SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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
Commission File Number: 333-42441
MID-AMERICA CAPITAL PARTNERS, L.P.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1717980
(State of Incorporation) (I.R.S. Employer
Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class
-------------------
Commercial Mortgage Pass Through Certificates, Series 1998 -1
Representing Beneficial Ownership in Mid-America Capital Partners,
L.P. 6.376% First Mortgage Bonds, Due 2003
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. [ x ] <PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
TABLE OF CONTENTS
Item Page
PART I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to Vote of Security Holders
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
7.A. Quantitative and Qualitative Disclosures About Market
Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and
Management
13. Certain Relationships and Related Transactions
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Mid-America Capital Partners, L.P. (the Partnership) is a special purpose
Delaware limited partnership. The Partnership was formed on November 24, 1997
for the sole purpose of owning and operating 26 apartment communities (the
Mortgaged Properties) and to manage, renovate, improve, lease, sell, transfer,
exchange, mortgage and otherwise deal with the Mortgaged Properties. The sole
limited partner of the Partnership is Mid-America Apartments, L.P., a Tennessee
limited partnership (MAALP), which is a majority owned subsidiary of Mid-America
Apartment Communities, Inc. (MAAC). MAAC owns, directly or through its
subsidiaries, all of the outstanding units of partnership interest. MAAC is a
self-administered and self-managed umbrella partnership real estate investment
trust (REIT). MAAC conducts a substantial portion of its operations through
MAALP and subsidiaries of MAALP. The sole general partner of the Partnership is
MAACP, Inc., a Tennessee corporation (MAACP), a wholly-owned subsidiary of MAAC.
The term of the Partnership shall be until December 31, 2020, unless terminated
earlier as provided in the Partnership Agreement or as otherwise provided by
law.
The Partnership was formed to succeed substantially all the interests in
Capital Properties Group (predecessor to the Partnership, "Predecessor").
Distributions to the Partners relating to operations of the Mortgaged Properties
are to be based upon net cash flow as defined in the Partnership Agreement.
Profits and losses are allocated to the Partners in proportion with their
ownership.
Subsequent to the Partnership formation, MAALP contributed its interest in
20 of the Mortgaged Properties, and the right to acquire the Reorganization
Properties (as defined below) to the Partnership in exchange for a 99% limited
partnership interest in the Partnership. MAACP contributed cash in exchange for
a 1% general partnership interest in the Partnership.
The Mortgaged Properties consist of (i) 20 properties contributed by MAALP
comprising the Predecessor; (ii) 5 properties acquired on November 25, 1997 by
the Partnership in connection with the consummation of the merger of Flournoy
Development Company (FDC) with and into MAAC and the other transactions
(collectively, the Reorganization Properties) as described in the Agreement and
Plan of Reorganization dated as of September 15, 1997 (the Plan of
Reorganization) between FDC, MAAC and MAALP consisting of 4 properties acquired
from Brown-Flournoy Equity Income Fund Limited Partnership (the Brown-Flournoy
Properties) and Willow Creek; and (iii) one property (Hermitage at Beechtree)
which was acquired November 25, 1997 through the merger of Hermitage at
Beechtree, L.L.C. with and into the Partnership. The Partnership recorded the 20
properties comprising the Predecessor at historical cost in a manner similar to
that used in pooling of interests accounting and the five properties acquired in
connection with the Plan of Reorganization using the purchase method of
accounting.
OPERATING PHILOSOPHY
INTENSIVE MANAGEMENT FOCUS. The Partnership strongly emphasizes on-site property
management. Particular attention is paid to opportunities to increase rents,
raise average occupancy rates, and control costs, with property managers and
regional management being given the responsibility for monitoring market trends
and the discretion to react to such trends.
<PAGE>
DEDICATION TO CUSTOMER SERVICE. Management's experience is that maintaining a
consistently high level of customer satisfaction leads to greater demand for the
Partnership's apartment units, higher occupancy and rental rates, and increased
long-term profitability. The Partnership, as part of its intense management
focus, has established regional training facilities to produce highly trained
property managers, leasing consultants and service technicians on-site at each
of the Mortgaged Properties. Management believes that this commitment to
training and excellence in associates ultimately translates to higher customer
satisfaction. Also, management undertakes frequent resident surveys and focus
groups, in order to measure customer satisfaction.
DECENTRALIZED OPERATIONAL STRUCTURE. The Partnership's operational structure is
organized on a decentralized basis. The Partnership's property managers have
overall operating responsibility for their specific Mortgaged Properties.
Property managers report to area managers or regional managers. Management
believes that its decentralized operating structure capitalizes on specific
market knowledge, increases personal accountability relative to a centralized
structure and is beneficial in the acquisition, redevelopment and development
process.
GROWTH STRATEGIES
Management's goal is to maximize its return on investment in each Community
by increasing rental rates and reducing operating expenses while maintaining
high occupancy levels. The Partnership seeks higher net rental revenues by
enhancing and maintaining the competitiveness of the Mortgaged Properties and
manages expenses through its system of detailed management reporting and
accountability in order to achieve increases in operating cash flow. The steps
taken to meet these objectives include:
* empowering the Partnership's property managers to adjust rents in response to
local market conditions and to concentrate resident turnover in peak rental
demand months;
* implementing programs to control expenses through investment in
cost-saving initiatives;
* ensuring that, through monthly inspections of all Mortgaged Properties by
senior management and prompt attention to maintenance and recurring capital
needs as well as defined preventive maintenance programs conducted quarterly
at each property, the Mortgaged Properties are properly maintained;
* improving the "curb appeal" of the Mortgaged Properties through extensive
landscaping and exterior improvements and repositioning Mortgaged Properties
from time to time to maintain market leadership positions;
* investing heavily in training programs for its property level
personnel;
* compensating employees through performance-based compensation and
stock ownership programs; and
* maintaining a hands-on management style and "flat" organizational structure
that emphasizes senior management's continued close contact with the market
and employees.
<PAGE>
COMPETITION
All of the Partnership's Mortgaged Properties are located in areas that
include other apartment communities. Occupancy and rental rates are affected by
the number of competitive apartment communities in a particular area. The
Partnership's properties compete with numerous other multifamily properties, the
owners of which may have greater resources than the Partnership and whose
management may have more experience than the Partnership's management. Moreover,
single-family rental housing, manufactured housing, condominiums and the new and
existing home markets provide housing alternatives to potential residents of
apartment communities.
ITEM 2. PROPERTIES
The following table sets forth certain historical information on an
historical basis for the 26 Mortgaged Properties owned at December 31, 1998:
The following table presents information concerning the properties at December
31, 1998:
<TABLE>
Average Average
Approximate Average Rent per Occupancy
Number Rentable Unit Unit at % at
Year Management of Area Size December 31, December 31,
Property (1) Location Completed Commenced Units (Square Ft.)(Square Ft.) 1998 1998
- ------------ -------- --------- --------- ------ ----------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Belmere Tampa, FL 1984 1994 210 202,440 964 $624 97.14%
Crosswinds Jackson, MS 1988/1989 1996 360 443,200 1,231 $612 88.06%
Fairways at Royal Oak Cincinnati, OH 1988 1994 214 214,477 1,002 $601 90.19%
Hermitage at Beechtree Cary, NC 1988 1997 194 169,776 875 $671 95.36%
Hidden Lake II Union City, GA 1987 1997 160 154,000 963 $649 94.06%
High Ridge Athens, GA 1987 1997 160 186,608 1,166 $756 98.13%
Howell Commons Greenville, SC 1986/88 1997 348 292,840 841 $505 92.82%
Kirby Station Memphis, TN 1978 1994 371 310,173 836 $571 96.23%
Lakepointe Lexington, KY 1986 1994 118 90,614 768 $539 93.22%
Lakeside Jacksonville, FL 1985 1996 416 344,192 827 $580 94.47%
Marsh Oaks Atlantic Beach, FL 1986 1995 120 93,280 777 $544 100.00%
Napa Valley Little Rock, AR 1984 1996 240 183,216 763 $550 87.50%
Park Haywood Greenville, SC 1983 1993 208 156,776 754 $500 91.35%
Park Place Spartanburg, SC 1987 1997 184 195,312 1,061 $594 92.93%
Pear Orchard Jackson, MS 1985 1994 389 338,400 870 $568 90.49%
Savannah Creek Memphis, TN 1989 1996 205 237,200 1,162 $606 96.10%
Shenandoah Ridge Augusta, GA 1975/1984 1994 272 222,800 819 $457 94.12%
Somerset Place Jackson, MS 1981 1995 144 126,848 881 $504 93.06%
Southland Station I Warner Robins, GA 1987 1997 160 186,704 1,167 $622 97.69%
Steeplechase Chattanooga, TN 1986 1991 108 98,602 913 $550 94.44%
Sutton Place Memphis, TN 1991 1996 253 267,600 1,062 $593 93.28%
Tiffany Oaks Altamonte Springs, FL 1985 1996 288 234,224 813 $589 97.92%
Village, The Lexington, KY 1989 1994 252 182,716 725 $583 92.06%
Westside Creek I Little Rock, AR 1984 1997 142 148,030 1,042 $609 91.23%
Williamsburg Village Jackson, TN 1987 1994 148 121,412 820 $539 93.92%
Willow Creek Columbus, GA 1968-78 1997 285 246,668 866 $485 91.23%
======================================================
Total Properties 5,949 5,448,108 916 $574 93.40%
======================================================
</TABLE>
(1) All 26 of these communities are encumbered by the Bonds of $142 million
which mature on March 3, 2003 and have an interest rate of 6.376%.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not presently subject to any material litigation nor, to
the Partnership's knowledge, is any material litigation threatened against the
Partnership, other than routine litigation arising in the ordinary course of
business, some of which is expected to be covered by liability insurance and
none of which is expected to have a material adverse effect on the financial
condition of the Partnership taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an historical
basis for the Partnership. This data should be read in conjunction with the
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Annual Report on Form 10-K.
<TABLE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Selected Financial Data
(Dollars in thousands except per share data)
Year Ended December 31,
--------------------------------------------------------
--------------------------------------------------------
(Predecessor)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operating Data:
Total revenues $ 38,742 $ 30,949 $ 20,251 $ 14,497 $ 4,753
Expenses:
Property expenses 14,207 10,985 7,207 5,306 1,688
General and administrative 1,515 1,238 810 580 190
Interest 9,162 1,671 2,169 2,225 925
Depreciation and amortization 8,324 6,389 4,000 2,614 755
Amortization of deferred financing
costs 1,026 152 58 48 37
---------------------------------------------------------------------
---------------------------------------------------------------------
Income before extraordinary item 4,508 10,514 6,007 3,724 1,158
Extraordinary item (86) (16) - - -
---------------------------------------------------------------------
Net income $ 4,422 $ 10,498 $ 6,007 $ 3,724 $ 1,158
=====================================================================
Balance Sheet Data:
Real estate owned, at cost $ 233,164 $ 227,608 $ 158,285 $ 87,240 $ 73,521
Real estate owned, net $ 210,855 $ 213,623 $ 150,699 $ 83,653 $ 72,548
Total assets $ 224,324 $ 219,363 $ 151,257 $ 84,216 $ 73,499
Total debt $ 142,000 $ 140,000 $ 16,461 $ 22,830 $ 23,110
Partners' Capital $ 78,211 $ 73,789 $ 131,951 $ 59,978 $ 48,938
Other Data (at end of period):
Number of properties owned 26 26 18 12 10
Number of apartment units owned 5,949 5,948 4,314 2,554 2,290
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the financial condition and results of
operations of the Partnership and its Predecessor for the years ended December
31, 1998, 1997 and 1996. This discussion should be read in conjunction with the
financial statements included in this report.
The total number of apartment units owned at December 31, 1998 was 5,949 in
26 apartment communities, compared to 5,948 in 26 communities at December, 31
1997 and 4,314 in 18 communities at December 31, 1996.
RESULTS OF OPERATIONS
COMPARISON OF THE PARTNERSHIP'S YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED
DECEMBER 31, 1997
Total revenues for 1998 increased by $7,793,000 due to $7,217,000
from the communities acquired in 1997 and $576,000 from the communities owned
throughout both periods.
Property operating expenses include costs for personnel, repairs and
maintenance, real estate taxes and insurance, utilities, landscaping and other
operating costs. Property operating expenses for 1998 increased by $3,222,000
due to $2,735,000 from the communities acquired in 1997 and $487,000
from the communities owned throughout both periods.
Depreciation and amortization expense increased $2,809,000 for 1998
compared to 1997 due to (i) depreciation expense of $1,427,000 from the
communities acquired in 1997, (ii) depreciation expense of $508,000 from the
communities owned throughout both periods, and (iii) $874,000 of additional
amortization expense for the deferred financing costs incurred on the March 6,
1998 issuance of Bonds.
Interest expense increased $7,491,000 in 1998 as compared to 1997 due to
the issuance of the Bonds. The total borrowing cost of the Bonds was 6.62% at
December 31, 1998.
<PAGE>
COMPARISON OF THE PARTNERSHIP'S YEAR ENDED DECEMBER 31, 1997 TO THE
PREDECESSOR'S YEAR ENDED DECEMBER 31, 1996
Total revenues for the 1997 increased by $10,698,000 due to (i)
$6,760,000 from the communities acquired in 1996, (ii) $3,474,000 from the
communities acquired in 1997, and (iii) $464,000 from the communities owned
throughout both periods.
Property operating expenses include costs for personnel, repairs and
maintenance, real estate taxes and insurance, utilities, landscaping and other
operating costs. Property operating expenses for the 1997 increased by
$3,778,000 due primarily to (i) $2,298,000 from the communities acquired in
1996, (iii) $1,239,000 from the communities acquired in 1997, and (iii) $241,000
from the communities owned throughout both periods.
Depreciation and amortization expense for 1997 increased $2,483,000
compared to the same period a year earlier primarily due to (i) depreciation
expense of $1,493,000 from the communities acquired in 1996, (ii) $694,000 from
the communities acquired in 1997, and (iii) $202,000 from the communities owned
throughout both periods.
Interest expense decreased $498,000 during 1997 compared to the same period
a year earlier, mainly because there was no debt outstanding related to the
properties for a portion of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased by $6,709,000 for 1998
as compared to 1997. The decrease was primarily due to a decrease in net income,
mainly related to the additional interest costs of the Bonds, which was
partially offset by an increase in earnings and cash flow from the additional
properties acquired.
Net cash flow used in investing activities decreased by $32,675,000 in 1998
as compared to 1997. This decrease is mainly due to the purchase real estate
during 1997 totaling $33,280,000. There were no property acquisitions during
1998.
Net cash flow provided by (used in) financing activities decreased by
$28,972,000 in 1998 as compared to 1997. The principal uses of cash from
financing activities were primarily from $140,000,000 for repayment of the
bridge notes payable, $7,349,000 in advances to the limited partner, and
$3,617,000 for additional deferred financing costs related to the issuance of
$142,000,000 Bonds payable. During 1997 the Partnership received capital
contributions totaling $26,630,000 and made distributions totaling $104,270,000.
There were no capital contributions during 1998.
The Partnership believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements (including recurring capital expenditures at the
Mortgaged Properties).
<PAGE>
INSURANCE
In the opinion of management, property and casualty insurance is in place
which provides adequate coverage for financial protection against normal
insurable risks such that it believes that any loss experienced would not have a
significant impact on the Partnership's liquidity, financial position, or
results of operations.
INFLATION
Substantially all of the resident leases at the Mortgaged Properties allow,
at the time of renewal, for adjustments in the rent payable thereunder, and thus
may enable the Partnership to seek rent increases. The substantial majority of
these leases are for one year or less. The short-term nature of these leases
generally serves to reduce the risk to the Partnership of the adverse effects of
inflation.
YEAR 2000
In older computer programs, to conserve storage space, only two digits were
used to identify the year. This set up has created a date sequence problem. The
computer may not know that 00 comes after 99, moreover it may not know if 00 is
1900 or 2000("Y2K"). The business risk of this problem is that calculations or
processes that are date dependent may not yield the correct answer or work at
all.
Software vendors have certified all of the mission critical applications;
these vendors provide the software used for financial, network, property
management and telephone systems used by the Partnership. The Partnership does
not own any in- house development programs that require replacing or re-writing
of code.
The Partnership has performed a thorough assessment of its personal
computers and desktop software. All mission critical desktop hardware and
software are believed to be compliant. Remediation of non-compliant hardware and
software (none of which is mission-critical) is expected to be completed by June
1999.
The Partnership estimates that the total Y2K project cost is nominal, as
systems have been upgraded and become Y2K compliant as part of its normal course
of business. The Partnership believes that its Y2K initiatives are adequate to
address reasonably likely Y2K issues.
Management believes that hardware and software upgrades made over the last
few years will reduce the possibility of interruptions to the operation.
However, the Partnership is dependent on the utilities infrastructure within the
United States. The most likely worst case scenario would be that the Partnership
might experience disruption in its operations if any of the third-party
suppliers reported a system failure.
The Y2K contingency plan is the final phase of the project. The Partnership
maintains contingency plans in the normal course of business designed to be
deployed in the event of various potential business interruptions. Although the
Partnership believes that its contingency plans and Y2K project will reduce the
risk of significant operations disruption, due to general uncertainty over Y2K
readiness of the Partnership's third-party suppliers, the Partnership is unable
to determine at this time whether the consequences of the Y2K system failures
will have a material impact.
<PAGE>
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results
of Operations contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. These statements include the plans and
objectives of management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the Mortgaged
Properties. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Although the
Partnership believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Partnership or any other person that the objectives and plans of the Partnership
will be achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's primary market risk exposure is to changes in interest
rates obtainable on the Bonds. The Partnership's interest rate risk objective is
to limit the impact of interest rate fluctuations on earnings and cash flows and
to lower its overall borrowing costs. To achieve this objective, the Partnership
manages its exposure to fluctuations in market interest rates for its borrowings
through the use of fixed rate debt instruments to the extent that reasonably
favorable rates are obtainable with such arrangements and may enter into
derivative financial instruments such as interest rate swaps, caps and treasury
locks to mitigate its interest rate risk on a related financial instrument or to
effectively lock the interest rate on a portion of its variable debt. The
Partnership does not enter into derivative or interest rate transactions for
speculative purposes. The Bonds outstanding at December 31, 1998 have a fixed
interest rate of 6.376% and mature in 2003. As of December 31, 1998, the
interest rate on the Bonds reasonably approximated the rate attainable by the
Partnership on debt instruments with similar terms. The Partnership does not
have any other material market-sensitive financial instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report, Consolidated Financial Statements and
Selected Quarterly Financial Information are set forth in Item 14. herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the Partnership's independent
accountants on any matter of accounting principles or practices or financial
statement disclosure.
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the Registrant's filing on Form S- 3
relating to the issuance of the Bonds, filed with the Securities and Exchange
Commission December 17,1997.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Registrant's filing on Form S- 3
relating to the issuance of the Bonds, filed with the Securities and Exchange
Commission December 17,1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference to the Registrant's filing on Form S- 3
relating to the issuance of the Bonds, filed with the Securities and Exchange
Commission December 17,1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership is managed from a corporate headquarters owned by MAAC,
indirectly through its ownership of MAALP, which was acquired on July 23, 1997,
for $2,912,000. In connection with the acquisition, MAAC formed a special
committee of external directors to negotiate the transaction on its behalf
because certain executive officers of MAAC were also partners in the partnership
which owned the building. The consideration consisted of $862,000 cash, 22,246
UPREIT units valued at $634,000 ($28.50 per unit) and the assumption of an
existing loan. Certain executive officers of MAAC were partners in the
partnership who owned the building and received 5,831 UPREIT units in connection
with the exchange.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
1. Independent Auditors' Report
Balance Sheets of the Partnership as of December
31, 1998 and 1997
Statements of Operations of the Partnership and
Combined Statement of Operations of the
Predecessor for the years ended
December 31, 1998, 1997 and 1996
Statements of Partners' Capital of the Partnership
and Combined Statement of Partners' Capital of
the Predecessor for the years ended
December 31, 1998, 1997 and 1996
Statement of Cash Flows of the Partnership and
Combined Statement of Cash Flows of the
Predecessor for the years ended
December 31, 1998, 1997 and 1996
Notes to Financial Statements for the years ended
December 31, 1998, 1997 and 1996
2. Financial Statement Schedule required to be filed by item 8 and Paragraph
(d) of this item 14: Schedule III - Real Estate Investments and
Accumulated Depreciation as of December 31, 1998
3. The exhibits required by Item 601 of Regulation S- K, except as otherwise
noted, have been filed with previous reports by the registrant and are
herein incorporated by reference.
<PAGE>
Exhibit
Numbers Exhibit Description
- ------- -------------------
1.1* Underwriting Agreement
3.1* Certificate of Limited Partnership of Mid-America Capital
Partners, L.P.
3.2* Limited Partnership Agreement between MAAC, Inc., as General Partner
and Mid-America Apartments, L.P., a limited partner relating to the
formation of Mid-America Capital Partners, L.P., a Delaware limited
partnership
3.3* Certificate of Incorporation of MAACP, Inc.
3.4* Bylaws of MAACP, Inc.
3.5* Certificate of Incorporation of Mid-America Finance, Inc.
3.6* Bylaws of Mid-America Finance, Inc.
4.1* Form of Amended and Restated Indenture among Mid-America
Capital Partners, L.P. and Mid-America Apartments, as issuer
and La Salle National Bank, as Trustee
4.2* Form of Trust Agreement between Mid-America
Finance, Inc. as depositor and La Salle National Bank, as
Trustee
4.3* Form of Certificate
4.4* Form of Bond
5.1* Opinion of Baker, Donelson, Bearman & Caldwell, a
professional corporation
10.1* Cash Collateral Account Security, Pledge and Assignment
Agreement among Mid-America Capital Partners, L.P. and Mid-
America Apartments, L.P. and First Union Bank, and Morgan
Stanley Mortgage Capital, Inc., and La Salle National Bank
dated November 21, 1997
10.2* Form of Deed of Trust, Assignment of Leases and Rents and
Security Agreement
25.1* Statement of Eligibility and Qualification of Indenture
Trustee on Form T-1
- ----------------------------------------
* Previously filed as exhibits to the Partnership's Registration Statement on
Form S-3, filed with the Commission on December 17, 1997 under Commission File
No. 333-42441.
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the registrant during the
fourth quarter of 1998:
Date of
Form Events Reported Report
---- --------------- ------
None.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Item 14(a)(2) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MID-AMERICA CAPITAL PARTNERS, L.P.
Date: 3/30/99 /S/ Simon R.C. Wadsworth
--------------- ----------------------------------------
Simon R.C. Wadsworth
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
Date: 3/30/99 /s/ Simon R.C. Wadsworth
--------------- ----------------------------------------
Simon R. C. Wadsworth
President
(Principal Executive Officer)
Date: 3/30/99 /s/ Mark S. Martini
--------------- ----------------------------------------
Mark S. Martini
(Principal Financial and Accounting Officer)
Date: 3/30/99 /s/ George E. Cates
--------------- ----------------------------------------
George E. Cates
Director
Date: 3/30/99 /s/ H. Eric Bolton
--------------- ----------------------------------------
H. Eric Bolton, Jr.
Director
Date: 3/30/99 /s/ Stephen M. Carpenter
--------------- ----------------------------------------
Stephen M. Carpenter
Director
<PAGE>
Independent Auditors' Report
The Partners
Mid-America Capital Partners, L.P.:
We have audited the accompanying balance sheets of Mid-America Capital
Partners, L.P. (the "Partnership") as of December 31, 1998 and 1997, and the
related statements of operations, partners' capital and cash flows for each of
the years in the two-year period ended December 31, 1998 for the Partnership and
the related combined statements of operations, partners' capital and cash flows
for the year ended December 31, 1996 for Capital Properties Group (the
"Predecessor"). In connection with our audits of the financial statements we
also have audited the financial statement schedule III, Real Estate Investment
and Accumulated Depreciation. These financial statements and the financial
statement schedule are the responsibility of the management of the Partnership
and the Predecessor. Our responsibility is to express an opinion on these
financial statements and financial statement 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 financial position of the Partnership as of
December 31, 1998 and 1997, and the results of operations and cash flows of the
Partnership and Predecessor for each of the years in the three-year 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 financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Memphis, Tennessee
February 26, 1999
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Balance Sheets
December 31, 1998 and 1997
(Dollars in thousands)
1998 1997
Assets:
Real estate assets:
Land ....................................... $ 21,305 $ 21,016
Buildings and improvements ................. 204,886 201,499
Furniture, fixtures and equipment .......... 4,603 3,354
Construction in progress ................... 2,370 1,739
- --------------------------------------------------------------------------------
233,164 227,608
Less accumulated depreciation .............. (22,309) (13,985)
- --------------------------------------------------------------------------------
Real estate assets, net ............... 210,855 213,623
Cash ....................................... -- 1,570
Restricted cash ............................ 406 932
Deferred financing costs, net .............. 4,248 1,743
Due from limited partner ................... 8,613 1,264
Other assets ............................... 202 231
- --------------------------------------------------------------------------------
Total assets ............................ $ 224,324 $ 219,363
================================================================================
Liabilities and Partners' Capital
Liabilities:
Bonds payable .............................. $ 142,000 $ --
Bridge notes payable ....................... -- 140,000
Bank overdraft ............................. 667 --
Accounts payable ........................... 438 390
Accrued expenses and other liabilities ..... 1,828 2,875
Due to affiliate ........................... 474 1,596
Security deposits .......................... 706 713
- --------------------------------------------------------------------------------
Total liabilities ....................... 146,113 145,574
Partners' Capital:
General Partner ............................ 2,407 2,363
Limited Partner ............................ 75,804 71,426
- --------------------------------------------------------------------------------
Total partners' capital ................. 78,211 73,789
- --------------------------------------------------------------------------------
Total liabilities and
partners' capital ...................... $ 224,324 $ 219,363
================================================================================
See accompanying notes to financial statements.
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Operations of the Partnership and
Combined Statement of Operations of the Predecessor
Years ended December 31, 1998, 1997 and 1996
(Predecessor)
(Dollars in thousands) 1998 1997 1996
---- ---- ----
Revenues:
Rental ............................... $38,316 $30,691 $20,056
Other ................................ 426 258 195
- --------------------------------------------------------------------------------
Total revenues ....................... 38,742 30,949 20,251
- --------------------------------------------------------------------------------
Expenses:
Personnel ............................ 4,251 3,148 1,996
Building repairs and maintenance ..... 2,053 1,519 917
Real estate taxes and insurance ...... 3,826 2,985 1,942
Utilities ............................ 1,554 1,173 930
Landscaping .......................... 978 869 502
Other operating ...................... 1,545 1,291 920
Depreciation and amortization
real estate assets .................. 8,284 6,360 3,981
Depreciation and amortization
non-real estate assets .............. 40 29 19
General and administrative ........... 1,515 1,238 810
Interest ............................. 9,162 1,671 2,169
Amortization of deferred
financing costs ..................... 1,026 152 58
- --------------------------------------------------------------------------------
Total expenses ....................... 34,234 20,435 14,244
- --------------------------------------------------------------------------------
Income before extraordinary item ........... 4,508 10,514 6,007
- --------------------------------------------------------------------------------
Extraordinary item:
Loss on debt extinguishment .......... 86 16 --
- --------------------------------------------------------------------------------
Net income ................................. $ 4,422 $10,498 $ 6,007
================================================================================
See accompanying notes to financial statements.
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Partners' Capital of the Partnership and
Combined Statement of Partners' Capital of the Predecessor
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
CPG
Partners'
Capital Total
General Limited (Prede- Partners'
Partner Partner (cessor) Capital
------- ------- -------- -------
Balance December 31, 1995 .............. $ -- $ -- $ 59,978 $ 59,978
Capital contributions, net ....... -- -- 65,966 65,966
Net income ....................... -- -- 6,007 6,007
- --------------------------------------------------------------------------------
Balance December 31, 1996 .............. -- -- 131,951 131,951
December 31, 1996
Capital contributions, net
(prior to Partnership formation) -- -- 24,359 24,359
Formation contribution ........... 2,271 166,630 (166,630) 2,271
Merger with Hermitage ............ 90 8,890 -- 8,980
at Beechtree, LLC
Capital distributions, net ....... -- (104,270) -- (104,270)
Net income ....................... 2 176 10,320 10,498
- --------------------------------------------------------------------------------
Balance December 31, 1997 .............. 2,363 71,426 -- 73,789
Net income ....................... 44 4,378 -- 4,422
- --------------------------------------------------------------------------------
Balance December 31, 1998 .............. $2,407 $ 75,804 $ -- $ 78,211
================================================================================
See accompanying notes to financial statements.
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Cash Flows of the Partnership and
Combined Statement of Cash Flows of the Predecessor
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
(Predecessor)
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net income ...............................$ 4,422 $ 10,498 $ 6,007
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ..... 9,350 6,541 4,058
Extraordinary item ................ 86 -- --
Changes in assets and liabilities:
Restricted cash ............... 526 (654) (29)
Due to affiliate .............. (1,122) 1,596 --
Other assets .................. 29 (120) (52)
Accounts payable .............. 48 (197) 485
Accrued expenses and other
liabilities (1,047) 1,166 712
Security deposits ............. (7) 164 240
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 12,285 18,994 11,421
Cash flows from investing activities:
Purchases of real estate assets ... -- (33,280) (66,226)
Improvements to properties ........ (5,556) (4,951) (4,819)
- --------------------------------------------------------------------------------
Net cash used in investing
activities ..... (5,556) (38,231) (71,045)
Cash flows from financing activities:
Proceeds from notes payable .......142,000 140,000 --
Principal payments on bridge
notes payable (140,000) -- --
Principal payments on notes
payable ....... -- (38,573) (6,370)
Deferred financing costs .......... (3,617) (1,850) --
Due from limited partner .......... (7,349) (1,264) --
Capital contributions, net
(Predecessor) .. -- 24,359 65,966
Formation contribution ............ -- 2,271 --
Capital distributions ............ -- (104,270) --
Bank overdrafts ................... 667 -- --
- --------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities ............ (8,299) 20,673 59,596
- --------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents ............ (1,570) 1,436 (28)
- --------------------------------------------------------------------------------
Cash, beginning of period ...................... 1,570 134 162
- --------------------------------------------------------------------------------
Cash, end of period ............................ $ -- $ 1,570 $ 134
================================================================================
Supplemental disclosure of cash flow information:
Interest paid ............................... $9,247 $ 947 $ 2,170
- --------------------------------------------------------------------------------
Supplemental disclosure of noncash
investing activities-
Assumption of debt related to
property acquisitions .. $ - $ 22,112 $ --
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
Notes to Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Summary of Significant Accounting Policies
Organization
Mid-America Capital Partners, L.P. (the Partnership) is a special purpose
Delaware limited partnership. The Partnership was formed on November 24,
1997 for the sole purpose of owning and operating 26 apartment communities
(the Mortgaged Properties) and to manage, renovate, improve, lease, sell,
transfer, exchange, mortgage and otherwise deal with the Mortgaged
Properties. The sole limited partner of the Partnership is Mid-America
Apartments, L.P., a Tennessee limited partnership (MAALP), which is a
majority owned subsidiary of Mid-America Apartment Communities, Inc.
(MAAC). MAAC owns, directly or through its subsidiaries, all of the
outstanding units of partnership interest. MAAC is a self- administered and
self-managed umbrella partnership real estate investment trust (REIT). MAAC
conducts a substantial portion of its operation through MAALP and
subsidiaries of MAALP. The sole general partner of the Partnership is
MAACP, Inc., a Tennessee corporation (MAACP), a wholly-owned subsidiary of
MAAC. The term of the Partnership shall be to December 31, 2020, unless
terminated earlier as provided in the Partnership Agreement or as otherwise
provided by law.
The Partnership was formed to succeed substantially all the interests
in Capital Properties Group (predecessor to the Partnership,
"Predecessor"). Distributions to the Partners relating to operations of the
Mortgaged Properties will be based upon net cash flow as defined in the
Partnership Agreement. Profits and losses are allocated to the Partners in
proportion with their ownership. Earnings per Partnership unit is not a
meaning presentation because the Partnership is indirectly a wholly-owned
subsidiary of MAAC.
Subsequent to the Partnership formation, MAALP contributed its interest in
20 of the Mortgaged Properties, and the right to acquire the Reorganization
Properties (as defined below) to the Partnership in exchange for 99%
limited partnership interest in the Partnership. MAACP contributed cash in
exchange for a 1% general partnership interest in the Partnership.
The Mortgaged Properties consist of (i) 20 properties contributed by MAALP
comprising the Predecessor; (ii) 5 properties acquired on November 25, 1997
by the Partnership in connection with the consummation of the merger of
Flournoy Development Partnership (FDC) with and into MAAC and the other
transactions (collectively, the ReorganizationProperties)
<PAGE>
as described in the Agreement and Plan of Reorganization dated as of
September 15, 1997 (the Plan of Reorganization) between FDC, MAAC and MAALP
consisting of 4 properties acquired from Brown-Flournoy Equity Income Fund
Limited Partnership (the Brown-Flournoy Properties) and Willow Creek; and
(iii) one property (Hermitage at Beechtree) which was acquired November 25,
1997 through the merger of Hermitage at Beechtree, L.L.C. with and into the
Partnership. The Partnership recorded the five properties acquired in
connection with the Plan of Reorganization using the purchase method of
accounting.
Basis of Presentation
The accompanying 1997 financial statements include the accounts of the
Partnership from November 24, 1997 (the Partnership Formation Date) through
December 31, 1997 and the accounts of the Predecessor for the period from
January 1, 1997 through the Partnership Formation Date. Financial
statements for 1996 included the combined accounts of the Predecessor. As
part of the Partnership formation, the contribution of all Mortgaged
Property interests was reflected at historical cost in a manner similar to
that used in pooling of interests accounting.
The accompanying combined financial statements of the Predecessor have been
presented on a combined basis because of their common ownership and because
the Mortgaged Properties were contributed to the Partnership. The accounts
of each of the Mortgaged Properties comprising the Predecessor are combined
in the financial statements. All significant inter-entity accounts and
transactions have been eliminated in combination. The combined financial
statements include the assets and liabilities, as well as the operations of
the Predecessor, from the date that each Property was acquired by MAALP or
MAAC.
The accompanying combined financial statements include the revenues and
direct operating expenses of the Mortgaged Properties. Certain general and
administrative expenses and other costs which are incurred by MAALP on
behalf of the Predecessor are not included in the financial statements.
Instead, the accompanying combined Predecessor financial statements reflect
a management fee (calculated as 4% of revenues) to MAALP for providing
these services. In addition, MAALP incurred debt to fund the acquisition
and improvement of certain of the Properties. The debt and related interest
expenses are not included in the accompanying financial statements.
<PAGE>
Revenue Recognition
The Partnership leases residential apartments under operating leases with
terms generally one year or less. Rental and other revenues are recorded
when earned.
Rental Operations
The Partnership owns and operates apartment units which are leased to
tenants on terms of one year or less, with monthly payments due in advance.
In management's opinion, due to the number of tenants, the type and
diversity of submarkets in which the Mortgaged Properties operate, and the
collection terms, there is no concentration of credit risk.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for property
taxes, insurance, debt service and replacement reserves. The escrow
deposits are designated for certain operating expense payments.
Real Estate Assets and Depreciation
Real estate assets are carried at the lower of depreciated cost or net
realizable value. Interest, property taxes and other development costs
incurred during construction are capitalized until completion. Repairs and
maintenance costs are expensed as incurred while significant improvements,
renovations and replacements are capitalized. The cost of interior
painting, vinyl flooring and blinds are expensed as incurred.
In conjunction with acquisitions of properties, the Partnership's policy is
to provide in its acquisition budgets adequate funds to complete any
deferred maintenance items to bring the properties to the required
standards, including the cost of replacement appliances, carpet, interior
painting, vinyl flooring and blinds. These costs are capitalized.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets which range from 8 to 40 years for land,
buildings and improvements and 5 years for furniture, fixtures and
equipment.
Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt
using a method which approximates the interest method.
Due from Limited Partner
The Partnership periodically makes payments to the Limited Partner based
upon the excess cash flows of the Mortgaged Properties from rental
operations or receives cash from the limited partner to fund capital
improvements on the Mortgaged Properties. These payments and receipts are
recorded on the balance sheet of the Partnership as a receivable or payable
to the Limited Partner.
<PAGE>
Due to Affiliate
The Partnership may make payments or receive cash from MAAC in a manner
similar to that of the Partnership and Limited Partner described above.
These payments and receipts are recorded on the balance sheet of the
Partnership as a receivable or payable to an affiliate, MAAC.
Capital Contributions, Net
MAALP provided cash management and vendor remittance services for the
Predecessor. Net cash flows resulting from these services are treated as
capital contributions or distributions. In addition, MAALP provided funding
for the Predecessor's property acquisition and improvement projects and for
debt service related to the notes payable included in the Predecessor
combined financial statements. The amount of these funded activities are
contributed by MAALP to the Predecessor as capital contributions. Capital
contributions, net for the years ended December 31, 1997 and 1996,
consisted of funds utilized (provided) by (dollars in thousands):
1997 1996
---- ----
Acquisitions and improvements of properties $19,064 $71,045
Principal payments on notes payable 16,461 6,370
Intercompany remittances, net (11,166) (11,449)
------- -------
$24,359 65,966
======= ======
Income Taxes
No provision for federal income taxes has been made in the accompanying
combined financial statements. Each partner is responsible for reporting
his share of taxable income or loss from the real estate investments.
Use of Estimates
Management of the Partnership and Predecessor has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity," was issued effective for years beginning after June 15,
1999. The Partnerships has only limited involvement with derivative
financial instruments and does not use them for trading purposes. This new
accounting statement is not expected to have a material impact on the
Partnership's consolidated financial statements.
<PAGE>
(2) Bridge Notes and Bonds Payable
On November 24, 1997 the Mortgaged Properties were acquired by the
Partnership and were pledged to secure a $140 million loan (the "Bridge
Notes") received from Morgan Stanley Mortgage Capital Inc. A portion of the
proceeds from the Bridge Notes were utilized in connection with the
acquisition of certain of the Reorganization Properties, the funding of
deferred financing costs, the establishment of replacement reserves and the
remainder being distributed to MAALP.
A portion of the Bridge Notes proceeds was used to repay certain debt
attributable to Willow Creek, resulting in an extraordinary loss of $16,000
in 1997.
On March 6, 1998, the Partnership issued $142 million aggregate principal
amount of 6.376% Bonds due 2003 (the "Bonds"). The Bonds are secured by a
first priority deed of trust, security agreement and assignment of rents
and leases in respect of the 26 mortgaged properties. The net proceeds from
the sale of the Bonds were applied to the Bridge Notes and utilized to fund
costs of the issuance.
In anticipation of the March 6, 1998 Bond issuance discussed above, the
Partnership entered four separate interest rate swaps in 1997 with notional
amounts aggregating $140 million, the effect of which was to lock the
interest rate on $140 million of the Bonds at an average rate of 6.62%. On
March 6, 1998 the Company realized a $1.4 million loss on the interest rate
contracts. The realized loss resulting from the change in the market value
of these contracts is being amortized into interest expense over the life
of the related debt issuance.
(3) Fair Value Disclosure of Financial Instruments
Cash, accounts payable and accrued expenses and other liabilities and
security deposits are carried at amounts which reasonably approximate their
fair value.
The fixed rate Bonds had a carrying value at December 31, 1998 of $142
million which reasonably estimated their fair value (excluding prepayment
penalties) based upon interest rates available for the issuance of debt
with similar terms and remaining maturities as of December 31, 1998. These
notes are subject to prepayment penalties which would be required to retire
these notes prior to maturity.
The carrying value of the variable rate Bridge Notes at December 31, 1997
was $140 million and reasonably approximated its fair value.
The fair value estimates presented herein are based on information
available to management as of December 31, 1998 and 1997. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
(5) Commitments and Contingencies
The Partnership is not presently subject to any material litigation nor, to
the Partnership's knowledge, is any material litigation threatened against
the Partnership or any of the Mortgaged Properties, other than routine
litigation arising in the ordinary course of business, some of which is
expected to be covered by liability insurance and none of which is expected
to have a material adverse effect on the financial condition of the
Partnership taken as a whole.
<PAGE>
(6) Employee Benefit Plans
MAALP employees at the Mortgaged Properties participate in employee benefit
plans sponsored by MAAC.
(7) Related Party Transactions
The accompanying financial statements include the revenues and certain
direct operating expenses of the Mortgaged Properties. MAALP provides the
Mortgaged Properties management and other services (including employee
benefits) at a 4% management fee and also provides funds for the
improvement of the Mortgaged Properties. Management fees incurred by the
Partnership under the terms of the agreement with MAALP were approximately
$1,530,000, $1,228,000, and $800,000 for the years ended 1998, 1997 and
1996, respectively.
(8) Financial Instruments with Off-Balance Sheet Risk
The Partnership has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Partnership
occasionally utilizes derivative financial instruments as hedges in
anticipation of future debt transactions to manage well-defined interest
rate risk.
(9) Segment Information
The Partnership adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998. At December 31, 1998, the
Partnership owned and operated 26 multifamily apartment communities from
which it derives all significant sources of earnings and operating cash
flows. The Partnership's operational structure is organized on a
decentralized basis, with individual property managers having overall
responsibility and authority regarding the operations of their respective
properties. Each property manager individually monitors local and area
trends in rental rates, occupancy percentages, and operating costs.
Property managers are given the on-site responsibility and discretion to
react to such trends in the best interest of the Partnership. The
Partnership's chief operating decision maker evaluates the performance of
each individual property based on its contribution to net operating income
in order to ensure that the individual property continues to meet the
Partnership's return criteria and long term investment goals. The
Partnership defines each of its multifamily communities as an individual
operating segment. It has also determined that all of its communities have
similar economic characteristics and also meet the other criteria which
permit the communities to be aggregated into one reportable segment, which
is acquisition, development, and operation of the multifamily communities
owned.
<PAGE>
The revenues, net operating income, assets and real estate investment
capital expenditures for the aggregated multifamily segment are summarized
as follows for the years ended December 31, 1998, 1997 and 1996 (in 000's):
1998 1997 1996
---- ---- ----
Multifamily rental revenues $ 38,742 $ 30,949 $ 20,251
============= ========== ===========
Multifamily net operating income 24,535 19,964 13,044
Reconciling items to net income:
Interest expense (9,162) (1,671) (2,169)
General and administrative expenses (1,515) (1,238) (810)
Depreciation and amortization (8,324) (6,389) (4,000)
Amortization of deferred financing costs (1,026) (152) (58)
Extraordinary items, net (86) (16) -
============= ========== ===========
Net income $ 4,422 $ 10,498 $ 6,007
============= ========== ===========
Assets 1998 1997
- ------ ---- ----
Multifamily real estate assets $ 233,164 $ 227,608
Accumulated depreciation -
multifamily assets (22,309) (13,985)
-------------- -----------
Total multifamily real estate
assets, net 210,855 213,623
Cash and restricted cash 406 2,502
Other assets 13,063 3,238
============== ===========
Total assets $ 224,324 $ 219,363
============== ===========
1998 1997 1996
---- ---- ----
Total expenditures for
property additions $ 5,556 $ 4,951 $ 4,819
============== =========== ===========
<PAGE>
(10) Selected Quarterly Financial Information (Unaudited)
Mid America Capital Partners, L.P.
Quarterly Financial Data (Unaudited)
(Dollars in thousands)
Year Ended December 31, 1998
----------------------------
First Second Third Fourth
----- ------ ----- ------
Total revenues $ 9,706 $ 9,567 $ 9,819 $ 9,650
Income before extraordinary item $ 1,213 $ 1,157 $ 1,100 $ 1,038
Extraordinary item $ (86) $ - $ -
Net income $ 1,127 $ 1,157 $ 1,100 $ 1,038
Year Ended December 31, 1997
----------------------------
First Second Third Fourth
----- ------ ----- ------
Total revenues $ 7,121 $ 7,550 $ 7,749 $ 8,589
Income before extraordinary item $ 2,541 $ 2,622 $ 3,060 $ 2,291
Extraordinary item $ - $ - $ - $16
Net income $ 2,541 $ 2,622 $ 3,060 $ 2,275
<PAGE>
MID AMERICA CAPITAL PARTNERS, L.P.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
Years ended December 31, 1998, 1997 and 1996
A summary of activity for real estate investments and accumulated
depreciation is as follows:
<TABLE>
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------ -----------
Building Building
and and
Property Name Location Encumbrance Land Fixtures Land Fixtures
- ------------- -------- ----------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Belmere ............................ Tampa, FL -(1) 851 7,667 -- 1,036
Crosswinds ......................... Jackson, MS -(1) 1,535 13,826 -- 935
Fairways @ Royal Oak Cincinnati, OH -(1) 814 7,335 -- 796
Hermitage at Beechtree Cary, NC -(1) 900 8,099 -- 539
Hidden Lake II ..................... Union City, GA -(1) 621 5,587 -- 154
High Ridge ......................... Athens, GA -(1) 884 7,958 -- 170
Howell Commons ..................... Greenville, SC -(1) 1,304 11,740 -- 508
Kirby Station ...................... Memphis, TN -(1) 1,148 10,337 -- 1,994
Lakepointe ......................... Lexington, KY -(1) 411 3,699 -- 622
Lakeside ........................... Jacksonville, FL -(1) 1,431 12,883 288 2,287
Marsh Oaks ......................... Atlantic Beach, FL -(1) 244 2,829 -- 557
Napa Valley ........................ Little Rock, AR -(1) 960 8,642 -- 579
Park Haywood ....................... Greenville, SC -(1) 325 2,925 35 2,459
Park Place ......................... Spartanburg, SC -(1) 723 6,504 -- 482
Pear Orchard ....................... Jackson, MS -(1) 1,352 12,168 -- 1,228
Savannah Creek ..................... Southaven, MS -(1) 778 7,013 -- 499
Shenandoah Ridge ................... Augusta, GA -(1) 650 5,850 -- 1,820
Somerset ........................... Jackson, MS -(1) 477 4,294 -- 606
Southland Station I ................ Warner Robins, GA -(1) 777 6,992 -- 383
Steeplechase ....................... Hixson, TN -(1) 217 1,957 -- 1,174
Sutton Place ....................... HornLake, MS -(1) 894 8,053 -- 678
The Village ........................ Lexington, KY -(1) 900 8,097 -- 908
Tiffany Oaks ....................... Altamonte Springs, FL -(1) 1,024 9,219 -- 692
Westside Creek I ................... Little Rock, AR -(1) 616 5,559 -- 392
Williamsburg Village Jackson, TN -(1) 523 4,711 -- 501
Willow Creek ....................... Columbus, GA -(1) 623 5,523 -- 393
- -----------------------------------------------------------------------------------------------------------
Total Real Estate Assets ........... $142,000 $20,982 $189,467 323 $22,392
===========================================================================================================
Gross Amount
Carried at Life Used
December 31, 1998 To Compute
Depreciation
Building in latest
and Accumulated Date of Income
Property Name Land Fixtures Total Depreciation Net Construction Statement
- ------------- ---- -------- ----- ------------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Belmere ............................ 851 8,703 9,554 (1,314) 8,240 1984 5 - 40
Crosswinds ......................... 1,535 14,761 16,296 (1,319) 14,977 1988/1990 5 - 40
Fairways @ Royal Oak................ 814 8,131 8,945 (1,207) 7,738 1988 5 - 40
Hermitage at Beechtree.............. 900 8,638 9,538 (339) 9,199 1988 5 - 40
Hidden Lake II ..................... 621 5,741 6,362 (218) 6,144 1987 5 - 40
High Ridge ......................... 884 8,128 9,012 (306) 8,706 1987 5 - 40
Howell Commons ..................... 1,304 12,248 13,552 (828) 12,724 1986/1988 5 - 40
Kirby Station ...................... 1,148 12,331 13,479 (1,893) 11,586 1978 5 - 40
Lakepointe ......................... 411 4,321 4,732 (694) 4,038 1986 5 - 40
Lakeside ........................... 1,719 15,170 16,889 (1,708) 15,181 1985 5 - 40
Marsh Oaks ......................... 244 3,386 3,630 (468) 3,162 1986 5 - 40
Napa Valley ........................ 960 9,221 10,181 (722) 9,459 1984 5 - 40
Park Haywood ....................... 360 5,384 5,744 (789) 4,955 1983 5 - 40
Park Place ......................... 723 6,986 7,709 (259) 7,450 1987 5 - 40
Pear Orchard ....................... 1,352 13,396 14,748 (2,252) 12,496 1985 5 - 40
Savannah Creek ..................... 778 7,512 8,290 (665) 7,625 1989 5 - 40
Shenandoah Ridge ................... 650 7,670 8,320 (1,276) 7,044 1982 5 - 40
Somerset ........................... 477 4,900 5,377 (750) 4,627 1981 5 - 40
Southland Station I ................ 777 7,375 8,152 (275) 7,877 1987 5 - 40
Steeplechase ....................... 217 3,131 3,348 (693) 2,655 1986 5 - 40
Sutton Place ....................... 894 8,731 9,625 (782) 8,843 1991 5 - 40
The Village ........................ 900 9,005 9,905 (1,442) 8,463 1989 5 - 40
Tiffany Oaks ....................... 1,024 9,911 10,935 (724) 10,211 1985 5 - 40
Westside Creek I ................... 616 5,951 6,567 (372) 6,195 1984 5 - 40
Williamsburg Village................ 523 5,212 5,735 (793) 4,942 1987 5 - 40
Willow Creek ....................... 623 5,916 6,539 (221) 6,318 1971/1977 5 - 40
----------------------------------------------------------------
Total Real Estate Assets ........... 21,305 $ 211,859 $233,164 ($ 22,309) $210,855
================================================================
</TABLE>
(1) These 26 communities are encumbered by the $142 million Bonds which mature
on March 3, 2003 and have an interest rate of 6.376%.
<PAGE>
Mid - America Capital Partners, L.P.
(a limited partnership)
Real Estate Investments and Accumulated Depreciation
(Dollars in thousands)
1998 1997 1996
---- ---- ----
Real estate investments:
Balance at beginning of year $ 227,608 $ 158,285 $ 87,240
Acquisitions - 64,372 66,226
Improvements 5,556 4,951 4,819
------------- ----------- -------------
Balance at end of year $ 233,164 $ 227,608 $ 158,285
============= =========== =============
Accumulated depreciation:
Balance at beginning of year $ 13,985 $ 7,596 $ 3,596
Depreciation 8,324 6,389 4,000
------------- ----------- -------------
Balance at end of year $ 22,309 $ 13,985 $ 7,596
============= =========== =============
See accompanying notes to financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Balance Sheet at
December 31, 1998 and Statement of Operations for the year ended December 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
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0
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</TABLE>
