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 March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 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 April 26, 2001
----- ----------------------------
Common Stock, $.01 par value 17,405,473
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001 (Unaudited) and
December 31, 2000
Consolidated Statements of Operations for the three months ended
March 31, 2001 and 2000 (Unaudited)
Consolidated Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
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
March 31, 2001 (Unaudited) and December 31, 2000
(Dollars in thousands)
2001 2000
- --------------------------------------------------------------------------------------------
Assets:
Real estate assets:
Land $ 125,794 $ 124,867
Buildings and improvements 1,242,998 1,231,603
Furniture, fixtures and equipment 30,759 29,094
Construction in progress 24,040 28,523
- --------------------------------------------------------------------------------------------
1,423,591 1,414,087
Less accumulated depreciation (196,589) (183,652)
- --------------------------------------------------------------------------------------------
1,227,002 1,230,435
Land held for future development 1,366 1,366
Commercial properties, net 4,240 5,044
Investment in and advances to real estate joint venture 7,319 7,630
- --------------------------------------------------------------------------------------------
Real estate assets, net 1,239,927 1,244,475
Cash and cash equivalents 18,863 16,095
Restricted cash 12,943 17,472
Deferred financing costs, net 9,199 9,700
Other assets 13,615 16,029
- --------------------------------------------------------------------------------------------
Total assets $1,294,547 $1,303,771
============================================================================================
Liabilities and Shareholders' Equity:
Liabilities:
Notes payable $ 791,245 $ 781,089
Accounts payable 1,049 1,740
Accrued expenses and other liabilities 24,937 26,589
Security deposits 4,621 4,611
Deferred gain on disposition of properties 4,308 4,366
- --------------------------------------------------------------------------------------------
Total liabilities and deferred gain 826,160 818,395
Minority interest 49,611 51,383
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 17,476,873 and 17,506,968 shares at
March 31, 2001 and December 31, 2000, respectively) 175 175
Additional paid-in capital 551,114 551,809
Other (1,160) (1,171)
Accumulated distributions in excess of net income (126,304) (116,889)
Accumulated other comprehensive income (3,971) -
Treasury stock at cost, 51,200 shares
at March 31, 2001 (1,147) -
- --------------------------------------------------------------------------------------------
Total shareholders' equity 418,776 433,993
- --------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,294,547 $1,303,771
============================================================================================
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three months ended March 31, 2001 and 2000
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
-------------------------
2001 2000
----------- -----------
Revenues:
Rental revenues $ 55,535 $ 54,218
Other property revenues 746 696
----------- -----------
Total property revenues 56,281 54,914
Interest and other income 287 355
Management and development income, net 188 180
Equity in loss of real estate joint venture (145) (41)
----------- -----------
Total revenues 56,611 55,408
----------- -----------
Expenses:
Property operating expenses:
Personnel 6,042 5,869
Building repairs and maintenance 2,035 2,272
Real estate taxes and insurance 6,650 6,319
Utilities 2,008 1,949
Landscaping 1,526 1,431
Other operating 2,541 2,474
Depreciation and amortization 12,997 13,459
----------- -----------
33,799 33,773
Property management expenses 2,589 2,451
General and administrative expenses 1,441 1,329
Interest expense 13,459 12,220
Amortization of deferred financing costs 529 714
----------- -----------
Total expenses 51,817 50,487
----------- -----------
Income before gain on dispositions,
minority interest in operating partnership
income and extraordinary items 4,794 4,921
----------- -----------
Gain on dispositions, net 169 2,991
----------- -----------
Income before minority interest in operating
partnership income and extraordinary items 4,963 7,912
----------- -----------
Minority interest in operating partnership income 102 540
----------- -----------
Income before extraordinary items 4,861 7,372
----------- -----------
Extraordinary items - loss on debt extinguishment - (56)
----------- -----------
Net income 4,861 7,316
Dividends on preferred shares 4,028 4,030
----------- -----------
Net income available for common shareholders $ 833 $ 3,286
=========== ===========
(Continued)
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations (Continued)
Three months ended March 31, 2001 and 2000
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
-------------------------
2001 2000
----------- -----------
Net income available per common share:
Basic (in thousands):
Average common shares outstanding 17,479 17,630
=========== ===========
Basic earnings per share:
Net income available per common share $ 0.05 $ 0.19
before extraordinary item
Extraordinary item - -
----------- -----------
Net income available per common share $ 0.05 $ 0.19
=========== ===========
Diluted (in thousands):
Average common shares outstanding 17,479 17,630
Effect of dilutive stock options 31 25
----------- -----------
Average dilutive common shares outstanding 17,510 17,655
=========== ===========
Diluted earnings per share:
Net income available per common share $ 0.05 $ 0.19
before extraordinary item
Extraordinary item - -
----------- -----------
Net income available per common share $ 0.05 $ 0.19
=========== ===========
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000
(Dollars in thousands)
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 4,861 $ 7,316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,526 14,173
Amortization of unearned stock compensation 131 137
Equity in loss of real estate joint venture 145 41
Minority interest in operating partnership income 102 540
Extraordinary items - 56
Gain on dispositions, net (169) (2,991)
Changes in assets and liabilities:
Restricted cash 4,529 (643)
Other assets 2,228 505
Accounts payable (691) (721)
Accrued expenses and other (5,694) (1,833)
Security deposits 10 (12)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 18,978 16,568
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of real estate assets - (1,046)
Improvements to properties (4,163) (2,628)
Construction of units in progress and future development (4,949) (17,697)
Proceeds from disposition of real estate assets 600 12,774
Proceeds from (advance to) real estate joint venture 166 (5)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,346) (8,602)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in credit lines 11,417 13,490
Principal payments on notes payable (1,261) (1,037)
Payment of deferred financing costs (28) (428)
Repurchase of common stock (2,418) (288)
Proceeds from issuances of common shares and units 420 433
Distributions to unitholders (1,718) (1,718)
Dividends paid on common shares (10,248) (10,210)
Dividends paid on preferred shares (4,028) (4,030)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,864) (3,788)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,768 4,178
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 16,095 14,092
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 18,863 $ 18,270
================================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 13,478 $ 13,469
Supplemental disclosure of noncash investing and financing activities:
Conversion of units for common shares $ 149 $ 66
Issuance of advances in exchange for common shares and units $ 120 $ 359
Interest capitalized $ 476 $ 973
See accompanying notes to consolidated financial statements.
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001 and 2000 (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, 2000, 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 month period ended March 31, 2001 are not necessarily indicative
of the results to be expected for the full year.
2. Real Estate Transactions
In March 2001, the Company sold a tract of surplus land adjacent to one of its
operating communities for approximately $600,000. The Company recorded a gain
for financial reporting purposes of approximately $234,000, which comprises the
majority of the caption "gain on dispositions, net" in the accompanying
financial statements for the first quarter of 2001.
3. Share Repurchase Program
In connection with the Company's share repurchase program, the Company
repurchased 108,800 shares of common stock and retired 57,600 of those shares
during the first quarter of 2001 for a cost of approximately $2.4 million at an
average price per common share of $22.21.
4. Share and Unit Information
At March 31, 2001, 17,425,673 common shares and 2,935,764 operating partnership
units were outstanding, a total of 20,361,437 shares and units. Additionally,
MAAC has outstanding options for 1,542,544 shares of common stock at March 31,
2001.
5. Segment Information
At March 31, 2001, the Company owned or had ownership interest in, and operated
124 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, profits and assets for the aggregated communities are summarized
as follows for the three months ended as of March 31 (Dollars in thousands):
Three months
ended March 31,
------------------------
2001 2000
------------ -----------
Multifamily rental revenues $ 60,245 $ 58,947
Other multifamily revenues 784 470
------------------------
Segment revenues 61,029 59,417
Reconciling items to consolidated revenues:
Joint venture revenues (4,748) (4,503)
Management and development income, net 188 180
Equity in loss of real estate joint venture (145) (41)
Interest income and other revenues 287 355
------------------------
Total revenues $ 56,611 $ 55,408
========================
Multifamily net operating income $ 38,167 $ 37,073
Reconciling items to net income available for common shareholders:
Joint venture net operating income (2,688) (2,473)
Management and development income, net 188 180
Equity in loss of real estate joint venture (145) (41)
Interest and other income 287 355
Interest expense (13,459) (12,220)
Property management expenses (2,589) (2,451)
General and administrative expenses (1,441) (1,329)
Depreciation and amortization (12,997) (13,459)
Amortization of deferred financing costs (529) (714)
Gain on dispositions, net 169 2,991
Extraordinary items, net - (56)
Minority interest in operating partnership (102) (540)
Dividends on preferred shares (4,028) (4,030)
------------------------
Net income available for common shareholders $ 833 $ 3,286
March 31, 2001 March 31, 2000
-------------------- -------------------
Assets:
Multifamily real estate assets $ 1,526,085 $ 1,485,955
Accumulated depreciation - multifamily assets (203,392) (159,337)
-----------------------------------------
Segment assets 1,322,693 1,326,618
-----------------------------------------
Reconciling items to total assets:
Joint venture multifamily real estate assets, net (95,691) (97,692)
Land held for future development 1,366 1,712
Commercial properties, net 4,240 5,164
Investment in and advances to real estate joint venture 7,319 8,018
Cash and restricted cash 31,806 31,450
Deferred financing costs 9,199 9,986
Other assets 13,615 13,287
-----------------------------------------
Total assets $ 1,294,547 $ 1,298,543
=========================================
6. 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.
On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities." SFAS 133, as amended, established
accounting and reporting standards for derivative instruments. Specifically,
SFAS No. 133 requires an entity to recognize all derivatives as either assets or
liabilities in the balance sheet and to measure those instruments at fair value.
Additionally, the fair value adjustments will affect either shareholders' equity
or net income depending on whether the derivative instrument qualifies as a
hedge for accounting purposes and, if so, the nature of the hedging activity.
As of January 1, 2001, the adoption of the new standard resulted in derivative
instruments reported on the balance sheet as liabilities of $2,184,000, and an
increase of $2,184,000 to "Accumulated Other Comprehensive Income." The adoption
did not impact the Company's results of operations or cash flows for any period
presented in the accompanying financial statements.
The Company requires that hedging derivatives instruments are 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 these hedging criteria are formally designated as hedges 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 hedges inception 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 is not highly effective as
a hedge or that it has ceased to be a highly effective hedge, the Company
discontinues hedge accounting prospectively.
On March 31, 2001, the derivative instruments were reported at their fair value
as other liabilities of $3,971,000. The offsetting adjustments were represented
as losses in accumulated other comprehensive income.
All of the Company's hedges that are reported at fair value and are represented
on the balance sheet were 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. The unrealized gains/losses in
the fair value of these hedges are reported on the balance sheet with a
corresponding adjustment to accumulated other comprehensive income, with any
ineffective portion of the hedging transaction reclassified to earnings. During
the three month period ended March 31, 2001, the ineffective portion of the
hedging transaction was not significant. Within the next twelve months, the
Company expects to reclassify to earnings an estimated $100,000 of the current
balance held in accumulated other comprehensive income.
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 months ended March 31, 2001
and 2000. 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 March 31, 2001 was 33,778 in 124
communities compared to the 33,974 units in 129 communities owned at March 31,
2000. The average monthly rental per apartment unit for the Company's
non-development, owned units increased to $646 at March 31, 2001 from $619 at
March 31, 2000. Occupancy for these same units at March 31, 2001 and 2000 was
94.9% and 95.4%, 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 depreciable 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 $167,000 and $96,000 at March 31, 2001 and 2000,
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 months ended March 31, 2001 and 2000 is
calculated as follows (in thousands):
Three months
ended March 31,
----------------------------
2001 2000
-------------- -------------
Net income available for common shareholders $ 833 $ 3,286
Depreciation and amortization - real property 12,830 13,363
Adjustment for joint venture depreciation 313 299
Minority interest in operating pertnership 102 540
(Gain) loss on dispositions of depreciable real property 65 (2,991)
Extraordinary items - 56
----------------------------
Funds from operations $ 14,143 $ 14,553
============================
Weighted average shares and units:
Basic 20,416 20,591
Diluted 20,446 20,616
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 TO THE THREE MONTHS ENDED MARCH
31, 2000
Property revenues for 2001 increased by approximately $1,367,000 due primarily
to increases of (i) $2,021,000 from the communities in development that were in
lease-up ("Development Communities") and (ii) $1,954,000 from the communities
owned throughout both periods. These increases were partially offset by a
decrease in rental revenue of $2,608,000 from the sale of the Pine Trails,
MacArthur Ridge, Clearbrook Village, McKellar Woods, Winchester Square, 2000
Wynnton, Riverwind and Hollybrook apartments in 2000 ("2000 Dispositions").
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 2001 increased
approximately $488,000 due primarily to increases of (i) $831,000 from the
Development Communities and (ii) $771,000 from communities owned throughout both
periods. These increases were partially offset by the decrease in operating
expenses of $1,114,000 due to 2000 Dispositions.
During the current year, the Company began separating total overhead costs into
two captions on the accompanying financial statements, property management
expenses and general and administrative expenses, to more accurately present
costs directly attributable to property operations and general administration.
The changes in presentation has no impact on the results of operations or cash
flows of the Company, and has been reflected in all periods presented.
Management believes the change was necessary to make the Company's presentation
more comparable with its peer companies.
During the quarter ended March 31, 2001, the combined property management and
general and administrative costs increased approximately $250,000 over the same
period during 2000. This increase was mainly related to increased franchise
taxes, health insurance costs and airplane repair costs. Management remains
focused on maintaining the efficiency of the support functions, and based on
current plans expects property management and general and administrative costs
to sustain inflationary level increases over the next year.
Depreciation and amortization expense decreased by approximately $462,000
primarily due to decreases of (i) $637,000 from the 2000 Dispositions and (ii)
$105,000 from the communities owned throughout both periods. These decreases
were partially offset by the depreciation and amortization expense increase of
$280,000 from the Development Communities.
Interest expense increased $1,239,000 over the three months ended March 31, 2000
mainly related to additional funding required for new development and the
Company's share repurchase program, which impacted the Company's variable rate
credit facilities, as well as a reduction in the capitalization of interest as
most of the Company's development units were completed prior to the first
quarter of 2001. During the current quarter, the Company fixed the interest rate
on $25 million of its variable rate conventional debt through an interest rate
swap agreement. At March 31, 2001 the Company's overall average borrowing cost
was 7.06%, with unhedged variable rate conventional debt comprising 7.8% of the
outstanding debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the three months ended March 31, 2001
increased $2,410,000 compared to the same period a year earlier mainly due to
changes in operating assets and liabilities related to timing of payments for
escrow items.
During the first quarter of 2001 the Company invested $4,949,000 in development
properties, reduced from $17,697,000 from the same period in 2000. The Company
is nearing the completion of the approximately $300,000,000 development program
begun in 1997, and anticipates that approximately another $13,000,000 funding
will be required during 2001 to complete the entire program.
The following table summarizes the Company's remaining communities in various
stages of lease-up and construction, as of March 31, 2001 (Dollars in
thousands):
Current
Total Estimated Cost to Apartment Units
----------------------------
Location Units Cost Date Completed Occupied
------------------ --------- ------------- ------------- -------------- ------------
Completed Communities
In Lease-up:
Grand Reserve Lexington Lexington, KY 370 $ 33,355 $ 32,842 370 212
Kenwood Club at the Park Katy(Houston), TX 320 18,248 18,248 320 270
Reserve at Dexter Lake Phase II Memphis, TN 244 16,821 16,589 242 214
Grande View Nashville Nashville, TN 433 36,839 34,909 432 217
------------------------------------------------------------------
1,367 $105,263 $ 102,588 1,364 913
------------------------------------------------------------------
Under Construction:
Reserve at Dexter Lake Phase III Memphis, TN 244 $ 16,869 $ 6,225 - -
------------------------------------------------------------------
Total Units Currently Under Development 1,611 $122,132 $ 108,813 1,364 913
==================================================================
Actual capital expenditures for development of communities and capital
improvements for the three months ended March 31, 2001 are summarized below
(Dollars in thousands):
New construction $ 4,949
Recurring capital expenditures at stabilized properties 2,948
Revenue enhancing projects at stabilized properties 801
Corporate additions and improvements 414
--------
$ 9,112
========
Net cash used in financing activities increased $4,076,000 to $7,864,000 during
the first quarter of 2001 from $3,788,000 during the first quarter 2000. During
the first quarter of 2001, the Company borrowed an additional $11,417,000 under
its credit facilities, $2,073,000 less than during the same quarter a year
earlier, and used the majority of the proceeds to fund development, certain
improvements to properties and the repurchase of common shares. Also during the
quarter ended March 31, 2001, the Company distributed a total of $15,994,000 to
operating partnership unit holders, common shareholders and preferred
shareholders.
As of March 31, 2001, the Company had a $295,000,000 secured credit facility
with FNMA (the "FNMA Facility") which matures in 2009. The FNMA Facility
provides for both fixed and variable rate borrowings. The interest rate on the
variable portion renews every 90 days and is based on the FNMA mortgage backed
security rate on the date of renewal, which has historically approximated 3
month LIBOR less a spread ranging from .05%-.10%, plus a fee of .67% based on
the outstanding borrowings. Borrowings under the FNMA Facility totaled
$198,070,000 at March 31, 2001, consisting of $65,000,000 under the fixed
portion at a rate of 7.712% and the remaining $133,070,000 under the variable
rate portion of the facility. The proceeds from draws under the FNMA Facility
were primarily used to pay down other credit lines and fund development.
Additionally, the Company currently maintains a $70,000,000 secured credit
facility with a group of banks led by AmSouth Bank, and a $20,000,000 unsecured
credit facility with Compass Bank. As of March 31, 2001, the Company had
$8,849,663 and $20,000,000 outstanding under these credit facilities,
respectively.
The two secured credit facilities are subject to borrowing base calculations
that effectively reduce the maximum amount that may be borrowed. The total
amount that could be borrowed under the credit facilities at March 31, 2001 was
approximately $257,000,000.
At March 31, 2001, the Company had outstanding four interest rate swap
agreements, totaling $100 million to lock the interest rate on a portion of the
Company's variable rate debt. At March 31, 2001, the Company had $61.9 million
(after considering the interest rate swaps) of conventional floating rate debt
at an average interest rate of 7.28% and an additional $32 million of tax-free
variable rate debt at an average rate of 6.1%; all other debt was fixed rate
term debt at an average interest rate of 7.16%.
The weighted average interest rate and weighted average maturity at March 31,
2001 for the $791.2 million of total notes payable were 7.06% and 10.5 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 facilities, 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
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, but are not limited
to, statements about anticipated growth rate of revenues and expenses,
anticipated lease-up (and rental concessions) at development properties, costs
remaining to complete development properties, planned asset dispositions,
disposition pricing, and planned acquisition and developments. Actual results
and the timing of certain events could differ materially from those projected in
or contemplated by the forward-looking statements due to a number of factors,
including a downturn in general economic conditions or the capital markets,
competitive factors including overbuilding or other supply/demand imbalances in
some or all of our markets, construction delays that could cause additional
apartment units to reach the market later than anticipated, changes in interest
rates, and other items that are difficult to control such as insurance rates,
increases in real estate taxes, and other general risks inherent in the
apartment business. 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 2000 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
None.
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.
None.
(b) Reports on Form 8-K
Form Event Reported Date of Report Date Filed
---- -------------- -------------- ----------
8-K Time and logistics for 4Q00 1-5-2001 1-8-2001
conference call
8-K Composition of 2000 distributions 1-22-2001 1-22-2001
8-K 4Q00 conference call transcript 2-16-2001 2-16-2001
and press release
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: 5/15/2001 /s/Simon R.C. Wadsworth
--------- ------------------------
Simon R.C. Wadsworth
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)