FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 21, 1997
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 1-10524 54-0857512
State or other jurisdiction of (Commission (I.R.S. Employer
incorporation of organization) File Number) Identification No.)
10 South Sixth Street, Suite 203, Richmond, Virginia 23219-3802
(Address of principal executive offices)
Registrant's telephone number, including area code (804) 780-2691
NO CHANGE
(Former name or former address, if change since last report)
<PAGE>
ITEM 5. OTHER EVENTS
For the year ended December 31, 1996, United Dominion Realty Trust, Inc.
("United Dominion"), the registrant, and its wholly owned subsidiaries acquired
in separate transactions 30 apartment communities containing 7,712 apartment
homes at a total costs of $321.1 million, including closing costs. In addition,
effective at 11:59 p.m. on December 31, 1996, South West Property Trust
Inc., ("South West") merged with and into UDR Residential Inc., a wholly-owned
subsidiary of United Dominion pursuant to the Amended and Restated Agreement
and Plan of Merger dated as of October 1, 1996 (the "Merger") as previously
filed as Annex I to the Joint Proxy Statement/Prospectus of United Dominion
and South West that was made part of the Registration Statement (Form S-4,
file number 333-13475) filed with the Securities and Exchange Commisssion on
October 9, 1996. South West, a Texas based real estate investment trust, owned
44 apartment communities containing 14,975 apartment homes (includes 760
apartment homes under development). United Dominion issued approximately 22.8
million shares of its common stock at $14.125 per share for a total market
equity of appproximatley $322 million and assumed debt and other liabilities
estimated at approximately $235 million resulting in total consideration
estimated at approximately $557 million (excluding transaction costs) in
connection with the Merger.
2
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
Description Location
----------- --------
(b) Pro Forma Financial Information 4 through 20
(c) Consent of Independent Public Accountants Exhibit 23
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents (File No. 1-11224) filed by South West with the
Securities and Exchange Commission under the Exchange Act are hereby
incorporated by reference into this Form 8-K: (i) South West's consolidated
financial statements included in its annual report on Form 10-K for the year
ended December 31, 1995 filed with the Securities and Exchange Commission on
March 2, 1996 and (ii) South West's consolidated financial statements included
in its quarterly report on Form 10-Q for the quarter ended September 30, 1996
filed with the Securities and Exchange Commission on November 4, 1996, filed
under the Exchange Act including any amendments or reports filed for the purpose
of updating such description.
3
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Combined Balance Sheet at September 30, 1996,
gives effect to the Merger of United Dominion and South West as if the Merger
had occurred on September 30, 1996. The Unaudited Pro Forma Combined Balance
Sheet gives effect to the Merger under the purchase method of accounting in
accordance with Accounting Standards Board Opinion No. 16. In the opinion of
management, all significant adjustments necessary to reflect the effects of the
Merger have been made.
The Unaudited Pro Forma Combined Balance Sheet is not necessarily
indicative of what the actual combined finanical position of United Dominion and
South West would have been at September 30, 1996, nor does it purport to
represent the future combined financial position of United Dominion. The
Unaudited Pro Forma Combined Balance Sheet should be read in conjunction with
United Dominion's audited consolidated financial statements for the year
ended December 31, 1995 (included in the United Dominion's Form 10-K for the
year ended December 31, 1995) and its unaudited consolidated financial
statements as of September 30, 1996 and for the nine months then ended (included
in the United Dominion's Form 10-Q for the quarterly period ended September 30,
1996) and the accompanying notes thereto.
The Unaudited Pro Forma Combined Statements of Operations for the
twelve months ended December 31, 1995 and the nine months ended September 30,
1996 are presented as if the Merger had occurred at the beginning of each 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 periods presented. In addition
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
each period presented: (i) two apartment communities acquired during 1996 as
previously reported on Form 8-K dated October 31, 1996 (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), (iii) nine
apartment communities acquired in a May 4, 1995 portfolio acquisition as
previously reported on Form 8-K dated June 30, 1995 and (iv) four apartment
communities acquired during the second half of 1995 as previously reported on
Form 8-K dated December 28, 1995.
The Unaudited Pro Forma Combined Statements of Operations are not
necessarily indicative of what United Dominion's actual results would have been
for the year ended December 31, 1995 and the nine months ended September 30,
1996 if the acquisitions and Merger had occurred at the beginning of each 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 United Dominion. The Unaudited Pro Forma
Combined Statements of Operations should be read in conjunction with United
Dominion's audited consolidated financial statements for the year ended December
31, 1995 (included in United Dominion's Form 10-K for the year ended December
31, 1995) and its unaudited consolidated financial statements as of September
30, 1996 and for the nine months then ended (included in United Dominion's Form
10-Q for the quarterly period ended September 30, 1996) and the accompanying
notes thereto.
4
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996
(In thousands, except for share data)
<CAPTION>
<S> <C>
SOUTH WEST
HISTORICAL (1) HISTORICAL (28)
----------------------- -------------------------
Assets
Real estate owned:
Real estate held for investment $ 1,448,622 $ 397,682
Less: accumulated depreciation (159,429) (79,632)
----------------------- -------------------------
1,289,193 318,050
Construction in progress -- 73,598
----------------------- -------------------------
1,289,193 391,648
Real estate held for disposition 42,889 --
Cash and cash equivalents 7,803 9,333
Other assets 35,826 15,428
----------------------- -------------------------
$ 1,375,711 $ 416,409
======================= =========================
Liabilities and shareholders' equity
Notes payable-secured $ 307,505 $ 218,124
7.25% Notes due April 1, 1999 75,000
8.50% Debentures due September 15, 2024 150,000
7.95% Medium Term Notes due July 12, 2006 125,000
Notes payable-unsecured 138,389
Distributions payable to common shareholders 14,099 5,375
Accounts payable, accrued expenses and other liabilities 34,992 11,210
----------------------- -------------------------
844,985 234,709
----------------------- -------------------------
Minority interest of unitholders in operating partnership 2,030
Shareholders' equity:
Preferred stock, no par value; 25,000,0000 shares authorized:
9 1/4% Series A Cumulative Redeemable Preferred Stock
(liquidation preference of $25 per share), 4,200,000 shares issued
and outstanding 105,000
Common stock, $1 par value; 100,000,000 shares authorized
81,548,734 shares issued and outstanding (58,744,488 at
September 30, 1996) 58,744 205
Additional paid-in-capital 510,314 236,240
Notes receivable from officer-shareholders (5,903) (3,095)
Distributions in excess of net income (141,336) (51,650)
Unrealized gain on securities available-for-sale 1,877
----------------------- -------------------------
Total shareholders' equity 528,696 181,700
======================= =========================
1,375,711 $ 416,409
======================= =========================
<PAGE>
<CAPTION>
PRO FORMA
MERGER
ADJUSTMENTS (29)
---------------------------
Assets
Real estate owned:
Real estate held for investment $ 81,555 (30)
Less: accumulated depreciation 79,632 (30)
---------------------------
161,187
Construction in progress
---------------------------
161,187
Real estate held for disposition --
Cash and cash equivalents
Other assets (5,972)(31)
---------------------------
$ 155,215
===========================
Liabilities and shareholders' equity
Notes payable-secured $ (116,666)(32)
7.25% Notes due April 1, 1999
8.50% Debentures due September 15, 2024
7.95% Medium Term Notes due July 12, 2006
Notes payable-unsecured 131,797 (33)
Distributions payable to common shareholders
Accounts payable, accrued expenses and other liabilities
---------------------------
15,131
---------------------------
Minority interest of unitholders in operating partnership
Shareholders' equity:
Preferred stock, no par value; 25,000,0000 shares authorized:
9 1/4% Series A Cumulative Redeemable Preferred Stock
(liquidation preference of $25 per share), 4,200,000 shares issued
and outstanding
Common stock, $1 par value; 100,000,000 shares authorized
81,548,734 shares issued and outstanding (56,744,488 at
September 30, 1996) 22,600 (34)
Additional paid-in-capital 62,739 (34)
Notes receivable from officer-shareholders 3,095 (34)
Distributions in excess of net income 51,650 (34)
Unrealized gain on securities available-for-sale
---------------------------
Total shareholders' equity 140,084
===========================
155,215
===========================
<PAGE>
<CAPTION>
UNITED
DOMINION
PRO FORMA
COMBINED
Assets -------------------------
Real estate owned:
Real estate held for investment
Less: accumulated depreciation $ 1,927,859
(159,429)
-------------------------
Construction in progress 1,768,430
73,598
-------------------------
Real estate held for disposition 1,842,028
Cash and cash equivalents 42,889
Other assets 17,136
45,282
-------------------------
$ 1,947,335
=========================
Liabilities and shareholders' equity
Notes payable-secured
7.25% Notes due April 1, 1999 $ 408,963
8.50% Debentures due September 15, 2024 75,000
7.95% Medium Term Notes due July 12, 2006 150,000
Notes payable-unsecured 125,000
Distributions payable to common shareholders 270,186
Accounts payable, accrued expenses and other liabilities 19,474
46,202
-------------------------
1,094,825
-------------------------
Minority interest of unitholders in operating partnership
2,030
Shareholders' equity:
Preferred stock, no par value; 25,000,0000 shares authorized:
9 1/4% Series A Cumulative Redeemable Preferred Stock
(liquidation preference of $25 per share), 4,200,000 shares issued
and outstanding
Common stock, $1 par value; 100,000,000 shares authorized 105,000
81,548,734 shares issued and outstanding (56,744,488 at
September 30, 1996)
Additional paid-in-capital 81,549
Notes receivable from officer-shareholders 809,293
Distributions in excess of net income (5,903)
Unrealized gain on securities available-for-sale (141,336)
1,877
-------------------------
Total shareholders' equity
850,480
=========================
$ 1,947,335
=========================
</TABLE>
See accompanying notes.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 1995
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
<S> <C>
ACQUISITIONS
PREVIOUSLY
REPORTED ON JUNE 30, 1995 AND
FORM 8-K DATED DECEMBER 28, 1995
JUNE 30, 1995 AND ACQUISITIONS
FORM 8-K DATED PRO FORMA
HISTORICAL (1) DECEMBER 28, 1995 (2) ADJUSTMENTS (3)
--------------- ---------------------- ---------------
Income
Rental Income $195,240 $6,519 $1,045
Interest and dividend income 1,692 (269)(4)
-------- ------ ------
196,932 6,519 776
Expenses
Rental Expenses
Utilities 14,464 430 64
Repairs & maintenance 30,374 895 98
Real estate taxes 14,058 504 67
Property management 5,300 284 (25)(5)
Other operating expenses 17,446 844 106
Depreciation of real estate owned 38,939 1,088 (6)
Interest 40,646 532 (7)
General and administrative 4,865
Other depreciation and amortization 1,103
Other expenses:
Impairment loss on real estate held for disposition 1,700
-------- ------ ------
168,895 2,957 1,930
-------- ------ ------
Income before gains on sales of investments and 28,037 3,562 (1,154)
minority interest of unitholders in
operating partnership
Gains on sales of investments 5,090
Minority interest of unitholders in
operating partnership
-------- ------ ------
Net income 33,127 3,562 (1,154)
Dividends to preferred shareholders 6,637 2,599 (8)
-------- ------ ------
Net income available to common shareholders $26,490 $3,562 ($3,753)
======= ====== =======
Net income per common share $0.50
=====
Distributions declared per common share $0.90
=====
Weighted average number of common shares outstanding 52,781
<PAGE>
<CAPTION>
NON-DEVELOPMENT
PROPERTIES
PRO FORMA SOUTHEAST SOUTH HILLS
BEFORE 1996 PORTFOLIO PRO FORMA
ACQUISITIONS ACQUISITION (9) ADJUSTMENTS (11)
------------ --------------- ----------------
Income
Rental Income $202,804 $17,539 $52
Interest and dividend income 1,423
-------- ------- ---
204,227 17,539 52
Expenses
Rental Expenses
Utilities 14,958 1,311 4
Repairs & maintenance 31,367 2,632 13
Real estate taxes 14,629 1,303 5
Property management 5,559 866 3
Other operating expenses 18,396 1,353 9
Depreciation of real estate owned 40,027
Interest 41,178
General and administrative 4,865
Other depreciation and amortization 1,103
Other expenses:
Impairment loss on real estate held for disposition 1,700
-------- ------- ---
173,782 7,465 34
-------- ------- ---
Income before gains on sales of investments and 30,445 10,074 18
minority interest of unitholders in
operating partnership
Gains on sales of investments 5,090
Minority interest of unitholders in
operating partnership
-------- ------- ---
Net income 35,535 10,074 18
Dividends to preferred shareholders 9,236
-------- ------- ---
Net income available to common shareholders $26,299 $10,074 $18
======= ======= ===
Net income per common share $0.50
=====
Distributions declared per common share $0.90
=====
Weighted average number of common shares outstanding 52,781
<PAGE>
<CAPTION>
NON-DEVELOPMENT DEVELOPMENT
PROPERTIES DEVELOPMENT PROPERTIES
SOUTHEAST PROPERTIES SOUTHEAST
PORTFOLIO SOUTHEAST PORTFOLIO
PRO FORMA PORTFOLIO PRO FORMA
ADJUSTMENTS ACQUISITION (10) ADJUSTMENTS
----------- ---------------- -----------
Income
Rental Income $5,011
Interest and dividend income
-------- ------ -------
0 5,011 0
Expenses
Rental Expenses
Utilities 319
Repairs & maintenance 447
Real estate taxes 325
Property management ($436)(13) 231 ($108)(18)
Other operating expenses 96 (14) 542 26 (19)
Depreciation of real estate owned 3,780 (15) 1,421 (20)
Interest 7,362 (16) 2,447 (21)
General and administrative
Other depreciation and amortization
Other expenses:
Impairment loss on real estate held for disposition
-------- ------ -------
10,802 1,864 3,786
-------- ------ -------
Income before gains on sales of investments and (10,802) 3,147 (3,786)
minority interest of unitholders in
operating partnership
Gains on sales of investments
Minority interest of unitholders in
operating partnership
-------- ------ -------
Net income (10,802) 3,147 (3,786)
Dividends to preferred shareholders
-------- ------ -------
Net income available to common shareholders ($10,802) $3,147 ($3,786)
======== ====== =======
Net income per common share
Distributions declared per common share
Weighted average number of common shares outstanding 934 (17) 441 (22)
<PAGE>
<CAPTION>
WESTLAND PARK WESTLAND PARK
AND STEEPLECHASE AND STEEPLECHASE UNITED
APARTMENTS PRO FORMA DOMINION
ACQUISITIONS (23) ADJUSTMENTS PRO FORMA
----------------- ----------- ---------
Income
Rental Income $4,639 $230,045
Interest and dividend income 1,423
------ ----- --------
4,639 0 231,468
Expenses
Rental Expenses
Utilities 173 16,765
Repairs & maintenance 481 34,940
Real estate taxes 398 16,660
Property management 245 (131)(25) 6,229
Other operating expenses 547 20,969
Depreciation of real estate owned 904 (26) 46,132
Interest 1,805 (27) 52,792
General and administrative 4,865
Other depreciation and amortization 1,103
Other expenses:
Impairment loss on real estate held for disposition 1,700
------ ----- --------
1,844 2,578 202,155
------ ----- --------
Income before gains on sales of investments and 2,795 (2,578) 29,313
minority interest of unitholders in
operating partnership
Gains on sales of investments 5,090
Minority interest of unitholders in
operating partnership
------ ----- --------
Net income 2,795 (2,578) 34,403
Dividends to preferred shareholders 9,236
------ ----- --------
Net income available to common shareholders $2,795 ($2,578) $25,167
====== ======= =======
Net income per common share $0.46
=====
Distributions declared per common share $0.90
=====
Weighted average number of common shares outstanding 54,156
<PAGE>
<CAPTION>
SOUTH WEST UNITED
PRO FORMA DOMINION
SOUTH WEST MERGER PRO FORMA
HISTORICAL (28) ADJUSTMENTS COMBINED
--------------- ----------- --------
Income
Rental Income $71,061 $301,106
Interest and dividend income 1,053 2,476
------ ----- ------
72,114 0 303,582
Expenses
Rental Expenses
Utilities 4,940 21,705
Repairs & maintenance 9,980 44,920
Real estate taxes 6,499 23,159
Property management 2,464 (493)(35) 8,200
Other operating expenses 9,782 30,751
Depreciation of real estate owned 12,304 1,859 (36) 60,295
Interest 10,686 (614)(37) 62,864
General and administrative 2,037 (1,039)(38) 5,863
Other depreciation and amortization 393 1,496
Other expenses:
Impairment loss on real estate held for disposition 1,700
------ ----- ------
59,085 (287) 260,953
------ ----- ------
Income before gains on sales of investments and 13,029 287 42,629
minority interest of unitholders in
operating partnership
Gains on sales of investments 10 5,100
Minority interest of unitholders in
operating partnership (8) (8)
------ ----- ------
Net income 13,031 287 47,721
Dividends to preferred shareholders 9,236
------ ----- ------
Net income available to common shareholders $13,031 $287 $38,485
======= ===== =======
Net income per common share $0.52
=====
Distributions declared per common share $0.90
=====
Weighted average number of common shares outstanding 20,308 (39) 74,464
</TABLE>
See accompanying notes.
6
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(In thousands, except per share data)
<CAPTION>
<S> <C>
NON-DEVELOPMENT
NON-DEVELOPMENT PROPERTIES DEVELOPMENT
PROPERTIES SOUTHEAST PROPERTIES
SOUTHEAST PORTFOLIO SOUTHEAST
PORTFOLIO PRO FORMA PORTFOLIO
HISTORICAL (1) ACQUISITION (9) ADJUSTMENTS (12) ACQUISITION (10)
-------------- --------------- ----------------- ----------------
Income
Rental income $175,119 $9,160 $2,265 $3,757
Interest and dividend income 1,197
-------- ------ ------ ------
176,316 9,160 2,265 3,757
Expenses
Rental expenses:
Utilities 12,810 662 164 219
Repairs & maintenance 29,847 1,146 283 316
Real estate taxes 12,698 651 161 321
Property management 4,192 452 (172)(13) 184
Other operating expenses 16,852 699 232 (14) 266
Depreciation of real estate owned 33,711 2,344 (15)
Interest 35,413 4,566 (16)
General and administrative 4,192
Other depreciation and amortization 917
Impairment loss on real estate held for disposition 290
-------- ------ ------ ------
150,922 3,610 7,578 1,306
Income before gains on sales of investments and 25,394 5,550 (5,313) 2,451
minority interest of unitholders in operating partnership
Gains on sales of investments 2,176
Minority interest of unitholders in operating partnership (26)
-------- ------ ------ ------
Net income 27,544 5,550 (5,313) 2,451
Dividends to preferred shareholders 7,284
-------- ------ ------ ------
Net income available to common shareholders $20,260 $5,550 (5,313) $2,451
======= ====== ====== ======
Net income per common share $0.36
=====
Distributions declared per common share $0.72
=====
Weighted average number of common shares outstanding 56,978 774 (17)
<PAGE>
<CAPTION>
DEVELOPMENT
PROPERTIES
SOUTHEAST WESTLAND PARK WESTLAND PARK
PORTFOLIO AND STEEPLECHASE AND STEEPLECHASE
PRO FORMA APARTMENTS PRO FORMA
ADJUSTMENTS (12) AQUISITIONS (23) ADJUSTMENTS (24)
---------------- ---------------- ----------------
Income
Rental income $929 $1,278 $95
Interest and dividend income
---- ------ ---
929 1,278 95
Expenses
Rental expenses:
Utilities 54 50 4
Repairs & maintenance 78 139 10
Real estate taxes 79 114 8
Property management (70)(18) 69 (30)(25)
Other operating expenses 89 (19) 153 11
Depreciation of real estate owned 1,316 (20) 252 (26)
Interest 2,223 (21) 499 (27)
General and administrative
Other depreciation and amortization
Impairment loss on real estate held for disposition
---- ------ ---
3,769 525 754
Income before gains on sales of investments and (2,840) 753 (659)
minority interest of unitholders in operating partnership
Gains on sales of investments
Minority interest of unitholders in operating partnership
---- ------ ---
Net income (2,840) 753 (659)
Dividends to preferred shareholders
---- ------ ---
Net income available to common shareholders (2,840) 753 (659)
====== === ====
Net income per common share
Distributions declared per common share
Weighted average number of common shares outstanding 578 (22)
<PAGE>
<CAPTION>
UNITED SOUTH WEST UNITED
DOMIMINION PRO FORMA DOMINION
PRO SOUTH WEST MERGER PRO FORMA
FORMA HISTORICAL (28) ADJUSTMENTS COMBINED
----- --------------- ----------- --------
Income
Rental income $192,603 $61,559 $254,162
Interest and dividend income 1,197 439 1,636
-------- ------- ----- --------
193,800 61,998 0 255,798
Expenses
Rental expenses:
Utilities 13,963 4,037 18,000
Repairs & maintenance 31,819 7,582 39,401
Real estate taxes 14,032 5,859 19,891
Property management 4,625 2,114 (346)(35) 6,393
Other operating expenses 18,302 8,789 27,091
Depreciation of real estate owned 37,623 9,952 1,656 (36) 49,231
Interest 42,701 9,747 (756)(37) 51,692
General and administrative 4,192 1,342 (722)(38) 4,812
Other depreciation and amortization 917 248 1,165
Impairment loss on real estate held for disposition 290 290
-------- ------- ----- --------
168,464 49,670 (168) 217,966
Income before gains on sales of investments and 25,336 12,328 168 37,832
minority interest of unitholders in operating partnership
Gains on sales of investments 2,176 2,176
Minority interest of unitholders in operating partnership (26) (26)
-------- ------- ----- --------
Net income 27,486 12,328 168 39,982
Dividends to preferred shareholders 7,284 7,284
-------- ------- ----- --------
Net income available to common shareholders $20,202 $12,328 $168 $32,698
======= ======= ===== =======
Net income per common share $0.35 $0.41
===== =====
Distributions declared per common share $0.72 $0.72
===== =====
Weighted average number of common shares outstanding 58,330 22,370 (39) 80,700
</TABLE>
See accompanying notes.
7
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
THE TWELVE MONTHS ENDED DECEMBER 31, 1995
Basis of Presentation
The Unaudited Pro Forma Combined Statements of Operations on this Form 8-K
reflect the historical results of United Dominion adjusted to reflect the
operations of: (i) 44 apartment communities containing 14,975 apartment homes
(includes 760 apartment homes under development) owned by South West that were
merged with and into UDR Western Residential, Inc., a wholly-owned subsidiary of
United Dominion, on December 31, 1996, (ii) two apartment communities acquired
during 1996 as previously reported on Form 8-K dated October 31, 1996 (iii) 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), (iv)
nine apartment communities acquired in a May 4, 1995 portfolio acquisition
as previously reported on Form 8-K dated June 30, 1995 and (v) four
apartment communities acquired during the second half of 1995 as previously
reported on Form 8-K dated December 28, 1995.
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 each of the periods
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 United
Dominion 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 assume the following
events occurred on the first day of each reporting period presented: (i) the
Merger of South West Property Trust Inc. with and into UDR Western Residential,
Inc., through the issuance of approximately 22.8 million shares of United
Dominion common stock at $14.125 per share for a total market equity value of
approximately $322 million and the assumption of debt and other liabilities
estimated at approximately $235 million for an aggregate value estimated at
approximately $557 million (excluding transaction costs), (ii) 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% (United
Dominion's weighted average market interest rate on short-term bank borrowings
in effect at the time of each of the acquisitions), (iii) the acquisition of
four apartment communities previously reported on Form 8-K dated December
28, 1995, and (iv) the acquisition of nine apartment communities previously
reported on Form 8-K dated June 30, 1995. For 1995, in connection with
the acquisitions previously described, the pro forma statements of
operations include the April 24, 1995 sale of 4.2 million shares of 9-1/4%
Cumulative Redeemable Preferred Stock with a $25 liquidation preference value
("preferred stock"). Net proceeds from the sale of the preferred stock were used
to fund the Acquisitions Previously Reported on Form 8-K dated June 30, 1995 and
to temporarily repay in full, then existing bank debt until such time
additional acquisitions were completed. Of the 4.2 million shares sold, 2.7
million shares were assumed to be used to acquire the Acquisitions Previously
Reported on Form 8-K dated June 30, 1995 and 878,589 shares were assumed to
have been used to acquire Hunters Ridge Apartments and Mallards of Wedgewood
Apartments (two of the properties included in the acquisitions previously
reported on Form 8-K dated December 28, 1995). Therefore, such
consolidated pro forma statements of operations assume the issuance of 3.6
million shares of preferred stock from the period January 1, 1995 to April
24, 1995 for the twelve months ended December 31, 1995. In addition, 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 each reporting period
presented. The pro forma statements of operations include the effect of
8
<PAGE>
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% (United Dominion'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
United Dominion's common stock valued at $13.50 (the closing sales price of
United Dominion's common stock on the date of acquisition) per share for total
consideration of $12.6 million. The Unauidted 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% (United Dominion'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 United Dominion's common stock valued at $13.50 per share
(the closing sales price of United Dominion'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-Collateralize Secured Notes Payable:
<TABLE>
<CAPTION>
Loan Interest
Lender Amount Rate
------ ------ ----
<S> <C>
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
============
</TABLE>
** 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 the United
Dominion pays a fixed-rate of interest and receives a variable-rate on
the notional amounts. The interest rate swaps effectively change the
United Dominion'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.
9
<PAGE>
*** 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 United Dominion pays a fixed-rate of interest and
receives a variable-rate on the notional amounts. The interest rate
swaps effectively change the United Dominion'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 United Dominion's results would have been for the nine
months ended September 30, 1996 and for the year ended December 31, 1995 if the
acquisitions had been consummated at the beginning of each period presented, nor
do they purport to be indicative of the results of operations or financial
position in future periods.
(1) Represents the United Dominion's Historical Statements of Operations
contained in its Quarterly Report on Form 10-Q for the nine months
ended September 30, 1996 and its Annual Report on Form 10-K for the
year ended December 31, 1995 and United Dominion's Historical Balance
Sheet contained in its Quarterly Report on Form 10-Q for the nine
months ended September 30, 1996.
(2) Amounts appearing under the column entitled "Acquisitions Previously
Reported on Form 8-K dated June 30, 1995 and Form 8-K dated December
28, 1995" give effect to significant acquisitions that have been
previously reported to the Securities and Exchange Commission by the
United Dominion on Form 8-K dated June 30, 1995 and Form 8-K dated
December 28, 1995. A reconciliation of net income for the twelve months
ended December 31, 1995 is as follows:
Net Income
Filing to Update Twelve Months
8-K Filed 8-K (In thousands)
-----------------------------------------------------------------------
June 30, 1995 N/A $ 1,821
December 28, 1995 8-K/A 1,741
----------
$ 3,562
==========
(3) Represents operations of the Acquisitions Previously Reported on Form
8-K Dated June 30, 1995 for the 33 day period from April 1, 1995 to May
3, 1995, which represents the period not owned by the United Dominion
during the second quarter of 1995 (based on the operating statements of
the properties for the stub period January 1, 1995 to March 31, 1995).
The unaudited combined statements of rental operations were for the
stub period January 1, 1995 to March 31, 1995.
(4) Reflects the reduction of interest income associated with the use of
short-term investments to acquire Hunters Ridge Apartments (66 of the
365 days during 1995) and Mallards of Wedgewood Apartments (93 of the
365 days during 1995) at market interest rates in effect at the time of
the acquisition. As discussed in the "Basis of Presentation", Hunters
Ridge Apartments and Mallards of Wedgewood Apartments were assumed to
have been acquired with 878,589 shares of the preferred stock. The net
proceeds from the sale of the preferred stock were received on April
24, 1995 and were temporarily invested in short-term investments until
such time as these acquisitions occurred.
Purchase Interest Interest Income
Property Price Rate Adjustment
-------- ----- ---- ----------
Hunters Ridge $13,403,983 6.17% $ 149,544
Mallards of Wedgewood 7,823,950 6.00% 119,610
----------- ----------
$21,227,933 $ 269,154
=========== ==========
(5) Reflects the net reduction in property management fees for the
Acquisitions Previously Reported on Form 8-K dated June 30, 1995 and
Form 8-K dated December 28, 1995. United Dominion internally managed
its apartment portfolio at a then assumed cost of approximately 3.5% of
rental income (based on 1994 actual information). United Dominion uses
98% of the amount reported as rental income in calculating the property
10
<PAGE>
management fee, as 2% of the amount reported as rental income is
assumed to be other income which is not subject to management fee. As
documented in Notes 13 and 18, based upon 1995 actual information,
United Dominion internally managed its apartment properties at an
assumed cost of approximately 2.5% of rental income. The decrease in
the management fee from 3.5% in 1994 to 2.5% in 1995 was a result of
the economies of scale and efficiencies the United Dominion achieved
due to the significant growth experienced by the United Dominion during
this same time.
(6) Reflects the net adjustments to depreciation expense to record the
Acquisitions Previously Reported on Form 8-K dated June 30, 1995 and
December 28, 1995 at the beginning of each period presented.
Depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets. Buildings have been depreciated
over 35 years and other improvements over 15 years based upon the
initial cost of the Acquisitions Previously Reported on Form 8-K dated
June 30, 1995 of $65.7 million and Acquisitions Previously Reported on
Form 8-K dated December 31, 1995 of $32.9 million. The allocation and
estimated useful lives are as follows:
Acquisitions Previously Reported on Form 8-K dated June 30, 1995:
<TABLE>
<CAPTION>
<S> <C>
Estimated Twelve Month
Allocation of Useful Life Depreciation
Purchase Price In Years Adjustment**
-------------- -------- ------------
Building $ 50,495,338 35 $ 492,931
Other Improvements 2,916,939 15 66,441
Land 12,292,524 N\A --
---------- ------------
$ 65,704,801 $ 559,372
============ ============
</TABLE>
** The Acquisitions Previously Reported on Form 8-K Dated June 30, 1995
were purchased by United Dominion on May 4, 1995, as such, the
depreciation adjustment for the twelve months ended December 31, 1995
is computed for the 123 day period (out of 360 days) the properties
were not owned by United Dominion.
Acquisitions Previously Reported on Form 8-K dated December 28, 1995:
<TABLE>
<CAPTION>
<S> <C>
Estimated Twelve Month
Allocation of Useful Life Depreciation
Purchase Price In Years Adjustment**
-------------- -------- ------------
Building $ 25,438,503 35 $ 442,549
Other Improvements 2,138,662 15 86,814
Land 5,290,780 N\A --
------------ ------------
$ 32,867,945 $ 529,363
============ ============
Total $ 98,572,746 $ 1,088,735
============ ============
</TABLE>
** The Acquisitions Previously reported on Form 8-K Dated December 28,
1995 were purchased by United Dominion at various times during the
second and third quarters of 1995. The depreciation adjustment is
computed for each property based on the number of days the properties
were not owned by the United Dominion. The weighted average number of
days the properties were not owned by United Dominion during 1995 was
219.20 days (out of 360 days).
(7) Reflects the additional interest expense associated with the
Acquisitions Previously Reported on Form 8-K dated December 28, 1995 as
follows: (i) variable-rate bank debt aggregating $2.7 million used to
fund the acquisitions at assumed interest rates equal to market rates
in effect at the time of each respective acquisition, (ii) the
assumption of a fixed-rate mortgage note in the amount of $3.3 million
bearing interest of 7.6% in connection with the acquisition of Marble
Hill Apartments and (iii) the assumption of a $5.6 million
variable-rate tax-exempt housing bond bearing interest of 5.14% in
connection with the acquisition of Andover Place Apartments.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Twelve Month
Amount Interest Interest
Property Type of Debt Debt Rate Adjustment**
--------------------- ---- ---- ------------
Marble Hill Bank Debt $ 2,629,662 6.48% $ 126,517
Marble Hill Mortgage Debt 3,344,066 7.60% 188,697
Andover Place Bank Debt 46,284 6.48% 2,227
Andover Place Tax-Exempt Bonds 5,620,000 5.14% 214,475
----------- ---- ---------
$11,640,012 $ 531,916
=========== =========
</TABLE>
** For the twelve months ended December 31, 1995, the interest expense
adjustment is for 271 days (based on a 365 day year) as the properties
were purchased on September 28, 1995.
(8) Reflects the adjustment to net income to record dividends paid to
preferred shareholders on 3,598,001 shares of preferred stock in
calculating net income available to common shareholders for the 114 day
period (out of 365 days) from the period January 1, 1995 to April 24,
1995 for the twelve months ended December 31, 1995.
(9) 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 twelve months ended December 31, 1995 and the
unaudited 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:
<TABLE>
<CAPTION>
<S> <C>
Net Income Net Income
Twelve Months Nine Months
Properties (In 000's) (In 000's)
---------- ---------- ----------
Development Properties $ 3,147 $ 2,451
Non-Developmement Properties 10,074 5,550
-------------- -------------
$ 13,221 $ 8,001
============== =============
</TABLE>
(10) 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 9 above.
(11) Represents operations of South Hills Apartments for the 29 day period
from January 1, 1995 to January 29, 1995, which represents the period
not owned by the Sellers of the Southeast Portfolio during 1995 (based
on the unaudited operating statement of the property for the stub
period January 30, 1995 to December 31 , 1995).
(12) Represents the pro forma results of operations for the 14
non-development properties and the four development properties for the
the 45 day period from July 1, 1996 to August 15, 1996, which was the
period that the properties were not owned by United Dominion during the
quarter ended September 30, 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 9 and 10 above).
(13) Reflects the net decrease in property management fees for the
non-development properties. United Dominion internally manages its
apartment properties at an assumed cost of approximately 2.5% of rental
income (based upon 1995 actual information). United Dominion 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.
(14) Represents the net increase in insurance expense to reflect that the
United Dominion 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 nine months ended September 30, 1996, includes a pro
forma adjustment for 227 out of 366 days).
12
<PAGE>
(15) Reflects the net adjustments to depreciation expense to record the
non-development properties in the Southeast Portfolio acquisition 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 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:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Allocation of Useful Life Depreciation Depreciation
Purchase Price In Years Adjustment** Adjustment**
-------------- -------- ------------ ------------
Building $ 96,637,354 35 $ 2,761,067 $ 1,712,465
Other Improvements 7,296,003 7.1622 1,018,681 631,805
Land 11,739,024 N\A -- --
------------ ----------- -------------
$115,672,381 $ 3,779,748 $ 2,344,270
============ =========== =============
</TABLE>
** The nine months ended September 30, 1996, includes a pro forma
adjustment for 227 out of 366 days. The twelve months ended December
31, 1995 includes a pro forma adjustment for the full year.
(16) 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%.
<TABLE>
<CAPTION>
<S> <C>
Weighted
Average Twelve Month Nine Month
Interest Interest Expense Interest Expense
Type of Debt Amount Rate Adjustment** Adjustment**
------------ ------ ---- ------------ ------------
Bank Lines $ 13,982,880 6.01% $ 840,371 $ 521,214
Secured Debt* 75,175,680 7.36% 5,534,563 3,432,639
Note to Seller 13,902,591 7.10% 987,084 612,208
------------- ------------- --------------
$ 103,061,151 $ 7,362,018 $ 4,566,061
============= ============= ==============
</TABLE>
** The nine months ended September 30, 1996, includes a pro forma
adjustment for 227 out of 366 days. The twelve months ended December
31, 1995 includes a pro forma adjustment for the full year.
(17) Represents the issuance of 934,165 shares of United Dominion'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 each period
presented. The nine months ended September 30, 1996, includes a pro
forma adjustment for 227 out of 274 days. The twelve months ended
December 31, 1995 includes a pro forma adjustment for the full year.
(18) Reflects the net decrease in property management fees for the
development properties. United Dominion internally manages its
apartment properties at an assumed cost of approximately 2.5% of rental
income (based upon 1995 actual information). United Dominion 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.
13
<PAGE>
(19) Represents the net increase in insurance expense to reflect that United
Dominion 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 1995 and 1996, the weighted average number of units outstanding
for both periods presented is used in the calculation of the insurance
expense pro forma adjustment. For the twelve months ended December 31,
1995, and the nine months ended September 30, 1996, the weighted
average number of development units outstanding was 861 and 1,241 (the
nine months ended September 30, 1996, includes a pro forma adjustment
for 227 out of 366 days), respectively.
(20) Reflects the net adjustments to depreciation expense to record the
development properties in the Southeast Portfolio acquisition 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 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:
For the twelve months ended December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Twelve Months
Allocation of Allocation of Useful Life Depreciation
Purchase Price Purchase Price** In Years Adjustment***
-------------- ---------------- -------- -------------
Building $ 57,967,420 $37,151,197 35 $ 1,061,463
Other Improvements 4,048,512 2,408,985 6.7 359,550
Land 4,952,938 2,938,969 N\A --
-------------- ----------- -----------
$ 66,968,870 $42,499,151 $ 1,421,013
============== =========== ===========
</TABLE>
For the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Twelve Months
Allocation of Allocation of Useful Life Depreciation
Purchase Price Purchase Price** In Years Adjustment***
-------------- ---------------- -------- -------------
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>
** Since the four development properties were under various stages of
construction during 1995 and 1996, the weighted average balance of the
purchase price outstanding for both periods presented is used in the
calculation for the depreciation expense pro forma adjustment.
*** The nine months ended September 30, 1996, includes a pro forma
adjustment for 227 out of 366 days. The twelve months ended December
31, 1995 includes a pro forma adjustment for the full year.
(21) 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%.
For the twelve months ended December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months
Development Weighted Average Weighted Average Interest Expense
Property Total Debt Debt Outstanding Interest Rate Adjustment**
-------- ---------- ---------------- ------------- ------------
Morganton Place $ 12,386,796 $ 11,264,470 6.537781% $ 736,446
Lake Brandt 12,000,041 7,495,453 7.016978% 525,954
Cape Harbor 16,733,447 2,868,373 6.540838% 187,616
Stonesthrow 15,781,975 14,919,438 6.684529% 997,294
------------ ------------- --------------
$ 56,902,259 $ 36,547,734 $ 2,447,310
============ ============ ==============
</TABLE>
14
<PAGE>
For the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Development Weighted Average Weighted Average Interest Expense
Property Total Debt Debt Outstanding Interest Rate Adjustment**
-------- ---------- ---------------- ------------- ------------
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 1995 and 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 during each of the periods presented. For the nine months
ended September 30, 1996, the interest expense adjustment is calculated
on 227 out of 366 days.
(22) Represents the issuance of 745,675 shares of United Dominion'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 each 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, 1995 and the nine months ended
September 30, 1996, based upon the weighted average balance of the
purchase price outstanding during 1995 and 1996, the weighted average
days the stock is assumed to have been outstanding is 215.79 (out of
365 days) and 175.92 (out of 227 days), respectively.
(23) 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 United Dominion on Form 8-K dated
October 31, 1996.
(24) 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 United Dominion 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 United Dominion 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).
(25) Reflects the net decrease in property management fees for Westland Park
and Steeplechase Apartments. United Dominion internally manages its
apartment properties at an assumed cost of approximately 2.5% of rental
income (based upon 1995 actual information). United Dominion 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.
(26) 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:
15
<PAGE>
For the twelve months ended December 31, 1995:
Twelve Months
Allocation of Useful Life Depreciation
Purchase Price In Years Adjustment
-------------- -------- ----------
Building $ 25,133,903 35 $ 718,112
Other Improvements 1,375,227 7.405319 185,707
Land 3,689,016 --
-------------- -----------
Total $ 30,198,146 $ 903,819
============== ===========
For the nine months ended September 30, 1996:
Nine Months
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 nine months ended September 30, 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. The twelve months ended
December 31, 1995 includes a pro forma adjustment for the full year.
(27) 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.
For the twelve months ended December 31, 1995:
Twelve Months
Interest Expense
Property Total Debt Interest Rate Adjustment**
-------- ---------- ------------- ------------
Westland Park $ 16,699,276 6.0296% $ 1,006,899
Steeplechase 13,498,870 5.9144% 798,376
------------ -----------
$ 30,198,146 $ 1,805,275
============ ===========
For the nine months ended September 30, 1996:
Nine Months
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, 1995, the interest expense
adjustment is for the full year.
*** For the nine months ended September 30, 1996, the interest expense
adjustment for Westland Park and Steeplechase Apartments is for 129 and
66 days, respectively (based on a 366 day year).
(28) Certain reclassifications have been made to South West's historical
statements of operations for the twelve months ended December 31, 1995
and the nine months ended September 30, 1996 to conform to United
Dominion's financial statement presentations.
(29) Represents adjustments to record the Merger in accordance with the
purchase method of accounting, based upon the estimated purchase price
of approximately $572 million, based on a market value of $14.125 per
share of United Dominion common stock, as follows (in thousands):
16
<PAGE>
<TABLE>
<S> <C>
Issuance of 22,805 shares of United Dominion common stock
based on the 1.0833 exchange ratio in exchange for
21,051 shares of South West
common stock* $ 322,110
Assumption of South West liabilities 234,709
Adjustment to record South West mortgages,
other notes payable and interest rate swap
agreement at fair value 2,016
Merger costs (See calculation below) 12,788
--------------------
$ 571,623
====================
</TABLE>
* 21,050,721 shares of South West common stock were outstanding on
December 31, 1996.
The following is a calculation of the estimated fees and other expenses
related to the Merger (in thousands):
<TABLE>
<S> <C>
Advisory fees $ 1,200
Legal and accounting fees 985
Termination, severance and relocations costs 1,887
Printing, filing fees and transfer costs 222
Payments of options and notes** 7,684
Due diligence 230
Other 580
----------------
$ 12,788
================
</TABLE>
** Represents payment for the purchase of unvested options and forgiveness
of notes to South West employees and directors.
(30) Estimated increase of $81.6 million in the book value of South West's
real estate assets based upon United Dominion's estimated purchase
price and the adjustment to eliminate South West's historical
accumulated depreciation of $79.6 million, as follows (in thousands):
<TABLE>
<S> <C>
Purchase price (See Note (29)) $ 571,623
Less basis of South West's assets assumed:
Real estate held for investment 397,682
Construction in progress 73,598
Cash and cash equivalents 9,333
Other assets (See Note (31)) 9,455
(490,068)
----------
Pro forma adjustment $ 81,555
==========
South West historical accumulated depreciation $ 79,632
Less basis assigned to accumulated depreciation ---
-----------
Pro forma adjustment $ 79,632
===========
Total pro forma adjustment to real estate held for investment $ 161,187
===========
</TABLE>
(31) To adjust the historical basis of South West's other assets to
eliminate deferred financing and similar costs in the aggregate amount
of approximately $6.0 million which will be eliminated in connection
with the Merger.
(32) To record the estimated $2,016,227 premium as of September 30, 1996
required to adjust South West fixed-rate mortgages, other notes payable
and an interest rate swap agreement to estimated fair value using
market quotations from investment banks. To record the
reclassification of $118,682,000 of notes payable-secured to notes
payable-unsecured. For purposes of this Form 8-K, it is assumed that
United Dominion would refinance $118,682,000 of South West's secured
notes payable which consists of the following amounts at September 30,
1996: (i) bank-line borrowings aggregating $56.6 million, (ii)
construction notes payable aggregating $53.7 million and (iii) two
mortgage notes payable aggregating $8.4 million with unsecured notes
payable.
17
<PAGE>
(33) Additional borrowings estimated at $13,115,000 of variable-rate bank
debt incurred by United Dominion to fund Merger costs estimated at
$12,788,000 (See note (29) and the estimated registration costs of
$327,000. (See Note (34)). To record the reclassification of
$118,682,000 of notes payable-secured to notes payable-unsecured. See
Note (32) above.
(34) To adjust South West's shareholders' equity to reflect the issuance of
22,804,246 (at an exchange ratio of 1.0833) shares of United Dominion
common stock based on a market value of $14.125 per share, in exchange
for all of the 21,050,721 outstanding shares of South West's common
stock and to record the estimated registration costs in connection with
the Merger of $327,000, as follows:
<TABLE>
<CAPTION>
<S> <C>
Notes Receivable
From Distributions
Common Paid-in Officer in Excess
Stock Capital Shareholders Of Earnings
(000's) (000's) (000's) (000's)
----- ------- ------------ -----------
Issuance of United Dominion
common stock $ 22,805 $ 299,306 $ --- $ ---
Registration costs incurred in
connection with the
Merger (327)
South West's historical shareholders'
equity (205) (236,240) 3,095 51,650
---------- ---------- -------- -----------
Pro forma adjustments $ 22,600 $ 62,739 $ 3,095 $ 51,650
========== ========== ======== ===========
</TABLE>
(35) Reflects the estimated net reduction of property management costs of
$493,032 and $346,013 for the twelve months ended December 31, 1995 and
the nine months ended September 30, 1996, respectively, 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:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Ended Ended
December 31, 1995 September 30, 1996
(000's) (000's)
----------------- -------------------
Net reduction in salary, benefits and occupancy costs $ 285 $ 230
Net reduction in travel, entertainment & other 57 51
Net reduction in other expenses 151 65
------- -------
Pro forma adjustment $ 493 $ 346
======= =======
</TABLE>
(36) Represents the estimated 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 26.3 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.
<TABLE>
<S> <C>
Calculation of fair value of depreciable real estate assets at September 30, 1996 (in thousands):
-------------------------------------------------------------------------------------------------
Purchase price (See Note (30)) $ 571,623
Less:
Purchase price allocated to cash and other assets (18,788)
Purchase price allocated to land (71,886)
Purchase price allocated to construction in progress** (73,598)
------------
Pro Forma basis of South West's depreciable real estate
held for investment at fair value assets $ 407,351
============
</TABLE>
** At September 30, 1996, South West had two apartment communities
containing 698 apartment homes and three additions to existing
properties which will total 392 apartment homes under construction. The
historical cost of construction in progress is assumed to be at fair
value.
18
<PAGE>
Calculation of depreciation of real estate owned for the twelve
months ended December 31, 1995 and the nine months ended September 30,
1996:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Ended Ended
December 31, 1995 September 30, 1996
(In 000's) (In 000's)
---------- ----------
Depreciation expense based upon an
estimated weighted average
useful life of approximately 26.3
years $ 14,163 $ 11,608
Less historical South West depreciation of real
estate owned (12,304) (9,952)
-------- ----------
Pro forma adjustment $ 1,859 $ 1,656
======== ==========
</TABLE>
(37) Represents the estimated net adjustment to interest expense, as follows:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Ended Ended
December 31, 1995 September 30, 1996
(In 000's) (In 000's)
----------------- ------------------
To adjust amortization of South West's deferred financing costs
which would be eliminated in connection with the Merger $ (965) $ (921)
To adjust the amortization of the premium required to adjust
South West's mortgages, other notes payable and an
interest rate swap agreement at fair value (440) (428)
To reflect the additional borrowings of $13.1 million of variable-rate
bank line borrowings used to fund the Merger costs (See Note
(34)) at current market interest rates available to
United Dominion of 6.03% 791 593
------------ -----------
Pro forma adjustment $ (614) $ (756)
============ ===========
</TABLE>
(38) Represents the estimated net reduction to general and administrative
costs of $1,039,471 and $722,046 for the twelve months ended December
31, 1995 and the nine months ended September 30, 1996, respectively,
based upon the identified historical costs of certain items which are
anticipated to be eliminated or reduced as a result of the Merger, as
follows:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Ended Ended
December 31, 1995 September 30, 1996
(In 000's) (In 000's)
----------------- ------------------
Net reduction in salary, benefits and occupancy costs $ 704 $ 471
Net reduction in duplication of public company
expenses 181 123
Net reduction in other expenses 154 128
-------- -----
$ 1,039 $ 722
======== =====
</TABLE>
19
<PAGE>
(39) The pro forma weighted average shares outstanding for the twelve
months ended December 31, 1995 and the nine months ended September 30,
1996 are computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Twelve Months Nine Months
Ended Ended
December 31, 1995 September 30, 1996
(In 000's) (In 000's)
---------- ----------
South West's historical weighted average common shares
outstanding 18,627 20,659
Plus: effect of South West vested stock options converted
upon Merger 211 211
Less: dilutive effect of South West stock options
To be eliminated in the Merger ( 92) (220)
------ ------
South West adjusted weighted average common shares
outstanding 18,746 20,650
====== ======
United Dominion Pro Forma weighted average
common shares outstanding 54,156 58,330
Issuance of United Dominion common stock at an
exchange ratio of 1.0833 for all of the South
West common stock in connection with
the Merger ** 20,308 22,370
------ ------
Pro Forma Shares 74,464 80,700
====== ======
</TABLE>
** Weighted average historical South West common shares
outstanding multiplied by the exchange ratio.
20
<PAGE>
<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: January 21, 1997 /s/ James Dolphin
------------------------------------
James Dolphin, Senior Vice President
Chief Financial Officer
Date: January 21, 1997 /s/ Jerry A. Davis
------------------------------------
Jerry A. Davis, Vice President
Corporate Controller
21
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Current Report on Form 8-K
to be filed on or about January 21, 1997, of United Dominion Realty Trust, Inc.
of our report dated January 30, 1996, with respect to the consolidated financial
statements and schedule of South West Property Trust Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
We also 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 30, 1996, with respect to the consolidated financial
statements and schedule of South West Property Trust Inc. for each of the three
years in the period ended December 31, 1995, incorporated by reference in this
Current Report on Form 8-K to be filed on or about January 21, 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
January 20, 1997
