UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 17, 1997
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 1-12762 62-1543819
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
6584 POPLAR AVENUE, SUITE 340, MEMPHIS, TENNESSEE 38138
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 682-6600
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On September 17, 1997, Mid-America Apartment Communities, Inc., a
Tennessee corporation ("MAAC"), Mid-America Apartments, L.P., a Tennessee
limited partnership ("MAALP"), and Flournoy Development Company, a Georgia
corporation ("FDC") entered into an Agreement and Plan of Reorganization (the
"Plan of Reorganization") dated as of September 17, 1997 pursuant to which FDC
will merge with and into MAAC, (the "Merger") and MAAC and MAALP will acquire
all the assets of FDC and certain affiliated entities (collectively, the
"Flournoy Properties Group") through a series of merger, exchange and purchase
transactions (the "Reorganization"). The Flournoy Properties Group owns and
operates 29 multifamily apartment communities containing an aggregate of 7,255
apartment units located primarily in Georgia, Florida, South Carolina and
Tennessee. Completion of the Reorganization is conditioned upon certain consents
and approvals and certain other closing conditions. See "Terms of the Plan of
Reorganization" below. Upon completion of the Reorganization, John F. Flournoy,
the Chairman of the Board and Chief Executive Officer of FDC, will become a
director of MAAC and W. Randall Jones, President of FDC, will become an advisory
member of the MAAC board.
In connection with the Reorganization, MAAC is hereby filing the
following additional information regarding the business and properties of the
Flournoy Properties Group to be acquired in the Reorganization. MAAC has filed
the Plan of Reorganization with the SEC on Form 8-K on September 19, 1997, to
which reference is hereby made.
GENERAL
Unless otherwise indicated or as the context otherwise requires,
references to the "Flournoy Properties Group" shall include the operations of
FDC and entities affiliated with FDC which currently own the properties, land
and other assets to be acquired by MAAC and MAALP in the Reorganization (the
"Transaction Assets"). Any reference herein to the Flournoy Properties Group
shall be deemed to mean MAAC and MAALP after Consummation of the Reorganization.
The Flournoy Properties Group was formed in October 1967 and is a fully
integrated operating company specializing in the development, construction,
management and operation of multifamily apartment communities in midsize markets
located in the southeastern United States. The Flournoy Properties Group owns
and operates 29 multifamily apartment communities (the "Existing Communities")
containing an aggregate of 7,255 apartment units located primarily in Georgia,
Florida, South Carolina and Tennessee. During the past 19 years, the Flournoy
Properties Group developed and constructed 26 of the 29 Existing Communities
containing an aggregate of 7,039 apartment units (or approximately 97% of the
total apartment units at the Existing Communities). The Existing Communities had
an average age of 10 years as of June 30, 1997 and an average economic occupancy
rate of 90.8% for the month of June 1997. As of June 30, 1997, the average
monthly rental rate per apartment unit was $593, and the average size per
apartment unit was 1,051 square feet.
In addition to the Existing Communities, the Flournoy Properties Group
owns six multifamily apartment communities under development (three of which are
expansions of Existing Communities) that will add a total of 1,326 apartment
units to the Flournoy Properties Group's portfolio (the "Development
Communities"). The Existing Communities and the Development Communities are
referred to collectively herein as the "Communities." At June 30, 1997, the
Development Communities are under various stages of development and construction
and are expected to be completed and stabilized over the next 18 months (a
property is considered by the Flournoy Properties Group to have achieved
stabilized occupancy upon the occurrence of (i) attainment of 95% physical
occupancy on the first day of any month or (ii) one year after completion of
construction, whichever is earlier). Upon completion of the Development
Communities, the Flournoy Properties Group will own a total of 8,581 apartment
units. The Flournoy Properties Group also owns three sites, consisting of 91
acres and contracts to purchase two sites, consisting of 86 acres, intended for
the development and construction of five additional multifamily apartment
communities (two of which are expansions of Existing Communities) which, if
completed, are expected to contain a total of 1,308 apartment units (the
"Development Rights"). The Flournoy Properties Group intends to commence the
development and construction of all of the properties subject to Development
Rights over the next 6 months. At June 30, 1997, the budgeted cost to complete
the construction of the Development Communities and properties subject to
Development Rights is approximately $33.7 million and $71.2 million,
respectively.
The Flournoy Properties Group's strategy generally is to develop and
construct multifamily apartment communities for long-term ownership in midsize
markets located primarily in the southeastern United States that meet the
company's criteria for development opportunities. The Flournoy Properties Group
is a fully integrated real estate organization with in-house development,
construction and property management expertise. In addition, in-house
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development and construction capabilities enable the Flournoy Properties Group
to (i) control development and construction costs, (ii) reduce operating
maintenance and service expenditures and (iii) maximize the long-term investment
value of the Communities.
The Flournoy Properties Group is also engaged in third-party
development, construction and management businesses (the "Third Party
Businesses"). The Flournoy Properties Group has also developed and constructed a
variety of other property types, including office buildings, light manufacturing
plants, warehouses, and single-family homes. In addition to the development and
construction of the Communities, the Flournoy Properties Group has, through the
Third Party Businesses, developed and constructed 40 multifamily apartment
communities since 1990 pursuant to a tax credit program established under
Section 42 of the Internal Revenue Code (the "Section 42 Properties"). The
Section 42 Properties will not be contributed to MAAC or MAALP pursuant to the
Reorganization. The Section 42 Properties are managed by the Flournoy Properties
Group pursuant to management contracts that are terminable on sixty-days notice,
with or without cause or upon the sale of the Section 42 Property. The Flournoy
Properties Group currently has contracts for the construction, development and
management of two additional properties being developed under Section 42 of the
Internal Revenue Code. The management contracts and additional Section 42
contracts will be assigned to an affiliate of MAALP in connection with the
Reorganization.
COMPETITION
All of the Communities are located in developed areas that include other
apartment communities. The number of competitive communities in a particular
area could have a material adverse effect on the Flournoy Properties Group's
ability to lease apartments at the Communities or at any newly developed or
acquired properties and on the rents charged by the Flournoy Properties Group.
The Flournoy Properties Group may be competing with others that have greater
financial and other resources than the Flournoy Properties Group and whose
officers and directors have more experience than the Flournoy Properties Group's
officers and directors. In addition, other forms of housing, such as single
family homes, townhomes and condominiums provide alternatives to potential
residents of high quality apartment complexes like the Communities.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
The Flournoy Properties Group believes that the Communities are in
compliance in all material respects with all federal, state and local laws,
ordinances and regulations regarding hazardous or toxic substances or petroleum
products. The Flournoy Properties Group has not been notified by any
governmental authority, and is not otherwise aware, of any material
noncompliance, liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of its present properties.
EMPLOYEES
As of September 17, 1997, the Flournoy Properties Group employed
approximately 670 persons, which constitute substantially all of the
professional employees that are currently engaged in the multifamily residential
property management, development and construction business of the Flournoy
Properties Group. The Flournoy Properties Group believes that its relations with
its employees are good.
REGULATION
Apartment communities are subject to various laws, ordinances and
regulations, including laws, ordinances and regulations related to fair housing,
Americans with disabilities and building safety. The Flournoy Properties Group
believes that each Community has the necessary permits and approvals to operate
its business and that each Community is in material compliance with present
laws, ordinances and regulations.
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COMMUNITIES
EXISTING COMMUNITIES. The Flournoy Properties Group constructed and
developed 26 of the 29 Existing Communities during the past 19 years. The
Flournoy Properties Group currently manages all of the Existing Communities,
which contain an aggregate of 7,255 apartment units. As of June 30, 1997, the
average age of the Existing Communities was approximately 10 years. The average
economic occupancy rate of the Existing Communities for the month of June 1997
was 90.8%. As of June 30, 1997, the average monthly rental rate for the Existing
Communities was $593 and the average size per apartment unit was 1,051 square
feet. The Existing Communities offer high levels of features and amenities, such
as clubhouses, exercise rooms, swimming pools and tennis courts. The majority of
the apartment units offer features such as washer/dryers, fully-equipped
kitchens with upgraded cabinets, dishwashers and microwave ovens, high ceilings,
separate dining areas, individual storage and patios, sun porches and balconies.
The following table sets forth certain information regarding the Existing
Communities.
<TABLE>
<CAPTION>
AVERAGE
OCCUPANCY
AVERAGE FOR THE AVERAGE
NUMBER OF APARTMENT MONTH OF RENT AS OF
APARTMENT SIZE YEAR JUNE JUNE 30
PROPERTY LOCATION MSA UNITS (SQ. FT.) COMPLETED 1997(1) 1997(2)
- ------------------------- ------------- ------------ ---------- ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
Paddock Club Huntsville... Huntsville Huntsville 200 1,058 1989 97% $585
------ ----- ---- ----
Total Alabama 200 1,058 97% $585
------ ----- --- ----
(2.8% of Total Units at all
Existing Communities)
GEORGIA
2000 Wynnton .......... Columbus Columbus 72 917 1983(3) 96% $430
Fountain Lake(4)....... Brunswick N/A 100 1,180 1983 92 652
Hidden Lake
Phase I ............. Union City Atlanta 160 1,070 1985 91 619
Phase II ............ Union City Atlanta 160 962 1987 87 606
Hidden Oaks
Phase I ............. Albany Albany 128 1,032 1979 91 451
Phase II ............ Albany Albany 112 1,023 1980 87 448
High Ridge ............ Athens Athens 160 1,166 1987 81 755
In The Pines
Phase I ............. Augusta Augusta 160 1,033 1979 96 507
Phase II ............ Augusta Augusta 96 927 1984 93 485
Parkwalk .............. College Park Atlanta 124 909 1985 94 611
Regency Club .......... Albany Albany 100 802 1983(3) 94 395
Riverwind ............. Columbus Columbus 44 916 1983(3) 90 431
Southland Station
Phase I ............. Warner Robins Macon/Warner
Robins 160 1,167 1987 93 643
Phase II ............ Warner Robins Macon/Warner
Robins 144 1,172 1990 89 664
The Vistas .............. Macon Macon/Warner
Robins 144 1,068 1985 91 599
Three Oaks Phase I .... Valdosta N/A 120 1,033 1983 95 528
Phase II ............ Valdosta N/A 120 1,077 1984 88 545
Westbury Creek ........ Augusta Augusta 120 892 1984 89 532
Westbury Springs ...... Lilburn Atlanta 150 918 1983 95 616
Whispering Pines
Phase I.............. LaGrange N/A 120 1,033 1982 89 547
Phase II............. LaGrange N/A 96 1,027 1984 92 545
Whisperwood
Whisperwood ......... Columbus Columbus 506 1,207 1981-86 95 592
Whisperwood Spa &
Club............... Columbus Columbus 348 1,092 1988 90 589
Wildwood
Phase I.............. Thomasville N/A 120 1,033 1980 90 493
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AVERAGE
OCCUPANCY
AVERAGE FOR THE AVERAGE
NUMBER OF APARTMENT MONTH OF RENT AS OF
APARTMENT SIZE YEAR JUNE JUNE 30
PROPERTY LOCATION MSA UNITS (SQ. FT.) COMPLETED 1997(1) 1997(2)
- ------------------------- ------------- ------------ ---------- ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phase II............. Thomasville N/A 96 1,054 1984 89 521
Willow Creek(5) ....... Columbus Columbus 285 866 1971-77 88 463
----- ----- -- ----
Total Georgia 3,945 1,045 91% $562
----- ----- -- ----
(54.4% of Total Units at All Existing
Communities)
FLORIDA
Paddock Club
Jacksonville
Phase I.............. Jacksonville Jacksonville 200 1,080 1989 92% $700
Phase II ............ Jacksonville Jacksonville 120 1,102 1996 95 725
Paddock Club Lakeland
Phase I ............. Lakeland Lakeland 200 1,089 1988 92 639
Phase II ............ Lakeland Lakeland 264 1,073 1990 91 641
Paddock Club
Tallahassee
Phase I ............. Tallahassee Tallahassee 192 1,083 1990 74 688
Phase II ............ Tallahassee Tallahassee 112 1,114 1995 81 693
Paddock Park Ocala
Phase I ............. Ocala Ocala 200 1,011 1986 85 609
Phase II ............ Ocala Ocala 280 1,037 1988 90 656
--- ----- -- ---
Total Florida... 1,568 1,068 87% $663
----- ----- -- ----
(21.5% of Total Units at All Existing
Communities)
SOUTH CAROLINA
Paddock Club Columbia
Phase I ............. Columbia Columbia 200 1,094 1989 89% $675
Phase II ............ Columbia Columbia 136 1,064 1995 88 720
Paddock Club
Greenville .......... Greenville Greenville/
Spartanburg 208 1,020 1996 89 688
Park Place............. Spartanburg Greenville/
Spartanburg 184 1,061 1987 87 606
----- ----- -- ---
Total South Carolina 728 1,074 88% $670
----- ----- --- ----
(10.0% of Total Units at All
Existing Communities)
TENNESSEE
River Trace
Phase I.............. Memphis Memphis 244 843 1981 95% $495
Phase II............. Memphis Memphis 196 994 1985 95 530
Windridge.............. Chattanooga Chattanooga 174 1,372 1984 95 643
----- ----- -- ---
Total Tennessee ... 614 1,041 95% 548
----- ----- --- ---
(8.5% of Total Units at All
Existing Communities)
KENTUCKY
Paddock Club Florence... Florence Cincinnati 200 1,035 1994 93 710
----- ----- -- ---
Total Kentucky... 200 1,035 93 710
----- ----- -- ---
(2.8% of Total Units at All
Existing Communities)
Total For All States 7,255 1,051 90.8 593
=====
</TABLE>
- ----------
(1) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
entire period, expressed as a percentage.
(2) Average rent is defined as gross potential rent divided by number of
apartment units available for rent.
(3) These Communities were acquired by the Flournoy Properties Group from a
third party in 1983 and have been extensively renovated since the date of
acquisition.
(4) Data presented does not reflect lease of 10,052 square feet at this
Community for commercial use. As of June 30, 1997, monthly rent for such
commercial space was $8,810.
(5) Data presented does not reflect lease of 1,500 square feet at this Community
to a non-profit organization for nominal rent.
One of the Communities (Whisperwood) accounted for 10.6% of the Flournoy
Properties Group's revenue for the six month period ended June 30, 1997. The
average economic occupancy for Whisperwood (presented in the aggregate for
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both Whisperwood Phase I and Whisperwood Spa) for the years ended 1993, 1994,
1995, 1996 and the six month period ended June 30, 1997 was 94.7%, 94.8%, 91.1%,
89.5% and 93.1%, respectively, and the average monthly rent for each of such
periods was $525, $541, $561, $578 and $587, respectively. No resident holds a
lease for ten percent or more of the rentable units at Whisperwood.
DEVELOPMENT COMMUNITIES. The Flournoy Properties Group will continue the
development and construction of six new properties (three of which are
expansions of Existing Communities) which, if completed, will contain a total of
1,326 apartment units. At June 30, 1997, the Development Communities are under
various stages of development and construction and are expected to be completed
and stabilized over the next 18 months. In analyzing a particular development
opportunity, the Flournoy Properties Group establishes a target yield of
generally between 10% and 13%.
The following table sets forth certain information regarding the Development
Communities as of June 30, 1997:
<TABLE>
<CAPTION>
CAPITALIZED
DATE COSTS INCURRED BUDGETED
NUMBER OF FIRST THROUGH BUDGETED YIELD ON
APARTMENT UNITS ANTICIPATED JUNE 30, CAPITALIZED CAPITALIZED
PROPERTY LOCATION MSA UNITS AVAILABLE STABILIZATION(1)(2) 1997(3) COSTS(4) COSTS(5)
- ------------------ --------------- ---------- ---------- ---------- ------------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
Paddock Club
Huntsville II .. Huntsville Huntsville 192 11/1/97 9/30/98 $1,146,085 $ 10,487,328 11.3%
FLORIDA
Paddock Club
Brandon ........ Brandon Tampa 308 2/1/97 8/31/97 17,411,477 17,411,477 11.1
Paddock Club
Jacksonville
Phase III ...... Jacksonville Jacksonville 120 8/1/97 3/31/98 4,048,445 6,771,369 12.3
Paddock Club
Mandarin ....... Jacksonville Jacksonville 288 10/1/97 12/31/98 2,272,051 16,284,921 11.7
GEORGIA
Terraces at
Towne Lake ..... Cherokee County Atlanta 264 11/1/96 8/31/97 15,885,557 15,554,556 11.0
Whisperwood
Spa II ......... Columbus Columbus 154 11/1/97 6/30/98 523,174 8,129,385 12.5
--- ------- ---------
Total for All
States.......... 1,326 $41,286,789 $ 74,970,037
======= =========== ============
</TABLE>
- ----------
(1) Such dates are based upon the Flournoy Properties Group's planning
estimates and forecasts and therefore are subject to change.
(2) A property is considered by the Flournoy Properties Group to have achieved
stabilized occupancy upon the occurrence of (i) attainment of 95% physical
occupancy on the first day of any month or (ii) one year after completion of
construction, whichever is earlier.
(3) Capitalized Costs is defined as the Flournoy Properties Group's capitalized
costs determined in accordance with generally accepted accounting principles
("GAAP"). Such costs include land acquisition costs, governmental and
quasi-governmental fees, out-of-pocket construction costs, architectural and
engineering fees, on-site supervision costs, real estate taxes, interest and
loan fees and other costs associated with construction. Such costs do not
include contractor and development fees paid to the Flournoy Properties
Group or any allocation of corporate overhead. There can be no assurance
that actual costs will not be significantly higher than budgeted costs.
(4) Budgeted Capitalized Costs given for each Development Community consist of
the Flournoy Properties Group's Capitalized Costs incurred through June 30,
1997 as well as budgeted capitalized costs for the period thereafter to
develop such property.
(5) Budgeted Yield on Capitalized Costs consists of estimated annual Property
Net Operating Income for the particular Development Property at
stabilization expressed as a percentage of the Budgeted Capitalized Costs
for the particular Development Property. The estimated annual Property Net
Operating Income of a particular Development Property consists of gross
potential rent from the Development Property to be achieved based on current
rents prevailing in the respective Development Property's local market
(without adjustment for potential growth factors) minus (a) estimated
vacancy losses, model expenses and bad debt, and (b) estimated property
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operating and maintenance expenses. There can be no assurance that the
Flournoy Properties Group will complete the Development Properties, that the
Flournoy Properties Group's budgets, leasing, occupancy or Property Net
Operating Income estimates will be realized or that future developments will
realize comparable returns.
The forward-looking information set forth in the table and paragraph above is
based upon a number of estimates and assumptions that are inherently subject to
business, economic and competitive uncertainties and contingencies, many of
which are beyond the Flournoy Properties Group's control. The actual development
cost, completion date and stabilization date of any project will be dependent
upon a variety of factors beyond the control of the Flournoy Properties Group
including, for example, labor and other personnel costs, material costs, weather
conditions, government fees and leasing rates.
DEVELOPMENT RIGHTS. The Flournoy Properties Group will also own sites
intended for the development and construction of three additional multifamily
apartment properties and additions to two Existing Properties which, if
completed, are expected to contain a total of 1,308 apartment units. The
Flournoy Properties Group intends to commence the development and construction
of the properties subject to Development Rights over the next 6 months.
The following table sets forth certain information regarding the Development
Rights as of June 30, 1997:
<TABLE>
<CAPTION>
CAPITALIZED
NUMBER COSTS INCURRED
OF ESTIMATED DATE ESTIMATED DATE ANTICIPATED THROUGH BUDGETED
APARTMENT OF CONSTRUCTION FIRST UNITS STABILI- JUNE 30, CAPITALIZED
PROPERTY LOCATION MSA UNITS COMMENCEMENT(1) AVAILABLE(1) ZATION(1)(2) 1997(3) COSTS(4)
- ------------------- ----------- ---------- --------- ---------------- --------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA
Paddock Club
Brandon II ....... Brandon Tampa 132 1/1/98 6/1/98 1/31/99 765,707 7,676,250
Paddock Club
Gainesville(5) .. Gainesville Gainesville 264 9/15/97 1/1/98 1/31/99 190,938 15,734,061
GEORGIA
Terraces at
Fieldstone ....... Conyers Atlanta 316 9/15/97 1/1/98 4/30/99 1,394,906 17,294,040
Terraces at
Cascade(5) ....... Atlanta Atlanta 360 9/22/97 2/1/98 5/31/99 241,146 21,021,500
13,387,933
Terraces at Towne
Lake II .......... Cherokee
County Atlanta 236 10/1/97 3/1/98 2/28/99 1,347,693
----- --------- -----------
Total for
All States ..... 1,308 $3,940,390 $75,113,784
===== ========== ===========
</TABLE>
- ----------
(1) Such dates are based upon the Flournoy Properties Group's planning
estimates and forecasts and therefore are subject to change.
(2) A property is considered by the Flournoy Properties Group to have achieved
stabilized occupancy upon the occurrence of (i) attainment of 95% physical
occupancy on the first day of any month or (ii) one year after completion of
construction, whichever is earlier.
(3) Capitalized Costs is defined as the Flournoy Properties Group's capitalized
costs determined in accordance with GAAP. Such costs include land
acquisition costs, governmental and quasi-governmental fees, out-of-pocket
construction costs, architectural and engineering fees, on-site supervision
costs, real estate taxes, interest and loan fees and other costs associated
with construction. Such costs do not include contractor and development fees
paid to the Flournoy Properties Group or any allocation of corporate
overhead.
(4) Budgeted Capitalized Costs given for the properties subject to Development
Rights consist of the Flournoy Properties Group's Capitalized Costs incurred
through June 30, 1997 as well as budgeted Capitalized Costs for the period
thereafter to develop such property. There can be no assurance that actual
costs will not be significantly higher than budgeted costs.
(5) These properties subject to Development Rights are currently under contract
for purchase. The closing of such purchase contracts is subject to customary
closing conditions.
The forward-looking information set forth in the table and paragraph above
is based upon a number of estimatesandassumptions that are inherently subject to
business, economic and competitive uncertainties and contingencies, many of
which are beyond the Flournoy Properties Group's control. The actual development
cost,
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completion date and stabilization date of any project will be dependent upon a
variety of factors beyond the control of the Flournoy Properties Group
including, for example, labor and other personnel costs, material costs, weather
conditions, government fees and leasing rates.
TERMS OF THE PLAN OF REORGANIZATION
GENERAL
The Plan of Reorganization generally provides for the acquisition by MAAC
and its subsidiaries, including MAALP, of the Reorganization Assets through a
series of merger, exchange and purchase transactions. The terms and conditions
of the Plan of Reorganization are set forth in the Agreement and Plan of
Reorganization, dated September 17, 1997, by and among FDC, MAAC and MAALP,
which has been filed with the SEC with a Current Report on Form 8-K on September
19, 1997, to which reference is hereby made. The following is a summary of the
material terms of the Plan of Reorganization.
CONSIDERATION FOR REORGANIZATION
As consideration for the transfer of the Transaction Assets to MAAC and
MAALP upon consummation of the Reorganization, MAAC shall issue to the FDC
Shareholders an aggregate of 1,556,510 shares of MAAC Common Stock as
consideration for the Merger, and MAALP shall issue to the partners of the
several partnerships holding the remaining assets included in the Flournoy
Properties Group an aggregate of 481,704 Class A Common Units of limited
partnership interest in MAALP. In addition, in connection with the
Reorganization, MAAC and MAALP are obligated under the Plan of Reorganization to
prepay at the time of closing the Prepaid Mortgage Debt, Credit Line Debt and
Construction and Development Debt (as defined in the Plan of Reorganization),
and shall assume (either expressly or by operation of law) the Retained Mortgage
Debt (as defined in the Plan of Reorganization). Finally, MAALP shall acquire
the Cash-Out Properties for an aggregate of approximately $29.6 million cash.
NON-SOLICITATION
FDC has agreed that it will not, directly or indirectly, through any
officer, director, partner, agent or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate knowingly, any inquiry or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any FDC
Competing Reorganization (as defined in the Plan of Reorganization), or enter
into or maintain or continue discussions or negotiate with any person in
furtherance of such inquiry or with a view toward soliciting or consummating a
FDC Competing Reorganization, or agree to or endorse any FDC Competing
Reorganization, or authorize or knowingly permit any of the officers, directors,
partners or employees of such party or any of its Affiliates or any investment
banker, financial advisor, attorney, accountant or other representative retained
by such party or any of such party's Affiliates to take any such action. FDC
must also notify MAAC of all the relevant details relating to all inquiries and
proposals which FDC or any officer, director, partner, agent or other person may
receive relating to any such matters.
MAAC has agreed that it shall not, without the prior written consent of FDC,
directly or indirectly, through any officer, director, agent or otherwise,
negotiate, undertake or consummate a MAAC Competing Reorganization (as defined
in the Plan of Reorganization).
The non-solicitation obligations of FDC and MAAC described above will
terminate if the Plan of Reorganization is terminated in accordance with its
terms.
REPRESENTATIONS AND WARRANTIES
The Plan of Reorganization contains various customary representations and
warranties relating to, among other things: (a) due incorporation, organization,
etc. of FDC, MAAC and MAALP and similar corporate matters; (b) the
authorization, execution, delivery and enforceability of the Plan of
Reorganization and any other agreements contemplated thereby; (c) certain
financial statements of FDC and reports filed by MAAC under the Securities
Exchange Act of 1934; (d) conduct of business in the ordinary course and the
absence of certain changes or events that would have a material adverse effect
on the business, results of operations, business or prospects of FDC, MAAC or
MAALP; (e) properties; (f) environmental matters; (g) retirement and other
employee benefit plans; (h) litigation; and (i) taxes.
CONDITIONS TO COMPLETION OF THE REORGANIZATION
Completion of the Reorganization is subject to the satisfaction of the
conditions set forth below (the "Closing Conditions"). If any of the Closing
Conditions set forth below is not satisfied, the Reorganization will not be
completed, except as described below.
CLOSING ON OR BEFORE DECEMBER 31, 1997. Either party may terminate the Plan
of Reorganization if the Reorganization is not consummated on or before December
31, 1997.
REPRESENTATIONS AND WARRANTIES. The Representations and Warranties of FDC on
the one hand, and MAAC and MAALP on the other hand, made in the Plan of
Reorganization shall be true, complete and correct as of the Closing Date.
NO MATERIAL ADVERSE CHANGE. Since the date of the Plan of Reorganization,
there shall not have been any material adverse change, circumstance or event in
the assets, business or prospects of FDC, MAAC or MAALP.
NO INJUNCTION. There shall not be in effect any order which enjoins or
prohibits consummation of the Reorganization.
THIRD PARTY CONSENTS. The Reorganization will not be completed in whole or
as to any property if all required third-party consents are not obtained,
including the consents of the existing lenders having a security interest
therein, or if adverse circumstances arise with respect to such property, such
as, but not limited to, the occurrence or discovery of adverse physical
conditions respecting land or improvements, or the condemnation or destruction
of such property, unless FDC and MAAC determine, in their sole discretion, that
it is in its best interests to effectuate the Reorganization in whole or as to
any such property.
AMENDMENT
The Plan of Reorganization may be amended only by the mutual written consent
of the parties.
EXPENSES
The expenses incurred in the consummation of the transactions contemplated
in the Reorganization of the transactions contemplated in the Plan of
Reorganization shall be paid by MAAC or MAALP. In the event the Plan of
Reorganization is terminated prior to the Closing, each party thereto shall pay
its own expenses incident to the Plan of Reorganization and the transactions
contemplated thereby, including all legal and accounting fees and disbursements.
TERMINATION; REMEDIES; BREAK-UP FEE
The Plan of Reorganization may be terminated and the transactions
contemplated thereby abandoned at any time prior to the Closing Date in the
following circumstances:
(i) by the mutual written consent of FDC and MAAC;
(ii) by either FDC or MAAC and MAALP if the other party (or parties in
the case of MAAC and MAALP) shall have materially breached any covenant,
representation or warranty under the Plan of Reorganization or failure of
any condition to such party's obligation to close and such breach or failure
shall not have been remedied within 10 business days after receipt by such
party of a notice in writing from the non-breaching and non-failing party
specifying the breach or failure and requesting such be remedied; or
(iii) by FDC or MAAC if the Closing has not taken place by December 31,
1997 (subject to extension as provided in the Plan of Reorganization), at
any time thereafter.
CONTINGENT VALUE SHARES
In connection with the Merger, the shareholders of FDC (the "FDC
Shareholders") will receive the right (the "Contingent Value Rights") to receive
additional shares of MAAC Common Stock (the "Contingent Value Shares") in
accordance with each such FDC Shareholder's respective ownership percentage in
FDC, based upon the combined entity's Funds from Operations (as defined in the
Plan of Reorganization) in the years 1998, 1999 and 2000. The FDC Shareholders
will have the right to transfer all or any portion of the Contingent Value
Rights held by the FDC Shareholders to any other person without the consent or
approval of MAAC. In addition, the Contingent Value Rights will be deemed fully
earned upon a Major Reorganization or Change in Control (as such terms are
defined in the Plan of Reorganization) of MAAC. The Contingent Value Shares will
be earned over a period of three years, as follows:
(a) If the Adjusted FFO Per Share (as defined herein) for calendar year
1998 exceeds $3.15, MAAC shall issue to the FDC Shareholders, on or before
March 15, 1999, Contingent Value Shares having an aggregate value as of
December 31, 1998 of $2,500,000 (the "1998 Contingent Value Shares");
(b) If (i) the Adjusted FFO Per Share for calendar year 1999 exceeds
$3.32 or (ii) the aggregate Adjusted FFO Per Share for calendar years 1998
and 1999 exceeds $6.47, MAAC shall issue to the FDC Shareholders, on or
before March 15, 2000, Contingent Value Shares having an aggregate value as
of December 31, 1999 of $2,500,000 (the "1999 Contingent Value Shares");
(c) If (i) the Adjusted FFO Per Share for calendar year 2000 exceeds
$3.61 or (ii) the aggregate Adjusted FFO Per Share for calendar years 1998,
1999 and 2000 exceeds $10.08, MAAC shall issue to the FDC Shareholders, on
or before March 15, 2001, Contingent Value Shares having an aggregate value
as of December 31, 2000 of $2,500,000 (the "2000 Contingent Value Shares");
(d) If the 1998 Contingent Value Shares are not issued pursuant to
subparagraph (a) above and either (i) the aggregate Adjusted FFO Per Share
for calendar years 1998 and 1999 exceeds $6.47 or (ii) the aggregate
Adjusted FFO Per Share for calendar years 1998, 1999 and 2000 exceeds
$10.08, MAAC shall issue to the FDC Shareholders, on or before March 15,
2000, if such Contingent Value Shares are issued pursuant to clause (i) of
this paragraph (d), or March 15, 2001, if such Contingent Value Shares are
issued pursuant to clause (ii) of this paragraph (d), Contingent Value
Shares having an aggregate value as of December 31, 1999 or December 31,
2000, respectively, of $2,500,000 (the "1998 Make-Up Shares"), in addition
to the 1999 Contingent Value Shares, 2000 Contingent Value Shares and/or
1999 Make-Up Shares (as defined herein) which may have been issued pursuant
to subparagraphs (b), (c) and (e) hereof; and
(e) If the 1999 Contingent Value Shares are not issued pursuant to
subparagraph (b) above and either (i) the aggregate Adjusted FFO Per Share
for calendar years 1999 and 2000 exceeds $6.93 or (ii) the aggregate
Adjusted FFO Per Share for calendar years 1998, 1999, and 2000 exceeds
$10.08, MAAC shall issue to the FDC Shareholders, on or before March 15,
2001, Contingent Value Shares having an aggregate value as of December 31,
2000 of $2,500,000 (the "1999 Make-Up Shares"), in addition to any 1998
Contingent Value Shares, 2000 Contingent Value Shares and/or 1998 Make-Up
Shares which may have been issued pursuant to subparagraphs (a), (c) and (d)
hereof.
FDC and MAAC established the target FFO Per Share amounts set forth above
based upon a projected balance sheet of the combined entity, including the
following assumptions set forth therein: (i) the projected number of outstanding
shares of MAAC Common Stock, which includes MAAC Common Stock issuable upon
conversion of Class A Common Units (the "Outstanding Share Assumption"); (ii)
the projected number of outstanding shares of Series A Preferred Stock of MAAC;
(iii) the leverage, capital structure, debt structure, and amount of outstanding
debt of the combined entity; (iv) debt amortization payments; (v) interest
rates; and (vi) the mix between acquisition and development properties (the
assumptions described in clauses (ii) through (vi) of this paragraph, together
with similar assumptions reflected in the projected balance sheet of the
combined entity, are herein collectively referred to as the "Financial
Assumptions"). In the event the number of the outstanding shares of MAAC Common
Stock during any calendar year 1998, 1999, or 2000 differ from the Outstanding
Share Assumption, then the FFO Per Share for such calendar year shall be
adjusted to the extent necessary to reflect the FFO Per Share which would have
been realized during such calendar year if the Outstanding Share Assumption was
correct for such calendar year. In the event the balance sheet of MAAC and MAALP
or any other facts or circumstances during any calendar year 1998, 1999 or 2000
differ from the Financial Assumptions set forth in the projected balance sheet
of the combined entity and result in a lesser FFO Per Share, then the FFO Per
Share for such calendar year will be increased to the extent necessary to
reflect the increased FFO Per Share which would have been realized during such
calendar year if the Financial Assumptions were correct for such calendar year
(such adjusted FFO Per Share is hereinafter referred to as the "Adjusted FFO Per
Share"). If the designated representative of the FDC Shareholders (the
"Contingent Value Representative") determines that there has been a change of
circumstances that has changed the Outstanding Share Assumption or Financial
Assumptions, then MAAC shall cause a new projected balance sheet of the combined
entity and recomputation of Adjusted FFO Per Share to be prepared. The
Contingent Value Representative and MAAC will use their reasonable best efforts
to agree upon all numbers in the new projected balance sheet and upon the
Adjusted FFO Per Share. If the Contingent Value Representative and MAAC cannot
agree upon the Adjusted FFO Per Share, then the Adjusted FFO Per Share will be
determined by an independent committee of outside directors of MAAC or by
binding arbitration, in accordance with the terms of the Plan of Reorganization.
ADJUSTMENT TO MERGER CONSIDERATION
MAAC and FDC have agreed upon the methodology and timing of preparation of a
pro forma combined balance sheet as of the closing of the Merger (the "Closing
Date Balance Sheet"). Subsequent to the preparation of the Closing Date Balance
Sheet, MAAC will prepare a list of adjustments to the Closing Date Balance Sheet
based upon changes in the actual amounts of certain assets and liabilities of
FDC occurring prior to the closing date of the Merger. If the representative of
FDC disagrees with such adjustments, the parties shall submit the adjustments
and subsequent computation of the Closing Date Balance Sheet to binding
arbitration in accordance with the terms of the Plan of Reorganization.
After the Closing Date Balance Sheet adjustments have been determined, the
number of shares of MAAC Common Stock delivered to the FDC Shareholders will be
adjusted. If the Adjusted Net Equity (as defined in the Plan of Reorganization)
reflected on the Closing Date Balance Sheet is more or less than $57,070,000,
then the number of shares of MAAC Common Stock issued to the FDC Shareholders
will be adjusted as follows: (i) if the Adjusted Net Equity is more than
$57,070,000, then MAAC will issue additional shares of MAAC Common Stock to the
FDC Shareholders in a number equal to the excess of Adjusted Net Equity over
$57,070,000, divided by $28.00, and (ii) if the Adjusted Net Equity is less than
$57,070,000, then the FDC Shareholders will transfer to MAAC such number of
shares of MAAC Common Stock received in the Merger equal to the excess of
$57,070,000 over the Adjusted Net Equity, divided by $28.00. The FDC
Shareholders will receive or return shares of MAAC Common Stock in proportion to
each FDC Shareholder's ownership in FDC.
Any Participant receiving MAAC Common Stock or Class A Common Units in the
Reorganization will not have the right to receive the pro rata portion of the
1997 fourth quarter dividend or distribution for the period prior to the closing
of the Reorganization. If the full dividend or distribution is paid to such
Participants, then an adjustment will be made either by offsetting distributions
payable to such Participants or by separate cash payments by such Participants
to MAAC or MAALP, as applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business to be Acquired
FLOURNOY PROPERTIES GROUP
Combined Financial Statements
December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
and June 30, 1997 and 1996 (unadutied)
-8-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Flournoy Properties Group:
We have audited the accompanying combined balance sheets of Flournoy Properties
Group as of December 31, 1996 and 1995, and the related combined statements of
operations, partners' and owners' deficit, and cash flows for each of the years
in the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the management of Flournoy Properties
Group. Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Flournoy
Properties Group as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Atlanta, Georgia
May 5, 1997, except for note 9,
which is as of September 17, 1997
-9-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Balance Sheets
December 31,
June 30, --------------------
1997 1996 1995
--------- -------- --------
(Unaudited)
ASSETS (Dollars in thousands)
Real estate assets (note 2):
Land .................................... $ 20,365 17,098 15,885
Buildings and improvements .............. 237,916 213,026 202,297
Furniture, fixtures, and equipment ...... 39,270 32,225 24,170
--------- -------- --------
297,551 262,349 242,352
Less accumulated depreciation ........... 94,747 89,270 78,974
--------- -------- --------
Operating real estate assets ....... 202,804 173,079 163,378
Construction in progress .................. 7,632 25,984 8,001
Real estate held for development or sale .. 12,817 11,928 9,649
--------- -------- --------
Net real estate assets ............... 223,253 210,991 181,028
Cash and cash equivalents ................. 4,075 5,278 5,397
Trading securities ........................ 2,241 937 3,911
Restricted cash ........................... 5,350 3,606 4,818
Due from affiliates (note 4) .............. 4,936 3,497 4,617
Deferred financing costs, net of
accumulated amortization of $2,931
and $2,963 for 1996 and 1995,
respectively ............................ 5,012 5,198 5,479
Other assets .............................. 7,810 8,495 5,283
--------- -------- --------
Total assets ....................... $ 252,737 238,002 210,533
========= ======== ========
LIABILITIES AND PARTNERS' AND
OWNERS' DEFICIT
Liabilities:
Notes payable (note 2) .................. $ 291,049 273,438 241,738
Accrued interest payable ................ 3,022 2,378 2,252
Accounts payable and accrued expenses ... 13,477 11,618 7,534
Due to affiliates (note 4) .............. 2,453 1,227 1,974
Deferred development fees ............... 1,347 1,347 2,572
Security deposits ....................... 1,573 1,441 1,315
--------- -------- --------
Total liabilities .................. 312,921 291,449 257,385
Partners' and owners' deficit ............. (60,184) (53,447) (46,852)
--------- -------- --------
Commitments and contingencies (note 8)
Total liabilities and partners'
and owners' deficit .............. $ 252,737 238,002 210,533
========= ======== ========
See accompanying notes to combined financial statements.
-10-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Operations
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Property:
Rental ......................... $ 24,422 21,572 44,642 41,257 39,443
Other .......................... 1,309 992 2,177 1,720 1,504
Property management .............. 706 643 1,319 1,170 894
Development ...................... 363 1,136 2,046 4,779 3,668
Construction, net ................ 754 751 1,990 1,956 4,504
Miscellaneous .................... 333 1,276 2,143 1,673 1,197
-------- -------- -------- -------- --------
Total revenues ............ 27,887 26,370 54,317 52,555 51,210
-------- -------- -------- -------- --------
Expenses:
Property operating expenses:
Personnel costs ................ 2,863 2,530 5,286 4,743 4,281
Building repairs and maintenance 1,903 2,203 4,343 3,941 3,333
Real estate taxes and insurance 2,306 2,087 4,100 3,855 3,604
Utilities ...................... 1,149 1,182 2,164 2,067 1,900
Depreciation and amortization .. 5,759 5,117 10,712 9,406 8,587
Other operating expenses ....... 1,189 935 2,066 1,428 1,819
-------- -------- -------- -------- --------
15,169 14,054 28,671 25,440 23,524
Interest ......................... 11,958 10,449 21,338 19,730 19,322
Property management .............. 381 347 715 617 493
General and administrative ....... 2,367 2,435 4,548 4,674 5,471
Offering expenses ................ 2,056 -- 233 -- --
Other expense, net (note 1(k)) ... 103 76 194 666 643
-------- -------- -------- -------- --------
Total expenses ............ 32,034 27,361 55,699 51,127 49,453
-------- -------- -------- -------- --------
Nonrecurring income from easement
and settlement of claim (note 7) . -- -- -- 2,565 900
-------- -------- -------- -------- --------
Net (loss) income ......... $ (4,147) (991) (1,382) 3,993 2,657
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
-11-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Partners' and Owners' Deficit
Six Months ended June 30, 1997 (Unaudited) and Each of
the Years in the Three-Year Period ended December 31, 1996
(Dollars in thousands)
----------------------
Partners' and owners' deficit, December 31, 1993 ...... $(43,329)
Distributions ......................................... (4,479)
Net income ............................................ 2,657
--------
Partners' and owners' deficit, December 31, 1994 ...... (45,151)
Distributions ......................................... (4,303)
Purchase and retirement of common stock ............... (1,541)
Issuance of common stock .............................. 150
Net income ............................................ 3,993
--------
Partners' and owners' deficit, December 31, 1995 ...... (46,852)
Distributions ......................................... (4,186)
Purchase and retirement of common stock ............... (1,027)
Net loss .............................................. (1,382)
--------
Partners' and owners' deficit, December 31 1996 ....... (53,447)
Distributions ......................................... (2,590)
Net loss .............................................. (4,147)
--------
Partners' and owners' deficit, June 30, 1997 .......... $(60,184)
========
See accompanying notes to combined financial statements.
-12-
<PAGE>
FLOURNOY PROPERTIES GROUP
Combined Statements of Cash Flows
Six Months ended June 30, 1997 and 1996 (Unaudited) and Each of
the Years in the Three-Year Period ended December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .......................................... $ (4,147) (991) (1,382) 3,993 2,657
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization .......................... 5,759 5,117 10,712 9,406 8,587
Purchase of trading securities ......................... (2,399) (2,115) (3,171) (1,276) (2,837)
Proceeds from sales of trading securities .............. 1,097 1,739 7,203 1,446 2,138
Realized gains on sales of trading securities .......... (95) (120) (1,187) (108) (16)
Unrealized holding (gains) losses on trading securities 93 (703) 129 (700) (447)
Gain on sale of real estate held for development or sale (30) (30) (382) (100) (187)
Changes in assets and liabilities:
(Increase) decrease in restricted cash ............... (1,744) 1,333 1,212 3,475 (939)
Net change in due from (to) affiliates ............... (213) (26) 373 (3,482) 3,405
(Increase) decrease in other assets .................. 625 (5,479) (3,212) 2,774 (2,158)
Increase (decrease) in accrued interest payable ...... 644 (210) 126 (51) 251
Increase (decrease) in accounts payable and
accrued expenses .................................. 1,859 6,597 4,084 (2,808) 2,235
Increase (decrease) in deferred development fees ..... -- 276 (1,225) (1,781) (905)
Increase in tenants security deposit ................. 132 103 126 153 95
-------- -------- -------- -------- --------
Net cash provided by operating activities ........ 1,581 5,491 13,406 10,941 11,879
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to real estate assets ............................ (19,842) (16,527) (43,013) (32,054) (10,520)
Proceeds from the sale of real estate assets ............... 2,150 1,127 3,169 3,769 4,267
-------- -------- -------- -------- --------
Net cash used in investing activities ........... (17,692) (15,400) (39,844) (28,285) (6,253)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable ................................ 24,541 18,027 71,059 40,633 22,810
Principal payments on notes payable ........................ (6,930) (4,773) (39,359) (18,196) (22,394)
Payment of deferred financing costs ........................ (113) -- (168) (615) (132)
Proceeds from the issuance of common stock ................. -- -- -- 150 --
Purchase and retirement of common stock .................... -- (1,027) (1,027) (1,541) --
Capital distributions ...................................... (2,590) (2,781) (4,186) (4,303) (4,479)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities ......................... 14,908 9,446 26,319 16,128 (4,195)
-------- -------- -------- -------- --------
Net (decrease)increase in cash and
cash equivalents ............................. (1,203) (463) (119) (1,216) 1,431
Cash and cash equivalents, beginning of period ................. 5,278 5,397 5,397 6,613 5,182
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period ....................... 4,075 4,934 5,278 5,397 6,613
======== ======== ======== ======== ========
Supplemental disclosure of cash flow, information -
interest paid, including capitalized interest .............. $ 12,665 10,806 21,212 20,249 18,710
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
-13-
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
June 30, 1997 (Unaudited) and
December 31, 1996, 1995, and 1994
(Dollars in Thousands)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
The accompanying combined financial statements consist of the accounts
of the following entities having varying ownership in common.
Partnerships owning operating apartment communities (the "Properties"):
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Wildwood Apartments, Ltd. 120 Thomasville, Georgia March 1, 1979
River Trace Apartments, Ltd. 244 Memphis, Tennessee January 29, 1981
Three Oaks, Ltd. 120 Valdosta, Georgia March 20, 1981
Westbury Springs, Ltd. 150 Lilburn, Georgia March 6, 1982
Whispering Pines, Ltd. 120 LaGrange, Georgia March 9, 1982
Willow Creek Associates
Limited Partnership 285 Columbus, Georgia March 9, 1982
Fountain Lakes Apartments, Ltd. 100 Brunswick, Georgia May 5, 1982
Riverwynn, Ltd.: March 10, 1983
2000 Wynnton 72 Columbus, Georgia -
Riverwind 44 Columbus, Georgia -
Regency Club 100 Albany, Georgia -
Westbury Creek, Ltd. 120 Augusta, Georgia June 15, 1983
Whispering Pines,
Phase II, Ltd. 96 LaGrange, Georgia June 27, 1983
Windridge Apartments, Ltd. 174 Chattanooga, Tennessee July 8, 1983
Wildwood Apartments,
Phase II, Ltd. 96 Thomasville, Georgia July 22, 1983
Three Oaks Apartments,
Phase II, Ltd. 120 Valdosta, Georgia August 1, 1983
Pines Associates I 160 Augusta, Georgia October 25, 1983
In the Pines, Phase II, Ltd. 96 Augusta, Georgia November 1, 1983
Park Walk Apartments, Ltd. 124 Riverdale, Georgia August 9, 1984
Hidden Lake, Ltd. 160 Union City, Georgia September 11, 1984
The Vistas, Ltd. 144 Macon, Georgia October 11, 1984
River Trace Apartments,
Phase II, Ltd. 196 Memphis, Tennessee October 2, 1984
Paddock Park Apartments, Ltd. 200 Ocala, Florida July 25, 1985
Hidden Oaks Associates, L.P. 240 Albany, Georgia December 12, 1985
Brown-Flournoy Equity Income
Fund Limited Partnership: June 25, 1986
Southland Station I 160 Warner Robins, Georgia -
Park Place 184 Spartanburg, South Carolina -
Hidden Lake II 160 Union City, Georgia -
High Ridge 160 Athens, Georgia -
Paddock Club Huntsville,
a Limited Partnership 200 Huntsville, Alabama November 11, 1988
</TABLE>
-14- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Paddock Club Jacksonville,
a Limited Partnership 200 Jacksonville, Florida November 18, 1988
Paddock Club Wildewood,
a Limited Partnership 200 Columbia, South Carolina November 18, 1988
Paddock Club Lakeland,
a Limited Partnership 200 Lakeland, Florida December 21, 1988
Paddock Park Ocala II,
a Limited Partnership 280 Ocala, Florida December 21, 1988
Paddock Club Lakeland,
Phase II, a Limited Partnership 264 Lakeland, Florida August 24, 1989
Southland Station, Phase II,
a Limited Partnership 144 Warner Robins, Georgia August 24, 1989
Whisperwood Associates,
a Limited Partnership 506 Columbus, Georgia November 7, 1989
Whisperwood Spa & Club,
a Limited Partnership 348 Columbus, Georgia November 7, 1989
Paddock Club - Tallahassee
a Limited Partnership 192 Tallahassee, Florida July 25, 1990
Paddock Club Florence,
a Limited Partnership 200 Florence, Kentucky January 18, 1994
Paddock Club - Tallahassee,
Phase II, a Limited Partnership 112 Tallahassee, Florida May 10, 1994
Paddock Club Columbia,
Phase II, a Limited Partnership 136 Columbia, South Carolina February 23, 1995
Paddock Club Jacksonville,
Phase II, a Limited Partnership 120 Jacksonville, Florida August 7, 1995
</TABLE>
Partnerships owning apartment Properties which were under construction and/or in
initial lease-up during 1997:
<TABLE>
<CAPTION>
Number of
Apartment Location Date of
Name Units of Property Organization
---- --------- ----------- ------------
<S> <C> <C> <C>
Towne Lake Hills Apartments,
a Limited Partnership 264 Woodstock, Georgia August 8, 1995
Paddock Club Greenville,
a Limited Partnership 208 Greenville, South Carolina August 14, 1995
Paddock Club Brandon
a Limited Partnership 308 Brandon, Florida December 7, 1995
</TABLE>
Corporations involved in property management, leasing, development and
construction:
Date of
Name Organization
---- ------------
Flournoy Development Company ("FDC") October 1967
Flournoy Construction Company ("FCC") January 1972
-15- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
The entities listed above and on the two preceding pages are referred to
collectively as the Flournoy Properties Group ("FPG"). FDC is engaged in
the ownership of apartment communities located in Southeastern United
States and provides management, development and construction services on
a contractual basis.
(b) PRINCIPLES OF COMBINATION
The accompanying combined financial statements of FPG have been
presented on a combined basis because of the common ownership and
management and because the entities are expected to be the subject of a
business combination.
The accounts of each of the entities comprising FPG are combined in the
accompanying financial statements. All significant inter-entity accounts
and transactions have been eliminated in combination. The combined
financial statements include the assets and liabilities, as well as
operations of FPG, from the date that each entity commenced operations.
FPG management has made a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare the accompanying financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
(c) INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information for the six
months ended June 30, 1997 and 1996 has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. In the
opinion of management, all adjustments and eliminations, consisting only
of normal recurring adjustments, necessary to present fairly the
combined results of FPG's operations and cash flows for the six months
ended June 30, 1997 and 1996 have been included. The results of
operations for such interim periods is not necessarily indicative of the
results for the full year.
(d) REVENUE RECOGNITION
FPG leases residential apartments under operating leases with terms
generally one year or less. Rental and other revenues are recorded on
the accrual method of accounting as earned.
In addition to leasing the residential apartments of FPG, FDC provides
property management services for 40 affiliated Section 42 Housing Tax
Credit multifamily properties ("Section 42") - (note 8). Property
management revenue is recorded on the accrual method of accounting as
earned.
-16- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
FDC and FCC receive development and construction fees related to the
development of the affiliated Section 42 properties. Development and
construction income is recognized as earned as the property is developed
and certain operating and financing performance conditions are met. FDC
does not recognize development income to the extent that requirement
exists to invest a portion of such development fees in the partnership
entities from which the fees are earned.
FCC recognizes construction contract revenues, which are presented net
of construction contract costs in the accompanying statements of
operations, using the percentage-of-completion method. Under this
method, the percentage of contract revenue to be recognized currently is
computed based upon that percentage of estimated total revenue that
incurred costs to date bear to total estimated costs, after giving
effect to the most recent estimates of costs to complete. Revisions in
cost and revenue estimates are reflected in the period in which the
facts which require the revision become known. When revised cost
estimates indicate a loss on an individual contract, the total estimated
loss is provided for currently in its entirety without regard to the
percentage of completion.
(e) RENTAL OPERATIONS
FPG currently owns and operates approximately 8,600 apartment units
including those under construction and in initial lease up, Apartment
units are leased generally to tenants on terms of one year or less, with
monthly payments due in advance. In management's opinion, due to the
number of tenants, the type and diversity of submarkets in which the
Properties operate, and the collection terms, there is no concentration
of credit risk.
(f) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand. FPG considers all highly
liquid investments with a maturity of ninety days or less to be cash
equivalents.
(g) TRADING SECURITIES
Unrealized holding gains and losses on trading securities are included
in miscellaneous revenues in the accompanying combined statements of
operations.
(h) RESTRICTED CASH
Restricted cash is comprised of resident security deposits and
restricted deposits for property taxes and escrow accounts.
-17- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(i) REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are stated at the lower of depreciated cost or
estimated net realizable value.
The Flournoy Properties Group adopted the provisions of SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, on January 1, 1996. This statement requires
that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement did
not have a material impact on the Flournoy Properties Group's financial
position, results of operations, or liquidity.
Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line
basis over the useful lives of the properties (buildings and related
land improvements - 25 to 30 years; furniture, fixtures, and equipment -
3 to 10 years).
(j) REAL ESTATE HELD FOR DEVELOPMENT OR SALE
Real estate held for development or sale, which consists primarily of
sites intended for future multifamily developments, is stated at the
lower of aggregate cost or fair value. The cost includes the purchase
price of the land, construction, and development costs and fees, as well
as capitalized interest and loan fees.
(k) INCOME TAXES
No provision for federal and state income taxes relating to the combined
partnerships and Flournoy Properties (S Corporation) has been made in
the accompanying combined financial statements. Each partner or
shareholder is responsible for reporting their share of taxable income
or loss from these entities. There was no income tax expense for FDC in
1996. The 1995 and 1994 income tax expense for FDC was $460 and $650,
respectively, and is classified in other expense in the accompanying
statements of operations.
(l) DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are deferred. Deferred
financing costs are amortized over the terms of the related debt using a
method which approximates the interest method.
-18- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(2) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-------- --------
1996 1995
-------- --------
<S> <C> <C>
Demand and term notes:
Prime plus 1% (9.25% at December 31, 1996) notes payable to bank,
secured by real estate, property and equipment, and/or guaranteed
by John F. Flournoy, due on demand ................................. $ 42,657 17,434
Notes payable to bank, interest rate ranging from 8% to prime plus
1%, secured by real estate and assigned rents, due through 2010 ..... 7,953 7,193
Prime rate margin loan, due on demand; secured by trading securities .. -- 1,393
-------- --------
50,610 26,020
-------- --------
Mortgage and installment notes:
Mortgage and installment notes payable consist of the following:
Mortgage notes payable, bearing interest at rates ranging from
6.15% to 11.00%, due in monthly principal and interest
installments. Certain mortgage notes contain provisions for
payment of additional interest, as defined in the note agreement,
as well as for restrictions on prepayment of the notes ...........
Supplemental interest amounts were $743 at December 31, 1996, $562
in 1995 and $445 in 1994. The mortgage notes are secured by real
estate, certain letters of credit, assignment of leases and
management agreement, and/or guaranteed by John F. Flournoy ...... 175,403 192,560
Mortgage loan payable monthly through March 1, 1999, at which
time the entire outstanding principal balance is due and payable,
bearing interest at 275 basis points over the weekly average yield
on one year U.S. Treasury, adjusted on an annual basis; secured by
real estate assets, assignment of leases, and a guarantee
from John F. Flournoy ............................................ 6,995 7,087
Installment note payable, bearing interest at an annual rate of prime
plus 1%, secured by real estate assets and property and equipment 668 828
Installment note payable, bearing interest at fixed annual rate of
10.625%, secured by real estate assets or property and equipment . 1,442 1,457
-------- --------
184,508 201,932
-------- --------
Construction notes payable:
Construction notes payable bearing interest at 8.50%, secured by the
related real estate assets; convertible into installment notes ...... 11,197 6,592
Construction notes payable bearing interest at prime plus .5% to prime
plus 1%, secured by the related real estate assets; convertible into
installment notes ................................................... 27,123 7,194
-------- --------
38,320 13,786
-------- --------
$273,438 241,738
======== ========
</TABLE>
-19- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
The principal maturities as of December 31, 1996 of the mortgage and
installment notes are as follows:
1997 $ 5,343
1998 2,415
1999 16,673
2000 33,121
2001 9,727
Thereafter 117,229
-----------
$ 184,508
===========
Certain of the mortgage notes payable require escrow balances for the
payments of insurance, taxes, improvements, and repairs.
(3) FAIR VALUE OF DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by FPG
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret
market data and develop the related estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that could be realized upon disposition of the
financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts.
Cash and cash equivalents, rental and contract receivables, accrued
expenses and other liabilities, and security deposits are carried at
amounts which reasonably approximate their fair value.
Trading securities are carried at fair value based on published quotes.
The carrying value of notes payable at December 31, 1996 reasonably
approximates their fair value.
The fair value estimates presented herein are based on information
available to management as of December 31, 1996. Although management is
not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively revalued
for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts
presented herein.
-20- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
(4) RELATED PARTY TRANSACTIONS
Accounts due from/to affiliates, which are noninterest bearing and have
open payment terms, consist of the following:
December 31,
-------------------------
1996 1995
-------- --------
Accounts due from affiliates:
Section 42 partnerships .................... $ 2,654 2,227
Majority stockholder of FDC ................ 612 1,729
Other ...................................... 231 661
-------- --------
$ 3,497 4,617
======== ========
Account due to affiliates:
Section 42 partnerships .................... $ 725 1,867
Other ...................................... 502 107
-------- --------
$ 1,227 1,974
======== ========
During 1996 and 1995, there were capital stock transactions involving
related parties (note 5).
(5) CAPITAL STOCK
FDC has authorized 10,000,000 shares of common stock of $.01 par value
of which there were issued and outstanding 1,734,385; 1,831,789; and
1,944,444 shares at December 31, 1996, 1995, and 1994, respectively.
During 1996, FDC repurchased and retired 97,404 shares of its common
stock from a trust of which two existing shareholders/officers of the
Flournoy Properties Group are trustees. The stock was repurchased for
approximately $10.54 per share or a total of $1,027.
During 1995, FDC purchased and retired 142,655 shares of its common
stock from a trust of which two existing shareholders/officers of the
FDC are trustees. The stock was repurchased for approximately $10.80 per
share or a total of $1,541. Also, during 1995, FDC sold 30,000 shares of
common stock at $5.00 per share to three officers of FDC.
(6) EMPLOYEE BENEFIT PLANS
FDC has a contributory profit sharing plan covering substantially all
employees. FDC contributions to the Plan are discretionary.
Contributions of approximately $200, $203, and $200 were accrued in
1996, 1995 and 1994, respectively.
-21- (Continued)
<PAGE>
FLOURNOY PROPERTIES GROUP
Notes to Combined Financial Statements
(Dollars in Thousands)
Additionally, FDC had a deferred compensation plan for certain
employees. The deferred balance of each participants' account was a
function of the estimated fair value of the Flournoy Properties Group
common stock through December 31, 1995. The plan was frozen as of
December 31, 1995, and no further contributions have been made to the
plan by either the FDC or the participants. Compensation expense of $226
and $346 was accrued in the accompanying financial statements for 1995
and 1994, respectively.
(7) LITIGATION AND EASEMENT SETTLEMENTS
Certain partnerships settled, in 1995, an outstanding legal claim with
the manufacturer of defective polybutylene water piping that was
installed at six Properties. The lawsuit sought damages resulting from
water pipe leaks at the Properties since construction. The final
settlement included the cost to re-plumb each Property, as well as
additional net settlement proceeds to the partnerships of $2,465.
Additionally, two partnerships (Phases I and II of same Property)
received proceeds of $100 and $900 in 1995 and 1994, respectively, for a
court-ordered gas pipe easement granted to a Florida utility Flournoy
Properties Group.
(8) COMMITMENTS AND CONTINGENCIES
FDC is contingently liable at December 31, 1996 in the amount of $4,536
for letters of credit required by investors and mortgagees of various
affiliated partnerships. FDC is also contingently liable at December 31,
1996 in the amount of $3,474 for letters of credit issued for completion
of construction projects and for amounts required by local governments
relating to land improvements. Also, FDC and certain affiliates have
guaranteed at December 31, 1996 loan obligations of affiliated
partnerships amounting to approximately $3,200.
FDC is the general partner in 43 limited partnerships that are included
in the Low Income Housing Tax Credit LIHTC Program and are governed by
Section 42 of the Internal Revenue Code of 1986 ("IRC"), as amended. In
order to maintain the tax benefits associated with the ownership of the
properties, LIHTC Program provisions must be followed in the management
and operations of the properties during the Compliance Period, as
defined in the IRC.
As of December 31, 1996 and under certain circumstances, the Flournoy
Properties Group is committed to make project expense and working
capital loans up to $3,707 to various affiliated partnerships. The
balance of such loans as of December 31, 1996 is $997.
As of December 31, 1996, Paddock Park Apartments, Ltd. is contingently
liable in the amount of $6,852 for a letter of credit issued to the
trustee for the Housing Finance Authority of Marion County, Florida. The
letter of credit is required to fund any defaults of the Florida
Multifamily Housing Revenue Refunding Bonds and expires November 5,
2008.
(9) REORGANIZATION
On September 17, 1997, FDC, Mid-America Apartment Communities, Inc.
("MAAC") and Mid-America Apartments, L.P. ("MAALP") entered into an
Agreement and Plan of Reorganization pursuant to which FDC will merge
with and into MAAC, and MAAC and MAALP will acquire certain assets of
FDC and certain affiliated entities (collectively FPG) through a series
of merger, exchange and purchase transactions. The Reorganization is
subject to approval of the shareholders and partners of FPG and certain
other third parties.
-22-
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma condensed combined financial statements
give effect to the following transactions: (i) consummation of the merger of
Flournoy Development Company ("FDC") with and into Mid-America Apartment
Communities, Inc. ("MAAC") and the other transactions (collectively, the
"Reorganization") as described in the Agreement and Plan of Reorganization dated
as of September 15, 1997 (the "Plan of Reorganization") between FDC, MAAC and
Mid-America Apartments, L.P. ("MAALP") pursuant to which MAAC and MAALP shall
acquire all the properties and assets comprising the Flournoy Properties Group
("FPG") including FDC as described in Note 1 to the Combined Financial
Statements of Flournoy Properties Group, which have been filed together with
these unaudited pro forma financial statements, in exchange for 1,556,510 shares
of MAAC Common Stock, 481,700 Class A Common Units of MAALP, and approximately
$29.6 million cash; (ii) the acquisition in 1996 of six apartment communities
("Communities") containing an aggregate of 1,760 apartment units for an
aggregate cash purchase price of $65.7 million (the "1996 Completed
Acquisitions"); (iii) the acquisition in 1997 of nine Communities containing an
aggregate of 2,600 apartment units for an aggregate cash purchase price of
$107.6 million (the "1997 Completed Acquisitions") (the 1996 Completed
Acquisitions and 1997 Completed Acquisitions, collectively, the "Completed
Acquisitions"); (iv) the disposition in 1996 of three Communities containing an
aggregate of 724 apartment units for an aggregate cash consideration of $17.8
million (the " Dispositions"); (v) the anticipated acquisition, subsequent to
June 30, 1997, of three additional Communities containing an aggregate of 602
apartment units for an aggregate cash purchase price of $21.9 million (the "1997
"Probable Acquisitions"); (vi) the issuance and sale in October 1996 of 2.0
million shares of MAAC's 9.5% Series A Cumulative Preferred Stock (Liquidation
Preference $25 per Share) (the "Series A Preferred Stock") for an aggregate net
cash price of $47.8 million (the "October 1996 Preferred Stock Offering"), and
the related use of such proceeds; and (vii) the issuance and sale in March 1997
of 2.3 million shares of MAAC Common Stock for an aggregate net cash price of
$62.6 million, and the related use of such proceeds.
In addition, such unaudited pro forma condensed combined financial
statements give effect to the following financing transactions that the Company
expects to consummate prior to the closing of the Reorganization and the
Company's assumptions with respect to the terms of such financing: (i) the
issuance and sale of 3,333,000 shares of MAAC Common Stock at an assumed price
of $29.50 per share for an estimated aggregate net cash price of $92.9 million
(the "Common Stock Offering"); (ii) the issuance and sale of 3,200,000 shares of
MAAC's 9% Preferred Stock (Liquidation Preference $25 per Share) for an
estimated aggregate net cash price of $77.4 million (the "Preferred Stock
Offering"); and (iii) the establishment of a new $150 million secured term loan
bearing interest at 7% per annum and the establishment of a new $150 million
secured line of credit bearing interest at 7.65% per annum (collectively, the
"New Credit Facilities") and the Company's initial anticipated borrowings
thereunder. The Preferred Stock Offering and New Credit Facilities are intended
to provide financing for the transactions described in the above paragraph.
While the Company intends to undertake the financing transactions described
above, there can be no assurance that such financing will occur on the terms
assumed by the Company.
The unaudited pro forma condensed combined balance sheet at June 30, 1997
has been prepared as if the Reorganization, the Common Stock Offering, the
Preferred Stock Offering, the establishment of the New Credit Facilities and the
1997 Probable Acquisitions had been completed on that date.
The unaudited pro forma condensed combined statements of operations for
the six months ended June 30, 1997 and the year ended December 31, 1996 have
been prepared as if each of the transactions described above had been
consummated on January 1, 1996 and assuming that MAAC had qualified as a REIT
and distributed all of its taxable income for the periods presented and,
therefore, incurred no income tax expense.
For purposes of these unaudited pro forma financial statements, the
Reorganization has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of MAAC's management,
all significant adjustments necessary to reflect the effects of the foregoing
transactions have been made.
<PAGE>
These unaudited pro forma financial statements have been prepared by MAAC
based on the historical financial statements of FPG included elsewhere in this
Current Report on Form 8-K and of MAAC previously filed in its 1996 Annual
Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, which have been previously filed with the Securities and Exchange
Commission and are incorporated herein by reference. These unaudited pro forma
financial statements should be read in conjunction with the foregoing historical
financial statements, including the notes thereto. These pro forma condensed
combined financial statements are presented for comparitive purposes only and
are not indicative of what the actual financial position or results of
operations of MAAC would have been had the foregoing transactions occurred on
the dates indicated.
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAAC FPG Pro Forma
Pro Forma (A) Historical (B) Adjustments (C) Combined
-------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C>
Rental real estate assets, net ............................ 712,106 202,804 158,497 (D) 1,073,407
Construction in progress .................................. 14,123 7,632 (539)(E) 21,216
Real estate held for development .......................... -- 12,817 1,934 (D) 14,751
- ------------------------------------------------------------------------------------------------------------------------------------
Net real estate assets ............................. 726,229 223,253 159,892 1,109,374
Cash and cash equivalents ................................. 5,214 4,075 (3,875)(F) 5,414
Trading securities ........................................ -- 2,241 (2,241)(G) --
Restricted cash ........................................... 5,271 5,350 (1,527)(H) 9,094
Due from affiliates ....................................... -- 4,936 (4,936)(I) --
Deferred financing costs, net ............................. 2,856 5,012 (4,342)(J) 3,526
Other assets .............................................. 6,679 7,870 (428)(K) 14,121
-------------------------------------------------------------------
TOTAL ASSETS .............................................. 746,249 252,737 142,543 1,141,529
===================================================================
LIABILITIES:
Notes payable ............................................. 318,670 291,049 (130,222)(L) 479,497
Line of credit ............................................ 72,007 -- -- 72,007
Due to affiliates ......................................... -- 2,453 (1,029)(M) 1,424
Deferred development fees ................................. -- 1,347 (1,347)(N) --
Other liabilities ......................................... 15,914 18,072 (5,631)(O) 28,355
-------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 406,591 312,921 (138,229) 581,283
===================================================================
Minority interest ......................................... 45,282 -- 31,298 (P) 76,580
SHAREHOLDERS' EQUITY:
Preferred stock ........................................... 20 -- 32 (Q) 52
Common stock .............................................. 134 -- 49 (R) 183
Additional paid-in-capital ................................ 317,253 -- 197,368 (S) 514,621
Accumulated deficit ....................................... (22,112) (60,184) 52,025 (T) (30,271)
Other ..................................................... (919) -- -- (919)
-------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY ................................ 294,376 (60,184) 249,474 483,666
-------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................ 746,249 252,737 142,543 1,141,529
===================================================================
</TABLE>
<PAGE>
PRO FORMA ADJUSTMENTS:
(A) See MAAC Pro Forma below.
(B) Reflects the unaudited combined historical balance sheet of FPG as of June
30, 1997.
(C) MAAC may issue additional shares of Common Stock having a value of up to
$7,500,000 ("Contingent Value Shares") if certain agreed upon conditions are
satisfied during calendar years 1998, 1999 and 2000. When and if issued, the
Contingent Value Shares will be recorded as additional purchase
consideration based upon the fair value of the Common Stock at the date of
issuance. The amount of the Contingent Value Shares potentially issuable by
MAAC, has not been included in the Pro Forma Condensed Combined Balance
Sheet.
(D) Represents an increase in the carrying value of FPG properties resulting
from the application of the purchase method of accounting.
(E) Represents the elimination of income on a construction contract between MAAC
and FPG.
<TABLE>
<S> <C>
(F) Represents:
Estimated proceeds from the sale of trading securities, net of estimated commissions of $67 2,174
Anticipated FPG distributions at the date of consummating the Reorganization .............. (3,172)
Contributions to FPG by the majority shareholder .......................................... 201
Net change in cash resulting from the disposition of Section 42 partnership interests and
related affiliate balances .......................................................... 1,639
Purchase of certain real estate assets and partnership interests in connection with the
Reorganization ...................................................................... (29,589)
Prepayment of certain FPG mortgages and notes payable consisting of principal ($197,222),
interest ($2,262), penalties ($7,620) and escrow refunds $1,385 ..................... (205,719)
Settlement of FPG's deferred compensation plan ............................................ (1,610)
Legal, accounting, investment banking and other costs ..................................... (5,000)
Settlement of a portion of due from majority FPG stockholder .............................. 595
Anticipated net proceeds from the Preferred Stock Offering ................................ 77,360
Anticipated net proceeds from the Common Stock Offering ................................... 92,916
Anticipated proceeds from the New Credit Facilities, net of issuance costs of $670 ........ 66,330
---------
(3,875)
=========
</TABLE>
(G) Represents the sale of trading securities.
(H) Represents the refund ($1,385) of escrow deposits on FPG mortgages and notes
payable expected to be prepaid and escrow deposits ($142) expected to be
settled in connection with the sale of the Section 42 partnership interests.
(I) Represents amounts which were eliminated in conjunction with the sale of the
Section 42 partnership interests ($2,311), the settlement of certain Section
42 and other affiliate balances for cash ($1,610), the settlement of amounts
due from the majority stockholder for cash ($595) and units in MAALP ($420).
(J) Represents the write-off of FPG deferred financing costs ($5,012) resulting
from the application of the purchase method of accounting to reflect the
debt at fair value and deferred financing costs of $670 for new debt
expected to be incurred as part of the New Credit Facilities.
(K) Represents the elimination of amounts receivable by FPG under a construction
contract between MAAC and FPG ($1,759), and an increase in the carrying
value of certain non-rental FPG assets resulting from the application of the
purchase method of accounting of $1,331.
(L) Represents the anticipated prepayment of certain FPG mortgages and notes
payable ($197,222) and anticipated additional borrowings under the New
Credit Facilities in connection with the transactions of $67,000.
(M) Represents amounts which were eliminated in conjunction with the sale of the
Section 42 partnership interests ($413), the settlement of Section 42 and
other affiliate balances for cash ($144) and the elimination of an affiliate
balance ($472) related to a formation entity acquired for cash.
(N) Represents the elimination of amounts resulting from the sale of the Section
42 partnership interests.
(O) Represents the elimination of amounts payable by MAAC to FPG under a
construction contract ($1,759), payment of accrued interest on FPG mortgages
and notes payable expected to be prepaid in connection with the
Reorganization ($2,262), and the termination of FPG's deferred compensation
plan ($1,610).
(P) Represents the issuance of 481,700 Class A Common Units in MAALP at
consummation of the Reorganization at a market value of $13,819 (based upon
$28.69 per unit) and an adjustment to minority interest for the issuance of
Class A Common Units in connection with the Reorganization, the Common Stock
Offering and a property acquisition of $17,479.
(Q) Represents the issuance of 3,200,000 shares of preferred stock in the
Preferred Stock Offering.
(R) Represents the issuance of 3,333,000 shares of Common Stock in the Common
Stock Offering, $33 ($29.50 per share), and the issuance of Common Stock in
connection with the Reorganization, $16 ($28.69 per share).
<TABLE>
<S> <C>
(S) Represents:
Net proceeds from the anticipated Preferred Stock Offering ...................... 77,360
Net proceeds from the anticipated Common Stock Offering ......................... 92,916
Issuance of 1,556,510 shares of Common Stock in connection with the
Reorganization assuming a market value of $28.69 per share ................. 44,652
Adjustment to minority interest of MAALP for the issuance of
Class A Common Units ....................................................... (17,479)
Par value of shares issued in the Common Stock Offering and the Preferred
Stock Offering ............................................................. (81)
--------
197,368
========
(T) Represents:
Elimination of income recognized on a construction contract between MAAC and FPG (539)
Anticipated prepayment penalties to be incurred in connection with the prepayment
of certain FPG mortgages and notes payable subsequent to the Reorganization (7,620)
Elimination of FPG accumulated deficit as a result of the application of
the purchase method of accounting .......................................... 60,184
-------
52,025
=======
</TABLE>
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAAC COMPLETED PROBABLE MAAC
HISTORICAL(U) ACQUISITIONS ACQUISITIONS PRO FORMA
------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
ASSETS:
Real estate assets, net ........................... $ 669,191 $20,798(V) $22,117(W) $ 712,106
Construction in progress .......................... 14,123 -- -- 14,123
--------- ------- ------- ---------
Net real estate assets ............................ 683,314 20,798 22,117 726,229
Cash and cash equivalents ......................... 5,214 -- -- 5,214
Restricted cash ................................... 5,271 -- -- 5,271
Deferred financing costs, net ..................... 2,751 100(X) 5(X) 2,856
Other assets ...................................... 6,679 -- -- 6,679
--------- ------- ------- ---------
TOTAL ASSETS ...................................... $ 703,229 $20,898 $22,122 $ 746,249
========= ======= ======= =========
Liabilities:
Notes payable ..................................... $ 299,972 15,149(Y) 3,549(Y) 318,670
Line of credit .................................... 47,925 5,509(Z) 18,573(Z) 72,007
Other liabilities ................................. 15,914 -- -- 15,914
--------- ------- ------- ---------
TOTAL LIABILITIES ................................. 363,811 20,658 22,122 406,591
Minority interest ................................. 45,042 240(AA) -- 45,282
SHAREHOLDERS' EQUITY:
Cumulative preferred stock ........................ 20 -- -- 20
Common shares ..................................... 134 -- -- 134
Additional paid-in-capital ........................ 317,253 -- -- 317,253
Accumulated deficit ............................... (22,112) -- -- (22,112)
Other ............................................. (919) -- -- (919)
--------- ------- ------- ---------
TOTAL SHAREHOLDERS' EQUITY ........................ 294,376 -- -- 294,376
--------- ------- ------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........ $ 703,229 $20,898 $22,122 $ 746,249
========= ======= ======= =========
</TABLE>
<PAGE>
MAAC PRO FORMA ADJUSTMENTS:
(U) Reflects the unaudited historical consolidated balance sheet of MAAC as of
June 30, 1997.
(V) Increase represents Completed Acquisitions which were consummated subsequent
to June 30, 1997.
(W) Increase represents the 1997 Probable Acquisitions which are expected to
occur subsequent to June 30, 1997.
(X) Increase represents deferred financing costs incurred in connection with the
assumption of debt to fund the Completed Acquisitions which were consummated
subsequent to June 30, 1997 and the 1997 Probable Acquisitions.
(Y) Increase represents assumption of debt anticipated in connection with the
Completed Acquisitions which were consummated subsequent to June 30, 1997
and the 1997 Probable Acquisitions.
(Z) Increase represents additional borrowings which are anticipated in
connection with the Completed Acquisitions which were consummated subsequent
to June 30, 1997 and the 1997 Probable Acquisitions.
(AA) Increase represents Class A Common Units in MAALP which were issued in
connection with a property acquisition.
<PAGE>
MID - AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MAAC FPG COMBINED
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS(C) PRO FORMA
------------ ------------- -------------- ---------
<S> <C> <C> <C>
REVENUES:
Property
Rental .................................................................. $68,360 $24,422 -- $92,782
Other ................................................................... 778 1,309 -- 2,087
Property management ....................................................... -- 706 -- 706
Development ............................................................... -- 363 -- 363
Construction, net ......................................................... -- 754 (539)(D) 215
Miscellaneous ............................................................. 330 331 (269)(E) 392
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES ...................................................... 69,468 27,885 (808) 96,545
EXPENSES:
Personnel ............................................................... 7,231 2,863 -- 10,094
Building repairs/maintenance, utilities,
landscaping, and other operating ...................................... 11,550 4,241 (37)(F) 15,754
Real estate taxes and insurance ......................................... 7,481 2,306 -- 9,787
Depreciation and amortization - real estate assets ...................... 13,719 5,422 259 (G) 19,400
Depreciation and amortization - non real estate assets .................. 95 141 (10)(G) 226
Property management ..................................................... -- 381 -- 381
General and administrative .............................................. 3,223 2,367 (485)(H) 5,105
Interest ................................................................ 15,409 11,958 (6,635)(I) 20,732
Amortization of deferred financing costs ................................ 444 299 (232)(J) 511
Offering expenses ....................................................... -- 2,056 (2,056)(K) --
Other, net .............................................................. -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses ...................................................... 59,152 32,034 (9,196) 81,990
- ------------------------------------------------------------------------------------------------------------------------------------
Income before gains on sale of assets ..................................... 10,316 (4,149) 8,388 14,555
- ------------------------------------------------------------------------------------------------------------------------------------
GAINS ON SALE OF ASSETS ................................................... -- 2 (2)(L) --
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest in operating partnership income ........... 10,316 (4,147) 8,386 14,555
- ------------------------------------------------------------------------------------------------------------------------------------
Minority interest in operating partnership income ......................... 1,630 -- 422 (M) 2,052
- ------------------------------------------------------------------------------------------------------------------------------------
Net income ................................................................ 8,686 (4,147) 7,964 12,503
- ------------------------------------------------------------------------------------------------------------------------------------
Dividend on preferred shares .............................................. 2,375 -- 3,600 (N) 5,975
- ------------------------------------------------------------------------------------------------------------------------------------
Net income available for common shareholders .............................. $6,311 $(4,147) $4,364 $6,528
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per common share ............................................... $ 0.36(O)
====================================================================================================================================
</TABLE>
Pro Forma Adjustments:
(A) See MAAC Pro Forma below.
(B) Reflects the historical combined statement of operations of FPG for the six
months ended June 30, 1997. Certain reclassifications have been made to
FPG's historical statement of operations to conform to MAAC's presentation.
Subsequent to the Reorganization, MAAC expects to incur prepayment
penalties of approximately $7,620 on notes payable of FPG which are
expected to be prepaid. These nonrecurring costs are charged to operations
as an extraordinary item when incurred. Such amounts have not been included
in the Pro Forma Condensed Consolidated Statement of Operations.
(C) MAAC may issue additional shares of Common Stock having a value of up to
$7,500,000 if certain agreed upon conditions are satisfied during calendar
years 1998, 1999 and 2000. When and if issued, the Contingent Value Shares
will be recorded as additional purchase consideration based upon the fair
value of the Common Stock at the date of issuance. The amount of the
amortization charge related to the Contingent Value Shares potentially
issuable by MAAC has not been included in the Pro Forma Condensed Combined
Statement of Operations.
(D) Represents the elimination of income recognized on a construction contract
between MAAC and FPG.
(E) Represents the elimination of nonrecurring income of FPG consisting of
dividend income on trading securities ($18), distributions from the Section
42 interests which are expected to be disposed of prior to the
Reorganization ($224) and other ($27).
(F) Represents elimination of certain administrative fees of FPG.
(G) Represents additional depreciation related to the increase in the cost of
FPG properties resulting from the application of the purchase method of
accounting.
(H) Represents reductions in general and administrative expenses as a result of
the Reorganization due to a decrease in professional fees ($165) and a
decrease in executive compensation and certain employee benefit cost
($320).
(I) Represents the net reduction in interest and credit enhancement costs
associated with the repayment of FPG mortgage and notes payable as a part
of the transaction ($9,147) and interest on additional borrowings under the
New Credit Facility of $2,512.
(J) Represents amortization of historical deferred financing costs of FPG which
were eliminated in connection with applying the purchase method of
accounting ($299) net of the amortization of deferred financing costs on
new debt which is expected to be incurred of $67.
(K) Represents elimination of accounting, legal and other costs incurred in
connection with proposed public offering of FDC common stock which was
aborted during 1997.
(L) Represents the elimination of nonrecurring gains on sales of assets.
(M) Represents the change in minority interest in MAALP income as a result of
the Reorganization, Common Stock Offering and a property acquisition where
Class A Common Units were issued.
(N) Represents dividends on the 3,200,000 shares of preferred stock which are
expected to be issued in the Preferred Stock Offering.
(O) Pro Forma net income available per common share is based on 18,275 shares
outstanding during the period and Pro Forma net income available for common
shareholders. Extraordinary expenses related to debt financings have been
excluded from the calculation of Pro Forma net income available for common
shareholders.
<PAGE>
MID - AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------------------------
MAAC COMPLETED PROBABLE MAAC
HISTORICAL(P) ACQUISITIONS(Q) ACQUISITIONS(R) OTHER PRO FORMA
------------- --------------- --------------- ----- ---------
<S> <C> <C> <C> <C>
REVENUES:
Property
Rental ........................................ $61,629 $4,992 $1,739 -- $68,360
Other ......................................... 600 128 50 -- 778
Miscellaneous ................................... 330 -- -- -- 330
------- ------ ------ -------- --------
TOTAL REVENUES ............................ 62,559 5,120 1,789 69,468
EXPENSES:
Personnel ..................................... 6,576 468 187 -- 7,231
Building repairs/maintenance, utilities,
landscaping, and other operating ............ 10,323 891 336 -- 11,550
Real estate taxes and insurance ............... 6,537 600 344 -- 7,481
Depreciation and amortization - real
estate assets ............................... 12,350 -- -- 1,369(S) 13,719
Depreciation and amortization - non real
estate assets ............................... 85 -- -- 10(T) 95
General and administrative .................... 3,016 -- -- 207(U) 3,223
Interest ...................................... 13,097 -- -- 2,312(V) 15,409
Amortization of deferred financing costs ...... 410 -- -- 34(W) 444
------- ------ ------ -------- --------
TOTAL EXPENSES ............................ 52,394 1,959 867 3,932 59,152
Income before minority interest in operating
partnership income ............................ 10,165 3,161 922 (3,932) 10,316
------- ------ ------ -------- --------
Minority interest in operating partnership income 1,750 -- -- (120)(X) 1,630
Net income ...................................... 8,415 3,161 922 (3,812) 8,686
------- ------ ------ -------- --------
Dividends on preferred shares ................... 2,375 -- -- -- 2,375
------- ------ ------ -------- --------
Net income available for common shareholders .... $ 6,040 $3,161 $ 922 $ (3,812) $ 6,311
======= ====== ====== ======== ========
</TABLE>
MAAC PRO FORMA ADJUSTMENTS:
(P) Reflects the unaudited historical consolidated statement of operations of
MAAC for the six months ended June 30, 1997.
(Q) Represents historical operating revenues and expenses from January 1, 1997
to the earlier of the acquisition date or June 30, 1997 for the 1997
Completed Acquisitions.
(R) Represents historical operating revenues and expenses for the six months
ended June 30, 1997 for the 1997 Probable Acquisitions.
(S) Represents additional real estate depreciation and amortization resulting
from the Completed Acquisitions and the 1997 Probable Acquisitions.
(T) Represents additional non-real estate depreciation and amortization
resulting from the Completed Acquisitions and the 1997 Probable
Acquisitions.
(U) Represents anticipated additional costs to operate MAAC resulting from
property acquisitions.
(V) Represents additional interest costs related to mortgage debt incurred or
assumed in connection with the Completed Acquisitions and the 1997 Probable
Acquisitions.
(W) Represents additional amortization resulting from deferred financing costs
incurred in connection with the Completed Acquisitions and the 1997
Probable Acquisitions.
(X) Represents the change in the minority interest in the income of MAALP
during the period.
<PAGE>
MID - AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MAAC FPG COMBINED
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS(C) PRO FORMA
----------- ------------- -------------- --------
<S> <C> <C> <C>
REVENUES:
Property
Rental ............................................... $ 134,591 $44,642 $ -- $179,233
Other ................................................ 1,827 2,177 -- 4,004
Property management .................................... -- 1,319 -- 1,319
Development ............................................ -- 2,046 -- 2,046
Construction, net ...................................... -- 1,990 (136)(D) 1,854
Miscellaneous .......................................... 732 823 (296)(E) 1,259
--------- ------- ------- --------
TOTAL REVENUES ................................... 137,150 52,997 (432) 189,715
EXPENSES:
Personnel ............................................ 13,944 5,286 -- 19,230
Building repairs/maintenance, utilities,
landscaping, and other operating ................... 23,218 8,573 (75)(F) 31,716
Real estate taxes and insurance ...................... 14,374 4,100 -- 18,474
Depreciation and amortization - real estate assets ... 26,145 10,191 1,170(G) 37,506
Depreciation and amortization - non real estate assets 190 266 (4)(G) 452
Property management .................................. -- 715 -- 715
General and administrative ........................... 6,912 4,548 (829)(H) 10,631
Interest ............................................. 29,992 21,338 (11,258)(I) 40,072
Amortization of deferred financing costs ............. 739 449 (315)(J) 873
Offering expenses .................................... -- 233 (233)(K) --
Other, net ........................................... -- -- 640(L) 640
--------- ------- ------- --------
TOTAL EXPENSES ................................... 115,514 55,699 (10,904) 160,309
--------- ------- ------- --------
Income before gains on sale of assets .................. 21,636 (2,702) 10,472 29,406
--------- ------- ------- --------
Gains on sale of assets ................................ -- 1,320 (1,320)(M) --
Income before minority interest in operating
partnership income ................................... 21,636 (1,382) 9,152 29,406
--------- ------- ------- --------
Minority interest in operating partnership income ...... 3,419 -- 727(N) 4,146
--------- ------- ------- --------
Net income ............................................. 18,217 (1,382) 9,425 25,260
--------- ------- ------- --------
Dividend on preferred shares ........................... 4,750 -- 7,200(O) 11,950
--------- ------- ------- --------
Net income available for common shareholders ........... $ 13,467 $(1,382) $ 1,225 $ 13,310
========= ======= ======= ========
Net income per common share ............................ $ 0.73(P)
========= ======= ======= ========
</TABLE>
<PAGE>
PRO FORMA ADJUSTMENTS:
(A) See MAAC Pro Forma below.
(B) Reflects the historical combined statement of operations of FPG for the
year ended December 31, 1996. Certain reclassifications have been made to
FPG's historical statement of operations to conform to MAAC's presentation.
Subsequent to the reorganization, MAAC expects to incur prepayment
penalties of approximately $7,620 on mortgages and notes payable of FPG
which are expected to be prepaid. These nonrecurring costs will be charged
to operations as an extraordinary item when incurred. Such amounts have not
been included in the Pro Forma Condensed Combined Statement of Operations.
(C) MAAC may issue additional shares of Common Stock having a value of up to
$7,500,000 if certain agreed upon conditions are satisfied during calendar
years 1998, 1999 and 2000. When and if issued, the Contingent Value Shares
will be recorded as additional purchase consideration based upon the fair
value of the Common Stock at the date of issuance. The amount of the
amortization charge related to the Contingent Value Shares potentially
issuable by MAAC has not been included in the Pro Forma Condensed Combined
Statement of Operations.
(D) Represents the elimination of income recognized on a construction contract
between MAAC and FPG.
(E) Represents the elimination of nonrecurring income recognized by FPG during
1996 related to dividends on trading securities ($34) and distributions
from the Section 42 interests which are expected to be disposed of prior to
the Reorganization ($262).
(F) Represents elimination of certain administrative fees of FPG.
(G) Represents depreciation related to the increase in the cost of FPG
properties resulting from the application of the purchase method of
accounting.
(H) Represents reductions in general and administrative expenses as a result of
the Reorganization due to decreases in professional fees ($105), and a
decrease in executive compensation and certain employee benefit costs
($724).
(I) Represents the net reduction in interest and credit enhancement costs
associated with the expected prepayment of certain FPG mortgage and notes
payable ($16,283) net of interest on additional borrowings under the New
Credit Facilities of $5,025.
(J) Represents amortization of historical deferred financing costs of FPG which
were eliminated in connection with applying the purchase method of
accounting ($449), net of the amortization of the deferred financing costs
on new debt which is expected to be incurred of $134.
(K) Represents elimination of accounting, legal and other costs incurred in
connection with a proposed public offering of FDC common stock which was
abandoned during 1997.
(L) Represents the estimated additional income tax expense for the operation of
Mid-America Services Corporation, a subsidiary of MAALP to be organized in
connection with the Reorganization for the purpose of conducting third
-party service businesses (the "Service Sub").
(M) Represents the elimination of nonrecurring income of FPG on the sale of
trading securities ($1,058) and on the liquidation of a single property
partnership ($262).
(N) Represents the change in minority interest in the MAALP income as a result
of the Reorganization, the Common Stock Offering, and a property
acquisition where Class A Common Units were issued.
(O) Represents dividends on 3,200,000 shares of preferred stock which are
expected to be issued in the Preferred Stock Offering.
(P) Pro Forma net income available per common share is based on 18,275 shares
outstanding during the period and Pro Forma net income available for common
shareholders. Extraordinary expenses related to debt financings have been
excluded from the calculation of Pro Forma net income available for common
shareholders.
<PAGE>
MID - AMERICA APARTMENT COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------------------
MAAC COMPLETED PROBABLE MAAC
HISTORICAL(Q) ACQUISITIONS(R) ACQUISITIONS(S) DISPOSITIONS(T) OTHER PRO FORMA
------------- --------------- --------------- --------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Property
Rental ..................................... $110,090 $23,186 $3,642 $(2,327) $ -- $134,591
Other ...................................... 1,060 735 104 (72) -- 1,827
Miscellaneous ................................ 732 -- -- -- -- 732
-------- ------- ------ ------- -------- --------
TOTAL REVENUES ......................... 111,882 23,921 3,746 (2,399) -- 137,150
EXPENSES:
Personnel .................................. 11,702 2,237 331 (326) -- 13,944
Building repairs/maintenance, utilities,
landscaping, and other operating ......... 19,226 3,846 739 (593) -- 23,218
Real estate taxes and insurance ............ 11,642 2,442 491 (201) -- 14,374
Depreciation and amortization - real
estate assets ............................ 21,288 -- -- (519) 5,376(U) 26,145
Depreciation and amortization - non real
estate assets ............................ 155 -- -- (3) 38(V) 190
General and administrative ................. 6,154 -- -- -- 758(W) 6,912
Interest ................................... 25,766 -- -- -- 4,226(X) 29,992
Amortization of deferred financing costs ... 661 -- -- -- 78(Y) 739
-------- ------- ------ ------- -------- --------
TOTAL EXPENSES ......................... 96,594 8,525 1,561 (1,642) 10,476 115,514
-------- ------- ------ ------- -------- --------
Income before gain on disposition of
properties ................................. 15,288 15,396 2,185 (757) (10,476) 21,636
Gain on dispositions of properties ........... 2,185 -- -- -- (2,185)(Z) --
-------- ------- ------ ------- -------- --------
Income before minority interest in
operating partnership ...................... 17,473 15,396 2,185 (757) (12,661) 21,636
-------- ------- ------ ------- -------- --------
Minority interest in operating partnership
income ..................................... 3,213 -- -- -- 206(AA) 3,419
-------- ------- ------ ------- -------- --------
Net income ................................... 14,260 15,396 2,185 (757) (12,867) 18,217
-------- ------- ------ ------- -------- --------
Dividend on preferred shares ................. 990 -- -- -- 3,760(AB) 4,750
-------- ------- ------ ------- -------- --------
Net income available for common shareholders . $ 13,270 $15,396 $2,185 $ (757) $(16,627) $ 13,467
======== ======= ====== ======= ======== ========
</TABLE>
<PAGE>
MAAC PRO FORMA ADJUSTMENTS:
(Q) Reflects the historical consolidated statement of operations of MAAC for
the year ended December 31, 1996.
(R) Represents historical operating revenues and expenses from January 1, 1996
to the earlier of the acquisition date or December 31. 1996 for the 1996
Completed Acquisitions and the 1997 Completed Acquisitions.
(S) Represents historical operating revenues and expenses for the year ended
December 31, 1996 for the 1997 Probable Acquisitions.
(T) Represents historical operating revenues and expenses for the year ended
December 31, 1996 Dispositions subsequent to January 1, 1996.
(U) Represents real estate depreciation and amortization resulting from the
Completed Acquisitions and the 1997 Probable Acquisitions.
(V) Represents non-real estate depreciation and amortization resulting from the
Completed Acquisitions and the 1997 Probable Acquisitions.
(W) Represents anticipated additional costs to operate MAAC resulting from
property acquisitions, net of anticipated savings resulting from the
Dispositions.
(X) Represents interest costs related to mortgage debt incurred or assumed in
connection with the Completed Acquisitions and the 1997 Probable
Acquisitions, net of reductions in interest expense resulting from the
repayment of mortgage debt in connection with the Dispositions.
(Y) Represents amortization of deferred financing costs incurred in connection
with the financing of Completed Acquisitions and the 1997 Probable
Acquisitions.
(Z) Represents the elimination of nonrecurring gain on Dispositions.
(AA) Represents the change in the minority interest in income of MAALP during
the period.
(AB) Represents dividends on the Series A Preferred Stock issued during 1996.
EXHIBIT 23.1
Shareholders and Partners
Flournoy Properties Group:
We consent to the inclusion of our report dated May 5, 1997, except for note 9,
which is as of September 17, 1997, with respect to the combined balance sheets
of Flournoy Properties Group as of December 31, 1996 and 1995, and the related
combined statements of ope
rations, partners' and owners' deficit, and cash flows
for each of the years in the three-year period ended December 31, 1996, which
report appears in the Form 8-K of Mid-America Apartment Communities, Inc., dated
September 30, 1997.
Atlanta, Georgia
September 30, 1997
