SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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
Securities registered pursuant to Section 12 (b) of the Act:
Name of Exchange
Title of Class on Which Registered
-------------------------------------- -----------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in PART III of
this Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, (based on the closing price of such stock ($29.00
per share), as reported on the New York Stock Exchange, on March 21,
1997) was approximately $368,000,000 ( for purposes of this
calculation, directors and executive officers are treated as
affiliates).
The number of shares outstanding of the Registrant's Common Stock as
of March 21, 1997, was 13,304,398 shares, of which approximately
720,715 were held by affiliates.
<PAGE> 1
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
Item Page
PART I
1. Business 1
2. Properties 5
3. Legal Proceedings 9
4. Submission of Matters to Vote of Security Holders 9
PART II
5. Market for Registrant's Common Equity and Related 9
Stockholder Matters
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
10. Directors and Executive Officers of the Registrant 17
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and 22
Management
13. Certain Relationships and Related Transactions 23
PART IV
14. Exhibits, Financial Statement Schedule and Reports on 24
Form 8-K
<PAGE> 2
PART I
ITEM 1. BUSINESS
THE COMPANY
Mid-America Apartment Communities, Inc. (the "Company") is a
Memphis, Tennessee-based self-administered and self-managed umbrella
partnership REIT ("UPREIT") which owns and operates 76 apartment
communities containing 20,154 apartment units in 12 states (the
"Communities"), and has definitive agreements to acquire two
additional apartment communities containing 616 apartment units. As
measured by the number of apartment units owned, the Company is the
sixth largest apartment REIT in the United States.
Founded in 1977 by George E. Cates, the Company's Chairman of the
Board of Directors and Chief Executive Officer, the Company's
predecessor grew from an operator of a single 252-unit apartment
community in Memphis, Tennessee into a fully-integrated owner and
operator of 5,580 apartment units in 22 apartment communities in
four southeastern states immediately prior to the Company's initial
public offering in February 1994 (the "Initial Offering"). Since the
Initial Offering, the Company's portfolio has increased by 54
apartment communities containing 14,574 apartment units, including
12 apartment communities containing 3,212 apartment units acquired
in the Company's merger with America First REIT, Inc. ("AFR") in
June 1995 (the "AFR Merger") for an aggregate value of approximately
$111 million (as measured by Common Stock issued and AFR debt
assumed).
The Company's business is conducted principally through Mid-America
Apartments, L.P., a Tennessee limited partnership (the "Operating
Partnership"). The Company is the sole general partner of the
Operating Partnership, holding, as of December 31, 1996, a 1%
general partnership interest in the Operating Partnership. The
Company is also a limited partner in the Operating Partnership and
as of December 31, 1996 held 4,253,448 common units of partnership
interests, ("Common Units"), or 38.45% of all outstanding Common
Units. The Company's wholly-owned qualified REIT subsidiary, MAC of
Delaware, Inc., a Delaware corporation, is a limited partner in the
Operating Partnership and, as of December 31, 1996, held 4,253,448
Common Units, or 38.45% of all outstanding Common Units.
In connection with the formation of the Operating Partnership and
the Initial Offering, the Operating Partnership issued 2,460,413
Common Units to the former owners of Communities contributed to the
Operating Partnership. The Common Units held by such former owners
are redeemable by the holders, at their option, for shares of Common
Stock on a one-for-one basis or, at the Company's option, for cash.
The Company has filed a shelf registration statement relating to the
offer and sale of the Common Units by the holders thereof. As of
December 31, 1996, such former owners held 2,444,352 Common Units,
or 22.1% of all outstanding Common Units.
Certain Communities are owned by limited partnerships of which the
Operating Partnership and the Company or a wholly owned qualified
REIT subsidiary are the only partners. In addition, the Company,
directly or through six wholly owned qualified REIT subsidiaries,
owns 15 Communities.
1
<PAGE> 3
OPERATING PHILOSOPHY
MID-SIZE MARKET FOCUS. The Company focuses on owning, operating,
and acquiring apartment communities in mid-size southeastern and
Texas cities. The Company believes that these markets generally have
been less susceptible to apartment overbuilding during past real
estate investment cycles, and the Company believes that apartment
communities in these markets offer attractive long-term investment
returns. The Company seeks to acquire apartment communities in its
existing markets and selected new markets where it believes there is
less competition for acquisitions from other well-capitalized
buyers. The Company believes it can acquire apartment units at a
significant discount to estimated replacement cost in these markets.
INTENSIVE MANAGEMENT FOCUS. The Company strongly emphasizes on-site
property management. Particular attention is paid to opportunities
to increase rents, raise average occupancy rates, and control costs,
with property managers being given the responsibility for monitoring
market trends and the discretion to react to such trends. The
Company has had demonstrable success in this regard as evidenced by:
(i) monthly rental per apartment unit was $529 at December 31, 1996
versus $508 at December 31, 1995, which represented a 4.1% increase;
(ii) average occupancy during 1996 was 95.4% versus 95.2% in 1995;
and (iii) during 1996 the Company was able to decrease property
operating expenses as a percentage of revenue principally through
the installation of individual apartment unit water and utility
meters.
DEDICATION TO CUSTOMER SERVICE. Management's experience is that
maintaining a consistently high level of customer satisfaction leads
to greater demand for the Company's apartment units, higher
occupancy and rental rates, and increased long-term profitability.
The Company, as part of its intense management focus, has
implemented a practice of having highly trained property managers
and service technicians on-site at each of the Communities.
Management undertakes frequent resident surveys and focus groups, in
order to measure customer satisfaction.
DECENTRALIZED OPERATIONAL STRUCTURE. The Company's operational
structure is organized on a geographic basis. The Company's property
managers have overall operating responsibility for their specific
Communities. Property managers report to area managers or regional
managers who, in turn, are accountable to the Company's President.
Management believes that its decentralized operating structure
capitalizes on specific market knowledge, increases personal
accountability relative to a centralized structure and is beneficial
in the acquisition, redevelopment and development process.
GROWTH STRATEGIES
The Company seeks to increase earnings per share and operating cash
flow to maximize shareholder value through a balanced strategy of
internal and external growth.
INTERNAL GROWTH STRATEGY. Management's goal is to maximize its
return on investment in each Community by increasing rental rates
and reducing operating expenses while maintaining high occupancy
levels. The Company (i) seeks higher net rental revenues by
enhancing and maintaining the competitiveness of the Communities and
(ii) manages expenses through its system of detailed management
reporting and accountability in order to achieve increases in
operating cash flow. The steps taken to meet these objectives
include:
* empowering the Company's property managers to adjust
rents in response to local market conditions and to concentrate
resident turnover in peak rental demand months;
* implementing programs to control expenses through
investment in cost-saving initiatives, such as the installation of
individual apartment unit water and utility meters in certain
Communities;
* ensuring that, through monthly inspections of all
Communities by senior management and prompt attention to maintenance
and recurring capital needs, the Communities are properly
maintained;
* improving the "curb appeal" of the Communities through
extensive landscaping and exterior improvements and repositioning
Communities from time to time to maintain market leadership
positions;
* investing heavily in training programs for its property-
level personnel;
* compensating all employees through performance-based
compensation programs and stock ownership programs; and
* maintaining a hands-on management style and "flat"
organizational structure that emphasizes senior management's
continued close contact with the market and employees.
2
<PAGE> 4
EXTERNAL GROWTH STRATEGY. The Company's external growth strategy is
to acquire and selectively develop additional apartment units and,
when apartment communities no longer meet the Company's long-term
strategic objectives or investment return goals, to dispose of those
Communities. Through the UPREIT structure, the Company has the
ability to acquire apartment communities through the issuance of
UPREIT Units in tax-deferred exchanges with owners of such
properties. Since the Initial Offering, the Company has grown by
14,574 apartment units, an increase of approximately 261% over the
number of apartment units immediately prior to the Initial Offering.
Typical attributes of apartment communities which the Company seeks
to acquire are:
* well-constructed properties having attractive locations,
potential for increases in rental rates and occupancy, potential for
reductions in operating costs and acquisition prices below estimated
replacement cost;
* properties with opportunities for internal growth
through (i) market repositioning by means of property upgrades which
typically include landscaping, selective refurbishing and the
addition of amenities and (ii) realizing economies of scale in
management and purchasing; and
* properties located in the Company's existing markets and
mid-size southeastern and Texas metropolitan areas having favorable
market characteristics.
In addition, the Company develops new apartments when it believes it
can achieve an attractive return on investment. Since the Initial
Offering, the Company has completed the following development
projects:
* 122 apartment units constructed at the Woods of Post
House in Jackson, Tennessee in close proximity to three other
Communities;
* 24 additional apartment units at the Reflection Pointe
apartment community in Jackson, Mississippi; and
* 32 additional apartment units at the Park Haywood
apartment community in Greenville, South Carolina.
In the Fall of 1996, the Company commenced construction of a 234-
unit expansion of the 384-unit Lincoln on the Green apartment
community at the Tournament Players' Club at Southwind in Memphis,
Tennessee. Construction of that expansion is expected to be
completed in the Fall of 1997. Several other expansion and new
development opportunities are currently being explored.
COMPLETED ACQUISITIONS. During 1996, the Company has acquired
the following apartment communities (the "Completed Acquisitions")
containing an aggregate of 1,760 apartment units (dollars in
millions):
<TABLE>
<CAPTION>
NUMBER OF ACQUISITION CONTRACT
PROPERTY MARKET UNITS DATE PRICE (1)
- -------------- ---------------- ----- ----------- ----------
<S> <C> <C> <C> <C>
Lakeside Jacksonville, FL 416 3/12/96 $ 14.1
Crosswinds Jackson, MS 360 7/25/96 15.3
Savannah Creek Memphis, TN 204 7/25/96 7.8
Sutton Place Memphis, TN 252 7/25/96 8.9
Napa Valley Little Rock, AR 240 10/17/96 9.5
Tiffany Oaks Orlando, FL 288 12/17/96 10.1
----- --------
Total 1,760 $ 65.7
===== ========
</TABLE>
(1) Excluding additional customary closing costs, including expenses and
commissions.
3
<PAGE> 5
COMPETITION
All of the Company's communities are located in developed areas that
include other apartment communities. Occupancy and rental rates are
affected by the number of competitive apartment communities in a
particular area. The Company's properties compete with numerous
other multifamily properties, the owners of which may have greater
resources than the Company and whose management may have more
experience than the Company's management. Moreover, single-family
rental housing, manufactured housing, condominiums and the new and
existing home market provide housing alternatives to potential
residents of apartment communities.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS
Since December 31, 1996, the Company has acquired the following
apartment communities (the "Recent Acquisitions") containing an
aggregate of 874 apartment units (dollars in millions):
<TABLE>
<CAPTION>
NUMBER ACQUISITION CONTRACT
PROPERTY MARKET OF UNITS DATE PRICE
- ---------------- --------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Howell Commons Greenville, SC 348 1/16/97 $ 13.0
Balcones Woods Austin, TX 384 3/18/97 15.8
Westside Creek I Little Rock, AR 142 3/28/97 6.1
--- ------
Total 874 $ 34.9
=== ======
</TABLE>
The Company funded the cash required to consummate the Recent
Acquisitions with borrowings under the Company's unsecured bank line
of credit (the "Credit Line").
PROPOSED ACQUISITIONS
The Company has entered into definitive agreements to purchase
Woodhollow apartments containing 450 apartment units and Westside
Creek Phase II ("Westside II") containing 166 apartment units. The
seller of Westside II has the option to delay the closing of the
sale for up to six months, during which period the Company will
manage the property for a management fee equal to 4.5% of gross
revenue from the property. The Company plans to fund the cash
required to consummate the Proposed Acquisitions with borrowings
under the Credit Line.
DISTRIBUTION INCREASE
In January 1997, the Company raised its quarterly distribution to
common shareholders from $.51 per share to $.535 per share,
effective with its distribution paid on January 31, 1997.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
In January 1997, the Company adopted a Dividend Reinvestment and
Stock Purchase Plan (the "DRSPP") pursuant to which the Company's
shareholders will be permitted to acquire shares of Common Stock
through the reinvestment of distributions on Common Stock and the
Company's Series A Cumulative Preferred Stock ("Series A Preferred
Stock") and through optional cash payments from shareholders. The
Company has registered with the Securities and Exchange Commission
the offer and sale of up to 750,000 shares of Common Stock pursuant
to the DRSPP. It is expected that shareholders of the Company may
begin participating in the DRSPP commencing with the Company's April
1997 distribution to holders of Common Stock. See "Part II Item 5
Market for Registrant's Common Equity and Related Stockholder
Matters".
4
<PAGE> 6
COMMON STOCK OFFERING
In March 1997, the Company offered and sold to the public 2,300,000
shares of common stock, (the "Offering"). The net proceeds to the
Company from the Offering totaled approximately $62.4 million after
payment of all underwriting discounts and expenses of the Offering.
The Company contributed the net proceeds of the Offering to the
Operating Partnership in exchange for additional Common Units in the
Operating Partnership. The Operating Partnership will use
substantially all of the net proceeds to repay outstanding
borrowings under the Credit Line and any excess will be used for
general corporate purposes, including acquisitions. Amounts repaid
under the Credit Line may be re-borrowed (subject to the terms and
limits of the Credit Line) to finance acquisitions of additional
apartment communities and for other corporate purposes.
ITEM 2. PROPERTIES
The Company seeks to acquire apartment communities appealing to
middle and upper income residents in mid-size cities in the
southeastern United States and Texas. Approximately 64% of the
Company's apartment units are located in Tennessee, Florida and
Texas markets. The Company's strategic focus is to provide its
residents high quality apartment units in attractive community
settings, characterized by extensive landscaping and attention to
aesthetic detail. The Company utilizes its experience and expertise
in maintenance, landscaping, marketing and management to effectively
"reposition" many of the apartment communities it acquires to raise
occupancy levels and per unit average rentals. The average age of
the Communities at December 31, 1996 was 12.8 years. The following
table sets forth certain operating data regarding the Company for
the periods indicated.
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Apartment units at year end 19,280 18,219 14,333
Average monthly rental per
apartment unit at year end $529 $508 $482
Average occupancy for the year 95.4% 95.2% 95.5%
</TABLE>
The following table sets forth selected financial and operating
information on an historical basis for the 73 Communities owned at
December 31, 1996:
5
<PAGE> 7
The following table presents information concerning the properties at
December 31, 1996:
<TABLE>
<CAPTION>
Approximate Average
Year Rentable Unit
Year Management Number Area Size
Property Location Completed Commenced Of Units (Square Ft.) (Square Ft.)
- ---------------- --------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Calais Forest Little Rock, AR 1987 1994 260 194,928 750
Napa Valley Little Rock, AR 1984 1996 240 183,120 763
Whispering Oaks Little Rock, AR 1978 1994 206 192,422 934
---- --------- -----
706 570,470 808
Tiffany Oaks Altamonte
Springs, FL 1985 1996 288 234,144 813
Marsh Oaks Atlantic Beach, FL 1986 1995 120 93,240 777
Anatole Daytona Beach, FL 1986 1995 208 149,136 717
Cooper's Hawk Jacksonville, FL 1987 1995 208 218,400 1,050
Lakeside Jacksonville, FL 1985 1996 416 344,032 827
St. Augustine Jacksonville, FL 1987 1995 400 304,400 761
Woodbridge at
the Lake Jacksonville, FL 1985 1994 188 166,000 883
Savannahs at
James Landing Melbourne, FL 1990 1995 256 238,592 932
Belmere Tampa, FL 1984 1994 210 202,440 964
Sailwinds at
Lake Magdalene Tampa, FL 1975 1994 798 667,084 836
----- --------- -----
3,092 2,617,468 847
Shenandoah Ridge Augusta, GA 1975/1982 1994 272 202,640 745
Hollybrook Dalton, GA 1972 1994 158 188,640 1,194
---- --------- -----
430 391,280 910
Lakepointe Lexington, KY 1986 1994 118 90,614 768
Mansion, The Lexington, KY 1987 1994 184 138,720 754
Village, The Lexington, KY 1989 1994 252 182,716 725
Stonemill Village Louisville, KY 1985 1994 384 324,008 844
---- --------- -----
938 736,058 785
Canyon Creek St. Louis, MO 1987 1994 320 312,592 977
Riverhills Grenada, MS 1972 1985 96 81,942 854
Advantages, The Jackson, MS 1984 1991 252 199,136 790
Crosswinds Jackson, MS 1988/1990 1996 360 443,160 1,231
Lakeshore Landing Jackson, MS 1974 1994 196 171,156 873
Pear Orchard Jackson, MS 1985 1994 389 338,430 870
Pine Trails Jackson, MS 1978 1988 120 98,560 821
Reflection Pointe Jackson, MS 1986 1988 296 254,856 861
Somerset Place Jackson, MS 1981 1995 144 128,848 881
Woodridge Jackson, MS 1987 1988 192 175,034 912
----- --------- -----
2,045 1,891,122 925
Woodstream Greensboro, NC 1983 1994 304 217,186 714
Corners, The Winston-Salem, NC 1982 1993 240 173,496 723
----- --------- -----
544 390,682 718
Fairways at
Royal Oak Cincinnati, OH 1988 1994 214 214,477 1,002
Tanglewood Anderson, SC 1980 1994 168 146,600 873
The Fairways Columbia, SC 1992 1994 240 213,720 891
Highland Ridge Greenville, SC 1984 1995 168 144,000 857
Park Haywood Greenville, SC 1983 1993 208 152,256 732
Spring Creek Greenville, SC 1984 1995 208 182,000 875
Runaway Bay Mt. Pleasant, SC 1988 1995 208 177,840 855
----- --------- -----
1,200 1,016,416 847
Hamilton Pointe Chattanooga, TN 1989 1992 362 256,716 711
Hidden Creek Chattanooga, TN 1987 1988 300 259,152 864
Steeplechase Chattanooga, TN 1986 1991 108 97,016 898
Oaks, The Jackson, TN 1978 1993 100 87,512 875
Post House
Jackson Jackson, TN 1987 1989 150 163,640 1,091
Post House North Jackson, TN 1987 1989 144 144,724 1,005
Williamsburg
Village Jackson, TN 1987 1994 148 121,412 820
Woods at Post
House Jackson, TN 1995 1995 122 118,922 975
Cedar Mill Memphis, TN 1973/1986 1982/1994 276 297,794 1,079
Clearbrook
Village Memphis, TN 1974 1987 176 150,400 855
Crossings Memphis, TN 1974 1991 80 89,968 1,125
EastView Memphis, TN 1974 1984 432 356,480 825
Greenbrook Memphis, TN 1986 1988 1,031 934,490 906
Hickory Farm Memphis, TN 1985 1994 200 150,256 751
Kirby Station Memphis, TN 1978 1994 371 310,742 838
Lincoln on the
Green Memphis, TN 1988 1994 384 293,664 765
McKellar Woods Memphis, TN 1976 1988 624 589,776 945
Glen Eagles Memphis, TN 1975 1990 184 189,560 1,030
Park Estate Memphis, TN 1974 1977 81 95,751 1,182
Savannah Creek Memphis, TN (8) 1989 1996 204 237,252 1,163
Sutton Place Memphis, TN (8) 1991 1996 252 267,624 1,062
Winchester Square Memphis, TN 1973 1977 252 301,409 1,196
Brentwood Downs Nashville, TN 1986 1994 286 220,166 770
Park at Hermitage Nashville, TN 1987 1995 440 392,480 892
----- --------- -----
6,707 6,126,906 914
Stassney Woods Austin, TX 1985 1995 288 248,832 864
Travis Station Austin, TX 1987 1995 304 249,888 822
Redford Park Conroe, TX 1984 1994 212 153,744 725
Celery Stalk Dallas, TX 1978 1994 410 552,220 1,347
Lodge at
Timberglen Dallas, TX 1984 1994 260 226,124 870
MacArthur Ridge Irving, TX 1991 1994 248 210,393 848
Westborough Katy, TX 1984 1994 274 197,264 720
Lane at Towne
Crossing Mesquite, TX 1983 1994 384 277,616 723
Cypresswood Court Spring, TX 1984 1994 208 160,672 772
Green Tree Place Woodlands, TX 1984 1994 200 152,168 761
----- --------- ----
2,788 2,428,921 871
Township Hampton, VA 1987 1995 296 248,048 838
------ ---------- ----
Total 19,280 16,944,440 879
====== ========== ====
<PAGE> 8
The following table presents information concerning the properties at
December 31, 1996:
<CAPTION>
Encumbrances at
Average Average December 31, 1995
Rent Per Occupancy --------------------------
Unit at % at Mortgage
December 31, December 31, Principal Interest Maturity
Property Location 1996 1996 (000's) Rate Date
- -------- -------- ------------ ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Calais Forest Little Rock, AR $550 90.4% $5,610 8.915% 12/01/99
Napa Valley Little Rock, AR $542 82.9% -(2) -(2) -(2)
Whispering Oaks Little Rock, AR $489 90.8% $3,000 8.915% 12/01/99
---- ----- ------
$530 88.0% $8,610
Tiffany Oaks Altamonte
Springs, FL $528 96.0% - - -
Marsh Oaks Atlantic Beach, FL $501 99.2% -(2) -(2) -(2)
Anatole Daytona Beach, FL $542 97.1% $7,000 5.370% 09/01/05
Cooper's Hawk Jacksonville, FL $644 95.2% -(7) -(7) -(7)
Lakeside Jacksonville, FL $556 95.4% -(2) -(2) -(2)
St. Augustine Jacksonville, FL $518 95.0% -(7) -(7) -(7)
Woodbridge at
the Lake Jacksonville, FL $581 96.3% $3,738 -(1) -(1)
Savannahs at
James Landing Melbourne, FL $554 96.1% -(7) -(7) -(7)
Belmere Tampa, FL $592 97.1% -(2) -(2) -(2)
Sailwinds at
Lake Magdalene Tampa, FL $517 96.0% $15,950 8.915% 12/01/99
---- ----- -------
$545 96.0% $26,688
Shenandoah Ridge Augusta, GA $434 92.3% -(2) -(2) -(2)
Hollybrook Dalton, GA $554 94.9% $2,520 8.915% 12/01/99
---- ----- -------
$478 93.3% $2,520
Lakepointe Lexington, KY $520 98.3% $2,562 8.750% 06/15/97
Mansion, The Lexington, KY $529 95.7% $4,140 8.915% 12/01/99
Village, The Lexington, KY $542 96.0% $5,256 8.750% 06/15/97
Stonemill Village Louisville, KY $545 91.1% -(6) -(6) -(6)
---- ----- ------
$538 94.2% $11,958
Canyon Creek St. Louis, MO $521 90.9% -(6) -(6) -(6)
Riverhills Grenada, MS $397 97.9% $880 7.000% 05/01/13
Advantages, The Jackson, MS $462 91.3% -(6) -(6) -(6)
Crosswinds Jackson, MS $588 96.7% -(2) -(2) -(2)
Lakeshore Landing Jackson, MS $493 95.4% -(6) -(6) -(6)
Pear Orchard Jackson, MS $556 97.9% $8,643 10.000% 11/01/97
Pine Trails Jackson, MS $459 99.2% $1,396 7.000% 04/01/15
Reflection Pointe Jackson, MS $536 95.6% $6,073 6.600% 09/01/10
Somerset Place Jackson, MS $492 98.6% -(2) -(2) -(2)
Woodridge Jackson, MS $499 95.8% $4,840 6.500% 10/01/27
---- ----- -------
$518 96.2% $21,832
Woodstream Greensboro, NC $525 92.4% $5,565 9.250% 12/01/98
Corners, The Winston-Salem, NC $519 95.4% $4,406 7.850% 06/15/03
---- ----- ------
$522 93.7% $9,971
Fairways at
Royal Oak Cincinnati, OH $570 98.1% -(2) -(2) -(2)
Tanglewood Anderson, SC $518 92.9% $2,651 7.600% 11/15/02
The Fairways Columbia, SC $541 96.3% $7,674 8.500% 03/01/33
Highland Ridge Greenville, SC $476 91.7% -(3) -(3) -(3)
Park Haywood Greenville, SC $479 93.8% -(2) -(2) -(2)
Spring Creek Greenville, SC $504 97.6% -(3) -(3) -(3)
Runaway Bay Mt. Pleasant, SC $632 93.8% -(3) -(3) -(3)
---- ----- -------
$527 94.5% $10,325
Hamilton Pointe Chattanooga, TN $443 91.7% -(6) -(6) -(6)
Hidden Creek Chattanooga, TN $458 90.0% -(6) -(6) -(6)
Steeplechase Chattanooga, TN $522 96.3% -(2) -(2) -(2)
Oaks, The Jackson, TN $470 95.0% -(6) -(6) -(6)
Post House
Jackson Jackson, TN $548 93.3% $5,179 8.170% 10/01/27
Post House North Jackson, TN $554 95.1% $3,765 5.270% 09/01/25
Williamsburg
Village Jackson, TN $507 97.3% -(2) -(2) -(2)
Woods at
Post House Jackson, TN $639 85.8% $5,339 7.250% 09/01/35
Cedar Mill Memphis, TN $555 95.7% $2,529 -(4) -(4)
Clearbrook
Village Memphis, TN $470 97.7% $1,226 9.000% 04/01/08
Crossings Memphis, TN $597 98.8% -(6) -(6) -(6)
EastView Memphis, TN $483 96.1% $3,708 8.625% 12/01/99
Greenbrook Memphis, TN $481 96.6% $15,743 -(5) -(5)
Hickory Farm Memphis, TN $500 98.5% -(6) -(6) -(6)
Kirby Station Memphis, TN $531 97.0% - - -
Lincoln on the
Green Memphis, TN $568 98.7% -(2) -(2) -(2)
McKellar Woods Memphis, TN $447 96.3% $8,501 -(5) -(5)
Glen Eagles Memphis, TN $525 97.3% -(6) -(6) -(6)
Park Estate Memphis, TN $654 98.8% $1,497 -(5) -(5)
Savannah Creek Memphis, TN (8) $557 99.0% -(2) -(2) -(2)
Sutton Place Memphis, TN (8) $536 98.8% -(2) -(2) -(2)
Winchester Square Memphis, TN $541 96.4% -(6) -(6) -(6)
Brentwood Downs Nashville, TN $612 96.2% $6,678 8.915% 12/01/99
Park at Hermitage Nashville, TN $568 98.0% $8,385 5.790% 02/01/19
---- ----- -------
$516 96.2% $62,550
Stassney Woods Austin, TX $584 94.8% $4,925 6.600% 10/01/19
Travis Station Austin, TX $528 95.4% $4,355 6.600% 04/01/19
Redford Park Conroe, TX $474 94.8% $3,000 9.006% 12/01/04
Celery Stalk Dallas, TX $619 92.2% $8,460 9.006% 12/01/04
Lodge at
Timberglen Dallas, TX $571 94.6% $4,740 9.006% 12/01/04
MacArthur Ridge Irving, TX $674 91.1% $7,648 7.400% 08/15/98
Westborough Katy, TX $479 92.3% $3,958 9.006% 12/01/04
Lane at Towne
Crossing Mesquite, TX $503 93.5% $5,756 8.750% 01/01/98
Cypresswood Court Spring, TX $500 94.7% $3,330 9.006% 12/01/04
Green Tree Place Woodlands, TX $552 92.0% $3,180 9.006% 12/01/04
---- ----- -------
$552 93.5% $49,352
Township Hampton, VA $552 93.9% $10,800 8.750% 11/01/09
---- ----- --------
Total $529 95.2% $214,606
==== ===== ========
</TABLE>
(1) Encumbered by two mortgages with interest rates of 7.75% and
maturities of September 7, 1999 and January 1, 2004.
(2) Subject to a negative pledge pursuant to the agreement in respect
of the Credit Line, with an outstanding balance of $30.4 million at
December 31, 1996. The line had a variable interest rate at
December 31, 1996 of 7.50%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) Cedar Mill is encumbered by two mortgages with interest rates of
7.8% and 8.35% with maturities of February 4, 2004 and July 1, 2001 and
Mendenhall Townhomes with a 8.65% loan maturing July 1, 2001.
(5) Encumbered by three mortgages with interest rates of 7.8%, 7.55%
and 8.35% and maturities of February 4, 2004, July 1, 2001 and July 1,
2001, respectively.
(6) These eleven properties are encumbered by a $43.4 million mortgage.
(7) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(8) These properties are located in Desoto County, MS, a suburb of
Memphis, TN. The Company considers the properties a part of the Memphis,
TN market.
6 - 8
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Communities is presently subject to
any material litigation nor, to the Company's knowledge, is any
material litigation threatened against the Company or the
Communities properties, other than routine litigation arising in the
ordinary course of business, some of which is expected to be covered
by liability insurance and none of which is expected to have a
material adverse effect on the business, financial condition,
liquidity or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's shareholders during
the fourth quarter of 1996.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock has been listed and traded on the NYSE under the
symbol "MAA" since the Initial Offering in February 1994. On March
21, 1997, the reported last sale price of the Company's common stock
on the NYSE was $29.00 per share and there were approximately 1,477
holders of record of the Common Stock. The Company estimates there
are approximately 11,000 beneficial owners of the Common Stock. The
following table sets forth the quarterly high and low sales prices
of the Common Stock as reported on the NYSE and the distributions
declared by the Company with respect to the periods indicated.
<TABLE>
<CAPTION>
Sales Prices Dividends
High Low Declared
------ ------ ---------
<S> <C> <C> <C>
1995:
First Quarter $ 26.00 $ 25.75 $ .50
Second Quarter 25.00 24.75 .50
Third Quarter 24.75 24.625 .50
Fourth Quarter 24.875 24.375 .51
1996:
First Quarter 26.625 24.00 .51
Second Quarter 26.625 25.125 .51
Third Quarter 25.875 23.875 .51
Fourth Quarter 28.875 24.75 .535
</TABLE>
The Company's current annual distribution rate with respect to the
Common Stock is $2.14 per share. The actual distributions made by
the Company will be affected by a number of factors, including the
gross revenues received from the Communities, the operating expenses
of the Company, the interest expense incurred on borrowings and
unanticipated capital expenditures.
The Company pays a preferential regular monthly distribution on the
Series A Preferred Stock issued in October 1996 at an annual rate of
$2.375 per share. No distribution may be made on the Common Stock
unless all accrued distributions have been made with respect to the
Series A Preferred Stock. No assurance can be given that the Company
will be able to maintain its distribution rate on its Common Stock
or make required distributions with respect to the Series A
Preferred Stock.
9
<PAGE> 11
In January 1997, the Company implemented the DRSPP under which
holders of Common Stock (and Series A Preferred Stock) may elect
automatically to reinvest their distributions in additional shares
of Common Stock and/or to make optional purchases of Common Stock
free of brokerage commissions and charges. Shares purchased directly
from the Company will be purchased at up to a 3% discount from their
fair market value at the Company's discretion. To fulfill its
obligations under the DRSPP, the Company may either issue additional
shares of Common Stock or repurchase Common Stock in the open
market.
Future distributions by the Company will be at the discretion of the
Board of Directors and will depend on the actual funds available
for distribution of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of
Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an
historical basis for the Company and its predecessor. This data
should be read in conjunction with the consolidated financial
statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this Annual Report on Form 10-K. In the opinion of
management, the data for the periods presented include all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.
10
<PAGE> 12
Mid - America Apartment Communities, Inc.
Selected Financial Data
(Dollars in thousands except per share and property data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
Historical
-------------------------------------------------------
(Predecessor)
-------------------
1996 1995 1994(1) 1993 1992
---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
- ---------------
Total revenues $ 111,882 $ 94,963 $ 51,207 $ 26,295 $ 22,194
Expenses:
Property expenses (2) 42,570 37,954 19,484 11,316 9,682
General and administrative 6,154 4,851 3,613 1,402 1,112
Interest 25,766 22,684 10,233 7,448 7,524
Depreciation and amortization 21,443 16,574 8,803 3,521 3,235
Amortization of deferred
financing costs 661 593 296 199 109
Gain on disposition of properties 2,185 - - - -
---------- --------- -------- -------- --------
Income (loss) before minority
interest in operating
partnership income and
extraordinary item 17,473 12,307 8,778 2,409 532
Net income 14,260 9,810 6,944 2,542 1,090
Preferred dividends 990 - - N/A N/A
Net income available for
common shares $ 13,270 $ 9,810 $ 6,944 N/A N/A
Per Share Data:
- ---------------
Net income available for
common shares $ 1.21 $ 1.00 $ 1.01 N/A N/A
Dividends declared $ 2.065 $ 2.01 $ 1.71 N/A N/A
Balance Sheet Data:
- -------------------
Real estate owned, at cost $ 641,893 $ 578,788 $ 434,460 $ 125,269 $ 111,686
Real estate owned, net $ 592,335 $ 549,284 $ 421,074 $ 98,029 $ 87,969
Total assets $ 611,199 $ 565,267 $ 439,233 $ 104,439 $ 93,252
Total debt $ 315,239 $ 307,939 $ 232,766 $ 105,594 $ 95,036
Minority interest $ 39,238 $ 41,049 $ 43,709 N/A N/A
Shareholders' equity
(owners' deficit) $ 241,384 $ 202,278 $ 152,385 $ (4,684) $ (4,493)
Weighted average common
shares and unit 13,431 12,276 9,818 N/A N/A
Other Data (at end of period):
- ------------------------------
Market capitalization
(shares and units) $ 436,739 $ 331,238 $ 295,300 N/A N/A
Ratio of total debt to
total capitalization (3) 41.9% 48.2% 44.1% N/A N/A
Number of Properties 73 70 54 22 19
Number of apartment units 19,280 18,219 14,333 5,580 5,064
</TABLE>
(1) Operating data for 1994 includes 34 days of predecessor financial
information and per share data for 1994 is for the period February 4, 1994
through December 31, 1994.
(2) See discussion of the change in accounting policy during 1996 in
Note 1 to the Consolidated Financial Statements.
(3) Total capitalization is total debt and market capitalization of
preferred shares, common shares and partnership units.
11
<PAGE> 13
ITEM 7. 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 years
ended December 31, 1996, 1995, and 1994. This discussion should be
read in conjunction with all of the financial statements
incorporated by reference into this Annual Report on Form 10-K.
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. The Company adopted
this method of calculating FFO effective as of the NAREIT-suggested
adoption date of January 1, 1996. 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 year ended December 31, 1996, FFO increased by
approximately $6,809,000 or 23.7%, when compared to the year earlier
(adjusted only for the new NAREIT definition of FFO). The increase
was primarily attributable to an approximate $16,919,000 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. On a per share basis, FFO increased 8.6% from $2.44
per share (restated for the effect of adoption of the current NAREIT
FFO definition and the change in accounting policy) for the year
ended December 31, 1995 to $2.65 per share for the same period in
1996.
CAPITAL EXPENDITURES
Following a review of its capital expenditure and depreciation
policy, effective January 1, 1996, the Company implemented a new
policy of which the primary changes are as follows:
(a) Increase minimum dollar amounts to capitalize from $500 to $1,000;
(b) For stabilized Communities (generally, Communities owned and
operated by the Company for at least one year), capitalize
replacement purchases for major appliances and carpeting of an
entire apartment unit which was previously expensed; and
(c) Reduce depreciation life for certain assets from 20 years to 10
to 15 years.
The Company believes that the newly adopted accounting policy is
preferable because it is consistent with policies currently being
used by the majority of the largest apartment REITs and provides a
better matching of expenses with the estimated benefit period. The
Company's 1995 and 1994 financial statements were not restated for
the effect of the change in accounting policy. The policy has been
implemented prospectively effective January 1, 1996.
12
<PAGE> 14
The following table presents the impact on 1995 net income of the
Company's new capitalization policy and adoption of NAREIT's current
definition of FFO.
<TABLE>
<CAPTION>
IMPACT OF CHANGE IN ACCOUNTING POLICY
AND THE CURRENT NAREIT FFO DEFINITION
(Dollars in thousands except per share data)
Year Ended December 31, 1995
With Current With Current
NAREIT NAREIT FFO
Year Ended As FFO definition and
December 31, 1996 Reported definition capital policy
----------------- -------- ------------ --------------
<S> <C> <C> <C> <C>
Net income before $ 17,473 $ 12,307 $ 12,307 $ 12,307
minority interest
Change for
capitalization policy
as if in effect at
January 1, 1995 N/A N/A N/A 1,243
Additional depreciation
due to change in
capitalization policy N/A N/A N/A (249)
-------- -------- -------- ---------
Adjusted net income
before minority
interest $ 17,473 $ 12,307 $ 12,307 $ 13,301
Preferred dividend
distribution 990 - - -
Gain on disposition
of properties 2,185 - - -
Depreciation and
amortization of:
Real estate assets 21,288 16,470 16,470 16,719
Non-real estate assets - 104 - -
Deferred financing costs - 593 - -
-------- -------- -------- --------
FFO $ 35,586 $ 29,474 $ 28,777 $ 30,020
======== ======== ======== ========
FFO per share and common unit $ 2.65 $ 2.40 $ 2.34 $ 2.44
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED
DECEMBER 31, 1995
During the 1996 period, the Company acquired six apartment
communities and sold three apartment communities. The total number
of apartment units owned at December 31, 1996 was 19,280 in 73
apartment communities, compared to 18,219 in 70 communities at
December 31, 1995. Average monthly rental per apartment unit
increased to $529 at December 31, 1996 from $508 at December 30,
1995. Average occupancy for the years ended December 31, 1996 and
1995 was 95.4% and 95.2%, respectively.
Total revenues for 1996 increased by approximately $16,919,000, due
primarily to (i) approximately $4,833,000 from the six Communities
acquired in 1996, (ii) approximately $7,156,000 from a full years
operation of the 15 Communities acquired in 1995, including the
Communities acquired in the AFR Merger, (iii) approximately
$4,363,000 from the Communities owned throughout both periods, and
(iv) approximately $567,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Property operating expenses for 1996 increased by approximately
$4,616,000, due primarily to (i) approximately $1,686,000 from the
six Communities acquired in 1996, (ii) approximately $2,746,000
from a full years operations of the 15 Communities acquired in 1995,
including the Communities acquired in the AFR Merger, and (iii)
approximately $234,000 from The Woods at Post House in Jackson,
Tennessee which completed development in the Fall of 1995. These
increases were offset by a decrease of approximately $51,000 from
the Communities owned throughout both periods. Repair and
maintenance expense decreased primarily due to the change in the
capitalization policy described above. Utility costs decreased from
6.1% of revenue to 5.5% of revenue for the year ended December 31,
1996 compared to the same period a year earlier, due primarily to
the installation of 6,400 individual apartment unit water meters and
the completion of the individual apartment unit electricity metering
at Sailwinds at Lake Magdalene.
13
<PAGE> 15
General and administrative expense increased in 1996 approximately
$1,303,000 primarily due to the opening of the new training center
and other expenses due to the continued growth of the company.
Depreciation and amortization expense increased primarily due to (i)
approximately $893,000 from the six apartment communities acquired
in 1996, (ii) approximately $1,346,000 from the 15 apartment
communities acquired in 1995, including the Communities acquired in
the AFR Merger, (iii) approximately $2,187,000 from additional
capital expenditures on Communities owned throughout both periods,
and (iv) approximately $443,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Amortization of deferred financing costs and unamortized costs in
excess of fair value of net assets acquired for 1996 were
approximately $661,000 and approximately $192,000, respectively.
Interest expense increased approximately $3,082,000 during 1996 due
primarily to apartment acquisitions. The Company reduced the average
borrowing cost to 7.92% at December 31, 1996 as compared to 8.15% on
December 31, 1995. The average maturity on the Company's debt was
9.9 years at both December 31, 1996 and 1995.
In 1996, the Company recorded an approximate $2,185,000 gain for the
disposition of three apartment communities. As a result of the
foregoing, income before minority interest for the year ended
December 31, 1996 increased approximately $5,166,000 over the same
period a year earlier.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED
DECEMBER 31, 1994 (THE COMPANY AND ITS PREDECESSOR)
The total number of apartment units owned at December 31, 1995 was
18,219 in 70 apartment communities, compared to 14,333 in 54
communities at December 31, 1994. Average monthly rental per
apartment unit increased to $508 for 1995 from $482 for 1994.
Average occupancy for 1995 and 1994 was 95.2% and 95.5%,
respectively.
For the 10,268 apartment units owned on December 31, 1995 and 1994,
average occupancy increased to 95.4% as compared to 92.8%,
respectively, and the average monthly rental per apartment unit
increased for this same period 6.2% to $499 from $470.
Total revenues for 1995 increased by approximately $43,756,000, due
primarily to (i) approximately $13,966,000 from the 15 apartment
communities acquired, including the Communities acquired in the AFR
Merger, (ii) approximately $28,348,000 from a full year's operation
of 32 Communities acquired in 1994, and (iii) approximately
$1,442,000 from the Communities owned throughout both periods. In
addition, the Company completed the development of The Woods at Post
House in Jackson, Tennessee in the Fall of 1995.
Property operating expenses increased by approximately $18,470,000
over 1994. The increase primarily resulted from (i) approximately
$5,514,000 of operating expense from the 15 apartment communities
acquired in 1995, including the Communities acquired in the AFR
Merger, (ii) approximately $12,243,000 for full year's operation of
the 32 Communities acquired in 1994, and (iii) approximately
$713,000 from the apartment communities owned throughout both
periods. As a percentage of revenue, property operating expenses
increased to 40.0% from 38.1% for the year ended December 31, 1995
and 1994, respectively. The 5,176 apartment units owned in the
states of Florida and Texas acquired during 1994 and 1995 account
for a 2.5% increase in the expense ratio. As anticipated in the
acquisition forecasts, these apartment units have been more
expensive to operate than the balance of the Communities. During
1995, approximately $1,374,000 was expensed for replacement of
appliances and carpets compared to approximately $888,000 for 1994.
General and administrative expenses decreased to 5.1% of revenues
for 1995 from 7.1% for 1994 as a result of increased efficiencies
from the economies of scale.
14
<PAGE> 16
Depreciation and amortization expense increased primarily due to (i)
an increase of approximately $2,017,000 from the 15 apartment
communities acquired during 1995 and (ii) an increase of
approximately $5,390,000 for a full year's operation of 32 apartment
communities acquired during 1994. Amortization of deferred financing
costs and unamortized costs in excess of fair value of net assets
acquired for 1995 were approximately $593,000 and approximately
$186,000, respectively.
Interest expense increased approximately $12,451,000 during 1995 due
to apartment communities acquired during the year as well as a full
year of operation for Communities acquired in 1994. The Company
reduced the average borrowing cost to 8.15% at December 31, 1995 as
compared to 8.45% on December 31, 1994. The average maturity on the
Company's debt increased to 9.9 years from 8.7 years at December 31,
1995 and 1994, respectively.
As a result of the foregoing, income before minority interest and
extraordinary items in 1995 increased by approximately $3,529,000
over 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased from
approximately $34,289,000 for the year ended December 31, 1995 to
approximately $38,018,000 for the year ended December 31, 1996. The
increase in net cash flow was primarily due to an increase in net
income, depreciation and amortization, and accrued expenses and
liabilities. This increase in net cash flow provided by operating
activities was offset by an increase in restricted cash due to an
increase in tax-exempt bond financing requiring additional cash
reserves and increases in other mortgage escrows and replacement
reserves and the gain recorded for the disposition of three
apartment communities.
Net cash flow used in investing activities increased from
approximately $39,167,000 for the year ended December 31, 1995 to
approximately $70,436,000 for the year ended December 31, 1996. The
increase was primarily due to the acquisition of 1,760 apartment
units in 1996 for approximately $66,258,000 as compared to the
acquisition of 520 apartment units in 1995 for approximately
$15,561,000. This increase in net cash flow used in investing
activities was offset by the sale of three apartment communities in
1996 for approximately $17,096,000. Capital improvements to existing
properties totaled approximately $18,437,000 for the year ended
December 31, 1996, compared to approximately $19,233,000 for the
same period in 1995. Of the $18,437,000 capital improvements
approximately $6,979,000 was for recurring capital expenditures,
including carpet and appliances, approximately $5,896,000 was for
revenue enhancing projects, approximately $4,774,000 was for
acquisition capital with the remaining balance for other
miscellaneous spend, including corporate. For the stabilized
apartment units, recurring capital expenditures averaged $413 per
apartment unit. Construction in progress for new apartment units
decreased from approximately $5,692,000 for the year ended December
31, 1995 to approximately $2,837,000 for the comparable period in
1996, due primarily to the completion of the 122-unit development in
Jackson, Tennessee which began leasing during the third quarter of
1995.
Net cash flow provided by financing activities increased from
approximately $2,944,000 during the year ended December 31, 1995 to
approximately $33,425,000 for the year ended December 31, 1996.
During 1996, approximately $29,407,000 was provided by borrowings
under the Credit Line and notes payable and approximately
$47,768,000 was provided from the issuance of preferred shares. The
principal uses of the cash included approximately $14,427,000 for
the repayment of notes payable and approximately $28,302,000 for
dividends and distributions.
15
<PAGE> 17
At December 31, 1996, the Company had approximately $30,405,000
outstanding on the Credit Line. At December 31, 1996, the Company
had approximately $47,243,000 (including the Credit Line) of
floating rate debt at an average interest rate of 6.9%; all other
debt was fixed rate term debt at an average interest rate of 8.1%.
The weighted average interest rate and weighted average maturity at
December 31, 1996 for the approximately $315,239,000 of notes
payable were 7.9% and 9.9 years, respectively. The Company used the
approximately $47,768,000 of net proceeds from the Preferred Stock
Offering, which closed in October, for the acquisitions of Napa
Valley Apartments and Tiffany Oaks Apartments and used the balance
to reduce the amount outstanding on the Credit Line. In December
1996, the Company increased its credit limit under the Credit Line
from $65,000,000 to $90,000,000 and expects to use the Credit Line
for future acquisitions, development, and to provide letters of
credit as credit enhancements for tax-exempt bonds. In addition, in
March 1997 the Company issued 2,300,000 shares of Common Stock in an
underwritten public offering. The net proceeds from such offering
were approximately $62.4 million, all of which were contributed to
the Operating Partnership and utilized to repay outstanding
borrowings under the Credit Line. 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 to
approximately $87,000,000 as of the date of this Annual Report on
Form 10-K.
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 Code.
Capital expenditures on property improvements and expansion projects
for 1996 totaled approximately $21,274,000 with capital expenditures
of approximately $27,400,000 planned for 1997 for property
improvement and expansion projects. 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 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 Annual Report on Form 10-K 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.
16
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report, Consolidated Financial Statements
and Selected Quarterly Financial Information are set forth on pages
F-1 to F-20 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent
accountants and auditors on any matter of accounting principles or
practices or financial statement disclosure.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Charter divides the Board of Directors into three classes
as nearly equal in number as possible, with each class serving a term of
three years. One class of Directors is elected by the shareholders of the
Company at each annual meeting. The Board of Directors has set at seven
the number of directors constituting the full Board of Directors. The
current terms of two directors expire in this year, two expire in 1998
and three in 1999.
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Position Class Term Expires
- -------------------- ------------------------------- --------- ------------
<S> <C> <C> <C>
George E. Cates Chief Executive Officer and Class III 1997
Chairman of the Board
of Directors
H. Eric Bolton, Jr. President, Chief Operating Class II 1999
Officer and Director
Simon R.C. Wadsworth Executive Vice President, Chief Class III 1997
Financial Officer and Director
John J. Byrne, III Independent Director Class I 1998
Robert F. Fogelman Independent Director Class I 1998
O. Mason Hawkins Independent Director Class II 1999
Michael B. Yanney Independent Director Class II 1999
</TABLE>
The following is a biographical summary of the experience of the
directors and executive officers of the Company:
GEORGE E. CATES. Mr. Cates is the Chief Executive Officer and
Chairman of the Board of Directors of the Company, positions he has
held since the Company's inception. Mr. Cates founded The Cates
Company in 1977 and served as its president and chief executive
officer until its merger with the Company in February 1994. Mr.
Cates received a B.S. in industrial engineering from Georgia Tech.
From 1970 to 1977, Mr. Cates was a shareholder and general manager
of Walk Jones and Francis Mah, Inc., architects and engineers. Prior
to that, he served in a number of manufacturing, sales and marketing
positions with the Buckeye Cellulose division of Procter & Gamble.
Mr. Cates is past Chairman of the Board of Memphis Light, Gas and
Water Division, past president of the Memphis Apartment Council,
past Vice Chairman of the Memphis and Shelby County Airport
Authority and is currently a trustee of Rhodes College. Mr. Cates is
also a director of First Tennessee National Corporation. Mr. Cates
is 59 years old.
17
<PAGE> 19
H. ERIC BOLTON, JR. Mr. Bolton has been an employee of the Company
since 1994. Mr. Bolton joined the Company as its Vice-President of
Development and was named Chief Operating Officer in February 1996.
In December 1996, Mr. Bolton was appointed to serve as President of
the Company and was appointed as a member of the Board of Directors
of the Company in February 1997. Mr. Bolton has over 10 years of
real estate experience and prior to joining the Company was
Executive Vice President and Chief Financial Officer of Trammell
Crow Realty Advisors. He received a B.BA. in accounting from the
University of Memphis and an M.B.A. in finance and real estate from
the University of North Texas. Mr. Bolton is 40 years old.
SIMON R. C. WADSWORTH. Mr. Wadsworth is Executive Vice President,
Chief Financial Officer and a director of the Company. Mr. Wadsworth
joined the Company in March 1994, but acted as a consultant to the
Company from the time the Initial Offering was completed until being
named to his current positions. Mr. Wadsworth is the President and
85% shareholder of TMF, Inc., an industrial equipment dealership
which he acquired in 1981. Mr. Wadsworth spends less than two hours
per week on TMF, Inc. business, which is managed by professional
management. From 1976 to 1980, he was Director of Corporate
Development for Holiday Inns, Inc., and from 1973 to 1976 was Budget
Director for Royal Crown Companies. Mr. Wadsworth received a B.A.
with honors from Cambridge University and an M.B.A. (concentrating
in finance and accounting) from the Harvard Graduate School of
Business. Mr. Wadsworth is 49 years old.
JOHN J. BYRNE, III. Mr. Byrne has served as an independent director
of the Company since May 1995. Mr. Byrne founded Cirque Property
L.C., a real estate acquisitions and property management company
headquartered in Salt Lake City, Utah in 1986, and since that time
has served as its President and Managing Member. Mr. Byrne is 37
years old.
ROBERT F. FOGELMAN. Mr. Fogelman has served as an independent
director of the Company since July 1994 and has been President of
Fogelman Investment Company, a privately-owned investment firm for
more than five years. Mr. Fogelman received a B.S. degree in
Economics from the Wharton School of Finance and Commerce at the
University of Pennsylvania in 1958. Mr. Fogelman is 61 years old.
O. MASON HAWKINS. Mr. Hawkins has served as an independent director
of the Company since October 1993 and is Chairman and Chief
Executive Officer of Southeastern Asset Management, Inc., a
registered investment advisor co-founded by Mr. Hawkins in 1975 and
presently having over $8 billion of assets under management. He is
also a director of Longleaf Partners Funds, a registered investment
company of which Southeastern Asset Management, Inc. serves as
investment advisor. Mr. Hawkins received a B.S.B.A. degree from the
University of Florida and a M.B.A. in Finance from the University of
Georgia. He was a research analyst for Atlantic National Bank from
1972 to 1973, serving as Director of Research in 1973, and was a
research analyst for First Tennessee Investment Management from 1974
to 1975, serving as Director of Research in 1975. He is a Chartered
Financial Analyst. Mr. Hawkins is 49 years old.
MICHAEL B. YANNEY. Mr. Yanney has served as an independent director
of the Company since the consummation of the AFR Merger in June
1995. Mr. Yanney served as Chairman and Chief Executive Officer of
America First Companies since 1984. From 1977 until 1984, Mr. Yanney
was principally engaged in the ownership and management of
commercial banks. He is also a director of Burlington Northern Inc.,
Forest Oil Corporation, MFS Communications Company, Inc. and Lozier
Corporation. Mr. Yanney is 63 years old.
18
<PAGE> 20
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Summary Compensation Table.
Annual Compensation Long Term Compensation
----------------------------------- -----------------------
Other Restricted
Annual Stock
Name and Position Year Salary($) Bonus($) Compensation($) Awards($) Options(#)
- ----------------- ---- --------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
George E. Cates 1996 $255,137 $-- $-- $-- 25,000
Chairman, Chief 1995 257,500 67,500 -- -- --
Executive Officer 1994 225,000 -- -- -- 90,000
and Director
H. Eric Bolton 1996 136,670 15,770 -- -- 15,000
President, Chief 1995 108,400 20,800 -- -- 12,500
Operating Officer 1994 56,042 -- -- -- 2,500
and Director
Simon R. C. Wadsworth 1996 135,187 -- -- -- 10,000
Executive Vice 1995 131,400 36,000 -- -- 2,500
President, Chief 1994 120,000 -- -- -- 30,000
Financial Officer
and Director
</TABLE>
Option Grants during the year ending December 31, 1996. The following
table provides information on option grants during the year ending
December 31, 1996 to the executive officers listed in the table above.
<TABLE>
<CAPTION>
Individual Grants
----------------- Potential Realization
% of Total Value at
Options Assumed Rates of
Granted to Annual Stock Price
Employees Exercise Appreciation for
Options in Price Expiration Option Term
Name Granted Fiscal Year ($/Share) Date 5% 10%
- --------------------- ------- ----------- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
George E. Cates 25,000 27.0% $26.50 2/14/06 $416,643 $1,055,854
H. Eric Bolton 15,000 16.2% $26.50 2/14/06 $250,136 $633,513
Simon R. C. Wadsworth 10,000 10.8% $26.50 2/14/06 $166,657 $422,342
</TABLE>
19
<PAGE> 21
Aggregated Option Exercises through December 31, 1996. The following
table provides information on options held by the executive officers
listed above through December 31, 1996, and the value of each of their
unexercised options at December 31, 1996. There were no stock options
exercised in 1996.
<TABLE>
<CAPTION>
Number of Shares
Exercised Options Underlying Value of Unexercised
----------------- Unexercised In-the-Money
Shares Options Options (1)
acquired Value Exercisable/ Exercisable/
Name on exercise Realized Unexercisable Unexercisable
- --------------------- ----------- -------- ---------------- --------------------
<S> <C> <C> <C> <C>
George E. Cates -- -- 26,000 / 79,000 $237,250 / $552,125
H. Eric Bolton -- -- 3,500 / 26,500 $13,500 / $79,313
Simon R. C. Wadsworth -- -- 12,500 / 30,000 $67,875 / $130,250
</TABLE>
__________
(1) Based upon the closing price of the Company's Common Stock on the
NYSE on December 31, 1996 of $28.875 per share.
Compensation of Directors
Directors who are employees of the Company or one of its subsidiaries do
not receive additional remuneration as directors. In 1994, the Company's
three initial independent directors were each awarded 2,500 shares of
Common Stock for their services as director. The directors' rights in the
Common Stock vest at the rate of 500 shares per year beginning in 1994.
Each director is entitled to receive the distributions paid on his shares
of Common Stock prior to vesting. Directors who cease to be directors
will forfeit any shares not previously vested prior to the termination of
that person's service on the board of directors. Mr. Yanney currently
receives $15,000 per year as compensation for his service on the board of
directors. Any independent directors elected to the board in the future
will be paid annual compensation of $15,000. In 1996, each independent
director was awarded options to acquire 1,000 shares of stock and
committee chairmen were awarded an additional 1,000 options.
General
The Compensation Committee of the Board of Directors is composed of
independent Directors. In 1996, it was composed of John J. Byrne, III,
Robert F. Fogelman, O. Mason Hawkins, and Michael B. Yanney. The
Compensation Committee is responsible for developing and communicating
recommendations to the Board of Directors with respect to the Company's
executive compensation policies, and determines, pursuant to authority
delegated by the Board of Directors, the compensation (including stock
options) to be paid to the Chief Executive Officer and each of the other
executive officers of the Company.
The Company is at a relatively early stage of its development.
Consequently, the Compensation Committee does not believe it appropriate
to base its compensation decisions solely on traditional financial
measures of performance, including return on equity. Instead, the
Compensation Committee has evaluated performance based primarily on
growth in funds from operations per share, which industry analysts
consider to be the primary measure of performance for an equity REIT.
The Company's executive officer compensation program is comprised of base
salary, cash incentive bonus compensation, long-term incentive
compensation in the form of stock options, and various benefits,
including medical plans generally available to all employees of the
Company.
20
<PAGE> 22
Base Salary
Base salary levels for the Company's executive officers together with
option grants and benefits are intended to be competitively set relative
to other REITs of comparable size and stage of development in the
Company's geographic area. In determining base salaries the Compensation
Committee also takes into account individual experience and performance
as well as specific issues relating to the Company.
Incentive Bonus Compensation
The Compensation Committee may periodically award bonuses to executives
in order to provide a direct financial incentive, in the form of a cash
bonus, to executives to achieve individual and Company objectives. The
amount of the bonus is determined based upon the Compensation Committee's
evaluation of each executive's performance and in accordance with
employment agreements with certain executives.
Amended and Restated 1994 Restricted Stock and Stock Option Plan
The 1994 Restricted Stock and Stock Option Plan (the "1994 Plan") is the
Company's long-term incentive plan for executive officers and other
selected employees. The objective of the program is to retain and
motivate executives to improve long-term stock performance. The
Compensation Committee has the authority, within limitations set forth in
the 1994 Plan, (i) to establish rules and regulations concerning the 1994
Plan, (ii) to determine the persons to whom Options and Restricted Stock
may be granted (iii) to fix the number of shares of Common Stock to be
covered by each Option and (iv) to set the terms and provisions of each
Option to be granted and the vesting schedule for Restricted Stock. Stock
options are generally granted at the prevailing market value and will
only have value if the Company's stock increases.
Non-Qualified Executive Deferred Compensation Plan
In August, 1995, the Compensation Committee adopted a non-qualified
deferred compensation plan for key employees who are not qualified for
participation in the Company's 401 (k) Savings Plan. Under the terms of
the plan, key employees may elect to defer a percentage of their
compensation and the Company matches a portion of their salary deferral
with similar provisions as apply for the Company's 401 (k) Savings Plan.
The plan is designed so that the employees' investment earnings under the
non-qualified plan should be the same as the earning assets in the
Company's 401 (k) Savings Plan.
Compensation of Chief Executive Officer
Mr. Cates' base salary was $255,000 for the year ended December 31, 1996.
On February 4, 1994 the Company entered into a five-year employment
agreement with Mr. Cates for an annual base compensation of $225,000,
subject to any increases in base compensation approved by the
Compensation Committee. The Compensation Committee considered the initial
annual base salary of Mr. Cates to be competitive with comparable REITs
in the Company's geographic area. The employment contract provides for
certain severance payments in the event of death or disability or upon
termination by the Company without cause or by the employee with cause.
The agreement contains a non-competition provision which prohibits Mr.
Cates, except as an officer or employee of the Company, from engaging
directly or indirectly in the acquisition, development, operation,
management, leasing or landscaping of any multifamily community. This
prohibition extends to all multifamily communities wherever located,
during the term of employment and to multifamily properties within 30
miles of any multifamily community owned by the Company after termination
of such employment.
21
<PAGE> 23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF THE COMPANY'S COMMON STOCK
Security Ownership of Certain Beneficial Owners.
The following table sets forth information as of March 21, 1997,
regarding each person known to the Company to be the beneficial owner of
more than five percent of its Common Stock:
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class(1)
- ------------------------------------ -------------------- -------------------
<S> <C> <C>
Snyder Capital Management, Inc. 1,100,400 (2) 8.2%
350 California Street, Suite 1460
San Francisco, CA 94104-1436
</TABLE>
__________
(1) Based on 13,404,398 shares of Common Stock outstanding on March 21, 1997.
(2) The information set forth is based on a Schedule 13G filed by Snyder
Capital Management, Inc. on February 14, 1997 that indicates that
beneficial ownership of 1,100,400 shares of Common Stock, of which it
has sole and dispositive power over 70,500 shares, shared voting power
over 934,800 shares and shared dispositive power over 1,029,900 shares.
Security Ownership of Management
The following table sets forth the beneficial ownership of the
Company's Common Stock as of March 21, 1997 by (i) each director, (ii)
each executive officer named in the Summary Compensation Table, and (iii)
all directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name of Beneficial Owner Ownership Class(1)
- ------------------------ ------------- --------
<S> <C> <C>
Robert F. Fogelman 653,000 (2) 4.5 %
George E. Cates 588,122 (3) 4.1
O. Mason Hawkins 353,417 (4) 2.4
Michael B. Yanney 132,051 *
John J. Byrne, III 34,500 *
Simon R. C. Wadsworth 34,620 (5) *
H. Eric Bolton 13,317 (6) *
All Directors and Executive Officers
as a Group (7 Persons) 1,809,027 12.5 %
</TABLE>
__________
(1) Based on 13,404,398 shares of Common Stock outstanding on March 21,
1997, plus, with respect to each listed person (or all listed
persons, as a group), the number of shares of Common Stock issuable
by the Company to such person or group in exchange for Common Units
in the Operating Partnership plus the number of shares of Common
Stock issuable to such person (or group) in respect of currently
exercisable options. The total number of shares used in calculating
this percentage assumes that none of the Common Units or exercisable
options held by other persons are redeemed for shares of Common
Stock.
(2) Includes 82,500 shares owned directly by Mr. Fogelman and 570,500
shares that Mr. Fogelman has the current right to acquire upon
redemption of Common Units.
22
<PAGE> 24
(3) Includes 258,928 shares owned directly by Mr. Cates, 235,794 shares
that Mr. Cates has the current right to acquire upon redemption of
Common Units, 49,000 shares that Mr. Cates has the current right to
acquire upon the exercise of options that are currently exercisable
and 44,400 shares owned by the Company's ESOP over which Mr. Cates
shares voting power. Excludes 2,123 shares owned by Mr. Cates' wife,
over which Mr. Cates exercises no voting or investment power and
with respect to which Mr. Cates disclaims beneficial ownership.
(4) Includes 194,799 shares owned directly by Mr. Hawkins and 158,618
shares that Mr. Hawkins has the current right to acquire upon
redemption of Common Units.
(5) Includes 21,000 shares that Mr. Wadsworth has the current right to
acquire upon the exercise of options that are currently exercisable.
(6) Includes 9,000 shares that Mr. Bolton has the current right to
acquire upon the exercise of options that are currently exercisable.
* Represents less than 1% of total.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases office space from a partnership which owns the
building where the Company's principal office is located. Mr. Cates has a
6.9% and Mr. Wadsworth a 4.2% interest in such partnership. The Company
paid approximately $107,400 in rent, or $14.20 per average square foot
(including concessions), for such office space during 1996, and has lease
obligations of $616,800 for the remaining lease term. The Company
believes the rental rate is a competitive rate for buildings in the area
of Memphis in which the Company's headquarters are located.
All transactions involving related parties must be approved by a majority
of the disinterested members of the Company's Board of Directors. The
Company has, and expects to have, transactions in the ordinary course of
its business with directors and officers of the Company and their
affiliates, including members of their families or corporations,
partnerships or other organizations in which such officers or directors
have a controlling interest, on substantially the same terms (including
price, or interest rates and collateral) as those prevailing at the time
for comparable transactions with unrelated parties.
23
<PAGE> 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Independent Auditors' Report F - 1
Consolidated Balance Sheets as of December 31, F - 2
1996 and 1995
Consolidated Statements of Operations for the
years ended F - 3
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity
for the years ended F - 4
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the
years ended F - 5
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for F - 6
the years ended
December 31, 1996, 1995 and 1994
2. Financial Statement Schedule required to be filed
by item 8 and Paragraph (d) of this item 14:
Independent Auditors' Report F - 16
Schedule III - Real Estate Investments and
Accumulated Depreciation as of F - 17
December 31, 1996
3. The exhibits required by Item 601 of Regulation S-K, except as
otherwise noted, have been filed with previous reports by the
registrant and are herein incorporated by reference.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- --------------
<S> <C>
3.1* Amended and Restated Charter of Registrant
3.2 Articles of Amendment to the Charter of Registrant
dated January 28, 1994
3.3 Articles of Merger of America First REIT Advisory
Company with and into the Registrant
3.4** Articles of Amendment to the Amended and Restated
Charter of Registrant Designating and Fixing the Rights
and Preferences of A Series of Shares of Preferred Stock
3.5* Bylaws of the Registrant
4.1* Form of Common Share Certificate
4.2** Form of Series A Preferred Stock Certificate
4.3** Articles of Amendment to the Amended and Restated
Charter of Registrant Designating and Fixing the Rights
and Preferences of A Series of Shares of Preferred Stock
10.1* First Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
10.2 Amendment No. 1 to the First Amended and Restated
Agreement of Limited Partnership of the Operating
Partnership dated as of June 28, 1994
10.3 Amendment No. 2 to the First Amended and Restated
Agreement of Limited Partnership of the Operating
Partnership dated as of February 24, 1996
10.4 Amendment No. 3 to the First Amended and Restated
Agreement of Limited Partnership of the Operating
Partnership dated as of October 10, 1996
10.5 Amendment No. 4 to the First Amended and Restated
Agreement of Limited Partnership of the Operating
Partnership dated December 10, 1996, but effective as
of February 24, 1996
10.6* Supplemental Agreement with Respect to Transfer of
Property and Delivery of Guaranty
10.7* Employment Agreement (George E. Cates)
10.8* 1994 Restricted Stock and Stock Option Plan
24
<PAGE> 26
10.9* Indemnity Agreement and Agreement to Make Capital
Contribution
10.10* Supplemental Representations and Warranties Agreement
10.11*** Promissory Note of the Operating Partnership in favor
of Leader Federal Bank for Savings (McKellar)
10.12*** Promissory Note of the Operating Partnership in favor
of Leader Federal Bank for Savings (Park Estate)
10.13*** Promissory Note of the Operating Partnership in favor
of Leader Federal Bank for Savings (Greenbrook)
10.14*** Promissory Note of the Operating Partnership in favor
of Leader Federal Bank for Savings (Cedar Mill)
10.15*** Assignment of Rents and Leases by the Operating
Partnership in favor of Leader Federal Bank for Savings
(McKellar, Park Estate, Greenbrook, Cedar Mill)
10.16***** Agreement and Plan of Merger among the Registrant, AFRI
Merger Sub, Inc., America First REIT Advisory Company
and America First REIT, Inc. dated as of February 24, 1995
10.17****** Agreement and Plan of Merger between the Registrant,
America First Companies, L.L.C. and America First REIT
Advisory Company dated as of February 24, 1995
10.18 Revolving Credit Agreement between the Registrant and
AmSouth Bank of Alabama
10.19 Amendment No. 1 to Revolving Credit Agreement between
the Registrant and AmSouth Bank of Alabama
23.1 Consent of KPMG Peat Marwick LLP
23.2 Opinion of KPMG Peat Marwick LLP on Schedule III (included
in F pages of this Form 10-K)
</TABLE>
- -----------------------
* Previously filed as an exhibit to the Registration
Statement on Form S-11 (SEC File No. 33-69434), as amended,
of the Registrant and incorporated herein by reference.
** Previously filed as an exhibit to the Registration
Statement on Form 8-A
*** Previously filed as an exhibit to the Registration
Statement on Form S-11 (SEC File No. 33-81970), as amended,
of the Registrant and incorporated herein by reference.
**** Previously filed as an exhibit to the Current Report of
the Registrant on Form 8-K as of December 3, 1994
***** Previously filed as an exhibit to the Current Report of
the Registrant on Form 8-K as of March 3, 1995
****** Previously filed as an exhibit to the 1994 Annual Report
of the Registrant on Form 10-K as of March 30, 1995
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the
registrant during the fourth quarter of 1996:
<TABLE>
<CAPTION>
Date of
Form Events Reported Report
---- ----------------------------------------- -----------
<S> <C> <C>
8-K 98.1% occupancy achieved 10/15/96
8-K Announcement of Preferred Stock Offering
with exhibit of Underwriting Agreement 10/15/96
8-K Announcement of declaration for third
quarter common stock dividend.
Announcement of plans to file a Dividend
Reinvestment and Direct Stock Purchase Plan. 10/15/96
8-K Announcement of an apartment community
disposition and acquisition. 12/18/96
8-K Announcement of apartment community
acquisition. 12/26/96
</TABLE>
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Item 14(a)(2) above.
25
<PAGE> 27
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: March 25, 1997 /s/ George E. Cates
------------------- ----------------------------
George E. Cates
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on
the dates indicated.
Date: March 25, 1997 /s/ George E. Cates
------------------ ----------------------------
George E. Cates
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 25, 1997 /s/ Simon R.C. Wadsworth
------------------ ----------------------------
Simon R.C. Wadsworth
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 26, 1997 /s/ H. Eric Bolton
----------------- ----------------------------
H. Eric Bolton
President and Chief Operating Officer
Date:_________________ ______________________________
John J. Bynre, III
Director
Date: March 26, 1997 /s/ Robert F. Fogelman
----------------- ------------------------------
Robert F. Fogelman
Director
Date: March 26, 1997 /s/ O. Mason Hawkins
----------------- ------------------------------
O. Mason Hawkins
Director
Date:_________________ ______________________________
Michael B. Yanney
Director
26
<PAGE> 28
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheets of Mid-
America Apartment Communities, Inc. (the "Company") as of December 31,
1996 and 1995 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-
year period ended December 31, 1996. These financial statements are the
responsibility of the management of the Company. Our responsibility is
to express an opinion on these 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 financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant 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 financials statements referred to above present
fairly, in all material respects the financial position of the Company at
December 31, 1996 and 1995, and the results of the Company's operations
and cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, the
Company changed its accounting method to capitalize replacement
purchases for major appliances and carpet in 1996.
KPMG Peat Marwick LLP
Memphis, Tennessee
February 14, 1997
F - 1
<PAGE> 29
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Assets:
Real estate assets (note 3):
Land $ 61,150 $ 57,456
Buildings and improvements 563,584 507,586
Furniture, fixtures and equipment 12,511 9,916
Construction in progress 4,648 3,830
--------- ---------
641,893 578,788
Less accumulated depreciation (49,558) (29,504)
--------- ---------
Real estate assets, net 592,335 549,284
Cash and cash equivalents 4,053 3,046
Restricted cash 5,538 4,118
Deferred financing costs, net 2,984 2,225
Other assets 6,289 6,594
--------- ----------
Total assets $ 611,199 $ 565,267
========= ==========
Notes payable (note 3) $ 315,239 $ 307,939
Accounts payable 744 1,403
Accrued expenses and other liabilities 12,182 10,146
Security deposits 2,412 2,452
--------- ----------
Total liabilities 330,577 321,940
Minority interest 39,238 41,049
Commitments and contingencies (note 6) - -
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,
issued and outstanding 20 -
Common stock, $.01 par value
(authorized 20,000,000 shares;
issued and outstanding 10,949,216
and 10,936,832 shares at December 31,
1996 and 1995, respectively 109 109
Additional paid-in capital 256,689 208,670
Unearned compensation (260) (381)
Accumulated deficit (15,174) (6,120)
--------- ---------
Total shareholders' equity 241,384 202,278
--------- ---------
Total liabilities and shareholders'
equity $ 611,199 $ 565,267
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 2
<PAGE> 30
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental $ 110,090 $ 93,509 $ 50,181
Other 1,792 1,454 1,026
---------- --------- ---------
Total revenues 111,882 94,963 51,207
Expenses:
Personnel 11,702 9,798 5,145
Building repairs and maintenance 5,305 5,791 3,048
Real estate taxes and insurance 11,642 10,198 5,322
Utilities 6,148 5,753 2,526
Landscaping 2,910 2,361 1,294
Other operating 4,863 4,053 2,149
Depreciation and amortization
real estate assets 21,288 16,470 8,747
Depreciation and amortization
non-real estate assets 155 104 56
General and administrative 6,154 4,851 3,613
Interest 25,766 22,684 10,233
Amortization of deferred financing costs 661 593 296
--------- --------- ---------
Total expenses 96,594 82,656 42,429
Income before gain on disposition of
properties, minority interest in
operating partnership income and
extraordinary item 15,288 12,307 8,778
Gain on disposition of properties 2,185 - -
--------- --------- ---------
Income before minority interest in
operating partnership income and
extraordinary item 17,473 12,307 8,778
Minority interest in operating
partnership income 3,213 2,497 2,319
--------- --------- ---------
Net income before extraordinary item 14,260 9,810 6,459
Gain on extinguishment of debt (note 3) - - 485
--------- --------- ---------
Net income 14,260 9,810 6,944
Dividends on preferred shares 990 - -
---------- --------- ---------
Net income available for common
shareholders $ 13,270 $ 9,810 $ 6,944
========== ========= =========
Net income available per common share (note 1):
- ------------------------------------------------
Before extraordinary items $ 1.21 $ 1.00 $ 0.94
Extraordinary items - - 0.07
---------- --------- ---------
Net income available per common share $ 1.21 $ 1.00 $ 1.01
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 3
<PAGE> 31
Mid-America Apartment Communities, Inc.
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- ------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
PARTNERS' AND OWNERS' DEFICIT,
DECEMBER 31, 1993 - $ - - $ -
Capital contributions (prior to IPO) - - - -
Capital distributions (prior to IPO) - - - -
Net proceeds of IPO, private placement and
shares issued in exchange for interests
in entities included in the Predecessor - - 5,154 52
Shares issued to Employee Stock Option Plan
at the IPO date - - 22 -
Restricted shares issued to directors - - 10 -
Acquisition of interests in non-controlled
entities included in the Predecessor
or where cash consideration was involved - - - -
Adjustment for minority interest of unitholders
in Operating Partnership at the IPO date - - - -
Net proceeds of secondary offering - - 3,393 34
Adjustment for minority interest of unitholders
in Operating Partnership at date of
secondary offering - - - -
Amortization of unearned compensation - - - -
Dividends on common stock ($1.21 per share) - - - -
Net income - - - -
--------- -------- --------- ----------
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 - $ - 8,579 $ 86
Issuance of common shares - - 5 -
Exercise of stock options - - 10 -
Shares issued in exchange for units - - 12 -
Shares issued in AFR Merger - - 2,331 23
Amortization of unearned compensation - - - -
Dividends on common stock ($2.00 per share) - - - -
Net income - - - -
---------- --------- --------- ----------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 - $ - 10,937 $ 109
Issuance of common shares - - 11 -
Issuance of preferred shares 2,000 20 - -
Exercise of stock options - - -
Shares issued in exchange for units - - 1 -
Amortization of unearned compensation - - - -
Dividends on common stock ($2.04 per share) - - - -
Dividends on preferred stock ($0.495 per share) - - - -
Net income - - - -
---------- ---------- --------- ----------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 2,000 $ 20 10,949 $ 109
========== ========== =========
See accompanying notes to consolidated financial statements.
<CAPTION>
Additional Accumulated
Paid-In Unearned Earnings
Capital Compensation (Deficit) Total
---------- ------------ ----------- ----------
PARTNERS' AND OWNERS' DEFICIT,
DECEMBER 31, 1993 $ - $ - $ (4,684) $ (4,684)
Capital contributions (prior to IPO) - - 73 73
Capital distributions (prior to IPO) - - (2,257) (2,257)
Net proceeds of IPO, private placement and
shares issued in exchange for interests
in entities included in the Predecessor 88,433 - (3) 88,482
Shares issued to Employee Stock Option Plan
at the IPO date 445 (445) - -
Restricted shares issued to directors 211 (211) - -
Acquisition of interests in non-controlled
entities included in the Predecessor
or where cash consideration was involved 24,737 - 12,100 36,837
Adjustment for minority interest of unitholders
in Operating Partnership at the IPO date (36,463) - (1,797) (38,260)
Net proceeds of secondary offering 78,958 - - 78,992
Adjustment for minority interest of unitholders
in Operating Partnership at date of
secondary offering (5,886) - - (5,886)
Amortization of unearned compensation - 114 - 114
Dividends on common stock ($1.21 per share) - - (7,970) (7,970)
Net income - - 6,944 6,944
---------- --------- ----------- ------------
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 $ 150,435 $ (542) $ 2,406 $ 152,385
Issuance of common shares 106 37 - 143
Exercise of stock options 203 - - 203
Shares issued in exchange for units 200 - - 200
Shares issued in AFR Merger 57,726 - - 57,749
Amortization of unearned compensation - 124 - 124
Dividends on common stock ($2.00 per share) - - (18,336) (18,336)
Net income - - 9,810 9,810
---------- --------- ----------- ------------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 $ 208,670 $ (381) $ (6,120) $ 202,278
Issuance of common shares 277 - - 277
Issuance of preferred shares 47,748 - - 47,768
Exercise of stock options (2) - - (2)
Shares issued in exchange for units (4) - - (4)
Amortization of unearned compensation - 121 - 121
Dividends on common stock ($2.04 per share) - - (22,324) (22,324)
Dividends on preferred stock ($0.495 per share) - - (990) (990)
Net income - - 14,260 14,260
---------- --------- ----------- ------------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 $ 256,689 $ (260) $ (15,174) $ 241,384
========== ========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE> 32
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flow
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
------------------------------------
Net income $ 14,260 $ 9,810 $ 6,944
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 22,243 17,291 9,213
Minority interest in operating partnership income 3,213 2,497 2,319
Extraordinary item - - (485)
Gain on disposition of properties (2,185) - -
Changes in assets and liabilities, net
of effect from business combination:
Restricted cash (1,420) 6,333 (2,575)
Other assets (95) (1,154) (670)
Accounts payable 6 (77) 630
Accrued expenses and other liabilities 2,036 (358) 4,793
Security deposits (40) (53) 1,421
-------- -------- --------
Net cash provided by operating activities 38,018 34,289 21,590
Cash flows from investing activities:
------------------------------------
Purchases of real estate assets (66,258) (15,561) (217,310)
Proceeds from dispositions of real estate assets 17,096 - -
Improvements to properties (18,437) (19,233) (6,557)
Construction of units in progress (2,837) (5,692) (3,879)
Net cash acquired from business combination - 1,319 -
-------- -------- --------
Net cash used in investing activities (70,436) (39,167) (227,746)
Cash flows from financing activities:
------------------------------------
Proceeds from notes payable 17,049 19,256 129,034
Net increase in credit line 12,358 18,047 -
Principal payments on notes payable (14,427) (10,928) (65,975)
Deferred financing costs (1,256) (484) (2,459)
Proceeds from issuances of preferred shares 47,768 - -
Proceeds from issuances of common shares 271 346 167,474
Redemption of unitholder interests (36) (43) (6,844)
Capital contributions (Predecessor) - - 73
Capital distributions (Predecessor) - - (2,257)
Distributions to unitholders (4,988) (4,914) (2,977)
Dividends paid on common shares (22,324) (18,336) (7,970)
Dvidends paid on preferred shares (990) - -
--------- -------- --------
Net cash provided by financing activities 33,425 2,944 208,099
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,007 (1,934) 1,943
Cash and cash equivalents, beginning of period 3,046 4,980 3,037
--------- -------- --------
Cash and cash equivalents, end of period $ 4,053 $ 3,046 $ 4,980
========= ======== ========
Supplemental disclosure of cash flow information:
------------------------------------------------
Interest paid $ 25,262 $ 22,362 $ 9,968
Supplemental disclosure of noncash investing activities:
-------------------------------------------------------
Increase in basis of properties acquired in
connection with the formation transaction - - $ 41,147
Assumption (transfer) of debt related to
property acquisitions (dispositions) $ (7,680) - $ 62,886
Conversion of units for common shares - $ 200 -
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE> 33
Mid-America Apartment Communities, Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
1. Organization and Summary of Significant Accounting Policies
Organization and Formation of the Company
Mid-America Apartment Communities, Inc. (the "Company") is a Memphis,
Tennessee based self-administered and self-managed real estate
investment trust which at December 31, 1996 owns and operates 73
apartments with 19,280 units in 12 states. The Company completed an
initial public offering (the "IPO") and private placement of shares on
February 4, 1994. Net proceeds were used to acquire a general
partnership interest in Mid-America Apartments, L.P. ( the "Operating
Partnership") which was formed to succeed substantially all of the
interests in MAC Properties Group, (predecessor to the Company,
"Predecessor"). The Company's business is conducted principally through
the Operating Partnership. The Company completed a second public offering
on August 26, 1994 and completed a merger with America First REIT, Inc.
and America First REIT Advisory Company on June 30, 1995.
Basis of Presentation
The accompanying 1996 and 1995 financial statements include the accounts
of the Company, the Operating Partnership, and other subsidiaries.
The 1994 financial statements include the accounts of the Company and
Operating Partnership from February 4, 1994 (the "IPO date") through
December 31, 1994 and the accounts of the Predecessor for the period
January 1, 1994 through the IPO date. All significant intercompany
accounts and transactions have been eliminated in consolidation.
As part of the formation transaction, purchase accounting was applied to
the acquisition of all non-controlled interests and interests in which
cash consideration was paid. This resulted in an increase of $41,147,000
in the historical cost basis of the related real estate assets. The
acquisition of all other interests was accounted for as a reorganization
of entities under common control and, accordingly, was reflected at
historical cost in a manner similar to that used in pooling of interests
accounting.
Minority Interest
Minority interest in the accompanying consolidated financial statements
relates to the unitholders' ownership interest in the Operating
Partnership. The Company is the sole general partner of the Operating
Partnership. The consolidated financial statements of the Company for the
periods ending after the IPO have been adjusted for the minority interest
in the Operating Partnership based on the weighted average shares of the
Company plus partnership units outstanding during the period.
At the IPO date, the Company's Board established economic rights in
respect of each unit of limited partnership interest in the Operating
Partnership that were equivalent to the economic rights in respect of
each share of common stock. Each unit is redeemable at the option of the
holder thereof in exchange for one share of common stock. The Operating
Partnership has followed the policy of paying the same per unit
distribution in respect of the units as the per share distribution in
respect of the common stock. The Operating Partnership agreement has
been amended to allocate additional net income to the holders of units
that would otherwise be the net income of the Company or another entity.
Net income before minority interest of the Company for 1996 was allocated
approximately 18% to holders of units and 82% to the Company.
Use of Estimates
Management of the Company 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 these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Revenue Recognition
F - 6
<PAGE> 34
The Company leases residential apartments under operating leases with
terms of one year or less. Rental and other revenues are recorded when
earned.
Cash and Cash Equivalents
The Company considers cash, investments in money market accounts and
certificates of deposit with original maturities of three months or less
to be cash equivalents.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for property
taxes, insurance, debt service and replacement reserves.
Real Estate Assets and Depreciation
Real estate assets are carried at the lower of depreciated cost or net
realizable value. Interest, property taxes, and other development costs
incurred during construction is capitalized until completion. Repairs and
maintenance costs are expensed as incurred while significant
improvements, renovations, and replacements are capitalized. The cost of
interior painting, vinyl flooring, and blinds are expensed as incurred.
In conjunction with acquisitions of properties, the Company's policy is
to provide in its acquisition budgets adequate funds to complete any
deferred maintenance items to bring the properties to the required
standard, including the cost of replacement appliances, carpet, interior
painting, vinyl flooring, and blinds. These costs are capitalized.
Following a review of its capital expenditure and depreciation policy,
effective January 1, 1996, the Company implemented a new policy of which
the primary changes are as follows:
(a) Increase minimum dollar amounts to capitalize from $500 to $1,000;
(b) For stabilized properties (generally, properties owned and operated
by the Company for at least one year), capitalize replacement purchases
for major appliances and carpeting of an entire apartment unit which was
previously expensed; and
(c) Reduce depreciation life for certain assets from 20 years to 10 to
15 years.
The Company believes that the newly adopted accounting policy is
preferable because it is consistent with policies currently being used by
the majority of the largest apartment REITs and provides a better
matching of expenses with the estimated benefit period. The Company's
1995 and 1994 financial statements were not restated for the effect of
the change in accounting policy. The policy has been implemented
prospectively effective January 1, 1996.
Depreciation is computed on a straight line basis over the estimated
useful lives of the related assets which range from 8 to 40 years for
land improvements and buildings and 5 years for furniture, fixtures and
equipment.
The Company periodically evaluates its real estate assets for impairment
based upon undiscounted cash flows and measures impairment based on fair
value. This determination is dependent primarily on the Company's
estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of
many years. At December 31, 1996 the Company does not hold any assets
which meet the impairment criteria.
F - 7
<PAGE> 35
Deferred Costs and Intangibles
Organization costs are amortized using the straight line method over 60
months. Deferred financing costs are amortized over the terms of the
related debt using a method which approximates the interest method.
Unamortized cost in excess of fair value of net assets acquired is
amortized using the straight line method over 30 years.
Partners' capital contributions, distributions and profit and loss with
respect to entities included in the Predecessor
Prior to the IPO, partners' capital contributions, distributions and
profit and loss were allocated in accordance with the terms of individual
partnership agreements, which generally prescribed allocation in
proportion to respective ownership interests. Certain agreements also
provided for a preference return to limited partners.
Per Share Data
Primary earnings per share is computed based upon 10,986,316 and
9,818,804 weighted average shares outstanding for the years ending
December 31, 1996 and 1995, respectively. For the period February 4,
1994 through December 31, 1994, primary earnings per share is computed
based upon net income for that period and 6,534,327 weighted average
shares outstanding.
At December 31, 1996 10,949,216 common shares and 2,444,352 units were
outstanding, a total of 13,393,568. Additionally, the Company has
outstanding options for 338,650 shares of common stock which increased
weighted average shares outstanding during the years ended December 31,
1996 and 1995 by 43,792 and 40,987 shares, respectively and the period
February 4, 1994 through December 31, 1994 by 42,956 shares.
Reclassification
Certain prior year amounts have been reclassified to conform with 1996
presentation. The reclasses had no effect on shareholders' equity or net
income.
2. Business Combination
On June 29, 1995, the Company completed the acquisition of America First
REIT, Inc. and America First REIT Advisory Company ("AFR") accounted for
using the purchase method of accounting. The Company exchanged 2,331,000
shares of its common stock, valued at $57,749,000, for all of the
capital stock of AFR. The operating results of AFR are included in the
accompanying statement of operations commencing July 1, 1995.
The fair value of assets acquired and liabilities assumed were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired, primarily real estate asset $ 109,999,000
Liabilities assumed 52,250,000
-------------
Net assets acquired $ 57,749,000
=============
</TABLE>
3. Notes Payable and Credit Line
The Company has an unsecured bank line of credit (the "Credit Line")
which may be drawn to $90 million depending upon the borrowing base made
available by the Company. As of December 31, 1996, $30,405,000 was
outstanding under this line. This two year line of credit expires in
October 1998. Including the Credit Line, the Company has approximately
$315.2 million and $307.9 million outstanding at December 31, 1996 and
1995 under notes payable. These notes (excluding the Credit Line) are
secured by real estate assets and certain restricted cash accounts. As
of December 31, 1996, the Company estimated that the weighted average
interest rate on balances then outstanding was 7.9%, with an average
maturity of 10 years. At December 31, 1996, 85% of outstanding debt was
at a fixed interest rate, and 15% was at variable rates.
F - 8
<PAGE> 36
A portion of the proceeds of the IPO was used to repay certain debt
attributable to the Predecessor, resulting in an extraordinary gain of
$485,000, net of minority interest.
The notes payable and Credit Line at December 31, 1996 and 1995 are
summarized as follows (dollars in millions):
<TABLE>
<CAPTION>
At December 31, 1996
------------------------------------------
Actual Average
Interest Rates Interest Rate Maturity 1996 1995
---------------- ------------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Fixed Rate:
Taxable 6.50 - 10.00% 8.51% 1997 - 2035 $ 212.7 $ 225.9
Tax-exempt 5.75 - 8.75% 6.55% 2009 - 2021 55.3 46.9
------- -------
$ 268.0 $ 272.8
Variable Rate:
Taxable Credit Line LIBOR + 1.75% 7.50% 1998 $ 30.4 $ 18.0
Tax-exempt 5.27 - 6.60% 5.79% 2005 - 2025 16.8 17.1
------- -------
$ 47.2 $ 35.1
------- -------
$ 315.2 $ 307.9
======= =======
</TABLE>
Scheduled principal repayments on the notes payable and Credit Line at
December 31, 1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year Amortization Balloon Payments Total
---- ------------ ---------------- ---------
<S> <C> <C> <C>
1997 $ 2,498 $ 16,314 $ 18,812
1998 2,727 48,966 51,693
1999 2,913 40,545 43,458
2000 2,799 - 2,799
2001 2,839 54,269 57,108
Thereafter 73,082 68,287 141,369
-------- --------- ---------
$ 86,858 $ 228,381 $ 315,239
======== ========= =========
</TABLE>
The Company's notes payable include various restrictive financial
covenants. The Company was in compliance with these covenants as of
December 31, 1996.
F - 9
4. Preferred Stock Offering
In October 1996, the Company offered and sold to the public 2,000,000
shares of Series A Preferred Stock at a price of $25.00 per share (the
"Preferred Stock Offering"). The net proceeds of the Preferred Stock
Offering totaled approximately $47.9 million. Preferential dividends are
payable on the Series A Preferred Stock in the fixed annual amount of
$2.375 per share, payable monthly.
5. Fair Value Disclosure of Financial Instruments
Cash and cash equivalents, rental receivable, accounts payable and
accrued expenses and other liabilities and security deposits are carried
at amounts which reasonably approximate their fair value.
Fixed rate notes payable at December 31, 1996 and 1995 total $268.0
million and $272.8 million, respectively, and have an estimated fair
value of $273.6 million and $281.6 million (excluding prepayment
penalties) based upon interest rates available for the issuance of debt
with similar terms and remaining maturities as of December 31, 1996 and
1995. These notes were subject to prepayment penalties which would be
required to retire these notes prior to maturity. The carrying value of
variable rate notes payable at December 31, 1996 and 1995 total $47.2
million and $35.1, respectively, and reasonably approximates their fair
value. Included in these variable rate notes are certain Multifamily
Housing Renewal bonds with rates which are less than the prime lending
rates at December 31, 1996 and 1995. Approximately $16.8 million in 1996
and $17.1 in 1995 of these mortgages are non-taxable and have lower rates
than would be expected for taxable notes with similar terms.
<PAGE> 37
The fair value estimates presented herein are based on information
available to management as of December 31, 1996 and 1995. 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.
6. Commitments and Contingencies
Neither the Company nor the Predecessor is presently subject to any
material litigation nor, to the Company's knowledge, is any material
litigation threatened against the Company or the Predecessor, other than
routine litigation arising in the ordinary course of business, some of
which is expected to be covered by liability insurance and none of which
is expected to have a material adverse effect on the consolidated
financial statements of the Company.
The Company incurred lease expense relating to a five year aircraft lease
agreement for the years ended December 31, 1996, 1995, and 1994 of
$185,400, $185,400, and $61,800, respectively. During the first quarter
of 1997, the Company began a new five year lease agreement whose
scheduled annual lease payments are $194,400.
7. Income Taxes
No provision for federal income taxes has been made in the accompanying
consolidated financial statements. The Company has made an election to
be taxed as a Real Estate Investment Trust ("REIT") under Sections 856
through 860 of the Code. As a REIT, the Company generally is not subject
to Federal income tax to the extent it distributes 95% of its REIT
taxable income to its shareholders and meets certain other tests relating
to the number of shareholders, types of assets and allocable income. If
the Company fails to qualify as a REIT in any taxable year, the Company
will be subject to the Federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate
rates. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its
income and property and to Federal income and excise tax on its
undistributed income.
F - 10
8. Employee Benefit Plans
401 (k) Savings Plan
The Company has adopted the Mid-America Apartment Communities, Inc. 401
(k) Savings Plan, a defined contribution plan that satisfies the
requirements of Section 401 (a) and 401 (k) of the Code. The Company
may, but is not obligated to, make a matching contribution of $.50 for
each $1.00 contributed, up to 6% of the participant's compensation. The
Company's contribution to this plan was $118,700 and $81,600 in 1996 and
1995, respectively, with no contribution in 1994.
Non-qualified Deferred Compensation Plan
The Company has adopted a non-qualified deferred compensation plan for
key employees who are not qualified for participation in the Company's
401 (k) Savings Plan. Under the terms of the plan, employees may elect
to defer a percentage of their compensation and the Company matches a
portion of their salary deferral. The plan is designed so that the
employees' investment earnings under the non-qualified plan should be the
same as the earning assets in the Company's 401 (k) Savings Plan. The
Company's match to this plan in 1996 and 1995 was $23,600 and $8,600,
respectively, with no employer match in 1994.
<PAGE> 38
Employee Stock Purchase Plan
The Company has adopted the Mid-America Apartment Communities, Inc.
Employee Stock Purchase Plan (the "ESPP") which provides a means for
employees to purchase common stock of the Company. The board has
authorized the issuance of 150,000 shares for the plan. The ESPP is
administered by the Compensation Committee who may annually grant options
to employees to purchase annually up to an aggregate of 15,000 shares of
common stock at a price equal to 85% of the market price of the common
stock. During 1996 and 1995, the ESPP purchased 3,176 and 2,710 shares,
respectively, with no purchases made in 1994.
Employee Stock Ownership Plan
The Company has adopted the Mid-America Apartment Communities, Inc.
Employee Stock Ownership Plan (the "ESOP") which is a non-contributory
stock bonus plan that satisfies the requirements of Section 401 (a) of
the Internal Revenue Code. Each employee of the Company is eligible to
participate in the ESOP after attaining the age of 21 years and
completing one year of service with the Company. Participants' ESOP
accounts will be 100% vested after five years of continuous service, with
no vesting prior to that time. The Company contributed 22,500 shares of
Common Stock to the ESOP upon conclusion of the IPO. During 1996 and
1995, the Company contributed $276,000 and $186,000, respectively, to the
ESOP which purchased an additional 8,208 and 5,148 shares, respectively,
with no contributions made in 1994.
Stock Option Plan
The Company has adopted the 1994 Restricted Stock and Stock Option Plan
(the "Plan") to provide incentives to attract and retain independent
directors, executive officers and key employees. The Plan provides for
the grant of options to purchase a specified number of shares of common
stock ("Options") or grants of restricted shares of common stock
("Restricted Stock"). The Plan authorizes Options to buy a total of
500,000 shares of common stock. The Compensation Committee of the Board
of Directors is responsible for granting Options and shares of Restricted
Stock and for establishing the exercise price of Options and terms and
conditions of Restricted Stock. During the first quarter of 1997, the
Company amended the Plan to increase the shares authorized an increase
from 500,000 to 1,000,000.
F - 11
A summary of changes in Options for the three years ended December 31,
1996 follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- ----------------
<S> <C> <C>
Granted 259,000 $ 20.34
Forfeited (24,000) 19.75
-------
Outstanding at December 31, 1994 235,000 20.40
Granted 33,000 25.07
Exercised (12,150) 19.75
Forfeited (8,300) 19.75
-------
Outstanding at December 31, 1995 247,550 21.00
Granted 99,000 26.50
Exercised (1,900) 19.75
Forfeited (6,000) 19.75
-------
Outstanding at December 31, 1996 338,650 22.53
=======
Options exercisable:
December 31, 1994 - $ -
December 31, 1995 34,850 20.63
December 31, 1996 84,050 20.82
</TABLE>
<PAGE> 39
Exercise prices for options outstanding as of December 31, 1996 ranged
from $19.75 to $26.50. The weighted average remaining contractual life
of those options is 7.8 years.
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which requires either the (i) fair value of
employee stock-based compensation plans be recorded as a component of
compensation expense in the statement of operations as of the date of
grant of awards related to such plans, or (ii) impact of such fair value
on net income and earnings per share be disclosed on a pro forma basis in
a footnote to financial statements for awards granted after December 15,
1994, if the accounting for such awards continues to be in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB 25"). The Company will continue such
accounting under the provisions of APB 25. The pro forma effect in 1996
to net income per common share was not considered material.
F - 12
9. Subsequent Events (Unaudited)
Declaration of Dividend
The Company declared a fourth quarter common stock dividend of $.535 per
share to be paid January 31, 1997 to holders of record on January 24,
1997.
Completed Acquisitions
Since December 31, 1996, the Company has acquired the following apartment
communities (the "Completed Acquisitions") containing an aggregate of 874
apartment units (dollars in millions):
<TABLE>
<CAPTION>
NUMBER ACQUISITION CONTRACT
PROPERTY MARKET OF UNITS DATE PRICE
- ---------------- --------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Howell Commons Greenville, SC 348 1/16/97 $ 13.0
Balcones Woods Austin, TX 384 3/18/97 15.8
Westside Creek I Little Rock, AR 142 3/28/97 6.1
--- ------
Total 874 $ 34.9
=== ======
</TABLE>
The financial statements of the completed acquisitions are not included
in the audited consolidated financial statements included herein.
Dividend Reinvestment and Stock Purchase Plan
In January 1997, the Company adopted a Dividend Reinvestment and Stock
Purchase Plan (the "DRSPP") pursuant to which the Company's shareholders
will be permitted to acquire shares of Common Stock through the
reinvestment of distributions on Common Stock and Series A Preferred
Stock and through optional cash payments. The Company has 750,000 shares
of Common Stock available to the DRSPP. It is expected that shareholders
of the Company may begin participating in the DRSPP commencing with the
Company's July 1997 dividends.
Common Stock Offering (the "Offering")
In March 1997, the Company issued 2,300,000 of common stock. The net
cash proceeds to the Company were approximately $62.4 million after
payment of all underwriting discounts and expenses of the offering. The
Company contributed the net proceeds of the offering to the Operating
Partnership in exchange for additional interests in the Operating
Partnership. The Operating Partnership will use substantially all of the
net proceeds to repay outstanding borrowings under the Credit Line and
any excess will be used for general corporate purposes, including
acquisitions. Amounts repaid under the Credit Line may be re-borrowed
(subject to the terms and limits of the Credit Line) to finance
acquisitions of additional apartment communities and for other corporate
purposes.
F - 13
<PAGE> 40
10. Pro forma Condensed Combined Statements of Operations (Unaudited)
This unaudited Pro Forma Condensed Combined Statements of Operations
are presented as if the following transactions had been consummated on
January 1, 1996 and 1995 (i) acquisition of 15 apartment communities in
1995, including the 12 acquired thtough the merger with AFR, (ii)
acquisition of six apartment communities in 1996, (iii) dispositions of
three apartment communities in 1996, (iv) acquisitions of three apartment
communities in 1997, (v) definitive agreements for two 1997 acquisitions,
(vi) the October issuance of the Series A Preferred Stock, and (vii)
the March 1997 issuance of 2,300,000 shares of Common Stock.
The unaudited Pro Forma Condensed Combined Statements of Operations for
the years ending December 31, 1996 and 1995 have been prepared as if the
Company had qualified as a REIT, distributed all of its taxable income
and, therefore, incurred no federal income tax expense during the years
ended December 31, 1996 and 1995. In the opinion of the Company's
management, all adjustments necessary to reflect the effects of these
transaction have been made.
This unaudited Pro Forma Condensed Combined Statements of
Operations is presented for comparative purposes only and is not
necessarily indicative of what the actual result of operations of the
Company would have been for the periods presented had the
transactions described above been consummated on January 1, 1996 and
1995, nor does it purport to represent the results for future periods.
This unaudited Pro Forma Condensed Combined Statements of
Operations should be read in conjunction with, and is qualified in its
entirety by, the respective historical consolidated financial
statements and notes thereto of the Company and of AFR.
F - 14
<PAGE> 41
Mid - America Apartment Communities, Inc.
Pro Forma Condensed Combined Statements of Operations
for the years ended December 31, 1996 and 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
Historical Pro Forma Historical Pro Forma
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 110,090 $ 123,516 $ 93,509 $ 119,394
Interest and other 1,792 2,176 1,454 2,175
--------- --------- -------- ---------
Total revenues 111,882 125,692 94,963 121,569
Expenses:
Personnel 11,702 12,946 9,798 12,341
Building repairs/maintenance, utilities,
landscaping, and other operating 19,226 21,232 17,958 22,496
Real estate taxes and insurance 11,642 13,082 10,198 13,053
Depreciation and amortization
- real estate assets 21,288 23,820 16,470 21,814
Depreciation and amortization
- non-real estate assets 155 177 104 132
General and administrative 6,154 6,568 4,851 5,785
Interest 25,766 24,535 22,684 24,302
Amortization of deferred financing costs 661 679 593 596
------- ------- ------- -------
Total expenses 96,594 103,039 82,656 100,519
------- ------- ------- -------
Income before gain on dispositions
of properties 15,288 22,653 12,307 21,050
Gain on disposition of properties 2,185 - - -
------ ------ ------ -------
Income before minority interest in
operating partnership income 17,473 22,653 12,307 21,050
Minority interest in operating
partnership income 3,213 3,532 2,497 3,282
------ ------ ------ ------
Net income 14,260 19,121 9,810 17,768
Dividends on preferred shares 990 4,750 - 4,750
------ ------ ------ ------
Net income available for common
shareholders $ 13,270 $ 14,371 $ 9,810 $ 13,018
======== ======== ======= ========
Net income available per common
shareholders - $ 1.08 - $ 0.98
</TABLE>
F - 15
<PAGE> 42
11. Selected Quarterly Financial Information (Unaudited)
Mid-America Apartment Communities, Inc.
Quarterly Financial Data (Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 27,151 $ 27,361 $ 28,362 $ 29,008
Income before minority interest in operating
partnership income and extraordinary item $ 3,638 $ 5,595 $ 3,492 $ 4,748
Minority interest in operating partnership income $ 670 $ 1,027 $ 644 $ 872
Net income available for common shares $ 2,968 $ 4,568 $ 2,848 $ 2,886
Per share:
Funds from operations * $ 0.65 $ 0.66 $ 0.66 $ 0.69
Net income available for common shares $ 0.27 $ 0.41 $ 0.26 $ 0.26
Dividend declared $ 0.51 $ 0.51 $ 0.51 $ 0.535
Year Ended December 31, 1995
------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 20,316 $ 21,155 $ 26,483 $ 27,009
Income before minority interest in operating
partnership income and extraordinary item $ 2,323 $ 2,849 $ 3,338 $ 3,797
Minority interest in operating partnership income $ 525 $ 650 $ 616 $ 706
Net income available for common shares $ 1,798 $ 2,199 $ 2,722 $ 3,091
Per share:
Funds from operations * $ 0.53 $ 0.57 $ 0.59 $ 0.64
Net income available for common shares $ 0.21 $ 0.25 $ 0.25 $ 0.28
Dividend declared $ 0.50 $ 0.50 $ 0.50 $ 0.51
</TABLE>
* See the definition of Funds from operations in "Management's Discussion
and Analysis of Financial Condition and Results of Operations". 1995 funds
from operations restated to reflect 1996 NAREIT definition.
F - 16
<PAGE> 43
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.:
Under date of February 14, 1997, we reported on the consolidated
balance sheets of Mid-America Apartment Communities, Inc. (the Company)
as of December 31, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1996 as
contained in the annual report to shareholders. Our report refers to
the Company's change in its accounting method to capitalize replacement
purchases for major appliances and carpet in 1996. In connection with
our audits of the aforementioned consolidated financial statements, we
also have audited the financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents, fairly in all material respects, the information set
forth therein.
KPMG Peat Marwick LLP
Memphis, Tennessee
February 14, 1997
F - 17
<PAGE> 44
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost
------------------
Building
and
Property Name Location Encumbrances Land fixtures
- ------------- ------------- ------------ ------ --------
<S> <C> <C> <C> <C>
The Advantages Jackson, MS - (1) $ 422 $3,727
McKellar Woods Memphis, TN 8,501 737 13,200
Pine Trails Clinton, MS 1,396 178 2,728
Reflection Pointe Jackson, MS 6,073 710 8,770
Riverhills Grenada, MS 880 153 2,092
Woodridge Jackson, MS 4,840 471 5,522
Greenbrook Memphis, TN 15,743 2,100 24,468
Hamilton Pointe Chattanooga, TN - (1) 686 6,281
Hidden Creek Chattanooga, TN - (1) 895 8,098
Steeplechase Hixson, TN -(2) 217 1,957
Cedar Mill (7) Memphis, TN 2,529 475 6,546
Clearbrook Village Memphis, TN 1,226 260 3,658
Crossings Memphis, TN - (1) 554 2,216
Eastview Memphis, TN 3,708 700 9,646
Gleneagles Memphis, TN - (1) 443 3,983
The Park Estate Memphis, TN 1,497 178 1,141
Winchester Square Memphis, TN - (1) 350 7,279
Post House North Jackson, TN 3,765 381 4,299
Post House Jackson Jackson, TN 5,179 443 5,078
The Oaks Jackson, TN - (1) 177 1,594
The Corners Winston-Salem, NC 4,406 685 6,165
Park Haywood Greenville, SC -(2) 325 2,925
Hickory Farm Memphis, TN - (1) 580 5,220
Lakeshore Landing Jackson, MS - (1) 480 4,320
Woodstream Greensboro, NC 5,565 953 8,599
Stonemill Village Louisville, KY - (1) 1,169 10,518
Canyon Creek St. Louis, MO - (1) 880 7,923
Whispering Oaks Little Rock, AR 3,000 506 4,551
Pear Orchard Jackson, MS 8,643 1,352 12,168
Celery Stalk Dallas, TX 8,460 1,463 13,165
Lane at Towne Crossing Mesquite, TX 5,756 1,038 9,338
Hollybrook Dalton, GA 2,520 405 3,646
Green Tree Place Woodlands, TX 3,180 539 4,850
Redford Park Conroe, TX 3,000 509 4,580
MacArthur Ridge Irving, TX 7,648 1,131 10,183
Lincoln on the Green Memphis, TN -(2) 1,498 13,484
Brentwood Downs Nashville, TN 6,678 1,193 10,739
Shenandoah Ridge Augusta, GA -(2) 650 5,850
Westborough Crossing Katy, TX 3,958 677 6,091
Sailwinds at Lake Magdalene Tampa, FL 15,950 2,212 19,909
Woodbridge at the Lake Jacksonville, FL 3,738 645 5,804
Lakepointe Lexington, KY 2,562 411 3,699
The Mansion Lexington, KY 4,140 694 6,242
The Village Lexington, KY 5,256 900 8,097
Cypresswood Court Spring, TX 3,330 577 5,190
The Lodge at Timberglen Dallas, TX 4,740 825 7,422
Calais Forest Little Rock, AR 5,610 1,026 9,244
The Fairways Columbia, SC 7,674 910 8,207
Kirby Station Memphis, TN - 1,148 10,337
Belmere Tampa, FL -(2) 851 7,667
Williamsburg Village Jackson, TN -(2) 523 4,711
Fairways @ Royal Oak Cincinnati, OH -(2) 814 7,335
Tanglewood Anderson, SC 2,651 427 3,853
Woods at Post House Jackson, TN 5,339 240 6,839
Mid-America Apartment
Communities, Inc. Memphis, TN - - 133
Somerset Jackson, MS -(2) 477 4,294
Highland Ridge Greenville, SC -(3) 482 4,337
Spring Creek Greenville, SC -(3) 597 5,374
St. Augustine Jacksonville, FL -(4) 2,858 6,475
Cooper's Hawk Jacksonville, FL -(4) 854 7,500
Marsh Oaks Atlantic Beach, FL -(2) 244 2,829
Park at Hermitage Nashville, TN 8,385 1,524 14,800
Anatole Daytona Beach, FL 7,000 1,227 5,879
The Savannahs Melbourne, FL -(4) 582 7,868
Stassney Woods Austin, TX 4,925 1,621 7,501
Travis Station Austin, TX 4,355 2,282 6,169
Runaway Bay Mt. Pleasant, SC -(3) 1,085 7,269
The Township Hampton, VA 10,800 1,509 8,189
Lakeside Jacksonville, FL -(2) 1,431 12,883
Crosswinds Jackson, MS -(2) 1,535 13,826
Sutton Place HornLake, MS -(2) 894 8,053
Savannah Creek Southaven, MS -(2) 778 7,013
Napa Valley Little Rock, AR - 960 8,642
Tiffany Oaks Altamonte Springs, FL - 1,024 9,219
Lincoln on the Green - Memphis, TN
Phase II - - -
-------- ------- --------
Total $214,606 $60,730 $529,407
======== ======= ========
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1996
(Dollars in thousands)
<CAPTION>
Cost capitalized Gross amount
subsequent to carried at
acquisition December 31, 1996 (5)
---------------- ----------------------------
Building Building
and and
Property Name Location Land fixtures Land fixtures Total
- -------------------- --------------- ---- -------- ---- -------- -------
<S> <C> <C> <C> <C> <C> <C>
The Advantages Jackson, MS - $581 $422 $4,308 $4,730
McKellar Woods Memphis, TN - 582 737 13,782 14,519
Pine Trails Clinton, MS - 310 178 3,038 3,216
Reflection Pointe Jackson, MS $140 1,771 850 10,541 11,391
Riverhills Grenada, MS - 107 153 2,199 2,352
Woodridge Jackson, MS - 162 471 5,684 6,155
Greenbrook Memphis, TN 25 1,905 2,125 26,373 28,498
Hamilton Pointe Chattanooga, TN - 574 686 6,855 7,541
Hidden Creek Chattanooga, TN - 843 895 8,941 9,836
Steeplechase Hixson, TN - 1,024 217 2,981 3,198
Cedar Mill (7) Memphis, TN - 895 475 7,441 7,916
Clearbrook Village Memphis, TN - 191 260 3,849 4,109
Crossings Memphis, TN - 350 554 2,566 3,120
Eastview Memphis, TN - 652 700 10,298 10,998
Gleneagles Memphis, TN - 1,079 443 5,062 5,505
The Park Estate Memphis, TN - 613 178 1,754 1,932
Winchester Square Memphis, TN - 408 350 7,687 8,037
Post House North Jackson, TN - 446 381 4,745 5,126
Post House Jackson Jackson, TN - 292 443 5,370 5,813
The Oaks Jackson, TN - 441 177 2,035 2,212
The Corners Winston-Salem,NC - 254 685 6,419 7,104
Park Haywood Greenville, SC 35 2,088 360 5,013 5,373
Hickory Farm Memphis, TN - 257 580 5,477 6,057
Lakeshore Landing Jackson, MS - 285 480 4,605 5,085
Woodstream Greensboro, NC - 393 953 8,992 9,945
Stonemill Village Louisville, KY - 756 1,169 11,274 12,443
Canyon Creek St. Louis, MO 220 1,086 1,100 9,009 10,109
Whispering Oaks Little Rock, AR - 1,232 506 5,783 6,289
Pear Orchard Jackson, MS - 599 1,352 12,767 14,119
Celery Stalk Dallas, TX - 911 1,463 14,076 15,539
Lane at Towne Crossing Mesquite, TX - 725 1,038 10,063 11,101
Hollybrook Dalton, GA - 533 405 4,179 4,584
Green Tree Place Woodlands, TX - 392 539 5,242 5,781
Redford Park Conroe, TX - 519 509 5,099 5,608
MacArthur Ridge Irving, TX - 244 1,131 10,427 11,558
Lincoln on the Green Memphis, TN - 353 1,498 13,837 15,335
Brentwood Downs Nashville, TN - 362 1,193 11,101 12,294
Shenandoah Ridge Augusta, GA - 1,469 650 7,319 7,969
Westborough Crossing Katy, TX - 393 677 6,484 7,161
Sailwinds at Lake Magdalene Tampa, FL - 5,867 2,212 25,776 27,988
Woodbridge at the Lake Jacksonville, FL - 522 645 6,326 6,971
Lakepointe Lexington, KY - 371 411 4,070 4,481
The Mansion Lexington, KY - 391 694 6,633 7,327
The Village Lexington, KY - 560 900 8,657 9,557
Cypresswood Court Spring, TX - 452 577 5,642 6,219
The Lodge at Timberglen Dallas, TX - 1,160 825 8,582 9,407
Calais Forest Little Rock, AR - 810 1,026 10,054 11,080
The Fairways Columbia, SC - 263 910 8,470 9,380
Kirby Station Memphis, TN - 1,499 1,148 11,836 12,984
Belmere Tampa, FL - 706 851 8,373 9,224
Williamsburg Village Jackson, TN - 316 523 5,027 5,550
Fairways @ Royal Oak Cincinnati, OH - 517 814 7,852 8,666
Tanglewood Anderson, SC - 393 427 4,246 4,673
Woods at Post House Jackson, TN - 473 240 7,312 7,552
Mid-America Apartment
Communities, Inc. Memphis, TN - 1,286 - 1,419 1,419
Somerset Jackson, MS - 459 477 4,753 5,230
Highland Ridge Greenville, SC - 93 482 4,430 4,912
Spring Creek Greenville, SC - 177 597 5,551 6,148
St. Augustine Jacksonville, FL - 1,373 2,858 7,848 10,706
Cooper's Hawk Jacksonville, FL - 348 854 7,848 8,702
Marsh Oaks Atlantic Beach, FL - 328 244 3,157 3,401
Park at Hermitage Nashville, TN - 637 1,524 15,437 16,961
Anatole Daytona Beach, FL - 322 1,227 6,201 7,428
The Savannahs Melbourne, FL - 539 582 8,407 8,989
Stassney Woods Austin, TX - 695 1,621 8,196 9,817
Travis Station Austin, TX - 501 2,282 6,670 8,952
Runaway Bay Mt. Pleasant, SC - 338 1,085 7,607 8,692
The Township Hampton, VA - 66 1,509 8,255 9,764
Lakeside Jacksonville, FL - 1,232 1,431 14,115 15,546
Crosswinds Jackson, MS - 423 1,535 14,249 15,784
Sutton Place HornLake, MS - 259 894 8,312 9,206
Savannah Creek Southaven, MS - 163 778 7,176 7,954
Napa Valley Little Rock, AR - 198 960 8,840 9,800
Tiffany Oaks Altamonte
Springs, FL - - 1,024 9,219 10,243
Lincoln on the Green - Memphis, TN
Phase II - 1,522 - 1,522 1,522
---- ------- ------- -------- --------
Total $420 $51,336 $61,150 $580,743 $641,893
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation
at December 31, 1996
(Dollars in thousands)
<CAPTION>
Life used
to compute
depreciation
in latest
Accumulated Date of income
Property Name Location Depreciation Net Construction statement (6)
- ----------------- ---------------- ------------ ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
The Advantages Jackson, MS ($970) $ 3,760 1984 5 - 40
McKellar Woods Memphis, TN (1,527) 12,992 1976 5 - 40
Pine Trails Clinton, MS (958) 2,258 1978 5 - 40
Reflection Pointe Jackson, MS (898) 10,493 1986 5 - 40
Riverhills Grenada, MS (323) 2,029 1972 5 - 40
Woodridge Jackson, MS (537) 5,618 1987 5 - 40
Greenbrook Memphis, TN (2,792) 25,706 1986 5 - 40
Hamilton Pointe Chattanooga, TN (825) 6,716 1989 5 - 40
Hidden Creek Chattanooga, TN (2,170) 7,666 1987 5 - 40
Steeplechase Hixson, TN (467) 2,731 1986 5 - 40
Cedar Mill (7) Memphis, TN (898) 7,018 1973/1986 5 - 40
Clearbrook Village Memphis, TN (411) 3,698 1974 5 - 40
Crossings Memphis, TN (547) 2,573 1974 5 - 40
Eastview Memphis, TN (1,234) 9,764 1974 5 - 40
Gleneagles Memphis, TN (1,343) 4,162 1975 5 - 40
The Park Estate Memphis, TN (746) 1,186 1974 5 - 40
Winchester Square Memphis, TN (832) 7,205 1973 5 - 40
Post House North Jackson, TN (409) 4,717 1987 5 - 40
Post House Jackson Jackson, TN (490) 5,323 1987 5 - 40
The Oaks Jackson, TN (236) 1,976 1978 5 - 40
The Corners Winston-Salem, NC (658) 6,446 1982 5 - 40
Park Haywood Greenville, SC (406) 4,967 1983 5 - 40
Hickory Farm Memphis, TN (570) 5,487 1985 5 - 40
Lakeshore Landing Jackson, MS (471) 4,614 1974 5 - 40
Woodstream Greensboro, NC (870) 9,075 1983 5 - 40
Stonemill Village Louisville, KY (1,110) 11,333 1985 5 - 40
Canyon Creek St. Louis, MO (849) 9,260 1987 5 - 40
Whispering Oaks Little Rock, AR (548) 5,741 1978 5 - 40
Pear Orchard Jackson, MS (1,226) 12,893 1985 5 - 40
Celery Stalk Dallas, TX (1,303) 14,236 1978 5 - 40
Lane at Towne Crossing Mesquite, TX (928) 10,173 1983 5 - 40
Hollybrook Dalton, GA (309) 4,275 1972 5 - 40
Green Tree Place Woodlands, TX (463) 5,318 1984 5 - 40
Redford Park Conroe, TX (455) 5,153 1984 5 - 40
MacArthur Ridge Irving, TX (899) 10,659 1991 5 - 40
Lincoln on the Green Memphis, TN (1,180) 14,155 1988 5 - 40
Brentwood Downs Nashville, TN (964) 11,330 1986 5 - 40
Shenandoah Ridge Augusta, GA (607) 7,362 1982 5 - 40
Westborough Crossing Katy, TX (551) 6,610 1984 5 - 40
Sailwinds at Lake Magdalene Tampa, FL (2,138) 25,850 1975 5 - 40
Woodbridge at the Lake Jacksonville, FL (526) 6,445 1985 5 - 40
Lakepointe Lexington, KY (331) 4,150 1986 5 - 40
The Mansion Lexington, KY (532) 6,795 1987 5 - 40
The Village Lexington, KY (713) 8,844 1989 5 - 40
Cypresswood Court Spring, TX (458) 5,761 1984 5 - 40
The Lodge at Timberglen Dallas, TX (700) 8,707 1984 5 - 40
Calais Forest Little Rock, AR (773) 10,307 1987 5 - 40
The Fairways Columbia, SC (641) 8,739 1992 5 - 40
Kirby Station Memphis, TN (875) 12,109 1978 5 - 40
Belmere Tampa, FL (619) 8,605 1984 5 - 40
Williamsburg Village Jackson, TN (374) 5,176 1987 5 - 40
Fairways @ Royal Oak Cincinnati, OH (560) 8,106 1988 5 - 40
Tanglewood Anderson, SC (300) 4,373 1980 5 - 40
Woods at Post House Jackson, TN (510) 7,042 1995 5 - 40
Mid-America Apartment
Communities, Inc. Memphis, TN (520) 899 N/A 5
Somerset Jackson, MS (340) 4,890 1981 5 - 40
Highland Ridge Greenville, SC (176) 4,736 1984 5 - 40
Spring Creek Greenville, SC (217) 5,931 1984 5 - 40
St. Augustine Jacksonville, FL (459) 10,247 1987 5 - 40
Cooper's Hawk Jacksonville, FL (436) 8,266 1987 5 - 40
Marsh Oaks Atlantic Beach, FL (176) 3,225 1986 5 - 40
Park at Hermitage Nashville, TN (842) 16,119 1987 5 - 40
Anatole Daytona Beach, FL (346) 7,082 1986 5 - 40
The Savannahs Melbourne, FL (465) 8,524 1990 5 - 40
Stassney Woods Austin, TX (453) 9,364 1985 5 - 40
Travis Station Austin, TX (357) 8,595 1987 5 - 40
Runaway Bay Mt. Pleasant, SC (412) 8,280 1988 5 - 40
The Township Hampton, VA (435) 9,329 1987 5 - 40
Lakeside Jacksonville, FL (409) 15,137 1985 5 - 40
Crosswinds Jackson, MS (207) 15,577 1988/1990 5 - 40
Sutton Place HornLake, MS (122) 9,084 1991 5 - 40
Savannah Creek Southaven, MS (105) 7,849 1989 5 - 40
Napa Valley Little Rock, AR (51) 9,749 1984 5 - 40
Tiffany Oaks Altamonte Springs, FL - 10,243 1985 5 - 40
Lincoln on the Green - Memphis, TN
Phase II - 1,522 (8) 5 - 40
--------- --------
Total ($49,558) $592,335
========= ========
</TABLE>
Note: This schedule excludes the 1996 dispositions of Summit Ridge,
Laguna Point and Park @ 58.
(1) These 11 Properties are encumbered by a $43.4 million note payable.
(2) Subject to a negative pledge pursuant to the agreement in respect of
the Credit Line, with an outstanding balance of $30,403 at December 31,
1996. The line had a variable interest rate at December 31, 1996 of 7.5%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(5) The aggregate cost for Federal income tax purposes was approximately
$639 million at December 31, 1996. The total gross amount of real estate
assets for GAAP purposes exceeds the aggregate cost for Federal income tax
purposes, principally due to purchase accounting adjustments recorded
under generally accepted accounting principles.
(6) Depreciation is on a straight line basis over the estimated useful
asset life which ranges from 8 to 40 years for land improvements and
buildings and 5 years for furniture, fixtures and equipment.
(7) Includes adjacent 68-unit Mendenhall Townhomes.
(8) Lincoln Phase II is under construction - leasing to begin Second
quarter 1997.
F - 18 through 20
<PAGE> 45
MID - AMERICA APARTMENT COMMUNITIES, INC.
Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for real estate investments and accumulated
depreciation is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1996 1995 1994
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year $ 578,788 $ 434,460 $ 125,269
Acquisitions 66,258 15,561 280,196
Improvements 20,634 25,590 10,436
Assets acquired from business combination - 103,177 -
Increase in basis as a result of
applying purchase method accounting - - 41,147
Disposition of real estate assets (23,787) - -
Write-off of fully depreciated assets - - (22,588)
--------- --------- ---------
Balance at end of year $ 641,893 $ 578,788 $ 434,460
========= ========= =========
Accumulated depreciation:
Balance at beginning of year $ 29,504 $ 13,386 $ 27,240
Depreciation 21,249 16,118 8,734
Write-off of fully depreciated assets - - (22,588)
Disposition of real estate assets (1,195) - -
-------- -------- --------
Balance at end of year $ 49,558 $ 29,504 $ 13,386
======== ======== ========
</TABLE>
F - 21
<PAGE> 46
ARTICLES OF AMENDMENT
TO THE
CHARTER
OF
MID-AMERICA APARTMENT COMMUNITIES, INC.
Pursuant tot he provisions of Section 48-20-106 of the
Tennessee Business Corporation Act, the undersigned corporation
adopts the following Articles of Amendment to its Charter:
1. The name of the corporation is Mid-America Apartment
Communities, Inc.
2. The text of each amendment adopted is:
(a) Section 14(c) is hereby amended by
the deletion of the first sentence
thereof and the replacement of that
sentence with the following:
Notwithstanding any other provision
hereof to the contrary, except
Sections 14(e) and 14(k), any
acquisition of shares of capital
stock that (i) causes any person's
ownership to exceed the Limit (as
defined in Section 14(d) or (ii)
would result in the
disqualification of the Corporation
as a REIT under the Code shall be
void ab initio to the fullest
extent permitted under applicable
law and the intended transferee of
those shares shall be deemed never
to have had an interest therein.
(b) Section 14(g) is hereby amended by
the addition of the following
clause to the beginning of the
first sentence thereof:
Subject to the provisions of
Section 14(k) hereof,
3. The corporation is a for-profit corporation.
4. The amendment was duly adopted by unanimous consent on
January 27, 1994 by the sole shareholder of the
Corporation.
5. This amendment shall be effective when these Articles
are filed with the Secretary of State of Tennessee.
Dated: January 28, 1994 Mid-America Apartment Communities, Inc.
Vice President By:/s/ Lynn A. Johnson
- -------------------- --------------------------
Signer's Capacity Lynn A. Johnson
ARTICLES OF MERGER OF
AMERICA FIRST REIT ADVISORY COMPANY,
A NEBRASKA CORPORATION,
WITH AND INTO
MID-AMERICA APARTMENT COMMUNITIES, INC.,
A TENNESSEE CORPORATION
Pursuant to the provisions of Sections 48-21-107 and 48-21-109 of
the Tennessee Business Corporation Act (the "Act"), the undersigned
corporation adopts the following Articles of Merger for the purpose of
effecting the merger (the "Merger") of America First REIT Advisory
Company, a Nebraska corporation ("Advisory") into Mid-America Apartment
Communities, Inc., a Tennessee corporation ("MAAC"), with MAAC being
the surviving corporation in the Merger:
1. The Plan of Merger is attached hereto as Appendix "A" and
incorporated herein by reference.
2. As to MAAC, a Tennessee corporation, and the surviving corporation
in the merger, shareholder approval of the Merger is not required
pursuant to 48-21-104(h)(2) of the Act. The Plan of Merger was
duly adopted by the Board of Directors of MAAC, by unanimous
written consent without a meeting on February 23, 1995. The Plan
of Merger was duly adopted by the Board of Directors of Advisory
by unanimous written consent on February 24, 1995 and was approved
by the sole shareholder of Advisory on February 24, 1995 pursuant
to applicable provisions of the Nebraska Business Corporation Act.
3. In accordance with Section 48-21-109 of the Tennessee Code
Annotated, this merger is permitted under the laws of the State of
Nebraska and Advisory has complied with that law in effecting this
merger.
4. In accordance with Section 21-2076 of the Nebraska Business
Corporation Act, this merger is permitted under the laws of the
State of Tennessee and MAAC has complied with that law in
effecting this merger.
5. The merger shall be effective on June 30, 1995 at 10:00 a.m.,
local time.
IN WITNESS WHEREOF, the undersigned has caused this document to be
executed as of the 29th day of June, 1995.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: /s/ Simon R. C. Wadsworth
---------------------------
Simon R. C. Wadsworth, Executive Vice
President and Chief Financial
Officer
<PAGE>
APPENDIX "A"
PLAN OF MERGER
ARTICLE I
CHARTER AND BYLAWS OF THE SURVIVING CORPORATION
I.1 Charter. The Charter of MAAC in effect immediately prior to
June 30, 1995 (the "Effective Time") shall be the Charter of the
Surviving Corporation, until duly amended in accordance with applicable
law.
I.2 Bylaws. The Bylaws of MAAC in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation,
until duly amended in accordance with applicable law.
ARTICLE II
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
II.1 Directors. The directors of MAAC immediately prior to the
Effective Time, namely George E. Cates, Simon R. C. Wadsworth, John J.
Byrne, III, Robert F. Fogelman and O. Mason Hawkins, shall be the
directors of the Surviving Corporation as of the Effective Time. In
addition, as of the Effective Time, Michael B. Yanney shall become, and
thereafter be, a Class II director of the Surviving Corporation.
II.2 Officers. The officers of MAAC immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of
the Effective Time.
ARTICLE III
ADVISORY STOCK
III.1 Conversion of the Advisory Stock. (a) At the Effective
Time, each share of the Common Stock, $.01 par value per share, of MAAC
outstanding immediately prior to the Effective Time (the "MAAC Common
Stock") shall remain outstanding and shall represent one share of
Common Stock, $.01 par value per share, of the Surviving Corporation.
(b) At the Effective Time, the shares of the Class A Voting
Common Stock, $1.00 par value per share (the "Advisory Common Stock"),
of Advisory issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive, in the
aggregate, 153,110 shares of MAAC Common Stock (the "Merger
Consideration").
(c) As a result of the Merger and without any action on the part
of the America First Companies L.L.C. (the "Advisory Shareholder"), all
shares of Advisory Common Stock shall cease to be outstanding and shall
be cancelled and retired and shall cease to exist. Upon delivery by
Advisory Shareholder of the certificates representing all of the
outstanding Advisory Common Stock, MAAC shall deliver to Advisory
Shareholder a single certificate representing 153,110 fully paid and
nonassessable shares of MAAC Common Stock, which certificate shall bear
a legend noting the restrictions on transfer set forth in Section 7.7
of that certain Agreement and Plan of Merger between MAAC, the Advisory
Shareholder and Advisory dated as of February 24, 1995.
(d) Each share of Advisory Common Stock issued and held in
Advisory's treasury at the Effective Time, if any, shall, by virtue of
the Merger, cease to be outstanding and shall be cancelled and retired
and shall cease to exist without payment of any consideration therefor.
(e) Subject to the effect of applicable laws, following surrender
of the certificates representing all shares of outstanding Advisory
Common Stock immediately prior to the Effective Time, there shall be
paid to Advisory Shareholder, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to
153,110 shares of MAAC Common Stock (as if the same had been issued at
the Effective Time), and not paid, less the amount of any withholding
taxes which may be required thereon and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of MAAC
Common Stock, less the amount of any withholding taxes which may be
required hereon.
AMENDMENT NO. 1 TO THE FIRST AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
MID-AMERICA APARTMENTS, L.P.
Pursuant to Article XI of the First Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of
Mid-America Apartments, L.P. (the "Partnership"), the
undersigned, being the sole general partner of the Partnership,
hereby amends the Partnership Agreement as follows:
Article VI, Section 6.01 of the Partnership Agreement is
hereby amended by adding subparagraph (xix) as follows:
(xix) to execute and deliver or assume any note and
mortgage securing any loan insured by the Federal Home
Administration (the "FHA"), the U.S. Department of Housing
and Urban Development ("HUD") or any other public body
(individually, an "Agency" and, collectively, "Agencies")
over which the Secretary of Housing and Urban Development
(the "Secretary") has oversight responsibility, and to
execute any Regulatory Agreement and other documents
required by the Secretary or any Agency in connection with
any such loan. Any successor or substitute general partner
or person duly admitted as an additional general partner of
the Partnership shall, as a condition precedent to receiving
an interest as a general partner in the Partnership, agree
to be bound by the terms and conditions of any note,
mortgage and/or Regulatory Agreement and other documents and
instruments required in connection with any FHA, HUD or
other Agency insured loan to the same extent and on the same
terms and conditions as all other general partners. Upon
any dissolution of the Partnership, no title or right to
possession and control of any property subject to any FHA,
HUD or Agency insured loan, and no right to collect the
rents therefrom, shall pass to any person who is not bound
by any Regulatory Agreement affecting such property in a
manner satisfactory to the Secretary or the appropriate
Agency.
IN WITNESS WHEREOF, the foregoing Amendment No. 1 to the
First Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P. has been signed and delivered as of
this 28th day of June, 1994 by the undersigned as general partner
of the Partnership.
MID-AMERICA APARTMENT COMMUNITIES, INC.
as General Partner
By: /s/ Lynn A. Johnson
-----------------------
Title: Vice President
AMENDMENT NO. 2 TO THE FIRST AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
MID-AMERICA APARTMENTS, L.P.
Pursuant to Article XI of the First Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of
Mid-America Apartments, L.P. (the "Partnership"), the
undersigned, being the sole general partner of the Partnership,
hereby amends the Partnership Agreement as follows:
Article II of the Partnership Agreement is hereby amended by
adding the following sentences to Section 2.03(a):
The interest of the General Partner in the Partnership will
consist of a one percent (1%) general partnership interest and
the balance of its interest will be a Limited Partnership
Interest. In that regard, the General Partner is hereby admitted
as an Additional Limited Partner pursuant to Section 4.02(a) of
the Partnership Agreement. The General Partner has determined
that the General Partner has paid fair value for said Limited
Partnership Interest.
Article V of the Partnership Agreement is hereby amended by
adding Section 5.01A as follows:
5.01A Special Allocation with respect to
Affiliated Properties. In the event that the General
Partner shall own real property or other investment assets
other than through the Partnership or shall own stock in any
qualified REIT subsidiary (as defined in the Code) or other
entity (other than another partnership of which the
Partnership owns at least 90% of the interests) that owns
real property or other investment assets (an "Affiliated
Entity"), and the General Partner or such Affiliated Entity
shall receive income from such real property or investment
assets, then there shall be a special allocation of Profit
and Loss of the Partnership to the Limited Partners based on
the following formula:
Allocation = [(U/(S+U))xCNI] - [(U/(S+U))xPNI]
In the foregoing formula: (i) U equals the aggregate number
of Partnership Units owned by Limited Partners from time to
time; (ii) S equals the aggregate number of REIT Shares
issued and outstanding from time to time; (iii) CNI equals
the aggregate aggregate net income (or loss) for financial
accounting purposes of the Partnership, the General Partner
and all Affiliated Entities which the General Partner is
required to consolidate in its Statement of Operations; and
(iv) PNI equals the aggregate net income (or loss) for
financial accounting purposes of the Partnership. The
foregoing allocation shall be prior to any other allocation
of Profit or Loss, with any remaining Profit or Loss being
allocated among the Partners pursuant to Section 5.01(a)
above. The special allocations shall be allocated among the
Limited Partners in proportion to their Percentage Interests
in the Partnership.
For income tax purposes, the General Partner is
authorized to use any reasonable and lawful method to effect
the foregoing allocations for tax accounting and capital
account accounting purposes to properly reflect the economic
effect of the foregoing special allocation.
Article VII, Section 7.01(b) of the Partnership Agreement is
hereby amended by deleting the reference to 20% in the first line
thereof and inserting "1%" in lieu thereof.
IN WITNESS WHEREOF, the foregoing Amendment No. 2 to the
First Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P. has been signed and delivered as of
this 24th day of February, 1996 by the undersigned as general
partner of the Partnership.
MID-AMERICA APARTMENT COMMUNITIES, INC.
as General Partner
By: /s/ George E. Cates
-------------------
Title: President
AMENDMENT NO. 3 TO THE FIRST AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
MID-AMERICA APARTMENTS, L.P.
Pursuant to Article XI of the First Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of
Mid-America Apartments, L.P. (the "Partnership"), the
undersigned, being the sole general partner of the Partnership,
hereby further amends the Partnership Agreement as follows:
Article I of the Partnership Agreement is hereby amended by
inserting in the logical alphabetical locations on pages 3, 6 and
7, respectively, the following definitions of Common Units,
Preferred Units and Series A Preferred Units, as follows:
"Common Units" means all Partnership Interests that are not
specifically designated as Preferred Units pursuant to Section
4.02(c).
"Preferred Units" means all Partnership Interests designated
and issued by the General Partner from time to time in accordance
with the provisions of Section 4.02(c).
"Series A Preferred Units" means the Partnership Interests
of the General Partner acquired with the net proceeds of the
issuance by the General Partner of its 9.5% Series A Cumulative
Preferred Stock, which Partnership Interests shall have the
designations, preferences, privileges, limitations and relative
rights set forth in Section 4.02(c)(i) hereof.
In addition, Article I of the Partnership Agreement is amended by
deleting in its entirety the second sentence in the definition of
"Partnership Unit" on page 6 of the Partnership Agreement.
Article IV of the Partnership Agreement is hereby amended by
adding Section 4.02(c)(i) as follows:
(i) 9.5% Series A Cumulative Preferred Units.
1. Designation and Number. A series of Preferred Units,
designated the "9.5% Series A Cumulative Preferred Units"
(the "Series A Preferred Units"), is hereby established.
The number of Series A Preferred Units shall be 2,000,000.
2. Maturity. The Series A Preferred Units have no stated
maturity and will not be subject to any sinking fund or
mandatory redemption.
3. Rank. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution
or winding up of the Partnership, rank (i) senior to all
classes or series of Common Units of the Partnership, and to
all Partnership Interests ranking junior to the Series A
Preferred Units with respect to distribution rights or
rights upon liquidation, dissolution or winding up of the
Partnership; (ii) on a parity with all Partnership Interests
issued by the Partnership the terms of which specifically
provide that such Partnership Interests rank on a parity
with the Series A Preferred Units with respect to
distribution rights or rights upon liquidation, dissolution
or winding up of the Partnership; and (iii) junior to all
existing and future indebtedness of the Partnership. The
term "Partnership Interests" does not include convertible
debt securities, which will rank senior to the Series A
Preferred Units prior to conversion.
4. Distributions
(a) Holders of the Series A Preferred Units are entitled to
receive, when and as declared by the General Partner out of funds
legally available for the payment of distributions, preferential
cumulative cash distributions at the rate of 9.5% per annum of
the Liquidation Preference (as defined below) per Series A
Preferred Unit (equivalent to a fixed annual amount of $2.375 per
Series A Preferred Unit). Distributions on the Series A
Preferred Units shall be cumulative from the date of original
issue and shall be payable monthly in arrears on or before the
15th day of each month, or, if not a business day, the next
succeeding business day (each, a "Distribution Payment Date").
The first distribution, which will be paid on November 15, 1996,
will be for less than a full month. Such distribution and any
distribution payable on the Series A Preferred Units for any
partial distribution period will be computed on the basis of a
360-day year consisting of twelve 30-day months. Distributions
will be payable to holders of record as they appear in the
ownership records of the Partnership at the close of business on
the applicable record date, which shall be the first day of the
calendar month in which the applicable Distribution Payment Date
falls or on such other date designated by the General Partner of
the Partnership for the payment of distributions that is not more
than 30 nor less than 10 days prior to such Distribution Payment
Date (each, a "Distribution Record Date").
(b) No distributions on Series A Preferred Units shall be
declared by the General Partner or paid or set apart for payment
by the Partnership at such time as the terms and provisions of
any agreement of the Partnership, including any agreement
relating to its indebtedness, prohibits such declaration, payment
or setting apart for payment or provides that such declaration,
payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or
payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing, distributions on the
Series A Preferred Units will accrue whether or not the
Partnership has earnings, whether or not there are funds legally
available for the payment of such distributions and whether or
not such distributions are declared. Accrued but unpaid
distributions on the Series A Preferred Units will not bear
interest and holders of the Series A Preferred Units will not be
entitled to any distributions in excess of full cumulative
distributions described above. Except as set forth in the next
sentence, no distributions will be declared or paid or set apart
for payment on any Partnership Interests or any other series of
Preferred Units ranking, as to distributions, on a parity with or
junior to the Series A Preferred Units (other than a distribution
of the Partnership's Common Units or any other class of
Partnership Interests ranking junior to the Series A Preferred
Units as to distributions and upon liquidation) for any period
unless full cumulative distributions have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for such payment
on the Series A Preferred Units for all past distribution periods
and the then current distribution period. When distributions are
not paid in full (or a sum sufficient for such full payment is
not so set apart) upon the Series A Preferred Units and any other
series of Preferred Units ranking on a parity as to distributions
with the Series A Preferred Units, all distributions declared
upon the Series A Preferred Units and any other series of
Preferred Units ranking on a parity as to distributions with the
Series A Preferred Units shall be declared pro rata so that the
amount of distributions declared per Series A Preferred Unit and
such other series of Preferred Units shall in all cases bear to
each other the same ratio that accrued distributions per Series A
Preferred Unit and such other series of Preferred Units (which
shall not include any accrual in respect of unpaid distributions
for prior distribution periods if such Preferred Units does not
have a cumulative distribution) bear to each other.
(d) Except as provided in the immediately preceding
paragraph, unless full cumulative distributions on the Series A
Preferred Units have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is
set apart for payment for all past distribution periods and the
then current distribution period, no distributions (other than in
Common Units or other Partnership Interests ranking junior to the
Series A Preferred Units as to distributions and upon
liquidation) shall be declared or paid or set aside for payment
nor shall any other distribution be declared or made upon the
Common Units, or any other Partnership Interests in the
Partnership ranking junior to or on a parity with the Series A
Preferred Units as to distributions or upon liquidation, nor
shall any Common Units, or any other Partnership Interests in the
Partnership ranking junior to or on a parity with the Series A
Preferred Units as to distributions or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by the Partnership.
Holders of Series A Preferred Units shall not be entitled to any
distribution, whether payable in cash, property or securities, in
excess of full cumulative distributions on the Series A Preferred
Units as provided above. Any distribution payment made on Series
A Preferred Units shall first be credited against the earliest
accrued but unpaid distribution due with respect to such Series A
Preferred Units which remains payable.
5. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Partnership, the holders of Series A Preferred Units are entitled
to be paid out of the assets of the Partnership legally available
for distribution to its partners a liquidation preference of $25
per Series A Preferred Unit (the "Liquidation Preference"), plus
an amount equal to any accrued and unpaid distributions to the
date of payment, but without interest, before any distribution of
assets is made to holders of Common Units or any other class or
series of Partnership Interests in the Partnership that ranks
junior to the Series A Preferred Units as to liquidation rights.
The Partnership will promptly provide to the holders of Series A
Preferred Units written notice of any event triggering the right
to receive such Liquidation Preference. After payment of the
full amount of the Liquidation Preference, plus any accrued and
unpaid distributions to which they are entitled, the holders of
Series A Preferred Units will have no right or claim to any of
the remaining assets of the Partnership. The consolidation or
merger of the Partnership with or into any other partnership,
corporation, trust or entity or of any other partnership or
corporation with or into the Partnership, or the sale, lease or
conveyance of all or substantially all of the property or
business of the Partnership, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Partnership.
6. Redemption.
(a) The Series A Preferred Units are not redeemable prior
to November 1, 2001. On and after November 1, 2001, the
Partnership, at its option upon not less than 30 nor more than 60
days' written notice, may redeem the Series A Preferred Units, in
whole or in part, at any time or from time to time, for cash at a
redemption price of $25 per Series A Preferred Unit, plus all
accrued and unpaid distributions thereon to the date fixed for
redemption, without interest. Holders of Series A Preferred
Units to be redeemed shall surrender such Series A Preferred
Units at the place designated in such notice and shall be
entitled to the redemption price and any accrued and unpaid
distributions payable upon such redemption following such
surrender. If notice of redemption of any Series A Preferred
Units has been given and if the funds necessary for such
redemption have been set aside by the Partnership in trust for
the benefit of the holders of any Series A Preferred Units so
called for redemption, then from and after the redemption date
distributions will cease to accrue on such Series A Preferred
Units, such Series A Preferred Units shall no longer be deemed
outstanding and all rights of the holders of such series A
Preferred Units will terminate, except the right to receive the
redemption price. If less than all of the outstanding Series A
Preferred Units are to be redeemed, the Series A Preferred Units
to be redeemed shall be selected pro rata (as nearly as may be
practicable without creating fractional Series A Preferred Units)
or by any other equitable method determined by the General
Partner.
(b) Unless full cumulative distributions on all Series A
Preferred Units shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past distribution periods and the
then current distribution period, no Series A Preferred Units
shall be redeemed unless all outstanding Series A Preferred Units
are simultaneously redeemed and the Partnership shall not
purchase or otherwise acquire directly or indirectly any Series A
Preferred Units (except by exchange for Partnership Interests of
the Partnership ranking junior to the Series A Preferred Units as
to distributions and upon liquidation); provided, however, that
the foregoing shall not prevent the purchase or acquisition of
Series A Preferred Units pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding Series A
Preferred Units.
(c) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such
publication to be made once a week for two successive weeks
commencing not less than 30 nor more than 60 days prior to the
redemption date. A similar notice will be mailed by the
Partnership, postage prepaid, not less than 30 nor more than 60
days prior to the redemption date, addressed to the respective
holders of record of the Series A Preferred Units to be redeemed
at their respective addresses as they appear on the stock
transfer records of the Partnership. No failure to give such
notice or any defect therein or in the mailing thereof shall
affect the validity of the proceedings for the redemption of any
Series A Preferred Units except as to the holder to whom notice
was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of
Series A Preferred Units to be redeemed; (iv) the place or places
where the Series A Preferred Units are to be surrendered for
payment of the redemption price; and (v) that distributions on
the shares to be redeemed will cease to accrue on such redemption
date. If less than all of the Series A Preferred Units held by
any holder are to be redeemed, the notice mailed to such holder
shall also specify the number of Series A Preferred Units held by
such holder to be redeemed.
(d) Immediately prior to any redemption of Series A
Preferred Units, the Partnership shall pay, in cash, any
accumulated and unpaid distributions through the redemption date,
unless a redemption date falls after a Distribution Record Date
and prior to the corresponding Distribution Payment Date, in
which case each holder of Series A Preferred Units at the close
of business on such Distribution Record Date shall be entitled to
the distribution payable on such shares on the corresponding
Distribution Payment Date notwithstanding the redemption of such
shares before such Distribution Payment Date.
7. Voting Rights. Holders of the Series A Preferred Units will
not have any voting rights.
8. Conversion. The Series A Preferred Units are not redeemable
for, convertible into or exchangeable for any other property or
securities of the Partnership.
Article V, Section 5.01 is hereby amended by adding the
following sentences as the last two sentences of subsection (a)
thereof:
"Notwithstanding the foregoing, gross income of the
Partnership for each fiscal year of the Partnership shall first
be allocated to the holders of any series of the Partnership's
Preferred Units in an amount equal to the distributions in
respect of such Preferred Units required by the terms of such
Preferred Units as set forth above, and no Profit in excess of
that amount shall be allocated to such holders. In no event
shall Loss be allocated to holders of any series of the
Partnership's Preferred Units"
Article V, Section 5.02 is hereby amended by adding
subsection (b) as follows:
(b) Notwithstanding the discretion given to the General
Partner in subsection (a) above, the General Partner shall cause
the Partnership to distribute to the holders of any series of the
Partnership's Preferred Units, prior to any distributions to the
holders of Common Units, such amounts at such times as shall be
required by the appropriate designating amendment to the
Partnership Agreement adopted pursuant to Section 4.02 hereof.
IN WITNESS WHEREOF, the foregoing Amendment No. 3 to the
First Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P. has been signed and delivered as of
this 10th day of October, 1996 by the undersigned as general
partner of the Partnership.
MID-AMERICA APARTMENT COMMUNITIES, INC.
as General Partner
By: /s/ George E. Cates
--------------------
Title: President
AMENDMENT NO. 4 TO THE FIRST AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
MID-AMERICA APARTMENTS, L.P.
Pursuant to Article XI of the First Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of
Mid-America Apartments, L.P. (the "Partnership"), the
undersigned, being the sole general partner of the Partnership,
hereby amends the Partnership Agreement as follows:
WHEREAS, the Partnership Agreement was amended by written
Amendment No. 2 effective February 24, 1996 in order to express
the intention of the Partners to provide the Limited Partners
(excluding the General Partner and Affiliated Entities) with the
economic benefit (and to burden Limited Partners with the
economic detriment) of real estate investments of the General
Partner and Affiliated Entities made outside of the Partnership
and Subsidiary Partnerships.
Article I of the Partnership Agreement is hereby amended by
inserting in the logical alphabetical locations on pages 2, 3 and
7 the following definitions:
"Affiliated Entity" means each Qualified REIT Subsidiary (as
defined in Code Section 856(i)(2)) of the General Partner which
owns real estate directly and each other entity (except
Subsidiary Partnerships) which owns real estate and in which the
General Partner owns an interest, including, without limitation,
joint ventures, general partnerships, limited liability companies
and other entities, but specifically excluding the Partnership
and all Subsidiary Partnerships.
"Class A Common Units" means all Common Units issued to
Limited Partners other than the General Partner and Affiliated
Entities.
"Class A Limited Partners" means all Limited Partners who
hold Class A Common Units.
"Class A Ownership Percentage" means for any relevant period
the percentage derived by applying the formula "U/(S+U)" wherein
U equals the average aggregate number of Class A Common Units
issued and outstanding and S equals the average aggregate number
of REIT Shares issued and outstanding.
"Class B Common Units" means all Common Units issued to the
General Partner and all Affiliated Entities.
"Class B Limited Partners" means the General Partner and
each Affiliated Entity that has been admitted as a Limited
Partner of the Partnership.
"Class B Ownership Percentage" means 100% minus the Class A
Ownership Percentage.
"Separate Real Estate Assets" means all interests in real
estate assets (as defined in Code Section 856(c)(6)(B)) owned by
the General Partner either directly or indirectly through
Affiliated Entities.
"Separate Real Estate Economics" means, (i) for all tax
purposes, all items of income, gain, and/or loss and (ii) for all
financial accounting purposes, net income (loss) under GAAP,
respectively, as derived by the General Partner and Affiliated
Entities from Separate Real Estate Assets.
"Subsidiary Partnership" means any general partnership,
limited partnership, joint venture or limited liability company
ninety percent (90%) of the equity interests of which are owned
by the Partnership.
"Target Class A Allocation" means the product of (A) the
Class A Ownership Percentage, times (B) the sum of Separate Real
Estate Economics plus or minus (i) for all tax purposes,
Partnership Profit or Loss, and (ii) for financial reporting
purposes, net income (loss) of the Partnership under GAAP.
Article II, Section 2.03 is amended by deleting
subparagraphs (a) and (c) in their entirety and inserting in lieu
thereof the following:
(a) The General Partner of the Partnership is Mid-America
Apartment Communities, Inc. Its principal place of business
shall be the same as that of the Partnership. The
Partnership Interest of the General Partner consists of a
one percent (1%) general partnership interest represented by
Class B Common Units and the balance of which consists of a
limited partnership interest represented also by Class B
Common Units.
(c) The Limited Partners shall consist of Class A Limited
Partners and Class B Limited Partners. The Class A Limited
Partners shall be those Persons who shall have signed and
delivered a Transaction Consent and Signature Page or shall
otherwise have been admitted as Class A Limited Partners
pursuant hereto. Those persons who shall have executed and
delivered a Transaction Consent and Signature Page are
hereby admitted as Class A Limited Partners. The Class B
Limited Partners shall be the General Partner and each
Affiliated Entity that shall have been duly admitted as a
Limited Partner.
Article V, Section 5.01A of the Partnership Agreement is
hereby amended by deleting Section 5.01A in its entirety and
inserting in lieu thereof the following:
5.01A Special Allocation with respect to Separate
Real Estate Economics. There shall be specially allocated
to the Class A Limited Partners at the appropriate times as
determined by the General Partner, in its sole discretion,
which allocations shall be taken solely from allocations
otherwise allocable to the Class B Limited Partners pursuant
to this Partnership Agreement, an amount equal to the
difference between the Target Class A Allocation and (i) for
all tax purposes, the Partnership Profit or Loss, and (ii)
for financial reporting purposes, net income (loss) under
GAAP, in each case as allocated to the Class A Limited
Partners pursuant to Section 5.01(a). To the extent
possible, for all tax purposes such special allocations
shall affect the same elements of income, gain, loss and
cash flow of the Partnership as would have been affected had
the Separate Real Estate Economics been realized within the
Partnership as if the Separate Real Estate Assets had been
owned by the Partnership. The special allocation shall be
allocated among the Class A Limited Partners in proportion
to the average number of Class A Units held by each Class A
Limited Partner during a period divided by the average
aggregate number of Class A Units outstanding during such
period, and shall be allocated away from the Class B Limited
Partners in proportion to the average number of Class B
Units held by each Class B Limited Partner during a period
divided by the average aggregate number of Class B Units
outstanding during such period.
Article V of the Partnership Agreement is further amended by
adding the following Section 5.08:
5.08 Savings Provisions. (a) The tax allocation provisions
of this Agreement are intended to produce final Capital Account
balances that are at levels ("Target Final Balances") which
permit liquidating distributions that are made in accordance with
such final Capital Account balances to be made equally on a "per
Common Unit" basis to the holders of Class A Common Units and
Class B Common Units pursuant to Section 5.06 above. To the
extent that the tax allocation provisions of this Agreement would
not produce the Target Final Balances, the Partners agree to take
such actions as are necessary to amend such provisions to produce
such Target Final Balances. Notwithstanding the other provisions
of this Agreement, allocations of Partnership gross income and
deductions shall be made prospectively as necessary to produce
such Target Final Balances (and, to the extent such prospective
allocations would not reach such result, the prior tax returns of
the Partnership shall be amended to reallocate Partnership gross
income and deductions to produce such Target Final Balances).
(b) For financial reporting purposes, the General Partner
is authorized to use any method which is reasonable and in
conformity with generally accepted accounting principles ("GAAP")
to effect the foregoing allocations for GAAP accounting purposes
to properly reflect the economic effect of the allocation and
distribution provisions contained herein.
IN WITNESS WHEREOF, the foregoing Amendment No. 4 to the
First Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P. has been signed and delivered as of
this 10th day of December, 1996 by the undersigned as general
partner of the Partnership, but for all purposes shall be
effective as of the 24th day of February, 1996, this Amendment
No. 4 being curative in nature and intended to clarify the
provisions of Amendment No. 2 executed, delivered and effective
as of February 24, 1996.
MID-AMERICA APARTMENT COMMUNITIES, INC.
as General Partner
By: /s/ Simon R.C. Wadsworth
-------------------------
Title: Executive Vice President
Mid-America Apartment Communities, Inc.
Mid-America Apartments, L.P.
Revolving Credit Agreement
AmSouth Bank of Alabama
Administrative Agent
December __, 1996
<PAGE>
Contents
1 Loan terms 1
1.1 The Loans 1
1.2 Borrowings 2
1.3 Commitments 2
1.4 Notes 2
1.5 Maximum amounts of Loans and Borrowings 2
1.6 Minimum Borrowing size 2
1.7 Swing Line Facility 3
1.8 Letters of Credit 5
1.9 Drafts under the Letter of Credit 6
1.10 Maturity of Loans 7
1.11 Unused Fee 7
1.12 Letter of Credit Fees 7
1.13 Commitment Fee 8
1.14 Interest Periods 8
1.15 Interest 8
1.16 Maximum Eurodollar Borrowings 9
1.17 Borrowers' termination of Borrowing Rights 9
1.18 Prepayments 9
1.19 Payments generally 10
1.20 Funding losses 11
1.21 Pro-rata treatment 11
1.22 Whole dollars 12
2 Eurodollar Borrowing and Conversion procedures 12
2.1 Borrowing Notices 12
2.2 Funding of Loans 12
2.3 Lender's failure to fund 13
2.4 Conversions 14
2.5 Defective notices 15
3 Conditions 15
3.1 Conditions to effectiveness 15
3.2 Conditions to Borrowings 16
3.3 Conditions to Maintaining Loan 19
3.4 Conditions to Release of Property 20
3.5 Conditions to Addition of Property 21
4 Representations and warranties 21
4.1 Corporate existence and power 21
4.2 Corporate, Partnership and governmental
authorization; non- contravention 22
4.3 Binding effect 22
4.4 Financial information 22
4.5 No material adverse change 22
4.6 Litigation 23
4.7 Taxes 23
4.8 Compliance with ERISA 23
4.9 Not an investment company or public
utility holding company 23
4.10 Margin regulations 24
4.11 Title to assets 24
4.12 Contracts or restrictions affecting Borrowers 24
4.13 No default 24
4.14 Patents and Trademarks 24
4.15 Hazardous Substances 25
4.16 Real Estate Investment Trust 25
5 Affirmative Covenants 25
5.1 Financial information 25
5.2 Maintenance of property; insurance 27
5.3 Compliance with laws 29
5.4 Books and records; payment of Taxes 29
5.5 Notice of Defaults 29
5.6 ERISA events 29
5.7 Use of proceeds 30
5.8 Maintenance of existence; merger; sale of assets 30
5.9 Right of inspection 30
5.10 Environmental laws 30
5.11 Notice of adverse change in assets 31
5.12 Indemnification 31
5.13 Debt service coverage ratio 31
5.14 Adjusted NOI ratio 31
5.15 Payrate 31
5.16 Net worth 31
5.17 Qualification as a Real Estate Investment Trust 31
6 Negative Covenants of Borrowers 32
6.1 Indebtedness 32
6.2 Guaranties 33
6.3 Sale of Assets 33
6.4 Accounts Receivable From Related Persons 34
6.5 Loans to Officers and Employees 34
6.6 Line of Credit Financing 34
6.7 Trademarks and Trade Names 34
6.8 Net Operating Loss 34
6.9 Dividend Payout 34
6.10 Other Financial Ratios 35
6.11 Control 35
6.12 Arizona 35
7 Default 35
7.1 Events of Default 35
7.2 Action on Default 41
7.3 Notice of Default 42
8 The Administrative Agent 42
8.1 Appointment and authorization 42
8.2 Other conduct 42
8.3 Scope of obligations 42
8.4 Consultation with experts 43
8.5 Liability of Administrative Agent 43
8.6 Indemnification 43
8.7 Successor Administrative Agent 44
8.8 Fees 44
9 Change in circumstances 45
9.1 Eurocurrency Reserve Requirements 45
9.2 Increased cost or reduced return 45
9.3 LIBOR unavailable or inadequate 47
9.4 Illegal Loans 48
9.5 Termination of suspension 48
9.6 Taxes on payments 48
9.7 Change of Office 50
9.8 Replacement of Lender 51
10 Miscellaneous 51
10.1 Notices 52
10.2 No waivers; remedies cumulative; integration;
survival 52
10.3 Expenses; documentary Taxes 53
10.4 Indemnification 53
10.5 Sharing of set-offs 55
10.6 Amendments and waivers 55
10.7 Successors and assigns 56
10.8 Borrowers' liability 58
10.9 No reliance on Margin Stock collateral 59
10.10 Credit decision 59
10.11 Alabama law 59
10.12 Waiver of jury trial 59
10.13 Venue of Actions 60
10.14 Execution 60
10.15 Survival 60
11 Definitions and usages 60
11.1 Definitions 60
11.2 Accounting terms and determinations 76
11.3 Miscellaneous usages 77
List of Schedules 77
List of Exhibits 78
Revolving Credit Agreement
This Revolving Credit Agreement is dated as of December __, 1996 (this
"Agreement") among
Mid-America Apartment Communities, Inc. ("MAAC"),
Mid-America Apartments, L.P. ("Mid-America"),
the financial institutions listed on Schedule 1 as amended or
supplemented from time to time (the "Lenders"), and
AmSouth Bank of Alabama, an Alabama banking corporation, as
Administrative Agent for the Lenders, its successors and assigns
(in such capacity, the "Administrative Agent").
The parties, intending to be legally bound, severally agree as
follows:
1Loan terms
1.1 The Loans Each "Lender shall make loans ("Loans")
to MAAC and Mid-America, jointly and
severally (each a "Borrower" and together
the "Borrowers").
The agreements of the Lenders to make
Loans, are several and not joint.
All Loans shall be made on the terms, and
subject to the conditions, of this
Agreement. The Borrowers may borrow,
repay, prepay and reborrow under this
Agreement from the Effective Date until
the Termination Date of the Loan, in an
aggregate principal amount not to exceed,
at any one time outstanding, the lesser
of:
* the sum of Ninety Million Dollars
($90,000,000.00), or
* the Borrowing Base reduced by (a) the
amount of all outstanding Letters of
Credit, (b) the amount of outstanding
Advances, and (c) the FTB Letter of
Credit, to the extent of $2,615,903.
If the Borrowers should desire to obtain
funds to pay construction costs incurred
with respect to a Development Project,
the Borrower shall submit to the
Administrative Agent (i) detailed plans
and specifications for the Development
Project, and (ii) paid invoices, duly
certified to be true and correct by MAAC,
the architect performing inspections
during the construction of the
Development Project and the general
contractor, if any, constructing the
Development Project. Such costs and
expenses must be verified and approved by
the Administrative Agent's own
construction consultant, at the expense
of the Borrowers.
1.2 Borrowings All Loans to the Borrowers that have
Interest Periods that begin on the same
day and end on the same day shall
constitute a single borrowing
("Borrowing").
1.3 Commitments A Lender's Commitment as of the date of
this Agreement is the amount shown
opposite its name on Schedule 1; a
Lender's Commitment may be subsequently
reduced pursuant to this Agreement or
increased pursuant to a permitted
assignment. As of the date of this
Agreement, the Aggregate Commitment is
$90,000,000.
1.4 Notes The Loans shall be evidenced by
promissory notes of the Borrowers,
payable to the order of each Lender, in
the principal amount of their respective
Proportionate Share of the Aggregate
Commitment, and in the form substantially
the same as the copy of the Note attached
hereto as Exhibit A (the "Notes").
1.5 Maximum amounts of LoansNo Lender shall make Loans in an
and Borrowings aggregate unpaid principal amount that
exceeds the Lender's Commitment. Each
Borrowing shall consist of Loans made by
the Lenders in proportion to their
respective Commitments.
No Loan shall be made to the Borrowers
if, immediately following the making of
the Loan, the aggregate unpaid principal
amount of all Loans to the Borrowers
would exceed the lesser of the Aggregate
Commitment or the Borrowing Base.
1.6 Minimum Borrowing sizeEach Borrowing shall be in the principal
amount of $2,000,000 or a larger integral
multiple of $500,000.
1.7 Swing Line FacilityThe "Swing Line Facility" is being
extended under, and as a component of,
the Aggregate Commitment, and shall be
advanced and readvanced by the
Administrative Agent to the Borrowers in
accordance with the provisions of this
Agreement hereinafter set forth, and
shall be evidenced by, and payable,
together with interest thereon, in
accordance with the provisions of, the
Swing Line Facility Note. The Borrowers
expressly acknowledge and agree that
* the Administrative Agent directly
assumes the obligation to fund, and
shall have the sole obligation to
fund, 100% of each Advance of the
Swing Line Facility which is made, or
required to be made, in accordance
with the provisions of this Agreement,
and
* the Borrowers shall not have the right
under any fact or circumstance to look
to any other party, including, without
limitation, any other Lender, for the
funding of all or any portion of the
Swing Line Facility which is required
to be made in accordance with the
provisions of this Agreement if the
Administrative Agent shall default in
doing so, all risk of such default
being assumed in all respects by the
Borrowers.
Subject to satisfaction of the applicable
general terms and conditions set forth in
this Agreement, Advances under the Swing
Line Facility will be available on any
day the Administrative Agent is open for
business and on the same day notice is
given by the Borrowers to the
Administrative Agent, provided that any
such request by the Borrowers for an
Advance under the Swing Line Facility is
received by the Administrative Agent
prior to 1:00 P.M., Birmingham time, on
the date such Advance is requested. The
outstanding principal balance under the
Swing Line Facility may be prepaid, in
whole or in part and at any time, without
prior notice to the Administrative Agent
and without payment of penalty or
premium. Notice of prepayments under the
Swing Line Facility must be received by
the Administrative Agent prior to 1:00
P.M., Birmingham time, and payment
received by the close of business on the
day of notice for the Borrowers to
receive credit for such prepayment that
day. With respect to an Advance under
the Swing Line Facility in excess of
$750,000, the Borrowers shall submit to
the Administrative Agent a detailed
request for the Advance in the form
attached hereto as Exhibit B. For an
Advance of $750,000 or less under the
Swing Line Facility, the Borrowers shall
submit to the Administrative Agent a
written memo requesting such Advance.
Notwithstanding anything to the contrary
contained herein, all controlled advances
and payments automatically generated by
the Administrative Agent's cash
management system shall not require any
of the above notices from the Borrowers.
The Borrowers shall notify the
Administrative Agent in writing of the
responsible officer, who shall be either
the chief financial officer, the chief
executive officer, the chief operating
officer, or the treasurer (the
"Responsible Officer") authorized to
request Advances under the Swing Line
Facility on behalf of the Borrowers.
1.8 Letters of Credit The Letter of Credit Facility is being
extended under, and as a component of,
the Aggregate Commitment. The Borrowers
shall have the right, from time to time,
to request the Administrative Agent to
issue one or more unconditional and
irrevocable letters of credit for its
account (each a "Letter of Credit"),
subject to the terms and conditions of
this paragraph hereinafter set forth:
* Each request for the issuance of a
Letter of Credit shall be in writing,
shall state the requested date of
issuance of the Letter(s) of Credit
(which shall be at least five (5)
Business Days after the request is
received by the Administrative Agent),
shall state the requested amount of
the Letter(s) of Credit and the
purposes for which the Letter(s) of
Credit are requested, shall indicate
the beneficiary of the Letter(s) of
Credit, and shall specify the terms of
the Letter(s) of Credit (which terms
shall be reasonably satisfactory to
the Administrative Agent).
* The aggregate amount of Letters of
Credit outstanding at any one time
shall not exceed $20,000,000.
* At no time during the term of the
Loans shall there be more than twenty
(20) Letters of Credit in the
aggregate outstanding, unless
otherwise agreed to by Administrative
Agent in its sole discretion.
* No Letter of Credit shall have an
expiration date beyond the Maturity
Date.
* The Administrative Agent shall have
the sole obligation to issue Letter(s)
of Credit under this Agreement, and
Borrower shall not have the right
under any fact or circumstance to look
to any other party, including, without
limitation, any other Lender, for the
issuance of the Letter(s) of Credit if
the Administrative Agent defaults in
doing so, all such risk of default
being assumed by the Borrowers.
The Borrowers acknowledge that First
Tennessee has issued a letter of credit
in the face amount of $7,230,903.00 (the
"FTB Letter of Credit") for and in behalf
of America First. Notwithstanding any
provision in this Agreement to the
contrary, so long as the FTB Letter of
Credit is outstanding, the maximum
principal amount that the Lenders are
obligated to advance to the Borrowers
with respect to the Loans shall be
reduced by the amount the Lenders will be
required to pay to First Tennessee in the
event that America First does not make
immediate reimbursement to First
Tennessee of any draft drawn under the
FTB Letter of Credit pursuant to the
provisions hereof. If at any time during
the term of this Agreement, a draft is
drawn under the FTB Letter of Credit, and
First Tennessee does not receive
immediate reimbursement for the amount of
such draft in accordance with the terms
and provisions of the reimbursement
agreement between it and America First,
then and in such event, upon demand of
First Tennessee, the Administrative Agent
will pay to First Tennessee an amount
equal to the lesser of (a) the amount of
such draft or (b) the sum of
$2,615,903.00. Any such payment by the
Administrative Agent to First Tennessee
shall constitute an Advance to the
Borrowers, subject to all of the terms
and conditions of this Agreement
applicable to Advances. If the FTB
Letter of Credit expires or otherwise
terminates prior to the Termination Date
(other than by reason of a default by
America First of its reimbursement
obligations to First Tennessee), then,
subject to all of the terms and
conditions set forth herein and in all
other Loan Documents, the Aggregate
Commitment shall no longer be reduced as
provided in this Section 1.8.
1.9 Drafts under the Any draw honored by the Administrative
Letter of Credit Agent under a Letter of Credit shall
constitute an automatic Advance and shall
be evidenced by and payable, together
with interest thereon, in accordance with
the provisions of the Notes. Upon
request of the Administrative Agent, each
of the other Lenders shall immediately
fund their respective Proportionate Share
in each such Advance which is made as a
result of a draw under a Letter of
Credit.
1.10 Maturity of Loans Subject to Section 7.2, (Action on Event
of Default), and Section 1.17 (Borrowers'
Termination of Borrowing Rights), the
unpaid principal amount of each Loan
shall be due and payable on the Maturity
Date.
The Borrowing Rights of the Borrowers and
the obligation of the Lenders to extend
Loans shall permanently terminate on the
Termination Date.
1.11Unused Fee The Borrowers shall pay a fee (an "Unused
Fee") on the average daily unused portion
of the Aggregate Commitment at the rate
of 0.25% per annum.
Unused Fees shall accrue from the date of
this Agreement until the Maturity Date.
The Borrowers shall jointly and severally
pay accrued Unused Fees to the
Administrative Agent for the account of
each Lender quarterly in arrears on each
January 1, April 1, July 1 and October 1
and on the Maturity Date, commencing
December __, 1996. The Borrowers agree
that such Unused Fee is fair and
reasonable, considering the condition of
the money market, the creditworthiness of
the Borrowers and the interest rate to be
paid. For the purposes of this
calculation, any issued and outstanding
Letters of Credit shall be deemed to
constitute a portion of the Loan which is
outstanding, and, therefore, not subject
to payment of a Unused Fee.
1.12 Letter of Credit The annual fee for the issuance of a
Fees Letter of Credit shall be equal to the
greater of (i) Two Hundred Fifty Dollars
($250.00) or (ii) one and one-quarter
percent (1 1/4%) per annum multiplied by the
face amount of such Letter of Credit; and
any such fee shall be paid annually in
advance for the entire period of time
that such Letter of Credit is
outstanding.
1.13 Commitment Fee The Borrowers have agreed to pay to the
Lenders a commitment fee in the aggregate
amount set forth on Schedule 1.13. Such
payment is being made in consideration of
the agreement of the Lenders to make
funds available to the Borrowers under
the terms and provisions hereof from the
Effective Date until the Termination
Date. The Borrowers agree that this
commitment fee is fair and reasonable,
considering the condition of the money
market, the creditworthiness of the
Borrowers and the interest rate to be
paid for the Loan. A portion of that
amount, as set forth on Schedule 1.13,
will be retained by the Administrative
Agent as administrative or servicing fee;
and the balance will be shared by the
Administrative Agent with the Lenders on
a pro rata basis in accordance with their
respective Proportionate Share, as set
forth on Schedule 1.13.
1.14 Interest Periods Each Eurodollar Loan shall have an
Interest Period of thirty (30), sixty
(60) or ninety (90) days (the "Interest
Period") as the Borrowers specify in the
applicable Borrowing or Conversion
Notice, except that:
* an Interest Period that would
otherwise end on a day that is not a
Business Day shall end on the
following Business Day unless the
following Business Day falls in
another calendar month, in which case
the Interest Period shall end on the
preceding Business Day, and
* an Interest Period that begins on the
last Business Day of a calendar month
(or on a day for which there is no
numerically corresponding day in the
calendar month at the end of the
Interest Period) shall end on the last
Business Day of a calendar month.
1.15 Interest Each Eurodollar Loan shall bear interest
at the Eurodollar Rate on its unpaid
principal amount from the first to the
last day in its applicable Interest
Period.
Each Loan evidenced by the Swing Line
Facility Note shall bear interest at the
Prime Rate minus .75% on its unpaid
principal amount from the date such Loan
is made until repaid.
The Borrowers shall pay on the Conversion
Date accrued interest on any Loan
converted prior to the last day of its
Interest Period.
Overdue principal of or interest on a
Loan shall bear interest, payable on
demand, from the first day the principal
or interest is overdue until paid (after
as well as before judgment) at a rate per
annum equal to the sum of 2% plus the
applicable interest rate on the
particular Loan for each day.
The Administrative Agent shall determine
the interest rates for all Loans and
shall promptly notify the Borrowers and
the Lenders of such interest rates. Such
determinations shall be conclusive in the
absence of manifest error.
1.16 Maximum Eurodollar Notwithstanding anything to the contrary
Borrowings contained herein, there shall not be more
than seven (7) Eurodollar Borrowings
outstanding at any given time.
1.17 Borrowers' The Borrowers may, upon at least three
Termination of Business Days' notice to the
Borrowing Rights Administrative Agent, permanently
terminate their Borrowing Rights. If the
Borrowers so terminate their Borrowing
Rights, the unpaid principal amount of
all Loans to the Borrowers with all
accrued interest, and all fees, including
Unused Fees and funding losses, and other
amounts owing by the Borrowers under this
Agreement, shall be payable on the
effective date of the termination. The
Administrative Agent shall promptly
notify the Lenders of such termination of
the Borrowers' Borrowing Rights.
1.18 Prepayments The Borrowers may prepay on any Business
Day the unpaid principal amount of the
Loans in a Borrowing in whole or in a
part that is $2,000,000 or a larger
integral multiple of $500,000.
In the event the aggregate outstanding
balance of the Loans shall at any time
exceed the Borrowing Base, the Borrowers
shall immediately make a principal
payment which will reduce the outstanding
aggregate principal balance of the Loans
to an amount not exceeding the Borrowing
Base.
If a Development Project for which
Advances have been made in accordance
with the Borrowing Base has not become a
Negatively Pledged Property or a
Mortgaged Property within one (1) year
from the date a certificate of occupancy
(or other comparable governmental
approval if a certificate of occupancy is
not utilized by the appropriate
governmental authority) has been issued,
or if no certificate of occupancy (or
comparable approval) has been issued
within 24 months from the first Advance
for such Development Project, the amount
of such Advance shall be immediately due.
A prepayment of principal must be
accompanied by payment of accrued
interest on the principal amount prepaid.
Prepayments of Loans accruing interest at
the Eurodollar Rate shall be subject to
Section 1.20 (Funding losses).
Prepayment Notices The Borrowers shall notify the
Administrative Agent of a prepayment,
specifying the date of the prepayment and
the amount of the Borrowings to be
prepaid, at least two (2) Business Days
before the date of prepayment.
Upon receipt of a notice of prepayment,
the Administrative Agent shall promptly
notify each Lender of its contents and of
the Lender's ratable share of the
prepayment.
1.19 Payments generally The Borrowers shall make each payment of
principal of and interest on its
Borrowings and of fees hereunder by 11:00
a.m. on the date due, in immediately
available funds in Birmingham, Alabama,
to the Administrative Agent at its Notice
Address. The Administrative Agent shall
promptly distribute to each Lender its
Proportionate Share of each such payment.
If a payment of principal, interest or
fees is due on a day that is not a
Business Day, the date for the payment
shall be extended to the following
Business Day, except that if the
following Business Day falls in another
calendar month, the date for the payment
of a Loan shall be the preceding Business
Day. If the date for a payment of
principal is so extended, or is extended
by operation of law or otherwise,
interest on the payment shall be payable
for the extended time.
All interest and fees shall be computed
on the basis of a year of 360 days and
paid for the actual number of days
elapsed.
Entries in records maintained by a Lender
in accordance with its usual practice
evidencing the Borrowers' indebtedness to
the Lender under this Agreement and under
the Notes, including the amounts of
Loans, applicable Interest Periods and
payments of principal and interest, shall
be prima facie evidence of the existence
and amounts of the obligations of the
Borrowers to which the entries relate. A
Lender's failure to maintain such
records, or any error therein, shall not
affect the Borrowers' obligations to
repay the Loans in accordance with this
Agreement.
1.20 Funding losses If
* the Borrowers make a payment of
principal of a Loan before the last
day of the Interest Period for such
Loan (including prepayment of Loans
pursuant to Section 9.4 (Illegal
Loans), or
* the Borrowers fail to borrow or prepay
or to convert a Loan after the
Administrative Agent has notified any
other Lender of the Borrowing,
prepayment or Conversion,
then the Borrowers shall reimburse each
Lender on demand for any resulting loss
or expense incurred by it, including any
loss incurred in obtaining, liquidating
or employing deposits from third parties,
but excluding loss of margin for the
period after such payment or Conversion
or failure to borrow, prepay or convert,
provided that the Lender has delivered to
the Borrowers a certificate reasonably
detailing the amount of the loss or
expense, which certificate shall be
conclusive in the absence of manifest
error.
1.21 Pro-rata treatment Except as otherwise expressly provided in
this Agreement, or to the extent
otherwise reasonably required due to a
Lender's failure to fund,
* each payment of a Unused Fee shall be
allocated among the Lenders in their
Proportionate Share for the relevant
period,
* each payment of principal of a
Borrowing shall be allocated among the
Lenders in their respective
Proportionate Share of the unpaid
principal amounts of their Loans
included in the Borrowing, and
* each payment of interest on a
Borrowing shall be allocated among the
Lenders in their respective
Proportionate Share of the amounts of
accrued and unpaid interest on their
Loans included in the Borrowing.
1.22 Whole dollars In computing the amounts of the Lenders'
Loans to be included in a Borrowing, the
Administrative Agent may round each
Lender's Loan to the next higher or lower
whole dollar amount.
2 Eurodollar Borrowing and
Conversion procedures
2.1 Borrowing Notices The Borrowers shall notify the
Administrative Agent (a "Borrowing
Notice") by 1:00 p.m. on the third
Business Day immediately preceding a
Eurodollar Borrowing.
A Borrowing Notice shall be in
substantially the form of Exhibit C and
shall specify:
* the aggregate principal amount of the
Eurodollar Borrowing,
* the Interest Period (which shall not
extend beyond the Maturity Date), and
* the Borrowers' account at the
Administrative Agent to which the
proceeds of the Eurodollar Borrowing
are to be deposited.
2.2 Funding of Loans The Administrative Agent shall promptly
notify each Lender of the contents of
each Borrowing Notice and of the
principal amount of the Lender's Loan to
be included in the Eurodollar Borrowing.
Not later than 12 p.m. on the day of a
Eurodollar Borrowing, each Lender shall
make available the full amount of its
Loan to be included in the Eurodollar
Borrowing, in immediately available funds
in Birmingham, to the Administrative
Agent at its Notice Address.
Unless the Administrative Agent
determines that an applicable condition
specified in Section 3 has not been
satisfied, the Administrative Agent shall
make the funds received from the Lenders
pursuant to this Section 2.2 available to
the Borrowers at the Administrative
Agent's Notice Address by 2 p.m. on such
day for a Eurodollar Borrowing.
2.3 Lender's failure Unless a Lender notifies the
to fund Administrative Agent before the date of a
Borrowing (whether for a Eurodollar
Borrowing, a draw under a Letter of
Credit or any other Borrowing available
hereunder) that the Lender will not make
available to the Administrative Agent the
full amount of its Loan to be included in
the Borrowing, the Administrative Agent
may assume that the Lender's Loan will be
made available to the Administrative
Agent on the day of the Borrowing and
may, in reliance on that assumption, make
the full amount of the Loan available to
the Borrowers.
If the Administrative Agent makes the
full amount of a Lender's Loan available
to the Borrowers, and the Lender does not
make available to the Administrative
Agent some or all of the Loan (the
"Unfunded Amount") by the date of the
Borrowing, then the Lender shall pay the
Administrative Agent on demand interest
at the Federal Funds Rate on the Unfunded
Amount from the date of the Borrowing
until the Lender makes the Unfunded
Amount available to the Administrative
Agent or the Borrowers repay the Loan.
If a Lender does not make the full amount
of its Loan included in a Borrowing
available to the Administrative Agent by
the third Business Day after the date of
the Borrowing, the Borrowers shall,
promptly on the Administrative Agent's
demand, repay the full amount of such
Loan to the Administrative Agent,
together with accrued interest at the
interest rate for the Loans comprising
the Borrowing.
Nothing in this Section 2.3 shall relieve
a Lender of the obligation to make the
full amount of its Loans available to the
Administrative Agent.
2.4 Conversions The Borrowers may at any time, if they
are not in Default, convert the Loans
bearing interest at the Eurodollar Rate
into new Loans for an additional Interest
Period (a "Conversion"). A Conversion
shall convert each Loan in a Borrowing in
the same proportion. Since each Loan in
a Borrowing shall be converted in the
same proportions, Conversion shall refer
equally to Conversion of Loans and
Conversion of Borrowings.
A Borrower may initiate a Conversion by
notifying the Administrative Agent (a
"Conversion Notice") not later than 1:00
p.m. on the third Business Day before the
Conversion date.
The Administrative Agent shall promptly
notify each Lender of the contents of
each Conversion Notice and of the
Lender's Loans that will result from the
Conversion.
A Conversion Notice shall be in
substantially the form of Exhibit D and
shall:
* state the Conversion date,
* identify each then outstanding
Borrowing that is to be converted,
* state the aggregate unpaid principal
amount of the Loans in such
outstanding Borrowings, and
* state the principal amount and
Interest Period (which shall not
extend beyond the Maturity Date) of
each Borrowing into which such
outstanding Borrowings are to be
converted.
Each Borrowing resulting from a
Conversion must, as to amount and
Interest Period, conform to the
requirements for a Borrowing comprised of
Loans made on such date (as if the Loans
to be converted had been prepaid, and the
new Loans made, on the Conversion date),
and a Conversion Notice shall be
effective solely as to the resulting
Borrowings that do so conform. If a
Conversion Notice purports to or is
effective to convert only part of the
Borrowings specified in the Conversion
Notice, the remaining parts of such
Borrowings shall on the Conversion date
automatically be converted into a single
Base Rate Borrowing. The Borrowers shall
be liable to the Lenders for any funding
losses in accordance with Section 1.20 on
any portion of a Borrowing not converted.
A Conversion of a Loan must satisfy the
conditions in Section 3.2 for the making
of a Loan.
If part or all of a Loan is not otherwise
converted by the last day of its Interest
Period, it shall automatically be
converted on the last day of its Interest
Period into a Base Rate Loan.
2.5 Defective notices The Administrative Agent shall promptly
notify a Lender or the Borrowers if the
Administrative Agent believes that a
notice or other document given to the
Administrative Agent by a party under
Section 1 or this Section 2 fails to
conform to the requirements of such
Section.
3 Conditions
3.1 Conditions to This Agreement shall become effective
effectiveness when the Administrative Agent has
received the following documents, each
dated the date of this Agreement:
* for each party to the Agreement, an
original or telecopied counterpart of
this Agreement signed by all parties;
* an original Note executed to the order
of each Lender, in the principal
amount of such Lender's Commitment and
evidencing such Lender's Loans;
* the Negative Pledges and Mortgages
upon those Properties identified in
Schedule 2;
* Title Documents consisting of current
and complete title searches or reports
(with legible copies of all
instruments of record) for each and
all of the Properties;
* opinions of counsel satisfactory to
the Administrative Agent to each of
the Borrowers, substantially in the
form of Exhibit E;
* a certificate of a senior officer of
each Borrower that (i) no Default has
occurred and is continuing and (ii)
the representations and warranties of
the Borrowers contained in this
Agreement are true on the date of this
Agreement; and
* such other documents as the
Administrative Agent reasonably
requests and deems satisfactory
relating to each Borrower's existence,
the corporate authority for and
validity of this Agreement and any
other relevant matter.
The Administrative Agent shall promptly
notify the Borrowers and the Lenders when
this Agreement becomes effective, and
such notice shall be conclusive and
binding on all parties.
3.2 Conditions to BorrowingsThe obligation of a Lender to make a Loan
to the Borrowers as part of a Borrowing
is subject to the satisfaction of the
following conditions:
* this Agreement is effective;
* the Administrative Agent receives a
Borrowing Notice conforming to the
requirements of this Agreement;
* immediately after the Borrowing, the
aggregate unpaid principal amount of
the Borrowers' Loans will not exceed
the lesser of the Aggregate Commitment
or the Borrowing Base;
* each Borrower represents that no
material adverse change in its
financial condition or results of
operations has occurred;
* immediately before and after the
Borrowing, no Default by the Borrowers
will have occurred and be continuing;
* the representations and warranties of
the Borrowers contained in this
Agreement are true on and as of the
date of the Borrowing with the same
effect as if made on and as of such
date (except to the extent such
representations and warranties
expressly relate to an earlier date);
* if a new Eligible Property is offered
as a Property, the Borrowers shall
have satisfied all of the same
conditions specified herein with
respect to the initial Properties,
including, without limitation, the
furnishing of adequate financial
information to determine the value of
such Property in accordance with the
provisions hereof, a current survey, a
current Level I Environmental Survey
and such other information as shall be
indicated by such Survey (including,
if so indicated, an asbestos survey),
and current Title Documents, all of
which must be satisfactory to the
Administrative Agent and its counsel;
* no mechanic's lien claim shall have
been filed or asserted against any
Property, which has not been "bonded
off" such Property in accordance with
applicable law;
* all licenses, permits and approvals of
governmental authorities required for
the operation of the respective
Properties shall have been obtained
and are in full force and effect;
* there shall have occurred no material
violation of any applicable laws,
ordinances, rules or regulations; it
being understood that a single
violation shall be deemed material if
it involves by way of fees, fines,
costs, expenses, curative work or
other potential loss or expense to the
Borrowers exceeding the sum of One
Hundred Thousand Dollars ($100,000.00)
or $500,000 in the aggregate for
multiple violations;
* there shall be no action, suits or
proceedings pending, or to the
Borrowers' knowledge, threatened
against or affecting either Borrower
or any Property, at law or in equity,
or before any governmental agencies,
which, if adversely determined, would
substantially impair the ability of
the Borrowers to pay their obligations
as set forth herein; and
* there shall have occurred no material
adverse change in the financial
condition of either Borrower.
Each Borrowing shall constitute a
representation and warranty by the
Borrowers that, on the date of the
Borrowing, the conditions set forth in
this Section 3.2, as they apply to the
Borrowers, are satisfied.
3.3 Conditions to * The Administrative Agent shall have
Maintaining Loan the right, at any time and from time
to time, to require the Borrowers to
furnish to the Administrative Agent
current financial information, updated
appraisals and/or environmental
studies of any one or more of the
Properties if, in the unrestricted
discretion of the Administrative
Agent, such Properties shall have
declined in value in any material
amount or may be in violation of any
applicable Environmental Laws. Any
such appraisals and environmental
studies must be in form, content and
conclusion satisfactory to the
Administrative Agent, subject to the
Administrative Agent's approval in all
respects, and must be made by a
qualified, licensed professional
selected by the Administrative Agent.
If any such current financial
information, updated appraisal or
environmental study should reflect a
decline in value, the Borrowing Base
shall be reduced accordingly; and, if
the then outstanding Loans should
exceed the reduced Borrowing Base, the
Borrowers shall be obligated
immediately to reduce the Loans to an
amount not exceeding the applicable
reduced Borrowing Base. If any such
appraisal or current financial
information should reflect an increase
in value, the applicable Borrowing
Base shall be increased accordingly to
the extent appropriate.
* If any environmental study should
reflect the necessity or desirability
for action to be taken to prevent or
cure the violation or prospective
violation of applicable Environmental
Laws, the Borrowers shall, at their
sole cost and expense, immediately
undertake such action and diligently
prosecute same to conclusion.
* Although the Administrative shall have
the right to require as many
appraisals and environmental surveys
as it shall elect with respect to each
Property, the Borrowers shall be
obligated to pay for only one (1)
appraisal and one (1) environmental
survey, with respect to each Property
during any one (1) consecutive twelve
(12) month period. Any initial
appraisals and environmental studies
furnished to the Administrative Agent
in connection with each Property shall
be excluded from consideration in
determining whether Borrowers are
obligated to pay the cost of
additional appraisals or environmental
studies for any such Property.
3.4 Conditions to Release * The privilege is given and reserved so
of Property that the Borrowers or Arizona may
obtain the release of a Property from
any Negative Pledge or from the lien
of a Mortgage upon payment to the
Administrative Agent, for application
upon the Loan, a principal amount
equal to the amount of the applicable
Borrowing Base for such Negatively
Pledged Property, or Mortgaged
Property, as the case may be, together
with all interest accrued upon such
amount, and all out-of-pocket expenses
and advances then due and owing to the
Administrative Agent in connection
with the Loans.
* The release privilege herein granted
is conditioned upon (1) there being no
Default existing (a) at the time any
such release is requested, or (b) on
the date the release is to be
delivered, or (2) the release not
causing a Default.
* Any such requested release shall be
made at the sole cost and expense of
the Borrowers.
3.5 Conditions to Subject to the satisfaction of the same
Addition of conditions and requirements set forth
Property herein with respect to the initial
Properties, the Borrowers shall be
entitled to offer Apartment Communities
which, if approved by the Administrative
Agent as Eligible Properties, shall (upon
satisfaction of the same conditions
imposed for the initial Properties) then
be deemed to constitute Properties and
available for use in determining the
Borrowing Base.
4 Representations and
warranties
Each Borrower represents and warrants
that:
4.1 Corporate Mid-America is a limited partnership duly
existence and organized, validly existing and in good
power standing under the laws of the State of
Tennessee; it has the power and authority
to own its properties and assets and is
in good standing and duly qualified to
carry on its business in every
jurisdiction wherein such qualification
is necessary, including, without
limitation, the States of Tennessee,
Mississippi, Arkansas, Ohio, South
Carolina, Florida and Georgia, and will
be so qualified in every other
jurisdiction in which an Eligible
Property is offered to the Lenders as a
Property.
MAAC is a corporation duly organized,
validly existing, and in good standing
under the laws of the State of Tennessee;
it has the power and authority to own its
properties and assets and is in good
standing and duly qualified to carry on
its business in every jurisdiction
wherein such qualification is necessary,
including, without limitation, the States
of Tennessee, Mississippi, Arkansas,
Ohio, Texas and Georgia, and will be so
qualified in every other jurisdiction in
which an Eligible Property is offered to
the Lenders as a Property.
Arizona is a corporation duly organized,
validly existing, and in good standing
under the laws of the State of Arizona;
it has the power and authority to own its
properties and assets and is in good
standing and duly qualified to carry on
its business in every jurisdiction
wherein such qualification is necessary,
including, without limitation, the State
of Mississippi.
4.2 Corporate, The execution, delivery and performance
Partnership and by the Borrower of this Agreement are
governmental within the Borrower's corporate or
authorization partnership, as the case may be, powers,
non-contravention have been duly authorized by all
necessary corporate or partnership, as
the case may be, action, require no
action by or in respect of, or filing
with, any governmental body, agency or
official and do not contravene, or
constitute a default under, any provision
of applicable law or regulation or of the
articles of incorporation or by-laws or
partnership agreement of the Borrower or
of any material agreement, judgment,
injunction, order, decree or other
instrument binding upon the Borrower or
result in the creation or imposition of
any Lien on any asset of the Borrower.
4.3 Binding effect This Agreement is a valid and binding
agreement of the Borrower, enforceable in
accordance with its terms, except as
enforceability may be limited by (i)
applicable bankruptcy, insolvency,
reorganization, moratorium or similar
laws affecting the enforcement of
creditors' rights generally and (ii)
general principles of equity.
4.4 Financial The consolidated balance sheet of MAAC
information prepared as of the 30th day of June,
1996, together with any explanatory notes
therein referred to and attached thereto,
is correct and complete and fairly
presents the financial condition of the
Borrowers as of the date of said balance
sheet. A copy of such balance sheet has
been delivered to each Lender.
4.5 No material Since June 30, 1996, there has been no
adverse change material adverse change in the financial
position or results of operations of the
Borrowers, considered as a whole.
4.6 Litigation There is no action, suit or proceeding
pending against, or, to the knowledge of
the Borrower, threatened against or
affecting, the Borrower before any court
or arbitrator or any governmental body,
agency or official in which there is a
reasonable probability of an adverse
decision that would materially adversely
affect the business, financial position
or results of operations of the Borrower
or that in any manner draws into question
the validity or enforceability of this
Agreement.
4.7 Taxes United States federal income tax returns
of the Borrower have been examined or the
applicable statute of limitations has run
through the period ended
* if the Borrower is MAAC, December 31,
199_, and
* if the Borrower is Mid-America,
December 31, 199_.
The Borrower has filed all United States
federal income tax returns and all other
material tax returns that are required to
be filed by it and has paid all Taxes
then due pursuant to such returns or
pursuant to any assessment received by
the Borrower, except for Taxes contested
in good faith by appropriate proceedings
and as to which appropriate reserves in
accordance with generally accepted
accounting principles have been
established. The charges, accruals and
reserves on the books of the Borrower for
Taxes are, in the Borrower's opinion,
adequate.
4.8 Compliance with Each member of the Controlled Group has
ERISA fulfilled its obligations under the
minimum funding standards of ERISA and
the Code for each Pension Plan and is in
compliance in all material respects with
ERISA and the Code, and has not incurred
any liability to the PBGC or a Pension
Plan under Title IV of ERISA other than a
liability to the PBGC for premiums under
Section 4007 of ERISA.
4.9 Not an investment The Borrower is not an 'investment
company or public company' within the meaning of the
utility holding Investment Company Act of 1940 or a
company 'holding company' within the meaning of
the Public Utility Holding Company Act of
1935.
4.10 Margin regulations At no time will Margin Stock comprise
more than 5% of the value of the assets
of a Borrower.
4.11 Title to assets Each Borrower has good and marketable
title to all its properties and assets
reflected on the consolidated balance
sheet referred to herein, except for (a)
such assets shown on said balance sheet
that have been disposed of since said
date as no longer used or useful in the
conduct of business, (b) inventory sold
in the ordinary course of business and
thereafter accounted for as accounts
receivable or cash, (c) accounts
receivable collected and property
accounted for, and (d) items which have
been amortized in accordance with GAAP
applied on a consistent basis; and all
such properties and assets are free and
clear of Liens except as otherwise
expressly permitted by the provisions
hereof.
4.12 Contracts or Neither Borrower nor Arizona is a party
restrictions to, nor subject to, any agreement or
affecting instrument, including, without
Borrowers limitation, any partnership agreement,
partnership restrictions, voting trust or
shareholders' agreement, materially and
adversely affecting its business,
Apartment Communities, or other assets,
operations or condition (financial or
otherwise).
4.13 No default Neither Borrower nor Arizona is in
default in the performance, observance or
fulfillment of any of the obligations,
covenants, or conditions contained in any
agreement or instrument to which it is a
party, which default (if not cured) would
materially and adversely and
substantially affect the financial
condition, property or operations of such
Borrower or Arizona.
4.14 Patents and TrademarksEach Borrower possesses all necessary
patents, service marks, trademarks, trade
names, copyrights, and licenses necessary
to the conduct of its business.
4.15 Hazardous SubstancesTo the best of the Borrower's knowledge,
(a) except strictly in accordance with
all applicable Environmental Laws, no
Hazardous Substances are located upon or
have been stored, processed or disposed
of on or released or discharged
(including ground water contamination)
from any Apartment Community owned or
leased by either Borrower or Arizona, and
(b) no aboveground or underground storage
tanks exist on any of the Apartment
Communities of Borrowers or Arizona. No
private or governmental lien or judicial
or administrative notice or action
related to Hazardous Substances or other
environmental matters has been filed
against any Apartment Community owned or
leased by either Borrower or Arizona or
otherwise issued to or received by either
Borrower or Arizona.
4.16 Real Estate MAAC is qualified under the Code as a
Investment Trust real estate investment trust.
5 Affirmative Covenants
Each Borrower agrees that:
5.1 Financial informationThe Borrower shall deliver to the
Administrative Agent for distribution to
each Lender:
* As soon as available, and in any event
within ninety-five (95) days after the
end of each fiscal year of MAAC, a
consolidated unqualified audit as of
the close of such fiscal year of MAAC,
together with a consolidated
unqualified audit report and opinion
of an independent certified public
accountant acceptable to the
Administrative Agent, prepared in
accordance with GAAP, showing the
financial condition of MAAC as of the
close of such year, which audit shall
include, inter alia, consolidated
financial results of both Borrowers
and all Subsidiaries of each of them;
and the results of operations during
such year; and within thirty (30) days
after the end of each calendar
quarter, consolidated financial
statements similar to those mentioned
above, not audited but certified by
the Certifying Officer, such balance
sheets to be as of the end of such
calendar month, and such statements of
income and surplus to be for the
period from the beginning of the
fiscal year to the end of such month,
in each case subject only to audit and
year-end adjustment. The certificate
of the Certifying Officer shall state
that:
a)the attached financial
statement, together with any
explanatory notes referred to and
attached thereto, is correct and
complete and fairly resents the
financial condition of MAAC as of
the date of the financial
statement, and the results of its
operations for the period ending
on the date reflected in said
financial statement,
b)that such financial statement
has been prepared in accordance
with GAAP applied on a consistent
basis maintained throughout the
period involved, and
c)to the best of such Certifying
Officer's knowledge, the
Borrowers are not in Default
under any of the terms and
provisions of this Agreement, or,
if the Borrowers are in Default,
identifying with particularity
each such Default;
* within 15 days of mailing or filing,
copies of all annual reports to its
stockholders and all reports that the
Borrower files with the Securities and
Exchange Commission;
* upon request of the Administrative
Agent, but in any event no later than
the 22nd day of each calendar quarter,
but as of the last day of the
immediately preceding calendar
quarter, a Borrowing Base Certificate
in the form attached hereto as Exhibit
F; and
* promptly, such other financial
information as may be reasonably
requested by the Administrative Agent
or a Lender.
5.2 Maintenance of property;a) The Borrower shall keep all property
insurance useful and necessary in its business
in good working order and condition,
ordinary wear and tear excepted.
b) The Borrower at all times shall
maintain (or cause to be maintained)
with respect to each Property in some
company or companies (having a Best's
rating of A:VIII or better, except for
liability insurance maintained with
respect to Properties located in
Texas, which shall be maintained with
a company or companies having a Best's
rating of at least A-:VII) approved by
the Administrative Agent:
* Comprehensive public liability
insurance covering claims for
bodily injury, death, and
property damage, with minimum
limits satisfactory to the
Administrative Agent, but in any
event not less than those amounts
customarily maintained by
companies in the same or
substantially similar business;
* Business interruption insurance
and/or loss of rents insurance in
a minimum amount specified by the
Administrative Agent, and in any
such event covering loss of rents
for a minimum period of one (1)
year;
* Hazard insurance insuring the
Apartment Communities and other
assets against loss by fire (with
extended coverage) and against
such other hazards and perils
(including but not limited to
loss by windstorm, hail,
explosion, riot, aircraft, smoke,
vandalism, malicious mischief and
vehicle damage) as the
Administrative Agent, in its sole
discretion, shall from time to
time require, all such insurance
to be issued in such form, with
such deductible provision, and
for such amount as shall be
satisfactory to the
Administrative Agent; and
* Such other insurance as the
Administrative Agent may, from
time to time, reasonably require
by notice in writing to the
Borrowers.
c) The Borrower shall not, nor permit the
any other Person to, cancel,
terminate, or materially amend any of
the insurance policies required by
this Section 5 without giving at least
thirty (30) days' prior written notice
to the Administrative Agent. The
Borrower will deliver (or cause to be
delivered) to the Administrative Agent
original or certified copies of the
insurance policies, or satisfactory
certificates of insurance, and, as
often as the Administrative Agent may
reasonably request, a report of a
reputable insurance broker with
respect to such insurance. At the
option of the Borrower, the Borrower
may maintain the insurance coverages
required by this Section 5, pursuant
to so-called "blanket insurance
policies", in which event the Borrower
shall, from time to time, upon the
Administrative Agent's request,
furnish to the Administrative Agent
certificates from the respective
insurance companies (or their
authorized agents) setting forth the
types and amounts of insurance being
maintained, any applicable deductible
provisions, and such other information
as the Administrative Agent may
require (including, without
limitation, the effective dates of any
such insurance), together with copies
of all such blanket insurance
policies.
5.3 Compliance with lawsThe Borrower shall comply in all material
respects with all applicable laws,
ordinances, rules, regulations and
requirements of governmental authorities,
except where the necessity of compliance
is contested in good faith by appropriate
proceedings.
5.4 Books and records; The Borrower shall keep proper books and
payment of Taxes records in which full and correct entries
are made of all dealings and transactions
in relation to its business and
activities. While a Default is
continuing, representatives of any Lender
may inspect the Borrower's relevant books
and records at any reasonable time.
The Borrower shall pay and discharge, at
or before maturity, all their respective
material Tax liabilities, except for
liabilities contested in good faith by
appropriate proceedings and as to which
appropriate reserves in accordance with
generally accepted accounting principles
have been established.
5.5 Notice of Defaults The Borrower shall, within five Business
Days of a senior officer of the Borrower
obtaining knowledge of a continuing
Default, deliver to the Administrative
Agent a certificate of the Certifying
Officer setting forth the details of the
Default and the action the Borrower is
taking or proposes to take with respect
to the Default.
5.6 ERISA events If a member of the Controlled Group
* gives or is required to give notice to
the PBGC of a 'reportable event' or
knows that the plan administrator of a
Pension Plan has given or is required
to give notice of such reportable
event,
* receives notice of complete or partial
Withdrawal Liability under Title IV of
ERISA,
* receives notice from the PBGC under
Title IV of ERISA of an intent to
terminate or appoint a trustee to
administer a Pension Plan, or
* knows that a Pension Plan is
terminated or in reorganization,
then the Borrower shall within five
Business Days deliver a copy of the
notice to the Administrative Agent.
5.7 Use of proceeds The Borrower shall use Loan proceeds only
for its general corporate purposes. The
Borrower shall not use any Loan proceeds
for any purpose that violates Regulations
G, T, U or X of the Federal Reserve
Board.
5.8 Maintenance of The Borrower shall keep in full force and
existence; merger; saleeffect its corporate or partnership
of assets existence, as the case may be, and its
rights, privileges and franchises
necessary or desirable in the normal
conduct of business, provided that a
Subsidiary of a Borrower may merge or
consolidate with or into the Borrower
(but only if the Borrower is the
surviving entity) or a wholly-owned
consolidated Subsidiary of the Borrower.
A Borrower shall not (i) consolidate or
merge with or into another Person unless
the Borrower is the surviving entity and
no Default by the Borrower exists
immediately thereafter, or (ii) sell,
lease or otherwise transfer all or
substantially all of its assets to any
other Person, except for the distribution
of ordinary dividends to shareholders and
distributions to partners. As used
herein "substantially all" shall mean
more than thirty percent (30%) of the
total assets.
5.9 Right of inspectionThe Borrower shall permit any Person
designated by the Administrative Agent to
visit and inspect any of the properties,
corporate books and financial reports of
each Borrower and Arizona and to discuss
its affairs, finances and accounts with
its principal officers, at all such
reasonable times during normal business
hours and as often as the Administrative
Agent may reasonably request.
5.10 Environmental laws The Borrower shall maintain at all times
all of each Borrower's and Arizona's
Apartment Communities in compliance with
all Environmental Laws, and immediately
notify the Administrative Agent of any
notice, action, lien or similar action
alleging either the location of any
Hazardous Substances or the violation of
any Environmental Laws with respect to
any of such Borrower's Apartment
Communities or operations.
5.11 Notice of adverse At the time of either Borrower's first
change in assets knowledge or notice, such Borrower shall
immediately notify the Administrative
Agent of any information that may
adversely affect in any material manner
the assets of either Borrower, including,
but not limited to, the value or
marketability of any Properties.
5.12 Indemnification The Borrower shall defend, indemnify and
hold the Administrative Agent harmless
from and against any and all loss, costs,
damage or expense, of every kind and
nature, including, without limitation,
reasonable attorneys' fees and costs,
which the Administrative Agent could or
might incur by reason of any violation of
any Environmental Laws by either Borrower
or by any predecessors or successors to
title to any Property of such Borrower.
5.13 Debt service The Borrower shall maintain as of the end
coverage ratio of each fiscal quarter a ratio of
Annualized EBITDA for trailing six (6)
months to Total Annualized Debt Service
on Indebtedness for the same period of at
least 2.0 to 1.0.
5.14 Adjusted NOI ratio The Borrower shall maintain at all times
as of the end of each fiscal quarter
using a trailing six (6) months a ratio
of Adjusted NOI from Unsecured Properties
to Interest on Unsecured Debt of at least
2.25 to 1.00.
5.15 Payrate The Borrower shall maintain a Payrate of
not less than fifteen percent (15%)
during the period ending on the 1st day
of July, 1997, and of not less than
sixteen percent (16%) at all times
thereafter.
5.16 Net worth The Borrower shall maintain at all times
beginning on the Effective Date a
consolidated Tangible Net Worth which is
not less than Two Hundred Million Dollars
($200,000,000.00) plus seventy-five
percent (75%) of net proceeds of new
equity offerings.
5.17 Qualification as a MAAC shall at all times remain (a)
Real Estate qualified under the Code as a real estate
Investment Trust investment trust and (b) the general
partner of Mid-America.
6 Negative Covenants of
Borrowers
Each Borrower covenants and agrees that,
at all times from and after the Effective
Date, unless Two-thirds of Lenders shall
otherwise consent in writing, it will
not, either directly or indirectly:
6.1 Indebtedness Incur, create, assume or permit to exist
any indebtedness to any Person other than
the Lenders, except as follows and
subject to full compliance with the terms
of this Agreement:
* Obligations in place as of the
Effective Date;
* Purchase money debt of the Borrowers
and their Affiliates and debt assumed
in the acquisition of an Apartment
Community or a business entity;
* Intra-company debt of either Borrower
or any Affiliate to a Borrower or an
Affiliate;
* Other property-specific, long-term
(five (5) years or more) secured debt,
including, without limitation, letters
of credit issued in support of
property-specific financing, which
financing has or originally had a
maturity of not less than five (5)
years, in all instances with a loan to
value ratio of not greater than
seventy percent (70%), based on an
appraisal approved by the
Administrative Agent;
* Construction debt for present or
future payments of amounts not to
exceed Thirty Million Dollars
($30,000,000.00) in the aggregate, and
the applicable Development Project has
been negatively pledged or mortgaged
to secure such construction debt,
subject to the Administrative Agent's
refusal, at its option, to fund
construction using terms and
conditions the same or as similar to
those approved by the Administrative
Agent for the Apartment Community in
Memphis, Tennessee known as "Lincoln
on The Green";
* Unsecured debt in addition to the
Loans only when MAAC achieves an
investment grade rating of at least
BBB- from S&P or Baa-3 from Moody's;
* Trade payables in the ordinary course
of business;
* Obligations under leases of personal
property; or
* Contractual obligations incurred in
the ordinary course of the apartment
leasing business.
6.2 Guaranties Guarantee or otherwise in any way become
or be responsible for the indebtedness or
obligations of any other Person, by any
means whatsoever, whether by agreement to
purchase the indebtedness of any other
Person or agreement for the furnishing of
funds to any other Person through the
purchase of goods, supplies or services
(or by way of stock purchase, capital
contribution, advance or loan) for the
purpose of paying or discharging the
indebtedness of any other Person, or
otherwise, except for (a) the endorsement
of negotiable instruments by either
Borrower in the ordinary course of
business for collection; (b) guaranties
of renewals, replacements or extensions
of indebtednesses, liabilities and
obligations outstanding as of the date
hereof, which are presently guaranteed by
either of the Borrowers; provided,
however, that the maximum amount of each
such guaranty shall not exceed the lesser
of (i) the amount guaranteed as of the
date hereof, or (ii) the amount
outstanding as of the date of such new
guaranty; (c) guaranties of the Debt of
Affiliates or Subsidiaries to the extent
such Debt would be of a type permitted in
Section 6.1 and provided that such Debt
being guaranteed is considered Debt of
the Borrowers for purposes of the
financial covenants in Articles 5 and 6
of this Agreement, and (d) other
guaranties which do not exceed, in the
aggregate, at any one time outstanding,
the principal sum of Two Million Dollars
($2,000,000.00).
6.3 Sale of Assets Sell, lease, transfer or dispose (other
than in the normal course of business) of
all or a substantial part of its assets.
6.4 Accounts Receivable FromPermit or allow the aggregate of accounts
Related Persons receivable and other loans and
indebtedness owed by Related Persons to
the Borrowers to exceed the sum of Five
Hundred Thousand Dollars ($500,000.00) in
the aggregate as to both Borrowers.
6.5 Loans to Officers andPermit or allow loans to directors,
Employees officers, partners, shareholders and
employees of both Borrowers to exceed, in
the aggregate, the sum of Five Hundred
Thousand Dollars ($500,000.00).
6.6 Line of Credit FinancingIncur (a) additional debt which
constitutes "line of credit" financing as
contemplated by this Agreement, or (b)
other interim financing for project
acquisition or construction (excluding
seller financing), except as permitted
under Section 6.1.
6.7 Trademarks and TradeSell, transfer, convey, grant any
Names security interest in, or otherwise
encumber any existing or hereafter
acquired trademarks, service marks or
trade names owned by the Borrower.
6.8 Net Operating Loss Permit or allow a Net Operating Loss of
more than One Million Dollars
($1,000,000.00) in any quarterly period
or in any amount for any two (2)
consecutive quarterly periods in any one
(1) fiscal year.
6.9 Dividend Payout Make a dividend payment (including both
common stock dividends and preferred
stock dividends) which is greater than
ninety percent (90%) of Funds from
Operations or that would otherwise
violate the United States federal tax
laws governing the qualifications of real
estate investment trusts. As used
herein, "Funds from Operations" shall
mean consolidated net income of MAAC
(computed in accordance with GAAP),
excluding gains (or losses) from debt
restructuring or sales of property, plus
depreciation of real property. Upon
written pre-approval of the
Administrative Agent, exceptions may be
made where the Board of Directors of MAAC
determines, in good faith, that a special
dividend must be paid to avoid taxes due
to excess gains from the sale of
Property.
6.10 Other Financial Ratiosa) Permit Total Liabilities to exceed
sixty-three percent (63%) of the Total
Market Value of Assets during the
period ending on the 1st day of July,
1997, or to exceed sixty percent (60%)
thereof at any time thereafter, or to
permit the aggregate amount of Secured
Debt to exceed fifty percent (50%) of
the Total Market Value of Assets.
b) Permit Unsecured Debt to exceed sixty-
five percent (65%) of the Total Market
Value of Unencumbered Assets during
the period ending on the 1st day of
July, 1997, or to exceed sixty-two and
one-half percent (62 1/2%) of the Total
Market Value of Unencumbered Assets at
any time thereafter.
c) Permit Total Development and Joint
Venture Investment to exceed ten
percent (10%) of the Total Market
Value of Assets.
d) Fail to maintain as of the end of each
fiscal quarter a ratio of Annualized
EBITDA for trailing six (6) months to
Total Annualized Fixed Charges for the
same period of at least 1.7 to 1.0.
6.11 Control Permit any Person, or group of Persons,
acting in concert for the purpose of
influencing the affairs of MAAC to
control more than twenty percent (20%) of
the outstanding voting shares of MAAC.
6.12 Arizona (As to MAAC only) Sell, transfer or
otherwise dispose of any shares of stock
in Arizona, or permit any such shares of
stock to be disposed of, sold, or
otherwise transferred.
7 Default
7.1 Events of Default Each of the following events shall be a
Default by the Borrowers:
a) the Borrowers fail to pay
* any principal of a Loan when
due,
* any interest on a Loan within
five Business Days after the due
date (except interest due and
payable on the Termination Date
which must be paid on the
Termination Date), or
* a fee or other amount payable
under this Agreement within 10
Business Days after its due date;
or
b) a representation, warranty,
certification or statement made by
either Borrower in this Agreement or
in a certificate, financial statement
or other document delivered pursuant
to this Agreement is materially
incorrect when made (or deemed made);
or
c) either Borrower fails to observe or
perform
* a covenant applicable to it
regarding use of Loan proceeds,
notice of Defaults or maintenance
of existence, merger, or sales of
assets; or
* a financial covenant applicable
to it contained in Section 5 or
Section 6; or
d) either Borrower fails to observe or
perform a covenant or agreement made
by it in this Agreement (other than
those referred to in Section 7.1(a) or
7.1(c) above) for 30 days after the
Administrative Agent notifies the
Borrower of such failure; or
e) either Borrower defaults with respect
to any other agreement to which either
Borrower is a party or with respect to
any other indebtedness when due or the
performance of any other obligation
incurred in connection with any
indebtedness for borrowed money, if
the Borrower's obligations or exposure
exceeds $100,000, and if the effect of
such default is to accelerate the
maturity of such indebtedness, or if
the effect of such default is to
permit the holder thereof to cause
such indebtedness to become due prior
to its stated maturity; provided,
however, if the amount in default is
less than $750,000 and no other
default exists under any other
agreement described in this
subparagraph, and the Borrower is
diligently and in good faith
contesting any default under this
paragraph to the reasonable
satisfaction of the Administrative
Agent, it shall not be a Default
hereunder; or
f) either Borrower or Arizona
* commences a voluntary case or
other proceeding seeking
liquidation, reorganization or
other relief for itself or its
debts under a bankruptcy,
insolvency, receivership or
similar law or seeking the
appointment of a trustee,
receiver, liquidator, custodian
or similar official of it or a
substantial part of its property,
* consents to any such relief or
to the appointment of or taking
possession by any such official
in an involuntary case or other
proceeding commenced against it,
* makes a general assignment for
the benefit of creditors,
* fails generally to pay its
debts as they become due, or
* takes the appropriate action to
authorize any of the foregoing;
or
g) an involuntary case or other
proceeding is commenced against either
Borrower or Arizona seeking
liquidation, reorganization or other
relief with respect to it or its debts
under a bankruptcy, insolvency,
receivership or other similar law or
seeking the appointment of a trustee,
receiver, liquidator, custodian or
similar official of the Borrower or
Arizona or a substantial part of its
property, and such case or proceeding
(i) results in an order for relief or
such adjudication or appointment, or
(ii) remains undismissed and unstayed
for 60 days; or
h)
* a member of the Controlled
Group fails to pay when due an
aggregate amount in excess of
$5,000,000 that it is liable to
pay to the PBGC or to a Pension
Plan under Title IV of ERISA,
* a member of the Controlled
Group and/or a plan administrator
files a notice of intent under
Title IV of ERISA to terminate a
Pension Plan or Pension Plans
having aggregate Unfunded Vested
Liabilities in excess of
$35,000,000 (collectively, a
Material Pension Plan),
* the PBGC institutes proceedings
under Title IV of ERISA to
terminate or to cause a trustee
to be appointed to administer a
Material Pension Plan,
* a fiduciary of a Material
Pension Plan institutes a
proceeding against a member of
the Controlled Group to enforce
Section 515 or 4219(c)(5) of
ERISA and such proceeding is not
dismissed within 60 days
thereafter,
* a condition exists that
entitles the PBGC to obtain a
decree adjudicating that a
Material Pension Plan must be
terminated, or
* either Borrower is notified by
the plan administrator of a
Pension Plan that the Pension
Plan is in reorganization or is
being terminated, within the
meaning of Title IV of ERISA, and
solely as a result of such
reorganization or termination the
aggregate annual contributions of
the Borrower to all Pension Plans
that are then in reorganization
or have been or are being
terminated is increased over the
amounts required to be
contributed to such Pensions
Plans for their most recently
completed plan years by an amount
exceeding $15,000,000; or
i) a judgment or order against either
Borrower or Arizona for the payment of
more than $1,000,000 continues
unsatisfied and unstayed for 60 days
or a judgment creditor takes legal
action to levy on such judgment; or
j) either Borrower or Arizona shall have
concealed, removed, or permitted to be
concealed or removed, any part of its
property, with intent to hinder, delay
or defraud its creditors or any of
them, or made or suffered a transfer
of any of its property which may be
fraudulent under any bankruptcy,
fraudulent conveyance or similar law;
or shall have made any transfer of its
property to or for the benefit of a
creditor at a time when other
creditors similarly situated have not
been paid; or shall have suffered or
permitted, while insolvent, any
creditor to obtain a lien upon any of
its property through legal proceedings
or distraint which is not vacated
within thirty (30) days from the date
thereof; or
k) except for a transfer from MAAC to
MAAC of Delaware, Inc., a Delaware
corporation which is a wholly-owned
Subsidiary of MAAC, there shall occur,
whether in a single transaction or
successive transactions, a change or
changes in the ownership of more than
five percent (5%) of the partnership
interests of Mid-America, or Mid-
America shall grant or convey or
permit to be granted or conveyed,
voluntarily or involuntarily, directly
or indirectly, any security interest
in, pledge of or other lien or
encumbrance upon any owner's
partnership interests in Mid-America;
or MAAC shall cease to be the sole
general partner of Mid-America; or any
single Person or related group of
Persons shall control more than twenty
percent (20%) of MAAC's voting shares.
Exchanges by existing limited partners
of Mid-America of their respective
limited partnership interests for
capital stock of MAAC, not exceeding,
in the aggregate, as to all such
exchanges, transfers of not more than
thirty-five percent (35%) of the
partnership interests of Mid-America,
shall not constitute an Event of
Default; or
l) any officer of MAAC who, in the
reasonable judgment of the
Administrative Agent, occupies a
position of substantial and material
management, responsibility ("Material
Officer"), shall, by reason of death,
permanent disability, or departure
from the employ of MAAC, cease to be
active in the management of MAAC, and
MAAC does not, within a period of five
(5) Business Days from such permanent
disability, death or departure,
deliver written notice of such event
to the Administrative Agent and,
within a period of thirty (30) days
from such permanent disability, death
or departure, secure a replacement for
such officer, such replacement to be,
by reason of his or her experience and
credentials, reasonably satisfactory
to and approved by the Administrative
Agent. For the purposes of this
Section (l), permanent disability
means any disability that prevents
such Material Officer from rendering,
in any one calendar year, full-time
services for a period of thirty (30)
consecutive days, or in the aggregate,
for forty-five (45) days, and (ii) at
the present time, the Persons whom the
Administrative Agent deems to be
Material Officers are George E. Cates,
Simon R.C. Wadsworth, and H. Eric
Bolton, Jr. Further, the
Administrative Agent shall have the
right to review and approve the
credentials of any individual proposed
for the office of President or
Executive Vice President of MAAC; or
m) Except as expressly permitted in
Section 3.4, or except with the
consent of the Administrative Agent,
which consent shall not be
unreasonably withheld, Mid-America,
Arizona or any other Person granting
to the Administrative Agent a Negative
Pledge or Mortgage shall sell, assign,
transfer, convey, lease with an option
to purchase, enter into a contract of
sale, grant an option to purchase, or
encumber all or any part of its
interest in any Property or any
portion thereof, or permit the same to
be sold, assigned, transferred,
conveyed, contracted for or
encumbered; provided, further,
however, that the encumbrance of any
Property by any mechanic's lien claim
shall not be deemed to constitute an
Event of Default so long as a Borrower
shall promptly notify the
Administrative Agent of such
mechanic's lien claim, and shall
diligently and in good faith contest
(or cause to be contested) the same by
appropriate proceedings and shall
establish such reserves with respect
thereto as the Administrative Agent
shall specify.
n) MAAC fails to maintain its
qualification as a real estate
investment trust under the Code.
7.2 Action on Default During the continuance of a Default, the
Administrative Agent shall, if requested
by Two-thirds of the Lenders, notify the
Borrowers that
* the Borrowers' Rights are terminated,
whereupon such Borrowing Rights shall
terminate, or
* all the Borrowers' Loans, with accrued
interest, and all other amounts
payable by the Borrowers under this
Agreement, are immediately due and
payable, whereupon all such Loans,
accrued interest and other amounts
payable under this Agreement shall be
immediately due and payable by the
Borrowers without presentment, demand,
protest or other notice of any kind,
all of which the Borrowers waive,
provided that if the Default is one
described in Section 7.1(f) or 7.1(g),
then without notice to the Borrowers or
other act by the Administrative Agent or
Two-thirds of the Lenders, the Borrowers'
Borrowing Rights shall immediately
terminate, and the Loans, with accrued
interest, and other amounts payable under
this Agreement, shall become immediately
due and payable by the Borrowers without
presentment, demand, protest or other
notice of any kind, all of which the
Borrowers waive, and the Administrative
Agent may exercise all rights and
remedies available to it hereunder and
under applicable law or in equity.
7.3 Notice of Default On the request of a Lender, the
Administrative Agent shall promptly give
the notice referred to in Section 7.1(d)
and shall promptly notify all the Lenders
that such notice has been given.
8 The Administrative Agent
8.1 Appointment and Each Lender irrevocably authorizes the
authorization Administrative Agent to take such action
as agent on the Lender's behalf and to
exercise such powers as are given to the
Administrative Agent under this
Agreement, together with all powers
reasonably incidental thereto.
8.2 Other conduct The Administrative Agent and its
Affiliates
* shall have the same rights and powers
under this Agreement as any other
Lender and may exercise or refrain
from exercising such rights and powers
as though it were not the
Administrative Agent and
* may accept deposits from, lend money
to and generally engage in any kind of
business with the Borrowers or their
Affiliates as if it were not the
Administrative Agent.
8.3 Scope of obligationsThe obligations of the Administrative
Agent under this Agreement are only those
expressly set forth herein. Without
limiting the generality of the foregoing,
the Administrative Agent shall not be
required to take any action with respect
to a Default except as expressly provided
in Section 7.
8.4 Consultation with The Administrative Agent may consult with
experts legal counsel, independent public
accountants and other experts selected by
the Administrative Agent and shall not be
liable for any action taken or omitted to
be taken by it in good faith in
accordance with the advice of such
counsel, accountants or experts.
8.5 Liability of Neither the Administrative Agent nor any
Administrative Agentof its directors, officers, agents, or
employees shall be
* liable for any action it takes or does
not take in connection with this
Agreement (i) with the consent or at
the request of Two-Thirds of the
Lenders, unless the consent or request
of all of the Lenders is expressly
required by this Agreement, or (ii) in
the absence of its own gross
negligence or willful misconduct, or
* responsible for or have a duty to
ascertain, inquire into or verify (i)
any statement, warranty or
representation made in connection with
this Agreement or a Borrowing, (ii) a
Borrower's performance or observance
of any covenant or agreement, (iii)
the satisfaction of any condition in
Section 3 (except for the receipt of
items required to be delivered to the
Administrative Agent), or (iv) the
validity, effectiveness or genuineness
of this Agreement or any other
instrument or writing furnished in
connection herewith.
The Administrative Agent shall not incur
any liability by acting in reliance upon
any notice, consent, certificate,
statement or other writing (which may be
a bank wire, telex, telecopy or similar
writing) it believes is genuine or signed
by the proper parties.
8.6 Indemnification Each Lender shall, ratably in accordance
with its Commitment, indemnify the
Administrative Agent (to the extent not
reimbursed by the Borrowers) against any
cost, expense, claim, demand, action,
loss or liability (except such as result
from the Administrative Agent's gross
negligence or willful misconduct) that
the Administrative Agent may suffer or
incur in connection with this Agreement
or any action the Administrative Agent
takes or omits hereunder.
8.7 Successor AdministrativeThe Administrative Agent may resign by
Agent giving notice thereof to the Lenders and
the Borrowers. So long as no Default
exists, the Administrative Agent may be
removed upon the request of the
Borrowers. Upon such resignation or
removal, the Borrowers may appoint a
successor Administrative Agent with the
consent of Two-Thirds of the Lenders. If
the Borrowers are in Default, Two-Thirds
of the Lenders may appoint a successor
Administrative Agent. If the
Administrative Agent resigns or is
removed and no successor Administrative
Agent is so appointed and accepts such
appointment within 30 days after the
resigning Administrative Agent's notice
of resignation or its removal, then the
resigning or removed Administrative Agent
may, on behalf of the Lenders, shall
appoint a successor Administrative Agent
that is a commercial bank organized or
licensed under the laws of the United
States of America or of any State thereof
and having a combined capital and surplus
of at least $100,000,000. Upon a
successor Administrative Agent's written
acceptance of its appointment as
Administrative Agent, the successor
Administrative Agent shall succeed to and
become vested with all the rights and
duties of the resigning or removed
Administrative Agent, and the resigning
or removed Administrative Agent shall be
discharged from its duties and
obligations as Administrative Agent.
After the Administrative Agent's
resignation or removal, the provisions of
this Section 8 shall continue to inure to
its benefit as to any action it took or
omitted to take while it was
Administrative Agent.
8.8 Fees The Borrowers shall pay the
Administrative Agent for its account such
fees for its services under this
Agreement as the Borrowers and the
Administrative Agent may agree.
9 Change in circumstances
9.1 Eurocurrency ReserveIf a Lender notifies the Administrative
Requirements Agent and the Borrowers that the Lender
is or will be generally subject to
Eurocurrency Reserve Requirements as a
result of which the Lender will incur
additional costs on its Loans, then the
Lender shall, to the extent such costs
are actually incurred, for each day from
the later of the date of such notice and
the date on which the Lender becomes
subject to the Eurocurrency Reserve
Requirements, be entitled to additional
interest on each Loan made by the Lender
at a rate per annum (rounded upward to
the nearest .01%) equal to the remainder
obtained by subtracting (i) LIBOR for the
Eurodollar Loan from (ii) the rate
obtained by dividing such LIBOR by the
excess of 100% over the Eurocurrency
Reserve Requirements.
Such additional interest shall be payable
in arrears to the Administrative Agent,
for the account of the Lender, on each
date interest is payable on the Loan.
A Lender that gives a notice under this
Section 9.1 shall promptly withdraw such
notice by notifying the Administrative
Agent and the Borrowers if Eurocurrency
Reserve Requirements cease to apply to it
or the circumstances giving rise to such
notice otherwise cease to exist.
9.2 Increased cost or If any Regulatory Action (other than the
reduced return imposition of Eurocurrency Reserve
Requirement) taken after the date hereof
* imposes, modifies or deems applicable
any reserve, special deposit or
similar requirement against assets of,
deposits with or for the account of or
credit extended by a Lender or its
Office,
* imposes on a Lender or its Office or
the London interbank market any other
condition affecting the Lender's
Eurodollar Loans, or
* imposes, modifies or deems applicable
any standards of capital adequacy,
and such Regulatory Action will, in the
Lender's judgment,
* increase the cost to the Lender or
Office of making or maintaining any
Eurodollar Loan,
* reduce the amount receivable by the
Lender or Office under this Agreement
with respect to any such Eurodollar
Loan, or
* reduce the rate of return on the
Lender's capital as a consequence of
its obligations under this Agreement
(taking into consideration the
Lender's policies on capital adequacy)
by an amount the Lender deems material,
then the Lender shall promptly notify the
Borrowers and the Administrative Agent
thereof, enclosing (i) a certificate of
an officer of the Lender describing the
Regulatory Action leading to the
increased costs or reduction with, if
possible, a copy of the relevant law,
regulation, interpretation or guideline
and (ii) the Lender's calculation setting
forth in reasonable detail the dollar
amount of the increased costs or
reduction.
determination of In calculating any amount payable under
amount this Section 9.2, a Lender may use
reasonable averaging and attribution
methods. A Lender's determination of the
amount shall be conclusive in the absence
of manifest error.
payment of Subject to the following sentence, the
compensation Borrowers shall pay a Lender within 30
days after receipt of a notice from the
Lender under this Section 9.2 such
amounts as will compensate the Lender for
the increased costs or reduction. The
Borrowers will not, however, be required
to pay the Lender any amount set forth in
the notice that relates to any period
prior to the 30th day before the date the
Lender gives the notice. Each Lender
agrees that it shall notify the Borrowers
immediately upon becoming aware of such
increased costs.
Base Rate election by If a Lender demands compensation under
Borrower this Section 9.2 with respect to a
Eurodollar Loan, then the Borrowers may,
on at least five Business Days' prior
notice to the Lender and the
Administrative Agent, elect that, until
the Lender or the Administrative Agent
notifies the Borrowers that the
circumstances giving rise to the demand
for compensation no longer apply, all
Loans to the Borrowers that would
otherwise be made by the Lender as
Eurodollar Loans, shall be made instead
as Loans at the Base Rate (on which
interest and principal shall be payable
contemporaneously with the related Loans
of the other Lenders).
9.3 LIBOR unavailable or If on or before the second Business Day
inadequate before an Interest Period for a Borrowing
* dollar deposits in the applicable
amounts are not being offered to the
Administrative Agent in the relevant
market for the Interest Period, or
suspension of * Two-Thirds of the Lenders advise the
obligation to make Loans Administrative Agent that the LIBOR
will not adequately and fairly reflect
the cost to such Lenders of funding
their Loans for the Interest Period,
then the Administrative Agent shall
promptly notify the Borrowers and the
Lenders thereof, whereupon the
obligations of the Lenders to make, or
permit Conversion of Loans into,
Eurodollar Loans shall be suspended, and
any subsequent request by the Borrowers
for a Eurodollar Loan or for Conversion
into a Eurodollar Loan shall be deemed to
be a request for, or for Conversion into,
a Loan bearing interest at the Base Rate.
suspension after If the Lenders' obligations to make Loans
Borrowing Notice given is suspended pursuant to this Section 9.3
after the Borrowers give the Borrowing
Notice for the Borrowing that includes
such Loans, then unless the Borrowers
notify the Administrative Agent at least
one Business Day before the date of such
Borrowing that the Borrowers elect not to
borrow on such date, the Borrowing shall
instead accrue interest at the Base Rate.
9.4 Illegal Loans If, after the date of this Agreement, any
Regulatory Action makes it unlawful or
impossible for a Lender or its Office to
make, maintain or fund its Eurodollar
Loans, and the Lender so notifies the
Administrative Agent, then the
Administrative Agent shall promptly
notify the other Lenders and the
Borrowers, whereupon the obligation of
the Lender to make or permit Conversions
into Eurodollar Loans shall be suspended.
prepayment of illegal If a Lender determines that it may not
Loans lawfully continue to maintain an
outstanding Eurodollar Loan to the
Borrowers to the end of the Eurodollar
Loan's applicable Interest Period and so
specifies in the notice it gives pursuant
to this Section 9.4, the Administrative
Agent shall so notify the Borrowers, and
the Borrowers shall immediately prepay in
full the unpaid principal amount of the
Eurodollar Loan with accrued interest.
As each such Loan is prepaid, the Lender
shall make a Loan bearing interest at the
Base Rate to the Borrower in an equal
principal amount with interest and
principal payable contemporaneously with
the related Loans of the other Lenders.
new Loans made as Base If the obligation of a Lender to make
Rate Loans Eurodollar Loans is suspended pursuant to
this Section 9.4, then until the Lender
or the Administrative Agent notifies the
Borrowers that the circumstances giving
rise to the suspension no longer apply,
all Loans that would otherwise be made by
the Lender as Eurodollar Loans shall be
made instead as Loans accruing interest
at the Base Rate (on which interest and
principal shall be payable
contemporaneously with the related Loans
of the other Lenders).
9.5 Termination of When the circumstances giving rise to a
suspension suspension of the obligation to make
Eurodollar Loans under Section 9.3 or
Section 9.4 no longer exist, the
Administrative Agent shall so notify the
Borrowers and the Lenders, whereupon the
suspension shall terminate.
9.6 Taxes on payments Each Lender shall deliver to each of the
Borrowers and to the Administrative Agent
delivery of Tax Forms * no more than 30 days after the date it
becomes a Lender, either a statement
that it is incorporated in the United
States of America or, if it is not so
incorporated, two duly completed
copies of, as applicable, a United
States Internal Revenue Service Form
1001 or Form 4224 (including a Form W-
9 or equivalent) promulgated under the
Internal Revenue Code (each, as
applicable to any Person and together
with any successor form, a "Tax Form")
indicating that the Lender is entitled
to receive payments under this
Agreement without deduction or
withholding of United States federal
income Taxes as permitted by the
Internal Revenue Code,
* such extensions or renewals of the Tax
Form as applicable because of
expiration of the Tax Form or as the
Borrowers reasonably request (but only
to the extent the Lender determines
that it may properly effect such
extensions or renewals under
applicable Tax treaties, laws,
regulations and directives), and
* if a Loan is transferred to an
Affiliate of the Lender, a new Tax
Form for the Affiliate.
The Borrowers and the Administrative
Agent may each rely on a Tax Form in its
possession until the earlier of the
expiration date of the Tax Form or
receipt of any revised or successor form
pursuant to this Section 9.6.
withholding Taxes If a Tax imposed by the United States of
America, or any political subdivision or
taxing authority thereof, subjects a
Lender or its Office to any deduction or
withholding on a payment (including fees)
on its Loans to the Borrowers, the Lender
shall promptly notify the Borrowers of
the Tax, enclosing a copy of the relevant
statute, regulation or interpretation
requiring the deduction or withholding
and setting forth in reasonable detail
the Lender's calculation of the dollar
amount of the Tax. Within 30 days after
it receives the notice (or a longer
period that complies with the law
relating to the Tax without subjecting
the Lender to additional payments with
respect to the Tax), the Borrowers shall,
as requested by the Lender in the notice,
* increase the amount of the payment so
that the Lender will receive a net
amount (after deduction of the Tax)
equal to the amount due hereunder,
* pay the Tax to the appropriate taxing
authority for the Lender's account,
and
* as promptly as possible, send the
Lender evidence showing payment of the
Tax, together with any additional
documentary evidence the Lender
reasonably requests.
The Borrowers shall indemnify a Lender
for any incremental Taxes, interest or
penalties that may become payable as a
result of the Borrowers' failure to
comply with this Section 9.6.
failure to furnish Tax not withstanding anything to the contrary
Forms in this Section 9.6, the Borrowers shall
not be required to make any payment to a
Lender or taxing authority under this
Section 9.6 as a result of any deduction
or withholding or incremental Tax,
interest or penalty
* that is caused by the Lender's failure
or inability to furnish the Borrowers
with a Tax Form, or an extension or
renewal thereof, pursuant to this
Section 9.6 unless such failure or
inability is the result of a change in
an applicable law, regulation or Tax
treaty or in the interpretation
thereof by a regulatory authority that
becomes effective after the date of
this Agreement, or
* for any period for which the Lender or
its applicable Office has furnished a
Tax Form to the Borrowers that
incorrectly indicates that the Lender
or its applicable Office is not
subject to such deduction or
withholding.
9.7 Change of Office A Lender shall designate a different
Office for its Loans if such designation
will avoid the need for giving a notice
pursuant to Section 9.4 with respect to
suspension of Loans, or reduce the amount
of compensation under Section 9.2
(Increased cost or reduced return), or
Section 9.6, (Taxes on payments), and
will not, in the Lender's judgment, be
disadvantageous to the Lender.
9.8 Replacement of
Lender If
* the obligation of a Lender to make
Eurodollar Loans is suspended under
Section 9.4 (Illegal Loans),
* a Lender demands compensation or
payment under Section 9.2 (Increased
cost or reduced return), or Section
9.6 (Taxes on payments), or
* a Lender's senior unsecured debt is
rated lower than BBB- by S&P,
then the Borrowers may, on five Business
Days' notice to the Administrative Agent
and the Lender, select a replacement bank
or banks (which may be one or more of the
other Lenders) to purchase the Lender's
Loans and assume its Commitment. The
purchase price for the Lender's Loans
shall be the sum of the unpaid principal
amount of the Loans, with accrued
interest, the Lender's share of accrued
Unused Fees and other amounts due to the
Lender under this Agreement (including
any amounts due under Section 1.20
(Funding losses) for each Loan so
purchased on a date other than the last
day of the Interest Period for the Loan).
Upon the execution and delivery of an
assignment and assumption agreement
substantially in the form of Exhibit G by
such Lender and each replacement bank
(and, if the replacement bank is not a
Lender, with the subscribed consent of
the Borrowers and the Administrative
Agent), each such replacement bank shall
be deemed to be, a 'Lender' for all
purposes of this Agreement, and the
Administrative Agent shall notify the
other Lenders accordingly.
10 Miscellaneous
10.1 Notices Except as otherwise stated, all notices,
requests, consents and other
communications to any party to this
Agreement shall be in writing. For
purposes of this Section 10.1 (writing)
shall include writings in any form that
provides the recipient, using the systems
routinely used by the recipient for
communication, with a permanent record
and a human-readable text. All notices
to a party shall be given at the
addresses, telecopy number or other
electronic addresses or by other methods
set forth on Schedule 3 or at such other
addresses, numbers or by such other
reasonable methods as such party may
specify for the purpose by notice to the
Administrative Agent and the Borrowers
(each a "Notice Address").
Each notice, request, consent or other
communication given under this Agreement
shall be effective when received at the
number or address or by the method
specified pursuant to this Section 10.1.
Any requirement in this Agreement that a
notice or other communication be 'prompt'
or be given 'promptly' shall mean that
such notice or other communication shall
promptly be transmitted by telephone (if
oral notice is permitted), bank wire,
telex, telecopy, computer link or other
means that normally provides nearly
instantaneous transmission.
10.2 No waivers; remedies No failure or delay by the Administrative
cumulative; integration; Agent or a Lender in exercising a right,
survival power or privilege under this Agreement
shall operate as a waiver thereof, nor
shall a single or partial exercise
thereof preclude any other or further
exercise thereof or the exercise of any
other right, power or privilege. The
rights and remedies provided in this
Agreement shall be cumulative and not
exclusive of other rights or remedies
provided by law. This Agreement
constitutes the entire agreement and
understanding among the parties and
supersedes all prior agreements and
understandings, oral or written, relating
to its subject matter.
All covenants, agreements,
representations and warranties of the
Borrowers in this Agreement or in
certificates or other documents delivered
pursuant to this Agreement shall be
considered to have been relied on by the
Lenders and shall survive the making of
any Loans, regardless of any
investigation made by or on behalf of the
Lenders, and shall continue in full force
and effect as long as any obligation of
the Borrowers under this Agreement is
unpaid or the Borrowers' Borrowing Rights
have not terminated.
10.3 Expenses; documentary The Borrowers shall pay, and shall be
Taxes jointly and severally liable for, the
reasonable Expenses of the Administrative
Agent in connection with (i) its drafting
and negotiation of this Agreement, any
waiver or consent hereunder or any
amendment hereof (all of which documents
shall be prepared by counsel for the
Administrative Agent) and (ii) the
effectiveness of this Agreement under
Section 3.1.
If a Default by the Borrowers occurs, the
Borrowers shall pay the reasonable
Expenses incurred by the Administrative
Agent in connection with such Default.
In addition, if there is a Default by the
Borrowers, the Borrowers shall pay the
reasonable Expenses incurred by any
Lender, including collection and other
enforcement proceedings, resulting
therefrom.
The Borrowers shall, jointly and
severally, indemnify the Administrative
Agent and the Lenders against all
transfer, documentary or similar Taxes
payable by reason of the execution and
delivery of this Agreement.
10.4 Indemnification Each Borrower shall indemnify the
Administrative Agent and each Lender and
shall hold the Administrative Agent and
each Lender jointly and severally
harmless from and against any and all
liabilities, damages, costs and Expenses
of any kind in connection with an actual
or threatened investigative,
administrative or judicial proceeding
(whether or not the Administrative Agent
or Lender is a party thereto)
(collectively, "Claims") incurred by the
Administrative Agent or Lender to the
extent arising out of
* a Borrower's breach of, or any Default
under, this Agreement,
* any claim by a Person not a party to
this Agreement that either Borrower's,
the Administrative Agent's or a
Lender's conduct in connection with
this Agreement is unlawful by a court
of competent jurisdiction or has or
will violate such Person's legal
rights, but only to the extent that
the Lender's or Administrative Agent's
conduct is deemed unlawful or
violative due to some action or
inaction of the Borrowers or either of
them,
* an actual or proposed use of Loan
proceeds by the Borrowers, or
* an action initiated by either or both
Borrowers against the Administrative
Agent or a Lender relating to this
Agreement, unless a court of competent
jurisdiction enters a final non-
appealable order in such action in
favor of the Borrowers.
Notwithstanding anything to the contrary
in this Section 10.4, neither the
Administrative Agent nor a Lender shall
be indemnified for any Claim to the
extent such Claim
* is caused by the Administrative
Agent's or Lender's gross negligence
or willful misconduct, as determined
in a final non-appealable order by a
court of competent jurisdiction, or
* results from a Lender's claims against
other Lenders not attributable to a
Borrower's actions and for which the
Borrowers otherwise have no liability.
10.5 Sharing of set-offs If a Lender exercises a right of set-off
or counterclaim or otherwise receives
payment of a portion of the aggregate
amount of principal and interest due on
its Loans to the Borrowers, and such
payment is greater than the proportion
received by any other Lender of the
aggregate amount of principal and
interest due on such other Lender's Loans
to the Borrowers, the Lender receiving
the proportionately greater payment shall
purchase participations in the Loans made
to the Borrowers by the other Lenders,
and other adjustments shall be made as
required so that all payments of
principal and interest on the Loans to
the Borrowers shall be shared by the
Lenders pro-rata, provided that this
Section 10.5 shall not impair a Lender's
right to exercise, to the extent
permitted by applicable law, a right of
set-off or counterclaim and to apply the
amount subject to such exercise to the
payment of indebtedness of the Borrowers
other than indebtedness on Loans. A
Participant in a Loan, whether or not
acquired pursuant to the foregoing
arrangements, may exercise rights of set-
off or counterclaim and other rights with
respect to its participation as fully as
if the Participant were a direct creditor
of the Borrowers in the amount of such
participation.
10.6 Amendments and An amendment to or waiver of a provision
waivers of this Agreement must be in writing and
signed by the Borrowers and Two-Thirds of
the Lenders (and, if the rights or duties
of the Administrative Agent are affected
thereby, by the Administrative Agent),
provided that each affected Lender must
sign an amendment or waiver that
(a) increases or decreases the
Commitment of such Lender or
subjects such Lender to
additional obligations, except as
contemplated in Section 9.8
(Replacement of Lender),
(b) reduces the principal of or rate
of interest on any Loan or any
fees hereunder,
(c) postpones the Maturity Date or
other date fixed for payment of
principal or interest on a Loan
or of any fees hereunder or for
the termination of the Borrowers'
Borrowing Rights,
(d) changes the percentage of the
Commitments or of the aggregate
unpaid principal amount of the
Loans, or the Borrowing Base, or
the number of Lenders required
for the Lenders to take any
action under this Agreement,
(e) amends Section 1.21 (Pro-rata
treatment), or
(f) amends this Section 10.6.
10.7 Successors and assignsThe provisions of this Agreement shall be
binding upon and inure to the benefit of
the parties and their respective
(a) generally successors and assigns, except that
neither Borrower may assign, delegate or
otherwise transfer any of its rights or
obligations under this Agreement.
(b) participations A Lender may grant a bank or other
institution (a "Participant") a
participating interest in its Commitment
or some or all of its Loans. If a Lender
grants a participating interest to a
Participant, the Lender shall remain
responsible for the performance of its
obligations under this Agreement, and the
Borrowers and the Administrative Agent
shall continue to deal solely with the
Lender in connection with this Agreement,
regardless of whether the Lender has
notified the Borrowers and the
Administrative Agent of the grant. An
agreement granting such a participating
interest shall provide that the Lender
shall retain the sole right and
responsibility to enforce the obligations
of the Borrowers under this Agreement,
including the right to approve any
amendment, modification or waiver of any
provision of this Agreement. Subject to
Section 10.7(e) (funding losses and
changed circumstances), a Participant
shall, to the extent provided in its
participation agreement, be entitled to
the benefits of Section 9 (Change in
circumstances), with respect to its
participating interest. An assignment or
other transfer that is not permitted by
Section 10.7(c) (assignments), or 10.7(d)
(assignment to Federal Reserve Bank),
shall be given effect only to the extent
that it is a participating interest
granted in accordance with this Section
10.7(b).
(c) assignments A Lender may assign to one or more banks
or other institutions (each an
"Assignee") all or a proportionate part
of its rights and obligations under this
Agreement, and each Assignee shall assume
such rights and obligations, pursuant to
an assignment and assumption agreement in
substantially the form of Exhibit G. The
assignment and assumption agreement shall
be signed by the Assignee and the
transferor Lender, with (and subject to)
the subscribed acknowledgment and consent
of the Administrative Agent and the
subscribed consent, which shall not be
unreasonably withheld, of the Borrowers,
provided that such consents shall not be
required if the Assignee is a Lender or a
Federal Reserve Bank.
Upon the later of (i) the effective date
stated in the assignment and assumption
agreement (which shall not be earlier
than the fifth Business Day after
execution of such agreement) or (ii)
payment by the Assignee to the transferor
Lender of the purchase price agreed
between them, and payment by the
transferor Lender or the Assignee to the
Administrative Agent of a registration
and processing fee of $2,500,
* the Assignee shall be a Lender party
to this Agreement and shall have all
the rights and obligations of a Lender
with the Commitment set forth in the
assignment and assumption agreement,
* the transferor Lender shall be
released from its obligations under
this Agreement to a corresponding
extent so long as the Assignee at the
time of transfer has a net worth at
least equal to the net worth of the
transferor Lender, and
* no further consent or action by any
party shall be required.
(d)assignment to A Lender may assign all or a
Federal Reserve Bank proportionate part of its rights under
this Agreement to a Federal Reserve Bank,
and the Borrowers, if requested by the
Lender, shall issue a promissory note to
be pledged to the Federal Reserve Bank
evidencing the Borrowers' obligations on
the Lender's Loans to the Borrowers.
Such assignment shall not release the
transferor Lender from its obligations
under this Agreement.
(e) funding losses No Assignee, Participant or other
and changed transferee of any Lender's rights may
circumstances receive any greater payment under Section
1.20 (Funding losses), and Section 9.2
(Increased cost and reduced return), than
the transferor Lender would have received
with respect to the rights transferred,
unless such transfer was made with the
Borrowers' prior consent.
(f) registration of The Administrative Agent shall maintain
assignments at one of its offices in Birmingham,
Alabama, a copy of each assignment and
assumption agreement delivered to it and
a register for the recordation of the
names and addresses of the Lenders, and
the Commitment of, and principal amount
of the Loans owing to, each Lender (the
"Register"). The entries in the Register
shall be conclusive in the absence of
manifest error, and the Borrowers, the
Administrative Agent and the Lenders may
treat each Person whose name is recorded
in the Register as a Lender for all
purposes of this Agreement. The Register
shall be available for inspection by the
Borrowers or Lender at any reasonable
time upon reasonable notice.
If an Assignee is not already a Lender,
it shall deliver to the Administrative
Agent a completed administrative
questionnaire in the form required by the
Administrative Agent. Upon its receipt
of (i) an assignment and assumption
agreement executed by an assigning Lender
and an Assignee (and, if required, by the
Borrowers), (ii) the completed
administrative questionnaire (unless the
Assignee is already a Lender) and (iii)
the registration and processing fee
referred to in Section 10.7(c), the
Administrative Agent shall record the
information contained in the assignment
and assumption agreement in the Register
and give prompt notice thereof to the
Lenders.
10.8 Borrowers' liability The parties acknowledge that the rights
and obligations (including the
representations, warranties, agreements,
breaches, liabilities, indemnities and
Defaults) of the Borrowers under this
Agreement are joint and several and that
the liability of the Borrowers is joint
and several.
10.9 No reliance on MarginEach Lender represents to the
Stock collateral Administrative Agent and the other
Lenders that it is not relying upon any
Margin Stock as collateral in the
extension or maintenance of the credit
provided for in this Agreement.
10.10 Credit decision Each Lender acknowledges that it has,
independently and without reliance upon
the Administrative Agent or any other
Lender, and based on such documents and
information as it deemed appropriate,
made its own credit analysis and decision
to enter into this Agreement. Each
Lender also acknowledges that it will,
independently and without reliance upon
the Administrative Agent or any other
Lender, and based on such documents and
information as it deems appropriate at
the time, continue to make its own credit
decisions in taking or not taking any
action under this Agreement.
10.11 Alabama law This Agreement shall be governed by and
construed in accordance with the laws of
the State of Alabama.
10.12 Waiver of jury trialThe Borrowers, the Lenders and the
Administrative Agent hereby irrevocably
and unconditionally waive trial by jury
in any legal action or proceeding
relating to this Agreement and for any
counterclaim therein.
10.13 Venue of ActionsAs an integral part of the consideration
for making of the Loans, it is expressly
understood and agreed that no suit or
action shall be commenced by either
Borrower, or by any successor, personal
representative or assignee thereof, with
respect to the Loans contemplated hereby,
or with respect to this Agreement or any
other document or instrument which now or
hereafter evidences or secures all or any
part of the Loans, other than in a state
court of competent jurisdiction in and
for the County of the State in which the
principal place of business of the
Administrative Agent is situated, or in
the United States District Court for the
District in which the principal place of
business of the Administrative Agent is
situated, and not elsewhere. Nothing in
this paragraph contained shall prohibit
the Administrative Agent from instituting
suit in any court of competent
jurisdiction for the enforcement of its
rights hereunder or in any other document
or instrument which evidences or secures
the loan indebtedness.
10.14 Execution This Agreement may be executed in
counterparts. Delivery of an executed
counterpart signature page to this
Agreement, including delivery by
telecopier, shall be effective as
delivery of a manually executed
counterpart of this Agreement.
10.15 Survival Section 9 (Change in circumstances),
Section 10.3 (Expenses), and Section 10.4
(Indemnification) shall survive
termination of this Agreement or the
Borrowers' Borrowing Rights.
11 Definitions and usages
11.1 Definitions In this Agreement, the following terms
shall have the following meanings:
Account Balance Agreements shall mean,
collectively, the documents between the
Borrowers and the Administrative Agent
that govern certain cash management
services to be made available by the
Administrative Agent to the Borrowers,
including making Advances under the Loans
to cover overdrafts in the Designated
Account, and using any excess funds on
deposit in the Designated Account to make
payments on the outstanding Advances
under the Loans, all from time to time as
more particularly set forth in the
various Account Balance Agreements.
Adjusted NOI shall mean, as to any
Property, for any period, the actual Net
Operating Income of such Property for
such period; provided that (i) all annual
expenses, including, but not limited to,
taxes and insurance, shall be accounted
for on an accrual basis; and (ii)
expenses shall include an assumed
management fee of five percent (5%) and
capital expenses of Two Hundred Dollars
($200.00) per rental unit on average per
year.
Administrative Agent shall mean AmSouth
Bank of Alabama, or its successors or
assigns.
Advances or Loan Advances shall mean
advances of principal upon the Loans by
the Lenders to either or both of the
Borrowers under the terms of this
Agreement, specifically including,
without limitation, advances under the
Swing Line Facility, the Notes and draws
under the Letters of Credit.
Affiliate of a specified Person means
another Person that directly, or
indirectly through one or more
intermediaries, controls, is controlled
by or is under common control with the
specified Person. In the foregoing
definition, control of a Person means
possession, directly or indirectly, of
the power to direct or cause the
direction of the management or policies
of a Person, whether through the
ownership of voting securities, by
contract or otherwise.
Aggregate Commitment means the sum of the
Commitments of the Lenders at any time
available to the Borrower under the
Loans.
America First shall mean America First
Florida REIT, Inc., a Delaware
corporation, a wholly-owned Subsidiary of
MAAC.
Annualized Adjusted NOI shall mean, for
the most recent two calendar quarters,
the Adjusted NOI for such calendar
quarters, multiplied by the integer two
(2).
Annualized EBITDA shall mean EBITDA for
the most recent two calendar quarters,
multiplied by the integer two (2).
Apartment Community shall mean an
apartment community owned by either
Borrower or Arizona, whether or not it is
subject to a Negative Pledge or Mortgage.
Arizona shall mean America First Arizona
REIT, Inc., an Arizona corporation, which
is a wholly-owned Subsidiary of Mid-
America.
Assignee shall have the meaning assigned
to such term in Section 10.7(c).
Base Rate for a day means a rate per
annum equal to the higher of (a) the
Prime Rate or (b) the sum of the Federal
Funds Rate for the day plus 1.00%. Any
change in the Base Rate due to a change
in the Prime Rate or the Federal Funds
Rate shall be effective on the effective
date of such change in the Prime Rate or
the Federal Funds Rate, respectively.
Borrowers mean MAAC and Mid-America,
jointly, and, individually, a "Borrower".
Borrowing shall have the meaning assigned
to that term in Section 1.2.
Borrowing Base is the limitation on the
amount of the Loan which may be
outstanding at any time and from time to
time during the term of this Agreement.
The Borrowing Base shall equal (a) sixty-
five percent (65%) of the fair market
value of the Properties which at the time
of determination are subject to the
Negative Pledges or the Mortgages plus
(b) the lesser of (i) $15,000,000 of
construction costs approved by the
Administrative Agent for a Development
Project or (ii) fifty percent (50%) of
such approved costs; provided, however,
the amount available under (b) above
shall in no event exceed thirty percent
(30%) of the sum of (a) plus (b). The
Properties existing as of the date
hereof, the present fair market value of
each thereof and the resulting Borrowing
Base, are all as set forth in Schedule 2,
attached hereto, and made a part hereof
by reference. No other Apartment
Community shall be deemed to constitute a
Property until such time as the
Administrative Agent shall have received
and approved, inter alia, Level I
Environmental Surveys together with such
other information (including asbestos
surveys) as may be recommended, by such
Level I Environmental Surveys, and
current information regarding the
Adjusted NOI of such Property, and a
Negative Pledge Agreement or Mortgage, as
selected by the Borrowers (and related
documentation as may be required by the
Administrative Agent), all in form,
content and conclusion satisfactory to
the Administrative Agent. The fair
market value of Properties shall be
determined quarterly, on a "Net Operating
Income" basis, not later than the twenty-
second (22nd) day of each calendar
quarter, but as of the last day of the
immediately preceding calendar quarter,
from the Effective Date until the
Termination Date of the Loans, by
multiplying the prior calendar quarter's
Annualized Adjusted NOI of such
Properties by the integer ten (10). MAAC
shall have the right, at its
option, to determine fair market value by
appraisal, provided that (i) valuations
shall not be mixed between appraisal and
Net Operating Income, (ii) all appraisals
must be current within eighteen (18)
months, and (iii) all appraisals must
meet Federal Institutions Reform,
Recovery and Enforcement Act guidelines
and be approved by the Administrative
Agent and all Lenders. Notwithstanding
anything to the contrary contained
herein, if a Property has been injured or
damaged by fire or other casualty to the
extent that twenty-five percent (25%) of
the apartment units included in such
Property has been rendered uninhabitable,
the Borrowing Base shall be immediately
reduced, and the Loans repaid by the
corresponding amount, in an amount equal
to 65% of the fair market value of such
Property (as determined in this
definition) immediately prior to such
damage or injury; provided, however, that
if the damaged Property is insured in an
amount sufficient to rebuild or restore
such damage and if rental insurance is
payable for the repair and reconstruction
period, no reduction in the Borrowing
Base will result hereunder.
Borrowing Base Certificate shall mean a
certificate substantially in the form of
Exhibit F, duly executed by the
Certifying Officer, setting forth in
reasonable detail the calculations for
each component of the Borrowing Base.
Borrowing Notice shall have the meaning
assigned to that such term in Section
2.1.
Borrowing Rights of the Borrowers means
the rights of the Borrowers under this
Agreement to require the Lenders to make
Loans.
Business Day means a day other than a
Saturday, Sunday or other day on which
commercial banks in Birmingham, Alabama
and New York, New York are authorized or
required by law to close.
Certifying Officer shall mean MAAC's
chief financial officer.
Claims shall have the meaning assigned to
that term in Section 10.4.
Code shall mean the Internal Revenue Code
of 1986, as amended, or any successor
Federal tax code.
Commitment shall mean the portion of the
Loans to be made available by a Lender.
Controlled Group means, for a Borrower,
all members of a controlled group of
corporations and all trades or businesses
(whether or not incorporated) under
common control that, together with the
Borrower, are treated as a single
employer under Section 414 of the
Internal Revenue Code.
Conversion means shall have the meaning
assigned to that term in Section 2.4.
Conversion Date shall mean the date on
which a Conversion occurs.
Conversion Notice shall have the meaning
assigned to that term in Section 2.4.
Debt of a Person at a date means, without
duplication,
* all obligations of the Person for
borrowed money, including all
obligations of the Person evidenced by
bonds, debentures, notes or other
similar instruments,
* all obligations of the Person to pay
the deferred purchase price of
property or services, except trade
accounts payable and deferred
compensation arising in the ordinary
course of business,
* all obligations of the Person as
lessee under capital leases,
* all Debt of others secured by a Lien
on assets of the Person, whether or
not the Debt is assumed by the Person,
* all Debt of others Guaranteed by the
Person,
* all letters of credit (excluding
letters of credit enhancements for
other loans), banker's acceptances,
swap transactions and similar hedge
agreements, and
* all Debt of any partnership for which
such Person is a general partner.
Default means a condition or event that
constitutes an event of default hereunder
or that with the giving of notice or
lapse of time or both would, unless cured
or waived, become a Default, as more
specifically set forth in Section 7.
Designated Account shall mean the demand
deposit account of Mid-America with the
Administrative Agent, designated for the
cash management services contemplated by
the Account Balance Agreements.
Development Project is a real property
which is being developed into, or upon
which improvements are being constructed
to enable it to become, an Eligible
Property.
EBITDA shall mean, on a consolidated
basis, earnings before interest, taxes,
depreciation and amortization, calculated
in accordance with GAAP, consistently
applied.
Eligible Property shall mean an Apartment
Community which has met (or which, upon
completion of construction and
development in accordance with plans and
specifications approved by the
Administrative Agent, will have met) all
of the requirements of the Administrative
Agent for approval as a Property. No
Apartment Community shall be deemed to
constitute an Eligible Property unless
(a) a certificate of occupancy (or its
equivalent) has been issued for the
entire Apartment Community, or the
Borrowers shall furnish satisfactory
proof to the effect that the improvements
for the entire Apartment Community have
been completed and that the local
government having jurisdiction does not
issue a certificate of occupancy (or its
equivalent) upon completion of
construction; and (b) the Apartment
Community has achieved an occupancy rate
of at least eighty percent (80%) for at
least two (2) consecutive months.
Environmental Laws means all applicable
local, state or federal laws, rules or
regulations pertaining to environmental
regulation, contamination or cleanup,
including, without limitation, the
Comprehensive Environmental Response,
Compensation and Liability Act of 1980,
the Resource Conservation and Recovery
Act of 1976 or any state lien or
superlien or environmental cleanup
statutes.
ERISA means the Employee Retirement
Income Security Act of 1974.
Eurocurrency Reserve Requirements for any
day means the aggregate of the maximum
reserve percentage (including any
marginal, special, emergency or
supplemental reserves) established by the
Federal Reserve Board and any other
banking authority to which a Lender is
subject and applicable to 'eurocurrency
liabilities', as such term is defined in
Regulation D of the Federal Reserve
Board, or any similar category of assets
of liabilities relating to eurocurrency
fundings. Eurocurrency Reserve
Requirements shall be adjusted
automatically on and as of the effective
date of any change in such reserve
percentage.
Eurodollar Borrowing means a Borrowing
bearing interest at the Eurodollar Rate.
Eurodollar Loan means a Loan bearing
interest at the Eurodollar Rate.
Eurodollar Rate shall mean the LIBOR
Rate, plus the Margin.
Expenses of a Person means the Person's
reasonable out of pocket expenses
(including reasonable fees and expenses
of the Person's outside counsel) and
reasonably allocable expenses of counsel
who are employees of the Person.
Federal Funds Rate for a day means the
rate per annum (rounded upwards, if
necessary, to the nearest 0.01%) equal to
the weighted average of the rates on
overnight federal funds transactions with
members of the Federal Reserve System
arranged by federal funds brokers on the
day, as published by the Federal Reserve
Bank of New York on the Business Day
following that day, provided that:
* if the day is not a Business Day, the
Federal Funds Rate for the day shall
be the rate on such transactions on
the preceding Business Day as so
published on the following Business
Day, and
* if no such rate is so published on the
following Business Day, the Federal
Funds Rate for the day shall be the
average rate on such transaction
quoted to the Administrative Agent on
the day by three federal funds brokers
of recognized standing selected by the
Administrative Agent.
Federal Reserve Board means the Board of
Governors of the Federal Reserve System.
First Tennessee shall mean First
Tennessee Bank National Association, a
national banking association having its
principal place of business in Memphis,
Tennessee.
FTB Letter of Credit shall have the
meaning assigned to that term in Section
1.8.
Funds from Operations has the meaning
assigned in Section 6.9.
GAAP means generally accepted accounting
principles in the United States of
America in effect from time to time,
consistently applied.
Hazardous Substances shall mean and
include all hazardous and toxic
substances, wastes or materials, any
pollutants or contaminants (including,
without limitation, asbestos and raw
materials which include hazardous
constituents), or any other similar
substances or materials which are
included under or regulated by any
applicable Environmental Laws.
Interest Period shall have the meaning
assigned to that term in Section 1.14.
Lenders shall have the meaning assigned
to such term in the introductory
paragraph of this Agreement.
Letter(s) of Credit shall have the
meaning assigned to that term in Section
1.8.
Letter of Credit Facility shall mean the
portion of the Aggregate Commitment that
may be utilized for the issuance of
Letters of Credit.
LIBOR for an Interest Period means
* the interest rate per annum for
deposits in U.S. dollars for a
maturity most nearly comparable to the
Interest Period that appears on page
3750 (or a successor page) of the Dow
Jones Telerate Screen as of 11 a.m.,
London time, on the second Business
Day before the first day of the
Interest Period, or
* if such rate does not so appear on the
Dow Jones Telerate Screen, an interest
rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%)
equal to the rate at which U.S. dollar
deposits approximately equal in
principal amount to the Administrative
Agent's portion of such Borrowing and
for a maturity comparable to the
Interest Period, are offered to the
principal London office of the
Administrative Agent in immediately
available funds in the London
interbank market at approximately 11
a.m., London time, on the second
Business Day before the first day of
the Interest Period.
Lien means, for an asset, a mortgage,
lien (including without limitation
statutory liens), pledge, charge,
security interest or encumbrance of any
kind in respect of the asset, including
the interest of a vendor or lessor under
a conditional sales agreement, capital
lease or other title retention agreement,
or any preferential arrangement of any
kind.
Loan Documents shall mean this
Agreement, the Notes, the Negative
Pledges, the Mortgages, any other
instrument or document at any time
evidencing or securing the Loans, and any
other instrument or document executed by
the Borrowers or Arizona with or in favor
of the Administrative Agent or the
Lenders in connection with the Loans.
Loans shall have the meaning assigned to
such term in Section 1.1, and,
individually, a Loan.
MAAC shall have the meaning given to such
term in the introductory paragraph of
this Agreement.
Management Fees means, with respect to
each Apartment Community for any period,
an amount equal to five percent (5%) of
the aggregate rent due and payable for
such period under leases with tenants at
such Apartment Community.
Market Value of Unencumbered Assets shall
mean Annualized Adjusted NOI of
Unencumbered Assets multiplied by the
integer ten (10).
Margin means 175 basis points.
Margin Stock means 'margin stock' as
defined in Regulation U of the Federal
Reserve Board.
Material Officer shall have the meaning
assigned to such term in Section 7.1(l).
Maturity Date means October 1, 1998.
Mid-America shall have the meaning
assigned to such term in the introductory
paragraph of this Agreement.
Moody's shall mean Moody's Investors
Service, Inc.
Mortgage shall mean any deed of trust,
mortgage, deed to secure debt, or other
similar lien instrument, executed by the
Borrowers or Arizona for the purpose of
securing the Loans, and constituting a
valid first lien upon or security title
in an Apartment Community.
Mortgaged Property shall mean the
Eligible Properties subject to the lien
of a Mortgage.
Negative Pledges shall mean each and all
of those agreements now or at any time
hereafter executed by either Borrower as
a condition to or otherwise in connection
with the Loans, pursuant to which such
Borrower, as the owner of an Eligible
Property, shall agree that it will not
voluntarily sell, assign, transfer or
convey such Eligible Property, nor place
or permit the existence of any Lien upon
such Eligible Property, in each instance
without the prior written consent of Two-
thirds of the Lenders. All such Negative
Pledges shall be in recordable form and
shall contain such terms and provisions
as the Administrative Agent shall
require; and such term shall include all
renewals, modifications, restatements,and
amendments thereof, in whole or in part.
Negatively Pledged Property shall mean
the Eligible Properties subject to a
Negative Pledge.
Net Operating Income or NOI means, with
respect to any Apartment Community for
the most recent two calendar quarters,
"actual property rental and other income"
(as determined by GAAP) attributable to
such Apartment Community accruing for
such period, minus the amount of all
expenses (as determined in accordance
with GAAP) incurred in connection with
and directly attributable to the
ownership and operations of such
Apartment Community for such period,
including, without limitation, Management
Fees and amounts accrued for the payment
of real estate taxes and insurance
premiums, but excluding interest expense
or other debt service charges and any non-
cash charges such as depreciation or
amortization of financing costs. In
calculating NOI attributable to any
Apartment Community first acquired or
opened by either Borrower during a
quarter, "actual property rental and
other income" and expenses shall be
adjusted for the purposes of this
definition to reflect the full amount of
"actual property rental and other income"
and expenses that would have been
attributable to such Apartment Community
if it had been owned or opened for the
full quarter.
Net Operating Loss for any period shall
mean the amount by which expenses exceed
income, all determined in accordance with
GAAP.
Net Worth or Tangible Net Worth means the
sum of consolidated shareholders' equity
and minority interests in MAAC,
determined in accordance with GAAP,
reduced by the amount of any intangible
assets of MAAC, determined in accordance
with GAAP.
Notes shall have the meaning assigned to
such term in Section 1.4.
Notice Addresses shall have the meaning
assigned in Section 10.1.
Office of a Lender means the Lender's
office designated as its office and
located at the address set forth on
Schedule 3, or such other office as the
Lender designates as its office by notice
to the Borrowers and the Administrative
Agent.
Participant shall have the meaning
assigned to such term in Section 10.7(b).
Payrate shall mean, for any calendar
quarter, the ratio of Annualized EBITDA
to Total Liabilities.
PBGC means the Pension Benefit Guaranty
Corporation.
Pension Plan at a time means an employee
pension benefit plan that is covered by
Title IV of ERISA or subject to the
minimum funding standards under Section
412 of the Internal Revenue Code and is
either (a) maintained by a member of the
Controlled Group for employees of a
member of the Controlled Group or (b)
maintained pursuant to a collective
bargaining agreement or other arrangement
under which more than one employer makes
contributions and to which a member of
the Controlled Group is then making or
accruing an obligation to make
contributions or has within the preceding
five plan years made contributions.
Person means an individual, a
corporation, a partnership, an
association, a trust or any other entity
or organization, including a government
or political subdivision or an agency or
instrumentality thereof.
Prime Rate means the per annum rate of
interest publicly announced by the
Administrative Agent as its Prime Rate at
its principal office in Birmingham,
Alabama. Each change in the Prime Rate
shall be effective on the date such
change is publicly announced as
effective.
Property shall mean an Apartment
Community, now owned or hereafter
acquired by either Borrower or Arizona,
which is now or at any time hereafter
subject to a Negative Pledge or a
Mortgage in connection with the Loans.
Proportionate Share means the respective
pro rata interests of the Lenders in the
Aggregate Commitment and in the Loans.
Register shall have the meaning assigned
to such term in Section 10.7(f).
Regulatory Action means the adoption of
an applicable law, rule or regulation, or
a change therein, or a change in the
interpretation or administration thereof
by a governmental authority, central bank
or comparable agency charged with the
interpretation or administration thereof,
or compliance by a Lender (or its Office)
with a request or directive (whether or
not having the force of law) of the
authority, central bank or comparable
agency.
Related Person shall mean any Person (i)
which now or hereafter directly or
indirectly through one or more
intermediaries controls, or is controlled
by, or is under common control with
either Borrower, or (ii) which now or
hereafter beneficially owns or holds ten
percent (10%) or more of the partnership
interests of Mid-America, or ten percent
(10%) or more of the capital stock of
MAAC, or (iii) ten percent (10%) or more
of the capital stock, partnership
interest or other form of ownership
interest of which is beneficially owned
or held by either Borrower. For the
purposes hereof, "control" shall mean
possession, directly or indirectly, of
the power to direct or cause the
direction of the management and policies
of a Person, whether through the
ownership of voting stock or interests,
by contract or otherwise.
Responsible Officer shall have the
meaning ascribed to that term in Section
1.7 hereof.
S&P means Standard & Poor's Corporation
or a successor.
Secured Debt shall mean any indebtedness
of either Borrower which is secured, in
whole or in part, by a lien upon or
security interest in an Apartment
Community, except that the Loans shall
not be deemed to constitute a Secured
Debt.
Subsidiary of a Person means a
corporation or other entity a majority of
whose Voting Stock is directly or
indirectly owned by the Person.
Swing Line Facility shall have the
meaning assigned to such term in Section
1.7.
Swing Line Facility Note shall mean that
certain promissory note executed by the
Borrowers in the principal amount of
$5,000,000, evidencing the Swing Line
Facility.
Tax includes any present or future tax,
assessment or governmental charge or
levy.
Tax Form shall have the meaning assigned
to that term in Section 9.6.
Termination Date shall mean the earlier
of (a) October 31, 1998, or (b) the date
as of which the Borrowers shall have
terminated the Lender's commitment under
the provisions of Section 1.17 hereof, or
(c) the Lenders have terminated this
Agreement under the provisions of Section
7 hereof.
Title Documents shall mean any and all
real property title searches, real
property title abstracts, title reports
and other real property title information
regarding any Properties, issued by a
title insurance company or other source
pre-approved by the Administrative Agent,
as the Administrative Agent may
reasonably require hereunder or as the
Administrative Agent may otherwise
request from time to time.
Total Annualized Debt Service on
Indebtedness shall mean for any period
the aggregate amount of principal and
interest payments due for such period
upon liabilities for borrowed money, but
excluding balloon payments.
Total Annualized Fixed Charges shall mean
for any period the aggregate amount of
preferred stock distributions; principal;
and interest due for such period upon
liabilities for borrowed money, but
excluding balloon payments.
Total Development and Joint Venture
Investment shall mean the aggregate from
time to time of (i) a Borrower's
expenditures with respect to any
Apartment Community for land acquisition,
development and construction costs until
a certificate of occupancy is received
for such entire Apartment Community (or,
if no certificate of occupancy is
available from the local governmental
authority having jurisdiction until all
construction of the entire Apartment
Community has been completed), plus (ii)
the amount of funds or other assets
invested by a Borrower in any joint
venture arrangement with any Person,
whether or not a Related Person.
Total Liabilities shall mean the
aggregate amount of all liabilities of
both Borrowers, from time to time
outstanding, calculated on a consolidated
basis, in accordance with GAAP, applied
on a consistent basis. (For the purposes
hereof, with respect to indebtednesses of
any joint venture in which a Borrower is
a party, such Borrower's pro rata share
of the joint venture's liabilities shall
be considered a liability of such
Borrower, if such joint venture liability
is non-recourse; but if such joint
venture liability is a recourse
obligation, the total amount of such
joint venture liability shall be
considered a liability of the Borrower.)
Total Market Value of Assets shall mean,
for any calendar quarter, the EBITDA for
the most recent two (2) calendar
quarters, multiplied by the integer two
(2) (thereby converting the calendar
quarter's EBITDA to an annualized
amount), and then multiplying the result
so obtained by the integer ten (10).
Two-Thirds of the Lenders means Lenders
having Commitments aggregating at least
two-thirds of the Aggregate Commitment
except that if the Borrowers' Borrowing
Rights have terminated or for purposes of
Section 7.2 (Action on Event of Default),
Two-Thirds of the Lenders means Lenders
having two-thirds of the aggregate unpaid
principal amount of all Loans to the
Borrowers.
Unencumbered Assets shall mean assets
which are not subject to any Lien
securing an indebtedness or obligation
owed to any Person, and, in addition,
Mortgaged Properties.
Unfunded Amount shall have the meaning
assigned to such term in Section 2.3.
Unfunded Vested Liabilities for a Pension
Plan at a time means the amount (if any)
by which (i) the present value of all
vested nonforfeitable benefits under the
Pension Plan exceeds (ii) the fair market
value of all Pension Plan assets
allocable to such benefits, all
determined as of the then most recent
valuation date for the Pension Plan, but
only to the extent that such excess
represents a potential liability of a
member of the Controlled Group to the
PBGC or the Pension Plan under Title IV
of ERISA.
Unsecured Debt shall mean the aggregate
amount of all liabilities of both
Borrowers not secured by a Lien upon or
in either Borrower's assets; and such
term shall include, for the purposes of
this Agreement, the Loans.
Unused Fees shall have the meaning
assigned to that term in Section 1.11.
Withdrawal Liability means liability to a
multiemployer plan as a result of a
complete or partial withdrawal from the
multiemployer plan, as such terms are
defined in Part I of Subtitle E of ERISA.
11.2 Accounting terms andUnless otherwise stated, all accounting
determinations terms used in this Agreement shall be
interpreted, all accounting
determinations under this Agreement shall
be made and all financial statements of a
Borrower required to be delivered under
this Agreement shall be prepared in
accordance with GAAP.
11.3 Miscellaneous usagesIn this Agreement, unless otherwise
stated or the context otherwise clearly
requires, the following usages apply:
time periods In computing periods from
a specified
date to a later specified date, the words
'from' and 'commencing on' (and the like)
mean 'from and including,' and the words
'to,' 'until' and 'ending on'( and the
like) mean 'to but excluding.'
when action may be taken Any action permitted
to be taken under this Agreement may be taken
at any time and from time to time.
Birmingham, Alabama All indications of time of day shall mean
Central Standard Time in effect in
Birmingham, Alabama.
'including'; 'or' 'Including' means 'including, but not
limited to.' 'A or B' means 'A or B or
both.'
statutes and References to a statute include all
regulations regulations promulgated under or
implementing the statute, as in effect at
the relevant time.
agreements References to an agreement (including
this Agreement) shall refer to the
agreement as amended at the relevant
time.
governmental agencies References to any governmental or quasi-
governmental agency or authority shall
include any successor agency or
authority.
section references References to numbered sections in this
Agreement shall refer to all included
sections. For example, references to
Section 6 shall also refer to Sections
6.1, 6.1(a), etc.
other defined terms Other defined terms are contained within
the body of this Agreement.
List of Schedules
Schedule 1 List of Lenders (1.3)
Schedule 1.13 Fees
Schedule 2 List of Existing Properties and Fair
Market Value (3.1)
Schedule 3 Notice Addresses (10.1)
List of Exhibits
Exhibit A Notes (1.4)
Exhibit B Swingline Request (1.7)
Exhibit C Borrowing Notice (2.1)
Exhibit D Conversion Notice (2.4)
Exhibit E Attorney Opinion (3.1)
Exhibit F Borrowing Base Certificate (5.1)
Exhibit G Assignment (9.8)
MID-AMERICA APARTMENT COMMUNITIES,
INC.
By______________________________
Name__________________________
Title_________________________
By______________________________
Name__________________________
Title_________________________
MID-AMERICA APARTMENTS, L.P.
By Mid-America Apartments Communities,
Inc.
Its Sole General Partner
By______________________________
Name__________________________
Title_________________________
By______________________________
Name__________________________
Title_________________________
Signature page to
Revolving Credit Agreement
AMSOUTH BANK OF ALABAMA,
in its individual capacity as Lender
and as Administrative Agent
By______________________________
Name__________________________
Title_________________________
Signature page to
Revolving Credit Agreement
HIBERNIA NATIONAL BANK
By______________________________
Name__________________________
Title_________________________
Signature page to
Revolving Credit Agreement
SIGNET BANK
By______________________________
Name__________________________
Title_________________________
Signature page to
Revolving Credit Agreement
FIRST TENNESSEE BANK, N.A.
By______________________________
Name__________________________
Title_________________________
SCHEDULE 1
List of Lenders
AmSouth Bank of Alabama
Hibernia National Bank
Signet Bank
First Tennessee Bank, N.A.
SCHEDULE 1.13
Fees
TOTAL FEES $206,250.00
Administrative Agent $52,500.00
AmSouth Bank of Alabama, as Lender 37,500.00
Signet Bank 56,250.00
Hibernia National Bank 56,250.00
First Tennessee Bank, N.A. 3,750.00
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This First Amendment to Revolving Credit Agreement is
dated as of December 23, 1996, by and among Mid-America Apartment
Communities, Inc. ("MAAC"), Mid-America Apartments, L.P. ("Mid-
America"), AmSouth Bank of Alabama, as Administrative Agent (the
"Administrative Agent"), and the financial institutions listed on
Schedule 1 (the "Lenders").
Recitals
A. MAAC, Mid-America, the Lenders and the
Administrative Agent entered that certain Revolving Credit
Agreement dated as of December 23, 1996 (the "Agreement").
Unless otherwise defined in this First Amendment, capitalized
terms shall have the meaning assigned to them in the Agreement.
B. The Borrowers and the Lenders desire to amend the
definition of "Base Rate".
Agreement
NOW, THEREFORE, in consideration of the above Recitals,
the Borrowers and the Lenders hereby amend the Agreement as
follows:
1. Section 11.1, Definitions, is hereby amended by
deleting in its entirety the definition of Base Rate where it
appears on page 62 and replacing it with the following:
Base Rate for a day means
a rate per annum equal to the
higher of (a) the Prime Rate minus
.75% or (b) the sum of the Federal
Funds Rate for the day plus 1.00%.
Any change in the Base Rate due to
a change in the Prime Rate or the
Federal Funds Rate shall be
effective on the effective date of
such change in the Prime Rate or
the Federal Funds Rate,
respectively.
Except as expressly amended hereby, the Agreement shall
remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the Borrowers, the Lenders and the
Administrative Agent have caused this First Amendment to be
executed by their respective, duly authorized representatives as
of the date first set forth above.
MID-AMERICA APARTMENT
COMMUNITIES, INC.
By______________________________
Name__________________________
Title_________________________
By______________________________
Name__________________________
Title_________________________
MID-AMERICA APARTMENTS, L.P.
By Mid-America Apartment
Communities, Inc.
Its Sole General Partner
By_________________________
Name_____________________
Title____________________
By_________________________
Name_____________________
Title____________________
SIGNATURE PAGE TO FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
AMSOUTH BANK OF ALABAMA, in its
individual capacity as Lender
and as Administrative Agent
By______________________________
Name__________________________
Title_________________________
SIGNATURE PAGE TO FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
HIBERNIA NATIONAL BANK
By______________________________
Name__________________________
Title_________________________
SIGNATURE PAGE TO FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
SIGNET BANK
By______________________________
Name__________________________
Title_________________________
SIGNATURE PAGE TO FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
FIRST TENNESSEE BANK, N.A.
By______________________________
Name__________________________
Title_________________________
Accountants' Consent
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.:
We consent to incorporation by reference in the registration
statement (No. 33-91416) on Form S-8 and the registration
statements (Nos. 33-95734, 33-96852 and 333-3274) on Form S-3
of Mid-America Apartment Communities, Inc. of our report dated
February 14, 1997 to the consolidated balance sheets of Mid-
America Apartment Communities, Inc. as of December 31, 1996 and
1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1996 and our report
dated February 14, 1997 to the financial statement schedule of
Mid-America Apartment Communities, Inc., which reports are
herein included in the 1996 Annual Report on Form 10-K of Mid-
America Apartment Communities, Inc. Our reports refer to the
Company's change in its accounting method to capitalize
replacement purchases for major appliances and carpet in 1996.
KPMG Peat Marwick LLP
Memphis, Tennessee
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,591
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,273
<PP&E> 641,893
<DEPRECIATION> 49,558
<TOTAL-ASSETS> 611,199
<CURRENT-LIABILITIES> 15,338
<BONDS> 315,239
0
20
<COMMON> 109
<OTHER-SE> 241,384
<TOTAL-LIABILITY-AND-EQUITY> 611,199
<SALES> 110,090
<TOTAL-REVENUES> 111,882
<CGS> 42,570
<TOTAL-COSTS> 42,570
<OTHER-EXPENSES> 21,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,427
<INCOME-PRETAX> 17,473
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,260
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 0
</TABLE>
