10-Q 1 a74811e10-q.txt FORM 10-Q PERIOD ENDED JUNE 30, 2001 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Period Ended June 30, 2001. or [ ] 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: 0-22569 (Irvine Apartment Communities, L.P.) 1-13721 (IAC Capital Trust) IRVINE APARTMENT COMMUNITIES, L.P. IAC CAPITAL TRUST -------------------------------------------------------------------------------- (Exact Name of Registrants as Specified in Their Charters) Delaware 33-0587829 Delaware 91-6457946 ------------------------ --------------------------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 550 Newport Center Drive, Suite 300, Newport Beach, California 92660 -------------------------------------------------------------------------------- (Address of principal executive offices) (949) 720-5500 -------------------------------------------------------------------------------- (Registrants' 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 registrants (1) have 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 time as required), and (2) have been subject to such filing requirements for the past 90 days. Irvine Apartment Communities, L.P.: Yes [X] No [ ] IAC Capital Trust: Yes [X] No [ ] Indicate the number of units outstanding of each of the issuer's classes of common partnership units, as of the latest practical date. Irvine Apartment Communities, L.P.: units of common partnership interest - 45,202,828 units as of August 13, 2001. ================================================================================ 2 IRVINE APARTMENT COMMUNITIES, L.P. IAC CAPITAL TRUST INDEX

3 Irvine Apartment Communities, L.P. CONSOLIDATED BALANCE SHEETS

See accompanying notes. Page 1 4 Irvine Apartment Communities, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes. Page 2 5 Irvine Apartment Communities, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

See accompanying notes. Page 3 6 Irvine Apartment Communities, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes. Page 4 7 IAC Capital Trust BALANCE SHEETS

See accompanying notes. Page 5 8 IAC Capital Trust STATEMENTS OF OPERATIONS AND EQUITY

See accompanying notes. Page 6 9 IAC Capital Trust STATEMENTS OF CASH FLOWS

See accompanying notes. Page 7 10 IRVINE APARTMENT COMMUNITIES, L.P. IAC CAPITAL TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - ORGANIZATION Irvine Apartment Communities, L.P. (the "Partnership"), a Delaware limited partnership, was formed on November 15, 1993. In connection with an initial public offering of common shares on December 8, 1993, Irvine Apartment Communities, Inc. ("IAC, Inc.") obtained a general partnership interest in and became the sole managing general partner of the Partnership. The Irvine Company transferred 42 apartment communities and a 99% interest in a limited partnership which owns one apartment community to the Partnership. On June 7, 1999, IAC, Inc. was merged with and into TIC Acquisition LLC (the "Acquiror"), a Delaware limited liability company indirectly wholly owned by The Irvine Company (the "Merger"), with the Acquiror remaining as the surviving entity and renamed Irvine Apartment Communities LLC ("IACLLC"). As a result of the Merger and a related transaction in which The Irvine Company acquired an additional 74,523 common limited partnership units, The Irvine Company beneficially owns and controls all of the outstanding common limited partnership units in the Partnership and IACLLC became the sole general partner of the Partnership. The Partnership's management and operating decisions are under the unilateral control of IACLLC. All management powers over the business and affairs of the Partnership are vested exclusively in IACLLC. At June 30, 2001, IACLLC had a 44.6% general partnership interest and The Irvine Company had a 55.4% common limited partnership interest in the Partnership. The Partnership owns, operates and develops apartment communities in Orange County, California and, since 1997, other locations in California. The Partnership has created market positions in Northern California, San Diego County and Santa Monica which possess rental demographic and economic growth prospects similar to those on the Irvine Ranch. As of June 30, 2001, the Partnership owned 65 apartment communities representing 18,337 operating apartment units and 1,144 units under construction or development. In March 1998, the Partnership and Western National Property Management ("WNPM") announced the formation of a strategic alliance that assumed all property management responsibilities for the Partnership's Southern California portfolio. Subsequently, the property management responsibilities of the new entity, Irvine Apartment Management Company ("IAMC"), were expanded to include the Partnership's entire portfolio. On March 30, 2001, The Irvine Company purchased WNPM's 25% interest in IAMC. At June 30, 2001, IAMC is owned 75% by the Partnership and 25% by The Irvine Company. IAC Capital Trust (the "Trust"), a Delaware business trust, was formed on October 31, 1997. The Trust is a limited purpose financing vehicle established by the Partnership. The Trust exists for the sole purpose of issuing redeemable preferred securities and investing the proceeds thereof in preferred limited partner units of the Partnership. NOTE 2 - BASIS OF PRESENTATION The accompanying financial statements of the Partnership include the consolidated accounts of its financially controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Trust's investment in subsidiary relates to the redeemable Series A preferred limited partner units in the Partnership. The Trust has less than a controlling interest in the Partnership and accounts for its investment using the equity method. Page 8 11 The Partnership operates and develops apartment communities in California which generate rental and other income through the leasing of apartment units to a diverse base of renters. The Partnership separately evaluates the performance of each of its apartment communities. However, because each of the apartment communities has similar economic characteristics, facilities, services and tenants, the apartment communities have been aggregated into a single dominant apartment communities segment. The Partnership evaluates performance and allocates resources primarily based on the net operating income ("NOI") of individual apartment communities. NOI is defined by the Partnership as rental and other income less property expenses and real estate taxes. Accordingly, NOI excludes certain expenses included in the determination of net income. NOI from apartment communities totaled $107,144,000 and $94,675,000 for the six months ended June 30, 2001 and 2000, respectively, and $53,327,000 and $48,002,000 for the three months ended June 30, 2001 and 2000, respectively. All other segment measurements are included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000. Profits and losses of the Partnership are generally allocated to the general partner and to the common limited partner based on their respective ownership interests in the Partnership. The holders of the Series A redeemable preferred limited partner units and redeemable preferred securities are entitled to distributions/dividends at an annual rate of 8 1/4% of the stated value per unit/security. The stated value of each unit/security is $25. The holders of the Series B redeemable preferred limited partner units are entitled to distributions at an annual rate of 8 3/4% of the stated value per unit. The stated value of each unit is $25. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of June 30, 2001 and December 31, 2000, and the revenues and expenses for the three and six months ended June 30, 2001 and 2000. Actual results could differ from those estimates. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. Operating results for the three and six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Partnership's and the Trust's Annual Report on Form 10-K for the year ended December 31, 2000. Page 9 12 NOTE 3 - MORTGAGES AND NOTES PAYABLE Unsecured Line of Credit: Previously, the Partnership had a $125 million unsecured revolving credit facility. The credit facility was terminated as of December 27, 2000. The Partnership had entered into letters of credit under the credit facility. In conjunction with the termination of the credit facility, the letters of credit under the credit facility were transferred to the credit facility of The Irvine Company. The Partnership continues to pay all fees related to the letters of credit transferred to The Irvine Company, as such letters of credit remain outstanding to secure obligations of the Partnership. Tax-Exempt Mortgage Bond Financings: On August 1, 2001, the Partnership completed a $69.2 million offering of tax-exempt mortgage bonds. The offering included $19.2 million of new tax-exempt mortgage bonds (the "2001 Bonds") for the construction of a 104-unit apartment building (the "Project") at the Partnership's Villa Siena property. Additionally, the offering included the refinancing of the Partnership's existing $32 million tax-exempt mortgage bonds and $18 million tax-exempt mortgage bonds (the "Refinanced Bonds" and collectively with the 2001 Bonds, the "Bonds"). Payment of principal and interest on the Bonds is secured by an irrevocable direct-pay letter of credit issued by Bank of America, N.A. As a result, the Bonds were assigned the rating of "Aaa"/ "VMIG 1" from Moody's. Monthly interest payments are made to a trustee, which in turn pays the bondholders when interest is due. The 2001 Bonds represent loans payable that are collateralized by a deed of trust granting a security interest in the Project. The 2001 Bonds bear interest at a weekly-remarketed tax-exempt rate and are due August 2034. Proceeds from the 2001 Bonds will be held by a trustee and will be released to the Partnership for the construction of the Project as costs are incurred. Proceeds from the Refinanced Bonds were used to repay the Partnership's existing tax-exempt mortgage bonds. All terms of the Refinanced Bonds remain unchanged; however, the Refinanced Bonds are now unsecured and no longer collateralized by a deed of trust. NOTE 4 - PARTNERS' CAPITAL RECONCILIATION OF COMMON PARTNERSHIP UNITS OUTSTANDING

Page 10 13 NOTE 5 - MINORITY REDEEMABLE PREFERRED INTERESTS In January 1998, the Trust issued 6.0 million of 8 1/4% Series A Preferred Securities. The proceeds of $150 million were used to purchase an equivalent amount of 8 1/4% Series A Preferred Limited Partner Units in the Partnership. The Partnership used the $150 million of proceeds, net of costs and offering expenses, all of which were paid by the Partnership, to repay the outstanding balance on the Partnership's unsecured credit facility and to fund development. In November 1998, the Partnership issued 2.0 million of 8 3/4% Series B Preferred Limited Partner Units. The Partnership used the net proceeds to reduce the outstanding balance on its unsecured line of credit. As of June 30, 2001, the Partnership had a $4.2 million distributions payable to the redeemable preferred limited partner unit holders, and the Trust had a $3.1 million distributions receivable from the Partnership which was payable to its preferred security holders. The distributions were paid on July 2, 2001. On July 12, 2001, the Partnership's 2.0 million of 8 3/4% Series B Preferred Limited Partner Units were redeemed by the Partnership. The Partnership utilized its cash on hand for the redemption. NOTE 6 - CERTAIN TRANSACTIONS WITH RELATED PARTIES Included in general and administrative expenses are charges from The Irvine Company pursuant to an administrative services agreement covering services for information technology and other services totaling $285,000 and $26,000 for the six months ended June 30, 2001 and 2000, respectively, and $132,000 and $13,000 for the three months ended June 30, 2001 and 2000, respectively. The Irvine Company and the Partnership jointly purchase employee health care insurance and property and casualty insurance. The Partnership incurred rent totaling $294,000 and $278,000 for the six months ended June 30, 2001 and 2000, respectively, and $147,000 and $130,000 for the three months ended June 30, 2001 and 2000, respectively, related to leases with The Irvine Company that expire at the end of 2003. IAMC incurred rent totaling $177,000 and $132,000 for the six months ended June 30, 2001 and 2000, respectively, and $92,000 and $77,000 for the three months ended June 30, 2001 and 2000, respectively, related to a lease with The Irvine Company that expires in June 2005. The Partnership reimburses IACLLC for substantially all of its costs incurred in operating the Partnership, including the compensation of each of the employees of IACLLC who perform services for the Partnership. The aggregate amount paid by the Partnership to IACLLC for such costs was $5.3 million and $7.0 million for the six months ended June 30, 2001 and 2000, respectively, and $3.5 million and $1.8 million for the three months ended June 30, 2001 and 2000, respectively. The aggregate amount incurred by the Partnership for such costs was $7.8 million and $6.0 million for the six months ended June 30, 2001 and 2000, respectively, and $4.4 million and $3.5 million for the three months ended June 30, 2001 and 2000, respectively. Included in other assets at June 30, 2001 is approximately $820,000 due from The Irvine Company. The amount represents a receivable of the Partnership for general and administrative costs and development costs incurred by the Partnership on behalf of The Irvine Company. Included in accounts payable and accrued liabilities at June 30, 2001 is approximately $247,000 due to The Irvine Company. The amount represents a payable to The Irvine Company for information technology costs incurred by The Irvine Company on behalf of the Partnership. During the first quarter of 2001, the Partnership recorded interest income of approximately $48,000 related to amounts due from The Irvine Company at the end of 2000. Amounts due from The Irvine Company accrued interest at 5.73%. For the three and six months ended June 30, 2000, the Partnership incurred net interest expense of Page 11 14 approximately $36,000 and $168,000, respectively, relating to advances from The Irvine Company, with interest accruing at 5.75%. In October 2000, the Partnership and The Irvine Company entered into a Loan Agreement whereby the Partnership is the lender and The Irvine Company is the borrower. Borrowings under the Loan Agreement shall bear interest at a variable or fixed rate to be quoted by the Partnership however the rate shall not be lower than the applicable federal rate or the rate at which interest is paid to the Partnership on its overnight cash investments. The Irvine Company shall make monthly interest payments on each borrowing until the principal is repaid. The Loan Agreement expires in June 2003. As of June 30, 2001, there were no borrowings under the Loan Agreement. Page 12 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion compares the activities of the Partnership for the three and six month periods ended June 30, 2001 (unaudited) with the activities of the Partnership for the three and six month periods ended June 30, 2000 (unaudited). The Trust is a limited purpose financing vehicle established by the Partnership and exists for the sole purpose of issuing preferred securities and investing the proceeds thereof in preferred limited partnership units of the Partnership. The following discussion should be read in conjunction with all the financial statements appearing elsewhere in this report, as well as the information presented in the Partnership's and the Trust's Annual Report on Form 10-K for the year ended December 31, 2000. Certain information set forth below is forward looking and involves various risks and uncertainties. Such information is based upon a number of estimates and assumptions that inherently are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond the Partnership's control. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000. The Partnership's net income was $16.1 million for the three months ended June 30, 2001, up from $13.8 million for the same period of 2000. The Partnership's net income increased in 2001 due to the contribution of newly delivered rental units from its development program as well as an increase in rental rates within its stabilized portfolio. The increase was offset, in part, by an increase in interest expense related to the additional conventional mortgage financings obtained in 2000. REVENUE AND EXPENSE DATA

OPERATING REVENUES (rental and other income) increased by 9.3% to $77.7 million in the second quarter of 2001, up from $71.1 million in the same period of 2000. Operating revenues rose in 2001 because of higher rental rates and a larger average number of rental units in service, primarily as a result of new development. PROPERTY EXPENSES increased by 4.6% to $18.5 million in the second quarter of 2001, up from $17.7 million in the same period of 2000. The 2001 increase reflects incremental expenses from newly delivered rental units and communities stabilized during 2000. To improve operating efficiency and reduce operating costs, the Partnership formed IAMC in March 1998 to manage the Partnership's properties. The personnel and office costs of IAMC are included in property expenses. REAL ESTATE TAXES totaled $5.9 million in the second quarter of 2001 and $5.5 million in the same period of 2000. Real estate taxes increased in the second quarter of 2001 due primarily to the addition of new rental units. Page 13 16 NET INTEREST EXPENSE increased to $16.1 million in the second quarter of 2001 compared to $13.0 million in the same period of 2000. Total interest incurred was $17.7 million in the second quarter of 2001 and $14.5 million in the same period of 2000. Total interest incurred increased due to the impact of the Partnership's additional conventional mortgage financings in 2000. Capitalized interest totaled $1.6 million in the second quarter of 2001 and $1.5 million in the same period of 2000. The Partnership capitalizes interest on projects actively under development using qualifying asset balances and applicable weighted average interest rates. DEPRECIATION AND AMORTIZATION EXPENSE decreased to $15.1 million in the second quarter of 2001, down from $16.3 million in the same period of 2000. The decrease in 2001 was mostly due to certain abandoned project costs in 2000. GENERAL AND ADMINISTRATIVE EXPENSE increased to $2.7 million in the second quarter of 2001, up from $1.7 million in the same period of 2000. The increase in 2001 was the result of additional employee related costs incurred in the second quarter of 2001. SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000. The Partnership's net income was $35.8 million for the six months ended June 30, 2001, up from $29.8 million for the same period of 2000. The Partnership's net income increased in 2001 due to the contribution of newly delivered rental units from its development program as well as an increase in rental rates within its stabilized portfolio. The increase was offset, in part, by an increase in interest expense related to the additional conventional mortgage financings obtained in 2000. REVENUE AND EXPENSE DATA

OPERATING REVENUES (rental and other income) increased by 11.8% to $155.1 million in the first half of 2001, up from $138.7 million in the same period of 2000. Operating revenues rose in 2001 because of higher rental rates and a larger average number of rental units in service, primarily as a result of new development. PROPERTY EXPENSES increased by 9.5% to $36.2 million in the first half of 2001, up from $33.1 million in the same period of 2000. The 2001 increase reflects incremental expenses from newly delivered rental units and communities stabilized during 2000. REAL ESTATE TAXES totaled $11.8 million in the first half of 2001 and $11.0 million in the same period of 2000. Real estate taxes increased in the first half of 2001 due primarily to the addition of new rental units. NET INTEREST EXPENSE increased to $31.7 million in the first half of 2001 compared to $25.3 million in the same period of 2000. Total interest incurred was $34.8 million in the first half of 2001 and $28.6 million in the same period of 2000. The increase in interest incurred in the first half of 2001 was primarily due to the impact of the Partnership's additional conventional mortgage financings in 2000. Capitalized interest totaled $3.1 million in the first half of 2001 and $3.3 million in the same period of 2000. The Partnership capitalizes interest on projects actively under development using qualifying asset balances and applicable weighted average interest rates. Page 14 17 DEPRECIATION AND AMORTIZATION EXPENSE decreased to $28.7 million in the first half of 2001, down from $29.4 million in the same period of 2000. The decrease in 2001 was mostly due to certain abandoned project costs in 2000. GENERAL AND ADMINISTRATIVE EXPENSE increased to $4.8 million in the first half of 2001, up from $3.9 million in the same period of 2000. The increase in 2001 was the result of additional employee related costs incurred during the first half of 2001. LIQUIDITY AND CAPITAL RESOURCES The Partnership believes that cash provided by operations will be adequate to meet ongoing operating requirements, debt service payments and payment of distributions by the Partnership to the preferred limited partners in both the short and long term. LIQUIDITY: The Partnership expects to meet its short-term and long-term liquidity requirements, such as construction costs and scheduled debt maturities, through the refinancing of long-term debt or borrowings from financial institutions. DEBT: The Partnership's conventional debt bears interest at fixed interest rates. Interest rates on conventional mortgage debt were reduced to then-current market rates at the time of IAC, Inc.'s December 1993 initial public offering through interest rate buy-down agreements that are scheduled to expire at various dates prior to loan maturity that range from 2002 to 2008. The weighted average effective interest rate on the Partnership's debt, including the non-cash charges of amortization of deferred financing costs, was 6.50% at June 30, 2001. DEBT STRUCTURE AT JUNE 30, 2001

OPERATING ACTIVITIES: Cash provided by operating activities was $85.0 million and $79.2 million in the first half of 2001 and 2000, respectively. Cash provided by operating activities increased in the first half of 2001 compared to the same period in 2000 primarily due to an increase in the Partnership's NOI during the first half of 2001 partially offset by an increase in interest expense. Page 15 18 INVESTING ACTIVITIES: Cash used in investing activities was $55.7 million and $68.3 million in the first half of 2001 and 2000, respectively. The decrease reflects decreased development activity in the first half of 2001 as compared to 2000. FINANCING ACTIVITIES: Cash used in financing activities was $55.7 million and approximately $800,000 in the first half of 2001 and 2000, respectively. Cash used in financing activities increased primarily as a result of the net proceeds from borrowings and advances during the first half of 2000 partially offset by a decrease in distributions during the first half of 2001. CAPITAL EXPENDITURES Capital expenditures consist of capital improvements and investments in real estate assets. Capital improvements to operating real estate assets totaled $2.2 million and $1.1 million in the first half of 2001 and 2000, respectively. Capital investments in real estate assets totaled $53.5 million and $67.1 million in the first half of 2001 and 2000, respectively. These investments consisted of new development and capital replacements. CAPITAL IMPROVEMENTS: The Partnership has a policy of capitalizing expenditures related to new assets, the material enhancement of the value of an existing asset, or the substantial extension of an existing asset's useful life. CAPITAL REPLACEMENTS: Capital replacements consist of special programs to upgrade and enhance a community to achieve higher rental rates. Expenditures for capital replacements totaled $1.5 million in the first half of 2001. These expenditures were made at eight properties: Promontory Point, Turtle Rock Vista, Rancho San Joaquin, Park West, Woodbridge Willows, Bayview, Baywood and Bayport. Page 16 19 CAPITAL INVESTMENTS IN NEW DEVELOPMENT: Currently, the Partnership has three apartment communities under development or construction that are expected to require total expenditures of approximately $402 million, of which $239 million had been incurred as of June 30, 2001. Funding for these developments is expected to come from borrowings from financial institutions and refinancing of long-term debt. The Partnership has no plans for future development beyond the remaining three apartment communities currently under development. CONSTRUCTION INFORMATION

---------- (1) As of June 30, 2001, 393 units were delivered and 267 units were occupied. (2) As of June 30, 2001, 195 units were delivered and 129 units were occupied. The estimated costs of apartment communities that are in development are only estimates. Actual results will depend on numerous factors, many of which are beyond the control of the Partnership. These include the extent and timing of economic growth in the Partnership's rental markets; future trends in the pricing of construction materials and labor; product design changes; entitlement decisions by local government authorities; weather patterns; changes in interest rate levels; and other changes in capital markets. No assurance can be given that the estimates set forth in the foregoing table will not vary substantially from actual results. IMPACT OF INFLATION The Partnership's business is affected by general economic conditions, including the impact of inflation and interest rates. Substantially all of the Partnership's leases allow, at time of renewal, for adjustments in the rent payable thereunder, and thus may enable the Partnership to seek increases in rents. Substantially all leases are for a period of one year or less. The short-term nature of these leases generally serves to minimize the risk to the Partnership of the adverse effects of inflation. For construction, the Partnership enters into various contracts for the development and construction of new apartment communities. These are fixed-fee contracts and thus partially insulate the Partnership from inflationary risk. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its amendments Statements No. 137 and 138, in June 1999 and June 2000, respectively, (collectively, the "Statements"). The Statements are effective for fiscal years beginning after June 15, 2000 (January 1, 2001 for the Partnership). The Partnership adopted the new Statements on January 1, 2001; however, because the Partnership currently has no derivatives, there is currently no impact on the financial position or the results of operations of the Partnership. Page 17 20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000 for detailed disclosure about quantitative and qualitative disclosures about market risk. Quantitative and qualitative disclosures about market risk have not materially changed since December 31, 2000. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: None. (b) During the second quarter of 2001, the Partnership and the Trust filed no current reports on Form 8-K. Page 18 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. IRVINE APARTMENT COMMUNITIES, L.P. By: Irvine Apartment Communities LLC its sole general partner Date: August 13, 2001 By: /s/ Michael D. McKee -------------------------------- Michael D. McKee Vice Chairman, Chief Financial Officer and Secretary IAC CAPITAL TRUST Date: August 13, 2001 By: /s/ David A. Patty -------------------------------- David A. Patty Regular Trustee Page 19

IRVINE APARTMENT COMMUNITIES L P 10-Q