FORM 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 2
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 Annual Report on Form 10-K for the year
ended December 31, 1995 as set forth in the pages attached hereto. The entire
Annual Report on Form 10-K for the year ended December 31, 1995, including those
items not amended is included in this amendment.
ITEM 1. Business
Item 1 has been revised as follows:
Amendment No. 1
(i) the reference to the dividend payout ratio has been deleted
Amendment No. 2
(ii) the word "dividends" has been replaced with the word "distributions", (iii)
the discussion regarding environmental liabilities has been revised, and (iv)
additional disclosure regarding partnership redemption rights has been added.
ITEM 2. Properties
Amendment No. 2
The property table has been revised to add average square feet and average
rental rates for the year ended December 31, 1995 and disclosure regarding net
effective rents.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Amendment No. 2
Item 5 has been revised to add the following information: (i) distributions
required for the Company to maintain its status as a REIT for 1995 and (ii)
portion of 1995 distributions that represents a return of capital, ordinary
income and capital gains.
ITEM 6. Selected Financial Data
Amendment No. 1
Selected Financial Data has been revised as follows: (i) the line item
"Impairment loss on real estate held for disposition" has been deleted and (ii)
the line item "Income before gains (losses) on investments and extraordinary
item" has been changed to "Income before gains (losses) on sales of investments
and extraordinary item".
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Amendment No. 1
Management's Discussion and Analysis of Financial Condition and Results of
Operations has been revised as follows:
(i) Liquidity and Capital Resources has been moved to begin the discussion,
(ii) references to net operating income have been deleted,
Amendment No. 2
(iii) the word "dividends" has been replaced by the word "distributions", (iv)
additional disclosure regarding market and credit risk for financial instruments
has been added, and (iv) the paragraph under Results of Operations discussing
Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" has been revised.
ITEM 8. Consolidated Statements of Operations
Amendment No. 1
The Consolidated Statements of Operations have been revised to move the expense
line items of Interest, General and administrative, Other depreciation and
amortization, and Impairment loss on real estate held for disposition, directly
under the caption "Expenses". Also, the line items "Income before gains (losses)
on investments and extraordinary items" and "Gains (losses) on sales of real
estate" have been changed to "Income before gains (losses) on sales of
investments and extraordinary items" and "Gains (losses) on sales of
investments", respectively.
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ITEM 8. Notes to Consolidated Financial Statements
Amendment No. 2
Note 1 "Real estate assets and depreciation", Note 2 "Real Estate Owned" and
Note 11 "Unaudited Summarized Consolidated Quarterly Financial Data" were
revised to reflect the recognition of a $1.7 million impairment loss in the
third quarter of 1995, (originally recorded in the fourth quarter of 1995) and
the line item "Income from property operations" was changed to "Income before
gains (losses) on sales of investments and extraordinary item".
ITEM 11. Executive Compensation
Amendment No. 2
The table setting forth option grants in the last fiscal year has been added.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Amendment No. 2
The table setting forth beneficial ownership has been revised.
UNITED DOMINION REALTY TRUST, INC.
(Registrant)
By: /s/ Jerry A. Davis
Jerry A. Davis, Vice President & Corporate Controller
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UNITED DOMINION REALTY TRUST, INC.
TABLE OF CONTENTS
PAGE
PART I.
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security-Holders 13
PART II.
Item 5. Market for Registrant's Common Equity and Related 15
Stockholder Matters
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial 17
Condition and Results of Operation
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on 22
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the 23
Registrant
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial 23
Owners and Management
Item 13. Certain Relationships and Related Transactions 23
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and 24
Reports on Form 8-K
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Part I
Item 1. Business
United Dominion Realty Trust, Inc., a Virginia corporation, and its
subsidiaries (collectively, the "Company") is a self-administered equity real
estate investment trust ("REIT"), formed in 1972, whose business is devoted to
one industry segment, the ownership and operation of income-producing real
estate, primarily apartment communities located in the southeastern U.S. (the
"Southeast"). The Company is headquartered in Richmond, Virginia with divisional
offices in Richmond, Atlanta, Georgia, and Orlando, Florida, and regional
offices in the previously mentioned cities plus Columbia, Maryland, Raleigh,
North Carolina, and Nashville, Tennessee. The Company has approximately 1,100
associates as of March 15, 1996. The Company is a fully integrated real estate
company with acquisition, development and asset and property management
capabilities. The Company acquires, upgrades and operates its properties
with the goals of maximizing its funds from operations ("FFO") (defined as
income before gains [losses] on investments and extraordinary items
[computed in accordance with generally accepted accounting principles] plus
real estate depreciation, less preferred dividends and after adjustment for
significant nonrecurring items, if any) and quarterly distributions to
shareholders, while building equity primarily through real estate
appreciation.
At the beginning of 1991, the Company embarked on a major expansion of
its apartment portfolio in an effort to take advantage of unique buying
opportunities resulting from the real estate credit crisis. This enabled the
Company to (i) acquire more stable apartment properties having high occupancy
levels and not requiring substantial renovation, and (ii) enter into new markets
including the Baltimore/Washington area, central and south Florida, Nashville
and Memphis, Tennessee. The Company's acquisition strategy focuses on acquiring
two types of apartment communities: (i) near Class A properties built since 1980
where the investment (purchase price plus planned improvements) represents a
significant discount to replacement cost and (ii) well-located communities built
in the late 1960s or 1970s that can be upgraded and repositioned for the longer
term. In 1995, the Company purchased 23 apartment communities with 5,142
apartment homes for approximately $195 million. This includes 9 apartment
communities with 1,596 apartment homes acquired in a portfolio purchase for
$65.7 million, including closing costs. As of March 15, 1996, the Company's
portfolio of income-producing real estate consisted of 154 properties including
144 apartment complexes, 6 shopping centers, and 4 other properties. A
geographic distribution of the Company's portfolio of apartment communities
held for investment is included in Item 2, "Properties".
The Company is operated so as to qualify as a real estate investment
trust under the applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify, the Company must meet certain tests which,
among other things, require that its assets consist primarily of real estate,
its income be derived primarily from real estate, and at least 95% of its
taxable income be distributed to its shareholders. Because the Company qualifies
as a REIT, it is generally not subject to Federal income taxes.
The Company manages its properties directly, rather than through
outside property management firms. During 1995, the cost of internal property
management of the Company's apartment properties was approximately 2.6% of rents
collected versus the 4-5% fee typically charged by independent fee management
companies in the Company's region. In determining its cost of self management,
the Company considers all direct and indirect costs associated with the internal
property management function.
Near the end of 1992, management of the Company determined that the
Company should devote substantially all of its resources to the apartment
business. During 1994, the Company sold one shopping center and during 1995 the
Company sold seven shopping centers. As of the end of 1995, six of the Company's
remaining seven shopping centers were under contract to be sold. There is no
assurance that these sales transactions will be consummated. Although no formal
plans which would commit the Company for divestiture have been made, the
Company hopes to substantially liquidate its commercial properties over time
as opportunities arise.
A significant aspect of the Company's investment strategy has been to
concentrate its investments within the Southeast. The Company currently owns
properties in the seven coastal states from Delaware to Florida plus Tennessee
and Alabama. This strategy of geographically focusing on one region, has enabled
management to regularly inspect each property and to monitor developments in
local real estate markets. The Company is a significant apartment owner in 15
Southeast markets with each market averaging approximately 2,000 apartment
homes. The Company's strategy is to establish a dominant presence in each of
these markets in order to:
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(bullet) Be a local market leader.
(bullet) Improve operating efficiencies in the purchase of good and services.
(bullet) Reduce the cost of community management.
(bullet) Generate new sources of revenue from services marketed
to residents.
(bullet) Reduce costs and add revenues from utility deregulation.
(bullet) Build stronger local organizations which are conducive to
growing and retaining associates.
The Company will continue to grow principally through acquisitions.
However, given its size, as well as its objective to be a dominant owner in its
larger markets, management believes that it is important that the Company have
some development capability. During 1995, the Company began building its
prototype apartment building as a second phase to Clear Run Apartments in
Wilmington, North Carolina. The Company plans to build this prototype as a
second phase at four other communities in 1996. The Company also plans to do a
ground up development of 360 apartment homes in a suburb of Nashville.
As a qualified REIT, the Company distributes a substantial portion of
its cash flow to its shareholders in the form of distributions. Over the
past several years, the Company has sought to retain a greater portion of its
cash flow. For 1995, the Company's cash flow from operating activities exceeded
cash distributions paid to common shareholders by approximately $20.7 million.
The Company utilizes a variety of primarily external financing sources to fund
new acquisitions, property renovations and expansions, major capital
improvements and balloon debt payments. The Company has frequently utilized its
bank lines of credit to temporarily finance these expenditures and has
subsequently replaced the short-term bank debt with longer term debt or
equity. During 1995 the Company recognized cash proceeds from sales of
real estate owned of $23.5 million. Property sales should continue to be a
funding source in the future.
During 1995 the Company raised approximately $218 million
externally. This included $78.7 million from the sale of common stock in
February, September and October and $101.5 million from the April sale of
4,200,000 shares of 9 1/4% Series A Cumulative Redeemable Preferred Stock ($25
per share liquidation preference value) ("Preferred Stock"). Also during 1995,
the Company completed new tax-exempt housing bond financings or assumed
such bond financings and conventional mortgage notes in connection with certain
acquisitions in the aggregate amount of approximately $38.0 million.
In the past, the Company utilized fixed rate mortgage debt to finance
its growth. As the Company's capital base has broadened over the past several
years primarily through its sale of common stock in seven of the last nine
years, its financial strength and credit standing have improved. The Company's
senior debt is currently rated BBB+ by Standard & Poor's and Baal by Moody's. As
a result of its investment grade debt ratings, the Company has used and expects
to continue to use unsecured debt as its primary debt funding source. The
Company also uses secured debt financing but to a much lesser extent and only
(i) when such financing takes the form of tax-exempt housing bonds or (ii) in
connection with an acquisition when existing mortgage financing is in place that
either is closed to prepayment or cannot be repaid at a reasonable cost.
At December 31, 1995, the Company had $70 million of revolving credit
facilities with four commercial banks plus $33.5 million of additional available
lines of credit with three of these banks. The Company will seek to further
expand these credit arrangements during 1996. At December 31, 1995, the Company
had $18.4 million of borrowings outstanding under the revolving credit
facilities and no borrowings outstanding under its lines of credit.
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At the end of 1995, the apartment portion of the Company's portfolio
included 141 complexes having a total of 34,224 apartment homes and constituting
95.8% of the Company's real estate owned, at cost. During 1995, the Company
acquired 23 apartment complexes, having a total of 5,142 apartment homes, a
16.9% increase in the number of apartment homes owned. During 1995, 1994, and
1993, apartments provided approximately 96%, 93% and 89% respectively, of the
Company's rental income. The Company's apartment communities consist primarily
of upper middle to moderate income complexes which make up the broadest segment
of the apartment market. Management believes that well located apartments offer
the Company a good combination of current income and longer term equity growth.
Although there is no known move toward rent control in any of the markets in
which the Company now owns apartments, should rent control legislation be
enacted, the Company's ability to raise rents to cover increases in operating
expenses might be impaired. While the Company has been largely unaffected by
military cutbacks and base closures, the effect of future defense cuts on the
Company's region is unknown. As the Company has expanded beyond Virginia and
North Carolina, it has attempted to avoid markets where the exposure to reduced
defense spending is believed to be high. The Company has one property, Indian
Hills in Anniston, Alabama, which caters to Fort McClellan which was included in
the list of military base closings announced by the Defense Department in
February, 1995.
Management expects the Company's apartment business to continue to be
stable during the next two to three years. Apartment markets in the Company's
region in 1994 and 1995 generally benefitted from the combination of job growth
which led to strong growth in the number of renter households and only modest
apartment construction. Beginning in mid-year 1994 and lasting through mid-year
1995, physical occupancy of the Company's apartments steadily increased.
However, occupancy trended downward beginning in August, 1995 and continued to
decline albeit slowly through year end. Physical occupancy at the Company's
apartment properties averaged 93.9% for December, 1995. Management believes that
apartment markets within the Southeast will remain in balance over the next few
years if construction activity remains at 1994 and 1995 levels. Because the
Company's apartment occupancy has stabilized at approximately 94% at the
beginning of 1996, it is anticipated that the Company will benefit more from
higher rent growth in 1996 and 1997 than from occupancy gains.
It is widely believed by those who closely follow the industry that the
next few years will be a period of consolidation for REITs. Prior to 1990,
United Dominion was the only major publicly held REIT focusing almost
exclusively on apartment investments. Since then, a number of new multifamily
REITs have been formed. According to the National Association of Real Estate
Investment Trusts (NAREIT), there were more than 35 apartment REITs as of
February 29, 1996. It is believed that some of these REITs may be forced to seek
to be acquired by larger, better capitalized REITs with superior access to the
capital markets, such as the Company. If consolidation occurs, then the Company
expects to participate in the process as an acquirer of other apartment REITs
when such transactions are accretive to FFO earnings and can enhance dividend
growth and shareholder value.
At December 31, 1995, commercial properties, primarily shopping
centers, constituted the remaining 4% of the Company's real estate owned at
cost. During 1995, 1994, and 1993, commercial properties provided 4%, 7%, and
11%, respectively, of the Company's rental income. The commercial portfolio has
become a non-material portion of the Company's total portfolio.
In most of the Company's markets, the competition for residents among
properties is very intense. Some competing properties are larger and/or newer
than the Company's properties and offer features for prospective residents not
offered by properties owned by the Company. The competitive situation of each
property varies and intensifies as additional properties are constructed.
The Company expects to continue to aggressively acquire additional
apartment properties within the Southeast during 1996. When it is in the market
for new acquisitions, the Company competes with numerous other investors,
including REITs, individuals, partnerships, corporations, pension funds,
syndicators, insurance companies, foreign investors, and other real estate
entities. Management believes that the Company, in general, is well positioned
in terms of economic and other resources to compete effectively. Even though the
Company has certain advantages over some of its competitors because of its
substantial presence in the region and its access to capital, some competing
investors are larger than the Company in terms of assets and other investment
resources and may have a competitive advantage.
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To date, compliance with Federal, State, and local environmental
protection regulations has not had a material effect upon the capital
expenditures, earnings, or competitive position of the Company. However, over
the past few years, there have been increasing concerns raised regarding the
presence of asbestos and other hazardous materials in existing real estate
properties. In response to this, on March 1, 1991, the Company adopted a
property management plan for hazardous materials. As part of the plan, Phase I
environmental site investigation and reports have been completed for each
property owned by the Company and not previously inspected. In addition, all
proposed acquisitions are inspected prior to acquisition. Nevertheless, it is
possible that the Company's assessments did not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. In some cases, the Company has abandoned otherwise
economically attractive acquisitions because the costs of removal or control
have been prohibitive and/or the Company has been unwilling to accept the
potential risks involved. The Company does not believe it would be required to
remediate any asbestos materials at any of its properties as asbestos is managed
in place in accordance with current environmental laws and regulations.
Management believes that thorough professional environmental inspections
and testing for asbestos and other hazardous materials, coupled with a
conservative posture toward accepting known risk, the Company can minimize
its exposure to potential liability associated with environmental hazards.
The Company is not aware of any environmental hazards on or in its
properties which individually or in the aggregate may have a material adverse
impact on its operations or financial position. To the best of its
knowledge, the Company is in compliance with all applicable environmental rules
and regulations. The Company has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance, liability
or claim relating to hazardous or toxic substances or petroleum products in
connection with any of its properties. The Company does not believe that the
cost of continued compliance with applicable environmental laws or regulations
will have a material adverse effect on the Company or its financial condition or
results of operations. There can be no assurance, however, that future
environmental laws, regulations or ordinances will not require additional
remediation of existing conditions that are not currently actionable, or impose
additional or more stringent requirements on the Company, the costs of
compliance with which would have a material adverse effect on the Company or its
financial condition.
UNITED DOMINION REALTY, L.P.
On October 23, 1995, the Company organized United Dominion Realty, L.P.
(the "Partnership") under the Virginia Revised Uniform Limited Partnership Act.
The Company is the sole General Partner of the Partnership and currently holds a
99% interest therein. The remaining 1% is currently held by UDRT of North
Carolina, L.L.C., a wholly owned subsidiary of the Company. In 1995, the
Company acquired two apartment communities and land to develop an additional
apartment community using the Partnership, and transferred seven of its
Tennessee properties into the Partnership. The Partnership is intended to assist
the Company in competing for acquisitions of properties that meet the Company's
investment strategies from seller partnerships some or all of whose partners
may wish to defer taxation of gain realized on sale through an exchange of
partnership interests.
The Partnership is organized under a First Amended and Restated
Agreement of Limited Partnership dated as of December 31, 1995 (the "Partnership
Agreement"). A summary of certain provisions of the Partnership Agreement is set
forth below. The summary does not purport to be complete and is subject to and
qualified in its entirety by reference to applicable provisions of the
Partnership Act and the complete Partnership Agreement, which is filed as an
exhibit to this annual report on Form 10-K for the year ended December 31, 1995.
ADMISSION OF LIMITED PARTNERS; INVESTMENT AGREEMENTS
The Company presently intends to limit admission to the Partnership to
Limited Partners who are "accredited investors," as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the "Securities Act"). Limited Partners
will be admitted upon executing and delivering to the Company an Investment
Agreement (the "Investment Agreement")
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and delivering to the Partnership the consideration prescribed therein. In the
Investment Agreement, the prospective Limited Partner makes representations as
to his status as an accredited investor and other representations and agreements
regarding the Units, defined below, to be issued to him, intended to assure
compliance with the Securities Act. Any rights to Securities Act registration of
the Common Stock of the Company, if any, issued to such Limited Partner upon
redemption of his Units (see "Redemption Rights" below), will also be set forth
in the Investment Agreement.
UNITS
The interests in the Partnership of the Partnership's limited Partners
(the "Limited Partners") are represented by units of limited partnership
interest (the "Units"). All holders of Units are entitled to share in cash
distributions from, and in the profits and losses of, the Partnership.
Distributions by the Partnership are made equally for each Unit outstanding. As
the Partnership's sole General Partner, the Company intends to make
distributions per Unit in the same amount as the cash dividends paid by the
Company on each share of Common Stock. However, because the Partnership
properties, which are the primary source of cash available for distribution to
Unit holders, are significantly fewer than the properties held directly by the
Company and may not perform as well, there can be no assurance that
distributions per Unit will always equal Common Stock dividends per share. A
distribution made to the Company to enable it to maintain its REIT status (see
"Management and Operations" below) may deplete cash otherwise distributable to
Unit holders. The Partnership may borrow from the Company for the purpose of
equalizing per Unit and per share of Common Stock distributions, but
neither the Partnership nor the Company is under any obligation regarding
Partnership borrowings for this or any other purpose.
The Limited Partners have the rights to which limited partners are
entitled under the Partnership Act. The Units are illiquid; they are not
registered for secondary sale under any securities laws, state or federal, and
cannot be transferred by a holder unless they are so registered or an exemption
from such registration is available. Neither the Partnership nor the Company is
under any obligation to effect any such registration or to establish any such
exemption. The Partnership Agreement imposes additional restrictions on the
transfer of Units, as described below under "Transferability of Interests."
MANAGEMENT AND OPERATIONS
The Company, as the sole General Partner of the Partnership, has full,
exclusive and complete responsibility and discretion in the management and
control of the Partnership, and the Limited Partners have no authority to
transact business for, or participate in the management activities or decisions
of, the Partnership.
The Partnership Agreement requires that the Partnership be operated in
a manner that will enable the Company to satisfy the requirements for being
classified as a REIT and to avoid any federal income tax liability. The General
Partner is expressly directed, notwithstanding anything to the contrary in the
Partnership Agreement, to cause the Partnership to distribute amounts (including
proceeds of Partnership borrowings) sufficient to enable the Company to pay
distributions to its shareholders required to maintain its REIT status and avoid
income tax or excise tax liability.
ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST
The Company and other persons (including officers, directors,
employees, agents and other affiliates of the Company) are not prohibited under
the Partnership Agreement from engaging in other business activities, including
business activities substantially similar or identical to those of the
Partnership, and the Company will not be required to present any business
opportunities to the Partnership or to any Limited Partner.
BORROWING BY THE PARTNERSHIP
The General Partner is authorized under the Partnership Agreement to
cause the Partnership to borrow money and to issue and guarantee debt as it
deems necessary for the conduct of the activities of the Partnership. Such debt
may be secured by mortgages, deeds of Company, pledges or other liens on the
assets of the Partnership.
REIMBURSEMENT OF GENERAL PARTNER; TRANSACTIONS WITH THE GENERAL PARTNER AND ITS
AFFILIATES
The General Partner will receive no compensation for its services as
General Partner of the Partnership. However, as a partner in the Partnership,
the General Partner has the same right to allocations of profit and loss and
distributions as other partners of the Partnership. In addition, the Partnership
will reimburse the General Partner for all expenses it incurs
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relating to the ownership and operation of, or for the benefit of, the
Partnership and any offering of Units or other partnership interests, and for
the pro rata share of the expenses of any offering securities of the Company
some or all the proceeds of which are contributed to the Partnership.
LIABILITY OF GENERAL PARTNER AND LIMITED PARTNERS
The General Partner is liable for all general obligations of the
Partnership to the extent not paid by the Partnership. The General Partner is
not liable for the non-recourse obligations of the Partnership.
The Limited Partners are not required to make further capital
contributions to the Partnership after their respective initial contributions
are fully paid. Assuming that a Limited Partner acts in conformity with the
provisions of the Partnership Agreement, the liability of the Limited Partner
for obligations of the Partnership under the Partnership Agreement and
Partnership Act will be limited, subject to certain possible exceptions, to the
loss of the Limited Partner's investment in the Partnership.
The Partnership is qualified to conduct business in each state in which
it owns property and may qualify to conduct business in other jurisdictions.
Maintenance of limited liability may require compliance with certain legal
requirements of those jurisdictions and certain other jurisdictions. Limitations
on the liability of a limited partner for the obligations of a limited
partnership have not clearly been established in many states. Accordingly, if it
were determined that the right, or exercise of the right by the Limited
Partners, to make certain amendments to the Partnership Agreement or to take
other action pursuant to the Partnership Agreement constituted "control" of the
Partnership's business for the purposes of the statutes of any relevant state,
the Limited Partners might be held personally liable for the Partnership's
obligations. The Partnership will operate in a manner the General Partner deems
reasonable, necessary and appropriate to preserve the limited liability of the
Limited Partners.
EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER
The Partnership Agreement provides that the General Partner will incur
no liability for monetary damages to the Partnership or any Limited Partner for
losses sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if the General Partner acted in good faith. In addition, the
General Partner is not responsible for any misconduct or negligence on the part
of its agents, provided the General Partner appointed such agents in good faith.
The Partnership Agreement also provides for indemnification of the
General Partner, the directors, officers and employees of the General Partner,
and such other persons as the General Partner may from time to time designate,
against any and all losses, claims, damages, liabilities (joint or several),
expenses (including reasonable legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, that relate to the operations of the Partnership in which any
such indemnitee may be involved, or is threatened to be involved, unless it is
established that (i) the act or omission of such indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty, (ii) such indemnitee
actually received an improper personal benefit in money, property or services,
or (iii) in the case of any criminal proceeding, such indemnitee had reasonable
cause to believe that the act or omission was unlawful.
SALE OF ASSETS
Under the Partnership Agreement, the General Partner generally has the
exclusive authority to determine whether, when and on what terms the assets of
the Partnership will be sold.
REMOVAL OF THE GENERAL PARTNER; TRANSFER OF GENERAL PARTNER'S INTEREST
The Partnership Agreement does not authorize the Limited Partners to
remove the General Partner and the Limited Partners have no right to remove the
General Partner under the Partnership Act. The General Partner may not transfer
any of its interest as General Partner and withdraw as General Partner, except
(a) to a wholly-owned subsidiary of the General Partner or the owner of all the
ownership interests in the General Partner, (b) in connection with a merger or
sale of all or substantially all of the assets of the General Partner or (c) as
a result of the bankruptcy of the General Partner. A substitute or additional
General Partner may be admitted upon compliance with the applicable provisions
of the Partnership Agreement, including delivery by counsel for the Partnership
of an opinion that admission of such General Partner will not cause (i) the
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Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability. The
General Partner may not sell all or substantially all of its assets, or enter
into a merger, unless the sale or merger includes the sale of all or
substantially all of the assets of, or the merger of, the Partnership and the
Limited Partners receive for each Unit substantially the same consideration as
the holder of one share of Common Stock.
TRANSFERABILITY OF INTERESTS
A Limited Partner may transfer his interest in the Partnership without
the consent of the General Partner, unless in the opinion of counsel for the
Partnership such transfer would require the registration of such interest under
the Securities Act or would otherwise violate any applicable federal or state
securities or blue sky law (including investment suitability standards) and
unless such transfer would have undesirable federal income tax consequences for
the Partnership. The General Partner may require, as a condition of any
transfer, that the transferring Limited Partner assume all costs incurred by the
Partnership in connection with such transfer.
REDEMPTION RIGHTS
Each Limited Partner has the right (the "Redemption Right"), subject
to the purchase right of the General Partner described below, to cause the
redemption of such Limited Partner's Units for cash in an amount per Unit
equal to the average of the closing sale prices of the Common Stock of the
Company on the New York Stock Exchange (the "NYSE") for the ten trading days
immediately preceding the date of receipt by the General Partner of notice of
such Limited Partner's exercise of the Redemption Right. Subject to certain
restrictions intended to prevent undesirable tax consequences and assure
compliance with the Securities Act, a Limited Partner may exercise the
Redemption Right at any time but not more than twice within the same calendar
year and not with respect to less than 1,000 units (or all units owned by such
Limited Partner, if less than 1,000). A Limited Partner that exercises the
Redemption Right shall be deemed to have offered to sell the Units to be
redeemed to the General Partner, and the General Partner may elect to
purchase such Units by paying to such Limited Partner either the redemption
price in cash or by delivering to such Limited Partner a number of shares of
Common Stock of the Company equal to the product of the number of such Units,
multiplied by the "Conversion Factor," which is 1.0, subject to customary
antidilution provisions in the event of stock dividends on or subdivisions or
combinations of the Common Stock subsequent to issuance of such Units. Any
Common Stock issued to the redeeming Limited Partner will be listed on the NYSE
and if and to the extent provided in such Redeeming Partner's Investment
Agreement, registered under the Securities Act and/or entitled to rights to
Securities Act registration.
NO WITHDRAWAL OF CAPITAL BY LIMITED PARTNERS
No Limited Partner has the right to withdraw any part of his capital
contribution to the Partnership or to interest thereon or to receive any
distribution, except as provided in the Partnership Agreement.
ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTERESTS AND OTHER PARTNERSHIP
SECURITIES
The General Partner is authorized, without the consent of the Limited
Partners, to cause the Partnership to issue additional Units or other
Partnership securities to the partners or to other persons on such terms and
conditions and for such consideration, including cash or any property or other
assets permitted by the Partnership Act, as the General Partner deems
appropriate.
MEETINGS
The Partnership Agreement does not provide for annual meetings of the
Limited Partners, and the General Partner does not anticipate calling such
meetings.
AMENDMENT OF PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may, with four exceptions, be
made by the General Partner without the consent of the Limited Partners. Any
amendment to the Partnership Agreement which would (i) affect the Conversion
Factor or the Redemption Rights of the Limited Partners, (ii) adversely affect
the rights of the Limited Partners to receive distributions payable to them
under the Partnership Agreement, (iii) alter the Partnership's profit and loss
allocations or (iv) impose any obligation upon the Limited Partners to make
additional capital contributions to the Partnership shall require the consent of
Limited Partners owning more than 50% of the percentage interests in the
Partnership.
9
<PAGE>
BOOKS AND REPORTS
The General Partner is required to keep at the specified office of the
Partnership the Partnership's books and records, including copies of the
Partnership's federal, state and local tax returns, a list of the partners and
their last known business addresses, the Partnership Agreement, the Partnership
certificate and all amendments thereto and any other documents and information
required under Partnership Act. Any partner or his duly authorized
representative, upon paying duplicating, collection and mailing costs, is
entitled to inspect or copy such records during ordinary business hours.
The General Partner will furnish to each Limited Partner, as soon as
practicable after the close of each fiscal year, an annual report containing
financial statements of the Partnership (or the Company, if consolidated
financial statements including the Partnership are prepared) for such fiscal
year. The financial statements will be audited by accountants selected by the
General Partner. In addition, as soon as practicable after the close of each
fiscal quarter (other than the last quarter of the fiscal year), the General
Partner will furnish to each Limited Partner a quarterly report containing
unaudited financial statements of the Partnership (or the Company and the
Partnership, consolidated).
The General Partner will furnish to each Limited Partner, within 75
days after the close of each fiscal year of the Partnership, the tax information
necessary to file such Limited Partner's individual tax returns.
LOANS TO PARTNERSHIP
The Partnership Agreement provides that the General Partner may borrow
additional Partnership funds for any Partnership purpose from the General
Partner or a subsidiary or subsidiaries of the General Partner or otherwise.
ADJUSTMENTS OF CAPITAL ACCOUNTS AND PERCENTAGE INTERESTS
A separate capital account will be established and maintained for each
Partner. If (i) a new or existing general or limited partner of the
Partnership (a "Partner" or collectively "Partners") acquires an additional
interest in the Partnership interest in exchange for more than a de minimis
capital contribution, (ii) the Partnership distributes to a Partner more
than a de minimis amount of Partnership property as consideration for a
Partnership interest, or (iii) the Partnership is liquidated for federal income
tax purposes, the General Partner shall revalue the property of the
Partnership to its fair market value (as determined by the General Partner, in
its sole discretion) in accordance with applicable federal income tax
regulations. When the Partnership's property is revalued by the General
Partner, the capital accounts of the partners shall be adjusted in accordance
with such regulations, which generally require such capital accounts to be
adjusted to reflect the manner in which the unrealized gain or loss inherent
in such property (that has not been reflected in the capital accounts
previously) would be allocated among the partners pursuant to the Partnership
Agreement if there were a taxable disposition of such property for its fair
market value on the date of the revaluation.
If the number of outstanding Units increases or decreases during a
taxable year, each partner's percentage interest in the Partnership shall be
adjusted by the General Partner effective as of the effective date of each such
increase or decrease to a percentage equal to the number of Units held by such
Partner divided by the aggregate number of Units outstanding after giving effect
to such increase or decrease, and profits and losses for the year will be
allocated among the partners in a manner selected by the General Partner to give
appropriate effect to such adjustments.
REGISTRATION RIGHTS
Limited Partners have no rights to Securities Act registration of any
Common Stock of the Company received in connection with redemption of Units
except as provided in their respective Investment Agreements.
TAX MATTERS; PROFIT AND LOSS ALLOCATIONS
Pursuant to the Partnership Agreement, the General Partner is the tax
matters partner of the Partnership and, as such, has the authority to handle tax
audits and to make tax elections under the Code on behalf of the Partnership.
Profit and loss of the Partnership generally will be allocated among
the Partners in accordance with their respective interests in the Partnership
based on the number of Units held by the Partners.
10
<PAGE>
DISTRIBUTIONS
The Partnership Agreement provides that the General Partner shall
distribute cash quarterly, in amounts determined by the General Partner in its
sole discretion, to the partners in accordance with their respective percentage
interests in the Partnership, except that the amount of cash distributable to a
Limited Partner who has not been a Limited Partner for the full quarter for
which the distribution is paid is subject to pro rata reduction. Upon
liquidation of the Partnership, after payment of, or adequate provision for,
debts and obligations of the Partnership, including any Partner loans, any
remaining assets of the Partnership will be distributed to all Partners with
positive capital accounts in accordance with their respective positive capital
account balances. If the General Partner has a negative balance in its capital
account following a liquidation of the Partnership, it will be obligated to
contribute cash to the Partnership equal to the negative balance in its capital
account.
TERM
The Partnership will continue until December 31, 2051, or until sooner
dissolved upon (i) the bankruptcy, dissolution, death or withdrawal of a General
Partner (unless the Limited Partners elect to continue the Partnership by
electing by unanimous consent a substitute General Partner within 90 days of
such occurrence), (ii) the passage of 90 days after the sale or other
disposition of all or substantially all the assets of the Partnership, (iii) the
redemption of all Limited Partners' interests in the Partnership, or (iv)
election by the General Partner. Upon dissolution of the Partnership, the
General Partner will proceed to liquidate the assets of the Partnership and
distribute the proceeds remaining after payment or adequate provision for
payment of all debts and obligations of the Partnership as provided in the
Partnership Agreement.
11
<PAGE>
ITEM 2. PROPERTIES
REAL ESTATE HELD FOR INVESTMENT
The table below sets forth a summary by major geographic market of the Company's
portfolio of apartment rental properties held for investment at December 31,
1995. The Company also held five commercial properties for investment at
December 31, 1995, having an aggregate cost of $7,249,020 containing 325,000
square feet. See also Notes 1 and 2 to the Consolidated Financial Statements and
Schedule III - Summary of Real Estate Owned.
<TABLE>
<CAPTION>
AVERAGE
MONTHLY
RENTAL
RATES FOR
NUMBER NUMBER PERCENTAGE REAL ECONOMIC THE YEAR AVERAGE
MAJOR OF OF OF ESTATE COST OCCUPANCY ENDED UNIT SIZE
GEOGRAPHIC APARTMENT APARTMENT APARTMENT AT PER FULL YEAR DECEMBER (SQUARE
MARKETS COMMUNITIES HOMES HOMES COST ENCUMBRANCES UNIT 1995 31, 1995* FEET)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Richmond,
Virginia 12 3,541 11% $99,088,108 $10,546,791 $27,982 95.8% $464 945
Columbia,
South Carolina 11 3,218 10% 95,294,439 19,841,033 29,613 94.6% 458 864
Raleigh,
North Carolina 7 2,272 7% 81,186,113 7,000,000 35,733 99.0% 538 927
Tampa,
Florida 8 2,351 7% 76,449,020 -- 32,518 90.1% 527 986
Charlotte,
North Carolina 10 2,002 6% 71,555,132 10,629,071 35,742 95.3% 513 958
Orlando,
Florida 8 2,253 7% 78,902,434 27,510,000 35,021 90.5% 532 926
Atlanta,
Georgia 6 1,670 5% 57,011,100 6,027,182 34,138 92.0% 523 960
Baltimore,
Maryland 8 1,746 5% 73,650,412 30,800,000 42,182 93.4% 614 865
Eastern,
North Carolina 8 1,730 5% 47,537,154 1,463,867 27,478 98.1% 482 916
Hampton Roads,
Virginia 6 1,436 5% 42,319,745 3,900,000 29,471 94.4% 503 997
Nashville,
Tennessee 5 1,344 4% 46,520,494 5,223,854 34,613 97.9% 523 979
Greenville/Spartanburg,
South Carolina 7 1,330 4% 37,328,147 3,265,000 28,066 93.9% 456 890
Washington, DC 4 1,011 3% 34,380,221 11,437,183 34,006 93.1% 610 865
Ft. Lauderdale,
Florida 4 960 3% 58,232,414 -- 60,659 91.6% 768 1,092
Memphis,
Tennessee 4 935 3% 30,179,225 5,890,000 32,277 94.4% 462 784
Other Maryland 4 784 2% 31,548,586 -- 40,241 96.1% 591 935
Other North Carolina 2 447 1% 14,497,318 -- 32,432 90.8% 431 885
Other Florida 6 1,524 5% 51,283,043 17,452,916 33,652 90.9% 564 819
Other Virginia 6 988 3% 33,138,387 2,960,000 33,541 96.3% 498 848
Delaware 3 468 1% 19,238,635 -- 41,108 95.4% 587 745
Other Georgia 2 468 1% 20,067,668 6,407,421 42,880 90.8% 594 1,140
Other South Carolina 2 408 1% 12,030,615 2,200,000 29,487 89.2% 382 909
Alabama 2 382 1% 12,410,936 -- 32,489 87.0% 474 1,067
=======================================================================================================
135 33,268 100% $1,123,849,346 $172,554,318 $33,782 94.1% $520 924
=======================================================================================================
</TABLE>
At December 31, 1995, the Company has six shopping centers and six apartment
properties classified in the consolidated balance sheet as real estate held for
disposition in the amount of $51,015,137, net of accumulated depreciation in the
amount of $23,572,195 and impairment loss valuation allowance in the amount of
$1,700,000. These properties are not included in the above table.
* Average monthly rental rates for the year ended December 31, 1995, represents
potential rent collections (gross potential rents less market adjustments),
which approximates net effective rents.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its apartment communities is presently
subject to any material litigation nor, to the Company's knowledge, is any
litigation threatened against the Company or any of the communities, other
than routine actions arising in the ordinary course of business, some of
which are expected to be covered by liability insurance and all of which
collectively are not expected to have a material adverse effect on the
business or financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders
during the last quarter of its fiscal year ended December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, listed below, serve in their
respective capacities for approximate one year terms and are subject to
re-election annually by the Board of Directors, normally in May of each year.
Name Age Office Since
John P. McCann 51 President and Chief 1974
Executive Officer
James Dolphin 46 Senior Vice President 1979
and Chief Financial Officer
Barry M. Kornblau 46 Senior Vice President and 1991
Director of Apartment Operations
Richard B. Chess 42 Vice President and Director 1987
of Acquisitions
Richard A. Giannotti 40 Vice President and Director 1985
of Construction
Katheryn E. Surface 37 Vice President, Corporate Secretary
and General Counsel 1992
Jerry A. Davis 33 Vice President and Corporate Controller 1989
Mr. McCann, a Director, has been the Company's managing officer since
1974, serving as its President since 1979, its Secretary from 1974 to 1980, and
its Treasurer from 1982 to 1985.
Mr. Dolphin, a Director, was first employed by the Company in May, 1979
as Controller and served as Corporate Secretary from 1980 to February, 1994. He
was elected Vice President of Finance in 1985 and Senior Vice President in 1987.
Mr. Kornblau, a Director, joined the Company in 1991 as Senior Vice
President and Director of Apartment Operations. From 1985 through 1990, he was
President and Chief Executive Officer of Summit Realty Group, Inc. which managed
the Trust's apartment properties during that period. He is a licensed real
estate broker and a C.P.M.
Mr. Chess joined the Company in October, 1987 as Director of
Acquisitions. He was elected Assistant Vice President in 1988 and Vice President
in 1989.
Mr. Giannotti joined the Company as Director of Development and
Construction in September, 1985. He was elected Assistant Vice President in
1988 and Vice President in 1989.
Ms. Surface joined the Company in 1992 as Assistant Vice President and
Legal Counsel and in 1994 was elected General Counsel, Corporate Secretary and
Vice President. From 1986 to 1992, she was an attorney with the law firm of
Hunton and Williams, the Company's outside counsel.
Mr. Davis joined the Company in March, 1989 as Controller and was
subsequently elected Assistant Secretary. In 1991 he was elected Vice
President. He is a certified public accountant.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "UDR". The following table sets forth the quarterly
high and low closing sale prices per share reported on the NYSE for each quarter
of the last two years. Distribution information reflects distributions
declared per share for each calender quarter and paid at the end of the
following month.
DISTRIBUTIONS
1994 HIGH LOW DECLARED
1st Quarter $ 15 7/8 $ 12 3/4 $ .195
2nd Quarter 15 1/8 13 3/8 .195
3rd Quarter 14 1/4 13 .195
4th Quarter 14 1/2 12 1/4 .195
1995
1st Quarter $ 14 5/8 $ 13 $ .225
2nd Quarter 15 3/8 13 1/2 .225
3rd Quarter 15 13 1/2 .225
4th Quarter 15 13 1/4 .225
The Company determined that, for Federal income tax purposes, approximately
82.3% of the distributions for each of the four quarters of 1995 represented
ordinary income to its shareholders, 17.4% represented return of capital to its
shareholders and .3% represented capital gains to its shareholders.
On March 15, 1996, the closing sale price of the Common Stock was $15.50 per
share on the NYSE. On March 15, 1996 there were 5,636 holders of record of the
56,506,249 shares of Common Stock.
The Company pays regular quarterly distributions to holders of shares of
Common Stock. Future distributions by the Company will be at the discretion
of its Board of Directors and will depend on the actual funds from operations
of the Company, the Company's financial condition and capital requirements, the
annual distribution requirements under the REIT provisions of the Internal
Revenue Code and such other factors as the Board of Directors deems relevant.
The annual distribution payment for the calendar year 1995 necessary for the
Company to maintain its status as a REIT was approximately $.67 per share. The
Company paid total distributions of $.87 for 1995.
The Company has a Dividend Reinvestment and Stock Purchase Plan under which
holders of Common and Preferred Stock may elect to automatically reinvest their
distributions and make additional cash payments to acquire additional shares of
the Company's Common Stock.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and
other information for the Company as of and for each of the years in the five
year period ended December 31, 1995. The table should be read in conjunction
with the Consolidated Financial Statements of United Dominion Realty Trust, Inc.
and the Notes thereto included elsewhere herein.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data and apartments homes owned
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Rental income $195,240 $139,972 $89,084 $63,202 $51,250
Income before gains (losses) on sales of
investments and extraodinary item 28,037 19,118 11,286 6,577 3,578
Gains (losses) on sales of investments 5,090 108 (89) -- 26
Extraordinary item - early extinguishment of debt -- (89) -- (242) (35)
Net income 33,127 19,137 11,197 6,335 3,569
Dividends to preferred shareholders 6,637 -- -- -- --
Net income available to common shareholders 26,490 19,137 11,197 6,335 3,569
Common distributions declared 48,610 37,539 27,988 23,271 15,872
Weighted average number of common shares outstanding (a) 52,781 46,182 38,202 34,604 24,642
Per share:(a)
Net income per common share $0.50 $0.41 $0.29 $0.18 $0.14
Common distributions declared 0.90 0.78 0.70 0.66 0.63
---------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Real estate held for investment $1,131,098 $1,007,599 $582,213 $454,115 $361,503
Real estate held for disposition 51,015 -- -- -- --
Accumulated depreciation 129,454 120,341 91,444 71,806 56,074
Total assets 1,080,616 911,913 505,840 390,365 314,473
Mortgage notes payable 180,481 158,449 72,862 76,516 73,373
Notes payable 349,858 368,215 156,558 104,605 94,973
Shareholders' equity 516,389 356,968 259,963 197,677 136,152
Number of common shares outstanding (a) 56,375 50,356 41,653 35,285 27,133
---------------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
CASH FLOW DATA
Cash provided by operating activities $66,428 $54,544 $33,939 $24,608 $16,614
Cash used in investing activities (183,930) (359,631) (130,064) (81,373) (67,321)
Cash provided by financing activities 113,145 306,575 100,793 56,777 50,815
FUNDS FROM OPERATIONS (b)
Income before gains (losses) on sales of investments and
extraordinary items $28,037 $19,118 $11,286 $6,577 $3,578
Adjustments:
Real estate depreciation 38,939 28,729 19,516 15,557 12,732
Non-recurring items:
Impairment loss on real estate held for disposition 1,700 -- -- -- --
Prior years' employment and other taxes (c) 395 -- -- -- --
Adoption of SFAS No. 112 "Employers' Accounting
for Postemployment Benfits" -- 450 -- -- --
Provision for possible investment losses -- -- -- 1,564
Imputed interest expense -- -- -- -- 530
Dividends to preferred shareholders (6,637) -- -- -- --
---------------------------------------------------------
Funds from operations $62,434 $48,297 $30,802 $23,698 $16,840
=========================================================
APARTMENTS HOMES OWNED
Total apartment homes owned at December 31, 1995 34,224 29,282 17,914 13,832 10,924
Weighted average number of apartment homes owned during the year 31,242 23,160 15,445 11,387 9,491
</TABLE>
(a) All share and per share information has been adjusted to give effect
to a 2-for-1 stock split in May, 1993.
(b) Funds from operations ("FFO") is defined as income before gains
(losses) on sales of 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. This definition conforms to
the recommendations set forth in a White Paper adopted by the National
Association of Real Estate Investment Trusts ("NAREIT") in early 1995.
FFO for years prior to 1995 have been adjusted to conform to the
NAREIT definition. The Trust considers FFO in evaluating property
acquisitions and its operating performance and believes that FFO
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. FFO 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.
(c) Prior years payroll tax liability resulting from an Internal Revenue
Service examination for the years 1993 and 1994.
16
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
As a qualified REIT, the Company distributes a substantial portion of its cash
flow to its shareholders in the form of distributions. Over the past few years,
the Company has sought to retain a greater portion of its cash flow. For 1995,
the Company's cash flow from operating activities exceeded cash distributions
paid to common shareholders by approximately $20.7 million. The Company
presently intends to continue to retain a greater percentage of its cash
flow from operating activities, which allows for the retention of sufficient
cash to cover normal operating needs, including routine replacements and
to help fund additional acquisitions. The Company utilizes a variety of
primarily external financing sources to fund portfolio growth, major capital
improvement programs and balloon debt payments. The Company 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. The Company has, from time to time, used derivative instruments to
synthetically alter on-balance sheet liabilities or to hedge anticipated
financing transactions. Derivative contracts did not have a material impact
on results of operations during the three year period ended December 31, 1995.
At the beginning of 1995, the Company had approximately $7.3 million of cash and
cash equivalents and $89.4 million of available and unused bank lines of credit.
For 1995, the Company's cash flow from operating activities increased $11.9
million over the same period last year, primarily as a result of the significant
expansion of the Company's portfolio as discussed below and under "Results of
Operations".
During 1995, net cash used for investing activities was $183.9 million which
resulted primarily from the Company's acquisition of 23 apartment communities
containing 5,142 apartment homes and several parcels of undeveloped land for a
total cost of $198.1 million, which includes $24.1 million of mortgage and bond
indebtedness assumed in these transactions. The Company also funded $35.6
million of capital improvements to its properties during the year. This includes
$10.5 million of improvements at the Company's 17,916 mature apartment homes.
Excluding 11 communities that were acquired in the latter part of 1993 and which
still were undergoing rehabilitation in 1995, the remaining 15,220 mature
apartment homes averaged $424 in capital expenditures. This includes the
following: carpet and tile replacements ($141/unit), appliances ($48/unit), HVAC
equipment ($33/unit), various interior improvements ($50/unit), various exterior
improvements including new roofs ($89/unit), various land improvements including
parking lots and site lighting ($31/unit) and various other improvements
($32/unit). The Company also received net cash proceeds of $23.5 million from
the sale of real estate owned during 1995 and payments aggregating $2.2 million
on mortgage notes receivable.
Net cash provided by financing activities during 1995 was approximately $113.1
million reflecting (i) the sale of common and preferred stock during the year
netting approximately $181.1 million, (ii) net proceeds from the issuance of
mortgage notes payable and notes payable of approximately $31.3 million, (iii)
net short-term bank borrowings of $4.25 million and (iv) mortgage financing
proceeds released from construction funds of $2.5 million. These cash inflows
were partially offset by (i) $50.4 million of cash distributions paid to common
and preferred shareholders, (ii) scheduled mortgage principal payments of $1.9
million, and (iii) payments on notes and non-scheduled mortgage principal
payments of $53.7 million. In February, 1995 the Company sold 1,360,000 shares
of its common stock to a group of institutional investors at a price of $13 1/8
per share. Net proceeds of $17.8 million were used to curtail then outstanding
bank debt. In April, 1995, the Company sold 4,200,000 shares of 9 1/4%
Cumulative Redeemable Preferred Stock ($25 per share liquidation preference
value). Net proceeds of the offering after deducting underwriting commissions
and direct offering costs aggregated approximately $101.5 million, of which
approximately $33.1 million was used to repay then outstanding bank debt and
approximately $65.7 million was used to acquire a portfolio of nine apartment
communities. The remaining net proceeds were temporarily invested in short-term
money market instruments and were subsequently used to fund additional apartment
acquisitions. In September and October, 1995, the Company sold an aggregate of
4,550,000 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 $61 million. Proceeds from the offering
were used to repay $26.8 million of then existing bank debt. The remaining
proceeds were temporarily invested in short-term money market instruments and
subsequently used to purchase additional apartment communities. Also during
1995, the Company completed new tax-exempt multifamily housing bond financings
or assumed such bond financings and conventional mortgage notes in connection
with certain acquisitions in the aggregate amount of approximately $45.4
million.
The Company considers its cash provided by operating activities to be adequate
to meet operating requirements and payments of distributions. The Company
expects to acquire 5,000 to 7,000 apartment homes during 1996 at an estimated
cost of $35,000 to $40,000 per apartment home. While the Company used primarily
equity, both preferred and common, to fund its acquisition program during 1995,
it anticipates that it will use a combination of equity, debt and proceeds from
property sales to fund its 1996 acquisitions. During the first half of 1996 the
Company plans to implement a medium-term note program which is expected to
include an initial $50 million 7-10 year issue. In November, 1995, the Company
entered into a treasury rate lock transaction which had the effect of fixing a
10-year Treasury rate beginning March 1, 1996 at 5.946%. This agreement was
terminated on February 20, 1996 at no gain or loss to the Company. The Company
anticipates a second medium-term note issue around mid-July, 1996 in the amount
of $50 million, primarily to repay a then maturing $35 million senior note
issue. In July, 1995, the Company executed a forward starting interest rate swap
with a notional amount of $50 million which had the effect of fixing the
interest rate on a 10-year Treasury starting July 15, 1996 at 6.544%. Including
the $35 million loan, the Company has aggregate debt maturities of $47 million
in 1996. The maturing debt has a weighted average interest rate of 9.26%. When
this hedge transaction was executed, it was intended to fix a rate on 7-10 year
debt at approximately 7.5% which is approximately 170 basis points lower than
the weighted average interest rate on the maturing debt to be refinanced. At
December 31, 1995, the Company had an aggregate unrealized loss on these
derivative instruments of approximately $4 million, which includes $1.4 million
relating to the rate lock agreement terminated on February 20, 1996 at no gain
or loss. The Company does not obtain collateral or other security to support
off-balance sheet financial instruments subject to credit risk, but monitors the
credit standing of counterparties. There was no credit exposure to the Company
at December 31, 1995.
The Company currently has six shopping centers and six apartment communities
under contracts or letters of intent to sell. These sales are scheduled to occur
during the first half of 1996 and will generate approximately $63 million of
cash proceeds. Three of these properties are encumbered with an aggregate amount
of approximately $7.9 million of secured debt. If all twelve sales occur, the
Company will recognize an aggregate gain of approximately $8.5 million for
financial reporting purposes. For income tax purposes, several of the sales are
expected to be structured as tax deferred exchanges. The proceeds from these
property dispositions will be used to purchase apartment communities. There are
no assurances that any of these sales transactions will be consummated.
Depending upon the volume and timing of acquisition activity, the Company
anticipates raising equity capital during the middle of the year through both a
public offering and private placements.
The Company's liquidity and capital resources are believed to be more than
adequate to meet its cash requirements for the next several years. The Company
expects to meet its long-term liquidity requirements, such as balloon debt
maturities, property acquisitions and significant capital improvements primarily
through the issuance of capital stock and the issuance of long-term unsecured
notes payable. The Company will also rely upon (i) the assumption of mortgage
indebtedness, (ii) property sales, (iii) distributions reinvested and cash
reinvested through the Company's Dividend Reinvestment and Stock Purchase Plan
and (iv) retained cash flow to meet its cash requirements.
FUNDS FROM OPERATIONS
Funds from Operations ("FFO") is defined as income before gains (losses) on
sales of 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 Company considers FFO in evaluating property acquisitions and its
operating performance, and believes that FFO should be considered along with,
but not as an alternative to, net income and cash flows as a measure of the
Company's operating performance and liquidity. FFO 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.
For 1995, the Company implemented a revised definition of FFO and has restated
FFO for prior years to conform to the recommendations set forth in a White Paper
adopted by NAREIT (The National Association of Real Estate Investment Trusts) at
the beginning of the year. The impact of adopting the NAREIT recommendations was
to reduce FFO for 1995, 1994 and 1993 by $1.1 million, $915,000 and $855,000,
respectively.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
For 1995, the Company reported significant increases over 1994 in rental income,
income before gains (losses) on sales of investments and extraordinary items,
net income and FFO. Net income available to common shareholders increased $7.4
million or $.09 per share over 1994. During 1994 and 1995, the Company acquired
a total of 16,308 apartment homes in 67 communities, net of properties resold,
representing a 91% expansion in the number of apartment homes owned during that
period. These apartment homes (the "non-mature" communities) provided a
substantial portion of the aggregate reported increases noted above. However,
the improved performance of the Company's mature group of 17,916 apartment homes
in the 74 communities acquired prior to 1994 (the "mature" communities) also
contributed to the increases, particularly when considered on a per share basis.
For 1995, the Company's mature communities provided approximately 53% of the
Company's rental income. Total rental income from these apartment homes grew
5.0%, or $4.9 million in 1995, reflecting an increase in economic occupancy to
94.8% from 94.1% for 1994, and growth in average rents and other income of 4.4%.
The improvement in occupancy reflected stronger apartment markets throughout the
Company's region. Occupancy peaked in mid-1994 and remained above 95% through
mid-1995 before trending downward slighty in the second half of the year. Rental
expenses at these communities increased 2.6%, or $1.1 million, resulting in a
decrease in the operating expense ratio (the ratio of rental expenses to rental
income) of 1.0% to 42.9%. The increase in rental expenses reflected increased
repairs, real estate taxes and exterior painting expenses. These increases were
offset somewhat by lower gas, property management, and promotional expenses
caused primarily by the combination of stronger occupancy and efficiencies of
size. As a result of an Internal Revenue Service examination, property
management expenses for the 1995 period include a $395,000 payment for
employment and other taxes associated with employee occupied apartment homes for
the 1993 and 1994 tax years. In 1995, the Company was able to internally manage
its mature apartment communities at a cost of approximately 2.6% of rental
income versus 3.4% in 1994. This reduction was achieved through economies of
scale, as the Company acquired a significant number of apartment communities
over the past two years without a corresponding increase in property management
costs. Turnover (measured by move-outs) was 60% at the mature communities for
1995 versus 59% in 1994.
For the 16,308 apartments in the 67 non-mature communities, average occupancy
was 93.1% and the operating expense ratio was 41.3% during 1995. These
communities provided increases of $52.1 million and $21.6 million ,
respectively, in rental income and rental expenses. For the 34,224 apartment
homes in the 141 communities owned on December 31, 1995, occupancy averaged
94.0% and the operating expense ratio was 42.2% for the full year 1995. For
1994, the 29,282 apartment homes then owned had occupancy of 93.7% and an
expense ratio of 43.2% for that year. For 1995, rental income, rental expenses
and real estate depreciation from commercial properties decreased $1.8 million,
$370,000 and $741,000, respectively since 1994, primarily due to the sales of
eight shopping centers over the past two years.
For 1995, depreciation of real estate owned increased $10.2 million with
substantially all of the increase attributable to the portfolio expansion that
occured during 1994 and 1995.
For 1995, interest expense increased approximately $12.1 million over 1994. The
Company used both debt and equity to finance its growth over the past two years;
however, the weighted average amount of debt employed was higher in 1995 than it
was in 1994 ($512 million in 1995 versus $392 million in 1994). The $.15 per
share increase in interest expense reflected this
17
<PAGE>
higher average amount of outstanding debt in 1995 together with an increase in
the weighted average interest rate on this debt from 7.3% in 1994 to 7.9% in
1995. The rate increase reflected the Company's heavier reliance on lower rate
short-term bank borrowings in 1994 than in 1995 ($33.8 million weighted average
outstanding in 1994 versus $8.2 million in 1995).
General and administrative expenses were relatively flat in 1995, increasing by
only $62,000 over 1994. General and administrative expense for 1994 included a
$450,000 charge related to the adoption of SFAS No. 112, "Employers' Accounting
for Postemployment Benefits". In 1995, the Company incurred increases in most of
its general and administrative expense categories with the largest percentage
increase attributable to costs related to abandoned acquisitions, including
$204,000 associated with an unsuccessful business combination with another
apartment company.
During 1995, the Company sold seven shopping centers and two apartment
communities and recognized gains for financial reporting purposes totaling $5.1
million. Four of the shopping centers were sold to First Washington Realty
Trust, Inc. on June 30, 1995. In connection with the sales, the Company received
cash and 358,000 shares of First Washington's 9.75% Series A Cumulative
Participating Convertible Preferred Stock having a fair value of $7.7 million on
the date of sale. Five of the shopping center sales during the year were
structured to qualify as tax deferred exchanges which enabled the Company to
defer approximately $4.5 million of capital gains for income tax purposes. The
Company also sold two apartment communities, both of which were acquired as part
of the Clover Portfolio in 1994. No significant book gain or loss was recognized
on the sale of either property. The Company recorded a $1.7 million impairment
loss in 1995 associated with management's decision to sell a shopping center at
a discount as part of a portfolio transactions.
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 estimated
undiscounted future cash flows are not sufficient to recover the assets carrying
value. 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. On October 1, 1995, the
Company opted for the early adoption of Statement No. 121. At the end of
October, 1995, the Company executed a letter of intent to sell five shopping
centers in a bulk sale at an aggregate purchase price of $28.4 million. Closing
is expected to occur in the first half of 1996. At December 31, 1995, an
additional shopping center plus six apartment communities were under
contracts or letters of intent to sell. These twelve properties are classified
on the consolidated balance sheet as "Real estate held for disposition" in the
amount of $51.0 million, net of accumulated depreciation and impairment loss
valuation allowance. Real estate held for disposition contributed income from
property operations of approximately $4.1 million for the year ended December
31, 1995.
YEAR ENDED DECEMBER 31, 1994
For 1994, the Company reported significant increases over 1993 in rental income,
income before gains (losses) on sales of investments and extraordinary item, net
income and funds from operations. During 1993 and 1994, the Company acquired
15,450 apartment units (63 apartment communities) representing a 112% expansion
in the number of apartment homes owned during that two year period. These
additional apartment homes provided a substantial portion of the reported
increases noted above. However, the improved performance of the Company's mature
group of 13,832 apartment homes (57 apartment communities) acquired prior to
1993 also contributed to the increases, particularly when considered on a per
share basis.
For 1994, the Company's mature apartment communities provided approximately 53%
of the Company's rental income. Total rental income from these apartment homes
grew 6.2%, or $4.3 million in 1994, reflecting an increase in economic occupancy
to 94.3% compared to 91.6% for 1993, and growth in average rents and other
income of 3.3%. The improvement in occupancy reflected stronger apartment
markets throughout the Company's region. Rental expenses at these properties
increased 2.3% resulting in a decrease in the operating expense ratio (the ratio
of rental expenses to rental income) of 1.7% to 44.0%. The increase in rental
expenses was moderated by lower advertising, rental promotions, electricity, and
interior painting and cleaning expenses caused by the combination of stronger
occupancy and lower tenant turnover. Turnover was 57% for 1994.
18
<PAGE>
For the 15,450 apartments in the 63 apartment communities acquired by the
Company since the beginning of 1993, average occupancy was 92.8% and the
operating expense ratio was 43.1% during 1994. These communities provided
increases of $46.2 million and $19.9 million , respectively, in rental income
and rental expenses. For the 29,282 apartment homes in the 120 communities owned
on December 31, 1994, occupancy averaged 93.7% and the operating expense ratio
was 43.6% for the full year 1994. For 1993, the 17,914 apartment homes then
owned had occupancy of 91.5% and an expense ratio of 45.5% for that year. For
1994, rental income and rental expenses from commercial properties increased
$351,000 and $130,000, respectively.
For 1994, depreciation of real estate owned increased $9.2 million with
substantially all of the increase attributable to the portfolio expansion that
occurred during 1993 and 1994. Interest expense increased approximately $11.4
million in 1994 over 1993. The Company used both debt and equity to finance its
growth during the two year period; however, the Company used more debt relative
to equity in 1994 than it did in 1993. The increase in interest expense of
approximately $.17 per share also reflects the rising interest rate environment
of 1994 when rates were generally higher than in 1993.
General and administrative expenses increased by $1.5 million or 43% during
1994. In January, 1994, the Company adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits" and incurred a $450,000 charge to expense. In 1994,
the Company incurred increases in most of its general and administrative expense
categories. The largest percentage increase related to employee payroll and
related employee overhead costs which resulted from the significant growth the
Company experienced during 1994.
INFLATION
Management believes that the direct effects of inflation on the Company's
operations have been inconsequential.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedule on page
F-1 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 7, 1996.
Information required by this item regarding the executive officers of
the Company is included in Part I of this Annual Report on Form 10-K in the
section entitled "Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402(c) of Regulation S-K is set forth
below. Other information required by Item II of Form 10-K is incorporated herein
by reference from the Company's definitive proxy statement to be filed with
respect to its Annual Meeting of Shareholders to be held on May 7, 1996.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (NOTE 1)
Individual Grants Potential Realizable
------------------------------------------------------------------- Value at Assumed Annual
Number of Securities Percent of Total Rates of Share Price
Underlying Options/SARs Granted Appreciation for Option
Options/SAR's to Employees in Exercise or Term
Name Granted (#) Fiscal Year Base Price Expiration ------------------------
(Note 2) (Note 3) ($/Share) Date 5% ($) 10% ($)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John P. McCann 60,000 16.13% $14.625 12/12/05 $551,855 $1,398,509
James Dolphin 30,000 8.06% 14.625 12/12/05 275,928 699,255
Barry M. Kornblau 30,000 8.06% 14.625 12/12/05 275,928 699,255
Richard B. Chess 22,500 6.05% 14.625 12/12/05 206,946 524,441
Richard A. Giannotti 22,500 6.05% 14.625 12/12/05 206,946 524,441
</TABLE>
Note 1 The Company has never granted SARs.
Note 2 Stock options granted to employees on December 12, 1995, were granted at
an exercise price of $14.625, which was the fair market value as of the
date of the grant. The options may not be exercised until Janury 1, 1997
and expire on December 12, 2005 (the tenth anniversary of the date of
grant).
Note 3 A total of 372,000 employee stock options was granted during 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership of shares as of March 15, 1996, by directors and
officers of the Company and nominees for election at the Annual Meeting of the
Company's Shareholders held May 8, 1996, including shares deemed owned as a
consequence of ownership of stock options exercisable within 60 days, is
indicated in the table below. Except as otherwise indicated in the footnotes,
each person named in the table and included in the director/officer group has
sole voting and investment powers as to such shares, or shares such powers with
his spouse and minor children, if any.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-----------------------------------------------------
Immediately Through Options(1)
----------------------- -----------------------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Jeff C. Bane 105,820(2) 0.2 6,000 --
Robert P. Buford 129,000 0.2 6,000 --
Richard B. Chess 57,650 0.1 52,263(4) 0.1
R. Toms Dalton, Jr. 33,740 0.1 4,000 --
James Dolphin 140,310 0.2 60,542(4) 0.1
Richard A. Giannotti 49,250 0.1 51,012(4) 0.1
Barry M. Kornblau 218,499(5) 0.4 30,774(4) 0.1
John C. Lanford 12,323(6) -- 6,000 --
John P. McCann 358,164(2)(3) 0.6 231,204(4) 0.4
H. Franklin Minor 64,900 0.1 6,000 --
Lynne B. Sagalyn 1,000 -- --(7) --
C. Harmon Williams, Jr. 98,668(2) 0.2 6,000 --
All directors and officers as a
group* 1,399,836(2)(3)(5) 2.5 691,779(4) 1.2
</TABLE>
*(24 persons)
-------------------------
(1) Assumes exercise in full of all options exercisable within 60 days.
(2) Includes, in the case of Messrs. McCann, Bane and Williams and all
directors and officers as a group, 37,500 shares owned by Planned Property
Realty Corp., of which Mr. McCann is President and 50% shareholder and of which
Messrs. Bane and Williams are each 25% shareholders. The Form 3 of Mr. Bane
was amended by a Form 5 for 1995 to report ownership of shares by Planned
Property Realty Corp.
(3) Includes 8,000 shares held by the Profit Sharing Plan of the Company of
which Messrs. McCann and Dolphin are trustees and under which they share voting
and investment powers as to such shares.
(4) Does not include 44,737 shares, 97,126 shares, 45,988 shares, 77,226
shares, 138,132 and 516,925 shares issuable upon exercise of options granted
to Messrs. Chess, Dolphin, Giannotti, Kornblau, McCann and all directors and
officers as a group, respectively, which are not exercisable within 60 days.
(5) Does not include a total of 1,263,708 shares beneficially owned by Mr.
Kornblau's parents, beneficial ownership of which is disclaimed by Mr.
Kornblau.
(6) Includes 1,323 shares in Mr. Lanford's self-directed IRA account, the
purchase of which in June of 1993 was not reported to the Commission on a
timely basis, but was reported on Mr. Lanford's Form 5 for 1995.
(7) In the event Ms. Sagalyn is elected to the Board at the Annual Meeting
and certain proposed amendments to the Company's 1985 Stock Option Plan are
approved, she will be granted 7,000 stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 7, 1996.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1&2) See Index to Consolidated Financial Statements and
Schedule on page F-1 of this Annual Report on Form 10-K.
(3) Exhibits
.
The exhibits listed below are filed as part of this annual report.
References under the caption "Location" 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.
Exhibit Description Location
3(a)(i) Restated Articles of Exhibit 3 to the
Incorporation Company'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
of Incorporation Company's Form 8-A
Registration Statement
dated April 19, 1990.
3(a)(iii) Amendment and Restated Articles Exhibit 1 (c) to the
of Incorporation Company's Form 8-A
Registration Statement
dated April 24, 1995.
3(b)(i) By-Laws Exhibit 4(c) to the
Company's Form S-3
Registration Statememt
(Registration No. 33-44743)
filed with the Commission
on December 31, 1991.
3(b)(ii) Amendment of By-Laws Filed herewith.
4(i)(a) Specimen Common Stock Exhibit 4(i) to the
Certificate Company's Annual Report on
Form 10-K for the year
ended December 31, 1993.
4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the
of 9 1/4% Series A Cumulative Company's Form 8-A
Redeemable Preferred Stock Registration Statement
dated April 24, 1995.
4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(i) to the
November 7, 1991, between the Company's Form 8-A
Company and Aid Association for Registration Statement
Lutherans dated April 19, 1990.
4(ii)(c) Note Purchase Agreement dated Exhibit 6(c)(3) to the
as of February 19, 1992, between Company's Form 8-A
the Company and Principal Mutual Registration Statement
Life Insurance Company dated April 19, 1990.
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the
as of February 15, 1993, between Company's Form 8-A
the Company and CIGNA Property Registration Statement
and Casualty Insurance Company, dated April 19, 1990.
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) Credit Agreement dated as of Exhibit 6 (c)(6) to the
December 15, 1994 between the Company's Form 8-A
Company and First Union National Registration Statement
Bank of Virginia dated April 19, 1990.
4(ii)(g)(1) Indenture dated as of April 1, Exhibit 4(ii)(f)(1) to
1994, between the Company and the Company's Quarterly
NationsBank of Virginia, N.A., Report on Form 10-Q for
as Trustee the quarter ended March
31, 1994.
4(ii)(g)(2) Resolution of the Board of Exhibit 4(ii)(f)(2) to
Directors of the Company the Company's Quarterly
establishing terms of 7 1/4% Report on Form 10-Q for
Notes due April 1, 1999 the quarter ended
March 13, 1994.
4(ii)(g)(3) Form of 7 1/4% Notes due Exhibit 4(ii)(f)(3) to the
April 1, 1999 Company's Quarterly Report
on Form 10-Q for the
quarter ended
March 31, 1994.
4(ii)(g)(4) Resolution of the Board of Exhibit 4 (ii)(f)(4) to the
the Company establishing terms Company's Quarterly Report
of the 8 1/2% Debentures due on Form 10-Q for quarter
September 15, 2024 ended September 30, 1994.
4(ii)(g)(5) Form of 8 1/2% Debentures Exhibit 4 (ii)(f)(5) to the
due September 15, 2024 Company's Quarterly Report
on Form 10-Q for the
quarter ended Septem-
ber 30, 1994.
The Company agrees to furnish to the Commission on request a copy of
any instrument with respect to long-term debt of the Company or its subsidiaries
the total amount of securities authorized under which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
10(i) Employment Agreement between Exhibit 10(v)(i) to the
the Company and John P. McCann Company's Annual report on
dated October 29, 1982 Form 10-K for the year
ended December 31, 1982.
10(ii) Employment Agreement between Exhibit 10(v)(ii) to the
the Company and James Dolphin Company's Annual Report on
dated October 29, 1982. Form 10-K for the year
ended December 31, 1982.
10(iii) Employment Agreement between Exhibit 10(iii) to the
The Company and Barry M. Company's Annual Report on
Kornblau, dated Form 10-K for the year
February 1, 1991. December 31, 1990.
10(iv) 1985 Stock Option Plan, Exhibit B to the Company's
as amended definitive proxy statement
dated April 13, 1992.
10(v) 1991 Stock Purchase and Loan Exhibit 10(v) to the
Plan Company's Annual Report on
Form 10-K for the year
ended December 31, 1991.
10(vi) Amended and Restated Agreement Filed herewith.
Of Limited Partnership of
United Dominion Realty, L.P.
Dated as of December 31, 1995
12 Computation of Ratio of Earnings Filed herewith.
to Fixed Charges
21 The Company has the following subsidiaries, all of which are
wholly owned:
The Commons of Columbia, a Virginia corporation
UDRT of North Carolina, L.L.C., a North Carolina limited
liability company
UDRT of Alabama, Inc., an Alabama corporation
UDR of Marble Hill, L.L.C., a Virginia limited liability
company
United Dominion Realty, L.P., a Virginia limited
partnership
United Dominion Residential, Inc., a Virginia corporation
UDRT of Virginia, Inc., a Virginia corporation
23 Consent of Independent Auditors Filed herewith.
Exhibits 10(i) through 10(v) inclusive, are management contracts or compenatory
plans or arrangements required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K
(i) A Form 8-K dated December 28, 1995 was filed with the
Securities and Exchange Commission on January 11,
1996 and amended by a Form 8-K/A dated March 11,
1996. The filing reported the acquisition of certain
properties which in the aggregate were deemed to be
significant. The financial statements filed as a part
of this report are statements of rental operations of
Andover Place Apartments, Mallards of Wedgewood
Apartments, Hunters Ridge Apartments and Marble Hill
Apartments.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Company, Inc.
(registrant)
By /s/ James Dolphin
James Dolphin
Senior Vice President and Chief Financial Officer
March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 29, 1996 by the following persons on behalf of
the registrant and in the capacities indicated.
/s/ John P. McCann /s/ R. Toms Dalton, Jr.
John P. McCann R. Toms Dalton, Jr.
Director, President and Chief Director
Executive Officer
/s/ James Dolphin /s/ Jeff C. Bane
James Dolphin Jeff C. Bane
Director, Senior Vice President, Director
Secretary and Chief Financial
Officer
/s/ Jerry A. Davis
Jerry A. Davis John C. Lanford
Vice President, Controller-Corporate Director
Accounting and Chief Accounting Officer
/s/ C. Harmon Williams, Jr. /s/ H. Franklin Minor
C. Harmon Williams, Jr. H. Franklin Minor
Chairman of the Board of Directors Director
/s/ Barry M. Kornblau /s/ Robert P. Buford
Barry M. Kornblau Robert P. Buford
Director, Senior Vice President and Director
Director of Apartments
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
UNITED DOMINION REALTY TRUST, INC.
Page
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Ernst & Young LLP, Independent Auditors F-2
Consolidated Balance Sheets at December 31, 1995 and 1994 F-3
Consolidated Statements of Operations for each of
the three years in the period ended December 31, 1995 F-4
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 1995 F-5
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1995 F-6
Notes to Consolidated Financial Statements F-7
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III - Summary of Real Estate Owned F-18
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
United Dominion Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of United Dominion
Realty Trust, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Dominion
Realty Trust, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1995
the Company changed its method of accounting for impairment of long-lived assets
and long-lived assets held for disposition.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
January 25, 1996
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
December 31, 1995 1994
------------ ---- ----
<S> <C> <C>
ASSETS
Real estate held for investment (Notes 2 and 3):
Apartments $1,123,849 $ 928,758
Shopping centers 2,934 74,237
Office and industrial buildings 4,315 4,604
------------ ----------
1,131,098 1,007,599
Less accumulated depreciation 129,454 120,341
------------ ----------
1,001,644 887,258
Real estate held for disposition (Notes 1 and 2) 51,015 --
Cash and cash equivalents 2,904 7,261
Other assets 25,053 17,394
---------- ---------
$1,080,616 $ 911,913
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable (Note 4) $ 180,481 $ 158,449
7 1/4% Notes due April 1, 1999 (Note 5) 75,000 75,000
8 1/2% Debentures due September 15, 2024 (Note 5) 150,000 150,000
Other notes payable (Note 5) 124,858 143,215
Accounts payable, accrued expenses and other liabilities 21,193 18,459
Distributions payable to common shareholders 12,695 9,822
---------- -----------
564,227 554,945
Shareholders' equity (Notes 9 and 10):
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) 105,000 --
Common stock, $1 par value; 100,000,000 shares authorized
56,375,333 shares issued and outstanding (50,355,640 in 1994) 56,375 50,356
Additional paid-in capital 480,971 410,797
Notes receivable from officer shareholders (6,091) (5,991)
Distributions in excess of net income (120,314) (98,194)
Unrealized gain on securities available-for-sale 448 --
------------ -----------
Total shareholders' equity 516,389 356,968
------------ -----------
$1,080,616 $ 911,913
============ ===========
</TABLE>
See accompanying notes.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data
<S> <C> <C> <C>
Revenues
Rental income $195,240 $139,972 $89,084
Interest and other income 1,692 756 708
---------------- ---------------- ----------------
196,932 140,728 89,792
Expenses
Rental expenses:
Utilities 14,464 11,206 7,838
Repairs and maintenance 30,374 21,216 13,950
Real estate taxes 14,058 9,658 5,777
Property management 5,300 4,645 2,782
Other rental expenses 17,446 12,141 7,512
Depreciation of real estate owned 38,939 28,729 19,516
Interest 40,646 28,521 17,237
General and administrative 4,865 4,803 3,349
Other depreciation and amortization 1,103 691 545
Impairment loss on real estate held for disposition (Note 2) 1,700 - -
---------------- ---------------- ----------------
168,895 121,610 78,506
Income before gains (losses) on sales of investments
and extraordinary item 28,037 19,118 11,286
Gains (losses) on sales of investments 5,090 108 (89)
---------------- ---------------- ----------------
Income before extraordinary item 33,127 19,226 11,197
Extraordinary item -- early extinguishment of debt - (89) -
---------------- ---------------- ----------------
Net income 33,127 19,137 11,197
Dividends to preferred shareholders 6,637 - -
---------------- ---------------- ----------------
Net income available to common shareholders $ 26,490 $ 19,137 $11,197
Net income per common share $ .50 $ .41 $ .29
================ ================ ================
Weighted average number of common shares outstanding 52,781 46,182 38,202
</TABLE>
See accompanying notes.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock, $1 Par Value Preferred Stock
---------------------------- --------------------
Additional
Number Number Paid-in
of Shares Amount of Shares Amount Capital
---------------- --------- -------------------------------- -
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 35,284,718 $35,285 - $ - $227,935
- -
Common shares issued in public offering 6,095,000 6,095 - - 71,573
Exercise of common share options 98,900 99 - - 741
Common shares purchased by officers, net of repayments 135,500 135 - - 1,712
Common shares issued through dividend
reinvestment and stock purchase Plan 38,979 39 - - 525
Common stock dividends declared ($.70 per share) - - - - -
Net income - - - - -
---------------- --------- ----------- ---------- -----------
Balance at December 31, 1993 41,653,097 41,653 302,486
Common shares issued in public offering 8,479,400 8,479 - - 105,731
Exercise of common share options 50,488 51 - - 456
Common shares purchased by officers, net of repayments 137,500 138 - - 1,652
Common shares issued through Dividend
Reinvestment and stock purchase Plan 35,155 35 - - 472
Common stock dividends declared ($.78 per share) - - - - -
Net income - - - - -
---------------- --------- ----------- ---------- -----------
Balance at December 31, 1994 50,355,640 50,356 - 410,797
Common shares issued in direct institutioanl sale 1,360,000 1,360 - 16,452
Preferred shares issued in public offering - - 4,200,000 105,000 (3,522)
Common shares issued in public offering 4,550,000 4,550 - - 56,376
Exercise of common share options 98,536 98 - - 717
Common shares purchased by officers, net of repayments 10,000 10 - - 136
Common shares issued through Employee Stock Purchase Plan 1,157 1 - - 15
Preferred stock dividends declared (1.58 per share) - - - - -
Common stock dividends declared ($.90 per share) - - - - -
Unrealized gain on securities available for sale at
December 31, 1995 - - - - -
Net income - - - - -
================ ========= =========== =========== ========
Balance at December 31, 1995 56,375,333 $56,375 4,200,000 $105,000 $480,971
================ ========= =========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Receivable Distributions Gain on
from in Excess Securities Total
Officer of Available Shareholders'
Shareholders Net Income for Sale Equity
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 ($2,542) ($63,001) $ - $197,677
- - -
Common shares issued in public offering - - - 77,668
Exercise of common share options - - - 840
Common shares purchased by officers, net of repayments (1,842) - - 5
Common shares issued through dividend reinvestment and
stock purchase plan - - - 564
Common stock dividends declared ($.70 per share) - (27,988) - (27,988)
Net income - 11,197 - 11,197
--------- ------------ ------------ -------------
Balance at December 31, 1993 (4,384) (79,792) 259,963
Common shares issued in public offering - - - 114,210
Exercise of common share options - - - 507
Common shares purchased by officers, net of repayments (1,607) - - 183
Common shares issued through dividend reinvestment and
stock purchase plan - - - 507
Common stock dividends declared ($.78 per share) - (37,539) - (37,539)
Net income - 19,137 - 19,137
--------- ------------ ------------ -------------
Balance at December 31, 1994 (5,991) (98,194) 356,968
Common shares issued in direct institutional sale - - - 17,812
Preferred shares issued in public offering - - - 101,478
Common shares issued in public offering - - - 60,926
Exercise of common share options - - - 815
Common shares purchased by officers, net of repayments (100) - - 46
Common shares issued through Employee Stock Purchase Plan - - - 16
Preferred stock dividends declared ($1.58 per share) - (6,637) - (6,637)
Common stock dividends declared ($.90 per share) - (48,610) - (48,610)
Unrealized gain on securities available for sale at
December 31, 1995 - - 448 448
Net income - 33,127 - 33,127
========== ============ ============ =============
Balance at December 31, 1995 ($6,091) ($120,314) $448 $516,389
========== ============ ============ =============
</TABLE>
See accompanying notes.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31, 1995 1994 1993
------------------------ ---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $33,127 $19,137 $11,197
Adjustments to reconcile net income to net cash provided
by operating activities:
(Gains) losses on sales of real estate owned (5,090) (108) 89
Impairment loss on real estate held for disposition 1,700 -- --
Extraordinary item -- 89 --
Depreciation and amortization 40,042 29,644 20,372
Adoption of SFAS No. 112 "Employers' Accounting
for Postemployment Benefits" -- 450 --
Changes in operating assets and liabilities:
Increase in operating liabilities 763 6,680 2,724
Decrease in operating assets (4,114) (1,348) (443)
-------- -------- --------
Net cash provided by operating activities 66,428 54,544 33,939
INVESTING ACTIVITIES
Acquisitions of real estate, net of debt and liabilities assumed (173,937) (346,730) (117,197)
Capital expenditures (35,613) (19,154) (11,060)
Net proceeds from sales of real estate owned 23,464 2,706 69
Proceeds from gain on interest rate hedge transaction -- 3,484 --
Net (increase) decrease in mortgage notes receivable 2,156 63 (1,907)
Other -- -- 31
------- ------- -------
Net cash used in investing activities (183,930) (359,631) (130,064)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 79,615 115,407 79,077
Net proceeds from issuance of preferred stock 101,478 -- --
Net proceeds from issuance of mortgage notes payable 21,349 12,006 13,800
Net proceeds from issuance of notes payable 10,000 250,000 52,000
Net borrowings (repayments) of short-term bank borrowings 4,250 (14,500) 150
Mortgage financing proceeds released from construction funds 2,457 24,866 --
Cash distributions paid to preferred shareholders (4,613) -- --
Cash distributions paid to common shareholders (45,737) (35,005) (26,523)
Scheduled mortgage principal payments (1,932) (1,455) (806)
Payments on notes and non-scheduled mortgage principal payments (53,722) (44,744) (16,905)
-------- -------- --------
Net cash provided by financing activities 113,145 306,575 100,793
Net increase in cash and cash equivalents (4,357) 1,488 4,668
Cash and cash equivalents, beginning of year 7,261 5,773 1,105
-------- -------- --------
Cash and cash equivalents, end of year $ 2,904 $ 7,261 $ 5,773
======== ======== ========
</TABLE>
See accompanying notes.
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION United Dominion Realty Trust, Inc. (the "Company"), a Virginia
corporation, is an owner-operator of income producing real estate, primarily
multifamily apartment communities in the mid-Atlantic and Southeastern, U.S.
BASIS OF PRESENTATION The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FEDERAL INCOME TAXES The Company is operated as and annually elects to be taxed
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended (the "Code"). Generally, a real estate investment trust, which complies
with the provisions of the Code and distributes at least 95% of its taxable
income to its shareholders, does not pay federal income taxes on its distributed
income. Accordingly, no provision has been made for federal income taxes.
CASH AND CASH EQUIVALENTS All highly liquid investments with maturities of three
months or less, when purchased, are considered to be cash equivalents.
REAL ESTATE ASSETS AND DEPRECIATION On October 1, 1995, the Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" for the fiscal year ended December 31, 1995. The statement
requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted
future cash flows are not sufficient to recover the assets, carrying value. If
such indicators are present, an impairment loss is recognized based on the
excess of the carrying amount of the impaired asset over its fair value.
For long-lived assets to be disposed of, impairment losses are recognized when
the fair value of the asset, less the estimated cost to sell, is less than the
carrying value of the asset measured at the time management commits to a plan to
dispose of the asset. Assets are classified as assets to be disposed of when
management has committed to sell and is actively marketing the property. Assets
to be disposed of are carried at the lower of carrying value or fair value less
cost to dispose, determined on an asset by asset basis. Depreciation is not
recorded during the period in which assets are held for disposal and
gains(losses) from initial and subsequent adjustments to the carrying value of
the assets, if any, are recorded as a separate component of income from
continuing operations. Real estate assets held for disposition are reported
separately on the consolidated balance sheet, net of accumulated depreciation
and impairment loss valuation allowance.
Ordinary repairs and maintenance costs are expensed as incurred; significant
improvements, renovations, and replacements are capitalized and depreciated over
their estimated useful lives. Certain costs, principally payroll, directly
related to real estate acquisitions and redevelopment, are capitalized.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets which range from 25 to 40 years for properties, 10
to 35 years for major improvements, and 3 to 15 years for fixtures, equipment
and other assets.
INTEREST Interest is capitalized on accumulated expenditures relating to the
acquisition and development of certain qualifying properties. During 1995, 1994
and 1993, total interest paid was $39,568,000, $22,944,000 and $14,649,000,
respectively, which includes $40,000 that was capitalized during 1995. No
interest was capitalized in 1994 or 1993.
DEFERRED FINANCING COSTS Deferred financing costs are generally amortized over a
period not to exceed the term of the related debt. Amortization of deferred
financing costs is classified as interest expense and included in the
consolidated statements of operations in the amounts of $1,078,000, $1,180,000
and $707,000 for 1995, 1994 and 1993, respectively.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTEREST RATE SWAP AGREEMENTS The Company enters into interest rate swap
agreements to alter the interest rate characteristics of outstanding debt
instruments. The interest rate swap agreements involve the periodic exchange of
interest payments over the life of the agreements. Amounts received or paid on
the interest rate swap agreements that are used to alter the interest rate
characteristics of outstanding debt are recorded on an accrual basis as an
adjustment to the related interest expense of the outstanding debt. The related
amount payable to and receivable from counterparties are included in other
liabilities. Changes in the fair value of the interest rate swap agreements
accounted for under the accrual method are not reflected in the accompanying
financial statements.
INTEREST RATE RISK MANAGEMENT AGREEMENTS The Company enters into interest rate
risk management agreements to manage interest rate risk associated with
anticipated debt transactions. The Company follows SFAS No.80 "Accounting for
Futures Contracts" which permits hedge accounting for anticipatory transactions
meeting certain criteria. Gains and losses, if any, on these transactions are
deferred and amortized over the terms of the related debt as an adjustment to
interest expense. Changes in the fair values of interest rate risk management
agreements are not recognized in the financial statements. In the event that the
anticipated transaction is no longer likely to occur, the Company would mark the
derivative to market and would recognize any adjustment in the consolidated
statement of operations. The Company does not enter into interest rate risk
management agreements for trading purposes.
INCOME PER COMMON SHARE Primary net income per common share is calculated using
the weighted average number of shares outstanding during each year. Options
outstanding are not included since their inclusion would not be materially
dilutive.
INVESTMENT IN MARKETABLE EQUITY SECURITIES In connection with certain property
sales during 1995, the Company received marketable preferred stock with a fair
value of $7.7 million on the date of receipt. These securities are classified as
available-for-sale and are included in other assets. Securities
available-for-sale are stated at fair value. Unrealized gains and losses are
reported as a separate component of shareholders' equity and are not reported in
the consolidated statement of operations until realized or until a decline in
fair value is deemed to be other-than-temporary.
POSTEMPLOYMENT BENEFITS Effective January 1, 1994, the Company adopted the
provisions of SFAS No. 112, "Employers' Accounting for Postemployment Benefits".
This statement requires the accrual of the estimated cost of benefits provided
by an employer to its former or inactive employees after employment, but before
retirement. Adoption of SFAS No. 112 increased 1994 general and administrative
expense by $450,000 or $.01 per share.
RECLASSIFICATIONS Certain previously reported amounts have been reclassified to
conform with the current financial statement presentation.
STOCK BASED COMPENSATION In October, 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based Compensation" which is
effective for the Company's December 31, 1996 financial statements. SFAS No. 123
allows companies to either account for stock-based compensation under the new
provisions of SFAS No. 123 or under the provisions of APB Opinion No. 25, but
requires pro forma disclosure in the footnotes and financial statements as if
the measurement provisions of SFAS No. 123 had been adopted. The Company intends
to continue accounting for its stock-based compensation in accordance with the
provisions of APB No. 25. As such, the adoption of SFAS No. 123 will not impact
the financial position or the results of operations of the Company.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REAL ESTATE OWNED
The Company operates primarily in 15 separate major markets dispersed throughout
a nine state area. At December 31, 1995, the Company did not own more than 11%
of its apartment homes in any one market.
The following summarizes real estate held for investment at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
---- ----
<S> <C> <C>
Land and land improvements $ 193,672 $ 174,536
Buildings and improvements 864,331 773,015
Furniture, fixtures and equipment 72,576 59,552
Construction in progress 519 496
----------- -----------
Real estate held for investment 1,131,098 1,007,599
Accumulated depreciation (129,454) (120,341)
---------- ----------
Real estate held for investment, net $ 1,001,644 $ 887,258
========== ==========
</TABLE>
The following is a summary of real estate owned at December 31, 1995:
<TABLE>
<CAPTION>
Initial
Dollars in thousands Number of Acquisition Carrying Accumulated
REAL ESTATE HELD FOR INVESTMENT Properties Cost Value* Depreciation Encumbrances
---------- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
APARTMENTS
North Carolina 27 $180,491 $ 214,776 $ 37,187 $ 19,093
Florida 26 247,582 264,869 12,269 44,962
Virginia 28 175,432 208,924 44,865 28,844
South Carolina 20 121,089 144,653 14,558 25,306
Georgia 8 68,338 77,079 8,750 12,435
Maryland 12 99,906 105,199 5,093 30,800
Tennessee 9 71,481 76,700 3,193 11,114
Alabama 2 12,742 12,411 637 --
Delaware 3 18,684 19,239 652 --
COMMERCIAL
Tennessee 1 1,176 2,438 716 --
Virginia 4 4,288 4,810 1,534 --
---- ----------- ---------- -------- --------
140 $1,001,209 $1,131,098 $129,454 $172,554
==== =========== ========== ======== ========
REAL ESTATE HELD FOR DISPOSITION
APARTMENTS
North Carolina 3 $ 11,906 $ 17,254 $ 7,268 $ 3,231
Virginia 2 4,014 5,806 2,504 1,246
Georgia 1 4,526 7,914 2,319 --
COMMERCIAL
Virginia 5 11,766 21,541 6,556 3,450
South Carolina 2 12,566 13,396 2,787 --
North Carolina 1 5,169 8,676 2,138 --
---- --------- --------- --------- ---------
14 $ 49,947 $ 74,587 $ 23,572 $ 7,927
==== ========= ========= ========= =========
</TABLE>
* Real estate held for disposition is stated at the lower of carrying value or
fair value, less cost to sell.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Real estate held for disposition includes two parcels of land, six shopping
centers and six smaller apartment communities which contributed income from
property operations in the aggregate amount of approximately $4.1 million for
the year ended December 31, 1995. The sales of real estate held for disposition
are expected to occur during the first half of 1996, however, there are no
assurances that these sales will be consummated.
The Company recorded a $1.7 million impairment loss associated with
management's decision to sell a shopping center at a discount as part of a
portfolio transaction.
The following is a reconciliation of the carrying amount of real estate held for
investment:
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
------------ ---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 1,007,599 $ 582,213 $ 454,115
Real estate purchased* 198,136 409,280 118,265
Improvements 35,682 18,857 10,380
Real estate sold (34,031) (2,751) (547)
Transferred to real estate held for
disposition (76,288) -- --
---------- ----------- ---------
Balance at December 31 $ 1,131,098 $ 1,007,599 $ 582,213
========== ========== ========
</TABLE>
*In connection with the acquisition of certain apartment properties in 1995 and
1994, the Company assumed approximately $24.1 and $60.3 million, respectively,
of mortgage debt encumbering the properties acquired.
The following is a reconciliation of accumulated depreciation:
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
------------ ---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 120,341 $ 91,444 $ 71,806
Depreciation expense for the year* 39,442 29,049 19,764
Transferred to real estate held for disposition (23,572) -- --
Real estate sold (6,757) (152) (126)
--------- ---------- --------
Balance at December 31 $ 129,454 $ 120,341 $ 91,444
======== ======== =======
</TABLE>
*Depreciation expense of $503, $320 and $248, for 1995, 1994 and 1993,
respectively, is included in "Other depreciation and amortization" in the
consolidated statements of operations.
The Company's properties are leased to others under operating leases. Certain
shopping center leases provide that tenants share certain operating costs such
as real estate taxes, insurance and maintenance by reimbursement to the Company.
Such reimbursements amounted to $887,000 in 1995, $1,070,000 in 1994 and
$936,000 in 1993. The Company has no material net lease arrangements.
The aggregate cost of real estate owned for federal income tax purposes was
approximately $1.192 billion at December 31, 1995 and $987 million at December
31, 1994.
3. ACQUISITIONS
During 1995, the Company acquired 23 apartment communities containing 5,142
apartment homes at a total cost of $195.0 million. During 1994, the Company
acquired 47 apartment communities containing 11,433 apartment homes at a total
cost of $409.3 million. Information concerning unaudited pro forma results of
operations for the years ended December 31, 1995 and 1994 is set forth below.
For 1995, such information assumes the acquisition of 13 apartment communities
containing 2,417 apartment homes at a total cost of $98.6 million, as if the
acquisitions had occurred on January 1, 1995. For 1994, such pro forma
information assumes (i) the acquisition of 41 apartment communities containing
9,749 homes at a total cost of $350.3 million, and (ii) the 1995 acquisitions of
13 apartment communities containing 2,417 apartment homes at a total cost of
$98.6 million, as if the acquisitions had occurred on January 1, 1994.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pro Forma Pro Forma
In thousands, except per share amounts 1995 1994
-------------------------------------- ---- ----
<S> <C> <C>
Rental income $202,804 $183,836
Net income available to common shareholders 26,299 18,904
Net income per common share $ .50 $ .38
</TABLE
The unaudited information is not necessarily indicative of what the Company's
consolidated results of operations would have been if the acquisitions had
occurred at the beginning of each period presented. Additionally, the pro forma
information does not purport to be indicative of the Company's results of
operations for future periods.
4. MORTGAGE NOTES PAYABLE
Mortgage notes payable consisted of the following at December 31, 1995 and 1994:
</TABLE>
<TABLE>
<CAPTION>
In thousands 1995 1994
------------ ---- ----
<S> <C> <C>
Conventional fixed-rate $ 56,368 $ 53,206
Tax-exempt fixed-rate 112,843 93,053
Total fixed-rate 169,211 146,259
--------- ---------
Tax-exempt variable-rate 11,270 12,190
--------- ---------
$ 180,481 $ 158,449
======== ========
</TABLE>
CONVENTIONAL FIXED-RATE MORTGAGE NOTES Conventional fixed-rate mortgage notes
included 19 loans encumbering 13 properties at December 31, 1995 and 22 loans
encumbering 17 properties at December 31, 1994. Mortgage notes are generally due
in monthly installments of principal and interest and mature at various dates
through 2020. At December 31, 1995 and 1994, this debt carried fixed rates of
interest ranging from 7.00% to 9.625% (8.2% weighted average) and 7.00% to
12.50% (8.5% weighted average), respectively. During 1995, the Company prepaid
five mortgage loans aggregating $10.3 million having a weighted average interest
rate of 10.1%.
TAX-EXEMPT MORTGAGE NOTES At December 31, 1995, 17 properties were encumbered by
fixed-rate mortgage notes which secure related tax-exempt housing bond issues.
Interest on these notes is generally payable in semi-annual installments and the
notes mature at various dates through 2025. At December 31, 1995 and 1994,
tax-exempt fixed-rate mortgage notes had interest rates ranging from 5.98% to
8.50% (weighted average 6.9%), and 5.91% to 10.235% (weighted average 7.2%),
respectively.
At December 31, 1995, three of the Company's properties were encumbered by
variable-rate mortgage notes, which secure tax-exempt housing bond issues.
Interest on these notes is generally payable in semi-annual installments and the
notes mature at various dates through 2010. At December 31, 1995 and 1994,
tax-exempt variable-rate notes had interest rates ranging from 5.00% to 7.29%
(weighted average 5.8%) and 4.60% to 7.29% (weighted average 5.6%),
respectively.
The tax-exempt mortgage notes contain covenants which require the Company to
lease or hold for lease 15% to 40% of the apartment homes for low to moderate
income residents, as defined. Certain of the Company's tax-exempt notes contain
covenants which require minimum rentals to individuals based upon income levels,
as specified.
The aggregate maturities of mortgage notes (conventional and bond related) for
the five years subsequent to December 31, 1995 are as follows (in thousands):
1996 $ 7,878
1997 9,701
1998 7,201
1999 12,677
2000 2,261
Thereafter 140,763
-------
$180,481
=======
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These payments include special principal curtailments and balloon payments of
$5.6 million in 1996, $7.6 million in 1997, $4.8 million in 1998 and $10.0
million in 1999.
5. OTHER NOTES PAYABLE
A summary of other notes payable at December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
-------------------- ---- ----
<S> <C> <C>
Commercial Banks
Borrowings outstanding under revolving credit facilities $ 18,400 $ 14,150
Variable rate note due March, 1995 (a) -- 10,000
Insurance Companies--Senior Unsecured Notes
7.98% due March, 1997-2003 (b) 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, 1996-1998 (c) 6,000 8,000
Other (d) 3,458 4,065
--------- ---------
124,858 143,215
Senior Unsecured Notes - Other
7 1/4% Notes due April 1, 1999 75,000 75,000
8 1/2% Debentures due September 15, 2024(e) 150,000 150,000
-------- --------
$ 349,858 $ 368,215
======== ========
</TABLE>
(a) The note had an interest rate of one month LIBOR plus 62 1/2 basis
points.
(b) Payable in seven equal annual principal installments of $7.4 million.
(c) Payable in three equal annual principal installments of $2 million.
(d) Includes $3.0 million and $3.5 million at December 31, 1995 and 1994,
respectively, of deferred gain from interest rate hedge transaction
discussed in Note 6.
(e) Debentures include an investor put feature which grants the
debentureholder a one time option to redeem debentures at the
end of 10 years.
Information concerning short-term bank borrowings is summarized in the table
that follows:
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
------------ ---- ---- ----
<S> <C> <C> <C>
Total revolving credit facilities
and lines of credit
at December 31 $103,500 $103,500 $ 61,000
Borrowings outstanding
at December 31 18,400 14,150 28,650
Weighted average daily
borrowings during the year 8,198 33,787 11,313
Maximum daily borrowings
during the year 35,300 79,300 43,200
Weighted average daily interest
rate during the year 6.8% 5.1% 4.0%
Weighted average daily interest
rate at December 31 6.5% 6.5% 3.8%
</TABLE>
The underlying loan agreements contain certain covenants which, among other
things, require the Company to maintain minimum consolidated tangible net worth,
as defined, and maintain certain financial ratios.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1995, the Company had $70 million of unsecured revolving credit
facilities with four commercial banks. These credit agreements currently expire
in June, 1996 and 1997, but are renewable annually by mutual agreement between
the Company and each bank. Interest on borrowings outstanding under these
agreements are at varying rates depending on the level of the Company's debt and
the term of the borrowing. Generally, loans for 30 days or more are priced at
LIBOR plus 5/8% to 1%. Loans of shorter duration are priced at spreads of 5/8%
to 11/8% over the applicable base rate. The Company is obligated to pay a fee
equal to 1/4% per annum on the average daily amount of the unused portion of the
commitment during the revolving loan period. None of these agreements have
compensating balance requirements.
At December 31, 1995, the Company had unsecured lines of credit with three
commercial banks totalling $33.5 million. At December 1995, there were no
borrowings outstanding under these lines. Each line is subject to periodic bank
review and requires the Company to maintain a depository relationship with the
respective bank, however, there are no formal compensating balance arrangements.
Borrowings bear interest generally at negotiated rates in line with borrowings
under the Company's revolving credit facilities.
6. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair
value of financial instruments were determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgment is necessary to interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize upon disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The carrying amounts and estimated fair value of the Company's financial
instruments at December 31, 1995, both on and off-balance sheet, are summarized
as follows:
<TABLE>
<CAPTION>
In thousands Carrying Amount Fair Value
------------ --------------- ----------
<S> <C> <C>
Cash and cash equivalents $2,904 $2,904
Investment in equity securities 8,144 8,144
Conventional mortgage notes payable 56,368 58,180
Tax-exempt notes payable 124,113 131,486
Notes payable 349,858 376,347
Interest rate risk management agreements -- (3,996)
</TABLE>
The following methods and assumptions were used by the Company in estimating the
fair values set forth above.
MORTGAGE NOTES PAYABLE Estimated fair value is based on mortgage rates believed
to be available to the Company for issuance of debt with similar terms and
remaining maturities as of December 31, 1995.
NOTES PAYABLE The carrying amounts of the Company's borrowings under short-term
revolving credit agreements and lines of credit are variable rate and therefore,
approximate their fair values. The fair value of the Company's fixed rate term
debt are estimated using discounted cash flow analysis, based on the Company's
estimated incremental borrowing rate at December 31, 1995, for similar types of
borrowing arrangements.
INTEREST RATE RISK MANAGEMENT AGREEMENTS Fair value is based on market
quotations from investment banks.
Disclosure about the fair value of financial instruments is based upon relevant
information available to the Company at December 31, 1995. Although management
is not aware of any factors that would have a material effect on the fair value
amounts reported herein, such amounts have not been revalued since that date and
current estimates of fair value may significantly differ from the amounts
presented.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTEREST RATE SWAP AGREEMENTS Interest rate swap contracts with a notional
amount of $10,000,000 and $20,000,000 matured during 1994 and 1993,
respectively. At December 31, 1995, there were no interest rate swap agreements
outstanding, nor were there any interest rate swap agreements entered into
during 1995. For all periods presented, the Company had no deferred gains or
losses relating to terminated swap contracts. Interest rate swap contracts did
not have a material impact on interest expense or consolidated results of
operations during the periods presented.
INTEREST RATE RISK MANAGEMENT AGREEMENTS In 1995, the Company 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 Company to lock-in a ten year Treasury rate of
6.544% on or before July 15, 1996. The Company anticipates unwinding the
interest rate swap transaction upon refinancing of the $50 million debt in 1996.
At December 31, 1995, the Company had a $2.6 million unrealized loss on this
transaction. In anticipation of the issuance of approximately $50 million of
medium-term notes during the first quarter of 1996, the Company entered into a
$50 million interest rate lock agreement with one of its commercial banks. The
transaction allowed the Company to lock-in a 10 year Treasury rate of 5.946%
beginning on or before March 1, 1996. At December 31, 1995, the Company had a
$1.4 million unrealized loss on this transaction. Any gain or loss from these
transactions will be recognized at the transaction date and amortized into
interest expense over the term of the new debt. While the Company is exposed to
credit loss in the event of nonperformance by the counterparties, such
nonperformance is not anticipated as the counterparties are highly rated, credit
quality companies. By entering into these interest rate risk management
agreements, the Company has reduced its interest rate risk associated with the
near-term maturities and additional issuance of unsecured debt by effectively
locking in an interest rate. There is no credit exposure to the Company under
these agreements at December 31, 1995.
During 1994, the Company entered into two interest rate hedge transactions
involving futures contracts with a total principal amount of $150 million to
hedge against possible interest rate fluctuations during the period prior to the
issuance of the $150 million Debentures. These two transactions effectively
reduced the interest rate on the Debentures from 8.50% to 8.22% for ten years.
These contracts were terminated upon issuance of the Debentures. Gains from
these contracts of $3.5 million were deferred as an adjustment to the carrying
amount of the Debentures and will be amortized on a straight line basis as a
reduction of interest expense over a ten year period.
The Company does not obtain collateral or other security to support off-balance
sheet financial instruments subject to credit risk, but monitors the credit
standing of counterparties.
7. INCOME TAXES
The differences between net income available to common shareholders for
financial reporting purposes and taxable income before dividend deductions
relate primarily to temporary differences, principally real estate depreciation,
the accrual on the preferred stock dividend, and the deferral for tax purposes
of certain gains on property sales.
All realized gains (losses) on sales of investments are distributed to
shareholders if and when recognized for income tax purposes. Since 1980, gains
aggregating approximately $11.6 million have been deferred for income tax
purposes and are undistributed at December 31, 1995.
For income tax purposes, distributions paid to shareholders consist of ordinary
income, capital gains, return of capital or a combination thereof. For the three
years ended December 31, 1995, distributions paid per share were taxable as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Ordinary income $.715 $ .629 $ .493
Capital gains .003 .004 --
Return of capital .152 .127 .197
---- ---- ----
$.870 $.760 $.690
==== ==== ====
</TABLE>
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. PROFIT SHARING PLAN
The "United Dominion Realty Trust, Inc. Profit Sharing Plan" (the "Plan") is a
defined contribution plan covering all full-time employees who have completed
1,000 hours of service and are age twenty-one or older at the time of
enrollment. Under the plan, participants may contribute a percentage of
compensation, but not in excess of the maximum allowed under the Code. The
Company may make matching contributions in an amount equal to a percentage of
each participant's elective deferral contribution deduction for that Plan year
as determined by the Compensation Committee. For the years ended December 31,
1995, 1994 and 1993, the Company matched 85%, 75% and 65%, respectively, of the
first $1,000 annually contributed by each eligible participant. Expenses related
to the Plan and included in the Company's consolidated statements of operations
for the three years ended December 31, 1995, 1994 and 1993 were $136,000,
$100,000, and $37,000, respectively.
The Plan also allows the Company to make discretionary profit sharing
contributions to the Plan as determined by the Compensation Committee of the
Board of Directors. Contribu-tions, if any, are allocated to each participant
based on the relative compensation of the participant to the compensation of all
participants (maximum annual compensation in the determination is $50,000).
Aggregate discretionary contributions of approximately $400,000, $250,000, and
$150,000 were made for the years ended December 31, 1995, 1994 and 1993,
respectively.
9. SHARE OPTIONS
Under the Company's 1985 Share Option Plan (the "Plan"), as amended, a maximum
of 2,400,000 options could be granted, at the discretion of the Board, to
certain officers, directors and key employees of the Company, through 1997. On
December 12, 1995, the Board granted 286,667 incentive stock options (ISO's)and
85,333 non-qualified options (NQO's) to certain officers and key employees of
the Company at $14.63 per share. These options vest on December 31, 1996. Of the
options outstanding at December 31, 1995, 705,480 options were not then
exercisable under the provisions of the Plan.
The Plan generally provides, among other things, that options be granted at
exercise prices not lower than the market value of the shares on the date of
grant. Shares under options which subsequently expire or are canceled are
available for subsequent grant. For options granted prior to December 12, 1995,
the optionee has up to five years from the date on which the options first
become exercisable during which to exercise the options. For the options granted
on December 12, 1995, the optionee has up to ten years from the date the options
were granted during which to exercise the options. Activity in the Company's
share option plan during the three years ended December 31, 1995 is summarized
in the following table.
<TABLE>
<CAPTION>
Shares Available
for future Options Outstanding
Option Grant Shares Price per Share
---------------- ------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1992 1,371,000 970,400 $7.44 - $11.56
Options granted (67,100) 67,100 $13.63
Options exercised -- (98,900) $7.44 - $11.56
Options expired 4,000 (4,000) $9.09 - $11.56
--------- --------- --------------
Balance, December 31, 1993 1,307,900 934,600 $7.44 - $13.63
Options granted (371,000) 371,000 $13.13
Options exercised -- (50,488) $7.44 - $11.56
Options expired 23,240 (23,240) $11.56 - $13.63
--------- --------- --------------
Balance, December 31, 1994 960,140 1,231,872 $7.44 - $13.63
Options granted (372,000) 372,000 $14.63
Options exercised -- (98,536) $7.44 - $13.63
Options expired 14,700 (14,700) $11.56 - $13.63
--------- --------- --------------
Balance, December 31, 1995 602,840 1,490,636 $7.44 - $14.63
========= ========== ===============
</TABLE>
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHAREHOLDERS' EQUITY
PREFERRED STOCK In April, 1995, the Company 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
of which $33.1 million was used to repay then existing bank debt and $65.7
million was used to fund the acquisition of a portfolio of nine apartment
communities. The remaining net proceeds were used to help fund subsequent
apartment acquisitions.
Dividends on the preferred stock are payable on a quarterly basis at an annual
dividend rate of $2.3125 per share. The preferred stock has no par value, with a
liquidation preference of $25 per share and 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 voting rights, no stated maturity, is
not subject to any sinking fund or mandatory redemption and is not convertible
into any other securities of the Company.
COMMON STOCK In September, 1995, the Company completed a public offering of
4,550,000 shares of its common stock at $14.25 per share. Net proceeds of the
offering, after deducting underwriting commissions and direct offering costs,
aggregated approximately $61 million and were used to repay $26.8 million of
bank debt. The remaining net proceeds were temporarily invested in short-term
money market investments and were used primarily for the acquisition of
additional apartment communities. In February, 1995, the Company 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.
All share and per share information in the accompanying financial statements has
been adjusted to retroactively reflect a 2 for 1 stock split in 1993.
OFFICERS' STOCK PURCHASE AND LOAN PLAN At December 31, 1995, 553,000 shares of
common stock were issued under the Officer Stock Purchase and Loan Plan. Under
the plan, certain officers have purchased common stock at the then current
market price with financing provided by the Company at 7% interest only. The
underlying notes mature beginning in November, 1998. A total of 47,000 shares
are available for future issuance under this plan.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN As of December 31, 1995, 92,544
shares of common stock had been issued under the Company's Dividend Reinvestment
and Stock Purchase Plan. Shares in the amount of 907,456 are reserved for
further issuance under this plan. During 1995, shares were purchased on the open
market.
EMPLOYEE STOCK PURCHASE PLAN As of December 31, 1995, 1,157 shares of common
stock had been issued under the Company's Employee Stock Purchase Plan. Shares
in the amount of 98,843 are reserved for future issuance under the plan. During
1995, shares were also purchased on the open market.
11. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Summarized unaudited consolidated quarterly financial data for the years ended
December 31, 1995 and 1994 is as follows: (In thousands, except per share data):
<TABLE> Three Months Ended
<CAPTION>
1995 March 31 June 30* September 30** December 31
---- -------- ------- ------------ -----------
<S> <C> <C> <C>
Rental income $45,493 $47,747 $49,842 $52,158
Income before gains (losses) on sales of
investments and extraordinary item 6,087 6,993 5,599 9,358
Net income 6,150 11,569 5,804 9,604
Dividends to preferred shareholders -- 1,781 2,428 2,428
Net income available to common shareholders 6,150 9,788 3,376 7,176
Per share:
Net income per common share .12 .19 .07 .13
Weighted average number of common shares outstanding 51,125 51,776 51,883 56,293
</TABLE>
* For the quarter ended June 30, 1995, the Company recognized a $4.6
million aggregate book gain on the sales of real estate.
** For the quarter ended September 30, 1995, the Company recognized a $1.7
million impairment loss on real estate held for disposition (Note 2).
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended
1994 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Rental income $26,706 $29,673 $39,526 $44,066
Income before gains (losses) on sales of
investments and extraorindary item 3,415 4,067 5,995 5,641
Net income 3,415 3,978 5,975 5,768
Dividends to preferred shareholders -- -- -- --
Net income available to common shareholders 3,415 3,978 5,975 5,768
Per share:
Net income per common share .08 .09 .12 .11
Weighted average number of common shares
outstanding 41,688 42,508 50,153 50,241
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned
Cost of
Improvements
Initial Cost to Capitalized
Trust Subsequent to
Land and Buildings Acquisition
Land and (Net of
Encumbrances Improvements Improvements Disposals)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments:
2131 Apartments/Nashville, TN $ $ 869,860 $9,155,185 $1,885,836
Alafaya Woods/Orlando, FL -- 1,653,000 9,042,256 677,711
Alexander Glen/Charlotte, NC 5,490,273 698,860 6,488,061 191,044
Andover Place/Orlando, FL 5,620,000 1,732,406 3,943,184 119,804
Bay Cove/Clearwater, FL -- 2,928,847 6,578,257 1,193,572
Bayberry Commons/Portsmouth, VA -- 516,800 3,485,645 1,027,509
Beechwood/Greensboro, NC -- 1,409,377 6,086,677 338,460
Braeland Commons/Columbia, MD 4,955,000 1,564,942 7,006,574 298,101
Braeton Bay/ Richmond, VA -- 2,059,252 15,049,088 36,281
Bramblewood/Goldsboro, NC -- 401,538 3,150,912 946,532
Brantley Pines/Fort Myers, FL -- 841,400 5,914,766 738,168
Briar Club/Memphis, TN -- 1,214,400 6,928,959 633,837
Brittingham Square/Salisbury, MD -- 650,143 4,962,246 24,314
Brynn Marr/Jacksonville, NC -- 432,974 3,821,508 1,047,691
Canterbury Woods/Charlotte, NC -- 409,675 5,011,435 1,693,246
Cinnamon Ridge/Raleigh, NC 7,000,000 967,230 3,337,197 4,065,357
Clear Run/Wilmington, NC -- 874,830 8,586,978 803,448
Cleary Court/Fort Lauderdale, FL -- 2,399,848 7,913,450 214,893
Colonial Villa/Columbia, SC -- 1,014,181 5,100,269 1,060,785
Colony of Stone Mountain/Atlanta, GA -- 3,160,000 5,641,646 3,027,996
Colony Village/New Bern, NC -- 346,330 3,036,956 1,003,058
Copperfield/Fort Lauderdale, FL -- 4,424,128 20,428,969 192,416
Country Walk/Columbia, SC -- 422,113 3,133,623 1,164,098
Courthouse Green/Richmond, VA -- 732,050 4,702,353 1,314,310
Courtney Square/Raleigh, NC -- 1,114,600 5,119,259 1,105,031
The Cove at Lake Lynn/Raleigh, NC -- 1,723,363 5,303,760 534,936
Covington Crossing/Memphis, TN -- 1,296,240 3,792,590 791,425
Craig Manor/Salem,VA -- 282,200 2,419,570 607,073
The Creek/Wilmington, NC -- 417,500 2,506,206 845,450
Crescent Square/Atlanta, GA -- 1,057,000 6,865,036 4,281,851
Crossroads/Columbia, SC -- 2,074,800 13,710,803 852,600
Dover Country Club/Dover, DE -- 2,007,878 6,347,331 539,290
Dover Village/Orlando, FL -- 2,894,702 6,456,100 1,591,328
Dunwoody Pointe/Atlanta, GA 6,027,182 2,763,324 6,902,996 33,189
Eastwind/Virginia Beach, VA -- 155,000 5,316,738 1,296,863
Eden Commons/Columbia, MD 8,450,000 2,361,167 9,384,171 485,788
Emerald Bay/Charlotte, NC -- 626,070 4,722,862 2,106,220
English Hills/Richmond, VA -- 1,979,174 11,524,313 2,800,786
Excalibur/Charlotte, NC -- 1,115,261 8,629,877 384,157
Fisherman's Village/Orlando, FL -- 2,387,368 7,458,897 2,070
Forest Hills/Wilmington, NC -- 1,028,000 5,420,478 685,376
Forest Lakes at Oyster Point/
Newport News, VA -- 780,117 8,861,878 179,850
Forestbrook/Columbia, SC 5,000,000 395,516 2,902,040 1,180,092
Foxcroft/Tampa, FL -- 749,400 3,927,644 630,825
Franklin Mansions-Land/Nashville, TN -- 2,104,394 0 34,582
Gable Hill/Columbia, SC -- 824,847 5,307,194 713,648
Gatewater Landing/Glen Burnie, MD -- 2,078,422 6,084,526 701,153
Grand Oaks/Charlotte, NC -- 446,075 4,463,344 2,388,036
Great Oaks/Baltimore, MD -- 2,919,481 9,075,956 933,009
Greens at Cedar Chase/Dover, DE -- 1,528,667 4,830,738 61,963
Greens of Constant Friendship/
Baltimore, MD -- 903,122 4,668,956 19,896
Greens at Cross Court/Easton, MD -- 1,182,414 4,544,012 29,049
Greens at Falls Run/Fredericksburg, VA -- 2,730,722 5,300,203 24,678
Greens at Hilton Run/Lexington Park, MD -- 2,754,447 10,482,579 46,362
Greens at Hollymead/Charlottesville, VA -- 965,114 5,250,374 25,211
Greens at Schumaker Pond/Salisbury, MD -- 709,559 6,117,582 45,879
Greentree Place/Jacksonville, FL 12,455,000 1,634,330 11,226,990 683,250
Griffin Crossing/Atlanta, GA -- 1,509,633 7,544,018 438,413
The Groves/Daytona Beach, FL -- 789,953 4,767,055 5,565
Gwinnett Square/Atlanta, GA -- 1,924,325 7,376,454 221,285
Hampton Court/Alexandria, VA -- 7,388,420 4,811,937 405,764
Hampton Forest/Greenville, SC -- 454,140 2,578,103 339,651
Hampton Greene/Columbia, SC 7,841,033 1,363,046 10,118,453 362,098
Harbour Town/Nashville, TN -- 572,567 3,522,092 347,367
Harris Pond/Charlotte, NC 5,138,798 886,788 6,714,647 141,351
Heather Lake/Hampton, VA -- 616,800 3,400,672 2,083,099
Heatherwood/Greenville, SC -- 354,566 3,234,105 612,300
Heritage Trace/Newport News, VA 3,900,000 880,000 2,312,285 1,602,989
Hickory Run/Nashville, TN -- 1,468,727 11,583,786 7,423
Hickory Pointe/Memphis, TN -- 1,074,424 6,052,020 209,528
The Highlands/Charlotte, NC -- 321,400 2,830,346 1,869,598
Holly Tree Park/Waldorf, MD -- 1,576,366 5,095,323 209,332
Hunters Ridge/Plant City, FL -- 2,461,548 10,942,434 380,594
Hunters Trace/Memphis, TN 5,890,000 888,440 6,676,552 620,810
Hunting Ridge/Greenville, SC 3,265,000 449,500 2,234,882 251,166
Indian Hills/Anniston, AL -- 338,335 3,715,585 131,859
Key Pines/Spartanburg, SC -- 601,693 3,773,304 995,721
Knolls at Newgate/Fairfax, VA -- 1,725,725 3,518,741 502,864
The Lakes/Nashville, TN -- 1,285,657 5,980,197 673,350
Lake Washington Downs/Melbourne, FL -- 1,434,450 4,940,166 643,691
Lakeside North/Orlando, FL 12,440,000 1,532,700 11,076,062 1,455,899
Lakewood Place/Tampa, FL -- 1,395,051 10,647,377 468,348
The Landing/Greenville, SC -- 685,000 5,622,454 343,643
Laurel Ridge/Roanoke, VA 2,960,000 445,400 2,531,357 1,087,345
Laurel Village/Richmond, VA -- 694,281 3,119,716 521,788
The Ledges/Winston-Salem, NC -- 492,283 1,561,947 4,608,575
Legacy Hill/Nashville, TN 5,223,854 1,147,660 5,867,567 14,243
Liberty Crossing/Jacksonville, NC 1,463,867 840,000 3,873,139 1,541,088
Mallard Green/Charlotte, NC -- 329,300 2,766,436 59,970
Mallards of Wedgewood/Lakeland, FL -- 959,283 6,864,666 269,595
Manor at England Run/Fredericksburg, VA -- 1,710,477 6,413,447 1,376,993
Marble Hill/Richmond, VA 3,317,218 825,760 5,147,968 43,290
Meadow Run/Richmond, VA -- 636,059 3,423,884 1,171,082
Meadowdale Lakes/Richmond, VA 920,431 1,581,671 6,717,237 2,940,350
Mediterranean Village/Miami, FL -- 2,064,788 11,939,113 203,754
The Melrose/Dumfries, VA 5,312,183 662,000 3,705,404 3,875,979
Mill Creek/Wilmington, NC -- 597,248 4,618,561 711,353
Northview/Salem, VA -- 171,600 1,238,501 558,122
Olde West Village/Richmond, VA 3,871,932 1,965,097 12,203,965 1,621,856
Orange Orlando/Orlando, FL -- 1,233,151 2,177,417 1,033,037
Overlook/Greenville, SC -- 824,600 5,079,443 1,269,184
Palm Grove/Tampa, FL -- 616,121 5,268,814 528,323
The Park/Columbia, SC -- 1,004,072 5,535,334 1,087,409
Park Green/Raleigh, NC -- 500,000 4,321,872 826,318
Parkwood Court/Alexandria, VA 6,125,000 2,482,633 3,813,116 1,487,638
Patriot Place/Florence, SC 2,200,000 212,500 1,600,757 5,324,114
Peppertree/Charlotte, NC -- 1,546,267 7,699,221 651,899
Pinebrook/Clearwater,FL -- 1,780,375 2,458,172 1,794,704
Plum Chase/Columbia, SC 7,000,000 802,750 3,149,607 4,495,788
Regatta Shores/Orlando, FL -- 757,008 6,607,367 897,071
River Place/Macon, GA -- 1,097,280 7,492,385 773,156
River Road/Ettrick, VA -- 229,699 1,648,394 852,288
Riverwind/Spartanburg, SC -- 802,484 6,386,212 435,996
Rollingwood/Richmond, VA 2,437,210 777,971 5,058,707 1,962,714
Royal Oaks/Savannah, GA 6,407,421 533,100 9,907,978 263,770
Santa Barbara Landing/Naples, FL 4,997,916 1,134,120 8,019,814 415,782
The Shire/Raleigh, NC -- 1,791,215 11,968,852 1,052,616
Somerset/Charleston, SC -- 485,160 4,053,792 354,292
St. Andrews/Columbia, SC -- 976,192 6,866,147 203,261
St. Andrews Commons/Columbia, SC -- 1,428,826 9,371,378 472,524
Spring Forest/Raleigh, NC -- 1,257,500 8,586,255 1,720,167
Stanford Village/Atlanta, GA -- 884,500 2,807,839 571,596
Summit West/Tampa, FL -- 2,176,500 4,709,970 1,283,882
Three Fountains/Montgomery, AL -- 1,075,009 6,853,156 296,991
Timbercreek/Richmond, VA -- 379,000 2,030,525 1,134,137
Twin Coves/Baltimore, MD 3,750,000 912,771 2,893,861 456,530
Twin Rivers/Hopewell, VA -- 149,200 885,671 1,168,191
University Club/Ft. Lauderdale, FL -- 1,390,220 6,992,620 68,216
Village at Old Tampa Bay/Oldsmar, FL -- 1,750,320 10,756,337 1,021,604
Vinyards/Orlando, FL 9,450,000 1,840,230 11,571,625 762,042
Walnut Creek/Raleigh, NC -- 3,170,290 21,718,401 1,001,894
Waterford/Columbia, SC -- 957,980 6,926,736 316,229
West Knoll/Newark, DE -- 305,138 3,564,067 53,563
Windsor Harbor/Charlotte, NC -- 475,000 3,928,113 1,960,573
Woodscape/Newport News, VA -- 798,700 7,209,525 1,795,276
Woodside/Baltimore, MD 13,645,000 3,112,881 8,864,762 2,043,322
Shopping Centers:
Gloucester Exchange/Gloucester, VA -- 403,688 2,278,553 251,415
Office and Industrial Buildings:
Franklin St./Richmond, VA -- 67,900 282,173 75,843
Meadowdale Offices/Richmond, VA -- 240,563 359,913 93,340
Statesman Park/Roanoke, VA -- 90,162 565,557 101,050
Tri-County Buildings/Bristol, TN -- 275,580 900,281 1,263,000
-------------------------------------------------------------------------------------
$172,554,318 $171,545,275 $829,663,874 $129,889,218
=====================================================================================
Real Estate Held for Disposition
Apartments:
Azalea/Richmond, VA $ -- $ 272,522 $ 2,721,686 $ 1,009,575
Cedar Point/Raleigh, NC -- 75,400 4,514,435 2,921,515
Mill Creek/Atlanta, GA -- 529,800 3,996,252 3,387,840
Summit-on-Park/Charlotte, NC -- 147,000 1,021,602 964,072
Towne Square/Hopewell, VA 1,246,067 109,500 909,897 782,567
Woodland Hollow/Charlotte, NC 3,230,710 755,000 5,393,023 1,462,042
Shopping Centers:
Circle/Richmond, VA -- 885,964 1,836,464 1,627,917
Deerfield Plaza/Myrtle Beach, SC -- 883,767 2,182,509 646,872
Hanover Village-Land/Richmond, VA -- 1,623,910 0 0
Laburnum Park-Land/Richmond, VA -- 300,000 0 0
Meadowdale/Richmond, VA -- 1,099,620 3,875,145 1,106,516
The Village/Durham, NC -- 1,355,000 3,814,496 3,506,490
Village Square/Myrtle Beach, SC -- 3,070,000 6,428,614 183,638
Willow Oaks/Hampton, VA 3,450,000 934,220 1,211,045 7,040,401
-------------------------------------------------------------------------------------
$7,926,777 $12,041,703 $37,905,168 $24,639,445
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross
Amount at Which
Carried at
Close of Period
Land and Buildings
Land and Total Accumulated Date of
Improvements Improvements (a) Depreciation Construction
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Apartments:
2131 Apartments/Nashville, TN $1,062,415 $10,848,466 $11,910,881 $1,121,296 1972
Alafaya Woods/Orlando, FL 1,844,091 9,528,876 11,372,967 418,403 1988/90
Alexander Glen/Charlotte, NC 773,128 6,604,837 7,377,965 323,093 1989
Andover Place/Orlando, FL 1,735,808 4,059,586 5,795,394 44,678 1988
Bay Cove/Clearwater, FL 3,102,629 7,598,047 10,700,676 959,209 1972
Bayberry Commons/Portsmouth, VA 709,610 4,320,344 5,029,954 1,559,058 1973/74
Beechwood/Greensboro, NC 1,563,537 6,270,977 7,834,514 505,188 1985
Braeland Commons/Columbia, MD 1,611,272 7,258,345 8,869,617 815,136 1983
Braeton Bay/ Richmond, VA 2,059,251 15,085,370 17,144,621 0 1989
Bramblewood/Goldsboro, NC 508,726 3,990,256 4,498,982 1,766,200 1980/82
Brantley Pines/Fort Myers, FL 1,299,078 6,195,256 7,494,334 323,441 1986
Briar Club/Memphis, TN 1,297,103 7,480,093 8,777,196 352,646 1987
Brittingham Square/Salisbury, MD 652,547 4,984,156 5,636,703 114,215 1991
Brynn Marr/Jacksonville, NC 548,205 4,753,968 5,302,173 2,100,186 1973/77
Canterbury Woods/Charlotte, NC 545,477 6,568,879 7,114,356 2,654,210 1968/70
Cinnamon Ridge/Raleigh, NC 1,262,601 7,107,183 8,369,784 2,708,510 1968/70
Clear Run/Wilmington, NC 1,080,927 9,184,329 10,265,256 471,906 1987/89
Cleary Court/Fort Lauderdale, FL 2,473,000 8,055,191 10,528,191 301,692 1984/85
Colonial Villa/Columbia, SC 1,375,899 5,799,336 7,175,235 797,087 1974
Colony of Stone Mountain/Atlanta, GA 3,876,604 7,953,038 11,829,642 2,545,917 1970/72
Colony Village/New Bern, NC 483,387 3,902,957 4,386,344 1,816,821 1972/74
Copperfield/Fort Lauderdale, FL 4,464,327 20,581,186 25,045,513 860,540 1991
Country Walk/Columbia, SC 648,953 4,070,881 4,719,834 1,018,092 1974
Courthouse Green/Richmond, VA 941,166 5,807,547 6,748,713 2,550,308 1974/78
Courtney Square/Raleigh, NC 1,262,896 6,075,994 7,338,890 566,746 1979/81
The Cove at Lake Lynn/Raleigh, NC 1,857,167 5,704,892 7,562,059 850,951 1986
Covington Crossing/Memphis, TN 1,351,759 4,528,496 5,880,255 235,304 1974
Craig Manor/Salem,VA 355,235 2,953,608 3,308,843 1,003,519 1975
The Creek/Wilmington, NC 456,598 3,312,558 3,769,156 550,140 1973
Crescent Square/Atlanta, GA 1,343,952 10,859,935 12,203,887 3,271,318 1970
Crossroads/Columbia, SC 2,121,539 14,516,664 16,638,203 782,180 1977/84
Dover Country Club/Dover, DE 2,168,760 6,725,739 8,894,499 352,676 1970
Dover Village/Orlando, FL 3,092,825 7,849,305 10,942,130 939,262 1981
Dunwoody Pointe/Atlanta, GA 2,763,324 6,936,185 9,699,509 46,546 1980
Eastwind/Virginia Beach, VA 291,688 6,476,913 6,768,601 2,188,093 1970
Eden Commons/Columbia, MD 2,436,429 9,794,698 12,231,127 1,121,640 1984
Emerald Bay/Charlotte, NC 1,131,773 6,323,379 7,455,152 2,061,112 1972
English Hills/Richmond, VA 2,428,574 13,875,699 16,304,273 2,741,039 1969/76
Excalibur/Charlotte, NC 1,159,881 8,969,414 10,129,295 483,960 1987
Fisherman's Village/Orlando, FL 2,387,368 7,460,967 9,848,335 0 1984
Forest Hills/Wilmington, NC 1,137,457 5,996,397 7,133,855 834,883 1964/69
Forest Lakes at Oyster Point/
Newport News, VA 790,464 9,031,380 9,821,844 107,497 1986
Forestbrook/Columbia, SC 541,808 3,935,840 4,477,648 465,784 1974
Foxcroft/Tampa, FL 912,892 4,394,977 5,307,869 565,121 1972
Franklin Mansions-Land/Nashville, TN 2,138,976 0 2,138,976 0 --
Gable Hill/Columbia, SC 1,053,085 5,792,604 6,845,689 1,470,965 1985
Gatewater Landing/Glen Burnie, MD 2,103,284 6,760,817 8,864,101 817,006 1970
Grand Oaks/Charlotte, NC 794,520 6,502,935 7,297,455 3,149,328 1966/67
Great Oaks/Baltimore, MD 3,102,786 9,825,660 12,928,446 558,796 1974
Greens at Cedar Chase/Dover, DE 1,533,892 4,887,476 6,421,368 113,804 1988
Greens of Constant Friendship/
Baltimore, MD 907,823 4,684,151 5,591,974 109,006 1990
Greens at Cross Court/Easton, MD 1,186,510 4,568,965 5,755,475 107,125 1987
Greens at Falls Run/Fredericksburg, VA 2,733,209 5,322,394 8,055,603 128,198 1989
Greens at Hilton Run/Lexington Park, MD 2,769,799 10,513,589 13,283,388 244,127 1988
Greens at Hollymead/Charlottesville, VA 967,686 5,273,013 6,240,699 122,986 1990
Greens at Schumaker Pond/Salisbury, MD 710,607 6,162,413 6,873,020 139,725 1988
Greentree Place/Jacksonville, FL 1,796,141 11,748,429 13,544,570 576,246 1986
Griffin Crossing/Atlanta, GA 1,589,778 7,902,286 9,492,064 491,590 1987/89
The Groves/Daytona Beach, FL 789,952 4,772,621 5,562,573 0 1989
Gwinnett Square/Atlanta, GA 1,933,560 7,588,504 9,522,064 202,189 1985
Hampton Court/Alexandria, VA 7,526,928 5,079,193 12,606,121 641,707 1967
Hampton Forest/Greenville, SC 554,486 2,817,408 3,371,894 160,103 1968
Hampton Greene/Columbia, SC 1,561,771 10,281,826 11,843,597 510,706 1990
Harbour Town/Nashville, TN 698,564 3,743,462 4,442,026 330,303 1974
Harris Pond/Charlotte, NC 903,859 6,838,927 7,742,786 355,554 1987
Heather Lake/Hampton, VA 781,743 5,318,828 6,100,571 3,278,373 1972/74
Heatherwood/Greenville, SC 428,725 3,772,246 4,200,971 386,223 1978
Heritage Trace/Newport News, VA 1,172,351 3,622,923 4,795,274 1,456,429 1973
Hickory Run/Nashville, TN 1,468,726 11,591,210 13,059,936 0 1989
Hickory Pointe/Memphis, TN 1,171,404 6,164,568 7,335,972 210,743 1985
The Highlands/Charlotte, NC 542,070 4,479,274 5,021,344 2,315,855 1970
Holly Tree Park/Waldorf, MD 1,607,351 5,273,670 6,881,021 288,373 1973
Hunters Ridge/Plant City, FL 2,643,760 11,140,816 13,784,576 204,753 1992
Hunters Trace/Memphis, TN 979,724 7,206,078 8,185,802 315,871 1986
Hunting Ridge/Greenville, SC 518,172 2,417,376 2,935,548 102,539 1972
Indian Hills/Anniston, AL 356,896 3,828,883 4,185,779 206,948 1975
Key Pines/Spartanburg, SC 693,915 4,676,803 5,370,718 718,008 1974
Knolls at Newgate/Fairfax, VA 1,758,439 3,988,891 5,747,330 248,963 1972
The Lakes/Nashville, TN 1,421,521 6,517,683 7,939,204 626,857 1986
Lake Washington Downs/Melbourne, FL 1,579,894 5,438,413 7,018,307 517,474 1984
Lakeside North/Orlando, FL 1,631,060 12,433,601 14,064,661 749,480 1984
Lakewood Place/Tampa, FL 1,492,758 11,018,018 12,510,776 736,132 1986
The Landing/Greenville, SC 778,256 5,872,841 6,651,097 320,790 1976
Laurel Ridge/Roanoke, VA 648,390 3,415,713 4,064,102 1,361,250 1970/72
Laurel Village/Richmond, VA 776,450 3,559,335 4,335,785 744,590 1972
The Ledges/Winston-Salem, NC 1,120,186 5,542,619 6,662,805 3,102,639 1959
Legacy Hill/Nashville, TN 1,145,660 5,883,810 7,029,470 0 1977
Liberty Crossing/Jacksonville, NC 1,147,544 5,106,683 6,254,227 1,536,636 1972/74
Mallard Green/Charlotte, NC 363,283 2,792,423 3,155,706 150,891 1985
Mallards of Wedgewood/Lakeland, FL 988,894 7,104,649 8,093,543 101,421 1985
Manor at England Run/Fredericksburg, VA 3,020,706 6,480,211 9,500,917 150,515 1990
Marble Hill/Richmond, VA 828,620 5,188,398 6,017,018 56,700 1973
Meadow Run/Richmond, VA 834,395 4,396,630 5,231,025 2,128,682 1973/74
Meadowdale Lakes/Richmond, VA 2,193,200 9,046,058 11,239,258 4,385,577 1967/71
Mediterranean Village/Miami, FL 2,128,736 12,078,919 14,207,655 516,120 1989
The Melrose/Dumfries, VA 1,329,494 6,913,889 8,243,383 3,290,228 1951
Mill Creek/Wilmington, NC 786,991 5,140,171 5,927,162 978,398 1986
Northview/Salem, VA 216,569 1,751,654 1,968,223 1,087,848 1969
Olde West Village/Richmond, VA 2,216,484 13,574,434 15,790,918 4,689,698 1978/82/85/87
Orange Orlando/Orlando, FL 1,388,200 3,055,405 4,443,605 491,946 1971
Overlook/Greenville, SC 1,124,928 6,048,299 7,173,227 335,598 1976
Palm Grove/Tampa, FL 727,179 5,686,079 6,413,258 423,564 1969/71
The Park/Columbia, SC 1,250,402 6,376,413 7,626,815 315,569 1975/77
Park Green/Raleigh, NC 549,180 5,099,009 5,648,189 1,030,126 1987
Parkwood Court/Alexandria, VA 2,577,866 5,205,521 7,783,387 517,354 1964
Patriot Place/Florence, SC 1,355,659 5,781,712 7,137,371 2,303,536 1974
Peppertree/Charlotte, NC 1,622,411 8,274,976 9,897,387 681,938 1987
Pinebrook/Clearwater,FL 1,860,267 4,172,984 6,033,251 456,035 1977
Plum Chase/Columbia, SC 1,084,908 7,363,237 8,448,145 2,184,841 1974
Regatta Shores/Orlando, FL 992,064 7,269,382 8,261,446 431,756 1988
River Place/Macon, GA 1,393,689 7,969,132 9,362,821 583,704 1988
River Road/Ettrick, VA 316,464 2,413,917 2,730,381 1,389,984 1973/74
Riverwind/Spartanburg, SC 890,960 6,733,732 7,624,692 558,121 1987
Rollingwood/Richmond, VA 1,051,511 6,747,881 7,799,392 3,229,781 1974/78
Royal Oaks/Savannah, GA 556,206 10,148,642 10,704,848 546,921 1980
Santa Barbara Landing/Naples, FL 1,247,876 8,321,840 9,569,716 416,825 1987
The Shire/Raleigh, NC 1,978,587 12,834,096 14,812,683 823,801 1982/84
Somerset/Charleston, SC 536,990 4,356,254 4,893,244 226,962 1979
St. Andrews/Columbia, SC 1,023,055 7,022,545 8,045,600 385,681 1972
St. Andrews Commons/Columbia, SC 1,569,651 9,703,077 11,272,728 1,117,341 1986
Spring Forest/Raleigh, NC 1,408,066 10,155,856 11,563,922 2,207,645 1978/81
Stanford Village/Atlanta, GA 1,054,857 3,209,078 4,263,935 1,061,691 1985
Summit West/Tampa, FL 2,348,038 5,822,314 8,170,352 720,301 1972
Three Fountains/Montgomery, AL 1,094,419 7,130,737 8,225,156 430,211 1973
Timbercreek/Richmond, VA 516,962 3,026,700 3,543,662 1,715,738 1969
Twin Coves/Baltimore, MD 1,004,466 3,258,696 4,263,162 168,906 1974
Twin Rivers/Hopewell, VA 351,158 1,851,904 2,203,062 1,256,585 1972
University Club/Ft. Lauderdale, FL 1,430,079 7,020,977 8,451,056 64,175 1988
Village at Old Tampa Bay/Oldsmar, FL 2,007,013 11,521,248 13,528,261 911,846 1986
Vinyards/Orlando, FL 2,080,739 12,093,158 14,173,897 538,874 1984/86
Walnut Creek/Raleigh, NC 3,342,023 22,548,562 25,890,585 1,337,751 1985/86
Waterford/Columbia, SC 1,030,567 7,170,378 8,200,945 397,939 1985
West Knoll/Newark, DE 305,138 3,617,630 3,922,768 185,318 1964
Windsor Harbor/Charlotte, NC 892,976 5,470,710 6,363,686 1,822,128 1971
Woodscape/Newport News, VA 1,006,107 8,797,394 9,803,501 2,832,621 1974/76
Woodside/Baltimore, MD 3,329,380 10,691,585 14,020,965 609,255 1966
Shopping Centers:
Gloucester Exchange/Gloucester, VA 492,475 2,441,181 2,933,656 702,939 1974
Office and Industrial Buildings:
Franklin St./Richmond, VA 67,900 358,016 425,916 129,929 1890
Meadowdale Offices/Richmond, VA 258,144 435,674 693,818 292,043 1983
Statesman Park/Roanoke, VA 147,996 608,773 756,769 410,485 1974
Tri-County Buildings/Bristol, TN 364,120 2,074,738 2,438,859 716,173 1976/79
--------------------------------------------------------------------------------
$193,672,389 $937,425,977 $1,131,098,366 $129,454,008
================================================================================
Real Estate Held for Disposition
Apartments:
Azalea/Richmond, VA $ 403,786 $ 3,599,997 $ 4,003,783 $ 1,650,368 1967
Cedar Point/Raleigh, NC 231,347 7,280,003 7,511,350 3,455,287 1972
Mill Creek/Atlanta, GA 857,665 7,056,227 7,913,892 2,318,840 1972
Summit-on-Park/Charlotte, NC 245,650 1,887,024 2,132,674 1,091,746 1963
Towne Square/Hopewell, VA 326,080 1,475,884 1,801,964 853,610 1967
Woodland Hollow/Charlotte, NC 968,333 6,641,732 7,610,065 2,720,964 1974/76
Shopping Centers:
Circle/Richmond, VA 949,970 3,400,375 4,350,345 2,069,506 1956/62/67
Deerfield Plaza/Myrtle Beach, SC 1,267,012 2,446,136 3,713,148 841,228 1979
Hanover Village-Land/Richmond, VA 1,623,910 0 1,623,910 5,090 --
Laburnum Park-Land/Richmond, VA 300,000 0 300,000 0 --
Meadowdale/Richmond, VA 1,288,237 4,793,044 6,081,281 1,770,793 1976/82
The Village/Durham, NC 2,175,372 6,500,614 8,675,986 2,138,586 1965
Village Square/Myrtle Beach, SC 3,726,673 5,956,579 9,683,252 1,946,883 1978/79
Willow Oaks/Hampton, VA 3,102,314 6,083,352 9,185,666 2,709,294 1968/74
--------------------------------------------------------------------
$17,466,349 $57,120,967 $74,587,316 $23,572,195
====================================================================
</TABLE>
<TABLE>
<CAPTION>
Depreciable
Life of
Date Building
Acquired Component
----------------------------------------
<S> <C> <C>
Apartments:
2131 Apartments/Nashville, TN 12/16/92 35 yrs.
Alafaya Woods/Orlando, FL 10/21/94 35 yrs.
Alexander Glen/Charlotte, NC 08/16/94 35 yrs.
Andover Place/Orlando, FL 09/29/95 35 yrs.
Bay Cove/Clearwater, FL 12/16/92 35 yrs.
Bayberry Commons/Portsmouth, VA 04/07/88 35 yrs.
Beechwood/Greensboro, NC 12/22/93 35 yrs.
Braeland Commons/Columbia, MD 12/29/92 35 yrs.
Braeton Bay/ Richmond, VA 12/28/95 35 yrs.
Bramblewood/Goldsboro, NC 12/31/84 35 yrs.
Brantley Pines/Fort Myers, FL 08/11/94 35 yrs.
Briar Club/Memphis, TN 10/14/94 35 yrs.
Brittingham Square/Salisbury, MD 05/04/95 35 yrs.
Brynn Marr/Jacksonville, NC 12/31/84 35 yrs.
Canterbury Woods/Charlotte, NC 12/18/85 35 yrs.
Cinnamon Ridge/Raleigh, NC 12/01/89 35 yrs.
Clear Run/Wilmington, NC 07/22/94 35 yrs.
Cleary Court/Fort Lauderdale, FL 11/30/94 35 yrs.
Colonial Villa/Columbia, SC 09/16/92 35 yrs.
Colony of Stone Mountain/Atlanta, GA 06/12/90 35 yrs.
Colony Village/New Bern, NC 12/31/84 35 yrs.
Copperfield/Fort Lauderdale, FL 09/21/94 35 yrs.
Country Walk/Columbia, SC 12/19/91 35 yrs.
Courthouse Green/Richmond, VA 12/31/84 35 yrs.
Courtney Square/Raleigh, NC 07/08/93 35 yrs.
The Cove at Lake Lynn/Raleigh, NC 12/01/92 35 yrs.
Covington Crossing/Memphis, TN 10/14/94 35 yrs.
Craig Manor/Salem,VA 11/06/87 35 yrs.
The Creek/Wilmington, NC 06/30/92 35 yrs.
Crescent Square/Atlanta, GA 03/22/89 35 yrs.
Crossroads/Columbia, SC 07/01/94 35 yrs.
Dover Country Club/Dover, DE 07/01/94 35 yrs.
Dover Village/Orlando, FL 03/31/93 35 yrs.
Dunwoody Pointe/Atlanta, GA 10/24/95 35 yrs.
Eastwind/Virginia Beach, VA 04/04/88 35 yrs.
Eden Commons/Columbia, MD 12/29/92 35 yrs.
Emerald Bay/Charlotte, NC 02/06/90 35 yrs.
English Hills/Richmond, VA 12/06/91 35 yrs.
Excalibur/Charlotte, NC 07/01/94 35 yrs.
Fisherman's Village/Orlando, FL 12/29/95 35 yrs.
Forest Hills/Wilmington, NC 06/30/92 35 yrs.
Forest Lakes at Oyster Point/
Newport News, VA 08/15/95 35 yrs.
Forestbrook/Columbia, SC 07/01/93 35 yrs.
Foxcroft/Tampa, FL 01/28/93 35 yrs.
Franklin Mansions-Land/Nashville, TN 12/08/95 35 yrs.
Gable Hill/Columbia, SC 12/04/89 35 yrs.
Gatewater Landing/Glen Burnie, MD 12/16/92 35 yrs.
Grand Oaks/Charlotte, NC 05/01/84 35 yrs.
Great Oaks/Baltimore, MD 07/01/94 35 yrs.
Greens at Cedar Chase/Dover, DE 05/04/95 35 yrs.
Greens of Constant Friendship/
Baltimore, MD 05/04/95 35 yrs.
Greens at Cross Court/Easton, MD 05/04/95 35 yrs.
Greens at Falls Run/Fredericksburg, VA 05/04/95 35 yrs.
Greens at Hilton Run/Lexington Park, M 05/04/95 35 yrs.
Greens at Hollymead/Charlottesville, V 05/04/95 35 yrs.
Greens at Schumaker Pond/Salisbury, MD 05/04/95 35 yrs.
Greentree Place/Jacksonville, FL 07/22/94 35 yrs.
Griffin Crossing/Atlanta, GA 06/08/94 35 yrs.
The Groves/Daytona Beach, FL 12/13/95 35 yrs.
Gwinnett Square/Atlanta, GA 03/29/95 35 yrs.
Hampton Court/Alexandria, VA 02/19/93 35 yrs.
Hampton Forest/Greenville, SC 08/16/94 35 yrs.
Hamtpon Greene/Columbia, SC 08/19/94 35 yrs.
Harbour Town/Nashville, TN 12/10/93 35 yrs.
Harris Pond/Charlotte, NC 07/01/94 35 yrs.
Heather Lake/Hampton, VA 03/01/80 35 yrs.
Heatherwood/Greenville, SC 09/30/93 35 yrs.
Heritage Trace/Newport News, VA 06/30/89 35 yrs.
Hickory Run/Nashville, TN 12/29/95 35 yrs.
Hickory Pointe/Memphis, TN 02/10/95 35 yrs.
The Highlands/Charlotte, NC 01/17/84 35 yrs.
Holly Tree Park/Waldorf, MD 07/01/94 35 yrs.
Hunters Ridge/Plant City, FL 06/30/95 35 yrs.
Hunters Trace/Memphis, TN 10/14/94 35 yrs.
Hunting Ridge/Greenville, SC 11/01/94 35 yrs.
Indian Hills/Anniston, AL 07/01/94 35 yrs.
Key Pines/Spartanburg, SC 09/25/92 35 yrs.
Knolls at Newgate/Fairfax, VA 07/01/94 35 yrs.
The Lakes/Nashville, TN 09/15/93 35 yrs.
Lake Washington Downs/Melbourne, FL 09/24/93 35 yrs.
Lakeside North/Orlando, FL 04/14/94 35 yrs.
Lakewood Place/Tampa, FL 03/10/94 35 yrs.
The Landing/Greenville, SC 07/01/94 35 yrs.
Laurel Ridge/Roanoke, VA 05/17/88 35 yrs.
Laurel Village/Richmond, VA 09/06/91 35 yrs.
The Ledges/Winston-Salem, NC 08/13/86 35 yrs.
Legacy Hill/Nashville, TN 11/06/95 35 yrs.
Liberty Crossing/Jacksonville, NC 11/30/90 35 yrs.
Mallard Green/Charlotte, NC 07/01/94 35 yrs.
Mallard of Wedgewood/Lakeland, FL 07/27/95 35 yrs.
Manor at England Run/Fredericksburg, VA 05/04/95 35 yrs.
Marble Hill/Richmond, VA 09/28/95 35 yrs.
Meadow Run/Richmond, VA 12/31/84 35 yrs.
Meadowdale Lakes/Richmond, VA 12/31/84 35 yrs.
Mediterranean Village/Miami, FL 09/30/94 35 yrs.
The Melrose/Dumfries, VA 12/11/85 35 yrs.
Mill Creek/Wilmington, NC 09/30/91 35 yrs.
Northview/Salem, VA 09/29/78 35 yrs.
Olde West Village/Richmond, VA 12/31/84 & 8/27/91 35 yrs.
Orange Orlando/Orlando, FL 01/21/93 35 yrs.
Overlook/Greenville, SC 07/01/94 35 yrs.
Palm Grove/Tampa, FL 04/15/94 35 yrs.
The Park/Columbia, SC 07/01/94 35 yrs.
Park Green/Raleigh, NC 09/27/91 35 yrs.
Parkwood Court/Alexandria, VA 06/30/93 35 yrs.
Patriot Place/Florence, SC 10/23/85 35 yrs.
Peppertree/Charlotte, NC 12/14/93 35 yrs.
Pinebrook/Clearwater,FL 09/28/93 35 yrs.
Plum Chase/Columbia, SC 01/04/91 35 yrs.
Regatta Shores/Orlando, FL 06/30/94 35 yrs.
River Place/Macon, GA 04/08/94 35 yrs.
River Road/Ettrick, VA 08/31/81 35 yrs.
Riverwind/Spartanburg, SC 12/31/93 35 yrs.
Rollingwood/Richmond, VA 12/31/84 35 yrs.
Royal Oaks/Savannah, GA 07/01/94 35 yrs.
Santa Barbara Landing/Naples, FL 09/01/94 35 yrs.
The Shire/Raleigh, NC 03/04/94 35 yrs.
Somerset/Charleston, SC 07/01/94 35 yrs.
St. Andrews/Columbia, SC 07/01/94 35 yrs.
St. Andrews Commons/Columbia, SC 05/20/93 35 yrs.
Spring Forest/Raleigh, NC 05/21/91 35 yrs.
Stanford Village/Atlanta, GA 09/26/89 35 yrs.
Summit West/Tampa, FL 12/16/92 35 yrs.
Three Fountains/Montgomery, AL 07/01/94 35 yrs.
Timbercreek/Richmond, VA 08/31/83 35 yrs.
Twin Coves/Baltimore, MD 08/16/94 35 yrs.
Twin Rivers/Hopewell, VA 01/06/82 35 yrs.
University Club/Ft. Lauderdale, FL 09/26/95 35 yrs.
Village at Old Tampa Bay/Oldsmar, FL 12/08/93 35 yrs.
Vinyards/Orlando, FL 10/31/94 35 yrs.
Walnut Creek/Raleigh, NC 05/17/94 35 yrs.
Waterford/Columbia, SC 07/01/94 35 yrs.
West Knoll/Newark, DE 07/01/94 35 yrs.
Windsor Harbor/Charlotte, NC 01/13/89 35 yrs.
Woodscape/Newport News, VA 12/29/87 35 yrs.
Woodside/Baltimore, MD 08/16/94 35 yrs.
Shopping Centers:
Gloucester Exchange/Gloucester, VA 11/12/87 35 yrs.
Office and Industrial Buildings:
Franklin St./Richmond, VA 07/01/86 35 yrs.
Meadowdale Offices/Richmond, VA 12/31/84 35 yrs.
Statesman Park/Roanoke, VA 05/22/75 33 yrs.
Tri-County Buildings/Bristol, TN 01/21/81 33 yrs.
Real Estate Held for Disposition
Apartments:
Azalea/Richmond, VA 12/31/84 35 yrs.
Cedar Point/Raleigh, NC 12/18/85 35 yrs.
Mill Creek/Atlanta, GA 11/11/88 35 yrs.
Summit-on-Park/Charlotte, NC 01/17/84 35 yrs. .
Towne Square/Hopewell, VA 08/27/85 35 yrs.
Woodland Hollow/Charlotte, NC 11/03/86 35 yrs.
Shopping Centers:
Circle/Richmond, VA 11/01/73 25/35 yrs
Deerfield Plaza/Myrtle Beach, SC 01/17/84 35 yrs.
Hanover Village-Land/Richmond, VA 06/30/86 35 yrs.
Laburnum Park-Land/Richmond, VA 09/28/90 35 yrs.
Meadowdale/Richmond, VA 12/31/84 35 yrs.
The Village/Durham, NC 08/28/86 35 yrs.
Village Square/Myrtle Beach, SC 05/25/88 35 yrs.
Willow Oaks/Hampton, VA 08/01/84 35 yrs.
</TABLE>
(a) The aggregate cost for federal income tax purposes was
approximately $1.192 billion at December 31, 1995 and $987 million
at December 31, 1994.
EXHIBIT 3(b)(ii)
UNITED DOMINION REALTY TRUST, INC.
BOARD OF DIRECTORS
RESOLUTIONS
First Amendment to Bylaws of
United Dominion Realty Trust, Inc.
Adopted February 20, 1996
RESOLVED, that the Board of Directors of United Dominion Realty Trust, Inc., a
Virginia corporation (the "Company") does hereby approve an amendment to the
bylaws of the Trust to allow for the record date to occur no more than 70 days
prior to the annual meeting of shareholders as provided by ss. 13.1-714 of the
Virginia Stock Corporation Act;
FURTHER RESOLVED, that the amendment be effective as of January 30, 1996; and
FURTHER RESOLVED, that paragraph 3 of the Company's bylaws are amended and
restated, as follows:
The transfer of books for shares of stock of the corporation
may be closed by order of the Board of Directors for not exceeding 70
days for the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof or
entitled to receive payment of any dividend or in order to make a
determination of stockholders for any other purpose. In lieu of closing
the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of stockholders,
such date to be not more than 70 days preceding the date on which the
particular action requiring such determination of the stockholders is
to be taken.
EXHIBIT 10(VI)
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
UNITED DOMINION REALTY, L.P.
DATED AS OF DECEMBER 31, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C> <C>
1.01 Defined Terms................................................................................. 1
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.01 Continuation.................................................................................. 8
2.02 Name, Office and Registered Agent............................................................. 8
2.03 Partners...................................................................................... 8
2.04 Term and Dissolution.......................................................................... 8
2.05 Filing of Certificate and Perfection of Limited Partnership................................... 9
2.06 Certificates Describing Partnership Units..................................................... 9
ARTICLE III
BUSINESS OF THE PARTNERSHIP
3.01 Business of the Partnership................................................................... 10
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.01 Capital Contributions......................................................................... 10
4.02 Additional Capital Contributions and Issuances of Additional Partnership Interests............ 10
4.03 Loans to the Partnership...................................................................... 12
4.04 Capital Accounts.............................................................................. 12
4.05 Percentage Interests.......................................................................... 12
4.06 No Interest on Contributions.................................................................. 13
4.07 Return of Capital Contributions............................................................... 13
4.08 No Third Party Beneficiary.................................................................... 13
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.01 Allocation of Profit and Loss................................................................. 14
5.02 Distribution of Cash.......................................................................... 15
5.03 REIT Distribution Requirements................................................................ 16
5.04 No Right to Distributions in Kind............................................................. 16
5.05 Limitations on Return of Capital Contributions................................................ 16
5.06 Distributions Upon Liquidation................................................................ 16
5.07 Substantial Economic Effect................................................................... 17
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<PAGE>
ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.01 Management of the Partnership................................................................. 17
6.02 Delegation of Authority....................................................................... 20
6.03 Indemnification and Exculpation of Indemnitees................................................ 20
6.04 Liability of the General Partner.............................................................. 21
6.05 Partnership Expenses.......................................................................... 23
6.06 Outside Activities............................................................................ 23
6.07 Employment or Retention of Affiliates......................................................... 23
6.08 Title to Partnership Assets................................................................... 23
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01 Transfer of a General Partner's Partnership Interest.......................................... 24
7.02 Admission of a Substitute or Additional General............................................... 25
7.03 Effect of Bankruptcy of a General Partner..................................................... 25
ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS
8.01 Management of the Partnership................................................................. 26
8.02 Power of Attorney............................................................................. 26
8.03 Limitation on Liability of Limited Partners................................................... 27
8.04 Ownership by Limited Partner of Corporate General Partner or Affiliate........................ 27
8.05 Redemption Right.............................................................................. 27
8.06 NYSE Listing and Securities Act Registration of REIT Shares................................... 29
ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
9.01 Purchase for Investment....................................................................... 29
9.02 Restrictions on Transfer of Limited Partnership Interests..................................... 29
9.03 Admission of Substitute Limited Partner....................................................... 30
9.04 Rights of Assignees of Partnership Interests.................................................. 31
9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner................. 32
9.06 Joint Ownership of Interests.................................................................. 32
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.01 Books and Records............................................................................. 32
10.02 Custody of Partnership Funds; Bank Accounts................................................... 33
10.03 Fiscal and Taxable Year....................................................................... 33
10.04 Annual Tax Information and Report............................................................. 33
10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments................................. 33
10.06 Reports to Limited Partners................................................................... 34
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<PAGE>
ARTICLE XI
AMENDMENT OF AGREEMENT
11.01 Amendment of Agreement........................................................................ 34
ARTICLE XII
GENERAL PROVISIONS
12.01 Notices...................................................................................... 35
12.02 Survival of Rights........................................................................... 35
12.03 Additional Documents......................................................................... 35
12.04 Severability................................................................................. 35
12.05 Entire Agreement............................................................................. 35
12.06 Rules of Construction........................................................................ 35
12.07 Headings..................................................................................... 36
12.08 Counterparts................................................................................. 36
12.09 Governing Law................................................................................ 36
</TABLE>
EXHIBITS
EXHIBIT A - Partners, Capital Contributions and Percentage Interests
EXHIBIT B - List of Exchange Properties
EXHIBIT C - Notice of Exercise of Redemption Right
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<PAGE>
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
UNITED DOMINION REALTY, L.P.
DATED AS OF DECEMBER 31, 1995
RECITALS
United Dominion Realty, L.P. (the "Partnership") was formed as a
limited partnership under the laws of the Commonwealth of Virginia by a
Certificate of Limited Partnership filed with the Clerk of the State Corporation
Commission of Virginia on October 23, 1995. The Partnership is governed by an
Agreement of Limited Partnership dated as of October 23, 1995, and maintained at
the offices of the Partnership (the "Original Agreement"). The parties to the
Original Agreement are United Dominion Realty Trust, Inc. (the "Company"), as
the General Partner (in such capacity, the "General Partner") and United
Dominion Residential, Inc., a Virginia corporation ("UDR"), as the Limited
Partner.
On December 29, 1995, the Company assigned its interest in the
Partnership to UDRT of North Carolina, L.L.C., a North Carolina limited
liability company (the "Original Limited Partner"); and thereafter on December
29, 1995, UDR assigned its 1% interest in the Partnership to the Company and
thereupon ceased to be a Limited Partner.
The General Partner and the Original Limited Partner, being all of the
partners of the Partnership, desire to (i) admit additional Limited Partners to
the Partnership and (ii) restate the Original Agreement in its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Original Agreement to read in its entirety as follows:
ARTICLE I
DEFINED TERMS
1.01 DEFINED TERMS. The following defined terms used in this
Agreement shall have the meanings specified below:
"ACT" means the Virginia Revised Uniform Limited Partnership Act, as it
may be amended from time to time.
"ADDITIONAL FUNDS" is defined in Section 4.03.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to this
Partnership as a Limited Partner pursuant to Section 4.02.
"AFFILIATE" means, (i) any Person that, directly or indirectly,
controls or is controlled by or is under common control with such Person, (ii)
any other Person that owns, beneficially, directly or indirectly, 10% or more of
the outstanding capital stock, shares or equity interests of such Person, or
(iii) any officer, director, employee, partner or trustee of such Person or any
Person controlling, controlled by or under common control with such Person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities or partnership interests or otherwise.
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<PAGE>
"AGREED VALUE" means the fair market value of a Partner's non-cash
Capital Contribution as of the date of contribution as agreed to by the
Partners. For purposes of this Agreement, the Agreed Value of a Partner's
non-cash Capital Contribution shall be equal to the number of Partnership Units
received by such Partner in exchange for a Property or an interest therein or in
connection with the merger of a partnership of which such person is a partner
with and into the Partnership, or for any other non-cash asset so contributed,
multiplied by the "Market Price" calculated in accordance with the second and
third sentences of the definition of "Cash Amount." The name and address of each
Partner, number of Partnership Units issued to such Partner, and the Agreed
Value of such Partner's non-cash Capital Contributions as of the date of
contribution thereof is set forth on Exhibit A.
"AGREEMENT" means this First Amended and Restated Agreement of Limited
Partnership, as amended from time to time.
"CAPITAL ACCOUNT" is defined in Section 4.04.
"CAPITAL CONTRIBUTION" means the total amount of capital initially
contributed or agreed to be contributed, as the context requires, to the
Partnership by each Partner pursuant to the terms of the Agreement. Any
reference to the Capital Contribution of a Partner shall include the Capital
Contribution made by a predecessor holder of the Partnership Interest of such
Partner. The paid-in Capital Contribution shall mean the cash amount or the
Agreed Value of other assets actually contributed by each Partner to the capital
of the Partnership.
"CAPITAL TRANSACTION" means the refinancing, sale, exchange,
condemnation, recovery of a damage award or insurance proceeds (other than
business or rental interruption insurance proceeds not reinvested in the repair
or reconstruction of Properties), or other disposition of any Property (or the
Partnership's interest therein).
"CASH AMOUNT" means an amount of cash per Partnership Unit equal to the
value of the REIT Shares Amount on the date of receipt by the General Partner of
a Notice of Redemption. The value of the REIT Shares Amount shall be based on
the average of the daily market price of REIT Shares for the ten consecutive
trading days immediately preceding the date of such valuation. The market price
for each such trading day shall be the closing sale price, regular way, on the
NYSE on such day, or if no such sale takes place on the NYSE on such day, the
average of the closing bid and asked prices, regular way, on the NYSE on such
day. In the event the REIT Shares Amount includes rights that a holder of REIT
Shares would be entitled to receive, then the value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
"CERTIFICATE" means any instrument or document that is required under
the laws of the Commonwealth of Virginia, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of the
Partnership (either by themselves or pursuant to the power-of-attorney granted
to the General Partner in Section 8.02) and filed for recording in the
appropriate public offices within the Commonwealth of Virginia or such other
jurisdiction to perfect or maintain the Partnership as a limited partnership, to
effect the admission, withdrawal, or substitution of any Partner of the
Partnership, or to protect the limited liability of the Limited Partners as
limited partners under the laws of the Commonwealth of Virginia or such other
jurisdiction.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
successor provision of the Code.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means United Dominion Realty Trust, Inc., a Virginia
corporation.
"CONVERSION FACTOR" means 1.0, provided that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its
outstanding REIT Shares into a smaller number
- 2 -
<PAGE>
of REIT Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such purposes that such
dividend, distribution, subdivision or combination has occurred as of such
time), and the denominator of which shall be the actual number of REIT Shares
(determined without the above assumption) issued and outstanding on such date.
Any adjustment to the Conversion Factor shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
"EVENT OF BANKRUPTCY" as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part of
his assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
"EXCHANGE PROPERTIES" means those properties listed on Exhibit B
hereto.
"GENERAL PARTNER" means the Company and any Person who becomes a
substitute or additional General Partner as provided herein, and any of their
successors as General Partner. At any time at which the Partnership has two or
more General Partners, all such General Partners shall designate one of such
General Partners as managing General Partner and may from time to time designate
a successor managing General Partner and, unless the context otherwise requires,
references to the General Partner shall mean the General Partner at the time so
designated as managing General Partner.
"GENERAL PARTNERSHIP INTEREST" means a Partnership Interest held by the
General Partner that is a general partnership interest.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of such Person's status as the General Partner or a director, officer or
employee of the Partnership or the General Partner, and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time, in its sole and absolute discretion.
"INVESTMENT AGREEMENT" means the investment, subscription or other
agreement pursuant to which a Limited Partner contributes an Exchange Property,
an interest therein, other property or cash to the Partnership in exchange for a
Partnership Interest.
"LIMITED PARTNER" means any Person named as a Limited Partner on
Exhibit A attached hereto, and any Person who becomes a Substitute or Additional
Limited Partner, in such Person's capacity as a Limited Partner in the
Partnership.
"LIMITED PARTNERSHIP INTEREST" means the ownership interest of a
Limited Partner in the Partnership at any particular time, including the right
of such Limited Partner to any and all benefits to which such Limited Partner
may be entitled as provided in this Agreement and in the Act, together with the
obligations of such Limited Partner to comply with all the provisions of this
Agreement and of such Act.
"LOSS" is defined in Section 5.01(f).
"MINIMUM LIMITED PARTNERSHIP INTEREST" means the lesser of (i) 1% or
(ii) if the total Capital Contributions to the Partnership exceeds $50 million,
1% divided by the ratio of the total Capital Contributions to the Partnership to
$50 million; provided, however, that the Minimum Limited Partnership Interest
shall not be less than 0.2% at any time.
- 3 -
<PAGE>
"NOTICE OF REDEMPTION" means the Notice of Exercise of Redemption Right
substantially in the form attached as Exhibit C hereto.
"NYSE" means the New York Stock Exchange and includes any other
national securities exchange on which the REIT Shares are listed at the
determination date.
"OFFER" is defined in Section 7.01(c).
"ORIGINAL LIMITED PARTNER" means UDRT of North Carolina, L.L.C., a
North Carolina limited liability company.
"PARTNER" means any General Partner or Limited Partner.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
held by either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner's share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of cash pursuant to Section 5.02, which
record date shall be the same as the record date established by the General
Partner for a distribution to the holders of the REIT Shares.
"PARTNERSHIP UNIT" means a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder. The allocation of
Partnership Units among the Partners shall be as set forth on Exhibit A, as may
be amended from time to time.
"PERCENTAGE INTEREST" means at any time the percentage ownership
interest in the Partnership of each Partner, as determined by dividing the
Partnership Units owned by such Partner by the total number of Partnership Units
outstanding at such time. The Percentage Interest of each Partner shall be as
set forth on Exhibit A, as may be amended from time to time.
"PERCENTAGE INTEREST ADJUSTMENT DATE" means the effective date of an
adjustment of the Partners' Percentage Interests pursuant to Section 4.05.
"PERSON" means any individual, partnership, corporation, joint venture,
trust or other entity.
"PROFIT" is defined in Section 5.01(f).
"PROPERTY" means any apartment property or other investment in which
the Partnership holds an ownership interest.
"REDEEMING PARTNER" is defined in Section 8.05(a).
- 4 -
<PAGE>
"REDEMPTION AMOUNT" means either the Cash Amount or the REIT Shares
Amount, as selected by the General Partner in its sole discretion pursuant to
Section 8.05(b).
"REDEMPTION RIGHT" is defined in Section 8.05(a).
"REGULATIONS" means the Federal Income Tax Regulations issued under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT EXPENSES" means (i) costs and expenses relating to the continuity
of existence and operation of the Company and any Subsidiaries thereof (which
Subsidiaries shall, for purposes of this definition, be included within the
definition of Company), including taxes, fees and assessments associated
therewith, any and all costs, expenses or fees payable to any director, officer,
or employee of the Company, (ii) costs and expenses relating to the public
offering and registration of securities by the Company and all statements,
reports, fees and expenses incidental thereto, including underwriting discounts
and selling commissions applicable to any such offering of securities, (iii)
costs and expenses associated with the preparation and filing of any periodic
reports by the Company under federal, state or local laws or regulations,
including filings with the Commission, (iv) costs and expenses associated with
compliance by the Company with laws, rules and regulations promulgated by any
regulatory body, including the Commission, and (v) all other operating or
administrative costs of the Company incurred in the ordinary course of its
business on behalf of or in connection with the Partnership.
"REIT SHARE" means a share of common stock of the Company, $1 par value
per share.
"REIT SHARES AMOUNT" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor as adjusted to and including the
Specified Redemption Date; provided that in the event the Company issues to all
holders of REIT Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase REIT Shares,
or any other securities or property (collectively, the "rights"), and the rights
have not expired at the Specified Redemption Date, then the REIT Shares Amount
shall also include the rights issuable to a holder of the REIT Shares Amount of
REIT Shares on the record date fixed for purposes of determining the holders of
REIT Shares entitled to rights.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE" means the Internal Revenue Service.
"SPECIFIED REDEMPTION DATE" means the first business day of the month
that is at least 60 business days after the receipt by the General Partner of
the Notice of Redemption.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"SUBSIDIARY PARTNERSHIP" means any partnership of which the majority of
the limited or general partnership interests therein are owned, directly or
indirectly, by the Partnership.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 9.03.
"TRANSACTION" is defined in Section 7.01(c).
- 5 -
<PAGE>
"TRANSFER" is defined in Section 9.02(a).
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.01 CONTINUATION. The Partners hereby agree to continue the
Partnership pursuant to the Act and upon the terms and conditions set forth in
this Agreement.
2.02 NAME, OFFICE AND REGISTERED AGENT. The name of the Partnership
shall be United Dominion Realty, L.P. The specified office and place of business
of the Partnership shall be 10 South 6th Street, Suite 203, Richmond Virginia
23219-3802. The General Partner may at any time change the location of such
office, provided the General Partner gives notice to the Partners of any such
change. The name and address of the Partnership's registered agent is Katheryn
E. Surface, United Dominion Realty Trust, Inc., 10 South 6th Street, Suite 203,
Richmond Virginia 23219-3802. The sole duty of the registered agent as such is
to forward to the Partnership any notice that is served on her as registered
agent.
2.03 PARTNERS.
(a) The General Partner of the Partnership is the Company.
Its principal place of business shall be the same as that of the Partnership.
(b) Pursuant to Section 6.1 of the Original Agreement, the
Partners hereby consent to admit those persons identified on Exhibit A as
Limited Partners as of the date hereof. The Limited Partners shall be those
Persons identified as Limited Partners on Exhibit A hereto, as amended from time
to time.
2.04 TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full force
and effect until December 31, 2051, except that the General Partner, in its sole
discretion, may extend the term of the Partnership and the Partnership shall be
dissolved upon the first to occur of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to
a General Partner or the dissolution, death or withdrawal of a
General Partner unless the Partnership is reconstituted and
its business is continued pursuant to Section 2.04(c);
provided that if a General Partner is on the date of such
occurrence a partnership, the dissolution of such General
Partner as a result of the dissolution, death, withdrawal,
removal or Event of Bankruptcy of a partner in such
partnership shall not be an event of dissolution of the
Partnership if the business of such General Partner is
continued by the remaining partner or partners, either alone
or with additional partners, and such General Partner and such
partners comply with any other applicable requirements of this
Agreement;
(ii) The passage of 90 days after the sale or other
disposition of all or substantially all of the assets of the
Partnership (provided that if the Partnership receives one or
more obligations as consideration for such sale or other
disposition, the Partnership shall continue, unless sooner
dissolved under the provisions of this Agreement, until such
time as all of such obligations are paid or satisfied in
full);
(iii) The redemption of all Limited Partnership
Interests (other than any of such interests held by the
Company or any Subsidiary thereof); or
(iv) The election by the General Partner that the
Partnership should be dissolved.
- 6 -
<PAGE>
(b) Upon dissolution of the Partnership (unless the
Partnership is reconstituted and its business is continued pursuant to Section
2.04(c)), the General Partner (or its trustee, receiver, successor or legal
representative) shall amend or cancel the Certificate and liquidate the
Partnership's assets and apply and distribute the proceeds thereof in accordance
with Section 5.06. Notwithstanding the foregoing, the liquidating General
Partner may either (i) defer liquidation of, or withhold from distribution for a
reasonable time, any assets of the Partnership (including those necessary to
satisfy the Partnership's debts and obligations), or (ii) distribute the assets
to the Partners in kind.
(c) Notwithstanding Section 2.04(a)(i), upon the occurrence of
an Event of Bankruptcy as to a General Partner or the dissolution, death or
withdrawal of a General Partner, the Limited Partners, within 90 days after such
occurrence, may elect to reconstitute the Partnership and continue the business
of the Partnership for the balance of the term specified in Section 2.04(a) by
selecting, subject to Section 7.02 and any other provisions of this Agreement, a
substitute General Partner by unanimous consent of the Limited Partners. If the
Limited Partners elect to reconstitute the Partnership and admit a substitute
General Partner, the relationship with the Partners and of any Person who has
acquired an interest of a Partner in the Partnership shall be governed by this
Agreement.
2.05 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
2.06 CERTIFICATES DESCRIBING PARTNERSHIP UNITS. At the request of a
Limited Partner, the General Partner, at its option, may issue a certificate
summarizing the terms of such Limited Partner's interest in the Partnership,
including the number of Partnership Units owned and the Percentage Interest
represented by such Partnership Units as of the date of such certificate. Any
such certificate (i) shall be in form and substance as approved by the General
Partner, (ii) shall not be negotiable and (iii) shall bear the following legend:
This certificate is not negotiable. The Partnership Units
represented by this certificate are governed by and
transferable only in accordance with the provisions of the
Agreement of Limited Partnership of United Dominion Realty,
L.P., as amended and restated.
ARTICLE III
BUSINESS OF THE PARTNERSHIP
3.01 BUSINESS OF THE PARTNERSHIP. The purpose and nature of the
business to be conducted by the Partnership is (i) to conduct any business that
may be lawfully conducted by a limited partnership organized pursuant to the
Act, provided, however, that such business shall be limited to and conducted in
such a manner as to permit the Company at all times to qualify as a REIT, unless
the Company otherwise ceases to qualify as a REIT, (ii) to enter into any
partnership, joint venture or other similar arrangement to engage in any of the
foregoing or the ownership of interests in any entity engaged in any of the
foregoing and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the Company's right in its
sole discretion to cease qualifying as a REIT, the Partners acknowledge that the
Company's current status as a REIT inures to the benefit of all the Partners and
not solely to the Company. The General Partner shall also be empowered to do any
and all acts and things necessary or prudent to ensure that the Partnership will
not be classified as a "publicly traded partnership" for purposes of Section
7704 of the Code.
- 7 -
<PAGE>
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.01 CAPITAL CONTRIBUTIONS. The General Partner and the Original
Limited Partner have contributed to the capital of the Partnership cash in an
amount set forth opposite their names on Exhibit A. The Partners have
contributed to the capital of the Partnership interests in one or more of the
Exchange Properties or the partnerships owning such Exchange Properties as set
forth opposite their names on Exhibit A. The Agreed Values of such Limited
Partners' ownership interests in the Exchange Properties that are contributed to
the Partnership are as set forth opposite their names on Exhibit A.
4.02 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS. Except as provided in this Section 4.02 or in Section
4.03, the Partners shall have no right or obligation to make any additional
Capital Contributions or loans to the Partnership. The Partners, with the
consent of the General Partner, which consent may be withheld in its sole
discretion, may contribute additional capital to the Partnership, from time to
time, and receive additional Partnership Interests in respect thereof, in the
manner contemplated in this Section 4.02.
(a) Issuances of Additional Partnership Interests. The General
Partner is hereby authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any Partnership
purpose at any time or from time to time, to the Partners (including the General
Partner and the Original Limited Partner) or to other Persons for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole and absolute discretion, all without the approval of
any Limited Partners. Any additional Partnership Interests issued thereby may be
issued in one or more classes, or one or more series of any of such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and duties
senior to Limited Partnership Interests, all as shall be determined by the
General Partner in its sole and absolute discretion and without the approval of
any Limited Partner, subject to Virginia law, including, without limitation, (i)
the allocations of items of Partnership income, gain, loss, deduction and credit
to each such class or series of Partnership Interests; (ii) the right of each
such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership. Without limiting
the foregoing, the General Partner is expressly authorized to cause the
Partnership to issue Partnership Units for less than fair market value, so long
as the General Partner concludes in good faith that such issuance is in the best
interests of the Company and the Partnership. Upon each issuance of Partnership
Units hereunder, the General Partner shall amend Exhibit A attached hereto to
reflect such issuance.
(b) Certain Deemed Contributions of Proceeds of Issuance of
Company Securities. If (i) the Company issues securities and contributes some or
all the proceeds raised in connection with such issuance to the Partnership and
(ii) the proceeds actually received and contributed by the Company to the
Partnership are less than the gross proceeds of such issuance as a result of any
underwriter's discount or other expenses paid or incurred in connection with
such issuance, then the Company shall be deemed to have made Capital
Contributions to the Partnership in the aggregate amount of the gross proceeds
of such issuance that are contributed to the Partnership and the Partnership
shall be deemed simultaneously to have paid such offering expenses in connection
with the issuance of additional Partnership Units to the Company for such
Capital Contributions pursuant to Section 4.02(a). In any case in which the
Company contributes less than all of the proceeds of such issuance to the
Partnership, it shall be deemed to have contributed the gross proceeds of
issuance of the number of units of the issued security (or the number of dollars
of principal in the case of debt securities) equal to the quotient of the
division of the amount of proceeds contributed by the net proceeds per unit (or
per dollar), and the Partnership shall be deemed to have paid offering expenses
equal to the product of such number of units (or dollars) times the per unit (or
per dollar) offering expenses.
(c) Minimum Limited Partnership Interest. In the event that
either a redemption pursuant to Section 8.05 or additional Capital Contributions
by the General Partner and the Original Limited Partner would result in the
Limited Partners (other than the Original Limited Partner), in the aggregate,
owning less than the Minimum Limited Partnership Interest, the General Partner
and the Limited Partners (other than the Original Limited Partner) shall form
another partnership and contribute sufficient Limited Partnership Interests
together with such other Limited Partners so that the Limited Partners (other
than the Original Limited Partner), in the aggregate, own at least the Minimum
Limited Partnership Interest.
4.03 LOANS TO THE PARTNERSHIP. If the General Partner determines that
it is in the best interests of the
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Company and the Partnership to provide for additional Partnership funds
("Additional Funds") for any Partnership purpose, the General Partner may (i)
cause the Partnership to obtain such funds from outside borrowings or (ii) elect
to have the Company or a Subsidiary or Subsidiaries of the Company loan such
Additional Funds to the Partnership. The loans to the Partnership shall be in
exchange for such consideration and on such terms and conditions as shall be
established by the General Partner in its sole and absolute discretion, all
without the approval of any Limited Partners. Without limiting the foregoing,
the General Partner is expressly authorized to cause the Partnership to issue
debt securities for less than fair market value, so long as the General Partner
concludes in good faith that such issuance is in the best interests of the
Company and the Partnership.
4.04 CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Partner in
accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing
Partner acquires an additional Partnership Interest in exchange for more
than a de minimis Capital Contribution, (ii) the Partnership distributes to a
Partner more than a de minimis amount of Partnership property as
consideration for a Partnership Interest, or (iii) the Partnership is
liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g),
the General Partner shall revalue the property of the Partnership to its fair
market value (as determined by the General Partner, in its sole discretion,
and taking into account Section 7701(g) of the Code) in accordance with
Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership's property is
revalued by the General Partner, the Capital Accounts of the Partners
shall be adjusted in accordance with Regulations Sections
1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts
to be adjusted to reflect the manner in which the unrealized gain or loss
inherent in such property (that has not been reflected in the Capital
Accounts previously) would be allocated among the Partners pursuant to Section
5.01 if there were a taxable disposition of such property for its fair market
value (as determined by the General Partner, in its sole discretion, and taking
into account Section 7701(g) of the Code) on the date of the revaluation.
4.05 PERCENTAGE INTERESTS. If the number of outstanding Partnership
Units increases or decreases during a taxable year, each Partner's Percentage
Interest shall be adjusted by the General Partner effective as of the effective
date of each such increase or decrease to a percentage equal to the number of
Partnership Units held by such Partner divided by the aggregate number of
Partnership Units outstanding after giving effect to such increase or decrease.
If the Partners' Percentage Interests are adjusted pursuant to this Section
4.05, the Profits and Losses for the taxable year in which the adjustment occurs
shall be allocated between the several parts of the year (a) beginning on the
first day of the year and ending on the next following Percentage Interest
Adjustment Date, (b) beginning on the day following a Percentage Interest
Adjustment Date and ending on the next following Percentage Interest Adjustment
Date, and/or (c) beginning on the first day following the last Percentage
Interest Adjustment Date occurring during the year and ending on the last day of
the year, as may be appropriate, either (i) as if the taxable year had ended on
the last day of each part or (ii) based on the number of days in each part. The
General Partner, in its sole discretion, shall determine which method shall be
used to allocate Profits and Losses for the taxable year in which the adjustment
occurs. The allocation among the Partners of Profits and Losses allocated to any
part of the year shall be based on the Percentage Interests determined as of the
first day of such part.
4.06 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.
4.07 RETURN OF CAPITAL CONTRIBUTIONS. No Partner shall be entitled
to withdraw any part of its Capital Contribution or its Capital Account or
to receive any distribution from the Partnership, except as specifically
provided in this Agreement. Except as otherwise provided herein, there
shall be no obligation to return to any Partner or withdrawn Partner any
part of such Partner's Capital Contribution for so long as the Partnership
continues in existence.
4.08 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Partners herein
set forth to make Capital Contributions or loans to the Partnership shall be
deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners. In
addition, it is the intent of the parties hereto that no
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distribution to any Limited Partner shall be deemed a return of money or other
property in violation of the Act. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, any
Limited Partner is obligated to return such money or property, such obligation
shall be the obligation of such Limited Partner and not of the General Partner.
Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or
property of the Partnership.
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.01 ALLOCATION OF PROFIT AND LOSS.
(a) General. Profit and Loss of the Partnership for each
fiscal year of the Partnership shall be allocated among the Partners in
accordance with their respective Percentage Interests.
(b) Minimum Gain Chargeback. Notwithstanding any provision to
the contrary, (i) any expense of the Partnership that is a "nonrecourse
deduction" within the meaning of Regulations Section 1.704-2(b)(1) shall be
allocated in accordance with the Partners' respective Percentage Interests, (ii)
any expense of the Partnership that is a "partner nonrecourse deduction" within
the meaning of Regulations Section 1.704-2(i)(2) shall be allocated in
accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net
decrease in Partnership Minimum Gain within the meaning of Regulations Section
1.704-2(f)(1) for any Partnership taxable year, items of gain and income shall
be allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section 1.704- 2(j),
and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership
taxable year, items of gain and income shall be allocated among the Partners in
accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). A Partner's "interest in
partnership profits" for purposes of determining its share of the nonrecourse
liabilities of the Partnership within the meaning of Regulations Section
1.752-3(a)(3) shall be such Partner's Percentage Interest.
(c) Qualified Income Offset. If a Limited Partner receives in
any taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that
causes or increases a negative balance in such Partner's Capital Account that
exceeds the sum of such Partner's shares of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially
for such taxable year (and, if necessary, later taxable years) items of income
and gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to
a Limited Partner in accordance with this Section 5.01(c), to the extent
permitted by Regulations Section 1.704-1(b) and Section 5.01(d), items of
expense or loss shall be allocated to such Partner in an amount necessary to
offset the income or gain previously allocated to such Partner under this
Section 5.01(c).
(d) Capital Account Deficits. Loss shall not be allocated to a
Limited Partner to the extent that such allocation would cause a deficit in such
Partner's Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. Any Loss in excess of that limitation shall be allocated to the
General Partner. After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.01(d), to the extent permitted by
Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an
amount necessary to offset the Loss previously allocated to such Partner under
this Section 5.01(d).
(e) Allocations Between Transferor and Transferee. If a
Partner transfers any part or all of its Partnership Interest, the distributive
shares of the various items of Profit and Loss allocable among the Partners
during such fiscal year of the Partnership shall be allocated between the
transferor and the transferee Partner either (i) as if the Partnership's fiscal
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year had ended on the date of the transfer, or (ii) based on the number of days
of such fiscal year that each was a Partner without regard to the results of
Partnership activities in the respective portions of such fiscal year in which
the transferor and the transferee were Partners. The General Partner, in its
sole discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the
transferor and the transferee Partner.
(f) Definition of Profit and Loss. "Profit" and "Loss" and any
items of income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss
shall not include items of income, gain and expense that are specially allocated
pursuant to Section 5.01(b), 5.01(c), or 5.01(d). All allocations of income,
Profit, gain, Loss, and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 5.01, except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have
the authority to elect the method to be used by the Partnership for allocating
items of income, gain, and expense as required by Section 704(c) of the Code and
such election shall be binding on all Partners.
5.02 DISTRIBUTION OF CASH.
(a) The General Partner shall distribute cash on a quarterly
(or, at the election of the General Partner, more frequent) basis, in an amount
determined by the General Partner in its sole discretion, to the Partners who
are Partners on the Partnership Record Date with respect to such quarter (or
other distribution period) in accordance with their respective Percentage
Interests on the Partnership Record Date; provided, however, that if a new or
existing Partner acquires an additional Partnership Interest in exchange for a
Capital Contribution on any date other than a Partnership Record Date, the cash
distribution attributable to such additional Partnership Interest for the
Partnership Record Date following the issuance of such additional Partnership
Interest shall be reduced in the proportion that the number of days that such
additional Partnership Interest is held by such Partner bears to the number of
days between such Partnership Record Date and the immediately preceding
Partnership Record Date.
(b) Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to the Partner or assignee (including by reason of
Section 1446 of the Code), the amount withheld shall be treated as a
distribution of cash in the amount of such withholding to such Partner.
(c) In no event may a Partner receive a distribution of cash
with respect to a Partnership Unit if such Partner is entitled to receive a cash
dividend as the holder of record of a REIT Share for which all or part of such
Partnership Unit has been or will be exchanged.
5.03 REIT DISTRIBUTION REQUIREMENTS. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall cause the Partnership to
distribute amounts sufficient to enable the Company to pay shareholder dividends
that will allow the Company to (i) meet its distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
avoid any federal income or excise tax liability imposed by the Code.
5.04 NO RIGHT TO DISTRIBUTIONS IN KIND. No Partner shall be entitled
to demand property other than cash in connection with any distributions by the
Partnership.
5.05 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS. Notwithstanding
any of the provisions of this Article V, no Partner shall have the right to
receive and the General Partner shall not have the right to make, a distribution
that includes a return of all or part of a Partner's Capital Contributions,
unless after giving effect to the return of a Capital Contribution, the sum of
all Partnership liabilities, other than the liabilities to a Partner for the
return of his Capital Contribution, does not exceed the fair market value of the
Partnership's assets.
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5.06 DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon liquidation of the Partnership, after payment of, or
adequate provision for, debts and obligations of the Partnership, including any
Partner loans, any remaining assets of the Partnership shall be distributed to
all Partners with positive Capital Accounts in accordance with their respective
positive Capital Account balances. For purposes of the preceding sentence, the
Capital Account of each Partner shall be determined after all adjustments made
in accordance with Sections 5.01 and 5.02 resulting from Partnership operations
and from all sales and dispositions of all or any part of the Partnership's
assets. Any distributions pursuant to this Section 5.06 shall be made by the end
of the Partnership's taxable year in which the liquidation occurs (or, if later,
within 90 days after the date of the liquidation). To the extent deemed
advisable by the General Partner, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
(b) If the General Partner has a negative balance in its
Capital Account following a liquidation of the Partnership, as determined after
taking into account all Capital Account adjustments in accordance with Sections
5.01 and 5.02 resulting from Partnership operations and from all sales and
dispositions of all or any part of the Partnership's assets, the General Partner
shall contribute to the Partnership an amount of cash equal to the negative
balance in its Capital Account and such cash shall be paid or distributed by the
Partnership to creditors, if any, and then to the Limited Partners in accordance
with Section 5.06(a). Such contribution by the General Partner shall be made by
the end of the Partnership's taxable year in which the liquidation occurs (or,
if later, within 90 days after the date of the liquidation).
5.07 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners
that the allocations of Profit and Loss under the Agreement have substantial
economic effect (or be consistent with the Partners' interests in the
Partnership in the case of the allocation of losses attributable to
nonrecourse debt) within the meaning of Section 704(b) of the Code as
interpreted by the Regulations promulgated pursuant thereto. Article V and
other relevant provisions of this Agreement shall be interpreted in a manner
consistent with such intent.
ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.01 MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement,
the General Partner shall have full, complete and exclusive discretion to manage
and control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Partnership.
Subject to the restrictions specifically contained in this Agreement, the powers
of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership:
(i) to acquire, purchase, own, operate, lease and
dispose of any real property and any other property or assets,
including, without limitation, equity interests in other
REITs, mortgage loans and participations therein, that the
General Partner determines are necessary or appropriate or in
the best interests of the business of the Company and the
Partnership;
(ii) to construct buildings and make other
improvements on the properties owned or leased by the
Partnership;
(iii) to authorize, issue, sell, redeem or otherwise
purchase any Partnership Interests or any securities
(including secured and unsecured debt obligations of the
Partnership, debt obligations of the Partnership convertible
into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any
Partnership Interests) of the Partnership;
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(iv) to borrow or lend money for the Partnership,
issue or receive evidences of indebtedness in connection
therewith, refinance, increase the amount of, modify, amend or
change the terms of, or extend the time for the payment of,
any such indebtedness, and secure such indebtedness by
mortgage, deed of trust, pledge or other lien on the
Partnership's assets;
(v) to guarantee or become a comaker of indebtedness
of the Company or any Subsidiary thereof, refinance, increase
the amount of, modify, amend or change the terms of, or extend
the time for the payment of, any such guarantee or
indebtedness, and secure such guarantee or indebtedness by
mortgage, deed of trust, pledge or other lien on the
Partnership's assets;
(vi) to use assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent
with this Agreement, including, without limitation, payment,
either directly or by reimbursement, of all operating costs
and general administrative expenses of the Company, the
Partnership, or any Subsidiary of either to third parties or
to the Company as set forth in this Agreement;
(vii) to lease all or any portion of any of the
Partnership's assets, whether or not the terms of such leases
extend beyond the termination date of the Partnership and
whether or not any portion of the Partnership's assets so
leased are to be occupied by the lessee, or, in turn,
subleased in whole or in part to others, for such
consideration and on such terms as the General Partner may
determine;
(viii) to prosecute, defend, arbitrate, or compromise
any and all claims or liabilities in favor of or against the
Partnership, on such terms and in such manner as the General
Partner may reasonably determine, and similarly to prosecute,
settle or defend litigation with respect to the Partners, the
Partnership, or the Partnership's assets; provided, however,
that the General Partner may not, without the consent of the
Limited Partners (other than the Original Limited Partner)
holding more than 50% of the Percentage Interests of the
Limited Partners (other than the Original Limited Partner),
confess a judgment against the Partnership;
(ix) to file applications, communicate, and otherwise
deal with any and all governmental agencies having
jurisdiction over, or in any way affecting, the Partnership's
assets or any other aspect of the Partnership business;
(x) to make or revoke any election permitted or
required of the Partnership by any taxing authority;
(xi) to maintain such insurance coverage for public
liability, fire and casualty, and any and all other insurance
for the protection of the Partnership, for the conservation of
Partnership assets, or for any other purpose convenient or
beneficial to the Partnership, in such amounts and such types,
as it shall determine from time to time;
(xii) to determine whether or not to apply any
insurance proceeds for any property to the restoration of such
property or to distribute the same;
(xiii) to establish one or more divisions of the
Partnership, to hire and dismiss employees of the Partnership
or any division of the Partnership, and to engage legal
counsel, accountants, consultants, real estate brokers, and
other professionals, as the General Partner may deem necessary
or appropriate in connection with the Partnership business, on
such terms (including provisions for compensation and
eligibility to participate in employee benefit plans, stock
option plans and similar plans funded by the Partnership) as
the General Partner may deem reasonable and proper;
(xiv) to retain other services of any kind or nature
in connection with the Partnership business, and to pay
therefor such remuneration as the General Partner may deem
reasonable and proper;
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(xv) to negotiate and conclude agreements on behalf
of the Partnership with respect to any of the rights, powers
and authority conferred upon the General Partner;
(xvi) to maintain accurate accounting records and to
file promptly all federal, state and local income tax returns
on behalf of the Partnership;
(xvii) to distribute Partnership cash or other
Partnership assets in accordance with this Agreement;
(xviii) to form or acquire an interest in, and
contribute property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property
to, its Subsidiaries and any other Person in which it has an
equity interest from time to time);
(xix) to establish Partnership reserves for working
capital, capital expenditures, contingent liabilities, or any
other valid Partnership purpose; and
(xx) to take such other action, execute, acknowledge,
swear to or deliver such other documents and instruments, and
perform any and all other acts that the General Partner deems
necessary or appropriate for the formation, continuation and
conduct of the business and affairs of the Partnership
(including, without limitation, all actions consistent with
allowing the General Partner at all times to qualify as a REIT
unless the General Partner voluntarily terminates its REIT
status) and to possess and enjoy all of the rights and powers
of a general partner as provided by the Act.
(b) Except as otherwise provided herein, to the extent the
duties of the General Partner require expenditures of funds to be paid to third
parties, the General Partner shall not have any obligations hereunder except to
the extent that Partnership funds are reasonably available to it for the
performance of such duties, and nothing herein contained shall be deemed to
authorize or require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any individual
liability or obligation on behalf of the Partnership.
6.02 DELEGATION OF AUTHORITY. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform any acts or services for the Partnership as the General Partner may
approve.
6.03 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) The Partnership shall indemnify an Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including reasonable legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership as set forth in this Agreement
in which any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, unless it is established that: (i) the act or omission of
the Indemnitee was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 6.03(a). The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent, or
an entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to that specified in
this Section 6.03(a). Any indemnification pursuant to this Section 6.03 shall be
made only out of the assets of the Partnership.
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(b) The Partnership may reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.03 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 6.03 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.03, the Partnership shall
be deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 6.03; and actions
taken or omitted by an Indemnitee with respect to an employee benefit plan in
the performance of its duties for a purpose reasonably believed by it to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the
Partnership.
(f) In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 6.03 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.03 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
6.04 LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith. The General Partner shall not be in breach of any duty that
the General Partner may owe to the Limited Partners or the Partnership or any
other Persons under this Agreement or of any duty stated or implied by law or
equity provided the General Partner, acting in good faith, abides by the terms
of this Agreement.
(b) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership, the Company and the
Company's shareholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or the
tax consequences of some, but not all, of the Limited Partners) in deciding
whether to cause the Partnership to take (or decline to take) any actions. In
the event of a conflict between the interests of the shareholders of the Company
on one hand and the Limited Partners on the other, the General Partner shall
endeavor in good faith to resolve the conflict in a manner not adverse to either
the shareholders of the Company or the Limited Partners; provided, however, that
for so long as the Company and its Subsidiaries own a controlling interest in
the Partnership, any such conflict that cannot be resolved in a manner not
adverse to either the shareholders of the Company or the Limited Partners shall
be resolved in favor
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of the shareholders. The General Partner shall not be liable for monetary
damages for losses sustained, liabilities incurred, or benefits not derived by
Limited Partners in connection with such decisions, provided that the General
Partner has acted in good faith.
(c) Subject to its obligations and duties as General Partner
set forth in Section 6.01, the General Partner may exercise any of the powers
granted to it under this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT or (ii) to prevent the Company from incurring any
taxes under Section 857, Section 4981, or any other provision of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
(e) Any amendment, modification or repeal of this Section 6.04
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 6.04 as in effect immediately prior to
such amendment, modification or repeal with respect to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when claims relating to such matters may arise or be asserted.
6.05 PARTNERSHIP EXPENSES. In addition to the expenses that are
directly attributable to the Partnership, the Partnership shall pay the REIT
Expenses that are allocable to the Partnership. The General Partner, in its sole
discretion, shall determine what portion of the REIT Expenses are allocable to
the Partnership. If any REIT Expenses determined by the General Partner to be
allocable to the Partnership are paid by the General Partner, the General
Partner shall be reimbursed by the Partnership therefor.
6.06 OUTSIDE ACTIVITIES. The General Partner and any officer,
director, employee, agent, trustee, Affiliate, Subsidiary, or shareholder of
the General Partner shall be entitled to and may have business interests
and engage in business activities in addition to those relating to the
Partnership, including business interests and activities substantially similar
or identical to those of the Partnership. Neither the Partnership nor any of
the Limited Partners shall have any rights by virtue of this Agreement in
any such business ventures, interest or activities. None of the Limited
Partners nor any other Person shall have any rights by virtue of this
Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures, interests and activities to the Partnership or any
Limited Partner, even if such opportunity is of a character which, if
presented to the Partnership or any Limited Partner, could be taken by such
Person.
6.07 EMPLOYMENT OR RETENTION OF AFFILIATES.
(a) Any Affiliate of the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership (whether
as a buyer, lessor, lessee, manager, furnisher of goods or services, broker,
agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner
determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries
or other Persons in which it has an equity investment, and such Persons may
borrow funds from the Partnership, on terms and conditions established in the
sole and absolute discretion of the General Partner. The foregoing authority
shall not create any right or benefit in favor of any Subsidiary or any other
Person.
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(c) The Partnership may transfer assets to joint ventures,
other partnerships, corporations or other business entities in which it is or
thereby becomes a participant upon such terms and subject to such conditions as
the General Partner deems are consistent with this Agreement and applicable law.
6.08 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01 TRANSFER OF A GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) Except as provided in Section 7.01(c), 7.01(d) or 7.03(a),
a General Partner shall not transfer all or any portion of its General
Partnership Interest or withdraw as General Partner.
(b) Except as provided in Section 7.01(c) or 7.01(d), the
General Partner (or all General Partners if at any time there are two or more
General Partners) and the Original Limited Partner will at all times own in the
aggregate at least a 20% Percentage Interest.
(c) Except as otherwise provided in Section 7.01(d), no
General Partner shall engage in any merger with or into another Person, any sale
of all or substantially all of its assets or any reclassification,
recapitalization or change of outstanding REIT Shares (other than a change in
par value, or from par value to no par value, or as a result of a subdivision or
combination of REIT Shares) (a "Transaction"), unless (i) the Transaction, if a
merger or asset sale, also includes a merger of the Partnership or sale of all
or substantially all of the assets of the Partnership as a result of which all
Limited Partners will receive for each Partnership Unit an amount of cash,
securities, or other property equal to the product of the Conversion Factor and
the greatest amount of cash, securities or other property paid in the
Transaction to a holder of one REIT Share in consideration of one REIT Share;
and (ii) if, in connection with the Transaction, a purchase, tender or exchange
offer ("Offer") shall have been made to and accepted by the holders of more than
50% of the outstanding REIT Shares, each holder of Partnership Units shall be
given the option to exchange its Partnership Units for the greatest amount of
cash, securities, or other property which a Limited Partner would have received
had it (A) exercised its Redemption Right and (B) sold, tendered or exchanged
pursuant to the Offer the REIT Shares received upon exercise of the Redemption
Right immediately prior to the expiration of the Offer.
(d) Notwithstanding Sections 7.01(a), 7.01(b) and 7.01(c),
(i) a General Partner may transfer all or any portion of its
General Partnership Interest to (A) a wholly-owned Subsidiary
of such General Partner or (B) the owner of all of the
ownership interests of such General Partner, and following a
transfer of all of its General Partnership Interest, may
withdraw as General Partner; and
(ii) a General Partner may engage in a Transaction not
required by law or by the rules of any national securities
exchange on which the REIT Shares are listed to be submitted
to the vote of the holders of the REIT Shares.
7.02 ADMISSION OF A SUBSTITUTE OR ADDITIONAL GENERAL PARTNER. A
Person shall be admitted as a substitute or additional General Partner of the
Partnership only if the following terms and conditions are satisfied:
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(a) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.05 in connection with
such admission shall have been performed;
(b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any other
jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the
Act, that none of the actions taken in connection with the admission of such
Person as a substitute or additional General Partner will cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability.
7.03 EFFECT OF BANKRUPTCY OF A GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to a
General Partner, if the Partnership is continued pursuant to Section 2.04(c),
such General Partner shall promptly transfer and assign its General Partnership
Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners (excluding the Original Limited
Partner) in accordance with Section 2.04(c) and otherwise admitted to the
Partnership in accordance with Section 7.02, and shall withdraw (or shall be
deemed to have withdrawn) as General Partner. At the time of assignment, the
bankrupt General Partner shall be entitled to receive from the substitute
General Partner the fair market value of the General Partnership Interest of
such bankrupt General Partner. Such fair market value shall be determined by an
appraiser mutually agreed upon by the General Partner and a majority in interest
of the Limited Partners (excluding the Original Limited Partner) within 10 days
following the occurrence of such Event of Bankruptcy. In the event that the
parties are unable to agree upon an appraiser, the bankrupt General Partner and
a majority in interest of the Limited Partners (excluding the Original Limited
Partner) each shall select an appraiser. Each such appraiser shall complete an
appraisal of the fair market value of the bankrupt General Partner's General
Partnership Interest within 30 days of the occurrence of such Event of
Bankruptcy, and the fair market value of the bankrupt General Partner's General
Partnership Interest shall be the average of the two appraisals; provided,
however, that if the higher appraisal exceeds the lower appraisal by more than
20% of the amount of the lower appraisal, the two appraisers, no later than 40
days after the removal of the General Partner, shall select a third appraiser
who shall complete an appraisal of the fair market value of the bankrupt General
Partner's General Partnership Interest no later than 60 days after the removal
of the General Partner. In such case, the fair market value of the bankrupt
General Partner's General Partnership Interest shall be the average of the two
appraisals closest in value.
(b) The General Partnership Interest of a bankrupt General
Partner, during the time after occurrence of the Event of Bankruptcy until
transfer under Section 7.03(a), shall be converted to that of a special Limited
Partner; provided, however, such bankrupt General Partner shall not have any
rights to participate in the management and affairs of the Partnership, and
shall not be entitled to any portion of the income, expense, profit, gain or
loss allocations or cash distributions allocable or payable, as the case may be,
to the Limited Partners. Instead, such bankrupt General Partner shall receive
and be entitled only to retain distributions or allocations of such items that
it would have been entitled to receive in its capacity as General Partner, until
the transfer is effective pursuant to Section 7.03(a).
(c) All Partners shall have given and hereby do give such
consents, shall take such actions and shall execute such documents as shall be
legally necessary and sufficient to effect all the foregoing provisions of this
Section.
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ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS
8.01 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners shall not
participate in the management or control of Partnership business nor shall they
transact any business for the Partnership, nor shall they have the power to sign
for or bind the Partnership, such powers being vested solely and exclusively in
the General Partner.
8.02 POWER OF ATTORNEY. Each Limited Partner hereby irrevocably
appoints the General Partner its true and lawful attorney-in-fact, who may act
for each Limited Partner and in its name, place and stead, and for its use and
benefit, to sign, acknowledge, swear to, deliver, file and record, at the
appropriate public offices, any and all documents, certificates, and instruments
as may be deemed necessary or desirable by the General Partner to carry out
fully the provisions of this Agreement and the Act in accordance with their
terms, which power of attorney is coupled with an interest and shall survive the
death, dissolution or legal incapacity of the Limited Partner, or the transfer
by the Limited Partner of any part or all of its Partnership Interest.
8.03 LIMITATION ON LIABILITY OF LIMITED PARTNERS. No Limited Partner
shall be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make
payments of its Capital Contribution, if any, as and when due hereunder. After
its Capital Contribution is fully paid, no Limited Partner shall, except as
otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.
8.04 OWNERSHIP BY LIMITED PARTNER OF CORPORATE GENERAL PARTNER OR
AFFILIATE. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof, if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partner shall be
entitled to make such reasonable inquiry of the Limited Partners as is required
to establish compliance by the Limited Partners with the provisions of this
Section.
8.05 REDEMPTION RIGHT.
(a) Subject to Sections 8.05(b), 8.05(c), 8.05(d), and
8.05(e), each Limited Partner, other than the Original Limited Partner, shall
have the right (the "Redemption Right") to require the Partnership to redeem on
a Specified Redemption Date all or a portion of the Partnership Units held by
such Limited Partner at a redemption price equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the General Partner) by the Limited Partner who is exercising the Redemption
Right (the "Redeeming Partner"); provided, however, that the Partnership shall
not be obligated to satisfy such Redemption Right if the General Partner elects
to purchase the Partnership Units subject to the Notice of Redemption pursuant
to Section 8.05(b); and provided, further, that no Limited Partner may deliver
more than two Notices of Redemption during each calendar year. A Limited Partner
may not exercise the Redemption Right for less than 1,000 Partnership Units or,
if such Limited Partner holds less than 1,000 Partnership Units, all of the
Partnership Units held by such Partner. The Redeeming Partner shall have no
right, with respect to any Partnership Units so redeemed, to receive any
distribution paid with respect to Partnership Units if the record date for such
distribution is on or after the Specified Redemption Date.
(b) Notwithstanding the provisions of Section 8.05(a), a
Limited Partner that exercises the Redemption Right shall be deemed to have
offered to sell the Partnership Units described in the Notice of Redemption to
the General Partner, and the General Partner may, in its sole and absolute
discretion, elect to purchase directly and acquire such Partnership Units by
paying to the Redeeming Partner either the Cash Amount or the REIT Shares
Amount, as elected by the General Partner (in its sole and absolute discretion),
on the Specified Redemption Date, whereupon the General Partner shall acquire
the Partnership Units offered for redemption by the Redeeming Partner and shall
be treated for all purposes of this Agreement as the owner of such Partnership
Units. If the General Partner shall elect to exercise its right to purchase
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Partnership Units under this Section 8.05(b) with respect to a Notice of
Redemption, it shall so notify the Redeeming Partner within five Business Days
after the receipt by the General Partner of such Notice of Redemption. Unless
the General Partner (in its sole and absolute discretion) shall exercise its
right to purchase Partnership Units from the Redeeming Partner pursuant to this
Section 8.05(b), the General Partner shall not have any obligation to the
Redeeming Partner or the Partnership with respect to the Redeeming Partner's
exercise of the Redemption Right. In the event the General Partner shall
exercise its right to purchase Partnership Units with respect to the exercise of
a Redemption Right in the manner described in the first sentence of this Section
8.05(b), the Partnership shall have no obligation to pay any amount to the
Redeeming Partner with respect to such Redeeming Partner's exercise of such
Redemption Right, and each of the Redeeming Partner, the Partnership, and the
General Partner shall treat the transaction between the General Partner and the
Redeeming Partner for federal income tax purposes as a sale of the Redeeming
Partner's Partnership Units to the General Partner. Each Redeeming Partner
agrees to execute such documents as the General Partner may reasonably require
in connection with the issuance of REIT Shares upon exercise of the Redemption
Right.
(c) Notwithstanding the provisions of Section 8.05(a) and
8.05(b), a Limited Partner shall not be entitled to exercise the Redemption
Right if the delivery of REIT Shares to such Partner on the Specified Redemption
Date by the General Partner pursuant to Section 8.05(b) (regardless of whether
or not the General Partner would in fact exercise its rights under Section
8.05(b)) would (i) cause the Company to own, directly or constructively, 10% or
more of the ownership interests in a tenant of the General Partner's, the
Partnership's, or a Subsidiary Partnership's real property, within the meaning
of Section 856(d)(2)(B) of the Code, (ii) result in the Company being "closely
held" within the meaning of Section 856(h) of the Code, or (iii) in the opinion
of counsel for the Company, constitute or result in a violation of Section 5 of
the Securities Act.
(d) Any Cash Amount to be paid to a Redeeming Partner pursuant
to this Section 8.05 shall be paid within 60 days after the initial date of
receipt by the General Partner of the Notice of Redemption relating to the
Partnership Units to be redeemed; provided, however, that such 60-day period may
be extended for up to an additional 180-day period to the extent required for
the Company to issue and sell securities the proceeds of which will be
contributed to the Partnership to provide cash for payment of the Cash Amount.
Notwithstanding the foregoing, the General Partner agrees to use its best
efforts to cause the closing of the acquisition of redeemed Partnership Units
hereunder to occur as quickly as reasonably possible.
(e) Notwithstanding any other provision of this Agreement, the
General Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Redemption Rights as and if deemed necessary
to ensure that the Partnership does not constitute a "publicly traded
partnership" under section 7704 of the Code.
8.06 NYSE LISTING AND SECURITIES ACT REGISTRATION OF REIT SHARES.
In the event that the General Partner elects to acquire a Redeeming
Partner's Partnership Units by paying to such Partner the REIT Shares Amount,
the REIT Shares issued to the Redeeming Partner will be (a) listed on the NYSE
and (b) if and to the extent provided in such Redeeming Partner's Investment
Agreement, registered under the Securities Act and/or entitled to rights to
Securities Act registration.
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ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
9.01 PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby represents and warrants to the
General Partner and to the Partnership that the acquisition of his Partnership
Interest is made as a principal for his account for investment purposes only and
not with a view to the resale or distribution of such Partnership Interest.
(b) Each Limited Partner agrees that he will not sell, assign
or otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and warranties to the General
Partner set forth in Section 9.01(a) above and similarly agree not to sell,
assign or transfer such Partnership Interest or fraction thereof to any Person
who does not similarly represent, warrant and agree.
9.02 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.02(b), (c) and
(d), a Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise
transfer all or any portion of his Limited Partnership Interest, or any of such
Limited Partner's economic rights as a Limited Partner, whether voluntarily or
by operation of law or at judicial sale or otherwise (collectively, a
"Transfer"), with or without the consent of the General Partner. The General
Partner may require, as a condition of any Transfer, that the transferor assume
all costs incurred by the Partnership in connection therewith.
(b) No Limited Partner may effect a Transfer of its Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would require the registration of
the Limited Partnership Interest under the Securities Act or would otherwise
violate any applicable federal or state securities or blue sky law (including
investment suitability standards).
(c) No transfer by a Limited Partner of its Partnership Units,
in whole or in part, may be made to any Person if (i) in the opinion of counsel
for the Partnership, the transfer would result in the Partnership's being
treated as an association taxable as a corporation (other than a qualified REIT
subsidiary within the meaning of Section 856(i) of the Code), (ii) in the
opinion of counsel for the Partnership, it would adversely affect the ability of
the Company to continue to qualify as a REIT or subject the Company to any
additional taxes under Section 857 or Section 4981 of the Code, or (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code.
(d) No transfer of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a nonrecourse liability (within the meaning of Regulations Section
1.752-1(a)(2)), without the consent of the General Partner, which may be
withheld in its sole and absolute discretion, provided that as a condition to
such consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to exchange or redeem for the Cash Amount
any Partnership Units in which a security interest is held simultaneously with
the time at which such lender would be deemed to be a partner in the Partnership
for purposes of allocating liabilities to such lender under Section 752 of the
Code.
(e) Any Transfer in contravention of any of the provisions of
this Article IX shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
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9.03 ADMISSION OF SUBSTITUTE LIMITED PARTNER.
(a) Subject to the other provisions of this Article IX, an
assignee of the Limited Partnership Interest of a Limited Partner (which shall
be understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Limited Partnership Interest) shall be deemed admitted
as a Limited Partner of the Partnership only upon the satisfactory completion of
the following:
(i) The assignee shall have accepted and agreed to
be bound by the terms and provisions of this Agreement by
executing a counterpart or an amendment thereof, including a
revised Exhibit A, and such other documents or instruments as
the General Partner may require in order to effect the
admission of such Person as a Limited Partner.
(ii) To the extent required, an amended Certificate
evidencing the admission of such Person as a Limited Partner
shall have been signed, acknowledged and filed for record in
accordance with the Act.
(iii) The assignee shall have delivered a letter
containing the representation set forth in Section 9.01(a) and
the agreement set forth in Section 9.01(b).
(iv) If the assignee is a corporation, partnership
or trust, the assignee shall have provided the General Partner
with evidence satisfactory to counsel for the Partnership of
the assignee's authority to become a Limited Partner under the
terms and provisions of this Agreement.
(v) The assignee shall have executed a power of
attorney containing the terms and provisions set forth in
Section 8.02.
(vi) The assignee shall have paid all reasonable
legal fees of the Partnership and the General Partner and
filing and publication costs in connection with its
substitution as a Limited Partner.
(vii) The assignee has obtained the prior written
consent of the General Partner to its admission as a
Substitute Limited Partner, which consent may be given or
denied in the exercise of the General Partner's sole and
absolute discretion.
(b) For the purpose of allocating Profits and Losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section 9.03(a)(ii) or, if no such filing is required, the later of the date
specified in the transfer documents or the date on which the General Partner has
received all necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person
seeking to become a Substitute Limited Partner by preparing the documentation
required by this Section and making all official filings and publications. The
Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article IX to the admission of such
Person as a Limited Partner of the Partnership.
9.04 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.01 and 9.02,
except as required by operation of law, the Partnership shall not be obligated
for any purposes whatsoever to recognize the assignment by any Limited Partner
of its Partnership Interest until the Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a
Limited Partner's Limited Partnership Interest, but does not become a Substitute
Limited Partner and desires to make a further assignment of such Limited
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Partnership Interest, shall be subject to all the provisions of this Article IX
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of its Limited Partnership Interest.
9.05 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A
LIMITED PARTNER. The occurrence of an Event of Bankruptcy as to a Limited
Partner, the death of a Limited Partner or a final adjudication that a Limited
Partner is incompetent (which term shall include, but not be limited to,
insanity) shall not cause the termination or dissolution of the Partnership, and
the business of the Partnership shall continue if an order for relief in a
bankruptcy proceeding is entered against a Limited Partner, the trustee or
receiver of his estate or, if he dies, his executor, administrator or trustee,
or, if he is finally adjudicated incompetent, his committee, guardian or
conservator, shall have the rights of such Limited Partner for the purpose of
settling or managing his estate property and such power as the bankrupt,
deceased or incompetent Limited Partner possessed to assign all or any part of
his Partnership Interest and to join with the assignee in satisfying conditions
precedent to the admission of the assignee as a Substitute Limited Partner.
9.06 JOINT OWNERSHIP OF INTERESTS. A Partnership Interest may be
acquired by two individuals as joint tenants with right of survivorship,
provided that such individuals either are married or are related and share the
same home as tenants in common. The written consent or vote of both owners of
any such jointly held Partnership Interest shall be required to constitute the
action of the owners of such Partnership Interest; provided, however, that the
written consent of only one joint owner will be required if the Partnership has
been provided with evidence satisfactory to the counsel for the Partnership that
the actions of a single joint owner can bind both owners under the applicable
laws of the state of residence of such joint owners. Upon the death of one owner
of a Partnership Interest held in a joint tenancy with a right of survivorship,
the Partnership Interest shall become owned solely by the survivor as a Limited
Partner and not as an assignee. The Partnership need not recognize the death of
one of the owners of a jointly-held Partnership Interest until it shall have
received notice of such death. Upon notice to the General Partner from either
owner, the General Partner shall cause the Partnership Interest to be divided
into two equal Partnership Interests, which shall thereafter be owned separately
by each of the former owners.
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.01 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the General Partner shall keep or cause to be kept at the
Partnership's specified office true and complete books of account in accordance
with generally accepted accounting principles, including: (a) a current list of
the full name and last known business address of each Partner, (b) a copy of the
Certificate of Limited Partnership and all certificates of amendment thereto,
(c) copies of the Partnership's federal, state and local income tax returns and
reports, (d) copies of the Agreement and any financial statements of the
Partnership for the three most recent years and (e) all documents and
information required under the Act. Any Partner or its duly authorized
representative, upon paying the costs of collection, duplication and mailing,
shall be entitled to inspect or copy such records during ordinary business
hours.
10.02 CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested shall
be deposited in one or more accounts maintained in such banking or brokerage
institutions as the General Partner shall determine, and withdrawals shall be
made only on such signature or signatures as the General Partner may, from time
to time, determine.
(b) All deposits and other funds not needed in the operation
of the business of the Partnership may be invested by the General Partner in
investment grade instruments (or investment companies whose portfolio consists
primarily thereof), government obligations, certificates of deposit, bankers'
acceptances and municipal notes and bonds. The funds of the Partnership shall
not be commingled with the funds of any other Person except for such commingling
as may necessarily result from an investment in those investment companies
permitted by this Section 10.02(b).
10.03 FISCAL AND TAXABLE YEAR. The fiscal and taxable year of the
Partnership shall be the calendar year.
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<PAGE>
10.04 ANNUAL TAX INFORMATION AND REPORT. Within 75 days after the end
of each fiscal year of the Partnership, the General Partner shall furnish to
each person who was a Limited Partner at any time during such year the tax
information necessary to file such Limited Partner's individual tax returns as
shall be reasonably required by law.
10.05 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the Tax Matters Partner of
the Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax
Matters Partner, the General Partner shall have the right and obligation to take
all actions authorized and required, respectively, by the Code for the Tax
Matters Partner. The General Partner shall have the right to retain professional
assistance in respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on behalf of the
Partnership as Tax Matters Partner shall constitute Partnership expenses. In the
event the General Partner receives notice of a final Partnership adjustment
under Section 6223(a)(2) of the Code, the General Partner shall either (i) file
a court petition for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of which petition shall be
mailed to all Limited Partners on the date such petition is filed, or (ii) mail
a written notice to all Limited Partners, within such period, that describes the
General Partner's reasons for determining not to file such a petition.
(b) All elections required or permitted to be made by the
Partnership under the Code or any applicable state or local tax law shall be
made by the General Partner in its sole discretion.
(c) In the event of a transfer of all or any part of the
Partnership Interest of any Partner, the Partnership, at the option of the
General Partner, may elect pursuant to Section 754 of the Code to adjust the
basis of the Properties. Notwithstanding anything contained in Article V of this
Agreement, any adjustments made pursuant to Section 754 shall affect only the
successor in interest to the transferring Partner and in no event shall be taken
into account in establishing, maintaining or computing Capital Accounts for the
other Partners for any purpose under this Agreement. Each Partner will furnish
the Partnership with all information necessary to give effect to such election.
10.06 REPORTS TO LIMITED PARTNERS.
(a) As soon as practicable after the close of each fiscal
quarter (other than the last quarter of the fiscal year), the General Partner
shall cause to be mailed to each Limited Partner a quarterly report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
quarter, presented in accordance with generally accepted accounting principles.
As soon as practicable after the close of each fiscal year, the General Partner
shall cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
year, presented in accordance with generally accepted accounting principles. The
annual financial statements shall be audited by accountants selected by the
General Partner.
(b) Any Partner shall further have the right to a private
audit of the books and records of the Partnership, provided such audit is made
for Partnership purposes, at the expense of the Partner desiring it and is made
during normal business hours.
ARTICLE XI
AMENDMENT OF AGREEMENT
11.01 AMENDMENT OF AGREEMENT. The General Partner's consent shall be
required for any amendment to the Agreement. The General Partner, without the
consent of the Limited Partners, may amend this Agreement in any respect;
provided, however, that the following amendments shall require the consent of
Limited Partners (other than the Original Limited Partner) holding more than 50%
of the Percentage Interests of the Limited Partners (other than the Original
Limited Partner):
- 24 -
<PAGE>
(a) any amendment affecting the operation of the Conversion
Factor or the Redemption Right (except as provided in Section 8.05(e)) in a
manner adverse to the Limited Partners;
(b) any amendment that would adversely affect the rights of
the Limited Partners to receive the distributions payable to them hereunder,
other than with respect to the issuance of additional Partnership Units pursuant
to Section 4.02;
(c) any amendment that would alter the Partnership's
allocations of Profit and Loss to the Limited Partners, other than with respect
to the issuance of additional Partnership Units pursuant to Section 4.02; or
(d) any amendment that would impose on the Limited
Partners any obligation to make additional Capital Contributions to the
Partnership.
ARTICLE XII
GENERAL PROVISIONS
12.01 NOTICES. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses set
forth in Exhibit A attached hereto; provided, however, that any Partner may
specify a different address by notifying the General Partner in writing of such
different address. Notices to the Partnership shall be delivered at or mailed to
its specified office.
12.02 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of the
Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.
12.03 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all further
acts and execute, swear to, acknowledge and deliver all further documents which
may be reasonable, necessary, appropriate or desirable to carry out the
provisions of this Agreement or the Act.
12.04 SEVERABILITY. If any provision of this Agreement shall be
declared illegal, invalid, or unenforceable in any jurisdiction, then such
provision shall be deemed to be severable from this Agreement (to the extent
permitted by law) and in any event such illegality, invalidity or
unenforceability shall not affect the remainder hereof.
12.05 ENTIRE AGREEMENT. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior written
agreements and prior and contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.
12.06 RULES OF CONSTRUCTION. When the context in which words are used
in the Agreement indicates that such is the intent, words in the singular number
shall include the plural and the masculine gender shall include the neuter or
female gender as the context may require. Unless the context otherwise
indicates, references to particular Articles and Sections are references to
Articles and Sections of this Agreement.
12.07 HEADINGS. The Article headings or sections in this Agreement are
for convenience only and shall not be used in construing the scope of this
Agreement or any particular Article.
12.08 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the same
counterpart.
- 25 -
<PAGE>
12.09 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
- 26 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this First Amended and Restated Agreement of Limited Partnership,
all as of the 31st day of December, 1995.
GENERAL PARTNER:
UNITED DOMINION REALTY TRUST, INC.
By: _____________________________
Its:_________________________
LIMITED PARTNER:
UDRT OF NORTH CAROLINA, L.L.C.,
By: United Dominion Realty Trust,
Inc., sole managing member
By: _____________________________
Its:_________________________
- 27 -
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Agreed Value of
Cash Non-Cash Partnership Percentage
Partner and Address Contribution Contribution Units Interest
<S> <C> <C> <C> <C>
GENERAL PARTNER:
United Dominion Realty Trust, Inc. 1,300 772,834.29 52,948.98 1%
10 South Sixth Street, Suite 203
Richmond, Virginia 23219
LIMITED PARTNERS:
UDRT of North Carolina, L.L.C. 128,700 76,510,594.71 5,241,947.00 99%
c/o United Dominion Realty Trust, Inc.
10 South Sixth Street, Suite 203
Richmond, Virginia 23219
</TABLE>
- 28 -
<PAGE>
EXHIBIT B
LIST OF EXCHANGE PROPERTIES
PROPERTIES: LOCATION
2131 Nashville, Tennessee
Briar Club Memphis, Tennessee
Covington Crossing Memphis, Tennessee
Franklin Mansions Franklin, Tennessee
Harbour Town Nashville, Tennessee
Hickory Run Hendersonville, Tennessee
Hickory Pointe Memphis, Tennessee
Lakes Nashville, Tennessee
Legacy Hill Nashville, Tennessee
Tri-County Industrial Bristol, Tennessee
- 29 -
<PAGE>
EXHIBIT C
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.05 of the First Amended and Restated
Agreement of Limited Partnership (the "Agreement") of United Dominion Realty,
L.P., the undersigned hereby irrevocably (i) presents for redemption ________
Partnership Units in United Dominion Realty, L.P. in accordance with the terms
of the Agreement and the Redemption Right referred to in Section 8.05 thereof,
(ii) surrenders such Partnership Units and all right, title and interest
therein, and (iii) directs that the Cash Amount or REIT Shares Amount (as
defined in the Agreement) as determined by the General Partner deliverable upon
exercise of the Redemption Right be delivered to the address specified below,
and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT
Shares be registered or placed in the name(s) and at the address(es) specified
below.
Dated:________ __, _____
Name of Limited Partner:
------------------------------
(Signature of Limited Partner)
------------------------------
(Mailing Address)
------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------
If REIT Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
- 30 -
EXHIBIT 12
United Dominion
Realty Trust, Inc.
Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends
(Dollar in
thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1991 1992 1993 1994 1995
------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Income before extraordinary item $3,604 $6,577 $11,197 $19,226 $33,127
Add:
Portion of rents representative
of the interest factor 103 126 143 177 333
Interest on indebtedness 11,918 11,777 17,237 28,521 40,646
Adoption of SFAS No. 112 "Employers'
Accounting for Postemployment
Benefits" -- -- -- 450 --
--------- ------- ---------- ------- --------
Earnings $15,625 $18,480 $28,577 $48,374 $74,106
========= ========= ======== ========= =========
Fixed charges and preferred
stock dividend:
Interest on indebtedness $11,918 $11,777 $17,237 $28,521 $40,646
Capitalized Interest 291 73 -- -- 40
Portion of rents representative
of the interest factor 103 126 143 177 333
--------- --------- -------- --------- ---------
Fixed charges 12,312 11,976 17,380 28,698 41,019
--------- --------- -------- --------- ---------
Add:
Preferred stock dividend -- -- -- -- 6,637
--------- --------- -------- --------- ------------
Combined fixed charges and
preferred stock dividend $12,312 $11,976 $17,380 $28,698 $47,656
========== ======== ======== ======= ========
Ratio of earnings to fixed charges 1.27 x 1.54 x 1.64 x 1.69 x 1.81 x
Ratio of earnings to combined fixed
charges and preferred stock
dividend 1.27 1.54 1.64 1.69 1.56
</TABLE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDENPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of United Dominion Realty Trust, Inc. and in the related Prospectuses
of our report dated January 25, 1996, with respect to the consolidated financial
statements and schedule of United Dominion Realty Trust, Inc. included in this
Annual Report (Form 10-K) for the year ended December 31, 1995.
REGISTRATION
STATEMENT NUMBER DESCRIPTION
---------------- -----------
33-40433 Form S-3, pertaining to the private placement
of 900,000 shares of the Company's common
stock in May, 1991.
33-32930 Form S-3, pertaining to the Company's Dividend
Reinvestment and Stock Purchase Plan.
33-48000 Form S-8, pertaining to the Company's Stock
Purchase and Loan Plan.
33-47926 Form S-8, pertaining to the Company's Stock
Option Plan.
33-58201 Form S-8, pertaining to the Employees' Stock
Purchase Plan.
33-55159 Form S-3, Shelf Registration Statement,
pertaining to $400 Million of Common Stock,
Preferred Stock and Debentures.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,904
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,053
<PP&E> 1,052,659
<DEPRECIATION> 129,454
<TOTAL-ASSETS> 1,080,616
<CURRENT-LIABILITIES> 0
<BONDS> 530,339
0
105,000
<COMMON> 56,375
<OTHER-SE> 355,014
<TOTAL-LIABILITY-AND-EQUITY> 1,080,616
<SALES> 195,240
<TOTAL-REVENUES> 196,932
<CGS> 0
<TOTAL-COSTS> 81,642
<OTHER-EXPENSES> 44,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,646
<INCOME-PRETAX> 29,737
<INCOME-TAX> 0
<INCOME-CONTINUING> 33,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,127
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
