UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 1-10524
-------
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0857512
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
10 South Sixth Street, Richmond, Virginia 23219-3802
(Address of principal executive offices - zip code)
(804) 780-2691
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to filing requirements
for at least the past 90 days.
Yes X No
------ ------
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 9, 2000:
Common Stock, $1 Par Value: 103,154,399
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<CAPTION>
March 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Real estate owned:
Real estate held for investment (Note 2) $ 3,527,098 $ 3,577,848
Less: accumulated depreciation 384,556 373,164
----------------- ------------------
3,142,542 3,204,684
Real estate under development 90,604 91,914
Real estate held for disposition (net of accumulated depreciation of
$42,917 and $22,700) 291,214 260,583
----------------- ------------------
Total real estate owned, net of accumulated depreciation 3,524,360 3,557,181
Cash and cash equivalents 5,957 7,678
Restricted cash 56,818 56,969
Deferred financing costs 13,744 13,511
Other assets 53,472 52,978
----------------- ------------------
Total assets $ 3,654,351 $ 3,688,317
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured debt (Note 3) $ 936,778 $ 1,000,136
Unsecured debt (Note 4) 1,181,416 1,127,169
Real estate taxes payable 31,374 30,887
Accrued interest payable 22,476 17,867
Security deposits and prepaid rent 20,845 20,738
Distributions payable 36,455 36,020
Accounts payable, accrued expenses and other liabilities 37,850 51,121
----------------- ------------------
Total liabilities 2,267,194 2,283,938
Minority interests 92,862 94,167
Shareholders' equity
Preferred stock, no par value; $25 liquidation preference,
25,000,000 shares authorized;
4,149,020 shares 9.25% Series A Cumulative Redeemable issued and
outstanding (4,168,560 in 1999) 103,726 104,214
5,917,805 shares 8.60% Series B Cumulative Redeemable issued and
outstanding (5,946,300 in 1999) 147,945 148,658
8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable
issued and outstanding (8,000,000 in 1999) 175,000 175,000
Common stock, $1 par value; 150,000,000 shares authorized
103,165,332 shares issued and outstanding (102,740,777 in 1999) 103,165 102,741
Additional paid-in capital 1,086,947 1,083,687
Distributions in excess of net income (313,757) (296,030)
Deferred compensation - unearned restricted stock awards (1,017) (305)
Notes receivable from officer-shareholders (7,714) (7,753)
----------------- ------------------
Total shareholders' equity 1,294,295 1,310,212
----------------- ------------------
Total liabilities and shareholders' equity $ 3,654,351 $ 3,688,317
================= ==================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended March 31, 2000 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Rental income $ 154,057 $ 153,791
Other non-property income 1,070 447
--------------- --------------
Total revenues 155,127 154,238
EXPENSES
Rental expenses:
Personnel 16,438 16,628
Real estate taxes and insurance 17,483 15,995
Repair and maintenance 8,532 9,257
Utilities 6,534 8,249
Administrative and marketing 5,923 6,003
Property management 4,643 4,730
Other operating 402 397
Real estate depreciation 33,904 29,392
Interest 39,075 38,079
General and administrative 3,870 3,476
Other depreciation and amortization 1,203 1,091
--------------- --------------
Total expenses 138,007 133,297
--------------- --------------
Income before gains on sales of investments, minority interests
and extraordinary item 17,120 20,941
Gains on sales of investments 2,533 191
--------------- --------------
Income before minority interests and extraordinary item 19,653 21,132
Minority interests of outside partners (177) (167)
Minority interests of unitholders in operating partnerships (668) (883)
--------------- --------------
Income before extraordinary item 18,808 20,082
Extraordinary item - early extinguishment of debt (228) -
--------------- --------------
Net income 18,580 20,082
Distributions to preferred shareholders - Series A and B (5,583) (5,654)
Distributions to preferred shareholders - Series D (Convertible) (3,825) (3,785)
--------------- --------------
Net income available to common shareholders $ 9,172 $ 10,643
=============== ==============
Earnings per common share (Note 5):
Basic $ 0.09 $ 0.10
=============== ==============
Diluted $ 0.09 $ 0.10
=============== ==============
Common distributions declared per share $ 0.2675 $ 0.2650
=============== ==============
Weighted average number of common shares outstanding-basic 103,019 103,932
Weighted average number of common shares outstanding-diluted 103,045 103,935
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31, 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 18,580 $ 20,082
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 35,107 30,483
Minority interests 845 1,050
Extraordinary item-early extinguishment of debt 228 -
Amortization of deferred financing costs and other 1,057 510
Gains on sales of investments (2,533) (191)
Changes in operating assets and liabilities:
Decrease in operating liabilities (8,272) (25,500)
Decrease/(increase) in operating assets 3,896 (475)
---------------- ---------------
Net cash provided by operating activities 48,908 25,959
INVESTING ACTIVITIES
Proceeds from sales of investments 23,409 12,900
Development of real estate assets (19,653) (28,037)
Acquisition of real estate, net of liabilities assumed - (17,875)
Capital expenditures - real estate assets (6,220) (14,302)
Capital expenditures - non real estate assets (1,766) (1,650)
Other - 1,132
---------------- ---------------
Net cash used in investing activities (4,230) (47,832)
FINANCING ACTIVITIES
Net reduction in secured debt (63,585) (22,370)
Net increase in unsecured debt 54,449 79,072
Payment of financing costs (935) (3,266)
Proceeds from the issuance of common stock 4,305 4,644
Distributions paid to minority interests (2,393) (1,423)
Distributions paid to preferred shareholders (9,355) (6,640)
Distributions paid to common shareholders (26,899) (27,208)
Repurchase of common and preferred stock (1,986) -
---------------- ---------------
Net cash (used in)/provided by financing activities (46,399) 22,809
Net (decrease)/increase in cash and cash equivalents (1,721) 936
Cash and cash equivalents, beginning of period 7,678 26,081
---------------- ---------------
Cash and cash equivalents, end of period $ 5,957 $ 27,017
================ ===============
SUPPLEMENTAL INFORMATION:
Interest paid during the period $ 34,466 $ 38,817
Conversion of operating partnership units to common stock 626 668
Issuance of restricted stock awards 829 460
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 2000
(In thousands, except per share data)
(Unaudited)
PREFERRED STOCK
<S> <C>
Balance, December 31, 1999 $ 427,872
Repurchase of preferred stock (1,201)
---------------------
Balance, March 31, 2000 $ 426,671
=====================
COMMON STOCK, $1 PAR VALUE
Balance, December 31, 1999 $ 102,741
Issuance of common shares through dividend reinvestment
and stock purchase plan 445
Repurchase of common stock (26)
Purchase of restricted stock awards (86)
Issuance of restricted stock awards 86
Conversion of operating partnership units 5
---------------------
Balance, March 31, 2000 $ 103,165
=====================
ADDITIONAL PAID-IN CAPITAL
Balance, December 31, 1999 $ 1,083,687
Issuance of common shares through dividend reinvestment
and stock purchase plan 3,804
Repurchase of preferred stock 301
Repurchase of common stock (231)
Issuance of common shares to employees, officers and director-shareholders 17
Adjustment for cash purchase and conversion of minority interests of
unitholders in operating partnerships (631)
---------------------
Balance, March 31, 2000 $ 1,086,947
=====================
NOTES RECEIVABLE FROM OFFICER-SHAREHOLDERS
Balance, December 31, 1999 $ (7,753)
Principal repayments officer-shareholders 39
---------------------
Balance, March 31, 2000 $ (7,714)
=====================
DISTRIBUTIONS IN EXCESS OF NET INCOME
Balance, December 31, 1999 $ (296,030)
Net income 18,580
Common stock distributions declared ($.2675 per share) (26,899)
Preferred stock distributions declared-Series A ($.58 per share) (2,398)
Preferred stock distributions declared-Series B ($.54 per share) (3,185)
Preferred stock distributions declared-Series D ($.48 per share) (3,825)
---------------------
Balance, March 31, 2000 $ (313,757)
=====================
DEFERRED COMPENSATION-UNEARNED RESTRICTED STOCK AWARDS
Balance, December 31, 1999 $ (305)
Issuance of restricted stock awards (829)
Amortization of deferred compensation 117
---------------------
Balance, March 31, 2000 $ (1,017)
=====================
TOTAL SHAREHOLDERS' EQUITY $ 1,294,295
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
United Dominion and its subsidiaries, including United Dominion Realty, L.P.,
(the "Operating Partnership"), and Heritage Communities L.P. (collectively,
"United Dominion"). As of March 31, 2000, there were 74,463,788 units in the
Operating Partnership outstanding, of which, 67,624,603, or 90.8%, were owned by
United Dominion and 6,839,185, or 9.2%, were owned by non-affiliated limited
partners. In connection with the acquisition of ASR Investment Corporation in
March 1998, United Dominion acquired Heritage Communities L.P., a Delaware
limited partnership (the "Heritage OP"). As of March 31, 2000, there were
4,502,668 units in the Heritage OP outstanding, of which 3,839,330, or 85.3%,
were owned by United Dominion and 663,338 units, or 14.7%, were owned by
non-affiliated limited partners. The consolidated financial statements of United
Dominion include the minority interests of the unitholders in the operating
partnerships.
The accompanying interim unaudited consolidated financial statements have been
prepared according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. The accompanying consolidated
financial statements should be read in conjunction with the audited financial
statements and related notes appearing in United Dominion's December 31, 1999
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
In the opinion of management, the consolidated financial statements reflect all
adjustments which are necessary for the fair presentation of financial position
at March 31, 2000 and results of operations for the interim periods ended March
31, 2000 and 1999. Such adjustments are normal and recurring in nature. All
significant inter-company accounts and transactions have been eliminated in
consolidation. The interim results presented are not necessarily indicative of
results that can be expected for a full year.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the dates of the
financial statements and the amounts of revenues and expenses during the
reporting periods. Actual amounts realized or paid could differ from those
estimates.
Certain previously reported amounts have been reclassified to conform with the
current financial statement presentation.
2. Real Estate Held for Investment
At March 31, 2000, there are 255 communities with 73,408 apartment homes
classified as real estate held for investment. The following table summarizes
the components of real estate held for investment at March 31, 2000 and December
31, 1999 (dollars in thousands):
March 31, December 31,
2000 1999
--------------------------------------
Land and land improvements $ 628,398 $ 636,905
Buildings and improvements 2,735,319 2,767,940
Furniture, fixtures and equipment 162,427 166,826
Construction in progress 954 6,177
--------------------------------------
Real estate held for investment 3,527,098 3,577,848
Accumulated depreciation (384,556) (373,164)
--------------------------------------
Real estate held for investment, net $ 3,142,542 $ 3,204,684
======================================
6
<PAGE>
3. Secured Debt
Secured debt, which encumbers $1.8 billion or 44.5% of United Dominion's real
estate owned, ($2.2 billion or 55.5% of United Dominion's real estate owned is
unencumbered) consist of the following at March 31, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
Weighted Average
--------------------------- No. of
Principal Interest Years to Communities
Outstanding Rate Maturity Encumbered
- --------------------------------------------------------------------------------------------------------------
Fixed Rate Debt
<S> <C> <C> <C> <C>
Mortgage Notes Payable (a) $ 542,300 7.83% 6.3 83
Tax-Exempt Secured Notes Payable 96,574 6.91% 12.3 13
REMIC Financings 58,500 7.88% 1.0 21
Secured Credit Facilities (b) 57,000 6.65% 13.7 --
------------------------------------------------------
Total Fixed Rate Secured Debt 754,374 7.63% 7.2 117
Variable Rate Debt
Secured Credit Facilities (b) 138,675 6.50% 13.7 19
Tax-Exempt Secured Notes Payable 19,916 4.00% 25.2 3
Mortgage Notes Payable 23,813 7.33% 11.5 10
------------------------------------------------------
Total Variable Rate Secured Debt 182,404 6.34% 14.7 32
--------------------------------------------------------
Total Secured Debt $ 936,778 7.36% 8.7 149
==========================================================
</TABLE>
(a) Includes fair value adjustments aggregating $13.8 million recorded in
connection with the ASR Merger and the AAC Merger on March 27, 1998 and
December 7, 1998, respectively.
(b) During 1999, United Dominion closed on a $200 million revolving credit
facility with the Federal National Mortgage Association (the "FNMA
Credit Facility"). The FNMA Credit Facility is for an initial term of
five years, bear interest at a floating rate which can be fixed for
periods of up to 270 days, and can be extended for an additional five
or ten years at United Dominion's discretion. At March 31, 2000, the
FNMA Credit Facility had a weighted average floating rate of interest
of 6.50%. In order to limit a portion of its interest rate exposure on
the Credit Facility, United Dominion entered into three forward rate
swap agreements. These agreements have an aggregate notional value of
$57 million under which United Dominion pays a fixed rate of interest
and receives a variable rate on the notional amount. The interest rate
swap agreements effectively change United Dominion's interest rate
exposure on $57 million of secured debt from a variable rate to a
weighted average fixed rate of 6.65%.
Approximate principal payments due during each of the next five calendar years
and thereafter, as of March 31, 2000, are as follows (dollars in thousands):
Amount
Year Maturing
-------------------------------------------------
2000 $ 52,663
2001 102,704
2002 52,721
2003 54,236
2004 125,730
Thereafter 548,724
----------------------
Total $ 936,778
======================
7
<PAGE>
4. Unsecured Debt
A summary of unsecured debt at March 31, 2000 and December 31, 1999 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- ----------------
<S> <C> <C>
Commercial Banks
Borrowings outstanding under
unsecured credit facilities (a) (b) $193,700 $277,600
Insurance Companies--Senior Unsecured Notes
7.98% due March, 2000-2003 (c) 22,371 29,800
Other (d) 4,630 4,931
Senior Unsecured Notes - Other
8.13% Senior Notes due November 2000 146,010 146,150
7.60% Medium-Term Notes due January 2002 55,000 55,000
7.65% Medium-Term Notes due January 2003 (e) 10,000 10,000
7.22% Medium-Term Notes due February 2003 12,000 12,000
5.05% City of Portland, OR Bonds due October 2003 7,345 7,345
8.63% Debentures due March 2003 100,000 --
7.67% Medium-Term Notes due January 2004 54,000 54,000
7.73% Medium-Term Notes due April 2005 23,400 23,400
7.02% Medium-Term Notes due November 2005 50,000 50,000
7.95% Medium-Term Notes due July 2006 120,340 120,340
7.07% Medium-Term Notes due November 2006 25,000 25,000
7.25% Notes due January 2007 111,825 111,825
Tax-Exempt Bonds due August 2008 46,700 --
8.50% Monthly Income Notes due November 2008 59,095 59,778
8.50% Debentures due September 2024(f) 140,000 140,000
----------- ----------
960,715 814,838
----------- ----------
Total Unsecured Debt $ 1,181,416 $1,127,169
=========== ==========
</TABLE>
(a) Weighted average interest rate of 6.6% and 6.7% at March 31, 2000 and
December 31, 1999, respectively.
(b) As of March 31, 2000, United Dominion had five interest rate swap
agreements associated with commercial bank borrowings with an aggregate
notional value of $45 million under which United Dominion pays a fixed
rate of interest and receives a variable rate of interest on the
notional amounts. The interest rate swaps effectively change United
Dominion's interest rate exposure on these borrowings from a variable
rate to a weighted average fixed rate of approximately 6.8%.
(c) Payable annually in three equal principal installments of $7.4 million.
(d) Includes $4.4 million and $4.6 million at March 31, 2000 and December
31, 1999, respectively, of deferred gains from the termination of
interest rate risk management agreements.
(e) United Dominion has one interest rate swap agreement associated with
these unsecured notes with an aggregate notional value of $10 million
under which United Dominion pays a fixed rate of interest and receives
a variable rate on the notional amount. The interest rate swap
agreement effectively changes United Dominion's interest rate exposure
on the $10 million from a variable rate to a fixed rate of 7.7%.
(f) Debentures include an investor put feature which grants a one-time
option to redeem debentures in September 2004.
8
<PAGE>
5. Earnings Per Share
Basic earnings per common share is computed based upon the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share is computed based on common shares outstanding plus the effect of
dilutive stock options and other potentially dilutive common stock equivalents.
The dilutive effect of stock options and other potential common stock
equivalents is determined using the treasury stock method based on United
Dominion's average stock price. The early extinguishment of debt does not have
an effect on the earnings per share calculation for the periods presented. The
following table sets forth the computation of basic and diluted earning per
share (dollars in thousands, except per share data):
March 31, 2000 March 31, 1999
- --------------------------------------------------------------------------------
Numerator for basic earnings
per share-net income available to common
shareholders $ 9,172 $ 10,643
Discount on repurchase of preferred stock 258 --
---------- ---------
Numerator for diluted earnings per share $ 9,430 $ 10,643
=========== =========
Denominator:
Denominator for basic earnings per share-
weighted average shares 103,019 103,932
Effect of dilutive securities:
Employee stock options 26 3
----------- -----------
Denominator for diluted earnings per share 103,045 103,935
=========== ===========
Basic earnings per share $ .09 $ .10
=========== ===========
Diluted earnings per share $ .09 $ .10
=========== ===========
The effect of the conversion of the operating partnership units and convertible
preferred stock is not dilutive and is therefore not included as a dilutive
security in the earnings per share computation. The weighted average effect of
the conversion of the operating partnership units for the three months ended
March 31, 2000 and 1999 was 7,503,570 and 8,590,907, respectively. The weighted
average effect of the conversion of the convertible preferred stock for the
three months ended March 31, 2000 and 1999 was 12,307,692 common shares.
6. Impact of Recently Issued Standards
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"), as amended by Statement No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133 - an Amendment of FASB Statement No. 133," which is required to be adopted
in years beginning after June 15, 2000. Statement 133 permits early adoption as
of the beginning of any fiscal quarter after its issuance, however, United
Dominion does not anticipate adopting Statement 133 until such time as it is
required. Statement 133 will require United Dominion to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings. United Dominion has not yet determined what the effect
of Statement 133 will be on earnings and the financial position of United
Dominion, however, management does not anticipate that the adoption of Statement
133 will have a significant effect on earnings or the financial position of
United Dominion.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following information should be read in conjunction with the United Dominion
Realty Trust, Inc. ("United Dominion") 1999 Form 10-K as well as the financial
statements and notes included in Item 1 of this report. This quarterly report
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1993, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such forward-looking statements include, without
limitation, statements concerning property acquisitions and dispositions,
development activity and capital expenditures, capital raising activities, rent
growth, occupancy and rental expense growth. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates" and
variations of such words and similar expressions are intended to identify such
forward-looking statements. Such statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievement of United Dominion to be materially different from the results of
operations or plans expressed or implied by such forward-looking statements.
Such factors include, among other things, unanticipated adverse business
developments affecting United Dominion, or its properties, adverse changes in
the real estate markets and general and local economies and business conditions.
Although United Dominion believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore there can be no assurance that
such statements included in this report will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by United Dominion or any other person that the results or
conditions described in such statements or the objectives and plans of United
Dominion will be achieved.
United Dominion is a real estate investment trust ("REIT") with activities
related to the ownership, development, acquisition, renovation, management,
marketing and strategic disposition of multifamily apartment communities
nationwide. Management's strategy is to be a national, highly efficient provider
of quality apartment homes. During the past several years, United Dominion has
implemented this strategy through the acquisition of portfolios of higher
quality communities, the disposition of non-strategic communities, a greater
commitment to development and the upgrade of its core portfolio of apartment
communities. Through a combination of dispositions and acquisitions over the
past two years, United Dominion aggressively moved the company into better
performing markets with attractive prospects for long-term growth. During this
same period, more emphasis has been placed on higher quality development
projects. This strategy resulted in the upgrade of the overall quality and
average age of United Dominion's portfolio, which is now solidly positioned with
"B" and "A" grade communities. United Dominion seeks to be a market leader by
operating a sufficiently sized portfolio of apartments within each of its target
markets in order to drive down operating costs through economies of scale and
management efficiencies. United Dominion believes that geographic market
diversification increases investment opportunities and decreases the risk
associated with cyclical local real estate markets and economies.
At March 31, 2000, United Dominion owned 298 communities with 81,714 apartment
homes nationwide, including 43 communities with 8,602 completed apartment homes
included in real estate held for disposition and 330 recently completed
apartment homes included in real estate under development.
10
<PAGE>
<TABLE>
The following table summarizes United Dominion's apartment market information by
major and other geographic markets:
<CAPTION>
Quarter Ended
As of March 31, 2000 March 31 , 2000
- ----------------------------------------------------------------------------- ---------------------------------
No. of No. of % of Carrying Average
Apartment Apartment Carrying Value Physical Monthly
Area Communities Homes Value (in thousands) Occupancy Rental Rates (a)
- ----------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Major Markets
Dallas, TX 16 5,025 6.3% $ 249,493 95.1% $682
Houston, TX 25 6,228 6.1% 239,318 91.9% 584
Phoenix, AZ 10 3,460 5.1% 200,100 95.1% 669
Orlando, FL 14 4,140 5.0% 196,917 94.4% 677
San Antonio, TX 12 3,515 4.4% 175,223 93.7% 637
Tampa, FL 11 3,778 4.4% 172,913 93.8% 662
Fort Worth, TX 12 3,823 4.1% 159,763 95.5% 611
Raleigh, NC 9 2,951 3.8% 150,581 91.2% 702
San Francisco, CA 4 980 3.5% 138,986 99.7% 1,519
Nashville, TN 10 2,808 3.4% 135,839 92.4% 611
Charlotte, NC 10 2,642 3.3% 130,744 89.8% 684
Columbus, OH 5 2,175 3.1% 121,117 94.3% 637
Memphis, TN 7 2,196 2.7% 106,111 94.4% 595
Monterey Peninsula, CA 12 1,879 2.7% 105,734 90.0% 784
South Florida 6 1,638 2.6% 102,416 93.4% 851
Greensboro, NC 8 2,123 2.6% 102,195 92.7% 628
Richmond, VA 8 2,372 2.5% 99,325 95.8% 672
Columbia, SC 9 2,730 2.5% 97,564 91.4% 542
Southern California 5 1,414 2.3% 88,630 95.7% 824
Wilmington, NC 6 1,869 2.2% 87,574 87.3% 644
Baltimore, MD 8 1,788 2.2% 85,580 96.8% 708
Atlanta, GA 6 1,426 1.8% 69,356 93.6% 708
Jacksonville, FL 3 1,157 1.4% 56,893 90.6% 645
Hampton Roads, VA 6 1,437 1.4% 54,775 96.3% 618
Sacramento, CA 2 914 1.3% 52,808 98.2% 661
Portland, OR 4 996 1.2% 48,683 91.5% 678
East Lansing, MI 4 1,226 1.2% 47,551 94.6% 623
Denver, CO 2 876 1.1% 45,331 93.9% 670
Fayetteville, NC 3 884 1.0% 41,158 93.4% 588
Detroit, MI 4 742 1.0% 40,342 96.1% 694
Fort Myers, FL 2 556 0.9% 36,448 97.0% 677
Washington, DC 3 615 0.9% 35,715 98.6% 804
Eastern Shore MD 4 784 0.9% 34,857 93.8% 711
Seattle, WA 3 628 0.8% 33,033 95.9% 690
Fredericksburg, VA 2 556 0.8% 30,695 96.2% 715
Indianapolis, IN 2 766 0.7% 26,301 91.7% 524
Daytona Beach, FL 3 550 0.6% 24,527 95.1% 661
Austin, TX 2 542 0.6% 23,891 95.1% 636
Little Rock, AR 2 512 0.6% 22,350 94.3% 594
Pullman, WA 3 536 0.6% 21,927 93.4% 709
Albuquerque, NM 3 530 0.5% 20,016 91.5% 520
Jacksonville, NC 3 653 0.5% 19,328 94.7% 487
Dover, DE 2 372 0.4% 17,777 96.3% 629
Tucson, AZ 2 408 0.3% 13,438 94.0% 448
Dayton, OH 2 240 0.3% 12,338 92.9% 680
Roanoke, VA 3 454 0.3% 10,468 93.2% 476
Other Single Asset Markets 16 3,820 3.8% 151,971 93.6% 579
-------------------------------------------------- -----------------------------
Total Apartments 298 81,714 99.7% $ 3,938,100 93.7% $657
-------------------------------------------------- -----------------------------
Commercial 4 N/A 0.3% 13,733 N/A N/A
-------------------------------------------------- -----------------------------
Total 302 81,714 100.0% $3,951,833 93.7% $657
================================================== =============================
</TABLE>
(a) Average monthly rental rates represent potential rent collections (gross
potential rents less market adjustments) which approximate net effective
rents. These average rent figures exclude development communities in
lease-up.
11
<PAGE>
Liquidity and Capital Resources
United Dominion expects to finance its operating and investing activities
primarily through net cash provided by operations, the proceeds from its
disposition program and borrowings under its unsecured bank lines of credit.
United Dominion routinely uses its unsecured bank credit facility to temporarily
fund investing activities prior to arranging for longer-term financing. United
Dominion considers its liquidity and ability to generate cash from operations,
dispositions and financings to be adequate to meet the cash flow needs of the
company during the remainder of 2000.
As a significant portion of the proceeds from the sale of communities is used to
reduce debt, the immediate impact is dilutive to earnings as the return on
investment of the property being sold exceeds the interest rate on the debt
repaid. While using disposition proceeds in this manner will moderate the growth
rate for earnings, the company remains committed to reducing debt levels and
further improving its financial flexibility during 2000.
To facilitate future fund raising activities in the public capital markets,
management believes that it is prudent to maintain shelf registration statement
capacity. In this regard, United Dominion filed such a shelf registration
statement in December 1999 providing for the issuance of up to $700 million in
common shares, preferred shares and debt securities.
During the second quarter of 2000, United Dominion plans to establish a program
for the sale of up to $200 million aggregate principal amount of medium-term
notes. The amount and timing of sales of medium-term notes will depend upon
market conditions and the company's needs for additional financing. It is
anticipated that the proceeds of any such sales would be used to repay certain
secured and unsecured debt and for other general corporate purposes.
United Dominion has no significant maturities of debt until the fourth quarter
of 2000 at which time approximately $146 million of unsecured debt and $29
million of secured debt will mature. Management expects to repay the maturing
unsecured debt using proceeds from the company's disposition program or proceeds
from the sale of medium-term notes, and expects to refinance the maturing
secured debt with debt of similar characteristics at the then prevailing market
rates. The following table outlines United Dominion's debt maturities over the
next five years (dollars in thousands):
Amount
Year Maturing
-------------------------------------------
2000 $ 395,569 (a)
2001 112,049
2002 117,366
2003 193,415
2004 322,535
Thereafter 977,260
------------------
Total $ 2,118,194
==================
(a) Includes $193.7 million of unsecured bank debt - See discussion under
Unsecured Credit Facilities that follows.
The following discussion explains the changes in net cash provided by operating
activities, net cash used in investing activities and net cash used in financing
activities which are presented in United Dominion's Consolidated Statements of
Cash Flows.
Operating Activities
For the quarter ended March 31, 2000, United Dominion's cash flow from operating
activities was $48.9 million compared to $26.0 million for the same period last
year. The increase was primarily due to the larger payment of accrued operating
expenses during the first quarter of 1999, a portion of which related to the
payment of expenses accrued in connection with the American Apartment
Communities II merger which occurred on December 7, 1998.
12
<PAGE>
Investing Activities
For the quarter ended March 31, 2000, net cash used in investing activities was
$4.2 million compared to $47.8 million for the same period last year, a decrease
of $43.6 million. Changes in the level of investing activities from period to
period reflect the changing levels of United Dominion's acquisition, capital
expenditure, development and disposition programs, as well as the impact of the
capital market environment on these activities. The decrease in these
expenditures reflect decreased acquisition and capital expenditure activity
coupled with increased disposition activity. The decrease in acquisition
activity is a result of a change in investment focus toward higher yielding
development opportunities as well as plans to improve our financial flexibility
by using disposition proceeds to repay debt and repurchase preferred stock.
Disposition of Investments
United Dominion selectively disposes of assets that are not in core markets,
have a lower net operating income growth rate than the overall portfolio or no
longer meet the operating and investment strategies of United Dominion.
During the first quarter of 2000, United Dominion sold four communities with 727
apartment homes and one commercial property for an aggregate sales price of
$28.4 million and recognized gains for financial reporting purposes of $2.5
million. Proceeds from the disposition program were primarily used to strengthen
the balance sheet by paying down debt and repurchasing shares of United
Dominion's preferred stock.
Subsequent to March 31, 2000, United Dominion sold one community for $10.7
million. In addition, United Dominion has entered into contracts or letters of
intent to sell 21 communities and one parcel of land for an aggregate sales
price of approximately $195 million. For financial reporting purposes, aggregate
gains on the sales of investments are expected to be in excess of $30 million.
The transactions are expected to close during the second and third quarters of
2000; however, there can be no assurance that these transactions will be
consummated as planned.
At March 31, 2000, United Dominion had 43 communities with 8,602 apartment homes
and four commercial properties included in real estate held for disposition
totaling $291.2 million. Certain assets are secured by mortgage indebtedness,
which may be assumed by the purchaser or repaid from the net proceeds. Property
operating income from these communities was $8.4 million and $8.1 million for
the three months ended March 31, 2000 and 1999, respectively. Properties held
for disposition are expected to be sold within the next twelve months.
Real Estate under Development
Development activity is focused in core markets that have locally based
development teams and strong operations managers in place. For the three months
ended March 31, 2000, United Dominion invested $19.7 million on development
projects, including the acquisition of land.
In the first quarter, United Dominion completed the development of Ashton at
Waterford Lakes, a 292 apartment home community located in Orlando, Florida for
an aggregate investment of $21.0 million. At March 31, 2000, the community is
75% leased with expected stabilized occupancy to occur in the third quarter of
2000.
13
<PAGE>
<TABLE>
The following projects are under development at March 31, 2000:
<CAPTION>
Costs Estimated Estimated Expected
No. Apt. Completed To Date Costs Cost per Completion
Property Location Homes Apt. Homes (Thousands) (Thousands) Home Date
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New Communities
- ---------------
The Meridian Dallas, TX 250 178 $13,899 $16,500 $66,000 2Q00
Oaks at Weston Raleigh, NC 380 -- 10,401 30,100 79,200 2Q01
Parke 33 Lakeland, FL 264 -- 4,010 17,400 65,900 1Q01
Sierra Canyon Phoenix, AZ 236 -- 3,097 16,700 70,800 1Q01
Mandolin Dallas, TX 308 -- 2,989 22,070 71,700 3Q01
-----------------------------------------------------
1,438 178 34,396 102,770 71,500
Additional Phases
- -----------------
Dominion Crown Point Charlotte, NC 220 152 12,442 14,800 67,300 2Q00
Ashlar Ft. Myers, FL 168 -- 2,581 12,900 76,800 4Q00
Escalante San Antonio, TX 312 -- 8,576 19,700 63,100 4Q00
-----------------------------------------------------
700 152 23,599 47,400 67,700
Total 2,138 330 $57,995 $150,170 $70,200
=======================================================
</TABLE>
In addition to the apartment homes under development at March 31, 2000, United
Dominion has land held for future development with a carrying value of $32.6
million.
United Dominion is in the final stages of completing a development joint venture
with a financial institution. Upon completion, which is expected during the
second quarter, the company will transfer to the joint venture five communities
currently included in real estate under development. By forming this joint
venture, United Dominion expects to reduce capital outlays for its development
activities and generate fee income by providing development, construction and
property management services to the joint venture.
Capital Expenditures
United Dominion capitalizes those expenditures related to acquiring new assets,
materially enhancing the value of an existing asset, or substantially extending
the useful life of an existing asset. Expenditures necessary to maintain an
existing property in ordinary operating condition are expensed as incurred.
For the quarter ended March 31, 2000, $7.4 million or $94 per home was spent on
capital expenditures for United Dominion's same communities (those acquired or
developed prior to January 1, 1999). These capital improvements included
recurring capital expenditures, including floor coverings, HVAC equipment,
roofs, appliances, landscaping, siding, parking lots and other non-revenue
enhancing capital expenditures, which aggregated $4.3 million or $54 per home.
In addition, non-recurring / revenue enhancing capital expenditures, including
water sub-metering, gating and access systems, the additions of microwaves,
washer-dryers, interior upgrades and new business and fitness centers totaled
$3.1 million or $40 per home for the quarter ended March 31, 2000. United
Dominion will continue to selectively add revenue-enhancing improvements, which
are budgeted to provide a high return on investment. Capital expenditures during
2000 are currently expected to be at levels somewhat below the levels in 1999.
Financing Activities
Net cash used in financing activities during the three months ended March 31,
2000 was $46.4 million compared to net cash provided by financing activities of
$22.8 million for the same period last year. During the first quarter of 2000,
as part of its plan to improve its balance sheet position, United Dominion used
85% of the proceeds from its disposition program to pay down secured and
unsecured debt and to repurchase shares of preferred stock.
During the first quarter of 2000, United Dominion issued $100 million of 8.625%
unsecured notes due 2003. Net proceeds received of $99.5 million were used to
repay outstanding bank debt. In addition, United Dominion completed the
refinancing of tax-exempt notes aggregating $46.7 million at a blended rate of
6.32% and with a final maturity of August 2008. In conjunction with this
refinancing, the company removed the liens on $86 million of real estate which
had previously secured the tax-exempt notes.
14
<PAGE>
Using proceeds from its disposition program, United Dominion repurchased $3.9
million of certain of its higher rate outstanding unsecured debt with a weighted
average yield of 8.7%. In addition, the company was relieved of $10.0 million of
mortgage debt and $3.7 million of revolving bank debt. During the remainder of
the year, United Dominion expects to make further debt reductions as the
disposition activity increases and proceeds are expected to be received from
contributing development projects to the joint venture.
United Dominion issued 445,680 shares of its common stock and received $4.3
million under its Dividend Reinvestment and Stock Purchase Plan during the first
three months of 2000.
For the quarter ended March 31, 2000, United Dominion paid distributions to its
common shareholders and unitholders in its operating partnerships aggregating
$29.3 million. The distribution to common shareholders and holders of operating
partnership units equates to a dividend rate of $1.07 per share or unit. In
addition, $9.4 million of preferred dividends were paid to Series A, B and D
preferred shareholders.
In 1999, the Board of Directors approved the repurchase of up to $25 million of
United Dominion's Series A and Series B Cumulative Redeemable Preferred Stock
from time to time as market conditions permit. For the quarter ended March 31,
2000, United Dominion repurchased 17,840 Series A preferred shares at an average
price of $20.55 per share and 26,925 Series B preferred shares at an average
price of $19.25 per share. Subsequent to March 31, 2000, United Dominion
repurchased 324,716 Series B preferred shares at an average price of $18.50 per
share.
Unsecured Credit Facilities
United Dominion has a $200 million three-year unsecured revolving credit
facility (the "Bank Credit Facility") which expires in August 2000 and a $110
million one-year unsecured line of credit (the "Line of Credit") which expires
in August 2000 that are provided by a consortium of banks. Under the Bank Credit
Facility, pricing is based upon the higher of United Dominion's senior unsecured
debt ratings from Standard & Poor's Corporation and Moody's Investor Services
that are currently BBB and Baa2, respectively. At these rating levels, interest
under the Bank Credit Facility is LIBOR plus 0.50% and interest under the Line
of Credit is LIBOR plus 1.0%. However, these rates are subject to change as
United Dominion's credit ratings change. At March 31, 2000, $193.7 million was
outstanding under these credit facilities leaving $116.3 million available for
use.
The Bank Credit Facility and Line of Credit are subject to customary financial
covenants and limitations.
United Dominion is negotiating a successor unsecured revolving credit facility
with a consortium of banks. The successor facility is anticipated to be a
three-year facility that will replace both the Bank Credit Facility and the Line
of Credit for an aggregate amount greater than the $310 million currently
available.
Funds from Operations
Funds from operations ("FFO") is defined as net income (computed in accordance
with generally accepted accounting principles), excluding gains (losses) from
sales of property, plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. United Dominion
computes FFO for all periods presented in accordance with the recommendations
set forth by the National Association of Real Estate Investment Trusts
("NAREIT") October 1, 1999 White Paper. United Dominion considers FFO in
evaluating property acquisitions and its operating performance, and believes
that FFO should be considered along with, but not as an alternative to, net
income and cash flows as a measure of United Dominion's operating performance
and liquidity. FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs.
15
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands)
----------------------------
2000 1999
----------------------------
<S> <C> <C>
Net income available to common shareholders $9,172 $10,643
Adjustments:
Real estate depreciation, net of outside partners' interest 33,575 29,136
Gains on sale of real estate assets (2,533) (191)
Minority interests of unitholders in operating partnership 668 883
Extraordinary items - early extinguishment of debt 228 -
----------------------------
Funds from operations - basic $41,110 $40,471
============================
Distributions to preferred shareholders - Series D (Convertible) 3,825 3,785
----------------------------
Funds from operations - diluted $44,935 $44,256
============================
Weighted average number of common shares, OP Units
and common equivalents outstanding 122,857 124,833
</TABLE>
Results of Operations
United Dominion's net income is primarily generated from the operations of its
apartment communities. The following table summarizes the operating performance
for United Dominion's apartment portfolio for each period (dollars in
thousands):
Three Months Ended
March 31,
----------------------------------
All Communities 2000 1999 % Change
- --------------------------------------------------------------------------------
Property rental income $ 153,657 $ 153,420 0.2%
Property rental expenses (excluding
depreciation and amortization) (59,819) (61,076) -2.1%
----------------------------------
Property operating income $93,838 $ 92,344 1.6%
==================================
Weighted average number of apartment homes 82,067 87,244 -5.9%
Physical occupancy 93.7% 92.0% 1.7%
Apartment Community Operations
During the first quarter of 2000, all community property operating income
increased $1.5 million or 1.6%. The strong increase in property operating income
generated from our same community portfolio was partially offset by the loss of
property operating income as a result of the Company's disposition program
during the past several years.
United Dominion's same communities (those communities acquired, developed and
stabilized prior to January 1, 1999 and held on January 1, 2000) provided 95%
and 93% of its property operating income for the three months ended March 31,
2000 and 1999, respectively. During the first quarter of 2000, same community
property operating income increased 4.7% or $4.1 million compared to the first
quarter of 1999. The growth in property operating income resulted from a 4.1% or
$5.8 million increase in property rental income for the same communities over
the same period in the prior year. The increase was primarily driven by a 1.4%
increase in physical occupancy coupled with a 2.6% increase in average monthly
rental rates. During this same period, property operating expenses at these same
communities increased 3.1%, or $1.7 million. The increase in property operating
expenses was primarily due to (i) an increase in real estate taxes which are
being accrued at higher rates in 2000 on the $1.4 billion of real estate
acquired in 1998 in anticipation of property reassessment, (ii) an increase in
casualty insurance costs largely as a result of hurricane losses incurred in
North Carolina over the past five years, and (iii) an increase in personnel
costs, primarily in the service area due to higher wages and healthcare costs.
As a result of the increase in property rental income exceeding the increase in
property operating expenses, the operating margin (property operating income
divided by property rental income) at the same communities improved 0.4% to
61.6%.
16
<PAGE>
The remaining 5% of United Dominion's property operating income during the first
quarter of 2000 was generated from its non-mature communities (those communities
acquired and developed during 1999 and the first quarter of 2000). Compared to
the same period last year, additional property operating income of $2.1 million
was generated by the successful lease-up of United Dominion's development
communities which included 1,806 apartment homes constructed since January 1,
1999. In addition, the five communities with 1,230 apartment homes acquired by
United Dominion during 1999 provided an additional $1.4 million of property
operating income over the first quarter of 1999.
The $7.6 million increase in property operating income provided by the same
communities, development communities and acquisition communities was offset by
the loss of $6.1 million of property operating income due to the sale of 7,443
apartment homes for an aggregate sales price of $241.2 million during 1999. As a
result of United Dominion's disposition program, the weighted average number of
apartment homes declined 5.9% from the first quarter of 1999.
Real Estate Depreciation
Real estate depreciation increased $4.5 million or 15.4% for the three months
ended March 31, 2000 over the same period last year. This increase is primarily
attributable to two factors: (i) the catch up of depreciation expense on
communities transferred from held for disposition to held for investment and
(ii) the impact of completed development communities on depreciation expense
during the first quarter of 2000.
Interest Expense
Interest expense increased $996,000 for the three months ended March 31, 2000,
over the same period last year as a result of a lower level of capitalized
interest during the first quarter of 2000. Although the weighted average
interest rate on the debt held by the company was slightly higher than it was
during the same period last year, increasing from 7.4% in 1999 to 7.5% in 2000,
the weighted average debt outstanding decreased from $2.2 billion in 1999 to
$2.1 billion in 2000. The weighted average amount of debt employed during 2000
was lower as disposition proceeds were used to repay outstanding debt. For the
three months ended March 31, 2000 and March 31, 1999, total interest capitalized
was $1.0 million and $1.7 million, respectively.
General and Administrative
For the three months ended March 31, 2000, general and administrative expenses
increased $394,000, or 11.3%, over 1999, reflecting a full year's impact of
United Dominion's investment in professional staff, technology and scaleable
accounting and information systems and the effect of additional franchise taxes
in Tennessee as a result of a change in the state law regarding franchise taxes.
Inflation
United Dominion believes that the direct effects of inflation on United
Dominion's operations have been inconsequential.
Information Technology
United Dominion is currently engaged in the development of an innovative on-site
property management system (the "system") to enable management to capture,
review and analyze data to a greater extent than is possible using available
existing commercial software. United Dominion believes the new system will
enable it to become a more efficient provider of a high quality living
environment for its residents, and provide the scalability necessary to support
future growth. These development activities are being conducted through a joint
venture with another public multifamily real estate investment trust. A third
multifamily real estate investment trust announced its intention to become a
participant in the joint venture, which is expected to occur in the second
quarter of 2000.
The system development process is currently managed by the employees of United
Dominion and its joint venture partner who have significant related project
management experience. The actual programming and documentation of the system is
being conducted by employees and third party consultants under the supervision
of these experienced project managers.
17
<PAGE>
Current projections indicate that total development costs over a three-year
period will be approximately $7.5 million (including hardware costs and
expenses, the costs of employees and related overhead, and the costs of engaging
third party consultants) and that such development costs will be shared on an
equal basis by the joint venture partners. Once developed, the system would be
used in place of current property management information systems for which a
license fee is paid to third parties.
The system is currently projected to undergo an on-site test (i.e., a "beta
test") during the third quarter of 2000 and the system should be functional by
the fourth quarter of 2000.
Neither United Dominion nor its joint venture partner has been engaged in the
development of systems software. There are several risks associated with the
development of the system for internal use, such as: (i) the inability to
maintain the schedule or budget that has been projected for the development and
implementation of the software, and (ii) the system may not have the
functionality and efficiencies desired.
Taxable REIT Subsidiary
In December 1999, the REIT Modernization Act ("RMA") was signed into law. The
RMA contains several provisions that, when effective in 2001, will allow REIT's
to compete more effectively in the real estate industry by allowing REIT's to
offer the same types of services as other competitors in the marketplace. The
most important feature of the RMA is the allowance for REIT's to create a
taxable REIT subsidiary ("TRS") that can provide services to residents and
others without disqualifying the rents that a REIT receives from its residents.
REIT's will be allowed, through a TRS, to provide a wide range of increasingly
important services that residents have come to expect. In addition, the TRS will
allow REIT's to generate new sources of income for REIT shareholders.
Effective January 1, 2001, a REIT can own 100% of the stock of a TRS. However,
the legislation contains a number of safeguards that would limit the size of a
TRS to ensure that REIT's remain focused on their core business of owning and
operating real estate assets. Furthermore, the RMA changes the minimum
distribution requirement from 95% to 90% of the REIT's taxable income. This will
allow REIT's to retain a greater level of capital, which can be used to invest
back into expenditures to maintain the quality of their real estate assets as
well as repay outstanding debt.
18
<PAGE>
Item 3. Quantitative and Qualitative Disclosure of Market Risk
Information required by Item 3 regarding Quantitative and Qualitative Disclosure
of Market Risk is included in Part I, Item 2 of this Form 10-Q included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
19
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS
- ---------------------------
Neither the Company nor any of its apartment communities is presently
subject to any material litigation nor, to the Company's knowledge, is any
litigation threatened against the Company or any of the communities, other than
routine actions arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively are
not expected to have a material adverse effect on the business or financial
condition or results of operations of the Company.
Item 2. CHANGES IN SECURITIES
- -----------------------------
None
Item 3. DEFAULT UPON SENIOR SECURITIES
- --------------------------------------
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None
Item 5. OTHER INFORMATION
- -------------------------
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) The exhibits listed on the accompanying index to exhibits are filed as
part of this quarterly report.
(b) Reports on Form 8-K
A Form 8-K was filed with the Securities and Exchange Commission on
February 25, 2000. The filing reported United Dominion's 1999 fourth
quarter and year to date results of operations as reported on its Press
Release issued on February 1, 2000.
20
<PAGE>
EXHIBIT INDEX
Item 6 (a)
The exhibits listed below are filed as part of this Quarterly Report.
References under the caption Location to exhibits, forms, or other filings
indicate that the form or other filing has been filed, that the indexed exhibit
and the exhibit referred to are the same and that the exhibit referred to is
incorporated by reference.
<TABLE>
<CAPTION>
Exhibit Description Location
- ------- -------------------------------------- ---------------------------------------------------
<S> <C> <C>
2(a) Agreement and Plan of Merger dated Exhibit 2(a) to the Company's Form S-4 Registration
as of December 19, 1997, between Statement (Registration No. 333-45305) filed with
the Company, ASR Investment the Commission on January 30, 1998.
Corporation and ASR Acquisition Sub,
Inc.
2(b) Agreement of Plan of Merger dated as Exhibit 2(c) to the Company's Form S-3 Registration
of September 10, 1998, between the Statement (Registration No. 333-64281) filed with
Company and American Apartment the Commission on September 25, 1998.
Communities II, Inc. including as
exhibits thereto the proposed terms
of the Series D Preferred Stock and the
proposed form of Investment Agreement
between the Company, United Dominion
Realty, L.P., American Apartment
Communities II, Inc., American
Apartment Communities Operating
Partnership, L.P., Schnitzer Investment
Corp., AAC Management LLC and LF
Strategic Realty Investors, L.P.
2(c) Partnership Interest Purchase and Exchange Exhibit 2(d) to the Company's Form S-3 Registration
Agreement dated as of September 10, 1998, Statement (Registration No. 333-64281) filed with
between the Company, United Dominion the Commission on September 25, 1998.
Realty, L.P., American Apartment
Communities Operating Partnership, L.P.,
AAC Management LLC, Schnitzer
Investment Corp., Fox Point Ltd. and
James D. Klingbeil including as an exhibit
thereto the proposed form of the Third
Amended and Restated Limited Partnership
Agreement of United Dominion Realty, L.P.
3(a) Restated Articles of Incorporation Exhibit 4(a)(ii) to the Company's Form S-3
Registration Statement (Registration No. 333-72885)
filed with the Commission on February 24, 1999.
3(b) Restated By-Laws Exhibit 3(b) to the Company's Annual Report
on Form 10-K for the year ended December
31, 1998.
21
<PAGE>
4(i)(a) Specimen Common Stock Exhibit 4(i) to the Company's Annual Report
Certificate on Form 10-K for the year ended December 31, 1993.
4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A
of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995.
Redeemable Preferred Stock
4(i)(c) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A
of 8.60% Series B Cumulative Registration Statement dated June 11, 1997.
Redeemable Preferred Stock
4(i)(d) Rights Agreement dated as of Exhibit 1 to the Company's Form 8-A
January 27, 1998, between the Company Registration Statement dated February 4, 1998.
and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent.
4(i)(d)(a) First Amended and Restated Rights Exhibit 4(i)(d)(a) to the Company's Form 10-Q
Agreement dates as of September 14, for the quarter ended September 30, 1999.
1999, between the Company and
ChaseMellon Shareholders Services,
L.L.C., as Rights Agent
4(i)(e) Form of Rights Certificate Exhibit 4(e) to the Company's Form 8-A
Registration Statement dated February 4, 1998.
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Company's Form 8-A
as of February 15, 1993, between Registration Statement dated April 19, 1990.
the Company and CIGNA Property
and Casualty Insurance Company,
Connecticut General Life Insurance
Company, Connecticut General Life
Insurance Company, on behalf of
one or more separate accounts,
Insurance Company of North
America, Principal Mutual Life
Insurance Company and Aid
Association for Lutherans
4(ii)(f) 364-day Credit Agreement dated Exhibit 4(ii)(f) to the Company's Form 10-Q for
as of September 16, 1999, between the quarter ended September 30, 1999.
the Company and certain subsidiaries
and a syndicate of banks represented
by Bank of America, N.A.
10(i) Employment Agreement between Exhibit 10(i) to the Company's Annual Report
the Company and John P. McCann on Form 10-K for the year ended December 31,
dated December 8, 1998. 1998.
10(ii) Employment Agreement between Exhibit 10(ii) to the Company's Annual Report
the Company and John S. Schneider on Form 10-K for the year ended December 31,
dated December 8, 1998. 1998.
22
<PAGE>
10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual Report
the Company and Richard Giannotti on Form 10-K for the year ended December 31,
dated December 8, 1998. 1998.
10(iv) Employment Agreement between Exhibit 10(iv) to the Company's Quarterly Report
the Company and A. William Hamill on Form 10-Q for the quarter ended September 30,
dated September 30, 1999. 1999.
10(v) 1985 Stock Option Plan, Exhibit 10(iv) to the Company's Quarterly
as amended. Report on Form 10-Q for the quarter ended
June 30, 1998.
10(vi) 1991 Stock Purchase and Loan Exhibit 10(viii) to the Company's Quarterly Report
Plan. on Form 10-Q for the quarter ended March 31, 1997.
10(vii) Third Amended and Restated Exhibit 10(vi) to the Company's Annual Report
Agreement of Limited Partnership of on Form 10-K for the year ended December 31,
United Dominion Realty, L.P. 1998.
Dated as of December 7, 1998.
10(vii)(a) Subordination Agreement dated Exhibit 10(vi)(a) to the Company's Form 10-Q for
April 16, 1998, between the the quarter ended March 31, 1998.
Company and United Dominion
Realty, L.P.
10(viii) Servicing and Purchase Exhibit 10(vii) to the Company's Form 10-Q for
Agreement dated as of June 24, the quarter ended June 30, 1999.
1999, including as an exhibit
thereto the Note and Participation
Agreement forms.
10(ix) Description of Restricted Stock Exhibit 10(ix) to the Company's Annual Report
Awards Program. on Form 10-K for the year ended December 31,
1999.
10(x) Description of United Dominion Exhibit 10(x) to the Company's Annual
Realty Trust, Inc. Shareholder Report on Form 10-K for the year ended
Value Plan. December 31, 1999.
10(xi) Description of United Dominion Exhibit 10(xi) to the Company's Annual
Realty Trust, Inc. Executive Report on Form 10-K for the year ended
Deferral Plan. December 31, 1999.
10(xii) Employment Agreement between Exhibit 10(xii) to the Company's Annual
the Company and Curtis W. Carter Report on Form 10-K for the year ended
dated December 8, 1998. December 31, 1999.
10(xiii) Employment Agreement between Exhibit 10(xiii) to the Company's Annual
the Company and Mark E. Wood Report on Form 10-K for the year ended
dated March 21, 2000. December 31, 1999.
23
<PAGE>
12 Computation of Ratio of Earnings Filed herewith.
to Fixed Charges.
27 Financial Data Schedule Filed electronically with the Securities
and Exchange Commission.
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Quarterly Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Trust, Inc.
(registrant)
Date: May 12, 2000 /s/ A. William Hamill
- ----------------------- ----------------------
A. William Hamill
Executive Vice President and
Chief Financial Officer
Date: May 12, 2000 /s/ Robin R. Flanagan
- ----------------------- ---------------------
Robin R. Flanagan
Vice President and
Chief Accounting Officer
25
<TABLE>
EXHIBIT 12
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in thousands)
<CAPTION>
Three Months ended March 31,
--------------------------------------------------
2000 1999
----------------------- ----------------------
<S> <C> <C>
Net income before extraordinary items $18,808 $20,082
Add:
Portion of rents representative
of the interest factor 244 259
Interest on indebtedness 39,075 38,079
----------------------- ----------------------
Earnings $58,127 $58,420
======================= ======================
Fixed charges and preferred stock dividend:
Interest on indebtedness $39,075 $38,079
Capitalized interest 964 1,667
Portion of rents representative
of the interest factor 244 259
----------------------- ----------------------
Fixed charges 40,283 40,005
----------------------- ----------------------
Add:
Preferred stock dividend 9,408 9,439
----------------------- ----------------------
Combined fixed charges and preferred stock dividend $49,691 $49,444
======================= ======================
Ratio of earnings to fixed charges 1.44 x 1.46 x
Ratio of earnings to combined fixed charges
and preferred stock dividend 1.17 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,957
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 124,034
<PP&E> 3,951,833
<DEPRECIATION> 427,473
<TOTAL-ASSETS> 3,654,351
<CURRENT-LIABILITIES> 149,000
<BONDS> 2,118,194
0
426,671
<COMMON> 103,165
<OTHER-SE> 764,459
<TOTAL-LIABILITY-AND-EQUITY> 3,654,351
<SALES> 154,057
<TOTAL-REVENUES> 155,127
<CGS> 0
<TOTAL-COSTS> 59,955
<OTHER-EXPENSES> 38,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,075
<INCOME-PRETAX> 18,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,808
<DISCONTINUED> 0
<EXTRAORDINARY> (228)
<CHANGES> 0
<NET-INCOME> 18,580
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.09
</TABLE>
