FORM 8-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------------------------
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
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)
AMENDMENT NO. 1
The undersigned registrant hereby amends its Current Report on Form 8-K
dated December 31, 1996, which was filed with the Securities and Exchange
Commission on January 15, 1997, to include the Financial Statements of
Businesses Acquired and the Consolidated Pro Forma Condensed Financial
Statements and Notes thereto, as set forth on the pages attached hereto.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
(c) Exhibits
(23) Consent of experts
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED DOMINION REALTY TRUST, INC.
-------------------------------------
(Registrant)
/s/ Jerry A. Davis
-------------------------------------
Jerry A. Davis
Vice-President & Corporate Controller
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Description Location
(a) Financial Statements of Business Acquired 3 through 20
(b) PRO FORMA Financial Information 21 through 30
(c) Exhibits
(23) Consents of Independent Auditors 31
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the three years ended December 31, 1996
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors............................................... 3
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994.............................................. 4
Consolidated Balance Sheets at December 31, 1996 and 1995............... 5
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1996, 1995 and 1994........................... 6
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.............................................. 7
Notes to Consolidated Financial Statements.............................. 9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
United Dominion Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of
South West Property Trust Inc. ("SWP") and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of SWP's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SWP and
subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Dallas, Texas
March 4, 1997
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C>
Revenues:
Rental operations............................................ $ 82,169 $ 70,396 $ 57,625
Other income................................................. 976 1,466 1,303
----------- ---------- -----------
83,145 71,862 58,928
----------- ---------- -----------
Expenses:
Property operating expenses:
Personnel................................................ 8,802 7,705 6,556
Utilities................................................ 5,492 4,940 4,259
Repairs and maintenance.................................. 6,529 6,556 5,617
Real estate taxes........................................ 8,631 6,499 5,266
Marketing and other operating............................ 8,789 7,301 6,107
----------- ---------- -----------
38,243 33,001 27,805
Depreciation and amortization................................ 13,777 12,697 10,236
Debenture and mortgage interest.............................. 14,126 10,878 8,470
Interest forfeited by debentureholders upon conversion....... 220 115
General and administrative................................... 3,133 2,037 2,278
----------- ---------- -----------
69,279 58,833 48,904
----------- ---------- -----------
Operating income.................................................. 13,866 13,029 10,024
Minority interest in net (income) loss of
consolidated partnerships.................................... ( 8) ( 61)
Gain on sale of real estate assets................................ 10
----------- ---------- ------------
Income before extraordinary losses............................ 13,866 13,031 9,963
Extraordinary losses (Note 12).................................... ( 10,677)
-----------
Net income........................................................ $ 3,189 $ 13,031 $ 9,963
============ =========== ============
Primary and fully-diluted earnings per share:
Income before extraordinary losses....................... $ .66 $ .70 $ .64
Extraordinary losses......................................... ( .51)
----------- ----------- ------------
Net income................................................... $ .15 $ .70 $ .64
============ =========== ============
</TABLE>
See accompanying notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1995
---- ----
<S> <C>
ASSETS
Real estate investments:
Property:
Land......................................................... $ 51,749 $ 44,584
Buildings and improvements................................... 406,023 311,694
------------ ------------
457,772 356,278
Less accumulated depreciation................................ ( 83,127) ( 69,584)
------------ ------------
374,645 286,694
Construction in progress......................................... 29,173 69,436
------------ ------------
403,818 356,130
Cash and cash equivalents............................................. 153 2,406
Cash reserved for additions to property, including $587
and $2,413 of restricted cash in 1996 and 1995................... 5,075 4,643
Escrow deposits....................................................... 5,991 6,708
Deferred charges, less accumulated amortization of $2,566
and $1,664 in 1996 and 1995, respectively........................ 3,052 4,448
Other assets, net..................................................... 2,988 3,830
------------ ------------
$ 421,077 $ 378,165
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Mortgage loans payable................................................ $ 98,786 $ 129,286
Construction loans payable............................................ 32,256
Revolving line of credit.............................................. 125,035 16,500
Accounts payable and accrued expenses................................. 15,466 9,104
Dividends payable..................................................... 5,497 5,112
Accrued interest...................................................... 727 557
Tenant security deposits.............................................. 1,896 1,878
------------ ------------
247,407 194,693
------------ ------------
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued......................................
Common stock, $.01 par value; 50,000,000 shares authorized,
21,049,321 and 20,319,405 shares issued and outstanding
at December 31, 1996 and 1995, respectively.................. 211 203
Paid-in capital.................................................. 239,722 231,208
Accumulated deficit.............................................. ( 66,263) ( 47,939)
------------ ------------
173,670 183,472
------------ ------------
$ 421,077 $ 378,165
============= =============
</TABLE>
See accompanying notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Total
Stockholders'
Common Stock Paid-In Accumulated Equity/
Shares Amount Capital Deficit (Deficit)
------ ------ ------- ----------- -------------
<S> <C>
Balance, December 31, 1993......................... 14,527,119 $ 145 $ 172,283 $ (37,608) $ 134,820
Net income.................................... 9,963 9,963
Sale of common stock, net of offering costs... 115,000 1 1,403 1,404
Exercise of options for common stock.......... 55,000 1 646 647
Conversion of debentures to common stock...... 1,484,900 14 14,333 14,347
Common stock dividends declared,
$.91 per share............................ (14,329) (14,329)
--------------- ---- --------- -------- ---------
Balance, December 31, 1994......................... 16,182,019 161 188,665 (41,974) 146,852
Net income.................................... 13,031 13,031
Repurchase common stock....................... (115,000) (1) (1,508) (1,509)
Sale of common stock, net of offering costs... 2,711,853 27 30,648 30,675
Exercise of options for common stock, net
of stock tendered in payment.............. 189,033 2 2,036 2,038
Notes receivable from common stock options
exercised................................. (1,945) (1,945)
Conversion of debentures to common stock...... 1,351,500 14 13,312 13,326
Common stock dividends declared,
$1.00 per share........................... (18,996) (18,996)
--------------- ---- --------- -------- --------
Balance, December 31, 1995......................... 20,319,405 203 231,208 (47,939) 183,472
Net income.................................... 3,189 3,189
Sale of common stock, net of offering costs... 167,664 2 2,227 2,229
Exercise of options for common stock,
net of stock tendered in payment.......... 562,252 6 6,489 6,495
Notes receivable from common stock
options exercised, net of repayments...... (4,728) (4,728)
Forgiveness of notes receivable............... 4,526 4,526
Common stock dividends declared,
$1.04 per share........................... (21,513) (21,513)
--------------- ---- --------- --------- --------
Balance, December 31, 1996......................... 21,049,321 $ 211 $ 239,722 $ (66,263) $ 173,670
=============== ===== =========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Cash received from rental operations.............. $ 82,617 $ 70,824 $ 57,755
Cash received from other sources.................. 835 1,473 1,246
Operating expenses paid........................... (39,266) (34,173) (33,008)
Interest paid..................................... (12,661) (10,469) (8,061)
------------ ----------- ------------
Net cash provided by operating activities..... 31,525 27,655 17,932
------------ ----------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of properties............................ (3,031) (58,317)
Proceeds from sale of real estate................. 2,814
Cost of construction in progress.................. (48,094) (60,405) (25,592)
Additions to properties........................... (13,138) (6,441) (7,764)
Purchase additional partnership interests......... (1,593) (2,259)
Withdrawals from (additions to) capital
improvement reserves.......................... (432) (726) 1,269
Proceeds from mortgage notes receivable........... 6,279
Receipts on mortgage notes receivable............. 108 159
Prepaid acquisition costs......................... (214) (761)
Insurance claim reimbursements (advances)......... 56 (195) (218)
------------ ----------- ------------
Net cash used in investing activities......... (61,608) (63,404) (93,483)
------------ ----------- ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net proceeds from issuance of common stock........ 2,229 30,675 1,404
Cash received from mortgage loans................. 1,000 50,000
Repayment of mortgage loans....................... (27,974)
Cash received from construction loans............. 25,353 38,280 4,584
Repayment of construction loans................... (57,609)
Revolving line of credit draws.................... 108,535 23,800 27,700
Revolving line of credit payments................. (35,000)
Mortgage and notes payable principal payments..... (2,526) (2,391) (4,479)
Repayment of Debentures........................... (14)
Payment of loan costs............................. (817) (459) (2,932)
Proceeds from exercise of warrants and options.... 1,591 93 647
Payments received on notes receivable............. 176
Repurchase common stock........................... (1,509)
Dividends and cash distributions.................. (21,128) (17,654) (13,780)
------------ ----------- ------------
Net cash provided by financing activities..... 27,830 36,821 63,144
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents... (2,253) 1,072 (12,407)
Cash and cash equivalents at beginning of year......... 2,406 1,334 13,741
------------ ----------- -----------
Cash and cash equivalents at end of year............... $ 153 $ 2,406 $ 1,334
============ =========== ============
</TABLE>
See accompanying notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income....................................................... $ 3,189 $ 13,031 $ 9,963
Write-off of unamortized loan costs.............................. 921
Forgiveness of notes receivable principal and accrued interest... 4,678
Depreciation of real estate assets............................... 13,447 12,304 9,746
Depreciation and amortization of other assets.................... 330 393 545
Amortization of loan costs....................................... 1,295 965 414
Interest forfeited by debentureholders upon conversion........... 220 115
Adjustment for rental guaranty................................... (193)
Amortization of note receivable discount......................... (17) (58)
Gain on sale of real estate assets............................... (10)
Minority interest in income (loss) of
consolidated partnerships..................................... 8 61
(Increase) decrease in other assets.............................. 398 (393) (3,528)
(Increase) decrease in escrow deposits........................... 717 (314) (2,994)
Increase (decrease) in accounts payable
and accrued expenses.......................................... 6,362 (1,929) (3,765)
Increase (decrease) in accrued interest.......................... 170 (608) (60)
Increase in tenant security deposits............................. 18 147 156
----------- ---------- -----------
Net cash provided by operating activities..................... $ 31,525 $ 27,655 $ 17,932
============ =========== ============
</TABLE>
See accompanying notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - South West Property Trust Inc., formerly Southwestern
Property Trust, Inc. ("SWP" or the "Company"), a Maryland corporation, was
formed in 1992 for the purpose of acquiring all of the assets subject to the
liabilities of Southwest Realty, Ltd. ("SRL") in connection with the
reorganization of SRL into a corporation which would elect to qualify as a real
estate investment trust ("REIT") for federal income tax purposes. SWP is a
self-administered fully integrated, equity REIT that has acquired, developed and
managed apartment properties since 1973. SWP's portfolio currently has
approximately 80% of its apartment units in Texas with remaining units in
Arizona, Arkansas, North Carolina, Nevada, Oklahoma and New Mexico. Effective
December 31, 1996, the Company merged into United Dominion Realty Trust, Inc.
("UDR") (the "Merger"). The Merger was effected by an exchange of 1,0833 shares
of UDR's common stock for each share of SWP's common stock. As a result of the
Merger, the Company ceased to exist. (See Note 11).
CONSOLIDATION AND PRESENTATION - The consolidated financial
statements for the year ended December 31, 1996, reflects the financial position
and results of operations of the Company immediately prior to the Merger. The
consolidated financial statements include the accounts of the Company, its
wholly owned corporate subsidiaries, and the partnerships in which the Company
owns at least a 50% controlling interest. The portion of net income or loss
attributable to minority interests in consolidated partnerships is presented as
a single line item in the Company's statement of operations. Investments in
partnerships in which the Company owns less than a 50% interest are accounted
for on the equity method. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform to the current presentation.
USE OF ESTIMATES - The preparation of 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.
PROPERTIES - Properties are stated at the Company's cost or the
historical cost of SRL. For financial reporting purposes, the properties are
depreciated over their estimated useful lives ranging from 5 to 35 years using
the straight-line method.
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 recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
1995 and the adoption had no effect.
INCOME TAXES - The Company has elected to be taxed as a REIT under
the Internal Revenue Code. Under the Internal Revenue Code, if certain
requirements are met in a taxable year, a corporation that is treated as a REIT
will generally not be subject to federal income tax with respect to income which
it distributes to its stockholders. The Company made distributions in excess of
its taxable income for 1996, 1995 and 1994. Accordingly, no provision for income
taxes has been reflected in the statements of operations.
Earnings and profits, which will determine the taxability of
distributions to stockholders, will differ from net income reported for
financial reporting purposes, due primarily to differences in the historical
cost and tax bases of the assets and the estimated useful lives used to compute
depreciation.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist
primarily of cash in demand deposit and money market accounts and short-term
commercial paper carried at cost, which approximates fair value. Highly liquid
debt instruments purchased with a maturity of three months or less are
considered to be cash equivalents.
CASH RESERVED FOR ADDITIONS TO PROPERTY - At December 31, 1996 and
1995, the Company has set aside cash reserves in the amount of $4,488,000 and
$2,230,000, respectively, to provide for the payment of planned additions to its
wholly-owned properties. In addition, reserves in the amount of $587,000 and
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
$2,413,000 at December 31, 1996 and 1995, respectively, are being held by
trustees and certain mortgage holders for recurring replacements to the
properties which secure the REMIC Financing (see Note 5) and two other first
mortgages. The carrying amount of these deposits approximates their fair value.
ESCROW DEPOSITS - Escrow deposits consist of amounts on deposit with
lenders for payment of property taxes and insurance premiums.
DEFERRED CHARGES - Deferred charges include loan origination costs,
commitment fees and debt issue costs which are amortized over the life of the
related debt.
OTHER ASSETS - Other assets consist primarily of office furniture,
fixtures and equipment, miscellaneous accounts receivable and prepaid expenses.
Furniture, fixtures and equipment are depreciated over their estimated useful
lives ranging from three to five years using the straight-line method.
REVENUE RECOGNITION - The apartment properties are leased to
individual tenants on short-term leases. Rental revenue is recognized
monthly as it is earned.
EARNINGS PER SHARE - Earnings per share is based on the net income
or loss attributable to the common stock and the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding during
the periods presented. Earnings per share for the years ended December 31, 1996,
1995 and 1994 were based on 20,937,430, 18,627,322 and 15,633,291, respectively,
weighted average shares of common stock outstanding.
The number of shares assumed outstanding related to options to
purchase common stock has been calculated by application of the treasury stock
method. The Company's Debentures were not common stock equivalents as defined
under generally accepted accounting principles and, therefore, during the years
they were outstanding, were not considered in the primary earnings per share
computations and are antidilutive to the computation of fully-diluted earnings
per share.
NOTE 2 - ACQUISITION OF PROPERTIES
In August 1995, the Company sold the Meridian Business Park located
in Oklahoma City, Oklahoma, for total consideration of $3,000,000. In September
1995, the Company sold the third-party property management business in Little
Rock, Arkansas, for total consideration of $25,000. The Company recognized a net
gain on the sale of real estate assets of $10,000 from these two transactions.
In August 1995, the Company acquired the remaining ownership
interests in Foxfire Apartments, Phases I and II, located in Dallas, Texas, for
a gross purchase price of $5,493,000 and subject to two first mortgage loans.
Prior to the purchase, the Company held a 5% interest in the partnership which
owned Phase I of the property. The Company sold its partnership interest
immediately prior to this acquisition for $128,000.
In March, May and June 1994, the Company purchased six apartment
properties (in separate transactions) aggregating 1,734 units for a total
purchase price of $50,350,000. Funds for the acquisitions came primarily from
the second phase of the REMIC Financing which closed on June 30, 1994 (see Note
5). The properties are located in Fort Worth and Euless, Texas; Little Rock,
Arkansas; and Raleigh, North Carolina. In September and November 1994, the
Company purchased two apartment properties (in separate transactions)
aggregating 600 units for a total purchase price of $22,633,000. Funds for the
acquisitions came primarily from draws on the line of credit (see Note 7). The
properties are located in Las Vegas, Nevada, and Grapevine, Texas (a Dallas
suburb).
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
NOTE 3 - NONCASH INVESTING AND FINANCING ACTIVITIES (IN THOUSANDS)
<TABLE>
For the year ended December 31, 1996:
<S> <C>
Forgiveness of notes and interest receivable related to stock options exercised..... $ 4,678
=======
Write-off of unamortized loan costs related to mortgage notes repaid................ 321
Write-off of loan costs paid in connection with loan negotiations
abandoned because of the merger................................................. 600
-------
$ 921
=======
For the year ended December 31, 1995:
Conversion of debentures into 1,351,500 shares of common stock as follows -
Principal amount of debentures converted............................................ $ 13,515
Accrued interest forfeited by debenture holders upon conversion..................... 220
Unamortized debenture issue costs at date of conversion............................. ( 409)
-------
$ 13,326
=======
In connection with the acquisition of the Foxfire Phase I Apartments the
Company assumed first lien mortgage debt and other liabilities as follows -
Fair value of property acquired................................................. $ 5,154
Mortgage debt assumed........................................................... ( 2,798)
Tenant security deposits, property tax, accrued interest
and other assets and liabilities assumed................................... 77
-------
$ 2,433
=======
For the year ended December 31, 1994:
Conversion of debentures into 1,484,900 shares of common stock as follows -
Principal amount of debentures converted............................................ $ 14,849
Accrued interest forfeited by debenture holders upon conversion..................... 115
Unamortized debenture issue costs at date of conversion............................. ( 617)
-------
$ 14,347
=======
In connection with the acquisitions of the Turtle Creek Apartments and the
Sunset Pointe Apartments, the Company assumed first lien mortgage debt and
other liabilities as follows -
Fair value of property acquired................................................. $ 22,454
Mortgage debt assumed........................................................... ( 14,058)
Tenant security deposits, property tax and accrued interest
liabilities assumed........................................................ ( 190)
-------
$ 8,206
=======
</TABLE>
NOTE 4 - MORTGAGE NOTES RECEIVABLE
As of December 31, 1994, the Company had a seven-year purchase money
all-inclusive note receivable collateralized by the Highland Oaks Apartments
with a balance outstanding of $3,636,000. Monthly installments of $31,875,
including principal and interest at 9.625% per annum, were payable on the
underlying first mortgage loan until its maturity in April 1995. In February
1995, the maturity date was extended to April 30, 1995. On April 27, 1995, the
borrower repaid the notes.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
On June 4, 1993, the Company acquired the first mortgage loan on the
Phase I Foxfire Apartments in Dallas (in which the Company held a 5% partnership
interest) for $2,645,000. Under the terms of a modified loan agreement, the
Company also advanced an additional $162,000 for capital improvements to the
property. On June 16, 1995, the borrower repaid the note in full.
In 1993, the Company purchased the first mortgage loan on the Phase
II Foxfire Apartments in Dallas. In June 1995, the partnership owning the Phase
II Foxfire Apartments refinanced its mortgage and repaid the Company's mortgage
note receivable.
NOTE 5 - MORTGAGE LOANS PAYABLE
GENERAL - Mortgage loans payable are collateralized by land,
buildings and improvements and are non-recourse to the Company. The carrying
values of the mortgage loans payable approximate fair value.
<TABLE>
<CAPTION>
Balance at December 31, Balance
Interest Due or Original ----------------------- Due at
Rate Call Date Amount 1996 1995 Maturity
-------- --------- -------- ---- ---- --------
<S> <C>
MORTGAGE LOANS PAYABLE:
First Mortgage REMIC Financing.... 7.01% 12/10/00 $ 50,000 $ 46,289 $ 47,647 $ 39,953
First Mortgage REMIC Financing.... 8.50% 02/10/01 50,000 47,444 48,566 41,735
Oak Forest....................... LIBOR + 2.25% 06/30/97 10,864 10,609
Sunset Pointe..................... 8.50% 06/01/96 8,873 8,873
Turtle Creek...................... 8.50% 10/01/99 5,248 5,053 5,110 4,891
High Ridge........................ 8.50% 01/01/00 4,865 4,693
Foxfire - Dallas.................. COFI + 2.75% 07/01/25 3,800 3,788
------- -------- -------- --------
Total mortgage loans.......... $ 133,650 $ 98,786 $ 129,286 $ 86,579
======= ======== ======== ========
</TABLE>
REMIC FINANCING - The Company, through wholly-owned subsidiaries,
closed a $100,000,000 first mortgage financing package (the "REMIC Financing").
The two $50,000,000 phases of the REMIC Financing closed on June 30, 1994 and
December 22, 1993. The REMIC Financing is collateralized by 27 of the Company's
wholly-owned properties, bears interest at an average fixed rate of 7.75% per
annum and is non-recourse to the Company. Monthly principal and interest
payments in the amount of $821,893 are required.
The REMIC Financing requires that a debt service coverage ratio of
not less than 1.9 to 1.0 be maintained on the mortgaged properties (to be
computed quarterly on the basis of the trailing four quarters). If such debt
service coverage ratio falls to less than 1.6 to 1.0, after notice and failure
to cure (which could be effected by paying down the principal), the Company is
required to deposit all collections from the mortgaged properties into a debt
service coverage reserve account until such time as the debt service coverage
ratio equals or exceeds 1.9 to 1.0. As of December 31, 1996, the Company is in
compliance.
The mortgage loan documents also require the Company to maintain
escrow deposits with the REMIC trustees for: (i) "basic carrying costs," i.e.,
insurance premiums, property taxes and management fees; (ii) capital
improvements, at a rate of $100 per year per apartment unit; and (iii) tenant
security deposits. As of December 31, 1996 and 1995, the Company had such escrow
deposits with the REMIC trustees aggregating $4,942,000 and $8,347,000,
respectively.
OTHER MORTGAGE LOANS - In addition to the REMIC Financing, the
Company has a non-recourse first mortgage payable secured by the Turtle Creek
Apartments in the principal amount of $5,053,000 which bears interest at 8.5%,
requires monthly payments of principal and interest of $40,353, and matures on
October 1, 1999.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
In March 1996, the Company repaid the outstanding balances of
$8,873,000 on the mortgage loan secured by the Sunset Pointe Apartments in Las
Vegas, Nevada, and $10,693,000 on the mortgage loan secured by the Oak Forest
Apartments in Lewisville, Texas, with funds drawn from the line of credit.
In December 1996, the Company repaid the outstanding balances of
$2,766,000 and $988,000 on the mortgage loans secured by the Foxfire Phase I and
Phase II Apartments, respectively, in Dallas, Texas, and of $4,654,000 on the
mortgage loan secured by the High Ridge Apartments in Dallas, Texas, with funds
drawn from the line of credit.
Under the terms of the loans, principal amortization requirements at
December 31, 1996 are as follows for each of the next five years (in thousands):
Normal Balloon
Amortization Payments Total
------------ -------- -----
1997 $ 2,730 $ $ 2,730
1998 2,953 2,953
1999 3,171 4,891 8,062
2000 3,216 39,953 43,169
2001 137 41,735 41,872
-------- -------- --------
$ 12,207 $ 86,579 $ 98,786
======== ========= ========
All debt outstanding at December 31, 1996, bears interest at a
weighted average rate of approximately 7.4%, and consists of interest rates
ranging from 7.01% to 8.50%. Such debt has a weighted average maturity of 1.9
years, with maturity or call dates ranging from 1999 to 2001.
NOTE 6 - CONSTRUCTION OF PROPERTIES
The construction projects are financed with construction loans for
approximately 70% of the estimated project costs. The Company funds the initial
30% of the estimated project costs from available funds or from draws on its
line of credit (see Note 7). Thereafter, construction lenders fund construction
costs upon periodic draws in accordance with specific construction loan
agreements.
Below is a summary of the construction in progress activity for the
years ended December 31, 1996 and 1995, respectively:
1996 1995
---- ----
Balance at beginning of year................ $ 69,436 $ 25,592
Additions to construction in progress....... 48,094 60,405
Completion of construction in progress and
reclass to real estate assets........... ( 88,357) ( 16,561)
-------- -------
Balance at end of year............... $ 29,173 $ 69,436
========= ========
In September 1996, the Company acquired, for approximately
$1,250,000, a parcel of land adjacent to the Oak Forest Apartments in
Lewisville, Texas, and has commenced construction of 260 additional apartment
units.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
CONSTRUCTION LOANS PAYABLE:
<TABLE>
<CAPTION>
As of December 31,
Maximum -----------------------
Amount 1996 1995
---------- ------- ----
<S> <C>
Promontory Pointe............... LIBOR + 2.25% 01/31/97 $ 19,800 $ $ 17,573
Ashley Oaks Phase II............ LIBOR + 2.25% 06/30/97 7,354 6,297
Sierra Palms.................... LIBOR + 2.25% 12/29/96 12,402 3,884
Copper Mill..................... LIBOR + 2.00% 04/13/97 10,700 4,501
Providence Court................ LIBOR + 2.00% 03/12/98 18,250 1
------ -------- --------
Total construction loans.... $ 68,506 $ -- $ 32,256
======= ======== ========
</TABLE>
During the fourth quarter of 1996, the Company repaid all of the
construction loans with funds drawn from the line of credit and available cash.
For the years ended December 31, 1996 and 1995, the Company has
capitalized interest expense of approximately $2,782,000 and $2,561,000,
respectively, related to construction and development of properties.
NOTE 7 - REVOLVING LINE OF CREDIT
In September 1994, the Company obtained a revolving line of credit
in the maximum amount of $75,000,000 from Lehman Brothers Holding ("LBH").
The line of credit, which is recourse to the Company, has a revolving period
of 18 months, with a one-year extension at the lender's option, followed by
an amortization period of two years. In October 1995, the Company requested
and received a one-year extension to March 1997. The extension modified the
interest rate during the revolving period from LIBOR plus 1.75% to LIBOR plus
1.50%. The agreement requires quarterly payments of a non-use fee equal to
.25% per year calculated on the average unused portion of the line of credit.
The Company can currently draw up to a total of $41,800,000 on the unsecured
line of credit.
In December 1996, the Company obtained a short-term $55,989,000
loan from LBH. The terms of the agreement state an interest rate of 7% and a
maturity date of January 15, 1997. The loan is unsecured. The proceeds from
the loan were used to repay construction and mortgage loans.
At December 31, 1996, the Company had an interest rate swap
agreement with a notional amount of $77,230,000. The Company has entered into
the interest rate swap agreement to convert floating rate liabilities to fixed
rate liabilities. The agreement fixes the interest rate on the Company's
expected variable rate debt at 7.9% through April 1997. The Company does not
hold or issue interest rate swap agreements for trading purposes. The
Company is exposed to possible credit risk if the counterparty fails to
perform, however, this risk is minimized by entering into the agreement with a
highly rated counterparty. At December 31, 1996, there were no defaults under
this agreement.
NOTE 8 - CONVERTIBLE DEBENTURES
In 1992, the Company concluded an initial public offering of
$55,000,000 in principal amount of 8% Convertible Debentures Due 2003. The
Debentures could be converted into shares of common stock at any time after
October 15, 1993 on the basis of $10.00 per share. In September 1995, the
Company called the Debentures for redemption on October 16, 1995. As of October
16, 1995, $13,515,000 in principal amount of Debentures due were converted to
1,351,500 shares of common stock. In addition, $220,000 of accrued Debenture
interest
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
that was forfeited by Debenture holders and $409,000 of unamortized Debenture
issue costs were reclassified to equity. The remaining $14,000 in Debentures
were redeemed for cash on October 16, 1995.
During the year ended December 31, 1994, $14,849,000 in principal
amount of Debentures was converted to 1,484,900 shares of common stock. In
addition, $115,000 of accrued Debenture interest that was forfeited by
Debenture holders during 1994 and $617,000 of unamortized Debenture issue
costs were reclassified to equity.
NOTE 9 - RELATED PARTY TRANSACTIONS
THE COMPANY - The Company generally receives a computer services
fee, and property and asset management fees in consideration for services
provided for properties in which the Company has ownership interests. There were
no such fees in 1996. The Company received fees for these services aggregating
$68,000 in 1995 and $75,000 in 1994 from affiliated, unconsolidated partnerships
which have been included in other income for financial reporting purposes.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASES - The Company is obligated under a five-year lease
for its main office in Dallas, Texas, which commenced in 1994. The Company
is also obligated under leases for its regional offices. The regional
office leases have terms ranging from nine months to five years. Minimum
annual future rental payments under all leases are $254,000 in 1997, $260,000
in 1998, $197,000 in 1999, $11,000 in 2000 and $0 in 2001. The related
rental expense in 1996, 1995 and 1994 was $294,000, $261,000 and $243,000,
respectively.
NOTE 11 - STOCKHOLDERS' EQUITY (DEFICIT)
CAPITAL STOCK - Common stockholders are entitled to one vote for
each share held on all matters presented for a vote of stockholders. There is
no right of cumulative voting in connection with the election of Directors.
Stockholders are entitled to receive pro rata, any dividends declared by the
Board of Directors in their discretion from funds legally available therefor.
Upon liquidation or dissolution, stockholders are entitled to share ratably in
all assets available for distribution to the stockholders, subject to the
right of the holders of the Debentures then outstanding and to the rights of
any preferred class of the Company's securities (if any are outstanding). The
common stock issued is fully paid and non-assessable, has no conversion
rights, and is not subject to redemption, except under certain circumstances
determined by the Board of Directors.
For the Company to qualify as a REIT under the Internal Revenue
Code, not more than 50% in value of its outstanding common stock may be owned,
directly or indirectly, by five or fewer individuals. In order to meet these
requirements, the Directors of the Company are given power to refuse to
recognize the transfer of a sufficient number of shares of common stock to
maintain or bring the ownership of common stock of the Company into conformity
with such requirements and to refuse the transfer of common stock to persons
whose acquisitions thereof would result in a violation of such requirements.
The Company declared a special dividend to each record holder of
shares of common stock on March 17, 1995, of one non-transferable right for
each share held on such date. Four rights entitled the holder to purchase one
share of common stock at a price of $11.875 per share (the "Rights
Transaction"). On April 10, 1995, the Rights Transaction concluded with
985,440 shares purchased for total proceeds of $11,702,100. The net proceeds of
approximately $11,400,000 were used to repay a portion of the line of credit.
In April 1995, the Company concluded a public offering of
1,714,560 shares of common stock at a price of $11.875 per share for gross
proceeds of $20,360,400. The net proceeds of approximately $18,600,000 were
used to repay a portion of the line of credit.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company had outstanding 21,049,321, 20,319,405 and 16,182,019
shares of common stock at December 31, 1996, 1995 and 1994, respectively.
Effective April 1, 1994, the Company entered into an employment
agreement with an officer of the Company, Senior Vice President for the
Charlotte Regional Office of the Company. In connection with this
agreement, the officer purchased from the Company 115,000 shares of the
Company's common stock for approximately $1,509,000 ($13.125 per share). In
January 1995, his employment agreement was terminated, and pursuant to that
agreement, the Company repurchased such shares at the purchase price he paid
and cancelled such shares.
DIVIDENDS - The Company paid dividends of $.26 per share of common
stock for the first three quarters of 1996. The Company also declared a
dividend of $.26 per share for the fourth quarter of 1996 (which was paid on
February 1, 1997). Eighty percent of the dividends paid in 1996 were
characterized as ordinary income and twenty percent of the dividends were
characterized as return of capital.
The Company paid dividends of $.25 per share of common stock for
the first three quarters of 1995. The Company also declared a dividend of
$.25 per share for the fourth quarter of 1995 (which it paid on January 17,
1996). Eighty-seven percent of the dividends paid in 1995 were characterized
as ordinary income and eight percent of the dividends were characterized as
capital gains for federal income tax purposes and five percent of the 1995
dividends were a return of capital.
The characterization of the dividends for federal income tax
purposes is made based upon the earnings and profits of the Company, as
defined in the Internal Revenue Code, for the years ended December 31, 1996,
1995 and 1994, respectively.
In 1995, the Company introduced a dividend reinvestment program
to allow its shareholders to acquire additional common shares from the Company
at a 5% discount to the fair market price. The dividend reinvestment program
also permits stockholders to purchase a limited number of additional shares of
common stock on the same basis by making optional cash payments. The Company
suspended the dividend reinvestment program as a result of the merger.
STOCK OPTION PLANS - In May 1992, the Company adopted an incentive
and non-qualified stock option plan (the "Stock Option Plan") for the
purpose of attracting and retaining the Company's directors, executive
officers and other key employees (including any officer or director who is also
an employee). A maximum of 1,200,000 shares of common stock were reserved
for issuance under the Stock Option Plan. The Stock Option Plan allows
for the grant of "incentive" and "non-qualified" options (within the meaning
of the Internal Revenue Code) that are exercisable at a price that is at
least equal to the fair market value of the shares of common stock at the date
of the grant as established by the Compensation Committee of the Board of
Directors. In May 1994, the Company's stockholders approved an amendment to
the Stock Option Plan that increased the amount of shares reserved for
issuance under the Stock Option Plan by 600,000 shares to a maximum of
1,800,000 shares. In 1995, the Company's stockholders approved the 1995
Omnibus Incentive Plan, which provides for the granting of stock options,
SAR's, restricted shares and performance units. Under the 1995 plan,
3,000,000 shares were reserved for issuance subject to the limitation that the
aggregate number of shares underlying outstanding awards (including those
outstanding under the 1992 plan) not exceed approximately 10% of the Company's
outstanding capital stock on a fully diluted basis. The options vest over a
period of up to 5 years and once vested must be exercised within 5 years. The
Company accounts for its options to purchase shares of common stock in
accordance with APB No. 25.
During 1994, the Company granted 600,000 options to purchase a
like number of shares of common stock at an exercise price of $13.00 and 100,000
options to purchase a like number of shares at $11.00. The exercise prices
reflect the closing price of the shares on the date of each grant.
Non-qualified options were exercised to purchase 55,000 shares of common stock
at an exercise price of $11.00 each. Additionally, 233,000 options previously
granted were forfeited (and became available for reissuance) due to employee
attrition. As of December 31, 1994, the Company had outstanding 1,467,000
options to purchase common stock (of which 161,500 were vested) at exercise
prices ranging from $11.00 to $13,625 per share.
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During 1995, 626,000 options to purchase shares of common stock
at exercise prices ranging from $11.50 to $13.00 each were granted pursuant
to the Company's non-qualified employee stock option plan. Non-qualified
options were exercised to purchase 275,000 shares of common stock at exercise
prices ranging from $11.00 to $13.00 each. Additionally, 100,000 options
previously granted were forfeited due to employee attrition. As of
December 31, 1995, the Company had outstanding 1,718,000 options to purchase
common stock (of which 204,500 are vested) at exercise prices ranging from
$11.00 to $13.00 per share.
During 1996, 69,000 options to purchase shares of common stock
at exercise prices ranging from $12.375 to $15.00 each were granted pursuant
to the Company's non-qualified employee stock option plan. Non-qualified
options were exercised to purchase 631,000 shares of common stock at exercise
prices ranging from $11.00 to $13.00 each. Additionally, 219,000 options
previously granted were forfeited due to employee attrition. As of
December 31, 1996, the Company had outstanding 947,000 options to purchase
common stock (none of which were vested) at exercise prices ranging from $11.00
to $15.00.
During 1996 and 1995, the Company accepted notes receivable totaling
$4,904,000 and $1,945,000, respectively, from certain officers, directors and
key employees to exercise options to purchase common stock. The notes
receivable, which mature on December 31, 2003 and 2002, respectively, are
generally in amounts up to 80% of the option exercise price and bear interest
at the Applicable Federal Rate (as published by the Internal Revenue
Service) at the date of exercise. Principal in the amount of 50% of the exercise
price was to be forgiven ratably over seven years beginning January 1, 1998
and 1997, respectively, contingent upon continued service and in the absence
of any default on the notes. The balance of such loans was to be payable
ratably over the same period. The loans were secured by the common stock
purchased.
Under the terms of the Stock Option Plan, as a result of the
Merger, the note receivable forgiveness was accelerated. As of December
31, 1996, $4,526,000 in principal and $152,000 in accrued interest receivable
was forgiven. Additionally as a result of the merger, the Company purchased
outstanding options for the difference between the exercise price and $15.1527
for a total cost of $2,971,000.
RIGHTS AGREEMENT - In August 1994, the Company declared a dividend
of one right (the "Right") for each outstanding share of the Company's common
stock. The Rights do not become detached from the common stock until the
occurrence of a triggering event such as a tender offer or acquisition by a
person (or related parties) of 10% or more of the Company's outstanding common
stock. At that time, the Rights (which expire in August 2004) may be exercised,
except by the party causing the triggering event, to purchase for $30 an amount
of common stock from the Company having an aggregate market value of $60. During
the fourth quarter 1996, the Company's Board of Directors waived the provisions
of this plan with respect to the Merger.
NOTE 12 - EXTRAORDINARY LOSSES
Extraordinary losses incurred in 1996 are comprised of the following (in
thousands):
Extraordinary loss related to the Merger:
Forgiveness of officer and employee notes and interest
receivable (Note 11)....................................... $ 4,678
Buyout of stock options (Note 11).............................. 2,971
Write-off of abandoned loan negotiation costs.................. 600
Other merger costs paid by SWP................................. 2,058
-------
10,307
Extraordinary loss from debt repayments 370
-------
Total...................................................... $ 10,677
========
<PAGE>
SOUTH WEST PROPERTY TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
NOTE 13 - PROFIT SHARING AND SAVINGS PLAN
The Company has a 401(k) plan for all full-time employees who have
been employed for at least 12 months. Eligible employees may contribute up to
15% of their gross pay, subject to certain limitations. In 1995, 1994 and 1993
the Company matched 50% of the amount contributed by the employee, up to 10% of
the employee's gross pay. In 1996, 1995 and 1994, expenses include $151,000,
$76,000 and $53,000, respectively, representing the employer's matching
contribution to the plan.
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited summarized financial data by quarter for 1996 and 1995 is
as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER ENDED: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 (1)
- -------------- -------- --------- ------------ ---------------
<S> <C>
1996
Total revenues........................... $ 19,356 $ 20,260 $ 21,464 $ 22,065
Net income before extraordinary items.... 3,939 4,170 4,219 1,538
Net income(loss)......................... 3,939 4,170 4,219 ( 9,139)
Earnings per share:
Net income before extraordinary items $ .19 $ .20 $ .20 $ .07
Net income (loss)..................... .19 .20 .20 ( .44)
QUARTER ENDED: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -------------- -------- --------- ------------ -----------
1995
Total revenues........................... $ 16,928 $ 17,525 $ 18,508 $ 18,901
Net income............................... 2,995 3,363 3,383 3,290
Earnings per share:
Net income........................... $ .18 $ .19 $ .18 $ .16
</TABLE>
(1) In the fourth quarter of 1996, adjustments were recorded to accrue real
estate taxes that are in dispute, and to reflect fourth quarter settlements
made on prior year real estate taxes in dispute. Additionally, the fourth
quarter includes additional operating and general and administrative costs
that were accelerated due to the Merger. The entire amount of extraordinary
loss (see Note 12) was also incurred in the fourth quarter.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Combined Balance Sheet at December 31, 1996 is
not presented as the acquisitions reported on this Form 8-K were consummated on
or before December 31, 1996 and are therefore included in the Company's
consolidated balance sheet at December 31, 1996. Effective at the close of
business on December 31, 1996, a wholly-owned subsidiary of United Dominion
Realty Trust, Inc. (the "Company") purchased South West Property Trust Inc.
("South West") a Texas-based public real estate investment trust in a statutory
merger (the "Merger"). The Merger has been accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16. Assets and
liabilities acquired were recorded at their estimated fair values at December
31, 1996 and results of operations are included from the date of acquisition.
The Unaudited Pro Forma Combined Statements of Operations for the
twelve months ended December 31, 1996 is presented as if the Merger had occurred
at the beginning of the period presented. The Unaudited Pro Forma Combined
Statements of Operations give effect to the Merger under the purchase method of
accounting in accordance with Accounting Standards Board Opinion No. 16, and the
combined entity qualifying as a REIT, distributing at least 95% of its taxable
income, and therefore, incurring no federal income tax liability for the period
presented. The Unaudited Pro Forma Combined Statements of Operations for the
twelve months ended December 31, 1996 excludes extraordinary items of
$10,677,000 included in the South West Consolidated Statement of Operations
which primarily relate to costs directly attributable to the Merger.
The Unaudited Pro Forma Combined Statements of Operations give effect
to the following acquisitions as if they had occurred on the first day of the
period presented: (i) two apartment communities acquired during 1996 as
previously reported on Form 8-K dated October 31, 1996 and (ii) 18 apartment
communities (the "Southeast Portfolio") acquired in an August 15, 1996 portfolio
acquisition as previously reported on Form 8-K dated August 15, 1996
(subsequently updated to reflect the results of operations for the nine months
ended September 30, 1996 on Form 8-K dated October 31, 1996).
The Unaudited Pro Forma Combined Statements of Operations are not
necessarily indicative of what the Company's actual results would have been for
the twelve months ended December 31, 1996 if the acquisitions and Merger had
occurred at the beginning of the period presented, nor do they purport to be
indicative of the results of operations in future periods. The Unaudited Pro
Forma Combined Statements of Operations have been prepared by the management of
the Company. The Unaudited Pro Forma Combined Statements of Operations should be
read in conjunction with the Company's audited consolidated financial statements
for the year ended December 31, 1996 (included in the Company's Form 10-K for
the year ended December 31, 1996) and the accompanying notes thereto.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
NON-DEVELOPMENT DEVELOPMENT
NON-DEVELOPMENT PROPERTIES DEVELOPMENT PROPERTIES
PROPERTIES SOUTHEAST PROPERTIES SOUTHEAST
SOUTHEAST PORTFOLIO SOUTHEAST PORTFOLIO
PORTFOLIO PRO FORMA PORTFOLIO PRO FORMA
HISTORICAL (1) ACQUISITION (2) ADJUSTMENTS (4) ACQUISITION (3) ADJUSTMENTS (4)
-------------- --------------- ----------------- ---------------- ----------------
<S> <C>
Income
Rental income $242,112 $9,160 $2,265 $3,757 $929
Interest and other income
(non-property) 1,707
-------------- --------------- ----------------- ---------------- ----------------
243,819 9,160 2,265 3,757 929
Expenses
Rental expenses:
Utilities 17,735 662 164 219 54
Repairs & maintenance 40,665 1,146 283 316 78
Real estate taxes 17,348 651 161 321 79
Property management 5,575 452 (172)(5) 184 (70)(10)
Other operating expenses 23,510 699 232 (6) 266 89 (11)
Depreciation of real estate owned 47,410 2,344 (7) 1,316 (12)
Interest 50,843 4,566 (8) 2,223 (13)
General and administrative 5,418
Other depreciation and amortization 1,299
Impairment loss on real estate held
for disposition 290
-------------- --------------- ----------------- ---------------- ----------------
210,093 3,610 7,578 1,306 3,769
Income before gains on sales of
investments and minority interest of
unitholders in operating partnership 33,726 5,550 (5,313) 2,451 (2,840)
Gains on sales of investments 4,346
Minority interest of unitholders in
operating partnership (58)
-------------- --------------- ----------------- ---------------- ----------------
Income before extraordinary item 38,014 5,550 (5,313) 2,451 (2,840)
============== =============== ================= ================ ================
Dividends to preferred shareholders (9,713)
-------------- --------------- ----------------- ---------------- ----------------
Net income per common share before
extraordinary item $0.49
==============
Distributions declared per common share $0.96
==============
Weighted average number of common shares
outstanding 57,482 774 (9) 578 (14)
</TABLE>
<TABLE>
<CAPTION>
WESTLAND PARK WESTLAND PARK UNITED SOUTH WEST UNITED
AND STEEPLECHASE AND STEEPLECHASE DOMIMINION PRO FORMA DOMINION
APARTMENTS PRO FORMA PRO SOUTH WEST MERGER PRO FORMA
AQUISITIONS (15) ADJUSTMENTS (16) FORMA HISTORICAL (20) ADJUSTMENTS COMBINED
---------------- ---------------- ---------- --------------- ----------- ---------
<S> <C>
Income
Rental income $1,278 $95 $259,596 $82,169 $341,765
Interest and other income
(non-property) 1,707 976 2,683
---------------- ---------------- ---------- --------------- ----------- -------
1,278 95 261,303 83,145 0 344,448
Expenses
Rental expenses:
Utilities 50 4 18,888 5,492 24,380
Repairs & maintenance 139 10 42,637 10,818 53,455
Real estate taxes 114 8 18,682 8,631 27,313
Property management 69 (30)(17) 6,008 2,884 (1,089)(21) 7,803
Other operating expenses 153 11 24,960 10,418 35,378
Depreciation of real estate owned 252 (18) 51,322 13,447 2,015 (22) 66,784
Interest 499 (19) 58,131 14,126 (1,316)(23) 70,941
General and administrative 5,418 3,133 (1,438)(24) 7,113
Other depreciation and amortization 1,299 330 1,629
Impairment loss on real estate held
for disposition 290 290
---------------- ---------------- ---------- --------------- ----------- -------
525 754 227,635 69,279 (1,828) 295,086
Income before gains on sales of
investments and minority interest of
unitholders in operating partnership 753 (659) 33,668 13,866 1,828 49,362
Gains on sales of investments 4,346 4,346
Minority interest of unitholders in
operating partnership (58) (58)
---------------- ---------------- ---------- --------------- ----------- -------
Income before extraordinary item 753 (659) 37,956 13,866 1,828 53,650
================ ================ ========== =============== =========== =======
Dividends to preferred shareholders (9,713) (9,713)
========== =======
Net income per common share before
extraordinary item $0.48 $0.54
========== =======
Distributions declared per common share $0.96 $0.96
========== =======
Weighted average number of common shares
outstanding 58,834 22,671 (25) 81,505
</TABLE>
See accompanying notes.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Statements of Operations on this Form 8-K
reflect the historical results of the Company adjusted to reflect the operations
of: (i) 44 apartment communities containing 14,320 apartment homes (excluding
675 apartment homes under development) owned by South West that were merged with
and into UDR Western Residential, Inc., a wholly-owned subsidiary of the
Company, on December 31, 1996, (i) two apartment communities acquired during
1996 as previously reported on Form 8-K dated October 31, 1996 and (ii) 18
apartment communities (the "Southeast Portfolio") acquired in an August 15, 1996
portfolio acquisition as previously reported on Form 8-K dated August 15, 1996
(subsequently updated to reflect the results of operations for the nine months
ended September 30, 1996 on Form 8-K dated October 31, 1996).
For presentation purposes in the Unaudited Pro Forma Combined Statements of
Operations on this Form 8-K, the Southeast Portfolio has been segregated into
two components, the development properties and the non-development properties.
There are 14 properties containing 3,196 units which are considered
non-development properties and 4 properties containing 1,312 units which are
considered development properties. The 14 non-development properties were built
prior to 1995 and the four development properties had completed units available
for occupancy at various times during 1995 and 1996. For the period
presented, the pro forma adjustments for the four development properties are
determined based upon the weighted average balance of the purchase price
outstanding. The weighted average balance of the purchase price outstanding was
calculated by assuming the properties were financed and acquired by the Company
on the dates on which certificates of occupancy were obtained for each unit
during 1995 and 1996.
The Unaudited Pro Forma Combined Statements of Operations assumes the Merger
occurred on the first day of the reporting period presented. In connection with
the Merger, the Company issued 22.8 million shares of common stock valued at
$14.125 per share for all of the outstanding common stock of South West for an
aggregate equity value of approximately $322.1 million. The Company acquired
real estate assets of $559.6 million plus other assets and cash of $8.4 million
and $2.7 million, respectively. In addition, the Company assumed debt totaling
$225.0 million, including the following : (i) an unsecured line of credit with
an investment bank in the amount of $69.1 million with a weighted average
interest rate of 6.3%, (ii) an unsecured note payable in the amount of $55.9
million bearing interest of 7.0%, (iii) two REMIC financings aggregating $94.9
million with a weighted average interest rate of 7.76%, (iv) one mortgage note
payable in the amount of $5.1 million bearing interest of 8.5% and (v) other
liabilities aggregating $23.8 million.
In addition to the Merger outlined above, the Unaudited Pro Forma Combined
Statements of Operations assume the acquisition of Westland Park and
Steeplechase Apartments with bank line borrowings aggregating $30.2 million and
a weighted average interest rate of 5.98% (the Company's weighted average market
interest rate on short-term bank borrowings in effect at the time of each of the
acquisitions).
<PAGE>
Also, the Consolidated Pro Forma Statements of Operations assume the
acquisition of the 14 non-development apartment communities contained in the
Southeast Portfolio as if it had occurred on the first day of the reporting
period presented. The Pro Forma Statements of Operations include the effect of
debt and equity incurred in connection with the acquisition of the 14
non-development apartment communities contained in the Southeast Portfolio which
includes: (i) bank lines of credit of approximately $14.0 million with a
weighted average interest rate of 6.01% (The Company's market interest rate on
short-term bank borrowings in effect at the time of the acquisition), (ii) the
assumption of secured debt encumbering the properties in the aggregate amount of
approximately $75.2 million with a weighted average interest rate of 7.30%,
(iii) Seller financing of approximately $13.9 million bearing interest of 7.10%,
and (iv) the issuance of approximately 934,000 newly issued shares of the
Company's common stock valued at $13.50 (the closing sales price of the
Company's common stock on the date of acquisition) per share for total
consideration of $12.6 million. The Unaudited Pro Forma Statements of Operations
also assume the acquisition of the four development apartment communities
contained in the Southeast Portfolio. The Unaudited Pro Forma Statements of
operations include the effects of debt and equity incurred in connection with
the acquisition of the four development apartment communities contained in the
Southeast Portfolio which includes: (i) bank lines of credit of approximately
$11.2 million with a weighted average interest rate of 6.01% (the Company's
market interest rate on short-term bank borrowings in effect at the time of the
acquisition), (ii) the assumption of secured debt encumbering the properties in
the aggregate amount of approximately $34.6 million with a weighted average
interest rate of 6.59%, (iii) Seller financing of approximately $11.1 million
bearing interest of 7.10% and (iv) the issuance of approximately 746,000 newly
issued shares of the Company's common stock valued at $13.50 per share (the
closing sales price of the Company's common stock on the date of acquisition)
for total consideration of $10.1 million.
The assumption of secured debt encumbering the Southeast Portfolio properties
consists of the following: (i) four mortgage notes payable encumbering specific
properties aggregating $38.6 million, (ii) a $40 million secured senior credit
facility with Wachovia Bank and (iii) a $31.2 million secured senior credit
facility with First Union National Bank, as follows:
Specific Mortgage or Construction Notes Payable:
------------------------------------------------
LOAN INTEREST
PROPERTY NAME AMOUNT RATE
Cape Harbor* $ 9,500,000 6.531% (Variable-LIBOR + 1%)
The Village at Cliffdale 10,509,232 7.875%
Rivergate 9,837,246 8.000%
Morganton Place 8,739,750 6.531% (Variable-LIBOR + 1%)
------------
$ 38,586,228
============
*Construction Note Payable
Cross-Collateralized Secured Notes Payable:
-------------------------------------------
LOAN INTEREST
LENDER AMOUNT RATE
Wachovia Bank** $ 10,000,000 7.14%
Wachovia Bank** 5,000,000 6.98%
Wachovia Bank** 25,000,000 6.53% (Variable-LIBOR +1%)
First Union National Bank*** 20,000,000 7.75%
First Union National Bank*** 5,000,000 7.38%
First Union National Bank*** 5,000,000 7.50%
First Union National Bank*** 1,232,805 6.61% (Variable-LIBOR +1.18%)
------------
$ 71,232,805
============
Total Mortgage Notes Payable $109,819,033
============
<PAGE>
** The $40 million Wachovia Bank senior credit facility is secured by six
properties contained in the Southeast Portfolio. For purposes of this
Form 8- K, LIBOR is assumed to be 5.53% which represents the 3 month
LIBOR on August 15, 1996, the date of the acquisition. There are two
related interest rate swap agreements with Wachovia Bank in the
aggregate notional amount of $15 million under which theCompany pays a
fixed-rate of interest and receives a variable-rate on the notional
amounts. The interest rate swaps effectively change the Company's
interest rate exposure from a variable-rate to a fixed-rate of 7.09%
(weighted average) on $15 million of the $40 million senior credit
facility.
*** The $31.2 million First Union National Bank senior credit facility is
secured by seven properties contained in the Southeast Portfolio. For
purposes of this Form 8- K, LIBOR is assumed to be 5.43% which
represents the 1 month LIBOR on August 15, 1996, the date of the
acquisition. There are three interest rate swap agreements with First
Union National Bank in the aggregate notional amount of $30 million
under which the Company pays a fixed-rate of interest and receives a
variable-rate on the notional amounts. The interest rate swaps
effectively change the Company's interest rate exposure from a
variable- rate to a fixed-rate of 7.65% (weighted average) on $30
million of the $31.2 million senior credit facility.
The Unaudited Pro Forma Combined Statements of Operations are not necessarily
indicative of what the Company's results would have been for the year ended
December 31, 1996 if the acquisitions had been consummated at the beginning of
the period presented, nor do they purport to be indicative of the results of
operations or financial position in future periods.
(1) Represents the Company's Historical Statements of Operations contained
in its Annual Report on Form 10- K for the years ended December 31,
1996.
<PAGE>
(2) Represents the actual results of operations for the 14 properties
containing 3,196 units which are considered non-development properties.
A reconciliation of the combined rental operations of the development
and non-development properties to the audited combined results of
operations for the six months ended June 30, 1996, as appearing in Form
8-K dated August 15, 1996, is as follows:
Net Income
Six Months
Properties (In 000's)
---------- ---------
Development Properties $ 2,451
Non-Development Properties 5,550
-----
$ 8,001
=====
(3) Represents the actual results of operations for the 4 properties
containing 1,312 units which are considered development properties for
the six month period ended June 30, 1996. See Note 2 above.
<PAGE>
(4) Represents the pro forma results of operations for the 14
non-development properties and the four development properties for the
45 day period from July 1, 1996 to August 15, 1996, which was the period
that the properties were not owned by the Company during 1996 (based on
the unaudited combined statement of rental operations for the 182 day
stub period from January 1, 1996 to June 30, 1996). The unaudited
combined statement of rental operations was for the stub period January
1, 1996 to June 30, 1996, as appearing in Form 8-K dated August 15, 1996
(See Notes 2 and 3 above).
(5) Reflects the net decrease in property management fees for the
non-development properties. The Company internally manages its apartment
properties at an assumed cost of approximately 2.5% of rental income
(based upon 1995 actual information). The Company uses 98% of the amount
reported as rental income in calculating the property management fee, as
2% of the amount reported as rental income is assumed to be other income
which is not subject to management fee.
(6) Represents the net increase in insurance expense to reflect that the
Company insures its apartments for approximately $29.97 per unit more
than the historical insurance expense of the 3,196 apartment units for
the the non-development properties contained in Southeast Portfolio (the
twelve months ended December 31, 1996, includes a pro forma adjustment
for 227 out of 366 days).
(7) Reflects the net adjustments to depreciation expense to record the
non-development properties in the Southeast Portfolio acquisition at the
beginning of the period presented. Depreciation is computed on a
straight-line basis over the useful lives of the related assets based
upon the actual purchase price allocation of the Southeast Portfolio.
Buildings have been depreciated over 35 years and other improvements
over a weighted average life of 7.1622 years based upon the initial cost
of the non-development properties in the Southeast Portfolio of $115.7
million. The allocation and useful lives are as follows for the non-
development properties:
1996
Allocation of Useful Life Depreciation
Purchase Price In Years Adjustment**
-------------- ----------- --------------
Building $ 96,637,354 35 $ 1,712,465
Other Improvements 7,296,003 7.1622 631,805
Land 11,739,024 N\A --
------------ ------------
$115,672,381 $ 2,344,270
============ =============
** The twelve months ended December 31, 1996, includes a pro forma
adjustment for 227 out of 366 days.
(8) Reflects the additional interest expense associated with the acquisition
of the non-development properties contained in the Southeast Portfolio
as follows: (i) variable-rate bank debt aggregating $14.0 million used
to fund the acquisition at assumed interest rates equal to market rates
in effect at the time of the acquisition of 6.01%, (ii) the assumption
of secured debt in the amount of $75.2 million which includes two
mortgage notes aggregating $20.3 million and seven cross-collateralized
notes aggregating $54.9 million with a weighted average interest rate of
7.36%, and (iii) the issuance of a fixed-rate $13.9 million note to the
Seller of the Southeast Portfolio bearing interest of 7.10%.
Weighted
Average 1996
Interest Interest Expense
Type of Debt Amount Rate Adjustment**
------------ ----------- -------- ----------------
Bank Lines $ 13,982,880 6.01% $ 521,214
Secured Debt* 75,175,680 7.36% 3,432,639
Note to Seller 13,902,591 7.10% 612,208
----------- ------------
$103,061,151 $ 4,566,061
=========== ============
<PAGE>
** The twelve months ended December 31, 1996, includes a pro forma
adjustment for 227 out of 366 days.
(9) Represents the issuance of 934,165 shares of the Company's common stock
to the Seller of the Southeast Portfolio at $13.50 per share
attributable to the non-development properties in the Southeast
Portfolio based upon the aggregate allocated purchase price. The shares
are assumed to have been outstanding from the beginning of the period
presented. The twelve months ended December 31, 1996, includes a pro
forma adjustment for 227 out of 366 days.
(10) Reflects the net decrease in property management fees for the
development properties. The Company internally manages its apartment
properties at an assumed cost of approximately 2.5% of rental income
(based upon 1995 actual information). The Company uses 98% of the
amount reported as rental income in calculating the property management
fee, as 2% of the amount reported as rental income is assumed to be
other income which is not subject to management fee.
(11) Represents the net increase in insurance expense to reflect that the
Company insures its apartments for approximately $29.97 per unit more
than the historical insurance expense of the 1,312 apartment units for
the development properties contained in Southeast Portfolio. Since the
four development properties were under various stages of construction
during 1996, the weighted average number of units outstanding for the
period presented is used in the calculation of the insurance expense
pro forma adjustment. For the twelve months ended December 31, 1996,
the weighted average number of development units outstanding was 1,241
(the twelve months ended December 31, 1996, includes a pro forma
adjustment for 227 out of 366 days).
(12) Reflects the net adjustments to depreciation expense to record the
development properties in the Southeast Portfolio acquisition at the
beginning of the period presented. Depreciation is computed on a
straight-line basis over the useful lives of the related assets based
upon the actual purchase price allocations of the Southeast Portfolio.
Buildings have been depreciated over 35 years and other improvements
over a weighted average life of 6.7 years based upon the initial cost
of the development properties in the Southeast Portfolio of $67.0
million. The allocation and useful lives are as follows for the
development properties:
<TABLE>
<CAPTION>
Weighted Average 1996
Allocation of Allocation of Useful Life Depreciation
Purchase Price Purchase Price* In Years Adjustment**
-------------- --------------- ----------- -------------
<S> <C>
Building $ 57,967,420 $54,604,690 35 $ 967,624
Other Improvements 4,048,512 3,768,179 6.7 348,820
Land 4,952,938 4,623,032 N\A --
------------ ---------- ----------
$ 66,968,870 $62,995,901 $ 1,316,444
============ ========== ==========
</TABLE>
<PAGE>
* Since the four development properties were under various stages of
construction during 1996, the weighted average balance of the
purchase price outstanding for the period presented is used in the
calculation for the depreciation expense pro forma adjustment.
** The twelve months ended December 31, 1996, includes a pro forma
adjustment for 227 out of 366 days.
(13) Reflects the additional interest expense associated with the
acquisition of the development properties contained in the Southeast
Portfolio as follows: (i) additional bank debt aggregating $11.2
million used to fund the acquisition at assumed interest rates equal to
market rates in effect at the time of the acquisition of 6.01%, (ii)
the assumption of various secured debt aggregating $34.6 million
bearing a weighted average interest rate of 6.76% which includes one
mortgage note, one construction note and seven cross- collateralized
notes and (iii) the issuance of a fixed-rate $11.1 million note to the
Seller of the Southeast Portfolio bearing interest of 7.10%.
<TABLE>
<CAPTION>
1996
Development Weighted Average Weighted Average Interest Expense
Property Total Debt Debt Outstanding Interest Rate Adjustment**
-------- ------------ ---------------- ---------------- ----------------
<S> <C>
Morganton Place $ 12,386,796 $ 12,386,796 6.537781% $ 502,266
Lake Brandt 12,000,041 12,000,041 7.016978% 522,249
Cape Harbor 16,733,447 13,410,168 6.540838% 544,017
Stonesthrow 15,781,975 15,781,975 6.684529% 654,300
----------- -------------- ----------
$ 56,902,259 $ 53,578,980 $ 2,222,832
=========== ============== ==========
</TABLE>
** Since the four development properties were under various stages of
construction during 1996, the interest expense pro forma adjustment is
based on the weighted average amount of debt outstanding as determined
by the weighted average balance of the purchase price outstanding. For
the twelve months ended December 31, 1996, the interest expense
adjustment is calculated on 227 out of 366 days.
(14) Represents the issuance of 745,675 shares of the Company's common
stock to the Seller of the Southeast Portfolio at $13.50 per share
attributable to the development properties in the Southeast Portfolio
based on the aggregate allocated purchase price. The shares are
assumed to have been issued and outstanding from the earlier of the
beginning of the period presented or the date on which certificates of
occupancy were granted for each unit contained in the development
properties. For the twelve months ended December 31, 1996, based upon
the weighted average balance of the purchase price outstanding during
1996, the weighted average days the stock is assumed to have been
outstanding is 175.92 (out of 366 days).
(15) Represents the actual results of operations for Steeplechase Apartments
and Westland Park Apartments that have been previously reported to the
Securities and Exchange Commission by the Company on Form 8-K dated
October 31, 1996.
<PAGE>
(16) Represents the pro forma adjustments for Westland Park and Steeplechase
Apartments. For Westland Park Apartments this represents the 8 day
period from May 1, 1996 to May 9, 1996, which was the period that the
property was not owned by the The Company during 1996 and the period
not included in the actual results of operations in Note 23 (based on
the average per day unaudited statement of rental operations for the
121 day stub period from January 1, 1996 to April 30, 1996). For
Steeplechase Apartments this represents the 6 day period from March 1,
1996 to March 6, 1996, which was the period that the property was not
owned by the Company during 1996 and the period not included in the
actual results of operations in Note 23 (based on the average per day
unaudited statement of rental operations for the 60 day stub period
from January 1, 1996 to February 29, 1996).
(17) Reflects the net decrease in property management fees for Westland Park
and Steeplechase Apartments. The Company internally manages its
apartment properties at an assumed cost of approximately 2.5% of rental
income (based upon 1995 actual information). The Company uses 98% of
the amount reported as rental income in calculating the property
management fee, as 2% of the amount reported as rental income is
assumed to be other income which is not subject to management fee.
(18) Reflects the net adjustments to depreciation expense to record Westland
Park and Steeplechase Apartments acquisitions at the beginning of each
period presented. Depreciation is computed on a straight-line basis
over the useful lives of the related assets based upon the actual
purchase price allocations of the properties. Buildings have been
depreciated over 35 years and other assets over 5, 10 or 20 years
depending on the useful life of the related asset. The weighted average
life of other assets for Westland Park and Steeplechase Apartments is
approximately 7.41 years based upon the initial cost of the properties
of $30.2 million. The allocation and useful lives are as follows:
1996
Allocation of Useful Life Depreciation
Purchase Price In Years Adjustment**
-------------- ----------- ------------
Building $ 25,133,903 35 $ 200,384
Other Improvements 1,375,227 7.405319 51,820
Land 3,689,016 --
------------ ----------
$ 30,198,146 $ 252,204
============ ==========
* The twelve months ended December 31, 1996, includes a pro forma
adjustment for 102.13 (66 days for Steeplechase Apartments and 129 days
for Westland Park Apartments) out of 366 days.
(19) Reflects the additional interest expense associated with the
acquisition of Westland Park and Steeplechase Apartments on
variable-rate bank debt aggregating $30.2 million used to fund the
acquisitions at assumed interest rates equal to market rates in effect
at the time of each respective acquisition.
<PAGE>
1996
Interest Expense
Property Total Debt Interest Rate Adjustment**
-------- ----------- ------------- ----------------
Westland Park $ 16,699,276 6.0296% $ 354,891
Steeplechase 13,498,870 5.9144% 143,969
----------- -------------
$ 30,198,146 $ 498,860
=========== =============
** For the twelve months ended December 31, 1996, the interest expense
adjustment for Westland Park and Steeplechase Apartments is for 129 and
66 days, respectively (based on a 366 day year).
(20) Certain reclassifications have been made to South West's historical
statements of operations for the twelve months ended December 31, 1996
to conform to the Company's financial statement presentations.
(21) Reflects the estimated net reduction of property management costs of
$1,089,000 for the twelve months ended December 31, 1996, based upon
the identified historical costs for those items which are anticipated
to be eliminated or reduced as a result of the Merger, as follows (in
thousands):
Net reduction in salary, benefits and occupancy costs $ 497
Net reduction in travel, entertainment and related
expenses 141
Net reduction in other expenses 451
---------
Pro forma adjustment $ 1,089
=========
(22) Represents the net increase in depreciation of real estate owned as a
result of recording the South West real estate assets at fair value
versus historical cost. Depreciation is computed on a straight-line
basis over the estimated useful lives of the related assets which have
an estimated weighted average useful life of approximately 27.6 years.
Buildings have been depreciated over 35 years and other assets over 5,
10 or 20 years depending on the useful life of the related asset.
Calculation of fair value of depreciable real estate assets at
December 31, 1996 (in thousands):
Purchase price $ 572,281
Less:
Purchase price allocated to cash and other assets (12,690)
Purchase price allocated to land (104,044)
Purchase price allocated to real estate under development** (28,623)
-----------
Pro Forma basis of South West's depreciable real estate
held for investment at fair value assets $ 426,924
===========
** At December 31, 1996, South West had one apartment communities
containing 315 apartment homes under development and three
additions to existing properties which will total 360
apartment homes under construction. The historical cost of
construction in progress is assumed to be at fair value.
<PAGE>
Calculation of depreciation of real estate owned for the twelve months
ended December 31, 1996 (in thousands):
Depreciation expense based upon an
estimated weighted average
useful life of approximately 27.6
years $ 15,462
Less historical South West depreciation of real
estate owned (13,447)
-----------
Pro forma adjustment $ 2,015
===========
(23) Represents the estimated net adjustment to interest expense for the
twelve months ended December 31, 1996 as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
To adjust amortization of South West's deferred financing costs
which were eliminated in connection
with the Merger $ (1,295)
To adjust the amortization of the premium on
South West's notes payable to fair value (278)
To reflect the additional borrowings of $4.1 million of variable-
rate bank line borrowings used to fund the Merger
and registration costs (at current market interest
rates available to the Company of 6.3%) 257
---------
Pro forma adjustment $ (1,316)
=========
</TABLE>
(24) Represents the estimated net reduction to general and administrative
costs of $1,438,000 for the twelve months ended December 31, 1996,
based upon the identified historical costs of certain items which are
anticipated to be eliminated or reduced as a results of the Merger, as
follows (in thousands):
Net reduction in salary, benefits and occupancy costs $ 659
Net reduction in duplication of public company
expenses 178
Net reduction in other expenses 601
----------
$ 1,438
==========
<PAGE>
(25) The pro forma weighted average shares outstanding for the twelve months
ended December 31, 1996 is computed as follows:
South West's historical weighted average common shares
outstanding 20,937
Plus: effect of South West vested stock options converted
upon Merger 211
Less: dilutive effect of South West stock options
to be eliminated in the Merger (220)
-------
South West adjusted weighted average common shares
outstanding 20,928
=======
United Dominion Pro Forma weighted average
common shares outstanding 58,834
Issuance of the Company's common stock at an
exchange ratio of 1.0833 for all of the South
West common stock in connection with
the Merger * 22,671
------
Pro Forma Shares 81,505
======
* Weighted average historical South West common shares outstanding
multiplied by the exchange ratio.
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNITED DOMINION REALTY TRUST, INC.
Date: March 17, 1997 /s/ James Dolphin
-------------- ------------------------------------
James Dolphin, Senior Vice President
Chief Financial Officer
Date: March 17, 1997 /s/ Jerry A. Davis
-------------- ------------------------------
Jerry A. Davis, Vice President
Corporate Controller
<PAGE>
Exhibit 23
Consent of Independent 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 March 4, 1997, with respect to the consolidated financial
statements of South West Property Trust Inc. for each of the three years in the
period ended December 31, 1996, included in this Current Report on Form 8-K/A to
be filed on or about March 14, 1997.
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
33-47296 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
33-64275 Form S-3, Shelf Registration
Statement pertaining to the
registration of $462.3 million
of Common Stock, Preferred Stock
and Debt Securities
333-11207 Form S-3, Shelf Registration
Statement, pertaining to the
private placement of 1,679,840
shares of the Company's Common
Stock in August 1996
333-15133 Form S-3, pertaining to the
Company's Dividend Reinvestment
and Stock Purchase Plan
ERNST & YOUNG LLP
Dallas, Texas
March 11, 1997
