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FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 3
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
The undersigned registrant hereby amends the following items, financial
statements and other portions of its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 as set forth in the pages attached hereto.
Consolidated Balance Sheet
The Consolidated Balance Sheet at September 30, 1995 was revised to show "Real
Estate Held for Disposition", as a separate line item.
Consolidated Statements of Operations
The Consolidated Statements of Operations for the three months and the nine
months ended September 30, 1995 were revised to reflect $1.7 million impairment
loss originally recorded in the fourth quarter of 1995. In addition, the
Consolidated Statements of Operations were revised to be consistent with the
format in the Annual Report on Form 10- K for the year ended December 31, 1995.
Consolidated Statements of Cash Flow and Shareholders Equity
The Statements were revised to reflect the $1.7 million impairment loss on real
estate held for disposition recorded in the third quarter of 1995.
Notes to Consolidated Financial Statements
Note 1 was updated to reference Note 9. Note 10 was added to discuss Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of" and the $1.7 million impairment loss recorded during
the third quarter of 1995.
Management's Discussion of Financial Condition and Operations
Management's Discussion of Financial Condition and Operations was revised as
follows: (i) the reference to the dividend payout ratio under the caption
"Financial Condition" in Management's Discussion of Financial Condition and
Operations has been deleted, (ii) the paragraph discussing General and
Administrative expense for the third quarter of 1995 versus the third quarter of
1994 was updated to include an explanation of the decrease in general and
administrative expense for the third quarter of 1995, (iii) the last paragraph
under Results of Operations for the Nine Month Periods Ended September 30, 1995
and 1994 discussing Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of" was revised to
reflect the impairment loss in the third quarter of 1995, (iv) results of
operations was revised to account for the $1.7 million impairment loss on real
estate held for disposition, and (v) deleted the reference to net operating
income.
Exhibit 12
Exhibit 12 was revised to reflect the change in the Consolidated Statements of
Operations and the reference to Funds from Operations was deleted.
UNITED DOMINION REALTY TRUST, INC.
(Registrant)
By: /s/ JERRY A. DAVIS
Jerry A. Davis, Vice President
Corporate Controller
================================================================================
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Assets
Real estate owned: (Notes 7 and 8)
Apartments $ 1,070,441 $ 928,758
Shopping centers 1,722 74,237
Office and industrial buildings 4,608 4,604
----------- -----------
1,076,771 1,007,599
Less accumulated depreciation 130,228 120,341
----------- -----------
946,543 887,258
Real Estate held for disposition (Note 10) 41,630 --
Cash and cash equivalents 7,031 7,261
Receivable from underwriters (Note 5) 57,354 --
Other assets (Note 8) 27,417 17,394
----------- -----------
$ 1,079,975 $ 911,913
=========== ===========
Liabilities and Shareholders' Equity
Mortgage notes payable (Note 3) $ 166,732 $ 158,449
7 1/4% Notes due April 1, 1999 75,000 75,000
8 1/2% Debentures due September 15, 2024 150,000 150,000
Other notes payable (Note 4) 134,992 143,215
Accounts payable, accrued expenses and
other liabilities 22,984 18,459
Distributions payable to common shareholders 12,610 9,822
----------- -----------
562,318 554,945
Shareholders' equity:
Preferred stock, no par value; 25,000,000 shares authorized: 9 1/4% Series A
Cumulative Redeemable Preferred Stock (liquidation preference of $25
per share), 4,200,000 shares issued and outstanding
(no shares outstanding in 1994) (Note 6) 105,000 --
Common stock, $1 par value; 100,000,000
shares authorized, 56,045,232 shares issued
and outstanding (50,355,640 in 1994) (Note 5) 56,045 50,356
Additional paid-in capital 477,186 410,797
Notes receivable from officer shareholders (5,959) (5,991)
Distributions in excess of net income (114,794) (98,194)
Unrealized gain on securities available for sale (Note 8) 179 --
----------- -----------
Total shareholders' equity 517,657 356,968
----------- -----------
$ 1,079,975 $ 911,913
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------------------------------------------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $49,842 $39,526 $143,082 $95,905
Interest and other income 496 155 1,031 541
------------ -------------- -------------- -------------
50,338 39,681 144,113 96,446
EXPENSES
Rental expenses:
Utilities 3,700 3,072 10,627 7,928
Repairs and maintenance 8,429 6,166 22,493 14,607
Real estate taxes 3,457 2,611 10,115 6,475
Property management (Note 9) 1,785 1,543 4,153 3,596
Other rental expenses 4,417 3,488 12,631 8,206
Depreciation of real estate owned 9,996 7,931 28,545 19,807
Interest 9,974 7,580 30,563 18,202
General and administrative (Note 9) 989 1,080 3,771 3,566
Other depreciation and amortization 292 215 835 581
Impairment loss on real estate held for disposition (Note 10) 1,700 -- 1,700 --
------------ -------------- -------------- -------------
44,739 33,686 125,433 82,968
Income before gains (losses) on sales of investments
and extraordinary item 5,599 5,995 18,680 13,478
Gains (losses) on sales of investments (Note 8) 205 (20) 4,844 (20)
------------ -------------- -------------- -------------
Income before extraordinary item 5,804 5,975 23,524 13,458
Extraordinary item -- early extinguishment of debt -- -- -- (89)
------------ -------------- -------------- -------------
Net income 5,804 5,975 23,524 13,369
Dividends to preferred shareholders (Note 6) 2,428 -- 4,209 --
------------ -------------- -------------- -------------
Net income available to common shareholders $ 3,376 $ 5,975 $ 19,315 $13,369
Net income per common share $ 0.07 $ 0.12 $ 0.37 $ 0.30
============ ============== ============== =============
Weighted average number of common shares outstanding 51,883 50,153 51,597 44,814
</TABLE>
See accompanying notes.
3
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 23,524 $ 13,369
Adjustments to reconcile net income to
net cash provided by operating activities:
(Gains) losses on sales of real estate owned (Note 8) (4,844) 20
Extraordinary item -- 89
Depreciation and amortization 29,380 20,388
Impairment loss on real estate held for disposition (Note 10) 1,700 --
Adoption of SFAS No. 112 "Employers' Accounting
for Postemployment Benefits (Note 9) -- 450
Accrual for estimated employment and other taxes (Note 9) 500 --
Changes in operating assets and liabilities:
Increase in operating liabilities 1,780 7,255
Increase in operating assets (Note 5) (5,642) (2,751)
--------- ---------
Net cash provided by operating activities 46,398 38,820
--------- ---------
INVESTING ACTIVITIES:
Acquisitions of real estate, net of debt and
liabilities assumed (Note 7) (120,516) (306,864)
Capital expenditures (23,889) (12,676)
Net proceeds from sales of real estate
owned (Note 8) 20,060 1,943
Principal payments received on mortgage
notes receivable 2,156 102
--------- ---------
Net cash used in investing activities (122,189) (317,495)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from the public sale of
preferred stock (Note 6) 101,478 --
Net proceeds from issuance of common
stock (Note 5) 18,278 115,343
Increase in mortgages and notes payable 25,496 256,329
Net borrowings (repayments) of short-term bank borrowings 12,250 (28,650)
Cash distributions paid to preferred
shareholders (Note 6) (2,185) --
Cash distributions paid to common shareholders (33,126) (25,214)
Scheduled mortgage principal payments (1,405) (948)
Payments on notes and non-scheduled
mortgage principal payments (45,225) (18,188)
--------- ---------
Net cash provided by financing activities 75,561 298,672
--------- ---------
Net increase (decrease) in cash and cash equivalents (230) 19,997
Cash and cash equivalents, beginning of period 7,261 5,773
--------- ---------
Cash and cash equivalents, end of period $ 7,031 $ 25,770
========= =========
See accompanying notes.
</TABLE>
4
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Preferred Stock,
Common Stock, $1 Par Value $25 liquidation preference
-------------------------- ---------------------------
Number Number
of Shares Amount of Shares Amount
------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 50,355,640 $50,356 - $ -
Sale of common shares issued in direct institutional sale (Note 5) 1,360,000 1,360 -
Sale of preferred shares issued in public offering (Note 6) 4,200,000 105,000
Sale of common shares issued in public offering (Note 5 ) 4,250,000 4,250
Exercise of share options 79,036 79 -
Principal repayments on officer stock loans -
Shares issued through Employee Stock Purchase Plan 556 -
Net income -
Preferred stock dividends declared
Common stock dividends declared ($.675 per share) -
Unrealized gain on securities available for sale at September 30, 1995 -
----------- ------- --------- --------
Balance at September 30, 1995 56,045,232 $56,045 4,200,000 $105,000
=========== ======= ========= ========
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Additional Receivable Distributions
Paid-in from Officer in Excess of
Capital Shareholders Net Income
-------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1994 $410,797 ($5,991) ($98,194)
Sale of common shares issued in direct institutional sale (Note 5) 16,452
Sale of preferred shares issued in public offering (Note 6) (3,576)
Sale of common shares issued in public offering (Note 5 ) 52,954
Exercise of share options 552
Principal repayments on officer stock loans 32
Shares issued through Employee Stock Purchase Plan 7
Net income 23,524
Preferred stock dividends declared (4,209)
Common stock dividends declared ($.675 per share) (35,915)
Unrealized gain on securities available for sale at September 30, 1995
--------- -------- ----------
Balance at September 30, 1995 $477,186 ($5,959) ($114,794)
========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
gain on
securities Total
available Shareholders'
for sale Equity
--------------------------
<S> <C> <C>
Balance at December 31, 1994 $ - $356,968
Sale of common shares issued in direct institutional sale (Note 5) 17,812
Sale of preferred shares issued in public offering (Note 6) 101,424
Sale of common shares issued in public offering (Note 5 ) 57,204
Exercise of share options 631
Principal repayments on officer stock loans 32
Shares issued through Employee Stock Purchase Plan 7
Net income 23,524
Preferred stock dividends declared (4,209)
Common stock dividends declared ($.675 per share) (35,915)
Unrealized gain on securities available for sale at September 30, 1995 179 179
--------- ---------
Balance at September 30, 1995 179 $517,657
========= =========
</TABLE>
5
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
Notes to Consolidated Financial Statements
September 30, 1995
(Unaudited)
1. The accompanying consolidated financial statements include the
accounts of the Trust and its wholly-owned subsidiaries. All
significant inter-company accounts have been eliminated in
consolidation. The financial information furnished reflects all
adjustments which are necessary for a fair presentation of financial
position at September 30, 1995 and results of operations for the
interim periods ended September 30, 1995 and 1994. Except as
described in Note 9, such adjustments are of a normal and recurring
nature. The interim results presented are not necessarily
indicative of results that can be expected for a full year. The
accompanying financial statements should be read in conjunction
with the audited financial statements and related notes appearing in
the Trust's 1994 Annual Report.
2. Certain previously reported amounts have been reclassified to conform
with current financial statement presentation.
3. Mortgage notes payable consist of conventional mortgage notes payable
and "bond indebtedness" which represents mortgages or deeds of trust
granted to secure tax-exempt bonds issued to finance the acquisition
and/or rehabilitation of certain of the Trust's properties.
Conventional mortgage notes payable included 17 loans encumbering 11
properties at September 30, 1995 and 23 loans encumbering 17
properties at September 30, 1994. Mortgage notes payable aggregating
$45.4 million at September 30, 1995 had fixed rates of interest
ranging from 7.00% to 9.625% (weighted average interest rate of
8.03%). Bond indebtedness aggregating $109.2 million and encumbering
16 properties at September 30, 1995 had fixed rates of interest
ranging from 5.98% to 8.50% (weighted average interest rate of 6.83%).
At September 30, 1995, the Trust had variable rate bond indebtedness
encumbering four properties aggregating $17.7 million (weighted
average interest rate of 5.23%).
During the nine months ended September 30, 1995, the Trust assumed two
mortgage notes payable in connection with the acquisitions of certain
apartment properties which includes (i) a $3.3 million mortgage note
payable bearing interest at 7.6% (fixed) maturing in November, 2002,
and (ii) a $9.5 million variable rate tax-exempt bond issue ($3.9
million of which has been defeased) which will be refunded in whole or
in part in March, 1996. The Trust completed separate tax-exempt bond
refundings on two properties totaling $15.8 million during the second
quarter of 1995. The bonds bear interest at 6.75% and have a final
maturity in 2025. During this same period, the Trust prepaid six
mortgage notes payable aggregating approximately $10.2 million with
interest rates ranging from 9.0% to 12.5% (weighted average interest
rate of 10.1%).
6
<PAGE>
4. A summary of unsecured notes payable at September 30, 1995 and 1994
is as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
---- ----
<S> <C> <C>
Commercial Banks
Borrowings outstanding under revolving
credit facilities (a) $ 26,400 --
Variable rate note due November, 1994 (b) -- $ 10,000
Insurance Companies-Senior Unsecured Notes
7.98% due March, 1997-2003 52,000 52,000
9.57% due July, 1996 35,000 35,000
7.89% due March, 1996 10,000 10,000
7.57% due March, 1995 -- 10,000
8.72% due November, 1995-1998 8,000 10,000
Other (c) 3,592 4,195
-------- --------
$134,992 $131,195
Senior Unsecured Notes - Other
7 1/4% Notes due April 1, 1999 75,000 75,000
8 1/2% Debentures due September 15, 2024 150,000 150,000
------- -------
$359,992 $356,195
======= =======
</TABLE>
a. The weighted average interest rate at September 30, 1995 was
7.25%. This debt was repaid on October 5, 1995. (See Note 5).
b. The note had an original maturity date of November, 1994 which
was extended to June 30, 1995. The note was prepaid in April,
1995.
c. Includes a $3.5 and $3.1 million deferred gain at September 30,
1995 and 1994, respectively, from two interest rate hedge
transaction that expired during the third quarter of 1994.
5. In February, 1995, the Trust sold 1,360,000 shares of its common stock
to a group of institutional investors at a price of $131/8 per share.
Net proceeds of $17.8 million were used to curtail then existing bank
debt.
On September 28, 1995, the Trust sold 4,250,000 shares of common stock
in a public offering at $14.25 per share. Net proceeds of the offering,
after deducting underwriting commissions and direct offering costs,
aggregated approximately $57.2 million, and are reflected in the
accompanying balance sheet under the caption "Receivable from
underwriters" at September 30, 1995. Proceeds from the common stock
sale were received on October 5, 1995 at which time $26.8 million was
used to repay then existing bank debt. The remaining net proceeds have
been temporarily invested in short-term money market investments and
will be used to fund apartment acquisitions. In mid-October, 1995, the
underwriters purchased an additional 300,000 shares of common stock
7
<PAGE>
pursuant to their over-allotment option. Net proceeds of approximately
$4.0 million were received by the Trust on October 18, 1995.
6. In April, 1995, the Trust sold 4,200,000 shares of 9 1/4% Cumulative
Redeemable Preferred Stock in a public offering at $25 per share
("preferred stock"). Net proceeds of the offering, after deducting
underwriting commissions and direct offering costs, aggregated
approximately $101.5 million. Approximately $33.1 million of these
proceeds was used to repay then existing bank debt and approximately
$65.7 million was used to fund the acquisition of a portfolio of nine
apartment communities. The remaining net proceeds were temporarily
invested in short-term money market investments and were subsequently
used to fund additional apartment acquisitions.
Dividends on the preferred stock were cumulative from the date of
issuance and payable on a quarterly basis commencing on July 15, 1995,
at an annual dividend rate of $2.3125 per share. The preferred stock is
redeemable on or after April 24, 2000 solely from the proceeds from the
sale of additional capital stock (common or preferred). The preferred
stock has no stated maturity and is not subject to any sinking fund or
mandatory redemption and is not convertible into any other securities
of the Trust.
7. During the third quarter of 1995, the Trust acquired five apartment
communities containing 1,153 units at a total cost of $37.5 million,
including closing costs. The third quarter acquisitions were as
follows:
<TABLE>
<CAPTION>
Year Purchase
Name/Location Units Built Price
------------- ----- ----- -----
<S> <C> <C> <C>
Mallards of Wedgewood
Lakeland, FL 240 1985 $7.8
Forest Lake of Oyster Point
Newport News, VA 296 1986 9.6
Marble Hill
Richmond, VA 253 1973 6.0
University Club
Ft. Lauderdale, FL 164 1988 8.4
Andover Place
Orlando, FL 200 1988 5.7
----- -----
1,153 $37.5
</TABLE>
During the nine month period ended September 30, 1995, the Trust
acquired 17 apartment communities containing 3,580 units at a total
cost of $133.0 million, including closing costs.
8. For financial reporting purposes, the Trust recognized an aggregate
$205,000 gain on the sale of a shopping center and an outparcel of land
at a second shopping center. The shopping center sale was structured to
qualify as a like-kind exchange under Section 1031
8
<PAGE>
of the Internal Revenue Code, so the related capital gain will be
deferred for federal income tax purposes.
The Trust recognized a $4.6 million gain ($.09 per share) during the
second quarter of 1995 on the sale of four shopping centers to First
Washington Realty Trust, Inc. Total consideration of approximately $20
million included cash of approximately $12.4 million and 358,000 shares
of First Washington's 9.75% Series A Cumulative Participating Preferred
Stock, recorded at $7.7 million ($21.50 per share). The disposition of
two of the shopping centers was structured to qualify as tax deferred
exchanges pursuant to Section 1031 of the Internal revenue Code of
1986, as amended (the "Code"), which will enable the Trust to defer,
for income tax purposes, approximately $4 million of related capital
gains. On the sale of the remaining two centers, the Trust will
recognize an approximate $900,000 capital gain for income tax purposes.
For financial reporting purposes, the First Washington securities are
treated as "investment securities available-for-sale" and are included
under the caption "Other Assets" in the accompanying balance sheet.
Available-for-sale securities are stated at fair value, with unrealized
gains and losses reported as a separate component of shareholders'
equity.
For the nine month period, the Trust sold two apartment properties
containing 202 units for $6.4 million, both of which were acquired in
1994 as part of the Clover Portfolio. No significant book gain or loss
was recognized on either sale. One of the transactions was structured
to qualify as a like-kind exchange pursuant to Section 1031 of the
Code.
9. General and administrative expenses for the nine month period ended
September 30, 1995, include approximately $204,000 associated with an
unsuccessful business combination with another apartment company.
Negotiations were terminated in May, 1995.
At the beginning of 1994, the Trust adopted the provisions of SFAS No.
112 "Employers' Accounting for Postemployment Benefits". The cumulative
effect of this accounting change was to increase general and
administrative expense and decrease net income by $450,000 or $.01 per
share for the 1994 periods.
As a result of an Internal Revenue Service examination, property
management expenses for the 1995 periods include a $500,000 accrual for
estimated employment and other taxes associated with employee occupied
apartment units for the 1993 and 1994 tax years.
10. In March, 1995, the FASB issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows are not sufficient to recover
the assets' carrying amount. The statement requires that impairment
losses be recognized for long-lived assets to be disposed of when
the fair value of the asset less the estimated cost to sell is less
than the carrying value of that asset measured at the time
management commits to the sale or disposal. The Trust will opt for
the early adoption of Statement No. 121 in the fourth quarter of 1995.
At the end of October, 1995, the Trust executed a letter of intent
to sell five shopping centers at an aggregate purchase price of
$28.4 million. Closing is expected to occur during the first quarter
of 1996. The Trust recorded a 1.7 million impairment loss on real
estate held for disposition during the third quarter of 1995 associated
with management's decision to sell a shopping center at a discount as
a part of a portfolio transaction. The other four centers are expected
to be sold at modest gains.
Real estate held for disposition included in the Consolidated Balance
Sheet in the amount of $41.6 million includes: (i) one apartment
community in the amount of $6.0 million, (ii) seven shopping centers
aggregating $33.7 million, and (iii) two parcels of undeveloped land
aggregating $1.9 million. These properties are carried at the lower of
net book value or fair value less estimated cost to dispose.
9
<PAGE>
Form 10-Q
Quarter Ended September 30, 1995
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATIONS
Funds from operations (FFO) is defined as income before gains (losses)
on sales investments and extraordinary items (computed in accordance with
generally accepted accounting principles) plus real estate depreciation, less
preferred dividends and after adjustment for significant non-recurring items,
if any. 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.
In early 1995, the National Association of Real Estate Investment
Trusts ("NAREIT") adopted a White Paper recommending certain changes to the
calculation of FFO. The Trust has implemented these recommendations and has
restated FFO for 1994 to conform with the revised definition set forth above.
The impact of adopting the NAREIT recommendations was to reduce FFO by
approximately $363,000 and $1,053,000, respectively, for the quarter and the
nine months ended September 30, 1995, and $285,000 and $805,000, respectively,
for the quarter and the nine months ended September 30, 1994.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
Third quarter 1995 rental income was $49.8 million compared to $39.5
million in the third quarter of 1994, an increase of $10.3 million or 26.1%.
Net income available to common shareholders for the third quarter totaled
$3.4 million compared to $6.0 million reported in last year's third quarter. On
a per share basis, net income per common share decreased from $.12 for the
third quarter of 1994 to $.07 in the third quarter of 1995 primarily due to
depreciation expense on newer apartment acquisitions and a $1.7 million
impairment loss on real estate held for disposition during the third quarter of
1995. Funds from operations increased 10.3% from $13.9 million last year to
$15.4 million in the current year's third quarter.
The Trust's 1994 acquisitions made the largest contribution to the
reported increases; however, 1995 acquisitions and improved results from the
core portfolio of mature apartments (those owned since the beginning of 1994)
also had a positive impact on third quarter 1995 results. For the 17,916 mature
apartment units (74 communities), economic occupancy was 94.6% in the current
quarter compared to 95.2% for the third quarter last year. Rental revenue at
these properties grew by 4.1%, operating expenses increased 3.8% and the
operating expense ratio decreased .1% to 44.3%. For the remaining 14,746
apartment units (61 complexes), acquired since January 1, 1994, economic
occupancy averaged 93.3% during the third quarter
10
<PAGE>
and the operating expense ratio was 42.0%. For all of the Trust's 32,662 units,
economic occupancy was 94.0%, and the operating expense ratio was 43.3% for the
third quarter of 1995. During the third quarter last year, the 27,547 units then
owned had economic occupancy of 94.3% and operating expense ratio of 43.7%.
For the third quarter of 1995 versus the third quarter of 1994:
o Interest expense increased approximately $2.4 million as the Trust had
more debt outstanding on average in 1995 than in 1994. On a per share
basis, interest expense increased $.04.
o Depreciation of real estate owned increased $2.1 million primarily from
the portfolio expansion that has occurred during the last year.
o General and administrative expense, which includes corporate expenses,
decreased approximately $91,000 or 8.4%. Expenses associated with
abandoned property acquisitions, management bonus expense
and construction administration expenses were all lower in the 1995
quarter
o Property management expenses increased $242,000. Property management
expenses for the third quarter of 1995 include a $500,000 accrual for
estimated employment and other taxes associated with employee occupied
apartment units for the 1993 and 1994 tax years, as a result of the
completion of an Internal Revenue Service examination.
o Gains (losses) on the sales of real estate owned includes the
recognition, for financial reporting purposes, an aggregate $205,000
gain on the sale of a shopping center and an outparcel of land at a
second shopping center. The shopping center sale was structured to
qualify as a like-kind exchange under Section 1031 of the Internal
Revenue Code, so the related capital gain will be deferred for Federal
income tax purposes.
o Net income available to common shareholders decreased $2,599. Net
income available to common shareholders for the third quarter of 1995
includes a $2.4 million preferred stock dividend not included in last
year's results.
o An impairment loss on real estate held for disposition of $1.7 million
was recorded in the third quarter of 1995 associated with management's
decision to sell a shopping center at a discount as part of a portfolio
transaction.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
For the first nine months of 1995, the Trust reported increases over
the comparable 1994 period in rental income, net income and funds from
operations. The majority of the reported increases were attributable to the
Trust's apartment acquisitions since the beginning of 1994. The performance of
the Trust's 17,916 mature apartments contributed to the increases with economic
occupancy to 95.0% in the current year compared to 93.8% for the first nine
months last year. Rental revenues at these properties grew by 5.2% and
operating expenses increased approximately 1.0%, decreasing the operating
expense ratio 1.8% to 42.8%. For the remaining 14,746
11
<PAGE>
apartment units acquired by the Trust since the beginning of 1994, economic
occupancy averaged 92.9% during the first nine months of 1995 and operating
expenses were 41.5% of revenues. For the Trust's 32,662 units owned at September
30, 1995, economic occupancy was 94.1% and the operating expense ratio was 42.2%
for the first nine months of 1995 compared to 93.6% and 44.0%, respectively, for
the 27,547 units owned at September 30, 1994.
For the first nine months of 1995 versus the first nine months of 1994:
o Interest expense increased by approximately $12.4 million ($.19 per
share) reflecting various debt financings completed since the beginning
of 1994, including: (i) the assumption of mortgage notes payable, (ii)
the issuance of tax-exempt bond financings, (ii) the completion of a
$75 million public offering of 7 1/4% Senior Notes in April, 1994, and
(iv) the completion of a $150 million public offering of 8 1/2%
Debentures in September 1994.
o Depreciation of real estate owned totaled $28.5 million versus $19.8
million in 1994. The increase of $8.7 million reflects the portfolio
expansion that has occurred during the past year.
o General and administrative expense increased approximately $205,000 or
5.7%. The increase includes a $204,000 charge associated with merger
negotiations with another apartment company that were terminated in
May, 1995.
o Property management expenses increased approximately $557,000. Property
management expenses for the 1995 period include a $500,000 accrual for
estimated employment and other taxes associated with employee occupied
apartment units for the 1993 and 1994 tax years, as a result of the
completion of an Internal Revenue Service examination.
o Gains (losses) on the sales of real estate owned includes (i) the
recognition of an aggregate $205,000 gain on the sale of a shopping
center and an outparcel of land at a second shopping center and (ii)
the sale of four Richmond area shopping centers in two separate
transactions with First Washington Realty Trust, Inc. on June 30, 1995
and recognized $4.6 million of aggregate book gains on the sales of
real estate owned. Total consideration of approximately $20 million
included cash of approximately $12.4 million and 358,000 shares of
First Washington's 9.75% Series A Cumulative Participating Preferred
Stock recorded by the Trust as "investment securities
available-for-sale" in the amount of $7.7 million ($21.50 per share).
These sales are part of the Trust's intent to liquidate its commercial
properties over time. Commercial properties now comprise approximately
5% of real estate owned. The sale of two of the shopping centers were
structured as tax deferred exchanges which will enable the Trust to
defer approximately $4 million of capital gain for income tax purposes.
On the other two centers, the Trust will recognize approximately
$900,000 of capital gains for Federal income tax purposes. The Trust
sold two apartment communities, both of which were acquired as part of
the
12
<PAGE>
Clover Portfolio in 1994. No significant book gain or loss was
recognized on the sale of either property.
o Net income available to common shareholders increased $5.9 million as a
result of the following: (i) $4.8 million of aggregate gains on the
sale of real estate owned recognized during 1995, (ii) the increase in
mature apartment net operating income of $3.5 million, and (iii) the
positive impact of the significant portfolio expansion that has
occurred during the last twelve months. These increases were offset by
the $1.7 million impairment loss on real estate held for disposition
recorded in the third quarter of 1995 in association with management's
decision to sell a shopping center at a discount as part of a portfolio
transaction.
Management believes that the Trust's operating results for the fourth
quarter of 1995 will show continued improvement over the comparable period last
year reflecting the continued positive impact of the Trust's 1994 and 1995
acquisitions. During 1994, the Trust's mature apartment economic occupancy
improved steadily through August and then stabilized between 95% an 96% during
the remainder of the year. Mature apartment operating results improved during
each succeeding quarter last year. Thus, year to year improvement in quarterly
mature apartment operating results should be more moderate in the fourth quarter
of 1995. Consequently, higher rent growth will be more important to improved
fourth quarter results than occupancy gains. Management believes that the
Trust's operating results should continue to benefit over the next few years
from a number of factors including (i) the contribution of the large volume of
units acquired since 1994 and expected to be acquired during the remainder of
1995, and (ii) continued strong apartment markets as a result of anticipated job
growth and resultant household formation in the Southeast.
The Trust expects to close on separate sales of two shopping centers during
the fourth quarter of 1995 which will result in a gain, for financial reporting
purposes of approximately $1.3 million.
In March, 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount. The statement
requires that impairment losses be recognized for long-lived assets to be
disposed of when the fair value of the asset less the estimated cost to sell is
less than the carrying value of that asset measured at the time management
commits to the sale or disposal. The Trust will opt for the early adoption of
Statement No. 121 in the fourth quarter of 1995. At the end of October, 1995,
the Trust executed a letter of intent to sell five shopping centers at an
aggregate purchase price of $28.4 million. Closing is expected to occur during
the first quarter of 1996. The Trust recorded a $1.7 million impairment loss on
real estate held for disposition during the third quarter of 1995 associated
with management's decision to sell a shopping center at a discount as a part of
a portfolio transaction. The other four centers are expected to be sold at
modest gains.
FINANCIAL CONDITION
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, the Trust has sought to retain a greater portion of its cash
flow. The Trust utilizes a variety of primarily external financing sources to
fund its acquisition program. The Trust has frequently
13
<PAGE>
utilized its lines of credit to finance these expenditures and has subsequently
replaced any short-term bank debt so incurred with longer term debt or equity.
At the beginning of 1995, the Trust had approximately $7.3 million of
cash and cash equivalents and $89.35 million of available and unused bank lines
of credit. In February, 1995, the Trust sold 1.36 million shares of common stock
at $131/8 per share to a group of institutional investors. Net proceeds of
approximately $17.8 million were used to curtail then existing bank debt. In
April, 1995, the Trust sold 4.2 million shares of 9 1/4% Cumulative Redeemable
Preferred Stock at $25 per share. Net proceeds of the offering, after deducting
underwriting commissions and direct offering costs aggregated approximately
$101.5 million. A portion of the proceeds were used to retire short-term bank
debt and to acquire the High Portfolio in May, 1995. The remaining proceeds were
utilized for additional apartment acquisitions and renovations. On September 28,
1995, the Trust sold 4,250,000 shares of common stock in a public offering at
$14.25 per share. Net proceeds of the offering, after deducting underwriting
commissions and direct offering costs, aggregated approximately $57.2 million.
Proceeds from the stock sale were received on October 5, 1995, at which time
$26.8 million was used to curtail then existing bank debt. The remaining net
proceeds have been temporarily invested in short-term money market investments
and will be used to fund apartment acquisitions during the fourth quarter of
1995. In mid-October, 1995, the underwriters exercised their over-allotment
option and purchased an additional 300,000 shares. Net proceeds of approximately
$4.0 million were received by the Trust on October 18, 1995.
During the third quarter of 1995, the Trust assumed two mortgage notes
payable in connection with the acquisitions of certain apartment properties
which includes (i) a $3.3 million mortgage note payable bearing interest at 7.6%
(fixed rate) maturing November 15, 2002, and (ii) a $9.5 million variable rate
tax-exempt bond issue ($3.9 million of which has been defeased) which will be
refunded in whole or in part in March, 1996. During the second quarter of 1995,
the Trust completed separate tax-exempt bond refundings on two properties
totaling $15.8 million. The bonds bear interest at 6.75% and have a final
maturity in 2025. During this same period, the Trust prepaid six mortgage notes
payable aggregating $10.2 million with a weighted average interest rate of
10.1%.
In July, 1995, the Trust entered into a $50 million (notional amount)
fixed pay forward starting swap agreement with a major Wall Street investment
banking firm in order to reduce the interest rate risk associated with the
anticipated refinancing of fixed rate debt maturing in 1996. The transaction
allowed the Trust to lock-in a ten year Treasury rate of 6.544% on or before
July 15, 1996. The Trust anticipates unwinding the interest rate swap
transaction upon refinancing of the $50 million debt in 1996. Any gain or loss
from this transaction will be recognized over the term of the new debt issue.
During the third quarter of 1995, the Trust acquired five apartment
communities (1,153 units) at a total cost of approximately $37.5 million,
including closing costs. These acquisitions include (i) a 240 unit garden
apartment community in Lakeland, Florida, for $7.8 million ($32,600/unit), all
cash, (ii) a 296 unit garden apartment community in Newport News, Virginia, for
$9.6 million ($32,600/unit), all cash, (iii) a 164 unit garden and townhouse
apartment community in Fort Lauderdale, Florida for $8.4 million,
($51,100/unit), all cash, (iv) a 253 unit townhouse apartment community in
Richmond, Virginia for $6.0 million, ($23,600/unit), subject
14
<PAGE>
to a 7.6% first mortgage in the amount of $3.3 million, and (v) a 200 unit
garden apartment community in Orlando, Florida for $5.7 million, ($28,300/unit)
subject to approximately $9.5 million of tax-exempt housing bonds encumbering
the property ($3.9 million of which has been defeased).
The Trust's liquidity and capital resources are believed to be more
than adequate to meet its cash requirements for the foreseeable future.
15
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
Form 10-Q
Quarter Ended September 30, 1995
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
(a) The exhibits listed on the accompanying index to exhibits
are filed as part of this quarterly report.
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
16
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
EXHIBIT INDEX
Item 6 (a)
References to pages under the caption "Location" are to sequentially
numbered pages of the manually signed original of this Form 10-Q, and references
to exhibits, forms, or other filings indicate that the form or other filing has
been filed, that the indexed exhibit and the exhibit referred to are the same
and that the exhibit referred to is incorporated by reference.
<TABLE>
<CAPTION>
Exhibit Description Location
------- ----------- --------
<S> <C> <C>
3(a)(i) Restated Articles of Incorporation Exhibit 3 to the Trust's Quarterly Report on
Form 10-Q for the quarter ended June 30,
1992
3(a)(ii) Amendment of Restated Articles Exhibit 6(a)(2) to the Trust's Form 8-A
of Incorporation Registration Statement dated April 10, 1990
3(a)(iii) Amendment of Restated Articles Exhibit 1(c) to the Trust's Form 8-A
of Incorporation Registration Statement dated April 24, 1995
3(b) By-Laws Exhibit 4(c) to the Trust's Form S-3
Registration Statement (Registration No. 33-
44743) filed with the Commission on
December 31, 1991
4(i)(a) Specimen Common Stock Exhibit 4(i) to the Trust's Annual Report
Certificate on Form 10-K for the year ended December
31, 1993
4(i)(b) Specimen Certificate for Shares Exhibit 1(e) to the Trust's Form 8-A
of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995
Redeemable Preferred Stock
4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(l) to the Trust's Form
8-A November 7, 1991, between the Registration Statement dated
Trust and Aid Association for Lutherans April 19, 1990
4(ii)(c) Note Purchase Agreement dated Exhibit 6(c)(3) to the Trust's Form 8-A
as February 19, 1992, between Registration Statement dated April 19, 1990
the Trust and Principal Mutual
Life Insurance Company
17
<PAGE>
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Trust's Form 8-A
as of January 15, 1993, between Registration Statement dated April 19, 1990
the Trust and CIGNA Property
and Casualty Insurance Company,
Connecticut General Life Insurance
Company, Connecticut General Life
Insurance Company, on behalf of
one or more separate accounts,
Insurance Company of North
America, Principal Mutual Life
Insurance Company and Aid
Association for Lutherans
4(ii)(f)(1) Indenture dated as of April 1, 1994, Exhibit 4(ii)(f)(1) to the Trust's
between the Trust and NationsBank Quarterly Report on Form 10-Q for
of Virginia, N.A., as Trustee the quarter ended March 31, 1994
4(ii)(f)(2) Resolution of the Board of Directors Exhibit 4(ii)(f)(2) to the Trust's
of the Trust establishing terms of Quarterly Report on Form 10-Q for
7 1/4% Notes due April 1, 1999 the quarter ended March 31, 1994
4(ii)(f)(3) Form of 7 1/4% Notes due Exhibit 4(ii)(f)(3) to the Trust's
April 1, 1999 Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994
4(ii)(f)(4) Resolution of the Board of Exhibit 4 (ii)(f)(4) to the Trust's
the Trust establishing terms of Quarterly Report on Form 10-Q for
the 8 1/2% Debentures due September quarter ended September 30, 1994
15, 2024
4(ii)(f)(5) Form of 8 1/2% Debentures Exhibit 4 (ii)(f)(5) to the Trust's
due September 15, 2024 Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994
4(ii)(g) Credit Agreement dated as of Exhibit 6 (c)(6) to the Trust's
December 15, 1994 between the Form 8-A Registration Statement
Trust and First Union National Bank dated April 19, 1990 of
Virginia
The Trust agrees to furnish to the Commission on request a copy of any
instrument with respect to long-term debt of the Trust or its subsidiary the
total amount of securities authorized under which does not exceed 10% of the
total assets of the Trust.
18
<PAGE>
10(i) Employment Agreement between Exhibit 10(v)(i)to Form 10-K for
the Trust and John P. McCann the year ended December 31, 1982.
dated October 29, 1982
10(ii) Employment Agreement between Exhibit 10(v)(ii) to Form 10-K for
the Trust and James Dolphin, the year ended December 31, 1982.
dated October 29, 1982.
10(iii) Employment Agreement between Exhibit 10(iii) to Form 10-K for the
The Trust and Barry M. Kornblau, for the year ended December 31, 1990.
dated January 1, 1991.
10(iv) 1985 Stock Option Plan, Exhibit B to the Trust's definitive
as amended proxy statement dated April 13, 1992.
10(v) 1991 Stock Purchase and Loan Exhibit 10(v) to Form 10-K for the
Plan year ended December 31, 1991.
12 Computation of Ratio of Earnings Exhibit 12 to this Form 10-Q
to Combined Fixed Charges and included herein
Preferred Stock Dividends
</TABLE>
21 The Trust has the following subsidiaries, all of which are
wholly owned:
The Commons of Columbia, Inc., a Maryland corporation
UDRT of North Carolina, L.L.C., a North Carolina limited
liability company
UDRT of Alabama, Inc., an Alabama corporation
UDR at Marble Hill, L.L.C., a Virginia limited
liability company
United Dominion Realty, L.P., a limited partnership
United Dominion Residential, Inc., a Virginia corporation
UDRT of Virginia, Inc., a Virginia corporation
19
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
Form 10-Q
Quarter Ended September 30, 1995
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
UNITED DOMINION REALTY TRUST, INC.
Date: November 13, 1995 /s/ James Dolphin
James Dolphin, Senior Vice President
Chief Financial Officer
Date: November 13, 1995 /s/ Jerry A. Davis
Jerry A. Davis, Vice President
Corporate Controller
20
United Dominion Realty Trust, Inc.
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1994 1995 1994 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income before extraordinary item $5,975 $5,804 $13,458 $23,524
Add:
Portion of rents representative
of the interest factor 43 53 121 143
Interest on indebtedness 7,580 9,974 18,202 30,563
Adoption of SFAS No. 112 "Employers' Accounting for
Postemployment Benefits" -- -- 450 --
---------- ---------- ---------- ----------
Earnings $13,598 $15,831 $32,231 $54,230
Fixed charges and preferred stock dividend:
Interest on indebtedness $7,580 $9,974 $18,202 $30,563
Portion of rents representative
of the interest factor 43 53 121 143
---------- ---------- ---------- ----------
Fixed charges 7,623 10,027 18,323 30,706
---------- ---------- ---------- ----------
Add:
Preferred stock dividend -- 2,428 -- 4,209
---------- ---------- ---------- ----------
Combined fixed charges and preferred stock dividend $7,623 $12,455 $18,323 $34,915
========== ========== ========== ==========
Ratio of earnings to fixed charges 1.78 x 1.58 x 1.76 x 1.77 x
Ratio of earnings to combined fixed charges
and preferred stock dividend 1.78 1.27 1.76 1.55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<CASH> 7,031
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,771
<PP&E> 1,118,401
<DEPRECIATION> 130,228
<TOTAL-ASSETS> 1,079,975
<CURRENT-LIABILITIES> 0
<BONDS> 526,724
<COMMON> 56,045
0
105,000
<OTHER-SE> 356,612
<TOTAL-LIABILITY-AND-EQUITY> 1,079,975
<SALES> 143,082
<TOTAL-REVENUES> 144,113
<CGS> 0
<TOTAL-COSTS> 60,019
<OTHER-EXPENSES> 34,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,563
<INCOME-PRETAX> 18,680
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,524
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
