UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-12762
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1543819
(State of Incorporation) (I.R.S. Employer Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class at July 15, 2000
Common Stock, $.01 par value 17,568,612
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and
December 31, 1999
Consolidated Statements of Operations for the three and six
months ended June 30, 2000 and 1999 (Unaudited)
Consolidated Statements of Cash Flows for the six months ended
June 30, 2000 and 1999 (Unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
June 30, 2000 (Unaudited) and December 31, 1999
(Dollars in thousands)
2000 1999
---- ----
Assets:
Real estate assets:
Land $ 122,665 $ 119,823
Buildings and improvements 1,182,580 1,172,780
Furniture, fixtures and equipment 28,928 28,238
Construction in progress 65,991 58,840
- -------------------------------------------------------------------------------------
1,400,164 1,379,681
Less accumulated depreciation (161,894) (146,611)
- -------------------------------------------------------------------------------------
1,238,270 1,233,070
Land held for future development 1,366 1,710
Commercial properties, net 4,069 5,217
Investment in and advances to real estate joint venture 7,858 8,054
- -------------------------------------------------------------------------------------
Real estate assets, net 1,251,563 1,248,051
Cash and cash equivalents 16,013 14,092
Restricted cash 14,949 12,537
Deferred financing costs, net 9,998 10,272
Other assets 13,184 13,871
- -------------------------------------------------------------------------------------
Total assets $ 1,305,707 $ 1,298,823
=====================================================================================
Liabilities and Shareholders' Equity:
Liabilities:
Notes payable $ 765,476 $ 744,238
Accounts payable 1,501 2,122
Accrued expenses and other liabilities 23,539 23,199
Security deposits 4,798 4,739
Deferred gain on disposition of properties 4,337 4,581
- -------------------------------------------------------------------------------------
Total liabilities and deferred gain 799,651 778,879
Minority interest 54,368 56,060
Shareholders' equity:
Preferred stock, $.01 par value, 20,000,000 shares
authorized, $173,470,750 or $25 per share liquidation
preference:
2,000,000 shares at 9.5% Series A Cumulative 20 20
1,938,830 shares at 8.875% Series B Cumulative 19 19
2,000,000 shares at 9.375% Series C Cumulative 20 20
1,000,000 shares at 9.5% Series E Cumulative 10 10
Common stock, $.01 par value (authorized 50,000,000
shares;
issued 17,563,617 and 17,971,960 shares
June 30, 2000 and December 31, 1999, respectively) 176 180
Additional paid-in capital 553,289 562,547
Other (1,414) (1,053)
Accumulated distributions in excess of net income (100,432) (89,869)
Treasury stock at cost, 355,900 shares
at December 31, 1999 - (7,990)
- -------------------------------------------------------------------------------------
Total shareholders' equity 451,688 463,884
- -------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,305,707 $ 1,298,823
=====================================================================================
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three and six months ended June 30, 2000 and 1999
(Dollars in thousands except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------ --------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Rental revenue $54,256 $54,920 $108,474 $110,826
Other property revenues 913 729 1,609 1,463
- ----------------------------------------------------------------------------------------------------------------
Total property revenues 55,169 55,649 110,083 112,289
Interest and other income 359 506 714 709
Management and deveopment income, net 182 177 362 423
Equity in earnings (loss) of real estate joint venture (109) 30 (150) 51
- ----------------------------------------------------------------------------------------------------------------
Total revenues 55,601 56,362 111,009 113,472
- ----------------------------------------------------------------------------------------------------------------
Expenses:
Property operating expenses:
Personnel 5,989 6,294 11,858 12,776
Building repairs and maintenance 2,298 2,467 4,570 4,847
Real estate taxes and insurance 6,311 6,288 12,630 12,371
Utilities 1,686 2,167 3,635 4,599
Landscaping 1,486 1,411 2,917 2,822
Other operating 2,489 2,579 4,963 5,041
Depreciation and amortization 12,658 12,625 26,117 25,141
- ----------------------------------------------------------------------------------------------------------------
32,917 33,831 66,690 67,597
General and administrative 3,746 3,010 7,526 6,149
Interest expense 12,318 12,195 24,538 24,196
Amortization of deferred financing costs 819 685 1,533 1,377
- ----------------------------------------------------------------------------------------------------------------
Total expenses 49,800 49,721 100,287 99,319
- ----------------------------------------------------------------------------------------------------------------
Income before gain (loss) on dispositions,
minority interest in operating partnership
income and extraordinary item 5,801 6,641 10,722 14,153
- ----------------------------------------------------------------------------------------------------------------
Gain (loss) on dispositions, net 6,394 (4,366) 9,385 332
- ----------------------------------------------------------------------------------------------------------------
Income before minority interest in operating
partnership income and extraordinary item 12,195 2,275 20,107 14,485
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Minority interest in operating partnership income (loss) 1,403 (414) 1,943 782
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 10,792 2,689 18,164 13,703
- ----------------------------------------------------------------------------------------------------------------
Extraordinary item - loss on debt extinguishment (148) - (204) (67)
- ----------------------------------------------------------------------------------------------------------------
Net income 10,644 2,689 17,960 13,636
Dividends on preferred shares 4,029 4,029 8,059 8,056
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) available for common shareholders $ 6,615 $(1,340) $ 9,901 $ 5,580
================================================================================================================
(Continued)
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations (Continued)
Three and six months ended June 30, 2000 and 1999
(Dollars in thousands except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) available per common share:
- -------------------------------------------------------------------------------------------------------------------
Basic (in thousands):
Average common shares outstanding 17,584 18,967 17,607 18,935
- -------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
Net income (loss) available per common share $ 0.38 $ (0.07) $ 0.57 $ 0.30
before extraordinary item
Extraordinary item (0.01) - (0.01) (0.01)
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) available per common share $ 0.37 $ (0.07) $ 0.56 $ 0.29
- -------------------------------------------------------------------------------------------------------------------
Diluted (in thousands):
Average common shares outstanding 17,584 18,967 17,607 18,935
Effect of dilutive stock options 70 37 47 20
- -------------------------------------------------------------------------------------------------------------------
Average dilutive common shares outstanding 17,654 19,004 17,654 18,955
- -------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
Net income (loss) available per common share $ 0.38 $ (0.07) $ 0.57 $ 0.30
before extraordinary item
Extraordinary item (0.01) - (0.01) (0.01)
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) available per common share $ 0.37 $ (0.07) $ 0.56 $ 0.29
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Dollars in thousands)
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 17,960 $ 13,636
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 27,650 26,518
Equity in (earnings) loss of real estate joint venture 150 (51)
Minority interest in operating partnership income 1,943 782
Extraordinary item 204 67
Gain on dispositions (9,385) (332)
Changes in assets and liabilities:
Restricted cash (2,412) (1,616)
Other assets 128 528
Accounts payable (621) (6,080)
Accrued expenses and other 267 5,529
Security deposits 59 33
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 35,943 39,014
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of real estate assets (14,952) -
Improvements to properties (7,091) (16,563)
Construction of units in progress and future development (40,521) (36,647)
Proceeds from disposition of real estate assets 44,563 69,184
Proceeds from sale of development and construction assets - 19,100
Investment in and advances to real estate joint venture 46 (6,027)
Escrow funding for tax free exchange, net 7,679 (7,744)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (10,276) 21,303
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in credit lines 23,405 (18,747)
Proceeds from notes payable - 11,760
Principal payments on notes payable (11,969) (15,945)
Payment of deferred financing costs (1,259) (633)
Repurchase of common stock (3,680) -
Proceeds from issuances of common shares and units 1,707 2,854
Proceeds from issuance of preferred shares - (35)
Distributions to unitholders (3,427) (3,454)
Dividends paid on common shares (20,465) (21,747)
Dividends paid on preferred shares (8,058) (8,056)
- ---------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (23,746) (54,003)
- ---------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,921 6,314
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 14,092 7,237
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 16,013 $ 13,551
===============================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 24,661 $ 24,295
Supplemental disclosure of noncash investing and financing activities:
Assumption of debt related to property acquisitions $ 9,559 $ -
Conversion of units for common shares $ 169 $ 47
Issuance of advances in exchange for common shares and units $ 173 $ 97
Interest capitalized $ 2,099 $ 2,397
See accompanying notes to consolidated financial statements.
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999 (Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the accounting policies in effect as of December 31, 1999, as
set forth in the annual consolidated financial statements of Mid-America
Apartment Communities, Inc. ("MAAC" or the "Company"), as of such date. In the
opinion of management, all adjustments necessary for a fair presentation of the
consolidated financial statements have been included and all such adjustments
were of a normal recurring nature. All significant intercompany accounts and
transactions have been eliminated in consolidation. The results of operations
for the three and six-month period ended June 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
2. Real Estate Transactions
Property Dispositions
In February 2000, the Company sold the 120-unit Pine Trails Apartments, located
in Clinton, MS, for approximately $2.8 million and the 248-unit MacArthur Ridge
Apartments, located in Irving, TX, for approximately $12.0 million. The proceeds
from both of these dispositions were used to pay down the Company's outstanding
lines of credit (the Company has two outstanding lines of credit, Amsouth and
FNMA, collectively referred to as "Credit Lines") fund the development pipeline,
and to fund the Company's share repurchase program.
In April 2000, the Company sold the 176-unit Clearbrook Village Apartments for
approximately $7.8 million, the 253-unit Winchester Square Apartments for
approximately $8.0 million and the 624-unit McKellar Woods Apartments for
approximately $14.0 million, all located in Memphis, Tennessee. In connection
with the sale, the Company provided a $400,000 loan to the buyer of Clearbrook
Village Apartments repayable in ten years at a 7.5% interest rate. The proceeds
from these sales were used to fund two acquisitions, to pay down the Company's
Credit Lines, and to fund the Company's share repurchase program.
In connection with the dispositions discussed above, the Company recorded a gain
for financial reporting purposes of approximately $9.3 million for the six month
period ended June 30, 2000.
Property Acquisitions
In April 2000 the Company acquired the 200-unit Huntington Chase Apartments
located in Warner Robins, GA for approximately $11.6 million and assumed a 6.85%
note payable of $9.6 million. The Company also acquired the 240-unit Indigo
Point Apartments located in Brandon, FL for approximately $11.7 million.
3. Stock Repurchase Plan
In connection with the Company's stock repurchase plan, the Company repurchased
and retired 146,400 shares of common stock during the second quarter of 2000 for
a cost of approximately $3.4 million at an average price per common share of
$23.18. During the current year, the Company has repurchased a total of 159,200
shares at a cost of approximately $3.7 million.
4. Share and Unit Information
At June 30, 2000, 17,563,617 common shares and 2,955,150 operating partnership
units were outstanding, a total of 20,518,767 shares and units. Additionally,
MAAC has outstanding options for 1,291,119 shares of common stock at June 30,
2000.
5. Segment Information
At June 30, 2000, the Company owned and operated 127 apartment communities in 13
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. Management evaluates the performance of each
individual property based on its contribution of revenues and net operating
income ("NOI"), which is composed of property revenues less all operating costs
including insurance and real estate taxes. The Company's reportable segments are
its individual properties because each is managed separately and requires
different operating strategy and expertise based on the geographic location,
community structure and quality, population mix, and numerous other factors
unique to each community.
The revenues and profits for the aggregated communities are summarized as
follows for the three and six months ended as of June 30:
Three months Six months
ended June 30, ended June 30,
---------------------- ----------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
Multifamily rental revenues $ 58,754 $ 57,908 $ 117,427 $114,178
Other multifamily revenues 955 594 1,699 1,089
---------------------------------------------
Segment revenues 59,709 58,502 119,126 115,267
Reconciling items to consolidated revenues:
Joint venture revenues (4,540) $ (2,893) (9,043) $ (2,981)
Management and development income, net 182 177 362 423
Equity in earnings (loss) of real estate joint venture (109) 30 (150) 51
Interest income and other revenues 359 546 714 712
---------------------------------------------
Total revenues $ 55,601 $ 56,362 $ 111,009 $113,472
=============================================
Multifamily net operating income $ 37,367 $ 36,169 $ 74,440 $ 71,670
Reconciling items to net income available for common shareholers:
Joint venture net operating income (2,457) $ (1,766) (4,930) $ (1,840)
Management and development income, net 182 177 362 423
Equity in earnings (loss) of real estate joint venture (109) 30 (150) 51
Interest income and other revenues 359 546 714 712
Interest expense (12,318) (12,195) (24,538) (24,196)
General and administrative expenses (3,746) (3,010) (7,526) (6,149)
Depreciation and amortization (12,658) (12,625) (26,117) (25,141)
Amortization of deferred financing costs (819) (685) (1,533) (1,377)
Gain (loss) on dispositions 6,394 (4,366) 9,385 332
Extraordinary items, net (148) - (204) (67)
Minority interest in operating partnership (1,403) 414 (1,943) (782)
Dividends on preferred shares (4,029) (4,029) (8,059) (8,056)
---------------------------------------------
Net income (loss) available for common shareholders $ 6,615 $ (1,340) $ 9,901 $ 5,580
=============================================
2000 1999
------------- --------------
Assets:
Multifamily real estate assets $1,501,295 $1,461,153
Accumulated depreciation - multifamily assets (165,926) (136,792)
----------------------------
Segment assets 1,335,369 1,324,361
----------------------------
Reconciling items to total assets:
Joint venture multifamily real estate assets, net (97,099) (65,085)
Land held for future development 1,366 1,366
Commercial properties, net 4,069 4,401
Investment in and advances to real estate joint venture 7,858 5,578
Cash and restricted cash 30,962 32,148
Deferred financing costs 9,998 9,615
Other assets 13,184 10,861
----------------------------
Total assets $1,305,707 $1,323,245
============================
PART I. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three and six months ended June 30,
2000 and 1999. This discussion should be read in conjunction with the financial
statements appearing elsewhere in this report. These financial statements
include all adjustments, which are, in the opinion of management, necessary to
reflect a fair statement of the results for the interim periods presented, and
all such adjustments are of a normal recurring nature.
The total number of apartment units the Company owned or had an ownership
interest in, including the 10 properties containing 2,793 apartment units owned
by its 33.3% unconsolidated joint venture, at June 30, 2000 was 33,591 in 127
communities compared to the 34,825 units in 130 communities owned at June 30,
1999. The average monthly rental per apartment unit for the Company's
non-development owned units increased to $631 at June 30, 2000 from $604 at June
30, 1999. Overall occupancy at June 30, 2000 and 1999 was 95.4% and 95.0%,
respectively.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") represents net income (computed in accordance with
generally accepted accounting principles "GAAP") excluding extraordinary items,
minority interest in operating partnership income (loss), gain or loss on
disposition of real estate assets, and certain non-cash and other items,
(primarily depreciation and amortization), less preferred stock dividends.
Adjustments for the unconsolidated joint venture are made to include the
Company's portion of FFO in the calculation. The Company computes FFO in
accordance with NAREIT's definition which reflects the recommendations of
NAREIT's Best Financial Practices Council that FFO should include all operating
results, both recurring and non-recurring, except those defined as
"extraordinary" under GAAP. The Company's FFO calculation reflects this
definition for all periods presented. 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 because they are necessary for the continued use of the
property, 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 in
understanding the Company's results of operations in that such calculation
reflects the Company's ability to support interest payments and general
operating expenses before the impact of certain activities such as changes in
other assets and accounts payable. 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. Depreciation expense
includes approximately $192,000 and $194,000 at June 30, 2000 and 1999,
respectively, which relates to computer software, office furniture and fixtures
and other assets found in other industries and which is required to be
recognized, for purposes of computing funds from operations.
Funds from operations for the three and six months ended June 30, 2000 and 1999
is calculated as follows (in thousands):
Three months Six months
ending June 30, ending June 30,
------------------------ ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income available for common shareholders $ 6,615 $ (1,340) $ 9,901 $ 5,580
Depreciation and amortization - real property 12,562 12,530 25,925 24,947
Adjustment for joint venture depreciation 301 188 600 188
Minority interest in operating partnership 1,403 (414) 1,943 782
(Gain) loss on dispositions, net (6,394) 4,366 (9,385) (332)
Extraordinary items 148 - 204 67
-------------------------------------------------
Funds from operations $ 14,635 $ 15,330 $ 29,188 $ 31,232
=================================================
Weighted average shares and units:
Basic 20,540 21,978 20,566 21,946
Diluted 20,611 22,014 20,613 21,978
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THE THREE MONTHS ENDED JUNE
30, 1999
Property revenues for 2000 decreased by approximately $480,000 due primarily to
decreases of (i) $1,750,000 due to the sale of 10 properties to the BRE/MAAC
Associates L.L.C. joint venture ("Joint Venture") in 1999 and (ii) $1,444,000
due to the sale of Sailwinds at Lake Magdalene Apartments and Regency Club
Apartments in 1999 ("1999 Dispositions") and (iii) $1,798,000 due to the sale of
Clearbrook Village, McKellar Woods, Winchester Square, MacArthur Ridge and Pine
Trails Apartment Communities in 2000 ("2000 Dispositions"). These decreases were
partially offset by increases in rental revenue of (i) $642,000 from the
purchase of Huntington Chase Apartments and Indigo Point Apartments in 2000 and
(ii) $2,244,000 from the communities in development ("Development Communities")
and (iii) $1,626,000 from the communities owned throughout both periods.
Property operating expenses for 2000 decreased approximately $947,000 due
primarily to decreases of (i) $770,000 due to the sale of 10 properties to the
Joint Venture in 1999 and (ii) $674,000 due to 1999 Dispositions and (iii)
$744,000 due to 2000 Dispositions. These decreases were partially offset by
increases in operating expenses of (i) $239,000 from the purchase of Huntington
Chase Apartments and Indigo Point Apartments in 2000 and (ii) $724,000 from
Development Communities and (iii) $278,000 from the communities owned throughout
both periods.
General and administrative expense increased by approximately $736,000 for the
three months ended June 30, 2000. The majority of the increase is related to
additional salaries, benefits, training, and other costs related to the addition
and expansion of certain administrative functions to support the Company's
portfolio. Based on current plans, the Company expects general and
administrative expenses for the full year of 2000 to increase by approximately
3% to 4% over 1999.
Depreciation and amortization expense increased by approximately $33,000
primarily due to (i) $123,000 from the purchase of Huntington Chase Apartments
and Indigo Point Apartments in 2000 and (ii) $502,000 from Development
Communities and (iii) $1,114,000 from the communities owned throughout both
periods. These increases were partially offset by depreciation and amortization
expense decreases of (i) $681,000 due to the sale of 10 properties to the Joint
Venture in 1999 and (ii) $369,000 due to 1999 Dispositions and (iii) $337,000
due to 2000 Dispositions and (iiii) $319,000 due to the dissolution of the
Flournoy Service Corporation.
Interest expense increased $123,000 during the three months ended June 30, 2000
mainly due to additional funding required for the new development pipeline and
increased interest rates on the variable rate debt.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS ENDED JUNE 30,
1999
Property revenues for 2000 decreased by approximately $2,206,000 due primarily
to decreases of (i) $6,117,000 due to the sale of 10 properties to the Joint
Venture in 1999 and (ii) $2,852,000 due to 1999 Dispositions and (iii)
$2,004,000 due to 2000 Dispositions. These decreases were partially offset by
increases in rental revenue of (i) $642,000 from the purchase of Huntington
Chase Apartments and Indigo Point Apartments in 2000 and (ii) $4,753,000 from
Development Communities and (iii) $3,372,000 from the communities owned
throughout both periods.
Property operating expenses for 2000 decreased approximately $1,883,000 due
primarily to decreases of (i) $2,503,000 due to the sale of 10 properties to the
Joint Venture in 1999 and (ii) $1,336,000 due to 1999 Dispositions and (iii)
$834,000 due to 2000 Dispositions. These decreases were partially offset by
increases in operating expenses of (i) $239,000 from the purchase of Huntington
Chase Apartments and Indigo Point Apartments in 2000 and (ii) $1,580,000 from
Development Communities and (iii) $971,000 from the communities owned throughout
both periods.
General and administrative expense increased by approximately $1,377,000 for the
six months ended June 30, 2000 The majority of the increase is related to
additional salaries, benefits, training, and other costs related to the addition
and expansion of certain administrative functions to support the Company's
portfolio. Based on current plans, the Company expects general and
administrative expenses for the full year of 2000 to increase by approximately
3% to 4% over 1999.
Depreciation and amortization expense increased by approximately $976,000
primarily due to (i) $123,000 from the purchase of Huntington Chase Apartments
and Indigo Point Apartments in 2000 and (ii) $1,463,000 from Development
Communities and (iii) $2,608,000 from the communities owned throughout both
periods. These increases were partially offset by depreciation and amortization
expense decreases of (i) $1,521,000 due to the sale of 10 properties to the
Joint Venture in 1999 and (ii) $739,000 due to 1999 Dispositions and (iii)
$321,000 due to 2000 Dispositions and (iiii) $637,000 due to the dissolution of
the Flournoy Service Corporation.
Interest expense increased $342,000 during the six months ended June 30, 2000
mainly due to the additional funding required to complete the Company's
development pipeline.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased $3,071,000 for the six
months ended June 30, 2000 as compared to the same period one year earlier. The
majority of the decrease relates to a $3,431,000 decrease in income before gain
on dispositions, minority interest in operating partnership income and
extraordinary items mainly due to the contribution of assets sold during the
current year. The asset sales during the last year relate to the Company's
strategy to fund the share repurchase program, fund the development pipeline,
and to dispose of assets not meeting the Company's long-term strategic
objectives. Each of these intended uses of sales proceeds is expected to
eventually, on a per share basis, generate a greater return that the expected
long-term return of the assets sold.
Net cash from investing activities decreased by $31,579,000 from a source of
$21,303,000 for the six months ended June 30, 1999 to a usage of $10,276,000 for
the six months ended June 30, 2000. The main components of this decrease relate
to (i) $14,952,000 real estate purchased during the 2000, verses none for the
same period in 1999, (ii) $5,598,000 additional spending for capital
improvements and development and (iii) $43,721,000 less in proceeds from assets
sales in 2000. These decreases were partially offset by the utilization of
$7,679,000 of funds placed in escrow during 1999 related to the tax free
exchange of certain properties sold and the prior year investment of $6,027,000
in the real estate joint venture.
As of June 30, 2000 the Company's communities in various stages of development
and lease-up are summarized as follows (Dollars in thousands):
Apartment Units
-------------------------
Current
Total Estimated Cost to
Location Units Cost Date Completed Occupied
----------------- -------- ----------- ------------------------ -----------
Development Communities:
In Lease-up:
Grand Reserve Lexington Lexington, KY 370 32,922 30,339 212 94
Kenwood Club at the Park Katy(Houston), TX 320 18,686 17,074 320 119
---------------------------------------------------------
690 $ 51,608 $ 47,413 532 213
---------------------------------------------------------
Under Construction:
Grande View Nashville Nashville, TN 433 35,796 25,317 - -
Reserve at Dexter Lake Phase II Memphis, TN 244 16,672 15,466 164 101
Reserve at Dexter Lake Phase III Memphis, TN 244 17,300 - - -
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921 69,768 40,783 164 101
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Total Units Currently Under Development 1,611 $ 121,376 $ 88,196 696 314
=========================================================
Actual capital expenditures for development of communities and capital
improvements for the six months ending June 30, 2000 are summarized below:
(Dollars in thousands)
Community development $ 40,521
Recurring capital at stabilized properties 5,110
Revenue enhancing projects at stabilized properties 1,650
Corporate additions and improvements 331
---------
$ 47,612
=========
Net cash used by financing activities decreased by $30,257,000 from $54,003,000
in 1999 to $23,746,000 for the same period in 2000. The decrease was primarily
due to borrowing and repayment activity of the Company's credit lines and notes
payable. During the first six months of 1999, the Company used a combined
$22,932,000 for principal payments and reductions of the credit lines, whereas,
for the same period in 2000 the Company received net proceeds of $11,436,000
from activity on the credit lines and principal payments. These proceeds were
primarily used to fund the development pipeline and capital improvements, as
well as to fund the Company's share repurchase program. The Company used
$3,680,000 during 2000 to repurchase common shares, which is partially offset by
$1,282,000 less in dividend distributions relating to the shares repurchased.
At June 30, 2000 the Company had two major outstanding lines of credit: a $195
million credit facility with FNMA and a $150 million facility with Amsouth Bank
("the Credit Lines"). At June 30, 2000, the Company had $196.8 million
outstanding on the Credit Lines, and $228.6 million (including the Credit Lines)
of floating rate debt at an average interest rate of 6.7%; all other debt was
fixed rate term debt at an average interest rate of 7.1%. The Company expects to
use the Credit Lines to fund future property acquisitions, property development,
capital expenditures, share repurchases, and to provide letters of credit as
credit enhancements for tax-exempt bonds. The Credit Lines are secured and are
subject to borrowing base calculations that effectively reduce the maximum
amount that may be borrowed under the Credit Lines to $260 million as of June
30, 2000.
The weighted average interest rate and weighted average maturity at June 30,
2000 for the $765.5 million of total debt outstanding were 7.0% and 10.2 years,
respectively.
The Company believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements (including recurring capital expenditures at the
apartment communities) and payment of distributions by the Company in accordance
with REIT requirements under the applicable tax code.
The Company expects to meet its long term liquidity requirements, such as
scheduled mortgage debt maturities, property developments and acquisitions,
expansions and non-recurring capital expenditures, through long and medium-term
collateralized and uncollateralized fixed rate borrowings, fundings from the
Company's Credit Lines, potential asset sales and joint venture transactions.
INSURANCE
In the opinion of management, property and casualty insurance is in place which
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 thereunder, and thus may enable
the Company to seek rent increases. The substantial majority of these 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.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. These statements include the plans and
objectives of management for future operations, including plans and objectives
relating to property acquisitions and dispositions, capital expenditures, future
development, and general and administrative expense increases. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate and, therefore, there
can be no assurance that the forward-looking statements included in this report
on Form 10-Q will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
This information has been omitted as there have been no material changes in the
Company's market risk as disclosed in the 1999 Annual Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was held on June
8, 2000.
George E. Cates, Simon R. Wadsworth, and John S. Grinalds were elected
directors at the meeting by approximately 97% of the shares
represented at the meeting.
KPMG LLP was ratified as the Company's independent auditors for 2000
by approximately 99% of the shares represented at the meeting.
The Third Amended and Restated 1994 Restricted Stock and Stock Option
Plan providing for the issuance of up to an additional 1,000,000
shares of common stock or units of limited partnership interests in
Mid-America Apartments, L.P. was approved by approximately 83% of the
shares represented at the meeting.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.
(27) Financial Data Schedule for the period ended 6/30/00
(b) Reports on Form 8-K
Date of
Form Event Reported Report Date Filed
8-K Board approval for repurchase of 5/18/2000 5/22/2000
$1 million preferred shares as part
of share repurchase program.
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: 8/14/00 /s/Simon R.C. Wadsworth
Simon R.C. Wadsworth
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)