UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 17, 1997
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 1-12762 62-1543819
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
6584 POPLAR AVENUE, SUITE 340, MEMPHIS, TENNESSEE 38138
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 682-6600
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Item 7 of the registrant's Current Report on Form 8-K dated September 30, 1997
is hereby amended to include updated pro forma financial statements.
As required, Item 7, in its entirety is included herein. There are no changes to
the Flournoy Property Group combined historical financial statements and
footnotes.
(a) Financial Statements of Business to be Acquired
FLOURNOY PROPERTIES GROUP
Combined Financial Statements
December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
and June 30, 1997 and 1996 (unadutied)
-8-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Flournoy Properties Group:
We have audited the accompanying combined balance sheets of Flournoy Properties
Group as of December 31, 1996 and 1995, and the related combined statements of
operations, partners' and owners' deficit, and cash flows for each of the years
in the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the management of Flournoy Properties
Group. Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Flournoy
Properties Group as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Atlanta, Georgia
May 5, 1997, except for note 9,
which is as of September 17, 1997
-9-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Balance Sheets
December 31,
June 30, --------------------
1997 1996 1995
--------- -------- --------
(Unaudited)
ASSETS (Dollars in thousands)
Real estate assets (note 2):
Land .................................... $ 20,365 17,098 15,885
Buildings and improvements .............. 237,916 213,026 202,297
Furniture, fixtures, and equipment ...... 39,270 32,225 24,170
--------- -------- --------
297,551 262,349 242,352
Less accumulated depreciation ........... 94,747 89,270 78,974
--------- -------- --------
Operating real estate assets ....... 202,804 173,079 163,378
Construction in progress .................. 7,632 25,984 8,001
Real estate held for development or sale .. 12,817 11,928 9,649
--------- -------- --------
Net real estate assets ............... 223,253 210,991 181,028
Cash and cash equivalents ................. 4,075 5,278 5,397
Trading securities ........................ 2,241 937 3,911
Restricted cash ........................... 5,350 3,606 4,818
Due from affiliates (note 4) .............. 4,936 3,497 4,617
Deferred financing costs, net of
accumulated amortization of $2,931
and $2,963 for 1996 and 1995,
respectively ............................ 5,012 5,198 5,479
Other assets .............................. 7,870 8,495 5,283
--------- -------- --------
Total assets ....................... $ 252,737 238,002 210,533
========= ======== ========
LIABILITIES AND PARTNERS' AND
OWNERS' DEFICIT
Liabilities:
Notes payable (note 2) .................. $ 291,049 273,438 241,738
Accrued interest payable ................ 3,022 2,378 2,252
Accounts payable and accrued expenses ... 13,477 11,618 7,534
Due to affiliates (note 4) .............. 2,453 1,227 1,974
Deferred development fees ............... 1,347 1,347 2,572
Security deposits ....................... 1,573 1,441 1,315
--------- -------- --------
Total liabilities .................. 312,921 291,449 257,385
Partners' and owners' deficit ............. (60,184) (53,447) (46,852)
--------- -------- --------
Commitments and contingencies (note 8)
Total liabilities and partners'
and owners' deficit .............. $ 252,737 238,002 210,533
========= ======== ========
See accompanying notes to combined financial statements.
-10-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Operations
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Property:
Rental ......................... $ 24,422 21,572 44,642 41,257 39,443
Other .......................... 1,309 992 2,177 1,720 1,504
Property management .............. 706 643 1,319 1,170 894
Development ...................... 363 1,136 2,046 4,779 3,668
Construction, net ................ 754 751 1,990 1,956 4,504
Miscellaneous .................... 333 1,276 2,143 1,673 1,197
-------- -------- -------- -------- --------
Total revenues ............ 27,887 26,370 54,317 52,555 51,210
-------- -------- -------- -------- --------
Expenses:
Property operating expenses:
Personnel costs ................ 2,863 2,530 5,286 4,743 4,281
Building repairs and maintenance 1,903 2,203 4,343 3,941 3,333
Real estate taxes and insurance 2,306 2,087 4,100 3,855 3,604
Utilities ...................... 1,149 1,182 2,164 2,067 1,900
Depreciation and amortization .. 5,759 5,117 10,712 9,406 8,587
Other operating expenses ....... 1,189 935 2,066 1,428 1,819
-------- -------- -------- -------- --------
15,169 14,054 28,671 25,440 23,524
Interest ......................... 11,958 10,449 21,338 19,730 19,322
Property management .............. 381 347 715 617 493
General and administrative ....... 2,367 2,435 4,548 4,674 5,471
Offering expenses ................ 2,056 -- 233 -- --
Other expense, net (note 1(k)) ... 103 76 194 666 643
-------- -------- -------- -------- --------
Total expenses ............ 32,034 27,361 55,699 51,127 49,453
-------- -------- -------- -------- --------
Nonrecurring income from easement
and settlement of claim (note 7) . -- -- -- 2,565 900
-------- -------- -------- -------- --------
Net (loss) income ......... $ (4,147) (991) (1,382) 3,993 2,657
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
-11-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Partners' and Owners' Deficit
Six Months ended June 30, 1997 (Unaudited) and Each of
the Years in the Three-Year Period ended December 31, 1996
(Dollars in thousands)
----------------------
Partners' and owners' deficit, December 31, 1993 ...... $(43,329)
Distributions ......................................... (4,479)
Net income ............................................ 2,657
--------
Partners' and owners' deficit, December 31, 1994 ...... (45,151)
Distributions ......................................... (4,303)
Purchase and retirement of common stock ............... (1,541)
Issuance of common stock .............................. 150
Net income ............................................ 3,993
--------
Partners' and owners' deficit, December 31, 1995 ...... (46,852)
Distributions ......................................... (4,186)
Purchase and retirement of common stock ............... (1,027)
Net loss .............................................. (1,382)
--------
Partners' and owners' deficit, December 31 1996 ....... (53,447)
Distributions ......................................... (2,590)
Net loss .............................................. (4,147)
--------
Partners' and owners' deficit, June 30, 1997 .......... $(60,184)
========
See accompanying notes to combined financial statements.
-12-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Cash Flows
Six Months ended June 30, 1997 and 1996 (Unaudited) and Each of
the Years in the Three-Year Period ended December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .......................................... $ (4,147) (991) (1,382) 3,993 2,657
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization .......................... 5,759 5,117 10,712 9,406 8,587
Purchase of trading securities ......................... (2,399) (2,115) (3,171) (1,276) (2,837)
Proceeds from sales of trading securities .............. 1,097 1,739 7,203 1,446 2,138
Realized gains on sales of trading securities .......... (95) (120) (1,187) (108) (16)
Unrealized holding (gains) losses on trading securities 93 (703) 129 (700) (447)
Gain on sale of real estate held for development or sale (30) (30) (382) (100) (187)
Changes in assets and liabilities:
(Increase) decrease in restricted cash ............... (1,744) 1,333 1,212 3,475 (939)
Net change in due from (to) affiliates ............... (213) (26) 373 (3,482) 3,405
(Increase) decrease in other assets .................. 625 (5,479) (3,212) 2,774 (2,158)
Increase (decrease) in accrued interest payable ...... 644 (210) 126 (51) 251
Increase (decrease) in accounts payable and
accrued expenses .................................. 1,859 6,597 4,084 (2,808) 2,235
Increase (decrease) in deferred development fees ..... -- 276 (1,225) (1,781) (905)
Increase in tenants security deposit ................. 132 103 126 153 95
-------- -------- -------- -------- --------
Net cash provided by operating activities ........ 1,581 5,491 13,406 10,941 11,879
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to real estate assets ............................ (19,842) (16,527) (43,013) (32,054) (10,520)
Proceeds from the sale of real estate assets ............... 2,150 1,127 3,169 3,769 4,267
-------- -------- -------- -------- --------
Net cash used in investing activities ........... (17,692) (15,400) (39,844) (28,285) (6,253)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable ................................ 24,541 18,027 71,059 40,633 22,810
Principal payments on notes payable ........................ (6,930) (4,773) (39,359) (18,196) (22,394)
Payment of deferred financing costs ........................ (113) -- (168) (615) (132)
Proceeds from the issuance of common stock ................. -- -- -- 150 --
Purchase and retirement of common stock .................... -- (1,027) (1,027) (1,541) --
Capital distributions ...................................... (2,590) (2,781) (4,186) (4,303) (4,479)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities ......................... 14,908 9,446 26,319 16,128 (4,195)
-------- -------- -------- -------- --------
Net (decrease)increase in cash and
cash equivalents ............................. (1,203) (463) (119) (1,216) 1,431
Cash and cash equivalents, beginning of period ................. 5,278 5,397 5,397 6,613 5,182
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period ....................... 4,075 4,934 5,278 5,397 6,613
======== ======== ======== ======== ========
Supplemental disclosure of cash flow, information -
interest paid, including capitalized interest .............. $ 12,665 10,806 21,212 20,249 18,710
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
-13-
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
June 30, 1997 (Unaudited) and
December 31, 1996, 1995, and 1994
(Dollars in Thousands)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
The accompanying combined financial statements consist of the accounts
of the following entities having varying ownership in common.
Partnerships owning operating apartment communities (the "Properties"):
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Wildwood Apartments, Ltd. 120 Thomasville, Georgia March 1, 1979
River Trace Apartments, Ltd. 244 Memphis, Tennessee January 29, 1981
Three Oaks, Ltd. 120 Valdosta, Georgia March 20, 1981
Westbury Springs, Ltd. 150 Lilburn, Georgia March 6, 1982
Whispering Pines, Ltd. 120 LaGrange, Georgia March 9, 1982
Willow Creek Associates
Limited Partnership 285 Columbus, Georgia March 9, 1982
Fountain Lakes Apartments, Ltd. 100 Brunswick, Georgia May 5, 1982
Riverwynn, Ltd.: March 10, 1983
2000 Wynnton 72 Columbus, Georgia -
Riverwind 44 Columbus, Georgia -
Regency Club 100 Albany, Georgia -
Westbury Creek, Ltd. 120 Augusta, Georgia June 15, 1983
Whispering Pines,
Phase II, Ltd. 96 LaGrange, Georgia June 27, 1983
Windridge Apartments, Ltd. 174 Chattanooga, Tennessee July 8, 1983
Wildwood Apartments,
Phase II, Ltd. 96 Thomasville, Georgia July 22, 1983
Three Oaks Apartments,
Phase II, Ltd. 120 Valdosta, Georgia August 1, 1983
Pines Associates I 160 Augusta, Georgia October 25, 1983
In the Pines, Phase II, Ltd. 96 Augusta, Georgia November 1, 1983
Park Walk Apartments, Ltd. 124 Riverdale, Georgia August 9, 1984
Hidden Lake, Ltd. 160 Union City, Georgia September 11, 1984
The Vistas, Ltd. 144 Macon, Georgia October 11, 1984
River Trace Apartments,
Phase II, Ltd. 196 Memphis, Tennessee October 2, 1984
Paddock Park Apartments, Ltd. 200 Ocala, Florida July 25, 1985
Hidden Oaks Associates, L.P. 240 Albany, Georgia December 12, 1985
Brown-Flournoy Equity Income
Fund Limited Partnership: June 25, 1986
Southland Station I 160 Warner Robins, Georgia -
Park Place 184 Spartanburg, South Carolina -
Hidden Lake II 160 Union City, Georgia -
High Ridge 160 Athens, Georgia -
Paddock Club Huntsville,
a Limited Partnership 200 Huntsville, Alabama November 11, 1988
</TABLE>
-14- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Paddock Club Jacksonville,
a Limited Partnership 200 Jacksonville, Florida November 18, 1988
Paddock Club Wildewood,
a Limited Partnership 200 Columbia, South Carolina November 18, 1988
Paddock Club Lakeland,
a Limited Partnership 200 Lakeland, Florida December 21, 1988
Paddock Park Ocala II,
a Limited Partnership 280 Ocala, Florida December 21, 1988
Paddock Club Lakeland,
Phase II, a Limited Partnership 264 Lakeland, Florida August 24, 1989
Southland Station, Phase II,
a Limited Partnership 144 Warner Robins, Georgia August 24, 1989
Whisperwood Associates,
a Limited Partnership 506 Columbus, Georgia November 7, 1989
Whisperwood Spa & Club,
a Limited Partnership 348 Columbus, Georgia November 7, 1989
Paddock Club - Tallahassee
a Limited Partnership 192 Tallahassee, Florida July 25, 1990
Paddock Club Florence,
a Limited Partnership 200 Florence, Kentucky January 18, 1994
Paddock Club - Tallahassee,
Phase II, a Limited Partnership 112 Tallahassee, Florida May 10, 1994
Paddock Club Columbia,
Phase II, a Limited Partnership 136 Columbia, South Carolina February 23, 1995
Paddock Club Jacksonville,
Phase II, a Limited Partnership 120 Jacksonville, Florida August 7, 1995
</TABLE>
Partnerships owning apartment Properties which were under construction and/or in
initial lease-up during 1997:
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Towne Lake Hills Apartments,
a Limited Partnership 264 Woodstock, Georgia August 8, 1995
Paddock Club Greenville,
a Limited Partnership 208 Greenville, South Carolina August 14, 1995
Paddock Club Brandon
a Limited Partnership 308 Brandon, Florida December 7, 1995
</TABLE>
Corporations involved in property management, leasing, development and
construction:
Date of
Name Organization
---- ------------
Flournoy Development Company ("FDC") October 1967
Flournoy Construction Company ("FCC") January 1972
-15- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
The entities listed above and on the two preceding pages are referred to
collectively as the Flournoy Properties Group ("FPG"). FDC is engaged in
the ownership of apartment communities located in Southeastern United
States and provides management, development and construction services on
a contractual basis.
(b) PRINCIPLES OF COMBINATION
The accompanying combined financial statements of FPG have been
presented on a combined basis because of the common ownership and
management and because the entities are expected to be the subject of a
business combination.
The accounts of each of the entities comprising FPG are combined in the
accompanying financial statements. All significant inter-entity accounts
and transactions have been eliminated in combination. The combined
financial statements include the assets and liabilities, as well as
operations of FPG, from the date that each entity commenced operations.
FPG management has made a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare the accompanying financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
(c) INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information for the six
months ended June 30, 1997 and 1996 has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. In the
opinion of management, all adjustments and eliminations, consisting only
of normal recurring adjustments, necessary to present fairly the
combined results of FPG's operations and cash flows for the six months
ended June 30, 1997 and 1996 have been included. The results of
operations for such interim periods is not necessarily indicative of the
results for the full year.
(d) REVENUE RECOGNITION
FPG leases residential apartments under operating leases with terms
generally one year or less. Rental and other revenues are recorded on
the accrual method of accounting as earned.
In addition to leasing the residential apartments of FPG, FDC provides
property management services for 40 affiliated Section 42 Housing Tax
Credit multifamily properties ("Section 42") - (note 8). Property
management revenue is recorded on the accrual method of accounting as
earned.
-16- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
FDC and FCC receive development and construction fees related to the
development of the affiliated Section 42 properties. Development and
construction income is recognized as earned as the property is developed
and certain operating and financing performance conditions are met. FDC
does not recognize development income to the extent that requirement
exists to invest a portion of such development fees in the partnership
entities from which the fees are earned.
FCC recognizes construction contract revenues, which are presented net
of construction contract costs in the accompanying statements of
operations, using the percentage-of-completion method. Under this
method, the percentage of contract revenue to be recognized currently is
computed based upon that percentage of estimated total revenue that
incurred costs to date bear to total estimated costs, after giving
effect to the most recent estimates of costs to complete. Revisions in
cost and revenue estimates are reflected in the period in which the
facts which require the revision become known. When revised cost
estimates indicate a loss on an individual contract, the total estimated
loss is provided for currently in its entirety without regard to the
percentage of completion.
(e) RENTAL OPERATIONS
FPG currently owns and operates approximately 8,600 apartment units
including those under construction and in initial lease up, Apartment
units are leased generally to tenants on terms of one year or less, with
monthly payments due in advance. In management's opinion, due to the
number of tenants, the type and diversity of submarkets in which the
Properties operate, and the collection terms, there is no concentration
of credit risk.
(f) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand. FPG considers all highly
liquid investments with a maturity of ninety days or less to be cash
equivalents.
(g) TRADING SECURITIES
Unrealized holding gains and losses on trading securities are included
in miscellaneous revenues in the accompanying combined statements of
operations.
(h) RESTRICTED CASH
Restricted cash is comprised of resident security deposits and
restricted deposits for property taxes and escrow accounts.
-17- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(i) REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are stated at the lower of depreciated cost or
estimated net realizable value.
The Flournoy Properties Group adopted the provisions of SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, on January 1, 1996. This statement requires
that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement did
not have a material impact on the Flournoy Properties Group's financial
position, results of operations, or liquidity.
Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line
basis over the useful lives of the properties (buildings and related
land improvements - 25 to 30 years; furniture, fixtures, and equipment -
3 to 10 years).
(j) REAL ESTATE HELD FOR DEVELOPMENT OR SALE
Real estate held for development or sale, which consists primarily of
sites intended for future multifamily developments, is stated at the
lower of aggregate cost or fair value. The cost includes the purchase
price of the land, construction, and development costs and fees, as well
as capitalized interest and loan fees.
(k) INCOME TAXES
No provision for federal and state income taxes relating to the combined
partnerships and Flournoy Properties (S Corporation) has been made in
the accompanying combined financial statements. Each partner or
shareholder is responsible for reporting their share of taxable income
or loss from these entities. There was no income tax expense for FDC in
1996. The 1995 and 1994 income tax expense for FDC was $460 and $650,
respectively, and is classified in other expense in the accompanying
statements of operations.
(l) DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are deferred. Deferred
financing costs are amortized over the terms of the related debt using a
method which approximates the interest method.
-18- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(2) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-------- --------
1996 1995
-------- --------
<S> <C> <C>
Demand and term notes:
Prime plus 1% (9.25% at December 31, 1996) notes payable to bank,
secured by real estate, property and equipment, and/or guaranteed
by John F. Flournoy, due on demand ................................. $ 42,657 17,434
Notes payable to bank, interest rate ranging from 8% to prime plus
1%, secured by real estate and assigned rents, due through 2010 ..... 7,953 7,193
Prime rate margin loan, due on demand; secured by trading securities .. -- 1,393
-------- --------
50,610 26,020
-------- --------
Mortgage and installment notes:
Mortgage and installment notes payable consist of the following:
Mortgage notes payable, bearing interest at rates ranging from
6.15% to 11.00%, due in monthly principal and interest
installments. Certain mortgage notes contain provisions for
payment of additional interest, as defined in the note agreement,
as well as for restrictions on prepayment of the notes ...........
Supplemental interest amounts were $743 at December 31, 1996, $562
in 1995 and $445 in 1994. The mortgage notes are secured by real
estate, certain letters of credit, assignment of leases and
management agreement, and/or guaranteed by John F. Flournoy ...... 175,403 192,560
Mortgage loan payable monthly through March 1, 1999, at which
time the entire outstanding principal balance is due and payable,
bearing interest at 275 basis points over the weekly average yield
on one year U.S. Treasury, adjusted on an annual basis; secured by
real estate assets, assignment of leases, and a guarantee
from John F. Flournoy ............................................ 6,995 7,087
Installment note payable, bearing interest at an annual rate of prime
plus 1%, secured by real estate assets and property and equipment 668 828
Installment note payable, bearing interest at fixed annual rate of
10.625%, secured by real estate assets or property and equipment . 1,442 1,457
-------- --------
184,508 201,932
-------- --------
Construction notes payable:
Construction notes payable bearing interest at 8.50%, secured by the
related real estate assets; convertible into installment notes ...... 11,197 6,592
Construction notes payable bearing interest at prime plus .5% to prime
plus 1%, secured by the related real estate assets; convertible into
installment notes ................................................... 27,123 7,194
-------- --------
38,320 13,786
-------- --------
$273,438 241,738
======== ========
</TABLE>
-19- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
The principal maturities as of December 31, 1996 of the mortgage and
installment notes are as follows:
1997 $ 5,343
1998 2,415
1999 16,673
2000 33,121
2001 9,727
Thereafter 117,229
-----------
$ 184,508
===========
Certain of the mortgage notes payable require escrow balances for the
payments of insurance, taxes, improvements, and repairs.
(3) FAIR VALUE OF DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by FPG
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret
market data and develop the related estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that could be realized upon disposition of the
financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts.
Cash and cash equivalents, rental and contract receivables, accrued
expenses and other liabilities, and security deposits are carried at
amounts which reasonably approximate their fair value.
Trading securities are carried at fair value based on published quotes.
The carrying value of notes payable at December 31, 1996 reasonably
approximates their fair value.
The fair value estimates presented herein are based on information
available to management as of December 31, 1996. Although management is
not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively revalued
for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts
presented herein.
-20- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(4) RELATED PARTY TRANSACTIONS
Accounts due from/to affiliates, which are noninterest bearing and have
open payment terms, consist of the following:
December 31,
-------------------------
1996 1995
-------- --------
Accounts due from affiliates:
Section 42 partnerships .................... $ 2,654 2,227
Majority stockholder of FDC ................ 612 1,729
Other ...................................... 231 661
-------- --------
$ 3,497 4,617
======== ========
Account due to affiliates:
Section 42 partnerships .................... $ 725 1,867
Other ...................................... 502 107
-------- --------
$ 1,227 1,974
======== ========
During 1996 and 1995, there were capital stock transactions involving
related parties (note 5).
(5) CAPITAL STOCK
FDC has authorized 10,000,000 shares of common stock of $.01 par value
of which there were issued and outstanding 1,734,385; 1,831,789; and
1,944,444 shares at December 31, 1996, 1995, and 1994, respectively.
During 1996, FDC repurchased and retired 97,404 shares of its common
stock from a trust of which two existing shareholders/officers of the
Flournoy Properties Group are trustees. The stock was repurchased for
approximately $10.54 per share or a total of $1,027.
During 1995, FDC purchased and retired 142,655 shares of its common
stock from a trust of which two existing shareholders/officers of the
FDC are trustees. The stock was repurchased for approximately $10.80 per
share or a total of $1,541. Also, during 1995, FDC sold 30,000 shares of
common stock at $5.00 per share to three officers of FDC.
(6) EMPLOYEE BENEFIT PLANS
FDC has a contributory profit sharing plan covering substantially all
employees. FDC contributions to the Plan are discretionary.
Contributions of approximately $200, $203, and $200 were accrued in
1996, 1995 and 1994, respectively.
-21- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
Additionally, FDC had a deferred compensation plan for certain
employees. The deferred balance of each participants' account was a
function of the estimated fair value of the Flournoy Properties Group
common stock through December 31, 1995. The plan was frozen as of
December 31, 1995, and no further contributions have been made to the
plan by either the FDC or the participants. Compensation expense of $226
and $346 was accrued in the accompanying financial statements for 1995
and 1994, respectively.
(7) LITIGATION AND EASEMENT SETTLEMENTS
Certain partnerships settled, in 1995, an outstanding legal claim with
the manufacturer of defective polybutylene water piping that was
installed at six Properties. The lawsuit sought damages resulting from
water pipe leaks at the Properties since construction. The final
settlement included the cost to re-plumb each Property, as well as
additional net settlement proceeds to the partnerships of $2,465.
Additionally, two partnerships (Phases I and II of same Property)
received proceeds of $100 and $900 in 1995 and 1994, respectively, for a
court-ordered gas pipe easement granted to a Florida utility Flournoy
Properties Group.
(8) COMMITMENTS AND CONTINGENCIES
FDC is contingently liable at December 31, 1996 in the amount of $4,536
for letters of credit required by investors and mortgagees of various
affiliated partnerships. FDC is also contingently liable at December 31,
1996 in the amount of $3,474 for letters of credit issued for completion
of construction projects and for amounts required by local governments
relating to land improvements. Also, FDC and certain affiliates have
guaranteed at December 31, 1996 loan obligations of affiliated
partnerships amounting to approximately $3,200.
FDC is the general partner in 43 limited partnerships that are included
in the Low Income Housing Tax Credit LIHTC Program and are governed by
Section 42 of the Internal Revenue Code of 1986 ("IRC"), as amended. In
order to maintain the tax benefits associated with the ownership of the
properties, LIHTC Program provisions must be followed in the management
and operations of the properties during the Compliance Period, as
defined in the IRC.
As of December 31, 1996 and under certain circumstances, the Flournoy
Properties Group is committed to make project expense and working
capital loans up to $3,707 to various affiliated partnerships. The
balance of such loans as of December 31, 1996 is $997.
As of December 31, 1996, Paddock Park Apartments, Ltd. is contingently
liable in the amount of $6,852 for a letter of credit issued to the
trustee for the Housing Finance Authority of Marion County, Florida. The
letter of credit is required to fund any defaults of the Florida
Multifamily Housing Revenue Refunding Bonds and expires November 5,
2008.
(9) REORGANIZATION
On September 17, 1997, FDC, Mid-America Apartment Communities, Inc.
("MAAC") and Mid-America Apartments, L.P. ("MAALP") entered into an
Agreement and Plan of Reorganization pursuant to which FDC will merge
with and into MAAC, and MAAC and MAALP will acquire certain assets of
FDC and certain affiliated entities (collectively FPG) through a series
of merger, exchange and purchase transactions. The Reorganization is
subject to approval of the shareholders and partners of FPG and certain
other third parties.
-22-
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma condensed combined financial statements
give effect to the following transactions: (i) consummation of the FDC Merger
and the Reorganization pursuant to which MAAC and MAALP shall acquire all the
properties and assets comprising the Flournoy Properties Group, including FDC,
in exchange for 1,556,510 shares of Common Stock, 481,704 Class A Common Units
of MAALP, and approximately $29.6 million cash; in addition, MAAC is obligated
to prepay certain FPG indebtedness totalling approximately $197.2 million at
June 30, 1997 and to assume certain FPG indebtedness totalling approximately
$93.5 million at June 30, 1997; (ii) the acquisition in 1996 of six Communities
containing an aggregate of 1,760 apartment units for an aggregate cash price of
$65.7 million (the "1996 Completed Acquisitions"); (iii) the acquisition in
1997 of ten Communities containing an aggregate of 2,938 apartment units for an
aggregate cash purchase price of $121.5 million (the "1997 Completed
Acquisitions") (the 1996 Completed Acquisitions and 1997 Completed
Acquisitions, collectively, the "Completed Acquisitions"); (iv) the
disposition in 1996 of three Communities containing an aggregate of 724
apartment units for an aggregate cash consideration of $17.8 million (the
"Dispositions"); (v) the issuance and sale in October 1996 of 2,000,000 shares
of MAAC's 9.5% Series A Cumulative Preferred Stock (Liquidation Preference $25
per Share) (the "Series A Preferred Stock") for an aggregate net cash price of
$47.8 million (the "October 1996 Preferred Stock Offering"), and the related
use of such proceeds; (vi) the issuance and sale in March 1997 of 2,300,000
shares of MAAC Common Stock for an aggregate net cash price of $62.6 million,
and the related use of such proceeds; and (vii) the issuance and sale in October
1997 of 3,499,300 shares of MAAC Common Stock for an aggregate net cash price of
$98.2 million (the "Common Stock Offering"), and the related use of such
proceeds.
In addition, such unaudited pro forma condensed combined financial
statements give effect to the following financing transactions that the Company
expects to consummate prior to the closing of the Reorganization and the
Company's assumptions with respect to the terms of such financing: (i) the
issuance and sale of 1,600,000 shares of MAAC's 8.75% Preferred Stock
(Liquidation Preference $25 per share) for an estimated aggregate net cash price
of $38.6 million (the "Preferred Stock Offering"); and (ii) the establishment
of a bridge loan for up to $150 million bearing interest at 6.95% per annum and
the borrowing of approximately $101,100 under the arrangement (the "New Credit
Facilities") and the Company's initial anticipated borrowings thereunder. The
Preferred Stock Offering and New Credit Facilities are intended to provide
financing for the transactions described in the above paragraph. While the
Company intends to undertake the financing transactions described above, there
can be no assurance that such financings will occur on the terms assumed by the
Company.
The unaudited pro forma condensed combined balance sheet at June 30, 1997
has been prepared as if the Reorganization, the Common Stock Offering, the
Preferred Stock Offering, the establishment of the New Credit Facilities and the
1997 Probable Acquisitions had been completed on that date.
The unaudited pro forma condensed combined statements of operations for the
six months ended June 30, 1997 and the year ended December 31, 1996 have been
prepared as if each of the transactions described above had been consummated on
January 1, 1996 and assuming that MAAC had qualified as a REIT and distributed
all of its taxable income for the periods presented and, therefore, incurred no
income tax expense.
A
<PAGE>
For purposes of these pro forma financial statements, the Reorganization
has been accounted for as a purchase in accordance with Accounting Principles
Board Opinion No. 16. In the opinion of MAAC's management, all significant
adjustments necessary to reflect the effects of the foregoing transactions have
been made.
These unaudited pro forma financial statements have been prepared by MAAC
based on the historical financial statements of FPG and MAAC, which have been
previously filed with the Securities and Exchange Commission and are
incorporated herein by reference. These unaudited pro forma financial statements
should be read in conjunction with the foregoing historical financial
statements, including the notes thereto. These pro forma combined financial
statements are presented for comparative purposes only and are not indicative of
what the actual financial position or results of operations of MAAC would have
been had the foregoing transactions occurred on the dates indicated.
B
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAAC FPG PRO FORMA
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS(C) COMBINED
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Rental real estate assets, net....... $704,051 $ 202,804 $ 158,497(D) $ 1,065,352
Construction in progress............. 14,123 7,632 (539)(E) 21,216
Real estate held for development..... -- 12,817 1,934(D) 14,751
------------ ------------- -------------- ------------
Net real estate assets.......... 718,174 223,253 159,892 1,101,319
Cash and cash equivalents............ 5,214 4,075 (3,883)(F) 5,406
Trading securities................... -- 2,241 (2,241)(G) --
Restricted cash...................... 5,271 5,350 (1,527)(H) 9,094
Due from affiliates.................. -- 4,936 (4,936)(I) --
Deferred financing costs, net........ 2,856 5,012 (3,748)(J) 4,120
Other assets......................... 6,679 7,870 (428)(K) 14,121
------------ ------------- -------------- ------------
Total assets.................... $738,194 $ 252,737 $ 143,129 $ 1,134,060
============ ============= ============== ============
LIABILITIES:
Debt................................. $382,622 $ 291,049 $ (96,122)(L) $ 577,549
Due to affiliates.................... -- 2,453 (1,029)(M) 1,424
Deferred development fees............ -- 1,347 (1,347)(N) --
Other liabilities.................... 15,914 18,072 (5,631)(O) 28,355
------------ ------------- -------------- ------------
Total liabilities............... $398,536 $ 312,921 $ (104,129) $ 607,328
============ ============= ============== ============
Minority interest.................... $ 45,282 $ -- $ 17,795(P) $ 63,077
SHAREHOLDERS' EQUITY:
Preferred stock...................... 20 -- 16(Q) 36
Common stock......................... 134 -- 51(R) 185
Additional paid-in-capital........... 317,253 -- 177,371(S) 494,624
Accumulated deficit.................. (22,112) (60,184) 52,025(T) (30,271)
Other................................ (919) -- -- (919)
------------ ------------- -------------- ------------
Total shareholders' equity...... 294,376 (60,184) 229,463 463,655
------------ ------------- -------------- ------------
Total liabilities and
shareholders' equity.......... $738,194 $ 252,737 $ 143,129 $ 1,134,060
============ ============= ============== ============
</TABLE>
PRO FORMA ADJUSTMENTS:
(A) See MAAC Pro Forma below.
(B) Reflects the unaudited combined historical balance sheet of FPG as of
June 30, 1997.
(C) MAAC may issue additional shares of Common Stock having a value of up
to $7,500 ("Contingent Value Shares") if certain agreed upon
conditions are satisfied during calendar years 1998, 1999 and 2000.
When and if issued, the Contingent Value Shares will be recorded as
additional purchase consideration based upon the fair value of the
Common Stock at the date of issuance. The amount of the Contingent
Value Shares potentially issuable by MAAC has not been included in
the Pro Forma Condensed Combined Balance Sheet.
(D) Represents an increase in the carrying value of FPG properties
resulting from the application of the purchase method of accounting.
(NOTES CONTINUED ON FOLLOWING PAGE)
C
<PAGE>
(E) Represents the elimination of income on a construction contract
between MAAC and FPG.
(F) Represents:
Estimated proceeds from the
sale of trading securities,
net of estimated
commissions of $67........... $ 2,174
Anticipated FPG distributions
at the date of consummating
the Reorganization........... (3,172)
Contributions to FPG by the
majority shareholder......... 201
Net change in cash resulting
from the disposition of
Section 42 partnership
interests and related
affiliate balances........... 1,639
Purchase of certain real
estate assets and partnership
interests in connection
with the Reorganization...... (29,589)
Prepayment of certain FPG
mortgages and notes payable
consisting of principal
($197,222), interest
($2,262), penalties ($7,620)
and escrow refunds $1,385.... (205,719)
Settlement of FPG's deferred
compensation plan............ (1,610)
Legal, accounting, investment
banking and other costs...... (5,000)
Settlement of a portion of
amounts due from majority FPG
stockholder.................. 595
Anticipated net proceeds from
the Preferred Stock
Offering..................... 38,590
Net proceeds from the Common
Stock Offering............... 98,172
Anticipated proceeds from the
New Credit Facilities, net of
issuance costs of $1,264..... 99,836
------------
$ (3,883)
============
(G) Represents the sale of trading securities.
(H) Represents the refund ($1,385) of escrow deposits on FPG mortgages
and notes payable expected to be prepaid and escrow deposits ($142)
expected to be settled in connection with the sale of the Section 42
partnership interests.
(I) Represents amounts which were eliminated in conjunction with the sale
of the Section 42 partnership interests ($2,311), the settlement of
certain Section 42 and other affiliate balances for cash ($1,610),
the settlement of amounts due from the majority stockholder for cash
($595) and units in MAALP ($420).
(J) Represents the write-off of FPG deferred financing costs ($5,012)
resulting from the application of the purchase method of accounting
to reflect the debt at fair value and deferred financing costs of
$1,264 for new debt expected to be incurred as part of the New Credit
Facilities.
(K) Represents the elimination of amounts receivable by FPG under a
construction contract between MAAC and FPG ($1,759), and an increase
in the carrying value of certain non-rental FPG assets resulting from
the application of the purchase method of accounting of $1,331.
(L) Represents the anticipated prepayment of certain FPG mortgages and
notes payable ($197,222) and anticipated additional borrowings under
the New Credit Facilities in connection with the transactions of
$101,100.
(M) Represents amounts which were eliminated in conjunction with the sale
of the Section 42 partnership interests ($413), the settlement of
Section 42 and other affiliate balances for cash ($144) and the
elimination of an affiliate balance ($472) related to a formation
entity acquired for cash.
(N) Represents the elimination of amounts resulting from the sale of the
Section 42 partnership interests.
(O) Represents the elimination of amounts payable by MAAC to FPG under a
construction contract ($1,759), payment of accrued interest on FPG
mortgages and notes payable expected to be prepaid in connection with
the Reorganization ($2,262), and the termination of FPG's deferred
compensation plan ($1,610).
D
<PAGE>
(P) Represents the issuance of 481,704 Class A Common Units in MAALP at
consummation of the Reorganization at a market value of $13,819
(based upon $28.69 per unit) and an adjustment to minority interest
for the issuance of Class A Common Units in connection with the
Reorganization, the Common Stock Offering and a property acquisition
of $3,976.
(Q) Represents the anticipated issuance of 1,600,000 shares of preferred
stock in the Preferred Stock Offering.
(R) Represents the issuance of 3,499,300 shares of Common Stock in the
Common Stock Offering, $35 ($29.69 per share), and the anticipated
issuance of Common Stock in connection with the Reorganization, $16
($28.69 per share).
(S) Represents:
Net proceeds from the anticipated
Preferred Stock Offering.......................... $ 38,590
Net proceeds from the Common Stock Offering......... 98,172
Issuance of 1,556,510 shares of Common Stock
in connection with the Reorganization
assuming a market value of $28.69 per share....... 44,652
Adjustment to minority interest of MAALP for
the issuance of Class A Common Units.............. (3,976)
Par value of shares issued in the Common
Stock Offering and the Preferred Stock Offering... (67)
----------
$ 177,371
==========
(T) Represents:
Elimination of income recognized on a
construction contract between MAAC and FPG........ $ (539)
Anticipated prepayment penalties to be incurred
in connection with the prepayment of
certain FPG mortgages and notes payable
subsequent to the Reorganization.................. (7,620)
Elimination of FPG accumulated deficit as
a result of the application of the purchase
method of accounting.............................. 60,184
----------
$ 52,025
==========
E
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
MAAC COMPLETED MAAC
HISTORICAL(U) ACQUISITIONS PRO FORMA
------------- ------------ ---------
ASSETS:
Real estate assets, net.......... $ 669,191 $ 34,860(V) $ 704,051
Construction in progress......... 14,123 -- 14,123
------------- ------------ ---------
Net real estate assets......... 683,314 34,860 718,174
Cash and cash equivalents........ 5,214 -- 5,214
Restricted cash.................. 5,271 -- 5,271
Deferred financing costs, net.... 2,751 105(W) 2,856
Other assets..................... 6,679 -- 6,679
------------- ------------ ---------
Total assets.............. $ 703,229 $ 34,965 $ 738,194
============= ============ =========
LIABILITIES:
Debt............................. $ 347,897 $ 34,725(X) $ 382,622
Other liabilities................ 15,914 -- 15,914
------------- ------------ ---------
Total liabilities......... 363,811 34,725 398,536
Minority interest................ 45,042 240(Y) 45,282
SHAREHOLDERS' EQUITY:
Cumulative preferred stock....... 20 -- 20
Common shares.................... 134 -- 134
Additional paid-in-capital....... 317,253 -- 317,253
Accumulated deficit.............. (22,112) -- (22,112)
Other............................ (919) -- (919)
------------- ------------ ---------
Total shareholders'
equity................. 294,376 -- 294,376
------------- ------------ ---------
Total liabilities and
shareholders' equity... $ 703,229 $ 34,965 $ 738,194
============= ============ =========
MAAC PRO FORMA ADJUSTMENTS:
(U) Reflects the unaudited historical consolidated balance sheet of MAAC as of
June 30, 1997.
(V) Increase represents Completed Acquisitions which were consummated
subsequent to June 30, 1997.
(W) Increase represents deferred financing costs incurred in connection with
the assumption of debt to fund the Completed Acquisitions which were
consummated subsequent to June 30, 1997.
(X) Increase represents assumption of debt and additional borrowings incurred
in connection with the Completed Acquisitions which were consummated
subsequent to June 30, 1997.
(Y) Increase represents Class A Common Units in MAALP which were issued in
connection with a property acquisition.
F
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAAC FPG COMBINED
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS(C) PRO FORMA
------------ ------------- -------------- ----------
<S> <C> <C> <C>
REVENUES:
Property
Rental.......................... $ 67,683 $24,422 -- $ 92,105
Other........................... 756 1,309 -- 2,065
Property management.................. -- 706 -- 706
Development.......................... -- 363 -- 363
Construction, net.................... -- 754 (539)(D) 215
Miscellaneous........................ 330 331 (269)(E) 392
------------ ------------- -------------- ----------
TOTAL REVENUES............. 68,769 27,885 (808) 95,846
EXPENSES:
Personnel............................ 7,143 2,863 -- 10,006
Building repairs / maintenance,
utilities, landscaping, and other
operating.......................... 11,414 4,241 (37)(F) 15,618
Real estate taxes and insurance...... 7,387 2,306 -- 9,693
Depreciation and amortization -- real
estate assets...................... 13,602 5,422 259(G) 19,283
Depreciation and amortization -- non
real estate assets................. 94 141 (10)(G) 225
Property management.................. -- 381 -- 381
General and administrative........... 3,202 2,367 (485)(H) 5,084
Interest............................. 15,111 11,958 (5,634)(I) 21,435
Amortization of deferred financing
costs.............................. 449 299 (173)(J) 575
Offering expenses.................... -- 2,056 (2,056)(K) --
Other, net........................... -- -- -- --
------------ ------------- -------------- ----------
TOTAL EXPENSES............. 58,402 32,034 (8,136) 82,300
------------ ------------- -------------- ----------
Income before gains on sale of
assets............................. 10,367 (4,149) 7,328 13,546
------------ ------------- -------------- ----------
Gains on sale of assets.............. -- 2 (2)(L) --
------------ ------------- -------------- ----------
Income before minority interest in
operating partnership income....... 10,367 (4,147) 7,326 13,546
------------ ------------- -------------- ----------
Minority interest in operating
partnership income................. 1,638 -- 258(M) 1,896
------------ ------------- -------------- ----------
Net income........................... 8,729 (4,147) 7,068 11,650
------------ ------------- -------------- ----------
Dividend on preferred shares......... 2,375 -- 1,750(N) 4,125
------------ ------------- -------------- ----------
Net income available for common
shareholders....................... $ 6,354 $(4,147) $ 5,318 $ 7,525
============ ============= ============== ==========
Net income per common share.......... $ 0.41(O)
==========
</TABLE>
G
<PAGE>
PRO FORMA ADJUSTMENTS:
(A) See MAAC Pro Forma below.
(B) Reflects the historical combined statement of operations of FPG for
the six months ended June 30, 1997. Certain reclassifications have
been made to FPG's historical statement of operations to conform to
MAAC's presentation. Subsequent to the Reorganization, MAAC expects
to incur prepayment penalties of approximately $7,620 on notes
payable of FPG which are expected to be prepaid. These nonrecurring
costs are charged to operations as an extraordinary item when
incurred. Such amounts have not been included in the Pro Forma
Condensed Consolidated Statement of Operations.
(C) MAAC may issue additional shares of Common Stock having a value of up
to $7,500 if certain agreed upon conditions are satisfied during
calendar years 1998, 1999 and 2000. When and if issued, the
Contingent Value Shares will be recorded as additional purchase
consideration based upon the fair value of the Common Stock at the
date of issuance. The amount of the amortization charge related to
the Contingent Value Shares potentially issuable by MAAC has not been
included in the Pro Forma Condensed Combined Statement of Operations.
(D) Represents the elimination of income recognized on a construction
contract between MAAC and FPG.
(E) Represents the elimination of nonrecurring income of FPG consisting
of dividend income on trading securities ($18), distributions from
the Section 42 interests which are expected to be disposed of prior
to the Reorganization ($224) and other ($27).
(F) Represents elimination of certain administrative fees of FPG.
(G) Represents additional depreciation related to the increase in the
cost of FPG properties resulting from the application of purchase
method of accounting.
(H) Represents reductions in general and administrative expenses as a
result of the Reorganization due to a decrease in professional fees
($165) and a decrease in executive compensation and certain employee
benefit costs ($320).
(I) Represents the net reduction in interest and credit enhancement costs
associated with the repayment of FPG mortgage and notes payable as a
part of the transaction ($9,147) and interest on additional
borrowings under the New Credit Facilities of $3,513.
(J) Represents amortization of historical deferred financing costs of FPG
which were eliminated in connection with applying the purchase method
of accounting ($299) net of the amortization of deferred financing
costs on new debt which is expected to be incurred of $126.
(K) Represents elimination of accounting, legal and other costs incurred
in connection with proposed public offering of FDC common stock which
was abandoned during 1997.
(L) Represents the elimination of nonrecurring gains on sales of assets.
(M) Represents the change in minority interest in MAALP income as a
result of the Reorganization, Common Stock Offering and a property
acquisition where Class A Common Units were issued.
(N) Represents dividends on the 1,600,000 shares of preferred stock which
is expected to be issued in the Preferred Stock Offering.
(O) Pro Forma net income available per common shares is based on 18,441
shares outstanding during the period and Pro Forma net income
available for common shareholders. Extraordinary expenses related to
the debt financings have been excluded from the calculation of Pro
Forma net income available for common shareholders.
H
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------
MAAC COMPLETED MAAC
HISTORICAL(P) ACQUISITIONS(Q) OTHER PRO FORMA
------------- --------------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Property
Rental.......................... $61,629 $ 6,054 -- $67,683
Other........................... 600 156 -- 756
Miscellaneous................... 330 -- -- 330
------------- --------------- --------- ---------
TOTAL REVENUES............. 62,559 6,210 -- 68,769
EXPENSES:
Personnel....................... 6,576 567 -- 7,143
Building repairs/maintenance,
utilities, landscaping, and
other operating............... 10,323 1,091 -- 11,414
Real estate taxes and
insurance..................... 6,537 850 -- 7,387
Depreciation and
amortization -- real estate
assets........................ 12,350 -- 1,252(R) 13,602
Depreciation and
amortization -- non real
estate assets................. 85 -- 9(S) 94
General and administrative...... 3,016 -- 186(T) 3,202
Interest........................ 13,097 -- 2,014(U) 15,111
Amortization of deferred
financing costs............... 410 -- 39(V) 449
------------- --------------- --------- ---------
TOTAL EXPENSES............. $52,394 $ 2,508 $ 3,500 $58,402
============= =============== ========= =========
Income before minority interest in
operating partnership income....... $10,165 $ 3,702 $ (3,500) $10,367
------------- --------------- --------- ---------
Minority interest in operating
partnership income................. 1,750 -- (112)(W) 1,638
------------- --------------- --------- ---------
Net income........................... 8,415 3,702 (3,388) 8,729
------------- --------------- --------- ---------
Dividends on preferred shares........ 2,375 -- -- 2,375
------------- --------------- --------- ---------
Net income available for common
shareholders....................... $ 6,040 $ 3,702 $ (3,388) $ 6,354
============= =============== ========= =========
</TABLE>
I
<PAGE>
MAAC PRO FORMA ADJUSTMENTS:
(P) Reflects the unaudited historical consolidated statement of
operations of MAAC for the six months ended June 30, 1997.
(Q) Represents historical operating revenues and expenses from January 1,
1997 to the earlier of the acquisition date or June 30, 1997 for the
1997 Completed Acquisitions.
(R) Represents additional real estate depreciation and amortization
resulting from the Completed Acquisitions.
(S) Represents additional non-real estate depreciation and amortization
resulting from the Completed Acquisitions.
(T) Represents anticipated additional costs to operate MAAC resulting
from property acquisitions.
(U) Represents additional interest costs related to mortgage debt
incurred or assumed in connection with the Completed Acquisitions.
(V) Represents additional amortization resulting from deferred financing
costs incurred in connection with the Completed Acquisitions.
(W) Represents the change in the minority interest in the income of MAALP
during the period.
J
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAAC FPG COMBINED
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS(C) PRO FORMA
------------ ------------- -------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Property
Rental.......................... $133,185 $44,642 $ -- $177,827
Other........................... 1,774 2,177 -- 3,951
Property management.................. -- 1,319 -- 1,319
Development.......................... -- 2,046 -- 2,046
Construction, net.................... -- 1,990 (136)(D) 1,854
Miscellaneous........................ 732 823 (296)(E) 1,259
------------ ------------- -------------- ----------
TOTAL REVENUES............. 135,691 52,997 (432) 188,256
EXPENSES:
Personnel............................ 13,796 5,286 -- 19,082
Building repairs / maintenance,
utilities, landscaping, and other
operating.......................... 22,916 8,573 (75)(F) 31,414
Real estate taxes and insurance...... 14,189 4,100 -- 18,289
Depreciation and amortization -- real
estate assets...................... 25,891 10,191 1,170(G) 37,252
Depreciation and amortization -- non
real estate assets................. 188 266 (4)(G) 450
Property management.................. -- 715 -- 715
General and administrative........... 6,868 4,548 (829)(H) 10,587
Interest............................. 29,392 21,338 (9,257)(I) 41,473
Amortization of deferred financing
costs.............................. 739 449 (196)(J) 992
Offering expenses.................... -- 233 (233)(K) --
Other, net........................... -- -- 640(L) 640
------------ ------------- -------------- ----------
TOTAL EXPENSES............. 113,979 55,699 (8,784) 160,894
------------ ------------- -------------- ----------
Income before gains on sale of
assets............................. 21,712 (2,702) 8,352 27,362
------------ ------------- -------------- ----------
Gains on sale of assets.............. -- 1,320 (1,320)(M) --
Income before minority interest in
operating partnership income....... 21,712 (1,382) 7,032 27,362
------------ ------------- -------------- ----------
Minority interest in operating
partnership income................. 3,409 -- 422(N) 3,831
------------ ------------- -------------- ----------
Net income........................... 18,303 (1,382) 6,610 23,531
------------ ------------- -------------- ----------
Dividend on preferred shares......... 4,750 -- 3,500(O) 8,250
------------ ------------- -------------- ----------
Net income available for common
shareholders....................... $ 13,553 $(1,382) $ 3,110 $ 15,281
============ ============= ============== ==========
Net income per common share.......... $ 0.83(P)
==========
</TABLE>
PRO FORMA ADJUSTMENTS:
(A) See MAAC Pro Forma below.
(B) Reflects the historical combined statement of operations of FPG for
the year ended December 31, 1996. Certain reclassifications have been
made to FPG's historical statement of
K
<PAGE>
operations to conform to MAAC's presentation. Subsequent to the
Reorganization, MAAC expects to incur prepayment penalties of
approximately $7,620 on mortgages and notes payable to FPG which are
expected to be prepaid. These nonrecurring costs will be charged to
operations as an extraordinary item when incurred. Such amounts have
not been included in the Pro Forma Condensed Combined Statement of
Operations.
(C) MAAC may issue additional shares of Common Stock having a value of up
to $7,500 if certain agreed upon conditions are satisfied during
calendar years 1998, 1999 and 2000. When and if issued, the
Contingent Value Shares will be recorded as additional purchase
consideration based upon the fair value of the Common Stock at the
date of issuance. The amount of the Contingent Value Shares
potentially issuable by MAAC has not been included in the Pro Forma
Condensed Combined Statement of Operations.
(D) Represents the elimination of income recognized on a construction
contract between MAAC and FPG.
(E) Represents the elimination of nonrecurring income recognized by FPG
during 1996 related to dividends on trading securities ($34) and
distributions from the Section 42 interests which are expected to be
disposed to prior to the Reorganization ($262).
(F) Represents elimination of certain administrative fees of FPG.
(G) Represents depreciation related to the increase in the cost of FPG
properties resulting from the application of the purchase method of
accounting.
(H) Represents reductions in general and administrative expenses as a
result of the Reorganization due to decreases in professional fees
($105), and a decrease in executive compensation and certain employee
benefit costs ($724).
(I) Represents the net reduction in interest and credit enhancement costs
associated with the expected prepayment of certain FPG mortgage and
notes payable ($16,283) net of interest on additional borrowings
under the New Credit Facilities of $7,026.
(J) Represents amortization of historical deferred financing costs of FPG
which were eliminated in connection with applying the purchase method
of accounting ($449), net of the amortization of the deferred
financing costs on new debt which is expected to be incurred of $253.
(K) Represents elimination of accounting, legal and other costs incurred
in connection with a proposed public offering of FDC common stock
which was abandoned during 1997.
(L) Represents the estimated additional income tax expense for the
operation of Mid-America Services Corporation, a subsidiary of MAALP
to be organized in connection with the Reorganization for the purpose
of conducting third-party service businesses.
(M) Represents the elimination of nonrecurring income of FPG on the sale
of trading securities ($1,058) and on the liquidation of a single
property partnership ($262).
(N) Represents the change in minority interest in the MAALP income as a
result of the Reorganization, the Common Stock Offering, and a
property acquisition where Class A Common Units were issued.
(O) Represents dividends on 1,600,000 shares of preferred stock which is
expected to be issued in the Preferred Stock Offering.
(P) Pro Forma net income available per common share is based on 18,441
shares outstanding during the period and Pro Forma net income
available for common shareholders. Extraordinary expenses related to
debt financings have been excluded from the calculation of Pro Forma
net income available for common shareholders.
L
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------------
MAAC COMPLETED MAAC
HISTORICAL(Q) ACQUISITIONS(R) DISPOSITIONS(S) OTHER PRO FORMA
------------- --------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Property
Rental........................... $ 110,090 $25,422 $(2,327) $ -- $133,185
Other............................ 1,060 786 (72) -- 1,774
Miscellaneous.................... 732 -- -- -- 732
------------- --------------- --------------- --------- ---------
TOTAL REVENUES.............. 111,882 26,208 (2,399) -- 135,691
EXPENSES:
Personnel........................ 11,702 2,420 (326) -- 13,796
Building repairs/maintenance,
utilities, landscaping, and
other operating................ 19,226 4,283 (593) -- 22,916
Real estate taxes and
insurance...................... 11,642 2,748 (201) -- 14,189
Depreciation and
amortization -- real estate
assets......................... 21,288 -- (519) 5,122(T) 25,891
Depreciation and
amortization -- non real estate
assets......................... 155 -- (3) 36(U) 188
General and administrative....... 6,154 -- -- 714(V) 6,868
Interest......................... 25,766 -- -- 3,626(W) 29,392
Amortization of deferred
financing costs................ 661 -- -- 78(X) 739
------------- --------------- --------------- --------- ---------
TOTAL EXPENSES.............. 96,594 9,451 (1,642) 9,576 113,979
------------- --------------- --------------- --------- ---------
Income before gain on disposition of
properties......................... 15,288 16,757 (757) (9,576) 21,712
------------- --------------- --------------- --------- ---------
Gain on dispositions of properties... 2,185 -- -- (2,185)(Y) --
------------- --------------- --------------- --------- ---------
Income before minority interest in
operating partnership.............. 17,473 16,757 (757) (11,761) 21,712
------------- --------------- --------------- --------- ---------
Minority interest in operating
partnership income................. 3,213 -- -- 196(Z) 3,409
------------- --------------- --------------- --------- ---------
Net income........................... 14,260 16,757 (757) (11,957) 18,303
------------- --------------- --------------- --------- ---------
Dividends on preferred shares........ 990 -- -- 3,760(AA) 4,750
------------- --------------- --------------- --------- ---------
Net income available for common
shareholders....................... $ 13,270 $16,757 $ (757) $ (15,717) $ 13,553
============= =============== =============== ========= =========
</TABLE>
M
<PAGE>
MAAC PRO FORMA ADJUSTMENTS:
(Q) Reflects the historical consolidated statement of operations of MAAC
for the year ended December 31, 1996.
(R) Represents historical operating revenues and expenses from January
1, 1996 to the earlier of the acquisition date or December 31, 1996
for the 1996 Completed Acquisitions and the 1997 Completed
Acquisitions.
(S) Represents historical operating revenues and expenses for the year
ended December 31, 1996 Dispositions subsequent to January 1, 1996.
(T) Represents real estate depreciation and amortization resulting from
the Completed Acquisitions.
(U) Represents non-real estate depreciation and amortization resulting
from the Completed Acquisitions.
(V) Represents anticipated additional costs to operate MAAC resulting
from property acquisitions, net of anticipated savings resulting
from the Dispositions.
(W) Represents interest costs related to mortgage debt incurred or
assumed in connection with the Completed Acquisitions, net of
reductions in interest expense resulting from the repayment of
mortgage debt in connection with the Dispositions.
(X) Represents amortization of deferred financing costs incurred in
connection with the financing of Completed Acquisitions.
(Y) Represents the elimination of nonrecurring gain on Dispositions.
(Z) Represents the change in the minority interest in income of MAALP
during the period.
(AA) Represents dividends on the Series A Preferred Stock issued during
1996.
N
<PAGE>
SIGNATURES
Pursuant to the requirements 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 6, 1997 /s/ SIMON R.C. WADSWORTH
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and
Accounting Officer)
