UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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: 1-12762
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1543819
(State of Incorporation) (I.R.S. Employer Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
(Former name, former address and former fiscal year,
if changed since last report)
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 (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Number of
Shares Outstanding
Class at May 13, 1996
---------- ------------------
Common Stock, $.01 par value 10,940,962
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995
Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Pro Forma Condensed Combined Statement of Operations of
Mid-America Apartment Communities, Inc. for the three months
ended March 31, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. Financial Information
ITEM 1.
<TABLE>
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
March 31, 1996 (Unaudited) and December 31, 1995
(Dollars in thousands)
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
ASSETS:
Real estate assets:
Land $ 58,886 $ 57,456
Buildings and improvements 523,468 507,586
Furniture, fixtures and equipment 10,446 9,916
Construction in progress 4,758 3,830
--------- ---------
597,558 578,788
Less accumulated depreciation (34,575) (29,504)
--------- ---------
Real estate assets, net 562,983 549,284
Cash and cash equivalents 2,018 3,046
Restricted cash 6,332 4,118
Deferred financing costs, net 2,918 2,225
Other assets 6,925 6,594
--------- ---------
Total assets $ 581,176 $ 565,267
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Notes payable $ 328,760 $ 307,939
Accounts payable 1,146 1,403
Accrued expenses and other liabilities 8,618 10,146
Security deposits 2,443 2,452
---------- ---------
Total liabilities 340,967 321,940
Minority interest 40,448 41,049
Shareholders' equity:
Preferred stock (authorized 5,000,000 shares) - -
Common stock, $.01 par value (authorized 20,000,000
shares;issued and outstanding 10,940,020 and
10,936,832 shares at March 31, 1996 and
December 31, 1995) 109 109
Additional paid-in-capital 208,733 208,670
Unearned compensation (351) (381)
Accumulated deficit (8,730) (6,120)
--------- ---------
Total shareholders' equity 199,761 202,278
--------- ---------
Total liabilities and shareholders' equity $ 581,176 $ 565,267
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental $ 26,837 $ 19,968
Other 275 316
-------- --------
Total revenues 27,112 20,284
Expenses:
Personnel 2,731 2,111
Building repairs and maintenance 1,123 1,042
Real estate taxes and insurance 2,986 2,294
Utilities 1,667 1,247
Landscaping 644 489
Other operating 1,088 863
Depreciation and amortization real estate assets 5,084 3,527
Depreciation and amortization non-real estate assets 35 26
General and administrative 1,706 1,126
Interest 6,236 5,106
Amortization of deferred financing costs 174 130
-------- --------
Total expenses 23,474 17,961
-------- --------
Income before minority interest in operating partnership 3,638 2,323
Minority interest in operating partnership income 670 525
-------- --------
Net income $ 2,968 $ 1,798
======== ========
Net income per common share $ 0.27 $ 0.21
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,968 $ 1,798
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,323 3,716
Minority interest in operating partnership income 670 525
Changes in assets and liabilities:
Restricted cash (2,214) (520)
Other assets (387) (153)
Accounts payable (257) 113
Accrued expenses and other liabilities (1,528) 238
Security deposits (9) 22
-------- --------
Net cash provided by operating activities 4,566 5,739
Cash flows from investing activities:
Purchases of real estate assets (14,309) (15,545)
Improvements to properties (3,860) (2,056)
Construction of new units (601) (2,911)
-------- --------
Net cash used in investing activities (18,770) (20,512)
Cash flows from financing activities:
Proceeds from notes payable 39,490 19,147
Principal payments on notes payable (18,668) (399)
Deferred financing costs (863) 157
Proceeds from issuances of common stock 80 -
Redemption of unitholder interests (37) -
Distributions to minority interest holders (1,248) (1,230)
Dividends paid (5,578) (4,289)
-------- --------
Net cash provided by financing activities 13,176 13,386
-------- --------
Net increase decrease in cash and cash equivalents (1,028) (1,387)
Cash and cash equivalents, beginning of period 3,046 4,980
-------- --------
Cash and cash equivalents, end of period $ 2,018 $ 3,593
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 5,956 $ 4,529
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with the accounting policies
in effect as of December 31, 1995, as set forth in the annual
consolidated financial statements of Mid-America Apartment
Communities, Inc. ("MAAC" or the "Company"), as of such date with
the exception of Note 2 below. In the opinion of management, all
adjustments necessary for a fair presentation of the consolidated
financial statements have been included and all such adjustments
were of a normal recurring nature. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The results of operations for the three-month period ended March 31,
1996 are not necessarily indicative of the results to be expected
for the full year.
The accompanying 1996 financial statements include the 12 apartment
communities acquired through the June 29, 1995 merger of America
First REIT, Inc. ("AFR"). The former stockholders of AFR were issued
2,331,030 shares of MAA common stock for their interests in AFR.
The operating results of the acquired properties were included in
consolidated net income commencing July 1, 1995.
2. Capital expenditures are those made for assets having a useful
life in excess of one year. In conjunction with acquisitions of
properties, the Company's policy is to provide in its acquisition
budgets adequate funds to complete any deferred maintenance items
to bring the properties to the required standard and/or stabilize.
In 1995, the Company completed a review of its capital expenditure
and depreciation policy. Effective January 1, 1996, the Company
implemented a new policy whose primary changes are as follows:
a) increase minimum dollar amounts to capitalize
from $500 to $1,000,
b) for stabilized properties, capitalize replacement purchases
for major appliances and carpeting of an entire unit which
was previously expensed, and
c) reduce depreciation life for certain assets from 20 years to
10 to 15 years.
The Company believes that the newly adopted accounting policy is
preferable because it is consistent with policies currently being
used by the majority of the largest apartment REITs in the industry
and provides a better matching of expenses with the estimated benefit
period. The policy has been implemented prospectively effective
January 1, 1996.
3. Primary earnings per share is computed based upon 10,981,189
weighted average shares outstanding during the period from January 1,
1996 through March 31, 1996, and 8,627,636 for the period January 1,
1995 through March 31, 1995. Fully diluted earnings per share is not
presented as the dilution is not materially different as compared to
primary earnings per share.
At March 31, 1996, 10,940,020 common shares and 2,445,090 operating
partnership units were outstanding, a total of 13,385,110. Additionally,
MAAC has outstanding options of 340,150 shares of common stock which
increased weighted average shares outstanding during the period January 1,
1996 through March 31, 1996 by 43,652 shares and the period January 1,
1995 through March 31, 1995 by 48,788 shares.
4. Pro Forma Condensed Combined Statement of Operations (Unaudited)
On June 29, 1995, through the merger (the "Merger") of AFR, the Company
acquired 12 apartment communities containing 3,212 units located in six
states. This unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Merger had been consummated on January 1,
1995 and as if the Company had qualified as a REIT, distributed all of its
taxable income and, therefore, incurred no federal income tax expense
during the three months ended March 31, 1995. The Merger has been accounted
for under the purchase method in accordance with Accounting Principles Board
Opinion No. 16. In the opinion of the Company's management, all adjustments
necessary to reflect the effects of these transaction have been made.
This unaudited Pro Forma Condensed Combined Statement of Operations is
presented for comparative purposes only and is not necessarily indicative
of what the actual result of operations of the Company would have been for
the period presented had the transaction described above been consummated
on January 1, 1995, nor does it purport to represent the results for future
periods. This unaudited Pro Forma Condensed Combined Statement of Operations
should be read in conjunction with, and is qualified in its entirety by,
the respective historical consolidated financial statements and notes
thereto of MAAC and of AFR.
<PAGE>
<TABLE>
Mid-America Apartment Communities, Inc.
Pro Forma Condensed Combined Statement of Operations
for the three months ended March 31, 1995
(In thousands except per share data)
(Unaudited)
<CAPTION>
Historical Pro Forma
---------- ---------
<S> <C> <C>
Revenues:
Rental $ 19,968 $ 24,843
Interest and other 316 353
-------- --------
Total revenues 20,284 25,196
Expenses:
Personnel 2,111 2,538
Building repairs/maintenance, utilities,
landscaping, and other operating 3,641 4,820
Real estate taxes and insurance 2,294 2,776
Depreciation and amortization - real estate assets 3,527 4,552
Depreciation and amortization - non-real estate assets 26 34
General and administrative 1,126 1,290
Interest 5,106 5,988
Amortization of deferred financing costs 130 130
-------- --------
Total expenses 17,961 22,127
-------- --------
Net income before minority interest 2,323 3,069
Minority interest 525 561
Net income before extraordinary items $ 1,798 $ 2,508
======== ========
Net income per common share $ 0.21 $ 0.23
======== ========
</TABLE>
<PAGE>
PART I. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The following is a discussion of the consolidated financial condition
and results of operations of Mid-America Apartment Communities, Inc.
(the "Company") for the quarter ended March 31, 1996 and 1995. This
discussion should be read in conjunction with all of the financial
statements appearing elsewhere in this report. These financial statements
include all adjustments which are, in the opinion of management, necessary
to reflect a fair statement of the results for the interim periods
presented, and all such adjustments are of a normal recurring nature.
Funds from Operations
Funds from Operations ("FFO") represents net income (computed in accordance
with GAAP) excluding extraordinary items and certain non-cash items,
primarily depreciation and amortization. FFO is computed in accordance
with the definition adopted by the National Association of Real Estate
Investment Trusts ("NAREIT"). FFO should not be considered as an alternative
to net income or any other GAAP measurement of performance, as an
indicator of operating performance or as an alternative to cash flows from
operating, investing, and financing activities as a measure of liquidity.
The Company believes that FFO is helpful in understanding a property
portfolio in that such calculation reflects cash flow from operating
activities and the properties' ability to support interest payments
and general operating expenses before the impact of certain activities
such as changes in other assets and accounts payable.
In March 1995, NAREIT modified the definition of FFO to eliminate
amortization of deferred financing costs and depreciation of non-real
estate assets as items added back to net income when computing FFO.
The Company implemented the new method of calculating FFO under
the NAREIT-suggested adoption date of January 1, 1996. For the three
months ended March 31, 1996, FFO increased by $2,872,000 or 49%,
when compared to the same period a year earlier. The increase was
primarily attributable to a $6,869,000 increase in rental revenues,
which was partially offset by increases in expenses associated with
the increase in the number of units owned by the Company.
On a per share basis, FFO increased 22.6% from $0.53 per share
(adjusted for new NAREIT FFO definition) for the three months
ending March 31, 1995 to $0.65 per share for the same period in 1996.
Capital Expenditures
Capital expenditures are those made for assets having a useful life
in excess of one year. In conjunction with acquisitions of properties,
the Company's policy is to provide in its acquisition budgets adequate
funds to complete any deferred maintenance items to bring the properties
to the required standard and/or stabilize.
In 1995, the Company completed a review of its capital expenditure and
depreciation policy. Effective January 1, 1996, the Company implemented
a new policy whose primary changes are as follows:
a) Increase minimum dollar amounts to capitalize
from $500 to $1,000,
b) for stabilized properties, capitalize replacement purchases for
major appliances and carpeting of an entire unit which was
previously expensed, and
c) reduce depreciation life for certain assets from 20 years to
10 to 15 years.
The Company feels the new policy is comparable to the policies currently
being used by the majority of the largest apartment REITs in the industry.
The policy has been implemented prospectively effective January 1, 1996.
<PAGE>
The following table presents a reconciliation of 1995 net income to NAREITs
New FFO definition and the new capitalization policy.
<TABLE>
IMPACT OF NET ACCOUNTING CHANGES ON 1995 NET INCOME AND FFO
<CAPTION>
Three Months Ending March 31, 1995
----------------------------------
With new
With new NAREIT FFO
NAREIT FFO definition and
FIRST QUARTER 1995: As Reported definition capital policy
- ------------------------------------------------------- ----------- ---------- --------------
<S> <C> <C> <C>
Net income before minority interest $ 2,323 $ 2,323 $ 2,323
Add:
Change for capitalization policy as if in effect at 1/1/95 N/A N/A 171
Less:
Additional depreciation due for change in capitalization policy N/A N/A 34
------- ------- -------
Adjusted net income before minority interest 2,323 2,323 2,460
Add:
Depreciation and amortization of real estate assets 3,527 3,527 3,561
Depreciation and amortization of non-real estate assets 26 - -
Amortization of deferred financing costs 130 - -
------- ------- -------
FFO for the first quarter of 1995 $ 6,006 $ 5,850 $ 6,021
======= ======= =======
FFO per average share for the first quarter of 1995 $ 0.54 $ 0.53 $ 0.54
======= ======= =======
</TABLE>
Results of Operations
Comparison of three months ended March 31, 1996 to the
three months ended March 31, 1995
The total number of apartment units owned at March 31, 1996 was 18,660
in 71 apartment communities, compared to 14,854 in 59 communities
at March 31, 1995. Rental revenue per average unit increased to
$512 at March 31, 1996 from $487 at March 31, 1995. Weighted average
occupancy at March 31, 1996 and 1995 was 95.4% and 93.9%, respectively.
For the 12,374 stabilized units owned on March 31, 1996 and 1995, occupancy
increased 1.2% to 95.4%, and average rental rate per unit increased 3.8%
to $505.93.
Total revenues for the period ended March 31, 1996 increased by $6,828,000
due primarily to (i) the acquisition of 13 properties since March 31, 1995,
and (ii) $1,072,000, or 6.4% from rental revenue increases at 12,374
stabilized units owned throughout both periods.
Expenses increased by $5,513,000, of which was primarily attributable
to (i) the 13 properties acquired since March 31, 1995, (ii) an increase
in General and Administrative expense, interest expense and depreciation
due to the continued growth of the Company, and (iii) $114,000 or a 1.8%
increase in operating expenses at the 12,374 apartment stabilized units
owned throughout both periods.
As a result of the foregoing, income before minority interest and
extraordinary items for the three months ended March 31, 1996 increased
$1,315,000 over the same period a year earlier.
<PAGE>
Liquidity and Capital Resources
Net cash flow provided by operating activities decreased from
$5,739,000 for the period January 1, 1995 through March 31, 1995 to
$4,566,000 for the period January 1, 1996 through March 31, 1996. The
decrease in net cash flow was primarily due to (i) an increase in restricted
cash related to an increase in tax-exempt bond financing requiring additional
cash reserves and increases in other mortgage escrows and replacement
reserves and (ii) decrease in accrued expenses and other liabilities
primarily for the payment of real estate taxes.
Net cash flow used in investing activities decreased from $20,512,000
in the period January 1, 1995 through March 31, 1995 to $18,770,000 for
the period January 1, 1996 through March 31, 1996. During the first
quarter of 1996, the 416-unit apartment community was acquired for the
purchase price of $14,309,000 compared to 3 communities totaling 520
units at an aggregate purchase price of $15,545,000 for the period
January 1, 1995 through March 31, 1995. Capital improvements to
existing properties totaled $3,860,000 in the period January 1, 1996
through March 31, 1996, compared to $2,056,000 for the period January 1,
1995 through March 31, 1995. $1,950,000 of capital improvements
during the first quarter of 1996 was "required" capital expenditures,
including carpet and appliances, and averaged $107 per unit. Construction
in progress for new units decreased from $2,911,000 for the period
January 1, 1995 through March 31, 1995 to $601,000 for the comparable
period in 1996, due primarily to the completion of the 122-unit
development in Jackson, Tennessee which began leasing during the third
quarter of 1995.
Net cash flow provided by financing activities slightly decreased
from $13,386,000 during the period January 1, 1995 through March 31,
1995 to $13,176,000 for the period January 1, 1996 through March 31,
1996.
The Company has incurred additional indebtedness of $39.5 million during
the period January 1, 1996 through March 31, 1996 primarily from the
$16.5 million refunding of tax-exempt bonds secured by three apartment
communities and $22.8 million from the new unsecured line of credit.
The Company paid off the $18 million secured line of credit. At March 31,
1996, the Company had $40.2 million of floating rate debt; all other debt
(87.8%) was fixed rate term debt. Excluding the floating rate line of
credit, 94.4% of the debt was fixed rate. The Company anticipates
that its interest payments for the 12 month period ending December 31,
1996 will approximate $24.7 million.
The Company believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short
and long term to meet operating requirements (including capital
expenditures required to maintain the communities) and payment of
distributions by the Company in accordance with REIT requirements.
Planned capital expenditures on property improvements and expansion
projects for the full year 1996 presently total $21.8 million, of
which $4.1 million was expended in the three month period ending
March 31, 1996. The Company expects to meet its long term liquidity
requirements, such as scheduled mortgage debt maturities, property
acquisitions, expansions and non-budgeted capital improvements, through
long and medium term collateralized and uncollateralized fixed rate
borrowings, issuance of debt or additional equity securities in the
Company and the Company's line of credit.
Insurance
In the opinion of management, property and casualty insurance is in
place which provides adequate coverage to provide financial protection
against normal insurable risks such that it believes that any loss
experienced would not have a significant impact on the Company's
liquidity, financial position, or results of operations.
Inflation
Substantially all of the resident leases at the properties allow,
at the time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek increases in
rents. The substantial majority of these leases are for one year or
less. The short-term nature of these leases generally serves to reduce
the risk to the Company of the adverse affects of inflation.
<PAGE>
Risks Associated with Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, which are intended to be
covered by the safe harbors created thereby. These statements include
the plans and objectives of management for future operations, including
plans and objectives relating to capital expenditures and rehabilitation
costs on the apartment communities. The forward-looking statements
included herein are based on current expectations that involve numerous
risks and uncertainties which are discussed below. Although the Company
believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Form 10-Q 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 the Company or any other person that
the objectives and plans of the Company will be achieved.
Risk Factors and Uncertainties including, but not limited to:
A) risks associated with competition for acquisition
opportunities, construction, lease-up and financing risks,
B) real estate investment risks such as:
(i) general risks related to the ability of the Company's properties
to generate sufficient funds available for distribution to shareholder;
(ii) operating risks such as competition from existing apartment
communities, alternative housing and potential overbuilding of housing;
(iii)dependence on the economies of the metropolitan areas where the
Company's properties are located;
(iv) increases in operating costs (including real estate taxes and
insurance) due to inflation and other factors, which increases may not
necessarily be offset by increased rents, and
(v) potential losses in the event of a casualty or title loss that is
not insured, insurable or economically insurable, all of which could
adversely affect the value of the Company's apartment communities.
C) potential fluctuations in interest rates or the availability of debt
capital impacting the cost of financing and the ability of the Company
to refinance scheduled debt maturities,
D) potential increase in market interest rates that may result in higher
yields on other financial instruments, which could adversely affect
the market price of the Company's common stock, and
E) taxation of the Company as a regular corporation if it fails to qualify
as a REIT in any taxable year.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
Exhibit # Exhibit
- --------- -------
18 Letter re change in accounting principles
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
Form Events Reported Financial Statements Date of Report Date Filed
---- --------------- -------------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
8-K $16.52 million N/A 3/5/96 3/15/96
refunding of
tax-exempt bonds
on St. Augustine
Apartments.
8-K Purchase of To be filed. 3/13/96 3/15/96
Lakeside
Apartments.
</TABLE>
<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 report to be
signed on its behalf by the undersigned thereunto duly authorized.
MID-AMERICA APARTMENT COMMUNITIES, INC.
Date: May 14, 1996 GEORGE E. CATES
-----------------------
George E. Cates
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1996 SIMON R.C. WADSWORTH
-----------------------
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and
Accounting Officer)
KPMG Peat Marwick LLP
50 North Front Street, Suite 900
Memphis, TN 38103
May 13, 1996
Mid-America Apartment Communities, Inc.
Memphis, Tennessee
Gentlemen:
We have been furnished with a copy of Form 10-Q of Mid-America
Apartment Communities, Inc. (the Company) for the three months
ended March 31, 1996, and have read the Company's statements
contained in Note 2 to the financial statements included
therein. As stated in Note 2, the Company changed its method of
accounting to capitalize replacement purchases for major appliances
and carpeting which were previously expensed and states that the
newly adopted accounting principle is preferable in the circumstances
because it is consistent with industry practice and provides a better
matching of expenses with the estimated benefit period. In accordance
with your request, we have reviewed and discussed with Company officials
the circumstances and business judgement and planning upon which the
decision to make this change in the method of accounting was based.
We have not audited any financial statements of Mid-America
Apartment Communities, Inc. as of any date or for any period
subsequent to December 31, 1995, nor have we audited the
information set forth in the aforementioned Note 2 to the
financial statements; accordingly, we do not express an opinion
concerning the factual information contained therein.
With regard to the aforementioned accounting change, authoritative
criteria have not been established for evaluating the preferability
of one acceptable method of accounting over another acceptable method.
However, for purposes of Mid-America Apartment Communities, Inc.'s
compliance with the requirements of the Securities and Exchange
Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's
business judgment and planning, we concur that the newly adopted
method of accounting is preferable in the Company's circumstances.
Very truly yours,
KPMG Peat Marwick LLP
