FAQs

We are AMLI Residential Properties Trust (or AMLI), a publicly traded real estate investment trust (or REIT), which came public in 1994 to carry on the multifamily investment activities of our predecessor company, AMLI Realty Co. (or ARC).

ARC was formed in 1980 by John E. Allen and Gregory T. Mutz, AMLI’s current Vice-Chairman and Chairman, respectively, and Life Investors, a Cedar Rapids, Iowa-based insurance company. Hence the name AMLI. ARC was involved in the acquisition, development, construction, leasing and management of multifamily residential and suburban office and industrial properties for its own account and, through various entities, functioned as a general partner and advisor to third party capital.

We chose to take advantage of the growing interest in public real estate companies, because we believe in the public securitization of real estate as a viable capital markets investment alternative.

Brief resumes for our senior management and trustees are available under the Senior Management & Trustees section (see link at left).

Apartments, as a real estate asset class, have one of the best track records of producing quality risk-adjusted returns over the long term. We chose to be in the apartment business in 1980, and we still believe it is a good business, if properly managed.

We believe that the upscale segment of the apartment market has the best opportunity to produce more stable financial returns over different economic cycles than do lesser quality apartment properties.

The upscale segment of the apartment market targets the more affluent renter as its customer. Often known as the “renter by choice,” as compared to the “renter by necessity,” this renter makes the decision to rent rather than own. The typical renter by choice may be a younger “white-collar” professional, a businessperson relocating to a new location or an empty-nester seeking greater flexibility in lifestyle.

The upscale renter seeks a “living experience” in a convenient and well-located property that is soundly constructed and pleasingly designed with curb appeal, quality interior finishes and an extensive amenity package. In addition, this customer demands a high level of on-site services.

Currently most of the assets in our portfolio are suburban, garden-style apartment properties, which we call “communities,” that typically contain 300 to 1,000 apartments in two- or three-story buildings located around a central clubhouse/leasing office. A portion of our portfolio consists of five- to seven-story mid-rise buildings in urban or suburban “infill” locations, which are set on a smaller parcel of land than the typical garden-style community.

We currently own and operate apartment communities in nine major markets within four major regions of the U.S. They are Atlanta and Southeast Florida in the Southeast; Chicago, Kansas City and Indianapolis in the Midwest; Dallas, Austin and Houston in the Southwest; and Denver in the Mountain region.

We have chosen each market for a number of reasons with a view to developing economies of scale within each market and diversification over the entire portfolio. At the time of the IPO, we had operations in Atlanta, Dallas, Austin, Chicago and Indianapolis. In addition to expanding our portfolio in each of those cities, we have since added Houston, Kansas City, Denver and Southeast Florida.

Yes we are, and we expect to expand into other markets over time. We believe expansion will help us diversify our source of earnings, thereby reducing some of our historical portfolio concentration in the Southeast and Southwest. In addition, operating in additional markets will provide a larger geographic platform for our co-investment activities, which we discuss below, thereby expanding our opportunities for external growth.

We believe in a disciplined approach to market expansion. There are significant costs associated with a startup in a new market, and it is important to us to be able to achieve certain local and regional economies of scale in our operations within a reasonable time period after entering a new market.

There are potentially many markets that could satisfy our criteria; however, it is more likely that we will ultimately have operations in 12-15 markets, rather than 25 or 30.

We have four growth strategies. They are:

• "Brand and Market Share"
• Acquisition
• Development
• Co-investment

Internal growth comes from promoting the AMLI® brand and increasing market share, and external growth primarily comes from acquiring, developing and co-investing.

Internal growth means the increase in corporate operating earnings that is generated by increasing the net operating income (revenues less expenses) from our stabilized portfolio of apartment communities.

External growth means the increase in corporate operating earnings that is generated by all activities other than those, which contribute to internal growth.

We believe that creating name recognition for our company and for our apartment communities are consistent with the objectives of growing a public real estate company focused on the upscale segment of the multifamily residential business.

We believe that certain economies of scale and operating efficiencies can be derived through increased market share. Although we are not the largest national owner/operator of apartments, we are one of the largest in each of our markets. Our visibility is even more noticeable in our selected sub-markets.

The objectives are to:

• Create an image and awareness of AMLI
• Focus on resident satisfaction
• Foster employee pride
• Increase community net operating Income

In 1994, we made public our commitment to making AMLI® a recognized brand in the multifamily industry, and during 1995, we renamed all of our communities to include the AMLI® name. In 1996, we coined a slogan that we use inside AMLI to help focus our attention on our brand identity -- "Operate Like a Retailer. Think Like a Brand." Since then we have focused on getting out the AMLI® name and our mission in a consistent manner from community to community and region to region.

By focusing on resident satisfaction, we hope to be able to reduce tenant turnover and obtain a premium rental rate over our competition. Our typical resident will also pay for other services, thereby, increasing our other property-related income.

The corporate image represented by the AMLI® brand allows each of our employees to be part of a positive work environment, which will, over time, result in lower employee turnover and more dedication to profitability.

Employees who have worked in the apartment industry have historically demonstrated very little corporate commitment. They were often employed by a single property bearing its own name and identity. Working for a public operating company that is committed to long-term profitability offers an employee more career opportunities.

If we can generate higher revenues through name recognition and customer service initiatives and reduce operating expenses through the dedicated efforts of our employees, then the net operating income from our communities will increase.

There is very little marginal cost to developing and promoting our brand name.

Yes. We have noticed several benefits to date, although some benefits are more anecdotal than financially quantifiable so far. First, by equating branding to image and reputation, we foster a company culture focused on making good longer-term decisions, rather than simply dwelling on very short-term profitability. We believe this approach is the right way to create value for our shareholders.

Second, our branding efforts are contributing positively to our development activities by promoting an image of reliability, quality, honesty, integrity and deep pockets, all very important characteristics that local officials are looking for.

Third, the benefits of fostering resident satisfaction and employee pride are beginning to become noticeable in our communities' net operating income.

Branding is a journey. Our positive name recognition is stronger today than it was five years ago, and we expect it will be even stronger five years from now.

We strive to maintain a “young,” high quality, well-located portfolio of apartment communities that appeals to our upscale “renter by choice” customer. We do this by developing and acquiring new, or newer, communities, while selling older ones. Interestingly, the average age of our portfolio is less today than it was when we came public in 1994.

We have the capability to both acquire and develop, which allows us to be active investors in almost any market situation. That’s because we view acquiring and developing as complementary investment strategies. Typical acquisition pricing is better when there is less new development activity, whereas development opportunities typically best present themselves when pricing of existing properties is at their highest.

Unless we acquire existing development expertise, we will generally look to acquire existing properties in a new market before undertaking any new developments.

We consider ourselves to be more of a “value” or “contrarian” investor generally seeking to acquire when others do not. That being said, we have an active acquisition staff, which continually looks for good acquisition opportunities, and we will be more or less aggressive depending on our view of conditions in the capital markets and in the real estate markets. We may also make “strategic” acquisitions, which will allow us to increase market share and/or obtain operating efficiencies, whether through single-asset or portfolio purchases.

We are always looking for acquisition opportunities in our existing markets, and we will consider acquisitions in a limited number of additional targeted markets if, in general, the initial investment establishes, or leads to establishing, meaningful market share over time.

Yes. We have a professional and experienced acquisition team. Allan Sweet, our President and Co-CEO, oversees our acquisition activities. We have three full-time acquisition professionals reporting to Allan. Each person is responsible for different markets and handles both acquisitions and dispositions. For contact information, please visit the Acquisition/Disposition page on our website (see link at left).

Yes. We welcome broker submissions.

Properly executed developments will produce financial returns in excess of those available through the acquisition of comparable existing property in the same markets. So one reason we develop is to increase the financial returns on our invested capital. There are others, but controlling the quality and design of the communities in our portfolio is another very important one.

We recognize that there is more risk associated with development than acquisition, and we believe such risk is best understood by having knowledgeable people and an established operation “on the ground,” which is why we are not inclined to undertake development in any market until we have established a strong market presence through the acquisition of properties and/or people.

We develop suburban garden-style communities and mid-rise urban, or “infill,” properties. To date, we have not developed a high-rise building.

We use a disciplined approach for determining when we should undertake new development. We build only when we believe the financial returns are justified relative to the risk. Our objective is to build high quality construction, on time and within budget, including lease-up. We focus on the downside risk of each development and attempt to mitigate risk by employing an experienced development and construction management team, by building the same product from similar plans and specifications as often as possible, by working with the same suppliers and sub-contractors as often as possible and by sharing risk as part of AMLI’s co-investment business.

Our core development business builds for long-term investment purposes, but we have done, and will consider, some amount of “merchant building” development for sale to third parties.

Building for investment means approaching the development process with a long-term owner’s perspective, where development budgets include costs for products and features that will lower repair and maintenance expenses over time. We also include enhancements of core electric, cable and telephonic systems to service the growing technology demands of our residents and to benefit from continuing utility deregulation, which we believe will benefit us in the future.

Yes. We have a very capable group of professional, experienced development personnel on staff. Our development activities are run by Phil Tague, Executive Vice President and Co-CEO. For contact information for our development group, please visit the Development page of our website (see link at left).

Yes. Through one of our subsidiaries, AMLI Residential Construction, Inc. (Amrescon), we operate as our own general contractor. Amrescon typical functions as the general contractor for each of our development projects, although there are instances where Amrescon will represent AMLI in a supervisory role where a third party general contractor has been hired.

Co-investment results from the formation of a joint venture in which both partners invest capital in the partnership. We form co-investment partnerships to both acquire and develop apartment communities.

No. But historically, the sponsor, or general partner, did not make any meaningful equity capital investment in the partnership. Typically, the "investor" put up all the money.

The primary reason is that it aligns the economic and strategic interests of the partners and goes a long way to avoid conflicts of interest.

Real estate investment is a capital-intensive business. Because REITs are required to distribute a high percentage of their internally generated cash flow to shareholders as common dividends, REITs are somewhat more constrained than many other forms of real estate ownership in their ability to retain capital. We believe that by accessing “private” capital in addition to “public” capital, we will, over the long term, have a competitive advantage in promoting external growth.

Since we were in the institutional investment management business before we came public, it was a relatively easy transition for us to continue and expand our institutional co-investment business after our IPO.

Yes. The ownership structure of a joint venture asset is more complex than those wholly owned. There is a lack of full accounting transparency, some extra administrative duties, a potential for real or perceived conflicts of interest, opportunity costs to management and uneven partner quality. But any business activity has it pros and cons, and we simply believe that the benefits from co-investing far outweigh the negatives.

The primary benefits, or objectives, of our co-investment business are to:

• Diversify access to equity capital
• "Leverage" our invested capital to promote the AMLI® brand and increase market share
• Obtain the participation of sophisticated partners in certain of our real estate decisions
• Increase earnings on invested capital

Through the formation of joint ventures for property-specific investments, we are able to access private equity capital targeted to invest in real estate.

The ability to attract capital is critical to the growth of any real estate investment company. AMLI believes that there will be times when public or private equity capital will be more or less available, or more or less costly. As such, we believe that it is not only prudent, but also the obligation of management, to seek to expand the potential sources of capital available to it.

No. As many REITs came public in the early 1990s, many people believed that the public markets would provide all the capital that REITs would ever want. However, now that the industry has experienced several market cycles, it is clear that that there will be times when, public equity capital is both readily available and relatively inexpensive and times when it will be much more limited and more costly.

Through joint ventures, we are able to acquire and develop more communities than we could if we owned 100% of every community. Each of our joint venture communities is branded and managed in the same manner as each of our wholly-owned communities, permitting us to extend the reach of the AMLI® brand in each of our markets. "Leverage" in this case does not mean adding more debt.

Our partners are knowledgeable and sophisticated real estate investors, and we value their participation with us in the development, acquisition and disposition process. Having one more set of eyes and ears, one more check and balance and a validation of our decision making process is good business. Good partners make for good partnerships, and the sum of the parts becomes greater than the whole. We encourage and profit from our partners’ perspectives and experiences in both the real estate and capital markets.

We receive fees, reimbursements and other compensation from our partners and/or from the co-investment partnerships. The amount and nature of the compensation that we earn may differ slightly depending on the type of transaction (acquisition or development) or the level of services that we provide to the partner or partnership.

Our ability to be compensated for the services we provide is a direct result of our approaching our co-investment joint venture activities as an ongoing business and professionally meeting the needs of our institutional partners. We focus on building relationships with our co-investment partners.

AMLI earns transaction fees, recurring fees and value-added fees.

Transaction fees include acquisition fees, disposition fees, debt placement fees, development fees and general contractor fees. Some, such as development and general contractor fees, are typically earned ratably over a shorter development period. Others, such as acquisition and disposition fees, are earned at a single point in time (collectively "front-end" fees). Transaction fees are more "lumpy" in that they are greater in some quantities than others, and they typically represent a more significant dollar amount than recurring annual fees.

Certain fees are earned by us throughout the life of each partnership and possess the same high quality as the recurring nature of income from the real estate itself. These fees include asset management fees, cash flow preferences and property management fees.

We earn value-added compensation in the form of a promoted interest or incentive fee, which generally entitles us to an additional portion of cash flow, sale or refinancing proceeds once we and our client/partner have received an agreed cumulative return on our pro rata invested capital.

We typically serve as the managing general partner or managing member of each partnership or LLC, and historically we have invested an average of about 30% of our partnerships’ required equity capital. Some investments are leveraged, and some are owned without any debt.

No. Our invested capital is invested para passu with the capital invested by our partner. We do not subordinate our capital or return thereon, guarantee any returns or allow our partners to benefit from cash flow preferences or “IRR look-backs.”

Most joint ventures agreements are complicated, because the parties often have different objectives and are trying to enhance their position against each other. Our co-investment documents are relatively straightforward, because we only form joint ventures with partners who have the same goals and objectives as ours.

Generally, normal operating decisions are our responsibility. Our partners generally participate in the annual budget process, and all major decisions, such as sale, (re)financing or investment of significant capital, are made jointly.

Generally a simple "buy/sell" provision governs unresolved "major decision" items between the partners, and it can be "triggered" by either partner anytime (normally after completion and stabilization of a development transaction).

One of the partners picks a price at which it would either buy or sell its interest in the partnership based on a value of the whole property. The other partner then has the right to elect to either buy or sell at that same price.

Our partners are typically institutional investors, such as pension funds and insurance companies, which have the same longer-term “core” or “value-added core” strategy as we do.

No. Our co-ownership joint ventures invest in exactly the same type of property as our wholly-owned portfolio. Each community is the same quality and is operated under the AMLI® brand. AMLI does not co-invest in order to move certain non-core activities "off balance sheet." Co-investment partnerships are not consolidated for accounting purposes for a number of reasons. We would actually prefer to account for our ownership based on our pro rata share, but such approach is not permitted under GAAP. As such, we provide substantial supplemental disclosure in our quarterly and annually reporting.

Yes. We target the overall leverage of our co-investment joint ventures to be the same as "on balance sheet." We manage our overall leverage ratios by including and disclosing our pro-rata share of "off balance sheet" debt.

Since coming public, we have formed over 50 co-investment partnerships to acquire or development approximately $1.6 billion of real estate at cost.

We are traded on the New York Stock Exchange (NYSE) under the symbol “AML.”

We are currently paying dividends on our common shares at the annual rate of $1.92 per common share.

Contact our transfer agent, EquiServe Trust Company. Their Shareholder Services Team can be contacted at P.O. Box 43010, Providence, RI 02940-3010, or call 800-730-6001.

Yes. Our plan is a convenient way to increase ownership in AMLI automatically without paying brokerage commissions or bank fees. You may reinvest dividends as well as make optional cash purchases through this plan. (See the link at left for more information)

You may contact Susan Bersh
AMLI Residential
125 South Wacker Drive
Suite 3100, Chicago, IL 60606
312-984-2607
sbersh@amli.com (or see Information Request link at left).