<PAGE>
- - -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10K
------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1994
----------------------
Merry Land & Investment Company, Inc.
P.O. Box 1417
Augusta, Georgia
30903
706 722-6756
Commission file number: 0-10384
State of Incorporation: Georgia
I.R.S. Employer Identification Number: 58-0961876
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value 30,744,451 New York Stock Exchange
$1.75 Series A Cumulative Convertible
Preferred Stock 2,516,324 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Number of shares of common stock outstanding as of December 31, 1994:
30,744,451
Number of shares of Series A Convertible Preferred Stock
outstanding as of December 31, 1994:
2,516,324
Indicate by check mark whether the registrant has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
months, and (2) has been subject to such filing requirements for
the past ninety days: Yes X. No .
-----
The aggregate market value of the voting stock held by non
affiliates of the registrant on December 31, 1994: Common Stock,
no par value - $601,956,000 (all shares other than those owned or
controlled by officers, directors, and 5% shareholders).
Documents incorporated by reference: The 1995 definitive proxy
statement to be mailed to shareholders for the annual meeting
scheduled for April 17, 1995, is incorporated by reference into
Part III of this form 10-K.
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--
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<PAGE>
Table of Contents
Part I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceeding
Item 4 Submission of Matters to a Vote of Security Holders
Part II
Item 5 Market for the Registrant's Common Stock and Related
Shareholders' Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Part III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and
Management
Item 13 Certain Relationships and Related Transactions
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
<PAGE>
Part I
Item 1 - Business
The Company
Merry Land is one of the largest owners and operators of
upscale garden apartments in the United States. At December
31, 1994, the Company owned a high quality portfolio of 71
apartment communities located primarily in the Southeastern
United States, containing 18,851 units and having an aggregate
cost of $796.4 million. At that date, the communities had an
average occupancy of 96% and an average monthly rental rate of
$591 per unit. The Company owns all of its properties in fee
simple without any partners.
Merry Land became an independent publicly owned company in
1981 and has been managing apartment communities since 1982.
It is a self-administered and self-managed Real Estate
Investment Trust headquartered in Augusta, Georgia. It is not
a so-called "UPREIT" nor does it have any subsidiaries, nor
does it manage apartments for or provide other services to
third parties.
Merry Land's objective is to increase funds from operations
and distributions to shareholders by producing greater cash
flows at its existing apartment communities through effective
management and also by purchasing and developing additional
apartment properties.
In recent years, Merry Land has conducted an active program
of apartment acquisition. The Company buys properties which it
expects will produce attractive initial rates of return and
which have the potential for cash flow growth. The following
table summarizes the Company's acquisitions in recent years
(dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units acquired 4,872 7,452 2,845 986
Total units owned at
end of period 18,851 13,979 6,527(1) 3,708
Total cost of
apartments $796,364 $554,444 $209,549 $121,072
Total apartment rental
income $101,667 $54,565 $22,460 $15,354
<FN>
------------------
(1) In 1992 the Company sold 26 of 140 duplex rental units at
one of its properties.
</TABLE>
Substantially all of the Company's properties are
relatively new, suburban garden apartments located in the
Southern United States. The Company intends to continue to
focus on the acquisition of apartments and also intends to
develop communities in selected locations throughout the
entire Southern region of the United States, including Texas.
1994 Highlights
Apartment Acquisitions. In 1994, the Company bought 18
apartment communities containing 4,872 apartment units at an
aggregate cost of $226.2 million. Twelve of these communities
containing 3,343 units were acquired in one portfolio
transaction which was closed in November 1994, at a purchase
price of $154.4 million. This transaction brought Merry Land
ten communities located within its target market areas and two
communities in Ohio. The following table summarizes the 1994
acquisitions.
<TABLE>
<CAPTION>
Community Location Units
--------- -------- -----
<S> <C> <C>
Adams Farm Greensboro N.C. 300
Shadow Lake Atlanta, Ga. 228
Indigo Lakes Daytona Beach, Fla. 304
Waterford Delray Beach, Fla. 236
Promenade Tampa, Fla. 334
Bermuda Cove* Jacksonsville, Fla. 350
Champions' Club* Richmond, Va. 212
Champions' Park* Atlanta, Ga. 252
Clarys Crossing* Columbia, Md. 198
Duraleigh Woods* Raleigh, N. C. 362
English Hills* Charlotte, N.C. 280
Hickory Creek* Richmond, Va. 294
Hunters Chase* Cleveland, Oh. 244
Landings* Memphis, Tenn. 292
Sawmill Village* Columbus, Oh. 340
Steeplechase* Charlotte, N.C. 247
Windridge* Atlanta, Ga. 272
Crystal Springs Nashville, Tenn. 127
-----
4,872
*Portfolio acquisition
</TABLE>
The apartment communities which the Company acquired in 1994
averaged seven years of age, 271 units in size and $46,774 per
unit in cost at December 31, 1994. At that date, The Company's
other apartment communities averaged seven years of age, 254
units in size and $40,670 per unit in cost. At December 31,
1994, rental rates at the 1994 acquisition communities
averaged $629 per month compared to $578 for the Company's
other communities.
Development. In recent years strong demand for apartment
rentals in the South has caused rent rates and occupancy to rise
to the extent that, in the Company's opinion, construction of new
apartment communities has become financially feasible in certain
locations. In order to take advantage of these conditions, the
Company has commenced a program of apartment construction by
engaging experienced apartment developers to provide development
and construction management services to the Company on a project
by project basis. The developers' fees will be computed as a
share of the value of the completed projects, based on agreed
upon formulas, less actual costs. Merry Land's employees will
supervise development activities with the assistance of
architects and engineers as required. The Company will own all
land and improvements, will directly contract for construction
and will bear essentially all risks of project development.
While the Company intends to add several individuals to its
acquisition and development department as a result of this
program, it does not intend to establish a large, specialized
development organization. The Company believes that this system
of constructing new communities will allow it the flexibility to
develop communities in a number of markets and to expand, or
contract, or terminate such activities as conditions warrant. The
Company's present intention is to limit its total financial
commitment to development to no more than 10% of its total
assets. Merry Land will manage these new communities during and
after construction.
In December 1994, the Company purchased three tracts of land on
which it has begun to develop high quality garden apartment
communities. The land acquired included tracts located in
Atlanta, 43 acres for $3.7 million; Nashville, 67 acres for $3.5
million; and Savannah, 37 acres for $1.4 million. The Company
expects to develop these three projects in phases with
construction scheduled to begin in the first half of 1995 and
with the first units expected to be available for occupancy late
that year. The initial phases of these projects are described as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Location Units Cost(1)
-------- ----- -------
<S> <C> <C>
Atlanta, Georgia 287 $17,200
Nashville, Tennessee (2) 244 13,300
Savannah, Georgia 300 16,500
831 $47,000
<PAGE>
<FN>
--------------------
(1) Represents current estimated total cost of the initial phase
of each project, including capitalized interest, allocated land
cost and development fees. Projects are in the planning stages
and final costs may vary.
(2) The Nashville parcel adjoins the 127 unit Crystal Springs
apartments described above.
</TABLE>
Common Stock Sale. On June 30, 1994 the Company issued 4.6
million shares of common stock in a public offering at a price
of $20.25 per share, for net proceeds of $87.5 million. The
proceeds were used to repay short term acquisition debt and to
acquire additional apartment communities.
Preferred Stock Sale. On November 1, 1994, the Company
issued 4.0 million shares of $2.205 Series B Cumulative
Convertible Preferred Stock at a price of $25.00 per share for
net proceeds of $96.7 million. The Series B Preferred Stock
was sold in a private placement to a small group of
institutional investors. It has an annual dividend rate of
$2.205 per year, payable quarterly, and is convertible into
common shares at a price of $21.04 per common share
(equivalent to a conversion rate of 1.188 shares of common
stock for each share of preferred). The Series B Preferred
Stock may not be redeemed for cash at any time, but may be
redeemed by the Company for common stock after October 31,
1999, provided the Company's common stock is trading above the
conversion price of $21.04 per share.
Common Stock Repurchases. In December 1994, the Company's
Board of Directors authorized the repurchase of up to 1.0
million shares of the Company's common stock. The Board took
this action because in its judgment the stock price had fallen
significantly below price levels which the Board felt were
appropriate. The Company bought and retired 175,440 shares for
approximately $3.1 million, an average price of $17.94 per
share. The Company discontinued the repurchase program as the
stock price rose over the last weeks of the year.
Organization
Merry Land has 577 employees. Of this number, 535 work at
its apartment communities, 21 are employed in accounting,
administrative and general management, 15 in corporate
property management and 6 in acquisitions and development.
The Company manages all of its properties under the trade
name "Merry Land Apartment Communities". Each apartment
community is operated by an on-site Property Manager and staff
who are extensively trained by the Company in sales,
management, accounting, maintenance and other disciplines.
Each community functions as an individual business unit
according to well developed policies and procedures. On site
staff participate in an incentive program under which cash
bonus payments are made to individuals whose communities
attain budgeted levels of cash flow. All full-time employees
are eligible to participate in the Company's Employee Stock
Ownership Plan.
Property Managers report to eight Regional Property Managers
who report to the Company's two Vice Presidents of Property
Management. Regional Property Managers are located in Raleigh,
Charlotte, Augusta, Atlanta, Savannah, Jacksonville, Orlando
and Tampa.
The Company believes it has successfully integrated newly
acquired apartment communities into its portfolio using the
property management organization and expertise developed in
its thirteen years of buying and operating apartments. The
Company's operating efficiency has increased as it has grown.
General and administrative expense for 1994 declined to 1.7%
of rental revenues from 2.6% in 1993 as the Company spread its
overhead over more apartment units.
Market Conditions
Residents at the Company's apartments generally earn middle
and upper middle levels of incomes, and typically include
young professionals, white collar workers, medical personnel,
teachers, members of the military, single parents, single
adults and young families. These residents often have the
means to own homes but choose to live in apartment communities
because of their current employment, family or other personal
circumstances. There is a steady turnover of leases at the
Company's communities, allowing rents to be adjusted upward as
demand allows. About 60% of the Company's units turn over each
year, a rate the Company believes is typical for higher end
apartment communities. Leases are generally for either six or
twelve month terms.
The Company believes that investments in apartments in the
Southern region of the U.S. are attractive because of the
favorable relationship between supply and demand for apartment
rentals. The twenty-five metropolitan areas in which the
Company operates contain 11% of the country's total population
and have experienced growth in households, a key determinant
of apartment demand, well in excess of national averages
during the 1980's and 1990's. U.S. Census data indicate that
from 1980 to 1990 total households increased 27% as a group in
these cities versus an increase of 13% nationally. From 1990
to 1993, households increased 9% in these cities versus an
increase of 3% nationally and from 1993 to 1998, households
are expected to increase 9% here versus 7% nationally. At
present the Company is experiencing its highest occupancy in
recent years.
Furthermore, current rent levels do not encourage extensive
new apartment construction, and while construction has begun
to rise from historically low levels in recent years, the
Company does not expect added supply of apartments to meet
added demand for the foreseeable future. Multi-family housing
starts in the Company's markets fell from a high of 165,200
units in 1987 to 23,905 in 1992, and have risen to 35,213 in
1993 and 52,982 on an annualized basis for the first ten
months of 1994.
The Company owns apartments in a number of cities with
significant military employment. The reduction of the nation's
armed forces has cut military payrolls in some of these cities
and has adversely affected the rental market for some of the
Company's properties. The effect of military cutbacks, which
will continue for some time, are expected to be most severe in
Charleston, and the Company anticipates significant weakness
there over the next several years as many of that city's naval
installations are closed. However, at December 31, 1994, the
Company's average occupancy in Charleston was 96%. The Augusta
market is weak as a result of job losses at local defense
related industries and the city experienced a 91% occupancy at
December 31, 1994. In the Company's other markets, military
employment is expected to either remain stable or rise, or it
is not a significant portion of total employment. At December
31, 1994, the percentages of the Company's occupants serving
in the military were as follows: Augusta, 21%; Charleston,
17%; Savannah, 13%; Jacksonville, 6%; Melbourne, 5%; Orlando,
5%; Tampa, 1% and Columbia, 1%. Leases with Military personnel
account for less than 4% of the Company's total leases.
History
Merry Land conducted its initial public stock offering in
1981 after having been spun off earlier that year by Merry
Companies, Inc., one of the nation's largest brick
manufacturers, in connection with the latter's acquisition by
an Australian company. Merry Land was incorporated in 1966 and
had remained a passive asset holding subsidiary of Merry
Companies, Inc. until the 1981 spin-off, when active
operations began. At that time, the Company's major asset was
4,700 acres of clay land, most of which it still owns and from
which it continues to receive clay and sand royalties.
For most of the 1980's, the Company invested in a portfolio
of both real estate and other assets. Its real estate assets
consisted of apartments, commercial properties, land, mortgage
notes and mortgage backed securities. Its non-real estate
assets included utility stocks, treasury securities and the
securities of financial institutions. In the mid 1980's, it
increased its investment in mortgage backed securities,
expanding that portfolio to $226.5 million by the end of 1989.
Merry Land elected to become a REIT in 1987 and thereafter
began to focus on buying and operating apartments. During the
late 1980's, the Company disposed of most of its portfolio of
utility stocks and other financial assets. In 1992, in order
to concentrate its efforts on buying and managing apartment
communities and to decrease its exposure to interest rate
risk, the Company sold its remaining portfolio of mortgage
backed securities. The Company has now largely disposed of its
non-apartment assets and intends to liquidate the remainder as
conditions allow.
By 1991, tax law changes and significant reductions in the
amount of capital available nationally for real estate investment
had led to a substantial decline in the sales prices of apartment
communities. The Company began to increase its rate of acquiring
such properties. In 1992, the Company conducted its first stock
offering in several years, hired additional personnel for its
acquisition department, and commenced the accelerated program of
acquisition which continues today.
The Company is a Georgia corporation. It has its principal
office at 624 Ellis Street, Augusta, Georgia 30901 and the
telephone number is (706) 722-6756.
<PAGE>
Part I
Item 2 - Properties
Apartments
The Company owns high quality apartment communities,
substantially all of which command rental rates in the upper
range of their markets. They are generally newer "garden
apartments", in wood frame two- and three-story buildings
without elevators, with individually metered electric and gas
service and individual heating and cooling systems. The
Company's apartments are 47% one bedroom units, 48% two
bedroom units and 5% three bedroom units. The units average
900 square feet in area, seven years of age and are well
equipped with modern appliances and other conveniences. The
communities are heavily landscaped and offer extensive
amenities, which generally include swimming pools, tennis
courts, club rooms, exercise facilities and hot tubs. Some of
the Company's communities also offer garages, racquetball
courts, saunas, alarm systems and other features.
Merry Land's apartment communities are located in metropolitan
areas with populations in excess of 250,000, primarily in the
Southeastern states of Florida, Georgia and the Carolinas. The
following table summarizes property information by market (cost
in thousands):
<TABLE>
<CAPTION
Cost (1) % of Average Average
Location Communities Units (thousands) Cost Rent(2) Occup(3)
- - -------- ----------- ----- ----------- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Jacksonville, Fla. 8 2,550 $102,153 12.8% $568 97%
Orlando, Fla. 6 1,902 88,935 11.2% 622 92%
Ft. Myers, Fla. 3 948 45,462 5.7% 638 97%
Tampa, Fla. 4 1,301 63,486 8.0% 625 94%
Ft. Lauderdale, Fla. 1 304 18,029 2.3% 789 96%
Melbourne, Fla. 1 326 15,154 1.9% 626 96%
Delray Beach, Fla. 1 236 13,015 1.6% 731 94%
Miami, Fla. 1 175 11,837 1.5% 851 98%
Daytona Beach, Fla. 1 304 11,057 1.4% 544 90%
Tallahassee, Fla. 1 222 8,110 1.0% 593 98%
--- ------ ------- ----- ---- ---
27 8,268 377,238 47.4% 618 95%
Atlanta, Ga. 10 3,086 126,342 15.9% 591 96%
Savannah, Ga. 5 865 32,292 4.1% 567 97%
Augusta, Ga. 4 490 14,714 1.8% 431 89%
--- ------ ------- ----- ----- ---
19 4,441 173,348 21.8% 569 96%
Charlotte, N.C. 5 1,363 47,950 6.0% 547 97%
Raleigh, N.C. 5 1,256 45,743 5.7% 563 97%
Greensboro, N.C. 2 508 21,572 2.7% 1,570 98%
--- ------ ------- ------ ----- ---
12 3,127 115,265 14.4% 557 97%
Charleston, S.C. 4 880 32,818 4.1% 507 93%
Greenville, S.C. 1 216 6,769 0.8% 511 98%
Columbia, S.C. 1 21 6,351 0.8% 482 94%
--- ------ ------ ----- ----- ---
6 1,308 45,938 5.7% 503 94%
Columbus, Ohio 1 340 19,651 2.5% 699 93%
Cleveland, Ohio 1 244 13,884 1.7% 708 97%
-- ------ ------ ----- ---- ----
2 584 33,535 4.2% 703 95%
Richmond, Va. 2 506 24,360 3.1% 661 92%
Memphis, Tenn. 1 292 11,301 1.4% 546 95%
Nashville, Tenn. 1 127 3,536 0.4% 388 97%
--- ------ ------ ----- ---- ----
2 419 14,837 1.9% 498 96%
Columbia, Md. 1 198 11,843 1.5% 782 97%
--- ------ ------ ----- ---- ----
Totals 71 18,851 $796,364 100.0% $591 95%
<FN>
(1) Represents the total acquisition cost of the property plus
the capitalized cost of the improvements made subsequent to
acquisition.
(2) Represents the weighted average of rent charged for occupied
units and rent asked for unoccupied units at December 31, 1994.
(3) Represents average physical occupancy at each month end for
the period held.
</TABLE>
The following table describes the Company's apartment
communities. The Company owns all its communities in fee
simple. Of its communities, only the two so indicated in the
table are subject to encumbrances.
<PAGE>
Item 102. Description of Property
Apartments
<TABLE>
<CAPTION>
December Rent(2) Average
Avg. Per Sq.Ft. Occupancy(3)
Cost Unit
Date Cost(1) Per Size Per Month ----------------------
Name Location Built Units Thousands Unit(1) S/F 1993 1994 1993 1994 1993 1994
- - ---- -------- ----- ----- --------- ------- ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.
2. Tampa 1990 447 $19,998 $44,738 849 $569 $583 $0.67 $0.69 99% 95%
3. Tallahassee 1988 222 8,110 36,532 900 581 593 0.65 0.66 93% 98
4. Orlando 1991 1,480 22,183 46,215 1,021 617 632 0.60 0.62 96% 92%
5. Jacksonville 1989 350 15,141 43,260 912 (4) 640 (4) 0.70 (4) 98%
6. Orlando 1991 324 16,402 50,623 903 582 600 0.64 0.66 92% 85%
7. Jacksonville 1986 256 11,987 46,824 1,010 594 603 0.59 0.60 100% 97%
8. Ft. Myers 1991 300 18,023 60,077 1,136 669 689 0.59 0.61 98% 97%
9. Orlando 1987 242 10,850 44,835 787 554 559 0.70 0.71 (4) 90%
10 Orlando 1989 300 11,723 39,077 902 623 644 0.69 0.71 95% 95%
11. Melbourne 1990 326 15,154 46,488 1,027 608 626 0.59 0.61 93% 96%
12. Jacksonville 1983 144 6,958 48,319 1,293 630 664 0.49 0.51 96% 98%
13. Tampa 1985 240 8,085 33,688 658 495 496 0.75 0.75 93% 93%
14. Daytona Beach 1989 304 11,057 36,372 882 (4) 544 (4) 0.62 (4) 90%
15. Miami 1991 175 11,837 67,640 970 835 851 0.86 0.88 98% 98%
16. Orlando 1988 252 10,924 43,349 799 561 566 0.70 0.71 91% 95%
17. Tampa 1988 280 14,559 51,996 953 (4) 615 (4) 0.65 91% 95%
18. Orlando 1991 304 16,853 55,438 1,087 692 702 0.64 0.65 97% 97%
19. Ft. Myers 1991 328 15,074 45,957 955 604 616 0.63 0.65 94% 95%
20. Jacksonville 1984 288 8,105 28,146 738 453 477 0.61 0.65 76% 95%
21. Tampa 1994 334 20,844 62,407 978 (4) 765 (4) 0.78 (4) 92%
22. Jacksonville 1991 284 12,229 43,060 816 562 574 0.69 0.70 96% 98%
23. Jacksonville 1986 512 16,196 31,633 759 468 484 0.62 0.64 95% 97%
24. Jacksonville 1987 284 12,592 44,338 851 540 559 0.63 0.66 97% 95%
25. Ft. Myers 1991 320 12,365 38,641 863 606 614 0.70 0.71 91% 95%
26. Jacksonville 1988 432 18,945 43,854 1,066 598 617 0.56 0.58 96% 98%
27. Delray Beach 1989 236 13,015 55,148 910 (4) 731 (4) 0.80 (4) 94%
28. Ft.Lauderdale 1991 304 18,029 59,306 951 746 789 0.78 0.83 99% 96%
29.
30. Atlanta 1988 316 13,151 41,617 1,023 564 587 0.55 0.57 96% 96%
31. Atlanta 1988 424 15,880 37,453 911 544 556 0.60 0.61 95% 93%
32. Atlanta 1987 252 11,362 45,087 806 (4) 628 (4) 0.78 (4) 98%
33. Augusta (5) 76 3,351 44,092 961 425 442 0.48 0.47 95% 94%
34. Savannah 1983 194 7,016 36,165 852 529 533 0.62 0.63 97% 93%
35. Atlanta 1990 314 9,822 31,280 846 529 551 0.63 0.65 98% 98%
36. Atlanta 1986 376 10,943 29,104 927 519 536 0.56 0.58 97% 98%
37. Savannah 1986 147 5,106 34,735 812 557 570 0.69 0.70 99% 99%
38. Atlanta 1990 480 30,792 64,150 1,095 692 740 0.63 0.68 97% 95%
39. Savannah 1986 144 5,366 37,264 1,119 550 548 0.49 0.49 98% 98%
40. Savannah 1983 188 7,818 41,585 1,053 569 587 0.54 0.56 98% 97%
41. Atlanta 1989 228 9,684 42,474 1,018 (4) 579 (4) 0.57 (4) 98%
42. Augusta 1950 114 1,661 14,570 682 280 289 0.41 0.42 89% 82%
43. Atlanta 1986 200 5,830 29,150 802 501 533 0.62 0.66 92% 96%
44. Savannah 1985 192 6,986 36,385 1,124 541 594 0.48 0.53 99% 99%
45. Atlanta 1985 224 7,618 34,009 860 511 532 0.59 0.62 86% 94%
46. Atlanta 1982 272 11,260 41,397 845 (4) 578 (4) 0.68 (4) 98%
47. Augusta 1982 248 8,223 33,157 875 475 494 0.54 0.56 80% 88%
48. Augusta 1975 152 1,479 28,442 900 417 432 0.46 0.48 98% 98%
49. Maryland
50. Baltimore 1984 198 11,843 59,813 938 (4) 782 (4) 0.83 (4) 97%
51.
52. Greensboro 1987 300 14,543 48,477 1,005 (4) 633 (4) 0.63 (4) 98%
53. Charlotte 1982 240 8,632 35,967 882 493 540 0.56 0.61 98% 98%
54. Greensboro 1986 208 7,029 33,793 811 465 479 0.57 0.59 97% 98%
55. Raleigh 1987 362 17,670 48,812 784 (4) 625 (4) 0.80 (4) 96%
56. Charlotte 1984 280 9,896 35,343 688 520 520 0.76 0.76 (4) 98%
57. Charlotte 1990 300 10,561 35,203 891 586 622 0.66 0.70 87% 98%
58. Charlotte 1984 296 10,031 33,889 918 484 515 0.53 0.56 87% 97%
59. Raleigh 1984 360 10,168 28,244 766 507 532 0.66 0.69 97% 98%
60. Raleigh 1986 192 6,147 32,016 641 460 492 0.72 0.77 98% 98%
61. Raleigh 1983 144 5,350 37,153 780 532 562 0.68 0.72 98% 97%
62. Charlotte 1986 247 8,830 35,749 724 533 533 0.74 0.74 (4) 91%
63. Raleigh 1986 198 6,408 32,364 735 545 576 0.74 0.78 99% 99%
64.
65. Cleveland 1987 244 13,884 56,902 890 (4) 708 (4) 0.80 (4) 97%
66. Columbus 1987 340 19,651 57,797 1,161 (4) 699 (4) 0.60 (4) 93%
67.
68. Greenville 1985 216 6,769 48,812 848 491 511 0.58 0.60 92% 98%
69. Columbia 1987 212 6,351 29,958 762 469 482 0.62 0.63 89% 94%
70. Charleston 1986 230 9,405 40,891 810 519 531 0.64 0.66 85% 98%
71. Charleston 1985 226 8,015 35,465 892 453 459 0.51 0.51 88% 88%
72. Charleston 1985 200 7,644 38,220 911 512 527 0.56 0.58 95% 95%
73. Charleston 1984 224 7,754 34,616 953 504 512 0.53 0.54 89% 90%
74.
75. Nashville 1986 3,536 27,843 676 (4) 388 (4) 0.57 (4) 97%
76. Memphis 1986 292 11,301 38,702 786 (4) 546 (4) 0.70 (4) 95%
77.
78. Richmond 1988 212 10,099 47,637 776 (4) 650 (4) 0.84 (4) 93%
79. Richmond 1984 294 14,261 48,507 851 (4) 668 (4) 0.79 (4) 92%
------ ------- ------ --- --- --- ---- ---- --- ---
TOTALS 18,851 796,364 42,245 901 559 591 0.62 0.66 93% 95%
<FN>
1. Florida 23. Spicewood Springs 45. Willow Trail 67. South Carolina
2. Audubon Village 24. Timberwalk 46. Windridge 68. Haywood Pointe
3. Augustine Club 25. Viridian Lake 47. Woodcrest 69. Hollows
4. Auvers Village 26. Waterford 48. Woodknoll 70. Quarterdeck
5. Bermuda Cove 27. Waterford Village 49. Maryland 71. Summit Place
6. Bishop Park 28. Welleby Lake Club 50. Clarys Crossing 72. Waters Edge
7. Claire Point 29. Georgia 51. North Carolina 73. Windsor Place
8. Colony Place 30. Belmont Crossing 52. Adams Farm 74. Tennessee
9. Conway Station 31. Belmont Landing 53. Berkshire Place 75. Crystal Springs
10. Copper Terrace 32. Champions' Park 54. Chatham Wood 76. The Landings
11. Cypres Cove 33. Downtown(5) 55. Duraleigh Woods 77. Virginia
12. Deerbrook 34. Greentree 56. English Hills 78. Champions' Club
13. Falls 35. Gwinnett Crossing 57. Hunt Club 79. Hickory Creek
14. Indigo Lakes 36. Harvest Grove 58. Lake Point
15. Lakeridge 37. Huntington 59. Misty Woods
16. Lexington Park 38. Lexington Glen 60. Sailboat Bay
17. Lofton Place 39. Magnolia Villa 61. Sommerset Place
18. Mission Bay 40. Marsh Cove 62. Steeplechase
19. Polos 41. Shadow Lake 63. Timber Hollow
20. Princeton Square 42. South Augusta 64. Ohio
21. Promenade 43. Sweetwater Glen 65. Hunters Chase
22. Royal Oaks 44. West Wind Landing 66. Saw Mill
(1) Represents the total acquisition cost of the property plus
the capitalized cost of the improvements made subsequent to
acquisition.
(2) Represents the weighted average of monthly rent charged for
occupied units and rent asked for unoccupied units at December
month end.
(3) Represents the average of physical occupancy at each month
end for the period held.
(4) Properties not owned during period indicated.
(5) These units consist of three locations, built and acquired at
various times.
</TABLE>
<PAGE>
Development in Progress
In December 1994, the Company commenced a program of
apartment development by acquiring three tracts of land and
entering into development agreements with three experienced
developers. The Company's development properties are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Gwinnett I Long PointI Crystal Springs I
Atlanta Savannah Nashville Total
--------- ----------- --------- -------
<S> <C> <C> <C> <C>
Acres 20.9 37.0 21.3 79.2
Planned units 287 300 244 831
Expected investment $17,000 $16,500 $13,330 $47,000
Expected completion
date 3/31/97 11/30/96 12/31/96
Investment to date $ 1,645 $ 1,302 $ 1,208 $ 4,155
Gwinnett II Crystal Springs II
Atlanta Nashville Total
----------- ------------------ -------
Acres 22.2 45.8 68.0
Planned units 299 200 499
Investment to date $ 1,736 $ 2,366 $ 4,102
</TABLE>
Other Assets
Unimproved Land. The Company owns 5,369 acres of undeveloped
land with a book value of $3.8 million. Most of this land was
acquired by the Company's predecessor for clay reserves and is
located in Georgia and South Carolina. Since 1981, brick
manufacturer Boral Bricks, Inc. has had a long term clay
mining lease on 2,622 acres of the Company's land. The Company
also leases 100 acres to another corporation for the mining of
sand and gravel, leases other tracts for agriculture, and
grows timber on much of the remaining land. The Company
expects that some of its land eventually may be developed or
sold for development by others.
Commercial Properties. The Company owns eight small
commercial properties in the Augusta area, primarily office
buildings, including the Company's headquarters building,
which were acquired before the Company began to focus on
apartments. These properties, aggregating 206,000 square feet
and have a book value of $4.6 million. The Company intends to
sell these properties as circumstances allow.
Environmental Matters
Landfill Sites. Portions of the Company's land holdings in
Richmond County, Georgia were used by the County for two
municipal landfills during the late 1960's and early 1970's.
One site is comprised of 71 acres and the other, the New
Savannah Road Landfill, 96 acres. Both landfills were closed
in the mid-1970's and have been held by the Company and its
predecessors as unimproved land since that time. Although the
sites were used primarily as municipal landfills, there have
been some reports that industrial wastes may have been
disposed of at the sites.
In 1992, a contractor for the U.S. Environmental Protection
Agency sampled air, surface water, soil and groundwater on the
New Savannah Road Landfill in order to determine whether there
was any contamination on the site and whether the site should
be placed on the federal National Priorities List for
potential clean up. The report indicated that some
contamination was present in soil samples but that sufficient
groundwater samples had not been taken to permit a complete
evaluation of the site. Accordingly, the report recommended
that further action be taken which the Company believes would
consist principally of additional testing of the site's
groundwater and surface water. The Company has had no further
contact with the EPA or its agents since that time and the
site has not been included on the National Priorities List.
Following the EPA's 1992 study, Merry Land retained
environmental consultants to conduct similar scientific
studies of both sites. The consultants reported that their
study of the sites did not reveal the presence on either site
of contaminants in amounts likely to result in the EPA listing
either site on the NPL. The Company's consultant also reviewed
the EPA contractor's test results and confirmed its prior
conclusion that the level of contamination discovered on the
New Savannah Road Landfill is not likely to result in the EPA
listing this site on the NPL. However, the studies were
limited in nature and did not include an examination of all
portions of the landfill sites. There can be no assurance that
a more complete investigation or further testing would not
reveal higher levels or different types of contamination at
the sites.
On July 1, 1994, the Environmental Protection Division of
the State of Georgia published its initial hazardous site
inventory under the state's 1992 "Superfund" law, which
requires investigation, and if appropriate, clean up of listed
sites. The New Savannah Road Landfill was included on this
list in a category of sites identified as having released
hazardous substances above reportable levels. The Company and
its environmental consultants currently are evaluating the
action by the State to determine whether it is appropriate for
the landfill site to be included on this list.
Should further investigation or remedial action be required
for the landfill, the Company believes that there will likely
be other entities which will be responsible for a portion of
the cost of the investigation or remediation. These entities
include Richmond County, which operated the landfills, any
identified company or municipality whose waste was placed in
the landfill, and the company that owned the site at the time
of the disposal of the waste.
In the third quarter of 1994, the Company recognized a non-
recurring charge against income of $200,000 associated with
this matter. This is the amount which the Company believes is
the potential cost of its share of any expenses which may be
incurred if further investigation of the New Savannah Road
Landfill is required. There can be no assurance that the
Company will not have material liability with respect to these
landfill sites.
Southern Wood Piedmont-Augusta Site. A portion of the
Company's land holdings is located adjacent to a site formerly
operated as a wood treatment facility by Southern Wood
Piedmont-Augusta. Southern Wood Piedmont-Augusta was the
subject of a property damage class action lawsuit arising from
the alleged contamination of that site and neighboring
properties, including the Company property. The Company
received approximately $0.8 million in a 1990 settlement of
its property damage claim. In June 1992, the Company sold 16
acres of land which may have been contaminated by Southern
Wood Piedmont - Augusta to that company. The contamination at
the Southern Wood Piedmont-Augusta site is the subject of
current remediation by Southern Wood Piedmont-Augusta under
state oversight. This includes remediation of contamination on
the remaining Company property in the area of the former
plant. Although the Company expects that the state-supervised
efforts will sufficiently address the contamination on the
Company's property, there is no assurance that some
remediation liability may not attach to the Company.
<PAGE>
Part I
Item 3 - Legal Proceedings
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
<PAGE>
Part II
Item 5 - Market for the Registrant's Common Stock and
Related Shareholders' Matters
Common Stock
Merry Land's common stock is traded on the New York Stock
Exchange under the symbol "MRY". The following table sets forth
the reported high and low sales prices of the common stock on the
NYSE, and the cash dividends declared per share of common stock.
<TABLE>
<CAPTION>
Dividends
High Low Declared
---- --- --------
<S> <C> <C> <C>
1994
Fourth Quarter $21.88 $16.25 $.35
Third Quarter 20.75 18.75 .30
Second Quarter 24.00 20.00 .30
First Quarter 24.38 18.75 .30
1993
Fourth Quarter $22.13 $17.50 $.26
Third Quarter 21.63 16.38 .22
Second Quarter 18.00 14.63 .22
First Quarter 17.75 14.50 .20
</TABLE>
On December 31, 1994 the Company had 3,115 shareholders of
record.
On January 16, 1995, the Board of Directors declared a
dividend of $0.35 per share of common stock to be paid on March
31, 1995 to holders of record on March 16, 1995. The current
annual dividend rate is $1.40 per share. The $.35 quarterly
dividend represents a payout of 77% of funds from operations
available for common shares for the quarter ended December 31,
1994, a payout ratio which the Company believes is conservative
relative to its REIT peers.
Under the REIT rules of the Internal Revenue Code, the Company
must pay at least 95% of its REIT taxable income as dividends in
order to avoid taxation as a regular corporation. The Board makes
decisions with respect to the distribution of capital gains on a
case-by-case basis. A portion of the Company's dividends paid to
its shareholders may be deemed either capital gain, ordinary
income or a return of capital, or all of these. None of the
Company's distributions have yet been classified as returns of
capital, though the Company expects a portion of 1995
distributions will be so classified. The Company annually
provides its shareholders a statement as to its designation of
the taxability of the dividends. Future dividends will be
declared at the discretion of the Board of Directors after
considering the Company's distributable funds, financial
requirements, tax considerations and other factors.
The federal income tax status of dividends paid to holders of
common stock was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Ordinary income $1.24 $.53 $.51
Capital gains .01 .37 .15
Return of capital ---- ---- ----
Total dividends paid $1.25 $.90 $.66
---- ---- ----
</TABLE>
The loan agreement for the Company's 6 5/8% Senior Notes
prohibits the payment of any dividends or other distributions
upon the occurrence of an event of default and otherwise limits
dividends and distributions after September 30, 1993 to a
cumulative amount which is not more than the Company's net
earnings plus depreciation and amortization after that date, plus
or minus any increase or decrease in Stockholders' Equity from
the issuance or redemption of stock.
Series A Preferred Stock
Merry Land's $1.75 Series A Cumulative Convertible Preferred
Stock is traded on the New York Stock Exchange under the symbol
"MRYpr". The following table sets forth the reported high and low
sales prices of the Series A Preferred Stock on the NYSE, and the
cash dividends declared per share of Series A Preferred Stock.
<TABLE>
<CAPTION>
Dividends
High Low Declared
---- --- --------
<S> <C> <C> <C>
1994
Fourth Quarter $29.63 $22.00 $.4375
Third Quarter 27.63 25.25 .4375
Second Quarter 31.63 27.00 .4375
First Quarter 32.88 27.00 .4375
1993
Fourth Quarter 30.75 26.50 .4375
Third Quarter $30.50 $25.00 $.4375
</TABLE>
The federal income tax status of dividends paid to holders Series
A Preferred Stock was
as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Ordinary income $1.734 $.550
Capital gains .016 .325
Return of capital ------ -----
Total dividends paid $1.750 $.875
</TABLE>
The Series A Preferred Stock has an annual dividend rate of
$1.75 per share, payable quarterly, and is convertible into
common shares at a conversion price of $18.65 per share of common
stock. The Series A Preferred Stock may not be redeemed for cash
at any time, but may be redeemed by the Company for common shares
after June 30, 1998, at a rate of 1.34 shares of common for each
share of Series A Preferred Stock, provided the common shares are
trading above $18.65, subject to adjustments or certain
circumstances.
Series B Preferred Stock.
On November 1, 1994 the Company completed the private placement
of $100.0 million of its $2.205 Series B Cumulative Convertible
Preferred Stock with a small group of institutional investors. It
has an annual dividend rate of $2.205 per year, payable
quarterly, and is convertible into common shares at a conversion
price of $21.04 per common share. The Series B Preferred Stock
may not be redeemed for cash at any time, but may be redeemed by
the Company for common shares after October 31, 1999, at a rate
of 1.188 shares of common stock for each share of preferred,
provided the Company's common shares are trading above the
conversion price of $21.04 per share. The shares were not
registered with the Securities and Exchange Commission at the
time of issuance and are not publicly traded. The Company has
granted to the holders of the Series B Preferred Stock certain
registration rights which commence on April 2, 1995. On December
31, 1994 the Series B Preferred paid a dividend of $.370 per
share, of which $.003 was capital gain.
Dividend Reinvestment and Stock Purchase Plans
The Company has adopted a Dividend Reinvestment and Stock
Purchase Plan under which any holder of common or preferred stock
may reinvest cash dividends or optional cash
payments of up to $5,000 per quarter in additional shares of
common stock purchased directly from the Company at a 5%
discount. Optional cash payments are subject to the limitation
that the number of shares of common stock which can be purchased
with optional cash payments cannot exceed the number of shares of
common stock and preferred stock owned by the shareholder. All
common and preferred shareholders are eligible to join the plan
including shareholders whose shares are held in the name of a
nominee or broker.
<PAGE>
Part II Item 6
(Dollars in 000's except apartment units and per share amounts)
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Years Ended December 31,
1994 1993 1992 1991 1990
-------------- ----------- ------
<S> <C> <C> <C> <C> <C>
Income from Property Operations:
Rental and mineral royalty
revenue $103,169 $56,181 $23,479 $16,447 $13,789
Rental expenses, property tax
and insurance 38,409 22,611 9,604 7,065 5,521
Depreciation of real estate
owned 17,877 9,066 4,156 3,022 2,119
------- ------ ----- ------ ------
46,883 24,504 9,719 6,360 6,149
Income from mortgage backed
securities:
Interest income - - 3,978 12,832 20,104
Interest expense - - 1,558 8,543 17,102
------ ----- ------ ------ ------
- - 2,420 4,289 3,002
Other income:
Other interest and dividend
income 2,440 2,463 1,940 1,709 1,701
Other 25 10 196 297 76
------ ------ ----- ----- -----
2,465 2,473 2,136 2,006 1,777
Expenses:
Interest unrelated to mortgage
backed securities 10,394 5,640 4,230 4,261 5,607
General and administrative 1,773 1,433 1,304 1,277 944
Depreciation - other, amortization
and other expenses 470 180 44 112 182
Other non-recurring costs 200 1,308 - - -
------ ------ ------ ------ -----
12,837 8,561 5,578 5,650 6,733
Gains on sales of assets:
Gains on sales of investments 201 6,960 385 (698) 491
Gains on sales of real estate 273 1,032 460 803 730
Gains on mortgage backed
securities - - 1,903 1,681 487
------ ----- ------ ------ -----
474 7,992 2,748 1,786 1,708
Income tax (benefit) - - - - (2)
------ ------ ------- ----- ------
Net income 36,985 26,408 11,445 8,791 5,905
Preferred dividends paid 7,934 4,025 - - -
------ ------ ------- ----- ------
Net income available for common
shares $29,051 $22,383 $11,445 $8,791 $5,905
------ ------ ------- ------ ------
Weighted average common shares 26,430 7,268 10,652 9,326 9,480
Weighted average fully diluted
common shares 32,562 20,381 10,769 9,449 9,606
Net income per common share $ 1.10 $ 1.30 $ 1.07 $ .94 $ .62
Common dividends paid $33,467 $16,934 $7,285 $4,116 $3,779
Common dividends paid per share $ 1.25 $ .90 $ .66 $ .44 $ .40
<CAPTION>
December 31,
-------------------------------------------------
1994 1993 1992 1991 1990
------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Properties, at cost $815,306 $565,111 $220,615 $132,355 $103,981
Mortgage backed securities - - - 115,973 196,620
Total assets 806,655 562,172 235,695 262,881 318,947
Debt related to mortgage
backed securities - - - 112,854 185,118
Senior Notes 120,000 120,000 - - -
Other debt 92,810 37,173 117,596 70,939 61,633
Total shareholders' equity 584,851 397,715 106,831 73,919 66,302
Other Data
Funds from operations $54,588 $28,790 $12,853 $10,027 $6,316
Funds from operations
available to common 46,654 24,765 12,853 10,027 6,316
Apartment units acquired
during year 4,872 7,452 2,845 986 592
Total apartment units at end
of year 18,851 13,979 6,527 3,708 2,722
<FN>
Based on the recently published recommendations of a task
force of the National Association of Real Estate Investment
Trust, the Company defines funds from operations as net
income computed in accordance with generally accepted
accounting principles, excluding nonrecurring costs and net
realized gains, plus depreciation of real property. Funds
from operations should be considered along with, and not as a
substitution for net income and cash flows as a measure of
the Company's operating performance and liquidity.
</TABLE>
<PAGE>
Part II
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
(In thousands except apartment and per share data)
Overview
Over the past several years, Merry Land has significantly
expanded its apartment holdings through an active program of
acquisitions. The Company believes that its access to public and
private debt and equity, its experience as an apartment operator,
its knowledge of the Southern apartment markets and its
acquisition expertise have allowed it to take advantage of
favorable conditions to make acquisitions at attractive yields.
Even though prices of apartments offered for sale have risen
throughout 1993 and 1994, the Company believes that prices have
recently subsided to levels which present continued favorable
opportunities for both acquisition and development.
The following table describes the growth of the Company's
apartment holdings in recent years:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Dec. 31,
1994 Increase 1993 Increase 1992 Increase
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units(1) 18,851 35% 13,979 114% 6,527 76%
Cost(in thousands)
(1)(2) $796,364 44% $554,444 165% $209,549 73%
<FN>
------------
(1) Excludes condominium units held for sale.
(2) Represents the total acquisition cost of the property
plus the capitalized cost of improvements made subsequent to
acquisition.
</TABLE>
In December 1994, the Company commenced a program of apartment
development by buying three tracts of land on which it intends to
build high quality suburban garden apartments. The Company will
build these communities using experienced apartment developers to
provide development and construction management services.
Construction on all three communities is expected to commence in
the first half of 1995 with the first units expected to be
available for occupancy later that year. The Company's present
intention is to limit its financial commitment to development to
no more than 10% of total assets.
Results of Operations for the Years Ended December 31, 1994,
1993 and 1992
Rental Operations. The operating performance of the
Company's apartments is summarized in the following table
(dollars in thousands except average monthly rent):
<TABLE>
<CAPTION>
Change from
1993 to 1994 1994 1993 1992
------------ ------- -------- -------
<S> <C> <C> <C> <C>
Rents 86% $101,667 $54,565 $22,460
Operating expenses 66% 27,578 16,572 6,954
Taxes and insurance 99% 9,634 4,833 2,596
Depreciation 99% 17,735 8,924 4,020
--- ------- ------ ------
Operating income 93% $46,720 $24,236 $8,890
Average occupancy(1) 2.3% 95.2% 92.9% 91.6%
Average monthly rent(2) 7.3% $591 $551 $472
Expense ratio(3) (2.6%) 36.6% 39.2% 42.5%
------------------
<FN>
(1) Represents the of average physical occupancy at each
month end for the period held.
(2) Represents weighted average monthly rent charged for
occupied units and rents asked for unoccupied units at December
month end.
(3) Represents total of operating expenses, taxes and
insurance divided by rental revenues.
</TABLE>
Rental revenues and expenses have risen sharply with the
Company's acquisition of new communities. The weighted
average number of apartments owned rose to 16,415 in 1994
from 10,253 in 1993 and 5,118 in 1992. Most of the rental
markets in which Merry Land operates are experiencing strong
job growth and household formation, and occupancy levels and
rent rates have risen. However, the 7.3% increase in
portfolio average rental rates in 1994 from 1993 largely
reflects the higher rents charged at the communities the
Company acquired in 1993 and 1994, whose monthly rents
averaged $626 at December 31, 1994, versus the total
portfolio average of $591.
Although construction starts of new apartment communities
have increased in 1994, the Company believes demand continues
to outstrip supply and expects a strong rental market to
continue throughout 1995, with continued high occupancy and
rising rent rates. The performance of the 6,527 units which
the Company held for all of both 1994 and 1993 ("same store"
results), is summarized in the following table (dollars in
thousands except average monthly rents; see footnotes above):
<TABLE>
<CAPTIONS>
Change from
1993 to 1994 1994 1993
------------ ---- ----
<S> <C> <C> <C>
Rents 8% $40,407 $37,339
Operating expenses (5%) 12,225 12,911
Taxes and insurance 4% 3,549 3,426
Depreciation 5% 6,676 6,346
--- ------ ------
23% $17,957 $14,656
Average occupancy 3.1% 95.7% 92.6%
Average monthly rent 3.9% $530 $510
Expense ratio (4.8%) 39.0% 43.8%
</TABLE>
Reflecting the strong rental markets, rental revenues and
operating income for those properties held for all of both
periods rose as a result of 3.1% higher occupancy and 3.9%
higher rental rates. Operating expenses decreased $0.7
million in 1994 as compared to 1993. Of this decrease, $0.5
million came from a change in capitalization policy which
resulted in the capitalization of certain expenditures which
had previously been expensed, including painting the
exteriors of apartment communities, replacement of mini
blinds and replacement of vinyl. The remaining decrease in
expenses came from lower personnel costs.
For those 3,360 apartments owned by the Company for both
1993 and 1992, rental revenues increased $1.0 million or 6%
in 1993 over 1992 as monthly rental rates increased 3.4% to
$491 per month from $475 per month, while occupancy for those
units rose to 93.2% for 1993 from 92.2% for 1992. Operating
expenses rose $1.1 million, or 19%, due to charging the cost
of ESOP contributions to the communities, rather than to
corporate overhead, and to higher maintenance expenditures,
which included painting the exterior of three more
communities than in the prior year. Taxes and insurance
expense rose 8% while depreciation rose 2%.
Mineral Royalty and Commercial Property Income. These
amounts rose to $1.4 million in 1994 and $1.6 million in 1993
from $1.0 million in 1992 largely as the result of the sale
of sand under a contract which has now expired. Mineral
royalties in 1995 should total less than half of 1994
amounts.
Interest and Dividend. Income Interest and dividend income
totaled $2.4 million for 1994 as compared to $2.5 million for
1993 and $5.9 million in 1992. Interest and dividend income
includes interest received on temporary investments, notes
receivable, and dividends earned on equity securities
investments. The 1992 amount included interest on the
Company's portfolio of mortgage backed securities, which was
disposed of in that year.
Interest Expense. Interest expense totaled $10.4 million
for 1994, up from $5.6 million for 1993 and $5.8 million for
1992. The increase resulted both from an increase in the
amount of debt outstanding and from higher interest rates.
Average debt outstanding rose to $165.2 million in 1994 from
$95.2 million in 1993 and $74.2 million in 1992, primarily as
a result of financing apartment purchases. The 1992 amount
included funds used to finance the mortgage backed securities
portfolio. The weighted average interest rate charged on all
the Company's debt increased to 6.4% for 1994 from 5.4% for
1993 and 5.0% for 1992, primarily as a result of the
Company's shift to higher cost fixed rate debt from variable
rate financing and also because of rising short term rates.
At December 31, 1994, $85.3 million of the Company's $212.8
million of outstanding debt was at variable interest rates,
and $9.9 million of this amount was tax exempt financing
bearing interest at 75% of prime.
General and Administrative Expenses. In 1994, general and
administrative expense totaled $1.8 million, versus $1.4
million for 1993 and $1.3 million in 1992. In 1994 general
and administrative expenses equaled 1.7% of rental revenues,
down from 2.6% for 1993 and 5.6% in 1992. The decrease in
this ratio is attributable to increased operating efficiency
as the Company's overhead was spread over more apartment
units. The Company expects that as it continues to grow, even
though general and administrative expenses will increase in
absolute terms, such expenses will continue to decline as a
percentage of revenues. In 1994, the Company began charging
the cost of property management activities conducted at the
regional and corporate level to rental expense. Previously,
such expenses had been included as part of general and
administrative expenses. Results for both 1993 and 1992 have
been presented on a basis consistent with 1994 expenses.
Non Recurring Costs. In 1994, the Company reserved $0.2
million as the estimated potential cost of its share of a
possible environmental investigation of a landfill located on
land the Company owns in Richmond County, Georgia. (See "Part
I, Item 2 -Properties - Environmental Matters"). In 1993 the
Company sold $120.0 million of 6.625% unsecured senior notes
and used the $119.0 net proceeds to repay substantially all
other debt. Prepayment penalties and the cost of closing out
an interest rate swap agreement totaled $1.3 million.
Gains on Sales of Assets. Net gains recognized on the sale
of assets totaled $0.5 million for 1994, $8.0 million for
1993 and $2.7 million in 1992. Gains in 1994 came from the
sale of securities and real estate. Gains in 1993 resulted
primarily from the sale of thrift stocks and in 1992 from the
sale of mortgage backed securities.
Net Income. Net income totaled $37.0 million for 1994,
$26.4 million in 1993, and $11.4 million for 1992. Net income
available for common shareholders totaled $29.1 million for
1994, $22.4 million for 1993, and $11.4 million for 1992. The
increases in net income and net income available for common
shareholders for 1994 when compared to 1993 arose principally
from substantially increased operating income from
apartments, which were partially offset by lower levels of
gains recognized on sales of assets. Net income per share for
1994 fell to $1.10 from $1.30 in 1993 as a result of various
factors, including the lower level of gains recognized,
increased depreciation and the increased number of shares
outstanding. The increase in net income for 1993 as compared
to 1992 arose both from increased operating income from
apartments and from greater gains recognized on the sale of
assets, principally securities.
Dividends to preferred shareholders. Dividends to preferred
shareholders totaled $7.9 million for 1994 and $4.0 million
in 1993. The increase in preferred dividends arose from the
sale of preferred stock during the two years. In June 1993,
the Company sold 4.6 million shares of Series A Cumulative
Convertible Preferred Stock in a public offering. In November
1994, the Company completed a private placement of 4.0
million shares of its Series B Preferred Stock. During 1994,
holders of Series A Preferred Stock converted 2.1 million
shares of the Series A Preferred Stock into approximately 2.8
million shares of the Company's common stock as the common
dividend was raised above the equivalent preferred dividend..
Funds From Operations. The Company believes that funds from
operations is an important measure of its operating
performance. Funds from operations does not represent cash
flows from operations as defined by generally accepted
accounting principles, GAAP, and should not be considered as
an alternative to net income or as an indicator of the
Company's operating performance, or as a measure of the
Company's liquidity. Based on recently published
recommendations of a task force of the National Association
of Real Estate Investment Trusts, the Company defines funds
from operations as net income computed in accordance with
GAAP, excluding non-recurring costs and net realized gains,
plus depreciation of real property. This revised definition
eliminates from funds from operations any amortization of
debt costs and any non-real estate depreciation which reduced
the Company's funds from operations by $0.5 million in 1994,
$0.2 million in 1993 and $0.04 million in 1992.
Funds from operations rose 90% to $54.6 million for 1994 as
compared to $28.8 million for 1993, and $12.9 million for
1992. These increases were principally due to increased
rental operating income resulting from the growth of the
Company's apartment holdings.
The following is a reconciliation of net income to funds
from operations (data in thousands, except per share data):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income $36,985 $26,408 $11,445
Less preferred dividends paid 7,934 4,025 _
------ ------ ------
Net income available for common
shares 29,051 22,383 11,445
Add depreciation of real estate
owned 17,877 9,066 4,156
Add non-recurring costs 200 1,308 _
Less net realized gains 474 7,992 2,748
-------- -------- --------
Funds from operations available to
common shares 46,654 24,765 12,853
Add preferred dividends 7,934 4,025 _
------- ------- -------
Funds from operations-fully
diluted $54,588 $28,790 $12,853
------- ------- -------
Weighted average common shares outstanding-
primary 26,430 17,268 10,652
fully diluted 32,562 20,381 10,753
Funds from operations per share-
primary $1.77 $1.43 $1.21
fully diluted $1.68 $1.41 $1.20
</TABLE>
Liquidity and Capital Resources
Merry Land's financial strategy is to buy apartment
communities for cash, using amounts drawn on its unsecured
line of credit, and subsequently to raise funds in the
capital markets to permanently finance these investments. The
Company completed a number of such acquisition and funding
cycles in recent years and expects to continue to fund its
acquisition and development activities in this manner.
In 1994, the Company acquired 4,872 apartment units for
$226.2 million and funded these purchases initially by
liquidating temporary investments and borrowing funds under
its line of credit.
On June 30, 1994, the Company completed a public offering
of 4.6 million shares of common stock at a price of $20.25
per share, for net proceeds of $87.5 million. Of this amount,
$58.7 million was used to repay debt incurred in the
acquisition and improvement of apartments and the remainder
was used for further acquisitions.
On November 1, 1994, the Company completed the private
placement of $100.0 million of its $2.205 Series B Cumulative
Convertible Preferred Stock for net proceeds of $96.7
million, and used this amount to pay in part for the $154.4
million apartment portfolio acquired on November 18, 1994.
The remainder of the purchase price was financed with the
Company's line of credit.
Common Stock Repurchases. In December 1994, the Company's Board
of Directors authorized the repurchase of up to 1.0 million
shares of the Company's common stock. The Board took this action
because in its judgment the Company's stock price had fallen
significantly below price levels which the Board felt were
appropriate. The Company bought and retired 175,440 shares for
approximately $3.1 million, an average price of $17.94 per share.
The Company discontinued the repurchase program as the stock
price rose over the last weeks of the year.
Financial Structure. At December 31, 1994, debt equaled 27%
of total capitalization at cost, and 20% of total
capitalization with equity valued at market. At that date,
the Company's financial structure was as follows (dollars in
thousands):
<TABLE>
<CAPTION>
% of Market% of
Cost Total Value Total
------- ----- ------ ------
<S> <C> <C> <C>
Advances under line
of credit $57,600 8% $57,600 5%
Repurchase agreements 17,375 2% 17,375 2%
Mortgage loans 17,835 2% 17,835 2%
6.625% Senior notes 120,000 15% 120,000 11%
------- --- ------- ---
Total debt 212,810 27% 212,810 20%
Common and preferred
equity 584,851 73% 850,245 80%
------- -------
Total
capitalization $797,661 100% $1,063,055 100%
-------- ---- ---------- ----
<FN>
- - ------------------
(1) Assumes conversion of all preferred stock outstanding
into common stock.
</TABLE>
Merry Land's primary commercial bank provides the Company
with a $100.0 million unsecured line of credit for property
acquisitions and other general corporate purposes. This line
bears interest at 0.65% over the 30 day LIBOR rate, matures
on September 30, 1995, and, subject to the bank's approval,
is expected to be renewed annually. At December 31, 1994, the
Company had $42.4 million available under this line of
credit. The Company is negotiating with a group of banks to
obtain a syndicated credit facility in addition to the
existing line.
It generally is not the practice of the Company to finance
its acquisitions using mortgage debt. At times, however, the
Company finds it advantageous to assume such debt in order to
successfully negotiate and close property acquisitions.
During 1994, the Company repaid approximately $19.2 million
of mortgage debt previously assumed in property acquisitions
of prior years. Repurchase agreements are borrowings secured
by the Company's temporary investments in U.S. Treasury
Notes. The Company's Preferred Stock, and implicitly its
senior notes, are rated investment grade by Standard & Poor's
Corporation and Moody's Investors Service, Inc.
Liquidity. Merry Land expects to meet its short-term
liquidity requirements with the net cash flow provided by
operating activities and with its line of credit. The Company
believes that its primary short-term liquidity needs are
operating expenses, capital improvements, debt service
payments, dividend payments and current requirements of its
program of new apartment development. The Company expects to
meet its long-term liquidity requirements, including
additional borrowings and the issuance and sale of debt or
equity securities in the public and private markets. The
Company is limited in the amount of debt it may incur under
the terms of its existing loan agreements. At December 31,
1994, the Company's loan agreements would have allowed it to
borrow an additional $180 million on an unsecured basis.
Cash Flows. Operating cash flow has grown significantly
with the expansion of the Company's apartment holdings.
Operating cash flow grew to $56.1 million in 1994 from $30.9
million in 1993 and $14.3 million in 1992. Sales of common
and preferred stock, however, have been the largest source of
cash for the past three years. The primary use of cash has
been for new apartment acquisitions and improvements.
Dividends paid in 1994 and 1993 increased from levels in
prior years due to an increase in the average amount of stock
outstanding during 1994 and 1993, and in the case of the
Company's common stock, an increase in the quarterly dividend
per share from $0.15 for the first quarter of 1992 to $0.35
for the last quarter of 1994.
The following table summarizes cash flows for 1994, 1993,
and 1992 (in thousands):
<TABLE>
<CAPTION>
Sources and Uses of Cash:
Year Ended December 31,
--------------------------
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Operating activities $ 56,099 $ 30,911 $ 14,256
Net sales of securities
and temporary investments _ 1,659 99,913
Sales of common and preferred
stock 187,939 283,560 27,703
Net borrowings 55,637 1,429 _
Other 576 10,677 20,724
-------- -------- --------
Total sources 300,251 328,236 162,596
Acquisitions of and improvements
to properties (250,263) (307,048) (88,841)
Dividends paid (41,401) (20,959) (7,666)
Net repayment of debt _ _ (66,197)
Net purchase of temporary
investments (8,447) _ _
-------- -------- ---------
Total uses $(300,111) $(328,007) $(162,704)
</TABLE>
Capital Expenditures. The Company capitalizes the cost of
expenditures for the acquisition or development of additional
productive assets and for expenditures which significantly
increase the revenue producing capability or which reduces
the cost of operating such assets. Normal operating costs are
expensed as incurred. Certain items which are replaced on a
regular basis, but which have lives of more than one year,
such as carpet, vinyl flooring and exterior repainting, are
capitalized. At newly acquired communities, the Company often
finds it necessary to upgrade the physical appearance of such
properties and to complete maintenance and repair work which
had been deferred by prior owners. These activities often
result in heavier capital expenditures in the early years of
Company ownership.
Inflation. Substantially all of the Company's leases are
for terms of one year or less, which should enable the
Company to replace existing leases with new leases at higher
rentals in times of rising prices. The Company believes that
this would offset the effect of cost increases stemming from
inflation.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Merry Land & Investment Company, Inc.:
We have audited the accompanying balance sheets of Merry
Land & Investment Company, Inc. (a Georgia corporation) as of
December 31, 1994 and 1993 and the related statements
of income, changes in stockholders' equity, and cash flows for
each of the three years in the period end December 31, 1994.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements 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 Merry Land & Investment Company, Inc. as of December 31, 1994
and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
January 13, 1995
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Merry Land & Investment Company, Inc.
BALANCE SHEETS
(In thousands)
December 31,
---------------------
1994 1993
--------- -----------
<S> <C> <C
PROPERTIES AT COST
Apartments $796,436 $ 554,589
Development in progress 8,129 _
Commercial rental property 6,040 6,047
Land held for investment or future
development 3,831 3,884
Operating equipment 870 591
-------- --------
815,306 565,111
Less accumulated depreciation and
depletion (41,874) (23,899)
-------- --------
773,432 541,212
CASH AND SECURITIES
Cash 718 578
Marketable securities 27,716 15,868
------- -------
28,434 16,446
OTHER ASSETS
Notes receivable 941 1,058
Deferred loan costs 2,066 2,412
Other 1,782 1,044
------- -------
4,789 4,514
------- -------
TOTAL ASSETS $806,655 $562,172
------- -------
NOTES PAYABLE
Mortgage loans $ 17,835 $ 37,173
6.625% Senior notes 120,000 120,000
Note payable-credit line 57,600 _
U.S. Treasury repurchase agreement 17,375 _
------- -------
212,810 157,173
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 2,224 1,988
Resident security deposits 3,012 2,344
Accrued property taxes 1,205 635
Other 2,553 2,317
------- -------
8,994 7,284
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 20,000
shares authorized; 2,516 shares $1.75
Series A Cumulative Convertible shares
issued and outstanding, $25.00 per share
liquidation preference 62,908 115,000
Preferred stock, no par value, 20,000 shares
authorized; 4,000 shares $2.205 Series B
Cumulative Convertible shares issued and
outstanding, $25.00 per share
liquidation preference 100,000 _
Common stock without par value at $1 stated
value, 50,000 shares authorized; 30,744 and
22,826 shares issued and outstanding at
December 31, 1994 and 1993 30,744 22,826
Capital surplus 375,170 236,369
Cumulative undistributed net earnings 23,112 27,529
Notes receivable from stockholders and
ESOP (10,283) (4,009)
Unrealized gain on securities 3,200 _
584,851 397,715
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $806,655 $562,172
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Part II
Item 8 -Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Merry Land & Investment Company, Inc.
STATEMENTS OF INCOME
(In thousands, except per share date)
Years Ended December 31,
---------------------------------
1994 1993 1992
--------- ------- ------------
<S> <C> <C> <C>
INCOME
Rental income $102,352 $55,262 $23,130
Mineral royalties 817 919 349
Mortgage interest 95 510 4,662
Other interest 2,070 1,709 910
Dividends 275 244 346
Other income 25 10 196
-------- ------- -------
105,634 58,654 29,593
EXPENSES
Rental expense 27,953 16,996 7,332
Interest 10,394 5,640 5,788
Depreciation - real estate 17,877 9,066 4,156
Depreciation - other 122 59 41
Amortization - financing costs 348 121 3
Taxes and insurance 10,456 5,615 2,272
General and administrative expense 1,773 1,433 1,304
Other non-recurring expense 200 ,308 _
---------- --------- ---------
69,123 40,238 20,896
---------- ---------- ---------
Income before net realized gains 36,511 18,416 8,697
Net realized gains 474 7,992 2,748
---------- --------------------
NET INCOME 36,985 26,408 11,445
Dividends to preferred share-
holders 7,934 4,025 _
---------- --------- ---------
NET INCOME AVAILABLE
FOR COMMON SHARES $29,051 $22,383 $11,445
---------- -------- --------
Weighted average
common shares outstanding 26,430 17,268 10,652
Weighted average
common shares - fully diluted 32,562 20,381 10,652
NET INCOME - PER SHARE $1.10 $1.30 $1.07
FULLY DILUTED $1.10 $1.30 $1.07
----- ----- -----
CASH DIVIDENDS DECLARED
PER COMMON SHARE $1.25 $0.90 $0.66
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Merry Land & Investment Company, Inc.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Total
Cumulative Stock-
Preferred Stock Common Stock Capital Undistributed holders
Shares Amount Shares Amount Surplus Net Earnings Equity
------------- -------------- ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 _ _ 9,397 9,397 47,033 17,489 73,919
1992 net income _ _ _ _ _ 11,445 11,445
Sale of common stock _ _ 2,910 2,910 24,230 _ 27,140
Common stock issued in conversion
of debentures - - 64 64 473 _ 537
Common stock dividends ($.66
per share) _ _ _ _ _ (7,285) (7,285)
Common stock dividends reinvested _ _ 145 145 1,224 _ 1,369
Exercise of stock options _ _ 59 59 278 _ 337
------ ------ ------ ------ ------ ------- -------
_ _ 12,575 12,575 73,238 21,649 107,462
Decrease in net unrealized loss on
marketable equity securities _ _ _ _ _ 431 431
Notes receivable from stock-
holders _ _ _ _ (1,062) _ (1,062)
----- ------- ------ ----- ------ -------- -------
Balance, December 31, 1992 _ _ 12,575 12,575 72,176 22,080 106,831
1993 net income _ _ _ _ _ 26,408 26,408
Sale of common stock _ _ 9,950 9,950 164,962 _ 174,912
Sale of preferred stock 4,600 115,000 _ _ (5,781) _ 109,219
Common stock issued in
conversion of debentures _ _ 55 55 410 _ 465
Sale of common stock to employees _ _ 135 135 1,910 _ 2,045
Increase in notes receivable from
stockholders _ _ _ _ (1,838) _ (1,838)
Common stock dividends ($.90 per
share _ _ _ _ _ (16,934) (16,934)
Common stock dividends reinvested _ _ 99 99 1,661 _ 1,760
Preferred stock dividends($.875
per share) _ _ _ _ _ (4,025) (4,025)
Stock purchase plan _ _ 9 9 164 _ 173
Common stock redeemed _ _ (72) (72) (1,480) _ (1,552)
Sale of common stock to ESOP _ _ 75 75 1,284 _ 1,359
Increase in notes receivable
from ESOP _ _ _ _ (1,108) _ (1,108)
------- -------- ------ ------ ------- ------- -------
Balance, December 31, 1993 4,600 115,000 22,826 22,826 232,360 27,529 397,715
1994 net income _ _ _ _ _ 36,985 36,985
Sale of common stock _ _ 4,600 4,600 82,907 _ 87,507
Sale of preferred stock 4,000 100,000 _ _ (3,288) _ 96,712
Common stock issued in
conversion of preferred
stock, Series A (2,084) (52,092) 2,792 2,792 49,300 _ _
Sale of common stock to
employees _ _ 389 389 6,888 _ 7,277
Purchase of common stock
from employees _ _ (9) (9) (186) - (195)
Increase in notes receivable from
stockholders _ _ _ _ (6,687) _ (6,687)
Common stock dividends _ _ _ _ _ (33,467) (33,467)
Common stock dividends reinvested _ _ 194 194 3,741 _ 3,935
Preferred stock dividends _ _ _ _ _ (7,934) (7,934)
Stock purchase plan _ _ 128 128 2,411 _ 2,539
Common stock redeemed _ _ (176) (176) (2,972) _ (3,148)
Decrease in notes receivable from
ESOP _ _ _ _ 412 _ 412
Unrealized gain on securities - - - - 3,200 - 3,200
----- ------ ------ ------ ------- ------ -------
Balance, December 31, 1994 6,516 162,908 30,744 30,744 368,086 23,113 584,851
===== ======= ====== ====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Merry Land & Investment Company, Inc.
STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
-----------------------------
1994 1993 1992
--------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Rents and royalties received $103,149 $56,347 $23,460
Interest received 2,011 2,035 6,535
Dividends received 275 244 346
Rental expense (27,804) (15,988) (7,182)
General and administrative
expense (1,229) (1,767) (1,183)
Interest expense (10,158) (4,395) (6,614)
Property taxes and insurance
expense (10,282) (5,880) (1,787)
Other 137 315 681
------- ------ ------
Net cash provided (used) by operating
activities: 56,099 30,911 14,256
INVESTING ACTIVITIES:
Principal received on notes
receivable 116 10,272 329
Monthly principal receipts on
mortgage backed securities _ _ 19,506
Sale of marketable securities and
temporary investments 7,030 117,494 107,391
Purchase of temporary invest-
ments (15,477) (115,835) (7,478)
Acquisition of and improvements
to properties (250,263) (307,048) (88,841)
Sale of real estate 302 428 856
Other 158 (23) 33
------- ------- ------
Net cash provided (used) by
investing activities: (258,134) (294,712) 31,796
FINANCING ACTIVITIES:
Net borrowings (repayments) -
repurchase agreements 17,375 _ (112,854)
Net borrowings (repayments) -
bank debt 57,600 (109,358) 46,770
Net borrowings - senior notes _ 119,025 _
Repayments of mortgage loans (19,338) (8,238) (113)
Cash dividends paid - common (33,467) (16,934) (7,666)
Cash dividends paid - preferred,
Series A (6,454) (4,025) _
Cash dividends paid - preferred,
Series B (1,480) _ _
Sale of common stock - public
offerings 87,507 171,949 26,334
Sale of common stock - reinvested
dividends 3,935 1,760 1,369
Sale of common stock - stock
purchase plan 2,538 173 _
Sale of common stock - employees 395 459 _
Sale of preferred stock - public
offering 96,712 109,219 _
Common stock retired (3,148) _ _
-------- ------- ------
Net cash provided by financing
activities 202,175 264,030 (46,160)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 140 228
(108)
CASH AT BEGINNING OF PERIOD 578 349 457
------- ------- -------
CASH AT END OF PERIOD $ 718 $ 57 $ 349
======= ====== =======
</TABLE>
<PAGE>
Item 8 - Financial Statements and Supplementary Data
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Reconciliation of Net Income to Cash Flows from Operating
Activities
Years Ended December 31,
-------------------------
1994 1993 1992
------ ------- -------
<S> <C> <C> <C>
Net income $36,985 $ 26,408 $11,445
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 18,347 9,246 4,200
(Increase) decrease in interest and
accounts receivable (110) (168) 943
(Increase) decrease in other assets (282) (9) 201
Inrease (decrease) in accounts
payable and accrued interest 1,479 3,426 38
Gain on the sale of mortgage backed
securities _ _ (1,903)
Gain on the sale of marketable
securities (201) (6,961) (385)
Gain on the sale of real estate (273) (1,031) (460)
ESOP contributions 154 _ 177
------- ------- -------
Net cash provided by operating
activitiesn $56,099 $30,911 $14,256
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
MERRY LAND & INVESTMENT COMPANY, INC.
Notes to Financial Statements
1. Nature of Business
Merry Land & Investment Company, Inc. is a real estate
investment trust, which invests in upscale apartment communities
located primarily in Florida, Georgia, North Carolina and South
Carolina. At December 31, 1994 the Company owned 71 apartment
communities containing 18,851 units in twenty five cities and
eight states. In past years it invested in mortgage backed and
other securities, most of which were sold by 1992.
As a qualified REIT, the Company pays no corporate income taxes
on earnings distributed to stockholders. It must specialize in
investments in real estate and real estate mortgages, meet
certain requirements as to stock ownership, gross income and
asset mix. The Company is self administered and has no affiliated
advisor, sponsor, or property manager.
Information on the Company's real estate and securities
investments follows for the years ended (in thousands):
<TABLE>
<CAPTION>
Mortgage Backed Other
Real Estate Securities Securities Total
- - ----------- ---------- ---------- -----
<S> <C> <C> <C> <C>
December 31, 1994
Revenues $103,469 $ _ $ 2,165 $105,634
Rental expenses,
property tax,
and insurance 38,300 _ 110 38,410
Depreciation and
amortization 18,347 _ _ 18,347
Interest expense _ _ _ 10,394
Net realized gains 273 _ 201 474
Net income _ _ _ 36,985
Assets 778,221 _ 28,434 806,655
Capital
expenditures 250,263 _ _ 250,263
December 31, 1993
Revenues $ 56,702 $ _ $ 1,952 $ 58,654
Rental expenses,
property tax, and
insurance 21,902 _ 181 22,083
Depreciation and
amortization 9,246 _ _ 9,246
Interest expense _ _ _ 5,640
Net realized gains 1,032 _ 6,960 7,992
Net income _ _ _ 26,408
Assets 546,118 _ 16,054 562,172
Capital
expenditures 307,048 _ _ 307,048
December 31, 1992
Revenues $ 24,354 $ 3,983 $ 1,256 $ 29,593
Rental expenses,
property tax, and
insurance 9,573 _ _ 9,573
Depreciation and
amortization 4,200 _ _ 4,200
Interest expense _ _ _ 5,788
Net realized gains 460 1,903 385 2,748
Net income _ _ _ 11,445
Assets 217,512 _ 18,183 235,695
Capital expenditures 88,841 _ _ 88,841
<FN>
Assets not specifically identified with securities have been
allocated to real estate. All general and administrative
expenses have been allocated to the Company's real estate
activities. Interest expense is not specifically identified
with real estate or securities investments since the Company
funds its business on an overall basis.
</TABLE>
2. Summary of Significant Accounting Policies
Recognition of Income
The Company leases its apartment properties generally for
terms of one year or less. Rental income is recognized when paid.
Depreciation and Amortization
Depreciation of buildings and equipment is computed on the
straight-line method for financial reporting purposes using the
following estimated useful lives:
<TABLE>
<S> <C>
Apartments 40-50 years
Land improvements 50 years
Commercial rental buildings 40-50 years
Furniture, fixtures, equipment
and carpet 5-10 years
Operating equipment 3-5 years
</TABLE>
Straight line and accelerated methods are used for income
tax reporting purposes. Betterments, renewals and extraordinary
repairs that extend the lives of assets are capitalized; other
repairs and maintenance are expensed.
Income Taxes
As a real estate investment trust, the Company does not pay
income taxes on its distributed income. It does pay income taxes
on that income which is not distributed, and it may be subject to
excise taxes on income distributed after certain dates. See Note
8 where income taxes are discussed further.
Earnings Per Share and Share Information
Earnings per share are computed on the basis of the weighted
average number of shares outstanding during the year. Earnings
per share assuming full dilution are computed based on the
assumption that convertible preferred stock was converted at the
beginning of the year with an applicable reduction in preferred
dividends.
3. Marketable Securities
The cost and market value of securities by major
classification at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------- -------------- ----------------
Cost Market Cost Market Cost Market
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Financial institutions
common stock and
debentures $ 3,323 $ 7,702 $ 5,825 $11,888 $10,567 $18,658
U.S. Treasury Notes 21,193 20,014 8,293 8,250 _ _
Repurchase Agreements _ _ 1,750 1,750 _ _
------ ------- ------- ------- ------- -------
$24,516 $27,716 $15,868 $21,888 $10,567 $18,658
------- ------- ------- ------- ------- -------
</TABLE>
In 1994, the Company sold 86,500 shares of First Financial
Holdings for a gain of $0.7 million, and sold $6.0 million of
Treasury Notes for a loss of $0.7 million. On January 1, 1994,
the Company adopted SFAS 115 and reports its marketable
securities at market value with unrealized gains and losses as a
separate component of shareholder's' equity. Changes in net
unrealized gains are recorded as adjustments to this account and
not as credits or charges to earnings.
4. Notes Receivable
Notes receivable at December 31 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
9% to 11.5% mortgage notes,
amortizing, balloon payments
due 1995-1996 $159 $ 195
10% mortgage notes, amortizing,
balloon payments due 1995 and
2002 782 863
---- ------
$941 $1,058
</TABLE>
At December 31, 1994, maturities of notes receivable were as
follows (in thousands):
<TABLE>
<S> <C>
1995 755
1996 36
1997 _
1998 _
1999 _
2000 and thereafter 150
---
$941
---
</TABLE>
The Company estimates that the fair value of its notes
receivable approximates their carrying value.
5. Borrowings and Assets Subject to Lien
Borrowings outstanding at December 31 were as follows (in
thousands):
<TABLE>
1994 1993
---- ----
<S> <C> <C>
Senior notes (a) $120,000 $ 120,000
Mortgage loan due to a pension
fund at fixed rates (b) 7,510 26,848
Mortgage loans due to a financial
corporation at variable rates (c) 10,325 10,325
Advances under unsecured lines of
credit (d) 57,600 _
Repurchase agreements 17,375 _
-------- --------
$212,810 $157,173
-------- -------
<FN>
(a) 6.625% unsecured notes, interest payable semi-annually,
principal installments of $40 million each due 1999, 2000, and 2001.
(b) Secured by Lakeridge Apartments at interest rate of 8.38%
with principal amortizing monthly and a balloon payment due in 2000.
(c) Secured by Claire Point Apartments at a variable rate of
75% of prime due in annual
installments in 1996 through 2000.
(d) Drawn on an unsecured $100.0 million line of credit bearing
interest at LIBOR + 0.65%, 6.65% at December 31, 1994, due
September 30, 1995.
</TABLE>
Maturities of borrowings at December 31 were as follows (in
thousands):
<TABLE>
<S> <C>
1995 75,043
1996 148
1997 279
1998 286
1999 and thereafter 137,054
-------
$212,810
-------
</TABLE>
6. Mineral Leases
The Company entered into a clay lease with Boral Bricks,
Inc. ("Boral") for a term of 40 years from January 1, 1981 to
December 31, 2020. Each year the royalty rate is adjusted for any
change in the Producer Price Index for Crude Materials Less
Agricultural Products. The royalty rate for 1994 was $.45 per ton
mined. The clay lease further provides that if the clay is
exhausted before December 31, 2020, and prior to 36 million tons
being mined, the Company is obligated to obtain other clay
deposits within 20 miles of the Augusta brick plant of Boral and
to subject such deposits to the clay lease. From 1981 through
1994, 7,711,200 tons of clay have been mined under the terms of
this lease. The Company also leases land in Richmond County,
Georgia, to a building materials firm which mines sand and gravel
on the tract.
7. Income Taxes
As discussed in Note 1, the Company has elected to be taxed
as a REIT. The Internal Revenue Code provides that a REIT, which
in any taxable year meets certain requirements and distributes to
its stockholders at least 95% of its ordinary taxable income,
will not be subject to federal income taxation on taxable income
which is distributed. The Company distributed the required
amounts of income for the periods reported. Accordingly, no
provision for income taxes is required.
The Company's taxable income differs from its income reported
in the accompanying financial statements because of the
difference in the timing of recognition of certain items of
income and expense for tax purposes. A reconciliation of tax and
book income follows:
<TABLE>
1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
Net income $36,985 $26,408 11,445
Adjustment of securities
to market value _ 457 (206)
Excess of tax over account-
ing depreciation (5,724) (9,847) (4,098)
Other (94) 218 (122)
------- ------- ------
Estimated taxable income $31,167 $17,236 $7,019
------- ------- ------
</TABLE>
8. Incentive Stock Option Plan
Under the Company's incentive stock option plan, at December
31, 1994, there were 5,000 shares available for grant and there
were 57,000 exercisable options outstanding. Options granted
under the plan expire ten years from date of grant and may not be
exercised at a rate greater than 20% per year. Shares under
option which subsequently expire or are canceled are available
for subsequent grant. The option price is equal to the market
price of the shares on the date of the option grants.
Options outstanding for the years ended December 31, 1994,
1993, and 1992, are as follows:
<TABLE>
<S> <C>
Balance, December 31, 1992 (at between $5.00 and $8.25 per share) 55,000
Issued (at between $16.63 and $18.75 per share) 125,000
Exercised (at between $5.00 and $8.25 per share) (25,000)
--------
Balance December 31, 1993 155,000
Issued (at between $17.50 and $20.88 per share) 400,000
Exercised (at $8.25 per share) (9,000)
--------
Balance December 31, 1994 (at between $8.25 and $20.88 per share) 546,000
</TABLE>
During 1993 and 1992, the Company loaned officers and
employees approximately $0.1 million and $0.3 million,
respectively, to exercise such options. The loans are secured by
the shares purchased, carry a 0% interest rate, and are due upon
demand. At December 31, 1994, the balance of such loans was $0.4
million.
During 1994, 1993 and 1992, the Company loaned officers and
employees $7.2 million, $2.0 million and $0.8 million
respectively, to purchase shares of the Company's common stock.
The terms of these loans are the same as for the loans to
exercise options, as discussed above. The Company requires that
at least two thirds of dividends paid on these notes be used to
repay the indebtedness. $0.5 million, $0.3 million and $0.1
million was repaid in 1994, 1993 and 1992. At December 31, 1994,
the balance of such loans was $9.3 million.
9. Employee Stock Ownership Plan
The Company maintains an Employee Stock Ownership Plan.
Under the plan, the Company makes annual contributions to a trust
for the benefit of eligible employees in the form of either cash
or common shares of the Company. The amount of the annual
contribution is discretionary. The Company contributed $0.5
million, $0.3 million and $0.2 million in 1994, 1993 and 1992. In
1993, the Company advanced the ESOP $1.4 million to buy 75,000
shares of common stock on the open market. The note bears an
interest rate equal to the thirty-day LIBOR rate and is due
November 30, 2000. At December 31, 1994, the balance of this note
was $0.7 million.
10. Preferred Stock
On November 1, 1994, the Company sold 4.0 million shares of
Series B Cumulative Convertible Preferred Stock for net
proceeds of $96.7 million. The Series B Preferred Stock was
sold in a private placement to a small group of institutional
investors. It has an annual dividend rate of $2.205 per year,
payable quarterly, and is convertible into common shares at a
conversion price of $21.04 per common share (equivalent to a
conversion rate of 1.188 shares of common stock for each share
of preferred). The Series B Preferred Stock may not be
redeemed for cash at any time, but may be redeemed by the
Company for common stock after October 31, 1999, provided the
Company's common shares are trading above the conversion price
of $21.04 per share. The shares were not registered under the
Securities Act of 1933, but the Company has agreed to register
them after April 2, 1995.
In 1993, the Company sold to the public 4.6 million shares of
Series A Cumulative Convertible Preferred Stock. The Series A
Preferred shares have a liquidation preference of $25.00 per
share and an annual dividend rate of $1.75 per year, payable
quarterly. The shares are convertible into common shares at any
time at the option of the holders at a conversion price of $18.65
per common share (equivalent to a conversion rate of 1.34 shares
of common stock for each share of preferred stock). On or after
June 30, 1998, the preferred shares will be redeemable for common
shares, at the option of the Company at a conversion rate of 1.34
shares of common stock for each share of preferred stock. At
December 31, 1994, 2,083,676 shares of Series A Preferred Stock
had been converted into 2,792,118 shares of common stock.
11. Dividends
In 1994, the Company paid dividends as follows:
<TABLE>
<CAPTION>
Common Preferred A Preferred B
------ ----------- -----------
<S> <C> <C> <C>
March 31 $.30 $.4375 $ _
June 30 .30 .4375 _
September 30 .30 .4375 _
December 31 $ .35 $ .4375 $.37
----- ------- ----
Total $1.25 $1.7500 $.37
</TABLE>
Of the total dividends paid in 1994, 99.1% related to
ordinary income and 0.9% related to capital gains. On January 16,
1995 the Company declared a $.35 per common share, $.4375
preferred A share, and $.55125 Preferred B share dividend payable
on March 31, 1995.
The Company has established a dividend reinvestment plan
whereby any shareholder may elect to use all or a portion of cash
dividends paid to acquire additional shares of the Company's
common stock at a price equal to 95% of the higher of: (a) the
high and low sales prices of the Company's common stock on the
dividend payment date, or (b) the average of the daily high and
low sales prices for the ten trading days prior to the dividend
payment date. During 1994, 194,227 shares were issued at a total
value of $3.9 million.
In December 1993 the Company established a Stock Purchase Plan
which provides holders of the Company's common stock and
preferred stock with a method of purchasing additional common
stock of the Company through optional cash payments without fees
and at a 5% discount. Optional cash payments are subject to the
limitation that the number of shares of common stock which can be
purchased cannot exceed the number of shares of common and
preferred stock owned by the shareholder. During 1994, 127,824
shares were issued for a total value of $2.5 million
12. Environmental Matters
Portions of the Company's land holdings in Richmond County,
Georgia were used by the County for two municipal landfills
during the late 1960's and early 1970's. One site is comprised
of 71 acres and the other, the "New Savannah Road Landfill",
96 acres. Both landfills were closed in the mid-1970's and
have been held by the Company and its predecessors as
unimproved land since that time. Although the sites were used
primarily as municipal landfills, there have been reports that
some industrial wastes may have been disposed of at the sites.
In 1992, a contractor for the U.S. Environmental Protection
Agency sampled air, surface water, soil and groundwater on the
New Savannah Road landfill in order to determine whether there
was any contamination on the site and whether the site should
be placed on the federal National Priorities List for
potential clean up. In October 1992, the EPA issued a report
which indicated that some contamination was present in soil
samples but that sufficient groundwater samples had not been
taken to permit a complete evaluation of the site.
Accordingly, the report recommended that further action be
taken which the Company believes would consist principally of
additional testing of the site's groundwater and surface
water. The Company has had no further contact with the EPA or
its agents since that time and the site has not been included
on the National Priorities List.
Following the EPA's 1992 study, Merry Land retained an
environmental consultant to conduct similar scientific studies
of both sites The consultant reported that its study of the
sites did not reveal the presence on either site of
contaminants in amounts likely to result in the EPA listing
either site on the NPL. After receiving the EPA's report, the
Company's consultant also reviewed the EPA contractor's test
results and confirmed its prior conclusions that the level of
contamination discovered on the New Savannah Road landfill is
not likely to result in the EPA listing this site on the NPL.
However, the studies were limited in nature and did not
represent an examination of all portions of the landfill
sites. There can be no assurance that a more complete
investigation, or further testing would not reveal higher
levels or different types of contamination at the sites.
On July 1, 1994, the Environmental Protection Division of
the State of Georgia published its initial hazardous site
inventory under the state's 1992 "Superfund" law, which
requires investigation, and if appropriate, clean up of listed
sites. The New Savannah Road landfill was included on this
list in a category of sites identified as having released
hazardous substances above reportable levels. The Company and
its environmental consultants have evaluated the action by the
State and have initiated discussions with the State of Georgia
to determine whether it is appropriate for the New Savannah
Road Landfill site to be included on this list.
Should further investigation or remedial action be required for
the landfill sites, the Company believes that there will likely
be other entities which will be responsible for a portion of the
cost of the investigation or remediation. These entities include
Richmond County, which operated the landfills, any identified
company or municipality whose waste was placed in the landfills,
and the company that owned the sites at the time of the disposal
of the waste. In the third quarter of 1994, the Company
recognized a non-recurring charge against income of $0.2 million
associated with this matter. This is the amount which the Company
believes to be the potential cost of its share of any expenses
which may be incurred if further investigation of the New
Savannah Road Landfill is required as a result of the action by
the State of Georgia. There can be no assurance that the Company
will not have material liability with respect to these landfill
sites.
<PAGE>
Part II
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Part III
Item 10 - Directors and Executive Officers of the Registrant
Incorporated by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange
Commission.
Item 11 - Executive Compensation
Incorporated by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange
Commission.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange
Commission.
Item 13 - Certain Relationships and Related Transactions
Incorporated by reference to the Company's definitive proxy
statement
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Merry Land & Investment Company, Inc.
We have audited in accordance with generally accepted
auditing standards, the financial statements included in this
Form 10-K, and have issued our report thereon dated January 13,
1995. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedules listed in Item
14 are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
January 13, 1995
<PAGE>
PART IV
Item 14-Schedule XI - Real Estate and Accumulated Depreciation
for the Year Ending December 31, 1994:
<TABLE>
<CAPTION>
Initial Cost Cost Capi- Gross Amount which Carried
to Company talized at December 31, 1994
---------------------- --------------------------
En- Subsequent Accumulated
cum- to Deprecia-
bran- Buildings & Acquisition Buildings & Total ion Date of Date
ces Land Improvements Improvements Land Improvements (a) (a) Constr. Acquired
--- ---------- ------------ ------------ ---------- ------------ ----------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. $1,500,000 $12,712,085 $ 331,219 $1,500,000 $13,043,304 $14,543,304 $249,679 1987 1994
2. 3,576,000 15,671,192 751,084 3,576,000 16,422,276 19,998,276 686,808 1990 1993
3. 1,110,000 6,330,825 669,362 1,110,000 7,000,187 8,110,187 366,335 1988 1993
4. 3,840,000 17,219,224 1,123,689 3,840,000 18,342,913 22,182,913 854,830 1991 1993
5. 1,580,000 10,983,800 587,259 1,580,000 11,571,059 13,151,059 503,841 1988 1993
6. 2,120,000 13,195,900 563,670 2,120,000 13,759,570 15,879,570 600,231 1988 1993
7. 805,550 7,166,331 660,286 805,550 7,826,617 8,632,167 1,247,721 1982 1990
8. 1,503,000 13,553,192 84,725 1,503,000 13,637,917 15,140,917 33,834 1989 1994
9. 2,592,000 13,375,363 435,033 2,592,000 13,810,396 16,402,396 527,920 1991 1993
10. 65,000 259,675 1,487,951 65,000 1,747,626 1,812,626 431,083 1918(b) 1983
11. 954,000 9,083,755 61,552 954,000 9,145,307 10,099,307 22,557 1988 1994
12. 1,134,000 10,158,363 69,564 1,134,000 10,227,927 11,361,927 25,316 1987 1994
13. 700,000 5,620,292 708,616 700,000 6,328,908 7,028,908 1,357,002 1986 1990
14. (e) 2,048,000 9,710,500 228,942 2,048,000 9,939,442 11,987,442 321,868 1986 1993
15. 891,000 10,883,905 67,793 891,000 10,951,698 11,842,698 26,678 1984 1994
16. 1,500,000 16,142,858 380,049 1,500,000 16,522,907 18,022,907 654,695 1991 1993
17. 1,936,000 7,939,000 975,229 1,936,000 8,914,229 10,850,229 295,404 1987 1993
18. 1,200,000 9,985,256 537,456 1,200,000 10,522,712 11,722,712 754,743 1989 1992
19. 635,000 2,901,168 0 635,000 2,901,168 3,536,168 0 1986 1994
20. 1,630,000 12,880,863 643,752 1,630,000 13,524,615 15,154,615 676,972 1990 1993
21. 1,008,000 5,133,133 816,350 1,008,000 5,949,483 6,957,483 301,779 1983 1993
22. 1,629,000 15,936,411 104,316 1,629,000 16,040,727 17,669,727 39,567 1987 1994
23. 1,260,000 8,584,736 51,061 1,260,000 8,635,797 9,895,797 21,767 1984 1994
24. 1,440,000 6,210,000 434,464 1,440,000 6,644,464 8,084,464 243,072 1985 1993
25. 325,000 6,001,731 688,991 325,000 6,690,722 7,015,722 1,457,078 1983 1986
26. 942,000 8,318,075 562,227 942,000 8,880,302 9,822,302 683,251 1990 1992
27. 752,000 9,759,351 431,336 752,000 10,190,687 10,942,687 778,801 1986 1992
28. 480,000 5,917,041 372,302 480,000 6,289,343 6,769,343 741,813 1985 1991
29. 1,323,000 12,864,616 73,785 1,323,000 12,938,401 14,261,401 31,855 1984 1994
30. 450,000 5,256,127 644,333 450,000 5,900,460 6,350,460 743,224 1987 1991
31. 990,000 9,016,445 554,202 990,000 9,570,647 10,560,647 665,566 1990 1992
32. 1,098,000 12,703,582 82,656 1,098,000 12,786,238 13,884,238 31,277 1987 1994
33. 485,100 4,371,125 249,484 485,100 4,620,609 5,105,709 327,887 1986 1992
34. 1,058,975 8,096,736 875,519 1,058,975 8,972,255 10,031,230 1,107,654 1984 1989(c)
35. (d) 2,100,000 9,600,000 137,214 2,100,000 9,737,214 11,837,214 328,467 1991 1993
36. 1,314,000 9,978,363 8,378 1,314,000 9,986,741 11,300,741 25,069 1986 1994
37. 5,760,000 24,320,449 711,994 5,760,000 25,032,443 30,792,443 912,968 1990 1993
38. 2,016,000 8,518,000 390,141 2,016,000 8,908,141 10,924,141 309,915 1988 1993
39. 2,240,000 11,960,000 358,646 2,240,000 12,318,646 14,558,646 430,591 1988 1993
40. 351,001 4,159,438 855,985 351,001 5,015,423 5,366,424 992,263 1986 1986
41. 329,786 6,649,280 838,869 329,786 7,488,149 7,817,935 1,554,410 1983 1986
42. 2,432,000 14,107,966 313,203 2,432,000 14,421,169 16,853,169 577,613 1991 1993
43. 720,000 7,959,871 1,487,707 720,000 9,447,578 10,167,578 1,024,823 1984 1991
44. 1,640,000 12,945,374 488,627 1,640,000 13,434,001 15,074,001 545,693 1991 1993
45. 864,000 5,252,025 1,989,971 864,000 7,241,996 8,105,996 473,447 1984 1992
46. 2,171,000 18,535,275 137,645 2,171,000 18,672,920 20,843,920 90,878 1994 1994
47. 580,000 8,216,250 608,793 580,000 8,825,043 9,405,043 1,096,359 1986 1989
48. 1,988,000 9,663,149 577,378 1,988,000 10,240,527 12,228,527 485,259 1991 1993
49. 960,000 4,937,213 250,017 960,000 5,187,230 6,147,230 237,340 1986 1993
50. 1,530,000 18,062,088 59,204 1,530,000 18,121,292 19,651,292 44,237 1987 1994
51. 1,140,000 8,397,085 146,419 1,140,000 8,543,504 9,683,504 162,197 1989 1994
52. 360,000 4,235,504 753,954 360,000 4,989,458 5,349,458 927,065 1983 1990
53. 194,375 1,135,112 331,291 194,375 1,466,403 1,660,778 488,866 1950 1982
54. 1,536,000 13,614,751 1,045,671 1,536,000 14,660,422 16,196,422 1,059,635 1986 1992
55. 1,111,500 7,671,643 47,204 1,111,500 7,718,847 8,830,347 19,454 1986 1994
56. 411,500 6,891,173 712,234 411,500 7,603,407 8,014,907 1,615,666 1985 1985
57. 500,000 4,571,011 758,696 500,000 5,329,707 5,829,707 411,049 1986 1992
58. 800,000 5,214,004 394,207 800,000 5,608,211 6,408,211 691,425 1986 1991
59. 1,988,000 9,833,825 770,227 1,988,000 10,604,052 12,592,052 525,730 1987 1993
60. 1,520,000 9,414,575 122,465 1,520,000 9,537,040 11,057,040 152,985 1989 1994
61. 960,000 11,022,351 382,866 960,000 11,405,217 12,365,217 788,034 1991 1992
62. 3,024,000 15,027,450 893,585 3,024,000 15,921,035 18,945,035 779,061 1988 1993
63. 1,888,000 10,950,825 175,622 1,888,000 11,126,447 13,014,447 137,892 1989 1994
64. 448,000 6,490,069 705,563 448,000 7,195,632 7,643,632 1,151,954 1985 1988
65. 3,648,000 13,152,000 1,229,304 3,648,000 14,381,304 18,029,304 484,270 1991 1993
66. 960,000 5,597,500 428,900 960,000 6,026,400 6,986,400 275,528 1985 1993
67. 1,120,000 6,088,097 409,539 1,120,000 6,497,636 7,617,636 293,064 1985 1993
68. 1,224,000 9,971,854 64,391 1,224,000 10,036,245 11,260,245 24,976 1982 1994
69. 377,500 6,195,990 1,180,779 377,500 7,376,769 7,754,269 989,714 1984 198
70. 73,163 _ 8,149,511 73,163 8,149,511 8,222,674 2,046,663 1982 1983
71. 125,000 1,076,646 277,055 125,000 1,353,701 1,478,701 491,848 1975 1982
72. 138,399 626,133 845,841 138,399 1,471,974 1,610,373 389,773 various various
-------------- ----------- ---------- ----------- ----------- ----------- ----------
73. 95,103,849 655,984,994 45,347,354 95,103,849 701,332,348 796,436,197 39,848,289
-------------- ----------- ---------- ----------- ----------- ----------- ----------
74. 791,726 3,089,125 2,158,391 791,726 5,247,516 6,039,242 1,484,809 various various
75. 8,105,583 - 23,360 8,105,583 23,360 8,128,943 -
76. 3,381,281 - - 3,831,281 - 3,831,281 29,526
77. $107,832,439 $659,074,119 $47,529,105 $107,832,439 $706,603,224 $814,435,66 $41,362,624
============ ============ =========== ============ ============ =========== ===========
<FN>
1. Adams Farm 20. Cypress Cove 39. Lofton Place 59. Timberwalk
2. Audubon Village 21. Deerbrook 40. Magnolia Villa 60. Village at Indigo
3. Augustine Club 22. Duraleigh Woods 41. Marsh Cove 61. Viridian Lake
4. Auvers Village 23. English Hills 43. Mission Bay 62. Waterford
5. Belmont Crossing 24. Falls 44. Misty Woods 63. Waterford Village
6. Belmont Landing 25. Greentree 45. Princeton Square 64. Waters Edge
7. Berkshire Place 26. Gwinnett Crossing 46. Promenade 65. Waterford Village
8. Bermuda Cove 27. Harvest Grove 47. Quarterdeck 66. West Wind Landing
9. Bishop Park 28. Haywood Pointe 48. Royal Oaks 67. Willow Trail
10. Broadway 29. Hickory Creek 49. Sailboat Bay 68. Windridge
11. Champions' Club 30. Hollows 50. Saw Mill Village 69. Windsor Place
12. Champions' Park 31. Hunt Club 51. Shadow Lake 70. Woodcrest
13. Chatham Wood 32. Hunter's Chase 52. Sommerset Place 71. Woodknoll
14. Clarie Pointe 33. Huntington 53. South Augusta 72. Miscellaneous
15. Clary's Crossing 34. Lake Point 54. Spicewood Springs 73. Total Residential
16. Colony Place 35. Lakeridge 55. Steeple Chase 74. Commercial
17. Conway Station 36. Landings 56. Summit Place 75. Development in Progress
18. Copper Terrace 37. Lexington Glen 57. Sweetwater Glen 76. Land
19. Crystal Springs 38. Lexington Park 58. Timber Hollow 77. Total
<FN>
Notes:
(a) Reconciliations of total real estate carrying value and
accumulated depreciation for the years ending December 31, 1994,
1993 and 1992 are as follows:
</TABLE>
<TABLE>
<CAPTION>
Real Estate Accumulated Depreciation
----------------------------------------------------------------
1994 1993 1992 1994 1993 1992
------------ ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $564,519,670 $220,185,267 $131,975,669 $23,479,723 $14,476,598 $10,403,642
Additions- acquisitions and
improvements 250,201,373 345,127,045 89,015,987 17,904,287 9,065,625 4,156,451
Deductions- cost of real estate
sold 285,380 792,642 806,389 21,386 62,500 83,495
----------- ------------ ------------ ----------- ----------- -----------
Balance at end of period $814,435,663 $564,519,670 $220,185,267 $41,362,624 $23,479,723 $14,476,598
<FN>
(b) This property was substantially renovated by the Company
following acquisition.
(c) Additional apartment units acquired in 1992.
(d) This property secures a term loan. At December 31, 1994, $7,509,734 was outstanding.
(e) This property secures a term loan. At December 31, 1994, $9,950,000 was outstanding.
</TABLE>
<PAGE>
Part IV
Item 14 _ Schedule XII _ Mortgage Loans on Real Estate at December 31, 1994
[CAPTION]
<TABLE>
Face
Interest Final Amount Carrying Delinquent
Descriptions Rate Maturity Payment Terms Mortgages Amount Amount
--------- -------- ------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Duplexes-
Augusta, Georgia 10% 1995 Monthly $695,000 $632,020 -
amortizing
with $632,000
balloon; no
prepayment
penalty
Duplexes
Augusta, Georgia 10% 2002 Monthly 327,600 150,444 -
amortizing with amortizing
with $20,119 _
balloon; no
prepayment
Condominiums-Augusta, penalty
Georgia (varying
principal amounts
of $20,700-
$66,100) 9%-11% Various Dates Monthly 193,250 158,708 -
through 1996 amortizing
with varying
balloon
payments; no
prepayment
penalties
--------- --------
$1,215,850 $941,172
<FN>
(a) Reconciliation of total carrying amounts of mortgage loans for the years ended December 31:
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
--------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $1,057,514 $ 6,970,197 $6,971,673
New mortgage loans _ _ 327,600
Collections of principal (122,595) (5,926,039) (341,099)
Amortization of discount 6,253 13,356 12,023
-------- ---------- ----------
Balance at end of period $941,172 $1,057,514 $6,970,197
</TABLE> ========= ========== =========
<PAGE>
Part IV
Item 14 _ Exhibit II _ Computation of Per Share Earnings
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Net income $36,984,527 $26,407,900 $11,445,355
Preferred dividend requirement 7,933,704 4,025,000 _
----------- ----------- -----------
Net income available for common $29,050,823 $22,382,900 $11,445,355
=========== =========== ===========
Average common shares outstanding 26,430,241 17,268,064 10,651,754
Primary earnings per share average $1.10 $1.30 $1.07
========== ========== ==========
FULLY DILUTED:
Net income $36,984,527 $26,407,900 $11,445,355
Conversion of preferred shares 6,132,041 3,113,330 _
Average common shares outstanding 26,430,241 17,268,064 10,667,021
Conversion of debentures - - 101,594
--------- ----------- ----------
Average fully diluted common shares
outstanding 32,562,282 20,381,394 10,768,615
========== ========== ==========
Fully diluted earnings per share $1.10 $1.30 $1.07
========== ========= ==========
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K into the
Company's previously filed Registration Statement File Nos. 33-
68172 and 33-56431.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
ATLANTA, GEORGIA
March 6, 1995
<PAGE>
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
a) FINANCIAL STATEMENTS. The following schedule lists the
financial statements filed as part of this report:
Report of Independent Public Accountants
Balance Sheets
Statements of Income
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Reconciliation of Net Income to Cash Flows
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES. The following schedule lists
the financial statement schedules required to be filed by Item 8
and Item 14(d) of Form 10K:
Real Estate and Accumulated Depreciation
Mortgage Loans on Real Estate at December 31, 1994
Report of Independent Public Accountants on Schedules
3. Exhibits. The following schedule lists the exhibits required
to be filed by Item 601 of Regulation S-K and Item 14(c) of
Form 10-K:
(3.i) Articles of Incorporation (Incorporated herein by reference
to Exhibit 3(i) of Item 14 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993
and to Exhibit 1 of Item 7 of the Company's current
report on Form 8-K/A filed on January 25, 1995)
(3.ii) By-laws (Incorporated herein by reference to Exhibit
3(ii) of Item 14 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1993)
(10.1) Material Contracts
(10.1.1) $100.0 Million Revolving Credit Agreement between
First Union National Bank of Georgia and the Company
(Incorporated herein by reference to Exhibit 10.i of
Item 6 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993)
(10.1.2) $120.0 million 6.625% Senior Notes/Notes Purchase
Agreement (Incorporated herein by reference to
Exhibit 10.ii of Item 6 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993)
(10.2) Compensation Plans
(10.2.1) 1993 Incentive Stock Option Plan (Incorporated
herein by reference to Exhibit (10.2.1) of Item 14 of
the Company's Annual Report on Form 10-K for the
year ended December 31, 1993)
(10.2.2) Executive Officer Restricted Stock Loan Plan, as
amended (Incorporated herein by reference to
Exhibit (10.2.2) of Item 14 of the Company's Annual
Report on Form 10-K for the year ended December 31,
1993)
(10.2.3) Employee Stock Ownership Plan and Trust
Agreement (Incorporated herein by reference to Exhibit (10.2.3) of
Item 14 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1993)
(10.2.4) The 1994 Stock Option and Incentive Plan
(Incorporated herein by reference to Exhibit (10.2.4)
of Item 14 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1993)
(11) Statement re computation of per share earnings
(12) Statement re computation of ratios.
(23) Consent of Arthur Andersen LLP
(27) Financial Data Schedules
b) Reports on Form 8-K. The registrant filed reports on
Form 8-K/A and Form 8-K during the last quarter of 1994 as
follows with respect to the following matters.
<TABLE>
<CAPTION>
Financial
Form Matter Date Filed Statements
---- ------ ---------- -----------
<S> <C> <C> <C>
8-K Private Placement of November 3, 1994 n/a
Series B Preferred
Stock
8-K/A Acquisition of
Portfolio of December 2, 1994 *
Twelve Apartments
Communities*
(FN>
* First reported on Form 8-K filed on August 15, 1994 and as
previously amended on Form 8-K/A filed on September 27, 1994 with
respect to the financial statements for this acquisition. These financial
statements have been updated in a Form 8-K/A filed on February 7, 1995.
</TABLE>
a) THE EXHIBITS listed in paragraph a(3) above are filed
herewith.
b) THE SCHEDULES listed in paragraph a(2) above are filed
herewith.
<PAGE>
Part III
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,
MERRY LAND & INVESTMENT COMPANY, INC.
(Registrant)
/s/ W. Tennent Houston
- - ------------------
W. Tennent Houston - President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
/s/Peter S. Knox III 3/6/95 /s/W. Tennent Houston 3/6/95
- - -------------------- ------ --------------------- -------
Peter S. Knox, III Date W. Tennent Houston Date
Chairman of the Houston - President
Board and Director Chief Financial Officer,
of the Board and Director and Director
/s/W. Hale Barrett 3/6/95 /s/Pierce Merry, Jr. 3/6/95
- - ------------------ ------ -------------------- --------
W. Hale Barrett - Date Pierce Merry, Jr. Date
Secretary
/s/Hugh C. Long II 3/6/95 /s/Ronald J. Benton 3/6/95
- - ------------------ ------ ------------------- ---------
Hugh C. Long II - Date Ronald J. Benton - Date
Director Vice President and
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 718
<SECURITIES> 27,716
<RECEIVABLES> 4,789
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,504
<PP&E> 815,306
<DEPRECIATION> 41,874
<TOTAL-ASSETS> 806,655
<CURRENT-LIABILITIES> 8,944
<BONDS> 0
<COMMON> 30,744
0
162,908
<OTHER-SE> 391,199
<TOTAL-LIABILITY-AND-EQUITY> 806,655
<SALES> 103,169
<TOTAL-REVENUES> 106,108
<CGS> 56,149
<TOTAL-COSTS> 56,149
<OTHER-EXPENSES> 2,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,394
<INCOME-PRETAX> 36,985
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,985
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,985
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
