<PAGE>
P R O S P E C T U S
8,000,000 SHARES
COMMON STOCK
The Common Stock is listed on the New York Stock Exchange. On June 14,
1994, the last reported sale price of the Common Stock was $14 1/4 per share.
See "Price Range of Common Stock and Distributions."
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.
[CAPTION]
<TABLE>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) TRUST (2)
<S> <C> <C> <C>
Per Share................................. $14.25 $.755 $13.495
Total (3)................................. $114,000,000 $6,040,000 $107,960,000
</TABLE>
(1) The Trust has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Trust estimated at $236,000.
(3) The Trust has granted the several Underwriters an option to purchase up to
an additional 1,200,000 shares to cover over-allotments. If all such shares
are purchased, the total Price to Public, Underwriting Discount and Proceeds
to Trust will be $131,100,000, $6,946,000 and $124,154,000, respectively.
See "Underwriting."
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 shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
will be made in New York, New York on or about June 21, 1994.
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
SCOTT & STRINGFELLOW, INC.
The date of this Prospectus is June 14, 1994.
<PAGE>
Photographs and Charts (see appendix)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE TRUST AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
THE TRUST
United Dominion Realty Trust, Inc. (the "Trust"), founded in 1972, is a
self-administered equity real estate investment trust that owns and operates
apartments in the Southeast from Maryland to Florida. It is a fully integrated
real estate company that acquires, improves, operates, manages and selectively
sells properties with the primary goal of maximizing its funds from operations,
while increasing the value of its real estate through capital improvements and
intensive management.
The Trust's 100 properties include 81 apartment communities, 15 shopping
centers, two warehouse/industrial properties and two office properties. The
apartment properties consist of 20,254 apartment units, providing approximately
90% of the Trust's rental income. Commercial properties consist of approximately
2.0 million square feet of rentable space, providing approximately 10% of rental
income. All of the Trust's properties are located in the Southeast. Management
believes that the Trust has benefitted from the population and job growth within
this region and that this region will continue to provide attractive demographic
and economic patterns conducive to real estate investment in the 1990's.
The Trust's investment policy has been to acquire primarily apartment
properties presenting the opportunity for higher occupancy, increased rents and
enhanced property values through a program of renovation, refurbishment and
intensive property management. Beginning in 1991, the Trust embarked on a major
expansion of its apartment portfolio involving (i) the acquisition of apartment
properties having high occupancy levels and not requiring substantial
renovation, and (ii) entry into new markets, most recently the
Baltimore/Washington area and central Florida. The properties have been acquired
generally at significant discounts from replacement cost and at attractive
current yields. The sellers were primarily financially distressed real estate
limited partnerships, the RTC, the FDIC, lenders who had foreclosed and
insurance companies seeking to reduce their real estate exposure. Since 1991,
the Trust has acquired 43 apartment properties containing 11,577 units at a
total cost of approximately $337 million.
The Trust has paid continuous quarterly distributions to its shareholders
since 1973 and has increased its distributions each year during the past 18
years. The distribution for the first quarter of 1994 was $.195 per share. The
current indicated annual distribution is $.78 per share. In past years, a
portion of the Trust's distributions to shareholders has been designated as a
non-taxable return of capital for Federal income tax purposes.
The Trust, a Virginia corporation, has its principal office at 10 South 6th
Street, Suite 203, Richmond, Virginia 23219-3802, and its telephone number is
(804) 780-2691. Unless the context indicates otherwise, the term "Trust," as
used herein, includes the Trust and its subsidiary.
RECENT DEVELOPMENTS
PROPOSED ACQUISITIONS
The Trust has executed individual contracts to purchase a portfolio of 25
apartment properties containing 5,170 units for a total purchase price of
approximately $162 million, excluding closing costs (the "Portfolio
Acquisition"). Twenty-three of the properties are located in the Southeast, and
approximately two-thirds of the units are based in four of the Trust's existing
markets: Baltimore, Maryland, Charlotte, North Carolina and Columbia and
Greenville, South Carolina. Closing on the Portfolio Acquisition has been
scheduled for July 1, 1994, but the Trust may elect to extend to August 15,
1994, closing on four properties which may be eligible for tax-exempt bond
financing. If the transaction is consummated as planned, it is expected to have
an immediate positive impact on the Trust's operating results. While each of the
individual properties in the Portfolio Acquisition was valued based on a
different estimated first year return, when taken as a whole, the Portfolio
Acquisition will be made based upon internal analyses showing a weighted average
first year return on average investment of 9.0%.
In addition, the Trust has five other apartment communities containing
1,540 units under contract in separate transactions at a cash purchase price
totalling $54.3 million, excluding closing costs. These properties are located
in Columbia, South Carolina (304 units), Sanford, Florida (256 units),
Kissimmee, Florida (400 units), Jacksonville, Florida (352 units), and
Wilmington, North Carolina (228 units).
There can be no assurance that any of the proposed acquisitions will be
consummated.
3
<PAGE>
1994 ACQUISITIONS
Since January 1, 1994, the Trust has acquired seven apartment communities
aggregating 2,340 apartment units at a total cost of $86.8 million, including
closing costs. These acquisitions were made based in part on internal analyses
showing a weighted average first year return on average investment of 9.0%.
The Shire Apartments -- 302 units located in Raleigh, North
Carolina, acquired March 4, 1994, for $13.8 million cash ($45,600 per
unit).
Lakewood Place Apartments -- 346 units located in Tampa, Florida,
acquired March 11, 1994, for $12.0 million cash ($34,800 per unit).
River Place Apartments -- 240 units located in Macon, Georgia,
acquired April 8, 1994, for $8.6 million cash ($35,800 per unit).
Lakeside North Apartments -- 360 units located in Altamonte
Springs, Florida, acquired April 14, 1994, for $12.6 million ($35,000
per unit). This acquisition was financed through the assumption of $12.4
million of tax-exempt housing bonds.
Palm Grove Apartments -- 244 units located in Tampa, Florida,
acquired April 15, 1994, for $5.9 million cash ($24,100 per unit).
Walnut Creek Apartments -- 576 units located in Raleigh, North
Carolina, acquired May 17, 1994, for $24.9 million cash ($43,200 per
unit).
Griffin Crossing Apartments -- 272 units located in Griffin,
Georgia, acquired June 9, 1994, for $9 million cash ($33,100 per unit).
FINANCING
Since January 1, 1994, the Trust has completed (i) a private placement of
$12.4 million of tax-exempt housing bonds, (ii) public offerings of $11.2
million of tax-exempt housing bonds and (iii) a public offering of $75 million
of senior unsecured notes.
The Trust presently intends to issue $75 million to $100 million of 7 to 10
year senior unsecured debt during the third quarter of 1994 to help finance its
1994 apartment acquisitions, including the Portfolio Acquisition. To mitigate
the risks of rising interest rates, on May 18, 1994, the Trust entered into an
interest rate hedge agreement, which has the effect of limiting the Trust's
exposure to an increase in the 10-year Treasury Rate to a maximum of 7.197% for
$75 million of its debt to be issued on or before September 15, 1994.
The Trust anticipates that it will continue to finance its acquisition
program using a combination of debt, equity and convertible securities.
USE OF PROCEEDS
The net proceeds to the Trust from the sale of 8,000,000 shares of Common
Stock are estimated at $107,724,000. The Trust presently intends to use the net
proceeds to fund a portion of the $162 million purchase price of the Portfolio
Acquisition. Pending such use, the Trust will invest the net proceeds in
short-term instruments bearing interest at market rates. The Trust will fund the
balance of the purchase price of the Portfolio Acquisition with borrowings under
its bank lines of credit pending permanent financing. See "Recent
Developments -- Financing."
4
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Trust at March 31,
1994, and as adjusted to give effect to (i) the issuance of 8,000,000 shares of
Common Stock offered hereby, (ii) the sale of $75 million of senior unsecured
notes on April 7, 1994 and the application of the proceeds thereof, (iii) the
issuance since March 31, 1994, of $11.2 million of tax-exempt housing bonds to
finance Trust properties, (iv) the assumption by the Trust of $12.4 million of
tax-exempt housing bonds on April 14, 1994, and (v) the authorization of
25,000,000 shares of Preferred Stock and an increase in the number of authorized
shares of Common Stock to 100,000,000, both approved by the shareholders on May
10, 1994. The table should be read in conjunction with the Trust's financial
statements incorporated herein by reference.
<TABLE>
<CAPTION>
MARCH 31, 1994
HISTORICAL AS ADJUSTED
<S> <C> <C>
(IN THOUSANDS)
Debt:
Mortgage notes payable.............................. $ 72,660 $ 96,304(1)
Notes payable....................................... 188,101 223,701(2)
Total debt....................................... $ 260,761 $ 320,005
Shareholders' equity:
Preferred Stock, no par value; 25,000,000 shares
authorized, no shares outstanding................ -- --
Common Stock, $1 par value;
60,000,000 shares authorized
(100,000,000 as adjusted)
41,703,785 shares issued and outstanding
(49,703,785 as adjusted)......................... 41,704 49,704
Additional paid-in capital.......................... 302,981 402,705
Notes receivable from officer shareholders.......... (4,096) (4,096)
Distributions in excess of net income............... (84,509) (84,509)
Total shareholders' equity....................... $ 256,080 $ 363,804
Total capitalization........................... $ 516,841 $ 683,809
</TABLE>
(1) Reflects the issuance or assumption of $23,644,000 of tax-exempt housing
bonds subsequent to March 31, 1994 to finance Trust properties.
(2) Reflects the public sale of $75 million of senior unsecured notes on April
7, 1994. Net proceeds of $74.3 million were used to repay $60.3 million of
bank lines outstanding on March 31, 1994 with the remaining $14.0 million
being used to finance subsequent apartment acquisitions. Since that date,
the Trust has drawn down an additional $20.9 million on its bank lines that
is outstanding at the date hereof.
5
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
PRICE RANGE
The Trust's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "UDR." The following table sets forth the reported high
and low sale prices of the Common Stock on the NYSE for the periods indicated
and the distributions per share paid in such periods, in each case as adjusted
for a 2 for 1 stock split effective May 5, 1993.
<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW PAID
<S> <C> <C> <C> <C>
1991
1st Quarter................................................. $ 8 5/8 $ 7 1/16 $.155
2nd Quarter................................................. 9 1/4 8 1/4 .155
3rd Quarter................................................. 9 9/16 8 11/16 .155
4th Quarter................................................. 10 5/16 8 7/8 .160
.625
1992
1st Quarter................................................. 11 1/2 10 .160
2nd Quarter................................................. 10 13/16 9 3/4 .165
3rd Quarter................................................. 12 3/16 10 9/16 .165
4th Quarter................................................. 12 11/16 10 7/8 .165
.655
1993
1st Quarter................................................. 14 13/16 11 7/8 .165
2nd Quarter................................................. 14 5/8 12 1/2 .175
3rd Quarter................................................. 16 5/8 13 1/2 .175
4th Quarter................................................. 16 7/8 12 5/8 .175
.690
1994
1st Quarter................................................. 15 7/8 12 3/4 .175
2nd Quarter (through June 14)............................... 15 1/8 13 3/8 .195
</TABLE>
On May 24, 1994, the Trust had 4,552 shareholders of record.
DISTRIBUTIONS
The Trust has paid continuous quarterly distributions to its shareholders
since 1973, its first full year of operations, and has increased its
distributions each year during the past 18 years. The Trust's current policy is
to make distributions in amounts exceeding 75% of its funds from operations, but
not less than such amounts as may be necessary to continue its qualification as
a real estate investment trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"). Funds from operations may not necessarily equal
cash available for distribution as the cash flow of the Trust is affected by
other factors not included in the calculation of funds from operations. The
distribution for the first quarter of 1994 was approximately 83% of funds from
operations for the quarter. The quarterly distribution for the second quarter of
1994 is to be paid on July 29, 1994 to shareholders of record as of the close of
business on July 15, 1994. Purchasers of the Common Stock offered hereby are
expected to participate in this distribution. The current indicated annual
distribution is $.78 per share.
For Federal income tax purposes, distributions paid to shareholders may
consist of ordinary income, capital gains distributions, non-taxable return of
capital or a combination thereof. Distributions which exceed the Trust's current
and accumulated earnings and profits constitute a return of capital rather than
a dividend and reduce the shareholder's basis in his shares. To the extent that
a distribution exceeds both current and accumulated earnings and profits and the
shareholder's basis in his shares, it will generally be treated as gain from the
sale or exchange of that shareholder's shares. The Trust annually notifies
shareholders as to the taxability of distributions paid during the preceding
year. Since 1989, cash distributions per share paid to shareholders have been
taxable as set forth below.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Ordinary income................................ $.378 $.355 $.368 $.418 $.493
Capital gains.................................. .010 -- -- -- --
Return of capital.............................. .212 .265 .257 .237 .197
Total distributions paid.................. $.600 $.620 $.625 $.655 $.690
</TABLE>
6
<PAGE>
HISTORICAL TOTAL RETURNS
The table below sets forth the compound annual rates of pretax total return
(increase in market value plus distributions paid) which would have been
realized by an investor who purchased the Trust's Common Stock on the open
market at the beginning of the periods indicated and sold such Common Stock on
the open market at the end of the periods indicated. Distributions paid during
each year are assumed to have been reinvested on the date paid at the then
closing market price of the Common Stock. Past performance is not necessarily
indicative of the results that can be expected in the future from an investment
in the Trust's Common Stock.
<TABLE>
<CAPTION>
COMPOUND ANNUAL
RATE OF TOTAL
PERIOD RETURN
<S> <C>
Ten years ended December 31, 1993.................................................. 18.6%
Five years ended December 31, 1993................................................. 16.9
Year ended December 31, 1993....................................................... 18.5
</TABLE>
MANAGEMENT
The officers and directors of the Trust are:
<TABLE>
<CAPTION>
NAME AGE OFFICE
<S> <C> <C>
John P. McCann 49 President and Chief Executive Officer; Director
James Dolphin 44 Senior Vice President and Chief Financial Officer; Director
Barry M. Kornblau 45 Senior Vice President and Director of Apartment Operations; Director
Curtis W. Carter 37 Vice President, Apartment Property Management
Richard B. Chess 40 Vice President and Director of Acquisitions
Jerry A. Davis 31 Vice President, Controller-Corporate Accounting and Assistant Secretary
Richard A. Giannotti 38 Vice President and Director of Construction
Katheryn E. Surface 36 Vice President, Secretary and General Counsel
Jeff C. Bane 64 Director; President, Blake & Bane Inc., Richmond, Virginia, real estate brokers
Robert P. Buford 68 Director; Senior Counsel, Hunton & Williams, Richmond, Virginia, attorneys
R. Toms Dalton, Jr. 61 Director; Partner, Allen & Carwile, Waynesboro, Virginia, attorneys
John C. Lanford 63 Director; President of Adams Construction Co., Roanoke, Virginia, general contractors
H. Franklin Minor 61 Director; Attorney-at-law and Real Estate Broker
C. Harmon Williams, Jr. 63 Chairman of the Board of Directors; Real Estate Broker
</TABLE>
7
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the financial statements of the Trust and
related notes incorporated herein by reference and with the pro forma financial
statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH
YEAR ENDED DECEMBER 31, 31,
PRO
HISTORICAL FORMA HISTORICAL
1989 1990 1991 1992 1993 1993 1993
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA
Income:
Income from property
operations:
Rental income............. $ 37,173 $ 44,042 $ 51,250 $ 63,202 $ 89,084 $137,342 $ 20,182
Property operating
expenses................ 14,214 17,969 20,956 26,503 37,859 60,930 8,171
Depreciation of real
estate owned............ 8,762 10,464 12,845 15,732 19,764 27,306 4,611
14,197 15,609 17,449 20,967 31,461 49,106 7,400
Interest and other income... 1,552 273 79 1,402 708 270 56
15,749 15,882 17,528 22,369 32,169 49,376 7,456
Expenses:
Interest.................... 9,934 9,435 11,859 11,697 16,938 25,196 3,913
General and
administrative............ 1,475 1,718 1,872 2,231 3,349 3,349 823
Other depreciation and
amortization.............. 201 173 219 300 596 596 131
11,610 11,326 13,950 14,228 20,883 29,141 4,867
Income before gains (losses)
on investments and
extraordinary item.......... 4,139 4,556 3,578 8,141 11,286 20,235 2,589
Gains (losses) on sales of
investments................. 1,433 417 26 -- (89) (89) --
Provision for possible
investment losses........... -- -- -- (1,564) -- -- --
Income before extraordinary
item........................ 5,572 4,973 3,604 6,577 11,197 20,146 2,589
Extraordinary item -- early
extinguishment of debt...... (98) (103) (35) (242) -- -- --
Net income.................... $ 5,474 $ 4,870 $ 3,569 $ 6,335 $ 11,197 $ 20,146 $ 2,589
Net income per share:
Before extraordinary item... $ .29 $ .21 $ .14 $ .19 $ .29 $ .43 $ .07
Extraordinary item.......... (.01) -- -- (.01) -- -- --
$ .28 $ .21 $ .14 $ .18 $ .29 $ .43 $ .07
Weighted average number of
shares outstanding.......... 19,329 23,238 24,642 34,604 38,202 46,807 35,312
Distributions declared........ $ 12,156 $ 14,402 $ 15,872 $ 23,271 $ 27,988 $ 34,012 $ 6,185
Distributions declared per
share....................... .61 .62 .63 .66 .70 .70 .175
OTHER DATA
Funds from operations(1)...... $ 12,865 $ 15,231 $ 17,158 $ 24,185 $ 31,658 $ 48,149 $ 7,331
<CAPTION>
PRO
FORMA
1994 1994
<S> <C> <C>
OPERATING DATA
Income:
Income from property
operations:
Rental income............. $ 26,706 $ 36,298
Property operating
expenses................ 11,385 16,050
Depreciation of real
estate owned............ 5,706 7,040
9,615 13,208
Interest and other income... 114 114
9,729 13,322
Expenses:
Interest.................... 4,655 6,255
General and
administrative............ 1,474 1,474
Other depreciation and
amortization.............. 185 185
6,314 7,914
Income before gains (losses)
on investments and
extraordinary item.......... 3,415 5,408
Gains (losses) on sales of
investments................. -- --
Provision for possible
investment losses........... -- --
Income before extraordinary
item........................ 3,415 5,408
Extraordinary item -- early
extinguishment of debt...... -- --
Net income.................... $ 3,415 $ 5,408
Net income per share:
Before extraordinary item... $ .08 $ .11
Extraordinary item.......... -- --
$ .08 $ .11
Weighted average number of
shares outstanding.......... 41,688 50,293
Distributions declared........ $ 8,133 $ 9,811
Distributions declared per
share....................... .195 .195
OTHER DATA
Funds from operations(1)...... $ 9,760 $ 13,087
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1994
1989 1990 1991 1992 1993 HISTORICAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate owned, at cost.... $251,051 $294,205 $361,503 $454,115 $582,213 $611,270
Total assets.................. 231,537 259,532 314,473 390,365 505,840 535,602
Mortgage and other notes
payable..................... 80,896 117,703 168,346 181,121 229,420 260,761
Convertible subordinated
debentures.................. 15,808 14,987 -- -- -- --
Shareholders' equity.......... 127,764 118,154 136,152 197,677 259,963 256,080
<CAPTION>
PRO
FORMA
<S> <C>
BALANCE SHEET DATA
Real estate owned, at cost.... $820,353
Total assets.................. 744,685
Mortgage and other notes
payable..................... 353,830
Convertible subordinated
debentures.................. --
Shareholders' equity.......... 372,094
</TABLE>
(1) Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Trust considers funds from
operations in evaluating property acquisitions and its operating
performance, and believes that funds from operations should be considered
along with, but not as an alternative to, net income and cash flows as a
measure of the Trust's operating performance and liquidity. Funds from
operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND OPERATIONS
RESULTS OF OPERATIONS
Funds from operations is defined as income before gains (losses) on
investments and extraordinary items adjusted for certain non-cash items,
primarily real estate depreciation. The Trust considers funds from operations in
evaluating property acquisitions and its operating performance, and believes
that funds from operations should be considered along with, but not as an
alternative to, net income and cash flows as a measure of the Trust's operating
performance and liquidity. Funds from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs.
THREE MONTHS ENDED MARCH 31, 1994
For the first quarter of 1994, the Trust reported increases over the
comparable 1993 quarter in rental income, income from property operations, net
income and funds from operations. First quarter 1994 rental income was $26.7
million compared to $20.2 million in the first quarter of 1993, an increase of
$6.5 million or 32.3%. Income from property operations, excluding depreciation,
increased from $12.0 million to $15.3 million, an increase of $3.3 million or
27.6%. Net income for the first quarter of 1994 totalled $3.4 million which was
$826,000, or 31.9%, greater than the $2.6 million reported for the first quarter
of 1993. On a per share basis, net income increased from $.07 for the first
quarter of 1993 to $.08 for the first quarter of 1994. Net income for the 1994
quarter includes a $450,000 charge ($.01 per share) reflecting the Trust's
implementation of the provisions of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." First quarter funds from operations increased 33.1%
from $7.3 million in 1993 to $9.8 million in 1994.
The Trust's 1993 acquisitions made the largest contribution to the reported
increases. The Trust's first quarter 1994 acquisitions and improved results from
its core portfolio of mature apartments and commercial properties also had a
positive impact on first quarter results. The Trust considers an apartment
community to be mature after it has been owned for a full calendar (fiscal)
year. For the Trust's 13,832 mature apartments (57 communities) that have been
owned since the beginning of 1993, economic occupancy increased 1.2% to 92.5%
for the first quarter of 1994 compared to 91.3% for the first quarter of 1993.
Average rents at these properties grew by 3.0% and operating expenses increased
approximately 5.5%, increasing the operating expense ratio 0.3% to 44.7%. As a
result, net operating income from these apartment units for the first quarter of
1994 increased 4.1%, or $386,000, compared to the first quarter of 1993. For the
remaining 4,730 apartment units (19 communities), acquired by the Trust since
January 1, 1993, economic occupancy averaged 91.1% and the operating expense
ratio was 44.9% during the first quarter of 1994.
For the first quarter of 1994, net operating income from commercial
properties increased 7.6%, or $141,000, from the first quarter in 1993,
primarily reflecting additional small tenant leases. Average economic occupancy
for the first quarter of 1994 increased 1.1% to 84.5% compared to the first
quarter of 1993.
During the first quarter of 1994, interest expense was approximately
$742,000 higher than it was in the first quarter of 1993 ($4.7 million in 1994
versus $3.9 million in 1993) as the Trust had more debt outstanding in 1994 than
in 1993. At March 31, 1994, the Trust's total debt (mortgage and unsecured notes
payable) was $260.7 million versus $209.7 million at March 31, 1993.
For the first quarter of 1994, depreciation expense increased to $5.7
million versus $4.6 million in the first quarter of 1993, reflecting the
portfolio expansion that has occurred during the past year.
Management expects that the Trust's operating results for the second
quarter of 1994 will show continued improvement when compared to the comparable
period last year reflecting the continued positive impact of the 1993 and 1994
acquisitions and anticipated occupancy gains and rent growth.
9
<PAGE>
YEAR ENDED DECEMBER 31, 1993
For 1993, the Trust reported significant increases over 1992 in rental
income, income from property operations, income before gains (losses) on
investments and extraordinary item, net income, and funds from operations. These
increases are attributable primarily to the significant portfolio expansion that
has occurred since the beginning of 1992. The performance of the Trust's mature
group of 10,924 apartment units (46 apartment communities) contributed to the
increases.
For 1993, the Trust's mature apartment properties provided 60% of the
Trust's rental income. These units had average economic occupancy of 91.2%
during 1993 compared to 90.6% for 1992, an increase of 0.6%. In 1993, average
rents at these properties grew 2.6% (to $440 per month) and rental expenses
increased 5.3%, resulting in an increase in the operating expense ratio (the
ratio of rental expenses to rental income) of 0.8% to 47.9%. Net operating
income (rental income minus operating expenses) from these apartment units was
up approximately $500,000 or 1.8%. For the remaining 6,990 apartment units
acquired by the Trust since the beginning of 1992, economic occupancy averaged
92.1% and the operating expense ratio was 43.3% for 1993. For the 17,914
apartments in the 74 communities owned on December 31, 1993, economic occupancy
averaged 91.5% and the expense ratio was 46.4% for the full year. In 1992, the
13,832 units then owned had economic occupancy of 90.7% and an expense ratio of
46.5%.
For 1993, net operating income from commercial properties increased
$288,000, or 4.0%, primarily reflecting additional small tenant leases.
For 1993, depreciation expense increased $4.0 million with substantially
all of the increase attributable to the portfolio expansion that has occurred
during the past year.
For 1993, interest income was $708,000 compared to $1.4 million in 1992.
During each year, the Trust completed a public offering of Common Stock and
invested the proceeds temporarily in short-term money market investments. During
1992, the Trust had such temporary investments throughout much of the year at
higher rates than in 1993 when the average amount invested in the money markets
was significantly lower. Consequently, interest income declined.
Interest expense increased approximately $5.2 million reflecting the fact
that the Trust used less equity relative to debt to finance its 1993
acquisitions than it did in 1992. While interest expense increased $.105 per
share in 1993, as a percent of rental income it was virtually unchanged.
LIQUIDITY AND CAPITAL RESOURCES
As a qualified REIT, the Trust distributes a substantial portion of its
cash flow to its shareholders in the form of distributions. Over the past
several years, these distributions have exceeded 80% of the Trust's cash flow
from operating activities and its funds from operations. While the Trust seeks
to retain sufficient cash to cover its normal operating needs, including routine
replacements, its distribution payout ratio requires that portfolio growth,
property improvements and balloon debt payments be financed through a variety of
primarily external sources. The Trust has frequently utilized its bank lines of
credit to temporarily finance these expenditures and has subsequently replaced
this short-term bank debt with longer term debt or equity.
For 1993 and the first quarter of 1994, the Trust's cash flow from
operating activities increased substantially as a result of the expansion of the
Trust's portfolio as discussed below and under "Results of Operations."
At the beginning of 1993, the Trust had $1.1 million of cash and cash
equivalents and $22.5 million of available and unused bank lines of credit. On
February 24, 1993, the Trust privately placed $52 million of senior unsecured
notes with three insurance companies at an interest rate of 7.98%. The notes are
due in equal annual principal installments of $7.4 million from 1997 to 2003.
The proceeds of the debt placement were utilized to repay $50 million of
short-term bank debt that had been incurred in connection with certain apartment
acquisitions completed since mid-December, 1992. In early July, 1993, the Trust
sold 6,095,000 shares of Common Stock in a public offering at $13.50 per share.
The net proceeds of the offering approximated $78 million of which $35 million
was used to repay, in full, then outstanding short-term bank debt. The remaining
proceeds were invested primarily in additional apartment acquisitions during the
second half of 1993. Also, at the beginning of July, 1993, the Trust completed
the refunding of $13.8 million of tax-exempt housing bonds encumbering two
Maryland apartment communities that had been acquired at the end of 1992. The
bonds were sold in a public offering, mature in 30 years and have a weighted
average life of 22.3 years. The bonds bear interest at a weighted average
interest rate of 5.91%. On April 7, 1994, the Trust completed a $75 million
public offering of 7 1/4% senior unsecured notes due April 1, 1999. The notes
were priced at 99.833% to yield 7.29% to maturity. The net proceeds from the
offering (approximately $74.3 million) were utilized to repay, in full,
outstanding bank debt and to fund subsequent apartment acquisitions.
10
<PAGE>
Since the beginning of 1993, the Trust has expanded its bank lines of
credit to $73.5 million, an increase of $22.5 million. As of June 14, 1994, the
Trust had approximately $52.6 million of credit available under these lines. The
Trust anticipates increasing its bank lines of credit to as much as $100 million
during 1994. Historically, the Trust has utilized its lines only as an interim
source of funds for new acquisitions and has subsequently replaced any such bank
borrowings with longer-term debt or equity capital when market conditions allow.
The Trust presently intends to issue $75 million to $100 million of 7 to 10
year senior unsecured debt during the third quarter of 1994 to help finance its
1994 apartment acquisitions, including the Portfolio Acquisition. To mitigate
the risks of rising interest rates, on May 18, 1994, the Trust entered into an
interest rate hedge agreement, which has the effect of limiting the Trust's
exposure to an increase in the 10-year Treasury Rate to a maximum of 7.197% for
$75 million of its debt to be issued on or before September 15, 1994.
During 1993, the Trust acquired 17 apartment communities containing 4,082
units at an aggregate cost of $118 million, including closing costs. The Trust
also made $10.4 million of capital improvements to its portfolio during the
year. This amount includes approximately $3.5 million of improvements at the
Trust's 10,924 mature apartment units that have been owned since the beginning
of 1992. Excluding English Hills (acquired December, 1991) which was still
undergoing rehabilitation in 1993, the remaining 10,348 mature units averaged
$270 per unit in capital expenditures. To date in 1994, the Trust has acquired
seven apartment communities containing 2,340 units at a total cost of $86.8
million, including closing costs. In connection with one of these acquisitions,
the Trust assumed $12.4 million of tax-exempt housing bonds. In early April
1994, the Trust agreed to acquire a portfolio of 25 properties containing 5,170
units for approximately $162 million.
The Trust's goal is to acquire 6,000 or more apartment units in addition to
the Portfolio Acquisition during 1994. Assuming a sufficient level of
acquisition activity, it will be necessary for the Trust to raise additional
capital later in the year. In connection with two of its 1993 acquisitions, the
Trust received regulatory approval for the issuance of approximately $11.2
million of tax-exempt housing bonds. These bonds were sold in the second quarter
of 1994. See "Recent Developments -- Proposed Acquisitions" and "Business
-- Proposed Portfolio Acquisition."
In April, 1993, the Trust engaged outside property management for most of
its shopping center properties following the decision to exit the commercial
property business. Although no formal plan has been adopted, management intends
to offer the Trust's seven Richmond, Virginia shopping centers for sale sometime
during the remainder of 1994. Management has committed to developing alternative
strategies that will enable the Trust to dispose of most of these properties
over the next few years.
The Trust's liquidity and capital resources are believed to be more than
adequate to meet its cash requirements for the foreseeable future.
INFLATION
Management believes that the direct effects of inflation on the Trust's
operations have been inconsequential.
BUSINESS
The Trust acquires, improves, operates, manages and selectively sells
properties with the principal objective of maximizing its funds from operations.
To meet this objective, the Trust has emphasized the acquisition of properties
that can be acquired at attractive initial yields and immediately increase funds
from operations. Historically, the Trust's primary investment policy has been to
acquire apartment properties presenting the opportunity for higher occupancy,
increased rents and enhanced property values through a program of renovation,
refurbishment and intensive property management. In 1991, the Trust expanded its
investment policy with the acquisition of apartment properties having higher
occupancies and requiring substantially less renovation. Generally, these
properties have been acquired at significant discounts from replacement cost and
at attractive initial yields. The Trust has also expanded into new markets, most
recently the Baltimore/Washington area and central Florida. Since 1991, the
Trust has acquired 43 apartment properties containing 11,577 units at a total
cost of approximately $337 million.
The Trust seeks to employ leverage conservatively using primarily corporate
debt, which is considered to be more flexible and less costly than mortgage debt
on individual properties. At March 31, 1994, approximately $459 million, or 75%,
of the Trust's real estate owned at cost was unencumbered by mortgage debt. The
Trust also uses tax-exempt housing bonds to finance eligible properties.
11
<PAGE>
The Trust considers apartments to be its principal business and plans to
commit substantially all of its investment portfolio and all of its new
acquisitions to apartments. Over the long term, management believes that
investment in apartments in the Southeast will benefit from the following
factors:
(Bullet) There has been a significant decline in apartment
construction in the Trust's target markets beginning in 1990
which has continued through the first quarter of 1994.
(Bullet) Only about two million apartments are projected to be built
in the 1990's. There were 600,000 completed in 1986 alone.
(Bullet) Approximately 12 million new households are expected to be
formed in the 1990's, and a majority of this growth is
projected in the South.
(Bullet) Approximately 36% of all households were renters at the start
of the decade. Despite historically low mortgage interest
rates, the proportion of renters has declined only slightly
over the past three years.
(Bullet) During this same period, only about 15% of all residential
construction permits have been for multifamily apartments.
(Bullet) There are estimates that a significant majority of today's
renter households cannot afford to buy a moderately priced
home in their region because of credit problems, the lack of
a down payment or a monthly payment that is too high.
(Bullet) Other demographic characteristics favor apartment demand
including an increase in single person and single parent
households, higher growth rates among minorities, additional
immigrant households and a decline in younger household
income.
Management also believes that demand for apartments within the Southeast will
grow faster than the national average for several reasons including both
population and job growth rates that are projected to be approximately 50%
greater than the national average. In several of the markets where the Trust
owns properties, the population and job growth rates for the decade are
projected to be more than double that of the national average.
The following chart shows the geographic distribution of the Trust's
apartment properties. Pro forma information gives effect to the proposed
acquisition by the Trust of the Portfolio Acquisition. See " -- Proposed
Portfolio Acquisition" and "Recent Developments. "
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
APARTMENT NUMBER OF APARTMENT
PROPERTIES UNITS UNITS
HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL
<S> <C> <C> <C> <C> <C>
Richmond, Virginia................................ 12 12 3,170 3,170 16%
Columbia, South Carolina.......................... 6 10 1,500 2,914 7
Baltimore/Washington.............................. 6 11 1,535 2,621 8
Raleigh, North Carolina........................... 8 9 2,440 2,505 12
Charlotte, North Carolina......................... 8 11 1,700 2,186 8
Tampa/Clearwater, Florida......................... 7 7 1,999 1,999 10
Greenville/Spartanburg, South Carolina............ 3 7 587 1,330 3
Tidewater Virginia(1)............................. 5 5 1,140 1,140 6
Atlanta, Georgia.................................. 4 4 1,123 1,123 6
Nashville, Tennessee.............................. 3 3 842 842 4
Orlando, Florida.................................. 3 3 821 821 4
Wilmington, North Carolina........................ 3 3 661 661 3
Other North Carolina.............................. 6 6 1,288 1,288 6
Other Georgia..................................... 2 3 512 740 3
Other Virginia.................................... 3 4 456 570 2
Other South Carolina.............................. 1 2 168 408 1
Other Florida..................................... 1 2 312 400 1
Alabama........................................... 0 2 0 382 0
Delaware.......................................... 0 2 0 324 0
Total........................................ 81 106 20,254 25,424 100%
<CAPTION>
PRO FORMA
<S> <C>
Richmond, Virginia................................ 12%
Columbia, South Carolina.......................... 11
Baltimore/Washington.............................. 10
Raleigh, North Carolina........................... 10
Charlotte, North Carolina......................... 9
Tampa/Clearwater, Florida......................... 8
Greenville/Spartanburg, South Carolina............ 5
Tidewater Virginia(1)............................. 5
Atlanta, Georgia.................................. 4
Nashville, Tennessee.............................. 3
Orlando, Florida.................................. 3
Wilmington, North Carolina........................ 3
Other North Carolina.............................. 5
Other Georgia..................................... 3
Other Virginia.................................... 2
Other South Carolina.............................. 2
Other Florida..................................... 2
Alabama........................................... 2
Delaware.......................................... 1
Total........................................ 100%
</TABLE>
(1) The Norfolk/Virginia Beach/Newport News/Hampton area.
12
<PAGE>
APARTMENTS
The Trust's apartments consist of a mix of lower to upper income properties
with a majority being middle to moderate income. A majority of the tenants are
family households. The apartments are typically suburban, garden or townhouse
style units with one, two and three bedrooms. The units are generally
individually heated and cooled, with all appliances and wall-to-wall carpet.
Amenities normally include swimming pools, tennis courts, clubhouses and
playgrounds. Some of the apartment communities also have fitness centers,
volleyball courts, jacuzzis and racquet ball courts. The average cost for the
Trust's apartments, including all renovations and refurbishment costs, was
approximately $28,700 per unit at March 31, 1994. During the first quarter of
1994, apartment occupancy averaged 92.2% overall and 92.5% for the mature 13,832
units which were acquired prior to 1993.
The following table presents information concerning the Trust's apartment
properties.
<TABLE>
<CAPTION>
MORTGAGE AVERAGE
COST(1) DEBT(2) MONTHLY
DATE NO. OF (IN (IN RENT PER AVERAGE
LOCATION ACQUIRED UNITS MILLIONS) MILLIONS) UNIT(3) OCCUPANCY(4)
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
Beechwood Greensboro 12/22/93 208 $ 7.5 $ -- $529 91%
Bramblewood Goldsboro 12/31/84 188 4.4 0.7 401 98
Brynn Marr Jacksonville 12/31/84 196 5.2 -- 438 96
Canterbury Woods Charlotte 12/18/85 207 7.0 -- 432 83
Cedar Point Raleigh 12/18/85 168 7.3 -- 489 98
Cinnamon Ridge Raleigh 12/01/89 365 8.2 7.0 404 97
Colony Village New Bern 12/31/84 171 4.3 -- 381 95
Courtney Square Raleigh 07/08/93 200 6.4 -- 518 100
Cove at Lake Lynn Raleigh 12/01/92 225 7.3 -- 533 97
The Creek Wilmington 06/30/92 198 3.5 1.5 423 98
Emerald Bay Charlotte 02/06/90 250 7.2 -- 473 95
Forest Hills Wilmington 06/30/92 279 6.8 3.2 530 98
Grand Oaks Charlotte 05/01/84 243 7.0 -- 433 92
The Highlands Charlotte 01/17/84 176 4.7 -- 454 88
The Ledges Winston-Salem 08/13/86 239 6.6 -- 306 84
Liberty Crossing Jacksonville 11/30/90 286 6.0 1.8 396 97
Mill Creek Wilmington 09/30/91 184 5.8 -- 539 99
Park Green Raleigh 09/27/91 200 5.6 -- 509 100
Peppertree Charlotte 12/14/93 292 9.3 -- 510 95
The Shire (5) Raleigh 03/04/94 302 13.8 -- 613 94
Spring Forest Raleigh 05/21/91 404 11.3 -- 487 97
Summit on Park Charlotte 01/17/84 80 2.1 -- 479 86
Walnut Creek (6) Raleigh 05/17/94 576 24.9 -- -- --
Windsor Harbor Charlotte 01/13/89 200 6.2 -- 444 87
Woodland Hollow Charlotte 11/03/86 252 7.4 3.3 419 78
VIRGINIA
Azalea Richmond 12/31/84 156 3.9 -- 485 91
Bayberry Commons Portsmouth 04/07/88 192 5.0 -- 414 88
Courthouse Green Richmond 12/31/84 266 6.6 -- 459 90
Craig Manor Roanoke 11/06/87 108 3.2 -- 439 99
Eastwind Virginia Beach 04/04/88 200 6.7 -- 514 95
English Hills Richmond 12/06/91 576 15.9 -- 511 91
Hampton Court Alexandria 02/19/93 308 12.3 -- 714 94
Heather Lake Hampton 03/01/80 252 5.9 -- 520 96
Heritage Trace Newport News 06/30/89 200 4.7 3.9 378 95
Laurel Ridge Roanoke 05/17/88 216 4.0 3.0 320 97
Laurel Village Richmond 09/06/91 159 4.3 -- 546 97
Meadow Run Richmond 12/31/84 204 5.1 -- 444 94
Meadowdale Lakes Richmond 12/31/84 516 11.0 1.3 417 92
The Melrose Dumfries 12/11/85 370 8.2 5.3 438 97
Northview Roanoke 09/29/78 132 1.9 -- 406 97
Olde West Village Richmond 12/31/84(7) 502 15.6 4.0 506 85
Parkwood Court Alexandria 06/30/93 189 6.7 -- 638 87
River Road Terrace Petersburg 08/31/81 128 2.7 -- 408 100
Rollingwood Richmond 12/31/84 278 7.6 2.6 441 88
Timbercreek Richmond 08/31/83 160 3.5 -- 412 92
Towne Square Hopewell 08/27/85 76 1.8 1.3 382 98
Twin Rivers Hopewell 01/06/82 149 2.1 -- 375 97
Woodscape Newport News 12/29/87 296 9.7 -- 466 91
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE AVERAGE
COST(1) DEBT(2) MONTHLY
DATE NO. OF (IN (IN RENT PER AVERAGE
LOCATION ACQUIRED UNITS MILLIONS) MILLIONS) UNIT(3) OCCUPANCY(4)
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA
Bay Cove Clearwater 12/31/84 336 $ 10.2 $ -- $531 92%
Dover Village Orlando 03/31/93 296 10.4 -- 576 94
Foxcroft Tampa 01/28/93 192 5.1 -- 490 92
Lake Washington Downs Melbourne 09/24/93 312 6.5 -- 428 94
Lakeside North (8) Altamonte Springs 04/14/94 360 12.6 12.4 505 86
Lakewood Place (5) Tampa 03/11/94 346 12.0 -- 495 96
Orange Orlando Orlando 01/28/93 165 4.2 -- 468 89
Palm Grove (8) Tampa 04/15/94 244 5.9 -- 449 75
Pinebrook Clearwater 09/28/93 209 4.5 -- 478 93
Summit West Tampa 12/16/92 264 7.5 -- 495 99
Village at Old Tampa Bay Tampa 12/08/93 408 12.6 -- 550 78
SOUTH CAROLINA
Colonial Villa Columbia 09/16/92 296 6.9 -- 422 94
Country Walk Columbia 12/19/91 208 4.6 -- 459 84
Forestbrook Columbia 07/01/93 180 3.7 -- 419 87
Gable Hill Columbia 12/04/89 180 6.8 -- 532 93
Heatherwood Greenville 09/30/93 152 3.7 -- 434 91
Key Pines Spartanburg 09/25/92 241 5.0 -- 417 95
Patriot Place Florence 10/23/85 168 6.2 2.2 310 99
Plum Chase Columbia 01/04/91 300 8.2 7.0 454 91
Riverwind Spartanburg 12/31/93 194 7.2 -- 576 91
St. Andrews Commons Columbia 05/20/93 336 10.9 -- 517 96
GEORGIA
Colony of Stone Mountain Atlanta 06/12/90 404 11.3 -- 495 80
Crescent Square Atlanta 03/22/89 360 12.0 -- 432 92
Griffin Crossing (9) Griffin 06/09/94 272 9.0 -- -- --
Mill Creek Atlanta 11/11/88 224 7.8 -- 465 95
River Place (8) Macon 04/08/94 240 8.6 -- 508 97
Stanford Village Atlanta 09/26/89 135 4.1 2.1 496 100
TENNESSEE
Harbour Town Nashville 12/10/93 185 4.1 -- 417 99
The Lakes Nashville 09/15/93 256 7.4 -- 500 85
2131 Apartments Nashville 12/16/92 401 10.7 -- 487 96
MARYLAND
Braeland Commons Columbia 12/29/92 172 8.8 5.1 645 98
Eden Commons Columbia 12/29/92 232 12.1 8.7 654 93
Gatewater Landing Baltimore 12/16/92 264 8.5 -- 586 78
Total 20,254 $ 593.3 $ 76.4
</TABLE>
(1) Represents at March 31, 1994 the sum of the total acquisition cost of the
property plus the capitalized cost of improvements made subsequent to
acquisition, less allowance for possible investment losses.
(2) Represents at March 31, 1994 the outstanding principal balances of the
mortgage loans, exclusive of discounts.
(3) Represents the weighted average of rent charged during the quarter ended
March 31, 1994 for occupied apartments and rent asked for unoccupied apartments
at 100% occupancy.
(4) Represents economic occupancy during the quarter ended March 31, 1994
expressed as the ratio of actual rent collected to potential rent collectible at
final occupancy.
(5) These properties were acquired during March, 1994. Average rent and
occupancy data are for the month of May, 1994.
(6) This property was acquired in May, 1994. Average rent and occupancy data for
a full month under Trust management are not available.
(7) This property was acquired in two phases. The acquisition dates were
December 31, 1984 and August 27, 1991.
(8) These properties were acquired in April, 1994. Average rent and occupancy
data are for the month of May, 1994.
(9) This property was acquired in June, 1994. Average rent and occupancy data
for a full month under Trust management are not available.
14
<PAGE>
PROPOSED PORTFOLIO ACQUISITION
The Trust has contracted to acquire a portfolio of 25 apartment
communities containing 5,170 units in separate but related transactions
from certain affiliates of Clover Financial Corporation, a New Jersey
corporation, for an aggregate purchase price of approximately $162 million,
excluding closing costs. Two of the properties, Harris Pond and Royal Oaks,
have mortgage debt of $5.2 million and $6.5 million, respectively. The
following table sets forth certain information concerning the Portfolio
Acquisition.
<TABLE>
<CAPTION>
AVERAGE AVERAGE
NO. UNIT MONTHLY
OF YEAR SIZE RENT PER
LOCATION UNITS CONSTRUCTED (SQ. FT.) 1 BR 2 BR 3 BR UNIT(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
Excalibur Charlotte 240 1987 1,048 132 108 $532
Grove Park Raleigh 65 1970 1,083 9 44 12 506
Harris Pond Charlotte 170 1987 832 74 96 562
Mallard Green Charlotte 76 1985 836 32 44 591
VIRGINIA
Huntingwood Lynchburg 114 1976 918 36 32 46 481
Knolls of Newgate Fairfax 144 1972 892 40 104 634
FLORIDA
Marina Park North Miami 88 1974 943 76 12 665
SOUTH CAROLINA
Crossroads Columbia 622 1977-1984 683 382 240 404
Hampton Forest Greenville 130 1968 879 60 70 409
Hunting Ridge Greenville 152 1972 791 72 80 351
The Landing Greenville 224 1976 995 48 133 43 454
Overlook Greenville 237 1976 703 125 112 406
Park Columbia 292 1975-1977 696 172 120 403
St. Andrews Columbia 232 1972 1,131 48 152 32 517
Somerset Dorchester 240 1979 1,092 22 154 64 447
Waterford Columbia 268 1985 598 232 36 427
GEORGIA
Royal Oaks Savannah 228 1980 1,446 196 32 702
MARYLAND
Ellicott
Great Oaks City 300 1974 939 126 174 596
Holly Tree Waldorf 144 1973 786 36 108 685
Twin Coves Glen Burnie 132 1974 624 48 84 557
Woodside Glen Burnie 366 1966 909 117 249 588
ALABAMA
Indian Hills Anniston 140 1975 1,014 40 80 20 439
Three Fountains Montgomery 242 1973 1,097 76 136 30 477
DELAWARE
Dover Country Club Dover 224 1970 859 58 155 11 546
West Knoll Newark 100 1964 781 48 52 587
5,170 889 2,109 2,771 290
<CAPTION>
AVERAGE
OCCUPANCY(2)
<S> <C>
NORTH CAROLINA
Excalibur 94%
Grove Park 99
Harris Pond 95
Mallard Green 88
VIRGINIA
Huntingwood 95
Knolls of Newgate 83
FLORIDA
Marina Park 90
SOUTH CAROLINA
Crossroads 87
Hampton Forest 91
Hunting Ridge 91
The Landing 90
Overlook 89
Park 88
St. Andrews 93
Somerset 75
Waterford 89
GEORGIA
Royal Oaks 90
MARYLAND
Great Oaks 93
Holly Tree 92
Twin Coves 90
Woodside 90
ALABAMA
Indian Hills 88
Three Fountains 95
DELAWARE
Dover Country Club 92
West Knoll 93
</TABLE>
(1) Represents the weighted average of rent charged during the quarter
ended March 31, 1994 for occupied apartments and rent asked for
unoccupied apartments at 100% occupancy.
(2) Represents economic occupancy during the quarter ended March 31, 1994
expressed as the ratio of actual rent collected to potential rent
collectible at final occupancy.
15
<PAGE>
SHOPPING CENTERS AND OTHER PROPERTIES
The Trust owns approximately two million square feet of commercial property
space including 15 neighborhood and community shopping centers and four other
commercial properties. Commercial properties provide approximately 10% of the
Trust's rental income. Near the end of 1992, management of the Trust determined
that the Trust should devote substantially all of its resources to the apartment
business. Consequently, the Trust has decided not to acquire any additional
commercial properties. The Trust plans to dispose of most or all of its
commercial properties over the next few years. Although no formal plans have
been adopted, management intends to offer the Trust's seven Richmond, Virginia
shopping centers for sale sometime during the remainder of 1994. Effective April
1, 1993, the Trust engaged independent fee management companies to manage all
but three of its commercial properties. The use of outside commercial property
management has not resulted in any significant changes in operating costs.
During the first quarter of 1994, net operating income from the Trust's
commercial properties was $2.0 million which was $141,000, or 7.6%, higher than
in the comparable period of 1993.
CAPITAL STOCK OF THE TRUST
COMMON STOCK
The Trust has authority to issue 100,000,000 shares of Common Stock, of
which 41,722,902 shares were issued and outstanding as of May 24, 1994. Holders
of Common Stock are entitled to receive dividends when and as declared by the
Board of Directors. Holders of Common Stock have one vote per share and
non-cumulative voting rights, which means that holders of more than 50% of the
shares voting can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
directors. In the event of any voluntary or involuntary liquidation or
dissolution of the Trust, holders of Common Stock are entitled to share ratably
in the distributable assets of the Trust. Holders of Common Stock do not have
preemptive rights.
Covenants in its loan agreements with certain lenders restrict the payment
of distributions in excess of the sum of (i) current "cash flow," (ii) varying
additional amounts and (iii) the proceeds of Common Stock offerings subsequent
to various dates, all as defined in the particular loan agreement. The covenants
do not prohibit the Trust from paying distributions in order to continue its
qualification as a REIT under the Code.
PREFERRED STOCK
The Trust is authorized to issue 25,000,000 shares of Preferred Stock,
which is issuable without the vote of holders of Common Stock, for any corporate
purpose and for whatever consideration the Board of Directors deems appropriate,
in one or more series having varying voting rights, redemption and conversion
features, distribution (including liquidating distribution) rights and
preferences, and other rights, including rights of approval of specified
transactions, as may be determined by the Board of Directors in fixing series
characteristics. A series of Preferred Stock could be given more than one vote
per share and a series having preferential distribution rights could limit
Common Stock distributions and reduce the amount holders of Common Stock would
otherwise receive on dissolution of the Trust.
No Preferred Stock has been issued and, at present, the Board of Directors
has approved no specific financing or acquisition plans involving the issuance
of Preferred Stock and does not propose to fix the characteristics of any series
in anticipation of issuing shares of that series.
AFFILIATED TRANSACTIONS
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions " designed to deter uninvited takeovers of Virginia
corporations. These provisions, with several exceptions discussed below, require
approval of material acquisition transactions between a Virginia corporation and
any holder of more than 10% of any class of its outstanding voting shares (an
"Interested Shareholder ") by the holders of at least two-thirds of the
remaining voting shares. For three years following the time that the Interested
Shareholder becomes an owner of 10% of the outstanding voting shares, Virginia
corporations cannot engage in an Affiliated Transaction with such Interested
Shareholder without approval of two-thirds of the voting shares other than those
shares beneficially owned by the Interested Shareholder, and majority approval
of the "Disinterested Directors." At the expiration of the three year period,
the statute requires approval of Affiliated Transactions by two-thirds of the
voting shares other than those beneficially owned by the Interested Shareholder
absent an exception. The principal exceptions to the special voting requirement
apply to transactions proposed after the three year period has expired and
require either that the transaction be approved by a majority of the
corporation's Disinterested Directors or that the transaction satisfy the
fair-price requirements of the law.
16
<PAGE>
The Virginia Stock Corporation Act also provides that shares acquired in a
transaction that would cause the acquiring person's voting strength to cross any
of three thresholds (20%, 33%, or 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Trust. An acquiring person may require the Trust to
hold a special meeting of shareholders to consider the matter within 50 days of
its request.
REDEMPTION AND RESTRICTIONS ON TRANSFER
In order to preserve the Trust's status as a REIT as defined in the Code,
the Trust can redeem or stop the transfer of its shares. The Trust's Articles of
Incorporation provide that the Trust is organized to qualify as a REIT. Because
the Code provides that the concentration of more than 50% in value of the direct
or indirect ownership of its shares in five or fewer individual shareholders
during the last six months of any year would result in the disqualification of
the Trust as a REIT, the Articles of Incorporation provide that the Trust shall
have the power (i) to redeem that number of concentrated shares sufficient in
the opinion of the Board of Directors of the Trust to maintain or bring the
direct or indirect ownership of shares into conformity with the requirements of
the Code, and (ii) to stop the transfer of shares to any person whose
acquisition thereof would, in the opinion of the Trust's Board of Directors,
result in such disqualification. The per share redemption price of any shares
redeemed by the Trust pursuant to this provision shall be the last reported sale
price for the shares as of the business day preceding the day on which notice of
redemption is given. The Board of Directors of the Trust can require
shareholders to disclose in writing to the Trust such information with respect
to ownership of its shares as it deems necessary to comply with the REIT
provisions of the Code.
REIT QUALIFICATION
The Trust operates in a manner intended to qualify for treatment as a REIT
under the Code. In general, a REIT which distributes to its shareholders at
least 95% of its taxable income (other than net capital gain) for a taxable year
and which meets certain other conditions will not be subject to federal income
taxation on income (including net capital gain) distributed for that year. If
the Trust fails to qualify in any taxable year, it will be taxed for federal
income tax purposes as a corporation for that year and distributions to
shareholders will not be deductible by the Trust in computing its taxable
income. Under such circumstances, the Trust also will be disqualified from being
treated as a REIT under the Code for the ensuing four fiscal years. Failure to
qualify could result in the Trust's incurring indebtedness and perhaps
liquidating investments in order to pay the resultant taxes.
17
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a Purchase Agreement (the
"Purchase Agreement "), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters for whom Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Alex. Brown & Sons Incorporated, Dean Witter Reynolds
Inc., A.G. Edwards & Sons, Inc. and Scott & Stringfellow, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Trust, the number of shares of Common Stock set forth below opposite their
respective names. The Underwriters are committed to purchase all of such shares
if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................................................. 910,000
Alex. Brown & Sons Incorporated....................................................................... 910,000
Dean Witter Reynolds Inc. ............................................................................ 910,000
A.G. Edwards & Sons, Inc. ............................................................................ 910,000
Scott & Stringfellow, Inc............................................................................. 910,000
Bear, Stearns & Co. Inc............................................................................... 150,000
Davenport & Co. of Virginia, Inc...................................................................... 150,000
Goldman, Sachs & Co................................................................................... 150,000
Kidder, Peabody & Co. Incorporated.................................................................... 150,000
Legg Mason Wood Walker, Incorporated.................................................................. 150,000
Lehman Brothers Inc................................................................................... 150,000
Montgomery Securities................................................................................. 150,000
Morgan Stanley & Co. Incorporated..................................................................... 150,000
NatWest Securities Limited............................................................................ 150,000
PaineWebber Incorporated.............................................................................. 150,000
Prudential Securities Incorporated.................................................................... 150,000
Smith Barney Inc...................................................................................... 150,000
Wheat, First Securities, Inc.......................................................................... 150,000
Advest, Inc........................................................................................... 75,000
J.C. Bradford & Co.................................................................................... 75,000
Branch, Cabell and Company............................................................................ 75,000
Cowen & Company....................................................................................... 75,000
Craigie Incorporated.................................................................................. 75,000
Dain Bosworth Incorporated............................................................................ 75,000
Fahnestock & Co. Inc.................................................................................. 75,000
Ferris, Baker Watts, Incorporated..................................................................... 75,000
J.J.B. Hilliard, W.L. Lyons, Inc...................................................................... 75,000
Interstate/Johnson Lane Corporation................................................................... 75,000
Janney Montgomery Scott Inc........................................................................... 75,000
Johnston, Lemon & Co. Incorporated.................................................................... 75,000
Edward D. Jones & Co.................................................................................. 75,000
Kemper Securities, Inc................................................................................ 75,000
Morgan Keegan & Company, Inc.......................................................................... 75,000
Piper Jaffray Inc..................................................................................... 75,000
Raymond James & Associates, Inc....................................................................... 75,000
The Robinson-Humphrey Company, Inc.................................................................... 75,000
Tucker Anthony Incorporated........................................................................... 75,000
Utendahl Capital Partners, L.P........................................................................ 75,000
Total................................................................................... 8,000,000
</TABLE>
The Representatives of the Underwriters have advised the Trust that they
propose initially to offer the shares of Common Stock to the public at the
public offering price set forth on the cover of this Prospectus and to certain
dealers at such price less a concession not in excess of $.42 per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $.10 per share on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
18
<PAGE>
The Trust has granted the Underwriters an option exercisable within 30 days
after the date hereof to purchase up to 1,200,000 additional shares of Common
Stock to cover over-allotments, if any, at the initial public offering price,
less the underwriting discount set forth on the cover of this Prospectus, and,
with respect to any such shares issued after July 15, 1994, less an amount equal
to the distribution per share to be paid by the Trust on July 29, 1994. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage thereof which the number of shares to be purchased by it shown in the
foregoing table above bears to the 8,000,000 shares offered hereby.
The Trust and certain of its officers, directors and principal shareholders
have agreed that for a period of 90 days from the date of this Prospectus they
will not, without the prior written consent of the Representatives, offer, sell
or otherwise dispose of any shares of Common Stock, except for shares issued for
property acquisitions or grants of options or issuance of shares upon exercise
of options.
In the Purchase Agreement, the Trust has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
LEGAL OPINIONS
The legality of the Common Stock offered hereby is being passed upon for
the Trust by Hunton & Williams, Richmond, Virginia, and for the Underwriters by
Brown & Wood, New York, New York.
EXPERTS
The financial statements of the Trust incorporated by reference in its
annual report on Form 10-K for the year ended December 31, 1993 have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The combined historical summary of gross income and direct operating
expenses of Holly Tree Park Apartments, Knolls at Newgate and Mallard Green
Apartments, included in the Trust's Current Report on Form 8-K, dated May 26,
1994, incorporated by reference in this Prospectus has been audited by BDO
Seidman, independent certified public accountants, to the extent and for the
periods set forth in their report incorporated herein by reference, and are
incorporated herein in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting. The combined statement of
rental operations of Clover Financial Partnership Properties, included in the
Trust's Current Report on Form 8-K, dated May 26, 1994, incorporated by
reference herein, has been incorporated herein in reliance upon the report dated
May 19, 1994, of Alloy, Silverstein, Shapiro, Adams, Mulford & Co., independent
auditors, also incorporated by reference herein, and upon the authority of such
firm as experts in accounting and auditing. The statement of rental operations
of The Shire Apartments, included in the Trust's Current Report on Form 8-K,
dated April 15, 1994, incorporated by reference herein, has been incorporated
herein in reliance upon the report dated May 12, 1994, of L. P. Martin &
Company, P.C., independent auditors, also incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing. The
statement of rental operations of Lakewood Place Apartments, included in the
Trust's Current Report on Form 8-K, dated April 15, 1994, incorporated by
reference herein, has been incorporated herein in reliance upon the report dated
May 13, 1994, of L. P. Martin & Company, P.C., independent auditors, also
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing. The statements of rental operations of River Place
Apartments and Lakeside North Apartments, included in the Trust's Current Report
on Form 8-K, dated April 15, 1994, incorporated by reference herein, have been
incorporated herein in reliance upon the reports dated May 24, 1994, of L. P.
Martin & Company, P.C., independent auditors, also incorporated by reference
herein, and upon the authority of such firm as experts in accounting and
auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Trust with the Securities and Exchange
Commission (the "Commission ") under the Securities Exchange Act of 1934 (the
"Exchange Act") are hereby incorporated by reference in this Prospectus: (i) the
Trust's annual report on Form 10-K for the year ended December 31, 1993; (ii)
the Trust's quarterly report on Form 10-Q for the quarter ended March 31, 1994;
(iii) the Trust's Current Report on Form 8-K dated April 15, 1994; (iv) the
Trust's Current Report on Form 8-K dated May 17, 1994; (v) the Trust's Current
Report on Form 8-K dated May 26, 1994; and (vi) the description of the Common
Stock contained in the Trust's registration statement on Form 8-A dated April
19, 1990 filed under the Exchange Act, including any amendment or reports filed
for the purpose of updating such description. All documents filed by the Trust
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference herein.
19
<PAGE>
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document, as the case may be, which also is
or is deemed to be incorporated by reference herein, 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.
The Trust will provide on request and without charge to each person to whom
this Prospectus is delivered a copy (without exhibits) of any or all documents
incorporated by reference into this Prospectus. Requests for such copies should
be directed to United Dominion Realty Trust, Inc., 10 South 6th Street, Suite
203, Richmond, Virginia 23219-3802, Attention: Secretary (telephone
804/780-2691).
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. Reports, proxy statements and other information filed by the Trust
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 at its
Regional Offices located at 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661, and 7 World Trade Center, New York, New York 10048, 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 payments of the prescribed fees.
20
<PAGE>
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Pro Forma Financial Information (unaudited):
United Dominion Realty Trust, Inc.
Pro Forma Balance Sheet as of March 31, 1994...................................................................... F-2
Notes to Pro Forma Balance Sheet.................................................................................. F-3
Pro Forma Statement of Operations for the Three Months Ended
March 31, 1994.................................................................................................. F-4
Pro Forma Statement of Operations for the Year Ended
December 31, 1993............................................................................................... F-5
Notes to Pro Forma Statements of Operations....................................................................... F-6
</TABLE>
F-1
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITIONS
PREVIOUSLY
REPORTED ON
FORM 8-K
DATED APRIL
15, 1994
AND FORM 8-K
PORTFOLIO DATED
HISTORICAL (A) ACQUISITION MAY 17, 1994
<S> <C> <C> <C>
BALANCE SHEET
ASSETS
Real estate owned
Apartments............................................................. $532,227 $ 162,997(B) $ 46,086(G)
Shopping centers....................................................... 74,450
Office and Industrial.................................................. 4,593
611,270 162,997 46,086
Less accumulated depreciation.......................................... 97,150
514,120 162,997 46,086
Cash and cash equivalents................................................ 10,489
Other assets............................................................. 10,993
$535,602 $ 162,997 $ 46,086
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable................................................... $ 72,660 $ 11,700(C) $ 12,444(H)
Notes payable............................................................ 188,101 35,283(D) 33,642(H)
Accounts payable, accrued expenses and other............................. 7,259
Tenants' deposits and rents paid in advance.............................. 3,372
Distributions payable to shareholders.................................... 8,130
279,522 46,983 46,086
Shareholders' equity
Common stock, $1 par value; 60,000,000 shares authorized 41,703,785
shares
issued and outstanding (50,308,894 in pro forma)..................... 41,704 8,605(E)
Additional paid-in capital............................................. 302,981 107,409(F)
Notes receivable from officer shareholders............................. (4,096)
Distributions in excess of net income.................................. (84,509)
Total shareholders' equity............................................. 256,080 116,014 --
$535,602 $ 162,997 $ 46,086
<CAPTION>
PRO
FORMA
<S> <C>
BALANCE SHEET
ASSETS
Real estate owned
Apartments............................................................. $741,310
Shopping centers....................................................... 74,450
Office and Industrial.................................................. 4,593
820,353
Less accumulated depreciation.......................................... 97,150
723,203
Cash and cash equivalents................................................ 10,489
Other assets............................................................. 10,993
$744,685
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable................................................... $ 96,804
Notes payable............................................................ 257,026
Accounts payable, accrued expenses and other............................. 7,259
Tenants' deposits and rents paid in advance.............................. 3,372
Distributions payable to shareholders.................................... 8,130
372,591
Shareholders' equity
Common stock, $1 par value; 60,000,000 shares authorized 41,703,785
shares
issued and outstanding (50,308,894 in pro forma)..................... 50,309
Additional paid-in capital............................................. 410,390
Notes receivable from officer shareholders............................. (4,096)
Distributions in excess of net income.................................. (84,509)
Total shareholders' equity............................................. 372,094
$744,685
</TABLE>
F-2
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO PRO FORMA BALANCE SHEET
MARCH 31, 1994
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying pro forma balance sheet assumes the completion, as of
March 31, 1994, of (i) the sale of 8,000,000 shares of Common Stock at an
assumed price of $14.25 per share (the "Offering"), (ii) the proposed
acquisition of 25 apartment communities (the "Portfolio Acquisition"), (iii) the
acquisition of five apartment communities purchased in 1994 (previously reported
on Forms 8-K dated April 15, 1994 and May 17, 1994), (iv) the borrowing of
$93,069,000 and the issuance of 605,109 shares of Common Stock to the seller of
the Portfolio Acquisition at an assumed price of $13.70 per share (assumed
market price of $14.25 per share net of an agreed discount of $.55 per share)
necessary to fund a portion of the Portfolio Acquisition. In management's
opinion, all significant adjustments necessary to reflect these transactions
have been made. The pro forma balance sheet should be read in conjunction with
the Trust's audited financial statements for the year ended December 31, 1993
and its unaudited financial statements for the first quarter ended March 31,
1994.
The unaudited pro forma balance sheet is not necessarily indicative of what
the Trust's financial position would have been if the Offering and related
acquisitions had been consummated as of March 31, 1994, nor does it purport to
be indicative of the Trust's financial position in future periods.
2. ADJUSTMENTS TO THE PRO FORMA BALANCE SHEET
(A) Represents the Trust's historical balance sheet contained in the
Trust's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
(B) Represents the initial purchase price of $161,950,000 for the 25
properties proposed to be acquired in the Portfolio Acquisition plus estimated
closing costs of $1,047,000.
(C) Represents the assumption of two mortgage loans encumbering two
properties included in the Portfolio Acquisition as follows:
<TABLE>
<CAPTION>
LOAN INTEREST
PROPERTY NAME AMOUNT RATE
<S> <C> <C>
Harris Pond Apartments................................................... $5,200,000 8.75%
Royal Oaks Apartments.................................................... 6,500,000 8.50
</TABLE>
(D) Represents assumed additional borrowings of $35,283,000 necessary to
fund a portion of the Portfolio Acquisition.
(E) Represents the issuance of 8,000,000 shares in the Offering and the
issuance of 605,109 shares to the seller of the Portfolio Acquisition.
(F) Represents the net proceeds from the Offering and the value of the
consideration received for the shares issued to the seller of the Portfolio
Acquisition attributable to additional paid-in capital. In determining net
proceeds from the Offering, underwriting discounts and other offering costs
equal to 5.5% of gross proceeds, or $6,276,000, have been assumed.
(G) Represents the aggregate purchase price of $46,086,000 of three
apartment communities purchased on April 8, 1994, April 14, 1994, and May 17,
1994 as previously reported on Forms 8-K dated April 15, 1994 and May 17, 1994.
(H) Represents assumed additional borrowings of $33,642,000 on unsecured
notes payable and the assumption of $12,444,000 of tax-exempt bonds necessary to
fund the acquisitions of the properties in (G).
F-3
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITIONS
PREVIOUSLY
REPORTED ON
FORM 8-K DATED
APRIL 15, 1994 AND PRO
PORTFOLIO FORM 8-K DATED FORMA
HISTORICAL (A) ACQUISITION (B) MAY 17, 1994 (C) ADJUSTMENTS
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
INCOME
Property operations:
Rental income........................................... $ 26,706 $ 7,149 $2,443
Property expenses:
Utilities............................................. 2,712 737 121
Repairs & maintenance................................. 3,716 1,174 388
Real estate taxes..................................... 1,802 511 184
Property management................................... 921 357 106 $ (181)(E)
Other operating expenses.............................. 2,234 1,127 280 (139)(F)
Depreciation of real estate owned..................... 5,706 1,334(G)
17,091 3,906 1,079 1,014
Income from property operations........................... 9,615 3,243 1,364 (1,014)
Interest income........................................... 114
9,729 3,243 1,364 (1,014)
EXPENSES
Interest................................................ 4,655 1,600(I)
General and administrative.............................. 1,474
Other depreciation and amortization..................... 185
6,314 -- -- 1,600
Income before gains (losses) on investments............... 3,415 3,243 1,364 (2,614)
Gains (losses) on sale of investments.....................
Net income................................................ $ 3,415 $ 3,243 $1,364 $(2,614)
Net income per share...................................... $ 0.08
Distributions declared per share.......................... .195
Weighted average number of shares outstanding............. 41,688 8,605
<CAPTION>
PRO
FORMA
<S> <C>
STATEMENT OF OPERATIONS
INCOME
Property operations:
Rental income........................................... $36,298
Property expenses:
Utilities............................................. 3,570
Repairs & maintenance................................. 5,278
Real estate taxes..................................... 2,497
Property management................................... 1,203
Other operating expenses.............................. 3,502
Depreciation of real estate owned..................... 7,040
23,090
Income from property operations........................... 13,208
Interest income........................................... 114
13,322
EXPENSES
Interest................................................ 6,255
General and administrative.............................. 1,474
Other depreciation and amortization..................... 185
7,914
Income before gains (losses) on investments............... 5,408
Gains (losses) on sale of investments.....................
Net income................................................ $ 5,408
Net income per share...................................... $ .11
Distributions declared per share.......................... .195
Weighted average number of shares outstanding............. 50,293
</TABLE>
F-4
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITIONS
PREVIOUSLY
REPORTED ON
FORM 8-K DATED ACQUISITIONS
APRIL 15, 1994 AND PREVIOUSLY
FORM 8-K REPORTED ON PRO
PORTFOLIO DATED FORM 8-K DATED FORMA
HISTORICAL (A) ACQUISITION (B) MAY 17, 1994 (C) DECEMBER 31, 1993 (D) ADJUSTMENTS
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
INCOME
Property operations:
Rental income..................... $ 89,084 $28,345 $ 10,489 $ 9,424
Property expenses:
Utilities....................... 7,838 2,461 554 846
Repairs & maintenance........... 13,950 4,439 1,542 1,407
Real estate taxes............... 5,777 1,975 865 780
Property management............. 2,782 1,413 447 422 $ (863)(E)
Other operating expenses........ 7,512 4,489 1,296 1,552 (554)(F)
Depreciation of real estate
owned......................... 19,764 7,542(G)
57,623 14,777 4,704 5,007 6,125
Income from property operations..... 31,461 13,568 5,785 4,417 (6,125)
Interest income..................... 708 (438)(H)
32,169 13,568 5,785 4,417 (6,563)
EXPENSES
Interest.......................... 16,938 8,258(I)
General and administrative........ 3,349
Other depreciation and
amortization.................... 596
20,883 -- -- -- 8,258
Income before gains (losses) on
investments....................... 11,286 13,568 5,785 4,417 (14,821)
Gains (losses) on sale of
investments....................... (89)
Net income.......................... $ 11,197 $13,568 $ 5,785 $ 4,417 $ (14,821)
Net income per share................ $ 0.29
Distributions declared per share.... 0.70
Weighted average number of shares
outstanding....................... 38,202 8,605
<CAPTION>
PRO
FORMA
<S> <C>
STATEMENT OF OPERATIONS
INCOME
Property operations:
Rental income..................... $137,342
Property expenses:
Utilities....................... 11,699
Repairs & maintenance........... 21,338
Real estate taxes............... 9,397
Property management............. 4,201
Other operating expenses........ 14,295
Depreciation of real estate
owned......................... 27,306
88,236
Income from property operations..... 49,106
Interest income..................... 270
49,376
EXPENSES
Interest.......................... 25,196
General and administrative........ 3,349
Other depreciation and
amortization.................... 596
29,141
Income before gains (losses) on
investments....................... 20,235
Gains (losses) on sale of
investments....................... (89)
Net income.......................... $ 20,146
Net income per share................ $ .43
Distributions declared per share.... 0.70
Weighted average number of shares
outstanding....................... 46,807
</TABLE>
F-5
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND
THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying pro forma statements of operations assume the completion
of (i) the sale of 8,000,000 shares of Common Stock at an assumed price of
$14.25 per share (the "Offering"), (ii) the proposed acquisition of 25 apartment
communities (the "Portfolio Acquisition"), (iii) the issuance of 605,109 shares
of Common Stock to the seller of the Portfolio Acquisition at an assumed price
of $13.70 per share (assumed market price of $14.25 per share net of an agreed
discount of $.55 per share), (iv) the acquisition of five apartment communities
purchased in 1994 previously reported on Forms 8-K dated April 15, 1994 and May
17, 1994, and (v) the acquisition of eleven apartment communities previously
reported on Form 8-K dated December 31, 1993, at the beginning of each period
presented. In addition, such pro forma statements of operations also assume that
$23,640,000 of 7 year senior unsecured notes are outstanding for approximately 8
months for the year ended December 31, 1993 and 2 months for the first quarter
of 1994. In management's opinion, all significant adjustments necessary to
reflect these transactions have been made. The pro forma statements of
operations should be read in conjunction with the Trust's audited financial
statements for the year ended December 31, 1993 and its unaudited financial
statements for the three months ended March 31, 1994.
The unaudited pro forma statements of operations are not necessarily
indicative of what the Trust's results would have been for the three months
ended March 31, 1994 and the year ended December 31, 1993 if the Offering and
related acquisitions had been consummated at the beginning of each period
presented, nor do they purport to be indicative of the results of operations or
financial position in future periods.
2. ADJUSTMENTS TO THE PRO FORMA STATEMENTS OF OPERATIONS
(A) Represents the Trust's historical statements of operations contained in
its Quarterly Report on Form 10-Q for the three months ended March 31, 1994 and
its Annual Report on Form 10-K for the year ended December 31, 1993.
(B) Represents actual rental income and related operating expenses of the
proposed Portfolio Acquisition, as reported on Form 8-K dated May 26, 1994.
(C) Represents rental income and related operating expenses of five
apartment acquisitions, as previously reported on Forms 8-K dated April 15, 1994
and May 17, 1994.
(D) Reflects the net adjustments required to allow for a full year of
rental income and operating expenses for the year ended December 31, 1993, for
the Trust's acquisitions reported on Form 8-K during 1993.
(E) Reflects the net decrease in property management fees for the Portfolio
Acquisition and the Trust's 1993 and 1994 acquisitions. The Trust internally
manages its apartment properties at a cost of approximately 3% of rental income.
(F) Reflects the net decrease in insurance expense to reflect that the
Trust insures its apartments for approximately $107 per unit less than the
historical insurance expense of the Portfolio Acquisition.
(G) Represents the net adjustments to depreciation expense as outlined in
the table below. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets. Buildings have been depreciated
over 35 years and other improvements over 15 years based upon an assumed
allocation of the estimated initial cost of the Portfolio Acquisition.
<TABLE>
<CAPTION>
3 MONTHS ENDED 12 MONTHS ENDED
MARCH 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Increase related to the Portfolio
Acquisition $1,022,000 $ 4,089,000
Increase related to the acquisitions
previously reported on Form 8-K dated
April 15, 1994 and Form 8-K dated May
17, 1994 312,000 1,943,000
Increase related to the acquisitions
previously reported on Form 8-K dated
December 31, 1993 -- 1,510,000
Total $1,334,000 $ 7,542,000
</TABLE>
F-6
<PAGE>
(H) Reflects the reduction of interest income associated with the use of
short-term investments to acquire the properties at assumed interest rates in
effect at the time of each respective acquisition for the year ended December
31, 1993, for the Trust's 1993 acquisitions reported on Form 8-K during 1993.
(I) Reflects the additional interest expense associated with the increase
in bank lines of credit and the assumption of tax-exempt bonds on one of the
1994 property acquisitions and of two mortgage notes assumed to have been
incurred by the Trust to purchase (i) the Portfolio Acquisition at interest
rates and maturities which are currently available to the Trust, (ii) the 1994
apartment acquisitions through May 17, 1994 at interest rates under the Trust's
bank lines of credit on the date of purchase, and (iii) the 1993 apartment
acquisitions made by the Trust at interest rates and maturities that were
available at the time of each acquisition as follows:
<TABLE>
<CAPTION>
3 MONTHS ENDED 12 MONTHS ENDED
MARCH 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Increase related to the Portfolio
Acquisition $ 883,000 $ 3,531,000
Increase related to the acquisitions
previously reported on Form 8-K
dated April 15, 1994 and Form 8-K dated
May 17, 1994 717,000 3,184,000
Increase related to the acquisitions
previously reported on Form 8-K
dated December 31, 1993 -- 1,543,000
Total $1,600,000 $ 8,258,000
</TABLE>
F-7
<PAGE>
APPENDIX
TO
ELECTRONIC FORMAT
RULE 424(b)(4) PROSPECTUS
DATED JUNE 14, 1994
OF
UNITED DOMINION REALTY TRUST, INC.
(FILE NO. 33-53839)
Pursuant to Item 304 of Regulation S-T, the following appendix
lists and describes certain graphic and image information included
in the foregoing Rule 424(B)(4) Prospectus of United Dominion
Realty Trust, Inc.
Location Description
Inside front cover of Prospectus Under caption "Existing
Trust Properties,"
subcaptioned exterior
photographs of apartment
buildings in The Creek
Apartments, Wilmington,
North Carolina, Stanford
Village Apartments,
Atlanta, Georgia, Hampton
Court Apartments,
Alexandria, Virginia, and
St. Andrews Apartments,
Columbia, South Carolina,
and common amenities in
Orange Orlando
Apartments, Orlando,
Florida (children's
playground), and English
Hills Apartments,
Richmond, Virginia
(tennis court).
Inside front cover of Prospectus Under caption "Proposed
Portfolio Acquisition
Properties" (footnoted as
follows: "No assurance
can be given that the
proposed Portfolio
Acquisition will be
consummated. See 'Recent
Developments.'") ,
subcaptioned exterior
photographs of apartment
buildings in Overlook
Apartments, Greenville,
South Carolina,
Crossroads Apartments,
Columbia, South Carolina,
Harris Pond Apartments,
Charlotte, North
Carolina, Dover Country
Club Apartments, Dover,
Delaware and Royal Oaks
Apartments, Savannah,
Georgia.
Inside front cover of Prospectus Vertical bar graph
illustrating growth in
distributions declared
per share from 1984
though 1994 (annualized
at current indicated
annual rate). The
following explanation of
this bar graph is
juxtaposed: "For each
year except 1984, a
significant portion of
the distributions
consisted of a non-
taxable return of
capital. See 'Price Range
of Common Stock and
Distributions -
Distributions.'"
Inside front cover of Prospectus Line graph comparing
total return on $1,000
investment in Common
Stock of the Trust with
the S&P 500 Index and the
NAREIT Equity REIT Index
from 1983 - 1993.
Inside front cover of Prospectus Vertical bar graph
illustrating growth in
apartments at December 31
owned from 1984 through
1994. The following
parenthetical explanation
of this bar graph is
juxtaposed: "1994 gives
effect to proposed
acquisition of Portfolio
Acquisition Properties."
The explanation is
footnoted as follows: "No
assurance can be given
that the proposed
Portfolio Acquisition
will be consummated. See
'Recent Developments.'"
Inside front cover of Prospectus Pie chart illustrating
numbers of apartment
units owned by state of
location. The following
parenthetical explanation
of this bar graph is
juxtaposed: "1994 gives
effect to proposed
acquisition of Portfolio
Acquisition Properties."
The explanation is
footnoted as follows: "No
assurance can be given
that the proposed
Portfolio Acquisition
will be consummated. See
'Recent Developments.'"
Inside back cover of Prospectus Map showing approximate
locations of properties,
with existing properties
and Portfolio Acquisition
properties indicated in
differing colors. The
map is titled "Trust
Apartment Properties
(Gives effect to proposed
acquisition of Portfolio
Acquisition Properties)"
and the title is
footnoted as follows: "No
assurance can be given
that the proposed
Portfolio Acquisition
will be consummated. See
'Recent Developments.'"
