Filed Pursuant Rule 424(b)(5)
File Number 333-27221
POSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 22, 1997)
$150,000,000
UNITED DOMINION REALTY TRUST, INC.
8 1/8% NOTES DUE 2000
---------------
INTEREST PAYABLE ON MAY 15 AND NOVEMBER 15
---------------
THE NOTES DUE 2000 WILL MATURE ON NOVEMBER 15, 2000 AND ARE NOT REDEEMABLE
BEFORE MATURITY.
THE NOTES DUE 2000 ARE UNSECURED AND RANK EQUALLY WITH ALL OF THE COMPANY'S
OTHER UNSECURED SENIOR INDEBTEDNESS. THE NOTES DUE 2000 WILL BE REPRESENTED BY
ONE OR MORE GLOBAL CERTIFICATES REGISTERED IN THE NAME OF A DEPOSITARY OR ITS
NOMINEE. EXCEPT IN LIMITED CIRCUMSTANCES, INVESTORS WILL NOT BE ENTITLED TO
RECEIVE CERTIFICATES REPRESENTING THE NOTES DUE 2000.
CONCURRENTLY WITH THE OFFERING OF THE NOTES DUE 2000, THE COMPANY IS OFFERING
$57,500,000 AGGREGATE PRINCIPAL AMOUNT OF ITS MONTHLY INCOME NOTES DUE 2008 IN
A PUBLIC OFFERING. THE OFFERING OF THE NOTES DUE 2000 IS NOT CONTINGENT UPON
THE CONSUMMATION OF THE OFFERING OF THE MONTHLY INCOME NOTES.
---------------
PRICE 99.919% AND ACCRUED INTEREST, IF ANY
---------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
---------------- --------------- ----------------
<S> <C> <C> <C>
PER NOTE DUE 2000 ......... 99.919% .250% 99.669%
TOTAL ..................... $149,878,500 $375,000 $149,503,500
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE UNDERWRITERS EXPECT TO DELIVER THE NOTES DUE 2000 TO PURCHASERS ON NOVEMBER
16, 1998.
---------------
MORGAN STANLEY DEAN WITTER
FIRST UNION CAPITAL MARKETS
NATIONSBANC MONTGOMERY SECURITIES LLC
NOVEMBER 10, 1998
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Forward-Looking Statements ............................................. S-2
The Company ............................................................ S-3
Recent Developments .................................................... S-3
Use of Proceeds ........................................................ S-6
Capitalization ......................................................... S-7
Selected Historical and Unaudited Pro Forma Consolidated Financial Data S-8
Description of the Offered Securities .................................. S-10
Underwriters ........................................................... S-12
Experts ................................................................ S-13
Legal Matters .......................................................... S-13
PROSPECTUS
Available Information .................................................. 2
Incorporation of Certain Documents by Reference ........................ 2
The Company ............................................................ 2
Use of Proceeds ........................................................ 4
Certain Ratios ......................................................... 4
Description of Debt Securities ......................................... 4
Description of Capital Stock ........................................... 15
Plan of Distribution ................................................... 19
Legal Opinions ......................................................... 20
Experts ................................................................ 20
</TABLE>
---------------
Prospective investors may rely only on the information contained or
incorporated by reference in this prospectus supplement or the accompanying
prospectus. Neither the Company nor any Underwriter has authorized anyone to
provide prospective investors with information different from that contained or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. Neither this prospectus supplement nor the accompanying prospectus
is an offer to sell or seeks an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. Neither delivery of this
prospectus supplement and the accompanying prospectus nor any sale of these
securities implies that the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus is correct as of
any time other than the date of this prospectus supplement, the accompanying
prospectus or the date of the document in which it was first presented, if
different.
---------------
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated or deemed to be incorporated by reference herein and therein
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements regarding the expected financial position, results of operations,
business and financing plans of the Company are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Important factors that could cause
actual results to differ materially from such expectations ("cautionary
statements") are disclosed in this prospectus supplement, the accompanying
prospectus and the documents incorporated or deemed to be incorporated herein
and therein by reference. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements.
S-2
<PAGE>
THE COMPANY
United Dominion Realty Trust, Inc., a Virginia corporation (collectively
with its subsidiaries, the "Company"), is a self-administered equity real
estate investment trust ("REIT") formed in 1972 whose business is devoted to
one industry segment, the ownership and operation of apartment communities
throughout the United States.
The Company is a fully integrated real estate company with acquisition,
development and asset and property management capabilities. The Company
acquires, repositions, develops, manages and selectively sells apartment homes
for its own portfolio throughout United States with the goals of growing funds
from operations and quarterly distributions to shareholders, while building
equity primarily through real estate appreciation. The Company's strategy is to
position the Company as a national low cost provider of "B" and "A" quality
apartment homes in 40 or more markets nationwide.
On October 23, 1995, the Company organized United Dominion Realty, L.P.
(the "Partnership") under the Virginia Revised Uniform Limited Partnership Act,
as amended. The Company is the sole General Partner of the Partnership and
currently with its wholly owned subsidiaries holds an 84.2% interest therein.
The remaining 15.8% interest in the Partnership is held by outside parties. The
Partnership is intended to assist the Company in competing for the acquisition
of properties that meet the Company's investment strategies from seller
partnerships, some or all of whose partners may wish to defer taxation of gain
realized on sale through an exchange of partnership interests.
The Company operates as a REIT under the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify, the Company
must meet certain tests which, among other things, require that (i) its assets
consist primarily of real estate, (ii) its income be derived primarily from
real estate and (iii) at least 95% of its taxable income be distributed to its
common shareholders. Because the Company qualifies as a REIT, it is generally
not subject to federal income taxes.
The Company, a Virginia corporation, has its principal office at 10 South
6th Street, Richmond, Virginia, 23219, and its telephone number is (804)
780-2691.
RECENT DEVELOPMENTS
MERGERS
ASR MERGER. Effective as of the close of business on March 27, 1998, the
Company completed the merger (the "ASR Merger") of ASR Investments Corporation
("ASR"), a publicly traded, Tucson-based, multifamily REIT that owned and
operated 39 communities with 7,550 apartment homes. Pursuant to the ASR Merger
agreement, each share of ASR's common stock was exchanged for 1.575 shares of
the Company's Common Stock. The ASR Merger was structured as a tax-free
transaction and was treated as a purchase for accounting purposes. In
connection with the ASR Merger, the Company acquired real estate assets
totaling $313.7 million and non-real estate assets totaling $9.1 million.
Consideration given by the Company included 7,742,839 shares of Common Stock
valued at $14 per share for an aggregate equity value of $108.4 million, plus
the assumption of 1,529,990 operating partnership units valued at $21.4
million. In addition, the Company assumed, at fair market value, mortgage debt
totaling $179.4 million and other liabilities of $13.6 million.
AAC MERGER. On September 11, 1998, the Company announced an agreement to
acquire American Apartment Communities II, Inc. ("AAC"), a San Francisco-based
private REIT, from a fund managed by Lazard Freres Real Estate Investors LLC
and other investors (the "AAC Merger"). The proposed AAC Merger will include 54
properties with 14,141 apartment homes, and, if consummated, will allow the
Company to enter growing markets in California, improve economies of scale by
increasing the number of its apartment homes in the Seattle, Columbus, Tampa
and South Florida markets, and position itself in Oregon, Colorado, Michigan
and Indiana. The proposed AAC Merger has been structured as a tax-free merger
and exchange of partnership units and will be treated as a purchase for
accounting purposes. In connection with the proposed AAC Merger, the Company
will acquire primarily real estate assets. The aggregate purchase price will
consist of the following: (i) 8,000,000 shares of the Company's 7.5% Series D
Convertible Preferred Stock ($25 liquidation preference value) which is
convertible into the Company's Common Stock at $16.25 per share with a fair
market value of $175 million, (ii) the issuance of 5,614,035 units of limited
partnership interest in the Partnership with an aggregate fair market value of
$67.4 million, (iii) the assumption of $466.2 million of secured notes payable
at fair market value, (iv) the assumption of other liabilities aggregating
$24.7 million and (v) $56.5 million of cash. The aggregate purchase price in
the proposed AAC Merger is estimated at approximately $806.0 million, including
transaction costs. With the acquisition, the Company will own approximately
86,000 completed apartments and operate nationally in 35 major U.S. markets.
S-3
<PAGE>
All due diligence has been completed, and AAC's and the Company's Boards
of Directors and other interested parties have approved the transaction.
Company shareholder approval is not required. The transaction is expected to
close in the fourth quarter of 1998; there is some risk, however, that the
proposed AAC Merger will not be consummated.
OTHER ACQUISITIONS. In addition to the ASR Merger, the Company has
acquired 24 communities with 6,959 apartment homes at a total cost (including
closing costs) of $314.8 million, or $45,200 per home, since January 1, 1998.
REAL ESTATE UNDER DEVELOPMENT
At September 30, 1998, the Company had seven communities (2,042 apartment
homes) under development and two additions (276 apartment homes) to existing
communities under development, of which 349 apartment homes were completed.
DISPOSITION OF INVESTMENTS
Since January 1, 1998, the Company has sold 17 apartment communities
containing 4,948 apartment homes and one shopping center at an aggregate sales
price of $144.7 million.
FINANCING ACTIVITIES
During the first quarter of 1998, the Company entered into two separate
transactions to sell its Common Stock to unit investment trusts ("UITs"). In
February 1998, the Company issued 1.7 million shares of its Common Stock at a
gross sales price of $14.31 per share to a UIT. In March 1998, the Company
issued 1.1 million shares of its Common Stock at a gross sales price of $14.19
per share to a second UIT. The net proceeds from the two UIT transactions
aggregated $38.0 million and were primarily used to repay bank debt.
Since January 1, 1998, the Company has issued 2,455,558 shares of its
Common Stock and received $32.8 million under its Dividend Reinvestment and
Stock Purchase Plan, which included $23.2 million in optional cash investments
and $9.6 million of reinvested distributions.
During the fourth quarter of 1998, the Company settled on a $100 million
(notional amount) fixed pay forward starting swap agreement (the "Interest Rate
Risk Management Agreement") by paying $15.6 million to the counterparty. The
Company originally entered into the Interest Rate Risk Management Agreement in
order to hedge the interest rate risk associated with the anticipated issuance
of unsecured notes during 1998. The Company was unable to issue the unsecured
notes contemplated at the time of execution of the Interest Rate Risk
Management Agreement, and accordingly, the cost associated with the settlement
of this agreement will be expensed during the fourth quarter of 1998, which
will adversely affect the Company's results of operations for that period.
CONCURRENT OFFERING
Concurrently with the offering of the 8 1/8% Notes due 2000 (the "Notes
due 2000" or the "Offered Securities"), the Company is publicly offering $57.5
million aggregate principal amount of its 8 1/2% Monthly Income Notes due 2008
(the "Monthly Income Notes"), plus up to an additional $5 million aggregate
principal amount of Monthly Income Notes which the underwriters thereof have
the right to purchase to cover over-allotments. Unless otherwise expressly
stated, the information in this prospectus supplement assumes that $57.5
million of Monthly Income Notes are issued and the over-allotment option is not
exercised. The offering of the Offered Securities is not contingent upon the
consummation of the offering of the Monthly Income Notes. There can be no
assurance that the offering of the Monthly Income Notes will be consummated, in
which case the Company may be required to seek additional sources of financing
or extensions in the maturities of its existing financing.
LIQUIDITY
The Company has a $200 million three-year unsecured revolving credit
facility which matures August 4, 2000 and a $50 million one-year revolving line
of credit facility which matures August 4, 1999. In addition to these credit
facilities, a $15 million uncommited unsecured line of credit is available to
the Company until June 30, 1999. As of October 29, 1998 the Company's aggregate
borrowings under these three credit facilities (the "Credit Facilities") were
$235 million at a weighted average interest rate of 5.73%.
The Company also has outstanding $75 million aggregate principal amount of
promissory notes (the "Promissory Notes") payable to certain banks. The
Promissory Notes are dated September 30, 1998 and mature November 30, 1998. The
Promissory Notes had a weighted average interest rate of 5.91% as of October
29, 1998. See "Capitalization" and note (e)
S-4
<PAGE>
to "Selected Historical and Unaudited Pro Forma Consolidated Financial Data"
for further information regarding the Company's capitalization and scheduled
maturities of indebtedness.
On November 9, 1998, the Company received verbal assurance from one of its
major lending banks of revised terms of certain credit facilities, including
the extension, at the Company's discretion, of the maturity of the $75 million
Promissory Notes from November 30, 1998 to November 30, 1999 and that an
additional $50 million one-year revolving line of credit facility would be made
available to the Company. In addition, the bank also provided verbal assurance
that, if the AAC Merger is consummated, AAC's secured lines of credit totaling
$100 million would be extended, at the Company's discretion, for 12 months. The
foregoing changes will not be effective until the Company and its lending bank
enter into definitive agreements and, accordingly, there can be no assurance
that these revised and additional credit facilities will become effective
(which could adversely affect the Company's liquidity) or, if they become
effective, that their terms will not differ from those set forth above. If
these revised and additional credit facilities do not become effective, the
Company may be required to seek additional sources of external capital.
The Company relies on the Credit Facilities to supplement its operating
cash flows in order to fund its ongoing capital requirements. The Company
intends to use the net proceeds from the offering of the Offered Securities
and, if consummated, the offering of the Monthly Income Notes to reduce its
borrowings under the Credit Facilities. See "Use of Proceeds". Immediately
after giving effect to the issuance of the Offered Securities and the Monthly
Income Notes and the application of the estimated net proceeds therefrom to
repay such indebtedness, on a pro forma basis, the Company would have had
approximately $215 million of borrowing capacity available under the Credit
Facilities. The Company believes its liquidity will be adequate to satisfy its
operating cash requirements. Subsequent to the issuance of the Offered
Securities and the Monthly Income Notes, the Company believes that it will have
the resources necessary to satisfy its debt service requirements through April
1999, including the repayment of $75 million of promissory notes due in April
1999. The Company must distribute a significant portion of its taxable income
to its shareholders to continue to qualify as a REIT and therefore expects to
seek additional financing to satisfy balloon payments under its debt
instruments as they come due. See note (e) under "Selected Historical and
Unaudited Pro Forma Consolidated Financial Data."
THIRD QUARTER RESULTS
On October 23, 1998, the Company issued a press release announcing its
results of operations for the three and nine months ended September 30, 1998.
The information contained in that press release was filed by the Company with
the Securities and Exchange Commission under a Form 8-K dated October 28, 1998
and may be obtained as described in the accompanying prospectus under the
caption "Available Information". Prospective investors should review such Form
8-K for information regarding the Company's results of operations and financial
condition as of and for the three and nine months ended September 30, 1998.
Such Form 8-K is incorporated by reference in the accompanying prospectus and
the historical and pro forma financial information contained in this prospectus
supplement should be read in conjunction with, and is qualified in its entirety
by reference to, the information and financial statements appearing in such
Form 8-K.
S-5
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering of the Notes due 2000
are estimated to be approximately $149.4 million, after deducting underwriting
discounts and commissions and other estimated offering expenses payable by the
Company. The net proceeds to the Company from the offering of the Monthly
Income Notes are estimated to be approximately $55.4 million after deducting
underwriting discounts and commissions and other estimated offering expenses
payable by the Company. However, the offering of the Notes due 2000 is not
contingent upon the consummation of the offering of the Monthly Income Notes.
See "Recent Developments -- Concurrent Offering". The Company intends to use
the net proceeds from the offering of the Notes due 2000 and, if consummated,
the offering of the Monthly Income Notes to repay a portion of the borrowings
outstanding under its Credit Facilities (see "Recent Developments --
Liquidity"). The Company may subsequently draw on its Credit Facilities and, if
and when entered into, the additional $50 million one-year revolving line of
credit facility to be provided by a major bank (see "Recent Developments --
Liquidity") to fund consummation of the AAC Merger and to repay other bank
debt.
Pending application for the foregoing purposes, the Company may invest the
net proceeds in short-term investments.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth (i) the historical consolidated
capitalization of the Company at June 30, 1998, (ii) the pro forma consolidated
capitalization of the Company at such date after giving pro forma effect to the
proposed AAC Merger as if such transaction had been consummated as of June 30,
1998, and (iii) on such pro forma basis and as further adjusted to give effect
to the issuance of $150 million of Offered Securities, the issuance of $57.5
million of Monthly Income Notes and the application of the estimated net
proceeds therefrom of approximately $204.9 million (after deducting offering
expenses estimated at approximately $120,000 and underwriting discounts and
commissions) as described above under "Use of Proceeds". The offering of the
Offered Securities is not contingent upon the consummation of the offering of
the Monthly Income Notes. See "Recent Developments -- Concurrent Offering". The
table should be read in conjunction with, and is qualified in its entirety by
reference to, the historical and pro forma consolidated financial statements
incorporated by reference in the accompanying prospectus. The pro forma
information is subject to a number of estimates, assumptions and other
uncertainties and does not purport to be indicative of the actual
capitalization that would have existed had the proposed AAC Merger in fact
occurred on June 30, 1998, or to be indicative of the Company's capitalization
as of any future date.
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
-------------- ------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
DEBT:
Notes payable - secured ................................ $ 623,248 $1,089,401 $1,089,401
Notes due 2000 ......................................... -- -- 150,000
Monthly Income Notes due 2008 .......................... -- -- 57,500
7.25% Notes due April 1999 ............................. 75,000 75,000 75,000
7.25% Notes due January 2007 ........................... 125,000 125,000 125,000
8.50% Debentures due September 2025 .................... 150,000 150,000 150,000
7.95% Medium Term Notes due July 2006 .................. 125,000 125,000 125,000
7.07% Medium Term Notes due November 2006 .............. 25,000 25,000 25,000
7.02% Medium Term Notes due November 2005 .............. 50,000 50,000 50,000
Notes payable - unsecured .............................. 277,881 350,637 145,766
---------- ---------- ----------
Total debt ........................................... 1,451,129 1,990,038 1,992,667
---------- ---------- ----------
MINORITY INTEREST ....................................... 51,675 124,797 124,797
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; $25 liquidation
preference, 25,000,000 shares authorized:
4,200,000 shares 9.25% Series A Cumulative
Redeemable ......................................... 105,000 105,000 105,000
6,000,000 shares 8.60% Series B Cumulative
Redeemable ......................................... 150,000 150,000 150,000
8,000,000 shares 7.50% Series D Convertible ......... -- 200,000 200,000
Common stock, $1 par value; 150,000,000 shares
authorized, 101,988,375 shares issued and
outstanding .......................................... 101,988 101,988 101,988
Additional paid-in capital ............................. 1,070,440 1,045,440 1,045,440
Notes receivable from officer shareholders ............. (8,333) (8,333) (8,333)
Distributions in excess of net income .................. (195,651) (195,651) (195,651)
---------- ---------- ----------
Total shareholders' equity ........................... 1,223,444 1,398,444 1,398,444
---------- ---------- ----------
Total capitalization ................................ $2,726,248 $3,513,279 $3,515,908
========== ========== ==========
</TABLE>
S-7
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data for the Company and unaudited pro forma consolidated financial data for
the Company and AAC as a combined entity, giving effect to the proposed AAC
Merger and certain other transactions described below as if such transactions
had all occurred on January 1, 1997. The unaudited pro forma consolidated
operating and other data and fixed charge ratios are presented as if the
proposed AAC Merger had been consummated on January 1, 1997 and as if the
following acquisitions by the Company had occurred on January 1, 1997: (i) 39
apartment communities with 7,550 apartment homes owned by ASR, which merged
with a wholly-owned subsidiary of the Company on March 27, 1998, (ii) the 1998
acquisitions of 13 communities containing 4,318 apartment homes for an
aggregate purchase price of approximately $144.0 million, including closing
costs and (iii) the 1997 acquisition of 17 communities containing 5,394
apartment homes for an aggregate purchase price of approximately $218.5
million, including closing costs. The unaudited pro forma consolidated balance
sheet and apartment homes owned data assumes the proposed AAC Merger and all
such other transactions had been consummated as of the end of the respective
periods. In the opinion of management, all adjustments necessary to reflect the
effects of these transactions have been made. The proposed AAC Merger has been
accounted for under the purchase method of accounting in accordance with
Accounting Standards Board Opinion No. 16, and the pro forma data assumes that
the combined entity qualified as a REIT, distributed at least 95% of its
taxable income, and therefore, incurred no federal income tax liability for the
periods presented. The unaudited pro forma financial information should be read
in conjunction with, and is qualified in its entirety by, the historical and
pro forma financial statements and notes thereto incorporated by reference into
the accompanying prospectus. The pro forma information is subject to a number
of estimates, assumptions and other uncertainties and does not purport to be
indicative of the actual results of operations or financial position that would
have been achieved or existed had these transactions in fact occurred on the
dates indicated above, or to be indicative of the Company's results of
operations or financial position as of any future date.
The following selected historical financial data as of and for the five
years ended December 31, 1997 is derived from the Company's audited financial
statements. The following selected historical financial data as of and for the
six months ended June 30, 1997 and June 30, 1998 is unaudited but, in the
opinion of management, contains all adjustments necessary for a fair
presentation of such information. Historical financial data as of and for the
six months ended June 30, 1998 does not purport to be indicative of results of
operations or financial position to be expected as of and for the year ending
December 31, 1998.
S-8
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996
------------- -------------- -------------- --------------
IN THOUSANDS, EXCEPT PER SHARE DATA, FIXED
CHARGE RATIOS AND APARTMENT HOMES OWNED
<S> <C> <C> <C> <C>
OPERATING DATA
Rental income $ 88,664 $ 139,380 $ 194,511 $ 241,260
Income before gains (losses) on sales of
investments, minority interest of unitholders
in operating partnership and extraordinary
item 11,286 19,118 28,037 33,726
Gains (losses) on sales of investments (89) 108 5,090 4,346
Extraordinary item - early extinguishment of
debt -- (89) -- (23)
Net income 11,197 19,137 33,127 37,991
Dividends to preferred shareholders -- -- 6,637 9,713
Net income available to common shareholders 11,197 19,137 26,490 28,278
Common distributions declared 27,988 37,539 48,610 55,493
Weighted average number of common shares
outstanding - basic (a) 38,202 46,182 52,781 57,482
Weighted average number of common shares
outstanding - diluted (a) 38,462 46,391 52,972 57,655
Per share: (a)
Basic earnings per share $ .29 $ .41 $ .50 $ .49
Diluted earnings per share .29 .41 .50 .49
Common distributions declared .70 .78 .90 .96
BALANCE SHEET DATA (END OF PERIOD)
Real estate held for investment $ 582,213 $1,007,599 $1,131,098 $2,007,612
Real estate under development -- -- -- 37,855
Real estate held for disposition -- -- 51,015 39,556
Total real estate owned 582,213 1,007,599 1,182,113 2,085,023
Accumulated depreciation 91,444 120,341 129,454 173,291
Total assets 505,840 911,913 1,080,616 1,966,904
Notes payable - secured 72,862 158,449 180,481 376,560
Notes payable - unsecured 156,558 368,215 349,858 668,275
Total debt 229,420 526,664 530,339 1,044,835
Shareholders' equity 259,963 356,968 516,389 850,379
Number of common shares outstanding 41,653 50,356 56,375 81,983
OTHER DATA
CASH FLOW DATA
Cash provided by operating activities $ 33,939 $ 54,544 $ 66,428 $ 90,064
Cash used in investing activities (130,064) (359,631) (183,930) (161,572)
Cash provided by financing activities 100,793 306,575 113,145 82,056
FUNDS FROM OPERATIONS (B)
Income before gains (losses) on sales of
investments, minority interest of
unitholders in operating partnership and
extraordinary item $ 11,286 $ 19,118 $ 28,037 $ 33,726
Adjustments:
Real estate depreciation 19,516 28,729 38,939 47,410
Non-recurring items:
Impairment loss on real estate owned -- -- 1,700 290
Prior years' employment and other taxes -- -- 395 --
Adoption of SFAS No. 112 "Employers'
Accounting for Post-employment
Benefits" -- 450 -- --
Dividends to preferred shareholders -- -- (6,637) (9,713)
----------- ---------- ---------- ----------
Funds from operations $ 30,802 $ 48,297 $ 62,434 $ 71,713
=========== ========== ========== ==========
FIXED CHARGE RATIOS (D)
Ratio of earnings to fixed charges 1.64 x 1.69 x 1.81 x 1.73 x
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.64 x 1.69 x 1.56 x 1.45 x
APARTMENT HOMES OWNED
Total apartment homes owned (end of period) 17,914 29,282 34,224 55,664
Weighted average number of apartment
homes owned 15,445 23,160 31,242 37,481
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- --------------------------------------
PRO FORMA PRO FORMA
1997 1997 (C) 1997 1998 1998
-------------- ------------- -------------- -------------- ------------------
IN THOUSANDS, EXCEPT PER SHARE DATA, FIXED
CHARGE RATIOS AND APARTMENT HOMES OWNED
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Rental income $ 386,672 $ 567,185 $ 185,312 $ 222,275 $ 291,883
Income before gains (losses) on sales of
investments, minority interest of unitholders
in operating partnership and extraordinary
item 57,813 59,812 28,475 32,966 36,169
Gains (losses) on sales of investments 12,664 13,138 3,374 20,461 20,461
Extraordinary item - early extinguishment of
debt (50) (50) -- (116) (116)
Net income 70,149 69,561 31,790 52,189 53,328
Dividends to preferred shareholders 17,345 32,345 6,039 11,303 18,803
Net income available to common shareholders 52,804 37,216 25,751 40,886 34,525
Common distributions declared 88,587 88,387 43,818 53,225 53,347
Weighted average number of common shares
outstanding - basic (a) 87,145 95,485 85,967 96,244 100,205
Weighted average number of common shares
outstanding - diluted (a) 87,339 103,977 86,157 98,666 109,593
Per share: (a)
Basic earnings per share $ .61 $ .39 $ .30 $ .42 $ .34
Diluted earnings per share .60 .39 .30 .42 .34
Common distributions declared 1.01 1.01 .51 .53 .53
BALANCE SHEET DATA (END OF PERIOD)
Real estate held for investment $2,281,438 $2,135,654 $2,813,957 $ 3,592,012
Real estate under development 24,598 62,716 43,811 43,811
Real estate held for disposition 166,501 85,431 104,864 104,864
Total real estate owned 2,472,537 2,283,801 2,962,632 3,470,687
Accumulated depreciation 200,506 181,662 242,803 242,803
Total assets 2,313,725 2,143,655 2,829,200 3,635,222
Notes payable - secured 417,325 389,106 623,248 1,089,401
Notes payable - unsecured 738,901 626,242 827,881 900,637
Total debt 1,156,226 1,015,348 1,451,129 1,990,038(e)
Shareholders' equity 1,058,357 1,049,738 1,223,444 1,398,444
Number of common shares outstanding 89,168 87,275 101,988 101,988
OTHER DATA
CASH FLOW DATA
Cash provided by operating activities $ 137,903 $ 165,004 $ 63,320 $ 79,830 $ 70,836
Cash used in investing activities (345,666) (505,534) (190,673) (119,998) (124,434)
Cash provided by financing activities 194,784 370,116 122,197 51,270 109,241
FUNDS FROM OPERATIONS (B)
Income before gains (losses) on sales of
investments, minority interest of
unitholders in operating partnership and
extraordinary item $ 57,813 $ 59,812 $ 28,475 $ 32,966 $ 36,169
Adjustments:
Real estate depreciation 76,688 113,094 35,289 46,476 61,504
Non-recurring items:
Impairment loss on real estate owned 1,400 1,400 -- -- --
Prior years' employment and other taxes -- -- -- -- --
Adoption of SFAS No. 112 "Employers'
Accounting for Post-employment
Benefits" -- -- -- -- --
Dividends to preferred shareholders (17,345) (32,345) (6,039) (11,303) (18,803)
---------- ----------- ---------- ---------- -------------
Funds from operations $ 118,556 $ 141,961 $ 57,725 $ 68,139 $ 78,870
========== =========== ========== ========== =============
FIXED CHARGE RATIOS (D)
Ratio of earnings to fixed charges 1.82 x 1.46 x 1.76 x 2.02 x 1.83 x
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.51 x 1.19 x 1.53 x 1.65 x 1.41 x
APARTMENT HOMES OWNED
Total apartment homes owned (end of period) 62,789 88,798 59,437 71,164 85,305
Weighted average number of apartment
homes owned 58,038 87,864 57,545 63,341 83,050
</TABLE>
Footnotes appear on the following page.
S-9
<PAGE>
(a) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128,
"Earning per Share". For further discussion of earnings per share and the
impact of Statement No. 128, see the notes to the consolidated financial
statements incorporated by reference in the accompanying prospectus.
(b) Funds from operations ("FFO") is defined as income before gains (losses) on
sales of investments, minority interest of unitholders in operating
partnership and extraordinary item (computed in accordance with generally
accepted accounting principles) plus real estate depreciation, less
preferred dividends and after adjustment for significant non-recurring
items, if any. This definition conforms to the recommendations set forth
in a White Paper adopted by the National Association of Real Estate
Investment Trusts ("NAREIT") in early 1995. FFO for years prior to 1995
has been adjusted to conform to the NAREIT definition. The Company
considers FFO in evaluating property acquisitions.
(c) The pro forma 1997 operating and other data and fixed charge ratios reflect
$6.7 million of non-recurring acquisition related expenses of ASR
Investments Corporation.
(d) These ratios have been computed as indicated in the following table. The
pro forma ratios do not give effect to the issuance of the Offered
Securities and the Monthly Income Notes or the application of the net
proceeds thereof:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1993 1994 1995 1996 1997 1997
---------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income before extraordinary item $11,197 $19,226 $33,127 $38,014 $ 70,199 $ 69,611
Add:
Portion of rents representative of the interest
factor 143 177 201 257 412 591
Interest on indebtedness 17,237 28,521 40,646 50,843 79,004 139,603
Adoption of SFAS No. 112 "Employers'
Accounting for Post-employment Benefits" -- 450 -- -- -- --
------- ------- ------- ------- -------- --------
Earnings $28,577 $48,374 $73,974 $89,114 $149,615 $209,805
======= ======= ======= ======= ======== ========
Fixed charges and preferred stock dividend:
Interest on indebtedness $17,237 $28,521 $40,646 $50,843 $ 79,004 $139,603
Capitalized interest -- -- 40 541 2,634 3,209
Portion of rents representative of the interest
factor 143 177 201 257 412 591
------- ------- ------- ------- -------- --------
Fixed charges 17,380 28,698 40,887 51,641 82,050 143,403
------- ------- ------- ------- -------- --------
Add:
Preferred stock dividend -- -- 6,637 9,713 17,345 32,345
------- ------- ------- ------- -------- --------
Combined fixed charges and preferred stock
dividend $17,380 $28,698 $47,524 $61,354 $ 99,395 $175,748
======= ======= ======= ======= ======== ========
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
PRO FORMA
1997 1998 1998
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income before extraordinary item $31,790 $ 52,305 $ 53,444
Add:
Portion of rents representative of the interest
factor 194 246 303
Interest on indebtedness 38,919 48,561 61,504
Adoption of SFAS No. 112 "Employers'
Accounting for Post-employment Benefits" -- -- --
------- -------- --------
Earnings $70,903 $101,112 $115,251
======= ======== ========
Fixed charges and preferred stock dividend:
Interest on indebtedness $38,919 $ 48,561 $ 61,504
Capitalized interest 1,230 1,312 1,312
Portion of rents representative of the interest
factor 194 246 303
------- -------- --------
Fixed charges 40,343 50,119 63,119
------- -------- --------
Add:
Preferred stock dividend 6,039 11,303 18,803
------- -------- --------
Combined fixed charges and preferred stock
dividend $46,382 $ 61,422 $ 81,922
======= ======== ========
</TABLE>
(e) Scheduled maturities of the Company's pro forma debt as of the date of this
prospectus supplement after giving effect to the proposed AAC merger and
prior to the offering of the Offered Securities and the Monthly Income
Notes are as follows:
<TABLE>
<S> <C>
1999......... $192,854,777
2000......... $107,259,984
2001......... $ 98,478,339
2002......... $ 73,410,139
2003......... $ 99,027,989
2004......... $121,582,340
2005......... $ 81,508,437
2006......... $181,322,884
2007......... $137,328,417
2008......... $ 7,112,838
</TABLE>
Note: the above schedule does not include the Credit Facilities.
DESCRIPTION OF THE OFFERED SECURITIES
The Offered Securities are a separate series of "Debt Securities" as
defined in the accompanying prospectus. The following description of the
particular terms and provisions applicable to the Offered Securities offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities set forth in
the prospectus, to which description reference is hereby made. The statements
relating to the Offered Securities and the Senior Indenture are summaries of
certain provisions contained therein and do not purport to be complete. Such
statements are qualified by reference to the provisions of the Offered
Securities and the Senior Indenture, including the definitions therein of
certain terms. The Senior Indenture and the form of certificate evidencing the
Offered Securities have been or will be filed or incorporated by reference as
exhibits to the registration statement of which the accompanying prospectus is
a part. Unless otherwise expressly stated or the context otherwise requires,
all references to the "Company" under this caption "Description of the Offered
Securities" and under the caption "Description of Debt Securities" in the
accompanying prospectus mean United Dominion Realty Trust, Inc. excluding its
subsidiaries. Capitalized terms used but undefined herein shall have the
meanings given such terms in the prospectus.
S-10
<PAGE>
GENERAL
The Offered Securities will constitute a separate series of Debt
Securities under the Senior Indenture, initally limited to $150 million
aggregate principal amount. The Offered Securities will be issued only in fully
registered form without coupons, in denominations of $1,000 and in integral
multiples thereof. The Offered Securities will be represented by one or more
permanent Global Securities in book-entry form, except under the limited
circumstance described in the accompanying prospectus under "Description of
Debt Securities -- Book-Entry System". The Global Securities will be registered
in the name of a nominee of The Depository Trust Company, as Depository for the
Offered Securities. See "Description of Debt Securities -- Book-Entry System"
in the accompanying prospectus.
The Offered Securities will not be entitled to the benefit of any sinking
fund and will not be subject to repurchase by the Company at the option of the
holders or to redemption at the option of the Company.
The Offered Securities will be subject to defeasance and covenant
defeasance as described under "Description of Debt Securities -- Discharge,
Defeasance and Covenant Defeasance" in the accompanying prospectus.
Notices and demands to or upon the Company in respect of the Offered
Securities and the Senior Indenture may be served and, in the event that the
Offered Securities are issued in definitive certificated form, the Offered
Securities may be surrendered for payment, registration of transfer or
exchange, at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York (which will initially be the
office of the Senior Indenture Trustee which on the date hereof is located at
40 Broad Street, Suite 55, New York, New York 10004) and in Charlotte, North
Carolina (which will initially be the Corporate Trust Operations Office of the
Senior Indenture Trustee which on the date hereof is located at 1525 West W.T.
Harris Boulevard 3C3, Charlotte, North Carolina 28262-1153).
The Senior Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder. The Senior Indenture and the Offered
Securities will be governed by the laws of the Commonwealth of Virginia.
RANKING; HOLDING COMPANY STRUCTURE
The Offered Securities will be unsecured and unsubordinated obligations of
the Company and will rank on a parity in priority of payment with all other
unsecured and unsubordinated indebtedness of the Company. The Offered
Securities will be effectively subordinated to any secured and unsubordinated
indebtedness of the Company to the extent of the collateral pledged as security
therefor.
The Offered Securities will be obligations exclusively of the Company.
Although a significant portion of the Company's consolidated assets is held by
the Company directly, substantially more than a majority of the Company's
consolidated assets is held by its subsidiaries and the proportion of the
Company's consolidated assets held by its subsidiaries will increase
substantially if the proposed AAC Merger is consummated. See "Recent
Developments". Accordingly, the cash flow of the Company and the consequent
ability to service its debt, including the Offered Securities, is in large part
dependent upon the results of operations of its subsidiaries and upon the
ability of its subsidiaries to provide cash (whether in the form of dividends,
loans or otherwise) to pay amounts due in respect of the Company's obligations,
including the Offered Securities. The Company's subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due on the Offered Securities or to make any funds available
therefor. In addition, dividends, loans and other distributions from its
subsidiaries to the Company are subject to contractual and other restrictions,
are contingent upon results of operations of such subsidiaries and are subject
to various business considerations.
The Offered Securities will be effectively subordinated to all existing
and future liabilities (including indebtedness, guarantees, trade payables,
lease obligations and letter of credit obligations) of the Company's
subsidiaries. Therefore, the Company's rights and the rights of its creditors,
including the holders of the Offered Securities, to participate in the assets
of any subsidiary upon the latter's liquidation or reorganization will be
subject to the prior claims of such subsidiary's creditors, except to the
extent that the Company may itself be a creditor with recognized claims against
such subsidiary, in which case the claims of the Company would still be
effectively subordinated to any security interest in, or mortgages or other
liens on, the assets of such subsidiary and would be subordinated to any
indebtedness of such subsidiary senior to that held by the Company. In
addition, subsidiaries of the Company owning directly or indirectly a
significant portion of the Company's consolidated assets have guaranteed
borrowings outstanding under the Company's $200 million and $50 million Credit
Facilities. See "Recent Developments -- Liquidity". As of October 29, 1998,
borrowings of $235 million were outstanding under such Credit Facilities. In
addition, under certain circumstances, one or more of the Company's other
subsidiaries may be required to guarantee borrowings under such Credit
Facilities. Although the Senior Indenture and certain
S-11
<PAGE>
instruments and agreements to which the Company and its subsidiaries are
parties or by which they are bound impose limitations on the incurrence of
additional indebtedness, both the Company and its subsidiaries retain the
ability to incur substantial indebtedness and other liabilities.
INTEREST RATE, INTEREST PAYMENT DATES AND MATURITY
The Offered Securities will mature on November 15, 2000. The Offered
Securities will bear interest at the rate of 8 1/8% per annum. Interest on the
Offered Securities will accrue from and including November 16, 1998 or from the
most recent date to which interest has been paid or duly provided for. Interest
on the Offered Securities will be payable semiannually in arrears on May 15 and
November 15 (each, an "Interest Payment Date") of each year, commencing May 15,
1999, to the persons in whose names such Offered Securities are registered at
the close of business on May 1 and November 1 (each, a "Regular Record Date"),
as the case may be, next preceding such Interest Payment Date. Interest on the
Offered Securities will be computed on the basis of a 360-day year of twelve
30-day months.
If any Interest Payment Date or maturity date for the Offered Securities
is not a Business Day, then payment of principal and interest need not be made
on such date but may be made on the next succeeding Business Day, and no
interest will accrue on the amounts so payable for the period from and after
such Interest Payment Date or maturity date.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of Offered Securities set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME OFFERED SECURITIES
- -------------------------------------------------- --------------------
<S> <C>
Morgan Stanley & Co. Incorporated ............. $ 97,500,000
First Union Capital Markets, a division of
Wheat First Securities, Inc. ................. 26,250,000
NationsBanc Montgomery Securities LLC ......... 26,250,000
------------
Total .................................. $150,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Offered Securities are
subject to the approval of certain legal matters by their counsel and to
certain other conditions. The Underwriters are obligated to take and pay for
all of the Offered Securities if any are taken.
The Underwriters initially propose to offer part of the Offered Securities
directly to the public at the public offering price set forth on the cover page
of this prospectus supplement and part to certain dealers at a price that
represents a concession not in excess of .20% of the principal amount of the
Offered Securities. Any Underwriter may allow, and any such dealer may reallow,
a discount not in excess of .10% of the principal amount of the Offered
Securities to certain other dealers. After the initial offering of the Offered
Securities, the offering price and other selling terms may from time to time be
changed by the Underwriters.
The Company does not intend to apply for listing of the Offered Securities
on a national securities exchange, but has been advised by the Underwriters
that they presently intend to make a market in the Offered Securities, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Offered Securities and any such
market making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Securities.
In order to facilitate the offering of the Offered Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Offered Securities. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Offered Securities for their own account. In addition, to cover overallotments
or to stabilize the price of the Offered Securities, the Underwriters may bid
for, and purchase, the Offered Securities in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing the Offered Securities in the
offering, if the Underwriters repurchase previously distributed Offered
Securities in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market prices of the Offered Securities above independent market levels.
The Underwriters are not required to engage in these activities, and may end
any of these activities at any time.
S-12
<PAGE>
The Company has agreed to indemnify the several Underwriters against
certain civil liabilities, including liabilities under the Securities Act.
As described under "Use of Proceeds", the Company intends to use the net
proceeds from the offering of the Offered Securities and, if consummated, the
proceeds from the offering of the Monthly Income Notes to repay bank debt. A
portion of the bank debt that will be repaid is held by affiliates of
NationsBanc Montgomery Securities LLC and First Union Capital Markets, two of
the Underwriters. These affiliates will receive more than 10% of the net
proceeds from the offering of the Offered Securities in the form of repayment
of Company borrowings. Accordingly, the offering of the Offered Securities is
being made pursuant to Rule 2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements and schedule of the Company
appearing in the Annual Report (Form 10-K) of United Dominion Realty Trust,
Inc. for the year ended December 31, 1997 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated in the accompanying prospectus by reference. Such
consolidated financial statements are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of American Apartment Communities
II, Inc. and American Apartment Communities II, L.P., for the year ended
December 31, 1997, included in the Company's current report on Form 8-K filed
with the Securities and Exchange Commission on October 23, 1998, incorporated
herein by reference, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
LEGAL MATTERS
The validity of the Offered Securities offered hereby will be passed upon
for the Company by Hunton & Williams, Richmond, Virginia. Brown & Wood LLP, San
Francisco, California, will act as counsel to the Underwriters. Brown & Wood
LLP will rely on Hunton & Williams as to all matters of Virginia law.
S-13
