SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
Form 10K
___________
(Mark One)
XX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _______
Commission file number: 001-11081
State of Incorporation: Georgia
I.R.S. Employer Identification Number: 58-0961876
___________
Merry Land & Investment Company, Inc.
(Exact Name of Registrant as Specified in Its Charter)
P.O. Box 1417
Augusta, Georgia
(Address of Principal Executive Offices)
706 722-6756 30903
(Registrants Telephone (Zip Code)
Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months, and (2) has been
subject to such filing requirements for the past ninety days: Yes X . No____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants 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. __
The aggregate market value of the voting stock held by non affiliates of the
registrant on January 31, 1997: Common Stock, no par value - $778,561,854 (all
shares other than those owned or controlled by officers,
directors, and 5% shareholders).
The number of shares of common stock outstanding as of January 31, 1997 was
38,143,781.
Documents incorporated by reference: The 1997 definitive proxy statement to be
mailed to shareholders for the annual meeting scheduled for April 21, 1997, is
incorporated by reference into Part III of this form 10-K.
<PAGE>
Table of Contents
Part I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
Part II
Item 5 Market for the Registrants Common Stock and Related
Shareholders Matters
Item 6 Selected Financial Data
Item 7 Managements 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
Part I
Item 1 - Business
This filing includes statements that are forward looking statements
regarding expectations with respect to market conditions, development
projects, occupancy rates, capital requirements and sources.
These assumptions and statements are subject to various factors,
unknown risks and uncertainties, including general economic conditions, local
market factors, delays and cost overruns in construction, completion and rent
up of development communities, performance of consultants or other
third parties and environmental concerns, any of which may cause actual results
to differ from the Companys current expectations.
The Company
Merry Land & Investment Company, Inc. is the largest owner and operator
of upscale garden apartments in the South. At December 31,1996, the Company
had a total equity market capitalization of over $1.1 billion and owned a high
quality portfolio of 91 apartment communities containing 24,936 units. The
communities are geographically diversified through the Southern United States,
located in twenty-seven metropolitan areas, each with a population in excess
of 250,000, extending from the Washington, D.C. area to Texas and Florida.
Substantially all of the Companys apartment communities command rental rates
in the upper range of their markets.
Operating Strategy. The Companys strategy is to own and operate a
significant number of communities in every major market in the Southern United
States, and to establish a reputation recognized among apartment dwellers
throughout this region for high quality communities and first class service.
The accomplishment of this strategy should allow the Company to increase funds
from operations and distributions to shareholders by producing greater cash
flows at each apartment community through significant marketing advantages and
operating efficiencies. 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.
Growth. In recent years Merry Land has grown primarily through the
acquisition of apartment communities, but in late 1994 commenced a program of
apartment development. At December 31, 1996, the Company had four communities
with 1,358 units under construction and four communities with 1,590 units
under development, for a total development program of 2,948 units. These
communities are expected to be completed throughout 1997, 1998 and 1999 at a
total cost of approximately $212.1 million. In 1996, the first 414 units of
new construction were delivered for occupancy. Merry Land expects future
growth to continue to come primarily from acquisitions, rather than from
development. The following table summarizes the Companys growth in recent
years (dollars in thousands):
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Units acquired 2,475 3,444 4,872 7,452 2,845
Units developed 414 - - - -
Total units owned at
end of period 24,936 22,296 18,852 13,981 6,529
Total cost of
apartments $1,175,427 $1,009,056 $796,436 $554,589 $209,694
Total apartment
rental incom e $ 176,053 $ 144,283 $101,667 $ 54,565 $ 22,460
Merry Land, headquartered in Augusta, Georgia, became an independent
publicly owned company in 1981 and has been a REIT since 1987.
Recent Developments
Acquisitions. In 1996, the Company acquired eleven apartment communities
containing 2,475 units at a cost of $137.6 million (dollars in thousands):
Community Location Units Price
- ---------- -------- ----- -----
Country Club Place Ft. Lauderdale, Florida 152 $ 8,600
Essex Place Tampa, Florida 148 5,075
Estate at Quarry Lake Austin, Texas 302 18,000
Madison at the Arboretum Austin, Texas 161 10,100
Mariner Club Ft. Lauderdale, Florida 304 18,000
Plantations at Killearn Tallahassee, Florida 184 7,365
Regency Charlotte, North Carolina 178 11,200
Sedona Springs Austin, Texas 396 27,324
Shoal Run Birmingham, Alabama 276 10,800
Valencia Plantation Orlando, Florida 194 10,000
Waterford Place Nashville, Tennessee 180 11,100
---- --------
2,475 $137,564
Acquisition of Communities under Development. The Company has also agreed
to acquire the following communities to be built by unrelated third parties
(dollars in thousands):
Estimated Estimated
Community Location Units Cost Completion
- ---------- -------- ----- --------- ----------
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
The Company will acquire title to these communities upon completion of
construction for an amount equal to the lesser of the budgeted cost or the
sellers actual cost. The Company will pay the seller additional amounts upon
the attainment of specified occupancy and net operating cash flow levels based
on agreed upon formulas. Although the third party developer bears the
development and construction risk, the Company will actively monitor
construction quality of the communities.
Development Activity. At the beginning of 1996, the Company had three
communities under construction in Atlanta, Nashville and Savannah, and during
the year started construction on two other communities in Greensboro and
Richmond. For the year, construction costs for these five communities
totaled $50.9 million. 414 units at a cost of $28.4 million were completed
and placed in service, including all 280 units at the Cherry Creek community
in Nashville and 134 units at the Madison at River Sound community in Atlanta.
During 1996, the Company also purchased land in Atlanta, Nashville and Richmond
for three development communities which will start in 1997. In 1996, the
Companys cumulative investment in its development program increased by
$63.1 million to $84.0 million.
Sale of Community. On December 30, 1996, the Company sold Hunters Chase
community in Cleveland for $15.0 million, recognizing a gain of $1.5 million.
Hunters Chase was acquired along with another Ohio community in 1994 as part
of a twelve property portfolio transaction and it did not conform to Merry
Lands strategy of building a Southern apartment franchise.
Sale of Preferred Stock. In a public offering completed on December 5,
1996, the Company issued 1.0 million shares of Series D Cumulative Redeemable
Preferred Stock at $50.00 per share for net proceeds of $48.7 million. This
issue bears a coupon of 8.29%. The Company intends to use the net
proceeds to acquire and develop additional apartment properties.
Sale of Common Stock. In a public offering completed in July, 1996, the
Company issued 2.8 million shares of common stock at $21.50 per share for net
proceeds of $56.0 million. The Company has invested the excess proceeds in
apartment acquisitions and development.
Credit Line Renewed. In June, 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 banks approval, may be renewed
annually. On October 8, 1996, the Company entered into an additional $30.0
million unsecured, revolving credit agreement with a second commercial bank.
Borrowings under this line bear interest at 0.75% above the thirty day London
Interbank Offered Rates, and may be renewed annually subject to the banks
approval. The Company maintains the credit lines to finance apartment
acquisitions and development and for general corporate purposes.
Credit Rating Assigned. On July 10, 1996, Duff & Phelps Credit Rating Co.
assigned its BBB+ rating to the Companys outstanding $360.0 million of senior
notes and its BBB rating to the Companys preferred stock. The Company had
previously received ratings on its senior notes of BBB+ from Standard & Poors
and Baa2 from Moodys Investors Service. All these ratings are investment grade.
Organization
Merry Land is an operating company which maintains a centralized corporate
structure, managing all its communities and conducting all its corporate level
activities (including accounting, general property management activities and
acquisitions and development) from its offices in Augusta. The Company does not
provide services to third parties and has no partners in any of its investments
or other activities.
The Company manages its properties under the trade name Merry Land
Apartment Communities. Each community functions as an individual business unit
according to well developed policies and procedures. 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. Property Managers report to twelve Regional Property Managers
who report to the Companys four Area Property Managers. Regional Property
Managers are located at communities in Raleigh, Charlotte, Augusta, Atlanta (2),
Charleston, Jacksonville, Orlando, Tampa, Ft. Lauderdale, Dallas and
Austin. Area Property Managers are located in Charlotte, Atlanta, Orlando,
and Dallas and are supported by training, marketing and maintenance
specialists.
The Company has 753 employees. Of this number 685 work at its apartment
communities, 31 are employed in accounting, administrative and general
management, 28 in corporate level property management and 9 in acquisitions and
development. A significant portion of the compensation of on site personnel is
tied to achievement of community cash flow targets. All employees have the
opportunity to become shareholders through the Companys Employee Stock
Ownership Plan. Management personnel (36 individuals or 5% of total
employees) participate in the Companys stock option and stock purchase plans,
further aligning their interests with those of its shareholders.
Market Conditions
Apartment construction in the nine states which the Company considers to
be its market area has risen in recent years, rising from 41,000 in 1992 to
112,000 in 1995. In 1996, this increased supply has led to somewhat softer
markets throughout the South. The Companys overall occupancy at communities it
held for all of 1995 and 1996 averaged 93.9% for 1996 versus 95.2% for 1995.
Despite lower occupancy, rental revenues for these same store communities rose
2.1% over this period as a result of higher rental rates. Nevertheless, the
Company believes that a generally favorable long term relationship between
aggregate supply and demand exists for apartment rentals in its Southern
markets. The Companys nine state market area has experienced growth
in households, a key determinant of apartment demand, well in
excess of national averages during the 1980s and 1990s. U.S. Census data
indicate that from 1985 to 1995 total households in these states increased
17.5% versus an increase of 9.2% nationally. In the most recent year,
households in these states increased 1.5% versus 0.7% nationally.
History
Merry Land conducted its initial public stock offering in 1981 after
having been spun off earlier that year from Merry Companies, Inc., one of the
nations largest brick manufacturers, in connection with the latters 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
Companys 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.
The Company bought its first apartment in 1982 and has been actively
involved in the acquisition and management of apartments since that date. In
1994 the Company began to buy newly completed communities and communities under
construction from merchant builders and initiated a program of apartment
development to complement its acquisition program. The Company is a Georgia
corporation. It has its principal office at 624 Ellis Street, Augusta, Georgia
30901 and its 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 Companys apartments are 47% one
bedroom units, 47% two bedroom units and 6% three bedroom units. The units
average 903 square feet in area, eight years of age, and are well equipped with
modern appliances and other conveniences. The communities are generally heavily
landscaped and offer extensive amenities. Most include swimming pools, tennis
courts, club rooms, exercise facilities and hot tubs. Some of the Companys
communities also offer racquetball courts, saunas, alarm systems and other
features, including 1,780 enclosed garages.
Residents at the Companys apartments typically earn middle and upper middle
levels of incomes. They include young professionals, white collar workers,
medical personnel, teachers, members of the military, single parents, single
adults and young families. These residents are generally renters by choice -
they have the means to own homes but choose to live in apartment communities
because of their current employment, family or other personal circumstances.
The Company believes that demand for its apartments is primarily dependent on
the general economic strength of each markets economy and its level
of job creation and household formation, and is less sensitive to prevailing
interest rate levels for home mortgage loans. There is a steady turnover of
leases at the Companys communities, allowing rents to be adjusted upward as
demand allows. Leases are generally for terms of from six to twelve months.
About two-thirds of the Companys units turn over each year, a rate the
Company believes is typical for higher end apartment communities.
Merry Lands apartment communities are located in 27 metropolitan areas,
each with a population in excess of 250,000 and none containing more than 14%
of the Companys portfolio. The Company believes that this diversification
reduces the volatility of its aggregate rental occupancy and rental
income. The Company also believes that specializing in high end Southern
apartment communities will allow it to establish a recognized franchise in
its market area and will allow it to achieve economies in marketing and
operating its communities.
The Company owns all its communities fee simple. Of its communities, only
three are subject to encumbrances. The following table summarizes the Companys
apartment holdings by major market as of December 31, 1996 (dollars in
millions):
Investment
Market Units at Cost % of Cost
- ------- ----- ---------- ---------
Atlanta, Georgia 3,480 $149.0 13%
Dallas, Texas 1,830 117.9 10%
Jacksonville, Florida 2,550 105.8 9%
Orlando, Florida 2,096 101.3 9%
Austin, Texas 1,249 80.0 7%
Ft. Lauderdale, Florida 1,144 71.6 6%
Charlotte, North Carolina 1,801 70.5 6%
Tampa, Florida 1,449 64.6 5%
Ft. Myers, Florida 1,268 64.1 5%
Others 8,069 350.6 30%
----- -------- ----
24,936 $1,175.4 100%
Item 102. Description of Property
Apartments
<TABLE>
<CAPTION>
Cost (1) Avg. Avg. Avg. Dec. Rent (2) Avg.
Date Date (in Cost Per Unit Size Month Sq.Ft. Occupancy(3)
Name Location Built Acquired Units thousands) Unit(1) (Sq.Ft.) 1995 1996 1995 1996 1995 1996
- ----- -------- ----- ------- ----- --------- ------ -------- ---- ---- ---- ---- ---- ----
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama
Shoal Run Birmingham 1986 1996 276 $10,996 $39,839 903 $(4) $582 $(4) $0.64 (4) 85%
Florida
Indigo Plantation Daytona 1989 1994 304 11,531 37,930 882 549 573 0.62 0.65 92% 88%
Waterford Village Delray Beach 1989 1994 236 13,632 57,762 910 758 756 0.83 0.83 95% 92%
Country Club
Place Ft. Lauderdale 1987 1996 152 8,694 57,194 1,100 (4) 838 (4) 0.76 (4) 94%
Laurel Gardens Ft. Lauderdale 1989 1995 384 26,320 68,541 1,192 849 864 0.73 0.72 92% 88%
Mariner Club Ft. Lauderdale 1988 1996 304 18,256 60,053 931 (4) 875 (4) 0.94 (4) 92%
Welleby Lake Club Ft. Lauderdale 1991 1993 304 18,323 60,274 1,061 785 798 0.74 0.75 91% 91%
---- ------ ------ ----- ---- ---- ---- ---- --- ---
1,144 71,593 62,581 1,076 830 846 0.73 0.79 92% 91%
Beach Club Ft. Myers 1990 1995 320 12,282 38,382 872 582 600 0.67 0.69 96% 92%
Colony Place Ft. Myers 1991 1993 300 18,388 61,294 1,136 739 753 0.65 0.66 98% 95%
Polos Ft. Myers 1991 1993 328 15,313 46,687 955 632 650 0.66 0.68 96% 94%
Viridian Lake Ft. Myers 1991 1992 320 12,807 40,021 863 638 647 0.74 0.75 95% 92%
---- ------ ------ ----- --- --- ---- ---- --- ---
1,268 58,791 46,365 953 646 661 0.68 0.70 96% 93%
Bermuda Cove Jacksonville 1989 1994 350 15,756 45,018 912 661 668 0.72 0.73 99% 96%
Claire Point Jacksonville 1986 1993 256 13,673 53,410 1,010 674 693 0.67 0.69 98% 97%
Deerbrook Jacksonville 1983 1993 144 7,090 49,237 1,293 703 739 0.54 0.57 96% 94%
Princeton Square Jacksonville 1984 1992 288 8,171 28,370 738 495 520 0.67 0.70 96% 95%
Royal Oaks Jacksonville 1991 1993 284 12,335 43,434 816 607 613 0.74 0.75 98% 96%
Spicewood Springs Jacksonville 1986 1992 512 16,700 32,616 759 511 527 0.67 0.69 97% 95%
Timberwalk Jacksonville 1987 1993 284 12,790 45,035 851 575 592 0.68 0.70 98% 98%
Waterford Jacksonville 1988 1993 432 19,266 44,598 1,066 662 671 0.62 0.63 97% 95%
---- ------ ------ ----- --- --- ---- ---- --- ---
2,550 105,781 41,483 902 600 615 0.67 0.69 97% 96%
Cypress Cove Melbourne 1990 1993 326 16,165 49,586 1,027 657 678 0.64 0.66 91% 91%
Lakeridge
at Moors Miami 1991 1993 175 12,010 68,629 970 871 844 0.90 0.87 94% 95%
Auvers Village Orlando 1991 1993 480 22,682 47,254 1,021 651 675 0.64 0.66 94% 97%
Bishop Park Orlando 1991 1993 324 16,944 52,297 903 616 637 0.68 0.71 93% 94%
Conway Station Orlando 1987 1993 242 11,319 46,773 787 575 594 0.73 0.75 93% 97%
Copper Terrace Orlando 1989 1992 300 11,828 39,427 902 657 665 0.73 0.74 92% 94%
Lexington Park Orlando 1988 1993 252 11,269 44,717 799 585 601 0.73 0.75 92% 89%
Mission Bay Orlando 1991 1993 304 17,261 56,780 1,087 748 763 0.69 0.70 92% 91%
Valencia
Plantation Orlando 1990 1996 194 9,956 51,320 899 (4) 684 (4) 0.76 (4) 96%
---- ------ ------ ----- --- --- ---- ---- --- ---
2,096 101,260 48,311 930 643 663 0.69 0.72 93% 94%
Augustine Club Tallahassee 1988 1993 222 8,370 37,705 900 625 633 0.69 0.70 95% 86%
Plantations
at Killearn Tallahassee 1990 1996 184 7,445 40,460 849 (4) 628 (4) 0.74 (4) 94%
---- ----- ------ ---- --- --- ---- ---- --- ---
406 15,815 38,953 877 625 631 0.69 0.72 95% 90%
Audubon Village Tampa 1990 1993 447 20,254 45,311 849 615 632 0.72 0.74 96% 95%
Essex Place Tampa 1989 1996 148 5,330 36,014 834 (4) 626 (4) 0.75 (4) 97%
Falls Tampa 1985 1993 240 8,393 34,971 655 504 519 0.77 0.79 95% 94%
Lofton Place Tampa 1988 1993 280 15,018 53,634 953 657 668 0.69 0.70 96% 94%
Promenade Tampa 1994 1994 334 20,953 62,734 978 742 764 0.78 0.78 95% 95%
---- ------ ------ ---- --- --- ---- ---- --- ---
1,449 69,948 48,273 865 643 650 0.74 0.75 96% 95%
Georgia
Belmont Crossing Atlanta 1988 1993 316 13,334 42,196 1,023 615 643 0.60 0.63 97% 96%
Belmont Landing Atlanta 1988 1993 424 16,219 38,253 911 582 611 0.64 0.67 97% 97%
Champions Park Atlanta 1987 1994 252 11,613 46,084 806 626 644 0.78 0.80 98% 97%
Gwinnett
Crossing (6) Atlanta 1990/89 1992/95 574 20,515 35,741 874 588 623 0.67 0.71 99% 96%
Harvest Grove Atlanta 1986 1992 376 11,057 29,407 927 574 593 0.62 0.64 97% 95%
Lexington Glen Atlanta 1990 1993 480 31,295 65,198 1,095 807 853 0.74 0.78 98% 93%
Madison at
River Sound Atlanta 1996 1996 134 9,284 69,285 834 (4) 793 (4) 0.95 (4) 63%
Shadowlake Atlanta 1989 1994 228 9,832 43,122 1,018 611 652 0.60 0.64 99% 96%
Sweetwater Glen Atlanta 1986 1992 200 6,097 30,484 802 556 579 0.69 0.72 97% 97%
Willow Trail Atlanta 1985 1993 224 7,808 34,856 860 561 587 0.65 0.68 97% 97%
Windridge Atlanta 1982 1994 272 11,949 43,931 845 604 629 0.71 0.74 99% 95%
---- ----- ----- ----- --- --- ---- ---- --- ---
3,480 149,004 42,817 931 622 657 0.67 0.71 98% 96%
Downtown Augusta (5) (5) 75 3,405 45,401 974 448 478 0.46 0.49 93% 86%
South Augusta Augusta 1950 1984 110 1,725 15,685 707 305 314 0.43 0.44 74% 63%
Woodcrest Augusta 1982 1982 248 8,511 34,317 875 502 519 0.57 0.59 83% 75%
Woodknoll Augusta 1975 1982 52 1,539 29,595 900 451 477 0.50 0.53 99% 95%
Other Augusta 1984 1984 1 72 72,131 1,300 675 675 0.52 0.52 100% 100%
---- ----- ----- ----- --- --- ---- ---- --- ---
486 15,252 31,383 856 443 447 0.54 0.52 84% 76%
Greentree Savannah 1983 1986 194 7,218 37,206 852 544 569 0.64 0.67 98% 95%
Huntington Savannah 1986 1992 147 5,229 35,571 812 578 606 0.71 0.75 99% 97%
Magnolia Villa Savannah 1986 1986 144 5,529 38,399 1,119 572 603 0.51 0.54 98% 96%
Marsh Cove Savannah 1983 1986 188 7,954 42,306 1,053 609 644 0.58 0.61 98% 96%
West Wind Landing Savannah 1985 1993 192 7,110 37,029 1,124 628 660 0.56 0.59 99% 99%
---- ----- ----- ----- --- --- ---- ---- --- ---
865 33,040 38,196 994 587 617 0.60 0.63 98% 96%
Maryland
Clarys Crossing Baltimore 1984 1994 198 12,060 60,908 938 786 805 0.84 0.86 96% 95%
North Carolina
Timber Hollow Chapel Hill 1986 1991 198 6,577 33,219 735 614 653 0.84 0.89 99% 96%
Berkshire Place Charlotte 1982 1990 240 8,856 36,901 882 594 615 0.67 0.70 96% 95%
English Hills Charlotte 1984 1994 280 10,465 37,376 688 536 559 0.78 0.81 93% 93%
Hunt Club Charlotte 1990 1992 300 10,747 35,823 891 653 665 0.73 0.75 98% 95%
Kimmerly Glen Charlotte 1986 1995 260 9,491 36,505 750 533 549 0.71 0.73 95% 94%
Lake Point Charlotte 1984 1989 296 10,481 35,408 918 553 597 0.60 0.65 97% 94%
Regency Charlotte 1986 1996 178 11,288 63,416 925 (4) 771 (4) 0.92 (4) 94%
Steeplechase Charlotte 1986 1994 247 9,205 37,267 724 537 558 0.74 0.77 93% 96%
---- ----- ----- ----- --- --- ---- ---- --- ---
1,801 70,533 39,163 823 569 610 0.71 0.75 95% 94%
Adams Farm Greensboro 1987 1994 300 15,198 50,660 1,005 661 690 0.66 0.69 98% 93%
Chatham Wood High Point 1986 1990 208 7,165 34,448 811 504 531 0.62 0.65 97% 97%
Duraleigh Woods Raleigh 1987 1994 362 18,326 50,625 784 635 644 0.81 0.82 96% 93%
Misty Woods Raleigh 1984 1991 360 11,122 30,894 766 554 587 0.72 0.77 96% 97%
Sailboat Bay Raleigh 1986 1993 192 6,347 33,057 641 524 547 0.82 0.85 98% 95%
Sommerset Place Raleigh 1983 1990 144 5,464 37,946 780 610 626 0.78 0.80 97% 96%
---- ----- ----- ----- --- --- ---- ---- --- ---
1,058 41,259 38,998 751 584 605 0.78 0.81 97% 95%
Ohio
Saw Mill Columbus 1987 1994 340 20,272 59,623 1,161 724 750 0.65 0.65 91% 88%
South Carolina
Quarterdeck Charleston 1986 1989 230 9,550 41,521 810 551 589 0.68 0.73 100% 100%
Summit Place Charleston 1985 1985 226 8,201 36,290 892 459 460 0.51 0.52 89% 87%
Waters Edge Charleston 1985 1988 200 7,796 38,979 911 539 547 0.59 0.60 96% 93%
Windsor Place Charleston 1984 1989 224 8,104 36,178 953 524 540 0.55 0.57 90% 88%
---- ----- ----- ----- --- --- ---- ---- --- ---
880 33,651 38,240 892 518 534 0.58 0.60 94% 92%
Hollows Columbia 1987 1991 212 6,467 30,507 762 497 516 0.65 0.68 96% 95%
Haywood Pointe Greenville 1985 1991 216 6,864 34,448 848 537 560 0.63 0.66 98% 98%
Tennessee
The Landings Memphis 1986 1994 292 11,689 40,029 786 562 570 0.72 0.73 89% 94%
Nashville
Cherry Creek (7) Nashville 1996/86 1994 407 23,977 58,911 902 489 716 0.72 0.79 93% 91%
Waterford
Plantation Nashville 1994 1996 180 11,183 62,129 1,027 (4) 758 (4) 0.74 (4) 96%
---- ----- ----- ----- --- --- ---- ---- --- ---
587 35,160 59,898 940 488 729 0.72 0.78 93% 93%
Texas
Estate at
Quarry Lake Austin 1995 1996 302 18,212 60,304 894 (4) 852 (4) 0.95 (4) 85%
Madison at the
Arboretum Austin 1995 1996 161 10,440 64,842 937 (4) 840 (4) 0.90 (4) 95%
Madison at
Stone Creek Austin 1995 1995 390 23,735 60,860 862 790 789 0.92 0.92 82% 89%
Sedona Springs Austin 1995 1996 396 27,630 69,772 950 (4) 888 (4) 0.93 (4) 88%
---- ----- ----- ----- --- --- ---- ---- --- ---
1,249 80,016 64,064 907 790 842 0.92 0.93 82% 88%
Madison at
Cedar Springs Dallas 1995 1995 380 24,465 64,382 898 850 870 0.95 0.97 91% 97%
Madison at
Chase Oaks Dallas 1995 1995 470 29,381 62,512 895 800 816 0.89 0.91 88% 91%
Madison on
Melrose Dallas 1995 1995 200 14,038 70,191 947 877 908 0.93 0.96 68% 88%
Madison on
the Parkway Dallas 1995 1995 376 24,884 66,180 904 832 851 0.95 0.94 89% 85%
Madison at
Round Grove Dallas 1995 1995 404 25,146 62,244 933 789 790 0.85 0.85 91% 91%
---- ----- ----- ----- --- --- ---- ---- --- ---
Virginia
Champions Club Richmond 1988 1994 212 10,396 49,036 776 629 656 0.81 0.85 96% 93%
Hickory Creek Richmond 1984 1994 294 15,389 52,345 851 639 664 0.75 0.78 96% 95%
---- ----- ----- ----- --- --- ---- ---- --- ---
506 25,785 50,958 820 635 661 0.78 0.81 96% 94%
TOTALS 24,93 $1,175,427 $47,138 903 $639 $670 $0.70$0.74 95% 93%
</TABLE>
(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 month end.
(3) Represents average 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
(6) Includes 260 units acquired on April 28, 1995.
(7) 1995 amounts represent the initial 127 units owned.
<PAGE>
Development Communities
At December 31, 1996, the Company had four communities with 1,358 units
under construction (of which 134 units have been delivered) and four
communities with 1,590 units under development as outlined below. These
communities will be completed at an expected total cost of $212.1 million. In
addition, the Company owns land for 1,072 additional units to be built in
subsequent phases of development communities in Greensboro, 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. These developers are not partners of the Company and have no
interest in the real estate or improvements which are owned in the fee simple
by Merry Land. The developers fees are computed as a share of the value of the
completed projects, based on agreed upon formulas, less actual costs. Merry
Lands 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 Companys current development and
recently completed communities. Estimated cost consists of land, direct
construction costs and indirect costs, including projected fees to third party
development managers and allocated overhead (dollars in thousands, except cost
per unit):
<TABLE>
<CAPTION>
Cost of
Total Units
Total Estimated Total Placed
Estimated Cost Cost Units in in Estimated
Location Community Units Cost Per Unit to Date Service Service Completion
-------- --------- ----- ---- -------- ------- ------- ------- ----------
Completed
- ---------
<S> <S> <C> <C> <C> <C> <C> <C> <C>
Nashville Cherry Creek 280 $19,137 $68,346 $19,137 280 $19,137 4Q1996
Under Construction
- ------------------
Atlanta River Sound 586 $41,250 $70,392 $27,939 134 $9,284 1Q 1998
Greensboro
Adams Farm II (1) 200 13,200 66,000 5,970 - - 4Q 1997
Savannah Long Point 308 21,000 68,182 9,628 - - 1Q 1998
Richmond Wyndham 264 23,400 88,636 3,962 - - 4Q 1997
---- ------ ------ ----- ---- -----
1,358 $98,850 $72,791 $47,499 134 $9,284
Under Development
- ------------------
Greensboro
Bridford Lake 300 $ 20,400 $68,000 $ 1,968 1998
Richmond Spring Oak 506 38,800 76,680 4,421 1998
Nashville Bell Road 360 22,000 61,111 1,596 1998
Atlanta
Sweetwater Creek 424 32,000 75,472 3,674 1999
---- ------ ------ -----
1,590 $113,200 $71,195 $11,659
Future Development
- ------------------
Nashville Cherry Creek 200 $12,000 $60,000 $2,795
Savannah Long Point II 352 20,400 57,955 627
Nashville Bell Road II 320 20,400 63,750 1,596
Greensboro
Bridford Lake II 200 12,000 60,000 1,218
---- ------ ------ -----
1,072 $64,800 $60,448 $6,236
</TABLE> __________
(1) Adjoins the Companys Adams Farm community
The Company also owns land adjacent to several existing communities (Essex
Place, Hunt Club, Magnolia Villas, Quarterdeck, Waters Edge, and Westwind
Landing) which is suitable for the further development of apartments. This
land was bought when the adjacent communities were acquired.
The Company believes that there is more risk associated with development
activities than with buying operating communities. Such risks include those
associated with obtaining regulatory approvals and entitlement, timely
completion of construction, cost control and marketing and lease up. Any
one or more of these factors could cause adverse changes in the construction
budgets referred to in the table. The Company believes that the potentially
higher returns on development projects merit the assumption of this additional
risk. The Companys present intent is to limit the total cost of development
underway at any given time to no more than 10% of its total assets.
Other Assets
Unimproved Land. The Company owns 5,315 acres of undeveloped land with a
book value of $4.1 million. Most of this land was acquired by the companys
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 Companys land. The Company also
leases 100 acres to another company for the mining of sand and gravel and
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 also owns eight small commercial
properties in the Augusta area, primarily office buildings, including the
Companys headquarters building, which were acquired before the Company began to
focus on apartments. These properties, aggregating 206,000 square feet, have a
book value of $5.1 million. The Company intends to sell these properties other
than the Companys headquarters as circumstances allow.
<PAGE>
Part I
Item 3 - Legal Proceedings
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Part II
<PAGE>
Item 5 - Market for the Registrants Common Stock and Related Shareholders
Matters
Common Stock
Merry Lands 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.
Dividends
High Low Declared
---- ---- --------
1996
Fourth quarter $ 21.75 $18.25 $.37
Third quarter 22.13 20.13 .37
Second quarter 22.25 20.00 .37
First quarter 23.75 21.63 .37
1995
Fourth quarter $24.00 $20.25 $.35
Third quarter 22.38 20.13 .35
Second quarter 21.50 18.88 .35
First quarter 21.63 19.00 .35
On December 31, 1996 the Company had 4,419 shareholders of record. The
Company estimates that an additional 21,000 shareholders hold their shares in
street name.
On January 17, 1997, the Board of Directors declared a dividend of $0.39,
up from $0.37, per share of common stock to be paid on March 31, 1997 to
holders of record on March 14, 1997. The current annual dividend rate is
$1.56 per share. The $.39 quarterly dividend represents a payout of 76% of
funds from operations available for common shares for the quarter ended
December 31, 1996, 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 (excluding capital gains) 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 Companys dividends paid to its shareholders may be
deemed either capital gain, ordinary income or a return of capital, or all of
these. Future dividends will be declared at the discretion of the Board of
Directors after considering the Companys 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:
1996 1995 1994
---- ---- ----
Ordinary income $1.18 $1.34 $1.24
Capital gains .11 .06 .01
Return of capital .19 - -
----- ----- -----
Total dividends paid $1.48 $1.40 $1.25
Series A Preferred Stock
Merry Lands $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.
Dividends
High Low Declared
----- --- ---------
1996
Fourth quarter $28.88 $25.13 $.4375
Third quarter 29.38 27.63 .4375
Second quarter 29.75 27.25 .4375
First quarter 31.75 30.00 .4375
1995
Fourth quarter $32.00 $27.00 $.4375
Third quarter 29.50 27.00 .4375
Second quarter 28.63 25.13 .4375
First quarter 28.25 25.50 .4375
The federal income tax status of dividends paid to holders
Series A Preferred Stock wasas follows:
1996 1995 1994
---- ---- ----
Ordinary income $1.61 $1.68 $1.73
Capital gains .14 .07 .02
Return of capital - - -
----- ----- -----
Total dividends paid $1.75 $1.75 $1.75
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 preferred, provided the common shares are trading above $18.65, subject to
adjustments for certain circumstances.
Series B Preferred Stock
Merry Lands $2.205 Series B Cummulative Convertible Preferred Stock is not
publicly traded. The Company has granted to the holders of the Series B
Preferred Stock certain registration rights. The federal income tax
status of dividends paid to holders of Series B Preferred Stock was as follows:
1996 1995 1994
---- ---- ----
Ordinary income $2.025 $2.115 $.367
Capital gains .180 .090 .003
Return of capital - - -
------ ------ ------
Total dividends paid $2.205 $2.205 $.370
The Series B Preferred Stock 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 Companys common shares are
trading above the conversion price of $21.04 per share, subject to adjustments
for certain circumstances.
Series C Preferred Stock
Merry Lands $2.15 Series C Cumulative Convertible Preferred Stock is
traded on the New York Stock Exchange under the symbol MRYprc. The following
table sets forth the high and low sales prices of the Series C Preferred Stock
on the NYSE, and the cash dividends declared per share of Series C Preferred
Stock:
Dividends
High Low Declared
---- --- ---------
1996
Fourth quarter $28.88 $24.50 $.5375
Third quarter 28.63 26.25 .5375
Second quarter 28.38 25.75 .5375
First quarter 30.25 27.00 .5375
1995
Fourth quarter $29.00 $26.75 $.5375
Third quarter 28.00 26.38 .5375
Second quarter 27.00 24.25 .6390
First quarter 25.25 24.50 ____
The federal income tax status of dividends paid to holders of Series C
Preferred Stock was as follows:
1996 1995
---- ----
Ordinary income $1.97 $1.64
Capital gains .18 .07
Return of capital - -
----- -----
Total dividends paid $2.15 $1.71
The Series C Preferred Stock is convertible into common shares at a
conversion price of $22.00 per share of common stock and ha s an annual
dividend rate of $2.15 per share payable quarterly, which dividend
rate will be increased to equal at least the dividends paid on the number of
shares of common stock into which the Series C Preferred Stock is
convertible. The Series C Preferred Stock may not be redeemed for cash at any
time, but may be redeemed by the Company for common shares after March 31, 2000,
at a rate of 1.136 shares of common for each share of Series C Preferred
Stock provided the common shares are trading above $22.00, subject to
adjustments for certain circumstances.
Series D Preferred Stock
On December 5, 1996 the Company completed a public offering of $50.0
million of its 8.29% Series D Cumulative Redeemable Preferred Stock. It has an
annual dividend rate of $4.145 per year, payable quarterly.
The Series D Preferred Stock may not be redeemed until December 10, 2026.
The shares are not listed on an established securities exchange. During 1996,
the Company paid a dividend of $.242 per share, of which $.02 was capital
gains.
Dividend Reinvestment and Stock Purchase Plan
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. During 1996, the Company issued 678,606 shares under the plans at an
average of $20.38 per share. These shares provided the Company $13.8 million
in new equity capital. The Dividend Reinvestment and Stock Purchase Plan have
provided new equity capital as follows (dollars in thousands):
1996 1995 1994
---- ---- ----
Dividend Reinvestment $ 9,128 $ 8,547 $ 3,935
Stock Purchase Plan 4,704 2,622 2,539
------- ------- -------
$ 13,832 $ 11,169 $ 6,474
<PAGE>
Part II Item 6
(Dollars in thousands except apartment units
and per share amounts)
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Years Ended December 31,
-------------------------------------------------------------
<S> <C> <C <C> <C> <C>
Operating Data
Income from property operations: 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Rental and mineral royalty revenue $176,989 $145,214 $103,169 $56,181 $23,479
Rental expenses, property tax
and insurance 68,087 58,527 38,409 22,611 9,604
Depreciation of real estate owned 34,490 26,265 17,877 9,066 4,156
-------- -------- -------- -------- -------
74,412 60,422 46,883 24,504 9,719
Income from mortgage backed securities:
Interest income - - - - 3,978
Interest expense - - - - 1 ,558
-------- -------- -------- -------- --------
- - - - 2,420
Other income:
Other interest and dividend income 5,454 6,908 2,440 2,463 1,940
Other 6,178 4,476 (655) 10 249
-------- -------- -------- -------- --------
11,632 11,384 1,785 2,473 2,189
Expenses:
Interest unrelated to
mortgage backed securities 22,527 15,646 10,394 5,640 4,230
General and administrative 2,858 2,396 1,773 1,433 1,304
Depreciation - other, amortization 860 670 470 180 44
Other non-recurring costs - 1,370 200 1,308 -
-------- -------- -------- -------- --------
26,245 20,082 12,837 8,561 5,578
Gains on sales of assets:
Gains on sales of investments 2,679 1,673 881 6,960 332
Gains on sales of land - 68 196 1,023 377
Gains on sales of
depreciable real estate 1,528 72 77 9 83
Gains on mortgage backed securities - - - - 1,903
-------- -------- -------- --------- --------
4,207 1,813 1,154 7,992 2,695
Net income 64,006 53,537 36,985 26,408 11,445
Preferred dividends paid 19,843 18,129 7,934 4,025 -
-------- -------- -------- ------- --------
Net income available for common shares $44,163 $35,408 $29,051 $22,383 $11,445
======== ======== ======== ======== =========
Weighted average common shares 35,919 33,368 26,430 17,268 10,652
Weighted average fully
diluted common shares 46,577 43,112 32,562 20,381 10,753
Fully diluted earnings per common share $1.23 $1.06 $ 1.10 $ 1.30 $ 1.07
Common dividends paid $53,886 $46,734 $33,467 $16,934 $7,285
Common dividends paid per share $1.48 $1.40 $ 1.25 $ .90 $ .66
December 31,
---------------------------------------------------------------
Balance Sheet Data 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Apartments, at cost $1,075,933 $943,070 $756,588 $532,465 $196,494
Senior notes 360,000 360,000 120,000 120,000 -
Mortgage debt 27,546 - 17,835 37,173 8,238
Other debt - - 74,975 - 109,358
Total shareholders equity 798,772 695,859 584,851 397,715 106,831
Total assets $1,208,246 $1,072,840 $806,655 $562,172 $235,695
Other Data
Funds from operations $94,047 $79,360 $53,907 $28,790 $12,906
Funds from operations available to common $74,446 $61,231 $45,973 $24,764 $12,906
Apartment units acquired
or developed during year 2,889 3,444 4,872 7,452 2,845
Total apartment units at end of year 24,936 22,296 18,852 13,981 6,529
</TABLE>
The Company uses the National Association of Real Estate Investment Trusts
task forces recently published definition of funds from operations. Funds
from operations is defined as net income computed in accordance with
generally accepted accounting principles, excluding non-recurring costs and
net realized gains (other than gains included in other income as cash
management income) 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 Companys operating performance and liquidity.
<PAGE>
Part II
Item 7 - Managements Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in thousands except apartment and per share data)
This filing includes statements that are forward looking statements
regarding expectations with respect to market conditions, development projects,
occupancy rates, capital requirements and sources. These assumptions and
statements are subject to various factors, unknown risks and uncertainties,
including general economic conditions, local market factors, delays and cost
overruns in construction, completion and rent up of development communities,
performance of consultants or other third parties, and environmental concerns,
any of which may cause actual results to differ from the Companys current
expectations.
Results of Operations for the Twelve Months Ended December 31, 1996 and 1995.
Rental Markets. Rental markets were weaker in 1996 than in 1995 primarily
as a result of new apartment construction. The Companys apartment portfolio
experienced occupancy in 1996 1.9% below the 95% average occupancy experienced
throughout 1995 as the result of both weaker markets and the purchase of
several communities still in their initial lease up. Company wide occupancy
at December 31, 1996 totaled 92.2%, down from 94.0% and 96.0% at the same
date in 1995 and 1994. The Company believes that if apartment starts do not
rise above their current level and if general economic activity, job growth
and household formation remain strong, markets should begin to strengthen
in late 1997 as newly delivered units are absorbed.
Rental Operations - Total Portfolio. The operating performance of the
Companys apartment portfolio is summarized in the following table (dollars in
thousands, except average monthly rent):
Change from
% Change 1995/1996 1996 1995 1994
----- ------ --------- --------- ---------
Average Units 16% 3,256 23,547 20,291 15,278
Rental income 22 $31,770 $176,053 $144,283 $101,667
Operating
expenses(1) 18 7,409 48,135 40,726 27,578
Taxes and insurance 22 3,462 18,982 15,520 10,058
----- ------ ------ ------
Subtotal 19 10,871 67,117 56,246 37,636
24% $20,899 $108,936 $ 88,037 $ 64,031
Average
occupancy(2) (1.9)%(3) 93.3% 95.2% 95.2%
Occupancy at
end of period (1.8)% 92.2% 94.0% 96.0%
Average
monthly rent(4) 4.9% $ 670 $ 639 $ 591
Expense ratio(5) (0.9)(3) 38.1% 39.0% 37.0%
__________
(1) Excludes depreciation and amortization.
(2) Represents the average physical occupancy at each month end for the
period held.
(3) Represents increase or decrease between periods.
(4) Represents weighted average monthly rent charged for occupied units and
rents asked fo unoccupied units at December 31.
(5) Represents total of operating expenses, taxes and insurance divided by
rental revenues.
The continued expansion of the Companys apartment holdings is evident in
the increase in rental revenues in 1996 from 1995 and 1994. The 4.9%
increase in portfolio average rental rates in 1996 resulted from both
higher rents at the Companys continuing properties and also the higher rents
charged at the communities the Company acquired and put in service in 1996
and 1995, whose monthly rents averaged $764 at December 31, 1996, versus the
total portfolio average of $670.
Rental Operations - Same Store. The performance of the 18,410 units which
the Company held for both 1996 and 1995 (same store results), is summarized in
the following table (dollars in thousands, except average monthly rent; see
footnotes above):
Change from
% Change 1995/1996 1996 1995
------- ------- ---------- -----------
Rental income 2.1% $2,794 $133,981 $131,187
Personnel (1.6) (228) 13,742 13,970
Utilities (6.5) (517) 7,477 7,994
Operating 8.8 540 6,690 6,150
Maintenance and grounds 2.4 227 9,561 9,334
Taxes and insurance (3.9) (542) 13,402 13,944
----- ----- ------- ------
Subtotal (1) (1.0) (520) 50,872 51,392
4.2% $3,314 $83,10 9 $79,795
Average occupancy (2) (1.5)%(3) 93.9% 95.4%
Occupancy at
end of period (2.1)% 92.9% 95.0%
Average monthly rent (4) 3.2% $636 $616
Expense ratio (5) (1.2)%(3) 38.0% 39.2%
__________
Same store community results do not include Gwinnett Crossing, a 314 unit
community, or Cherry Creek, a 127 unit community, which were owned for both
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 was recently renovated. It has
been combined with a development community which contains 280 additional
units.
Rental income rose by $2.8 million or 2.1% for those properties held for
all of both periods, as a result of 1.5% lower occupancy and 3.2% higher
average rental rates. At December 31, 1996 same property occupancy
was 92.9%, down 2.1% from December 31, 1995, as apartment construction reduced
occupancy in some of the Companys markets.
Operating expenses were $0.5 million or 1.0% less in 1996 than 1995.
Increases in operating and maintenance and grounds expenses were more than
offset by lower personnel, utilities and taxes and insurance expense.
Personnel costs were down primarily because year end cash incentive bonuses
decreased by $0.4 million in 1996 as a result of weaker operating results.
Utilities expense decreased by $0.5 million as the Company has begun charging
its residents a portion of its water expense. Property taxes and insurance
decreased by $0.5 million to reflect lower than expected millage rates, and the
successful appeal of the assessed values for several properties. Off site
property management expense, which is allocated to the communities, rose $0.5
million as the Company established additional corporate positions in training,
marketing and maintenance. Maintenance and grounds expense increased by
$0.2 million as turnover increased to 70% from 68% in 1995.
For those 13,665 apartments owned by the Company for both 1995 and 1994,
rental revenues increased $4.2 million or 4.7% in 1995 over 1994 as a result of
flat average occupancy during the year, 4.5% higher average rental rates and a
$0.7 million increase in other income. Operating expenses increased $2.4
million or 6.9% in 1995 as compared to the same period in 1994. Personnel
costs accounted for $1.5 million of this increase as a result of $0.4 million
higher performance bonuses, $0.3 million higher ESOP contributions, $0.2
million higher workers compensation insurance premiums and higher levels of
staffing as formerly vacant positions were filled at communities acquired in
late 1993. Insurance costs rose $0.3 million due to increases in premiums for
communities located in Florida.
Rental Operations - Development Communities. The Company placed in service
414 newly developed units in 1996 as summarized in the following table:
Occupancy
Units put of delivered
Units in service Total units units at
Community Location planned in 1996 in service 12/31/96
-------- -------- ------- ------- ---------- ------------
Cherry Creek Nashville 280 280 280 91.1%
Madison at
River Sound Atlanta 586 134 134 71.6%
----- ----- -----
414 414 84.8%
As discussed above, the 280 Cherry Creek II community is adjacent to the
existing 127 unit Cherry Creek community which has been renovated and these
two communities are now operated as one. Development and renovation of both
phases of Cherry Creek were completed in 1996. The operating results
for 1996 and 1995 for Cherry Creek and the Madison at River Sound are
summarized in the following table (dollars in thousands; see footnotes above):
1996 1995
---- ----
Units in service at year end 541 127
Rental income $1,967 $645
Operating expense (1) 678 276
Taxes and insurance 64 41
--- ---
Subtotal 742 317
$1,225 $328
Rental Operations - Other Communities. Other communities are those not
considered same store communities or development communities. At December 31,
1996, these communities included 6,233 units including Gwinnett Crossing and
5,919 units that were bought in 1996 and 1995. The performance of the other
communities for 1996 and 1995 is summarized in the following table (dollars in
thousands; see footnotes above):
1996 1995
---- ----
Units 6,233 3,759
Rental income $40,105 $12,451
Operating expense (1) 9,986 3,001
Taxes and insurance 5,517 1,535
-------- ------
Subtotal 15,503 4,536
$24,602 $ 7,915
Interest, Dividend and Other Income. Interest, dividend and other income
are summarized in the following table (dollars in thousands):
1996 1995 1994
---- ---- ----
Interest income $ 2,276 $ 5,514 $2,165
Dividend income 3,178 1,394 275
Cash management income 6,022 4,336 (681)
Other income 155 140 26
------ ------ ------
Total $11,631 $11,384 $1,785
Interest, dividend and other income rose to $11.6 million in 1996 from
$11.4 million in 1995 and $1.8 million 1994, due to the temporary investment of
proceeds from six different offerings for unsecured debt, preferred stock and
common stock during 1995 and 1996. Cash management income is derived primarily
from the gain on sale of temporary investments. In 1997, the Company expects
to realize additional cash management income in the first and second quarters
as it liquidates its remaining equity security investments and invests the
proceeds in apartments. At December 31, 1996, unrealized gains totaled
$3.0 million on these investments. As a result of the liquidation of the cash
management portfolio, the Company expects interest, dividend, and other
income to be less in 1997 than in 1996.
Interest Expense. Interest expense totaled $22.5 million in 1996, up from
$15.6 million in 1995 and $10.4 million in 1994. Average debtoutstanding rose
to $373.0 million in 1996 from $264.6 million in 1995 and $165.2
million in 1994, primarily as a result of the issuance of senior unsecured
notes in 1995 and the assumption of $27.6 million of mortgage debt in
connection with the acquisition of three apartment communities. The
weighted average interest rate charged on all the companys debt increased to
7.1% in 1996 from 6.9% in 1995 and 6.4% in 1994, primarily as a result of the
replacement of short-term financing with the higher rates on the senior
unsecured notes and mortgage debt assumed. During 1996 and 1995, $3.2 million
and $1.1 million of interest related to the Companys development projects was
capitalized.
General and Administrative Expenses. Merry Land maintains a simple, centralized
and cost efficient management structure. General and administrative expenses
for 1996 totaled $2.9 million, representing 1.6% of rental revenues and
3.0% of funds from operations. For 1995, expenses averaged 1.7% of rental
revenues and 3.0% of funds from operations and for 1994 averaged 1.7% of rental
revenues and 3.3% of funds from operations. In 1997, increased levels of
staffing at the corporate offices may offset portfolio growth and general and
administrative expenses may rise somewhat as a percent of rents in 1997.
Gains on Sales of Assets. Net gains recognized on the sale of assets
totaled $4.2 million in 1996, $1.8 million in 1995, and $1.2 million for 1994.
In December 1996, the Company sold Hunters Chase, a 244-unit apartment
community located in Cleveland, Ohio for $15.0 million, recognizing a
$1.5 million gain. Hunters Chase, along with another Ohio community, was
acquired in 1994 as part of a twelve property portfolio transaction, but the
Ohio locations of these two communities do not fit the Companys strategy of
building a Southern franchise. The Company expects to sell the other Ohio
community in 1997. Also during 1996, the Company sold 200,000 shares of
First Financial Holdings, Inc. for a gain of $2.7 million. Gains in 1995 came
primarily from the sale of 281,400 shares of First Financial Holdings, Inc. and
included losses on the sale of Treasury securities and the unwinding of an
interest rate lock. Gains in 1994 came from the sale of securities and real
estate.
Net Income. Net income totaled $64.0 million in 1996, $53.5 million in
1995 and $37.0 million in 1994. Net income available for common shareholders
totaled $44.2 million in 1996, $35.4 million in 1995 and $29.1 million in 1994.
The increases in net income and net income available for common shareholders
for 1996 when compared to 1995 and 1994 arose principally from substantially
increased operating income from apartments due to the growth of the Companys
apartment holdings, as well as increases in other income and net realized
gains. Net income per common share in 1996 increased to $1.23 from
$1.06 in 1995, and $1.10 in 1994.
Dividends to preferred shareholders. Preferred dividends are summarized in
the following table (dollars in thousands):
Issue
date 1996 1995 1994
------- ------ ------ ------
Series A Preferred share dividends 6/23/93 $ 891 $ 1,425 $6,454
Series B Preferred share dividends 10/31/94 8,820 8,820 1,480
Series C Preferred share dividends 3/8/95 9,890 7,884 -
Series D Preferred share dividends 12/5/96 242 - -
------- ------- -------
Total preferred dividends $19,843 $18,129 $7,934
The increase in preferred dividends arose from an increase in the amount
of preferred stock outstanding during the period. In December 1996 the Company
issued 1.0 million shares of the Series D Preferred Stock. In March and April
1995 the Company issued 4.6 million shares of Series C Convertible Preferred
Stock. Shareholders of the Companys Series A Preferred Stock have converted
4.2 million of the 4.6 million Series A shares originally issued in June 1993
into 5.7 million shares of the Companys common stock as the common dividend
was raised above the equivalent preferred dividend.
Funds From Operations. Funds from operations rose 19% to
$94.0 million 1996 as compared to $79.4 million in 1995 and $53.9 million
in 1994. Funds from operations available to common shares rose 22% to $74.4
million in 1996 compared to $61.2 million in 1995 and $46.0 million in 1994.
These increases were principally due to higher rental operating income
resulting from the growth of the Companys apartment holdings and increased
other income. On a fully diluted per share basis, funds from operations
increased 10% to $2.02 in 1996 from $1.84 in 1995 and $1.66 in 1994.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
1996 1995 1994
---- ---- ----
Net income $64,006 $53,537 $36,985
Less preferred dividends paid 19,843 18,129 7,934
------- ------- -------
Net income available for common shares 44,163 35,408 29,051
Add depreciation of real estate owned 34,490 26,265 17,877
Less net realized gains 4,207 1,812 1,155
Plus non-recurring expenses - 1,370 200
------- ------ -------
Funds from operations
available to common shares 74,446 61,231 45,973
Add convertible preferred dividends 19,601 18,129 7,934
------ ------ ------
Funds from operations-fully diluted $94,047 $79,360 $53,907
======= ======= =======
Weighted average common shares outstanding -
Primary 35,919 33,368 26,430
Fully diluted 46,577 43,112 32,562
Funds from operations per share-
Primary $2.07 $1.84 $1.74
Fully diluted $2.02 $1.84 $1.66
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 Companys operating performance, or as a measure of the
Companys 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 (other than gains included in other
income as cash management income), 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 Companys funds from operations by $0.9 million, $0.7 and $0.5
million in 1996, 1995 and 1994, respectively.
Liquidity and Capital Resources
Financial Structure. The Companys senior notes and its preferred stock are
rated investment grade by Standard & Poors Corporation (BBB+/BBB), Moodys
Investors Services, Inc. (Baa2/Baa3), and Duff & Phelps Credit Rating Co.
(BBB+/BBB). At December 31, 1996, total debt equaled 33% of total
capitalization at cost, and 26% of total capitalization with equity valued at
market. At that date, the Companys financial structure was as follows
(dollars in thousands):
Equity at
% of Market % of
Book (1) Total Value Total
-------- --- --------- ------
Advances under line of credit $ -
Mortgage loans 27,546
6.625% senior unsecured notes, 1999 40,000
6.625% senior unsecured notes, 2000 40,000
6.625% senior unsecured notes, 2001 40,000
7.25% senior unsecured notes, 2002 40,000
6.875% senior unsecured notes, 2003 40,000
6.875% senior unsecured notes, 2004 40,000
7.25% senior unsecured notes, 2005 120,000
------- ---- ---------- -----
Total debt 387,546 33% $387,546 26%
Series D preferred equity 50,000 4% 50,000 3%
Common and convertible preferred
equity (2) 748,772 63% 1,037,210 71%
------- ---- --------- -----
Total equity 798,772 67% 1,087,210 74%
Total capitalization $1,186,318 100% $1,474,756 100%
========== ==== ========== ====
__________
(1) Represents principal amount of debt, face amount of preferred stock and
book value of common stock.
(2) Assumes conversion of all outstanding convertible preferred stock into
common stock.
At December 31, 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. At December 31, 1996, the
Companys loan agreements and the covenants under its senior unsecured notes
would have allowed it to borrow $150.0 million on an unsecured basis.
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 December 31, 1996, the Company had three mortgage loans
outstanding, which were assumed in connection with the purchase of the Mariner
Club, Estate on Quarry Lake and Plantations at Killearn communities.
Liquidity. Merry Land expects to meet its short-term liquidity requirements
with cash provided by operating activities, by selling its remaining marketable
securities and short term investments and by borrowing under its line
of credit. The Companys 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 Companys capital requirements resulting from its development commitments
as of December 31, 1996. Not included in this table are additional acquisitions
and developments, debt repayments or the additional sale of debt or equity
securities (dollars in thousands):
Estimated capital requirements:
Development costs through 12/31/99 $295,987
Less development costs paid thru 12/31/96 (84,023)
-------
211,964
Acquisition of communities under development 61,200
-------
Total future development commitments 273,164
Estimated capital sources:
Cash on hand at 12/31/96 $ 32,793
Marketable securities held at 12/31/96 23,799
Funds available under line of credit 130,000
-------
Total capital sources 186,592
Excess of capital requirements over existing sources $ 86,572
========
Cash Flows. The following table summarizes cash flows for 1996, 1995, and
1994 including the availability of marketable securities (dollars in thousands):
Sources and Uses of Cash
1996 1995 1994
---- ---- ----
Operating activities $ 91,666 $ 82,224 $ 56,099
Sales of common and
preferred stock 104,680 107,725 181,465
Net borrowings 27,546 148,234 55,637
Dividend reinvestment and
stock purchase plan 13,832 11,170 6,474
Other sources 15,731 9,738 3,977
------- ------- -------
Total sources of cash 253,455 359,091 303,652
Acquisitions of and
improvements to properties (152,177) (213,521) (242,134)
Development of properties (63,081) (12,813) (8,129)
Dividends paid (73,729) (64,868) (41,401)
Other uses (178) (4,021) -
------- ------- -------
Total uses (289,165) (295,223) (291,664)
------- ------- -------
Increase (decrease) in cash,
cash equivalents and
marketable securities ($35,710) $63,868 $11,988
Cash, cash equivalents and marketable securities decreased by $35.7
million in 1996 as the Company invested funds raised in the debt and equity
offerings in 1995 in apartments. With the expansion of the Companys apartment
holdings, operating cash flow has grown to $91.7 million in 1996 from $82.2
million in 1995 and $56.1 million in 1994. In 1996, the Company sold 2.8
million shares of common stock at $21.50 per share for net proceeds
of $56.0 million, and issued 1.0 million shares of Series D Preferred Stock
for net proceeds of $48.7 million. $13.8 million was reinvested by shareholders
under the Companys Dividend Reinvestment and Stock Purchase Plans.
The primary use of cash is apartment acquisitions and improvements.
Expenditures for apartment communities under development increased to $63.1
million in 1996 from $12.8 million in 1995 and $8.1 million in 1994, as the
level of construction increased. The Company expects to spend approximately
$100.0 million in 1997 on the construction of apartment communities.
Dividends paid in 1996 increased from 1995 and 1994 due to an increase in the
average amount of stock outstanding and in the case of the Companys common
stock, an increase in the quarterly dividend.
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. In 1997, the Company expects expenditures for replacements to
rise on a per unit basis as it continues to invest in its communities
in order that they be presented to maximum advantage to renters. Improvements
are expenditures which significantly increase the revenue producing
capability or which significantly reduce the cost of operating assets.
Improvement expenditures may rise somewhat in 1997 on a per unit basis from
the level in 1996. 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. In addition to the
direct costs of construction, 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 capital expenditures for 1996,
1995 and 1994 (dollars in thousands, except per unit data):
1996 1995 1994
---- ---- ----
Apartment communities:
Acquisitions $139,066 $198,339 $226,041
Development projects:
Development costs 59,917 11,749 8,129
Capitalized interest 3,164 1,064 -
Replacements for
stabilized communities (1) 5,250 3,178 1,710
Improvements (2) 6,979 11,103 14,169
Commercial properties 462 373 153
Corporate level expenditures 419 528 61
------- ------- -------
$215,257 $226,334 $250,263
======= ======= =======
Per Unit:
Replacements for
stabilized communities (1) $285 $233 $262
Improvements (2) $278 $498 $752
__________
(1) Stabilized communities are those properties which have been owned for at
least one full calendar year. In 1996, 18,410 units were stabilized as
compared to 13,665 units in 1995 and 6,528 units in 1994.
(2) Improvements include expenditures for all properties owned during the
period, including replacements at newly acquired communities.
Inflation. Substantially all of the Companys 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 consolidated balance sheets of Merry Land &
Investment Company, Inc. (a Georgia corporation) as of December 31, 1996 and
1995 and the related consolidated statements of income, changes in stockholders
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Companys
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Merry Land &
Investment Company, Inc. as of December 31, 1996 and 1995 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
January 17, 1997
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
Merry Land & Investment Company, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
1996 1995
---- ----
PROPERTIES AT COST
Apartments $1,175,427 $1,009,056
Apartments under development 56,110 20,942
Commercial rental property 6,874 6,412
Land held for investment or future development 4,090 3,815
Operating equipment 1,817 1,397
--------- ---------
1,244,318 1,041,622
Less accumulated depreciation and depletion (102,277) (68,346)
--------- ---------
1,142,041 973,276
CASH AND SECURITIES
Cash and cash equivalents 32,793 43,834
Marketable securities 23,799 48,468
--------- ---------
56,592 92,302
OTHER ASSETS
Notes receivable 726 816
Brokers receivable 2,449 742
Deferred loan costs 3,497 4,022
Other 2,941 1,682
--------- ---------
9,613 7,262
--------- ---------
TOTAL ASSETS $1,208,246 1,072,840
========= =========
NOTES PAYABLE
Mortgage loans $ 27,546 $ -
Senior notes 360,000 360,000
Note Payable-credit line - -
--------- ---------
387,546 360,000
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 4,016 4,295
Resident security deposits 1,669 2,578
Accrued property taxes 7,642 4,294
Accrued employee compensation 2,284 2,472
Other 6,317 3,342
--------- ---------
21,928 16,981
STOCKHOLDERS EQUITY
Preferred stock, at $25 and $50 liquidation
preference, 20,000 shares authorized;
359 shares $1.75 Series A
Cumulative Convertible 8,970 16,688
4,000 shares $2.205 Series B
Cumulative Convertible 100,000 100,000
4,600 shares, $2.15 Series C
Cumulative Convertible 114,995 114,995
1,000 shares, $4.145 Series D
Cumulative Redeemable Preferred 50,000 -
Common stock, at $1 stated value,
100,000 shares authorized
37,784 and 33,876 shares issued 37,784 33,876
Capital surplus 498,907 425,611
Cumulative undistributed net earnings 2,064 11,787
Notes receivable from stockholders and ESOP (17,502) (15,796)
Unrealized gain on securities 3,554 8,698
--------- --------
798,772 695,859
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $1,208,246 $1,072,840
========= =========
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.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Years Ended December 31,
1996 1995 1994
---- ---- ----
INCOME
Rental income $176,620 $144,778 $102,352
Mineral royalties 369 436 817
Mortgage interest 70 79 95
Other interest 2,206 5,435 2,070
Dividends 3,178 1,394 275
Other income 6,177 4,476 (655)
------- ------- -------
188,620 156,598 104,954
EXPENSES
Rental expense 48,350 42,180 27,953
Interest 22,527 15,646 10,394
Depreciation - real estate 34,490 26,265 17,877
Depreciation - other 290 208 122
Amortization - financing costs 569 462 348
Taxes and insurance 19,737 16,347 10,456
General and administrative expense 2,858 2,396 1,773
Other non-recurring expense - 1,370 200
------- ------- --------
128,821 104,874 69,123
Income before net realized gains 59,799 51,724 35,831
Net realized gains 4,207 1,813 1,154
------- ------- -------
NET INCOME 64,006 53,537 36,985
Dividends to preferred shareholders 19,843 18,129 7,934
------- ------- -------
NET INCOME AVAILABLE
FOR COMMON SHARES $44,163 $35,408 $29,051
====== ====== ======
Weighted average common shares
Outstanding 35,919 33,368 26,430
Fully diluted 46,577 43,112 32,562
NET INCOME PER SHARE
Primary $1.23 $1.06 $1.10
Fully diluted $1.23 $1.06 $1.10
===== ===== =====
CASH DIVIDENDS DECLARED
PER COMMON SHARE $1.48 $1.40 $1.25
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.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(In thousands)
<TABLE>
<CAPTION>
Cumulative Total
Preferred Stock Common Stock Capital Undistributed Stockholders
Shares Amount Shares Amount Surplus Net Earnings Equity
------ ------ ------ ------ ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bal. 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 - -
Employee purchase and
sale of common stock - - 380 380 6,702 - 7,082
Increase in notes receivable
from stockholders - - - - (6,687) - (6,687)
Common stock dividends - - - - - (33,467) (33,467)
Dividend reinvestment
and stock purchase plan - - 322 322 6,152 - 6,474
Preferred stock dividends - - - - - (7,934) (7,934)
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
-------------------------------------------------------------------
Bal., December 31, 1994 6,516 $ 162,908 30,744 $30,744 $368,086 $23,113 $584,851
1995 net income - - - - - 53,537 53,537
Sale of preferred stock 4,600 115,000 - - (5,314) - 109,686
Common stock issued in conversion of
preferred stock,
Series A (1,849) (46,225) 2,478 2,478 43,747 - -
Employee purchase and
sale of common stock - - 226 226 3,966 - 4,192
Increase in notes receivable
from stockholders - - - - (3,453) - (3,453)
Common stock dividends - - - - - (46,734) (46,734)
Dividend reinvestment
and stock purchase plan - - 552 552 10,618 - 11,170
Preferred stock dividends - - - - - (18,129) (18,129)
Common stock redeemed - - (124) (124) (2,576) - (2,700)
Sale of common stock
to the ESOP - - - - (2,059) - (2,059)
Unrealized gain on
securities - - - - 5,498 - 5,498
-------------------------------------------------------------------
Bal., December 31, 1995 9,267 $231,683 33,876 $33,876 $418,513 $11,787 $695,859
1996 net income - - - - - 64,006 64,006
Sale of common stock - - 2,773 2,773 53,259 - 56,032
Sale of preferred stock 1,000 50,000 - - (1,275) - 48,725
Common stock issued in
conversion of preferred
stock, Series A (308) (7,718) 414 414 7,304 - -
Employee purchase and
sale of common stock - - 72 72 1,500 - 1,572
Increase in notes receivable
from stockholders - - - - (974) - (974)
Common stock dividends - - - - - (53,886) (53,886)
Dividend reinvestment and
stock purchase plan - - 679 679 13,153 - 13,832
Preferred stock dividends - - - - - (19,843) (19,843)
Common stock redeemed - - (30) (30) (645) - (675)
Sale of common stock
to the ESOP - - - - (732) - (732)
Unrealized gain on
securities - - - - (5,144) - (5,144)
-------------------------------------------------------------------
Bal., December 31, 199 6 9,959 $273,965 37,784 $37,784 $484,959 $2,064 $798,772
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Item 8 - Financial Statements and Supplementary Data
Merry Land & Investment Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES:
Rents and royalties received $176,968 $145,232 $103,149
Interest received 2,345 4,887 2,011
Dividends received 3,921 1,394 275
Rental expense (48,516) (40,981) (27,804)
General and administrative expense (2,637) (2,257) (1,229)
Interest expense (22,806) (13,575) (10,158)
Property taxes and insurance expense (16,644) (12,461) (10,282)
Other (965) (15) 137
-------- -------- --------
Net cash provided by
operating activities: 91,666 82,224 56,099
INVESTING ACTIVITIES:
Principal received on notes receivable 85 125 116
Sale of securities and
temporary investments 31,340 274,944 7,030
Purchase of securities and
temporary investments (5,408) (284,189) (15,477)
Sale of real property 14,904 156 302
Purchase of real property (139,066) (198,339) (226,041)
Development of real property (63,081) (12,813) (8,129)
Improvements to real property (13,111) (15,182) (16,093)
Nonrecurring expenditures - (1,546) -
Other 33 (2,475) 158
------- -------- -------
Net cash provided by
investing activities (174,304) (239,319) (258,134)
FINANCING ACTIVITIES:
Net borrowings (repayments)
- repurchase agreements - (17,375) 17,375
Net borrowings (repayments)
- bank debt - (57,600) 57,600
Net borrowings - senior notes - 240,000 -
Assumption of mortgage loans 27,546 7,041 -
Repayments of mortgage loans - (23,832) (19,338)
Cash dividends paid - common (53,886) (46,739) (33,467)
Cash dividends paid - preferred (19,843) (18,129) (7,934)
Sale of common stock - public offerings 56,032 - 87,507
Sale of common stock
- reinvested dividends and
stock purchase plan 13,832 11,170 6,473
Sale of common stock - employees 3,266 977 395
Sale of preferred stock
- public offering 48,725 109,686 96,712
Common stock retired (3,343) (2,938) (3,148)
Net (borrowings) repayments - ESOP (732) (2,050) -
------- ------- -------
Net cash provided by
financing activities 71,597 200,211 202,175
------- ------- -------
NET INCREASE (DECREASE) IN CASH (11,041) 43,116 140
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 43,834 718 578
------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $32,793 $43,834 $ 718
The accompanying notes are an integral part of these statements.
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
Statements of Cash Flows (Continued)
Reconciliation of Net Income to Cash Flows from Operating Activities
Years Ended December 31,
1996 1995 1994
---- ---- ----
Net income $64,006 $53,537 $36,985
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,349 26,935 18,347
(Increase) decrease in interest
and accounts receivable (1,572) (586) (110)
(Increase) decrease in other assets (865) (2,012) (282)
Increase (decrease) in accounts payable
and accrued interest (1,853) 6,163 1,479
Gain on the sale of marketable securities (2,679) (1,673) (201)
Gain on the sale of real estate (1,528) (140) (273)
ESOP contributions 808 - 154
------ ------ ------
Net cash provided by operating activities $91,666 $82,224 $56,099
The accompanying notes are an intergal part of these financial statements.
<PAGE>
Part II
Item 8 - Financial Statements and Supplementary Data
MERRY LAND & INVESTMENT COMPANY, INC.
Notes to Consolidated Financial Statements
1. Nature of Business
Merry Land & Investment Company, Inc. is a real estate investment trust
(REIT), which acquires, builds and operates upscale apartment communities
throughout the Southern United States.
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 collected.
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:
Apartments 40-50 years
Land improvements 50 years
Commercial rental buildings 40-50 years
Furniture, fixtures, equipment and carpet 5-15 years
Operating equipment 3-5 years
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. In 1996,
the Company adopted SFAS No. 121. The adoption had no effect on the financial
statements.
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 5 for a further discussion of income taxes.
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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned corporations and limited partnerships. Any significant
intercompany transactions and accounts have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform with the 1996
presentation.
Use of Estimates
The preparation of these financial statements required the use of certain
estimates by management in determining the Companys assets, liabilities,
revenue and expenses. Actual results may differ from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, all investments purchased
with an original maturity of three months or less are considered to be cash
equivalents.
Development Activities
The cost of developed properties includes interest, property taxes,
insurance and allocated development overhead incurred during the construction
period. During 1996, interest of $3.2 million was capitalized.
3. Marketable Securities
The cost and market value of securities by major classification at
December 31 were as follows:
1996 1995 1994
Cost Market Cost Market Cost Market
----- ------ ----- ------- ----- ------
Common stocks $18,339 $21,361 $37,864 $46,018 $ 3,323 $7,702
Corporate debentures 1,906 2,438 1,906 2,450 1,906 2,401
U.S. Treasury notes - - - - 19,287 17,613
------ ------ ------ ------ ------ ------
$20,245 $23,799 $39,770 $48,468 $24,516 $27,716
In 1996, the Company sold 200,000 shares of First Financial holdings for a
gain of $2.7 million, and recorded other income of $6.0 million related to the
sale of REIT stocks. On January 1, 1994, the Company adopted SFAS No. 115 and
began reporting its marketable securities at market value with unrealized gains
and losses as a separate component of shareholders equity.Changes in net
unrealized gains are recorded as adjustments to this account and not as credits
or charges to earnings.
4. Borrowings
Borrowings outstanding at December 31, 1996 were as follows (in thousands):
1996 1995
---- ----
9.76% mortgage notes (a) $12,720 $ -
7.75% mortgage note (b) 9,600 -
7.625% mortgage note (c) 5,226 -
6.625% senior unsecured notes (d) 120,000 120,000
7.25% senior unsecured notes (e) 40,000 40,000
6.875% senior unsecured notes (f) 40,000 40,000
6.875% senior unsecured notes (g) 40,000 40,000
7.25% senior unsecured notes (h) 120,000 120,000
Advance under unsecured line of credit (i) - -
------- -------
$387,546 $360,000
(a) $10.7 million and $2.0 million, 9.76% mortgage notes, principal and
interest payable monthly, maturity 2001.
(b) $9.6 million 7.75% mortgage note, interest payable monthly, maturity
2002.
(c) $5.2 million, 7.625% mortgage note, interest and principal payable
monthly, maturity 2002.
(d) $120 million, 6.625% notes, interest payable semi-annually, principal
installments of $40 million each due 1999, 2000, and 2001.
(e) $40 million, 7.25% notes, interest payable semi-annually, maturity 2002.
(f) $40 million, 6.875% notes, interest payable semi-annually, maturity
2003.
(g) $40 million, 6.875% notes, interest payable semi-annually, maturity
2004.
(h) $120 million, 7.25% notes, interest payable semi-annually, maturity 2005.
(i) $130 million line of credit, first $100 million bearing interest equal
to LIBOR plus 0.65%, maturity June 1997 and next $30 million bearing
interest equal to LIBOR plus 0.75%, maturity October 1997.
The Company estimates that the fair value of borrowings approximates their
carrying value at December 31, 1996. Maturities of borrowings at December 31,
1996 were as follows (in thousands):
Loan
Amount
------
1997 $ 157
1998 171
1999 40,187
2000 40,204
2001 52,466
2002 54,361
2003 40,000
2004 40,000
2005 120,000
-------
$387,546
5. 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 Companys 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:
1996 1995 1994
---- ---- ----
Net income $64,006 $53,537 $36,985
Excess of tax over accounting depreciation (5,857) (6,944) (5,724)
Other (1,133) 2,423 (94)
------ ------ ------
Estimated taxable income $57,016 $49,016 $31,167
======= ======= =======
6. Incentive Stock Option Plan
Under the Companys incentive stock option plan, at December 31, 1996,
there were 430,000 shares available for grant and 532,000 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, 1996, 1995, and 1994,
are as follows:
Balance December 31, 1994 546,000
Exercised (weighted average $13.25 per share) (11,000)
Canceled (weighted average $19.00 per share) (25,000)
-------
Balance December 31, 1995 510,000
Issued (at $20.88 per share) 790,000
Exercised (weighted average $18.58 per share) (50,300)
Canceled (weighted average $19.98 per share) (66,000)
-------
Balance December 31, 1996
(weighted average $19.98 per share) 1,183,700
The following table summarizes information about stock options outstanding
at December 31, 1996:
Number Number
Outstanding Remaining Exercisable
Award Date at 12/31/96 Contractual Life Exercise Price at 12/31/96
--------- ---------- --------------- -------------- -----------
3/16/92 14,000 5.3 yrs. $ 8.25 14,000
7/12/93 80,000 6.6 yrs. 16.63 64,000
9/1/93 25,000 6.8 yrs. 18.75 20,000
1/18/94 60,000 7.1 yrs. 20.88 40,500
8/18/94 230,700 7.7 yrs. 19.00 130,700
11/3/94 20,000 7.9 yrs. 17.88 12,000
4/15/96 754,000 9.3 yrs. 20.88 250,800
--------- --------
1,183,700 532,000
During 1996, 1995 and 1994, the Company loaned officers and employees $3.3
million, $4.4 million and $7.2 million respectively, to purchase shares of the
Companys common stock. The loans are secured by the shares purchased, carry a
0% interest rate, and are due upon demand. The Company requires
that at least two thirds of dividends paid on these shares be used to repay the
indebtedness. $2.3 million, $0.9 million and $0.5 million was repaid in 1996,
1995 and 1994. At December 31, 1996, the balance of such additional loans was
$14.0 million. The Company accounts for its stock-based compensation plans
under APB No. 25, under which no compensation expense has been recognized,
since all options have been granted with an exercise price equal to the fair
value of the Companys stock on the date of grant. The Company adopted SFAS No.
123 in 1996 and estimated the fair value of each option grant as of the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 6.5%, expected life
of seven years, dividend yield of 6.8 %, and expected volatility of 24%.
Using these assumptions, the fair value of the stock options granted in 1996
is $2.0 million which would be amortized as compensation expense over the
vesting period of the options. Options generally vest equally over five years.
The effect of SFAS No. 123 on the financial statements was less than 1% and
deemed immaterial.
7. Employee Stock Ownership Plan
The Company maintains an Employee Stock Ownership Plan under which 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 $1.1 million, $0.8 million and $0.5 million in 1996, 1995 and
1994. In 1996, the Company loaned the ESOP $1.5 million to buy 75,000 shares of
the Companys common stock. At December 31, 1996, the balance of this note and a
previous note was $3.5 million. Both notes bear an interest rate equal to the
thirty-day LIBOR rate plus 65 basis points. The notes are due December 31,
2002 and December 31, 2003.
8. Preferred Stock
On December 5, 1996, the Company in a public offering issued 1.0 million
shares of Series D Redeemable Preferred Stock for net proceeds of $48.7
million. In a public offering on March 8, 1995, the Company issued 4.6
million shares of Series C Cumulative Convertible Preferred Stock for net
proceeds of $109.8 million. 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 to a small group of institutional investors. The Company has
granted registration rights to the holders of the Series B and Series D
shares. In 1993, the Company sold to the public 4.6 million shares of Series
A Cumulative Convertible Preferred Stock for net proceeds of $109.2 million.
During 1996 Series A Cumulative Convertible Preferred shareholders converted
0.3 million shares to 0.4 million shares of the Company common stock and at
December 31, 1996 4.2 million shares of Series A had been converted to 5.7
million shares of common stock leaving 0.4 million shares outstanding. There
were no other preferred stock conversions during the year. Preferred stock at
December 31, 1996 was as follows:
Preferred A Preferred B Preferred C Preferred D
----------- ------------ ----------- -----------
Price per share $25.00 $25.00 $25.00 $50.00
Shares issued 4,600,000 4,000,000 4,600,000 1,000,000
Shares outstanding 358,807 4,000,000 4,599,800 1,000,000
Dividend per share $1.75 $2.205 $2.15(a) $4.145
Call date June 30, 1998 Oct. 31, 1999 March 31, 2000 Dec. 10, 2026
Conversion price $18.65 $21.04 $22.00 -(b)
(a) The Series C Preferred Stock contains a ratchet provision which provides
that the preferred dividend rate shall be increased if necessary so that
it will always be the greater of $2.15 per share or the dividends payable
on the number of shares of common stoc into which the Series C Preferred
Stock is convertible.
(b) The Series D Preferred Stock is not convertible into any other securities
of the Company.
9. Dividends
In 1996, the Company paid dividends per share as follows:
Common Preferred A Preferred B Preferred C Preferred D
------ ------------ ----------- ----------- -----------
March 31 $.37 $.4375 $.55125 $ .5375 $ -
June 30 .37 .4375 .55125 .5375 -
September 29 .37 .4375 .55125 .5375 -
December 29 .37 .4375 .55125 .5375 .242
---- ------- ------- ------ ----
Total $1.48 $1.7500 $2.20500 $2.1500 $.242
The ordinary, long-term capital gains and return of capital distributions
for 1996 were as follows:
Common Preferred A Preferred B Preferred C Preferred D
Dividends Dividends Dividends Dividends Dividends
-------- -------- --------- --------- ---------
Ordinary 79.89% 91.82% 91.82% 91.82% 91.82%
Return of Capital 13.00% - - - -
Long-term
capital gain 7.11% 8.18% 8.18% 8.18% 8.18%
------- ------- ------- ------- -------
100.00% 100.00% 100.00% 100.00% 100.00%
On January 17, 1997 the Company declared a $.39 per common share, $.4375
per Preferred A share, $.55125 per Preferred B share, $.5375 per Preferred C
and $1.03625 per Preferred D per share dividend payable on March 31, 1997.
The Companys dividend reinvestment plan allows any shareholder to elect to
use all or a portion of cash dividends paid to acquire additional shares of the
Companys common stock at a price equal to 95% of the higher of: (a) the average
of the high and low sales prices of the Companys 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 1996, 447,778
shares were issued at a total value of $9.1 million.
In December 1993 the Company established a Stock Purchase Plan which
provides holders of the Companys common stock and preferred stock with a method
of purchasing additional common stock of the Company through optional cash
payments without fees and at such 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 1996, 230,828 shares were
issued for a total value of $4.7 million.
<PAGE>
Part II
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Part III
Item 10 - Directors and Executive Officers of the Registrant
Incorporated by reference to the Companys definitive proxy statement
to be filed with the Securities and Exchange Commission.
Item 11 - Executive Compensation
Incorporated by reference to the Companys 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 Companys definitive proxy statement
to be filed with the Securities and Exchange Commission.
Item 13 - Certain Relationships and Related Transactions
Incorporated by reference to the Companys definitive proxy statement
to be filed with the Securities and Exchange Commission.
<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 Companys previously filed
Registration Statement File Nos. 33-65067, 33-03335, 33-63083, and 333-22221.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
March 21, 1997
<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
as 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
10-K:
Report of Independent Public Accountants on Schedules
Real Estate and Accumulated Depreciation
3. Exhibits.
(3.i) Amended and Restated Articles of Incorporation (incorporated herein
by reference to Exhibit 4(a) to the Companys Shelf Registration
Statement on Form S-3 filed December 15, 1995, file number 33-65067),
as amended by Articles of Amendment to Articles of Incorporation re
Series D Preferred Stock (incorporated herein by reference to Exhibit
4 to the Companys current report on Form 8-K filed December 11, 1996).
(3.ii) By-laws (incorporated herein by reference to Exhibit 3(ii) of Item
14 of the Companys 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 Companys $120,000,000 7 1/4% Notes due 2005 (incorporated herein
by reference to Item 7, Exhibit 4A to the Companys Form 8-K filed June
23, 1995).
(4.2) Indenture (incorporated herein by reference to Item 7, Exhibit 4B to
the Companys Form 8-K filed June 23, 1995).
(4.3) First Supplemental Indenture (incorporated herein by reference to
Item 7, Exhibit 4C to the Companys Form 8-K filed June 23, 1995).
(4.4) The Companys $40,000,000 7 1/4% Notes due 2002 (incorporated herein by
reference to Exhibit 4A to the Companys on Form 8-K filed September
1, 1995).
(4.5) The Companys $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
Companys 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 Companys Form 8-K filed July 15, 1996).
(10.2) $120,000,000 6.625% Senior Notes/Note Purchase Agreement (incorporated
herein by reference to Exhibit 10.ii of Item 6 of the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993).
(10.3) 1993 Incentive Stock Option Plan (incorporated herein by reference
to Exhibit (10.2.1) of item 14 of the Companys Annual Report on Form
10-K for the year ended December 31, 1993).
(10.4) Executive Officer Restricted Stock Loan Plan, as amended (incorporated
herein by reference to Exhibit (10.2.2) of the Companys Annual
Report on Form 10-K for the year ended December 31, 1993).
(10.5) Employee Stock Ownership Plan and Trust Agreement (incorporated herein
by reference to Exhibit (10.2.3) of Item 14 of the Companys Annual
Report on Form 10-K for the year ended December 31, 1993).
(10.6) 1994 Stock Option and Incentive Plan (incorporated herein by
reference to Exhibit (10.2.4) of Item 14 of the Companys Annual Report
on Form 10-K for the year ended December 31, 1993).
(10.7) 1995 Stock Option and Incentive Plan (incorporated herein by
reference to Appendix B to the Companys 1995 Proxy Statement on Form
DEF-14A filed March 27, 1995).
(10.8) Line of Credit Agreement (Unsecured) for $30 million with First
Alabama Bank dated October 7, 1996.
(11) Statement regarding computation of per share earnings.
(21) Subsidiaries of the subsidiaries of Merry Land &
Investment Company, Inc.:
State of Names Under Which
Name Type of Entity Formation Subsidiary Does Business
- -------------------------------------------------------------------------
Merry Land Apartment Merry Land Apartment
Communities, Inc. Corporation Maryland Communities
- -------------------------------------------------------------------------
ML Apartments
Limited Corporation Maryland ML Apartment Limited
- -------------------------------------------------------------------------
ML Texas Apartments LP Limited
Partnership Texas ML Texas Apartments
- -------------------------------------------------------------------------
ML North Carolina ML North Carolina
Apartments LP Limited Partnership Georgia Apartments LP
- -------------------------------------------------------------------------
ML Tennessee ML Tennessee
Apartments LP Limited Partnership Georgia Apartments LP
- -------------------------------------------------------------------------
ML Alabama ML Alabama
Apartments, Inc. Corporation Alabama Apartments LP
- --------------------------------------------------------------------------
(23) Consent of Arthur Andersen, LLP
(27) Financial Data Schedules
b) Reports on Form 8-K. The registrant filed reports on Form
8-K during the last quarter of 1996 as follows with respect to the
following matters.
Form Items Date Filed Location Financial Statements
---- ----------------- ---------- ------------ --------------------
8-K 5 (Illness of Chairman; Nov. 7, 1996 N/A N/A
W. Tennent Houston
appointed Chief
Executive Officer)
8-K 5,7 (Appointment Nov. 27, 1996; Ft. Lauderdale Statement of the
of 2 new directors; Fla.; Austin, Excess of
acquisition of Country Tx.; and Operating
Club Place; Estates at Birmingham, Revenues Over
Quarry Lakes; Shoal Run Ala. Specific
Expenses
8-K 5 (Death of Chairman) December 9, 1996 N/A N/A
8-K 5,7 (Completion of December 11, 1996 N/A N/A
Public Offering of
Series D Preferred
Stock)
<PAGE>
To the Shareholders of
Merry Land & Investment Company, Inc.
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in this Form 10-K, and have issued
our report thereon dated January 17, 1997. 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 Companys management
and are presented for purposes of complying with the Securities and Exchange
Commissions 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 17, 1997
<PAGE>
PART IV
Item 14-Schedule XI - Real Estate and Accumulated
Depreciation for the Year Ending December 31, 1996:
<TABLE>
<CAPTION>
Sub. Gross Amount at Whic
Initial Cost to Company Costs. Carried at December 31,1996
Capital.
--------------------- ------- ---------------------------
Encum- Buildings & Buildings & Total Deprec. Date Date Deprec
Residential brances Land Improvements Improve Land Improvements (a) (a Built Acqui'd Life
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adams Farm 1,500,000 12,712,085 985,892 1,500,000 13,697,977 15,197,977 1,169,244 1987 1994 5-50 yr.
Audubon Village 3,576,000 15,671,192 1,006,624 3,576,000 16,677,816 20,253,816 1,924,363 1990 1993 5-50 yr.
Augustine Club 1,110,000 6,330,825 929,591 1,110,000 7,260,416 8,370,416 906,594 1988 1993 5-50 yr.
Auvers Village 3,840,000 17,219,224 1,622,916 3,840,000 18,842,140 22,682,140 2,225,332 1991 1993 5-50 yr.
Beach Club 2,080,000 9,957,175 245,221 2,080,000 10,202,396 12,282,396 616,153 1990 1995 5-50 yr.
Belmont Crossing 1,580,000 10,983,800 770,029 1,580,000 11,753,829 13,333,829 1,353,220 1988 1993 5-50 yr.
Belmont Landing 2,120,000 13,195,900 903,174 2,120,000 14,099,074 16,219,074 1,614,880 1988 1993 5-50 yr.
Berkshire Place 805,550 7,166,331 884,282 805,550 8,050,613 8,856,163 1,915,102 1982 1990 5-50 yr.
Bermuda Cove 1,503,000 13,553,192 699,983 1,503,000 14,253,175 15,756,175 950,720 1989 1994 5-50 yr.
Bishop Park 2,592,000 13,375,363 977,007 2,592,000 14,352,370 16,944,370 1,532,898 1991 1993 5-50 yr.
Broadway 65,000 259,675 1,538,131 65,000 1,797,806 1,862,806 524,820 1918(b) 1983 5-50 yr.
Champions Club 954,000 9,083,755 357,780 954,000 9,441,535 10,395,535 599,495 1988 1994 5-50 yr.
Champions Park 1,134,000 10,158,363 320,929 1,134,000 10,479,292 11,613,292 663,013 1987 1994 5-50 yr.
Chatham Wood 700,000 5,620,292 844,828 700,000 6,465,120 7,165,120 1,862,649 1986 1990 5-50 yr.
Cherry Creek 635,000 2,901,168 20,440,603 635,000 23,341,771 23,976,771 443,800 1986 1994 5-50 yr.
Claire Pointe 2,048,000 9,710,500 1,914,533 2,048,000 11,625,033 13,673,033 1,003,209 1986 1993 5-50 yr.
Clarys Crossing 891,000 10,883,905 284,899 891,000 11,168,804 12,059,804 696,328 1984 1994 5-50 yr.
Colony Place 1,500,000 16,142,858 745,349 1,500,000 16,888,207 18,388,207 1,878,661 1991 1993 5-50 yr.
Conway Station 1,936,000 7,939,000 1,444,044 1,936,000 9,383,044 11,319,044 921,127 1987 1993 5-50 yr.
Copper Terrace 1,200,000 9,985,256 642,808 1,200,000 10,628,064 11,828,064 1,529,860 1989 1992 5-50 yr.
Country Club Place 912,000 7,717,525 64,011 2,376,000 6,317,536 8,693,536 65,083 1987 1996 5-50 yr.
Cypress Cove 1,630,000 12,880,863 1,654,133 1,630,000 14,534,996 16,164,996 1,698,049 1990 1993 5-50 yr.
Deerbrook 1,008,000 5,133,133 948,942 1,008,000 6,082,075 7,090,075 773,795 1983 1993 5-50 yr.
Duraleigh Woods 1,629,000 15,936,411 760,964 1,629,000 16,697,375 18,326,375 1,074,596 1987 1994 5-50 yr.
English Hills 1,260,000 8,584,736 620,650 1,260,000 9,205,386 10,465,386 621,671 1984 1994 5-50 yr.
Essex Place 888,000 4,241,225 200,844 888,000 4,442,069 5,330,069 107,499 1989 1996 5-50 yr.
Estate on
Quarry Lake (e) 1,963,000 16,037,341 211,324 2,574,000 15,637,665 18,211,665 153,935 1995 1996 5-50 yr.
Falls 1,440,000 6,210,000 743,089 1,440,000 6,953,089 8,393,089 786,462 1985 1993 5-50 yr.
Greentree 325,000 6,001,731 891,243 325,000 6,892,974 7,217,974 1,865,549 1983 1986 5-50 yr.
Gwinnett Crossing 2,632,000 16,839,075 1,044,367 2,632,000 17,883,442 20,515,442 1,927,031 1990 1992 5-50 yr.
Harvest Grove 752,000 9,759,351 545,656 752,000 10,305,007 11,057,007 1,478,661 1986 1992 5-50 yr.
Haywood Pointe 480,000 5,917,041 467,383 480,000 6,384,424 6,864,424 1,214,638 1985 1991 5-50 yr.
Hickory Creek 1,323,000 12,864,616 1,201,806 1,323,000 14,066,422 15,389,422 920,331 1984 1994 5-50 yr.
Hollows 450,000 5,256,127 761,363 450,000 6,017,490 6,467,490 1,218,131 1987 1991 5-50 yr.
Hunt Club 990,000 9,016,445 740,339 990,000 9,756,784 10,746,784 1,369,706 1990 1992 5-50 yr.
Huntington 485,100 4,371,125 372,751 485,100 4,743,876 5,228,976 664,119 1986 1992 5-50 yr.
Indigo Plantation 1,520,000 9,414,575 595,998 1,520,000 10,010,573 11,530,573 835,182 1989 1994 5-50 yr.
Kimmerly Glen 1,040,000 8,071,809 379,481 1,040,000 8,451,290 9,491,290 492,932 1986 1995 5-50 yr.
Lake Point 1,058,975 8,096,736 1,325,019 1,058,975 9,421,755 10,480,730 1,742,181 1984 1989(c) 5-50 yr.
Lakeridge 2,100,000 9,600,000 310,016 2,100,000 9,10,016 12,010,016 965,815 1991 1993 5-50 yr.
Landings 1,314,000 9,978,363 396,161 1,314,000 10,374,524 11,688,524 690,200 1986 1994 5-50 yr.
Laurel Gardens 4,800,000 20,742,850 776,985 4,800,000 21,519,835 26,319,835 1,350,673 1989 1995 5-50 yr.
Lexington Glen 5,760,000 24,320,449 1,214,558 5,760,000 25,535,007 31,295,007 2,584,294 1990 1993 5-50 yr.
Lexington Park 2,016,000 8,518,000 734,749 2,016,000 9,252,749 11,268,749 969,649 1988 1993 5-50 yr.
Lofton Place 2,240,000 11,960,000 817,598 2,240,000 12,777,598 15,017,598 1,325,696 1988 1993 5-50 yr.
Madison at
Cedar Springs 2,470,000 21,562,600 432,435 2,470,000 21,995,039 24,465,039 1,282,373 1995 1995 5-50 yr.
Madison at
Chase Oaks 3,055,000 25,957,233 368,606 3,055,000 26,325,839 29,380,839 1,111,260 1995 1995 5-50 yr.
Madison on Melrose 1,300,000 12,613,527 124,709 1,300,000 12,738,236 14,038,236 495,140 1995 1995 5-50 yr.
Madison at
River Sound 838,529 7,369,277 0 1,914,849 7,369,277 9,284,126 12,874 1996 1996 5-50 yr.
Madison at
Round Grove 2,626,000 22,060,707 459,782 2,626,000 22,520,489 25,146,489 1,167,619 1995 1995 5-50 yr.
Madison at
Stone Creek 2,535,000 20,986,021 214,256 2,535,000 21,200,277 23,735,277 830,623 1995 1995 5-50 yr.
Madison at the
Arboretum 1,046,500 9,054,154 338,966 1,046,500 9,393,120 10,439,620 321,960 1995 1996 5-50 yr.
Madison on the
Parkway 2,444,000 22,020,109 419,540 2,444,000 22,439,649 24,883,649 1,235,702 1995 1995 5-50 yr.
Magnolia Villa 351,001 4,159,438 1,019,049 351,001 5,178,487 5,529,488 1,299,388 1986 1986 5-50 yr.
Mariner Club (f) 1,824,000 16,227,875 204,302 1,824,000 16,432,177 18,256,177 432,574 1988 1996 5-50 yr.
Marsh Cove 329,786 6,649,280 974,436 329,786 7,623,716 7,953,502 1,982,694 1983 1986 5-50 yr.
Mission Bay 2,432,000 14,107,966 721,165 2,432,000 14,829,131 17,261,131 1,587,201 1991 1993 5-50 yr.
Misty Woods 720,000 7,959,871 2,442,084 720,000 10,401,955 11,121,955 1,813,154 1984 1991 5-50 yr.
Plantations at
Killearn (d) 828,000 6,563,020 53,608 828,000 6,616,628 7,444,628 0 1990 1996 5-50 yr.
Polos 1,640,000 12,945,374 727,943 1,640,000 13,673,317 15,313,317 1,522,860 1991 1993 5-50 yr.
Princeton Square 864,000 5,252,025 2,054,615 864,000 7,306,640 8,170,640 983,185 1984 1992 5-50 yr.
Promenade 2,171,000 18,535,275 247,016 2,171,000 18,782,291 20,953,291 1,091,858 1994 1994 5-50 yr.
Quarterdeck 580,000 8,216,250 753,465 580,000 8,969,715 9,549,715 1,615,890 1986 1989 5-50 yr.
Regency 890,000 10,318,505 79,511 890,000 10,398,016 11,288,016 33,762 1986 1996 5-50 yr.
Royal Oaks 1,988,000 9,663,149 684,083 1,988,000 10,347,232 12,335,232 1,193,707 1991 1993 5-50 yr.
Sailboat Bay 960,000 4,937,213 449,719 960,000 5,386,932 6,346,932 619,933 1986 1993 5-50 yr.
Saw Mill Village 1,530,000 18,062,088 679,701 1,530,000 18,741,789 20,271,789 1,160,028 1987 1994 5-50 yr.
Sedona Springs 2,574,000 24,834,228 221,506 2,574,000 25,055,734 27,629,734 977,527 1995 1996 5-50 yr.
Shadow Lake 1,140,000 8,397,085 294,751 1,140,000 8,691,836 9,831,836 743,206 1989 1994 5-50 yr.
Shoal Run 1,380,000 9,437,830 177,793 1,980,000 9,015,623 10,995,623 108,063 1986 1996 5-50 yr.
Sommerset Place 360,000 4,235,504 868,668 360,000 5,104,172 5,464,172 1,329,284 1983 1990 5-50 yr.
South Augusta 194,375 1,135,112 395,838 194,375 1,530,950 1,725,325 574,153 1950 1982 5-50 yr.
Spicewood Springs 1,536,000 13,614,751 1,548,803 1,536,000 15,163,554 16,699,554 2,228,155 1986 1992 5-50 yr.
Steeple Chase 1,111,500 7,671,643 421,826 1,111,500 8,093,469 9,204,969 539,398 1986 1994 5-50 yr.
Summit Place 411,500 6,891,173 898,757 411,500 7,789,930 8,201,430 1,997,220 1985 1985 5-50 yr.
Sweetwater Glen 500,000 4,571,011 1,025,769 500,000 5,596,780 6,096,780 806,151 1986 1992 5-50 yr.
Timber Hollow 800,000 5,214,004 563,342 800,000 5,777,346 6,577,346 1,143,745 1986 1991 5-50 yr.
Timberwalk 1,988,000 9,833,825 968,097 1,988,000 10,801,922 12,789,922 1,335,633 1987 1993 5-50 yr.
Valencia Plantation 873,000 9,033,168 50,000 873,000 9,083,168 9,956,168 0 1990 1996 5-50 yr.
Viridian Lake 960,000 11,022,351 824,296 960,000 11,846,647 12,806,647 1,624,221 1991 1992 5-50 yr.
Waterford 3,024,000 15,027,450 1,214,707 3,024,000 16,242,157 19,266,157 1,946,583 1988 1993 5-50 yr.
Waterford Place 900,000 10,222,867 60,400 900,000 10,283,266 11,183,266 33,332 1994 1996 5-50 yr.
Waterford Village 1,888,000 10,950,825 792,956 1,888,000 11,743,781 13,631,781 860,997 1989 1994 5-50 yr.
Waters Edge 448,000 6,490,069 857,799 448,000 7,347,868 7,795,868 1,572,161 1985 1988 5-50 yr.
Welleby Lake 3,648,000 13,152,000 1,523,172 3,648,000 14,675,172 18,323,172 1,496,095 1991 1993 5-50 yr.
West Wind Landing 960,000 5,597,500 552,105 960,000 6,149,605 7,109,605 717,162 1985 1993 5-50 yr.
Willow Trail 1,120,000 6,088,097 599,732 1,120,000 6,687,829 7,807,829 807,619 1985 1993 5-50 yr.
Windridge 1,224,000 9,971,854 753,447 1,224,000 10,725,301 11,949,301 674,492 1982 1994 5-50 yr.
Windsor Place 377,500 6,195,990 1,530,402 377,500 7,726,392 8,103,892 1,454,167 1984 1989 5-50 yr.
Woodcrest(g) 73,163 -------- 8,293,835 73,163 8,437,564 8,510,727 2,462,928 1982 1983 5-50 yr.
Woodknoll 125,000 1,076,646 337,311 125,000 1,413,957 1,538,957 587,482 1975 1982 5-50 yr.
Miscell. 138,399 626,133 849,876 138,399 1,476,009 1,614,408 452,446 various various 5-50 yr.
- --------------------------------------------------------------------------------------------------------------------
Total Residential 132,962,878 946,831,460 95,488,554 132,962,878 1,042,463,743 1,175,426,621 99,493,351
Commercial 791,726 3,089,125 2,993,232 791,726 6,082,357 6,874,083 1,744,257 various various 5-50 yr.
Development in
Progress(g) 14,395,165 -------- 37,737,542 24,698,865 31,411,558 56,110,423 --------
Land 3,815,405 -------- -------- 3,815,405 -------- 4,059,944 29,526
Total $151,965,174 $949,920,585 $136,219,32 $162,268,874 $1,079,957,658 $1,242,471,071 $101,267,134
Notes:
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the years ending December 31, 1996, 1995 and 1994 are as
follows: Real Estate Accumulated Depreciation
------------------------------------------- -------------------------------------
1996 1995 1994 1996 1995 1994
Balance at beginning of period $1,040,225,976 $814,435,663 $564,519,670 $67,627,934 $41,362,624 $23,479,723
Additions- acquisitions and
improvements 216,470,076 225,806,187 250,201,373 34,489,629 26,265,310 17,904,287
Deductions- cost of real estate sold 14,22,981 15,874 285,380 850,429 ----- 21,386
Balance at end of period $1,242,471,071 $1,040,225,976 $814,435,663 $101,267,134 $67,627,934 $41,362,624
(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, 1996, the balance
outstanding was $5,226,400.
(e) This property secures two term loans. At December 31, 1996, the balances
outstanding were $1,995,268 and $10,724,566.
(f) This property secures a term loan. At December 31, 1996, the balance
outstanding was $9,600,000.
(g) These properties have carrying costs equal to $523,036 for Woodcrest and
$3,977,716 for development in progress.
</TABLE>
<PAGE>
Part IV
Item 14 - Exhibit 11 - Computation of Per Share Earnings
1996 1995 1994
---- ---- ----
PRIMARY
Net income $64,006,073 $53,537,199 $36,984,527
Preferred dividend requirement 19,842,834 18,129,144 7,933,704
---------- ---------- ----------
Net income available for common $44,163,239 $35,408,085 $29,050,823
========== ========== ==========
Average common shares
outstanding 35,918,565 33,367,527 26,430,241
Primary earnings per share average $1.23 $1.06 $1.10
========== ========== ==========
FULLY DILUTED:
Net income $64,006,073 $53,537,199 $36,984,527
Preferred dividend requirement 242,000 - -
---------- ---------- ----------
Net income $63,764,073 $53,537,199 $36,984,527
========== ========== ==========
Average convertible
preferred shares 10,658,838 9,744,051 6,132,041
Average common shares
outstanding 35,918,565 33,367,527 26,430,241
---------- ---------- ----------
Average fully diluted common
shares outstanding 46,577,403 43,111,578 32,562,282
========== ========== ==========
Fully diluted earnings per share $1.23* $1.06* $1.10*
*Actual computation is antidilutive.
<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
and Chief Executive Officer
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/Boone A. Knox 3/24/97 /s/W. Tennent Houston 3/24/97
- ------------------------ ------------------------
Boone A. Knox - Chairman Date W. Tennent Houston - Date
of the Board and Director President, Chief Executive
Officer and Director
/s/ Micheal N. Thompson 3/24/97 /s/W. Hale Barrett 3/24/97
- ----------------------- -----------------------
Michael N. Thompson, Date W. Hale Barrett - Date
Executive Vice President, Secretary
Chief Operating Officer and Director
/s/Hugh Calvin Long II 3/24/97 /s/Pierce Merry, Jr. 3/24/97
- ---------------------- ----------------------
Hugh Calvin Long II - Date Pierce Merry, Jr. - Date
Director Director
/s/Paul S. Simon 3/24/97 Robert P. Kirby 3/24/97
- --------------------- ---------------------
Paul S. Simon -Director Date Robert P. Kirby - Director Date
/s/Ronald J. Benton 3/24/97
- --------------------
Ronald J. Benton - Date
Vice President
