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 June 30, 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 July 23, 1996
---------- ------------------
Common Stock, $.01 par value 10,944,182
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995
Consolidated Statements of Operations for the three and
six months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the three and
six months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements
Pro Forma Condensed Combined Statement of Operations of
Mid-America Apartment Communities, Inc. for the six months
ended June 30, 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.
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
ASSETS:
Real estate assets:
Land $ 56,539 $ 57,456
Buildings and improvements 515,076 507,586
Furniture, fixtures and equipment 10,815 9,916
Construction in progress 5,454 3,830
--------- ---------
587,884 578,788
Less accumulated depreciation (39,299) (29,504)
--------- ---------
Real estate assets, net 548,585 549,284
Cash and cash equivalents 2,455 3,046
Restricted cash 13,594 4,118
Deferred financing costs, net 2,846 2,225
Other assets 6,732 6,594
--------- ---------
Total assets $ 574,212 $ 565,267
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Notes payable $ 321,745 $ 307,939
Accounts payable 1,311 1,403
Accrued expenses and other liabilities 9,809 10,146
Security deposits 2,323 2,452
---------- ---------
Total liabilities 335,188 321,940
Minority interest 40,228 41,049
Shareholders' equity:
Preferred stock (authorized 5,000,000 shares) - -
Common stock, $.01 par value (authorized 20,000,000
shares;issued and outstanding 10,940,962 and
10,936,832 shares at June 30, 1996 and
December 31, 1995, respectively 109 109
Additional paid-in-capital 208,752 208,670
Unearned compensation (320) (381)
Accumulated deficit (9,745) (6,120)
--------- ---------
Total shareholders' equity 198,796 202,278
--------- ---------
Total liabilities and shareholders' equity $ 574,212 $ 565,267
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three and six months ended June 30, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- -------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental $ 26,950 $20,780 $53,787 $40,748
Other 364 342 639 658
-------- ------- ------- -------
Total revenues 27,314 21,122 54,426 41,406
Expenses:
Personnel 2,799 2,147 5,530 4,258
Building repairs and maintenance 1,287 1,279 2,410 2,321
Real estate taxes and insurance 2,926 2,282 5,912 4,576
Utilities 1,488 1,199 3,155 2,446
Landscaping 738 532 1,382 1,021
Other operating 1,147 782 2,235 1,645
Depreciation and amortization real estate assets 5,197 3,552 10,281 7,079
Depreciation and amortization non-real estate assets 35 26 70 52
General and administrative 1,373 1,007 3,079 2,133
Interest 6,553 5,330 12,789 10,436
Amortization of deferred financing costs 142 137 316 267
-------- ------- ------- -------
Total expenses 23,685 18,273 47,159 36,234
-------- ------- ------- -------
Income before gain on disposition of properties 3,629 2,849 7,267 5,172
Gain on disposition of properties 1,966 - 1,966 -
-------- ------- ------- -------
Income before minority interest in operating partnership 5,595 2,849 9,233 5,172
Minority interest in operating partnership income 1,027 650 1,697 1,175
-------- ------- ------- -------
Net income $ 4,568 $ 2,199 $ 7,536 $ 3,997
======== ======= ======= =======
Net income per common share $ 0.41 $ 0.25 $ 0.69 $ 0.46
======== ======= ======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,536 $ 3,997
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,728 7,463
Minority interest in operating partnership income 1,697 1,175
Gain on disposition of real estate assets (1,966) -
Changes in assets and liabilities:
Restricted cash (9,476) (584)
Other assets (235) 430
Accounts payable 573 (80)
Accrued expenses and other liabilities (337) 149
Security deposits (129) 50
-------- --------
Net cash provided by operating activities 8,391 12,600
Cash flows from investing activities:
Purchases of real estate assets (14,309) (15,561)
Proceeds from dispositions of real estate assets 16,769 -
Improvements to properties (9,327) (2,693)
Construction of new units (1,563) (9,202)
Payment for purchase of AFRI, net of cash acquired - (56,108)
-------- --------
Net cash used in investing activities (8,430) (83,564)
Cash flows from financing activities:
Proceeds from notes payable 22,664 26,125
Principal payments on notes payable (8,858) (4,507)
Deferred financing costs (760) 144
Proceeds from issuances of common stock 94 58,363
Redemption of unitholder interests (37) -
Distributions to minority interest holders (2,494) (2,460)
Dividends paid (11,161) (8,584)
-------- --------
Net cash (used in) provided by financing activities (552) 69,081
-------- --------
Net decrease in cash and cash equivalents (591) (1,883)
Cash and cash equivalents, beginning of period 3,046 4,980
-------- --------
Cash and cash equivalents, end of period $ 2,455 $ 3,097
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 12,202 $ 10,219
========= ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
SIX MONTHS ENDED JUNE 30, 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 six-month period ended June 30,
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 to 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 10,940,921
weighted average shares outstanding during the period from January 1,
1996 through June 30, 1996, and 8,668,720 for the period January 1,
1995 through June 30, 1995. Fully diluted earnings per share is not
presented as the dilution is not materially different as compared to
primary earnings per share.
At June 30, 1996, 10,940,962 common shares and 2,445,090 operating
partnership units were outstanding, a total of 13,386,052. 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 June 30, 1996 by 46,793 shares and the period January 1,
1995 through June 30, 1995 by 45,053 shares.
4. Subsequent Events
PROPERTY ACQUISITIONS
On July 25, 1996, the Company acquired three apartment communities totaling
816 units. The total purchase price and closing costs totaled $32.1 million
and was funded by $7.3 million cash from the sale in June 1996 of the
Company's Laguna Pointe property and the balance by the Company's line
of credit. Two of the acquisitions were used to defer the taxable gain made
on the Laguna Pointe sale.
FINANCING
In July 1996, the Company increased its unsecured line of credit from
$40 million to $65 million. The line continues to bear interest at 175
basis points over LIBOR.
5. 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 six months ended June 30, 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>
Mid-America Apartment Communities, Inc.
Pro Forma Condensed Combined Statement of Operations
for the six months ended June 30, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
<S> <C> <C>
Revenues:
Rental $ 40,748 $ 50,536
Interest and other 658 797
-------- --------
Total revenues 41,406 51,333
Expenses:
Personnel 4,258 5,181
Building repairs/maintenance, utilities,
landscaping, and other operating 7,433 10,028
Real estate taxes and insurance 4,576 5,519
Depreciation and amortization - real estate assets 7,079 9,148
Depreciation and amortization - non-real estate assets 52 67
General and administrative 2,133 2,423
Interest 10,436 12,164
Amortization of deferred financing costs 267 267
-------- --------
Total expenses 36,234 44,797
-------- --------
Net income before minority interest 5,172 6,536
Minority interest 1,175 1,194
Net income before extraordinary items $ 3,997 $ 5,342
======== =======
Net income per common share $ 0.46 $ 0.49
======== =======
</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 three and six months ended June 30, 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, gain or loss from disposition
of real estate assets 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 June 30, 1996, FFO increased by
$2,422,000 or 38%, when compared to the same period a year earlier.
The increase was primarily attributable to a $6,192,000 increase in
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 15.8% from $0.57 per share (adjusted for
new NAREIT FFO definition) for the three months ending June 30, 1995
to $0.66 per share for the same period in 1996.
For the six months ended June 30, 1996, FFO increased by
$5,297,000 or 43%, when compared to the same period a year earlier.
The increase was primarily attributable to a $13,020,000 increase in
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 19.1% from $1.10 per share (adjusted for
new NAREIT FFO definition) for the six months ending June 30, 1995 to
$1.31 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 to 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 June 30, 1995 Six Months Ending June 30, 1995
----------------------------------------- -----------------------------------------
With new With new
With new NAREIT FFO With new NAREIT FFO
NAREIT FFO definition* and NAREIT FFO definition* and
1995 DATA: As Reported definition* capital policy As Reported definition* capital policy
- ---------------------------------- ----------- ----------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net income before minority interest $ 2,849 $ 2,849 $ 2,849 $ 5,172 $ 5,172 $ 5,172
Change for capitalization policy
as if in effect at 1/1/95 N/A N/A 276 N/A N/A 447
Additional depreciation due for
change in capitalization policy N/A N/A (55) N/A N/A (89)
------- ------- ------- ------- ------- -------
Adjusted net income before
minority interest 2,849 2,849 3,070 5,172 5,172 5,530
Depreciation and amortization of:
Real estate assets 3,552 3,552 3,607 7,079 7,079 7,168
Non-real estate assets 26 - - 52 - -
Deferred financing costs 137 - - 267 - -
------- ------- ------- ------- ------- -------
FFO $ 6,564 $ 6,401 $ 6,677 $12,570 $12,251 $12,698
======= ======= ======= ======= ======= =======
1995 FFO per average share $ 0.59 $ 0.57 $ 0.60 $ 1.13 $ 1.10 $ 1.14
======= ======= ======= ======= ======= =======
<FN>
As recommended by NAREIT, the Company adopted the modified definition
of FFO on January 1, 1996.
</TABLE>
<PAGE>
Results of Operations
Comparison of three months ended June 30, 1996 to the three
months ended June 30, 1995
The total number of apartment units owned at June 30, 1996 was
18,176 in 69 apartment communities, compared to 18,094 in 72
communities at June 30, 1995. Rental revenue per average unit
increased to $517 at June 30, 1996 from $493 at June 30, 1995.
Weighted average occupancy at June 30, 1996 and 1995 was 93.7% and
94.2%, respectively. Weighted average occupancy for the quarter
ended June 30, 1996 and 1995 was 94.4% and 93.7%, respectively.
For the 13,258 stabilized units owned on June 30, 1996 and 1995,
weighted average occupancy was 93.9% and 94.7%, respectively. For
the quarter ended June 30, 1996 and 1995, weighted average occupancy
increased .6% to 94.7%. Average rental rate per unit increased 3.0% to
$512.20 as of June 30, 1996 compared to a year earlier.
Total revenues for the quarter ended June 30, 1996 increased by
$6,192,000 due primarily to (i) the acquisition of 13 properties on June
29, 1995, and (ii) $666,000, or 3.6% from rental revenue increases at
13,258 stabilized units owned throughout both periods. Expenses
increased by $5,412,000, of which was primarily attributable to (i) the
13 properties acquired on June 29, 1995, (ii) an increase in general and
administrative expense, interest expense and depreciation due to the
continued growth of the Company, and (iii) $229,000 or a 3.3% increase
in operating expenses at the 13,258 apartment stabilized units
owned throughout both periods. During the quarter ended June 30, 1996,
the Company recorded a $1,966,000 gain for the disposition of two
apartment communities.
As a result of the foregoing, income before minority interest
for the three months ended June 30, 1996 increased $3,088,000 over
the same period a year earlier.
Comparison of six months ended June 30, 1996 to the six months
ended June 30, 1995
The total number of apartment units owned at June 30, 1996 was 18,176
in 69 apartment communities, compared to 18,094 in 72
communities at June 30, 1995. Rental revenue per average unit
increased to $517 at June 30, 1996 from $493 at June 30, 1995.
Weighted average occupancy at June 30, 1996 and 1995 was 93.7% and
94.2%, respectively. Weighted average occupancy for the six months
ended June 30, 1996 and 1995 was 95.1% and 93.9%, respectively.
Total revenues for the six months ended June 30, 1996 increased by
$13,020,000 due primarily to the acquisition of 13 properties on June 29,
1995. Expenses increased by $10,925,000, of which was primarily
attributable to (i) the 13 properties acquired on June 29, 1995, and (ii) an
increase in general and administrative expense and depreciation due to
the continued growth of the Company. As a percentage of revenues,
interest expense, real estate taxes and insurance, and personnel costs
decreased for the six months ended June 30, 1996 compared to the same
period a year earlier. During the six months ended June 30, 1996, the
Company recorded a $1,966,000 gain for the disposition of two
apartment communities.
As a result of the foregoing, income before minority interest
for the six months ended June 30, 1996 increased $4,061,000 over
the same period a year earlier.
Liquidity and Capital Resources
Net cash flow provided by operating activities decreased from
$12,600,000 for the period January 1, 1995 through June 30, 1995 to
$8,391,000 for the period January 1, 1996 through June 30, 1996. The
decrease in net cash flow was primarily due to an increase in restricted
cash due to (i) an increase in tax-exempt bond financing requiring
additional cash reserves and increases in other mortgage escrows and
replacement reserves and (ii) $7,354,000 held in an escrow account to
complete a like-kind exchange (in July 1996) from the sale of the Laguna
Pointe apartment community in June 1996. This decrease in
cash provided was offset by an increase in net income of $3,539,000.
Net cash flow used in investing activities decreased from
$83,564,000 in the period January 1, 1995 through June 30, 1995 to
$8,430,000 for the period January 1, 1996 through June 30, 1996. The
decrease was primarily due to the sale of two apartment communities
in May and June of 1996 for $16,769,000 and the purchase of 12
apartment communities through the June 29, 1995 merger of America
First REIT, Inc. ("AFR") for $56,108,000 (net of cash and liabilities assumed
of $59,567,000). Capital improvements to existing properties totaled
$9,327,000 in the period January 1, 1996 through June 30, 1996, compared
to $2,693,000 for the same period in 1995. $3,626,000 of capital
improvements during the first half of 1996 was for "recurring" capital
expenditures, including carpet and appliances, and averaged $231 per unit,
or $462 annualized. Construction in progress for new units decreased from
$9,202,000 for the period January 1, 1995 through June 30, 1995 to $1,563,000
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 (used in) provided by financing activities decreased from
$69,081,000 during the period January 1, 1995 through June 30, 1995
to a negative $552,000 for the period January 1, 1996 through June
30, 1996 primarily due to the June 29, 1995 issuance of shares for
proceeds net of issuance costs of $58,363,000 in exchange for all the
outstanding shares of AFR.
The Company has incurred additional indebtedness of $22.7 million
during the period January 1, 1996 through June 30, 1996 primarily
from the $16.5 million refunding of tax-exempt bonds secured by three
apartment communities and $23.7 million from the new unsecured
line of credit. The Company paid off $18 million outstanding on the secured
line of credit. At June 30, 1996, the Company had $40.8 million of floating
rate debt; all other debt (87.3%) was fixed rate term debt. Excluding the
floating rate line of credit, 94.3% of the debt was fixed rate. The
weighted average interest rate at June 30, 1996 was 7.81%. The
Company anticipates that its interest payments for the 12 month period
ending December 31, 1996 will approximate $26.5 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 $22.2 million,
of which $10.9 million was expended in the six month period ended
June 30, 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
The annual meeting of shareholders of the Company was held on May 2, 1996.
At this meeting, the following matters were voted upon by the Company's
shareholders:
1) Election of Directors
<TABLE>
Votes Cast
Name Votes Cast in Favor Against or Withheld Absentions/Non Votes
- -------- ------------------- ------------------- --------------------
Class II Directors:
- -------------------
<S> <C> <C> <C>
O. Mason Hawkins 8,899,901 38,074 0
Michael B. Yanney 8,898,879 39,096 0
</TABLE>
The following directors continue in office following the meeting:
<TABLE>
Name Term Expires
- --------- ------------
<S> <C>
George E. Cates 1997
Simon R.C. Wadsworth 1997
John J. Byrne, III 1998
Robert F. Fogelman 1998
</TABLE>
2) Selection of Independent Auditors
The shareholders of the Company ratified the appointment of KPMG Peat Marwick
LLP as the Company's independent auditors for the fiscal year ended December
31, 1996 by the following vote:
<TABLE>
Votes Cast in Favor Votes Cast Against Absentions/Non Votes
or Withheld
------------------- ------------------ --------------------
<S> <C> <C> <C>
8,890,512 29,306 18,157
Item 5. Other Information
None.
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
</TABLE>
<TABLE>
Form Events Reported Financial Statements Date of Report Date Filed
------ --------------------- --------------------- -------------- ----------
<S> <C> <C> <C> <C>
8-K(A) Filing of audited Historical Summary of 3-15-96 6-7-96
statements related to Gross Income and
purchase of Lakeside Operating Expenses
Apartments.
8-K Press release regarding N/A 6-6-96 6-12-96
sale of Park at 58 and
Laguna Point apartment
communities.
Press release regarding N/A 6-11-96 6-12-96
signing of contract to
purchase three apartment
communities in Mississippi
totaling 816 units.
</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: August 14, 1996 /s/ GEORGE E. CATES
------------------- -----------------------------------
George E. Cates
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1996 /s/ SIMON R.C. WADSWORTH
------------------- -----------------------------------
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and
Accounting Officer)
