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 September 30, 1997
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 October 31, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 16,903,512
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996
Consolidated Statements of Operations for the three and
nine months ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996
Notes to Consolidated Financial Statements
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
September 30, 1997 (Unaudited) and December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Assets:
Real estate assets:
Land $ 74,046 $ 61,150
Buildings and improvements 676,012 563,584
Furniture, fixtures and equipment 15,114 12,511
Construction in progress 18,373 4,648
--------- ---------
783,545 641,893
Less accumulated depreciation (68,639) (49,558)
--------- ---------
Real estate assets, net 714,906 592,335
Cash and cash equivalents 5,782 4,053
Restricted cash 6,187 5,538
Deferred financing costs, net 2,603 2,984
Other assets 7,813 6,289
--------- ---------
Total assets $ 737,291 $ 611,199
========= =========
Liabilities and Shareholders' equity:
Liabilities:
Notes payable $ 382,058 $ 315,239
Accounts payable 1,387 744
Accrued expenses and other liabilities 15,133 12,182
Security deposits 2,831 2,412
--------- ---------
Total liabilities 401,409 330,577
Minority interest 45,383 39,238
Shareholders' equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized,
2,000,000 shares at 9.5% Series A
Cumulative Preferred Stock
Liquidation Preference $25 per share, 20 20
Common stock, $.01 par value
(authorized 20,000,000 shares;
issued and outstanding 13,394,932
and 10,949,216 shares at
September 30, 1997 and December 31, 1996 134 109
Additional paid-in capital 317,422 256,689
Other (889) (260)
Accumulated deficit (26,188) (15,174)
--------- ---------
Total shareholders' equity 290,499 241,384
--------- ---------
Total liabilities and shareholders' equity $ 737,291 $ 611,199
========= =========
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
<PAGE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three and nine months ended September 30, 1997 and 1996
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 33,759 $ 27,740 $ 95,388 $ 81,527
Other 636 622 1,566 1,347
-------- -------- -------- --------
Total revenues 34,395 28,362 96,954 82,874
Expenses:
Personnel 3,703 3,044 10,279 8,660
Building repairs and maintenance 1,949 1,484 4,746 3,894
Real estate taxes and insurance 3,662 2,900 10,199 8,812
Utilities 1,658 1,581 4,536 4,736
Landscaping 892 722 2,688 2,104
Other operating 1,628 1,354 4,480 3,589
Depreciation and amortization
real estate assets 6,739 5,296 19,089 15,577
Depreciation and amortization
non-real estate assets 46 44 131 114
General and administrative 1,691 1,542 4,707 4,621
Interest 7,174 6,713 20,271 19,502
Amortization of deferred financing 168 168 578 484
--------- --------- --------- --------
Total expenses 29,310 24,848 81,704 72,093
Income before gain on disposition of assets 5,085 3,514 15,250 10,781
Gain on disposition of properties (22) 1,944
--------- --------- --------- --------
Income before minority interest in
operating partnership income 5,085 3,492 15,250 12,725
Minority interest in operating
partnership income 822 644 2,572 2,341
--------- --------- --------- --------
Net income 4,263 2,848 12,678 10,384
Dividends on preferred shares 1,187 - 3,562 -
--------- --------- --------- --------
Net income available for common shareholders $ 3,076 $ 2,848 $ 9,116 $ 10,384
========= ========= ========= ========
Net income available per common share $ 0.23 $ 0.26 $ 0.71 $ 0.95
========= ========= ========= ========
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
<PAGE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flow
Nine months ended September 30, 1997 and 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,678 $ 10,384
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,889 16,264
Minority interest in operating partnership income 2,572 2,341
Gain on disposition of properties - (1,944)
Changes in assets and liabilities:
Restricted cash (649) (3,365)
Other assets (1,597) (299)
Accounts payable 643 (271)
Accrued expenses and other liabilities 2,951 2,982
Security deposits 419 50
-------- ---------
Net cash provided by operating activities 36,906 26,142
Cash flows from investing activities:
Purchases of real estate assets (72,737) (46,563)
Proceeds from dispositions of real estate asset - 9,069
Improvements to properties (14,207) (12,754)
Construction of units in progress (9,644) (1,981)
-------- ---------
Net cash used in investing activities (96,588) (52,229)
Cash flows from financing activities:
Proceeds from notes payable - 17,039
Net increase in credit line 41,064 37,981
Principal payments on notes payable (18,441) (7,738)
Deferred financing costs (237) (967)
Proceeds from issuances of common shares and units 66,718 177
Redemption of unitholder interests (8) (26)
Distributions to unitholders (3,994) (3,741)
Dividends paid on common shares (20,129) (16,741)
Dividends paid on preferred shares (3,562) -
--------- ---------
Net cash provided by financing activities 61,411 25,984
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,729 (103)
Cash and cash equivalents, beginning of period 4,053 3,046
--------- ---------
Cash and cash equivalents, end of period $ 5,782 $ 2,943
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 20,519 $ 18,178
Supplemental disclosure of noncash investing activities:
Assumption (transfer) of debt related to
property acquisitions (dispositions) $ 44,196 $ (7,680)
Issuance of units related to property acquisitions $ (880) -
Conversion of units for common shares $ 870 -
Issuance of note receivable in exchange for
common shares and units $ 720 -
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with the accounting policies in
effect as of December 31, 1996, as set forth in the annual
consolidated financial statements of Mid-America Apartment
Communities, Inc. ("MAAC" or the "Company"), as of such date. 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 nine-month period ended September 30, 1997 are not
necessarily indicative of the results to be expected for the full
year.
2. Primary earnings per share is computed based upon 12,731,190
weighted average common shares outstanding during the period from
January 1, 1997 through September 30, 1997, and 10,944,281 for
the period January 1, 1996 through September 30, 1996. Fully
diluted earnings per share is not presented as the dilution is
not materially different as compared to primary earnings per
share.
At September 30, 1997 13,394,932 common shares and 2,527,821
operating partnership units were outstanding, a total of
15,922,753. Additionally, MAAC has outstanding options of
519,400 shares of common stock which increased weighted average
shares outstanding during the period January 1, 1997 through
September 30, 1997 by 61,559 shares and the period January 1,
1996 through September 30, 1996 by 37,892 shares.
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share," specifies the computation, presentation,
and disclosure requirements for earnings per share (EPS). The
objective of SFAS No. 128 is to simplify the computation and to
make the U.S. standard more compatible with EPS standards of
other countries and with that of the International Accounting
Standards Committee. When adopted in the first quarter of 1998,
the standard is not expected to have a material impact on the EPS
computation of the Company.
3. Recent Development
The Company has entered into an Agreement and Plan of
Reorganization with Flournoy Development Company. In connection
with the merger, the Company will issue 2,038,214 shares of the
Company's common stock and UPREIT units (convertible to MAAC
common stock) and will assume certain indebtedness. The merger is
anticipated to close during the fourth quarter of 1997. The
combined company will be an entirely self-advised and self-managed
REIT operating as and trading under MAA, the NYSE stock symbol of
Mid-America Apartment Communities, Inc.
The financial statements of the proposed merger transaction are
not included in the consolidated financial statements herein, but
are included in filings made by the Company on Form 8-K dated
September 17, 1997 as amended and filed on November 6, 1997.
4. Subsequent Events
On October 6, 1997, the Company received net proceeds of $98.2
for the issuance of 3,499,300 shares of common stock at $29 11/16
per share in an underwritten public offering. Managing underwriters
in the offering were Morgan Stanley & Co. Incorporated, Raymond James
& Associates, Inc., and Morgan Keegan & Company, Inc.
On November 3, 1997, the Company acquired the 194-unit
Hermitage at Beechtree apartment community located in Cary, North
Carolina for $8.9 million. The purchase was funded by the
Company's credit line.
On November 6, 1997, the Company announced its intent to offer
and sell 1,600,000 shares of its Series B Cumulative Preferred
Stock with a liquidation preference of $25 per share.
On November 12, 1997, the Company acquired the 192-unit Sterling
Ridge apartment community located in Augusta, Georgia for $7.7 million
cash, including a bond assumption of $4.8 million. The cash portion
of the purchase was funded by the Company's credit line.
<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 the Company for the
three and nine months ended September 30, 1997 and 1996.
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, minority interest in Operating Partnership income,
gain or loss on disposition of real estate assets, and
certain non-cash items, primarily depreciation and
amortization, less preferred stock dividends. The Company
computes FFO in accordance with NAREIT's current definition,
which eliminates amortization of deferred financing costs
and depreciation of non-real estate assets as items added
back to net income when computing FFO. 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 the Company's results of operations in that
such calculation reflects cash flow from operating
activities and the Company's ability to support interest
payments and general operating expenses before the impact of
certain activities such as changes in other assets and
accounts payable.
For the three months ended September 30, 1997, FFO increased
by approximately $1,827,000 or 21%, when compared to the
year earlier. The increase was primarily attributable to an
approximate $6,033,000 increase in revenues, which was
partially offset by increases in expenses mainly associated
with the increase in the number of apartment units owned by
the Company and $1,187,000 of dividend distributions to
preferred shareholders from the October 1996 issuance of
9.5% Series A Cumulative Preferred Stock. On a per share
basis, FFO increased 2% from $.66 per share for the three
months ended September 30, 1996 to $.67 per share for the
same period in 1997.
For the nine months ended September 30, 1997, FFO increased
by approximately $4,419,000 or 17%, when compared to the
year earlier. The increase was primarily attributable to an
approximate $14,080,000 increase in revenues, which was
partially offset by increases in expenses mainly associated
with the increase in the number of apartment units owned by
the Company and $3,562,000 of dividend distributions to
preferred shareholders from the October 1996 issuance of
9.5% Series A Cumulative Preferred Stock. On a per share
basis, FFO increased 3% from $1.97 per share for the nine
months ended September 30, 1996 to $2.02 per share for the
same period in 1997.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1996
The total number of apartment units owned at September 30,
1997 was 22,085 in 82 apartment communities, compared to
18,992 in 72 communities at September 30, 1996. Average
monthly rental per apartment unit increased to $546 at
September 30, 1997 from $526 at September 30, 1996. Overall
occupancy was 95.8% at September 30, 1997 compared to 98.1%
at September 30, 1996. The Company pursued a different fall
lease up program for 1997 aimed at minimizing the use of
rental rate concessions.
Total revenues for the three months ended September 30, 1997
increased by approximately $6,033,000, due primarily to (i)
approximately $1,275,000 from the communities acquired in
1996, (ii) approximately $4,059,000 from the communities
acquired in 1997, and (iii) approximately $978,000 from the
communities owned throughout both periods. This increase
was offset by approximately the loss of $306,000 of revenues
from the communities sold in 1996.
Property operating expenses for the three months ended
September 30, 1997 increased by approximately $2,407,000,
due primarily to (i) approximately $390,000 from the
communities acquired in 1996, (ii) approximately $1,627,000
from the communities acquired in 1997, and (iii)
approximately $455,000 from the communities owned throughout
both periods. This increase was offset by approximately
$211,000 of expense reduction resulting from the communities
sold in 1996. Utility costs decreased from 5.6% of revenue
to 4.8% of revenue for the three months ended September 30,
1997 compared to the same period a year earlier, due primarily to
the further installation of approximately 10,000 individual
apartment unit water meters and the completion of the
individual apartment unit electricity metering at Sailwinds
at Lake Magdalene.
General and administrative expense decreased from 5.4% of
revenue to 4.9% of revenue for the three months ended
September 30, 1997 compared to the same period a year
earlier. Some of the decreases are primarily in the area of
bonus expense and reduced state and local taxes.
Depreciation and amortization expense increased
approximately $1,445,000 for the three months ended
September 30, 1997 compared to the same period a year
earlier primarily due to depreciation expense for (i)
approximately $306,000 from the communities acquired in
1996, (ii) approximately $831,000 from the communities
acquired in 1997, and (iii) approximately $378,000 from the
communities owned throughout both periods. This increase
was offset by approximately $76,000 of expense from the
communities sold in 1996.
Interest expense increased approximately $461,000 during the
three months ended September 30, 1997 compared to the same
period a year earlier primarily due to increased borrowings
to fund property acquisitions.
As a result of the foregoing, income before gain on
disposition of properties and minority interest in operating
partnership income increased $1,571,000 for the three months
ended September 30, 1997 over the same period a year
earlier.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE
NINE MONTHS ENDED SEPTEMBER 30, 1996
The total number of apartment units owned at September 30,
1997 was 22,085 in 82 apartment communities, compared to
18,992 in 72 communities at September 30, 1996. Average
monthly rental per apartment unit increased to $546 at
September 30, 1997 from $526 at September 30, 1996. Overall
occupancy was 95.8% at September 30, 1997 compared to 98.1%
at September 30, 1996. The Company pursued a different fall
lease up program for 1997 aimed at minimizing the use of
rental rate concessions.
Total revenues for the nine months ended September 30, 1997
increased by approximately $14,080,000, due primarily to (i)
approximately $6,219,000 from the communities acquired in
1996, (ii) approximately $7,598,000 from the communities
acquired in 1997, and (iii) approximately $2,246,000 from
the communities owned throughout both periods. This
increase was offset by the loss of approximately $2,118,000
of revenues from the communities sold in 1996.
Property operating expenses for the nine months ended
September 30, 1997 increased by approximately $5,133,000, due
primarily to (i) approximately $2,073,000 from the
communities acquired in 1996, (ii) approximately $2,981,000
from the communities acquired in 1997, and (iii) approximately
$896,000 from the communities owned throughout both periods.
This increase was offset by approximately $980,000 of expense
reductions resulting from the communities sold in 1996.
Utility costs decreased from 5.7% of revenue to 4.7% of
revenue for the nine months ended September 30, 1997
compared to the same period a year earlier, due primarily to
the further installation of approximately 10,000 individual
apartment unit water meters and the completion of the
individual apartment unit electricity metering at Sailwinds
at Lake Magdalene.
General and administrative expense decreased from 5.6% of
revenue to 4.9% of revenue for the nine months ended
September 30, 1997 compared to the same period a year
earlier. The reductions result from one-time expense
adjustments and the remaining decreases are primarily in the
area of bonus expense and reduced state and local taxes.
Depreciation and amortization expense increased
approximately $3,623,000 for the nine months ended September
30, 1997 compared to the same period a year earlier
primarily due to depreciation expense for (i) approximately
$1,325,000 from the communities acquired in 1996, (ii)
approximately $1,497,000 from the communities acquired in
1997, and (iii) approximately $1,208,000 from the
communities owned throughout both periods. This increase
was offset by approximately $463,000 of expense from the
communities sold in 1996.
Interest expense increased approximately $769,000 during the
nine months ended September 30, 1997 compared to the same
period a year earlier primarily due to increased borrowings
to fund property acquisitions.
As a result of the foregoing, income before gain on
disposition of properties and minority interest in operating
partnership income increased $4,469,000 for the nine months
ended September 30, 1997 over the same period a year
earlier. During the nine month period ending September 30,
1996, the Company recorded a gain from the disposition of two
apartment communities of approximately $1,944,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased
from approximately $26,142,000 for the nine months ended
September 30, 1996 to approximately $36,906,000 for the nine
months ended September 30, 1997. The increase in net cash
flow was primarily due to an increase in net income,
depreciation and amortization, other assets, and a decrease
in restricted cash.
Net cash flow used in investing activities increased from
approximately $52,229,000 for the nine months ended
September 30, 1997 to approximately $96,588,000 for the nine
months ended September 30, 1996. The increase was primarily
due to the acquisition of 2,744 apartment units during the
first nine months of 1997 for approximately $71,496,000, net
of debt assumed of $44,196,000, and issuances of units of
$880,000, as compared to the acquisition of 1,232 apartment
units during the same period in 1996 for approximately
$46,563,000. In July 1997, the company acquired land of
$1,241,000 for phase 1 of a 740-unit Reserve at Dexter Lake
development. Also, net cash flow used in investing
activities during 1996 was offset by the $9,069,000 received
from the sale of two apartment communities. Capital
improvements to existing properties totaled approximately
$14,207,000 for the nine months ended September 30, 1997,
compared to approximately $12,754,000 for the same period in
1996. Of the $14,207,000 capital improvements approximately
$5,896,000 was for recurring capital expenditures, including
carpet and appliances, approximately $4,394,000 was for
revenue enhancing projects, approximately $3,633,000 was for
acquisition capital with the remaining balance for other
miscellaneous items. Recurring capital spending of
$5,896,000, or $0.39 per share, reflects the Company's
practice of investing relatively more capital in the first
nine months of the year. Construction in progress for new
apartment units increased from approximately $1,981,000 for
the nine months ended September 30, 1996 to approximately
$9,644,000 for the comparable period in 1997, due primarily
to the development of the 234-unit expansion at Lincoln on
the Green apartments in Memphis, Tennessee which began
leasing during September 1997. We expect the development to
be completed during the fourth quarter of 1997.
Net cash flow provided by financing activities increased
from approximately $25,984,000 during the nine months ended
September 30, 1996 to approximately $61,411,000 for the same
period in 1997. In March 1997, approximately $62,493,000 was
provided from the Company's issuance of 2,300,000 shares of
Common Stock in an underwritten public offering. In April
1997, approximately $4,801,000 was provided from the
Company's issuance of restricted stock and restricted UPREIT
units to executives of the Company. Additional cash flow
provided by financing activities was provided from an
increase on the Company's line of credit of approximately
$41,064,000. This increase was offset by approximately
$18,441,000 principal repayments and $27,685,000 for
dividends and distributions.
At September 30, 1997, the Company had approximately
$71,469,000 outstanding on the Company's unsecured
$90,000,000 credit line. At September 30, 1997, the Company
had approximately $89,437,000 (including the credit line) of
floating rate debt at an average interest rate of 7.2%; all
other debt was fixed rate term debt at an average interest
rate of 8%. The weighted average interest rate and weighted
average maturity at September 30, 1997 for the approximately
$382,058,000 of notes payable were 7.8% and 8 years,
respectively. The credit line is unsecured and is subject to
borrowing base calculations that effectively reduce the
maximum amount that may be borrowed under the credit line.
The Company expects to use the credit line for future
acquisitions, development, and to provide letters of credit
as credit enhancements for tax-exempt bonds.
The Company has entered into a commitment letter with
Morgan Stanley Mortgage Capital Inc. ("MS Mortgage Capital")
pursuant to which MS Mortgage Capital has agreed to loan up
to $150 million to a newly-formed special purpose subsidiary
limited partnership of the Company (the "Special Purpose
Subsidiary") pursuant to the terms of a short-term promissory
note (the "Bridge Loan"). The Bridge Loan will mature 90 days
after funding (the "Bridge Maturity Date") but in no event later
than February 16, 1998, provided that the Special Purpose
Subsidiary may extend the maturity for up to an additional
90 days to a date not later than May 15, 1998. The Bridge Loan
will bear interest at the one-month LIBOR plus 1.0%, payable
monthly. After the Bridge Maturity Date, the interest rate shall
be LIBOR plus 5.0%. The Bridge Loan will be secured by 21
of the Communities (the "Contributed Communities"), which
will be contributed by the operating partnership of the Company
to the Special Purpose Subsidiary and five communities from
Flournoy Properties Group, which will be acquired by the
Special Purpose Subsidiary in the Reorganization. The operating
partnership of the Company will be the sole limited partner of
the Special Purpose Subsidiary and a wholly-owned subsidiary
of the Company will be the sole general partner of the Special
Purpose Subsidiary. The net proceeds from the Bridge Loan
will be utilized to repay certain indebtedness in connection
with the Reorganization. The Special Purpose Subsidiary
may issue certain First Mortgage Bonds, the net proceeds of
which will be utilized to repay the Bridge Loan. Moreover,
the Company has entered into commitment letters pursuant
to which it intends to borrow an aggregate of up to $147.5
million from various lenders which will be used for property
acquisitions and for general corporate purposes. Such
commitments include (i) an approximate $100 million revolving
credit line, which will accrue interest at a variable rate and will
be secured by certain Communities and communities from
Flournoy Properties Group, and (ii) an approximate $47.5
million term loan which will accrue interest at a fixed rate,
will mature in 2004, and will be secured by certain Communities
and communities from Flournoy Properties Group.
In connection with the Reorganization, the Company and its
operating partnership are obligated under the Plan of
Reorganization to repay at the time of closing certain
indebtedness of Flournoy Properties Group, which at
September 30, 1997 totaled approximately $213.1, and shall
assume (either expressly or by operation of law) certain
indebtedness of Flournoy Properties Group, which at
September 30, 1997 totaled approximately $93.3 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 recurring capital expenditures at
the communities) and payment of distributions by the Company
in accordance with REIT requirements under the Internal
Revenue Code.
Capital expenditures on property improvements and expansion
projects for 1997 are currently planned at approximately
$34.5 million, including $13.6 million for the development
of new units and $6.7 million to bring the acquired
properties to Mid-America standard during the stabilization
period. The Company expects to meet its long term liquidity
requirements, such as scheduled mortgage debt maturities,
property acquisitions, expansions and non-recurring capital
expenditures, 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 credit line.
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 communities
allow, at the time of renewal, for adjustments in the rent
payable thereunder, and thus may enable the Company to seek
rent increases. 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 effects of inflation.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial
Condition and Results of Operations contains certain forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, 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. 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.
<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
None.
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
Form Events Reported Financial Statements Date of Report Date Filed
- -------- ---------------------------- --------------------- -------------- ----------
<C> <S> <S> <S> <S>
8-K(A) Filing of audited statements Historical Summary of 7-29-97 7-29-97
related to purchase of Gross Income and
Oaks at Deerwood Apartments. Operating Expenses.
8-K Purchase consummation of N/A 8-19-97 8-19-97
Austin Chase Apartments.
8-K Announcement of merger To be filed. 9-19-97 9-19-97
between Registrant and
Flournoy Development
Company. Agreement and
Plan of Reorganization was
attached.
8-K Information regarding the Audited historical 9-17-97 9-30-97
business and properties of financials of FDC,
Flournoy Development unaudited historical
Company ("FDC"). financials of FDC, and
unaudited pro forma
financials of Registrant.
</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: November 10, 1997 /s/ H. ERIC BOLTON
---------------------- --------------------------
H. Eric Bolton
President and Chief Operating Officer
(Principal Officer)
Date: November 10, 1997 /s/ SIMON R.C. WADSWORTH
---------------------- ---------------------------
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at September 30, 1997 (UNAUDITED) and the
Consolidated Statement of Operations for the three months ended
September 30, 1997 (UNAUDITED) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,969
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,416
<PP&E> 783,545
<DEPRECIATION> 68,639
<TOTAL-ASSETS> 714,906
<CURRENT-LIABILITIES> 19,351
<BONDS> 382,058
0
20
<COMMON> 134
<OTHER-SE> 290,499
<TOTAL-LIABILITY-AND-EQUITY> 737,291
<SALES> 33,759
<TOTAL-REVENUES> 34,395
<CGS> 13,492
<TOTAL-COSTS> 13,492
<OTHER-EXPENSES> 6,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,342
<INCOME-PRETAX> 5,085
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,263
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
</TABLE>
