In accordance with Statement 144, long-lived assets, such as real estate assets, equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.
The Company utilizes certain derivative financial instruments, primarily interest rate swaps and caps, during the normal course of business to manage, or hedge, the interest rate risk associated with the Company’s variable rate debt or as hedges in anticipation of future debt transactions to manage well-defined interest rate risk associated with the transaction. The valuation of the derivative financial instruments under Statement No. 133 as amended requires the Company to make estimates and judgments that affect the fair value of the instruments.
In order for a derivative contract to be designated as a hedging instrument, the relationship between the hedging instrument and the hedged item must be highly effective. While the Company’s calculation of hedge effectiveness contains some subjective determinations, the historical correlation of the cash flows of the hedging instruments and the underlying hedged item are measured by the Company before entering into the hedging relationship and have been found to be highly correlated.
The Company performs ineffectiveness tests using the change in the variable cash flows method at the inception of the hedge and for each reporting period thereafter, through the term of the hedging instruments. Any amounts determined to be ineffective are recorded in earnings. The change in fair value of the interest rate swaps and caps designated as cash flow hedges are recorded to accumulated other comprehensive income in the statement of shareholders’ equity.
The Company’s results for 2005 were positively influenced by both the improvement in operational results of communities held throughout both the current and prior period (“same store”) and the positive impact from acquisitions in 2004 and 2005.
The Company’s 2005 same store operating results were helped by signs of economic recovery in the Company’s geographic areas of operation. Same store occupancy and average rental rates were both improved from the prior year.
The Company grew externally during 2004 by following its acquisition strategy to invest in large and mid-sized growing markets in the southeastern United States. The Company acquired six properties in 2004 for which it benefited from a full year of revenues in 2005. The Company acquired an additional three properties in 2005.
The Company sold one property in 2005. A joint venture the Company was invested in with Crow Holdings sold two properties in 2005 resulting in the winding up of the joint venture and generating approximately $3 million in gains and $1.7 million related to a one-time incentive fee for the Company.
The Company did experience an increase in interest expense in 2005 as its total debt outstanding and average borrowing costs both increased from prior year levels.
The following is a discussion of the consolidated financial condition and results of operations of the Company for the years ended December 31, 2005, 2004, and 2003. This discussion should be read in conjunction with all of the consolidated financial statements included in this Annual Report on Form 10-K.
As of December 31, 2005, the total number of apartment units the Company owned or had an ownership interest in, including the properties owned by the Crow JV was 38,227 in 132 Communities compared to the 37,904 apartment units in 132 Communities owned at December 31, 2004, and the 35,734 apartment units in 127 Communities owned at December 31, 2003. For properties owned 100% by the Company, the average monthly rental per apartment unit, excluding units in lease-up, increased to $695 at December 31, 2005, from $680 at December 31, 2004, and $667 at December 31, 2003. For these same units, overall occupancy at December 31, 2005, 2004, and 2003 was 94.6%, 93.6%, and 92.7%, respectively.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2005, TO THE YEAR ENDED DECEMBER 31, 2004
Property revenues for the year ended December 31, 2005, increased by approximately $29,928,000 from the year ended December 31, 2004, due to (i) a $12,816,000 increase in property revenues from the six properties acquired in 2004 (the “2004 Acquisitions”), (ii) a $8,934,000 increase in property revenues from the properties held throughout both periods, and (iii) a $8,178,000 increase in property revenues from the three properties acquired in 2005 (the “2005 Acquisitions”).
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for the year ended December 31, 2005, increased by approximately $10,968,000 from the year ended December 31, 2004, due primarily to increases of property operating expenses of (i) $5,356,000 from the 2004 Acquisitions, (ii) $3,336,000 from the 2005 Acquisitions, and (iii) $2,276,000 from the properties held throughout both periods.
Depreciation expense increased by approximately $6,397,000 primarily due to the increases of depreciation expense of (i) $4,217,000 from the 2004 Acquisitions, (ii) $3,954,000 from the 2005 Acquisitions, and (iii) $1,424,000 from the communities held throughout both periods. These increases were partially offset by a decrease in depreciation expense of $3,198,000 from the expiration of the amortization of fair market value of leases of 13 communities acquired by the Company in 2003.
Property management expenses increased by approximately $1,514,000 from the year ended December 31, 2004, to the year ended December 31, 2005, partially due to increased personnel expenses and incentive compensation both related to property acquisitions. General and administrative expenses increased by approximately $1,114,000 over this same period. Property management expenses and general and administrative expenses for 2005 were both impacted by a cumulative charge to amortize four years of a ten year senior management incentive plan which the Company previously expected would expense from 2007 through 2011.
Interest expense increased approximately $7,893,000 in 2005 from 2004 due primarily to the increase in the amount of debt outstanding from 2004 and the increase in the Company’s average borrowing cost from 5.0% over the twelve months ended December 31, 2004, to 5.3% over the twelve months ended December 31, 2005.
22
For the year ended December 31, 2005, the Company recorded total gains of approximately $3,034,000 from the sale of two properties owned by a joint venture of the Company. The sales of these properties resulted in an additional incentive fee being paid to the Company of approximately $1,723,000 in 2005. For the year ended December 31, 2004, the Company recorded a total of approximately $9,074,000 in gains from two property sales, of which approximately $3,249,000 represented the Company’s share of the gain from the sale of a property which was owned by a joint venture of the Company.
In 2005 and 2004, the Company refinanced the debt on several of its communities primarily to take advantage of the lower interest rate environment. In 2005, this resulted in a loss on debt extinguishment of approximately $409,000 due to the write-off of deferred financing costs and prepayment penalties. In 2004, the Company recorded a gain of approximately $1,095,000 related to the early extinguishment of debt.
For the years ended December 31, 2005, and 2004, the Company recorded net gains on insurance and other settlement proceeds totaling approximately $749,000 mainly related to insurance settlements from hurricane damage experienced at some of the Company’s Communities and $2,683,000 mainly related to insurance settlements from fires at some of the Company’s Communities, respectively.
Primarily as a result of the foregoing, net income decreased by approximately $5,454,000 in 2005 over 2004.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2004, TO THE YEAR ENDED DECEMBER 31, 2003
Comparisons of income from property operations for the years ended December 31, 2004, and 2003, were impacted by various factors. As a result of the buyout in August of 2003 of the partnership interest in Bre/Maac Associates, LLC, (the “BreMaac Buyout”), the Company’s joint venture with Blackstone Real Estate Advisors (“Blackstone”), the Company’s consolidated financial statements for 2003 include the impact of approximately only four months of operations of the 10 properties which were previously owned by the joint venture and accounted for using the equity method. The Company’s consolidated financial statements for 2004 include a full twelve months of operations for these 10 properties. The Company’s consolidated financial statements for 2003 also included only partial year results for the four properties acquired during 2003 (one of which was subsequently transferred to Mid-America CH/Realty, LP, the Company’s joint venture with Crow Holdings (the “Green Oaks Transfer”)). The Company also acquired an additional six properties during the course of 2004. During 2003, the Company had two development communities which completed lease-up. Finally, the Company’s performance during 2004 and 2003 was impacted by changes in performance of the communities that were held throughout both periods.
Property revenues for the year ended December 31, 2004, increased by approximately $31,262,000 from the year ended December 31, 2003, due to (i) a $12,481,000 increase in property revenues from the BreMaac Buyout, (ii) a $7,759,000 increase in property revenues from 2004 Acquisitions, (iii) a $7,372,000 increase in property revenues from the acquisitions of the Los Rios Park, Lighthouse Court and Legacy Pines communities in 2003 (the “2003 Acquisitions”), (iv) a $4,062,000 increase in property revenues from the communities held throughout both periods, and (v) a $189,000 increase in property revenues from the communities in lease-up in 2003 (the “Communities in Lease-up”). These increases were partially offset by a decrease in property revenues of $601,000 due to the Green Oaks Transfer.
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for the year ended December 31, 2004, increased by approximately $14,056,000 from the year ended December 31, 2003, due primarily to increases of property operating expenses of (i) $6,008,000 from the BreMaac Buyout, (ii) $3,966,000 from the 2003 Acquisitions, (iii) $3,307,000 from the 2004 Acquisitions, (iv) $593,000 from the communities held throughout both periods, (v) $514,000 from expenses related to the extraordinary hurricane season in 2004, and (vi) $27,000 from the Communities in Lease-up. These increases were partially offset by a decrease in property operating expenses of $359,000 from the Green Oaks Transfer.
Depreciation expense increased by approximately $10,579,000 primarily due to the increases of depreciation expense of (i) $3,659,000 from the 2003 Acquisitions, (ii) $3,362,000 from the 2004 Acquisitions, (iii) $2,781,000 from the BreMaac Buyout, and (iv) $802,000 from the communities held
23
throughout both periods. These increases were partially offset by a decrease in depreciation expense of $25,000 from the Communities in Lease-up.
Property management expenses increased by approximately $1,922,000 from the year ended December 31, 2003, to the year ended December 31, 2004, partially due to increased personnel expenses and incentive compensation related to property acquisitions. General and administrative expenses increased by approximately $2,005,000 over this same period partially related to expenses associated with the implementation of new property management software and expenses resulting from new regulatory requirements.
Interest expense increased approximately $5,867,000 from 2003 due primarily to the increase in the amount of debt outstanding from 2003. The Company’s average borrowing cost at December 31, 2004, and 2003, was 5.4%.
For the year ended December 31, 2004, the Company recorded a total of approximately $9,074,000 in gains from two property sales, of which approximately $3,249,000 represented the Company’s share of the gain from the sale of a property which was owned by one of the Company’s joint ventures. In 2003, the Company sold one property and recorded a gain of approximately $1,919,000.
In 2004, and 2003, the Company refinanced the debt on several of its communities primarily to take advantage of the lower interest rate environment. This resulted in gains of approximately $1,095,000 and $111,000 related to the early extinguishment of debt in 2004 and 2003, respectively.
For the years ended December 31, 2004, and 2003, the Company recorded net gains on insurance and other settlement proceeds totaling approximately $2,683,000, mainly related to insurance settlements from fires at some of the Company’s Communities, and approximately $2,860,000, mainly related to insurance settlements from the fire at the Company’s headquarters in March 2002, respectively.
Primarily as a result of the foregoing, net income increased by $4,992,000 in 2004 over 2003.
FUNDS FROM OPERATIONS
Funds from operations (“FFO”) represents net income (computed in accordance with U.S. generally accepted accounting principles, or “GAAP”) excluding extraordinary items, minority interest in Operating Partnership income, gain on disposition of real estate assets, plus depreciation of real estate, and adjustments for joint ventures to reflect FFO on the same basis. This definition of FFO is in accordance with the National Association of Real Estate Investment Trust’s (“NAREIT”) definition. Disposition of real estate assets includes sales of discontinued operations as well as proceeds received from insurance and other settlements from property damage.
In response to the Securities and Exchange Commission’s Staff Policy Statement relating to EITF Topic D-42 concerning the calculation of earnings per share for the redemption of preferred stock, the Company has included the amount charged to retire preferred stock in excess of carrying values in its FFO calculation.
The Company’s policy is to expense the cost of interior painting, vinyl flooring, and blinds as incurred for stabilized properties. During the stabilization period for acquisition properties, these items are capitalized as part of the total repositioning program of newly acquired properties, and, thus are not deducted in calculating FFO.
FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. The Company believes that FFO is helpful to investors in understanding the Company’s operating performance in that such calculation excludes depreciation expense on real estate assets. The Company believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. The Company’s calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.
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The following table is a reconciliation of FFO to net income for the years ended December 31, 2005, 2004, and 2003 (dollars and shares in thousands):
| | | | Years ended December 31,
| |
|---|
| | | | 2005
| | 2004
| | 2003
|
|---|
| Net income | | | | $ | 19,744 | | | $ | 25,198 | | | $ | 20,206 | |
| Depreciation real estate assets | | | | | 73,704 | | | | 67,302 | | | | 56,701 | |
| Net gain on insurance and other settlement proceeds | | | | | (749 | ) | | | (2,683 | ) | | | (2,860 | ) |
| Gain on disposition within unconsolidated entities | | | | | (3,034 | ) | | | (3,249 | ) | | | — | |
| Net loss (gain) on insurance and other settlement proceeds of discontinued operations | | | | | 25 | | | | (526 | ) | | | (82 | ) |
| Depreciation real estate assets of discontinued operations | | | | | — | | | | 681 | | | | 1,022 | |
| Gain on sale of discontinued operations | | | | | — | | | | (5,825 | ) | | | (1,919 | ) |
| Depreciation real estate assets of unconsolidated entities | | | | | 482 | | | | 1,688 | | | | 2,345 | |
| Preferred dividend distribution | | | | | (14,329 | ) | | | (14,825 | ) | | | (15,419 | ) |
| Minority interest in operating partnership income | | | | | 1,571 | | | | 2,264 | | | | 1,360 | |
| Premiums and original issuance costs associated with the redemption of preferred stock | | | | | — | | | | — | | | | (5,987 | ) |
| Funds from operations | | | | $ | 77,414 | | | $ | 70,025 | | | $ | 55,367 | |
Weighted average shares and units:
| | | | | | | | | | | | | | |
| Basic | | | | | 24,025 | | | | 22,981 | | | | 21,093 | |
| Diluted | | | | | 24,227 | | | | 23,316 | | | | 21,354 | |
FFO increased during 2005 by approximately $7,389,000 to $77,414,000 versus $70,025,000 in 2004 principally because of improved operation results both from the Company’s same store portfolio and the addition of properties from the 2004 Acquisitions and 2005 Acquisitions as previously reviewed in the net income discussion above. FFO increased during 2004 by approximately $14,658,000 to $70,025,000 versus $55,367,000 in 2003 principally because of the addition of properties through the BreMaac Buyout and 2003 Acquisitions and 2004 Acquisitions as previously reviewed in the net income discussion above. FFO for 2003 included a charge of $5,987,000 for premiums and original issuance costs associated with the redemption of preferred stock.
TRENDS
Property performance over the past four years has been pressured by an imbalance between supply and demand for apartment units in many of the Company’s markets, but has begun to show signs of improvement.
The Company believes that demand by apartment renters is most impacted by household formation, which is driven by job formation. Job formation has been quite weak in many of the Company’s markets, and most noticeably in the larger metro areas, such as Atlanta, Houston and Dallas. Some of the smaller and mid-size markets in which the Company operates, such as Jackson, Mississippi, Jacksonville, Florida, and Columbus, Georgia have been less impacted.
On the supply side, low interest rates encouraged over-building of apartments, especially in the larger metropolitan areas. Delivery of new apartment units during this period of weakened apartment demand increased competition, reducing apartment occupancy levels, especially in the larger markets. In addition, single-family homes, which are direct competition for apartments, became even more affordable, and home ownership continued to climb in the Company’s markets.
In 2005, the Company began to see a turn in many of its markets, particularly in Florida and Georgia, where there are some signs of improving demand coupled with a slight slow down in supply. The Company’s large-tier markets, which have been under the most pressure during the economic downturn, are beginning to show signs of absorbing the oversupply of new apartments and returning to historical occupancy and pricing levels, while the Company’s smaller tier and mid-sized markets are benefiting from improving market fundamentals which support continued stable growth. The policies of the Federal Reserve, which has raised short-term interest rates by 300 basis points in a short span of time, also seem to be having some early impact
25
on the supply of new apartments. Development costs of apartments and of single-family homes also appear to be rising, as are mortgage interest rates, with the likelihood that this may slightly alleviate this competition.
The Company believes that the impact of higher demand from apartment renters, a reduced rate of increase in supply, and reduced competition from single-family homes will contribute to better operating results in 2006. While rising interest rates will also increase the Company’s cost of borrowing, the Company has mitigated part of the impact of this by putting in place $25 million of forward swap, such that the interest rate on approximately 87% of its debt has been fixed, swapped, forward swapped, or capped, compared to 81% at the end of 2004.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased by approximately $11,458,000 to $99,687,000 for 2005 compared to $88,229,000 for 2004 mainly related to the growth of the Company through acquisitions and improved operating results in 2005. Net cash flow provided by operating activities increased by approximately $11,709,000 to $88,229,000 for 2004 compared to $76,520,000 for 2003 mainly related to the growth of the Company through the BreMaac Buyout and the 2003 Acquisitions and 2004 Acquisitions.
Net cash used in investing activities decreased by approximately $60,031,000 from $168,383,000 in 2004 to $108,352,000 in 2005. Net cash used in investing activities in 2003 was approximately $139,555,000. A total of approximately $105,643,000 was invested in 2005 to acquire properties, this compares to approximately $155,088,000 in 2004, and $138,688,000 in 2003. Capital improvements to existing real estate assets during 2005, 2004 and 2003 totaled approximately $27,301,000, $30,413,000 and $22,832,000, respectively.
Net cash provided by financing activities decreased approximately $66,896,000 to $13,596,000 in 2005 from $80,492,000 in 2004 and $61,680,000 in 2003. Cash provided from credit lines and notes payable decreased approximately $223,851,000 from approximately $280,930,000 in 2004 to $57,079,000 in 2005. Cash provided from credit lines and notes payable was approximately $245,897,000 in 2003. Principal payments on notes payable dropped to approximately $10,921,000 in 2005 from $152,046,000 in 2004 and $175,852,000 in 2003 as the Company had fewer refinancings in 2005. Proceeds from issuances of common shares and units increased in 2005 to approximately $39,459,000 mainly related to the Company’s use of its DRSPP. Proceeds from issuances of common shares and units decreased approximately $34,628,000 from 2003 to 2004 as the Company sold 1,765,000 shares of common stock to certain advisory clients of Cohen & Steers Capital Management, Inc. and to Scudder RREEF Real Estate Fund II, Inc. in 2003 to partially fund the BreMaac Buyout and 2003 Acquisitions.
The weighted average interest rate at December 31, 2005, for the $1.14 billion of debt outstanding was 5.4% compared to 5.4% on $1.08 billion of debt outstanding at December 31, 2004. The Company utilizes both conventional and tax exempt debt to help finance its activities. Borrowings are made through individual property mortgages and secured credit facilities. The Company utilizes fixed rate borrowings, interest rate swaps and interest rate caps to manage its current and future interest rate risk. More details on the Company’s borrowings can be found in the schedule on page 28.
At December 31, 2005, the Company had secured credit facilities relationships with Prudential Mortgage Capital which are credit enhanced by the Federal National Mortgage Association (“FNMA”), FNMA, Federal Home Loan Mortgage Corporation (“Freddie MAC”), and a group of banks led by AmSouth Bank. Together, these credit facilities provided a total borrowing capacity of $1.1 billion at December 31, 2005, with an availability to borrow of $1.0 billion. At December 31, 2005, the Company had total borrowings outstanding under these credit facilities of $920 million.
Approximately 71% of the Company’s outstanding obligations at December 31, 2005, were borrowed through facilities with/or credit enhanced by FNMA (the “FNMA Facilities”). The FNMA Facilities have a combined line limit of $950 million, $881 million of which was available to borrow at December 31, 2005. Various traunches of the facilities mature from 2010 through 2014. The FNMA Facilities provide for both fixed and variable rate borrowings. The interest rate on the majority of the variable portion renews every 90 days and is based on the FNMA Discount Mortgage Backed Security (“DMBS”) rate on the date of renewal,
26
which has typically approximated three-month LIBOR less an average spread of 0.04% over the life of the FNMA Facilities, plus a credit enhancement fee of 0.62% to 0.795%.
Each of the Company’s secured credit facilities is subject to various covenants and conditions on usage, and are subject to periodic re-evaluation of collateral. If the Company were to fail to satisfy a condition to borrowing, the available credit under one or more of the facilities could not be drawn, which could adversely affect the Company’s liquidity. In the event of a reduction in real estate values the amount of available credit could be reduced. Moreover, if the Company were to fail to make a payment or violate a covenant under a credit facility, after applicable cure periods one or more of its lenders could declare a default, accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing such facilities. Any such event could have a material adverse effect on the Company.
On May 26, 2005, the Company gave the required one year notice to redeem all of the issued and outstanding shares of its 8-5/8% Series G Cumulative Redeemable Preferred Stock (“Series G”) on May 26, 2006, for the total redemption price of $10 million. As a result, in accordance with Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, the Company classified the Series G as a liability within notes payable as of May 26, 2005, on the accompanying consolidated financial statements.
As of December 31, 2005, the Company had interest rate swaps in effect totaling a notional amount of approximately $659 million. To date, these swaps have proven to be highly effective hedges. The Company also had entered into a future interest rate swap totaling a notional amount of $25 million. This swap goes into effect in February 2006. The Company also had interest rate cap agreements totaling a notional amount of approximately $23 million in effect as of December 31, 2005.
27
Summary details of the debt outstanding at December 31, 2005, follows in the table below:
| | | | Line
Limit
| | Line
Availability
| | Outstanding
Balance/
Notional
Amount
| | Average
Interest
Rate
| | Average
Rate
Maturity
| | Average
Contract
Maturity
|
|---|
COMBINED DEBT
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Rate or Swapped
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Conventional | | | | | | | | | | | | $ | 847,354,719 | | | | 5.7 | % | | | 4/20/2011 | | | | 4/20/2011 | |
| Tax Exempt | | | | | | | | | | | | | 87,015,000 | | | | 4.5 | % | | | 6/25/2013 | | | | 6/25/2013 | |
| Preferred Series G | | | | | | | | | | | | | 10,000,000 | | | | 8.6 | % | | | 5/26/2006 | | | | 5/26/2006 | |
| Subtotal Fixed Rate or Swapped | | | | | | | | | | | | | 944,369,719 | | | | 5.6 | % | | | 6/13/2011 | | | | 6/13/2011 | |
Variable Rate
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Conventional | | | | | | | | | | | | | 162,245,891 | | | | 4.8 | % | | | 2/24/2006 | | | | 6/14/2012 | |
| Tax Exempt | | | | | | | | | | | | | 10,855,004 | | | | 4.0 | % | | | 1/15/2006 | | | | 5/30/2020 | |
| Conventional—Capped | | | | | | | | | | | | | 11,720,000 | | | | 4.9 | % | | | 3/1/2009 | | | | 3/1/2009 | |
| Tax Exempt—Capped | | | | | | | | | | | | | 10,855,000 | | | | 3.9 | % | | | 4/25/2008 | | | | 4/25/2008 | |
| Subtotal Variable Rate | | | | | | | | | | | | | 195,675,895 | | | | 4.7 | % | | | 2/19/2006 | | | | 1/16/2013 | |
Total Combined Debt Outstanding | | | | | | | | | | | | $ | 1,140,045,614 | | | | 5.4 | % | | | 7/15/2010 | | | | 9/21/2011 | |
UNDERLYING DEBT
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Individual Property Mortgages/Bonds
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Conventional Fixed Rate | | | | | | | | | | | | $ | 139,354,719 | | | | 5.0 | % | | | 11/7/2014 | | | | 11/7/2014 | |
| Tax Exempt Fixed Rate | | | | | | | | | | | | | 25,685,000 | | | | 5.5 | % | | | 12/2/2024 | | | | 12/2/2024 | |
| Tax Exempt Variable Rate | | | | | | | | | | | | | 4,760,004 | | | | 4.2 | % | | | 1/15/2006 | | | | 6/1/2028 | |
| Preferred Series G | | | | | | | | | | | | | 10,000,000 | | | | 8.6 | % | | | 5/26/2006 | | | | 5/26/2006 | |
FNMA Credit Facilities
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax Free Borrowings | | | | $ | 88,280,000 | | | $ | 78,280,000 | | | | 78,280,000 | | | | 3.9 | % | | | 1/15/2006 | | | | 3/1/2014 | |
Conventional Borrowings
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed Rate Borrowings | | | | | 110,000,000 | | | | 110,000,000 | | | | 110,000,000 | | | | 7.2 | % | | | 1/10/2009 | | | | 1/10/2009 | |
| Variable Rate Borrowings | | | | | 751,720,000 | | | | 692,955,000 | | | | 623,102,000 | | | | 4.9 | % | | | 2/28/2006 | | | | 5/20/2013 | |
| Subtotal FNMA Facilities | | | | | 950,000,000 | | | | 881,235,000 | | | | 811,382,000 | | | | 5.1 | % | | | 7/15/2006 | | | | 11/12/2012 | |
| Freddie Mac Credit Facility | | | | | 100,000,000 | | | | 96,404,000 | | | | 96,404,000 | | | | 5.0 | % | | | 3/9/2006 | | | | 7/1/2011 | |
| AmSouth Credit Facility | | | | | 40,000,000 | | | | 30,203,438 | | | | 12,459,891 | | | | 6.0 | % | | | 1/31/2006 | | | | 5/24/2007 | |
| Union Planters Bank | | | | | | | | | | | | | 40,000,000 | | | | 5.4 | % | | | 1/31/2006 | | | | 4/1/2009 | |
Total Underlying Debt Outstanding | | | | | | | | | | | | $ | 1,140,045,614 | | | | 5.1 | % | | | 11/30/2007 | | | | 1/31/2013 | |
HEDGING INSTRUMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Rate Swaps
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIBOR indexed | | | | | | | | | | | | $ | 598,000,000 | | | | 5.5 | % | | | 9/24/2010 | | | | | |
| LIBOR indexed—Forward Interest Rate Swap | | | | | | | | | | | | | 25,000,000 | | | | 5.3 | % | | | 2/1/2013 | | | | | |
| BMA indexed | | | | | | | | | | | | | 61,330,000 | | | | 4.1 | % | | | 9/10/2008 | | | | | |
| Total Interest Rate Swaps | | | | | | | | | | | | $ | 684,330,000 | | | | 5.4 | % | | | 8/19/2010 | | | | | |
Interest Rate Caps
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIBOR indexed | | | | | | | | | | | | $ | 11,720,000 | | | | 6.0 | % | | | 3/1/2009 | | | | | |
| BMA indexed | | | | | | | | | | | | | 10,855,000 | | | | 6.0 | % | | | 4/25/2008 | | | | | |
| Total Interest Rate Caps | | | | | | | | | | | | $ | 22,575,000 | | | | 6.0 | % | | | 10/2/2008 | | | | | |
During 2005, the Company offered an average 1.5% discount through its DRSPP and issued approximately 784,000 shares of common stock through the direct stock purchase feature of this plan, generating approximately $32.3 million in proceeds. During 2004, the Company offered an average discount of 2.0% from August through December through its DRSPP. For the twelve months ended December 31, 2004, the Company issued approximately 392,000 shares of common stock through the direct stock purchase feature of this plan, generating approximately $15.1 million in proceeds.
On July 10, 2003, in an underwritten public offering, the Company sold 5,600,000 shares of its 8.30% Series H Cumulative Redeemable Preferred Stock (“Series H”) at $25 per share less an underwriting discount of $0.7875 per share. The net proceeds of the sale were applied to the redemption of all the issued and
28
outstanding shares of the Company’s 9.5% Series A Cumulative Preferred Stock and 9-3/8% Series C Cumulative Redeemable Preferred Stock as well as 1,600,000 shares of the 1,938,830 issued and outstanding shares of the Company’s 8-7/8% Series B Cumulative Preferred Stock (“Series B”) on August 12, 2003.
On July 16, 2003, the underwriters of the Company’s Series H offering exercised an option to purchase an additional 525,000 shares of the Series H preferred stock for $25 per share less the underwriting discount, and on August 4, 2003, the underwriters exercised an option to purchase the remaining additional 75,000 shares of the Series H preferred stock for $25 per share less the underwriting discount. The net proceeds were used to redeem the remaining issued and outstanding shares of the Series B preferred stock on August 18, 2003.
On August 22, 2003, the Company sold 700,000 shares of its common stock to certain advisory clients of Cohen & Steers Capital Management, Inc. The stock was sold at a price of $28.40 per share. The $19,870,000 in net proceeds from the sale were used to partially fund the BreMaac Buyout.
On September 19, 2003, the Company sold 665,000 shares of its common stock to certain advisory clients of Cohen & Steers Capital Management, Inc. and to Scudder RREEF Real Estate Fund II, Inc. The stock was sold at a price of $29.36 per share. The $19,500,000 in net proceeds from the sale were used to partially fund the purchase of the Los Rios Park apartments.
On December 2, 2003, the Company sold 400,000 shares of its common stock to RREEF America, L.L.C. on behalf of itself and Scudder RREEF Real Estate Fund II, Inc. The stock was sold at a price of $30.00 per share. The $11,996,000 in net proceeds from the sale were used to partially fund the acquisition of the Lighthouse Court apartments.
The Company believes that it has adequate resources to fund its current operations, annual refurbishment of its properties, and incremental investment in new apartment properties. The Company is relying on the efficient operation of the financial markets to finance debt maturities, and also is heavily reliant on the creditworthiness of FNMA, which provides credit enhancement for approximately $811 million of the Company’s debt. The interest rate market for FNMA DMBS, which in the Company’s experience is highly correlated with three-month LIBOR interest rates, is also an important component of the Company’s liquidity and interest rate swap effectiveness. In the event that the FNMA DMBS market becomes less efficient, or the credit of FNMA becomes impaired, the Company would seek alternative sources of debt financing.
For the year ended December 31, 2005, the Company’s net cash provided by operating activities exceeded improvements to existing real estate assets, distributions to unitholders, and dividends paid on common and preferred shares by approximately $1.6 million. This compares to shortfalls for the years ended December 31, 2004, and 2003, of approximately $10.9 million and $11.0 million, respectively. While the Company has sufficient liquidity to permit distributions at current rates, from time to time the Company may utilize additional borrowings to cover shortfalls if necessary. Any significant deterioration in operations could result in the Company’s financial resources to be insufficient to pay distributions to shareholders at the current rate, in which event the Company would be required to reduce the distribution rate.
The following table reflects the Company’s total contractual cash obligations which consists of its long-term debt and operating leases as of December 31, 2005, (dollars in 000’s):
| | | | Payments Due by Period
| |
|---|
Contractual Obligations
| | | | 2006
| | 2007
| | 2008
| | 2009
| | 2010
| | Thereafter
| | Total
| |
|---|
| Long-Term Debt (1) | | | | $ | 38,889 | | | $ | 17,017 | | | $ | 110,510 | | | $ | 106,846 | | | $ | 121,948 | | | $ | 744,836 | | | $ | 1,140,046 | | | | | |
| Operating Lease | | | | | 4 | | | | 4 | | | | 4 | | | | — | | | | — | | | | — | | | | 12 | | | | | |
Total | | | | $ | 38,893 | | | $ | 17,021 | | | $ | 110,514 | | | $ | 106,846 | | | $ | 121,948 | | | $ | 744,836 | | | $ | 1,140,058 | | | | | |
| (1) | | Represents principal payments.
|
OFF-BALANCE SHEET ARRANGEMENTS
At December 31, 2005, and 2004, the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose entities,” established for the purpose of facilitating off-balance sheet arrangements or other contractually
29
narrow or limited purposes. The Company’s joint venture with Blackstone (terminated in 2003) was established in order to raise capital through asset sales to fund development (while acquiring management fees to help offset the reduction in FFO from the sale), share repurchases, and other capital requirements. The Company’s joint ventures with Crow Holdings were established to acquire approximately $200 million of multifamily properties. In addition, the Company does not engage in trading activities involving non-exchange traded contracts. As such, the Company is not materially exposed to any financing, liquidity, market, or credit risk that could arise if it had engaged in such relationships. The Company does not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with the Company or its related parties other than what is disclosed in Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements, Note 13.
The Company’s investments in its real estate joint ventures are unconsolidated and are recorded on the equity method as the Company does not have a controlling interest.
INSURANCE
In the opinion of management, property and casualty insurance is in place that provides adequate coverage to provide financial protection against normal insurable risks such that it believes that any loss experienced would not have a significant impact on the Company’s liquidity, financial position, or results of operations.
INFLATION
Substantially all of the resident leases at the Communities allow, at the time of renewal, for adjustments in the rent payable there under, and thus may enable the Company to seek rent increases. Almost all leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to the Company of the adverse effects of inflation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2004, the FASB issued Statement No. 153,Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 (“Statement 153”). Statement 153 was a result of a joint effort by the FASB and the IASB to improve financial reporting by eliminating certain narrow differences between their existing accounting standards. Statement 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. Statement 153 is applied prospectively for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of Statement 153 did not have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In December 2004, the FASB issued Statement No. 123 (revised December 2004),Share-Based Payment (“Statement 123(R)”). Statement 123(R) replaces FASB Statement No. 123,Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees. Statement 123(R) will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant date fair value of the equity or the liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. Statement 123(R) is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. The Company will adopt Statement 123(R) effective January 1, 2006, and does not believe it will have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In March 2005, the SEC issued SAB 107 to provide public companies additional guidance in applying the provisions of Statement 123(R). Among other things, SAB 107 describes the SEC staff’s expectations in determining the assumptions that underlie the fair value estimates and discusses the interaction of Statement 123(R) with certain existing SEC guidance. The guidance is also beneficial to users of financial statements in
30
analyzing the information provided under statement 123(R). SAB 107 will be applied upon the adoption of Statement 123(R).
In March 2005, the FASB issued Interpretation No. 47,Accounting for Conditional Asset Retirement Obligations-an interpretation of FASB Statement No. 143 (“Interpretation 47”). Interpretation 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143,Accounting for Asset Retirement Obligations, (“Statement 143”) refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Interpretation 47 is effective no later than the end of fiscal years ending after December 15, 2005, (December 31, 2005, for calendar-year enterprises). Retrospective application for interim financial information is permitted but is not required. The adoption of Interpretation 47 did not have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In June 2005, the FASB ratified EITF 04-5:Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”). EITF 04-5 provides a framework for determining whether a general partner is required to consolidate limited partners. The new framework is significantly different than the guidance in SOP 78-9 and would make it more difficult for a general partner to overcome the presumption that it controls the limited partnership, requiring the limited partner to have substantive “kick-out” or “participating” rights. Kick-out rights are the right to dissolve or liquidate the partnership or to otherwise remove the general partner without cause and participating rights are the right to effectively participate in significant decisions made in the ordinary course of the partnership’s business. EITF 04-5 became effective immediately for all newly formed limited partnerships and existing limited partnerships which are modified. The guidance will become effective for existing limited partnerships which are not modified the beginning of the first reporting period in fiscal years beginning after December 15, 2005. The Company does not believe the adoption of EITF 04-5 will have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s primary market risk exposure is to changes in interest rates obtainable on its secured and unsecured borrowings. At December 31, 2005, 45.6% of the Company’s total capitalization consisted of borrowings. The Company’s interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower its overall borrowing costs. To achieve this objective, the Company manages its exposure to fluctuations in market interest rates for its borrowings through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements, and may enter into derivative financial instruments such as interest rate swaps and caps to mitigate its interest rate risk on a related financial instrument or to effectively fix the interest rate on a portion of its variable debt or on future refinancings. The Company does not enter into derivative instruments for trading purposes. Approximately 85% of the Company’s outstanding debt was subject to fixed rates after considering related derivative instruments with a weighted average of 5.6% at December 31, 2005. After considering the $25 million forward interest rate swap which becomes operative in February 2006, approximately 87% of the Company’s debt was fixed or hedged by interest rate swaps or caps at December 31, 2005. The Company regularly reviews interest rate exposure on its outstanding borrowings in an effort to minimize the risk of interest rate fluctuations.
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The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For the Company’s interest rate swaps and caps, the table presents the notional amount of the swaps and caps and the years in which they expire. Weighted average variable rates are based on rates in effect at the reporting date (dollars in 000’s).
| | | | 2006
| | 2007
| | 2008
| | 2009
| | 2010
| | Total
Thereafter
| | Total
| | Fair
Value
|
|---|
Long-term Debt
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed Rate (1) | | | | $ | 34,518 | | | | — | | | $ | 114,451 | | | $ | 65,000 | | | | — | | | $ | 71,071 | | | $ | 285,040 | | | $ | 258,662 | |
| Average interest rate | | | | | 6.99 | % | | | — | | | | 4.86 | % | | | 7.71 | % | | | — | | | | 5.86 | % | | | 6.02 | % | | | | |
| Variable Rate (1) | | | | | — | | | $ | 12,460 | | | | — | | | $ | 40,000 | | | $ | 120,000 | | | $ | 682,546 | | | $ | 855,006 | | | $ | 855,006 | |
| Average interest rate | | | | | — | | | | 6.00 | % | | | — | | | | 5.40 | % | | | 4.93 | % | | | 4.79 | % | | | 4.86 | % | | | | |
Interest Rate Swaps (2)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Variable to Fixed | | | | $ | 25,000 | | | $ | 92,800 | | | $ | 74,935 | | | $ | 35,230 | | | $ | 98,365 | | | $ | 358,000 | | | $ | 684,330 | | | $ | 7,303 | |
| Average Pay Rate | | | | | 7.50 | % | | | 5.89 | % | | | 5.42 | % | | | 4.59 | % | | | 5.44 | % | | | 5.25 | % | | | 5.43 | % | | | | |
Interest Rate Cap
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Variable to Fixed | | | | | — | | | $ | 6,805 | | | | — | | | $ | 15,770 | | | | — | | | | — | | | $ | 22,575 | | | $ | 30 | |
| Average Pay Rate | | | | | — | | | | 6.00 | % | | | — | | | | 6.00 | % | | | — | | | | — | | | | 6.00 | % | | | | |
| (1) | | Excluding the effect of interest rate swap and cap agreements. |
| (2) | | Includes the Company’s forward interest rate swap agreement. |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Registered Public Accounting Firm, Consolidated Financial Statements and Selected Quarterly Financial Information are set forth on pages F-1 to F-29 of this Annual Report on Form 10-K.
ITEM 9. | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
On September 19, 2005, and effective October 31, 2005, upon the filing of its Form 10-Q for the third quarter of 2005, the Audit Committee of the Board of Directors of the Company dismissed KPMG LLP as the Company’s independent registered public accounting firm and engaged Ernst & Young LLP as its new independent registered public accounting firm to conduct the audit of the Company’s financial statements as of and for the year ended December 31, 2005.
The reports of KPMG LLP on the financial statements for the years ended December 31, 2004, and 2003, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principle.
There have been no disagreements with the Company’s independent accountants on any matter of accounting principles or practices or financial statement disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s filings under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management’s control objectives. The Company also has an investment in an unconsolidated entity
32
which is not under its control. Consequently, the Company’s disclosure controls and procedures with respect to this entity are necessarily more limited than those it maintains with respect to its consolidated subsidiaries.
Our management, with the participation of our principal executive officer and financial officers has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on their evaluation as of December 31, 2005, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) that is required to be included in the Company’s Exchange Act filings.
Management’s Report on Internal Control Over Financial Reporting
Management’s report on our internal control over financial reporting is presented on page F-1 of this Annual Report on Form 10-K. The reports of Ernst & Young LLP relating to the consolidated financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting are presented on pages F-2 and F-4 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
During the Company’s evaluation of internal controls over financial reporting, management identified items which would have been classified as deficiencies or significant deficiencies within the framework utilized by management to assess the effectiveness of internal control over financial reporting. Management communicated these items to the Audit Committee of the Board of Directors of the Company and all of the significant deficiencies were either remediated or the Company had a remediation plan in place as of the end of the period covered by this report. No material weaknesses were identified by management during its assessment.
During the three months ended December 31, 2005, there were no significant changes in the Company’s internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Company’s 2006 Proxy Statement in the sections entitled “Proposal 1—Election of Directors”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance,” is incorporated herein by reference in response to this item.
Our Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which can be found on the Company’s website at www.maac.net, on the Investor’s page under Company Info and Governance. The Company will provide a copy of this document to any person, without charge, upon request, by writing to the Investor Relations Department at Mid-America Apartment Communities, Inc., 6584 Poplar Avenue, Suite 300, Memphis, TN 38138. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on our website at the address and the locations specified above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Company’s 2006 Proxy Statement in the section entitled “Executive Compensation,” is incorporated herein by reference in response to this item.
ITEM 12. | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information contained in the Company’s 2006 Proxy Statement in the sections entitled “Security Ownership of Management” and “Security Ownership of Certain Beneficial Owners,” is incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Company’s 2006 Proxy Statement in the sections entitled “Certain Relationships and Related Transactions” is incorporated herein by reference in response to this item.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained in the Company’s 2006 Proxy Statement in the section entitled “Proposal 2—Ratification of Independent Registered Public Accounting Firm,” is incorporated herein by reference in response to this item.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | | The following documents are filed as part of this Annual Report on Form 10-K: |
| 1. | | | | Management’s Report on Internal Controls Over Financial Reporting | | F-1 |
| | | | | Reports of Independent Registered Public Accounting Firm | | F-2 |
| | | | | Consolidated Balance Sheets as of December 31, 2005, and 2004 | | F-5 |
| | | | | Consolidated Statements of Operations for the years ended
December 31, 2005, 2004, and 2003 | | F-6 |
| | | | | Consolidated Statements of Shareholders’ Equity for the years ended
December 31, 2005, 2004, and 2003 | | F-7 |
| | | | | Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004, and 2003 | | F-8 |
| | | | | Notes to Consolidated Financial Statements for the years ended
December 31, 2005, 2004, and 2003 | | F-10 |
| |
| 2. | | | | Financial Statement Schedule required to be filed by Item 8 and
Paragraph (b) of this Item 15:
| | | | |
| | | | | Schedule III—Real Estate Investments and Accumulated Depreciation as of
December 31, 2005 | | F-30 |
| |
| 3. | | | | The exhibits required by Item 601 of Regulation S-K, except as otherwise noted, have been filed with previous reports by the registrant and are herein incorporated by reference.
| | | | |
Exhibit Number | Exhibit Description |
3.1 | Amended and Restated Charter of Mid-America Apartment Communities, Inc. dated as of January 10, 1994, as filed with the Tennessee Secretary of State on January 25, 1994 (Filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
3.2 | Articles of Amendment to the Charter of Mid-America Apartment Communities, Inc. dated as of January 28, 1994, as filed with the Tennessee Secretary of State on January 28, 1994 (Filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). |
3.3 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Preferred Stock dated as of October 9, 1996, as filed with the Tennessee Secretary of State on October 10, 1996 (Filed as Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). |
3.4 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
3.5 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). |
35
3.6 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of June 25, 1998, as filed with the Tennessee Secretary of State on June 30, 1998 (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). |
3.7 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of A Series of Shares of Preferred Stock dated as of December 24, 1998, as filed with the Tennessee Secretary of State on December 30, 1998 (Filed as Exhibit 3.7 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.8 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 11, 2002, as filed with the Tennessee Secretary of State on October 14, 2002 (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). |
3.9 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 28, 2002, as filed with the Tennessee Secretary of State on October 28, 2002 (Filed as Exhibit 3.9 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.10 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of August 7, 2003, as filed with the Tennessee Secretary of State on August 7, 2003 (Filed as Exhibit 3.10 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.11 | Bylaws of Mid-America Apartment Communities, Inc. (Filed as an Exhibit to the Registrant’s Registration Statement on Form S-11 (File Number 33-69434) and incorporated herein by reference). |
4.1 | Form of Common Share Certificate (Filed as Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
4.2 | Form of 9.5% Series A Cumulative Preferred Stock Certificate (Filed as Exhibit 2 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). |
4.3 | Form of 8 7/8% Series B Cumulative Preferred Stock Certificate (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). |
4.4 | Form of 9 3/8% Series C Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). |
4.5 | Form of 9.5% Series E Cumulative Preferred Stock Certificate (Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
4.6 | Form of 9 ¼% Series F Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). |
4.7 | Form of 8.30% Series G Cumulative Preferred Stock Certificate (Filed as Exhibit 4.7 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
36
4.8 | Form of 8.30% Series H Cumulative Preferred Stock Certificate (Filed as Exhibit 4.8 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.1 | Second Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P., a Tennessee limited partnership (Filed as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and incorporated herein by reference). |
10.2 † | Employment Agreement between the Registrant and H. Eric Bolton, Jr. (Filed as Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). |
10.3 † | Employment Agreement between the Registrant and Simon R.C. Wadsworth (Filed as Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). |
10.4 † | Fourth Amended and Restated 1994 Restricted Stock and Stock Option Plan (Filed as Exhibit A to the Registrant’s Proxy Statement filed on April 24, 2002 and incorporated herein by reference). |
10.5 | AmSouth Revolving Credit Agreement (Amended and Restated) dated July 17, 2003 (Filed as Exhibit 10.10 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.6 | First Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 19, 2004 (Filed as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.7 | Second Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 23, 2005. |
10.8 | Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 30, 2004. |
10.9 | First Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2004 (Filed as Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.10 | Second Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated April 30, 2004 (Filed as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.11 | Third Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 3, 2004 (Filed as Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.12 | Fourth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 31, 2004 (Filed as Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
37
10.13 | Fifth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated October 1, 2004 (Filed as Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.14 | Sixth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 1, 2004 (Filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.15 | Seventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 15, 2004 (Filed as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.16 | Eighth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2005. |
10.17 | Ninth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated September 23, 2005. |
10.18 | Tenth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 16, 2005. |
10.19 | Eleventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated February 22, 2006. |
10.20 | Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P., dated March 30, 2004. |
10.21 | First Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2004. |
10.22 | Second Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of August 3, 2004 (Filed as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.23 | Third Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of December 1, 2004 (Filed as Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.24 | Fourth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2005. |
38
10.25 | Fifth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated September 23, 2005. |
10.26 | Sixth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated February 22, 2006. |
10.27 | Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways- Columbia, L.P. dated June 1, 2001 (Filed as Exhibit 10.17 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.28 | Amendment No. 1 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated December 24, 2002 (Filed as Exhibit 10.18 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.29 | Amendment No. 2 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated May 30, 2003 (Filed as Exhibit 10.19 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.30 | Amendment No. 3 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated March 2, 2004. |
10.31 | Amendment No. 4 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated November 17, 2005. |
10.32 | Amendment No. 5 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated February 23, 2006. |
10.33 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Sunset Valley Apartments, Texas) (Filed as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.34 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004 (Village Apartments, Texas) (Filed as Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.35 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Coral Springs Apartments, Florida) (Filed as Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.36 | Credit Agreement dated September 28, 1998 by and among Jefferson Village, L.P., Jefferson at Sunset Valley, L.P. and JPI Coral Springs, L.P. (Filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.37 | Credit Agreement by and among Mid-America Apartment Communities, Inc., Mid-America Apartments L.P. and Mid- America Apartments of Texas, L.P. and Financial Federal Savings Bank dated June 29, 2004 (Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference). |
39
10.38 | Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated March 2, 2004. |
10.39 | Amendment No. 1 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated November 17, 2005. |
10.40 | Amendment No. 2 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated February 23, 2006. |
10.41† | Mid-America Apartment Communities, Inc. Non-Qualified Deferred Compensation Plan for Outside Company Directors as Amended Effective January, 1 2005 (Filed as Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.42† | Mid-America Apartment Communities Non-Qualified Deferred Compensation Retirement Plan as Amended Effective January 1, 2005 (Filed as Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.43 † | Mid-America Apartment Communities 2005 Key Management Restricted Stock Plan (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 20, 2005 and incorporated herein by reference). |
10.44 † | 2005 Executive Annual Bonus Program (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 25, 2005 and incorporated herein by reference). |
10.45† | Form of Restricted Stock Agreement (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2005 and incorporated herein by reference). |
11 | Statement re: computation of per share earnings (included within the Form 10-K). |
14 | Code of Ethics (Filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference). |
21 | List of Subsidiaries |
23.1 | Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP |
23.2 | Consent of Independent Registered Public Accounting Firm, KPMG LLP |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
____________________
† Management contract or compensatory plan or arrangement. |
See Item 15(a)(3) above.
| (c) | | Financial Statement Schedule: |
See Item 15(a)(2) above.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
| | | | | MID-AMERICA APARTMENT
COMMUNITIES, INC. |
| Date: February 28, 2006 | | | | /s/ H. ERIC BOLTON, JR.
H. Eric Bolton, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
| |
| Date: February 28, 2006 | | | | /s/ H. ERIC BOLTON, JR.
H. Eric Bolton, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer) |
| Date: February 28, 2006 | | | | /s/ SIMON R.C. WADSWORTH
Simon R.C. Wadsworth
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |
| Date: February 28, 2006 | | | | /s/ GEORGE E. CATES
George E. Cates
Director |
| Date: February 28, 2006 | | | | /s/ JOHN F. FLOURNOY
John F. Flournoy
Director |
| Date: February 28, 2006 | | | | /s/ ROBERT F. FOGELMAN
Robert F. Fogelman
Director |
| Date: February 28, 2006 | | | | /s/ ALAN B. GRAF, JR.
Alan B. Graf, Jr.
Director |
| Date: February 28, 2006 | | | | /s/ JOHN S. GRINALDS
John S. Grinalds
Director |
| Date: February 28, 2006 | | | | /s/ RALPH HORN
Ralph Horn
Director |
41
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2005 using the framework specified inInternal Control—Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2005.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report.
F-1
Report of Independent Registered Accounting Firm
The Board of Directors and Shareholders
of Mid-America Apartment Communities, Inc.
We have audited the consolidated balance sheet of Mid-America Apartment Communities, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended. Our audit also included the information as of and for the year ended December 31, 2005 contained in the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements as of and for the year ended December 31, 2005 referred to above present fairly, in all material respects, the consolidated financial position of Mid-America Apartment Communities, Inc. and subsidiaries at December 31, 2005 and the consolidated results of their operations and their cash flows for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information as of and for the year ended December 31, 2005 set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Mid-America Apartment Communities, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2006 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Memphis, Tennessee
February 27, 2006
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheet of Mid-America Apartment Communities, Inc. and subsidiaries (the Company) as of December 31, 2004, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the 2004 and 2003 information included in the accompanying financial statement Schedule III: Real Estate and Accumulated Depreciation. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule 2004 and 2003 information based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mid-America Apartment Communities, Inc. and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the 2004 and 2003 information included in the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
Memphis, Tennessee
March 8, 2005
F-3
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
of Mid-America Apartment Communities, Inc.
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Mid-America Apartment Communities, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Mid-America Apartment Communities, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Mid-America Apartment Communities, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended and our report dated February 27, 2006 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Memphis, Tennessee
February 27, 2006
F-4
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2005 and 2004
(Dollars in thousands, except per share data)
| | | | December 31,
2005
| | December 31,
2004
|
|---|
ASSETS:
| | | | | | | | | | |
Real estate assets:
| | | | | | | | | | |
| Land | | | | $ | 179,523 | | | $ | 163,381 | |
| Buildings and improvements | | | | | 1,740,818 | | | | 1,625,194 | |
| Furniture, fixtures and equipment | | | | | 46,301 | | | | 41,682 | |
| Capital improvements in progress | | | | | 4,175 | | | | 6,519 | |
| | | | | | 1,970,817 | | | | 1,836,776 | |
| Less accumulated depreciation | | | | | (473,421 | ) | | | (399,762 | ) |
| | | | | | 1,497,396 | | | | 1,437,014 | |
| Land held for future development | | | | | 1,366 | | | | 1,366 | |
| Commercial properties, net | | | | | 7,345 | | | | 7,429 | |
| Investments in and advances to real estate joint ventures | | | | | 4,182 | | | �� | 14,143 | |
| Real estate assets, net | | | | | 1,510,289 | | | | 1,459,952 | |
| Cash and cash equivalents | | | | | 14,064 | | | | 9,133 | |
| Restricted cash | | | | | 5,534 | | | | 6,041 | |
| Deferred financing costs, net | | | | | 15,338 | | | | 16,365 | |
| Other assets | | | | | 20,181 | | | | 16,837 | |
| Goodwill | | | | | 5,051 | | | | 5,400 | |
| Assets held for sale | | | | | — | | | | 8,579 | |
| Total assets | | | | $ | 1,570,457 | | | $ | 1,522,307 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY:
| | | | | | | | | | |
Liabilities:
| | | | | | | | | | |
| Notes payable | | | | $ | 1,140,046 | | | $ | 1,083,473 | |
| Accounts payable | | | | | 3,278 | | | | 767 | |
| Accrued expenses and other liabilities | | | | | 28,380 | | | | 43,381 | |
| Security deposits | | | | | 6,429 | | | | 5,821 | |
| Liabilities associated with assets held for sale | | | | | — | | | | 164 | |
Total liabilities | | | | | 1,178,133 | | | | 1,133,606 | |
Minority interest | | | | | 29,798 | | | | 31,376 | |
| 8.625% Series G Cumulative Redeemable Preferred Stock, 400,000 shares authorized, 400,000 shares issued and outstanding | | | | | — | | | | 10,000 | |
Shareholders’ equity:
| | | | | | | | | | |
Preferred stock, $.01 par value, 20,000,000 shares authorized, $166,863 or $25 per share liquidation preference:
| | | | | | | | | | |
| 9.25% Series F Cumulative Redeemable Preferred Stock, 3,000,000 shares authorized, 474,500 shares issued and outstanding | | | | | 5 | | | | 5 | |
| 8.30% Series H Cumulative Redeemable Preferred Stock, 6,200,000 shares authorized, 6,200,000 shares issued and outstanding | | | | | 62 | | | | 62 | |
| Common stock, $.01 par value per share, 50,000,000 shares authorized; 22,048,372 and 20,856,791 shares issued and outstanding at December 31, 2005 and December 31, 2004, respectively | | | | | 220 | | | | 209 | |
| Additional paid-in capital | | | | | 671,885 | | | | 634,520 | |
| Other | | | | | (2,422 | ) | | | (3,252 | ) |
| Accumulated distributions in excess of net income | | | | | (314,352 | ) | | | (269,482 | ) |
| Accumulated other comprehensive income (loss) | | | | | 7,128 | | | | (14,737 | ) |
Total shareholders’ equity | | | | | 362,526 | | | | 347,325 | |
Total liabilities and shareholders’ equity | | | | $ | 1,570,457 | | | $ | 1,522,307 | |
See accompanying notes to consolidated financial statements.
F-5
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2005, 2004, and 2003
(Dollars in thousands, except per share data)
| | | | 2005
| | 2004
| | 2003
|
|---|
Operating revenues:
| | | | | | | | | | | | | | |
| Rental revenues | | | | $ | 285,965 | | | $ | 257,265 | | | $ | 227,541 | |
| Other property revenues | | | | | 11,165 | | | | 9,937 | | | | 8,399 | |
| Total property revenues | | | | | 297,130 | | | | 267,202 | | | | 235,940 | |
| Management fee income | | | | | 325 | | | | 582 | | | | 822 | |
| Total operating revenues | | | | | 297,455 | | | | 267,784 | | | | 236,762 | |
Property operating expenses:
| | | | | | | | | | | | | | |
| Personnel | | | | | 35,771 | | | | 32,154 | | | | 27,485 | |
| Building repairs and maintenance | | | | | 11,097 | | | | 9,994 | | | | 9,119 | |
| Real estate taxes and insurance | | | | | 37,677 | | | | 35,135 | | | | 31,331 | |
| Utilities | | | | | 16,749 | | | | 14,734 | | | | 12,117 | |
| Landscaping | | | | | 7,978 | | | | 7,251 | | | | 6,462 | |
| Other operating | | | | | 14,444 | | | | 13,480 | | | | 12,178 | |
| Depreciation | | | | | 75,050 | | | | 68,653 | | | | 58,074 | |
| Total property operating expenses | | | | | 198,766 | | | | 181,401 | | | | 156,766 | |
| Property management expenses | | | | | 11,871 | | | | 10,357 | | | | 8,435 | |
| General and administrative expenses | | | | | 10,354 | | | | 9,240 | | | | 7,235 | |
| Income from continuing operations before non-operating items | | | | | 76,464 | | | | 66,786 | | | | 64,326 | |
| Interest and other non-property income | | | | | 498 | | | | 593 | | | | 835 | |
| Interest expense | | | | | (58,751 | ) | | | (50,858 | ) | | | (44,991 | ) |
| (Loss) gain on debt extinguishment | | | | | (409 | ) | | | 1,095 | | | | 111 | |
| Amortization of deferred financing costs | | | | | (2,011 | ) | | | (1,753 | ) | | | (2,050 | ) |
| Minority interest in operating partnership income | | | | | (1,571 | ) | | | (2,264 | ) | | | (1,360 | ) |
| Income (loss) from investments in unconsolidated entities | | | | | 65 | | | | (287 | ) | | | (949 | ) |
| Incentive fee from unconsolidated entity | | | | | 1,723 | | | | — | | | | — | |
| Net gain on insurance and other settlement proceeds | | | | | 749 | | | | 2,683 | | | | 2,860 | |
| Gain on sale of non-depreciable assets | | | | | 334 | | | | — | | | | — | |
| Gain on disposition within unconsolidated entities | | | | | 3,034 | | | | 3,249 | | | | — | |
| Income from continuing operations | | | | | 20,125 | | | | 19,244 | | | | 18,782 | |
Discontinued operations:
| | | | | | | | | | | | | | |
| Loss from discontinued operations before asset impairment, settlement proceeds and gain on sale | | | | | (113 | ) | | | (197 | ) | | | (577 | ) |
| Asset impairment on discontinued operations | | | | | (243 | ) | | | (200 | ) | | | — | |
| Net (loss) gain on insurance and other settlement proceeds on discontinued operations | | | | | (25 | ) | | | 526 | | | | 82 | |
| Gain on sale of discontinued operations | | | | | — | | | | 5,825 | | | | 1,919 | |
| Net income | | | | | 19,744 | | | | 25,198 | | | | 20,206 | |
| Preferred dividend distribution | | | | | 14,329 | | | | 14,825 | | | | 15,419 | |
| Premiums and original issuance costs associated with the redemption of preferred stock | | | | | — | | | | — | | | | 5,987 | |
| Net income (loss) available for common shareholders | | | | $ | 5,415 | | | $ | 10,373 | | | $ | (1,200 | ) |
Weighted average shares outstanding (in thousands):
| | | | | | | | | | | | | | |
| Basic | | | | | 21,405 | | | | 20,317 | | | | 18,374 | |
| Effect of dilutive stock options | | | | | 202 | | | | 335 | | | | — | |
| Diluted | | | | | 21,607 | | | | 20,652 | | | | 18,374 | |
| Net income (loss) available for common shareholders | | | | $ | 5,415 | | | $ | 10,373 | | | $ | (1,200 | ) |
| Discontinued property operations | | | | | 381 | | | | (5,954 | ) | | | (1,424 | ) |
| Income (loss) from continuing operations available for common shareholders | | | | $ | 5,796 | | | $ | 4,419 | | | $ | (2,624 | ) |
Earnings per share—basic:
| | | | | | | | | | | | | | |
| Income (loss) from continuing operations available for common shareholders | | | | $ | 0.27 | | | $ | 0.22 | | | $ | (0.14 | ) |
| Discontinued property operations | | | | | (0.02 | ) | | | 0.29 | | | | 0.07 | |
| Net income (loss) available for common shareholders | | | | $ | 0.25 | | | $ | 0.51 | | | $ | (0.07 | ) |
Earnings per share—diluted:
| | | | | | | | | | | | | | |
| Income (loss) from continuing operations available for common shareholders | | | | $ | 0.27 | | | $ | 0.21 | | | $ | (0.14 | ) |
| Discontinued property operations | | | | | (0.02 | ) | | | 0.29 | | | | 0.07 | |
| Net income (loss) available for common shareholders | | | | $ | 0.25 | | | $ | 0.50 | | | $ | (0.07 | ) |
See accompanying notes to consolidated financial statements.
F-6
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2005, 2004 and 2003
(Dollars and Shares in Thousands)
| | | | Preferred Stock
| | Common Stock
| |
|---|
| | | | Shares
| | Amount
| | Shares
| | Amount
| | Additional
Paid-In
Capital
| | Other
| | Accumulated
Distributions
in Excess of
Net Income
| | Accumulated
Other
Comprehensive
Income (Loss)
| | Total
| |
|---|
BALANCE DECEMBER 31, 2002 | | | | | 6,413 | | | $ | 64 | | | | 17,840 | | | $ | 178 | | | $ | 548,483 | | | $ | (4,299 | ) | | $ | (188,155 | ) | | $ | (28,100 | ) | | $ | 328,171 | | | | | |
Comprehensive income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,206 | | | | — | | | | 20,206 | | | | | |
| Other comprehensive income—derivative instruments (cash flow hedges) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,652 | | | | 2,652 | | | | | |
| Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,858 | | | | | |
| Issuance and registration of common shares | | | | | — | | | | — | | | | 1,821 | | | | 18 | | | | 52,837 | | | | — | | | | — | | | | — | | | | 52,855 | | | | | |
| Exercise of stock options | | | | | — | | | | — | | | | 308 | | | | 3 | | | | 7,178 | | | | — | | | | — | | | | — | | | | 7,181 | | | | | |
| Repurchase of common shares | | | | | — | | | | — | | | | — | | | | — | | | | (47 | ) | | | — | | | | — | | | | — | | | | (47 | ) | | | | |
| Restricted shares issued to officers and directors (Note 11) | | | | | — | | | | — | | | | 8 | | | | — | | | | 213 | | | | (213 | ) | | | — | | | | — | | | | — | | | | | |
| Amortization of LESOP provision employee advances (Note 11) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 385 | | | | — | | | | — | | | | 385 | | | | | |
| Shares issued in exchange for units | | | | | — | | | | — | | | | 55 | | | | 1 | | | | 627 | | | | — | | | | — | | | | — | | | | 628 | | | | | |
| Adjustment for Minority Interest Ownership in Operating Partnership | | | | | — | | | | — | | | | — | | | | — | | | | (4,258 | ) | | | — | | | | — | | | | — | | | | (4,258 | ) | | | | |
| Amortization of unearned compensation | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 416 | | | | — | | | | — | | | | 416 | | | | | |
| Cash dividends on common stock ($2.34 per share) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (42,869 | ) | | | — | | | | (42,869 | ) | | | | |
| Redemption of preferred stock | | | | | (5,938 | ) | | | (59 | ) | | | — | | | | — | | | | (142,447 | ) | | | — | | | | (5,987 | ) | | | — | | | | (148,493 | ) | | | | |
| Issuance of preferred stock | | | | | 6,200 | | | | 62 | | | | — | | | | — | | | | 149,824 | | | | — | | | | — | | | | — | | | | 149,886 | | | | | |
| Dividends on preferred stock | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (15,419 | ) | | | — | | | | (15,419 | ) | | | | |
BALANCE DECEMBER 31, 2003 | | | | | 6,675 | | | | 67 | | | | 20,032 | | | | 200 | | | | 612,410 | | | | (3,711 | ) | | | (232,224 | ) | | | (25,448 | ) | | | 351,294 | | | | | |
Comprehensive income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25,198 | | | | — | | | | 25,198 | | | | | |
| Other comprehensive income—derivative instruments (cash flow hedges) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,711 | | | | 10,711 | | | | | |
| Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,909 | | | | | |
| Issuance and registration of common shares | | | | | — | | | | — | | | | 435 | | | | 5 | | | | 16,512 | | | | — | | | | — | | | | — | | | | 16,517 | | | | | |
| Exercise of stock options | | | | | — | | | | — | | | | 343 | | | | 3 | | | | 8,888 | | | | — | | | | — | | | | — | | | | 8,891 | | | | | |
| Repurchase of common shares | | | | | — | | | | — | | | | (2 | ) | | | — | | | | (54 | ) | | | — | | | | — | | | | — | | | | (54 | ) | | | | |
| Restricted shares issued to officers and directors (Note 11) | | | | | — | | | | — | | | | 2 | | | | — | | | | 104 | | | | (104 | ) | | | — | | | | — | | | | — | | | | | |
| Amortization of LESOP provision employee advances (Note 11) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 293 | | | | — | | | | — | | | | 293 | | | | | |
| Shares issued in exchange for units | | | | | — | | | | — | | | | 47 | | | | 1 | | | | 511 | | | | — | | | | — | | | | — | | | | 512 | | | | | |
| Adjustment for Minority Interest Ownership in Operating Partnership | | | | | — | | | | — | | | | — | | | | — | | | | (3,851 | ) | | | — | | | | — | | | | — | | | | (3,851 | ) | | | | |
| Amortization of unearned compensation | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 270 | | | | — | | | | — | | | | 270 | | | | | |
| Cash dividends on common stock ($2.34 per share) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (47,631 | ) | | | — | | | | (47,631 | ) | | | | |
| Dividends on preferred stock | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,825 | ) | | | — | | | | (14,825 | ) | | | | |
BALANCE DECEMBER 31, 2004 | | | | | 6,675 | | | | 67 | | | | 20,857 | | | | 209 | | | | 634,520 | | | | (3,252 | ) | | | (269,482 | ) | | | (14,737 | ) | | | 347,325 | | | | | |
Comprehensive income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,744 | | | | — | | | | 19,744 | | | | | |
| Other comprehensive income—derivative instruments (cash flow hedges) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,865 | | | | 21,865 | | | | | |
| Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 41,609 | | | | | |
| Issuance and registration of common shares | | | | | — | | | | — | | | | 816 | | | | 8 | | | | 33,836 | | | | — | | | | — | | | | — | | | | 33,844 | | | | | |
| Exercise of stock options | | | | | — | | | | — | | | | 240 | | | | 2 | | | | 5,613 | | | | — | | | | — | | | | — | | | | 5,615 | | | | | |
| Restricted shares issued to officers and directors (Note 11) | | | | | — | | | | — | | | | 23 | | | | — | | | | 939 | | | | (939 | ) | | | — | | | | — | | | | — | | | | | |
| Amortization of LESOP provision employee advances (Note 11) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 360 | | | | — | | | | — | | | | 360 | | | | | |
| Shares issued in exchange for units | | | | | — | | | | — | | | | 112 | | | | 1 | | | | 1,254 | | | | — | | | | — | | | | — | | | | 1,255 | | | | | |
| Adjustment for Minority Interest Ownership in Operating Partnership | | | | | — | | | | — | | | | — | | | | — | | | | (4,277 | ) | | | — | | | | — | | | | — | | | | (4,277 | ) | | | | |
| Amortization of unearned compensation | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,409 | | | | — | | | | — | | | | 1,409 | | | | | |
| Cash dividends on common stock ($2.35 per share) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (50,285 | ) | | | — | | | | (50,285 | ) | | | | |
| Dividends on preferred stock | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,329 | ) | | | — | | | | (14,329 | ) | | | | |
BALANCE DECEMBER 31, 2005 | | | | | 6,675 | | | $ | 67 | | | | 22,048 | | | $ | 220 | | | $ | 671,885 | | | $ | (2,422 | ) | | $ | (314,352 | ) | | $ | 7,128 | | | $ | 362,526 | | | | | |
F-7
See accompanying notes to consolidated financial statements.
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2005, 2004, and 2003
(Dollars in thousands)
| | | | 2005
| | 2004
| | 2003
|
|---|
Cash flows from operating activities:
| | | | | | | | | | | | | | |
| Net income | | | | $ | 19,744 | | | $ | 25,198 | | | $ | 20,206 | |
Adjustments to reconcile net income to net cash provided by operating activities:
| | | | | | | | | | | | | | |
| Loss from discontinued operations before asset impairment, settlement proceeds and gain on sale | | | | | 113 | | | | 197 | | | | 577 | |
| Depreciation and amortization of deferred financing costs | | | | | 77,061 | | | | 70,406 | | | | 60,124 | |
| Amortization of unearned stock compensation | | | | | 1,769 | | | | 563 | | | | 801 | |
| Amortization of debt premium | | | | | (1,862 | ) | | | (1,575 | ) | | | (1,429 | ) |
| (Gain) loss from investments in unconsolidated entities | | | | | (65 | ) | | | 287 | | | | 949 | |
| Minority interest in operating partnership income | | | | | 1,571 | | | | 2,264 | | | | 1,360 | |
| Loss (gain) on debt extinguishment | | | | | 409 | | | | (1,095 | ) | | | (111 | ) |
| Gain on sale of non-depreciable assets | | | | | (334 | ) | | | — | | | | — | |
| Gain on sale of discontinued operations | | | | | — | | | | (5,825 | ) | | | (1,919 | ) |
| Gain on disposition within unconsolidated entities | | | | | (3,034 | ) | | | (3,249 | ) | | | — | |
| Incentive fee from unconsolidated entity | | | | | (1,723 | ) | | | — | | | | — | |
| Net loss (gain) on insurance and other settlement proceeds on discontinued operations | | | | | 25 | | | | (526 | ) | | | (82 | ) |
| Asset impairment on discontinued operations | | | | | 243 | | | | 200 | | | | — | |
| Net gain on insurance and other settlement proceeds | | | | | (749 | ) | | | (2,683 | ) | | | (2,860 | ) |
Changes in assets and liabilities:
| | | | | | | | | | | | | | |
| Restricted cash | | | | | 343 | | | | 4,687 | | | | (3,265 | ) |
| Other assets | | | | | (3,843 | ) | | | (778 | ) | | | (2,517 | ) |
| Accounts payable | | | | | 2,511 | | | | (926 | ) | | | 1,232 | |
| Accrued expenses and other | | | | | 6,900 | | | | 264 | | | | 2,824 | |
| Security deposits | | | | | 608 | | | | 820 | | | | 630 | |
Net cash provided by operating activities | | | | | 99,687 | | | | 88,229 | | | | 76,520 | |
Cash flows from investing activities:
| | | | | | | | | | | | | | |
| Purchases of real estate and other assets | | | | | (105,643 | ) | | | (155,088 | ) | | | (116,835 | ) |
| Improvements to existing real estate assets | | | | | (27,301 | ) | | | (30,413 | ) | | | (22,832 | ) |
| Distributions from real estate joint venture | | | | | 14,903 | | | | 6,427 | | | | 445 | |
| Contributions to real estate joint ventures | | | | | — | | | | (5,222 | ) | | | (4,727 | ) |
| Payments received from real estate joint ventures | | | | | — | | | | 234 | | | | — | |
| Proceeds from disposition of real estate assets | | | | | 9,689 | | | | 15,679 | | | | 26,247 | |
| Purchase of Blackstone Joint Venture | | | | | — | | | | — | | | | (21,853 | ) |
Net cash used in investing activities | | | | | (108,352 | ) | | | (168,383 | ) | | | (139,555 | ) |
Cash flows from financing activities:
| | | | | | | | | | | | | | |
| Net change in credit lines | | | | | 29,228 | | | | 189,496 | | | | 218,399 | |
| Proceeds from notes payable | | | | | 27,851 | | | | 91,434 | | | | 27,498 | |
| Principal payments on notes payable | | | | | (10,921 | ) | | | (152,046 | ) | | | (175,852 | ) |
| Payment of deferred financing costs | | | | | (1,236 | ) | | | (5,044 | ) | | | (5,083 | ) |
| Repurchase of common stock | | | | | — | | | | (54 | ) | | | (47 | ) |
| Proceeds from issuances of common shares and units | | | | | 39,459 | | | | 25,408 | | | | 60,036 | |
| Distributions to unitholders | | | | | (6,171 | ) | | | (6,246 | ) | | | (6,376 | ) |
| Dividends paid on common shares | | | | | (50,285 | ) | | | (47,631 | ) | | | (42,869 | ) |
| Dividends paid on preferred shares | | | | | (14,329 | ) | | | (14,825 | ) | | | (15,419 | ) |
| Proceeds from issuance of preferred stock | | | | | — | | | | — | | | | 149,886 | |
| Redemption of preferred stock | | | | | — | | | | — | | | | (148,493 | ) |
Net cash provided by financing activities | | | | | 13,596 | | | | 80,492 | | | | 61,680 | |
Net decrease in cash and cash equivalents | | | | | 4,931 | | | | 338 | | | | (1,355 | ) |
| Cash and cash equivalents, beginning of period | | | | | 9,133 | | | | 8,795 | | | | 10,150 | |
| Cash and cash equivalents, end of period | | | | $ | 14,064 | | | $ | 9,133 | | | $ | 8,795 | |
F-8
| | | | 2005
| | 2004
| | 2003
|
|---|
Supplemental disclosure of cash flow information:
| | | | | | | | | | | | | | |
| Interest paid | | | | $ | 61,305 | | | $ | 53,295 | | | $ | 45,277 | |
Supplemental disclosure of noncash investing and financing activities:
| | | | | | | | | | | | | | |
| Conversion of units to common shares | | | | $ | 1,254 | | | $ | 512 | | | $ | 628 | |
| Issuance of restricted common shares | | | | $ | 939 | | | $ | 104 | | | $ | 213 | |
| Marked-to-market adjustment on derivative instruments | | | | $ | 21,865 | | | $ | 10,711 | | | $ | 2,652 | |
| Fair value adjustment on debt assumed | | | | $ | 2,277 | | | $ | 5,757 | | | $ | — | |
In August 2003, the Company purchased the limited partnership interest held by Blackstone Real Estate Advisors in BRE/MAAC Associates, LLC. In conjunction with the acquisition, liabilities were assumed as follows:
| | | | | | | | | | | | | | |
| Fair value of assets acquired | | | | $ | — | | | $ | — | | | $ | 75,091 | |
| Cash paid | | | | $ | — | | | $ | — | | | $ | (21,853 | ) |
| Debt assumed | | | | $ | — | | | $ | — | | | $ | 53,238 | |
See accompanying notes to consolidated financial statements.
F-9
Mid-America Apartment Communities, Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 2005, 2004 and 2003
1. | | Organization and Summary of Significant Accounting Policies |
Organization and Formation of the Company
Mid-America Apartment Communities, Inc. (“Mid-America”) is a self-administrated and self-managed real estate investment trust which owns, acquires and operates multifamily apartment communities mainly in the southeastern United States. Mid-America owns and operates 131 apartment communities principally through its majority owned subsidiary, Mid-America Apartments, L.P. (the “Operating Partnership”). Mid-America also owns a 33.33% interest in a real estate joint venture which owned one apartment community at December 31, 2005, for which the Company provides management services.
Basis of Presentation
The consolidated financial statements presented herein include the accounts of Mid-America, the Operating Partnership, and all other subsidiaries (“the Company”). The Company owns 51% to 100% of all consolidated subsidiaries. The Company uses the equity method of accounting for its investments in 20 to 50 percent owned entities for which the Company does not have the ability to exercise control. All significant intercompany accounts and transactions have been eliminated in consolidation.
Minority Interest
Minority interest in the accompanying consolidated financial statements relates to the ownership interest in the Operating Partnership by the holders of Class A Common Units of the Operating Partnership (“Operating Partnership Units”). Mid-America is the sole general partner of the Operating Partnership. Net income is allocated to the minority interest based on their respective ownership percentage of the Operating Partnership. Issuance of additional common shares or Operating Partnership Units changes the ownership of both the minority interest and Mid-America. Such transactions and the proceeds there from are treated as capital transactions and result in an allocation between shareholders’ equity and minority interest to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership.
The Company’s Board of Directors established economic rights in respect to each Operating Partnership Unit that were equivalent to the economic rights in respect to each share of common stock. The holder of each unit may redeem their units in exchange for one share of common stock or cash, at the option of the Company. The Operating Partnership has followed the policy of paying the same per unit distribution in respect to the units as the per share distribution in respect to the common stock. Operating Partnership net income for 2005, 2004 and 2003 was allocated approximately 11.4%, 12.1%, and 14.6%, respectively, to holders of Operating Partnership Units and 88.6%, 87.9%, and 85.4%, respectively, to Mid-America.
Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses to prepare these financial statements and notes in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.
Revenue Recognition
The Company leases multifamily residential apartments under operating leases primarily with terms of one year or less. Rental revenues are recognized using a method that represents a straight-line basis over the term of the lease and other revenues are recorded when earned.
The Company records all gains and losses on real estate in accordance with Statement No. 66 “Accounting for Sales of Real Estate”.
F-10
Rental Costs
Costs associated with rental activities are expensed as incurred. Certain costs associated with the lease-up of development projects, including cost of model units, their furnishings, signs, and “grand openings” are capitalized and amortized over their respective estimated useful lives. All other costs relating to renting development projects are expensed as incurred.
Earnings Per Share
The computation of basic earnings per share is based on the weighted average number of common shares outstanding. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding plus the shares resulting from the assumed exercise of all dilutive outstanding options using the treasury stock method. For periods where the Company reports a net loss available for common shareholders, the effect of dilutive shares is excluded from earnings per share calculations because including such shares would be anti-dilutive.
A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years ended December 31, 2005, 2004, and 2003 is presented on the Consolidated Statements of Operations.
Cash and Cash Equivalents
The Company considers cash, investments in money market accounts and certificates of deposit with original maturities of three months or less to be cash equivalents.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for property taxes, insurance, debt service and replacement reserves.
Real Estate Assets and Depreciation
Real estate assets are carried at depreciated cost. Repairs and maintenance costs are expensed as incurred while significant improvements, renovations, and recurring capital replacements are capitalized. Recurring capital replacements typically include whole unit carpet replacement, new roofs, HVAC units, plumbing, concrete, masonry and other paving, pools and various exterior building improvements. These expenditures extend the useful life of the property and increase the property’s fair market value. The cost of interior painting, vinyl flooring and blinds are expensed as incurred.
In conjunction with acquisitions of properties, the Company’s policy is to provide in its acquisition budgets adequate funds to complete any deferred maintenance items to bring the properties to the required standard, including the cost of replacement appliances, carpet, interior painting, vinyl flooring and blinds. These costs are capitalized.
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which range from 8 to 40 years for land improvements and buildings and 5 years for furniture, fixtures and equipment and 3 to 5 years for computers and software.
For real estate acquisitions subsequent to June 30, 2001, the effective date of Statement 141,Business Combinations, the fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building, furniture, fixtures and equipment, and identified intangible assets and liabilities, consisting of above and below market leases, resident relationship values and the value of in-place leases.
The fair value of the tangible assets of an acquired property (land, building, furniture, fixtures and equipment) is determined by valuing the property as if it were vacant. The “as-if-vacant” value is then allocated to land, building, furniture, fixtures and equipment based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the period of time that would be required in the
F-11
current market conditions to lease-up the property. Management includes real estate taxes, insurance, operating expenses and lost rentals as well as the costs required to execute similar leases in the estimated carrying costs.
In allocating the fair value of identified intangible assets and liabilities of an acquired property, the in-place leases are compared to current market conditions. Based on these evaluations, management believes that the leases acquired on each of its property acquisitions were at market rates since the lease terms generally do not extend beyond one year.
The fair value of the in-place leases and resident relationships is measured by the excess of the purchase price over the as-if-vacant value of the property as described above. The fair value of the in-place leases and resident relationships is then amortized over the remaining term of the resident leases. The amount of these resident lease intangibles included in real estate assets totaled $12.3 million, $9.1 million and $4.9 million as of December 31, 2005, 2004, and 2003, respectively, and the amortization recorded as depreciation expense was $4.9 million, $4.9 million and $1.4 million for the years ending December 31, 2005, 2004, and 2003, respectively.
Goodwill and Intangible Assets
The Company accounts for long-lived assets in accordance with the provisions of Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“Statement 144”) and evaluates its goodwill for impairment under Statement No. 142, Goodwill and Other Intangible Assets (“Statement 142”). The Company evaluates its goodwill for impairment on an annual basis in the Company’s fiscal fourth quarter, or sooner if a goodwill impairment indicator is identified. The Company periodically evaluates its long-lived assets, including its investments in real estate and goodwill, for indicators that would suggest that the carrying amount of the assets may not be recoverable. The judgments regarding the existence of such indicators are based on factors such as operating performance, market conditions, and legal factors.
In accordance with Statement 144, long-lived assets, such as real estate assets, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.
Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of a reporting unit and compares it to its carrying amount. In the apartment industry, the primary method used for determining fair value is to divide annual operating cash flows by an appropriate capitalization rate. The Company determines the appropriate capitalization rate by reviewing the prevailing rates in a property’s market or submarket. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with Statement No. 141,Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.
In 2005, the Company sold the Eastview apartments and recorded an asset impairment charge to discontinued operations of $243,000. In 2004, the Eastview apartments were classified as held for sale and the annual evaluation indicated an impairment of goodwill related to the property resulting in an asset impairment charge to discontinued operations of $200,000.
F-12
Land Held for Future Development
Real estate held for future development are sites intended for future multifamily developments and are carried at the lower of cost or fair value.
Investment In and Advances to Real Estate Joint Ventures
The Company’s investment in its unconsolidated real estate joint venture is recorded on the equity method as the Company is able to exert significant influence, but does not have a controlling interest in the joint venture.
Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt using a method which approximates the interest method.
Other Assets
Other assets consist of deferred rental concessions which are recognized on a straight line basis over the life of the leases, receivables and deposits from residents, and other prepaid expenses including prepaid insurance and prepaid interest.
Accrued Expenses and Other Liabilities
Accrued expenses consist of accrued real estate taxes, accrued interest payable, other accrued expenses payable, unearned income and the adjustment for the fair market value of the Company’s derivative financial instruments.
Derivative Financial Instruments
In the normal course of business, the Company uses certain derivative financial instruments to manage, or hedge, the interest rate risk associated with the Company’s variable rate debt or as hedges in anticipation of future debt transactions to manage well-defined interest rate risk associated with the transaction.
The Company does not use derivative financial instruments for speculative or trading purposes. Further, the Company has a policy of entering into contracts with major financial institutions based upon their credit rating and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designated to hedge, the Company has not sustained any material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.
The Company requires that derivative financial instruments designated as cash flow hedges be effective in reducing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Instruments that meet the hedging criteria are formally designated as hedging instruments at the inception of the derivative contract. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking all derivatives that are designated as fair-value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives used are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.
All of the Company’s derivative financial instruments are recorded at fair value and reported on the balance sheet, and are characterized as cash flow hedges. These transactions hedge the future cash flows of debt transactions through interest rate swaps that convert variable payments to fixed payments and interest rate caps that limit the exposure to rising interest rates. The unrealized gains/losses in the fair value of these hedging instruments are reported on the balance sheet with a corresponding adjustment to accumulated other comprehensive income, with any ineffective portion of the hedging transactions reclassified to earnings.
F-13
During the years ended December 31, 2005, 2004, and 2003, the ineffective portion of the hedging transactions was not significant.
Stock-Based Compensation
Upon shareholder approval at the May 24, 2004, Annual Meeting of Shareholders, the Company adopted the 2004 Stock Plan to provide incentives to attract and retain independent directors, executive officers and key employees. This plan replaced the 1994 Restricted Stock and Stock Option Plan under which no further awards may be granted as of January 31, 2004. See Note 11 for further details.
The Company has adopted the disclosure provisions of Statement No. 123,Accounting for Stock-Based Compensation, as amended by Statement No. 148,Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123 which requires the impact of the fair value of employee stock based compensation plans on net income and earnings per share be disclosed on a pro forma basis in a footnote to the financial statements for awards granted after December 15, 1994, if the accounting for such awards continues to be in accordance with Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees, (“APB 25”). The Company will continue such accounting under the provisions of APB 25.
The following table reflects the effect on net income (loss) if the fair value method of accounting allowed under Statement No. 123 had been used by the Company along with the applicable assumptions utilized in the Black-Scholes option pricing model calculation (dollars and shares in thousands, except per share data):
| | | | Years Ended December 31,
| |
|---|
| | | | 2005
| | 2004
| | 2003
|
|---|
| Net income (loss) available for common shareholders | | | | $ | 5,415 | | | $ | 10,373 | | | $ | (1,200 | ) |
| Add: Stock-based employee compensation expense included in reported net income | | | | | 887 | | | | — | | | | — | |
| Less: Stock-based employee compensation expense from employee stock purchase plan discount | | | | | (32 | ) | | | (27 | ) | | | (22 | ) |
| Less: Stock-based employee compensation expense determined under fair value method of accounting | | | | | (1,175 | ) | | | (185 | ) | | | (266 | ) |
| Pro forma net income (loss) available for common shareholders | | | | $ | 5,095 | | | $ | 10,161 | | | $ | (1,488 | ) |
| Average common shares outstanding—basic | | | | | 21,405 | | | | 20,317 | | | | 18,374 | |
| Average common shares outstanding—diluted | | | | | 21,607 | | | | 20,652 | | | | 18,374 | |
| |
Net income (loss) available per common share:
| | | | | | | | | | | | | | |
| Basic as reported | | | | $ | 0.25 | | | $ | 0.51 | | | $ | (0.07 | ) |
| Basic pro forma | | | | $ | 0.24 | | | $ | 0.50 | | | $ | (0.08 | ) |
| Diluted as reported | | | | $ | 0.25 | | | $ | 0.50 | | | $ | (0.07 | ) |
| Diluted pro forma | | | | $ | 0.24 | | | $ | 0.49 | | | $ | (0.08 | ) |
Assumptions:
| | | | | | | | | | | | | | |
| Risk free interest rate | | | | | N/A | | | | N/A | | | | N/A | |
| Expected life—years | | | | | N/A | | | | N/A | | | | N/A | |
| Expected volatility | | | | | N/A | | | | N/A | | | | N/A | |
No options were granted in 2005, 2004 or 2003.
Recent Accounting Pronouncements
In December 2004, the FASB issued Statement No. 153,Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 (“Statement 153”). Statement 153 was a result of a joint effort by the FASB and the IASB to improve financial reporting by eliminating certain narrow differences between their existing accounting standards. Statement 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. Statement 153 is applied prospectively for nonmonetary asset exchanges occurring in fiscal periods
F-14
beginning after June 15, 2005. The adoption of Statement 153 did not have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In December 2004, the FASB issued Statement No. 123 (revised December 2004),Share-Based Payment (“Statement 123(R)”). Statement 123(R) replaces FASB Statement No. 123,Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees. Statement 123(R) will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or the liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. Statement 123(R) is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. The Company will adopt Statement 123(R) effective January 1, 2006, and does not believe it will have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In March 2005, the SEC issued SAB 107 to provide public companies additional guidance in applying the provisions of Statement 123(R). Among other things, SAB 107 describes the SEC staff’s expectations in determining the assumptions that underlie the fair value estimates and discusses the interaction of Statement 123(R) with certain existing SEC guidance. The guidance is also beneficial to users of financial statements in analyzing the information provided under statement 123(R). SAB 107 will be applied upon the adoption of Statement 123(R).
In March 2005, the FASB issued Interpretation No. 47,Accounting for Conditional Asset Retirement Obligations-an interpretation of FASB Statement No. 143 (“Interpretation 47”). Interpretation 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143,Accounting for Asset Retirement Obligations, (“Statement 143”) refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Interpretation 47 is effective no later than the end of fiscal years ending after December 15, 2005, (December 31, 2005, for calendar-year enterprises). Retrospective application for interim financial information is permitted but is not required. The adoption of Interpretation 47 did not have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
In June 2005, the FASB ratified EITF 04-5:Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”). EITF 04-5 provides a framework for determining whether a general partner is required to consolidate limited partners. The new framework is significantly different than the guidance in SOP 78-9 and would make it more difficult for a general partner to overcome the presumption that it controls the limited partnership, requiring the limited partner to have substantive “kick-out” or “participating” rights. Kick-out rights are the right to dissolve or liquidate the partnership or to otherwise remove the general partner without cause and participating rights are the right to effectively participate in significant decisions made in the ordinary course of the partnership’s business. EITF 04-5 became effective immediately for all newly formed limited partnerships and existing limited partnerships which are modified. The guidance will become effective for existing limited partnerships which are not modified the beginning of the first reporting period in fiscal years beginning after December 15, 2005. The Company does not believe the adoption of EITF 04-5 will have a material impact on the Company’s consolidated financial condition or results of operations taken as a whole.
Reclassifications
Certain prior year amounts have been reclassified to conform to 2005 presentation. The reclassifications had no effect on net income available for common shareholders.
F-15
Total comprehensive income and its components for the years ended December 31, 2005, 2004, and 2003 were as follows (dollars in thousands):
| | | | Twelve months ended December 31,
| |
|---|
| | | | 2005
| | 2004
| | 2003
|
|---|
| Net income | | | | $ | 19,744 | | | $ | 25,198 | | | $ | 20,206 | |
| Marked-to-market adjustment on derivative instruments | | | | | 21,865 | | | | 10,711 | | | | 2,652 | |
| Total comprehensive income | | | | $ | 41,609 | | | $ | 35,909 | | | $ | 22,858 | |
3. | | Real Estate Joint Ventures |
At the beginning of 2005, the Company owned a 33.33% interest in a joint venture (“CH/Realty”) with Crow Holdings which was formed in 2002. In 2004, CH/Realty sold the Preserve at Arbor Lakes apartments, a 284-unit community in Jacksonville, FL. In 2005, CH/Realty sold Seasons at Green Oaks, a 300-unit community in Grand Prairie, TX and Preston Hills, a 464-unit community in Buford, GA, the two remaining properties owned by the joint venture. Following the sale of the final properties from the joint venture, the Company’s relationship with Crow Holdings in CH/Realty ceased to exist.
The Company entered into a second joint venture (“CH/Realty II”) with Crow Holdings in 2004 with the purchase of the Verandas at Timberglen apartments. The Company also owns a 33.33% interest in CH/Realty II, and contributed 33.33% of the capital necessary to establish the joint venture. While the joint venture agreement does provide for methods of establishing subsequent capital contributions, CH/Realty II has generated sufficient cash flow to meet the debt service requirements of its non-recourse debt and provide monthly distributions to the owners. At December 31, 2005, CH Realty II owned one apartment community with 522 apartment units.
Through August 25, 2003, the Company owned a 33.33% interest in a joint venture (“Bre/MAAC”) with Blackstone Real Estate Acquisitions, LLC (“Blackstone”) which was formed in 1999 when the Company sold 10 apartment communities containing 2,793 apartment units to Bre/MAAC for $97.9 million. On August 25, 2003, the Company paid $21.9 million in cash and assumed $53.2 million in debt to purchase Blackstone’s 66.67% interest in the joint venture. This acquisition was accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141,Business Combinations. The purchase accounting adjustments include an adjustment to the carrying value of the real estate asset resulting from the previously unrecognized deferred gain on the Company’s retained interest from the original sale of the properties to Bre/MAAC in 1999 and the recording of certain intangible assets. The operating results of Bre/MAAC are included in the accompanying statement of operations commencing August 25, 2003.
F-16
The income, contributions, distributions and ending investment balances related to the Company’s joint ventures consisted of the following for the years ended December 31, 2005, 2004, and 2003 (dollars in thousands):
| | | | 2005
| |
|---|
| | | | CH/Realty
| | CH/Realty II
| | Bre/MAAC
| | Total
|
|---|
| Joint venture income (loss) | | | | $ | 79 | | | $ | (14 | ) | | $ | — | | | $ | 65 | |
| Gain on joint venture asset dispositions | | | | | 3,034 | | | | — | | | | — | | | | 3,034 | |
| Management fee income | | | | | 121 | | | | 204 | | | | — | | | | 325 | |
| Incentive fee income | | | | | 1,723 | | | | — | | | | — | | | | 1,723 | |
| |
| Contributions to joint venture | | | | | — | | | | — | | | | — | | | | — | |
| Distributions from joint venture | | | | | 14,644 | | | | 259 | | | | — | | | | 14,903 | |
| |
| Investment in at December 31 | | | | | — | | | | 4,182 | | | | — | | | | 4,182 | |
| Advances to at December 31 | | | | | — | | | | — | | | | — | | | | — | |
| | | | 2004
| |
|---|
| | | | CH/Realty
| | CH/Realty II
| | Bre/MAAC
| | Total
|
|---|
| Joint venture income (loss) | | | | $ | 301 | | | $ | (588 | ) | | $ | — | | | $ | (287 | ) |
| Gain on joint venture asset dispositions | | | | | 3,249 | | | | — | | | | — | | | | 3,249 | |
| Management fee income | | | | | 382 | | | | 200 | | | | — | | | | 582 | |
| |
| Contributions to joint venture | | | | | — | | | | (5,222 | ) | | | — | | | | (5,222 | ) |
| Distributions from joint venture | | | | | 6,209 | | | | 218 | | | | — | | | | 6,427 | |
| |
| Investment in at December 31 | | | | | 5,252 | | | | 4,416 | | | | — | | | | 9,668 | |
| Advances to at December 31 | | | | | 4,475 | | | | — | | | | — | | | | 4,475 | |
| | | | 2003
| |
|---|
| | | | CH/Realty
| | CH/Realty II
| | Bre/MAAC
| | Total
|
|---|
| Joint venture loss | | | | $ | (444 | ) | | $ | — | | | $ | (505 | ) | | $ | (949 | ) |
| Gain on joint venture asset dispositions | | | | | — | | | | — | | | | — | | | | — | |
| Management fee income | | | | | 292 | | | | — | | | | 530 | | | | 822 | |
| |
| Contributions to joint venture | | | | | (4,727 | ) | | | — | | | | — | | | | (4,727 | ) |
| Distributions from joint venture | | | | | 445 | | | | — | | | | — | | | | 445 | |
| |
| Investment in at December 31 | | | | | 7,912 | | | | — | | | | — | | | | 7,912 | |
| Advances to at December 31 | | | | | 4,708 | | | | — | | | | — | | | | 4,708 | |
The Company maintains a total of $950 million of secured credit facilities with Prudential Mortgage Capital, credit enhanced by FNMA (the “FNMA Facilities”). The FNMA Facilities provide for both fixed and variable rate borrowings and have traunches with maturities from 2010 through 2014. The interest rate on the majority of the variable portion renews every 90 days and is based on the FNMA discount mortgage backed security rate on the date of renewal, which, for the Company, has historically approximated three-month LIBOR less an average of 0.04% over the life of the FNMA Facilities, plus a fee of 0.62% to 0.795%. Borrowings under the FNMA Facilities totaled $811 million at December 31, 2005, consisting of $110 million under a fixed portion at a rate of 7.2%, and the remaining $701 million under the variable rate portion of the facility at an average rate of 4.8%. The available borrowing base capacity at December 31, 2005, was $881 million. The Company has 21 interest rate swap agreements, totaling a notional amount of $551 million designed to fix the interest rate on a portion of the variable rate borrowings outstanding under the FNMA Facilities at approximately 5.5%. The interest rate swaps have maturities between 2006 and 2013. The Company also has a forward interest rate swap for an additional notional amount of $25 million at an interest rate of 5.3% which goes into effect in February 2006 and matures in 2013. The swaps are highly effective and
F-17
are designed as cash flow hedges. The Company has also entered into three interest rate caps totaling a notional amount of $23 million which are designated against the FNMA Facilities. These interest rate caps mature in 2007 and 2009 and are set at 6.0%. The FNMA Facilities are subject to certain borrowing base calculations that effectively reduce the amount that may be borrowed.
The Company has a $100 million credit facility with Freddie MAC (the “Freddie Mac Facility”). At December 31, 2005, the Company had $96 million borrowed against the Freddie Mac Facility at an interest rate of 5.0%. The Company has five interest rate swap agreements, totaling a notional amount of $83 million designed to fix the interest rate on a portion of the variable rate borrowings outstanding under the Freddie Mac Facility at approximately 5.4%. The interest rate swaps expire in 2011.
The Company also maintains a $40 million secured credit facility with two banks led by AmSouth Bank (the “AmSouth Credit Line”). The AmSouth Credit Line bears an interest rate of LIBOR plus a spread ranging from 1.35% to 1.75% based on certain quarterly coverage calculations established by the agreement. This credit line expires in May 2007 and is subject to certain borrowing base calculations that effectively reduce the amount that may be borrowed. At December 31, 2005, the Company had $30 million available to be borrowed under the AmSouth Credit Line agreement with $12 million borrowed under this facility at an interest rate of 6.0%. Approximately $7 million of the facility is used for letters of credit.
Each of the Company’s credit facilities is subject to various covenants and conditions on usage. If the Company were to fail to satisfy a condition to borrowing, the available credit under one or more of the facilities could not be drawn, which could adversely affect the Company’s liquidity. Moreover, if the Company were to fail to make a payment or violate a covenant under a credit facility, after applicable cure periods one or more of its lenders could declare a default, accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing such facilities. Any such event could have a material adverse effect on the Company. The Company believes it was in compliance with these covenants and conditions on usage at December 31, 2005.
The Company had outstanding at December 31, 2005, a $40 million promissory note with Union Planters Bank at a variable interest rate based on three month LIBOR of 5.4% which matures in April 2009. The Company has entered into an interest rate swap agreement with a notional amount of $25 million and an interest rate of 5.0% which expires in 2009 and is designated against the Union Planters Bank promissory note.
At December 31, 2005, the Company had $139 million of fixed rate conventional individual property mortgages with an average interest rate of 5.0% and an average maturity of 2014, $26 million of fixed rate tax exempt individual property mortgages with an average interest rate of 5.5% and an average maturity of 2024, and a $5 million variable rate tax exempt individual property mortgage at an interest rate of 4.2% with a maturity in 2028.
At December 31, 2005, the Company had $162 million (after considering the impact of interest rate swap agreements in effect) conventional variable rate debt outstanding at an average interest rate of 4.8%, $11 million (after considering the impact of interest rate swap agreements) of tax-free variable rate debt outstanding at an average rate of 4.0%, and an additional $23 million of capped tax-free variable rate debt at an average rate of 4.4%. As of December 31, 2005, the Company had also entered into a forward interest rate swap agreement which goes into effect in February 2006 and hedges an additional $25 million of conventional variable rate debt outstanding at an average interest rate of 5.3%. The interest rate on all other debt, totaling $944 million, was hedged or fixed at an average interest rate of 5.6%.
As of December 31, 2005, the Company estimated that the weighted average interest rate on the Company’s debt was 5.4%.
F-18
The following table summarizes the Company’s indebtedness at December 31, 2005, and 2004, (dollars in millions):
| | | | At December 31, 2005
| |
|---|
| | | | Actual
Interest
Rates
| | Average
Interest
Rate
| | Maturity
| | Balance
| | Balance at
December 31,
2004
|
|---|
Fixed Rate:
| | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | | | 3.59–8.76% | | | | 5.96 | % | | | 2006–2044 | | | $ | 249.4 | | | $ | 255.3 | |
| Tax-exempt | | | | | 5.21–5.87% | | | | 5.55 | % | | | 2021–2028 | | | | 25.7 | | | | 35.0 |
|
| Interest rate swaps | | | | | 3.23–7.50% | | | | 5.44 | % | | | 2006–2013 | | | | 659.3 |
| | | 519.0 |
|
| Preferred Series G | | | | 8.63%
| | | 8.63 | % | | 2006
| | | 10.0 | | | | — | |
| | | | | | | | | | | | | | | | | | 944.4 | | | | 809.3 | |
Variable Rate:(1)
| | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | | | 3.93–6.00% | | | | 4.82 | % | | | 2007–2014 | | | | 162.2 | | | | 240.8 | |
| Tax-exempt | | | | | 3.93–4.19% | | | | 4.04 | % | | | 2014–2028 | | | | 10.9 | | | | 10.8 | |
| Interest rate caps | | | | | 3.93–4.90% | | | | 4.44 | % | | | 2007–2009 | | | | 22.6 | | | | 22.6 | |
| | | | | | | | | | | | | | | | | | 195.7 | | | | 274.2 | |
| | | | | | | | | | | | | | | | | $ | 1,140.1 | | | $ | 1,083.5 | |
| (1) | | Amounts are adjusted to reflect interest rate swap and cap agreements in effect at December 31, 2005, and 2004, respectively which results in the Company paying fixed interest payments over the terms of the interest rate swaps and on changes in interest rates above the strike rate of the cap. |
The following table includes scheduled principal repayments on the borrowings at December 31, 2005, as well as the amortization of the fair market value of debt assumed (dollars in thousands):
Year
| | | | Amortization
| | Maturities
| | Total
|
|---|
| 2006 | | | | $ | 4,430 | | | $ | 34,459 | | | $ | 38,889 | |
| 2007 | | | | | 4,557 | | | | 12,460 | | | | 17,017 | |
| 2008 | | | | | 3,795 | | | | 106,715 | | | | 110,510 | |
| 2009 | | | | | 1,846 | | | | 105,000 | | | | 106,846 | |
| 2010 | | | | | 1,948 | | | | 120,000 | | | | 121,948 | |
| Thereafter | | | | | 64,165 | | | | 680,671 | | | | 744,836 | |
| | | | | $ | 80,741 | | | $ | 1,059,305 | | | $ | 1,140,046 | |
F-19
5. | | Derivative Financial Instruments |
Following are the details of the interest rate swaps that were entered into as of December 31, 2005 (dollars in thousands):
| | | |
| | Interest Rate
| |
|---|
| | | | Notional
Balance
| | Variable Leg Base
| | Fixed
Leg
| | Expiration
|
|---|
Interest rate swaps designated against the FNMA Facilities
|
| | | | | $ | 25,000 | | | | 3-month LIBOR | | | | 7.50 | % | | | 2006 | |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 6.43 | % | | | 2007 | |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 5.70 | % | | | 2007 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.87 | % | | | 2008 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.48 | % | | | 2010 | |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 6.93 | % | | | 2007 | |
| | | | | | 40,000 | | | | 3-month LIBOR | | | | 5.54 | % | | | 2010 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.36 | % | | | 2011 | |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 5.15 | % | | | 2012 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.29 | % | | | 2012 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.00 | % | | | 2012 | |
| | | | | | 50,000 | | | | 3-month LIBOR | | | | 5.06 | % | | | 2013 | |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 5.34 | % | | | 2013 | |
| | | | | | 490,000 | | | | | | | | 5.61 | % | | | | |
| |
Interest rate swaps designated against the FNMA Tax-Free Bond Facility
|
| | | | | | 16,990 | | | | BMA Municipal Swap Index | | | | 5.13 | % | | | 2008 | |
| | | | | | 10,800 | | | | BMA Municipal Swap Index | | | | 3.95 | % | | | 2007 | |
| | | | | | 7,000 | | | | BMA Municipal Swap Index | | | | 3.95 | % | | | 2007 | |
| | | | | | 4,965 | | | | BMA Municipal Swap Index | | | | 3.23 | % | | | 2008 | |
| | | | | | 2,980 | | | | BMA Municipal Swap Index | | | | 3.23 | % | | | 2008 | |
| | | | | | 3,585 | | | | BMA Municipal Swap Index | | | | 3.63 | % | | | 2009 | |
| | | | | | 6,645 | | | | BMA Municipal Swap Index | | | | 3.63 | % | | | 2009 | |
| | | | | | 8,365 | | | | BMA Municipal Swap Index | | | | 4.73 | % | | | 2010 | |
| | | | | | 61,330 | | | | | | | | 4.23 | % | | | | |
| |
Interest rate swaps designated against the Freddie Mac Facility
|
| | | | | | 26,000 | | | | 3-month LIBOR | | | | 5.40 | % | | | 2011 | |
| | | | | | 10,000 | | | | 3-month LIBOR | | | | 5.11 | % | | | 2011 | |
| | | | | | 15,000 | | | | 3-month LIBOR | | | | 5.19 | % | | | 2011 | |
| | | | | | 15,000 | | | | 3-month LIBOR | | | | 5.72 | % | | | 2011 | |
| | | | | | 17,000 | | | | 3-month LIBOR | | | | 5.53 | % | | | 2011 | |
| | | | | | 83,000 | | | | | | | | 5.41 | % | | | | |
| |
Interest rate swaps designated against Union Planters Bank borrowings
|
| | | | | | 25,000 | | | | | | | | 4.98 | % | | | 2009 | |
| |
| Total interest rate swaps in | | | | | | | | | | | | | | | | | 2011 | |
| effect at December 31, 2005 | | | | | 659,330 | | | | | | | | 5.44 | % | | | | |
| |
| Forward interest rate swap designated against FNMA Facilities |
| | | | | | 25,000 | | | | 3-month LIBOR | | | | 5.34 | % | | | 2013 | |
| |
| Total interest rate swaps entered into | | | | | | | | | | | | | | | | | 2011 | |
| as of December 31, 2005 | | | | $ | 684,330 | | | | | | | | 5.43 | % | | | | |
F-20
At December 31, 2005, all of the Company’s interest rate swaps and interest rate caps were designated as cash flow hedges in accordance with Statement No. 133 as amended and have a net liability fair value of $7.3 million recorded in accrued expenses and other liabilities in the consolidated balance sheet and an asset fair value of $30,000 recorded in other assets in the consolidated balance sheet, respectively.
6. | | Fair Value Disclosure of Financial Instruments |
Cash and cash equivalents, restricted cash, accounts payable, accrued expenses and other liabilities and security deposits are carried at amounts which reasonably approximate their fair value due to their short term nature.
Fixed rate notes payable at December 31, 2005, and 2004, total $285.0 million and $290.3 million, respectively, and have an estimated fair value of $258.7 million and $240.5 million (excluding prepayment penalties), respectively, based upon interest rates available for the issuance of debt with similar terms and remaining maturities as of December 31, 2005, and 2004. The carrying value of variable rate notes payable (excluding the effect of interest rate swap agreements) at December 31, 2005, and 2004, total $855.0 million and $793.2 million, respectively, which reasonably approximates their fair value because the related variable interest rates available for the issuance of debt with similar terms and remaining maturities reasonably approximate market rates. The notional amount of interest rate and forward interest rate swap agreements at December 31, 2005, and 2004, total $684.3 million and $569.0 million, respectively, and have an estimated fair value of $7.3 million and ($14.6) million, respectively, based upon interest rates available for interest rate swaps with similar terms and remaining maturities as of December 31, 2005, and 2004. The notional amount of interest rate cap agreements at December 31, 2005, and 2004, total $22.6 million and $22.6 million, respectively, and have an estimated fair value of $30 thousand and $66 thousand, respectively, based upon interest rates available for interest rate caps with similar terms and remaining maturities as of December 31, 2005, and 2004.
The fair value estimates presented herein are based on information available to management as of December 31, 2005, and 2004. These estimates are not necessarily indicative of the amounts the Company could ultimately realize.
7. | | Commitments and Contingencies |
The Company is not presently subject to any material litigation nor, to the Company’s knowledge, with advice of legal counsel, is any material litigation threatened against the Company. The Company is subject to routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and none of which is expected to have a material adverse effect on the consolidated financial statements of the Company.
The Company had operating lease expense of approximately $4,000 for the years ended December 31, 2005, and 2004, and none for the year ended December 31, 2003. The Company has commitments of approximately $4,000 annually through 2008 under operating lease agreements outstanding at December 31, 2005.
No provision for Federal income taxes has been made in the accompanying consolidated financial statements. The Company has made an election to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code. As a REIT, the Company is generally not subject to Federal income tax on that portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 90% of its taxable income to the Company’s shareholders and complies with certain requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to the Federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Even though the Company qualifies for taxation as a REIT, the Company may be subject to certain Federal, state and local taxes on its income and property and to Federal income and excise tax on its undistributed income.
F-21
Earnings and profits, which determine the taxability of dividends to shareholders, differ from net income reported for financial reporting purposes primarily because of differences in depreciable lives, bases of certain assets and liabilities and in the timing of recognition of earnings upon disposition of properties. For Federal income tax purposes, the following summarizes the taxability of cash distributions paid on the common shares in 2004 and 2003 and the estimated taxability for 2005:
| | | | 2005
| | 2004
| | 2003
|
|---|
Per common share
| | | | | | | | | | | | | | |
| Ordinary income | | | | $ | 0.86 | | | $ | 1.05 | | | $ | 1.13 | |
| Capital gains | | | | | 0.26 | | | | 0.26 | | | | 0.14 | |
| Return of capital | | | | | 1.23 | | | | 1.03 | | | | 1.07 | |
| Total | | | | $ | 2.35 | | | $ | 2.34 | | | $ | 2.34 | |
Series A Preferred Stock
Series A Cumulative Preferred Stock (“Series A Preferred Stock”) had a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.375 per share, payable monthly. In August 2003, the Company used part of the proceeds from the issuance of the Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”) to redeem all of the 2,000,000 outstanding shares of its Series A Preferred Stock for $50 million.
Series B Preferred Stock
Series B Cumulative Preferred Stock (“Series B Preferred Stock”) had a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.21875 per share, payable monthly. In August 2003, the Company used part of the proceeds from the issuance of the Series H Preferred Stock to redeem all 1,938,830 outstanding shares of its Series B Preferred Stock for $48.5 million.
Series C Preferred Stock
Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) had a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.34375 per share, payable quarterly. In August 2003, the Company used part of the proceeds from the issuance of the Series H Preferred Stock to redeem all 2,000,000 outstanding shares of its Series C Preferred Stock for $50 million.
Series D Preferred Stock—Shareholders Rights Plan
The Board of Directors authorized a Shareholders Rights Plan (the “Rights Plan”). In implementing the Rights Plan, the Board declared a distribution of one right for each of the Company’s outstanding common shares which would become exercisable only if a person or group (the “Acquiring Person”) became the beneficial owner of 10% or more of the common shares or announced a tender or exchange offer that would result in ownership of 10% of the Company’s common shares. The rights would trade with the Company’s common stock until exercisable. Each holder of a right, other than the Acquiring Person, would in that event be entitled to purchase one common share of the Company for each right at one half of the then current price.
In November 2005, as a governance initiative, the Board voted to terminate the Rights Plan.
Series F Preferred Stock
In 2002, the Company issued Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) with a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.3125 per share, payable monthly. The Company has outstanding 474,500 Series F Preferred shares for which it received aggregate proceeds of $11.9 million. On and after October 16, 2007, the Series F Preferred shares will be redeemable for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation preference plus dividends accrued and unpaid to the redemption date.
F-22
Series H Preferred Stock
In 2003, the Company issued the Series H Preferred Stock with a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.075 per share, payable quarterly. The Company has outstanding 6,200,000 Series H Preferred Stock shares for which it received net proceeds of $150.1 million. On and after August 11, 2008, the Series H Preferred Stock shares will be redeemable for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation preference plus dividends owed and unpaid to the redemption date.
Direct Stock Purchase and Distribution Reinvestment Plan
The Company has a Direct Stock Purchase and Distribution Reinvestment Plan (“DRSPP”) pursuant to which the Company’s shareholders have the ability to reinvest all or part of their distributions from the Company’s common stock, preferred stock or limited partnership interests in Mid-America Apartments, L.P. into the Company’s common stock. The plan also provides the opportunity to make optional cash investments in common shares of at least $250, but not more than $5,000 in any given month, free of brokerage commissions and charges. The Company, in its absolute discretion, may grant waivers to allow for optional cash payments in excess of $5,000. To fulfill its obligations under the DRSPP, the Company may either issue additional shares of common stock or repurchase common stock in the open market. The Company has registered with the Securities and Exchange Commission the offer and sale of up to 4,600,000 shares of common stock pursuant to the DRSPP. Additional shares will be purchased at the market price on the “Investment Date” each month, which shall in no case be later than ten business days following the distribution payment date. The Company may elect to sell shares under the DRSPP at up to a 5% discount.
Common stock shares totaling 803,251 in 2005, 413,598, in 2004, and 31,697 in 2003, were acquired by shareholders under the DRSPP. The Company offered an average of a 1.5% discount for optional cash purchases in 2005 and a 2% discount in the months of August through December in 2004. No discounts were offered in 2003.
Stock Repurchase Plan
In 1999, the Company’s Board of Directors approved a stock repurchase plan to acquire up to a total of 4.0 million shares of the Company’s common stock. Through December 31, 2005, the Company has repurchased and retired approximately 1.9 million shares of common stock for a cost of approximately $42 million at an average price per common share of $22.54. No shares were repurchased in 2002, 2003, 2004 or 2005 under the plan.
10. | | 8-5/8% Series G Cumulative Redeemable Preferred Stock |
In 2002, the Company issued 8-5/8% Series G Cumulative Redeemable Preferred Stock (“Series G”) with a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.15625 per share, payable monthly. The Company has outstanding 400,000 Series G shares issued in a direct placement with private investors (“Investors”) for which it received aggregate proceeds of $10 million. On or after November 15, 2004, the Company or the Investors may give the required one-year notice to redeem or put, respectively, all or part of the Series G shares beginning on or after November 15, 2005, in increments of $1 million. In the event the Investors elect to put all or a part of the Series G to the Company, the Company has the option to redeem all or a portion of the shares of the Series G in shares of common stock of the Company in lieu of cash.
In accordance with EITF D-98: Classification and Measurement of Redeemable Securities, as of March 31, 2005, the Company classified the Series G outside of permanent equity as the Company determined that in the event of a put by the Investors, there were two possible circumstances which were not wholly in control of the Company that could require the Series G to be redeemed by the Company for cash as opposed to common stock, and thus the Series G should be presented outside of permanent equity. These circumstances were the delisting of the Company’s common stock from the New York Stock Exchange and the failure to complete a registration of the Company’s common stock exchanged for the Series G. The December 31, 2004, consolidated balance sheet was adjusted to conform to such presentation as were the December 31, 2004 and 2003, Statements of Shareholders’ Equity.
F-23
On May 26, 2005, the Company gave the required one-year notice to redeem all of the issued and outstanding Series G shares on May 26, 2006. As a result, in accordance with Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“Statement 150”), the Company classified the Series G as a liability within notes payable as of May 26, 2005, on the accompanying consolidated financial statements. Statement 150 also requires that all subsequent dividend payments be classified as interest expense on the consolidated financial statements.
11. | | Employee Benefit Plans |
401 (k) Savings Plan
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a defined contribution plan that satisfies the requirements of Section 401(a) and 401(k) of the Code. The Company may, but is not obligated to, make a matching contribution of $0.50 for each $1.00 contributed, up to 6% of the participant’s compensation. The Company’s contribution to this plan was approximately $389,000, $330,000, and $251,000 in 2005, 2004, and 2003, respectively.
Non-Qualified Deferred Compensation Retirement Plan
The Company has adopted a non-qualified deferred compensation retirement plan for key employees who are not qualified for participation in the Company’s 401(k) Savings Plan. Under the terms of the plan, employees may elect to defer a percentage of their compensation and the Company matches a portion of their salary deferral. The plan is designed so that the employees’ investment earnings under the non-qualified plan should be the same as the earning assets in the Company’s 401(k) Savings Plan. The Company’s match to this plan in 2005, 2004, and 2003 was approximately $31,800, $30,400, and $23,700, respectively.
Non-Qualified Deferred Compensation Plan for Outside Company Directors
The Company has adopted a non-qualified deferred compensation plan for the non-employee directors who serve on the Board of Directors of the Company (the “Directors Deferred Compensation Plan”). The Directors Deferred Compensation Plan allows directors to receive shares of phantom stock in place of cash fees in increments of 25%. The phantom stock is then issued either in shares of common stock of the Company or in a comparable cash value in two annual installments following the director’s retirement from the Board of Directors. In 2005, 2004, and 2003, the Company issued 5,742, 5,931, and 7,879, shares of phantom stock, with weighted-average grant date fair values of $43.35, $36.59 and $27.67, respectively, to outside directors.
Director Restricted Stock Plan
Beginning with the 2005 Annual Meeting of Shareholders, non-employee directors elected to the Board of Directors receive a grant of $75,000 worth of restricted shares of common stock. The shares vest in three equal installments over the director’s three-year term. To begin the program, non-employee directors not sitting for re-election at the 2005 Annual Meeting of Shareholders received a pro-rata grant representing the number of years left in their term. In 2005, 8,596 shares of restricted stock were granted to non-employee directors with a grant date fair value of $40.71.
Employee Stock Purchase Plan
The Mid-America Apartment Communities, Inc. Employee Stock Purchase Plan (the “ESPP”) provides a means for employees to purchase common stock of the Company. The Board of Directors has authorized the issuance of 150,000 shares for the plan. The ESPP is administered by the Compensation Committee of the Board of Directors who may annually grant options to employees to purchase annually up to an aggregate of 15,000 shares of common stock at a price equal to 85% of the market price of the common stock. For 2005, 2004, and 2003, the ESPP purchased 4,796, 4,801, and 5,162 shares of common stock, with weighted-average grant date fair values of $37.41, $31.63 and $23.84, respectively.
F-24
Employee Stock Ownership Plan
The Mid-America Apartment Communities, Inc. Employee Stock Ownership Plan (the “ESOP”) is a non-contributory stock bonus plan that satisfies the requirements of Section 401(a) of the Internal Revenue Code. Each employee of the Company is eligible to participate in the ESOP after attaining the age of 21 years and completing one year of service with the Company. Participants’ ESOP accounts will be 100% vested after five years of continuous service, with no vesting prior to that time. The Company contributed 22,500 shares of common stock to the ESOP upon conclusion of the initial offering. During 2005, 2004, and 2003, the Company contributed approximately $700,000, $554,000, and $568,000, respectively, to the ESOP which purchased an additional 16,447, 15,104, and 20,489, shares of common stock, with weighted-average grant date fair values of $42.58, $36.66, and $27.74, respectively.
Restricted Stock and Stock Option Plan
The Company adopted the 1994 Restricted Stock and Stock Option Plan (the “1994 Plan”) to provide incentives to attract and retain independent directors, executive officers and key employees. As of January 31, 2004, no further awards may be granted under this plan. The 1994 Restricted Stock and Stock Option Plan was replaced by the 2004 Stock Plan (collectively the “Plans”) by shareholder approval at the May 24, 2004, Annual Meeting of Shareholders. The Plans provide(d) for the granting of options to purchase a specified number of shares of common stock (“Options”) or grants of restricted shares of common stock (“Restricted Stock”). The Plan also allow(ed) the Company to grant options to purchase Operating Partnership Units at the price of the common stock on the New York Stock Exchange on the day prior to issuance of the units (the “LESOP Provision”). The 1994 Plan authorized the issuance of 2,400,000 common shares or options to acquire shares. The 2004 Stock Plan authorizes the issuance of 500,000 common shares or options to acquire shares. Under the terms of the 1994 Plan, the Company could advance directors, executive officers, and key employees a portion of the cost of the common stock or units. The employee advances mature five years from the date of issuance and accrue interest, payable in arrears, at a rate established at the date of issuance. The Company has also entered into supplemental bonus agreements with the employees which are intended to fund the payment of a portion of the advances over a five year period. Under the terms of the supplemental bonus agreements, the Company will pay bonuses to these employees equal to 3% of the original note balance on each anniversary date of the advance, limited to 15% of the aggregate purchase price of the shares and units. In March of 2002, the Company entered into duplicate supplemental bonus agreements on the then existing options to executive officers, effectively doubling their advances. The advances become due and payable and the bonus agreement will terminate if the employees voluntarily terminate their employment with the Company. The Company also agreed to pay a bonus to certain executive officers in an amount equal to the debt service on the advances for as long as they remain employed by the Company.
As of December 31, 2005, the Company had advances outstanding relating to the Plan totaling approximately $840,000, which is presented as a reduction to shareholders’ equity in the accompanying consolidated balance sheets. All of the $840,000 advances at December 31, 2005, were to current and one former executive officers and were at interest rates ranging from 5.59%-6.49% and maturing at various dates from 2007 to 2010.
In 2005, the Company issued 8,852 restricted shares of common stock to executive management under the 2004 Stock Plan with a grant date fair value of $38.50. These shares will vest in two equal amounts in 2006 and 2007. Recipients will receive dividend payments on the shares of restricted stock prior to vesting.
In 2003, the Company issued 7,471 restricted shares of common stock to executive management with a grant date fair value of $23.42. These shares vested in 2004. Recipients received dividend payments on the shares of restricted stock prior to vesting.
In 2005, the Board of Directors adopted the 2005 Key Management Restricted Stock Plan (the “2005 Plan”), a long-term incentive program for key managers and executive officers. The 2005 Plan grants shares of restricted stock based on a sliding scale of total shareholder return over three 12-month periods. Any restricted stock earned will vest 100% at the end of a three-year restriction period. Recipients will receive dividend payments on the shares of restricted stock during the restriction period. There is no automatic vesting of the shares.
F-25
In 2002, the Company issued 97,881 restricted shares of common stock to key managers with a grant date fair value of $25.65. As a result of two managers leaving the employment of the Company, as of December 31, 2005, only 86,477 shares remain issued. These shares will vest 20% a year for five consecutive years beginning in 2007. Recipients receive dividend payments on the shares of restricted stock prior to vesting. In the fourth quarter of 2005, the Company expensed approximately $887,000 representing a cumulative charge to amortize the first four years of this plan which the Company previously expected would expense over the vesting period from 2007 through 2011.
In 2000, the Company issued 10,750 restricted shares of common stock to executive officers with a grant date fair value of $22.1875. These shares vest 10% each over ten years through 2010. The executive officers have the option to accelerate the vesting in lieu of bonuses. As of December 31, 2005, no shares have been vested early. Recipients receive dividend payments on the shares of restricted stock prior to vesting.
Options granted to employees through the 1994 Plan vest(ed) annually over five years in the following consecutive amounts: 10%, 10%, 20%, 30%, and 30%. No options have been granted through the 2004 Stock Plan. A summary of changes in options to acquire shares of the Company’s common stock and Operating Partnership Units, including grants and exercises pursuant to the LESOP provision, for the three years ended December 31, 2005, is as follows:
| | | | Options
| | Weighted Average
Exercise Price
|
|---|
| Outstanding at December 31, 2002 | | | | | 1,424,024 | | | $ | 24.37 | |
| Granted | | | | | — | | | | | |
| Exercised | | | | | (308,467 | ) | | $ | 23.12 | |
| Forfeited | | | | | (77,587 | ) | | $ | 23.85 | |
| |
| Outstanding at December 31, 2003 | | | | | 1,037,970 | | | $ | 24.78 | |
| Granted | | | | | — | | | | | |
| Exercised | | | | | (343,429 | ) | | $ | 25.76 | |
| Forfeited | | | | | (20,475 | ) | | $ | 24.14 | |
| |
| Outstanding at December 31, 2004 | | | | | 674,066 | | | $ | 24.30 | |
| Granted | | | | | — | | | | | |
| Exercised | | | | | (239,514 | ) | | $ | 23.45 | |
| Forfeited | | | | | (36,500 | ) | | $ | 24.10 | |
| |
| Outstanding at December 31, 2005 | | | | | 398,052 | | | $ | 24.83 | |
| |
Options exercisable:
| | | | | | | | | | |
| December 31, 2003 | | | | | 403,070 | | | $ | 26.75 | |
| December 31, 2004 | | | | | 247,216 | | | $ | 25.06 | |
| December 31, 2005 | | | | | 190,707 | | | $ | 25.09 | |
Exercise prices for options outstanding as of December 31, 2005, ranged from $22.14 to $29.50. The weighted average remaining contractual life of those options is 4.4 years.
Long-Term Performance Based Incentive Plan for Executive Officers
The Compensation Committee by authorization of the Board of Directors of the Company submitted the Long-Term Performance Based Incentive Plan for Executive Officers (the “Long-Term Plan”) which was approved by shareholders on June 2, 2003. The Long-Term Plan allows executive management to earn performance units that convert into shares of restricted stock based on achieving defined total shareholder investment performance levels. The potential award of performance units which convert into shares of restricted stock is based on the Company’s performance from January 1, 2003, through December 31, 2005. Any performance units earned will be granted based on the closing market price on December 31, 2005, and are immediately convertible into shares of restricted stock. While these shares of restricted stock will be entitled to dividend payments, they will not be transferable or have voting privileges until they vest. Dependent upon the executive officer’s continued employment with the Company, any shares of restricted stock awarded will vest 20% annually from 2006 through 2010.
F-26
12. | | Earnings from Discontinued Operations |
In accordance with Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company sold the Eastview apartments in 2005, the Island Retreat apartments in 2004 and the Crossings apartments in 2003, and has classified them as discontinued operations in the Consolidated Statements of Operations. The following is a summary of earnings from discontinued operations for the three years ended December 31, 2005, (dollars in thousands):
| | | | 2005
| | 2004
| | 2003
|
|---|
Revenues:
| | | | | | | | | | | | | | |
| Rental revenues | | | | $ | 579 | | | $ | 2,857 | | | $ | 3,355 | |
| Other revenues | | | | | (8 | ) | | | 64 | | | | 89 | |
| Total revenues | | | | | 571 | | | | 2,921 | | | | 3,444 | |
| |
Expenses:
| | | | | | | | | | | | | | |
| Property operating expenses | | | | | 684 | | | | 1,798 | | | | 1,945 | |
| Depreciation and amortization | | | | | — | | | | 681 | | | | 1,023 | |
| Interest expense | | | | | — | | | | 575 | | | | 1,041 | |
| Loss on debt extinguishment | | | | | — | | | | 60 | | | | — | |
| Amortization of deferred financing costs | | | | | — | | | | 4 | | | | 12 | |
| Asset impairment | | | | | 243 | | | | 200 | | | | — | |
| Total expenses | | | | | 927 | | | | 3,318 | | | | 4,021 | |
Earnings from discontinued operations before gain
on sale and settlement proceeds | | | | | (356 | ) | | | (397 | ) | | | (577 | ) |
Net gain (loss) on insurance and other
settlement proceeds | | | | | (25 | ) | | | 526 | | | | 82 | |
| Gain on sale | | | | | — | | | | 5,825 | | | | 1,919 | |
Earnings (loss) from discontinued operations | | | | $ | (381 | ) | | $ | 5,954 | | | $ | 1,424 | |
13. | | Related Party Transactions |
Pursuant to management contracts with the Company’s joint venture(s), the Company manages the operations of the joint venture(s) apartment communities for a fee of 4% of the revenues of the joint venture(s). The Company received approximately $325,000, $582,000, and $822,000 as management fees from the joint venture(s) in 2005, 2004, and 2003, respectively.
The Company earned interest on a $4.5 million loan to CH/Realty at an average interest rate of 9% until its closure following the sale of its remaining two properties in 2005.
The Company has certain advances to current and one former executive officer through the 1994 Plan as discussed in Note 11.
At December 31, 2005, the Company owned or had an ownership interest in 132 multifamily apartment communities, including the apartment community owned by the Company’s joint venture, in 12 different states from which it derives all significant sources of earnings and operating cash flows. The Company’s operational structure is organized on a decentralized basis, with individual property managers having overall responsibility and authority regarding the operations of their respective properties. Each property manager individually monitors local and area trends in rental rates, occupancy percentages, and operating costs. Property managers are given the on-site responsibility and discretion to react to such trends in the best interest of the Company. The Company’s chief operating decision maker evaluates the performance of each individual property based on its contribution to net operating income in order to ensure that the individual property continues to meet the Company’s return criteria and long term investment goals. The Company defines each of its multifamily communities as an individual operating segment. It has also determined that all of its communities have similar economic characteristics and meet the other criteria which permit the communities to be aggregated into one reportable segment, which is acquisition and operation of the multifamily communities owned.
F-27
DISTRIBUTION. In January 2006, the Company announced a quarterly distribution to common shareholders of $0.595 per share, which was paid on January 31, 2006.
In February 2006, the Company announced a monthly distribution to its Series F Cumulative Redeemable Preferred Stock shareholders of $0.1927 per share, which is payable on March 15, 2006.
ACQUISITIONS. On January 19, 2006, the Company acquired the Preserve at Brier Creek apartments in Raleigh, NC. The property had a total of 250 apartment units when purchased. The Company announced plans to develop an additional 200 apartment units on land it purchased adjacent to the existing property.
16. | | Selected Quarterly Financial Information (Unaudited) |
Mid-America Apartment Communities, Inc.
Quarterly Financial Data (Unaudited)
(Dollars in thousands except per share data)
| | | | Year Ended December 31, 2005
| |
| |
|---|
| | | | First
| | Second
| | Third
| | Fourth
|
|---|
| Total revenues | | | | $ | 71,441 | | | $ | 72,862 | | | $ | 75,155 | | | $ | 77,997 | |
| Income from continuing operations before non-operating items | | | | $ | 18,554 | | | $ | 19,138 | | | $ | 18,596 | | | $ | 20,176 | |
| Interest expense | | | | $ | (13,732 | ) | | $ | (14,473 | ) | | $ | (15,332 | ) | | $ | (15,214 | ) |
| (Loss) gain on debt extinguishment | | | | $ | (4 | ) | | $ | (90 | ) | | $ | 12 | | | $ | (327 | ) |
| Minority interest in operating partnership income | | | | $ | (260 | ) | | $ | (778 | ) | | $ | (91 | ) | | $ | (442 | ) |
| Income (loss) from investments in unconsolidated entities | | | | $ | 318 | | | $ | (193 | ) | | $ | (52 | ) | | $ | (8 | ) |
| Net gain (loss) on insurance and other settlement proceeds | | | | $ | 7 | | | $ | (16 | ) | | $ | 874 | | | $ | (116 | ) |
| Gain on disposition within unconsolidated entities | | | | $ | — | | | $ | 3,034 | | | $ | — | | | $ | — | |
Discontinued operations:
| | | | | | | | | | | | | | | | | | |
| (Loss) gain from discontinued operations before asset impairment, settlement proceeds and gain on sale | | | | $ | (135 | ) | | $ | 22 | | | $ | — | | | $ | — | |
| Asset impairment on discontinued operations | | | | $ | (94 | ) | | $ | (149 | ) | | $ | — | | | $ | — | |
| Net loss on insurance and other settlement proceeds on discontinued operations | | | | $ | (25 | ) | | $ | — | | | $ | — | | | $ | — | |
| Gain on sale of discontinued operations | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Net income | | | | $ | 4,326 | | | $ | 8,193 | | | $ | 3,615 | | | $ | 3,610 | |
| Net income available for common shareholders | | | | $ | 613 | | | $ | 4,558 | | | $ | 125 | | | $ | 119 | |
Per share:
| | | | | | | | | | | | | | | | | | |
| Net income available per common share—basic | | | | $ | 0.03 | | | $ | 0.21 | | | $ | 0.01 | | | $ | 0.01 | |
| Net income available per common share—diluted | | | | $ | 0.03 | | | $ | 0.21 | | | $ | 0.01 | | | $ | 0.01 | |
| Dividend declared | | | | $ | 0.585 | | | $ | 0.585 | | | $ | 0.585 | | | $ | 0.595 | |
F-28
| | | | Year Ended December 31, 2004
| |
|---|
| | | | First
| | Second
| | Third
| | Fourth
|
|---|
| Total revenues | | | | $ | 65,501 | | | $ | 66,066 | | | $ | 67,527 | | | $ | 68,690 | |
| Income from continuing operations before non-operating items | | | | $ | 16,540 | | | $ | 16,456 | | | $ | 16,573 | | | $ | 17,217 | |
| Interest expense | | | | $ | (12,341 | ) | | $ | (12,030 | ) | | $ | (12,868 | ) | | $ | (13,619 | ) |
| Gain (loss) on debt extinguishment | | | | $ | 82 | | | $ | (299 | ) | | $ | 38 | | | $ | 1,274 | |
| Minority interest in operating partnership income | | | | $ | (420 | ) | | $ | (534 | ) | | $ | (464 | ) | | $ | (846 | ) |
| Loss from investments in unconsolidated entities | | | | $ | (41 | ) | | $ | (33 | ) | | $ | (61 | ) | | $ | (152 | ) |
| Net gain (loss) on insurance and other settlement proceeds | | | | $ | 1,628 | | | $ | 1,228 | | | $ | 248 | | | $ | (421 | ) |
| Gain on disposition within unconsolidated entities | | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,249 | |
Discontinued operations:
| | | | | | | | | | | | | | | | | | |
| Loss from discontinued operations before asset impairment, settlement proceeds and gain on sale | | | | $ | (76 | ) | | $ | (53 | ) | | $ | (54 | ) | | $ | (14 | ) |
| Asset impairment on discontinued operations | | | | $ | — | | | $ | — | | | $ | — | | | $ | (200 | ) |
| Net gain on insurance and other settlement proceeds on discontinued operations | | | | $ | — | | | $ | 526 | | | $ | — | | | $ | — | |
| Gain on sale of discontinued operations | | | | $ | — | | | $ | — | | | $ | — | | | $ | 5,825 | |
| Net income | | | | $ | 5,055 | | | $ | 4,992 | | | $ | 3,131 | | | $ | 12,020 | |
| Net income (loss) available for common shareholders | | | | $ | 1,349 | | | $ | 1,286 | | | $ | (576 | ) | | $ | 8,314 | |
Per share:
| | | | | | | | | | | | | | | | | | |
| Net income (loss) available per common share—basic | | | | $ | 0.07 | | | $ | 0.06 | | | $ | (0.03 | ) | | $ | 0.40 | |
| Net income (loss) available per common share—diluted | | | | $ | 0.07 | | | $ | 0.06 | | | $ | (0.03 | ) | | $ | 0.40 | |
| Dividend declared | | | | $ | 0.585 | | | $ | 0.585 | | | $ | 0.585 | | | $ | 0.585 | |
F-29
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2005
(Dollars in thousands)
| | | |
| |
| | Initial Cost
| | Cost Capitalized
subsequent to
Acquisition
| | Gross Amount
carried at
December 31,
2005 (20)
| |
|---|
Property
| | | | Location
| | Encumbrances
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Total
| | Accumulated
Depreciation
| | Net
| | Date of
Construction
| | Life used
to compute
depreciation
in latest
income
statement (21)
|
|---|
| Eagle Ridge | | | | Birmingham, AL | | | —(1 | ) | | $ | 851 | | | $ | 7,667 | | | $ | — | | | $ | 1,360 | | | $ | 851 | | | $ | 9,027 | | | $ | 9,878 | | | $ | (2,548 | ) | | $ | 7,330 | | | | 1986 | | | | 1–40 | |
| Abbington Place | | | | Huntsville, AL | | | —(1 | ) | | | 524 | | | | 4,724 | | | | — | | | | 1,249 | | | | 524 | | | | 5,973 | | | | 6,497 | | | | (1,890 | ) | | | 4,607 | | | | 1987 | | | | 1–40 | |
| Paddock Club Huntsville | | | | Huntsville, AL | | | —(1 | ) | | | 909 | | | | 10,152 | | | | 830 | | | | 8,961 | | | | 1,739 | | | | 19,113 | | | | 20,852 | | | | (4,756 | ) | | | 16,096 | | | | 1989/98 | | | | 1–40 | |
| Paddock Club Montgomery | | | | Montgomery, AL | | | —(1 | ) | | | 965 | | | | 13,190 | | | | — | | | | 623 | | | | 965 | | | | 13,813 | | | | 14,778 | | | | (3,002 | ) | | | 11,776 | | | | 1999 | | | | 1–40 | |
| Calais Forest | | | | Little Rock, AR | | | —(1 | ) | | | 1,026 | | | | 9,244 | | | | — | | | | 2,462 | | | | 1,026 | | | | 11,706 | | | | 12,732 | | | | (4,857 | ) | | | 7,875 | | | | 1987 | | | | 1–40 | |
| Napa Valley | | | | Little Rock, AR | | | —(1 | ) | | | 960 | | | | 8,642 | | | | — | | | | 1,565 | | | | 960 | | | | 10,207 | | | | 11,167 | | | | (3,586 | ) | | | 7,581 | | | | 1984 | | | | 1–40 | |
| Westside Creek I | | | | Little Rock, AR | | | —(1 | ) | | | 616 | | | | 5,559 | | | | — | | | | 1,411 | | | | 616 | | | | 6,970 | | | | 7,586 | | | | (2,220 | ) | | | 5,366 | | | | 1984 | | | | 1–40 | |
| Westside Creek II | | | | Little Rock, AR | | | 4,518 | | | | 654 | | | | 5,904 | | | | — | | | | 509 | | | | 654 | | | | 6,413 | | | | 7,067 | | | | (1,976 | ) | | | 5,091 | | | | 1986 | | | | 1–40 | |
| Tiffany Oaks | | | | Altamonte Springs, FL | | | —(1 | ) | | | 1,024 | | | | 9,219 | | | | — | | | | 2,526 | | | | 1,024 | | | | 11,745 | | | | 12,769 | | | | (4,021 | ) | | | 8,748 | | | | 1985 | | | | 1–40 | |
| Marsh Oaks | | | | Atlantic Beach, FL | | | —(1 | ) | | | 244 | | | | 2,829 | | | | — | | | | 1,029 | | | | 244 | | | | 3,858 | | | | 4,102 | | | | (1,648 | ) | | | 2,454 | | | | 1986 | | | | 1–40 | |
| Indigo Point | | | | Brandon, FL | | | —(4 | ) | | | 1,167 | | | | 10,500 | | | | — | | | | 1,531 | | | | 1,167 | | | | 12,031 | | | | 13,198 | | | | (2,668 | ) | | | 10,530 | | | | 1989 | | | | 1–40 | |
| Paddock Club Brandon | | | | Brandon, FL | | | —(2 | ) | | | 2,896 | | | | 26,111 | | | | — | | | | 960 | | | | 2,896 | | | | 27,071 | | | | 29,967 | | | | (7,233 | ) | | | 22,734 | | | | 1997/99 | | | | 1–40 | |
| Preserve at Coral Square | | | | Coral Springs, FL | | | 32,203 | | | | 9,600 | | | | 41,206 | | | | — | | | | 821 | | | | 9,600 | | | | 42,027 | | | | 51,627 | | | | (2,884 | ) | | | 48,743 | | | | 1996 | | | | 1–40 | |
| Anatole | | | | Daytona Beach, FL | | | 7,000(10 | ) | | | 1,227 | | | | 5,879 | | | | — | | | | 1,296 | | | | 1,227 | | | | 7,175 | | | | 8,402 | | | | (2,822 | ) | | | 5,580 | | | | 1986 | | | | 1–40 | |
| Paddock Club Gainesville | | | | Gainesville, FL | | | —(2 | ) | | | 1,800 | | | | 15,879 | | | | — | | | | 339 | | | | 1,800 | | | | 16,218 | | | | 18,018 | | | | (3,277 | ) | | | 14,741 | | | | 1999 | | | | 1–40 | |
| Cooper’s Hawk | | | | Jacksonville, FL | | | —(6 | ) | | | 854 | | | | 7,500 | | | | — | | | | 1,595 | | | | 854 | | | | 9,095 | | | | 9,949 | | | | (3,624 | ) | | | 6,325 | | | | 1987 | | | | 1–40 | |
| Hunter’s Ridge at Deerwood | | | | Jacksonville, FL | | | —(7 | ) | | | 1,533 | | | | 13,835 | | | | — | | | | 1,571 | | | | 1,533 | | | | 15,406 | | | | 16,939 | | | | (4,572 | ) | | | 12,367 | | | | 1987 | | | | 1–40 | |
| Lakeside | | | | Jacksonville, FL | | | —(1 | ) | | | 1,431 | | | | 12,883 | | | | (1 | ) | | | 4,621 | | | | 1,430 | | | | 17,504 | | | | 18,934 | | | | (7,267 | ) | | | 11,667 | | | | 1985 | | | | 1–40 | |
| Lighthouse Court | | | | Jacksonville, FL | | | —(1 | ) | | | 4,047 | | | | 36,431 | | | | — | | | | 285 | | | | 4,047 | | | | 36,716 | | | | 40,763 | | | | (3,987 | ) | | | 36,776 | | | | 2003 | | | | 1–40 | |
| Paddock Club Jacksonville | | | | Jacksonville, FL | | | —(1 | ) | | | 2,294 | | | | 20,750 | | | | (2 | ) | | | 1,147 | | | | 2,292 | | | | 21,897 | | | | 24,189 | | | | (6,102 | ) | | | 18,087 | | | | 1989/96 | | | | 1–40 | |
| Paddock Club Mandarin | | | | Jacksonville, FL | | | —(2 | ) | | | 1,410 | | | | 14,967 | | | | — | | | | 617 | | | | 1,410 | | | | 15,584 | | | | 16,994 | | | | (3,212 | ) | | | 13,782 | | | | 1998 | | | | 1–40 | |
| St. Augustine | | | | Jacksonville, FL | | | —(6 | ) | | | 2,858 | | | | 6,475 | | | | (1 | ) | | | 3,205 | | | | 2,857 | | | | 9,680 | | | | 12,537 | | | | (4,446 | ) | | | 8,091 | | | | 1987 | | | | 1–40 | |
| Woodbridge at the Lake | | | | Jacksonville, FL | | | —(2 | ) | | | 645 | | | | 5,804 | | | | — | | | | 2,029 | | | | 645 | | | | 7,833 | | | | 8,478 | | | | (3,399 | ) | | | 5,079 | | | | 1985 | | | | 1–40 | |
| Woodhollow | | | | Jacksonville, FL | | | —(1 | ) | | | 1,686 | | | | 15,179 | | | | — | | | | 4,237 | | | | 1,686 | | | | 19,416 | | | | 21,102 | | | | (6,567 | ) | | | 14,535 | | | | 1986 | | | | 1–40 | |
| Paddock Club Lakeland | | | | Lakeland, FL | | | —(1 | ) | | | 2,254 | | | | 20,452 | | | | (1,033 | ) | | | 2,944 | | | | 1,221 | | | | 23,396 | | | | 24,617 | | | | (6,998 | ) | | | 17,619 | | | | 1988/90 | | | | 1–40 | |
| Savannahs at James Landing | | | | Melbourne, FL | | | —(6 | ) | | | 582 | | | | 7,868 | | | | — | | | | 2,973 | | | | 582 | | | | 10,841 | | | | 11,423 | | | | (4,074 | ) | | | 7,349 | | | | 1990 | | | | 1–40 | |
| Paddock Park Ocala | | | | Ocala, FL | | | 6,805(2)(3 | ) | | | 2,284 | | | | 21,970 | | | | — | | | | 1,301 | | | | 2,284 | | | | 23,271 | | | | 25,555 | | | | (7,143 | ) | | | 18,412 | | | | 1986/88 | | | | 1–40 | |
| Paddock Club Panama City | | | | Panama City, FL | | | —(2 | ) | | | 898 | | | | 14,276 | | | | — | | | | 495 | | | | 898 | | | | 14,771 | | | | 15,669 | | | | (3,739 | ) | | | 11,930 | | | | 2000 | | | | 1–40 | |
| Paddock Club Tallahassee | | | | Tallahassee, FL | | | —(2 | ) | | | 530 | | | | 4,805 | | | | 950 | | | | 9,874 | | | | 1,480 | | | | 14,679 | | | | 16,159 | | | | (4,248 | ) | | | 11,911 | | | | 1990/95 | | | | 1–40 | |
| Belmere | | | | Tampa, FL | | | —(1 | ) | | | 851 | | | | 7,667 | | | | 1 | | | | 2,933 | | | | 852 | | | | 10,600 | | | | 11,452 | | | | (4,432 | ) | | | 7,020 | | | | 1984 | | | | 1–40 | |
| Links at Carrollwood | | | | Tampa, FL | | | —(1 | ) | | | 817 | | | | 7,355 | | | | 110 | | | | 2,908 | | | | 927 | | | | 10,263 | | | | 11,190 | | | | (2,994 | ) | | | 8,196 | | | | 1980 | | | | 1–40 | |
| High Ridge | | | | Athens, GA | | | —(1 | ) | | | 884 | | | | 7,958 | | | | — | | | | 836 | | | | 884 | | | | 8,794 | | | | 9,678 | | | | (2,547 | ) | | | 7,131 | | | | 1987 | | | | 1–40 | |
| Bradford Pointe | | | | Augusta, GA | | | 4,760 | | | | 772 | | | | 6,949 | | | | — | | | | 1,158 | | | | 772 | | | | 8,107 | | | | 8,879 | | | | (2,448 | ) | | | 6,431 | | | | 1986 | | | | 1–40 | |
| Shenandoah Ridge | | | | Augusta, GA | | | —(1 | ) | | | 650 | | | | 5,850 | | | | 8 | | | | 3,091 | | | | 658 | | | | 8,941 | | | | 9,599 | | | | (3,830 | ) | | | 5,769 | | | | 1982 | | | | 1–40 | |
| Westbury Creek | | | | Augusta, GA | | | 3,480(15 | ) | | | 400 | | | | 3,626 | | | | — | | | | 811 | | | | 400 | | | | 4,437 | | | | 4,837 | | | | (1,400 | ) | | | 3,437 | | | | 1984 | | | | 1–40 | |
| Fountain Lake | | | | Brunswick, GA | | | —(5 | ) | | | 502 | | | | 4,551 | | | | — | | | | 1,272 | | | | 502 | | | | 5,823 | | | | 6,325 | | | | (1,913 | ) | | | 4,412 | | | | 1983 | | | | 1–40 | |
| Park Walk | | | | College Park, GA | | | —(1 | ) | | | 536 | | | | 4,859 | | | | — | | | | 685 | | | | 536 | | | | 5,544 | | | | 6,080 | | | | (1,667 | ) | | | 4,413 | | | | 1985 | | | | 1–40 | |
| Whisperwood | | | | Columbus, GA | | | —(1 | ) | | | 4,290 | | | | 42,722 | | | | (2 | ) | | | 7,127 | | | | 4,288 | | | | 49,849 | | | | 54,137 | | | | (14,017 | ) | | | 40,120 | | | | 1980/82/84/86/98 | | | | 1–40 | |
| Willow Creek | | | | Columbus, GA | | | —(1 | ) | | | 614 | | | | 5,523 | | | | — | | | | 2,265 | | | | 614 | | | | 7,788 | | | | 8,402 | | | | (2,451 | ) | | | 5,951 | | | | 1971/77 | | | | 1–40 | |
| Terraces at Fieldstone | | | | Conyers, GA | | | —(1 | ) | | | 1,284 | | | | 15,819 | | | | — | | | | 488 | | | | 1,284 | | | | 16,307 | | | | 17,591 | | | | (3,174 | ) | | | 14,417 | | | | 1999 | | | | 1–40 | |
| Prescott | | | | Duluth, GA | | | —(8 | ) | | | 3,840 | | | | 24,876 | | | | — | | | | 407 | | | | 3,840 | | | | 25,283 | | | | 29,123 | | | | (2,048 | ) | | | 27,075 | | | | 2001 | | | | 1–40 | |
| Lanier | | | | Gainesville, GA | | | 20,686 | | | | 3,560 | | | | 23,248 | | | | — | | | | 475 | | | | 3,560 | | | | 23,723 | | | | 27,283 | | | | (1,203 | ) | | | 26,080 | | | | 1998 | | | | 1–40 | |
| Lake Club | | | | Gainesville, GA | | | —(8 | ) | | | 3,150 | | | | 18,997 | | | | — | | | | 90 | | | | 3,150 | | | | 19,087 | | | | 22,237 | | | | (1,057 | ) | | | 21,180 | | | | 2001 | | | | 1–40 | |
| Whispering Pines | | | | LaGrange, GA | | | —(5 | ) | | | 823 | | | | 7,470 | | | | — | | | | 1,463 | | | | 823 | | | | 8,933 | | | | 9,756 | | | | (2,785 | ) | | | 6,971 | | | | 1982/84 | | | | 1–40 | |
| Westbury Springs | | | | Lilburn, GA | | | —(1 | ) | | | 665 | | | | 6,038 | | | | — | | | | 1,085 | | | | 665 | | | | 7,123 | | | | 7,788 | | | | (2,153 | ) | | | 5,635 | | | | 1983 | | | | 1–40 | |
| Austin Chase | | | | Macon, GA | | | —(7 | ) | | | 1,409 | | | | 12,687 | | | | — | | | | 152 | | | | 1,409 | | | | 12,839 | | | | 14,248 | | | | (3,355 | ) | | | 10,893 | | | | 1996 | | | | 1–40 | |
| The Vistas | | | | Macon, GA | | | —(1 | ) | | | 595 | | | | 5,403 | | | | — | | | | 992 | | | | 595 | | | | 6,395 | | | | 6,990 | | | | (1,965 | ) | | | 5,025 | | | | 1985 | | | | 1–40 | |
| Walden Run | | | | McDonough, GA | | | —(1 | ) | | | 1,281 | | | | 11,935 | | | | — | | | | 14 | | | | 1,281 | | | | 11,949 | | | | 13,230 | | | | (1,379 | ) | | | 11,851 | | | | 1997 | | | | 1–40 | |
| Georgetown Grove | | | | Savannah, GA | | | 10,102 | | | | 1,288 | | | | 11,579 | | | | — | | | | 712 | | | | 1,288 | | | | 12,291 | | | | 13,579 | | | | (3,369 | ) | | | 10,210 | | | | 1997 | | | | 1–40 | |
F-30
| | | |
| |
| | Initial Cost
| | Cost Capitalized
subsequent to
Acquisition
| | Gross Amount
carried at
December 31,
2005 (20)
| |
|---|
Property
| | | | Location
| | Encumbrances
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Total
| | Accumulated
Depreciation
| | Net
| | Date of
Construction
| | Life used
to compute
depreciation
in latest
income
statement (21)
|
|---|
| Wildwood | | | | Thomasville, GA | | | —(1 | ) | | | 438 | | | | 3,971 | | | | 371 | | | | 4,471 | | | | 809 | | | | 8,442 | | | | 9,251 | | | | (2,626 | ) | | | 6,625 | | | | 1980/84 | | | | 1–40 | |
| Hidden Lake | | | | Union City, GA | | | —(1 | ) | | | 1,296 | | | | 11,715 | | | | — | | | | 1,717 | | | | 1,296 | | | | 13,432 | | | | 14,728 | | | | (4,097 | ) | | | 10,631 | | | | 1985/87 | | | | 1–40 | |
| Three Oaks | | | | Valdosta, GA | | | —(1 | ) | | | 462 | | | | 4,188 | | | | 459 | | | | 5,606 | | | | 921 | | | | 9,794 | | | | 10,715 | | | | (3,052 | ) | | | 7,663 | | | | 1983/84 | | | | 1–40 | |
| Huntington Chase | | | | Warner Robins, GA | | | 8,891 | | | | 1,160 | | | | 10,437 | | | | — | | | | 636 | | | | 1,160 | | | | 11,073 | | | | 12,233 | | | | (2,352 | ) | | | 9,881 | | | | 1997 | | | | 1–40 | |
| Southland Station | | | | Warner Robins, GA | | | —(1 | ) | | | 1,470 | | | | 13,284 | | | | — | | | | 1,699 | | | | 1,470 | | | | 14,983 | | | | 16,453 | | | | (4,669 | ) | | | 11,784 | | | | 1987/90 | | | | 1–40 | |
| Terraces at Townelake | | | | Woodstock, GA | | | —(1 | ) | | | 1,331 | | | | 11,918 | | | | 1,688 | | | | 16,396 | | | | 3,019 | | | | 28,314 | | | | 31,333 | | | | (7,180 | ) | | | 24,153 | | | | 1999 | | | | 1–40 | |
| Fairways at Hartland | | | | Bowling Green, KY | | | —(1 | ) | | | 1,038 | | | | 9,342 | | | | — | | | | 1,347 | | | | 1,038 | | | | 10,689 | | | | 11,727 | | | | (3,411 | ) | | | 8,316 | | | | 1996 | | | | 1–40 | |
| Paddock Club Florence | | | | Florence, KY | | | 9,600 | | | | 1,209 | | | | 10,969 | | | | — | | | | 1,241 | | | | 1,209 | | | | 12,210 | | | | 13,419 | | | | (3,537 | ) | | | 9,882 | | | | 1994 | | | | 1–40 | |
| Grand Reserve Lexington | | | | Lexington, KY | | | —(1 | ) | | | 2,024 | | | | 31,234 | | | | — | | | | — | | | | 2,024 | | | | 31,234 | | | | 33,258 | | | | (5,457 | ) | | | 27,801 | | | | 2000 | | | | 1–40 | |
| Lakepointe | | | | Lexington, KY | | | —(1 | ) | | | 411 | | | | 3,699 | | | | — | | | | 1,119 | | | | 411 | | | | 4,818 | | | | 5,229 | | | | (2,013 | ) | | | 3,216 | | | | 1986 | | | | 1–40 | |
| Mansion, The | | | | Lexington, KY | | | —(1 | ) | | | 694 | | | | 6,242 | | | | — | | | | 1,618 | | | | 694 | | | | 7,860 | | | | 8,554 | | | | (3,195 | ) | | | 5,359 | | | | 1989 | | | | 1–40 | |
| Village, The | | | | Lexington, KY | | | —(1 | ) | | | 900 | | | | 8,097 | | | | — | | | | 2,358 | | | | 900 | | | | 10,455 | | | | 11,355 | | | | (4,350 | ) | | | 7,005 | | | | 1989 | | | | 1–40 | |
| Stonemill Village | | | | Louisville, KY | | | —(1 | ) | | | 1,169 | | | | 10,518 | | | | — | | | | 3,653 | | | | 1,169 | | | | 14,171 | | | | 15,340 | | | | (5,787 | ) | | | 9,553 | | | | 1985 | | | | 1–40 | |
| Riverhills | | | | Grenada, MS | | | —(1 | ) | | | 153 | | | | 2,092 | | | | — | | | | 735 | | | | 153 | | | | 2,827 | | | | 2,980 | | | | (1,587 | ) | | | 1,393 | | | | 1972 | | | | 1–40 | |
| Crosswinds | | | | Jackson, MS | | | —(1 | ) | | | 1,535 | | | | 13,826 | | | | — | | | | 2,351 | | | | 1,535 | | | | 16,177 | | | | 17,712 | | | | (5,726 | ) | | | 11,986 | | | | 1988/89 | | | | 1–40 | |
| Pear Orchard | | | | Jackson, MS | | | —(1 | ) | | | 1,352 | | | | 12,168 | | | | (1 | ) | | | 3,313 | | | | 1,351 | | | | 15,481 | | | | 16,832 | | | | (6,233 | ) | | | 10,599 | | | | 1985 | | | | 1–40 | |
| Reflection Pointe | | | | Jackson, MS | | | 5,880(11 | ) | | | 710 | | | | 8,770 | | | | 140 | | | | 3,693 | | | | 850 | | | | 12,463 | | | | 13,313 | | | | (4,871 | ) | | | 8,442 | | | | 1986 | | | | 1–40 | |
| Somerset | | | | Jackson, MS | | | —(1 | ) | | | 477 | | | | 4,294 | | | | — | | | | 1,303 | | | | 477 | | | | 5,597 | | | | 6,074 | | | | (2,287 | ) | | | 3,787 | | | | 1981 | | | | 1–40 | |
| Woodridge | | | | Jackson, MS | | | —(1 | ) | | | 471 | | | | 5,522 | | | | — | | | | 1,191 | | | | 471 | | | | 6,713 | | | | 7,184 | | | | (2,549 | ) | | | 4,635 | | | | 1987 | | | | 1–40 | |
| Lakeshore Landing | | | | Ridgeland, MS | | | —(1 | ) | | | 676 | | | | 6,470 | | | | — | | | | 71 | | | | 676 | | | | 6,541 | | | | 7,217 | | | | (759 | ) | | | 6,458 | | | | 1974 | | | | 1–40 | |
| Savannah Creek | | | | Southaven, MS | | | —(1 | ) | | | 778 | | | | 7,013 | | | | — | | | | 1,521 | | | | 778 | | | | 8,534 | | | | 9,312 | | | | (3,139 | ) | | | 6,173 | | | | 1989 | | | | 1–40 | |
| Sutton Place | | | | Southaven, MS | | | —(1 | ) | | | 894 | | | | 8,053 | | | | — | | | | 1,711 | | | | 894 | | | | 9,764 | | | | 10,658 | | | | (3,622 | ) | | | 7,036 | | | | 1991 | | | | 1–40 | |
| Hermitage at Beechtree | | | | Cary, NC | | | —(1 | ) | | | 900 | | | | 8,099 | | | | — | | | | 1,557 | | | | 900 | | | | 9,656 | | | | 10,556 | | | | (3,164 | ) | | | 7,392 | | | | 1988 | | | | 1–40 | |
| Waterford Forest | | | | Cary, NC | | | —(8 | ) | | | 4,000 | | | | 20,957 | | | | — | | | | 227 | | | | 4,000 | | | | 21,184 | | | | 25,184 | | | | (715 | ) | | | 24,469 | | | | 1996 | | | | 1–40 | |
| Woodstream | | | | Greensboro, NC | | | —(1 | ) | | | 1,048 | | | | 9,855 | | | | — | | | | 335 | | | | 1,048 | | | | 10,190 | | | | 11,238 | | | | (1,204 | ) | | | 10,034 | | | | 1983 | | | | 1–40 | |
| Corners, The | | | | Winston-Salem, NC | | | —(2 | ) | | | 685 | | | | 6,165 | | | | — | | | | 1,529 | | | | 685 | | | | 7,694 | | | | 8,379 | | | | (3,315 | ) | | | 5,064 | | | | 1982 | | | | 1–40 | |
| Fairways at Royal Oak | | | | Cincinnati, OH | | | —(1 | ) | | | 814 | | | | 7,335 | | | | (12 | ) | | | 1,478 | | | | 802 | | | | 8,813 | | | | 9,615 | | | | (3,635 | ) | | | 5,980 | | | | 1988 | | | | 1–40 | |
| Colony at South Park | | | | Aiken, SC | | | —(1 | ) | | | 862 | | | | 8,005 | | | | — | | | | 119 | | | | 862 | | | | 8,124 | | | | 8,986 | | | | (837 | ) | | | 8,149 | | | | 1989/91 | | | | 1–40 | |
| Woodwinds | | | | Aiken, SC | | | —(1 | ) | | | 503 | | | | 4,540 | | | | — | | | | 945 | | | | 503 | | | | 5,485 | | | | 5,988 | | | | (1,733 | ) | | | 4,255 | | | | 1988 | | | | 1–40 | |
| Tanglewood | | | | Anderson, SC | | | —(1 | ) | | | 427 | | | | 3,853 | | | | — | | | | 1,442 | | | | 427 | | | | 5,295 | | | | 5,722 | | | | (2,276 | ) | | | 3,446 | | | | 1980 | | | | 1–40 | |
| Fairways, The | | | | Columbia, SC | | | 7,735(12 | ) | | | 910 | | | | 8,207 | | | | — | | | | 829 | | | | 910 | | | | 9,036 | | | | 9,946 | | | | (3,680 | ) | | | 6,266 | | | | 1992 | | | | 1–40 | |
| Paddock Club Columbia | | | | Columbia, SC | | | —(1 | ) | | | 1,840 | | | | 16,560 | | | | — | | | | 1,646 | | | | 1,840 | | | | 18,206 | | | | 20,046 | | | | (5,356 | ) | | | 14,690 | | | | 1989/95 | | | | 1–40 | |
| Highland Ridge | | | | Greenville, SC | | | —(1 | ) | | | 482 | | | | 4,337 | | | | — | | | | 1,302 | | | | 482 | | | | 5,639 | | | | 6,121 | | | | (1,869 | ) | | | 4,252 | | | | 1984 | | | | 1–40 | |
| Howell Commons | | | | Greenville, SC | | | —(1 | ) | | | 1,304 | | | | 11,740 | | | | — | | | | 1,606 | | | | 1,304 | | | | 13,346 | | | | 14,650 | | | | (4,378 | ) | | | 10,272 | | | | 1986/88 | | | | 1–40 | |
| Paddock Club Greenville | | | | Greenville, SC | | | —(1 | ) | | | 1,200 | | | | 10,800 | | | | — | | | | 765 | | | | 1,200 | | | | 11,565 | | | | 12,765 | | | | (3,387 | ) | | | 9,378 | | | | 1996 | | | | 1–40 | |
| Park Haywood | | | | Greenville, SC | | | —(1 | ) | | | 325 | | | | 2,925 | | | | 35 | | | | 3,395 | | | | 360 | | | | 6,320 | | | | 6,680 | | | | (2,624 | ) | | | 4,056 | | | | 1983 | | | | 1–40 | |
| Spring Creek | | | | Greenville, SC | | | —(1 | ) | | | 597 | | | | 5,374 | | | | (14 | ) | | | 1,322 | | | | 583 | | | | 6,696 | | | | 7,279 | | | | (2,572 | ) | | | 4,707 | | | | 1985 | | | | 1–40 | |
| Runaway Bay | | | | Mt. Pleasant, SC | | | 8,365(9 | ) | | | 1,085 | | | | 7,269 | | | | — | | | | 1,783 | | | | 1,085 | | | | 9,052 | | | | 10,137 | | | | (3,593 | ) | | | 6,544 | | | | 1988 | | | | 1–40 | |
| Park Place | | | | Spartanburg, SC | | | —(1 | ) | | | 723 | | | | 6,504 | | | | — | | | | 1,402 | | | | 723 | | | | 7,906 | | | | 8,629 | | | | (2,526 | ) | | | 6,103 | | | | 1987 | | | | 1–40 | |
| Hamilton Pointe | | | | Chattanooga, TN | | | —(1 | ) | | | 1,131 | | | | 10,861 | | | | — | | | | 226 | | | | 1,131 | | | | 11,087 | | | | 12,218 | | | | (1,239 | ) | | | 10,979 | | | | 1989 | | | | 1–40 | |
| Hidden Creek | | | | Chattanooga, TN | | | —(1 | ) | | | 972 | | | | 9,201 | | | | — | | | | 183 | | | | 972 | | | | 9,384 | | | | 10,356 | | | | (1,073 | ) | | | 9,283 | | | | 1987 | | | | 1–40 | |
| Steeplechase | | | | Chattanooga, TN | | | —(1 | ) | | | 217 | | | | 1,957 | | | | — | | | | 2,121 | | | | 217 | | | | 4,078 | | | | 4,295 | | | | (1,734 | ) | | | 2,561 | | | | 1986 | | | | 1–40 | |
| Windridge | | | | Chattanooga, TN | | | 5,465(16 | ) | | | 817 | | | | 7,416 | | | | — | | | | 1,539 | | | | 817 | | | | 8,955 | | | | 9,772 | | | | (2,546 | ) | | | 7,226 | | | | 1984 | | | | 1–40 | |
| Oaks, The | | | | Jackson, TN | | | —(1 | ) | | | 177 | | | | 1,594 | | | | — | | | | 1,346 | | | | 177 | | | | 2,940 | | | | 3,117 | | | | (1,257 | ) | | | 1,860 | | | | 1978 | | | | 1–40 | |
| Post House Jackson | | | | Jackson, TN | | | 5,095 | | | | 443 | | | | 5,078 | | | | — | | | | 2,964 | | | | 443 | | | | 8,042 | | | | 8,485 | | | | (2,539 | ) | | | 5,946 | | | | 1987 | | | | 1–40 | |
| Post House North | | | | Jackson, TN | | | 3,375(13 | ) | | | 381 | | | | 4,299 | | | | (57 | ) | | | 1,600 | | | | 324 | | | | 5,899 | | | | 6,223 | | | | (2,362 | ) | | | 3,861 | | | | 1987 | | | | 1–40 | |
| Bradford Chase | | | | Jackson, TN | | | —(1 | ) | | | 523 | | | | 4,711 | | | | — | | | | 1,107 | | | | 523 | | | | 5,818 | | | | 6,341 | | | | (2,349 | ) | | | 3,992 | | | | 1987 | | | | 1–40 | |
| Woods at Post House | | | | Jackson, TN | | | 4,998 | | | | 240 | | | | 6,839 | | | | — | | | | 1,264 | | | | 240 | | | | 8,103 | | | | 8,343 | | | | (3,605 | ) | | | 4,738 | | | | 1997 | | | | 1–40 | |
| Cedar Mill | | | | Memphis, TN | | | —(1 | ) | | | 824 | | | | 8,023 | | | | — | | | | 573 | | | | 824 | | | | 8,596 | | | | 9,420 | | | | (1,223 | ) | | | 8,197 | | | | 1973/86 | | | | 1–40 | |
| Gleneagles | | | | Memphis, TN | | | —(1 | ) | | | 443 | | | | 3,983 | | | | — | | | | 2,610 | | | | 443 | | | | 6,593 | | | | 7,036 | | | | (4,079 | ) | | | 2,957 | | | | 1975 | | | | 1–40 | |
| Greenbrook | | | | Memphis, TN | | | —(4 | ) | | | 2,100 | | | | 24,468 | | | | 25 | | | | 18,207 | | | | 2,125 | | | | 42,675 | | | | 44,800 | | | | (18,575 | ) | | | 26,225 | | | | 1974/78/83/86 | | | | 1–40 | |
| Hickory Farm | | | | Memphis, TN | | | —(1 | ) | | | 580 | | | | 5,220 | | | | (19 | ) | | | 1,521 | | | | 561 | | | | 6,741 | | | | 7,302 | | | | (2,942 | ) | | | 4,360 | | | | 1985 | | | | 1–40 | |
| Kirby Station | | | | Memphis, TN | | | —(1 | ) | | | 1,148 | | | | 10,337 | | | | — | | | | 3,799 | | | | 1,148 | | | | 14,136 | | | | 15,284 | | | | (5,751 | ) | | | 9,533 | | | | 1978 | | | | 1–40 | |
| Lincoln on the Green | | | | Memphis, TN | | | —(1 | ) | | | 1,498 | | | | 20,483 | | | | — | | | | 9,800 | | | | 1,498 | | | | 30,283 | | | | 31,781 | | | | (10,938 | ) | | | 20,843 | | | | 1988/98 | | | | 1–40 | |
| Park Estate | | | | Memphis, TN | | | —(4 | ) | | | 178 | | | | 1,141 | | | | — | | | | 3,115 | | | | 178 | | | | 4,256 | | | | 4,434 | | | | (2,368 | ) | | | 2,066 | | | | 1974 | | | | 1–40 | |
| Reserve at Dexter Lake | | | | Memphis, TN | | | —(5 | ) | | | 1,260 | | | | 16,043 | | | | 2,147 | | | | 32,402 | | | | 3,407 | | | | 48,445 | | | | 51,852 | | | | (7,742 | ) | | | 44,110 | | | | 1999/01 | | | | 1–40 | |
| River Trace | | | | Memphis, TN | | | —(1 | ) | | | 1,622 | | | | 14,723 | | | | 1 | | | | 2,443 | | | | 1,623 | | | | 17,166 | | | | 18,789 | | | | (5,419 | ) | | | 13,370 | | | | 1981/85 | | | | 1–40 | |
F-31
| | | |
| |
| | Initial Cost
| | Cost Capitalized
subsequent to
Acquisition
| | Gross Amount
carried at
December 31,
2005 (20)
| |
|---|
Property
| | | | Location
| | Encumbrances
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Land
| | Buildings
and
Fixtures
| | Total
| | Accumulated
Depreciation
| | Net
| | Date of
Construction
| | Life used
to compute
depreciation
in latest
income
statement (21)
|
|---|
| Paddock Club Murfreesboro | | | | Murfreesboro, TN | | | —(1 | ) | | | 915 | | | | 14,774 | | | | — | | | | 293 | | | | 915 | | | | 15,067 | | | | 15,982 | | | | (3,164 | ) | | | 12,818 | | | | 1999 | | | | 1–40 | |
| Brentwood Downs | | | | Nashville, TN | | | —(1 | ) | | | 1,193 | | | | 10,739 | | | | (2 | ) | | | 1,753 | | | | 1,191 | | | | 12,492 | | | | 13,683 | | | | (5,137 | ) | | | 8,546 | | | | 1986 | | | | 1–40 | |
| Grand View Nashville | | | | Nashville, TN | | | —(1 | ) | | | 2,963 | | | | 33,673 | | | | — | | | | 1,052 | | | | 2,963 | | | | 34,725 | | | | 37,688 | | | | (5,397 | ) | | | 32,291 | | | | 2001 | | | | 1–40 | |
| Monthaven Park | | | | Nashville, TN | | | 22,725 | | | | 2,736 | | | | 29,556 | | | | — | | | | 751 | | | | 2,736 | | | | 30,307 | | | | 33,043 | | | | (2,678 | ) | | | 30,365 | | | | 1999/01 | | | | 1–40 | |
| Park at Hermitage | | | | Nashville, TN | | | 6,645(17 | ) | | | 1,524 | | | | 14,800 | | | | — | | | | 3,410 | | | | 1,524 | | | | 18,210 | | | | 19,734 | | | | (7,136 | ) | | | 12,598 | | | | 1987 | | | | 1–40 | |
| Northwood | | | | Arlington, TX | | | —(2 | ) | | | 886 | | | | 8,278 | | | | — | | | | 193 | | | | 886 | | | | 8,471 | | | | 9,357 | | | | (979 | ) | | | 8,378 | | | | 1980 | | | | 1–40 | |
| Balcones Woods | | | | Austin, TX | | | —(2 | ) | | | 1,598 | | | | 14,398 | | | | — | | | | 3,389 | | | | 1,598 | | | | 17,787 | | | | 19,385 | | | | (6,020 | ) | | | 13,365 | | | | 1983 | | | | 1–40 | |
| Grand Reserve at Sunset Valley | | | | Austin, TX | | | 11,193 | | | | 3,150 | | | | 11,868 | | | | — | | | | 319 | | | | 3,150 | | | | 12,187 | | | | 15,337 | | | | (957 | ) | | | 14,380 | | | | 1996 | | | | 1–40 | |
| Stassney Woods | | | | Austin, TX | | | 4,050(18 | ) | | | 1,621 | | | | 7,501 | | | | — | | | | 3,118 | | | | 1,621 | | | | 10,619 | | | | 12,240 | | | | (4,247 | ) | | | 7,993 | | | | 1985 | | | | 1–40 | |
| Travis Station | | | | Austin, TX | | | 3,585(19 | ) | | | 2,282 | | | | 6,169 | | | | (1 | ) | | | 2,251 | | | | 2,281 | | | | 8,420 | | | | 10,701 | | | | (3,331 | ) | | | 7,370 | | | | 1987 | | | | 1–40 | |
| Woods, The | | | | Austin, TX | | | —(2 | ) | | | 1,405 | | | | 13,083 | | | | — | | | | 157 | | | | 1,405 | | | | 13,240 | | | | 14,645 | | | | (1,445 | ) | | | 13,200 | | | | 1977 | | | | 1–40 | |
| Celery Stalk | | | | Dallas, TX | | | —(8 | ) | | | 1,463 | | | | 13,165 | | | | (1 | ) | | | 4,214 | | | | 1,462 | | | | 17,379 | | | | 18,841 | | | | (7,244 | ) | | | 11,597 | | | | 1978 | | | | 1–40 | |
| Courtyards at Campbell | | | | Dallas, TX | | | —(2 | ) | | | 988 | | | | 8,893 | | | | — | | | | 1,479 | | | | 988 | | | | 10,372 | | | | 11,360 | | | | (2,921 | ) | | | 8,439 | | | | 1986 | | | | 1–40 | |
| Deer Run | | | | Dallas, TX | | | —(2 | ) | | | 1,252 | | | | 11,271 | | | | — | | | | 1,934 | | | | 1,252 | | | | 13,205 | | | | 14,457 | | | | (3,733 | ) | | | 10,724 | | | | 1985 | | | | 1–40 | |
| Lodge at Timberglen | | | | Dallas, TX | | | —(8 | ) | | | 825 | | | | 7,422 | | | | (1 | ) | | | 2,951 | | | | 824 | | | | 10,373 | | | | 11,197 | | | | (4,466 | ) | | | 6,731 | | | | 1983 | | | | 1–40 | |
| Watermark | | | | Dallas, TX | | | —(8 | ) | | | 960 | | | | 14,839 | | | | — | | | | 121 | | | | 960 | | | | 14,960 | | | | 15,920 | | | | (1,195 | ) | | | 14,725 | | | | 2002 | | | | 1–40 | |
| Legacy Pines | | | | Houston, TX | | | —(2 | ) | | | 2,157 | | | | 19,491 | | | | — | | | | 305 | | | | 2,157 | | | | 19,796 | | | | 21,953 | | | | (2,266 | ) | | | 19,687 | | | | 1999 | | | | 1–40 | |
| Westborough Crossing | | | | Katy, TX | | | —(8 | ) | | | 677 | | | | 6,091 | | | | (1 | ) | | | 1,818 | | | | 676 | | | | 7,909 | | | | 8,585 | | | | (3,279 | ) | | | 5,306 | | | | 1984 | | | | 1–40 | |
| Kenwood Club | | | | Katy, TX | | | —(2 | ) | | | 1,002 | | | | 17,288 | | | | — | | | | 394 | | | | 1,002 | | | | 17,682 | | | | 18,684 | | | | (3,452 | ) | | | 15,232 | | | | 2000 | | | | 1–40 | |
| Lane at Towne Crossing | | | | Mesquite, TX | | | —(2 | ) | | | 1,311 | | | | 12,254 | | | | — | | | | 196 | | | | 1,311 | | | | 12,450 | | | | 13,761 | | | | (1,465 | ) | | | 12,296 | | | | 1983 | | | | 1–40 | |
| Highwood | | | | Plano, TX | | | —(4 | ) | | | 864 | | | | 7,783 | | | | — | | | | 1,416 | | | | 864 | | | | 9,199 | | | | 10,063 | | | | (2,689 | ) | | | 7,374 | | | | 1983 | | | | 1–40 | |
| Los Rios Park | | | | Plano, TX | | | —(2 | ) | | | 3,273 | | | | 29,483 | | | | — | | | | 718 | | | | 3,273 | | | | 30,201 | | | | 33,474 | | | | (3,053 | ) | | | 30,421 | | | | 2000 | | | | 1–40 | |
| Boulder Ridge | | | | Roanoke, TX | | | —(2 | ) | | | 5,432 | | | | 27,930 | | | | — | | | | 419 | | | | 5,432 | | | | 28,349 | | | | 33,781 | | | | (980 | ) | | | 32,801 | | | | 1999 | | | | 1–40 | |
| Cypresswood Court | | | | Spring, TX | | | —(8 | ) | | | 577 | | | | 5,190 | | | | (1 | ) | | | 1,529 | | | | 576 | | | | 6,719 | | | | 7,295 | | | | (2,876 | ) | | | 4,419 | | | | 1984 | | | | 1–40 | |
| Villages at Kirkwood | | | | Stafford, TX | | | 14,439 | | | | 1,918 | | | | 16,358 | | | | — | | | | 432 | | | | 1,918 | | | | 16,790 | | | | 18,708 | | | | (1,178 | ) | | | 17,530 | | | | 1996 | | | | 1–40 | |
| Green Tree Place | | | | Woodlands, TX | | | —(8 | ) | | | 539 | | | | 4,850 | | | | — | | | | 1,439 | | | | 539 | | | | 6,289 | | | | 6,828 | | | | (2,618 | ) | | | 4,210 | | | | 1984 | | | | 1–40 | |
| Township | | | | Hampton, VA | | | 10,800(14 | ) | | | 1,509 | | | | 8,189 | | | | — | | | | 3,419 | | | | 1,509 | | | | 11,608 | | | | 13,117 | | | | (3,458 | ) | | | 9,659 | | | | 1987 | | | | 1–40 | |
Total Properties | | | | | | | | | | $ | 173,907 | | | $ | 1,493,072 | | | $ | 5,616 | | | $ | 298,222 | | | $ | 179,523 | | | $ | 1,791,294 | | | $ | 1,970,817 | | | $ | (473,421 | ) | | $ | 1,497,396 | | | | | | | | | |
Land Held for Future Developments | | | | Various | | | | | | $ | 1,366 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,366 | | | $ | — | | | $ | 1,366 | | | $ | — | | | $ | 1,366 | | | | N/A | | | | N/A | |
Commercial Properties | | | | Various | | | | | | | — | | | | 2,769 | | | | — | | | | 8,719 | | | | — | | | | 11,488 | | | | 11,488 | | | | (4,143 | ) | | | 7,345 | | | | Various | | | | 1–40 | |
Total Other | | | | | | | | | | $ | 1,366 | | | $ | 2,769 | | | $ | — | | | $ | 8,719 | | | $ | 1,366 | | | $ | 11,488 | | | $ | 12,854 | | | $ | (4,143 | ) | | $ | 8,711 | | | | | | | | | |
Total Real Estate Assets | | | | | | | | | | $ | 175,273 | | | $ | 1,495,841 | | | $ | 5,616 | | | $ | 306,941 | | | $ | 180,889 | | | $ | 1,802,782 | | | $ | 1,983,671 | | | $ | (477,564 | ) | | $ | 1,506,107 | | | | | | | | | |
| (1) | | Encumbered by a $600 million FNMA facility, with $587.3 million available and $562.8 million outstanding with a variable interest rate of 4.93% on which there exists thirteen interest rate swap agreements totaling $490 million at an average rate of 5.61% at December 31, 2005. |
| (2) | | Encumbered by a $250 million FNMA facility, with $204.0 available and $158.6 million outstanding, $48.6 million of which had a variable interest rate of 4.58% and $110 million with a fixed rate of 7.18% at December 31, 2005. |
| (3) | | Phase I of Paddock Park—Ocala is encumbered by $6.8 million in bonds on which there exists a $6.8 million interest rate cap of 6.000% which terminates on October 24, 2007. |
| (4) | | Encumbered, along with one corporate property, by a mortgage with a principal balance of $40 million at December 31, 2005, with a maturity of April 1, 2009 and an interest rate of 5.41% on which there is a $25 million interest rate swap agreement with a rate of 4.98%, maturing on March 1, 2009. |
| (5) | | Encumbered by a credit line with AmSouth Bank, with an outstanding balance of $12.5 million at December 31, 2005. |
| (6) | | Encumbered by a mortgage securing a tax-exempt bond amortizing over 25 years with principal balance of $13.2 million at December 31, 2005, and an average interest rate of 5.87%. |
| (7) | | Encumbered by a mortgage securing a tax-exempt bond amortizing over 25 years with a principal balance of $12.5 million at December 31, 2005, and an average interest rate of 5.21%. |
| (8) | | Encumbered by a $100 million Freddie Mac facility, with $96.4 million available and an outstanding balance of $96.4 million and a variable interest rate of 4.96% on which there exists five interest rate swap agreements totaling $83 million at an average rate of 5.41% at December 31, 2005. |
| (9) | | Encumbered by $8.4 million in bonds on which there exists a $8.4 million interest rate swap agreement fixed at 4.73% and maturing on September 15, 2010. |
| (10) | | Encumbered by $7.0 million in bonds on which there exists a $7.0 million interest rate swap agreement fixed at 3.95% and maturing on October 24, 2007. |
F-32
| (11) | | Encumbered by $5.9 million in bonds on which there exists a $5.9 million interest rate swap agreement fixed at 5.13% and maturing on June 15, 2008. |
| (12) | | Encumbered by $7.7 million in bonds on which there exists a $7.7 million interest rate swap agreement fixed at 5.13% and maturing on June 15, 2008. |
| (13) | | Encumbered by $3.4 million in bonds on which there exists a $3.4 million interest rate swap agreement fixed at 5.13% and maturing on June 15, 2008. |
| (14) | | Encumbered by $10.8 million in bonds on which there exists a $10.8 million interest rate swap agreement fixed at 3.95% and maturing on October 24, 2007. |
| (15) | | Encumbered by $3.5 million in bonds on which there exist a $3.0 million interest rate swap agreement fixed at 3.23% and maturing on May 30, 2008. |
| (16) | | Encumbered by $5.5 million in bonds on which there exists a $5.0 million interest rate swap agreement fixed at 3.23% and maturing on May 30, 2008. |
| (17) | | Encumbered by $6.6 million in bonds on which there exists a $6.6 million interest rate swap agreement fixed at 3.63% and maturing on March 15, 2009. Also encumbered by a $11.7 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 4.99% which there exists a $11.7 million interest rate cap of 6.0% which terminates on March 1, 2009. |
| (18) | | Encumbered by $4.0 million in bonds on which there exists a $4.0 million interest rate cap of 6.0% which terminates on March 15, 2009. Also encumbered by a $11.7 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 4.99% which there exists a $11.7 million interest rate cap of 6.0% which terminates on March 1, 2009. |
| (19) | | Encumbered by $3.6 million in bonds on which there exists a $3.6 million interest rate swap agreement fixed at 3.63% and maturing on March 15, 2009. Also encumbered by a $11.7 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 4.99% which there exists a $11.7 million interest rate cap of 6.0% which terminates on March 1, 2009. |
| (20) | | The aggregate cost for Federal income tax purposes was approximately $1,872 million at December 31, 2005. The aggregate cost for book purposes exceeds the total gross amount of real estate assets for Federal income tax purposes, principally due to purchase accounting adjustments recorded under accounting principles generally accepted in the United States of America. |
| (21) | | Depreciation is on a straight line basis over the estimated useful asset life which ranges from 8 to 40 years for land improvements and buildings, 5 years for furniture, fixtures and equipment, and 1 year for fair market value of leases. |
F-33
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
A summary of activity for real estate investments and accumulated depreciation is as follows:
| | | | Year Ended December 31,
| |
|---|
| | | | 2005
| | 2004
| | 2003
|
|---|
| | | | Dollars in thousands
| |
|---|
Real estate investments:
| | | | | | | | | | | | | | |
| Balance at beginning of year | | | | $ | 1,848,707 | | | $ | 1,682,491 | | | $ | 1,463,793 | |
| Acquisitions | | | | | 107,920 | | | | 160,517 | | | | 200,104 | |
| Improvement and development | | | | | 27,301 | | | | 30,875 | | | | 22,374 | |
| Assets held for sale | | | | | — | | | | (14,171 | ) | | | — | |
| Disposition of real estate assets | | | | | (257 | ) | | | (11,005 | ) | | | (3,780 | ) |
| Balance at end of year | | | | $ | 1,983,671 | | | $ | 1,848,707 | | | $ | 1,682,491 | |
| |
Accumulated depreciation:
| | | | | | | | | | | | | | |
| Balance at beginning of year | | | | $ | 399,762 | | | $ | 339,704 | | | $ | 283,277 | |
| Depreciation | | | | | 73,700 | | | | 67,977 | | | | 56,506 | |
| Assets held for sale | | | | | — | | | | (5,622 | ) | | | — | |
| Disposition of real estate assets | | | | | (41 | ) | | | (2,297 | ) | | | (79 | ) |
| Balance at end of year | | | | $ | 473,421 | | | $ | 399,762 | | | $ | 339,704 | |
The Company’s consolidated balance sheet at December 31, 2005, 2004, and 2003 includes accumulated depreciation of $ 4,143, $3,136 and $3,558 respectively, in the caption “Commercial properties, net”.
See accompanying report of independent registered public accounting firm.
F-34
Exhibit Number | Exhibit Description |
3.1 | Amended and Restated Charter of Mid-America Apartment Communities, Inc. dated as of January 10, 1994, as filed with the Tennessee Secretary of State on January 25, 1994 (Filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
3.2 | Articles of Amendment to the Charter of Mid-America Apartment Communities, Inc. dated as of January 28, 1994, as filed with the Tennessee Secretary of State on January 28, 1994 (Filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). |
3.3 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Preferred Stock dated as of October 9, 1996, as filed with the Tennessee Secretary of State on October 10, 1996 (Filed as Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). |
3.4 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
3.5 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). |
3.6 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of June 25, 1998, as filed with the Tennessee Secretary of State on June 30, 1998 (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). |
3.7 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of A Series of Shares of Preferred Stock dated as of December 24, 1998, as filed with the Tennessee Secretary of State on December 30, 1998 (Filed as Exhibit 3.7 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.8 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 11, 2002, as filed with the Tennessee Secretary of State on October 14, 2002 (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). |
3.9 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 28, 2002, as filed with the Tennessee Secretary of State on October 28, 2002 (Filed as Exhibit 3.9 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.10 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of August 7, 2003, as filed with the Tennessee Secretary of State on August 7, 2003 (Filed as Exhibit 3.10 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
3.11 | Bylaws of Mid-America Apartment Communities, Inc. (Filed as an Exhibit to the Registrant’s Registration Statement on Form S-11 (File Number 33-69434) and incorporated herein by reference). |
4.1 | Form of Common Share Certificate (Filed as Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). |
4.2 | Form of 9.5% Series A Cumulative Preferred Stock Certificate (Filed as Exhibit 2 to the Registrant’s Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). |
4.3 | Form of 8 7/8% Series B Cumulative Preferred Stock Certificate (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). |
4.4 | Form of 9 3/8% Series C Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). |
4.5 | Form of 9.5% Series E Cumulative Preferred Stock Certificate (Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
4.6 | Form of 9 ¼% Series F Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). |
4.7 | Form of 8.30% Series G Cumulative Preferred Stock Certificate (Filed as Exhibit 4.7 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
4.8 | Form of 8.30% Series H Cumulative Preferred Stock Certificate (Filed as Exhibit 4.8 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.1 | Second Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P., a Tennessee limited partnership (Filed as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and incorporated herein by reference). |
10.2 † | Employment Agreement between the Registrant and H. Eric Bolton, Jr. (Filed as Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). |
10.3 † | Employment Agreement between the Registrant and Simon R.C. Wadsworth (Filed as Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). |
10.4 † | Fourth Amended and Restated 1994 Restricted Stock and Stock Option Plan (Filed as Exhibit A to the Registrant’s Proxy Statement filed on April 24, 2002 and incorporated herein by reference). |
10.5 | AmSouth Revolving Credit Agreement (Amended and Restated) dated July 17, 2003 (Filed as Exhibit 10.10 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.6 | First Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 19, 2004 (Filed as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.7 | Second Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 23, 2005. |
10.8 | Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 30, 2004. |
10.9 | First Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2004 (Filed as Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.10 | Second Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated April 30, 2004 (Filed as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.11 | Third Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 3, 2004 (Filed as Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.12 | Fourth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 31, 2004 (Filed as Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.13 | Fifth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated October 1, 2004 (Filed as Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.14 | Sixth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 1, 2004 (Filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.15 | Seventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 15, 2004 (Filed as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.16 | Eighth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2005. |
10.17 | Ninth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated September 23, 2005. |
10.18 | Tenth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 16, 2005. |
10.19 | Eleventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated February 22, 2006. |
10.20 | Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P., dated March 30, 2004. |
10.21 | First Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2004. |
10.22 | Second Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of August 3, 2004 (Filed as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.23 | Third Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of December 1, 2004 (Filed as Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.24 | Fourth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2005. |
10.25 | Fifth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated September 23, 2005. |
10.26 | Sixth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated February 22, 2006. |
10.27 | Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways- Columbia, L.P. dated June 1, 2001 (Filed as Exhibit 10.17 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.28 | Amendment No. 1 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated December 24, 2002 (Filed as Exhibit 10.18 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.29 | Amendment No. 2 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated May 30, 2003 (Filed as Exhibit 10.19 to the Registrant’s Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
10.30 | Amendment No. 3 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated March 2, 2004. |
10.31 | Amendment No. 4 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated November 17, 2005. |
10.32 | Amendment No. 5 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated February 23, 2006. |
10.33 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Sunset Valley Apartments, Texas) (Filed as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.34 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004 (Village Apartments, Texas) (Filed as Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.35 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Coral Springs Apartments, Florida) (Filed as Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.36 | Credit Agreement dated September 28, 1998 by and among Jefferson Village, L.P., Jefferson at Sunset Valley, L.P. and JPI Coral Springs, L.P. (Filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.37 | Credit Agreement by and among Mid-America Apartment Communities, Inc., Mid-America Apartments L.P. and Mid- America Apartments of Texas, L.P. and Financial Federal Savings Bank dated June 29, 2004 (Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference). |
10.38 | Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated March 2, 2004. |
10.39 | Amendment No. 1 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated November 17, 2005. |
10.40 | Amendment No. 2 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated February 23, 2006. |
10.41† | Mid-America Apartment Communities, Inc. Non-Qualified Deferred Compensation Plan for Outside Company Directors as Amended Effective January, 1 2005 (Filed as Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.42† | Mid-America Apartment Communities Non-Qualified Deferred Compensation Retirement Plan as Amended Effective January 1, 2005 (Filed as Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
10.43 † | Mid-America Apartment Communities 2005 Key Management Restricted Stock Plan (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 20, 2005 and incorporated herein by reference). |
10.44 † | 2005 Executive Annual Bonus Program (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 25, 2005 and incorporated herein by reference). |
10.45† | Form of Restricted Stock Agreement (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2005 and incorporated herein by reference). |
11 | Statement re: computation of per share earnings (included within the Form 10-K). |
14 | Code of Ethics (Filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference). |
21 | List of Subsidiaries |
23.1 | Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP |
23.2 | Consent of Independent Registered Public Accounting Firm, KPMG LLP |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
† Management contract or compensatory plan or arrangement. |
