AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): March 29, 1999 -------------- UNITED DOMINION REALTY TRUST, INC --------------------------------- (Exact name of registrant as specified in its charter) VIRGINIA 1-10524 54-0857512 -------- ------- ---------- (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation of organization) Identification No.) 10 SOUTH SIXTH STREET, VIRGINIA 23219-3802 ------------------------------------------ (Address of principal executive offices - zip code) (804) 780-2691 -------------- Registrant's telephone number, including area code ITEM 5. OTHER EVENT On December 7, 1998, United Dominion Realty Trust, Inc. ("United Dominion") completed the acquisition of American Apartment Communities II, Inc. ("AAC") in a statutory merger (the "AAC Merger"). ACC's principal asset was a 79% interest in American Apartment Communities II, LP. In connection with the acquisition of AAC, United Dominion 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, United Dominion acquired primarily real estate assets totaling $766.9 million. The aggregate purchase price consisted of the following: (i) 8,000,000 shares of the United Dominion's 7.5% Series D Convertible Preferred Stock ($25 liquidation preference value) with a fair market value of $175 million which is convertible into United Dominion'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 II, 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 United Dominion for the year ended December 31, 1998 are contained herein. For 1998, in addition to the AAC Merger, such pro forma information assumes the following transactions occurred on January 1, 1998: (i) the March 27, 1998, acquisition of ASR Investments Corporation , a publicly traded multifamily REIT that owned 39 communities with 7,550 apartment homes for an aggregate purchase price of $323.1 million and (ii) the acquisition of 13 communities with 4,318 apartment homes for an aggregate purchase price of $144.0 million. All of the acquisitions previously described have been accounted for as purchases of real estate and operating results for those communities are reflected in United Dominion's consolidated financial statements from their respective dates of acquisition. 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (b) Pro Forma Financial Information 4 through 9 3 UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 BASIS OF PRESENTATION The Unaudited Pro Forma Combined Balance Sheet at December 31, 1998 is not presented as the acquisitions reported on this Form 8-K were consumated on or before December 31, 1998 and are therefore included in the Company's consolidated balance sheet at December 31, 1998. Effective December 7, 1998, a wholly-owned subsidiary of United Dominion purchased American Apartment Communities II, Inc. ("AAC") a real estate investment trust in a statutory merger (the "Merger"). The Merger has been accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16. Assets and liabilities acquired were recorded at their estimated fair values at December 31, 1998 and results of operations are included from the date of acquisition. The Unaudited Pro Forma Combined Statement of Operations for the twelve months ended December 31, 1998 is presented as if the AAC Merger had occurred on January 1, 1998. The Unaudited Pro Forma Combined Statement of Operations gives effect to the AAC Merger under the purchase method of accounting in accordance with Accounting Standards Board Opinion No. 16, and the combined entity qualifying as a REIT, distributing at least 95% of its taxable income, and therefore, incurring no federal income tax liability for the periods presented. In addition to the AAC Merger, the column titled "Previously Reported Transactions" is presented as if the following acquisitions occurred on January 1, 1998: (i) 39 apartment communities with 7,550 apartment homes owned by ASR Investments Corporation that were merged with and into a wholly-owned subsidiary of the United Dominion, in a statutory merger on March 27, 1998 and (ii) the 1998 acquisitions of 13 communities containing 4,318 apartment homes. The Unaudited Pro Forma Combined Statement of Operations is presented for comparative purposes only and is not necessarily indicative of what United Dominion's actual results would have been for the twelve months ended December 31, 1998 if the Merger and other acquisitions had occurred at the beginning of the period presented, nor do they purport to be indicative of the results of operations in future periods. The Unaudited Pro Forma Combined Statement of Operations should be read in conjunction with, and is qualified in its entirety by, the historical financial statements and notes thereto of United Dominion included in its Annual Report on Form 10-K for the year ended December 31, 1998 and the pro forma financial statements and notes thereto of United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. 4 UNITED DOMINION REALTY TRUST, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS For the Twelve Months Ended December 31, 1998 (In thousands, except per share data) Previously Reported Previously Transactions United Dominion Reported Pro Forma Historical (A) Transactions (B) Adjustments (C) ----------------- ----------------- ----------------- Income Rental income $ 478,718 $ 16,648 $ 1,095 Interest and other non-property income 3,382 252 ----------------- ----------------- ----------------- 482,100 16,900 1,095 Expenses Rental expenses: Utilities 26,361 998 52 Repair and maintenance 62,753 1,712 144 Real estate taxes 41,768 1,610 86 Property management 16,748 564 (100) Other rental expenses 51,930 2,561 138 Depreciation of real estate owned 99,588 2,613 770 Interest 106,238 3,452 1,848 General and administrative 10,139 1,273 (993) Loss on termination of an interest rate risk management agreement 15,591 Other depreciation and amortization 3,645 189 (18) ----------------- ----------------- ----------------- 434,761 14,972 1,927 ----------------- ----------------- ----------------- Income before gains on sales of investments, minority interests and extraordinary item 47,339 1,928 (832) Gains on sales of investments 26,672 ----------------- ----------------- ----------------- Income before minority interests and extraordinary item 74,011 1,928 (832) Minority interests (1,541) (363) (405) ----------------- ----------------- ----------------- Income before extraordinary item 72,470 1,565 (1,237) Extraordinary items (138) (7,053) 7,053 ----------------- ----------------- ----------------- Net income 72,332 (5,488) 5,816 Distributions to preferred shareholders (23,593) ----------------- ----------------- ----------------- Net income available to common shareholders $ 48,739 $ (5,488) $ 5,816 ================= ================= ================= Earnings per common share: Basic $ 0.49 ================= Diluted $ 0.49 ================= Common distributions declared per share $ 1.05 ================= Weighted average number of common shares outstanding-basic 99,966 3,961 Weighted average number of common shares outstanding-diluted 100,062 4,057 United Dominion Pre AAC Merger AAC II, LP Pro Forma Historical (D) ------------------ ------------------ Income Rental income $ 496,461 $ 98,974 Interest and other non-property income 3,634 6,335 ------------------ ------------------ 500,095 105,309 Expenses Rental expenses: Utilities 27,411 6,180 Repair and maintenance 64,609 23,927 Real estate taxes 43,464 7,460 Property management 17,212 2,840 Other rental expenses 54,629 Depreciation of real estate owned 102,971 16,139 Interest 111,538 32,555 General and administrative 10,419 4,594 Loss on termination of an interest rate risk management agreement 15,591 Other depreciation and amortization 3,816 ------------------ ------------------ 451,660 93,695 ------------------ ------------------ Income before gains on sales of investments, minority interests and extraordinary item 48,435 11,614 Gains on sales of investments 26,672 ------------------ ------------------ Income before minority interests and extraordinary item 75,107 11,614 Minority interests (2,309) (329) ------------------ ------------------ Income before extraordinary item 72,798 11,285 Extraordinary items (138) ------------------ ------------------ Net income 72,660 11,285 Distributions to preferred shareholders (23,593) ------------------ ------------------ Net income available to common shareholders $ 49,067 $ 11,285 ================== ================== Earnings per common share: Basic $ 0.47 ================== Diluted $ 0.47 ================== Common distributions declared per share $ 1.05 ================== Weighted average number of common shares outstanding-basic 103,927 Weighted average number of common shares outstanding-diluted 104,119 Adjustments to AAC II, LP AAC Historical Adjustment (E) Financials (F) ---------------------- ------------------ Income Rental income $ 2,129 $ (104) Interest and other non-property income 96 (4) ---------------------- ------------------ 2,225 (108) Expenses Rental expenses: Utilities 135 Repair and maintenance 443 (39) Real estate taxes 163 Property management 59 Other rental expenses Depreciation of real estate owned 302 (14) Interest 700 (35) General and administrative 54 Loss on termination of an interest rate risk management agreement Other depreciation and amortization ---------------------- ------------------ 1,856 (88) ---------------------- ------------------ Income before gains on sales of investments, minority interests and extraordinary item 369 (20) Gains on sales of investments ---------------------- ------------------ Income before minority interests and extraordinary item 369 (20) Minority interests (17) ---------------------- ------------------ Income before extraordinary item 352 (20) Extraordinary items ---------------------- ------------------ Net income 352 (20) Distributions to preferred shareholders ---------------------- ------------------ Net income available to common shareholders $ 352 $ (20) ====================== ================== Earnings per common share: Basic Diluted Common distributions declared per share Weighted average number of common shares outstanding-basic Weighted average number of common shares outstanding-diluted AAC Pro Forma United Dominion Merger Pro Forma Adjustments Combined ------------------ ----------------- Income Rental income $ $ 597,460 Interest and other non-property income 10,061 ------------------ ----------------- 0 607,521 Expenses Rental expenses: Utilities 33,726 Repair and maintenance 88,940 Real estate taxes 51,087 Property management 20,111 Other rental expenses 54,629 Depreciation of real estate owned 3,681 (G) 123,079 Interest 2,876 (H) 147,634 General and administrative (4,428)(I) 10,639 Loss on termination of an interest rate risk management agreement 15,591 Other depreciation and amortization 3,816 ------------------ ----------------- 2,129 549,252 ------------------ ----------------- Income before gains on sales of investments, minority interests and extraordinary item (2,129) 58,269 Gains on sales of investments 26,672 ------------------ ----------------- Income before minority interests and extraordinary item (2,129) 84,941 Minority interests (1,461)(J) (4,116) ------------------ ----------------- Income before extraordinary item (3,590) 80,825 Extraordinary items (138) ------------------ ----------------- Net income (3,590) 80,687 Distributions to preferred shareholders (14,014)(K) (37,607) ------------------ ----------------- Net income available to common shareholders $ (17,604) $ 43,080 ================== ================= Earnings per common share: Basic $ 0.41 ================= Diluted $ 0.41 ================= Common distributions declared per share $ 1.05 ================= Weighted average number of common shares outstanding-basic 103,927 Weighted average number of common shares outstanding-diluted 104,119 5 UNITED DOMINION REALTY TRUST, INC. UNAUDITED NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND OP UNIT DATA) (A) Represents United Dominion's Historical Consolidated Statement of Operations contained in its Annual Report on Form 10-K for the twelve month period ended December 31, 1998. (B) Represents the actual results of operations of the following 1998 acquisitions by United Dominion (collectively, the Previously Reported Transactions): (i) 39 apartment communities with 7,550 apartment homes owned by ASR Investments Corporation (ASR) that were merged with and into a wholly-owned subsidiary of the United Dominion, in a statutory merger on March 27, 1998, (as previously reported on Form 8-K dated March 27, 1998 and subsequently amended on Form 8-K/A No.1 dated March 27, 1998 which was filed with the Securities and Exchange Commission on June 12, 1998), (ii) a portfolio of three apartment communities (collectively the Tennessee Portfolio) acquired on January 9, 1998 which consists of The Trails at Kirby Parkway Apartments and The Trails at Mount Moriah Apartments (which run as one community under the name The Trails), and Cinnamon Trails Apartments (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998), (iii) Dogwood Creek Apartments acquired on February 6, 1998 (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998), (iv) a portfolio of eight apartment communities (collectively the San Antonio Portfolio) acquired on April 16, 1998 which consists of Audubon Apartments, Carmel Apartments, Cimarron Apartments, Grand Cypress Apartments, Kenton Place Apartments, Peppermill Apartments, The Crest Apartments and Villages of Thousand Oaks Apartments (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998, (v) Rancho Mirage Apartments acquired on May 28, 1998 (as previously reported on Form 8-K dated May 28, 1998 which was filed with the Securities and Exchange Commission on October 19, 1998). The acquisitions described in (i) through (v) above are shown in detail in United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. (C) Represents the aggregate pro forma adjustments for the Previously Reported Transactions as described in Note B above. The pro forma adjustments for these acquisitions are shown in detail in United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. (D) Represents the AAC II, LP Historical Consolidated Statement of Operations for the eleven months ended November 30, 1998. Certain reclassifications have been made to the AAC II, LP Historical Consolidated Statement of Operations to conform to United Dominion's presentation. (E) Represents the results of operations for AAC II, LP for the seven day period from December 1, 1998 through December 7, 1998 which represents the period AAC II, LP was not owned by United Dominion during 1998 based on the Historical Consolidated Statement of Operation of AAC II, LP for the eleven months ended November 30, 1998. (F) Represents the elimination of rental income and rental expenses related to the results of operations of two properties included in the the AAC II, LP Historical Consolidated Statement of Operations. These two properties were not acquired by United Dominion in connection with the AAC Merger. 6 (G) Represents the estimated net increase in depreciation of real estate owned as a result of recording the AAC real estate at fair value versus historical cost and using United Dominion's depreciable lives. Depreciation is computed on a straight line basis over the estimated useful lives of the related assets which have an estimated weighted average useful life of approximately 28.6 years. Buildings have been depreciated over 35 years and other assets over 5, 10 or 20 years depending on the useful life of the related asset. Calculation of the fair value of depreciable real estate assets (IN THOUSANDS OF DOLLARS): Purchase price $ 793,667 Less: Purchase price allocated to cash and cash equivalents 21,798 Purchase price allocated to other assets 2,498 Purchase price allocated to land 115,762 Purchase price allocated to minority interest investment 2,375 --------------- Pro forma basis of AAC's depreciable real estate held for investment at fair value $ 651,234 =============== Calculation of pro forma adjustment to depreciation of real estate owned (IN THOUSANDS OF DOLLARS): Depreciation expense based upon an estimated weighted average useful life of approximately 28.6 years $ 20,122 Less: AAC's depreciation of real estate owned (16,441) ------------ Pro forma adjustment $ 3,681 ============ (H) Represents the estimated net adjustment to interest expense associated with the AAC Merger, as follows (IN THOUSANDS OF DOLLARS): To adjust amortization of AAC's deferred financing costs which were eliminated in the AAC Merger $ (948) To reflect amortization of the adjustment required to record AAC's mortgage notes payable at fair value (1,315) To reflect interest expense associated with United Dominion's issuance of debt at a weighted average interest rate of 8.23% 5,139 -------- Pro forma adjustment $ 2,876 ======== (I) Reflects the net estimated reduction of general and administrative expenses of $4,428 based upon the identified historical costs of certain items which are anticipated to be eliminated or reduced as a result of the AAC Merger. 7 (J) Reflects the increase in minority interest expense assuming the consummation of the AAC Merger on January 1, 1998. A percentage of net income was allocated to Minority Interests representing interests not owned by United Dominion. The pro forma allocation to Minority Interests is based upon the percentage owned by such Minority Interests as a result of the AAC Merger. In connection with the AAC Merger Agreement, United Dominion Realty, LP issued 5,614,035 OP Units to the Limited Partners in exchange for their 20.9% interest in AAC II, LP. As a result, the pro forma weighted average OP Units outstanding, including the pro forma effect of the AAC Merger (as a percentage of all common stock and Operating Partnership Units) was 8.72% for the twelve months ended December 31, 1998. The Minority Interests ownership in United Dominion is calculated as follows: United Dominion historical weighted average common shares outstanding 99,966 Common shares issued in connection with the Previously Reported Transactions 3,961 ----- Total pro forma weighted average common shares 103,927 United Dominion historical weighted average OP Units outstanding 2,963 OP Units issued in connection with the Previously Reported Transactions 1,352 OP Units issued in connection with the AAC Merger 5,614 ----- Total pro forma weighted average OP Units 9,929 Total weighted average common shares and OP Units 113,856 Pro forma Minority Interests ownership of United Dominion's Operating Partnership 8.72% (K) Reflects the increase in distributions to preferred shareholders of $14,014 for the period from January 1, 1998 to December 7, 1998. On December 7, 1998, United Dominion issued 8,000,000 shares of 7.5% Convertible Preferred Stock (Preferred Stock) for an aggregate stated value of $200 million to AAC II, Inc. in exchange for their 79.1% interest in AAC II, LP. 8 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED DOMINION REALTY TRUST, INC. Date: March 29, 1999 /s/ Robin R. Flanagan -------------------- ----------------------------- Robin R. Flanagan, Assistant Vice President and Principal Accounting Officer 9