SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 1-10524
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UNITED DOMINION REALTY TRUST, INC.
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(Exact name of registrant as specified in its charter)
Virginia 54-0857512
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 East Cary Street, Richmond, Virginia 23219
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(Address of principal executive offices - zip code)
(804) 780-2691
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(Registrant's telephone number, including area code)
10 South Sixth Street, Richmond, Virginia 23219
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(Former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, $1 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
9.25% Series A Cumulative Redeemable Preferred Stock New York Stock Exchange
8.60% Series B Cumulative Redeemable Preferred Stock New York Stock Exchange
7.50% Series D Cumulative Convertible Redeemable Preferred Stock None
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to filing requirements
for at least the past 90 days.
Yes X No _________
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or other information
statements incorporated by reference into Part III of this Form 10-K ( ).
The aggregate market value of the shares of common stock held by non-affiliates
(based upon the closing sales price on the New York Stock Exchange) on March 1,
2001 was approximately $1 billion. * As of March 1, 2001 there were 101,346,145
shares of common stock, $1 par value, outstanding.
Part III incorporates certain information by reference from the Proxy Statement
to be filed with respect to the Annual Meeting of Shareholders on May 8, 2001.
*In determining this figure, the Company has assumed that all of its officers &
directors, and persons known to the Company to be beneficial owners of more than
5% of the Company's shares, are affiliates. Such assumptions should not be
deemed conclusive for any other purpose.
UNITED DOMINION REALTY TRUST, INC.
TABLE OF CONTENTS
PAGE
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PART I.
Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 18
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 34
Item 8. Financial Statements and Supplementary Data 34
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
PART III.
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners and
Management 35
Item 13. Certain Relationships and Related Transactions 35
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K 36
2
Part I
Item 1. BUSINESS
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General
United Dominion Realty Trust, Inc. ("United Dominion"), a Virginia corporation,
is a self-administered equity real estate investment trust that owns, acquires,
renovates, develops and manages middle market apartment communities nationwide.
Formed in 1972, United Dominion is headquartered in Richmond, Virginia with
regional offices in Richmond, Dallas and Atlanta. The regional offices are
responsible for the operation and management of the Company's 277 apartment
communities in their respective geographic regions. United Dominion, which owns
over 77,000 apartment homes, had approximately 2,400 employees as of January 31,
2001.
The Company operates as a real estate investment trust under the applicable
provisions of the Internal Revenue Code of 1986, as amended. To qualify, the
Company must meet certain tests which, among other things, require that its
assets consist primarily of real estate, its income be derived primarily from
real estate and at least 95% of its taxable income be distributed to its
preferred and common shareholders. Because the Company qualifies as a REIT, it
is generally not subject to federal income taxes.
Business
Overview
With an objective to be a national company and one of the largest apartment
REITs, from 1996 through 1998, United Dominion acquired other REITs, private
portfolios and individual communities, growing its apartment portfolio from
34,000 to over 87,000 apartment homes by the end of 1998. Following this
significant acquisition period, the Company has spent the last two years
building infrastructure to catch up with the rapid growth, upgrading its
portfolio and focusing on operational issues. The goals have been to strengthen
and better position the Company to sustain above-average net operating income
growth, steadily increase cash flow per apartment home, generate more
predictable earnings and strengthen the capital structure.
In 2000, United Dominion upgraded its portfolio, increased its financial
flexibility and refined its strategy. During the year, the Company sold $215
million of non-core properties that included 26 communities with 5,835 apartment
homes. These divestitures were designed to increase the long-term profitability
of the portfolio. The properties sold included slower growing communities in
several of the Company's core markets, as well as properties located within
markets which United Dominion exited such as Galveston, Texas, Montgomery,
Alabama and Roanoke, Virginia. The majority of the proceeds were used to reduce
debt, strengthen the capital structure and increase financial flexibility. A
lesser part of the proceeds were used to buyback equity securities, both common
and preferred stock.
Changing demographics will have a significant impact on the apartment industry
over the next two decades. The number of young people entering the workforce and
creating households will be significantly higher over the next 17 years as
compared to the number who entered the workforce over the past 12 years. The
number of single people and single parent households continues to grow
significantly. There is also higher growth in immigration than had been
expected. Each of the above-mentioned population segments has a high propensity
to rent. For the first time in more than a decade, the growth in demand for
rental housing will exceed the growth in demand for owner occupied housing.
Customers
United Dominion focuses on the broad middle-market segment of the apartment
market which generally consists of renters-by-necessity. This group includes
young professionals, blue collar families, single parent households, older
singles, non-related parties and families renting while waiting to purchase a
home. The Company believes that this segment provides the highest profit
potential in terms of rent growth, stability of occupancy, desired level of
service and amenities and investment opportunities.
Recognizing the significant increase in younger renters over the next decade and
a half, the Company plans to target some of its incremental investments to
communities that will be attractive to young households. These communities will
often be located close to where young people work, shop and play.
3
Markets
At the end of 2000, United Dominion owned apartments in more than 60 MSAs, but
derived 70% of its net operating income in 2000 from its 20 largest markets. The
Company has a geographically diverse portfolio both by region and market. This
diversification increases investment opportunity and decreases the risk
associated with cyclical local real estate markets and economies, thereby
increasing the stability and predictability of United Dominion's earnings. In
any given year, the Company will have some markets that are strong, some that
are balanced and some that are weak.
In 2000, new supply continued to come into the market as demand was slowing. The
excess supply exerted pressure on occupancy and rents in some of the Company's
key markets, particularly Raleigh, Charlotte and Wilmington in North Carolina
and Columbus, Ohio. Offsetting this, some of the Company's markets experienced
above-average NOI growth for the year, including Richmond, Dallas/Fort Worth,
Atlanta, Greensboro and Baltimore. The Company's West Coast markets including
its markets in California and the Pacific Northwest were exceptionally strong
throughout the year.
Communities
At December 31, 2000, United Dominion's apartment portfolio included 277
communities having a total of 77,219 completed apartment homes (see Item 2,
Properties). In addition, United Dominion had 1,238 apartment homes under
development at two new communities and three additional phases to existing
owned communities.
The overall quality of the portfolio has significantly improved since 1997 with
the disposition of more than 21,000 apartment homes and the upgrading of most of
the core communities. The upgrading of the portfolio provides several key
benefits related to portfolio profitability. It reduces capital expenditures per
apartment, and therefore increases cash flow. It enables the Company to attract
residents with higher levels of disposable income, and these are customers that
are more likely to accept the transfer of expenses from the landlord to the
resident, such as water and sewer costs, and will generally want additional
services from the landlord that will generate additional revenue.
During the past four years, United Dominion's same community NOI growth averaged
above 5%. The Company grew rental and other income and increased occupancy while
controlling operating expenses. This is a direct result of the overall
improvement to the quality of the portfolio. For 2001, the Company expects same
community net operating income growth in a majority of its markets. NOI growth
is the Company's primary earnings driver.
New CEO
With the Company's repositioning substantially complete, United Dominion began a
search for a new CEO in the fourth quarter. This search culminated with the
hiring of Thomas W. Toomey on February 13, 2001 to replace John P. McCann who
served in this role for more than 26 years. Mr. Toomey has begun a review of the
organizational structure and strategy of the Company. This review could result
in changes that may require the Company to incur expenses for severance and
termination benefits. Additionally, the review may result in a change of intent
with regard to anticipated holding periods of certain assets which could require
the write down of these assets.
Technology
Primarily over the past two years, United Dominion has invested in technology to
improve business processes, communications with constituencies and to become a
better marketer. The Company believes that technology can provide competitive
advantages in the future. Key technology initiatives over the past year have
included a redeveloped corporate web site, an e-training initiative to take
training out of the classroom and directly to associates at their workstations,
and the co-development of a web-based property management system.
2000 Accomplishments
. Net operating income (property operating income less property operating
expenses) from same communities (those acquired, developed or stabilized
prior to January 1, 1999 and held on January 1, 2000) increased 4.1% in 2000
compared to 1999;
. Completed four development projects aggregating $68.1 million with 992
apartment homes in five different markets. Lease-ups were ahead of projected
absorption at two of these communities;
4
. Completed the formation with a financial partner of a development joint
venture for five new communities containing 1,438 apartment homes at a
budgeted cost of $103 million . United Dominion earns fee income by providing
development, construction and property management services to each of the
joint venture projects;
. Completed the disposition of 26 apartment communities representing $215
million of gross sales proceeds and consisting of communities that no longer
met the Company's investment criteria. This included exiting certain non-core
markets;
. Reduced debt by $135 million using divestiture proceeds;
. Repurchased $29 million of common and preferred stock and operating
partnership units (OP Units) using divestiture proceeds;
. Arranged a new $375 million, three-year revolving credit agreement in order
to enhance the Company's financial flexibility;
. Paid dividends of $1.07 per share, which represents United Dominion's 24th
year of consecutive dividend increases to shareholders, and;
. Formed Realeum, Inc. with two other apartment REITs to complete the
development of a web-based on-site apartment management system.
Acquisitions and Mergers
Over the past five years, United Dominion acquired over 60,000 apartment homes
as part of its strategy to have a national portfolio. Over the past two years,
the amount of United Dominion's dispositions exceeded its acquisitions, with
acquisitions limited to using disposition proceeds to complete 1031 tax-deferred
exchanges. During 2000, using the proceeds from its disposition program, United
Dominion acquired one community with 267 apartment homes at a total cost of
$14.8 million, including the assumption of debt and the use of tax free exchange
funds.
When evaluating potential acquisitions, United Dominion considers geographic
location, construction quality, condition and design of the community, asset
quality and current and projected cash flow of the property, ability to increase
the value and profitability of the property through upgrades and repositioning,
potential for rent growth, competition from existing multifamily communities,
anticipated new construction and the potential for economic growth in the market
and sub-market.
The following table summarizes United Dominion's apartment acquisitions
(including mergers) during the last five years (dollars in thousands):
2000 1999 1998 (a) 1997 1996 (b)
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Homes acquired 267 1,230 28,510 8,628 22,032
Homes owned at December 31, 77,219 82,154 86,893 62,789 55,664
Total real estate owned, at carrying value $3,836,320 $3,953,045 $3,952,752 $2,517,398 $2,099,641
Total rental income $ 616,825 $ 618,749 $ 478,718 $ 386,672 $ 241,260
(a) Includes 7,550 apartment homes acquired in the ASR Merger on March 27, 1998
and 14,001 apartment homes acquired in the American Apartment Communities
Merger on December 7, 1998.
(b) Includes 14,320 completed apartment homes and 675 homes under development
acquired in connection with the SouthWest Merger on December 31, 1996.
5
Prior to 1990, United Dominion was the only major publicly held REIT focusing
predominantly on apartment investments. Since then, a number of multifamily
REITs have been formed. The apartment sector of the real estate industry has
undergone modest but steady consolidation over the past decade. Some apartment
REITs and privately owned portfolios may seek to be acquired by large, well
capitalized REITs that have superior access to the capital markets. United
Dominion has been a participant in this consolidation process, completing the
following mergers:
On December 31, 1996, United Dominion completed the acquisition of
SouthWest Property Trust Inc. ("SouthWest") in a statutory merger (the
"SouthWest Merger"). SouthWest was a publicly traded multifamily REIT that
owned 44 communities with 14,320 apartment homes primarily located in
Texas. The SouthWest Merger provided the Company with diversification
beyond its traditional southeast and mid-atlantic markets, expanding the
Company into the southwestern markets.
On March 27, 1998, United Dominion completed the acquisition of ASR
Investments Corporation ("ASR") in a statutory merger (the "ASR Merger").
ASR was a publicly traded multifamily REIT that owned 39 communities with
7,550 apartment homes located in Arizona, Texas, New Mexico and the state
of Washington. The ASR Merger furthered the Company's investment in
southwestern markets, provided an initial presence in the Pacific
northwest, and added communities in Houston and Phoenix.
On December 7, 1998, United Dominion completed the acquisition of American
Apartment Communities II, Inc. ("AAC") in a statutory merger (the "AAC
Merger"). In connection with the acquisition of AAC, the Company acquired
53 communities with 14,001 apartment homes located primarily in California,
the Pacific northwest, the midwest and Florida. The AAC Merger allowed
United Dominion to enter into new major markets, many of which are strong
growth markets. Through the AAC merger, the Company entered Portland, San
Francisco, Sacramento, San Jose, Monterey, Los Angeles, Denver,
Indianapolis and Detroit. In addition, AAC added communities to the
Company's portfolios in Columbus, Tampa, South Florida and Seattle.
Development/Upgrading Activity
During 2000, United Dominion continued to reposition properties in targeted
markets where there was a perceived opportunity to add value and achieve greater
than inflationary increases in rents over the long term. Over the past three
years, the Company has shifted capital into development that could provide
returns on investment (property operating income less property operating
expenses and a capital expenditure allowance, divided by the average investment)
in excess of 9.5% and away from lower yielding acquisitions. In 2000, United
Dominion spent over $90 million on direct development projects. This included
$68.1 million to finish 992 apartment homes in one new community and three
second phases and $26.8 million to start 1,238 apartment homes in two new
communities and three second phases.
During 2000, United Dominion completed the formation of a development joint
venture with an institutional partner. The joint venture allows the Company to
reduce its development capital commitment and generate fee income as the
developer, general contractor and project manager. United Dominion expects to
further reduce the capital committed to development in 2001 and to do most new
development in joint ventures where the Company can generate fee income and
increased participation based on performance.
In 2001, the Company will reduce its development activity in suburban, low
barrier to entry sub-markets and sell off several suburban development sites.
In determining whether to develop in a certain market, United Dominion analyzes
demographic and market data such as income levels, occupancy rates, household
formation, employment growth and supply demand ratios. United Dominion will
spend less on development in 2001 than it spent in either 1999 or 2000.
Same Communities
United Dominion's primary earnings driver is same apartment community
operations. During 2000, the Company's same communities provided 94% of the
Company's property operating income. Rental growth was 4.2% and resulted
primarily from a 2.9% increase in rental rates and a 1.2% increase in physical
occupancy. Operating expenses also grew by 4.2%, much of which resulted from a
63.4% increase in property insurance costs and a 5.3% increase in real estate
taxes. Average physical occupancy, rental rates and operating margins at United
Dominion's same communities during the past three years as set forth below:
6
2000 1999 1998
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Physical occupancy 94.2% 93.0% 92.9%
Average monthly rental rates $ 667 $ 631 $ 602
Operating margin 61.2% 61.3% 59.6%
While the Company continues to add features to its apartment communities, United
Dominion completed most of its same community upgrade program in 1999, as part
of its plan to improve the quality of the portfolio. During 2000, the
Company's investment in revenue enhancing and recurring capital expenditures
significantly decreased. As a result of the portfolio upgrade, recurring and
overall capital expenditures declined in 2000. For the mature apartments,
recurring capital expenditures were $311 versus $386 per mature apartment in
1999. The Company, in 2000, also spent $203 per mature apartment on revenue
enhancing capital expenditures, mostly on communities acquired in 1998, where
the upgrade work was not completed in 1999. In 1999, the Company spent $253 per
mature apartment on revenue enhancing capital expenditures. Revenue enhancing
improvements include sub-metering of water and sewer to residents, gating and
fencing of communities, installing intrusion alarms, adding business and fitness
centers and constructing carports, garages and self storage units.
Divestiture Activity
During the past three years, United Dominion has sold more than 21,000 of its
slower growing, non-core apartment homes while exiting some markets. These sales
were done to increase the performance of the portfolio. They allowed United
Dominion to exit slower growing markets and increase the quality of the
portfolio, including reducing the average age of the portfolio. Proceeds from
the disposition program were used to strengthen the Company's capitalization
structure by paying down debt, as well as to fund new development projects and
to selectively repurchase shares of United Dominion's preferred and common
stock.
At December 31, 2000, there was one community with 132 apartment homes, three
commercial properties and one parcel of land classified as real estate held for
disposition. The Company regularly monitors and adjusts its assets in order to
increase portfolio profitability. Proceeds from the 2001 sales, currently
planned to be lower than 2000, are expected to be used to reduce debt,
repurchase common and preferred stock, fund development and acquire communities
through 1031 exchanges. The Company's divestitures in 2001 are currently
expected to be substantially non-dilutive to earnings.
Financing Activity
As part of United Dominion's plan to strengthen its capital structure in 2000,
the Company used a majority of its disposition proceeds to reduce debt. The
Company anticipates using a significant portion of its 2001 disposition proceeds
to reduce debt and further increase its financial flexibility.
During 2000, United Dominion's major financing activities consisted of: (i)
issuing $100 million of unsecured notes with an interest rate of 8.625%; (ii)
refinancing $46.7 million of tax-exempt notes at a blended rate of 6.32%; (iii)
closing on a $60 million revolving credit facility with the Federal National
Mortgage Association with an initial interest rate of 7.12%; (iv) borrowing $100
million in the form of an unsecured term loan from a consortium of banks; and
(v) repurchasing approximately 1.4 million of common shares and over 700,000
shares of preferred stock.
Taxable REIT Subsidiary
In December 1999, the REIT Modernization Act ("RMA") was signed into law. The
RMA contains several provisions that, when effective in 2001, will allow REIT's
to compete more effectively in the real estate industry by allowing REIT's to
offer the same types of services as other competitors in the marketplace. The
most important feature of the RMA is the allowance for REIT's to create a
taxable REIT subsidiary ("TRS") that can provide services to residents and
others without disqualifying the rents that a REIT receives from its
residents.
Under the prior law, REIT's were not allowed to provide non-customary or tenant
specific services to its residents, such as concierge services, beyond a de
minimus amount. As the apartment industry has become a competitive customer
focused business, these constraints inhibited REIT's from maintaining a
competitive edge in attracting and maintaining residents. As such, the RMA has
several significant benefits for the REIT industry. REIT's will be allowed,
through a TRS, to provide a wide range of increasingly important services that
residents have come to expect. In addition, the TRS will allow REIT's to
generate new sources of income for REIT shareholders.
Effective January 1, 2001, a REIT can own 100% of the stock of a TRS. However,
the legislation contains a number of safeguards that would limit the size of a
TRS to ensure that REIT's remain focused on their core business of owning and
operating real estate assets. The RMA provides another significant change to
the existing law. THE RMA changes the minimum distribution requirement from 95%
to 90% of the REIT's taxable income. This will allow REIT's to retain a greater
level of capital that can be used to invest back into expenditures to maintain
the quality of their real estate assets as well as repay outstanding debt.
United Dominion will determine the best uses of the TRS in order to be in a
position to take full advantage of the opportunities the new legislation has to
offer in 2001.
Competition
In most of United Dominion's markets, the competition for new residents is
intense. Some competing communities offer features that United Dominion's
communities do not have. Some competing communities may use concessions or lower
rents to obtain competitive advantages. Also, some competing communities are
larger or newer than United Dominion's communities. The competitive position of
each community is different depending upon many factors including sub-market
supply and demand.
Management believes that United Dominion, in general, is well positioned in
terms of economic and other resources to compete effectively for residents and
investments.
7
United Dominion believes it has certain competitive advantages that include:
. a fully integrated organization with property management, development,
acquisition, redevelopment, marketing and financing expertise;
. geographic diversification with presence in more than 32 major markets
across the country, and;
. local presence in many of its major markets which allows it to be a
local operating expert.
Environmental Regulations
To date, compliance with federal, state, and local environmental protection
regulations has not had a material effect on the capital expenditures, earnings
or competitive position of United Dominion. However, over the past 15 years,
the issue has been raised regarding the presence of asbestos and other hazardous
materials in existing real estate properties. United Dominion has a property
management plan for hazardous materials. As part of the plan, Phase I
environmental site investigation and reports have been completed for each
property owned. In addition, all proposed acquisitions are inspected prior to
acquisition. Acquisitions through merger are inspected on a case by case basis
given historical information available. The inspections are conducted by
qualified environmental consultants, and the report issued is reviewed by United
Dominion prior to the purchase or development of any property. Nevertheless, it
is possible that United Dominion's environmental assessments will not reveal all
environmental liabilities, or that some material environmental liabilities exist
of which United Dominion is unaware. In some cases, United Dominion has
abandoned otherwise economically attractive acquisitions because the costs of
removal or control of hazardous materials have been prohibitive or United
Dominion has been unwilling to accept the potential risks involved. United
Dominion does not believe it will be required to engage in any large-scale
abatement at any of its properties. Management believes that through
professional environmental inspections and testing for asbestos, lead paint and
other hazardous materials, coupled with a conservative posture toward accepting
known risk, United Dominion can minimize its exposure to potential liability
associated with environmental hazards.
Recently enacted federal legislation requires owners and landlords of
residential housing constructed prior to 1978 to disclose to potential residents
or purchasers of the communities any known lead paint hazards and will impose
treble damages for failure to so notify. In addition, lead based paint in any
of the communities may result in lead poisoning in children residing in that
community if chips or particles of such lead based paint are ingested, and
United Dominion may be held liable under state laws for any such injuries caused
by ingestion of lead based paint by children living at the communities.
United Dominion is unaware of any environmental hazards at any of its properties
which individually or in the aggregate may have a material adverse impact on its
operations or financial position. United Dominion has not been notified by any
governmental authority, and is not otherwise aware, of any material non-
compliance, liability or claim relating to environmental liabilities in
connection with any of its properties. United Dominion does not believe that
the cost of continued compliance with applicable environmental laws and
regulations will have a material adverse effect on the Company or its financial
condition or results of operations. There can be no assurance, however, that
future environmental laws, regulations or ordinances will not require additional
remediation of existing conditions that are not currently actionable. Also, if
more stringent requirements are imposed on United Dominion in the future, the
costs of compliance could have a material adverse effect on United Dominion or
its financial condition. To the best of its knowledge, United Dominion is in
compliance with all applicable environmental rules and regulations.
Operating Partnership - United Dominion Realty, L.P.
On October 23, 1995, United Dominion organized United Dominion Realty, L.P. (the
"Partnership") under the Virginia Revised Uniform Limited Partnership Act, as
amended (the "Partnership Act"). United Dominion is the sole General Partner
of the Partnership and currently holds a 90.8% interest. The Partnership is
intended to assist United Dominion in competing for the acquisition of
properties that meet United Dominion's investment strategies from seller
partnerships, some or all of whose partners may wish to defer taxation of gain
realized on sale through an exchange of partnership interests.
8
The Partnership was organized under a First Amended and Restated Agreement of
Limited Partnership dated as of December 31, 1995 which was subsequently amended
in the Second Amended and Restated Agreement of Limited Partnership dated as of
August 30, 1997 and later amended by the Third Amended and Restated Agreement of
Limited Partnership dated as of December 7, 1998 (the "Partnership Agreement").
A summary of certain provisions of the Partnership Agreement is set forth below.
The summary does not purport to be complete and is subject to and qualified in
its entirety by reference to applicable provisions of the Partnership Act and
the complete Partnership Agreement. The Partnership Agreement is filed as an
exhibit to United Dominion's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
Admission of Limited Partners; Investment Agreements
United Dominion presently intends to limit admission to the Partnership to
Limited Partners who are "accredited investors," as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the "Securities Act"). Limited Partners
will be admitted upon executing and delivering to United Dominion an Investment
Agreement (the "Investment Agreement") and delivering to the Partnership the
consideration prescribed therein. In the Investment Agreement, the prospective
Limited Partner makes both representations as to his status as an accredited
investor and other representations and agreements regarding the Units (defined
below) to be issued to him, thus, assuring compliance with the Securities Act.
Any rights to Securities Act registration of the Common Stock of United Dominion
issued to such Limited Partner upon redemption of his Units (see "Redemption
Rights" below), will also be set forth in the Investment Agreement or a separate
registration rights agreement.
Units
The interests in the Partnership of the Partnership's limited partners (the
"Limited Partners") are represented by units of limited partnership interest
(the "Units"). All holders of Units are entitled to share in the cash
distributions from, and in the profits and losses of, the Partnership.
Distributions by the Partnership are made equally for each Unit outstanding
except that outside partners have first priority as described in the
"Distributions" section. As the Partnership's sole General Partner, United
Dominion intends to make distributions per Unit in the same amount as the cash
dividends paid by United Dominion on each share of Common Stock. However,
because Partnership properties, which are the primary source of cash available
for distribution to Unit holders, are significantly fewer than properties held
directly by United Dominion and may not perform as well, there can be no
assurance that distributions per Unit will always equal Common Stock dividends
per share. A distribution made to United Dominion that enables it to maintain
its REIT status (see "Management and Operations" below) may deplete cash
otherwise available to Unit holders. The Partnership may borrow from United
Dominion for the purpose of equalizing per Unit and per Common share
distributions, but neither the Partnership nor United Dominion is under any
obligation regarding Partnership borrowings for this or any other purpose.
The Limited Partners have the rights to which limited partners are entitled
under the Partnership Act. The Units are illiquid, they are not registered for
secondary sale under any securities laws, state or federal, and they cannot be
transferred by a holder except as provided in the Partnership Agreement and
unless they are registered as such or an exemption from such registration is
available. Except as provided in any Investment Agreement or other agreement
with a partner, neither the Partnership nor United Dominion is under any
obligation to effect any such registration or to establish any such exemption.
The Partnership Agreement imposes additional restrictions on the transfer of
Units, as described below under "Transferability of Interests."
Management and Operations
United Dominion, as the sole General Partner of the Partnership, has full,
exclusive and complete responsibility and discretion in the management and
control of the Partnership. The Limited Partners have no authority to transact
business for, or participate in the management activities or decisions of the
Partnership.
The Partnership Agreement requires that the Partnership be operated in a manner
that will enable United Dominion to both satisfy the requirements for being
classified as a REIT and avoid any federal income tax liability. The General
Partner is expressly directed, notwithstanding anything to the contrary in the
Partnership Agreement, to cause the Partnership to distribute amounts (including
proceeds of Partnership borrowings) that sufficiently enable United Dominion to
pay distributions to its shareholders that are required in order to maintain
REIT status and to avoid income tax or excise tax liability.
9
Ability to Engage in Other Businesses; Conflicts of Interest
United Dominion and other persons (including officers, directors, employees,
agents and other affiliates of United Dominion) are not prohibited under the
Partnership Agreement from engaging in other business activities, including
business activities substantially similar or identical to those of the
Partnership. United Dominion will not be required to present any business
opportunities to the Partnership or to any Limited Partner.
Borrowing by the Partnership
The General Partner is authorized under the Partnership Agreement to cause the
Partnership to borrow money and to issue and guarantee debt as it deems
necessary for the conduct of the activities of the Partnership. Such debt may
be secured by mortgages, deeds of United Dominion, pledges or other liens on the
assets of the Partnership.
Reimbursement of General Partner; Transactions with the General Partner and its
Affiliates
The General Partner will receive no compensation for its services as General
Partner of the Partnership. However, as a partner in the Partnership, the
General Partner has the same right to allocations of profit and loss and
distributions as other partners of the Partnership. In addition, the
Partnership will reimburse the General Partner for all expenses it incurs
relating to the ownership and operation of, or for the benefit of, the
Partnership and any offering of Units or other partnership interests, and for
the pro rata share of the expenses of any offering of securities of United
Dominion some or all of the proceeds of which are contributed to the
Partnership.
Liability of General Partner and Limited Partners
The General Partner is liable for all general obligations of the Partnership to
the extent not paid by the Partnership. The General Partner is not liable for
the non-recourse obligations of the Partnership.
The Limited Partners are not required to make further capital contributions to
the Partnership after their respective initial contributions are fully paid.
Assuming that a Limited Partner acts in conformity with the provisions of the
Partnership Agreement, the liability of the Limited Partner for obligations of
the Partnership under the Partnership Agreement and Partnership Act will be
limited to, subject to certain possible exceptions, the loss of the Limited
Partner's investment in the Partnership.
The Partnership is qualified to conduct business in each state in which it owns
property and may qualify to conduct business in other jurisdictions.
Maintenance of limited liability may require compliance with certain legal
requirements of those jurisdictions and certain other jurisdictions.
Limitations on the liability of a limited partner for the obligations of a
limited partnership have not clearly been established in many states.
Accordingly, if it were determined that the right, or exercise of the right by
the Limited Partners, to make certain amendments to the Partnership Agreement or
to take other action pursuant to the Partnership Agreement constituted "control"
of the Partnership's business for the purposes of the statutes of any relevant
state, the Limited Partners might be held personally liable for the
Partnership's obligations. The Partnership will operate in a manner the General
Partner deems reasonable, necessary and appropriate to preserve the limited
liability of the Limited Partners.
Exculpation and Indemnification of the General Partner
If acting in good faith, the Partnership Agreement provides that the General
Partner will incur no liability for monetary damages to the Partnership or any
Limited Partner for losses sustained or liabilities incurred as a result of
errors in judgment or of any act or omission. In addition, the General Partner
is not responsible for any misconduct or negligence on the part of its agents,
provided the General Partner appointed such agents in good faith.
The Partnership Agreement also provides for indemnification of the General
Partner, the directors, officers and employees of the General Partner, and such
other persons as the General Partner may from time to time designate, against
any and all losses, claims, damages, liabilities (joint or several), expenses
(including reasonable legal fees and expenses), judgments, fines, settlements
and other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, that
relate to the operations of the Partnership in which any such indemnitee may be
involved, or is threatened to be involved, unless it is established that (i) the
act or omission of such indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) such indemnitee actually received an improper
personal benefit in money, property or services or (iii) in the case of any
criminal proceeding, such indemnitee had reasonable cause to believe that the
act or omission was unlawful.
10
Sale of Assets; Merger
Under the Partnership Agreement, the General Partner generally has the exclusive
authority to determine whether, when and on what terms the assets of the
Partnership will be sold or on which the Partnership will merge or consolidate
with another entity.
Removal of the General Partner; Transfer of General Partner's Interest
The Partnership Agreement does not authorize the Limited Partners to remove the
General Partner and the Limited Partners have no right to remove the General
Partner under the Partnership Act. The General Partner may not transfer any of
its interest as General Partner and withdraw as General Partner, except (a) to a
wholly-owned subsidiary of the General Partner or the owner of all the ownership
interests in the General Partner, (b) in connection with a merger or sale of all
or substantially all of the assets of the General Partner or (c) as a result of
the bankruptcy of the General Partner. A substitute or additional General
Partner may be admitted upon compliance with the applicable provisions of the
Partnership Agreement, including delivery by counsel for the Partnership of an
opinion that admission of such General Partner will not cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes or (ii) the loss of any Limited Partner's limited liability. The
General Partner may not sell all or substantially all of its assets, or enter
into a merger, unless the sale or merger includes the sale of all or
substantially all of the assets of, or the merger of, the Partnership and the
Limited Partners receive for each Unit substantially the same consideration as
the holder of one share of Common Stock.
Transferability of Interests
A Limited Partner generally may not transfer his interest in the Partnership
without the consent of the General Partner which may be withheld at its absolute
discretion. The General Partner may require, as a condition of any transfer,
that the transferring Limited Partner assume all costs incurred by the
Partnership in connection with such a transfer.
Redemption Rights
Each Limited Partner has the right (the "Redemption Right"), subject to the
purchase right of the General Partner described below, to cause the redemption
of such Limited Partner's Units for cash in an amount per Unit equal to the
average of the closing sale prices of the Common Stock of United Dominion on the
New York Stock Exchange (the "NYSE") for the ten trading days immediately
preceding the date of receipt by the General Partner of notice of such Limited
Partner's exercise of the Redemption Right provided that such Units have been
outstanding for at least one year. Subject to certain restrictions intended to
prevent undesirable tax consequences and assure compliance with the Securities
Act, a Limited Partner may exercise the Redemption Right at any time but not
more than twice within the same calendar year and not with respect to less than
1,000 Units (or all Units owned by such Limited Partner, if less than 1,000). A
Limited Partner that exercises the Redemption Right shall be deemed to have
offered to sell the Units to be redeemed to the General Partner, and the General
Partner may elect to purchase such Units by paying to such Limited Partner
either the redemption price in cash or by delivering to such Limited Partner a
number of shares of Common Stock of the Company equal to the product of the
number of such Units, multiplied by the "Conversion Factor," which is 1.0,
subject to customary antidilution provisions in the event of stock dividends on
or subdivisions or combinations of the Common Stock subsequent to issuance of
such Units. Any Common Stock issued to the redeeming Limited Partner will be
listed on the NYSE and, if to the extent provided in such Redeeming Partner's
Investment Agreement or other agreement, registered under the Securities Act
and/or entitled to rights to Securities Act registration.
No Withdrawal of Capital by Limited Partners
No Limited Partner has the right to withdraw any part of his capital
contribution to the Partnership or interest thereon or to receive any
distribution, except as provided in the Partnership Agreement.
Issuance of Additional Limited Partnership Interests and Other Partnership
Securities
The General Partner is authorized, without the consent of the Limited Partners,
to cause the Partnership to issue additional Units or other Partnership
securities to the partners or to other persons on such terms and conditions and
for such consideration, including cash or any property or other assets permitted
by the Partnership Act, as the General Partner deems appropriate.
Meetings
The Partnership Agreement does not provide for annual meetings of the Limited
Partners, and the General Partner does not anticipate calling such meetings.
11
Amendment of Partnership Agreement
Amendments to the Partnership Agreement may, with four exceptions, be made by
the General Partner without the consent of the Limited Partners. Any amendment
to the Partnership Agreement which would (i) affect the Conversion Factor or the
Redemption Rights of the Limited Partners, (ii) adversely affect the rights of
the Limited Partners to receive distributions payable to them under the
Partnership Agreement, or (iii) alter the Partnership's profit and loss
allocations shall require the consent of Limited Partners. Any amendment that
would impose any obligation upon the Limited Partners to make additional capital
contributions to the Partnership shall require the consent of each Limited
Partner owning more than 50% of the percentage interests in the Partnership.
Books and Reports
The General Partner is required to keep at the specified office of the
Partnership the Partnership's books and records, including copies of the
Partnership's federal, state and local tax returns, a list of the partners and
their last known business addresses, the Partnership Agreement, the Partnership
certificate and all amendments thereto and any other documents and information
required under the Partnership Act. Any partner or his duly authorized
representative, upon paying duplicating, collection and mailing costs, is
entitled to inspect or copy such records during ordinary business hours.
The General Partner will furnish to each Limited Partner, as soon as practicable
after the close of each fiscal year, an annual report containing financial
statements of the Partnership (or United Dominion, if consolidated financial
statements including the Partnership are prepared) for such fiscal year. The
financial statements will be audited by accountants selected by the General
Partner. In addition, as soon as practicable after the close of each fiscal
quarter (other than the last quarter of the fiscal year), the General Partner
will furnish to each Limited Partner a quarterly report containing unaudited
financial statements of the Partnership (or the Company and the Partnership,
consolidated).
The General Partner will furnish to each Limited Partner, within 75 days after
the close of each fiscal year of the Partnership, the tax information necessary
to file such Limited Partner's individual tax returns.
Loans to Partnership
The Partnership Agreement provides that the General Partner may borrow
additional Partnership funds for any Partnership purpose from the General
Partner or a subsidiary or subsidiaries of the General Partner or otherwise.
Adjustments of Capital Accounts and Percentage Interests
A separate capital account will be established and maintained for each Partner.
The General Partner shall revalue the property of the Partnership to its fair
market value (as determined by the General Partner, in its sole discretion) in
accordance with applicable federal income tax regulations if: (i) a new or
existing general or limited partner of the Partnership (a Partner or
collectively Partners) acquires an additional interest in the Partnership in
exchange for more than a de minimis capital contribution, (ii) the Partnership
-- -------
distributes to a Partner more than a de minimis amount of Partnership property
-- -------
as consideration for a Partnership interest or (iii) the Partnership is
liquidated for federal income tax purposes. When the Partnership's property is
revalued by the General Partner, the capital accounts of the partners shall be
adjusted in accordance with such regulations, which generally requires such
capital accounts to be adjusted to reflect the manner in which the unrealized
gain or loss inherent in such property (that has not been reflected in the
capital accounts previously) would be allocated among the Partners pursuant to
the Partnership Agreement if there were a taxable disposition of such property
for its fair market value on the date of the revaluation.
If the number of outstanding Units increases or decreases during a taxable year,
each Partner's percentage interest in the Partnership shall be adjusted by the
General Partner as of the effective date of each such increase or decrease to a
percentage equal to the number of Units held by such Partner divided by the
aggregate number of Units outstanding, after giving effect to such increase or
decrease, and profits and losses for the year will be allocated among the
Partners in a manner selected by the General Partner to give appropriate effect
to such adjustments.
Registration Rights
Limited Partners have no rights to Securities Act registration of any Common
Stock of United Dominion received in connection with redemption of Units except
as provided in their respective Investment Agreements or other agreements with
United Dominion.
12
Tax Matters; Profit and Loss Allocations
Pursuant to the Partnership Agreement, the General Partner is the "tax matters"
partner of the Partnership and, as such, has the authority to handle tax audits
and to make tax elections under the Code on behalf of the Partnership.
Profits of the Partnership are to be allocated first to partners in proportion
to and up to the amount of cash distributions, and second in accordance with the
respective partnership interests. Losses are allocated in accordance with each
partners percentage interest.
Distributions
The Partnership Agreement provides that the General Partner shall distribute
cash quarterly, in amounts determined by the General Partner in its sole
discretion (i) first to the outside limited partners, (ii) second to United
Dominion (or appropriate subsidiary) until United Dominion has received an
amount equal to prior distributions to the outside limited partners, and (iii)
third, to the outside limited partners and United Dominion (or the appropriate
subsidiary) in accordance with their percentage interests in the Partnership.
Also, the amount of cash distributable to a Limited Partner who has not been a
Limited Partner for the full quarter for which the distribution is paid is
subject to pro rata reduction. Upon liquidation of the Partnership, after
payment of, or adequate provision for, debts and obligations of the Partnership,
including any Partner loans, any remaining assets of the Partnership will be
distributed to all Partners with positive capital accounts in accordance with
their respective positive capital account balances. If the General Partner has
a negative balance in its capital account following a liquidation of the
Partnership, it will be obligated to contribute cash to the Partnership equal to
the negative balance in its capital account.
Term
The Partnership will continue until December 31, 2051, or until sooner dissolved
upon (i) the bankruptcy, dissolution, death or withdrawal of a General Partner
(unless the Limited Partners elect to continue the Partnership by electing by
unanimous consent a substitute General Partner within 90 days of such
occurrence), (ii) the passage of 90 days after the sale or other disposition of
all or substantially all the assets of the Partnership, (iii) the redemption of
all Limited Partners' interests in the Partnership or (iv) election by the
General Partner. Upon dissolution of the Partnership, the General Partner will
proceed to liquidate the assets of the Partnership and distribute the proceeds
remaining after payment or adequate provision for payment of all debts and
obligations of the Partnership as provided in the Partnership Agreement.
13
Item 2. Properties
Real Estate Owned
The table below sets forth a summary by major georgraphic market of United
Dominion's real estate portfolio at December 31, 2000. See also Notes 1 and 2 to
the Consolidated Financial Statements and Schedule III - Summary of Real Estate
Owned.
Number of Number of Percentage of Carrying
Apartment Apartment Carrying Value Encumbrances
Communities Homes Value (in thousands) (in thousands)
----------------------------------------------------------------------------------
NORTHERN REGION:
Raleigh, NC 9 2,951 3.7% $140,725 $31,327
Charlotte, NC 10 2,710 3.5% 133,652 12,267
Columbus, OH 5 2,175 3.2% 122,281 42,703
Greensboro, NC 8 2,123 2.7% 102,574 -
Richmond, VA 8 2,372 2.5% 94,633 60,682 (a)
Wilmington, NC 6 1,869 2.3% 88,200 -
Baltimore, MD 6 1,421 1.7% 66,380 28,657 (a)
Other Northern Markets 38 8,383 9.5% 366,179 56,194 (a)
SOUTHERN REGION:
Orlando, FL 14 4,140 5.2% 198,761 76,736 (a)
Tampa, FL 10 3,372 3.9% 149,907 51,665 (a)
Nashville, TN 8 2,220 3.1% 117,978 -
South Florida 6 1,638 2.7% 103,335 20,620 (a)
Memphis, TN 6 1,956 2.5% 95,752 32,724
Atlanta, GA 6 1,426 1.8% 69,964 17,714 (a)
Columbia, SC 6 1,584 1.6% 61,472 5,000
Other Southern Markets 16 4,760 5.8% 220,993 43,696 (a)
WESTERN REGION:
Houston, TX 22 5,722 5.8% 222,164 47,499
Dallas, TX 14 4,533 5.4% 208,238 10,349
Phoenix, AZ 10 3,460 5.2% 199,500 19,086
San Antonio, TX 12 3,827 4.9% 187,470 37,627
Fort Worth, TX 11 3,561 3.8% 145,046 18,711
San Francisco, CA 4 980 3.6% 139,462 21,709
Monterey Peninsula, CA 11 1,827 2.7% 104,041 - (a)
Southern California 5 1,414 2.3% 89,863 5,937
Seattle, WA 3 628 0.9% 33,473 16,661
Other Western Markets 22 6,167 7.6% 290,068 66,178 (a)
Land n/a n/a 0.9% 33,633 n/a
Real Estate Under Development n/a n/a 0.7% 26,735 n/a
----------------------------------------------------------------------------------
Total Apartments 276 77,219 99.4% $3,812,478 $859,285
----------------------------------------------------------------------------------
Real Estate Held for Disposition (c) 5 n/a 0.4% 16,980 6,830
Richmond - Corporate n/a n/a 0.2% 6,863 -
----------------------------------------------------------------------------------
Total Real Estate Owned 281 77,219 100.0% $3,836,320 $866,115
==================================================================================
Physical Average Monthly Rental Average
Cost Occupancy Rates for the Year Ended Unit Size
Per Home Full Year 2000 December 31, 2000 (b) (Square Feet)
------------------------------------------------------------------------------------
NORTHERN REGION:
Raleigh, NC $47,687 90.8% $707 914
Charlotte, NC 49,318 92.0% 686 983
Columbus, OH 56,221 95.0% 656 886
Greensboro, NC 48,315 92.5% 631 981
Richmond, VA 39,896 96.2% 684 945
Wilmington, NC 47,191 89.5% 648 951
Baltimore, MD 46,713 98.3% 731 872
Other Northern Markets 43,681 94.9% 643 912
SOUTHERN REGION:
Orlando, FL 48,010 94.4% 721 937
Tampa, FL 44,457 94.7% 676 951
Nashville, TN 53,143 94.8% 657 850
South Florida 63,086 92.9% 847 847
Memphis, TN 48,953 94.5% 610 835
Atlanta, GA 49,063 94.6% 718 908
Columbia, SC 38,808 94.0% 540 838
Other Southern Markets 46,427 92.5% 624 904
WESTERN REGION:
Houston, TX 38,826 92.8% 602 819
Dallas, TX 45,938 95.2% 669 713
Phoenix, AZ 57,659 93.3% 693 905
San Antonio, TX 48,986 93.7% 650 835
Fort Worth, TX 40,732 96.1% 610 803
San Francisco, CA 142,308 99.5% 1,602 776
Monterey Peninsula, CA 56,947 94.8% 829 707
Southern California 63,552 95.2% 818 745
Seattle, WA 53,300 96.0% 701 823
Other Western Markets 47,035 94.7% 636 810
Land n/a n/a n/a n/a
Real Estate Under Development n/a n/a n/a n/a
------------------------------------------------------------------------------------
Total Apartments $48,591 94.2% $674 869
------------------------------------------------------------------------------------
Real Estate Held for Disposition (c) n/a n/a n/a n/a
Richmond - Corporate n/a n/a n/a n/a
------------------------------------------------------------------------------------
Total Real Estate Owned $48,591 94.2% $674 869
=====================================================================================
(a) There are 88 communities encumbererd by fixed rate debt aggregating
$723.7 million. The amount of this debt is included in the encumbrances
shown for the individual markets. There are 27 communities encumbered by
fixed rate debt aggregating $135.5 million that is not included in the
encumbrances shown for the individual markets or in real estate held for
disposition.
(b) Average Monthly Rental Rates for the Year Ended December 31, 2000,
represents potential rent collections (gross potential rents less market
adjustments), which approximate net effective rents, based on weighted
average number of homes.
(c) Includes three commercial properties, one parcel of land and one apartment
community.
14
Item 3. LEGAL PROCEEDINGS
- - ----------------------------
United Dominion and its subsidiaries are engaged in various litigations and
have a number of unresolved claims pending. The ultimate liability in respect
of such litigations and claims cannot be determined at this time. United
Dominion is of the opinion that such liability, to the extent not provided for
through insurance or otherwise, is not likely to be material in relation to the
consolidated financial statements of United Dominion.
In October 2000, United Dominion reached an agreement to settle a class
action lawsuit concerning water usage billing in Texas. The settlement was for
$2.7 million and is subject to final court approval (see Note 9 -
Contingencies).
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - --------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of United Dominion's fiscal year ended December 31, 2000.
Executive Officers of the Registrant
- - ------------------------------------
The executive officers of United Dominion, listed below, serve in their
respective capacities for approximate one-year terms.
Name Age Office Since
- - ---- --- ------- -----
John P. McCann 56 Chairman of the Board 1974
Thomas W. Toomey 40 President and Chief Executive 2001
Officer
John S. Schneider 62 Senior Executive Vice President 1996
and Chief Operating Officer
A. William Hamill 53 Executive Vice President 1999
and Chief Financial Officer
Richard A. Giannotti 45 Senior Vice President and Director 1985
of Development-East
Mark E. Wood 49 Senior Vice President and Director 1996
of Development-West
Katheryn E. Surface 42 Senior Vice President, Corporate 1992
Secretary and General Counsel
Kevin W. Walsh 46 Senior Vice President of 1999
Finance
Curt W. Carter 44 Senior Vice President and Director 1985
of Apartment Operations-Northern
Region
Robert L. Landis 42 Senior Vice President and Director 1996
of Apartment Operations-Western
Region
15
Walter J. Lamperski 43 Senior Vice President and Director 1996
of Apartment Operations-Southern
Region
Blake W. Clemens 43 Senior Vice President and Director 1998
of Acquisitions
Thomas J. Corcoran 54 Senior Vice President and
Director of Human Resources 1997
Patrick S. Gregory 51 Senior Vice President and
Director of Information Technology 1997
Mr. McCann was United Dominion's Chief Executive Officer starting in 1974.
Mr. McCann was elected Chairman of the Board in 1996. Mr. McCann retired as
Chief Executive Officer of the Company in February 2001.
Mr. Toomey joined United Dominion as President and Chief Executive Officer
in February 2001. Prior to joining the Company, Mr. Toomey was the Chief
Operating Officer of Apartment Investment Management Company. Before becoming
Chief Operating Officer, Mr. Toomey was Executive Vice President - Finance
Administration. Prior to joining AIMCO in November 1995, Mr. Toomey was Senior
Vice President and Treasurer with Lincoln Property Company from 1990 to 1995 and
an Audit Manager with Arthur Andersen & Co. from 1984 to 1990.
Mr. Schneider is the former Chief Executive Officer and Chairman of the
Board of South West Property Trust Inc. (South West). Mr. Schneider was employed
with the investment banking firm of Donaldson, Lufkin and Jenrette from 1967
until 1973, when he co-founded a predecessor firm to South West. Mr. Schneider
was elected Vice Chairman of the Board and Executive Vice President in 1996 in
connection with the merger with South West and President in 1998.
Mr. Hamill joined United Dominion as Executive Vice President and Chief
Financial Officer in October 1999. Prior to joining United Dominion, Mr. Hamill
was the Chief Financial Officer of Union Camp Corporation. Mr. Hamill also
previously served as an investment banker with Morgan Stanley & Co.
Incorporated, where he was a managing director.
Mr. Giannotti joined United Dominion as Director of Development and
Construction in September 1985. He was elected Assistant Vice President in
1988, Vice President in 1989 and Senior Vice President in 1996. In 1998, Mr.
Giannotti was elected Director of Development-East.
Mr. Wood joined United Dominion as Vice President of Construction in
connection with the merger of South West in 1996. He was promoted to Senior
Vice President and Director of Development-West in 2000.
Ms. Surface joined United Dominion in 1992 as Assistant Vice President and
Legal Counsel, elected General Counsel, Corporate Secretary and Vice President
in 1994 and elected to Senior Vice President in 1997.
Mr. Walsh joined United Dominion as Vice President of Finance in May 1998.
In 1999, Mr. Walsh was elected to Senior Vice President. Prior to joining
United Dominion, Mr. Walsh was the Vice President of Finance and Treasurer of
Tultex Corporation. His experience also includes fifteen years in corporate
banking with predecessors to both First Union and NationsBank.
16
Mr. Carter joined United Dominion in 1991 as an Assistant Vice President of
Apartment Operations. In 1992, he was promoted to Vice President of Apartment
Operations. In 1995, he was elected Regional Vice President-Northern Region,
and in 1997 was promoted to Senior Vice President and Director of Apartment
Operations- Northern Region.
Mr. Landis joined United Dominion in 1996 as Regional Vice President-
Florida Region and was promoted in 1997 to Senior Vice President and Director of
Apartment Operations-Florida Region. During 1998, Mr. Landis became the Senior
Vice President and Director of Apartment Operations-Western Region. Prior to
joining United Dominion, he was Vice President of Asset Management and Property
Management for CRI/CAPREIT, Inc.
Mr. Lamperski joined United Dominion in 1996 as the Regional Vice
President-Southern Region and was promoted in 1997 to Senior Vice President and
Director of Apartment Operations-Southern Region. From February 1990 to August
1996, he was Vice President and Director of Property Management for Steven D.
Bell, a property management company located in Greensboro, North Carolina.
Mr. Clemens joined United Dominion in 1998 as a Vice President and Director
of Acquisitions and was promoted to Senior Vice President in 1999. Prior to
joining United Dominion, Mr. Clemens was the Vice President of Acquisitions for
McNeil Real Estate Management Company from 1996 to 1998. Prior to this, Mr.
Clemens was the Vice President of Acquisitions and Finance at Insignia
Commercial Group, Incorporated.
Mr. Corcoran joined United Dominion in 1997 as the Assistant Vice President
of Human Resources and was promoted to Vice President in 1998 and Senior Vice
President in 1999. Prior to joining United Dominion, Mr. Corcoran was the Vice
President of Human Resources for Acordia, Inc., a national insurance brokerage
firm from 1993 to 1995.
Mr. Gregory joined United Dominion in 1997 as the Vice President and
Director of Information Technology and was promoted to Senior Vice President in
1999. From 1976 to 1997, Mr. Gregory was employed by Crestar Bank as a New
Technology Analyst.
17
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- - -------------------------------------------------------------------------------
United Dominion's Common Stock is traded on the New York Stock Exchange
(NYSE) under the symbol UDR. The following tables set forth the quarterly high
and low sale prices per common share reported on the NYSE for each quarter of
the last two years. Distribution information for Common Stock reflects
distributions declared per share for each calendar quarter and paid at the end
of the following month.
COMMON STOCK
Distributions
High Low Declared
1999
1st Quarter $ 11 1/4 $ 9 1/16 $ .2650
2nd Quarter 11 15/16 9 13/16 .2650
3rd Quarter 12 1/16 10 3/4 .2650
4th Quarter 11 5/8 9 1/8 .2650
2000
1st Quarter $ 10 1/2 $ 9 7/16 $ .2675
2nd Quarter 11 3/4 9 3/4 .2675
3rd Quarter 11 3/4 10 11/16 .2675
4th Quarter 11 1/8 9 3/8 .2675
United Dominion determined that, for federal income tax purposes, approximately
76% of the distributions for each of the four quarters of 2000 represented
ordinary income to its shareholders and 24% represented long-term capital gain
to its shareholders.
On March 1, 2001, the closing sale price of the Common Stock was $12 per share
on the NYSE, and there were 8,265 holders of record of the 101,346,145 shares of
Common Stock.
United Dominion pays regular quarterly distributions to holders of shares of
Common Stock. Future distributions by United Dominion will be at the discretion
of its Board of Directors after considering the Company's actual funds from
operations, financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
and other factors. The annual distribution payment for calendar year 2000
necessary for United Dominion to maintain its status as a REIT was approximately
$1.04 per share. United Dominion paid total distributions of $1.07 per share for
2000.
18
SERIES A PREFERRED STOCK
United Dominion's Series A Preferred Stock ("Series A Preferred") and
Series B Preferred Stock ("Series B Preferred") is traded on the New York Stock
Exchange (NYSE) under the symbol "UDRpfa" and "UDRpfb", respectively. The
following tables set forth the quarterly high and low sale prices per share
reported on the NYSE for each quarter of the last two years for the Series A
Preferred and Series B Preferred. Distribution information for the Series A
Preferred and Series B Preferred reflects distributions declared per share for
each calendar quarter and paid at the end of the following month.
Distributions
High Low Declared
1999
1st Quarter $ 25 1/8 $ 24 $ .5775
2nd Quarter 25 1/4 23 13/16 .5775
3rd Quarter 25 1/16 20 9/16 .5775
4th Quarter 22 3/8 17 13/16 .5775
2000
1st Quarter $ 21 11/16 $ 19 1/16 $ .5781
2nd Quarter 23 3/8 18 3/4 .5781
3rd Quarter 24 7/8 22 5/8 .5781
4th Quarter 24 9/16 20 3/4 .5781
On or after April 24, 2000, the Series A Preferred Stock may be redeemed for
cash at a redemption price of $25 per share, plus accrued and unpaid dividends
from the proceeds from the sale of additional capital stock (common or
preferred).
SERIES B PREFERRED STOCK
Distributions
High Low Declared
1999
1st Quarter $ 26 1/16 $ 24 $ .5375
2nd Quarter 25 1/2 23 5/8 .5375
3rd Quarter 25 5/16 20 1/4 .5375
4th Quarter 22 5/8 15 5/8 .5375
2000
1st Quarter $ 20 9/16 $ 17 5/8 $ .5375
2nd Quarter 22 18 .5375
3rd Quarter 23 15/16 20 11/16 .5375
4th Quarter 23 1/4 19 1/4 .5375
The Series B Preferred Stock may be redeemed beginning May 29, 2007 at the sole
option of United Dominion at a redemption price of $25 per share, plus accrued
and unpaid dividends from the proceeds from the sale of additional capital stock
(common or preferred).
SERIES D PREFERRED STOCK
On December 7, 1998, in connection with the acquisition of American Apartment
Communities II, Inc. (AAC), United Dominion issued eight million shares of
Series D Convertible Redeemable Preferred Stock (Series D) to one of the sellers
of AAC. The Series D is convertible into 1.5385 shares of common stock at the
option of the holder at any time at $16.25 per share. The Series D is not
redeemable prior to December 7, 2003. On or after this date, United Dominion
may, at its option, redeem all or part of the Series D at a price per share of
$25, plus accrued and unpaid dividends from the proceeds from the sale of
additional capital stock (common or preferred). Distributions declared for 2000
were
19
$1.91 per share or $.4777 per quarter. The Series D is not listed on any
exchange.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
United Dominion has a Dividend Reinvestment and Stock Purchase Plan under which
holders of common and preferred stock may elect to automatically reinvest their
distributions and make additional cash payments to acquire additional shares of
United Dominion's common stock.
OPERATING PARTNERSHIP UNITS
From time to time, United Dominion issues shares of its common stock in exchange
for operating partnership units (OP Units) tendered to United Dominion's
operating partnerships, United Dominion Realty L.P. and Heritage Communities
L.P., for redemption in accordance with the provisions of their respective
agreements. Such shares are issued based on the exchange ratio of one share for
each OP Unit. During 2000, United Dominion issued a total of 41,490 shares of
common stock in exchange for OP Units.
Item 6. SELECTED FINANCIAL DATA
- - ---------------------------------
The following table sets forth selected consolidated financial and other
information for United Dominion as of and for each of the years in the five-year
period ended December 31, 2000. The table should be read in conjunction with
the Consolidated Financial Statements of United Dominion Realty Trust, Inc. and
the Notes thereto included elsewhere herein.
20
Selected Financial Data
Years ended December 31, 2000 1999 1998 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data and apartment homes owned
Operating Data (a)
Rental income $ 616,825 $ 618,749 $ 478,718 $ 386,672 $ 241,260
Income before gains on sales of investments,
minority interests and extraordinary item 48,720 60,379 47,339 57,813 33,726
Gains on sales of investments 31,450 37,995 26,672 12,664 4,346
Extraordinary item-early extinguishment of debt 831 927 (138) (50) (23)
Net income 76,615 93,622 72,332 70,149 37,991
Distributions to preferred shareholders 36,891 37,714 23,593 17,345 9,713
Net income available to common shareholders 42,653 55,908 48,739 52,804 28,278
Common distributions declared 110,225 109,607 107,758 88,587 55,493
Weighted average number of common shares outstanding-
basic 103,072 103,604 99,966 87,145 57,482
Weighted average number of common shares outstanding-
diluted 103,208 103,639 100,062 87,339 57,655
Weighted average number of common shares, OP Units
and common share equivalents-diluted 123,005 124,127 103,793 87,656 57,724
Per share:
Basic earnings per share $ 0.41 $ 0.54 $ 0.49 $ 0.61 $ 0.49
Diluted earnings per share 0.41 0.54 0.49 0.60 0.49
Common distributions declared 1.07 1.06 1.05 1.01 0.96
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Real estate owned, at carrying value $ 3,836,320 $ 3,953,045 $ 3,952,752 $ 2,517,398 $ 2,099,641
Accumulated depreciation 509,405 395,864 316,630 245,367 187,909
Total real estate owned, net of accumulated depreciation 3,326,915 3,557,181 3,636,122 2,272,031 1,911,732
Total assets 3,453,957 3,688,317 3,762,940 2,313,725 1,966,904
Secured debt 866,115 1,000,136 1,072,185 417,325 376,560
Unsecured debt 1,126,215 1,127,169 1,045,564 738,901 668,275
Total debt 1,992,330 2,127,305 2,117,749 1,156,226 1,044,835
Shareholders' equity 1,218,892 1,310,212 1,374,121 1,058,357 850,379
Number of common shares outstanding 102,219 102,741 103,639 89,168 81,983
- - ------------------------------------------------------------------------------------------------------------------------------------
Other Data (a)
Cash Flow Data
Cash provided by operating activities $ 224,160 $ 190,602 $ 140,597 $ 137,903 $ 90,064
Cash provided by/(used in) investing activities 103,793 (34,020) (263,864) (342,273) (161,572)
Cash (used in)/provided by financing activities (325,326) (174,985) 148,875 191,391 82,056
Funds from Operations (b)
Net income $ 76,615 $ 93,622 $ 72,332 $ 70,149 $ 37,991
Adjustments:
Distributions to preferred shareholders (36,891) (37,714) (23,593) (17,345) (9,713)
Real estate depreciation, net of other partnerships'
interest 151,520 120,543 99,588 76,688 47,410
Gains on sales of depreciable property, net of other
partnerships' interest (30,300) (37,995) (26,672) (12,664) (4,346)
Minority interests of unitholders in operating
partnership 2,885 4,434 1,430 278 58
Real estate depreciation related to unconsolidated
entities 251 181 24 -- --
Extraordinary item-early extinguishment of debt (831) (927) 138 50 23
Impairment loss on real estate and investments -- 19,300 -- 1,400 290
-----------------------------------------------------------------------
Funds from operations-basic $ 163,249 $ 161,444 $ 123,247 $ 118,556 $ 71,713
=======================================================================
Adjustment:
Distributions to preferred shareholders-Series D
(Convertible) 15,300 15,154 986 -- --
-----------------------------------------------------------------------
Funds from operations-diluted $ 178,549 $ 176,598 $ 124,233 $ 118,556 $ 71,713
=======================================================================
Apartment Homes Owned
Total apartment homes owned at December 31 77,219 82,154 86,893 62,789 55,664
Weighted average number of apartment homes owned
during the year 80,253 85,926 70,724 58,038 37,481
(a) From 1996 to 1998, United Dominion completed the following statutory
mergers: (i) South West Property Trust, Inc. on December 31, 1996 for an
aggregate purchase price of $572 million; (ii) ASR Investments Corporation
Inc. on March 27, 1998 for an aggregate purchase price of $323 million and;
(iii) American Apartment Communities II on December 7, 1998 for an
aggregate purchase price of $794 million.
(b) Funds from operations ("FFO") is defined as net income (computed in
accordance with GAAP), excluding gains (losses) from sales of depreciable
property, plus depreciation and amortization, less preferred dividends and
after adjustments for unconsolidated partnerships and joint ventures. This
definition conforms with the National Association of Real Estate Investment
Trust's definition issued in October 1999 which was effective beginning
January 1, 2000. United Dominion considers FFO in evaluating property
acquisitions and its operating performance and believes that FFO should be
considered along with, but not as an alternative to, net income and cash
flows as a measure of United Dominion's activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs. For 2000, FFO includes a non-
recurring net charge of $2.9 million related to the settlement of
litigation and an organizational charge which was partially offset by a
gain on the sale of land. For 1998, FFO includes a non-recurring charge of
$15.6 million related to the loss on the termination of a risk management
agreement.
21
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - -------------------------------------------------------------------------------
OF OPERATIONS
-------------
Forward-Looking Statements
This annual report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
include, without limitation, statements concerning property acquisitions and
dispositions, development activity and capital expenditures, capital raising
activities, rent growth, occupancy and rental expense growth. Words such as
"expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. Such statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievement of United Dominion to be materially different from
the results of operations or plans expressed or implied by such forward-looking
statements. Such factors include, among other things, unanticipated adverse
business developments affecting United Dominion, or its properties, adverse
changes in the real estate markets and general and local economies and business
conditions. Although United Dominion believes that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore there can be no assurance that
such statements included in this report 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 United Dominion or any other person that the results or
conditions described in such statements or the objectives and plans of United
Dominion will be achieved.
Overview
United Dominion is a real estate investment trust (REIT) with activities related
to the ownership, development, acquisition, renovation, management, marketing
and strategic disposition of multifamily apartment communities nationwide. Over
the past four years, United Dominion has diversified into new markets to create
a national platform, upgraded the quality of the portfolio and invested in
infrastructure and technology. The Company continues to review its strategy
with a goal of enhancing long-term earnings growth. At December 31, 2000,
United Dominion owned 277 communities with 77,219 apartment homes nationwide.
22
The following table summarizes United Dominion's apartment market information by
major geographic markets within each region (including real estate held for
disposition):
As of December 31, 2000 December 31, 2000
---------------------------------------------------------- ----------------------------
Number of Number of Percentage of Carrying Year Ended Quarter Ended
Apartment Apartment Carrying Value Physical Physical
Communities Homes Value (in thousands) Occupancy Occupancy
---------------------------------------------------------- ----------------------------
NORTHERN REGION:
Raleigh, NC 9 2,951 3.7% $ 140,725 90.8% 89.9%
Charlotte, NC 10 2,710 3.6% 133,652 92.0% 91.7%
Columbus, OH 5 2,175 3.3% 122,281 95.0% 95.0%
Greensboro, NC 8 2,123 2.7% 102,574 92.5% 91.5%
Richmond, VA 8 2,372 2.5% 94,633 96.2% 96.1%
Wilmington, NC 6 1,869 2.3% 88,200 89.5% 89.3%
Baltimore, MD 7 1,421 1.9% 71,076 98.0% 98.6%
Other Northern Markets 38 8,383 9.8% 366,179 94.9% 94.9%
SOUTHERN REGION:
Orlando, FL 14 4,140 5.3% 198,761 94.4% 94.1%
Tampa, FL 10 3,372 4.0% 149,907 94.7% 95.5%
Nashville, TN 8 2,220 3.1% 117,978 94.8% 94.9%
South Florida 6 1,638 2.8% 103,335 92.9% 94.8%
Memphis, TN 6 1,956 2.5% 95,752 94.5% 93.1%
Atlanta, GA 6 1,426 1.9% 69,964 94.6% 95.6%
Columbia, SC 6 1,584 1.6% 61,472 94.0% 95.0%
Other Southern Markets 16 4,760 5.9% 220,993 92.5% 91.7%
WESTERN REGION:
Houston, TX 22 5,722 5.9% 222,164 92.8% 92.8%
Dallas, TX 14 4,533 5.5% 208,238 95.2% 95.5%
Phoenix, AZ 10 3,460 5.3% 199,500 93.3% 91.9%
San Antonio, TX 12 3,827 5.0% 187,470 93.7% 93.3%
Fort Worth, TX 11 3,561 3.9% 145,046 96.1% 96.9%
San Francisco, CA 4 980 3.7% 139,462 99.5% 99.5%
Monterey Peninsula, CA 11 1,827 2.8% 104,041 94.8% 96.7%
Southern California 5 1,414 2.4% 89,863 95.2% 95.6%
Seattle, WA 3 628 0.9% 33,473 96.0% 95.7%
Other Western Markets 22 6,167 7.7% 290,068 94.7% 95.7%
---------------------------------------------------------- --------------------------
Total Apartments 277 77,219 100.0% $3,756,807 94.2% 94.2%
========================================================== ==========================
23
Liquidity and Capital Resources
United Dominion's primary source of liquidity is its cash flow from operations
as determined by rental rates, occupancy levels and operating expenses related
to its portfolio of apartment homes. United Dominion routinely uses its
unsecured bank credit facility to temporarily fund certain investing and
financing activities prior to arranging for longer-term financing. During the
past several years, proceeds from the sales of real estate have been used for
both investing and financing activities.
United Dominion regularly reviews its short and long-term liquidity requirements
and considers the adequacy of its cash flow from operations as well as other
liquidity sources to meet these requirements. United Dominion believes that it
can fund its short-term liquidity needs such as normal recurring operating
expenses, debt service payments, recurring capital expenditures and
distributions to common and preferred shareholders through cash provided by
operating activities and borrowings from the Company's unsecured bank credit
facility, as needed (see discussion that follows under "Financing Activities").
To facilitate future financing activities in the public capital markets,
management believes that it is prudent to maintain shelf registration statement
capacity. In this regard, United Dominion filed a shelf registration statement
in December 1999 providing for the issuance of up to $700 million in common
shares, preferred shares and debt securities. In March 2000, United Dominion
utilized this shelf registration statement to sell $100 million of senior
unsecured notes due March 2003 at an interest rate of 8.625%. The proceeds from
the offering were used to repay certain mortgage debt and repay revolving bank
debt.
Future Capital Needs
Future development expenditures are expected to be funded through joint ventures
or with proceeds from the sale of property. Acquisition activity is expected to
be primarily limited to the reinvestment of proceeds from the sale of property
in order to defer large tax gains and reinvested in targeted markets and sub-
markets.
During 2001, United Dominion has approximately $63 million of maturing debt
which the Company anticipates repaying using proceeds from the sale of apartment
communities, mortgage refinancing activity or borrowings under the Company's
unsecured credit facility.
The following discussion explains the changes in net cash provided by operating
and investing activities and net cash used in financing activities which are
presented in United Dominion's Consolidated Statements of Cash Flows.
Operating Activities
For the year ended December 31, 2000, United Dominion's cash flow from operating
activities was $224.2 million compared to $190.6 million for 1999, an increase
of $33.6 million. The increase in cash flow from operating activities resulted
primarily from a change in the level of operating assets as a result of
collections on escrow accounts and property insurance receivables during 2000.
Investing Activities
For the year ended December 31, 2000, net cash provided by investing activities
was $103.8 million compared to net cash used in investing activities of $34.0
million for 1999. Changes in the level of investing activities from period to
period reflects United Dominion's strategy as it relates to its acquisition,
capital expenditure, development and disposition programs, as well as the impact
of the capital market environment on these activities.
Real Estate under Development
During 2000, development activity was focused in core markets that have strong
operations managers in place. For the year ended December 31, 2000, United
Dominion invested approximately $80.1 million on real estate projects, down
$33.9 million from its 1999 level of $114.0 million.
24
The following projects were complete as of December 31, 2000:
Development
No. of Costs Cost Per Date
Apt. Homes (In thousands) Home Completed % Leased
------------ ------------------ ------------ ------------ ------------
New Community:
- - --------------
Ashton at Waterford Lakes 292 $21,500 $73,600 2/00 97.9%
Orlando, FL
Additional Phases:
- - ------------------
Dominion Crown Pointe II 220 14,700 66,800 6/00 89.1%
Charlotte, NC
Escalante II 312 19,100 61,200 11/00 82.1%
San Antonio, TX
Ashlar II 168 12,800 76,200 12/00 29.2%
Ft. Myers, FL
------------ ------------------ ------------
Total 992 $68,100 $68,600
============ ================== ============
The following projects were under development at December 31, 2000:
Cost to Budgeted Expected
No. of Apt. Completed Date Cost Est. Cost Completion
Homes Apt. Homes (In thousands) (In thousands) Per Home Date
------------- -------------- ---------------- ---------------- ------------ ------------
New Communities:
- - ----------------
Dominion Place at Kildaire Farm 332 -- $11,400 $25,700 $77,400 1Q02
Raleigh, NC
Red Stone Ranch 324 -- 8,600 21,700 67,000 4Q01
Austin, TX
------------- -------------- ---------------- ---------------- ------------
656 -- 20,000 47,400 72,300
------------- -------------- ---------------- ---------------- ------------
Additional Phases:
- - ------------------
Greensview II 192 -- 3,200 16,700 87,000 4Q01
Denver, CO
Manor at England Run III 120 -- 900 8,800 73,300 4Q01
Fredericksburg, VA
The Meridian II 270 -- 2,700 17,400 64,400 1Q02
Dallas, TX
------------- -------------- ---------------- ---------------- ------------
582 -- 6,800 42,900 73,700
------------- -------------- ---------------- ---------------- ------------
Total 1,238 -- $26,800 $90,300 $72,900
============= ============== ================ ================ ============
In addition to the apartment homes under development at December 31, 2000,
United Dominion has land held for future development with a carrying value of
$33.6 million, a significant portion of which the Company expects to sell during
2001 as these locations do not meet the investment criteria as a result of the
refinement of the Company's strategy during 2000. United Dominion anticipates
funding approximately $63.5 million on internal development activity in 2001,
which would include the development of two new communities and second phases at
three existing communities.
Development Joint Venture
On June 21, 2000, United Dominion completed the formation of a joint venture
that will invest approximately $103 million to develop five apartment
communities with a total of 1,438 apartment homes. United Dominion owns a 25%
interest in the joint venture and is serving as the managing partner of the
joint venture as well as the developer, general contractor and property manager.
Prior to completing the joint venture, United Dominion had commenced
construction on all five of the projects. Upon closing of the venture, United
Dominion contributed the projects in return for its equity interest of
approximately $8 million in the venture and was reimbursed for approximately $35
million of development outlays that were incurred prior to closing the joint
venture. The proceeds were used to reduce outstanding debt balances. In
addition, during 2000, United Dominion recognized fee income of
25
approximately $3 million for general contracting and developer services
provided by the Company to the joint venture. The Company has the option, but
not the obligation, to purchase these properties for fair value upon completion
of the projects.
The following joint venture project was complete as of December 31, 2000:
Development
No. of Apt. Cost Cost Per Date
Homes (In thousands) Home Completed % Leased
------------ ---------------- ------------ ------------ ------------
New Community:
- - --------------
The Meridian 250 $16,400 $65,600 6/00 100.0%
Dallas, TX
------------ ---------------- ------------
Total 250 $16,400 $65,600
============ ================ ============
The following joint venture projects were under development at December 31,
2000:
Cost to Budgeted Expected
No. of Apt. Completed Date Cost Est. Cost Completion
Homes Apt. Homes (In thousands) (In thousands) Per Home Date
------------- ------------- ----------------- ----------------- ------------ -------------
New Communities:
- - ----------------
Oaks at Weston 380 280 $26,300 $30,100 $79,200 2Q01
Raleigh, NC
Sierra Canyon 236 92 13,900 16,700 70,800 1Q01
Phoenix, AZ
Parke 33 264 244 16,700 17,400 65,900 1Q01
Lakeland, FL
Mandolin 308 -- 12,600 22,100 71,800 3Q01
Dallas, TX
------------- ------------- ----------------- ----------------- ------------
Total 1,188 616 $69,500 $86,300 $72,600
============= ============= ================= ================= ============
Disposition of Investments
For the year ended December 31, 2000, United Dominion sold 26 communities with
5,835 apartment homes, one commercial property and a parcel of land for an
aggregate sales price of approximately $214.5 million and recognized gains for
financial reporting purposes of $31.5 million. These sales allowed the Company
to dispose of older, non-core communities, to exit certain markets that had
limited growth opportunities and to improve the average age of the apartment
portfolio. During 1999, United Dominion sold 36 communities with 7,443
apartment homes for an aggregate sales price of $241.2 million, which resulted
in gains for financial reporting purposes of $38.0 million.
During 2001, United Dominion plans to sell non-core communities at levels
somewhat below that of 2000. Proceeds from the 2001 dispositions are currently
planned to be used to improve the Company's financial flexibility and
opportunistically reinvest a portion of the proceeds in acquisitions and the
repurchase of equity securities.
Acquisitions
During the year ended December 31, 2000, United Dominion acquired one community
with 267 apartment homes at a total cost (including closing costs) of $14.8
million which included the assumption of debt and the use of tax free exchange
funds as the Company further curtailed its acquisition activity from 1999 and
1998 levels.
During 2001, in order to complete 1031 exchange requirements, United Dominion
expects to invest 25% to 30% of the Company's disposition proceeds in targeted
markets and sub-markets. These acquisitions will focus on communities where
there is the opportunity to add value by repositioning the property to be
attractive to the Company's middle-market customer.
26
Capital Expenditures
United Dominion capitalizes those expenditures related to acquiring new assets,
materially enhancing the value of an existing asset, or substantially extending
the useful life of an existing asset. Expenditures necessary to maintain an
existing property in ordinary operating condition are expensed as incurred.
During 2000, $39.2 million or $514 per home was spent on capital expenditures
for United Dominion's same communities (those acquired or developed prior to
January 1, 1999). These capital improvements included recurring capital
expenditures, including floor coverings, HVAC equipment, roofs, appliances,
landscaping, siding, parking lots and other non-revenue enhancing capital
expenditures, which aggregated $23.7 million or $311 per home. In addition,
non-recurring revenue enhancing capital expenditures, including water sub-
metering, gating and access systems, the addition of microwaves, washer-dryers,
interior upgrades and new business and fitness centers totaled $15.5 million or
$203 per home for the year ended December 31, 2000. United Dominion will
continue to selectively add revenue-enhancing improvements which are budgeted to
provide a high return on investment. Capital expenditures during 2001 are
currently expected to be at levels somewhat higher than those experienced in
2000.
Financing Activities
Net cash used in financing activities during 2000 was $325.3 million compared to
$175.0 million for 1999, an increase of $150.3 million. During 2000, as part of
the plan to improve its balance sheet position, United Dominion used 77% of the
net proceeds from its disposition program to pay down secured and unsecured debt
and 14% to repurchase shares of common and preferred stock. The remaining 9% of
the net proceeds were used to complete an acquisition.
During 2000, using the net proceeds from its disposition program, United
Dominion repurchased $64.7 million of certain of its higher rate outstanding
unsecured debt with a weighted average yield of 8.39%. In addition, the Company
repaid $70.9 million of mortgage debt and $22.4 million of revolving bank debt.
During the first quarter of 2000, United Dominion issued $100 million of 8.625%
unsecured notes due 2003. Net proceeds of $99.5 million were used to repay
outstanding bank debt. In addition, United Dominion completed the refinancing
of tax-exempt notes aggregating $46.7 million at a blended rate of 6.32% and
with a final maturity of August 2008. In conjunction with this refinancing, the
Company removed the liens on $86 million of real estate which had previously
secured the tax-exempt notes.
In September 2000, United Dominion closed on the first part of a $60 million
revolving credit facility (the "FNMA Credit Facility") with the Federal National
Mortgage Association. The $38.3 million initially borrowed under the terms of
the FNMA Credit Facility has an initial interest rate of 7.12%, which is fixed
through April 1, 2001. The FNMA Credit Facility is for an initial term of five
years, bears interest at a floating rate which can be fixed for periods of up to
270 days, and can be extended for an additional five or ten years at United
Dominion's discretion. The proceeds from the FNMA Credit Facility were used to
repay a $28.6 million REMIC financing that matured during the third quarter and
the remaining proceeds were used to repay revolving bank debt.
In November 2000, United Dominion borrowed $100 million in the form of an
unsecured term loan from a consortium of banks. The term loan will initially
mature in May 2003 but may be extended at the Company's option for two
additional twelve-month periods. Proceeds from the term loan were used to
partially repay a $140.9 million unsecured note payable that matured in the
fourth quarter of 2000 with the remaining balance repaid from borrowings under
United Dominion's existing unsecured credit facility. Also during the fourth
quarter of 2000, a $23.9 million secured note payable matured and was repaid
using proceeds from additional borrowings under an existing revolving credit
facility with the Federal National Mortgage Association and borrowings under the
Company's unsecured credit facility.
As of December 31, 2000, approximately $14.5 million of United Dominion's
preferred shares have been repurchased under the $25 million preferred share
repurchase program. For the year ended December 31, 2000, United Dominion
repurchased 199,440 Series A preferred shares at an average price of $23.22 per
share and 507,191 Series B preferred shares at an average price of $19.46 per
share.
27
For the year ended December 31, 2000, the Company repurchased 1,398,659 common
shares at an average price of $10.03 and repurchased 10,097 operating
partnership units. As of December 31, 2000, approximately seven million common
shares remained available for purchase under the common share repurchase
program. Repurchases of shares will be made from time to time in the open
market or in privately negotiated transactions. The timing, volume and purchase
price will be at the discretion of the Company.
Credit Facilities
In June 2000, United Dominion closed on a $375 million three-year unsecured
revolving credit facility (the "Credit Facility") with a consortium of banks.
The Credit Facility, which extends until August 2003, replaces two lines of
credit that allowed the Company to borrow in aggregate up to $310 million. At
December 31, 2000, $244.4 million was outstanding under the Credit Facility
leaving $130.6 million available for use.
Under the Credit Facility, the Company may borrow at a rate of LIBOR plus 100
basis points for LIBOR-based borrowings. This rate is equal to the rate the
Company was able to borrow under a $110 million line of credit arranged in 1999
that was replaced by the new, expanded and longer-term Credit Facility. Under
the Credit Facility, the Company pays a facility fee, which is equal to 0.20% of
the commitment. The Credit Facility is subject to customary financial covenants
and limitations.
Derivative Instruments
As part of United Dominion's overall interest rate risk management strategy, the
Company uses off-balance sheet derivatives as a means to modify the interest
rate characteristics of on-balance sheet debt obligations or to hedge
anticipated financing transactions. The Company's off-balance sheet derivative
transactions used for interest rate risk management include various interest
rate swaps with indices that relate to the pricing of specific financial
instruments of United Dominion. The Company believes that it has appropriately
controlled the risk so that derivatives used for interest rate risk management
will not have any material unintended effect on consolidated earnings.
Derivative contracts did not have a material impact on the results of operations
during 2000 (see Note 6 - Financial Instruments).
Effective January 1, 2001, United Dominion will be required to adopt the
provisions of Statements of Financial Accounting Standards No. 133 and 138,
"Accounting for Derivative Instruments and Hedging Activities." All of the
Company's derivatives qualify as cash flow hedges under the provisions of the
statements (see Note 1 - Summary of Significant Accounting Policies).
Market Risk
United Dominion is exposed to market risk principally from interest rate risk
associated with variable rate notes payable and maturing debt that has to be
refinanced. United Dominion does not hold financial instruments for trading or
other speculative purposes, but rather issues these financial instruments to
finance its portfolio of real estate assets. United Dominion's interest rate
sensitivity position is managed by the Company's finance department. Interest
rate sensitivity is the relationship between changes in market interest rates
and the fair value of market rate sensitive assets and liabilities. United
Dominion's earnings are affected by changes in short-term interest rates on its
variable rate debt and the refinancing of fixed rate debt. A large portion of
United Dominion's market risk is exposure to short-term interest rates from
variable rate borrowings outstanding under its Credit Facility, which totaled
$244.4 million at December 31, 2000. The impact on United Dominion's financial
statements of refinancing fixed rate debt that matured during 2000 was not
material.
At December 31, 2000, the notional value of United Dominion's derivative
products for the purpose of managing interest rate risk was $247 million of
interest rate swaps under which United Dominion pays a fixed rate of interest
and receives a variable rate. These agreements effectively fix $247 million of
United Dominion's variable rate notes payable to a weighted average fixed rate
of 7.38%. At December 31, 2000, the fair market value of the interest rate
swaps in an unfavorable value position to United Dominion was $3.8 million (see
Note 6 - Financial Instruments). If interest rates were 100 basis points more
or less at December 31, 2000, the fair market value of the interest rate swaps
would have increased or decreased approximately $5.9 million and $6.1 million,
respectively.
28
If market interest rates for variable rate debt average 100 basis points more in
2001 than they did during 2000, United Dominion's interest expense, after
considering the effects of its interest rate swap agreements, would increase,
and income before taxes would decrease by $3.8 million. Comparatively, if
market interest rates for variable rate debt averaged 100 basis points more in
2000 than it did in 1999, United Dominion's interest expense, after considering
the effects of its interest rate swap agreements, would increase, and income
before taxes would decrease by $4.0 million. If market rates for fixed rate
debt were 100 basis points higher at December 31, 2000, the fair value of fixed
rate debt would have decreased from $1.39 billion to $1.33 billion. If market
interest rates for fixed rate debt were 100 basis points lower at December 31,
2000, the fair value of fixed rate debt would have increased from $1.39 billion
to $1.45 billion.
These amounts are determined by considering the impact of hypothetical interest
rates on United Dominion's borrowing cost and interest rate swap agreements.
These analyses do not consider the effects of the reduced level of overall
economic activity that could exist in such an environment. Further, in the
event of a change of such magnitude, management would likely take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no change in United Dominion's financial structure.
Results of Operations
2000-vs-1999
Net income available to common shareholders was $42.7 million ($.41 per share)
for the year ended December 31, 2000 compared to $55.9 million ($.54 per share)
for 1999, representing a decrease of $13.2 million ($.13 per share). The
decrease was primarily due to the following factors: (i) property operating
income growth generated from the performance of the portfolio during 2000 was
offset by the decrease in the size of the portfolio due to the disposition
program; (ii) United Dominion recognized $31.5 million ($.31 per share) of gains
on the sales of investments in 2000 compared to $38.0 million ($.37 per share)
for the comparable period in 1999 and; (iii) real estate depreciation increased
significantly in 2000 as a result of the recognition of catch-up depreciation
expense on communities transferred from real estate held for disposition to real
estate held for investment during the second quarter of 2000 and, to a lesser
extent, the impact of completed development communities and capital expenditures
(see Note 2 - Real Estate Owned).
1999-vs-1998
For 1999, net income available to common shareholders increased $7.2 million,
with a corresponding increase of $.05 for both basic and diluted earnings per
share, compared to 1998. The increase per share was primarily attributable to
aggregate gains on the sales of investments of $38.0 million ($.37 per share)
for the year ended December 31, 1999, compared to $26.7 million ($.27 per share)
in 1998. However, the increases associated with the gain on sales of
investments were moderated in part due to the $19.3 million of impairment losses
recorded during 1999. United Dominion's non-mature communities with 31,454
apartment homes at December 31, 1999 provided a substantial portion of the
increase in United Dominion's operating income during 1999.
Apartment Community Operations
United Dominion's net income is primarily generated from the operations of its
apartment communities. The following table summarizes the operating performance
for United Dominion's total apartment portfolio for each of the periods
presented (dollars in thousands):
Year Ended December 31, Year Ended December 31,
----------------------------------- ---------------------------------
2000 1999 % Change 1999 1998 % Change
----------------------------------- ---------------------------------
Property rental income $ 615,401 $ 617,298 -0.3% $ 617,298 $ 477,279 29.3%
Property rental expenses (excluding
depreciation and amortization) (238,717) (245,173) -2.6% (245,173) (198,877) 23.2%
----------------------------------- ---------------------------------
Property operating income $ 376,684 $ 372,125 1.2% $ 372,125 $ 278,402 33.7%
========================================================================
Weighted average number of homes 80,253 85,926 -6.6% 85,926 70,724 21.5%
Physical occupancy 94.2% 92.6% 1.2% 92.6% 92.5% 0.1%
29
The increase in property operating income provided by the same communities,
development communities and acquisition communities since December 31, 1999, was
partially offset by the loss of property operating income due to the disposition
of 13,278 apartment homes during 1999 and 2000. As a result of United
Dominion's disposition program, the weighted average number of apartment homes
declined 6.6% during 2000.
2000-vs-1999
Same Communities
United Dominion's same communities (those communities acquired, developed or
stabilized prior to January 1, 1999 and held on January 1, 2000 which consisted
of 76,267 weighted average apartment homes) provided 94% of its property
operating income for the year ended December 31, 2000.
In 2000, property operating income for the same communities increased 4.1% or
$14.1 million compared to 1999. The growth in property operating income
resulted from a $23.3 million or 4.2% increase in property rental income which
was driven by a $17.1 million or 2.9% increase in rental rates coupled with a
$5.8 million or 1.2% increase in physical occupancy. The increase in rental
rates and occupancy was partially offset by higher concessions and bad debt
expense.
For 2000, property operating expenses at these same communities increased $9.2
million or 4.2%. The increase in property operating expenses was due to (i) a
$2.6 million or 5.3% increase in real estate taxes related to the portion of the
$1.4 billion of real estate acquired in 1998 that has undergone reassessment;
(ii) a $4.5 million or 63.4% increase in property insurance costs attributable
to a combination of the Company's loss history plus overall increases in market
rates; (iii) a $3.1 million or 5.3% increase in personnel costs due to higher
salaries and benefit costs and; (iv) a $1.1 million or 6.5% increase in property
management as a result of added infrastructure costs in areas such as
information technology, human resources and training. These increases were
offset by a $1.6 million or 6.0% decrease in utilities expense due to the
continued transfer of water and sewer costs to residents and a $1.4 million or
3.8% decrease in repair and maintenance expense as the Company continues to
benefit from the upgrade program and centralized purchasing initiatives.
As a result of the percentage changes in total property operating income
and total property operating expenses, the operating margin (property operating
income divided by property rental income) declined 0.1% to 61.2%.
Non-Mature Communities
The remaining 6% of United Dominion's property operating income during 2000 was
generated from its non-mature communities (those communities acquired or
developed during 1999 and 2000). United Dominion's development communities which
included 2,470 apartment homes constructed since January 1, 1999 provided an
additional $12.3 million of property operating income for the year ended
December 31, 2000. In addition, the six communities with 1,497 apartment homes
acquired by United Dominion during 1999 and 2000 provided an additional $7.6
million of property operating income during 2000.
1999-vs-1998
Same Communities
United Dominion's same communities (those communities acquired, developed or
stabilized prior to January 1, 1998 and held on January 1, 1999 which consisted
of 51,316 weighted average apartment homes) provided 60% of its property
operating income for the year ended December 31, 1999.
In 1999, property operating income increased 5.6% or $12.0 million compared to
1998. The growth in property operating income resulted primarily from a $11.1
million or 3.1% increase in property rental income, reflecting an increase in
average monthly rental rates of 3.4% while physical occupancy remained constant
at 93.1%. For 1999, property operating expenses at these same communities
decreased 0.6% or $827 thousand compared to 1998. Utility expense decreased due
to the continued transfer of water and sewer costs to residents, repair and
maintenance expense decreased as a result of the upgrade program and taking more
turnover work in-house and property management expenses decreased due to better
economies of scale. However, these decreases were offset by an increase in
personnel costs due to higher salaries and
30
benefit costs, an increase in real estate taxes, the addition of monitored
alarms in more communities and higher technology costs.
As a result of the increase in property rental income and the decrease in
property operating expenses, the operating margin improved 1.5% to 61.3%.
Non-Mature Communities
The remaining 40% of United Dominion's property operating income during 1999 was
generated from its non-mature communities (those communities acquired or
developed during 1998 and 1999). United Dominion's non-mature apartment
portfolio consisted of (i) American Apartment Communities II, Inc., consisting
of 13,728 homes (net of sales), which provided a first year return on investment
(property rental income less property operating expenses divided by the average
capital investment in real estate) of 9.1% on an average investment of $761
million and achieved an operating margin of 62.7%; (ii) 13,577 homes (net of
sales) acquired in 1998, which provided an 8.4% return on investment on an
average investment of $611 million with an operating margin of 57.8%; (iii) five
communities with 1,230 apartment homes acquired by United Dominion during 1999
on an initial investment of $74 million that did not have a material impact on
1999 results of operation; (iv) 12,761 apartment homes sold for an aggregate
sales price of $398 million as part of United Dominion's strategic repositioning
since January 1, 1998 and; (v) 2,404 homes developed at various times since
January 1, 1998, which included the completion of six new communities and one
additional phase to an existing community during 1999.
Interest Expense
During 2000, interest expense increased $2.3 million over the corresponding
amount in 1999 as the weighted average interest rate increased from 7.4% in 1999
to 7.6% in 2000, which more than offset the decrease of $124.7 million in the
weighted average amount of debt outstanding ($2.1 billion in 2000 versus $2.2
billion in 1999). The weighted average amount of debt employed during 2000 was
lower as disposition proceeds were used to repay outstanding debt. The increase
in the average interest rate during 2000 reflects short-term bank borrowings
that had higher interest rates when compared to the prior year. For 2000, 1999
and 1998, total interest capitalized was $3.6 million, $5.2 million and $3.4
million, respectively.
During 1999, interest expense increased $47.5 million over the corresponding
amount in 1998 as the weighted average amount of debt employed during 1999 was
higher than it was in 1998 ($2.1 billion in 1999 versus $1.5 billion in 1998).
The increase in the weighted average amount of debt employed in 1999 was
primarily due to debt assumed during 1998 to fund United Dominion's investment
activities. The weighted average interest rate on this debt was 7.4% in both
1999 and 1998.
Real Estate Depreciation
During the year ended December 31, 2000, real estate depreciation increased
$31.3 million or 25.7% over 1999. This increase was primarily attributable to
the recognition of catch-up depreciation expense on communities transferred from
real estate held for disposition to real estate held for investment during the
second quarter of 2000 and, to a lesser extent, the impact of completed
development communities (see Note 2 - Real Estate Owned) and capital
expenditures.
During the year ended December 31, 1999, real estate depreciation increased
$22.1 million or 22.2% over 1998. The increase was primarily due to the
recognition of a full year of depreciation on United Dominion's 1998 acquired
properties, and to a lesser extent, the recognition of depreciation on the
Company's 1999 acquisitions.
General and Administrative
During the year ended December 31, 2000, general and administrative expenses
increased $1.9 million or 13.5% over 1999, excluding a $2.7 million charge
recognized in the third quarter of 2000 related to the settlement of a class
action lawsuit concerning water usage billing in Texas (see Note 10 -
Contingencies) and a $1.0 million charge to recognize expenses under employment
agreements for certain executives of United Dominion as a result of planned
organizational changes. The $1.9 million increase was primarily due to a $0.8
million increase in franchise taxes in Tennessee as a result of a change in the
state law
31
regarding franchise taxes with the remaining increase due to recruiting and
tuition costs and consulting costs incurred throughout the strategic planning
process.
During the year ended December 31, 1999, general and administrative expenses
increased $3.7 million or 36.6% over 1998, primarily due to the expanded
operations of United Dominion and its continued investment in professional
staff, technology and scaleable accounting and information systems.
Impairment Loss
United Dominion did not recognize any impairment loss on its real estate
portfolio for the year ended December 31, 2000.
For the year ended December 31, 1999, United Dominion recognized $18.3 million
in impairment losses on its real estate portfolio. As a result of the review of
its real estate apartment portfolio, 21 properties included in real estate held
for investment were moved to real estate held for disposition during the second
quarter. Through the review and analysis of communities targeted for strategic
disposition, an aggregate $7.1 million impairment loss was recognized on five
communities in the second quarter and an additional $11.2 million impairment
loss was recognized in the fourth quarter of 1999, related principally to
communities acquired in the ASR merger in 1998.
Gains on Sales of Investments
For the years ended December 31, 2000 and 1999, United Dominion recognized gains
for financial reporting purposes of $31.5 million and $38.0 million,
respectively. Changes in the level of gains recognized from period to period
reflect the changing level of United Dominion's divestiture activity from period
to period as well as the extent of gains related to specific properties sold.
Distributions to Preferred Shareholders
Distributions to preferred shareholders totaled $36.9 million for the year ended
December 31, 2000 compared to $37.7 million for 1999. The decrease was due to
the repurchase of 199,440 Series A preferred shares and 507,191 Series B
preferred shares during 2000.
Distributions to preferred shareholders totaled $37.7 million for 1999 compared
to $23.6 million for 1998. The increase was a result of the issuance of eight
million shares of Series D 7.50% Cumulative Convertible Redeemable Preferred
Stock in December 1998.
Discount on Preferred Share Repurchases
For the year ended December 31, 2000, United Dominion recognized $2.9 million of
discount on preferred share repurchases. The discount on preferred share
repurchases represents the difference between the carrying value and the
purchase price of the preferred shares.
Inflation
United Dominion believes that the direct effects of inflation on the Company's
operations have been inconsequential. Substantially all of the Company's leases
are for a term of one year or less which generally minimizes United Dominion's
risk from the adverse effects of inflation.
Technology Initiatives
United Dominion is committed to technology initiatives that will allow the
Company to improve its operating efficiencies, gain marketing advantages and
provide the electronic services its customers demand. Among the key technology
initiatives underway are:
. United Dominion is developing a comprehensive eCommerce plan. As part of
this plan, the Company has created a new corporate home page, and is in the
process of creating home pages for each of its communities and community
portals for residents. The resident portals will allow United Dominion to
offer additional products and services to residents, accessing a previously
untapped revenue source for the Company.
32
. United Dominion has approximately a 15% interest in Realeum, Inc. Realeum
is currently developing an innovative web-based property management and
leasing system. United Dominion believes this system will enable the
Company to capture, review and analyze data in a manner that is not
currently available on the commercial market. In addition, the Company
expects this system to make the leasing process more convenient for
residents and more efficient for leasing associates. This system will also
lay the foundation for the fulfillment of online leasing transactions.
. United Dominion is continuing the implementation of a virtual private
network (VPN) that will connect all of the Company's apartment communities
and offices. This network will improve the efficiency of United Dominion's
operations and its internal communications.
. United Dominion is implementing a web-based learning center that will give
all associates access to key corporate training courses and reference
materials.
Management Transition
With the Company's repositioning substantially complete, United Dominion began a
search for a new CEO in the fourth quarter. This search culminated with the
hiring of Thomas W. Toomey on February 13, 2001 to replace John P. McCann who
served in this role for more than 26 years. Mr. Toomey has begun a review of the
organizational structure and strategy of the Company. This review could result
in changes that may require the Company to incur expenses for severance and
termination benefits. Additionally, the review may result in a change of intent
with regard to anticipated holding periods of certain assets which could require
the write down of these assets.
33
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- - --------------------------------------------------------------------
Information required by this regarding Quantitative and Qualitative
Disclosures about Market Risk is included in Part II, Item 7 of this Annual
Report on Form 10-K included in Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ----------------------------------------------------
See Index to Consolidated Financial Statements and Schedule on page 44 of
this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- - ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
34
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - ------------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 8,
2001.
Information required by this item regarding the executive officers of
United Dominion is included in Part I of this Annual Report on Form 10-K in the
section entitled "Executive Officers of the Registrant".
Item 11. EXECUTIVE COMPENSATION
- - --------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 8,
2001.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - ------------------------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 8,
2001.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 8,
2001.
35
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- - --------------------------------------------------------------------------
(a) (1&2) See Index to Consolidated Financial Statements and Schedule on
page 44 of this Annual Report on Form 10-K.
(3) Exhibits
The exhibits listed below are filed as part of this Annual Report.
References under the caption Location to exhibits, forms, or other filings
indicate that the form or other filing has been filed, that the indexed exhibit
and the exhibit referred to are the same and that the exhibit referred to is
incorporated by reference.
Exhibit Description Location
- - --------- ------------------------------------ ---------------------------------------------------
2(a) Agreement and Plan of Merger dated Exhibit 2(a) to the Company's Form S-4 Registration
as of December 19, 1997, between Statement (Registration No. 333-45305) filed with
the Company, ASR Investment the Commission on January 30, 1998.
Corporation and ASR Acquisition Sub,
Inc.
2(b) Agreement of Plan of Merger dated as Exhibit 2(c) to the Company's Form S-3 Registration
of September 10, 1998, between the Statement (Registration No. 333-64281) filed with
Company and American Apartment the Commission on September 25, 1998.
Communities II, Inc. including as
exhibits thereto the proposed terms
of the Series D Preferred Stock and
the proposed form of Investment
Agreement between the Company,
United Dominion Realty, L.P.,
American Apartment Communities II,
Inc., American Apartment Communities
Operating Partnership, L.P.,
Schnitzer Investment Corp., AAC
Management LLC and LF Strategic
Realty Investors, L.P.
2(c) Partnership Interest Purchase and Exhibit 2(d) to the Company's Form S-3
Exchange Agreement dated as of Registration Statement (Registration No. 333-64281)
September 10, 1998, between the filed with the Commission on September 25, 1998.
Company, United Dominion Realty,
L.P., American Apartment Communities
Operating Partnership, L.P., AAC
Management LLC, Schnitzer Investment
Corp., Fox Point Ltd. and James D.
Klingbeil including as an exhibit
thereto the proposed form of the
Third Amended and Restated Limited
Partnership Agreement of United
Dominion Realty, L.P.
3(a) Restated Articles of Incorporation Exhibit 4(a)(ii) to the Company's Form S-3
Registration Statement (Registration No.
333-72885) filed with the Commission on February
24, 1999.
3(b) Restated By-Laws Filed herewith.
36
4(i)(a) Specimen Common Stock Certificate Exhibit 4(i) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
4(i)(b) Form of Certificate for Shares of Exhibit 1(e) to the Company's Form 8-A
9 1/4% Series A Cumulative Registration Statement dated April 24, 1995.
Redeemable Preferred Stock
4(i)(c) Form of Certificate for Shares of Exhibit 1(e) to the Company's Form 8-A
8.60% Series B Cumulative Registration Statement dated June 11, 1997.
Redeemable Preferred Stock
4(i)(d) Rights Agreement dated as of Exhibit 1 to the Company's Form 8-A
January 27, 1998, between the Registration Statement dated February 4, 1998.
Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
4(i)(d)(a) First Amended and Restated Rights Exhibit 4(i)(d)(a) to the Company's Quarterly
Agreement dates as of September Report on Form 10-Q for the quarter ended
14, 1999, between the Company and September 30, 1999.
ChaseMellon Shareholders Services,
L.L.C., as Rights Agent
4(i)(e) Form of Rights Certificate Exhibit 4(e) to the Company's Form 8-A
Registration Statement dated February 4, 1998.
4(ii)(e) Note Purchase Agreement dated as of Exhibit 6(c)(5) to the Company's Form 8-A
February 15, 1993, between the Registration Statement dated April 19, 1990.
Company and CIGNA Property and
Casualty Insurance Company,
Connecticut General Life Insurance
Company, on behalf of one or more
separate accounts, Insurance Company
of North America, Principal Mutual Life
Insurance Company and Aid Association
for Lutherans
4(ii)(f) 364-day Credit Agreement dated Exhibit 4(ii)(f) to the Company's Quarterly
as of June 1, 2000, between the Report on Form 10-Q for the quarter ended June 30,
Company and certain subsidiaries 2000.
and a syndicate of banks represented
by Bank of America, N.A.
4(ii)(g) Credit Agreement dated as of Filed herewith.
November 14, 2000, between the
Company and certain subsidiaries
and a syndicate of banks represented
by First Union Nation Bank
10(i) Amended Employment Agreement Filed herewith.
37
between the Company and John
P. McCann dated December 5,
2000.
10(ii) Amended Employment Agreement between Filed herewith.
the Company and John S. Schneider
dated December 5, 2000.
10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual Report
the Company and Richard Giannotti on Form 10-K for the year ended December 31, 1998.
dated December 8, 1998.
10(iv) Employment Agreement between Exhibit 10(iv) to the Company's Quarterly Report
the Company and A. William Hamill on Form 10-Q for the quarter ended
dated September 30, 1999. September 30, 1999.
10(v) 1985 Stock Option Plan, as amended. Exhibit 10(iv) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998.
10(vi) 1991 Stock Purchase and Loan Plan. Exhibit 10(viii) to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997.
10(vii) Third Amended and Restated Exhibit 10(vi) to the Company's Annual Report
Agreement of Limited Partnership of on Form 10-K for the year ended December 31, 1998.
United Dominion Realty, L.P.
Dated as of December 7, 1998.
10(vii)(a) Subordination Agreement dated Exhibit 10(vi)(a) to the Company's Quarterly
April 16, 1998, between the Report on Form 10-Q for the quarter ended
Company and United Dominion March 31, 1998.
Realty, L.P.
10(viii) Servicing and Purchase Exhibit 10(vii) to the Company's Quarterly
Agreement dated as of June 24, Report on Form 10-Q for the quarter ended
1999, including as an exhibit June 30, 1999.
thereto the Note and Participation
Agreement forms.
10(ix) Description of Restricted Stock Exhibit 10(ix) to the Company's Annual Report
Awards Program. on Form 10-K for the year ended December 31,
1999.
10(x) Description of United Dominion Exhibit 10(x) to the Company's Annual
Realty Trust, Inc. Shareholder Report on Form 10-K for the year ended
Value Plan. December 31, 1999.
10(xi) Description of United Dominion Exhibit 10(xi) to the Company's Annual
Realty Trust, Inc. Executive Report on Form 10-K for the year ended
Deferral Plan. December 31, 1999.
10(xii) Employment Agreement between Exhibit 10(xii) to the Company's Annual
the Company and Curtis W. Carter Report on Form 10-K for the year ended
38
dated December 8, 1998. December 31, 1999.
10(xiii) Employment Agreement between Exhibit 10(xiii) to the Company's Annual
the Company and Mark E. Wood Report on Form 10-K for the year ended
dated March 21, 2000. December 31, 1999.
12 Computation of Ratio of Earnings Filed herewith.
to Fixed Charges.
21 The Company has the following subsidiaries, all of which but United
Dominion Realty, L.P. are wholly owned. The Company owns general and
limited partnership interests in United Dominion Realty, L.P. and
Heritage Communities L.P., constituting 90.9% of the aggregate
partnership interest.
United Dominion Realty Trust, Inc.
The Commons of Columbia, Inc.
UDRT of Virginia, Inc.
United Dominion Residential, Inc.
United Dominion Realty, L.P.
UDRT of North Carolina, L.L.C.
UDRT of Alabama, Inc.
Cleary Court Property Owners' Association, Inc.
UDR South Carolina Trust
UDR Western Residential, Inc.
SWPT II Arizona Properties, Inc.
SRL Amarillo Investors, Inc.
Little Rock Apartment Management, Inc.
SWP Arkansas Properties, Inc.
SWP Developers, Inc.
SWP Depositor, Inc.
South West REIT Holding, Inc.
South West Properties, L.P.
SWP REMIC Properties II, Inc.
SWP REMIC Properties II-A, L.P.
SWP Creeks Properties, Inc.
UDR Summit Ridge, L.P.
SWP Woodscape Properties, Inc.
SWP Woodscape Properties I, L.P.
SWP Properties, Inc.
SWP Properties I, L.P.
South West Property Apartments, L.P.
UDR Pecan Grove, L.P.
UDR Camino Village, L.P.
United Sub, Inc.
ASR Acquisition Sub, Inc.
UDR Audubon, L.P.
UDR Villages of Thousand Oaks, L.P.
UDR Cimarron City, L.P.
UDR Kenton, L.P.
ASR Investments Corporation
Heritage Communities L.P.
Heritage SGP Corporation
39
Heritage - Aspen Court L.P.
Heritage - Gentry Place L.P.
Heritage - Greenwood Creek L.P.
Heritage - Highlands of Preston L.P.
Heritage - 14400 Montfort L.P.
Heritage - Preston Park L.P.
Heritage - Smith Summit L.P.
Heritage - Springfield L.P.
Heritage - Briar Park L.P.
Heritage - Chelsea Park L.P.
Heritage - Country Club Place L.P.
Heritage - Ivystone L.P.
Heritage - London Park L.P.
Heritage - Marymont L.P.
Heritage - Riverway L.P.
Heritage - Timbercreek Landings L.P.
Heritage - Campus Commons North, L.L.C.
Heritage - Campus Commons South, L.L.C.
Heritage - Court, L.L.C.
Heritage - On The Boulevard, L.L.C.
Heritage - Pacific South Center, L.L.C.
Heritage - Arbor Terrace I, L.L.C.
Heritage - Arbor Terrace II, L.L.C.
ASR Properties, Inc.
ASC Properties, Inc.
ASC-I Properties, Inc.
ASC-II Properties, Inc.
ASC-III Properties, Inc.
ASC-IV Properties, Inc.
ASC-V Properties, Inc.
Rescap Manager Limited Partnership
Contempo Heights L.L.C.
La Privada L.L.C.
Finisterra Apartments L.L.C.
ASV-I Properties, Inc.
ASV-II Properties, Inc.
ASV-III Properties, Inc.
ASV-IV Properties, Inc.
ASV-V Properties, Inc.
ASV-VI Properties, Inc.
ASV-VII Properties, Inc.
ASV-VIII Properties, Inc.
ASV-IX Properties, Inc.
ASV-X Properties, Inc.
ASV-XI Properties, Inc.
ASV-XII Properties, Inc.
ASV-XIII Properties, Inc.
ASV-XIV Properties, Inc.
ASV-XV Properties, Inc.
ASV-XVI Properties, Inc.
ASV-XVII Properties, Inc.
Heritage Residential Group, Inc.
RMA Investments Holdings, Inc.
40
CIMSA Financial Corporation
RMA Investments I, Inc.
RMA Investments II, Inc.
Cholla Estates Construction L.L.C.
ASR Finance Corporation
Southwest Capital Mortgage Funding L.P.
ASR Mortgage Acceptance, Inc.
UDR Developers, Inc.
UDR Texas Properties, L.P.
UDR of Tennessee, L.P.
UDR Seniors Housing, L.P.
UDR Aspen Creek, LLC
United Dominion Residential Ventures, L.L.C.
American Apartment Communities Holdings, Inc.
AAC Funding II, Inc.
AAC Funding III, Inc.
AAC Funding IV, Inc.
AAC Seattle I, Inc.
FMP Member, Inc.
AAC Funding IV LLC
AAC Funding Partnership II
AAC Funding Partnership III
AAC Vancouver I, L.P.
AAC/FSC Crown Pointe Investors, LLC
AAC/FSC Hilltop Investors, LLC
AAC/FSC Seattle Properties, LLC
CMP-1, LLC
Coastal Anaheim Properties, LLC
Coastal Long Beach Properties, LLC
Coastal Monterey Properties LLC
Fountainhead Apartments Limited Partnership
Governour's Square of Columbus Co.
Jamestown of St. Matthews Co.
Northbay Properties II, L.P.
Parker's Landing Venture I
Parker's Landing Venture II
Polo Chase Venture Limited Partnership
Regency Park, L.P.
Sunset Company
Tivoli of Columbus Limited Partnership
Windward Point, LLC
Winterland San Francisco Partners
Woodlake Village, L.P.
UDR Virginia Properties, LLC
UDR California Properties, LLC
UDR Florida Properties, LLC
UDR Holdings, LLC
UDR Lakeside Mills, LLC
UDR Maryland Properties, LLC
UDR Beaumont, LLC
UDR/CSFB JV, LLC
UDR/CSFB Holdings, LLC
41
UDR Mandolin, L.P.
UDR Meridian, L.P.
UDR Mortgage Capital-1 (CSFB) LLC
UDR Oaks @ Weston, LLC
UDR Parke 33, LLC
UDR Sierra Canyon, LLC
23 Consent of Independent Filed herewith.
Auditors
Exhibits 10(i) through 10(xiii), inclusive, are management contracts or
compensatory plans or arrangements required to be filed as exhibits to this Form
10-K pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K
A Form 8-K was filed with the Securities and Exchange Commission on March
9, 2001. The filing reported United Dominion's 2000 fourth quarter and
year to date results of operations as reported on its Press Release
issued on February 1, 2001.
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Trust, Inc.
- - ----------------------------------
(registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 9, 2001 by the following persons on behalf of the
registrant and in the capacities indicated.
/s/ John P. McCann /s/ Robert C. Larson
- - ---------------------------------- ------------------------------------
John P. McCann Robert C. Larson
Chairman of the Board Director
/s/ Thomas W. Toomey /s/ Lynne B. Sagalyn
- - ---------------------------------- ------------------------------------
Thomas W. Toomey Lynne B. Sagalyn
President and Chief Executive Director
Officer
/s/ Mark J. Sandler
- - ---------------------------------- ------------------------------------
John S. Schneider Mark J. Sandler
Senior Executive Vice President Director
and Chief Operating Officer
/s/ Robert W. Scharar
- - ---------------------------------- ------------------------------------
R. Toms Dalton Robert W. Scharar
Director Director
/s/ Robert P. Freeman /s/ A. William Hamill
- - ---------------------------------- ------------------------------------
Robert P. Freeman A. William Hamill
Director Executive Vice President and
Chief Financial Officer
/s/ Scott A. Shanaberger
- - ---------------------------------- ------------------------------------
Jon A. Grove Scott A. Shanaberger
Director Vice President, Corporate Controller
and Chief Accounting Officer
/s/ James D. Klingbeil
- - ----------------------------------
James D. Klingbeil
Director
43
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
UNITED DOMINION REALTY TRUST, INC.
Page
----
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Ernst & Young LLP, Independent Auditors 45
Consolidated Balance Sheets at December 31, 2000
and 1999 46
Consolidated Statements of Operations for each of
the three years in the period ended December 31, 2000 47
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 2000 48
Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended December 31, 2000 49
Notes to Consolidated Financial Statements 50
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III - Summary of Real Estate Owned 66
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.
44
Report of Independent Auditors
------------------------------
The Board of Directors and Shareholders
United Dominion Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of United
Dominion Realty Trust, Inc. (the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
Our audits also included the financial statement schedule listed in the Index at
Item 14(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 and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Dominion
Realty Trust, Inc. at December 31, 2000 and 1999, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.
Ernst & Young LLP
Richmond, Virginia
January 31, 2001
45
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
December 31, 2000 1999
- - ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Real estate owned:
Real estate held for investment (Note 2) $ 3,758,974 $ 3,577,848
Less: accumulated depreciation (506,871) (373,164)
---------------- ----------------
3,252,103 3,204,684
Real estate under development 60,366 91,914
Real estate held for disposition (net of accumulated depreciation of $2,534
and $22,700) (Note 2) 14,446 260,583
---------------- ----------------
Total real estate owned, net of accumulated depreciation 3,326,915 3,557,181
Cash and cash equivalents 10,305 7,678
Restricted cash 44,943 56,969
Deferred financing costs 14,271 13,511
Investment in unconsolidated development joint venture (Note 3) 8,088 -
Other assets 49,435 52,978
---------------- ----------------
Total assets $ 3,453,957 $ 3,688,317
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured debt (Note 4) $ 866,115 $ 1,000,136
Unsecured debt (Note 5) 1,126,215 1,127,169
Real estate taxes payable 30,554 30,887
Accrued interest payable 18,059 17,867
Security deposits and prepaid rent 22,524 20,738
Distributions payable 36,128 36,020
Accounts payable, accrued expenses and other liabilities 47,144 51,121
---------------- ----------------
Total liabilities 2,146,739 2,283,938
Minority interests 88,326 94,167
Shareholders' equity: (Note 8)
Preferred stock, no par value; $25 liquidation preference,
25,000,000 shares authorized;
3,969,120 shares 9.25% Series A Cumulative Redeemable issued and
outstanding (4,168,560 in 1999) 99,228 104,214
5,439,109 shares 8.60% Series B Cumulative Redeemable issued and
outstanding (5,946,300 in 1999) 135,978 148,658
8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued
and outstanding (8,000,000 in 1999) 175,000 175,000
Common stock, $1 par value; 150,000,000 shares authorized
102,219,250 shares issued and outstanding (102,740,777 in 1999) 102,219 102,741
Additional paid-in capital 1,081,387 1,083,687
Distributions in excess of net income (366,531) (296,030)
Notes receivable from officer-shareholders (7,561) (7,753)
Deferred compensation - unearned restricted stock awards (828) (305)
---------------- ----------------
Total shareholders' equity 1,218,892 1,310,212
---------------- ----------------
Total liabilities and shareholders' equity $ 3,453,957 $ 3,688,317
================ ================
See accompanying notes to consolidated financial statements.
46
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 2000 1999 1998
- - -------------------------------------------------------------------------------------------------------------------------------
Revenues
Rental income $616,825 $618,749 $478,718
Non-property income 5,326 1,942 3,382
-------------- -------------- --------------
Total revenues 622,151 620,691 482,100
Expenses
Rental expenses:
Real estate taxes and insurance 69,071 63,425 48,898
Personnel 65,666 66,968 51,219
Repair and maintenance 36,469 41,339 36,827
Utilities 25,791 30,106 26,361
Administrative and marketing 23,771 25,410 19,066
Property management 18,392 18,475 16,945
Other operating expenses 1,426 1,539 244
Real estate depreciation 152,994 121,727 99,588
Interest 156,040 153,748 106,238
Impairment loss on real estate and investments (Note 2) - 19,300 -
General and administrative 19,444 13,850 10,139
Other depreciation and amortization 4,367 4,425 3,645
Loss on termination of interest rate risk management agreement (Note 6) - - 15,591
-------------- -------------- --------------
Total expenses 573,431 560,312 434,761
-------------- -------------- --------------
Income before gains on sales of investments, minority interests
and extraordinary item 48,720 60,379 47,339
Gains on sales of depreciable property 30,618 37,995 26,672
Gains on sales of land 832 - -
-------------- -------------- --------------
Income before minority interests and extraordinary item 80,170 98,374 74,011
Minority interests of unitholders in operating partnership (2,885) (4,434) (1,430)
Minority interests in other partnerships (1,501) (1,245) (111)
-------------- -------------- --------------
Income before extraordinary item 75,784 92,695 72,470
Extraordinary item - early extinguishment of debt 831 927 (138)
-------------- -------------- --------------
Net income 76,615 93,622 72,332
Distributions to preferred shareholders - Series A and B (21,591) (22,560) (22,607)
Distributions to preferred shareholders - Series D (Convertible) (15,300) (15,154) (986)
Discount on preferred share repurchases 2,929 - -
-------------- -------------- --------------
Net income available to common shareholders $42,653 $55,908 $48,739
============== ============== ==============
Earnings per common share: (Note 1)
Basic $0.41 $0.54 $0.49
============== ============== ==============
Diluted $0.41 $0.54 $0.49
============== ============== ==============
Common distributions declared per share $1.07 $1.06 $1.05
============== ============== ==============
Weighted average number of common shares outstanding-basic 103,072 103,604 99,966
Weighted average number of common shares outstanding-diluted 103,208 103,639 100,062
See accompanying notes to consolidated financial statements.
47
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31, 2000 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 76,615 $ 93,622 $ 72,332
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 157,361 126,152 103,233
Impairment loss on real estate and investments - 19,300 --
Gains on sales of investments (31,450) (37,995) (26,672)
Minority interests 4,386 5,679 1,541
Extraordinary item-early extinguishment of debt (831) (927) 138
Amortization of deferred financing costs and other 2,551 5,184 2,061
Changes in operating assets and liabilities:
(Decrease)/increase in operating liabilities (2,333) (4,777) 30,682
Decrease/(Increase) in operating assets 17,861 (15,636) (42,718)
------------- ------------ -------------
Net cash provided by operating activities 224,160 190,602 140,597
Investing Activities
Proceeds from sales of real estate investments, net 205,345 236,706 155,459
Proceeds received for excess expenditures over investment contribution
in development joint venture 30,176 - -
Development of real estate assets (80,131) (114,028) (97,222)
Capital expenditures - real estate assets, net of escrow reimbursement (45,796) (74,049) (88,120)
Acquisition of real estate assets, net of liabilities assumed (4,635) (75,719) (169,808)
Capital expenditures - non-real estate assets (1,166) (8,062) (2,876)
Net cash paid in mergers - - (59,446)
Other investing activities - 1,132 (1,851)
------------- ------------ -------------
Net cash provided by/(used in) investing activities 103,793 (34,020) (263,864)
Financing Activities
Proceeds from the issuance of secured notes payable 67,285 207,611 7,700
Scheduled principal payments on secured notes payable (62,575) (19,100) (18,255)
Non-scheduled principal payments on secured notes payable (145,881) (260,559) (88,237)
Proceeds from the issuance of unsecured notes payable 248,035 197,345 212,500
Payments on unsecured notes payable (214,984) (151,117) (9,418)
Net (repayment)/borrowing of short-term bank debt (33,200) 37,600 104,400
Payment of financing costs (5,648) (6,719) (4,875)
Proceeds from the issuance of common stock 7,660 17,250 76,686
Distributions paid to minority interests (10,272) (9,200) (2,413)
Distributions paid to preferred shareholders (36,909) (34,958) (22,611)
Distributions paid to common shareholders (110,098) (109,608) (103,074)
Repurchase of operating partnership units (341) (11,967) (3,528)
Repurchase of common and preferred stock (28,398) (31,563) -
------------- ------------ -------------
Net cash (used in)/provided by financing activities (325,326) (174,985) 148,875
Net increase (decrease) in cash and cash equivalents 2,627 (18,403) 25,608
Cash and cash equivalents, beginning of year 7,678 26,081 473
------------- ------------ -------------
Cash and cash equivalents, end of year $ 10,305 $ 7,678 $ 26,081
============= ============ =============
Supplemental Information:
Interest paid during the period $ 152,434 $ 162,236 $ 104,858
Conversion of operating partnership units to common stock 247 3,947 7,542
Issuance of restricted stock awards 830 460 -
Non-cash transactions associated with the acquisition of properties:
Secured debt assumed 10,130 - 116,326
Issuance of common stock - - 7,099
Issuance of operating partnership units - - 18,477
Non-cash transactions associated with mergers:
Real estate assets acquired - - 1,080,696
Other operating assets acquired - - 26,845
Issuance of preferred stock - - 175,000
Issuance of common stock - - 108,456
Issuance of operating partnership units - - 88,831
Secured debt assumed - - 637,188
Operating liabilities assumed - - 36,026
Minority interests in partnerships assumed - - 5,382
See accompanying notes to consolidated financial statements.
48
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
Year ended December 31 2000 1999 1998
- - ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock
Balance, beginning of year $ 427,872 $ 430,000 $ 255,000
Issuance of 7.50% Series D Cumulative Convertible Redeemable
in connection with the acquisition of American Apartment Communities II - - 175,000
Purchase of preferred stock (17,666) (2,128) -
-------------- -------------- -------------
Balance, end of year $ 410,206 $ 427,872 $ 430,000
============== ============== =============
Common Stock, $1 Par Value
Balance, beginning of year $ 102,741 $ 103,639 $ 89,168
Issuance of common shares in public offerings - - 2,804
Issuance of common shares in the acquisition of ASR Investment Corporation - - 7,743
Issuance of common shares to employees, officers and director-shareholders 5 72 78
Issuance of common shares through dividend reinvestment
and stock purchase plan 767 1,598 2,825
Issuance of common shares in connection with the acquisition of properties - - 482
Purchase of common stock (1,399) (2,688) -
Issuance of restricted stock awards 86 46 -
Adjustment for cash purchase and conversion of minority interests of
unitholders in operating partnerships 19 74 539
-------------- -------------- -------------
Balance, end of year $ 102,219 $ 102,741 $ 103,639
============== ============== =============
Additional Paid-in Capital
Balance, beginning of year $ 1,083,687 $ 1,090,432 $ 906,307
Issuance of common shares in public offerings, net of issuance costs - - 35,170
Issuance of common shares in the acquisition of ASR Investment Corporation - - 100,713
Issuance of common shares to employees, officers and director-shareholders 158 665 801
Issuance of common shares through dividend reinvestment
and stock purchase plan 6,538 15,049 33,821
Issuance of common shares in connection with the acquisition of properties - - 6,617
Purchase of common and preferred stock (9,333) (26,746) -
Issuance of restricted stock awards 744 414 -
Adjustment for cash purchase and conversion of minority interests of
unitholders in operating partnerships (407) 3,873 7,003
-------------- -------------- -------------
Balance, end of year $ 1,081,387 $ 1,083,687 $ 1,090,432
============== ============== =============
Notes Receivable from Officer-Shareholders
Balance, beginning of year $ (7,753) $ (7,619) $ (8,806)
Principal repayments 192 139 1,413
Notes issued for common shares - (273) (226)
-------------- -------------- -------------
Balance, end of year $ (7,561) $ (7,753) $ (7,619)
============== ============== =============
Distributions in Excess of Net Income
Balance, beginning of year $ (296,030) $ (242,331) $ (183,312)
Net income 76,615 93,622 72,332
Common stock distributions declared ($1.07 per share for 2000,
$1.06 per share for 1999 and $1.05 per share for 1998) (110,225) (109,607) (107,758)
Preferred stock distributions declared-Series A ($2.31 per share for 2000,
1999 and 1998) (9,473) (9,688) (9,704)
Preferred stock distributions declared-Series B ($2.15 per share for 2000,
1999 and 1998) (12,118) (12,872) (12,903)
Preferred stock distributions declared-Series D ($1.91 per share for 2000,
$1.89 per share for 1999 and $.12 per share for 1998) (15,300) (15,154) (986)
-------------- -------------- -------------
Balance, end of year $ (366,531) $ (296,030) $ (242,331)
============== ============== =============
Deferred Compensation - Unearned Restricted Stock Awards
Balance, beginning of year $ (305) $ - $ -
Issuance of restricted stock awards (830) (460) -
Amortization of deferred compensation 307 155 -
-------------- -------------- -------------
Balance, end of year $ (828) $ (305) $ -
============== ============== =============
Total Shareholders' Equity $ 1,218,892 $ 1,310,212 $ 1,374,121
============== ============== =============
See accompanying notes to consolidated financial statements.
49
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Formation United Dominion Realty Trust, Inc., a Virginia
corporation, was formed in 1972. United Dominion operates within one defined
business segment with activities related to the ownership, development,
acquisition, renovation, management, marketing and strategic disposition of
multifamily apartment communities nationwide. At December 31, 2000, United
Dominion owned 277 communities with 77,219 completed apartment homes and had two
communities and three additional phases to existing communities with 1,238
apartment homes under development.
Basis of presentation The accompanying consolidated financial statements
include the accounts of United Dominion and its subsidiaries, including United
Dominion Realty, L.P., (the "Operating Partnership"), and Heritage Communities
L.P. (the "Heritage OP"), (collectively, "United Dominion"). As of December 31,
2000, there were 74,486,812 units in the Operating Partnership outstanding, of
which 67,686,662 units or 90.9% were owned by United Dominion and 6,800,150
units or 9.1% were owned by non-affiliated limited partners. As of December 31,
2000, there were 4,535,845 units in the Heritage OP outstanding, of which
3,879,880 units or 85.5% were owned by United Dominion and 655,965 units or
14.5% were owned by non-affiliated limited partners. The consolidated financial
statements of United Dominion include the minority interests of the unitholders
in the operating partnerships. All significant inter-company accounts and
transactions have been eliminated in consolidation.
Income taxes United Dominion is operated as, and elects to be taxed as, a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). Generally, a REIT complies with the provisions of the Code
if it distributes at least 95% of its taxable income and will avoid and will not
be subject to U.S. federal income taxes if it distributes 100% of its income.
Accordingly, no provision has been made for federal income taxes. However,
United Dominion is subject to certain state and local excise or franchise taxes.
The differences between net income available to common shareholders for
financial reporting purposes and taxable income before dividend deductions
relate primarily to temporary differences, principally real estate depreciation
and the tax deferral of certain gains on property sales. The temporary
differences in depreciation result from differences in the book and tax basis of
certain real estate assets and the differences in the methods of depreciation
and lives of the real estate assets.
For income tax purposes, distributions paid to common shareholders consist of
ordinary income, capital gains, return of capital or a combination thereof. For
the three years ended December 31, 2000, distributions paid per common share
were taxable as follows:
2000 1999 1998
------ ------ ------
Ordinary income $ .811 $ .620 $ .913
Long-term capital gain .257 .129 ---
Return of capital --- .309 .127
------ ------ ------
$1.068 $1.058 $1.040
====== ====== ======
Use of estimates The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Reclassifications Certain reclassifications have been made to amounts in prior
years' financial statements to conform with current year presentation.
Cash and cash equivalents Cash and cash equivalents include all cash and
liquid investments with maturities of three months or less when purchased.
Investments in Unconsolidated Joint Ventures The Company accounts for
investments in unconsolidated joint ventures using the equity method when major
business decisions require approval by the other partners. Investments are
recorded at cost and subsequently adjusted for equity in net income (loss) and
cash contributions and distributions. United Dominion eliminates intercompany
profits on sales of services that are capitalized by the venture. Differences
between the carrying value of investments and the underlying equity in net
assets of the
50
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
investee are due to capitalized interest on the investment balance and
capitalized development and leasing costs that are recovered by the Company
through fees during construction. Such differences are amortized on a straight-
line basis over the estimated useful life of the investment. During 2000, United
Dominion recognized development and general contractor fees from its venture of
approximately $3.0 million.
Real estate Real estate assets held for investment are carried at historical
cost less accumulated depreciation and any recorded impairment losses.
Expenditures for ordinary repair and maintenance costs are charged to expense as
incurred. Significant expenditures for improvements, renovations and
replacements related to the acquisition and improvement of real estate assets
are capitalized at cost and depreciated over their estimated useful lives.
United Dominion recognizes impairment losses on long-lived assets used in
operations when there is an event or change in circumstance that indicates an
impairment in the value of an asset and the undiscounted future cash flows are
not sufficient to recover the asset's carrying value. If such indicators of
impairment are present, an impairment loss is recognized based on the excess of
the carrying amount of the asset over its fair value.
For long-lived assets to be disposed of, impairment losses are recognized when
the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset. Prior to 2000, properties were classified as real
estate held for disposition when management had committed to sell and was
actively marketing the property, and United Dominion expected to dispose of
these properties within the next twelve months. Beginning in 2000, properties
classified as real estate held for disposition represent properties that are
under contract. Real estate held for disposition is carried at the lower of
cost, net of accumulated depreciation or fair value less the cost to dispose,
determined on an asset by asset basis. Depreciation is not recorded on real
estate held for disposition and gains (losses) from initial and subsequent
adjustments to the carrying value of the assets, if any, are recorded as a
separate component of income from continuing operations.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets which is 35 years for buildings, 10 to 35 years for
major improvements, and 3 to 20 years for furniture, fixtures, equipment and
other assets.
All development projects and related carrying costs are capitalized and reported
on the balance sheet as "real estate under development" until such time as the
development project is completed. Upon completion, the total cost of the
building and associated land is transferred to real estate held for investment
and the assets are depreciated over their estimated useful lives. The cost of
development projects includes interest, real estate taxes, insurance and
allocated development overhead during the construction period.
Interest and real estate taxes incurred during the development period are
capitalized as part of the real estate under development to the extent that such
charges do not cause the carrying value of the asset to exceed its net
realizable value. During 2000, 1999 and 1998, total interest capitalized was
$3.6 million, $5.2 million and $3.4 million, respectively.
Revenue recognition United Dominion's apartment homes are leased under
operating leases with terms generally of one year or less. Rental income is
recognized after it is earned and collectibility is reasonably assured.
Restricted cash Restricted cash consists of escrow deposits held by lenders
for real estate taxes, insurance and replacement reserves and security deposits.
Deferred financing costs Deferred financing costs include fees and other
external costs incurred to obtain debt financings and are generally amortized on
a straight-line basis, which approximates the effective interest method, over a
period not to exceed the term of the related debt. Unamortized financing costs
are written-off when debt is retired before its maturity date.
Advertising costs All costs are expensed as incurred.
51
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
Interest rate swap agreements United Dominion enters into interest rate swap
agreements to alter the interest rate characteristics of outstanding debt
instruments. Each interest rate swap agreement is designated with all or a
portion of the principal balance and term of a specific debt obligation. The
interest rate swaps involve the periodic exchange of payments over the life of
the related agreements. Amounts received or paid on the interest rate swaps are
recorded on an accrual basis as an adjustment to the related interest expense of
the outstanding debt based on the accrual method of accounting. The related
amounts payable to and receivable from counterparties are included in other
liabilities and other assets, respectively. The fair value of and changes in the
fair value as a result of changes in market interest rates for the interest rate
swap agreements are not reflected in the basic financial statements.
Gains and losses on terminations of interest rate swap agreements are deferred
as an adjustment to the carrying amount of the outstanding debt and amortized
into interest expense over the remaining term of the original contract life of
the terminated swap agreement. In the event of early extinguishment of a
designated debt obligation, any realized or unrealized gain or loss from the
swap would be recognized in income coincident with the extinguishment gain or
loss. There were no gains or losses on terminations of interest rate swap
agreements recognized by United Dominion for the periods presented.
Any interest rate swap agreements that are not designated with outstanding debt
or notional amounts of interest rate swap agreements in excess of the original
amounts of the underlying debt obligations are recorded as an asset or liability
at fair value, with the changes in the fair value recorded in other income or
expense (fair value method).
Interest rate risk management agreements United Dominion enters into interest
rate futures contracts to hedge interest rate risk associated with anticipated
debt transactions. United Dominion follows SFAS No. 80, "Accounting for Futures
Contracts," which permits hedge accounting for anticipatory transactions meeting
certain criteria. Gains and losses, if any, on these transactions are deferred
as an adjustment to the carrying amount of the outstanding debt and amortized
over the term of the related debt as an adjustment to interest expense. The fair
values of interest rate risk management agreements are not recognized in the
financial statements. At the time the anticipated transaction is no longer
likely to occur, United Dominion would record the derivative instrument at its
market value and would recognize any adjustment in the consolidated statement of
operations.
Earnings per share Basic earnings per common share is computed based upon the
weighted average number of common shares outstanding during the year. Diluted
earnings per common share is computed based on common shares outstanding plus
the effect of dilutive stock options and other potentially dilutive common stock
equivalents. The dilutive effect of stock options and other potentially dilutive
common stock equivalents is determined using the treasury stock method based on
United Dominion's average stock price. The early extinguishment of debt does not
have an effect on the earnings per share calculation for the periods presented.
The following table sets forth the computation of basic and diluted earning per
share (dollars in thousands, except per share amounts):
2000 1999 1998
- - ----------------------------------------------------------------------------
Numerator for basic and diluted earnings
per share-net income available to common
shareholders $ 42,653 $ 55,908 $ 48,739
Denominator:
Denominator for basic earnings per share-
weighted average shares 103,072 103,604 99,966
Effect of dilutive securities:
Employee stock options and awards 136 35 96
-------- -------- --------
Denominator for dilutive earnings per
share 103,208 103,639 100,062
======== ======== ========
Basic earnings per share $ .41 $ .54 $ .49
======== ======== ========
Diluted earnings per share $ .41 $ .54 $ .49
======== ======== ========
52
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
The effect of the conversion of the operating partnership units and convertible
preferred stock is not dilutive and is therefore not included as a dilutive
security in the earnings per share computation. The weighted average effect of
the conversion of the operating partnership units for the years ended December
31, 2000, 1999 and 1998 was 7,489,435 units, 8,180,409 units and 2,963,427
units, respectively. The weighted average effect of the conversion of the
convertible preferred stock for the years ended December 31, 2000 and 1999 was
12,307,692 shares and 809,273 shares at December 31, 1998.
Minority interests in operating partnerships Interests in operating
partnerships held by limited partners are represented by operating partnership
units (OP Units). The operating partnerships' income is allocated to holders of
OP Units based upon net income available to common shareholders and the weighted
average number of OP Units outstanding to total common shares plus OP Units
outstanding during the period. Capital contributions, distributions and profits
and losses are allocated to minority interests in accordance with the terms of
the individual partnership agreements. OP Units can be exchanged for cash or
shares of United Dominion's common stock on a one-for-one basis, at the option
of United Dominion. OP Units as a percentage of total OP Units and shares
outstanding were 6.8% at December 31, 2000 and 1999 and 7.7% at December 31,
1998.
Minority interest in other partnerships United Dominion has limited partners
in certain real estate partnerships acquired as part of the acquisition of
American Apartment Communities II on December 7, 1998. Net income for these
partnerships is allocated based on the percentage interest owned by these
limited partners in each respective real estate partnership.
Stock based compensation United Dominion has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") in accounting for its employee stock options because the alternative
fair value accounting provided for under SFAS No. 123, "Accounting for Stock
Based Compensation," requires the use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of United Dominion's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation cost has
been recognized.
Impact of recently issued accounting standards United Dominion will adopt
Statements of Financial Accounting Standards No. 133 and 138, "Accounting for
Derivative Instruments and Hedging Activities" on January 1, 2001. The new
accounting standards require companies to carry all derivative instruments,
including certain embedded derivatives, in the consolidated balance sheet at
fair value. The accounting for changes in the fair value of a derivative
instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and, if so, on the reason for holding it. If certain
conditions are met, companies might elect to designate a derivative instrument
as a hedge of exposures to changes in fair values or cash flows. If the hedged
exposure is a cash flow exposure, the effective portion of the gain or loss on
the derivative instrument is reported as a component of equity and reclassified
into earnings when the hedged transaction affects earnings. If the hedged
exposure is a fair value exposure, the gain or loss on the derivative is
recognized in earnings in the period of change together with the offsetting loss
or gain on the hedged item attributable to the risk being hedged. A gain or
loss is recognized in earnings when a derivative is not designated as a hedge,
or when any ineffectiveness is measured in the derivative when compared to the
hedged item or anticipated transaction.
United Dominion estimates that upon adoption of Statements 133 and 138 in
January 2001, the Company will record a $3.8 million net transition loss
adjustment in accumulated other comprehensive income (equity). Adoption of the
standards also will result in the Company recognizing $134.0 thousand of
derivative instrument assets and $3.9 million of derivative instrument
liabilities. In general, the amount of volatility will vary with the level of
derivative activities during any period.
53
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
2. REAL ESTATE OWNED
United Dominion operates in over 32 major markets dispersed throughout 21
states. At December 31, 2000, the Company's largest apartment market was
Houston, Texas, where it owned 5.9% of its apartment homes, based upon carrying
value. Excluding Houston, United Dominion did not own more than 5.5% of its
apartment homes in any one market, based upon carrying value.
The following table summarizes real estate held for investment at December 31,
(dollars in thousands):
2000 1999
- - -----------------------------------------------------------------------------
Land and land improvements $ 668,003 $ 636,905
Buildings and improvements 2,902,386 2,767,940
Furniture, fixtures and equipment 188,321 166,826
Construction in progress 264 6,177
------------------------------
Real estate held for investment 3,758,974 3,577,848
Accumulated depreciation (506,871) (373,164)
------------------------------
Real estate held for investment, net $3,252,103 $3,204,684
==============================
The following is a summary of real estate held for investment by major market
within each geographic region (in order of carrying value and excluding real
estate under development) at December 31, 2000 (dollars in thousands):
Initial
Number of Acquisition Carrying Accumulated
Communities Cost Value Depreciation Encumbrances
- - -----------------------------------------------------------------------------------------------------------------
NORTHERN REGION:
Raleigh, NC 9 $ 123,071 $ 140,725 $ 28,793 $ 31,327
Charlotte, NC 10 109,961 133,652 24,942 12,267
Columbus, OH 5 88,625 122,281 10,049 42,703
Greensboro, NC 8 85,362 102,574 14,917 -
Richmond, VA 8 74,856 94,633 25,219 60,682 (a)
Wilmington, NC 6 64,213 88,200 15,540 -
Baltimore, MD 6 58,846 66,380 14,752 28,657 (a)
Other Northern Markets 38 318,407 366,179 63,506 56,194 (a)
SOUTHERN REGION:
Orlando, FL 14 167,524 198,761 32,513 76,736 (a)
Tampa, FL 10 132,927 149,907 21,859 51,665 (a)
Nashville, TN 8 83,987 117,978 13,012 -
South Florida 6 95,637 103,335 13,588 20,620 (a)
Memphis, TN 6 88,467 95,752 11,727 32,724
Atlanta, GA 6 57,669 69,964 13,307 17,714 (a)
Columbia, SC 6 52,795 61,472 14,942 5,000
Other Southern Markets 16 168,885 220,993 35,955 43,696 (a)
54
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
Initial
Number of Acquisition Carrying Accumulated
Communities Cost Value Depreciation Encumbrances
- - -----------------------------------------------------------------------------------------------------------------
WESTERN REGION:
Houston, TX 22 178,188 222,164 24,255 47,499
Dallas, TX 14 177,414 208,238 23,930 10,349
Phoenix, AZ 10 165,191 199,500 21,104 19,086
San Antonio, TX 12 171,241 187,470 18,166 37,627
Fort Worth, TX 11 134,671 145,046 17,511 18,711
San Francisco, CA 4 136,504 139,462 6,855 21,709
Monterey Peninsula, CA 11 102,442 104,041 5,574 - (a)
Southern California 5 87,442 89,863 6,752 5,937
Seattle, WA 3 31,953 33,473 2,694 16,661
Other Western Markets 22 279,699 290,068 25,376 66,178 (a)
Richmond - Corporate 6,597 6,863 33 -
----------------------------------------------------------------------------------
276 $3,242,574 $3,758,974 $506,871 $859,285
==================================================================================
The following is a summary of real estate held for disposition by major category
at December 31, 2000 (dollars in thousands):
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
- - --------------------------------------------------------------------------------
Apartments (b) 1 $ 3,817 $ 4,696 $ 1,036 $ 3,506
Commercial (b) 4 10,482 12,284 1,498 3,324
-------------------------------------------------------------
5 $ 14,299 $ 16,980 $ 2,534 $ 6,830
=============================================================
Total 281 $3,256,873 $3,775,954 $509,405 $866,115
=============================================================
(a) There are 88 communities encumbered by fixed rate debt aggregating $723.7
million. The amount of this debt is included in the encumbrances shown for
the individual markets. There are 27 communities encumbered by fixed rate
debt aggregating $135.5 million that is not included in the encumbrances
shown for the individual markets or in real estate held for disposition.
(b) Real estate held for disposition included one apartment community with 132
homes, three commercial properties and one parcel of land totaling $14.5
million, which is net of $2.5 million of accumulated depreciation. Real
estate held for disposition contributed property operating income (property
rental income less property operating expense) of $1.7 million for the year
ended December 31, 2000. The properties classified as held for disposition
reflect properties that were under contract at December 31, 2000.
The management of United Dominion periodically reviews its divestiture program,
which is designed to better position the Company for achieving more consistent
earnings growth and increasing shareholder value over the long-term. The factors
considered in these reviews include the age, quality and projected operating
income of communities that might be sold, the expected market value for the
communities, the estimated timing for completion of sales and the pro forma
effect of sales upon United Dominion's earnings and financial position. After a
review undertaken in the second quarter of 2000, management transferred
approximately $197 million of assets from real estate held for disposition to
real estate held for investment and, as a result, approximately $10 million in
depreciation expense was recognized on the communities transferred in order to
reflect depreciation on these properties while they were classified in real
estate held for disposition.
For the year ended December 31, 1999, United Dominion recognized $18.3 million
in impairment losses on its real estate owned. Through the review and analysis
of communities targeted for strategic disposition, an aggregate $14.8 million
impairment loss was recognized on assets held for disposition. An impairment
loss was indicated as a result of the net book value of the assets held for
disposition being greater than the estimated fair market value less the cost of
disposal. In addition, United Dominion recorded a $3.5 million impairment loss
on three communities acquired in the ASR merger in 1998 which were classified in
real estate held for investment. An impairment loss
55
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
was indicated as the sum of the estimated future cash flows from the assets was
deemed to be less than their carrying amounts.
The following is a reconciliation of the carrying amount of real estate held for
investment at December 31, (dollars in thousands):
2000 1999 1998
- - -------------------------------------------------------------------------------------------------------------------
Balance at January 1 $3,577,848 $3,643,245 $2,281,438
Real estate acquired 14,898 75,719 1,388,514
Capital expenditures 46,299 72,096 98,872
Transferred from development 68,025 116,787 23,350
Transferred from (to) real estate held for disposition 58,068 (326,499) (148,929)
Impairment loss on real estate - (3,500) -
Disposal of fully depreciated assets (6,164) - -
----------------------------------------------------------
Balance at December 31 $3,758,974 $3,577,848 $3,643,245
==========================================================
The following is a reconciliation of accumulated depreciation for real estate
held for investment at December 31, (dollars in thousands):
2000 1999 1998
- - -------------------------------------------------------------------------------------------------------------------
Balance at January 1 $ 373,164 $ 280,663 $ 200,506
Depreciation expense for the year* 154,419 122,884 100,683
Transferred to held for disposition (14,548) (30,383) (20,526)
Disposal of fully depreciated assets (6,164) - -
----------------------------------------------------------
Balance at December 31 $ 506,871 $ 373,164 $ 280,663
==========================================================
* Includes $1,425, $1,157 and $1,095 for 2000, 1999 and 1998, respectively,
classified as "Other depreciation and amortization" in the consolidated
statements of operations.
3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
At December 31, 2000, United Dominion's investment in an unconsolidated joint
venture consisted of a 25% partnership interest in a development joint venture
in which the Company is serving as the managing partner. No gain or loss was
recognized on the Company's contribution to the development joint venture. The
venture will develop five apartment communities with a total of 1,438 homes for
an aggregate total cost of approximately $103 million. United Dominion serves as
the developer, general contractor and property manager for the venture. The
operating results for the joint venture were not material for the year ended
December 31, 2000. The following is a summary of the financial position of the
joint venture as of December 31, 2000 (dollars in thousands):
Assets:
Real estate, net $85,644
Other assets 6,507
-----------
Total assets $92,151
===========
Liabilities and partners' equity:
Mortgage notes payable $49,785
Other liabilities 11,436
Partners' equity 30,930
-----------
Total liabilities and partners' equity $92,151
===========
56
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
4. SECURED DEBT
Secured debt, which encumbers $1.5 billion or 38.8% of United Dominion's real
estate owned, ($2.3 billion or 61.2% of United Dominion's real estate owned is
unencumbered) consists of the following at December 31, 2000 (dollars in
thousands):
No. of
Weighted Avg. Weighted Avg. Communities
Principal Outstanding Interest Rate Years to Maturity Encumbered
----------------------------- ------------------------------------------------
2000 1999 2000 2000 2000
- - ------------------------------------------------------------------- ------------------------------------------------
Fixed Rate Debt
Mortgage Notes Payable (a) $513,962 $ 555,414 7.96% 5.8 76
Tax-Exempt Secured Notes Payable 79,756 96,699 6.83% 13.1 13
REMIC Financings -- 59,167 -- -- --
Secured Credit Facilities 17,000 57,000 7.04% 13.0 --
----------------------------- ------------------------------------------------
Total Fixed Rate Secured Debt 610,718 768,280 7.79% 7.0 89
Variable Rate Debt
Secured Credit Facilities 216,960 138,675 7.22% 13.3 22
Tax-Exempt Secured Notes Payable 19,916 66,616 4.98% 24.5 3
Mortgage Notes Payable 18,521 26,565 7.71% 11.7 5
----------------------------- ------------------------------------------------
Total Variable Rate Secured Debt 255,397 231,856 7.08% 14.1 30
----------------------------- ------------------------------------------------
Total Secured Debt $866,115 $1,000,136 7.58% 9.0 119
============================= ================================================
(a) Includes fair value adjustments aggregating $10.2 million in 2000 and $14.8
million in 1999 that were recorded in connection with two acquisitions
consummated in 1998.
Fixed Rate Debt
Mortgage Notes Payable Fixed rate mortgage notes payable are generally due in
monthly installments of principal and interest and mature at various dates from
January 2001 through June 2034 and carry interest rates ranging from 7.13% to
9.58%.
Tax-Exempt Secured Notes Payable Fixed rate mortgage notes payable which
secure tax-exempt housing bond issues mature at various dates through November
2025 and carry interest rates ranging from 6.13% to 8.10%. Interest on these
notes is generally payable in semi-annual installments.
Secured Credit Facilities On December 31, 2000, United Dominion had $234.0
million outstanding under two revolving secured credit facilities with the
Federal National Mortgage Association (the "FNMA Credit Facilities"). The FNMA
Credit Facilities are for an initial term of five years, bear interest at a
floating rate which can be fixed for periods of up to 270 days, and can be
extended for an additional five or ten years at United Dominion's discretion.
At December 31, 2000, the FNMA Credit Facilities had a weighted average floating
rate of interest of 7.21%. In order to limit a portion of its interest rate
exposure, United Dominion has two interest rate swap agreements associated with
the FNMA Credit Facilities. These agreements have an aggregate notional value
of $17 million under which United Dominion pays a fixed rate of interest and
receives a variable rate on the notional amount. The interest rate swap
agreements effectively change United Dominion's interest rate exposure on $17
million of secured debt from a variable rate to a weighted average fixed rate of
7.04% (Financial Instruments - Note 6).
Variable Rate Debt
Secured Credit Facilities Variable rate secured credit facilities consist of
$217.0 million of the $234.0 million outstanding on the FNMA Credit Facilities.
Tax-Exempt Secured Notes Payable Variable rate mortgage notes payable which
secure tax-exempt housing bond issues mature at various dates from December 2002
to October 2028. At December 31, 2000, these notes had interest rates ranging
from 4.80% to 5.50%.
57
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
Mortgage Notes Payable Variable rate mortgage notes payable are generally due
in monthly installments of principal and interest and mature at various dates
from July 2003 through September 2027. At December 31, 2000, these notes had
interest rates ranging from 7.30% to 8.37%.
The extraordinary loss for the year ended December 31, 1998 resulted from the
write-off of deferred financing costs on mortgage debt extinguished.
The aggregate maturities of secured debt for the five years subsequent to
December 31, 2000 are as follows (dollars in thousands):
Fixed Rate Variable Rate
------------------------------------------------ ------------------------------------------------
Mortgage Tax-Exempt Secured Secured Tax-Exempt Mortgage
Year Notes Bonds Notes Notes Notes Notes TOTAL
- - ------------ ------------------------------------------------ ------------------------------------------------ -----------
2001 $ 53,251 $ 1,062 - - - $ 281 $ 54,594
2002 47,446 1,215 - - $ 2,200 302 51,163
2003 40,855 1,246 - - - 5,886 47,987
2004 114,365 4,800 - - - 205 119,370
2005 119,406 1,236 - - - 5,489 126,131
Thereafter 138,639 70,197 $17,000 $216,960 17,716 6,358 466,870
------------------------------------------------ ------------------------------------------------ -----------
$513,962 $79,756 $17,000 $216,960 $19,916 $18,521 $866,115
================================================ ================================================ ===========
5. UNSECURED DEBT
A summary of unsecured debt at December 31, 2000 and 1999 is as follows (dollars
in thousands):
2000 1999
---------- ----------
Commercial Banks
Borrowings outstanding under an
unsecured credit facility (a) (b) $ 244,400 $ 277,600
Borrowings outstanding under an
unsecured term loan (c) 100,000 --
Senior Unsecured Notes - Other
8.13% Senior Notes due November 2000 -- 146,150
7.60% Medium-Term Notes due January 2002 48,750 55,000
7.65% Medium-Term Notes due January 2003 (d) 10,000 10,000
7.22% Medium-Term Notes due February 2003 11,900 12,000
5.05% City of Portland, OR Bonds due October 2003 7,345 7,345
8.63% Notes due March 2003 79,030 --
7.98% Notes due March 2000-2003 (e) 22,285 29,800
7.67% Medium-Term Notes due January 2004 54,000 54,000
7.73% Medium-Term Notes due April 2005 22,400 23,400
7.02% Medium-Term Notes due November 2005 50,000 50,000
7.95% Medium-Term Notes due July 2006 107,398 120,340
7.07% Medium-Term Notes due November 2006 25,000 25,000
7.25% Notes due January 2007 110,080 111,825
ABAG Tax-Exempt Bonds due August 2008 46,700 --
8.50% Monthly Income Notes due November 2008 57,400 59,778
8.50% Debentures due September 2024 (f) 125,500 140,000
Other (g) 4,027 4,931
---------- ----------
781,815 849,569
---------- ----------
Total Unsecured Debt $1,126,215 $1,127,169
========== ==========
58
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(a) Weighted average interest rate of 7.5% and 6.7% at December 31, 2000 and
1999, respectively.
(b) As of December 31, 2000, United Dominion had seven interest rate swap
agreements associated with commercial bank borrowings with an aggregate
notional value of $120 million under which United Dominion pays a fixed
rate of interest and receives a variable rate of interest on the notional
amounts. The interest rate swaps effectively change United Dominion's
interest rate exposure on these borrowings from a variable rate to a
weighted average fixed rate of approximately 7.27%.
(c) As of December 31, 2000, United Dominion had five interest rate swap
agreements associated with borrowings under the term loan with an aggregate
notional value of $100 million under which United Dominion pays a fixed
rate of interest and receives a variable rate of interest on the notional
amounts. The interest rate swaps effectively change United Dominion's
interest rate exposure on these borrowings from a variable rate to a
weighted average fixed rate of approximately 7.53%.
(d) United Dominion has one interest rate swap agreement associated with these
unsecured notes with an aggregate notional value of $10 million under which
United Dominion pays a fixed rate of interest and receives a variable rate
on the notional amount. The interest rate swap agreement effectively
changes United Dominion's interest rate exposure on the $10 million from a
variable rate to a fixed rate of 7.65%.
(e) Payable annually in three equal principal installments of $7.4 million.
(f) Includes an investor put feature which grants a one-time option to redeem
the debentures in September 2004.
(g) Includes $3.8 million and $4.6 million at December 31, 2000 and 1999,
respectively, of deferred gains from the termination of interest rate risk
management agreements.
For the years ended December 31, 2000 and 1999, United Dominion recognized $831
thousand and $927 thousand in extraordinary gains related to the write-off of
deferred financing costs and the repurchase of unsecured notes at less than face
value, respectively.
Information concerning short-term bank borrowings is summarized in the table
that follows (dollars in thousands):
2000 1999 1998
- - --------------------------------------------------------------------------------------
Total revolving credit facilities at December 31 $375,000 $310,000 $265,000
Borrowings outstanding at December 31 244,400 277,600 240,000
Weighted average daily borrowings during the year 195,128 223,629 238,587
Maximum daily borrowings during the year 308,000 283,000 334,500 (a)
Weighted average daily interest rate during the year 7.3% 5.8% 6.1% (a)
Weighted average daily interest rate at December 31 7.7% 6.7% 6.0%
(a) Includes balances on a $75 million bridge facility funded in July 1998 that
matured in November 1998.
In June 2000, United Dominion closed on a $375 million three-year unsecured
revolving credit facility (the "Credit Facility") with a consortium of banks.
The Credit Facility, which extends until August 2003, replaces two lines of
credit that allowed the Company to borrow in aggregate up to $310 million.
Under the Credit Facility, the Company may borrow at a rate of LIBOR plus 100
basis points for LIBOR-based borrowings and pays a facility fee which is equal
to 0.20% of the commitment. The Credit Facility is subject to customary
financial covenants and limitations.
6. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following estimated fair values of financial instruments were determined by
United Dominion using available market information and appropriate valuation
methodologies. Considerable judgement is necessary to interpret market data and
develop estimated fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts United Dominion would realize on the
disposition of the financial instruments. The use of different market
assumptions or estimation methodologies may have a material effect on the
estimated fair value amounts. The carrying amounts and estimated fair value of
United Dominion's financial instruments at December 31, 2000 and 1999, both on
and off-balance sheet, are summarized as follows (dollars in thousands):
59
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
2000 1999
--------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------- ------------------------
Secured debt $ 866,115 $ 887,430 $1,000,136 $1,031,074
Unsecured debt 1,126,215 1,130,100 1,127,169 1,102,605
Interest rate swap agreements -
(unfavorable) / favorable -- (3,847) -- 626
The following methods and assumptions were used by United Dominion in estimating
fair values:
Cash and cash equivalents The carrying amount of cash and cash equivalents
- - -------------------------
approximates fair value.
Secured and unsecured debt Estimated fair value is based on mortgage rates,
- - --------------------------
tax-exempt bond rates and corporate unsecured debt rates believed to be
available to United Dominion for the issuance of debt with similar terms and
remaining lives. The carrying amount of United Dominion's variable rate secured
debt approximates fair value at December 31, 2000 and 1999. The carrying
amounts of United Dominion's borrowings under variable rate unsecured debt
arrangements, short-term revolving credit agreements and lines of credit
approximate their fair values at December 31, 2000 and 1999.
Interest rate swap agreements Fair value is based on external market
- - -----------------------------
quotations.
Derivative Instruments
The following table summarizes certain information pursuant to interest rate
swap contracts at December 31, 2000 (dollars in thousands):
Notional Fixed Type of Underlying Effective Contract Fair
Amount Rate Contract Debt Date Maturity Value
- - --------------------------------------------------------------------------------
$ 5,000 7.32% Swap Bank Credit Facility 06/26/95 07/01/04 $ (95)
10,000 7.14% Swap Bank Credit Facility 10/18/95 10/03/02 (59)
5,000 6.98% Swap Bank Credit Facility 11/21/95 10/03/02 (11)
10,000 7.65% Swap Medium-Term Notes 01/26/99 01/27/03 134
7,000 6.78% Swap FNMA 06/30/99 06/30/04 (44)
10,000 7.22% Swap FNMA 12/01/99 04/01/04 (211)
25,000 7.39% Swap Bank Credit Facility 11/01/00 08/01/03 (428)
25,000 7.39% Swap Bank Credit Facility 11/01/00 08/01/03 (428)
25,000 7.49% Swap Bank Term Loan 11/15/00 05/15/03 (433)
20,000 7.49% Swap Bank Term Loan 11/15/00 05/15/03 (347)
23,500 7.62% Swap Bank Term Loan 11/15/00 05/15/04 (602)
23,000 7.62% Swap Bank Term Loan 11/15/00 05/15/04 (589)
25,000 7.21% Swap Bank Credit Facility 12/01/00 08/01/03 (315)
8,500 7.26% Swap Bank Term Loan 12/04/00 05/15/03 (103)
25,000 7.21% Swap Bank Credit Facility 12/04/00 08/01/03 (316)
- - --------------------------------------------------------------------------------
$247,000 $(3,847)
================================================================================
For all periods presented, United Dominion had no deferred gains or losses
relating to terminated swap contracts.
Interest Rate Risk Management Agreements
In order to reduce the interest rate risk associated with the anticipated
issuance of unsecured debt during 1998, United Dominion entered into a $100
million (notional amount) fixed pay forward starting swap agreement (interest
rate risk management agreement) with an investment banking firm in July 1997.
United Dominion settled the interest rate risk management agreement on November
9, 1998 by paying $15.6 million to the counterparty. United Dominion was unable
to issue the unsecured debt contemplated by the interest rate risk management
agreement, and
60
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
accordingly, the cost associated with this settlement is reflected in the 1998
statement of operations. United Dominion has no interest rate risk management
agreements outstanding at December 31, 2000.
Risk of Counterparty Non-Performance
United Dominion has not obtained collateral or other security to support
financial instruments. In the event of non-performance by the counterparty,
United Dominion's credit loss on its derivative instruments is limited to the
value of the derivative instruments that are favorable to United Dominion at
December 31, 2000. However, such non-performance is not anticipated as the
counterparties are highly rated credit quality U.S. financial institutions and
management believes that the likelihood of realizing material losses from
counterparty non-performance is remote.
7. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The United Dominion Realty Trust, Inc. Profit Sharing Plan (the "Plan") is a
defined contribution plan covering all eligible full-time employees. Under the
Plan, United Dominion makes discretionary profit sharing and matching
contributions to the Plan as determined by the Compensation Committee of the
Board of Directors. Aggregate contributions, both matching and discretionary,
which are included in United Dominion's consolidated statements of operations
for the three years ended December 31, 2000, 1999 and 1998 were $1.3 million,
$2.2 million and $550,000, respectively.
Stock Option Plan
United Dominion's 1985 Stock Option Plan, (the "Option Plan"), authorizes the
grant of options, at the discretion of the Board of Directors, to certain
officers, directors and key employees of United Dominion, for up to ten million
shares of United Dominion's common stock which is limited to 8% of the number of
shares of common stock issued and outstanding. The Option Plan generally
provides, among other things, that options be granted at exercise prices not
lower than the market value of the shares on the date of grant. Shares under
options which expire or are canceled are available for subsequent grant. For
options granted prior to December 12, 1995, the optionee has up to five years
from the date on which the options first become exercisable during which to
exercise the options. For options granted on or after December 12, 1995, the
options have a ten-year term. Options granted prior to December 9, 1997 vest on
December 31 of the year subsequent to grant while options granted on and after
this date vest ratably over a three-year period beginning on December 31 of the
year subsequent to grant. On December 8, 1998, United Dominion canceled
1,047,165 options which were granted on December 9, 1997 at $14.25. United
Dominion subsequently issued options on December 8, 1998, which vest over a
three-year period, at United Dominion's then market price of $10.875.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123 "Accounting for Stock Based Compensation" ("SFAS No. 123"), and has
been determined as if United Dominion had accounted for its employee stock
options under the fair value method of accounting as defined in SFAS No. 123.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Risk free interest rate 5.2% 6.7% 4.9%
Dividend yield 7.2% 6.9% 6.6%
Volatility factor .164 .144 .150
Weighted average expected life (years) 7 9 9
The weighted average fair value of options granted during 2000, 1999 and 1998
was $.65, $.76 and $.66, respectively.
61
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. United
Dominion's pro forma information is as follows (dollars in thousands, except per
share amounts):
2000 1999 1998
------- ------- -------
Net income available
to common shareholders
As reported $42,653 $55,908 $48,739
Pro forma 41,705 54,847 47,841
Earnings per common share-diluted
As reported $ .41 $ .54 $ .49
Pro forma .40 .53 .48
A summary of United Dominion's stock option activity during the three years
ended December 31, 2000 is provided in the following table (dollars in
thousands, except per share amounts):
Options Outstanding
-------------------------------------------------------
Shares Available Weighted Average Range of
For Future Grant Options Exercise Price Exercise Prices
- - ---------------------------------------------------------- ----------------- ---------------- ---------------
Balance, December 31, 1997 180,040 3,448,721 $13.89 $7.44-$15.38
Granted (1,137,665) 1,137,665 11.16 10.88-14.13
Exercised -- (73,490) 11.47 7.44-13.88
Forfeited 1,153,883 (1,153,883) 14.28 7.44-15.38
Additional shares authorized (a) 4,735,858 -- -- --
---------- ---------- ------ ------------
Balance, December 31, 1998 4,932,116 3,359,013 12.89 7.44-15.38
Granted (1,192,333) 1,192,333 10.02 9.63-11.19
Exercised -- (46,998) 9.87 9.19-10.25
Forfeited 288,756 (288,756) 13.46 10.88-15.38
---------- ---------- ------ ------------
Balance, December 31, 1999 4,028,539 4,215,592 12.09 9.19-15.38
Granted (653,300) 653,300 9.91 9.88-10.75
Exercised -- (11,584) 9.19 9.19
Forfeited 364,363 (364,363) 12.95 9.63-15.25
Reduction in shares authorized (a) (55,007) -- -- --
---------- ---------- ------ ------------
Balance, December 31, 2000 3,684,595 4,492,945 $11.71 $9.19-$15.38
========== ========== ====== ============
(a) The number of shares of common stock issuable upon the exercise of options
outstanding is limited to 8% of the number of shares of common stock issued and
outstanding.
Exercisable at December 31,
1998 1,691,863 $13.79 $7.44-$15.38
1999 2,042,505 13.28 9.19-15.38
2000 2,692,997 12.35 9.19-15.38
The weighted average remaining contractual life on all options outstanding is
7.2 years. 1,270,835 of share options had exercise prices between $13.94 and
$15.38, 1,783,008 of share options had exercise prices between $10.75 and $13.50
and 1,439,102 of share options had exercise prices between $9.19 and $10.25.
8. SHAREHOLDERS' EQUITY
Preferred Stock Both Series A and Series B Preferred Stock have no stated par
value and a liquidation preference of $25 per share. With no voting rights and
no stated maturity, the preferred stock in both series is not subject to any
sinking fund or mandatory redemption and is not convertible into any other
securities of United Dominion. The Series A Preferred Stock could not be
redeemed prior to April 24, 2000 and the Series B Preferred Stock is not
redeemable prior to May 29, 2007. On or after these dates, the Series A and
Series B Preferred Stock may be redeemed for cash at the option of United
Dominion, in whole or in part, at a redemption price of $25 per share plus
accrued and unpaid dividends. The redemption price is payable solely out of the
sales proceeds of other capital
62
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
stock of United Dominion. No Series A Preferred Stock was redeemed during 2000.
All dividends due and payable on the Series A and Series B Preferred Stock have
been accrued or paid as of the end of each fiscal year.
On December 7, 1998, in connection with the AAC merger, United Dominion issued
eight million shares of newly created Series D Convertible Redeemable Preferred
Stock (Series D), with a liquidation preference of $25 per share. The Series D
has no voting rights, no stated maturity and is not subject to any sinking fund
or mandatory redemption. Series D is convertible into 1.5385 shares of common
stock at the option of the holder of Series D at any time at $16.25 per share.
The Series D is not redeemable prior to December 7, 2003. On or after this date,
United Dominion may, at its option, redeem at any time all or part of the Series
D at a price per share of $25, payable in cash, plus all accrued and unpaid
dividends, provided that the current market price of the common stock at least
equals the conversion price, initially set at $16.25 per share. The redemption
is payable solely out of the sale proceeds of other capital stock. In addition,
United Dominion may not redeem in any consecutive twelve-month period a number
of shares of Series D having an aggregate liquidation preference of more than
$100 million.
Officers' Stock Purchase and Loan Plan Under the Officer Stock Purchase and Loan
Plan (the "Loan Plan"), certain officers have purchased common stock at the then
current market price with financing provided by United Dominion at an interest
rate of 7%. The underlying notes mature between November 2001 and October 2006.
A total of 858,500 shares have been issued and 556,500 shares are available for
future issuance under the Loan Plan.
Dividend Reinvestment and Stock Purchase Plan United Dominion's Dividend
Reinvestment and Stock Purchase Plan (the "Stock Purchase Plan") allows common
and preferred shareholders the opportunity to purchase, through the reinvestment
of cash dividends and through optional cash purchases, additional shares of
United Dominion's common stock. As of December 31, 2000, 9,105,474 shares of
common stock had been issued under the Stock Purchase Plan. Shares in the amount
of 4,894,526 were reserved for further issuance under the Stock Purchase Plan at
December 31, 2000. During 2000, 767,513 shares were issued under the Stock
Purchase Plan for a total consideration of approximately $7.3 million.
Restricted Stock Awards United Dominion's 1999 Restricted Stock Awards Plan
authorizes the granting of restricted stock awards to employees, officers and
directors of United Dominion. The shares of common stock vest ratably over a
three-year period. Deferred compensation expense is recorded over the vesting
period and is based upon the value of the common stock on the date of issuance.
A total of 132,000 shares of restricted stock have been issued under the
Restricted Stock Awards Plan as of December 31, 2000.
Purchase Rights On January 27, 1998, the Board of Directors authorized a
Shareholders Rights Plan (the "Rights Plan") which will become exercisable only
if a person or group (the "Acquiring Person") acquires or announces a tender
offer for more than 15% of the outstanding common stock of United Dominion.
Upon exercise, United Dominion may issue one share of common stock in exchange
for each right. Each right will entitle the holder to purchase for $45 one
thousandth of a share of Series C Preferred stock or, at the option of United
Dominion, common stock of United Dominion having a value of $90.
9. COMMITMENTS AND CONTINGENCIES
Land and Other Leases
United Dominion is party to several ground leases relating to operating
communities. In addition, United Dominion is party to various other operating
leases related to the operation of its regional offices. Future minimum lease
payments for non-cancelable land and other leases at December 31, 2000 are as
follows (dollars in thousands):
2001 $ 1,860
2002 1,809
2003 1,627
2004 1,506
2005 1,358
Thereafter 25,289
-----------
Total $33,449
===========
63
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
United Dominion incurred $2.6 million, $2.8 million and $1.6 million,
respectively, of rent expense for the years ended December 31, 2000, 1999, and
1998.
Contingencies
United Dominion and its subsidiaries are engaged in various litigations and have
a number of unresolved claims pending. The ultimate liability in respect of such
litigations and claims cannot be determined at this time. United Dominion is of
the opinion that such liability, to the extent not provided for through
insurance or otherwise, is not likely to be material in relation to the
consolidated financial statements of United Dominion.
During the third quarter of 2000, the Company agreed to settle a class action
lawsuit concerning water usage billing in Texas in the amount of $2.7 million.
The settlement is subject to final court approval. As a result of the
settlement, the Company accrued $2.7 million for the settlement amount and
estimated fees. The Company will pay the settlement amount when court approval
is final. Individuals may opt out of the settlement and in the event that more
than 125 persons opt out, United Dominion may elect to withdraw the settlement
agreement. Management believes that the litigation will be resolved in
accordance with the settlement agreement.
Commitments
United Dominion is committed to completing its real estate currently under
development which has an estimated cost to complete of $63.5 million at December
31, 2000. For the joint venture development projects, United Dominion is
committed to pay for all costs in excess of each individual project's budgeted
costs. United Dominion does not anticipate any of the projects' costs to be in
excess of their budget.
10. ACQUISITIONS
On March 27, 1998, United Dominion completed the acquisition of ASR Investments
Corporation in a statutory merger (the "ASR Merger"). In connection with the ASR
Merger, United Dominion acquired 39 communities with 7,550 apartment homes.
Each share of ASR's common stock was exchanged for 1.575 shares of United
Dominion's common stock. The acquisition was structured as a tax-free
transaction and was treated as a purchase for accounting purposes. In connection
with the acquisition, United Dominion acquired primarily real estate assets
totaling $313.7 million. Consideration given by United Dominion included
7,742,839 shares of United Dominion's common stock valued at $14 per share for
an aggregate equity value of $108.4 million plus the issuance of 1,529,990 units
in the ASR Operating Partnership valued at $21.4 million. In addition, United
Dominion assumed, at fair value, mortgage debt totaling $179.4 million and other
liabilities of $13.6 million.
On December 7, 1998, United Dominion completed the acquisition of American
Apartment Communities II ("AAC") in a statutory merger (the "AAC Merger"). In
connection with the acquisition of AAC, United Dominion acquired 53 communities
with 14,001 apartment homes. The AAC Merger was structured as a tax-free merger
and exchange of partnership units and was treated as a purchase for accounting
purposes. In connection with the AAC Merger, United Dominion acquired primarily
real estate assets totaling $766.9 million. The aggregate purchase price
consisted of the following: (i) 8,000,000 shares of United Dominion's 7.5%
Series D Convertible Preferred Stock ($25 liquidation preference value) which is
convertible into United Dominion's common stock at $16.25 per share with a fair
market value of $175 million; (ii) the issuance of 5,614,035 units of limited
partnership interest in the Partnership with an aggregate fair market value of
$67.4 million; (iii) the assumption of $457.7 million of secured notes payable
at fair market value; (iv) the assumption of liabilities and minority interest
aggregating $27.8 million and; (v) $59.8 million of cash.
The ASR Merger and the AAC Merger were accounted for as purchases of real estate
and the operating results for those communities are reflected in the
accompanying consolidated financial statements from their respective dates of
acquisition.
11. INDUSTRY SEGMENTS
United Dominion owns and operates multifamily apartment communities throughout
the United States which generates rental and other property related income
through the leasing of apartment units to a diverse base of tenants. United
Dominion separately evaluates the performance of each of its apartment
communities. However, because each of the apartment communities have similar
economic characteristics, facilities, services and tenants,
64
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
the apartment communities have been aggregated into a single apartment
communities segment. All segment disclosure is included in or can be derived
from United Dominion's consolidated financial statements.
There is no tenant who contributed 10% or more of United Dominion's total
revenues during 2000, 1999 or 1998.
12. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Summarized consolidated quarterly financial data for the year ended December 31,
2000 is as follows (dollars in thousands, except per share amounts):
Three Months Ended
---------------------------------------------------------------
March 31 June 30(a) September 30(b) December 31
-------- ---------- --------------- -----------
Rental income $154,057 $155,144 $154,645 $152,979
Income before gains on sales of investments,
minority interests and extraordinary item 17,120 7,617 10,199 13,784
Gains on the sales of investments 2,533 5,928 11,261 11,728
Net income available to common shareholders 9,172 6,233 11,161 16,087
Earnings per common share:
Basic $ .09 $ .06 $ .11 $ .16
Diluted $ .09 $ .06 $ .11 $ .16
(a) The second quarter of 2000 includes $9.9 million of catch-up depreciation
expense related to the transfer of properties from real estate held for
disposition to real estate held for investment.
(b) The third quarter of 2000 includes a $2.7 million charge related to water
usage billing litigation and a $1.0 million charge for changes to executive
employment agreements.
________________________________________________________________________________
Summarized consolidated quarterly financial data for the year ended December 31,
1999 is as follows (dollars in thousands, except per share amounts):
Three Months Ended
---------------------------------------------------------------
March 31 June 30(a) September 30 December 31b)
-------- ---------- ------------ -------------
Rental income $153,791 $154,430 $155,523 $155,005
Income before gains on sales of investments,
minority interests and extraordinary item 20,941 11,389 20,521 7,528
Gains on the sales of investments 191 32,214 48 5,542
Net income available to common shareholders 10,643 31,360 10,435 3,470
Earnings per common share:
Basic $ .10 $ .30 $ .10 $ .03
Diluted $ .10 $ .30 $ .10 $ .03
(a) The second quarter of 1999 includes $32.2 million of gains on the sales of
investments and a $7.1 million impairment loss on real estate and
investments.
(b) The fourth quarter of 1999 includes $5.5 million of gains on the sales of
investments and a $12.2 million impairment loss on real estate and
investments.
65
SCHEDULE III
Summary of Real Estate Owned
Initial Costs Total
-------------------------------------------
Land and Buildings Initial
Land and Acquisition
Encumbrances (a) (b) Improvements Improvements Costs (c)
------------------------------------------------------------------------------------
APARTMENTS
REAL ESTATE HELD FOR INVESTMENT
Northern Region:
RALEIGH-DURHAM-CHAPEL HILL, NC
Dominion On Spring Forest $ - $ 1,257,500 $ 8,586,255 $ 9,843,755
Dominion Park Green - 500,000 4,321,872 4,821,872
Dominion On Lake Lynn 16,250,000 1,723,363 5,303,760 7,027,123
Dominion Courtney Place - 1,114,600 5,119,259 6,233,859
Dominion Walnut Ridge - 1,791,215 11,968,852 13,760,067
Dominion Walnut Creek - 3,170,290 21,717,407 24,887,697
Dominion Ramsgate - 907,605 6,819,154 7,726,759
Harbour Pointe - 1,898,740 7,101,260 9,000,000
Copper Mill - 1,548,280 16,066,720 17,615,000
Trinity Park 15,076,889 4,579,648 17,575,712 22,155,360
RICHMOND-PETERSBURG, VA
Dominion Olde West - 1,965,097 12,203,965 14,169,062
Dominion Creekwood - - - -
Dominion Laurel Springs - 464,480 3,119,716 3,584,196
Dominion English Hills 16,640,000 1,979,174 11,524,313 13,503,487
Dominion Gayton Crossing 10,400,000 825,760 5,147,968 5,973,728
Dominion West End 14,597,100 2,059,252 15,049,088 17,108,340
Courthouse Green 7,410,000 732,050 4,702,353 5,434,403
Waterside At Ironbridge 11,635,000 1,843,819 13,238,590 15,082,409
CHARLOTTE-GASTONIA-ROCK HILL
The Highlands - 321,400 2,830,346 3,151,746
Emerald Bay - 626,070 4,722,862 5,348,932
Dominion Peppertree - 1,546,267 7,699,221 9,245,488
Dominion Crown Point - 2,122,179 22,338,577 24,460,756
Dominion Harris Pond - 886,788 6,728,097 7,614,885
Dominion Mallard Creek 4,962 698,860 6,488,061 7,186,921
Chateau Village - 1,046,610 6,979,555 8,026,164
Dominion At Sharon - 667,368 4,856,103 5,523,471
Providence Court - - 22,047,803 22,047,803
Stoney Pointe 12,262,385 1,499,650 15,855,610 17,355,260
GREENSBORO-WINSTON-SALEM-H PNT
Beechwood - 1,409,377 6,086,677 7,496,054
Steeplechase - 3,208,108 11,513,978 14,722,086
Northwinds - 1,557,654 11,735,787 13,293,441
Deerwood Crossings - 1,539,901 7,989,043 9,528,944
Dutch Village - 1,197,593 4,826,266 6,023,858
Lake Brandt - 1,546,950 13,489,466 15,036,416
Park Forest 378 679,671 5,770,413 6,450,084
Deep River Pointe - 1,670,648 11,140,329 12,810,977
WILMINGTON NC
Cape Harbor - 1,891,671 18,113,109 20,004,780
Mill Creek - 1,404,498 4,489,398 5,893,895
The Creek - 417,500 2,506,206 2,923,706
Forest Hills - 1,028,000 5,420,478 6,448,478
Clear Run - 874,830 8,740,602 9,615,432
Crosswinds - 1,096,196 18,230,236 19,326,432
BALTIMORE
Gatewater Landing - 2,078,422 6,084,526 8,162,948
Dominion Kings Place 4,525,000 1,564,942 7,006,574 8,571,516
Dominion At Eden Brook 7,730,000 2,361,167 9,384,171 11,745,339
Dominion Great Oaks 10,652,042 2,919,481 9,099,691 12,019,172
Cost of
Improvements Gross Amount at
Capitalized Which Carried at Close of Period
--------------------------------------
Subsequent Land and Buildings Total
to Acquisition Land and Carrying
(Net of Disposals) Improvements Improvements Value (d)
-----------------------------------------------------------------------------------
APARTMENTS
REAL ESTATE HELD FOR INVESTMENT
Northern Region:
RALEIGH-DURHAM-CHAPEL HILL, NC
Dominion On Spring Forest $ 2,942,976 $ 1,620,092 $ 11,166,639 $ 12,786,731
Dominion Park Green 1,298,146 686,991 5,433,027 6,120,017
Dominion On Lake Lynn 2,712,747 2,237,052 7,502,818 9,739,870
Dominion Courtney Place 2,809,359 1,435,467 7,607,752 9,043,218
Dominion Walnut Ridge 2,092,322 2,166,192 13,686,197 15,852,389
Dominion Walnut Creek 3,109,641 3,693,110 24,304,228 27,997,338
Dominion Ramsgate 799,858 1,028,925 7,497,692 8,526,617
Harbour Pointe 127,062 1,898,796 7,228,266 9,127,062
Copper Mill 872,794 1,760,775 16,727,019 18,487,794
Trinity Park 888,403 4,696,853 18,346,911 23,043,763
RICHMOND-PETERSBURG, VA
Dominion Olde West 1,784,328 2,378,396 13,574,994 15,953,390
Dominion Creekwood 453,599 45,423 408,176 453,599
Dominion Laurel Springs 1,040,630 632,047 3,992,779 4,624,826
Dominion English Hills 4,912,176 2,804,705 15,610,959 18,415,663
Dominion Gayton Crossing 6,252,057 1,164,893 11,060,892 12,225,785
Dominion West End 2,600,429 2,646,527 17,062,242 19,708,769
Courthouse Green 2,107,203 1,078,454 6,463,152 7,541,606
Waterside At Ironbridge 627,216 1,970,316 13,739,309 15,709,625
CHARLOTTE-GASTONIA-ROCK HILL
The Highlands 2,551,906 690,791 5,012,860 5,703,652
Emerald Bay 2,722,321 1,179,772 6,891,482 8,071,253
Dominion Peppertree 1,487,446 1,844,832 8,888,102 10,732,934
Dominion Crown Point 1,653,268 3,802,672 22,311,352 26,114,024
Dominion Harris Pond 1,233,852 1,225,463 7,623,274 8,848,737
Dominion Mallard Creek 603,947 776,615 7,014,252 7,790,868
Chateau Village 2,067,104 1,405,669 8,687,599 10,093,268
Dominion At Sharon 965,963 897,820 5,591,614 6,489,433
Providence Court 9,281,912 7,409,295 23,920,420 31,329,715
Stoney Pointe 1,123,359 1,733,721 16,744,898 18,478,619
GREENSBORO-WINSTON-SALEM-H PNT
Beechwood 930,458 1,614,690 6,811,822 8,426,512
Steeplechase 12,155,379 3,748,136 23,129,330 26,877,465
Northwinds 933,359 1,738,394 12,488,407 14,226,800
Deerwood Crossings 973,787 1,670,816 8,831,915 10,502,731
Dutch Village 567,861 1,282,479 5,309,240 6,591,719
Lake Brandt 720,578 1,782,363 13,974,632 15,756,994
Park Forest 555,165 859,257 6,145,992 7,005,249
Deep River Pointe 375,283 1,799,007 11,387,253 13,186,260
WILMINGTON NC
Cape Harbor 950,768 2,265,135 18,690,413 20,955,549
Mill Creek 13,360,826 1,892,237 17,362,484 19,254,721
The Creek 1,632,568 488,728 4,067,546 4,556,275
Forest Hills 1,876,920 1,201,540 7,123,858 8,325,398
Clear Run 5,179,423 1,251,932 13,542,922 14,794,855
Crosswinds 987,071 1,202,881 19,110,623 20,313,503
BALTIMORE
Gatewater Landing 1,259,919 2,175,367 7,247,500 9,422,867
Dominion Kings Place 853,607 1,645,423 7,779,700 9,425,123
Dominion At Eden Brook 1,204,443 2,462,172 10,487,609 12,949,782
Dominion Great Oaks 3,242,222 3,744,845 11,516,549 15,261,394
Depreciable
Life of
Accumulated Date of Date Building
Depreciation Construction Acquired Component (e)
-----------------------------------------------------------------------------------
APARTMENTS
REAL ESTATE HELD FOR INVESTMENT
Northern Region:
RALEIGH-DURHAM-CHAPEL HILL, NC
Dominion On Spring Forest $ 4,848,738 1978/81 05/21/91 35 Years
Dominion Park Green 2,174,275 1987 09/27/91 35 Years
Dominion On Lake Lynn 2,529,733 1986 12/01/92 35 Years
Dominion Courtney Place 2,313,698 1979/81 07/08/93 35 Years
Dominion Walnut Ridge 3,590,871 1982/84 03/04/94 35 Years
Dominion Walnut Creek 5,949,152 1985/86 05/17/94 35 Years
Dominion Ramsgate 1,289,101 1988 08/15/96 35 Years
Harbour Pointe 1,039,246 1984 12/31/96 35 Years
Copper Mill 2,442,624 1997 12/31/96 35 Years
Trinity Park 2,615,545 1987 02/28/97 35 Years
RICHMOND-PETERSBURG, VA
Dominion Olde West 5,803,922 1978/82/84/85/87 12/31/84 & 8/27/91 35 Years
Dominion Creekwood 64,594 1984 08/27/91 35 Years
Dominion Laurel Springs 1,563,229 1972 09/06/91 35 Years
Dominion English Hills 5,912,461 1969/76 12/06/91 35 Years
Dominion Gayton Crossing 3,650,677 1973 09/28/95 35 Years
Dominion West End 3,563,759 1989 12/28/95 35 Years
Courthouse Green 3,003,466 1974/78 12/31/84 35 Years
Waterside At Ironbridge 1,656,472 1987 09/30/97 35 Years
CHARLOTTE-GASTONIA-ROCK HILL
The Highlands 3,335,723 1970 01/17/84 35 Years
Emerald Bay 3,760,153 1972 02/06/90 35 Years
Dominion Peppertree 2,699,442 1987 12/14/93 35 Years
Dominion Crown Point 2,898,158 1987/2000 07/01/94 35 Years
Dominion Harris Pond 1,925,529 1987 07/01/94 35 Years
Dominion Mallard Creek 1,663,639 1989 08/16/94 35 Years
Chateau Village 1,806,472 1974 08/15/96 35 Years
Dominion At Sharon 1,040,435 1984 08/15/96 35 Years
Providence Court 3,296,574 1997 09/30/97 35 Years
Stoney Pointe 2,515,970 1991 02/28/97 35 Years
GREENSBORO-WINSTON-SALEM-H PNT
Beechwood 2,016,469 1985 12/22/93 35 Years
Steeplechase 3,385,125 1990/97 03/07/96 35 Years
Northwinds 2,167,287 1989/97 08/15/96 35 Years
Deerwood Crossings 1,586,060 1973 08/15/96 35 Years
Dutch Village 1,009,162 1970 08/15/96 35 Years
Lake Brandt 2,295,729 1995 08/15/96 35 Years
Park Forest 987,884 1987 09/26/96 35 Years
Deep River Pointe 1,469,221 1997 10/01/97 35 Years
WILMINGTON NC
Cape Harbor 3,132,026 1996 08/15/96 35 Years
Mill Creek 2,291,769 1986/98 09/30/91 35 Years
The Creek 1,686,047 1973 06/30/92 35 Years
Forest Hills 2,454,927 1964/69 06/30/92 35 Years
Clear Run 3,098,749 1987/89 07/22/94 35 Years
Crosswinds 2,876,364 1990 02/28/97 35 Years
BALTIMORE
Gatewater Landing 2,420,401 1970 12/16/92 35 Years
Dominion Kings Place 2,287,161 1983 12/29/92 35 Years
Dominion At Eden Brook 3,116,140 1984 12/29/92 35 Years
Dominion Great Oaks 3,586,816 1974 07/01/94 35 Years
Initial Costs Total
--------------------------------------
Land and Buildings Initial
Land and Acquisition
Encumbrances (a) (b) Improvements Improvements Costs (c)
------------------------------------------------------------------------------
Dominion Constant Friendship - 903,122 4,668,956 5,572,078
Lakeside Mill 5,750,000 2,665,869 10,109,175 12,775,044
COLUMBUS OH
Sycamore Ridge 13,702,434 4,067,900 15,433,285 19,501,185
Heritage Green - 2,990,199 11,391,797 14,381,996
Alexander Court - 1,573,412 - 1,573,412
Governour's Square 29,000,003 7,512,513 28,695,050 36,207,563
Hickory Creek - 3,421,413 13,539,402 16,960,815
OTHER MARKETS
Forest Lake At Oyster Point, Newport News, VA - 780,117 8,861,878 9,641,995
Woodscape, Newport News, VA - 798,700 7,209,525 8,008,225
Eastwind, Virginia Beach, VA - 155,000 5,316,738 5,471,738
Dominion Waterside At Lynnhaven, Virginia Beach, VA - 1,823,983 4,106,710 5,930,693
Heather Lake, Hampton, VA - 616,800 3,400,672 4,017,472
Dominion Yorkshire Downs, Yorktown, VA 6,825,000 1,088,887 8,581,771 9,670,658
Dominion Middle Ridge, Woodbridge. VA 13,192,977 3,311,468 13,283,047 16,594,515
Dominion Lake Ridge, Lake Ridge, VA 8,970,000 2,366,061 8,386,439 10,752,500
Knolls At Newgate, Centreville, VA - 1,725,725 3,530,134 5,255,859
Greens At Falls Run, Fredericksburg, VA - 2,730,722 5,300,203 8,030,925
Manor At England Run, Fredericksburg, VA - 1,168,810 7,006,464 8,175,274
Greens At Hollymead, Charlottesville, VA - 965,114 5,250,374 6,215,488
Brittingham Square, Salisbury, MD - 650,143 4,962,246 5,612,389
Greens At Schumaker Pond, Salisbury, MD - 709,559 6,117,582 6,827,141
Greens At Cross Court, Easton, MD - 1,182,414 4,544,012 5,726,426
Greens At Hilton Run, Lexington Park, MD 11,520,000 2,754,447 10,482,579 13,237,026
Dover Country, Dover, DE - 2,007,878 6,365,053 8,372,931
Greens At Cedar Chase, Dover, DE 4,150,000 1,528,667 4,830,738 6,359,405
Washington Park, Centerville, OH - 2,011,520 7,565,279 9,576,799
Fountainhead, Dayton, OH 1,521,711 390,542 1,420,166 1,810,708
Jamestown Of Toledo, Toledo, OH - 1,800,271 7,053,585 8,853,856
Colony Village, New Bern, NC - 346,330 3,036,956 3,383,286
Brynn Marr, Jacksonville, NC - 432,974 3,821,508 4,254,482
Liberty Crossing, Jacksonville, NC - 840,000 3,873,139 4,713,139
Bramblewood, Goldsboro, NC - 401,538 3,150,912 3,552,450
Cumberland Trace, Fayetteville, NC - 632,281 7,895,674 8,527,955
Village At Cliffdale, Fayetteville, NC 10,014,218 941,284 15,498,216 16,439,501
Morganton Place, Fayetteville, NC - 819,090 13,217,086 14,036,176
Woodberry, Asheville, NC - 388,699 6,380,899 6,769,598
Sunset Village, Flint, MI - 796,994 1,829,226 2,626,220
2900 Place, East Lansing, MI - 1,818,957 5,593,327 7,412,284
Brandywine Creek, East Lansing, MI - 4,665,991 17,514,466 22,180,457
Lakewood, Haslett, MI - 1,113,126 3,877,503 4,990,629
Nemoke Trail, Haslett, MI - 3,430,631 12,222,526 15,653,157
American Heritage, Waterford, MI - 1,021,412 3,958,146 4,979,558
Ashton Pines, Waterford, MI - 1,822,351 8,013,902 9,836,253
Kings Gate, Sterling Heights, MI - 1,180,664 4,828,504 6,009,168
Lancaster Lake, Clarkston, MI - 4,237,887 14,662,797 18,900,684
Southern Region:
ORLANDO
Fisherman's Village - 2,387,368 7,458,897 9,846,265
Seabrook - 1,845,853 4,155,275 6,001,128
Dover Village - 2,894,702 6,456,100 9,350,802
Lakeside North 12,440,000 1,532,700 11,076,062 12,608,762
Regatta Shore - 757,008 6,607,367 7,364,375
Alafaya Woods 10,000,000 1,653,000 9,042,256 10,695,256
Vinyards 8,795,000 1,840,230 11,571,625 13,411,855
Andover Place 13,405,000 3,692,187 7,756,919 11,449,106
Los Altos 11,440,000 2,803,805 12,348,464 15,152,270
Lotus Landing - 2,184,723 8,638,664 10,823,387
Cost of
Improvements Gross Amount at
Capitalized Which Carried at Close of Period
----------------------------------
Subsequent Land and Buildings Total
to Acquisition Land and Carrying
(Net of Disposals) Improvements Improvements Value (d)
------------------------------------------------------------------------------
Dominion Constant Friendship 693,335 1,043,201 5,222,212 6,265,413
Lakeside Mill 280,575 2,673,914 10,381,705 13,055,619
COLUMBUS OH
Sycamore Ridge 849,659 4,172,041 16,178,802 20,350,844
Heritage Green 9,228,112 3,093,476 20,516,631 23,610,107
Alexander Court 21,342,176 1,642,866 21,272,723 22,915,588
Governour's Square 1,589,518 7,663,518 30,133,563 37,797,081
Hickory Creek 646,837 3,452,749 14,154,904 17,607,652
OTHER MARKETS
Forest Lake At Oyster Point, Newport News, VA 1,897,758 1,166,789 10,372,964 11,539,752
Woodscape, Newport News, VA 2,357,904 1,103,568 9,262,561 10,366,129
Eastwind, Virginia Beach, VA 1,214,815 368,372 6,318,181 6,686,553
Dominion Waterside At Lynnhaven, Virginia Beach, VA 1,170,854 2,009,683 5,091,864 7,101,547
Heather Lake, Hampton, VA 3,429,085 1,015,545 6,431,012 7,446,557
Dominion Yorkshire Downs, Yorktown, VA 672,743 1,248,510 9,094,892 10,343,401
Dominion Middle Ridge, Woodbridge. VA 962,754 3,423,239 14,134,030 17,557,269
Dominion Lake Ridge, Lake Ridge, VA 760,043 2,511,181 9,001,362 11,512,543
Knolls At Newgate, Centreville, VA 1,637,046 1,846,268 5,046,637 6,892,905
Greens At Falls Run, Fredericksburg, VA 818,868 2,876,643 5,973,149 8,849,792
Manor At England Run, Fredericksburg, VA 13,178,991 2,794,885 18,559,380 21,354,265
Greens At Hollymead, Charlottesville, VA 638,962 1,056,498 5,797,953 6,854,451
Brittingham Square, Salisbury, MD 597,661 784,733 5,425,316 6,210,050
Greens At Schumaker Pond, Salisbury, MD 861,372 857,168 6,831,345 7,688,513
Greens At Cross Court, Easton, MD 985,831 1,362,893 5,349,364 6,712,257
Greens At Hilton Run, Lexington Park, MD 1,343,556 3,083,093 11,497,489 14,580,582
Dover Country, Dover, DE 2,369,190 2,359,250 8,382,870 10,742,121
Greens At Cedar Chase, Dover, DE 722,150 1,722,356 5,359,199 7,081,555
Washington Park, Centerville, OH 972,360 2,100,912 8,448,248 10,549,159
Fountainhead, Dayton, OH 68,744 390,542 1,488,910 1,879,452
Jamestown Of Toledo, Toledo, OH 499,396 1,874,443 7,478,809 9,353,252
Colony Village, New Bern, NC 1,865,002 552,767 4,695,521 5,248,288
Brynn Marr, Jacksonville, NC 2,528,323 723,818 6,058,987 6,782,805
Liberty Crossing, Jacksonville, NC 2,782,941 1,418,632 6,077,448 7,496,080
Bramblewood, Goldsboro, NC 1,453,075 576,414 4,429,111 5,005,525
Cumberland Trace, Fayetteville, NC 657,116 664,579 8,520,492 9,185,071
Village At Cliffdale, Fayetteville, NC 1,081,762 1,118,152 16,403,110 17,521,262
Morganton Place, Fayetteville, NC 584,479 886,825 13,733,830 14,620,655
Woodberry, Asheville, NC 983,036 554,427 7,198,206 7,752,634
Sunset Village, Flint, MI 59,350 796,994 1,888,576 2,685,570
2900 Place, East Lansing, MI 170,664 1,819,883 5,763,065 7,582,948
Brandywine Creek, East Lansing, MI (2,752,066) 4,691,285 14,737,106 19,428,391
Lakewood, Haslett, MI 114,808 1,162,755 3,942,683 5,105,437
Nemoke Trail, Haslett, MI 118,676 3,430,631 12,341,201 15,771,833
American Heritage, Waterford, MI 76,712 1,028,097 4,028,174 5,056,270
Ashton Pines, Waterford, MI 187,150 1,838,608 8,184,796 10,023,403
Kings Gate, Sterling Heights, MI 115,509 1,193,949 4,930,729 6,124,677
Lancaster Lake, Clarkston, MI 584,959 4,292,759 15,192,885 19,485,643
Southern Region:
ORLANDO
Fisherman's Village 2,945,691 3,090,614 9,701,343 12,791,956
Seabrook 2,674,836 2,241,118 6,434,846 8,675,964
Dover Village 3,334,730 3,359,514 9,326,019 12,685,532
Lakeside North 3,521,173 2,232,375 13,897,560 16,129,935
Regatta Shore 2,493,119 1,503,406 8,354,088 9,857,494
Alafaya Woods 1,993,331 2,097,999 10,590,589 12,688,588
Vinyards 2,735,670 2,379,143 13,768,382 16,147,525
Andover Place 2,947,660 4,456,793 9,939,973 14,396,766
Los Altos 2,426,454 3,306,774 14,271,949 17,578,724
Lotus Landing 1,793,437 2,384,771 10,232,053 12,616,824
Depreciable
Life of
Accumulated Date of Date Building
Depreciation Construction Acquired Component (e)
--------------------------------------------------------------------------
Dominion Constant Friendship 1,201,822 1990 05/04/95 35 Years
Lakeside Mill 2,140,095 1989 12/10/99 35 Years
COLUMBUS OH
Sycamore Ridge 1,522,763 1997 07/02/98 35 Years
Heritage Green 1,544,562 1998 07/02/98 35 Years
Alexander Court 3,680,423 1999 07/02/98 35 Years
Governour's Square 2,249,997 1967 12/07/98 35 Years
Hickory Creek 1,050,874 1988 12/07/98 35 Years
OTHER MARKETS
Forest Lake At Oyster Point, Newport News, VA 2,433,357 1986 08/15/95 35 Years
Woodscape, Newport News, VA 3,897,754 1974/76 12/29/87 35 Years
Eastwind, Virginia Beach, VA 2,567,744 1970 04/04/88 35 Years
Dominion Waterside At Lynnhaven, Virginia Beach, VA 1,115,488 1966 08/15/96 35 Years
Heather Lake, Hampton, VA 4,246,120 1972/74 03/01/80 35 Years
Dominion Yorkshire Downs, Yorktown, VA 1,101,616 1987 12/23/97 35 Years
Dominion Middle Ridge, Woodbridge. VA 2,427,325 1990 06/25/96 35 Years
Dominion Lake Ridge, Lake Ridge, VA 1,807,529 1987 02/23/96 35 Years
Knolls At Newgate, Centreville, VA 1,596,876 1972 07/01/94 35 Years
Greens At Falls Run, Fredericksburg, VA 1,356,223 1989 05/04/95 35 Years
Manor At England Run, Fredericksburg, VA 2,903,977 1990 05/04/95 35 Years
Greens At Hollymead, Charlottesville, VA 1,265,020 1990 05/04/95 35 Years
Brittingham Square, Salisbury, MD 1,209,075 1991 05/04/95 35 Years
Greens At Schumaker Pond, Salisbury, MD 1,500,105 1988 05/04/95 35 Years
Greens At Cross Court, Easton, MD 1,211,651 1987 05/04/95 35 Years
Greens At Hilton Run, Lexington Park, MD 2,502,809 1988 05/04/95 35 Years
Dover Country, Dover, DE 2,501,838 1970 07/01/94 35 Years
Greens At Cedar Chase, Dover, DE 1,273,486 1988 05/04/95 35 Years
Washington Park, Centerville, OH 795,173 1998 12/07/98 35 Years
Fountainhead, Dayton, OH 113,397 1966 12/07/98 35 Years
Jamestown Of Toledo, Toledo, OH 556,014 1965 12/07/98 35 Years
Colony Village, New Bern, NC 2,794,741 1972/74 12/31/84 35 Years
Brynn Marr, Jacksonville, NC 3,324,316 1973/77 12/31/84 35 Years
Liberty Crossing, Jacksonville, NC 3,284,032 1972/74 11/30/90 35 Years
Bramblewood, Goldsboro, NC 2,627,219 1980/82 12/31/84 35 Years
Cumberland Trace, Fayetteville, NC 1,463,266 1973 08/15/96 35 Years
Village At Cliffdale, Fayetteville, NC 2,653,591 1992 08/15/96 35 Years
Morganton Place, Fayetteville, NC 2,130,664 1994 08/15/96 35 Years
Woodberry, Asheville, NC 1,328,960 1987 08/15/96 35 Years
Sunset Village, Flint, MI 263,559 1940 12/07/98 35 Years
2900 Place, East Lansing, MI 395,404 1966 12/07/98 35 Years
Brandywine Creek, East Lansing, MI 1,276,029 1974 12/07/98 35 Years
Lakewood, Haslett, MI 323,424 1974 12/07/98 35 Years
Nemoke Trail, Haslett, MI 959,233 1978 12/07/98 35 Years
American Heritage, Waterford, MI 298,729 1968 12/07/98 35 Years
Ashton Pines, Waterford, MI 517,080 1987 12/07/98 35 Years
Kings Gate, Sterling Heights, MI 339,160 1973 12/07/98 35 Years
Lancaster Lake, Clarkston, MI 1,144,008 1988 12/07/98 35 Years
Southern Region:
ORLANDO
Fisherman's Village 2,571,996 1984 12/29/95 35 Years
Seabrook 1,922,830 1984 02/20/96 35 Years
Dover Village 3,391,517 1981 03/31/93 35 Years
Lakeside North 3,917,847 1984 04/14/94 35 Years
Regatta Shore 2,673,048 1988 06/30/94 35 Years
Alafaya Woods 2,941,398 1988/90 10/21/94 35 Years
Vinyards 3,754,574 1984/86 10/31/94 35 Years
Andover Place 2,609,490 1988 09/29/95 & 09/30/96 35 Years
Los Altos 2,546,376 1990 10/31/96 35 Years
Lotus Landing 1,408,858 1985 07/01/97 35 Years
SCHEDULE III
Summary of Real Estate Owned
Initial Costs Total
-------------------------------
Land and Buildings Initial
Land and Acquisition
Encumbrances (a) (b) Improvements Improvements Costs (c)
---------------------------------------------------------------------------
Seville On The Green - 1,282,616 6,498,062 7,780,678
Arbors @ Lee Vista 14,350,000 3,975,679 16,920,454 20,896,133
Heron Lake 6,306,389 1,446,553 9,287,878 10,734,431
Ashton @ Waterford - 3,871,744 17,537,879 21,409,623
TAMPA-ST PETERSBURG-CLEARWATER
Bay Cove - 2,928,847 6,578,257 9,507,104
Summit West - 2,176,500 4,709,970 6,886,470
Pinebrook - 1,780,375 2,458,172 4,238,547
Lakewood Place 10,250,000 1,395,051 10,647,377 12,042,428
Hunters Ridge 10,000,000 2,461,548 10,942,434 13,403,982
Bay Meadow - 2,892,526 9,253,525 12,146,051
Cambridge - 1,790,804 7,166,329 8,957,133
Laurel Oaks - 1,361,553 6,541,980 7,903,533
Parker's Landing 31,415,281 10,178,355 37,868,669 48,047,024
Sugar Mill Creek - 2,241,880 7,552,520 9,794,400
COLUMBIA SC
Gable Hill - 824,847 5,307,194 6,132,041
St. Andrews Commons - 1,428,826 9,371,378 10,800,204
Forestbrook 5,000,000 395,516 2,902,040 3,297,556
Waterford - 957,980 6,947,939 7,905,919
Hampton Greene - 1,363,046 10,118,453 11,481,499
Rivergate - 1,122,500 12,055,625 13,178,125
NASHVILLE TN
Legacy Hill - 1,147,660 5,867,567 7,015,227
Hickory Run - 1,468,727 11,583,786 13,052,513
Carrington Hills - 2,117,244 - 2,117,244
Brookridge - 707,508 5,461,251 6,168,760
Club At Hickory Hollow - 2,139,774 15,231,201 17,370,975
Breckenridge - 766,428 7,713,862 8,480,290
Williamsburg - 1,376,190 10,931,309 12,307,498
Colonnade - 1,459,754 16,014,857 17,474,612
MEMPHIS TN
Briar Club - 1,214,400 6,928,959 8,143,359
Hunters Trace 5,412,083 888,440 6,676,552 7,564,992
Cinnamon Trails - 1,886,632 7,644,522 9,531,154
The Trails 27,311,519 10,387,416 34,394,843 44,782,259
Dogwood Creek - 2,771,868 15,673,846 18,445,714
ATLANTA GA
Stanford Village - 884,500 2,807,839 3,692,339
Griffin Crossing - 1,509,633 7,544,018 9,053,651
Gwinnett Square 7,150,000 1,924,325 7,376,454 9,300,779
Dunwoody Pointe 5,580,829 2,763,324 6,902,996 9,666,320
Riverwood 4,983,254 2,985,599 11,087,903 14,073,502
Waterford Place - 1,579,478 10,302,679 11,882,157
SOUTH FLORIDA
Copperfield 12,300,000 4,424,128 20,428,969 24,853,097
Mediterranean Village 8,320,000 2,064,788 11,939,113 14,003,901
Cleary Court - 2,399,848 7,913,450 10,313,298
University Club - 1,390,220 6,992,620 8,382,840
Polo Chase - 3,675,276 13,301,853 16,977,129
Pembroke Bay - 4,442,492 16,664,469 21,106,962
OTHER MARKETS
Jamestown Of St. Matthews, St. Matthews, KY 11,235,576 3,865,596 14,422,383 18,287,979
Patriot Place, Florence, SC 2,200,000 212,500 1,600,757 1,813,257
Cost of
Improvements Gross Amount at
Capitalized Which Carried at Close of Period
----------------------------------
Subsequent Land and Buildings Total
to Acquisition Land and Carrying
(Net of Disposals) Improvements Improvements Value (d)
--------------------------------------------------------------------------
Seville On The Green 1,763,132 1,442,318 8,101,492 9,543,810
Arbors @ Lee Vista 1,579,430 4,364,804 18,110,760 22,475,563
Heron Lake 921,005 1,591,825 10,063,611 11,655,436
Ashton @ Waterford 106,854 3,871,744 17,644,733 21,516,477
TAMPA-ST PETERSBURG-CLEARWATER
Bay Cove 2,759,652 3,272,710 8,994,046 12,266,756
Summit West 2,380,213 2,446,995 6,819,689 9,266,683
Pinebrook 2,917,886 2,001,756 5,154,677 7,156,433
Lakewood Place 1,247,664 1,613,593 11,676,500 13,290,092
Hunters Ridge 1,384,461 2,948,973 11,839,470 14,788,443
Bay Meadow 2,463,507 3,424,786 11,184,772 14,609,557
Cambridge 1,367,588 2,069,587 8,255,134 10,324,721
Laurel Oaks 1,150,392 1,534,328 7,519,597 9,053,925
Parker's Landing 947,078 9,214,278 39,779,824 48,994,102
Sugar Mill Creek 362,264 2,383,861 7,772,803 10,156,664
COLUMBIA SC
Gable Hill 1,347,428 1,184,326 6,295,143 7,479,469
St. Andrews Commons 1,615,500 1,851,322 10,564,382 12,415,704
Forestbrook 1,840,654 627,056 4,511,154 5,138,210
Waterford 1,404,693 1,253,454 8,057,158 9,310,612
Hampton Greene 1,362,842 1,871,519 10,972,822 12,844,341
Rivergate 1,105,359 1,430,844 12,852,639 14,283,484
NASHVILLE TN
Legacy Hill 2,733,132 1,419,924 8,328,435 9,748,359
Hickory Run 1,446,005 1,638,812 12,859,706 14,498,518
Carrington Hills 24,316,537 2,719,118 23,714,662 26,433,781
Brookridge 1,206,524 922,455 6,452,829 7,375,284
Club At Hickory Hollow 1,884,544 2,681,185 16,574,334 19,255,519
Breckenridge 727,711 955,284 8,252,717 9,208,001
Williamsburg 1,240,439 1,537,718 12,010,219 13,547,938
Colonnade 435,493 1,601,222 16,308,882 17,910,104
MEMPHIS TN
Briar Club 1,955,591 1,560,279 8,538,670 10,098,950
Hunters Trace 1,366,817 1,179,599 7,752,210 8,931,809
Cinnamon Trails (86,708) 2,054,103 7,390,342 9,444,446
The Trails 3,327,549 11,072,164 37,037,644 48,109,808
Dogwood Creek 721,652 2,937,407 16,229,959 19,167,366
ATLANTA GA
Stanford Village 1,130,143 1,164,766 3,657,716 4,822,482
Griffin Crossing 1,445,351 1,805,742 8,693,260 10,499,002
Gwinnett Square 1,546,548 2,138,004 8,709,323 10,847,327
Dunwoody Pointe 4,394,708 3,305,952 10,755,076 14,061,028
Riverwood 3,396,877 3,340,776 14,129,603 17,470,379
Waterford Place 381,663 1,645,910 10,617,910 12,263,820
SOUTH FLORIDA
Copperfield 1,741,384 4,976,042 21,618,439 26,594,481
Mediterranean Village 1,491,518 2,280,874 13,214,545 15,495,419
Cleary Court 1,590,125 2,633,617 9,269,806 11,903,423
University Club 1,710,713 1,758,874 8,334,678 10,093,553
Polo Chase 553,282 3,761,446 13,768,966 17,530,411
Pembroke Bay 610,308 4,630,954 17,086,316 21,717,270
OTHER MARKETS
Jamestown Of St. Matthews, St. Matthews, KY 716,366 3,941,427 15,062,918 19,004,345
Patriot Place, Florence, SC 5,669,543 1,481,436 6,001,363 7,482,800
Depreciable
Life of
Accumulated Date of Date Building
Depreciation Construction Acquired Component (e)
---------------------------------------------------------------------
Seville On The Green 1,122,278 1986 10/21/97 35 Years
Arbors @ Lee Vista 2,123,136 1991 12/31/97 35 Years
Heron Lake 1,091,328 1989 03/27/98 35 Years
Ashton @ Waterford 438,672 2000 05/28/98 35 Years
TAMPA-ST PETERSBURG-CLEARWATER
Bay Cove 3,348,738 1972 12/16/92 35 Years
Summit West 2,519,809 1972 12/16/92 35 Years
Pinebrook 2,228,633 1977 09/28/93 35 Years
Lakewood Place 3,014,713 1986 03/10/94 35 Years
Hunters Ridge 2,765,425 1992 06/30/95 35 Years
Bay Meadow 1,996,174 1985 12/09/96 35 Years
Cambridge 1,293,086 1985 06/06/97 35 Years
Laurel Oaks 1,141,059 1986 07/01/97 35 Years
Parker's Landing 2,900,441 1991 12/07/98 35 Years
Sugar Mill Creek 651,092 1988 12/07/98 35 Years
COLUMBIA SC
Gable Hill 2,650,059 1985 12/04/89 35 Years
St. Andrews Commons 3,306,427 1986 05/20/93 35 Years
Forestbrook 1,875,622 1974 07/01/93 35 Years
Waterford 2,167,790 1985 07/01/94 35 Years
Hampton Greene 2,735,675 1990 08/19/94 35 Years
Rivergate 2,205,971 1989 08/15/96 35 Years
NASHVILLE TN
Legacy Hill 2,158,124 1977 11/06/95 35 Years
Hickory Run 2,632,416 1989 12/29/95 35 Years
Carrington Hills 69,320 1999 12/06/95 35 Years
Brookridge 1,455,483 1986 03/28/96 35 Years
Club At Hickory Hollow 2,689,207 1987 02/21/97 35 Years
Breckenridge 1,260,622 1986 03/27/97 35 Years
Williamsburg 1,477,333 1986 05/20/98 35 Years
Colonnade 1,269,212 1998 01/07/99 35 Years
MEMPHIS TN
Briar Club 2,395,205 1987 10/14/94 35 Years
Hunters Trace 2,067,346 1986 10/14/94 35 Years
Cinnamon Trails 916,584 1989 01/09/98 35 Years
The Trails 4,280,014 1990 01/09/98 35 Years
Dogwood Creek 2,067,610 1997 02/06/98 35 Years
ATLANTA GA
Stanford Village 1,912,758 1985 09/26/89 35 Years
Griffin Crossing 2,389,006 1987/89 06/08/94 35 Years
Gwinnett Square 1,971,405 1985 03/29/95 35 Years
Dunwoody Pointe 2,831,981 1980 10/24/95 35 Years
Riverwood 3,141,457 1980 06/26/96 35 Years
Waterford Place 1,060,557 1985 04/15/98 35 Years
SOUTH FLORIDA
Copperfield 4,576,456 1991 09/21/94 35 Years
Mediterranean Village 3,079,124 1989 09/30/94 35 Years
Cleary Court 2,258,407 1984/85 11/30/94 35 Years
University Club 1,759,178 1988 09/26/95 35 Years
Polo Chase 1,099,810 1991 12/07/98 35 Years
Pembroke Bay 815,485 1989 07/26/99 35 Years
OTHER MARKETS
Jamestown Of St. Matthews, St. Matthews, KY 1,129,765 1968 12/07/98 35 Years
Patriot Place, Florence, SC 3,644,528 1974 10/23/85 35 Years
Initial Costs
-----------------------------------
Land and Buildings Initial
Land and Acquisition
Encumbrances (a) (b) Improvements Improvements Costs (c)
-------------------------------------------------------------------------------------
River Place, Macon, GA 5,000,000 1,097,280 7,492,385 8,589,665
Mallards Of Wedgewood, Lakeland, FL - 959,284 6,864,666 7,823,950
Greentree, Jacksonville, FL 12,455,000 1,634,330 11,226,990 12,861,320
Westland, Jacksonville, FL 12,805,000 1,834,535 14,864,742 16,699,276
Antlers, Jacksonville, FL - 4,034,039 11,192,842 15,226,880
Brantley Pines, Ft. Myers, FL - 1,892,888 8,247,621 10,140,509
Santa Barbara, Naples, FL - 1,134,120 8,019,814 9,153,934
Ashlar, Ft. Myers, FL - 3,952,234 11,718,186 15,670,420
The Groves, Port Orange, FL - 789,953 4,767,055 5,557,008
Lakeside, Port Orange, FL - 2,404,305 6,420,160 8,824,465
Mallards Of Brandywine, Deland, FL - 765,949 5,407,683 6,173,632
Lake Washington Downs, Melbourne, FL - 1,434,450 4,940,166 6,374,616
International Village, Speedway, IN - 3,934,102 11,478,908 15,413,010
Regency Park South, Indianapolis, IN - 2,643,025 7,632,098 10,275,123
Western Region:
DALLAS TEXAS
Preston Oaks - 1,783,626 6,416,374 8,200,000
Preston Trace - 2,195,500 8,304,500 10,500,000
Rock Creek - 4,076,680 15,823,320 19,900,000
Windridge - 3,414,311 14,027,310 17,441,621
Catalina - 1,543,321 5,631,679 7,175,000
Wimbledon Court - 1,809,183 10,930,306 12,739,489
Lakeridge - 1,631,350 5,668,650 7,299,999
Summergate - 1,171,300 3,928,700 5,100,000
Oak Forest - 5,630,740 23,293,922 28,924,662
Oaks Of Lewisville - 3,726,795 13,563,181 17,289,976
Kelly Crossing - 2,496,701 9,156,355 11,653,056
Highlands Of Preston - 2,151,056 8,167,630 10,318,686
The Summit 5,182,107 1,932,195 9,041,301 10,973,496
Springfield 5,167,275 3,074,511 6,823,120 9,897,631
HOUSTON
Woodtrail - 1,543,000 5,457,000 7,000,000
Park Trails - 1,144,750 4,105,250 5,250,000
Green Oaks - 5,313,920 19,626,181 24,940,101
Sky Hawk - 2,297,741 7,157,965 9,455,706
South Grand At Pecan Grove 10,418,907 4,058,090 14,755,809 18,813,899
Breakers - 1,527,467 5,297,930 6,825,397
Braesridge 9,092,367 3,048,212 10,961,749 14,009,961
Skylar Pointe - 3,604,483 11,592,432 15,196,915
Stone Canyon - 899,515 - 899,515
Briar Park 1,391,437 329,002 2,794,131 3,123,133
Chelsea Park 3,192,625 1,991,478 5,787,626 7,779,104
Clear Lake Falls 3,054,749 1,090,080 4,534,335 5,624,415
Country Club Place 3,475,061 498,632 6,520,172 7,018,804
Arbor Ridge 3,734,476 1,688,948 6,684,229 8,373,177
London Park 4,455,643 2,018,478 6,667,450 8,685,928
Marymont - 1,150,696 4,155,411 5,306,107
Nantucket Square 2,688,551 1,067,617 4,833,402 5,901,019
Riverway 1,181,322 523,457 2,828,282 3,351,739
Riviera Pines 3,274,452 1,413,851 6,453,847 7,867,698
The Gallery 1,538,994 768,708 3,358,484 4,127,192
Towne Lake - 1,333,958 5,308,884 6,642,842
The Legend at Park 10 - 1,995,011 - 1,995,011
PHOENIX-MESA AZ
Paradise Falls - 1,622,700 6,170,800 7,793,500
Vista Point - 1,587,400 5,612,600 7,200,000
Sierra Palms - 4,638,950 17,361,050 22,000,000
Northpark Village - 1,519,314 13,536,707 15,056,021
Cost of Gross Amount at
Improvements Which Carried at Close of Period
Capitalized -----------------------------------
Subsequent Land and Buildings Total
to Acquisition Land and Carrying
(Net of Disposals) Improvements Improvements Value (d)
-----------------------------------------------------------------------------------
River Place, Macon, GA 1,898,820 1,717,042 8,771,442 10,488,485
Mallards Of Wedgewood, Lakeland, FL 1,643,276 1,249,320 8,217,906 9,467,226
Greentree, Jacksonville, FL 3,575,811 2,270,802 14,166,330 16,437,131
Westland, Jacksonville, FL 3,506,505 2,607,242 17,598,540 20,205,782
Antlers, Jacksonville, FL 5,385,491 4,782,830 15,829,541 20,612,372
Brantley Pines, Ft. Myers, FL 4,861,958 820,127 14,182,340 15,002,467
Santa Barbara, Naples, FL 1,643,083 1,714,318 9,082,699 10,797,017
Ashlar, Ft. Myers, FL 16,111,886 7,593,378 24,188,928 31,782,306
The Groves, Port Orange, FL 1,725,606 1,443,512 5,839,102 7,282,614
Lakeside, Port Orange, FL 1,268,820 2,574,381 7,518,904 10,093,285
Mallards Of Brandywine, Deland, FL 1,099,309 980,636 6,292,306 7,272,941
Lake Washington Downs, Melbourne, FL 2,039,249 1,750,997 6,662,868 8,413,865
International Village, Speedway, IN 465,769 3,976,199 11,902,580 15,878,779
Regency Park South, Indianapolis, IN 496,876 2,688,317 8,083,682 10,771,999
Western Region:
DALLAS TEXAS
Preston Oaks 613,050 1,897,501 6,915,549 8,813,050
Preston Trace 761,953 2,349,946 8,912,007 11,261,953
Rock Creek 4,051,565 4,486,002 19,465,563 23,951,565
Windridge 2,568,127 4,001,213 16,008,534 20,009,748
Catalina 609,896 1,648,194 6,136,703 7,784,896
Wimbledon Court 2,010,590 2,825,054 11,925,025 14,750,079
Lakeridge 845,732 1,776,336 6,369,395 8,145,731
Summergate 701,529 1,380,065 4,421,464 5,801,529
Oak Forest 10,000,318 6,354,384 32,570,596 38,924,980
Oaks Of Lewisville 3,485,698 4,497,320 16,278,354 20,775,674
Kelly Crossing 1,442,413 2,965,259 10,130,210 13,095,469
Highlands Of Preston 1,607,813 2,463,053 9,463,446 11,926,499
The Summit 1,133,379 2,302,119 9,804,756 12,106,875
Springfield 992,593 3,260,450 7,629,774 10,890,224
HOUSTON
Woodtrail 2,078,334 1,728,597 7,349,737 9,078,334
Park Trails 767,844 1,208,921 4,808,923 6,017,844
Green Oaks 2,383,195 5,758,011 21,565,285 27,323,296
Sky Hawk 1,872,546 2,698,250 8,630,002 11,328,252
South Grand At Pecan Grove 3,662,938 4,437,828 18,039,009 22,476,837
Breakers 2,038,067 1,873,522 6,989,942 8,863,464
Braesridge 1,705,322 3,349,650 12,365,633 15,715,283
Skylar Pointe 3,757,921 3,657,880 15,296,956 18,954,836
Stone Canyon 9,437,829 899,515 9,437,829 10,337,344
Briar Park 102,280 333,748 2,891,665 3,225,413
Chelsea Park 1,243,271 2,289,122 6,733,253 9,022,375
Clear Lake Falls (308,399) 1,106,162 4,209,854 5,316,016
Country Club Place 821,606 643,066 7,197,344 7,840,410
Arbor Ridge 148,635 2,029,720 6,492,092 8,521,812
London Park 1,374,895 2,299,585 7,761,238 10,060,823
Marymont 378,980 1,158,696 4,526,391 5,685,087
Nantucket Square (686,315) 1,070,242 4,144,462 5,214,704
Riverway 110,364 529,666 2,932,437 3,462,103
Riviera Pines 139,734 1,418,444 6,588,988 8,007,432
The Gallery 81,922 776,004 3,433,110 4,209,114
Towne Lake 1,106,694 1,563,625 6,185,911 7,749,536
The Legend at Park 10 11,758,419 2,018,039 11,735,391 13,753,430
PHOENIX-MESA AZ
Paradise Falls 2,886,523 1,828,963 8,851,060 10,680,023
Vista Point 1,312,937 1,717,158 6,795,779 8,512,937
Sierra Palms 437,202 4,733,068 17,704,134 22,437,202
Northpark Village 1,565,066 1,819,190 14,801,897 16,621,087
Depreciable
Life of
Accumulated Date of Date Building
Depreciation Construction Acquired Component (e)
------------------------------------------------------------------------------------
River Place, Macon, GA 2,642,789 1988 04/08/94 35 Years
Mallards Of Wedgewood, Lakeland, FL 2,014,027 1985 07/27/95 35 Years
Greentree, Jacksonville, FL 3,822,480 1986 07/22/94 35 Years
Westland, Jacksonville, FL 3,723,824 1990 05/09/96 35 Years
Antlers, Jacksonville, FL 3,680,912 1985 05/28/96 35 Years
Brantley Pines, Ft. Myers, FL 3,813,602 1986 08/11/94 35 Years
Santa Barbara, Naples, FL 2,497,039 1987 09/01/94 35 Years
Ashlar, Ft. Myers, FL 1,057,966 1999/2000 12/24/97 35 Years
The Groves, Port Orange, FL 1,541,419 1989 12/13/95 35 Years
Lakeside, Port Orange, FL 1,134,518 1985 07/01/97 35 Years
Mallards Of Brandywine, Deland, FL 995,046 1985 07/01/97 35 Years
Lake Washington Downs, Melbourne, FL 2,289,531 1984 09/24/93 35 Years
International Village, Speedway, IN 1,181,011 1968 12/07/98 35 Years
Regency Park South, Indianapolis, IN 787,026 1968 12/07/98 35 Years
Western Region:
DALLAS TEXAS
Preston Oaks 1,094,475 1980 12/31/96 35 Years
Preston Trace 1,349,446 1984 12/31/96 35 Years
Rock Creek 3,126,426 1979 12/31/96 35 Years
Windridge 2,697,391 1980 12/31/96 35 Years
Catalina 991,890 1982 12/31/96 35 Years
Wimbledon Court 1,709,266 1983 12/31/96 35 Years
Lakeridge 1,088,847 1984 12/31/96 35 Years
Summergate 742,151 1984 12/31/96 35 Years
Oak Forest 3,492,985 1996/98 12/31/96 35 Years
Oaks Of Lewisville 2,872,774 1983 03/27/97 35 Years
Kelly Crossing 1,525,524 1984 06/18/97 35 Years
Highlands Of Preston 1,138,410 1985 03/27/98 35 Years
The Summit 1,148,319 1983 03/27/98 35 Years
Springfield 951,962 1985 03/27/98 35 Years
HOUSTON
Woodtrail 1,531,754 1978 12/31/96 35 Years
Park Trails 806,361 1983 12/31/96 35 Years
Green Oaks 3,160,374 1985 06/25/97 35 Years
Sky Hawk 1,459,437 1984 05/08/97 35 Years
South Grand At Pecan Grove 2,486,549 1985 09/26/97 35 Years
Breakers 1,094,679 1985 09/26/97 35 Years
Braesridge 1,744,605 1982 09/26/97 35 Years
Skylar Pointe 2,208,604 1979 11/20/97 35 Years
Stone Canyon 92,201 1998 12/17/97 35 Years
Briar Park 293,683 1987 03/27/98 35 Years
Chelsea Park 838,680 1983 03/27/98 35 Years
Clear Lake Falls 478,335 1980 03/27/98 35 Years
Country Club Place 760,109 1985 03/27/98 35 Years
Arbor Ridge 775,659 1983 03/27/98 35 Years
London Park 983,269 1983 03/27/98 35 Years
Marymont 489,885 1983 03/27/98 35 Years
Nantucket Square 448,369 1983 03/27/98 35 Years
Riverway 365,345 1985 03/27/98 35 Years
Riviera Pines 633,214 1979 03/27/98 35 Years
The Gallery 297,475 1968 03/27/98 35 Years
Towne Lake 799,194 1984 03/27/98 35 Years
The Legend at Park 10 2,507,695 1998 05/19/98 35 Years
PHOENIX-MESA AZ
Paradise Falls 1,325,764 1986 12/31/96 35 Years
Vista Point 1,149,554 1986 12/31/96 35 Years
Sierra Palms 2,552,849 1996 12/31/96 35 Years
Northpark Village 1,801,053 1983 03/27/98 35 Years
SCHEDULE III
Summary of Real Estate Owned
Initial Costs
------------------------------
Cost of
Improvements
Total Capitalized
Land and Buildings Initial Subsequent of
Land and Acquisition to Acquisitioning
Encumbrances (a) (b) Improvements Improvements Costs (c) (Net of Disposals)
-------------------------------------------------------------------------------------------------
Stonegate 3,703,436 735,036 7,939,875 8,674,911 688,203
Finisterra - 1,273,798 26,392,207 27,666,005 307,400
La Privada 15,382,899 7,303,161 18,507,617 25,810,778 1,774,951
Terracina - 3,757,224 34,780,779 38,538,002 5,632,594
Woodland Park - 3,016,907 6,706,473 9,723,380 909,752
Sierra Foothills - 2,728,172 - 2,728,172 18,794,624
FORT WORTH-ARLINGTON TEXAS
Autumnwood - 2,412,180 8,687,820 11,100,000 915,690
Cobblestone - 2,925,372 10,527,738 13,453,110 1,895,732
Pavillion - 4,428,258 19,032,881 23,461,139 1,016,798
Oak Park - 3,966,129 22,227,701 26,193,830 (385,559)
Southern Oaks - 1,565,000 5,335,000 6,900,000 754,590
Hunter's Ridge - 1,613,000 5,837,000 7,450,000 790,643
Parc Plaza - 1,683,531 5,279,123 6,962,654 1,339,056
Summit Ridge 4,810,550 1,725,508 6,308,032 8,033,540 1,367,077
Greenwood Creek 4,768,424 1,958,378 8,551,018 10,509,396 1,127,672
Derby Park 7,218,225 3,121,153 11,764,974 14,886,127 773,887
Aspen Court 1,913,309 776,587 4,944,947 5,721,534 779,032
SAN ANTONIO
Promontory Pointe - 7,548,219 28,051,781 35,600,000 2,431,666
The Bluffs - 1,901,146 6,898,854 8,800,000 1,340,666
Ashley Oaks - 4,590,782 16,809,218 21,400,000 471,484
Sunflower - 2,209,000 7,891,000 10,100,000 582,262
Escalante 3,913,340 2,701,992 24,033,196 26,735,188 1,581,401
Cimarron City 3,097,104 487,906 4,534,793 5,022,699 683,210
Kenton 7,288,859 2,344,962 8,917,376 11,262,338 1,676,573
Peppermill 4,306,088 773,405 6,873,146 7,646,551 2,034,322
Sunset Canyon 8,753,297 3,201,039 10,669,680 13,870,720 3,780,981
Audubon 4,550,997 771,037 6,123,917 6,894,953 2,189,611
Grand Cypress 5,717,531 749,341 8,609,353 9,358,694 945,959
Inn @ Los Patios - 3,005,300 11,544,700 14,550,000 (1,489,487)
SAN FRANCISO-SAN JOSE, CA
2000 Post Street - 9,860,627 44,577,506 54,438,133 418,708
Birch Creek 7,670,278 4,365,315 16,695,509 21,060,824 943,028
Highlands Of Marin - 5,995,838 24,868,350 30,864,188 485,151
Marina Playa 14,038,935 6,224,383 23,916,283 30,140,666 1,111,432
MONTEREY PENINSULA SALINAS CA
Boronda Manor - 1,946,423 8,981,742 10,928,165 160,447
Garden Court - 888,038 4,187,950 5,075,988 96,563
Glenridge - 415,284 1,952,934 2,368,218 23,297
Harding Park Townhomes - 549,393 2,051,322 2,600,715 43,215
Cambridge Court - 2,020,384 9,226,038 11,246,422 357,691
Laurel Tree - 1,303,902 5,115,356 6,419,258 86,900
Pine Grove - 1,383,161 5,783,993 7,167,154 55,604
Santanna - 957,079 4,026,117 4,983,196 72,924
The CaprI - 1,018,493 3,657,274 4,675,767 10,620
The Pointe At Harden Ranch - 6,388,446 23,853,534 30,241,980 418,154
The Pointe At Northridge - 2,043,736 8,028,443 10,072,179 176,828
The Pointe At Westlake - 1,329,064 5,334,004 6,663,068 96,931
SOUTHERN CALIFORNIA
Pine Avenue 5,936,948 2,158,423 8,887,744 11,046,167 205,027
The Grand Resort - 8,884,151 35,706,606 44,590,757 592,157
Grand Terrace - 2,144,340 6,594,615 8,738,955 1,106,879
Windward Point - 1,767,970 7,117,879 8,885,849 209,105
Rancho Vallecitos - 3,302,967 10,877,286 14,180,254 307,466
Gross Amount at
Which Carried at Close of Period
------------------------------------ Depreciable
Land and Buildings Total Life of
Land and Carrying Accumulated Date of Date Building
Improvements Improvements Value (d) Depreciation Construction Acquired Component (e)
--------------------------------------------------------------------------------------------------------
Stonegate 882,503 8,480,611 9,363,114 962,027 1978 03/27/98 35 Years
Finisterra 1,323,764 26,649,641 27,973,405 2,609,099 1997 03/27/98 35 Years
La Privada 7,837,148 19,748,581 27,585,729 2,123,550 1987 03/27/98 35 Years
Terracina 4,518,578 39,652,018 44,170,597 4,269,616 1984 05/28/98 35 Years
Woodland Park 3,224,377 7,408,755 10,633,132 949,074 1979 06/09/98 35 Years
Sierra Foothills 2,790,490 18,732,306 21,522,796 3,361,015 1998 02/18/98 35 Years
FORT WORTH-ARLINGTON TEXAS
Autumnwood 2,651,258 9,364,432 12,015,690 1,529,956 1984 12/31/96 35 Years
Cobblestone 3,133,873 12,214,969 15,348,842 1,981,408 1984 12/31/96 35 Years
Pavillion 4,636,529 19,841,408 24,477,937 2,920,587 1979 12/31/96 35 Years
Oak Park 4,819,330 20,988,942 25,808,271 3,487,599 1982/98 12/31/96 35 Years
Southern Oaks 1,611,548 6,043,043 7,654,590 1,016,813 1982 12/31/96 35 Years
Hunter's Ridge 1,804,518 6,436,124 8,240,643 1,083,635 1992 12/31/96 35 Years
Parc Plaza 2,105,315 6,196,395 8,301,710 1,007,442 1986 10/30/97 35 Years
Summit Ridge 2,185,547 7,215,071 9,400,618 1,054,202 1983 03/27/98 35 Years
Greenwood Creek 2,112,719 9,524,349 11,637,068 1,127,923 1984 03/27/98 35 Years
Derby Park 3,516,461 12,143,553 15,660,014 1,636,578 1984 03/27/98 35 Years
Aspen Court 1,064,382 5,436,185 6,500,566 664,644 1986 03/27/98 35 Years
SAN ANTONIO
Promontory Pointe 7,799,506 30,232,160 38,031,666 4,623,781 1997 12/31/96 35 Years
The Bluffs 2,083,860 8,056,806 10,140,666 1,587,336 1978 12/31/96 35 Years
Ashley Oaks 4,682,717 17,188,767 21,871,484 2,467,545 1993 12/31/96 35 Years
Sunflower 2,323,773 8,358,488 10,682,262 1,338,170 1980 12/31/96 35 Years
Escalante 2,740,785 25,576,804 28,316,589 863,882 1986/2000 04/16/98 35 Years
Cimarron City 584,930 5,120,979 5,705,909 534,650 1983 04/16/98 35 Years
Kenton 2,446,157 10,492,755 12,938,912 1,131,061 1983 04/16/98 35 Years
Peppermill 938,875 8,741,998 9,680,873 1,014,174 1984 04/16/98 35 Years
Sunset Canyon 3,554,592 14,097,108 17,651,701 1,752,202 1984 04/16/98 35 Years
Audubon 1,014,250 8,070,314 9,084,564 1,064,677 1985 04/16/98 35 Years
Grand Cypress 797,794 9,506,858 10,304,653 969,564 1995 04/16/98 35 Years
Inn @ Los Patios 3,005,300 10,055,213 13,060,513 819,281 1990 08/15/98 35 Years
SAN FRANCISO-SAN JOSE, CA
2000 Post Street 9,914,645 44,942,195 54,856,841 2,402,441 1987 12/07/98 35 Years
Birch Creek 4,606,705 17,397,147 22,003,852 1,184,643 1968 12/07/98 35 Years
Highlands Of Marin 6,072,433 25,276,906 31,349,339 1,534,986 1991 12/07/98 35 Years
Marina Playa 6,438,679 24,813,419 31,252,098 1,732,828 1971 12/07/98 35 Years
MONTEREY PENINSULA SALINAS
Boronda Manor 1,960,729 9,127,883 11,088,612 545,192 1979 12/07/98 35 Years
Garden Court 891,220 4,281,331 5,172,551 261,684 1973 12/07/98 35 Years
Glenridge 415,744 1,975,771 2,391,515 84,998 1989 12/07/98 35 Years
Harding Park Townhomes 553,422 2,090,508 2,643,930 145,868 1984 12/07/98 35 Years
Cambridge Court 2,073,342 9,530,771 11,604,113 623,208 1974 12/07/98 35 Years
Laurel Tree 1,311,767 5,194,391 6,506,158 372,825 1977 12/07/98 35 Years
Pine Grove 1,387,287 5,835,471 7,222,758 365,774 1963 12/07/98 35 Years
Santanna 958,195 4,097,925 5,056,120 258,888 1989 12/07/98 35 Years
The CaprI 1,018,544 3,667,843 4,686,387 273,774 1973 12/07/98 35 Years
The Pointe At Harden Ranch 6,407,856 24,252,278 30,660,134 1,705,826 1986 12/07/98 35 Years
The Pointe At Northridge 2,052,115 8,196,892 10,249,007 565,569 1979 12/07/98 35 Years
The Pointe At Westlake 1,330,060 5,429,939 6,759,999 370,779 1975 12/07/98 35 Years
SOUTHERN CALIFORNIA
Pine Avenue 2,165,035 9,086,159 11,251,194 590,361 1987 12/07/98 35 Years
The Grand Resort 8,929,646 36,253,268 45,182,914 2,624,356 1971 12/07/98 35 Years
Grand Terrace 2,225,774 7,620,061 9,845,834 399,479 1986 06/30/99 35 Years
Windward Point 1,797,416 7,297,537 9,094,954 484,513 1983 12/07/98 35 Years
Rancho Vallecitos 3,359,502 11,128,217 14,487,719 2,652,866 1988 10/13/99 35 Years
Initial Costs Total
------------------------------------------
Land and Buildings Initial
Land and Acquisition
Encumbrances (a) (b) Improvements Improvements Costs (c)
----------------------------------------------------------------------------------
SEATTLE-BELLEVUE-EVERETT, WA
Arbor Terrace 7,310,472 1,453,342 11,994,972 13,448,314
Crowne Pointe 4,849,763 2,486,252 6,437,256 8,923,508
Hilltop 4,500,269 2,173,969 7,407,628 9,581,597
OTHER MARKETS
Pecan Grove, Austin, TX - 1,406,750 5,293,250 6,700,000
Anderson Mill, Austin, TX - 3,134,669 11,170,376 14,305,045
Turtle Creek, Little Rock, AR - 1,913,177 7,086,823 9,000,000
Shadow Lake, Little Rock, AR - 2,523,670 8,976,330 11,500,000
Desert Springs, Tuscon, AZ 4,503,289 1,118,402 7,094,431 8,212,833
Posada Del Rio, Tucson, AZ - 843,748 4,288,097 5,131,845
Sunset Point, Las Vegas., NV - 4,295,050 15,704,950 20,000,000
Alvarado, Albuquerque, NM - 1,930,229 5,969,771 7,900,000
Dorado Heights, Albuquerque, NM 5,094,107 1,567,762 6,555,395 8,123,157
Greensview, Aurora, CO - 2,974,024 12,489,598 15,463,622
Mountain View, Aurora, CO - 6,401,851 21,569,403 27,971,254
Lancaster Commons, Salem, OR - 2,485,291 7,451,165 9,936,456
Tualatin Heights, Tualatin, OR 8,815,206 3,272,585 9,134,089 12,406,674
University Park, Portland, OR - 3,007,202 8,191,307 11,198,509
Evergreen Park Apartments, Vancouver, WA 5,221,064 3,878,138 9,973,051 13,851,189
Aspen Creek, Puyallup, WA 6,911,618 1,177,714 9,115,789 10,293,503
Beaumont, Tacoma, WA 10,029,283 2,339,132 12,559,224 14,898,356
Campus Commons North, Pullman, WA 6,395,923 305,143 9,867,157 10,172,300
Campus Commons South, Pullman, WA 2,789,726 838,324 3,005,784 3,844,108
Foothills Tennis Village, Roseville, CA - 3,617,507 14,542,028 18,159,535
Woodlake Village, Sacramento, CA 16,417,907 6,772,438 26,966,750 33,739,188
Silk Oak, Fresno, CA - 2,324,562 4,566,446 6,891,008
--------------------------------------------------------------------------------
723,741,843 $ 593,021,296 $ 2,642,956,043 $ 3,235,977,339
================================================================================
REAL ESTATE UNDER DEVELOPMENT
NEW APARTMENT COMMUNITIES
Kildaire Farms Land, Cary, NC - 2,846,027 8,520,815 11,366,841
Red Stone Ranch, Cedar Park, TX - 1,896,723 6,699,073 8,595,796
ADDITIONS TO EXISTING COMMUNITIES
Meridian II, Carrollton, TX - 1,547,129 1,111,644 2,658,773
Manor At England Run III, Fredericksburg, VA - - 369,673 369,673
Greensview Phase II, Aurora, CO - 540,915 2,654,551 3,195,466
LAND HELD FOR FUTURE DEVELOPMENT - 33,632,506 - 33,632,506
--------------------------------------------------------------------------------
$ - $ 40,463,300 $ 19,355,756 $ 59,819,056
================================================================================
COMMERCIAL PROPERTY
Richmond Corporate - 245,332 6,351,847 6,597,179
COMMERCIAL PROPERTY HELD FOR DISPOSITION
Hanover Village, Richmond, VA - 1,623,910 - 1,623,910
Gloucester Exchange, Gloucester, VA - 403,688 2,278,553 2,682,241
Tri-County, Bristol, TN - 275,580 900,281 1,175,861
Pacific South Center, Seattle, WA 3,323,349 1,000,000 4,000,000 5,000,000
APARTMENTS HELD FOR DISPOSITION
Twin Coves, Glen Burnie, MD 3,506,254 912,771 2,904,304 3,817,075
--------------------------------------------------------------------------------
$ 6,829,603 $ 4,461,281 $ 16,434,985 $ 20,896,266
================================================================================
TOTAL REAL ESTATE OWNED $ 866,114,652 $ 637,945,877 $ 2,678,746,784 $ 3,316,692,661
================================================================================
Cost of
Improvements Gross Amount at
Capitalized Which Carried at Close of Period
-------------------------------------------
Subsequent Land and Buildings Total
to Acquisition Land and Carrying
(Net of Disposals) Improvements Improvements Value (d)
----------------------------------------------------------------------------------
SEATTLE-BELLEVUE-EVERETT, WA
Arbor Terrace 500,291 1,478,876 12,469,729 13,948,605
Crowne Pointe 696,326 2,513,293 7,106,541 9,619,834
Hilltop 322,600 2,240,945 7,663,252 9,904,197
OTHER MARKETS
Pecan Grove, Austin, TX 361,436 1,454,170 5,607,266 7,061,436
Anderson Mill, Austin, TX 2,804,234 3,468,727 13,640,552 17,109,279
Turtle Creek, Little Rock, AR 914,589 2,185,212 7,729,378 9,914,589
Shadow Lake, Little Rock, AR 1,220,904 2,743,019 9,977,885 12,720,904
Desert Springs, Tuscon, AZ 572,830 1,133,669 7,651,994 8,785,663
Posada Del Rio, Tucson, AZ (390,935) 938,382 3,802,529 4,740,910
Sunset Point, Las Vegas., NV 1,117,716 4,443,738 16,673,978 21,117,716
Alvarado, Albuquerque, NM 477,067 1,968,286 6,408,781 8,377,067
Dorado Heights, Albuquerque, NM 534,807 1,626,546 7,031,418 8,657,964
Greensview, Aurora, CO 415,868 2,450,457 13,429,033 15,879,490
Mountain View, Aurora, CO 1,028,829 6,268,502 22,731,581 29,000,083
Lancaster Commons, Salem, OR 266,092 2,504,452 7,698,096 10,202,548
Tualatin Heights, Tualatin, OR 636,663 3,368,922 9,674,414 13,043,337
University Park, Portland, OR 251,868 3,012,564 8,437,813 11,450,377
Evergreen Park Apartments, Vancouver, WA 487,162 3,911,688 10,426,663 14,338,351
Aspen Creek, Puyallup, WA 210,308 1,262,651 9,241,160 10,503,811
Beaumont, Tacoma, WA 269,726 2,378,591 12,789,491 15,168,082
Campus Commons North, Pullman, WA (1,833,580) 328,100 8,010,620 8,338,720
Campus Commons South, Pullman, WA (615,842) 895,743 2,332,524 3,228,266
Foothills Tennis Village, Roseville, CA 382,482 3,698,804 14,843,214 18,542,017
Woodlake Village, Sacramento, CA 1,068,668 6,945,744 27,862,112 34,807,856
Silk Oak, Fresno, CA 188,467 2,365,843 4,713,631 7,079,475
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$ 516,133,397 $ 667,754,240 $ 3,084,357,496 $ 3,752,110,736
=================================================================================
REAL ESTATE UNDER DEVELOPMENT
NEW APARTMENT COMMUNITIES
Kildaire Farms Land, Cary, NC - 2,846,027 8,520,815 11,366,841
Red Stone Ranch, Cedar Park, TX - 1,896,723 6,699,073 8,595,796
ADDITIONS TO EXISTING COMMUNITIES
Meridian II, Carrollton, TX - 1,547,129 1,111,644 2,658,773
Manor At England Run III, Fredericksburg, VA 548,058 541,667 376,064 917,731
Greensview Phase II, Aurora, CO - 540,915 2,654,551 3,195,466
LAND HELD FOR FUTURE DEVELOPMENT - 33,632,506 - 33,632,506
---------------------------------------------------------------------------------
$ 548,058 $ 41,004,967 $ 19,362,147 $ 60,367,114
=================================================================================
COMMERCIAL PROPERTY
Richmond Corporate 265,542 248,554 6,614,167 6,862,721
COMMERCIAL PROPERTY HELD FOR DISPOSITION
Hanover Village, Richmond, VA - 1,103,600 520,310 1,623,910
Gloucester Exchange, Gloucester, VA 513,391 602,442 2,593,190 3,195,632
Tri-County, Bristol, TN 1,280,670 364,123 2,092,408 2,456,531
Pacific South Center, Seattle, WA 7,772 1,000,000 4,007,772 5,007,772
APARTMENTS HELD FOR DISPOSITION
Twin Coves, Glen Burnie, MD 878,599 1,025,146 3,670,528 4,695,674
---------------------------------------------------------------------------------
$ 2,945,975 $ 4,343,864 $ 19,498,376 $ 23,842,241
=================================================================================
TOTAL REAL ESTATE OWNED $ 519,627,429 $ 713,103,071 $ 3,123,218,020 $ 3,836,320,090
=================================================================================
Depreciable
Life of
Accumulated Date of Date Building
Depreciation Construction Acquired Component (e)
---------------------------------------------------------------------------
SEATTLE-BELLEVUE-EVERETT, WA
Arbor Terrace 1,362,540 1996 03/27/98 35 Years
Crowne Pointe 715,809 1987 12/07/98 35 Years
Hilltop 615,624 1985 12/07/98 35 Years
OTHER MARKETS
Pecan Grove, Austin, TX 748,248 1984 12/31/96 35 Years
Anderson Mill, Austin, TX 2,722,711 1984 03/27/97 35 Years
Turtle Creek, Little Rock, AR 1,273,301 1985 12/31/96 35 Years
Shadow Lake, Little Rock, AR 1,679,685 1984 12/31/96 35 Years
Desert Springs, Tuscon, AZ 773,792 1985 03/27/98 35 Years
Posada Del Rio, Tucson, AZ 525,779 1980 03/27/98 35 Years
Sunset Point, Las Vegas., NV 2,417,657 1990 12/31/96 35 Years
Alvarado, Albuquerque, NM 1,039,555 1984 12/31/96 35 Years
Dorado Heights, Albuquerque, NM 755,411 1986 03/27/98 35 Years
Greensview, Aurora, CO 859,321 1987 12/07/98 35 Years
Mountain View, Aurora, CO 1,857,474 1973 12/07/98 35 Years
Lancaster Commons, Salem, OR 732,532 1992 12/07/98 35 Years
Tualatin Heights, Tualatin, OR 930,089 1989 12/07/98 35 Years
University Park, Portland, OR 778,197 1987 03/27/98 35 Years
Evergreen Park Apartments, Vancouver, WA 1,106,331 1988 03/27/98 35 Years
Aspen Creek, Puyallup, WA 684,955 1996 12/07/98 35 Years
Beaumont, Tacoma, WA 1,366,911 1996 06/14/00 35 Years
Campus Commons North, Pullman, WA 1,323,144 1972 03/27/98 35 Years
Campus Commons South, Pullman, WA 173,657 1972 03/27/98 35 Years
Foothills Tennis Village, Roseville, CA 986,712 1988 12/07/98 35 Years
Woodlake Village, Sacramento, CA 1,953,472 1979 12/07/98 35 Years
Silk Oak, Fresno, CA 687,450 1985 12/07/98 35 Years
-------------------
$ 506,838,438
===================
REAL ESTATE UNDER DEVELOPMENT
NEW APARTMENT COMMUNITIES
Kildaire Farms Land, Cary, NC - 2000 05/25/00
Red Stone Ranch, Cedar Park, TX - 2000 06/14/00
ADDITIONS TO EXISTING COMMUNITIES
Meridian II, Carrollton, TX - 2000 01/27/98
Manor At England Run III, Fredericksburg, VA - 2000 05/04/95
Greensview Phase II, Aurora, CO (849) 2000 12/07/98
LAND HELD FOR FUTURE DEVELOPMENT 962 - -
-------------------
$ 114
===================
COMMERCIAL PROPERTY
Richmond Corporate 33,177 1999 11/30/99 35 Years
COMMERCIAL PROPERTY HELD FOR DISPOSITION
Hanover Village, Richmond, VA - - 06/30/86 35 Years
Gloucester Exchange, Gloucester, VA 764,072 1974 11/12/87 35 Years
Tri-County, Bristol, TN 733,831 1976/79 01/21/81 35 Years
Pacific South Center, Seattle, WA 227 1965 08/28/86 35 Years
APARTMENTS HELD FOR DISPOSITION
Twin Coves, Glen Burnie, MD 1,035,753 1974 08/16/94 35 Years
-------------------
$ 2,567,060
===================
TOTAL REAL ESTATE OWNED $ 509,405,611
===================
SCHEDULE III
Summary of Real Estate Owned
(a) There are 88 communities encumbererd by fixed rate debt aggregating $723.7
million. The amount of this debt is included in the encumbrances shown for
the individual markets. There are 27 communities encumbered by fixed rate
debt aggregating $135.5 million that is not included in the encumbrances
shown for the individual markets or in real estate held for disposition.
(b) Includes a fair market value adjustment of $10.2 milion.
(c) Includes a purchase price reallocation of $8.5 million.
(d) The aggregate cost for federal income tax purposes was approximately $3.0
billion at December 31, 2000.
(e) The depreciable life for all buildings is 35 years.