UNITED STATES
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, 1998
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, Richmond, Virginia 23219-3802
(Address of principal executive offices - zip code)
(804) 780-2691
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
- - ------------------- -------------------------------------
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
Indicate by check mark if the 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 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 2,
1999 was approximately $1 billion. * As of March 2, 1999 there were 104,060,609
shares of common stock, $1 par value, outstanding.
Part III incorporates certain information be reference from the Proxy Statement
to be filed with respect to the Annual Meeting of Shareholders on May 11, 1999.
*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
----
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 17
Stockholder Matters
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial 21
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 37
Item 9. Changes in and Disagreements with Accountants on 37
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant 38
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and 38
Management
Item 13. Certain Relationships and Related Transactions 38
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and 39
Reports on Form 8-K
2
Part I
Item 1. BUSINESS
The Company
General
United Dominion Realty Trust, Inc., a Virginia corporation, (collectively with
its subsidiaries, the Company), is a self-administered equity real estate
investment trust ("REIT"), that operates within one defined business segment as
a fully integrated owner, operator, renovator and developer of apartment
communities located nationwide.
Formed in 1972, the Company is headquartered in Richmond, Virginia with regional
offices in Richmond, Dallas and Atlanta. In addition, the Company has area
offices in the previously mentioned cities plus Orlando, Raleigh, Charlotte,
Tampa, Houston, San Francisco and Phoenix. The regional offices are responsible
for the operation, acquisition, construction and asset management activities in
their respective geographic regions. The Company had approximately 2,700
employees as of March 15, 1999.
The Company manages its properties directly, rather than through outside
property management firms. During 1998, the cost of internal property management
of the Company's communities totaled 3.5% of rental revenue. In determining its
cost of self management, the Company considers all direct and indirect costs
associated with the internal property management function.
The Company operates as a real estate investment trust under the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). 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 common shareholders. Because the Company qualifies as a REIT, it is
generally not subject to federal income taxes.
Apartments and Markets
At December 31, 1998, the Company's apartment portfolio included 326 communities
having a total of 86,893 completed apartment homes (See Item 2, Properties.).
The Company had eight communities and two additional phases to existing
communities with 1,946 apartment homes under development at December 31, 1998.
The apartment community is the Company's basic business unit and is staffed with
well trained property management personnel. The communities have a community
director, leasing assistants and a maintenance staff who oversee the daily
operation of the communities. Other than Dallas, Texas where 9.5% of the
Company's apartment homes are located, no other market has more than 5% of the
Company's apartment homes. The Company's apartment communities consist primarily
of upper middle to moderate income garden and townhouse communities which make
up the broadest segment of the apartment market. Most of the communities are
considered to be "B" grade quality although the Company does own class A
properties that compete at or near the top of their respective markets. "B"
grade communities are generally either of 1980's construction, located in good
neighborhoods or 1970's construction in good neighborhoods where the apartments
have been, or can be, significantly upgraded and repositioned. Management
believes that these well located apartments offer the Company a good combination
of current income and longer-term income growth.
Management's strategy is to be a national, highly efficient provider of quality
apartment homes with meaningful size in approximately 35 growth markets.
Geographic market diversification is important as it balances the portfolio
performance and makes the Company less vunerable to cyclical real estate cycles
and economies in a specific market. In a given year, the Company will have some
markets that are strong or recovering, some will be balanced and others may be
softening. However, with its market diversification, the Company's aggregate
results of operations are anticipated to be balanced year to year.
3
Physical occupancy at the Company's apartment communities averaged 91.9% for
December 1996 and bottomed out in January 1997 at 91.6%. Occupancy grew steadily
throughout 1997 as these markets began to recover, and by December 1997,
physical occupancy had increased to 92.6%, one full basis point above the
beginning of the year. In 1997, the increased supply led to softness in certain
of the Company's southeastern markets, however, supply and demand in the
Company's markets are generally in equilibrium. During 1998, physical occupancy
of 92.9% was the same as 1997. In 1998, the Company's best performing markets
were also its largest: Dallas, Houston and Orlando. The Company experienced
improvements in markets that were weak in 1997, including Baltimore, Washington,
Atlanta and Jacksonville. Greenville, Greensboro and Albuquerque continued to be
soft. During 1998, apartment supply and demand are in relative balance in most
of the Company's markets. Although there was an increase in apartment
construction in 1997 and 1998, a strong economy led to good absorption of the
new supply of apartments. Apartment supply and demand are in relative balance in
most of the Company's major markets. During 1999, the Company anticipates some
slowdown in economic growth and a slight increase in apartment completions which
is expected to result in a modest decline in physical occupancy and slightly
lower rent growth.
Although there is no known move toward rent control in any of the markets in
which the Company currently owns apartments, the Company's ability to raise
rents to cover increases in operating expenses might be impaired should rent
control legislation be enacted. As the Company has expanded, attempts have been
made to avoid markets where the exposure to reduced defense spending is believed
to be high.
Business and Operating Strategies
The Company seeks to increase shareholder value by (i) generating growth in the
operating results of its existing communities, (ii) acquiring communities that
will provide a good long-term investment, (iii) developing communities in its
existing markets which provide above market yields, (iv) selling communities
that no longer meet its investment criteria and (v) financing its activities at
the lowest possible cost of capital.
The apartment sector has become increasingly competitive, as ownership has
shifted to large companies with more resources and sophisticated management. In
order to compete more effectively, the Company began a strategic repositioning
in 1996, with the objective of being better positioned to achieve more
consistent earnings growth in the future. The repositioning included expanding
geographically, upgrading the quality of its apartment portfolio through the
sale of non-strategic assets and the upgrade of its existing portfolio and
investing in scalable management systems. The key elements of the Company's
strategic repositioning included: (i) investing in property upgrades, including
revenue-enhancing improvements, (ii) establishing a development pipeline, (iii)
selling non-strategic properties and reinvesting the proceeds in newer
communities with more growth potential, (iv) investing in scalable
infrastructure, primarily in the form of people and technology and (v) expanding
into new markets in new regions of the country. The Company believes that the
repositioning strategy provides the following benefits:
o More stable operating growth
o Lower capital expenditures per apartment home
o Improved operating margins
o A balance between acquisitions and development that will
provide better investment returns
o Lower general and administrative costs as a percentage of rental
income
o Increased productivity
Acquisitions
The Company seeks to acquire communities in individual and portfolio
transactions that can provide returns on investment (property rental income less
property operating expenses divided by the average capital investment in real
estate) substantially in excess of the Company's cost of capital by the third
year of ownership. During 1998, the Company continued added size to its existing
markets where it was under-invested. During 1998, the Company acquired 24
communities, in individual and portfolio transactions, containing 6,959
apartment homes (excluding ASR Investments Corporation ("ASR") and American
Apartment Communities II, Inc. ("AAC") at a total cost (including closing costs)
of $314.7 million or $45,200 per home.
When evaluating potential acquisitions, the Company considers, among other
things: (i) the geographic location, (ii) construction quality, condition and
design of the community, (iii) asset quality and age of the property, (iv)
current and projected cash flow of the property, (v) the ability to increase the
value and cash flow of the property through upgrades and repositioning, (vi)
potential for rent increases, (vii) competition from existing multi-family
communities, (viii) anticipated new construction and (ix) the potential for
economic growth in the market.
4
The following table summarizes the Company's growth during the last five years
(dollars in thousands):
1998 (a) 1997 1996 (b) 1995 1994
-------- ---- -------- ---- ------
Homes acquired 28,510 8,628 22,032 5,142 11,368
Homes owned at December 31, 86,893 62,789 55,664 34,224 29,282
Total real estate owned, at cost $3,916,785 $2,472,537 $2,085,023 $1,182,113 $1,007,599
Total rental income $ 478,718 $ 386,672 $ 241,260 $ 194,511 $ 139,380
(a) Includes 7,550 apartment homes acquired in the ASR Merger on March 27,
1998 and 14,001 apartment homes acquired in the AAC Merger on December 7,
1998.
(b) Includes 14,320 completed apartment homes and 675 homes under development
acquired in connection with the South West Property Trust Inc. Merger on
December 31, 1996.
During 1999, the Company does not anticipate acquiring communities except to
reinvest a portion of the proceeds from property sales.
Mergers
Prior to 1990, the Company was the only major publicly held REIT focusing
predominantly on apartment investments. Since then, a number of new multi-family
REITs have been formed. Some of these REITs may seek to be acquired by larger,
more strongly capitalized REITs that have superior access to the capital
markets. During the past few years, the apartment sector has undergone
consolidation and the Company has been a major participant in this real estate
consolidation process, completing the following mergers:
On December 31, 1996, The Company completed the acquisition of South West
Property Trust Inc. ("South West") in a statutory merger (the "South West
Merger"). South West was a publicly traded multifamily REIT that owned 44
communities with 14,320 apartment homes primarily located in Texas and
several other Southwestern markets. The South West Merger provided the
Company with significant diversification beyond its traditional Southeast
and Mid-Atlantic markets, expanding the Company into Southwestern markets.
On March 27, 1998, the Company 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 provided the Company with critical size in Houston and
Phoenix.
On December 7, 1998, the Company 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 the Company to enter into new major markets that are believed to
have the potential for good long-term growth, such as, Portland, San
Francisco, Sacramento, San Jose, Monterey, Los Angeles, Denver,
Indianapolis and Detroit. In addition, it added size to our existing
portfolios in Columbus, Tampa, South Florida and Seattle.
5
Real estate under development
Development activity is focused in certain of the Company's major markets. With
acquisition costs approaching replacement cost and the spreads over the
Company's cost of capital narrowing, building in selected markets enables the
Company to increase its return on investment. In determining whether to develop
in a certain market, the Company considers among other things, the following:
(i) income levels and employment growth, (ii) location, (iii) barriers to entry
that would limit competition, (iii) demographic information such as expected
household growth, (iv) supply/demand ratio and competition among other apartment
communities or housing alternatives and (v) pricing and yields on acquisition
properties relative to development properties.
During 1998, the Company increased is commitment to development as part of its
strategic repositioning, investing $97.2 million on development projects which
included eight new communities, four additional phases to existing communities
and nine parcels of undeveloped land. The Company plans to invest approximately
$150 million on development, including communities currently under development
plus six new starts during the year. These communities are anticipated to
provide stabilized returns on investment in excess of 10%. The Company believes
that having a development capability provides the following benefits: (i)
returns on investment in excess of returns on acquisitions, (ii) control over
the quality of the product which includes quality of features, size and floor
plan, (iii) ability to add presence in existing markets and (iv) a new, high
quality community that requires no material capital expenditures for five years.
Same Communities
The Company's net income is primarily generated from the operations of its
apartment communities. During 1998, the Company's same communities (those
communities acquired, developed and stabilized prior to January 1, 1997 and held
throughout the annual reporting period) consisted of 180 communities containing
47,875 apartment homes. These same communities provided rental growth of 3.3%
which was coupled with a .3% decrease in rental expenses. Average physical
occupancy and rental rates at the Company's same communities during the
comparable periods are set forth below:
1998 1997 1996
---- ---- ----
Physical occupancy 92.9% 92.9% 92.6%
Average monthly rental rates $602 $582 $572
The Company's strategic objectives include upgrading the apartment
portfolio through the addition of features and initiatives to the communities
that are appropriate for the market and which will support higher rents. Value
enhancing improvements plus improvements that substantially extend the useful
life of an existing asset are capitalized. A significant portion of the
Company's capital expenditures relate to an upgrade and repositioning program
that began in 1996. The Company recognized the need to improve its asset quality
in order to compete with an increase in the supply of newer communities, and
consequently, embarked on the upgrade program. In addition, several initiatives
which are considered revenue enhancing or expense reducing are underway that
either allow the Company to increase rents by more than the inflationary rate or
allow the Company to pass expenses to residents including: (i) sub-metering of
water and sewer to residents where local and state regulations allow, (ii)
gating and fencing of apartment communities, (iii) installing monitoring devices
such as intrusion alarms or controlled access devices, (iv) adding business and
fitness centers and (v) constructing carports, garages and self storage units.
Sales
The Company continually undertakes portfolio review analysis with the
objective of identifying communities that do not meet the Company's long-term
investment objectives. When determining whether to dispose of communities, the
Company considers the following factors: (i) size, location, asset quality and
age of the community, (ii) current operating performance of the community,
(iii) markets where the economy is not expected to be strong over the long-term
and (iv) markets where the Company does not intend to establish a long-term
concentration. These sales allow the Company to reduce the age of its existing
portfolio, which should result in lower operating expenses and capital
expenditures associated with the older communities and to exit non-core markets.
Since 1997, the Company sold 30 communities with 7,888 non-strategic
apartment homes (average age of communities sold was 25 years), the net proceeds
from which were used to acquire and develop newer communities that will provide
higher long-term returns on investment than the communities that are being sold.
The Company intends to sell 6,000 to 7,000 apartment homes during 1999 to
complete the sale of non-strategic assets, the proceeds from which will be used
to fund acquisitions in order to complete tax deferred exchanges, to repay debt
and to fund new development. At December 31, 1998, the Company had 26
communities, four commercial properties and one parcel of undeveloped land
included in real estate held for disposition.
6
Financing Strategies
As a qualified REIT, the Company distributes a substantial portion of its cash
flow to its shareholders in the form of distributions. The Company seeks to
retain sufficient cash to cover normal operating needs, including routine
replacements and to help fund additional acquisitions and development activity.
The Company utilizes a variety of primarily external financing sources to fund
portfolio growth, major capital improvement programs and balloon debt payments.
Bank lines of credit generally have been used to temporarily finance these
expenditures, and subsequently this short-term bank debt has been replaced with
longer-term debt or equity. The Company may also fund its capital requirements
through (i) the assumption of mortgage indebtedness, (ii) property sales, (iii)
common shares sold through the Company's Dividend Reinvestment and Stock
Purchase Plan, (iv) retained operating cash flow, (v) the issuance of operating
partnership units and (vi) the use of unused credit facilities.
At December 31, 1998, the Company had the following credit facilities: (i) $200
million three year unsecured revolving credit facility which includes a $100
million competitive bid option which allows the Company to solicit bids from
participating banks at rates below the contractual rate, (ii) a $50 million one
year unsecured line of credit and (iii) a $15 million uncommitted line of credit
with a major U.S. financial institution. At December 31, 1998, the Company had
$240 million of borrowings outstanding under these credit facilities.
During 1998, the Company completed the following financing activities: (i)
issued 1.7 million shares of common stock at a gross sales price of $14.31 per
share to a Unit Investment Trust (UIT) and 1.1 million shares of common stock at
a gross sales price of $14.19 to a second UIT, for net proceeds of $38.0
million, (ii) issued $150 million of 8.125% Notes, (iii) issued $62.5 million of
8.5% Monthly Income Notes, (iv) raised $36.6 million under the Dividend
Reinvestment and Stock Purchase Plan, (v) assumed debt of $753.5 million in
connection with the acquisition of communities, (vi) issued 8,396,863 Operating
Partnership Units valued at $107.3 million in connection with the acquisition of
communities, (vii) issued 8,224,090 shares of common stock with an aggregate
value of $115.6 million in connection with the acquisition of communities,
(viii) issued eight million shares of convertible preferred stock with a fair
value of $175 million in connection with the AAC Merger and (ix) had net
borrowings under its bank credit facilities of $104.4 million.
In January 1999, the Company established a program for the sale of up to $200
million aggregate principal amount of medium-term notes (the "MTN Program"). The
Company subsequently sold an aggregate of $150 million of senior unsecured notes
under the MTN Program which consisted of the following: (i) $70 million of 7.60%
Notes due January 25, 2002, (ii) $58 million of 7.67% Notes due January 26,
2004, (iii) $10 million of variable-rate Notes due January 27, 2003 on which the
Company subsequently executed a swap fixing the rate at 7.52% and (iv) $12
million of 7.22% notes due February 19, 2003. Net proceeds from the offerings
were used to repay revolving bank debt and prepay mortgage debt. The Company
anticipates issuing the remaining $50 million of notes under the MTN Program
during the first half of 1999, the net proceeds of which will be used to repay a
senior unsecured note maturing in April 1999.
The Company is currently negotiating a $130 million five year variable-rate
revolving credit agreement ("the Credit Facility") with a lender through which
the Company will have access to secured funding through Federal National
Mortgage Association. The proceeds from the Credit Facility will be used to
repay a $91 million secured credit facility assumed in connection with the AAC
transaction and repay unsecured bank debt. Additional features of this Credit
Facility may allow the Company to extend the maturity for five or ten years and
increase the amount available under the Credit Facility to $200 million. It is
anticipated that this Credit Facility will be executed during the first quarter
of 1999.
7
Depending on the volume and timing of acquisition activity, the Company
anticipates raising additional debt during the next twelve months primarily to
refinance debt maturities, however, 1999 acquisition and development activity is
expected to be funded primarily with the proceeds from the planned sales of
communities.
Competition
In most of the Company's markets, the competition for residents among
communities is extremely intense as some competing communities offer features
that the Company's communities do not have. Also, some competing communities are
larger and/or newer than the Company's communities. The competitive situation of
each community varies and intensifies as additional properties are constructed.
When in the market for new acquisitions, the Company competes with numerous
other investors, including other REITs, individuals, partnerships, corporations,
pension funds, insurance companies, foreign investors and other real estate
entities. Although the Company has certain advantages because of its substantial
presence in its markets and its access to capital, some competing investors are
larger than and may have a competitive advantage over the Company in terms of
assets and other investment resources. During 1998, the competition for both
single property and portfolio acquisitions intensified which resulted in lower
acquisition capitalization rates. Management believes that the Company, in
general, is well positioned in terms of economic and other resources to compete
effectively and intends to maintain its pricing discipline while continuing to
pursue acquisitions that meet the Company's long-term investment objectives.
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 the Company. However, over the past few years, the
issue has been raised regarding the presence of asbestos and other hazardous
materials in existing real estate properties. In response to this, on March 1,
1991, the Company adopted 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 by the Company and not previously inspected.
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 the Company
prior to the purchase or development of any property. Nevertheless, it is
possible that the Company's environmental assessments will not reveal all
environmental liabilities, or that some material environmental liabilities exist
in which the Company is unaware. In some cases, the Company has abandoned
otherwise economically attractive acquisitions because the costs of removal or
control have been prohibitive and/or the Company has been unwilling to accept
the potential risks involved. The Company does not believe it will be required
to engage in any large scale abatement at any of its properties as asbestos is
managed in place in accordance with current environmental laws and regulations.
Management believes that through professional environmental inspections and
testing for asbestos and other hazardous materials, coupled with a conservative
posture toward accepting known risk, the Company 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 the
Company may be held liable under state laws for any such injuries caused by
ingestion of lead based paint by children living at the communities.
The Company 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. The Company 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. The Company 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 the Company in the future, the costs
of compliance could have a material adverse effect on the Company or its
financial condition. To the best of its knowledge, the Company is in compliance
with all applicable environmental rules and regulations.
8
Operating Partnership - United Dominion Realty Trust, L.P.
On October 23, 1995, the Company organized United Dominion Realty, L.P. (the
"Partnership") under the Virginia Revised Uniform Limited Partnership Act, as
amended (the "Partnership Act"). The Company is the sole General Partner of the
Partnership and currently holds a 79.8% interest. The Partnership is intended to
assist the Company in competing for the acquisition of properties that meet the
Company'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.
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 the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
Admission of Limited Partners; Investment Agreements
The Company 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 the Company 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 the Company 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, the Company
intends to make distributions per Unit in the same amount as the cash dividends
paid by the Company 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 the
Company 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 the Company 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 the Company for the purpose of
equalizing per Unit and per Common share distributions, but neither the
Partnership nor the Company 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 the Company 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."
9
Management and Operations
The Company, 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 the Company 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 the Company to pay
distributions to its shareholders that are required in order to maintain REIT
status and to avoid income tax or excise tax liability.
Ability to Engage in Other Businesses; Conflicts of Interest
The Company and other persons (including officers, directors, employees, agents
and other affiliates of the Company) 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. The
Company 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 Company, 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 the Company 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.
10
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.
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 the Company 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.
11
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.
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 the Company, 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.
12
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 the Company received in connection with redemption of Units except as
provided in their respective Investment Agreements or other agreements with the
Company.
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 the Company
(or appropriate subsidiary) until the Company has received an amount equal to
prior distributions to the outside limited partners, and (iii) third, to the
outside limited partners and the Company (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 geographic market of the Company's
portfolio of apartment communities at December 31, 1998.
Included in the table below are (i) 26 apartment communities held for
disposition in the amount of $163,366,912, net of accumulated depreciation in
the amount of $34,176,249 and (ii) real estate under development which includes
eight new communities and two additional phases (excludes land held for future
development). At December 31, 1998, the Company also had two shopping centers,
three other commercial properties and one parcel of undeveloped land in the
consolidated balance sheet classified as real estate held for disposition in the
amount of $16,294,529, net of accumulated depreciation in the amount of
$1,791,161, which are not included in the table below.
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 Apartment Value Encumbrances
Major Geographic Markets Communities Homes Homes (In thousands) (In thousands)
- - ------------------------------------------------------------------------------------------------------------------------------------
Dallas, TX 28 8,954 10% $389,202 $49,002 (A)
Houston, TX 23 5,927 7% 210,015 65,965 (A)
Orlando, FL 12 3,848 4% 177,696 41,630
Phoenix, AZ 8 3,136 4% 177,434 19,931 (A)
San Antonio, TX 13 3,840 4% 170,405 38,609 (A)
Tampa, FL 11 3,777 4% 162,077 41,067 (A)
Raleigh, NC 11 3,484 4% 154,990 16,132 (A)
San Francisco, CA 4 980 1% 128,754 70,086
Nashville, TN 10 2,776 3% 123,343 5,081
Charlotte, NC 11 2,566 3% 122,009 22,772 (A)
Richmond, VA 10 3,091 4% 114,880 3,034
Columbia, SC 11 3,326 4% 113,633 28,639
Columbus, OH 7 1,972 2% 110,996 34,981 (A)
Eastern NC 10 2,710 3% 110,189 10,127
Monterey Peninsula, CA 16 2,076 2% 105,970 (A)
Memphis, TN 7 2,206 3% 103,851 43,412
Greensboro, NC 8 2,123 3% 101,521 4,145 (A)
Other Florida 8 1,722 2% 81,280 --
Miami/Ft Lauderdale, FL 5 1,280 1% 80,473 --
Baltimore, MD 8 1,746 2% 79,665 29,755
Atlanta, GA 7 1,642 2% 78,195 11,093
Hampton Roads, VA 8 1,830 2% 63,774 3,900
Portland, OR 4 996 1% 59,743 12,745
Washington DC 5 1,113 1% 57,759 5,875
Jacksonville, FL 3 1,157 1% 55,913 12,455
Greenville, SC 6 1,436 2% 53,794 3,265
Los Angeles, CA 2 926 1% 53,387 6,141
Lansing, MI 4 1,227 2% 50,558 (A)
Other Virginia 6 1,156 1% 47,739 2,830
Sacramento, CA 2 914 1% 47,549 17,127 (A)
Seattle, WA 4 790 1% 46,382 24,367
Denver, CO 2 876 1% 44,195 (A)
Other Midwest 5 969 1% 42,321 --
Fayetteville, NC 3 884 1% 40,900 18,453
Detroit, MI 4 744 1% 38,125 (A)
Eastern Shore MD 4 784 1% 34,546 --
Indianapolis, IN 3 875 1% 32,663 (A)
Tucson, AZ 8 1,112 1% 30,062 15,557
Albuquerque, NM 4 758 1% 29,422 13,704 (A)
Other Washington State 2 536 1% 25,264 9,702
Other Texas 3 776 1% 23,352 (A)
Austin, TX 2 542 1% 23,315 (A)
Other Georgia 2 468 1% 22,401 6,179
Arkansas 2 512 1% 21,897 --
Nevada 1 384 1% 20,551 --
Other California 2 444 1% 18,277 (A)
Delaware 2 368 -- 17,672 --
Other South Carolina 2 408 -- 13,471 2,200
Alabama 1 242 -- 11,211 --
Oklahoma 1 316 -- 9,734 (A)
Other North Carolina 1 168 -- 7,628 (A)
--------------------------------------------------------------------------------------
Total 326 86,893 100% $3,940,183 $1,068,672
--------------------------------------------------------------------------------------
Physical Average Monthly Rental Average
Cost Occupancy Rates for the Year Ended Unit Size
Major Geographic Markets Per Home Full Year 1998 (C) December 31, 1998 (B) (Square Feet)
- - -------------------------------------------------------------------------------------------------------------------------------
Dallas, TX $43,467 94.4% $606 (D) 801
Houston, TX 35,434 91.9% 540 (D) 825
Orlando, FL 46,179 94.0% 634 953
Phoenix, AZ 56,580 89.7% 661 (D) 891
San Antonio, TX 44,376 92.6% 622 815
Tampa, FL 42,912 94.2% 604 956
Raleigh, NC 44,486 94.1% 660 926
San Francisco, CA 131,382 -- -- (D) 776
Nashville, TN 44,432 91.0% 536 955
Charlotte, NC 47,548 91.0% 659 961
Richmond, VA 37,166 92.7% 610 951
Columbia, SC 34,165 93.5% 514 929
Columbus, OH 56,286 -- -- (D) 870
Eastern NC 40,660 86.8% 569 1,002
Monterey Peninsula, CA 51,045 -- -- (D) 727
Memphis, TN 47,077 90.9% 541 833
Greensboro, NC 47,820 84.8% 615 981
Other Florida 47,201 94.0% 567 826
Miami/Ft Lauderdale, FL 62,870 90.9% 818 1,084
Baltimore, MD 45,627 94.3% 677 869
Atlanta, GA 47,622 93.2% 628 906
Hampton Roads, VA 34,849 92.0% 558 981
Portland, OR 59,983 -- -- (D) 890
Washington DC 51,895 92.8% 755 859
Jacksonville, FL 48,326 91.3% 616 896
Greenville, SC 37,461 87.5% 532 883
Los Angeles, CA 57,653 -- -- (D) 649
Lansing, MI 41,205 -- -- (D) 815
Other Virginia 41,297 87.2% 607 869
Sacramento, CA 52,023 -- -- (D) 820
Seattle, WA 58,711 -- -- (D) 840
Denver, CO 50,451 -- -- (D) 957
Other Midwest 43,675 -- -- (D) 1,004
Fayetteville, NC 46,267 92.6% 568 900
Detroit, MI 51,243 95.0% -- (D) 946
Eastern Shore MD 44,064 97.5% 656 938
Indianapolis, IN 37,329 -- -- (D) 966
Tucson, AZ 27,034 87.7% -- (D) 582
Albuquerque, NM 38,815 78.5% 553 (D) 712
Other Washington State 47,134 68.4% -- (D) 936
Other Texas 30,093 88.7% 526 725
Austin, TX 43,017 92.9% 595 713
Other Georgia 47,865 88.6% 649 1,142
Arkansas 42,768 92.5% 581 821
Nevada 53,518 81.3% 645 839
Other California 41,164 -- -- (D) 1,031
Delaware 48,022 94.0% 616 889
Other South Carolina 33,017 90.9% 427 909
Alabama 46,326 91.8% 516 1,095
Oklahoma 30,804 91.7% 456 756
Other North Carolina 45,405 94.5% 590 836
----------------------------------------------------------------------------------
Total $45,345 91.7% $602 882
----------------------------------------------------------------------------------
(A) These communities are encumbered by the following: (i) 23 communities
encumbered by two REMIC financings aggregating $75,919,228, (ii) six
communities encumbered by one secrued note payable in the amount of
$31,700,000, (iii) 24 communities encumbered by two fixed-rate notes
payable aggregating $159,732,050 and (iv) 18 communities encumbered by two
variable-rate notes payable aggregating $111,360,025.
Excludes a $3.5 million mortgage note on one commercial property.
(B) Average Monthly Rental Rates for the Year Ended December 31, 1998,
represents potential rent collections (gross potential rents less market
adjustments), which approximates net effective rents.
These amounts exclude the 1998 acquisitions.
(C) Physical occupancy for the year excludes the communities acquired on
December 7, 1998, in connection with the American Apartment Communities II,
Inc. statutory merger ("AAC Merger").
(D) Average Monthly Rental Rates for the year ended December 31, 1998 exclude
the 14,001 apartment homes acquired on December 7, 1998 in connection with
the AAC Merger and the 7,550 apartment homes acquired on March 27, 1998 in
connection with the acquisition of ASR Investments Corporation. These
apartment homes are excluded because the results are not meaningful on a
yearly comparison as these apartment homes were not owned for a full year.
14
Item 3. LEGAL PROCEEDINGS
Neither the Company nor any of its apartment communities is presently
subject to any material litigation nor, to the Company's knowledge, is any
litigation threatened against the Company or any of the communities, other than
routine actions arising in the ordinary course of business. Some of these
routine actions are expected to be covered by liability insurance, and none are
expected to have a material adverse effect on the business or financial
condition or results of operations of the Company.
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 the Company's fiscal year ended December 31, 1998.
Executive Officers of the Registrant
The executive officers of the Company, listed below, serve in their
respective capacities for approximate one year terms.
Name Age Office Since
- - ---- --- ------ ------
John P. McCann 54 Chairman of the Board 1974
and Chief Executive Officer
John S. Schneider 60 Vice-Chairman of the Board, 1996
Chief Operations Officer
and President
James Dolphin 49 Executive Vice President 1979
and Chief Financial Officer
Richard A. Giannotti 43 Senior Vice President and Director 1985
of Development-East
Mark E. Wood 54 Senior Vice President and Director 1996
of Development-West
Katheryn E. Surface 40 Senior Vice President, Corporate 1992
Secretary and General Counsel
Curt W. Carter 42 Senior Vice President and Director 1985
of Apartment Operations-Northern
Region
Robert L. Landis 40 Senior Vice President and Director 1996
of Apartment Operations-Western
Region
Walter J. Lamperski 41 Senior Vice President and Director 1996
of Apartment Operations-Southern
Region
15
Mr. McCann has been the Company's managing Chief Executive Officer since
1974. Mr. McCann was elected Chairman of the Board in 1996.
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 until 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. Dolphin was first employed by the Company in 1979 as Controller. He was
elected Vice President of Finance in 1985 and has served as the Company's Chief
Financial Officer through December 31, 1998. He was elected Senior Vice
President in 1987 and Executive Vice President in 1996. Effective at the close
of business on December 31, 1998, Mr. Dolphin was no longer employed by the
Company.
Mr. Giannotti joined the Company 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 the Company as Vice President of Construction in connection
with the merger of South West in 1996. He was promoted to Senior Vice President
and Director Development-West in 1998.
Ms. Surface joined the Company 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. Carter joined the Company 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 the Company 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 the Company, he was Vice President of Asset Management and Property
Management for CRI/CAPREIT, Inc.
Mr. Lamperski joined the Company joined the Company 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.
16
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company'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
closing 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
1997
1st Quarter $ 16 $ 14 5/8 $ .2525
2nd Quarter 15 1/8 13 3/8 .2525
3rd Quarter 15 3/8 13 7/8 .2525
4th Quarter 15 1/8 13 5/8 .2525
1998
1st Quarter $ 14 13/16 $ 13 3/4 $ .2625
2nd Quarter 14 1/2 13 5/16 .2625
3rd Quarter 14 1/16 10 11/16 .2625
4th Quarter 11 3/4 10 1/16 .2625
The Company determined that, for federal income tax purposes, approximately
87.8% of the distributions for each of the four quarters of 1998 represented
ordinary income to its shareholders and 12.2% represented return of capital to
its shareholders.
On March 2, 1999, the closing sale price of the Common Stock was $9.81 per share
on the NYSE, and there were 8,809 holders of record of the 104,060,609 shares of
Common Stock.
The Company pays regular quarterly distributions to holders of shares of Common
Stock. Future distributions by the Company 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 1998 necessary for
the Company to maintain its status as a REIT was approximately $0.84 per share.
The Company paid total distributions of $1.04 per share for 1998.
SERIES A PREFERRED STOCK
The Company'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 closing 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.
17
Distributions
High Low Declared
1997
1st Quarter $ 26 7/8 $ 25 3/4 $ .578
2nd Quarter 26 5/8 25 5/8 .578
3rd Quarter 27 1/8 25 7/8 .578
4th Quarter 26 7/8 25 1/8 .578
1998
1st Quarter $ 26 11/16 $ 26 1/8 $ .578
2nd Quarter 26 7/8 25 3/4 .578
3rd Quarter 25 15/16 24 1/2 .578
4th Quarter 25 11/16 24 3/8 .578
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
1997
1st Quarter -- -- --
2nd Quarter $ 25 1/2 $ 25 --
3rd Quarter 26 7/8 25 1/4 .5554
4th Quarter 26 5/8 25 7/8 .5375
1998
1st Quarter $ 27 3/8 26 3/16 .5375
2nd Quarter 26 1/2 25 5/8 .5375
3rd Quarter 26 13/16 24 9/16 .5375
4th Quarter 25 7/8 24 9/16
The Series B Preferred Stock may be redeemed beginning May 29, 2007 at the sole
option of the Company 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), the Company 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, the Company 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 during the fourth quarter were
$.12 per share. The Series D is not listed on any exchange.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company 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
the Company's Common Stock at a discount.
18
OPERATING PARTNERSHIP UNITS
From time to time, the Company issues shares of its common stock in exchange for
Operating Partnership Units (OP Unit) tendered to the Company's operating
partnership, United Dominion Realty L.P., for redemption in accordance with the
provisions of the Agreement of limited Partnership of United Dominion Realty
L.P. Such shares are issued based on the exchange ratio of one share for each OP
Unit. During 1998, the Company issued a total of 39,041 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 the Company as of and for each of the years in the five year
period ended December 31, 1998. 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.
19
Selected Financial Data
Years Ended December 31, 1998 1997 1996 1995 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data and apartment homes owned
Operating Data (a)
Rental income $ 478,718 $ 386,672 $ 241,260 $ 194,511 $ 139,380
Income before gains on sales of investments, minority interests
and extraordinary item 47,339 57,813 33,726 28,037 19,118
Gains on sales of investments 26,672 12,664 4,346 5,090 108
Extraordinary item - early extinguishment of debt (138) (50) (23) - (89)
Net income 72,332 70,149 37,991 33,127 19,137
Distributions to preferred shareholders 23,593 17,345 9,713 6,637 -
Net income available to common shareholders 48,739 52,804 28,278 26,490 19,137
Common distributions declared 107,758 88,587 55,493 48,610 37,539
Weighted average number of common shares outstanding-basic 99,966 87,145 57,482 52,781 46,182
Weighted average number of common shares outstanding-diluted 100,062 87,339 57,655 52,972 46,391
Per share:
Basic earnings per share $ 0.49 $ 0.61 $ 0.49 $ 0.50 $ 0.41
Diluted earnings per share 0.49 0.60 0.49 0.50 0.41
Common distributions declared 1.05 1.01 0.96 0.90 0.78
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Real estate held for investment $3,643,245 $2,281,438 $2,007,612 $1,131,098 $1,007,599
Real estate under development 99,395 24,598 37,855 - -
Real estate held for disposition 174,145 166,501 39,556 51,015 -
Total real estate owned, net of accumulated depreciation 3,636,122 2,272,031 1,911,732 1,052,659 887,258
Total assets 3,755,388 2,313,725 1,966,904 1,080,616 911,913
Notes payable-secured 1,072,185 417,325 376,560 180,481 158,449
Notes payable-unsecured 1,045,564 738,901 668,275 349,858 368,215
Total debt 2,117,749 1,156,226 1,044,835 530,339 526,664
Shareholders' equity 1,374,121 1,058,357 850,379 516,389 356,968
Number of common shares outstanding 103,639 89,168 81,983 56,375 50,356
- - ------------------------------------------------------------------------------------------------------------------------------------
Other Data (a)
Cash Flow Data
Cash provided by operating activities $ 145,323 $ 137,903 $ 90,064 $ 66,428 $ 54,544
Cash used in investing activities (296,437) (345,666) (161,572) (183,930) (359,631)
Cash provided by financing activities 169,170 194,784 82,056 113,145 306,575
Funds from operations (b)
Income before gains on sales of investments, minority
interests and extraordinary item $ 47,339 $ 57,813 $ 33,726 $ 28,037 $ 19,118
Adjustments:
Depreciation of real estate owned 99,588 76,688 47,410 38,939 28,729
Distributions to preferred shareholders (23,593) (17,345) (9,713) (6,637) --
Non-recurring items:
Impairment loss on real estate owned -- 1,400 290 1,700 --
Loss on termination of an interest rate risk
management agreement (d) 15,591 -- -- -- --
Prior years' employment and other taxes -- -- -- 395 --
Adoption of SFAS No. 112 "Employers' Accounting for
Postemployment benefits" -- -- -- -- 450
Adjustment for internal acquisition costs (c) (544) (1,341) (901) (587) (704)
---------------------------------------------------------------
Funds from operations $ 138,381 $ 117,215 $ 70,812 $ 61,847 $ 47,593
===============================================================
Apartment Homes Owned
Total apartment homes owned at December 31 86,893 62,789 55,664 34,224 29,282
Weighted average number of apartment homes owned during the year 70,724 58,038 37,481 31,242 23,160
(a) During the past three years, the Company has completed three statutory
mergers which include the following: (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, Inc. on
December 7, 1998, for an aggregate purchase price of $794 million.
(b) Funds from operations ("FFO") is defined as income before gains (losses) on
sales of investments, minority interests 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. This definition conforms to recommendations
set forth in a White Paper adopted by the National Association of Real
Estate Investment Trusts (NAREIT) in early 1995. FFO for the years prior to
1995 have been adjusted to conform to the NAREIT definition. 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 activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs.
(c) Reflects the adjustment for internal acquisition costs that were capitalized
prior to March 19, 1998.
(d) During 1998, the Company recorded a loss of $15.6 million on the termination
of an interest rate risk management contract.
20
PART II
Item 7. 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 of United Dominion Realty Trust, Inc.
(the "Company") appearing elsewhere in this report. 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 1999 property acquisitions and dispositions, 1999
development activity and capital expenditures, 1999 capital raising activities,
1999 rent growth, occupancy and rental expense growth. Such statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievement of the Company 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 the Company, and/or its
properties, adverse changes in the real estate markets and general and local
economies and business conditions. Although the Company 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 representation by the Company or any other person that
the results or conditions described in such statements or the objectives and
plans of the Company will be achieved.
The Company operates in one defined business segment as an owner, operator,
renovator and developer of apartment communities nationwide. Management's
strategy is to be a national, highly efficient provider of quality apartment
homes with meaningful size in approximately 35 growth markets. The Company has
implemented this strategy through the acquisition of portfolios of higher
quality communities, the sale of lower quality communities, a greater commitment
to development and the upgrade of older communities. The Company seeks to be a
market leader by operating a sufficiently sized portfolio of apartments within
each market in order to drive down operating costs through economies of scale
and management efficiencies. The Company believes that market diversification
increases investment opportunity and decreases the risk associated with cyclical
local real estate markets and economies. At December 31, 1998, the Company owned
326 communities containing 86,893 apartment homes nationwide. The following
table summarizes the Company's apartment information by market:
21
The following table summarizes the Company's apartment market information by
strategic geographic market:
Year Ended Quarter Ended
As of December 31, 1998 December 31, 1998 December 31, 1998
--------------------------------------------------- -------------------- ---------------------
Average Average
No. of No. of % of Carrying Physical Monthly Physical Monthly
Apartment Apartment Apartment Value Occupancy Rental Occupancy Rental
Market Communities Homes Homes (in thousands) (b) Rates (a) (b) Rates (a)
- - -------------------------------------------------------------------------- ----------------------- ----------------------
Dallas, TX (c) 28 8,954 10% $389,202 94.4% $ 606 94.6% $ 617
Houston, TX (c) 23 5,927 7% 210,015 91.9% 540 89.5% 583
Orlando, FL 12 3,848 4% 177,696 94.0% 634 93.8% 652
Phoenix, AZ (c) 8 3,136 4% 177,434 89.7% 661 90.5% 668
San Antonio, TX 13 3,840 4% 170,405 92.6% 622 93.3% 621
Tampa, FL 11 3,777 4% 162,077 94.2% 604 92.8% 613
Raleigh, NC 11 3,484 4% 154,990 94.1% 660 94.3% 669
San Francisco, CA (d) 4 980 1% 128,754 -- -- -- --
Nashville, TN 10 2,776 3% 123,343 91.0% 536 87.2% 593
Charlotte, NC 11 2,566 3% 122,009 91.0% 659 93.0% 667
Richmond, VA 10 3,091 4% 114,880 92.7% 610 91.7% 622
Columbia, SC 11 3,326 4% 113,633 93.5% 514 92.1% 520
Columbus, OH (d) 7 1,972 2% 110,996 -- -- -- --
Eastern NC 10 2,710 3% 110,189 86.8% 569 83.3% 602
Monterey
Peninsula, CA (d) 16 2,076 2% 105,970 -- -- -- --
Memphis, TN 7 2,206 3% 103,851 90.9% 541 92.3% 546
Greensboro, NC 8 2,123 3% 101,521 84.8% 615 88.1% 619
Miami /
Ft. Lauderdale, FL 5 1,280 1% 80,473 90.9% 818 89.8% 829
Baltimore, MD 8 1,746 2% 79,665 94.3% 677 96.1% 686
Atlanta, GA 7 1,642 2% 78,195 93.2% 628 94.7% 640
Hampton Roads, VA 8 1,830 2% 63,774 92.0% 558 92.8% 566
Portland, OR (d) 4 996 1% 59,743 -- -- -- --
Washington, DC 5 1,113 1% 57,759 92.8% 755 94.3% 764
Jacksonville, FL 3 1,157 1% 55,913 91.3% 616 90.2% 628
Greenville, SC 6 1,436 2% 53,794 87.5% 532 86.5% 538
Los Angeles, CA (d) 2 926 1% 53,387 -- -- -- --
Lansing, MI (d) 4 1,227 2% 50,558 -- -- -- --
Sacramento, CA (d) 2 914 1% 47,549 -- -- -- --
Seattle, WA (c) 4 790 1% 46,382 -- -- -- --
Denver , CO (d) 2 876 1% 44,195 -- -- -- --
Fayetteville, NC 3 884 1% 40,900 92.6% 568 95.7% 573
Detroit, MI (d) 4 744 1% 38,125 95.0% -- 95.0% --
Eastern Shore, MD 4 784 1% 34,546 97.5% 656 97.4% 667
Indianapolis, IN (d) 3 875 1% 32,663 -- -- -- --
Tucson, AZ (c) 8 1,112 1% 30,062 87.7% -- 86.6% --
Albuquerque, NM (c) 4 758 1% 29,422 78.5% 553 81.9% 557
Austin, TX 2 542 1% 23,315 92.9% 595 96.4% 599
Other Florida 8 1,722 2% 81,280 94.0% 567 94.0% 587
Other Virginia 6 1,156 1% 47,739 87.2% 607 93.0% 614
Other Midwest (d) 5 969 1% 42,321 -- -- -- --
Other Washington State (c) 2 536 1% 25,264 68.4% -- 77.1% --
Other Texas 3 776 1% 23,352 88.7% 526 88.8% 528
Other Georgia 2 468 1% 22,401 88.6% 649 88.6% 651
Arkansas 2 512 1% 21,897 92.5% 581 92.0% 585
Nevada 1 384 1% 20,551 81.3% 645 84.0% 642
Other California 2 444 1% 18,277 91.7% -- 91.7% --
Delaware 2 368 -- 17,672 94.0% 616 94.1% 617
Other South Carolina 2 408 -- 13,471 90.9% 427 92.6% 433
Alabama 1 242 -- 11,211 91.8% 516 91.4% 512
Oklahoma 1 316 -- 9,734 91.7% 456 94.6% 457
Other North Carolina 1 168 -- 7,628 94.5% 590 95.5% 597
------------------------------------------ ------------------- ---------------
Total 326 86,893 100% $3,940,183 91.7% $602 91.8% $616
============================================ ================== ===============
22
(a) Average monthly rental rates represent potential rent collections
(gross potential rents less market adjustments), which approximate
net effective rents. These figures exclude 1998 acquisitions.
(b) Physical occupancy is defined as rental income (potential rental
collections less vacancy loss, management units, units held out of
service and move-in concessions) divided by potential collections
(gross potential rent less management units, units held out of
service and move-in concessions) for the period, expressed as a
percentage.
(c) The Physical Occupancy and Average Monthly Rental Rates for the
twelve months ended December 31, 1998, does not include communities
which were acquired on March 27, 1998 in connection with the
acquisition of ASR Investments Corporation nor communities acquired
on December 7, 1998 in connection with the acquisition of American
Apartment Communities II or the 1998 single acquisitions.
(d) The Physical Occupancy and Average Monthly Rental Rates are not
available for the communities included in this market which were
acquired on December 7, 1998 in connection with the acquisition of
American Apartment Communities II.
Liquidity and Capital Resources
As a qualified real estate investment trust ("REIT"), the Company distributes a
substantial portion of its cash flow to its shareholders in the form of
quarterly distributions. The Company believes that cash provided by operations
will be adequate to meet normal operating requirements and payment of
distributions by the Company in accordance with REIT requirements in both the
short and long-term. For the year ended December 31, 1998, the Company's cash
flow from operating activities exceeded cash distributions paid to preferred and
common shareholders and operating partnership unitholders by $17.2 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's bank lines of credit generally have been used to temporarily
finance these expenditures, and subsequently this short-term bank debt has been
replaced with longer-term debt or equity. At December 31, 1998, the Company had
cash and cash equivalents of $18.5 million and amounts available under its
various credit facilities aggregating $25.0 million.
The Company expects to meet its short-term liquidity requirements through net
cash provided by operations and borrowings under credit facilities. To meet
certain long-term liquidity requirements, such as scheduled debt maturities,
development activity and significant capital improvements, the Company expects
to issue secured and unsecured notes payable. The Company may also fund its
capital requirements through: (i) proceeds from asset sales, (ii) common shares
sold through the Company's Dividend Reinvestment and Stock Purchase Plan, (iii)
retained operating cash flow and (iv) the use of unused credit facilities. The
Company anticipates issuing debt during 1999, primarily to replace existing debt
maturities and to pay down credit facilities.
The following discussion explains the changes in net cash provided by operating
activities, net cash used for investing activities and net cash provided by
financing activities which are presented in the Company's Consolidated
Statements of Cash Flows.
Operating Activities
For the year ended December 31, 1998, the Company's cash flow from operating
activities increased $7.4 million over the same period last year. This increase
is primarily due to the increased operating income from the Company's acquired
communities, as well as increases in property operating income within the
Company's same community portfolio achieved primarily through higher rental
rates as discussed below and under "Results of Operations".
Investing Activities
For the year ended December 31, 1998, net cash used for investing activities was
$296.4 million compared to $345.7 million for 1997, a decrease of $49.3 million.
Changes in the level of investing activities from period to period primarily
reflect the changing levels of the Company's acquisition, capital expenditure,
development and sales programs.
23
Acquisitions
The Company seeks to acquire communities in individual or portfolio transactions
that can provide returns on investment (property rental income less property
operating expenses divided by the average capital investment in real estate)
substantially in excess of the Company's cost of capital by the third year of
ownership. During 1999, the Company does not anticipate acquiring communities
except to reinvest a portion of the proceeds from property sales. During 1998,
the Company acquired 24 communities, in individual and portfolio transactions,
containing 6,959 apartment homes (excluding ASR and AAC) at a total cost
(including closing costs) of $314.7 million or $45,200 per home. All of these
acquisitions were located within one of the Company's designated major markets.
The communities acquired by market were as follows:
Purchase
Purchase No. Apt. Year Price Cost
Location Date Name Homes Built (thousands) per Home
- - ------------------------------------------------------------------------------------------------------------------------------------
San Antonio, TX 04/16/98 Audubon 216 1984 $7,082 $ 32,800
04/16/98 Carmel 228 1984 8,084 35,500
04/16/98 Cimarron 140 1984 5,087 36,300
04/16/98 Grand Cypress 164 1995 9,975 60,800
04/16/98 Kenton Place 244 1982 11,883 48,700
04/16/98 Peppermill 232 1984 8,151 35,100
04/16/98 Villages of Thousand Oaks 466 1983 13,986 30,000
08/15/98 Inn at Los Patios 167 1990 14,550 87,100
Memphis, TN 01/09/98 The Trails at Kirby Parkway 376 1987 16,757 44,600
01/09/98 Cinnamon Trails 208 1989 9,531 45,800
01/09/98 The Trails at Mount Moriah 630 1990/91 28,026 44,500
02/06/98 Dogwood Creek 278 1997 18,446 66,400
Phoenix, AZ 01/09/98 The Village at North Park 320 1983 15,056 47,100
05/28/98 Rancho Mirage 856 1984/85 38,538 45,000
06/09/98 Woodland Park 300 1980 9,723 32,400
Columbus, OH 07/02/98 Sycamore Ridge 270 1997 19,501 72,200
07/02/98 Washington Park 150 1997/98 9,577 63,800
07/02/98 Heritage Green 264 1997/98 10,476 39,700
Dallas, TX 01/30/98 Summit Ridge 264 1983 8,034 30,400
04/16/98 The Crest 280 1983 7,026 25,100
Atlanta, GA 04/15/98 Waterford Place 180 1990 11,900 66,100
Nashville, TN 05/20/98 Williamsburg 300 1986 12,307 41,000
Orlando. FL 07/20/98 Heron Lake 264 1989 10,734 40,700
Seattle, WA 07/31/98 Aspen Creek 162 1996 10,261 63,300
--------------------------------------------------------------------------------------------------------
Total/Weighted Average 6,959 1986 $314,691 $45,200
------------------------------------------------------------------------------------------------
Mergers
On March 27, 1998, the Company 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
acquisition was structured as a tax-free transaction and was treated as a
purchase for accounting purposes. No goodwill was recorded in connection with
this transaction. In connection with the acquisition, the Company acquired
primarily real estate assets totaling $313.7 million. Each share of ASR's common
stock was exchanged for 1.575 shares of the Company's common stock.
Consideration given by the Company included 7,742,839 shares of the Company's
common stock valued at $14 per share for an aggregate equity value of $108.4
million plus the issuance of 1,529,990 OP Units in the Heritage Communities,
L.P. valued at $21.4 million. In addition, the Company assumed, at fair value,
mortgage debt totaling $179.4 million and other liabilities of $13.6 million.
The aggregate purchase price in the ASR Merger was $323.1 million, including
transaction costs.
On December 7, 1998, the Company completed the acquisition of American Apartment
Communities II ("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 was structured as a tax-free merger and was
treated as a purchase for accounting purposes. No goodwill was recorded in
connection with this transaction. In connection with the AAC Merger, the Company
acquired primarily real estate assets totaling $766.9 million. The aggregate
purchase price consisted of the following: (i) 8,000,000 shares of the Company's
24
7.5% Series D Convertible Preferred Stock ($25 liquidation preference value)
with a fair market value of $175 million which is convertible into the Company's
Common Stock at $16.25 per share, (ii) the issuance of 5,614,035 OP Units to
holders of the 21% interest in AAC 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 interests
aggregating $27.8 million and (v) the payment of $59.8 million of cash. The
aggregate purchase price in the AAC Merger was $793.7 million, including
transaction costs.
The AAC Merger and ASR Merger established the Company as a national owner of
apartment communities. These two transactions enabled the Company to enter into
new markets in the Pacific Northwest, California, Colorado and the Midwest.
Entry into these markets provides the Company with market diversification and
reduces cyclical risks by making the Company less dependent on any one market.
Real Estate under Development
Consistent with the Company's acquisition strategy, development activity is
focused in certain of its major markets. During 1998, the Company increased its
level of development activity, completing the development of 228 apartment homes
in two additional phases to existing communities and 662 apartment homes in four
new communities. During 1998, the Company invested $97.2 million on development
projects, which included eight new communities, four additional phases to
existing communities and nine parcels of undeveloped land.
At December 31, 1998, the Company had 1,946 apartment homes under development as
outlined below (dollars in thousands except estimated cost per home):
Estimated Estimated Expected
No. Apt. Completed Development Development Cost per Completion
Property Location Homes Apt. Homes Costs to Date Costs Home Date
- - ------------------------------------------------------------------------------------------------------------------------------------
New Apartment Communities
Dominion Franklin Nashville, TN 360 360 $24,545 $24,800 $68,900 1Q99
Ashlar I Fort Myers, FL 260 76 13,224 18,600 71,500 2Q99
Sierra Foothill Phoenix, AZ 322 -- 7,125 22,500 69,900 4Q99
Stone Canyon Houston, TX 216 120 8,945 11,100 51,400 2Q99
Alexander Court Columbus, OH 356 106 15,707 23,000 64,600 2Q99
Legends at Park 10 Houston, TX 236 -- 2,800 13,900 58,900 4Q99
Ashton at Waterford Lakes Orlando, FL 292 -- 5,003 18,600 63,700 4Q99
The Meridian I Dallas, TX 250 -- 3,452 15,480 61,700 2Q00
-----------------------------------------------------------------------------
2,292 662 80,801 147,980 64,600
Additional Phases
Heritage Green II Columbus, OH 96 -- 3,919 6,900 71,900 2Q99
Dominion Crown Pointe II Charlotte, NC 220 -- 1,942 14,939 67,900 1Q00
-----------------------------------------------------------------------------
316 -- 5,861 21,839 69,100
Land Held for Future Development -- -- 12,733 -- --
-----------------------------------------------------------------------------
2,608 662 $99,395 $169,819 $65,100
=============================================================================
During 1998, the following development projects were completed and moved to real
estate held for investment (dollars in thousands):
No. Apt. Development Date % Leased
Property Location Homes Costs Completed at 12/31/98
- - ------------------------------------------------------------------------------------------------
Additional Phases
Oak Forest II Dallas, TX 260 $ 11,876 1Q98 95%
Mill Creek II Wilmington, NC 184 11,946 4Q98 56%
The Company has increased its commitment to development as part of its strategic
repositioning. During 1999, the Company expects to invest approximately $150
million on the development, including communities currently under development
plus six new starts during the year.
25
Capital Expenditures
The Company capitalizes value enhancing improvements plus improvements that
substantially extend the useful life of an existing asset. In addition to the
Company's capital expenditures on new acquisitions, a significant portion of
capital expenditures relate to the Company's same communities. These capital
expenditures include an upgrade program and other initiatives which began in
1996 and are considered revenue enhancing or expense reducing.
During 1998, the Company invested $100.4 million on capital improvements to its
apartment portfolio which include an upgrade program and other initiatives that
began in 1996. For the same community apartments (those owned prior to January
1, 1997), capital expenditures averaged $1,112 per home as follows: (i) ordinary
capital expenditures including floor coverings, HVAC equipment, roofs,
appliances and other ordinary capital expenditures of $14.5 million or $303 per
home, (ii) asset preservation expenditures including landscaping, parking lots
and other land improvements of $9.4 million or $197 per home and (iii) revenue
enhancing expenditures including sub-metering of water and sewer, interior
improvements and upgrades, construction of carports, garages and self-storage
units, business and fitness centers, security alarms, gating and access devices
and intrusion alarms, washer and dryer connections and other revenue enhancing
expenditures of $29.3 million or $612 per home.
The Company has completed most of its same community upgrade program and will
reduce its capital expenditures related to same communities during 1999, but
will continue to selectively add revenue enhancing improvements which can
provide a high return on investment.
Disposition of Investments
The Company continually undertakes portfolio review analyses with the objective
of identifying communities that do not meet the Company's long-term investment
objectives due to size, location, age, quality and/or performance. These sales
allow the Company to reduce the age of its existing portfolio, which should
result in lower operating expenses and capital expenditures associated with the
older communities and to exit non-core markets. Since 1997, the Company has sold
30 communities with 7,888 non-strategic apartment homes (average age of
communities sold was 25 years), the net proceeds from which were used to acquire
and develop newer communities that will provide higher long-term returns on
investment than the communities that are being sold. The sales are initially
dilutive to earnings as the initial returns on investment on higher quality
apartments are lower than the returns on investment on the communities being
sold. During 1998, the sales program had approximately a $.03 per share dilutive
impact on the Company's net income available to common shareholders.
During 1998, the Company transferred 19 communities and one commercial property
aggregating $128.4 million, net of accumulated depreciation and valuation
allowance, from real estate held for investment to real estate held for
disposition.
During 1998, the Company sold 18 communities with 5,318 apartment homes and one
shopping center for an aggregate sales price of $156.6 million. For income tax
purposes, 11 of the 18 community sales were structured to qualify as a like-kind
exchange under Section 1031 of the Internal Revenue Code, so the related capital
gain will be deferred for federal income tax purposes. Net proceeds of
approximately $135.2 million were primarily used to fund acquisitions.
The Company intends to sell 6,000 to 7,000 apartment homes during 1999 to
complete the sale of non-strategic assets. It is anticipated that the net
proceeds from the sales, estimated between $200 million to $250 million, will be
used to fund acquisitions in order to complete tax-deferred exchanges to defer
large capital gains, to fund development activity and repay mortgage debt.
Financing Activities
Net cash provided by financing activities during 1998 was $169.2 million
compared to $194.8 million for 1997.
26
Cash Provided by Financing Activities
During the first quarter of 1998, the Company entered into two separate
transactions to sell its common stock to Unit Investment Trusts ("UIT"). In
February 1998, the Company issued 1.7 million shares of its common stock at a
gross sales price of $14.31 per share to a UIT. In March 1998, the Company
issued 1.1 million shares of its common stock at a gross sales price of $14.19
to a second UIT. The net proceeds from the two UIT's aggregating $38.0 million
were primarily used to curtail bank debt.
The Company issued 2,824,627 shares of its common stock and received $36.6
million under its Dividend Reinvestment and Stock Purchase Plan during 1998,
which included $23.5 million in optional cash investments and $13.1 million of
reinvested distributions.
On November 10, 1998, the Company sold an aggregate $212.5 million of senior
unsecured notes payable in two simultaneous but separate public offerings which
consisted of the following: (i) $150 million of 8.125% Notes due November 15,
2000 and (ii) $62.5 million (including the over-allotment option) of 8.5%
Monthly Income Notes due November 15, 2008. Net proceeds from the two offerings
(net of underwriting discounts, commissions and offering expenses) of
approximately $207.6 million were used to repay bank debt outstanding under the
Company's various credit facilities and to fund the acquisition of AAC.
In January 1999, the Company established a program for the sale of up to $200
million aggregate principal amount of medium-term notes (the "MTN Program"). The
Company subsequently sold an aggregate of $150 million of senior unsecured notes
under the MTN Program which consisted of the following: (i) $70 million of 7.60%
Notes due January 25, 2002, (ii) $58 million of 7.67% Notes due January 26,
2004, (iii) $10 million of variable-rate Notes due January 27, 2003 on which the
Company subsequently executed a swap fixing the rate at 7.52% and (iv) $12
million of 7.22% notes due February 19, 2003. Net proceeds from the offerings
were used to repay revolving bank debt and prepay mortgage debt. The Company
anticipates issuing the remaining $50 million of notes under the MTN Program
during the first half of 1999, the net proceeds of which will be used to repay a
senior unsecured note maturing in April 1999.
The Company is currently negotiating a $130 million five year variable-rate
revolving credit agreement ("the Credit Facility") with a lender through which
the Company will have access to secured funding through Federal National
Mortgage Association. The proceeds from the Credit Facility will be used to
repay a $91 million secured credit facility assumed in connection with the AAC
transaction and repay unsecured bank debt. Additional features of this Credit
Facility may allow the Company to extend the maturity for five or ten years and
increase the amount available under the Credit Facility to $200 million. It is
anticipated that this Credit Facility will be executed during the first quarter
of 1999.
Derivative Instruments
The Company, from time to time, uses derivative instruments to synthetically
alter on-balance sheet liabilities or to hedge anticipated financing
transactions.
In order to reduce the interest rate risk associated with the anticipated
issuance of unsecured notes during 1998, the Company entered into a $100 million
(notional amount) fixed pay forward starting swap agreement (interest rate risk
management agreement) with a major Wall Street investment banking firm in July
1997. The Company settled the interest rate risk management agreement on
November 9, 1998, by paying $15.6 million to the counterparty. The Company was
unable to issue the unsecured notes contemplated by the interest rate risk
management agreement because of changed market conditions, and accordingly, the
cost associated with the settlement of this agreement was expensed during the
fourth quarter of 1998.
Market Risk Disclosures
The Company is exposed to market risk principally from interest rate risk
associated with variable-rate notes payable and maturing debt that has to be
refinanced. The Company does not hold financial instruments for trading
27
purposes, but rather, holds these financial instruments to finance owning and
managing real estate. The Company's interest rate sensitivity position is
managed by its treasury department. Interest rate sensitivity is the
relationship between changes in market interest rates and changes in rate
sensitive income due to the repricing characteristics of assets and liabilities.
The Company's earnings are affected by changes in short-term interest rates on
its variable-rate debt and the repricing of fixed-rate debt maturities. A large
portion of the Company's market risk is exposure to short-term interest rates
from variable-rate borrowings outstanding under its various credit facilities,
which was $240 million at December 31, 1998. The impact on the Company's
financial statements of refinancing fixed-rate debt that matured during 1998 was
not material.
At December 31, 1998, the notional value of the Company's derivative products
for the purpose of managing interest rate risk was $45 million of interest rate
swaps which have an average pay rate fixed at 5.98% to 8.00% and an average
receive rate of one month to three month LIBOR. These agreements effectively fix
$45 million of the Company's variable-rate secured notes payable to a weighted
average interest rate of 7.29%. At December 31, 1998, the fair market value of
the interest rate swaps in an unfavorable value position to the Company was $1.3
million. If interest rates were 100 basis points more or less at December 31,
1998, the fair market value would have been $80,000 and $1.8 million,
respectively.
If market interest rates for variable-rate debt average 100 basis points more in
1999 than they did during 1998, the Company's interest expense, after
considering the effects of its interest rate swap agreements, would increase,
and income before taxes would decrease by $2.9 million. Comparatively, if market
interest rates for variable-rate debt averaged 100 basis points more in 1998
than it did in 1997, the Company's interest expense, after considering the
effects of its interest rate swap agreements, would have increased, and income
before taxes would have decreased by $1.0 million. If market rates for
fixed-rate debt were 100 basis points higher at December 31, 1998, the fair
value of fixed-rate debt would have decreased from $1.75 billion to $1.68
billion. If market interest rates for fixed-rate debt were 100 basis points
lower at December 31, 1998, the fair value of fixed-rate debt would have
increased from $1.75 billion to $1.82 billion.
These amounts are determined by considering the impact of the hypothetical
interest rates on the Company'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 changes in the Company's financial structure.
Credit Facilities
The Company has a $200 million three year unsecured revolving credit facility
(the "Credit Facility"), a $50 million one year unsecured line of credit (the
"Line of Credit") and a $15 million uncommitted line of credit with a major U.S.
financial institution. Under the Credit Facility, pricing is based upon the
higher of the Company's senior unsecured debt ratings from S&P and Moody's which
are currently BBB and Baa2, respectively. At these rating levels, contractual
interest under the Credit Facility is LIBOR plus 55 basis points. The Credit
Facility also includes a $100 million competitive bid option which allows the
Company to solicit bids from participating banks at rates below the contractual
rate. The Credit Facility and Line of Credit are subject to customary financial
covenants and limitations.
At and for the year ended December 31, 1998, the Company had the following
credit facilities (dollars in thousands):
Twelve Months Ended December 31, 1998 At December 31, 1998
-------------------------------------- ----------------------------------
Weighted Average
Amount of Amount Weighted Average Amount Weighted Average
Credit Facility Facility Outstanding Interest Rate Outstanding Interest Rate
- - ---------------------------------------------------------------------------------------- ----------------------------------
Credit Facility $ 200,000 $ 180,915 6.1% $190,000 6.0%
Line of Credit 50,000 31,205 6.1% 50,000 6.1%
Uncommitted Line 15,000 6,184 6.1% -- --
----------- --------- ---- -------- ----
$ 265,000 $ 218,304 6.1% $ 240,000 6.0%
=========== ========= ==== ======== ====
28
Funds from Operations
Funds from operations ("FFO") is defined as income before gains (losses) on
sales of investments, minority interests 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. 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 1998, FFO increased 18.1% to $138.4 million, compared with $117.2 million
during 1997. For 1997, FFO increased 65.5% to $117.2 million, compared with
$70.8 million for 1996. The increase in FFO for both periods was principally due
to the increased property operating income from the Company's non-mature
apartment homes that were acquired and developed.
Year Ended December 31,
-----------------------------------------
In thousands 1998 1997 1996
-----------------------------------------
Calculation of funds from operations:
Income before gains on sales of investments,
minority interests and extraordinary item $ 47,339 $ 57,813 $ 33,726
Adjustments:
Depreciation of real estate owned 99,588 76,688 47,410
Distributions to preferred shareholders (23,593) (17,345) (9,713)
Non-recurring items:
Loss on termination of an interest rate
risk management agreement 15,591 -- --
Impairment loss on real estate owned -- 1,400 290
Adjustment for internal acquisition costs (544) (1,341) (901)
------------------------------------------
Funds from operations $ 138,381 $ 117,215 $ 70,812
==========================================
Results of Operations
The Company's net income is primarily generated from the operations of its
communities. For purposes of evaluating its comparative operating performance,
the Company categorizes its communities into two categories, same community and
non-mature. For the 1998 versus 1997 comparison, these communities are as
follows: (i) same community--those communities acquired, developed and
stabilized prior to January 1, 1997 and held throughout both 1998 and 1997 and
(ii) non-mature--those communities acquired, developed or sold subsequent to
January 1, 1997. For the 1997 versus 1996 comparison, these communities are as
follows: (i) same community--those communities acquired prior to January 1, 1996
and held throughout the annual reporting period and (ii) non-mature--those
communities acquired and developed subsequent to January 1, 1996.
All per share amounts refer to basic earnings per share unless otherwise
indicated.
1998-vs-1997
For 1998, net income available to common shareholders decreased $4.1 million,
with a corresponding decrease of $.12 and $.11 for basic and diluted earnings
per share, respectively, compared to 1997. The decrease per share over last year
is primarily attributable to the $15.6 million ($.15 per share) loss on the
termination of an interest rate risk management agreement during the fourth
quarter of 1998. Net income available to common shareholders for the year ended
December 31, 1998 includes aggregate gains on the sales of investments of $26.7
million ($.27 per share) compared to $12.7 million ($.15 per share) last year.
1997-vs-1996
Net income available to common shareholders increased $24.5 million, with a
corresponding increase of $.12 and $.11 for basic and diluted earnings per
share, respectively, compared to 1996. The per share increase over last year is
29
primarily attributable to gains recognized on the sales of investments which
aggregated $12.7 million ($.15 per share) for the year ended December 31, 1997.
From January 1, 1996 to December 31, 1997, the Company acquired and developed a
total of 31,270 apartment homes in 98 communities (including those acquired in
the South West Property Trust Inc. Merger on December 31, 1996) representing an
82% expansion in the number of apartment homes owned during that period. These
non-mature apartment homes provided a substantial portion of the aggregate
reported increases. However, these increases were moderated in part due to the
Company's financing activities during 1997 as the Company financed its
acquisition and development activity primarily with common and preferred equity
and the proceeds from property sales rather than debt which was used to finance
much of the 1996 acquisition and development programs.
All Communities
The operating performance for the Company's total apartment portfolio is
summarized below (dollars in thousands):
Years Ended Years Ended
December 31, December 31,
(In thousands) (In thousands)
------------------------------------- ------------------------------------
1998 1997 % Change 1997 1996 % Change
------------------------------------- ------------------------------------
Property rental income $ 476,226 $ 384,205 24.0% $ 384,205 $ 236,690 62.3%
Property operating expenses (excluding
depreciation and amortization) (197,824) (162,977) 21.4% (162,977) (102,499) 59.0%
------------------------------------- -----------------------------------
Property operating income $ 278,402 $ 221,228 25.9% $ 221,228 $ 134,191 64.9%
===================================== ====================================
Weighted average number of apartment homes 70,724 58,038 21.9% 58,038 37,481 54.8%
Physical occupancy 91.7% 92.3% (0.6%) 92.3% 92.9% (0.6%)
1998-vs-1997
During 1998, the weighted average number of apartment homes increased 21.9% to
70,724, which resulted in significant increases in property rental income and
property operating expenses. This includes 7,550 apartment homes acquired in the
ASR Merger on March 27, 1998 and 14,001 apartment homes acquired in the AAC
Merger on December 7, 1998.
1997-vs-1996
Due to the acquisition and development of 31,270 apartment homes from January 1,
1996 to December 31, 1997 (including the 14,320 apartment homes acquired in the
South West Property Trust Inc. Merger on December 31, 1996), the weighted
average number of apartment homes increased 54.8% to 58,038 for the year ended
December 31, 1997, which resulted in significant increases in both property
rental income and property operating expenses.
Same Communities
The operating performance of the Company's same community apartments is
summarized below (dollars in thousands). For 1998 vs. 1997, there were 180
communities with 47,875 apartment homes that were classified as same community.
For 1997 vs. 1996, there were 127 communities with 31,519 apartment homes were
classified as same community.
Years Ended Years Ended
December 31, December 31,
(In thousands) (In thousands)
------------------------------------ -------------------------------
1998 1997 % Change 1997 1996 % Change
------------------------------------ -------------------------------
Property rental income $ 327,416 $ 316,860 3.3% $207,040 $ 199,432 3.8%
Property operating expenses (excluding
depreciation and amortization (132,156) (132,577) (0.3%) (88,394) (86,529) 2.2%
------------------------------------- ------------------------------
Property operating income $ 195,260 $ 184,283 6.0% $118,646 $ 112,903 5.1%
=================================== ==============================
Physical occupancy 92.9% 92.9% 0.0% 92.6% 93.0% (0.4%)
Average monthly rental rate $ 602 $ 582 3.4% $ 572 $ 551 3.9%
1998-vs-1997
For 1998, the Company's same communities provided approximately 70.1% of its
total property operating income. During 1998, the Company's same communities
continued to generate rent growth greater than the rate of inflation. Compared
to the same period last year, property rental income grew 3.3%, or approximately
$10.6 million, reflecting an increase in average monthly rental rates of 3.4% to
$602 per month while physical occupancy of 92.9% remained stable compared to
30
last year. Management believes a portion of the rent growth reflects the impact
of the Company's upgrade and revenue enhancing capital expenditure programs. It
is anticipated that there will be a slowdown in the U.S. economic growth, while
new apartment completions increase. As a result, the Company expects a modest
decline in occupancy and slightly lower rent growth during 1999. The Company
expects to maintain rent growth in the 3% range and physical occupancy in the
92% range during 1999.
For 1998, property operating expenses at these same communities decreased 0.3%,
or $421,000. The decline is primarily the result of the following: (i) utility
expenses decreased $2.1 million, which is directly attributable to the Company's
water and sewer sub-metering initiative where local and state regulations allow
and (ii) an overall decrease in repair and maintenance expenses of $2.6 million.
The decrease in repair and maintenance expenses occurred as the Company
continued to benefit from its upgrade program and centralized purchasing
initiatives. However, these decreases were offset by increases in real estate
taxes, personnel costs and property management expenses. Real estate taxes
increased $1.3 million primarily in certain Florida and Texas markets. Personnel
costs increased $1.6 million as the Company experienced pressure on wages due to
low unemployment and tighter job markets, particularly in the service area. In
addition, the Company's cost of property management increased $1.1 million as a
result of the added infrastructure costs in areas such as Information
Technology, Human Resources and Training, and the cost of entering new markets
in new regions of the country during 1998. The Company's objective is for
operating expenses to be unchanged in 1999 primarily as a result of lower
utility expenses due to the continuing transfer of water and sewer costs to the
resident.
Primarily as a result of an increase in property rental income, the operating
margin improved 1.4% to 59.6% over 1997.
1997-vs-1996
For 1997, the Company's same communities provided approximately 53.6% of its
total property operating income. During 1997, the Company's same communities
continued to generate rent growth greater than the pace of inflation and double
digit growth of other income. Compared to the same period in 1996, property
rental income from these apartment homes grew 3.8%, or approximately $7.6
million, reflecting an increase in average monthly rents of 3.9% to $572 per
month. Growth in property rental income was slightly offset by a .04% decrease
in physical occupancy. In addition, other income, primarily fee income,
increased approximately $1.2 million or 17.6%. Overall, physical occupancy
bottomed out in January 1997 at 90.8% and grew steadily through August before
declining slightly to 92.3% in December 1997, an improvement of 1.9% for the
year. Physical occupancy declined due to the weakening of certain major
southeastern markets during the last half of 1996.
For 1997, property operating expenses at these communities increased 2.2%, or
$1.9 million. The 2.2% increase in property operating expenses was attributable
to higher personnel costs, marketing and advertising costs and the Company's
cost of property management. Personnel costs increased approximately $1.8
million, primarily due to understaffing at some properties during much of 1996.
Marketing and advertising costs increased 33.9% or approximately $845,000 over
the same period in 1996 as a direct result of softening in certain major markets
as discussed above. The cost of property management increased $1.7 million as
the Company invested heavily in its personnel and technological infrastructure
during 1997 in response to growth. However, these expense increases were offset
by decreases in repair and maintenance expense and utility expense. Repair and
maintenance expense decreased 13.1% or approximately $2.0 million primarily as a
result of less exterior painting, extraordinary repairs, mechanical repairs and
the effect of the upgrade program. In addition, the Company benefited from
economies of scale due to its increased size and some centralized purchasing
during the 1997 period. Utility expense decreased primarily as a result of
sub-metering water and sewer that began in 1997.
Due to the increase in property rental income, the operating margin improved
0.8% to 57.3%.
Non-Mature Communities
For 1998 vs. 1997, the Company's non-mature communities include: (i) 28
communities with 8,524 apartment homes acquired during 1997, net of one resold,
(ii) 39 communities with 7,550 apartment homes acquired on March 27, 1998 in
31
connection with the ASR Merger, (iii) 53 communities with 14,001 apartment homes
acquired on December 7, 1998 in connection with the AAC Merger, (iv) 24
communities with 6,959 apartment homes acquired in individual and portfolio
transactions during 1998, (v) 7,888 apartment homes sold since January 1, 1997
and (vi) the 1,957 apartment homes developed since January 1, 1997, which is
summarized in the chart below (dollars in thousands):
For 1997 vs. 1996, the Company's non-mature communities include: (i) 7,590
apartment homes acquired during 1996, net of one resold, and a community
acquired in 1995 and not stabilized due to significant rehabilitation, (ii)
13,671 apartment homes acquired on December 31, 1996 in connection with the
South West Property Trust Inc. Merger, net of one resold and one under
development, (iii) 8,524 apartment homes acquired since January 1, 1997, net of
one resold, (iv) 3,222 apartment homes sold from January 1, 1996 to December 31,
1997 and (v) the 1,232 apartment homes developed during 1996 and 1997. The
operating performance of these non-mature communities is summarized in the chart
below (dollars in thousands):
Years Ended December 31, 1998 and 1997:
Sales Development
1997 Acquisitions 1998 Acquisitions Communities Communities Total Non-Mature
----------------- --------------------- ----------------- ----------------- ------------------
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
------------------------------------------- ----------------- ----------------- ------------------
Property rental income $ 57,609 $ 27,292 $ 74,295 $ -- $ 7,660 $ 36,677 $ 9,246 $ 3,376 $ 148,810 $ 67,345
Property operating
expenses (excluding
depreciation and
amortization) (24,925) (10,961) (33,149) -- (3,773) (17,987) (3,821) (1,452) (65,668) (30,400)
------------------- ------------------- ---------------- ----------------- -----------------
Property operating
income $ 32,684 $ 16,331 $ 41,146 $ -- $ 3,887 $18,690 $ 5,425 $ 1,924 $ 83,142 $ 36,945
===================== =================== ================= ================= ==================
Years Ended December 31, 1997 and 1996:
1997 Acquisitions and
Former 1997 and 1996
1996 Acquisitions South West Development & Sales Total Non-Mature
------------------------ -------------------- -------------------- ---------------------
1997 1996 1997 1996 1997 1996 1997 1996
------------------------ -------------------- -------------------- ---------------------
Property rental income $ 50,977 $ 23,336 $ 86,884 $ -- $ 39,304 $ 13,922 $ 177,165 $ 37,258
Property operating
expenses (excluding
depreciation and
amortization) (20,690) (8,958) (36,923) -- (16,970) (7,012) (74,583) (15,970)
------------------------ ------------------- -------------------- --------------------
Property operating income $ 30,287 $ 14,378 $ 49,961 $ -- $ 22,334 $ 6,910 $ 102,582 $ 21,288
======================== =================== ==================== ====================
1998-vs-1997
For 1998, the Company's non-mature communities provided approximately 29.9% of
its total property operating income. Property rental income and property
operating expenses increased from 1997 to 1998 directly as a result of the
increase in the weighted average number of apartment homes owned during 1998.
For the year ended December 31, 1998, average economic occupancy was 88.6%, and
the operating margin was 55.9% for the non-mature communities.
1997 Acquisitions
On an average investment of $355.2 million, the 1997 acquisitions provided a
9.1% return on investment during 1998. For the year, these communities had
physical occupancy of 91.9% and an operating margin of 56.7%. During 1998,
property operating expenses were adversely impacted by (i) an increase in real
estate taxes due to reassessments at several Florida communities and (ii) the
delay in the Company's implementation of its water billing and reimbursement
schedule for these communities.
1998 Acquisitions
1998 Single Acquisitions
Included in this category are the 24 communities with 6,959 apartment homes
acquired by the Company during 1998 which are projected to have a first year
return on investment of approximately 9%. The annualized return on investment
for the 1998 single acquisitions on an average investment of $311.9 million was
32
8.7%. These results were below the Company's full year forecasted return on
investment of 9% primarily as a result of market softness in San Antonio and
Phoenix where the Company acquired communities in 1998. However, it is expected
that these communities will experience improved operating results in 1999 as
improvements are completed.
ASR Investments Corporation (ASR)
The acquisition of the 39 communities containing 7,550 apartment homes included
in the ASR Merger on March 27, 1998, provided the largest increases in property
rental income and property operating expenses for the Company's apartment
portfolio. The annualized return on investment for the ASR properties was 7.3%
on an average investment of $312.5 million during 1998. The under-performance of
this portfolio is primarily attributable to weak markets and seasonality in the
Phoenix/Tuscon/Albuquerque markets, however, certain assets are undergoing
upgrading and repositioning that is expected to improve operating results in
1999. While the Phoenix and Tuscon markets suffer temporarily from an abundance
of supply in the apartment sector, the Company believes in these markets over
the long-term. For the year ended December 31, 1998, these communities had
economic occupancy of 87.9% and an operating margin of 49.5%.
American Apartment Communities (AAC)
The acquisition of the 53 communities containing 14,001 apartment homes included
in the AAC Merger on December 7, 1998, had economic occupancy of 94.0% and an
operating margin of 67.4% for the 24 days owned during 1998. The return on
investment for the AAC properties is projected to be approximately 9% during
1999 on an initial investment of $766.9 million. This acquisition did not have a
material effect on 1998 results of operations.
Sales Communities
Since January 1, 1997, the Company sold approximately $225 million of property
consisting of 30 communities with 7,888 apartment homes, the net proceeds from
which were used to acquire newer communities that will provide higher long-term
returns on investment than the communities being sold. The properties sold
during 1998 had an annualized return on investment in excess of 10%.
Development Communities
The development communities consist of 1,957 apartment homes in five new
communities and five additional phases to existing communities developed since
January 1, 1997. Once stabilized, development communities are projected to
generate an average return on investment in excess of 10%.
1997-vs-1996
For 1997, the Company's non-mature communities provided approximately 46.4% of
the Company's total property operating income. Property rental income and
property operating expenses increased from 1996 to 1997 directly as a result of
the increase in the weighted average number of apartment homes owned during
1997. For the year ended December 31, 1997, average physical occupancy was
90.7%, and the operating margin was 57.9% for the non-mature communities.
1996 Acquisitions (excluding the South West Merger)
The 29 communities containing 7,590 apartment homes that were acquired during
1996 (net of one community containing 122 apartment homes resold and a community
acquired in 1995 and not stabilized due to significant rehabilitation) provided
a significant increase in property rental income and property operating expenses
for the Company's apartment portfolio for 1997. For 1997, these communities had
economic occupancy of 89.8% and an operating margin of 59.4%. The first year
return on investment for these communities in 1997, on an average investment of
$319 million, was 9.0% (excluding one community under renovation). This reflects
the under-performance of nine communities in the Greensboro/Winston-Salem, North
Carolina market that were acquired in August 1996 as part of a portfolio
transaction. Occupancy in this region peaked in August 1996 when the Company
acquired these properties and subsequently fell, reflecting an oversupply of
apartment product in this market. However, the Company believes Greensboro is a
good long-term market.
South West Property Trust Inc. (South West)
The acquisition of the 43 communities containing 13,671 apartment homes included
in the South West Merger on December 31, 1996, net of one community resold and
33
one under development, provided the largest increases in property rental income
and property operating expenses for the Company's entire apartment portfolio for
the year ended December 31, 1997. The return on investment for the South West
properties was 9.4% during 1997. For the year ended December 31, 1997, these
communities had economic occupancy of 92.7% and an operating margin of 57.5%.
1997 Acquisitions, Development and Sales
Included in this category are the following: (i) the 28 communities containing
8,524 apartment homes acquired by the Company during 1997 (net of one resold),
(ii) the 1,232 apartment homes developed during 1996 and 1997 and (iii) the 16
communities containing 3,222 apartment homes sold between January 1, 1996 and
December 31, 1997. The annualized return on investment for 1997 acquisitions on
an average investment of $345 million was projected to be 9.5%, but fell
slightly short at 9.3%.
Interest Expense
During 1998, interest expense increased $27.2 million or $.15 per common share
over 1997. The weighted average amount of debt employed during 1998 was higher
than it was in 1997 ($1.5 billion in 1998 versus $1 billion in 1997) which
accounted for the majority of the increase in interest expense. The weighted
average interest rate on this debt was slightly lower than it was last year,
decreasing from 7.5% in 1997 to 7.4% in 1998 reflecting the fact that the
Company's reliance on the lower rate short-term bank borrowings increased in
1998 compared to 1997 ($238.6 million weighted average outstanding in 1998
versus $74.6 million in 1997). For 1998, 1997 and 1996, total interest
capitalized was $3.4 million, $2.6 million and $541,000, respectively.
For 1997, interest expense increased $28.2 million or $.02 per common share over
1996. The weighted average amount of debt employed during 1997 was higher than
it was in 1996 ($1 billion in 1997 versus $647 million in 1996). The weighted
average interest rate on this debt was slightly lower in 1997, decreasing from
7.6% in 1996 to 7.5% in 1997. The slightly lower interest rate during 1997
reflected the fact that the weighted average interest rate on short-term bank
borrowings decreased compared to 1996 and the Company's reliance on these lower
rate short-term bank borrowings increased in 1997 compared to 1996 ($74.6
million weighted average outstanding in 1997 versus $49.9 million in 1996).
General and Administrative
During the year ended December 31, 1998, general and administrative expenses
increased by $3.1 million over 1997. In 1998, the Company incurred increases in
most of its general and administrative expense categories which were directly
attributable to the increased size of the Company and its investment in
infrastructure. The largest increases occurred in payroll and payroll-related
expenses. General and administrative expense as a percentage of rental income
increased 0.3% from 1.8% during 1997 to 2.1% during 1998 primarily due to (i)
the added infrastructure costs incurred due to the increased size of the Company
and (ii) the change in accounting for internal acquisition costs subsequent to
March 19, 1998.
During 1997, general and administrative expenses increased by $1.7 million over
the same period in the prior year. In 1997, the Company incurred increases in
most of its general and administrative expense categories. The largest increases
occurred in payroll expenses, investor relations expenses and office rent which
was directly related to increasing the size of the Company. However, general and
administrative expense, as a percentage of property rental income, remained
relatively flat compared to 1996.
Impairment Loss
During 1997, the Company recorded an impairment loss of $1.4 million relating to
two communities included in the Company's real estate held for investment. These
communities were subsequently moved to real estate held for disposition based
upon management's decision to dispose of these properties.
Gains on Sales of Investments
For the year ended December 31, 1998, the Company recognized gains on the sales
of investments for financial reporting purposes aggregating $26.7 million as a
result of the sale of 18 communities with 5,318 apartment homes and one shopping
center for an aggregate sales price of $156.6 million.
34
During 1997, the Company recognized gains on the sales of investments
aggregating $12.7 million as a result of the: (i) first quarter sale of the
Company's investment in the preferred stock of First Washington Realty Trust,
Inc. on which the Company recognized a gain for financial reporting purposes of
$2.1 million and (ii) the sale of 12 communities containing 2,570 apartment
homes and one shopping center for an aggregate sales price of $68.4 million on
which the Company recognized aggregate gains for financial reporting purposes of
$10.6 million.
Distributions to Preferred Shareholders
Distributions to preferred shareholders totaled $23.6 million for 1998 compared
to $17.3 million for 1997. The increase in distributions to preferred
shareholders is a result of the issuance of eight million shares of Series D
7.50% Cumulative Convertible Redeemable Preferred Stock in December 1998, in
connection with the acquisition of AAC and the issuance of six million shares of
Series B 8.60% Cumulative Redeemable Preferred Stock in May 1997.
Distributions to preferred shareholders totaled $17.3 million for the year ended
December 31, 1997 compared to $9.7 million for 1996. The increase in
distributions to preferred shareholders was a result of the issuance of six
million shares of Series B 8.60% Cumulative Redeemable Preferred Stock in May
1997.
Inflation
The Company believes that the direct effects of inflation on the Company's
operations have been inconsequential.
Year 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date sensitive software or embedded
chips may recognize a date using "00"" as the year 1900 rather than the year
2000. This could result in system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to process
transactions or engage in similar normal business activities.
The Company continues to identify and address issues regarding the transition to
Year 2000, as it is dependent on computer systems and applications to conduct
its business. The Company has performed a thorough assessment of its personal
computers, desktop software and major applications and is in the process of
completing its server environment assessment. To ensure that the Company
completed a formalized and thorough assessment of its Year 2000 issues, the
Company engaged an outside consulting firm to conduct a Year 2000 assessment and
develop a remediation plan. The plans covers four stages: (i) inventory, (ii)
assessment, (iii) remediation and (iv) testing and certification. Because the
Company operates in a structured, standardized environment, the assessment
indicated a high degree of Year 2000 compliance with few items for remediation.
All mission-critical applications have been determined to be Year 2000
compliant. Desktop hardware and software are 90% compliant, with remediation of
the non-compliant 10% to be completed by July 1999. None of the non-compliant
issues identified are mission-critical.
The Company is commencing the assessment phase for non-IT operating equipment at
its communities (gates, security, telephone, elevator, HVAC systems and other
such systems). This assessment will be completed by May 1, 1999, with any
remediation to be completed by November 1, 1999.
The Company is also assessing the Year 2000 compliance of vendors and other
external relationships to determine the extent to which the Company may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. The
Company has initiated formal communication with these parties. The Company
cannot insure timely compliance of third parties and; therefore, could be
adversely affected by failure of a significant third party to become Year 2000
compliant. The effect, if any, on the Company's results of operations from the
failure of such third parties to be Year 2000 compliant is not reasonably
estimable.
The Company estimates that the total Year 2000 project cost will be
approximately $100,000, of which approximately 50% has been incurred as of
December 31, 1998. Amounts expended to ensure Year 2000 compliance have been
35
funded by cash flows from operations and are not expected to have a material
impact on the Company's financial position, results of operations, or cash
flows. The Company believes that its Year 2000 initiatives are adequate to
address reasonably likely Year 2000 issues.
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
Assessment Remediation / Testing
% Complete Compliance Expected Completion
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
IT - Mission-Critical
Applications 100% 100% July 1999
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
IT - Desktop
Hardware / Software 95% 90% July 1999
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
IT - Network
Hardware / Software 60% 90% July 1999
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
Operating Equipment 0%, Expected Completion, Expected
at Communities May 1999 Completion, November 1999
July 1999
- - --------------------------------- ------------------------------- ------------------------------ -------------------------------
Failure to correct a material Year 2000 problem could result in the failure of
certain normal business activities or operations. Management believes that, with
the implementation of new or upgraded business systems, as needed, and the
completion of the Year 2000 project as scheduled, the possibility of significant
interruptions of normal operations due to the failure of those systems will be
reduced. However, the Company is dependent on the power and telecommunications
infrastructure within the United States. The most reasonably likely worst case
scenario would be that the Company may experience disruption in its operations
if any of the third-party suppliers reported a system failure. Although the
Company's Year 2000 project will reduce the level of uncertainty about the
compliance and readiness of its material third-party providers, due to the
general uncertainty over Year 2000 readiness of these third-party suppliers, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact.
The final phase of the Company's Year 2000 project relates to a contingency
plan. The Company maintains contingency plans in the normal course of business
designed to be deployed in the event of various potential business
interruptions.
36
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item 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 Managements 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 F-1 of
this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
37
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company's Proxy Statement to be
filed with respect to its Annual Meeting of Shareholders to be held on May 11,
1999.
Information required by this item regarding the executive officers of the
Company 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 the Company's Proxy Statement to be
filed with respect to its Annual Meeting of Shareholders to be held on May 11,
1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's Proxy Statement to be
filed with respect to its Annual Meeting of Shareholders to be held on May 11,
1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's Proxy Statement to be
filed with respect to its Annual Meeting of Shareholders to be held on May 11,
1999.
38
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 F-1 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 Exchange Company's Form S-3 Registration
Agreement dated as of September 10, 1998, Statement (Registration No. 333-64281) filed with
between the Company, United Dominion the Commission on September 25, 1998.
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.
39
3(b) Restated By-Laws Filed herewith.
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(i)(c) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A
of 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 Company Registration Statement dated February 4, 1998.
and ChaseMellon Shareholder 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)(b) Amended and Restated Credit Filed herewith.
Agreement dated as of December 7,
1998, among AAC Funding
Partnership III, certain affiliates of
AAC Funding Partnership III, the
Lenders identified therein and
NationsBank, N.A., as Administrative
Agent
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
10(i) Employment Agreement between Filed herewith.
the Company and John P. McCann
dated December 8, 1998
10(ii) Employment Agreement between Filed herewith.
the Company and John S. Schneider
dated December 8, 1998
40
10(iii) Employment Agreement between Filed herewith.
the Company and Richard Giannotti
dated December 8, 1998
10(iv) 1985 Stock Option Plan, Exhibit 10(iv) to the Company's Quarterly
as amended. Report on Form 10-Q for the quarter ended
June 30, 1998.
10(v) 1991 Stock Purchase and Loan Exhibit 10(viii) to the Company's Quarterly Report
Plan. on Form 10-Q for the quarter ended March 31, 1997.
10(vi) Third Amended and Restated Filed herewith.
Agreement of Limited Partnership of
United Dominion Realty, L.P.
Dated as of December 7, 1998.
10(vi)(a) Subordination Agreement dated Exhibit 10(vi)(a) to the Company's Form 10-Q for
April 16, 1998, between the the quarter ended March 31, 1998.
Company and United Dominion
Realty, L.P.
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.,
constituting 79.1% of the aggregate partnership interest.
United Dominion Realty Trust, Inc., a Virginia corporation
The Commons of Columbia, Inc., a Virginia corporation
UDRT of North Carolina, L.L.C., a North Carolina limited liability company
UDRT of Alabama, Inc., an Alabama corporation
UDR at Marble Hill, L.L.C., a Virginia limited liability company
United Dominion Realty, L.P., a Virginia limited partnership
UDRT of Virginia, Inc., a Virginia corporation
United Dominion Residential, Inc., a Virginia corporation
UDR South Carolina Trust, a Maryland real estate investment trust
Cleary Court Property Owner's Association, Inc., a Florida non-profit corporation
United Sub, Inc., a Virginia corporation
ASR Acquisition Sub, Inc.
UDR Developers, Inc., a Virginia corporation
UDR of Tennessee, L.P., a Virginia limited partnership
United Dominion Residential Ventures, L.L.C., a Virginia limited liability company
UDR Western Residential, Inc., a Virginia corporation
UDR Summit Ridge, L.P., a Delaware limited partnership
SWO REMIC Properties II-A, L.P., a Delaware limited partnership
South West Properties, L.P., a Delaware limited partnership
SWP Arkansas Properties, Inc., an Arkansas corporation
SWP Depositor, Inc., a Texas corporation
SWP Developers, Inc., a Texas corporation
SRL Amarillo Investors, Inc., a Texas corporation
UDR Camino Village, L.P., a Delaware limited partnership
UDR Pecan Grove, L.P., a Delaware limited partnership
41
UDR Seniors Housing, L.P. a Delaware limited partnership
UDR Texas Properties, L.P., a Delaware limited partnership
UDR Aspen Creek, L.L.C., a Virginia limited liability company
South West REIT Holding, Inc., a Texas corporation
SWP Properties, Inc., a Texas corporation
SWP Woodscape Properties, Inc., a Texas corporation
SWP Creeks Properties, Inc., a Texas corporation
SWP Properties I, L.P., a Delaware limited partnership
SWP Woodscape Properties I, L.P., a Delaware limited partnership
SWP Creeks Properties, I, L.P., a Delaware limited partnership
SWP REMIC Properties II, Inc., a Texas corporation
SWPT II Arizona Properties, Inc., an Arizona corporation
UDR Audobon, L.P., a Delaware limited partnership
UDR Cimarron City, L.P. a Delaware limited partnership
UDR Kenton, L.P., a Delaware limited partnership
UDR Villages of Thousand Oaks, L.P., a Delaware limited partnership
ASR Investments Corporation, an Arizona corporation
ASR Properties, Inc., an Arizona corporation
Heritage Communities L.P., a Delaware limited partnership
Heritage SGP Corporation, an Arizona corporation
Heritage Residential Group, an Arizona corporation
RMA Investments Holdings, Inc., an Arizona corporation
RMA Investments, Inc., an Arizona corporation
RMA Investments II, Inc., an Arizona corporation
Cholla Estates Construction L.L.C., an Arizona limited liability company
Pima Realty Advisors
JC Mortgage Advisors
JG Mortgage Advisors
FP Mortgage Advisors
CIMSA Financial Corporation, an Arizona corporation
ASR Finance Corporation, an Arizona corporation
Southwest Funding Capital Mortgage L.P., an Arizona limited partnership
ASR Mortgage Acceptance, Inc., an Arizona corporation
Rescap, Inc., an Arizona corporation
Rescap Manager Limited Partnership
ASC Properties, Inc., an Arizona corporation
ASV-II Properties, Inc., an Arizona corporation
ASV-XVII Properties, Inc., an Arizona corporation
ASC II Properties, Inc., an Arizona corporation
La Privada L.L.C., an Arizona limited liability company
Contempo Heights L.L.C., an Arizona limited liability company
Finesterra Apartments L.L.C., an Arizona limited liability company
Residential Mortgage Acceptance
AAC Funding II, Inc., a Delaware corporation
AAC Funding III, Inc., a Delaware corporation
AAC Funding IV, Inc., a Delaware corporation
AAC Funding IV, L.L.C., a Delaware limited liability company
AAC Funding Partnership II, a Delaware corporation
AAC Funding Partnership III, a Delaware corporation
AAC Management L.L.C., a Delaware limited liability company
AAC Seattle I, Inc., a Delaware corporation
AAC Vancouver I, L.P., a Washington limited partnership
42
AAC/FSC Clocktower Investors, L.L.C., a Washington limited liability company
AAC/FSC Crown Pointe Investors, L.L.C., a Washington limited liability company
AAC/FSC Hilltop Investors, L.L.C., a Washington limited liability company
AAC/FSC Seattle Properties, L.L.C., a Delaware limited liability company
Alexandria Executive Limited Partnership
American Apartment Communities II, Inc., a Maryland corporation
American Apartment Communities II, L.P., a Delaware limited partnership
American Apartment Communities Holdings, Inc., a Delaware corporation
American Apartment Communities Operating Partnership, L.P., a Delaware limited partnership
Bainbridge Associates PL-I, Ltd.
Bainbridge Associates PL-II, Ltd.
Bainbridge Communities, L.L.C.
C.A. Property Associates, L.L.C.
CMP-1, L.L.C.
Coastal Anaheim Properties, L.L.C., a Delaware limited liability company
Coastal Long Beach Properties, L.L.C., a Delaware limited liability company
Coastal Monterey Properties, L.L.C.
FMP Member, Inc., a Delaware corporation
FSC Realty, L.L.C.
Ft. Craig, L.P., an Ohio limited partnership
Fountainhead Apartments, L.P. an Ohio limited partnership
Jamestown of St. Matthews
Governour's Square of Columbus Co., an Ohio company
Jamestown of St. Matthews Co., an Ohio company
L.B. Property Associates, L.L.C.
LF Strategic Realty Investors, L.P.
Monterey Property Associates, L.L.C.
Northbay Properties II, L.P., a California limited partnership
Parker's Landing Venture I
Parker's Landing Venture II
Polo Chase Venture, L.L.C., a Delaware limited liability company
Regency park, L.P., an Indiania limited partnership
Schitzer Investment Corporation
Sunset Company, an Ohio company
Tivoli of Columbus L.P., an Ohio limited partnership
University Arms L.P.
Windward Point, L.L.C., a California limited liability company
Winterland San Francisco Partners
Woodlake Village, L.P., a California limited partnership
23 Consent of Independent Filed herewith.
Auditors
27 Financial Data Schedule Filed electronically with the Securities
and Exchange Commission.
Exhibits 10(i) through 10(v) inclusive, are management contracts or compensatory
plans or arrangements required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) of this report.
43
(b) Reports on Form 8-K
A Form 8-K dated September 11, 1998 was filed with the Securities and
Exchange Commission on October 23, 1998. The filing reported the proposed
merger of American Apartment Communities II, Inc. by the Company. The
filing included the audited financial statements of American Apartment
Communities II, Inc, and American Apartment Communities II, LP for the
year ended December 31, 1997.
A Form 8-K dated October 28, 1998 was filed with the Securities and
Exchange Commission on October 28, 1998. The filing reported on the
Company's results of operations for the three and nine months ended
September 30, 1998.
A Form 8-K dated November 2, 1998 was filed with the Securities and
Exchange Commission on November 6, 1998. The filing included the Exhibits
for the Consents of Experts as used in the Company's Prospectus Supplement
for the issuance of debt securities.
A Form 8-K dated November 12, 1998 was filed with the Securities and
Exchange Commission on November 12, 1998. The filing included the Exhibits
for the Underwriting Agreements, Pricing Agreements and Form of Notes as
used in the Company's Prospectus Supplement for the issuance of debt
securities.
A Form 8-K/A amending the Form 8-K dated September 11, 1998 was filed with
the Securities and Exchange Commission on December 21, 1998. The filing
amended the Item under which the original 8-K was previously filed.
A Form 8-K dated December 7, 1998, was filed with the Securities and
Exchange Commission on December 21, 1998. The filing reported the
acquisition of American Apartment Communities II, Inc. on December 7,
1998.
A Form 8-K dated January 20, 1999 was filed with the Securities and
Exchange Commission on January 20, 1999. The filing included pro forma
financial statements for the Company for the nine months ended September
30, 1998.
44
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, 1999 by the following persons on behalf of the
registrant and in the capacities indicated.
/s/ John P. McCann /s/ Jeff C. Bane
- - ------------------------------- ------------------------------
John P. McCann Jeff C. Bane
Chairman of the Board and Chief Director
Executive Officer
/s/ Lynne Sagalyn /s/ Mark J. Sandler
- - ------------------------ -------------------------------
Lynne Sagalyn Mark J. Sandler
Director Director
/s/ John S. Schneider
- - ---------------------------------- --------------------------------
John S. Schneider Robert W. Scharar
Director, Vice Chairman of the Board, Director
President and Chief Operating Officer
/s/ C. Harmon Williams, Jr. /s/ R. Toms Dalton
- - ---------------------------- --------------------------------
C. Harmon Williams, Jr. R. Toms Dalton
Director Director
/s/ Robert P. Freeman /s/ Jon A. Grove
- - ---------------------------- --------------------------------
Robert P. Freeman Jon A. Grove
Director Director
/s/ James D. Klingbeil /s/ Barry M. Kornblau
- - ---------------------------- -------------------------------
James D. Klingbeil Barry M. Kornblau
Director Director
/s/ Robin R. Flanagan
- - ---------------------------------------
Robin R. Flanagan
Assistant Vice President, Controller-Corporate
Accounting and Chief Accounting Officer
45
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 F-2
Consolidated Balance Sheets at December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for each of the three years
in the period ended December 31, 1998 F-4
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1998 F-5
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1998 F-6
Notes to Consolidated Financial Statements F-7
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III-Summary of Real Estate Owned F-26
All other schedules are omitted since the required information 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.
Report of Ernst & Young LLP, 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, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1998.
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 generally accepted auditing
standards. 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, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
Ernst & Young LLP
Richmond, Virginia
January 27, 1999
F-2
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
December 31, 1998 1997
- - ------------------------------------------------------------------------------------------------------------------------------
ASSETS
Real estate owned:
Real estate held for investment (Notes 2 and 3) $ 3,643,245 $ 2,281,438
Less: accumulated depreciation 280,663 200,506
---------------- ----------------
3,362,582 2,080,932
Real estate under development 99,395 24,598
Real estate held for disposition (Note 2) 174,145 166,501
---------------- ----------------
Total real estate owned, net of accumulated depreciation 3,636,122 2,272,031
Cash and cash equivalents 18,529 473
Restricted cash 50,805 17,107
Deferred financing costs-net 10,894 10,588
Other assets 39,038 13,526
---------------- ----------------
Total assets $ 3,755,388 $ 2,313,725
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable-secured (Note 4) $ 1,072,185 $ 417,325
Notes payable-unsecured (Note 5) 1,045,564 738,901
Real estate taxes payable 29,078 21,744
Accrued interest payable 20,714 14,912
Security deposits and prepaid rent 21,125 12,105
Distributions payable 31,423 25,607
Accounts payable, accrued expenses and other liabilities 45,736 10,081
---------------- ----------------
Total liabilities 2,265,825 1,240,675
Minority interests 115,442 14,693
Shareholders' equity: (Notes 8 and 9)
Preferred stock, no par value; $25 liquidation preference,
25,000,000 shares authorized;
4,200,000 shares 9.25% Series A Cumulative Redeemable 105,000 105,000
6,000,000 shares 8.60% Series B Cumulative Redeemable 150,000 150,000
8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable 175,000 -
Common stock, $1 par value; 150,000,000 shares authorized
103,639,117 shares issued and outstanding (89,168,442 in 1997) 103,639 89,168
Additional paid-in capital 1,090,432 906,307
Notes receivable from officer-shareholders (7,619) (8,806)
Distributions in excess of net income (242,331) (183,312)
---------------- ----------------
Total shareholders' equity 1,374,121 1,058,357
================ ================
Total liabilities and shareholders' equity $ 3,755,388 $ 2,313,725
================ ================
See accompanying notes to consolidated financial statements.
F-3
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 1998 1997 1996
- - ------------------------------------------------------------------------------------------------------------- -------------
Revenues
Rental income $478,718 $386,672 $241,260
Interest and other non-property income 3,382 1,123 1,707
-------------- -------------- -------------
482,100 387,795 242,967
Expenses
Rental expenses:
Utilities 26,361 24,861 17,735
Repair and maintenance 62,753 54,607 40,665
Real estate taxes 41,768 30,961 17,348
Property management 16,748 12,203 5,575
Other operating expenses 51,930 41,099 22,658
Depreciation of real estate owned 99,588 76,688 47,410
Interest 106,238 79,004 50,843
General and administrative 10,139 7,075 5,418
Other depreciation and amortization 3,645 2,084 1,299
Loss on termination of an interest rate risk management agreement (Note 6) 15,591 - -
Impairment loss on real estate owned - 1,400 290
-------------- -------------- -------------
434,761 329,982 209,241
-------------- -------------- -------------
Income before gains on sales of investments, minority interests
and extraordinary item 47,339 57,813 33,726
Gains on sales of investments 26,672 12,664 4,346
-------------- -------------- -------------
Income before minority interests and extraordinary item 74,011 70,477 38,072
Minority interests (1,541) (278) (58)
-------------- -------------- -------------
Income before extraordinary item 72,470 70,199 38,014
Extraordinary item - early extinguishment of debt (138) (50) (23)
-------------- -------------- -------------
Net income $ 72,332 $ 70,149 $ 37,991
Distributions to preferred shareholders (23,593) (17,345) (9,713)
-------------- -------------- -------------
Net income available to common shareholders $ 48,739 $ 52,804 $ 28,278
============== ============== =============
Earnings per common share: (Note 1)
Basic $ 0.49 $ 0.61 $ 0.49
============== ============== =============
Diluted $ 0.49 $ 0.60 $ 0.49
============== ============== =============
Common distributions declared per share $ 1.05 $ 1.01 $ 0.96
============== ============== =============
Weighted average number of common shares outstanding-basic 99,966 87,145 57,482
Weighted average number of common shares outstanding -diluted 100,062 87,339 57,655
See accompanying notes to consolidated financial statements.
F-4
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31, 1998 1997 1996
- - ----------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 72,332 $ 70,149 $ 37,991
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 103,233 78,772 48,709
Minority interests 1,541 278 58
Extraordinary item-early extinguishment of debt 138 50 23
Impairment loss on real estate owned -- 1,400 290
Gains on sales of investments (26,672) (12,664) (4,346)
Amortization of deferred financing costs 2,061 1,706 1,319
Changes in operating assets and liabilities:
Increase in operating liabilities 23,130 8,830 8,899
Increase in operating assets (30,440) (10,618) (2,879)
----------- ----------- -----------
Net cash provided by operating activities 145,323 137,903 90,064
- - ----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Net cash acquired in acquisition of ASR Investments Corporation 321 -- --
Net cash used in acquisition of American Apartment Communities II (59,767) -- --
Acquisition of real estate, net of liabilities assumed (169,808) (271,836) (137,236)
Capital expenditures (100,398) (95,499) (50,533)
Development of real estate assets (97,222) (52,217) (9,229)
Additions to non-real estate assets (2,876) (3,659) (2,554)
Net proceeds from sales of investments 135,164 73,864 33,823
Proceeds from interest rate risk management agreements -- 1,538 3,025
Net cash acquired in acquisition of South West Property Trust Inc. -- -- 1,129
Other investing activities (1,851) 2,143 3
----------- ----------- -----------
Net cash used in investing activities (296,437) (345,666) (161,572)
- - ----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net proceeds from the issuance of common stock 40,040 61,009 1,824
Net proceeds from the sale of preferred stock -- 145,068 --
Net proceeds from the issuance of common stock through the
dividend reinvestment and stock purchase plan 36,646 39,742 13,188
Gross proceeds from the issuance of notes payable-unsecured 212,500 125,000 200,111
Net proceeds from the issuance of notes payable-secured -- -- 5,925
Net borrowings of short-term bank debt 104,400 10,350 37,800
Proceeds from refunding of tax exempt bonds 7,700 -- --
Conversion of operating partnership units (3,528) -- --
Distributions paid to preferred shareholders (22,611) (16,270) (9,713)
Distributions paid to common shareholders (103,074) (85,777) (53,979)
Distributions paid to minority interest operating partnership unitholders (2,413) (144) --
Scheduled principal payments on notes payable-secured (18,255) (6,547) (2,729)
Non-scheduled payments on notes payable-secured (67,942) (9,397) (40,628)
Mortgage financing proceeds released from construction fund -- -- 3,627
Payments on notes payable-unsecured (9,418) (65,414) (72,064)
Payment of financing costs (4,875) (2,836) (1,306)
----------- ----------- -----------
Net cash provided by financing activities 169,170 194,784 82,056
- - ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 18,056 (12,979) 10,548
Cash and cash equivalents, beginning of year 473 13,452 2,904
----------- ----------- -----------
Cash and cash equivalents, end of year $ 18,529 $ 473 $ 13,452
=========== =========== ===========
- - ----------------------------------------------------------------------------------------------------------------------------
Supplemental Information:
Interest paid during the period $ 104,858 $ 76,669 $ 48,500
Non-cash transactions associated with the acquisition of properties:
Secured debt assumed 116,326 60,052 137,988
Issuance of common stock 7,099 -- 22,769
Issuance of unsecured notes payable -- -- 25,000
Issuance of operating partnership units 18,477 12,530 2,006
Non-cash transactions associated with Mergers:
Real estate assets acquired 1,080,696 -- 559,591
Other operating assets acquired 26,845 -- --
Issuance of preferred stock 175,000 -- --
Issuance of common stock 108,456 -- 322,110
Issuance of operating partnership units 88,831 -- --
Secured debt assumed 637,188 -- 99,921
Unsecured debt assumed -- -- 125,035
Operating liabilities assumed 36,026 -- 23,805
Minority interests in partnerships assumed 5,382 -- --
See accompanying notes to consolidated financial statements.
F-5
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
Year ended December 31 1998 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock
Balance, beginning of year $ 255,000 $ 105,000 $ 105,000
Issuance of 8.60% Series B Cumulative Redeemable -- 150,000 --
Issuance of 7.50% Series D Cumulative Convertible Redeemable 175,000
=========== =========== ===========
Balance, end of year $ 430,000 $ 255,000 $ 105,000
=========== =========== ===========
Common Stock, $1 Par Value
Balance, beginning of year $ 89,168 $ 81,983 $ 56,375
Issuance of common shares in public offerings 2,804 4,000 --
Issuance of common shares in the acquisition of South West Property Trust Inc. -- -- 22,804
Issuance of common shares in the acquisition of ASR Investments Corporation 7,743 -- --
Issuance of common shares in private placement -- -- 1,680
Issuance of common shares to employees and officer-shareholders 78 333 152
Issuance of common shares through dividend reinvestment
and stock purchase plan 2,825 2,852 972
Issuance of common shares in connection with the acquisition of properties 482 -- --
Conversion of operating partnership units to common stock 539 -- --
=========== =========== ===========
Balance, end of year $ 103,639 $ 89,168 $ 81,983
=========== =========== ===========
Additional Paid-in Capital
Balance, beginning of year $ 906,307 $ 814,795 $ 480,971
Issuance of commons shares in public offerings, net of issuance costs 35,170 55,386 --
Issuance of common shares in the acquisition of South West Property Trust Inc. -- -- 299,109
Issuance of common shares in the acquisition of ASR Investments Corporation 100,713 -- --
Issuance of common shares in private placement, net of issuance costs -- -- 21,059
Offering costs associated with the issuance of preferred shares -- (4,934) --
Issuance of common shares to employees and officer-shareholders 801 4,170 1,440
Issuance of common shares through dividend reinvestment
and stock purchase plan 33,821 36,890 12,216
Issuance of common shares in connection with the acquisition of properties 6,617 -- --
Conversion of operating partnership units to common stock 7,003 -- --
=========== =========== ===========
Balance, end of year $ 1,090,432 $ 906,307 $ 814,795
=========== =========== ===========
Notes Receivable from Officer-Shareholders
Balance, beginning of year $ (8,806) $ (5,926) $ (6,091)
Principal repayments 1,413 635 381
Notes received for issuance of common shares (226) (3,515) (216)
=========== =========== ===========
Balance, end of year $ (7,619) $ (8,806) $ (5,926)
=========== =========== ===========
Distributions in Excess of Net Income
Balance, beginning of year $ (183,312) $ (147,529) $ (120,314)
Net income 72,332 70,149 37,991
Common stock distributions declared ($1.05 per share for 1998, --
$1.01 per share for 1997 and $.96 per share for 1996) (107,758) (88,587) (55,493)
Preferred stock distributions declared-Series A ($2.31 per share for 1998, --
1997 and 1996) (9,704) (9,713) (9,713)
Preferred stock distributions declared-Series B ($2.15 per share for 1998
and $1.27 per share for 1997) (12,903) (7,632) --
Preferred stock distributions declared-Series D ($.12 per share for 1998) (986) -- --
=========== =========== ===========
Balance, end of year $ (242,331) $ (183,312) $ (147,529)
=========== =========== ===========
Unrealized Gains on Securities Available-for-Sale
Balance, beginning of year $ -- $ 2,056 $ 448
Realized gain on securities available-for-sale -- (2,056) --
Unrealized gain on securities availabe-for-sale -- -- 1,608
=========== =========== ===========
Balance, end of year $ -- $ -- $ 2,056
=========== =========== ===========
Total Shareholders' Equity $ 1,374,121 $ 1,058,357 $ 850,379
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-6
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization United Dominion Realty Trust, Inc., a Virginia corporation, was
formed in 1972. The Company operates within one defined business segment. The
Company is a fully integrated owner, operator, renovator and developer of
apartment communities located nationwide. At December 31, 1998, the Company
owned 326 communities with 86,893 completed apartment homes. The Company had
eight communities and two additional phases to existing communities with 1,946
apartment homes under development at December 31, 1998.
Basis of presentation The accompanying consolidated financial statements include
the accounts of the Company and its subsidiaries, including United Dominion
Realty, L.P., its Operating Partnership, and Heritage Communities, L.P.
(collectively, the "Company"). As of December 31, 1998, there were 38,218,389
units in the Operating Partnership outstanding, of which, 30,486,005, or 79.8%
were owned by the Company and 7,732,384, or 20.2% were owned by non-affiliated
limited partners. In connection with the acquisition of ASR Investment
Corporation, the Company acquired Heritage Communities, L.P., a Delaware limited
partnerhip (Heritage OP). As of December 31, 1998, there were 3,834,837 units in
the Heritage OP outstanding, of which, 2,974,252 or 77.5% were owned by the
Company and 22.5% were owned by non-affiliated limited partnerships. The
financial statements of the Company include the minority interest of the
unitholders in the operating partnerships. All significant inter-company
accounts and transactions have been eliminated in consolidation. Certain
previously reported amounts have been reclassified to conform with the current
financial statement presentation.
Use of estimates The preparation of the financial statements in conformity with
generally accepted accounting principles 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.
Federal income taxes The Company is operated as and elects to be taxed as a real
estate investment trust under the Internal Revenue Code of 1986, as amended (the
Code). Generally, a real estate investment trust which complies with the
provisions of the Code and distributes at least 95% of its taxable income to its
shareholders, does not pay federal income taxes on its distributed income.
Accordingly, no provision has been made for federal income taxes.
Cash and cash equivalents All highly liquid investments with maturities of three
months or less, when purchased, are considered to be cash equivalents.
Real estate assets and depreciation Real estate assets held for investment are
carried at historical cost less accumulated depreciation less any recorded
impairment losses.
Ordinary repair and maintenance costs are expensed as incurred. Significant
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.
The Company recognizes impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted future cash flows
are not sufficient to recover the assets carrying value. If such indicators are
present, an impairment loss is recognized based on the excess of the carrying
amount of the impaired 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. Real estate is classified as real estate held for
disposition when management has committed to sell and is actively marketing the
property, and the Company expects to dispose of these properties within the next
twelve months. Real estate held for disposition is carried at the lower of cost,
net of accumulated depreciation or fair value less cost to dispose, determined
on an asset by asset basis. Depreciation is not recorded on real estate held for
F-7
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 5 to 20 years for fixtures, equipment and other assets.
All development projects and related carrying costs, principally interest and
real estate taxes, 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, property taxes, insurance and allocated development overhead during
the construction period.
Interest and real estate taxes incurred during the construction period are
capitalized as part of the projects under development to the extent that such
charges do not cause the carrying value of the asset to exceed its net
realizable value. During 1998, 1997 and 1996, total interest capitalized was
$3,360,000, $2,634,000 and $541,000, respectively.
Commencing with the adoption of EITF No. 97-11 on March 19, 1998, "Accounting
for Internal Costs Relating to Real Estate Property Acquisitions", the Company
expenses direct internal costs related to identifying and acquiring operating
properties.
Revenue recognition The Company's apartment homes are leased under operating
leases with terms generally of one year or less. Rental income is recognized as
it is earned.
Restricted cash Restricted cash mainly consists of escrow deposits held by
lenders for property taxes, insurance and replacement reserves and resident
security deposits.
Deferred financing costs Deferred financing costs include fees and other costs
incurred to obtain long-term debt obligations and are generally amortized over a
period not to exceed the term of the related debt.
Interest rate swap agreements The Company 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 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 the Company for the periods presented.
F-8
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 The Company enters into interest rate
futures contracts to hedge interest rate risk associated with anticipated debt
transactions. The Company 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 terms 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, the Company marks the derivative instrument to market and
recognizes 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 potential common
stock equivalents is determined using the treasury stock method based on the
Company'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
effect of the conversion of the operating partnership units and convertible
preferred stock is not dilutive and is therefore not included in the following
calculations. The weighted average effect of the conversion of the operating
partnership units for the years ended December 31, 1998, 1997 and 1996 was
2,963,427, 317,120 and 68,502, respectively. The weighted average effect of the
conversion of the convertible preferred stock for the year ended December 31,
1998, was 809,273. The following table sets forth the computation of basic and
diluted earning per share (dollars in thousands, except per share data):
1998 1997 1996
-------- ------- -------
Numerator for basic and diluted earnings
per share-net income available to common
shareholders $ 48,739 $ 52,804 $ 28,278
Denominator:
Denominator for basic earnings per share-
weighted average shares 99,966 87,145 57,482
Effect of dilutive securities:
Employee stock options 96 194 173
-------- -------- --------
Dilutive potential common shares
Denominator for dilutive earnings per
share-adjusted weighted average shares
and assumed conversions 100,062 87,339 57,655
======== ======== ========
Basic earnings per share $ .49 $ .61 $ .49
======== ======== ========
Diluted earnings per share $ .49 $ .60 $ .49
======== ======== ========
Investment in marketable equity securities In connection with a shopping center
sale in 1995, the Company received marketable preferred stock with a fair value
of $7.7 million on the date of receipt. In January 1997, the Company sold the
preferred stock and received $9.9 million in cash and recognized a $2.1 million
gain on the sale of investment for financial reporting purposes.
F-9
Minority interests in operating partnerships Interests in the Operating
Partnership held by limited partners are represented by operating partnerships
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 the Company's common stock on a one-for-one basis, at the option of
the Company. OP Units as a percentage of total units and shares outstanding was
7.7%, 1.1% and 0.1% at December 31, 1998, 1997 and 1996, respectively.
Minority interests in other partnerships The Company 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 The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations 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 use of option valuation models that were
not developed for use in valuing employee stock options. Under APB 25, because
the exercise price of the Company'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 As of January 1, 1998, the
Company adopted SFAS No. 130, "Reporting Comprehensive Income" (Statement 130).
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of Statement 130
had no impact on the Company's financial statements for each of the periods
presented as the Company has no items of comprehensive income.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (Statement 133)
which is required to be adopted in years beginning after June 15, 1999.
Statement 133 permits early adoption as of the beginning of any fiscal quarter
after its issuance, however, the Company does not anticipate adopting Statement
133 until such time as it is required. Statement 133 will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings. The Company has not yet determined what the effect of
Statement 133 will be on earnings and the financial position of the Company,
however, management does not anticipate that the adoption of Statement 133 will
have a significant effect on earnings or the financial position of the Company.
F-10
2. REAL ESTATE OWNED
The Company operates primarily in 34 major markets dispersed throughout a 22
state area. At December 31, 1998, the Company's largest apartment market was
Dallas, where it owned 9.5% of its apartment homes, based upon carrying value.
Excluding Dallas, the Company did not own more than 5% of its apartment homes in
any one market, based upon carrying value.
The following table summarizes the components of real estate held for investment
at December 31, (dollars in thousands):
1998 1997
----------- ----------
Land and land improvements $ 647,328 $ 393,505
Buildings and improvements 2,819,312 1,783,565
Furniture, fixtures and equipment 169,364 100,380
Construction in progress 7,241 3,988
----------- -----------
Real estate held for investment 3,643,245 2,281,438
Accumulated depreciation (280,663) (200,506)
----------- -----------
Real estate held for investment, net $ 3,362,582 $ 2,080,932
=========== ===========
The following is a reconciliation of the carrying amount of real estate held for
investment at December 31, (dollars in thousands):
1998 1997 1998
---------- ---------- -----------
Balance at January 1 $ 2,281,438 $ 2,007,612 $ 1,131,098
Real estate acquired 1,388,514 344,363 843,277
Capital expenditures 98,872 96,102 49,434
Transferred from real estate under development 23,350 65,475 --
Real estate sold -- -- (230)
Impairment loss -- (1,400) --
Transferred to real estate held for disposition (148,929) (230,714) (15,967)
----------- ----------- -----------
Balance at December 31 $ 3,643,245 $ 2,281,438 $ 2,007,612
=========== =========== ===========
The following is a reconciliation of accumulated depreciation for real estate
held for investment at December 31, (dollars in thousands):
1998 1997 1996
--------- -------- ----------
Balance at January 1 $ 200,506 $ 173,291 $ 129,454
Depreciation expense for the year* 100,683 77,440 48,039
Transferred to real estate held for disposition (20,526) (50,225) (4,202)
--------- --------- ---------
Balance at December 31 $ 280,663 $ 200,506 $ 173,291
========= ========= =========
* Includes $1,095, $752, and $629 for 1998, 1997 and 1996, respectively,
classified as "Other depreciation and amortization" in the Consolidated
Statements of Operations.
F-11
The following is a summary of real estate owned by market at December 31, 1998
(dollars in thousands):
Real Estate Held for Investment by Market (Excluding real estate under
development)
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
---------- ----------- -------- ------------ ------------
Apartments
Dallas, TX 27 $340,778 $375,962 $18,872 $40,510 (A)
Houston, TX 22 183,317 195,997 7,276 65,965 (A)
Orlando, FL 12 146,114 172,692 17,647 41,630
Phoenix, AZ 8 162,162 168,309 5,194 19,931 (A)
Tampa, FL 11 146,849 162,077 13,855 41,067 (A)
San Antonio, TX 12 150,741 159,216 6,514 38,609 (A)
Raleigh, NC 10 123,071 137,946 19,070 9,132 (A)
San Francisco, CA 4 128,754 128,754 240 70,086
Charlotte, NC 10 95,265 116,668 16,227 22,772 (A)
Eastern NC 10 80,116 110,189 19,514 10,127
Monterey Peninsula, CA 16 105,970 105,970 183 (A)
Columbia, SC 10 89,168 104,132 17,440 21,639
Memphis, TN 6 95,594 101,809 6,260 43,412
Nashville, TN 9 85,781 98,798 11,059 5,081
Richmond, VA 8 74,856 96,063 20,511 3,034
Columbus, OH 6 90,539 91,395 617 34,981 (A)
Miami/Ft.
Lauderdale, FL 5 75,030 80,473 7,478 --
Atlanta, GA 7 66,892 78,195 8,382 11,093
Greensboro, NC 5 63,359 77,768 5,211 (A)
Portland, OR 4 59,743 59,743 108 12,745 (A)
Jacksonville, FL 3 44,787 55,913 6,173 12,455
Los Angeles, CA 2 53,387 53,387 96 6,141
Hampton, VA 6 42,741 53,286 13,198 --
Baltimore, MD 5 46,071 51,827 8,788 12,980
Lansing, MI 4 50,559 50,559 89 (A)
Greenville, SC 5 41,703 50,058 7,544 --
Sacramento, CA 2 47,549 47,549 85 17,127 (A)
Seattle, WA 4 46,147 46,383 386 24,367
Denver, CO 2 44,195 44,195 79 (A)
Fayetteville, NC 3 39,004 40,900 3,255 18,453
Detroit, MI 4 38,126 38,126 68 (A)
Washington DC 2 32,603 35,509 3,339 --
Eastern Shore MD 4 31,403 34,546 4,014 --
Indianapolis, IN 3 32,663 32,663 57 (A)
F-12
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
---------- ----------- -------- ------------ ------------
Apartments (continued)
Albuquerque, NM 4 28,531 29,101 999 13,704 (A)
Tucson, AZ 6 25,679 26,341 702 13,937
Austin, TX 2 21,005 23,315 1,680 (A)
Other FL 7 54,048 66,929 7,898 --
Other VA 6 29,510 47,194 7,666 2,830
Other Midwest 5 41,556 42,321 207 --
Other WA 3 24,728 25,264 635 9,702
Other GA 2 19,049 22,401 3,769 6,179
Arkansas 2 20,500 21,897 1,287 --
Nevada 1 20,000 20,549 1,138 --
Other CA 2 18,277 18,277 32 (A)
Delaware 2 14,732 17,670 2,364 --
Alabama 1 7,947 11,212 1,799 --
Other NC 1 6,770 7,628 663 (A)
Other SC 1 4,558 6,089 995 --
- ----- ----- ---- ------
296 $3,291,927 $3,643,245 $280,663 $ 629,689
=== ========== ========== ======== =========
Real Estate Held for Disposition (B)
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
---------- ----------- -------- ------------ ------------
Apartments 26 $ 154,733 $ 197,543 $ 34,177 $ 60,273 (A)
Commercial 4 11,082 12,569 1,790 3,512
- ------ ------ ----- --------
30 $165,815 $ 210,112 $ 35,967 $ 63,785
== ======== ========= ========= ========
Total Real Estate
Owned (C) 326 $3,457,742 $3,853,357 $316,630 $1,072,185
=== ========== ========== ======== ==========
(A) There are 23 communities encumbered by two REMIC financings
aggregating $75.9 million, 6 communities encumbered by one
secured note payable aggregating $31.7 million, 24 communities
encumbered by fixed-rate debt aggregating $159.7 million and
18 communities encumbered by variable-rate debt aggregating
$111.4 million.
(B) Real estate held for disposition contributed property
operating income (property rental income less property
operating expenses) in the aggregate amount of $19.7 million,
$19.5 million and $3.9 million, respectively for the years
ended December 31, 1998, 1997 and 1996, respectively.
(C) Excludes real estate under development.
In connection with the Company's periodic evaluation of its apartment portfolio
during 1997 the Company recorded an impairment loss of $1.4 million relating to
two communities included in real estate held for investment. These apartment
communities were subsequently moved to real estate held for disposition based
upon management's decision to dispose of these properties.
F-13
3. ACQUISITIONS
On March 27, 1998, the Company 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. Each
share of ASR's common stock was exchanged for 1.575 shares of the Company's
common stock. The transaction was structured as a tax-free merger and was
treated as a purchase for accounting purposes. No good will was recorded in
connection with this transaction. In connection with the acquisition, the
Company acquired primarily real estate assets totaling $313.7 million.
Consideration given by the Company included 7,742,839 shares of the Company's
common stock valued at $14 per share for an aggregate equity value of $108.4
million plus the issuance of 1,529,990 OP Units in Heritage Communities, L.P.
valued at $21.4 million. In addition, the Company assumed, at fair value,
mortgage debt totaling $179.4 million and other liabilities of $13.6 million.
The aggregate purchase price in the ASR Merger was $323.1 million, including
transaction costs.
On December 7, 1998, the Company completed the acquisition of American Apartment
Communities II, Inc. ("AAC") in a statutory merger (the "AAC Merger"). American
Apartment Communities II, Inc.'s principal asset was a 79% interest in American
Apartment Communities II, LP. 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 was
structured as a tax-free merger and was treated as a purchase for accounting
purposes. No good will was recorded in connection with this transaction. In
connection with the AAC Merger, the Company acquired primarily real estate
assets totaling $766.9 million. The aggregate purchase price consisted of the
following: (i) 8,000,000 shares of the Company's 7.5% Series D Convertible
Preferred Stock ($25 liquidation preference value) with a fair market value of
$175 million which is convertible into the Company's Common Stock at $16.25 per
share, (ii) the issuance of 5,614,035 OP units to holders of the 21% minority
interests in American Apartment Communities, L.P. 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
interests aggregating $27.8 million and (v) $59.8 million of cash. The aggregate
purchase price in the AAC Merger was $793.7 million, including transaction
costs.
Information concerning unaudited pro forma results of operations of the Company
for the years ended December 31, 1998 and 1997 are set forth below. For 1998,
such pro forma information assumes the following transactions occurred on
January 1, 1997: (i) the acquisition of ASR, (ii) the acquisition of AAC and
(iii) the acquisition of 13 communities with 4,318 apartment homes for an
aggregate purchase price of $144 million. For 1997, in addition to the
acquisitions previously described, such pro forma information assumes the
following transactions occurred on January 1, 1997: (i) the acquisition by the
Company of 17 communities with 5,659 apartment homes at a total cost of $219
million and (ii) the acquisition by ASR of 22 communities with 4,208 apartment
homes at a total cost of $176 million.
In addition to the ASR Merger and the AAC Merger, all of the acquisitions
previously described have been accounted for as purchases of real estate and
operating results for those communities are reflected in the accompanying
consolidated financial statements from their respective dates of acquisition.
F-14
Pro Forma
Year Ended December 31,
----------------------
In thousands, except per share amounts 1998 1997
- - --------------------------------------- -------- ----------
(Unaudited)
Rental income $597,460 $566,681
Net income available to common shareholders
before extraordinary item 43,218 37,468
Net income available to common shareholders 43,080 37,418
Net income per common share before extraordinary item-basic
and diluted $ .41 $ .39
Net income per common share-basic and diluted .41 .39
The unaudited information is not necessarily indicative of what the Company's
consolidated results of operations would have been if the acquisitions
previoulsy described had occurred at the beginning of each period presented.
Additionally, the pro forma information does not purport to be indicative of the
Company's results of operations for future periods.
4. NOTES PAYABLE-SECURED
Notes payable-secured, which encumber $1.9 billion or 48.7% of the Company's
real estate owned, ($2.0 billion or 51.3% of the Company's real estate owned is
unencumbered) consist of the following at December 31, 1998 (dollars in
thousands):
Weighted Weighted
Average Average No. of
Interest Years to Communities
Principal Outstanding Rate Maturity Encumbered
- - --------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1998 1998
---------------------------------------------------------------------
Fixed-Rate Debt
Mortgage Notes Payable (a) $ 618,997 $ 134,888 7.87% 6.1 76
Tax-Exempt Secured Notes Payable 125,405 127,437 7.02% 21.5 18
REMIC Financings 75,919 88,574 7.82% 2.0 23
Secured Notes Payable 45,000 45,000 7.29% 0.2 6
-------------------------------------------------------------------
Total Fixed-Rate Secured Notes Payable 865,321 395,899 7.69% 7.1 123
Variable-Rate Debt
Secured Notes Payable 141,969 19,226 7.13% 3.9 7
Tax-Exempt Secured Notes Payable 64,895 2,200 5.45% 15.5 5
-------------------------------------------------------------------
Total Variable-Rate Secured Notes Payable 206,864 21,426 6.60% 10.1 12
-------------------------------------------------------------------
Total Notes Payable-Secured $1,072,185 $ 417,325 7.48% 7.6 135
===================================================================
(a) Includes fair value adjustments aggregating $18.9 million recorded in
connection with the ASR Merger and the AAC Merger.
F-15
Fixed-Rate
Mortgage Notes Payable Fixed-rate mortgage notes payable are generally due in
monthly installments of principal and interest and mature at various dates from
March 1999 through June 2034 and carry interest rates ranging from 7.13% to
9.58%. During 1998, the Company assumed sixty fixed-rate mortgage notes payable
aggregating $515.6 million with a weighted average interest rate of 8.03% in
connection with the acquisition of communities, including the ASR Merger and AAC
Merger.
Tax-Exempt Secured Notes Payable Fixed-rate mortgage notes payable which secure
tax-exempt housing bond issues mature at various dates from November 2004
through December 2025 and carry interest rates from 6.03% to 8.50%. Interest on
these notes is generally payable in semi-annual installments. During 1998, the
Company assumed one fixed-rate tax-exempt secured note payable carrying an
interest rate of 7.54%.
REMIC Financings The Company has two fixed-rate REMIC Financings which bear
interest of 7.01% and 8.50% and mature on December 10, 2000 and February 10,
2001, respectively. The Company makes monthly installments of principal and
interest over the term of the REMIC Financings. Principal balances at maturity
are expected to be $29.3 million and $36.6 million, respectively.
Secured Notes Payable Secured notes payable consist of a $31.7 million
variable-rate secured senior credit facility and two secured variable-rate notes
payable aggregating $13.3 million, all of which mature in August 1999. The
variable-rate secured notes payable bear interest at LIBOR + .65% or 6.06% at
December 31, 1998. The Company has five interest rate swap agreements with an
aggregate notional value of $45 million under which the Company pays a
fixed-rate of interest and receives a variable-rate on the notional amounts. The
interest rate swap agreements effectively change the Company's interest rate
exposure on the $45 million secured notes payable from a variable-rate to a
weighted average fixed-rate of 7.29%.
Variable-Rate
Secured Notes Payable Variable-rate mortgage notes payable are generally due in
monthly installments of principal and interest and mature at various dates from
August 1999 through September 2027. At December 31, 1998, these notes carry
interest rates ranging from 6.33% to 7.21%. During 1998, the Company assumed
five variable-rate mortgage notes payable aggregating $129.4 million with a
weighted average interest rate of 7.26%.
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 April 2029. At December 31, 1998, these notes carry interest rates ranging
from 3.07% to 7.00%. During 1998, the Company assumed three variable-rate
tax-exempt notes payable aggregating $55 million which carry a weighted average
interest rate of 5.33%.
The aggregate maturities of secured notes payable for the five years subsequent
to December 31, 1998 is as follows (dollars in thousands):
Fixed-Rate Variable-Rate
--------------------------------------------------- ------------------------
Mortgage Tax-Exempt REMIC Secured Mortgage Tax-Exempt
Notes Bonds Financings Notes Notes Notes Total
- - ---------------------------------------------------------------------- ------------------------- -----------
1999 $ 32,209 $ 1,769 $ 3,396 $ 45,000 $ 111,365 $ 1,400 $ 195,139
2000 61,451 1,400 34,464 -- 743 1,500 99,558
2001 55,636 1,657 38,059 -- 10,386 1,500 107,238
2002 61,108 1,845 -- -- 293 4,000 67,246
2003 110,314 1,786 -- -- 5,810 1,900 119,810
Thereafter 298,279 116,948 -- -- 13,372 54,595 483,194
------------------------------------------------------- ------------------------- ----------
$ 618,997 $ 125,405 $ 75,919 $ 45,000 $ 141,969 $ 64,895 $1,072,185
======================================================= ========================= ==========
F-16
5. NOTES PAYABLE-UNSECURED
A summary of notes payable-unsecured at December 31, 1998 and 1997 is as
follows:
Dollars in thousands 1998 1997
--------- ----------
Commercial Banks
Borrowings outstanding under
credit facilities $ 240,000 $ 135,600
Insurance Companies -Senior Unsecured Notes
7.98% due March 1999-2003 (a) 37,228 44,571
8.72% due November 1998 -- 2,000
---------- ----------
37,228 46,571
Other (b)
5,836 6,730
Senior Unsecured Notes - Other
8.50% Monthly Income Notes due November 2008 62,500 --
8.13% Senior Notes due November 2000 150,000 --
7.25% Notes due April 1999 75,000 75,000
8.50% Debentures due September 2024 (c) 150,000 150,000
7.95% Medium-Term Notes due July 2006 125,000 125,000
7.07% Medium-Term Notes due November 2006 25,000 25,000
7.02% Medium-Term Notes due November 2005 50,000 50,000
7.25% Notes due January 2007 125,000 125,000
---------- ----------
762,500 550,000
---------- ----------
Total Notes Payable-Unsecured $1,045,564 $ 738,901
========== ==========
(a) Payable in five equal principal installments of $7.4 million.
(b) Includes $5.4 million and $6.2 million at December 31, 1998 and 1997,
respectively, of deferred gain from the termination of interest rate risk
management agreements.
(c) Debentures include an investor put feature which grants a one time option
to redeem debentures in September 2004.
On January 21, 1999, the Company established a program for the sale of up to
$200 million aggregate principal amount of Medium-Term Notes (the "MTN
Program"). The Company sold an aggregate of $150 million of senior unsecured
notes which consisted of the following: (i) $70 million of 7.60% Notes due
January 25, 2002, (ii) $58 million of 7.67% Notes due January 26, 2004, (iii)
$10 million of variable rate Notes due January 27, 2003 on which the Company
subsequently executed an interest rate swap with a notional amount of $10
million which effectively fixed the interest rate at 7.52% and (iv) $12 million
of 7.22% Notes due February 19, 2003. Net proceeds from the offerings will be
used to repay revolving bank debt and prepay mortgage debt.
The extraordinary items for the years ended December 31, 1998, 1997 and 1996
resulted from the write-off of deferred financing costs on mortgage debt
satisfied.
F-17
Information concerning short-term bank borrowings is summarized in the table
that follows:
In thousands 1998 1997 1996
- - --------------------------------------------------------------------------------------------------
Total revolving credit facilities
and lines of credit at December 31 $265,000 $265,000 $228,500
Borrowings outstanding at December 31 240,000 135,600 125,250
Weighted average daily borrowings during the year (d) 238,587 74,623 49,941
Maximum daily borrowings during the year (d) 334,500 135,600 125,250
Weighted average daily interest rate during the year(d) 6.1% 6.3% 6.0%
Weighted average daily interest rate at December 31 6.0% 6.4% 6.3%
(d) Includes balances on a $75 million bridge facility funded in July 1998 that
matured in November 1998.
At December 31, 1998, the Company had in place a syndicated three year $200
million unsecured revolving credit facility (the "Credit Facility") of which
$190 million was outstanding at December 31, 1998. The Credit Facility will
expire on August 4, 2000. Borrowings under the Credit Facility generally bear
interest at LIBOR plus 55 basis points. The Company is also required to pay a
fee of .200% of the committed amount. This fee and the interest rate are both
subject to change as the Company's credit ratings change.
At December 31, 1998, the Company had a $50 million interim syndicated 364-day
credit agreement (the "Credit Agreement") of which $50 million was outstanding
at December 31, 1998. The Credit Agreement will mature on August 4, 1999.
Borrowings under the Credit Agreement generally bear interest at LIBOR plus 55
basis points. The Company is also required to pay a fee of .150% of the
committed amount. This fee and the interest rate are both subject to change as
the Company's credit ratings change.
At December 31, 1998, the Company had a $15 million unsecured line of credit
with a commercial bank, of which there were no borrowings outstanding at
December 31, 1998. Currently expiring on June 30, 1999, this credit facility is
renewable annually by mutual agreement between the Company and the bank. The
line is subject to periodic bank review and requires the Company to maintain a
depository relationship with the 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 facility.
The Credit Facility and Credit Agreement are subject to customary financial
covenants and limitations. 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.
F-18
6. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following disclosures of estimated fair value of financial instruments were
determined by the Company 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 the Company would realize
on the disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. The carrying amounts and estimated fair value of
the Company's financial instruments at December 31, 1998 and 1997, both on and
off-balance sheet, are summarized as follows:
December 31, 1998 December 31, 1997
----------------------------- ----------------------------
In thousands Carrying Fair Carrying Fair
Amount Value Amount Value
------------------------------ ----------------------------
Notes payable-secured $ 1,072,185 $ 1,125,582 $ 417,325 $ 444,925
Notes payable-unsecured 1,045,564 1,068,868 738,901 780,051
Interest rate swap agreements -- (1,321) -- (547)
Interest rate risk management agreements -- -- -- (5,620)
The following methods and assumptions were used by the Company in estimating the
fair values set forth above.
Cash and cash equivalents The carrying amount of cash and cash equivalents
approximates fair value.
Notes payable Estimated fair value is based on mortgage rates and tax-exempt
bond rates believed to be available to the Company for the issuance of debt with
similar terms and remaining lives. The carrying amount of the Company's
variable-rate notes payable-secured approximate fair value at December 31, 1998
and 1997. The carrying amounts of the Company's borrowings under short-term
revolving credit agreements and lines of credit approximate their fair values.
Interest rate swap agreements Fair value is based on external market quotations
from investment banks.
Interest rate risk management agreements Fair value is based on external market
quotations from investment banks.
Derivative Instruments
Interest rate swap agreements At December 31, 1998 and 1997, the Company had
five interest rate swap agreements (the "Agreements") outstanding with an
aggregate notional amount of $45 million. These agreements effectively fix the
interest rate on certain variable-rate secured notes payable to a weighted
average fixed-rate of 7.29%. These Agreements have a weighted average maturity
of 2.6 years and mature at various times from May 2000 to July 2004. The
Company's credit exposure on swaps is limited to the value of interest rate
swaps that are favorable to the Company at December 31, 1998.
For all periods presented, the Company had no deferred gains or losses relating
to terminated swap contracts.
Interest rate risk management agreements The Company deferred gains of $1.5
million in 1997 related to the termination of an interest rate risk management
agreement used to hedge the issuance of $125 million of notes issued in 1997.
This agreement had the economic impact of reducing the interest rate from 7.31%
to 7.14% over the ten year term of the notes.
F-19
In order to reduce the interest rate risk associated with the anticipated
issuance of unsecured notes during 1998, the Company entered into a $100 million
(notional amount) fixed pay forward starting swap agreement (interest rate risk
management agreement) with a major Wall Street investment banking firm in July
1997. The Company settled the interest rate risk management agreement on
November 9, 1998, by paying $15.6 million to the counterparty. The Company was
unable to issue the unsecured notes contemplated by the interest rate risk
management agreement, and accordingly, the cost associated with this settlement
is reflected in the 1998 Statement of Operations.
The Company has no interest rate risk management agreements outstanding at
December 31, 1998.
The Company has not obtained collateral or other security to support financial
instruments. In the event of non-performance by the counterparty, the Company's
credit loss on its derivative instruments is limited to the value of the
derivative instruments that are favorable to the Company at December 31, 1998.
However, such non-performance is not anticipated as the counterparties are
highly rated, credit quality U.S. financial institutions.
7. INCOME 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.
All realized gains (losses) on sales of investments are distributed to
shareholders if and when recognized for income tax purposes. Since 1980, gains
aggregating approximately $82.6 million have been deferred for income tax
purposes and are undistributed at December 31, 1998.
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, 1998, distributions paid per common share
were taxable as follows:
1998 1997 1996
---- ----- ------
Ordinary income $ .913 $ .727 $ .638
Long-term capital gain --- .021 ---
Return of capital .127 .249 .307
------ ------ -------
$1.040 $ .997 $ .945
====== ====== =======
8. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The United Dominion Realty Trust, Inc. Profit Sharing Plan (the "Profit Sharing
Plan") is a defined contribution plan covering all eligible full-time employees.
Under the Profit Sharing Plan, the Company makes discretionary profit sharing
and matching contributions to the Profit Sharing Plan as determined by the
Compensation Committee of the Board of Directors. Aggregate contributions, both
matching and discretionary, which are included in the Company's consolidated
statements of operations for the three years ended December 31, 1998, 1997 and
1996 were $550,000, $646,000 and $600,000, respectively.
F-20
Stock Option Plan
The Company's 1985 Share 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 the Company, for up to 10,000,000 shares of the
Company'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 equal to the market value of
the shares on the date of grant. Shares under options which subsequently 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 all
options granted subsequent to December 12, 1995, the options have ten year terms
and typically vest on December 31 of the year subsequent to grant. On December
8, 1998, the Company cancelled 1,047,165 options which were granted on December
9, 1997 at $14.25. The Company subsequently reissued these options on December
8, 1998 at the Company'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 the Company 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 1998,
1997 and 1996:
1998 1997 1996
---- ---- ----
Risk free interest rate 4.9% 4.8% 4.8%
Dividend yields 6.6% 6.6% 6.6%
Volatility factor .150 .150 .150
Weighted average expected life (years) 9 9 9
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. SFAS No. 123
is applicable only to options granted subsequent to December 31, 1994,
consequently, the pro forma effect is not fully reflected until 1997. The
Company's pro forma information is as follows: (in thousands, except per share
amounts):
1998 1997 1996
---- ---- ----
Net income available
to common shareholders
As reported $ 48,739 $ 52,804 $ 28,278
Pro forma 47,841 52,221 27,961
Earnings per common share-diluted
As reported $ .49 $ .60 $ .49
Pro forma .48 .60 .48
F-21
A summary of the Company's stock option activity during the three years ended
December 31, 1998 is provided in the following table (in thousand of dollars,
except per share amounts).
Outstanding Options
-----------------------------------------------------
Shares Available Weighted Average Range of
For Future Grant Options Exercise Price Exercise Prices
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 602,840 1,490,636 $12.41 $ 7.44-$14.63
Granted (472,000) 472,000 15.21 13.88-15.25
Exercised -- (148,220) 10.33 7.44-13.63
Forfeited 39,200 (39,200) 14.17 13.13-14.63
Additional shares authorized 1,800,000 -- -- --
-----------------------------------------------------------------------------------
Balance, December 31, 1996 1,970,040 1,775,216 13.29 7.44-15.25
Granted (1,841,000) 1,841,000 14.34 13.50-15.38
Exercised -- (116,495) 11.18 7.44-14.63
Forfeited 51,000 (51,000) 15.09 13.13-15.38
---------------------------------------------------------------------------------------
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
=======================================================================================
(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,
1996 713,791 $11.94 $7.44-$15.25
1997 916,981 12.67 7.44-15.38
1998 1,691,863 13.79 7.44-15.38
The weighted average remaining contractual life on all options outstanding is
7.6 years. Approximately 1,533,335 of share options had exercise prices between
$14.13 and $15.38, approximately 1,781,454 had exercise prices between $10.88
and $13.94 and approximately 44,224 of share options had exercise prices
between $7.44 and $9.19.
The weighted average fair value of options granted during 1998, 1997 and 1996
was $.66, $1.35 and $1.43, respectively.
9. SHAREHOLDERS' EQUITY
Preferred Stock Both Series A and Series B Preferred Stock have no stated par
value, with 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 the Company. The Series A and Series B Preferred Stock are not
redeemable prior to April 24, 2000 and May 29, 2007, respectively. On or after
these dates, the Series A and Series B Preferred Stock may be redeemed for cash
at the option of the Company, 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 proceeds of the sales proceeds of other capital stock of the
Company. 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, the Company 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
F-22
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, the Company 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, the Company may not redeem in
any consecutive 12 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 the Company at 7.5% interest
only. Originally, the underlying notes began maturing in November 1998, however,
the maturity date for the 194,000 shares maturing November 1998 was extended to
November 2001. A total of 823,500 shares have been issued and 576,500 shares are
available for future issuance under the Loan Plan.
Dividend Reinvestment and Stock Purchase Plan The Company's Dividend
Reinvestment and Stock Purchase Plan (the "Stock Purchase Plan") allows common
and preferred shareholders the opportunity to purchase, through reinvestment of
cash dividends and optional cash constributions, additional shares of the
Company's common stock. As of December 31, 1998, 6,740,120 shares of common
stock had been issued under the Stock Purchase Plan. Shares in the amount of
7,259,880 were reserved for further issuance under the Stock Purchase Plan at
December 31, 1998. During 1998, 2,824,627 shares were issued under the Stock
Purchase Plan for a total market equity value of approximately $36.6 million.
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 the Company. Upon
exercise, the Company 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 the Company, the
Company's common stock having a value of $90.
10. COMMITMENTS AND CONTINGENCIES
Land and Other Leases
The Company is party to several ground leases relating to operating communities.
In addition, the Company is party to various other operating leases related to
the operation of its corporate and regional offices. Future minimum lease
payments for noncancelable land and other leases at December 31, 1998 are as
follows (in thousands):
1999 $ 2,129
2000 1,336
2001 1,233
2002 1,227
2003 1,180
Thereafter 29,996
-----------
Total $ 37,101
===========
The Company incurred $1,614, $1,150, and $707, of rent expense for the years
ended December 31, 1998, 1997 and 1996.
F-23
Contingencies
The Company is party to various legal actions which are incidental to its
business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operation.
Commitments
The Company is committed to completing its real estate currently under
development which has an estimated cost to complete of $83.2 million at December
31, 1998.
11. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Summarized consolidated quarterly financial data for the year ended December 31,
1998 is as follows (In thousands, except per share information):
Three Months Ended
------------------------------------------------------------
March 31(a) June 30 September 30 December 31(a), (b)
---------- ---------- ------------ ------------------
Rental income $ 104,249 $ 118,176 $ 123,475 $ 132,818
Income before gains (losses) on sales of investments,
minority interests and extraordinary item 17,578 15,387 13,872 502
Gains (losses) on the sales of investments (260) 20,721 13 6,198
Net income 17,183 35,005 13,807 6,337
Distributions to preferred shareholders 5,650 5,653 5,650 6,640
Net income (loss) available to common shareholders 11,533 29,352 8,157 (303)
Earnings per common share:
Basic $ .13 $ .29 $ .08 $ (.00)
Diluted $ .13 $ .29 $ .08 $ (.00)
Weighted average number of common shares
outstanding-basic 90,867 101,562 103,104 103,467
Weighted average number of common shares
outstanding-diluted 90,985 102,358 103,145 103,476
(a) The Company completed the acquisition of ASR Investments Corporation on
March 27, 1998 and the acquisition of American Apartment Communities II on
December 7, 1998.
(b) The fourth quarter of 1998 includes a $15.6 million charge associated with
the termination of an interest rate risk management agreement.
F-24
Summarized consolidated quarterly financial data for the year ended December 31,
1997 is as follows (In thousands, except per share information):
Three Months Ended
-------------------------------------------------------
March 31 June 30 September 30 December 31
----------- ---------- ------------ -------------
Rental income $ 89,984 $ 95,382 $ 98,816 $ 102,490
Income before gains (losses) on sales of investments,
minority interests and extraordinary item 15,024 13,451 14,053 15,285
Gains (losses) on the sales of investments 2,120 1,254 9,309 (19)
Net income 17,113 14,677 23,309 15,050
Distributions to preferred shareholders 2,428 3,611 5,653 5,653
Net income available to common shareholders 14,685 11,066 17,656 9,397
Earnings per common share:
Basic $ .17 $ .13 $ .20 $ .11
Diluted $ .17 $ .13 $ .20 $ .11
Weighted average number of common shares
outstanding-basic 85,046 86,877 87,853 88,756
Weighted average number of common shares
outstanding -diluted 85,273 87,036 88,007 88,906
F-25
SCHEDULE III.
Summary of Real Estate Owned
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Apartments:
Real estate held for investment
Dallas, Texas
Citiscape b 2,092,387 7,532,613 9,625,000 293,033
Preston Oaks b 1,783,626 6,416,374 8,200,000 353,018
Preston Trace 2,195,500 8,304,500 10,500,000 427,246
Rock Creek c 4,076,680 15,823,320 19,900,000 1,677,201
Windridge b 3,414,311 14,027,310 17,441,621 1,915,476
Autumnwood c 2,412,180 8,687,820 11,100,000 650,093
Cobblestone c 2,925,372 10,527,738 13,453,110 1,187,891
Pavillion b 4,428,258 18,692,922 23,121,180 872,429
Oak Park 3,966,129 17,848,850 21,814,979 3,404,370
Catalina b 1,543,321 5,631,679 7,175,000 356,305
Wimbledon Court c 1,809,183 10,930,306 12,739,489 2,009,275
Southern Oaks 1,565,000 5,335,000 6,900,000 451,052
Hunters Ridge 1,613,000 5,837,000 7,450,000 480,238
Lakeridge c 1,631,350 5,668,650 7,300,000 543,554
Summergate c 1,171,300 3,928,700 5,100,000 535,904
Dove Park 2,309,195 9,699,046 12,008,241 790,709
Oak Forest 5,630,740 19,961,055 25,591,795 1,181,665
Oak Forest II/Dallas, TX - 3,332,867 3,332,867 8,543,425
Post Oak Ridge 3,726,795 13,563,181 17,289,976 2,593,852
Kelly Crossing 2,496,701 9,156,355 11,653,056 847,386
Parc Plaza 1,683,531 5,279,123 6,962,654 901,066
Summit Ridge 4,925,555 1,725,508 6,308,032 8,033,540 1,041,606
Greenwood Creek 4,993,022 1,958,378 8,551,018 10,509,396 330,832
Highlands of Preston 4,774,686 2,151,056 8,167,630 10,318,686 599,129
Merit Place 7,416,554 3,121,153 12,071,435 15,192,588 1,667,007
Park on Preston 5,668,758 1,521,877 9,950,455 11,472,332 196,598
Aspen Court 2,022,724 776,587 4,944,947 5,721,534 232,885
Smith Summit 5,516,872 1,932,195 9,041,301 10,973,496 699,299
Springfield 5,192,011 3,074,511 6,823,120 9,897,631 401,450
Orlando, Florida
Fisherman's Village 2,387,368 7,458,897 9,846,265 2,661,274
Seabrook 1,845,853 4,155,275 6,001,128 2,529,430
Dover Village 2,894,702 6,456,100 9,350,802 3,023,040
Lakeside North 12,440,000 1,532,700 11,076,062 12,608,762 3,086,935
Regatta Shores 757,008 6,607,367 7,364,375 2,176,134
Alafaya Woods 1,653,000 9,042,256 10,695,256 1,629,505
Vinyards 9,080,000 1,840,230 11,571,625 13,411,855 2,367,182
Andover Place 13,560,000 3,692,187 7,756,919 11,449,106 2,574,008
Los Altos 2,803,805 12,348,464 15,152,269 2,071,136
Lotus Landing 2,184,723 8,638,664 10,823,387 1,483,462
Seville on the Green 1,282,616 6,498,062 7,780,678 1,570,126
Arbors at Lee Vista 3,975,679 16,920,454 20,896,133 1,166,563
Heron Lake 6,549,795 1,446,553 9,287,878 10,734,431 239,004
Raleigh, North Carolina
Dominion on Spring Forest 1,257,500 8,586,255 9,843,755 2,658,993
Dominion Park Green 500,000 4,321,872 4,821,872 1,151,529
Dominion on Lake Lynn 1,723,363 5,303,760 7,027,123 1,998,600
Dominion Courtney Place 1,114,600 5,119,259 6,233,859 2,568,045
Dominion Walnut Ridge 1,791,215 11,968,852 13,760,067 1,845,863
Dominion Walnut Creek 3,170,290 21,717,407 24,887,697 2,481,164
Dominion Ramsgate d 907,605 6,819,154 7,726,759 565,726
Harbour Pointe 1,898,740 7,101,260 9,000,000 137,505
Copper Mill 1,548,280 16,066,720 17,615,000 772,401
Trinity Park 9,132,143 4,579,648 17,575,712 22,155,360 695,680
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
--------------------------------------------------- ------------------------------------
Apartments:
Real estate held for investment
Dallas, Texas
Citiscape 2,162,504 7,755,529 9,918,033 584,774 1973
Preston Oaks 1,879,294 6,673,724 8,553,018 497,289 1980
Preston Trace 2,303,887 8,623,359 10,927,246 616,382 1984
Rock Creek 4,454,182 17,123,019 21,577,201 1,297,000 1974
Windridge 3,971,087 15,386,010 19,357,097 1,163,009 1980
Autumnwood 2,625,778 9,124,315 11,750,093 700,677 1984
Cobblestone 3,060,821 11,580,180 14,641,001 835,546 1984
Pavillion 4,576,772 19,416,837 23,993,609 1,302,289 1979
Oak Park 2,257,661 22,961,688 25,219,349 1,535,094 1982
Catalina 1,615,288 5,916,017 7,531,305 453,230 1982
Wimbledon Court 1,889,146 12,859,618 14,748,764 755,713 1983
Southern Oaks 1,593,240 5,757,812 7,351,052 469,256 1982
Hunters Ridge 1,786,871 6,143,367 7,930,238 502,247 1992
Lakeridge 1,754,334 6,089,219 7,843,553 489,394 1984
Summergate 1,364,304 4,271,600 5,635,904 320,733 1984
Dove Park 2,557,532 10,241,418 12,798,950 719,443 1984
Oak Forest 5,674,617 21,098,843 26,773,460 1,678,772 1996
Oak Forest II/Dallas, TX 606,365 11,269,927 11,876,292 803,552 1998
Post Oak Ridge 4,358,867 15,524,961 19,883,828 1,157,558 1983
Kelly Crossing 2,791,685 9,708,757 12,500,442 588,853 1984
Parc Plaza 1,864,220 5,999,500 7,863,720 323,701 1986
Summit Ridge 2,110,943 6,964,203 9,075,146 291,473 1983
Greenwood Creek 2,007,346 8,832,882 10,840,228 259,035 1984
Highlands of Preston 2,222,899 8,694,916 10,917,815 242,580 1985
Merit Place 3,276,257 13,583,338 16,859,595 375,279 1984
Park on Preston 1,572,297 10,096,633 11,668,930 287,753 1983
Aspen Court 843,321 5,111,098 5,954,419 144,617 1986
Smith Summit 2,261,908 9,410,887 11,672,795 261,913 1983
Springfield 3,180,328 7,118,753 10,299,081 214,697 1985
Orlando, Florida
Fisherman's Village 3,057,520 9,450,019 12,507,539 1,351,487 1984
Seabrook 2,222,219 6,308,339 8,530,558 1,006,352 1984
Dover Village 3,351,532 9,022,310 12,373,842 2,341,719 1981
Lakeside North 2,209,769 13,485,928 15,695,697 2,568,868 1984
Regatta Shores 1,487,257 8,053,252 9,540,509 1,795,008 1988
Alafaya Woods 2,070,133 10,254,628 12,324,761 1,866,181 1988/90
Vinyards 2,351,199 13,427,838 15,779,037 2,375,293 1984/86
Andover Place 4,428,435 9,594,679 14,023,114 1,383,978 1987/88
Los Altos 3,256,262 13,967,144 17,223,406 1,219,123 1990
Lotus Landing 2,364,862 9,941,987 12,306,849 510,974 1985
Seville on the Green 1,430,736 7,920,068 9,350,804 369,368 1986
Arbors at Lee Vista 4,189,389 17,873,307 22,062,696 670,345 1991
Heron Lake 1,534,759 9,438,676 10,973,435 188,470 1989
Raleigh, North Carolina
Dominion on Spring Forest 1,542,668 10,960,080 12,502,748 3,765,984 1978/81
Dominion Park Green 674,640 5,298,761 5,973,401 1,706,827 1987
Dominion on Lake Lynn 2,156,066 6,869,657 9,025,723 1,807,699 1986
Dominion Courtney Place 1,377,228 7,424,676 8,801,904 1,513,094 1979/81
Dominion Walnut Ridge 2,085,931 13,519,999 15,605,930 2,496,621 1982/84
Dominion Walnut Creek 3,643,340 23,725,521 27,368,861 4,160,114 1985/86
Dominion Ramsgate 994,517 7,297,968 8,292,485 653,113 1988
Harbour Pointe 1,898,796 7,238,709 9,137,505 517,692 1984
Copper Mill 1,742,427 16,644,974 18,387,401 1,205,279 1997
Trinity Park 4,695,353 18,155,687 22,851,040 1,244,633 1987
Depreciable
Life of
Date Building
Acquired Component
------------------ -------------
Apartments:
Real estate held for investment
Dallas, Texas
Citiscape 12/31/96 35 yrs.
Preston Oaks 12/31/96 35 yrs.
Preston Trace 12/31/96 35 yrs.
Rock Creek 12/31/96 35 yrs.
Windridge 12/31/96 35 yrs.
Autumnwood 12/31/96 35 yrs.
Cobblestone 12/31/96 35 yrs.
Pavillion 12/31/96 35 yrs.
Oak Park 12/31/96 35 yrs.
Catalina 12/31/96 35 yrs.
Wimbledon Court 12/31/96 35 yrs.
Southern Oaks 12/31/96 35 yrs.
Hunters Ridge 12/31/96 35 yrs.
Lakeridge 12/31/96 35 yrs.
Summergate 12/31/96 35 yrs.
Dove Park 12/31/96 35 yrs.
Oak Forest 12/31/96 35 yrs.
Oak Forest II/Dallas, TX 01/31/98 35 yrs.
Post Oak Ridge 03/27/97 35 yrs.
Kelly Crossing 06/18/97 35 yrs.
Parc Plaza 10/30/97 35 yrs.
Summit Ridge 3/27/98 35 yrs.
Greenwood Creek 3/27/98 35 yrs.
Highlands of Preston 3/27/98 35 yrs.
Merit Place 3/27/98 35 yrs.
Park on Preston 3/27/98 35 yrs.
Aspen Court 3/27/98 35 yrs.
Smith Summit 3/27/98 35 yrs.
Springfield 3/27/98 35 yrs.
Orlando, Florida
Fisherman's Village 12/29/95 35 yrs.
Seabrook 02/20/96 35 yrs.
Dover Village 3/31/93 35 yrs.
Lakeside North 04/14/94 35 yrs.
Regatta Shores 06/30/94 35 yrs.
Alafaya Woods 10/21/94 35 yrs.
Vinyards 10/31/94 35 yrs.
Andover Place 9/29/95 35 yrs.
Los Altos 10/31/96 35 yrs.
Lotus Landing 07/01/97 35 yrs.
Seville on the Green 10/21/97 35 yrs.
Arbors at Lee Vista 12/31/97 35 yrs.
Heron Lake 3/27/98 35 yrs.
Raleigh, North Carolina
Dominion on Spring Forest 05/21/91 35 yrs.
Dominion Park Green 09/27/91 35 yrs.
Dominion on Lake Lynn 12/01/92 35 yrs.
Dominion Courtney Place 07/08/93 35 yrs.
Dominion Walnut Ridge 03/04/94 35 yrs.
Dominion Walnut Creek 05/17/94 35 yrs.
Dominion Ramsgate 08/15/96 35 yrs.
Harbour Pointe 12/31/96 35 yrs.
Copper Mill 12/31/96 35 yrs.
Trinity Park 02/28/97 35 yrs.
F-26
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Charlotte, North Carolina
The Highlands 321,400 2,830,346 3,151,746 2,352,583
Emerald Bay 626,070 4,722,862 5,348,932 2,559,463
Dominion Peppertree 1,546,267 7,699,221 9,245,488 1,189,092
Dominion Crown Point 70,641 1,115,261 8,648,865 9,764,126 1,022,310
Dominion Harris Pond 4,962,658 886,788 6,728,097 7,614,885 1,056,872
Dominion Mallard Creek (A) 5,345,937 698,860 6,488,061 7,186,921 515,832
Chateau Village 1,046,610 6,979,555 8,026,165 1,891,855
Dominion at Sharon d 667,368 4,856,103 5,523,471 903,292
Providence Court - 22,047,803 22,047,803 8,957,196
Stoney Pointe 12,393,112 1,499,650 15,855,610 17,355,260 954,937
Richmond, Virginia
Dominion Olde West 1,965,097 12,203,965 14,169,062 3,372,637
Dominion Creekwood - - - 100,362
Dominion Laurel Springs 464,480 3,119,716 3,584,196 1,016,484
Dominion English Hills 1,979,174 11,524,313 13,503,487 4,878,966
Dominion Gayton Crossing 3,027,211 825,760 5,147,968 5,973,728 6,248,180
Dominion West End 2,059,252 15,049,088 17,108,340 2,182,406
Courthouse Green 732,050 4,702,353 5,434,403 2,942,594
Waterside at Ironbridge 6,874 1,843,819 13,238,590 15,082,409 465,623
Houston, Texas
Woodtrail b 1,543,000 5,457,000 7,000,000 1,598,821
Park Trails b 1,144,750 4,105,250 5,250,000 235,290
Green Oaks 5,313,920 19,626,181 24,940,101 1,801,513
Seahawk 2,297,741 7,157,965 9,455,706 1,598,418
Greenhouse Patio 11,142,725 4,058,090 14,755,809 18,813,899 2,088,263
Breakers 1,527,467 5,297,930 6,825,397 832,009
Braesridge 9,478,127 3,048,212 10,961,749 14,009,961 889,358
Bammelwood 2,914,992 929,601 3,330,352 4,259,953 207,914
Camino Village 8,550,559 3,604,483 11,592,432 15,196,915 806,930
Briar Park 1,463,642 329,002 2,742,196 3,071,198 50,963
Chelsea Park 3,241,830 1,991,478 5,787,626 7,779,104 407,440
Clear Lake Falls 1,764,277 1,090,080 4,534,335 5,624,415 43,878
Country Club Place 3,649,073 498,632 5,658,634 6,157,266 268,962
Ivy Stone 3,916,943 1,688,948 4,761,680 6,450,628 348,902
London Park 4,714,569 2,018,478 6,534,362 8,552,840 454,256
Marymont 1,150,696 4,155,411 5,306,107 296,151
Memorial Bend 1,972,752 882,230 3,157,829 4,040,059 (37,095)
Nantucket Square 2,825,491 1,067,617 4,222,908 5,290,525 45,805
Prestonwood 2,532,249 998,433 4,128,699 5,127,132 70,540
Riverway 1,250,187 523,457 2,828,282 3,351,739 23,632
Riviera Pines 3,420,047 1,413,851 5,578,207 6,992,058 29,917
The Gallery 3,127,232 768,708 2,410,732 3,179,440 19,822
Timbercreek Landing 1,333,958 5,308,884 6,642,842 598,363
Columbia, South Carolina
Gable Hill 824,847 5,307,194 6,132,041 1,163,591
Colonial Villa 1,014,181 5,100,269 6,114,450 1,898,967
St. Andrews Commons 1,428,826 9,371,378 10,800,204 1,315,853
Forestbrook 5,000,000 395,516 2,902,040 3,297,556 1,693,495
Crossroads 2,074,800 13,760,014 15,834,814 2,935,215
The Park 1,004,072 5,558,436 6,562,508 1,881,195
St. Andrews 976,192 6,884,502 7,860,694 938,009
Waterford 957,980 6,947,939 7,905,919 1,071,145
Hampton Greene 7,183,907 1,363,046 10,118,453 11,481,499 1,177,708
Rivergate 9,454,788 1,122,500 12,055,625 13,178,125 889,548
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
-------------------------------------------------------------------------------------------------
Charlotte, North Carolina
The Highlands 629,591 4,874,738 5,504,329 2,930,714 1970
Emerald Bay 1,171,772 6,736,623 7,908,395 3,084,174 1972
Dominion Peppertree 1,830,202 8,604,378 10,434,580 1,875,697 1987
Dominion Crown Point 1,316,111 9,470,325 10,786,436 1,730,037 1987
Dominion Harris Pond 1,199,843 7,471,914 8,671,757 1,265,039 1987
Dominion Mallard Creek (A) 775,856 6,926,897 7,702,753 1,141,100 1989
Chateau Village 1,407,248 8,510,771 9,918,019 888,350 1974
Dominion at Sharon 897,820 5,528,943 6,426,763 520,656 1984
Providence Court 7,332,921 23,672,078 31,004,999 1,607,404 1997
Stoney Pointe 1,722,292 16,587,905 18,310,197 1,184,108 1991
Richmond, Virginia
Dominion Olde West 2,376,176 15,165,523 17,541,699 6,372,898 1978/82/85/87
Dominion Creekwood 17,786 82,576 100,362 5,114 1984
Dominion Laurel Springs 617,439 3,983,241 4,600,680 1,343,137 1972
Dominion English Hills 2,579,333 15,803,120 18,382,453 5,055,054 1969/76
Dominion Gayton Crossing 1,125,116 11,096,792 12,221,908 1,768,866 1973
Dominion West End 2,460,328 16,830,418 19,290,746 1,936,326 1989
Courthouse Green 1,068,765 7,308,232 8,376,997 3,399,361 1974/78
Waterside at Ironbridge 1,960,369 13,587,663 15,548,032 630,628 1987
Houston, Texas
Woodtrail 1,653,334 6,945,487 8,598,821 608,145 1978
Park Trails 1,145,558 4,339,732 5,485,290 363,216 1983
Green Oaks 5,724,396 21,017,218 26,741,614 1,237,112 1985
Seahawk 2,665,473 8,388,651 11,054,124 539,300 1984
Greenhouse Patio 4,011,815 16,890,347 20,902,162 759,509 1985
Breakers 1,689,613 5,967,793 7,657,406 320,120 1985
Braesridge 3,098,893 11,800,426 14,899,319 594,692 1982
Bammelwood 946,970 3,520,897 4,467,867 198,498 1980
Camino Village 3,614,087 12,389,758 16,003,845 748,207 1979
Briar Park 332,107 2,790,054 3,122,161 77,096 1987
Chelsea Park 2,027,451 6,159,093 8,186,544 180,100 1983
Clear Lake Falls 1,095,021 4,573,272 5,668,293 123,003 1980
Country Club Place 564,173 5,862,055 6,426,228 167,766 1985
Ivy Stone 1,813,711 4,985,819 6,799,530 172,079 1983
London Park 2,151,877 6,855,219 9,007,096 210,184 1983
Marymont 1,150,696 4,451,562 5,602,258 128,040 1983
Memorial Bend 883,645 3,119,319 4,002,964 98,900 1967
Nantucket Square 1,068,145 4,268,185 5,336,330 116,824 1983
Prestonwood 1,003,137 4,194,535 5,197,672 124,329 1978
Riverway 523,457 2,851,914 3,375,371 95,032 1985
Riviera Pines 1,415,859 5,606,116 7,021,975 167,615 1979
The Gallery 770,447 2,428,815 3,199,262 77,014 1968
Timbercreek Landing 1,447,042 5,794,163 7,241,205 168,809 1984
Columbia, South Carolina
Gable Hill 1,135,416 6,160,216 7,295,632 2,153,319 1985
Colonial Villa 1,481,347 6,532,070 8,013,417 1,723,195 1974
St. Andrews Commons 1,773,706 10,342,351 12,116,057 2,436,770 1986
Forestbrook 626,697 4,364,354 4,991,051 1,246,558 1974
Crossroads 2,559,396 16,210,633 18,770,029 2,838,789 1977/84
The Park 1,415,284 7,028,419 8,443,703 1,295,885 1975/77
St. Andrews 1,188,669 7,610,034 8,798,703 1,330,794 1972
Waterford 1,226,683 7,750,381 8,977,064 1,480,926 1985
Hampton Greene 1,833,229 10,825,978 12,659,207 1,791,543 1990
Rivergate 1,352,160 12,715,513 14,067,673 1,142,450 1989
Depreciable
Life of
Date Building
Acquired Component
--------------------------------
Charlotte, North Carolina
The Highlands 01/17/84 35 yrs.
Emerald Bay 02/06/90 35 yrs.
Dominion Peppertree 12/14/93 35 yrs.
Dominion Crown Point 07/01/94 35 yrs.
Dominion Harris Pond 07/01/94 35 yrs.
Dominion Mallard Creek (A) 08/16/94 35 yrs.
Chateau Village 08/15/96 35 yrs.
Dominion at Sharon 08/15/96 35 yrs.
Providence Court 09/30/97 35 yrs.
Stoney Pointe 02/28/97 35 yrs.
Richmond, Virginia
Dominion Olde West 12/31/84 35 yrs.
Dominion Creekwood 08/27/91 35 yrs.
Dominion Laurel Springs 09/06/91 35 yrs.
Dominion English Hills 12/06/91 35 yrs.
Dominion Gayton Crossing 09/28/95 35 yrs.
Dominion West End 12/28/95 35 yrs.
Courthouse Green 12/31/84 35 yrs.
Waterside at Ironbridge 09/30/97 35 yrs.
Houston, Texas
Woodtrail 12/31/96 35 yrs.
Park Trails 12/31/96 35 yrs.
Green Oaks 06/25/97 35 yrs.
Seahawk 05/08/97 35 yrs.
Greenhouse Patio 09/26/97 35 yrs.
Breakers 09/26/97 35 yrs.
Braesridge 09/26/97 35 yrs.
Bammelwood 10/30/97 35 yrs.
Camino Village 11/20/97 35 yrs.
Briar Park 3/27/98 35 yrs.
Chelsea Park 3/27/98 35 yrs.
Clear Lake Falls 3/27/98 35 yrs.
Country Club Place 3/27/98 35 yrs.
Ivy Stone 3/27/98 35 yrs.
London Park 3/27/98 35 yrs.
Marymont 3/27/98 35 yrs.
Memorial Bend 3/27/98 35 yrs.
Nantucket Square 3/27/98 35 yrs.
Prestonwood 3/27/98 35 yrs.
Riverway 3/27/98 35 yrs.
Riviera Pines 3/27/98 35 yrs.
The Gallery 3/27/98 35 yrs.
Timbercreek Landing 3/27/98 35 yrs.
Columbia, South Carolina
Gable Hill 12/04/89 35 yrs.
Colonial Villa 09/16/92 35 yrs.
St. Andrews Commons 05/20/93 35 yrs.
Forestbrook 07/01/93 35 yrs.
Crossroads 07/01/94 35 yrs.
The Park 07/01/94 35 yrs.
St. Andrews 07/01/94 35 yrs.
Waterford 07/01/94 35 yrs.
Hampton Greene 08/19/94 35 yrs.
Rivergate 08/15/96 35 yrs.
F-27
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Tampa, Florida
Bay Cove 2,928,847 6,578,257 9,507,104 2,304,898
Summit West 2,176,500 4,709,970 6,886,470 1,937,832
Pinebrook 1,780,375 2,458,172 4,238,547 2,689,874
Village at Old Tampa Bay 1,750,320 10,756,337 12,506,657 1,844,632
Lakewood Place 1,395,051 10,647,377 12,042,428 936,027
Hunters Ridge 2,461,548 10,942,434 13,403,982 1,185,735
Bay Meadow 7,855,253 2,892,526 9,253,525 12,146,051 2,258,216
Cambridge 1,790,804 7,166,329 8,957,133 1,061,448
Orange Oaks 1,361,553 6,541,980 7,903,533 1,008,878
Parker's Landing 33,211,758 10,178,355 38,584,669 48,763,024 -
Sugar Mill Creek e 2,241,880 8,252,520 10,494,400 -
Greensboro, North Carolina
Beechwood 1,409,377 6,086,677 7,496,054 823,687
Steeplechase 3,208,108 11,513,978 14,722,086 11,949,577
Northwinds d 1,557,654 11,735,787 13,293,441 804,111
Lake Brandt 1,546,950 13,489,466 15,036,416 572,667
Deep River Pointe 1,670,648 11,140,329 12,810,977 258,714
Eastern North Carolina
Colony Village 346,330 3,036,956 3,383,286 1,768,928
Brynn Marr 432,974 3,821,508 4,254,482 2,247,425
Liberty Crossing 869,731 840,000 3,873,139 4,713,139 2,453,104
Bramblewood 401,538 3,150,912 3,552,450 1,277,629
Cape Harbor 9,257,264 1,891,671 18,113,109 20,004,780 786,419
Mill Creek 597,248 4,489,398 5,086,646 1,679,481
Mill Creek II/Wilmington, NC 807,250 - 807,250 11,138,762
The Creek 417,500 2,506,206 2,923,706 1,372,412
Forest Hills 1,028,000 5,420,478 6,448,478 1,625,769
Clear Run 874,830 8,740,602 9,615,432 5,000,303
Crosswinds 1,096,196 18,230,236 19,326,432 722,601
San Antonio, Texas
Promontory Pointe 7,548,219 28,051,781 35,600,000 1,419,789
Bluffs b 1,901,146 6,898,854 8,800,000 1,115,367
Ashley Oaks c 4,590,782 16,809,218 21,400,000 217,320
Sunflower 2,209,000 7,891,000 10,100,000 367,744
Carmel 4,087,024 875,417 6,709,349 7,584,766 778,025
Cimarron City 3,158,544 487,906 4,284,793 4,772,699 441,320
Kenton 7,469,865 2,344,962 8,817,376 11,162,338 1,026,816
Peppermill 4,459,272 773,405 6,873,146 7,646,551 786,793
Villages of Thousand Oaks 8,923,129 3,201,039 9,919,680 13,120,719 1,636,801
Audubon 4,641,035 771,037 5,873,917 6,644,954 1,445,307
Grand Cypress 5,870,421 749,341 8,609,353 9,358,694 777,896
Inn At Los Patios 3,005,300 11,544,700 14,550,000 (1,537,310)
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
--------------------------------------------------------------------------------------------
Tampa, Florida
Bay Cove 3,257,053 8,554,949 11,812,002 2,314,008 1972
Summit West 2,446,995 6,377,307 8,824,302 1,758,153 1972
Pinebrook 2,022,578 4,905,843 6,928,421 1,462,590 1977
Village at Old Tampa Bay 2,108,454 12,242,835 14,351,289 2,605,702 1986
Lakewood Place 1,565,662 11,412,793 12,978,455 2,108,171 1986
Hunters Ridge 2,915,105 11,674,612 14,589,717 1,694,918 1992
Bay Meadow 3,415,436 10,988,831 14,404,267 909,254 1985
Cambridge 2,049,576 7,969,005 10,018,581 480,927 1985
Orange Oaks 1,529,357 7,383,054 8,912,411 414,613 1986
Parker's Landing 10,178,355 38,584,669 48,763,024 87,684 1991
Sugar Mill Creek 2,241,880 8,252,520 10,494,400 18,816 1988
Greensboro, North Carolina
Beechwood 1,599,720 6,720,021 8,319,741 1,397,580 1985
Steeplechase 3,730,687 22,940,976 26,671,663 1,296,142 1990/97
Northwinds 1,725,289 12,372,263 14,097,552 755,072 1989/97
Lake Brandt 1,742,758 13,866,325 15,609,083 1,208,681 1995
Deep River Pointe 1,752,525 11,317,166 13,069,691 554,003 1997
Eastern North Carolina
Colony Village 543,318 4,608,896 5,152,214 2,355,236 1972/74
Brynn Marr 714,169 5,787,738 6,501,907 2,753,746 1973/77
Liberty Crossing 1,362,097 5,804,146 7,166,243 2,464,291 1972/74
Bramblewood 551,414 4,278,665 4,830,079 2,274,746 1980/82
Cape Harbor 2,214,575 18,576,624 20,791,199 1,658,467 1996
Mill Creek 822,733 5,943,393 6,766,126 1,671,542 1986
Mill Creek II/Wilmington, NC 1,654,093 10,291,919 11,946,012 - 1998
The Creek 485,163 3,810,955 4,296,118 1,210,607 1973
Forest Hills 1,165,162 6,909,085 8,074,247 1,754,109 1964/69
Clear Run 1,230,647 13,385,088 14,615,735 2,013,480 1987/89
Crosswinds 1,179,387 18,869,646 20,049,033 1,358,307 1990
San Antonio, Texas
Promontory Pointe 7,749,116 29,270,673 37,019,789 2,206,529 1997
Bluffs 2,034,223 7,881,144 9,915,367 678,287 1978
Ashley Oaks 4,631,887 16,985,433 21,617,320 1,190,444 1993
Sunflower 2,299,470 8,168,274 10,467,744 624,998 1980
Carmel 878,986 7,483,805 8,362,791 208,163 1986
Cimarron City 518,973 4,695,046 5,214,019 133,162 1983
Kenton 2,384,911 9,804,243 12,189,154 274,164 1983
Peppermill 780,771 7,652,573 8,433,344 220,604 1984
Villages of Thousand Oaks 3,457,982 11,299,539 14,757,521 357,774 1984
Audubon 841,343 7,248,917 8,090,260 213,945 1985
Grand Cypress 760,798 9,375,792 10,136,590 252,007 1995
Inn At Los Patios 3,005,300 10,007,390 13,012,690 153,450 1990
Depreciable
Life of
Date Building
n Acquired Component
----------------------------------
Tampa, Florida
Bay Cove 12/16/92 35 yrs.
Summit West 12/16/92 35 yrs.
Pinebrook 09/28/93 35 yrs.
Village at Old Tampa Bay 12/08/93 35 yrs.
Lakewood Place 03/10/94 35 yrs.
Hunters Ridge 06/30/95 35 yrs.
Bay Meadow 12/09/96 35 yrs.
Cambridge 06/06/97 35 yrs.
Orange Oaks 07/01/97 35 yrs.
Parker's Landing 12/7/98 35 yrs.
Sugar Mill Creek 12/7/98 35 yrs.
Greensboro, North Carolina
Beechwood 12/22/93 35 yrs.
Steeplechase 03/07/96 35 yrs.
Northwinds 08/15/96 35 yrs.
Lake Brandt 08/15/96 35 yrs.
Deep River Pointe 10/01/97 35 yrs.
Eastern North Carolina
Colony Village 12/31/84 35 yrs.
Brynn Marr 12/31/84 35 yrs.
Liberty Crossing 11/30/90 35 yrs.
Bramblewood 12/31/84 35 yrs.
Cape Harbor 08/15/96 35 yrs.
Mill Creek 09/30/91 35 yrs.
Mill Creek II/Wilmington, NC 35 yrs.
The Creek 06/30/92 35 yrs.
Forest Hills 06/30/92 35 yrs.
Clear Run 07/22/94 35 yrs.
Crosswinds 02/28/97 35 yrs.
San Antonio, Texas
Promontory Pointe 12/31/96 35 yrs.
Bluffs 12/31/96 35 yrs.
Ashley Oaks 12/31/96 35 yrs.
Sunflower 12/31/96 35 yrs.
Carmel 4/16/98 35 yrs.
Cimarron City 4/16/98 35 yrs.
Kenton 4/16/98 35 yrs.
Peppermill 4/16/98 35 yrs.
Villages of Thousand Oaks 4/16/98 35 yrs.
Audubon 4/16/98 35 yrs.
Grand Cypress 4/16/98 35 yrs.
Inn At Los Patios 8/15/98 35 yrs.
F-28
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Nashville, Tennessee
2131 Apartments 869,860 9,155,185 10,025,045 3,413,587
The Lakes 1,285,657 5,980,197 7,265,854 1,131,216
Harbour Town 572,567 3,522,092 4,094,659 891,015
Legacy Hill 5,080,972 1,147,660 5,867,567 7,015,227 2,569,984
Hickory Run 1,468,727 11,583,786 13,052,513 1,200,687
Brookridge 707,508 5,461,251 6,168,759 916,879
Club at Hickory Hollow 2,139,774 15,231,201 17,370,975 1,552,323
Breckenridge 766,428 7,713,862 8,480,290 521,768
Williamsburg 1,376,190 10,931,309 12,307,499 819,399
Baltimore, Maryland
Gatewater Landing 2,078,422 6,084,526 8,162,948 1,025,553
Dominion Kings Place 4,795,000 1,564,942 7,006,574 8,571,516 700,588
Dominion at Eden Brook 8,185,000 2,361,167 9,384,171 11,745,338 995,646
Dominion Great Oaks 2,919,481 9,099,691 12,019,172 2,410,980
Dominion Constant Friendship 903,122 4,668,956 5,572,078 623,209
Atlanta, Georgia
Stanford Village 884,500 2,807,839 3,692,339 1,016,626
Griffin Crossing 1,509,633 7,544,018 9,053,651 1,103,728
Gwinnett Square 1,924,325 7,376,454 9,300,779 1,255,281
Dunwoody Pointe 5,783,881 2,763,324 6,902,996 9,666,320 4,119,690
Riverwood 5,309,328 2,985,599 11,087,903 14,073,502 2,866,910
Lake of the Woods 835,352 8,388,258 9,223,610 846,137
Waterford Place 1,579,478 10,302,679 11,882,157 94,149
Miami/Fort Lauderdale, Florida
Copperfield 4,424,128 20,428,969 24,853,097 1,476,079
Mediterranean Village 2,064,788 11,939,113 14,003,901 1,233,880
Cleary Court 2,399,848 7,913,450 10,313,298 1,389,858
University Club 1,390,220 6,992,620 8,382,840 1,342,786
Polo Chase 3,675,276 13,801,853 17,477,129 -
Washington D.C.
Dominion Middle Ridge/Woodbridge 3,311,468 13,283,047 16,594,515 772,923
Dominion Lake Ridge/Woodbridge 2,366,061 8,386,439 10,752,500 665,608
Knolls at Newgate/Fairfax 1,725,725 3,530,134 5,255,859 1,467,169
Hampton Roads, Virginia
Forest Lakes at Oyster Point 780,117 8,861,878 9,641,995 1,558,191
Woodscape 798,700 7,209,525 8,008,225 2,670,385
Eastwind 155,000 5,316,738 5,471,738 1,944,651
Kings Arms 1,823,983 4,106,710 5,930,693 1,060,252
Heather Lake 616,800 3,400,672 4,017,472 2,796,641
York Pointe 1,088,887 8,581,771 9,670,658 515,331
Jacksonville, Florida
Greentree Place 12,455,000 1,634,330 11,226,990 12,861,320 3,316,528
Westland Park 1,834,535 14,864,742 16,699,277 3,189,368
The Antlers 4,034,039 11,192,842 15,226,881 4,619,321
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
----------------------------------------------------------------------------------------------
Nashville, Tennessee
2131 Apartments 1,190,094 12,248,538 13,438,632 2,768,622 1972
The Lakes 1,461,651 6,935,419 8,397,070 1,661,764 1986
Harbour Town 721,324 4,264,350 4,985,674 944,649 1974
Legacy Hill 1,416,362 8,168,849 9,585,211 1,122,442 1977
Hickory Run 1,621,766 12,631,434 14,253,200 1,479,324 1989
Brookridge 909,717 6,175,921 7,085,638 779,067 1986
Club at Hickory Hollow 2,645,694 16,277,604 18,923,298 1,246,401 1987
Breckenridge 924,092 8,077,966 9,002,058 598,483 1986
Williamsburg 1,436,225 11,690,672 13,126,897 457,939 1986
Baltimore, Maryland
Gatewater Landing 2,166,411 7,022,090 9,188,501 1,797,148 1970
Dominion Kings Place 1,645,423 7,626,681 9,272,104 1,688,397 1983
Dominion at Eden Brook 2,462,172 10,278,813 12,740,985 2,312,986 1984
Dominion Great Oaks 3,241,013 11,189,139 14,430,152 2,255,101 1974
Dominion Constant Friendship 1,038,234 5,157,053 6,195,287 734,120 1990
Atlanta, Georgia
Stanford Village 1,156,761 3,552,204 4,708,965 1,551,738 1985
Griffin Crossing 1,671,386 8,485,993 10,157,379 1,573,554 1987/89
Gwinnett Square 2,110,130 8,445,930 10,556,060 1,194,754 1985
Dunwoody Pointe 3,265,954 10,520,056 13,786,010 1,439,655 1980
Riverwood 3,321,388 13,619,024 16,940,412 1,509,651 1980
Lake of the Woods 1,064,519 9,005,229 10,069,748 842,622 1989
Waterford Place 1,612,011 10,364,295 11,976,306 270,375 1985
Miami/Fort Lauderdale, Florida
Copperfield 4,955,878 21,373,298 26,329,176 3,045,731 1991
Mediterranean Village 2,262,087 12,975,694 15,237,781 2,011,391 1989
Cleary Court 2,613,237 9,089,919 11,703,156 1,398,251 1984/85
University Club 1,757,874 7,967,752 9,725,626 991,011 1988
Polo Chase 3,675,276 13,801,853 17,477,129 31,352 1991
Washington D.C.
Dominion Middle Ridge/Woodbridge 3,408,199 13,959,239 17,367,438 1,292,977 1990
Dominion Lake Ridge/Woodbridge 2,489,682 8,928,426 11,418,108 1,026,435 1987
Knolls at Newgate/Fairfax 1,844,394 4,878,634 6,723,028 1,020,075 1972
Hampton Roads, Virginia
Forest Lakes at Oyster Point 1,144,089 10,056,096 11,200,185 1,410,934 1986
Woodscape 1,060,243 9,618,367 10,678,610 4,025,551 1974/76
Eastwind 349,983 7,066,406 7,416,389 2,986,791 1970
Kings Arms 2,010,103 4,980,842 6,990,945 526,341 1966
Heather Lake 954,979 5,859,134 6,814,113 3,899,340 1972/74
York Pointe 1,251,487 8,934,502 10,185,989 349,065 1987
Jacksonville, Florida
Greentree Place 2,245,862 13,931,986 16,177,848 2,451,035 1986
Westland Park 2,567,434 17,321,210 19,888,644 1,891,845 1990
The Antlers 4,757,500 15,088,701 19,846,201 1,829,629 1985
Depreciable
Life of
Date Building
Acquired Component
---------------------------------
Nashville, Tennessee
2131 Apartments 12/16/92 35 yrs.
The Lakes 09/15/93 35 yrs.
Harbour Town 12/10/93 35 yrs.
Legacy Hill 11/06/95 35 yrs.
Hickory Run 12/29/95 35 yrs.
Brookridge 03/28/96 35 yrs.
Club at Hickory Hollow 02/21/97 35 yrs.
Breckenridge 03/27/97 35 yrs.
Williamsburg 5/20/98 35 yrs.
Baltimore, Maryland
Gatewater Landing 12/16/92 35 yrs.
Dominion Kings Place 12/29/92 35 yrs.
Dominion at Eden Brook 12/29/92 35 yrs.
Dominion Great Oaks 07/01/94 35 yrs.
Dominion Constant Friendship 05/04/95 35 yrs.
Atlanta, Georgia
Stanford Village 09/26/89 35 yrs.
Griffin Crossing 06/08/94 35 yrs.
Gwinnett Square 03/29/95 35 yrs.
Dunwoody Pointe 10/24/95 35 yrs.
Riverwood 06/26/96 35 yrs.
Lake of the Woods 08/15/96 35 yrs.
Waterford Place 04/15/98 35 yrs.
Miami/Fort Lauderdale, Florida
Copperfield 09/21/94 35 yrs.
Mediterranean Village 09/30/94 35 yrs.
Cleary Court 11/30/94 35 yrs.
University Club 09/26/95 35 yrs.
Polo Chase 12/7/98 35 yrs.
Washington D.C.
Dominion Middle Ridge/Woodbridge 06/25/96 35 yrs.
Dominion Lake Ridge/Woodbridge 02/23/96 35 yrs.
Knolls at Newgate/Fairfax 07/01/94 35 yrs.
Hampton Roads, Virginia
Forest Lakes at Oyster Point 08/15/95 35 yrs.
Woodscape 12/29/87 35 yrs.
Eastwind 04/04/88 35 yrs.
Kings Arms 08/15/96 35 yrs.
Heather Lake 03/01/80 35 yrs.
York Pointe 12/23/97 35 yrs.
Jacksonville, Florida
Greentree Place 07/22/94 35 yrs.
Westland Park 05/09/96 35 yrs.
The Antlers 05/28/96 35 yrs.
F-29
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Greenville, South Carolina
Key Pines 601,693 3,773,304 4,374,997 1,877,702
Riverwind 802,484 6,386,212 7,188,696 842,648
The Landing 685,000 5,640,176 6,325,176 1,852,861
Overlook 824,600 5,098,194 5,922,794 2,835,133
Stonesthrow 1,557,015 16,334,483 17,891,498 946,578
Phoenix, Arizona
Greenway Park c 1,622,700 6,170,800 7,793,500 2,682,360
Vista Point b 1,587,400 5,612,600 7,200,000 1,076,149
Sierra Palms 4,638,950 17,361,050 22,000,000 163,100
Northpark Village 36,957 1,519,314 13,536,707 15,056,021 818,456
Contempo Heights 3,887,969 735,036 7,639,875 8,374,911 287,769
Finisterra 1,273,798 26,392,207 27,666,005 87,620
La Privada 16,005,613 7,303,161 18,507,617 25,810,778 530,259
Rancho Mirage 3,757,224 34,780,779 38,538,003 710,794
Woodland Park 3,016,907 6,706,473 9,723,380 (210,136)
Tucson, Arizona
Casa Del Norte 1,410,911 319,181 1,980,628 2,299,809 18,496
Desert Springs 4,728,191 1,118,402 6,186,758 7,305,160 154,363
Landmark 3,120,868 460,791 3,980,299 4,441,090 132,988
Park Terrace 2,768,268 530,136 3,590,288 4,120,424 38,971
Posada Del Rio 843,748 3,742,175 4,585,923 269,539
South Point 1,909,114 447,370 2,479,069 2,926,439 47,593
Eastern Shore Maryland
Brittingham Square 650,143 4,962,246 5,612,389 537,805
Greens at Schumaker Pond 709,559 6,117,582 6,827,141 786,483
Greens at Cross Court 1,182,414 4,544,012 5,726,426 792,429
Greens at Hilton Run 2,754,447 10,482,579 13,237,026 1,026,716
Fayetteville, North Carolina
Cumberland Trace 632,281 7,895,674 8,527,955 430,321
Village At Cliffdale 10,259,673 941,284 15,498,216 16,439,500 942,148
Morganton Place 8,193,194 819,090 13,217,086 14,036,176 523,433
Memphis, Tennessee
Briar Club 1,214,400 6,928,959 8,143,359 1,765,174
Hunters Trace 5,715,000 888,440 6,676,552 7,564,992 1,234,099
Hickory Pointe 1,074,424 6,052,020 7,126,444 1,399,445
Cinnamon Trails 1,886,632 7,644,522 9,531,154 (529,642)
The Trails 27,696,865 10,387,416 34,394,843 44,782,259 1,948,511
Dogwood Creek 10,000,000 2,771,868 15,673,846 18,445,714 397,714
Columbus, Ohio
Sycamore Ridge 14,008,386 4,067,900 15,433,285 19,501,185 580,955
Heritage Green 2,990,199 11,391,797 14,381,996 275,495
Govenour's Square 20,972,590 7,512,513 27,695,050 35,207,563 -
Grandview Terrace 511,610 1,923,940 2,435,550 -
Hickory Creek g 3,421,413 12,539,402 15,960,815 -
The Tivoli 653,372 2,398,488 3,051,860 -
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
) Improvements Improvements (i) (a) Depreciation Construction
-----------------------------------------------------------------------------------------------
Greenville, South Carolina
Key Pines 715,531 5,537,168 6,252,699 1,683,686 1974
Riverwind 953,688 7,077,656 8,031,344 1,498,576 1987
The Landing 1,018,551 7,159,486 8,178,037 1,306,801 1976
Overlook 1,327,738 7,430,189 8,757,927 1,520,361 1976
Stonesthrow 1,705,535 17,132,541 18,838,076 1,534,995 1993
Phoenix, Arizona
Greenway Park 1,794,474 8,681,386 10,475,860 492,378 1986
Vista Point 1,656,868 6,619,281 8,276,149 472,090 1986
Sierra Palms 4,666,075 17,497,025 22,163,100 1,262,425 1996
Northpark Village 1,755,745 14,118,732 15,874,477 503,184 1983
Contempo Heights 786,471 7,876,209 8,662,680 223,595 1978
Finisterra 1,281,243 26,472,382 27,753,625 699,060 1997
La Privada 7,483,518 18,857,519 26,341,037 508,599 1987
Rancho Mirage 3,889,108 35,359,688 39,248,796 860,128 1984
Woodland Park 3,021,817 6,491,427 9,513,244 172,615 1979
Tucson, Arizona
Casa Del Norte 325,937 1,992,368 2,318,305 62,032 1984
Desert Springs 1,118,946 6,340,577 7,459,523 187,196 1985
Landmark 471,887 4,102,191 4,574,078 127,103 1986
Park Terrace 532,907 3,626,488 4,159,395 117,849 1986
Posada Del Rio 929,027 3,926,435 4,855,462 121,384 1980
South Point 457,330 2,516,702 2,974,032 86,023 1984
Eastern Shore Maryland
Brittingham Square 775,922 5,374,272 6,150,194 751,840 1991
Greens at Schumaker Pond 853,788 6,759,836 7,613,624 927,317 1988
Greens at Cross Court 1,362,894 5,155,961 6,518,855 781,560 1987
Greens at Hilton Run 3,041,042 11,222,700 14,263,742 1,553,356 1988
Fayetteville, North Carolina
Cumberland Trace 663,198 8,295,078 8,958,276 756,005 1973
Village At Cliffdale 1,107,855 16,273,794 17,381,649 1,374,710 1992
Morganton Place 886,825 13,672,784 14,559,609 1,124,625 1994
Memphis, Tennessee
Briar Club 1,490,502 8,418,031 9,908,533 1,569,826 1987
Hunters Trace 1,125,488 7,673,603 8,799,091 1,360,476 1986
Hickory Pointe 1,560,332 6,965,557 8,525,889 1,214,489 1985
Cinnamon Trails 1,967,974 7,033,538 9,001,512 281,464 1989
The Trails 10,852,433 35,878,337 46,730,770 1,300,464 1990
Dogwood Creek 2,796,344 16,047,084 18,843,428 533,684 1997
Columbus, Ohio
Sycamore Ridge 4,101,080 15,981,060 20,082,140 262,645 1997
Heritage Green 3,030,466 11,627,025 14,657,491 253,770 1998
Govenour's Square 7,512,513 27,695,050 35,207,563 62,695 1967
Grandview Terrace 511,610 1,923,940 2,435,550 4,329 1974
Hickory Creek 3,421,413 12,539,402 15,960,815 28,105 1988
The Tivoli 653,372 2,398,488 3,051,860 5,365 1967
Depreciable
Life of
Date Building
Acquired Component
-------------------------------------
Greenville, South Carolina
Key Pines 09/25/92 35 yrs.
Riverwind 12/31/93 35 yrs.
The Landing 07/01/94 35 yrs.
Overlook 07/01/94 35 yrs.
Stonesthrow 08/15/96 35 yrs.
Phoenix, Arizona
Greenway Park 12/31/96 35 yrs.
Vista Point 12/31/96 35 yrs.
Sierra Palms 12/31/96 35 yrs.
Northpark Village 03/27/98 35 yrs.
Contempo Heights 03/27/98 35 yrs.
Finisterra 03/27/98 35 yrs.
La Privada 03/27/98 35 yrs.
Rancho Mirage 05/28/98 35 yrs.
Woodland Park 06/09/98 35 yrs.
Tucson, Arizona
Casa Del Norte 3/27/98 35 yrs.
Desert Springs 3/27/98 35 yrs.
Landmark 3/27/98 35 yrs.
Park Terrace 3/27/98 35 yrs.
Posada Del Rio 3/27/98 35 yrs.
South Point 3/27/98 35 yrs.
Eastern Shore Maryland
Brittingham Square 05/04/95 35 yrs.
Greens at Schumaker Pond 05/04/95 35 yrs.
Greens at Cross Court 05/04/95 35 yrs.
Greens at Hilton Run 05/04/95 35 yrs.
Fayetteville, North Carolina
Cumberland Trace 08/15/96 35 yrs.
Village At Cliffdale 08/15/96 35 yrs.
Morganton Place 08/15/96 35 yrs.
Memphis, Tennessee
Briar Club 10/14/94 35 yrs.
Hunters Trace 10/14/94 35 yrs.
Hickory Pointe 02/10/95 35 yrs.
Cinnamon Trails 1/9/98 35 yrs.
The Trails 1/9/98 35 yrs.
Dogwood Creek 2/6/98 35 yrs.
Columbus, Ohio 3/27/98 35 yrs.
Sycamore Ridge 7/2/98 35 yrs.
Heritage Green 7/2/98 35 yrs.
Govenour's Square 12/7/98 35 yrs.
Grandview Terrace 12/7/98 35 yrs.
Hickory Creek 12/7/98 35 yrs.
The Tivoli 12/7/98 35 yrs.
F-30
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Austin, Texas
Pecan Grove b 1,406,750 5,293,250 6,700,000 156,669
Anderson Mill 3,134,669 11,170,376 14,305,045 2,152,805
Albuquerque, New Mexico
Alvarado b 1,930,229 5,969,771 7,900,000 297,767
Dorado Heights 5,345,522 1,567,762 6,555,395 8,123,157 155,175
Villa Serena 2,749,125 512,421 3,403,906 3,916,327 37,545
Whispering Sands 5,609,631 865,633 7,725,456 8,591,089 80,378
East Lansing, Michigan
2900 Place g 1,818,957 6,593,327 8,412,284 -
Brandywine Creek e 4,665,991 16,736,466 21,402,457 -
Lakewood e 1,113,126 3,877,503 4,990,629 -
Nemoke Trail e 3,430,631 12,322,526 15,753,157 -
Detroit, Michigan
American Heritage e 1,021,412 3,608,146 4,629,558 -
Ashton Pines g 1,822,351 6,513,902 8,336,253 -
Kings Gate e 1,180,664 4,328,504 5,509,168 -
Lancaster Lakes e 4,237,887 15,412,797 19,650,684 -
Other Midwest
Washington Park/Centerville, Ohio 2,011,520 7,565,279 9,576,799 765,800
Fountainhead/Dayton, Ohio 390,542 1,420,166 1,810,708 -
Jamestown of St.Matthews/
St. Matthews, Kentucky 3,865,596 14,422,383 18,287,979 -
Jamestown of Toledo/Toledo, Ohio 1,800,271 6,453,585 8,253,856 -
Sunset Village/Flint, Michigan - 796,994 2,829,226 3,626,220 -
Other Florida
Brantley Pines/Ft. Myers 1,892,888 8,247,621 10,140,509 4,619,987
Santa Barbara Landing/Naples 1,134,120 8,019,814 9,153,934 1,439,501
Mallards of Wedgewood/Lakeland 959,284 6,864,666 7,823,950 1,506,236
The Groves/Daytona Beach 789,953 4,767,055 5,557,008 1,563,944
Lakeside/Daytona Beach 2,404,305 6,420,160 8,824,465 1,084,294
Mallards of Brandywine/Deland 765,949 5,407,683 6,173,632 927,687
Lake Washington Downs/Melbourne 1,434,450 4,940,166 6,374,616 1,739,542
Seattle, Washington
Arbor Terrace I 4,568,671 831,068 6,834,471 7,665,539 91,196
Arbor Terrace II 3,116,814 622,274 5,160,501 5,782,775 56,047
Aspen Creek 7,052,655 1,177,714 9,115,789 10,293,503 88,508
Crown Point 4,958,705 2,486,252 9,437,256 11,923,508 -
Hill Top 4,670,040 2,173,969 8,307,628 10,481,597 -
Indianapolis, Indiana
Cold Springs Manor e 599,646 2,074,834 2,674,480 -
International Village e 3,934,102 13,778,908 17,713,010 -
Regency Park South g 2,643,025 9,632,098 12,275,123 -
Denver, Colorado
Greensview g 2,974,024 11,029,598 14,003,622 -
Mountain View g 6,401,851 23,789,403 30,191,254 -
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
---------------------------------------------------------------------------------------------
Austin, Texas
Pecan Grove 1,440,733 5,415,936 6,856,669 347,068 1984
Anderson Mill 3,437,730 13,020,120 16,457,850 1,333,117 1984
Albuquerque, New Mexico
Alvarado 1,961,453 6,236,314 8,197,767 494,554 1984
Dorado Heights 1,615,674 6,662,658 8,278,332 189,464 1986
Villa Serena 513,602 3,440,270 3,953,872 97,695 1986
Whispering Sands 869,838 7,801,629 8,671,467 217,575 1986
East Lansing, Michigan
2900 Place 1,818,957 6,593,327 8,412,284 14,791 1966
Brandywine Creek 4,665,991 16,736,466 21,402,457 37,986 1974
Lakewood 1,113,126 3,877,503 4,990,629 8,666 1974
Nemoke Trail 3,430,631 12,322,526 15,753,157 27,831 1978
Detroit, Michigan
American Heritage 1,021,412 3,608,146 4,629,558 8,088 1968
Ashton Pines 1,822,351 6,513,902 8,336,253 14,755 1987
Kings Gate 1,180,664 4,328,504 5,509,168 9,803 1973
Lancaster Lakes 4,237,887 15,412,797 19,650,684 35,510 1988
Other Midwest
Washington Park/Centerville, Ohio 2,050,015 8,292,584 10,342,599 149,955 1998
Fountainhead/Dayton, Ohio 390,542 1,420,166 1,810,708 3,028 1966
Jamestown of St. Matthews/
St. Matthews, Kentucky 3,865,596 14,422,383 18,287,979 32,917 1968
Jamestown of Toledo/Toledo, Ohio 1,800,271 6,453,585 8,253,856 14,540 1965
Sunset Village/Flint, Michigan 796,994 2,829,226 3,626,220 6,072 1940
Other Florida
Brantley Pines/Ft. Myers 801,116 13,959,380 14,760,496 1,839,427 1986
Santa Barbara Landing/Naples 1,674,582 8,918,853 10,593,435 1,655,803 1987
Mallards of Wedgewood/Lakeland 1,240,264 8,089,921 9,330,185 1,222,376 1985
The Groves/Daytona Beach 1,413,329 5,707,623 7,120,952 840,751 1989
Lakeside/Daytona Beach 2,602,581 7,306,178 9,908,759 408,287 1985
Mallards of Brandywine/Deland 974,487 6,126,832 7,101,319 359,393 1985
Lake Washington Downs/Melbourne 1,725,169 6,388,989 8,114,158 1,571,641 1984
Seattle, Washington
Arbor Terrace I 832,888 6,923,847 7,756,735 194,030 1996
Arbor Terrace II 623,750 5,215,072 5,838,822 151,046 1996
Aspen Creek 1,251,783 9,130,228 10,382,011 - 1996
Crown Point 2,486,252 9,437,256 11,923,508 21,676 1987
Hill Top 2,173,969 8,307,628 10,481,597 19,032 1985
Indianapolis, Indiana
Cold Springs Manor 599,646 2,074,834 2,674,480 4,512 1963
International Village 3,934,102 13,778,908 17,713,010 30,968 1968
Regency Park South 2,643,025 9,632,098 12,275,123 21,739 1968
Denver, Colorado
Greensview 2,974,024 11,029,598 14,003,622 24,956 1987
Mountain View 6,401,851 23,789,403 30,191,254 54,260 1973
Depreciable
Life of
Date Building
Acquired Component
---------------------------------
Austin, Texas
Pecan Grove 12/31/96 35 yrs.
Anderson Mill 03/27/97 35 yrs.
Albuquerque, New Mexico
Alvarado 12/31/96 35 yrs.
Dorado Heights 03/27/98 35 yrs.
Villa Serena 03/27/98 35 yrs.
Whispering Sands 03/27/98 35 yrs.
East Lansing, Michigan
2900 Place 12/07/98 35 yrs.
Brandywine Creek 12/07/98 35 yrs.
Lakewood 12/07/98 35 yrs.
Nemoke Trail 12/07/98 35 yrs.
Detroit, Michigan
American Heritage 12/07/98 35 yrs.
Ashton Pines 12/07/98 35 yrs.
Kings Gate 12/07/98 35 yrs.
Lancaster Lakes 12/07/98 35 yrs.
Other Midwest
Washington Park/Centerville, Ohio 12/07/98 35 yrs.
Fountainhead/Dayton, Ohio 12/07/98 35 yrs.
Jamestown of St. Matthews/
St. Matthews, Kentucky 12/07/98 35 yrs.
Jamestown of Toledo/Toledo, Ohio 12/07/98 35 yrs.
Sunset Village/Flint, Michigan 12/07/98 35 yrs.
Other Florida
Brantley Pines/Ft. Myers 08/11/94 35 yrs.
Santa Barbara Landing/Naples 09/01/94 35 yrs.
Mallards of Wedgewood/Lakeland 07/27/95 35 yrs.
The Groves/Daytona Beach 12/13/95 35 yrs.
Lakeside/Daytona Beach 07/01/97 35 yrs.
Mallards of Brandywine/Deland 07/01/97 35 yrs.
Lake Washington Downs/Melbourne 09/24/93 35 yrs.
Seattle, Washington
Arbor Terrace I 3/27/98 35 yrs.
Arbor Terrace II 3/27/98 35 yrs.
Aspen Creek 12/7/98 35 yrs.
Crown Point 12/7/98 35 yrs.
Hill Top 12/7/98 35 yrs.
Indianapolis, Indiana
Cold Springs Manor 12/7/98 35 yrs.
International Village 12/7/98 35 yrs.
Regency Park South 12/7/98 35 yrs.
Denver, Colorado
Greensview 12/7/98 35 yrs.
Mountain View 12/7/98 35 yrs.
F-31
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Portland, Oregon
Lancaster Commons e 2,485,291 9,301,165 11,786,456 -
Tualatin Heights e 3,272,585 12,134,089 15,406,674 -
University Park 7,345,000 3,007,202 11,691,307 14,698,509 -
Double Tree 5,400,078 3,878,138 13,973,051 17,851,189 -
Los Angeles, California
Pine Avenue 6,141,240 2,158,423 8,387,744 10,546,167 -
The Grand Resort 8,884,151 33,956,606 42,840,757 -
Sacramento, California
Foothills Tennis Village e 3,617,507 13,192,028 16,809,535 -
Woodlake Village 17,126,871 6,772,438 23,966,750 30,739,188 -
San Francisco, California
2000 Post Street 26,850,000 9,860,627 38,577,506 48,438,133 -
Birch Creek 1,668,896 4,365,315 16,645,509 21,010,824 -
Highlands of Marin 20,800,000 5,995,838 23,168,350 29,164,188 -
Marina Playa 20,766,883 6,224,383 23,916,283 30,140,666 -
Monterey Peninsula, California
Boronda Manor f 1,946,423 6,981,742 8,928,165 -
Garden Court h 888,038 3,187,950 4,075,988 -
Glenridge h 415,284 1,552,934 1,968,218 -
Harding Park Townhomes f 549,393 2,051,322 2,600,715 -
Heather Plaza f 2,020,384 7,226,038 9,246,422 -
Laurel Tree f 1,303,902 4,615,356 5,919,258 -
New San Pablo h 289,468 1,020,473 1,309,941 -
Pine Grove f 1,383,161 5,283,993 6,667,154 -
San Pablo h 804,394 3,094,626 3,899,020 -
Santanna h 957,079 3,526,117 4,483,196 -
The Capri f 1,018,493 3,657,274 4,675,767 -
The Claremont h 463,143 1,637,120 2,100,263 -
The Pointe At Harden Ranch f 6,388,446 23,853,534 30,241,980 -
The Pointe At Northridge f 2,043,736 7,528,443 9,572,179 -
The Pointe At Westlake f 1,329,064 4,834,004 6,163,068 -
Valli Hi h 881,376 3,237,805 4,119,181 -
Other California
Silk Oak/Fresno g 2,324,562 7,566,446 9,891,008 -
Windward Point/Chula Vista g 1,767,970 6,617,879 8,385,849 -
Other Virginia
Greens at Falls Run/Fredericksburg 2,730,722 5,300,203 8,030,925 752,246
Manor at England Run/Fredericksburg 1,168,810 7,006,464 8,175,274 13,113,435
Laurel Ridge/Roanoke 2,830,000 445,400 2,531,357 2,976,757 1,482,339
Greens at Hollymead/Charlottesville 965,114 5,250,374 6,215,488 562,402
Craig Manor/Salem 282,200 2,419,570 2,701,770 949,636
Northview/Salem 171,600 1,238,501 1,410,101 823,888
Other Georgia
Royal Oaks/Savannah 6,178,829 533,100 9,926,017 10,459,117 1,667,483
River Place/Macon 1,097,280 7,492,385 8,589,665 1,684,859
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
--------------------------------------------------------------------------------------------
Portland, Oregon
Lancaster Commons 2,485,291 9,301,165 11,786,456 21,046 1992
Tualatin Heights 3,272,585 12,134,089 15,406,674 27,836 1989
University Park 3,007,202 11,691,307 14,698,509 27,345 1987
Double Tree 3,878,138 13,973,051 17,851,189 31,820 1988
Los Angeles, California
Pine Avenue 2,158,423 8,387,744 10,546,167 19,350 1987
The Grand Resort 8,884,151 33,956,606 42,840,757 76,300 1971
Sacramento, California
Foothills Tennis Village 3,617,507 13,192,028 16,809,535 30,333 1988
Woodlake Village 6,772,438 23,966,750 30,739,188 54,502 1979
San Francisco, California
2000 Post Street 9,860,627 38,577,506 48,438,133 90,657 1987
Birch Creek 4,365,315 16,645,509 21,010,824 38,909 1968
Highlands of Marin 5,995,838 23,168,350 29,164,188 54,230 1991
Marina Playa 6,224,383 23,916,283 30,140,666 55,851 1971
Monterey Peninsula, California
Boronda Manor 1,946,423 6,981,742 8,928,165 15,810 1979
Garden Court 888,038 3,187,950 4,075,988 7,166 1973
Glenridge 415,284 1,552,934 1,968,218 3,540 1989
Harding Park Townhomes 549,393 2,051,322 2,600,715 4,743 1984
Heather Plaza 2,020,384 7,226,038 9,246,422 16,348 1974
Laurel Tree 1,303,902 4,615,356 5,919,258 10,348 1977
New San Pablo 289,468 1,020,473 1,309,941 2,304 1973
Pine Grove 1,383,161 5,283,993 6,667,154 12,188 1963
San Pablo 804,394 3,094,626 3,899,020 7,019 1963
Santanna 957,079 3,526,117 4,483,196 8,077 1989
The Capri 1,018,493 3,657,274 4,675,767 826 1973
The Claremont 463,143 1,637,120 2,100,263 3,694 1973
The Pointe At Harden Ranch 6,388,446 23,853,534 30,241,980 55,046 1986
The Pointe At Northridge 2,043,736 7,528,443 9,572,179 17,186 1979
The Pointe At Westlake 1,329,064 4,834,004 6,163,068 10,963 1975
Valli Hi 881,376 3,237,805 4,119,181 7,410 1965
Other California
Silk Oak/Fresno 2,324,562 7,566,446 9,891,008 16,648 1985
Windward Point/Chula Vista 1,767,970 6,617,879 8,385,849 15,311 1983
Other Virginia
Greens at Falls Run/Fredericksburg 2,872,643 5,910,528 8,783,171 834,669 1989
Manor at England Run/Fredericksburg 2,794,777 18,493,932 21,288,709 1,448,501 1990
Laurel Ridge/Roanoke 665,161 3,793,935 4,459,096 1,874,928 1970/72
Greens at Hollymead/Charlottesville 1,048,258 5,729,632 6,777,890 779,314 1990
Craig Manor/Salem 364,351 3,287,055 3,651,406 1,412,021 1975
Northview/Salem 241,143 1,992,846 2,233,989 1,316,170 1969
Other Georgia
Royal Oaks/Savannah 935,619 11,190,981 12,126,600 1,937,253 1980
River Place/Macon 1,689,302 8,585,222 10,274,524 1,831,308 1988
Depreciable
Life of
f Date Building
ion Acquired Component
-----------------------------------
Portland, Oregon
Lancaster Commons 12/8/98 35 yrs.
Tualatin Heights 12/8/98 35 yrs.
University Park 3/27/98 35 yrs.
Double Tree 3/27/98 35 yrs.
Los Angeles, California
Pine Avenue 12/7/98 35 yrs.
The Grand Resort 12/7/98 35 yrs.
Sacramento, California
Foothills Tennis Village 12/7/98 35 yrs.
Woodlake Village 12/7/98 35 yrs.
San Francisco, California
2000 Post Street 12/7/98 35 yrs.
Birch Creek 12/7/98 35 yrs.
Highlands of Marin 12/7/98 35 yrs.
Marina Playa 12/7/98 35 yrs.
Monterey Peninsula, California
Boronda Manor 12/7/98 35 yrs.
Garden Court 12/7/98 35 yrs.
Glenridge 12/7/98 35 yrs.
Harding Park Townhomes 12/7/98 35 yrs.
Heather Plaza 12/7/98 35 yrs.
Laurel Tree 12/7/98 35 yrs.
New San Pablo 12/7/98 35 yrs.
Pine Grove 12/7/98 35 yrs.
San Pablo 12/7/98 35 yrs.
Santanna 12/7/98 35 yrs.
The Capri 12/7/98 35 yrs.
The Claremont 12/7/98 35 yrs.
The Pointe At Harden Ranch 12/7/98 35 yrs.
The Pointe At Northridge 12/7/98 35 yrs.
The Pointe At Westlake 12/7/98 35 yrs.
Valli Hi 12/7/98 35 yrs.
Other California
Silk Oak/Fresno 12/7/98 35 yrs.
Windward Point/Chula Vista 12/7/98 35 yrs.
Other Virginia
Greens at Falls Run/Fredericksburg 05/04/95 35 yrs.
Manor at England Run/Fredericksburg 05/04/95 35 yrs.
Laurel Ridge/Roanoke 05/17/88 35 yrs.
Greens at Hollymead/Charlottesville 05/04/95 35 yrs.
Craig Manor/Salem 11/06/87 35 yrs.
Northview/Salem 09/29/78 35 yrs.
Other Georgia
Royal Oaks/Savannah 07/01/94 35 yrs.
River Place/Macon 04/08/94 35 yrs.
F-32
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Little Rock, Arkansas
Turtle Creek 1,913,177 7,086,823 9,000,000 652,892
Shadow Lake 2,523,670 8,976,330 11,500,000 743,946
Las Vegas, Nevada
Sunset Pointe 4,295,050 15,704,950 20,000,000 549,273
Dover, Delaware
Dover Country Club 2,007,878 6,365,053 8,372,931 2,260,287
Greens at Cedar Chase 1,528,667 4,830,738 6,359,405 677,819
Other Washington
Campus Commons North/Pullman 7,027,934 305,143 9,867,157 10,172,300 287,619
On The Boulevard/Kennewick 1,164,652 9,547,299 10,711,951 18,507
Campus Commons South/Pullman 2,674,005 838,324 3,005,784 3,844,108 229,249
Alabama
Three Fountains/Montgomery 1,075,009 6,872,302 7,947,311 3,263,986
Other North Carolina
Woodberry/Asheville d 388,699 6,380,899 6,769,598 858,015
Other South Carolina
Somerset/Charleston 485,160 4,072,780 4,557,940 1,530,833
============================================================================================
$ 629,688,918 $ 589,223,859 $ 2,702,702,804 $3,291,926,663 $ 351,318,208
============================================================================================
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
----------------------------------------------------------------------------------------------
Little Rock, Arkansas
Turtle Creek 2,150,367 7,502,525 9,652,892 564,049 1985
Shadow Lake 2,672,445 9,571,501 12,243,946 722,571 1984
Las Vegas, Nevada
Sunset Pointe 4,435,225 16,114,048 20,549,273 1,137,800 1990
Dover, Delaware
Dover Country Club 2,355,591 8,277,627 10,633,218 1,583,479 1970
Greens at Cedar Chase 1,709,779 5,327,445 7,037,224 780,941 1988
Other Washington
Campus Commons North/Pullman 328,060 10,131,859 10,459,919 286,517 1972
On The Boulevard/Kenniwick 1,166,044 9,564,414 10,730,458 255,088 1995
Campus Commons South/Pullman 886,377 3,186,980 4,073,357 93,617 1972
Alabama
Three Fountains/Montgomery 1,263,205 9,948,092 11,211,297 1,798,645 1973
Other North Carolina
Woodberry/Asheville 521,039 7,106,574 7,627,613 663,418 1987
Other South Carolina
Somerset/Charleston 692,721 5,396,052 6,088,773 994,586 1979
==============================================================================
$ 647,327,889 $ 2,995,916,977 $ 3,643,244,866 $ 280,663,279
==============================================================================
Depreciable
Life of
Date Building
Acquired Component
----------------------------------
Little Rock, Arkansas
Turtle Creek 12/31/96 35 yrs.
Shadow Lake 12/31/96 35 yrs.
Las Vegas, Nevada
Sunset Pointe 12/31/96 35 yrs.
Dover, Delaware
Dover Country Club 07/01/94 35 yrs.
Greens at Cedar Chase 05/04/95 35 yrs.
Other Washington
Campus Commons North/Pullman 3/27/98 35 yrs.
On The Boulevard/Kenniwick 3/27/98 35 yrs.
Campus Commons South/Pullman 3/27/98 35 yrs.
Alabama
Three Fountains/Montgomery 07/01/94 35 yrs.
Other North Carolina
Woodberry/Asheville 08/15/96 35 yrs.
Other South Carolina
Somerset/Charleston 07/01/94 35 yrs.
F-33
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Real estate held for disposition
Apartments
Heritage Trace/Hampton Roads, VA 3,900,000 880,000 2,312,285 3,192,285 1,879,478
Twin Coves/Baltimore, MD 3,615,000 912,771 2,904,304 3,817,075 835,231
Cedar Point/Raleigh, NC 75,400 4,514,435 4,589,835 3,306,726
Cinnamon Ridge/Raleigh, NC 7,000,000 967,230 3,337,197 4,304,427 4,841,777
Plum Chase/Columbia, SC 7,000,000 802,750 3,149,607 3,952,357 5,542,032
Hunting Ridge/Greenville, SC 3,265,000 449,500 2,246,908 2,696,408 1,039,761
Patriot Place/Florence, SC 2,200,000 212,500 1,600,757 1,813,257 5,568,491
Bluff Creek/Oklahoma City, OK c 2,172,063 7,202,937 9,375,000 359,258
Chandler's Mill/Corpus Christi, TX b 1,930,120 6,844,880 8,775,000 269,535
Ryan's Mill/El Paso, TX c 1,522,900 5,277,100 6,800,000 232,009
The Crest/Dallas, TX 4,616,074 1,464,755 5,126,939 6,591,694 683,389
Dominion Mallard Creek (M)/Charlotte, NC 329,300 2,772,449 3,101,749 296,545
Parkwood Court/Alexandria, VA 5,875,000 2,482,633 3,813,116 6,295,749 2,096,342
Hampton Court/Alexandria, VA 7,388,420 4,811,937 12,200,357 1,624,145
Westlake Villas /San Antonio, TX b 2,371,865 8,278,135 10,650,000 538,502
Meadowdale Lakes/Richmond, VA 1,581,671 6,717,237 8,298,908 3,963,789
Meadow Run/Richmond, VA 636,059 3,423,884 4,059,943 1,891,890
Acacia Hills/Tuscon, AZ 1,053,831 410,737 1,415,788 1,826,525 214,275
Park Village/Tuscon, AZ 566,324 187,860 1,065,384 1,253,244 13,238
Bayberry Commons/Hampton Roads, VA 516,800 3,485,645 4,002,445 1,411,705
Montfort/Dallas, TX 3,876,278 1,696,778 4,747,254 6,444,032 34,876
Holly Tree Park/Baltimore, MD 1,576,366 5,106,716 6,683,082 1,287,803
Woodside/Baltimore, MD 13,160,000 3,112,881 8,893,721 12,006,602 3,129,401
Deerwood Crossing/Greensboro, NC 1,539,901 7,989,043 9,528,944 894,394
Dutch Village/Greensboro, NC 1,197,593 4,826,266 6,023,859 508,099
Park Forest/Greensboro, NC 4,145,270 679,671 5,770,413 6,450,084 347,611
Commercial
Pacific South Center/Seattle, WA 3,512,328 1,000,000 4,000,000 5,000,000 655
Hanover Village-Land/Richmond, VA 1,623,910 - 1,623,910 -
Gloucester Exchange/Gloucester, VA 403,688 2,278,553 2,682,241 85,667
Tri-County Buildings/Bristol, TN 275,580 900,281 1,175,861 1,280,670
Meadowdale Office/Richmond, VA 240,563 359,913 600,476 119,344
========================================================================================
$63,785,105 $40,642,265 $125,173,084 $165,815,349 $44,296,638
========================================================================================
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
--------------------------------------------------------------------------------------------
Real estate held for disposition
Apartments
Heritage Trace/Hampton Roads, VA 1,200,782 3,870,981 5,071,763 1,603,230 1973
Twin Coves/Baltimore, MD 1,020,290 3,632,016 4,652,306 376,566 1974
Cedar Point/Raleigh, NC 249,622 7,646,939 7,896,561 3,432,650 1972
Cinnamon Ridge/Raleigh, NC 1,272,296 7,873,908 9,146,204 3,308,395 1968/70
Plum Chase/Columbia, SC 1,138,202 8,356,187 9,494,389 2,754,252 1974
Hunting Ridge/Greenville, SC 611,412 3,124,757 3,736,169 366,795 1972
Patriot Place/Florence, SC 1,435,436 5,946,312 7,381,748 2,671,178 1974
Bluff Creek/Oklahoma City , OK 2,224,067 7,510,191 9,734,258 298,127 1984
Chandler's Mill/Corpus Christi , TX 1,956,652 7,087,883 9,044,535 261,307 1984
Ryan's Mill/El Paso, TX 1,561,530 5,470,479 7,032,009 212,958 1985
The Crest/Dallas, TX 1,536,987 5,738,096 7,275,083 117,872 1983
Dominion Mallard Creek (M)/Charlotte, NC 451,420 2,946,874 3,398,294 474,575 1985
Parkwood Court/Alexandria, VA 2,730,047 5,662,044 8,392,091 1,220,304 1964
Hampton Court/Alexandria, VA 7,631,128 6,193,374 13,824,502 1,526,912 1967
Westlake Villas /San Antonio, TX 2,447,517 8,740,985 11,188,502 314,309 1985
Meadowdale Lakes/Richmond, VA 2,212,224 10,050,473 12,262,697 5,629,984 1967/71
Meadow Run/Richmond, VA 869,735 5,082,098 5,951,833 2,676,832 1973/74
Acacia Hills/Tuscon, AZ 609,735 1,431,065 2,040,800 29,596 1986
Park Village/Tuscon, AZ 191,195 1,075,287 1,266,482 24,112 1985
Bayberry Commons/Hampton Roads, VA 744,991 4,669,159 5,414,150 2,108,631 1973/74
Montfort/Dallas, TX 1,704,006 4,774,902 6,478,908 80,288 1986
Holly Tree Park/Baltimore, MD 1,764,001 6,206,884 7,970,885 1,098,776 1973
Woodside/Baltimore, MD 3,449,637 11,686,366 15,136,003 1,911,050 1966
Deerwood Crossing/Greensboro, NC 1,670,815 8,752,523 10,423,338 740,581 1973
Dutch Village/Greensboro, NC 1,282,479 5,249,478 6,531,957 469,550 1970
Park Forest/Greensboro, NC 772,557 6,025,137 6,797,694 467,852 1987
Commercial
Pacific South Center/Seattle, WA 1,000,000 4,000,655 5,000,655 - 1965
Hanover Village-Land/Richmond, VA 1,103,600 520,310 1,623,910 - --
Gloucester Exchange/Gloucester, VA 531,881 2,236,027 2,767,908 757,307 1974
Tri-County Buildings/Bristol, TN 364,123 2,092,408 2,456,531 733,820 1976/79
Meadowdale Office/Richmond, VA 259,684 460,136 719,820 300,034 1976/82
===========================================================================
$45,998,051 $164,113,934 $210,111,985 $35,967,843
===========================================================================
Depreciable
Life of
Date Building
Acquired Component
-------------------------------
Real estate held for disposition
Apartments
Heritage Trace/Hampton Roads, VA 06/30/89 35 yrs.
Twin Coves/Baltimore, MD 08/16/94 35 yrs.
Cedar Point/Raleigh, NC 12/18/85 35 yrs.
Cinnamon Ridge/Raleigh, NC 12/01/89 35 yrs.
Plum Chase/Columbia, SC 01/04/91 35 yrs.
Hunting Ridge/Greenville, SC 11/01/94 35 yrs.
Patriot Place/Florence, SC 10/23/85 35 yrs.
Bluff Creek/Oklahoma City , OK 12/31/96 35 yrs.
Chandler's Mill/Corpus Christi , TX 12/31/96 35 yrs.
Ryan's Mill/El Paso, TX 12/31/96 35 yrs.
The Crest/Dallas, TX 03/27/98 35 yrs.
Dominion Mallard Creek (M)/Charlotte 07/01/94 35 yrs.
Parkwood Court/Alexandria, VA 06/30/93 35 yrs.
Hampton Court/Alexandria, VA 02/19/93 35 yrs.
Westlake Villas /San Antonio, TX 12/31/96 35 yrs.
Meadowdale Lakes/Richmond, VA 12/31/84 35 yrs.
Meadow Run/Richmond, VA 12/31/84 35 yrs.
Acacia Hills/Tuscon, AZ 3/27/98 35 yrs.
Park Village/Tuscon, AZ 3/27/98 35 yrs.
Bayberry Commons/Hampton Roads, VA 04/07/88 35 yrs.
Montfort/Dallas, TX 3/27/98 35 yrs.
Holly Tree Park/Baltimore, MD 07/01/94 35 yrs.
Woodside/Baltimore, MD 08/16/94 35 yrs.
Deerwood Crossing/Greensboro, NC 08/15/96 35 yrs.
Dutch Village/Greensboro, NC 08/15/96 35 yrs.
Park Forest/Greensboro, NC 09/26/96 35 yrs.
Commercial
Pacific South Center/Seattle, WA 08/28/86 35 yrs.
Hanover Village-Land/Richmond, VA 06/30/86 35 yrs.
Gloucester Exchange/Gloucester, VA 11/12/87 35 yrs.
Tri-County Buildings/Bristol, TN 01/21/81 35 yrs.
Meadowdale Office/Richmond, VA 12/31/84 35 yrs.
F-34
Cost of
Intitial Costs Improvements
--------------------------------------- Total Capitalized
Land and Building Initials Subsequent
Land and Acquisition to Acquisition
Encumbrances Improvements Improvement Costs (Net of Disposals)
---------------------------------------------------------------------- ---------------------
Real estate under development
New apartment communites
Ashlar I/Fort Myers, FL 2,853,178 10,370,767 13,223,945
Sierra Foothills/Phoenix, AZ 2,728,172 4,397,105 7,125,277
Dominion Franklin/Nashville, TN 2,117,244 22,428,101 24,545,345
Alexander Court/Columbus, OH 1,573,412 14,133,628 15,707,040
Stone Canyon/Houston, TX 899,515 8,045,153 8,944,668
Legends at Park 10/Houston, TX 1,995,011 804,518 2,799,529
Ashton at Waterford Lakes/Orlando, FL 3,077,956 1,925,512 5,003,468
The Meridian I/Dallas, TX 2,979,656 472,617 3,452,273
Additions to existing communites
Heritage Green II/Columbus, OH 767,040 3,151,567 3,918,607
Dominion Crown Pointe/Charlotte, NC 1,936,427 5,654 1,942,081
Other Land Held for Development 12,733,141 12,733,141
============================================================================================
$0 $33,660,752 $65,734,622 $99,395,374 $0
============================================================================================
============================================================================================
Total real estate owned $1,072,185,325 $663,526,876 $2,893,610,510 $3,557,137,386 $395,614,846
============================================================================================
Gross Amount at Which
Carried at Close of Period
------------------------------ Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (i) (a) Depreciation Construction
-----------------------------------------------------------------------------------------------
Real estate under development
New apartment communites
Ashlar I/Fort Myers, FL 2,853,178 10,370,767 13,223,945 1999
Sierra Foothills/Phoenix, AZ 2,728,172 4,397,105 7,125,277 1998
Dominion Franklin/Nashville, TN 2,117,244 22,428,101 24,545,345 4,899 1999
Alexander Court/Columbus, OH 1,573,412 14,133,628 15,707,040 1,103 1999
Stone Canyon/Houston, TX 899,515 8,045,153 8,944,668 1998
Legends at Park 10/Houston, TX 1,995,011 804,518 2,799,529 1998
Ashton at Waterford Lakes/Orlando, 3,077,956 1,925,512 5,003,468 1999
The Meridian I/Dallas, TX 2,979,656 472,617 3,452,273 1999
Additions to existing communites
Heritage Green II/Columbus, OH 767,040 3,151,567 3,918,607 1998
Dominion Crown Pointe/Charlotte, NC 1,936,427 5,654 1,942,081 1999
Other Land Held for Development 12,733,141 12,733,141
============================================================================
$33,660,752 $65,734,622 $99,395,374 $6,002
============================================================================
============================================================================
Total real estate owned $726,986,692 $3,225,765,533 $3,952,752,225 $316,637,124
============================================================================
Depreciable
Life of
Date Building
Acquired Component
-----------------------------
Real estate under development
New apartment communites
Ashlar I/Fort Myers, FL 12/24/97
Sierra Foothills/Phoenix, AZ 2/18/98
Dominion Franklin/Nashville, TN 12/6/95
Alexander Court/Columbus, OH 7/2/98
Stone Canyon/Houston, TX 12/17/97
Legends at Park 10/Houston, TX 5/19/98
Ashton at Waterford Lakes/Orlando, FL 5/28/98
The Meridian I/Dallas, TX 1/27/98
Additions to existing communites
Heritage Green II/Columbus, OH 7/2/98
Dominion Crown Pointe/Charlotte, NC 12/29/98
Other Land Held for Development
Total real estate owned
(a) The aggregate cost for federal income tax purposes was approximately $3.3
billion and $2.3 billion at December 31, 1998 and 1997, respectively.
(b) Represents a $34,262,390 REMIC financing encumbering 12 apartment
communities.
(c) Represents a $41,656,838 REMIC financing encumbering 13 apartment
communites.
(d) Represents a $31,700,000 notes payable-secured which encumbers six
apartment communities.
(e) Represents $114,833,855 of fixed rate debt which encumbers 15 apartment
communities.
(f) Represents $44,898,195 of fixed rate debt which encumbers 9 apartment
communties.
(g) Represents $97,265,000 of variable rate debt which encumbers 11 apartment
communties.
(h) Represents $14,095,024 of variable rate debt which encumbers 7 apartment
communities.
(i) The depreciable life for all buildings is 35 years.