<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-65067
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated February 23, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 22, 1996)
3,000,000 Shares
[MERRY LAND LOGO]
COMMON STOCK
------------------------
ALL OF THE 3,000,000 SHARES OF COMMON STOCK, WITHOUT PAR VALUE (THE "COMMON
STOCK"), OFFERED HEREBY (THE "OFFERING") ARE BEING SOLD BY MERRY LAND &
INVESTMENT COMPANY, INC. ("MERRY LAND" OR THE "COMPANY"). THE COMMON
STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE (THE "NYSE") UNDER
THE SYMBOL "MRY". ON FEBRUARY 20, 1998, THE REPORTED LAST
SALE PRICE OF THE COMPANY'S COMMON STOCK ON THE NYSE
WAS $23 7/16 PER SHARE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------ -------------- -----------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses of the offering estimated at $300,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 450,000 additional Shares solely to cover over-allotments, if any. To
the extent the option is exercised, the Underwriters will offer the
additional Shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to the Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein, and subject to approval of certain
matters by Piper & Marbury L.L.P., counsel to the Underwriters. It is expected
that delivery of the shares of the Common Stock will be made on or about March
, 1998, at the offices of Morgan Stanley & Co. Incorporated, New York, N.Y.,
against payment therefor in immediately available funds.
MORGAN STANLEY DEAN WITTER BT ALEX. BROWN
INTERSTATE/JOHNSON LANE
CORPORATION
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY
The date of this Prospectus Supplement is March , 1998.
<PAGE> 2
INSIDE FRONT COVER
[Map of Southern United States from Maryland to Texas and Florida, with
markings to indicate locations of the Company's Corporate Offices, Apartment
Communities, Development Communities and the Trammell Crow Residential
Communities]
[Photograph of Vinings at Lake Vista apartment community]
Vinings at Lake Buena Vista, Orlando, Florida
(A Trammell Crow Residential Community)
[Photograph of Hidden Lakes apartment community]
Hidden Lakes, Dallas/Ft. Worth, Texas
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 3
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement or the accompanying
Prospectus in connection with the offer made by this Prospectus Supplement and
the accompanying Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Underwriters. This Prospectus Supplement and the accompanying Prospectus
do not constitute an offer to sell or a solicitation of an offer to buy the
shares of Common Stock offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus Supplement and the accompanying Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the facts set forth in this Prospectus Supplement and the
accompanying Prospectus or in the affairs of the Company since the date hereof.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Statement Regarding Forward Looking Disclosure.............. S-3
The Company................................................. S-4
Recent Developments......................................... S-8
The Offering................................................ S-10
Use of Proceeds............................................. S-10
Capitalization.............................................. S-11
Common Stock Price Range and Dividends...................... S-12
Selected Financial Data..................................... S-14
Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................. S-15
Business.................................................... S-23
Management.................................................. S-29
Taxation.................................................... S-29
Underwriting................................................ S-33
Experts..................................................... S-33
Legal Opinions.............................................. S-34
Incorporation of Certain Documents by Reference............. S-34
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 4
Use of Proceeds............................................. 4
Certain Ratios.............................................. 4
Description of Debt Securities.............................. 5
Description of Common Stock................................. 16
Description of Preferred Stock.............................. 17
Description of Common Stock Warrants........................ 21
Description of Depositary Shares............................ 21
Plan of Distribution........................................ 23
Experts..................................................... 24
Legal Opinions.............................................. 24
</TABLE>
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
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.
S-3
<PAGE> 4
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>
S-4
<PAGE> 5
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.
S-5
<PAGE> 6
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
S-6
<PAGE> 7
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>
Date
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 in Delivered
Community Location Planned 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
S-7
<PAGE> 8
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.
S-8
<PAGE> 9
The following is a detailed listing of the communities to be acquired:
<TABLE>
<CAPTION>
12/31/97
Year Sq. ft. ------------------
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%
</TABLE>
- ---------------
(1) Under lease-up at December 31, 1997.
(2) Under construction at December 31, 1997.
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>
S-9
<PAGE> 10
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.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.................. 3,000,000 shares
Common Stock to be outstanding after the Offering.... 42,176,625 shares
Use of Proceeds...................................... To acquire and develop additional
apartment communities, including the
Trammell Crow Residential Portfolio.
NYSE symbol.......................................... MRY
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares are estimated
at approximately $66.3 million ($76.3 million if the underwriters'
over-allotment option is exercised in full). The Company intends to use the net
proceeds to acquire and develop additional apartment communities, including the
Trammell Crow Residential Portfolio. Pending such uses, the Company intends to
invest temporarily the excess proceeds in interest bearing and marketable
securities.
S-10
<PAGE> 11
CAPITALIZATION
The following table sets forth the capitalization of the Company on
December 31, 1997, pro forma for the sale of the Series E Preferred Stock on
February 13, 1997 and as further adjusted to reflect the sale by the Company of
3,000,000 shares of Common Stock pursuant to this Offering (assuming the
Underwriters' overallotment option is not exercised). This table should be read
in conjunction with the financial statements of the Company and related notes
incorporated by reference herein.
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
---------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Debt:
Unsecured bank line(1)................................... $ 67,800 $ -- $ --
Mortgage loans........................................... 70,282 70,282 70,282
6.625% Senior Notes, due 1999-2001....................... 120,000 120,000 120,000
7.25% Senior Notes, due 2002............................. 40,000 40,000 40,000
6.875% Senior Notes, due 2003............................ 40,000 40,000 40,000
6.875% Senior Notes, due 2004............................ 40,000 40,000 40,000
7.25% Senior Notes, due 2005............................. 120,000 120,000 120,000
6.69% Senior Notes, due 2006............................. 50,000 50,000 50,000
6.90% Senior Notes, due 2007............................. 50,000 50,000 50,000
---------- ---------- ----------
Total debt..................................... 598,082 530,282 530,282
Stockholders' equity:
Preferred Stock, no par value, 20,000,000 shares
authorized;
$1.75 Series A Cumulative Convertible, 187,666 shares
issued and outstanding, $25.00 per share liquidation
preference............................................ 4,692 4,692 4,692
$2.205 Series B Cumulative Convertible, 4,000,000 shares
issued and outstanding, $25.00 per share liquidation
preference............................................ 100,000 100,000 100,000
$2.15 Series C Cumulative Convertible, 4,599,400 shares
issued and outstanding, $25.00 per share liquidation
preference............................................ 114,985 114,985 114,985
8.29% Series D Cumulative Redeemable, 1,000,000 shares
issued and outstanding, $50.00 per share liquidation
preference............................................ 50,000 50,000 50,000
7.625% Series E Cumulative Redeemable, 4,000,000 shares
issued and outstanding pro forma, $25.00 per share
liquidation preference................................ -- 100,000 100,000
Common Stock, no par value, $1.00 stated value,
100,000,000 shares authorized; 39,176,625 shares
issued and outstanding (42,176,625 as adjusted)....... 39,177 39,177 42,177
Capital surplus.......................................... 525,745 522,395 585,716
Cumulative undistributed net earnings.................... (15,730) (15,730) (15,730)
Notes receivable from stockholders and ESOP.............. (21,691) (21,691) (21,691)
Unrealized gain on securities............................ 154 154 154
---------- ---------- ----------
Total stockholders' equity.......................... 797,332 893,982 960,303
---------- ---------- ----------
Total capitalization........................... $1,395,414 $1,424,264 $1,490,585
========== ========== ==========
</TABLE>
- ---------------
(1) $200 million line of credit bearing interest equal to LIBOR plus 0.60%,
maturing September 2000.
S-11
<PAGE> 12
COMMON STOCK PRICE RANGE AND DIVIDENDS
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>
Common Cash
Stock Price Dividends
----------------- Declared
High Low per Share
---- --- ---------
<S> <C> <C> <C>
1998
First Quarter (through February 20, 1998)................... $24 1/8 $22 3/8 $.41
1997
Fourth Quarter.............................................. $24 1/8 $21 1/16 $.39
Third Quarter............................................... 23 21 1/16 .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 February 13, 1998, the Company had 4,475 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:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
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
===== ===== =====
</TABLE>
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.
S-12
<PAGE> 13
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 a 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):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Dividend Reinvestment.................................... $11,459 $ 9,128 $ 8,547
Stock Purchase Plan...................................... 4,858 4,704 2,622
------- ------- -------
$16,317 $13,832 $11,169
</TABLE>
S-13
<PAGE> 14
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 Trust's
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."
S-14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In recent years Merry Land has grown rapidly through the acquisition of
apartment communities. Its investment in apartments at cost grew by 27% in 1997,
16% in 1996, 27% in 1995, 44% in 1994, and 164% in 1993, and revenue, expenses,
net income and FFO all reflect this growth. The Company believes that its access
to public and private debt and equity, its experience as an apartment owner, its
knowledge of the Southern apartment markets and its acquisition expertise have
allowed it to take advantage of favorable conditions to make acquisitions at
attractive yields. Merry Land considers its market area to include the Southern
United States, extending from the Washington, D.C. area to Texas and Florida.
The Company believes that conditions in the real estate and financial
markets will allow it to continue to expand its apartment holdings through a
variety of sources, including acquisitions, the purchase of communities planned,
under construction or newly completed by merchant builders, and ground-up
development. It should be noted, however, that as the Company's absolute size
increases, it is likely that its rate of growth will slow and that increases in
earnings and cash flow will become increasingly dependent on improved results
from its existing communities rather than from portfolio growth. However, there
can be no assurance that market conditions will allow any rental increase.
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.
S-15
<PAGE> 16
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
S-16
<PAGE> 17
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
S-17
<PAGE> 18
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>
S-18
<PAGE> 19
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. On a fully diluted per share basis, funds from operations
increased 4.0% to $2.10 in 1997 from $2.02 in 1996 and $1.84 in 1995. Other
income from securities totaled $5.0 million, or $.10 per share, for 1997 versus
$6.0 million, or $.13 per share, for 1996 and $4.3 million, or $.10 per share
for 1995. "Core FFO", those earnings produced exclusively by non cash management
activities, rose 5.8% to $2.00 per share from $1.89 in 1996 and $1.74 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...................... $102,367 $94,047 $79,359
======== ======= =======
Weighted average common shares outstanding --
Basic..................................................... 38,461 35,919 33,368
Fully diluted(1).......................................... 48,747 46,577 43,112
Funds from operations per share --
Basic..................................................... $ 2.16 $ 2.07 $ 1.84
Fully diluted(1).......................................... 2.10 2.02 1.84
Other income from securities (diluted).................... .10 .13 .10
Core funds from operations (diluted)...................... 2.00 1.89 1.74
</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.
S-19
<PAGE> 20
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.
S-20
<PAGE> 21
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):
<TABLE>
<S> <C>
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
=========
</TABLE>
- ---------------
(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.
S-21
<PAGE> 22
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.
S-22
<PAGE> 23
BUSINESS
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.
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.
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.
S-23
<PAGE> 24
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 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.
S-24
<PAGE> 25
APARTMENTS
The following table describes the Company's apartment communities at
December 31, 1997.
<TABLE>
<CAPTION>
Average Average
Date Date Cost(1) Cost Unit Size
Name Location Built Acquired Units (In Thousands) Per Unit(1) (Sq. Ft.)
---- -------- ------- -------- ------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
Shoal Run........................ Birmingham 1986 1996 276 $ 11,528 $41,766 903
FLORIDA
Indigo Plantation................ Daytona 1989 1994 304 11,615 38,208 882
Waterford Village................ Delray Beach 1989 1994 236 13,708 58,083 910
Country Club Place............... Ft. Lauderdale 1987 1996 152 9,120 59,998 1,100
Madison at Coral Square.......... Ft. Lauderdale 1989 1995 384 26,479 68,957 1,192
Mariner Club..................... Ft. Lauderdale 1988 1996 304 18,483 60,798 931
Welleby Lake Club................ Ft. Lauderdale 1991 1993 304 18,433 60,634 1,061
------- ---------- ------- -----
1,144 72,515 63,387 1,076
Beach Club....................... Ft. Myers 1990 1995 320 12,421 38,817 872
Colony Place..................... Ft. Myers 1991 1993 300 18,469 61,565 1,136
Polos............................ Ft. Myers 1991 1993 328 15,413 46,990 955
Viridian Lake.................... Ft. Myers 1991 1992 320 12,889 40,277 863
------- ---------- ------- -----
1,268 59,192 46,681 953
Bermuda Cove..................... Jacksonville 1989 1994 350 15,976 45,644 912
Claire Point..................... Jacksonville 1986 1993 256 13,839 54,059 1,010
Deerbrook........................ Jacksonville 1983 1993 144 7,142 49,595 1,293
Princeton Square................. Jacksonville 1984 1992 288 8,561 29,724 738
Royal Oaks....................... Jacksonville 1991 1993 284 12,406 43,682 816
Spicewood Springs................ Jacksonville 1986 1992 512 16,946 33,097 759
Timberwalk....................... Jacksonville 1987 1993 284 12,836 45,196 851
Waterford........................ Jacksonville 1988 1993 432 19,380 44,861 1,066
------- ---------- ------- -----
2,550 107,086 41,995 902
Cypress Cove..................... Melbourne 1990 1993 326 16,246 49,833 1,027
Lakeridge at Moors............... Miami 1991 1993 175 12,109 69,194 970
Auvers Village................... Orlando 1991 1993 480 22,890 47,688 1,021
Bishop Park...................... Orlando 1991 1993 324 17,126 52,859 903
Conway Station................... Orlando 1987 1993 242 11,417 47,176 787
Copper Terrace................... Orlando 1989 1992 300 12,182 40,608 902
Lexington Park................... Orlando 1988 1993 252 11,380 45,159 799
Mission Bay...................... Orlando 1991 1993 304 17,343 57,050 1,087
Polos East....................... Orlando 1991 1997 308 16,491 53,543 877
Valencia Plantation.............. Orlando 1990 1996 194 10,197 52,564 899
------- ---------- ------- -----
2,404 119,026 49,512 930
Augustine Club................... Tallahassee 1988 1993 222 8,468 38,144 900
Plantations at Killearn.......... Tallahassee 1990 1996 184 7,685 41,767 849
------- ---------- ------- -----
406 16,153 39,786 877
Audubon Village.................. Tampa 1990 1993 447 20,374 45,580 849
Essex Place...................... Tampa 1989 1996 148 5,358 36,204 834
Falls............................ Tampa 1985 1993 240 8,590 35,794 655
Lofton Place..................... Tampa 1988 1993 280 15,180 54,215 953
Promenade........................ Tampa 1994 1994 334 21,081 63,117 978
------- ---------- ------- -----
1,449 70,583 48,712 865
<CAPTION>
Average December Rent(2) Average
--------------------------- Occupancy
Per Month Per Sq. Ft. (3)
----------- ------------- -----------
Name 1996 1997 1996 1997 1996 1997
---- ---- ---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ALABAMA
Shoal Run........................ $582 $571 $0.64 $0.63 85% 92%
FLORIDA
Indigo Plantation................ 573 586 0.65 0.66 88 95
Waterford Village................ 756 809 0.83 0.89 92 98
Country Club Place............... 838 849 0.76 0.77 94 95
Madison at Coral Square.......... 864 883 0.72 0.74 88 93
Mariner Club..................... 875 836 0.94 0.90 92 93
Welleby Lake Club................ 798 790 0.75 0.74 91 94
---- ---- ----- ----- --- ---
846 841 0.79 0.78 91 94
Beach Club....................... 600 617 0.69 0.71 92 96
Colony Place..................... 753 748 0.66 0.66 95 97
Polos............................ 650 673 0.68 0.70 94 96
Viridian Lake.................... 647 663 0.75 0.77 92 96
---- ---- ----- ----- --- ---
661 674 0.70 0.71 93 96
Bermuda Cove..................... 668 683 0.73 0.75 96 96
Claire Point..................... 693 850 0.69 0.84 97 95
Deerbrook........................ 739 750 0.57 0.58 94 94
Princeton Square................. 520 542 0.70 0.73 95 94
Royal Oaks....................... 613 617 0.75 0.76 96 94
Spicewood Springs................ 527 547 0.69 0.72 95 94
Timberwalk....................... 592 624 0.70 0.73 98 97
Waterford........................ 671 682 0.63 0.64 95 95
---- ---- ----- ----- --- ---
615 646 0.69 0.72 96 95
Cypress Cove..................... 678 683 0.66 0.67 91 97
Lakeridge at Moors............... 844 850 0.87 0.88 95 97
Auvers Village................... 675 713 0.66 0.70 97 97
Bishop Park...................... 637 659 0.71 0.73 94 96
Conway Station................... 594 622 0.75 0.79 97 98
Copper Terrace................... 665 687 0.74 0.76 94 96
Lexington Park................... 601 613 0.75 0.77 89 94
Mission Bay...................... 763 776 0.70 0.71 91 96
Polos East....................... (4) 694 (4) 0.79 (4) 94
Valencia Plantation.............. 684 711 0.76 0.79 96 97
---- ---- ----- ----- --- ---
663 688 0.72 0.75 94 96
Augustine Club................... 633 626 0.70 0.70 86 93
Plantations at Killearn.......... 628 623 0.74 0.73 94 93
---- ---- ----- ----- --- ---
631 625 0.72 0.71 90 93
Audubon Village.................. 632 655 0.74 0.77 95 98
Essex Place...................... 626 658 0.75 0.79 97 99
Falls............................ 519 521 0.79 0.80 94 96
Lofton Place..................... 668 689 0.70 0.72 94 98
Promenade........................ 764 786 0.78 0.80 95 99
---- ---- ----- ----- --- ---
650 670 0.75 0.77 95 98
</TABLE>
S-25
<PAGE> 26
<TABLE>
<CAPTION>
Average Average
Date Date Cost(1) Cost Unit Size
Name Location Built Acquired Units (In Thousands) Per Unit(1) (Sq. Ft.)
---- -------- ------- -------- ------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
GEORGIA
Belmont Crossing............... Atlanta 1988 1993 316 $ 13,535 $42,834 1,023
Belmont Landing................ Atlanta 1988 1993 424 16,734 39,468 911
Champion's Park................ Atlanta 1987 1994 252 11,861 47,069 806
Chatelaine Park................ Atlanta 1995 1997 303 23,709 78,247 1,105
Gwinnett Crossing.............. Atlanta 1990/89 1992/95 574 20,905 36,420 874
Harvest Grove.................. Atlanta 1986 1992 376 11,580 30,799 927
Lexington Glen................. Atlanta 1990 1993 480 31,810 66,271 1,095
Madison at River Sound......... Atlanta 1996 1996 586 41,984 71.645 834
Shadowlake..................... Atlanta 1989 1994 228 9.987 43,803 1,018
Sweetwater Glen................ Atlanta 1986 1992 200 6,440 32,202 802
Willow Trail................... Atlanta 1985 1993 224 7,915 35,335 860
Windridge...................... Atlanta 1982 1994 272 12,185 44,798 845
------- ---------- ------- -----
4,235 208,645 49,267 927
Downtown....................... Augusta (5) (5) 75 3,454 46,055 974
Woodcrest...................... Augusta 1982 1982 248 8,699 35,077 875
Woodknoll...................... Augusta 1975 1982 52 1,554 35,077 900
Other.......................... Augusta 1984 1984 1 72 72,131 1,300
------- ---------- ------- -----
376 13,779 36,593 856
Greentree...................... Savannah 1983 1986 194 7,392 38,102 852
Hammocks at Long Point......... Savannah 1997 1997 284 21,385 75,300 1,049
Huntington..................... Savannah 1986 1992 147 5,335 36,291 812
Magnolia Villa................. Savannah 1986 1986 144 5,709 39,648 1,119
Marsh Cove..................... Savannah 1983 1986 188 8,104 43,105 1,053
West Wind Landing.............. Savannah 1985 1993 192 7,262 37,822 1,124
------- ---------- ------- -----
1,149 55,187 48,030 994
MARYLAND
Clarys Crossing................ Baltimore 1984 1994 198 12,138 61,031 938
NORTH CAROLINA
Berkshire Place................ Charlotte 1982 1990 240 9,024 37,599 882
English Hills.................. Charlotte 1984 1994 280 10,541 37,648 688
Hunt Club...................... Charlotte 1990 1992 300 10,901 36,335 891
Kimmerly Glen.................. Charlotte 1986 1995 260 9,638 37,070 750
Lake Point..................... Charlotte 1984 1989 296 10,739 36,280 918
The Oaks....................... Charlotte 1996 1997 318 20,413 64,192 883
The Point...................... Charlotte 1996 1997 340 21,529 63,319 884
Regency........................ Charlotte 1986 1996 178 11,461 64,388 925
Steeplechase................... Charlotte 1986 1994 247 9,304 37,668 724
------- ---------- ------- -----
2,459 113,550 46,177 823
Adams Farm..................... Greensboro 1987 1994 500 28,546 57,092 1,005
Chatham Wood................... High Point 1986 1990 208 7,426 35,702 811
Duraleigh Woods................ Raleigh 1987 1994 362 18,553 51,251 784
Misty Woods.................... Raleigh 1984 1991 360 11,615 32,264 766
Sailboat Bay................... Raleigh 1986 1993 192 6,391 33,286 641
Sommerset Place................ Raleigh 1983 1990 144 5,601 38,894 780
Timber Hollow.................. Chapel Hill 1986 1991 198 6,649 33,582 735
------- ---------- ------- -----
1,256 48,809 38,861 751
SOUTH CAROLINA
Quarterdeck.................... Charleston 1986 1989 230 9,681 42,093 810
Summit Place................... Charleston 1985 1985 226 8,346 36,929 892
Waters Edge.................... Charleston 1985 1988 200 7,939 39,693 911
Windsor Place.................. Charleston 1984 1989 224 8,192 36,570 953
------- ---------- ------- -----
880 34,158 38,816 890
Hollows........................ Columbia 1987 1991 212 6,540 30,847 762
Haywood Pointe................. Greenville 1985 1991 216 7,070 32,732 848
<CAPTION>
Average December Rent(2) Average
----------------------------- Occupancy
Per Month Per Sq. Ft. (3)
------------- ------------- -----------
Name 1996 1997 1996 1997 1996 1997
---- ---- ------ ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
GEORGIA
Belmont Crossing............... $643 $668 $0.63 $0.65 96% 95%
Belmont Landing................ 611 646 0.67 0.71 97 94
Champion's Park................ 644 682 0.80 0.85 97 96
Chatelaine Park................ (4) 866 (4) 0.78 (4) 92
Gwinnett Crossing.............. 623 639 0.71 0.73 96 94
Harvest Grove.................. 593 605 0.64 0.65 95 94
Lexington Glen................. 853 866 0.78 0.79 93 94
Madison at River Sound......... 793 855 0.95 1.03 63 63
Shadowlake..................... 652 658 0.64 0.65 96 94
Sweetwater Glen................ 579 616 0.72 0.77 97 96
Willow Trail................... 587 603 0.68 0.70 97 95
Windridge...................... 629 644 0.74 0.76 95 91
---- ------ ----- ----- --- ---
657 712 0.71 0.77 96 91
Downtown....................... 478 487 0.49 0.50 86 91
Woodcrest...................... 519 525 0.59 0.60 75 78
Woodknoll...................... 477 492 0.53 0.55 95 96
Other.......................... 675 675 0.52 0.52 100 100
---- ------ ----- ----- --- ---
447 513 0.52 0.57 76 83
Greentree...................... 569 594 0.67 0.70 95 92
Hammocks at Long Point......... (4) 776 (4) 0.74 (4) 77
Huntington..................... 606 616 0.75 0.76 97 77
Magnolia Villa................. 603 621 0.54 0.55 96 94
Marsh Cove..................... 644 658 0.61 0.62 96 90
West Wind Landing.............. 660 684 0.59 0.61 99 96
---- ------ ----- ----- --- ---
617 671 0.63 0.67 96 98
MARYLAND
Clarys Crossing................ 805 842 0.86 0.90 95 95
NORTH CAROLINA
Berkshire Place................ 615 630 0.70 0.71 95 96
English Hills.................. 559 556 0.81 0.81 93 95
Hunt Club...................... 665 672 0.75 0.75 95 95
Kimmerly Glen.................. 549 567 0.73 0.76 94 95
Lake Point..................... 597 607 0.65 0.66 94 91
The Oaks....................... (4) 756 (4) 0.86 (4) 93
The Point...................... (4) 743 (4) 0.84 (4) 95
Regency........................ 771 751 0.92 0.81 94 91
Steeplechase................... 558 565 0.77 0.78 96 95
---- ------ ----- ----- --- ---
610 651 0.75 0.78 94 95
Adams Farm..................... 690 727 0.69 0.72 93 80
Chatham Wood................... 531 557 0.65 0.69 97 95
Duraleigh Woods................ 644 658 0.82 0.84 93 92
Misty Woods.................... 587 611 0.77 0.80 97 95
Sailboat Bay................... 547 568 0.85 0.89 95 95
Sommerset Place................ 626 640 0.80 0.82 96 97
Timber Hollow.................. 653 676 0.89 0.92 96 98
---- ------ ----- ----- --- ---
605 632 0.81 0.84 95 95
SOUTH CAROLINA
Quarterdeck.................... 589 616 0.73 0.76 100 99
Summit Place................... 460 480 0.52 0.54 87 93
Waters Edge.................... 547 570 0.60 0.63 93 97
Windsor Place.................. 540 551 0.57 0.58 88 98
---- ------ ----- ----- --- ---
534 554 0.60 0.62 92 97
Hollows........................ 516 528 0.68 0.69 95 94
Haywood Pointe................. 560 565 0.66 0.67 98 94
</TABLE>
S-26
<PAGE> 27
<TABLE>
<CAPTION>
Average Average
Date Date Cost(1) Cost Unit Size
Name Location Built Acquired Units (In Thousands) Per Unit(1) (Sq. Ft.)
---- -------- ------- -------- ------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TENNESSEE
The Landings................... Memphis 1986 1994 292 $ 11,831 $40,517 786
Cherry Creek................... Nashville 1996/86 1994 407 24,247 59,575 902
Waterford Place................ Nashville 1994 1996 180 11,254 62,524 1,027
------- ---------- ------- -----
587 35,501 60,479 940
TEXAS
Estate at Quarry Lake.......... Austin 1995 1996 302 18,286 60,509 894
Madison at the Arboretum....... Austin 1995 1996 161 10,467 65,015 937
Madison at Stone Creek......... Austin 1995 1995 390 23,905 61,294 862
Sedona Springs................. Austin 1995 1996 396 27,714 69,985 950
------- ---------- ------- -----
1,249 80,372 64,439 907
Madison at Cedar Springs....... Dallas 1995 1995 380 24,423 64,271 898
Madison at Chase Oaks.......... Dallas 1995 1995 470 29,608 62,995 895
Madison on Melrose............. Dallas 1995 1995 200 14,086 70,430 947
Madison on the Parkway......... Dallas 1995 1995 376 24,981 66,439 904
Madison at Round Grove......... Dallas 1995 1995 404 25,213 62,407 933
Riverhill...................... Dallas 1996 1997 334 21,877 65,501 890
Coventry at Cityview........... Ft. Worth 1996 1997 360 22,278 61,882 978
Hidden Lakes................... Ft. Worth 1996 1997 312 20,141 64,553 928
Wimberly....................... Ft. Worth 1996 1997 372 26,689 71,746 921
------- ---------- ------- -----
3,208 209,296 65,242 919
La Tour Fontaine............... Houston 1994 1997 162 15,415 95,156 1,029
Palms of South Shore........... Houston 1990 1997 240 12,310 51,293 795
Parc Royale.................... Houston 1994 1997 171 12,891 75,383 976
Ranchstone..................... Houston 1996 1997 220 11,353 51,604 878
Richmond Townhomes............. Houston 1995 1997 188 12,963 68,952 978
Trails at Briar Forest......... Houston 1990 1997 476 22,485 47,238 897
------- ---------- ------- -----
1,457 87,417 59,998 912
VIRGINIA
Champions Club................. Richmond 1988 1994 212 10,486 49,463 776
Hickory Creek.................. Richmond 1984 1994 294 15,597 53,055 851
------- ---------- ------- -----
506 26,083 51,549 820
TOTALS................... 29,526 $1,496,109 $50,671 909
<CAPTION>
Average December Rent(2) Average
----------------------------- Occupancy
Per Month Per Sq. Ft. (3)
------------- ------------- -----------
Name 1996 1997 1996 1997 1996 1997
---- ---- ------ ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
TENNESSEE
The Landings................... $570 $595 $0.73 $0.76 94% 93%
Cherry Creek................... 716 757 0.79 0.84 91 97
Waterford Place................ 758 789 0.74 0.77 96 95
---- ------ ----- ----- --- ---
729 767 0.78 0.82 93 95
TEXAS
Estate at Quarry Lake.......... 852 877 0.95 0.98 85 96
Madison at the Arboretum....... 840 833 0.90 0.89 95 97
Madison at Stone Creek......... 789 773 0.92 0.90 89 95
Sedona Springs................. 888 918 0.93 0.97 88 95
---- ------ ----- ----- --- ---
842 852 0.93 0.94 88 95
Madison at Cedar Springs....... 870 911 0.97 1.01 97 98
Madison at Chase Oaks.......... 816 814 0.91 0.91 91 93
Madison on Melrose............. 908 915 0.96 0.97 88 93
Madison on the Parkway......... 851 866 0.94 0.96 85 91
Madison at Round Grove......... 790 819 0.85 0.88 91 92
Riverhill...................... (4) 831 (4) 0.93 (4) 84
Coventry at Cityview........... (4) 856 (4) 0.88 (4) 92
Hidden Lakes................... (4) 831 (4) 0.90 (4) 85
Wimberly....................... (4) 888 (4) 0.96 (4) 91
---- ------ ----- ----- --- ---
839 855 0.92 0.93 91 92
La Tour Fontaine............... (4) 1,171 (4) 1.14 (4) 93
Palms of South Shore........... (4) 752 (4) 0.95 (4) 97
Parc Royale.................... (4) 1,019 (4) 1.04 (4) 94
Ranchstone..................... (4) 771 (4) 0.88 (4) 95
Richmond Townhomes............. (4) 889 (4) 0.91 (4) 96
Trails at Briar Forest......... (4) 712 (4) 0.79 (4) 95
---- ------ ----- ----- --- ---
(4) 837 (4) 0.92 (4) 96
VIRGINIA
Champions Club................. 656 685 0.85 0.88 93 96
Hickory Creek.................. 664 701 0.78 0.82 95 97
---- ------ ----- ----- --- ---
661 694 0.81 0.85 94 96
TOTALS................... $670 $709 $0.74 $0.78 93% 94%
</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
S-27
<PAGE> 28
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> <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
</TABLE>
- ---------------
(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>
<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.
S-28
<PAGE> 29
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.
MANAGEMENT
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Position with the Company and
Name Age Present Principal Occupation
---- --- -----------------------------
<S> <C> <C>
Boone A. Knox........................ 61 Chairman of the Board
W. Tennent Houston................... 47 President and Chief Executive Officer; Director
Michael N. Thompson.................. 49 Executive Vice President and Chief Operating
Officer; Director
W. Hale Barrett...................... 69 Secretary; Director; Member of law firm Hull,
Towill, Norman & Barrett, counsel to the Company
Hugh Calvin Long II.................. 46 Director; Capital Area President, First Union
National Banks of Virginia, Maryland &
Washington D.C.
Paul S. Simon........................ 66 Director; Retired President, Morris
Communications Corporation
Robert P. Kirby...................... 61 Director; Chief Executive Officer,
Castleberry/Snow's Inc.
John W. Gibson....................... 46 Senior Vice President -- Mergers, Acquisitions &
Development
Dorrie E. Green...................... 39 Vice President and Chief Financial Officer
Ronald J. Benton..................... 40 Vice President -- Accounting
Joseph P. Bailey III................. 39 Vice President -- Property Management
Ralph J. Simons...................... 32 Vice President -- Property Management
John R. Davis, Jr.................... 38 Vice President -- Property Management
</TABLE>
As of January 31, 1998, Mr. Knox beneficially owned 2,859,619 or 7.1% of
the Company's Common Stock. At that date all directors and executive officers as
a group, including Mr. Knox, beneficially owned 4,514,485 or 11.3% of the
outstanding shares of Common Stock.
TAXATION
This section is a general summary of the material federal income tax
considerations that may be relevant to prospective purchasers of Common Stock
under the Internal Revenue Code of 1986, as amended (the "Code") and is based
upon applicable Code provisions, rules and regulations promulgated thereunder,
and reported judicial and administrative interpretations thereof, all of which
are subject to change (possibly on a retroactive basis).
S-29
<PAGE> 30
The following discussion does not include all matters that may be relevant
to any particular holder of Common Stock in light of such holder's particular
facts and circumstances. Certain holders, such as foreign persons, tax-exempt
entities, insurance companies and financial institutions, may be subject to
special rules not discussed below. In particular, the following discussion does
not discuss issues under the Employee Retirement Income Security Act of 1974, as
amended, the Foreign Investment in Real Property Tax Act of 1980, and foreign,
state and local tax laws.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT, AND MUST DEPEND ON, HIS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE,
OWNERSHIP, AND SALE OF THE COMMON STOCK AND OF THE COMPANY'S ELECTION TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986. The Company believes that it was
organized and has operated in such a manner as to qualify for taxation as a REIT
under the Code, and the Company intends to continue to operate in such a manner,
but no assurance can be given that it will operate in a manner so as to qualify
or remain qualified.
If the Company qualifies for tax treatment as a REIT, it will generally not
be subject to federal corporate taxation on its net income to the extent
currently distributed to its stockholders. This substantially eliminates the
"double taxation" (at both the corporate and stockholder levels) that typically
results from the use of corporate investment vehicles.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be an investor in real estate and to avoid excessive concentration
of ownership of its capital stock. Among other requirements, the principal
activities of a REIT must be real estate related. Generally, at least 75% of the
value of the total assets of the Company at the end of each calendar quarter
must consist of real estate assets, cash or certain U.S. government securities.
The Company may not own more than 10% of the outstanding voting securities of
any corporation and no more than 5% of the value of the Company's assets may be
invested in a single corporation; shares of qualified REITs and of certain
wholly-owned subsidiaries are exempt from this prohibition. Additionally, for
taxable years beginning before August 6, 1997, gross income from the sale or
other disposition of stock and securities held for less than one year, and of
real property held for less than four years, must constitute less than 30% of
the gross income for each taxable year of a REIT; the foregoing 30% restriction
has been repealed for taxable years beginning after August 5, 1997. For each
taxable year, at least 75% of the REIT's gross income must be derived from
specified real estate sources and 95% must be derived from such real estate
sources plus certain other permitted sources. Real estate income for purposes of
these requirements includes gains from the sale of real property not held
primarily for sale to customers in the ordinary course of business, dividends on
REIT shares, interest on loans secured by mortgages on real property, certain
rents from real property and income from foreclosure property. For rents to
qualify, they may not be based on the income or profits of any person, except
that they may be based on a percentage or percentages of gross income or
receipts, and the REIT may not furnish services to residents, unless the
services performed are of a type customarily rendered in connection with the
rental of space for occupancy only or, for taxable years beginning after August
5, 1997, the amounts received by the REIT for non-customary tenant services do
not exceed 1% of all amounts received by the REIT with respect to the property.
In this regard, it should be noted that the Company manages its real properties
directly, but the Company believes that it provides only customary services.
Moreover, rents do not qualify if the Company holds, directly or indirectly,
more than a certain prescribed percentage interest in a tenant.
The Company must satisfy certain ownership restrictions that limit
concentration of ownership of capital stock directly or indirectly in the hands
of a few individuals. The outstanding capital of the Company must be held by at
least 100 stockholders. No more than 50% in value of the outstanding capital
stock, including in
S-30
<PAGE> 31
some circumstances capital stock into which outstanding securities might be
converted, may be owned actually or constructively by five or fewer individuals
or certain other entities at any time during the last half of the Company's
taxable year. There are no restrictions in the Company's Articles that would
limit the ability of a holder of common stock or preferred stock to transfer
shares if such transfer would cause or contribute to a violation of the stock
ownership requirements. Thus, while the Company intends to monitor carefully its
stock ownership and expects to be able to meet the ownership requirements in the
future, there can be no assurance that transfers of shares of capital stock
beyond the control of the Company, or changes in the relative values of the
preferred stock and the common stock, could not result in the Company's failure
to satisfy the stock ownership requirements. For taxable years beginning after
August 5, 1997, a REIT that satisfies certain shareholder recordkeeping
requirements prescribed in Treasury Department Regulations will be treated as
having satisfied the foregoing 50% requirement unless the REIT knows, or
exercising reasonable diligence would have known, that the 50% requirement was
not satisfied. The Company intends to comply with the recordkeeping
requirements.
So long as the Company qualifies for taxation as a REIT and distributes at
least 95% of its real estate investment trust taxable income (computed without
regard to net capital gains or the dividends-paid deduction) for its taxable
year to its stockholders annually, the Company itself will not be subject to
federal income tax on that portion of such income distributed to stockholders.
The Company will be taxed at regular corporate rates on all income not
distributed to stockholders. The Company's policy is to distribute at least 95%
of its taxable income. REITs may also incur taxes on certain categories of
income (such as undistributed capital gain income and certain income from
foreclosure property) for the alternative minimum tax, and for certain other
activities. They may also be subject to federal excise tax to the extent
distributions do not satisfy certain requirements, as well as to certain state,
local and other taxes. For taxable years beginning after August 5, 1997, a REIT
may designate undistributed net capital gain (upon which a corporate income tax
has been incurred) as constructively distributed to its shareholders. If such
designation is made, each shareholder is required to report on its individual
return its share of the designated undistributed net capital gain and is
entitled to a credit for its share of the corporate tax on such gain.
Failure of the Company to qualify during any taxable year as a REIT could,
unless certain relief provisions were available, have a material adverse effect
upon holders of the Company's securities. If disqualified for taxation as a REIT
for a taxable year, the Company would also be disqualified for taxation as a
REIT for the next four taxable years, unless the failure was due to reasonable
cause and not willful neglect. In order to elect again to be taxed as a REIT,
the Company would be required to distribute all of its earnings and profits
accumulated in any non-REIT taxable year. Further, the Company might be subject
to taxation on any unrealized gain inherent in its assets at the time of such
election. If disqualified, the Company would be subject to federal income tax at
corporate rates on all of its taxable income and would not be able to deduct the
dividends paid. Should the failure to qualify be determined to have occurred
retroactively in an earlier tax year of the Company, substantial federal income
tax liability on the Company attributable to such nonqualifying tax years could
be imposed. In the event that the Company fails to meet certain income tests of
the tax law, it may nonetheless retain its qualification as a REIT if it pays a
100% tax based upon the amount by which it failed to meet the income tests so
long as its failure was due to reasonable cause and not willful neglect. Any
such liabilities could result in the Company being unable to pay dividends on
the Common Stock and could result in the Company being unable to pay dividends
sufficient to maintain its REIT status.
TAXATION OF THE SHAREHOLDERS OF THE COMPANY
Distributions to Holders. Distributions made by the Company with respect
to the Common Stock out of its current or accumulated earnings and profits that
remain after an appropriate allocation of such earnings and profits to
distributions made to holders of preferred stock will generally be taxed to the
holders of the Common Stock as ordinary income. Distributions with respect to
the Common Stock in excess of earnings and profits will be treated first as a
tax-free return of capital to the holder, to the extent of the holder's basis in
such stock (and will correspondingly reduce such basis) and then as a capital
gain, to the extent of any excess over such basis (assuming the holder holds the
Common Stock as a capital asset).
S-31
<PAGE> 32
Dividends will be taxed as ordinary income to the holder except to the
extent that the dividend is a distribution of the Company's net capital gain and
is properly designated by the Company as a capital gain dividend. The Company
presently intends to designate the respective dividends paid by the Company to
the holders of all classes of the Preferred Stock and Common Stock in such a
manner that the aggregate dividends paid to the holders of each such class of
stock annually will have the same relative proportions of capital gain dividends
(if any are so designated) and ordinary income dividends. The Company will
notify each holder of the Series E Preferred Stock as to the portions of each
distribution which, in its judgment and consistent with the intention stated in
the preceding sentence, constitute ordinary income and capital gain.
Capital gain distributions to corporate holders are generally taxed in the
same manner as ordinary income, except that capital losses of such holders are
deductible only to the extent of capital gains. Under Section 291 of the Code,
however, corporate holders may be required to treat up to 20% of any such
capital gain as ordinary income. For noncorporate shareholders, net capital
gains are taxed at a maximum rate of 28%, while short-term capital gains and
ordinary income are taxed at a maximum rate of 39.6%. However, because of
certain limitations on itemized deductions and personal exemptions, the
effective rate may be higher in certain circumstances. Except to a very limited
extent, capital losses of noncorporate shareholders are deductible only to the
extent of capital gains.
Ordinary and capital gain dividends are not eligible for the
dividends-received deduction that is generally allowed to corporate
shareholders.
Sale or Exchange of Common Stock. Upon the sale or exchange of Common
Stock, the holder will recognize gain or loss equal to the difference between
the amount realized on such sale and the tax basis of such Common Stock.
Assuming such stock is held as a capital asset, such gain or loss will be a
long-term capital gain or loss if the Common Stock have been held for more than
one year. However, any loss recognized by a holder on the sale of a share of
Common Stock held for not more than six months and with respect to which a
capital gain dividend was received will be treated as a long-term capital loss
to the extent of the amount of distributions from the Company with respect to
such Common Stock that was required to be treated by such holder as long-term
capital gain.
Unrelated Business Income Tax of Pension Trusts. If any exempt pension
trust described in Section 401(a) becomes the owner of more than 10% (by value)
of the outstanding stock of the Company and certain other conditions (generally
related to the existence of a high concentration of ownership of Company stock
in the hands of such pension trusts) are satisfied, a portion of the dividends
received by the pension trust with respect to its Company stock may be subject
to the unrelated business income tax. Exempt pension trusts should consult their
tax advisors regarding the advisability of acquiring more than 10% (by value) of
the outstanding stock of the Company.
Backup Withholding. Under the backup withholding provisions of the Code
and applicable Treasury regulations thereunder a holder of Common Stock may be
subject to backup withholding at the rate of 31% with respect to dividends paid
on, or the proceeds of a sale or redemption of, such stock unless (i) such
holder is a corporation or comes within certain other exempt categories and when
required demonstrates this fact, or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the applicable requirements of the backup withholding
rules. The amount of any backup withholding from a payment to a holder will be
allowed as a credit against the holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Other Tax Matters. Holders of Common Stock will not be permitted to deduct
any losses of the Company (whether ordinary or capital) on their own income tax
returns. In addition, under regulations to be promulgated by the Treasury
Department, holders of Common Stock may be required to report as tax preference
items or adjustments certain items and adjustments of the Company for purposes
of determining the holders' alternative minimum tax liability, if any.
S-32
<PAGE> 33
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Morgan
Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Interstate/Johnson Lane
Corporation, Morgan Keegan & Company, Inc. and The Robinson-Humphrey Company,
LLC (the "Underwriters"), have severally agreed to purchase from the Company the
following respective number of shares of Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus supplement:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
BT Alex. Brown Incorporated.................................
Interstate/Johnson Lane Corporation.........................
Morgan Keegan & Company, Inc. ..............................
The Robinson-Humphrey Company, LLC .........................
---------
Total....................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase the total number of shares of Common Stock offered
hereby if any such shares are purchased.
The Company has been advised that the underwriters propose to offer the
shares of Common Stock directly to the public at the public offering price set
forth on the cover of this Prospectus Supplement and to certain dealers at such
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per share
to certain other dealers. After the public offering, the public offering price
and other selling terms may be changed by the underwriters.
The Company has granted to the underwriters an option, exercisable not
later than 30 days after the date of this Prospectus Supplement, to purchase up
to 450,000 additional shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
prospectus supplement. To the extent that the Underwriters exercise such option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage thereof which the number of shares of Common Stock to be
purchased by it shown in the table above bears to 3,000,000, and the Company
will be obligated, pursuant to the option, to sell such shares of Common Stock
to the Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Shares offered hereby.
If purchased, the underwriters will offer such additional shares of Common Stock
on the same terms as those on which the 3,000,000 shares of Common Stock are
being offered.
The Underwriting Agreement contains covenants of indemnity among the
underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Company and its executive officers and directors have entered into
agreements prohibiting the sale of their shares of Common Stock and securities
convertible into Common Stock, if any, for 90 days after the date of this
prospectus supplement without the prior consent of the Underwriters.
EXPERTS
The audited financial statements of the Company incorporated by reference
in this prospectus supplement and elsewhere in the registration statement of
which this prospectus supplement is a part, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said reports.
S-33
<PAGE> 34
LEGAL OPINIONS
Certain legal opinions relating to tax matters and the shares of Common
Stock offered hereby will be passed upon for the Company by Hull, Towill, Norman
& Barrett, P.C., Augusta, Georgia. Certain legal matters relating to the
validity of the Shares offered hereby will be passed upon for the Underwriters
by Piper & Marbury L.L.P., Baltimore, Maryland. W. Hale Barrett, a member of the
firm of Hull, Towill, Norman & Barrett, P.C., is a director and secretary of the
Company. He and members of his firm own 47,119 shares of Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents incorporated by reference pursuant to the
accompanying prospectus dated January 22, 1996, there is incorporated by
reference herein the Company's current report on Form 8-K filed on February 23 ,
1998 and the Company's annual report on Form 10-K for the year ended December
31, 1997. For additional information with respect to documents incorporated by
reference herein, see "Incorporation Of Certain Documents By Reference" in the
accompanying Prospectus.
S-34
<PAGE> 35
PROSPECTUS
$500,000,000
MERRY LAND
----------
& INVESTMENT COMPANY, INC.
[LOGO]
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
COMMON STOCK AND COMMON STOCK WARRANTS
------------------
Merry Land & Investment Company, Inc. ("Merry Land" or the "Company") may
from time to time offer in one or more series (i) its unsecured senior or
subordinated debt securities (the "Debt Securities"), (ii) shares or fractional
shares of its preferred stock, without par value (the "Preferred Stock"), (iii)
shares of Preferred Stock represented by depositary shares (the "Depositary
Shares"), (iv) shares of its common stock, without par value (the "Common
Stock"), or (v) warrants to purchase Common Stock (the "Common Stock Warrants"),
with an aggregate public offering price of up to $500,000,000 on terms to be
determined at the time of offering. The Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Common Stock Warrants (collectively, the
"Offered Securities") may be offered, separately or together, in separate series
in amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Debt Securities") or subordinated
Debt Securities ("Subordinated Debt Securities"). The Senior Debt Securities
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. The Subordinated Debt Securities will be subordinated to all
existing and future Senior Debt of the Company, as defined. See "Description of
Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the Holder, terms for sinking fund payments, terms
for conversion into Preferred Stock, Common Stock or other Company securities,
additional covenants, and any initial public offering price; (ii) in the case of
Preferred Stock, the specific title and stated value, any dividend, liquidation,
redemption, conversion, voting and other rights, and any initial public offering
price; (iii) in the case of Depositary Shares, the fractional share of Preferred
Stock represented by each such Depositary Share; (iv) in the case of Common
Stock, any initial public offering price; and (v) in the case of Common Stock
Warrants, the duration, offering price, exercise price and detachability. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Offered Securities, in each case
as may be appropriate to preserve the status of the Company as a real estate
investment trust for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly by the Company, through
agents designated from time to time by the Company, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the Offered Securities and the method and terms of the offering.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is January 22, 1996.
<PAGE> 36
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and its Regional Offices located at: 75 Park
Place, New York, New York 10017; and 500 West Madison Street, Chicago, Illinois
60661; and can also be inspected and copied at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has filed a registration statement with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities (the "Registration Statement"). As permitted by the rules
and regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement. For further information,
reference is made to such Registration Statement and to the exhibits, which may
be inspected and copied at or obtained from the Commission's public reference
facilities, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the
prescribed fees. Each statement made in this Prospectus with respect to a
document that is filed as an exhibit to the Registration Statement is qualified
by reference to such exhibit for a complete statement of the terms and
conditions thereof.
There are incorporated herein by reference the following documents
heretofore filed by the Company with the Commission:
i. the Company's annual report on Form 10-K for the year ended
December 31, 1994;
ii. the Company's quarterly reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995;
iii. the Company's current reports on Form 8-K filed on, February 14,
1995, March 13, 1995, June 8, 1995, June 19, 1995, June 23, 1995, July 14,
1995, September 1, 1995, September 14, 1995, and November 8, 1995;
iv. the Company's current reports on Form 8-K/A filed on January 24,
1995 amending the Company's report on Form 8-K filed on November 3, 1994,
February 7, 1995 amending the Company's report on Form 8-K filed on August
15, 1994, June 21, 1995 amending the Company's report on Form 8-K filed on
June 19, 1995, September 18, 1995 amending the Company's report on Form 8-K
filed on June 8, 1995, and December 1, 1995 amending the Company's report
on Form 8-K filed on September 14, 1995;
v. the description of the Company's Common Stock, $1.75 Series A
Cumulative Convertible Preferred Stock and $2.15 Series C Cumulative
Convertible Preferred Stock contained in the Company's registration
statements on Form 8-A filed under the Exchange Act, including any
amendments or reports filed for the purpose of updating such descriptions;
and
vi. the Company's definitive proxy statement dated March 27, 1995
relating to the annual meeting of shareholders held on April 17, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing such
documents.
Any statement contained herein or in a document incorporated herein by
reference or deemed to be incorporated herein by reference shall be modified or
superseded for purposes of this Prospectus to the extent
2
<PAGE> 37
that a statement contained herein, in any accompanying Prospectus Supplement
relating to a specific offering of Offered Securities or in any other amendment
or supplement hereto or document subsequently incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates), will be
provided without charge to each person who receives a copy of this Prospectus on
the written or oral request of such person directed to W. Hale Barrett, the
Company's Secretary, 624 Ellis Street, Augusta, Georgia 30901, telephone number
(706) 722-6756.
3
<PAGE> 38
THE COMPANY
Merry Land is one of the largest owners and operators of upscale garden
apartments in the Southern region of the United States. Merry Land became an
independent publicly owned company in 1981 and has been managing apartment
communities since 1982. The Company is a self-administered and self-managed real
estate investment trust ("REIT") headquartered in Augusta, Georgia. At December
15, 1995, the Company owned 78 apartment communities containing 21,705 units and
having an aggregate cost of $969.8 million. At September 30, 1995, the
communities had an average occupancy of 95.2% and an average monthly rental rate
of $624. The Company's apartment communities are located in Florida, Georgia,
Maryland, North Carolina, Ohio, South Carolina, Tennessee, Texas and Virginia.
Merry Land is a Georgia corporation. The Company's principal office is
located at 624 Ellis Street, Augusta, Georgia 30901 and its telephone number is
(706) 722-6756.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for general
corporate purposes, which may include repayment of indebtedness, making
improvements to apartment properties, the acquisition of additional apartment
properties and the development and construction of new apartment properties.
CERTAIN RATIOS
The following table sets forth the Company's ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and Preferred Stock
dividends for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................... 1.26x 1.69x 2.98x 5.58x 4.44x
Ratio of earnings to combined fixed charges and
Preferred Stock dividends................................. 1.26x 1.69x 2.98x 3.29x 2.56x
</TABLE>
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. The ratio of earnings to combined fixed charges and Preferred
Stock dividends was computed by dividing earnings by fixed charges and Preferred
Stock dividends. For the purpose of computing these ratios, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest on
borrowed funds and amortization of debt discount and expense. Preferred Stock
dividends consist of those dividends paid on the Company's $1.75 Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") and
$2.205 Series B Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock") during the respective periods set forth in the preceding table.
4
<PAGE> 39
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Debt Securities are to be issued under an indenture dated as of
February 1, 1995, as supplemented by a supplemental indenture dated as of June
1, 1995 and as may be further supplemented from time to time (the "Senior
Indenture"), between the Company and First Union National Bank of Georgia (the
"Senior Indenture Trustee"), and the Subordinated Debt Securities are to be
issued under an indenture dated as of February 1, 1995, as supplemented from
time to time (the "Subordinated Indenture"), between the Company and First Union
National Bank of Georgia (the "Subordinated Indenture Trustee"). The term
"Trustee," as used herein, shall refer to the Senior Indenture Trustee or the
Subordinated Indenture Trustee, as appropriate. The Senior Indenture and the
form of the Subordinated Indenture (being sometimes referred to herein
collectively as the "Indentures" and individually as an "Indenture") are filed
as exhibits to the Registration Statement and are available for inspection at
the corporate trust office of the Senior Indenture Trustee in Atlanta, Georgia
and the corporate trust office of the Subordinated Indenture Trustee in Atlanta,
Georgia or as described under "Available Information." The Indentures are
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made herein relating to the Indentures and the Debt
Securities are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indentures and the Debt Securities. All section
references appearing herein are to sections of the Indentures, and capitalized
terms used but not defined herein have the respective meanings set forth in the
Indentures and the Debt Securities.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Debt Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by the Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of the Senior Debt
of the Company, as described under "Subordination".
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more supplemental indentures to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued; all Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608 of each Indenture). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
(Sections 101 and 609 of each Indenture), and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
1. the title of such Debt Securities and whether such Debt Securities
are Senior Debt Securities or Subordinated Debt Securities;
2. the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
5
<PAGE> 40
3. the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock (as defined in the Indentures), or the method by which any such
portion will be determined;
4. if convertible, any applicable limitations on the ownership or
transferability of the Capital Stock into which such Debt Securities are
convertible;
5. the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
6. the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates, if any, for such Interest payable on
any Registered Security on any Interest Payment Dates, or the method by
which such Dates will be determined, and the basis upon which interest will
be calculated if other than that of a 360-day year consisting of twelve
30-day months;
7. the place or places where the principal of (and premium or
Make-Whole Amount (as defined), if any), interest, if any, on, and
Additional Amounts, if any, payable in respect of, such Debt Securities
will be payable, where such Debt Securities may be surrendered for
registration of transfer, conversion or exchange and where notices or
demands to or upon the Company in respect of such Debt Securities and the
applicable Indenture may be served;
8. the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other terms and conditions upon which such Debt Securities may be redeemed
in whole or in part, at the option of the Company, if the Company is to
have the option;
9. the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within which
or the date or dates on which, the price or prices at which, the currency
or currencies, currency unit or units or composite currency or currencies
in which, and other terms and conditions upon which such Debt Securities
will be redeemed, repaid or purchased, in whole or in part, pursuant to
such obligation;
10. whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $5,000, the
denomination or denominations in which any bearer Debt Securities will be
issuable;
11. if other than United States dollars, the currency or currencies in
which such Debt Securities will be denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a composite
currency or currencies;
12. whether the amount of payment of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
13. whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time
6
<PAGE> 41
and manner of, and identity of the exchange rate agent with responsibility
for, determining the exchange rate between the currency or currencies,
currency unit or units or composite currency or currencies in which such
Debt Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
14. provisions, if any, granting special rights to the Holders of such
Debt Securities upon the occurrence of such events as may be specified;
15. any deletions from, modifications of or additions to the Events of
Default or covenants of the Company with respect to such Debt Securities,
whether or not such Events of Default or covenants are consistent with the
Events of Default or covenants set forth in the applicable Indenture;
16. whether such Debt Securities will be issued in certificated or
book-entry form and terms and conditions related thereto;
17. the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the applicable Indenture;
18. whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the Indenture on such Debt Securities
to any Holder who is not a United States person in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities rather than pay such Additional
Amounts (and the terms of any such option);
19. the obligation, if any, of the Company to permit the conversion of
the Debt Securities of such series into shares of Capital Stock of the
Company and the terms and conditions upon which such conversion shall be
effected; and
20. any other terms of such Debt Securities, which terms shall not be
inconsistent with the provisions of the applicable Indenture (Section 301
of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Any
special United States federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Senior Debt Securities will be payable at the corporate trust office
of the Senior Indenture Trustee located at Corporate Trust Administration, 999
Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309, and the principal of
(and premium or Make-Whole Amount, if any) and interest on any series of
Subordinated Debt Securities will be payable at the corporate trust office of
the Subordinated Indenture Trustee located at Corporate Trust Administration,
999 Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309; provided that at
the option of the Company payment of interest on any series of Debt Securities
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register for such series or by wire transfer of funds to
such Person at an account maintained within the United States (Sections 301,
305, 306, 307 and 1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at
7
<PAGE> 42
the close of business on a special record date (the "Special Record Date") for
the payment of such Defaulted Interest to be fixed by the Trustee, in which case
notice thereof shall be given to the Holder of such Debt Security not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner, all as more completely described in the applicable
Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office of
the Trustee referred to above. Every Debt Security surrendered for conversion,
registration or transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration or transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305 of each Indenture). If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which such transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each Place of Payment for such series. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities (Section 1002 of each Indenture).
Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing or publication of the relevant notice of redemption; (ii)
register the transfer of or exchange any Registered Security, or portion
thereof, called for redemption, except the unredeemed portion of any Registered
Security being redeemed in part; (iii) exchange any Bearer Security selected for
redemption, except that such a Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided that such Registered Security
shall be simultaneously surrendered for redemption; or (iv) issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such Debt
Security not to be so repaid (Section 305 of each Indenture).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest (including all Additional
Amounts, if any) on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result thereof as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default under an
Indenture, and no event which, after notice or the lapse of time, or both, would
become such an Event of Default, shall have occurred and be continuing; and (c)
an Officers' Certificate and legal opinion covering such conditions shall be
delivered to the Trustee (Sections 801 and 803 of each Indenture).
CERTAIN COVENANTS
Existence. Except as described above under "Merger, Consolidation or
Sale," the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect the existence, rights (charter and statutory)
and franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer
8
<PAGE> 43
desirable in the conduct of the business of the Company and its Subsidiaries as
a whole and that the loss thereof is not disadvantageous in any material respect
to the Holders of the Debt Securities of any series (Section 1005 of each
Indenture).
Maintenance of Properties. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing of for value their properties in the
ordinary course of business (Section 1006 of each Indenture).
Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage in an amount
at least equal to their then full insurable value with financially sound and
reputable insurance companies (Section 1007 of each Indenture).
Payment of Taxes and other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings (Section 1008 of each Indenture).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 and 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder (Section 1009 of each Indenture).
Waiver of Certain Covenants. The Company may omit to comply with any term,
provision or condition of the foregoing covenants, and with any other term,
provision or condition with respect to the Debt Securities of any series
specified in Section 301 of the Indentures (except any such term, provision or
condition which could not be amended without the consent of all Holders of Debt
Securities of such series), if before or after the time for such compliance the
Holders of at least a majority in principal amount of all outstanding Debt
Securities of such series, by act of such Holders, either waive such compliance
in such instance or generally waive compliance with such covenant or condition,
but no such waiver shall extend to or affect such covenant or condition except
to the extent so expressly waived, and until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect (Section
1012 of each Indenture).
Additional Covenants. The Prospectus Supplement for a particular series of
Debt Securities may contain additional covenants of the Company with respect to
such series of Debt Securities.
9
<PAGE> 44
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series: (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance of
any other covenant of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor) having an aggregate principal amount outstanding
of at least $10,000,000, whether such indebtedness now exists or shall hereafter
be created, which default shall have resulted in such indebtedness being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such acceleration having been rescinded or
annulled within 10 days after written notice to the Company as provided in the
Indenture; (f) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary in an
aggregate amount (excluding amounts fully covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts fully covered by
insurance) in excess of $10,000,000 for a period of 30 consecutive days; (g)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Company or any Significant
Subsidiary or for all or substantially all of the property of the Company or any
Significant Subsidiary; and (h) any other Event of Default provided with respect
to such series of Debt Securities (Section 501 of each Indenture). The term
"Significant Subsidiary" means each significant subsidiary (as defined in
Regulations S-X promulgated under the Securities Act) of the Company.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of, and premium or Make-Whole Amount,
if any, on, all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the Trustee if
given by the Holders). However, at any time after such declaration of
acceleration with respect to Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of such series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the
Company shall have deposited with the Trustee all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest, and any
Additional Amounts, on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the Trustee and (b)
all Events of Default, other than the nonpayment of accelerated principal (or
specified portion thereof and the premium or Make-Whole Amount, if any) or
interest, with respect to the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
have been cured or waived as provided in the Indenture (Section 502 of each
Indenture). Each Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium or Make-Whole Amount, if any) or interest or Additional Amounts payable
on any Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or
10
<PAGE> 45
amended without the consent of the Holder of each Outstanding Debt Security
affected thereby (Section 513 of each Indenture).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that such Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts payable on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of reasonable indemnity (Section 507 of each
Indenture). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any), interest on and additional
Amounts payable with respect to, such Debt Securities at the respective due
dates or redemption dates thereof (Section 508 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendment of either Indenture may be made with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the stated Maturity of the principal of (or premium
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts payable on, any such Debt Security; (b) reduce the principal
amount of, or the rate or amount of interest on, or any premium or Make-Whole
Amount payable on redemption of, or any Additional Amount payable with respect
to, any such Debt Security, or reduce the amount of principal of an Original
Issue Discount Security or Make-Whole Amount, if any, that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the Place of Payment, or the coin or
currency, for payment of principal of (and premium or Make-Whole Amount, if
any), or interest on, or any Additional Amounts payable with respect to, any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
percentage of Outstanding Debt Securities of any series, the consent of whose
Holders is necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the consent
of the Holder of each such Debt Security (Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in such Indenture (Section 1012 of each
Indenture).
Modifications and amendments of either Indenture may be made by the Company
and the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes:
i. to evidence the succession of another Person to the Company as
obligor under such Indenture;
ii. to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities or to surrender any right
or power conferred upon the Company in such Indenture;
11
<PAGE> 46
iii. to add Events of Default for the benefit of the Holders of all or
any series of Debt Securities;
iv. to add or change any provisions of either Indenture to facilitate
the issuance of, or to liberalize certain terms of, Debt Securities in
bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form provided that such action shall not adversely affect
the interests of the Holders of the Debt Securities of any series in any
material respect;
v. to add, change or eliminate any provisions of either Indenture,
provided that any such addition, change or elimination shall become
effective only when there are no Debt Securities Outstanding of any series
created prior thereto which are entitled to the benefit of such provision;
vi. to secure the Debt Securities;
vii. to establish the form or terms of Debt Securities of any series,
including the provisions and procedures, if applicable, for the conversion
of such Debt Securities into Common Stock or Preferred Stock of the
Company; to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under either
Indenture by more than one Trustee;
viii. to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under either
Indenture by more than one Trustee;
ix. to cure any ambiguity, defect or inconsistency in either
Indenture, provided that such action shall not adversely affect the
interests of Holders of Debt Securities of any series issued under such
Indenture;
x. to close either Indenture with respect to the authentication and
delivery of additional series of Debt Securities or to qualify, or maintain
qualification of, either Indenture under the Trust Indenture Act; or
xi. to supplement any of the provisions of either Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect (Section 901 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution, bankruptcy, insolvency or reorganization, the payment of the
principal of and interest on the Subordinated Debt Securities will be
subordinated to the extent provided in the Subordinated Indenture in right of
payment to the prior payment in full of all Senior Debt (Sections 1601 and 1602
of the Subordinated Indenture), but the obligation of the Company to make
payment of the principal and interest on the Subordinated Debt Securities will
not otherwise be affected (Section 1608 of the Subordinated Indenture). No
payment of principal or interest may be made on the Subordinated Debt Securities
at any time if a default on Senior Debt exists that permits the holders of such
Senior Debt to accelerate its maturity and the default is the subject of
judicial proceedings or the Company receives notice of the default (Section 1603
of the Subordinated Indenture). The Company may resume payments on the
Subordinated Debt Securities when the default is cured or waived, or 120 days
pass after the notice is given if the default is not the subject of judicial
proceedings, if the subordination provisions of the Subordinated Indenture
otherwise permit payment at that time (Section 1603 of the Subordinated
Indenture). After all Senior Debt is paid in full and until the Subordinated
Debt Securities are paid in full, Holders will be subrogated to the rights of
holders of Senior Debt to the extent that distributions otherwise payable to
holders have been applied to the payment of Senior Debt (Section 1607 of the
Subordinated Indenture). By reason of such subordination, in the event of a
distribution of assets upon insolvency, certain general creditors of the Company
may recover more, ratably, than holders of the Subordinated Debt Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the
12
<PAGE> 47
Company evidenced by notes, debentures, or bonds, or other securities issued
under the provisions of an indenture, fiscal agency agreement or other
instrument, (c) obligations of the Company as lessee under leases of property
either made as part of any sale and leaseback transaction to which the Company
is a party or otherwise, (d) indebtedness of partnerships and joint ventures
that is included in the consolidated financial statements of the Company, (e)
indebtedness, obligations and liabilities of others in respect of which the
Company is liable contingently or otherwise to pay or advance money or property
or as guarantor, endorser or otherwise or which the Company has agreed to
purchase or otherwise acquire, and (f) any binding commitment of the Company to
fund any real estate investment or to fund any investment in any entity making
such real estate investment, in each case other than (1) any such indebtedness,
obligation or liability referred to in clauses (a) through (f) above as to
which, in the instrument creating or evidencing the same pursuant to which the
same is outstanding, it is provided that such indebtedness, obligation or
liability is not superior in right of payment to the Subordinated Debt
Securities or ranks pari passu with the Subordinated Debt Securities, (2) any
such indebtedness, obligation or liability which is subordinated to indebtedness
of the Company to substantially the same extent as or to a greater extent than
the Subordinated Debt Securities are subordinated, and (3) the Subordinated Debt
Securities (Section 101 of the Subordinated Indenture). At December 15, 1995,
Senior Debt aggregated approximately $360.0 million. There are no restrictions
in the Subordinated Indenture upon the creation of additional Senior Debt or
other indebtedness.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts payable to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary, mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402 of each Indenture) or (b) to be released from its
obligations with respect to such Debt Securities under provisions of each
Indenture described under "Certain Covenants," or, if provided pursuant to
Section 301 of each Indenture, its obligations with respect to any other
covenant, and any failure to comply with such obligations shall not constitute a
default or an Event or Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403 of each Indenture), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or currency units or
composite currency or currencies in which such Debt Securities are payable at
Stated Maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
each Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same
13
<PAGE> 48
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred, and such Opinion of
Counsel, in the case of defeasance, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United States federal
income tax laws occurring after the date of such Indenture (Section 1404 of each
Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect to such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market exchange
rate (Section 1405 of each Indenture).
"Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency issued by the government of one or more countries
other than the United States (other than the ECU or other currency unit) both by
the government of the country that issued such currency and for the settlement
of transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency, currency unit or
composite currency other than the ECU for the purposes for which it was
established (Section 101 of each Indenture). Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a Foreign Currency that ceases to be used by its government of issuance shall be
made in United States dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (d) under "Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of either Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (h) under
"Events of Default, Notice and Waiver" with respect to a covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the Trustee, will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting
14
<PAGE> 49
from such Event of Default. However, the Company would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Capital Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Capital Stock, the conversion price (or manner
of calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the Holders or the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such Debt Securities.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with the Depository
Trust Company, as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form. Unless
and until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Security may not be transferred except as a whole
by the Depository for such Global Security to a nominee of such Depository or by
a nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any nominee of such Depository to a
successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository for such Global Security or its nominee (with respect to
beneficial interests of Participants) and records of Participants (with respect
to beneficial interests of persons who hold through Participants). The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and laws may impair the
ability to own, pledge or transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
15
<PAGE> 50
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depository for any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
such Debt Securities, will immediately credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name. Such payments will be the
responsibility of such Participants.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
TRUSTEES
First Union National Bank of Georgia, the Senior Indenture Trustee and the
Subordinate Indenture Trustee, also provides the Company's revolving line of
credit facility and from time to time directly or through affiliates performs
other services for the Company in the normal course of business.
GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with
the laws of the State of Georgia.
DESCRIPTION OF COMMON STOCK
This summary of certain terms and provisions of the Company's Common Stock
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the terms and provisions of the Company's Amended and Restated
Articles of Incorporation (the "Articles"), and By-laws, as amended, which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
The Company has 100,000,000 shares of Common Stock authorized and
33,827,757 shares were outstanding at November 30, 1995. All outstanding shares
of Common Stock are fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina. The Company's Common
Stock is traded on the New York Stock Exchange under the symbol "MRY".
The holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors, after payment of, or provision for, full
cumulative dividends for outstanding Preferred Stock. Each share of Common Stock
is entitled to one vote on all matters submitted to a vote of shareholders,
including the
16
<PAGE> 51
election of directors. Cumulative voting for directors is not permitted, which
means that holders of more than 50% of all of the shares of Common Stock voting
can elect all of the directors if they choose to do so, and, in such event, the
holders of the remaining shares of Common Stock will not be able to elect any
directors. Holders of Common Stock and Preferred Stock, when outstanding and
when entitled to vote, vote as a class, except with respect to matters that
relate only to the rights, terms or conditions of the Preferred Stock, that
affect only the holders of the Preferred Stock, or that relate to the rights of
the holders of the Preferred Stock if the Company fails to fulfill any of its
obligations regarding the Preferred Stock. Upon any dissolution, liquidation or
winding-up of the Company, the holders of Common Stock are entitled to receive
pro rata all of the Company's assets and funds remaining after payment of, or
provision for, creditors and distribution of, or provision for, preferential
amounts and unpaid accumulated dividends to holders of Preferred Stock. Holders
of Common Stock have no preemptive right to purchase or subscribe for any shares
of capital stock of the Company.
DESCRIPTION OF PREFERRED STOCK
This summary of certain terms and provisions of the Company's Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the terms and provisions of the Company's Articles and
By-laws, as amended, which are filed as exhibits to the Registration Statement
of which this Prospectus is a part.
The Articles authorize the issuance of 20,000,000 shares of Preferred
Stock, without par value, of which 677,470 shares of Series A Preferred Stock,
4,000,000 shares of Series B Preferred Stock and 4,599,800 shares of Series C
Preferred Stock were issued and outstanding at November 30, 1995. All
outstanding shares of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock are fully paid and nonassessable.
The transfer agent and registrar for the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina.
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Articles fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.
GENERAL
Under the Articles, the Board of Directors of the Company is authorized,
without further shareholder action, to provide for the issuance of up to
20,000,000 shares of Preferred Stock, in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as the Board of Directors shall approve. At November 30, 1995 the
Company had 9,277,270 shares of Preferred Stock issued and outstanding of its
20,000,000 authorized shares of Preferred Stock.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (ii) the price at which such series of Preferred Stock will be
issued; (iii) the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall commence to
accumulate; (iv) any redemption or sinking fund provisions of such series of
Preferred Stock; (v) any conversion provisions of such series of Preferred
Stock; and (vi) any additional dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions of such
series of Preferred Stock.
17
<PAGE> 52
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the Common Stock.
DIVIDEND RIGHTS
Holders of Preferred Stock of each series will be entitled to receive, when
as and if declared by the Board of Directors, out of assets of the Company
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate may be fixed or variable or both and may be cumulative,
noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
Common Stock, unless the accrued dividends on each series of Preferred Stock
have been fully paid or declared and set apart for payment and the Company shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such other series will in all cases bear to each
other the same ratio that accrued dividends per share on such series of
Preferred Stock and such other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Company.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of the assets of the Company available for distribution
to shareholders, the amount stated or determined on the basis set forth in the
Prospectus Supplement relating to such series, which may include accrued
dividends, if such liquidation, dissolution or winding-up is involuntary or may
equal the current redemption price per share (otherwise than for the sinking
fund, if any, provided for such series) provided for such series set forth in
such Prospectus Supplement, if such liquidation, dissolution or winding-up is
voluntary, and on such preferential basis as is set forth in such Prospectus
Supplement. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to Preferred Stock
of any series and any other shares of stock of the Company ranking as to any
such distribution on a parity with such series of Preferred Stock are not paid
in full, the holders of Preferred Stock of such series and of such other shares
will share ratably in any such distribution of assets of the Company in
proportion to the full respective preferential amounts to which they are
entitled or on such other basis as is set forth in the applicable Prospectus
Supplement. The rights, if any, of the holders of any series of Preferred Stock
to participate in the assets of the Company remaining after the holders of other
series of Preferred Stock have been paid their respective specified liquidation
preferences upon any liquidation, dissolution or winding-up of the Company will
be described in the Prospectus Supplement relating to such series.
REDEMPTION
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times and the redemption prices
and for the types of consideration set forth in the Prospectus Supplement
relating to
18
<PAGE> 53
such series. The Prospectus Supplement relating to a series of Preferred Stock
which is subject to mandatory redemption shall specify the number of shares of
such series that shall be redeemed by the Company in each year commencing after
a date to be specified, at a redemption price per share to be specified,
together with an amount equal to any accrued and unpaid dividends thereon to the
date of redemption. Except as indicated in the applicable Prospectus Supplement,
the Preferred Stock is not subject to any mandatory redemption at the option of
the holder.
SINKING FUND
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, of a sinking fund for the purchase or redemption of that series.
CONVERSION RIGHTS
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of Preferred Stock. The Preferred Stock will have
no preemptive rights.
VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by Georgia law, a
holder of Preferred Stock will not be entitled to vote. Except as indicated in
the Prospectus Supplement relating to a particular series of Preferred Stock, in
the event the Company issues full shares of any series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of Preferred Stock are entitled to vote.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursement agent for a series
of Preferred Stock will be selected by the Company and be described in the
applicable Prospectus Supplement. The registrar for shares of Preferred Stock
will send notices to shareholders of any meetings at which holders of Preferred
Stock have the right to vote on any matter.
OUTSTANDING PREFERRED STOCK
Series A Preferred Stock. The Series A Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series B Preferred Stock and Series C
Preferred Stock, with respect to payment of dividends and amounts upon
liquidation, dissolution or winding-up. Holders of Series A Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of funds legally available for payment, cumulative cash dividends
at the rate per annum of $1.75 per share of Series A Preferred Stock. Dividends
on the Series A Preferred Stock are payable quarterly in arrears on the last
calendar day of March, June, September and December of each year.
Shares of Series A Preferred Stock are not redeemable by the Company prior
to June 30, 1998, and at no time are the shares of Series A Preferred Stock
redeemable for cash. On and after June 30, 1998, the shares of Series A
Preferred Stock are redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
preference of the Series A Preferred Stock to be redeemed divided by the
applicable conversion price as of the opening of business on the date set for
such redemption, subject to adjustment in certain circumstances. The Company may
exercise this option only if for 20 trading days, within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on the New York Stock Exchange equals or
exceeds the conversion price per share, subject to adjustments in certain
circumstances.
The holders of Series A Preferred Stock are entitled to receive in the
event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, $25.00 per share of Series A Preferred Stock plus an
amount per share of Series A Preferred Stock equal to all dividends (whether or
not earned or
19
<PAGE> 54
declared) accrued and unpaid thereon to the date of final distribution to such
holders, and no more. Except under certain circumstances or except as otherwise
from time to time required by applicable law, the holders of Series A Preferred
Stock have no voting rights.
Series B Preferred Stock. The Series B Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series A Preferred Stock and the Series C
Preferred Stock, with respect to payment of dividends and amounts upon
liquidation, dissolution or winding-up. Holders of Series B Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of funds legally available for payment, cumulative cash dividends
at the rate per annum of $2.205 per share of Series B Preferred Stock. Dividends
on the Series B Preferred Stock are payable quarterly in arrears on the last
calendar day of March, June, September and December of each year.
Shares of Series B Preferred Stock are not redeemable by the Company prior
to October 31, 1999, and at no time are the shares of Series B Preferred Stock
redeemable for cash. On and after October 31, 1999, the shares of Series B
Preferred Stock are redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
preference of the Series B Preferred Stock to be redeemed divided by the
applicable conversion price as of the opening of business on the date set for
such redemption, subject to adjustment in certain circumstances. The Company may
exercise this option only if for 20 trading days, within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on the New York Stock Exchange equals or
exceeds the conversion price per share, subject to adjustments in certain
circumstances.
The holders of Series B Preferred Stock are entitled to receive in the
event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, $25.00 per share of Series B Preferred Stock plus an
amount per share of Series B Preferred Stock equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders, and no more. Except under certain circumstances or
except as otherwise from time to time required by applicable law, the holders of
Series B Preferred Stock have no voting rights.
Series C Preferred Stock. The Series C Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series A Preferred Stock and the Series B
Preferred Stock, with respect to payment of dividends and amounts upon
liquidation, dissolution or winding-up. Holders of Series C Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of funds legally available for payment, cumulative cash dividends
at the rate per annum of $2.15 per share of Series C Preferred Stock. Dividends
on the Series C Preferred Stock are payable quarterly in arrears on the last
calendar day of March, June, September and December of each year.
Shares of Series C Preferred Stock are not redeemable by the Company prior
to March 31, 2000, and at no time are the shares of Series C Preferred Stock
redeemable for cash. On and after March 31, 2000, the shares of Series C
Preferred Stock are redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
preference of the Series C Preferred Stock to be redeemed divided by the
applicable conversion price as of the opening of business on the date set for
such redemption, subject to adjustment in certain circumstances. The Company may
exercise this option only if for 20 trading days, within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on the New York Stock Exchange equals or
exceeds the conversion price per share, subject to adjustments in certain
circumstances.
The holders of Series C Preferred Stock are entitled to receive in the
event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, $25.00 per share of Series C Preferred Stock plus an
amount per share of Series C Preferred Stock equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders, and no more. Except under certain circumstances or
except as otherwise from time to time required by applicable law, the holders of
Series C Preferred Stock have no voting rights.
20
<PAGE> 55
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock Warrants. The following sets forth certain general terms and
provisions of the Common Stock Warrants offered hereby. Further terms of the
Common Stock Warrants and the applicable Warrant Agreements will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such Common Stock
Warrants; (2) the aggregate number of such Common Stock Warrants: (3) the price
or prices at which such Common Stock Warrants will be issued; (4) the
designation, number and terms of the shares of Common Stock purchasable upon
exercise of such Common Stock Warrants; (5) the designation and terms of the
other Offered Securities with which such Common Stock Warrants are issued and
the number of such Common Stock Warrants issued with each such Offered Security;
(6) the date, if any, on and after which such Common Stock Warrants and the
related Common Stock will be separately transferable; (7) the price at which
each share of Common Stock purchasable upon exercise of such Common Stock
Warrants may be purchased; (8) the date on which the right to exercise such
Common Stock Warrants shall commence and the date on which such right shall
expire; (9) the minimum or maximum amount of such Common Stock Warrants which
may be exercised at any one time; (10) information with respect to book-entry
procedures, if any; (11) a discussion of certain federal income tax
considerations; and (12) any other terms of such Common Stock Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Common Stock Warrants.
DESCRIPTION OF DEPOSITARY SHARES
The Company may, at its option, elect to offer receipts for fractional
interests ("Depositary Shares") in Preferred Stock. In such event, receipts
("Depositary Receipts") for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock) of a share of a particular series of Preferred Stock,
will be issued as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and the depositary named in the Prospectus Supplement
relating to such shares (the "Preferred Stock Depositary"). Subject to the terms
of the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, subscription
and liquidation rights). The following summary of certain provisions of the
Deposit Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Deposit
Agreement, including the definitions therein of certain terms. Whenever
particular sections of the Deposit Agreement are referred to, it is intended
that such sections shall be incorporated herein by reference. The form of
Deposit Agreement is filed as an exhibit to the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibit.
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Shares relating to such Preferred Stock in proportion to
the numbers of such Depositary Shares owned by such holders. (Deposit Agreement,
Section 4.01)
21
<PAGE> 56
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares in an equitable manner, unless the Preferred Stock Depositary
determines that it is not feasible to make such distribution, in which case the
Preferred Stock Depositary may sell such property and distribute the net
proceeds from such sale to such holders. (Deposit Agreement, Section 4.02)
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary and upon payment of the taxes, charges and fees
provided for in the Deposit Agreement and subject to the terms thereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office, to or upon his or her order, of the number of whole shares of the
related series of Preferred Stock and any money or other property, if any,
represented by such Depositary Shares.
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of such series of Preferred Stock held by the Preferred Stock Depositary.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Preferred Stock Depositary, the Preferred Stock Depositary will
redeem as of the same redemption date the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot, pro rata or by any other equitable method as may be
determined by the Preferred Stock Depositary. (Deposit Agreement, Section 2.08)
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
the Preferred Stock represented by such holder's Depositary Shares. The
Preferred Stock Depositary will endeavor, insofar as practicable, to vote the
amount of the Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting shares of the Preferred
Stock to the extent it does not receive specific instructions from the holder of
Depositary Shares representing such Preferred Stock. (Deposit Agreement, Section
4.05)
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
which materially and adversely alters the rights of the holders of Depositary
Shares will not be effective unless such amendment has been approved by the
holders of at least a majority of the Depositary Shares then outstanding.
(Deposit Agreement, Section 6.01) The Deposit Agreement will only terminate if
(i) all outstanding Depositary Shares have been redeemed or (ii) there has been
a final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding-up of the Company and such distribution has
been distributed to the holders of Depositary Receipts. (Deposit Agreement,
Section 6.02)
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Preferred Stock Depositary in connection with the
initial deposit of the Preferred Stock and issuance of Depositary Receipts, all
withdrawals of shares of Preferred Stock by owners of Depositary Shares and any
redemption of the Preferred Stock. Holders of Depositary Receipts will pay other
transfer and other taxes and governmental charges and such other charges as are
expressly provided in the Deposit Agreement to be for their accounts. (Deposit
Agreement, Section 5.07)
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such
22
<PAGE> 57
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary and its acceptance of such appointment. Such
successor Preferred Stock Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000. (Deposit Agreement, Section 5.04)
The Preferred Stock Depositary will forward to the holders of the Preferred
Stock all reports and communications from the Company which are delivered to the
Preferred Stock Depositary and which the Company is required or otherwise
determines to furnish to such holders. (Deposit Agreement, Section 4.07)
Neither the Preferred Stock Depositary nor the Company will be liable under
the Deposit Agreement to holders of Depositary Receipts other than for its
negligence, willful misconduct or bad faith. Neither the Company nor the
Preferred Stock Depositary will be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary may rely upon written advice of counsel or accountants, or upon
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Receipts or other persons believed to be competent and on
documents believed to be genuine. (Deposit Agreement, Section 5.03)
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to or through underwriters or
may sell the Offered Securities to investors directly or through designated
agents. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as agents to offer and sell the Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement. In connection with
the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions (which may be changed from
time to time) from the underwriters and from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts
23
<PAGE> 58
will not be subject to any conditions except (i) the purchase by an institution
of the Offered Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject and (ii) the Company shall have sold to
such underwriters the total principal amount of the Offered Securities less the
principal amount thereof covered by Contracts. A commission indicated in the
Prospectus Supplement will be paid to agents and underwriters soliciting
purchases of Offered Securities pursuant to Contracts accepted by the Company.
Agents and underwriters shall have no responsibility in respect of the delivery
or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
EXPERTS
The audited financial statements and schedules of the Company incorporated
by reference in this Prospectus and elsewhere in the registration statement of
which this Prospectus is a part, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said reports.
LEGAL OPINIONS
Certain legal opinions relating to tax matters and the Offered Securities
will be passed upon for the Company by Hull, Towill, Norman & Barrett, P.C.,
Augusta, Georgia. Certain legal matters relating to the validity of the Offered
Securities will be passed upon for the Underwriters by Piper & Marbury L.L.P.,
Baltimore, Maryland. W. Hale Barrett, a member of the firm of Hull, Towill,
Norman & Barrett, P.C., is a director and secretary of the Company. He and
members of his firm own 26,141 shares of the Company's Common Stock.
24
<PAGE> 59
INSIDE BACK COVER
[Photograph of Coventry at City View apartment community]
Coventry at City View, Dallas/Ft. Worth, Texas
[Photograph of The Palms at South Shore apartment community]
The Palms at South Shore, Houston, Texas
[Photograph of Polos East apartment community]
Polos East, Orlando, Florida
[Photograph of Carriage Homes at Wyndham apartment community]
Carriage Homes at Wyndham, Richmond, Virginia
[Photograph of Chatelaine Park apartment community]
Chatelaine Park, Atlanta, Georgia
[Photograph of Hammocks at Long Point apartment community]
Hammocks at Long Point, Savannah, Georgia
<PAGE> 60
[MERRY LAND LOGO]
