AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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): March 29, 1999
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UNITED DOMINION REALTY TRUST, INC
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(Exact name of registrant as specified in its charter)
VIRGINIA 1-10524 54-0857512
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation of organization) Identification No.)
10 SOUTH SIXTH STREET, VIRGINIA 23219-3802
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(Address of principal executive offices - zip code)
(804) 780-2691
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Registrant's telephone number, including area code
<PAGE>
ITEM 5. OTHER EVENT
On December 7, 1998, United Dominion Realty Trust, Inc. ("United Dominion")
completed the acquisition of American Apartment Communities II, Inc. ("AAC") in
a statutory merger (the "AAC Merger"). ACC's principal asset was a 79% interest
in American Apartment Communities II, LP. In connection with the acquisition of
AAC, United Dominion acquired 53 communities with 14,001 apartment homes located
primarily in California, the Pacific Northwest, the Midwest and Florida. The AAC
Merger was structured as a tax-free merger and was treated as a purchase for
accounting purposes. No good will was recorded in connection with this
transaction. In connection with the AAC Merger, United Dominion acquired
primarily real estate assets totaling $766.9 million. The aggregate purchase
price consisted of the following: (i) 8,000,000 shares of the United Dominion's
7.5% Series D Convertible Preferred Stock ($25 liquidation preference value)
with a fair market value of $175 million which is convertible into United
Dominion's Common Stock at $16.25 per share, (ii) the issuance of 5,614,035 OP
units to holders of the 21% minority interests in American Apartment Communities
II, L.P. with an aggregate fair market value of $67.4 million, (iii) the
assumption of $457.7 million of secured notes payable at fair market value, (iv)
the assumption of liabilities and minority interests aggregating $27.8 million
and (v) $59.8 million of cash. The aggregate purchase price in the AAC Merger
was $793.7 million, including transaction costs.
Information concerning unaudited pro forma results of operations of United
Dominion for the year ended December 31, 1998 are contained herein. For 1998, in
addition to the AAC Merger, such pro forma information assumes the following
transactions occurred on January 1, 1998: (i) the March 27, 1998, acquisition of
ASR Investments Corporation , a publicly traded multifamily REIT that owned 39
communities with 7,550 apartment homes for an aggregate purchase price of $323.1
million and (ii) the acquisition of 13 communities with 4,318 apartment homes
for an aggregate purchase price of $144.0 million.
All of the acquisitions previously described have been accounted for as
purchases of real estate and operating results for those communities are
reflected in United Dominion's consolidated financial statements from their
respective dates of acquisition.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information 4 through 9
3
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Balance Sheet at December 31, 1998 is not
presented as the acquisitions reported on this Form 8-K were consumated on or
before December 31, 1998 and are therefore included in the Company's
consolidated balance sheet at December 31, 1998. Effective December 7, 1998, a
wholly-owned subsidiary of United Dominion purchased American Apartment
Communities II, Inc. ("AAC") a real estate investment trust in a statutory
merger (the "Merger"). The Merger has been accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16. Assets and
liabilities acquired were recorded at their estimated fair values at December
31, 1998 and results of operations are included from the date of acquisition.
The Unaudited Pro Forma Combined Statement of Operations for the twelve months
ended December 31, 1998 is presented as if the AAC Merger had occurred on
January 1, 1998. The Unaudited Pro Forma Combined Statement of Operations gives
effect to the AAC 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 AAC Merger, the column titled "Previously Reported
Transactions" is presented as if the following acquisitions occurred on January
1, 1998: (i) 39 apartment communities with 7,550 apartment homes owned by ASR
Investments Corporation that were merged with and into a wholly-owned subsidiary
of the United Dominion, in a statutory merger on March 27, 1998 and (ii) the
1998 acquisitions of 13 communities containing 4,318 apartment homes.
The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what United
Dominion's actual results would have been for the twelve months ended December
31, 1998 if the Merger and other acquisitions had occurred at the beginning of
the period presented, nor do they purport to be indicative of the results of
operations in future periods. The Unaudited Pro Forma Combined Statement of
Operations should be read in conjunction with, and is qualified in its entirety
by, the historical financial statements and notes thereto of United Dominion
included in its Annual Report on Form 10-K for the year ended December 31, 1998
and the pro forma financial statements and notes thereto of United Dominion's
Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission
on October 19, 1998.
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<PAGE>
<TABLE>
<CAPTION>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 1998
(In thousands, except per share data)
Previously
Reported
Previously Transactions
United Dominion Reported Pro Forma
Historical (A) Transactions (B) Adjustments (C)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Income
Rental income $ 478,718 $ 16,648 $ 1,095
Interest and other non-property income 3,382 252
----------------- ----------------- -----------------
482,100 16,900 1,095
Expenses
Rental expenses:
Utilities 26,361 998 52
Repair and maintenance 62,753 1,712 144
Real estate taxes 41,768 1,610 86
Property management 16,748 564 (100)
Other rental expenses 51,930 2,561 138
Depreciation of real estate owned 99,588 2,613 770
Interest 106,238 3,452 1,848
General and administrative 10,139 1,273 (993)
Loss on termination of an interest rate risk management agreement 15,591
Other depreciation and amortization 3,645 189 (18)
----------------- ----------------- -----------------
434,761 14,972 1,927
----------------- ----------------- -----------------
Income before gains on sales of investments, minority interests and
extraordinary item 47,339 1,928 (832)
Gains on sales of investments 26,672
----------------- ----------------- -----------------
Income before minority interests and extraordinary item 74,011 1,928 (832)
Minority interests (1,541) (363) (405)
----------------- ----------------- -----------------
Income before extraordinary item 72,470 1,565 (1,237)
Extraordinary items (138) (7,053) 7,053
----------------- ----------------- -----------------
Net income 72,332 (5,488) 5,816
Distributions to preferred shareholders (23,593)
----------------- ----------------- -----------------
Net income available to common shareholders $ 48,739 $ (5,488) $ 5,816
================= ================= =================
Earnings per common share:
Basic $ 0.49
=================
Diluted $ 0.49
=================
Common distributions declared per share $ 1.05
=================
Weighted average number of common shares outstanding-basic 99,966 3,961
Weighted average number of common shares outstanding-diluted 100,062 4,057
</TABLE>
<TABLE>
<CAPTION>
United Dominion
Pre AAC Merger AAC II, LP
Pro Forma Historical (D)
------------------ ------------------
<S> <C> <C>
Income
Rental income $ 496,461 $ 98,974
Interest and other non-property income 3,634 6,335
------------------ ------------------
500,095 105,309
Expenses
Rental expenses:
Utilities 27,411 6,180
Repair and maintenance 64,609 23,927
Real estate taxes 43,464 7,460
Property management 17,212 2,840
Other rental expenses 54,629
Depreciation of real estate owned 102,971 16,139
Interest 111,538 32,555
General and administrative 10,419 4,594
Loss on termination of an interest rate risk management agreement 15,591
Other depreciation and amortization 3,816
------------------ ------------------
451,660 93,695
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Income before gains on sales of investments, minority interests and
extraordinary item 48,435 11,614
Gains on sales of investments 26,672
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Income before minority interests and extraordinary item 75,107 11,614
Minority interests (2,309) (329)
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Income before extraordinary item 72,798 11,285
Extraordinary items (138)
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Net income 72,660 11,285
Distributions to preferred shareholders (23,593)
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Net income available to common shareholders $ 49,067 $ 11,285
================== ==================
Earnings per common share:
Basic $ 0.47
==================
Diluted $ 0.47
==================
Common distributions declared per share $ 1.05
==================
Weighted average number of common shares outstanding-basic 103,927
Weighted average number of common shares outstanding-diluted 104,119
</TABLE>
<TABLE>
<CAPTION>
Adjustments to
AAC II, LP AAC Historical
Adjustment (E) Financials (F)
---------------------- ------------------
<S> <C> <C>
Income
Rental income $ 2,129 $ (104)
Interest and other non-property income 96 (4)
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2,225 (108)
Expenses
Rental expenses:
Utilities 135
Repair and maintenance 443 (39)
Real estate taxes 163
Property management 59
Other rental expenses
Depreciation of real estate owned 302 (14)
Interest 700 (35)
General and administrative 54
Loss on termination of an interest rate risk management agreement
Other depreciation and amortization
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1,856 (88)
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Income before gains on sales of investments, minority interests and
extraordinary item 369 (20)
Gains on sales of investments
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Income before minority interests and extraordinary item 369 (20)
Minority interests (17)
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Income before extraordinary item 352 (20)
Extraordinary items
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Net income 352 (20)
Distributions to preferred shareholders
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Net income available to common shareholders $ 352 $ (20)
====================== ==================
Earnings per common share:
Basic
Diluted
Common distributions declared per share
Weighted average number of common shares outstanding-basic
Weighted average number of common shares outstanding-diluted
</TABLE>
<TABLE>
<CAPTION>
AAC
Pro Forma United Dominion
Merger Pro Forma
Adjustments Combined
------------------ -----------------
<S> <C> <C>
Income
Rental income $ $ 597,460
Interest and other non-property income 10,061
------------------ -----------------
0 607,521
Expenses
Rental expenses:
Utilities 33,726
Repair and maintenance 88,940
Real estate taxes 51,087
Property management 20,111
Other rental expenses 54,629
Depreciation of real estate owned 3,681 (G) 123,079
Interest 2,876 (H) 147,634
General and administrative (4,428)(I) 10,639
Loss on termination of an interest rate risk management agreement 15,591
Other depreciation and amortization 3,816
------------------ -----------------
2,129 549,252
------------------ -----------------
Income before gains on sales of investments, minority interests and
extraordinary item (2,129) 58,269
Gains on sales of investments 26,672
------------------ -----------------
Income before minority interests and extraordinary item (2,129) 84,941
Minority interests (1,461)(J) (4,116)
------------------ -----------------
Income before extraordinary item (3,590) 80,825
Extraordinary items (138)
------------------ -----------------
Net income (3,590) 80,687
Distributions to preferred shareholders (14,014)(K) (37,607)
------------------ -----------------
Net income available to common shareholders $ (17,604) $ 43,080
================== =================
Earnings per common share:
Basic $ 0.41
=================
Diluted $ 0.41
=================
Common distributions declared per share $ 1.05
=================
Weighted average number of common shares outstanding-basic 103,927
Weighted average number of common shares outstanding-diluted 104,119
</TABLE>
5
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
UNAUDITED NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND OP UNIT DATA)
(A) Represents United Dominion's Historical Consolidated Statement of
Operations contained in its Annual Report on Form 10-K for the twelve
month period ended December 31, 1998.
(B) Represents the actual results of operations of the following 1998
acquisitions by United Dominion (collectively, the Previously Reported
Transactions): (i) 39 apartment communities with 7,550 apartment homes
owned by ASR Investments Corporation (ASR) that were merged with and
into a wholly-owned subsidiary of the United Dominion, in a statutory
merger on March 27, 1998, (as previously reported on Form 8-K dated
March 27, 1998 and subsequently amended on Form 8-K/A No.1 dated March
27, 1998 which was filed with the Securities and Exchange Commission on
June 12, 1998), (ii) a portfolio of three apartment communities
(collectively the Tennessee Portfolio) acquired on January 9, 1998 which
consists of The Trails at Kirby Parkway Apartments and The Trails at
Mount Moriah Apartments (which run as one community under the name The
Trails), and Cinnamon Trails Apartments (as previously reported on Form
8-K dated June 9, 1998 which was filed with the Securities and Exchange
Commission on June 24, 1998), (iii) Dogwood Creek Apartments acquired on
February 6, 1998 (as previously reported on Form 8-K dated June 9, 1998
which was filed with the Securities and Exchange Commission on June 24,
1998), (iv) a portfolio of eight apartment communities (collectively the
San Antonio Portfolio) acquired on April 16, 1998 which consists of
Audubon Apartments, Carmel Apartments, Cimarron Apartments, Grand
Cypress Apartments, Kenton Place Apartments, Peppermill Apartments, The
Crest Apartments and Villages of Thousand Oaks Apartments (as previously
reported on Form 8-K dated June 9, 1998 which was filed with the
Securities and Exchange Commission on June 24, 1998, (v) Rancho Mirage
Apartments acquired on May 28, 1998 (as previously reported on Form 8-K
dated May 28, 1998 which was filed with the Securities and Exchange
Commission on October 19, 1998). The acquisitions described in (i)
through (v) above are shown in detail in United Dominion's Form 8-K
dated May 28, 1998 as filed with the Securities and Exchange Commission
on October 19, 1998.
(C) Represents the aggregate pro forma adjustments for the Previously
Reported Transactions as described in Note B above. The pro forma
adjustments for these acquisitions are shown in detail in United
Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and
Exchange Commission on October 19, 1998.
(D) Represents the AAC II, LP Historical Consolidated Statement of
Operations for the eleven months ended November 30, 1998. Certain
reclassifications have been made to the AAC II, LP Historical
Consolidated Statement of Operations to conform to United Dominion's
presentation.
(E) Represents the results of operations for AAC II, LP for the seven day
period from December 1, 1998 through December 7, 1998 which represents
the period AAC II, LP was not owned by United Dominion during 1998 based
on the Historical Consolidated Statement of Operation of AAC II, LP for
the eleven months ended November 30, 1998.
(F) Represents the elimination of rental income and rental expenses related
to the results of operations of two properties included in the the AAC
II, LP Historical Consolidated Statement of Operations. These two
properties were not acquired by United Dominion in connection with the
AAC Merger.
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<PAGE>
(G) Represents the estimated net increase in depreciation of real estate
owned as a result of recording the AAC real estate at fair value versus
historical cost and using United Dominion's depreciable lives.
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 28.6 years. Buildings have been
depreciated over 35 years and other assets over 5, 10 or 20 years
depending on the useful life of the related asset.
Calculation of the fair value of depreciable real estate assets (IN
THOUSANDS OF DOLLARS):
<TABLE>
<CAPTION>
<S> <C>
Purchase price $ 793,667
Less:
Purchase price allocated to cash and cash equivalents 21,798
Purchase price allocated to other assets 2,498
Purchase price allocated to land 115,762
Purchase price allocated to minority interest investment 2,375
---------------
Pro forma basis of AAC's depreciable real estate held for investment
at fair value $ 651,234
===============
</TABLE>
Calculation of pro forma adjustment to depreciation of real estate owned
(IN THOUSANDS OF DOLLARS):
Depreciation expense based upon an estimated weighted
average useful life of approximately 28.6 years $ 20,122
Less: AAC's depreciation of real estate owned (16,441)
------------
Pro forma adjustment $ 3,681
============
(H) Represents the estimated net adjustment to interest expense associated
with the AAC Merger, as follows (IN THOUSANDS OF DOLLARS):
To adjust amortization of AAC's deferred financing
costs which were eliminated in the AAC Merger $ (948)
To reflect amortization of the adjustment required to
record AAC's mortgage notes payable at fair value (1,315)
To reflect interest expense associated with United
Dominion's issuance of debt at a weighted
average interest rate of 8.23% 5,139
--------
Pro forma adjustment $ 2,876
========
(I) Reflects the net estimated reduction of general and administrative
expenses of $4,428 based upon the identified historical costs of certain
items which are anticipated to be eliminated or reduced as a result of
the AAC Merger.
7
<PAGE>
(J) Reflects the increase in minority interest expense assuming the
consummation of the AAC Merger on January 1, 1998. A percentage of net
income was allocated to Minority Interests representing interests not
owned by United Dominion. The pro forma allocation to Minority Interests
is based upon the percentage owned by such Minority Interests as a
result of the AAC Merger. In connection with the AAC Merger Agreement,
United Dominion Realty, LP issued 5,614,035 OP Units to the Limited
Partners in exchange for their 20.9% interest in AAC II, LP. As a
result, the pro forma weighted average OP Units outstanding, including
the pro forma effect of the AAC Merger (as a percentage of all common
stock and Operating Partnership Units) was 8.72% for the twelve months
ended December 31, 1998.
The Minority Interests ownership in United Dominion is calculated as
follows:
United Dominion historical weighted average common
shares outstanding 99,966
Common shares issued in connection with the Previously
Reported Transactions 3,961
-----
Total pro forma weighted average common shares 103,927
United Dominion historical weighted average
OP Units outstanding 2,963
OP Units issued in connection with the Previously
Reported Transactions 1,352
OP Units issued in connection with the AAC Merger 5,614
-----
Total pro forma weighted average OP Units 9,929
Total weighted average common shares and OP Units 113,856
Pro forma Minority Interests ownership of United Dominion's
Operating Partnership 8.72%
(K) Reflects the increase in distributions to preferred shareholders of
$14,014 for the period from January 1, 1998 to December 7, 1998. On
December 7, 1998, United Dominion issued 8,000,000 shares of 7.5%
Convertible Preferred Stock (Preferred Stock) for an aggregate stated
value of $200 million to AAC II, Inc. in exchange for their 79.1%
interest in AAC II, LP.
8
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNITED DOMINION REALTY TRUST, INC.
Date: March 29, 1999 /s/ Robin R. Flanagan
-------------------- -----------------------------
Robin R. Flanagan, Assistant Vice President
and Principal Accounting Officer
9
