SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 to
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number: 1-12762
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1543819
(State of Incorporation) (I.R.S. Employer Identification
Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
Securities registered pursuant to Section 12 (b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
Common Stock, par value $.01 per share New York Stock Exchange
Series A Cumulative Preferred Stock, New York Stock Exchange
par value $.01 per share
Series B Cumulative Preferred Stock, New York Stock Exchange
par value $.01 per share
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in PART III of
this Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, (based on the closing price of such stock ($28.19
per share), as reported on the New York Stock Exchange, on March 13,
1998) was approximately $469,000,000 ( for purposes of this
calculation, directors and executive officers are treated as
affiliates).
The number of shares outstanding of the Registrant's Common Stock as
of March 13, 1998, was 18,553,931 shares, of which approximately
1,923,087 were held by affiliates.
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
Item Page
PART I
1. Business 1
2. Properties 6
3. Legal Proceedings 12
4. Submission of Matters to Vote of Security Holders 12
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
8. Financial Statements and Supplementary Data 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 21
PART III
10. Directors and Executive Officers of the Registrant 21
11. Executive Compensation 21
12. Security Ownership of Certain Beneficial Owners and
Management 21
13. Certain Relationships and Related Transactions 21
PART IV
14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K 22
<PAGE>
The registrant hereby amends the following items, financial statements
and other portions of its Annual Report on Form 10-K for the year ended
December 31, 1997 primarily for the three areas set forth below. The
entire Annual Report on Form 10-K for the year ended December 31, 1997,
including those items not amended is included in this amendment.
ITEM 6. SELECTED FINANCIAL DATA
Caption entitled "Deferred dividends" has been corrected to read
"Preferred dividends". Dollar signs have been omitted from the
"Weighted average common shares (000's)" columns and the 1997 number
of shares has been changed from 13,897 to 13,892.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
"Liquidity and Capital Resources" has been expanded to include a
discussion of the October 1997 issuance of 3.499 million shares of
common stock.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
In section (a) the Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995 have been revised to include
a column for the number of Common Shares. The Consolidated Statements of
Cash Flows for the years ended December 31, 1997, 1996 and 1995 have been
revised to correct the amount of "Net increase (decrease) in cash and cash
equivalents".
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Mid-America Apartment Communities, Inc. (the "Company") is a
Memphis, Tennessee-based self-administered and self-managed umbrella
partnership real estate investment trust, ("REIT") ("UPREIT") which
owns and operates 115 apartment communities containing 30,912
apartment units in 13 states (the "Communities"), has 2,660
apartment units under construction in 7 new communities and 5
additions to existing communities, and a further 804 apartment units
in various stages of development. The Company has entered into
definitive agreements to acquire three additional apartment
communities containing 624 apartment units, of which negotiations
are still in progress.
Founded in 1977 by George E. Cates, the Company's Chairman of the
Board of Directors and Chief Executive Officer, the Company's
predecessor grew from an operator of a single 252-unit apartment
community in Memphis, Tennessee into a fully-integrated owner and
operator of 5,580 apartment units in 22 apartment communities in
four southeastern states immediately prior to the Company's initial
public offering in February 1994 (the "Initial Offering"). Since the
Initial Offering, the Company's portfolio has increased by 93
apartment communities containing 25,332 apartment units, including
1) 12 apartment communities containing 3,212 apartment units
acquired in the Company's merger with America First REIT, Inc.
("AFR") in June 1995 (the "AFR Merger") for an aggregate value of
approximately $111 million (as measured by Common Stock issued and
AFR debt assumed) and 2) 30 apartment communities containing 7,691
apartments acquired in the company's merger with Flournoy
Development Company and related partnerships ("FDC") on November 25,
1997 (the "FDC Merger") for an aggregate value of $423 million. The
FDC Merger resulted in the establishment of Flournoy Service
Corporation ("FSC"), the name of which was later changed to Flournoy
Development Corporation, of which the Company owns 100% of the non-
voting common stock, specifically to own and operate the third-party
construction, brokerage and management activities formerly conducted
by FDC. At least 95% of the after tax cash flow after intercompany
interest expense of this subsidiary is distributed to Mid-America
Apartments, L.P., a Tennessee limited partnership (the "Operating
Partnership") through its ownership of the non-voting common stock
in FSC, with the 5% balance to the owners of FSC's common stock,
consisting of Mr. Cates and John F. Flournoy, the Vice-Chairman of
the Company. FSC did not make a distribution to Messrs. Cates and
Flournoy in 1997 and does not currently anticipate a distribution in
1998. The operations of FSC include the management of 43 properties
with 4,971 apartment units owned by third party investors, and the
development and construction of properties for third parties. The
Company believes that this structure is permitted under the terms of
the Internal Revenue Code and also provides the most economic
benefit to its shareholders.
The Company's business is conducted principally through the
Operating Partnership. The Company is the sole general partner of
the Operating Partnership, holding, as of December 31, 1997, 181,844
Common Units or a 1% general partnership interest in the Operating
Partnership. The Company's wholly-owned qualified REIT subsidiary,
MAC II of Delaware, Inc., a Delaware corporation, is a limited
partner in the Operating Partnership and, as of December 31, 1997,
held 15,736,248 Common Units, or 81.1% of all outstanding Common
Units.
In connection with the formation of the Operating Partnership and
the Initial Offering, the Operating Partnership issued 2,460,413
Common Units to the former owners of Communities contributed to the
Operating Partnership. The Common Units held by such former owners
are redeemable by the holders, at their option, for shares of Common
Stock on a one-for-one basis or, at the Company's option, for cash.
The Company has filed a shelf registration statement relating to the
offer and sale of the Common Units by the holders thereof. As of
December 31, 1997, such former owners held 2,384,097 Common Units.
In subsequent transactions and acquisitions of properties, including
in the FDC Merger, an additional 553,205 Common Units have been
issued, resulting in a total of 2,937,302 Common Units being owned
by outside investors.
Certain Communities are owned by limited partnerships of which the
Operating Partnership and the Company or a wholly owned qualified
REIT subsidiary are the only partners. The Company, directly or
through seven wholly owned qualified REIT subsidiaries, owns 19
Communities. The Company also has established Mid-America Capital
Partners, L.P., a single-purpose entity formed in 1997 to own 26
apartment communities containing 5,947 apartment units, of which the
Operating Partnership owns a 99% limited partnership interest and
the Company, through a subsidiary, owns a 1% General Partnership
interest
OPERATING PHILOSOPHY
MID-SIZE MARKET FOCUS. The Company focuses on owning, operating,
developing, constructing and acquiring apartment communities in mid-
size southeastern and Texas cities. The Company believes that these
markets generally have been less susceptible to apartment
overbuilding during past real estate investment cycles, and the
Company believes that apartment communities in these markets offer
attractive long-term investment returns. The Company seeks to
develop and acquire apartment communities in its existing markets
and selected new markets where it believes there is less competition
for acquisitions or new construction from other well-capitalized
buyers. The Company believes it can acquire apartment units at a
significant discount to estimated replacement cost in these markets
and through its experience construct and develop apartments at a
reasonable investment cost to generate higher returns on investment
than is available in large metropolitan areas.
INTENSIVE MANAGEMENT FOCUS. The Company strongly emphasizes on-site
property management. Particular attention is paid to opportunities
to increase rents, raise average occupancy rates, and control costs,
with property managers being given the responsibility for monitoring
market trends and the discretion to react to such trends.
DEDICATION TO CUSTOMER SERVICE. Management's experience is that
maintaining a consistently high level of customer satisfaction leads
to greater demand for the Company's apartment units, higher
occupancy and rental rates, and increased long-term profitability.
The Company, as part of its intense management focus, has
implemented a practice of having highly trained property managers
and service technicians on-site at each of the Communities.
Management undertakes frequent resident surveys and focus groups, in
order to measure customer satisfaction.
DECENTRALIZED OPERATIONAL STRUCTURE. The Company's operational
structure is organized on a geographic basis. The Company's property
managers have overall operating responsibility for their specific
Communities. Property managers report to area managers or regional
managers who, in turn, are accountable to the Company's President.
Management believes that its decentralized operating structure
capitalizes on specific market knowledge, increases personal
accountability relative to a centralized structure and is beneficial
in the acquisition, redevelopment and development process.
GROWTH STRATEGIES
The Company seeks to increase earnings per share and operating cash
flow to maximize shareholder value through a balanced strategy of
internal and external growth.
INTERNAL GROWTH STRATEGY. Management's goal is to maximize its
return on investment in each Community by increasing rental rates
and reducing operating expenses while maintaining high occupancy
levels. The Company (i) seeks higher net rental revenues by
enhancing and maintaining the competitiveness of the Communities and
(ii) manages expenses through its system of detailed management
reporting and accountability in order to achieve increases in
operating cash flow. The steps taken to meet these objectives
include:
* empowering the Company's property managers to adjust rents in
response to local market conditions and to concentrate resident turnover
in peak rental demand months;
* implementing programs to control expenses through investment in cost-
saving initiatives, such as the installation of individual apartment
unit water and utility meters in certain Communities;
* ensuring that, through monthly inspections of all Communities by
senior management and prompt attention to maintenance and recurring
capital needs, the Communities are properly maintained;
* improving the "curb appeal" of the Communities through extensive
landscaping and exterior improvements and repositioning Communities from
time to time to maintain market leadership positions;
* investing heavily in training programs for its property-level
personnel;
* compensating all employees through performance-based compensation
programs and stock ownership programs; and
* maintaining a hands-on management style and "flat" organizational
structure that emphasizes senior management's continued close contact
with the market and employees.
EXTERNAL GROWTH STRATEGY. The Company's external growth strategy is
to acquire and develop additional apartment units and, when
apartment communities no longer meet the Company's long-term
strategic objectives or investment return goals, to dispose of those
Communities. Through the Company's umbrella partnership REIT
("UPREIT") structure, the Company has the ability to acquire
apartment communities through the issuance of UPREIT Units in tax-
deferred exchanges with owners of such properties. Since the Initial
Offering, the Company has grown by 25,332 apartment units, an
increase of approximately 454% over the number of apartment units
immediately prior to the Initial Offering. Typical attributes of
apartment communities which the Company seeks to acquire are:
* well-constructed properties having attractive locations, potential
for increases in rental rates and occupancy, potential for reductions in
operating costs and acquisition prices below estimated replacement cost;
* properties with opportunities for internal growth through (i) market
repositioning by means of property upgrades which typically include
landscaping, selective refurbishing and the addition of amenities and
(ii) realizing economies of scale in management and purchasing; and
* properties located in the Company's existing markets and mid-size
southeastern and Texas metropolitan areas having favorable market
characteristics.
The Company develops new apartments when it believes it can achieve
an attractive return on investment substantially above the rate of
return of acquisitions. In November the Company acquired, through
the FDC Merger, Flournoy Development Company, a builder and
developer of multifamily apartments with 30 years of experience
owning, managing, developing and building apartments. As a result of
this merger, the Company has significantly expanded its commitment
to new development. The Company has established higher investment
return criteria for new development than it maintains for
acquisitions and generally expects that its new development program
will generate higher stabilized returns on investment than most
acquisition opportunities. Since the Initial Offering, the Company
has completed the following development projects:
* 122 apartment units constructed at the Woods of Post House in
Jackson, Tennessee in close proximity to three other Communities;
* 24 additional apartment units at the Reflection Pointe apartment
community in Jackson, Mississippi; and
* 32 additional apartment units at the Park Haywood apartment
community in Greenville, South Carolina.
In 1997, the Company substantially completed construction of a 234-
unit expansion of the 384-unit Lincoln on the Green apartment
community at the Tournament Players' Club at Southwind in Memphis,
Tennessee. The development of expansion for Lincoln on the Green
was managed successfully and began by Flournoy Development Company
prior to the merger with the Company. The Company currently has a
development pipeline of 3,466 apartments that are in various stages
of construction and development, of which 1,690 are anticipated to
be completed in 1998. It is likely that additional opportunities
will be identified for development in late 1998 and 1999.
COMPLETED ACQUISITIONS. During 1997, the Company acquired the
following 12 apartment communities (the "Completed Acquisitions")
containing an aggregate of 3,314 apartment units (dollars in
millions):
NUMBER
OF DATE OF CONTRACT
PROPERTY LOCATION UNITS ACQUISITION PRICE (1)
- ---------------- ---------------- ------ ----------- ----------
1. Howell Commons Greenville, SC 348 1/15/97 $ 13.0
2. Balcones Woods Austin, TX 384 3/18/97 15.8
3. Westside Creek I Little Rock, AR 142 3/28/97 6.1
4. Fairways at
Hartland Bowling Green, KY 240 3/31/97 10.4
5. Woodhollow Jacksonville, FL 450 4/10/97 16.7
6. The Woods Austin, TX 278 4/15/97 10.0
7. Hunters' Ridge Jacksonville, FL 336 5/29/97 15.2
8. Austin Chase Macon, GA 256 8/5/97 14.0
Westside Creek II Little Rock, AR 166 9/24/97 6.5
9. Woodwinds Aiken, SC 144 9/30/97 5.0
10. Hermitage at
Beechtree Cary, NC 194 11/3/97 8.9
11. Sterling Ridge Augusta, GA 192 11/13/97 7.7
12. Colony at
South Park Aiken, SC 184 11/25/97 7.5
----- -------
Total 3,314 $ 136.8
===== =======
(1) Excluding additional customary closing costs, including expenses and
commissions.
COMPETITION
All of the Company's Communities are located in developed areas that
include other apartment communities. Occupancy and rental rates are
affected by the number of competitive apartment communities in a
particular area. The Company's properties compete with numerous
other multifamily properties, the owners of which may have greater
resources than the Company and whose management may have more
experience than the Company's management. Moreover, single-family
rental housing, manufactured housing, condominiums and the new and
existing home market provide housing alternatives to potential
residents of apartment communities.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS
Since December 31, 1997, the Company has acquired the following
apartment communities (the "Recent Acquisitions") containing an
aggregate of 392 apartment units (dollars in millions):
NUMBER ACQUISITION CONTRACT
PROPERTY LOCATION OF UNITS DATE PRICE
- ---------- -------------- -------- ----------- --------
Walden Run McDonough, GA 240 2/5/98 $ 13.4
Van Mark Huntsville, AL 152 2/26/98 5.1
-------- --------
Total 392 $ 18.5
======== ========
The Company funded the cash required to consummate the Recent
Acquisitions with borrowings under the Company's bank line of
credit.
PROPOSED ACQUISITIONS
The Company has entered into definitive agreements to purchase the
200-unit Eagle Ridge apartments in Birmingham, Alabama, the 204-
unit Village Apartments at Carrollwood in Tampa, Florida and the
220-unit Georgetown Grove Apartments in Savannah, Georgia. The
Company plans to fund the cash required to consummate the Proposed
Acquisitions with issuance of Umbrella Partnership units, borrowings
under the Credit Line and assumption of existing mortgages. There
are remaining issues to negotiate on these contracts and there can
be no assurance that these acquisitions will close.
DEVELOPMENT
The Company's Board of Directors has approved the development of
three apartment communities totaling 702 units located in
Montgomery, Alabama, Murfreesboro, Tennessee, and Panama City,
Florida; the Board has also approved the development of a 124-unit
addition to the Company's St Augustine property in Jacksonville, Florida.
The total estimated cost of these projects is $50.5 million to be
invested in 1998 and 1999.
The Company has a total of 1,762 apartments in pre-development or in-
depth feasibility review. If all these are developed, together with
the 1,070 apartments under construction and the 634 apartments under
construction and lease-up, the total planned investment in new
development in 1998 is $118 million, with an additional $70 million
to complete the projects in 1999. The Company has several additional
projects in earlier stages of feasibility study, and it anticipates
that the additional apartment communities will be approved for
development later in 1998 which will require additional funding in
1999.
DISTRIBUTION INCREASE
In January 1998, the Company raised its quarterly distribution to
common shareholders from $.535 per share to $.55 per share,
effective with its distribution paid on January 30, 1998.
ITEM 2. PROPERTIES
The Company seeks to acquire and develop apartment communities
appealing to middle and upper income residents in mid-size cities in
the southeastern United States and Texas. Approximately 71% of the
Company's apartment units are located in Georgia, Florida,
Tennessee, and Texas markets. The Company's strategic focus is to
provide its residents high quality apartment units in attractive
community settings, characterized by extensive landscaping and
attention to aesthetic detail. The Company utilizes its experience
and expertise in maintenance, landscaping, marketing and management
to effectively "reposition" many of the apartment communities it
acquires to raise occupancy levels and per unit average rentals. The
average age of the Communities at December 31, 1997 was 12.2 years.
The following table sets forth certain operating data regarding the
Company for the periods indicated excluding development communities.
1997 1996 1995
------- ------- -------
Apartment units at year end 30,468 19,280 18,219
Average monthly rental per
apartment unit at year end $568 $529 $508
Average occupancy for the year 94.7% 95.4% 95.2%
The following table presents information concerning the properties at
December 31, 1997:
<TABLE>
<CAPTION>
Year
Year Management
Property Location Completed Commenced
<C> <S> <S> <S>
Paddock Club-Huntsville Huntsville, AL 1989 1997
Calais Forest Little Rock, AR 1987 1994
Napa Valley Little Rock, AR 1984 1996
Westside Creek I Little Rock, AR 1984 1997
Westside Creek II Little Rock, AR 1986 1997
Whispering Oaks Little Rock, AR 1978 1994
Tiffany Oaks Altamonte Springs, FL 1985 1996
Marsh Oaks Atlantic Beach, FL 1986 1995
Paddock Club - Brandon Brandon, FL 1997 1997
Anatole Daytona Beach, FL 1986 1995
Cooper's Hawk Jacksonville, FL 1987 1995
Hunter's Ridge at Deerwood Jacksonville, FL 1987 1997
Lakeside Jacksonville, FL 1985 1996
Paddock Club-Jacksonville I Jacksonville, FL 1989 1997
Paddock Club-Jacksonville II Jacksonville, FL 1996 1997
Paddock Club-JacksonvilleIII Jacksonville, FL 1997 1997
St. Augustine Jacksonville, FL 1987 1995
Woodbridge at the Lake Jacksonville, FL 1985 1994
Woodhollow Jacksonville, FL 1986 1997
Paddock Club-Lakeland I Lakeland, FL 1988 1997
Paddock Club-Lakeland II Lakeland, FL 1990 1997
Savannahs at James Landing Melbourne, FL 1990 1995
Paddock Park-Ocala I Ocala, FL 1986 1997
Paddock Park-Ocala II Ocala, FL 1988 1997
Paddock Club-Tallahassee I Tallahassee, FL 1990 1997
Paddock Club-Tallahassee II Tallahassee, FL 1995 1997
Belmere Tampa, FL 1984 1994
Sailwinds at Lake Magdalene Tampa, FL 1975 1994
Hidden Oaks I Albany, GA 1979 1997
Hidden Oaks II Albany, GA 1980 1997
Regency Club Albany, GA 1983 1997
High Ridge Athens, GA 1987 1997
Shenandoah Ridge Augusta, GA 1975/1984 1994
Sterling Ridge Augusta, GA 1986 1997
Westbury Creek Augusta, GA 1984 1997
Fountain Lake Brunswick, GA 1983 1997
Park Walk College Park, GA 1985 1997
2000 Wynnton Columbus, GA 1983 1997
Riverwind Columbus, GA 1983 1997
Whisperwood Columbus, GA 1980-86 1997
Whisperwood Spa & Club Columbus, GA 1988 1997
Willow Creek Columbus, GA 1968-78 1997
Hollybrook Dalton, GA 1972 1994
Whispering Pines I LaGrange, GA 1982 1997
Whispering Pines II LaGrange, GA 1984 1997
Westbury Springs Lilburn, GA 1983 1997
Austin Chase Macon, GA 1996 1997
The Vistas Macon, GA 1985 1997
Wildwood I Thomasville, GA 1980 1997
Wildwood II Thomasville, GA 1984 1997
Hidden Lake I Union City, GA 1985 1997
Hidden Lake II Union City, GA 1987 1997
Three Oaks I Valdosta, GA 1983 1997
Three Oaks II Valdosta, GA 1984 1997
Southland Station I Warner Robins, GA 1987 1997
Southland Station II Warner Robins, GA 1990 1997
Terraces at Towne Lake Woodstock, GA 1997 1997
Fairways at Hartland Bowling Green, KY 1996 1997
Paddock Club Florence Florence, KY 1994 1997
Lakepointe Lexington, KY 1986 1994
Mansion, The Lexington, KY 1987 1994
Village, The Lexington, KY 1989 1994
Stonemill Village Louisville, KY 1985 1994
Canyon Creek St. Louis, MO 1987 1994
Riverhills Grenada, MS 1972 1985
Advantages, The Jackson, MS 1984 1991
Crosswinds Jackson, MS 1988/1989 1996
Lakeshore Landing Jackson, MS 1974 1994
Pear Orchard Jackson, MS 1985 1994
Pine Trails Jackson, MS 1978 1988
Reflection Pointe Jackson, MS 1986 1988
Somerset Place Jackson, MS 1981 1995
Woodridge Jackson, MS 1987 1988
Hermitage at Beechtree Cary, NC 1988 1997
Woodstream Greensboro, NC 1983 1994
Corners, The Winston-Salem, NC 1982 1993
Fairways at Royal Oak Cincinnati, OH 1988 1994
Colony at Southpark Aiken, SC 1989/91 1997
Woodwinds Aiken, SC 1988 1997
Tanglewood Anderson, SC 1980 1994
The Fairways Columbia, SC 1992 1994
Paddock Club-Columbia I Columbia, SC 1989 1997
Paddock Club-Columbia II Columbia, SC 1995 1997
Highland Ridge Greenville, SC 1984 1995
Howell Commons Greenville, SC 1986/88 1997
Paddock Club - Greenville Greenville, SC 1996 1997
Park Haywood Greenville, SC 1983 1993
Spring Creek Greenville, SC 1984 1995
Runaway Bay Mt. Pleasant, SC 1988 1995
Park Place Spartanburg, SC 1987 1997
Hamilton Pointe Chattanooga, TN 1989 1992
Hidden Creek Chattanooga, TN 1987 1988
Steeplechase Chattanooga, TN 1986 1991
Windridge Chattanooga, TN 1984 1997
Oaks, The Jackson, TN 1978 1993
Post House Jackson Jackson, TN 1987 1989
Post House North Jackson, TN 1987 1989
Williamsburg Village Jackson, TN 1987 1994
Woods at Post House Jackson, TN 1995 1995
Cedar Mill Memphis, TN 1973/1986 1982/1994
Clearbrook Village Memphis, TN 1974 1987
Crossings Memphis, TN 1974 1991
EastView Memphis, TN 1974 1984
Glen Eagles Memphis, TN 1975 1990
Greenbrook Memphis, TN 1986 1988
Hickory Farm Memphis, TN 1985 1994
Kirby Station Memphis, TN 1978 1994
Lincoln on the Green Memphis, TN 1988 1994
Lincoln on the Green II Memphis, TN 1997 1997
McKellar Woods Memphis, TN 1976 1988
Park Estate Memphis, TN 1974 1977
River Trace I Memphis, TN 1981 1977
River Trace II Memphis, TN 1985 1977
Savannah Creek Memphis, TN (8) 1989 1996
Sutton Place Memphis, TN (8) 1991 1996
Winchester Square Memphis, TN 1973 1977
Brentwood Downs Nashville, TN 1986 1994
Park at Hermitage Nashville, TN 1987 1995
Balcones Woods Austin, TX 1983 1997
Stassney Woods Austin, TX 1985 1995
Travis Station Austin, TX 1987 1995
Woods Austin, TX 1977 1997
Redford Park Conroe, TX 1984 1994
Celery Stalk Dallas, TX 1978 1994
Lodge at Timberglen Dallas, TX 1984 1994
MacArthur Ridge Irving, TX 1991 1994
Westborough Katy, TX 1984 1994
Lane at Towne Crossing Mesquite, TX 1983 1994
Cypresswood Court Spring, TX 1984 1994
Green Tree Place Woodlands, TX 1984 1994
Township Hampton, VA 1987 1995
Total
<CAPTION>
Approximate Average
Rentable Unit
Number Area Size
Property Location Of Units (Square Ft.)(Square Ft.)
<S> <C> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL 200 211,576 1,058
Calais Forest Little Rock, AR 260 194,928 750
Napa Valley Little Rock, AR 240 183,216 763
Westside Creek I Little Rock, AR 142 148,030 1,042
Westside Creek II Little Rock, AR 166 156,646 944
Whispering Oaks Little Rock, AR 206 192,422 934
------ -------- ------
1,014 875,242 863
Tiffany Oaks Altamonte Springs, FL 288 234,224 813
Marsh Oaks Atlantic Beach, FL 120 93,280 777
Paddock Club - Brandon Brandon, FL 308 358,600 1,164
Anatole Daytona Beach, FL 208 149,136 717
Cooper's Hawk Jacksonville, FL 208 218,400 1,050
Hunter's Ridge at Deerwood Jacksonville, FL 336 294,888 878
Lakeside Jacksonville, FL 416 344,192 827
Paddock Club-Jacksonville I Jacksonville, FL 200 216,016 1,080
Paddock Club-Jacksonville II Jacksonville, FL 120 132,280 1,102
Paddock Club-JacksonvilleIII Jacksonville, FL 120 130,544 1,088
St. Augustine Jacksonville, FL 400 304,400 761
Woodbridge at the Lake Jacksonville, FL 188 166,000 883
Woodhollow Jacksonville, FL 450 342,162 760
Paddock Club-Lakeland I Lakeland, FL 200 217,704 1,089
Paddock Club-Lakeland II Lakeland, FL 264 283,365 1,073
Savannahs at James Landing Melbourne, FL 256 238,592 932
Paddock Park-Ocala I Ocala, FL 200 202,282 1,011
Paddock Park-Ocala II Ocala, FL 280 290,496 1,037
Paddock Club-Tallahassee I Tallahassee, FL 192 208,000 1,083
Paddock Club-Tallahassee II Tallahassee, FL 112 124,720 1,114
Belmere Tampa, FL 210 202,440 964
Sailwinds at Lake Magdalene Tampa, FL 798 667,084 836
------ --------- ------
5,874 5,418,805 923
Hidden Oaks I Albany, GA 128 132,096 1,032
Hidden Oaks II Albany, GA 112 114,624 1,023
Regency Club Albany, GA 100 80,200 802
High Ridge Athens, GA 160 186,608 1,166
Shenandoah Ridge Augusta, GA 272 222,800 819
Sterling Ridge Augusta, GA 192 156,232 814
Westbury Creek Augusta, GA 120 106,998 892
Fountain Lake Brunswick, GA 100 118,046 1,180
Park Walk College Park, GA 124 112,776 909
2000 Wynnton Columbus, GA 72 66,056 917
Riverwind Columbus, GA 44 40,304 916
Whisperwood Columbus, GA 506 610,876 1,207
Whisperwood Spa & Club Columbus, GA 348 380,044 1,092
Willow Creek Columbus, GA 285 246,668 866
Hollybrook Dalton, GA 158 188,640 1,194
Whispering Pines I LaGrange, GA 120 123,904 1,033
Whispering Pines II LaGrange, GA 96 98,572 1,027
Westbury Springs Lilburn, GA 150 137,744 918
Austin Chase Macon, GA 256 293,016 1,144
The Vistas Macon, GA 144 153,792 1,068
Wildwood I Thomasville, GA 120 123,904 1,033
Wildwood II Thomasville, GA 96 101,152 1,054
Hidden Lake I Union City, GA 160 171,192 1,070
Hidden Lake II Union City, GA 160 154,000 963
Three Oaks I Valdosta, GA 120 123,904 1,033
Three Oaks II Valdosta, GA 120 129,200 1,077
Southland Station I Warner Robins, GA 160 186,704 1,167
Southland Station II Warner Robins, GA 144 168,704 1,172
Terraces at Towne Lake Woodstock, GA 264 286,968 1,087
----- --------- -------
4,831 5,015,724 979
Fairways at Hartland Bowling Green, KY 240 251,180 1,047
Paddock Club Florence Florence, KY 200 207,036 1,035
Lakepointe Lexington, KY 118 90,614 768
Mansion, The Lexington, KY 184 138,720 754
Village, The Lexington, KY 252 182,716 725
Stonemill Village Louisville, KY 384 324,008 844
----- --------- -------
1,378 1,194,274 867
Canyon Creek St. Louis, MO 320 312,592 977
Riverhills Grenada, MS 96 81,942 854
Advantages, The Jackson, MS 252 199,136 790
Crosswinds Jackson, MS 360 443,200 1,231
Lakeshore Landing Jackson, MS 196 171,156 873
Pear Orchard Jackson, MS 389 338,400 870
Pine Trails Jackson, MS 120 98,560 821
Reflection Pointe Jackson, MS 296 254,856 861
Somerset Place Jackson, MS 144 126,848 881
Woodridge Jackson, MS 192 175,034 912
----- --------- -------
2,045 1,889,132 924
Hermitage at Beechtree Cary, NC 194 169,776 875
Woodstream Greensboro, NC 304 217,186 714
Corners, The Winston-Salem, NC 240 173,496 723
----- --------- -------
738 560,458 759
Fairways at Royal Oak Cincinnati, OH 214 214,477 1,002
Colony at Southpark Aiken, SC 184 174,800 950
Woodwinds Aiken, SC 144 165,188 1,147
Tanglewood Anderson, SC 168 146,600 873
The Fairways Columbia, SC 240 213,720 891
Paddock Club-Columbia I Columbia, SC 200 218,872 1,094
Paddock Club-Columbia II Columbia, SC 136 144,720 1,064
Highland Ridge Greenville, SC 168 144,000 857
Howell Commons Greenville, SC 348 292,840 841
Paddock Club - Greenville Greenville, SC 208 212,104 1,020
Park Haywood Greenville, SC 208 156,776 754
Spring Creek Greenville, SC 208 182,000 875
Runaway Bay Mt. Pleasant, SC 208 177,840 855
Park Place Spartanburg, SC 184 195,312 1,061
----- --------- -------
2,604 2,424,772 931
Hamilton Pointe Chattanooga, TN 362 256,716 711
Hidden Creek Chattanooga, TN 300 259,152 864
Steeplechase Chattanooga, TN 108 98,602 913
Windridge Chattanooga, TN 174 238,704 1,372
Oaks, The Jackson, TN 100 87,512 875
Post House Jackson Jackson, TN 150 163,640 1,091
Post House North Jackson, TN 144 144,724 1,005
Williamsburg Village Jackson, TN 148 121,412 820
Woods at Post House Jackson, TN 122 118,922 975
Cedar Mill Memphis, TN 276 297,794 1,079
Clearbrook Village Memphis, TN 176 150,400 855
Crossings Memphis, TN 80 89,968 1,125
EastView Memphis, TN 432 356,480 825
Glen Eagles Memphis, TN 184 189,560 1,030
Greenbrook Memphis, TN 1,031 934,490 906
Hickory Farm Memphis, TN 200 150,256 751
Kirby Station Memphis, TN 371 310,173 836
Lincoln on the Green Memphis, TN 384 293,664 765
Lincoln on the Green II Memphis, TN 182 241,280 1,031
McKellar Woods Memphis, TN 624 589,776 945
Park Estate Memphis, TN 82 95,751 1,182
River Trace I Memphis, TN 244 205,780 843
River Trace II Memphis, TN 196 194,864 994
Savannah Creek Memphis, TN (8) 204 237,200 1,162
Sutton Place Memphis, TN (8) 252 267,600 1,062
Winchester Square Memphis, TN 252 301,409 1,196
Brentwood Downs Nashville, TN 286 220,166 770
Park at Hermitage Nashville, TN 440 392,480 892
----- --------- -------
7,504 7,008,475 934
Balcones Woods Austin, TX 384 313,756 817
Stassney Woods Austin, TX 288 248,832 864
Travis Station Austin, TX 304 249,888 822
Woods Austin, TX 278 213,970 770
Redford Park Conroe, TX 212 153,744 725
Celery Stalk Dallas, TX 410 552,220 1,347
Lodge at Timberglen Dallas, TX 260 226,124 870
MacArthur Ridge Irving, TX 248 210,393 848
Westborough Katy, TX 274 197,264 720
Lane at Towne Crossing Mesquite, TX 384 277,616 723
Cypresswood Court Spring, TX 208 160,672 772
Green Tree Place Woodlands, TX 200 152,168 761
----- --------- -------
3,450 2,956,647 766
Township Hampton, VA 296 248,048 838
------ ---------- -------
Total 30,468 28,082,174 910
====== ========== =======
<CAPTION>
Average Average
Rent Per Occupancy
Unit at % at
December 31,December 31,
Property Location 1997 1997
<S> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL $595 96.0%
Calais Forest Little Rock, AR $561 96.2%
Napa Valley Little Rock, AR $543 90.0%
Westside Creek I Little Rock, AR $631 93.7%
Westside Creek II Little Rock, AR $589 95.2%
Whispering Oaks Little Rock, AR $500 94.2%
---- -----
$559 93.8%
Tiffany Oaks Altamonte Springs, FL $563 97.9%
Marsh Oaks Atlantic Beach, FL $525 98.3%
Paddock Club - Brandon Brandon, FL $747 97.0%
Anatole Daytona Beach, FL $544 97.6%
Cooper's Hawk Jacksonville, FL $644 96.6%
Hunter's Ridge at Deerwood Jacksonville, FL $570 93.8%
Lakeside Jacksonville, FL $559 91.8%
Paddock Club-Jacksonville I Jacksonville, FL $704 90.0%
Paddock Club-Jacksonville II Jacksonville, FL $728 95.0%
Paddock Club-JacksonvilleIII Jacksonville, FL $751 59.0%
St. Augustine Jacksonville, FL $528 90.3%
Woodbridge at the Lake Jacksonville, FL $593 95.2%
Woodhollow Jacksonville, FL $566 92.9%
Paddock Club-Lakeland I Lakeland, FL $648 97.0%
Paddock Club-Lakeland II Lakeland, FL $650 96.0%
Savannahs at James Landing Melbourne, FL $575 96.9%
Paddock Park-Ocala I Ocala, FL $603 94.0%
Paddock Park-Ocala II Ocala, FL $653 94.0%
Paddock Club-Tallahassee I Tallahassee, FL $660 94.0%
Paddock Club-Tallahassee II Tallahassee, FL $679 86.0%
Belmere Tampa, FL $603 98.1%
Sailwinds at Lake Magdalene Tampa, FL $533 96.9%
---- -----
$601 94.1%
Hidden Oaks I Albany, GA $430 95.0%
Hidden Oaks II Albany, GA $432 96.0%
Regency Club Albany, GA $388 84.0%
High Ridge Athens, GA $743 96.0%
Shenandoah Ridge Augusta, GA $442 86.0%
Sterling Ridge Augusta, GA $529 95.3%
Westbury Creek Augusta, GA $540 93.0%
Fountain Lake Brunswick, GA $748 81.0%
Park Walk College Park, GA $623 94.0%
2000 Wynnton Columbus, GA $431 96.0%
Riverwind Columbus, GA $432 95.0%
Whisperwood Columbus, GA $598 95.0%
Whisperwood Spa & Club Columbus, GA $594 95.0%
Willow Creek Columbus, GA $462 92.0%
Hollybrook Dalton, GA $578 93.0%
Whispering Pines I LaGrange, GA $553 83.0%
Whispering Pines II LaGrange, GA $552 94.0%
Westbury Springs Lilburn, GA $631 99.0%
Austin Chase Macon, GA $646 96.9%
The Vistas Macon, GA $583 90.0%
Wildwood I Thomasville, GA $470 98.0%
Wildwood II Thomasville, GA $509 98.0%
Hidden Lake I Union City, GA $626 95.0%
Hidden Lake II Union City, GA $616 90.0%
Three Oaks I Valdosta, GA $519 92.0%
Three Oaks II Valdosta, GA $537 94.0%
Southland Station I Warner Robins, GA $603 87.0%
Southland Station II Warner Robins, GA $624 93.0%
Terraces at Towne Lake Woodstock, GA $765 96.0%
---- -----
$572 93.1%
Fairways at Hartland Bowling Green, KY $554 92.1%
Paddock Club Florence Florence, KY $716 84.0%
Lakepointe Lexington, KY $531 98.3%
Mansion, The Lexington, KY $528 96.7%
Village, The Lexington, KY $560 96.4%
Stonemill Village Louisville, KY $552 88.5%
---- -----
$573 91.9%
Canyon Creek St. Louis, MO $525 94.1%
Riverhills Grenada, MS $392 85.4%
Advantages, The Jackson, MS $445 95.2%
Crosswinds Jackson, MS $604 95.8%
Lakeshore Landing Jackson, MS $500 95.9%
Pear Orchard Jackson, MS $547 97.2%
Pine Trails Jackson, MS $491 85.8%
Reflection Pointe Jackson, MS $556 92.9%
Somerset Place Jackson, MS $491 95.8%
Woodridge Jackson, MS $513 93.2%
---- -----
$524 94.3%
Hermitage at Beechtree Cary, NC $648 94.8%
Woodstream Greensboro, NC $528 93.1%
Corners, The Winston-Salem, NC $532 95.8%
---- -----
$561 94.4%
Fairways at Royal Oak Cincinnati, OH $592 96.3%
Colony at Southpark Aiken, SC $548 97.0%
Woodwinds Aiken, SC $580 88.2%
Tanglewood Anderson, SC $515 89.9%
The Fairways Columbia, SC $563 95.8%
Paddock Club-Columbia I Columbia, SC $689 96.0%
Paddock Club-Columbia II Columbia, SC $735 93.0%
Highland Ridge Greenville, SC $479 95.2%
Howell Commons Greenville, SC $497 95.1%
Paddock Club - Greenville Greenville, SC $697 84.0%
Park Haywood Greenville, SC $487 92.3%
Spring Creek Greenville, SC $505 96.2%
Runaway Bay Mt. Pleasant, SC $655 93.8%
Park Place Spartanburg, SC $601 80.0%
---- -----
$574 92.4%
Hamilton Pointe Chattanooga, TN $455 94.2%
Hidden Creek Chattanooga, TN $489 86.3%
Steeplechase Chattanooga, TN $539 92.6%
Windridge Chattanooga, TN $657 91.0%
Oaks, The Jackson, TN $484 95.0%
Post House Jackson Jackson, TN $567 93.3%
Post House North Jackson, TN $566 95.9%
Williamsburg Village Jackson, TN $523 98.0%
Woods at Post House Jackson, TN $634 95.1%
Cedar Mill Memphis, TN $552 96.7%
Clearbrook Village Memphis, TN $495 96.6%
Crossings Memphis, TN $618 100.0%
EastView Memphis, TN $490 96.3%
Glen Eagles Memphis, TN $556 94.0%
Greenbrook Memphis, TN $498 92.9%
Hickory Farm Memphis, TN $504 97.0%
Kirby Station Memphis, TN $560 98.1%
Lincoln on the Green Memphis, TN $586 91.4%
Lincoln on the Green II Memphis, TN $681 42.9%
McKellar Woods Memphis, TN $443 98.4%
Park Estate Memphis, TN $673 97.6%
River Trace I Memphis, TN $496 95.0%
River Trace II Memphis, TN $533 95.0%
Savannah Creek Memphis, TN (8) $590 99.5%
Sutton Place Memphis, TN (8) $566 99.2%
Winchester Square Memphis, TN $575 93.7%
Brentwood Downs Nashville, TN $633 94.1%
Park at Hermitage Nashville, TN $588 91.6%
---- -----
$537 93.5%
Balcones Woods Austin, TX $656 96.4%
Stassney Woods Austin, TX $585 94.1%
Travis Station Austin, TX $537 96.4%
Woods Austin, TX $671 95.0%
Redford Park Conroe, TX $488 90.6%
Celery Stalk Dallas, TX $640 93.9%
Lodge at Timberglen Dallas, TX $574 94.6%
MacArthur Ridge Irving, TX $696 96.8%
Westborough Katy, TX $502 97.4%
Lane at Towne Crossing Mesquite, TX $521 95.6%
Cypresswood Court Spring, TX $510 91.8%
Green Tree Place Woodlands, TX $566 94.5%
---- -----
$584 94.9%
Township Hampton, VA $571 88.5%
---- -----
Total $568 93.9%
==== =====
<CAPTION>
Encumbrances at December 31, 1997
---------------------------------
Mortgage
Principal Interest Maturity
Property Location (000's) Rate Date
<S> <C> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL -(2) -(2) -(2)
Calais Forest Little Rock, AR $5,610 8.915% 12/01/99
Napa Valley Little Rock, AR -(9) -(9)
Westside Creek I Little Rock, AR -(9) -(9)
Westside Creek II Little Rock, AR $4,958 8.760% 10/01/06
Whispering Oaks Little Rock, AR $3,000 8.915% 12/01/99
-------
$13,568
Tiffany Oaks Altamonte Springs, FL -(9) -(9)
Marsh Oaks Atlantic Beach, FL -(9) -(9)
Paddock Club - Brandon Brandon, FL -(2) -(2)
Anatole Daytona Beach, FL $7,000 5.510% 12/01/27
Cooper's Hawk Jacksonville, FL -(7) -(7)
Hunter's Ridge at Deerwood Jacksonville, FL -(2) -(2)
Lakeside Jacksonville, FL -(9) -(9)
Paddock Club-Jacksonville I Jacksonville, FL -(10) -(10)
Paddock Club-Jacksonville II Jacksonville, FL -(10) -(10)
Paddock Club-JacksonvilleIII Jacksonville, FL -(10) -(10)
St. Augustine Jacksonville, FL -(7) -(7)
Woodbridge at the Lake Jacksonville, FL $3,672 -(1) -(1)
Woodhollow Jacksonville, FL $10,149 7.500% 09/01/02
Paddock Club-Lakeland I Lakeland, FL -(10) -(10)
Paddock Club-Lakeland II Lakeland, FL -(10) -(10)
Savannahs at James Landing Melbourne, FL -(7) -(7)
Paddock Park-Ocala I Ocala, FL $6,805 6.500% 10/01/08
Paddock Park-Ocala II Ocala, FL -(2) -(2)
Paddock Club-Tallahassee I Tallahassee, FL -(2) -(2)
Paddock Club-Tallahassee II Tallahassee, FL $4,727 8.500% 04/01/36
Belmere Tampa, FL -(9) -(9)
Sailwinds at Lake Magdalene Tampa, FL $15,950 8.915% 12/01/99
-------
$48,303
Hidden Oaks I Albany, GA - - -
Hidden Oaks II Albany, GA $2,470 8.000% 02/01/21
Regency Club Albany, GA - - -
High Ridge Athens, GA -(9) -(9)
Shenandoah Ridge Augusta, GA -(9) -(9)
Sterling Ridge Augusta, GA $4,805 8.750% 04/01/17
Westbury Creek Augusta, GA $3,207 7.594% 11/01/24
Fountain Lake Brunswick, GA $3,005 7.750% 04/01/24
Park Walk College Park, GA $3,438 6.370% 11/01/25
2000 Wynnton Columbus, GA - - -
Riverwind Columbus, GA - - -
Whisperwood Columbus, GA -(2) -(2)
Whisperwood Spa & Club Columbus, GA -(2) -(2)
Willow Creek Columbus, GA -(9) -(9)
Hollybrook Dalton, GA $2,520 8.915% 12/01/99
Whispering Pines I LaGrange, GA $2,770 7.750% 01/01/23
Whispering Pines II LaGrange, GA $2,561 6.150% 12/01/24
Westbury Springs Lilburn, GA $4,307 7.500% 07/01/23
Austin Chase Macon, GA $10,182 7.300% 05/01/98
The Vistas Macon, GA $4,130 6.230% 03/01/28
Wildwood I Thomasville, GA $2,112 7.500% 12/01/20
Wildwood II Thomasville, GA $2,046 6.573% 07/01/24
Hidden Lake I Union City, GA $4,583 6.340% 12/01/26
Hidden Lake II Union City, GA -(9) -(9)
Three Oaks I Valdosta, GA $2,894 7.500% 02/01/22
Three Oaks II Valdosta, GA $2,978 6.259% 07/01/24
Southland Station I Warner Robins, GA -(9) -(9)
Southland Station II Warner Robins, GA - - -
Terraces at Towne Lake Woodstock, GA $15,246 8.250% 01/01/37
-------
$73,254
Fairways at Hartland Bowling Green, KY $4,697 8.875% 05/01/00
Paddock Club Florence Florence, KY $9,723 7.250% 02/01/36
Lakepointe Lexington, KY -(9) -(9)
Mansion, The Lexington, KY $4,140 8.915% 12/01/99
Village, The Lexington, KY -(9) -(9)
Stonemill Village Louisville, KY -(6) -(6)
-------
$18,560
Canyon Creek St. Louis, MO -(6) -(6)
Riverhills Grenada, MS $851 7.000% 05/01/13
Advantages, The Jackson, MS -(6) -(6)
Crosswinds Jackson, MS -(9) -(9)
Lakeshore Landing Jackson, MS -(6) -(6)
Pear Orchard Jackson, MS -(9) -(9)
Pine Trails Jackson, MS $1,357 7.000% 04/01/15
Reflection Pointe Jackson, MS $5,882 5.500% 12/01/27
Somerset Place Jackson, MS -(9) -(9)
Woodridge Jackson, MS $4,789 6.500% 10/01/27
-------
$12,879
Hermitage at Beechtree Cary, NC -(9) -(9)
Woodstream Greensboro, NC $5,491 9.250% 12/01/98
Corners, The Winston-Salem, NC $4,306 7.850% 06/15/03
-------
$9,797
Fairways at Royal Oak Cincinnati, OH -(9) -(9)
Colony at Southpark Aiken, SC - - -
Woodwinds Aiken, SC $3,532 8.840% 06/01/05
Tanglewood Anderson, SC $2,576 7.600% 11/15/02
The Fairways Columbia, SC $7,641 8.500% 03/01/33
Paddock Club-Columbia I Columbia, SC -(2) -(2)
Paddock Club-Columbia II Columbia, SC -(2) -(2)
Highland Ridge Greenville, SC -(3) -(3)
Howell Commons Greenville, SC -(9) -(9)
Paddock Club - Greenville Greenville, SC -(2) -(2)
Park Haywood Greenville, SC -(9) -(9)
Spring Creek Greenville, SC -(3) -(3)
Runaway Bay Mt. Pleasant, SC -(3) -(3)
Park Place Spartanburg, SC -(9) -(9)
-------
$13,749
Hamilton Pointe Chattanooga, TN -(6) -(6)
Hidden Creek Chattanooga, TN -(6) -(6)
Steeplechase Chattanooga, TN -(9) -(9)
Windridge Chattanooga, TN $5,558 6.314% 12/01/24
Oaks, The Jackson, TN -(6) -(6)
Post House Jackson Jackson, TN $5,140 8.170% 10/01/27
Post House North Jackson, TN $3,680 5.750% 09/01/25
Williamsburg Village Jackson, TN -(9) -(9)
Woods at Post House Jackson, TN $5,313 7.250% 09/01/35
Cedar Mill Memphis, TN $2,487 -(4) & (6) -(4) & (6)
Clearbrook Village Memphis, TN $1,162 9.000% 05/01/08
Crossings Memphis, TN -(6) -(6)
EastView Memphis, TN $3,286 8.630% 12/01/99
Glen Eagles Memphis, TN -(6) -(6)
Greenbrook Memphis, TN $15,477 -(5) -(5)
Hickory Farm Memphis, TN -(6) -(6)
Kirby Station Memphis, TN -(9) -(9)
Lincoln on the Green Memphis, TN -(10) -(10)
Lincoln on the Green II Memphis, TN - - -
McKellar Woods Memphis, TN $8,357 -(5) -(5)
Park Estate Memphis, TN $1,471 -(5) -(5)
River Trace I Memphis, TN $5,832 7.500% 02/01/22
River Trace II Memphis, TN $5,739 6.380% 02/01/26
Savannah Creek Memphis, TN (8) -(9) -(9)
Sutton Place Memphis, TN (8) -(9) -(9)
Winchester Square Memphis, TN -(6) -(6)
Brentwood Downs Nashville, TN $6,678 8.915% 12/01/99
Park at Hermitage Nashville, TN $8,190 5.790% 02/01/19
-------
$78,370
Balcones Woods Austin, TX $8,986 7.630% 11/01/03
Stassney Woods Austin, TX $4,825 6.600% 04/01/19
Travis Station Austin, TX $4,265 6.600% 04/01/19
Woods Austin, TX -(2) -(2)
Redford Park Conroe, TX $3,000 9.006% 12/01/04
Celery Stalk Dallas, TX $8,460 9.006% 12/01/04
Lodge at Timberglen Dallas, TX $4,740 9.006% 12/01/04
MacArthur Ridge Irving, TX $7,524 7.400% 08/15/98
Westborough Katy, TX $3,958 9.006% 12/01/04
Lane at Towne Crossing Mesquite, TX $5,696 8.750% 01/01/98
Cypresswood Court Spring, TX $3,330 9.006% 12/01/04
Green Tree Place Woodlands, TX $3,180 9.006% 12/01/04
-------
$57,964
Township Hampton, VA -(2) -(2)
--------
Total $326,444
========
</TABLE>
[FN]
(1) Encumbered by two mortgages with interest rates of 7.75% and maturities
of September 7, 1999 and January 1, 2004.
(2) Encumbered by the Credit Line, with an outstanding balance of $45.2
million at December 31, 1997. The line had a variable interest rate at
December 31, 1997 of 7.07%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) Cedar Mill is encumbered by two mortgages with interest rates of 7.8%
and 8.35%, with maturities of February 4, 2004 and July 1, 2001 and
Mendenhall Townhomes with a 8.65% loan maturing July 1, 2001.
(5) Encumbered by three mortgages with interest rates of 7.8%, 7.55%
and 8.35% and maturities of February 4, 2004, July 1, 2001 and
July 1, 2001, respectively.
(6) These twelve properties are encumbered by a $43.4 million mortgage
with a maturity of July 1, 2001 and an average interest rate of
8.65%.
(7) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(8) These properties are located in Desoto County, MS, a suburb of Memphis,
TN. The Company considers the properties part of the Memphis, TN market.
(9) These 26 properties are encumbered by a $140 million loan with a
maturity of March 3, 2003 and an average interest rate of 6.62%.
(10) These six properties are encumbered by a $47.5 million mortgage.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Communities is presently subject to
any material litigation nor, to the Company's knowledge, is any
material litigation threatened against the Company or the
Communities properties, other than routine litigation arising in the
ordinary course of business, some of which is expected to be covered
by liability insurance and none of which is expected to have a
material adverse effect on the business, financial condition,
liquidity or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of shareholders in November 1997
for the following purposes:
Proposal 1: To approve an amendment to the Company's Charter to
increase the number of authorized shares of Common Stock from 20
million shares to 50 million shares.
Proposal 2: To approve an amendment to the Company's Charter to
increase the number of authorized shares of Preferred Stock from 5
million shares to 20 million shares.
Votes Cast
Votes Cast Against or Abstentions/
In Favor Withheld Non Votes
---------- ---------- ------------
Votes cast by holders of Common Stock:
- --------------------------------------
Proposal 1 12,648,206 2,231,956 99,670
Proposal 2 8,736,016 2,610,523 131,468
Votes cast by holders of 9.5%
Series A Cumulative Preferred Stock:
- ------------------------------------
Proposal 2 1,060,289 71,026 24,025
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock has been listed and traded on the NYSE under the
symbol "MAA" since the Initial Offering in February 1994. On March
13, 1998, the reported last sale price of the Company's common stock
on the NYSE was $28.13 per share and there were approximately 1,640
holders of record of the Common Stock. The Company estimates there
are approximately 16,000 beneficial owners of the Common Stock. The
following table sets forth the quarterly high and low sales prices
of the Common Stock as reported on the NYSE and the distributions
declared by the Company with respect to the periods indicated.
Sales Prices
---------------- Dividends
High Low Declared
--------- --------- ---------
1996:
-----
First Quarter $ 26.875 $ 24.00 $ .51
Second Quarter 26.625 25.00 .51
Third Quarter 25.875 23.75 .51
Fourth Quarter 28.875 24.625 .535
1997:
-----
First Quarter $ 29.750 $ 27.625 .535
Second Quarter 28.875 25.00 .535
Third Quarter 30.500 26.625 .535
Fourth Quarter 30.063 26.625 .55
The Company's current annual distribution rate with respect to the
Common Stock is $2.20 per share. The actual distributions made by
the Company will be affected by a number of factors, including the
gross revenues received from the Communities, the operating expenses
of the Company, the interest expense incurred on borrowings and
unanticipated capital expenditures.
The Company pays a preferential regular monthly distribution on the
Series A Preferred Stock issued in October 1996 and the Series B
Preferred Stock issued in November 1997 at an annual rate of $2.375
per share and $2.21875 per share, respectively. No distribution may
be made on the Common Stock unless all accrued distributions have
been made with respect to the Series A and Series B Preferred Stock.
No assurance can be given that the Company will be able to maintain
its distribution rate on its Common Stock or make required
distributions with respect to the Series A or Series B Preferred
Stock.
In 1997, the Company implemented the DRSPP under which holders of
Common Stock (and Series A and Series B Preferred Stock) may elect
automatically to reinvest their distributions in additional shares
of Common Stock and/or to make optional purchases of Common Stock
free of brokerage commissions and charges. Shares purchased directly
from the Company will be purchased at up to a 3% discount from their
fair market value at the Company's discretion. To fulfill its
obligations under the DRSPP, the Company may either issue additional
shares of Common Stock or repurchase Common Stock in the open
market.
Future distributions by the Company will be at the discretion of the
Board of Directors and will depend on the actual funds available
for distribution of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of
Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an
historical basis for the Company and its predecessor. This data
should be read in conjunction with the consolidated financial
statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this Annual Report on Form 10-K. In the opinion of
management, the data for the periods presented include all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.
Mid - America Apartment Communities, Inc.
Selected Financial Data
(Dollars in thousands except per share and property data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Historical
----------------------------------------------------
(Predecessor)
1997 1996 1995 1994 (1) 1993
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Operating Data:
- --------------
Total revenues $139,116 $111,882 $94,963 $51,207 $26,295
Expenses:
Property expenses (2) 52,404 42,570 37,954 19,484 11,316
General and administrative 6,602 6,154 4,851 3,613 1,402
Interest 28,943 25,766 22,684 10,233 7,448
Depreciation and amortization 27,737 21,443 16,574 8,803 3,521
Amortization of deferred financing costs 888 661 593 296 199
Gain on disposition of properties - 2,185 - - -
Income before minority interest in operating
partnership income and extraordinary item 22,542 17,473 12,307 8,778 2,409
Extraordinary item (8,622) - - 485 -
Net income 11,227 14,260 9,810 6,944 2,542
Preferred dividends 5,252 990 - - N/A
Net income available for common shareholders $5,975 $13,270 $9,810 $6,944 N/A
Per Common Share Data:
- ----------------------
Basic and diluted:
Before extraordinary item $1.05 $1.21 $1.00 $0.94 N/A
Extraordinary item ($0.62) $0.00 $0.00 $0.07 N/A
---------------------------------------------------
Net income available per common share $0.43 $1.21 $1.00 $1.01 N/A
===================================================
Dividends declared per common share $2.155 $2.065 $2.01 $1.71 N/A
Balance Sheet Data:
- ------------------
Real estate owned, at cost $1,211,693 $641,893 $578,788 $434,460 $125,269
Real estate owned, net $1,134,704 $592,335 $549,284 $421,074 $98,029
Total assets $1,194,070 $611,199 $565,267 $439,233 $104,439
Total debt $632,213 $315,239 $307,939 $232,766 $105,594
Minority interest $62,865 $39,238 $41,049 $43,709 N/A
Shareholders' equity (owners' deficit) $461,500 $241,384 $202,278 $152,385 ($4,684)
Weighted average common shares (000's) 13,892 10,938 9,772 6,484 N/A
Other Data (at end of period):
- -----------------------------
Market capitalization (shares and units) $710,175 $436,739 $331,238 $295,300 N/A
Ratio of total debt to total capitalization(3) 47.1% 41.9% 48.2% 44.1% N/A
Number of properties 116 73 70 54 22
Number of apartment units 30,579 19,280 18,219 14,333 5,580
</TABLE>
[FN]
(1) Operating data for 1994 includes 34 days of predecessor
financial information and per share data for 1994 is for
the period February 4, 1994 through December 31, 1994.
(2) See discussion of the change in accounting policy during
1996 in Note 1 to the Consolidated Financial Statements.
(3) Total capitalization is total debt and market capitalization
of preferred shares, common shares and partnership units.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the consolidated financial
condition and results of operations of the Company for the years
ended December 31, 1997, 1996, and 1995. This discussion should be
read in conjunction with all of the financial statements included in
this Annual Report on Form 10-K.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") represents net income (computed in
accordance with GAAP) excluding extraordinary items, minority
interest in Operating Partnership income, gain or loss on
disposition of real estate assets, and certain non-cash items,
primarily depreciation and amortization, less preferred stock
dividends. The Company computes FFO in accordance with NAREIT's
current definition, which eliminates amortization of deferred
financing costs and depreciation of non-real estate assets as items
added back to net income when computing FFO. The Company adopted
this method of calculating FFO effective as of the NAREIT-suggested
adoption date of January 1, 1996. FFO should not be considered as an
alternative to net income or any other GAAP measurement of
performance, as an indicator of operating performance or as an
alternative to cash flows from operating, investing, and financing
activities as a measure of liquidity. The Company believes that FFO
is helpful in understanding the Company's results of operations in
that such calculation reflects cash flow from operating activities
and the Company's ability to support interest payments and general
operating expenses before the impact of certain activities such as
changes in other assets and accounts payable. The Company's
calculation of FFO may differ from the methodology for calculating
FFO utilized by other REITs and, accordingly, may not be comparable
to such other REITs.
For the year ended December 31, 1997, FFO increased by
approximately $9,246,000 or 26%, when compared to the year ended
December 31, 1996. The increase was primarily attributable to an
approximate $27,234,000 increase in revenues, which was partially
offset by increases in expenses mainly associated with the increase
in the number of apartment units owned by the Company. On a per
share basis, FFO increased approximately 3% from $2.65 per share for
the year ended December 31, 1996 to $2.73 per share for the same
period in 1997.
For the year ended December 31, 1996, FFO increased by
approximately $6,809,000 or 23.7%, when compared to the year earlier
(adjusted only for the new NAREIT definition of FFO). The increase
was primarily attributable to an approximate $16,919,000 increase in
revenues, which was partially offset by increases in expenses mainly
associated with the increase in the number of apartment units owned
by the Company. On a per share basis, FFO increased 8.6% from $2.44
per share (restated for the effect of adoption of the current NAREIT
FFO definition and the change in accounting policy) for the year
ended December 31, 1995 to $2.65 per share for the same period in
1996.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED
DECEMBER 31, 1996
During the 1997 period, the Company acquired 12 communities
containing 3,314 apartment units. In addition, through the November
25, 1997 merger with Flournoy Development Company ("FDC"), the
Company acquired 32 communities containing 8,641 apartment units
including 950 apartment units under development. The total number of
apartment units owned at December 31, 1997 was 30,579 in 116
apartment communities, compared to 19,280 in 73 communities at
December 31, 1996. Average monthly rental per apartment unit
increased to $549 at December 31, 1997 from $529 at December 31,
1996 for the Company's properties owned prior to the merger. For the
communities owned prior to the merger, average occupancy for the
years ended December 31, 1997 and 1996 was 94.5% and 95.4%,
respectively. For the properties acquired through the FDC Merger,
average monthly rental per apartment unit was $613 and average
occupancy was 92.2% at December 31, 1997.
Total revenues for 1997 increased by approximately $27,234,000, due
primarily to (i) approximately $12,743,000 from the 12 Communities
acquired in 1997, (ii) approximately $5,342,000 from the 30
completed Communities acquired through the FDC Merger, (iii)
approximately $6,759,000 from a full years operation of the six
Communities acquired in 1996, (iv) approximately $2,113,000 from
the Communities owned throughout both periods, and (v)
approximately $277,000 from The Woods at Post House in Jackson,
Tennessee which completed development in the Fall of 1995 and
Lincoln on the Green phase II in Memphis, Tennessee which completed
development early 1998.
Property operating expenses for 1997 increased by approximately
$9,834,000, due primarily to (i) approximately $4,929,000 from the
12 Communities acquired in 1997, (ii) approximately $1,938,000 from
the 30 completed Communities acquired through the FDC Merger, (iii)
approximately $2,298,000 from a full years operation of the six
Communities acquired in 1996, (iv) approximately $583,000 from the
Communities owned throughout both periods, and (v) approximately
$86,000 from The Woods at Post House which completed development in
the Fall of 1995 and Lincoln on the Green phase II. Utility costs
decreased from 5.5% of revenue to 4.6% of revenue for the year ended
December 31, 1997 compared to the same period a year earlier, due
primarily to over 13,000 units now submetered for water usage and
continued benefits from the 1996 completion of the individual
apartment unit electricity metering at Sailwinds at Lake Magdalene.
General and administrative expense increased $448,000 for the year
ended December 31, 1997 compared to December 31, 1996 and decreased
from 5.5% of revenue to 4.8% of revenue for the year ended December
31, 1997 compared to the same period a year earlier. The reductions
result from $122,000 transfer of landscape overhead to property
costs, $156,000 reduced state and local taxes and increased
operating efficiencies of a larger operation.
Depreciation and amortization expense increased primarily due to (i)
approximately $2,503,000 from the 12 Communities acquired in 1997,
(ii) approximately $1,247,000 from the 30 completed Communities
acquired through the FDC Merger, (iii) approximately $1,493,000
from a full years operation of the six Communities acquired in 1996,
(iv) approximately $1,224,000 from additional capital expenditures
on Communities owned throughout both periods, and (v)
approximately $54,000 from The Woods at Post House and Lincoln on
the Green phase II. Amortization of deferred financing costs and
unamortized costs in excess of fair value of net assets acquired for
1997 were approximately $888,000 and approximately $309,000,
respectively.
Interest expense increased approximately $3,177,000 during 1997 due
primarily to apartment acquisitions and the FDC merger. The Company
reduced its average borrowing cost to 7.41% at December 31, 1997 as
compared to 7.92% on December 31, 1996. The average maturity on the
Company's debt was 10.2 and 9.9 years at December 31, 1997 and 1996,
respectively. In 1997, the Company recorded an approximate $8,622,000
loss on early extinguishment of debt, net of minority interest, primarily
from the repayment of certain debt in connection with the FDC Merger.
Income before minority interest for the year ended December 31, 1997
increased approximately $5,069,000 over the same period a year
earlier.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED
DECEMBER 31, 1995
During the 1996 period, the Company acquired six apartment
communities and sold three apartment communities. The total number
of apartment units owned at December 31, 1996 was 19,280 in 73
apartment communities, compared to 18,219 in 70 communities at
December 31, 1995. Average monthly rental per apartment unit
increased to $529 at December 31, 1996 from $508 at December 30,
1995. Average occupancy for the years ended December 31, 1996 and
1995 was 95.4% and 95.2%, respectively.
Total revenues for 1996 increased by approximately $16,919,000, due
primarily to (i) approximately $4,833,000 from the six Communities
acquired in 1996, (ii) approximately $7,156,000 from a full years
operation of the 15 Communities acquired in 1995, including the
Communities acquired in the AFR Merger, (iii) approximately
$4,363,000 from the Communities owned throughout both periods, and
(iv) approximately $567,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Property operating expenses for 1996 increased by approximately
$4,616,000, due primarily to (i) approximately $1,686,000 from the
six Communities acquired in 1996, (ii) approximately $2,746,000
from a full year's operations of the 15 Communities acquired in
1995, including the Communities acquired in the AFR Merger, and
(iii) approximately $234,000 from The Woods at Post House. These
increases were offset by a decrease of approximately $51,000 from
the Communities owned throughout both periods. Repair and
maintenance expense decreased primarily due to the Company's change
in the capitalization policy to conform with policies currently used
by the majority of the largest apartment REITs. Utility costs
decreased from 6.1% of revenue to 5.5% of revenue for the year ended
December 31, 1996 compared to the same period a year earlier, due
primarily to the installation of 6,400 individual apartment unit
water meters and the completion of the individual apartment unit
electricity metering at Sailwinds at Lake Magdalene.
General and administrative expense increased in 1996 approximately
$1,303,000 primarily due to the opening of the new training center
and other expenses due to the continued growth of the company.
Depreciation and amortization expense increased primarily due to (i)
approximately $893,000 from the six apartment communities acquired
in 1996, (ii) approximately $1,346,000 from the 15 apartment
communities acquired in 1995, including the Communities acquired in
the AFR Merger, (iii) approximately $2,187,000 from additional
capital expenditures on Communities owned throughout both periods,
and (iv) approximately $443,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Amortization of deferred financing costs and unamortized costs in
excess of fair value of net assets acquired for 1996 were
approximately $661,000 and approximately $192,000, respectively.
Interest expense increased approximately $3,082,000 during 1996 due
primarily to apartment acquisitions. The Company reduced the average
borrowing cost to 7.92% at December 31, 1996 as compared to 8.15% on
December 31, 1995. The average maturity on the Company's debt was
9.9 years at both December 31, 1996 and 1995.
In 1996, the Company recorded an approximate $2,185,000 gain for the
disposition of three apartment communities. The dispositions were
structured as tax-deferred exchanges for federal tax purposes. As a
result of the foregoing, income before minority interest for the
year ended December 31, 1996 increased approximately $5,166,000 over
the same period a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from
approximately $38,018,000 for the year ended December 31, 1996 to
approximately $44,797,000 for the year ended December 31, 1997. The
increase in net cash flow was primarily due to an increase in
depreciation and amortization less an extraordinary loss recorded
due to the early extinguishment of certain debt.
Net cash used in investing activities increased from approximately
$70,436,000 for the year ended December 31, 1996 to approximately
$138,263,000 for the year ended December 31, 1997. The increase was
primarily due to the acquisition of 3,314 apartment units in 1997
for approximately $76,287,000 as compared to the acquisition of
1,760 apartment units in 1996 for approximately $66,258,000. This
increase in net cash flow used in investing activities was partially
offset by the sale of three apartment communities in 1996 for
approximately $17,096,000. Capital improvements to existing
properties totaled approximately $20,205,000 for the year ended
December 31, 1997, compared to approximately $18,437,000 for the
same period in 1996. Of the $20,205,000 capital improvements
approximately $7,743,000 was for recurring capital expenditures,
including carpet and appliances, approximately $6,112,000 was for
revenue enhancing projects, approximately $5,557,000 was for
acquisition capital with the remaining balance for other
miscellaneous expenditures, including corporate. Recurring capital
expenditures averaged $0.47 per share in 1997. Construction in
progress for new apartment units increased from approximately
$2,837,000 for the year ended December 31, 1996 to approximately
$16,093,000 for the comparable period in 1997, due primarily to the
completion of the 234-unit development at Lincoln on the Green in
Memphis, Tennessee which began leasing during 1997 and other
developments including $1,685,000 for the 254-unit Reserve at Dexter
Lake, $1,273,000 for the 288-unit Mandarin, $879,000 for the 154-
unit phase II addition for Whisperwood Spa and $789,000 for the 316-
unit Terraces at Fieldstone.
Net cash provided by financing activities increased from
approximately $33,425,000 during the year ended December 31, 1996 to
approximately $104,218,000 for the year ended December 31, 1997.
During 1997, approximately $202,320,000 was provided by borrowings
under the Credit Line and notes payable and approximately
$46,635,000 was provided from the issuance of preferred shares. The
principal uses of the cash included approximately $30,021,000 for
the repayment of notes payable and approximately $39,771,000 for
dividends and distributions.
At December 31, 1997, the Company had approximately $45,225,000
outstanding on the Credit Line. At December 31, 1997, the Company
had approximately $63,200,000 (including the Credit Line) of
floating rate debt at an average interest rate of 6.5%; all other
debt was fixed rate term debt at an average interest rate of 7.8%.
The weighted average interest rate and weighted average maturity at
December 31, 1997 for the approximately $632,213,000 of notes
payable were 7.4% and 10.2 years, respectively. The Company used the
approximately $46,635,000 of net proceeds from the Preferred Stock
Offering, which closed in November, for the acquisitions of the 192-
unit Sterling Ridge apartment community in Augusta, Georgia and the
184-unit Colony at South Park apartment community in Aiken, South
Carolina and used the balance to reduce the amount outstanding on
the Credit Line. In November 1997, the Company increased its credit
limit under the Credit Line from $90,000,000 to $110,000,000 and in
March 1998 increased the credit limit to $200,000,000. The Company
expects to use the Credit Line for future acquisitions, development,
and to provide letters of credit as credit enhancements for tax-
exempt bonds. During 1997 the Company issued 5,799,000 shares of
Common Stock in underwritten public offerings. The net proceeds from
such offerings totaled approximately $160.7 million, all of which
were contributed to the Operating Partnership and utilized to repay
outstanding borrowings under the Credit Line. The Credit Line is
secured and is subject to borrowing base calculations that
effectively reduce the maximum amount that may be borrowed under the
Credit Line to approximately $44,300,000 as of the date of this
Annual Report on Form 10-K.
The Company believes that cash provided by operations is adequate
and anticipates that it will continue to be adequate in both the
short and long-term to meet operating requirements (including
recurring capital expenditures at the Communities) and payment of
distributions by the Company in accordance with REIT requirements
under the Code.
During 1997, capital expenditures were approximately $20,205,000 for
property improvements and $16,093,000 for the development of new units.
For 1998, the Company plans approximately $27,000,000 for property
improvements and $120,000,000 for development of new units. The Company
expects to meet its long term liquidity requirements, such as scheduled
mortgage debt maturities, property acquisitions, expansions and non-
recurring capital expenditures, through long and medium-term
collateralized and uncollateralized fixed rate borrowings, issuance
of debt or additional equity securities in the Company and the
Credit Line.
INSURANCE
In the opinion of management, property and casualty insurance is in
place which provides adequate coverage to provide financial
protection against normal insurable risks such that it believes that
any loss experienced would not have a significant impact on the
Company's liquidity, financial position, or results of operations.
INFLATION
Substantially all of the resident leases at the Communities allow,
at the time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek rent increases.
The substantial majority of these leases are for one year or less.
The short-term nature of these leases generally serves to reduce the
risk to the Company of the adverse effects of inflation.
YEAR 2000
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (Year 2000)
approaches. The "Year 2000" issue is pervasive and complex as
virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or
cause a system to fail.
The Company is utilizing both internal and external resources to
identify, correct or reprogram, and test the systems for the Year
2000 compliance. During 1997, the Company developed a plan to deal
with the Year 2000 issue. Management has conducted a comprehensive
review of the Company's computer systems to identify the systems
that could be affected by the Year 2000 issue and has developed an
implementation plan to resolve potential issues. The Company has
reviewed our core mainframe systems and application subsystems and
have obtained the Year 2000 compliant releases and are developing
the installation and testing plan for each of these applications.
The Company has corresponded with our third party service providers
and other providers of software and hardware for certification of
their compliance with Year 2000 issues. It is anticipated that all
reprogramming efforts will be completed by December 31, 1998,
allowing adequate time for testing. Management has assessed the
Year 2000 compliance expense and believe that the related potential
effect on the Company's business, financial condition and results of
operations should be immaterial. The Company is expensing all costs
associated with the Year 2000 as the costs are incurred.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors
created thereby. These statements include the plans and objectives
of management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the
apartment communities. Although the Company believes that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking
statements included in this Annual Report on Form 10-K will prove to
be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report, Consolidated Financial Statements
and Selected Quarterly Financial Information are set forth on pages
F-1 to F-24 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent
accountants and auditors on any matter of accounting principles or
practices or financial statement disclosure.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 23, 1997, the Company acquired its corporate headquarters for
$2,912,000. In connection with the acquisition, the Company formed a
special committee of its external directors to negotiate the transaction
on its behalf because certain executive officers of the Company were also
partners in the partnership which owned the building. The consideration
consisted of approximately $862,000 cash, 22,246 Operating Partnership
Units valued at $634,000 ($28.50 per unit) and the assumption of an
existing loan. Certain executive officers of the Company were partners
in the partnership who owned the building and received 5,831 units of
common shares connected with the exchange.
All transactions involving related parties must be approved by a majority
of the disinterested members of the Company's Board of Directors. The
Company has, and expects to have, transactions in the ordinary course of
its business with directors and officers of the Company and their
affiliates, including members of their families or corporations,
partnerships or other organizations in which such officers or directors
have a controlling interest, on substantially the same terms (including
price, or interest rates and collateral) as those prevailing at the time
for comparable transactions with unrelated parties.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Independent Auditors' Report F - 1
Consolidated Balance Sheets as of December 31, 1997 and 1996 F - 2
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 F - 3
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995 F - 4
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 F - 5
Notes to Consolidated Financial Statements for the years
ended December 31, 1997, 1996 and 1995 F - 6
2. Financial Statement Schedule required to be filed
by item 8 and Paragraph (d) of this item 14:
Independent Auditors' Report F - 19
Schedule III - Real Estate Investments and
Accumulated Depreciation as of December 31, 1997 F - 20
3. The exhibits required by Item 601 of Regulation S-K,
except as otherwise noted, have been filed with previous
reports by the registrant and are herein incorporated by reference.
Item 16. Exhibits.
Exhibit
Numbers Exhibit Description
- ------- -------------------
2.1* Agreement and Plan of Reorganization made as of September 15,
1997 by and among Mid-America Apartments, L.P., Mid-America
Apartment Communities, Inc. and Flournoy Development Company
3.1 Amended and Restated Charter of Mid-America Apartment
Communities, Inc. dated as of January 10, 1994, as filed with
the Tennessee Secretary of State on January 25, 1994
3.2****** Articles of Amendment to the Charter of Mid-America Apartment
Communities, Inc. dated as of January 28, 1994, as filed with
the Tennessee Secretary of State on January 28, 1994
3.3 Articles of Merger of The Cates Company with and into Mid-
America Apartment Communities, Inc. dated February 2, 1994, as
filed with the Tennessee Secretary of State on February 3, 1994
3.4****** Articles of Merger of America First REIT Advisory Company, a
Nebraska corporation, with and into Mid-America Apartment
Communities, Inc., a Tennessee corporation, dated June 29,
1995, as filed with the Tennessee Secretary of State on June
29, 1995
3.5** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of October 9, 1996, as filed with the Tennessee Secretary of
State on October 10, 1996
3.6 Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter dated November 17, 1997, as
filed with the Tennessee Secretary of State on November 18,
1997
3.7*** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of November 17, 1997, as filed with the Tennessee Secretary of
State on November 18, 1997
3.8 Articles of Merger of Flournoy Development Company (a Georgia
corporation) with and into Mid-America Apartment Communities,
Inc. (a Tennessee corporation) dated November 21, 1997, as
filed with the Tennessee Secretary of State on November 25,
1997
3.9 Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter dated December 15, 1997, as
filed with the Tennessee Secretary of State on December 31,
1997
3.10 Bylaws of Mid-America Apartment Communities, Inc.
4.1 Form of Common Share Certificate
4.2**** Form of 9.5% Series A Cumulative Preferred Stock Certificate
4.3***** Form of 8 7/8% Series B Cumulative Preferred Stock Certificate
4.4** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of October 9, 1996, as filed with the Tennessee Secretary of
State on October 10, 1996
4.5*** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of November 17, 1997, as filed with the Tennessee Secretary of
State on November 18, 1997
10.1 Second Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P., a Tennessee limited partnership
10.2 Employment Agreement between Mid-America Apartment Communities,
Inc. and George E. Cates
10.3 1994 Restricted Stock and Stock Option Plan
10.4******* Promissory Note of the Operating Partnership in favor of
Leader Federal Bank for Savings (McKellar)
10.5******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Park Estate)
10.6******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Greenbrook)
10.7******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Cedar Mill)
10.8******* Assignment of Rents and Leases by the Operating Partnership in
favor of Leader Federal Bank for Savings (McKellar, Park Estate,
Greenbrook, Cedar Mill)
10.9 Revolving Credit Agreement between the Registrant and
AmSouth Bank of Alabama
10.10 Note Purchase Agreement of the Operating Partnership and
the Registrant and Prudential Insurance Company of America
10.11 Amendment 1 to Note Purchase Agreement of the Operating Partnership
and the Registrant and Prudential Insurance Company of America
11.1 Statement re: computation of per share earnings
(included within the Form 10-K)
12.1 Statement re: computation of ratios (definition of ratios used
are disclosed as footnotes on the related table(s) within the
Form 10-K)
21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
23.2 Opinion of KPMG Peat Marwick LLP on Schedule III (included
in F pages of this Form 10-K)
27.1 Financial Data Schedule
_____________________
* Filed as Exhibit 10.20 to the Registrant's Current Report on
Form 8-K, filed with the Commission on September 19, 1997
(Commission File No. 1-12762)
** Filed as Exhibit 1 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on October 11, 1996
*** Filed as Exhibit 4.1 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on November 19, 1997
**** Filed as Exhibit 3 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on October 11, 1996
***** Filed as Exhibit 4.3 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on November 19, 1997
****** Filed as an exhibit to the 1996 Annual Report of the Registrant
on Form 10-K as of March 31, 1997
******* Filed as an exhibit to the Registration Statement on Form S-11
(SEC File No. 33-81970), as amended, of the Registrant and
incorporated herein by reference.
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the
registrant during the fourth quarter of 1997:
Date of
Form Events Reported Report
------ -------------------------------- -------
8-K Announcement of two apartment 10/07/97
acquisitions and the sale of Common Stock
8-K/A Combined Financial Statements for 11/06/97
Flournoy Properties Group for the years
ended December 31, 1996, 1995, and 1994
(Audited) and six months ended June 30,
1997 and 1996 (Unaudited). Pro Forma
Condensed Combined Financial Statements
for the Registrant and Subsidiaries for
the year ended December 31, 1996 and six
months ended June 30, 1997 (Unaudited).
8-K/A Combined Financial Statements for 11/14/97
Flournoy Properties Group for the years
ended December 31, 1996, 1995, and 1994
(Audited) and six months ended September
30, 1997 and 1996 (Unaudited). Pro Forma
Condensed Combined Financial Statements
for the Registrant and Subsidiaries for
the year ended December 31, 1996 and six
months ended September 30, 1997
(Unaudited).
8-K/A Audited historical summary of gross 11/20/97
income and operating expenses for two
apartment acquisitions.
8-K Announcement of an apartment community 11/20/97
acquisition and the related audited
historical summary of gross income and
operating expenses.
8-K Announcement of an apartment acquisition, 11/21/97
the sale of preferred stock and the
related underwriting agreement.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
MID-AMERICA APARTMENT COMMUNITIES, INC.
Date: April 14, 1998______ /s/ George E. Cates___________
George E. Cates
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on
the dates indicated.
Date: April 14, 1998
/s/ George E. Cates__________
George E. Cates
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: April 14, 1998 /s/ Simon R.C. Wadsworth______
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and Accounting Officer)
Date: April 14, 1998 /s/ H. Eric Bolton
H. Eric Bolton
President and Chief Operating Officer
Date: ______________ /s/ John F. Flournoy
John F. Flournoy
Vice-Chairman of the Board and Chief Executive
Officer, Flournoy Development Company
Date: _______________ /s/ John J. Byrne,III
John J. Byrne, III
Director
Date: April 13, 1998 /s/ Robert F. Fogelman
Robert F. Fogelman
Director
Date: April 13, 1998 /s/ John S. Grinalds
John S. Grinalds
Director
Date: ________________ /s/ O. Mason Hawkins
O. Mason Hawkins
Director
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheets of Mid-
America Apartment Communities, Inc. and subsidiaries (the "Company") as
of December 31, 1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1997. These financial
statements are the responsibility of the management of the Company. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financials statements referred to above present
fairly, in all material respects the financial position of the Company at
December 31, 1997 and 1996, and the results of the Company's operations
and cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, the
Company changed its accounting method to capitalize replacement
purchases for major appliances and carpet in 1996.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
March 27, 1998
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Assets:
- ------
Real estate assets (note 3):
Land $109,800 $61,150
Buildings and improvements 1,027,853 563,584
Furniture, fixtures and equipment 21,886 12,511
---------- -----------
1,159,539 637,245
Less accumulated depreciation (76,129) (49,558)
---------- -----------
Apartment properties, net 1,083,410 587,687
Construction in progress 33,717 4,648
Land held for future development 8,849 0
Commercial properties, net 8,728 0
---------- ----------
Real estate assets, net 1,134,704 592,335
Cash and cash equivalents 14,805 4,053
Restricted cash 13,397 5,538
Deferred financing costs, net 5,700 2,984
Other assets 25,464 6,289
---------- ----------
Total assets $1,194,070 $611,199
========== ==========
Liabilities and Shareholders' equity:
- ------------------------------------
Liabilities:
Notes payable (note 3) $632,213 $315,239
Accounts payable 10,098 744
Accrued expenses and other liabilities 22,885 12,182
Security deposits 4,509 2,412
---------- ----------
Total liabilities 669,705 330,577
Minority interest 62,865 39,238
Commitments and Contingencies (note 5) - -
Shareholders' equity:
Preferred stock, $.01 par value,
$25 per share liquidation preference,
20,000,000 shares authorized
2,000,000 shares at 9.5% Series A Cumulative 20 20
1,938,830 shares at 8.875% Series B Cumulative 19 0
Common stock, $.01 par value (authorized
50,000,000 shares); issued and outstanding
18,479,046 and 10,949,216 shares at
December 31, 1997 and 1996, respect 185 109
Additional paid-in capital 500,492 256,689
Other (845) (260)
Accumulated deficit (38,371) (15,174)
---------- ----------
Total shareholders' equity 461,500 241,384
----------- ----------
Total liabilities and shareholders' equity $1,194,070 $611,199
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental $135,673 $110,090 $93,509
Other 3,279 1,792 1,454
Management and development income, net 164 0 0
-------- -------- --------
Total revenues 139,116 111,882 94,963
-------- -------- --------
Expenses:
Personnel 14,623 11,702 9,798
Building repairs and maintenance 6,811 5,305 5,791
Real estate taxes and insurance 14,465 11,642 10,198
Utilities 6,341 6,148 5,753
Landscaping 3,684 2,910 2,361
Other operating 6,480 4,863 4,053
Depreciation and amortization 27,737 21,443 16,574
General and administrative 6,602 6,154 4,851
Interest 28,943 25,766 22,684
Amortization of deferred financing costs 888 661 593
-------- -------- --------
Total expenses 116,574 96,594 82,656
-------- -------- --------
Income before gain on disposition of
properties, minority interest in operating
partnership income and extraordinary item 22,542 15,288 12,307
Gain on disposition of properties - 2,185 -
-------- -------- --------
Income before minority interest in operating
partnership income and extraordinary item 22,542 17,473 12,307
-------- -------- --------
Minority interest in operating
partnership income 2,693 3,213 2,497
-------- -------- --------
Net income before extraordinary item 19,849 14,260 9,810
-------- -------- --------
Extraordinary item: loss on early
extinguishment of debt (note 3) (8,622) - -
-------- -------- --------
Net Income 11,227 14,260 9,810
Dividends on preferred shares 5,252 990 -
-------- -------- --------
Net income available for common shareholders $5,975 $13,270 $9,810
======== ======== ========
Net income available per common share (note 7)
Basic: Before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
------ ------ ------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
====== ====== ======
Diluted: Before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
------ ------ ------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Series A Series B
Preferred Preferred Common Stock
Stock Stock Shares Amount
--------- --------- --------- --------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 $ - $ - 8,579 $ 86
Issuance of common shares - - 5 -
Exercise of stock options - - 10 -
Shares issued in exchange for units - - 12 -
Shares issued in AFR Merger - - 2,331 23
Amortization of unearned compensation - - - -
Dividends on common stock ($2.00 per share) - - - -
Net income - - - -
--------- --------- --------- --------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 $ - $ - 10,937 $ 109
Issuance of common shares - - 11 -
Issuance of Series A preferred shares 20 - - -
Exercise of stock options - - - -
Shares issued in exchange for units - - 1 -
Amortization of unearned compensation - - - -
Dividends on common stock ($2.04 per share) - - - -
Dividends on preferred stock - - - -
Net income - - - -
--------- --------- --------- --------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 $ 20 $ - 10,949 $ 109
Issuance of common shares - - 5,911 59
Issuance of Series B preferred shares - 19 - -
Exercise of stock options - - 9 -
Notes receivable issued for shares and units (Note 8) - - - -
Shares issued in exchange for units - - 60 1
Shares issued in FDC Merger - - 1,550 16
Adjustment for minority interest of Unitholders
resulting from:
Common Stock Offerings - - - -
FDC Merger - - - -
Other - - - -
Amortization of unearned compensation - - - -
Dividends on common stock ($2.14 per share) - - - -
Dividends on preferred stock - - - -
Net income - - - -
--------- --------- --------- --------
SHAREHOLDERS' EQUITY DECEMBER 31, 1997 $20 $19 18,479 $ 185
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
<CAPTION>
Additional Accumulated
Paid-In Earnings
Capital Other (Deficit) Total
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 $150,435 ($542) $2,406 $152,385
Issuance of common shares 106 37 - 143
Exercise of stock options 203 - - 203
Shares issued in exchange for units 200 - - 200
Shares issued in AFR Merger 57,726 - - 57,749
Amortization of unearned compensation - 124 - 124
Dividends on common stock ($2.00 per share) - - (18,336) (18,336)
Net income - - 9,810 9,810
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 $208,670 ($381) ($6,120) $202,278
Issuance of common shares 277 - - 277
Issuance of Series A preferred shares 47,748 - - 47,768
Exercise of stock options (2) - - (2)
Shares issued in exchange for units (4) - - (4)
Amortization of unearned compensation - 121 - 121
Dividends on common stock ($2.04 per share) - - (22,324) (22,324)
Dividends on preferred stock - - (990) (990)
Net income - - 14,260 14,260
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 $256,689 ($260) ($15,174) $241,384
Issuance of common shares 163,531 - - 163,590
Issuance of Series B preferred shares 46,616 - - 46,635
Exercise of stock options (31) - - (31)
Notes receivable issued for shares and units (Note - (706) - (706)
Shares issued in exchange for units 973 - - 974
Shares issued in FDC Merger 44,374 - - 44,390
Adjustment for minority interest of Unitholders
resulting from:
Common Stock Offerings (10,008) - - (10,008)
FDC Merger (834) - - (834)
Other (818) - - (818)
Amortization of unearned compensation - 121 - 121
Dividends on common stock ($2.14 per share) - - (29,172) (29,172)
Dividends on preferred stock - - (5,252) (5,252)
Net income - - 11,227 11,227
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1997 $500,492 ($845) ($38,371) $461,500
========= ========= ========== =========
</TABLE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flow
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
- ------------------------------------
Net income $11,227 $14,260 $9,810
Adjustments to reconcile net income to
net cash provided by operating activity:
Depreciation and amortization 28,746 22,243 17,291
Minority interest in operating partnership income 2,693 3,213 2,497
Extraordinary item 8,622 - -
Gain on disposition of properties - (2,185) - -
Changes in assets and liabilities, net
of effect from business combination:
Restricted cash (1,214) (1,420) 6,333
Other assets (1,341) (95) (1,154)
Accounts payable 140 6 (77)
Accrued expenses and other liabilities (4,550) 2,036 (358)
Security deposits 474 (40) (53)
------ ------ ------
Net cash provided by operating activities 44,797 38,018 34,289
Cash flows from investing activities:
- ------------------------------------
Purchases of real estate assets (76,287) (66,258) (15,561)
Proceeds from dispositions of real estate assets - 17,096 -
Improvements to properties (20,205) (18,437) (19,233)
Construction of units in progress
and future development (16,093) (2,837) (5,692)
Net cash (paid in) acquired from
business combination (25,678) - 1,319
-------- ------- -------
Net cash used in investing activities (138,263) (70,436) (39,167)
Cash flows from financing activities:
- ------------------------------------
Proceeds from notes payable 187,500 17,049 19,256
Net increase in credit line 14,820 12,358 18,047
Principal payments on notes payable (267,003) (14,427) (10,928)
Deferred financing costs (3,813) (1,256) (484)
Proceeds from issuances of
common shares and units 165,858 271 346
Proceeds from issuances of preferred shares 46,635 47,768 -
Redemption of unitholder interests (8) (36) (43)
Distributions to unitholders (5,347) (4,988) (4,914)
Dividends paid on common shares (29,172) (22,324) (18,336)
Dividends paid on preferred shares (5,252) (990) -
------- ------- -------
Net cash provided by financing activities 104,218 33,425 2,944
------- ------- -------
Net increase (decrease) in cash and cash equivalents 10,752 1,007 (1,934)
------- ------- -------
Cash and cash equivalents, beginning of period 4,053 3,046 4,980
------- ------- -------
Cash and cash equivalents, end of period $14,805 $4,053 $3,046
======= ======= =======
Supplemental disclosure of cash flow information:
- ------------------------------------------------
Interest paid $27,468 $25,262 $22,362
------- ------- -------
Supplemental disclosure of noncash investing activities:
- -------------------------------------------------------
Increase in basis of properties acquired in
connection with the business combination $ 58,359 $ - $ -
Assumption (transfer) of debt related to
property acquisitions (dispositions) $ 63,690 $(7,680) $ -
Issuance of units related to property acquisitions $ 880 $ - $ -
Conversion of units for common shares $ 973 $ - $ 200
Issuance of note receivable in exchange for
common shares and units $ 706 $ - $ -
</TABLE>
See Accompanying Notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 1997, 1996 and 1995
1. Organization and Summary of Significant Accounting Policies
Organization and Formation of the Company
Mid-America Apartment Communities, Inc. (the "Company") is a self-
administrated and self-managed real estate investment trust which owns,
develops, acquires and operates multifamily apartment communities in the
southeastern United States and Texas. The Company owns and operates 116
apartment communities principally through its majority owned subsidiary,
Mid-America Apartments, L.P. (the "Operating Partnership") and its
subsidiary, Mid-America Capital Partners, L.P. ("MACP"). MACP is a
recently formed special purpose entity established to issue first
mortgage bonds. In addition to owning and operating apartment
communities, the Company conducts third party property management and
construction and development activities through its service corporation,
Flournoy Development Corporation.
Basis of Presentation
The accompanying financial statements include the accounts of the
Company, the Operating Partnership, and other subsidiaries. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
Minority Interest
Minority interest in the accompanying consolidated financial statements
relates to the ownership interest in the Operating Partnership by the
holders of Class A Common Units of the Operating Partnership. The
Company is the sole general partner of the Operating Partnership. Net
income is allocated to the Minority Interests based on their respective
ownership percentage of the Operating Partnership as described below.
Issuance of additional Common Shares or Operating Partnership Units
changes the ownership of both the Minority Interests and the Company.
Such transactions and the proceeds therefrom are treated as capital
transactions and result in an allocation between shareholders' equity and
Minority Interests to account for the change in the respective percentage
ownership of the underlying equity of the Operating Partnership.
The Company's Board established economic rights in respect of each unit
of limited partnership interest in the Operating Partnership that were
equivalent to the economic rights in respect of each share of common
stock. Each unit is redeemable at the option of the holder thereof in
exchange for one share of common stock. The Operating Partnership has
followed the policy of paying the same per unit distribution in respect
of the units as the per share distribution in respect of the common
stock. Prior to 1997, the Operating Partnership agreement provided for
the allocation of additional net income to the holders of Class A units
that would otherwise be the net income of the Company or another entity.
Effective January 1, 1997 the Operating Partnership agreement was amended
to eliminate the additional allocation of income to the unitholders.
Operating Partnership net income for 1997 was allocated approximately
17.9% to holders of Class A Common Units and 82.1% to the Company.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Revenue Recognition
The Company leases residential apartments under operating leases with
terms of one year or less. Rental and other revenues are recorded when
earned.
In addition to leasing the owned Communities, the Company provides
property management services for affiliated Section 42 Housing Tax Credit
multifamily properties ("Section 42") and conventional properties.
Property management revenue is recorded on the accrual method of
accounting as earned.
The Company receives 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.
Development income is not recognized to the extent that requirements
exist to invest a portion of such development fees in the partnership
entities from which the fees are earned.
Construction contract revenues, which are presented net of construction
contract costs in the accompanying statements of operations, are
recognized 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.
Cash and Cash Equivalents
The Company considers cash, investments in money market accounts and
certificates of deposit with original maturities of three months or less
to be cash equivalents.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for property
taxes, insurance, debt service and replacement reserves.
Real Estate Assets and Depreciation
Real estate assets are carried at the lower of depreciated cost or net
realizable value. Interest, property taxes, and other development costs
incurred during construction is capitalized until completion. Interest of
$388,000 and $91,000 was capitalized in 1997 and 1996, respectively.
Repairs and maintenance costs are expensed as incurred while significant
improvements, renovations, and replacements are capitalized. The cost of
interior painting, vinyl flooring, and blinds are expensed as incurred.
In conjunction with acquisitions of properties, the Company's policy is
to provide in its acquisition budgets adequate funds to complete any
deferred maintenance items to bring the properties to the required
standard, including the cost of replacement appliances, carpet, interior
painting, vinyl flooring, and blinds. These costs are capitalized.
Following a review of its capital expenditure and depreciation policy,
effective January 1, 1996, the Company implemented a new policy of which
the primary changes were (i) to increase minimum dollar amounts to
capitalize from $500 to $1,000; (ii) for stabilized properties
(generally, properties owned and operated by the Company for at least one
year), to capitalize replacement purchases for major appliances and
carpeting of an entire apartment unit which was previously expensed; and
(iii) to reduce the depreciation life of certain assets from 20 years to
10 to 15 years.
The Company believes that the newly adopted accounting policy is
preferable because it is consistent with policies currently being used by
the majority of the largest apartment REITs and provides a better
matching of expenses with the estimated benefit period. The Company's
1995 financial statements were not restated for the effect of the change
in accounting policy. The policy has been implemented prospectively
effective January 1, 1996. The effect of the change in depreciable lives
was not material to consolidated net income of the Company.
Depreciation is computed on a straight line basis over the estimated
useful lives of the related assets which range from 8 to 40 years for
land improvements and buildings and 5 years for furniture, fixtures and
equipment. Depreciation expense includes $195,000, $155,000 and $104,000
in 1997, 1996 and 1995 which relates to computer software, office
furniture and fixtures and other assets found in other industries and
which is required to be recognized, for purposes of funds from operations
computations, as expenses in the calculation of net income.
The Company periodically evaluates its real estate assets for impairment
based upon undiscounted cash flows and measures impairment based on fair
value. This determination is dependent primarily on the Company's
estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of
many years. At December 31, 1997 the Company does not hold any assets
which meet the impairment criteria.
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.
Deferred Costs and Intangibles
Organization costs are amortized using the straight line method over 60
months. Deferred financing costs are amortized over the terms of the
related debt using a method which approximates the interest method.
Unamortized cost in excess of fair value of net assets acquired is
amortized using the straight line method over a range of 8 to 30 years.
Recent Accounting Pronouncements
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued,
effective for years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
This new accounting statement is not expected to have a material impact
on the Company's consolidated financial statements. The Company will
adopt this accounting standard in 1998.
Also in June 1997, SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," was issued, effective for years
beginning after December 15, 1997. This statement requires companies to
identify segments consistent with the manner in which management makes
decisions about allocating resources to segments and measuring their
performance. Disclosures for the newly identified segments are similar
to those required under current standards, with the addition of certain
quarterly disclosure requirements. It also establishes standards for
related disclosures about products and services, geographic areas and
major customers. The Company will adopt this accounting standard in
1998.
Reclassification
Certain prior year amounts have been reclassified to conform with 1997
presentation. The reclassifications had no effect on shareholders' equity
or net income available for common shareholders.
2. Business Combinations
On November 25, 1997, the Company completed the merger with Flournoy
Development Company and related entities ("FDC") (the "FDC Merger")
accounted for using the purchase method of accounting. Total
consideration consisted of $88,271,000, including 1,550,311 shares of
common stock and 412,110 Operating Partnership units in Mid-America
Apartments, L.P., valued at $56,213,000 ($28.6875 per share and unit),
$29,608,000 cash and transaction costs of approximately $2,450,000. The
Company may also issue additional shares of Common Stock (the
"Contingent Value Shares") 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 operating results of FDC are
included in the accompanying statement of operations commencing November
25, 1997.
The assets acquired and liabilities assumed in connection with the merger
were recorded at their respective fair values as follows:
Fair value of assets acquired,
primarily real estate assets $ 411,397,000
Liabilities assumed 335,326,000
---------------
Net assets acquired $ 76,071,000
===============
The following unaudited summarized pro forma consolidated financial
information has been prepared as if the FDC Merger, various other
insignificant acquisitions ( 12 in 1997 and 6 in 1996) and dispositions
(3 in 1996) of properties during the periods presented and various
financing transaction entered into in connection with the acquisitions
had occurred as of the beginning of the periods presented. In
management's opinion, the summarized pro forma consolidated financial
information does not purport to present what actual results would have
been had the above transactions occurred on January 1, 1996, or to
project results for any future period. The amounts presented for the
years ended December 31, 1997 and 1996 are in thousands except for share
amounts (unaudited):
1997 1996
--------- ---------
Total Revenues $ 195,748 $ 188,290
Net income before extraordinary item $ 22,104 $ 23,160
Extraordinary item, net of minority interest (7,866) -
Dividends on preferred shares (9,052) (9,052)
--------- ---------
Net income available for common shareholders $ 5,186 $ 14,108
========= =========
Per common share amounts:
- -------------------------
Basic net income before extraordinary item
per common share $ 0.71 $ 0.76
Basic net income available per common share $ 0.28 $ 0.76
On June 29, 1995, the Company completed the acquisition of America First
REIT, Inc. and America First REIT Advisory Company ("AFR") accounted for
using the purchase method of accounting. The Company exchanged 2,331,000
shares of its common stock, valued at $57,749,000, for all of the
capital stock of AFR. The operating results of AFR are included in the
accompanying statement of operations commencing July 1, 1995.
The fair value of assets acquired and liabilities assumed were as
follows:
Fair value of assets acquired,
primarily real estate assets $ 109,999,000
Liabilities assumed 52,250,000
-------------
Net assets acquired $ 57,749,000
=============
3. Borrowings
During 1997, the Company entered into a new $110 million line of credit
agreement (the "Credit Line") which expires in November 1999. The Credit
Line is secured by certain of the properties, bears interest at LIBOR
plus 1.25% (7.07% at December 31, 1997), and has various restrictive
financial covenants. At December 31, 1997, $45.2 million was outstanding
under the Credit Line. At December 31, 1996, $30.4 million was
outstanding under a $90 million line of credit, which was replaced by the
Credit Line.
At December 31, 1997 MACP had indebtedness of $140 million to Morgan
Stanley Mortgage Capital Inc. pursuant to a short-term promissory note
(the MSMC Loan). The 26 Communities, with a net book value of $213.6
million at December 31, 1997, owned by MACP are pledged to secure the
MSMC Loan. The MSMC Loan has a variable interest rate of LIBOR plus
1.00% (6.72% at December 31, 1997). The MSMC Loan was repaid subsequent
to December 31, 1997. See note 11.
The Company has approximately $447.0 million and $284.8 million at
December 31, 1997 and 1996 under various mortgage notes payable. These
notes are secured by real estate assets and certain restricted cash
accounts.
As of December 31, 1997, the Company estimated that the weighted average
interest rate on the Company's debt was 7.41% with an average maturity of
10.2 years. These estimates consider the effect of the MSMC Loan
repayment discussed in note 11.
During 1997, the Company extinguished a bond note, resulting in an
extraordinary loss of $771,000. At consummation of the merger with FDC,
the Company repaid certain debt primarily attributable to FDC, resulting
in an extraordinary loss of $7,851,000, net of minority interest.
The following tables summarize the Company's indebtedness at December 31,
1997. The tables are prepared as if the issuance of the commercial
mortgage pass-through certificates and repayment of the MSMC Loan which
occurred in 1998 (see note 11) had occurred at December 31, 1997:
<TABLE>
<CAPTION>
At December 31, 1997
-----------------------------------
Actual Average
Interest Interest
Rates Rate Maturity 1997 1996
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Fixed Rate:
Taxable 6.50 - 10.625% 8.06% 1998 - 2037 $ 479.0 $ 212.7
Tax-exempt 5.75 - 8.75% 6.36% 2008 - 2028 90.0 55.3
- ----------------------------------------------------------------------
$ 569.0 $ 268.0
Variable Rate:
Taxable 7.07 - 7.22% 7.07% 1998 - 2009 $ 46.6 $ 30.4
Tax-exempt 5.50 - 5.75% 5.56% 2025 - 2027 16.6 16.8
- ----------------------------------------------------------------------
$ 63.2 $ 47.2
- ----------------------------------------------------------------------
$ 632.2 $ 315.2
======================================================================
Scheduled principal repayments on the borrowings at December 31, 1997 are as
follows (dollars in thousands):
</TABLE>
Year Amortization Balloon Payments Total
- --------- ------------ ---------------- -----
1998 $ 4,146 $ 18,564 $ 22,710
1999 4,299 90,339 94,638
2000 4,088 4,525 8,613
2001 4,191 54,256 58,447
2002 4,373 11,233 15,606
Thereafter 178,147 254,052 432,199
- -------------------------------------------------------------------
$ 199,244 $ 432,969 $ 632,213
- -------------------------------------------------------------------
The Company's indebtedness includes various restrictive financial
covenants. The Company believes that it was in compliance with these
covenants as of December 31, 1997.
4. Fair Value Disclosure of Financial Instruments
Cash and cash equivalents, rental receivable, accounts payable and
accrued expenses and other liabilities and security deposits are carried
at amounts which reasonably approximate their fair value.
Fixed rate notes payable at December 31, 1997 and 1996 total $569.0
million and $268.0 million, respectively, and have an estimated fair value
of $559.9 million and $273.6 million (excluding prepayment penalties)
based upon interest rates available for the issuance of debt with similar
terms and remaining maturities as of December 31, 1997 and 1996. These
notes were subject to prepayment penalties, in the event of repayment
prior to maturity. The carrying value of variable rate notes payable at
December 31, 1997 and 1996 total $63.2 million and $47.2 million,
respectively, and reasonably approximates their fair value. Included in
these variable rate notes are certain Multifamily Housing Renewal bonds
with rates which are less than the prime lending rates at December 31,
1997 and 1996. Approximately $16.6 million in 1997 and $16.8 million
in 1996 of these mortgages are non-taxable and have lower rates than would
be expected for taxable notes with similar terms.
The fair value estimates presented herein are based on information
available to management as of December 31, 1997 and 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.
5. Commitments and Contingencies
The Company is not presently subject to any material litigation nor, to
the Company's knowledge, is any material litigation threatened against
the Company, other than routine litigation arising in the ordinary course
of business, some of which is expected to be covered by liability
insurance and none of which is expected to have a material adverse effect
on the consolidated financial statements of the Company.
The Company incurred lease expense relating to a five year aircraft lease
agreement for the years ended December 31, 1997, 1996, and 1995 of
$187,000, $185,400, and $185,400, respectively.
6. Income Taxes
No provision for federal income taxes has been made in the accompanying
consolidated financial statements. The Company has made an election to
be taxed as a Real Estate Investment Trust ("REIT") under Sections 856
through 860 of the Code. As a REIT, the Company generally is not subject
to Federal income tax to the extent it distributes 95% of its REIT
taxable income to its shareholders and meets certain other tests relating
to the number of shareholders, types of assets and allocable income. If
the Company fails to qualify as a REIT in any taxable year, the Company
will be subject to the Federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate
rates. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its
income and property and to Federal income and excise tax on its
undistributed income.
Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting
purposes primarily because of differences in depreciable lives, bases of
certain assets and liabilities and in the timing of recognition of
earnings upon disposition of properties. For federal income tax
purposes, the following summarizes the taxability of cash distributions
paid on the common shares in 1996 and 1995 and the estimated taxability
for 1997:
1997 1996 1995
------ ------ ------
Per common share
Ordinary income $ 1.16 $ 1.50 $ 1.45
Capital gains - .02 -
Return of capital .98 .52 .55
----------------------------
Total $ 2.14 $ 2.04 $ 2.00
============================
7. Shareholders' Equity
Series A Preferred Stock
Series A Cumulative Preferred Stock ("Series A Preferred Stock") has a
$25.00 per share liquidation preference and a preferential cummulative
annual distribution of $2.375 per share, payable monthly. The Company
issued 2,000,000 Series A Preferred shares in October 1996 and received
net proceeds of $47.8 million.
Series B Preferred Stock
Series B Cumulative Preferred Stock ("Series B Preferred Stock") has a
$25.00 per share liquidation preference and a preferential cummulative
annual distribution of $2.21875 per share, payable monthly. In November
1997 the Company issued 1,938,830 Series B Preferred shares and received
net proceeds of $46.7 million.
Common Stock Offerings
In March 1997 the Company issued 2,300,000 shares of Common Stock and
received net proceeds of $62.5 million. In October 1997 the Company
issued 3,499,000 shares of Common Stock and received net proceeds of
$98.2 million. The Company contributed the net proceeds of the offerings
to the Operating Partnership in exchange for additional Common Units in
the Operating Partnership.
Dividend Reinvestment and Stock Purchase Plan
In January 1997, the Company adopted a Dividend Reinvestment and Stock
Purchase Plan (the "DRSPP") pursuant to which the Company's shareholders
will be permitted to acquire shares of Common Stock through the
reinvestment of distributions on Common Stock, Series A Preferred Stock,
Series B Preferred Stock and through optional cash payments from
shareholders. The Company has registered with the Securities and Exchange
Commission the offer and sale of up to 750,000 shares of Common Stock
pursuant to the DRSPP. During 1997, 24,785 shares of Common Stock were
acquired by shareholders pursuant to the DRSPP.
Earnings Per Share and Dividend Data
The Company adopted SFAS No. 128, "Earnings per Share", effective for
financial statements for periods ending after December 15, 1997. All
prior period EPS data has been restated to conform with the provisions of
this statement.
The computation of basic earnings per share is based on the weighted
average number of common shares outstanding. The computation of diluted
earnings per share is based on the weighted average number of common
shares outstanding plus the shares resulting from the assumed exercise of
all outstanding options using the treasury stock method. The following
table provides a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the years ended
December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<C> <C> <C> <C>
Basic:
- ------
Net income before preferred dividends
and extraordinary item $ 19,849 $ 14,260 $ 9,810
Dividends on preferred shares (5,252) (990) -
----------------------------
Net income available for common
shareholders before extraordinary item $ 14,597 $ 13,270 $ 9,810
Extraordinary item (8,622) - -
----------------------------
Net income available for common shareholders $ 5,975 $ 13,720 $ 9,810
============================
Average common shares outstanding 13,892 10,938 9,772
Basic earnings per share:
- -------------------------
Net income available per common share
before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
----------------------------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
============================
Diluted:
- --------
Net income before preferred dividends
and extraordinary item $ 19,849 $ 14,260 $ 9,810
Dividends on preferred shares (5,252) (990) -
----------------------------
Net income available for common shareholders
before extraordinary item $ 14,597 $ 13,270 $ 9,810
Extraordinary item (8,622) - -
----------------------------
Net income available for common shareholders $ 5,975 $ 13,270 $ 9,810
============================
Average common shares outstanding 13,892 10,938 9,772
Effect of dilutive stock options 63 45 42
----------------------------
Average dilutive common shares outstanding 13,955 10,983 9,814
============================
Diluted earnings per share:
- ---------------------------
Net income available per common share
before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
----------------------------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
============================
</TABLE>
[FN]
The computation of earnings per share does not include the Contingent
Value Shares which may be issued in 1998, 1999, and 2000 due to the
conditions for issuance of the shares have not been satisfied.
8. Employee Benefit Plans
401 (k) Savings Plan
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a
defined contribution plan that satisfies the requirements of Section
401(a) and 401(k) of the Code. The Company may, but is not obligated to,
make a matching contribution of $.50 for each $1.00 contributed, up to 6%
of the participant's compensation. The Company's contribution to this
plan was $154,300, $118,700 and $81,600 in 1997, 1996 and 1995,
respectively.
Non-qualified Deferred Compensation Plan
The Company has adopted a non-qualified deferred compensation plan for
key employees who are not qualified for participation in the Company's
401 (k) Savings Plan. Under the terms of the plan, employees may elect
to defer a percentage of their compensation and the Company matches a
portion of their salary deferral. The plan is designed so that the
employees' investment earnings under the non-qualified plan should be the
same as the earning assets in the Company's 401 (k) Savings Plan. The
Company's match to this plan in 1997, 1996 and 1995 was $18,600, $23,600
and $8,600, respectively.
Employee Stock Purchase Plan
The Mid-America Apartment Communities, Inc. Employee Stock Purchase Plan
(the "ESPP") provides a means for employees to purchase common stock of
the Company. The board has authorized the issuance of 150,000 shares for
the plan. The ESPP is administered by the Compensation Committee who may
annually grant options to employees to purchase annually up to an
aggregate of 15,000 shares of common stock at a price equal to 85% of the
market price of the common stock. During 1997, 1996 and 1995, the ESPP
purchased 2,758, 3,176 and 2,710 shares, respectively.
Employee Stock Ownership Plan
The Mid-America Apartment Communities, Inc. Employee Stock Ownership Plan
(the "ESOP") which is a non-contributory stock bonus plan that satisfies
the requirements of Section 401 (a) of the Internal Revenue Code. Each
employee of the Company is eligible to participate in the ESOP after
attaining the age of 21 years and completing one year of service with the
Company. Participants' ESOP accounts will be 100% vested after five
years of continuous service, with no vesting prior to that time. The
Company contributed 22,500 shares of Common Stock to the ESOP upon
conclusion of the IPO. During 1997, 1996 and 1995, the Company
contributed $344,000, $276,000 and $186,000, respectively, to the ESOP
which purchased an additional 11,921, 8,208 and 5,148 shares,
respectively.
Stock Option Plan
The Company has adopted the 1994 Restricted Stock and Stock Option Plan
(the "Plan") to provide incentives to attract and retain independent
directors, executive officers and key employees. The Plan provides for
the grant of options to purchase a specified number of shares of common
stock ("Options") or grants of restricted shares of common stock
("Restricted Stock"). The Plan also allows the Company to grant options
to purchase Operating Partnership units at the price of the Common Stock
on the New York Stock Exchange on the day prior to issuance of the units
(the "LESOP Provision"). The Plan authorizes Options to buy a total of
500,000 shares of common stock. The Compensation Committee of the Board
of Directors is responsible for granting Options and shares of Restricted
Stock and for establishing the exercise price of Options and terms and
conditions of Restricted Stock. During the first quarter of 1997, the
Company amended the Plan to increase the shares authorized an increase
from 500,000 to 1,000,000 and to remove the restriction on the number of
options that may be issued, subject to overall plan limits.
In 1997 the Company granted options to certain executives and other
officers to purchase 96,000 shares of Common Stock and 110,000 Operating
Partnership units pursuant to the LESOP Provision. In 1997 options to
purchase 75,000 shares of common stock and 110,000 Operating Partnership
units were exercised and the Company advanced a portion of
the purchase price of these shares and units. The employee
advances mature five years from date of issuance and accrue interest,
payable in arrears, at a rate of 7.0% per annum. At December 31, 1997,
the outstanding principal balance on the employee advances was
approximately $700,000 and is recorded in the Company's statement of
shareholders' equity. The Company entered into supplemental bonus agreements
with the employees which are intended to fund the payment of the advances
over a five year period. Under the terms of the supplemental bonus
agreements, the Company will pay cash bonuses to these employees equal to
20% of the original note balance on each anniversary date of the notes.
The bonuses are limited to 15% of the aggregate purchase price of the
common shares and units.
A summary of changes in Options to acquire shares of Common Stock and
Operating Partnership Units for the three years ended December 31, 1997
follows:
Weighted Average
Options Exercise Price
------- ----------------
Outstanding at December 31, 1994 235,000 20.40
Granted 33,000 25.07
Exercised (12,150) 19.75
Forfeited (8,300) 22.02
--------
Outstanding at December 31, 1995 247,550 21.00
Granted 99,000 26.50
Exercised (1,900) 19.75
Forfeited (6,000) 25.81
--------
Outstanding at December 31, 1996 338,650 22.53
Granted 416,500 29.46
Exercised (218,625) 28.17
Forfeited (13,025) 27.91
--------
Outstanding at December 31, 1997 523,500 25.40
========
Options exercisable:
December 31, 1995 34,850 $ 20.63
December 31, 1996 84,050 20.82
December 31, 1997 140,500 21.71
Exercise prices for options outstanding as of December 31, 1997 ranged
from $19.75 to $29.50. The weighted average remaining contractual life
of those options is 8 years.
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which requires either the (i) fair value of
employee stock-based compensation plans be recorded as a component of
compensation expense in the statement of operations as of the date of
grant of awards related to such plans, or (ii) impact of such fair value
on net income and earnings per share be disclosed on a pro forma basis in
a footnote to financial statements for awards granted after December 15,
1994, if the accounting for such awards continues to be in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB 25"). The Company will continue such
accounting under the provisions of APB 25. The pro forma effects in 1997
and 1996 to net income per common share were not considered material.
9. Financial Instruments with Off-Balance Sheet Risk
The Partnership has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Partnership
occasionally utilizes derivative financial instruments as hedges in
anticipation of future debt transactions to manage well-defined interest
rate risk.
In anticipation of the March 6, 1998 financing transaction discussed in
Note 11 "Subsequent Events (Unaudited)", the Partnership entered into
four separate interest rate contracts in 1997 with notional amounts
aggregating $140 million. As of December 31, 1997 the fair value of
these interest rate contracts, based on broker estimates, was an
unrealized loss of approximately $1.1 million ($1.4 million realized loss
as of March 6, 1998). Unrealized changes in the market value of interest
rate contracts are deferred until the hedged transaction is consumated
and realized gains and losses resulting from changes in the market value
of these contacts are deferred and amortized into interest expense over
the life of the related debt issuance.
10. Related Party Transaction
During 1997 the Company acquired its corporate headquarters building for
$2,912,000 from a partnership whose partners included certain executive
officers of the Company. The consideration paid consisted of $862,000
cash, 22,246 Operating Partnership Units valued at $634,000 ($28.50 per
unit) and the assumption of an existing loan. Prior to acquisition the
Company leased the building from the partnership.
11. Subsequent Events (Unaudited)
Declaration of Dividend
The Company declared a fourth quarter common stock dividend of $.55 per
share to be paid January 30, 1998 to holders of record on January 23,
1998.
Completed Acquisitions
Since December 31, 1997, the Company has acquired the following apartment
communities (the "Completed Acquisitions") containing an aggregate of 392
apartment units (dollars in millions):
NUMBER OF ACQUISITION CONTRACT
PROPERTY LOCATION UNITS DATE PRICE
-------- ------------ -------- ----------- --------
Walden Run McDonough, GA 240 2/5/98 $ 13.4
Van Mark Huntsville, AL 152 2/26/98 5.1
-------- --------
Total 392 $ 18.5
======== ========
The financial statements of the completed acquisitions are not included
in the audited consolidated financial statements included herein.
Financing Transactions
On March 6, 1998, MACP completed the sale of $142,000,000 of first
mortgage bonds (the "MACP Bonds") secured by liens on 26 properties owned
by MACP. The MACP Bonds were issued to Mid-America Finance, Inc., a
wholly owned qualified REIT subsidiary of the Company, which deposited
MACP Bonds into a grantor trust (the "Trust"). The Trust issued
commercial mortgage pass-through certificates representing beneficial
ownership of the MACP Bonds. The five year fixed rate non-amortizing
certificates bear interest at 6.376%. The net proceeds to the Company
were approximately $139.2 million after payment of initial discount,
underwriters' fees, costs of rate lock and other expenses. The Company
used the net proceeds of the MACP Bonds to repay the MSMC Loan.
On March 13, 1998, the Company issued mortgages of $36.2 million,
refinancing $29.04 million of existing loans. These new mortgages are
fixed at 7.00% and will amortize over 25 years and will balloon in 2005.
On March 16, 1998, the Company increased its line of credit from $110
million to $200 million with terms substantially the same as before.
11. Selected Quarterly Financial Information (Unaudited)
Mid-America Apartment Communities, Inc.
Quarterly Financial Data (Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------
First(2) Second(2) Third(2) Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $29,839 $32,720 $34,395 $42,162
Income before minority interest in operating
partnership income and extraordinary item $4,704 $5,461 $5,085 $7,292
Minority interest in operating partnership income $527 $651 $620 $895
Extraordinary item, net of minority interest - - - ($8,622)
Net income (loss) available for common shareholders $2,990 $3,622 $3,278 ($3,915)
Per common share:
Basic and diluted per common share (1):
Net income available per common shares
Before extraordinary item $0.26 $0.27 $0.24 $0.27
Extraordinary item $0.00 $0.00 $0.00 ($0.50)
---------------------------------------------
Net income available per common share $0.26 $0.27 $0.24 ($0.23)
=============================================
Dividend declared per common share $0.535 $0.535 $0.535 $0.55
Year Ended December 31, 1996
----------------------------
First Second Third Fourth
--------- ------- ------- -------
Total revenues $27,151 $27,361 $28,362 $29,008
Income before minority interest in operating
partnership income $3,638 $5,595 $3,492 $4,748
Minority interest in operating partnership income $670 $1,027 $644 $872
Net income available for common shareholders $2,968 $4,568 $2,848 $2,886
Per common share:
Basic and diluted per common share (1):
Net income available per common share $0.27 $0.42 $0.26 $0.26
================================================
Dividend declared per common share $0.51 $0.51 $0.51 $0.535
</TABLE>
[FN]
(1) Earnings per share have been restated for the effect of implementing, in
the quarter ended December 31, 1997 SFAS No. 128, "Earnings per Share".
(2) During the quarter ended December 31, 1997, the Operating Partnership
Agreement was amended to eliminate, effective January 1, 1997, the
additional allocation of income to the Class A Common unitholders. The
amounts previously reported for prior quarters during 1997 have been
restated for the effect of this amendment. The effect of this amendment
was to increase net income available for common shareholders
approximately $315, $257 and $200 and to increase net income available
per common share by $ 0.03, $ 0.02, and $ 0.02 for the first, second and
third quarters of 1997.
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.:
Under date of March 27, 1998, we reported on the consolidated balance
sheets of Mid-America Apartment Communities, Inc. (the Company) as of
December 31, 1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997 as contained in the
annual report to shareholders. Our report refers to the Company's
change in its accounting method to capitalize replacement purchases for
major appliances and carpet in 1996. In connection with our audits of
the aforementioned consolidated financial statements, we also have
audited the financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents, fairly in all material respects, the information set
forth therein.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
March 27, 1998
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost
---------------------
Building
and
Property Name Location Encumbrances Land Fixtures
- --------------- ------------- ------------ ------- ----------
<S> <C> <C> <C> <C>
The Advantages Jackson, MS - (1) $422 $3,727
McKellar Woods Memphis, TN 8,357 737 13,200
Pine Trails Clinton, MS 1,357 178 2,728
Reflection Pointe Jackson, MS 5,882 710 8,770
Riverhills Grenada, MS 851 153 2,092
Woodridge Jackson, MS 4,789 471 5,522
Greenbrook Memphis, TN 15,477 2,100 24,468
Hamilton Pointe Chattanooga, TN - (1) 686 6,281
Hidden Creek Chattanooga, TN - (1) 895 8,098
Steeplechase Hixson, TN -(9) 217 1,957
Cedar Mill (7) Memphis, TN 2,487 & (1) 475 6,546
Clearbrook Village Memphis, TN 1,162 260 3,658
Crossings Memphis, TN - (1) 554 2,216
Eastview Memphis, TN 3,286 700 9,646
Gleneagles Memphis, TN - (1) 443 3,983
The Park Estate Memphis, TN 1,471 178 1,141
Winchester Square Memphis, TN - (1) 350 7,279
Post House North Jackson, TN 3,680 381 4,299
Post House Jackson Jackson, TN 5,140 443 5,078
The Oaks Jackson, TN - (1) 177 1,594
The Corners Winston-Salem, NC 4,306 685 6,165
Park Haywood Greenville, SC -(9) 325 2,925
Hickory Farm Memphis, TN - (1) 580 5,220
Lakeshore Landing Jackson, MS - (1) 480 4,320
Woodstream Greensboro, NC 5,491 953 8,599
Stonemill Village Louisville, KY - (1) 1,169 10,518
Canyon Creek St. Louis, MO - (1) 880 7,923
Whispering Oaks Little Rock, AR 3,000 506 4,551
Pear Orchard Jackson, MS -(9) 1,352 12,168
Celery Stalk Dallas, TX 8,460 1,463 13,165
Lane at Towne Crossing Mesquite, TX 5,696 1,038 9,338
Hollybrook Dalton, GA 2,520 405 3,646
Green Tree Place Woodlands, TX 3,180 539 4,850
Redford Park Conroe, TX 3,000 509 4,580
MacArthur Ridge Irving, TX 7,524 1,131 10,183
Lincoln on the Green Memphis, TN -(10) 1,498 13,484
Brentwood Downs Nashville, TN 6,678 1,193 10,739
Shenandoah Ridge Augusta, GA -(9) 650 5,850
Westborough Crossing Katy, TX 3,958 677 6,091
Sailwinds at Lake Magdalene Tampa, FL 15,950 2,212 19,909
Woodbridge at the Lake Jacksonville, FL 3,672 645 5,804
Lakepointe Lexington, KY -(9) 411 3,699
The Mansion Lexington, KY 4,140 694 6,242
The Village Lexington, KY -(9) 900 8,097
Cypresswood Court Spring, TX 3,330 577 5,190
The Lodge at Timberglen Dallas, TX 4,740 825 7,422
Calais Forest Little Rock, AR 5,610 1,026 9,244
The Fairways Columbia, SC 7,641 910 8,207
Kirby Station Memphis, TN -(9) 1,148 10,337
Belmere Tampa, FL -(9) 851 7,667
Williamsburg Village Jackson, TN -(9) 523 4,711
Fairways @ Royal Oak Cincinnati, OH -(9) 814 7,335
Tanglewood Anderson, SC 2,576 427 3,853
Woods at Post House Jackson, TN 5,313 240 6,839
Somerset Jackson, MS -(9) 477 4,294
Highland Ridge Greenville, SC -(3) 482 4,337
Spring Creek Greenville, SC -(3) 597 5,374
St. Augustine Jacksonville, FL -(4) 2,858 6,475
Cooper's Hawk Jacksonville, FL -(4) 854 7,500
Marsh Oaks Atlantic Beach, FL -(9) 244 2,829
Park at Hermitage Nashville, TN 8,190 1,524 14,800
Anatole Daytona Beach, FL 7,000 1,227 5,879
The Savannahs Melbourne, FL -(4) 582 7,868
Stassney Woods Austin, TX 4,825 1,621 7,501
Travis Station Austin, TX 4,265 2,282 6,169
Runaway Bay Mt. Pleasant, SC -(3) 1,085 7,269
The Township Hampton, VA -(2) 1,509 8,189
Lakeside Jacksonville, FL -(9) 1,431 12,883
Crosswinds Jackson, MS -(9) 1,535 13,826
Sutton Place HornLake, MS -(9) 894 8,053
Savannah Creek Southaven, MS -(9) 778 7,013
Napa Valley Little Rock, AR -(9) 960 8,642
Tiffany Oaks Altamonte Springs, FL -(9) 1,024 9,219
Lincoln on the Green -II Memphis, TN - - 6,999
Howell Commons Greenville, SC -(9) 1,304 11,740
Balcones Woods Austin, TX 8,986 1,598 14,398
Westside Creek I Little Rock, AR -(9) 616 5,559
Fairways at Hartland Bowling Green, KY 4,697 1,038 9,342
Woodhollow Jacksonville, FL 10,149 1,686 15,179
The Woods Austin, TX -(2) 1,012 9,120
Hunters Ridge at Deerwood Jacksonville, FL -(2) 1,533 13,835
Austin Chase Macon, GA 10,182 1,409 12,687
Westside Creek II Little Rock, AR 4,958 654 5,904
Woodwinds Aiken, SC 3,532 503 4,540
Hermitage at Beechtree Cary, NC -(9) 900 8,099
Sterling Ridge Augusta, GA 4,805 772 6,949
Colony at Southpark Aiken, SC - 757 6,820
Fountain Lake Brunswick, GA 3,005 502 4,551
Hidden Lake I Union City, GA 4,583 675 6,128
Hidden Lake II Union City, GA -(9) 621 5,587
Hidden Oaks I Albany, GA - 364 3,300
Hidden Oaks II Albany, GA 2,470 306 2,774
High Ridge Athens, GA -(9) 884 7,958
Paddock Club Columbia I Columbia, SC -(2) 1,040 9,360
Paddock Club Huntsville Huntsville, AL -(2) 830 7,470
Paddock Club Jacksonville I Jacksonville, FL -(10) 963 8,739
Paddock Club Lakeland I Lakeland, FL -(10) 951 8,630
Paddock Club Lakeland II Lakeland, FL -(10) 1,303 11,822
Paddock Club Tallahassee I Tallahassee, FL -(2) 950 8,550
Paddock Park I Ocala, FL 6,805 901 8,177
Paddock Park II Ocala, FL -(2) 1,383 12,547
Park Place Spartanburg, SC -(9) 723 6,504
Park Walk College Park, GA 3,438 536 4,859
Regency Club Albany, GA - 198 1,795
River Trace I Memphis, TN 5,832 881 7,996
River Trace II Memphis, TN 5,739 741 6,727
Riverwind Columbus, GA - 108 979
Southland Station I Warner Robins, GA -(9) 777 6,992
Southland Station II Warner Robins, GA - 693 6,292
Three Oaks I Valdosta, GA 2,894 462 4,188
Three Oaks II Valdosta, GA 2,978 460 4,170
The Vistas Macon, GA 4,130 595 5,403
Westbury Creek Augusta, GA 3,207 400 3,626
Westbury Springs Lilburn, GA 4,307 665 6,038
Whispering Pines I LaGrange, GA 2,770 454 4,116
Whispering Pines II LaGrange, GA 2,561 370 3,354
Whisperwood Columbus, GA -(2) 2,330 20,970
Whisperwood Spa I Columbus, GA -(2) 1,510 13,590
Wildwood I Thomasville, GA 2,112 438 3,971
Wildwood II Thomasville, GA 2,046 372 3,372
Willow Creek Columbus, GA -(9) 614 5,523
Windridge Chattanooga, TN 5,558 817 7,416
2000 Wynnton Columbus, GA - 192 1,741
Paddock Club Tallahassee II Tallahassee, FL 4,727 530 4,805
Paddock Club Jacksonville II Jacksonville, FL -(10) 689 6,255
Paddock Club Columbia II Columbia, SC -(2) 800 7,200
Paddock Club Florence Florence, KY 9,723 1,209 10,969
Paddock Club Greenville Greenville, SC -(2) 1,200 10,800
Paddock Club Brandon I Brandon, FL -(2) 2,100 18,900
Terraces at Towne Lake I Woodstock, GA 15,246 1,689 15,321
Paddock Club Jacksonville III Jacksonville, FL -(10) 642 5,756
-------- -------- ---------
Total apartments 326,444 109,380 975,666
Other real estate assets:
- ------------------------
Commercial properties, net Various 2,844 682 7,187
Construction in progress Various -(2) 9,259 24,458
Land held for future developments Various - 7,991 858
-------- -------- ---------
Total other 2,844 17,932 32,503
-------- -------- ---------
Total real estate assets $329,288 $127,312 $1,008,169
======== ======== =========
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<CAPTION>
Cost capitalized Gross amount
Subsequent to carried at
Acquisition December 31, 1997 (5)
----------------- ---------------------------
Building Building
and and
Property Name Location Land fixtures Land fixtures Total
- --------------------- -------------- ---- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
The Advantages Jackson, MS - $704 $422 $4,431 $4,853
McKellar Woods Memphis, TN - 1,295 737 14,495 15,232
Pine Trails Clinton, MS - 464 178 3,192 3,370
Reflection Pointe Jackson, MS 140 2,129 850 10,899 11,749
Riverhills Grenada, MS - 177 153 2,269 2,422
Woodridge Jackson, MS - 231 471 5,753 6,224
Greenbrook Memphis, TN 25 3,438 2,125 27,906 30,031
Hamilton Pointe Chattanooga, TN - 718 686 6,999 7,685
Hidden Creek Chattanooga, TN - 1,050 895 9,148 10,043
Steeplechase Hixson, TN - 1,087 217 3,044 3,261
Cedar Mill (7) Memphis, TN - 1,101 475 7,647 8,122
Clearbrook Village Memphis, TN - 391 260 4,049 4,309
Crossings Memphis, TN - 443 554 2,659 3,213
Eastview Memphis, TN - 1,084 700 10,730 11,430
Gleneagles Memphis, TN - 1,238 443 5,221 5,664
The Park Estate Memphis, TN - 737 178 1,878 2,056
Winchester Square Memphis, TN - 713 350 7,992 8,342
Post House North Jackson, TN - 560 381 4,859 5,240
Post House Jackson Jackson, TN - 437 443 5,515 5,958
The Oaks Jackson, TN - 531 177 2,125 2,302
The Corners Winston-Salem, NC - 459 685 6,624 7,309
Park Haywood Greenville, SC 35 2,250 360 5,175 5,535
Hickory Farm Memphis, TN - 337 580 5,557 6,137
Lakeshore Landing Jackson, MS - 466 480 4,786 5,266
Woodstream Greensboro, NC - 558 953 9,157 10,110
Stonemill Village Louisville, KY - 945 1,169 11,463 12,632
Canyon Creek St. Louis, MO 220 1,414 1,100 9,337 10,437
Whispering Oaks Little Rock, AR - 1,422 506 5,973 6,479
Pear Orchard Jackson, MS - 982 1,352 13,150 14,502
Celery Stalk Dallas, TX - 1,104 1,463 14,269 15,732
Lane at Towne Crossing Mesquite, TX - 899 1,038 10,237 11,275
Hollybrook Dalton, GA - 767 405 4,413 4,818
Green Tree Place Woodlands, TX - 465 539 5,315 5,854
Redford Park Conroe, TX - 624 509 5,204 5,713
MacArthur Ridge Irving, TX - 473 1,131 10,656 11,787
Lincoln on the Green Memphis, TN - 660 1,498 14,144 15,642
Brentwood Downs Nashville, TN - 563 1,193 11,302 12,495
Shenandoah Ridge Augusta, GA - 1,678 650 7,528 8,178
Westborough Crossing Katy, TX - 491 677 6,582 7,259
Sailwinds at Lake Magdalene Tampa, FL - 6,667 2,212 26,576 28,788
Woodbridge at the Lake Jacksonville, FL - 659 645 6,463 7,108
Lakepointe Lexington, KY - 571 411 4,270 4,681
The Mansion Lexington, KY - 529 694 6,771 7,465
The Village Lexington, KY - 757 900 8,854 9,754
Cypresswood Court Spring, TX - 582 577 5,772 6,349
The Lodge at Timberglen Dallas, TX - 1,309 825 8,731 9,556
Calais Forest Little Rock, AR - 1,042 1,026 10,286 11,312
The Fairways Columbia, SC - 327 910 8,534 9,444
Kirby Station Memphis, TN - 1,753 1,148 12,090 13,238
Belmere Tampa, FL - 808 851 8,475 9,326
Williamsburg Village Jackson, TN - 407 523 5,118 5,641
Fairways @ Royal Oak Cincinnati, OH - 617 814 7,952 8,766
Tanglewood Anderson, SC - 477 427 4,330 4,757
Woods at Post House Jackson, TN - 474 240 7,313 7,553
Somerset Jackson, MS - 523 477 4,817 5,294
Highland Ridge Greenville, SC - 178 482 4,515 4,997
Spring Creek Greenville, SC - 276 597 5,650 6,247
St. Augustine Jacksonville, FL - 1,582 2,858 8,057 10,915
Cooper's Hawk Jacksonville, FL - 479 854 7,979 8,833
Marsh Oaks Atlantic Beach, FL - 459 244 3,288 3,532
Park at Hermitage Nashville, TN - 825 1,524 15,625 17,149
Anatole Daytona Beach, FL - 422 1,227 6,301 7,528
The Savannahs Melbourne, FL - 670 582 8,538 9,120
Stassney Woods Austin, TX - 823 1,621 8,324 9,945
Travis Station Austin, TX - 616 2,282 6,785 9,067
Runaway Bay Mt. Pleasant, SC - 442 1,085 7,711 8,796
The Township Hampton, VA - 125 1,509 8,314 9,823
Lakeside Jacksonville, FL - 2,034 1,431 14,917 16,348
Crosswinds Jackson, MS - 830 1,535 14,656 16,191
Sutton Place HornLake, MS - 537 894 8,590 9,484
Savannah Creek Southaven, MS - 365 778 7,378 8,156
Napa Valley Little Rock, AR - 448 960 9,090 10,050
Tiffany Oaks Altamonte Springs, FL - 500 1,024 9,719 10,743
Lincoln on the Green -II Memphis, TN - 5,827 - 12,826 12,826
Howell Commons Greenville, SC - 316 1,304 12,056 13,360
Balcones Woods Austin, TX - 1,010 1,598 15,408 17,006
Westside Creek I Little Rock, AR - 180 616 5,739 6,355
Fairways at Hartland Bowling Green, KY - 466 1,038 9,808 10,846
Woodhollow Jacksonville, FL - 562 1,686 15,741 17,427
The Woods Austin, TX - 163 1,012 9,283 10,295
Hunters Ridge at Deerwood Jacksonville, FL - 849 1,533 14,684 16,217
Austin Chase Macon, GA - 6 1,409 12,693 14,102
Westside Creek II Little Rock, AR - 13 654 5,917 6,571
Woodwinds Aiken, SC - 31 503 4,571 5,074
Hermitage at Beechtree Cary, NC - 7 900 8,106 9,006
Sterling Ridge Augusta, GA - 24 772 6,973 7,745
Colony at Southpark Aiken, SC - 3 757 6,823 7,580
Fountain Lake Brunswick, GA - 281 502 4,832 5,334
Hidden Lake I Union City, GA - 5 675 6,133 6,808
Hidden Lake II Union City, GA - 3 621 5,590 6,211
Hidden Oaks I Albany, GA - 2 364 3,302 3,666
Hidden Oaks II Albany, GA - 2 306 2,776 3,082
High Ridge Athens, GA - 2 884 7,960 8,844
Paddock Club Columbia I Columbia, SC - 3 1,040 9,363 10,403
Paddock Club Huntsville Huntsville, AL - 3 830 7,473 8,303
Paddock Club Jacksonville I Jacksonville, FL - 1 963 8,740 9,703
Paddock Club Lakeland I Lakeland, FL - 6 951 8,636 9,587
Paddock Club Lakeland II Lakeland, FL - 1,303 11,822 13,125
Paddock Club Tallahassee I Tallahassee, FL - 7 950 8,557 9,507
Paddock Park I Ocala, FL - 9 901 8,186 9,087
Paddock Park II Ocala, FL - 13 1,383 12,560 13,943
Park Place Spartanburg, SC - 2 723 6,506 7,229
Park Walk College Park, GA - 4 536 4,863 5,399
Regency Club Albany, GA - 3 198 1,798 1,996
River Trace I Memphis, TN - 4 881 8,000 8,881
River Trace II Memphis, TN - 3 741 6,730 7,471
Riverwind Columbus, GA - 108 979 1,087
Southland Station I Warner Robins, GA - 14 777 7,006 7,783
Southland Station II Warner Robins, GA - 3 693 6,295 6,988
Three Oaks I Valdosta, GA - 8 462 4,196 4,658
Three Oaks II Valdosta, GA - 4 460 4,174 4,634
The Vistas Macon, GA - 595 5,403 5,998
Westbury Creek Augusta, GA - 400 3,626 4,026
Westbury Springs Lilburn, GA - 1 665 6,039 6,704
Whispering Pines I LaGrange, GA - 1 454 4,117 4,571
Whispering Pines II LaGrange, GA - 370 3,354 3,724
Whisperwood Columbus, GA - 17 2,330 20,987 23,317
Whisperwood Spa I Columbus, GA - 9 1,510 13,599 15,109
Wildwood I Thomasville, GA - 1 438 3,972 4,410
Wildwood II Thomasville, GA - 1 372 3,373 3,745
Willow Creek Columbus, GA - 3 614 5,526 6,140
Windridge Chattanooga, TN - 2 817 7,418 8,235
2000 Wynnton Columbus, GA - 0 192 1,741 1,933
Paddock Club Tallahassee II Tallahassee, FL - 0 530 4,805 5,335
Paddock Club Jacksonville II Jacksonville, FL - - 689 6,255 6,944
Paddock Club Columbia II Columbia, SC - 1 800 7,201 8,001
Paddock Club Florence Florence, KY - - 1,209 10,969 12,178
Paddock Club Greenville Greenville, SC - - 1,200 10,800 12,000
Paddock Club Brandon I Brandon, FL - - 2,100 18,900 21,000
Terraces at Towne Lake I Woodstock, GA - - 1,689 15,321 17,010
Paddock Club Jacksonville III Jacksonville, FL - - 640 5,756 6,396
----- ------- ------- --------- ---------
Total apartments 420 74,073 109,800 1,049,739 1,159,549
----- ------- ------- --------- ---------
Other real estate assets:
- -------------------------
Commercial properties, net Various - 1,719 682 8,906 9,588
Construction in progress Various - 9,259 24,458 33,717
Land held for future developments Various - 7,991 858 8,849
----- ------- ------- --------- ---------
Total other 0 1,719 17,932 34,222 52,154
----- ------- ------- --------- ---------
Total real estate assets $420 $75,792 $127,732 $1,083,961 $1,211,693
===== ======= ======= ========= =========
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<CAPTION>
Life used
to compute
depreciation
in latest
Accumulated Date of income
Property Name Location Depreciation Net Construction statement(6)
- ------------------------ ------------- ------------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
The Advantages Jackson, MS ($1,118) $3,735 1984 5 - 40
McKellar Woods Memphis, TN (2,105) 13,124 1976 5 - 40
Pine Trails Clinton, MS (1,088) 2,282 1978 5 - 40
Reflection Pointe Jackson, MS (1,265) 10,484 1986 5 - 40
Riverhills Grenada, MS (440) 1,982 1972 5 - 40
Woodridge Jackson, MS (729) 5,495 1987 5 - 40
Greenbrook Memphis, TN (3,885) 26,146 1986 5 - 40
Hamilton Pointe Chattanooga, TN (1,062) 6,623 1989 5 - 40
Hidden Creek Chattanooga, TN (2,447) 7,596 1987 5 - 40
Steeplechase Hixson, TN (576) 2,685 1986 5 - 40
Cedar Mill (7) Memphis, TN (1,257) 6,865 1973/1986 5 - 40
Clearbrook Village Memphis, TN (575) 3,734 1974 5 - 40
Crossings Memphis, TN (643) 2,570 1974 5 - 40
Eastview Memphis, TN (1,709) 9,721 1974 5 - 40
Gleneagles Memphis, TN (1,567) 4,097 1975 5 - 40
The Park Estate Memphis, TN (816) 1,240 1974 5 - 40
Winchester Square Memphis, TN (1,149) 7,193 1973 5 - 40
Post House North Jackson, TN (589) 4,651 1987 5 - 40
Post House Jackson Jackson, TN (680) 5,278 1987 5 - 40
The Oaks Jackson, TN (322) 1,980 1978 5 - 40
The Corners Winston-Salem, NC (900) 6,409 1982 5 - 40
Park Haywood Greenville, SC (583) 4,952 1983 5 - 40
Hickory Farm Memphis, TN (781) 5,356 1985 5 - 40
Lakeshore Landing Jackson, MS (659) 4,607 1974 5 - 40
Woodstream Greensboro, NC (1,210) 8,900 1983 5 - 40
Stonemill Village Louisville, KY (1,562) 11,070 1985 5 - 40
Canyon Creek St. Louis, MO (1,200) 9,237 1987 5 - 40
Whispering Oaks Little Rock, AR (806) 5,673 1978 5 - 40
Pear Orchard Jackson, MS (1,717) 12,785 1985 5 - 40
Celery Stalk Dallas, TX (1,852) 13,880 1978 5 - 40
Lane at Towne Crossing Mesquite, TX (1,345) 9,930 1983 5 - 40
Hollybrook Dalton, GA (501) 4,317 1972 5 - 40
Green Tree Place Woodlands, TX (671) 5,183 1984 5 - 40
Redford Park Conroe, TX (662) 5,051 1984 5 - 40
MacArthur Ridge Irving, TX (1,291) 10,496 1991 5 - 40
Lincoln on the Green Memphis, TN (1,696) 13,946 1988 5 - 40
Brentwood Downs Nashville, TN (1,394) 11,101 1986 5 - 40
Shenandoah Ridge Augusta, GA (930) 7,248 1982 5 - 40
Westborough Crossing Katy, TX (809) 6,450 1984 5 - 40
Sailwinds at Lake Magdalene Tampa, FL (3,377) 25,411 1975 5 - 40
Woodbridge at the Lake Jacksonville, FL (789) 6,319 1985 5 - 40
Lakepointe Lexington, KY (501) 4,180 1986 5 - 40
The Mansion Lexington, KY (797) 6,668 1987 5 - 40
The Village Lexington, KY (1,067) 8,687 1989 5 - 40
Cypresswood Court Spring, TX (682) 5,667 1984 5 - 40
The Lodge at Timberglen Dallas, TX (1,063) 8,493 1984 5 - 40
Calais Forest Little Rock, AR (1,177) 10,135 1987 5 - 40
The Fairways Columbia, SC (960) 8,484 1992 5 - 40
Kirby Station Memphis, TN (1,367) 11,871 1978 5 - 40
Belmere Tampa, FL (960) 8,366 1984 5 - 40
Williamsburg Village Jackson, TN (578) 5,063 1987 5 - 40
Fairways @ Royal Oak Cincinnati, OH (876) 7,890 1988 5 - 40
Tanglewood Anderson, SC (469) 4,288 1980 5 - 40
Woods at Post House Jackson, TN (934) 6,619 1995 5 - 40
Somerset Jackson, MS (540) 4,754 1981 5 - 40
Highland Ridge Greenville, SC (348) 4,649 1984 5 - 40
Spring Creek Greenville, SC (433) 5,814 1984 5 - 40
St. Augustine Jacksonville, FL (869) 10,046 1987 5 - 40
Cooper's Hawk Jacksonville, FL (758) 8,075 1987 5 - 40
Marsh Oaks Atlantic Beach, FL (315) 3,217 1986 5 - 40
Park at Hermitage Nashville, TN (1,449) 15,700 1987 5 - 40
Anatole Daytona Beach, FL (600) 6,928 1986 5 - 40
The Savannahs Melbourne, FL (807) 8,313 1990 5 - 40
Stassney Woods Austin, TX (787) 9,158 1985 5 - 40
Travis Station Austin, TX (624) 8,443 1987 5 - 40
Runaway Bay Mt. Pleasant, SC (710) 8,086 1988 5 - 40
The Township Hampton, VA (729) 9,094 1987 5 - 40
Lakeside Jacksonville, FL (1,026) 15,322 1985 5 - 40
Crosswinds Jackson, MS (738) 15,453 1988/1990 5 - 40
Sutton Place HornLake, MS (436) 9,048 1991 5 - 40
Savannah Creek Southaven, MS (372) 7,784 1989 5 - 40
Napa Valley Little Rock, AR (374) 9,676 1984 5 - 40
Tiffany Oaks Altamonte Springs, FL (332) 10,411 1985 5 - 40
Lincoln on the Green -II Memphis, TN (106) 12,720 1997 5 - 40
Howell Commons Greenville, SC (380) 12,980 1986/1988 5 - 40
Balcones Woods Austin, TX (385) 16,621 1983 5 - 40
Westside Creek I Little Rock, AR (149) 6,206 1984 5 - 40
Fairways at Hartland Bowling Green, KY (247) 10,599 1996 5 - 40
Woodhollow Jacksonville, FL (412) 17,015 1986 5 - 40
The Woods Austin, TX (215) 10,080 1977 5 - 40
Hunters Ridge at Deerwood Jacksonville, FL (308) 15,909 1987 5 - 40
Austin Chase Macon, GA (186) 13,916 1996 5 - 40
Westside Creek II Little Rock, AR (52) 6,519 1986 5 - 40
Woodwinds Aiken, SC (40) 5,034 1988 5 - 40
Hermitage at Beechtree Cary, NC (47) 8,959 1988 5 - 40
Sterling Ridge Augusta, GA (41) 7,704 1986 5 - 40
Colony at Southpark Aiken, SC (20) 7,560 1989/1991 5 - 40
Fountain Lake Brunswick, GA (16) 5,318 1983 5 - 40
Hidden Lake I Union City, GA (21) 6,787 1985 5 - 40
Hidden Lake II Union City, GA (21) 6,190 1987 5 - 40
Hidden Oaks I Albany, GA (11) 3,655 1979 5 - 40
Hidden Oaks II Albany, GA (10) 3,072 1980 5 - 40
High Ridge Athens, GA (29) 8,815 1987 5 - 40
Paddock Club Columbia I Columbia, SC (33) 10,370 1989 5 - 40
Paddock Club Huntsville Huntsville, AL (26) 8,277 1989 5 - 40
Paddock Club Jacksonville I Jacksonville, FL (30) 9,673 1989 5 - 40
Paddock Club Lakeland I Lakeland, FL (30) 9,557 1988 5 - 40
Paddock Club Lakeland II Lakeland, FL (41) 13,084 1990 5 - 40
Paddock Club Tallahassee I Tallahassee, FL (30) 9,477 1990 5 - 40
Paddock Park I Ocala, FL (28) 9,059 1986 5 - 40
Paddock Park II Ocala, FL (44) 13,899 1988 5 - 40
Park Place Spartanburg, SC (22) 7,207 1987 5 - 40
Park Walk College Park, GA (17) 5,382 1985 5 - 40
Regency Club Albany, GA (6) 1,990 1983 5 - 40
River Trace I Memphis, TN (28) 8,853 1981 5 - 40
River Trace II Memphis, TN (23) 7,448 1985 5 - 40
Riverwind Columbus, GA (3) 1,084 1983 5 - 40
Southland Station I Warner Robins, GA (21) 7,762 1987 5 - 40
Southland Station II Warner Robins, GA (22) 6,966 1990 5 - 40
Three Oaks I Valdosta, GA (15) 4,643 1983 5 - 40
Three Oaks II Valdosta, GA (15) 4,619 1984 5 - 40
The Vistas Macon, GA (19) 5,979 1985 5 - 40
Westbury Creek Augusta, GA (13) 4,013 1984 5 - 40
Westbury Springs Lilburn, GA (21) 6,683 1983 5 - 40
Whispering Pines I LaGrange, GA (14) 4,557 1982 5 - 40
Whispering Pines II LaGrange, GA (12) 3,712 1984 5 - 40
Whisperwood Columbus, GA (74) 23,243 1981/1986 5 - 40
Whisperwood Spa I Columbus, GA (48) 15,061 1988 5 - 40
Wildwood I Thomasville, GA (14) 4,396 1980 5 - 40
Wildwood II Thomasville, GA (12) 3,733 1984 5 - 40
Willow Creek Columbus, GA (26) 6,115 1971/1977 5 - 40
Windridge Chattanooga, TN (26) 8,209 1984 5 - 40
2000 Wynnton Columbus, GA (6) 1,927 1983 5 - 40
Paddock Club Tallahassee II Tallahassee, FL (17) 5,318 1995 5 - 40
Paddock Club Jacksonville II Jacksonville, FL (22) 6,922 1996 5 - 40
Paddock Club Columbia II Columbia, SC (25) 7,976 1995 5 - 40
Paddock Club Florence Florence, KY (38) 12,140 1994 5 - 40
Paddock Club Greenville Greenville, SC (38) 11,962 1996 5 - 40
Paddock Club Brandon I Brandon, FL (66) 20,934 1997 5 - 40
Terraces at Towne Lake I Woodstock, GA (53) 16,957 1997 5 - 40
Paddock Club Jacksonville III Jacksonville, FL (20) 6,376 1997 5 - 40
-------- ---------
Total apartments (76,129) 1,083,410
Other real estate assets:
- -------------------------
Commercial properties, net Various (860) 8,728 Various 5 - 40
Construction in progress Various 33,717 N/A N/A
Land held for future developments Various 8,849 N/A N/A
-------- ---------
Total other (860) 51,294
-------- ---------
Total real estate assets ($76,989)$1,134,704
======== =========
</TABLE>
[FN]
(1) These 12 Properties are encumbered by a $43.4 million note payable.
(2) Encumbered by the Credit Line, with an outstanding balance of $45.2
million and a variable interest rate at December 31, 1997 of 7.07%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(5) The aggregate cost for Federal income tax purposes was approximately
$1,115 million at December 31, 1997. The total gross amount of
real estate assets for GAAP purposes exceeds the aggregate cost for
Federal income tax purposes, principally due to purchase accounting
adjustments recorded under generally accepted accounting principles.
(6) Depreciation is on a straight line basis over the estimated useful
asset life which ranges from 8 to 40 years for land improvements
and buildings and 5 years for furniture, fixtures and equipment.
(7) Includes adjacent 68-unit Mendenhall Townhomes.
(8) Lincoln Phase II is under construction - completed First quarter 1998.
(9) These 26 communities are encumbered by a $140 million MSMC loan
with an average interest rate of 6.62%.
(10)These six communities are encumbered by a $47.5 million note payable
with a maturity of December 15, 2004 and a interest rate of 7.04%.
MID - AMERICA APARTMENT COMMUNITIES, INC.
Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for real estate investments and accumulated depreciation
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1996 1995
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year $ 641,893 $ 578,788 $ 434,460
Acquisitions 140,858 66,258 15,561
Improvements and development 36,298 20,634 25,590
Assets acquired from business
combination 392,644 - 103,177
Disposition of real estate
assets - (23,787) -
----------- --------- ---------
Balance at end of year $ 1,211,693 $ 641,893 $ 578,788
=========== ========= =========
Accumulated depreciation:
Balance at beginning of year $ 49,558 $ 29,504 $ 13,386
Depreciation 27,431 21,249 16,118
Disposition of real estate
assets - (1,195) -
----------- -------- --------
Balance at end of year $ 76,989 $ 49,558 $ 29,504
=========== ======== ========
</TABLE>
[FN]
The Company's consolidated balance sheet at December 31, 1997
includes accumulated depreciation of $860 thousand in the
caption "Commercial properties, net".
EXHIBIT 23.1
Accountants' Consent
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We consent to incorporation by reference in the registration
statement (No. 33-91416) on Form S-8 and the registration
statements (Nos. 33-95734, 33-96852, 333-3274, 333-20221 and
333-34775) on Form S-3 of Mid-America Apartment Communities,
Inc. of our report dated March 27, 1998 to the consolidated
balance sheets of Mid-America Apartment Communities, Inc. as
of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1997 and our report dated March 27, 1998 to the
financial statement schedule of Mid-America Apartment
Communities, Inc., which reports are herein included in the
1997 Annual Report on Form 10-K(A) of Mid-America Apartment
Communities, Inc. Our reports refer to the Company's change
in its accounting method to capitalize replacement purchases
for major appliances and carpet in 1996.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
April 20, 1998
