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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
June 30, 1996
MERRY LAND & INVESTMENT COMPANY, INC.
P.O. Box 1417
Augusta, Georgia 30903
706 722-6756
Commission file number: 001-11081
State of Incorporation: Georgia
I.R.S. Employer Identification Number: 58-0961876
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
<S> <S>
Common Stock, no par value New York Stock Exchange
$1.75 Series A Cumulative Convertible Preferred Stock New York Stock Exchange
$2.15 Series C Cumulative Convertible Preferred Stock New York Stock Exchange
</TABLE>
Number of shares outstanding as of June 30, 1996:
Common Stock 36,802,000
Series A Preferred Stock 630,102
Series C Preferred Stock 4,599,800
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 (or for such shorter time as required),
and (2) has been subject to such filing requirements for the past ninety
days: Yes X . No .
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Balance sheets - June 30, 1996 and December 31, 1995
Statements of income - Three months ended June 30, 1996 and 1995 and six
months ended June 30, 1996 and 1995
Statements of cash flows - Six months ended June 30, 1996 and 1995
Notes to consolidated financial statements
Item 2.Managements Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1- Financial Statements
Merry Land & Investment Company, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
-------------- --------------
<TABLE>
<CAPTION>
<S> <C> <C>
PROPERTIES AT COST
Apartments $1,085,366,493 $1,009,056,178
Apartments under development 34,381,995 20,942,118
Commercial rental property 6,709,667 6,412,275
Land held for investment or future development 4,089,470 3,815,405
Operating equipment 1,661,423 1,397,410
------------- -------------
1,132,209,048 1,041,623,386
Less accumulated depreciation and depletion (84,732,137) (68,347,362)
------------- -------------
1,047,476,911 973,276,024
CASH AND SECURITIES
Cash and cash equivalents 27,193,420 43,833,846
Marketable securities 51,231,097 48,467,978
------------- ------------
78,424,517 92,301,824
OTHER ASSETS
Notes receivable 803,192 815,689
Deferred loan costs 3,781,371 4,022,226
Other 3,750,719 2,423,981
------------ ------------
8,335,282 7,261,896
------------- --------------
TOTAL ASSETS $1,134,236,711 $1,072,839,744
------------- -------------
DEBT
7.75% Mortgage note, due 2002 $ 9,600,000 $ -
6.625% Senior unsecured notes, due 1999-2001 120,000,000 120,000,000
7.25% Senior unsecured notes, due 2002 40,000,000 40,000,000
6.875% Senior unsecured notes, due 2003 40,000,000 40,000,000
6.875% Senior unsecured notes, due 2004 40,000,000 40,000,000
7.25% Senior unsecured notes, due 2005 120,000,000 120,000,000
-------------- ------------
369,600,000 360,000,000
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 4,015,833 4,294,768
Resident security deposits 2,122,496 2,577,913
Accrued property taxes 9,482,868 4,294,312
Other 4,174,930 5,814,021
------------- ------------
19,796,128 16,981,014
STOCKHOLDERS' EQUITY
Preferred stock, at $25 liquidation preference, 20,000,000 shares authorized:
630,102 shares $1.75 Series A Cumulative
Convertible 15,752,550 16,688,000
4,000,000 shares $2.205 Series B Cumulative
Convertible 100,000,000 100,000,000
4,599,800 shares, $2.15 Series C Cumulative
Convertible 114,995,000 114,995,000
Common stock, at $1 stated value, 100,000,000
shares authorized
36,802,000 and 33,876,102 shares issued 36,802,000 33,876,102
Capital surplus 482,191,721 425,610,937
Cumulative undistributed net earnings 6,408,843 11,786,179
Notes receivable from stockholders and ESOP (16,715,044) (15,795,762)
Unrealized gain on securities 5,405,512 8,698,274
------------ ------------
744,840,583 695,858,730
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY $1,134,236,711 $1,072,839,744
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1- Financial Statements
Merry Land & Investment Company, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended June 30, Six months ended June
--------------------------- --------------------
1996 1995 1996 1995
------ ------ ----- ------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Rental income $43,489,075 $34,108,113 $85,052,573 $66,990,375
Mineral royalties 83,614 96,222 173,204 204,255
Mortgage interest 14,966 19,558 38,605 39,324
Other interest 278,241 871,777 1,005,330 1,415,950
Dividends 1,030,642 270,821 1,930,059 338,217
Other income 1,410,873 - 2,633,926 139,772
---------- ---------- ---------- ----------
46,307,411 35,366,491 90,833,697 69,127,894
Rental expense 12,000,071 9,272,489 23,238,912 18,408,995
Interest 5,639,414 2,322,070 11,431,123 5,299,152
Depreciation-real estate 8,463,670 6,090,293 16,265,712 11,982,395
Depreciation-other 64,988 43,438 129,976 84,729
Amortization-financing
costs 142,383 86,996 284,766 173,991
Taxes and insurance 4,445,267 3,297,200 9,246,772 6,543,675
General and administrative
expense 674,348 402,793 1,268,776 912,650
Other non-recurring expense - (200,000) - (200,000)
---------- ---------- --------- -----------
31,430,141 21,315,279 61,866,037 43,205,587
Income before net realized
gains 14,877,271 14,051,212 28,967,661 25,922,307
Net realized gains 1,256,674 48,576 1,714,824 97,012
---------- ---------- ---------- ----------
NET INCOME 16,133,945 14,099,788 30,682,485 26,019,319
Dividends to preferred
shareholders 4,953,062 5,104,753 9,918,706 8,178,919
NET INCOME AVAILABLE
FOR COMMON SHARES $11,180,883 $8,995,035 $20,763,779 $17,840,400
----------- ---------- ------------ -----------
Weighted average common shares
- outstanding 34,623,510 33,249,163 34,265,434 32,986,093
- fully diluted 45,445,221 44,273,817 45,106,412 41,763,750
NET INCOME PER COMMON SHARE $.33 $.27 $.61 $.54
---- ---- ---- ----
CASH DIVIDENDS DECLARED
PER COMMON SHARE $.37 $.35 $.74 $.70
---- ---- ---- ----
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Form 10-Q - Part I.
Financial Information
Item 1-Financial Statements
Merry Land & Investment Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months ended June 30,
-------------------------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
OPERATING ACTIVITIES:
Rents and royalties received $85,225,777 $67,213,13
Interest received 1,231,498 1,199,020
Dividends received 1,792,864 338,217
Rental expense (24,240,767) (18,319,983)
General and administrative expense (1,702,379) (1,162,479)
Interest expense (11,710,058) (5,342,606)
Property taxes and insurance expense (4,778,724) (1,826,110)
Other (452,138) 75,366
------------ ----------
Net cash provided by operating activities: 45,366,073 42,174,564
INVESTING ACTIVITIES:
Principal received on notes receivable 8,497 112,705
Sale of securities 6,266,529 12,523,563
Purchase of securities (8,031,253) (21,006,670)
Sale of real property (190,837) -
Purchase of real property (61,037,298) (72,683,377)
Development of real property (22,290,614) (1,099,306)
Recurring capital expenditures (2,864,347) (1,320,105)
Improvements to existing properties (3,898,743) (4,594,686)
Other (1,160,563) (3,792,675)
----------- -----------
Net cash (used) by operating activities (93,198,629) (91,860,551)
FINANCING ACTIVITIES:
Net borrowings (repayments) - bank debt - 120,000,000
Net borrowings(repayments)-mortgage loan s 9,600,000 (57,632,689)
Repurchase agreements - (17,375,000)
Cash dividends paid - common (26,141,115) (23,124,571)
Cash dividends paid - preferred, Series A (563,921) (829,647)
Cash dividends paid - preferred, Series B (4,410,000) (4,410,000)
Cash dividends paid - preferred, Series C (4,944,785) (2,939,272)
Common stock retired (675,250) (18,816)
Sale of common stock-reinvested dividends 4,240,090 4,217,206
Sale of common stock-stock purchase plan 2,277,231 1,150,934
Sale of common stock - employees 987,129 401,638
Sale of common stock - public offering 50,847,839 -
Sale of preferred stock - public offering (25,088) 109,795,290
Net cash provided (used) by financing ------------ -----------
activities 31,192,130 129,235,073
------------ -----------
NET INCREASE (DECREASE) IN CASH (16,640,426) 79,549,087
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 43,833,846 717,957
---------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $27,193,420 $80,267,044
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1-Financial Statements
Merry Land & Investment Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Reconciliation of Net Income to Cash Flows from Operating Activities
(Unaudited)
Six Months ended June 30,
-------------------------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Net income $30,682,485 $26,019,319
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,680,454 12,241,115
(Increase)decrease in interest and accounts receivable 992,146 (210,630)
(Increase) decrease in other assets (1,194,835) (3,703,970)
Increase (decrease) in accounts payable and
accrued interest (79,353) 7,925,742
Gain on the sale of marketable securities (1,657,230) (97,012)
Gain on the sale of real property (57,594) -
------------ ------------
Net cash provided by operating activities $45,366,073 $42,174,564
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Merry Land & Investment Company, Inc.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. Nature of Business
Merry Land & Investment Company, Inc. is a real estate investment trust
(REIT), which owns and operates upscale apartment communities in eight
Southern states including Florida, Georgia, Maryland, North Carolina, South
Carolina, Tennessee, Texas and Virginia and also in Ohio. As a qualified REIT
the Company pays no corporate income taxes on earnings distributed to
stockholders. The consolidated financial statements for the six month periods
ended June 30, 1996 and June 30, 1995 reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim period.
2. Marketable Securities
The cost and market value of securities by major classification at June
30, 1996 were as follows:
Unrealized
Cost Market Gain
----- ------ ----------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common stock $43,919,835 $48,780,847 $4,861,012
Corporate debentures 1,905,750 2,450,250 544,500
----------- ---------- ---------
$45,825,585 $51,231,097 $5,405,512
----------- ----------- ---------
</TABLE>
3. Borrowings
Borrowings at June 30, 1996 were as follows:
7.75% mortgage note (a) $ 9,600,000
6.625% senior unsecured notes (b) 120,000,000
7.25% senior unsecured notes (c) 40,000,000
6.875% senior unsecured notes (d) 40,000,000
6.875% senior unsecured notes (e) 40,000,000
7.25% senior unsecured notes (f) 120,000,000
Advances under unsecured line of credit (g) --
------------
$369,600,000
- -----------
(a)$9.6 million, 7.75% mortgage note, interest payable monthly, maturity 2002.
(b)$120 million, 6.625% notes, interest payable semi-annually, principal
installments of $40 million each due 1999, 2000, and 2001.
(c)$40 million, 7.25% notes, interest payable semi-annually, maturity 2002.
(d)$40 million, 6.875% notes, interest payable semi-annually, maturity 2003.
(e)$40 million, 6.875% notes, interest payable semi-annually, maturity 2004.
(f)$120 million, 7.25% notes, interest payable semi-annually, maturity 2005.
(g)$100 million line of credit, bearing interest equal to LIBOR plus 0.65%,
maturity June 1997.
The Company estimates that the fair value of borrowings approximates their
carrying value at June 30, 1996. Maturities of borrowings at June 30 were as
follows:
1996 $ -
1997 -
1998 -
1999 40,000,000
2000 40,000,000
2001 40,000,000
2002 49,600,000
2003 40,000,000
2004 40,000,000
2005 120,000,000
-------------
$369,600,000
-------------
On November 30, 1995 the Company defeased $17.4 million of mortgage debt by
transferring government securities totaling $17.9 million to a trust account
with First Union National Bank. The mortgage debt defeased was secured by the
Claire Point and Lakeridge communities. The encumbrance covering the Claire
Point community was removed effective February 1, 1996 upon repayment of the
mortgage debt by the trust. The encumbrance against the Lakeridge community
was removed upon repayment of the mortgage debt by the trust in July 1996.
4. Income Taxes and Dividend Policy
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 intends to distribute the
required amounts of income in 1996 to qualify as a REIT and to avoid paying
income taxes. On June 28, 1996, the Company paid dividends per share as
follows:
Series A Preferred $.43750
Series B Preferred $.55125
Series C Preferred $.53750
Common $.37000
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(Dollars in thousands except apartment and per share data)
Overview
Merry Land & Investment Company, Inc. is one of the largest publicly
owned real estate investment trusts in the United States and is one of the
nation s largest owners and operators of upscale garden apartments. At June
30, 1996 the Company had a total equity market capitalization of $1.0 billion
and owned a high quality portfolio of 84 apartment communities containing
23,424 units, having an aggregate cost of $1.1 billion.
Substantially all of the Company s apartment communities command rental
rates in the upper range of their markets. The communities are geographically
diversified, located in twenty-seven metropolitan areas primarily in the
Southern United States, each with a population in excess of 250,000, extending
from the Washington D.C. area to Texas and to Florida. The Company expects
eventually to own and operate a significant number of communities in most of
the major markets in the Southern United States. The following table further
describes the Company s apartment holdings by major market as of June 30,
1996:
Average June Average
Occupancy(1) Rental Rate(2)
% of ------------ -------------
Market Units Cost Total Cost 1996 1995 1996 1995
- ------ ----- -------- ---------- ---- ---- ---- ----
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta 3,346 $139,039 13% 96% 98% $640 $602
Dallas 1,830 117,745 11 89 - 839 -
Jacksonville 2,550 105,216 10 96 97 613 578
Orlando 1,902 90,800 8 93 90 658 631
Tampa 1,449 64,159 6 94 96 647 626
Ft. Myers 1,268 63,750 6 94 97 656 630
Ft. Lauderdale 992 62,653 6 89 94 837 826
Austin 947 61,458 6 88 - 865 -
Charlotte 1,623 58,826 5 94 95 580 561
Raleigh 1,256 47,284 4 94 96 601 578
Charleston 880 33,393 3 90 93 533 513
Savannah 865 32,879 3 96 98 605 578
All others 4,516 208,164 19 92 93 632 609
------ --------- --- --- --- ---- ----
23,424 $1,085,366 100% 93% 95% $660 $609
- -----------
(1)Represents the average of 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 June month end.
Portfolio Growth
Merry Land seeks to expand its apartment holdings in order to establish
a presence recognized by renters throughout the Southern United States. The
Company adds to its holdings by buying existing apartment communities, by
buying communities under construction and in the initial lease-up stage
(primarily from merchant builders), and by developing communities from the
ground up. From 1984 until April 1996, all portfolio growth occurred through
acquisitions. In the second quarter of 1996, the first 120 units of the
Company s new development program were delivered.
Acquisitions. The following table describes the growth of the Company s
apartment holdings through acquisitions in recent years:
Units Ending Cost of Ending
Acquired Units Increase Acquisitions Cost (1) Increase
-------- ----- ------- ------------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1992 2,845 6,529 76% $ 86,081 $ 209,694 73%
1993 7,452 13,981 114 335,213 554,589 164
1994 4,872 18,852 35 226,174 796,436 44
1995 3,444 22,296 18 196,275 1,009,056 27
1996,
through June 30 1,009 23,424(2) 5 60,551 1,085,366(2) 8
</TABLE>
- -------------
(1)Represents the total acquisition cost of apartment communities plus
the capitalized cost of improvements made subsequent to acquisition.
(2)Includes 120 units placed in service from Cherry Creek II development
community.
Development. In December 1994, Merry Land commenced a program of
apartment development. At June 30, 1996, the Company had four communities with
1,374 units under construction (of which 120 units at Cherry Creek had been
delivered) and four communities with 1,495 units under development. These
communities will be completed throughout 1996, 1997, 1998 and 1999 at an
expected total cost of $208.5 million. In addition, the Company owns land for
752 additional units to be built in subsequent phases in Atlanta, Nashville
and Savannah. The communities under development offer features typical of very
high end properties, including nine foot ceilings, high levels of trim and
finish, garages and extensive amenities.
The Company has engaged experienced apartment developers to provide
development and construction management services to the Company on a project
by project basis. The developers fees are computed as a share of the value of
the completed projects, based on agreed upon formulas, less actual costs.
Merry Land s employees supervise development activities with the assistance of
architects and engineers as required. The Company owns all land and
improvements, directly contracts for construction and bears essentially all
risks of project development. While the Company has added 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, reduce or terminate such activities as conditions warrant. Merry Land
will manage these new communities during and after construction.
The following table summarizes the Company s current development
communities. Estimated cost consists of land, direct construction costs and
indirect cost, including projected fees to third party development managers
and allocated overhead (dollars in thousands, except cost per unit):
Total
Total Est. Units Placed Total Est.
Est. Cost in in Cost Comp-
Location Community Units Cost PerUnit Ser. Serv. to Date letion
- -------- --------- ---- ------ -------- ----- ------- ------- -----
Under Construction
- ------------------
<TABLE>
<CAPTION>
<S> <S> <C> <C> <C> <C> <C> <C> <S>
Nashville Cherry Creek 280 $18,700 $66,785 120 $7,953 $12,405 4Q 1996
Greensboro Adams Farm II(1) 200 13,100 65,500 - - - 3Q 1997
Atlanta River Sound 586 42,200 72,013 - - - 4Q 1997
Savannah Long Point 308 20,500 66,558 - - - 4Q 1997
----- -------- ------- ---- ----- ------
1,374 $94,500 $68,777 120 $7,953 $12,405
Under Development
- ----------------
Richmond Wyndham 264 $23,000 $87,121 - - $ 2,297 1Q 1998
Greensboro Wendover 300 20,300 67,667 - - 1,793 2Q 1998
Richmond Spring Oak 506 38,700 76,482 - - 3,964 4Q 1998
Atlanta Sweetwater
Creek 425 32,000 75,294 - - 3,416 3Q 1999
----- ------- ------ --- ---- -------
1,495 $114,000 $76,254 - - $11,470
Future Development
- ------------------
Nashville Cherry Creek II 200 - - $ 2,618
Savannah Long Point II 352 - - 569
Greensboro Wendover II 200 - - 1,171
---- ---- ---- ------
752 - - $ 4,358
</TABLE>
- ----------
(1)Adjoins the Company s Adams Farm community.
Recent Events
Sale of Common Stock. In a public offering completed on June 14, 1996,
the Company issued 2,500,000 shares of common stock at $21.50 per share for
net proceeds of $50.8 million. On July 16, 1996, the Company issued an
additional 272,900 shares of common stock for net proceeds of $5.5 million.
These shares were issued pursuant to the exercise of the overallotment option
given to the underwriters. The Company intends to use the net proceeds to
acquire and develop additional apartment properties. Pending such uses, the
Company has invested temporarily the excess proceeds in marketable securities.
Acquisitions. In the first six months of 1996, the Company acquired the
following communities (dollars in thousands):
Community Location Units Cost
-------- ----------- ------ -------
<TABLE>
<CAPTION>
<S> <S> <C> <C>
Crestview Austin, Texas 161 $10,100
Sedona Springs Austin, Texas 396 27,376
Mariner Club Ft. Lauderdale, Fla. 304 18,000
Essex Place Tampa, Florida 148 5,075
----- -------
1,009 $60,551
</TABLE>
The Company has entered into an agreement to purchase for $18.2 million
the Estate On Quarry Lake community containing 302 units in Austin, Texas. The
acquisition of this community, which was completed in the spring of 1996, is
conditioned upon completion of inspections by the Company and the attainment
of specified occupancy and rent levels.
Acquisition of Communities under Development. The Company has also
agreed to acquire the following communities to be built by unrelated third
parties pursuant to detailed plans and specifications agreed to by the Company
(dollars in thousands):
Estimated Estimated
Community Location Units Cost Completion
- --------- --------- ---- ---- ----------
<TABLE>
<CAPTION>
<S> <S> <C> <C> <S>
Creekside Homes at Legacy Dallas, Texas 380 $28,500 2Q 1998
Villages of Prairie Creek I Dallas, Texas 236 17,700 2Q 1998
Villages of Prairie Creek II Dallas, Texas 200 15,000 3Q 1999
----- - ------
816 $61,200
</TABLE>
The Company will acquire title to these communities upon completion of
construction for an amount equal to the lesser of the seller s actual cost or
the budgeted cost agreed to by the Company. The Company will pay the seller
additional sums upon the attainment of specified occupancy and net operating
cash flow levels based on agreed upon formulas. Although the unrelated third
party developer bears the development and construction risk, the Company will
actively monitor and inspect quality control of the communities during
construction.
Development Activity. During the first six months of 1996, the Company
bought one tract of land in Atlanta for $3.5 million on which a 425 unit
community to be named Madison at Sweetwater Creek will be built. The Company
also bought two tracts in Richmond for $3.9 million on which a 506 community
to be named Madison at Spring Oak will be built.
Credit Line. On June 28, 1996, the Company renewed its $100.0 million
unsecured, revolving credit agreement with its primary commercial bank.
Borrowings under the line bear interest at 0.65% above the thirty day London
Interbank Offered Rates, and subject to the bank s approval, may be renewed
annually. The Company maintains the credit line to finance apartment
acquisitions and development and for general corporate purposes. The Company
is negotiating for an additional credit facility to replace the $60.0 million
portion of the line which it did not renew.
Credit Rating Assigned. On July 10, 1996, Duff & Phelps Credit Rating
Co. assigned its BBB+ rating to the Company s outstanding $360.0 million of
senior notes and its BBB rating to the Company s cumulative convertible
preferred stock. The Company had previously received ratings on its senior
notes of BBB+ from Standard & Poor s and Baa2 from Moody s Investors Service.
All these ratings are "investment grade".
Results of Operations for the Six Months Ended June 30, 1996 and 1995.
Rental Markets. Rental markets were weaker in the first half of 1996
than in the same period in 1995 primarily as a result of new apartment
construction, and the Company expects its apartment portfolio to experience
occupancy in 1996 approximately 1.5% to 2.0% below the 95% average occupancy
experienced throughout 1995. The Company believes that if general economic
activity, job growth and household formation remain strong, serious weakness
should not develop in 1996 as a result of overbuilding.
Forward-looking statements made in this filing are based on reasonable
assumptions. However, general economic conditions, local market factors, the
performance of communities under development and the consultants hired by the
Company to provide services for these communities under development may cause
actual results to differ from the Company s current expectations.
Rental Operations - Total Portfolio. The operating performance of the
Company s apartment portfolio is summarized in the following table (dollars in
thousands except average monthly rent):
Six Months
Change From ---------------
% Change 1995 to 1996 1996 1995
-------- ------------ ------ -------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Rents 27% $18,022 $84,769 $66,747
Operating expenses 26 4,834 23,145 18,311
Taxes and insurance 42 2,651 8,966 6,315
Depreciation 36 4,298 16,203 11,905
Operating income 21% $6,239 $36,455 $30,216
Average occupancy(1) (2.1)% (4) 93.0% 95.1%
Average monthly(2) 8.4% $660 $609
Expense ratio (3) 0.6% 37.9% 36.8%
</TABLE>
---------
(1)Represents the 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 June 30.
(3)Represents total of operating expenses, taxes and insurance divided
by rental revenues.
(4)Represents increase or decrease between periods.
With Merry Land s acquisition of new communities, the weighted average
number of apartments owned rose to 22,876 in the first six months of 1996 from
19,280 in the first six months of 1995, and rental revenues and expenses rose
accordingly. Company wide occupancy at June 30, 1996 totaled 93.0%, down from
95.0% at the same date in 1995.
The 8.4% increase in portfolio average rental rates in the first six
months of 1996 from the first six months of 1995 resulted from both higher
rents at the Company s continuing properties and also the higher rents charged
at the communities the Company acquired in 1995 and 1996, whose monthly rents
averaged $797, at June 30, 1996, versus the total portfolio average of $660.
Rental Operations - Comparable Communities. The performance of the
18,410 units which the Company held for the first six months of both 1996 and
1995 ("comparable communities" results), is summarized in the following table
(dollars in thousands, except average monthly rent; see footnotes above):
Six Months
Change from ------------
% Change 1995 to 1996 1996 1995
-------- ------------ ----- ------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Rental income 3.1% $2,014 $66,393 $64,379
Personnel 3.7 239 6,695 6,457
Utilities 2.3 91 4,009 3,918
Operating 13.9 417 3,418 3,001
Maintenance and grounds 8.0 352 4,749 4,397
Taxes and insurance 1.2 75 6,167 6,092
---- ----- ------- -----
4.9 1,174 25,039 23,865
Depreciation 1.5 403 11,961 11,558
--- ----- ------- -------
Operating income 1.5% $ 437 $29,393 $28,956
Average occupancy(1) (1.4)%(4) 93.6% 95.0%
Average monthly rent(2) 4.3% $629 $603
Expense ratio (3) 0.6%(4) 37.7% 37.1%
</TABLE>
Comparable community results do not include Gwinnett Crossing, a 314
unit community, or Cherry Creek, a 127 unit community, which were owned for
the first six months of 1996 and 1995. A 260 unit community adjacent to
Gwinnett Crossing was acquired in 1995 and combined with that community. The
Cherry Creek community was acquired in December 1994 and is currently being
renovated. It has been combined with a development community which will
contain 280 additional units.
Rental income rose by $2.0 million or 3.1% for those properties held for
all of both periods, as a result of 1.4% lower occupancy and 4.3% higher
average rental rates. At June 30, 1996 same property occupancy was 93.4%, down
from 95.1% at June 30, 1995, as newly completed apartment construction reduced
occupancy in some of the Company s markets.
Operating expenses increased $1.2 million or 4.9% in 1996 from the same
period in 1995. An unusually severe winter caused higher than expected
operating and maintenance expenses and also led to a number of out of service
units due to frozen pipes. Personnel costs accounted for $0.2 million of the
increase, resulting from higher life and health insurance premiums (because
the Company extended coverage to its employees dependents) and the vesting of
additional employees in the Company s ESOP plan. Off site property management
expense, which is allocated to the communities, rose $0.2 million as the
Company established additional corporate positions in training, marketing and
maintenance. Accruals for property taxes and insurance rose $0.1 million.
Rental Operations - Development Communities. $22.1 million was expended
in the first six months of 1996 for apartments under development, bringing the
cumulative investment to $43.1 million, including capitalized interest of $2.1
million. The Company expects to put approximately 500 units in service in
1996. Some dilution of earnings may occur to the extent leasing lags behind
the delivery of units.
120 units of the Cherry Creek II development community, the first in the
Company s new development program, were delivered in the second quarter of
1996. As discussed above, this 280 community is adjacent to the existing 127
unit Cherry Creek community which is being renovated and these two communities
are operated together. The operating results for the first six months of 1996
and 1995 for both phases of Cherry Creek are summarized in the following table
(dollars in thousands):
Six months
----------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Units 247 127
Rental income $502 $309
Operating expense 223 111
Taxes and insurance 21 19
Depreciation 51 49
---- ----
Operating income $207 $130
</TABLE>
At June 30, 1996, 93% of the 120 units delivered in phase II were leased
at an average rental rate of $748 per unit, or $.76 per square foot.
Rental Operations - Other Communities. The Company defines "other
communities" as those not included in comparable communities or development
communities. At June 30, 1996, these communities included 4,767 units, of
which 1,009 units were bought in the first six months of 1996. The remaining
units were bought in 1995, except for the 314 units of Gwinnett Crossing
described above. The performance of the other communities for the first six
months of 1996 and 1995 are summarized in the following table (dollars in
thousands, except average monthly rent; see footnotes above):
Six months
----------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Units 4,767 1,785
Rental income $17,874 $2,059
Operating expense 4,050 427
Taxes and insurance 2,778 204
Depreciation 4,191 298
------ -----
Operating income 6,855 1,130
</TABLE>
Interest, Dividend and Other Income. Interest, dividend and other income
are summarized in the following table (dollars in thousands):
Six months
---------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Interest income $1,044 $1,455
Dividend income 1,930 338
Other income 2,634 140
----- -----
Total $5,608 $1,933
</TABLE>
The increase in 1996 when compared to 1995 is due to higher dividend and
other income. For the first six months of 1996, the Company realized dividend
income of $1.9 million and other income of $2.5 million on an average of $44.6
million in equity security investments. The $2.5 million in other income was
generated from the sale of a portion of the equity security investments.
Interest Expense. Interest expense totaled $11.4 million in the first
six months of 1996, up from $5.3 million in the first six months of 1995.
Average debt outstanding rose to $367.1 million in the first six months of
1996 from $190.2 million in the first six months of 1995, primarily as a
result of the issuance of the 6.875% and 7.25% senior unsecured notes in 1995.
The weighted average interest rate charged on all the Company s debt increased
to 7.0% in the first six months of 1996 from 6.8% for the first six months in
1995, primarily as a result of the replacement of short-term financing with
the 6.875% and 7.25% senior unsecured notes. During the first six months of
1996, $1.1 million of interest related to the Company s development projects
was capitalized.
General and Administrative Expenses. General and administrative expenses
in the first six months of 1996 were $1.3 million, representing 1.5% of rental
revenues and 2.8% of funds from operations. For all of 1995, expenses averaged
1.7% of rental revenues and 3.0% of funds from operations. The significant
improvement this year reflects continuing efforts to control overhead costs
and more importantly the significant increase in the Company s revenues and
funds from operations.
Gains on Sales of Assets. Net gains recognized on the sale of assets
totaled $1.7 million in the first six months of 1996 and $0.1 million in the
first six months of 1995. Gains in both years came primarily from the sale of
securities. In the first six months of 1996, 122,000 shares of First Financial
Holdings, Inc. were sold on the open market. At June 30, 1996, the Company
owned 78,000 shares of First Financial.
Net Income. Net income totaled $30.7 million in the first six months of
1996 and $26.0 million for the first six months of 1995. Net income available
for common shareholders totaled $20.8 million in the first six months of 1996
and $17.8 million for the first six months of 1995. The increases in net
income and net income available for common shareholders for 1996 when compared
to 1995 arose principally from substantially increased operating income from
apartments due to the growth of the Company s apartment holdings, as well as
increases in other income and net realized gains. Net income per common share
in the first six months of 1996 increased to $.61 from $.54 in the first six
months of 1995.
Dividends to preferred shareholders. Dividends to preferred shareholders
totaled $9.9 million in the first six months of 1996 and $8.2 million in the
first six months of 1995. The increase in preferred dividends arose from an
increase in the amount of preferred stock outstanding during the period.
Preferred dividends are summarized in the following table (dollars in
thousands):
Six months
----------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Series A Preferred share dividends $ 564 $ 830
Series B Preferred share dividends 4,410 4,410
Series C Preferred share dividends 4,945 2,939
----- -----
Total preferred dividends $9,919 $8,179
</TABLE>
Holders of the Company s Series A Preferred Stock have converted 4.0
million of the 4.6 million Series A shares originally issued in June 1993 into
5.3 million shares of the Company s common stock as the common dividend was
raised above the equivalent preferred dividend. In March and April 1995 the
Company issued 4.6 million shares of the Series C Convertible Preferred Stock.
Funds From Operations. Funds from operations rose 20% to $45.2 million
in the first six months of 1996 as compared to $37.7 million in the first six
months of 1995. Funds from operations available to common shares rose 20% to
$35.3 million in the first six months of 1996 compared to $29.5 million in the
first six months of 1995. These increases were principally due to increased
rental operating income resulting from the growth of the Company s apartment
holdings, capital gains and increased other income. On a fully diluted per
share basis, funds from operations increased 11% to $1.00 in 1996 from $0.90.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
Six Months
------------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Net income $30,683 $26,019
Less preferred dividends paid 9,919 8,179
------- ------
Net income available for common shares 20,764 17,840
Add depreciation of real estate owned 16,266 11,982
Less net realized gains 1,715 97
Plus non-recurring expenses -- (200)
------ ------
Funds from operations available to common shares 35,315 29,525
Add preferred dividends 9,919 8,179
----- -----
Funds from operations-fully diluted $45,234 $37,704
------- -------
Weighted average common shares outstanding -
Primary 34,265 32,936
Fully diluted 45,106 41,764
Funds from operations per share-
Primary $1.03 $.90
Fully diluted $1.00 $.90
</TABLE>
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 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. Revision
of the definition reduced the Company s funds from operations by $0.4 million
and $0.3 million in the first six months of 1996 and 1995, respectively.
Liquidity and Capital Resources
Financial Structure. At June 30, 1996, total debt equaled 33% of total
capitalization at cost, and 27% of total capitalization with equity valued at
market. At that date, the Company s financial structure was as follows
(dollars in thousands):
Equity at
% of Market % of
Cost Total Value Total
----- ----- ------- -----
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Advances under line of credit $ - $ -
Mortgage loans 9,600 9,600
6.625% senior unsecured notes, 1999 40,000 40,000
6.625% senior unsecured notes,2001 40,000 40,000
6.625% senior unsecured notes, 2000 40,000 40,000
7.25% senior unsecured notes, 2002 40,000 40,000
6.875% senior unsecured notes, 2003 40,000 40,000
6.875% senior unsecured notes, 2004 40,000 40,000
7.25% senior unsecured notes, 2005 120,000 120,000
--------- ---------
Total debt 369,600 33% 369,600 27%
Common and preferred equity (1) 744,538 67% 999,997 73%
-------- --- --------
Total capitalization $1,114,138 100% $1,369,597 100%
---------- ---- ---------- ----
</TABLE>
---------------
(1) Assumes conversion of all outstanding preferred stock into common
stock.
At June 30, 1996, the Company had no borrowings outstanding under its
line of credit. Borrowings under the line bear interest at 0.65% above the
thirty day London Interbank Offered Rates. The Company is negotiating an
additional credit facility to replace the $60.0 million portion of the line
which it did not renew.
It generally is not the practice of the Company to finance its
acquisitions using mortgage debt, though at times the Company finds it
advantageous to assume such debt in order to successfully negotiate and close
property acquisitions. At June 30, 1996, the Company had one mortgage loan
outstanding, which was assumed in April, 1996 in connection with the purchase
of the Mariner Club community.
The Company s preferred stock and its senior notes are rated investment
grade by Standard & Poor s Corporation, Moody s Investors Services, Inc., and
Duff & Phelps Credit Rating Co.
Liquidity. Merry Land expects to meet its short-term liquidity
requirements with cash provided by operating activities, by liquidating short
term investments and by borrowing under its line of credit. The Company s
primary short-term liquidity needs are operating expenses, apartment
acquisitions and development and capital improvements. The Company expects to
meet its long-term liquidity requirements, including scheduled debt maturities
and permanent financing for property acquisitions and development, from a
variety of sources, including operating cash flow, additional borrowings and
the issuance and sale of debt and equity securities in the public and private
markets. The following table summarizes the estimated future capital
requirements and capital sources as of June 30, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Estimated capital requirements:
- -------------------------------
Development communities expected costs $208,500
Less development costs paid thru 6/30/96 (41,000)
--------
167,500
Acquisition of communities under development 61,200
-------
Total future development commitments 228,700
Estimated capital sources:
- --------------------------
Cash on hand at 6/30/96 $ 27,200
Marketable securities held at 6/30/96 51,200
Proceeds from common stock issued on 7/16/96 5,500
Availability under line of credit at 6/30/96 100,000
-------
Total capital sources 183,900
-------
Excess of capital requirements over sources $ 44,800
-------
</TABLE>
The excess of capital requirements over capital sources is expected to
be funded with cash provided by operating activities and proceeds from the
issuance of stock under the Company s Dividend Reinvestment and Stock Purchase
Plans. Additional new developments or acquisitions of existing apartment
communities will increase the Company s capital requirements. At June 30,
1996, the Company s loan agreements and the covenants under its senior
unsecured notes would have allowed it to borrow an additional $133.0 million
on an unsecured basis.
Cash Flows. The following table summarizes cash flows for the first six
months of 1996 and 1995 (dollars in thousands):
Sources and Uses of Cash:
------------------------
Six Months
------------------------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Operating activities $ 45,366 $ 42,175
Sales of Merry Land common and preferred stock 58,327 115,565
Net borrowings 9,600 44,992
Other 8 113
------- ------
Total sources of cash 113,301 202,845
Acquisitions of and improvements to properties (67,800) (78,598)
Development of properties (22,291) (1,009)
Dividends paid (36,060) (31,303)
Other (1,027) (229)
------- --------
Total uses (127,178) (111,139)
-------- --------
Increase (decrease) in cash, cash equivalents
and marketable securities ($ 13,877) $ 91,706
</TABLE>
With the expansion of the Company s apartment holdings, operating cash
flow has grown to $45.4 million in the first six months of 1996 from $42.2
million in the first six months of 1995. Sales of common and preferred stock
have been the largest source of cash for both periods. The primary use of cash
has been apartment acquisitions and improvements. Dividends paid in the first
six months of 1996 increased from the same period in 1995 due to an increase
in the average amount of stock outstanding, and in the case of the Company s
common stock, an increase in the quarterly dividend per share from $0.35 to
$0.37 in the first quarter of 1996.
Capital Expenditures. The Company capitalizes the direct and indirect
cost of expenditures for the acquisition or development of apartments and for
replacements and improvements. Replacements are non-revenue producing capital
expenditures which recur on a regular basis, but which have estimated useful
lives of more than one year, such as carpet, vinyl flooring and exterior
repainting. Improvements are expenditures which significantly increase the
revenue producing capability or which significantly reduce the cost of
operating assets. At newly acquired communities, the Company often finds it
necessary to upgrade the physical appearance of the 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, and some of these expenditures which would be considered
replacements at stabilized communities (as defined below) are classified as
improvements at newly acquired properties. Interest, real estate taxes and
other carrying costs incurred during the development period of apartments
under construction are capitalized and, upon completion of the project,
depreciated over the lives of the project.
The following table summarizes the capital expenditures for the first
six months of 1996 and 1995 (dollars in thousands, except per unit data):
Six Months
------------
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Apartment communities:
Acquisitions $61,037 $72,684
Development projects:
Development costs 21,149 652
Capitalized interest 1,142 447
Replacements for stabilized communities (1) 2,484 1,320
Improvements (2) 3,717 4,048
Commercial properties 297 278
Corporate level expenditures 264 268
----- -------
$90,090 $79,697
Per Unit:
Replacements for stabilized communities (1) $135 $97
Improvements (2) $159 $200
</TABLE>
--------------
(1)Stabilized communities are those properties which have been
owned for at least one full calendar year. In the first six months
of 1996, 18,410 units were stabilized as compared to 13,665 units
in the first six months of 1995.
(2)Improvements include expenditures for all properties owned
during the period, including replacementsat newly acquired
communities.
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>
Merry Land & Investment Company, Inc.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
1. Election of Directors: shares voted - 27,512,813
For Against/Abstain
<TABLE>
<CAPTION>
<S> <C> <C>
W. Hale Barrett 27,349,192(99.4%) 163,621(.6%)
W. Tennent Houston 27,344,989(99.4%) 167,824(.6%)
Peter S. Knox III 27,347,693(99.4%) 165,120(.6%)
Hugh C. Long II 27,350,114(99.4%) 162,699(.6%)
Pierce Merry, Jr. 27,351,022(99.4%) 161,791(.6%)
</TABLE>
ITEM 5. Other Information
None
ITEM 6.Exhibits and Reports on Form 8-K
3. Exhibits.
(3.i) Amended and Restated Articles of Incorporation (incorporated herein
by reference to Exhibit 4(a) to the Company's Shelf Registration
Statement on Form S-3 filed December 15, 1995, file number 33-65067).
(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).
(4) Instruments Defining Rights of Security Holders, Including Indentures
---------------------------------------------------------------------
(4.1) The Company's $120,000,000 7 1/4% Notes due 2005 (incorporated
herein by reference to Item 7, Exhibit 4A to the Company's
Form 8-K filed June 23, 1995).
(4.2) Indenture (incorporated herein by reference to Item 7, Exhibit 4B
to the Company's Form 8-K filed June 23, 1995).
(4.3) First Supplemental Indenture (incorporated herein by reference to
Item 7, Exhibit 4C to the Company's Form 8-K field June 23, 1995).
(4.4) The Company's $40,000,000 7 1/4% Notes due 2002 (incorporated
herein by reference to Exhibit 4A to the Company's current report
on Form 8-K filed September 1, 1995).
(4.5) The Company's $40,000,000 6.875% Notes due 2003 and $40,000,000
6.875% Notes due 2004 incorporated herein by reference to
Exhibit 4A to the Company's current report on Form 8-K filed
November 8, 1995.
(10) Material Contracts.
(10.1)Credit Agreement between the Company and Lenders for a $100 million
credit facility (incorporated herein by reference to Item 7,
Exhibit 10 to the Company's current report on Form 8-K July 15,1996).
(10.2)Credit Agreement between the Company and Lenders for a $160 million
credit facility (incorporated herein by reference to Item 7,
Exhibit 10 to the Company's current report on Form 8-K filed
July 14, 1995).
(10.3)$120,000,000 6.625% Senior Notes/Note 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).
(10.4)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).
(10.5)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).
(10.6)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).
(10.7)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.
(10.8)1995 Stock Option and Incentive Plan (incorporated herein by
reference to Appendix "B" to the Company's 1995 Proxy Statement on
Form DEF-14A filed March 27, 1995).
b. Reports on Form 8-K and K-/A:
Form Date Filed Items Reported Financial Statements Filed
8-K June 11, 1996 Completion of offering N/A
of 2.5 million common
stock.
8-K July 15, 1996 Renewal of $100MM N/A
line of credit.
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MERRY LAND & INVESTMENT COMPANY, INC.
/s/ W. Tennent Houston
W. Tennent Houston
President
Principal Financial Officer
July 31, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 271977
<SECURITIES> 51231
<RECEIVABLES> 1075
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82175
<PP&E> 1093738
<DEPRECIATION> 84703
<TOTAL-ASSETS> 1134237
<CURRENT-LIABILITIES> 19796
<BONDS> 360000
0
230748
<COMMON> 36802
<OTHER-SE> 477291
<TOTAL-LIABILITY-AND-EQUITY> 1134237
<SALES> 85053
<TOTAL-REVENUES> 92549
<CGS> 23239
<TOTAL-COSTS> 61866
<OTHER-EXPENSES> 285
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11431
<INCOME-PRETAX> 30682
<INCOME-TAX> 0
<INCOME-CONTINUING> 30682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30682
<EPS-PRIMARY> .56
<EPS-DILUTED> .46
</TABLE>
