 rental properties and two parcels of land being held for development. During 1998, we disposed of 13 rental properties and one parcel of land being held for development. Note 10–Commitments and Contingencies At December 31, 2000, we were liable on $3.7 million in letters of credit. We were contingently liable for letters of credit related to various completion escrows and on performance bonds amounting to approximately $13.1 million to ensure completion of required public improvements on our construction projects. In 1998, we entered into forward treasury agreements (treasury locks) in order to hedge against the impact of interest rate fluctuations on planned future debt issuances. At December 31, 1998, we determined that these positions no longer represented effective hedges. At that time, we recognized a loss of $13.7 million in anticipation of terminating the agreements. These contracts were settled in February 1999 for $9.2 million in cash, resulting in a gain of $4.5 million in 1999. We have a 401(k) plan for employees under which we match 50% of employee contributions up to the first 4% of pay. We also make a base contribution of 3% of pay for participants who remain employed on December 31 (end of the plan year). Our contributions to the plan are subject to a five-year graduated vesting schedule. Our contributions to the plan were $1.6 million in 2000 and $1.1 million in 1999 and 1998. In 2001, the vesting schedule is changing to four years, 25% per year, and our contribution will be 75% of employee contributions up to the first 6% of pay. We are currently involved in two separate lawsuits with two stockholders of HQ Global. The first lawsuit involves the conversion in September 1998 of approximately $111 million of debt previously loaned by us to HQ Global into stock of HQ Global. We, along with HQ Global, initiated this lawsuit asking the court to declare that the terms of the debt conversion were fair, after these two stockholders threatened to challenge the terms of the conversion. The stockholders had claimed that both the conversion price used and the methods by which the conversion price was agreed upon between HQ Global and us were not fair to HQ Global or these stockholders. Thereafter, the two stockholders filed their own counterclaims against HQ Global, the board of directors of HQ Global and us. The stockholders have asked the court to declare the conversion void, or in the alternative for compensatory and punitive damages. The second lawsuit involves claims filed by the two stockholders arising out of the June 2000 HQ Global/VANTAS merger transactions. In this lawsuit, the two stockholders have brought claims against HQ Global, the board of directors of HQ Global, and us. The two stockholders allege that, in connection with the transactions, we breached our fiduciary duties to the two stockholders and breached a certain contract with the stockholders. The stockholders have asked the court to rescind the entire transaction, or in the alternative for compensatory and rescissory damages. Although we believe that the two stockholders' claims are without merit and that we will ultimately prevail in these actions, there can be no assurance that the court will not find in favor of these stockholders. However, even if the two stockholders were successful in their claims, we do not believe that this result would have a material adverse effect on our financial condition or results of operations. In the course of our normal business activities, various lawsuits, claims and proceedings have been or may be instituted or asserted against us. Based on currently available facts, we believe that the disposition of matters that are pending or asserted will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. Note 11–Selected Quarterly Financial Information (unaudited) The following is a summary of the quarterly results of operations for 2000 and 1999:
Note 12–Segment Information Our reportable operating segments are real estate property operations and development operations. Other business activities and operating segments that are not reportable are included in other operations. The real estate property operations segment includes the operation and management of rental properties. The development operations segment includes the development of new rental properties for us and for unaffiliated companies. Our reportable segments offer different products and services and are managed separately because each requires different business strategies and management expertise. Our operating segments' performance is measured using funds from operations. Funds from operations is defined by the National Association of Real Estate Investment Trusts (NAREIT) as follows:
Operating results of our reportable segments and our other operations are summarized as follows:
Note 13–Subsequent Events As of December 31, 2000, our portfolio of rental properties in Phoenix (exclusive of one property) and three parcels of land were under contracts for sale for purchase prices of $97.9 million and $5.3 million, respectively. The sale of the Phoenix portfolio closed on February 15, 2001, producing net proceeds of $85.2 million that will be used to fund development projects and meet other corporate needs. We recognized a gain of $2.7 million, net of tax of $1.7 million. We also repaid a $ 7.3 million mortgage on one of the properties sold. |
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