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424B2
File No. 33-90706
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 15, 1995)
5,000,000 SHARES
(Summit Properties
SUMMIT PROPERTIES INC. logo appears here)
COMMON STOCK
Summit Properties Inc. (the "Company") is a fully integrated real estate
investment trust ("REIT") engaged in the development, construction, acquisition
and management of apartment communities. The Company is one of the largest
developers and operators of luxury garden apartment communities in the
southeastern United States. The Company's current portfolio consists of 46
apartment communities (the "Communities") with 10,348 apartment homes, and 11
apartment communities with 3,118 apartment homes under construction or in
lease-up. The Company also manages approximately 8,416 apartment homes for
unrelated third parties.
All of the shares of common stock offered hereby (the "Offering") are being
sold by the Company. The Company's common stock (the "Common Stock") is listed
on the New York Stock Exchange (the "NYSE") under the symbol "SMT." On August 1,
1996, the last reported sale price of the Common Stock on the NYSE was $18 1/8
per share. See "Share Price and Distribution History." To ensure that the
Company maintains its qualification as a REIT, ownership by any single person is
limited to 9.8%, or 15% for certain types of entities, of the value of the
outstanding capital stock of the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.................................................... $18.00 $.945 $17.055
Total (3).................................................... $90,000,000 $4,725,000 $85,275,000
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses payable by the Company of $300,000, a
portion of which will be paid by the Underwriters.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 750,000 shares of Common Stock to cover over-allotments, if
any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $103,500,000,
$5,433,750 and $98,066,250, respectively. See "Underwriting."
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as, and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Common
Stock offered hereby will be made in New York, New York on or about August 7,
1996.
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
MORGAN STANLEY & CO.
INCORPORATED
PRUDENTAL SECURTES INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
WHEAT FIRST BUTCHER SINGER
The date of this Prospectus Supplement is August 1, 1996.
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SUMMIT
PROPERTIES
WE CREATE VALUE
PROPERTIES AND MARKETS
(A map appears here showing the locations of the Regional Offices;
33 Current Communities; 1995 Acquisition, 13 Communities; and
Development/Lease-up, 11 Communities. along with the following caption.)
The Company's portfolio includes 10,348 apartment homes in 46 completed
apartment communities plus 11 communities with 3,118 apartment homes
under construction or in lease-up. These communities are concentrated
in three Southeastern markets: the Greater Washington D.C./Virginia
area; I-85 corridor connecting Atlanta, Charlotte and Raleigh-Durham;
and central and south Florida.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
FINANCIAL AND OTHER INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN OR THEREIN BY
REFERENCE. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED, AND THAT ALL UNITS OF LIMITED PARTNERSHIP INTEREST ("UNITS") IN
SUMMIT PROPERTIES PARTNERSHIP, L.P. (THE "OPERATING PARTNERSHIP"), THE COMPANY'S
PRINCIPAL OPERATING SUBSIDIARY, HAVE BEEN REDEEMED FOR COMMON STOCK. UNLESS THE
CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS SUPPLEMENT TO THE
"COMPANY" SHALL MEAN SUMMIT PROPERTIES INC., THE OPERATING PARTNERSHIP AND THEIR
SUBSIDIARIES AND PREDECESSORS ON AN AGGREGATED BASIS.
THE COMPANY
The Company, which was founded in 1972, is one of the largest developers
and operators of luxury garden apartment communities in the southeastern United
States. The Company's current portfolio consists of 46 apartment communities
with 10,348 apartment homes, including Summit Foxcroft in which the Company has
a 75% managing general partner interest. The Company also has 11 apartment
communities with 3,118 apartment homes under construction or in lease-up. Since
its initial public offering in February 1994 (the "Initial Offering"), the
Company has increased its portfolio from 6,979 apartment homes to 13,466
apartment homes, including apartment communities under construction or in
lease-up, which represents a 93.0% increase. The six members of senior
management have been with the Company for an average of 12 years. Following the
Offering, senior management and directors of the Company will own approximately
14% of the Company.
The Company has chosen to focus its efforts in three high growth regions of
the southeast: the I-85 corridor connecting Atlanta, Charlotte and the
Raleigh-Durham area (the "I-85 Corridor"), central and south Florida and the
Greater Washington, DC/Virginia area. The population, employment and household
formation growth rates in these markets from 1996 to 2005 are expected to be
approximately double the national growth rates for these measures. Within these
regions, the Company has strived to develop communities distinctive for their
architectural design and quality of service and which target the preferences of
today's more affluent renter base. In keeping with this resident profile, the
Communities developed and acquired by the Company have extensive amenities,
larger unit sizes and a high proportion of two and three bedroom units.
RECENT DEVELOPMENTS
OPERATING RESULTS. The Company reported record funds from operations
("FFO") for the six months ended June 30, 1996. The Company's FFO for this
period was $17.2 million or $.83 per share, up from $13.0 million or $.82 per
share for the six months ended June 30, 1995. FFO is calculated based on the
revised definition adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts ("NAREIT") and is considered the primary
earnings measure for equity REITs. The Company currently pays its stockholders
an annualized dividend of $1.55 per share, which represents a 5.4% increase
since the Initial Offering.
For the twelve months ended December 31, 1995, property operating income at
those Communities which were stabilized during the twelve months ended December
31, 1995 and 1994 increased $2.1 million, or 6.6%, to $33.4 million from $31.3
million for the comparable period in 1994. For the six months ended June 30,
1996, property operating income at Communities which were stabilized during the
six months ended June 30, 1996 and 1995 increased $739,000, or 3.7%, to $20.6
million from $19.8 million for the comparable period in 1995. A Community is
considered to be stabilized at the earlier of its attainment of 93.0% physical
occupancy or one year from the completion of its construction.
DEVELOPMENT ACTIVITY. During the second quarter of 1996, the Company
continued its lease-up of six communities. One of these communities, Summit
Aventura, with 379 apartment homes, was completed in the fourth quarter of 1995
and was 90.0% leased on June 30, 1996. Two of these communities, Summit Hill II
and Summit Green, were completed in the second quarter of 1996 and were 98.1%
and 74.0% leased on June 30, 1996, respectively. These three communities
represent a total investment of $60.1 million.
The remaining three lease-up communities are still under construction, with
completion anticipated in the third quarter of 1996 and the first quarter of
1997. As of June 30, 1996, the Company had leased: 60.8%, or 191 of the 314
apartment homes, at Summit River Crossing, which opened in December, 1995;
19.3%, or 68 of the 352 apartment
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homes at Summit on the River, which opened in May 1996; and 6.7%, or 16 of the
240 apartment homes at Summit Fairways, which will open in July 1996. These
three communities will represent a total investment upon completion of $60.8
million. Communities in lease-up increased FFO by $130,000 and $70,000 for the
three and six months ended June 30, 1996, respectively. The Company had no
contribution from communities in lease-up during the comparable period in 1995.
As of June 30, 1996, the Company had an additional five communities with
1,326 apartment homes under construction, representing an investment of $92.6
million at completion, of which $20.9 million has been spent. All of these
communities are expected to be stabilized before the second quarter of 1998. In
addition, the Company is currently conducting pre-development work on seven new
communities containing 1,194 apartment homes with a total budgeted cost of $96.1
million.
ACQUISITION ACTIVITY. The Company has acquired the remaining 75% joint
venture interest of a third party in Summit Plantation, in which the Company
previously owned a 25% joint venture interest. The portfolio of 2,025 apartment
homes (the "Crosland Portfolio") purchased from The Crosland Group, Inc.
("Crosland") in the second quarter of 1995 continued its trend of
quarter-to-quarter increases in property operating income, which has increased
7.4% since the third quarter of 1995 (the first full quarter of operation under
the Company's management). Average monthly rental revenues per apartment home
for the Crosland Portfolio increased to $625 in the second quarter, up 8.3%
since the properties were purchased. Occupancy for the Crosland Portfolio during
the three and six months ended June 30, 1996 was 93.8% and 93.9%, respectively.
FINANCING ACTIVITY. The Company has obtained a commitment from Wachovia
Bank of North Carolina, N.A. ("Wachovia") to provide $31 million principal
amount of senior unsecured debt financing (the "Wachovia Unsecured Note
Financing"), consisting of $15 million having a term of four years and $16
million having a term of six years, which will bear interest at 7.71% and 7.95%
per annum, respectively. The Wachovia Unsecured Note Financing will provide for
future interest rate decreases if the Company obtains an investment grade rating
for its senior unsecured debt. In addition, the Company currently has a
commitment for a $60 million unsecured credit facility (the "Unsecured Credit
Facility") from First Union Bank of North Carolina ("First Union") and is
negotiating with First Union and the Company's other lenders to expand this
credit facility to up to $180 million. The Unsecured Credit Facility is expected
to provide for borrowings on a revolving basis for a term of three years at a
variable interest rate based on the London Interbank Offered Rate ("LIBOR").
Since neither of these financings have actually closed, there can be no
assurance that they will be completed.
The Company believes that the completion of the Offering, the Wachovia
Unsecured Note Financing and the expected closing of the expanded Unsecured
Credit Facility will result in a more conservative and flexible capital
structure. The Company believes that a more conservative and flexible capital
structure will lower its overall cost of capital by enabling it to access
additional sources of long-term financing. Following completion of the Offering
and the closing of the Wachovia Unsecured Note Financing, the Company's
debt-to-total market capitalization ratio will be 38.4%, based on a price per
share of Common Stock of $18 1/8, which was the closing price of the Company's
Common Stock on August 1, 1996. The Company currently intends to limit its
debt-to-total market capitalization ratio to no greater than 55%. Following the
Offering, the Company could incur approximately $280 million of additional debt
without exceeding a 55% debt-to-total market capitalization ratio, based on the
closing price per share of Common Stock of $18 1/8 on August 1, 1996. The
unfunded costs of the communities currently under construction and the cost of
the communities in the pre-development phase total approximately $183 million.
STRATEGIC PLAN. During 1996, the Company revised its strategic plan. The
Company intends to focus its development and acquisition activity exclusively in
its current markets and to organize senior management along functional lines in
order to enhance decision making at a local level, while restructuring the
Company's management to better accommodate anticipated growth. A central element
of the plan is to remove an excess layer of management and move development and
property management decision making responsibilities closer to the residents of
the Communities. While revised, this strategic plan continues to support the
Company's core management philosophy of decentralized management through local
level decision making.
One of the most significant management changes is the creation of City
Teams composed of development and property management personnel in major cities
within the Company's core market areas. These City Teams work together to
identify the most promising development opportunities and then develop and
manage apartment communities that target the specific demands of their
particular market. The City Teams will focus on core markets with an
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objective to build a preeminent position for the Company within those markets.
By concentrating on those core markets, the Company will be in a position to
improve operating efficiencies, increase market knowledge and share and build
brand name identity.
GROWTH STRATEGIES
The Company's objective is to increase FFO per share and distributions to
stockholders through three core strategies.
INCREASE CASH FLOW FROM EXISTING COMMUNITIES. The Company seeks to maximize
the economic return from its Communities by optimizing the trade-off between
increasing rental rates and maintaining high occupancy levels. Consistent with
this strategy, the Company is among the rental rate leaders in its markets. Even
though this strategy may result in slightly lower occupancy rates, the Company
believes that the dynamic tension created by this balancing strategy maximizes
operating income at the property level and improves growth in the Company's cash
flow over the long term. The Company's affluent resident profile, well-trained
property management staff and management information systems support this
strategy. For the six month period ended June 30, 1996, average rent per
apartment home for the Company's Communities that were stabilized during the
comparable periods in 1996 and 1995 increased 4.4%, and property operating
income from these Communities increased 3.7%. Average occupancy, rent and
operating income levels for the Company's Communities that were stabilized
during the comparable periods are as follows for the years and periods set forth
below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Average Physical Occupancy..................................................... 92.8% 93.7% 94.0% 93.3%
Average Monthly Rent per Apartment Home........................................ $ 710 $ 680 $ 682 $ 650
Average Monthly Rent per Apartment Home Growth Rate............................ 4.4% 5.1% 4.9% 5.1%
Property Operating Income Growth Rate (1)...................................... 3.7% 7.5% 6.6% 8.8%
Number of Communities.......................................................... 32 27 27 27
</TABLE>
(1) Property Operating Income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
The Company is also looking to other methods of increasing cash flow from
existing Communities. The Company has recently entered into a contract to
purchase a three acre tract of vacant land which would be annexed onto the
adjacent Summit Norcroft Community. This additional parcel would allow for the
development of 51 apartment homes which would be managed and maintained without
increasing the existing management staff or amenities. The Company is pursuing
this same strategy at several of the Company's other Communities which are
located adjacent to parcels of vacant land. The Company believes that increasing
the number of enclosed garages at several of the Communities will also result in
increased cash flow. Since new enclosed garages can be constructed on existing
land, usually on existing paved parking spaces, without the necessity for
increased Community infrastructure or management staff, the Company believes the
capital expenditures on these garages will deliver more efficient financial
performance than comparable expenditures on acquisitions or developments and
will enhance the property's cash flow.
DEVELOPMENT. Development of new communities has been the foundation of the
Company's growth. Since its founding, the Company has developed more than $1
billion of multifamily apartment communities, representing over 19,000 apartment
homes. Of its 46 Communities, 29 have been developed by the Company or its
predecessors, and 12 were developed by, and acquired by the Company from
Crosland. The Company attributes much of its historical cash flow growth to the
quality of the apartment communities it has developed over the years. Where
favorable opportunities exist, the Company plans to continue to capitalize on
its extensive experience and proven reputation as a developer by developing new
communities.
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As of June 30, 1996, the Company had 11communities with 3,118 apartment
homes under construction or in lease-up as set forth below (dollars in
millions):
<TABLE>
<CAPTION>
FIRST
APARTMENT
APARTMENT DEVELOPMENT CONSTRUCTION HOMES ANTICIPATED
HOMES BUDGETS START COMPLETED STABILIZATION
<S> <C> <C> <C> <C> <C>
PROJECTS CURRENTLY UNDER CONSTRUCTION OR IN LEASE-UP
Summit Aventura -- Aventura, FL......................... 379 $ 31.3 2Q94 2Q95 3Q96
Summit Hill II -- Chapel Hill, NC....................... 207 11.2 3Q94 3Q95 2Q96
Summit Green -- Charlotte, NC........................... 300 17.6 4Q94 3Q95 3Q96
Summit River Crossing -- Indianapolis, IN............... 314 19.2 4Q94 4Q95 4Q96
Summit on the River -- Atlanta, GA...................... 352 23.9 2Q95 2Q96 2Q97
Summit Fairways -- Orlando, FL.......................... 240 17.7 4Q95 3Q96 2Q97
Summit Russett -- Laurel, MD............................ 314 22.1 1Q95 4Q96 4Q97
Summit Ballantyne I -- Charlotte, NC.................... 246 16.8 2Q96 1Q97 1Q98
Summit Sedgebrook I -- Charlotte, NC.................... 248 15.6 2Q96 1Q97 1Q98
Summit Stonefield -- Yardley, PA........................ 216 18.4 2Q96 1Q97 1Q98
Summit Lake I -- Raleigh, NC............................ 302 19.7 2Q96 1Q97 1Q98
3,118 $ 213.5
</TABLE>
As a result of improved economic conditions and the demand for apartment
homes of comparable quality in its markets, the Company believes the operating
prospects of the communities currently under development remain favorable. As
with any development project, there are uncertainties and risks associated with
the development of the communities described above and there can be no assurance
that these communities will be completed. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Development
Activity" for a discussion of uncertainties and risks associated with the
Company's development activity.
The Company is also conducting feasibility and other pre-development work
for seven new communities. The Company either owns or holds options to purchase
the land for each of these potential developments (dollars in millions):
<TABLE>
<CAPTION>
ANTICIPATED
APARTMENT DEVELOPMENT CONSTRUCTION
HOMES BUDGETS START
<S> <C> <C> <C>
COMMUNITIES IN PRE-DEVELOPMENT
Summit Plantation II -- Plantation, FL.............................................. 240 $21.0 3Q96
Summit Fair Lakes I -- Fairfax, VA.................................................. 360 28.1 1Q97
Summit Norcroft II -- Charlotte, NC................................................. 51 3.0 1Q97
Summit Ballantyne II -- Charlotte, NC............................................... 154 12.0 4Q97
Summit Sedgebrook II -- Charlotte, NC............................................... 117 9.0 4Q97
Summit Lake II -- Raleigh, NC....................................................... 100 8.0 4Q97
Summit Fair Lakes II -- Fairfax, VA................................................. 172 15.0 2Q98
1,194 $96.1
</TABLE>
For each of these potential communities, the Company is only in the
pre-development phase, and there can be no assurance that all or any one of
these communities will be completed. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Development Activity" for a
discussion of uncertainties and risks associated with the Company's development
activity.
ACQUISITION. The Company also seeks to grow cash flow by acquiring existing
communities that have prospects for long-term growth in excess of industry
averages. Although the Company's established development capacity and current
market conditions tend to favor the development of new communities over
acquisitions, the Company intends to continue to aggressively pursue
opportunistic acquisitions like the Crosland Portfolio. As a result of the
acquisition of the Crosland Portfolio, the Company is now the largest operator
of luxury garden apartment homes in Charlotte and continues to benefit from
improved economies of scale in that market, such as reductions in on-site staff
to manage proximate communities and lower per Community advertising costs. The
property operating income of the Crosland
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Portfolio has increased 7.4% since the third quarter of 1995, which was the
first full quarter of operation under the Company's management.
THE COMMUNITIES
Of the Company's 46 Communities, 29 have been developed by the Company or
its predecessors, and 12 were developed by Crosland. All of the Communities
target middle to upper income apartment renters as customers. Twenty of the
Communities have been completed since January 1, 1990, resulting in an average
age of the Communities of approximately 8.3 years. For the six months ended June
30, 1996, the average physical occupancy rate at the Company's stabilized
Communities was 93.0%, and the average monthly rent per apartment home for these
Communities was $700.
The Communities are concentrated in three regions: the I-85 Corridor,
central and south Florida and the greater Washington, DC/Virginia area, as well
as in Delaware and Ohio.
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
NUMBER OF APARTMENT APARTMENT
REGION/CITY COMMUNITIES HOMES HOMES
<S> <C> <C> <C>
I-85 CORRIDOR
Atlanta, GA........................................................................ 3 877 8.5%
Charlotte, NC...................................................................... 11 1,864 18.0
Greensboro, Winston-Salem, NC...................................................... 4 652 6.3
Raleigh-Durham, NC................................................................. 4 838 8.1
Greenville, SC..................................................................... 2 324 3.1
Subtotal............................................................................. 24 4,555 44.0
CENTRAL AND SOUTH FLORIDA
Tampa.............................................................................. 5 1,154 11.1
Sarasota........................................................................... 4 1,094 10.6
South Florida...................................................................... 3 818 7.9
Subtotal............................................................................. 12 3,066 29.6
GREATER WASHINGTON, DC/VIRGINIA
Washington, DC Metro............................................................... 4 1,043 10.1
Richmond, VA....................................................................... 3 862 8.3
Subtotal............................................................................. 7 1,905 18.4
OTHER MARKETS
Cincinnati, OH..................................................................... 2 558 5.4
Newark, DE......................................................................... 1 264 2.6
Subtotal............................................................................. 3 822 8.0
PORTFOLIO TOTAL...................................................................... 46 10,348 100.0%
</TABLE>
Each of the Communities is managed by the Company's property management
staff. The property management team for each Community includes on-site
management and maintenance personnel, as well as off-site supervisory personnel.
In 1992, the Company's management subsidiary was recognized as the Property
Management Company of the Year by the National Association of Home Builders.
Community management teams perform leasing and rent collection functions and
coordinate resident services. The Company's personnel are extensively trained
and experienced and are encouraged to continue their education through both
Company-designed and outside courses.
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THE OFFERING
All of the shares of Common Stock offered hereby are being sold by the
Company.
<TABLE>
<S> <C>
Shares of Common Stock Offered........................ 5,000,000
Shares of Common Stock Outstanding After the
Offering............................................ 25,660,916
NYSE Symbol........................................... SMT
Use of Proceeds of the Offering....................... Proceeds of the Offering will be used to repay the Company's current
outstanding balance under its revolving credit facility and
construction indebtedness. Any remaining net proceeds, and any
additional proceeds received if the Underwriters' over-allotment
option is exercised, will be used to fund current development and for
working capital purposes.
</TABLE>
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THE COMPANY
The Company is one of the largest developers and operators of luxury garden
apartment communities in the southeastern United States. The Company's current
portfolio consists of 46 Communities with 10,348 apartment homes, including
Summit Foxcroft in which the Company has a 75% managing general partner
interest. The Company also has 11 apartment communities with 3,118 apartment
homes under construction or in lease-up.
The Communities are located in six states throughout the southeastern
United States, as well as in Delaware and Ohio. For the six months ended June
30, 1996, the average physical occupancy rate of the Company's stabilized
Communities was 93.0%, and the average monthly rent for these Communities was
$700 per apartment home. A Community is considered to be stabilized at the
earlier of its attainment of 93.0% physical occupancy or one year from the
completion of its construction. The Company also manages approximately 8,416
apartment homes for unrelated third parties. The Company is a fully integrated
organization with multifamily development, construction, acquisition and
management expertise which employs approximately 550 individuals.
The Company has chosen to focus its efforts in three high growth regions of
the southeast: the I-85 Corridor, central and south Florida and the Greater
Washington, DC/Virginia area. In keeping with this strategy, the Company has
established city operating offices in Charlotte, Tampa, Reston, Atlanta, Fort
Lauderdale and Raleigh. These city offices have direct responsibility for
selecting and overseeing new developments and for managing the Communities in
their geographic areas. This decentralized structure enables corporate
management to maintain tight controls and allows the Company to compete
effectively in its core markets, while efficiently allocating development and
acquisition capital to those markets that will yield the highest risk-adjusted
return.
OPERATING PHILOSOPHY
The Company seeks to maximize the economic return from its Communities by
optimizing the trade-off between increasing rental rates and maintaining high
occupancy levels. Consistent with this strategy, the Company is among the rental
rate leaders in its markets. Although this strategy may result in slightly lower
occupancy rates, the Company believes that the dynamic tension created by this
balancing strategy maximizes operating income at the property level and improves
growth in the Company's cash flow over the long term. Generally, the Company has
found that it is not maximizing property operating income per apartment home
when occupancies are above 95%.
Historically, the Company has been able to charge market leading rents to
its residents while maintaining high occupancy rates due to: the upscale
features of its Communities, the comprehensive service provided by its on-site
management and its favorable unit mix. The Company's geographic market focus and
decentralized structure further promote income growth.
UPSCALE APARTMENT COMMUNITIES. Since its inception, the Company has been
dedicated to developing, acquiring and managing upscale apartment communities
designed to satisfy the aesthetic and lifestyle desires of their residents. The
Communities are characterized by high-quality construction, superior
architecture and design and extensive resident amenities. The Communities target
middle to upper income professionals who are generally attracted to these
communities because of their interior and exterior ambiance, floor plan design,
community location and amenities. Because these professionals often can afford
to pay higher rents, the ability of the Company to raise rents is constrained
only by its markets and not the income of its residents. This resident profile,
the Company believes, results in rental growth potential and risk-adjusted
returns that are more favorable than those available in other classes of
apartment communities.
DEDICATION TO CUSTOMER SERVICE. The Company has long stressed the
importance of developing strong customer relationships with its residents. The
Company's total commitment to resident satisfaction is further evidenced by its
"sundown policy" which mandates a response by the appropriate Company employee
to any resident inquiry or complaint no later than "sundown" of the day on which
the inquiry or complaint was received. The Company has sought to provide its
residents with experienced, well-trained and attentive management staffs. Every
Community employee enters into a comprehensive training program when he or she
is hired by the Company. This training program ensures that employees have a
clear understanding of their job responsibilities, the high standards of
performance expected of them and the Company's operating philosophies. On-going
Company sponsored training following each employee's initial employment period
further enhances employee productivity. The Company believes that this training
regimen along with a proven hiring process has produced a higher quality
management staff, evidenced by higher resident satisfaction at the Communities
and lower employee turnover.
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UNIT MIX. The Company has sought to respond to the desires of its target
customer base by adjusting the unit composition and features of the Communities.
There have been broad demographic changes in the Company's resident mix over the
past ten years. Today's renters are older, more affluent and, accordingly,
desire larger apartment homes with more amenities. The Company has responded to
these shifts by developing and acquiring Communities with a greater proportion
of large two and three bedroom units with extensive amenities. Because these
features are generally not present in older apartment properties, the Company
believes it is more competitively positioned to meet the desires of its target
renter group than some of its competitors with older apartment portfolios.
MARKET FOCUS. Ninety-two percent of the Company's portfolio is located in
its three core markets: the I-85 Corridor, central and south Florida and the
Greater Washington, DC/Virginia area, with 18% located in Charlotte, North
Carolina, the Company's top performing metropolitan market. This market focus
has enabled the Company to capitalize on the stronger than average growth in
population, employment and household formation experienced in these markets in
the past several years. Additionally, it allows the Company to achieve certain
economies of scale in management and advertising costs.
DECENTRALIZED ORGANIZATIONAL STRUCTURE. The Company's operational structure
reflects its geographic market focus. The Company's decentralized format
provides each of its six city offices with operating accountability and control
over its respective market area. In addition, it capitalizes on specific market
knowledge which allows for superior site selection and valuation in connection
with the development of new communities, enhanced asset management and the
efficient allocation of capital to those development opportunities with the
greatest potential for financial performance.
CAPITALIZATION
The following table sets forth the capitalization of the Company on an
historical and pro forma basis as of June 30, 1996 assuming: (i) the sale by the
Company of the 5,000,000 shares of Common Stock offered hereby,(ii) the
application of the net proceeds of the Offering as described below in "Use of
Proceeds", and (iii) the application of the proceeds from the Wachovia Unsecured
Note Financing to repay secured indebtedness (dollars in thousands, except per
share data):
<TABLE>
<CAPTION>
JUNE 30, 1996
HISTORICAL PRO FORMA
<S> <C> <C>
Debt:
Mortgage notes, bonds and other loans payable.................................................. $ 354,083 $ 289,886
Minority Interest.............................................................................. 41,180 46,440
Stockholders' Equity:
Preferred Stock, $.01 par value; 25,000,000 authorized; none issued............................ -- --
Common Stock, $.01 par value; 100,000,000 authorized; 16,574,300 issued and outstanding........ 166 216
Additional paid-in capital..................................................................... 249,425 329,090
Unamortized restricted stock compensation...................................................... (950) (950)
Accumulated deficit............................................................................ (77,735) (77,735)
Total stockholders' equity................................................................ 170,906 250,621
Total capitalization...................................................................... $ 566,169 $ 586,947
</TABLE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the Common Stock
offered hereby, after deducting the underwriting discount and estimated expenses
of the Offering, are approximately $85.0 million (approximately $97.8 million if
the Underwriters' over-allotment option is exercised in full). The Company
expects to use the net proceeds (i) to repay indebtedness under the Company's
revolving credit facility, which equaled $14.8 million at July 31, 1996 and (ii)
to repay construction indebtedness, which equaled $51.4 million at July 31,
1996. The remaining net proceeds, and any additional proceeds received if the
Underwriters' over-allotment option is exercised, will be used to fund certain
additional construction costs already incurred or expected to be incurred on or
before September 30, 1996 and for working capital purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
S-10
<PAGE>
SHARE PRICE AND DISTRIBUTION HISTORY
The Company's Common Stock began trading on the NYSE on February 8, 1994
under the symbol "SMT." On August 1, 1996, the last reported sale price of the
Common Stock on the NYSE was $18 1/8 per share and there were 260 holders of
record of the Company's Common Stock. The following table sets forth the
quarterly high and low sales prices per share reported on the NYSE, as well as
the Company's quarterly per share distribution to stockholders with respect to
each period indicated.
<TABLE>
<CAPTION>
PERIOD OR QUARTER ENDED HIGH LOW DISTRIBUTION
<S> <C> <C> <C>
February 8, 1994 through March 31, 1994.......................................................... $21 3/4 $19 $.1838
Second Quarter 1994.............................................................................. 22 3/8 19 .3675
Third Quarter 1994............................................................................... 20 5/8 18 5/8 .3675
Fourth Quarter 1994.............................................................................. 19 1/4 15 1/2 .3675
First Quarter 1995............................................................................... 19 1/4 16 1/4 .3775
Second Quarter 1995.............................................................................. 18 15 7/8 .3775
Third Quarter 1995............................................................................... 19 16 5/8 .3775
Fourth Quarter 1995.............................................................................. 20 18 .3775
First Quarter 1996............................................................................... 21 3/8 19 .3875
Second Quarter 1996.............................................................................. 20 1/2 18 1/2 .3875
Third Quarter 1996 (through August 1, 1996)...................................................... 20 1/8 18
</TABLE>
The Company has declared a distribution of $.3875 per share for the second
quarter of 1996, payable August 15, 1996 to stockholders of record on July 11,
1996. The Company increased its annualized distributions to stockholders to
$1.55 per share from $1.51 in the first quarter of 1996. The Company expects any
future increases in its distributions to be made at levels that allow it to
achieve a conservative payout ratio. Any future distributions will be declared
at the discretion of the Board of Directors and will depend on actual cash flow
of the Company, its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue
Code, and such other factors as the Board of Directors may deem relevant. The
Board of Directors may modify the Company's distribution policy from time to
time. For federal income tax purposes, approximately 74% of the $1.51 per share
distribution paid for the fiscal year 1995 represented ordinary dividend income
to its stockholders and the remaining 26% represented a nontaxable return of
capital to its stockholders.
In March 1995, the Company implemented a dividend reinvestment and stock
purchase plan under which holders of Common 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 with reinvested distributions will be
purchased at a 5% discount from their fair market value. All other purchases
under the plan will be made at full market value. To fulfill its obligations
under this program, the Company may either issue additional shares of Common
Stock or repurchase Common Stock in the open market.
THE COMMUNITIES
The Company owns and manages through the Operating Partnership 46
Communities consisting of 10,348 luxury garden apartment homes. Twenty of the
Communities have been completed since January 1, 1990 and the average age of the
stabilized Communities is approximately 8.3 years. The average physical
occupancy rate at the stabilized Communities was 93.0% and 94.3% for the six
months ended June 30, 1996 and 1995, respectively. The average monthly rent per
apartment home during the six months ended June 30, 1996 and 1995 was $700 and
$660, respectively.
S-11
<PAGE>
All of the Communities target middle to upper income apartment renters as
customers and have amenities, unit sizes and unit mixes consistent with the
desires of this resident population. The Communities are located in six states
throughout the southeastern United States (Florida, Georgia, Maryland, North
Carolina, South Carolina and Virginia) as well as in Delaware and Ohio. The
following table highlights certain information regarding the Communities:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
AVERAGE AVERAGE RENT PER RENT PER
AVERAGE OCCUPANCY OCCUPANCY APARTMENT APARTMENT
APARTMENT NUMBER OF YEAR JUNE 30, JUNE 30, JUNE 30, JUNE 30,
NAME OF PROPERTY LOCATION SIZE APARTMENTS COMPLETED 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
I-85 CORRIDOR:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GEORGIA:
Summit Glen Atlanta 983 242 1992 92.5% 94.4% $ 842 $ 811
Summit Village Marietta 984 323 1991 92.5 93.0 731 694
Summit Springs Norcross 934 312 1990 94.3 98.4 703 661
GEORGIA SUBTOTAL/WEIGHTED AVERAGE 965 877 93.1 95.3 752 715
NORTH CAROLINA:
CHARLOTTE
Summit Arbors Charlotte 944 120 1986 94.6 99.0 731 684
Summit Charleston Charlotte 806 214 1986 92.5 93.3 578 552
Summit Creek Charlotte 910 260 1983 92.2 94.7 618 567
Summit Crossing Charlotte 978 128 1985 96.4 98.1 640 591
Summit Fairview Charlotte 1,036 135 1983 91.8 95.1 722 714
Summit Foxcroft Charlotte 940 156 1979 92.2 98.2 632 578
Summit Hollow Charlotte 949 232 1978 93.0 97.0 646 597
Summit Norcroft Charlotte 1,112 162 1991 93.4 93.4 812 791
Summit Radbourne Charlotte 1,006 225 1991 91.8 95.2 787 758
Summit Simsbury Charlotte 874 100 1985 94.2 99.0 724 686
Summit Touchstone Charlotte 899 132 1986 93.4 97.4 666 623
Charlotte Subtotal 948 1,864 93.0 96.0 681 643
GREENSBORO-WINSTON SALEM-HIGH POINT
Summit Creekside Hickory 1,006 118 1981 97.7 99.0 550 511
Summit Eastchester High Point 947 172 1981 97.1 96.9 542 504
Summit Old Town Winston-Salem 954 172 1979 90.4 96.1 529 495
Summit Sherwood Winston-Salem 1,028 190 1968 96.1 93.9 512 478
Greensboro Subtotal 983 652 95.1 96.2 531 495
RALEIGH-DURHAM
Summit Hill I Chapel Hill 904 204 1991 91.5 94.8 682 638
Summit Square Durham 925 362 1990 91.1 91.9 763 733
Summit Oak Goldsboro 918 100 1982 95.0 97.6 530 504
Summit Highland Raleigh 986 172 1987 92.4 93.7 704 689
Raleigh Subtotal 932 838 91.9 93.6 703 674
NORTH CAROLINA SUBTOTAL/WEIGHTED AVERAGE 951 3,354 93.2% 95.5 657 622
SOUTH CAROLINA:
Summit Beacon Ridge Greenville 1,046 144 1988 92.2 94.0 645 623
Summit East Ridge Greenville 959 180 1986 92.0 93.9 567 544
SOUTH CAROLINA SUBTOTAL/WEIGHTED AVERAGE 998 324 92.1 94.0 602 579
I-85 CORRIDOR SUBTOTAL/WEIGHTED AVERAGE 957 4,555 93.1 95.3 672 637
<CAPTION>
GREATER WASHINGTON, DC/VIRGINIA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARYLAND:
Summit Meadow Columbia 1,020 178 1990 94.3 95.2 851 825
Summit Windsor Frederick 911 147 1989 91.4 92.9 684 679
MARYLAND SUBTOTAL/WEIGHTED AVERAGE 971 325 93.0 94.1 775 759
VIRGINIA:
Summit Belmont Fredericksburg 881 300 1987 91.5 92.1 617 590
Summit Reston Reston 854 418 1987 92.5 93.3 900 857
Summit Breckenridge Richmond 928 300 1987 94.9 92.2 693 657
Summit Stony Point Richmond 1,045 250 1986 92.6 93.8 718 683
Summit Waterford Richmond 995 312 1990 92.6 93.4 674 620
VIRGINIA SUBTOTAL/WEIGHTED AVERAGE 931 1,580 92.8 93.0 734 694
GREATER WASHINGTON, DC/VIRGINIA
SUBTOTAL/WEIGHTED AVERAGE 938 1,905 92.8 93.2 741 705
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
AVERAGE AVERAGE
AVERAGE AVERAGE RENT PER RENT PER
AVERAGE OCCUPANCY OCCUPANCY APARTMENT APARTMENT
APARTMENT NUMBER OF YEAR JUNE 30, JUNE 30, JUNE 30, JUNE 30,
NAME OF PROPERTY LOCATION SIZE APARTMENTS COMPLETED 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CENTRAL AND SOUTH FLORIDA:
TAMPA
Summit Providence Brandon 952 444 1991 91.3 94.0 664 647
Summit Lofts Palm Harbour 1,045 200 1990 89.9 89.7 702 690
Summit Gateway St. Petersburg 828 212 1987 93.0 90.8 623 614
Summit Station Tampa 902 230 1990 92.5 94.2 614 589
Summit Walk Tampa 1,614 68 1993 95.1 91.3 1,029 1,003
Tampa Subtotal 974 1,154 91.8 92.5 675 658
SARASOTA
Summit Hampton Bradenton 933 352 1988 94.8 95.9 622 589
Summit Perico Bradenton 911 256 1990 94.3 94.6 652 615
Summit Heron's Run Sarasota 863 274 1990 94.0 95.2 648 630
Summit McIntosh Sarasota 855 212 1990 94.6 93.8 676 648
Sarasota Subtotal 895 1,094 94.5 95.0 646 617
SOUTH FLORIDA
Summit Del Ray Delray Beach 968 252 1993 88.0 93.2 872 872
Summit Plantation Plantation 1,134 262 1995 93.1 NA 998 NA
Summit Palm Lake W. Palm Beach 919 304 1992 97.4 96.6 748 709
South Florida Subtotal 1,003 818 93.1 95.1 866 783
CENTRAL AND SOUTH FLORIDA SUBTOTAL/WEIGHTED
AVERAGE 954 3,066 93.1 94.0 716 667
<CAPTION>
OTHER MARKETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DELAWARE:
Summit Pike Creek Newark 899 264 1988 95.9 91.4 779 732
OHIO:
Summit Blue Ash Blue Ash 1,158 242 1992 94.2 94.1 755 727
Summit Park Forest Park 963 316 1989 89.8 91.4 591 566
OHIO SUBTOTAL/WEIGHTED AVERAGE 1,048 558 91.7 92.5 662 636
OTHER MARKETS SUBTOTAL/WEIGHTED AVERAGE 1,000 822 93.0 92.2 700 667
TOTAL/WEIGHTED AVERAGE 956 10,348 93.0% 94.3% $ 700 $ 660
</TABLE>
(1) Summit Foxcroft is held by a partnership in which the Company is a 75%
managing general partner.
Each Community has many of the following features: swimming pools, tennis,
racquetball and volleyball courts, saunas, whirlpools, fitness facilities,
picnic areas, large clubhouses and convenient parking facilities. Most of the
apartment homes offer amenities including spacious open living areas, sunrooms,
patios or balconies, sunken living rooms, fireplaces, built-in shelves or
entertainment centers, large storage areas or walk-in closets, vaulted ceilings,
ceiling fans and separate in-home laundry facilities or laundry hook-ups. In
many cases, additional services are available to residents such as dry cleaning
pick-up and delivery, fax services and resident social activities. In addition
to these physical amenities, each Community has its own highly trained and
experienced on-site management and maintenance staff to ensure that courteous
and responsive service is provided to its residents.
COMMUNITY MANAGEMENT
Each of the Communities is managed by the Company's property management
staff. The property management team for each Community includes on-site
management and maintenance personnel as well as an off-site support staff.
Community management teams perform leasing and rent collection functions and
coordinate resident services. All personnel are extensively trained and
experienced and are encouraged to continue their education through both
Company-designed and outside courses.
S-13
<PAGE>
THE MARKETS
Within its three core markets, the Communities are concentrated in or
around 11 metropolitan areas (the "Markets") in six states, as well as Delaware
and Ohio, as shown below:
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
NUMBER OF APARTMENT APARTMENT
REGION/CITY COMMUNITIES HOMES HOMES
<S> <C> <C> <C>
I-85 CORRIDOR
Atlanta, GA........................................................................ 3 877 8.5%
Charlotte, NC...................................................................... 11 1,864 18.0
Greensboro, Winston-Salem, NC...................................................... 4 652 6.3
Raleigh-Durham, NC................................................................. 4 838 8.1
Greenville, SC..................................................................... 2 324 3.1
Subtotal............................................................................. 24 4,555 44.0
CENTRAL AND SOUTH FLORIDA
Tampa.............................................................................. 5 1,154 11.1
Sarasota........................................................................... 4 1,094 10.6
South Florida...................................................................... 3 818 7.9
Subtotal............................................................................. 12 3,066 29.6
GREATER WASHINGTON, DC/VIRGINIA
Washington, DC Metro............................................................... 4 1,043 10.1
Richmond, VA....................................................................... 3 862 8.3
Subtotal............................................................................. 7 1,905 18.4
OTHER MARKETS
Cincinnati, OH..................................................................... 2 558 5.4
Newark, DE......................................................................... 1 264 2.6
Subtotal............................................................................. 3 822 8.0
PORTFOLIO TOTAL...................................................................... 46 10,348 100.0%
</TABLE>
The Company believes that the Markets present significant opportunities for
improved returns on existing Communities, as well as for new development and
acquisitions.
INCREASING DEMAND IN THE MARKETS. Demand for apartment home rentals should
remain strong in the Markets due to increasing population, employment and
household formations growth. Between 1986 and 1994, population, employment and
household formation increased approximately 17.6%, 21.6% and 19.2%,
respectively, in the Markets, compared to approximately 8.4%, 13.1% and 10.6%,
respectively, in the United States. Population and employment growth have been
especially strong in the southeastern United States, where over 89.7% of the
Company's apartment homes are located.
Population, employment and household formation growth in the Markets are
expected to continue to exceed the national average. Based on data from Woods &
Poole Economics, Inc., the average rate of population growth from 1996 to 2005
is projected to be approximately 17% in the Markets, compared to approximately
8% in the United States. Employment growth during this period is projected to be
approximately 14% in the Markets, compared to approximately 9% in the United
States. Household formation growth during this period is projected to be
approximately 17% in the Markets, compared to 8% in the United States.
S-14
<PAGE>
Demographic information for the Markets is set forth in the following
table:
PROJECTED POPULATION, EMPLOYMENT AND HOUSEHOLD GROWTH
<TABLE>
<CAPTION>
PROJECTED PROJECTED PROJECTED
POPULATION EMPLOYMENT HOUSEHOLD
GROWTH GROWTH GROWTH
MARKETS 1996-2005 1996-2005 1996-2005
<S> <C> <C> <C>
I-85 CORRIDOR
Atlanta, GA........................................................................... 17% 13% 17%
Charlotte, NC......................................................................... 16 12 16
Raleigh-Durham, NC.................................................................... 26 21 27
Greensboro, NC........................................................................ 11 11 12
Greenville, SC........................................................................ 14 11 14
CENTRAL AND SOUTH FLORIDA:
Ft. Lauderdale, FL.................................................................... 18 14 18
Sarasota, FL.......................................................................... 21 21 21
Tampa/St. Petersburg, FL.............................................................. 19 18 19
West Palm Beach, FL................................................................... 24 18 24
GREATER WASHINGTON, DC/VIRGINIA AREA
Washington, DC........................................................................ 11 10 11
Richmond, VA.......................................................................... 11 10 12
Average of Markets.................................................................... 17% 14% 17%
United States......................................................................... 8% 9% 8%
</TABLE>
Source: Woods & Poole Economics, Inc., Washington, DC. The Company's use of this
information and its conclusions drawn therefrom are solely the
responsibility of the Company.
SELECTED FINANCIAL AND OTHER INFORMATION
The following table sets forth selected financial and operating information
for the Company on a consolidated historical basis as of and for the three
months ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994. The consolidated financial and other information for the three months
ended March 31, 1996 and 1995 has been derived from the unaudited consolidated
financial statements of the Company and, in the opinion of management, includes
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth therein. The information should be read
in conjunction with all of the financial statements and notes thereto
incorporated by reference in this Prospectus Supplement and accompanying
Prospectus. The consolidated historical financial and operating information of
the Company for the years ended December 31, 1995 and 1994 have been derived
from the historical financial statements audited by Deloitte & Touche LLP,
independent auditors, whose report with respect thereto is incorporated by
reference herein.
S-15
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, (1) DECEMBER 31, (1)
1996 1995 1995 1994
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OPERATING INFORMATION:
Revenue
Rental.................................................................. $ 20,190 $ 15,004 $ 70,773 $ 54,198
Property management (2)................................................. -- -- -- 536
Interest and other...................................................... 1,240 887 4,221 3,700
Total................................................................... 21,430 15,891 74,994 58,434
Property operating and maintenance expense (before depreciation and
amortization)........................................................... 8,124 5,914 28,012 21,502
Property management expenses (2).......................................... -- -- -- 366
Interest expense.......................................................... 4,149 3,550 14,802 14,067
Depreciation and amortization............................................. 4,130 3,249 15,141 11,700
REIT formation costs...................................................... -- -- -- 457
General and administrative expenses....................................... 625 403 1,949 1,756
Loss (income) from equity investments..................................... 165 (29) 39 59
Total................................................................... 17,193 13,087 59,943 49,907
Income before extraordinary items and minority interest of unitholders in
Operating Partnership................................................... $ 4,237 $ 2,804 $ 15,051 $ 8,527
Net income................................................................ $ 3,409 $ 2,346 $ 11,819 $ 14,032
Income before extraordinary items per share............................... $ 0.21 $ 0.19 $ 0.83 $ 0.64
Net income per share...................................................... $ 0.21 $ 0.19 $ 0.80 $ 1.28
Dividends per share....................................................... $ 0.39 $ 0.38 $ 1.51 $ 1.29
Weighted average shares (in thousands).................................... 16,954 12,431 14,754 10,992
OTHER INFORMATION:
Cash flow provided by (used in):
Operating activities.................................................... $ 9,236 $ 4,170 $ 30,994 $ 17,525
Investing activities.................................................... (18,652) (7,628) (63,734) (113,741)
Financing activities.................................................... 8,861 3,581 34,440 88,993
Funds from Operations (3)................................................. $ 8,391 $ 6,023 $ 30,148 $ 20,120
Recurring capital expenditures............................................ $ 561 $ 421 $ 2,180 $ 1,710
Non-recurring capital expenditures (4).................................... $ 721 $ 167 $ 864 --
Funds available for distribution.......................................... $ 7,109 $ 5,435 $ 27,104 $ 18,410
Total completed communities (at end of period)............................ 46 32 46 32
Total apartment homes developed (5)....................................... -- -- 379 --
Total apartment homes acquired............................................ -- -- 2,025 1,332
Total apartment homes (at end of the period) (6).......................... 10,465 8,061 10,465 8,061
Average monthly rent per apartment home (7)............................... $ 690 $ 677 $ 669 $ 657
Average physical occupancy (8)............................................ 93.3% 93.4% 94.5% 93.5%
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation............................ $607,023 $446,653 $586,264 $ 439,025
Total assets............................................................ 550,573 404,642 533,252 397,945
Total long-term debt.................................................... 313,720 258,074 297,010 249,009
Stockholders' equity.................................................... 173,446 113,182 175,454 115,525
</TABLE>
S-16
<PAGE>
(1) Information is historical unless otherwise indicated. For purposes of the
Selected Financial and Other Information, historical information is
presented both for the Company and its predecessors; provided that
historical financial information for its predecessors only includes
information relating to the Communities and the entities which provided
property and management services for the Communities.
(2) Consists of revenues and expenses from property management services provided
to communities owned by unrelated third parties and by certain predecessor
partnerships prior to the Initial Offering. Since the Initial Offering,
these services have been performed by Summit Management Company, which is
accounted for under the equity method of accounting.
(3) The Company generally considers FFO to be an appropriate measure of the
performance of an equity REIT. FFO is generally defined by NAREIT as net
income (loss) before minority interest of holders of Units in the Operating
Partnership and excluding gains and losses from sales of assets or debt
restructuring, plus certain non-cash items, primarily real estate
depreciation, and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for all periods consisted only of depreciation.
FFO should not be considered as an alternative to net income (determined in
accordance with generally accepted accounting principles), as an indication
of the Company's financial performance, or as an alternative to cash flow
from operating activities (determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(4) Represents improvements made in conjunction with the Company's 1995 and 1994
acquisitions and construction of garages at certain Florida properties.
(5) Represents the total number of apartment homes in communities completed and
owned by the Company during the period. Does not include Summit Plantation,
a 262-unit community the Company developed in a joint venture in which it
owned 25%. In April 1996, the Company acquired the remaining 75% joint
venture interest of a third party in Summit Plantation not previously owned
by the Company.
(6) Represents the total number of apartment homes in communities completed and
owned by the Company at the end of the period.
(7) Represents the average monthly net rental income per occupied apartment home
at Communities deemed to have achieved stabilized occupancy on the earlier
of the attainment of 93.0% physical occupancy or one year after the
completion of construction.
(8) Physical occupancy is defined as the number of apartment homes occupied
divided by the total number of apartment homes contained in the Communities,
expressed as a percentage, and reflects only stabilized Communities.
Physical occupancy has been calculated using the average of the midweek
occupancy that existed during each week during the period.
S-17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements including,
without limitation, statements relating to development activities of the Company
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, the Company's actual results and performance of
development communities could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include general economic conditions, local real estate conditions, construction
delays due to unavailability of materials, weather conditions or other delays
and those factors discussed in the section entitled "Development
Activity -- Certain Factors Affecting the Performance of Development
Communities" on page S-25 of this Prospectus Supplement.
OVERVIEW
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto
incorporated by reference herein.
HISTORICAL RESULTS OF OPERATIONS
The Company's net income is generated primarily from operations of its
apartment communities. The changes in operating results from period to period
reflect changes in existing Community performance and increases in the number of
apartment homes due to development and acquisition of new Communities. Where
appropriate, comparisons are made on a "stabilized Communities," "acquisition
Communities" and "Communities in lease-up" basis in order to adjust for changes
in the number of apartment homes. A Community is deemed to be "stabilized" when
it has attained a physical occupancy level of at least 93% or when construction
has been completed for one year. The thirteen Communities comprising the
Crosland Portfolio acquired in 1995 (the "Crosland Acquisition Communities"),
are considered acquisition Communities in the following comparisons. Four
communities were in lease-up during the first quarter of 1996.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THREE MONTHS ENDED MARCH
31, 1995
For the three months ended March 31, 1996, income before minority interest
increased $1.4 million to $4.2 million, from $2.8 million for the three months
ended March 31, 1995.
OPERATING PERFORMANCE OF THE COMPANY'S PORTFOLIO OF COMMUNITIES
The operating performance of the Communities is summarized below (dollars
in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995 % CHANGE
<S> <C> <C> <C>
Rental revenue.................................................................... $20,190 $15,004 34.6%
Other property revenue............................................................ 1,014 712 42.4%
Total property revenue............................................................ 21,204 15,716 34.9%
Property operating and maintenance expense (1).................................... 8,124 5,914 37.4%
Property operating income (2)..................................................... $13,080 $ 9,802 33.4%
Apartment homes, end of period.................................................... 11,286 8,061 40.0%
</TABLE>
(1) Before real estate depreciation and amortization expense.
(2) Property operating income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
Rental revenue for the three months ended March 31, 1996 increased
primarily due to revenues from acquisition Communities and Communities in
lease-up and higher average rental rates at stabilized Communities.
S-18
<PAGE>
Property operating and maintenance expenses increased primarily due to
expenses at the acquisition Communities and communities in lease-up during the
first quarter of 1996, and increases at stabilized Communities (primarily
personnel and insurance expenses).
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED COMMUNITIES
The operating performance of the 32 Communities, containing 8,061 apartment
homes, stabilized during the entire period for the three months ended March 31,
1996 and 1995 is summarized below (dollars in thousands except average monthly
rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995 % CHANGE
<S> <C> <C> <C>
Rental revenue.................................................................... $15,673 $15,004 4.5%
Other property revenue............................................................ 822 712 15.4%
Total property revenue............................................................ 16,495 15,716 5.0%
Property operating and maintenance expense (1):
Personnel....................................................................... 1,500 1,394 7.6%
Advertising and promotion....................................................... 142 141 .7%
Utilities....................................................................... 752 731 2.9%
Building repairs and maintenance................................................ 1,240 1,213 2.2%
Real estate taxes and insurance................................................. 1,680 1,530 9.8%
Property supervision............................................................ 409 391 4.6%
Other operating expense......................................................... 465 514 (9.5%)
Total operating expense........................................................... 6,188 5,914 4.6%
Property operating income (2)..................................................... $10,307 $ 9,802 5.2%
Average physical occupancy (3).................................................... 93.1% 93.4% (0.3%)
Average monthly rental revenue (4)................................................ $ 708 $ 677 4.6%
</TABLE>
(1) Before real estate depreciation and amortization expense.
(2) Property operating income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
(3) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(4) Represents the average monthly net rental revenue per occupied apartment
home.
The increase in rental revenue from stabilized Communities was primarily
the result of increases in average rental rates. Property operating and
maintenance expense increases were due primarily to an increase in property and
casualty insurance premiums ($60,000 or a 40% increase), an increase in property
taxes ($90,000 or a 6.5% increase) and higher personnel costs. Building repairs
and maintenance includes approximately $96,000 of snow removal and storm damage
repairs which were offset by lower turnover cost. As a percentage of total
property revenue, property operating and maintenance expenses remained stable at
37.6%.
S-19
<PAGE>
OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITIONS
The Crosland Acquisition Communities, with a total of 2,025 apartment
homes, were acquired on May 16, 1995, except Summit East Ridge which was
acquired on June 22, 1995. The operations of the Crosland Acquisition
Communities are summarized as follows (dollars in thousands except average
monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
<S> <C>
Rental revenue....................................................................................... $3,475
Other property revenue............................................................................... 108
Total property revenue............................................................................... 3,583
Property operating and maintenance expense (1)....................................................... 1,413
Property operating income (2)........................................................................ $2,170
Average physical occupancy (3)....................................................................... 94.02%
Average monthly rental revenue (4)................................................................... $ 616
</TABLE>
(1) Before real estate depreciation and amortization expense.
(2) Property operating income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
(3) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Crosland Acquisition Communities, expressed as a percentage. Average
physical occupancy has been calculated using the average of the midweek
occupancy that existed during each week of the period.
(4) Represents the average monthly net rental revenue per occupied apartment
home.
OPERATING PERFORMANCE OF THE COMPANY'S COMMUNITIES IN LEASE-UP
The Company had four communities with a total of 1,200 apartment homes
(Summit Aventura, Summit Hill II, Summit Green, and Summit River Crossing),
which began renting apartment homes in the third quarter of 1995. Summit
Aventura (379 apartment homes) received certificates of occupancy on its final
units in December, 1995. In order to evaluate the impact of developments and
lease-ups on the Company's operations, the amount of interest expensed on
Communities in development and lease-up is presented. The results of operations
of the four communities in development and lease-up since rental operations
began, including interest expense during construction and lease-up, are
summarized as follows (dollars in thousands except average monthly rental
revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, DECEMBER 31,
1996 1995
<S> <C> <C>
Rental revenue.............................................................................. $ 1,042 $511
Other property revenue...................................................................... 84 48
Total property revenue...................................................................... 1,126 559
Property operating and maintenance expense (1).............................................. 523 160
Property operating income (2)............................................................... 603 399
Interest expense............................................................................ 662 416
Property (loss) income after interest expense............................................... $ (59) $(17)
Average monthly rental revenue (3).......................................................... $ 889 $832
Number of units completed................................................................... 870 576
Number of units leased...................................................................... 681 364
Number of units occupied.................................................................... 539 291
</TABLE>
(1) Before real estate depreciation, amortization and interest expense.
(2) Property operating income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
(3) Represents the average monthly net rental revenue per occupied apartment
home.
S-20
<PAGE>
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
The operating performance of Summit Management Company (the "Management
Company") and its wholly owned subsidiary, Summit Apartment Builders Inc., is
summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
<S> <C> <C>
Property management revenue......................................................................... $1,132 $1,315
Construction company income......................................................................... 64 85
Other management company income..................................................................... 26 60
Total revenue..................................................................................... 1,222 1,460
Property management expenses:
Operating......................................................................................... 1,152 1,138
Depreciation...................................................................................... 28 32
Amortization...................................................................................... 69 68
Interest.......................................................................................... 75 75
Total property management expenses............................................................. 1,324 1,313
Construction company expenses....................................................................... 64 118
Total expenses................................................................................. 1,388 1,431
Net (loss) income of Summit Management Company...................................................... $ (166) $ 29
</TABLE>
The decrease in property management revenue was the result of a reduction
in the average number of communities managed for third parties during 1996
compared to 1995 offset by higher revenues for managing the Company's
Communities. Total third party apartment homes managed for third parties was
7,926 and 12,039 at March 31, 1996 and 1995, respectively. The decrease was
primarily due to the termination of the Management Company's contract to manage
a portfolio of 4,050 apartment homes effective October 1, 1995. This contract
was terminated as a result of the owner's decision to provide its own property
management of these apartment homes.
Property management fees include $568,000 and $924,000 of fees from third
parties in 1996 and 1995, respectively.
OTHER INCOME AND EXPENSES
Development and other related party fees increased $48,000 or 200.0% to
$72,000 for the three months ended March 31, 1996, from $24,000 for the same
period in 1995, due primarily to the credit enhancement fees earned from the
Summit Plantation joint venture in 1996. The Company acquired the remaining 75%
joint venture interest in the Summit Plantation Community in April 1996.
Interest expense increased $599,000 or 16.9% to $4.2 million for the three
months ended March 31, 1996, from $3.6 million for the same period in 1995,
primarily due to interest on debt related to the 1995 acquired Communities and
interest on development projects, offset by the Company's repayment of debt in
connection with a public offering of 4 million shares of Common Stock in June
1995 (the "1995 Offering"). The 1995 Offering resulted in net proceeds of
approximately $66 million and was the Company's first public offering since its
initial public offering in February of 1994.
General and administrative expense increased $222,000, or 55.1%, to
$625,000 for the three months ended March 31, 1996, from $403,000 for the same
period in 1995. This increase was primarily due to increased compensation costs
and higher professional fees.
S-21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities increased from $4.2
million for the three months ended March 31, 1995 to $9.2 million for the same
period in 1996 primarily due to a $3.3 million increase in property operating
income, and a $1.2 million increase in accounts payable (primarily property
taxes) offset by a $599,000 increase in interest expense in 1996 compared to
1995. The increase in interest expense was small relative to the increase in
property operating income due to the retirement of debt with the proceeds from
the 1995 Offering in June 1995. Net cash used in investing activities increased
from $7.6 million for the three months ended March 31, 1995 to $18.7 million for
the same period in 1996 due to the increase in development of new properties.
Net cash provided by financing activities increased from $3.6 million for the
three months ended March 31, 1995 to $8.9 million for the same period in 1996
primarily due to an increase in debt proceeds offset by higher dividends and
distributions to unitholders.
The Company's outstanding indebtedness at March 31, 1996 totaled $313.7
million. This amount includes approximately $195.8 million in fixed rate
conventional mortgages, $54.7 million of variable rate tax-exempt bonds, $9.4
million of tax-exempt fixed rate loans, $47.3 million in development loans and
borrowings of $6.5 million under the Company's $50 million revolving credit
facility (the "Credit Facility").
After giving effect to the Offering and the Wachovia Unsecured Note
Financing, the Company's total indebtedness as of June 30, 1996 would have been
$289.9 million (of which 81% is fixed rate financing), which represents a
debt-to-total market capitalization ratio of approximately 36.7% (assuming a
price per share of Common Stock of $19 1/2, the last reported sale price on July
17, 1996). After giving effect to the Offering, the Company's indebtedness will
have a weighted average interest rate of 6.5% and a weighted average remaining
term of 9.9 years. The Company believes that the completion of the Offering, the
Wachovia Unsecured Note Financing, and the expected closing of the expanded
Unsecured Credit Facility will result in a more conservative and flexible
capital structure. The Company believes that a more conservative and flexible
capital structure will lower its overall cost of capital by enabling it to
access additional sources of long-term financing. The Company currently intends
to limit its debt-to-total market capitalization ratio to no greater than 55%.
Following the Offering, the Company could incur an additional approximately $320
million without exceeding a 55% debt-to-total market capitalization ratio, based
on the closing price per share of Common Stock of $19 1/2 on July 17, 1996. The
unfunded costs of the communities currently under construction and the cost of
the communities in the pre-development phase total approximately $183 million.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under the Credit
Facility. The Company believes that its net cash provided by operations will be
adequate to meet its operating requirements and to satisfy applicable REIT
dividend payment requirements in both the short-term and in the long-term.
Improvements and renovations at existing Communities are expected to be funded
from property operations.
The Company expects to meet its long-term liquidity requirements, such as
future developments, debt maturities, acquisitions, renovations and other
non-recurring capital improvements, through the issuance of long-term secured
and unsecured debt securities and additional equity securities of the Company,
or in connection with the acquisition of land or improved property in exchange
for Units of the Operating Partnership.
S-22
<PAGE>
The following table sets forth certain information regarding debt financing
as of June 30, 1996 and as adjusted for the Offering and the Wachovia Unsecured
Note Financing (dollars in thousands):
<TABLE>
<CAPTION>
PRINCIPAL OUTSTANDING
INTEREST PRO FORMA
RATE AS OF MATURITY JUNE 30, JUNE 30,
COMMUNITIES JUNE 30, 1996 DATE 1996 1996 (1)
<S> <C> <C> <C> <C>
FIXED RATE DEBT
MORTGAGE LOAN (2)...................................... 5.88% 02/15/01 $124,180 $124,180
MORTGAGE LOAN (2)...................................... 7.71% 12/15/05 29,860 29,860
MORTGAGE LOAN (3)...................................... 8.00% 09/01/05 8,676 8,676
MORTGAGE NOTES
Summit Hollow I..................................... 8.00% 11/01/18 2,306 2,306
Summit Hollow II.................................... 7.75% 01/01/29 2,597 2,597
Summit Creekside.................................... 8.00% 06/01/22 2,895 2,895
Summit Old Town..................................... 8.00% 09/01/20 3,120 3,120
Summit Eastchester.................................. 8.00% 05/01/21 3,899 3,899
Summit Foxcroft..................................... 8.00% 04/01/20 2,817 2,817
Summit Oak.......................................... 7.75% 12/01/23 2,600 2,600
Summit Sherwood..................................... 7.88% 03/01/29 3,341 3,341
Summit Radbourne.................................... 9.80% 03/01/02 8,722 8,722
TOTAL MORTGAGE NOTES.............................. 32,297 32,297
UNSECURED NOTES
Four-year Notes..................................... 7.71% 07/31/00 0 15,000
Six-year Notes...................................... 7.95% 07/31/02 0 16,000
TOTAL UNSECURED NOTES............................. 0 31,000
TAX EXEMPT MORTGAGE NOTES
Summit Crossing..................................... 6.95% 11/01/25 4,238 4,238
Summit at East Ridge................................ 7.25% 12/01/26 5,182 5,182
TOTAL TAX EXEMPT MORTGAGE NOTES................... 9,420 9,420
TOTAL FIXED RATE DEBT............................. 204,433 235,433
VARIABLE RATE DEBT
Credit Facility (4).................................... LIBOR + 100........ 02/15/97 18,343 0
TAX EXEMPT BONDS
Summit Belmont...................................... 4.95% 04/01/07 11,850 11,850
Summit Hampton...................................... 4.95% 06/01/07 12,700 12,700
Summit Pike Creek................................... 4.95% 08/15/20 13,378 13,378
Summit Gateway...................................... 4.95% 07/01/07 7,700 7,700
Summit Stony Point.................................. 4.95% 04/01/29 8,825 8,825
TOTAL TAX EXEMPT BONDS............................ 54,453 54,453
DEVELOPMENT LOANS
Summit Aventura (5)................................. LIBOR + 160 12/31/98 8,714 0
Summit River Crossing............................... LIBOR + 110 06/30/99 12,348 0
Summit Hill II (5).................................. LIBOR + 95 11/15/99 8,466 0
Summit Green........................................ LIBOR + 95 12/21/99 12,918 0
Summit Fairways..................................... LIBOR + 110 06/30/00 7,145 0
Summit on the River................................. LIBOR + 125 08/10/00 8,580 0
Summit Russett...................................... LIBOR + 125 06/29/99 4,381 0
Summit Plantation (5)............................... LIBOR + 110 06/30/98 14,302 0
TOTAL DEVELOPMENT LOANS........................... 76,854 0
TOTAL VARIABLE RATE DEBT.......................... 149,650 54,453
TOTAL OUTSTANDING INDEBTEDNESS..................................................... $354,083 $289,886
</TABLE>
(1) As adjusted to reflect the application of the net proceeds from the Offering
as set forth in "Use of Proceeds" and the repayment of certain indebtedness
with the proceeds of the Wachovia Unsecured Note Financing.
(2) Mortgage Loans secured by fifteen communities
(3) Mortgage Loan secured by two communities
(4) Credit Facility secured by seven communities
(5) The Company intends to repay these Development Loans with the proceeds from
the Wachovia Unsecured Note Financing.
S-23
<PAGE>
DEVELOPMENT ACTIVITY
The Company's developments in process at March 31, 1996 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
FUNDS AVAILABLE
TOTAL ESTIMATED FROM
ESTIMATED COST TO COST TO DEVELOPMENT
PROJECT UNITS COSTS DATE COMPLETE LOANS
<S> <C> <C> <C> <C> <C>
Summit Hill II-Chapel Hill, NC................................. 207 $ 11,200 $10,514 $ 686 $ 1,390
Summit River Crossing-Indianapolis, IN......................... 314 19,200 13,757 5,443 4,791
Summit Green-Charlotte, NC..................................... 300 17,600 15,528 2,072 2,717
Summit Russett-Laurel, MD...................................... 314 22,100 8,275 13,825 14,474
Summit on the River-Atlanta, GA................................ 352 23,900 11,323 12,577.. 14,037
Summit Fairways-Orlando, FL.................................... 240 17,720 8,417 9,303 9,442
Summit Ballantyne I-Charlotte, NC.............................. 246 16,800 1,828 14,972 --
Summit Stonefield-Yardley, PA.................................. 216 18,370 3,739 14,631 14,500
Summit Sedgebrook I-Charlotte, NC.............................. 248 15,640 1,550 14,090 --
Other development and construction costs....................... -- -- 5,052 -- --
TOTAL................................................ 2,437 $ 162,530 $79,983 $87,599 $61,351
</TABLE>
CERTAIN FACTORS AFFECTING THE PERFORMANCE OF DEVELOPMENT COMMUNITIES
As a result of the improved economic conditions and the demand for
apartment homes of comparable quality in its markets, the Company believes that
the operating prospects of the communities currently under development remain
favorable. As with any development project, there are uncertainties and risks
associated with the development of the communities described above. While the
Company has prepared development budgets and has estimated completion and
stabilization target dates based on what it believes are reasonable assumptions
in light of current conditions, there can be no assurance that actual costs will
not exceed current budgets or that the Company will not experience construction
delays due to the unavailability of materials, weather conditions or other
events. Other development risks include the possibility of incurring additional
cost or liability resulting from defects in construction materials and the
possibility that financing may not be available on favorable terms, or at all,
to pursue or complete development activities. Similarly, market conditions at
the time these communities become available for leasing will affect the rental
rates that may be charged and the period of time necessary to achieve
stabilization, which could make one or more of the development communities
unprofitable or result in achieving stabilization later than currently
anticipated. In addition, the Company is conducting feasibility and other
pre-development work for seven new communities. The Company could abandon the
development of any one or more of these potential communities in the event that
it determines that market conditions do not support development, financing is
not available on favorable terms or other circumstances prevent development.
Similarly, there can be no assurance that if the Company does pursue one or more
of these potential communities that it will be able to complete construction
within the currently estimated development budgets or that construction can be
started at the time currently anticipated.
CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS
The Company has established a policy of capitalizing those expenditures
relating to acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset. All
expenditures necessary to maintain a Community in ordinary operating condition
(including replacement carpets) are expensed as incurred.
Capitalized expenditures for the three months ended March 31, 1996 and 1995
are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
<S> <C> <C>
Construction of new Communities (1)................................................................ $19,940 $7,040
Non-recurring capital expenditures (2)............................................................. 721 167
Recurring capital expenditures..................................................................... 561 421
$21,222 $7,628
</TABLE>
S-24
<PAGE>
(1) Includes the issuance of $2.1 million of Units in the Operating Partnership
for the acquisition of land in 1996.
(2) Non-recurring capital expenditures consist primarily of the construction of
garages at certain Florida properties in the three months ended March 31,
1996 and improvements to an acquisition community in the three months ended
March 31, 1995.
Construction of new Communities was funded primarily by development loans
and borrowing under the Credit Facility. Other additions and improvements were
funded primarily by Community operations and the Credit Facility.
INFLATION
Substantially all of the leases at the Communities are for a term of one
year or less, which, coupled with the relatively high occupancy rates, may
enable the Company to seek increased rents upon renewal of existing leases or
commencement of new leases. The Company's policy is to permit residents to
terminate leases upon 60 days' written notice and payment of two months' rent as
compensation for early termination. The short-term nature of these leases
generally serves to reduce the risk to the Company of the adverse effect of
inflation.
FUNDS FROM OPERATIONS
The Company generally considers FFO to be an appropriate measure of
performance of an equity REIT. FFO is defined by NAREIT as income (loss) before
minority interest of holders of Units in the Operating Partnership, and
excluding gains or losses from sales of assets or debt restructuring, plus
certain non-cash items, primarily real estate depreciation, and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments for
all periods consisted only of real estate depreciation. Funds Available for
Distribution is defined as FFO less recurring capital expenditures funded by
operations. FFO and Funds Available for Distribution should not be considered as
an alternative to net income (determined in accordance with generally accepted
accounting principles), as an indication of the Company's financial performance,
or to cash flow from operating activities (determined in accordance with
generally accepted accounting principles) as a measure of liquidity.
Funds from Operations and Funds Available for Distribution are calculated
as follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
<S> <C> <C>
Net Income.............................................................................. $ 3,409 $ 2,346
Minority Interest of Unitholders in Operating Partnership............................... 828 458
Depreciation:
Operating Communities................................................................. 4,121 3,219
Summit Plantation..................................................................... 33 --
4,154 3,219
Funds from Operations................................................................... 8,391 6,023
Recurring capital expenditures (1)...................................................... (561) (421)
Non-recurring capital expenditures...................................................... (721) (167)
Funds Available for Distribution........................................................ $ 7,109 $ 5,435
Weighted average shares outstanding..................................................... 16,593,937 12,430,665
Weighted average shares and units outstanding........................................... 20,615,923 14,858,846
</TABLE>
(1) Exterior painting ($123,000 in 1996 and $90,000 in 1995) and clubhouse
redecorating ($133,000 in 1996 and $49,000 in 1995) are the largest
components of recurring capital expenditures.
S-25
<PAGE>
MANAGEMENT
DIRECTOR AND OFFICERS
The persons who are Directors and officers of the Company and their
respective positions are as follows:
<TABLE>
<CAPTION>
YEARS
WITH
THE
NAME AGE COMPANY POSITIONS AND OFFICES HELD
<S> <C> <C> <C>
William F. Paulsen..................... 50 14 President, Chief Executive Officer and Director
Raymond V. Jones....................... 49 11 Executive Vice President of Development and Construction
Keith H. Kuhlman....................... 54 10 Executive Vice President
David F. Tufaro........................ 49 11 Executive Vice President and Chairman of the Capital Allocation
Committee
John T. Gray........................... 40 9 Executive Vice President of Property Services
Michael L. Schwarz..................... 36 2 Executive Vice President and Chief Financial Officer
William B. McGuire, Jr................. 52 23 Chairman of the Board
Nelson Schwab III...................... 51 -- Director
John Crosland, Jr...................... 67 -- Director
James H. Hance, Jr..................... 51 -- Director
Henry H. Fishkind...................... 46 -- Director
</TABLE>
The following are biographical summaries of the experience of the officers
and Directors of the Company:
MR. PAULSEN is the President and Chief Executive Officer and a director.
Prior to the formation of the Company, Mr. Paulsen was a senior partner and the
Chief Executive Officer of Summit Properties and a general partner of each of
the partnerships which transferred Communities to the Company when it was
formed. Mr. Paulsen joined Summit Properties in 1982. He was selected as North
Carolina Entrepreneur of the Year in 1990. In addition to his responsibilities
with the Company, Mr. Paulsen is a full Member and Residential Council Member of
the Urban Land Institute. He is a Member of the Board of Directors of The Beach
Company, a real estate investment company specializing primarily in commercial
and resort development in the southeastern United States. Mr. Paulsen also
served as a Vice President of the Charlotte Apartment Association.
MR. JONES is the Executive Vice President of Development and Construction.
Prior to the formation of the Company, Mr. Jones served as regional partner of
the Charlotte division of Summit Properties, as well as a general partner of
several of the partnerships which transferred Communities to the Company when it
was formed. Since joining Summit Properties in 1984, Mr. Jones has developed 26
multifamily communities comprising nearly 6,500 apartment homes in Georgia,
North Carolina, South Carolina and Ohio. Mr. Jones is a Member of the Board of
Directors and Committee Chairman of the Charlotte Mecklenburg Housing
Partnership, a non-profit venture organized to provide low income housing. He
also served as President of the Charlotte Apartment Association and the
Apartment Association of North Carolina.
MR. KUHLMAN is an Executive Vice President. Prior to the formation of the
Company, Mr. Kuhlman served as regional partner of the Tampa division of Summit
Properties, as well as a general partner of several of the partnerships which
transferred Communities to the Company when it was formed. Since joining Summit
Properties in 1985, Mr. Kuhlman has been responsible for the development of 19
multifamily communities in Florida with a total of over 4,700 apartment homes.
He also founded Summit Building Corporation, the predecessor to Summit Apartment
Builders, Inc., a development subsidiary of the Company. He is a former
President of the Florida Developer's Council of the National Apartment
Association.
MR. TUFARO is an Executive Vice President and Chairman of the Capital
Allocation Committee. Prior to the formation of the Company, Mr. Tufaro served
as regional partner of the Baltimore division of Summit Properties, as well as a
general partner of several of the partnerships which transferred Communities to
the Company when it was formed. Since joining Summit Properties in 1984, Mr.
Tufaro has been responsible for the development of 18 multifamily communities
comprising over 4,600 apartment homes in Delaware, Maryland, Pennsylvania and
Virginia. Mr. Tufaro currently serves as Vice President of the Board of
Directors of the Baltimore Corporation for Housing Partnerships, a non-profit
housing sponsor for low income families and is a Member of the Board of
Directors of Roland Park Community Foundation.
MR. GRAY is the Executive Vice President of Property Services and the
President of Summit Management Company, the Company's management subsidiary.
Prior to the formation of the Company, Mr. Gray was President of Old
S-26
<PAGE>
Summit Management Company, as well as a general partner of several of the
partnerships which transferred Communities to the Company when it was formed. In
1985, he joined Old Summit Management Company, where he was responsible for the
leasing, management and maintenance of the communities, as well as all
residential properties managed for related and unrelated third parties.
MR. SCHWARZ is an Executive Vice President and Chief Financial Officer.
Prior to joining the Company in 1994, Mr. Schwarz spent five years as the Senior
Vice President and Chief Financial Officer as well as co-founder of Industrial
Developments International, Inc., a developer of industrial real estate. He is a
certified public accountant. Mr. Schwarz served as the Chairman of the Board of
The Study Hall of Emmaus House, a non-profit educational facility serving
inner-city youths.
MR. MCGUIRE is the Chairman of the Board. Prior to the formation of the
Company, Mr. McGuire served as a senior partner of Summit Properties and as a
general partner of each of the partnerships which transferred Communities to the
Company when it was formed. Mr. McGuire founded McGuire Properties, Inc., the
predecessor to the Company, in 1972. He has been active in the following
professional and community organizations: Residential and Urban Development
Mixed Use Councils of the Urban Land Institute; Charlotte Advisory Board of
NationsBank of North Carolina, N.A.; and the Board of Governors of The Charlotte
City Club. He was a Trustee of the North Carolina Nature Conservancy; a Founder
and Director of Habitat for Humanity of Charlotte; and the Founder and President
of The Neighborhood Medical Clinic.
MR. SCHWAB has been a director since 1994. He is a Managing Director of
Carousel Capital, a merchant banking firm based in Charlotte, North Carolina and
specializing in middle market acquisitions. Mr. Schwab is a Member of the Board
of Directors of First Union National Bank of North Carolina, Silver Dollar City,
Inc., Griffin Corporation, Burlington Industries, North Carolina Blumenthal
Performing Arts Center and Presbyterian Hospital. He also served as the Chairman
of the Carolinas Partnership and the Charlotte Chamber of Commerce.
MR. CROSLAND has been a director since 1995. He has been Chairman and Chief
Executive Officer of The Crosland Group, Inc., a fully diversified real estate
development company, since 1971. Mr. Crosland is a Member of the Board of
Directors of First Union National Bank of North Carolina, Fox Ridge Homes and
Writer Corporation. He has been very active in the homebuilding industry holding
office at local, state and national levels. From 1977 to 1989 he served as
Chairman of the North Carolina Housing Finance Agency. Among his diverse civic
involvement, Mr. Crosland was a Founder and first Chairman of Charlotte's
Habitat for Humanity; currently serves on the Habitat for Humanity International
Affiliates Advisory Committee; is 1996 Chairman of the Davidson College Board of
Visitors and is a Member of the Davidson Board of Trustees. Mr. Crosland was
honored by the home building industry by being named 1985 Builder of the Year by
PROFESSIONAL BUILDER MAGAZINE and has been inducted into both the National and
North Carolina Housing Halls of Fame.
MR. HANCE has been a director since 1994. He is a Vice Chairman and the
Chief Financial Officer of NationsBank Corporation, where he is responsible for
NationsBank Services Company, which performs NationsBank Corporation's
operations functions, and NationsBank Corporation's finance group. He also has
responsibility for NationsBank's non-bank consumer and commercial credit
companies, NationsCredit Consumer Corporation and NationsCredit Commercial
Corporation, and serves as Managing Director of several of NationsBank's banks
and subsidiaries. Mr. Hance is the Vice Chairman of the Board of Trustees of
Presbyterian Health Services Corporation. He also is a Member of the Board of
Visitors of the Duke University Fuqua School of Business and the Board of
Directors of Caraustar Industries, Inc., Family Dollar Stores, Inc. and Lance,
Inc. Additionally, Mr. Hance is a certified public accountant, a 1988
International Business Fellow, Chairman of the Charlotte Chamber of Commerce and
is on the Board of Trustees of the Charlotte Country Day School.
DR. FISHKIND has been a director since 1994. He is the President of
Fishkind & Associates, Inc., a private consulting firm based in Orlando, Florida
that he founded in 1988. Dr. Fishkind is a Member of the Board of Directors of
Engle Homes. Dr. Fishkind served on the Florida Governor's Economic Advisory
Board from 1979 to 1981.
S-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions in the terms agreement and the related
underwriting agreement (together the "Underwriting Agreement"), among the
Company and each of the underwriters named below (the "Underwriters"), the
Company has agreed to sell to each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Dean Witter Reynolds
Inc., Morgan Stanley & Co. Incorporated, Prudential Securities Incorporated,
Interstate/Johnson Lane Corporation and Wheat, First Securities, Inc. are acting
as representatives (the "Representatives"), and each of the Underwriters has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................................................. 491,670
Dean Witter Reynolds Inc............................................................................... 491,666
Morgan Stanley & Co. Incorporated...................................................................... 491,666
Prudential Securities Incorporated..................................................................... 491,666
Interstate/Johnson Lane Corporation.................................................................... 491,666
Wheat, First Securities, Inc........................................................................... 491,666
Alex. Brown & Sons Incorporated........................................................................ 200,000
A.G. Edwards & Sons, Inc............................................................................... 200,000
PaineWebber Incorporated............................................................................... 200,000
Smith Barney Inc....................................................................................... 200,000
Janney Montgomery Scott Inc............................................................................ 100,000
Legg Mason Wood Walker, Incorporated................................................................... 100,000
McDonald & Company Securities, Inc..................................................................... 100,000
The Ohio Company....................................................................................... 100,000
Raymond James & Associates, Inc........................................................................ 100,000
The Robinson-Humphrey Company, Inc..................................................................... 100,000
Scott & Stringfellow, Inc.............................................................................. 100,000
Branch, Cabell and Company............................................................................. 50,000
JW Charles Securities, Inc............................................................................. 50,000
Craigie Incorporated................................................................................... 50,000
Davenport & Co. of Virginia, Inc....................................................................... 50,000
Allen C. Ewing & Co.................................................................................... 50,000
First Equity Corporation of Florida.................................................................... 50,000
Friedman, Billings, Ramsey & Co., Inc.................................................................. 50,000
Parker/Hunter Incorporated............................................................................. 50,000
Southeast Research Partners, Inc....................................................................... 50,000
Sterne, Agee & Leach, Inc.............................................................................. 50,000
Utendahl Capital Partners, L.P......................................................................... 50,000
Total........................................................................................... 5,000,000
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the Underwriting
Agreement, to purchase all of the shares of Common Stock being sold pursuant to
the Underwriting Agreement if any of such shares of Common Stock are purchased.
Under certain circumstances, the commitments of non-defaulting Underwriters may
be increased.
The Representatives have advised the Company that the Underwriters propose
to offer the Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus Supplement and to certain dealers at
such price less a concession not in excess of $.55 per share. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of $.10 per
share on sales to certain other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to 750,000
additional shares of Common Stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this Prospectus Supplement. If the Underwriters exercise this
option, each Underwriter will have a firm commitment, subject to certain
conditions, to
S-28
<PAGE>
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the foregoing table bears to the
shares of Common Stock initially offered hereby.
The Company and its executive officers and directors have agreed, subject
to certain exceptions (including the issuance of Common Stock under an employee
stock plan) not to offer, sell, contract to sell or otherwise dispose of any
Common Stock, or shares or interests convertible into or exercisable or
exchangeable for Common Stock, for a period of 90 days after the date of this
Prospectus Supplement without the prior written consent of Merrill Lynch.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act. The
Underwriters have agreed to reimburse the Company for a portion of its expenses
incurred in connection with the Offering.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar LLP, and for the Underwriters by Brown & Wood LLP. The statements
set forth in the Prospectus attached hereto, relating to the Company's
qualification as a REIT and the taxation of the Company's stockholders, will be
passed upon for the Company by Goodwin, Procter & Hoar LLP.
S-29
<PAGE>
PROSPECTUS
$200,000,000
SUMMIT PROPERTIES INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
Summit Properties Inc. ("Summit" or the "Company") may offer from time to
time in one or more series (i) its unsecured debt securities ("Debt
Securities"), (ii) shares of its preferred stock, $.01 par value per share
("Preferred Stock"), and (iii) shares of its common stock, $.01 par value per
share ("Common Stock"), with an aggregate public offering price of up to
$200,000,000 (or its equivalent based on the exchange rate at the time of sale)
in amounts, at prices and on terms to be determined at the time of offering. The
Debt Securities, Preferred Stock and Common Stock (collectively, the
"Securities") may be offered separately or together, in separate series, in
amounts, at prices and on terms to be set forth in one or more supplements to
this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion into
Common Stock or Preferred Stock, covenants and any initial public offering
price; (ii) in the case of Preferred Stock, the specific designation and stated
value per share, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Stock, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities, in each case as may be consistent with the
Company's Articles of Incorporation, as then in effect, or otherwise appropriate
to preserve the status of the Company as a real estate investment trust ("REIT")
for federal income tax purposes. See "Restrictions on Transfers of Capital
Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in an
accompanying Prospectus Supplement. See "Plan of Distribution." No Securities
may be sold without delivery of a Prospectus Supplement describing the method
and terms of the offering of such Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is May 15, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Securities. This Prospectus, which constitutes part of the
Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits thereto on file with the Commission
pursuant to the Securities Act and the rules and regulations of the Commission
thereunder. The Registration Statement, including exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and copies may be obtained at the prescribed
rates from the Public Reference Section of the Commission at its principal
office in Washington, D.C. The Commission also maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission. Statements contained in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
In addition, the Common Stock is listed on the New York Stock Exchange (the
"NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31,1994, filed with the Commission pursuant to the Exchange Act.
2. The Company's Quarterly Report on Form 10-Q for the three months ended
March 31, 1995, filed with the Commission pursuant to the Exchange Act.
3. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant to the
Exchange Act, including all amendments and reports updating such description.
4. The Proxy Statement prepared by the Company in connection with the 1995
Annual Meeting of Stockholders of the Company.
All other documents filed with the Commission by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
are to be incorporated herein by reference and such documents shall be deemed to
be a part hereof from the date of filing of such documents. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN, WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS. WRITTEN REQUESTS
SHOULD BE MAILED TO MICHAEL G. MALONE, ESQ., SUMMIT PROPERTIES INC., 212 SOUTH
TRYON STREET, SUITE 500, CHARLOTTE, NORTH CAROLINA 28281. TELEPHONE REQUESTS MAY
BE DIRECTED TO (704) 334-9905.
2
<PAGE>
THE COMPANY
GENERAL
Summit is one of the largest developers and operators of luxury garden and
midrise multifamily apartment communities in the Southeastern United States. The
Company, a Maryland corporation, is a self-administered and self-managed real
estate investment trust (a "REIT"). The Company's Common Stock is listed on the
New York Stock Exchange under the symbol "SMT".
The Company's business is conducted principally through Summit Properties
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
of which the Company is the sole general partner and an 83.9% economic owner.
The Company's third party management and certain construction and other
businesses are conducted through its subsidiaries, Summit Management Company, a
Maryland corporation (the "Management Company"), and Summit Apartment Builders,
Inc., a Florida corporation (the "Building Company"). Except where otherwise
explicitly noted, the "Company" shall also hereinafter refer to the Operating
Partnership, the Management Company and the Building Company.
The Company was organized as a real estate investment trust under the laws
of the State of Maryland on December 1, 1993 and later changed to corporate form
on January 13, 1994. On February 15, 1994, the Company completed its initial
public offering of 10,000,000 shares of Common Stock and on March 4, 1994 sold
an additional 1,500,000 shares upon exercise of the underwriters' overallotment
option (the "Initial Offering"). The principal executive office of the Company
is located at 212 South Tryon Street, Suite 500, Charlotte, North Carolina
28281; telephone number (704) 334-9905.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for general
corporate purposes, including repayment of indebtedness, investment in new
communities and new developments and maintenance of currently owned communities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C>
1.60x 0.78x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense, rent expense, and the amortization of debt issuance costs. To date, the
Company has not issued any Preferred Stock; therefore, the ratios of earnings to
combined fixed charges and preferred stock dividend requirements are the same as
the ratios of earnings to fixed charges presented above.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Debt Securities will be issued under
one or more indentures, each dated as of a date prior to the issuance of the
Debt Securities to which it relates. Senior Securities and Subordinated
Securities may be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and a trustee (a "Trustee"), which may be the same Trustee, and in the
form that has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, subject to such amendments or supplements as may be
adopted from time to time. The Senior Indenture and the Subordinated Indenture,
as amended or supplemented from time to time, are sometimes hereinafter referred
to collectively as the "Indentures." The Indentures will be subject to and
governed by the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made under this heading relating to the Debt Securities and the
3
<PAGE>
Indentures are summaries of the anticipated provisions thereof, do not purport
to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
The indebtedness represented by the Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by Subordinated Securities will be subordinated in
right of payment to the prior payment in full of the Senior Debt of the Company
as described under " -- Subordination." The particular terms of the Debt
Securities offered by a Prospectus Supplement will be described in the
applicable Prospectus Supplement, along with any applicable modifications of or
additions to the general terms of the Debt Securities as described herein and in
the applicable Indenture and any applicable federal income tax considerations.
Accordingly, for a description of the terms of any series of Debt Securities,
reference must be made to both the Prospectus Supplement relating thereto and
the description of the Debt Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Company or as set forth in
the applicable Indenture or in one or more indentures supplemental to such
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuance of additional
Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities and a successor Trustee may be
appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or
(if applicable) the portion of the principal amount of such Debt
Securities that is convertible into Common Stock or Preferred Stock,
or the method by which any such portion shall be determined;
(4) If convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate and the
conversion period and any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock receivable on
conversion;
(5) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
4
<PAGE>
(8) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the
Company in respect of such Debt Securities and the applicable
Indenture may be served;
(9) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, as a whole or in part, at the option of the
Company;
(10) The obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the other terms
and conditions upon which such Debt Securities will be redeemed,
repaid or purchased, as a whole or in part, pursuant to such
obligation;
(11) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units, or composite currency or currencies) and the
manner in which such amounts shall be determined;
(13) Whether such Debt Securities will be issued in certificated or
book-entry form and, if in book entry form, the identity of the
depository for such Debt Securities;
(14) Whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(15) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture,
or any modification thereof;
(16) Whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will
have the option to redeem such Debt Securities in lieu of making such
payment;
(17) Any deletions from, modifications of or additions to the events of
default or covenants of the Company, to the extent different from
those described herein or set forth in the applicable Indenture with
respect to such Debt Securities, and any change in the right of any
Trustee or any of the holders to declare the principal amount of any
of such Debt Securities due and payable; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders of Debt Securities
protection in the event of a highly leveraged or similar transaction involving
the Company or in the event of a change of control. Restrictions on ownership
and transfers of the Common Stock and Preferred Stock are designed to preserve
its status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Restrictions on Transfers of Capital Stock." Reference is made to
the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of, or additions to, the events of default or
covenants of the Company that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
5
<PAGE>
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Company for such purpose. In addition, subject
to certain limitations imposed upon Debt Securities issued in book-entry form,
the Debt Securities of any series may be surrendered for conversion or
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Company for such purpose. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the applicable Trustee) initially designated by the Company with
respect to any series of Debt Securities, the Company may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each place of payment for such series.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.
Neither the Company nor any Trustee shall be required (i) to issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before the day of mailing of
a notice of redemption of any Debt Securities that may be selected for
redemption and ending at the close of business on the day of such mailing; (ii)
to register the transfer of or exchange any Debt Security, or portion thereof,
so selected for redemption, in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part; or (iii) to issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the holder, except the portion, if any, of such Debt
Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures will provide that the Company may, without the consent of
the holders of any outstanding Debt Securities, consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into, any
other entity provided that (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets, and which is organized under the laws of any domestic
jurisdiction and assumes (A) the Company's obligations to pay principal of (and
premium, if any) and interest on all of the Debt Securities and (B) the due and
punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no event of default
under the Indentures, and no event which, after notice or the lapse of time, or
both, would become such an event of default, shall have occurred and be
continuing; and (iii) an officers' certificate and legal opinion covering such
conditions shall be delivered to each Trustee.
CERTAIN COVENANTS
EXISTENCE. Except as permitted under " -- Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by articles of incorporation, by laws and statute) and
franchises; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
MAINTENANCE OF PROPERTIES. The Indentures will require the Company to cause
all of its material properties used or useful in the conduct of its business or
the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs,
6
<PAGE>
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that the Company and its subsidiaries shall not be prevented
from selling or otherwise disposing of their properties for value in the
ordinary course of business.
INSURANCE. The Indentures will require the Company to cause each of its and
its subsidiaries' insurable properties to be insured against loss or damage at
least equal to their then full insurable value with insurers of recognized
responsibility and, if described in the applicable Prospectus Supplement, having
a specified rating from a recognized insurance rating service.
PAYMENT OF TAXES AND OTHER CLAIMS. The Indentures will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of such
series; (ii) default in the payment of principal of (or premium, if any, on) any
Debt Security of such series at its maturity; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Company contained in the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued thereunder other
than such series), continued for 60 days after written notice as provided in the
applicable Indenture; (v) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any of its
subsidiaries (including obligations under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting principles
but not including any indebtedness or obligations for which recourse is limited
to property purchased) in an aggregate principal amount in excess of $5,000,000
or under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or any of its subsidiaries (including such leases, but
not including such indebtedness or obligations for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5,000,000,
whether such indebtedness exists on the date of such Indenture or shall
thereafter be created, which default shall have resulted in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable or such obligations being accelerated,
without such acceleration having been rescinded or annulled; (vi) certain events
of bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary of the
Company; and (vii) any other event of default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" has the
meaning ascribed to such term in Regulation S-X promulgated under the Securities
Act.
If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (i) the Company shall have deposited with the
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applicable Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the applicable
Trustee; and (ii) all events of default, other than the non-payment of
accelerated principal (or specified portion thereof), with respect to Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) have been cured or waived as provided
in such Indenture. The Indentures will also provide that the holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (i) in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series; or (ii) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the holder of each outstanding Debt Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; PROVIDED, HOWEVER, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indentures will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the case of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an event of default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium, if any) and interest on such Debt Securities at the respective
due dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; PROVIDED, HOWEVER, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (i) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (ii)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of any outstanding Debt Securities necessary to modify
or amend the applicable Indenture with respect to such Debt Securities, to waive
compliance with
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certain provisions thereof or certain defaults and consequences thereunder or to
reduce the quorum or voting requirements set forth in the applicable Indenture;
or (vi) modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to increase
the required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the holder of
such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants of the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be made
by the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Company in such Indenture; (iii) to add events of default for
the benefit of the holders of all or any series of Debt Securities; (iv) to add
or change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, PROVIDED that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate any
provisions of an Indenture, PROVIDED that any such change or elimination shall
become effective only when there are no Debt Securities outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provisions and procedures,
if applicable, for the conversion of such Debt Securities into Common Stock or
Preferred Stock; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture, PROVIDED that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (x) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, PROVIDED that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant to such
Indenture; and (iv) Debt Securities owned by the Company or any other obligor
upon the Debt Securities or any affiliate of the Company or of such other
obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting will be permitted to be called
at any time by the applicable Trustee, and also, upon request, by the Company or
the holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as provided in
such Indenture. Except for any consent that must be given by the holder of each
Debt Security affected by certain modifications and amendments of an Indenture,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the holders
of a majority in principal amount of the outstanding Debt Securities of that
series; PROVIDED, HOWEVER, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with an Indenture will be binding on all holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at
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any reconvened meeting, will be persons holding or representing a majority in
principal amount of the outstanding Debt Securities of a series; PROVIDED,
HOWEVER, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding Debt Securities of a series,
the persons holding or representing such specified percentage in principal
amount of the outstanding Debt Securities of such series will constitute a
quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting; and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Debt (as defined below), but the obligation of the Company to make
payments of the principal of and interest on such Subordinated Securities will
not otherwise be affected. No payment of principal or interest will be permitted
to be made on Subordinated Securities at any time if a default on Senior Debt
exists that permits the holders of such Senior Debt to accelerate its maturity
and the default is the subject of judicial proceedings or the Company receives
notice of the default. After all Senior Debt is paid in full and until the
Subordinated Securities are paid in full, holders will be subrogated to the
rights of holders of Senior Debt to the extent that distributions otherwise
payable to holders have been applied to the payment of Senior Debt. The
Subordinated Indenture will not restrict the amount of Senior Debt or other
indebtedness of the Company and its subsidiaries. As a result of these
subordination provisions, in the event of a distribution of assets upon
insolvency, holders of Subordinated Indebtedness may recover less, ratably, than
general creditors of the Company.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
applicable Indenture or thereafter incurred, created or assumed: (i)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations; (ii) indebtedness of the Company evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other agreement; (iii) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise; (iv) indebtedness,
obligations and liabilities of others in respect of which the Company is liable
contingently or otherwise to pay or advance money or property or as guarantor,
endorser or otherwise or which the Company has agreed to purchase or otherwise
acquire; and (v) any binding commitment of the Company to fund any real estate
investment or to fund any investment in any entity making such real estate
investment, in each case other than (A) any such indebtedness, obligation or
liability referred to in clauses (i) through (iv) above as to which, in the
instrument creating or evidencing the same pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to the Subordinated Securities or ranks PARI
PASSU with the Subordinated Securities; (B) any such indebtedness, obligation or
liability which is subordinated to indebtedness of the Company to substantially
the same extent as or to a greater extent than the Subordinated Securities are
subordinated; and (C) the Subordinated Securities. There will not be any
restrictions in any Indenture relating to Subordinated Securities upon the
creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
to the date of such deposit (if such Debt Securities have become due and
payable) or to the stated maturity or redemption date, as the case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (i) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities, to hold moneys for payment in trust and, with
respect to Subordinated Debt Securities which are convertible or exchangeable,
the right to convert or exchange) ("defeasance"); or (ii) to be released from
its obligations with respect to such Debt Securities under the applicable
Indenture (being the restrictions described under " -- Certain Covenants") or,
if provided in the applicable Prospectus Supplement, its obligations with
respect to any other covenant, and any omission to comply with such obligations
shall not constitute an event of default with respect to such Debt Securities
("covenant defeasance"), in either case upon the irrevocable deposit by the
Company with the applicable Trustee, in trust, of an amount, in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable at stated maturity, or Government Obligations
(as defined below), or both, applicable to such Debt Securities, which through
the scheduled payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to pay the principal of (and premium,
if any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged; or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depository receipt, PROVIDED that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
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that in which such deposit has been made in respect of such Debt Security; or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community; (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities; or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default other than the event of default described
in clause (iv) under " -- Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under " -- Events of
Default, Notice and Waiver" with respect to any other covenant as to which there
has been covenant defeasance, the amount in such currency, currency unit or
composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price or rate (or manner of calculation
thereof), the conversion period, provisions as to whether conversion will be at
the option of the holders or the Company, the events requiring an adjustment of
the conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities and any restrictions on conversion, including
restrictions directed at maintaining the Company's REIT status.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
PROVIDED that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States.
All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security
which remain unclaimed at the end of two years after such principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of such Debt Security thereafter may look only to the Company for payment
thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus
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Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. The
specific terms of the depositary arrangement with respect to a series of Debt
Securities will be described in the applicable Prospectus Supplement relating to
such series.
DESCRIPTION OF PREFERRED STOCK
THE DESCRIPTION OF THE COMPANY'S PREFERRED STOCK, PAR VALUE $.01 PER SHARE
("PREFERRED STOCK"), SET FORTH BELOW DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPANY'S ARTICLES OF
INCORPORATION (THE "ARTICLES OF INCORPORATION") AND BYLAWS (THE "BYLAWS"), AS IN
EFFECT.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 25
million shares of Preferred Stock, none of which was outstanding as of the date
of this Prospectus. Shares of Preferred Stock may be issued from time to time,
in one or more series, as authorized by the Board of Directors of the Company.
Prior to issuance of shares of each series, the Board of Directors is required
by the Maryland General Corporation Law ("MGCL") and the Company's Articles of
Incorporation to fix for each series, subject to the provisions of the Company's
Articles of Incorporation regarding excess stock, $.01 par value per share
("Excess Stock"), the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Maryland law. The Preferred Stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights. The Board of Directors could
authorize the issuance of shares of Preferred Stock with terms and conditions
that could have the effect of discouraging a takeover or other transaction that
holders of Common Stock might believe to be in their best interests or in which
holders of some, or a majority, of the shares of Common Stock might receive a
premium for their shares over the then market price of such shares of Common
Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion
price or rate (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
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(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company, the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company,
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company. The term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period; or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and
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paid or declared and a sum sufficient for the payment thereof is set apart for
payment for the then current dividend period, no dividends (other than in shares
of Common Stock or other shares of capital stock ranking junior to the Preferred
Stock of such series as to dividends and upon liquidation) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made upon the Common Stock, or any other capital stock of the Company ranking
junior to or on a parity with the Preferred Stock of such series as to dividends
or upon liquidation, nor shall any shares of Common Stock, or any other shares
of capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any such shares) by
the Company (except by conversion into or exchange for other capital stock of
the Company ranking junior to the Preferred Stock of such series as to dividends
and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remain payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period; and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series of
Preferred Stock have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period; and (ii) if such series
of Preferred Stock does not have a cumulative dividend, full dividends on the
Preferred Stock of such series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, the Company shall not purchase or
otherwise acquire directly or indirectly any shares of Preferred Stock of such
series (except by conversion into or exchange for capital shares of the Company
ranking junior to the Preferred Stock of such series as to dividends and upon
liquidation); PROVIDED, HOWEVER, that the foregoing shall not prevent the
purchase or acquisition of shares of Preferred Stock of such series to preserve
the REIT status of the Company or pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such
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holder (with adjustments to avoid redemption of fractional shares) or by any
other equitable manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such
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series of Preferred Stock or the holders thereof; PROVIDED, HOWEVER, with
respect to the occurrence of any of the Events set forth in (ii) above, so long
as the Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event the Company
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of holders of Preferred Stock, and PROVIDED FURTHER that (A) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (B) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price or rate (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
of the Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement, the Company may
take certain actions to limit the beneficial ownership, directly or indirectly,
by a single person of the Company's outstanding equity securities, including any
Preferred Stock of the Company. Therefore, the Designating Amendment for each
series of Preferred Stock may contain provisions restricting the ownership and
transfer of the Preferred Stock. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
THE DESCRIPTION OF THE COMPANY'S COMMON STOCK SET FORTH BELOW DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS, AS IN EFFECT.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At May 3, 1995, the Company had outstanding 12,430,665 shares of
Common Stock.
TERMS
Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, holders of shares of Common Stock will be entitled to receive
dividends on shares of Common Stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
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Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of Directors and, except as otherwise required by law or except as
provided with respect to any other class or series of stock, the holders of
Common Stock will possess the exclusive voting power. There is no cumulative
voting in the election of Directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the Directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation provide that such
transactions, with the exception of an amendment of the Articles of
Incorporation affecting restrictions on transfer, can be affected by a vote of a
majority of the shares entitled to vote on such matters.
Provisions of the Company's Articles of Incorporation described below under
"Restrictions on Transfers of Capital Stock," together with other provisions of
the Company's Articles of Incorporation and the MGCL may discourage a change in
control and limit the opportunity for stockholders to receive a premium for
their Common Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than the
first year), and such capital stock must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months (other than the
first year) or during a proportionate part of a shorter taxable year. In order
to maintain the Company's qualification as a REIT, the Articles of
Incorporation, subject to certain exceptions, provide that no holder who is an
individual may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 9.8% (the "Ownership Limit") of the Company's capital
stock. Pursuant to the Code, certain types of entities, such as pension trusts
qualifying under Section 401(a) of the Code, United States investment companies
registered under the Investment Company Act of 1940 and corporations will be
looked-through for the purposes of the Five or Fewer Test. The Company's
Articles of Incorporation will limit such entities to holding no more than 15%
of the aggregate value of the Company's shares of capital stock (the
"Look-Through Ownership Limit"). Any transfer of capital stock or any security
convertible into capital stock that would create a direct or indirect ownership
of capital stock in excess of the Ownership Limit or the Look-Through Ownership
Limit or that would result in the disqualification of the Company as a REIT,
including any transfer that results in the capital stock being owned by fewer
than 100 persons or results in the Company being "closely held" within the
meaning of Section 856(h) of the Code, shall be null and void, and the intended
transferee will acquire no rights to the capital stock. The Board of Directors
in its sole discretion may waive the Ownership Limit or the Look-
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Through Ownership Limit if evidence satisfactory to the Board of Directors and
the Company's tax counsel is presented that the changes in ownership will not
then or in the future jeopardize the Company's status as a REIT. The foregoing
restrictions on transferability and ownership will not apply if the Board of
Directors determines that it is no longer in the best interests of the Company
to attempt to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit or the Look-Through Ownership Limit will
automatically be converted into shares of Excess Stock that will be transferred,
by operation of law, to the Company as trustee of a trust for the exclusive
benefit of the transferees to whom such capital stock may be ultimately
transferred without violating the Ownership Limit or the Look-Through Ownership
Limit. While held in trust, the Excess Stock will not be considered for purposes
of any stockholder vote or the determination of a quorum for such vote and,
except upon liquidation, will not be entitled to participate in distributions.
Any distribution paid on Excess Stock, prior to the discovery by the Company
that capital stock has been transferred in violation of the Ownership Limit or
the Look-Through Ownership Limit, shall be repaid to the Company upon demand.
Shares of Excess Stock are not treasury stock, but rather constitute a separate
class of issued and outstanding stock of the Company. The original
transferee-stockholder may, at any time the shares of Excess Stock are held by
the Company in trust, transfer the interest in the trust representing the Excess
Stock to any individual whose ownership of the capital stock converted into such
Excess Stock would be permitted under the Ownership Limit or the Look-Through
Ownership Limit, at a price not in excess of (i) the price paid by the original
transferee-stockholder for the capital stock that was converted into Excess
Stock, or (ii) if the original transferee-stockholder did not give value for
such shares (e.g. the capital stock was received through a gift, devise or other
transaction), the average closing price for the class of shares from which such
shares of Excess Stock were converted for the 10 days immediately preceding such
sale or gift. Immediately upon the transfer to the permitted transferee, the
Excess Stock will automatically be converted into capital stock of the class
from which it was converted. If the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee of any Excess Stock may be deemed,
at the option of the Company, to have acted as an agent on behalf of the Company
in acquiring the Excess Stock and to hold the Excess Stock on behalf of the
Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held by the Company in trust, to
purchase all or any portion of the Excess Stock from the original transferee-
stockholder for the lesser of (i) the price initially paid for the capital stock
by the original transferee-stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of capital stock from which such shares of Excess Stock were
converted for the 10 days immediately preceding such sale or gift, and (ii) the
average closing price for the class of such shares of Excess Stock were
converted for the 10 trading days immediately preceding the date the Company
elects to purchase such shares. The 90-day period begins on the date of the
violative transfer if the original transferee-stockholder gives notice to the
Company of the transfer or, if no such notice is given, the date the Board of
Directors determines that a violative transfer has been made.
These restrictions will not preclude settlement of transactions through the
New York Stock Exchange.
Each stockholder shall, upon demand, be required to disclose to the Company
in writing any information with respect to the direct, indirect and constructive
ownership of beneficial interests as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
The Ownership Limit and the Look-Through Ownership Limit may have the
effect of precluding acquisition of control of the Company unless the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue
to operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company and its
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stockholders. For the particular provisions that govern the federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. If the Company fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's Securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those Securities.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax consequences
of an investment in the Company, including the possibility of United States
income tax withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters or dealers, directly
to one or more purchasers, through agents or through a combination of any such
methods of sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities, for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from the Company and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Under agreements into which the Company may enter, underwriters, dealers
and agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company in the ordinary course of
business.
20
<PAGE>
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Debt Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company by Goodwin, Procter & Hoar, Boston, Massachusetts.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this registration statement by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 have been
audited by Deloitte & Touche LLP, independent accountants, as stated in their
report which is incorporated herein by reference and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
21
<PAGE>
WE CREATE VALUE
(Photo appears here with the following caption.)
Smmmit Hill,
Chapel Hill, North Carolina
(Photo appears here with the following caption.)
Summit Apartment Homes are designed to meet the needs of the '90's lifestyle.
(Photo appears here with the following caption.)
Summit Fairways, Orlando, Florida
Currently under construction.
(Photo appears here with the following caption.)
Summit Aventura,
Aventura, Florida
(Photo appears here with the following caption.)
Summit Plantation,
Plantation, Florida
(Photo appears here with the following caption.)
Summit On The River, Atlanta, Georgia
Currently under construction.
(Photo appears here with the following caption.)
Summit Green, Charlotte, North Carolina
Currently under construction.
SUMMIT
PROPERTIES
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES OF COMMON STOCK IN ANY
JURISDICTION, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS AS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary........................ S-3
The Company.......................................... S-9
Capitalization....................................... S-10
Use of Proceeds...................................... S-10
Share Price and Distribution History................. S-11
The Communities...................................... S-11
Selected Financial and Other Information............. S-15
Management's Discussion and Analysis of Financial
Condition and Results of
Operations......................................... S-18
Management........................................... S-26
Underwriting......................................... S-28
Legal Matters........................................ S-29
PROSPECTUS
Available Information................................ 2
Incorporation of Certain Documents by
Reference.......................................... 2
The Company.......................................... 3
Use of Proceeds...................................... 3
Ratios of Earnings to Fixed Charges.................. 3
Description of Debt Securities....................... 3
Description of Preferred Stock....................... 13
Description of Common Stock.......................... 17
Restrictions on Transfer of Capital Stock............ 18
Federal Income Tax Considerations.................... 19
Plan of Distribution................................. 20
Legal Matters........................................ 21
Experts.............................................. 21
</TABLE>
5,000,000 SHARES
(Summit Properties Logo appears here)
COMMON STOCK
PROSPECTUS SUPPLEMENT
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
MORGAN STANLEY & CO.
INCORPORATED
PRUDENTAL SECURTES INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
WHEAT FIRST BUTCHER SINGER
AUGUST 1, 1996
