UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 16, 2001
Date of Report (Date of earliest event reported)
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 1-12762 62-1543819
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(State of Incorporation) (Commission File Number) (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 or address, if changed since last report)
Item 7. Financial Statements and Exhibits
c. Exhibits
Exhibit 99.1 Press Release
Exhibit 99.2 Supplemental Data
Item 9. Regulation FD
On February 15, 2001, the Registrant issued a press release announcing its
results for the fourth quarter of 2000. The related press release is attached
hereto as Exhibit 99.1.
Attached as Exhibit 99.2 is supplemental data to the financial information
contained in the February 15, 2001 press release.
On February 16, 2001, the Registrant held its fourth quarter 2000 conference
call. The following is the script from that conference call.
Fourth Quarter 2000 Conference Call February 16, 2001
Welcome to this commentary on Mid-America's fourth quarter earnings release
yesterday afternoon. This is George Cates, CEO, and with me are Eric Bolton,
President and COO, and Simon Wadsworth, CFO. We'll not repeat particulars from
that release, only a few highlights. For a copy of the release and supplemental
data, please contact Michelle Sargent at Mid-America or check our web-site at
www.maac.net.
Before we begin, I'm required to note that our remarks will involve some
forward-looking statements. Please refer to the safe-harbor language included in
our press release and our 34-Act filings with the Securities and Exchange
Commission which describe certain risk factors that may impact future results.
This call is being recorded and members of the press may be participating.
Highlights of our release yesterday include:
o FFO for the quarter was 71(cent)/share, and for the year $2.80, in line
with estimates
o Development properties are continuing to mature, creating greater balance
sheet flexibility and adding to share value throughout 2001 and thereafter
o Our award-winning portfolio is in outstanding condition and our business is
sound
o Capital outlays continue to fall, due both to the completion of our
acquisition refurbishment program and of the development pipeline. The
resulting higher cash retention provides us with additional earnings
opportunities and contributes to earnings growth as this year progresses
o Our internet service provider has pulled out of the apartment business. Our
markets as a whole are a little softer than a year ago. Even with interest
cost savings, these two factors led us to lower our forecast for 2001
Eric Bolton: During the fourth quarter we continued to experience new supply
excesses in several of our markets which pressured revenue performance. In
addition, in December we noted a higher than normal dip in leasing traffic. The
always slow leasing holiday period was weakened further by harsher than normal
weather in several markets. October and November results were in line with
expectations, but with December's weak leasing traffic the quarter's revenue was
not as strong as we had expected. One month isn't a trend, but it is a caution
signal.
While occupancy, rent growth and unit turnover were all satisfactory, new supply
pressures were evidenced by higher concession costs and an increase of two days
in the average number of days vacant between residents. We have seen leasing
traffic pick back up in January and early February, this is always a tough time
of the year to make up lost ground before the traditional seasonal upturn in the
second quarter.
New supply is above absorption levels in the Memphis and Jackson, MS markets,
which together represent about 19% of our portfolio. We expect a fairly soft
market for Memphis throughout the year. Jackson could improve by summer as new
development additions have slowed in that market.
Overall occupancy is steady compared to last year, and we've seen improvement in
several markets. Occupancy in both Columbus, GA and Columbia SC is improving.
Our Georgia properties; Nashville TN; and all of our Texas markets are also
performing well. The Florida portfolio is steady and performing at a
satisfactory level, as are the Carolinas. In general, markets continue to behave
in the normal pattern of being out of balance for only sort periods, but they
are still slightly tougher than a year ago. We maximize revenue by maintaining
occupancy, so any weakness, wherever it occurs, shows itself in higher
concessions and marketing costs.
Overall, our new development properties continued to meet lease-up expectations
through the fourth quarter. The most significant market pressures of the group
are at Grand Reserve, 370 units in Lexington, KY, which was 57% leased by year
end, and at the 244-unit second phase of our Reserve at Dexter Lake property in
Memphis which was 83% leased by year end. The lease-up at Dexter Lake represents
our most significant challenge, as we will begin receiving the first apartments
in the third and final phase, representing another 244 units, this summer. While
facing a tough lease-up environment, we remain very enthusiastic about this
community, once stabilized. Located in a high growth corridor of the region and
near a successful new regional mall, it should stabilize in 2002 at 95%
occupancy and will be a solid long term contributor to share value.
Lease up at Kenwood Club, 320 units in Katy, TX is on target. Leased occupancy
was 83% at yearend. Lease-up is well underway at Grande View in Nashville, TN
and continues to exceed our expectations. By yearend, occupancy was 70% of
completed units. We remain comfortable with the current forecast calling for
full stabilization of this 433-unit property by the spring of next year.
Operating expenses remain under tight control. The only areas of operating
expense pressure during the quarter were advertising and marketing costs as
competitive pressures intensified in several markets. Offsetting these pressures
were very strong results in repair and maintenance expenses which were up only
0.4% for the quarter and continued progress with our utility expense management
initiatives. Same store utility expenses were down 2.6% for the fourth quarter;
marking the ninth straight quarter we've reduced costs in this important area of
property operations.
Early last year we initiated a program to implement high-speed internet access
service throughout our portfolio. We earned 3.8(cent) per share of access fees
and a small amount of revenue participation during 2000 with no capital outlay
whatsoever by Mid-America. By yearend, however, we determined that our internet
service provider was unable to fulfill their commitment, and the agreement was
terminated last month. We expect shortly to announce a replacement program with
installation starting by mid-year. As a result, we have revised our forecast for
2001 with this fee stream to resume in early 2002.
Simon Wadsworth. We are reducing our internal forecast from $2.90 to a range of
$2.83 to $2.87, as detailed in our press release. Last year, our internet
services provider generated 3.8(cent) of income. We are pleased to have received
that income in 2000...and that we did not make the mistake of putting any cash
into the volatile broadband business.
While same store occupancy is at about the same as last year, we are taking a
more cautious forward view, trimming same store NOI growth forecasts by 50 bp to
2% for 2001. We are also projecting slightly slower lease-up and higher
concessions at two of our development properties (the final two phases of
Reserve at Dexter Lake in Memphis and Grande Reserve in Lexington), reflective
again of local market conditions. For these reasons, we have adjusted our
forecast accordingly.
These changes should be offset partially by the favorable impact of lower
interest rates, resulting in a net reduction of our original $2.90 forecast of
almost 4(cent) from the gap in internet income and about 3(cent) from market
conditions. Thus our internal forecasts are currently for FFO in the $2.83 to
$2.87 range for 2001.
We now expect to stabilize the development properties that have been completed
and are coming on line at around a 9.5% yield in the current concessionary
environment. The coming summer months will be critically important toward
achievement of that estimate.
Over the past couple of months as interest rates have dropped, cap rates may
have also improved, again making asset sales attractive. Based on our actual
asset sales experience we continue to believe that our net asset value is at
least $27/share, well above current market share price.
We have several refinancings planned for this year, only one of which, the
maturity of a $40 million loan mid-year, is required. However, we have several
opportunities to reduce our borrowing costs. Our forecasts take into account a
total of $160 million of refinancings this year at current interest rates, and
assume a further 25 bp favorable adjustment in short rates mid-year.
George Cates. Our $290 million new development pipeline nears completion. With
its steadily increasing stabilization, we continue to gain considerably more
balance sheet flexibility as the year develops. We persistently explore options
to create share value, and to capture it for our owners. We may well continue to
sell assets both to capture some of the value that we've created, as well as to
improve our portfolio quality, the latter being an ongoing and normal part of
the business for many years.
Share repurchases may be attractive if accompanying share value creation is
substantial. Our current thinking is that asset sale proceeds would most likely
be used to reduce our liabilities - debt and preferred, as well as common - more
or less pro rata to their present levels on our balance sheet, thus lessening
the benefit of devoting the entire proceeds to share repurchase, thus increasing
our aggregate debt and preferred level.
Insiders continue to be buyers of Mid-America shares. As owners now of 16% of
the business, we believe that our stock is the place to be, including during a
possible recession. The last serious real estate recession came in 1989-93, and
Mid-America's predecessor continued to grow revenues and NOI throughout that
harsh period. Given our stable and diversified markets, and our major reduction
in new development exposure beginning in 1999, we are strongly positioned to
provide a high, growing, and well-covered dividend and continued solid value
growth.
We invite your questions.
(Q & A Followed)
SIGNATURES
Pursuant to the requirements 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 16, 2001 /s/ Simon R.C. Wadsworth
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Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and
Accounting Officer)