UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 - zip code)
(804) 780-2691
Registrant's telephone number, including area code
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 1996:
Common Stock 56,754,597
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
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
(Unaudited)
June 30, December 31,
1996 1995
------------ ------------
Assets
Real estate held for investment $ 1,238,045 $ 1,131,098
Less accumulated depreciation 146,988 129,454
------------ ------------
1,091,057 1,001,644
Real estate held for disposition 48,710 51,015
Cash and cash equivalents 7,592 2,904
Other assets 23,560 25,053
------------ ------------
$ 1,170,919 $ 1,080,616
============ ============
Liabilities and shareholders' equity
Mortgage notes payable $ 195,017 $ 180,481
7 1/4% Notes due April 1, 1999 75,000 75,000
8 1/2% Debentures due September 15, 2024 150,000 150,000
Other notes payable 197,118 124,858
Distributions payable to common shareholders 13,621 12,695
Accounts payable, accrued expenses and other liabilities 30,315 21,193
------------ ------------
661,071 564,227
------------ ------------
Minority interest of unitholders in Operating Partnership 2,007 --
Shareholders' equity:
Preferred stock, no par value; 25,000,0000 shares authorized:
9 1/4% Series A Cumulative Redeemable Preferred Stock
(liquidation preference of $25 per share), 4,200,000 shares issued
and outstanding 105,000 105,000
Common stock, $1 par value; 100,000,000 shares authorized
56,745,450 shares issued and outstanding (56,375,333 in 1995) 56,745 56,375
Additional paid-in-capital 485,408 480,971
Notes receivable from officer shareholders (6,024) (6,091)
Distributions in excess of net income (134,628) (120,314)
Unrealized gain on securities available-for-sale 1,340 448
------------ ------------
Total shareholders' equity 507,841 516,389
============ ============
$ 1,170,919 $ 1,080,616
============ ============
The accompanying notes are an integral part of the financial statements.
2
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
----------- ------------ ---------- -----------
Revenues
Rental income $ 57,197 $ 47,747 $ 112,036 $ 93,239
Interest and other income 445 361 795 535
----------- ------------ ------------ -----------
57,642 48,108 112,831 93,774
Expenses
Rental expenses:
Utilities 3,857 3,271 8,385 6,927
Repairs and maintenance 10,597 7,717 19,136 14,065
Real estate taxes 4,209 3,422 8,189 6,658
Property management 1,247 1,114 2,748 2,368
Other rental expenses 5,279 4,146 10,453 8,214
Real estate depreciation 10,805 9,493 21,365 18,549
Interest 11,237 10,135 21,883 20,589
General and administrative 1,549 1,547 2,932 2,781
Other depreciation and amortization 276 270 560 543
Impairment loss on real estate held for disposition (Note 3) 290 -- 290 --
----------- ------------ ------------ -----------
49,346 41,115 95,941 80,694
Income before gains (losses) on sales of investments and minority interest
of unitholders in Operating Partnership 8,296 6,993 16,890 13,080
Gains (losses) on sales of investments (129) 4,576 836 4,639
Minority interest of unitholders in Operating Partnership (Note 1) (1) -- (1) --
----------- ------------ ------------ -----------
Net income 8,166 11,569 17,725 17,719
Dividends to preferred shareholders 2,428 1,781 4,856 1,781
----------- ------------ ------------ -----------
Net income available to common shareholders $ 5,738 $ 9,788 $ 12,869 $ 15,938
=========== ============== ============ ===========
Net income per common share $ 0.10 $ 0.19 $ 0.23 $ 0.31
=========== ============ ============ ===========
Dividends declared per common share $ 0.24 $ 0.225 $ 0.48 $ 0.45
=========== ============ ============ ===========
Weighted average number of common shares outstanding 56,666 51,776 56,566 51,452
The accompanying notes are an integral part of the financial statements.
3
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
1996 1995
---------- ----------
Operating Activities
Net income $ 17,725 $ 17,719
Adjustments to reconcile net income to cash provided
by operating activities:
Minority interest of unitholders in Operating Partnership 1 --
Impairment loss on real estate held for disposition 290 --
Gains on sales of investments (836) (4,639)
Depreciation and amortization 21,925 19,092
Changes in operating assets and liabilities:
Increase in operating liabilities 8,555 4,539
Increase (decrease) in operating assets (567) 145
---------- ----------
Net cash provided by operating activities 47,093 36,856
Investing Activities
Acquisition of real estate, net of debt and liabilties assumed (80,678) (95,111)
Capital expenditures (24,856) (14,547)
Net proceeds from the sales of investments 15,794 16,601
Other 2 36
---------- ----------
Net cash used in investing activities (89,738) (93,021)
Financing Activities
Net proceeds from the issuance of common stock 4,874 18,383
Net proceeds from the issuance of preferred stock -- 101,478
Net proceeds from the issuance of notes payable 111 10,000
Net proceeds from the issuance of mortgage notes payable -- 15,720
Net borrowings of short-term bank borrowings 82,400 (14,150)
Cash distributions paid to preferred shareholders (4,856) --
Cash distributions paid to common shareholders (26,257) (21,473)
Scheduled mortgage principal payments (1,213) (1,115)
Mortgage financing proceeds released from construction funds 2,665 --
Payments on notes and non-scheduled mortgage principal payments (10,077) (45,180)
Payment of financing costs (314) (742)
---------- ----------
Net cash provided by financing activities 47,333 62,921
Net increase in cash and cash equivalents 4,688 6,756
Cash and cash equivalents, beginning of period 2,904 7,261
---------- ----------
Cash and cash equivalents, end of period $ 7,592 $ 14,017
========== ==========
The accompanying notes are an integral part of the financial statements.
4
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In thousands, except share and per share amounts)
(Unaudited)
Common Stock, $1 Par Value Preferred Stock
--------------------------- ------------------- Additional
Number Number Paid-in-
of Shares Amount of Shares Amount Capital
-----------------------------------------------------------------
Balance at December 31, 1995 56,375,333 $56,375 4,200,000 $105,000 $480,971
Exercise of common share options 96,132 96 - - 899
Common shares purchased by officers, net of loan repayments 2,500 3 - - 32
Common shares issued through dividend reinvestment and
stock purchase plan 268,557 268 - - 3,465
Common shares issued through employee stock purchase plan 2,928 3 - - 41
Preferred stock dividends declared ($1.16 per share) - - - - -
Common stock distributions declared ($.48 per share) - - - - -
Unrealized gain on securities available-for-sale
- - - - -
Net income - - - - -
============= ============= ========== ========== ========
Balance at June 30, 1996 56,745,450 $56,745 4,200,000 $105,000 $485,408
============= ============= ========== ========== ========
The accompanying notes are an integral part of the financial statements.
Unrealized
Gain on
Receivable Distribution Securities- Total
from Office in Excess of Available- Shareholders'
Shareholder Net Income for-Sale Equity
---------------------------------------------------------------
Balance at December 31, 1995 ($6,091) ($120,314) $448 $516,389
Exercise of common share options - - - 995
Common shares purchased by officers, net of loan repayments 67 - - 102
Common shares issued through dividend reinvestment and
stock purchase plan - - - 3,733
Common shares issued through employee stock purchase plan - - - 44
Preferred stock dividends declared ($1.16 per share) - (4,856) - (4,856)
Common stock distributions declared ($.48 per share) - (27,183) - (27,183)
Unrealized gain on securities available-for-sale - - 892 892
Net income - 17,725 - 17,725
========== ========== ========== ===========
Balance at June 30, 1996 ($6,024) ($134,628) $1,340 $507,841
========== ========== ========== ===========
The accompanying notes are an integral part of the financial statements.
5
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of presentation
The consolidated financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of financial position
at June 30, 1996 and results of operations for the interim periods ended June
30, 1996 and 1995. Such adjustments are of a normal and recurring nature.
Certain information and note disclosures normally included in the annual
financial statements of United Dominion Realty Trust, Inc. (the "Company")
prepared in accordance with generally accepted accounitng principles have been
condensed or omitted. The accompanying consolidated financial statements should
be read in conjunction with the audited financial statements and related notes
appearing in the Company's December 31, 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission. The interim results presented are
not necessarily indicative of results that can be expected for a full year.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries and United Dominion Realty, L.P. (the " Operating
Partnership"), formed in 1995. At June 30, 1996, 11 of the Company's apartment
communities were owned by the Operating Partnership. At June 30, 1996, the
Company was the sole general partner and held a 1% interest in the Operating
Partnership. UDRT of North Carolina, L.L.C., a wholly owned subsidiary, held a
96.9% interest. All significant inter-company accounts and transactions have
been eliminated in consolidation.
2. Reclassifications
Certain previously reported amounts have been reclassified to conform with the
current financial statement presentation.
3. Real Estate Owned
Real estate held for investment
The following summarizes real estate held for investment at June 30, 1996 and
December 31, 1995:
June 30, December 31,
Dollars in thousands 1996 1995
- -------------------- ------------ ------------
Land and land improvements $ 213,512 $ 193,672
Buildings and improvements 940,224 864,331
Furniture, fixtures and equipment 80,405 72,576
Construction in progress 3,904 519
------------ ------------
Real estate held for investment 1,238,045 1,131,098
Accumulated depreciation (146,988) (129,454)
------------ ------------
Real estate held for investment, net $ 1,091,057 $ 1,001,644
============ ============
Real estate held for disposition
Real estate held for disposition included in the Consolidated Balance Sheet in
the aggregate amount of $48.7 million includes: (i) two parcels of land
aggregating $1.9 million, (ii) seven apartment communities aggregating $22.5
million, (iii) five shopping centers aggregating $21.6 million and (iv) four
office/ industrial properties aggregating $2.7 million. These properties
contributed net rental income ( total rental income, less rental expenses, less
depreciation expense) in the aggregate amount of approximately $1.7 million and
$3.4 million for the three and six months ended June 30, 1996, respectively.
At June 30, 1996, the Company reclassified one shopping center and three
office/industrial properties, from assets held for investment to assets held for
disposition in the Consolidated Balance Sheet and recorded an aggregate $290,000
impairment loss relating to the shopping center and one office building,
representing the excess of the carrying values of the assets over the estimated
fair values less estimated costs to sell.
6
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Acquisitions
During the second quarter of 1996, the Company acquired four apartment
communities containing 1,425 apartment homes at a total cost of $62.6 million,
including closing costs. These acquisitions were as follows (in millions of
dollars):
No. Apartment Year Purchase
Name/Location Homes Built Price
Westland Park
Jacksonville, FL 405 1990 $ 16.7
The Antlers
Jacksonville, FL 400 1985 15.2
Chase at Middle Ridge
Woodbridge, VA 280 1990 16.6
Riverwood (1)
Atlanta, GA 340 1980 14.1
----- ------
Total 1,425 $ 62.6
===== ======
For the six month period ended June 30, 1996, the Company acquired eight
apartment communities containing 2,237 apartment homes at a total cost of $99.0
million, including closing costs.
(1) Held by the Operating Partnership.
5. Dispositions
During the second quarter, the Company sold Village Square Shopping Center in
Myrtle Beach, South Carolina, for approximately $7.8 million and West Knoll
Apartments in Newark, Delaware for approximately $3.4 million. The net proceeds
from the sales have been utilized primarily for apartment acquisitions. An
aggregate $129,000 loss on these two sales was recognized for financial
reporting purposes.
For the six months ended June 30, 1996, the Company recognized an aggregate
$836,000 book gain on property sales. In addition to the two aforementioned
sales, in February, 1996, the Company sold Deerfield Plaza Shopping Center in
Myrtle Beach, South Carolina for approximately $5.9 million. A $965,000
financial reporting gain was recognized on this transaction which was structured
to qualify as a like-kind exchange under Section 1031 of the Internal Revenue
Code, so the related capital gains will be deferred for federal income tax
purposes.
6. Mortgage Notes Payable
Mortgage notes payable consisted of the following at June 30, 1996 and 1995 and
December 31, 1995 (in thousands of dollars):
June 30, December 31,
1996 1995 1995
-------- -------- --------
Conventional fixed-rate $ 71,419 $ 42,363 $ 56,368
Tax-exempt fixed-rate 112,428 103,578 112,843
-------- -------- --------
Total fixed-rate 183,847 145,941 169,211
Tax-exempt variable-rate 11,170 12,100 11,270
-------- -------- --------
$195,017 $158,041 $180,481
======== ======== ========
7
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Conventional Fixed-Rate Mortgage Notes Conventional fixed-rate mortgage notes
included 21 loans encumbering 15 properties at June 30, 1996 and 16 loans
encumbering 10 properties at June 30, 1995. Mortgage notes are generally due in
monthly installments of principal and interest and mature at various dates
through 2020. At June 30, 1996 and 1995, this debt carried fixed rates of
interest ranging from 7.00% to 9.625% (8.26% weighted average) and 7.00% to
9.625% (8.06% weighted average), respectively.
Tax-Exempt Mortgage Notes At June 30, 1996, 17 properties were encumbered by
fixed-rate mortgage notes aggregating $112.4 million which secure related
tax-exempt housing bond issues. Interest on these notes is generally payable in
semi-annual installments and the notes mature at various dates through 2025. At
June 30, 1996 and 1995, tax-exempt fixed-rate mortgage notes had interest rates
ranging from 6.00% to 8.50% (weighted average 6.91%), and 5.976% to 8.00%
(weighted average 6.95%), respectively.
At June 30, 1996, three of the Company's properties were encumbered by
variable-rate mortgage notes aggregating $11.2 million which secure tax-exempt
housing bond issues. Interest on these notes is generally payable in monthly
installments and the notes mature at various dates through 2010. At June 30,
1996 and 1995, tax-exempt variable-rate notes had interest rates ranging from
5.16% to 7.30% (weighted average 6.53%) and 4.60% to 7.29% (weighted average
5.21%), respectively.
The tax-exempt mortgage notes contain certain covenants which require the
Company to lease or hold for lease 15% to 40% of the apartment homes for low to
moderate income residents, as defined. Certain of the Company's tax-exempt notes
contain covenants which require minimum rentals to individuals based upon income
levels, as specified.
7. Other Notes Payable
A summary of other notes payable at June 30, 1996 and 1995 and December 31, 1995
is as follows (in thousands of dollars):
June 30, June 30, December 31,
1996 1995 1995
--------- -------- -----------
Commercial Banks
Borrowings outstanding under revolving
credit facilities (a) (1) $ 100,800 $ --- $ 18,400
Insurance Companies--Senior Unsecured Notes
7.98% due March, 1997-2003 (b) 52,000 52,000 52,000
9.57% due July, 1996 (2) 35,000 35,000 35,000
7.89% due March, 1996 --- 10,000 10,000
8.72% due November, 1996-1998 (c) 6,000 8,000 6,000
Other (d) 3,318 3,724 3,458
--------- -------- ---------
197,118 108,724 124,858
Senior Unsecured Notes - Other
7 1/4% Notes due April 1, 1999 75,000 75,000 75,000
8 1/2% Debentures due
September 15, 2024 (e) 150,000 150,000 150,000
--------- ------- ---------
$ 422,118 $333,724 $ 349,858
========= ======== =========
(1) Of this amount $93.1 million was repaid on July 12, 1996
using proceeds from a $125 million medium-term note issue.
See Note 8.
(2) This loan was repaid at maturity on July 15, 1996.
(a) The weighted average balance outstanding for the quarters
ended June 30, 1996 and 1995 was $83.2 million and $8.2
million, respectively. This debt carried a weighted
average daily interest rate during the second quarter of
1996 and 1995 of 6.14% and 6.92%, respectively. The
weighted average balance outstanding for the six months
ended June 30, 1996 and 1995 was $54.3 million and $9.1
million, respectively. The weighted average daily interest
rate for the six months ended June 30, 1996 and 1995 was
6.14% and 6.84%, respectively. This debt carried a
weighted average daily interest rate at June 30, 1996 of
6.18%.
(b) Payable in seven equal annual principal installments of
$7.4 million.
8
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(c) Payable in equal annual principal installments of $2
million.
(d) Includes $2.9 million and $3.2 million at June 30, 1996
and 1995, respectively, of deferred gain from an interest
rate hedge transaction.
(e) Debentures include an investor put feature which grants
the debenture-holder a one time option to redeem
debentures in September 2004.
The underlying loan agreements contain certain covenants which, among other
things, require the Company to maintain minimum consolidated tangible net worth,
as defined, and maintain certain financial ratios.
At June 30, 1996, the Company had $70 million of unsecured revolving credit
facilities with four commercial banks. These credit agreements currently expire
in June, 1997 and 1998, but are renewable annually by mutual agreement between
the Company and each bank. Interest on borrowings outstanding under these
agreements are at varying rates depending on the level of the Company's debt and
the term of the borrowing. Generally, loans for 30 days or more are priced at
LIBOR plus 5/8% to 1%. Loans of shorter duration are priced at spreads of 5/8%
to 1 1/8% over the applicable base rate. The Company is obligated to pay a fee
equal to 1/4% per annum on the average daily amount of the unused portion of the
commitment during the revolving loan period. None of these agreements have
compensating balance requirements. The Company had $70.0 million outstanding
under these revolving credit facilities at June 30, 1996.
At June 30, 1996, the Company had unsecured lines of credit with three
commercial banks totaling $33.5 million. In addition, the Company had a interim
bank line of credit with one of these banks in the amount of $50 million. At
June 30, 1996, the Company had $30.8 million outstanding under these lines. Each
line is subject to periodic bank review and requires the Company to maintain a
depository relationship with the respective bank, however, there are no formal
compensating balance arrangements. Borrowings bear interest generally at
negotiated rates in line with borrowings under the Company's revolving credit
facilities.
8. Subsequent Events
On July 1, 1996, the Company executed a contract to acquire a portfolio of 18
apartment communities containing 4,508 apartment homes, for approximately $182.3
million, excluding closing costs. The properties are located in North Carolina
(13), South Carolina (3), Virginia (1) and Georgia (1). Closing is scheduled to
occur prior to August 20, 1996.
Subsequent to June 30, 1996, the Company sold two properties: (i) a 203,000
square foot shopping center located in Richmond, Virginia for $2.4 million and
(ii) a 76 unit apartment community located in Hopewell, Virginia for $1.8
million which was encumbered by $1.2 million of tax-exempt bonds. For financial
reporting purposes the Company will recognize an approximate $800,000 aggregate
gain on these sales. These sales were also structured to qualify as a
like-kind-exchange under Section 1031 of the Internal Revenue Code, so the
related capital gains will be deferred for federal income tax purposes.
During the fourth quarter of 1995, the Company filed a shelf registration
statement covering up to an aggregate of $462.5 million of various debt and
equity securities. During 1996, the Company implemented a $200 million
medium-term note program under this shelf registration statement. On July 9,
1996, the Company issued $125 million of ten year notes under its medium-term
note program at an interest rate of 7.95%. Net proceeds of approximately $124.2
million were used to (i) curtail existing bank debt in the amount of $93.1
million, and (ii) repay a 9.57%, $35 million senior note that matured on July
15, 1996. Including the $35 million note, the Company has aggregate debt
maturities of $37 million during the remainder of 1996 with a weighted average
interest rate of 9.52%. In July, 1995, the Company executed a forward starting
interest rate swap with a notional amount of $50 million which had the effect of
fixing the interest rate on a 10-year Treasury starting July 15, 1996 at 6.544%.
This transactions was intended to lock-in an approximate 170 basis point savings
on $47 million of unsecured debt that was to be refinanced in 1996, including
the $35 million loan which matured on July 15, 1996. In anticipation of
implementing the medium-term note program, the Company entered into a second
interest rate hedge agreement for $75 million (notional amount) on June 28, 1996
which allowed the Company to lock-in a 10 year Treasury rate of 6.75%. The two
interest rate hedge agreements were terminated simultaneously with the $125
million medium-term note issuance and the Company received $3.0 million in cash.
This had the economic effect of reducing the interest rate to approximately
7.61% over the ten year term.
9
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this report.
The Company operates primarily in 17 major markets dispersed throughout a nine
state area extending from Delaware to Florida and Tennessee and Alabama. At June
30, 1996, the Company did not own more than 10% of its apartment homes in any
one market. The Company believes that this diversity in its apartment portfolio
reduces the risk of volatility in its aggregate occupancy and rental rates. The
following table summarizes the Company's major apartment market information
(includes real estate held for investment and real estate held for disposition):
Six Months Ended Three Months Ended
As of June 30, 1996 June 30, 1996 June 30, 1996
------------------------------------------------ -------------------------- ---------------------------
Number of Number of Percentage of Average Average
Apartment Apartment Apartment Economic Monthly Economic Monthly
Market Communities Homes Homes Occupancy Rental Rates* Occupancy Rental Rates*
- ------------------------------------------------------------------ -------------------------- ---------------------------
Richmond, VA 14 3,773 10% 95.1% $511 94.6% $ 514
Columbia, SC 11 3,218 9% 92.2% 478 91.4% 480
Orlando, FL 9 2,453 7% 90.7% 544 90.3% 545
Raleigh, NC 8 2,440 7% 98.4% 568 98.4% 572
Tampa, FL 8 2,351 6% 92.1% 541 93.5% 543
Charlotte, NC 12 2,334 6% 95.3% 532 95.2% 537
Atlanta, GA 8 2,234 6% 94.8% 555 95.2% 558
Baltimore, MD 8 1,746 5% 89.6% 632 90.3% 634
Eastern NC 8 1,730 5% 96.1% 507 96.2% 511
Nashville, TN 6 1,520 4% 94.3% 553 94.9% 556
Hampton Roads, VA 6 1,436 4% 91.4% 522 91.8% 525
Greenville, SC 7 1,330 4% 92.5% 482 92.5% 486
Washington, DC 6 1,483 4% 89.0% 663 89.7% 664
Jacksonville, FL 3 1,157 3% 93.1% 586 93.0% 593
Ft. Lauderdale, FL 4 960 3% 91.6% 773 90.5% 774
Memphis, TN 4 935 3% 93.5% 483 95.3% 487
Greensboro, NC 3 691 2% 92.6% 527 93.1% 528
Other 23 4,570 12% 92.9% 539 92.9% 541
--- ------ ---- ------- ---- ----- ----
Total 148 36,361 100% 93.2% $545 93.3% $ 548
=== ====== ==== ======= ==== ===== ======
* Average Monthly Rental Rates for the Quarter and Six Months Ended June 30,
1996, represents potential rent collections (gross potential rents less
market adjustments), which approximates net effective rents.
Financial Condition
As a qualified REIT, the Company distributes a substantial portion of its cash
flow to its shareholders in the form of quarterly distributions. The Company
seeks to retain sufficient cash to cover normal operating needs, including
routine replacements and to help fund additional acquisitions. For the six
months ended June 30, 1996, the Company's cash flow from operating activities
exceeded cash distributions paid to common shareholders by approximately $20.8
million. The Company utilizes a variety of primarily external financing sources
to fund portfolio growth, major capital improvement programs and balloon debt
payments. The Company has frequently utilized its bank lines of credit to
temporarily finance these expenditures and has subsequently replaced this
short-term bank debt with longer term debt or equity. The Company has, from time
to time, used derivative instruments to synthetically alter on-balance sheet
liabilities or to hedge anticipated financing transactions. Derivative contracts
did not have a material impact on results of operations during the periods ended
June 30, 1996 or 1995.
10
At June 30, 1996, the Company's outstanding indebtedness totaled $617.1 million
with a weighted average interest rate of 7.52%. This amount includes (i)
conventional mortgage notes payable aggregating $71.4 million with a weighted
average interest rate of 8.26%, (ii) tax-exempt bond indebtedness aggregating
$123.6 million with a weighted average interest rate of 6.88%, (iii) senior
unsecured notes payable aggregating $321.3 million with a weighted average
interest rate of 8.07% and (iv) bank line borrowings aggregating $100.8 million
with a weighted average interest rate of 6.18%. At June 30, 1996, total senior
debt equaled 40% of the Company's total market capitalization.
At the beginning of 1996, the Company had approximately $2.9 million of cash and
cash equivalents and $85.1 million of available and unused bank lines of credit.
For the six months ended June 30, 1996, the Company's cash flow from operating
activities increased approximately $10.2 million over the same period last year,
primarily as a result of the significant expansion of the Company's portfolio of
apartment communities as discussed below and under "Results of Operations".
During the six months ended June 30, 1996, net cash used for investing
activities was approximately $89.7 million which resulted primarily from the
Company's acquisition of eight apartment communities containing 2,237 apartment
homes for a total cost, net of liabilities assumed of $80.7 million, which
includes $15.7 million of mortgage notes payable with a weighted average
interest rate of 8.5% assumed in these transactions. The Company also funded
$24.9 million of capital improvements to its properties during this same period.
The Company received net cash proceeds of $15.8 million from the sales of real
estate held for disposition during the first six months of 1996 which included
one apartment community and two shopping centers, the proceeds of which were
primarily used to fund the acquisitions of apartment communities.
Net cash provided by financing activities during the six months ended June 30,
1996, was approximately $47.3 million reflecting (i) net proceeds from the
issuance of common stock through the exercise of stock options and amounts
received from the dividend reinvestment and stock purchase plan in the amount of
$4.9 million, (ii) net proceeds from the issuance of notes payable of
approximately $111,000, (iii) net short-term bank borrowings of $82.4 million,
and (iv) mortgage financing proceeds released from construction funds in the
amount of $2.7 million. These cash inflows were partially offset by (i) $31.1
million of cash distributions paid to common and preferred shareholders funded
with cash flows from operating activities, (ii) scheduled mortgage principal
payments of $1.2 million, (iii) payments on notes and non-scheduled mortgage
principal payments of $10.1 million, and (iv) payment of financing costs
aggregating $314,000.
The Company considers its cash provided by operating activities to be adequate
to meet operating requirements and payments of distributions. The Company hopes
to acquire an additional 6,000 apartment homes during the remainder of 1996 at
an estimated cost of $40,000 per apartment home which includes the acquisition
of a portfolio of 18 properties containing 4,508 apartment homes that is
scheduled to be acquired on August 15, 1996 for an aggregate purchase price of
approximately $182.3 million.
Depending upon the volume and timing of acquisition activity, the Company
anticipates raising additional debt and equity capital during the next twelve
months.
During the fourth quarter of 1995, the Company filed a shelf registration
statement covering up to an aggregate of $462.5 million of various debt and
equity securities. During 1996, the Company implemented a $200 million
medium-term note program under this shelf registration statement. On July 9,
1996, the Company issued $125 million of ten year notes under its medium-term
note program at an interest rate of 7.95%. Net proceeds of approximately $124.2
million were used to (i) curtail existing bank debt in the amount of $93.1
million, and (ii) repay a 9.57%, $35 million senior note that matured on July
15, 1996. Including the $35 million note, the Company has aggregate debt
maturities of $37 million during the remainder of 1996 with a weighted average
interest rate of 9.52%. In July, 1995, the Company executed a forward starting
interest rate swap with a notional amount of $50 million which had the effect of
fixing the interest rate on a 10-year Treasury starting July 15, 1996 at 6.544%.
This transactions was intended to lock-in an approximate 170 basis point savings
on $47 million of
11
unsecured debt that was to be refinanced in 1996, including the $35 million loan
which matured on July 15, 1996. In anticipation of implementing the medium-term
note program, the Company entered into a second interest rate hedge agreement
for $75 million (notional amount) on June 28, 1996 which allowed the Company to
lock-in a 10 year Treasury rate of 6.75%. The two interest rate hedge agreements
were terminated simultaneously with the $125 million medium-term note issuance
and the Company received $3.0 million in cash. This had the economic effect of
reducing the interest rate to approximately 7.61% over the ten year term.
The Company's liquidity and capital resources are believed to be more than
adequate to meet its cash requirements for the next several years. The Company
expects to meet its long-term liquidity requirements, such as balloon debt
maturities, property acquisitions and significant capital improvements primarily
through the public and private sale of capital stock and the issuance of medium
and long-term unsecured notes payable. The Company may also raise capital
through (i) the assumption of mortgage indebtedness, (ii) sales of properties,
(iii) distributions reinvested and cash invested through the Company's Dividend
Reinvestment and Stock Purchase Plan, (iv) retained cash flow and (v) the
issuance of Operating Partnership Units.
Although no formal plans which would commit the Company for divestiture have
been made, the Company hopes to substantially liquidate it commercial properties
over time as suitable opportunities arise. At the end of October, 1995, the
Company executed a letter of intent to sell five of its seven shopping centers
in a bulk sale at an aggregate purchase price of $28.4 million. During the first
quarter of 1996, the contract for the five shopping centers was terminated.
Since January 1, 1996, two of the five shopping centers included in the
terminated bulk sale, were sold in separate and unrelated transactions at an
aggregate sales price of $10.2 million (one sold in the second quarter for $7.8
million and one sold in the third quarter for $2.4 million) and one is currently
under contract for sale. In addition, the Company sold a Myrtle Beach, South
Carolina shopping center for $5.9 million in February, 1996. The three remaining
shopping centers in the Company's portfolio are currently not under letter of
intent or contract for sale. At June 30, 1996, the Company had one apartment
community, two shopping centers, one industrial park and two parcels of
undeveloped land under contract or letter of intent to sell. These sales are
expected to occur during the remainder of 1996 and are expected to generate
approximately $15 million in cash proceeds. One of the properties is encumbered
with approximately $1.2 million of secured debt. For income tax purposes, it is
anticipated that the transactions will be structured to qualify as tax deferred
exchanges pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended (the "Code") so that a substantial portion of the related capital gains
will be deferred. The proceeds from these sales are expected to be reinvested in
acquisitions of apartment communities. There are no assurances that any of these
sales transactions will be consummated. Included in the consolidated balance
sheet as "Real estate held for disposition" are 16 properties in the aggregate
amount of $48.7 million, net of accumulated depreciation and impairment loss
valuation allowance. Real estate held for disposition contributed net rental
income (total rental income, less rental expenses, less depreciation expense) of
approximately $1.7 million and $3.4 million for the quarter and six months ended
June 30, 1996, respectively. The 16 properties consist of the following: (i)
seven apartment communities aggregating $22.5 million, (ii) five shopping
centers aggregating $21.6 million, (iii) four office/ industrial properties in
the amount of $2.7 million and (iv) two parcels of land aggregating $1.9
million.
At June 30, 1996, the Company reclassified one shopping center and three
office/industrial properties, from assets held for investment to assets held for
disposition in the Consolidated Balance Sheet and recorded an aggregate $290,000
impairment loss relating to the shopping center and one office building,
representing the excess of the carrying values of the assets over the estimated
fair values less estimated costs to sell.
12
Funds from operations
Funds from operations ("FFO") is defined as income before gains (losses) on
sales investments, minority interest of unitholders in Operating Partnership and
extraordinary items (computed in accordance with generally accepted accounting
principles) plus real estate depreciation, less preferred dividends and after
adjustment for significant non-recurring items, if any. The Company computes FFO
in accordance with the recommendations set forth by the National Association of
Real Estate Investment Trusts ("NAREIT"). The Company 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 the Company's operating performance and
liquidity. FFO 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.
For the three months ended June 30, 1996, FFO increased 15.4% to $17.0 million,
compared with $14.7 million for the second quarter of 1995. For the six months
ended June 30, 1996, FFO increased 12.9% to $33.7 million, compared to $29.8
million for the same period last year. The increase in FFO for both periods
presented was principally due to the increased net rental income from the
Company's 7,379 non-mature apartment homes in 31 apartment communities (those
acquired subsequent to December 31, 1994).
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) (In thousands)
(Unaudited) (Unaudited)
------------------------------ ---------------------------------
1996 1995 % Change 1996 1995 % Change
------------------------------ ---------------------------------
Calculation of Funds from Operations:
Income before gains (losses) on sales of
investments and minority interest of
unitholders in Operating Partnership $ 8,296 $ 6,993 18.6% $ 16,890 $ 13,080 29.1%
Adjustments:
Real estate depreciation 10,805 9,493 13.8% 21,365 18,549 15.2%
Dividends to preferred
shareholders (2,428) (1,781) 36.3% (4,856) (1,781) 173%
Impairment loss on real
estate held for
disposition 290 -- -- 290 -- --
------ ------- ----- -------- -------- -----
Funds from Operations $16,963 $14,705 15.4% $ 33,689 $ 29,848 12.9%
====== ======= ===== ======== ======== =====
Results of Operations
The Company's net income is primarily generated from the operations of its
apartment communities. For purposes of evaluating the Company's comparative
operating performance, the Company categorizes its apartment communities into
two categories (i) mature - those communities acquired prior to January 1, 1995
and (ii) non- mature - those communities acquired subsequent to December 31,
1994 plus three apartment communities sold during this same period.
For the quarter and six months ended June 30, 1996, the Company reported
significant increases over the same period last year in rental income and income
before gains (losses) on sales of investments and minority interest of
unitholders in Operating Partnership and FFO. Since the beginning of 1995, the
Company acquired a total of 7,379 apartment homes in 31 communities representing
a 25.5% expansion in the number of apartment homes owned during that period.
These apartment homes (the "non-mature" communities) provided a substantial
portion of the aggregate reported increases noted above. Net income decreased
$3.4 million for the quarter ended June 30, 1996 and was flat for the six month
period ended June 30, 1996 when compared to the same periods last year
13
primarily as a result of the June 30, 1995 sale of four Richmond, Virginia
shopping centers at an aggregate $4.6 million gain.
All Communities
The operating performance for all of the Company's 148 apartment communities
containing 36,361 apartment homes and the 122 apartment communities containing
31,507 apartment homes for the three months and six months ended June 30, 1996
and 1995, respectively, is summarized as follows:
Three Months Ended June 30 Six Months Ended June 30,
(In thousands) (In thousands)
(Unaudited) (Unaudited)
---------------------------------- -------------------------------
1996 1995 %Change 1996 1995 % Change
---------------------------------- -------------------------------
Rental income $ 55,826 $ 45,578 22.5% $109,106 $ 88,904 22.7%
Rental expenses 24,727 19,346 27.8% 47,949 37,537 27.7%
Real estate depreciation 10,805 8,905 21.3% 21,271 17,366 22.5%
-------- -------- ----- -------- -------- -----
Net rental income (1) $ 20,294 $ 17,327 17.1% $ 39,886 $ 34,001 17.3%
======== ======== ===== ======== ======== =====
Weighted average number of
apartment homes 35,423 30,765 15.1% 34,942 30,095 16.1%
Economic occupancy (2) 93.3% 93.9% (0.6%) 93.2% 94.2% (1.0%)
Average monthly rental rates $ 545 $ 498 9.4% $ 548 $ 485 12.9%
(1) Net rental income for an apartment community is defined as total rental
income, less rental expenses, less depreciation expense.
(2) Economic occupancy is defined as rental income (gross potential rent less
vacancy loss, management units and credit loss) divided by potential collections
(gross potential rent less management units) for the period, expressed as a
percentage.
Due to the acquisition of 7,379 apartment homes since January 1, 1995, the
weighted average number of apartment homes has increased 15.1% and 16.1% for the
three and six months period ended June 30, 1996, respectively. For the six month
period, the weighted average number of apartment homes increased to 34,942 from
30,095 apartment homes compared to the same period last year and to 35,423 from
30,765 for the quarter ended June 30, 1996. As a result of the increase in the
number of apartment homes acquired since January 1, 1995, the Company has
experienced significant increases in rental income, rental expenses and real
estate depreciation for the three and six month periods ended June 30, 1996.
The non-mature apartment homes provided the majority of the increases in rental
income, rental expenses and depreciation expense for the three and six month
periods ended June 30, 1996, however, the higher average rents at the Company's
mature communities also contributed to the increases in rental income. The
non-mature apartment homes provided all of the increase in the aggregate net
rental income experienced by the Company during the three and six month period
ended June 30, 1996. For the 36,361 apartment homes in the 148 apartment
communities owned at June 30, 1996, economic occupancy averaged 93.2%, the
operating expense ratio (ratio of rental expenses to rental income) averaged
43.9% and average monthly rents were $545 for the six months ended June 30,
1996. For the six months ended June 30, 1995, the 31,507 apartment homes then
owned had economic occupancy of 94.2%, the operating expense ratio averaged
42.2% and the average monthly rents were $498.
Overall, for the three and six months ended June 30, 1996, rent growth was
higher than the same period last year, however, this increase was offset by
lower occupancy and higher expenses. The increase in operating expenses for the
six month period was in part attributable to the severe winter weather
experienced during the first quarter of 1996 which resulted in an increase in
gas, snow removal and repair labor expenses. In addition, during the second
14
quarter of 1996, the Company's mature apartments experienced increases in most
of the operating expense categories compared to the second quarter last year.
Exterior painting and other non-recurring exterior improvements, such as
striping and sealcoating parking lots, accounted for a significant amount of the
increase. The major markets in which the Company operates have experienced good
job growth and household formation, which has led to strong rent growth.
Mature Communities
The operating performance for the Company's 117 mature apartment communities
containing 28,982 apartment homes for the three months and six months ended June
30, 1996 and 1995 is summarized as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) (In thousands)
(Unaudited) (Unaudited)
------------------------------- ---------------------------------
1996 1995 % Change 1996 1995 % Change
------------------------------- ---------------------------------
Rental income $ 44,804 $ 42,788 4.7% $ 88,956 $ 85,410 4.2%
Rental expenses 20,255 18,316 10.6% 39,720 36,195 9.7%
Real estate depreciation 8,846 8,406 5.2% 17,719 16,775 5.6%
-------- -------- ------ --------------------- -----
Net rental income $ 15,703 $ 16,066 (2.3%) $ 31,517 $ 32,440 (2.8%)
Economic occupancy 93.2% 93.9% (0.7%) 93.1% 94.2% (1.1%)
Average monthly rental
rates $ 536 $ 511 4.8% $ 533 $ 509 4.6%
For the six months ended June 30, 1996, the Company's mature communities
provided approximately 82% of the Company's rental income and 79% of its net
rental income. Compared to the same six month period last year, total rental
income from these apartment homes grew 4.2%, or $3.5 million, reflecting an
increase in average monthly rents of 4.6% to $533 per month and an increase in
other income of 41% as a result of the generally strong rental markets. The
Company expects to maintain rent growth in the 4 1/2% range through the
remainder of the year. For the six month period ended June 30, 1996, these
rental rate increases were offset by a decrease in economic occupancy of 1.1% to
93.1% which resulted from a decrease in physical occupancy of .8% and an
increase in credit loss of .3%. The Company expects to be able to sustain
economic occupancy of approximately 94% through the remainder of the year. These
same factors led to similar increases in rental income for the quarter ended
June 30, 1996, as total rental income from these apartment homes grew 4.7%, or
$2.0 million, reflecting an increase in average monthly rents of 4.8% to $536
per month and an increase in other income of 44%, over the same period last
year.
For the six months ended June 30, 1996 rental expenses at these communities
increased 9.7%, or $3.5 million, resulting in an increase in the operating
expense ratio (the ratio of rental expenses to rental income) of 2.3% to 44.7%.
The increase in rental expenses is partly attributable to the severe winter of
1996 compared to the relatively mild winter of 1995. Of the $3.5 million
increase, approximately $450,000 was weather related which included increases in
gas, snow removal and repair labor expenses. During the second quarter of 1996,
the Company's mature apartments experienced increases in most of its operating
expense categories compared to the same period last year. Exterior painting and
other non-recurring exterior improvements, such as striping and sealcoating
parking lots, accounted for a significant amount of the increase. In 1996, the
Company began the process of upgrading certain of its older apartment
communities. The upgrades relate primarily to the modernization of the kitchens
and bathrooms with new appliances, cabinets, light fixtures, ceiling fans,
shelving, countertops, doors and floor coverings. Although much of these costs
have been capitalized, a portion has been expensed. The Company expects rental
expenses to moderate in the two remaining quarters of 1996. However, the Company
expects continuing pressure on certain expenses such as real estate taxes,
insurance and water/sewer rates. Turnover (measured by move-outs) for the first
six months of 1996, was 31.2% at the mature communities which
15
approximates turnover for the six month period last year. The combination of
higher rents which were offset by a decrease in occupancy and higher rental
expenses led to a decrease in net rental income from mature communities of
approximately $923,000 or 2.8% for the six month period ended June 30, 1996.
Excluding the effects of the winter related expenses incurred during the first
quarter, these same factors resulted in similar increases in operating expenses
for the quarter ended June 30, 1996, as rental expenses increased 10.6% which
resulted in an increase in the operating expense ratio of 2.4% to 45.2%.
Non-Mature Communities
The operating performance for the three and six months ended June 30, 1996 and
1995 for the Company's non-mature apartment communities which includes (i) the
7,379 apartment homes acquired since January 1, 1995 and (ii) the three
apartment communities containing 302 apartment homes sold subsequent to December
31, 1994, is summarized as follows:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) (In thousands)
(Unaudited) (Unaudited)
------------------------------- -----------------------------
1996 1995 $ Change 1996 1995 $ Change
------------------------------- -----------------------------
Rental income $ 11,022 $ 2,791 $ 8,231 $ 20,150 $ 3,495 $ 16,655
Rental expenses 4,472 1,030 3,442 8,230 1,342 6,888
Real estate depreciation 1,958 499 1,459 3,552 591 2,961
-------- -------- ------- -------- ------- --------
Net rental income $ 4,592 $ 1,262 $ 3,330 $ 8,368 $ 1,562 $ 6,806
For the six months ended June 30, 1996, the Company's non-mature communities
provided approximately 18% of the Company's rental income and 21% of its net
rental income. Rental income, rental expenses and real estate depreciation
increased from 1995 to 1996 directly as a result of the increase in the number
of apartment homes acquired during 1995 and the first six months of 1996. For
the 7,379 apartments in the 31 non-mature communities acquired since January 1,
1995, average economic occupancy was 93.4% and the operating expense ratio was
40.8% during the first six months of 1996. These communities provided increases
of $16.7 million, $6.9 million and $6.8 million, respectively, in rental income,
rental expenses , and net rental income for the six months ended June 30, 1996.
For the quarter ended June 30, 1996, these communities provided increases of
$8.2 million, $3.4 million and $3.3 million, respectively in rental income,
rental expenses , and net rental income.
Commercial
Rental income, rental expenses and net rental income from commercial properties
decreased $1.9 million, $354,000 and $508,000, respectively during the first six
months of 1996 compared to the same period last year. Rental income, rental
expenses and net rental income from commercial properties decreased $1.1
million, $194,000 and $293,000, respectively during the quarter ended June 30,
1996 compared to the same period last year. The decreases for both periods are
directly attributable to the sale of nine shopping centers since the beginning
of 1995.
Other Income and Expenses
Interest and other income increased $84,000 and $260,000 for the three and six
month periods ended June 30, 1996, primarily due to dividend income from the
Company's investment in securities available-for-sale in First Washington Realty
Trust, Inc. 9.75% Series A Cumulative Participating Preferred Stock which was
not held by the Company during the first six months of 1995. However, this
amount was somewhat offset by interest income earned on the Company's short-term
investments during the second quarter of 1995 relating to funds received from
the April, 1995 issuance of preferred stock which was not fully invested in new
apartment acquisitions until July, 1995.
16
Depreciation of real estate owned increased $1.3 million and $2.8 million for
the three and six month periods ended June 30, 1996 over the same periods last
year with substantially all of the increase attributable to the portfolio
expansion that occurred during 1995. However, the increase was somewhat offset
by the sales of nine shopping centers since January 1, 1995 and the transfer of
properties from real estate held for investment to real estate held for
disposition.
Interest expense increased $1.1 million and $1.3 million for the three and six
month periods ended June 30, 1996 over the same period last year. The weighted
average amount of debt employed for the six months ended June 30, 1996 was
higher than it was in 1995 ($563.3 million in 1996 versus $510.7 million in
1995). The weighted average interest rate on this debt was slightly lower than
it was during the same period last year, decreasing from 7.82% in 1995 to 7.61%
in 1996. For the quarter ended June 30, 1996, the weighted average amount of
debt outstanding was higher than the same period last year ($600.1 million in
1996 versus $510.6 million in 1995). The weighted average interest rate
on this debt was slightly lower than it was during the same period last year,
decreasing from 7.82% in 1995 to 7.56% in 1996.
General and administrative expenses increased by $151,000 or 5.4% for the six
months ended June 30, 1996 over the same period last year. In 1996, the Company
incurred increases in most of its general and administrative expense categories
with the largest increases in payroll and payroll related expenses and
shareholder relation expense which are directly related to the higher
administrative costs associated with increasing the size of the Company.
Although the Company experienced these same increases for the quarter ended June
30, 1996, total general and administrative expenses were flat compared to the
same period last year when approximately $204,000 of expenses associated with an
unsuccessful business combination with another apartment company was
written-off.
Gains (losses) on sales of investments For the second quarter of 1996, the
Company recognized a $129,000 financial reporting loss on the sale of a shopping
center located in Myrtle Beach, South Carolina and one apartment community
located in Newark, Delaware. In addition, a $965,000 financial reporting gain
was recognized on the February, 1996 sale of a Myrtle Beach, South Carolina
shopping center. The results of operations for the three and six month periods
ended June 30, 1995 included a $4.6 million gain recognized on the sale of four
of the Company's shopping centers to another REIT on June 30, 1995.
Other depreciation and amortization increased $6,000 and $17,000 for the three
and six month periods ended June 30, 1996, primarily due to the increasing size
of the Company.
Income before gains (losses) on the sales of investments and minority interest
of unitholders in Operating Partnership increased $1.3 million and $3.8 million
for the three and six month periods ended June 30, 1996, primarily as a result
of the expansion of the Company's apartment portfolio during the past 18 months.
Net income decreased $3.4 million and increased $6,000 for the three and six
month periods ended June 30, 1996 compared to the same period last year
primarily as a result of the $4.6 million gain on the sale of investments
recorded in the second quarter of 1995. Net income per share decreased 26% for
the first six months of 1996 to $.23 per share from $.31 per share and decreased
47% for the quarterly period to $.10 per share from $.19 per share for this same
reason.
Dividends to preferred shareholders totaled $2.4 million and $4.9 million for
the three and six month periods ended June 30, 1996, compared to $1.8 million
for the same periods last year. The Company issued 4.2 million shares of 9 1/4%
Cumulative Redeemable Preferred Stock on April 24, 1995, therefore, the
preferred stock was outstanding for only a portion of the periods presented last
year.
17
Inflation
The Company believes that the direct effects of inflation on the Company's
operations have been inconsequential.
18
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the accompanying index to exhibits are
filed as part of this quarterly report.
(b) A Form 8-K dated April 12, 1996 as filed with the Securities
and Exchange Commission on April 12, 1996. The filing updated
the reported the pro forma consolidated results of operations
to reflect a full twelve months for the period ended December
31, 1995.
19
EXHIBIT INDEX
Item 6 (a)
.
The exhibits listed below are filed as part of this quarterly 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
3(a) Restated Articles of Incorporation Exhibit 4(i)(c) to the Company's Form S-3 Registration
Statement (Registration No. 33-64275) filed with the
Commission on November 15, 1995.
3(b)(i) By-Laws Exhibit 4(c) to the Company's Form S-3 Registration
Statement (Registration No. 33-44743) filed with the
Commission on December 31, 1991.
3(b)(ii) Amendment of By-Laws Exhibit 3(b)(ii) to the Company's Annual Report
On Form 10-K for the year ended December 31, 1995.
4(i)(a) Specimen Common Stock Exhibit 4(i) to the Company's Annual Report
Certificate on Form 10-K for the year ended December
31, 1993.
4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A
of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995.
Redeemable Preferred Stock
4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(i) to the Company's Form 8-A
November 7, 1991, between the Registration Statement dated April 19, 1990.
Company and Aid Association for
Lutherans
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Company's Form 8-A
as of February 15, 1993, between Registration Statement dated April 19, 1990.
the Company and CIGNA Property
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) Credit Agreement dated as of Exhibit 6 (c)(6) to the Company's
December 15, 1994 between the Form 8-A Registration Statement
Company and First Union National Bank dated April 19, 1990.
of Virginia
20
4(ii)(g)(1) Indenture dated as of April 1, 1994, Exhibit 4(ii)(f)(1) to the Company's
between the Company and First Union Quarterly Report on Form 10-Q for
National Bank of Virginia, N.A., the quarter ended March 31, 1994.
as Trustee.
4(ii)(g)(2) Resolution of the Board of Directors Exhibit 4(ii)(f)(2) to the Company's
of the Company establishing terms of Quarterly Report on Form 10-Q for
7 1/4% Notes due April 1, 1999 the quarter ended March 31, 1994.
4(ii)(g)(3) Form of 7 1/4% Notes due April 1, Exhibit 4(ii)(f)(3) to the Company's
1999 Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.
4(ii)(g)(4) Resolution of the Board of Exhibit 4 (ii)(f)(4) to the Company's
the Company establishing terms of Quarterly Report on Form 10-Q for
the 8 1/2% Debentures due quarter ended September 30, 1994.
September 15, 2024
4(ii)(g)(5) Form of 8 1/2% Debentures Exhibit 4 (ii)(f)(5) to the Company's
due September 15, 2024 Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994.
4(ii)(h)(1) Indenture dated November 1, Filed herewith.
1995, between the Company
And First Union National Bank
of Virginia, N.A., as Trustee
4(ii)(h)(2) Resolution of the Board of the Filed herewith.
Company establishing the terms
of the Medium-Term Notes
4(ii)(h)(3) Form of Note for Medium-Term Filed herewith.
Notes due nine months or more
from the date of issue
The Company agrees to furnish to the Commission on request a copy of
any instrument with respect to long-term debt of the Company or its subsidiaries
the total amount of securities authorized under which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
10(i) Employment Agreement between Exhibit 10(v)(i) to the Company's Annual Report on
the Company and John P. McCann Form 10-K for the year ended December 31, 1982.
dated October 29, 1982
10(ii) Employment Agreement between Exhibit 10(v)(ii) to the Comapny's Annual Report on
the Company and James Dolphin Form 10-K for the year ended December 31, 1982.
dated October 29, 1982.
10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual
The Company and Barry M. Kornblau, Report on Form 10-K for the year December
dated February 1, 1991. 31, 1990.
21
10(iv) 1985 Stock Option Plan, Exhibit A to the Company's definitive proxy
as amended statement dated March 28, 1996.
10(v) 1991 Stock Purchase and Loan Exhibit 10(v) to the Company's Annual Report on Form
Plan 10-K for the year ended December 31, 1991.
10(vi) Amended and Restated Agreement Exhibit 10(vi) to the Company's Annual Report on
of Limited Partnership of Form 10-K for the year ended December 31, 1995.
United Dominion Realty, L.P.
Dated as of December 31, 1995
10(vii) Distribution Agreement dated as of Filed herewith.
July 8, 1996, between the Company
And Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith
Incorporated, Alex Brown & Sons
Incorporated, Goldman Sachs & Co.,
J. P. Morgan Securities, Inc. and
NationsBanc Capital Markets, Inc.
relating to Medium-Term Notes
due nine months or more from the
date of issue.
12 Computation of Ratio of Earnings Filed herewith.
to Fixed Charges
21 The Company has the following subsidiaries, all of which are wholly owned:
The Commons of Columbia, a Virginia corporation
UDRT of North Carolina, L.L.C., a North Carolina limited
liability company
UDRT of Alabama, Inc., an Alabama corporation
UDR of Marble Hill, L.L.C., a Virginia limited
liability company
United Dominion Realty, L.P., a Virginia
limited partnership
United Dominion Residential, Inc., a
Virginia corporation
UDRT of Virginia, Inc., a Virginia
corporation
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Quarterly Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Trust, Inc.
(registrant)
Date: August 14, 1996 /s/ James Dolphin
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James Dolphin
Senior Vice President,
and Chief Financial Officer
Date: August 14, 1996 /s/ Jerry A. Davis
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Jerry A. Davis
Vice President, Controller-Corporate
Accounting and Chief Accounting Officer
23