SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0857512
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
10 South Sixth Street, Suite 203 Richmond, Virginia 23219-3802
(Address of principal executive offices)
Registrant's telephone number, including area code (804) 780-2691
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
Indicate the number of shares outstanding of each of the issuer's class of
common stock as the latest practicable date.
Class Outstanding at May 9, 1994
Common Stock, $1 par value 41,722,902
UNITED DOMINION REALTY TRUST, INC.
BALANCE SHEETS
(unaudited)
(in thousands, except share data)
March 31, December 31,
1994 1993
Assets
Real estate owned (Note 6):
Apartments $ 532,227 $ 503,226
Shopping centers 74,450 74,404
Office and industrial buildings 4,593 4,583
611,270 582,213
Less accumulated depreciation 97,150 91,444
514,120 490,769
Cash and cash equivalents 10,489 5,773
Other assets 10,993 9,298
$ 535,602 $ 505,840
Liabilities and Shareholders' Equity
Mortgage notes payable $ 72,660 $ 72,862
Notes payable 188,101 156,558
Accounts payable, accrued expenses
and other liabilities 10,631 9,169
Distributions payable to shareholders 8,130 7,288
279,522 245,877
Shareholders' equity (Note 4):
Common stock, $1 par value;
60,000,000 shares authorized
41,703,785 shares issued and
outstanding (41,653,097 in 1993) 41,704 41,653
Additional paid-in capital 302,981 302,486
Notes receivable from officer shareholders (4,096) (4,384)
Distributions in excess of net income (84,509) (79,792)
Total shareholders' equity 256,080 259,963
$ 535,602 $ 505,840
UNITED DOMINION REALTY TRUST, INC.
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
1994 1993
Income:
Property operations:
Rental income $26,706 $20,182
Rental expenses 11,385 8,171
Real estate depreciation 5,706 4,611
9,615 7,400
Interest and other income 114 56
9,729 7,456
Expenses:
Interest 4,655 3,913
General and administrative (Note 5) 1,474 823
Other depreciation and amortization 185 131
6,314 4,867
Income before gains (losses) on invest-
ments and extraordinary item 3,415 2,589
Loss on sale of investment -- --
Income before extraordinary item 3,415 2,589
Extraordinary item - early
extinguishment of debt -- --
Net income $ 3,415 $ 2,589
Net income per share:
Before extraordinary item $ .08 $ .07
Extraordinary item -- --
$ .08 $ .07
Dividends declared per share $ .195 $ .175
Weighted average number of
shares outstanding 41,688 35,312
UNITED DOMINION REALTY TRUST, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended
March 31
1994 1993
OPERATING ACTIVITIES:
Net income $ 3,415 $ 2,589
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,895 4,742
Adoption of SFAS No. 112 "Employers' Accounting
for Postemployment Benefits" (Note 5) 450 --
Changes in operating assets and liabilities:
Decrease in rents and other receivables 20 580
Increase in accounts payable and accrued expenses 1,009 2,390
Increase in prepaid expenses and other assets (386) (131)
Net cash provided by operating activities 10,403 10,170
INVESTING ACTIVITIES:
Acquisitions of real estate, net of debt assumed (27,227) (29,074)
Capital expenditures (3,356) (1,277)
Collection of mortgage notes receivable 44 1
Net cash used in investing activities (30,539) (30,350)
FINANCING ACTIVITIES:
Net proceeds from issuance of shares 834 443
Increase in mortgages and notes payable 15,000 52,000
Net borrowings (repayments) under bank lines of credit 16,650 (20,700)
Cash distributions paid to shareholders (7,291) (5,824)
Scheduled mortgage principal payments (202) (184)
Payments on notes and non-scheduled
mortgage principal payments (106) (2,566)
Financing costs related to $75 million public debt
offering (Note 3) (33) --
Net cash provided by financing activities 24,852 23,169
Net increase in cash and cash equivalents 4,716 2,989
Cash and cash equivalents, beginning of period 5,773 1,105
Cash and cash equivalents, end of period $ 10,489 $ 4,094
UNITED DOMINION REALTY TRUST, INC.
Notes to Financial Statements
March 31, 1994
(Unaudited)
(1) The financial information furnished reflects all adjustments which are
necessary for a fair presentation of financial position at March 31,
1994 and the results of operations for the interim periods ended March
31, 1994 and 1993. These adjustments are of a normal and recurring
nature. Such interim results are not necessarily indicative of the
results that can be expected for a full year. The accompanying
financial statements should be read in conjunction with the audited
financial statements and related notes appearing in the Trust's 1993
Annual Report.
(2) Certain previously reported amounts have been reclassified to conform
with the current financial statement presentation.
(3) On April 7, 1994, the Trust issued $75 million of 7 1/4% senior
unsecured notes due April 1, 1999. The net proceeds of $74.3 million
were used to repay, in full, then existing bank debt and to fund
subsequent apartment acquisitions.
(4) At the Annual Shareholders' Meeting on May 10, 1994, the Trust's
Shareholders voted to increase the authorized shares of Common Stock to
100 million shares and also authorized a new class of 25 million shares
of Preferred Stock.
(5) At the beginning of 1994, the Trust adopted the provisions of SFAS No.
112, "Employers' Accounting for Postemployment Benefits". Under the new
method of accounting, the Trust accrues the benefits when it is probable
that such benefits will be paid and when sufficient information exists to
make reasonable estimates of the amounts to be paid. As required by the
Statement, prior year financial statements have not been restated to
reflect the change in accounting method. The cumulative effect of this
accounting change was to decrease net income by $450,000 or $.01 per share
for the first quarter of 1994. This change is included in the caption
"general and administrative" expense in the Trust's income statement.
(6) A summary of the Trust's apartment acquisitions made during the three
months ended March 31, 1994 is as follows:
Acquisition
Date Number Cost
Acquired of Units Location (in millions)
3/04/94 302 Raleigh, NC $13.8
3/10/94 346 Tampa, FL 12.0
648 $25.8
(7) Subsequent to March 31, 1994, the Trust has also completed the following
apartment acquistions:
Acquisition
Date Number Cost
Acquired of Units Location (in millions)
4/08/94 240 Macon, GA $ 8.6
4/14/94 360 Altamonte Springs, FL $12.6
4/15/94 244 Tampa, FL 5.9
844 $27.1
On April 1, 1994, the Trust entered into 28 separate but related
contracts to purchase 28 apartment communities containing 5,882 units at
a purchase price of approximately $188 million. The contracts provide
for a due diligence period through June 1, 1994, during which time the
Trust may terminate the contracts for any reason without penalty. If,
after completing due diligence, the Trust elects to proceed with the
acquisition, closing will be scheduled for July, 1994.
UNITED DOMINION REALTY TRUST, INC.
Form 10-Q
Quarter Ended March 31, 1994
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATIONS
Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Trust considers funds from
operations in evaluating property acquisitions and its operating performance
and believes that funds from operations should be considered along with, but
not as an alternative to, net income and cash flows as a measure of the
Trust's operating performance and liquidity. Funds from operations does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs.
RESULTS OF OPERATIONS
For the first quarter of 1994, the Trust reported increases over the
comparable 1993 quarter in rental income, income from property operations,
net income, and funds from operations. First quarter 1994 rental income was
$26.7 million compared to $20.2 million in first quarter 1993, an increase
of $6.5 million or 32.3%. Income from property operations excluding
depreciation, increased from $12.0 million to $15.3 million, an increase of
$3.3 million or 27.6%. Net income for the current quarter totaled $3.4
million which was $826,000, or 31.9%, greater than the $2.6 million reported
in last year's first quarter. On a per share basis, net income increased
from $.07 for the first quarter of 1993 to $.08 in the first quarter of 1994.
Net income for the 1994 quarter includes a $450,000 charge ($.01 per share)
reflecting the Trust's implementation of the provisions of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". Funds from operations
increased 33.1% from $7.3 million last year to $9.8 million in the current
year's first quarter.
The Trust's 1993 acquisitions made the largest contribution to the
reported increases. The Trust's first quarter 1994 acquisitions and improved
results from its core portfolio of mature apartments and commercial
properties also had a positive impact on first quarter results. For the
Trust's 13,832 mature apartment units (57 communities) that have been owned
since the beginning of 1993, occupancy increased 1.2% to 92.5% in the current
quarter compared to 91.3% for the first quarter last year. Average rents at
these properties grew by 3.0% and operating expenses increased approximately
5.5%, increasing the operating expense ratio 0.3% to 44.7%. As a result, net
operating income from these apartment units increased 4.1% or $386,000. For
the remaining 4,730 apartment units (19 communities), acquired by the Trust
since January 1, 1993, occupancy averaged 91.1% and operating expenses at
these properties were 44.9% of revenues during the 1994 quarter.
For the first quarter, net operating income from commercial properties
increased 7.6%, or $141,000, from the first quarter last year, primarily
reflecting additional small tenant leases. Average occupancy increased 1.1%
to 84.5% compared to the same quarter last year.
During the first quarter, interest expense was approximately $742,000
higher than it was in the first quarter of 1993 ($4.7 million in 1994 versus
$3.9 million 1993) as the Trust had more debt outstanding in 1994 than in
1993. At March 31, 1994, the Trust's total debt (mortgage and unsecured
notes payable) was $260.7 million versus $209.7 million last year.
For the first quarter of 1994, depreciation expense increased to $5.7
million versus $4.6 million in 1993, reflecting the portfolio expansion that
has occurred during the past year.
Management expects that the Trust's operating results for the second
quarter of 1994 will show continued improvement when compared to the
comparable period last year reflecting the continued positive impact of the
1993 and 1994 acquisitions and anticipated occupancy gains and rent growth.
At the beginning of April, mature apartment occupancy was more than 2% higher
than it was at the beginning of the year. Management believes that the
Trust's operating results should improve further during the next few years
for a number of factors including (i) the contribution of the large volume of
units acquired since 1991 and expected to be acquired during the remainder of
1994 and (ii) improving apartment markets as a result of anticipated
population and job growth in the Southeast and the lack of significant multi-
family construction.
FINANCIAL CONDITION
As a qualified REIT, the Trust distributes a substantial portion of its
cash flow to its shareholders in the form of dividends. Consequently, new
acquisitions, property renovations and expansions, major capital improvements
and balloon debt payments are funded by a variety of primarily external
sources including bank borrowings, the issuance of equity and debt in public
and private transactions and, to a much lesser extent, property sales and
mortgage financings.
At the beginning of 1994, the Trust had approximately $5.8 million of
cash and cash equivalents and $32.4 million of available and unused bank
lines of credit. During the first quarter, the Trust expanded its bank lines
of credit to $73.5 million, an increase of $12.5 million since December 31,
1993. On April 7, 1994, the Trust completed a $75 million public offering of
7 1/4% senior unsecured notes due April 1, 1999. The notes were priced at
99.833% to yield 7.29% to maturity. The net proceeds from the debt offering
of approximately $74.3 million were utilized to repay, in full, outstanding
bank debt and to fund subsequent apartment acquisitions.
During the first quarter of 1994, the Trust acquired two apartment
communities (648 units) at a total cost of approximately $25.8 million, all
cash. On March 4, 1994, the Trust acquired a 302 unit garden and townhouse
community in Raleigh, North Carolina that was purchased for $13.8 million
($45,400 per unit). On March 10, 1994, the Trust acquired a 346 unit garden
community in Tampa, Florida for $12.0 million ($34,700 per unit).
At the beginning of April, the Trust executed individual contracts to
purchase a group of 28 apartment communities containing 5,882 units for
approximately $188 million. All but one of the properties are located in the
Southeast. Approximately two-thirds of the units are located in four
markets: Baltimore, Charlotte, and Columbia and Greenville, South Carolina.
The Trust is currently performing the due diligence necessary to determine
whether to proceed with the acquisition. The due diligence period runs
through June 1, 1994 during which time the Trust may terminate the contracts
for any reason without penalty. If, after completing due diligence, the
Trust elects to proceed with the purchase, it is expected that the
transaction would close in July. If the transaction is consummated as
planned, it is expected to have an immediate positive impact on the Trust's
operating results.
In April, 1993, the Trust engaged outside property management for most
of its shopping centers properties following the decision to exit the
commercial property business. Although no formal plan has been adopted,
management intends to offer the Trust's seven Richmond, Virginia shopping
centers for sale sometime during the remainder of 1994. Management has
committed to developing alternative strategies that will enable the Trust to
dispose of most of these properties over the next few years.
The Trust's liquidity and capital resources are believed to be more than
adequate to meet its cash requirements for the foreseeable future.
UNITED DOMINION REALTY TRUST, INC.
Form 10-Q
Quarter Ended March 31, 1994
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed on the accompanying index to exhibits are filed
as part of this quarterly report.
(b) Reports on Form 8-K
(i) A Form 8-K dated December 22, 1993 was filed with the
Securities and Exchange Commission on December 22, 1993 as
subsequently amended by Form 8-K/A filed on February 18, 1994.
The filing reported the acquisition of certain properties
which in the aggregate were deemed to be significant. The
financial statements filed as part of this report are the
statements of rental operations of the Village at Old Tampa Bay
Apartments, Peppertree Apartments and Beechwood Apartments.
(ii) A Form 8-K dated December 22, 1993, was filed with the
Securities and Exchange Commission on December 22, 1993 as
subsequently amended by Form 8-K/A filed January 20, 1994.
The filing reported the acquisition of Beechwood Apartments in
Greensboro, North Carolina on December 22, 1993 which was
inadvertently omitted.
(iii) A Form 8-K dated December 31, 1993 was filed with the
Securities and Exchange Commission on December 31, 1993
as subsequently amended by Form 8-K/A filed on March 3,
1994. The filing reported the acquisition of a certain
property which in the aggregate was deemed to be
significant. The financial statement filed as part of
this report is the statements of rental operations of
Riverwind Apartments.
UNITED DOMINION REALTY TRUST, INC.
FORM 10-Q FOR QUARTER ENDED MARCH 31, 1994
EXHIBIT INDEX
Item 6(a)
References to pages under the caption "Location" are to be sequentially
numbered pages of the manually signed original of this Form 10-Q, and
references to exhibits, forms or other filings indicate that the exhibit,
form or other filing referred to has been filed, that the indexed exhibit and
the exhibit referred to are the same and that the exhibit referred to is
incorporated herein by reference.
Exhibit Description Location
3(a)(i) Restated Articles of Incorporation Exhibit 3 to the
Trust's Quarterly
Report on Form 10-Q
for the quarter
ended June 30, 1992.
3(a)(ii) Amendment to Articles of Exhibit 6(a)(i) to
Incorporation the Trust's Form 8-A
Registration
Statement.
3(b) By-Laws Exhibit 4(c) to the
Trust's Form S-3
Registration
Statement
(Registration No.
33-44743) filed with
the Commission on
December 31, 1991.
4(i) Specimen Common Stock Exhibit 4(i) to the
Certificate Trust's Annual
Report on Form 10-K
for the year ended
December 31, 1993.
4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(l) to the
Trust's Form November 7, 1991, 8-A Registration
between the Trust and Aid Statement
Association for Lutherans
4(ii)(b) Loan Agreement dated as of Exhibit 6(c)(2) to the
November 14, 1991, between the Trust's Form 8-A
Trust and Signet Bank/Virginia Registration Statement
4(ii)(c) Note Purchase Agreement dated Exhibit 6(c)(3) to the
as of February 19, 1992, between Trust's Form 8-A
the Trust and Principal Mutual Registration Statement
Life Insurance Company
4(ii)(d) Credit Agreement dated as of Exhibit 6(c)(4) to the
December 15, 1992, between the Trust's Form 8-A
Trust and Signet Bank/Virginia Registration Statement
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the
as of January 15, 1993, between Trust's Form 8-A
the Trust and CIGNA Property Registration Statement
and Casualty Insurance Company,
Connecticut General Life 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)(1) Indenture dated as of April 1, 1994, Filed herewith
between the Trust and NationsBank of
Virginia, N.A.. as Trustee
4 (ii)(f)(2) Resolution of the Board of Directors Filed herewith
of the Trust establishing terms of
7 1/4% Notes due April 1, 1999
4 (ii)(f)(3) Form of 7 1/4 Note due April 1, 1999 File herewith
UNITED DOMINION REALTY TRUST, INC.
Form 10-Q
Quarter Ended March 31, 1994
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
UNITED DOMINION REALTY TRUST, INC.
Date: May 13, 1994 /s/ James Dolphin
James Dolphin, Senior Vice President
Chief Financial Officer
Date: May 13, 1994 /s/ Jerry A. Davis
Jerry A. Davis, Vice President
Corporate Controller