SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-K/A
AMENDMENT NO. 1
_________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
DECEMBER 31, 1997
Commission file number: 001-11081
________________
MERRY LAND & INVESTMENT COMPANY, INC.
P.O. Box 1417
Augusta, Georgia 30903
706-722-6756
State of Incorporation: Georgia I.R.S. Employer Identification Number:
58-0961876
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
7.625% Series E Cumulative Redeemable 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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The aggregate market value of the voting stock held by non affiliates of the
registrant on January 30, 1998: Common Stock, no par value--$819,689,731 (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, 1998 was
39,506,587.
Documents incorporated by reference: The 1998 definitive proxy statement to be
mailed to shareholders for the annual meeting scheduled for April 20, 1998, is
incorporated by reference into Part III of this form 10-K.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ----
Item 1 Business 1
Item 2 Properties 9
Item 3 Legal Proceedings 15
Item 4 Submission of Matters to a Vote of Security Holders 15
PART II
Item 5 Market for the Registrant's Common Stock and Related Shareholders'
Matters 16
Item 6 Selected Financial Data 20
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Item 8 Financial Statements and Supplementary Data 30
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 41
PART III
Item 10 Directors and Executive Officers of the Registrant 41
Item 11 Executive Compensation 41
Item 12 Security Ownership of Certain Beneficial Owners
and Management 41
Item 13 Certain Relationships and Related Transactions 41
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 42
<PAGE>
PART I
Item 1--Business
THE COMPANY
Merry Land & Investment Company, Inc. is an apartment operating company
and is one of the largest owners of upscale garden apartments in the United
States. At December 31, 1997, the Company had a total market capitalization
of $1.8 billion and owned a high quality portfolio of 104 apartment
communities, containing 29,526 units geographically diversified throughout
the Southern United States. The communities are located in nine states,
extending from the Washington, D.C. area to Texas and to Florida, with 32% of
the Company's assets located in Florida, 25% in Texas, and 43% in other
Southern states, based on cost. The Company also has seven apartment
communities under development and construction. The Company believes that its
strong capitalization, cost efficient operations and established brand
identity give it significant operating advantages over other apartment
operators. Merry Land completed its initial public securities offering in
1981 and elected real estate investment trust ("REIT") tax status in 1987.
The Company is headquartered in Augusta, Georgia and maintains area
management offices in Charlotte, Atlanta, Orlando and Dallas.
Merry Land's apartment communities are located in 27 metropolitan areas,
each with a population in excess of 250,000 and, at December 31, 1997, no
metropolitan area contained more than 14% of the Company's 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 following table summarizes the Company's apartment holdings by major
market as of December 31, 1997 (dollars in millions):
<TABLE>
<CAPTION>
INVESTMENT
MARKET UNITS AT COST % OF COST
<S> <C> <C> <C>
Dallas/Ft. Worth, Texas 3,208 $ 209.3 14%
Atlanta, Georgia 4,235 208.6 14
Orlando, Florida 2,404 119.0 8
Charlotte, North Carolina 2,459 113.6 8
Jacksonville, Florida 2,550 107.1 7
Houston, Texas 1,457 87.4 6
Austin, Texas 1,249 80.4 5
Ft. Lauderdale, Florida 1,144 72.5 5
Tampa, Florida 1,449 70.6 5
Ft. Myers, Florida 1,268 59.2 4
Savannah, Georgia 1,149 55.2 4
Raleigh, North Carolina 1,256 48.8 3
Nashville, Tennessee 587 35.5 2
Charleston, South Carolina 880 34.2 2
Others 4,231 194.7 12
------ -------- ----
29,526 $1,496.1 100%
</TABLE>
<PAGE>
CORPORATE STRATEGY
The Company's objective is to increase operating cash flow and
shareholder value by generating superior growth in the net operating income
of its communities, by acquiring or developing selected communities with
satisfactory initial yields and the prospects for continued cash flow
growth, and by financing its activities at the lowest possible cost. In
order to accomplish these objectives, the Company intends to own and
operate a significant number of communities in most major markets of the
Southern United States, to build further on its recognized reputation among
apartment renters in this region for high quality communities and first
class service, and to continue to develop superior techniques for operating
a growing system of communities. The Company expects eventually to extend
its operations to other high growth areas of the country.
OPERATING. The execution of this strategy provides significant marketing
advantages and operating efficiencies to Merry Land. The Company believes
that operating a system of communities which are of consistently high
quality allows it to conduct a focused marketing effort, provide high
levels of customer service, maintain consistent policies, procedures and
training, and offer programs and amenities tailored to the needs of upscale
residents. The Company believes that significant incremental demand is
generated by its brand identity and by the referral of prospects from one
Merry Land community to another. At present, approximately 5% of the
Company's new leases are provided by the transfer of residents from other
Merry Land communities or the referral of customers from other Merry Land
communities. The Company also believes that its high income residents
provide a large customer base to which it can market additional goods and
services and generate additional income.
GROWTH. Merry Land seeks to increase its apartment holdings both for the
increase in earnings expected from each transaction as well as to build
further on the marketing and operating advantages provided by its system of
Southern apartments. The Company adds to its holdings by a variety of means
including buying existing apartment communities, buying communities under
construction and in the initial lease-up stage (primarily from merchant
builders) and developing communities from the ground up.
Merry Land has bought over $1.0 billion of apartment communities in the
past five years. The Company believes that the long term growth prospects
of the South remain the strongest in the country. Furthermore, the large
number of newly built communities currently available for sale in its
market areas provide excellent prospects for the Company's acquisition
program. The Company buys both single assets and portfolios after careful
evaluation of each community's location, physical attributes, and the
conditions of supply and demand in its submarket.
While the Company believes rapid growth through acquisitions remains
the preferable way to expand its holdings, it also believes that
development is becoming an increasingly important component of its growth
strategy. The Company currently uses the services of outside developers to
build apartment communities in selected markets. The cost of development
units delivered by the Company was $28.4 million in 1996, $67.1 million in
1997 and is expected to be $101.1 million in 1998. The use of outside
developers has allowed the Company to undertake a large development program
in multiple markets while retaining the flexibility to expand or contract
this program as conditions warrant. The Company expects to expand its
internal development capability over the next several years.
The Company also intends to dispose of assets which do not conform to its
strategy and to reinvest those proceeds in conforming communities. In the past
two years the Company has sold two apartment communities in Ohio as well as
older properties in Augusta. In 1998, it intends to redevelop or sell a
limited number of communities whose cash flow growth prospects do not meet the
Company's targets. Dispositions in 1998 are expected to total less than 5% of
assets.
The following table summarizes the Company's growth in recent years
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Units acquired 4,104 2,475 3,444 4,872 7,452
Units developed 936 414 -- -- --
Total units owned at end
of period 29,526 24,936 22,296 18,852 13,981
Total cost of apartments $1,496,109 $1,175,427 $1,009,056 $796,436 $554,589
Total apartment rental income $ 208,363 $ 176,053 $ 144,283 $101,667 $ 54,565
</TABLE>
PROPERTY MANAGEMENT. The apartment community is Merry Land's basic business
unit. Each community is led by a Property Manager whose staff receives ongoing
training in the disciplines of leasing, administration, maintenance and
marketing. The objective of the on site staff is to maximize growth in cash
flow by providing superior customer service, maximum revenue growth, and cost
effective maintenance. In order to tie employee compensation to the interests
of the Company's shareholders, a significant part of on site personnel's
compensation consists of cash bonuses paid for achievement of budgeted net
cash flow.
The Company believes that its large size provides it superior buying power
which allows it to obtain goods and services for lower costs than would
otherwise be available. The Company has dedicated personnel who concentrate
their efforts on exploiting this advantage. Large size also allows the Company
to hire and train well qualified individuals who specialize in various
disciplines, providing the Company greater competence in these areas than
would be available in a smaller organization.
The Company believes that the control of operating expenses is
essential to the production of superior operating returns. Its focus on the
acquisition of newly built communities and controlling expenses have
allowed it to reduce its same store operating ratio (operating costs as a
percent of revenue) from 39.0% in 1994, 38.9% in 1995, 38.0% in 1996 to
37.5% in 1997.
FINANCING. The Company maintains a capital structure which affords both
financial flexibility and access to low cost capital. At December 31, 1997,
equity market capitalization was $1.2 billion, total capitalization was
$1.8 billion and debt equaled 34% of total capitalization. The Company
prefers to finance its acquisitions using unsecured debt but on occasion
assumes mortgage debt in order to acquire apartment communities or
portfolios. At December 31, 1997, seven of the Company's 104 apartment
communities were encumbered with mortgages. The average interest rate on
outstanding debt at that date was 7.0%. The Company has scheduled
maturities of its debt in order to allow orderly repayment or refinancing.
Its securities carry investment grade ratings.
1997 ACTIVITIES
ORGANIZATIONAL CHANGES. In December, 1996, Peter S. Knox III, Chairman
and Chief Executive Officer of Merry Land since its inception in 1981, died
after an illness of several months. W. Tennent Houston, President of the
Company and Chief Operating Officer since 1985, was appointed Chief
Executive Officer; Michael N. Thompson, Vice President of Acquisitions and
Development since 1992, was appointed Chief Operating Officer; and Boone A.
Knox, Mr. Knox's brother, was elected Chairman of the Board of Directors.
Boone Knox was Chief Executive Officer of Allied Bankshares, a publicly
owned bank holding company, and is a director of Cousins Properties
Incorporated, a diversified REIT. Mr. Knox's family is the largest
shareholder of the Company. During 1997, the Company's organization was
restructured along functional lines, area management offices were opened,
additional personnel were added in various areas, and the Company invested
in equipment and systems to enable it to compete more effectively in the
rapidly maturing apartment industry.
OPERATING RESULTS. In 1997, the Company more aggressively managed its
rent rates and rental concessions in order to operate at a higher level of
occupancy and to increase rental income. Positions in its property
management organization were added to provide better support of its
communities. As a result of those measures and improving conditions in some
southern markets, same store net operating income rose 4.2% for the year.
Same store occupancy (consisting of apartment communities owned for all of
1996 and 1997) rose 1.1% for the year to 94.8% and same store rental
revenues rose 3.3%. The Company focused on expense control and began to
pass a significant portion of water costs on to its residents which helped
hold the increase in same store operating expense to 1.8%.
SALE OF MARKETABLE SECURITIES. In order to fund the future expenditures
required by its development program, the Company had raised funds through
sales of securities in 1995 and 1996 and had invested a portion of the
proceeds in the securities of other REITs. Marketable securities totaled
$23.8 million at December 31, 1996. Income produced by these holdings added
$5.0 million of funds from operations ("FFO") in 1997 ($.10 per share), and
$6.0 million in 1996 ($.13 per share). During the first half of 1997, these
holdings were liquidated and the proceeds were invested in apartment
acquisitions and development.
ACQUISITIONS. In 1997, the Company acquired 14 apartment communities
containing 4,104 units at a cost of $257.9 million. These high quality
communities had an average age of two years and average rents of $820 per
month. They averaged 93% occupancy at closing. During the year the Company
made its first investments in Houston and eventually added 1,457 units in
that city at a cost of $86 million. The following is a listing of
communities acquired in 1997 (dollars in thousands):
<TABLE>
<CAPTION>
COMMUNITY LOCATION UNITS BUILT COST
-------- ----- ----- ----
<S> <C> <C> <C> <C>
Trails at Briar Forest Houston, Texas 476 1990 $22,150
La Tour Fontaine Houston, Texas 162 1994 15,250
Parc Royale Houston, Texas 171 1994 12,750
Richmond Townhomes Houston, Texas 188 1995 12,700
Palms at South Shore Houston, Texas 240 1990 12,210
Ranchstone Houston, Texas 220 1996 11,250
Wimberly Dallas/Ft. Worth, Texas 372 1996 26,500
Coventry at City View Dallas/Ft. Worth, Texas 360 1996 22,140
Riverhill Dallas/Ft. Worth, Texas 334 1996 22,000
Hidden Lakes Dallas/Ft. Worth, Texas 312 1997 20,000
The Point Charlotte, North Carolina 340 1996 21,300
The Oaks Charlotte, North Carolina 318 1996 20,250
Chatelaine Park Atlanta, Georgia 303 1996 23,413
Polos East Orlando, Florida 308 1991 16,000
---- -------
4,104 $257,913
</TABLE>
DEVELOPMENT. In 1997, the Company completed the construction of Adams Farm
II, a 200 unit expansion in Greensboro, continued construction on its
development communities in Atlanta and Savannah, and started construction on
four other communities in Atlanta, Richmond and Greensboro. For the year,
construction expenditures for these seven communities totaled $57.1 million,
and 936 units at a total cost of $67.1 million were completed and placed in
service. This included all 200 units at Madison at Adams Farm in Greensboro,
452 units at Madison at River Sound in Atlanta, and 284 units at Hammocks at
Long Point in Savannah. The Company expects to deliver the following units in
1998 (dollars in thousands):
<TABLE>
<CAPTION>
Expected Cost of
Units Delivery Delivered
Community Location Planned in 1998 Units
--------- -------- ------- ------- -------
<S> <C> <C> <C> <C>
Hammocks at Long Point Savannah, Georgia 308 24 $ 1,914
Carriage Homes at Wyndham Richmond, Virginia 264 264 26,071
Madison at Bridford Lake Greensboro, North Carolina 320 320 24,791
Madison at Satellite Place Atlanta, Georgia 424 308 25,715
Cherry Creek III Nashville, Tennessee 220 160 12,186
Spring Oak Richmond, Virginia 506 132 10,467
--- --- -------
2,042 1,208 $101,144
</TABLE>
SALE OF NON-CONFORMING ASSETS. In April, 1997, the Company sold Saw Mill
Village in Columbus, Ohio for $19.6 million, recognizing a gain of $0.5
million. Saw Mill Village was acquired in 1994 as part of a twelve property
portfolio transaction but did not conform to Merry Land's strategy of building
a Southern apartment franchise. The Company also disposed of several small
commercial and residential properties located in Augusta which were acquired
early in the 1980s. The cost of these assets was $3.4 million, and a net loss
of $0.4 million was recognized on the sales.
FINANCING ACTIVITY. On July 28, 1997, the Company completed a public
offering of $50.0 million of senior unsecured notes to yield 6.941% to
maturity. The notes bear an interest rate of 6.90%, with interest payable
semi-annually in February and August, and with principal due August 1,
2007.
On October 30, 1997, the Company completed a public offering of $50.0
million of senior unsecured notes to yield 6.69% to maturity. The notes
bear an interest rate of 6.69%, with interest payable semi-annually in
May and November, and with principal due October 30, 2006.
The notes issued in 1997 are rated BBB+ by Standard & Poor's
Corporation and Duff & Phelps Credit Rating Co. and Baa2 by Moody's
Investors Services, Inc. and rank equally with the Company's other
unsecured and unsubordinated indebtedness.
On September 16, 1997, the Company obtained a $200.0 million syndicated
revolving credit facility from a group of banks. Borrowings under the line
bear interest at 0.60% above the thirty day London Interbank Offered Rates.
The credit facility also includes a $100.0 million competitive bid option
which allows the Company to solicit bids from participating banks at rates
below the contractual rate. The facility is for a three year term followed by
a two year amortization for a total term of five years with an annual renewal
option.
RECENT DEVELOPMENTS
ACQUISITION OF COMMUNITIES FROM TRAMMELL CROW RESIDENTIAL. On February
23, 1998 Merry Land entered into a definitive agreement to acquire
13 Florida apartment communities containing 3,994 units (the "Trammell Crow
Residential Portfolio") from Trammell Crow Residential, a national
apartment development and management company, and its affiliates. The
acquisition is expected to close late in the first quarter of 1998. The
sellers will receive consideration of approximately $248.0 million,
including partnership units in Merry Land's newly created subsidiary
DownREIT partnership, cash and the assumption of debt.
The communities to be acquired include eleven stabilized properties, one
in lease up and one under construction. Four communities are located in
Orlando, four in Tampa, three in Jacksonville and one each in Sarasota and
Daytona. This high quality portfolio averages seven years of age, 941 square
feet per unit and $717 monthly rent, and was 94% occupied as of December 31,
1997. These characteristics are very similar to those of Merry Land's existing
Florida holdings. These communities have approximately 100 on-site employees.
Merry Land expects to employ substantially all of the staff at the communities
and a number of additional management personnel from Trammell Crow
Residential.
The following is a detailed listing of the communities to be acquired:
<TABLE>
<CAPTION>
YEAR SQ. FT. 12/31/97
COMMUNITY LOCATION BUILT UNITS PER UNIT AVG. RENT OCCUP.
--------- -------- ----- ----- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Wood Forest Daytona Beach 1985 144 822 $ 568 93%
Oaks at Baymeadows Jacksonville 1985 248 995 637 88
Oaks at Regency Jacksonville 1985 159 844 562 86
Oaks at Orange Park Jacksonville 1986 280 845 603 92
Vinings at Lake
Buena Vista Orlando 1988 400 927 696 97
Chicasaw Crossing Orlando 1986 292 850 613 95
Vinings Club at Metrowest Orlando 1997 411 1,182 1,005 (1)
Vinings at Lenox Place Orlando 1998 456 1,011 851 (2)
Beneva Place Sarasota 1986 192 882 683 96
Vinings Club at Boot
Ranch Tampa 1996 432 956 773 94
Vinings at Carrollwood
Place Tampa 1995 432 970 738 93
Forest Place Tampa 1985 244 813 577 97
Horizon Place Tampa 1985 304 841 605 97
---- --- --- ----- ---
Weighted Average or Total 1990 3,994 941 $ 717 94%
----------
(1) Under lease-up at December 31, 1997.
(2) Under construction at December 31, 1997.
</TABLE>
The Company believes that this transaction will be a significant step in
its strategy to become recognized by renters throughout the South as the
region's leading provider of high-quality apartment homes. With this
transaction, Merry Land will assume a major position in the Florida luxury
apartment market with 14,256 high quality units in that state and with
particularly strong concentrations in Orlando, Tampa and Jacksonville. The
Company expects this transaction will help it to further capitalize on its
significant marketing advantages and operating efficiencies in the state.
Merry Land has substantial infrastructure in place in Florida and expects to
quickly integrate the new communities into its Orlando based Florida
Management Area.
The acquisition will bring Merry Land's investment in Florida
apartments to $746 million, an increase of 50%, and will represent a 17%
increase in the Company's total investment in apartments based on total
cost. Following the transaction, Merry Land's Florida communities will
represent about 43% of the Company's total apartments at cost. The
following table includes Merry Land's apartment holdings at December 31,
1997 and the Trammell Crow Residential Portfolio:
<TABLE>
<CAPTION>
% of
TCR Merry Land Total Investment Investment
City Units Units Units at Cost at Cost
---- ----- ---------- ----- ---------- ----------
(millions)
<S> <C> <C> <C> <C> <C>
Orlando 1,559 2,404 3,963 $ 235.0 13.5%
Tampa 1,412 1,449 2,861 164.2 9.4
Jacksonville 687 2,550 3,237 140.0 8.0
Ft. Lauderdale -- 1,144 1,144 72.5 4.2
Ft. Myers -- 1,268 1,268 59.2 3.4
Other Florida 336 1,447 1,783 75.3 4.3
----- ------ ------ ----- ----
Total Florida 3,994 10,262 14,256 746.2 42.8
Dallas/Ft. Worth -- 3,208 3,208 209.3 12.0
Atlanta -- 4,235 4,235 208.6 12.0
Charlotte -- 2,459 2,459 113.6 6.5
Houston -- 1,457 1,457 87.4 5.0
Austin -- 1,249 1,249 80.4 4.6
Other Markets -- 6,656 6,656 298.6 17.1
----- ------ ------ ----- ----
Total Portfolio 3,994 29,526 33,520 $1,744.1 100.0%
</TABLE>
To fund the acquisition Merry Land will assume $113.5 million of debt,
including $96.7 million of tax exempt debt bearing interest at an average
rate of approximately 5.0%. Merry Land also has formed a subsidiary
DownREIT partnership which will issue operating partnership units with an
aggregate value of approximately $20.0 million to the sellers. The units
will be redeemable for cash or, at the Company's option shares of Merry
Land common stock on a one for one basis, beginning one year after closing.
The Company will file a registration statement allowing the units exchanged
for common stock to be publicly traded. The balance of the purchase price
of approximately $115.0 million will be paid in cash. The definitive
agreement with Trammell Crow Residential contains customary conditions of
sale and there can be no assurance the transaction will close.
SALE OF PREFERRED STOCK. In an offering completed on February 13, 1998,
the Company issued 4.0 million shares of Series E Cumulative Redeemable
Preferred Stock at $25.00 per share for net proceeds of $96.7 million. This
issue bears a dividend rate of 7.625%. The Company used the net proceeds to
pay down its line of credit and to provide funds to acquire and develop
additional apartment communities. The Series E Preferred Stock is rated BBB
by Standard & Poor's Corporation and Duff & Phelps Credit Rating Co. and
Baa3 by Moody's Investors Services, Inc. and ranks equally with the
Company's other series of preferred stock.
ORGANIZATION
Merry Land is an operating company which maintains a centralized and
functionally organized management structure, conducting all its corporate
level activities (including accounting, finance, general property management
and acquisitions and development) from its offices in Augusta. The Company
does not provide any services to third parties.
The Company manages its properties under the trade name "Merry Land
Apartment Communities" and in 1998 has begun to identify each of its
communities with the trade name "Merritt" followed by the community's
specific name in order to further establish brand identity.
Each apartment community functions as an individual business unit
according to well developed policies and procedures. Each community is
operated by an onsite Property Manager and staff who are extensively
trained by the Company in sales, management, accounting, maintenance and
other disciplines. Property Managers report to 14 Regional Property
Managers who report to four Area Property Managers. Regional Property
Managers are located in Raleigh, Charlotte (2), Atlanta (2), Charleston,
Jacksonville, Orlando, Tampa, Ft. Lauderdale, Dallas (2), Houston and
Austin. Area Property Managers are located in Charlotte, Atlanta, Orlando,
and Dallas and are supported by training, marketing and maintenance
specialists.
At December 31, 1997, the Company had a total of 905 employees. Of this
number 820 work at its apartment communities, 48 are employed in accounting,
administrative and general management, 25 in corporate level property
management and 12 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 Company's Employee Stock Ownership Plan. Management level
personnel participate in the Company's stock option and stock purchase plans,
further aligning their interests with those of the Company's shareholders.
MARKETS
The Company believes that a generally favorable long term relationship
between aggregate supply and demand exists for apartment rentals in its
Southern markets. The Company's nine state market area has experienced
growth in households, a key determinant of apartment demand, in excess of
national averages during the 1980s and 1990s. Demographic data for the
Company's markets indicate that from 1990 to 1997 total households in these
markets increased 13.0% versus an increase of 7.4% nationally. Data also
indicates that in the next five years, total households in these markets
will increase 8.4% versus an increase of 4.5% nationally.
Apartment starts in the nine states which the Company considers to be its
current market area have risen in recent years from 50,000 in 1992 to 124,000
in 1996. In 1997, this increased supply led to softness in certain markets,
but the Company believes supply and demand, in the South as a whole, are in
equilibrium. The Company's overall occupancy at communities it held for all of
1996 and 1997 averaged 94.8% for 1997 versus 93.7% for 1996.
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 Nation's largest brick manufacturers, in connection with the latter's
acquisition by an Australian company. Merry Land had been incorporated in
1966 and had remained a passive asset holding subsidiary of Merry
Companies, Inc. until the 1981 spin-off, when active operations began. At
that time, the Company's major asset was 4,700 acres of clay land, most of
which it still owns and from which it continues to receive clay and sand
royalties. The Company bought its first apartments in 1982 and has been
actively involved in the acquisition and management of apartments since
that date. 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.
FORWARD LOOKING STATEMENTS
This filing includes statements that are "forward looking statements"
regarding expectations with respect to market conditions, development
projects, acquisitions, occupancy rates, capital requirements, sources of
funds, expense levels, operating performance and other matters. 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, environmental concerns, and interest rates, any of which may cause
actual results to differ from the Company's current expectations.
<PAGE>
PART I
Item 2--Properties
APARTMENTS
COMMUNITIES. 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. In
1997, the Company acquired two "mid-rise" communities containing 333 units
located in urban areas of Houston, Texas. The Company's apartments are 48%
one bedroom units, 46% two bedroom units and 6% three bedroom units. The
units average 909 square feet in area, seven 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 Company's communities also offer racquetball courts,
saunas, alarm systems and other features, including enclosed garages.
RESIDENTS. Residents at the Company's 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"--who 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 market's economy
and its level of job creation and household formation, and to a lesser extent
to prevailing interest rate levels for home mortgage loans. There is a steady
turnover of leases at the Company's 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 Company's units turn over each year, a rate
the Company believes is typical for higher end apartment communities.
MARKETS. Merry Land's apartment communities are located in 27
metropolitan areas, each with a population in excess of 250,000 and, as of
December 31, 1997, none containing more than 14% of the Company's
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 following table describes the Company's apartment communities at
December 31, 1997.
<TABLE>
<CAPTION>
Average Average December Rent(2) Occupancy
Date Date Cost(1) Cost Per Unit Size Per Month Per Sq. Ft. (3)
Name Location Built Acquired Units (In Thousands)Unit(1)(Sq.Ft.) 1996 1997 1996 1997 1996 1997
---- -------- ----- -------- ------ ----------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
1. Birmingham 1986 1996 276 $ 11,528 $41,766 903 $582 $571 $0.64 $0.63 85% 92%
FLORIDA
2. Daytona 1989 1994 304 11,615 38,208 882 573 586 0.65 0.66 88 95
3. Delray Beach 1989 1994 236 13,708 58,083 910 756 809 0.83 0.89 92 98
4. Ft. Lauderdale 1987 1996 152 9,120 59,998 1,100 838 849 0.76 0.77 94 95
5. Ft. Lauderdale 1989 1995 384 26,479 68,957 1,192 864 883 0.72 0.74 88 93
6. Ft. Lauderdale 1988 1996 304 18,483 60,798 931 875 836 0.94 0.90 92 93
7. Ft. Lauderdale 1991 1993 304 18,433 60,634 1,061 798 790 0.75 0.74 91 94
----- ------ ------ ----- --- --- ---- ---- --- ---
1,144 72,515 63,387 1,076 846 841 0.79 0.78 91 94
8. Ft. Myers 1990 1995 320 12,421 38,817 872 600 617 0.69 0.71 92 96
9. Ft. Myers 1991 1993 300 18,469 61,565 1,136 753 748 0.66 0.66 95 97
10. Ft. Myers 1991 1993 328 15,413 46,990 955 650 673 0.68 0.70 94 96
11. Ft. Myers 1991 1992 320 12,889 40,277 863 647 663 0.75 0.77 92 96
----- ------ ------ ---- --- --- ---- ---- --- ---
1,268 59,192 46,681 953 661 674 0.70 0.71 93 96
12. Jacksonville 1989 1994 350 15,976 45,644 912 668 683 0.73 0.75 96 96
13. Jacksonville 1986 1993 256 13,839 54,059 1,010 693 850 0.69 0.84 97 95
14. Jacksonville 1983 1993 144 7,142 49,595 1,293 739 750 0.57 0.58 94 94
15. Jacksonville 1984 1992 288 8,561 29,724 738 520 542 0.70 0.73 95 94
16. Jacksonville 1991 1993 284 12,406 43,682 816 613 617 0.75 0.76 96 94
17. Jacksonville 1986 1992 512 16,946 33,097 759 527 547 0.69 0.72 95 94
18. Jacksonville 1987 1993 284 12,836 45,196 851 592 624 0.70 0.73 98 97
19. Jacksonville 1988 1993 432 19,380 44,861 1,066 671 682 0.63 0.64 95 95
----- ------ ------ ----- --- --- ---- ---- --- ---
2,550 107,086 41,995 902 615 646 0.69 0.72 96 95
20. Melbourne 1990 1993 326 16,246 49,833 1,027 678 683 0.66 0.67 91 97
21. Miami 1991 1993 175 12,109 69,194 970 844 850 0.87 0.88 95 97
22. Orlando 1991 1993 480 22,890 47,688 1,021 675 713 0.66 0.70 97 97
23. Orlando 1991 1993 324 17,126 52,859 903 637 659 0.71 0.73 94 96
24. Orlando 1987 1993 242 11,417 47,176 787 594 622 0.75 0.79 97 98
25. Orlando 1989 1992 300 12,182 40,608 902 665 687 0.74 0.76 94 96
26. Orlando 1988 1993 252 11,380 45,159 799 601 613 0.75 0.77 89 94
27. Orlando 1991 1993 304 17,343 57,050 1,087 763 776 0.70 0.71 91 96
28. Orlando 1991 1997 308 16,491 53,543 877 (4) 694 (4) 0.79 (4) 94
29. Orlando 1990 1996 194 10,197 52,564 899 684 711 0.76 0.79 96 97
----- ------ ------ ---- --- --- ---- ---- --- ---
2,404 119,026 49,512 930 663 688 0.72 0.75 94 96
30. Tallahassee 1988 1993 222 8,468 38,144 900 633 626 0.70 0.70 86 93
31. Tallahassee 1990 1996 184 7,685 41,767 849 628 623 0.74 0.73 94 93
----- ------ ------ ---- --- --- ---- ---- --- ---
406 16,153 39,786 877 631 625 0.72 0.71 90 93
32. Tampa 1990 1993 447 20,374 45,580 849 632 655 0.74 0.77 95 98
33. Tampa 1989 1996 148 5,358 36,204 834 626 658 0.75 0.79 97 99
34. Tampa 1985 1993 240 8,590 35,794 655 519 521 0.79 0.80 94 96
35. Tampa 1988 1993 280 15,180 54,215 953 668 689 0.70 0.72 94 98
36. Tampa 1994 1994 334 21,081 63,117 978 764 786 0.78 0.80 95 99
--- ------ ------ --- --- --- ---- ---- --- ---
1,449 70,583 48,712 865 650 670 0.75 0.77 95 98
GEORGIA
37. Atlanta 1988 1993 316 13,535 42,834 1,023 643 668 0.63 0.65 96 95
38. Atlanta 1988 1993 424 16,734 39,468 911 611 646 0.67 0.71 97 94
39. Atlanta 1987 1994 252 11,861 47,069 806 644 682 0.80 0.85 97 96
40. Atlanta 1995 1997 303 23,709 78,247 1,105 (4) 866 (4) 0.78 (4) 92
41. Atlanta 1990/89 1992/95 574 20,905 36,420 874 623 639 0.71 0.73 96 94
42. Atlanta 1986 1992 376 11,580 30,799 927 593 605 0.64 0.65 95 94
43. Atlanta 1990 1993 480 31,810 66,271 1,095 853 866 0.78 0.79 93 94
44. Atlanta 1996 1996 586 41,984 71,645 834 793 855 0.95 1.03 63 63
45. Atlanta 1989 1994 228 9,987 43,803 1,018 652 658 0.64 0.65 96 94
46. Atlanta 1986 1992 200 6,440 32,202 802 579 616 0.72 0.77 97 96
47. Atlanta 1985 1993 224 7,915 35,335 860 587 603 0.68 0.70 97 95
48. Atlanta 1982 1994 272 12,185 44,798 845 629 644 0.74 0.76 95 91
----- ------ ------ ----- --- --- ---- ---- --- ---
4,235 208,645 49,267 927 657 712 0.71 0.77 96 91
49. Augusta (5) (5) 75 3,454 46,055 974 478 487 0.49 0.50 86 91
50. Augusta 1982 1982 248 8,699 35,077 875 519 525 0.59 0.60 75 78
51. Augusta 1975 1982 52 1,554 35,077 900 477 492 0.53 0.55 95 96
52. Augusta 1984 1984 1 72 72,131 1,300 675 675 0.52 0.52 100 100
----- ------ ------ ----- --- --- ---- ---- --- ---
376 13,779 36,593 856 447 513 0.52 0.57 76 83
53. Savannah 1983 1986 194 7,392 38,102 852 569 594 0.67 0.70 95 92
54. Savannah 1997 1997 284 21,385 75,300 1,049 (4) 776 (4) 0.74 (4) 77
55. Savannah 1986 1992 147 5,335 36,291 812 606 616 0.75 0.76 97 77
56. Savannah 1986 1986 144 5,709 39,648 1,119 603 621 0.54 0.55 96 94
57. Savannah 1983 1986 188 8,104 43,105 1,053 644 658 0.61 0.62 96 90
58. Savannah 1985 1993 192 7,262 37,822 1,124 660 684 0.59 0.61 99 96
----- ------ ------ ----- --- --- ---- ---- --- ---
1,149 55,187 48,030 994 617 671 0.63 0.67 96 98
MARYLAND
59. Baltimore 1984 1994 198 12,138 61,031 938 805 842 0.86 0.90 95 95
NORTH CAROLINA
60. Charlotte 1982 1990 240 9,024 37,599 882 615 630 0.70 0.71 95 96
61. Charlotte 1984 1994 280 10,541 37,648 688 559 556 0.81 0.81 93 95
62. Charlotte 1990 1992 300 10,901 36,335 891 665 672 0.75 0.75 95 95
63. Charlotte 1986 1995 260 9,638 37,070 750 549 567 0.73 0.76 94 95
64. Charlotte 1984 1989 296 10,739 36,280 918 597 607 0.65 0.66 94 91
65. Charlotte 1996 1997 318 20,413 64,192 883 (4) 756 (4) 0.86 (4) 93
66. Charlotte 1996 1997 340 21,529 63,319 884 (4) 743 (4) 0.84 (4) 95
67. Charlotte 1986 1996 178 11,461 64,388 925 771 751 0.92 0.81 94 91
68. Charlotte 1986 1994 247 9,304 37,668 724 558 565 0.77 0.78 96 95
----- ------ ------ --- --- --- ---- ---- --- ---
2,459 113,550 46,177 823 610 651 0.75 0.78 94 95
69. Greensboro 1987 1994 500 28,546 57,092 1,005 690 727 0.69 0.72 93 80
70. High Point 1986 1990 208 7,426 35,702 811 531 557 0.65 0.69 97 95
71. Raleigh 1987 1994 362 18,553 51,251 784 644 658 0.82 0.84 93 92
72. Raleigh 1984 1991 360 11,615 32,264 766 587 611 0.77 0.80 97 95
73. Raleigh 1986 1993 192 6,391 33,286 641 547 568 0.85 0.89 95 95
74. Raleigh 1983 1990 144 5,601 38,894 780 626 640 0.80 0.82 96 97
75. Chapel Hill 1986 1991 198 6,649 33,582 735 653 676 0.89 0.92 96 98
----- ------ ------ ----- --- --- ---- ---- --- ---
1,256 48,809 38,861 751 605 632 0.81 0.84 95 95
SOUTH CAROLINA
76. Charleston 1986 1989 230 9,681 42,093 810 589 616 0.73 0.76 100 99
77. Charleston 1985 1985 226 8,346 36,929 892 460 480 0.52 0.54 87 93
78. Charleston 1985 1988 200 7,939 39,693 911 547 570 0.60 0.63 93 97
79. Charleston 1984 1989 224 8,192 36,570 953 540 551 0.57 0.58 88 98
----- ------ ------ ----- --- --- ---- ---- --- ---
880 34,158 38,816 890 534 554 0.60 0.62 92 97
80. Columbia 1987 1991 212 6,540 30,847 762 516 528 0.68 0.69 95 94
81. Greenville 1985 1991 216 7,070 32,732 848 560 565 0.66 0.67 98 94
TENNESSEE
82. Memphis 1986 1994 292 11,831 40,517 786 570 595 0.73 0.76 94 93
83. Nashville 1996/86 1994 407 24,247 59,575 902 716 757 0.79 0.84 91 97
84. Nashville 1994 1996 180 11,254 62,524 1,027 758 789 0.74 0.77 96 95
----- ------ ------ ----- --- --- ---- ---- --- ---
587 35,501 60,479 940 729 767 0.78 0.82 93 95
TEXAS
85. Austin 1995 1996 302 18,286 60,509 894 852 877 0.95 0.98 85 96
86. Austin 1995 1996 161 10,467 65,015 937 840 833 0.90 0.89 95 97
87. Austin 1995 1995 390 23,905 61,294 862 789 773 0.92 0.90 89 95
88. Austin 1995 1996 396 27,714 69,985 950 888 918 0.93 0.97 88 95
----- ------ ------ --- --- --- ---- ---- --- ---
1,249 80,372 64,439 907 842 852 0.93 0.94 88 95
89. Dallas 1995 1995 380 24,423 64,271 898 870 911 0.97 1.01 97 98
90. Dallas 1995 1995 470 29,608 62,995 895 816 814 0.91 0.91 91 93
91. Dallas 1995 1995 200 14,086 70,430 947 908 915 0.96 0.97 88 93
92. Dallas 1995 1995 376 24,981 66,439 904 851 866 0.94 0.96 85 91
93. Dallas 1995 1995 404 25,213 62,407 933 790 819 0.85 0.88 91 92
94. Dallas 1996 1997 334 21,877 65,501 890 (4) 831 (4) 0.93 (4) 84
95. Ft. Worth 1996 1997 360 22,278 61,882 978 (4) 856 (4) 0.88 (4) 92
96. Ft. Worth 1996 1997 312 20,141 64,553 928 (4) 831 (4) 0.90 (4) 85
97. Ft. Worth 1996 1997 372 26,689 71,746 921 (4) 888 (4) 0.96 (4) 91
----- ------ ------ --- --- --- ---- ---- --- ---
3,208 209,296 65,242 919 839 855 0.92 0.93 91 92
98. Houston 1994 1997 162 15,415 95,156 1,029 (4) 1,171 (4) 1.14 (4) 93
99. Houston 1990 1997 240 12,310 51,293 795 (4) 752 (4) 0.95 (4) 97
100. Houston 1994 1997 171 12,891 75,383 976 (4) 1,019 (4) 1.04 (4) 94
101. Houston 1996 1997 220 11,353 51,604 878 (4) 771 (4) 0.88 (4) 95
102. Houston 1995 1997 188 12,963 68,952 978 (4) 889 (4) 0.91 (4) 96
103. Houston 1990 1997 476 22,485 47,238 897 (4) 712 (4) 0.79 (4) 95
----- ------ ------ --- --- ----- ---- ---- --- ---
1,457 87,417 59,998 912 (4) 837 (4) 0.92 (4) 96
VIRGINIA
104. Richmond 1988 1994 212 10,486 49,463 776 656 685 0.85 0.88 93 96
105. Richmond 1984 1994 294 15,597 53,055 851 664 701 0.78 0.82 95 97
---- ------ ------ --- --- ----- ---- ---- --- ---
506 26,083 51,549 820 661 694 0.81 0.85 94 96
TOTALS 29,526 $1,496,109 $50,671 909 $670 $ 709 $0.74 $0.78 93% 94%
<FN>
1. Shoal Run
2. Indigo Plantation
3. Waterford Village
4. Country Club Place
5. Madison at Coral Square
6. Mariner Club
7. Welleby Lake Club
8. Beach Club
9. Colony Place
10. Polos
11. Viridian Lake
12. Bermuda Cove
13. Claire Point
14. Deerbrook
15. Princeton Square
16. Royal Oaks
17. Spicewood Springs
18. Timberwalk
19. Waterford
20. Cypress Cove
21. Lakeridge at Moors
22. Auvers Village
23. Bishop Park
24. Conway Station
25. Copper Terrace
26. Lexington Park
27. Mission Bay
28. Polos East
29. Valencia Plantation
30. Augustine Club
31. Plantations at Killearn
32. Audubon Village
33. Essex Place
34. Falls
35. Lofton Place
36. Promenade
37. Belmont Crossing
38. Belmont Landing
39. Champion's Park
40. Chatelaine Park
41. Gwinnett Crossing
42. Harvest Grove
43. Lexington Glen
44. Madison at River Sound
45. Shadowlake
46. Sweetwater Glen
47. Willow Trail
48. Windridge
49. Downtown
50. Woodcrest
51. Woodknoll
52. Other
53. Greentree
54. Hammocks at Long Point
55. Huntington
56. Magnolia Villa
57. Marsh Cove
58. West Wind Landing
59. Clarys Crossing
60. Brookshire Place
61. English Hills
62. Hunt Club
63. Kimmerly Glen
64. Lake Point
65. The Oaks
66. The Point
67. Regency
68. Steeplechase
69. Adams Farm
70. Chatham Wood
71. Duraleigh Woods
72. Misty Woods
73. Sailboat Bay
74. Sommerset Place
75. Timber Hollow
76. Quarterdeck
77. Summit Place
78. Waters Edge
79. Windsor Place
80. Hollows
81. Haywood Pointe
82. The Landings
83. Cherry Creek
84. Waterford Place
85. Estate at Quarry Lake
86. Madison at the Arboretum
87. Madison at Stone Creek
88. Sedona Springs
89. Madison at Cedar Springs
90. Madison at Chase Oaks
91. Madison on Melrose
92. Madison on the Parkway
93. Madison at Round Grove
94. Riverhill
95. Coventry at Cityview
96. Hidden Lakes
97. Wimberly
98. La Tour Fontaine
99. Palms at South Shore
100. Parc Royale
101. Ranchstone
102. Richmond Townhomes
103. Trials at Briar Forest
104. Champions Club
105. Hickory Creek
</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) 1996 amounts represent the 134 units delivered by December 31,1996.
(7) 1996 amounts represent the initial 300 units owned.
DEVELOPMENT COMMUNITIES
At December 31, 1997, the Company had six communities under construction
which will contain 2,408 units (of which 870 units have been delivered) and
one community with 220 units under development. These communities will be
completed at an expected total cost of $203.3 million. In addition, the
Company owns land for 1,240 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
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 Land's employees supervise development activities with
the assistance of architects and engineers as required. The Company owns
all land and improvements, directly contracts for construction and bears
essentially all risks of project development. While the Company has added
several individuals to its acquisition and development department as a
result of this program, it does not intend to establish a large,
specialized development organization. The Company believes that this system
of constructing new communities allows it the flexibility to simultaneously
develop communities in multiple markets and to expand, reduce or terminate
such activities as conditions warrant. Merry Land will manage these new
communities during and after construction.
The following table summarizes the Company's current developments and
recently completed communities as of December 31, 1997. Estimated costs
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
Units
Total Total Units Placed
Estimated Cost in in Units Estimated
Location Community Units Cost to date Service Service Leased Completion
-------- --------- ----- --------- ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Completed
Greensboro Adams Farm(1) 200 $ 13,100 $ 13,062 200 $13,062 167 3Q1997
Under Construction
Atlanta River Sound 586 $ 42,000 $ 41,976 586 $41,976 366 1Q1998
Savannah Long Point 308 22,900 22,289 284 21,383 221 1Q1998
Richmond Wyndham 264 24,500 15,764 -- -- 0 4Q1998
Greensboro Bridford Lake 320 24,500 7,832 -- -- 0 1998
Atlanta Satellite Place 424 34,000 7,721 -- -- 0 1999
Richmond Spring Oak 506 38,800 6,073 -- -- 0 1999
----- -------- -------- --- ------- ---
2,408 $186,700 $101,655 870 $63,359 587
UNDER DEVELOPMENT
Nashville Cherry Creek
III(1) 220 $ 16,600 $ 3,682 1999
FUTURE DEVELOPMENT
Savannah Long Point II(1) 352 $ 1,128
Nashville Bell Road I and II 688 3,908
Greensboro Bridford Lake II(1) 200 1,328
----- --------
1,240 $ 6,364
----------
(1) Adjoins an existing community owned by the Company.
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):
</TABLE>
<TABLE>
<CAPTION>
Estimated Estimated
Community Location Units Cost Completion
-------- -------- ----- --------- ----------
<S> <C> <C> <C> <C>
Creekside Homes at Legacy Dallas, Texas 380 $31,200 2Q1998
Villages of Prairie Creek I Dallas, Texas 236 19,800 2Q1998
Villages of Prairie Creek II Dallas, Texas 200 19,500 1Q1999
--- -------
816 $70,500
</TABLE>
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
seller's 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.
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
entitlements, 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 Company's 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 Company's
predecessor for clay reserves and is located in Georgia and South Carolina.
Since 1981, brick manufacturer Boral Bricks, Inc. has had a long term clay
mining lease on 2,622 acres of the Company's land. The Company also leases
100 acres to another 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 several small commercial
properties in the Augusta area, primarily office buildings, including the
Company's headquarters building, which were acquired before the Company
began to focus on apartments. These properties, aggregating 182,000 square
feet, have a book value of $4.0 million. The Company intends to sell these
properties.
<PAGE>
PART I
Item 3--Legal Proceedings
None
Item 4--Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5--Market for the Registrant's Common Stock and Related Shareholders'
Matters
COMMON STOCK
Merry Land's Common Stock is traded on the NYSE under the symbol "MRY".
The following table sets forth the reported high and low sales prices of
the Common Stock on the NYSE, and the cash dividends declared per share of
Common Stock.
<TABLE>
<CAPTION>
Cash
Common Dividends
Stock Price Declared
High Low per share
---- --- ---------
<S> <C> <C> <C>
1997
Fourth Quarter $24 1/8 $211/16 $.39
Third Quarter 23 211/16 .39
Second Quarter 22 1/8 20 1/2 .39
First Quarter 22 5/8 20 3/8 .39
1996
Fourth Quarter $21 3/4 $18 1/4 $.37
Third Quarter 22 1/8 20 1/8 .37
Second Quarter 22 1/4 20 .37
First Quarter 23 3/4 21 5/8 .37
</TABLE>
On December 31, 1997, the Company had 4,523 shareholders of record. The
Company estimates that an additional 24,000 shareholders hold their shares in
"street name."
On January 19, 1998, the Board of Directors declared a dividend of $.41
per share of Common Stock to be paid on March 31, 1998 to holders of record
on March 16, 1998. The projected current annual dividend rate is $1.64 per
share. The $.41 quarterly dividend represents a payout of 79% of FFO
available for common shares for the quarter ended December 31, 1997, a
payout ratio which the Company believes is conservative relative to its
REIT peers. Future dividends will be declared at the discretion of the
Board of Directors after considering the Company's distributable funds,
financial requirements, tax considerations and other factors.
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, or all, of the Company's dividends paid to
its shareholders may be deemed capital gain, ordinary income or a return of
capital.
The federal income tax status of dividends paid to holders of Common
Stock was as follows:
1997 1996 1995
---- ---- ----
Ordinary income $0.88 $1.18 $1.34
Capital gains .16 .11 .06
Return of capital .52 .19 --
----- ----- -----
Total dividends paid $1.56 $1.48 $1.40
The loan agreements for the Company's 6.625% Senior Notes and its
$200.0 million line of credit prohibit the payment of any dividends or other
distributions upon the occurrence of an event of default. The terms of the
Company's credit agreements and preferred stock include other restrictions on
its ability to pay dividends, including a requirement in its line of credit
agreement that it not pay dividends in any year in an amount in excess of 90%
of its FFO, except as necessary to maintain the Company's REIT status. The
Company does not expect that these covenants will adversely affect its ability
to make dividend payments.
SERIES A PREFERRED STOCK
Merry Land's $1.75 Series A Cumulative Convertible Preferred Stock is
traded on the New York Stock Exchange under the symbol "MRYpr". At
December 31, 1997, $4.7 million of Series A Preferred Stock was
outstanding. The following table sets forth the reported high and low sales
prices of the Series A Preferred Stock on the NYSE, and the cash dividends
declared per share of Series A Preferred Stock.
<TABLE>
<CAPTION>
Preferred
Stock Price Dividends
High Low Declared
---- --- ---------
<S> <C> <C> <C>
1997
Fourth quarter $31.94 $29.63 $.4375
Third quarter 30.63 28.69 .4375
Second quarter 29.38 27.38 .4375
First quarter 30.00 28.38 .4375
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
</TABLE>
The federal income tax status of dividends paid to holders Series A
Preferred Stock was as follows:
1997 1996 1995
---- ---- ----
Ordinary income $1.49 $1.61 $1.68
Capital gains 0.26 .14 .07
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 Land's $2.205 Series B Cumulative Convertible Preferred Stock is
not publicly traded though the Company has granted to the holders of the
Series B Preferred Stock certain registration rights. At December 31, 1997,
$100.0 million of Series B Preferred Stock was outstanding. The federal
income tax status of dividends paid to holders of Series B Preferred Stock
was as follows:
1997 1996 1995
---- ---- ----
Ordinary income $1.875 $2.025 $2.115
Capital gains .330 .180 .090
Return of capital -- -- --
Total dividends paid $2.205 $2.205 $2.205
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 Company's common shares are trading
above the conversion price of $21.04 per share, subject to adjustments for
certain circumstances.
SERIES C PREFERRED STOCK
Merry Land's $2.15 Series C Cumulative Convertible Preferred Stock is
traded on the New York Stock Exchange under the symbol "MRYPrC". At
December 31, 1997, $115.0 million of Series C Preferred Stock was
outstanding. 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:
<TABLE>
<CAPTION>
Preferred
Stock Price Dividends
High Low Declared
---- --- ---------
<S> <C> <C> <C>
1997
Fourth quarter $28.31 $26.50 $.5375
Third quarter 28.81 26.38 .5375
Second quarter 28.00 26.00 .5375
First quarter 28.75 26.00 .5375
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
</TABLE>
The federal income tax status of dividends paid to holders of Series C
Preferred Stock was as follows:
1997 1996 1995
---- ---- ----
Ordinary income $1.82 $1.97 $--
Capital gains 0.33 .18 --
Return of capital -- -- --
Total dividends paid $2.15 $2.15 $--
The Series C Preferred Stock is convertible into common shares at a
conversion price of $22.00 per share of common stock and has an annual
dividend rate of $2.15 per share payable quarterly. The dividend rate will be
increased to an amount equal to 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
Merry Land's $4.145 Series D Cumulative Redeemable Preferred Stock is
not publicly traded. At December 31, 1997, $50.0 million of Series D
Preferred Stock was outstanding. The federal income tax status of dividends
paid to holders of Series D Preferred Stock was as follows:
1997 1996 1995
---- ---- ----
Ordinary income $3.526 $0.222 --
Capital gains 0.619 .020 --
Return of capital -- -- --
Total dividends paid $4.145 $0.242 --
The Series D Preferred Stock 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.
SERIES E PREFERRED STOCK
On February 13, 1998, the Company issued 4,000,000 shares of 7.625%
Series E Cumulative Redeemable Preferred Stock, which has an annual
dividend rate of $1.906, payable quarterly beginning March 31, 1998. The
Series E Preferred Stock may not be redeemed until February 13, 2003. The
Series E Preferred Stock is traded on the New York Stock Exchange under the
symbol "MRYPrE".
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has adopted a Dividend Reinvestment and Stock Purchase Plan
under which any holder of Common Stock 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. Stock purchases made 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 va nominee
or broker. During 1997 the Company issued 783,907 shares under the plan at
an average price of $20.81 per share providing $16.3 million in new equity
capital. The Dividend Reinvestment and Stock Purchase Plan has provided new
equity capital as follows (dollars in thousands):
1997 1996 1995
---- ---- ----
Dividend Reinvestment $11,459 $ 9,128 $ 8,547
Stock Purchase Plan 4,858 4,704 2,622
------- ------- -------
$16,317 $13,832 $11,169
<PAGE>
PART II
Item 6--Selected Financial Data
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company
and should be read in conjunction with the financial statements and notes
thereto incorporated by reference herein. The following amounts are in
thousands, except for information with respect to per share amounts and
apartment units.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data
Income from property operations:
Rental and mineral royalty revenue $ 210,272 $ 176,989 $ 145,214 $103,169 $56,181
Rental expenses, property taxes
and insurance 79,735 68,087 58,527 38,409 22,611
Depreciation of real estate owned 42,464 34,490 26,265 17,877 9,066
------- ------- ------- ------- ------
88,073 74,412 60,422 46,883 24,504
Other income:
Other interest and dividend income 2,603 5,454 6,908 2,440 2,463
Other 5,086 6,178 4,476 (655) 10
------- ------- ------- ------- ------
7,689 11,632 11,384 1,785 2,473
Expenses:
Interest 25,900 22,527 15,646 10,394 5,640
General and administrative 4,666 2,858 2,396 1,773 1,433
Depreciation-other and amortization 1,149 860 670 470 180
Other non-recurring costs -- -- 1,370 200 1,308
------- ------- ------- ------- ------
31,715 26,245 20,082 12,837 8,561
Gains on sales of assets:
Gains on sales of investments 996 2,679 1,673 881 6,960
Gains on sales of land -- -- 68 196 1,023
Gains on sales of depreciable
real estate 460 1,528 72 77 9
------- ------- ------- ------- ------
1,456 4,207 1,813 1,154 7,992
Net income 65,503 64,006 53,537 36,985 26,408
Preferred dividends paid 23,257 19,843 18,129 7,934 4,025
------- ------- ------- ------- ------
Net income available for common shares $ 42,246 $ 44,163 $ 35,408 $29,051 $22,383
======== ========== ========= ======= =======
Weighted average common shares 38,461 35,919 33,368 26,430 17,268
Weighted average diluted common shares 38,928 36,676 33,418 26,450 17,288
Diluted earnings per common share $ 1.10 $ 1.23 $ 1.06 $ 1.10 $ 1.30
Common dividends paid $ 60,040 $ 53,886 $ 46,734 $ 33,467 $ 16,934
Common dividends paid per share $ 1.56 $ 1.48 $ 1.40 $ 1.25 $ .90
BALANCE SHEET DATA (at end of period)
Apartments, net of depreciation $1,356,226 $1,075,933 $ 943,070 $756,588 $532,465
Senior notes 460,000 360,000 360,000 120,000 120,000
Mortgage debt 70,282 27,546 -- 17,835 37,173
Other debt 67,800 -- -- 74,975 --
Total stockholders' equity 797,332 798,772 695,859 584,851 397,715
Total assets $1,427,881 $1,208,246 $1,072,840 $806,655 $562,172
OTHER DATA
Funds from operations(1) $ 102,367 $ 94,047 $ 79,360 $ 53,907 $ 28,790
Funds from operations
available to common shares $ 83,254 $ 74,446 $ 61,231 $ 45,973 $ 24,764
Apartment units acquired or
developed during the period 5,040 2,889 3,444 4,872 7,452
Total apartment units at end of
the period 29,526 24,936 22,296 18,852 13,981
</TABLE>
______________
(1) The Company uses the National Association of Real Estate Investment
Trusts' task force's 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 Company's operating
performance and liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<PAGE>
PART II
Item 7--Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997, 1996 AND
1995.
RENTAL MARKETS. In the aggregate, the Company's Southern rental markets
were stronger in 1997 than in 1996 as strong demand for apartments exceeded
additions to supply. The Company's apartments experienced occupancy in 1997 of
93.8% which was 0.5% above 1996 as the result of stronger markets, aggressive
leasing efforts by staff, and selectively offering concessions to residents in
order to induce them to rent. While levels of new construction throughout the
South remain high, the Company believes that physical occupancy should remain
satisfactory if general economic activity, job growth and household formation
in the South remain strong.
RENTAL OPERATIONS--TOTAL PORTFOLIO. The operating performance of the
Company's apartment portfolio is summarized in the following table (dollars in
thousands, except average monthly rent):
<TABLE>
<CAPTION>
% Change from
Change 1996 TO 1997 1997 1996 1995
------ ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental income 18% $32,310 $208,363 $176,053 $144,283
Operating expenses(1) 15 7,212 55,347 48,135 40,726
Taxes and insurance
expense 23 4,283 23,265 18,982 15,520
Subtotal 17 11,495 78,612 67,117 56,246
Earnings before interest,
depreciation and amortization 19 $20,815 $129,751 $108,936 $ 88,037
Average Units(2) 14 3,303 26,850 23,547 20,291
Average occupancy(3) 0.5(4) 93.8% 93.3% 95.2%
Occupancy at end of period 0.6(4) 92.8% 92.2% 94.0%
Average monthly rent(5) 5.8 $ 39 $ 709 $ 670 $ 639
Expense ratio (6) (0.5)(4) 37.7% 38.1% 39.0%
</TABLE>
______________
(1) Excludes depreciation and amortization.
(2) Represents the average number of units owned at each month end.
(3) Represents the average physical occupancy at each month end for the period
held.
(4) Represents increase between periods.
(5) Represents weighted average monthly rent charged for occupied units and
rents asked for unoccupied units at December 31.
(6) Represents total of operating expenses, taxes and insurance divided by
rental revenues.
Acquisitions and the delivery of units from the Company's development
program increased the weighted average number of apartments owned to 26,850 in
1997 from 23,547 in 1996. Rental revenues, operating expenses and taxes and
insurance rose accordingly. A 5.8% increase in portfolio average rental rates
in 1997 resulted from both higher rents at the Company's continuing properties
and also from higher rents charged at the communities the Company acquired and
put in service in 1997 and 1996, whose monthly rents averaged $800 at
December 31, 1997, versus the total portfolio average of $709.
RENTAL OPERATIONS--SAME STORE. The performance of the 21,156 units which
the Company held for all of both 1997 and 1996 ("same store" results) is
summarized in the following table (dollars in thousands, except average monthly
rent; see footnotes above):
<TABLE>
<CAPTION>
Change from
CHANGE 1996 TO 1997 1997 1996
------ ------------ ---- ----
<S> <C> <C> <C> <C>
Rental income 3.3% $5,183 $162,995 $157,811
Personnel expense 14.5 2,260 17,887 15,627
Utilities expense (23.2) (2,056) 6,816 8,872
Operating expense 12.7 996 8,830 7,834
Maintenance and grounds expense (4.7) (509) 10,214 10,723
Taxes and insurance expense 2.4 543 17,238 16,837
Subtotal(1) 1.8 1,234 60,985 59,893
Earnings before interest,
depreciation and amortization 4.2 $3,949 $102,010 $ 97,918
Average occupancy(3) 1.1(4) 94.8% 93.7%
Occupancy at end of period 1.9(4) 94.6% 92.7%
Average monthly rent(5) 2.6 $ 17 $ 674 $ 657
Expense ratio(6) (0.4)(4) 37.5% 38.0%
</TABLE>
Same store community results do not include Cherry Creek, a 127 unit community
which was owned for both 1997 and 1996. This community was acquired in December
1994 and was recently renovated. It has been combined with a development
community which contains 280 additional units. Same store community results
also do not include Adams Farm, a 300 unit community which was owned for both
1997 and 1996. This community was acquired in 1994 and has been combined with a
development community which contains 200 additional units.
Rental income rose by $5.2 million, or 3.3%, for those properties held for
all of both periods, as a result of 1.1% higher occupancy and 2.6% higher
average rental rates. At December 31, 1997, same store occupancy was 94.6%, up
from 92.7% at December 31, 1996.
Rental expenses were $61.0 million, or 1.8% more in 1997 than 1996. Higher
on-site bonuses accounted for $1.8 million of a $2.3 million increase in
personnel costs. Utilities expense decreased by $2.1 million as the Company
passed a portion of its water expense to the residents. Operating expenses
increased $1.0 million primarily as a result of higher marketing costs. Off
site property management expense, which is allocated to the communities, rose
$0.3 million as the Company added corporate positions in 1996 and 1997 in
operations, training, marketing, and maintenance. Maintenance and grounds
expenses decreased by $0.5 million or 4.7% due primarily to lower levels of
contracted services. Property taxes and insurance increased by $0.5 million to
reflect higher assessed values.
For those 18,410 apartments owned by the Company for both 1996 and 1995,
rental revenues increased $2.8 million or 2.1% in 1996 over 1995 as a result of
1.5% lower occupancy and 3.2% higher average rental rates. Operating expenses
decreased $0.5 million or 1.0% in 1996 as compared to the same period in 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 began 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 1996.
RENTAL OPERATIONS--DEVELOPMENT COMMUNITIES. In 1997, the Company placed in
service 936 units as summarized in the following table:
<TABLE>
<CAPTION>
Occupancy
of
Units put delivered
Units in service Total units units at
Community Location Planned In 1997 In Service 12/31/97
- --------- -------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Madison at Adams Farm II Greensboro 200 200 500 84%
Hammocks at Long Point Savannah 308 284 284 78
Madison at River Sound Atlanta 586 452 586 63
----- --- ----- ---
1,094 936 1,370 75%
</TABLE>
As discussed above, the 200 unit Madison at Adams Farm II is adjacent to
the existing 300 unit Adams Farm community and these two communities are now
operated as one. The operating results for 1997 and 1996 for the Madison at
River Sound, Madison at Adams Farm, and the Hammocks at Long Point are
summarized in the following table (dollars in thousands; see footnotes above):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Rental income $9,697 $4,344
Operating expenses(1) 2,663 1,313
Taxes and insurance expense 491 230
------ ------
Subtotal 3,154 1,543
------ ------
Earnings before interest, depreciation and amortization $6,543 $2,801
Units in service at year end 1,777 841
</TABLE>
RENTAL OPERATIONS--OTHER COMMUNITIES. "Other communities" are those not
considered "same store communities" or "development communities". These include
communities bought or sold in part or in whole in 1996 or 1997. At December 31,
1997, these communities included 6,593 units. The performance of the other
communities for 1997 and 1996 is summarized in the following table (dollars in
thousands; see footnotes above):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Rental income $35,671 $13,898
Operating expenses(1) 8,937 3,766
Taxes and insurance expense 5,536 1,915
------- -------
Subtotal 14,473 5,681
------- -------
Earnings before interest, depreciation and amortization $21,198 $ 8,217
Units 6,593 2,939
</TABLE>
INTEREST, DIVIDEND AND OTHER INCOME. Interest, dividend and other income
decreased to $7.7 million in 1997 from $11.6 million in 1996 and $11.4 million
in 1995 as the Company liquidated its holdings of cash and marketable
securities and invested the proceeds in apartments. At December 31, 1997, cash
and marketable securities totaled $2.5 million as compared to $56.6 million at
December 31, 1996 and $92.3 million at December 31, 1995. Interest, dividend
and other income are summarized in the following table (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest income $1,878 $ 2,276 $ 5,514
Dividend income 725 3,178 1,394
Other income 5,086 6,177 4,476
Total $7,689 $11,631 $11,384
</TABLE>
INTEREST EXPENSE. Interest expense net of capitalized interest totaled
$25.9 million in 1997, up from $22.5 million in 1996 and $15.6 million in 1995.
Average debt outstanding rose to $457.1 million in 1997 from $373.0 million in
1996 and $264.6 million in 1995. During 1997, the Company issued $100.0 million
of senior unsecured notes in July and October, assumed $43.0 million of
mortgage debt in connection with the acquisition of four apartment communities
and borrowed a net of $67.8 million under the Company's line of credit. The
weighted average interest rate charged on all the Company's debt was 7.0% in
1997, 7.1% in 1996 and 6.9% in 1995. During 1997, $5.3 million of interest
related to the Company's development projects was capitalized, up from
$3.2 million in 1996 and $1.1 million in 1995, due to the higher level of
development.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for 1997 totaled $4.7 million, representing 2.2% of rental revenues. For 1996,
general and administrative expenses averaged 1.6% of rental revenues and for
1995 averaged 1.7% of rental revenues. General and administrative expenses
increased in 1997 primarily as a result of higher headcount and their
associated costs. In 1997, the Company added positions in the areas of property
management, acquisitions, development, accounting, and administration in order
to provide better service to its residents and to compete more effectively in a
rapidly evolving industry. The Company expects that its overhead expense
measured as a percentage of revenues will remain in the range of 2.0% to 2.5%
of rents.
GAINS ON SALES OF ASSETS. Net gains recognized on the sale of assets
totaled $1.5 million in 1997, $4.2 million in 1996, and $1.8 million for 1995.
Gains in 1997 consisted of $1.0 million from the sale of securities and
$0.5 million in gains from the sale of real estate. In 1997, the Company sold
Saw Mill Village, a 340-unit apartment community located in Columbus, Ohio
recognizing a $0.5 million gain. In 1996, the Company sold Hunters Chase, a
244-unit apartment community located in Cleveland, Ohio, recognizing a
$1.5 million gain. Saw Mill Village and Hunters Chase were acquired in 1994 as
part of a twelve property portfolio transaction, but the Ohio locations of
these two communities did not fit the Company's strategy of building a Southern
franchise.
NET INCOME. Net income totaled $65.5 million in 1997, $64.0 million in
1996 and $53.5 million in 1995. Net income available for common shareholders
totaled $42.2 million in 1997, $44.2 million in 1996 and $35.4 million in 1995.
The increases in net income for 1997 when compared to 1996 and 1995 arose
principally from substantially increased operating income from apartments due
to the growth of the Company's apartment holdings, higher same store net
operating income and higher leverage. Net income available for common
shareholders and net income per common share decreased in 1997 primarily due to
a reduction in net realized gains. Net income per common share was $1.10 in
1997, $1.23 in 1996, and $1.06 in 1995.
DIVIDENDS TO PREFERRED SHAREHOLDERS. Preferred dividends are summarized
in the following table (dollars in thousands):
<TABLE>
<CAPTION>
Issue
Date 1997 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Series A Preferred share dividends 6/23/93 $ 404 $ 891 $ 1,425
Series B Preferred share dividends 10/31/94 8,820 8,820 8,820
Series C Preferred share dividends 3/8/95 9,889 9,890 7,884
Series D Preferred share dividends 12/5/96 4,144 242 --
------- ------- -------
Total preferred dividends $23,257 $19,843 $18,129
</TABLE>
The increase in preferred dividends arose from the issue in December 1996
of 1.0 million shares of Series D Preferred Stock. Shareholders of the
Company's Series A Preferred Stock have converted 4.4 million of the 4.6
million Series A shares originally issued in June 1993 into 5.9 million shares
of the Company's common stock as the common dividend was raised above the
equivalent preferred dividend.
FUNDS FROM OPERATIONS. Funds from operations rose 8.8% to $102.4 million
in 1997 as compared to $94.0 million in 1996 and $79.4 million in 1995. Funds
from operations available to common shares rose 11.8% to $83.3 million in 1997
compared to $74.4 million in 1996 and $61.2 million in 1995. These increases
were principally due to higher same store net operating income, higher rental
operating income resulting from the growth of the Company's apartment holdings
and higher leverage. Other income from securities totaled $5.0 million
for 1997 versus $6.0 million for 1996 and $4.3 million for 1995. "Core
FFO", those earnings produced exclusively by non cash management activities,
rose 10.7% to $97.3 million in 1997 as compared to $88.0 million in 1996 and
$75.0 million in 1995.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income $ 65,503 $64,006 $53,537
Less preferred dividends paid 23,257 19,843 18,129
-------- ------- -------
Net income available for common shares 42,246 44,163 35,408
Add depreciation of real estate owned 42,464 34,490 26,265
Less net realized gains 1,456 4,207 1,813
Plus non-recurring expenses -- -- 1,370
-------- ------- -------
Funds from operations available to common shares 83,254 74,446 61,230
Add convertible preferred dividends 19,113 19,601 18,129
Funds from operations--fully diluted (1) $102,367 $94,047 $79,359
======== ======= =======
Less Other Income from Securities $ 5,018 $ 6,022 $ 4,336
======== ======= =======
Core Funds from Operations $ 97,349 $88,025 $75,023
======== ======= =======
Weighted average common shares outstanding--
Basic 38,461 35,919 33,368
Fully diluted(1) 48,747 46,577 43,112
</TABLE>
_____________
(1) Assumes conversion of all convertible preferred shares.
The Company believes that funds from operations is an important measure of
its operating performance. Funds from operations does not represent cash flows
from operations as defined by generally accepted accounting principles, GAAP,
and should not be considered as an alternative to net income or as an indicator
of the Company's operating performance, or as a measure of the Company's
liquidity. Based on published recommendations of a task force of the National
Association of Real Estate Investment Trusts, the Company defines funds from
operations as net income computed in accordance with GAAP, excluding
non-recurring costs and net realized gains (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 Company's funds from operations by $1.1 million, $0.9 and $0.7
million in 1997, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL STRUCTURE. The Company's senior notes and its preferred stock
are rated investment grade by Standard & Poor's Corporation (BBB+/BBB), Moody's
Investors Services, Inc. (Baa2/Baa3), and Duff & Phelps Credit Rating Co.
(BBB+/BBB). At December 31, 1997, total debt equaled 43% of total
capitalization at cost, and 34% of total capitalization with equity valued at
market. At that date, the Company's financial structure was as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Equity at
% of Market % of
Book(1) Total Value Total
------ ----- --------- -----
<S> <C> <C> <C> <C>
Advances under line of credit $ 67,800 5%
Mortgage loans 70,282 5
6.625% senior unsecured notes, 1999 40,000 3
6.625% senior unsecured notes, 2000 40,000 3
6.625% senior unsecured notes, 2001 40,000 3
7.250% senior unsecured notes, 2002 40,000 3
6.875% senior unsecured notes, 2003 40,000 3
6.875% senior unsecured notes, 2004 40,000 3
7.250% senior unsecured notes, 2005 120,000 7
6.690% senior unsecured notes, 2006 50,000 4
6.900% senior unsecured notes, 2007 50,000 4
---------- ---- ----------- ----
Total debt 598,082 43 $ 598,082 34%
Series D preferred equity 50,000 4 50,000 3
Common and convertible preferred equity(2) 747,332 53 1,130,140 63
---------- ---- ----------- ----
Total equity 797,332 57 1,180,140 66
Total capitalization $1,395,414 100% $1,778,222 100%
========== ==== =========== ====
</TABLE>
______________
(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, 1997, the Company had $67.8 million borrowings outstanding
under its $200.0 million line of credit. Borrowings under the line bear
interest at 0.60% above the thirty day London Interbank Offered Rates. At
December 31, 1997, the Company's loan agreements and the covenants under its
senior unsecured notes would have allowed it to borrow $220.3 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, 1997, the Company had seven mortgage loans
outstanding, which were assumed in connection with the purchase of the Mariner
Club, Estate on Quarry Lake, Plantations at Killearn, Richmond Townhomes,
Trails at Briar Forest, Parc Royale, and La Tour Fontaine communities.
LIQUIDITY. Merry Land expects to meet its short-term liquidity
requirements with cash provided by operating activities and by borrowing under
its line of credit. The Company's primary short-term liquidity needs are
operating expenses, apartment acquisitions and development and capital
improvements. The Company has essentially completed the liquidation of its
holdings of marketable securities which were acquired as temporary investments
pending the acquisition or development of additional apartment communities.
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 Company's estimated capital requirements
resulting from its development commitments as of December 31, 1997, pro forma
for the sale of the Series E Preferred Stock on February 13, 1998. Not included
in this table are additional acquisitions and developments, including the
Trammell Crow Residential Portfolio, debt repayments or the additional sale of
debt or equity securities (dollars in thousands):
Estimated capital requirements:
Development costs through 12/31/99 $ 222,415
Less development costs paid through 12/31/97 (124,414)
Development costs through 1999 98,001
Acquisition of communities under development 70,500
Total future development commitments 168,501
Estimated capital sources:
Cash on hand at 12/31/97, pro forma 29,420(1)
Funds available under line of credit at 12/31/97, pro forma 200,000(2)
Total capital sources 229,420
Excess of capital sources over capital requirements $ 60,919
______________
(1) Represents cash on hand at 12/31/97 of $570, plus net proceeds of $96,650
from the sale of Series E Preferred Stock, less the balance of $67,800
repaid under the Company's line of credit at 12/31/97.
(2) See footnote (1).
CASH FLOWS. The following table summarizes cash flows for 1997, 1996, and
1995 including the availability of marketable securities (dollars in
thousands):
<TABLE>
<CAPTION>
Sources and Uses of Cash
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating activities $ 110,925 $ 91,666 $ 82,224
Sales of Merry Land common and preferred stock 17,212 118,512 118,895
Net borrowings 210,536 27,546 148,234
Sale of real property 21,710 -- --
Other sources 7,254 15,731 9,738
--------- --------- ---------
Total sources of cash 367,637 253,455 359,091
Acquisitions of and improvements to properties (277,419) (152,177) (213,521)
Development of properties (58,711) (63,081) (12,813)
Dividends paid (83,297) (73,729) (64,868)
Other uses (2,269) (178) (4,021)
--------- --------- ---------
Total uses (421,696) (289,165) (295,223)
Increase (decrease) in cash, cash equivalents
and marketable securities $ (54,059) $ (35,710) $ 63,868
</TABLE>
Cash, cash equivalents and marketable securities decreased by $54.1
million in 1997 as the Company invested funds raised in equity offerings in
1996 in apartments. With the expansion of the Company's apartment holdings,
operating cash flow has grown to $110.9 million in 1997 from $91.7 million in
1996 and $82.2 million in 1995. During 1997 net borrowings provided $210.5
million in funds. In July and October the Company issued a total of $100.0
million of senior unsecured notes; drawings under the Company's line of credit
totaled $67.8 million at December 31, 1997; and $43.0 million of mortgage debt
was assumed in connection with the purchase of four apartment communities.
$16.3 million was reinvested by shareholders under the Company's Dividend
Reinvestment and Stock Purchase Plans.
The primary use of cash has been apartment acquisitions, development and
improvements and dividends. Dividends paid in 1997 increased from the same
periods in 1996 and 1995 due to an increase in the average amount of common and
preferred stock outstanding, and in the case of the Company's Common Stock, an
increase in the dividends per share to $1.56 from $1.48 in 1996 and $1.40 in
1995.
CAPITAL EXPENDITURES. The Company capitalizes the direct and indirect
cost of expenditures for the acquisition or development of apartments and for
replacements and improvements. Replacements are non-revenue producing capital
expenditures which recur on a regular basis, but which have estimated useful
lives of more than one year, such as carpet, vinyl flooring and exterior
repainting. Improvements are expenditures which significantly increase the
revenue producing capability or which significantly reduce the cost of
operating assets. At newly acquired communities, the Company often finds it
necessary to upgrade the physical appearance of the properties and to complete
maintenance and repair work which had been deferred by prior owners. These
activities often result in heavier capital expenditures in the early years of
Company ownership, and some of these expenditures which would be considered
replacements at stabilized communities (as defined below) are classified as
improvements at newly acquired properties. 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 1997, 1996 and
1995 (dollars in thousands, except per unit data):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Apartment communities:
Acquisitions $260,213 $139,066 $198,339
Development projects:
Development costs 53,453 59,917 11,749
Capitalized interest 5,258 3,164 1,064
Replacements for stabilized communities(1) 8,250 5,250 3,178
Improvements(2) 6,928 6,979 11,103
Commercial properties 175 462 373
Corporate level expenditures 1,853 419 528
-------- -------- --------
$336,130 $215,257 $226,334
======== ======== ========
Per Unit:
Replacements for stabilized communities(1) $ 390 $ 285 $ 233
Improvements(2) $ 235 $ 278 $ 498
</TABLE>
_____________
(1) Stabilized communities are those properties which have been owned for at
least two full calendar years. In 1997, 21,156 units were stabilized as
compared to 18,410 units in 1996 and 13,665 units in 1995.
(2) Improvements include expenditures for all properties owned during the
period, including replacements at newly acquired communities.
INFLATION. Substantially all of the Company's leases are for terms of one
year or less, which should enable the Company to replace existing leases with
new leases at higher rentals in times of rising prices. The Company believes
that this would offset the effect of cost increases stemming from inflation.
FORWARD LOOKING STATEMENTS. This filing includes statements that are
"forward looking statements" regarding expectations with respect to market
conditions, development projects, acquisitions, occupancy rates, capital
requirements, sources of funds, expense levels, operating performance and other
matters. 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, environmental concerns, and interest rates, any of which may cause
actual results to differ from the Company's current expectations.
<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, 1997 and
1996 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, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 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, 1997 and 1996 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN LLP
------------------------
Arthur Andersen LLP
Atlanta, Georgia
January 16, 1998
<PAGE>
PART II
Item 8--Financial Statements and Supplementary Data
Merry Land & Investment Company, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
PROPERTIES AT COST
Apartments $1,496,109 $1,175,427
Apartments under development 48,342 56,110
Commercial rental property 5,363 6,874
Land held for investment or future development 4,090 4,090
Operating equipment 3,676 1,817
---------- ----------
1,557,580 1,244,318
Less accumulated depreciation and depletion (142,617) (102,277)
1,414,963 1,142,041
CASH AND SECURITIES
Cash and cash equivalents 570 32,793
Marketable securities 1,963 23,799
--------- ---------
2,533 56,592
OTHER ASSETS
Notes receivable 1,412 726
Other receivable 249 2,449
Deferred loan costs 4,639 3,497
Other 4,085 2,941
--------- ---------
10,385 9,613
TOTAL ASSETS $1,427,881 $1,208,246
NOTES PAYABLE
Mortgage loans $ 70,282 $ 27,546
Senior notes 460,000 360,000
Note payable--credit line 67,800 --
--------- ---------
598,082 387,546
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 6,622 4,016
Resident security deposits 1,597 1,669
Accrued property taxes 10,780 7,642
Accrued employee compensation 3,471 2,284
Other 9,997 6,317
--------- ---------
32,467 21,928
STOCKHOLDERS' EQUITY
Preferred stock, at $25 and $50
liquidation preference, 20,000 shares authorized;
188 and 359 shares $1.75 Series A Cumulative Convertible 4,692 8,970
4,000 shares $2.205 Series B Cumulative Convertible 100,000 100,000
4,599 shares, $2.15 Series C Cumulative Convertible 114,985 114,995
1,000 shares, $4.145 Series D Cumulative Redeemable Preferred 50,000 50,000
Common stock, at $1 stated value, 100,000 shares authorized;
39,177 and 37,784
shares issued 39,177 37,784
Capital surplus 525,744 498,907
Cumulative undistributed net earnings (15,730) 2,064
Notes receivable from stockholders and ESOP (21,691) (17,502)
Unrealized gain on securities 155 3,554
---------- ---------
797,332 798,772
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,427,881 $1,208,246
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<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)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
INCOME
Rental income $208,871 $176,620 $144,778
Mineral royalties 1,401 369 436
Mortgage interest 84 70 79
Other interest 1,794 2,206 5,435
Dividends 725 3,178 1,394
Other income 5,086 6,177 4,476
-------- -------- --------
217,961 188,620 156,598
EXPENSES
Rental expense 56,023 48,350 42,180
Interest 25,900 22,527 15,646
Depreciation--real estate 42,464 34,490 26,265
Depreciation--other 412 290 208
Amortization--financing costs 737 569 462
Taxes and insurance 23,712 19,737 16,347
General and administrative expense 4,666 2,858 2,396
Other non-recurring expense -- -- 1,370
-------- -------- --------
153,914 128,821 104,874
Income before net realized gains 64,047 59,799 51,724
Net realized gains 1,456 4,207 1,813
-------- -------- --------
NET INCOME 65,503 64,006 53,537
======== ======== ========
Dividends to preferred shareholders 23,257 19,843 18,129
======== ======== ========
NET INCOME AVAILABLE FOR COMMON SHARES $ 42,246 $ 44,163 $ 35,408
======== ======== ========
Weighted average common shares
Outstanding 38,461 35,919 33,368
Diluted 38,928 36,676 33,418
EARNINGS PER COMMON SHARE
Basic $ 1.10 $ 1.23 $ 1.06
Diluted $ 1.10 $ 1.23 $ 1.06
======== ======== ========
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 1.56 $ 1.48 $ 1.40
</TABLE>
The accompanying notes are an integral part of these consolidated 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>
BALANCE, 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 (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)
Preferred stock dividends -- -- -- -- -- (18,129) (18,129)
Dividend reinvestment and stock
purchase plan -- -- 552 552 10,618 -- 11,170
Common stock redeemed -- -- (124) (124) (2,576) -- (2,700)
Sale of common stock to ESOP -- -- -- -- (2,059) -- (2,059)
Unrealized gain on securities -- -- -- -- 5,498 -- 5,498
--- ----- ----- ------ ------- ---------- --------
BALANCE, 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 (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)
Preferred stock dividends -- -- -- -- -- (19,843) (19,843)
Dividend reinvestment and stock
purchase plan -- -- 679 679 13,153 -- 13,832
Common stock redeemed -- -- (30) (30) (645) -- (675)
Sale of common stock to ESOP -- -- -- -- (732) -- (732)
Unrealized gain on securities -- -- -- -- (5,144) -- (5,144)
---- ------- ----- ------ ------- ----- ------
BALANCE, DECEMBER 31, 1996 9,959 $273,965 37,784 $37,784$484,959 $ 2,064 $798,772
1997 net income -- -- -- -- -- 65,503 65,503
Common stock issued in conversion
of preferred stock (172) (4,288) 231 231 4,057 -- --
Employee purchase and sale of
common stock -- -- 378 378 7,425 -- 7,803
Increase in notes receivable from
stockholders -- -- -- -- (5,262) -- (5,262)
Common stock dividends -- -- -- -- -- (60,040) (60,040)
Preferred stock dividends -- -- -- -- -- (23,257) (23,257)
Dividend reinvestment and stock
purchase plan -- -- 784 784 15,354 -- 16,138
Sale of common stock to ESOP -- -- -- -- 1,073 -- 1,073
Unrealized gain on securities -- -- -- -- (3,398) -- (3,398)
----- ------- ------ ------- -------- -------- -------
BALANCE, DECEMBER 31, 1997 9,787 $269,677 39,177 $39,177 $504,208 $(15,730) $797,332
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
PART II
Item 8--Financial Statements and Supplementary Data
Merry Land & Investment Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Rents and royalties received $ 210,608 $ 176,968 $145,232
Interest received 2,005 2,345 4,887
Dividends received 725 3,921 1,394
Rental expense (54,899) (48,516) (40,981)
General and administrative expense (4,408) (2,637) (2,257)
Interest expense (23,294) (22,806) (13,575)
Property taxes and insurance expense (21,054) (16,644) (12,461)
Other 1,241 (965) (15)
--------- --------- --------
Net cash provided by operating activities: 110,925 91,666 82,224
INVESTING ACTIVITIES:
Principal received on notes receivable (687) 85 125
Sale of securities and temporary investments 26,549 31,340 274,944
Purchase of securities and temporary investments -- (5,408)(284,189)
Sale of real property 21,710 14,904 156
Purchase of real property (260,213)(139,066)(198,339)
Development of real property (58,711) (63,081) (12,813)
Improvements to real property (17,206) (13,111) (15,182)
Nonrecurring expenditures -- -- (1,546)
Other (1,582) 33 (2,475)
--------- -------- --------
Net cash used in investing activities (290,140)(174,304)(239,319)
FINANCING ACTIVITIES:
Issuance of senior unsecured notes 100,000 -- 240,000
Net borrowings (repayments)--bank debt 67,800 -- (57,600)
Net borrowings (repayments)--repurchase agreements -- -- (17,375)
Assumption of mortgage loans 42,979 27,546 7,041
Repayments of mortgage loans (243) -- (23,832)
Cash dividends paid--common (60,040) (53,886) (46,739)
Cash dividends paid--preferred (23,257) (19,843) (18,129)
Sale of common stock--public offerings -- 56,032 --
Sale of common stock--reinvested
dividends and stock purchase plan 16,138 13,832 11,170
Sale of common stock--employees 2,542 3,266 977
Sale of preferred stock (net of conversions)--
public offering -- 48,725 109,686
Common stock retired -- (3,343) (2,938)
Net (borrowings) repayments--ESOP 1,073 (732) (2,050)
-------- -------- --------
Net cash provided by financing activities 146,992 71,597 200,211
NET INCREASE (DECREASE) IN CASH (32,223) (11,041) 43,116
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,793 43,834 718
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 570 $ 32,793 $ 43,834
========= ======== ========
RECONCILIATION OF NET INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,503 $ 64,006 $ 53,537
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 43,613 35,349 26,935
(Increase) decrease in interest and accounts receivable 69 (1,572) (586)
(Increase) decrease in other assets (2,604) (865) (2,012)
Increase (decrease) in accounts payable and accrued
interest 4,727 (1,853) 6,163
Gain on the sale of marketable securities (996) (2,679) (1,673)
Gain on the sale of real estate (460) (1,528) (140)
ESOP contributions 1,073 808 --
-------- -------- --------
Net cash provided by operating activities $ 110,925 $ 91,666 $ 82,224
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated 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 an apartment operating company,
which acquires, builds and operates upscale apartment communities throughout
the Southern United States. The Company is taxed as a real estate investment
trust (REIT).
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 earned .
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 Statement of Financial Accounting Standard ("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
In 1997, the Company adopted SFAS 128, "Earnings Per Share." In accordance
with this standard, basic earnings per share is computed on the basis of the
weighted average number of shares outstanding during the year. Diluted earnings
per share is computed giving effect to dilutive stock options and dilutive
preferred stock (Series A) 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.
USE OF ESTIMATES
The preparation of these financial statements required the use of certain
estimates by management in determining the Company's assets, liabilities,
revenue and expenses. Actual results may differ from these estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, all investments purchased
with an original maturity of three months or less are considered to be cash
equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued,
effective for years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Based on
current accounting standards, this new accounting statement is not expected to
have a material impact on the Company's consolidated financial statements. The
Company will adopt this accounting standard in 1998.
Also in June 1997, SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," was issued, effective for years beginning
after December 15, 1997. This statement requires companies to identify segments
consistent with the manner in which management makes decisions about allocating
resources to segments and measuring their performance. Disclosures for the
newly identified segments are similar to those required under current
standards, with the addition of certain quarterly disclosure requirements. It
also establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt this accounting
standard in 1998.
DEVELOPMENT ACTIVITIES
The cost of developed properties includes interest, property taxes,
insurance and allocated development overhead incurred during the construction
period. Interest of $5.3 million and $3.2 million was capitalized during 1997
and 1996, respectively.
3. MARKETABLE SECURITIES
The cost and market value of securities by major classification at
December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
COST MARKET COST MARKET COST MARKET
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Common stocks $1,808 $1,963 $18,339 $21,361 $37,864 $46,018
Corporate debentures -- -- 1,906 2,438 1,906 2,450
------ ------ ------- ------- ------- -------
$1,808 $1,963 $20,245 $23,799 $39,770 $48,468
====== ====== ======= ======= ======= =======
</TABLE>
On January 1, 1994, the Company adopted SFAS No. 115 and began classifying
its marketable securities as available for sale and reporting them at market
value with unrealized gains and losses reported 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, 1997 and 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
9.760% mortgage notes(a) $ 12,642 $ 12,720
7.750% mortgage note(b) 9,600 9,600
7.625% mortgage note(c) 5,147 5,226
7.210% mortgage note(d) 9,423 --
7.125% mortgage note(e) 14,713 --
7.570% mortgage note(f) 9,828 --
8.250% mortgage note(g) 8,929 --
6.625% senior unsecured notes(h) 120,000 120,000
7.250% senior unsecured notes(i) 40,000 40,000
6.875% senior unsecured notes(j) 40,000 40,000
6.875% senior unsecured notes(k) 40,000 40,000
7.250% senior unsecured notes(l) 120,000 120,000
6.690% senior unsecured notes(m) 50,000 --
6.900% senior unsecured notes(n) 50,000 --
Advance under unsecured line of credit(o) 67,800 --
-------- --------
$598,082 $387,546
</TABLE>
(a) $10.6 million and $2.0 million, 9.760% mortgage notes, principal and
interest payable monthly, maturity 2001.
(b) 7.750% mortgage note, interest payable monthly, maturity 2002.
(c) 7.625% mortgage note, principal and interest payable monthly, maturity
2005.
(d) 7.210% mortgage note, principal and interest payable monthly, maturity
2001.
(e) $0.8 million and $8.0 million and $5.9 million, 7.125% mortgage
notes, principal and interest payable monthly, maturity 2006.
(f) 7.570% mortgage note, principal and interest payable monthly, maturity
2001.
(g) 8.250% mortgage note, principal and interest payable monthly, maturity
2001.
(h) 6.625% notes, interest payable semi-annually, principal installments of
$40.0 million each due 1999, 2000, and 2001.
(i) 7.250% notes, interest payable semi-annually, maturity 2002.
(j) 6.875% notes, interest payable semi-annually, maturity 2003.
(k) 6.875% notes, interest payable semi-annually, maturity 2004.
(l) 7.250% notes, interest payable semi-annually, maturity 2005.
(m) 6.690% notes, principal and interest payable semi-annually, maturity 2006.
(n) 6.900% notes, principal and interest payable semi-annually, maturity
August, 2007.
(o) $200 million line of credit bearing interest equal to floating LIBOR plus
0.60%, maturity September, 2000.
The Company estimates that the aggregate fair value of borrowings
approximates their carrying value at December 31, 1997. Maturities of
borrowings at December 31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Loan
Amount
------
<S> <C>
1998 $ 68,511
1999 40,768
2000 40,829
2001 80,038
2002 54,700
2003 40,364
2004 40,391
2005 120,419
2006 62,062
2007 50,000
--------
$598,082
========
</TABLE>
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 Company's taxable income differs from its income reported in the
accompanying financial statements because of the difference in the timing of
recognition of certain items of income and expense for tax purposes. A
reconciliation of tax and book income follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income $65,503 $64,006 $53,537
Excess of tax over accounting depreciation (5,725) (5,451) (6,944)
Other 2,572 (85) 2,423
Estimated taxable income $62,350 $58,470 $49,016
======= ======= =======
</TABLE>
6. INCENTIVE STOCK OPTION PLAN
Under the Company's incentive stock option plan, at December 31, 1997,
there were 1,727,800 shares available for grant and 619,100 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, 1997, 1996, and 1995
are as follows:
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 1,183,700
Issued (weighted average $21.03 per share) 577,500
Exercised (weighted average $20.51 per share) (220,700)
Canceled (weighted average $20.66 per share) (75,300)
---------
Balance, December 31, 1997 (weighted average $20.31 per share) 1,465,200
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Number
Exercisable
Award Outstanding Remaining at
Date at 12/31/97 Contractual Life Exercise Price 12/31/97
------ ----------- ---------------- -------------- ----------
<S> <C> <C> <C> <C>
3/16/92 14,000 4.3 yrs. $8.25 14,000
7/12/93 54,000 5.6 yrs. 16.63 54,000
9/1/93 25,000 5.8 yrs. 18.75 25,000
1/18/94 45,000 6.1 yrs. 20.88 36,000
8/18/94 206,700 6.7 yrs. 19.00 160,700
11/3/94 20,000 6.9 yrs. 17.88 16,000
4/15/96 541,500 8.3 yrs. 20.88 212,400
1/17/97 211,000 9.0 yrs. 21.50 37,000
4/28/97 243,000 9.3 yrs. 20.50 47,000
5/12/97 50,000 9.4 yrs. 21.13 10,000
5/19/97 10,000 9.4 yrs. 20.88 2,000
5/20/97 25,000 9.4 yrs. 21.00 5,000
7/28/97 7,500 9.6 yrs. 21.88 0
10/27/97 12,500 9.8 yrs. 21.94 0
--------- -------
1,465,200 619,100
</TABLE>
During 1997, 1996 and 1995, the Company loaned officers and employees
$10.5 million, $3.3 million and $4.4 million respectively, to purchase shares
of the Company's 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 60% of dividends paid on these shares be used to repay the indebtedness.
$5.2 million, $2.3 million and $0.9 million were repaid in 1997, 1996 and 1995.
At December 31, 1997, the balance of officer and employee loans was
$19 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
Company's stock on the date of grant. The Company adopted SFAS No. 123 in 1996
for disclosure purposes and estimated the fair value of each option grant
during 1997 and 1996 as of the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions: risk-free
interest rate of 6.6%, expected life of seven years, dividend yield of 7.4%,
and expected volatility of 25%. Using these assumptions, the fair value of the
stock options granted in 1997 and 1996 is $1.5 million and $2.0 million
respectively which would be amortized as compensation expense over the vesting
period of the options. Options generally vest equally over five years. Had
compensation expense for the plans been recorded in accordance with SFAS 123,
the Company's net income available for common shareholders and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net Income:
As reported $42,246 $44,163
Pro Forma $41,601 $43,865
Earnings per Share:
As reported (basic and diluted) 1.10 1.23
Pro Forma (basic and diluted) $ 1.08 $ 1.22
</TABLE>
Basic and diluted earnings per share are computed as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
BASIC:
Net income $65,503,469 $64,006,073 $53,537,199
Preferred dividend requirement 23,257,662 19,842,834 18,129,144
----------- ----------- -----------
Net income available for common $42,245,807 $44,163,239 $35,408,055
=========== =========== ===========
Average common shares outstanding 38,460,687 35,918,565 33,367,527
Basic earnings per share $ 1.10 $ 1.23 $ 1.06
=========== =========== ===========
DILUTED:
Net income $65,503,469 $64,006,073 $53,537,199
Preferred dividend requirement 22,779,499 18,944,799 18,129,144
----------- ----------- -----------
Net income available for common $42,723,970 $45,061,274 $35,408,055
=========== =========== ===========
Dilutive convertible preferred shares 366,136 687,638 0
Dilutive stock options 101,300 70,100 50,200
Average common shares outstanding 38,460,687 35,918,565 33,367,527
----------- ----------- -----------
Average diluted common shares outstanding 38,928,123 36,676,303 33,417,727
=========== =========== ===========
Diluted earnings per share $ 1.10 $ 1.23 $ 1.06
</TABLE>
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
$0.9 million, $1.1 million and $0.8 million in 1997, 1996 and 1995. In 1996,
the Company loaned the ESOP $1.5 million to buy 75,000 shares of the Company's
common stock. At December 31, 1997, the balance of this note and a previous
note was $2.4 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. On March 8, 1995, the Company issued 4.6 million shares of
Series C Cumulative Convertible Preferred Stock in a public offering for net
proceeds of $109.8 million. In 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 1997, Series A Cumulative Convertible Preferred shareholders converted
170 thousand shares to 230 thousand shares of the Company's common stock and at
December 31, 1997, 4.4 million shares of Series A had been converted to
5.9 million shares of common stock leaving 0.2 million shares outstanding.
Preferred stock at December 31, 1997 was as follows:
<TABLE>
<CAPTION>
PREFERRED A PREFERRED B PREFERRED C PREFERRED D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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 187,666 4,000,000 4,599,400 1,000,000
Dividend per share $1.75 $2.205 $2.15(a) $4.145
Call date June 30, 1998 October 31, 1999 March 31, 2000 December 10, 2026
Conversion price $18.65 $21.04 $22.00 --(b)
</TABLE>
______________
(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 stock 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 1997, the Company paid dividends per share as follows:
<TABLE>
<CAPTION>
COMMON PREFERRED A PREFERRED B PREFERRED C PREFERRED D
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
March 31 $.39 $.4375 $.55125 $.5375 $1.03625
June 30 .39 .4375 .55125 .5375 1.03625
September 29 .39 .4375 .55125 .5375 1.03625
December 29 .39 .4375 .55125 .5375 1.03625
Total $1.56 $1.7500 $2.20500 $2.1500 $4.14500
</TABLE>
The ordinary, long-term capital gains and return of capital distributions
for 1997 were as follows:
<TABLE>
<CAPTION>
Common Preferred A Preferred B Preferred C Preferred D
Dividends Dividends Dividends Dividends Dividends
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ordinary 56.44% 84.88% 84.88% 84.88% 84.88%
Return of Capital 33.50 0 0 0 0
Long-term capital gain 10.06 15.12 15.12 15.12 15.12
------ ------ ------ ------- ------
100.00% 100.00% 100.00% 100.00% 100.00%
</TABLE>
On January 19, 1998, the Company declared a $.41 per common share, $.4375
per Preferred A share, $.55125 per Preferred B share, $.5375 per Preferred C
share and $1.03625 per Preferred D per share dividend payable on March 31,
1998.
The Company's dividend reinvestment plan allows any shareholder to elect
to use all or a portion of cash dividends paid to acquire additional shares of
the Company's common stock at a price equal to 95% of the higher of: (a) the
average of the high and low sales prices of the Company's common stock on the
dividend payment date, or (b) the average of the daily high and low sales
prices for the ten trading days prior to the dividend payment date. During
1997, 550,876 shares were issued at a total value of $11.5 million.
In December 1993, the Company established a Stock Purchase Plan which
provides holders of the Company's common stock and preferred stock with a
method of purchasing additional common stock of the Company through optional
cash payments without fees and at a 5% discount. Optional cash payments are
subject to the limitation that the number of shares of common stock which can
be purchased cannot exceed the number of shares of common and preferred stock
owned by the shareholder. During 1997, 233,031 shares were issued for a total
value of $4.9 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 Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
Item 11--Executive Compensation
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
Item 12--Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
Item 13--Certain Relationships and Related Transactions
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
<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 Company's 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 Company's current report on Form 8-K filed
December 11, 1996), and as further amended by Articles of Amendment
to Articles of Incorporation re Series E Preferred Stock
(incorporated herein by reference to Exhibit B of the Company's
Form 8-A filed February 11, 1998).
(3.ii) -- By-laws (incorporated herein by reference to Exhibit 3(ii) of Item 14
of the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
(4) -- INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
(4.1) -- The Company's $120,000,000 7 1/4% Notes due 2005 (incorporated herein
by reference to Item 7, Exhibit 4A to the Company's Form 8-K filed
June 23, 1995).
(4.2) -- Indenture (incorporated herein by reference to Item 7, Exhibit 4B to
the Company's Form 8-K filed June 23, 1995).
(4.3) -- First Supplemental Indenture (incorporated herein by reference to
Item 7, Exhibit 4C to the Company's Form 8-K filed June 23, 1995).
(4.4) -- The Company's $40,000,000 7 1/4% Notes due 2002 (incorporated herein
by reference to Exhibit 4A to the Company's on Form 8-K filed
September 1, 1995).
(4.5) -- The Company's $40,000,000 6.875% Notes due 2003 and $40,000,000
6.875% Notes due 2004 (incorporated herein by reference to Exhibit 4A
to the Company's Form 8-K filed November 8, 1995.)
(4.6) -- The Company's $50,000,000 6.90% Notes due 2007 (incorporated herein
by reference to Exhibit 4A to the Company's Form 8-K filed July 29,
1997.)
(4.7) -- The Company's $50,000,000 6.69% Notes due 2006 (incorporated herein
by reference to Exhibit 4A to the Company's Form 8-K filed
October 31, 1997.)
(10) -- MATERIAL CONTRACTS.
(10.1) -- $120,000,000 6.625% Senior Notes/Note Purchase Agreement
(incorporated herein by reference to Exhibit 10.ii of Item 6 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
(10.2) -- Executive Officer Restricted Stock Loan Plan, as amended
(incorporated herein by reference to Exhibit (10.2.2) of the
Company's Annual Report on Form 10-K for the year ended December 31,
1993).
(10.3) -- Employee Stock Ownership Plan and Trust Agreement (incorporated
herein by reference to Exhibit (10.2.3) of Item 14 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
(10.4) -- Credit Agreement between the Company and Lenders dated September 16,
1997, (incorporated herein by reference to Item 7, Exhibit 10 to the
Company's report on Form 8-K filed September 22, 1997)
(10.5) -- Stock Option and Incentive Plan (incorporated herein by reference to
Appendix "A" to the Company's 1997 Proxy Statement on Form DEF-14A
filed March 24, 1997)
(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 Limited Partnership Georgia ML Tennessee
Apartments LP Apartments LP
ML Alabama Corporation Alabama ML Alabama
Apartments, Inc. Apartments LP
MLA, Inc. Corporation Georgia MLA, Inc.
McCaslin Riverhill, Limited Partnership Texas McCaslin Riverhill
Ltd.
The Wimberly Apartment Limited Partnership Texas The Wimberly
Homes, Ltd. Apartment Homes
McCaslin Hidden Lakes, Limited Partnership Texas McCaslin Hidden Lakes
Ltd.
(23) -- Consent of Arthur Andersen, LLP
(27) -- Financial Data Schedule (for SEC use only).
b) -- Reports on Form 8-K. The registrant filed reports on Form 8-K during
the last quarter of 1997 as follows with respect to the following
matters.
<TABLE>
<CAPTION>
FORM ITEMS DATE FILED LOCATION FINANCIAL STATEMENTS
- ---- ----- ---------- -------- --------------------
<S> <C> <C> <C> <C>
8-K 5,7 (Acquisition of four October 8, 1997 Duluth, Ga Audited Statements
apartment communities) Dallas, Tex. and Pro Forma
Financial Statements
8-K 5 (Acquisition of two October 8, 1997 Houston, Tex. N/A
apartment communities)
8-K 5,7 ($50MM 6.69% Notes October 31, 1997 N/A N/A
due 2006)
8-K 5 (Completion of Public February 13, 1998 N/A N/A
Offering of Series E
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 16, 1998. Our audit was made for the purpose
of forming an opinion on those statements taken as a whole. The schedules
listed in Item 14 are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Atlanta, Georgia
January 16, 1998
<PAGE>
PART IV
Item 14--Schedule XI--Real Estate and Accumulated Depreciation for the Year
Ending December 31, 1997:
</TABLE>
<TABLE>
<CAPTION>
Cost Capitalized Gross Amount at Which
Initial Cost to Company Subsequent to Acquisition Carried at December 31, 1997 Accumulated Depre-
Buildings & Carrying Buildings & Total Depreciation Date of Date ciable
Residential Land Improvements Improvements Cost Land Improvements (a) (aP) Constr. Acq. Life
- ----------- ---- ------------ ------------ ----- ---- ------------ ----- ------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. $1,500,000 $ 12,712,085 $14,334,143 $1,500,000 $27,046,228 $28,546,228 $2,105,408 1987 1994 5-50 yr.
2. 3,576,000 15,671,192 1,127,193 3,576,000 16,798,385 20,374,385 2,567,866 1990 1993 5-50 yr.
3. 1,110,000 6,330,825 1,027,057 1,110,000 7,357,882 8,467,882 1,192,864 1988 1993 5-50 yr.
4. 3,840,000 17,219,224 1,831,230 3,840,000 19,050,454 22,890,454 2,945,724 1991 1993 5-50 yr.
5. 2,080,000 9,957,175 384,122 2,080,000 10,341,297 12,421,297 1,073,315 1990 1995 5-50 yr.
6. 1,580,000 10,983,800 971,654 1,580,000 11,955,454 13,535,454 1,802,704 1988 1993 5-50 yr.
7. 2,120,000 13,195,900 1,418,343 2,120,000 14,614,243 16,734,243 2,157,767 1988 1993 5-50 yr.
8. 805,550 7,166,331 1,051,951 805,550 8,218,282 9,023,832 2,270,885 1982 1990 5-50 yr.
9. 1,503,000 13,553,192 919,341 1,503,000 14,472,533 15,975,533 1,419,457 1989 1994 5-50 yr.
10. 2,592,000 13,375,363 1,158,803 2,592,000 14,534,166 17,126,166 2,061,461 1991 1993 5-50 yr.
11. 65,000 259,675 1,567,939 65,000 1,827,614 1,892,614 576,333 1918(b) 1983 5-50 yr.
12. 954,000 9,083,755 448,371 954,000 9,532,126 10,486,126 907,966 1988 1994 5-50 yr.
13. 1,134,000 10,158,363 569,070 1,134,000 10,727,433 11,861,433 1,017,354 1987 1994 5-50 yr.
14. 1,818,000 21,740,650 150,043 1,818,000 21,890,693 23,708,693 212,144 1996 1997 5-50 yr.
15. 700,000 5,620,292 1,105,789 700,000 6,726,081 7,426,081 2,048,209 1986 1990 5-50 yr.
16. 635,000 2,901,168 20,711,036 635,000 23,612,204 24,247,204 1,130,975 1986 1994 5-50 yr.
17. 2,048,000 9,710,500 2,080,518 2,048,000 11,791,018 13,839,018 1,497,947 1986 1993 5-50 yr.
18. 891,000 10,883,905 362,725 891,000 11,246,630 12,137,630 1,048,827 1984 1994 5-50 yr.
19. 1,500,000 16,142,858 826,636 1,500,000 16,969,494 18,469,494 2,388,834 1991 1993 5-50 yr.
20. 1,936,000 7,939,000 1,541,663 1,936,000 9,480,663 11,416,663 1,249,086 1987 1993 5-50 yr.
21. 1,200,000 9,985,256 997,101 1,200,000 10,982,357 12,182,357 1,970,553 1989 1992 5-50 yr.
22. 912,000 7,717,525 490,213 912,000 8,207,738 9,119,738 351,970 1987 1996 5-50 yr.
23. 2,160,000 19,980,440 137,073 2,160,000 20,117,513 22,277,513 327,271 1996 1997 5-50 yr.
24. 1,630,000 12,880,863 1,734,707 1,630,000 14,615,570 16,245,570 2,254,648 1990 1993 5-50 yr.
25. 1,008,000 5,133,133 1,000,503 1,008,000 6,133,636 7,141,636 1,018,817 1983 1993 5-50 yr.
26. 1,629,000 15,936,411 987,441 1,629,000 16,923,852 18,552,852 1,650,774 1987 1994 5-50 yr.
27. 1,260,000 8,584,736 696,681 1,260,000 9,281,417 10,541,417 947,313 1984 1994 5-50 yr.
28. 888,000 4,241,225 228,921 888,000 4,470,146 5,358,146 293,958 1989 1996 5-50 yr.
29. 1,963,000 16,037,341 285,468 1,963,000 16,322,809 18,285,809 773,253 1995 1996 5-50 yr.
30. 1,440,000 6,210,000 940,447 1,440,000 7,150,447 8,590,447 1,074,647 1985 1993 5-50 yr.
31. 325,000 6,001,731 1,065,060 325,000 7,066,791 7,391,791 2,077,609 1983 1986 5-50 yr.
32. 2,632,000 16,839,075 1,433,842 2,632,000 18,272,917 20,904,917 2,635,148 1990 1992 5-50 yr.
33. 258,277 21,126,910 0 258,277 21,126,910 21,385,187 258,814 1990 1992 5-50 yr.
34. 752,000 9,759,351 1,068,936 752,000 10,828,287 11,580,287 1,885,051 1986 1992 5-50 yr.
35. 480,000 5,917,041 672,998 480,000 6,590,039 7,070,039 1,464,170 1985 1991 5-50 yr.
36. 1,323,000 12,864,616 1,410,628 1,323,000 14,275,244 15,598,244 1,418,863 1984 1994 5-50 yr.
37. 1,872,000 18,134,684 133,848 1,872,000 18,268,532 20,140,532 177,901 1996 1997 5-50 yr.
38. 450,000 5,256,127 833,452 450,000 6,089,579 6,539,579 1,467,167 1987 1991 5-50 yr.
39. 990,000 9,016,445 894,165 990,000 9,910,610 10,900,610 1,748,398 1990 1992 5-50 yr.
40. 485,100 4,371,125 478,590 485,100 4,849,715 5,334,815 846,763 1986 1992 5-50 yr.
41. 1,520,000 9,414,575 680,577 1,520,000 10,095,152 11,615,152 1,204,856 1989 1994 5-50 yr.
42. 1,040,000 8,071,809 526,330 1,040,000 8,598,139 9,638,139 876,504 1986 1995 5-50 yr.
43. 2,916,000 12,418,026 81,250 2,916,000 12,499,276 15,415,276 1994 1997 5-50 yr.
44. 1,058,975 8,096,736 1,583,233 1,058,975 9,679,969 10,738,944 2,105,636 1984 1989(c)5-50 yr.
45. 2,100,000 9,600,000 408,950 2,100,000 10,008,950 12,108,950 1,306,296 1991 1993 5-50 yr.
46. 1,314,000 9,978,363 538,603 1,314,000 10,516,966 11,830,966 1,046,636 1986 1994 5-50 yr.
47. 4,800,000 20,742,850 936,471 4,800,000 21,679,321 26,479,321 2,237,950 1989 1995 5-50 yr.
48. 5,760,000 24,320,449 1,729,762 5,760,000 26,050,211 31,810,211 3,475,702 1990 1993 5-50 yr.
49. 2,016,000 8,518,000 846,151 2,016,000 9,364,151 11,380,151 1,329,915 1988 1993 5-50 yr.
50. 2,240,000 11,960,000 980,063 2,240,000 12,940,063 15,180,063 1,825,613 1988 1993 5-50 yr.
51. 2,470,000 21,562,604 390,469 2,470,000 21,953,073 24,423,073 2,144,146 1995 1995 5-50 yr.
52. 3,055,000 25,957,233 595,430 3,055,000 26,552,663 29,607,663 2,147,427 1995 1995 5-50 yr.
53. 1,300,000 12,613,527 172,478 1,300,000 12,786,005 14,086,005 995,869 1995 1995 5-50 yr.
54. 838,529 7,369,277 33,776,110 838,529 41,145,387 41,983,916 674,124 1996 1996 5-50 yr.
55. 2,626,000 22,060,707 525,830 2,626,000 22,586,537 25,212,537 2,037,188 1995 1995 5-50 yr.
56. 2,535,000 20,986,021 383,551 2,535,000 21,369,572 23,904,572 1,674,579 1995 1995 5-50 yr.
57. 1,046,500 9,054,154 366,784 1,046,500 9,420,938 10,467,438 646,117 1995 1996 5-50 yr.
58. 2,444,000 22,020,109 516,804 2,444,000 22,536,913 24,980,913 2,118,479 1995 1995 5-50 yr.
59. 351,001 4,159,438 1,198,887 351,001 5,358,325 5,709,326 1,461,626 1986 1986 5-50 yr.
60. 1,824,000 16,227,875 430,803 1,824,000 16,658,678 18,482,678 1,093,465 1988 1996 5-50 yr.
61. 329,786 6,649,280 1,124,748 329,786 7,774,028 8,103,814 2,206,008 1983 1986 5-50 yr.
62. 2,432,000 14,107,966 803,187 2,432,000 14,911,153 17,343,153 2,118,959 1991 1993 5-50 yr.
63. 720,000 7,959,871 2,935,193 720,000 10,895,064 11,615,064 2,261,396 1984 1991 5-50 yr.
64. 2,196,744 18,053,471 162,921 2,196,744 18,216,392 20,413,136 356,981 1996 1997 5-50 yr.
65. 2,223,000 10,598,821 68,750 2,223,000 10,667,571 12,890,571 0 1994 1997 5-50 yr.
66. 1,200,000 11,010,416 99,977 1,200,000 11,110,393 12,310,393 182,789 1990 1997 5-50 yr.
67. 828,000 6,563,020 294,134 828,000 6,857,154 7,685,154 275,988 1990 1996 5-50 yr.
68. 1,700,000 19,600,290 228,253 1,700,000 19,828,543 21,528,543 388,061 1996 1997 5-50 yr.
69. 1,640,000 12,945,374 827,473 1,640,000 13,772,847 15,412,847 2,035,558 1991 1993 5-50 yr.
70. 1,386,000 14,775,063 330,178 1,386,000 15,105,240 16,491,240 398,211 1991 1997 5-50 yr.
71. 864,000 5,252,025 2,444,531 864,000 7,696,556 8,560,556 1,259,496 1984 1992 5-50 yr.
72. 2,171,000 18,535,275 374,936 2,171,000 18,910,211 21,081,211 1,682,822 1994 1994 5-50 yr.
73. 580,000 8,216,250 885,105 580,000 9,101,355 9,681,355 1,894,352 1986 1989 5-50 yr.
74. 777,000 10,480,126 95,684 777,000 10,575,810 11,352,810 278,974 1996 1997 5-50 yr.
75. 890,000 10,318,505 252,582 890,000 10,571,087 11,461,087 448,552 1986 1996 5-50 yr.
76. 940,000 11,919,983 102,992 940,000 12,022,975 12,962,975 117,059 1995 1997 5-50 yr.
77. 2,004,000 19,980,334 (106,874) 2,004,000 19,873,460 21,877,460 194,702 1996 1997 5-50 yr.
78. 1,988,000 9,663,149 754,412 1,988,000 10,417,561 12,405,561 1,559,864 1991 1993 5-50 yr.
79. 960,000 4,937,213 493,690 960,000 5,430,903 6,390,903 824,483 1986 1993 5-50 yr.
80. 2,574,000 24,834,228 305,720 2,574,000 25,139,948 27,713,948 1,961,223 1995 1996 5-50 yr.
81. 1,140,000 8,397,085 449,955 1,140,000 8,847,040 9,987,040 1,053,170 1989 1994 5-50 yr.
82. 1,380,000 9,437,830 709,707 1,380,000 10,147,537 11,527,537 497,626 1986 1996 5-50 yr.
83. 360,000 4,235,504 1,005,194 360,000 5,240,698 5,600,698 1,546,712 1983 1990 5-50 yr.
84. 1,536,000 13,614,751 1,795,060 1,536,000 15,409,811 16,945,811 2,885,884 1986 1992 5-50 yr.
85. 1,111,500 7,671,643 520,873 1,111,500 8,192,516 9,304,016 822,147 1986 1994 5-50 yr.
86. 411,500 6,891,173 1,043,287 411,500 7,934,460 8,345,960 2,192,178 1985 1985 5-50 yr.
87. 500,000 4,571,011 1,369,336 500,000 5,940,347 6,440,347 1,029,963 1986 1992 5-50 yr.
88. 800,000 5,214,004 635,302 800,000 5,849,306 6,649,306 1,392,730 1986 1991 5-50 yr.
89. 1,988,000 9,833,825 1,013,729 1,988,000 10,847,554 12,835,554 1,754,512 1987 1993 5-50 yr.
90. 2,380,000 19,936,610 168,768 2,380,000 20,105,378 22,485,378 198,882 1991 1997 5-50 yr.
91. 873,000 9,033,168 291,166 873,000 9,324,334 10,197,334 397,505 1990 1996 5-50 yr.
92. 960,000 11,022,351 906,223 960,000 11,928,574 12,888,574 2,065,934 1991 1992 5-50 yr.
93. 3,024,000 15,027,450 1,328,306 3,024,000 16,355,756 19,379,756 2,555,627 1988 1993 5-50 yr.
94. 900,000 10,222,867 131,512 900,000 10,354,378 11,254,378 436,642 1994 1996 5-50 yr.
95. 1,888,000 10,950,825 868,740 1,888,000 11,819,565 13,707,565 1,244,745 1989 1994 5-50 yr.
96. 448,000 6,490,069 1,000,539 448,000 7,490,608 7,938,608 1,799,737 1985 1988 5-50 yr.
97. 3,648,000 13,152,000 1,632,824 3,648,000 14,784,824 18,432,824 2,024,155 1991 1993 5-50 yr.
98. 960,000 5,597,500 704,280 960,000 6,301,780 7,261,780 951,766 1985 1993 5-50 yr.
99. 1,120,000 6,088,097 706,973 1,120,000 6,795,070 7,915,070 1,081,288 1985 1993 5-50 yr.
100. 2,232,000 24,274,684 182,792 2,232,000 24,457,476 26,689,476 237,448 1996 1997 5-50 yr.
101. 1,224,000 9,971,854 989,319 1,224,000 10,961,173 12,185,173 1,036,709 1982 1994 5-50 yr.
102. 377,500 6,195,990 1,618,101 377,500 7,814,091 8,191,591 1,724,596 1984 1989 5-50 yr.
103. 73,163 -- 8,293,835 523,036 73,163 8,625,884 8,699,047 2,674,414 1982 1983 5-50 yr.
104. 125,000 1,076,646 352,155 125,000 1,428,801 1,553,801 643,579 1975 1982 5-50 yr.
Miscell 138,399 626,133 869,118 138,399 1,495,251 1,633,650 469,971various various5-50 yr.
TOTAL RESIDENTIAL
----------- ------------- ------------ ------- ----------- ---------- ---------- --------- ---- ---- --------
$157,301,524$1,181,664,767 $156,810,925 $523,036$157,301,524$1,383,807,741$1,496,109,265$139,883,740
----------- ------------- ------------ ------- ----------- ---------- ---------- --------- ---- ---- --------
Commercial
791,726 3,089,125 1,482,180 -- 791,726 4,571,305 5,363,031 1,370,506various various5-50 yr.
Development in Progress
14,395,165 -- 29,968,766 3,977,716 24,698,865 23,642,782 48,341,647 --
Land
4,089,470 -- -- -- 4,089,470 -- 4,089,470 29,526
----------- ------------- ------------ ------- ----------- ---------- ---------- ----------
TOTAL
$176,303,820 $1,184,753,892 $188,261,781$4,500,752$186,607,520$1,367,021,828$1,553,873,887$141,283,772
============ ============== ============ ========= =========== ============= ============= ===========
</TABLE>
<PAGE>
Notes:
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the years ending December 31, 1997, 1996 and 1995 are
as follows:
<TABLE>
<CAPTION>
Real Estate Accumulated Depreciation
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $1,242,471,071 $1,040,255,976 $814,435,663 $101,267,134 $67,627,934 $41,362,624
Additions--acquisitions and improvements 335,099,751 216,470,076 225,806,187 42,463,748 34,489,629 26,265,310
Deductions--cost of real estate sold 23,696,935 14,224,981 15,874 2,447,110 850,429 0
-------------- -------------- -------------- ------------ ------------ -----------
Balance at end of period $1,553,873,887 $1,242,471,071 $1,040,225,976 $141,283,772 $101,267,134 $67,627,934
============== ============== ============== ============ ============ ===========
<FN>
1. Adams Farm
2. Audubon Village
3. Augustine Club
4. Auvers Village
5. Beach Club
6. Belmont Crossing
7. Belmont Landing
8. Berkshire Place
9. Bermuda Cove
10. Bishop Park
11. Broadway
12. Champions Club
13. Champions Park
14. Chatelaine Park
15. Chatham Wood
16. Cherry Creek
17. Claire Pointe
18. Clary's Crossing
19. Colony Place
20. Conway Station
21. Copper Terrace
22. Country Club Place
23. Coventry at City View
24. Cypress Cove
25. Deerbrook
26. Duraleigh Woods
27. English Hills
28. Essex Place
29. Estate at Quarry Lake (e)
30. Falls
31. Greentree
32. Gwinnett Crossing
33. Hammocks at Long Point
34. Harvest Grove
35. Haywood Pointe
36. Hickory Creek
37. Hidden Lakes
38. Hollows
39. Hunt Club
40. Huntington
41. Indigo Plantation
42. Kimmerly Glen
43. La Tour Fontaine (g)
44. Lake Point
45. Lakeridge
46. Landings
47. Laurel Gardens
48. Lexington Glen
49. Lexington Park
50. Lofton Place
51. Madison at Cedar Springs
52. Madison at Chase Oaks
53. Madison at Melrose
54. Madison at River Sound
55. Madison at Round Grove
56. Madison at Stone Creek
57. Madison at the Arboretum
58. Madison on the Parkway
59. Magnolia Villa
60. Mariner Club (f)
61. Marsh Cove
62. Mission Bay
63. Misty Woods
64. The Oaks
65. Parc Royale (h)
66. Palms at South Shore
67. Plantations at Killearn (d)
68. The Point
69. Polos
70. Polos East
71. Princeton Square
72. Promenade
73. Quarterdeck
74. Ranchstone
75. Regency
76. Richmond Townhomes (j)
77. Riverhill
78. Royal Oaks
79. Sailboat Bay
80. Sedona Springs
81. Shadow Lake
82. Shoal Run
83. Somerset Place
84. Spicewood Springs
85. Steeple Chase
86. Summit Place
87. Sweetwater Glen
88. Timber Hollow
89. Timberwalk
90. Trails at Briar Forest (i)
91. Valencia Plantation
92. Viridian Lake
93. Waterford
94. Waterford Place
95. Waterford Village
96. Waters Edge
97. Welleby Lake
98. West Wind Landing
99. Willow Trail
100. Wimberly
101. Windridge
102. Windsor Place
103. Woodcrest
104. Woodknoll
Miscellaneous
</TABLE>
ENCUMBRANCES
- ------------
(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, 1997, the balance
outstanding was $5,146,989.
(e) This property secures two term loans. At December 31, 1997, the balances
outstanding were $1,983,098 and $10,659,152.
(f) This property secures a term loan. At December 31, 1997, the balance
outstanding was $9,600,000.
(g) This property secures a term loan. At December 31,1997, the balance was
$9,827,808.
(h) This property secures a term loan. At December 31,1997, the balance was
$8,928,467.
(i) This property secures three term loans. At December 31, 1997, the balances
outstanding were $773,035, $8,016,267, and $5,923,839.
(j) This property secures a term loan. At December 31,1997, the balance was
$9,423,036.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned,
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.
SIGNATURE TITLE DATE
/S/ BOONE A. KNOX Chairman of the Board April 9, 1998
- ---------------------- and Director
Boone A. Knox
/S/ W. TENNENT HOUSTON President, Chief Executive April 9, 1998
- ---------------------- Officer and Director
W. Tennent Houston
/S/ MICHAEL N. THOMPSON Executive Vice President, April 9, 1998
- ---------------------- Chief Operating Officer and
Michael N. Thompson Director
/S/ W. HALE BARRETT Secretary and Director April 9, 1998
- ----------------------
W. Hale Barrett
/S/ HUGH CALVIN LONG II Director April 9, 1998
- ----------------------
Hugh Calvin Long II
/S/ ROBERT P. KIRBY Director April 9, 1998
- ----------------------
Robert P. Kirby
/S/ PAUL S. SIMON Director April 9, 1998
- ----------------------
Paul S. Simon
/S/ DORRIE E. GREEN Vice President and Chief April 9, 1998
- ---------------------- Financial Officer
Dorrie E. Green
/S/ RONALD J. BENTON Vice President and April 9, 1998
- ---------------------- Controller
Ronald J. Benton
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 520
<SECURITIES> 1,963
<RECEIVABLES> 1,661
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,533
<PP&E> 1,557,580
<DEPRECIATION> 142,617
<TOTAL-ASSETS> 1,427,881
<CURRENT-LIABILITIES> 32,467
<BONDS> 460,000
0
269,677
<COMMON> 39,177
<OTHER-SE> 488,478
<TOTAL-LIABILITY-AND-EQUITY> 1,427,881
<SALES> 210,272
<TOTAL-REVENUES> 210,272
<CGS> 122,199
<TOTAL-COSTS> 153,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,900
<INCOME-PRETAX> 65,503
<INCOME-TAX> 0
<INCOME-CONTINUING> 65,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,503
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
