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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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
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UNITED DOMINION REALTY TRUST, INC.
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(Exact name of registrant as specified in its charter)
Virginia 54-0857512
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
10 South Sixth Street, Richmond, 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)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of exchange on which registered
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<S> <C>
Common Stock, $1 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
9.25% Series A Cumulative Redeemable Preferred Stock New York Stock Exchange
8.60% Series B Cumulative Redeemable Preferred Stock New York Stock Exchange
7.50% Series D Cumulative Convertible Redeemable Preferred Stock None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or other information
statements incorporated by reference into Part III of this Form 10-K ( ).
The aggregate market value of the shares of common stock held by non-affiliates
(based upon the closing sales price on the New York Stock Exchange) on March 2,
1999 was approximately $1 billion. * As of March 21, 2000 there were
103,127,425 shares of common stock, $1 par value, outstanding.
Part III incorporates certain information by reference from the Proxy Statement
to be filed with respect to the Annual Meeting of Shareholders on May 9, 2000.
*In determining this figure, the Company has assumed that all of its officers &
directors, and persons known to the Company to be beneficial owners of more than
5% of the Company's shares, are affiliates. Such assumptions should not be
deemed conclusive for any other purpose.
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UNITED DOMINION REALTY TRUST, INC.
TABLE OF CONTENTS
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PAGE
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<S> <C>
PART I.
Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 18
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 34
Item 8. Financial Statements and Supplementary Data 34
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 34
PART III.
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners and Management 35
Item 13. Certain Relationships and Related Transactions 35
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 36
</TABLE>
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Part I
Item 1. BUSINESS
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General
United Dominion Realty Trust, Inc. ("United Dominion"), a Virginia corporation,
is a self-administered equity real estate investment trust with activities
related to the ownership, development, acquisition, renovation, management,
marketing and strategic disposition of multifamily apartment communities
nationwide.
Formed in 1972, United Dominion is headquartered in Richmond, Virginia with
regional offices in Richmond, Dallas and Atlanta. The regional offices are
responsible for the operation, acquisition, construction and asset management
activities in their respective geographic regions. United Dominion had
approximately 2,400 employees as of January 31, 2000.
The Company operates as a real estate investment trust under the applicable
provisions of the Internal Revenue Code of 1986, as amended. To qualify, the
Company must meet certain tests which, among other things, require that its
assets consist primarily of real estate, its income be derived primarily from
real estate and 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.
Business and Operating Strategies
The apartment industry has become increasingly competitive, as ownership has
shifted to large companies with more resources and sophisticated management. In
order to compete more effectively, United Dominion began a strategic
repositioning in 1996, with the objective of being better positioned to achieve
more consistent earnings growth in the future in order to increase shareholder
value over the long-term. During the past several years, United Dominion
implemented this strategy through the following:
. the acquisition of portfolios and mergers with companies primarily in
different markets and different regions;
. the disposition of communities that do not meet the long-term strategic
objectives set for the portfolio due to location, size, age, quality and/
or operating performance;
. the development of higher quality apartment communities in target markets
that can provide higher returns on investment;
. the upgrade of our communities through various capital investments and
through the addition of revenue enhancing and/or expense reducing features;
. building local operating management groups throughout the country in order
to bring local market knowledge in order to run our business effectively;
. refocusing on serving our residents by providing high quality apartment
homes and uncompromising service;
. the hiring of experienced corporate and operations staff; and
. the investment in efficient, scalable systems.
United Dominion believes that the repositioning strategy provides the following
benefits:
. more consistent property net operating income growth;
. lower capital expenditures per apartment home;
. improved operating margins;
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. operating efficiencies;
. increased cash flow per apartment home and per common share; and
. a balance between acquisitions and development that will provide better
investment returns.
1999 Accomplishments
. Net operating income (property operating income less property operating
expenses) from our same communities (those acquired or developed prior to
January 1, 1998) increased 5.6% in 1999 compared to 1998; the third
consecutive year same community net operating income growth has exceeded
5%;
. Completed seven development projects aggregating $120 million with 1,846
apartment homes in five different markets. Lease-ups were generally ahead
of projected absorption at these communities;
. Return on investment of the American Apartment Communities II acquisition
that occurred in December 1998 of 9.1%, which is better than the initial
projection of 9.0%;
. Completed the disposition of $241 million of apartment homes that no longer
met our investment criteria, which included exiting certain non-core
markets including Greenville, South Carolina;
. Instituted a share repurchase program, which resulted in the buyback of $44
million of common and preferred stock and operating partnership units (OP
Units);
. Repurchased $70 million of higher rate debt using proceeds from the
disposition program in order to proactively manage the balance sheet;
. Paid dividends of $1.06 per share, which represents United Dominion's 23rd
year of consecutive dividend increases to shareholders;
. Systems upgrades and technology initiatives that make United Dominion a
leader in the apartment industry, which included the installation of the
PeopleSoft financial system, the ongoing development of a web-based
property management system and the ability to provide high-speed broadband
Internet service to residents;
. Concluded the upgrade of our core portfolio of apartments, which included
the addition of new features and enhanced amenities to attract resident
customers; and
. Higher resident satisfaction as indicated by United Dominion winning the
1999 Level 1 National Multifamily Customer Service Award for Excellence.
Apartments and Markets
Apartments
At December 31, 1999, United Dominion's apartment portfolio included 301
communities having a total of 82,154 completed apartment homes (See Item 2,
Properties). In addition, United Dominion had three new communities and three
additional phases to existing communities with 1,622 apartment homes under
development at December 31, 1999. United Dominion's apartment communities
consist primarily of upper and middle-income garden and townhouse communities
that make up the broadest segment of the apartment market. Most of the
communities are considered to be "A" and "B" grade quality that compete at or
near the top of their respective markets. "A" grade communities are generally
properties less than five years old with superior amenity packages. "B" grade
communities are generally either of 1970's or 1980's construction, located in
good neighborhoods. Management believes that these well-located apartments
offer United Dominion a good combination of current income and longer-term
income growth. As a result of the upgrade program, the overall quality of
United Dominion's apartment portfolio has improved.
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Markets
Geographic market diversification increases investment opportunity and decreases
the risk associated with cyclical local real estate markets and economies,
thereby increasing the stability of United Dominion's earnings growth. In a
given year, United Dominion will have some markets that are strong or
recovering, some will be balanced and others may be softening. However, with its
market diversification, United Dominion's aggregate results of operations are
anticipated to be balanced from year to year.
During 1999, for the first time in United Dominion's history, we operated a
national portfolio of apartment homes. In 1999, West Coast markets,
including Seattle, Portland, Sacramento, San Francisco, the Monterey Peninsula
and Southern California, became important markets for United Dominion, providing
almost 20% of its property operating income by the fourth quarter. These markets
have barriers to apartment construction, which limits new supply and offers the
prospect for higher revenue growth in the future. In addition, new Midwest
markets, including Columbus, Detroit and Indianapolis, provided another 8% of
our property operating income. Most of the West and Midwest markets provided
occupancy rates above the average of the portfolio during 1999. As a result of
the geographic diversification, no single market is expected to provide more
than 10% of our property net operating income in 2000.
United Dominion's three largest markets, Dallas, Houston and Orlando, provided
above average rent growth in 1999. Although there has been an increase in
multifamily permits in these markets, they have benefited from strong economic
and job growth during the past several years.
During 1999, apartment supply and demand was in relative balance in most of
United Dominion's markets. Although there was an increase in apartment
construction in 1999, a strong economy led to good absorption of the new supply
of apartments. In 1999, United Dominion experienced a slight increase in
physical occupancy to 92.6% along with higher rent growth. A key objective for
2000 will be to grow average occupancy during a time when economic growth may
slow slightly and new apartment home completions are near the levels where they
have been the past two years. This can be achieved through aggressive property
management, use of the Internet to lease apartments and use of revenue
maintenance tools to manage vacant inventory.
Acquisitions and Mergers
During the past five years, United Dominion acquired 65,000 apartment homes as
part of our strategy to diversify geographically. However, this pace slowed
during 1999, with acquisitions being funded with disposition proceeds in order
to complete 1031 tax-deferred exchanges. During 1999, using the proceeds from
its disposition program, United Dominion acquired five communities with 1,230
apartment homes at a total cost of $74 million. The communities are located in
markets that are considered strategically important to United Dominion, such as
Baltimore, Maryland, South Florida and Riverside and San Diego, California where
we have locally based infrastructure.
When evaluating potential acquisitions, United Dominion considers geographic
location, construction quality, condition and design of the community, asset
quality and age of the property, current and projected cash flow of the
property, the ability to increase the value and cash flow of the property
through upgrades and repositioning, potential for rent increases, competition
from existing multifamily communities, anticipated new construction and the
potential for economic growth in the market.
The following table summarizes United Dominion's growth during the last five
years (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 (a) 1997 1996 (b) 1995
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<S> <C> <C> <C> <C> <C>
Homes acquired 1,230 28,510 8,628 22,032 5,142
Homes owned at December 31, 82,154 86,893 62,789 55,664 34,224
Total real estate owned, at carrying value $3,953,045 $3,952,752 $2,517,398 $2,099,641 $1,205,685
Total rental income $ 618,749 $ 478,718 $ 386,672 $ 241,260 $ 194,511
</TABLE>
(a) Includes 7,550 apartment homes acquired in the ASR Merger on March 27, 1998
and 14,001 apartment homes acquired in the AAC Merger on December 7, 1998.
(b) Includes 14,320 completed apartment homes and 675 homes under development
acquired in connection with the South West Merger on December 31, 1996.
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During 2000, United Dominion does not anticipate acquiring communities except to
reinvest a portion of the proceeds from property sales.
Prior to 1990, United Dominion was the only major publicly held REIT focusing
predominantly on apartment investments. Since then, a number of new
multifamily REITs have been formed. Some of these REITs may seek to be acquired
by larger, more strongly capitalized REITs that have superior access to the
capital markets. During the past few years, the apartment sector has undergone
consolidation and United Dominion has been a major participant in this real
estate consolidation process, completing the following mergers:
On December 31, 1996, United Dominion completed the acquisition of South
West Property Trust Inc. ("South West") in a statutory merger (the "South
West Merger"). South West was a publicly traded multifamily REIT that
owned 44 communities with 14,320 apartment homes primarily located in Texas
and several other Southwestern markets. The South West Merger provided the
company with significant diversification beyond its traditional Southeast
and Mid-Atlantic markets, expanding United Dominion into Southwestern
markets.
On March 27, 1998, United Dominion completed the acquisition of ASR
Investments Corporation ("ASR") in a statutory merger (the "ASR Merger").
ASR was a publicly traded multifamily REIT that owned 39 communities with
7,550 apartment homes located in Arizona, Texas, New Mexico and the state
of Washington. The ASR Merger furthered the company's investment in
Southwestern markets, provided an initial presence in the Pacific
Northwest, and provided United Dominion with critical size in Houston and
Phoenix.
On December 7, 1998, United Dominion completed the acquisition of American
Apartment Communities II, Inc. (AAC) in a statutory merger (the "AAC
Merger"). In connection with the acquisition of AAC, the Company acquired
53 communities with 14,001 apartment homes located primarily in California,
the Pacific Northwest, the Midwest and Florida. The AAC Merger allowed
United Dominion to enter into new major markets that are believed to have
the potential for good long-term growth, such as, Portland, San Francisco,
Sacramento, San Jose, Monterey, Los Angeles, Denver, Indianapolis and
Detroit. In addition, it added size to our existing portfolios in Columbus,
Tampa, South Florida and Seattle.
Development
During 1999, United Dominion continued to expand its development capability,
both as a way of upgrading the portfolio and increasing investment options.
There is balance between acquisition and development capabilities that will
allow United Dominion to achieve better long-term investment returns.
During 1999, United Dominion continued its commitment to development as part of
its strategic repositioning, shifting capital into development activity which
can provide returns on investment (property operating income less property
operating expenses divided by the average investment in real estate) in excess
of 10% and away from lower yielding acquisitions. During 1999, United Dominion
invested $114 million on the development of over 1,500 apartment homes, up from
890 homes completed during 1998. United Dominion believes that having a
development capability provides the following benefits:
. returns on investment in excess of returns on acquisitions;
. control over the quality of the product which includes quality of
features, size and floor plan;
. by acting as our own general contractor, we have more control over the
schedule, including building delivery; and
. the ability to add presence in existing markets where we have a strong
operating group in place.
During 2000, we plan to undertake a development joint venture with a financial
partner. This will allow us to reduce our development capital commitment,
generate fee income as the general contractor and developer and continue to
increase our development expertise and capability.
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In determining whether to develop in a certain market, United Dominion analyzes
demographic and market data such as income levels, occupancy rates, household
formation, employment growth and supply demand ratios.
Same Communities
United Dominion's net income is primarily generated from the operations of its
apartment communities. During 1999, the company's same communities provided
rental growth of 3.1% that was coupled with a 0.6% decrease in rental expenses.
Average physical occupancy, rental rates, and operating margins at United
Dominion's same communities during the comparable periods are set forth below:
1999 1998 1997
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Physical occupancy 93.1% 92.9% 92.6%
Average monthly rental rates $ 631 $ 602 $ 572
Operating margin 61.3% 59.6% 57.3%
Over the past three years, United Dominion's strategic objectives include
upgrading the apartment portfolio through the addition of features and
initiatives to the communities that are appropriate for the market and which
will support higher rents. United Dominion completed the same community upgrade
program in 1999 as part of the strategic plan to improve the overall quality of
the portfolio. United Dominion recognized the need to improve its asset quality
in order to compete with an increase in the supply of newer communities, and
consequently, embarked on the upgrade program. In addition, several initiatives
which are considered revenue enhancing or expense reducing were underway that
either allowed United Dominion to increase rents by more than the inflationary
rate or allowed United Dominion to pass expenses to residents including: sub-
metering of water and sewer to residents where local and state regulations
allow, gating and fencing of apartment communities, installing monitoring
devices such as intrusion alarms or controlled access devices, adding business
and fitness centers and constructing carports, garages and self storage units.
Capital expenditures decreased from 1998 as the overall age and physical
condition of the apartment portfolio has improved.
Dispositions
As part of its strategic repositioning, United Dominion determined that it would
selectively dispose 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. The disposition program
allowed United Dominion to reduce the age of its existing portfolio, which
should result in lower operating expense and capital expenditure growth
associated with the older communities. During 1999, the focus of United
Dominion's investment activities was the sale of non-strategic properties.
During the past three years, United Dominion sold approximately 15,000 of its
slow-growth, non-core apartment homes while exiting certain markets which have
proved to be less profitable. These sales allowed United Dominion to exit
markets that had low growth opportunities and improve the average age of the
apartment portfolio by selling communities with an average age of 25 years.
Proceeds from the disposition program were used to strengthen the balance sheet
by paying down debt, as well as to fund new development projects and to
selectively repurchase shares of United Dominion's preferred and common stock.
At December 31, 1999, there were 37 communities with 7,182 apartment homes and
four commercial properties classified as real estate held for disposition.
United Dominion intends to sell 6,000 to 7,000 apartment homes during 2000,
which will substantially complete the sale of its non-strategic assets.
However, a REIT must constantly monitor and adjust its assets in order to
achieve the best return on invested capital. Proceeds from the 2000 sales,
expected to be at levels similar to 1999, are expected to be used to reduce
debt, repurchase preferred shares, fund development activity and acquire
communities through 1031 exchanges.
Financing
United Dominion's significant 1998 acquisition activity was financed primarily
with debt, and to a lesser extent, preferred stock and Operating Partnership
Units. Since completing these acquisitions, United Dominion's objective has been
to maintain Baa2/BBB investment grade debt ratings and to improve its overall
financial flexibility through proactive balance sheet management.
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During the first half of 1999 United Dominion refinanced a significant portion
of the debt that resulted from the 1998 acquisitions. During 1999, our two major
financing activities consisted of selling $190 million of medium-term notes at a
weighted average interest rate of 7.6% and closing on $195.7 million of a $200
million revolving credit facility with the Federal National Mortgage Association
that had a weighted average interest rate of 6.3% at December 31, 1999.
During 1999, $141 million of the proceeds from the disposition program were used
to repay $70 million of unsecured debt at a weighted average interest rate of
7.7% and to repurchase $43.5 million of common and preferred shares and OP
Units. In addition, United Dominion was relieved of $57.7 million of mortgage
debt. We expect to use a significant portion of our 2000 disposition proceeds to
repay debt and repurchase common shares and Operating Partnership Units and
further increase our financial flexibility.
Competition
In most of United Dominion's markets, the competition for residents among
communities is extremely intense as some competing communities offer features
that United Dominion's communities do not have. Also, some competing communities
are larger and/or newer than United Dominion's communities. The competitive
situation of each community varies and intensifies as additional properties are
constructed.
Management believes that United Dominion, in general, is well positioned in
terms of economic and other resources to compete effectively and intends to
maintain its pricing discipline while continuing to pursue acquisitions that
meet United Dominion's long-term investment objectives.
United Dominion believes it has certain competitive advantages that include:
. A fully integrated organization with property management, development,
acquisition, redevelopment, marketing and financing expertise;
. geographic diversification of its apartment portfolio with market
presence in over 30 markets across the country; and
. local presence in many of its major markets which allows us to become
local market experts.
Environmental Regulations
To date, compliance with federal, state, and local environmental protection
regulations has not had a material effect on the capital expenditures, earnings
or competitive position of United Dominion. However, over the past few years,
the issue has been raised regarding the presence of asbestos and other hazardous
materials in existing real estate properties. United Dominion has a property
management plan for hazardous materials. As part of the plan, Phase I
environmental site investigation and reports have been completed for each
property owned. In addition, all proposed acquisitions are inspected prior to
acquisition. Acquisitions through merger are inspected on a case by case basis
given historical information available. The inspections are conducted by
qualified environmental consultants, and the report issued is reviewed by United
Dominion prior to the purchase or development of any property. Nevertheless, it
is possible that United Dominion's environmental assessments will not reveal all
environmental liabilities, or that some material environmental liabilities exist
in which United Dominion is unaware. In some cases, United Dominion has
abandoned otherwise economically attractive acquisitions because the costs of
removal or control have been prohibitive and/or United Dominion has been
unwilling to accept the potential risks involved. United Dominion does not
believe it will be required to engage in any large-scale abatement at any of its
properties as asbestos is managed in place in accordance with current
environmental laws and regulations. Management believes that through
professional environmental inspections and testing for asbestos and other
hazardous materials, coupled with a conservative posture toward accepting known
risk, United Dominion can minimize its exposure to potential liability
associated with environmental hazards.
Recently enacted federal legislation requires owners and landlords of
residential housing constructed prior to 1978 to disclose to potential residents
or purchasers of the communities any known lead paint hazards and will impose
treble damages for failure to so notify. In addition, lead based paint in any of
the communities may result in lead poisoning in children residing in that
community if chips or particles of such lead based paint are ingested, and
United Dominion
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may be held liable under state laws for any such injuries caused by ingestion of
lead based paint by children living at the communities.
United Dominion is unaware of any environmental hazards at any of its properties
which individually or in the aggregate may have a material adverse impact on its
operations or financial position. United Dominion has not been notified by any
governmental authority, and is not otherwise aware, of any material non-
compliance, liability or claim relating to environmental liabilities in
connection with any of its properties. United Dominion does not believe that the
cost of continued compliance with applicable environmental laws and regulations
will have a material adverse effect on the company or its financial condition or
results of operations. There can be no assurance, however, that future
environmental laws, regulations or ordinances will not require additional
remediation of existing conditions that are not currently actionable. Also, if
more stringent requirements are imposed on United Dominion in the future, the
costs of compliance could have a material adverse effect on United Dominion or
its financial condition. To the best of its knowledge, United Dominion is in
compliance with all applicable environmental rules and regulations.
Operating Partnership - United Dominion Realty, L.P.
On October 23, 1995, United Dominion organized United Dominion Realty, L.P. (the
"Partnership") under the Virginia Revised Uniform Limited Partnership Act, as
amended (the "Partnership Act"). United Dominion is the sole General Partner of
the Partnership and currently holds a 90.8% interest. The Partnership is
intended to assist United Dominion in competing for the acquisition of
properties that meet United Dominion'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 Partnership was organized under a First Amended and Restated Agreement of
Limited Partnership dated as of December 31, 1995 which was subsequently amended
in the Second Amended and Restated Agreement of Limited Partnership dated as of
August 30, 1997 and later amended by the Third Amended and Restated Agreement of
Limited Partnership dated as of December 7, 1998 (the "Partnership Agreement").
A summary of certain provisions of the Partnership Agreement is set forth below.
The summary does not purport to be complete and is subject to and qualified in
its entirety by reference to applicable provisions of the Partnership Act and
the complete Partnership Agreement. The Partnership Agreement is filed as an
exhibit to United Dominion's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
Admission of Limited Partners; Investment Agreements
United Dominion presently intends to limit admission to the Partnership to
Limited Partners who are "accredited investors," as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the "Securities Act"). Limited Partners
will be admitted upon executing and delivering to United Dominion an Investment
Agreement (the "Investment Agreement") and delivering to the Partnership the
consideration prescribed therein. In the Investment Agreement, the prospective
Limited Partner makes both representations as to his status as an accredited
investor and other representations and agreements regarding the Units (defined
below) to be issued to him, thus, assuring compliance with the Securities Act.
Any rights to Securities Act registration of the Common Stock of United Dominion
issued to such Limited Partner upon redemption of his Units (see "Redemption
Rights" below), will also be set forth in the Investment Agreement or a separate
registration rights agreement.
Units
The interests in the Partnership of the Partnership's limited partners (the
"Limited Partners") are represented by units of limited partnership interest
(the "Units"). All holders of Units are entitled to share in the cash
distributions from, and in the profits and losses of, the Partnership.
Distributions by the Partnership are made equally for each Unit outstanding
except that outside partners have first priority as described in the
"Distributions" section. As the Partnership's sole General Partner, United
Dominion intends to make distributions per Unit in the same amount as the cash
dividends paid by United Dominion on each share of Common Stock. However,
because Partnership properties, which are the primary source of cash available
for distribution to Unit holders, are significantly fewer than properties held
directly by United Dominion and may not perform as well, there can be no
assurance that distributions per Unit will always equal Common Stock dividends
per share. A distribution made to United Dominion that enables it to maintain
its REIT status (see "Management and Operations" below) may deplete cash
otherwise available to Unit holders. The Partnership may borrow from United
Dominion for the purpose of equalizing per Unit and per Common share
distributions, but neither the Partnership nor United Dominion is under any
obligation regarding Partnership borrowings for this or any other
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purpose.
The Limited Partners have the rights to which limited partners are entitled
under the Partnership Act. The Units are illiquid, they are not registered for
secondary sale under any securities laws, state or federal, and they cannot be
transferred by a holder except as provided in the Partnership Agreement and
unless they are registered as such or an exemption from such registration is
available. Except as provided in any Investment Agreement or other agreement
with a partner, neither the Partnership nor United Dominion is under any
obligation to effect any such registration or to establish any such exemption.
The Partnership Agreement imposes additional restrictions on the transfer of
Units, as described below under "Transferability of Interests."
Management and Operations
United Dominion, as the sole General Partner of the Partnership, has full,
exclusive and complete responsibility and discretion in the management and
control of the Partnership. The Limited Partners have no authority to transact
business for, or participate in the management activities or decisions of the
Partnership.
The Partnership Agreement requires that the Partnership be operated in a manner
that will enable United Dominion to both satisfy the requirements for being
classified as a REIT and avoid any federal income tax liability. The General
Partner is expressly directed, notwithstanding anything to the contrary in the
Partnership Agreement, to cause the Partnership to distribute amounts (including
proceeds of Partnership borrowings) that sufficiently enable United Dominion to
pay distributions to its shareholders that are required in order to maintain
REIT status and to avoid income tax or excise tax liability.
Ability to Engage in Other Businesses; Conflicts of Interest
United Dominion and other persons (including officers, directors, employees,
agents and other affiliates of United Dominion) are not prohibited under the
Partnership Agreement from engaging in other business activities, including
business activities substantially similar or identical to those of the
Partnership. United Dominion will not be required to present any business
opportunities to the Partnership or to any Limited Partner.
Borrowing by the Partnership
The General Partner is authorized under the Partnership Agreement to cause the
Partnership to borrow money and to issue and guarantee debt as it deems
necessary for the conduct of the activities of the Partnership. Such debt may be
secured by mortgages, deeds of United Dominion, pledges or other liens on the
assets of the Partnership.
Reimbursement of General Partner; Transactions with the General Partner and its
Affiliates
The General Partner will receive no compensation for its services as General
Partner of the Partnership. However, as a partner in the Partnership, the
General Partner has the same right to allocations of profit and loss and
distributions as other partners of the Partnership. In addition, the Partnership
will reimburse the General Partner for all expenses it incurs relating to the
ownership and operation of, or for the benefit of, the Partnership and any
offering of Units or other partnership interests, and for the pro rata share of
the expenses of any offering of securities of United Dominion some or all of the
proceeds of which are contributed to the Partnership.
Liability of General Partner and Limited Partners
The General Partner is liable for all general obligations of the Partnership to
the extent not paid by the Partnership. The General Partner is not liable for
the non-recourse obligations of the Partnership.
The Limited Partners are not required to make further capital contributions to
the Partnership after their respective initial contributions are fully paid.
Assuming that a Limited Partner acts in conformity with the provisions of the
Partnership Agreement, the liability of the Limited Partner for obligations of
the Partnership under the Partnership Agreement and Partnership Act will be
limited to, subject to certain possible exceptions, the loss of the Limited
Partner's investment in the Partnership.
The Partnership is qualified to conduct business in each state in which it owns
property and may qualify to conduct business in other jurisdictions. Maintenance
of limited liability may require compliance with certain legal requirements of
those jurisdictions and certain other jurisdictions. Limitations on the
liability of a limited partner for the obligations of a limited partnership have
not clearly been established in many states. Accordingly, if it were determined
that the
10
<PAGE>
right, or exercise of the right by the Limited Partners, to make certain
amendments to the Partnership Agreement or to take other action pursuant to the
Partnership Agreement constituted "control" of the Partnership's business for
the purposes of the statutes of any relevant state, the Limited Partners might
be held personally liable for the Partnership's obligations. The Partnership
will operate in a manner the General Partner deems reasonable, necessary and
appropriate to preserve the limited liability of the Limited Partners.
Exculpation and Indemnification of the General Partner
If acting in good faith, the Partnership Agreement provides that the General
Partner will incur no liability for monetary damages to the Partnership or any
Limited Partner for losses sustained or liabilities incurred as a result of
errors in judgment or of any act or omission. In addition, the General Partner
is not responsible for any misconduct or negligence on the part of its agents,
provided the General Partner appointed such agents in good faith.
The Partnership Agreement also provides for indemnification of the General
Partner, the directors, officers and employees of the General Partner, and such
other persons as the General Partner may from time to time designate, against
any and all losses, claims, damages, liabilities (joint or several), expenses
(including reasonable legal fees and expenses), judgments, fines, settlements
and other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, that
relate to the operations of the Partnership in which any such indemnitee may be
involved, or is threatened to be involved, unless it is established that (i) the
act or omission of such indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) such indemnitee actually received an improper
personal benefit in money, property or services or (iii) in the case of any
criminal proceeding, such indemnitee had reasonable cause to believe that the
act or omission was unlawful.
Sale of Assets; Merger
Under the Partnership Agreement, the General Partner generally has the exclusive
authority to determine whether, when and on what terms the assets of the
Partnership will be sold or on which the Partnership will merge or consolidate
with another entity.
Removal of the General Partner; Transfer of General Partner's Interest
The Partnership Agreement does not authorize the Limited Partners to remove the
General Partner and the Limited Partners have no right to remove the General
Partner under the Partnership Act. The General Partner may not transfer any of
its interest as General Partner and withdraw as General Partner, except (a) to a
wholly-owned subsidiary of the General Partner or the owner of all the ownership
interests in the General Partner, (b) in connection with a merger or sale of all
or substantially all of the assets of the General Partner or (c) as a result of
the bankruptcy of the General Partner. A substitute or additional General
Partner may be admitted upon compliance with the applicable provisions of the
Partnership Agreement, including delivery by counsel for the Partnership of an
opinion that admission of such General Partner will not cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes or (ii) the loss of any Limited Partner's limited liability. The
General Partner may not sell all or substantially all of its assets, or enter
into a merger, unless the sale or merger includes the sale of all or
substantially all of the assets of, or the merger of, the Partnership and the
Limited Partners receive for each Unit substantially the same consideration as
the holder of one share of Common Stock.
Transferability of Interests
A Limited Partner generally may not transfer his interest in the Partnership
without the consent of the General Partner which may be withheld at its absolute
discretion. The General Partner may require, as a condition of any transfer,
that the transferring Limited Partner assume all costs incurred by the
Partnership in connection with such a transfer.
Redemption Rights
Each Limited Partner has the right (the "Redemption Right"), subject to the
purchase right of the General Partner described below, to cause the redemption
of such Limited Partner's Units for cash in an amount per Unit equal to the
average of the closing sale prices of the Common Stock of United Dominion on the
New York Stock Exchange (the "NYSE") for the ten trading days immediately
preceding the date of receipt by the General Partner of notice of such Limited
Partner's exercise of the Redemption Right provided that such Units have been
outstanding for at least one year. Subject to certain restrictions intended to
prevent undesirable tax consequences and assure compliance with the Securities
Act, a Limited Partner may exercise the Redemption Right at any time but not
more than twice within the
11
<PAGE>
same calendar year and not with respect to less than 1,000 Units (or all Units
owned by such Limited Partner, if less than 1,000). A Limited Partner that
exercises the Redemption Right shall be deemed to have offered to sell the Units
to be redeemed to the General Partner, and the General Partner may elect to
purchase such Units by paying to such Limited Partner either the redemption
price in cash or by delivering to such Limited Partner a number of shares of
Common Stock of the Company equal to the product of the number of such Units,
multiplied by the "Conversion Factor," which is 1.0, subject to customary
antidilution provisions in the event of stock dividends on or subdivisions or
combinations of the Common Stock subsequent to issuance of such Units. Any
Common Stock issued to the redeeming Limited Partner will be listed on the NYSE
and, if to the extent provided in such Redeeming Partner's Investment Agreement
or other agreement, registered under the Securities Act and/or entitled to
rights to Securities Act registration.
No Withdrawal of Capital by Limited Partners
No Limited Partner has the right to withdraw any part of his capital
contribution to the Partnership or interest thereon or to receive any
distribution, except as provided in the Partnership Agreement.
Issuance of Additional Limited Partnership Interests and Other Partnership
Securities
The General Partner is authorized, without the consent of the Limited Partners,
to cause the Partnership to issue additional Units or other Partnership
securities to the partners or to other persons on such terms and conditions and
for such consideration, including cash or any property or other assets permitted
by the Partnership Act, as the General Partner deems appropriate.
Meetings
The Partnership Agreement does not provide for annual meetings of the Limited
Partners, and the General Partner does not anticipate calling such meetings.
Amendment of Partnership Agreement
Amendments to the Partnership Agreement may, with four exceptions, be made by
the General Partner without the consent of the Limited Partners. Any amendment
to the Partnership Agreement which would (i) affect the Conversion Factor or the
Redemption Rights of the Limited Partners, (ii) adversely affect the rights of
the Limited Partners to receive distributions payable to them under the
Partnership Agreement, or (iii) alter the Partnership's profit and loss
allocations shall require the consent of Limited Partners. Any amendment that
would impose any obligation upon the Limited Partners to make additional capital
contributions to the Partnership shall require the consent of each Limited
Partner owning more than 50% of the percentage interests in the Partnership.
Books and Reports
The General Partner is required to keep at the specified office of the
Partnership the Partnership's books and records, including copies of the
Partnership's federal, state and local tax returns, a list of the partners and
their last known business addresses, the Partnership Agreement, the Partnership
certificate and all amendments thereto and any other documents and information
required under the Partnership Act. Any partner or his duly authorized
representative, upon paying duplicating, collection and mailing costs, is
entitled to inspect or copy such records during ordinary business hours.
The General Partner will furnish to each Limited Partner, as soon as practicable
after the close of each fiscal year, an annual report containing financial
statements of the Partnership (or United Dominion, if consolidated financial
statements including the Partnership are prepared) for such fiscal year. The
financial statements will be audited by accountants selected by the General
Partner. In addition, as soon as practicable after the close of each fiscal
quarter (other than the last quarter of the fiscal year), the General Partner
will furnish to each Limited Partner a quarterly report containing unaudited
financial statements of the Partnership (or the Company and the Partnership,
consolidated).
The General Partner will furnish to each Limited Partner, within 75 days after
the close of each fiscal year of the Partnership, the tax information necessary
to file such Limited Partner's individual tax returns.
Loans to Partnership
The Partnership Agreement provides that the General Partner may borrow
additional Partnership funds for any Partnership purpose from the General
Partner or a subsidiary or subsidiaries of the General Partner or otherwise.
12
<PAGE>
Adjustments of Capital Accounts and Percentage Interests
A separate capital account will be established and maintained for each Partner.
The General Partner shall revalue the property of the Partnership to its fair
market value (as determined by the General Partner, in its sole discretion) in
accordance with applicable federal income tax regulations if: (i) a new or
existing general or limited partner of the Partnership (a Partner or
collectively Partners) acquires an additional interest in the Partnership in
exchange for more than a de minimis capital contribution, (ii) the Partnership
distributes to a Partner more than a de minimis amount of Partnership property
as consideration for a Partnership interest or (iii) the Partnership is
liquidated for federal income tax purposes. When the Partnership's property is
revalued by the General Partner, the capital accounts of the partners shall be
adjusted in accordance with such regulations, which generally requires such
capital accounts to be adjusted to reflect the manner in which the unrealized
gain or loss inherent in such property (that has not been reflected in the
capital accounts previously) would be allocated among the Partners pursuant to
the Partnership Agreement if there were a taxable disposition of such property
for its fair market value on the date of the revaluation.
If the number of outstanding Units increases or decreases during a taxable year,
each Partner's percentage interest in the Partnership shall be adjusted by the
General Partner as of the effective date of each such increase or decrease to a
percentage equal to the number of Units held by such Partner divided by the
aggregate number of Units outstanding, after giving effect to such increase or
decrease, and profits and losses for the year will be allocated among the
Partners in a manner selected by the General Partner to give appropriate effect
to such adjustments.
Registration Rights
Limited Partners have no rights to Securities Act registration of any Common
Stock of United Dominion received in connection with redemption of Units except
as provided in their respective Investment Agreements or other agreements with
United Dominion.
Tax Matters; Profit and Loss Allocations
Pursuant to the Partnership Agreement, the General Partner is the "tax matters"
partner of the Partnership and, as such, has the authority to handle tax audits
and to make tax elections under the Code on behalf of the Partnership.
Profits of the Partnership are to be allocated first to partners in proportion
to and up to the amount of cash distributions, and second in accordance with the
respective partnership interests. Losses are allocated in accordance with each
partners percentage interest.
Distributions
The Partnership Agreement provides that the General Partner shall distribute
cash quarterly, in amounts determined by the General Partner in its sole
discretion (i) first to the outside limited partners, (ii) second to United
Dominion (or appropriate subsidiary) until United Dominion has received an
amount equal to prior distributions to the outside limited partners, and (iii)
third, to the outside limited partners and United Dominion (or the appropriate
subsidiary) in accordance with their percentage interests in the Partnership.
Also, the amount of cash distributable to a Limited Partner who has not been a
Limited Partner for the full quarter for which the distribution is paid is
subject to pro rata reduction. Upon liquidation of the Partnership, after
payment of, or adequate provision for, debts and obligations of the Partnership,
including any Partner loans, any remaining assets of the Partnership will be
distributed to all Partners with positive capital accounts in accordance with
their respective positive capital account balances. If the General Partner has a
negative balance in its capital account following a liquidation of the
Partnership, it will be obligated to contribute cash to the Partnership equal to
the negative balance in its capital account.
Term
The Partnership will continue until December 31, 2051, or until sooner dissolved
upon (i) the bankruptcy, dissolution, death or withdrawal of a General Partner
(unless the Limited Partners elect to continue the Partnership by electing by
unanimous consent a substitute General Partner within 90 days of such
occurrence), (ii) the passage of 90 days after the sale or other disposition of
all or substantially all the assets of the Partnership, (iii) the redemption of
all Limited Partners' interests in the Partnership or (iv) election by the
General Partner. Upon dissolution of the Partnership, the General Partner will
proceed to liquidate the assets of the Partnership and distribute the proceeds
remaining after payment or adequate provision for payment of all debts and
obligations of the Partnership as provided in the Partnership Agreement.
13
<PAGE>
Item 2. Properties
Real Estate Owned
The table below sets forth a summary by major geographic market of United
Dominion's real estate portfolio at December 31, 1999.
See also Notes 1 and 2 to the Consolidated Financial Statements and Schedule
III - Summary of Real Estate Owned.
<TABLE>
<CAPTION>
Number of Number of Percentage of Carrying
Apartment Apartment Carrying Value Encumbrances Cost
Major Geographic Markets Communities Homes Value (In thousands) (In thousands) Per Home
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartments:
Dallas/Fort Worth, TX 29 9,042 11% $415,116 $ 43,455 (A) $45,910
Houston, TX 25 6,228 6% 238,123 66,546 (A) 38,234
Phoenix, AZ 10 3,458 5% 198,702 19,500 (A) 57,462
Orlando, FL 13 4,052 5% 194,569 41,298 (A) 48,018
Tampa, FL 12 4,018 5% 179,307 40,177 (A) 44,626
San Antonio, TX 12 3,515 4% 171,556 38,138 (A) 48,807
Raleigh, NC 9 2,951 4% 146,528 15,202 49,654
Nashville, TN 11 3,064 4% 144,107 - 47,032
San Francisco, CA 4 980 4% 138,681 68,751 141,511
Charlotte, NC 10 2,534 3% 128,190 17,650 50,588
Columbus, OH 5 2,175 3% 118,268 34,459 54,376
Wilmington, NC 10 2,710 3% 111,709 - 41,221
Monterey Peninsula, CA 13 1,955 3% 111,474 703 (A) 57,020
Memphis, TN 7 2,196 3% 105,859 33,032 48,205
South Florida 6 1,638 3% 102,349 - (A) 62,484
Richmond, VA 8 2,372 3% 102,120 2,917 (A) 43,052
Greensboro, NC 8 2,123 3% 102,091 4,072 48,088
Columbia, SC 9 2,730 2% 97,414 5,000 35,683
Southern California 6 1,762 2% 95,243 6,034 54,054
Baltimore, MD 8 1,788 2% 85,368 34,800 (A) 47,745
Atlanta, GA 6 1,426 2% 69,239 10,841 (A) 48,555
Jacksonville, FL 3 1,157 1% 56,783 12,455 49,078
Hampton Roads, VA 6 1,437 1% 54,655 - (A) 38,034
Sacramento, CA 2 914 1% 52,758 17,065 (A) 57,722
Denver, CO 2 876 1% 44,942 - 51,304
Seattle, WA 5 1,159 1% 57,816 28,684 49,884
Detroit, MI 4 744 1% 42,910 635 (A) 57,675
Washington, DC 3 615 1% 35,731 - (A) 58,099
Portland, OR 3 627 1% 34,353 1,542 (A) 54,789
Indianapolis, IN 3 875 1% 28,699 304 (A) 32,799
Austin, TX 2 542 1% 23,836 - (A) 43,978
Other Florida 7 1,665 1% 78,929 - 47,405
Eastern Shore MD and Delaware 6 1,156 1% 52,553 - (A) 45,461
Other North Carolina 4 1,052 1% 48,876 10,142 46,460
Other Virginia 6 1,154 1% 47,984 2,780 41,581
Other Michigan 4 1,227 1% 47,535 - (A) 38,741
Other Midwest 5 969 1% 42,780 1,006 (A) 44,149
Other Washington State 3 536 1% 21,914 8,889 40,884
Arkansas 2 512 1% 22,306 - 43,566
Nevada 1 384 1% 20,776 - 54,104
New Mexico 3 530 1% 19,972 7,771 (A) 37,683
Other Arizona 2 408 -- 13,408 4,618 32,863
Other Georgia 1 240 -- 10,413 - (A) 43,388
Alabama 1 242 -- 8,780 - 36,281
Other Texas 1 248 -- 8,330 - (A) 33,589
Other South Carolina 1 168 -- 7,428 2,200 44,214
---------------------------------------------------------------------------------------------------
Total Apartments 301 82,154 100% $3,940,480 $ 997,066 $47,965
---------------------------------------------------------------------------------------------------
Commercial Properties (C) 4 N/A -- 12,565 3,070 N/A
---------------------------------------------------------------------------------------------------
Total Real Estate Owned 305 82,154 100% $ 3,953,045 $ 1,000,136 $47,965
---------------------------------------------------------------------------------------------------
<CAPTION>
Physical Average Monthly Rental Average
Occupancy Rates for the Year Ended Unit Size
Major Geographic Markets Full Year 1999 December 31, 1999 (B) (Square Feet)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Apartments:
Dallas/Fort Worth, TX 94.5% $625 801
Houston, TX 90.5% 582 794
Phoenix, AZ 91.5% 662 891
Orlando, FL 94.1% 666 930
Tampa, FL 92.4% 646 950
San Antonio, TX 92.4% 623 818
Raleigh, NC 92.5% 693 914
Nashville, TN 89.7% 636 955
San Francisco, CA 98.8% 1,482 776
Charlotte, NC 91.2% 680 965
Columbus, OH 92.8% 631 853
Wilmington, NC 89.8% 593 936
Monterey Peninsula, CA 93.1% 735 727
Memphis, TN 93.9% 593 833
South Florida 91.1% 830 1,084
Richmond, VA 94.3% 661 945
Greensboro, NC 88.8% 625 981
Columbia, SC 91.1% 535 812
Southern California 93.8% 704 751
Baltimore, MD 96.2% 695 865
Atlanta, GA 92.7% 692 908
Jacksonville, FL 90.5% 638 896
Hampton Roads, VA 95.1% 603 1,016
Sacramento, CA 97.8% 646 820
Denver, CO 93.5% 644 957
Seattle, WA 93.2% 681 840
Detroit, MI 94.9% 690 946
Washington, DC 97.7% 783 814
Portland, OR 91.2% 682 890
Indianapolis, IN 94.0% 519 966
Austin, TX 94.6% 620 713
Other Florida 92.1% 610 841
Eastern Shore MD and Delaware 96.3% 667 922
Other North Carolina 94.7% 586 890
Other Virginia 93.8% 623 869
Other Michigan 90.5% 622 815
Other Midwest 94.5% 608 1,004
Other Washington State 83.3% 702 936
Arkansas 93.9% 593 821
Nevada 93.4% 646 839
New Mexico 89.4% 526 670
Other Arizona 91.5% 445 602
Other Georgia 90.8% 581 852
Alabama 91.8% 513 1,095
Other Texas 85.4% 562 739
Other South Carolina 88.7% 509 855
---------------------------------------------------------------------------
Total Apartments 92.6% $645 873
---------------------------------------------------------------------------
Commercial Properties (C) N/A N/A N/A
---------------------------------------------------------------------------
Total Real Estate Owned 92.6% $645 873
---------------------------------------------------------------------------
</TABLE>
(A) These communities are encumbered by the following: (i) 21 communities
encumbered by two REMIC financings aggregating $59.2 million, (ii) 19
communities encumbered by one secured note payable in the amount of $195.7
million and (iii) 29 communities encumbered by two fixed rate debt
aggregating $161.5 million. The amount of debt is not included in the
encumbrances shown for the individual markets.
(B) Average Monthly Rental Rates for the Year Ended December 31, 1999,
represents potential rent collections (gross potential rents less market
adjustments), which approximates net effective rents. These amounts exclude
the 1999 acquisitions.
(C) Includes four commercial properties and one parcel of land included in real
estate held for disposition.
14
<PAGE>
Item 3. LEGAL PROCEEDINGS
- ---------------------------
Neither United Dominion nor any of its apartment communities is presently
subject to any material litigation nor, to United Dominion's knowledge, is any
litigation threatened against United Dominion or any of the communities, other
than routine actions arising in the ordinary course of business. Some of these
routine actions are expected to be covered by liability insurance, and none are
expected to have a material adverse effect on the business or financial
condition or results of operations of United Dominion.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of United Dominion's fiscal year ended December 31, 1999.
Executive Officers of the Registrant
- ------------------------------------
The executive officers of United Dominion, listed below, serve in their
respective capacities for approximate one year terms.
Name Age Office Since
- ---- --- ------ -----
John P. McCann 55 Chairman of the Board 1974
and Chief Executive Officer
John S. Schneider 61 Vice-Chairman of the Board, 1996
Chief Operations Officer
and President
A. William Hamill 52 Executive Vice President 1999
and Chief Financial Officer
Richard A. Giannotti 44 Senior Vice President and Director 1985
of Development-East
Mark E. Wood 55 Senior Vice President and Director 1996
of Development-West
Katheryn E. Surface 41 Senior Vice President, Corporate 1992
Secretary and General Counsel
Kevin W. Walsh 45 Senior Vice President of 1999
Finance
Curt W. Carter 43 Senior Vice President and Director 1985
of Apartment Operations-Northern
Region
Robert L. Landis 41 Senior Vice President and Director 1996
of Apartment Operations-Western
Region
15
<PAGE>
Walter J. Lamperski 42 Senior Vice President and Director 1996
of Apartment Operations-Southern
Region
Blake W. Clemens 42 Senior Vice President and Director 1998
of Acquisitions
Thomas J. Corcoran 53 Senior Vice President and
Director of Human Resources 1997
Patrick S. Gregory 50 Senior Vice President and
Director of Information Technology 1997
Mr. McCann has been United Dominion's managing Chief Executive Officer
since 1974. Mr. McCann was elected Chairman of the Board in 1996.
Mr. Schneider is the former Chief Executive Officer and Chairman of the
Board of South West Property Trust Inc. (South West). Mr. Schneider was employed
with the investment banking firm of Donaldson, Lufkin and Jenrette until from
1967 until 1973, when he co-founded a predecessor firm to South West. Mr.
Schneider was elected Vice Chairman of the Board and Executive Vice President in
1996 in connection with the merger with South West and President in 1998.
Mr. Hamill joined United Dominion as Executive Vice President and Chief
Financial Officer in October 1999. Prior to joining United Dominion, Mr. Hamill
was the Chief Financial Officer of Union Camp Corporation. Mr. Hamill also
previously served as an investment banker with Morgan Stanley & Co.
Incorporated, where he was a managing director.
Mr. Giannotti joined United Dominion as Director of Development and
Construction in September 1985. He was elected Assistant Vice President in 1988,
Vice President in 1989 and Senior Vice President in 1996. In 1998, Mr. Giannotti
was elected Director of Development-East.
Mr. Wood joined United Dominion as Vice President of Construction in
connection with the merger of South West in 1996. He was promoted to Senior Vice
President and Director Development -West in 1998.
Ms. Surface joined United Dominion in 1992 as Assistant Vice President and
Legal Counsel, elected General Counsel, Corporate Secretary and Vice President
in 1994 and elected to Senior Vice President in 1997.
Mr. Walsh joined United Dominion as Vice President of Finance in May 1998.
In 1999, Mr. Walsh was elected to Senior Vice President. Prior to joining United
Dominion, Mr. Walsh was the Vice President of Finance and Treasurer of Tultex
Corporation. His experience also includes fifteen years in corporate banking
with predecessors to both First Union and NationsBank.
Mr. Carter joined United Dominion in 1991 as an Assistant Vice President of
Apartment Operations. In 1992, he was promoted to Vice President of Apartment
Operations. In 1995, he was elected Regional Vice President- Northern Region,
and in 1997 was promoted to Senior Vice President and Director of Apartment
Operations- Northern Region.
Mr. Landis joined United Dominion in 1996 as Regional Vice President-
Florida Region and was promoted in 1997 to Senior Vice President and Director of
Apartment Operations-Florida Region. During 1998, Mr. Landis became the Senior
Vice President and Director of Apartment Operations-Western Region. Prior to
joining United
16
<PAGE>
Dominion, he was Vice President of Asset Management and Property Management for
CRI/CAPREIT, Inc.
Mr. Lamperski joined United Dominion in 1996 as the Regional Vice
President-Southern Region and was promoted in 1997 to Senior Vice President and
Director of Apartment Operations-Southern Region. From February 1990 to August
1996, he was Vice President and Director of Property Management for Steven D.
Bell, a property management company located in Greensboro, North Carolina.
Mr. Clemens joined United Dominion in 1998 as a Vice President and Director
of Acquisitions and was promoted to Senior Vice President in 1999. Prior to
joining United Dominion, Mr. Clemens was the Vice President of Acquisitions for
McNeil Real Estate Management Company from 1996 to 1998. Prior to this,
Mr. Clemens was the Vice President of Acquisitions and Finance at Insignia
Commercial Group, Incorporated.
Mr. Corcoran joined United Dominion in 1997 as the Assistant Vice President
of Human Resources and was promoted to Vice President in 1998 and Senior Vice
President in 1999. Prior to joining United Dominion, Mr. Corcoran was the Vice
President of Human Resources for Acordia, Inc., a national insurance brokerage
firm from 1993 to 1995.
Mr. Gregory joined United Dominion in 1997 as the Vice President and
Director Information Technology and was promoted to Senior Vice President in
1999. From 1976 to 1997, Mr. Gregory was employed by Crestar Bank as a New
Technology Analyst.
17
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -------------------------------------------------------------------------------
United Dominion's Common Stock is traded on the New York Stock Exchange
(NYSE) under the symbol UDR. The following tables set forth the quarterly high
and low sale prices per common share reported on the NYSE for each quarter of
the last two years. Distribution information for Common Stock reflects
distributions declared per share for each calendar quarter and paid at the end
of the following month.
COMMON STOCK
Distributions
High Low Declared
1998
1st Quarter $14 13/16 $13 3/4 $.2625
2nd Quarter 14 1/2 13 5/16 .2625
3rd Quarter 14 1/16 10 11/16 .2625
4th Quarter 11 3/4 10 1/16 .2625
1999
1st Quarter $11 1/4 $ 9 1/16 $.2650
2nd Quarter 11 15/16 9 13/16 .2650
3rd Quarter 12 1/16 10 3/4 .2650
4th Quarter 11 5/8 9 1/8 .2650
United Dominion determined that, for federal income tax purposes, approximately
58.6% of the distributions for each of the four quarters of 1999 represented
ordinary income to its shareholders, 29.2% represented return of capital to its
shareholders and 12.2% represented long-term capital gain to its shareholders.
On March 21, 2000, the closing sale price of the Common Stock was $9 7/8 per
share on the NYSE, and there were 8,874 holders of record of the 103,127,425
shares of Common Stock.
United Dominion pays regular quarterly distributions to holders of shares of
Common Stock. Future distributions by United Dominion will be at the discretion
of its Board of Directors after considering the company's actual funds from
operations, financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
and other factors. The annual distribution payment for calendar year 1999
necessary for United Dominion to maintain its status as a REIT was approximately
$.78 per share. United Dominion paid total distributions of $1.06 per share for
1999.
18
<PAGE>
SERIES A PREFERRED STOCK
United Dominion's Series A Preferred Stock ("Series A Preferred") and
Series B Preferred Stock ("Series B Preferred") is traded on the New York Stock
Exchange (NYSE) under the symbol "UDRpfa" and "UDRpfb", respectively. The
following tables set forth the quarterly high and low sale prices per share
reported on the NYSE for each quarter of the last two years for the Series A
Preferred and Series B Preferred. Distribution information for the Series A
Preferred and Series B Preferred reflects distributions declared per share for
each calendar quarter and paid at the end of the following month.
Distributions
High Low Declared
1998
1st Quarter $26 11/16 $26 1/8 $.5775
2nd Quarter 26 7/8 25 3/4 .5775
3rd Quarter 25 15/16 24 1/2 .5775
4th Quarter 25 11/16 24 3/8 .5775
1999
1st Quarter $25 1/8 $24 $.5775
2nd Quarter 25 1/4 23 13/16 .5775
3rd Quarter 25 1/16 20 9/16 .5775
4th Quarter 22 3/8 17 13/16 .5775
On or after April 24, 2000, the Series A Preferred Stock may be redeemed for
cash at a redemption price of $25 per share, plus accrued and unpaid dividends
from the proceeds from the sale of additional capital stock (common or
preferred).
SERIES B PREFERRED STOCK
Distributions
High Low Declared
1998
1st Quarter $27 3/8 $26 3/16 $.5375
2nd Quarter 26 1/2 25 5/8 .5375
3rd Quarter 26 13/16 24 9/16 .5375
4th Quarter 25 7/8 24 9/16 .5375
1999
1st Quarter $26 1/16 $24 $.5375
2nd Quarter 25 1/2 23 5/8 .5375
3rd Quarter 25 5/16 20 1/4 .5375
4th Quarter 22 5/8 15 5/8 .5375
The Series B Preferred Stock may be redeemed beginning May 29, 2007 at the sole
option of United Dominion at a redemption price of $25 per share, plus accrued
and unpaid dividends from the proceeds from the sale of additional capital stock
(common or preferred).
19
<PAGE>
SERIES D PREFERRED STOCK
On December 7, 1998, in connection with the acquisition of American Apartment
Communities II, Inc. (AAC), United Dominion issued eight million shares of
Series D Convertible Redeemable Preferred Stock (Series D) to one of the sellers
of AAC. The Series D is convertible into 1.5385 shares of common stock at the
option of the holder at any time at $16.25 per share. The Series D is not
redeemable prior to December 7, 2003. On or after this date, United Dominion
may, at its option, redeem all or part of the Series D at a price per share of
$25, plus accrued and unpaid dividends from the proceeds from the sale of
additional capital stock (common or preferred). Distributions declared for 1999
were $1.89 per share or $.4725 per quarter. The Series D is not listed on any
exchange.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
United Dominion has a Dividend Reinvestment and Stock Purchase Plan under which
holders of Common and Preferred Stock may elect to automatically reinvest their
distributions and make additional cash payments to acquire additional shares of
United Dominion's Common Stock at a discount.
OPERATING PARTNERSHIP UNITS
From time to time, United Dominion issues shares of its common stock in exchange
for Operating Partnership Units (OP Units) tendered to United Dominion's
operating partnership, United Dominion Realty L.P., for redemption in accordance
with the provisions of the Agreement of Limited Partnership of United Dominion
Realty L.P. Such shares are issued based on the exchange ratio of one share for
each OP Unit. During 1999, United Dominion issued a total of 71,373 shares of
common stock in exchange for OP Units.
Item 6. SELECTED FINANCIAL DATA
- --------------------------------
The following table sets forth selected consolidated financial and other
information for United Dominion as of and for each of the years in the five year
period ended December 31, 1999. The table should be read in conjunction with
the Consolidated Financial Statements of United Dominion Realty Trust, Inc. and
the Notes thereto included elsewhere herein.
20
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
In thousands, except per share data and apartment homes owned
Operating Data (a)
Rental income $ 618,749 $ 478,718 $ 386,672 $ 241,260 $ 194,511
Income before gains on sales of investments, minority interests
and extraordinary item 60,379 47,339 57,813 33,726 28,037
Gains on sales of investments 37,995 26,672 12,664 4,346 5,090
Extraordinary item - early extinguishment of debt 927 (138) (50) (23) -
Net income 93,622 72,332 70,149 37,991 33,127
Distributions to preferred shareholders 37,714 23,593 17,345 9,713 6,637
Net income available to common shareholders 55,908 48,739 52,804 28,278 26,490
Common distributions declared 109,607 107,758 88,587 55,493 48,610
Weighted average number of common shares outstanding-basic 103,604 99,966 87,145 57,482 52,781
Weighted average number of common shares outstanding-diluted 103,639 100,062 87,339 57,655 52,972
Weighted average number of common shares, OP Units and common
share equivalents - diluted 124,127 103,793 87,656 57,724 52,972
Per share:
Basic earnings per share $0.54 $0.49 $0.61 $0.49 $0.50
Diluted earnings per share 0.54 0.49 0.60 0.49 0.50
Common distributions declared 1.06 1.05 1.01 0.96 0.90
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Real estate owned, at carrying value $3,953,045 $3,952,752 $2,517,398 $2,099,641 $1,205,685
Accumulated depreciation 395,864 316,630 245,367 187,909 153,026
Total real estate owned, net of accumulated depreciation 3,557,181 3,636,122 2,272,031 1,911,732 1,052,659
Total assets 3,688,317 3,762,940 2,313,725 1,966,904 1,080,616
Secured debt 1,000,136 1,072,185 417,325 376,560 180,481
Unsecured debt 1,127,169 1,045,564 738,901 668,275 349,858
Total debt 2,127,305 2,117,749 1,156,226 1,044,835 530,339
Shareholders' equity 1,310,212 1,374,121 1,058,357 850,379 516,389
Number of common shares outstanding 102,741 103,639 89,168 81,983 56,375
- -----------------------------------------------------------------------------------------------------------------------------------
Other Data (a)
Cash Flow Data
Cash provided by operating activities $ 190,876 $ 152,875 $ 137,903 $ 90,064 $ 66,428
Cash used in investing activities (34,294) (276,142) (342,273) (161,572) (183,930)
Cash (used in) provided by financing activities (174,985) 148,875 191,391 82,056 113,145
Funds from operations (b)
Income before gains on sales of investments, minority
interests and extraordinary item $ 60,379 $ 47,339 $ 57,813 $ 33,726 $ 28,037
Adjustments:
Depreciation of real estate owned, net of outside 120,543 99,588 76,688 47,410 38,939
partners' interest
Distributions to preferred shareholders (37,714) (23,593) (17,345) (9,713) (6,637)
Minority interest of outside partnerships (1,245) (111) -- -- --
Non-recurring items:
Impairment loss on real estate and investments 19,300 -- 1,400 290 1,700
Loss on termination of an interest rate risk
management agreement -- 15,591
Prior years' employment and other taxes -- -- -- -- 395
Adjustment for internal acquisition costs (c) -- (544) (1,341) (901) (587)
-------------------------------------------------------------
Funds from operations-basic $ 161,263 $ 138,270 $ 117,215 $ 70,812 $ 61,847
=============================================================
Adjustments:
Distributions to preferred shareholders-Series D
(Convertible) 15,154 986 -- -- --
-------------------------------------------------------------
Funds from operations-diluted $ 176,417 $ 139,256 $ 117,215 $ 70,812 $ 61,847
=============================================================
Apartment Homes Owned
Total apartment homes owned at December 31 82,154 86,893 62,789 55,664 34,224
Weighted average number of apartment homes owned during the
year 85,926 70,724 58,038 37,481 31,242
</TABLE>
(a) From 1996 to 1998, United Dominion completed the following statutory
mergers: (i) South West Property Trust, Inc. on December 31, 1996 for an
aggregate purchase price of $572 million, (ii) ASR Investments Corporation
Inc. on March 27, 1998 for an aggregate purchase price of $323 million, and
(iii) American Apartment Communities II on December 7, 1998, for an
aggregate purchase price of $794 million.
(b) Funds from operations ("FFO") is defined as income before gains (losses) on
sales of investments, minority interests and extraordinary items (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
recommendations set forth in a White Paper adopted by the National
Association of Real Estate Investment Trusts (NAREIT) in early 1995. 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 activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available
to fund cash needs.
(c) Reflects the adjustment for internal acquisition costs that were
capitalized prior to March 19, 1998.
21
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
This annual 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. Such statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievement of United Dominion Realty Trust,
Inc. ("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.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto of United Dominion appearing elsewhere in
this annual report.
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 December 31, 1999, United Dominion owned 301 communities containing 82,154
apartment homes nationwide, including 37 communities with 7,182 completed
apartment homes included in real estate held for disposition and 330 recently
completed apartment homes included in real estate under development.
22
<PAGE>
The following table summarizes United Dominion's apartment market information by
major geographic markets and other geographic areas (including real estate under
development and excluding four commercial properties):
<TABLE>
<CAPTION>
As of December 31, 1999 December 31, 1999
- ------------------------------------------------------------------------------------------- -----------------------------
No. of No. of % of Carrying Year Ended Quarter Ended
Apartment Apartment Carrying Value Physical Physical
Area Communities Homes Value (in thousands) Occupancy Occupancy
- ------------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Major Markets
- -------------
Dallas/Fort Worth, TX 29 9,042 11% $ 415,116 94.5% 94.8%
Houston, TX 25 6,228 6% 238,123 90.5% 90.3%
Phoenix, AZ 10 3,458 5% 198,702 91.5% 93.3%
Orlando, FL 13 4,052 5% 194,569 94.1% 94.3%
Tampa, FL 12 4,018 5% 179,307 92.4% 93.2%
San Antonio, TX 12 3,515 4% 171,556 92.4% 92.5%
Raleigh, NC 9 2,951 4% 146,528 92.5% 92.3%
Nashville, TN 11 3,064 4% 144,107 89.7% 92.4%
San Francisco, CA 4 980 4% 138,681 98.8% 99.5%
Charlotte, NC 10 2,534 3% 128,190 91.2% 91.1%
Columbus, OH 5 2,175 3% 118,268 92.8% 95.3%
Wilmington, NC 10 2,710 3% 111,709 89.8% 93.7%
Monterey Peninsula, CA 13 1,955 3% 111,474 93.1% 91.2%
Memphis, TN 7 2,196 3% 105,859 93.9% 94.1%
South Florida 6 1,638 3% 102,349 91.1% 90.8%
Richmond, VA 8 2,372 3% 102,120 94.3% 97.0%
Greensboro, NC 8 2,123 3% 102,091 88.8% 90.8%
Columbia, SC 9 2,730 2% 97,414 91.1% 91.2%
Southern California 6 1,762 2% 95,243 93.8% 93.4%
Baltimore, MD 8 1,788 2% 85,368 96.2% 97.1%
Atlanta, GA 6 1,426 2% 69,239 92.7% 94.4%
Seattle, WA 5 1,159 1% 57,816 93.2% 96.9%
Jacksonville, FL 3 1,157 1% 56,783 90.5% 92.0%
Hampton Roads, VA 6 1,437 1% 54,655 95.1% 97.4%
Sacramento, CA 2 914 1% 52,758 97.8% 98.1%
Denver, CO 2 876 1% 44,942 93.5% 95.1%
Detroit, MI 4 744 1% 42,910 94.9% 95.0%
Washington, DC 3 615 1% 35,731 97.7% 98.4%
Portland, OR 3 627 1% 34,353 91.2% 91.0%
Indianapolis, IN 3 875 1% 28,699 94.0% 92.7%
Austin, TX 2 542 1% 23,836 94.6% 97.4%
Other Areas
- -----------
Other Florida 7 1,665 1% 78,929 92.1% 94.6%
Eastern Shore MD and Delaware 6 1,156 1% 52,553 96.3% 95.6%
Other North Carolina 4 1,052 1% 48,876 94.7% 94.5%
Other Virginia 6 1,154 1% 47,984 93.8% 94.7%
Other Michigan 4 1,227 1% 47,535 90.5% 95.0%
Other Midwest 5 969 1% 42,780 94.5% 95.0%
Other Washington State 3 536 1% 21,914 83.3% 93.5%
Arkansas 2 512 1% 22,306 93.9% 95.3%
Nevada 1 384 1% 20,776 93.4% 96.8%
New Mexico 3 530 1% 19,972 89.4% 90.6%
Other Arizona 2 408 -- 13,408 91.5% 94.8%
Other Georgia 1 240 -- 10,413 90.8% 95.9%
Alabama 1 242 -- 8,780 91.8% 91.7%
Other Texas 1 248 -- 8,330 85.4% 91.4%
Other South Carolina 1 168 -- 7,428 88.7% 93.0%
-------------------------------------------------- -------------------
Total 301 82,154 100% $3,940,480 92.6% 93.6%
================================================== ===================
</TABLE>
23
<PAGE>
Liquidity and Capital Resources
United Dominion expects to meet its short-term financial requirements through
net cash provided by operations and borrowings under its unsecured bank lines of
credit. United Dominion believes that cash provided by operations will be
adequate to meet normal operating requirements and payment of distributions by
United Dominion in accordance with REIT requirements in both the short and long-
term. In addition, budgeted capital expenditures and monthly principal
amortization of debt are also expected to be funded from net cash provided by
operating activities.
United Dominion meets certain long-term liquidity requirements, such as
scheduled debt maturities, development activity and significant capital
improvements through: (i) the issuance of long-term secured and unsecured
borrowings, (ii) proceeds from the sales of assets, (iii) common and preferred
stock offerings, (iv) retained operating cash flow and (v) the use of unused
credit facilities. 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.
In March 2000, United Dominion sold $100 million of senior unsecured notes due
March 2003 at an interest rate of 8.625%. The proceeds from the offering were
used to prepay certain mortgage debt and repay revolving bank debt.
United Dominion currently plans to establish during 2000, a program for the sale
of up to $150 million aggregate principal amount of medium-term notes.
United Dominion has no significant maturities of debt until the fourth quarter
of 2000 at which time approximately $175 million of secured and unsecured debt
will mature. At this time, management expects to refinance the maturing debt
with debt of similar characteristics and prevailing market rates.
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 year ended December 31, 1999, United Dominion's cash flow from operating
activities was $190.9 million compared to $152.9 million in 1998. The increase
was primarily due to the increased operating income from United Dominion's
acquired communities as well as increases in property operating income achieved
through higher rent growth as discussed under "Results of Operations".
Investing Activities
For the year ended December 31, 1999, net cash used in investing activities was
$34.3 million compared to $276.1 million for 1998, a decrease of $241.8 million.
During 1999, United Dominion shifted its focus from the acquisition of real
estate assets to the disposition and development of real estate assets. 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.
Disposition of Investments
As part of its strategic repositioning, United Dominion determined that it would
selectively dispose 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. The disposition program
allows United Dominion to reduce the age of its existing portfolio, which should
result in lower operating expense and capital expenditure growth associated with
the older communities.
During 1999, United Dominion sold 36 communities with 7,443 apartment homes for
an aggregate sales price of $241.2 million and recognized gains for financial
reporting purposes of $38.0 million. These sales allowed United Dominion to exit
certain markets that had low growth opportunities and improve the average age of
the company's overall apartment portfolio by selling communities with an average
age of 25
24
<PAGE>
years. During 1998, 18 communities with 5,318 apartment homes and an average age
of 25 years were sold for an aggregate sales price of $156.6 million, which
resulted in gains for financial reporting purposes of $26.7 million.
Proceeds from the disposition program were used to strengthen the balance sheet
by paying down debt, as well as to fund new development projects and to
selectively repurchase shares of United Dominion's preferred and common stock.
Where necessary to defer capital gain taxes, disposition proceeds have been
reinvested in strategically attractive communities.
United Dominion intends to sell 6,000 to 7,000 apartment homes during 2000.
Proceeds from the 2000 dispositions, expected to be at levels similar to 1999,
are to be used to reduce debt, repurchase preferred shares, fund development
activity and acquire communities through 1031 exchanges.
Subsequent to year-end, United Dominion sold three communities for approximately
$18.5 million. In addition, United Dominion entered into contracts to sell two
communities with 285 apartment homes for an aggregate sales price in excess of
$17 million. For financial reporting purposes, aggregate gains on the sales of
investments are not expected to be material. The transactions are expected to
close during the first and second quarters of 2000; however, there can be no
assurance that these transactions will be consummated as planned.
Real Estate under Development
During 1999, United Dominion continued its commitment to development as part of
its strategic repositioning, shifting capital into development activity and away
from lower yielding acquisitions. During 1999, the development of over 1,500
homes was completed, up from 890 homes during 1998. Development activity is
focused in core markets that have locally based development teams and strong
operations managers in place.
During 1999, the following development projects were completed:
<TABLE>
<CAPTION>
Total
No. Apt. Costs Cost per Date % Leased
Property Location Homes (Thousands) Home Completed at 12/31/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Communities
- ---------------
Stone Canyon Houston, TX 216 $ 10,322 $47,800 3/99 89.4%
Dominion Franklin Nashville, TN 360 26,347 73,200 3/99 91.4%
Ashlar I Ft. Myers, FL 260 18,887 72,600 5/99 99.6%
Alexander Court Columbus, OH 356 22,827 64,100 11/99 91.9%
Sierra Foothills Phoenix, AZ 322 21,458 66,600 11/99 79.5%
Legends at Park 10 Houston, TX 236 13,612 57,700 11/99 89.8%
-----------------------------
1,750 113,453 64,800
Additional Phases
- -----------------
Heritage Green II Columbus, OH 96 $ 6,740 $70,200 5/99 94.8%
-----------------------------
Total 1,846 $120,193 $65,100
=============================
</TABLE>
The following projects are under development at December 31, 1999:
<TABLE>
<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
- ---------------
Ashton at Waterford Lakes Orlando, FL 292 204 $19,244 $ 21,000 $71,900 1Q00
The Meridian Dallas, TX 250 82 11,403 16,500 66,000 2Q00
Oaks at Weston Raleigh, NC 380 -- 6,391 30,200 79,500 2Q01
--------------------------------------------------------
922 286 37,038 67,700 73,400
Additional Phases
- -----------------
Dominion Crown Point II Charlotte, NC 220 44 10,016 14,800 67,300 1Q01
Ashlar II Ft. Myers, FL 168 -- 1,712 12,900 76,800 4Q00
Escalante II San Antonio, TX 312 -- 5,295 19,700 63,100 4Q00
--------------------------------------------------------
700 44 17,023 47,400 67,700
Total 1,622 330 $54,061 $115,100 $71,000
========================================================
</TABLE>
25
<PAGE>
In addition to the apartment homes under development at December 31, 1999,
United Dominion has land held for future development with a carrying value of
$37.9 million. Future development activity will be based upon the availability
of capital and real estate fundamentals. Additional development starts planned
in 2000 are expected to be undertaken with financial partners through joint
venture arrangements.
Acquisitions
During 1999, United Dominion curtailed its active pace of acquisitions,
investing in new communities only when necessary to complete 1031 exchanges in
order to defer taxes on large capital gains. During 1999, using proceeds from
its disposition program, United Dominion acquired five communities with 1,230
apartment homes at a total cost (including closing costs) of $74.3 million or
$60,400 per home during 1999. These communities are located in markets that are
considered strategically important to United Dominion, such as Baltimore,
Maryland, South Florida and Riverside and San Diego, California.
During 2000, United Dominion does not anticipate acquiring communities except to
reinvest a portion of the proceeds from property dispositions in order to defer
taxes on capital gains.
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.
During 1999, United Dominion substantially completed the upgrade program which
was part of the strategic plan to improve the overall quality of its portfolio.
Capital expenditures decreased from 1998 as the overall age and physical
condition of the apartment portfolio has improved. For the year ended December
31, 1999, $32.8 million or $639 per home was spent on capital expenditures for
United Dominion's same communities (those acquired or developed prior to January
1, 1998). 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 $19.8 million or $386 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 $13.0 million or $253 per home for the year
ended December 31, 1999. United Dominion reduced capital expenditures related to
same communities throughout 1999, but will continue to selectively add revenue-
enhancing improvements, which are budgeted to provide a high return on
investment. Capital expenditures during 2000 are expected to be at levels
similar to 1999.
In addition to capital improvements to its same communities, United Dominion
invested approximately $42 million or $1,220 per home on its non-mature
communities (those acquired or developed subsequent to January 1, 1998) during
1999, which includes both recurring and revenue enhancing capital improvements.
Financing Activities
Net cash used in financing activities during 1999 was $175.0 million compared to
net cash provided by financing activities of $148.9 million for 1998. During
1999, as part of its strategic plan to improve its balance sheet position,
United Dominion used approximately 60% of the proceeds from its disposition
program to pay down secured and unsecured debt. The remaining proceeds were used
to acquire assets where necessary to complete 1031 exchanges and, to a lesser
extent, to repurchase shares of preferred and common stock.
In January 1999, United Dominion established a program for the sale of up to
$200 million aggregate principal amount of medium-term notes (the "MTN
Program"). For the year ended December 31, 1999, United Dominion sold an
aggregate of $190 million of senior unsecured notes under the MTN Program with a
weighted average interest rate of 7.61%. Net proceeds from the offerings were
used to repay amortizing unsecured debt, repay maturing mortgage debt, repay a
$75 million senior unsecured note that matured in April 1999 and repay revolving
bank debt.
26
<PAGE>
During 1999, United Dominion closed on $195.7 million of 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, bears 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. The FNMA Credit Facility had a weighted average interest
rate of 6.32% at December 31, 1999. United Dominion used interest rate swap
agreements to limit its interest rate exposure on $57 million of this borrowing
(see Secured Credit Facilities in Note 3). The proceeds from the FNMA Credit
Facility were used to repay a $91 million secured credit facility assumed in
connection with the American Apartment Communities II transaction, to replace
$58 million in maturing secured debt and the remaining proceeds were used to
repay revolving bank debt.
United Dominion issued 1.6 million shares of its common stock and received $16.7
million under its Dividend Reinvestment and Stock Purchase Plan during 1999 that
included $1.2 million in optional cash investments and $15.5 million of
reinvested dividends.
For the year ended December 31, 1999, United Dominion paid distributions to its
common shareholders and unitholders in its operating partnerships aggregating
$118.8 million. The distribution to common shareholders and holders of operating
partnership units equates to a dividend rate of $1.06 per share or unit. In
addition, $35.0 million of preferred dividends were paid to Series A, B and D
preferred shareholders.
In June 1999, the Board of Directors authorized the repurchase of up to 5.5
million common shares, or 5% of the total common shares outstanding, using
proceeds from the disposition program. Such purchases will be made from time to
time in the open market or in privately negotiated transactions; the timing,
volume and price of such purchases will be at the discretion of management and
the Board of Directors. For the year ended December 31, 1999, United Dominion
repurchased 2.6 million common shares at an average price of $11.22 per share.
The Board of Directors, also 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 year ended December 31,
1999, United Dominion repurchased 31,440 Series A preferred shares at an average
price of $19.76 per share and 53,700 Series B preferred shares at an average
price of $18.35 per share. In addition, United Dominion redeemed one million
operating partnership units for $12.0 million.
During 1999, using proceeds from its disposition program, United Dominion
repurchased $70.0 million of certain of its higher rate outstanding unsecured
debt with a weighted average yield of 7.74%. In addition, in connection with the
disposition program, United Dominion was relieved of $57.7 million of mortgage
debt and $9.3 million of revolving bank debt.
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. The Bank Credit Facility also includes
a $100 million competitive bid option, which allows United Dominion to solicit
bids from participating banks at rates below the contractual rate. At December
31, 1999, $277.6 million was outstanding under these credit facilities leaving
$32.4 million available for use.
The Bank Credit Facility and Line of Credit are subject to customary financial
covenants and limitations.
Derivative Instruments
United Dominion, from time to time, uses derivative instruments to synthetically
alter on-balance sheet liabilities or to hedge anticipated financing
transactions. Derivative contracts did not have a material impact on the results
of operations during 1999.
27
<PAGE>
Market Risk
United Dominion is exposed to market risk principally from interest rate risk
associated with variable rate notes payable and maturing debt that has to be
refinanced. United Dominion does not hold financial instruments for trading
purposes, but rather issues these financial instruments to finance owning and
managing real estate. United Dominion's interest rate sensitivity position is
managed by its treasury department. Interest rate sensitivity is the
relationship between changes in market interest rates and the fair value of
market rate sensitive assets and liabilities. United Dominion's earnings are
affected by changes in short-term interest rates on its variable rate debt and
the repricing of fixed rate debt. A large portion of United Dominion's market
risk is exposure to short-term interest rates from variable rate borrowings
outstanding under its bank credit facilities, which totaled $277.6 million at
December 31, 1999. The impact on United Dominion's financial statements of
refinancing fixed rate debt that matured during 1999 was not material.
At December 31, 1999, the notional value of United Dominion's derivative
products for the purpose of managing interest rate risk was $177 million of
interest rate swaps under which United Dominion pays a fixed rate of interest
and receives a variable rate. These agreements effectively fix $177 million of
United Dominion's variable rate notes payable to a weighted average fixed rate
of 6.78% (see Note 5 - Financial Instruments). At December 31, 1999, the fair
market value of the interest rate swaps in a favorable value position to United
Dominion would have been $626 thousand. If interest rates were 100 basis points
more or less at December 31, 1999, the fair market value of the interest rate
swaps would have increased or decreased $500 thousand, respectively.
If market interest rates for variable rate debt averaged 100 basis points more
in 2000 than they did during 1999, United Dominion's interest expense, after
considering the effects of its interest rate swap agreements, would increase,
and income before taxes would decrease by $4.0 million. Comparatively, if market
interest rates for variable rate debt averaged 100 basis points more in 1999
than it did in 1998, United Dominion's interest expense, after considering the
effects of its interest rate swap agreements, would increase, and income before
taxes would decrease by $4.0 million. If market rates for fixed rate debt were
100 basis points higher at December 31, 1999, the fair value of fixed rate debt
would have decreased from $1.55 billion to $1.50 billion. If market interest
rates for fixed rate debt were 100 basis points lower at December 31, 1999, the
fair value of fixed rate debt would have increased from $1.55 billion to $1.62
billion.
These amounts are determined by considering the impact of the hypothetical
interest rates on United Dominion's borrowing cost and interest rate swap
agreements. These analyses do not consider the effects of the reduced level of
overall economic activity that could exist in such an environment. Further, in
the event of a change of such magnitude, management would likely take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no change in United Dominion's financial structure.
Results of Operations
United Dominion's net income is primarily generated from the operations of its
apartment communities.
1999-vs-1998
For 1999, net income available to common shareholders increased $7.2 million,
with a corresponding increase of $.05 for both basic and diluted earnings per
share, compared to 1998. The increase per share was primarily attributable to
aggregate gains on the sale of investments of $38.0 million ($.37 per share) for
the year ended December 31, 1999, compared to $26.7 million ($.27 per share) in
1998. However, the increases associated with the gain on sales of investments
were moderated in part due to the $19.3 million of impairment losses recorded
during 1999. United Dominion's non-mature communities with 31,454 apartment
homes at December 31, 1999 provided a substantial portion of the increase in
United Dominion's operating income during 1999.
1998-vs-1997
For 1998, net income available to common shareholders decreased $4.1 million,
with a corresponding decrease of $.12 and $.11 for basic and diluted earnings
per share, respectively, compared to 1997. The
28
<PAGE>
decrease per share was primarily attributable to the $15.6 million ($.15 per
share) loss on the termination of an interest rate risk management agreement
during the fourth quarter of 1998. Net income available to common shareholders
for the year ended December 31, 1998 included aggregate gains on the sales of
investments of $26.7 million ($.27 per share) compared to $12.7 million ($.15
per share) in 1997.
The following is a combined summary of the operating performance for United
Dominion's apartment portfolio (dollars in thousands):
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
------------------------------------ -----------------------------------
1999 1998 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
Same Communities
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental income $ 366,173 $ 355,038 3.1% $ 328,018 $ 316,995 3.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental expenses (excluding
depreciation and amortization) (141,721) (142,548) -0.6% (132,758) (132,712) 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Property operating income $ 224,452 $ 212,490 5.6% $ 195,260 $ 184,283 6.0%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Physical occupancy 93.1% 93.1% 0.0% 92.9% 92.9% 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Average monthly rental rates $ 631 $ 610 3.4% $ 602 $ 582 3.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Mature Communities
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental income $ 251,125 $ 122,245 105.4% $ 149,262 $ 67,207 122.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental expenses (excluding
depreciation and amortization) (103,452) (56,333) 83.6% (66,120) (30,262) 118.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Property operating income $ 147,673 $ 65,912 124.1% $ 83,142 $ 36,945 125.1%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of apartment homes 33,980 19,408 75.1% 22,849 10,164 124.8%
- ----------------------------------------------------------------------------------------------------------------------------------
All Communities
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental income $ 617,298 $ 477,279 29.3% $ 477,279 $ 384,205 24.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Property rental expenses (excluding
depreciation and amortization) (245,173) (198,877) 23.2% (198,877) (162,977) 22.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Property operating income $ 372,125 $ 278,402 33.7% $ 278,402 $ 221,228 25.8%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of apartment homes 85,926 70,724 21.5% 70,724 58,038 21.9%
- ----------------------------------------------------------------------------------------------------------------------------------
Physical occupancy 92.6% 92.5% 0.1% 91.7% 92.3% -0.6%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Same Communities
1999-vs-1998 (51,316 apartment homes)
In 1999, property rental income grew 3.1%, or approximately $11.1 million,
reflecting an increase in average monthly rental rates of 3.4% while physical
occupancy remained constant at 93.1%.
For 1999, property operating expenses at these same communities decreased 0.6%,
or $827 thousand. Utility expense decreased due to the continued transfer of
water and sewer costs to residents, repair and maintenance expense decreased as
a result of the upgrade program and taking more turnover work in-house and
property management expenses decreased due to better economies of scale.
However, these decreases were offset by an increase in personnel costs due to
higher salaries and benefit costs, an increase in real estate taxes, the
addition of monitored alarms in more communities and higher technology costs.
As a result of the increase in property rental income and the decrease in
property operating expenses, the operating margin (property operating income
divided by property rental income) improved 1.5% to 61.3%.
29
<PAGE>
1998-vs-1997 (47,875 apartment homes)
Compared to the same period in 1997, property rental income from these
communities grew 3.5%, or approximately $11.0 million, reflecting an increase in
average monthly rental rates of 3.4%. During 1998, physical occupancy of 92.9%
was the same as reported in 1997.
For 1998, property operating expenses at these communities were unchanged.
Utility expenses decreased as a result of United Dominion's water and sewer sub-
metering initiative and repair and maintenance expenses decreased as United
Dominion continued to benefit from a centralized purchasing initiative and the
upgrade program. However, these expense decreases were offset by increases in
real estate taxes primarily in certain Florida and Texas markets and increases
in personnel costs as United Dominion experienced pressure on wages due to low
unemployment and tighter job markets.
Due to the increase in property rental income and the unchanged property
operating expenses, the operating margin improved 1.4% to 59.5%.
Non-Mature Communities
1999-vs-1998
Property rental income and property operating expenses increased from 1998 to
1999 directly as a result of the increase in the weighted average number of
apartment homes owned during 1999. For the year ended December 31, 1999, average
economic occupancy was 88.2%, and the operating margin was 58.8% for the non-
mature communities.
United Dominion's non-mature apartment portfolio can be categorized as follows
for the years ended December 31, 1999 and 1998:
1998 Acquisitions
- -----------------
American Apartment Communities II, Inc. (AAC)
On an average investment of $761 million, the AAC portfolio (13,728 homes net of
sales) provided a first year return on investment (property rental income less
property operating expenses divided by the average capital investment in real
estate) of 9.1% which is slightly better than the projection of 9.0%. These
communities achieved physical occupancy of 93.6%, which is higher than United
Dominion's average physical occupancy primarily due to the California markets
included in this portfolio. For the year, these communities had an economic
occupancy of 92.1% and an operating margin of 62.7%.
1998 Acquisitions (Excluding AAC)
For the 13,577 homes (net of sales) acquired in 1998, the return on investment
for the year ended December 31, 1999, on an average investment of $611 million
was 8.4%. This return on investment was below amounts projected for 1999,
however, these communities continue to be upgraded, repositioned and selectively
sold, which is expected to improve overall operating results over the long-term.
These communities had an economic occupancy of 88.8% and an operating margin of
57.8%.
1999 Acquisitions
- -----------------
Included in this category are five communities with 1,230 apartment homes
acquired by United Dominion during 1999 that are projected to provide a first
year return on investment of 9.0% on an initial investment of $74 million. These
communities did not have a material impact on 1999 results of operations.
Disposition Communities
- -----------------------
Included in this category are the 12,761 apartment homes sold for an aggregate
sales price of $398 million as part of United Dominion's strategic repositioning
(see Disposition of Investments under Liquidity and Capital Resources) since
January 1, 1998. The communities sold during 1999 and 1998 had a capitalization
rate (budgeted property operating income less a reserve placement divided by the
sales price) in the 10% range.
30
<PAGE>
Development Communities
- -----------------------
United Dominion developed 2,404 homes at various times since January 1, 1998,
which included the completion of six new communities and one additional phase to
an existing community during 1999. Once stabilized, development communities are
projected to generate an average return on investment in the 10% range, however,
the full impact on property operating income is not realized until after the
communities are stabilized, which is generally six months after construction is
completed. United Dominion considers a development community stabilized on the
earlier to occur of (i) one year after completion of construction or (ii)
attainment of 90% physical occupancy. Construction activity is staged to allow
for leasing and occupancy during the construction period in order to minimize
the lease-up period subsequent to the completion of construction.
1998-vs-1997
Property rental income and property operating expenses increased from 1997 to
1998 directly as a result of the increase in the weighted average number of
apartment homes owned during 1998. For the year ended December 31, 1998, average
economic occupancy was 88.6%, and the operating margin was 55.7% for the non-
mature communities.
1997 Acquisitions
- -----------------
On an average investment of $355 million, the 1997 acquisitions which consisted
of 8,524 apartment homes provided a 9.1% return on investment during 1998. For
the year, these communities had economic occupancy of 91.5% and an operating
margin of 56.6%. During 1998, property operating expenses were adversely
impacted by (i) an increase in real estate taxes due to reassessments at several
Florida communities and (ii) the delay in United Dominion's implementation of
its water billing and reimbursement schedule for these communities.
1998 Acquisitions
- -----------------
1998 Single Acquisitions
On an average investment of $312 million, the 1998 acquisitions which consisted
of 6,959 apartment homes provided an annualized return on investment of 8.7%.
These results were below the full year forecasted return on investment of 9.0%
as a result of delays in water billing and reimbursement and market softness in
San Antonio and Phoenix where United Dominion acquired communities in 1998.
ASR Investments Corporation (ASR)
A total of 7,550 apartment homes were included in the ASR merger on March 27,
1998, which provided the largest increase in property rental income and property
operating expenses for United Dominion's apartment portfolio during 1998. The
annualized return on investment for the ASR properties was 7.3% on an average
investment of $313 million during 1998. The under-performance of this portfolio
was primarily attributable to weak markets in Phoenix, Tucson and Albuquerque
and certain assets were undergoing upgrading and repositioning. For the year
ended December 31, 1998, these communities had economic occupancy of 87.9% and
an operating margin of 49.3%.
American Apartment Communities (AAC)
This included 14,001 apartment homes in the AAC merger on December 7, 1998 for
an initial investment of $767 million. This acquisition did not have a material
effect on 1998 results of operations.
Disposition Communities
- ------------------------
During 1998 and 1997, United Dominion sold approximately $225 million of real
estate consisting of 30 communities with 7,888 apartment homes, the net proceeds
from which were used to acquire newer communities that provide higher long-term
returns on investment than the communities being sold. The properties sold
during 1998 had a capitalization rate (budgeted property operating income less a
replacement reserve divided by the sales price) in excess of 10%.
Development Communities
- -----------------------
These communities consisted of 1,957 apartment homes in five new communities and
five additional phases to existing communities developed from January 1, 1997 to
December 31, 1998. Once stabilized, development communities are projected to
generate an average return on investment in excess of 10%.
31
<PAGE>
Interest Expense
During 1999, interest expense increased $47.5 million over the corresponding
amount in 1998 as the weighted average amount of debt employed during 1999 was
higher than it was in 1998 ($2.1 billion in 1999 versus $1.5 billion in 1998).
The increase in the weighted average amount of debt employed in 1999 is
primarily due to debt assumed during 1998 to fund United Dominion's investment
activities. The weighted average interest rate on this debt was 7.4% in both
1999 and 1998. For 1999, 1998 and 1997, total interest capitalized was $5.2
million, $3.4 million and $2.6 million, respectively.
For 1998, interest expense increased $27.2 million over 1997. The weighted
average amount of debt employed during 1998 was higher than it was in 1997 ($1.5
billion in 1998 versus $1.0 billion in 1997) which accounted for the majority of
the increase in interest expense. The weighted average interest rate on this
debt was slightly lower than it was in 1997, decreasing from 7.5% in 1997 to
7.4% in 1998 reflecting greater usage of lower rate short-term bank borrowings
in 1998 ($238.6 million weighted average outstanding in 1998 versus $74.6
million in 1997).
General and Administrative
During the year ended December 31, 1999, general and administrative expenses
increased $3.7 million, or 36.6%, over 1998, primarily due to the expanded
operations of United Dominion and its continued investment in professional
staff, technology and scaleable accounting and information systems.
During 1998, general and administrative expenses increased by $3.1 million over
1997. In 1998, United Dominion incurred increases in most of its general and
administrative expense categories which was directly attributable to the
expanded operations of United Dominion and its investment in infrastructure. The
largest increases occurred in payroll and payroll-related expenses. General and
administrative expense as a percentage of rental income increased 0.3% from 1.8%
during 1997 to 2.1% during 1998 primarily due to (i) the added infrastructure
costs incurred due to the expanded operations of United Dominion and (ii) the
change in accounting for internal acquisition costs subsequent to March 19,
1998.
Impairment Loss
For the year ended December 31, 1999, United Dominion recognized $18.3 million
in impairment losses on its real estate portfolio. At the beginning of June
1999, United Dominion embarked on an accelerated disposition plan for non-
strategic properties. As a result of the review of its real estate apartment
portfolio, 21 properties included in real estate held for investment were moved
to real estate held for disposition during the second quarter. Accordingly,
through the review and analysis of communities targeted for strategic
disposition, an aggregate $7.1 million impairment loss was recognized on five
communities in the second quarter. Based on United Dominion's review and
analysis of the sales planned for 2000 and the periodic evaluation of its
apartment portfolio, an additional $11.2 million impairment loss was recognized
in the fourth quarter of 1999, related principally to communities acquired in
the ASR merger in 1998.
During 1997, the company recorded and impairment loss of $1.4 million relating
to two communities included in United Dominion's real estate held for
investment. These communities were subsequently moved to real estate held for
disposition based upon management's decision to dispose of these properties.
Distributions to Preferred Shareholders
Distributions to preferred shareholders totaled $37.7 million for 1999 compared
to $23.6 million for 1998. The increase was a result of the issuance of eight
million shares of Series D 7.50% Cumulative Convertible Redeemable Preferred
Stock in December 1998.
Distributions to preferred shareholders totaled $23.6 million for the year ended
December 31, 1998 compared to $17.3 million for 1997. The increase was a result
of the issuance of six million shares of Series B 8.60% Cumulative Redeemable
Preferred Stock in May 1997.
32
<PAGE>
age of 25
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 company. 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.
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 have 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.
Year 2000
United Dominion completed the transition to the Year 2000 with all of its
computer platforms Year 2000 compliant and the transition took place without
incident. There have been no reported problems with any equipment or software,
nor have any disruptions with suppliers or vendors occurred. United Dominion
will continue to monitor its systems in 2000 to insure that any latent issues
with Year 2000 are identified and addressed.
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.
Under the prior law, REIT's were not allowed to provide non-customary or tenant
specific services to its residents, such as concierge services, beyond a de
minimus amount. As the apartment industry has become a competitive customer
focused business, these constraints inhibited REIT's from maintaining a
competitive edge in attracting and maintaining residents. As such, the RMA has
several significant benefits for the REIT industry 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.
33
<PAGE>
The RMA provides another significant change to the existing law. 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.
During 2000, United Dominion will determine the best uses of the TRS in order to
be in a position to take full advantage of the opportunities the new legislation
has to offer in 2001.
34
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
Information required by this regarding Quantitative and Qualitative
Disclosures about Market Risk is included in Part II, Item 7 of this Annual
Report on Form 10-K included in Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
See Index to Consolidated Financial Statements and Schedule on page 45 of
this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
35
<PAGE>
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 9,
2000.
Information required by this item regarding the executive officers of
United Dominion is included in Part I of this Annual Report on Form 10-K in the
section entitled "Executive Officers of the Registrant".
Item 11. EXECUTIVE COMPENSATION
- --------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 9,
2000.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 9,
2000.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Incorporated herein by reference from United Dominion's Proxy Statement to
be filed with respect to its Annual Meeting of Shareholders to be held on May 9,
2000.
36
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) (1&2) See Index to Consolidated Financial Statements and Schedule on
page 45 of this Annual Report on Form 10-K.
(3) Exhibits
The exhibits listed below are filed as part of this Annual 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>
1(a) Underwriting Agreement and related Filed herewith.
Pricing Agreement, each dated
February 29, 2000, between the Company
and certain of its subsidiaries and the
underwriters named therein, relating to
$100,000,000 8.625% Notes Due 2003 of
the Company, issued March 3, 2000.
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.
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C>
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.
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 of 9 1/4% Exhibit 1(e) to the Company's Form 8-A
Series A Cumulative Redeemable Preferred Registration Statement dated April 24, 1995.
Stock
4(i)(c) Form of Certificate for Shares of 8.60% Exhibit 1(e) to the Company's Form 8-A
Series B Cumulative Redeemable Preferred Registration Statement dated June 11, 1997.
Stock
4(i)(d) Rights Agreement dated as of January 27, Exhibit 1 to the Company's Form 8-A
1998, between the Company and ChaseMellon Registration Statement dated February 4, 1998.
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 as of February Exhibit 6(c)(5) to the Company's Form 8-A
15, 1993, between the Company and CIGNA Registration Statement dated April 19, 1990.
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 as of September Exhibit 4(ii)(f) to the Company's Form 10-Q for
16, 1999, between the Company and certain the quarter ended September 30, 1999.
subsidiaries and a syndicate of banks
represented by Bank of America, N.A.
4(ii)(g)(a) Resolutions of the Board of Directors of the Filed herewith.
Company establishing terms of 8.625% Notes
Due 2003.
4(ii)(g)(b) Form of 8.625% Notes Due 2003. Filed herewith.
10(i) Employment Agreement between the Company and Exhibit 10(i) to the Company's Annual Report
John P. McCann dated December 8, 1998. on Form 10-K for the year ended December 31, 1998.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
10(ii) Employment Agreement between the Company Exhibit 10(ii) to the Company's Annual Report
and John S. Schneider dated December 8, on Form 10-K for the year ended December 31, 1998.
1998.
10(iii) Employment Agreement between the Company Exhibit 10(iii) to the Company's Annual Report
and Richard Giannotti dated December 8, on Form 10-K for the year ended December 31, 1998.
1998.
10(iv) Employment Agreement between the Company Exhibit 10(iv) to the Company's Quarterly Report
and A. William Hamill dated September 30, on Form 10-Q for the quarter ended September 30,
1999. 1999.
10(v) 1985 Stock Option Plan, as amended. Exhibit 10(iv) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1998.
10(vi) 1991 Stock Purchase and Loan Plan. Exhibit 10(viii) to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997.
10(vii) Third Amended and Restated Agreement of Exhibit 10(vi) to the Company's Annual Report
Limited Partnership of United Dominion on Form 10-K for the year ended December 31,
Realty, L.P. Dated as of December 7, 1998. 1998.
10(vii)(a) Subordination Agreement dated April 16, 1998, Exhibit 10(vi)(a) to the Company's Form 10-Q for
between the Company and United Dominion the quarter ended March 31, 1998.
Realty, L.P.
10(viii) Servicing and Purchase Agreement dated as of Exhibit 10(vii) to the Company's Form 10-Q for
June 24, 1999, including as an exhibit thereto the quarter ended June 30, 1999.
the Note and Participation Agreement forms.
10(ix) Description of Restricted Stock Awards Filed herewith.
Program.
10(x) Description of United Dominion Realty Trust, Filed herewith.
Inc. Shareholder Value Plan.
10(xi) Description of United Dominion Realty Trust, Filed herewith.
Inc. Executive Deferral Plan.
10(xii) Employment Agreement between the Company and Filed herewith.
Curtis W. Carter dated December 8, 1998.
10(xiii) Employment Agreement between the Company and Filed herewith.
Mark E. Wood dated March 21, 2000.
12 Computation of Ratio of Earnings to Fixed Filed herewith.
Charges.
</TABLE>
21 The Company has the following subsidiaries, all of which but United
Dominion Realty, L.P. are wholly owned. The Company owns general and
limited partnership interests in United Dominion Realty, L.P.,
constituting 90.8% of the aggregate partnership interest.
United Dominion Realty Trust, Inc.
The Commons of Columbia, Inc.
UDRT of Virginia, Inc.
United Dominion Residential, Inc.
UDR at Marble Hill, LLC
United Dominion Realty, L.P.
UDRT of North Carolina, L.L.C.
UDRT of Alabama, Inc.
Cleary Court Property Owners' Association, Inc.
39
<PAGE>
UDR South Carolina Trust
UDR Western Residential, Inc.
SWPT II Arizona Properties, Inc.
SRL Amarillo Investors, Inc.
Little Rock Apartment Management, Inc.
SWP Arkansas Properties, Inc.
SWP Developers, Inc.
SWP Depositor, Inc.
South West REIT Holding, Inc.
South West Properties, L.P.
SWP REMIC Properties II, Inc.
SWP REMIC Properties II-A, L.P.
SWP Creeks Properties, Inc.
UDR Summit Ridge, L.P.
SWP Woodscape Properties, Inc.
SWP Woodscape Properties I, L.P.
SWP Properties, Inc.
SWP Properties I, L.P.
South West Property Apartments, L.P.
UDR Pecan Grove, L.P.
UDR Camino Village, L.P.
United Sub, Inc.
ASR Acquisition Sub, Inc.
UDR Audubon, L.P.
UDR Villages of Thousand Oaks, L.P.
UDR Cimarron City, L.P.
UDR Kenton, L.P.
ASR Investments Corporation
Heritage Communities L.P.
Heritage SGP Corporation
Heritage - Aspen Court L.P.
Heritage - Gentry Place L.P.
Heritage - Greenwood Creek L.P.
Heritage - Highlands of Preston L.P.
Heritage - 14400 Montfort L.P.
Heritage - Preston Park L.P.
Heritage - Smith Summit L.P.
Heritage - Springfield L.P.
Heritage - Briar Park L.P.
Heritage - Chelsea Park L.P.
Heritage - Country Club Place L.P.
Heritage - Ivystone L.P.
Heritage - London Park L.P.
Heritage - Marymont L.P.
Heritage - Riverway L.P.
Heritage - Timbercreek Landings L.P.
Heritage - Campus Commons North, L.L.C.
Heritage - Campus Commons South, L.L.C.
Heritage - Court, L.L.C.
Heritage - On The Boulevard, L.L.C.
Heritage - Pacific South Center, L.L.C.
40
<PAGE>
Heritage - Arbor Terrace I, L.L.C.
Heritage - Arbor Terrace II, L.L.C.
ASR Properties, Inc.
ASC Properties, Inc.
ASC-I Properties, Inc.
ASC-II Properties, Inc.
ASC-III Properties, Inc.
ASC-IV Properties, Inc.
ASC-V Properties, Inc.
Rescap Inc.
Rescap Manager Limited Partnership
Contempo Heights L.L.C.
La Privada L.L.C.
Finisterra Apartments L.L.C.
ASV-I Properties, Inc.
ASV-II Properties, Inc.
ASV-III Properties, Inc.
ASV-IV Properties, Inc.
ASV-V Properties, Inc.
ASV-VI Properties, Inc.
ASV-VII Properties, Inc.
ASV-VIII Properties, Inc.
ASV-IX Properties, Inc.
ASV-X Properties, Inc.
ASV-XI Properties, Inc.
ASV-XII Properties, Inc.
ASV-XIII Properties, Inc.
ASV-XIV Properties, Inc.
ASV-XV Properties, Inc.
ASV-XVI Properties, Inc.
ASV-XVII Properties, Inc.
Heritage Residential Group, Inc.
RMA Investments Holdings, Inc.
CIMSA Financial Corporation
RMA Investments I, Inc.
RMA Investments II, Inc.
Cholla Estates Construction L.L.C.
ASR Finance Corporation
Southwest Capital Mortgage Funding L.P.
ASR Mortgage Acceptance, Inc.
UDR Developers, Inc.
UDR Texas Properties, L.P.
UDR of Tennessee, L.P.
UDR Seniors Housing, L.P.
UDR Aspen Creek, LLC
United Dominion Residential Ventures, L.L.C.
American Apartment Communities Holdings, Inc.
AAC Funding II, Inc.
AAC Funding III, Inc.
AAC Funding IV, Inc.
AAC Seattle I, Inc.
41
<PAGE>
FMP Member, Inc.
AAC Funding IV LLC
AAC Funding Partnership II
AAC Funding Partnership III
AAC Vancouver I, L.P.
AAC/FSC Crown Pointe Investors, LLC
AAC/FSC Hilltop Investors, LLC
AAC/FSC Seattle Properties, LLC
CMP-1, LLC
Coastal Anaheim Properties, LLC
Coastal Long Beach Properties, LLC
Coastal Monterey Properties LLC
Fountainhead Apartments Limited Partnership
Governour's Square of Columbus Co.
Jamestown of St. Matthews Co.
Northbay Properties II, L.P.
Parker's Landing Venture I
Parker's Landing Venture II
Polo Chase Venture Limited Partnership
Regency Park, L.P.
Sunset Company
Tivoli of Columbus Limited Partnership
Windward Point, LLC
Winterland San Francisco Partners
Woodlake Village, L.P.
UDR Virginia Properties, LLC
UDR California Properties, L.L.C.
UDR Florida Properties, L.L.C.
UDR Holdings, LLC
UDR Lakeside Mills, LLC
UDR Maryland Properties, LLC
23 Consent of Independent Filed herewith.
Auditors
27 Financial Data Schedule Filed electronically with
the Securities and
Exchange Commission.
Exhibits 10(i) through 10(v) inclusive, are management contracts or compensatory
plans or arrangements required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) of this 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.
A Form 8-K was filed with the Securities and Exchange Commission on
December 22, 1999. The filing reported United Dominion's 1999
dispositions and plans for 2000 dispositions as reported on its Press
Release issued on December 16, 1999.
42
<PAGE>
A Form 8-K was filed with the Securities and Exchange Commission on
March 29, 1999. The filing reported pro forma financial information with
respect to the American Apartment Communities II, Inc. merger.
A Form 8-K was filed with the Securities and Exchange Commission on
January 20, 1999. The filing reported pro forma financial information
with respect to the American Apartment Communities II, Inc. merger.
43
<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 Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Trust, Inc.
- ----------------------------------
(registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 17, 2000 by the following persons on behalf of
the registrant and in the capacities indicated.
/s/ John P. McCann /s/ Jeff C. Bane
- ------------------------------------- -----------------------------------
John P. McCann Jeff C. Bane
Chairman of the Board and Chief Director
Executive Officer
/s/ Lynne Sagalyn
- ------------------------------------- ___________________________________
Lynne Sagalyn Mark J. Sandler
Director Director
/s/ John S. Schneider /s/ Robert W. Scharar
- ------------------------------------- -----------------------------------
John S. Schneider Robert W. Scharar
Director, Vice Chairman of the Board, Director
President and Chief Operating Officer
_____________________________________ ___________________________________
Robert P. Freeman Jon A. Grove
Director Director
/s/ James D. Klingbeil /s/ Barry M. Kornblau
- ------------------------------------- -----------------------------------
James D. Klingbeil Barry M. Kornblau
Director Director
/s/ R. Toms Dalton /s/ Robin R. Flanagan
- ------------------------------------- -----------------------------------
R. Toms Dalton Robin R. Flanagan
Director Vice President,
Controller-Corporate Accounting
and Chief Accounting Officer
/s/ A. William Hamill
- -------------------------------------
A. William Hamill
Executive Vice President and
Chief Financial Officer
44
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
UNITED DOMINION REALTY TRUST, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Ernst & Young LLP, Independent Auditors 46
Consolidated Balance Sheets at December 31, 1999
and 1998 47
Consolidated Statements of Operations for each of
the three years in the period ended December 31, 1999 48
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1999 49
Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended
December 31, 1999 50
Notes to Consolidated Financial Statements 51
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III - Summary of Real Estate Owned 70
</TABLE>
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.
45
<PAGE>
Report of Independent Auditors
------------------------------
The Board of Directors and Shareholders
United Dominion Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of United
Dominion Realty Trust, Inc. (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a). The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimate made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
United Dominion Realty Trust, Inc. at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects,
the information set forth therein.
Ernst & Young LLP
Richmond, Virginia
January 31, 2000
46
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate owned:
Real estate held for investment (Notes 2 and 9) $ 3,577,848 $ 3,643,245
Less: accumulated depreciation 373,164 280,663
-------------- --------------
3,204,684 3,362,582
Real estate under development 91,914 99,395
Real estate held for disposition (net of accumulated depreciation of $22,700
and $35,967) (Note 2) 260,583 174,145
-------------- --------------
Total real estate owned, net of accumulated depreciation 3,557,181 3,636,122
Cash and cash equivalents 7,678 26,081
Restricted cash 56,969 50,805
Deferred financing costs 13,511 10,894
Other assets 52,978 39,038
-------------- --------------
Total assets $ 3,688,317 $ 3,762,940
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured debt (Note 3) $ 1,000,136 $ 1,072,185
Unsecured debt (Note 4) 1,127,169 1,045,564
Real estate taxes payable 30,887 29,078
Accrued interest payable 17,867 20,714
Security deposits and prepaid rent 20,738 21,125
Distributions payable 36,020 31,423
Accounts payable, accrued expenses and other liabilities 51,121 53,288
-------------- --------------
Total liabilities 2,283,938 2,273,377
Minority interests 94,167 115,442
Shareholders' equity (Notes 6 and 7):
Preferred stock, no par value; $25 liquidation preference,
25,000,000 shares authorized;
4,168,560 shares 9.25% Series A Cumulative Redeemable issued and 104,214 105,000
outstanding (4,200,000 in 1998)
5,946,300 shares 8.60% Series B Cumulative Redeemable issued and 148,658 150,000
outstanding (6,000,000 in 1998)
8,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued 175,000 175,000
and outstanding
Common stock, $1 par value; 150,000,000 shares authorized
102,740,777 shares issued and outstanding (103,639,117 in 1998) 102,741 103,639
Additional paid-in capital 1,083,687 1,090,432
Distributions in excess of net income (296,030) (242,331)
Deferred compensation - unearned restricted stock awards (305) --
Notes receivable from officer-shareholders (7,753) (7,619)
-------------- --------------
Total shareholders' equity 1,310,212 1,374,121
-------------- --------------
Total liabilities and shareholders' equity $ 3,688,317 $ 3,762,940
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
47
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $ 618,749 $ 478,718 $ 386,672
Other non-property income 1,942 3,382 1,123
------------ ------------ ------------
Total revenues 620,691 482,100 387,795
Expenses
Rental expenses:
Personnel 66,968 51,219 53,315
Real estate taxes and insurance 63,425 48,898 36,273
Repair and maintenance 41,339 36,827 21,392
Utilities 30,106 26,361 24,861
Administrative and marketing 25,410 19,066 15,208
Property management 18,475 16,945 12,299
Other operating expenses 1,539 244 383
Real estate depreciation 121,727 99,588 76,688
Interest 153,748 106,238 79,004
Impairment loss on real estate and investments (Note 2) 19,300 - 1,400
General and administrative 13,850 10,139 7,075
Other depreciation and amortization 4,425 3,645 2,084
Loss on termination of interest rate risk management agreement
(Note 5) - 15,591 -
------------ ------------ ------------
Total expenses 560,312 434,761 329,982
------------ ------------ ------------
Income before gains on sales of investments, minority interests
and extraordinary item 60,379 47,339 57,813
Gains on sales of investments 37,995 26,672 12,664
------------ ------------ ------------
Income before minority interests and extraordinary item 98,374 74,011 70,477
Minority interests of outside partners (1,245) (111) -
Minority interests of unitholders in operating partnership (4,434) (1,430) (278)
------------ ------------ ------------
Income before extraordinary item 92,695 72,470 70,199
Extraordinary item - early extinguishment of debt 927 (138) (50)
------------ ------------ ------------
Net income 93,622 72,332 70,149
Distributions to preferred shareholders - Series A and B (22,560) (22,607) (17,345)
Distributions to preferred shareholders - Series D (Convertible) (15,154) (986) -
------------ ------------ ------------
Net income available to common shareholders $ 55,908 $ 48,739 $ 52,804
============ ============ ============
Earnings per common share (Note 1):
Basic $ 0.54 $ 0.49 $ 0.61
============ ============ ============
Diluted $ 0.54 $ 0.49 $ 0.60
============ ============ ============
Common distributions declared per share $ 1.06 $ 1.05 $ 1.01
============ ============ ============
Weighted average number of common shares outstanding-basic 103,604 99,966 87,145
Weighted average number of common shares outstanding-diluted 103,639 100,062 87,339
</TABLE>
See accompanying notes to consolidated financial statements.
48
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 93,622 $ 72,332 $ 70,149
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 126,152 103,233 78,772
Minority interests 5,679 1,541 278
Impairment loss on real estate and investments 19,300 -- 1,400
Amortization of deferred financing costs and other 5,184 2,061 1,706
Gains on sales of investments (37,995) (26,672) (12,664)
Extraordinary item-early extinguishment of debt (927) 138 50
Net cash paid in mergers (8,417) -- --
Changes in operating assets and liabilities:
Increase in operating liabilities 3,640 30,682 8,830
Increase in operating assets (15,362) (30,440) (10,618)
------------- ------------- -------------
Net cash provided by operating activities 190,876 152,875 137,903
Investing Activities
Net proceeds from sales of investments 236,706 155,459 77,257
Development of real estate assets (114,028) (97,222) (52,217)
Acquisition of real estate, net of liabilities assumed (75,719) (169,808) (271,836)
Capital expenditures - real estate assets (74,323) (100,398) (95,499)
Capital expenditures - non real estate assets (8,062) (2,876) (3,659)
Net cash paid in mergers -- (59,446) --
Other investing activities 1,132 (1,851) 3,681
------------- ------------- -------------
Net cash used in investing activities (34,294) (276,142) (342,273)
Financing Activities
Net reduction in secured debt (72,048) (98,792) (19,337)
Net proceeds from the issuance of unsecured debt 83,828 307,482 69,936
Payment of financing costs (6,719) (4,875) (2,836)
Proceeds from the sale of preferred stock -- -- 145,068
Proceeds from the issuance of common stock 17,250 76,686 100,751
Distributions paid to minority interests (9,200) (2,413) (144)
Distributions paid to preferred shareholders (34,958) (22,611) (16,270)
Distributions paid to common shareholders (109,608) (103,074) (85,777)
Repurchase of operating partnership units (11,967) (3,528) --
Repurchase of common and preferred stock (31,563) -- --
------------- ------------- -------------
Net cash (used in)/provided by financing activities (174,985) 148,875 191,391
Net increase (decrease) in cash and cash equivalents (18,403) 25,608 (12,979)
Cash and cash equivalents, beginning of year 26,081 473 13,452
------------- ------------- -------------
Cash and cash equivalents, end of year $ 7,678 $ 26,081 $ 473
============= ============= =============
Supplemental Information:
Interest paid during the period $ 162,236 $ 104,858 $ 76,669
Conversion of operating partnership units to common stock 3,947 7,542 --
Non-cash transactions associated with the acquisition of properties:
Secured debt assumed -- 116,326 60,052
Issuance of common stock -- 7,099 --
Issuance of operating partnership -- 18,477 12,530
units
Non-cash transactions associated with mergers:
Real estate assets acquired -- 1,080,696 --
Other operating assets acquired -- 26,845 --
Issuance of preferred stock -- 175,000 --
Issuance of common stock -- 108,456 --
Issuance of operating partnership units -- 88,831 --
Secured debt assumed -- 637,188 --
Operating liabilities assumed -- 36,026 --
Minority interests in partnerships assumed -- 5,382 --
</TABLE>
See accompanying notes to consolidated financial statements.
49
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock
Balance, beginning of year $ 430,000 $ 255,000 $ 105,000
Issuance of 8.60% Series B Cumulative Redeemable - - 150,000
Issuance of 7.50% Series D Cumulative Convertible Redeemable
in connection with the acquisition of American
Apartment Communities II - 175,000 -
Purchase of preferred stock (2,128) - -
------------ ------------ --------------
Balance, end of year $ 427,872 $ 430,000 $ 255,000
============ ============ ==============
Common Stock, $1 Par Value
Balance, beginning of year $ 103,639 $ 89,168 $ 81,983
Issuance of common shares in public offerings - 2,804 4,000
Issuance of common shares in the acquisition of ASR Investment
Corporation - 7,743 -
Issuance of common shares to employees, officers and director-
shareholders 72 78 333
Issuance of common shares through dividend reinvestment and stock
purchase plan 1,598 2,825 2,852
Issuance of common shares in connection with the acquisition of properties - 482 -
Purchase of common stock (2,688) - -
Issuance of restricted stock awards 46 - -
Conversion of operating partnership units 74 539 -
------------ ------------ --------------
Balance, end of year $ 102,741 $ 103,639 $ 89,168
============ ============ ==============
Additional Paid-in Capital
Balance, beginning of year $ 1,090,432 $ 906,307 $ 814,795
Issuance of commons shares in public offerings, net of issuance costs - 35,170 55,386
Issuance of common shares in the acquisition of ASR Investment Corporation - 100,713 -
Offering costs associated with the issuance of preferred shares - - (4,934)
Issuance of common shares to employees, officers and director-shareholders 665 801 4,170
Issuance of common shares through dividend reinvestment and stock
purchase plan 15,049 33,821 36,890
Issuance of common shares in connection with the acquisition of properties - 6,617 -
Purchase of common stock (27,372) - -
Purchase of preferred stock 626 - -
Issuance of restricted stock awards 414 - -
Adjustment for cash purchase and conversion of minority interests of - - -
unitholders in operating partnerships 3,873 7,003 -
------------ ------------ --------------
Balance, end of year $ 1,083,687 $ 1,090,432 $ 906,307
============ ============ ==============
Notes Receivable from Officer-Shareholders
Balance, beginning of year $ (7,619) $ (8,806) $ (5,926)
Principal repayments officer-shareholders 139 1,413 635
Shares issued to officer-shareholders (273) (226) (3,515)
------------ ------------ --------------
Balance, end of year $ (7,753) $ (7,619) $ (8,806)
============ ============ ==============
Distributions in Excess of Net Income
Balance, beginning of year $ (242,331) $ (183,312) $ (147,529)
Net income 93,622 72,332 70,149
Common stock distributions declared ($1.06 per share for 1999,
$1.05 per share for 1998 and $1.01 per share for 1997) (109,607) (107,758) (88,587)
Preferred stock distributions declared-Series A ($2.31
per share for 1999, 1998 and 1997) (9,688) (9,704) (9,713)
Preferred stock distributions declared-Series B ($2.15
per share for 1999 and 1998 and $1.27 per share for 1997) (12,872) (12,903) (7,632)
Preferred stock distributions declared-Series D ($1.89
per share for 1999 and $.12 per share for 1998) (15,154) (986) -
------------ ------------ --------------
Balance, end of year $ (296,030) $ (242,331) $ (183,312)
============ ============ ==============
Deferred Compensation - Unearned Restricted Stock Awards
Balance, beginning of year $ - $ - $ -
Issuance of restricted stock awards (460) - -
Amortization of deferred compensation 155 - -
------------ ------------ --------------
Balance, end of year $ (305) $ - $ -
============ ============ ==============
Unrealized Gains on Securities Available-for-Sale
Balance, beginning of year $ - $ - $ 2,056
Realized gain on securities available-for-sale - - (2,056)
Unrealized gain on securities available-for-sale - - -
------------ ------------ --------------
Balance, end of year $ - $ - $ -
============ ============ ==============
Total Shareholders' Equity $ 1,310,212 $ 1,374,121 $ 1,058,357
============ ============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
50
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Formation United Dominion Realty Trust, Inc., a Virginia
corporation, was formed in 1972. United Dominion operates within one defined
business segment with activities related to the ownership, development,
acquisition, renovation, management, marketing and strategic disposition of
multifamily apartment communities nationwide. At December 31, 1999, United
Dominion owned 301 communities with 82,154 completed apartment homes and had
three communities and three additional phases to existing communities with 1,622
apartment homes under development.
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 December 31, 1999, there were
74,463,788 units in the Operating Partnership outstanding, of which, 67,619,425,
or 90.8%, were owned by United Dominion and 6,844,363, 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
December 31, 1999, 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. All significant inter-company accounts and
transactions have been eliminated in consolidation.
Income taxes United Dominion is operated as, and elects to be taxed as, a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). Generally, a REIT that complies with the provisions of the
Code and distributes at least 95% of its taxable income to its shareholders will
not be subject to U.S. federal income taxes. Accordingly, no provision has been
made for federal income taxes. However, United Dominion is subject to certain
state and local excise or franchise taxes.
The differences between net income available to common shareholders for
financial reporting purposes and taxable income before dividend deductions
relate primarily to temporary differences, principally real estate depreciation
and the tax deferral of certain gains on property sales. The temporary
differences in depreciation result from differences in the book and tax basis of
certain real estate assets and the differences in the methods of depreciation
and lives of the real estate assets.
For income tax purposes, distributions paid to common shareholders consist of
ordinary income, capital gains, return of capital or a combination thereof. For
the three years ended December 31, 1999, distributions paid per common share
were taxable as follows:
1999 1998 1997
------ ------ ------
Ordinary income $ .620 $.913 $.727
Long-term capital gain .129 --- .021
Return of capital .309 .127 .249
------ ----- -----
$1.058 $1.040 $.997
====== ====== =====
Dividends declared on all series of United Dominion's preferred stock represent
ordinary income to preferred stockholders for tax purposes in the year paid.
Use of estimates The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
51
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Reclassifications Certain reclassifications have been made to amounts in prior
years' financial statements to conform with current year presentation.
Cash and cash equivalents Cash and cash equivalents include all cash and
liquid investments with maturities of three months or less when purchased.
Real estate Real estate assets held for investment are carried at historical
cost less accumulated depreciation less any recorded impairment losses.
Expenditures for ordinary repair and maintenance costs are charged to expense as
incurred. Significant expenditures for improvements, renovations and
replacements related to the acquisition and improvement of real estate assets
are capitalized at cost and depreciated over their estimated useful lives.
United Dominion recognizes impairment losses on long-lived assets used in
operations when there is an event or change in circumstance that indicates an
impairment in the value of an asset and the undiscounted future cash flows are
not sufficient to recover the asset's carrying value. If such indicators of
impairment are present, an impairment loss is recognized based on the excess of
the carrying amount of the asset over its fair value.
For long-lived assets to be disposed of, impairment losses are recognized when
the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset. Real estate is classified as real estate held for
disposition when management has committed to sell and is actively marketing the
property, and United Dominion expects to dispose of these properties within the
next twelve months. Real estate held for disposition is carried at the lower of
cost, net of accumulated depreciation or fair value less the cost to dispose,
determined on an asset by asset basis. Depreciation is not recorded on real
estate held for disposition and gains (losses) from initial and subsequent
adjustments to the carrying value of the assets, if any, are recorded as a
separate component of income from continuing operations.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets which is 35 years for buildings, 10 to 35 years for
major improvements, and 5 to 20 years for furniture, fixtures, equipment and
other assets.
All development projects and related carrying costs are capitalized and reported
on the balance sheet as "real estate under development" until such time as the
development project is completed. Upon completion, the total cost of the
building and associated land is transferred to real estate held for investment
and the assets are depreciated over their estimated useful lives. The cost of
development projects includes interest, real estate taxes, insurance and
allocated development overhead during the construction period.
Interest and real estate taxes incurred during the development period are
capitalized as part of the real estate under development to the extent that such
charges do not cause the carrying value of the asset to exceed its net
realizable value. During 1999, 1998 and 1997, total interest capitalized was
$5.2 million, $3.4 million and $2.6 million, respectively.
Commencing with the adoption of EITF No. 97-11, "Accounting for Internal Costs
Relating to Real Estate Property Acquisitions" in March 1998, United Dominion
expenses direct internal costs of identifying and acquiring operating
properties.
Revenue recognition United Dominion's apartment homes are leased under
operating leases with terms generally of one year or less. Rental income is
recognized after it is earned and paid.
52
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Restricted cash Restricted cash consists of escrow deposits held by lenders
for real estate taxes, insurance and replacement reserves and security deposits.
Deferred financing costs Deferred financing costs include fees and other costs
incurred to obtain debt financings and are generally amortized on a straight-
line basis, which approximates the effective interest method, over a period not
to exceed the term of the related debt. Unamortized financing costs are written-
off when debt is retired before its maturity date.
Interest rate swap agreements United Dominion enters into interest rate swap
agreements to alter the interest rate characteristics of outstanding debt
instruments. Each interest rate swap agreement is designated with all or a
portion of the principal balance and term of a specific debt obligation. The
interest rate swaps involve the periodic exchange of payments over the life of
the related agreements. Amounts received or paid on the interest rate swaps are
recorded on an accrual basis as an adjustment to the related interest expense of
the outstanding debt based on the accrual method of accounting. The related
amounts payable to and receivable from counterparties are included in other
liabilities and other assets, respectively. The fair value of and changes in the
fair value as a result of changes in market interest rates for the interest rate
swap agreements are not reflected in the financial statements.
Gains and losses on terminations of interest rate swap agreements are deferred
as an adjustment to the carrying amount of the outstanding debt and amortized
into interest expense over the remaining term of the original contract life of
the terminated swap agreement. In the event of early extinguishment of a
designated debt obligation, any realized or unrealized gain or loss from the
swap would be recognized in income coincident with the extinguishment gain or
loss. There were no gains or losses on terminations of interest rate swap
agreements recognized by United Dominion for the periods presented.
Any interest rate swap agreements that are not designated with outstanding debt
or notional amounts of interest rate swap agreements in excess of the original
amounts of the underlying debt obligations are recorded as an asset or liability
at fair value, with the changes in the fair value recorded in other income or
expense (fair value method).
Interest rate risk management agreements United Dominion enters into interest
rate futures contracts to hedge interest rate risk associated with anticipated
debt transactions. United Dominion follows SFAS No. 80, "Accounting for Futures
Contracts," which permits hedge accounting for anticipatory transactions meeting
certain criteria. Gains and losses, if any, on these transactions are deferred
as an adjustment to the carrying amount of the outstanding debt and amortized
over the term of the related debt as an adjustment to interest expense. The fair
values of interest rate risk management agreements are not recognized in the
financial statements. At the time the anticipated transaction is no longer
likely to occur, United Dominion would mark the derivative instrument to market
and would recognize any adjustment in the consolidated statement of operations.
Earnings per share Basic earnings per common share is computed based upon the
weighted average number of common shares outstanding during the year. 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 potentially dilutive
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 amounts):
53
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator for basic and diluted earnings
per share-net income available to common
shareholders $ 55,908 $ 48,739 $52,804
Denominator:
Denominator for basic earnings per share-
weighted average shares 103,604 99,966 87,145
Effect of dilutive securities:
Employee stock options 35 96 194
-------- -------- -------
Denominator for dilutive earnings per
share 103,639 100,062 87,339
======== ======== =======
Basic earnings per share $ .54 $ .49 $ .61
======== ======== =======
Diluted earnings per share $ .54 $ .49 $ . 60
======== ======== =======
</TABLE>
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 years ended December
31, 1999, 1998 and 1997 was 8,180,409, 2,963,427, and 317,120, respectively. The
weighted average effect of the conversion of the convertible preferred stock for
the years ended December 31, 1999 and 1998 was 12,307,692 and 809,273,
respectively.
Minority interests in operating partnerships Interests in operating
partnerships held by limited partners are represented by operating partnership
units (OP Units). The operating partnerships' income is allocated to holders of
OP Units based upon net income available to common shareholders and the weighted
average number of OP Units outstanding to total common shares plus OP Units
outstanding during the period. Capital contributions, distributions and profits
and losses are allocated to minority interests in accordance with the terms of
the individual partnership agreements. OP Units can be exchanged for cash or
shares of United Dominion's common stock on a one-for-one basis, at the option
of United Dominion. OP Units as a percentage of total OP Units and shares
outstanding was 6.8%, 7.7% and 1.1% at December 31, 1999, 1998 and 1997,
respectively.
Minority interest in other partnerships United Dominion has limited partners in
certain real estate partnerships acquired as part of the acquisition of American
Apartment Communities II on December 7, 1998. Net income for these partnerships
is allocated based on the percentage interest owned by these limited partners in
each respective real estate partnership.
Stock based compensation United Dominion has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") in accounting for its employee stock options because the alternative
fair value accounting provided for under SFAS No. 123, "Accounting for Stock
Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of United Dominion's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation cost has
been recognized.
54
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Impact of recently issued accounting 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.
2. REAL ESTATE OWNED
United Dominion operates in over 30 major markets dispersed throughout a 22
state area. At December 31, 1999, the company's largest apartment market was
Dallas, Texas, where it owned 9.7% of its apartment homes, based upon carrying
value. Excluding Dallas, United Dominion did not own more than 5.5% of its
apartment homes in any one market, based upon carrying value.
The following table summarizes real estate held for investment at December 31,
(dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------------
<S> <C> <C>
Land and land improvements $ 636,905 $ 647,328
Buildings and improvements 2,767,940 2,819,312
Furniture, fixtures and equipment 166,826 169,364
Construction in progress 6,177 7,241
--------------------------
Real estate held for investment 3,577,848 3,643,245
Accumulated depreciation (373,164) (280,663)
--------------------------
Real estate held for investment, net $3,204,684 $3,362,582
==========================
</TABLE>
The following is a summary of real estate owned by market at December 31, 1999
(dollars in thousands):
Real Estate Held for Investment by Market (in order of carrying value and
excluding real estate under development):
<TABLE>
<CAPTION>
Initial
Number of Acquisition Carrying Accumulated
Market Communities Cost Value Depreciation Encumbrances
<S> <C> <C> <C> <C> <C>
Dallas/Ft. Worth, TX 25 $ 312,391 $ 348,190 $ 28,588 $ 34,299 (A)
Phoenix, AZ 10 164,891 196,529 11,174 19,500 (A)
Houston, TX 15 139,969 183,991 11,875 43,546 (A)
Orlando, FL 13 146,114 175,325 24,667 41,298 (A)
San Antonio, TX 12 150,741 165,825 12,051 38,138 (A)
Tampa, FL 11 146,849 162,933 19,550 40,177 (A)
Raleigh, NC 9 123,071 139,336 23,894 15,202
San Francisco, CA 4 128,754 138,681 3,320 68,751
Columbus, OH 5 86,625 120,913 3,244 34,459
</TABLE>
55
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial
Number of Acquisition Carrying Accumulated
Market Communities Cost Value Depreciation Encumbrances
<S> <C> <C> <C> <C> <C>
Charlotte, NC 10 95,265 118,169 20,430 17,650
Nashville, TN 8 83,987 116,954 9,253 --
Wilmington, NC 10 80,116 111,709 23,421 --
Monterey Peninsula, CA 13 100,762 111,474 2,930 703 (A)
Memphis, TN 7 95,594 103,723 10,110 33,032
South Florida 6 96,137 102,349 10,310 (A)
Richmond, VA 8 75,101 100,058 24,772 2,917 (A)
Columbia, SC 9 83,053 97,332 19,490 5,000
Southern California 6 94,583 95,243 2,102 6,034
Other FL 8 56,901 86,616 11,308 --
Greensboro, NC 5 63,359 78,175 8,625 --
Atlanta, GA 6 57,669 69,224 10,347 10,841
Baltimore, MD 6 58,846 65,439 10,796 18,260 (A)
Seattle, WA 5 63,998 57,816 2,341 28,684
Jacksonville, FL 3 44,787 56,783 8,657 12,455
Hampton, VA 6 42,741 54,653 15,238 (A)
Sacramento, CA 2 47,549 52,758 1,406 17,065 (A)
Other VA 6 29,510 47,439 9,337 2,780
Denver, CO 2 44,195 44,111 1,298 --
Other North Carolina 3 39,004 41,155 4,734 10,142
Detroit, MI 4 38,126 40,254 1,111 635 (A)
Other Midwest 3 36,119 38,293 1,267 1,006 (A)
Washington DC 3 32,603 35,731 4,565 (A)
Eastern Shore MD 4 31,403 34,790 5,217 (A)
Portland, OR 3 41,892 34,353 1,163 1,542 (A)
Indianapolis, IN 2 29,988 26,263 938 304 (A)
Austin, TX 2 21,005 23,836 2,506 (A)
Arkansas 2 20,500 22,306 2,083 --
Nevada 1 20,000 20,776 1,759 --
Delaware 2 14,732 17,761 3,044 (A)
New Mexico 2 16,023 16,761 1,219 5,221 (A)
Arizona 2 11,891 13,408 780 4,618
Other GA 1 8,590 10,413 2,244 (A)
---------------------------------------------------------------
264 $3,075,434 $3,577,848 $373,164 $514,259 (A)
===============================================================
</TABLE>
Real Estate Held for Disposition (B)
<TABLE>
<CAPTION>
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
<S> <C> <C> <C> <C> <C>
Apartments 37 $ 257,625 $ 270,718 $ 20,909 $ 66,407 (A)
Commercial 4 11,082 12,565 1,791 3,070
-----------------------------------------------------------
41 $ 268,707 $ 283,283 $ 22,700 $ 69,477 (A)
===========================================================
Total 305 $3,344,141 $3,861,131 $395,864 $1,000,136 (A)
===========================================================
</TABLE>
56
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(A) There are 21 communities encumbered by two REMIC financings aggregating
$59.2 million, 19 communities encumbered by one secured note payable
aggregating $195.7 million and 29 communities encumbered by fixed rate debt
aggregating $161.5 million. The amount of this debt is not included in the
encumbrances shown for the individual markets or in real estate held for
disposition.
(B) Real estate held for disposition contributed property operating income
(property rental income less property rental expenses) in the aggregate
amount of approximately $25.2 million for the year ended December 31, 1999.
The properties classified as held for disposition at December 31, 1999
reflect properties management has committed to sell during the next twelve
months.
For the year ended December 31, 1999, United Dominion recognized $18.3 million
in impairment losses on its real estate owned. At the beginning of June 1999,
United Dominion embarked on an accelerated disposition plan for non-strategic
properties. Accordingly, through the review and analysis of communities
targeted for strategic disposition which included exiting one of United
Dominion's major markets and planned sales in 2000, an aggregate $14.8 million
impairment loss was recognized on assets held for disposition. An impairment
loss was indicated as a result of the net book value of the assets held for
disposition being greater than the estimated fair market value less the cost of
disposal.
In connection with the periodic evaluation of its apartment portfolio, United
Dominion recorded a $3.5 million impairment loss on three communities acquired
in the ASR merger in 1998 which are classified in real estate held for
investment. An impairment loss was indicated as the sum of the estimated future
cash flows from the assets was deemed to be less than their carrying amounts.
The following is a reconciliation of the carrying amount of real estate held for
investment at December 31, (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
Balance at January 1 $3,643,245 $2,281,438 $ 2007,612
Real estate acquired 75,719 1,388,514 344,363
Capital expenditures 72,096 98,872 96,102
Transferred from development 116,787 23,350 65,475
Impairment loss on real estate (3,500) -- (1,400)
Transferred to real estate held for disposition (326,499) (148,929) (230,714)
--------------------------------------
Balance at December 31 $3,577,848 $3,643,245 $2,281,438
======================================
</TABLE>
The following is a reconciliation of accumulated depreciation for real estate
held for investment at December 31, (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------
<S> <C> <C> <C>
Balance at January 1 $280,663 $200,506 $173,291
Depreciation expense for the year* 122,884 100,683 77,440
Transferred to real estate held for disposition (30,383) (20,526) (50,225)
------------------------------------
Balance at December 31 $373,164 $280,663 $200,506
====================================
</TABLE>
* Includes $1,157, $1,095 and $752 for 1999, 1998 and 1997, respectively,
classified as "Other depreciation and amortization" in the Consolidated
Statements of Operations.
57
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. SECURED DEBT
Secured debt, which encumber $1.9 billion or 48.0% of United Dominion's real
estate owned, ($2.1 billion or 52.0% of United Dominion's real estate owned is
unencumbered) consist of the following at December 31, 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
Weighted Average No. of
--------------------
Interest Years to Communities
Principal Outstanding Rate Maturity Encumbered
1999 1998 1999 1999 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed Rate Debt
Mortgage Notes Payable (a) $ 555,414 $ 618,997 7.81% 6.5 84
Tax-Exempt Secured Notes Payable 96,699 125,405 6.91% 12.5 13
REMIC Financings 59,167 75,919 7.78% 1.0 21
Secured Credit Facilities 57,000 45,000 6.65% 14.0 --
------------------------------------------------------------
Total Fixed Rate Secured Debt 768,280 865,321 7.61% 7.4 118
Variable Rate Debt
Secured Credit Facilities 138,675 -- 6.18% 14.0 19
Tax-Exempt Secured Notes Payable 66,616 64,895 4.96% 18.9 5
Mortgage Notes Payable 26,565 141,969 7.34% 13.3 9
------------------------------------------------------------
Total Variable Rate Secured Debt 231,856 206,864 5.96% 15.3 33
------------------------------------------------------------
Total Secured Debt $1,000,136 $1,072,185 7.23% 9.2 151
============================================================
</TABLE>
(a) Includes fair value adjustments aggregating $14.8 million recorded in
connection with two statutory mergers consummated in 1998.
Fixed Rate Debt
Mortgage Notes Payable Fixed rate mortgage notes payable are generally due in
monthly installments of principal and interest and mature at various dates from
August 2000 through June 2034 and carry interest rates ranging from 7.13% to
9.58%.
Tax-Exempt Secured Notes Payable Fixed rate mortgage notes payable which secure
tax-exempt housing bond issues mature at various dates through November 2025 and
carry interest rates from 6.13% to 8.50%. Interest on these notes is generally
payable in semi-annual installments.
REMIC Financings United Dominion has two fixed rate REMIC Financings which bear
interest of 7.01% and 8.50% and mature in December 2000 and February 2001,
respectively. United Dominion makes monthly installments of principal and
interest over the term of the REMIC Financings.
Secured Credit Facilities On March 18, 1999, United Dominion closed on the
first part of 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. The $102.3 million initially
borrowed under the terms of the FNMA Credit Facility had an interest rate of
5.70%. In April 1999, United Dominion borrowed an additional $16.6 million at an
interest rate of 5.68% and $10.7 million at an interest rate of 5.72%. In
August, an additional $66.1 million was borrowed under the FNMA Credit Facility
at an interest rate of 6.53%. At December 31, 1999, the FNMA Credit Facility had
a weighted average floating rate of interest of 6.32%. 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
58
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
secured debt from a variable rate to a weighted average fixed rate of 6.65% (see
Note 5 - Financial Instruments).
Variable Rate Debt
Secured Credit Facilities Variable rate secured credit facilities consists of
$138.7 million of the $195.7 million outstanding on the FNMA Credit Facility.
Tax-Exempt Secured Notes Payable Variable rate mortgage notes payable which
secure tax-exempt housing bond issues mature at various dates from December 2002
to April 2029. At December 31, 1999, these notes carry interest rates ranging
from 4.75% to 5.90%.
Mortgage Notes Payable Variable rate mortgage notes payable are generally due
in monthly installments of principal and interest and mature at various dates
from February 2001 through September 2027. At December 31, 1999, these notes
carry interest rates ranging from 6.86% to 7.50%.
The extraordinary loss for the years ended December 31, 1998 and 1997 resulted
from the write-off of deferred financing costs on mortgage debt satisfied.
The aggregate maturities of secured debt for the five years subsequent to
December 31, 1999 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fixed Variable
------ -------------------------------------------- ------------------------------- ----------
Mortgage Tax-Exempt REMIC Secured Secured Tax Exempt Mortgage
Year Notes Bonds Financings Notes Notes Notes Notes TOTAL
------ -------------------------------------------- ------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $ 28,351 $ 1,150 $26,445 $ - $ - $ 1,500 $ 629 $ 58,075
2001 64,845 1,402 32,722 - - 1,500 4,232 104,701
2002 51,325 1,490 - - - 4,000 660 57,475
2003 52,076 1,306 - - - 1,900 6,255 61,537
2004 120,435 4,866 - - - 2,000 619 127,920
Thereafter 238,382 86,485 - 57,000 138,675 55,716 14,170 590,428
-------------------------------------------- ------------------------------ ----------
$555,414 $96,699 $59,167 $57,000 $138,675 $66,616 $26,565 $1,000,136
============================================ ============================== ==========
</TABLE>
4. UNSECURED DEBT
A summary of unsecured debt at December 31, 1999 and 1998 is as follows (dollars
in thousands):
1999 1998
-------- --------
Commercial Banks
Borrowings outstanding under
credit facilities (a) (b) $277,600 $240,000
Insurance Companies--Senior Unsecured Notes
7.98% due March, 2000-2003 (c) 29,800 37,228
Other (d) 4,931 5,836
59
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Senior Unsecured Notes - Other
<S> <C> <C>
7.25% Notes repaid April 1999 -- 75,000
8.13% Senior Notes due November 2000 146,150 150,000
7.60% Medium-Term Notes due January 2002 55,000 --
7.65% Medium-Term Notes due January 2003 (e) 10,000 --
7.22% Medium-Term Notes due February 2003 12,000 --
5.05% City of Portland, OR Bonds due October 2003 7,345 --
7.67% Medium-Term Notes due January 2004 54,000 --
7.73% Medium-Term Notes due April 2005 23,400 --
7.02% Medium-Term Notes due November 2005 50,000 50,000
7.95% Medium-Term Notes due July 2006 120,340 125,000
7.07% Medium-Term Notes due November 2006 25,000 25,000
7.25% Notes due January 2007 111,825 125,000
8.50% Monthly Income Notes due November 2008 59,778 62,500
8.50% Debentures due September 2024(f) 140,000 150,000
---------- ----------
814,838 762,500
---------- ----------
Total Unsecured Debt $1,127,169 $1,045,564
========== ==========
</TABLE>
(a) Weighted average interest rate of 6.7% and 6.0% at December 31, 1999 and
1998, respectively.
(b) As of December 31, 1999, United Dominion had seven interest rate swap
agreements associated with commercial bank borrowings with an aggregate
notional value of $110 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 6.77% (see Note 5 - Financial
Instruments).
(c) Payable annually in four equal principal installments of $7.4 million.
(d) Includes $4.6 million and $5.4 million at December 31, 1999 and 1998,
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 7.65% (see Note 5 - Financial
Instruments).
(f) Debentures include an investor put feature which grants a one-time option
to redeem debentures in September 2004.
For the year ended December 31, 1999, United Dominion recognized a $927 thousand
extraordinary gain related to the repurchase of $70.0 million of its unsecured
notes payable at less than face value.
Information concerning short-term bank borrowings is summarized in the table
that follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C>
Total revolving credit facilities
and lines of credit at December 31 $310,000 $265,000
Borrowings outstanding at December 31 277,600 240,000
Weighted average daily borrowings
during the year 223,629 238,587
Maximum daily borrowings during the year 283,000 334,500 (a)
Weighted average daily interest rate during the year 5.8% 6.1% (a)
Weighted average daily interest rate at December 31 6.7% 6.0%
</TABLE>
60
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(a) Includes balances on a $75 million bridge facility funded in July 1998 that
matured in November 1998.
At December 31, 1999, United Dominion had in place a syndicated three year $200
million unsecured revolving credit facility (the "Bank Credit Facility") of
which $197.6 million was outstanding at December 31, 1999. The Bank Credit
Facility will expire on August 4, 2000. Borrowings under the Bank Credit
Facility generally bear interest at LIBOR plus .50%. United Dominion is also
required to pay a fee of .20% of the committed amount. This fee and the
interest rate are both subject to change should United Dominion's credit ratings
change.
At December 31, 1999, United Dominion had a $110 million syndicated 364-day
credit agreement (the "Line of Credit") of which $80 million was outstanding at
December 31, 1999. The Line of Credit will mature on September 15, 2000.
Borrowings under the Line of Credit generally bear interest at LIBOR plus 1.00%.
United Dominion is also required to pay a fee of .20% of the committed amount.
This fee and the interest rate are both subject to change should United
Dominion's credit ratings change.
The Bank Credit Facility and the Line of Credit are subject to customary
financial covenants and limitations. The underlying loan agreements contain
certain covenants which, among other things, require United Dominion to maintain
minimum consolidated tangible net worth, as defined, and maintain certain
financial ratios.
5. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following disclosures of estimated fair value of financial instruments were
determined by United Dominion using available market information and appropriate
valuation methodologies. Considerable judgement is necessary to interpret market
data and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts United Dominion would
realize on the disposition of the financial instruments. The use of different
market assumptions or estimation methodologies may have a material effect on the
estimated fair value amounts. The carrying amounts and estimated fair value of
United Dominion's financial instruments at December 31, 1999 and 1998, both on
and off-balance sheet, are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------------ ------------------------
<S> <C> <C> <C> <C>
Secured debt $1,000,136 $1,031,074 $1,072,185 $1,125,582
Unsecured debt 1,127,169 1,102,605 1,045,564 1,068,868
Interest rate swap agreements -
favorable / (unfavorable) -- 626 -- (1,321)
</TABLE>
The following methods and assumptions were used by United Dominion in estimating
the fair values set forth above.
Cash and cash equivalents The carrying amount of cash and cash equivalents
- -------------------------
approximates fair value.
Secured and unsecured debt Estimated fair value is based on mortgage rates,
- --------------------------
tax-exempt bond rates and corporate unsecured debt rates believed to be
available to United Dominion for the issuance of debt with similar terms and
remaining lives. The carrying amount of United Dominion's variable rate secured
debt approximate fair value at December 31, 1999 and 1998. The carrying amounts
of United Dominion's borrowings under variable rate unsecured debt arrangements,
short-term revolving credit agreements and lines of credit approximate their
fair values at December 31, 1999 and 1998.
Interest rate swap agreements Fair value is based on external market
- -----------------------------
quotations from investment banks.
61
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Derivative Instruments
- ----------------------
The following table summarizes certain information pursuant to interest rate
limitation and swap contracts at December 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Notional Fixed Type of Underlying Contract Fair
Amount Rate Contract Debt Maturity Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 7,000 6.78% Swap FNMA 06/30/00 $ 230
10,000 7.22% Swap FNMA 04/01/04 141
40,000 6.49% Swap FNMA 04/01/04 174
20,000 7.07% Swap Bank Credit Facility 05/01/00 (45)
5,000 6.70% Swap Bank Credit Facility 06/01/00 (4)
5,000 6.82% Swap Bank Credit Facility 07/01/04 91
5,000 6.48% Swap Bank Credit Facility 10/03/02 98
10,000 6.64% Swap Bank Credit Facility 10/03/02 152
20,000 6.44% Swap Bank Credit Facility 01/24/00 10
45,000 6.84% Swap Line of Credit 01/18/00 23
10,000 7.65% Swap 4-year MTN 01/27/03 (244)
----------------------------------------------------------------------
$ 177,000 $ 626
======================================================================
</TABLE>
For all periods presented, United Dominion had no deferred gains or losses
relating to terminated swap contracts.
Interest rate risk management agreements
In order to reduce the interest rate risk associated with the anticipated
issuance of unsecured debt during 1998, United Dominion entered into a $100
million (notional amount) fixed pay forward starting swap agreement (interest
rate risk management agreement) with an investment banking firm in July 1997.
United Dominion settled the interest rate risk management agreement on November
9, 1998, by paying $15.6 million to the counterparty. United Dominion was unable
to issue the unsecured debt contemplated by the interest rate risk management
agreement, and accordingly, the cost associated with this settlement is
reflected in the 1998 Statement of Operations. United Dominion has no interest
rate risk management agreements outstanding at December 31, 1999.
Risk of counterparty non-performance
United Dominion has not obtained collateral or other security to support
financial instruments. In the event of non-performance by the counterparty,
United Dominion's credit loss on its derivative instruments is limited to the
value of the derivative instruments that are favorable to United Dominion at
December 31, 1999. However, such non-performance is not anticipated as the
counterparties are highly rated, credit quality U.S. financial institutions and
management believes that the likelihood of realizing material losses from
counterparty non-performance is remote.
6. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The United Dominion Realty Trust, Inc. Profit Sharing Plan (the "Plan") is a
defined contribution plan covering all eligible full-time employees. Under the
Plan, United Dominion makes discretionary profit sharing and matching
contributions to the Plan as determined by the Compensation Committee of the
Board of Directors. Aggregate contributions, both matching and discretionary,
which are included in United Dominion's consolidated statements of operations
for the three years ended December 31, 1999, 1998 and 1997 were $2.2 million,
$550,000 and $646,000, respectively.
Stock Option Plan
United Dominion's 1985 Share Option Plan, (the "Option Plan"), authorizes the
grant of options, at the discretion of the Board of Directors, to certain
officers, directors and key employees of United Dominion, for up to ten million
shares of
62
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
United Dominion's common stock which is limited to 8% of the number of shares of
common stock issued and outstanding. The Option Plan generally provides, among
other things, that options be granted at exercise prices not lower than the
market value of the shares on the date of grant. Shares under options which
subsequently expire or are canceled are available for subsequent grant. For
options granted prior to December 12, 1995, the optionee has up to five years
from the date on which the options first become exercisable during which to
exercise the options. For options granted on or after December 12, 1995, the
options have a ten-year term. Options granted prior to December 9, 1997 vest on
December 31 of the year subsequent to grant while options granted on and after
this date vest ratably over a three year period beginning on December 31 of the
year subsequent to grant. On December 8, 1998, United Dominion cancelled
1,047,165 options which were granted on December 9, 1997 at $14.25. United
Dominion subsequently issued options on December 8, 1998, which vest over a
three-year period, at United Dominion's then market price of $10.875.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123 "Accounting for Stock Based Compensation" ("SFAS No. 123"), and has
been determined as if United Dominion had accounted for its employee stock
options under the fair value method of accounting as defined in SFAS No. 123.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1999, 1998 and 1997:
1999 1998 1997
----- ----- -----
Risk free interest rate 6.7% 4.9% 4.8%
Dividend yields 6.9% 6.6% 6.6%
Volatility factor .144 .150 .150
Weighted average expected life (years) 9 9 9
The weighted average fair value of options granted during 1999, 1998 and 1997
was $.76, $.66 and $1.35, respectively.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. United
Dominion's pro forma information is as follows (dollars in thousands, except per
share amounts):
1999 1998 1997
------- -------- --------
Net income available
to common shareholders
As reported $55,908 $48,739 $52,804
Pro forma 54,847 47,841 52,221
Earnings per common share-diluted
As reported $ .54 $ .49 $ .60
Pro forma .53 .48 .60
63
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
A summary of United Dominion's stock option activity during the three years
ended December 31, 1999 is provided in the following table (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------------------------
Shares Available Weighted Average Range of
For Future Grant Options Exercise Price Exercise Prices
- ----------------------------------------------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 1,970,040 1,775,216 $13.29 $ 7.44-$15.25
Granted (1,841,000) 1,841,000 14.34 13.50-15.38
Exercised -- (116,495) 11.18 7.44-14.63
Forfeited 51,000 (51,000) 15.09 13.13-15.38
---------- ---------- ------ --------------
Balance, December 31, 1997 180,040 3,448,721 13.89 7.44- 15.38
Granted (1,137,665) 1,137,665 11.16 10.88-14.13
Exercised -- (73,490) 11.47 7.44-13.88
Forfeited 1,153,883 (1,153,883) 14.28 7.44-15.38
Additional shares authorized (a) 4,735,858 -- -- --
---------- ---------- ------ --------------
Balance, December 31, 1998 4,932,116 3,359,013 12.89 7.44-15.38
Granted (1,192,333) 1,192,333 10.02 9.63-11.19
Exercised -- (46,998) 9.87 9.19-10.25
Forfeited 288,756 (288,756) 13.46 10.88-15.38
---------- ---------- ------ --------------
Balance, December 31, 1999 4,028,539 4,215,592 $12.09 $9.19- $ 15.38
========== ========== ====== ==============
</TABLE>
(a) The number of shares of common stock issuable upon the exercise of options
outstanding is limited to 8% of the number of shares of common stock issued and
outstanding.
Exercisable at December 31,
1997 916,981 $12.67 $7.44-$15.38
1998 1,691,863 13.79 7.44-15.38
1999 2,042,505 13.28 9.19-15.38
The weighted average remaining contractual life on all options outstanding is
7.5 years. Approximately 1,407,315 of share options had exercise prices between
$14.13 and $15.38, approximately 1,967,691 of share options had exercise prices
between $10.81 and $13.94 and approximately 840,586 of share options had
exercise prices between $9.19 and $10.25.
7. SHAREHOLDERS' EQUITY
Preferred Stock Both Series A and Series B Preferred Stock have no stated par
value and a liquidation preference of $25 per share. With no voting rights and
no stated maturity, the preferred stock in both series is not subject to any
sinking fund or mandatory redemption and is not convertible into any other
securities of United Dominion. The Series A and Series B Preferred Stock are not
redeemable prior to April 24, 2000 and May 29, 2007, respectively. On or after
these dates, the Series A and Series B Preferred Stock may be redeemed for cash
at the option of United Dominion, in whole or in part, at a redemption price of
$25 per share plus accrued and unpaid dividends. The redemption price is payable
solely out of the sales proceeds of other capital stock of United Dominion. All
dividends due and payable on the Series A and Series B Preferred Stock have been
accrued or paid as of the end of each fiscal year. United Dominion declared
total distributions of $2.31 and $2.15 per share on the Series A and Series B
Preferred Stock, respectively, during 1999.
On December 7, 1998, in connection with the AAC merger, United Dominion issued
eight million shares of newly created Series D Convertible Redeemable Preferred
Stock (Series D), with a liquidation preference of $25 per share. The Series D
has no voting rights, no stated maturity and is not subject to any sinking fund
or mandatory redemption. Series D is convertible into 1.5385 shares of common
stock at the option of the holder of Series D at any time at $16.25 per share.
The Series D is not redeemable prior to December 7, 2003. On or after this date,
United Dominion may, at its option, redeem at any time all or part of the Series
D at a price per share of $25, payable in cash, plus all accrued and unpaid
dividends,
64
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
provided that the current market price of the common stock at least equals the
conversion price, initially set at $16.25 per share. The redemption is payable
solely out of the sale proceeds of other capital stock. In addition, United
Dominion may not redeem in any consecutive 12 month period a number of shares of
Series D having an aggregate liquidation preference of more than $100 million.
United Dominion declared total distributions of $1.89 per share on the Series D
Preferred Stock during 1999.
Officers' Stock Purchase and Loan Plan Under the Officer Stock Purchase and Loan
Plan (the "Loan Plan"), certain officers have purchased common stock at the then
current market price with financing provided by United Dominion at an interest
rate of 7%. The underlying notes mature between November 2001 and October 2006.
A total of 848,500 shares have been issued and 551,500 shares are available for
future issuance under the Loan Plan.
Dividend Reinvestment and Stock Purchase Plan United Dominion's Dividend
Reinvestment and Stock Purchase Plan (the "Stock Purchase Plan") allows common
and preferred shareholders the opportunity to purchase, through reinvestment of
cash dividends, additional shares of United Dominion's common stock. As of
December 31, 1999, 8,337,961 shares of common stock had been issued under the
Stock Purchase Plan. Shares in the amount of 5,662,039 were reserved for further
issuance under the Stock Purchase Plan at December 31, 1999. During 1999,
1,597,841 shares were issued under the Stock Purchase Plan for a total
consideration of approximately $16.7 million.
Restricted Stock Awards United Dominion's 1999 Restricted Stock Awards Plan
authorizes the granting of restricted stock awards to employees, officers and
directors of United Dominion. The shares of common stock vest ratably over a
three year period. Deferred compensation expense is recorded over the vesting
period and is based upon the value of the common stock on the date of issuance.
A total of 46,000 shares of restricted stock have been issued under the
Restricted Stock Awards Plan as of December 31, 1999.
Purchase Rights On January 27, 1998, the Board of Directors authorized a
Shareholders Rights Plan (the "Rights Plan") which will become exercisable only
if a person or group (the "Acquiring Person") acquires or announces a tender
offer for more than 15% of the outstanding common stock of United Dominion.
Upon exercise, United Dominion may issue one share of common stock in exchange
for each right. Each right will entitle the holder to purchase for $45 one
thousandth of a share of Series C Preferred stock or, at the option of United
Dominion, common stock of United Dominion having a value of $90.
8. COMMITMENTS AND CONTINGENCIES
Land and Other Leases
- ---------------------
United Dominion is party to several ground leases relating to operating
communities. In addition, United Dominion is party to various other operating
leases related to the operation of its corporate and regional offices. Future
minimum lease payments for noncancelable land and other leases at December 31,
1999 are as follows (dollars in thousands):
2000 $ 2,177
2001 1,800
2002 1,746
2003 1,566
2004 1,444
Thereafter 26,631
-------
Total $35,364
=======
65
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
United Dominion incurred $2.8 million, $1.6 million and $1.2 million,
respectively, of rent expense for the years ended December 31, 1999, 1998 and
1997.
Contingencies
- -------------
United Dominion is party to various legal actions which are incidental to its
business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operation.
Commitments
- -----------
United Dominion is committed to completing its real estate currently under
development which has an estimated cost to complete of $59.0 million at December
31, 1999.
9. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
On March 27, 1998, United Dominion completed the acquisition of ASR Investments
Corporation in a statutory merger (the "ASR Merger"). In connection with the ASR
Merger, United Dominion acquired 39 communities with 7,550 apartment homes.
Each share of ASR's common stock was exchanged for 1.575 shares of United
Dominion's common stock. The acquisition was structured as a tax-free
transaction and was treated as a purchase for accounting purposes. In connection
with the acquisition, United Dominion acquired primarily real estate assets
totaling $313.7 million. Consideration given by United Dominion included
7,742,839 shares of United Dominion's common stock valued at $14 per share for
an aggregate equity value of $108.4 million plus the issuance of 1,529,990 Units
in the ASR Operating Partnership valued at $21.4 million. In addition, United
Dominion assumed, at fair value, mortgage debt totaling $179.4 million and other
liabilities of $13.6 million.
On December 7, 1998, United Dominion completed the acquisition of American
Apartment Communities II ("AAC") in a statutory merger (the "AAC Merger"). In
connection with the acquisition of AAC, United Dominion acquired 53 communities
with 14,001 apartment homes. The AAC Merger was structured as a tax-free merger
and exchange of partnership units and was treated as a purchase for accounting
purposes. 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 United Dominion's 7.5%
Series D Convertible Preferred Stock ($25 liquidation preference value) which is
convertible into United Dominion'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 $457.7 million of secured notes payable
at fair market value, (iv) the assumption of liabilities and minority interest
aggregating $27.8 million and (v) $59.8 million of cash.
Information concerning unaudited pro forma results of operations of United
Dominion for the years ended December 31, 1998 and 1997 are set forth below. For
1998, such pro forma information assumes the following transactions occurred on
January 1, 1998: (i) the acquisition of ASR, (ii) the acquisition of AAC and
(iii) the acquisition of 13 communities with 4,318 apartment homes for an
aggregate purchase price of $144 million. For 1997, in addition to the
acquisitions previously described, such pro forma information assumes the
following transactions occurred on January 1, 1997: (i) the acquisition by
United Dominion of 17 communities with 5,659 apartment homes at a total cost of
$219 million and (ii) the acquisition by ASR of 22 communities with 4,208
apartment homes at total cost of $176 million.
66
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
In addition to the ASR Merger and the AAC Merger, all of the acquisitions
described have been accounted for as purchases of real estate and operating
results for those communities are reflected in the accompanying consolidated
financial statements from their respective dates of acquisition.
Pro Forma
Year Ended
December 31,
-------------------
In thousands, except per share amounts 1998 1997
- -------------------------------------- -------- --------
(Unaudited)
Rental income $597,460 $566,681
Net income available to common shareholders
before extraordinary item 43,218 37,468
Net income available to common shareholders 43,080 37,418
Net income per common share before
extraordinary item - basic and diluted $ .41 $ .39
Net income per common share -
basic and diluted .41 .39
The unaudited information is not necessarily indicative of what United
Dominion's consolidated results of operations would have been if the
acquisitions had occurred at the beginning of each period presented.
Additionally, the pro forma information does not purport to be indicative of
United Dominion's results of operations for future periods.
10. INDUSTRY SEGMENTS
United Dominion adopted Financial Accounting Standards Board ("FASB") Statement
No. 131, Disclosure about Segments of an Enterprise and Related Information"
("Statement 131") in the fourth quarter of 1998. Statement 131 superseded FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
Statement 131 establishes standards for the way public business enterprises
report information regarding reportable operating segments. The adoption of
Statement 131 did not affect the results of operations or financial position of
United Dominion.
United Dominion owns and operates multifamily apartment communities throughout
the United States which generated rental and other property related income
through the leasing of apartment units to a diverse base of tenants. United
Dominion separately evaluates the performance of each of its apartment
communities. However, because each of the apartment communities have similar
economic characteristics, facilities, services and tenants, the apartment
communities have been aggregated into a single apartment communities segment.
All segment disclosure are included in or can be derived from United Dominion's
consolidated financial statements.
All revenues are from external customers and no revenues are generated from
transactions with other segments. There are no tenants which contributed 10% or
more of United Dominion's total revenues during 1999, 1998 or 1997.
67
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
11. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA
Summarized consolidated quarterly financial data for the year ended December 31,
1999 is as follows (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
March 31 June 30 (a) September 30 December 31 (b)
--------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
Rental income $153,791 $154,430 $155,523 $155,005
Income before gains on sales
of investments, minority interests
and extraordinary item 20,941 11,389 20,521 7,528
Gains on the sales of investments 191 32,214 48 5,542
Net income 20,082 40,800 19,876 12,864
Distributions to preferred shareholders 9,439 9,440 9,441 9,394
Net income available to
common shareholders 10,643 31,360 10,435 3,470
Earnings per common share:
Basic $ .10 $ .30 $ .10 $ .03
Diluted $ .10 $ .30 $ .10 $ .03
Weighted average number of common shares
outstanding-basic 103,932 104,324 103,439 102,735
Weighted average number of common shares
outstanding-diluted 103,935 104,338 103,490 102,807
</TABLE>
(a) The second quarter of 1999 includes $32.2 million of gains on the sales of
investments and a $7.1 million impairment loss on real estate and
investments.
(b) The fourth quarter of 1999 includes $ 5.5 million of gains on the sales of
investments and a $12.2 million impairment loss on real estate and
investments.
________________________________________________________________________________
Summarized consolidated quarterly financial data for the year ended December 31,
1998 is as follows (dollars in thousands, except per share information):
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
March 31(a) June 30 September 30 December 31(a), (b)
------------ --------- ------------ -------------------
<S> <C> <C> <C> <C>
Rental income $104,249 $118,176 $123,475 $132,818
Income before gains (losses) on sales
of investments, minority interests
and extraordinary item 17,578 15,387 13,872 502
Gains (losses) on the sales of investments (260) 20,721 13 6,198
Net income 17,183 35,005 13,807 6,337
Distributions to preferred shareholders 5,650 5,653 5,650 6,640
Net income (loss) available to
common shareholders 11,533 29,352 8,157 (303)
Earnings per common share:
Basic $ .13 $ .29 $ .08 $ (.00)
Diluted $ .13 $ .29 $ .08 $ (.00)
Weighted average number of common shares
outstanding-basic 90,867 101,562 103,104 103,467
Weighted average number of common shares
outstanding-diluted 90,985 102,358 103,145 103,476
</TABLE>
68
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(a) United Dominion completed the acquisition of ASR Investments Corporation on
March 27, 1998 and the acquisition of American Apartment Communities II on
December 7, 1998.
(b) The fourth quarter of 1998 includes a $15.6 million charge associated with
the termination of an interest rate risk management agreement.
69
<PAGE>
SCHEDULE III.
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Cost of
Improvements
Intitial Costs Total Capitalized
------------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
------------------ ------------------------------ ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Apartments:
Real estate held for investment
Dallas, Texas
Preston Oaks b $ 1,783,626 $ 6,416,374 $ 8,200,000 $ 530,121
Preston Trace c 2,195,500 8,304,500 10,500,000 552,953
Rock Creek c 4,076,680 15,823,320 19,900,000 3,573,377
Windridge b 3,414,311 14,027,310 17,441,621 2,266,191
Autumnwood c 2,412,180 8,687,820 11,100,000 762,036
Cobblestone c 2,925,372 10,527,738 13,453,110 1,681,620
Pavillion b 4,428,258 19,032,881 23,461,139 1,184,901
Oak Park 3,966,129 22,227,701 26,193,830 (697,245)
Catalina b 1,543,321 5,631,679 7,175,000 456,151
Wimbledon Court c 1,809,183 10,930,306 12,739,489 1,745,504
Southern Oaks 1,565,000 5,335,000 6,900,000 542,005
Hunters Ridge 1,613,000 5,837,000 7,450,000 573,789
Lakeridge c 1,631,350 5,668,650 7,299,999 715,626
Summergate c 1,171,300 3,928,700 5,100,000 595,043
Oak Forest 5,630,740 23,293,922 28,924,662 9,817,808
The Oaks of Lewisville 3,726,795 13,563,181 17,289,976 3,119,859
Kelly Crossing 2,496,701 9,156,355 11,653,056 1,127,200
Parc Plaza 1,683,531 5,279,123 6,962,654 990,898
Summit Ridge 4,872,444 1,725,508 6,308,032 8,033,540 1,246,411
Greenwood Creek 4,774,835 1,958,378 8,551,018 10,509,396 935,853
Highlands of Preston 4,580,372 2,151,056 8,167,630 10,318,686 1,303,422
Derby Park 7,239,436 3,121,153 11,764,974 14,886,127 542,940
Aspen Court 1,912,063 776,587 4,944,947 5,721,534 684,781
The Summit 5,278,406 1,932,195 9,041,301 10,973,496 1,005,111
Springfield 5,206,080 3,074,511 6,823,120 9,897,631 846,362
Orlando, Florida
Fisherman's Village 2,387,368 7,458,897 9,846,265 2,795,562
Seabrook 1,845,853 4,155,275 6,001,128 2,581,715
Dover Village 2,894,702 6,456,100 9,350,802 3,196,819
Lakeside North 12,440,000 1,532,700 11,076,062 12,608,762 3,296,687
Regatta Shores 757,008 6,607,367 7,364,375 2,386,927
Alafaya Woods d 1,653,000 9,042,256 10,695,256 1,787,491
Vinyards 8,940,000 1,840,230 11,571,625 13,411,855 2,525,212
Andover Place 13,485,000 3,692,187 7,756,919 11,449,106 2,757,718
Los Altos d 2,803,805 12,348,464 15,152,270 2,286,065
Lotus Landing 2,184,723 8,638,664 10,823,387 1,675,727
Seville on the Green 1,282,616 6,498,062 7,780,678 1,678,320
Arbors at Lee Vista d 3,975,679 16,920,454 20,896,133 1,449,777
Heron Lake 6,432,533 1,446,553 9,287,878 10,734,431 792,740
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
-------------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (h) (a) Depreciation Construction
------------------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Apartments:
Real estate held for investment
Dallas, Texas
Preston Oaks $ 1,895,879 $ 6,834,242 $ 8,730,121 $ 779,301 1980
Preston Trace 2,333,010 8,719,943 11,052,953 963,573 1984
Rock Creek 4,473,445 18,999,932 23,473,377 2,105,346 1979
Windridge 3,996,322 15,711,490 19,707,812 1,905,987 1980
Autumnwood 2,640,715 9,221,321 11,862,036 1,102,885 1984
Cobblestone 3,089,857 12,044,873 15,134,730 1,385,007 1984
Pavillion 4,615,450 20,030,590 * 24,646,040 2,329,082 1979
Oak Park 4,780,229 20,716,355 25,496,585 2,456,430 1982, 1998
Catalina 1,645,302 5,985,849 7,631,151 711,272 1982
Wimbledon Court 2,789,704 11,695,289 14,484,993 1,201,246 1983
Southern Oaks 1,600,188 5,841,816 7,442,005 731,015 1982
Hunters Ridge 1,794,234 6,229,555 8,023,789 780,972 1992
Lakeridge 1,768,334 6,247,292 8,015,625 773,038 1984
Summergate 1,379,968 4,315,075 5,695,043 518,945 1984
Oak Forest 6,309,302 32,433,168 38,742,470 2,545,941 1996, 1998
The Oaks of Lewisville 4,480,658 15,929,177 20,409,835 1,974,317 1983
Kelly Crossing 2,814,883 9,965,373 12,780,256 1,037,252 1984
Parc Plaza 1,839,226 6,114,326 7,953,552 649,206 1986
Summit Ridge 2,159,446 7,120,505 9,279,952 662,931 1983
Greenwood Creek 2,075,518 9,369,732 11,445,249 663,904 1984
Highlands of Preston 2,303,384 9,318,724 11,622,108 667,857 1985
Derby Park 3,499,222 11,929,844 15,429,067 998,474 1984
Aspen Court 1,041,896 5,364,419 6,406,315 386,395 1986
The Summit 2,298,403 9,680,204 11,978,607 689,536 1983
Springfield 3,259,924 7,484,069 10,743,993 568,301 1985
Orlando, Florida
Fisherman's Village 3,071,962 9,569,866 12,641,828 1,922,285 1984
Seabrook 2,227,419 6,355,424 8,582,842 1,456,920 1984
Dover Village 3,355,114 9,192,507 12,547,621 2,860,515 1981
Lakeside North 2,213,892 13,691,557 15,905,449 3,201,570 1984
Regatta Shores 1,496,916 8,254,386 9,751,302 2,244,224 1988
Alafaya Woods 2,096,368 10,386,379 12,482,747 2,368,946 1988/90
Vinyards 2,361,248 13,575,819 15,937,067 3,062,340 1984/86
Andover Place 4,441,272 9,765,552 14,206,824 1,985,387 1988
Los Altos 3,293,459 14,144,876 17,438,335 1,867,618 1990
Lotus Landing 2,374,503 10,124,611 12,499,114 944,301 1985
Seville on the Green 1,433,223 8,025,775 9,458,998 749,337 1986
Arbors at Lee Vista 4,360,580 17,985,330 22,345,910 1,375,080 1991
Heron Lake 1,578,534 9,948,637 11,527,171 626,684 1989
<CAPTION>
Depreciable
Life of
Date Building
Acquired Component
------------ ---------------
<S> <C> <C>
Apartments:
Real estate held for investment
Dallas, Texas
Preston Oaks 12/31/96 35 yrs.
Preston Trace 12/31/96 35 yrs.
Rock Creek 12/31/96 35 yrs.
Windridge 12/31/96 35 yrs.
Autumnwood 12/31/96 35 yrs.
Cobblestone 12/31/96 35 yrs.
Pavillion 12/31/96 35 yrs.
Oak Park 12/31/96 35 yrs.
Catalina 12/31/96 35 yrs.
Wimbledon Court 12/31/96 35 yrs.
Southern Oaks 12/31/96 35 yrs.
Hunters Ridge 12/31/96 35 yrs.
Lakeridge 12/31/96 35 yrs.
Summergate 12/31/96 35 yrs.
Oak Forest 12/31/96 35 yrs.
The Oaks of Lewisville 03/27/97 35 yrs.
Kelly Crossing 06/18/97 35 yrs.
Parc Plaza 10/30/97 35 yrs.
Summit Ridge 03/27/98 35 yrs.
Greenwood Creek 03/27/98 35 yrs.
Highlands of Preston 03/27/98 35 yrs.
Derby Park 03/27/98 35 yrs.
Aspen Court 03/27/98 35 yrs.
The Summit 03/27/98 35 yrs.
Springfield 03/27/98 35 yrs.
Orlando, Florida
Fisherman's Village 12/29/95 35 yrs.
Seabrook 02/20/96 35 yrs.
Dover Village 3/31/93 35 yrs.
Lakeside North 04/14/94 35 yrs.
Regatta Shores 06/30/94 35 yrs.
Alafaya Woods 10/21/94 35 yrs.
Vinyards 10/31/94 35 yrs.
Andover Place 19/29/95 & 09/30/9 35 yrs.
Los Altos 10/31/96 35 yrs.
Lotus Landing 07/01/97 35 yrs.
Seville on the Green 10/21/97 35 yrs.
Arbors at Lee Vista 12/31/97 35 yrs.
Heron Lake 03/27/98 35 yrs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cost of
Improvements
Intitial Costs Total Capitalized
-------------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
---------------- ------------------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Raleigh, North Carolina
Dominion on Spring Forest 1,257,500 8,586,255 9,843,755 2,850,723
Dominion Park Green 500,000 4,321,872 4,821,872 1,244,921
Dominion on Lake Lynn 1,723,363 5,303,760 7,027,123 2,197,691
Dominion Courtney Place 1,114,600 5,119,259 6,233,859 2,678,260
Dominion Walnut Ridge 1,791,215 11,968,852 13,760,067 2,020,629
Dominion Walnut Creek 3,170,290 21,717,407 24,887,697 2,841,165
Dominion Ramsgate 907,605 6,819,154 7,726,759 681,882
Harbour Pointe 1,898,740 7,101,260 9,000,000 137,506
Copper Mill 1,548,280 16,066,720 17,615,000 805,675
Trinity Park 15,202,148 4,579,648 17,575,712 22,155,360 806,193
Charlotte, North Carolina
The Highlands 321,400 2,830,346 3,151,746 2,453,267
Emerald Bay 626,070 4,722,862 5,348,932 2,624,018
Dominion Peppertree 1,546,267 7,699,221 9,245,488 1,428,272
Dominion Crown Point 1,115,261 8,648,865 9,764,126 1,517,372
Dominion Harris Pond 886,788 6,728,097 7,614,885 1,173,119
Dominion Mallard Creek (A) 5,286,892 698,860 6,488,061 7,186,921 563,074
Chateau Village 1,046,610 6,979,555 8,026,164 2,010,495
Dominion at Sharon 667,368 4,856,103 5,523,471 937,996
Providence Court 0 22,047,803 22,047,803 9,190,662
Stoney Pointe 12,363,127 1,499,650 15,855,610 17,355,260 1,005,466
Richmond, Virginia
Dominion Olde West 1,965,097 12,203,965 14,169,062 3,642,140
Dominion Laurel Springs 464,480 3,119,716 3,584,196 1,096,684
Dominion English Hills d 1,979,174 11,524,313 13,503,487 5,235,888
Dominion Gayton Crossing 2,916,860 825,760 5,147,968 5,973,728 6,305,074
Dominion West End d 2,059,252 15,049,088 17,108,340 2,480,461
Courthouse Green d 732,050 4,702,353 5,434,403 3,035,353
Waterside at Ironbridge 1,843,819 13,238,590 15,082,409 514,371
Corporate Headquarters 245,332 0 245,332 2,646,644
Houston, Texas
Woodtrail b 1,543,000 5,457,000 7,000,000 1,968,873
Park Trails b 1,144,750 4,105,250 5,250,000 504,830
Green Oaks 5,313,920 19,626,181 24,940,101 2,104,673
Sky Hawk 2,297,741 7,157,965 9,455,706 1,777,515
South Grand at Pecan Grove 10,611,128 4,058,090 14,755,809 18,813,899 3,239,221
Breakers 1,527,467 5,297,930 6,825,397 1,755,182
Braesridge 9,311,384 3,048,212 10,961,749 14,009,961 1,520,863
Skylar Pointe 8,450,023 3,604,483 11,592,432 15,196,915 3,174,814
Stone Canyon 899,515 899,515 9,422,885
Chelsea Park 3,279,625 1,991,478 5,787,626 7,779,104 1,083,347
Country Club Place 3,402,110 498,632 6,520,172 7,018,804 708,680
Arbor Ridge 3,565,032 1,688,948 6,684,229 8,373,177 45,141
London Park 4,249,085 2,018,478 6,667,450 8,685,928 1,241,833
Legends at Park 10 1,995,011 1,995,011 11,616,704
Towne Lake 1,333,958 5,308,884 6,642,842 939,739
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
-------------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (h) (a) Depreciation Construction
------------------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Raleigh, North Carolina
Dominion on Spring Forest 1,590,092 11,104,386 12,694,478 4,289,327 1978/81
Dominion Park Green 683,491 5,383,303 6,066,793 1,937,129 1987
Dominion on Lake Lynn 2,222,832 7,001,982 9,224,814 2,161,888 1986
Dominion Courtney Place 1,397,012 7,515,107 8,912,119 1,911,643 1979/81
Dominion Walnut Ridge 2,187,221 13,593,476 15,780,696 3,046,721 1982/84
Dominion Walnut Creek 3,682,948 24,045,913 27,728,862 5,058,480 1985/86
Dominion Ramsgate 1,005,603 7,403,039 8,408,641 961,558 1988
Harbour Pointe 1,898,796 7,238,710 9,137,506 779,826 1984
Copper Mill 1,755,353 16,665,321 18,420,675 1,822,899 1997
Trinity Park 4,696,853 18,264,700 22,961,553 1,924,742 1987
Charlotte, North Carolina
The Highlands 648,291 4,956,722 5,605,013 3,135,715 1970
Emerald Bay 1,179,772 6,793,179 7,972,950 3,442,007 1972
Dominion Peppertree 1,840,457 8,833,304 10,673,760 2,304,375 1987
Dominion Crown Point 1,585,606 9,695,892 11,281,498 2,124,705 1987
Dominion Harris Pond 1,213,702 7,574,302 8,788,004 1,608,800 1987
Dominion Mallard Creek (A) 776,615 6,973,380 7,749,995 1,409,891 1989
Chateau Village 1,407,249 8,629,411 10,036,660 1,338,797 1974
Dominion at Sharon 897,820 5,563,648 6,461,467 775,591 1984
Providence Court 7,403,009 23,835,456 31,238,465 2,445,314 1997
Stoney Pointe 1,733,721 16,627,005 18,360,726 1,845,083 1991
Richmond, Virginia
Dominion Olde West 2,409,869 15,401,333 17,811,202 7,030,866 1978/82/84/85/87
Dominion Laurel Springs 629,481 4,051,398 4,680,880 1,553,130 1972
Dominion English Hills 2,791,907 15,947,467 18,739,374 5,887,304 1969/76
Dominion Gayton Crossing 1,154,343 11,124,459 12,278,802 2,704,162 1973
Dominion West End 2,635,873 16,952,927 19,588,801 2,734,344 1989
Courthouse Green 1,074,475 7,395,280 8,469,756 3,718,955 1974/78
Waterside at Ironbridge 1,966,099 13,630,681 15,596,780 1,142,817 1987
Corporate Headquarters 245,352 2,646,624 2,891,976 0 1999
Houston, Texas
Woodtrail 1,720,755 7,248,118 8,968,873 1,042,304 1978
Park Trails 1,157,500 4,597,329 5,754,830 572,312 1983
Green Oaks 5,736,323 21,308,451 27,044,774 2,159,879 1985
Sky Hawk 2,694,055 8,539,166 11,233,221 968,055 1984
South Grand at Pecan Grove 4,426,643 17,626,476 22,053,120 1,547,219 1985
Breakers 1,854,904 6,725,675 8,580,579 676,510 1985
Braesridge 3,315,626 12,215,199 15,530,824 1,141,337 1982
Skylar Pointe 3,658,701 14,713,028 18,371,729 1,375,015 1979
Stone Canyon 899,515 9,422,886 10,322,400 2,464 1998
Chelsea Park 2,282,748 6,579,703 8,862,451 480,958 1983
Country Club Place 638,395 7,089,089 7,727,484 441,084 1985
Arbor Ridge 2,026,944 6,391,374 8,418,318 445,042 1983
London Park 2,265,686 7,662,075 9,927,761 557,356 1983
Legends at Park 10 1,995,011 11,616,704 13,611,715 73 1998
Towne Lake 1,556,275 6,026,306 7,582,581 465,410 1984
<CAPTION>
Depreciable
Life of
Date Building
Acquired Component
------------ ---------------
<S> <C> <C>
Raleigh, North Carolina
Dominion on Spring Forest 05/21/91 35 yrs.
Dominion Park Green 09/27/91 35 yrs.
Dominion on Lake Lynn 12/01/92 35 yrs.
Dominion Courtney Place 07/08/93 35 yrs.
Dominion Walnut Ridge 03/04/94 35 yrs.
Dominion Walnut Creek 05/17/94 35 yrs.
Dominion Ramsgate 08/15/96 35 yrs.
Harbour Pointe 12/31/96 35 yrs.
Copper Mill 12/31/96 35 yrs.
Trinity Park 02/28/97 35 yrs.
Charlotte, North Carolina
The Highlands 01/17/84 35 yrs.
Emerald Bay 02/06/90 35 yrs.
Dominion Peppertree 12/14/93 35 yrs.
Dominion Crown Point 07/01/94 35 yrs.
Dominion Harris Pond 07/01/94 35 yrs.
Dominion Mallard Creek (A) 08/16/94 35 yrs.
Chateau Village 08/15/96 35 yrs.
Dominion at Sharon 08/15/96 35 yrs.
Providence Court 09/30/97 35 yrs.
Stoney Pointe 02/28/97 35 yrs.
Richmond, Virginia
Dominion Olde West 2/31/84 & 08/27/9 35 yrs.
Dominion Laurel Springs 09/06/91 35 yrs.
Dominion English Hills 12/06/91 35 yrs.
Dominion Gayton Crossing 09/28/95 35 yrs.
Dominion West End 12/28/95 35 yrs.
Courthouse Green 12/31/84 35 yrs.
Waterside at Ironbridge 09/30/97 35 yrs.
Corporate Headquarters 11/30/99 35 yrs.
Houston, Texas
Woodtrail 12/31/96 35 yrs.
Park Trails 12/31/96 35 yrs.
Green Oaks 06/25/97 35 yrs.
Sky Hawk 05/08/97 35 yrs.
South Grand at Pecan Grove 09/26/97 35 yrs.
Breakers 09/26/97 35 yrs.
Braesridge 09/26/97 35 yrs.
Skylar Pointe 11/20/97 35 yrs.
Stone Canyon 12/17/97 35 yrs.
Chelsea Park 03/27/98 35 yrs.
Country Club Place 03/27/98 35 yrs.
Arbor Ridge 03/27/98 35 yrs.
London Park 03/27/98 35 yrs.
Legends at Park 10 05/19/98 35 yrs.
Towne Lake 03/27/98 35 yrs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned Cost of
Improvements
Initial Costs Total Capitalized
----------------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
---------------- ---------------------------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Columbia, South Carolina
Gable Hill 824,847 5,307,194 6,132,041 1,292,961
St. Andrews Commons 1,428,826 9,371,378 10,800,204 1,496,945
Forestbrook 5,000,000 395,516 2,902,040 3,297,556 1,760,192
Crossroads 2,074,800 13,760,014 15,834,814 3,138,140
The Park 1,004,072 5,558,436 6,562,508 2,005,764
St. Andrews 976,192 6,884,502 7,860,694 1,018,436
Waterford 957,980 6,947,939 7,905,919 1,268,293
Hampton Greene 1,363,046 10,118,453 11,481,499 1,286,690
Rivergate 1,122,500 12,055,625 13,178,125 1,011,673
Tampa, Florida
Bay Cove 2,928,847 6,578,257 9,507,104 2,572,662
Summit West 2,176,500 4,709,970 6,886,470 2,077,805
Pinebrook 1,780,375 2,458,172 4,238,547 2,843,856
Village at Old Tampa Bay 1,750,320 10,756,337 12,506,657 2,067,928
Lakewood Place d 1,395,051 10,647,377 12,042,428 1,095,116
Hunters Ridge d 2,461,548 10,942,434 13,403,982 1,289,708
Bay Meadow 7,712,608 2,892,526 9,253,525 12,146,051 2,371,645
Cambridge 1,790,804 7,166,329 8,957,133 1,279,383
Orange Oaks 1,361,553 6,541,980 7,903,533 1,099,158
Parker's Landing 31,853,507 10,178,355 37,868,669 48,047,024 548,529
Sugar Mill Creek e 2,241,880 7,552,520 9,794,400 254,142
Greensboro, North Carolina
Beechwood 1,409,377 6,086,677 7,496,054 861,802
Steeplechase 3,208,108 11,513,978 14,722,086 12,058,659
Northwinds 1,557,654 11,735,787 13,293,441 867,710
Lake Brandt 1,546,950 13,489,466 15,036,416 678,417
Deep River Pointe 1,670,648 11,140,329 12,810,977 349,371
Eastern North Carolina
Colony Village 346,330 3,036,956 3,383,286 1,816,132
Brynn Marr 432,974 3,821,508 4,254,482 2,496,077
Liberty Crossing 840,000 3,873,139 4,713,139 2,640,985
Bramblewood 401,538 3,150,912 3,552,450 1,376,822
Cape Harbor 1,891,671 18,113,109 20,004,780 855,424
Mill Creek 1,404,498 4,489,398 5,893,895 13,280,395
The Creek 417,500 2,506,206 2,923,706 1,444,301
Forest Hills 1,028,000 5,420,478 6,448,478 1,767,817
Clear Run 874,830 8,740,602 9,615,432 5,048,129
Crosswinds 1,096,196 18,230,236 19,326,432 866,826
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
------------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of Date
Improvements Improvements (h) (a) Depreciation Constuction Acquired
------------------------------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Columbia, South Carolina
Gable Hill 1,184,326 6,240,676 7,425,002 2,403,028 1985 12/04/89
St. Andrews Commons 1,818,494 10,478,655 12,297,149 2,859,026 1986 05/20/93
Forestbrook 627,056 4,430,693 5,057,748 1,500,317 1974 07/01/93
Crossroads 2,605,133 16,367,821 18,972,954 3,609,947 1977/84 07/01/94
The Park 1,468,684 7,099,588 8,568,272 1,648,616 1975/77 07/01/94
St. Andrews 1,196,944 7,682,186 8,879,130 1,691,243 1972 07/01/94
Waterford 1,231,182 7,943,030 9,174,212 1,828,235 1985 07/01/94
Hampton Greene 1,866,086 10,902,104 12,768,189 2,278,167 1990 08/19/94
Rivergate 1,406,365 12,783,433 14,189,798 1,671,166 1989 08/15/96
Tampa, Florida
Bay Cove 3,264,201 8,815,565 12,079,766 2,826,433 1972 12/16/92
Summit West 2,446,995 6,517,280 8,964,275 2,133,335 1972 12/16/92
Pinebrook 2,039,000 5,043,403 7,082,403 1,830,553 1977 09/28/93
Village at Old Tampa Bay 2,120,323 12,454,262 14,574,585 3,152,798 1986 12/08/93
Lakewood Place 1,586,517 11,551,027 13,137,544 2,561,131 1986 03/10/94
Hunters Ridge 2,933,433 11,760,257 14,693,690 2,239,009 1992 06/30/95
Bay Meadow 3,421,576 11,096,120 14,517,695 1,436,787 1985 12/09/96
Cambridge 2,064,074 8,172,442 10,236,516 875,195 1985 06/06/97
Orange Oaks 1,534,286 7,468,405 9,002,691 771,467 1986 07/01/97
Parker's Landing 9,193,535 39,402,018 48,595,553 1,412,617 1991 12/07/98
Sugar Mill Creek 2,375,839 7,672,703 10,048,542 310,961 1988 12/07/98
Greensboro, North Carolina
Beechwood 1,599,720 6,758,136 8,357,856 1,710,041 1985 12/22/93
Steeplechase 3,748,136 23,032,609 26,780,745 2,528,179 1990/97 03/07/96
Northwinds 1,738,394 12,422,758 14,161,151 1,624,782 1989/97 08/15/96
Lake Brandt 1,771,863 13,942,970 15,714,833 1,750,446 1995 08/15/96
Deep River Pointe 1,783,557 11,376,791 13,160,348 1,012,011 1997 10/01/97
Eastern North Carolina
Colony Village 552,767 4,646,651 5,199,418 2,579,772 1972/74 12/31/84
Brynn Marr 734,114 6,016,445 6,750,559 3,016,012 1973/77 12/31/84
Liberty Crossing 1,400,915 5,953,209 7,354,124 2,803,360 1972/74 11/30/90
Bramblewood 551,414 4,377,858 4,929,272 2,450,853 1980/82 12/31/84
Cape Harbor 2,222,269 18,637,936 20,860,205 2,393,894 1996 08/15/96
Mill Creek 1,889,337 17,284,953 19,174,291 1,974,152 1986/98 09/30/91
The Creek 488,728 3,879,279 4,368,007 1,442,161 1973 06/30/92
Forest Hills 1,201,540 7,014,755 8,216,295 2,094,062 1964/69 06/30/92
Clear Run 1,234,266 13,429,295 14,663,561 2,564,093 1987/89 07/22/94
Crosswinds 1,191,487 19,001,771 20,193,258 2,102,685 1990 02/28/97
<CAPTION>
Depreciable
Life of
Building
Component
----------
<S> <C>
Columbia, South Carolina
Gable Hill 35 yrs.
St. Andrews Commons 35 yrs.
Forestbrook 35 yrs.
Crossroads 35 yrs.
The Park 35 yrs.
St. Andrews 35 yrs.
Waterford 35 yrs.
Hampton Greene 35 yrs.
Rivergate 35 yrs.
Tampa, Florida
Bay Cove 35 yrs.
Summit West 35 yrs.
Pinebrook 35 yrs.
Village at Old Tampa Bay 35 yrs.
Lakewood Place 35 yrs.
Hunters Ridge 35 yrs.
Bay Meadow 35 yrs.
Cambridge 35 yrs.
Orange Oaks 35 yrs.
Parker's Landing 35 yrs.
Sugar Mill Creek 35 yrs.
Greensboro, North Carolina
Beechwood 35 yrs.
Steeplechase 35 yrs.
Northwinds 35 yrs.
Lake Brandt 35 yrs.
Deep River Pointe 35 yrs.
Eastern North Carolina
Colony Village 35 yrs.
Brynn Marr 35 yrs.
Liberty Crossing 35 yrs.
Bramblewood 35 yrs.
Cape Harbor 35 yrs.
Mill Creek 35 yrs.
The Creek 35 yrs.
Forest Hills 35 yrs.
Clear Run 35 yrs.
Crosswinds 35 yrs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned Cost of
Improvements
Initial Costs Total Capitalized
----------------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
---------------- ---------------------------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
San Antonio, Texas
Promontory Pointe 7,548,219 28,051,781 35,600,000 2,063,598
Bluffs b 1,901,146 6,898,854 8,800,000 1,210,767
Ashley Oaks c 4,590,782 16,809,218 21,400,000 362,650
Sunflower 2,209,000 7,891,000 10,100,000 458,265
Escalanic 4,003,444 875,417 6,759,349 7,634,766 1,093,471
Cimarron City 3,129,269 487,906 4,534,793 5,022,699 620,157
Kenton 7,382,816 2,344,962 8,917,376 11,262,338 1,554,305
Peppermill 4,384,853 773,405 6,873,146 7,646,551 1,793,202
Sunset Canyon 8,842,261 3,201,039 10,669,680 13,870,720 2,995,004
Audubon 4,598,137 771,037 6,123,917 6,894,953 2,095,900
Grand Cypress 5,797,136 749,341 8,609,353 9,358,694 926,326
Inn At Los Patios 3,005,300 11,544,700 14,550,000 (1,489,487)
Nashville, Tennessee
Legacy Hill 1,147,660 5,867,567 7,015,227 2,680,368
Hickory Run 1,468,727 11,583,786 13,052,513 1,311,239
Dominion Franklin 2,117,244 2,117,244 24,230,126
Brookridge 707,508 5,461,251 6,168,760 1,028,328
Club at Hickory Hollow 2,139,774 15,231,201 17,370,975 1,752,625
Breckenridge 766,428 7,713,862 8,480,290 593,407
Williamsburg 1,376,190 10,931,309 12,307,498 1,164,247
Colonnade 1,459,754 16,014,857 17,474,612 206,901
Baltimore, Maryland
Gatewater Landing 2,078,422 6,084,526 8,162,948 1,102,194
Dominion Kings Place 4,620,000 1,564,942 7,006,574 8,571,516 755,523
Dominion at Eden Brook 7,890,000 2,361,167 9,384,171 11,745,339 1,082,388
Dominion Great Oaks d 2,919,481 9,099,691 12,019,172 2,986,389
Dominion Constant Friendship 903,122 4,668,956 5,572,078 662,873
Lakeside Mill 5,750,000 2,665,869 10,109,175 12,775,044 3,970
Atlanta, Georgia
Stanford Village 884,500 2,807,839 3,692,339 1,095,571
Griffin Crossing 1,509,633 7,544,018 9,053,651 1,241,934
Gwinnett Square d 1,924,325 7,376,454 9,300,779 1,447,504
Dunwoody Pointe 5,686,987 2,763,324 6,902,996 9,666,320 4,286,358
Riverwood 5,153,596 2,985,599 11,087,903 14,073,502 3,178,954
Waterford Place 1,579,478 10,302,679 11,882,157 305,079
Miami/Fort Lauderdale, Florida
Copperfield d 4,424,128 20,428,969 24,853,097 1,623,655
Mediterranean Village d 2,064,788 11,939,113 14,003,901 1,330,323
Cleary Court 2,399,848 7,913,450 10,313,298 1,528,958
University Club 1,390,220 6,992,620 8,382,840 1,467,700
Polo Chase 3,675,276 13,301,853 16,977,129 356,907
Pembroke Bay 4,442,492 16,664,469 21,106,962 404,631
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
------------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of Date
Improvements Improvements (h) (a) Depreciation Constuction Acquired
------------------------------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
San Antonio, Texas
Promontory Pointe 7,794,292 29,869,306 37,663,598 3,379,919 1997 12/31/96
Bluffs 2,082,390 7,928,377 10,010,767 1,117,979 1978 12/31/96
Ashley Oaks 4,658,532 17,104,118 21,762,650 1,811,750 1993 12/31/96
Sunflower 2,301,959 8,256,306 10,558,265 968,360 1980 12/31/96
Escalanic 911,937 7,816,299 8,728,236 510,746 1986 04/16/98
Cimarron City 583,875 5,058,980 5,642,855 328,616 1983 04/16/98
Kenton 2,437,944 10,378,699 12,816,643 684,645 1983 04/16/98
Peppermill 926,913 8,512,840 9,439,753 570,351 1984 04/16/98
Sunset Canyon 3,541,720 13,324,003 16,865,723 970,062 1984 04/16/98
Audubon 988,517 8,002,337 8,990,854 617,300 1985 04/16/98
Grand Cypress 796,794 9,488,226 10,285,020 605,058 1995 04/16/98
Inn At Los Patios 3,005,300 10,055,213 13,060,513 486,610 1990 08/15/98
Nashville, Tennessee
Legacy Hill 1,419,424 8,276,171 9,695,594 1,617,171 1977 11/06/95
Hickory Run 1,633,746 12,730,005 14,363,752 2,037,295 1989 12/29/95
Dominion Franklin 2,656,545 23,690,825 26,347,370 28,718 1999 12/06/95
Brookridge 918,655 6,278,432 7,197,087 1,113,562 1986 03/28/96
Club at Hickory Hollow 2,668,936 16,454,664 19,123,600 1,954,511 1987 02/21/97
Breckenridge 949,676 8,124,020 9,073,697 922,254 1986 03/27/97
Williamsburg 1,534,910 11,936,836 13,471,746 957,348 1986 05/20/98
Colonnade 1,538,137 16,143,375 17,681,512 621,990 1998 01/07/99
Baltimore, Maryland
Gatewater Landing 2,169,331 7,095,811 9,265,142 2,120,711 1970 12/16/92
Dominion Kings Place 1,645,423 7,681,617 9,327,039 1,984,785 1983 12/29/92
Dominion at Eden Brook 2,462,172 10,365,554 12,827,727 2,711,664 1984 12/29/92
Dominion Great Oaks 3,729,385 11,276,175 15,005,561 2,883,942 1974 07/01/94
Dominion Constant Friendship 1,043,201 5,191,750 6,234,951 976,261 1990 05/04/95
Lakeside Mill 2,665,869 10,113,145 12,779,014 118,442 1989 12/10/99
Atlanta, Georgia
Stanford Village 1,163,216 3,624,694 4,787,910 1,735,119 1985 09/26/89
Griffin Crossing 1,681,736 8,613,848 10,295,585 1,957,911 1987/89 06/08/94
Gwinnett Square 2,121,447 8,626,836 10,748,283 1,589,468 1985 03/29/95
Dunwoody Pointe 3,273,387 10,679,291 13,952,678 2,110,106 1980 10/24/95
Riverwood 3,332,343 13,920,113 17,252,456 2,296,664 1980 06/26/96
Waterford Place 1,642,321 10,544,915 12,187,236 657,262 1985 04/15/98
Miami/Fort Lauderdale, Florida
Copperfield 4,969,542 21,507,210 26,476,752 3,834,227 1991 09/21/94
Mediterranean Village 2,268,554 13,065,670 15,334,224 2,564,744 1989 09/30/94
Cleary Court 2,631,357 9,210,899 11,842,256 1,832,096 1984/85 11/30/94
University Club 1,757,874 8,092,665 9,850,540 1,372,224 1988 09/26/95
Polo Chase 3,740,090 13,593,946 17,334,036 528,403 1991 12/07/98
Pembroke Bay 4,581,097 16,930,495 21,511,592 178,252 1989 07/26/99
<CAPTION>
Depreciable
Life of
Building
Component
-----------
<S> <C>
San Antonio, Texas
Promontory Pointe 35 yrs.
Bluffs 35 yrs.
Ashley Oaks 35 yrs.
Sunflower 35 yrs.
Escalanic 35 yrs.
Cimarron City 35 yrs.
Kenton 35 yrs.
Peppermill 35 yrs.
Sunset Canyon 35 yrs.
Audubon 35 yrs.
Grand Cypress 35 yrs.
Inn At Los Patios 35 yrs.
Nashville, Tennessee
Legacy Hill 35 yrs.
Hickory Run 35 yrs.
Dominion Franklin 35 yrs.
Brookridge 35 yrs.
Club at Hickory Hollow 35 yrs.
Breckenridge 35 yrs.
Williamsburg 35 yrs.
Colonnade 35 yrs.
Baltimore, Maryland
Gatewater Landing 35 yrs.
Dominion Kings Place 35 yrs.
Dominion at Eden Brook 35 yrs.
Dominion Great Oaks 35 yrs.
Dominion Constant Friendship 35 yrs.
Lakeside Mill 35 yrs.
Atlanta, Georgia
Stanford Village 35 yrs.
Griffin Crossing 35 yrs
Gwinnett Square 35 yrs.
Dunwoody Pointe 35 yrs.
Riverwood 35 yrs.
Waterford Place 35 yrs.
Miami/Fort Lauderdale, Florida
Copperfield 35 yrs.
Mediterranean Village 35 yrs.
Cleary Court 35 yrs
University Club 35 yrs.
Polo Chase 35 yrs.
Pembroke Bay 35 yrs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned Cost of
Improvements
Initial Costs Total Capitalized
----------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposal)
---------------- ---------------------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Washington, D.C
Dominion Middle Ridge d 3,311,468 13,283,047 16,594,515 912,576
Dominion Lake Ridge d 2,366,061 8,386,439 10,752,500 690,425
Knolls at Newgate 1,725,725 3,530,134 5,255,859 1,524,692
Hampton Roads, Virginia
Forest Lakes at Oyster Point 780,117 8,861,878 9,641,995 1,815,296
Woodscape 798,700 7,209,525 8,008,225 3,239,207
Eastwind 155,000 5,316,738 5,471,738 2,063,900
Dominion Waterside at Lynnhaven 1,823,983 4,106,710 5,930,693 1,126,494
Heather Lake 616,800 3,400,672 4,017,472 3,114,571
Dominion Yorkshire Downs d 1,088,887 8,581,771 9,670,658 552,770
Jacksonville, Florida
Greentree Place 12,455,000 1,634,330 11,226,990 12,861,320 3,459,440
Westland Park 1,834,535 14,864,742 16,699,276 3,340,996
The Antlers 4,034,039 11,192,842 15,226,880 5,195,299
Phoenix, Arizona
Paradise Falls c 1,622,700 6,170,800 7,793,500 2,779,594
Vista Point b 1,587,400 5,612,600 7,200,000 1,255,301
Sierra Palms 4,638,950 17,361,050 22,000,000 250,531
Northpark Village 1,519,314 13,536,707 15,056,021 1,267,796
Stonegate 3,608,460 735,036 7,939,875 8,674,911 612,551
Finisterra 1,273,798 26,392,207 27,666,005 184,436
La Privada 15,534,541 7,303,161 18,507,617 25,810,778 1,386,298
Terracina 3,757,224 34,780,779 38,538,002 4,328,142
Woodland Park 3,016,907 6,706,473 9,723,380 543,832
Sierra Foothills 2,728,172 2,728,172 18,729,625
Tucson, Arizona
Desert Springs 4,385,309 1,118,402 7,094,431 8,212,833 478,720
Posada Del Rio 843,748 4,288,097 5,131,845 (415,617)
Eastern Shore Maryland
Brittingham Square 650,143 4,962,246 5,612,389 570,718
Greens at Schumaker Pond 709,559 6,117,582 6,827,141 833,510
Greens at Cross Court 1,182,414 4,544,012 5,726,426 853,023
Greens at Hilton Run d 2,754,447 10,482,579 13,237,026 1,129,949
Fayetteville, North Carolina
Cumberland Trace 632,281 7,895,674 8,527,955 560,363
Village At Cliffdale 10,141,760 941,284 15,498,216 16,439,501 1,035,732
Morganton Place 819,090 13,217,086 14,036,176 555,086
Memphis, Tennessee
Briar Club 1,214,400 6,928,959 8,143,359 1,869,009
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
-----------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of Date
Improvements Improvements (h) (a) Depreciation Construction Acquired
----------------------------------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Washington, D.C
Dominion Middle Ridge 3,423,239 14,083,851 17,507,091 1,852,981 1990 06/25/96
Dominion Lake Ridge 2,492,983 8,949,942 11,442,925 1,417,110 1987 02/23/96
Knolls at Newgate 1,846,268 4,934,283 6,780,551 1,294,946 1972 07/01/94
Hampton Roads, Virginia
Forest Lakes at Oyster Point 1,166,789 10,290,502 11,457,291 1,910,160 1986 08/15/95
Woodscape 1,100,154 10,147,278 11,247,432 4,462,580 1974/76 12/29/87
Eastwind 368,372 7,167,266 7,535,638 3,265,303 1970 04/04/88
Dominion Waterside at
Lynnhaven 2,009,683 5,047,503 7,057,186 813,609 1966 08/15/96
Heather Lake 1,030,545 6,101,498 7,132,043 4,067,057 1972/74 03/01/80
Dominion Yorkshire Downs 1,255,510 8,967,918 10,223,428 719,107 1987 12/23/97
Jacksonville, Florida
Greentree Place 2,261,104 14,059,656 16,320,760 3,160,326 1986 07/22/94
Westland Park 2,574,299 17,465,973 20,040,272 2,773,834 1990 05/09/96
The Antlers 4,760,539 15,661,640 20,422,180 2,722,635 1985 05/28/96
Phoenix, Arizona
Paradise Falls 1,815,207 8,757,887 10,573,094 894,067 1986 12/31/96
Vista Point 1,693,237 6,762,064 8,455,301 802,708 1986 12/31/96
Sierra Palms 4,704,744 17,545,787 22,250,531 1,894,955 1996 12/31/96
Northpark Village 1,819,190 14,504,627 16,323,817 1,124,575 1983 03/27/98
Stonegate 881,404 8,406,058 9,287,462 580,865 1978 03/27/98
Finisterra 1,303,253 26,547,188 27,850,441 1,646,350 1997 03/27/98
La Privada 7,794,661 19,402,415 27,197,076 1,275,680 1987 03/27/98
Terracina 4,492,064 38,374,080 42,866,144 2,420,135 1984 05/28/98
Woodland Park 3,206,079 7,061,133 10,267,212 516,492 1979 06/09/98
Sierra Foothills 2,788,376 18,669,421 21,457,797 17,806 1998 02/18/98
Tucson, Arizona
Desert Springs 1,123,560 7,567,993 8,691,553 466,928 1985 03/27/98
Posada Del Rio 938,382 3,777,846 4,716,228 313,532 1980 03/27/98
Eastern Shore Maryland
Brittingham Square 780,918 5,402,188 6,183,106 986,951 1991 05/04/95
Greens at Schumaker Pond 855,888 6,804,763 7,660,651 1,219,567 1988 05/04/95
Greens at Cross Court 1,362,893 5,216,555 6,579,449 977,309 1987 05/04/95
Greens at Hilton Run 3,045,621 11,321,355 14,366,976 2,033,520 1988 05/04/95
Fayetteville, North Carolina
Cumberland Trace 664,579 8,423,73 9,088,318 1,101,434 1973 08/15/96
Village At Cliffdale 1,118,152 16,357,08 17,475,233 2,007,330 1992 08/15/96
Morganton Place 886,825 13,704,43 14,591,261 1,625,684 1994 08/15/96
Memphis, Tennessee
Briar Club 1,522,537 8,489,831 10,012,368 2,002,236 1987 10/14/94
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned
Depreciable
Life of
Building
Component
---------
<S> <C>
Washington, D.C
Dominion Middle Ridge 35 yrs.
Dominion Lake Ridge 35 yrs.
Knolls at Newgate 35 yrs.
Hampton Roads, Virginia
Forest Lakes at Oyster Point 35 yrs.
Woodscape 35 yrs.
Eastwind 35 yrs.
Dominion Waterside at Lynnhaven 35 yrs.
Heather Lake 35 yrs.
Dominion Yorkshire Downs 35 yrs.
Jacksonville, Florida
Greentree Place 35 yrs.
Westland Park 35 yrs.
The Antlers 35 yrs.
Phoenix, Arizona
Paradise Falls 35 yrs.
Vista Point 35 yrs.
Sierra Palms 35 yrs.
Northpark Village 35 yrs.
Stonegate 35 yrs.
Finisterra 35 yrs.
La Privada 35 yrs.
Terracina 35 yrs.
Woodland Park 35 yrs.
Sierra Foothills 35 yrs.
Tucson, Arizona
Desert Springs 35 yrs.
Posada Del Rio 35 yrs.
Eastern Shore Maryland
Brittingham Square 35 yrs.
Greens at Schumaker Pond 35 yrs.
Greens at Cross Court 35 yrs.
Greens at Hilton Run 35 yrs.
Fayetteville, North Carolina
Cumberland Trace 35 yrs.
Village At Cliffdale 35 yrs.
Morganton Place 35 yrs.
Memphis, Tennessee
Briar Club 35 yrs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned Cost of
Improvements
Initial Costs Total Capitalized
----------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
---------------- ---------------------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Hunters Trace 5,520,000 888,440 6,676,552 7,564,992 1,314,492
Hickory Pointe 1,074,424 6,052,020 7,126,444 1,502,982
Cinnamon Trails 1,886,632 7,644,522 9,531,154 (175,680)
The Trails 27,512,347 10,387,416 34,394,843 44,782,259 3,050,080
Dogwood Creek 2,771,868 15,673,846 18,445,714 568,362
Columbus, Ohio
Sycamore Ridge 13,861,385 4,067,900 15,433,285 19,501,185 685,156
Heritage Green 2,990,199 11,391,797 14,381,996 8,978,316
Alexander Court 1,573,412 1,573,412 21,253,649
Govenour's Square 18,724,971 7,512,513 28,695,050 36,207,563 983,126
Hickory Creek 3,421,413 13,539,402 16,960,815 387,289
Austin, Texas
Pecan Grove b 1,406,750 5,293,250 6,700,000 261,494
Anderson Mill 3,134,669 11,170,376 14,305,045 2,569,958
Albuquerque, New Mexico
Alvarado b 1,930,229 5,969,771 7,900,000 412,002
Dorado Heights 4,957,908 1,567,762 6,555,395 8,123,157 326,338
Detroit, Michigan
American Heritage e 1,021,412 3,958,146 4,979,558 51,394
Ashton Pines 1,822,351 8,013,902 9,836,253 120,134
Kings Gate e 1,180,664 4,828,504 6,009,168 66,593
Lancaster Lakes e 4,237,887 14,662,797 18,900,684 290,639
Other Midwest
Washington Park/Centerville, Ohio 2,011,520 7,565,279 9,576,799 926,936
Jamestown of St. Matthews/Kentucky e 3,865,596 14,422,383 18,287,979 438,370
Jamestown of Toledo/Toledo, Ohio e 1,800,271 7,053,585 8,853,856 208,637
Other Florida
Brantley Pines/Ft. Myers 1,892,888 8,247,621 10,140,509 4,793,209
The Ashlar I/Ft. Myers 2,853,178 2,853,178 16,033,992
Santa Barbara Landing/Naples 1,134,120 8,019,814 9,153,934 1,569,307
Mallards of Wedgewood/Lakeland 959,284 6,864,666 7,823,950 1,575,226
The Groves/Daytona Beach 789,953 4,767,055 5,557,008 1,668,188
Lakeside/Daytona Beach 2,404,305 6,420,160 8,824,465 1,200,232
Mallards of Brandywine/Deland 765,949 5,407,683 6,173,632 1,004,914
Lake Washington Downs/Melbourne 1,434,450 4,940,166 6,374,616 1,869,890
Seattle, Washington
Arbor Terrace 7,038,404 1,453,342 11,994,972 13,448,314 408,014
Aspen Creek 6,984,886 1,177,714 9,115,789 10,293,503 150,930
Crown Point 4,884,471 2,486,252 6,437,256 8,923,508 645,031
Hill Top 4,485,658 2,173,969 7,407,628 9,581,597 168,873
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned
Gross amount at Which
Carried at Close of Period Total
-----------------------------------
Land and Buildings Carrying
Land and Value Accumulated Date of Date
Improvements Improvements (h) (a) Depreciation Construction Acquired
----------------------------------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Hunters Trace 1,163,246 7,716,238 8,879,484 1,727,534 1986 10/14/94
Hickory Pointe 1,573,592 7,055,834 8,629,426 1,606,203 1985 02/10/95
Cinnamon Trails 2,039,201 7,316,272 9,355,473 583,445 1989 01/09/98
The Trails 11,010,750 36,821,589 47,832,339 2,747,657 1990 01/09/98
Dogwood Creek 2,878,748 16,135,328 19,014,076 1,443,224 1997 02/06/98
Columbus, Ohio
Sycamore Ridge 4,172,041 16,014,300 20,186,341 903,971 1997 07/02/98
Heritage Green 3,056,832 20,303,479 23,360,312 773,329 1998 07/02/98
Alexander Court 1,609,147 21,217,914 22,827,061 4,962 1999 07/02/98
Govenour's Square 7,634,425 29,556,265 37,190,689 1,075,402 1967 12/07/98
Hickory Creek 3,452,266 13,895,838 17,348,104 486,787 1988 12/07/98
Austin, Texas
Pecan Grove 1,454,170 5,507,324 6,961,494 509,601 1984 12/31/96
Anderson Mill 3,466,120 13,408,883 16,875,003 1,996,516 1984 03/27/97
Albuquerque, New Mexico
Alvarado 1,968,286 6,343,716 8,312,002 758,436 1984 12/31/96
Dorado Heights 1,616,840 6,832,656 8,449,495 460,240 1986 03/27/98
Detroit, Michigan
American Heritage 1,028,097 4,002,855 5,030,952 146,058 1968 12/07/98
Ashton Pines 1,835,608 8,120,779 9,956,387 250,054 1987 12/07/98
Kings Gate 1,188,449 4,887,312 6,075,761 165,429 1973 12/07/98
Lancaster Lakes 4,280,152 14,911,171 19,191,323 549,283 1988 12/07/98
Other Midwest
Washington Park/Centerville, Ohio 2,075,843 8,427,892 10,503,735 467,686 1998 12/07/98
Jamestown of St. Matthews/Kentucky 3,909,569 14,816,780 18,726,349 535,390 1968 12/07/98
Jamestown of Toledo/Toledo, Ohio 1,868,402 7,194,091 9,062,493 264,180 1965 12/07/98
Other Florida
Brantley Pines/Ft. Myers 814,362 14,119,357 14,933,718 2,773,758 1986 08/11/94
The Ashlar I/Ft. Myers 4,621,590 14,265,580 18,887,170 259,619 1999 12/24/97
Santa Barbara Landing/Naples 1,697,900 9,025,341 10,723,241 2,088,979 1987 09/01/94
Mallards of Wedgewood/Lakeland 1,246,120 8,153,055 9,399,175 1,629,716 1985 07/27/95
The Groves/Daytona Beach 1,432,097 5,793,099 7,225,196 1,180,384 1989 12/13/95
Lakeside/Daytona Beach 2,574,381 7,450,316 10,024,697 760,734 1985 07/01/97
Mallards of Brandywine/Deland 977,719 6,200,828 7,178,546 666,752 1985 07/01/97
Lake Washington Downs/Melbourne 1,729,170 6,515,336 8,244,506 1,948,257 1984 09/24/93
Seattle, Washington
Arbor Terrace 1,475,148 12,381,180 13,856,328 835,624 1996 03/27/98
Aspen Creek 1,258,261 9,186,172 10,444,433 339,182 1996 12/07/98
Crown Point 2,518,247 7,050,292 9,568,539 336,161 1987 12/07/98
Hill Top 2,216,480 7,533,990 9,570,470 293,502 1985 12/07/98
<CAPTION>
Depreciable
Life of
Building
Component
-----------
<S> <C>
Hunters Trace 35 yrs.
Hickory Pointe 35 yrs.
Cinnamon Trails 35 yrs.
The Trails 35 yrs.
Dogwood Creek 35 yrs.
Columbus, Ohio
Sycamore Ridge 35 yrs.
Heritage Green 35 yrs.
Alexander Court 35 yrs.
Govenour's Square 35 yrs.
Hickory Creek 35 yrs.
Austin, Texas
Pecan Grove 35 yrs.
Anderson Mill 35 yrs.
Albuquerque, New Mexico
Alvarado 35 yrs.
Dorado Heights 35 yrs.
Detroit, Michigan
American Heritage 35 yrs.
Ashton Pines 35 yrs.
Kings Gate 35 yrs.
Lancaster Lakes 35 yrs.
Other Midwest
Washington Park/Centerville, Ohio 35 yrs.
Jamestown of St. Matthews/Kentucky 35 yrs.
Jamestown of Toledo/Toledo, Ohio 35 yrs.
Other Florida
Brantley Pines/Ft. Myers 35 yrs.
The Ashlar I/Ft. Myers 35 yrs.
Santa Barbara Landing/Naples 35 yrs.
Mallards of Wedgewood/Lakeland 35 yrs.
The Groves/Daytona Beach 35 yrs.
Lakeside/Daytona Beach 35 yrs.
Mallards of Brandywine/Deland 35 yrs.
Lake Washington Downs/Melbourne 35 yrs.
Seattle, Washington
Arbor Terrace 35 yrs.
Aspen Creek 35 yrs.
Crown Point 35 yrs.
Hill Top 35 yrs.
</TABLE>
<PAGE>
SCHEDULE III.
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Cost of
Intitial Costs Improvements
--------------------------------- Total Capitalized
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposalsl)
----------------- ---------------- --------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Evergreen Park Apts 4,681,453 3,878,138 9,973,051 13,851,189 344,769
Indianapolis, Indiana
International Village e 3,934,102 11,478,908 15,413,010 329,864
Regency Park South 2,643,025 7,632,098 10,275,123 245,388
Denver, Colorado
Greensview 2,974,024 12,489,598 15,463,622 166,714
Mountain View 6,401,851 21,569,403 27,971,254 509,503
Portland, Oregon
Lancaster Commons e 2,485,291 7,451,165 9,936,456 183,089
Tualatin Heights e 3,272,585 9,134,089 12,406,674 490,987
University Park 3,007,202 8,191,307 11,198,509 137,454
Los Angeles, California
Pine Avenue 6,033,714 2,158,423 8,887,744 11,046,167 141,187
The Grand Resort 8,884,151 35,706,606 44,590,757 320,326
Grand Terrace 2,144,340 6,594,615 8,738,955 143,802
Sacramento, California
Foothills Tennis Village e 3,617,507 14,542,028 18,159,535 239,155
Woodlake Village 16,232,867 6,772,438 26,966,750 33,739,188 619,851
San Francisco, California
2000 Post Street 26,400,000 9,860,627 44,577,506 54,438,133 192,850
Birch Creek 1,528,312 4,365,315 16,695,509 21,060,824 752,325
Highlands of Marin 20,300,000 5,995,838 24,868,350 30,864,188 309,500
Marina Playa 19,017,528 6,224,383 23,916,283 30,140,666 922,322
<CAPTION>
Gross amount at Which
Carried at Close of Period
----------------------------------- Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (h) (a) Depreciation Construction
----------------------------------- ------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Evergreen Park Apts 3,910,715 10,285,243 14,195,958 536,442 1988
Indianapolis, Indiana
International Village 3,976,199 11,766,675 15,742,874 560,782 1968
Regency Park South 2,688,317 7,832,194 10,520,511 377,508 1968
Denver, Colorado
Greensview 2,450,457 13,179,879 15,630,336 414,215 1987
Mountain View 6,249,912 22,230,845 28,480,757 883,487 1973
Portland, Oregon
Lancaster Commons 2,503,919 7,615,625 10,119,545 354,601 1992
Tualatin Heights 3,358,936 9,538,725 12,897,661 433,758 1989
University Park 3,008,511 8,327,452 11,335,963 375,112 1987
Los Angeles, California
Pine Avenue 2,160,001 9,027,353 11,187,354 284,989 1987
The Grand Resort 8,896,984 36,014,099 44,911,083 968,613 1971
Grand Terrace 2,193,927 6,688,830 8,882,757 125,429 1986
Sacramento, California
Foothills Tennis Village 3,680,947 14,717,744 18,398,690 477,259 1988
Woodlake Village 6,897,148 27,461,892 34,359,039 928,624 1979
San Francisco, California
2000 Post Street 9,911,958 44,719,025 54,630,983 1,203,057 1987
Birch Creek 4,583,889 17,229,260 21,813,149 560,803 1968
Highlands of Marin 6,059,698 25,113,990 31,173,688 745,584 1991
Marina Playa 6,391,496 24,671,492 31,062,988 810,756 1971
<CAPTION>
Depreciable
Life of
Date Building
Acquired Component
----------- ------------
<S> <C> <C>
Evergreen Park Apts 03/27/98 35 yrs.
Indianapolis, Indiana
International Village 12/07/98 35 yrs.
Regency Park South 12/07/98 35 yrs.
Denver, Colorado
Greensview 12/07/98 35 yrs.
Mountain View 12/07/98 35 yrs.
Portland, Oregon
Lancaster Commons 12/07/98 35 yrs.
Tualatin Heights 12/07/98 35 yrs.
University Park 03/27/98 35 yrs.
Los Angeles, California
Pine Avenue 12/07/98 35 yrs.
The Grand Resort 12/07/98 35 yrs.
Grand Terrace 06/30/99 35 yrs.
Sacramento, California
Foothills Tennis Village 12/07/98 35 yrs
Woodlake Village 12/07/98 35 yrs
San Francisco, California
2000 Post Street 12/07/98 35 yrs
Birch Creek 12/07/98 35 yrs
Highlands of Marin 12/07/98 35 yrs
Marina Playa 12/07/98 35 yrs
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III.
Summary of Real Estate Owned
Cost of
Initial Costs Improvements
-------------------------------- Total Capitalized
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances(j) Improvements Improvements Cost (i) (Net of Disposals)
--------------- -------------------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Monterey Peninsula, California
Boronda Manor f 1,946,423 8,981,742 10,928,165 67,862
Garden Court g 888,038 4,187,950 5,075,988 48,592
Glenridge g 415,284 1,952,934 2,368,218 11,540
Harding Park Townhomes f 549,393 2,051,322 2,600,715 24,545
Heather Plaza f 2,020,384 9,226,038 11,246,422 131,511
Laurel Tree f 1,303,902 5,115,356 6,419,258 44,043
Pine Grove f 1,383,161 5,783,993 7,167,154 33,898
Santanna g 957,079 4,026,117 4,983,196 34,415
The Capri f 1,018,493 3,657,274 4,675,767 10,620
The Claremont g 463,143 1,837,120 2,300,263 12,830
The Pointe At Harden Ranch f 6,388,446 23,853,534 30,241,980 223,449
The Pointe At Northridge f 2,043,736 8,028,443 10,072,179 86,632
The Pointe At Westlake f 1,329,064 5,334,004 6,663,068 45,561
Valli Hi g 881,376 5,037,805 5,919,181 37,167
Other California
Silk Oak/Fresno 2,324,562 4,566,446 6,891,008 118,014
Windward Point/San Diego 1,767,970 7,117,879 8,885,849 144,914
Rancho Vallecitos/San Diego 3,302,967 10,877,286 14,180,254 42,187
Other Virginia
Greens at Falls Run/Fredericksburg 2,730,722 5,300,203 8,030,925 792,141
Manor at England Run/Fredericksburg 1,168,810 7,006,464 8,175,274 13,146,585
Laurel Ridge/Roanoke 2,780,000 445,400 2,531,357 2,976,757 1,519,955
Greens at Hollymead/Charlottesville 965,114 5,250,374 6,215,488 622,219
Craig Manor/Salem 282,200 2,419,570 2,701,770 996,647
Northview/Salem 171,600 1,238,501 1,410,101 851,009
Other Georgia
River Place/Macon d 1,097,280 7,492,385 8,589,665 1,823,834
Arkansas
Turtle Creek/Little Rock 1,913,177 7,086,823 9,000,000 751,685
Shadow Lake/Little Rock 2,523,670 8,976,330 11,500,000 1,054,226
Nevada
Sunset Pointe/Las Vegas 4,295,050 15,704,950 20,000,000 775,884
Delaware
Dover Country Club/Dover 2,007,878 6,365,053 8,372,931 2,325,354
Greens at Cedar Chase/Dover d 1,528,667 4,830,738 6,359,405 703,310
--------------------------------------------------------------------------------------------
$ 514,259,193 $ 568,525,246 $2,515,397,434 $3,083,922,680 $493,925,036
============================================================================================
Real estate held for disposition
Apartments
Deerwood Crossing/Winston-Salem,
NC $ - $ 1,539,901 $ 7,989,043 $ 9,528,944 $ 911,450
Dutch Village/Winston-Salem, NC 1,197,593 4,826,266 6,023,858 540,781
<CAPTION>
Gross amount at Which
Carried at Close of Period
----------------------------------- Total
Land and Buildings Carrying
Land and Value Accumulated Date of
Improvements Improvements (h) (a) Depreciation Construction
----------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Monterey Peninsula, California
Boronda Manor 1,954,850 9,041,177 10,996,027 267,976 1979
Garden Court 890,232 4,234,348 5,124,580 127,938 1973
Glenridge 415,600 1,964,158 2,379,758 56,434 1989
Harding Park Townhomes 550,249 2,075,011 2,625,260 72,033 1984
Heather Plaza 1,990,719 9,387,214 11,377,933 297,605 1974
Laurel Tree 1,308,893 5,154,408 6,463,301 184,119 1977
Pine Grove 1,383,720 5,817,332 7,201,052 181,459 1963
Santanna 957,476 4,060,135 5,017,611 127,411 1989
The Capri 1,018,544 3,667,843 4,686,387 133,058 1973
The Claremont 463,957 1,849,136 2,313,093 64,055 1973
The Pointe At Harden Ranch 6,396,915 24,068,514 30,465,429 840,211 1986
The Pointe At Northridge 2,043,743 8,115,068 10,158,811 277,180 1979
The Pointe At Westlake 1,329,407 5,379,222 6,708,629 182,615 1975
Valli Hi 882,058 5,074,290 5,956,348 117,603 1965
Other California
Silk Oak/Fresno 2,354,241 4,654,781 7,009,022 16,648 1985
Windward Point/San Diego 1,796,891 7,233,872 9,030,763 235,101 1983
Rancho Vallecitos/San Die 3,304,236 10,918,204 14,222,440 470,982 1988
Other Virginia
Greens at Falls Run/Fredericksburg 2,876,643 5,946,423 8,823,066 1,108,675 1989
Manor at England Run/Fredericksburg 2,794,885 18,526,974 21,321,859 2,188,050 1990
Laurel Ridge/Roanoke 668,773 3,827,939 4,496,712 2,052,234 1970/72
Greens at Hollymead/Charlottesville 1,056,498 5,781,209 6,837,707 1,031,034 1990
Craig Manor/Salem 364,351 3,334,066 3,698,417 1,557,497 1975
Northview/Salem 246,975 2,014,135 2,261,110 1,399,369 1969
Other Georgia
River Place/Macon 1,700,991 8,712,508 10,413,499 2,244,453 1988
Arkansas
Turtle Creek/Little Rock 2,185,212 7,566,474 9,751,685 909,070 1985
Shadow Lake/Little Rock 2,743,019 9,811,207 12,554,226 1,173,493 1984
Nevada
Sunset Pointe/Las Vegas 4,437,932 16,337,952 20,775,884 1,758,837 1990
Delaware
Dover Country Club/Dover 2,359,250 8,339,035 10,698,285 2,005,526 1970
Greens at Cedar Chase/Dover 1,722,356 5,340,359 7,062,715 1,038,934 1988
---------------------------------------------------------------
$636,904,958 $ 2,940,942,758 $ 3,577,847,716 $ 373,164,015
===============================================================
Real estate held for disposition
Apartments
Deerwood Crossing/Winston-Salem, NC $ 1,670,816 $ 8,769,579 $ 10,440,395 $ 740,584 1973
Dutch Village/Winston-Salem, NC 1,282,479 5,282,160 6,564,639 468,792 1970
<CAPTION>
Depreciable
Life of
Date Building
Acquired Component
----------- ------------
<S> <C> <C>
Monterey Peninsula, California
Boronda Manor 12/07/98 35 yrs.
Garden Court 12/07/98 35 yrs.
Glenridge 12/07/98 35 yrs.
Harding Park Townhomes 12/07/98 35 yrs.
Heather Plaza 12/07/98 35 yrs.
Laurel Tree 12/07/98 35 yrs.
Pine Grove 12/07/98 35 yrs.
Santanna 12/07/98 35 yrs.
The Capri 12/07/98 35 yrs.
The Claremont 12/07/98 35 yrs.
The Pointe At Harden Ranc 12/07/98 35 yrs.
The Pointe At Northridge 12/07/98 35 yrs.
The Pointe At Westlake 12/07/98 35 yrs.
Valli Hi 12/07/98 35 yrs.
Other California
Silk Oak/Fresno 12/07/98 35 yrs.
Windward Point/San Diego 12/07/98 35 yrs.
Rancho Vallecitos/San Die 10/13/99 35 yrs.
Other Virginia
Greens at Falls Run/Fredericksburg 05/04/95 35 yrs.
Manor at England Run/Fredericksburg 05/04/95 35 yrs.
Laurel Ridge/Roanoke 05/17/88 35 yrs.
Greens at Hollymead/Charlottesville 05/04/95 35 yrs.
Craig Manor/Salem 11/06/87 35 yrs.
Northview/Salem 09/29/78 35 yrs.
Other Georgia
River Place/Macon 04/08/94 35 yrs.
Arkansas
Turtle Creek/Little Rock 12/31/96 35 yrs.
Shadow Lake/Little Rock 12/31/96 35 yrs.
Nevada
Sunset Pointe/Las Vegas 12/31/96 35 yrs.
Delaware
Dover Country Club/Dover 07/01/94 35 yrs.
Greens at Cedar Chase/Dover 05/04/95 35 yrs.
Real estate held for disposition
Apartments
Deerwood Crossing/Winston-Salem, NC 08/15/96 35 yrs.
Dutch Village/Winston-Salem, NC 08/15/96 35 yrs.
</TABLE>
76
<PAGE>
SCHEDULE III.
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Cost of
Improvements
Initial Costs Total Capitalized
----------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances(j) Improvements Improvements Cost (i) (Net of Disposals)
--------------- ---------------------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Park Forest/Greensboro, NC 4,072,138 679,671 5,770,413 6,450,084 460,526
Patriot Place/Florence, SC 2,200,000 212,500 1,600,757 1,813,257 5,614,497
Woodside/Glen Burnie, MD 12,975,000 3,112,881 8,893,721 12,006,602 3,247,157
Twin Coves/Baltimore, MD 3,565,000 912,771 2,904,304 3,817,075 858,015
Park on Preston/Dallas, TX 5,406,615 1,521,877 8,569,278 10,091,155 (253,082)
Cold Springs Manor/
Indianapolis, IN e 599,646 1,774,834 2,374,480 60,991
Woodberry/Asheville, NC 388,699 6,380,899 6,769,598 951,246
Montfort/Dallas, TX 3,749,516 1,696,778 4,645,874 6,342,652 51,321
Fountainhead/Dayton, Ohio e 390,542 1,420,166 1,810,708 20,562
Chandler's Mill/Corpus
Christi, TX b 1,930,120 6,844,880 8,775,000 (442,663)
Villa Serena/Albuquerque, NM 2,549,763 512,421 3,403,906 3,916,327 (705,775)
On The Boulevard/Kennewick, WA 1,164,652 9,547,299 10,711,951 (227,420)
Campus Commons North/Pullman, WA 6,253,953 305,143 9,867,157 10,172,300 (1,970,651)
Campus Commons South/Pullman, WA 2,635,139 838,324 3,005,784 3,844,108 (616,317)
Dove Park/Grapevine, TX 2,309,195 9,699,046 12,008,241 911,788
Citiscape/Dallas, TX b 2,092,387 7,532,613 9,625,000 392,422
Bammelwood/Houston, TX 2,863,973 929,601 3,330,352 4,259,953 261,607
Briar Park/Houston, TX 1,334,966 329,002 2,794,131 3,123,133 86,131
Clear Lake Falls/Webster, TX 2,974,723 1,090,080 4,534,335 5,624,415 (378,440)
The Gallery/Houston, TX 1,562,072 768,708 3,358,484 4,127,192 48,957
Marymont/Tombull, TX 1,150,696 4,155,411 5,306,107 338,317
Memorial Bend/Houston, TX 1,829,704 882,230 3,776,765 4,658,995 (657,630)
Nantucket Square/Houston, TX 2,620,590 1,067,617 4,833,402 5,901,019 (726,681)
Prestonwood/Houston, TX 2,348,614 998,433 4,128,699 5,127,132 111,140
Riverway/Bay City, TX 1,129,758 523,457 2,828,282 3,351,739 61,048
Riviera Pines/Houston, TX 3,109,672 1,413,851 6,453,847 7,867,698 90,819
2900 Place/East Lansing, MI 1,818,957 5,593,327 7,412,284 48,331
Sunset Village/Flint, Michigan 796,994 1,829,226 2,626,220 29,528
Brandywine Creek/East Lansing, MI e 4,665,991 17,514,466 22,180,457 (2,869,847)
Lakewood/Haslett, MI e 1,113,126 3,877,503 4,990,629 49,546
Nemoke Trail/Haslett, MI e 3,430,631 12,222,526 15,653,157 70,181
Three Fountains/Montgomery, AL 1,075,009 6,872,302 7,947,311 832,656
Harbour Town/Nashville, TN 572,567 3,522,092 4,094,659 961,611
The Lakes/Nashville, TN 1,285,657 5,980,197 7,265,854 1,264,196
2131 Apartments/Nashville, TN 869,860 9,155,185 10,025,045 3,667,714
Commercial
Pacific South Center/Seattle, WA 3,069,871 1,000,000 4,000,000 5,000,000 (3,580)
Hanover Village-Land/Richmond, VA 1,623,910 0 1,623,910 0
Gloucester Exchange/Gloucester, VA 403,688 2,278,553 2,682,241 86,096
Tri-County Buildings/Bristol, TN 275,580 900,281 1,175,861 1,280,670
Meadowdale Office/Richmond, VA 240,563 359,913 600,476 119,344
--------------------------------------------------------------------------------
$ 69,476,556 $49,731,309 $218,975,518 $268,706,827 $14,576,564
================================================================================
<CAPTION>
Gross amount at Which
Carried at Close of Period Total
-------------------------------------------
Land and Buildings Carrying
Land and Value Accumulated
Improvements Improvements (h) (a) Depreciation
--------------------- ------------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Park Forest/Greensboro, NC 804,457 6,106,153 6,910,610 592,023
Patriot Place/Florence, SC 1,451,936 5,975,818 7,427,754 2,671,181
Woodside/Glen Burnie, MD 3,446,281 11,807,478 15,253,759 1,910,891
Twin Coves/Baltimore, MD 1,025,146 3,649,943 4,675,090 373,910
Park on Preston/Dallas, TX 1,593,641 8,244,432 9,838,073 287,773
Cold Springs Manor/
Indianapolis, IN 601,096 1,834,375 2,435,471 4,512
Woodberry/Asheville, NC 549,427 7,171,417 7,720,844 822,465
Montfort/Dallas, TX 1,707,033 4,686,940 6,393,973 80,326
Fountainhead/Dayton, Ohio 390,542 1,440,728 1,831,270 3,028
Chandler's Mill/Corpus
Christi, TX 1,961,704 6,370,633 8,332,337 253,538
Villa Serena/Albuquerque, NM 513,945 2,696,607 3,210,552 97,684
On The Boulevard/Kennewick, WA 1,090,116 9,394,415 10,484,531 513,668
Campus Commons North/Pullman, WA 328,100 7,873,549 8,201,649 277,194
Campus Commons South/Pullman, WA 895,743 2,332,049 3,227,791 93,617
Dove Park/Grapevine, TX 2,566,974 10,353,056 12,920,029 1,036,306
Citiscape/Dallas, TX 2,180,783 7,836,639 10,017,422 824,483
Bammelwood/Houston, TX 947,590 3,573,969 4,521,560 198,498
Briar Park/Houston, TX 332,264 2,877,000 3,209,264 77,120
Clear Lake Falls/Webster, TX 1,099,021 4,146,954 5,245,975 123,003
The Gallery/Houston, TX 772,479 3,403,670 4,176,149 77,104
Marymont/Tombull, TX 1,158,696 4,485,728 5,644,424 128,011
Memorial Bend/Houston, TX 884,589 3,116,776 4,001,365 99,044
Nantucket Square/Houston, TX 1,070,242 4,104,096 5,174,338 116,824
Prestonwood/Houston, TX 1,005,193 4,233,080 5,238,272 124,325
Riverway/Bay City, TX 527,607 2,885,180 3,412,787 95,032
Riviera Pines/Houston, TX 1,415,869 6,542,648 7,958,517 167,615
2900 Place/East Lansing, MI 1,819,883 5,640,731 7,460,615 128,594
Sunset Village/Flint, Michigan 796,994 1,858,754 2,655,748 6,004
Brandywine Creek/East Lansing, MI 4,678,981 14,631,628 19,310,610 472,762
Lakewood/Haslett, MI 1,118,755 3,921,420 5,040,175 157,920
Nemoke Trail/Haslett, MI 3,430,631 12,292,707 15,723,338 354,478
Three Fountains/Montgomery, AL 1,268,368 7,511,599 8,779,967 1,797,658
Harbour Town/Nashville, TN 726,166 4,330,104 5,056,270 1,092,006
The Lakes/Nashville, TN 1,463,155 7,066,895 8,530,050 1,872,323
2131 Apartments/Nashville, TN 1,195,090 12,497,669 13,692,759 2,768,626
Commercial
Pacific South Center/Seattle, WA 1,000,000 3,996,420 4,996,420 0
Hanover Village-Land/Richmond, VA 1,103,600 520,310 1,623,910 0
Gloucester Exchange/Gloucester, VA 551,255 2,217,082 2,768,337 757,307
Tri-County Buildings/Bristol, TN 364,123 2,092,408 2,456,531 733,820
Meadowdale Office/Richmond, VA 259,684 460,136 719,820 300,034
-------------------------------------------------------------------------
$53,050,454 $230,232,937 $283,283,391 $22,700,081
=========================================================================
<CAPTION>
Depreciable
Life of
Date of Date Building
Construction Acquired Component
------------- --------- ------------
<S> <C> <C> <C> <C>
Park Forest/Greensboro, NC 1987 09/26/96 35 yrs.
Patriot Place/Florence, SC 1974 10/23/85 35 yrs.
Woodside/Glen Burnie, MD 1966 08/16/94 35 yrs.
Twin Coves/Baltimore, MD 1974 08/16/94 35 yrs.
Park on Preston/Dallas, TX 1983 03/27/98 35 yrs.
Cold Springs Manor/
Indianapolis, IN 1963 12/07/98 35 yrs.
Woodberry/Asheville, NC 1987 08/15/96 35 yrs.
Montfort/Dallas, TX 1986 03/27/98 35 yrs.
Fountainhead/Dayton, Ohio 1966 12/07/98 35 yrs.
Chandler's Mill/Corpus
Christi, TX 1984 12/31/96 35 yrs.
Villa Serena/Albuquerque, NM 1986 03/27/98 35 yrs.
On The Boulevard/Kennewick, WA 1995 03/27/98 35 yrs.
Campus Commons North/Pullman, WA 1972 03/27/98 35 yrs.
Campus Commons South/Pullman, WA 1972 03/27/98 35 yrs.
Dove Park/Grapevine, TX 1984 12/31/96 35 yrs.
Citiscape/Dallas, TX 1973 12/31/96 35 yrs.
Bammelwood/Houston, TX 1980 10/30/97 35 yrs.
Briar Park/Houston, TX 1987 03/27/98 35 yrs.
Clear Lake Falls/Webster, TX 1980 03/27/98 35 yrs.
The Gallery/Houston, TX 1968 03/27/98 35 yrs.
Marymont/Tombull, TX 1983 03/27/98 35 yrs.
Memorial Bend/Houston, TX 1967 03/27/98 35 yrs.
Nantucket Square/Houston, TX 1983 03/27/98 35 yrs.
Prestonwood/Houston, TX 1978 03/27/98 35 yrs.
Riverway/Bay City, TX 1985 03/27/98 35 yrs.
Riviera Pines/Houston, TX 1979 03/27/98 35 yrs.
2900 Place/East Lansing, MI 1966 12/07/98 35 yrs.
Sunset Village/Flint, Michigan 1940 12/07/98 35 yrs.
Brandywine Creek/East Lansing, MI 1974 12/07/98 35 yrs.
Lakewood/Haslett, MI 1974 12/07/98 35 yrs.
Nemoke Trail/Haslett, MI 1978 12/07/98 35 yrs.
Three Fountains/Montgomery, AL 1973 07/01/94 35 yrs.
Harbour Town/Nashville, TN 1974 12/10/93 35 yrs.
The Lakes/Nashville, TN 1986 09/15/93 35 yrs.
2131 Apartments/Nashville, TN 1972 12/16/92 35 yrs.
Commercial
Pacific South Center/Seattle, WA 1965 08/28/86 35 yrs.
Hanover Village-Land/Richmond, VA -- 06/30/86 35 yrs.
Gloucester Exchange/Gloucester, VA 1974 11/12/87 35 yrs.
Tri-County Buildings/Bristol, TN 1976/79 01/21/81 35 yrs.
Meadowdale Office/Richmond, VA 1976/82 12/31/84 35 yrs.
</TABLE>
<PAGE>
SCHEDULE III
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Cost of
Improvements
Initial Costs Total Capitalized
-----------------------------
Land and Buildings Initial Subsequent
Land and Acquisition to Acquisition
Encumbrances (j) Improvements Improvements Cost (i) (Net of Disposals)
----------------- ----------------------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Real estate under development
New apartment communities
Ashton at Waterford Lakes/Orlando, FL 3,079,772 16,163,734 19,243,506
The Meridian I/Dallas, TX 1,196,682 10,206,259 11,402,941
Oaks at Weston/Morrisville, NC 3,114,500 3,276,001 6,390,501
Additions to existing communities
Dominion at Crown Point II/Charlotte, NC 1,006,918 9,009,307 10,016,225
The Ashlar II/ Fort Myers, FL 1,099,056 612,483 1,711,539
Escalante II/San Antonio, TX 1,826,575 3,468,075 5,294,650
Land held for future development 37,854,702 0 37,854,702
--------------------------------------------------------------------------------
$ 0 $ 49,178,205 $ 42,735,859 $ 91,914,064 $ 0
================================================================================
--------------------------------------------------------------------------------
Total real estate owned $1,000,136 $667,434,760 $2,777,108,811 $3,444,543,571 $508,501,600
================================================================================
Gross amount at Which
Carried at Close of Period Total
-----------------------------------------
Land and Buildings Carrying
Land and Value Accumulated
Improvements Improvements (h) (a) Depreciation
--------------------- ------------------ ----------- -------------
<S> <C> <C> <C>
Real estate under development
New apartment communities
Ashton at Waterford Lakes/Orlando, FL 3,079,772 16,163,734 19,243,506
The Meridian I/Dallas, TX 1,196,682 10,206,259 11,402,941
Oaks at Weston/Morrisville, NC 3,114,500 3,276,001 6,390,501
Additions to existing communities
Dominion at Crown Point II/Charlotte, NC 1,006,918 9,009,307 10,016,225
The Ashlar II/ Fort Myers, FL 1,099,056 612,483 1,711,539
Escalante II/San Antonio, TX 1,826,575 3,468,075 5,294,650
Land held for future development 37,854,702 0 37,854,702
----------------------------------------------------------------------------
$ 49,178,205 $ 42,735,859 $ 91,914,064 $ 0
============================================================================
----------------------------------------------------------------------------
Total real estate owned $739,133,616 $3,213,911,555 $3,953,045,171 $395,864,095
============================================================================
<CAPTION>
Depreciable
Life of
Date of Date Building
Construction Acquired Component
------------- --------- ------------
<S> <C> <C> <C>
Real estate under development
New apartment communities
Ashton at Waterford Lakes/Orlando, FL 1999 05/28/98
The Meridian I/Dallas, TX 1999 01/27/98
Oaks at Weston/Morrisville, NC 1999 01/14/99
Additions to existing communities
Dominion at Crown Point II/Charlotte, NC 1999 12/29/98
The Ashlar II/ Fort Myers, FL 1999 12/24/97
Escalante II/San Antonio, TX 1999 04/16/98
Land held for future development
Total real estate owned
</TABLE>
(a) The aggregate cost for federal income tax purposes was approximately
$3.3 billion at December 31, 1999 and 1998, respectively.
(b) Represents a $30,581,553 REMIC financing encumbering 12 apartment
communities.
(c) Represents a $28,585,050 REMIC financing encumbering 9 apartment
communities.
(d) Represents a $195,675,000 secured credit facility which encumbers
19 apartment communities.
(e) Represents $107,492,963 of fixed rate debt which encumbers 15
apartment communities.
(f) Represents $43,010,206 of fixed rate debt which encumbers 9
apartment communities.
(g) Represents $11,031,634 of fixed rate debt which encumbers 5
apartment communities.
(h) The depreciable life for all buildings is 35 years.
(i) Total initial acquisition cost includes a purchase price
reallocation of $8.5 million.
(j) Encumbrances include a fair market value adjustment of $14.8
million.
<PAGE>
Exhibit 1(a)
United Dominion Realty Trust, Inc.
Debt Securities
Underwriting Agreement
----------------------
February 29, 2000
Banc of America Securities LLC
First Union Securities, Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Banc of America Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
From time to time United Dominion Realty Trust, Inc., a Virginia
corporation (the "Company"), United Dominion Realty, L.P., a Virginia limited
partnership (the "Operating Partnership"), UDR Western Residential, Inc., a
Virginia corporation ("Residential"), UDRT of North Carolina, L.L.C., a North
Carolina limited liability company ("North Carolina"), and ASR Investments
Corporation, a Maryland corporation ("Investment"; the Operating Partnership,
Residential, North Carolina and Investment are hereinafter sometimes called,
collectively, the "Operating Entities" and, individually, an "Operating
Entity"), propose to enter into one or more Pricing Agreements (each a "Pricing
Agreement") in the form of Annex I hereto, with such additions and deletions as
the parties thereto may determine, and, subject to the terms and conditions
stated herein and therein, the Company proposes to issue and sell to the firms
named in Schedule I to the applicable Pricing Agreement (such firms constituting
the "Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of the Company's debt securities (the "Securities")
specified in Schedule II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities"). The terms and rights of any particular
issuance of Designated Securities shall be as specified in the Pricing Agreement
<PAGE>
relating thereto and in or pursuant to the indenture (the "Indenture")
identified in such Pricing Agreement.
All references herein to any "subsidiary" or "subsidiaries" of the Company
shall be deemed to include the Operating Entities unless otherwise expressly
stated.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to an Underwriter or Underwriters who act without any firm
being designated as its or their representatives. This Underwriting Agreement
shall not be construed as an obligation of the Company to sell any of the
Securities or as an obligation of any of the Underwriters to purchase any of the
Securities. The obligation of the Company to issue and sell any of the
Securities and the obligation of any of the Underwriters to purchase any of the
Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of such Designated Securities, the initial public
offering price of such Designated Securities, the purchase price to the
Underwriters of such Designated Securities, the names of the Underwriters of
such Designated Securities, the names of the Representatives of such
Underwriters and the principal amount of such Designated Securities to be
purchased by each Underwriter and shall set forth the date, time and manner of
delivery of such Designated Securities and payment therefor. The Pricing
Agreement shall also specify (to the extent not set forth in the Indenture and
the registration statement and prospectus with respect thereto) the terms of
such Designated Securities. A Pricing Agreement shall be in the form of an
executed writing (which may be in counterparts), and may be evidenced by an
exchange of telegraphic communications or any other rapid transmission device
designed to produce a written record of communications transmitted. The
obligations of the Underwriters under this Agreement and each Pricing Agreement
shall be several and not joint.
2. The Company and the Operating Entities jointly and severally represent
and warrant to, and agree with, each of the Underwriters that:
(a) Two registration statements on Form S-3 (File Nos. 333-27221 and
333-92667) (the "Initial Registration Statements") in respect of the
Securities have been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statements and any post-effective
amendment thereto, each in the form heretofore delivered or to be delivered
to the Representatives and, excluding exhibits to such registration
statements but including all documents incorporated by reference in the
prospectus contained in the latest registration statement, to the
Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a "Rule 462(b)
Registration Statement") filed pursuant to Rule 462(b) under the Securities
Act of 1933, as amended (the "Act"), which became effective upon filing and
other than exhibits
2
<PAGE>
filed as part of documents incorporated by reference in the Initial
Registration Statements, no other document with respect to the Initial
Registration Statements or any document incorporated by reference therein
has heretofore been filed or transmitted for filing with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act each in the form heretofore
delivered to the Representatives); and no stop order suspending the
effectiveness of the Initial Registration Statements, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission; any preliminary prospectus included in the
Initial Registration Statements or filed with the Commission pursuant to
Rule 424(a) under the Act is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statements and the Rule
462(b) Registration Statement, if any, including all exhibits thereto and
the documents incorporated by reference in the prospectus contained in the
Initial Registration Statements at the time such part of the registration
statement became effective but excluding any Form T-1, each as amended at
the time such part of the Initial Registration Statements became effective
or such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, are hereinafter collectively called the
"Registration Statement"; the prospectus relating to the Securities, in the
form in which it has most recently been filed, or transmitted for filing,
with the Commission on or prior to the date of this Agreement, is
hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date
of such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of the
Company filed pursuant to Sections 13(a) or 15(d) of the Exchange Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; any reference to the Prospectus as
amended or supplemented shall be deemed to refer to the Prospectus as
amended or supplemented in relation to the applicable Designated Securities
in the form first used to confirm sales of such Designated Securities,
including any documents incorporated by reference therein as of the date of
such amendment or supplement, as the case may be; and if the Company elects
to rely on Rule 434 under the Act, any reference to the Prospectus shall be
deemed to include, without limitation, the form of prospectus and the
abbreviated term sheet, taken together, provided to the Underwriters by the
Company in reliance on Rule 434 under the Act (the "Rule 434 Prospectus");
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in
3
<PAGE>
all material respects to the requirements of the Act or the Exchange Act,
as applicable, and the rules and regulations of the Commission thereunder,
and none of such documents contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter of
Designated Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Designated
Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission thereunder
and do not and will not, as of the respective effective dates as to the
Registration Statement, any Rule 462(b) Registration Statement and any
amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto and as of the Time of Delivery (as
defined in Section 4 hereof) with respect to any Designated Securities,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating to
such Designated Securities;
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Virginia, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus; and the
Company is duly qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification except where
the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company;
(e) Each subsidiary of the Company has been duly organized and is
validly existing as a corporation, limited liability company, limited
partnership or real estate investment trust in good standing under the laws
of the jurisdiction of its incorporation or
4
<PAGE>
organization, with power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and is
duly qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification except where the
failure to so be in good standing would not have a material adverse effect
on the condition, financial or otherwise, or the earnings, business affairs
or business prospects of the Company and its subsidiaries, considered as
one enterprise; each such subsidiary is duly qualified to transact business
in all jurisdictions in which the conduct of its business requires such
qualification, or in which the failure to qualify would have a materially
adverse effect upon the business of such subsidiary; all of the issued and
outstanding shares of capital stock of each such corporate subsidiary and
all of the issued and outstanding shares of beneficial interest of each
such real estate investment trust subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the
Company or a subsidiary of the Company, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; all of the
issued and outstanding partnership interests of each such partnership
subsidiary and all of the issued and outstanding limited liability company
interests of each such limited liability company subsidiary have been duly
authorized and validly issued, are fully paid and (except in the case of
general partnership interests) non-assessable and, except as otherwise
disclosed in the Prospectus, are owned by the Company and/or one or more
subsidiaries of the Company, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; and the Company
and/or one or more subsidiaries of the Company are the only members or
general partners of the Company's limited liability company or limited
partnership subsidiaries, as applicable, and own the entire membership or
general partnership interest in each such subsidiary free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity;
(f) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any material change in the capital stock,
total assets or long-term debt of the Company or any of its subsidiaries or
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus as amended prior to the date of the Pricing Agreement
relating to the Designated Securities.
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable;
5
<PAGE>
(h) The Securities have been duly and validly authorized, and, when
Designated Securities are issued and delivered pursuant to this Agreement
and the Pricing Agreement with respect to such Designated Securities, such
Designated Securities will have been duly executed, authenticated, issued
and delivered and will constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Indenture, which will
be substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and duly qualified under
the Trust Indenture Act and, at the Time of Delivery for such Designated
Securities, the Indenture will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Indenture conforms, and the Designated
Securities will conform, to the descriptions thereof contained in the
Prospectus as amended or supplemented with respect to such Designated
Securities;
(i) The issue and sale of the Securities and the compliance by the
Company and the Operating Entities with all of the provisions of the
Securities, the Indenture, this Agreement, and any Pricing Agreement, and
the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Articles of Incorporation
or By-laws of the Company, Residential or Investment, the certificate of
limited partnership or limited partnership agreement of the Operating
Partnership, the operating agreement of North Carolina or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company or any of the Operating
Entities of the transactions contemplated by this Agreement, or any Pricing
Agreement or the Indenture, except such as have been, or will have been
prior to the Time of Delivery, obtained under the Act and the Trust
Indenture Act and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities by
the Underwriters;
(j) The statements set forth in the Prospectus as amended or
supplemented with respect to the Designated Securities under the captions
"Description of Our Debt Securities" and "Description of the Notes" (or
under any similar caption describing the Designated Securities), insofar as
they purport to constitute a summary of the terms of the Securities, and
under the captions "Description of Our Capital Stock," "Plan of
6
<PAGE>
Distribution" and "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair;
(k) Neither the Company nor any of its subsidiaries is in violation of
its Articles of Incorporation or By-laws, limited partnership agreement,
limited liability company agreement, operating agreement or other
organizational documents or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(m) The financial statements together with related notes and schedules
of the Company and its subsidiaries and of any companies, other entities or
properties acquired or to be acquired by the Company, in each case as set
forth or incorporated by reference in the Prospectus, present fairly the
financial position and the results of operations of the Company and its
subsidiaries and of such companies, entities and properties, as the case
may be, at the indicated dates and for the indicated periods. Such
financial statements have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the
periods involved, and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary financial and
statistical data included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with the
financial statements presented therein; the pro forma financial statements
and related notes thereto included in the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein;
(n) The Company and its subsidiaries have good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property referred to in the Prospectus as owned or leased by them,
in each case free and clear of all liens, encumbrances, claims, security
interests and defects, other than those referred to in the Prospectus or
which are not material in amount. Each lease of real property by the
7
<PAGE>
Company or any of its subsidiaries as lessor requiring annual lease
payments in excess of $100,000 is the legal, valid and binding obligation
of the lessee in accordance with its terms (except that the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought and to the Bankruptcy Act) and
the rents which at present have remained due and unpaid for more than 30
days are not payable under leases such that, were no further rental
payments to be received under such leases, the financial condition or
results of operations of the Company and its subsidiaries would be
materially adversely affected thereby. The Company has no reason to
believe that the lessee under any lease (excluding leases for which rent
payments due for the remainder of such lease are less than $500,000)
calling for annual lease payments in excess of $500,000 is not financially
capable of performing its obligations thereunder;
(o) The Company has filed all Federal, local and foreign income tax
returns which have been required to be filed or has filed extensions and
has paid all taxes indicated by said returns and all assessments received
by it to the extent that such taxes have become due and are not being
contested in good faith;
(p) The Company and each of its subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their respective businesses; and neither the
Company nor any of its subsidiaries has infringed any patents, patent
rights, trade names, trademarks or copyrights, which infringement is
material to the business of the Company or any of its subsidiaries;
(q) With respect to all tax periods regarding which the Internal
Revenue Service is or will be entitled to assert any claim, the Company has
met the requirements for qualification as a real estate investment trust
under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Company's present and contemplated
operations, assets and income continue to meet such requirements;
(r) The conditions for use of registration statements on Form S-3 set
forth in the General Instructions on Form S-3 have been satisfied and the
Company is entitled to use such form for the transaction contemplated
herein;
(s) The Company has no knowledge of (a) the unlawful presence of any
hazardous substances, hazardous materials, toxic substances or waste
materials (collectively, "Hazardous Materials") on any of the properties
owned by it or any of its subsidiaries, or of (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials that have occurred
or are presently occurring off such properties as a result of any
construction on or operation and use of such properties which presence or
occurrence would materially adversely affect the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company or any of its subsidiaries. In connection with the construction on
or operation and use of the properties owned by the Company or any of its
subsidiaries, the Company represents that it has no knowledge of any
material failure to comply with all applicable local, state and federal
environmental
8
<PAGE>
laws, regulations, ordinances and administrative and judicial orders
relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Materials;
(t) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(u) Ernst & Young LLP, who have certified certain financial statements
of the Company and its subsidiaries, and each other accounting firm which
has certified any other financial statements which are included or
incorporated by reference in the Prospectus, are each independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(v) At the date of the Pricing Agreement with respect to the
applicable Designated Securities, such Pricing Agreement and this Agreement
will have been duly authorized, executed and delivered by the Company and
the Operating Entities;
(w) The total real estate owned of the Operating Entities and the
Company, in each case excluding any of their respective subsidiaries other
than the Operating Entities, determined on a consolidated basis, are equal
to at least 50% of the total consolidated real estate owned of the Company;
the total net operating income of the Operating Entities and the Company
for the year ended December 31, 1999, in each case excluding any of their
respective subsidiaries other than the Operating Entities, determined on a
consolidated basis, were equal to at least 50% of the total consolidated
net operating income of the Company for the year ended December 31, 1999.
3. Upon the execution of the Pricing Agreement applicable to any Designated
Securities and authorization by the Representatives of the release of such
Designated Securities, the several Underwriters propose to offer such Designated
Securities for sale upon the terms and conditions set forth in the Prospectus as
amended or supplemented.
4. Designated Securities to be purchased by each Underwriter pursuant to
the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least twenty-four hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor in the funds
specified in such Pricing Agreement, all in the manner and at the place and time
and date specified in such Pricing Agreement or at such other place and time and
date as the Representatives and the Company may agree upon in writing, such time
and date being herein called the "Time of Delivery" for such Securities.
9
<PAGE>
5. The Company and the Operating Entities, jointly and severally, agree
with each of the Underwriters of any Designated Securities that:
(a) If the Company does not elect to rely on Rule 434 under the Act,
immediately following execution and delivery of the applicable Pricing
Agreement, the Company will prepare the Prospectus as amended or
supplemented in relation to the applicable Designated Securities in a form
approved by the Representatives and will file such Prospectus pursuant to
Rule 424(b) under the Act not later than the Commission's close of business
on the business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Securities or, if
applicable, such earlier time as may be required by Rule 424(b), or if the
Company elects to rely on Rule 434 under the Act, immediately following
execution and delivery of the applicable Pricing Agreement, the Company
will prepare an abbreviated term sheet relating to the Designated
Securities in a form approved by the Representatives that complies with the
requirements of Rule 434 under the Act and will file such form of Rule 434
Prospectus complying with Rule 434(c)(2) of the Act pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
business day following the execution and delivery of the Pricing Agreement
relating to the applicable Designated Securities or if applicable, such
earlier time as may be required by Rule 424(b); the Company will make no
further amendment or any supplement to the Registration Statement or
Prospectus as amended or supplemented after the date of the Pricing
Agreement relating to such Securities and prior to the Time of Delivery for
such Securities which shall be disapproved by the Representatives for such
Securities promptly after reasonable notice thereof; the Company will
advise the Representatives promptly of any such amendment or supplement
after such Time of Delivery and will furnish the Representatives with
copies thereof; the Company will file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act for so long as the delivery of a prospectus is required
in connection with the offering or sale of such Securities, and during such
same period will advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission, of
the issuance by the Commission of any stop order or of any order preventing
or suspending the use of any prospectus relating to the Securities, of the
suspension of the qualification of such Securities for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any such stop order or of
any such order preventing or suspending the use of any prospectus relating
to the Securities or suspending any such qualification, the Company will
promptly use its best efforts to obtain the withdrawal of such order;
(b) If necessary, promptly from time to time the Company will take
such action as the Representatives may reasonably request to qualify such
Securities for offering and
10
<PAGE>
sale under the securities laws of such jurisdictions as the Representatives
may request and will comply with such laws so as to permit the continuance
of sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of such Securities, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in
any jurisdiction;
(c) Prior to 10:00 a.m. New York City time on the New York business
day next succeeding the date of the applicable Pricing Agreement and from
time to time, the Company will furnish the Underwriters with copies of the
Prospectus as amended or supplemented in New York City in such quantities
as the Representatives may reasonably request, and, if the delivery of a
prospectus is required at any time in connection with the offering or sale
of the Securities and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made or when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act, the Exchange
Act or the Trust Indenture Act, the Company will notify the Representatives
and upon their request will file such document and will prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance;
(d) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date of the Pricing Agreement
for such Designated Securities and continuing to and including the later of
(i) the termination of trading restrictions for such Designated Securities,
as notified to the Company by the Representatives and (ii) the Time of
Delivery for such Designated Securities, the Company will not offer, sell,
contract to sell or otherwise dispose of any debt securities of the Company
which mature more than one year after such Time of Delivery and which are
substantially similar to such Designated Securities, without the prior
written consent of Banc of America Securities LLC;
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(f) The Company will use the net proceeds received by it from the sale
of the Securities in the manner specified in the Prospectus under the
caption "Use of Proceeds"; and
(g) The Company will continue to elect to qualify as a "real estate
investment trust" under the Code, and will use its best efforts to continue
to meet the requirements to qualify as a "real estate investment trust".
6. The Company and the Operating Entities, jointly and severally, covenant
and agree with the several Underwriters that they will pay or cause to be paid
the following: (i) the reasonable fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto (including
each abbreviated term sheet delivered by the Company pursuant to Rule 434 under
the Act) and the mailing and delivering of copies thereof to the Underwriters
and dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, any Pricing Agreement, any Indenture, any Blue Sky
and Legal Investment Surveys, closing documents (including any compilation
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Securities; (iii) all expenses, if any, in connection with
the qualification of the Securities for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky and Legal Investment Surveys; (iv) any fees charged
by securities rating services for rating the Securities; (v) any filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Securities; (vi) the cost of
preparing the Securities; (vii) the fees and expenses of any Trustee and any
agent of any Trustee and the fees and disbursements of counsel for any Trustee
in connection with any Indenture and the Securities; and (viii) all other costs
and reasonable expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section. It is
understood, however, that, except as provided in this Section, and Sections 8
and 10 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected with any offers they
may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company and the
Operating Entities in or incorporated by reference in the Pricing Agreement
relating to such Designated Securities are, at and as of the Time of Delivery
for such Designated Securities, true and correct, the condition that the Company
and the Operating Entities shall have performed all of their obligations
hereunder theretofore to be performed, and the following additional conditions:
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(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the Representatives' reasonable
satisfaction;
(b) Brown & Wood LLP, counsel for the Underwriters, shall have
furnished to the Representatives such opinion or opinions, dated the Time
of Delivery for such Designated Securities, with respect to the matters
covered in paragraphs (i), (vi), (vii), (viii), (xi) and (xiv) of
subsection (c) below as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters. In rendering their opinion, Brown &
Wood LLP may rely, as to all matters governed by or arising under the laws
of the Commonwealth of Virginia and the States of Maryland and North
Carolina, on the opinion of Hunton & Williams delivered pursuant to Section
7(c) below;
(c) Hunton & Williams, counsel for the Company, shall have furnished
to the Representatives their written opinion, dated the Time of Delivery
for such Designated Securities, in form and substance satisfactory to the
Representatives, to the effect set forth below (such opinion shall be
rendered to the Underwriters at the request of the Company and shall so
state therein and shall further state that Brown & Wood LLP, in rendering
their opinion pursuant to Section 7(b) above, may rely on such opinion of
Hunton & Williams as to all matters governed by or arising under the laws
of the Commonwealth of Virginia and the States of Maryland and North
Carolina) :
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Virginia, with corporate power and authority to own
its properties and conduct its business as described in the Prospectus
as amended or supplemented;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented and all of the
issued shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable;
(iii) The Company is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of the Company;
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(iv) Each subsidiary of the Company has been duly organized
and is validly existing as a corporation, limited liability company,
limited partnership or real estate investment trust in good standing
under the laws of the jurisdiction of its incorporation or
organization, with power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus as
amended or supplemented, and is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification except where the failure to so be in good standing would
not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Company and its subsidiaries, considered as one enterprise; each
such subsidiary is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such
qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of such subsidiary; all of
the issued and outstanding shares of capital stock of each such
corporate subsidiary and all of the issued and outstanding shares of
beneficial interest of each such real estate investment trust
subsidiary have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or by a
subsidiary of the Company, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; all of the
issued and outstanding partnership interests of each such partnership
subsidiary and all of the issued and outstanding limited liability
company interests of each such limited liability company subsidiary
have been duly authorized and validly issued, are fully paid and
(except in the case of general partnership interests) non-assessable
and, except as otherwise disclosed in the Prospectus, are owned by the
Company and/or one or more subsidiaries of the Company, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity; and the Company, and/or such subsidiaries of the Company
are the only members or general partners of the Company's limited
liability company or limited partnership subsidiaries, as applicable,
and own the entire membership or general partnership interest in each
such subsidiary free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity;
(v) To the best of such counsel's knowledge and other than
as set forth in the Prospectus as amended or supplemented, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, shareholders'
equity or results of operations of the Company and its subsidiaries;
and, to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
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(vi) This Agreement and the Pricing Agreement with respect
to the Designated Securities have been duly authorized, executed and
delivered by the Company and the Operating Entities;
(vii) The Designated Securities have been duly authorized
and executed by the Company and, when duly authenticated by the
Trustee in accordance with the Indenture and delivered to the
Underwriters against payment of the consideration therefor in
accordance with the Pricing Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles, whether considered at law or in equity, and
will be entitled to the benefits of the Indenture ;
(viii) The Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, whether
considered at law or in equity; and the Indenture has been duly
qualified under the Trust Indenture Act;
(ix) The issue and sale of the Designated Securities being
delivered on the date of such opinion and the compliance by the
Company and the Operating Entities with all of the provisions of the
Designated Securities, the Indenture, this Agreement and the Pricing
Agreement with respect to the Designated Securities and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the Articles of
Incorporation or By-laws of the Company, Residential or Investment or
the certificate of limited partnership or limited partnership
agreement of the Operating Partnership or the operating agreement of
North Carolina or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(x) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Designated Securities being delivered on the date of such opinion or
the consummation by the Company or the Operating Entities of the
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transactions contemplated by this Agreement, the Pricing Agreement or
the Indenture, except such as have been obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
orders, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Designated Securities by the Underwriters;
(xi) The statements set forth in the Prospectus under the
captions "Description of Our Debt Securities" and "Description of the
Notes" (or under any similar caption), insofar as they constitute a
summary of the Indenture, the Designated Securities, or any other
documents referred to therein or matters of law are accurate summaries
and fairly and correctly present the information called for with
respect to such documents and matters;
(xii) The Company is not required to be registered under the
Investment Company Act;
(xiii) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder; and although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements therein, nothing
has come to their attention which leads them to believe that any
documents incorporated by reference in the Prospectus as amended or
supplemented (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion),
when they became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Act or the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading; and
(xiv) The Registration Statement and the Prospectus as
amended or supplemented and any further amendments and supplements
thereto made by the Company on or prior to the date of such opinion
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the Trust
Indenture Act and the rules and regulations thereunder; if
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applicable, the Rule 434 Prospectus complies as to form in all
material respects with the requirements of Rule 434 under the Act;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xi) of this Section 7(c), nothing has
come to their attention which leads them to believe that, as of its
effective date the Registration Statement or any further amendment
thereto made by the Company on or prior to the date of such opinion
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of the date of the applicable
Pricing Agreement, the Prospectus as amended or supplemented or any
further amendment or supplement thereto made by the Company on or
prior to the date of such opinion (other than the financial statements
and related schedules therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that, as of the Time of Delivery, either the
Registration Statement or the Prospectus as amended or supplemented or
any further amendment or supplement thereto made by the Company on or
prior to the date of such opinion (other than the financial statements
and related schedules therein, as to which such counsel need express
no opinion) contains an untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents
of a character required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference into the
Prospectus as amended or supplemented or required to be described in
the Registration Statement or the Prospectus as amended or
supplemented which are not filed or incorporated by reference or
described as required;
(d) Hunton & Williams, counsel for the Company, shall have furnished
to the Representatives their written opinion (which shall be rendered to
the Underwriters at the request of the Company and shall so state therein),
dated the Time of Delivery for such Designated Securities, in form and
substance satisfactory to the Representatives, to the effect that the
Company has qualified to be taxed as a real estate investment trust
pursuant to Sections 856 through 860 of the Code for its most recently
ended fiscal year and for the four fiscal years immediately preceding such
year, and the Company's organization and contemplated method of operation
are such as to enable it to continue to so qualify for its current fiscal
year;
(e) On the date of the Pricing Agreement for such Designated
Securities and at the Time of Delivery for such Designated Securities, the
Underwriters shall have
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received, a letter dated the date hereof and the Time of Delivery,
respectively, in form and substance satisfactory to the Underwriters, from
Ernst & Young LLP, independent public accountants, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus as amended or supplemented.
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus as amended prior to
the date of the Pricing Agreement relating to the Designated Securities any
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus as amended prior to the date of the
Pricing Agreement relating to the Designated Securities, and (ii) since
the respective dates as of which information is given in the Prospectus as
amended prior to the date of the Pricing Agreement relating to the
Designated Securities there shall not have been any change in the capital
stock, total assets or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus as amended prior to the date of the Pricing Agreement relating
to the Designated Securities, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Designated
Securities on the terms and in the manner contemplated in the Prospectus as
first amended or supplemented relating to the Designated Securities;
(g) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities or preferred stock;
(h) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities generally
on the New York Stock Exchange; (ii) a suspension or material limitation in
trading in the Company's securities on the New York Stock Exchange; (iii) a
general moratorium on commercial banking activities in New York declared by
either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities, the occurrence of any change in financial
markets or, the occurrence of any calamity or crisis or the declaration by
the United States of a national
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emergency or war, if the effect of any such event specified in this Clause
(iv) in the judgment of Banc of America Securities LLC makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Designated Securities on the terms and in the manner
contemplated in the Prospectus as amended or supplemented;
(i) The Company and the Operating Entities shall have complied with
the provisions of Section 5(c) hereof with respect to the furnishing of
prospectuses on the New York business day next succeeding the date of the
applicable Pricing Agreement; and
(j) The Company and the Operating Entities shall have furnished or
caused to be furnished to the Representatives at the Time of Delivery for
the Designated Securities a certificate or certificates of officers of the
Company, Residential and Investment and of the general partner of the
Operating Partnership and of the sole member of North Carolina satisfactory
to the Representatives as to the accuracy of the representations and
warranties of the Company and the Operating Entities herein at and as of
such Time of Delivery, as to the performance by the Company and the
Operating Entities of all of their obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in
subsections (a) and (f) of this Section and as to such other matters as the
Representatives may reasonably request.
8.
(a) The Company and the Operating Entities, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Underwriter or any such
controlling person in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, any Preliminary
Prospectus, any preliminary prospectus supplement, the Prospectus as
amended or supplemented or any other prospectus relating to the Securities,
or any amendment or supplement to any of the foregoing, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein in connection with the offering
of the Designated Securities.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the foregoing
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indemnity from the Company to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in
writing by such Underwriter through the Representatives in connection with
the offering of the Designated Securities expressly for use in the
Registration Statement, any Preliminary Prospectus, any preliminary
prospectus supplement, the Prospectus as amended or supplemented or any
other prospectus relating to the Designated Securities or any amendment or
supplement to any of the foregoing.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to either paragraph (a) or (b) of this Section 8, such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by Banc of
America Securities LLC, in the case of parties indemnified pursuant to
paragraph (a) above, and by the Company, in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a
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party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding. The obligations of the Company and the Operating
Entities under this paragraph (c) are joint and several.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Operating Entities on the one hand and the Underwriters of the
Designated Securities on the other hand from the offering of the Designated
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Operating Entities on the
one hand and of the Underwriters of the Designated Securities on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Operating Entities on the one hand and the Underwriters of the
Designated Securities on the other hand in connection with the offering of
the Designated Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of such Designated
Securities (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters
of the Designated Securities, in each case as set forth in the table on the
cover of the Prospectus as amended or supplemented with respect to the
Designated Securities, bear to the aggregate public offering price of the
Designated Securities. The relative fault of the Company and the Operating
Entities on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Operating Entities on the one hand or by the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute pursuant
to this Section 8 are several in proportion to the respective principal
amounts of Designated Securities they have purchased hereunder, and not
joint. The obligations of the Company and the Operating Entities to
contribute pursuant to this Section 8 are joint and several.
(e) The Company, the Operating Entities and the Underwriters agree
that it would not be just or equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) of this Section 8. The amount paid or payable
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by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Designated Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 8 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company and the Operating Entities contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of
this Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or the Company, its
officers or directors or any person controlling the Company or any
Operating Entity, its officers or directors (if any) or any person
controlling any of the Operating Entities and (iii) acceptance of and
payment for any of the Designated Securities.
9. For purposes of this Section 9, (i) if the applicable Pricing Agreement
provides for the Underwriters to purchase two or more separate series of
Designated Securities, then each such series is sometimes referred to as a
"Series" of Designated Securities, and (ii) if the applicable Pricing Agreement
provides for the Underwriters to purchase only a single series of Designated
Securities, then all references to any "Series" of Designated Securities shall
be deemed to mean and refer to such single series of Designated Securities.
(a) If any Underwriter shall default in its obligation to purchase the
Designated Securities of any Series (as defined in the Pricing Agreement)
which it has agreed to purchase under the Pricing Agreement relating to
such Designated Securities, the Representatives may in their discretion
arrange for themselves or another party or other parties to purchase such
Designated Securities of such Series on the terms contained herein. If
within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Designated
Securities of such Series, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to the Representatives to purchase such Designated
Securities of such Series on such terms. In the event that, within the
respective prescribed period, the Representatives notify the Company that
they have so arranged for the purchase of such Designated Securities of
such Series, or the Company notifies the Representatives that it has so
arranged for the purchase of such
22
<PAGE>
Designated Securities of such Series, the Representatives or the Company
shall have the right to postpone the Time of Delivery for the Designated
Securities of such Series for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus as amended or supplemented, or in
any other documents or arrangements, and the Company agrees to file
promptly any amendments or supplements to the Registration Statement or the
Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such
person had originally been a party to the Pricing Agreement with respect to
the Designated Securities of such Series.
(b) If, after giving effect to any arrangements for the purchase of
the Designated Securities of a Series of a defaulting Underwriter or
Underwriters by the Representatives and the Company as provided in
subsection (a) above, the aggregate principal amount of the Designated
Securities of such Series which remains unpurchased does not exceed one-
eleventh of the aggregate principal amount of the Designated Securities of
such Series, then the Company shall have the right to require each non-
defaulting Underwriter to purchase the principal amount of the Designated
Securities of such Series which such Underwriter agreed to purchase under
the Pricing Agreement relating to the Designated Securities of such Series
and, in addition, to require each non-defaulting Underwriter to purchase
its pro rata share (based on the principal amount of Designated Securities
of such Series which such Underwriter agreed to purchase under such Pricing
Agreement) of the Designated Securities of such Series of such defaulting
Underwriter or Underwriters for which such arrangements have not been made;
but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Designated Securities of a Series of a defaulting Underwriter or
Underwriters by the Representatives and the Company as provided in
subsection (a) above, the aggregate principal amount of Designated
Securities of such Series which remains unpurchased exceeds one-eleventh of
the aggregate principal amount of the Designated Securities of such Series,
as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-
defaulting Underwriters to purchase Designated Securities of such Series of
a defaulting Underwriter or Underwriters, then the Pricing Agreement
relating to the Designated Securities of such Series shall thereupon
terminate, without liability on the part of any non-defaulting Underwriter,
the Company or the Operating Entities, except for the expenses to be borne
by the Company, the Operating Entities and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof and the provisions of Section 10 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
10. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company and the Operating Entities shall not then be under any
liability to any Underwriter with respect to the Designated Securities covered
by such Pricing Agreement except as provided in
23
<PAGE>
Section 6 and Section 8 hereof; but, if for any other reason Designated
Securities are not delivered by or on behalf of the Company as provided herein,
the Company and the Operating Entities will, jointly and severally, reimburse
the Underwriters through the Representatives for all out-of-pocket expenses
approved in writing by the Representatives, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of such Designated Securities, but the Company and
the Operating Entities shall then be under no further liability to any
Underwriter with respect to such Designated Securities except as provided in
Sections 6 and 8 hereof.
11. In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company or the Operating Entities shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement: Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by the Representatives upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
12. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company, the Operating
Entities and, to the extent provided in Section 8 hereof, the officers and
directors of the Company and each person who controls the Company, any of the
Operating Entities or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement or any such Pricing
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
13. Time shall be of the essence of each Pricing Agreement. As used herein,
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
14. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
15. This Agreement and each Pricing Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be
24
<PAGE>
an original, but all such respective counterparts shall together constitute one
and the same instrument.
25
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof.
Very truly yours,
United Dominion Realty Trust, Inc.
By: _____________________________________
Name:
Title:
United Dominion Realty, L.P.
By: United Dominion Realty Trust, Inc.,
its General Partner
By: _____________________________________
Name:
Title:
UDR Western Residential, Inc.
By: _____________________________________
Name:
Title:
UDRT of North Carolina, L.L.C.
By: United Dominion Realty Trust, Inc.,
its sole member
By: _____________________________________
Name:
Title:
26
<PAGE>
ASR Investments Corporation
By: _____________________________________
Name:
Title:
Accepted as of the date hereof:
Banc of America Securities LLC
Acting severally on behalf of themselves and the several Underwriters
By: Banc of America Securities LLC
By: _____________________________________
Name:
Title:
27
<PAGE>
Annex I
Pricing Agreement
[Names of Representative(s)]
As Representatives of the several
Underwriters named in Schedule I hereto,
[Name and Address of Representative]
______________, ____
Dear Sirs:
United Dominion Realty Trust, Inc., a Virginia corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated ______________, ____ (the "Underwriting
Agreement"), between the Company and the Operating Entities (as defined therein)
on the one hand and [names of Representatives named therein] on the other hand,
to issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") the Securities specified in Schedule II hereto (the "Designated
Securities"). Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representative designated to act on behalf of the Representatives and on behalf
of each of the Underwriters of the Designated Securities pursuant to Section 12
of the Underwriting Agreement and the address of the Representatives referred to
in such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you, is now proposed to be filed with the
Commission.
I-1
<PAGE>
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, on the basis of the representations and warranties
set forth herein and in such Underwriting Agreement, to purchase from the
Company, at the time and place and at the purchase price to the Underwriters set
forth in Schedule II hereto, the respective principal amount of Designated
Securities set forth opposite the name of such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company and the Operating Entities. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is or will be
pursuant to the authority set forth in a form of Agreement Among Underwriters,
the form of which shall be submitted to the Company for examination upon
request, but without warranty on the part of the Representatives as to the
authority of the signers thereof.
Very truly yours,
United Dominion Realty Trust, Inc.
By: ______________________________
Name:
Title:
United Dominion Realty, L.P.
By: United Dominion Realty Trust, Inc.,
its General Partner
By: ______________________________
Name:
Title:
UDR Western Residential, Inc.
By: ______________________________
Name:
Title:
I-2
<PAGE>
UDRT of North Carolina, L.L.C.
By: United Dominion Realty Trust, Inc.,
its sole member
By: _______________________________________
Name:
Title:
ASR Investments Corporation
By: _______________________________________
Name:
Title:
Accepted as of the date hereof:
__________________________________
[Name(s) of Co-Representative(s)]
On behalf of the Underwriters
I-3
<PAGE>
SCHEDULE I
Principal Amount
of Designated
Securities
Underwriter to be Purchased
----------- -----------------
$
-----------------
Total $
-----------------
I-4
<PAGE>
SCHEDULE II
Title of Designated Securities:
[ %] [Floating Rate] [Zero Coupon] [Notes]
[Debentures] due
Aggregate principal amount:
[$]
Price to Public:
% of the principal amount of the Designated Securities, plus accrued
interest from _________ to _________ [and accrued amortization, if any,
from _________ to _________]
Purchase Price by Underwriters:
% of the principal amount of the Designated Securities, plus accrued
interest from _________ to _________ [and accrued amortization, if any,
from _________ to _________]
Form of Designated Securities:
Specified funds for payment of purchase price:
Immediately Available Funds
Indenture:
Indenture dated _________, 199_, between the Company and _________, as
Trustee
Maturity:
Interest Rate:
[ %] [Zero Coupon] [See Floating Rate Provisions]
I-5
<PAGE>
Interest Payment Dates:
[Months and Dates]
Redemption Provisions:
[No provisions for redemption]
[The Designated Securities may be redeemed, otherwise than through the
sinking fund, in whole or in part at the option of the Company, in the
amount of [$ ] or an integral multiple thereof,
___________________________ [on or after _________, at the following
redemption prices (expressed in percentages of principal amount to be
redeemed). If (redeemed on or before _________, _________%, and if)
redeemed during the 12-month period beginning ___________________________,
Year Redemption Price
and thereafter at 100% of their principal amount, together in each case
with accrued interest to the redemption date.] [on any interest payment
date falling on or after _________, _________, at the election of the
Company, at a redemption price equal to the principal amount thereof, plus
accrued interest to the date of redemption.]
[Other possible redemption provisions, such as mandatory redemption upon
occurrence of certain events or redemption for changes in tax law]
[Restriction on refunding]
Sinking Fund Provisions:
[No sinking fund provisions]
[The Designated Securities are entitled to the benefit of a sinking fund to
retire [$ ] principal amount of Designated Securities on
_________ in each of the years _________ through _________ at 100% of their
principal amount plus accrued interest] [, together with [cumulative]
[noncumulative] redemptions at the option of the Company to retire an
additional [$ ] principal amount of Designated Securities in the
years through _________ at 100% of their principal amount plus accrued
interest].
Securities are extendable Debt Securities, insert--
Extendable provisions:
Securities are repayble on _________, [insert date and years], at the
option of the holder, at their principal amount with accrued interest.
Initial annual interest rate will _________%, and thereafter annual
interest rate will be adjusted on _________, and
I-6
<PAGE>
_________ to a rate not less than _________% of the effective annual
interest rate on U.S. Treasury obligations with _________-year maturities
as of the (insert date 15 days prior to maturity date] prior to such
[insert maturity date].]
Securities are Floating Rate debt Securities, insert--
Floating rate provisions:
Initial annual interest rate will be _________% through [and thereafter
will be adjusted [monthly] [on each _________, _________, _________ and] [
to an annual rate of _________% above the average rate for _____ year
[month] [securities] [certificates of deposit] issued by _________ and
[insert names of banks].] [and the annual interest rate [thereafter] [from
_________ through _______] will be the interest yield equivalent of the
weekly average per annum market discount rate for _________-month Treasury
bills plus ___% of Interest Differential (the excess, if any, of (i) then
current weekly average per annum secondary market yield for _________ -
month certificates of deposit over (ii) then current interest yield
equivalent of the weekly average per annum market discount rate for
_________ -month Treasury bills); [from and thereafter the rate will be the
then current interest yield equivalent plus _________% of Interest
Differential].]
Defeasance provisions:
Time of Delivery:
Closing Location for Delivery of Securities:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
[Other Terms]*:
* A description of particular tax accounting or other unusual features
(such as the addition of event risk provisions) of the Securities should be set
forth, or referenced to an attached and accompanying description, if necessary
to ensure agreement as to the terms of the Securities to be purchased and sold.
Such a description might appropriately be in the form in which such
features shall be described in the Prospectus Supplement for the offering
I-7
<PAGE>
Exhibit 1(a)
Pricing Agreement
-----------------
Banc of America Securities LLC
First Union Securities, Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Banc of America Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
February 29, 2000
Ladies and Gentlemen:
United Dominion Realty Trust, Inc., a Virginia corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated February 29, 2000 (the "Underwriting Agreement"),
between the Company and the Operating Entities (as defined therein) on the one
hand and Banc of America Securities LLC, First Union Securities, Inc., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, on the other hand, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") the
Securities specified in Schedule II hereto (the "Designated Securities"). Each
of the provisions of the Underwriting Agreement is incorporated herein by
reference in its entirety, and shall be deemed to be a part of this Agreement to
the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Pricing Agreement, except that each
representation and warranty which refers to the Prospectus in Section 2 of the
Underwriting Agreement shall be deemed to be a representation or warranty as of
the date of the Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented relating to
the Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be deemed to refer to
you. Unless otherwise defined herein, terms defined in the Underwriting
Agreement are used herein as therein defined. The Representative designated to
act on behalf of the Representatives and on behalf of each of the Underwriters
of the Designated Securities pursuant to Section 12 of the Underwriting
Agreement and the address of the Representatives referred to in such Section 12
are set forth at the end of Schedule II hereto.
<PAGE>
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you, is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, on the basis of the representations and warranties
set forth herein and in such Underwriting Agreement, to purchase from the
Company, at the time and place and at the purchase price to the Underwriters set
forth in Schedule II hereto, the respective principal amount of Designated
Securities set forth opposite the name of such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company and the Operating Entities. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is or will be
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company for examination upon
request, but without warranty on the part of the Representatives as to the
authority of the signers thereof.
Very truly yours,
United Dominion Realty Trust, Inc.
By:________________________________
Name:
Title:
United Dominion Realty, L.P.
By: United Dominion Realty Trust, Inc., its
General Partner
By:________________________________
Name:
Title:
<PAGE>
UDR Western Residential, Inc.
By:________________________________
Name:
Title:
UDRT of North Carolina, L.L.C.
By: United Dominion Realty Trust, Inc., its
sole member
By:________________________________
Name:
Title:
ASR Investments Corporation
By:________________________________
Name:
Title:
Accepted as of the date hereof:
Banc of America Securities LLC
First Union Securities, Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Acting severally on behalf of themselves and the several Underwriters
By: Banc of America Securities LLC
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
Principal Amount of
Designated
Securities
Underwriter to be Purchased
----------- -------------------
Banc of America Securities LLC $ 70,000,000
First Union Securities, Inc. 20,000,000
Chase Securities Inc. 3,334,000
Donaldson, Lufkin & Jenrette Securities Corporation 3,333,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 3,333,000
------------
Total $100,000,000
============
<PAGE>
SCHEDULE II
Title of Designated Securities:
8.625% Notes Due 2003 (the "Notes")
Aggregate Principal Amount of Designated Securities:
$100,000,000
Initial Public Offering Price:
99.876% of the principal amount of the Notes, plus accrued interest, if
any, from March 3, 2000.
Purchase Price by Underwriters:
99.526% of the principal amount of the Notes, plus accrued interest, if
any, from March 3, 2000 (no accrued interest will be payable by the
Underwriters in the case of Notes purchased by the Underwriters on March 3,
2000).
Form of Designated Securities:
Book-entry form represented by one or more global securities deposited with
The Depository Trust Company and registered in the name of its nominee.
Specified funds for payment of purchase price:
Immediately available funds.
Indenture:
Indenture dated November 1, 1995, between the Company and First Union
National Bank (formerly known as First Union National Bank of Virginia), as
Trustee
Maturity:
March 15, 2003
Interest Rate:
8.625% per annum
<PAGE>
Interest Payment Dates:
March 15 and September 15, commencing September 15, 2000.
Regular Record Dates:
March 1 and September 1
Redemption Provisions:
Not redeemable prior to maturity.
Sinking Fund Provisions:
No sinking fund provisions.
Defeasance provisions:
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance will apply to the Notes.
Time of Delivery:
10 a.m., New York time, on March 3, 2000.
Closing Location for Delivery of Designated Securities:
Offices of Brown & Wood llp, One World Trade Center, New York, New York
10048-0557.
Names and addresses of Representatives:
Designated Representative:
Banc of America Securities LLC
Address for Notices, etc.:
Banc of America Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Ms. Lynn T. McConnell
<PAGE>
Exhibit 4(ii)(g)(a)
RESOLUTIONS OF THE DEBT PRICING COMMITTEE
OF THE BOARD OF DIRECTORS OF
UNITED DOMINION REALTY TRUST, INC.
ADOPTED BY UNANIMOUS WRITTEN CONSENT
The undersigned members of the Debt Pricing Committee established by the
resolutions adopted February 22, 2000 (the "Resolutions") of the Board of
Directors of United Dominion Realty Trust, Inc. (the "Company"), by and in
accordance with the authority granted to the Debt Pricing Committee in the
Resolutions, do hereby adopt, by unanimous written consent, the following
resolutions, terms used and not otherwise defined herein being defined in the
Resolutions and in the Indenture (as defined below):
WHEREAS, the Debt Pricing Committee has determined to designate a series of
Securities, which are herein referred to as the "Notes" pursuant to the
Indenture dated as of November 1, 1995 (the "Indenture"), from the Company to
First Union National Bank, as Trustee (the "Trustee"); and
WHEREAS, the Debt Pricing Committee has determined to offer and sell the
Notes to Banc of America Securities LLC, First Union Securities, Inc., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (collectively, the "Underwriters"),
pursuant to an underwriting agreement between the Company, the Operating
Entities (as defined in the Underwriting Agreement) and the Underwriters and a
related pricing agreement between the Company, the Operating Entities and the
Underwriters (together, the "Underwriting Agreement") for reoffering by the
Underwriters to the public.
NOW THEREFORE BE IT RESOLVED, that in accordance with Section 301 of the
Indenture, the following terms of the Notes are hereby established (terms not
defined in these resolutions having the definitions specified in the Indenture):
1. The Notes shall constitute a series of Securities having the title
"8.625% Notes Due 2003."
2. The aggregate principal amount of the Notes that may be
authenticated and delivered under the Indenture (except for Notes
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Sections 304, 305, 306
or 906 of the Indenture) shall be $100,000,000. Notwithstanding the
foregoing, this series of Securities may be reopened, without the consent
of the Holders, for issuances of additional Notes so long as any such
additional Notes carry the same rights to accrued and unpaid interest, and
otherwise have the same terms and provisions and are in substantially the
same form, as the Notes then outstanding.
<PAGE>
3. The entire outstanding principal of the Notes shall be payable on
March 15, 2003.
4. The rate at which the Notes shall bear interest shall be 8.625%
per annum; the date from which such interest shall accrue shall be March 3,
2000 or the most recent Interest Payment Date to which interest has been
paid or duly provided for; the Interest Payment Dates on which such
interest will be payable shall be March 15 and September 15 of each year,
commencing September 15, 2000; the Regular Record Dates for the interest
payable on the Notes on any Interest Payment Date shall be the March 1 or
September 1 next preceding an Interest Payment Date; and the basis upon
which interest shall be calculated shall be that of a 360-day year
consisting of twelve 30-day months.
5. The Borough of Manhattan, The City of New York, Charlotte, North
Carolina, and Richmond, Virginia, are each designated as a Place of Payment
for the Notes; the office or agency of the Company where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Notes and the Indenture may be served,
shall initially be (i)in the Borough of Manhattan, The City of New York,
the office of the Trustee at 40 Broad Street, Suite 55, New York, New York
10004 and (ii) in Charlotte, North Carolina, the Corporate Trust Operations
Office of the Trustee at 1525 West W.T. Harris Boulevard, 3C3, Charlotte,
North Carolina 28262-1153, and (iii) in Richmond, Virginia, the Corporate
Trust Office of the Trustee at 800 East Main Street, Lower Mezzanine,
Richmond, Virginia 23219. The Trustee is hereby appointed as initial Paying
Agent, transfer agent and Securities Registrar for the Notes.
6. The Notes shall not be subject to redemption at the option of the
Company or subject to redemption at the option of the Holders and will not
be subject to any mandatory sinking fund requirements.
7. Neither payments of principal of nor interest on the Notes shall
be determined with reference to an index, formula or other similar method.
8. Neither principal of nor interest on the Notes shall be payable in
a currency other than that in which they are denominated.
9. The Notes shall be issuable only as Registered Securities in
permanent global form (without coupons) and will be issued in denominations
of $1,000 and integral multiples thereof. Beneficial owners of interests in
the permanent global Note may exchange such interests for definitive
certificated Notes registered in a name other than that of the Depository
or its nominee only in the manner provided in Section 305 of the Indenture.
DTC shall be the depository with respect to the permanent global Note Due
2000. The form of such permanent global Note attached hereto as Exhibit A
is hereby approved, with such changes therein as the officer executing the
same on behalf of the Company shall approve, such approval to be
conclusively evidenced by the execution thereof. In the event that the
Notes in definitive certificated form are issued under the circumstances
contemplated by Section 305 of the Indenture, such Notes shall be in
2
<PAGE>
substantially the same form as the permanent global Note Due 2000, except
they shall not bear the legend set forth on Exhibit A and shall have such
further changes as may be approved by any officer of the Company executing
such certificates on behalf of the Company, such approval to be
conclusively evidenced by such execution.
10. Except as provided in Section 307 of the Indenture with respect
to Defaulted Interest, interest on any Note shall be payable only to the
Person in whose name that Note (or one or more Predecessor Securities
thereof) is registered at the close of business on the Regular Record Date
for such interest.
11. Sections 1402 and 1403 of the Indenture shall be applicable to
the Notes.
12. The Company shall not pay Additional Amounts as contemplated by
Section 1011 of the Indenture on the Notes.
RESOLVED, that the Notes shall be sold to the Underwriters at a price equal
to 99.526% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, and the initial public offering price of the Notes shall be
99.876% of the principal amount thereof plus any accrued and unpaid interest
thereon, if any; and further
RESOLVED, that, on behalf of the Company, in its own right, as general
partner of United Dominion Realty, L.P. (the "Operating Partnership"), and as
sole member of UDRT of North Carolina, L.L.C. ("North Carolina"), this Committee
hereby approves the Underwriting Agreement, substantially in the form presented
to this Committee in connection with the adoption of these resolutions; and
further
RESOLVED, that each of the Chairman, President and Chief Executive Officer,
the Executive Vice President and Chief Financial Officer, the Senior Vice
President of Finance and the Senior Vice President, Secretary and General
Counsel is authorized, in the name and on behalf of the Company, in its own
right, and, where appropriate, as general partner of the Operating Partnership
and as sole member of North Carolina, and (in the case of the certificates
evidencing the Notes) under its corporate seal attested by its Secretary or an
Assistant Secretary, to execute and deliver the Notes and the Underwriting
Agreement, substantially in the respective forms approved hereby, with such
changes as shall have been approved by the executing officer, such approval to
be conclusively evidenced by the execution (by manual or facsimile signature)
thereof by the executing officer), provided that any such change shall be
consistent with all determinations made by the Debt Pricing Committee in these
resolutions; and further
RESOLVED, that the form, terms and provisions of the Indenture, and the
execution and delivery thereof by the officers of the Company who signed and
attested the Indenture, be, and the same hereby are, ratified, confirmed and
approved in all respects; and further
RESOLVED, that all officers of the Company are, and each of them acting
singly is hereby authorized, in the name and on behalf of the Company, to make,
execute and deliver or cause to be made, executed and delivered, and to evidence
the approval of the Board of Directors and this Debt Pricing Committee of, all
such officers' certificates, depository agreements, letters of representation or
other agreements or arrangements necessary or appropriate in connection with the
administration of any book-entry arrangements for the Notes and such other
agreements,
3
<PAGE>
undertakings, documents or instruments, and to perform all such acts and make
all such payments, as may, in the judgment of any such officer, be necessary,
appropriate or desirable to effectuate the purpose of these resolutions,
including the performance of the obligations of the Company under the Indenture,
the Notes and the Registration Statement, and the obligations of the Company,
the Operating Partnership and North Carolina under the Underwriting Agreement or
any other agreement, undertaking, document or instrument referred to herein or
therein; and further
RESOLVED, that and any and all action heretofore taken by the officers of
the Company pursuant to the authority conferred by the preceding resolutions and
consistent therewith is ratified, approved and confirmed.
The foregoing resolutions are effective as of February 29, 2000. The
undersigned waive any and all notice requirements with respect to the actions
taken hereby.
March __, 2000 ____________________________________
John P. McCann
March __, 2000 ____________________________________
A. William Hamill
March __, 2000 ____________________________________
Kevin W. Walsh
4
<PAGE>
EXHIBIT A
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.:R1 $100,000,000
CUSIP No.: 910197AG7
UNITED DOMINION REALTY TRUST, INC.
8.625% NOTE DUE 2003
UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (hereinafter
called the "Company," which term shall include any successor corporation under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, upon presentation, the principal sum
of ONE HUNDRED MILLION DOLLARS on March 15, 2003, and to pay interest on the
outstanding principal amount thereon from March 3, 2000, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on March 15 and September 15 in each year, commencing
September 15, 2000, at the rate of 8.625% per annum, until the entire principal
amount hereof is paid or made available for payment. Interest on this Note shall
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest which shall be
the March 1 or September 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date, and may either be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes of
this series not more than 15 days and not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Notes
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture. Payment of the principal of and interest
on this Note will be made at the office or agency of the Company maintained for
that purpose in the City of Richmond, State of Virginia, or elsewhere as
provided in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may
5
<PAGE>
be made by (i) check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register kept for the Notes pursuant
to Section 305 of the Indenture (the "Note Register") or (ii) transfer to an
account of the Person entitled thereto located inside the United States.
This Note is one of a duly authorized issue of securities of the Company
(herein called the "Notes"), issued and to be issued in one or more series under
an Indenture, dated as of November 1, 1995 (herein called the "Indenture"),
between the Company and First Union National Bank (formerly First Union National
Bank of Virginia) (herein called the "Trustee," which term includes any
successor trustee under the Indenture with respect to the Notes), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Notes and of the
terms upon which the Notes are, and are to be, authenticated and delivered. This
Note is one of the series designated as the "8.625% Notes Due 2003," initially
limited in aggregate principal amount to $100,000,000.
This Note is not redeemable at the option of the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Note.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Note shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes, the Holders of not less than 25% in principal amount of the Notes at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount of the Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Note for the enforcement of any payment of principal hereof or any interest
on or after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of not less
than a majority in principal amount of the Outstanding Notes. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Notes at the time Outstanding, on behalf of the Holders of all
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and
6
<PAGE>
their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable in the Note Register, upon
surrender of this Note for registration of transfer at the office or agency of
the Company in any Place of Payment where the principal of and interest on this
Note are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar for the
Notes (the "Note Registrar") duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Note, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such or, against any past,
present or future shareholder, officer or director, as such, of the Company or
of any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Note by
the Holder thereof and as part of the consideration for the issue of the Notes.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
THE INDENTURE AND THE NOTES, INCLUDING THIS NOTE, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA.
7
<PAGE>
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the correctness or accuracy of such CUSIP numbers
as printed on the Notes, and reliance may be placed only on the other
identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this 3rd day of March, 2000.
UNITED DOMINION REALTY TRUST, INC.
By:__________________________________________
Name: Kevin W. Walsh
Title: Senior Vice President of Finance
[SEAL]
Attest:
By:_________________________________
Name: Katheryn E. Surface
Title: Senior Vice President and Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Notes of the series designated "8.625% Notes Due 2003"
pursuant to the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By:_________________________________
Authorized Signatory
8
<PAGE>
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
_______________________________
_______________________________.................................................
................................................................................
................................................................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Note of United Dominion Realty Trust, Inc., and irrevocably
constitutes and appoints
................................................................................
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated: . . . . . ..............................................
.............................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
================================================================================
9
<PAGE>
Exhibit 4(ii)(g)(b)
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: R1 $100,000,000
CUSIP No.: 910197AG7
UNITED DOMINION REALTY TRUST, INC.
8.625% NOTE DUE 2003
UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (hereinafter
called the "Company," which term shall include any successor corporation under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, upon presentation, the principal sum
of ONE HUNDRED MILLION DOLLARS on March 15, 2003, and to pay interest on the
outstanding principal amount thereon from March 3, 2000, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on March 15 and September 15 in each year, commencing
September 15, 2000, at the rate of 8.625% per annum, until the entire principal
amount hereof is paid or made available for payment. Interest on this Note
shall be calculated on the basis of a 360-day year consisting of twelve 30-day
months. The interest so payable, and punctually paid or duly provided for on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Regular Record Date for such interest which
shall be the March 1 or September 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes of this series not more than 15 days and not less than 10 days prior to
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in the Indenture. Payment of the principal of and
interest on this Note will be made at the office or agency of the Company
maintained for that purpose in the City of Richmond, State of Virginia, or
elsewhere as provided in the Indenture, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by (i) check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register kept for
the Notes pursuant to Section 305 of the Indenture (the
<PAGE>
"Note Register") or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
This Note is one of a duly authorized issue of securities of the Company
(herein called the "Notes"), issued and to be issued in one or more series under
an Indenture, dated as of November 1, 1995 (herein called the "Indenture"),
between the Company and First Union National Bank (formerly First Union National
Bank of Virginia) (herein called the "Trustee," which term includes any
successor trustee under the Indenture with respect to the Notes), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Notes and of the
terms upon which the Notes are, and are to be, authenticated and delivered. This
Note is one of the series designated as the "8.625% Notes Due 2003," initially
limited in aggregate principal amount to $100,000,000.
This Note is not redeemable at the option of the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Note.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Note shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes, the Holders of not less than 25% in principal amount of the Notes at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount of the Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Note for the enforcement of any payment of principal hereof or any interest
on or after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of not less
than a majority in principal amount of the Outstanding Notes. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Notes at the time Outstanding, on behalf of the Holders of all
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.
2
<PAGE>
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable in the Note Register, upon
surrender of this Note for registration of transfer at the office or agency of
the Company in any Place of Payment where the principal of and interest on this
Note are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar for the
Notes (the "Note Registrar") duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different autho
rized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Note, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such or, against any past,
present or future shareholder, officer or director, as such, of the Company or
of any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Note by
the Holder thereof and as part of the consideration for the issue of the Notes.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
THE INDENTURE AND THE NOTES, INCLUDING THIS NOTE, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the correctness or accuracy of such CUSIP numbers
as printed on the Notes, and reliance may be placed only on the other
identification numbers printed hereon.
3
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this 3rd day of March, 2000.
UNITED DOMINION REALTY TRUST, INC.
By:___________________________________________
Name: Kevin W. Walsh
Title: Senior Vice President of Finance
[SEAL]
Attest:
By:____________________________________
Name: Katheryn E. Surface
Title: Senior Vice President and Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Notes of the series designated "8.625% Notes Due 2003"
pursuant to the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By:_________________________________
Authorized Signatory
4
<PAGE>
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
____________________________
____________________________ ..............................................
................................................................................
................................................................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Note of United Dominion Realty Trust, Inc., and irrevocably
constitutes and appoints
................................................................................
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated: . . . . . ...................................................
...................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
================================================================================
<PAGE>
Exhibit 10(ix)
UNITED DOMINION REALTY TRUST, INC.
1999 LONG-TERM INCENTIVE PLAN
SUMMARY OF
RESTRICTED STOCK AWARDS
GENERAL INFORMATION REGARDING THE PLAN
United Dominion Realty Trust, Inc.'s Restricted Stock Award program is a
subplan of the United Dominion Realty Trust, Inc. 1999 Long-Term Incentive Plan
(the "Plan"). This summary is not complete, and you should refer to the full
text of the Plan for further information. The purpose of the Plan is to promote
the success, and enhance the value, of the Company by linking the personal
interests of employees, officers and directors to those of the shareholders, and
by providing such employees, officers and directors with an incentive for
outstanding performance.
Administration
The Plan is administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee"). The Committee has the power,
authority and discretion to designate participants; determine the type or types
of awards to be granted to each participant and the number, terms and conditions
of any award; establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan; and make all other decisions
and determinations that may be required under, or as the Committee deems
necessary or advisable to administer, the Plan.
Terms Generally Applicable to Discretionary Awards
Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an incentive stock option, pursuant to a
qualified domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (1) does not result in accelerated taxation, (2) does not cause
any option intended to be an incentive stock option to fail to qualify as such,
and (3) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including without limitation, any state or federal tax or
securities laws or regulations applicable to transferable awards. A participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the participant and to receive any distribution with
respect to any award upon the participant's death.
Acceleration Upon Certain Events. Upon the participant's death or
disability all outstanding awards in the nature of rights that may be exercised
will become fully exercisable and all restrictions on
<PAGE>
outstanding awards will lapse. In the event of a Change in Control of the
Company (as defined in the Plan), all outstanding awards in the nature of rights
that may be exercised will become fully vested and all restrictions on all
outstanding awards will lapse; provided, however that such acceleration will not
occur if, in the opinion of the Company's accountants, such acceleration would
preclude the use of "pooling of interest" accounting treatment for a Change in
Control transaction that would otherwise qualify for such accounting treatment
and is contingent upon qualifying for such accounting treatment. Regardless of
whether an event described above shall have occurred, the Committee may in its
sole discretion declare all outstanding awards in the nature of rights that may
be exercised to become fully vested, and/or all restrictions on all outstanding
awards to lapse, in each case as of such date as the Committee may, in its sole
discretion, declare. The Committee may discriminate among participants or among
awards in exercising such discretion.
Termination and Amendment
The Board or the Committee may, at any time and from time to time,
terminate, amend or modify the Plan without shareholder approval; provided,
however, that the Committee may condition any amendment on the approval of
shareholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations. No termination, amendment, or modification of the Plan may
adversely affect any award previously granted under the Plan, without the
written consent of the participant. The Committee may amend any outstanding
award without approval of the participant; provided that no such amendment may
diminish the value of such award determined as if it has been exercised, vested,
cashed in or otherwise settled on the date of such amendment, and the exercise
price of any option may not be reduced.
Other Information
The Plan is not subject to any provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The Plan also is not subject to or qualified
under Section 401 of the Internal Revenue Code. No one has or may create a lien
on any funds, securities or other property held under the Plan.
-2-
<PAGE>
Exhibit 10(x)
UNITED DOMINION REALTY TRUST, INC.
SHAREHOLDER VALUE PLAN
SECTION 1
PURPOSE
1.1 Background. The Shareholder Value Plan (the "Shareholder Value Plan")
is a subplan of the United Dominion Realty Trust, Inc. 1999 Long-Term Incentive
Plan (the "LTIP"), consisting of a program for the systematic grant of
Performance Units under Article 9 of the LTIP. The Shareholder Value Plan has
been established and approved, and will be administered by, the Committee
pursuant to the terms of the LTIP.
1.2 Purpose. The purpose of the Shareholder Value Plan is:
(a) to increase a Participant's economic interest in the long-term
success of the Company,
(b) to encourage Participants to continue employment with the Company,
and
(c) to reward Participants for achieving long-term goals.
1.3 Effective Date. The Shareholder Value Plan is effective January 1.
SECTION 2
ELIGIBILITY
2.1 Eligibility. Participation in the Shareholder Value Plan shall be
limited to key executives of the Company who are members of a select group of
highly compensated or management employees who, through the effective execution
of their assigned duties and responsibilities, are in a position to have a
direct and measurable impact on the Company's long-term financial results, and
are designated by the Committee to be eligible for a SVP Performance Unit Grant.
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<PAGE>
SECTION 3
DEFINITIONS
3.1 Defined Terms. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned such terms in the LTIP. In addition, the
following terms shall have the following meanings.
Deferred Compensation Plan. The United Dominion Realty Trust, Inc.
Executive Deferred Compensation Plan, as amended from time to time, or any
successor plan or plans.
Payout Matrix. The matrix adopted by the Committee with respect to a
Performance Period equating Unit Value to Performance Results. The initial
Payout Matrix is set forth on Exhibit A hereto. Such Payout Matrix shall apply
to the first Performance Period and all subsequent Performance Periods unless a
different Payout Matrix is adopted by the Committee for any subsequent
Performance Period.
Performance Period. A period of no less than three full fiscal years over
which performance is measured for purposes of determining Performance Results.
The Performance Period may be a rolling period.
Performance Results. The Performance Results with respect to any
Performance Period shall be a measure of the Company's Total Shareholder Return
(as calculated by the sum total of yield plus appreciation/depreciation in the
price of the Company's common stock over the Performance Period) as ranked or
compared to such indices or competitors as the Committee may, in its sole
discretion, determine.
SVP Award. The value of an SVP Performance Unit Grant at the end of a
Performance Period, calculated as the product of the SVP Performance Unit Grant
multiplied by the Unit Value.
SVP Performance Unit. An SVP Performance Unit is a unit of long term
incentive compensation granted under this Shareholder Value Plan, pursuant to
the LTIP. An SVP Performance Unit shall have an initial value of zero dollars.
SVP Performance Unit Grant. The total number of SVP Performance Units
granted to a Participant for a particular Performance Period.
Targeted SVP Compensation. The target compensation under the Shareholder
Value Plan for a Participant with respect to a Performance Period, expressed in
dollars and based on a percentage (determined by the Committee) of the
Participant's total annual base compensation for the year in which the SVP
Performance Unit Grant is made.
Total Shareholder Return (TSR). The sum total of yield plus
appreciation/depreciation in the price of the Company's common stock over a
specified period of time.
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<PAGE>
Unit Value. Unit Value shall be the value of each SVP Performance Unit
based upon Performance Results, as determined by reference to the Payout Matrix.
Initially, the Unit Values shall be determined by reference to the Payout Matrix
set out on the attached Exhibit A. Unit Values for Performance Results between
those shown in Exhibit A shall be determined by straight line interpolation.
SECTION 4
OPERATION
4.1 Performance Periods. The initial Performance Period hereunder is the
three-year period beginning on January 1, 1999 and ending on December 31, 2001.
The Committee shall determine and declare subsequent Performance Periods from
time to time.
4.2 SVP Performance Unit Grants. At the beginning of a Performance Period
(or such later date as may be permitted under Code Section 162(m) or the
regulations thereunder), the Committee will determine the total number of SVP
Performance Unit Grants that will be granted, which Participants will receive
SVP Performance Unit Grants, and the amount of each Participant's SVP
Performance Unit Grant.
4.3 Determination of SVP Performance Unit Grants. An SVP Performance Unit
Grant will consist of a number of SVP Performance Units granted to any one
Participant as determined by the Committee, in its sole discretion, at the
beginning of each Performance Period (or in the case of a newly hired or newly
promoted Participant, at such time as the Committee shall determine) as follows:
Targeted SVP Compensation
-------------------------
$1000
4.4 Timing of Grants. The Committee may elect to make an SVP Performance
Unit Grant at any time provided that the beginning of a Performance Period
coincides with the beginning of the Company's fiscal year. However, with respect
to a newly hired or newly promoted Participant(s), the Committee may issue SVP
Performance Unit Grants for the current Performance Period provided such
Participant(s) is hired or promoted within the first three months of such
Performance Period.
4.5 Amount of SVP Award. At the end of each Performance Period the
Committee shall determine in writing the Unit Value based upon the Payout Matrix
and make SVP Awards to each Participant equal to the Unit Value multiplied by
the number of the Participant's outstanding SVP Performance Units. For example:
the Participant's annual base compensation is $100,000 and the Targeted SVP
Compensation is 30% or $30,000. $30,000/$1000 = 30. The Participant is granted
30 SVP Performance Units on January 1, 1999 for the Performance Period starting
on that date. At the end of the Performance Period (December 31, 2001) the
Performance Results are 125% as shown on the Payout Matrix set out on Exhibit A.
The Unit Value will, therefore, be $1000. The Participant's SVP Award will be
$30,000. Notwithstanding the above, the Committee may for any reason reduce (but
not increase) any SVP Award.
-3-
<PAGE>
4.6 Termination of Employment or Change in Control During Performance
Period:
(a) Termination of Employment. If a Participant's employment with
-------------------------
the Company or any Subsidiary terminates during a Performance Period for any
reason other than the Participant's death or Disability, SVP Performance Unit
Grants previously granted to the Participant (but upon which no SVP Award has
been made) shall be cancelled as of the date of termination of employment and no
SVP Award shall be made with respect to such cancelled SVP Performance Unit
Grant.
(b) Death or Disability. If a Participant's employment with the
-------------------
Company or any Subsidiary terminates by reason of the Participant's death or
Disability, then, upon conclusion of the Performance Period, any SVP Award due
with respect to the SVP Performance Unit Grant held by such Participant at the
date of his or her termination of employment shall be paid to the Participant
or, in the case of death, to the Participant's beneficiary (or estate, if no
beneficiary has been designated).
(c) Change of Control. In the event of a Change of Control, as
-----------------
defined in the LTIP, SVP Awards will be made as though all Performance Periods
had been completed in full as of the last day of the calendar quarter ended
immediately prior to the date of the Change of Control. The amount to be paid
shall be the greater of (i) the SVP Award that would result based on target
Performance Results ($1,000 per Unit), or (ii) the SVP Award that would result
based on actual Performance Results over the shortened Performance Period.
Payment of an Award shall be made within 120 days after the Change of Control
transaction has been completed.
(d) Adjustment to Value. If, during a Performance Period, the
-------------------
Company's structure should be materially altered by virtue of an acquisition,
merger, divestiture, reorganization or similar event, which does not constitute
a Change of Control, the Committee may redefine the Performance Matrix, adjust
the Performance Period, or change the index of peer companies, to reflect the
impact of such change. The nature of any such adjustment shall be to protect
the purpose and integrity of the Shareholder Value Plan, reducing the potential
for windfall gains or losses for Participants.
4.7 Form and Payment of SVP Award. An SVP Award may be made in either a
cash amount or a number of shares of Stock, in the sole discretion of the
Committee. Unless deferred as provided in Section 4.8 below, payment of the SVP
Award shall be as soon after the close of a Performance Period as practical
(within 120 days after a Change of Control transaction has been completed).
4.8 SVP Award Deferrals. On or before the end of the third calendar
quarter of the final year of a Performance Period, a Participant who is eligible
to participate in the Executive Deferred Compensation Plan may elect to defer
receipt of his or her SVP Award with respect to such Performance Period under
the Executive Deferred Compensation Plan. Any amount so deferred will be
governed by the terms of the Executive Deferred Compensation Plan. Such election
shall be made by filing with the director of human resources of the Company an
election form in accordance with Section 4.01 of the Executive Deferred
Compensation Plan. The
-4-
<PAGE>
deferral election will be irrevocable except as provided in the Executive
Deferred Compensation Plan.
SECTION 5
MISCELLANEOUS PROVISIONS
5.1 Grant Limitations. The maximum fair market value (measured as of the
date of grant) of any SVP Performance Unit Grant to a Covered Employee (as
defined in the LTIP) is $1,000,000.
5.2 Nontransferability of SVP Performance Units. SVP Performance Units may
not be transferred, assigned, pledged or encumbered.
5.3 Amendment and Termination. The Committee may terminate, amend or
modify the Shareholder Value Plan at any time in any respect it deems advisable,
without prior notice; provided that: (i) any SVP Awards deferred by a
Participant pursuant to Section 5 shall be paid as directed by such Participant;
and (ii) the Shareholder Value Plan may be terminated only prospectively and any
current Performance Periods for which Unit Values have not been determined shall
continue until the end of such Performance Period, at which time SVP Awards
shall be made pursuant to this Shareholder Value Plan.
5.4 Right to Terminate Employment. Nothing contained in the Shareholder
Value Plan shall confer upon any person a right to be employed by or to continue
in the employ of the Company or its Subsidiaries or interfere in any way with
the right of the Company or any Subsidiary to terminate the employment of a
Participant at any time, with or without cause.
5.5 Finality of Determinations. The Committee shall have the discretion to
construe and interpret the provisions of the Shareholder Value Plan, and to
administer the Shareholder Value Plan. Each determination, interpretation, or
other action made by the Company or the Committee shall be final and binding for
all purposes. The Company may, but is not required to, utilize a mediator to
facilitate the resolution of any dispute, and such mediator shall be a
disinterested party to the dispute.
5.6 Withholding. In accordance with Section 17.3 of the LTIP, the Company
or employer Subsidiary shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company or such Subsidiary,
an amount sufficient to satisfy federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the Shareholder Value Plan.
5.7 Grants Discretionary. No employee or other person shall have any claim
or right to receive a SVP Performance Unit Grant under the Shareholder Value
Plan.
5.8 Severability. If any provision of this Shareholder Value Plan is held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, the remaining provisions hereof shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision. Furthermore, in lieu of such illegal or unenforceable
provision, there shall be added automatically as a part of this Shareholder
Value Plan a provision as similar in terms to such illegal, invalid, or
unenforceable
-5-
<PAGE>
provision as may be possible and still be legal, valid and enforceable.
5.9 LTIP Controls. This Shareholder Value Plan is adopted pursuant to and
shall be governed by and construed in accordance with the LTIP. In the event of
any actual or alleged conflict between the provisions of the LTIP and the
provisions of this Shareholder Value Plan, the provisions of the LTIP shall be
controlling and determinative.
-6-
<PAGE>
EXHIBIT A
Payout Matrix
under the
United Dominion Realty Trust, Inc.
Shareholder Value Plan
Composite Index: NAREIT Equity Apartment Index
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Performance Level Total Shareholder Return SVP Unit Value
(TSR) as a Percentage of
TSR of Composite Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
less than 110% $ 0
- ---------------------------------------------------------------------------------------------
Threshold 110% $ 500
- ---------------------------------------------------------------------------------------------
Target 125% $1,000
- ---------------------------------------------------------------------------------------------
140% $1,500
- ---------------------------------------------------------------------------------------------
160% $2,000
- ---------------------------------------------------------------------------------------------
180% $2,500
- ---------------------------------------------------------------------------------------------
Maximum 200% or more $3,000
- ---------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Exhibit 10(xi)
UNITED DOMINION REALTY TRUST, INC.
EXECUTIVE DEFERRAL PLAN
SUMMARY
GENERAL INFORMATION REGARDING THE PLAN
The United Dominion Realty Trust, Inc. Executive Deferral Plan (the "EDP")
is a non-qualified deferred compensation plan for key executives of the Company.
Participants may defer a portion of salary or bonuses into the EDP on a pre-tax
basis. Participants may direct investment of their deferrals into selected
funds, which mirror those provided under the Company's 401(k) and Profit Sharing
Plan. The Plan is administered by the 401(k) Committee of the Board of Directors
of the Company (the "Committee"). The Board of Directors may amend or terminate
the EDP, provided that no amendment may cause a reduction in participants'
accounts. If the EDP is terminated, no future contributions may be made to the
EDP, but all participant accounts existing at the time of termination will
continue to be governed by the terms of the EDP until paid out.
<PAGE>
Exhibit 10(xii)
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 8th day of
December, 1998, between UNITED DOMINION REALTY TRUST, INC., a Virginia
corporation (the "Company") and CURTIS W. CARTER (the "Executive"), recites and
provides as follows:
R E C I T A L S:
The Executive is a senior executive of the Company, and the Company now
desires to reward the Executive for past performance and provide for the
continued employment of the Executive upon the terms set forth in this
Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises
and undertakings hereinafter set forth, and the payments to be made to the
Executive hereunder, the parties hereto agree as follows:
1. Position and Duties.
-------------------
a. The Company hereby agrees to and hereby does continue to employ the
Executive as an executive officer of the Company, subject to the supervision of
the Chief Operating Officer of the Company, or such other senior officer of the
Company as may be prescribed by the Chief Executive Officer or the Board of
Directors of the Company (the "Board"). Currently, the Executive is Senior Vice
President and reports to the Chief Operating Officer, and is responsible for the
Northern Region operations of the Company.
The Executive agrees that the description of the executive position
above shall not limit the Company from assigning to the Executive such other
duties and functions in addition to or in substitution of those described above.
b. The Executive agrees to serve the Company as a full time executive
officer with duties and authority as set forth in the Company's by-laws or as
otherwise prescribed by the Board, the Chief Operating Officer, or such other
senior officer prescribed by the Chairman, President or the Board. The
Executive shall devote such time, attention, skill, and efforts to the
performance of his duties as a Company executive as shall be required therefore,
all under the supervision and direction of the Board, the Chief Operating
Officer, or such other senior officer prescribed by the Board. The Executive
agrees that during the period of his employment he will not, without the
approval of a majority of the independent directors of the Board, have any other
(i) real estate investment trust or business affiliations, or (ii) corporate
affiliations that conflict with the business
-1-
<PAGE>
of the Company or interfere with the ability of the Executive to perform his
duties for the Company or comply with the covenants under this Agreement.
2. Term of Agreement.
-----------------
This Agreement will take effect as of the date of this Agreement and will
end on December 31, 1998. After December 31, 1998, this Agreement will
automatically renew for successive one (1) year periods, ending as of December
31 of each year, unless sooner terminated in accordance with Section 4.
3. Compensation and Benefits.
-------------------------
a. Base Salary. The Executive's pay will not be less than $161,000 per
-----------
year (beginning January 1, 1999), payable in accordance with the Company's
regular payroll practices, unless the Executive consents to a lesser base salary
in writing.
b. Annual Incentive Compensation. The Executive's annual compensation
-----------------------------
shall also include an annual incentive where the Executive has an opportunity to
earn a bonus of at least forty five percent (45%) of base salary based upon the
Executive and the Company meeting certain performance goals and objectives as
determined by the Compensation Committee of the Board (the "Compensation
Committee"), or the Chief Operating Officer. The Executive acknowledges that
the Board or the Compensation Committee, as appropriate, may elect to modify or
terminate annual incentive compensation for all executives at any time.
c. Long Term Incentive Compensation. The Executive's compensation shall
--------------------------------
also include participation (i) in the Company's 1982 Stock Option Plan; (ii) in
the Company's 1991 Officers Stock Purchase and Loan Plan; and (iii) any
"shareholder value plan" or other long-term compensation plan for senior
officers of the Company adopted by the Compensation Committee or the Board, on
the same basis as similarly situated executive officers of the Company. The
Executive acknowledges that the Board, or the Compensation Committee, as
appropriate, may elect to terminate or modify any or all long-term incentive
compensation at any time.
d. Associate Benefit Plans. The Executive will be eligible to participate
-----------------------
in any and all employee benefit plans, medical insurance plans, retirement
plans, and other benefit plans in effect for employees in similar positions at
the Company (the "Company Plans") or any other plans applicable for other
officers or executive officers of the Company. Such participation shall be
subject to the terms of the applicable plan documents and the Company's
generally applied policies. In addition, the Executive acknowledges that the
Company may elect to terminate or modify any or all Company Plans at any time.
e. Travel. It is contemplated that the Executive will be required to incur
------
travel and entertainment expense in the interests and on behalf of the Company
and in furtherance of its business. The Executive agrees to comply with the
travel and entertainment guidelines of the
-2-
<PAGE>
Company, which may be modified from time to time (the "T&E Guidelines"). The
Company at the end of each month during the period of this Agreement will, upon
submission of appropriate bills or vouchers, reimburse expenses incurred by the
Executive during such month in compliance with the T&E Guidelines. The Executive
agrees to maintain adequate records, in such detail as the Company may
reasonably request, of all expenses to be reimbursed by the Company hereunder
and to make such records available for inspection as and when reasonably
requested by the Company.
4. Employment Termination Outside of Change of Control.
---------------------------------------------------
a. Incapacity; Death. This Agreement may be terminated by the Company,
-----------------
by delivery of a "Notice of Termination" (defined in Section 8) to the
Executive or his personal representative given at least thirty (30) days prior
to the effective date specified therein, in the event that the Executive shall
be unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity. This Agreement shall
terminate on the death of the Executive.
b. Without Cause. This Agreement may be terminated by the Company,
-------------
without cause, by delivery of a "Notice of Termination" (defined in Section 8)
given to the Executive ten (10) days prior to the effective date of such
termination.
c. Severance Compensation. Upon termination of this Agreement pursuant to
----------------------
Section 4 (a) or 4 (b), the Company shall pay to the Executive or his legal
representative certain compensation (the "Severance Compensation") as follows:
(i) Base Salary. The Executive shall be paid fifty-two (52) weeks of
-----------
base salary, and the Company shall continue in effect for a period
of fifty-two (52) weeks after the effective date of the
Executive's termination, all health/life/disability insurance
coverage provided to the Executive and his immediate family on the
day immediately prior to the date of notice of termination or, if
the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the portion of the premium allocable
to the Executive for providing such coverage, provided, however,
if such coverage cannot be continued by the Company, the Company
shall pay to the Executive an amount sufficient for the Executive
to obtain substantially similar coverage for a period of fifty-two
(52) weeks after the effective date of termination.
(ii) Incentive Compensation. The Executive shall also be entitled to
----------------------
annual incentive compensation (i) actually earned by the
Executive, if any, pursuant to Section 3(b) of this Agreement for
the Company's current fiscal year prorated through the effective
date of termination, which compensation shall be paid no later
than forty-five (45) days after the end of the Company's fiscal
year and (ii) an amount equal to the sum of the annual incentive
compensation earned by the Executive over the two calendar years
prior to the effective date of termination, divided by two
("Average Annual Incentive
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<PAGE>
Compensation"). Compensation pursuant to paragraph 3(c) (long term
incentive compensation) shall be governed by the terms of the
subject plans.
(iii) Severance Compensation Reduction. In the event termination is
--------------------------------
to Section 4 (a) of this Agreement, the portion of Severance
Compensation to be paid pursuant to Section 4(i) and (ii) shall be
reduced by the amount of any life insurance proceeds paid by or
through the Company or disability insurance payments for one (1)
year, as appropriate, payable to the Executive or his personal
representative or other beneficiary as provided by this Agreement.
(iv) Timing. The Company, at its option, shall pay to the Executive or
------
his legal representative the sums payable to such Executive or his
legal representative on account of the portion of Severance
Compensation consisting of (y) base salary either in a lump sum or
in monthly increments payable on the first day of each month over
the succeeding twelve (12) month period; and (z) the Average
Annual Incentive Compensation within thirty (30) days after the
effective date of termination.
(v) Life Insurance. The Executive shall also be entitled to direct the
--------------
Company to change the beneficiary of any non-group life insurance
policy to another person or group.
d. By the Executive. This Agreement may be terminated by the Executive,
----------------
upon delivery of a "Notice of Termination" (defined in Section 8) given at least
ninety (90) days before the effective date of termination or for "Good Reason,"
which, for the purposes of this subsection, shall mean for the reasons set forth
in subsections 5(d)(i) to (vi). In such event, the Executive shall not be
entitled to any compensation under this Agreement for any period not worked
after the termination date, other than compensation to which the Executive is
entitled pursuant to Section 5.
e. For Cause. The Company may terminate this Agreement for cause by
---------
providing a "Notice of Termination" (as defined in Section 8). In such event,
the Executive shall not be entitled to any compensation under this Agreement for
the period after the termination date, and any compensation paid to the
Executive shall be net of any sums owed by the Executive to the Company as a
result of the act for which the employment of the Executive was terminated. The
circumstances under which the Company will be deemed to have cause to terminate
this Agreement will be a breach of this Agreement or a serious offense
inconsistent with his duties as an Executive which shall include but not be
limited to the following:
(i) The Executive is convicted of or pleads nolo contendere to any
crime, other than a traffic offense or misdemeanor;
-4-
<PAGE>
(ii) The Executive shall commit, with respect to the Company, an act of
fraud or embezzlement or shall have been grossly negligent in the
performance of his duties hereunder;
(iii) The Executive engages in gross dereliction of duties, refusal to
perform assigned duties consistent with his position, or repeated
violation of the Company's policies after written warning; or,
(iv) The Executive engages in drug abuse.
f. Consulting Services. Upon termination of this Agreement, the Executive
-------------------
shall, for a period of up to one year following the effective date of
termination, render such advisory or consulting services to the Company as it
may reasonably request, taking into account the Executive's health, business
commitments, geographical location and other relevant circumstances. The intent
of this paragraph is not to obligate the Executive to perform any day-to-day
duties for the Company following termination of his employment but only to
assist management in effecting a smooth transition of the functions or projects
for which the Executive was responsible while an employee of the Company. Should
the Executive fail to render such advisory or consulting services, after 30
days' prior written notice to the Executive and the Executive's failure to
commence the rendering of such service, the Company's sole remedy shall be to
terminate payment of any remaining severance compensation. If this Agreement is
terminated pursuant to Section 4(d)(except where the termination is for "Good
Reason") or 4(e) and no Severance Compensation is paid to the Executive, the
Executive shall be paid on an hourly basis to the extent requested by the
Company to perform advisory or consulting services, based upon his base salary
prior to termination for the actual time spent for advisory or consulting
services for the Company.
g. Return of Company Property. The parties acknowledge and agree that
--------------------------
records, files, reports, manuals, handbooks, computer diskettes, computer
software, customer files and information, documents, equipment and the like,
relating to the Company's business or which are developed for or by the Company,
or which Executive shall develop, create, use, prepare or come into possession
of during his employment with the Company, shall remain the sole property of the
Company and Executive covenants to promptly deliver to the Company any and all
such property and any copies thereof no later than the termination of
Executive's employment with the Company.
h. Covenants. The Executive shall not be entitled to any Severance
---------
Compensation or benefits for any period he is in violation of the Covenants in
Section 6.
5. Change of Control.
-----------------
a. Change of Control. For purposes of this Agreement, "Change of Control"
-----------------
shall mean (i) the merger or consolidation of the Company with any other real
estate investment trust, corporation or other business entity, in which the
Company is not the survivor (without respect to the legal structure of the
transaction), (ii) the transfer or sale of all or substantially all of the
assets of the Company other than to an affiliate or subsidiary of the Company,
(iii) the liquidation of the
-5-
<PAGE>
Company, or (iv) the acquisition by any person or by a group of persons acting
in concert, of more than 50% of the outstanding voting securities of the
Company, which results in the resignation or addition of fifty percent (50%) or
more members of the Board or the resignation or addition of fifty percent (50%)
or more independent members of the Board.
b. Compensation Upon Termination. Following a Change in Control that
-----------------------------
results in termination of the Executive's employment, the Executive shall be
entitled to the following benefits unless such termination is by the Executive
other than for "Good Reason" (as defined below):
(i) Compensation. The Company shall pay the Executive one hundred
------------
four (104) weeks of base salary at the rate in effect at the time
Notice of Termination is given, and the equivalent of two years
of annual incentive compensation based upon the average annual
incentive compensation earned by the Executive for the two
calendar years prior to the effective date of termination, plus
all other amounts to which the Executive is entitled under any
compensation plan of the Company.
(ii) Benefits. The Company shall provide the Executive with life,
--------
disability, accident and health insurance coverage (including any
dependent coverage) substantially similar to the coverage the
Executive is receiving immediately prior to the Notice of
Termination, for a twenty four (24) month period after the
Executive's termination. Benefits otherwise receivable by the
Executive pursuant to this subsection (ii) shall be reduced to
the extent comparable benefits are actually received by the
Executive during the twenty-four (24) month period following
termination, and any such benefits actually received by the
Executive shall be reported to the Company.
(iii) Long-Term Incentive Compensation. All of the Executive's
--------------------------------
outstanding options, stock appreciation rights and any other
awards in the nature of rights that may be exercised shall become
fully vested and immediately exercisable; all restrictions on any
outstanding other awards held by the Executive (such as awards of
restricted stock) shall lapse; and the Executive's balance in any
deferred compensation plan or shareholder value plan shall become
fully vested and immediately payable; provided, however, that
such acceleration will not occur if, in the opinion of the
Company's accountants, such acceleration would preclude the use
of "pooling of interest" accounting treatment for a Change of
Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for
such accounting treatment.
-6-
<PAGE>
(iv) Timing. The Severance Payments shall be made no later than the
------
thirtieth (30th) business day following the effective date of
termination. However, if the amounts of the Severance Payments
cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate of the minimum
amount of such payments and shall pay the remainder of such
payments as soon as the amount thereof can be determined but in
no event later than the ninetieth (90th) day after the effective
date of termination.
c. Limitation of Benefits.
----------------------
(i) Notwithstanding anything in this Agreement to the contrary, in the
event it shall be determined that any benefit, payment or distribution
by the Company to or for the benefit of Executive (whether payable or
distributable pursuant to the terms of this Agreement or
otherwise)(such benefits, payments or distributions are hereinafter
referred to as "Payments") would, if paid, be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Code, then the
aggregate present value of the Payments shall be reduced (but not
below zero) to an amount expressed in present value that maximizes the
aggregate present value of the Payments without causing the Payments
or any part thereof to be subject to the Excise Tax and therefore
nondeductible by the Company because of Section 280G of the Code (the
"Reduced Amount"). For purposes of this Section, present value shall
be determined in accordance with Section 280G(d)(4) of the Code.
(ii) All determinations required to be made under this Section, including
whether an Excise Tax would otherwise be imposed, whether the Payments
shall be reduced, the amount of the Reduced Amount, and the
assumptions to be utilized in arriving at such determinations, shall
be made by Ernst & Young, LLP or such other certified public
accounting firm acceptable to the Company, in its sole discretion (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from Executive that a Payment
is due to be made, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall
be binding upon the Company and Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that Payments hereunder will have been unnecessarily limited
by this Section ("Underpayment"), consistent with the calculations
required to be made hereunder. The Accounting Firm shall determine the
amount of the
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Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive.
d. Good Reason. The Executive shall be entitled to terminate this
-----------
Agreement for Good Reason. For purposes of this Section 5, "Good Reason" shall
mean the occurrence, within two (2) years after a Change in Control, of any of
the following circumstances:
(i) the assignment to the Executive of any duties inconsistent with the
Executive's position and status as head of operations for the Northern
Region, or a substantial adverse alteration in the nature or status of
the Executive's responsibilities from those in effect immediately prior
to the Change in Control;
(ii) a ten percent (10%) or greater reduction by the Company in the
Executive's annual base salary as in effect on the date hereof or as
the same may be increased from time to time except for across-the-board
salary reductions affecting all senior executives of the Company and
all senior executives of any person directly or indirectly in control
of the Company;
(iii) the Executive's relocation by the Company to a location not within
fifty miles of the Executive's present office or job location;
(iv) the failure by the Company to pay to the Executive any portion of the
Executive's current compensation, or to pay to the Executive any
portion of an installment of deferred compensation under any deferred
compensation program of the Company, within thirty (30) days of the
date such compensation is due;
(v) the failure by the Company to continue in effect any annual or long-
term monetary incentive opportunity to which the Executive was
entitled, or any compensation plan in which the Executive participates
immediately prior to the Change in Control which constitutes more than
ten percent (10%) of the Executive's total compensation; provided,
however, that the Company may modify the monetary incentive
opportunities so as to provide the Executive with the same or similar
monetary incentive opportunities;
(vi) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement or a similar
agreement satisfactory to the Executive;
(vii) in the event the Executive terminates this Agreement for Good Reason
following a Change in Control as provided by this Section 5, the
Executive shall be entitled to the compensation provided by Section
5(b), reduced by
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the amount of compensation received by the Executive following the
Change in Control through the effective date of termination.
e. Potential Change of Control. For purposes of this Agreement, a
---------------------------
"Potential Change in Control" shall be deemed to have occurred if (i) the
Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any person, who is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more over the percentage so owned by such person on the date
hereof; or (iv) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred. In the
event of a Potential Change in Control the Executive will remain in the employ
of the Company until the earliest of (x) a date which is six (6) months from the
occurrence of such Potential Change in Control, or (y) the occurrence of a
Change in Control.
6. Confidentiality; Non-Competition and Non-Solicitation Covenants.
---------------------------------------------------------------
a. Basis for Covenants. The Executive acknowledges that i) he will
-------------------
be employed as an executive officer in a managerial capacity; ii) his employment
with the Company gives him access to confidential and proprietary information
concerning the Company; iii) the agreements and covenants contained in this
Section 6 (the "Covenants") are essential to protect the business of the
Company; and iv) the Executive is to receive consideration pursuant to this
Agreement. Executive recognizes and acknowledges that the confidential
information described in Section 6(b) (the "Confidential Information") which he
will acquire in the course of his employment is utilized by the Company in all
geographic areas in which the Company does business. Further, the Confidential
Information will also be utilized in all geographic areas into which the Company
expands its business. Thus, Executive acknowledges that he will be a formidable
competitor in all areas where the Company conducts business. Executive also
acknowledges that the Covenants serve to protect the Company's investment in the
Confidential Information.
b. Confidentiality.
---------------
(i) The Executive acknowledges that he will be exposed to and learn a
substantial amount of information which is proprietary and confidential
to the Company, whether or not he develops or creates such information.
The Executive acknowledges that such proprietary and confidential
information may include, but is not limited to, trade secrets;
acquisition or merger information; advertising and promotional
programs; resource or developmental projects; plans or strategies for
future business development; financial or statistical data; customer
information, including, but not limited to, customer lists, sales
records, account records, sales and marketing programs, pricing
matters, and strategies and reports; and any Company
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manuals, forms, techniques, and other business procedures or methods,
devices, computer software or matters of any kind relating to or with
respect to any confidential program or projects of the Company, or any
other information of a similar nature made available to the Executive
and not known in the trade in which the Company is engaged, which, if
misused or disclosed, could adversely affect the business or standing
of the Company. Confidential Information shall not include information
that is generally known or generally available to the public through no
fault of the Executive.
(ii) The Executive agrees that except as required by law, he will not at any
time divulge to any person, agency, institution, company or other
entity any information which he knows or has reason to believe is
proprietary or confidential to the Company, including but not limited
to the types of information described in Section 6(b)(i), or use such
information to the competitive disadvantage of the Company. The
Executive agrees that his duties and obligations under this Section 6
will continue for 12 months from the termination of his employment or
as long as the Confidential Information remains proprietary or
confidential to the Company.
c. Non-Competition. During the period of the Executive's employment,
---------------
the Executive agrees that he will not, on behalf of anyone other than the
Company, engage in any managerial, executive, sales, or marketing activities
related to any business in which the Company is or becomes engaged during the
Executive's employment without the consent of the Board.
d. Non-Solicitation. The Executive agrees that for a twelve (12) month
----------------
period following the termination of his employment with the Company for any
reason (including the Executive's resignation), the Executive shall not,
directly or indirectly, hire or solicit any employee of the Company employed at
the time of his termination, or encourage any such employee to leave such
employment.
e. Scope of Covenants.
------------------
(i) Executive acknowledges that the Company intends to extend business
operations throughout the United States of America. Therefore, for a
period of twelve (12) months after termination of Executive's
employment for any reason (including Executive's resignation),
Executive agrees that he shall not directly or indirectly carry on or
participate in the ownership or management of apartment communities of
the same class and quality of the communities owned by the Company that
directly competes with the Company anywhere within the United States of
America.
(ii) Independent of the preceding provision, Executive agrees that he shall
not, for a period of twelve (12) months after termination of
Executive's employment, directly or indirectly carry on or participate
in the ownership or
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management of apartment communities of the same class and quality of
the apartment communities owned by the Company that directly competes
with the Company within any county or city in which the Company
conducts business.
(iii) These covenants shall not apply in the event the Executive is
terminated (i) by the Company without cause or as a result of a Change
of Control, or (ii) by the Executive (y) for Good Reason, which, for
the purposes of this subsection, shall mean any of the reasons set
forth in subsections 5(d)(i) to (iv), or (z) for a period of one (1)
year following any change in the officer to whom the Executive directly
reports.
f. Reasonableness of Covenants. The Executive agrees that the Covenants
---------------------------
are necessary for the reasonable and proper protection of the Company and that
the Covenants are reasonable in respect of subject matter, length of time, and
geographic scope. The Executive further acknowledges that the Covenants will
not unreasonably restrict him from earning a livelihood following the
termination of his employment with the Company.
g. Governing Law; Public Policy.
----------------------------
(i) The parties agree that it is not their intention to violate any public
policy or statutory or common law. The parties intend that the
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any provision of this
Agreement is found by a court to be unenforceable, the parties
authorize the court to amend or modify the provision to make it
enforceable in the most restrictive fashion permitted by law.
(ii) The Executive and the Company are sophisticated parties and fully
understand (i) the ramifications of the non-competition, non-
solicitation and confidentiality restrictions of this Agreement and
(ii) that the laws of each state with respect to the enforceability of
such provisions vary. The parties are specifically selecting the
internal laws of the Commonwealth of Virginia to govern this Agreement
in order that it be enforceable against all of them.
h. Separate Agreement Upon Termination. The provisions of this Section 6
-----------------------------------
so far as they relate to the period after the end of the term of this Agreement
shall continue to have effect and shall operate as a separate agreement between
the Company and the Executive.
7. Successors and Assigns.
----------------------
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<PAGE>
a. The Executive acknowledges and agrees that this Agreement is a contract
for his personal services, he is not entitled to assign, subcontract, or
transfer any of the obligations imposed or benefits provided under this
Agreement.
b. This Agreement shall be binding on and will inure to the benefit of any
successors or assigns of the Company.
8. Definitions. The following terms shall have the following meanings:
-----------
a. A "Notice of Termination" shall mean a written notice which shall
indicate the specific termination provision in this Agreement relied upon and,
if appropriate, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provisions so indicated.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended.
9. Miscellaneous.
-------------
a. Integration. This Agreement contains the complete agreement between
-----------
the Executive and the Company with respect to its subject matter. This
Agreement supersedes all previous and contemporaneous agreements, negotiations,
commitments, writings, and undertakings.
b. Governing Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the Commonwealth of Virginia, regardless of choice
of law rules. Any dispute arising between the parties related to or involving
this Agreement will be litigated in a court having jurisdiction in the
Commonwealth of Virginia.
c. Modifications. This Agreement may be modified or waived only by a
-------------
writing signed by both parties.
d. Waivers. Any waiver of a breach of this Agreement will not constitute
-------
a waiver of any future breach, whether of a similar or dissimilar nature.
e. Severability. The covenants in the various provisions of Section 6
------------
are separate and independent contractual provisions. The invalidity or
unenforceability of any particular restrictive covenant or any other provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.,
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a Virginia corporation
By: _______________________________
Its: ________________________________
EXECUTIVE
___________________________________
CURTIS W. CARTER
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<PAGE>
Exhibit 10(xiii)
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 21st day of
March, 2000, between UNITED DOMINION REALTY TRUST, INC., a Virginia corporation
(the "Company") and MARK E. WOOD (the "Executive"), recites and provides as
follows:
R E C I T A L S:
The Executive is a senior executive of the Company, and the Company now
desires to reward the Executive for past performance and provide for the
continued employment of the Executive upon the terms set forth in this
Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises
and undertakings hereinafter set forth, and the payments to be made to the
Executive hereunder, the parties hereto agree as follows:
1. Position and Duties.
-------------------
a. The Company hereby agrees to and hereby does continue to employ the
Executive as an executive officer of the Company, subject to the supervision of
the Chief Executive Officer of the Company, or such other senior officer of the
Company as may be prescribed by the Chief Executive Officer or the Board of
Directors of the Company (the "Board"). Currently, the Executive is Senior Vice
President and Director of Development for the Western Region, and reports to the
Chief Executive Officer. The Executive agrees that the description of the
executive position above shall not limit the Company from assigning to the
Executive such other duties and functions in addition to or in substitution of
those described above.
b. The Executive agrees to serve the Company as a full time executive
officer with duties and authority as set forth in the Company's by-laws or as
otherwise prescribed by the Board. The Executive shall devote such time,
attention, skill, and efforts to the performance of his duties as a Company
executive as shall be required therefore, all under the supervision and
direction of the Board. The Executive agrees that during the period of his
employment he will not, without the approval of a majority of the independent
directors of the Board, have any other (i) real estate investment trust or
business affiliations, or (ii) corporate affiliations that conflict with the
business of the Company or interfere with the ability of the Executive to
perform his duties for the Company or comply with the covenants under this
Agreement.
2. Term of Agreement.
-----------------
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<PAGE>
This Agreement will take effect as of the date of this Agreement and will
end on December 31, 2000. After December 31, 2000, this Agreement will
automatically renew for successive one (1) year periods, ending as of December
31 of each year, unless sooner terminated in accordance with Section 4.
3. Compensation and Benefits.
-------------------------
a. Base Salary. The Executive's pay will not be less than $160,000 per
-----------
year, payable in accordance with the Company's regular payroll practices, unless
the Executive consents to a lesser base salary in writing.
b. Annual Incentive Compensation. The Executive's annual compensation
-----------------------------
shall also include an annual incentive where the Executive has an opportunity to
earn a bonus based upon the Executive and the Company meeting certain
performance goals and objectives as determined by the Board, or the appropriate
supervising officer of the Company. The Executive acknowledges that the Board
or the Compensation Committee of the Board (the "Compensation Committee"), as
appropriate, may elect to modify or terminate annual incentive compensation for
all executives at any time.
c. Long Term Incentive Compensation. The Executive's compensation shall
--------------------------------
also include participation (i) in the Company's 1982 Stock Option Plan; (ii) in
the Company's 1991 Officers Stock Purchase and Loan Plan; and (iii) any
"shareholder value plan" or other long-term compensation plan for senior
officers of the Company adopted by the Compensation Committee or the Board, on
the same basis as similarly situated executive officers of the Company. The
Executive acknowledges that the Company Board or the Compensation Committee, as
appropriate, may elect to terminate or modify any or all long-term incentive
compensation at any time.
d. Associate Benefit Plans. The Executive will be eligible to participate
-----------------------
in any and all employee benefit plans, medical insurance plans, retirement
plans, and other benefit plans in effect for employees in similar positions at
the Company (the "Company Plans") or any other plans applicable for other
officers or executive officers of the Company. Such participation shall be
subject to the terms of the applicable plan documents and the Company's
generally applied policies. In addition, the Executive acknowledges that the
Company may elect to terminate or modify any or all Company Plans at any time.
e. Travel. It is contemplated that the Executive will be required to
------
incur travel and entertainment expense in the interests and on behalf of the
Company and in furtherance of its business. The Executive agrees to comply with
the travel and entertainment guidelines of the Company, which may be modified
from time to time (the "T&E Guidelines"). The Company at the end of each month
during the period of this Agreement will, upon submission of appropriate bills
or vouchers, reimburse expenses incurred by the Executive during such month in
compliance with the T&E Guidelines. The Executive agrees to maintain adequate
records, in such detail as the Company may reasonably request, of all expenses
to be reimbursed by the Company hereunder and to make such records available for
inspection as and when reasonably requested by the Company.
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<PAGE>
4. Employment Termination Outside of Change of Control.
---------------------------------------------------
a. Incapacity; Death. This Agreement may be terminated by the Company,
-----------------
by delivery of a "Notice of Termination" (defined in Section 8) to the Executive
or his personal representative given at least thirty (30) days prior to the
effective date specified therein, in the event that the Executive shall be
unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity. This Agreement shall
terminate on the death of the Executive.
b. Without Cause. This Agreement may be terminated by the Company,
-------------
without cause, by delivery of a "Notice of Termination" (defined in Section 8)
given to the Executive ten (10) days prior to the effective date of such
termination.
c. Severance Compensation. Upon termination of this Agreement pursuant to
----------------------
Section 4 (a) or 4 (b), the Company shall pay to the Executive or his legal
representative certain compensation (the "Severance Compensation") as follows:
(i) Base Salary. The Executive shall be paid fifty-two (52) weeks of
-----------
base salary, and the Company shall continue in effect for a period
of fifty-two (52) weeks after the effective date of the
Executive's termination, all health/life/disability insurance
coverage provided to the Executive and his immediate family on the
day immediately prior to the date of notice of termination or, if
the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the portion of the premium allocable
to the Executive for providing such coverage, provided, however,
if such coverage cannot be continued by the Company, the Company
shall pay to the Executive an amount sufficient for the Executive
to obtain substantially similar coverage for a period of fifty-two
(52) weeks after the effective date of termination.
(ii) Incentive Compensation. The Executive shall also be entitled
----------------------
to annual incentive compensation (i) actually earned by the
Executive, if any, pursuant to Section 3(b) of this Agreement for
the Company's current fiscal year prorated through the effective
date of termination, which compensation shall be paid no later
than forty-five (45) days after the end of the Company's fiscal
year and (ii) an amount equal to the sum of the annual incentive
compensation earned by the Executive over the two calendar years
prior to the effective date of termination, divided by two
("Average Annual Incentive Compensation"). Compensation pursuant
to paragraph 3(c) (long term incentive compensation) shall be
governed by the terms of the subject plans.
(iii) Severance Compensation Reduction. In the event termination
--------------------------------
is pursuant to Section 4 (a) of this Agreement, the portion of
Severance Compensation to be paid pursuant to Section 4(i) and
(ii) shall be reduced by the amount of
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<PAGE>
any life insurance proceeds paid by or through the Company or
disability insurance payments for one (1) year, as appropriate,
payable to the Executive or his personal representative or other
beneficiary.
(iv) Timing. The Company, at its option, shall pay to the
------
Executive or his legal representative the sums payable to such
Executive or his legal representative on account of the portion of
Severance Compensation consisting of (y) base salary either in a
lump sum or in monthly increments payable on the first day of each
month over the succeeding twelve (12) month period and (z) the
Average Annual Incentive Compensation within thirty (30) days
after the effective date of termination.
(v) Life Insurance. The Executive shall also be entitled to
--------------
direct the Company to change the beneficiary of any non-group life
insurance policy to another person or group.
d. By the Executive. This Agreement may be terminated by the Executive,
----------------
upon delivery of a "Notice of Termination" (defined in Section 8) given at least
ninety (90) days before the end of the term or for "Good Reason," which, for the
purposes of this subsection, shall mean the reasons set forth in subsections
5(d)(i) to (vi).
e. For Cause. The Company may terminate this Agreement for cause by
---------
providing delivery of a "Notice of Termination" (defined in Section 8). In
such event, the Executive shall not be entitled to any compensation under this
Agreement for the period after the termination date, and any compensation paid
to the Executive shall be net of any sums owed by the Executive to the Company
as a result of the act for which the employment of the Executive was terminated.
The circumstances under which the Company will be deemed to have cause to
terminate this Agreement will be a breach of this Agreement or a serious offense
inconsistent with his duties as an Executive which shall include but not be
limited to the following:
(i) The Executive is convicted of or pleads nolo contendere to any crime,
other than a traffic offense or misdemeanor;
(ii) The Executive shall commit, with respect to the Company, an act of
fraud or embezzlement or shall have been grossly negligent in the
performance of his duties hereunder;
(iii) The Executive engages in gross dereliction of duties, refusal to
perform assigned duties consistent with his position, or repeated
violation of the Company's policies after written warning; or,
(iv) The Executive engages in drug abuse.
f. Consulting Services. Upon termination of this Agreement, the Executive
-------------------
shall, for a period of up to one year following the effective date of
termination, render such advisory or
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<PAGE>
consulting services to the Company as it may reasonably request, taking into
account the Executive's health, business commitments, geographical location and
other relevant circumstances. The intent of this paragraph is not to obligate
the Executive to perform any day-to-day duties for the Company following
termination of his employment but only to assist management in effecting a
smooth transition of the functions or projects for which the Executive was
responsible while an employee of the Company. Should the Executive fail to
render such advisory or consulting services, after 30 days' prior written notice
to the Executive and the Executive's failure to commence the rendering of such
service, the Company's sole remedy shall be to terminate payment of any
remaining severance compensation. If this Agreement is terminated pursuant to
Section 4(e) and no Severance Compensation is paid to the Executive, the
Executive shall be paid on an hourly basis to the extent requested by the
Company to perform advisory or consulting services, based upon his base salary
prior to termination for the actual time spent for advisory or consulting
services for the Company.
g. Return of Company Property. The parties acknowledge and agree that
--------------------------
records, files, reports, manuals, handbooks, computer diskettes, computer
software, customer files and information, documents, equipment and the like,
relating to the Company's business or which are developed for or by the Company,
or which Executive shall develop, create, use, prepare or come into possession
of during his employment with the Company, shall remain the sole property of the
Company and Executive covenants to promptly deliver to the Company any and all
such property and any copies thereof no later than the termination of
Executive's employment with the Company.
h. Covenants. The Executive shall not be entitled to any Severance
---------
Compensation or benefits for any period he is in violation of the Covenants in
Section 6.
5. Change of Control.
-----------------
a. Change of Control. For purposes of this Agreement, "Change of Control"
-----------------
shall mean (i) the merger or consolidation of the Company with any other real
estate investment trust, corporation or other business entity, in which the
Company is not the survivor (without respect to the legal structure of the
transaction), (ii) the transfer or sale of all or substantially all of the
assets of the Company other than to an affiliate or subsidiary of the Company,
(iii) the liquidation of the Company, or (iv) the acquisition by any person or
by a group of persons acting in concert, of more than fifty percent (50%) of the
outstanding voting securities of the Company, which results in the resignation
or addition of fifty percent (50%) or more members of the Board or the
resignation or addition of fifty percent (50%) or more independent members of
the Board.
b. Compensation Upon Termination. Following a Change in Control that
-----------------------------
results in termination of the Executive's employment, the Executive shall be
entitled to the following benefits unless such termination is by the Executive
other than for "Good Reason" (as defined below):
(i) Compensation. The Company shall pay the Executive one hundred
------------
four (104) weeks of base salary at the rate in effect at the time
Notice of Termination is given, and the equivalent of two years
of annual incentive compensation based upon the average annual
incentive compensation earned by the Executive for the two
calendar years prior to the effective date of termination,
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<PAGE>
plus all other amounts to which the Executive is entitled under
any compensation plan of the Company.
(ii) Benefits. The Company shall provide the Executive with life,
--------
disability, accident and health insurance coverage (including any
dependent coverage) substantially similar to the coverage the
Executive is receiving immediately prior to the Notice of
Termination, for a twenty-four (24) month period after the
Executive's termination. Benefits otherwise receivable by the
Executive pursuant to this subsection (ii) shall be reduced to
the extent comparable benefits are actually received by the
Executive during the twenty-four (24) month period following
termination, and any such benefits actually received by the
Executive shall be reported to the Company.
(iii) Long-Term Incentive Compensation. All of the Executive's
--------------------------------
outstanding options, stock appreciation rights and any other
awards in the nature of rights that may be exercised shall become
fully vested and immediately exercisable; all restrictions on any
outstanding other awards held by the Executive (such as awards of
restricted stock) shall lapse; and the Executive's balance in any
deferred compensation plan or shareholder value plan shall become
fully vested and immediately payable; provided, however, that
such acceleration will not occur if, in the opinion of the
Company's accountants, such acceleration would preclude the use
of "pooling of interest" accounting treatment for a Change of
Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for
such accounting treatment.
(iv) Timing. The Severance Payments shall be made no later than the
------
thirtieth (30th) business day following the effective date of
termination. However, if the amounts of the Severance Payments
cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate of the minimum
amount of such payments and shall pay the remainder of such
payments as soon as the amount thereof can be determined but in
no event later than the ninetieth (90th) day after the effective
date of termination.
c. Limitation of Benefits.
- -- ----------------------
(i) Notwithstanding anything in this Agreement to the contrary, in
the event it shall be determined that any benefit, payment or
distribution by the Company to or for the benefit of Executive
(whether payable or distributable pursuant to the terms of this
Agreement or otherwise)(such benefits, payments or distributions
are hereinafter referred to as "Payments") would, if paid, be
subject to the excise tax (the "Excise Tax") imposed by Section
4999 of the Code, then the aggregate present value of the
Payments shall be reduced (but not below zero) to an amount
expressed in present value that maximizes the
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<PAGE>
aggregate present value of the Payments without causing the
Payments or any part thereof to be subject to the Excise Tax and
therefore nondeductible by the Company because of Section 280G of
the Code (the "Reduced Amount"). For purposes of this Section,
present value shall be determined in accordance with Section
280G(d)(4) of the Code.
(ii) All determinations required to be made under this Section,
including whether an Excise Tax would otherwise be imposed,
whether the Payments shall be reduced, the amount of the Reduced
Amount, and the assumptions to be utilized in arriving at such
determinations, shall be made by Ernst & Young, LLP or such other
certified public accounting firm acceptable to the Company, in
its sole discretion, (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and
Executive within fifteen (15) business days of the receipt of
notice from Executive that a Payment is due to be made, or such
earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Payments hereunder will have been
unnecessarily limited by this Section ("Underpayment"),
consistent with the calculations required to be made hereunder.
The Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive.
d. Good Reason. The Executive shall be entitled to terminate this
-----------
Agreement for Good Reason. For purposes of this Section 5, "Good Reason" shall
mean the occurrence, within two (2) years after a Change in Control, of any of
the following circumstances:
(i) the assignment to the Executive of any duties inconsistent with
the Executive's position and status as Director of Development for
the Western Region or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in
effect immediately prior to the Change in Control;
(ii) a ten percent (10%) or greater reduction by the Company in the
Executive's annual base salary as in effect on the date hereof or
as the same may be increased from time to time except for across-
the-board salary reductions affecting senior executives of the
Company and senior executives of any person directly or indirectly
in control of the Company;
(iii) the Executive's relocation by the Company to a location not within
fifty miles of the Executive's present office or job location;
-7-
<PAGE>
(iv) the failure by the Company to pay to the Executive any portion of
the Executive's current compensation, or to pay to the Executive
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within thirty (30)
days of the date such compensation is due;
(v) the failure by the Company to continue in effect any annual or
long-term monetary incentive opportunity to which the Executive
was entitled, or any compensation plan in which the Executive
participates immediately prior to the Change in Control which
constitutes more than ten percent (10%) of the Executive's total
compensation; provided, however, that the Company may modify the
monetary incentive opportunities so as to provide the Executive
with the same or similar monetary incentive opportunities;
(vi) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement or a
similar agreement satisfactory to the Executive;
(vii) in the event the Executive terminates this Agreement for Good
Reason following a Change in Control as provided in this Section
5, the Executive shall be entitled to the compensation provided by
Section 5(b), reduced by the amount of compensation received by
the Executive following the Change in Control through the
effective date of termination.
e. Potential Change of Control. For purposes of this Agreement, a
---------------------------
"Potential Change in Control" shall be deemed to have occurred if (i) the
Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any person, who is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more over the percentage so owned by such person on the date
hereof; or (iv) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred. In the
event of a Potential Change in Control the Executive will remain in the employ
of the Company until the earliest of (x) a date which is six (6) months from the
occurrence of such Potential Change in Control, or (y) the occurrence of a
Change in Control.
6. Confidentiality; Non-Competition and Non-Solicitation Covenants.
---------------------------------------------------------------
a. Basis for Covenants. The Executive acknowledges that i) he will
-------------------
be employed as an executive officer in a managerial capacity; ii) his employment
with the Company gives him access to confidential and proprietary information
concerning the Company; iii) the agreements and covenants contained in this
Section 6 (the "Covenants") are essential to protect the business of the
Company; and iv) the Executive is to receive consideration pursuant to this
Agreement. Executive
-8-
<PAGE>
recognizes and acknowledges that the confidential information described in
Section 6(b) (the "Confidential Information") which he will acquire in the
course of his employment is utilized by the Company in all geographic areas in
which the Company does business. Further, the Confidential Information will also
be utilized in all geographic areas into which the Company expands its business.
Thus, Executive acknowledges that he will be a formidable competitor in all
areas where the Company conducts business. Executive also acknowledges that the
Covenants serve to protect the Company's investment in the Confidential
Information.
b. Confidentiality.
---------------
(i) The Executive acknowledges that he will be exposed to and learn a
substantial amount of information which is proprietary and confidential
to the Company, whether or not he develops or creates such information.
The Executive acknowledges that such proprietary and confidential
information may include, but is not limited to, trade secrets;
acquisition or merger information; advertising and promotional
programs; resource or developmental projects; plans or strategies for
future business development; financial or statistical data; customer
information, including, but not limited to, customer lists, sales
records, account records, sales and marketing programs, pricing
matters, and strategies and reports; and any Company manuals, forms,
techniques, and other business procedures or methods, devices, computer
software or matters of any kind relating to or with respect to any
confidential program or projects of the Company, or any other
information of a similar nature made available to the Executive and not
known in the trade in which the Company is engaged, which, if misused
or disclosed, could adversely affect the business or standing of the
Company. Confidential Information shall not include information that is
generally known or generally available to the public through no fault
of the Executive.
(ii) The Executive agrees that except as required by law, he will not at any
time divulge to any person, agency, institution, company or other
entity any information which he knows or has reason to believe is
proprietary or confidential to the Company, including but not limited
to the types of information described in Section 6(b)(i), or use such
information to the competitive disadvantage of the Company. The
Executive agrees that his duties and obligations under this Section 6
will continue for 12 months from the termination of his employment or
as long as the Confidential Information remains proprietary or
confidential to the Company.
c. Non-Competition. During the period of the Executive's employment,
---------------
the Executive agrees that he will not, on behalf of anyone other than the
Company, engage in any managerial, executive, sales, or marketing activities
related to any business in which the Company is or becomes engaged during the
Executive's employment without the consent of the Board.
-9-
<PAGE>
d. Non-Solicitation. The Executive agrees that for a twelve (12)
----------------
month period following the termination of his employment with the Company for
any reason (including the Executive's resignation), the Executive shall not,
directly or indirectly, hire or solicit any employee of the Company employed at
the time of his termination, or encourage any such employee to leave such
employment.
e. Scope of Covenants.
------------------
(i) Executive acknowledges that the Company intends to extend business
operations throughout the United States of America. Therefore, for
a period of twelve (12) months after termination of Executive's
employment for any reason (including Executive's resignation),
Executive agrees that he shall not directly or indirectly carry on
or participate in the ownership or management of apartment
communities of the same class and quality of the communities owned
by the Company that directly competes with the Company anywhere
within the United States of America.
(ii) Independent of the preceding provision, Executive agrees that he
shall not, for a period of twelve (12) months after termination of
Executive's employment, directly or indirectly carry on or
participate in the ownership or management of apartment
communities of the same class and quality of the apartment
communities owned by the Company that directly competes with the
Company within any county or city in which the Company conducts
business.
(iii) These covenants shall not apply in the event the Executive is
terminated without cause, as a result of a Change of Control, or
by the Executive for Good Reason, which, for the purposes of this
subsection, shall mean any of the reasons set forth in subsections
5(d)(i) to (iv).
f. Reasonableness of Covenants. The Executive agrees that the Covenants
---------------------------
are necessary for the reasonable and proper protection of the Company and that
the Covenants are reasonable in respect of subject matter, length of time, and
geographic scope. The Executive further acknowledges that the Covenants will
not unreasonably restrict him from earning a livelihood following the
termination of his employment with the Company.
g. Governing Law; Public Policy.
----------------------------
(i) The parties agree that it is not their intention to violate any
public policy or statutory or common law. The parties intend that
the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any provision of
this Agreement is found by a court to be unenforceable, the
parties authorize the court to amend or modify the provision to
make it enforceable in the most restrictive fashion permitted by
law.
-10-
<PAGE>
(ii) The Executive and the Company are sophisticated parties and fully
understand (i) the ramifications of the non-competition, non-
solicitation and confidentiality restrictions of this Agreement
and (ii) that the laws of each state with respect to the
enforceability of such provisions vary. The parties are
specifically selecting the internal laws of the Commonwealth of
Virginia to govern this Agreement in order that it be enforceable
against all of them.
h. Separate Agreement Upon Termination. The provisions of this Section 6
-----------------------------------
so far as they relate to the period after the end of the term of this Agreement
shall continue to have effect and shall operate as a separate agreement between
the Company and the Executive.
7. Successors and Assigns.
----------------------
a. The Executive acknowledges and agrees that this Agreement is a contract
for his personal services, he is not entitled to assign, subcontract, or
transfer any of the obligations imposed or benefits provided under this
Agreement.
b. This Agreement shall be binding on and will inure to the benefit of any
successors or assigns of the Company.
8. Definitions. The following terms shall have the following meanings:
-----------
a. A "Notice of Termination" shall mean a written notice which shall
indicate the specific termination provision in this Agreement relied upon and,
if appropriate, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provisions so indicated.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended.
9. Miscellaneous.
-------------
a. Integration. This Agreement contains the complete agreement between
-----------
the Executive and the Company with respect to its subject matter. This
Agreement supersedes all previous and contemporaneous agreements, negotiations,
commitments, writings, and undertakings.
b. Governing Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the Commonwealth of Virginia, regardless of choice
of law rules. Any dispute arising between the parties related to or involving
this Agreement will be litigated in a court having jurisdiction in the
Commonwealth of Virginia.
c. Modifications. This Agreement may be modified or waived only by a
-------------
writing signed by both parties.
-11-
<PAGE>
d. Waivers. Any waiver of a breach of this Agreement will not constitute
-------
a waiver of any future breach, whether of a similar or dissimilar nature.
e. Severability. The covenants in the various provisions of Section 6
------------
are separate and independent contractual provisions. The invalidity or
unenforceability of any particular restrictive covenant or any other provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.,
a Virginia corporation
By: _______________________________
Its: ________________________________
EXECUTIVE
___________________________________
MARK E. WOOD
-12-
<PAGE>
EXHIBIT 12
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
<TABLE>
<CAPTION>
(dollars in thousands)
Years ended December 31, 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net income before extraordinary item $ 33,127 $ 38,014 $ 70,199 $ 72,470 $ 92,695
Add:
Portion of rents representative
of the interest factor 201 257 412 569 928
Interest on indebtedness 40,646 50,843 79,004 106,238 153,748
---------- ---------- ---------- ---------- -----------
Earnings $ 73,974 $ 89,114 $ 149,615 $ 179,277 $ 247,371
========== ========== ========== ========== ===========
Fixed charges and preferred stock dividend:
Interest on indebtedness $ 40,646 $ 50,843 $ 79,004 $ 106,238 $ 153,748
Capitalized interest 40 541 2,634 3,360 5,153
Portion of rents representative
of the interest factor 201 257 412 569 928
---------- ---------- ---------- ---------- -----------
Fixed charges 40,887 51,641 82,050 110,167 159,829
---------- ---------- ---------- ---------- -----------
Add:
Preferred stock dividend 6,637 9,713 17,345 23,593 37,714
---------- ---------- ---------- ---------- -----------
Combined fixed charges and preferred
stock dividend $ 47,524 $ 61,354 $ 99,395 $ 133,760 $ 197,543
========== ========== ========== ========== ===========
Ratio of earnings to fixed charges 1.81 x 1.73 x 1.82 x 1.63 x 1.55 x
Ratio of earnings to combined fixed
charges and preferred stock dividend 1.56 1.45 1.51 1.34 1.25
</TABLE>
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements of United Dominion Realty Trust, Inc. and in the related Prospectuses
of our report dated January 31, 2000, with respect to the consolidated financial
statements and schedule of United Dominion Realty Trust, Inc. included in this
Annual Report (Form 10-K) for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Registration Statement Number Description
----------------------------- -----------
<S> <C>
33-40433 Form S-3, pertaining to the private placement of 900,000
shares of the Company's common stock in May, 1991.
33-47296 Form S-8, pertaining to the Company's Stock Purchase and
Loan Plan.
33-48000 Form S-8, pertaining to the Company's Stock Option Plan.
33-58201 Form S-8, pertaining to the Employee's Stock Purchase Plan.
333-11207 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 1,679,840 shares of the Company's
Common Stock.
333-15133 Form S-3, pertaining to the Company's Dividend
Reinvestment and Stock Purchase Plan.
333-27221 Form S-3, Shelf Registration Statement, pertaining to the
registration of $600 million of Common Stock, Preferred
Stock and Debt Securities.
333-32829 Form S-8, pertaining to the Company's Stock Purchase and
Loan Plan.
333-42691 Form S-8, pertaining to the Company's Stock Option Plan.
333-44463 Form S-3, pertaining to the Company's Dividend
Reinvestment and Stock Purchase Plan.
333-48557 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 104,920 shares of Common Stock and
104,920 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
333-53401 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 1,528,089 shares of Common Stock and
1,528,089 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
333-64281 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 849,498 shares of Common Stock and
849,498 rights to Purchase Series C Junior Participating
Redeemable Preferred Stock.
333-72885 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 130,416 shares of Common Stock and
130,416 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
333-75897 Form S-8, pertaining to the Company's Long Term Incentive
Plan.
333-77107 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 1,023,732 shares of Common Stock and
1,023,732 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
333-77161 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 481,251 shares of Common Stock and
481,251 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
333-80279 Form S-8, pertaining to the Company's Open Market Purchase
Program.
333-82929 Form S-3, Shelf Registration Statement, pertaining to the
private placement of 95,119 shares of Common Stock and
95,119 rights to purchase Series C Junior Participating
Redeemable Preferred Stock.
333-92667 Form S-3, Shelf Registration Statement, pertaining to the
registration of $616,058,554 of Common Stock, Preferred
Stock and Debt Securities.
</TABLE>
Ernst & Young LLP
Richmond, Virginia
March 22, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,678
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 123,458
<PP&E> 3,953,045
<DEPRECIATION> 395,864
<TOTAL-ASSETS> 3,688,317
<CURRENT-LIABILITIES> 156,633
<BONDS> 2,127,305
0
427,872
<COMMON> 102,741
<OTHER-SE> 779,599
<TOTAL-LIABILITY-AND-EQUITY> 3,688,317
<SALES> 618,749
<TOTAL-REVENUES> 620,691
<CGS> 0
<TOTAL-COSTS> 247,262
<OTHER-EXPENSES> 140,002
<LOSS-PROVISION> 19,300
<INTEREST-EXPENSE> 153,748
<INCOME-PRETAX> 92,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 92,695
<DISCONTINUED> 0
<EXTRAORDINARY> 927
<CHANGES> 0
<NET-INCOME> 93,622
<EPS-BASIC> 0.54
<EPS-DILUTED> 0.54
</TABLE>
