================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 1-12762 MID-AMERICA APARTMENT COMMUNITIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) TENNESSEE 62-1543819 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 6584 POPLAR AVENUE, SUITE 340 MEMPHIS, TENNESSEE 38138 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (901) 682-6600 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NAME OF EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------------------------- ------------------------ Common Stock, par value $.01 per share New York Stock Exchange Series A Cumulative Preferred Stock, par value $.01 per share New York Stock Exchange Series B Cumulative Preferred Stock, par value $.01 per share New York Stock Exchange Series C Cumulative Redeemable Preferred Stock, par value $.01 per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in PART III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant, (based on the closing price of such stock ($22.625 per share), as reported on the New York Stock Exchange, on March 1, 2000) was approximately $354,000,000 (for purposes of this calculation, directors and executive officers are treated as affiliates). The number of shares outstanding of the Registrant's Common Stock as of March 17, 2000, was 17,635,277 shares, of which approximately 2,009,033 were held by affiliates. ================================================================================
MID-AMERICA APARTMENT COMMUNITIES, INC. TABLE OF CONTENTS ITEM PAGE - --------- ---- PART I 1. Business............................. 1 2. Properties........................... 4 3. Legal Proceedings.................... 9 4. Submission of Matters to Vote of Security Holders................... 9 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters.... 9 6. Selected Financial Data.............. 10 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 11 7A. Quantitative and Qualitative Disclosures About Market Risk...... 17 8. Financial Statements and Supplementary Data................. 18 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 18 PART III 10. Directors and Executive Officers of the Registrant..................... 19 11. Executive Compensation............... 19 12. Security Ownership of Certain Beneficial Owners and Management... 19 13. Certain Relationships and Related Transactions....................... 19 PART IV 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K... 19 i
PART I ITEM 1. BUSINESS THE COMPANY Mid-America Apartment Communities, Inc. (the "Company") is a Memphis, Tennessee-based self-administered and self-managed umbrella partnership ("UPREIT") real estate investment trust, ("REIT") which, as of December 31, 1999, owns or has ownership interest in, including 10 properties owned by an unconsolidated joint venture, and operates 129 apartment communities containing 33,901 apartment units in 13 states, primarily in the southeastern United States and Texas (the "Communities"). The Company currently has 1,367 apartment units in various stages of construction, development and pre-development in 3 new communities and 1 addition to an existing community. Founded in 1977 by George E. Cates, the Company's Chairman of the Board of Directors and Chief Executive Officer, the Company's predecessor grew from an operator of a single 252-unit apartment community in Memphis, Tennessee into a fully-integrated owner and operator of 5,580 apartment units in 22 apartment communities in four southeastern states immediately prior to the Company's initial public offering in February 1994 (the "Initial Offering"). Since the Initial Offering, the Company's portfolio has increased by 98 apartment communities containing 25,528 apartment units. On June 30, 1999, the Company sold its development, construction and fee management businesses acquired in connection with the November 1997 merger with Flournoy Development Company ("Flournoy or FDC") back to the principals of Flournoy. The Company received net proceeds of $18.1 million for these assets and recorded a net loss of approximately $4.0 million, relating mainly to the write-off of goodwill from to the original purchase transaction. In the transaction, Flournoy reacquired the development businesses, related fixed assets including single family development, land and property held for sale, and the fee management business of 5,131 tax credit apartment units. The Company has contracted with Flournoy to complete the remaining portion of its development pipeline. In March 1999 the Company entered into an agreement to form a joint venture (the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC ("Blackstone"), and operate 10 apartment communities. On March 31, 1999 the Company sold 6 apartment communities, containing 1,660 apartment units, to the Joint Venture for approximately $64.6 million in cash. In August 1999, the Company sold four additional properties containing 1,133 apartment units to the Joint Venture, for approximately $33.3 million. The Company contributed additional capital and made a loan to the Joint Venture bringing the Company's total investment in the Joint Venture to approximately $8.1 million. The Company recognized a gain of approximately $9.0 million and deferred gains of approximately $4.8 million for the Company's retained interest. Proceeds from the transactions were used to pay down the Company's Credit Line, fund the development pipeline and to fund two cash escrow reserves related to the planned tax free exchange of a portion of the properties, which exchange was completed during the balance of 1999. The Company has retained a 33.3% ownership interest in the Joint Venture and has an agreement to manage the operations of the communities for a fee of 4% of revenues. The Company's business is conducted principally through the Mid-America Apartments, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership, holding, as of December 31, 1999, 180,168 Common Units or a 1% general partnership interest in the Operating Partnership. The Company's wholly-owned qualified REIT subsidiary, MAC II of Delaware, Inc., a Delaware corporation, is a limited partner in the Operating Partnership and, as of December 31, 1999, held 14,872,572 Common Units, or 83.55% of all outstanding Common Units. OPERATING PHILOSOPHY DIVERSIFIED MARKET FOCUS. The Company focuses on owning, operating, developing, constructing and acquiring apartment communities mainly throughout the southeast and Texas. 1
INTENSIVE MANAGEMENT FOCUS. The Company strongly emphasizes on-site property management. Particular attention is paid to opportunities to increase rents, raise average occupancy rates, and control costs, with property managers and regional management being given the responsibility for monitoring market trends and the discretion to react to such trends. DEDICATION TO CUSTOMER SERVICE. Management's experience is that maintaining a consistently high level of customer satisfaction leads to greater demand for the Company's apartment units, higher occupancy and rental rates, and increased long-term profitability. The Company, as part of its intense management focus, has established regional training facilities to produce highly trained property managers, leasing consultants and service technicians on-site at each of the Communities. Management believes that this commitment to training and excellence in associates ultimately translates to higher customer satisfaction. DECENTRALIZED OPERATIONAL STRUCTURE. The Company's operational structure is organized on a decentralized basis. The Company's property managers have overall operating responsibility for their specific Communities. Property managers report to area managers or regional managers who, in turn, are accountable to the Company's President and Chief Operating Officer. Management believes that its decentralized operating structure capitalizes on specific market knowledge, increases personal accountability relative to a centralized structure and is beneficial in the acquisition, redevelopment and development process. PROACTIVE ASSET MANAGEMENT The Company reviews its existing assets routinely and sells those which no longer fit the Company's investment criteria. The Company constantly evaluates the effectiveness of its capital allocations and makes adjustments to its strategy, including investing in acquisitions and new development, debt retirement, and repurchases of Company shares. STRATEGIES The Company seeks to increase operating cash flow and earnings per share to maximize shareholder value through a balanced strategy of internal and external growth. OPERATING GROWTH STRATEGY. Management's goal is to maximize its return on investment in each Community by increasing rental rates and ancillary revenues while tightly controlling operating expenses and maintaining high occupancy levels. The Company seeks higher net rental revenues by enhancing the competitiveness of the Communities, adding revenue-generating services, and managing expenses through its system of detailed management reporting and accountability in order to achieve increases in operating cash flow. The steps taken to meet these objectives include: o empowering the Company's property managers to adjust rents in response to local market conditions and to concentrate resident turnover in peak rental demand months; o offering new services to residents, including telephone, cable, and internet access on which it generates fee and commission income; o implementing programs to control expenses through investment in cost-saving initiatives, such as the installation of individual apartment unit water and utility meters in certain Communities; o ensuring that, through monthly inspections of all Communities by senior management and prompt attention to maintenance and recurring capital needs as well as defined preventive maintenance programs conducted quarterly at each property, the Communities are properly maintained; o improving the "curb appeal" of the Communities through extensive landscaping and exterior improvements and repositioning Communities from time to time to maintain market leadership positions; o investing heavily in training programs for its property level personnel; o compensating employees through performance-based compensation and stock ownership programs; and 2
o maintaining a hands-on management style and "flat" organizational structure that emphasizes senior management's continued close contact with the market and employees; o when its cost of capital and asset values permit, selling assets and repurchasing common stock. DEVELOPMENT STRATEGY. During 1998, the Company's emphasis shifted from acquisitions to development because of the higher quality assets and higher long term investment returns generated by development. The Company expects to continue new development on a disciplined, selective basis. In 1999 the Company completed the following development projects consisting of a total 1,588 apartment units which are currently in various stages of lease-up: o 264 unit Paddock Club in Gainesville, Florida o 254 unit Paddock Club in Panama City, Florida o 132 unit Phase II expansion of the Paddock Club in Brandon, Florida o 238 unit Phase II expansion of the Terraces at Towne Lake in Cherokee County, Georgia o 252 unit Reserve at Dexter Lake in Memphis, Tennessee o 240 unit Paddock Club in Murfreesboro, Tennessee o 208 unit Paddock Club in Montgomery, Alabama The Company currently has a total of 1,367 apartment units in various stages of development, construction, and pre-development, of which 1,151 are scheduled to be completed in 2000 with the remainder in 2001. The Company anticipates a total capital investment in this development pipeline of approximately $43.2 million in 2000 and approximately $3 million in 2001. Also currently under consideration is a new addition to an existing community of 244 units with an estimated cost of $18 million, which is expected to begin in 2001 if development is approved. These projects are expected to be funded by the Company's outstanding lines of credit ("Credit Lines"), selective property dispositions and possible joint venture transactions. In June 1999 the Company concluded that development opportunities were becoming less financially attractive, reduced its development commitments to those already in process, and sold its development and construction businesses. ACQUISITION STRATEGY. An additional strategy of the Company is to acquire apartment communities that meet its investment criteria and long-term strategic objectives. Most apartment communities that the Company has identified as available for acquisition do not meet the Company's investment objectives, and the present status of capital markets have raised the threshold for yields. The Company did not acquire any apartment communities in 1999 and at the present time does not anticipate any significant investment in acquisition properties in 2000. JOINT VENTURE STRATEGY. An additional strategy of the Company is to sell apartment communities to a joint venture when a favorable return can be achieved. This allows the Company to obtain favorably-priced financing. The Company actively is seeking attractively priced investment opportunities which it and potential joint venture partners can invest in. At this time no negotiations are in process. 3
The following apartment communities containing an aggregate of 2,793 apartment units were sold during 1999 to the Joint Venture: <TABLE> <CAPTION> NUMBER GROSS PROPERTY LOCATION OF UNITS DATE PROCEEDS - ------------------------------------- ----------------------- --------- --------------- -------------- <S> <C> <C> <C> <C> Colony at South Park................. Aiken, SC 184 March 31, 1999 $ 7,900,000 Walden Run........................... McDonough, GA 240 March 31, 1999 13,700,000 Woodstream........................... Greensboro, NC 304 March 31, 1999 13,200,000 Northwood............................ Arlington, TX 270 March 31, 1999 7,500,000 Lane at Towne Crossing............... Mesquite, TX 384 March 31, 1999 11,300,000 The Woods............................ Austin, TX 278 March 31, 1999 11,000,000 Cedar Mill........................... Memphis, TN 276 August 4, 1999 11,200,000 Hamilton Pointe...................... Chattanooga, TN 361 August 4, 1999 9,600,000 Hidden Creek......................... Chattanooga, TN 300 August 4, 1999 8,100,000 Lakeshore Landing.................... Jackson, MS 196 August 4, 1999 4,400,000 --------- -------------- Total........................... 2,793 $ 97,900,000 ========= ============== </TABLE> DISPOSITION STRATEGY. The Company is committed to the selective disposition of non-strategic assets, those apartment communities that no longer meet its investment criteria and long-term strategic objectives. Typically the Company selects assets for disposition that do not meet its present investment criteria including future return on investment, location, market, potential for growth, and capital needs. The following apartment communities containing an aggregate of 1,138 apartment units were sold during 1999: <TABLE> <CAPTION> NUMBER GROSS PROPERTY LOCATION OF UNITS DATE PROCEEDS - ------------------------------------- ----------------------- --------- ------------------- -------------- <S> <C> <C> <C> <C> Hidden Oaks.......................... Albany, Ga 240 April 12, 1999 $ 6,100,000 Sailwinds at Lake Magdalene.......... Tampa, FL 798 November 10, 1999 31,100,000 Regency Club......................... Albany, GA 100 December 6, 1999 800,000 --------- -------------- Total........................... 1,138 $ 38,000,000 ========= ============== </TABLE> SHARE REPURCHASE PROGRAM In 1999, the Company's Board of Directors authorized the repurchase of up to 4 million common shares, of which the Company has repurchased approximately 1.5 million common shares (7% of the common shares and Common Units outstanding). From time to time the Company intends to sell assets based on its disposition strategy outlined herein and repurchase shares when it believes that shareholder value is enhanced. Factors affecting this determination include the relative valuation of its share price, assets sold, cost of debt and rates of return of alternative investments. COMPETITION All of the Company's Communities are located in areas that include other apartment communities. Occupancy and rental rates are affected by the number of competitive apartment communities in a particular area. The Company's properties compete with numerous other multifamily properties, the owners of which may have greater resources than the Company and whose management may have more experience than the Company's management. Moreover, single-family rental housing, manufactured housing, condominiums and the new and existing home markets provide housing alternatives to potential residents of apartment communities. 4
RECENT DEVELOPMENTS PROPERTY DISPOSITIONS AND ACQUISITIONS Subsequent to December 31, 1999, the Company sold two apartment communities containing 368 apartment units for approximately $14,890,000 and has letters of intent to sell three additional communities, two of which will be as a tax free exchange for two identified acquisitions. DISTRIBUTION INCREASE In January 2000, the Company raised its quarterly distribution to common shareholders from $.575 per share to $.58 per share, effective with its distribution paid on January 31, 2000. ITEM 2. PROPERTIES The Company's apartment communities principally appeal to middle and upper income residents in mid-size cities in the southeastern United States and Texas. Approximately 72% of the Company's apartment units are located in Georgia, Florida, Tennessee, and Texas markets. The Company's strategic focus is to provide its residents high quality apartment units in attractive community settings, characterized by extensive landscaping and attention to aesthetic detail. The Company utilizes its experience and expertise in maintenance, landscaping, marketing and management to effectively "reposition" many of the apartment communities it acquires to raise occupancy levels and per unit average rentals. The average age of the Communities at December 31, 1999 was 12.9 years. The following table sets forth certain operating data regarding the Company for the periods indicated where the Company owns or maintains an ownership interest, including the 10 properties containing 2,793 apartment units owned by the Joint Venture, at December 31, 1999. The table excludes development communities. 1999 1998 1997 --------- --------- --------- Apartment units at year end.......... 33,901 33,831 30,579 Average monthly rental per apartment.......................... $610 $597 $568 Average occupancy at year end........ 94.6% 94.1% 93.9% The following table sets forth certain historical information for the communities the Company owned or maintained an ownership interest, including the 10 properties containing 2,793 apartment units owned by the Joint Venture, at December 31, 1999: 5
<TABLE> <CAPTION> APPROXIMATE YEAR RENTABLE YEAR MANAGEMENT NUMBER AREA PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) - ------------------------------------- --------------------- ---------- ----------- ---------- ------------- <S> <C> <C> <C> <C> <C> Eagle Ridge.......................... Birmingham, AL 1986 1998 200 181,400 Abbington Place...................... Huntsville, AL 1987 1998 152 162,792 Paddock Club - Huntsville............ Huntsville, AL 1989 1997 200 211,600 Paddock Club - Huntsville II......... Huntsville, AL 1998 1997 192 212,736 ---------- ------------- 744 768,528 ---------- ------------- Calais Forest........................ Little Rock, AR 1987 1994 260 194,928 Napa Valley.......................... Little Rock, AR 1984 1996 240 183,216 Westside Creek I & II................ Little Rock, AR 1984 1997 308 148,030 Whispering Oaks...................... Little Rock, AR 1978 1994 207 192,422 ---------- ------------- 1,015 718,596 ---------- ------------- Tiffany Oaks......................... Altamonte Springs, FL 1985 1996 288 234,224 Marsh Oaks........................... Atlantic Beach, FL 1986 1995 120 93,280 Paddock Club - Brandon............... Brandon, FL 1997 1997 308 358,600 Anatole.............................. Daytona Beach, FL 1986 1995 208 149,136 Cooper's Hawk........................ Jacksonville, FL 1987 1995 208 218,400 Hunter's Ridge at Deerwood........... Jacksonville, FL 1987 1997 336 294,888 Lakeside............................. Jacksonville, FL 1985 1996 416 344,192 Paddock Club - Jacksonville I , II & III................................. Jacksonville, FL 1989 1997 440 216,016 Paddock Club - Mandarin.............. Jacksonville, FL 1998 1998 288 330,336 St. Augustine........................ Jacksonville, FL 1987 1995 400 304,400 Woodbridge at the Lake............... Jacksonville, FL 1985 1994 188 166,000 Woodhollow........................... Jacksonville, FL 1986 1997 450 342,162 Paddock Club - Lakeland I & II....... Lakeland, FL 1988 1997 464 217,704 Savannahs at James Landing........... Melbourne, FL 1990 1995 256 238,592 Paddock Park - Ocala I & II.......... Ocala, FL 1986 1997 480 202,282 Paddock Club - Tallahassee I & II.... Tallahassee, FL 1990 1997 304 208,000 Belmere.............................. Tampa, FL 1984 1994 210 202,440 Links at Carrollwood................. Tampa, FL 1980 1998 204 190,536 ---------- ------------- 5,568 4,311,188 ---------- ------------- High Ridge........................... Athens, GA 1987 1997 160 186,608 Shenandoah Ridge..................... Augusta, GA 1975/1984 1994 272 222,800 Bradford Pointe...................... Augusta, GA 1986 1997 192 156,232 Westbury Creek....................... Augusta, GA 1984 1997 120 106,998 Fountain Lake........................ Brunswick, GA 1983 1997 110 118,046 Island Retreat....................... St. Simons Island, GA 1978 1998 112 129,584 Park Walk............................ College Park, GA 1985 1997 124 112,776 Enclave at Whisperwood............... Columbus, GA 1998 1998 154 189,728 2000 Wynnton......................... Columbus, GA 1983 1997 72 66,056 Riverwind............................ Columbus, GA 1983 1997 44 40,304 Whisperwood I & Spa I................ Columbus, GA 1980-86 1997 854 610,876 Willow Creek......................... Columbus, GA 1968-78 1997 285 246,668 Terraces at Fieldstone............... Conyers, GA 1998 1998 316 351,076 Hollybrook........................... Dalton, GA 1972 1994 158 188,640 Whispering Pines I & II.............. LaGrange, GA 1982 1997 216 123,904 Westbury Springs..................... Lilburn, GA 1983 1997 150 137,744 Austin Chase......................... Macon, GA 1996 1997 256 293,016 The Vistas........................... Macon, GA 1985 1997 144 153,792 Georgetown Grove..................... Savannah, GA 1997 1998 220 239,800 Wildwood I & II...................... Thomasville, GA 1980 1997 216 123,904 <CAPTION> ENCUMBRANCES AT AVERAGE AVERAGE DECEMBER 31, 1999 AVERAGE RENT PER OCCUPANCY -------------------------- UNIT UNIT AT % AT MORTGAGE SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE - ------------------------------------- ------------- ------------- ------------- --------- ------------- <S> <C> <C> Eagle Ridge.......................... 907 $ 602 94.50% $ 6,349 8.250% Abbington Place...................... 1,071 $ 547 93.42% -- (2) -- (2) Paddock Club - Huntsville............ 1,058 $ 603 95.00% -- -- Paddock Club - Huntsville II......... 1,108 $ 676 95.83% -- -- --- ------------- ------------- --------- 1,033 $ 610 94.8% $ 6,349 --- ------------- ------------- --------- Calais Forest........................ 750 $ 555 91.54% -- -- Napa Valley.......................... 763 $ 548 92.92% -- (7) -- (7) Westside Creek I & II................ 1,042 $ 604 92.86% $ 4,875 8.760% & -- (7) Whispering Oaks...................... 934 $ 534 93.24% -- -- --- ------------- ------------- --------- 708 $ 564 92.6% $ 4,875 --- ------------- ------------- --------- Tiffany Oaks......................... 813 $ 607 97.57% -- (7) -- (7) Marsh Oaks........................... 777 $ 560 94.17% -- (7) -- (7) Paddock Club - Brandon............... 1,164 $ 790 90.26% -- (2) -- (2) Anatole.............................. 717 $ 588 96.63% $ 7,000 5.625% &(1) Cooper's Hawk........................ 1,050 $ 669 92.79% -- (5) -- (5) Hunter's Ridge at Deerwood........... 878 $ 612 97.32% -- (10) -- (10) Lakeside............................. 827 $ 605 91.35% -- (7) -- (7) Paddock Club - Jacksonville I , II & III................................. 1,080 $ 728 92.95% -- (8) -- (8) Paddock Club - Mandarin.............. 1,147 $ 764 94.10% -- (2) -- (2) St. Augustine........................ 761 $ 550 95.75% -- (5) -- (5) Woodbridge at the Lake............... 883 $ 617 96.81% -- (2) -- (2) Woodhollow........................... 760 $ 597 95.11% $ 9,784 7.500% Paddock Club - Lakeland I & II....... 1,089 $ 682 95.91% -- (8) -- (8) Savannahs at James Landing........... 932 $ 604 95.31% -- (5) -- (5) Paddock Park - Ocala I & II.......... 1,011 $ 649 94.38% $ 6,805 6.500% Paddock Club - Tallahassee I & II.... 1,083 $ 692 93.75% $ 4,691 8.500% Belmere.............................. 964 $ 649 92.86% -- (7) -- (7) Links at Carrollwood................. 934 $ 653 98.04% $ 5,704 8.750% --- ------------- ------------- --------- 774 $ 649 94.6% $33,984 --- ------------- ------------- --------- High Ridge........................... 1,166 $ 765 94.38% -- (7) -- (7) Shenandoah Ridge..................... 819 $ 477 97.06% -- (7) -- (7) Bradford Pointe...................... 814 $ 557 94.27% $ 4,760 5.10% Westbury Creek....................... 892 $ 566 95.83% $ 3,121 7.594% Fountain Lake........................ 1,180 $ 690 90.00% $ 2,929 7.750% Island Retreat....................... 1,157 $ 708 89.29% $ 3,388 7.215% Park Walk............................ 909 $ 642 95.97% $ 3,343 6.370% Enclave at Whisperwood............... 1,232 $ 760 92.86% -- (1) -- (1) 2000 Wynnton......................... 917 $ 468 97.22% -- -- Riverwind............................ 916 $ 477 93.18% -- -- Whisperwood I & Spa I................ 1,207 $ 631 95.67% -- (1) -- (1) Willow Creek......................... 866 $ 504 97.19% -- (7) -- (7) Terraces at Fieldstone............... 1,111 $ 813 96.20% -- (2) -- (2) Hollybrook........................... 1,194 $ 604 89.87% -- -- Whispering Pines I & II.............. 1,033 $ 577 90.28% $ 5,183 7.750% Westbury Springs..................... 918 $ 691 96.67% $ 4,186 7.500% Austin Chase......................... 1,144 $ 667 95.70% -- (10) -- (10) The Vistas........................... 1,068 $ 596 98.61% $ 4,015 6.230% Georgetown Grove..................... 1,090 $ 720 94.09% $10,460 7.750% Wildwood I & II...................... 1,033 $ 504 96.76% $ 4,019 7.500% MATURITY PROPERTY DATE - ------------------------------------- --------------- Eagle Ridge.......................... 07/01/28 Abbington Place...................... -- (2) Paddock Club - Huntsville............ -- Paddock Club - Huntsville II......... -- Calais Forest........................ -- Napa Valley.......................... -- (7) Westside Creek I & II................ 10/01/06 & -- (7) Whispering Oaks...................... -- Tiffany Oaks......................... -- (7) Marsh Oaks........................... -- (7) Paddock Club - Brandon............... -- (2) Anatole.............................. 12/01/27 & (1) Cooper's Hawk........................ -- (5) Hunter's Ridge at Deerwood........... -- (10) Lakeside............................. -- (7) Paddock Club - Jacksonville I , II & III................................. -- (8) Paddock Club - Mandarin.............. -- (2) St. Augustine........................ -- (5) Woodbridge at the Lake............... -- (2) Woodhollow........................... 09/01/02 Paddock Club - Lakeland I & II....... -- (8) Savannahs at James Landing........... -- (5) Paddock Park - Ocala I & II.......... 10/01/08 Paddock Club - Tallahassee I & II.... 04/01/36 Belmere.............................. -- (7) Links at Carrollwood................. 02/01/03 High Ridge........................... -- (7) Shenandoah Ridge..................... -- (7) Bradford Pointe...................... 06/01/28 Westbury Creek....................... 11/01/24 Fountain Lake........................ 04/01/24 Island Retreat....................... 03/01/03 Park Walk............................ 11/01/25 Enclave at Whisperwood............... -- (1) 2000 Wynnton......................... -- Riverwind............................ -- Whisperwood I & Spa I................ -- (1) Willow Creek......................... -- (7) Terraces at Fieldstone............... -- (2) Hollybrook........................... -- Whispering Pines I & II.............. 01/01/23 Westbury Springs..................... 07/01/23 Austin Chase......................... -- (10) The Vistas........................... 03/01/28 Georgetown Grove..................... 07/01/37 Wildwood I & II...................... 12/01/20 </TABLE> 6
<TABLE> <CAPTION> APPROXIMATE YEAR RENTABLE YEAR MANAGEMENT NUMBER AREA PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) - ------------------------------------- --------------------- ---------- ----------- ---------- ------------- <S> <C> <C> <C> <C> <C> Hidden Lake I & II................... Union City, GA 1985 1997 320 171,192 Three Oaks I & II.................... Valdosta, GA 1983 1997 240 123,904 Southland Station I & II............. Warner Robins, GA 1987 1997 304 186,704 Terraces at Towne Lake............... Woodstock, GA 1997 1997 264 286,968 --- ------------- 5,303 4,567,320 --- ------------- Fairways at Hartland................. Bowling Green, KY 1996 1997 240 251,180 Paddock Club Florence................ Florence, KY 1994 1997 200 207,036 Lakepointe........................... Lexington, KY 1986 1994 118 90,614 Mansion, The......................... Lexington, KY 1987 1994 184 138,720 Village, The......................... Lexington, KY 1989 1994 252 182,716 Stonemill Village.................... Louisville, KY 1985 1994 384 324,008 --- ------------- 1,378 1,194,274 --- ------------- Canyon Creek......................... St. Louis, MO 1987 1994 320 312,592 --- ------------- Riverhills........................... Grenada, MS 1972 1985 96 81,942 Advantages, The...................... Jackson, MS 1984 1991 252 199,136 Crosswinds........................... Jackson, MS 1988/1989 1996 360 443,200 Pear Orchard......................... Jackson, MS 1985 1994 389 338,400 Pine Trails.......................... Jackson, MS 1978 1988 120 98,560 Reflection Pointe.................... Jackson, MS 1986 1988 296 254,856 Somerset Place....................... Jackson, MS 1981 1995 144 126,848 Woodridge............................ Jackson, MS 1987 1988 192 175,034 --- ------------- 1,849 1,717,976 --- ------------- Hermitage at Beechtree............... Cary, NC 1988 1997 194 169,776 Corners, The......................... Winston-Salem, NC 1982 1993 240 173,496 --- ------------- 434 343,272 --- ------------- Fairways at Royal Oak................ Cincinnati, OH 1988 1994 214 214,477 --- ------------- Woodwinds............................ Aiken, SC 1988 1997 144 165,188 Tanglewood........................... Anderson, SC 1980 1994 168 146,600 The Fairways......................... Columbia, SC 1992 1994 240 213,720 Paddock Club - Columbia I & II....... Columbia, SC 1989 1997 336 218,872 Highland Ridge....................... Greenville, SC 1984 1995 168 144,000 Howell Commons....................... Greenville, SC 1986/88 1997 348 292,840 Paddock Club - Greenville............ Greenville, SC 1996 1997 208 212,104 Park Haywood......................... Greenville, SC 1983 1993 208 156,776 Spring Creek......................... Greenville, SC 1984 1995 208 182,000 Runaway Bay.......................... Mt. Pleasant, SC 1988 1995 208 177,840 Park Place........................... Spartanburg, SC 1987 1997 184 195,312 --- ------------- 2,420 2,105,252 --- ------------- Steeplechase......................... Chattanooga, TN 1986 1991 108 98,602 Windridge............................ Chattanooga, TN 1984 1997 174 238,704 Oaks, The............................ Jackson, TN 1978 1993 100 87,512 Post House Jackson................... Jackson, TN 1987 1989 150 163,640 Post House North..................... Jackson, TN 1987 1989 144 144,724 Williamsburg Village................. Jackson, TN 1987 1994 148 121,412 Woods at Post House.................. Jackson, TN 1995 1995 122 118,922 Clearbrook Village................... Memphis, TN 1974 1987 176 150,400 Crossings............................ Memphis, TN 1974 1991 80 89,968 ENCUMBRANCES AT AVERAGE AVERAGE DECEMBER 31, 1999 AVERAGE RENT PER OCCUPANCY --------------------------- UNIT UNIT AT % AT MORTGAGE SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE - ------------------------------------- ------------- ------------- ------------- --------- ------------ <S> <C> <C> Hidden Lake I & II................... 1,070 $ 670 95.63% $ 4,455 6.34% & --(7) Three Oaks I & II.................... 1,033 $ 539 92.92% $ 5,687 7.500% Southland Station I & II............. 1,167 $ 642 97.37% -- (7) -- (7) Terraces at Towne Lake............... 1,087 $ 814 90.91% $15,132 8.250% --- ------------- ------------- --------- 861 $ 636 94.9% $70,678 --- ------------- ------------- --------- Fairways at Hartland................. 1,047 $ 588 92.50% $ 4,552 8.875% Paddock Club Florence................ 1,035 $ 739 84.50% $ 9,620 7.250% Lakepointe........................... 768 $ 562 99.15% -- (7) -- (7) Mansion, The......................... 754 $ 576 98.91% -- -- Village, The......................... 725 $ 593 95.63% -- (7) -- (7) Stonemill Village.................... 844 $ 587 92.45% -- (4) -- (4) --- ------------- ------------- --------- 867 $ 607 93.3% $14,172 --- ------------- ------------- --------- Canyon Creek......................... 977 $ 559 95.94% -- (4) -- (4) --- ------------- ------------- --------- Riverhills........................... 854 $ 400 88.54% $ 785 7.000% Advantages, The...................... 790 $ 466 92.46% -- (4) -- (4) Crosswinds........................... 1,231 $ 606 96.11% -- (7) -- (7) Pear Orchard......................... 870 $ 577 94.09% -- (7) -- (7) Pine Trails.......................... 821 $ 536 96.67% $ 1,270 7.000% Reflection Pointe.................... 861 $ 590 96.28% $ 5,882 5.35% &(1) Somerset Place....................... 881 $ 519 94.44% -- (7) -- (7) Woodridge............................ 912 $ 530 97.92% $ 4,677 6.500% --- ------------- ------------- --------- 929 $ 548 94.9% $12,614 --- ------------- ------------- --------- Hermitage at Beechtree............... 875 $ 687 89.18% -- (7) -- (7) Corners, The......................... 723 $ 551 97.08% $ 4,081 7.850% --- ------------- ------------- --------- 791 $ 612 93.5% $ 4,081 --- ------------- ------------- --------- Fairways at Royal Oak................ 1,002 $ 627 92.52% -- (7) -- (7) --- ------------- ------------- --------- Woodwinds............................ 1,147 $ 614 91.67% $ 3,466 8.840% Tanglewood........................... 873 $ 532 93.45% $ 2,410 7.600% The Fairways......................... 891 $ 606 97.08% $ 7,566 8.500% Paddock Club - Columbia I & II....... 1,094 $ 708 87.50% -- (2) -- (2) Highland Ridge....................... 857 $ 515 89.88% -- (3) -- (3) Howell Commons....................... 841 $ 509 95.69% -- (7) -- (7) Paddock Club - Greenville............ 1,020 $ 698 89.90% -- (4) -- (4) Park Haywood......................... 754 $ 537 98.08% -- (7) -- (7) Spring Creek......................... 875 $ 526 93.27% -- (3) -- (3) Runaway Bay.......................... 855 $ 694 94.71% -- (3) -- (3) Park Place........................... 1,061 $ 604 91.85% -- (7) -- (7) --- ------------- ------------- --------- 870 $ 598 93.0% $13,442 --- ------------- ------------- --------- Steeplechase......................... 913 $ 566 92.59% -- (7) -- (7) Windridge............................ 1,372 $ 676 96.55% $ 5,391 6.314% Oaks, The............................ 875 $ 521 97.00% -- (4) -- (4) Post House Jackson................... 1,091 $ 596 89.33% $ 5,052 8.170% Post House North..................... 1,005 $ 609 93.06% $ 3,461 5.750% Williamsburg Village................. 820 $ 539 90.54% -- (7) -- (7) Woods at Post House.................. 975 $ 643 90.98% $ 5,255 7.250% Clearbrook Village................... 855 $ 530 96.59% $ 1,014 9.000% Crossings............................ 1,125 $ 679 93.75% -- (4) -- (4) MATURITY PROPERTY DATE - ------------------------------------- -------------- Hidden Lake I & II................... 12/1/26 & -- (7) Three Oaks I & II.................... 02/01/22 Southland Station I & II............. -- (7) Terraces at Towne Lake............... 01/01/37 Fairways at Hartland................. 05/01/00 Paddock Club Florence................ 02/01/36 Lakepointe........................... -- (7) Mansion, The......................... -- Village, The......................... -- (7) Stonemill Village.................... -- (4) Canyon Creek......................... -- (4) Riverhills........................... 05/01/13 Advantages, The...................... -- (4) Crosswinds........................... -- (7) Pear Orchard......................... -- (7) Pine Trails.......................... 04/01/15 Reflection Pointe.................... 12/01/27 & (1) Somerset Place....................... -- (7) Woodridge............................ 10/01/27 Hermitage at Beechtree............... -- (7) Corners, The......................... 06/15/03 Fairways at Royal Oak................ -- (7) Woodwinds............................ 06/01/05 Tanglewood........................... 11/15/02 The Fairways......................... 03/01/33 Paddock Club - Columbia I & II....... -- (2) Highland Ridge....................... -- (3) Howell Commons....................... -- (7) Paddock Club - Greenville............ -- (4) Park Haywood......................... -- (7) Spring Creek......................... -- (3) Runaway Bay.......................... -- (3) Park Place........................... -- (7) Steeplechase......................... -- (7) Windridge............................ 12/01/24 Oaks, The............................ -- (4) Post House Jackson................... 10/01/27 Post House North..................... 09/01/25 Williamsburg Village................. -- (7) Woods at Post House.................. 09/01/35 Clearbrook Village................... 05/01/08 Crossings............................ -- (4) </TABLE> 7
<TABLE> <CAPTION> APPROXIMATE AVERAGE YEAR RENTABLE UNIT YEAR MANAGEMENT NUMBER AREA SIZE PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) (SQUARE FT.) - ------------------------------------- --------------- ---------- ----------- ---------- ------------- ------------- <S> <C> <C> <C> <C> <C> <C> EastView............................. Memphis, TN 1974 1984 432 356,480 825 Glen Eagles.......................... Memphis, TN 1975 1990 184 189,560 1,030 Greenbrook........................... Memphis, TN 1986 1988 1,031 934,490 906 Hickory Farm......................... Memphis, TN 1985 1994 200 150,256 751 Kirby Station........................ Memphis, TN 1978 1994 371 310,173 836 Lincoln on the Green................. Memphis, TN 1988 1994 384 293,664 765 Lincoln on the Green II.............. Memphis, TN 1997 1997 234 241,280 1,031 McKellar Woods....................... Memphis, TN 1976 1988 624 589,776 945 Park Estate.......................... Memphis, TN 1974 1977 82 95,751 1,182 River Trace I & II................... Memphis, TN 1981 1977 440 205,780 843 Savannah Creek....................... Memphis, TN (6) 1989 1996 204 237,200 1,162 Sutton Place......................... Memphis, TN (6) 1991 1996 253 267,600 1,062 Winchester Square.................... Memphis, TN 1973 1977 253 301,409 1,196 Brentwood Downs...................... Nashville, TN 1986 1994 286 220,166 770 Park at Hermitage.................... Nashville, TN 1987 1995 440 392,480 892 ---------- ------------- --- 6,620 5,999,949 906 ---------- ------------- --- Balcones Woods....................... Austin, TX 1983 1997 384 313,756 817 Stassney Woods....................... Austin, TX 1985 1995 288 248,832 864 Travis Station....................... Austin, TX 1987 1995 304 249,888 822 Celery Stalk......................... Dallas, TX 1978 1994 410 552,220 1,347 Courtyards at Campbell............... Dallas, TX 1986 1998 231 167,475 725 Deer Run............................. Dallas, TX 1985 1998 304 206,720 680 Lodge at Timberglen.................. Dallas, TX 1984 1994 260 226,124 870 MacArthur Ridge...................... Irving, TX 1991 1994 248 210,393 848 Westborough.......................... Katy, TX 1984 1994 274 197,264 720 Highwood............................. Plano, TX 1983 1996 196 156,800 800 Cypresswood Court.................... Spring, TX 1984 1994 208 160,672 772 Green Tree Place..................... Woodlands, TX 1984 1994 200 152,168 761 ---------- ------------- --- 3,307 2,842,312 859 ---------- ------------- --- Township............................. Hampton, VA 1987 1995 296 248,048 838 ---------- ------------- --- TOTAL COMPLETED PROPERTIES........ 29,468 25,343,784 860 ---------- ------------- --- JOINT VENTURE PROPERTIES: - ------------------------------------- Cedar Mill........................... Memphis, TN 1973/1986 1982/1994 276 297,794 1,079 Hamilton Pointe...................... Chattanooga, TN 1989 1992 361 256,716 711 Hidden Creek......................... Chattanooga, TN 1987 1988 300 259,152 864 Lane at Towne Crossing............... Mesquite, TX 1983 1994 384 277,616 723 Lakeshore Landing.................... Jackson, MS 1974 1994 196 171,156 873 Woodstream........................... Greensboro, NC 1983 1994 304 217,186 714 Walden Run........................... McDonough, GA 1997 1998 240 271,200 1,130 Woods................................ Austin, TX 1977 1997 278 213,970 770 Colony at South Park................. Aiken, SC 1989/91 1997 184 174,800 950 Northwood............................ Arlington, TX 1980 1998 270 224,100 830 ---------- ------------- --- TOTAL JOINT VENTURE PROPERTIES.... 2,793 2,363,690 846 ---------- ------------- --- DEVELOPMENT PROPERTIES: - ------------------------------------- Paddock Club - Montgomery............ Montgomery, AL 1999 1999 208 230,880 1,110 Paddock Club - Brandon II (11)....... Brandon, FL 1999 1999 132 157,476 1,193 Paddock Club - Gainsville (11)....... Gainsville, FL 1999 1999 264 293,040 1,110 ---------- ------------- --- ENCUMBRANCES AT AVERAGE AVERAGE DECEMBER 31, 1999 RENT PER OCCUPANCY ------------------------------------------------- UNIT AT % AT MORTGAGE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY PROPERTY 1999 1999 (000'S) RATE DATE - ------------------------------------- ------------- ------------- --------- --------- -------------- EastView............................. $ 508 95.83% $ 11,696 8.630% 12/01/99 Glen Eagles.......................... $ 579 100.00% -- (4) -- (4) -- (4) Greenbrook........................... $ 542 93.70% -- (9) -- (9) -- (9) Hickory Farm......................... $ 536 97.50% -- (4) -- (4) -- (4) Kirby Station........................ $ 589 98.38% -- (7) -- (7) -- (7) Lincoln on the Green................. $ 598 96.09% -- (8) -- (8) -- (8) Lincoln on the Green II.............. $ 768 96.58% -- (8) -- (8) -- (8) McKellar Woods....................... $ 474 93.27% -- (9) -- (9) -- (9) Park Estate.......................... $ 733 91.46% -- (9) -- (9) -- (9) River Trace I & II................... $ 559 98.86% $ 11,231 8.000% 02/01/22 Savannah Creek....................... $ 624 96.08% -- (7) -- (7) -- (7) Sutton Place......................... $ 595 95.65% -- (7) -- (7) -- (7) Winchester Square.................... $ 589 96.05% -- (4) -- (4) -- (4) Brentwood Downs...................... $ 666 94.76% -- -- -- Park at Hermitage.................... $ 603 91.14% $ 7,770 5.790% 02/01/19 ------------- ------------- --------- $ 577 95.0% $ 50,870 ------------- ------------- --------- Balcones Woods....................... $ 702 97.14% $ 8,608 7.630% 11/01/03 Stassney Woods....................... $ 604 100.00% $ 4,595 6.600% 10/01/19 Travis Station....................... $ 570 97.37% $ 4,065 6.600% 04/01/19 Celery Stalk......................... $ 662 94.15% $ 8,460 9.006% 12/01/04 Courtyards at Campbell............... $ 669 96.98% -- (1) -- (1) -- (1) Deer Run............................. $ 607 95.07% -- (1) -- (1) -- (1) Lodge at Timberglen.................. $ 636 92.31% $ 4,740 9.006% 12/01/04 MacArthur Ridge...................... $ 719 93.15% -- (1) -- (1) -- (1) Westborough.......................... $ 538 98.18% $ 3,958 9.006% 12/01/04 Highwood............................. $ 675 90.31% -- (9) -- (9) -- (9) Cypresswood Court.................... $ 541 95.67% $ 3,330 9.006% 12/01/04 Green Tree Place..................... $ 613 94.50% $ 3,180 9.006% 12/01/04 ------------- ------------- --------- $ 631 95.6% $ 40,936 ------------- ------------- --------- Township............................. $ 584 93.92% $ 10,800 5.10% &(1) 02/01/28 &(1) ------------- ------------- --------- TOTAL COMPLETED PROPERTIES........ $ 610 94.6% $262,801 ------------- ------------- --------- JOINT VENTURE PROPERTIES: - ------------------------------------- Cedar Mill........................... $ 588 94.93% N/A Hamilton Pointe...................... $ 481 91.14% N/A Hidden Creek......................... $ 499 89.33% N/A Lane at Towne Crossing............... $ 554 90.10% N/A Lakeshore Landing.................... $ 531 90.82% N/A Woodstream........................... $ 560 98.36% N/A Walden Run........................... $ 736 95.00% N/A Woods................................ $ 726 99.28% N/A Colony at South Park................. $ 595 92.93% N/A Northwood............................ $ 547 93.70% N/A ------------- ------------- --------- TOTAL JOINT VENTURE PROPERTIES.... $ 576 93.4% N/A ------------- ------------- --------- DEVELOPMENT PROPERTIES: - ------------------------------------- <S> <C> <C> <C> <C> <C> Paddock Club - Montgomery............ $ 717 97.12% -- (2) -- (2) -- (2) Paddock Club - Brandon II (11)....... $ 878 91.67% -- (2) -- (2) -- (2) Paddock Club - Gainsville (11)....... $ 794 88.64% -- (1) -- (1) -- (1) </TABLE> 8
<TABLE> <CAPTION> APPROXIMATE YEAR RENTABLE YEAR MANAGEMENT NUMBER AREA PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) - ------------------------------------- --------------------- ---------- ----------- ---------- ------------- <S> <C> <C> <C> <C> <C> Paddock Club - Panama City (11)...... Panama City, FL 1999 1999 254 283,972 Terraces at Towne Lake II............ Woodstock, GA 1999 1999 238 272,986 Grand Reserve Lexington (11)......... Lexington, KY 1999 1999 52 60,788 Reserve at Dexter Lake............... Memphis, TN 1999 1999 252 262,332 Paddock Club - Murfreesboro (11)..... Murfreesboro, TN 1999 1999 240 268,800 ---------- ------------- Total Development Properties...... 1,640 1,830,274 ---------- ------------- TOTAL PROPERTIES.................. 33,901 29,537,748 ========== ============= ENCUMBRANCES AT AVERAGE AVERAGE DECEMBER 31, 1999 AVERAGE RENT PER OCCUPANCY -------------------------- UNIT UNIT AT % AT MORTGAGE SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE - ------------------------------------- ------------- ------------- ------------- --------- ------------- Paddock Club - Panama City (11)...... 1,118 $ 801 73.79% -- (1) -- (1) Terraces at Towne Lake II............ 1,147 $ 827 94.12% -- (2) -- (2) Grand Reserve Lexington (11)......... 1,169 $ 1,000 38.46% -- (1) -- (1) Reserve at Dexter Lake............... 1,041 $ 778 95.63% -- (1) -- (1) Paddock Club - Murfreesboro (11)..... 1,120 $ 784 78.75% -- (1) -- (1) --- ------------- ------------- --------- Total Development Properties...... 1,116 $ 800 86.5% $ -- --- ------------- ------------- --------- TOTAL PROPERTIES.................. 871 $ 610(11) 94.6%(11) $262,801 === ============= ============= ========= MATURITY PROPERTY DATE - ------------------------------------- --------------- Paddock Club - Panama City (11)...... -- (1) Terraces at Towne Lake II............ -- (2) Grand Reserve Lexington (11)......... -- (1) Reserve at Dexter Lake............... -- (1) Paddock Club - Murfreesboro (11)..... -- (1) Total Development Properties...... TOTAL PROPERTIES.................. </TABLE> - ------------ (1) Encumbered by the AmSouth Credit Line, with an outstanding balance of $60.2 million and a variable interest rate of 7.15% at December 31, 1999. (2) Encumbered by the FNMA Credit Line, with an outstanding balance of $113.2 million and a variable interest rate of 6.28% at December 31, 1999. (3) These three properties are encumbered by a $9.86 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 6.09%. (4) These eight properties are encumbered by a $43.4 million mortgage with an interest rate of 8.65%, maturing July 01, 2001. (5) These three properties are encumbered by a $16.1 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 5.75%. (6) These two properties are located in Desoto County, MS, a suburb of Memphis, TN. The Company considers the properties a part of the Memphis, TN market. (7) These 26 communities are encumbered by a $142 million loan with a maturity of March 3, 2003 and an average interest rate of 6.376%. (8) These five properties are encumbered by a $47.5 million mortgage with a maturity of December 15, 2004 and an interest rate of 7.04%. (9) These three properties, and one commercial building, are encumbered by a $35.3 million mortgage with a maturity of April 1, 2005. (10) These two properties are encumbered by a $14 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 5.281%. (11) Calculation excludes five of the development properties containing 942 units which are in lease-up at December 31, 1999. 9
ITEM 3. LEGAL PROCEEDINGS The Company is not presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company, other than routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and none of which is expected to have a material adverse effect on the business, financial condition, liquidity or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock has been listed and traded on the NYSE under the symbol "MAA" since the Initial Offering in February 1994. On March 17, 2000, the reported last sale price of the Company's common stock on the NYSE was $22.625 per share and there were approximately 1,700 holders of record of the Common Stock. The Company estimates there are approximately 11,500 beneficial owners of the Common Stock. The following table sets forth the quarterly high and low sales prices of the Common Stock as reported on the NYSE and the distributions declared by the Company with respect to the periods indicated. SALES PRICES -------------------- DIVIDENDS HIGH LOW DECLARED --------- --------- ---------- 1998: First Quarter........................ $ 29.875 $ 27.500 .55 Second Quarter....................... 29.063 25.625 .55 Third Quarter........................ 28.000 22.938 .55 Fourth Quarter....................... 26.000 22.625 .575 1999: First Quarter........................ 24.125 20.875 .575 Second Quarter....................... 25.000 21.188 .575 Third Quarter........................ 23.125 21.000 .575 Fourth Quarter....................... 23.063 21.438 .58 The Company's current annual distribution rate with respect to the Common Stock is $2.32 per share. The actual distributions made by the Company will be affected by a number of factors, including the gross revenues received from the Communities, the operating expenses of the Company, the interest expense incurred on borrowings and unanticipated capital expenditures. The Company pays a preferential regular monthly distribution on the Series A, Series B, Series C and Series E Preferred Stock at annual rates of $2.375, $2.21875, $2.34375 and $2.375 per share, respectively. No distribution may be made on the Common Stock unless all accrued distributions have been made with respect to each series of preferred stock. No assurance can be given that the Company will be able to maintain its distribution rate on its Common Stock or make required distributions with respect to the Series A, Series B, Series C, and Series E Preferred Stock. The Company had a Dividend Reinvestment and Stock Purchase Plan (the "DRSPP") under which holders of Common Stock (and Series A, Series B, Series C and Series E Preferred Stock) could 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 were purchased at up to a 3% discount from their fair market value at the Company's discretion. To fulfill its obligations under the DRSPP, the Company may either issue additional shares of Common Stock or repurchase Common Stock in the open market. In 1999, the Company implemented the Direct Stock Purchase and Distribution Reinvestment Plan (the "DSPDRP") which has terms substantially similar to the above DRSPP, except for certain additional benefits offered relating to purchase of the Company's common shares. The plan replaced the DRSPP, and its participants were automatically enrolled in the new plan. Future distributions by the Company will be at the discretion of the Board of Directors and will depend on the actual funds available for distribution of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. 10
ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data on an historical basis for the Company. This data should be read in conjunction with the consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Annual Report on Form 10-K. MID-AMERICA APARTMENT COMMUNITIES, INC. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1999 1998 1997 1996 1995 ------------ ------------ ------------ ---------- ---------- <S> <C> <C> <C> <C> <C> OPERATING DATA: Total revenues....................... $ 226,322 $ 215,543 $ 139,116 $ 111,882 $ 94,963 Expenses: Property expenses ................. 84,885 79,917 52,404 42,570 37,954 General and administrative......... 14,479 11,960 6,602 6,154 4,851 Interest........................... 48,302 45,704 28,943 25,766 22,684 Depreciation and amortization...... 49,903 46,021 27,737 21,443 16,574 Amortization of deferred financing costs........................... 2,854 2,348 888 661 593 Gain on dispositions................. 10,237 408 -- 2,185 -- ------------ ------------ ------------ ---------- ---------- Income before minority interest in operating partnership income and extraordinary item................. 36,136 30,001 22,542 17,473 12,307 Minority interest in operating partnership income................. 2,497 2,254 2,693 3,213 2,497 Extraordinary item................... (67) (990) (8,622) -- -- ------------ ------------ ------------ ---------- ---------- Net income........................... 33,572 26,757 11,227 14,260 9,810 Preferred dividends.................. 16,114 11,430 5,252 990 -- ------------ ------------ ------------ ---------- ---------- Net income available for common shareholders....................... $ 17,458 $ 15,327 $ 5,975 $ 13,270 $ 9,810 ============ ============ ============ ========== ========== PER SHARE DATA: Basic and diluted: Before extraordinary item.......... $ 0.93 $ 0.87 $ 1.05 $ 1.21 $ 1.00 Extraordinary item................. -- (0.05) (0.62) -- -- ------------ ------------ ------------ ---------- ---------- Net income available per common share........................... $ 0.93 $ 0.82 $ 0.43 $ 1.21 $ 1.00 ============ ============ ============ ========== ========== Dividends declared................... $ 2.305 $ 2.225 $ 2.155 $ 2.065 $ 2.01 BALANCE SHEET DATA: Real estate owned, at cost........... $ 1,396,743 $ 1,434,733 $ 1,211,693 $ 641,893 $ 578,788 Real estate owned, net............... $ 1,248,051 $ 1,315,368 $ 1,134,704 $ 592,335 $ 549,284 Total assets......................... $ 1,298,823 $ 1,366,427 $ 1,193,870 $ 611,199 $ 565,267 Total debt........................... $ 744,238 $ 753,427 $ 632,213 $ 315,239 $ 307,939 Minority interest.................... $ 56,060 $ 61,441 $ 62,865 $ 39,238 $ 41,049 Shareholders' equity................. $ 463,884 $ 517,299 $ 461,300 $ 241,384 $ 202,278 Weighted average common shares (000's): Basic.............................. 18,784 18,725 13,892 10,938 9,772 Diluted............................ 18,808 18,770 13,955 10,983 9,814 OTHER DATA (AT END OF PERIOD): Market capitalization (shares and units)............................. $ 639,095 $ 670,123 $ 710,175 $ 436,739 $ 331,238 Ratio of total debt to total capitalization(1).................. 53.8% 52.9% 47.1% 41.9% 48.2% Number of properties, including ownership interest................. 129 129 116 73 70 Number of apartment units, including ownership interest................. 33,901 33,831 30,579 19,280 18,219 </TABLE> - ------------ (1) Total capitalization is total debt and market capitalization of preferred shares, common shares and partnership units. 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following is a discussion of the consolidated financial condition and results of operations of the Company for the years ended December 31, 1999, 1998, and 1997. This discussion should be read in conjunction with all of the financial statements included in this Annual Report on Form 10-K. The total number of apartment units the Company owned or had an ownership interest in, including the 10 properties containing 2,793 apartment units owned by its 33.3% unconsolidated Joint Venture, at December 31, 1999 was 33,901 in 129 communities, compared to the 33,831 units in 129 communities owned at December 31, 1998 and 30,579 in 116 communities owned at December 31, 1997. The average monthly rental per apartment unit increased to $610 at December 31, 1999 from $597 at December 31, 1998 and $568 at December 31, 1997. Overall occupancy at December 31, 1999, 1998 and 1997 was 94.6%, 94.1% and 93.9%, respectively. FUNDS FROM OPERATIONS Funds from operations ("FFO") represents net income (computed in accordance with GAAP) excluding extraordinary items, minority interest in Operating Partnership income, gain or loss on disposition of real estate assets, and certain non-cash and other items, primarily depreciation and amortization, less preferred stock dividends. Adjustments for the unconsolidated joint venture are made to include the Company's portion of FFO in the calculation. The Company computes FFO in accordance with NAREIT's current definition, which eliminates amortization of deferred financing costs and depreciation of non-real estate assets as items added back to net income when computing FFO. The Company's policy is to expense the cost of interior painting, vinyl flooring, and blinds as incurred for stabilized properties. During the stabilization period for acquisition properties, these items are capitalized because they are necessary for the continued use of the property, and, thus, are not deducted in calculating FFO. At its October 27, 1999 meeting, NAREIT approved the recommendations of its Best Financial Practices Council with respect to clarifying the definition of FFO. The Council recommends that FFO should include all operating results, both recurring and non-recurring, except those results defined as "extraordinary" under GAAP. The Company plans to adopt this definition effective January 1, 2000, and will reflect this clarification for all periods presented in subsequent financial statements. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. The Company believes that FFO is helpful in understanding the Company's results of operations in that such calculation reflects the Company's ability to support interest payments and general operating expenses before the impact of certain activities such as changes in other assets and accounts payable. The Company's calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs. Depreciation expense includes $385,000, $245,000 and $195,000 at December 31, 1999, 1998 and 1997, respectively, which relates to computer software, office furniture and fixtures and other assets found in other industries and which is required to be recognized, for purposes of computing funds from operations. 12
Funds from operations ("FFO") decreased during 1999 by $3,947,000 to $60,046,000 versus $63,993,000 for 1998. FFO for 1997 was $44,896,000. FFO for the three years ending December 31, 1999, 1998 and 1997 is calculated as follows (dollars in thousands): YEAR ENDING DECEMBER 31, -------------------------------- 1999 1998 1997 ---------- --------- --------- Net income available for common shareholders....................... $ 17,458 $ 15,327 $ 5,975 Depreciation and amortization........ 49,188 45,776 27,542 Adjustment for joint venture depreciation....................... 741 -- -- Minority interest.................... 2,497 2,254 2,693 Gain on disposition of assets........ (10,237) (408) -- Extraordinary items.................. 67 990 8,622 Other non-recurring items............ 332 54 64 ---------- --------- --------- Funds from operations................ $ 60,046 $ 63,993 $ 44,896 ========== ========= ========= Weighted average shares and units: Basic........................... 21,794 21,717 16,419 Diluted......................... 21,817 21,764 16,482 RESULTS OF OPERATIONS COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31, 1998 During 1999 the Company sold 10 apartment communities containing 2,793 apartment units to the Joint Venture and retained a 33.33% ownership interest and continued to manage the units for a fee of 4% of revenue. The Company also completed development of 1,277 total apartment units in 7 new communities and 2 existing communities and sold three communities containing 1,138 units. Rental revenues for 1999 increased by $11,507,000 due primarily to increases of (i) $6,371,000 from the 8 communities acquired in 1998 and owned throughout 1999, (ii) $12,587,000 from the development communities completed during 1998 and 1999, and (iii) $4,281,000 from the communities owned throughout both periods. These increases were partially offset by decreases of (i) $9,691,000 due to the sale of 10 properties to the Joint Venture in 1999 and (ii) $2,041,000 from the sale of Redford Park Apartments in 1998 and the sale of Hidden Oaks Apartments, Sailwinds at Lake Magdalene Apartments and Regency Club Apartments in 1999. Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property operating related costs. As a percentage of rental revenues, property operating expenses increased from 37.9% in 1998 to 38.2% in 1999. The majority of the increase is related to increased real estate taxes. Reappraisals in some of the Company's markets, coupled with changes in tax rates in Shelby County, Tennessee, and the annexation of three of the Company's properties in the City of Memphis were the principal causes of the increase. Certain other expenses contributed to the increase in operating expenses, including initial lease-up costs for the development properties, and expenses associated with certain fires and wind damage occurring during the year. Personnel costs remained flat as a percentage of rental revenues from 1998 to 1999. In 1999 repair and maintenance costs decreased to 4.6% of rental revenues as compared to 4.8% in 1998 primarily as a result of the Company's significant investment of capital for the last two years to reposition the 7,600 units acquired in the 1997 FDC Merger. Also in 1999, utilities costs decreased to 4.1% of rental revenue as compared to 4.5% for the same period in 1998 mainly due to continued savings from the Company's program to submeter units for water usage. Property operating expenses for 1999 increased by $4,968,000 due primarily to (i) $2,637,000 from the 8 communities acquired in 1998 and owned throughout 1999, (ii) $4,290,000 from the development communities completed during 1998 and 1999 and (iii) $2,530,000 from the communities owned throughout both periods. These increases were partially offset by decreases of (i) $3,609,000 due to the sale of 10 properties to the Joint Venture in 1999 and (ii) $880,000 from the sale of Redford Park Apartments in 1998 and the sale of 13
Hidden Oaks Apartments, Sailwinds at Lake Magdalene Apartments and Regency Club Apartments in 1999. Depreciation and amortization expense increased by $3,882,000 primarily due to (i) $1,448,000 from the 8 communities acquired in 1998 and owned throughout 1999, (ii) $2,232,000 from the development communities completed during 1998 and 1999, and (iii) $1,661,000 from the communities owned throughout both periods. These increases were offset by decreases of (i) $1,793,000 due to the sale of 10 properties to the Joint Venture in 1999 and (ii) $291,000 from the sale of Redford Park Apartments in 1998 and the sale of Hidden Oaks Apartments, Sailwinds at Lake Magdalene Apartments and Regency Club Apartments in 1999. Amortization of costs in excess of fair value of net assets acquired was $849,000 and $1,474,000, for 1999 and 1998, respectively, which is included in depreciation and amortization in the accompanying consolidated statement of operations. The decrease is due to the write off of goodwill in connection with the sale of FDC during 1999. Amortization of deferred financing costs was $2,854,000 and $2,348,000 for 1999 and 1998, respectively. The majority of the increase is due to additional financing costs related to the restructuring of the AmSouth Credit Line and the addition of the new FNMA Credit Line. General and administrative expense increased by $2,519,000 mainly due to (i) approximately $800,000 in additional property level and support management bonuses related primarily to improved property level performance at certain properties as compared to the prior year, (ii) approximately $700,000 in additional training costs related to the Company's recent investment in regional training centers, (iii) approximately $450,000 in additional administrative costs related to recent systems initiatives and staffing changes to support the Company's portfolio growth, (iv) approximately $250,000 from increased franchise and excise taxes related to recent legislative changes in the state of Tennessee, and (v) approximately $240,000 in increased employee insurance costs. Interest expense increased $2,598,000 due primarily increased debt related to the 10 property acquisitions in 1998 and additional credit line funding to complete the new development properties. The Company reduced its average borrowing cost to 7.06% at December 31, 1999 as compared to 7.11% on December 31, 1998. The average maturity on the Company's debt was 10.7 years and 10.9 years at December 31, 1999 and 1998, respectively. For the year ended December 31, 1999 the Company recorded a net gain on disposition of assets totaling $10,237,000 comprised of the following transactions: GAIN (LOSS) ----------- Gain on sale of ten communities sold to Joint Venture, net of deferred gain of $4,581,000................. $ 9,264,000 Gain on sale of three communities.... 5,004,000 Loss on sale of FDC.................. (4,031,000) ----------- $10,237,000 =========== The Company recorded an extraordinary loss of $67,000, net of minority interest, for 1999 related to the early extinguishment of the mortgage for Eastview Apartments. As a result of the foregoing, income before minority interest and extraordinary item for the year ended December 31, 1999 increased $6,135,000 over the same period a year earlier. COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED DECEMBER 31, 1997 During 1998 the Company acquired 10 apartment communities containing 2,129 apartment units and completed development of 1,335 total apartment units in 6 new communities and 4 existing communities. Also, the Company sold one community containing 212 units. Total revenues for 1998 increased by $76,427,000, due primarily to (i) $7,735,000 from the 10 communities acquired in 1998, (ii) $49,386,000 from the 30 completed communities acquired through the FDC Merger, (iii) $10,717,000 from a full years operation of the 12 communities acquired in 1997, (iv) $5,410,000 from new development communities completed in late 1997 and 1998, and (v) $3,116,000 14
from communities owned throughout both periods. The remaining net increase is mainly related to a full year of FSC management and development activities. Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for 1998 increased by $27,513,000, due primarily to (i) $3,201,000 from the 10 Communities acquired in 1998, (ii) $17,480,000 from the 30 completed Communities acquired through the FDC Merger, (iii) $3,715,000 from a full years operation of the 12 Communities acquired in 1997, (iv) $2,013,000 from new development communities completed in 1997 and 1998, and (v) $1,348,000 from communities owned throughout both periods. As a percentage of rental revenues, property operating expenses decreased from 38.6% in 1997 to 37.9% in 1998. Personnel costs increased as a percentage of rental revenues from 10.8% in 1997 to 11.4% in 1998, due primarily to increased staffing to support the additional apartment units acquired in the FDC Merger and to produce a smooth lease-up of newly developed apartment units. As new development units are delivered, they require management, leasing, and maintenance staff to complete lease-up on schedule and to provide customer service. The ratio of personnel costs to revenues improves as a development community achieves stabilized occupancy. In 1998 repair and maintenance costs decreased to 4.8% of rental revenues as compared to 5.0% in 1997 primarily as a result of the Company's long standing commitment to spend adequate capital toward maintaining properties as well as the addition of the development units to the portfolio which require less repair and maintenance. Also in 1998, utilities costs decreased to 4.5% of rental revenue as compared to 4.7% for the same period in 1997 mainly due to continued savings from the Company's program to submeter units for water usage. General and administrative expense increased $5,358,000 for 1998 compared to 1997. This increase is mainly attributable to the increase in the number of employees due to the FDC Merger and the addition or expansion of certain functions to improve productivity and the quality of the Company's management. These additions are a one-time increase related to the acquisition and integration of FDC and preparation for continued future growth. Depreciation and amortization expense increased $18,284,000 from 1997 to 1998 due primarily to additional depreciation expense of (i) $1,549,000 from the 10 Communities acquired in 1998, (ii) $10,050,000 from the 30 completed Communities acquired through the FDC Merger, (iii) $2,583,000 from a full year operation of the 12 Communities acquired in 1997, (iv) $998,000 from development communities completed in 1997 and 1998, and (v) $2,055,000 from the communities owned throughout both periods. Also, amortization of deferred financing costs was $2,348,000 and $888,000 for 1998 and 1997, respectively. The majority of the increase is due to additional financing costs related to the restructuring of the Credit Line and the Bonds issued by the Company's special purpose subsidiary. Amortization of costs in excess of fair value of net assets acquired was $1,474,000 and $309,000, for 1998 and 1997, respectively, which are included in depreciation and amortization in the accompanying consolidated statement of operations. Interest expense increased $16,761,000 during 1998 due primarily to additional funding required for apartment acquisitions, development projects, and the FDC Merger. The Company reduced its average borrowing cost to 7.11% at December 31, 1998 as compared to 7.41% on December 31, 1997. The average maturity on the Company's debt was 10.9 years and 10.2 years at December 31, 1998 and 1997, respectively. For the year ended December 31, 1998 the Company recorded a gain on disposition of assets of $408,000 related to the sale of Redford Park Apartments, which also resulted in a loss on early extinguishment of the related debt. The Company recorded a total extraordinary loss of $990,000, net of minority interest, for 1998 related to the repayment of the mortgage for Redford Park Apartments and certain other debt. As a result of the foregoing, income before minority interest and extraordinary item for the year ended December 31, 1998 increased $7,459,000 over the same period a year earlier. 15
LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $74,978,000 in 1999 as compared to $80,405,000 in 1998. During 1999 the Company received total proceeds of $153,311,000 from the sale of 10 properties to the Joint Venture, the sale of 3 additional properties, and the sale of the development, construction and fee management businesses. The Company invested $71,563,000 in the development and construction of new properties or expansions of existing properties, $34,377,000 in total capital improvements to existing properties, and $8,085,000 in capital and advances to the Joint Venture. During 1998 the Company invested $63,732,000 in the purchase of additional properties, $107,963,000 in the development and construction of new properties, and $32,336,000 in total capital improvements to existing properties. Also during 1998 the Company received total proceeds of $5,424,000 from the disposition of properties. The following table summarizes the Company's communities in various stages of lease-up, construction, development, and pre-development as of December 31, 1999 (Dollars in 000's): <TABLE> <CAPTION> ANTICIPATED ANTICIPATED TOTAL BUDGETED COSTS TO FINISH INITIAL LOCATION UNITS COST DATE DATE OCCUPANCY --------------------- ------ --------- --------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> COMPLETED COMMUNITIES IN LEASE-UP: Paddock Club Gainesville............. Gainesville, FL 264 $ 17,688 $ 17,678 1Q 1999 3Q 1998 Terraces at Towne Lake II............ Cherokee County, GA 238 13,421 13,313 1Q 1999 4Q 1998 Paddock Club Brandon II.............. Brandon, FL 132 8,063 8,018 1Q 1999 1Q 1999 Reserve at Dexter Lake............... Memphis, TN 252 17,398 17,394 2Q 1999 4Q 1998 Paddock Club Panama City............. Panama City, FL 254 15,536 15,138 2Q 1999 4Q 1998 Paddock Club Montgomery.............. Montgomery, AL 208 14,192 14,189 2Q 1999 1Q 1999 Paddock Club Murfreesboro............ Murfreesboro, TN 240 15,963 15,728 4Q 1999 2Q 1999 ------ --------- --------- 1,588 $102,261 $ 101,458 ====== ========= ========= DEVELOPMENT COMMUNITIES IN LEASE-UP: Grand Reserve Lexington.............. Lexington, KY 370 32,840 22,170 2Q 2000 4Q 1999 Kenwood Club......................... Katy, TX 320 18,807 13,696 2Q 2000 1Q 2000 ------ --------- --------- 690 51,647 35,866 ------ --------- --------- UNDER CONSTRUCTION Reserve at Dexter Lake II............ Memphis, TN 244 16,645 9,115 3Q 2000 1Q 2000 Grande View.......................... Nashville, TN 433 35,550 12,554 1Q 2001 2Q 2000 ------ --------- --------- 677 52,195 21,669 ------ --------- --------- ------ --------- --------- Total Development Communities........ 1,367 $103,842 $ 57,535 ====== ========= ========= ANTICIPATED STABILIZA- TION ------------ COMPLETED COMMUNITIES IN LEASE-UP: Paddock Club Gainesville............. 3Q 1999 Terraces at Towne Lake II............ 4Q 1999 Paddock Club Brandon II.............. 3Q 1999 Reserve at Dexter Lake............... 4Q 1999 Paddock Club Panama City............. 2Q 1999 Paddock Club Montgomery.............. 4Q 1999 Paddock Club Murfreesboro............ 2Q 2000 DEVELOPMENT COMMUNITIES IN LEASE-UP: Grand Reserve Lexington.............. 2Q 2001 Kenwood Club......................... 2Q 2001 UNDER CONSTRUCTION Reserve at Dexter Lake II............ 1Q 2001 Grande View.......................... 4Q 2001 Total Development Communities........ </TABLE> 16
Actual capital expenditures for property improvements during 1999 are summarized below (in 000's): Recurring capital at stabilized properties........................... $ 13,154 Revenue enhancing projects at stabilized properties................ 9,297 Capital improvements to pre-stabilized properties............ 10,324 Corporate overhead capital improvements......................... 1,602 --------- $ 34,377 ========= During 1999 the Company used $11,260,000 for net reductions in borrowings and to fund deferred financing costs. Also during 1999 the Company initiated its share repurchase program and acquired 1,473,600 shares for a total cost of $33,073,000, which represented approximately 7% of the total common shares and Common Units outstanding. Also during the year the Company paid a total of $66,425,000 in distributions to holders of preferred shares, common shares, and partnership units and received $3,549,000 from issuances of common shares and units. During 1998 net proceeds from borrowings were $86,920,000 and an additional $82,411,000 was received from issuances of common and preferred shares and Common Units, which was mainly used to fund the acquisition and development of properties mentioned above. During 1998 the Company also distributed $58,547,000 to holders of preferred shares, common shares, and Common Units. At December 31, 1999, the Company had $173.4 million outstanding on the Credit Lines. Of this $25 million is effectively fixed at 7.565% through an interest rate swap agreement which expires in 2003. The average interest rate at December 31, 1999 for the conventional variable rate debt, including the impact of the interest rate swap agreement, was 7.2%. At December 31, 1999, the Company had an additional $31.9 million tax-free variable rate debt outstanding, with an average rate of 5.1% at December 31, 1999. All other debt was fixed rate term debt at an average interest rate of 7.1%. In November 1999, the Company decreased its credit limit under the AmSouth Credit Line from $200 million to $150 million. Additionally in 1999, the Company borrowed $113.2 million from a new FNMA Credit Line which is part of a $195 million credit facility. The Company expects to use the credit lines for future acquisitions, development, and to provide letters of credit as credit enhancements for tax-exempt bonds. The Credit Lines are secured and are subject to borrowing base calculations that effectively reduce the maximum amount that may be borrowed under the credit lines to $235.7 million as of March 1, 2000. The weighted average interest rate and weighted average maturity at December 31, 1999 for the $744.2 million of notes payable were 7.06% and 10.7 years, respectively. The Company believes that cash provided by operations is adequate and anticipates that it will continue to be adequate in both the short and long-term to meet operating requirements (including recurring capital expenditures at the Communities) and payment of distributions by the Company in accordance with REIT requirements under the Code. The Company expects to meet its long term liquidity requirements, such as scheduled mortgage debt maturities, property developments and acquisitions, expansions and non-recurring capital expenditures, through long and medium-term collateralized and uncollateralized fixed rate borrowings, issuance of debt or additional equity securities in the Company, potential asset sales or joint venture transactions and the Credit Lines. INSURANCE In the opinion of management, property and casualty insurance is in place which provides adequate coverage to provide financial protection against normal insurable risks such that it believes that any loss experienced would not have a significant impact on the Company's liquidity, financial position, or results of operations. INFLATION Substantially all of the resident leases at the Communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable the Company to seek rent increases. The 17
substantial majority of these leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to the Company of the adverse effects of inflation. YEAR 2000 During 1999 the Company completed all phases of an action plan designed to minimize the impact of Year 2000 ("Y2K") issue. Currently the Company has experienced no internal or external business disruptions associated with the Y2K issue. There can be, however, no assurance that future unforeseen Y2K problems will not cause disruptions to our internal business systems, or those of our vendors. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activity," as amended by SFAS No. 137, effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The accounting statement is not expected to have a material impact on the Company's consolidated financial statements. The Company plans to adopt this accounting standard in 2001. RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS This annual report on Form 10-K, including documents incorporated herein by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to acquisition and development of apartment communities, future expenditures for development projects, capital expenditures, and rehabilitation costs on the apartment communities. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including resident defaults, potential liability relating to environmental matters and illiquidity of real estate investments. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Annual Report on Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure is to changes in interest rates obtainable on its secured and unsecured borrowings. At December 31, 1999, 54% of the Company's total capitalization consisted of borrowings. The Company's interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower its overall borrowing costs. To achieve this objective, the Company manages its exposure to fluctuations in market interest rates for its borrowings through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks to mitigate its interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of its variable debt. The Company does not enter into derivative or interest rate transactions for speculative purposes. Approximately 76% of the Company's outstanding debt was subject to fixed interest rates with a weighted average rate of 7.2% at December 31, 1999. The Company regularly reviews interest rate exposure on its outstanding borrowings in an effort to minimize the risk of interest rate fluctuations. The Company does not have any other material market-sensitive financial instruments. 18
The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Weighted average variable rates are based on rates in effect at the reporting date (Dollars in 000's). <TABLE> <CAPTION> TOTAL FAIR 2000 2001 2002 2003 2004 THEREAFTER VALUE --------- --------- --------- --------- --------- ---------- --------- <S> <C> <C> <C> <C> <C> <C> <C> LIABILITIES Long-term Debt Fixed Rate .......... $ 9,170 $ 48,219 $ 16,306 $ 166,563 $ 75,886 $ 222,788 $ 516,500 Average interest rate 7.93% 8.48% 7.36% 6.39% 7.23% 6.90% Variable Rate ....... -- $ 60,171 -- -- $ 113,232 $ 31,903 $ 205,306 Average interest rate --% 7.15% --% --% 6.28% 5.13% </TABLE> ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Independent Auditors' Report, Consolidated Financial Statements and Selected Quarterly Financial Information are set forth on pages F-1 to F- of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with the Company's independent accountants on any matter of accounting principles or practices or financial statement disclosure. 19
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On July 23, 1997, the Company acquired its corporate headquarters for $2,912,000. In connection with the acquisition, the Company formed a special committee of its external directors to negotiate the transaction on its behalf because certain executive officers of the Company were also partners in the partnership which owned the building. The consideration consisted of $862,000 cash, 22,246 UPREIT units valued at $634,000 ($28.50 per unit) and the assumption of an existing loan. Certain executive officers of the Company were partners in the partnership who owned the building and received 5,831 UPREIT units in connection with the exchange. All transactions involving related parties must be approved by a majority of the disinterested members of the Company's Board of Directors. The Company has, and expects to have, transactions in the ordinary course of its business with directors and officers of the Company and their affiliates, including members of their families or corporations, partnerships or other organizations in which such officers or directors have a controlling interest, on substantially the same terms (including price, or interest rates and collateral) as those prevailing at the time for comparable transactions with unrelated parties. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K: 1. Independent Auditors' Report......... F-1 Consolidated Balance Sheets as of December 31, 1999 and 1998......... F-2 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997................ F-3 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997............................... F-4 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................ F-5 Notes to Consolidated Financial Statements for the years ended December 31, 1999, 1998 and 1997... F-6 2. Financial Statement Schedule required to be filed by item 8 and Paragraph (d) of this item 14: Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1999.................. F-22 20
3. The exhibits required by Item 601 of Regulation S-K, except as otherwise noted, have been filed with previous reports by the registrant and are herein incorporated by reference. EXHIBIT NUMBERS EXHIBIT DESCRIPTION - ------------------------------------------------------- 3.1+ -- Amended and Restated Charter of Mid-America Apartment Communities, Inc. dated as of January 10, 1994, as filed with the Tennessee Secretary of State on January 25, 1994 3.2******-- Articles of Amendment to the Charter of Mid-America Apartment Communities, Inc. dated as of January 28, 1994, as filed with the Tennessee Secretary of State on January 28, 1994 3.3** -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of A Series of Preferred Stock dated as of October 9, 1996, as filed with the Tennessee Secretary of State on October 10, 1996 3.4+ -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 3.5*** -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of A Series of Preferred Stock dated as of November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 3.6+ -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated December 15, 1997, as filed with the Tennessee Secretary of State on December 31, 1997 3.7+ -- Bylaws of Mid-America Apartment Communities, Inc. 3.8++ -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated June 25, 1998, as filed with the Tennessee Secretary of State on June , 1998 3.9++++ -- Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated December , 1998, as filed with the Tennessee Secretary of State on December , 1998 4.1+ -- Form of Common Share Certificate 4.2**** -- Form of 9.5% Series A Cumulative Preferred Stock Certificate 4.3***** -- Form of 8 7/8% Series B Cumulative Preferred Stock Certificate 4.4+++ -- Form of 9.375% Series C Cumulative Preferred Stock Certificate 4.5++++ -- Form of 9.5% Series E Cumulative Preferred Stock Certificate 4.6++++ -- Shareholders' Rights Plan dated March 1, 1999 10.1+ -- Second Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P., a Tennessee limited partnership 10.2+ -- 1994 Restricted Stock and Stock Option Plan 10.3++++ -- Revolving Credit Agreement between the Registrant and AmSouth Bank of Alabama 10.4 -- Sixth amendment to the Revolving Credit Agreement between the Registrant and AmSouth Bank of Alabama 10.5+ -- Note Purchase Agreement of the Operating Partnership and the Registrant and Prudential Insurance Company of America 10.6+ -- Amendment 1 to Note Purchase Agreement of the Operating Partnership and the Registrant and Prudential Insurance Company of America 10.7 -- Employment Agreement between Registrant and George E. Cates 10.8 -- Employment Agreement between Registrant and H. Eric Bolton 10.9 -- Employment Agreement between Registrant and Simon R.C. Wadsworth 10.10 -- Master Credit Facility Agreement between Registrant and WMF Washington Mortgage Corp. dated November 10, 1999 11.1 -- Statement re: computation of per share earnings (included within the Form 10-K) 12.1 -- Statement re: computation of ratios (definition of ratios used are disclosed as footnotes on the related table(s) within the Form 10-K) 21.1 -- List of Subsidiaries 23.1 -- Consent of KPMG LLP 27.1 -- Financial Data Schedule (FOOTNOTES ON FOLLOWING PAGE) 21
- ------------ * Filed as Exhibit 10.20 to the Registrant's Current Report on Form 8-K, filed with the Commission on September 19, 1997 (Commission File No. 1-12762) ** Filed as Exhibit 1 to the Registrant's Registration Statement on Form 8-A filed with the Commission on October 11, 1996 *** Filed as Exhibit 4.1 to the Registrant's Registration Statement on Form 8-A filed with the Commission on November 19, 1997 **** Filed as Exhibit 3 to the Registrant's Registration Statement on Form 8-A filed with the Commission on October 11, 1996 ***** Filed as Exhibit 4.3 to the Registrant's Registration Statement on Form 8-A filed with the Commission on November 19, 1997 ****** Filed as an exhibit to the 1996 Annual Report of the Registrant on Form 10-K as of March 31, 1997 ******* Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-81970), as amended, of the Registrant and incorporated herein by reference. + Filed as an exhibit to the 1997 Annual Report of the Registrant on Form 10-K for the year ended December 31, 1997 ++ Filed as Exhibit 4.3 to the Registrant's Registration Statement on Form 8-A filed with the Commission on June 25, 1998 +++ Filed as Exhibit 4.2 to the Registrant's Registration Statement on Form 8-A filed with the Commission on June 25, 1998 ++++ Filed as an exhibit to the 1998 Annual Report of the Registrant on Form 10-K for the year ended December 31, 1998 (b) Reports on Form 8-K The following report was filed on Form 8-K by the registrant during the fourth quarter of 1999: DATE OF FORM EVENTS REPORTED REPORT - ------------------------------------------ -------- 8-K Announcement of an approval by the 11/22/99 Board of Directors to authorize the Company to repurchase common stock (c) Exhibits: See Item 14(a)(3) above. (d) Financial Statement Schedules: See Item 14(a)(2) above. 22
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MID-AMERICA APARTMENT COMMUNITIES, INC. Date: March 17, 2000 /s/ GEORGE E. CATES GEORGE E. CATES CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. Date: March 17, 2000 /s/ GEORGE E. CATES GEORGE E. CATES CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) Date: March 30, 2000 /s/ SIMON R.C. WADSWORTH SIMON R.C. WADSWORTH EXECUTIVE VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) Date: March 17, 2000 /s/ H. ERIC BOLTON H. ERIC BOLTON PRESIDENT AND CHIEF OPERATING OFFICER Date: March 20, 2000 /s/ JOHN F. FLOURNOY JOHN F. FLOURNOY DIRECTOR Date: March 20, 2000 /s/ ROBERT F. FOGELMAN ROBERT F. FOGELMAN DIRECTOR Date: March 21, 2000 /s/ JOHN S. GRINALDS JOHN S. GRINALDS DIRECTOR Date: March 20, 2000 /s/ O. MASON HAWKINS O. MASON HAWKINS DIRECTOR Date: March 30, 2000 /s/ RALPH HORN RALPH HORN DIRECTOR Date: March 19, 2000 /s/ MICHAEL S. STARNES MICHAEL S. STARNES DIRECTOR 23
INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Mid-America Apartment Communities, Inc. We have audited the accompanying consolidated balance sheets of Mid-America Apartment Communities, Inc. and subsidiaries (the "Company") as of December 31, 1999 and 1998 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III -- Real Estate and Accumulated Depreciation. These financial statements and the financial statement schedule are the responsibility of the management of the Company. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the financial position of the Company and subsidiaries as of December 31, 1999 and 1998, and the results of the their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relationship to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Memphis, Tennessee February 25, 2000 F-1
MID-AMERICA APARTMENT COMMUNITIES, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998 (DOLLARS IN THOUSANDS) 1999 1998 ------------ ------------ ASSETS: REAL ESTATE ASSETS: Land............................ $ 119,823 $ 124,912 Buildings and improvements...... 1,172,780 1,184,611 Furniture, fixtures and equipment...................... 28,238 26,779 Construction in progress........ 58,840 75,776 ------------ ------------ 1,379,681 1,412,078 Less accumulated depreciation... (146,611) (117,773) ------------ ------------ 1,233,070 1,294,305 Land held for future development.................... 1,710 11,781 Commercial properties, net...... 5,217 9,282 Investment in and advances to real estate joint venture............... 8,054 -- ------------ ------------ REAL ESTATE ASSETS, NET......... 1,248,051 1,315,368 Cash and cash equivalents............ 14,092 7,237 Restricted cash...................... 12,537 9,282 Deferred financing costs, net........ 10,272 10,359 Other assets......................... 13,871 24,181 ------------ ------------ TOTAL ASSETS............... $ 1,298,823 $ 1,366,427 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Notes payable................... $ 744,238 $ 753,427 Accounts payable................ 2,122 10,384 Accrued expenses and other liabilities.................... 23,199 18,959 Security deposits............... 4,739 4,917 Deferred gain on disposition of properties..................... 4,581 -- ------------ ------------ TOTAL LIABILITIES AND DEFERRED GAIN.......... 778,879 787,687 MINORITY INTEREST.................... 56,060 61,441 SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 20,000,000 shares authorized, $173,470,750 or $25 per share liquidation preference: 2,000,000 shares at 9.5% Series A Cumulative.... 20 20 1,938,830 shares at 8.875% Series B Cumulative.... 19 19 2,000,000 shares at 9.375% Series C Cumulative.... 20 20 1,000,000 shares at 9.5% Series E Cumulative.... 10 10 Common stock, $.01 par value (authorized 50,000,000 shares; issued and outstanding 17,971,960 and 18,877,691 shares December 31, 1999 and 1998, respectively)....... 190 189 Additional paid-in capital........... 562,537 583,154 Other................................ (1,053) (2,237) Accumulated distributions in excess of net income...................... (89,869) (63,876) Treasury stock at cost, 355,900, shares in 1999..................... (7,990) -- ------------ ------------ TOTAL SHAREHOLDERS' EQUITY................. 463,884 517,299 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $ 1,298,823 $ 1,366,427 ============ ============ See accompanying notes to consolidated financial statements. F-2
MID-AMERICA APARTMENT COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998 1997 ---------- ---------- ---------- Revenues: Rental.......................... $ 222,098 $ 210,591 $ 135,673 Other........................... 3,504 3,111 3,279 Management and development income, net................... 751 1,841 164 Equity in loss of real estate joint venture................. (31) -- -- ---------- ---------- ---------- Total revenues.................. 226,322 215,543 139,116 ---------- ---------- ---------- Expenses: Personnel....................... 25,239 24,053 14,623 Building repairs and maintenance................... 10,107 10,030 6,811 Real estate taxes and insurance..................... 24,561 22,459 14,465 Utilities....................... 9,119 9,376 6,341 Landscaping..................... 5,634 5,009 3,684 Other operating................. 10,225 8,990 6,480 Depreciation and amortization... 49,903 46,021 27,737 General and administrative...... 14,479 11,960 6,602 Interest........................ 48,302 45,704 28,943 Amortization of deferred financing costs............... 2,854 2,348 888 ---------- ---------- ---------- Total expenses.................. 200,423 185,950 116,574 ---------- ---------- ---------- Income before gain on disposition of properties, minority interest in operating partnership income and extraordinary item................. 25,899 29,593 22,542 ---------- ---------- ---------- Gain on dispositions................. 10,237 408 -- ---------- ---------- ---------- Income before minority interest in operating partnership income and extraordinary item................. 36,136 30,001 22,542 Minority interest in operating partnership income................. 2,497 2,254 2,693 ---------- ---------- ---------- Income before extraordinary item..... 33,639 27,747 19,849 Extraordinary item -- loss on debt extinguishment, net of minority interest........................... (67) (990) (8,622) ---------- ---------- ---------- Net income........................... 33,572 26,757 11,227 Dividends on preferred shares........ 16,114 11,430 5,252 ---------- ---------- ---------- Net income available for common shareholders....................... $ 17,458 $ 15,327 $ 5,975 ========== ========== ========== Net income available per common share: Basic (in thousands): Average common shares outstanding................... 18,784 18,725 13,892 ========== ========== ========== Basic earnings per share: Net income available per common share before extraordinary item.......................... $ 0.93 $ 0.87 $ 1.05 Extraordinary item.............. -- (0.05) (0.62) ---------- ---------- ---------- Net income available per common share......................... $ 0.93 $ 0.82 $ 0.43 ========== ========== ========== Diluted (in thousands): Average common shares outstanding..................... 18,784 18,725 13,892 Effect of dilutive stock options... 24 45 63 ---------- ---------- ---------- Average dilutive common shares outstanding..................... 18,808 18,770 13,955 ========== ========== ========== Diluted earnings per share: Net income available per common share before extraordinary item.......................... $ 0.93 $ 0.87 $ 1.05 Extraordinary item.............. -- (0.05) (0.62) ---------- ---------- ---------- Net income available per common share......................... $ 0.93 $ 0.82 $ 0.43 ========== ========== ========== See accompanying notes to consolidated financial statements. F-3
MID-AMERICA APARTMENT COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS AND SHARES IN THOUSANDS) <TABLE> <CAPTION> ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS ------------------- ------------------- PAID-IN IN EXCESS OF SHARES AMOUNT SHARES AMOUNT CAPITAL OTHER NET INCOME --------- ------- --------- ------- ----------- --------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> BALANCE DECEMBER 31, 1996............ 2,000 $20 10,949 $ 109 $ 256,689 $ (260) $(15,174) Issuance of common shares............ -- -- 5,911 59 163,531 -- -- Issuance of Series B preferred shares............................. 1,939 19 -- -- 46,616 -- -- Exercise of stock options............ -- -- 9 -- (31) -- -- Notes receivable issued for shares and units (Note 8)................. -- -- -- -- -- (906) -- Shares issued in exchange for units.............................. -- -- 60 1 973 -- -- Shares issued in FDC Merger.......... -- -- 1,550 16 44,374 -- -- Adjustment for minority interest of Unitholders resulting from: Common Stock Offerings........... -- -- -- -- (10,008) -- -- FDC Merger....................... -- -- -- -- (834) -- -- Other............................ -- -- -- -- (818) -- -- Amortization of unearned compensation....................... -- -- -- -- -- 121 -- Dividends on common stock ($2.14 per share)............................. -- -- -- -- -- -- (29,172) Dividends on preferred stock......... -- -- -- -- -- -- (5,252) Net income........................... -- -- -- -- -- -- 11,227 --------- ------- --------- ------- ----------- --------- ------------ BALANCE DECEMBER 31, 1997............ 3,939 39 18,479 185 500,492 (1,045) (38,371) Issuance of common shares............ -- -- 308 4 7,953 -- -- Issuance of Series C preferred shares............................. 2,000 20 -- -- 48,060 -- -- Issuance of Series E preferred shares............................. 1,000 10 -- -- 24,735 -- -- Exercise of stock options............ -- -- 5 -- 129 -- -- Notes receivable issued for shares and units (Note 8)................. -- -- -- -- -- (1,458) -- Payments received on notes receivable (Note 8)........................... -- -- -- -- -- 145 -- Shares issued in exchange for units.............................. -- -- 86 -- 1,785 -- -- Amortization of unearned compensation....................... -- -- -- -- -- 121 -- Dividends on common stock ($2.225 per share)................. -- -- -- -- -- -- (40,832) Dividends on preferred stock......... -- -- -- -- -- -- (11,430) Net income........................... -- -- -- -- -- -- 26,757 --------- ------- --------- ------- ----------- --------- ------------ BALANCE DECEMBER 31, 1998............ 6,939 69 18,878 189 583,154 (2,237) (63,876) Repurchase of common shares (Note 9)................................. -- -- (1,118) (1) (25,082) -- -- Issuance of common shares............ -- -- 154 2 3,516 -- -- Exercise of stock options............ -- -- -- -- 27 -- -- Notes receivable issued for shares (Note 8)........................... -- -- 9 -- -- (100) -- Payments received on notes receivable (Note 8)........................... -- -- -- -- -- 343 -- Reductions to notes receivables (Note 8)................................. -- -- -- -- -- 447 -- Shares issued in exchange for units.............................. -- -- 49 -- 922 -- -- Amortization of unearned compensation....................... -- -- -- -- -- 494 -- Dividends on common stock ($2.30 per share).................. -- -- -- -- -- -- (43,451) Dividends on preferred stock......... -- -- -- -- -- -- (16,114) Net income........................... -- -- -- -- -- -- 33,572 --------- ------- --------- ------- ----------- --------- ------------ BALANCE DECEMBER 31, 1999............ 6,939 $69 17,972 $ 190 $ 562,537 $ (1,053) $(89,869) ========= ======= ========= ======= =========== ========= ============ TREASURY STOCK TOTAL -------- --------- BALANCE DECEMBER 31, 1996............ $ -- $ 241,384 Issuance of common shares............ -- 163,590 Issuance of Series B preferred shares............................. -- 46,635 Exercise of stock options............ -- (31) Notes receivable issued for shares and units (Note 8)................. -- (906) Shares issued in exchange for units.............................. -- 974 Shares issued in FDC Merger.......... -- 44,390 Adjustment for minority interest of Unitholders resulting from: Common Stock Offerings........... -- (10,008) FDC Merger....................... -- (834) Other............................ -- (818) Amortization of unearned compensation....................... -- 121 Dividends on common stock ($2.14 per share)............................. -- (29,172) Dividends on preferred stock......... -- (5,252) Net income........................... -- 11,227 -------- --------- BALANCE DECEMBER 31, 1997............ -- 461,300 Issuance of common shares............ -- 7,957 Issuance of Series C preferred shares............................. -- 48,080 Issuance of Series E preferred shares............................. -- 24,745 Exercise of stock options............ -- 129 Notes receivable issued for shares and units (Note 8)................. -- (1,458) Payments received on notes receivable (Note 8)........................... -- 145 Shares issued in exchange for units.............................. -- 1,785 Amortization of unearned compensation....................... -- 121 Dividends on common stock ($2.225 per share)................. -- (40,832) Dividends on preferred stock......... -- (11,430) Net income........................... -- 26,757 -------- --------- BALANCE DECEMBER 31, 1998............ -- 517,299 Repurchase of common shares (Note 9)................................. (7,990 ) (33,073) Issuance of common shares............ -- 3,518 Exercise of stock options............ -- 27 Notes receivable issued for shares (Note 8)........................... -- (100) Payments received on notes receivable (Note 8)........................... -- 343 Reductions to notes receivables (Note 8)................................. -- 447 Shares issued in exchange for units.............................. -- 922 Amortization of unearned compensation....................... -- 494 Dividends on common stock ($2.30 per share).................. -- (43,451) Dividends on preferred stock......... -- (16,114) Net income........................... -- 33,572 -------- --------- BALANCE DECEMBER 31, 1999............ $(7,990 ) $ 463,884 ======== ========= </TABLE> See accompanying notes to consolidated financial statements. F-4
MID-AMERICA APARTMENT COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS IN THOUSANDS) 1999 1998 1997 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.......................... $ 33,572 $ 26,757 $ 11,227 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 52,757 48,369 28,746 Amortization of unearned stock compensation................. 494 121 121 Equity in loss of real estate joint venture................ 31 -- -- Minority interest in operating partnership income........... 2,497 2,254 2,693 Extraordinary item............. 67 990 8,622 Gain on dispositions........... (10,237) (408) -- Changes in assets and liabilities: Restricted cash............ (3,300) 4,115 (1,214) Other assets............... (4,591) 1,044 (1,341) Accounts payable........... (4,459) 786 140 Accrued expenses and other liabilities.............. 8,325 (4,031) (4,550) Security deposits.......... (178) 408 474 ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 74,978 80,405 44,918 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of real estate assets....................... -- (63,732) (76,287) Improvements to properties..... (34,377) (32,336) (20,205) Construction of units in progress and future development.................. (71,563) (107,963) (16,093) Proceeds from disposition of real estate assets........... 134,977 5,424 -- Proceeds from sale of development and construction assets....................... 18,134 -- -- Investment in and advances to real estate joint venture.... (8,085) -- -- Net cash paid in business combination.................. -- -- (25,678) ---------- ---------- ---------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES......... 39,086 (198,607) (138,263) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in credit lines..... 56,389 71,789 14,820 Proceeds from notes payable.... 11,760 232,799 187,500 Principal payments on notes payable...................... (75,989) (210,571) (267,003) Payment of deferred financing costs........................ (3,420) (7,097) (3,813) Repurchase of common stock..... (33,073) -- -- Proceeds from issuances of common shares and units...... 3,549 9,586 165,737 Proceeds from issuance of preferred shares............. -- 72,825 46,635 Redemption of unitholder interests.................... -- (150) (8) Distributions to unitholders... (6,860) (6,285) (5,347) Dividends paid on common shares....................... (43,451) (40,832) (29,172) Dividends paid on preferred shares....................... (16,114) (11,430) (5,252) ---------- ---------- ---------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES......... (107,209) 110,634 104,097 ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... 6,855 (7,568) 10,752 ---------- ---------- ---------- Cash and cash equivalents, beginning of period................................ 7,237 14,805 4,053 ---------- ---------- ---------- Cash and cash equivalents, end of period................................ $ 14,092 $ 7,237 $ 14,805 ========== ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid....................... $ 49,375 $ 45,607 $ 27,468 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Increase in basis of properties acquired in connection with business combination.............. $ -- $ -- $ 58,359 Assumption of debt related to property acquisitions............. $ -- $ 26,231 $ 63,690 Conversion of units for common shares............................ $ 922 $ 1,785 $ 974 Issuance of units related to property acquisitions............. $ -- $ 1,911 $ 880 Issuance of advances in exchange for common shares and units........... $ 100 $ 1,458 $ 906 Interest capitalized................ $ 3,967 $ 4,265 $ 388 See accompanying notes to consolidated financial statements. F-5
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND FORMATION OF THE COMPANY Mid-America Apartment Communities, Inc. ("Mid-America") is a self-administrated and self-managed real estate investment trust which owns, develops, constructs, acquires and operates multifamily apartment communities mainly in the southeast and Texas. The company owns and operates 120 apartment communities principally through its majority owned subsidiary, Mid-America Apartments, L.P. (the "Operating Partnership") and its subsidiary, Mid-America Capital Partners, L.P. ("MACP"). MACP is a special purpose entity established in 1997 to issue first mortgage bonds. The Company also owns a 33.33% interest in a real estate joint venture which owns 10 apartment communities. From the period November 1997 through June 1999, the company conducted third party property management, construction and development activities through its service corporation, Flournoy Development Corporation. BASIS OF PRESENTATION The consolidated financial statements presented herein include the accounts of Mid-America, the Operating Partnership, MACP, and all other subsidiaries ("the Company"). The Company owns 51% to 100% of these subsidiaries. The Company uses the equity method of accounting for its investments in 20 to 50 percent-owned entities. All significant intercompany accounts and transactions have been eliminated in consolidation. MINORITY INTEREST Minority interest in the accompanying consolidated financial statements relates to the ownership interest in the Operating Partnership by the holders of Class A Common Units of the Operating Partnership ("Operating Partnership Units") Mid-America is the sole general partner of the Operating Partnership. Net income is allocated to the minority interest based on their respective ownership percentage of the Operating Partnership. Issuance of additional common shares or Operating Partnership Units changes the ownership of both the minority interest and Mid-America. Such transactions and the proceeds therefrom are treated as capital transactions and result in an allocation between shareholders' equity and minority interest to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership. The Company's Board of Directors established economic rights in respect of each Operating Partnership Unit that were equivalent to the economic rights in respect of each share of common stock. The holder of each unit may redeem their units in exchange for one share of common stock or cash, at the option of the Company. The Operating Partnership has followed the policy of paying the same per unit distribution in respect of the units as the per share distribution in respect of the common stock. Operating Partnership net income for 1999, 1998 and 1997 was allocated approximately 15.6%, 15.6% and 17.9%, respectively, to holders of Operating Partnership Units and 84.4%, 84.4% and 82.1%, respectively, to Mid-America. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. REVENUE RECOGNITION The Company leases multifamily residential apartments under operating leases with terms of one year or less. Rental and other revenues are recorded when earned. F-6
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DEVELOPMENT, CONSTRUCTION AND FEE MANAGEMENT REVENUES The Company provided development, construction and property management services to third parties from November 1997 (the date of the FDC Merger -- note 2) until June 1999 (the date of disposing of those businesses -- note 3). The Company provided development services related to the development of third party properties. Development fee income was recognized as earned as the property was developed and certain operating and financing performance conditions were met. Construction contract revenues, which are presented net of construction contract costs in the accompanying statements of operations, were recognized using the percentage-of-completion method. Under this method, the percentage of contract revenue to be recognized currently was computed based upon that percentage of estimated total revenue that incurred costs to date bear to total estimated costs, after giving effect to the most recent estimates of costs to complete. Revisions in cost and revenue estimates were reflected in the period in which the facts, which require the revision, become known. When revised cost estimates indicate a loss on an individual contract, the total estimated loss was provided for currently in its entirety without regard to the percentage of completion. The Company provided property management services for Section 42 Housing Tax Credit multifamily properties and conventional properties. Property management revenue was recorded on the accrual method of accounting as earned. RENTAL COSTS Costs associated with rental activities are expensed as incurred. Certain costs associated with the lease-up of development projects, including cost of model units, their furnishings, signs, and "grand openings" are capitalized and amortized over their estimated useful lives. All other costs relating to renting development projects are expenses as incurred. CASH AND CASH EQUIVALENTS The Company considers cash, investments in money market accounts and certificates of deposit with original maturities of three months or less to be cash equivalents. RESTRICTED CASH Restricted cash consists of escrow deposits held by lenders for property taxes, insurance, debt service and replacement reserves. REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are carried at the lower of depreciated cost or estimated fair value, less cost to sell. Repairs and maintenance costs are expensed as incurred while significant improvements, renovations, and replacements are capitalized. The cost of interior painting, vinyl flooring, and blinds are expensed as incurred. In conjunction with acquisitions of properties, the Company's policy is to provide in its acquisition budgets adequate funds to complete any deferred maintenance items to bring the properties to the required standard, including the cost of replacement appliances, carpet, interior painting, vinyl flooring, and blinds. These costs are capitalized. Depreciation is computed on a straight line basis over the estimated useful lives of the related assets which range from 8 to 40 years for land improvements and buildings and 5 years for furniture, fixtures and equipment. F-7
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company records all gains and losses on real estate in accordance with SFAS No. 66. The total gain for the period ended December 31, 1999 and 1998 was approximately $10,237,000 and $408,000, respectively. The Company periodically evaluates its real estate asset investments to determine whether any impairment indicators are present by comparing current capitalized net operating income to the carrying value of the asset. If any investment asset is considered impaired, a loss is provided to reduce the carrying value of the property to its estimated fair value. No such losses have been required or provided in the accompanying financial statements. Development projects and the related carrying costs, including interest, property taxes, insurance and allocated development overhead during the construction period, are capitalized and reported on the accompanying balance sheet as "construction in progress" during the construction period. Upon completion and certification for occupancy of individual units within a development, amounts representing the completed unit's portion of total estimated development costs for the project are transferred to land, buildings and furniture, fixtures and equipment as real estate held for investment. Capitalization of interest, property taxes, insurance and allocated development overhead costs ceases upon the transfer, and the assets are depreciated over their estimated useful lives. Total interest capitalized during 1999, 1998 and 1997 was $3,967,000, $4,265,000 and $388,000 respectively. LAND HELD FOR FUTURE DEVELOPMENT Real estate held for future development consists primarily of sites intended for future multifamily developments and is stated at the lower of cost or fair value less its cost to sell. INVESTMENT IN AND ADVANCES TO REAL ESTATE JOINT VENTURE The Company's investment in an unconsolidated real estate joint venture is recorded on the equity method as the Company does not have a controlling interest in the joint venture. The portion of the gain realized upon the Company's sale of apartment communities to the joint venture was deferred in proportion to the Company's ownership interest in the joint venture. The deferred gain will be amortized over 20 years, which approximates the useful life of the joint venture's real estate assets. DEFERRED COSTS AND OTHER INTANGIBLES Deferred financing costs are amortized over the terms of the related debt using a method which approximates the interest method. Cost in excess of fair value of net assets acquired is amortized using the straight line method over 30 years. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activity," effective for years beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued to defer the implementation of SFAS No. 133 to all fiscal years beginning June 15, 2000. The accounting statement is not expected to have a material impact on the Company's consolidated financial statements. The Company plans to adopt this accounting standard in 2001. RECLASSIFICATION Certain prior year amounts have been reclassified to conform with 1999 presentation. The reclassifications had no effect on net income available for common shareholders. F-8
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. BUSINESS COMBINATIONS On November 25, 1997, the Company completed the merger with Flournoy Development Company and related entities ("FDC") (the "FDC Merger") accounted for using the purchase method of accounting. Total consideration consisted of $88,271,000, including 1,550,311 shares of common stock and 412,110 Class A common units of the Operating Partnership, valued at $56,213,000 ($28.6875 per share and unit), $29,608,000 cash and transaction costs of approximately $2,450,000. The operating results of FDC are included in the accompanying statement of operations commencing November 25, 1997. The assets acquired and liabilities assumed in connection with the merger were recorded at their respective fair values as follows: Fair value of assets acquired, primarily real estate assets......... $ 411,397,000 Liabilities assumed.................. 335,326,000 --------------- Net assets acquired............. $ 76,071,000 =============== 3. SALE OF DEVELOPMENT, CONSTRUCTION AND FEE MANAGEMENT BUSINESSES On June 30, 1999, the Company sold its development, construction and fee management businesses acquired in connection with the November 1997 FDC Merger back to the principals of Flournoy Development Company ("Flournoy"). The Company received net proceeds of $18.1 million for these assets and recorded a net loss for approximately $4.0 million, relating mainly to the write-off of goodwill related to the original purchase transaction as described in Note 2. In the transaction, Flournoy reacquired the development businesses, related fixed assets including single family development, land and property held for sale, and the fee management business of 5,131 tax credit apartment units. The Company has contracted with Flournoy to complete the remaining portion of its development pipeline. 4. REAL ESTATE JOINT VENTURE In March 1999 the Company entered into an agreement to form a joint venture (the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC ("Blackstone"), to own and operate 10 apartment communities to be completed in two transactions. The first transaction was completed on March 31, 1999 when the Company sold 6 apartment communities, containing 1,660 apartment units, to the Joint Venture for approximately $64.6 million in cash. In August 1999, the Company closed the second portion of the Joint Venture transaction with Blackstone. The Company sold four additional properties containing 1,134 apartment units to the Joint Venture, for proceeds of approximately $33.3 million. The Company contributed cash and made an additional loan to the Joint Venture related to this transaction bringing the total investment in the Joint Venture to approximately $4.6 million and the total loan to $3.4 million, $3 million at an interest rate of 10% and $.4 million at a rate of 7%, both for the life of the entity. The loan is unsecured and is presented in the accompanying consolidated balance sheets in the caption "Investments in and advances to real estate joint venture". Interest and management fees are recorded as earned and presented in the accompanying consolidated income statement as "Other revenue" and "Management and development income, net", respectively. F-9
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company recognized a gain of approximately $9.0 million and deferred gains for the Company's retained interest of approximately $4.8 million. The Company retained a 33.33 percent ownership interest in the Joint Venture and manages the communities for a fee of 4% of revenues. The agreement provides that income and cash flows generated by the Joint Venture are to be allocated based on respective ownership percentages. Summary combined unaudited financial information for the Joint Venture for the year ended December 31, 1999 follows: 1999 ---------- Real estate assets, net.............. $ 98,323 Total assets......................... $ 103,011 Long-term debt....................... $ 86,150 Total liabilities.................... $ 89,313 Partners' capital.................... $ 13,698 Total revenues....................... $ 11,344 Depreciation expense................. $ 2,226 Net loss............................. $ 64 5. BORROWINGS At December 31, 1999 the Company has two lines of credit (the Credit Lines) with a total outstanding balance of $173.4 million. The Credit Lines are secured by certain of the properties and have restrictive financial covenants. The AmSouth Credit Line has a $150 million borrowing limit at December 31, 1999 and expires in November 2001. The AmSouth Credit Line has a tiered interest rate as determined by the Company's percentage of total liabilities to a valuation of the Company's investment in real estate assets ("AmSouth Ratio"), as defined by the loan agreement, which is reviewed quarterly for interest rate adjustments. The AmSouth Credit Line bears interest at LIBOR plus 1.45%, 1.65%, and 1.75% based on an AmSouth Ratio less than 55%, between 55% and 60%, and over 60%, respectively. The AmSouth Credit Line had an interest rate at December 31, 1999 of LIBOR plus 1.75% (7.75%). The FNMA Credit Line has a $195 million borrowing limit, bears interest at the 90-day FNMA mortgage backed security rate plus .67% (6.28% at December 31, 1999) and expires November 2004. At December 31, 1998 the Company had $117.0 million outstanding under the AmSouth Credit Line and $25.0 million outstanding under a short-term note payable. During 1999, the Company paid off approximately $73.2 million of various notes payable including $18.4 million relating to property dispositions and a $25.0 million short-term note payable established in 1998. The Company incurred costs of $67,000, net of minority interest, related to the early extinguishment of one mortgage which is included in "Extraordinary item -- loss on early extinguishment of debt" in the accompanying financial statements. The Company had approximately $570.8 million and $612.0 million at December 31, 1999 and 1998, respectively, outstanding under various mortgage notes and bonds payable secured by real estate assets. The Company has issued $142 million aggregate principal amount of 6.376% Bonds due 2003 (the "Bonds"). The Bonds are secured by a first priority deed of trust, security agreement and assignment of rents and leases in respect of 26 mortgaged properties, with a net book value of $207.2 million at December 31, 1999. In anticipation of the Bond issuance, the Company entered four separate forward interest rate lock agreements in 1997 with notional amounts aggregating $140 million, the effect of which was to lock the interest rate on $140 million of the Bonds at an average rate of 6.62%. In 1998 the Company realized a $1.4 million loss on the interest rate contracts. The realized loss resulting from the change in the F-10
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) market value of these contracts is being amortized into interest expense over the life of the related debt issuance. During 1998, the Company refinanced approximately $29.1 million of various notes payable. The Company also refunded $4.8 million of bonds secured by its Sterling Ridge Apartments and refunded $14.0 million of bonds secured by its Hunters Ridge Apartments. The Company incurred costs of $449,000, net of minority interest, for these combined transactions which is included in "Extraordinary item -- loss on early extinguishment of debt" in the accompany financial statements along with $455,000 related to extinguishment of debt due to the sale of real estate and $86,000 related to refinancing of a bridge loan. During 1997, the Company extinguished a bond note, resulting in an extraordinary loss of $771,000. At consummation of the merger with FDC, the Company repaid certain debt primarily attributable to FDC, resulting in an extraordinary loss of $7,851,000, net of minority interest. As of December 31, 1999, the Company estimated that the weighted average interest rate on the Company's debt was 7.06% with an average maturity of 10.7 years. The following table summarizes the Company's indebtedness at December 31, 1999. <TABLE> <CAPTION> ACTUAL AVERAGE INTEREST RATES INTEREST RATE MATURITY 1999 1998 -------------- -------------- ---------- --------- --------- <S> <C> <C> <C> <C> <C> (DOLLARS IN MILLIONS) Fixed Rate: Taxable......................... 6.376-9.006% 7.371% 2000-2037 $ 442.6 $ 481.5 Tax-exempt...................... 5.281-7.594% 6.118% 2008-2028 96.3 97.9 --------- --------- $ 538.9 $ 579.4 Variable Rate: Taxable......................... 6.28-7.15% 7.127% 2000-2004 $ 173.4* $ 142.0 Tax-exempt...................... 5.0-5.4% 5.133% 2025-2028 31.9 32.0 --------- --------- $ 205.3 $ 174.0 --------- --------- $ 744.2 $ 753.4 ========= ========= </TABLE> - ------------ * Includes $25 million of variable rate effectively fixed through the interest rate swap. Scheduled principal repayments on the borrowings at December 31, 1999 are as follows (dollars in thousands): <TABLE> <CAPTION> YEAR AMORTIZATION BALLOON PAYMENTS TOTAL - ------------------------------------- ------------ ---------------- ---------- <S> <C> <C> <C> 2000................................. $ 4,618 $ 4,552 $ 9,170 2001................................. 4,819 103,571 108,390 2002................................. 4,916 11,390 16,306 2003................................. 4,742 161,821 166,563 2004................................. 4,719 184,399 189,118 Thereafter........................... 170,082 84,609 254,691 ------------ ---------------- ---------- $193,896 $550,342 $ 744,238 ============ ================ ========== </TABLE> The Company's indebtedness includes various restrictive financial covenants. The Company believes that it was in compliance with these covenants as of December 31, 1999. F-11
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS Cash and cash equivalents, restricted cash, accounts payable, accrued expenses and other liabilities and security deposits are carried at amounts which reasonably approximate their fair value due to their short term nature. Fixed rate notes payable at December 31, 1999 and 1998 total $538.9 million and $579.4 million, respectively, and have an estimated fair value of $516.5 million and $582.4 million (excluding prepayment penalties) based upon interest rates available for the issuance of debt with similar terms and remaining maturities as of December 31, 1999 and 1998. These notes were subject to prepayment penalties in the event of repayment prior to maturity, which were not considered in determining their estimated fair value. The carrying value of variable rate notes payable at December 31, 1999 and 1998 total $205.3 million and $174.0 million, respectively, and reasonably approximates their fair value because the related variable interest rates reasonably approximate market rates. Included in these variable rate notes are certain Multifamily Housing Renewal bonds with rates which are less than the prime lending rates at December 31, 1999 and 1998. Approximately $32.0 million in 1999 and 1998 of these mortgages are non-taxable and have lower rates than would be expected for taxable notes with similar terms. The fair value estimates presented herein are based on information available to management as of December 31, 1999 and 1998. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 7. COMMITMENTS AND CONTINGENCIES The Company is not presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company, other than routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and none of which is expected to have a material adverse effect on the consolidated financial statements of the Company. The Company leases an aircraft to facilitate transportation between its properties. In 1998, the Company entered a new five year aircraft lease which generally provides for the Company to pay maintenance, insurance, and certain other operating costs of the leased property. The agreement has been accounted for as an operating lease. The Company incurred lease expense relating to aircraft lease agreements for the years ended December 31, 1999, 1998, and 1997 of $256,000, $138,000, and $187,000, respectively. 8. INCOME TAXES No provision for federal income taxes has been made in the accompanying consolidated financial statements. The Company has made an election to be taxed as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of the Code. As a REIT, the Company generally is not subject to Federal income tax to the extent it distributes 95% of its REIT taxable income to its shareholders and meets certain other tests relating to the number of shareholders, types of assets and allocable income. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to the Federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Even though the Company qualifies for taxation as a REIT, the Company may be subject to certain Federal, state and local taxes on its income and property and to Federal income and excise tax on its undistributed income. F-12
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Earnings and profits, which determine the taxability of dividends to shareholders, differ from net income reported for financial reporting purposes primarily because of differences in depreciable lives, bases of certain assets and liabilities and in the timing of recognition of earnings upon disposition of properties. For federal income tax purposes, the following summarizes the taxability of cash distributions paid on the common shares in 1998 and 1997 and the estimated taxability for 1999: 1999 1998 1997 ----- ----- ----- Per common share Ordinary income................. $1.40 $1.28 $1.16 Capital gains................... .18 -- -- Return of capital............... .72 .92 .98 ----- ----- ----- Total...................... $2.30 $2.20 $2.14 ===== ===== ===== 9. SHAREHOLDERS' EQUITY SERIES A PREFERRED STOCK Series A Cumulative Preferred Stock ("Series A Preferred Stock") has a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.375 per share, payable monthly. On and after November 1, 2001, the Series A Preferred shares will be redeemable for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation preference plus dividends accrued and unpaid to the redemption date. SERIES B PREFERRED STOCK Series B Cumulative Preferred Stock ("Series B Preferred Stock") has a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.21875 per share, payable monthly. In November 1997 the Company issued 1,938,830 Series B Preferred shares and received net proceeds of $46.6 million. On and after December 1, 2002, the Series B Preferred shares will be redeemable for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation preference plus dividends accrued and unpaid to the redemption date. SERIES C PREFERRED STOCK Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") has a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.34375 per share, payable quarterly. In June 1998 the Company issued 2,000,000 Series C Preferred shares and received net proceeds of $48.1 million. On and after June 30, 2003, the Series C Preferred shares will be redeemable for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation preference plus dividends accrued and unpaid to the redemption date. SERIES D PREFERRED STOCK -- SHAREHOLDERS RIGHTS PLAN During December 1998, the Board of Directors authorized a Shareholders Rights Plan (the "Rights Plan"). In implementing the Rights Plan, the Board declared a distribution of one right for each of the Company's outstanding common shares which would become exercisable only if a person or group (the "Acquiring Person") becomes the beneficial owner of 10% or more of the common shares or announces a tender or exchange offer that would result in ownership of 10% of the Company's common shares. The rights will trade with the Company's common stock until exercisable. Each holder of a right, other than the Acquiring Person, is in that event entitled to purchase one common share of the Company for each right at one half of the then current price. F-13
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SERIES E PREFERRED STOCK Series E Cumulative Preferred Stock ("Series E Preferred Stock") has a $25.00 per share liquidation preference and a preferential cumulative annual distribution of $2.375 per share, payable monthly. In December 1998 the Company issued 1,000,000 Series E Preferred shares in a direct placement with a private investor. The Company received net proceeds of $24.7 million. After five years, the securities may be required by the purchaser to be redeemed by the Company in cash or common stock, at the Company's option, at the then market price. The Series E Preferred Stock is equal in rank with the Company's other series of Preferred Stock with respect to the payment of dividends and amounts upon liquidation, dissolution or winding up. COMMON STOCK OFFERINGS In March 1997 the Company issued 2,300,000 shares of common stock and received net proceeds of $62.5 million. In October 1997 the Company issued 3,499,000 shares of common stock and received net proceeds of $98.2 million. The Company contributed the net proceeds of the offerings to the Operating Partnership in exchange for additional Operating Partnership Units. DIRECT STOCK PURCHASE AND DISTRIBUTION REINVESTMENT PLAN In January 1999 the Company adopted the DSPDRP pursuant to which the Company's shareholders have the ability to reinvest all or part of distributions from Mid-America common stock, preferred stock or limited partnership interests in Mid-America Apartments, L.P. Also, the plan provides the opportunity for shareholders to buy additional shares through an optional cash investment. This plan replaced the Company's previous Dividend Reinvestment and Stock Purchase Plan (the "DRSPP"). The Company has registered with the Securities and Exchange Commission the offer and sale of up to 1,600,000 shares of common stock pursuant to the DSPDRP and DRSPP. Additional shares will be purchased at the market price on the "Investment Date" each month, which shall in no case be later than ten business days following the distribution payment date. Common stock shares totaling 111,637, 62,175 and 24,785 were acquired by shareholders during 1999, 1998 and 1997, respectively. STOCK REPURCHASE PLAN In 1999, the Company's Board of Directors approved a stock repurchase plan to acquire up to a total of 4.0 million shares of the Company's common shares. In 1999, the Company repurchased approximately 1.5 million shares of common stock, of which 1.1 million were retired, for a cost of approximately $33 million at an average price per common share of $22.40. EARNINGS PER SHARE The computation of basic earnings per share is based on the weighted average number of common shares outstanding. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding plus the shares resulting from the assumed exercise of all dilutive outstanding options using the treasury stock method. The Series E Preferred Shares, which are convertible five years from the date of issuance, are not included in the calculation because the assumed conversion would be anti-dilutive. A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years ended December 31, 1999, 1998 and 1997 is presented on the Consolidated Statement of Operations. F-14
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. EMPLOYEE BENEFIT PLANS 401 (K) SAVINGS PLAN The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a defined contribution plan that satisfies the requirements of Section 401(a) and 401(k) of the Code. The Company may, but is not obligated to, make a matching contribution of $.50 for each $1.00 contributed, up to 6% of the participant's compensation. The Company's contribution to this plan was $204,200, $318,200 and $154,300 in 1999, 1998 and 1997, respectively. NON-QUALIFIED DEFERRED COMPENSATION PLAN The Company has adopted a non-qualified deferred compensation plan for key employees who are not qualified for participation in the Company's 401 (k) Savings Plan. Under the terms of the plan, employees may elect to defer a percentage of their compensation and the Company matches a portion of their salary deferral. The plan is designed so that the employees' investment earnings under the non-qualified plan should be the same as the earning assets in the Company's 401 (k) Savings Plan. The Company's match to this plan in 1999, 1998 and 1997 was $17,300, $19,100 and $18,600, respectively. EMPLOYEE STOCK PURCHASE PLAN The Mid-America Apartment Communities, Inc. Employee Stock Purchase Plan (the "ESPP") provides a means for employees to purchase common stock of the Company. The board has authorized the issuance of 150,000 shares for the plan. The ESPP is administered by the Compensation Committee who may annually grant options to employees to purchase annually up to an aggregate of 15,000 shares of common stock at a price equal to 85% of the market price of the common stock. During 1999, 1998 and 1997, the ESPP purchased 6,721, 5,242 and 2,758 shares, respectively. EMPLOYEE STOCK OWNERSHIP PLAN The Mid-America Apartment Communities, Inc. Employee Stock Ownership Plan (the "ESOP") which is a non-contributory stock bonus plan that satisfies the requirements of Section 401 (a) of the Internal Revenue Code. Each employee of the Company is eligible to participate in the ESOP after attaining the age of 21 years and completing one year of service with the Company. Participants' ESOP accounts will be 100% vested after five years of continuous service, with no vesting prior to that time. The Company contributed 22,500 shares of common stock to the ESOP upon conclusion of the IPO. During 1999, 1998 and 1997, the Company contributed $640,100, $448,300 and $344,000, respectively, to the ESOP which purchased an additional 28,233, 17,156 and 11,921 shares, respectively. STOCK OPTION PLAN The Company has adopted the 1994 Restricted Stock and Stock Option Plan (the "Plan") to provide incentives to attract and retain independent directors, executive officers and key employees. The Plan provides for the grant of options to purchase a specified number of shares of common stock ("Options") or grants of restricted shares of common stock ("Restricted Stock"). The Plan also allows the Company to grant options to purchase Operating Partnership Units at the price of the common stock on the New York Stock Exchange on the day prior to issuance of the units (the "LESOP Provision"). The Plan authorizes the issuance of 1,000,000 common shares or options to acquire shares. The Compensation Committee of the Board of Directors is responsible for granting Options and shares of Restricted Stock and for establishing the exercise price of Options and terms and conditions of Restricted Stock. In 1997 options to purchase 75,000 shares of common stock and 110,000 Operating Partnership Units were exercised pursuant to the LESOP Provision and the Company advanced a portion of the purchase price of these shares and units. The employee advances mature five years from date of issuance and accrue interest, payable in arrears, at a rate of 7.0% per annum and are presented as a reduction of F-15
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) shareholders' equity in the accompanying consolidated balance sheets. The Company entered into supplemental bonus agreements with the employees which are intended to fund the payment of the advances over a five year period. Under the terms of the supplemental bonus agreements, the Company will pay cash bonuses to these employees equal to 20% of the original note balance on each anniversary date of the advances. The bonuses are limited to 15% of the aggregate purchase price of the common shares and units. During 1998, the Company issued 150,000 shares of common stock and 100,000 Operating Partnership Units to certain executive officers of the Company. The Company received approximately $5,899,250 cash and advanced the employees approximately $1,040,750 secured by the common stock and Operating Partnership Units of the Company. The advances bear interest at rates ranging from 5.59% to 5.68% per annum, and are presented as a reduction of shareholders' equity in the accompanying consolidated balance sheets. In addition, the Company has agreed to pay a bonus to the executive officers mentioned above for as long as they remain employed by the Company in an amount equal to the debt service on the advances from the Company. The advances will become due and payable and the bonus agreement will terminate if the employees voluntarily terminate their employment with the Company. Additionally throughout 1998, the Company issued 69,000 shares of common stock to certain other officers of the Company at the market price on the date of issuance. The Company received approximately $900,000 cash and advanced the employees approximately $900,000. The advances bear interest at 7.5% and 8.25% per annum, are secured by the common stock of the Company and are presented as a reduction of shareholders' equity in the accompanying consolidated balance sheets. During 1999, the Company issued 9,000 shares of common stock to certain other officers of the Company at the market price on the date of issuance. The Company received approximately $100,000 cash and advanced the employees approximately $100,000. The advances bear interest at 7.5% and 8.25% per annum, are secured by the common stock of the Company and are presented as a reduction of shareholders' equity in the accompanying consolidated balance sheets. The Company has agreed to pay an annual bonus for five years to these officers amounting to 3% of the original purchase price of the shares. The advances will become due and payable if the employees terminate their employment with the Company. In connection with the sale of the development, construction and fee management businesses (note 3) certain executive officers of the Company resigned. Amounts due from these officers which related to the issuances of shares, totaling approximately $447,000, were forgiven as a part of the sale. The effect of this debt forgiveness is included in the loss on disposition of those businesses in the accompanying financial statements. At December 31, 1999, 1998 and 1997, the total outstanding principal balance on the employee advances was approximately $1,296,000, $2,219,000 and $906,000 respectively, and is presented as a reduction in the Company's statements of shareholders' equity. F-16
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of changes in Options to acquire shares of Common Stock and Operating Partnership Units, including grants and exercises pursuant to the LESOP provision, for the three years ended December 31, 1999 is as follows: WEIGHTED AVERAGE OPTIONS EXERCISE PRICE ---------- ---------------- Outstanding at December 31, 1996..... 338,650 $22.53 Granted......................... 416,500 29.46 Exercised....................... (218,625) 28.17 Forfeited....................... (13,025) 27.91 ---------- Outstanding at December 31, 1997..... 523,500 25.40 Granted......................... 663,250 28.78 Exercised....................... (338,581) 28.28 Forfeited....................... (52,850) 27.81 ---------- Outstanding at December 31, 1998..... 795,319 26.87 Granted......................... 371,750 22.25 Exercised....................... (1,300) 19.75 Forfeited....................... (219,550) 25.47 ---------- Outstanding at December 31, 1999..... 946,219 ========== Options exercisable: December 31, 1997............... 140,500 $21.71 December 31, 1998............... 208,769 23.19 December 31, 1999............... 285,694 23.34 Exercise prices for options outstanding as of December 31, 1999 ranged from $19.75 to $29.50. The weighted average remaining contractual life of those options is 7.3 years. On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which requires either the (i) fair value of employee stock-based compensation plans be recorded as a component of compensation expense in the statement of operations as of the date of grant of awards related to such plans, or (ii) impact of such fair value on net income and earnings per share be disclosed on a pro forma basis in a footnote to financial statements for awards granted after December 15, 1994, if the accounting for such awards continues to be in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25"). The Company will continue such accounting under the provisions of APB 25. If the fair value method of accounting allowed under SFAS No. 123 had been used by the Company, the pro forma net income available to common shareholders would have been $17,254,000, $14,681,000, $5,452,000 for 1999, 1998 and 1997, respectively. The pro forma diluted net income available per common share would have been $0.92, $0.78 and $0.39 for 1999, 1998 and 1997, respectively. The calculation was prepared using the Black-Scholes option pricing model using the following factors: 1) risk free interest rate of 6.38%, 2) expected life of 7.3 years, 3) expected volatility of 19.14%, and 4) expected dividends of 10.16%. The weighted average fair value of all options granted during the year is $8,271,000 at a weighted average option price of $22.25 per share. 11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. The Company occasionally utilizes derivative financial instruments as hedges in anticipation of future debt transactions to manage well-defined interest rate risk or as protection to hedge the interest rate risk of the Company's variable rate debt by locking the effective rate on portions of the outstanding lines of credit. F-17
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1998 the Company entered an Interest Rate Swap Agreement which expires on August 15, 2003 that effectively locks the interest rate the Company pays on a portion of its AmSouth Credit Line. As of December 31, 1999, $25 million notional amount was outstanding on this agreement with a fixed interest rate paid by the Company of 7.57%. The fair value of this agreement at December 31, 1999 was $894,000. 12. RELATED PARTY TRANSACTION During 1997 the Company acquired its corporate headquarters building for $2,912,000 from a partnership whose partners included certain executive officers of the Company. The consideration paid consisted of $862,000 cash, 22,246 Operating Partnership Units valued at $634,000 ($28.50 per unit) and the assumption of an existing loan. Prior to acquisition the Company leased the building from the partnership. Pursuant to a management contract with the Joint Venture, the Company manages the operations of the 10 Joint Venture apartment communities for a fee of 4% of the revenues of the Joint Venture. In 1999 the Company received approximately $453,000 as management fees from the Joint Venture. 13. SEGMENT INFORMATION At December 31, 1999, the Company owned or had an ownership interest in 130 multifamily apartment communities, including the 10 apartment communities owned by the Joint Venture, in 13 different states from which it derives all significant sources of earnings and operating cash flows. The Company's operational structure is organized on a decentralized basis, with individual property managers having overall responsibility and authority regarding the operations of their respective properties. Each property manager individually monitors local and area trends in rental rates, occupancy percentages, and operating costs. Property managers are given the on-site responsibility and discretion to react to such trends in the best interest of the Company. The Company's chief operating decision maker evaluates the performance of each individual property based on its contribution to net operating income in order to ensure that the individual property continues to meet the Company's return criteria and long term investment goals. The Company defines each of its multifamily communities as an individual operating segment. It has also determined that all of its communities have similar economic characteristics and also meet the other criteria which permit the communities to be aggregated into one reportable segment, which is acquisition, development, and operation of the multifamily communities owned. F-18
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The revenues, net operating income, assets and real estate investment capital expenditures for the aggregated multifamily segment are summarized as follows for the years ended as of December 31, 1999, 1998 and 1997 (in 000's). For purposes of this disclosure multifamily revenues, net operating income and real estate assets include amounts related to the 10 properties owned by the unconsolidated Joint Venture. 1999 1998 1997 ----------- ----------- --------- Multifamily rental revenues.......... $ 233,442 $ 210,591 $ 135,673 Other multifamily revenues........... 2,116 2,248 1,426 ----------- ----------- --------- Segment revenues................. 235,558 212,839 137,099 Reconciling items to consolidated revenues: Joint Venture revenues........... (11,344) -- -- Management and development income, net.................... 751 1,841 164 Equity in loss of joint venture........................ (31) -- -- Interest income and other revenues....................... 1,388 863 1,853 ----------- ----------- --------- Total revenues................. $ 226,322 $ 215,543 $ 139,116 =========== =========== ========= Multifamily net operating income..... 145,874 132,922 84,695 Reconciling items to net income available for common shareholders: Joint Venture net operating income......................... (6,545) -- -- Management and development income, net.................... 751 1,841 164 Equity in loss of real estate joint venture.................. (31) -- -- Interest income and other revenues....................... 1,388 863 1,853 Interest expense................. (48,302) (45,704) (28,943) General and administrative expenses....................... (14,479) (11,960) (6,602) Depreciation and amortization.... (49,903) (46,021) (27,737) Amortization of deferred financing costs................ (2,854) (2,348) (888) Gain on dispositions............. 10,237 408 -- Extraordinary items, net......... (67) (990) (8,622) Minority interest................ (2,497) (2,254) (2,693) Dividends on preferred shares.... (16,114) (11,430) (5,252) ----------- ----------- --------- Net income available for common shareholders................ $ 17,458 $ 15,327 $ 5,975 =========== =========== ========= 1999 1998 ----------- ----------- ASSETS: Multifamily real estate assets....... $ 1,480,232 $ 1,412,078 Accumulated depreciation -- multifamily assets............................. (148,839) (117,773) ----------- ----------- 1,331,393 1,294,305 Reconciling items to total assets: Joint Venture multifamily real estate assets, net........................ (98,323) -- Land held for future development.................... 1,710 11,781 Commercial properties, net....... 5,217 9,282 Investment in and advances to real estate joint venture...... 8,054 -- Cash and Restricted Cash......... 26,629 16,519 Other assets..................... 24,143 34,540 ----------- ----------- Total assets................ $ 1,298,823 $ 1,366,427 =========== =========== 1999 1998 1997 ----------- ----------- --------- Multifamily expenditures for property improvements, acquisitions and construction....................... $ 107,508 $ 204,031 $ 112,585 Less reconciling items: Joint Venture property improvements................... (1,568) -- -- ----------- ----------- --------- Total expenditures for property improvements, acquisitions and construction.............. $ 105,940 $ 240,031 $ 112,585 =========== =========== ========= F-19
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. SUBSEQUENT EVENTS (UNAUDITED) DECLARATION OF DIVIDEND The Company declared a 1999 fourth quarter common stock dividend of $0.58 per share to be paid January 31, 2000 to holders of record on January 24, 2000. PROPERTY DISPOSITIONS On February 11, 2000, the Company sold the 120-unit Pine Trails apartment community in Clinton, Mississippi for approximately $2,815,000 for cash. On February 25, 2000, the Company sold the 248-unit MacArthur Ridge apartment community for approximately $12,075,000 for cash. The proceeds from both dispositions were to be used to reduce debt, fund the development pipeline, and as a source of capital for future share repurchases. F-20
MID-AMERICA APARTMENT COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) MID-AMERICA APARTMENT COMMUNITIES, INC. QUARTERLY FINANCIAL DATA (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1999 ------------------------------------------- FIRST SECOND THIRD FOURTH --------- ------- --------- ------- <S> <C> <C> <C> <C> Total revenues ..................... $ 57,089 $ 56,362 $ 56,983 $ 55,888 Income before minority interest in operating partnership income and extraordinary item ............... $ 7,512 $ 2,275 $ 11,445 $ 14,904 Minority interest in operating partnership income (loss) ........ $ 1,196 $ (414) $ 917 $ 798 Extraordinary item, net of minority interest ......................... $ (67) -- -- -- Net income (loss) available for common shareholders .............. $ 6,920 $ (1,340) $ 6,500 $ 5,378 Per share: Basic and diluted per share: Net income available per common shares Before extraordinary item ..... $ 0.37 $ (0.07) $ 0.34 $ 0.29 Extraordinary item ............ -- -- -- -- -------- -------- -------- -------- Net income available per common share ....................... $ 0.37 $ (0.07) $ 0.34 $ 0.29 ======== ======== ======== ======== Dividend declared .................. $ 0.575 $ 0.575 $ 0.575 $ 0.58 </TABLE> <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1998 ------------------------------------------- FIRST SECOND THIRD FOURTH --------- ------- --------- ------- <S> <C> <C> <C> <C> Total revenues....................... $ 50,982 $52,166 $ 56,086 $56,309 Income before minority interest in operating partnership income and extraordinary item................. $ 7,467 $ 7,459 $ 7,764 $ 7,311 Minority interest in operating partnership income................. $ 421 $ 746 $ 610 $ 477 Extraordinary item, net of minority interest........................... $ (371) $ (619) $ -- $ -- Net income (loss) available for common shareholder................. $ 4,412 $ 3,818 $ 3,719 $ 3,378 Per share: Basic and diluted per share: Net income available per common shares Before extraordinary item....... $ 0.26 $ 0.24 $ 0.20 $ 0.18 Extraordinary item.............. $ (0.02) $ (0.04) $ -- $ -- --------- ------- --------- ------- Net income available per common share......................... $ 0.24 $ 0.20 $ 0.20 $ 0.18 ========= ======= ========= ======= Dividend declared.................... $ 0.55 $ 0.55 $ 0.55 $ 0.575 </TABLE> F-21
MID-AMERICA APARTMENT COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> GROSS AMOUNT CARRIED AT COST CAPITALIZED DECEMBER SUBSEQUENT TO 31, INITIAL COST ACQUISITION 1999(6) -------------------- ---------------- -------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND - ------------------------------------- ------------------------------- -------- --------- ----- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> The Advantages....................... Jackson, MS -- (1) $ 422 $ 3,727 $-- $ 949 $ 422 McKellar Woods....................... Memphis, TN -- (8) 737 13,200 -- 2,054 737 Pine Trails.......................... Clinton, MS $ 1,270 178 2,728 -- 775 178 Reflection Pointe.................... Jackson, MS $ 5,882 710 8,770 140 2,517 850 Riverhills........................... Grenada, MS $ 785 153 2,092 -- 385 153 Woodridge............................ Jackson, MS $ 4,677 471 5,522 -- 515 471 Greenbrook........................... Memphis, TN -- (8) 2,100 24,468 25 9,295 2,125 Steeplechase......................... Hixson, TN -- (9) 217 1,957 -- 1,305 217 Clearbrook Village................... Memphis, TN $ 1,014 260 3,658 -- 992 260 Crossings............................ Memphis, TN -- (1) 554 2,216 -- 627 554 Eastview............................. Memphis, TN $ 11,696 700 9,646 -- 1,633 700 Gleneagles........................... Memphis, TN -- (1) 443 3,983 -- 1,851 443 The Park Estate...................... Memphis, TN -- (8) 178 1,141 -- 920 178 Winchester Square.................... Memphis, TN -- (1) 350 7,279 -- 1,187 350 Post House North..................... Jackson, TN $ 3,461 381 4,299 -- 862 381 Post House Jackson................... Jackson, TN $ 5,052 443 5,078 -- 754 443 The Oaks............................. Jackson, TN -- (1) 177 1,594 -- 742 177 The Corners.......................... Winston-Salem, NC $ 4,081 685 6,165 -- 673 685 Park Haywood......................... Greenville, SC -- (9) 325 2,925 35 2,595 360 Hickory Farm......................... Memphis, TN -- (1) 580 5,220 -- 598 580 Stonemill Village.................... Louisville, KY -- (1) 1,169 10,518 -- 1,562 1,169 Canyon Creek......................... St. Louis, MO -- (1) 880 7,923 220 2,091 1,100 Whispering Oaks...................... Little Rock, AR -- 506 4,551 -- 1,644 506 Pear Orchard......................... Jackson, MS -- (9) 1,352 12,168 -- 1,444 1,352 Celery Stalk......................... Dallas, TX $ 8,460 1,463 13,165 -- 2,282 1,463 Hollybrook........................... Dalton, GA -- 405 3,646 -- 1,123 405 Green Tree Place..................... Woodlands, TX $ 3,180 539 4,850 -- 836 539 MacArthur Ridge...................... Irving, TX -- (2) 1,131 10,183 -- 763 1,131 Lincoln on the Green................. Memphis, TN -- (10) 1,498 13,484 -- 993 1,498 Brentwood Downs...................... Nashville, TN -- (3) 1,193 10,739 -- 778 1,193 Shenandoah Ridge..................... Augusta, GA -- (9) 650 5,850 -- 1,955 650 Westborough Crossing................. Katy, TX $ 3,958 677 6,091 -- 935 677 Woodbridge at the Lake............... Jacksonville, FL -- (3) 645 5,804 -- 1,025 645 Lakepointe........................... Lexington, KY -- (9) 411 3,699 -- 665 411 The Mansion.......................... Lexington, KY -- (3) 694 6,242 -- 999 694 The Village.......................... Lexington, KY -- (9) 900 8,097 -- 1,067 900 Cypresswood Court.................... Spring, TX $ 3,330 577 5,190 -- 926 577 The Lodge at Timberglen.............. Dallas, TX $ 4,740 825 7,422 -- 1,856 825 Calais Forest........................ Little Rock, AR $ -- 1,026 9,244 -- 1,378 1,026 The Fairways......................... Columbia, SC $ 7,566 910 8,207 -- 523 910 Kirby Station........................ Memphis, TN -- (9) 1,148 10,337 -- 2,317 1,148 Belmere.............................. Tampa, FL -- (9) 851 7,667 -- 1,730 851 Williamsburg Village................. Jackson, TN -- (9) 523 4,711 -- 543 523 Fairways @ Royal Oak................. Cincinnati, OH -- (9) 814 7,335 -- 964 814 Tanglewood........................... Anderson, SC $ 2,410 427 3,853 -- 829 427 Woods at Post House.................. Jackson, TN $ 5,255 240 6,839 -- 670 240 Somerset............................. Jackson, MS -- (9) 477 4,294 -- 694 477 Highland Ridge....................... Greenville, SC -- (4) 482 4,337 -- 473 482 Spring Creek......................... Greenville, SC -- (4) 597 5,374 -- 667 597 St. Augustine........................ Jacksonville, FL -- (5) 2,858 6,475 -- 2,026 2,858 Cooper's Hawk........................ Jacksonville, FL -- (5) 854 7,500 -- 879 854 Marsh Oaks........................... Atlantic Beach, FL -- (9) 244 2,829 -- 600 244 Park at Hermitage.................... Nashville, TN $ 7,770 1,524 14,800 -- 1,638 1,524 LIFE USED TO COMPUTE DEPRECIATION BUILDING IN LATEST AND ACCUMULATED DATE OF INCOME PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7) - ------------------------------------- --------- --------- ----------- --------- ------------ ------------ The Advantages....................... $ 4,676 $ 5,098 $ (1,443) $ 3,655 1984 5 - 40 McKellar Woods....................... 15,254 15,991 (3,483) 12,508 1976 5 - 40 Pine Trails.......................... 3,503 3,681 (1,348) 2,333 1978 5 - 40 Reflection Pointe.................... 11,287 12,137 (2,061) 10,076 1986 5 - 40 Riverhills........................... 2,477 2,630 (692) 1,938 1972 5 - 40 Woodridge............................ 6,037 6,508 (1,135) 5,373 1987 5 - 40 Greenbrook........................... 33,759 35,888 (6,565) 29,323 1986 5 - 40 Steeplechase......................... 3,262 3,479 (816) 2,663 1986 5 - 40 Clearbrook Village................... 4,650 4,910 (965) 3,945 1974 5 - 40 Crossings............................ 2,843 3,397 (864) 2,533 1974 5 - 40 Eastview............................. 11,279 11,979 (2,780) 9,199 1974 5 - 40 Gleneagles........................... 5,834 6,277 (2,075) 4,202 1975 5 - 40 The Park Estate...................... 2,061 2,239 (988) 1,251 1974 5 - 40 Winchester Square.................... 8,466 8,816 (1,873) 6,943 1973 5 - 40 Post House North..................... 5,161 5,542 (980) 4,562 1987 5 - 40 Post House Jackson................... 5,832 6,275 (1,102) 5,173 1987 5 - 40 The Oaks............................. 2,336 2,513 (526) 1,987 1978 5 - 40 The Corners.......................... 6,838 7,523 (1,433) 6,090 1982 5 - 40 Park Haywood......................... 5,520 5,880 (1,004) 4,876 1983 5 - 40 Hickory Farm......................... 5,818 6,398 (1,224) 5,174 1985 5 - 40 Stonemill Village.................... 12,080 13,249 (2,525) 10,724 1985 5 - 40 Canyon Creek......................... 10,014 11,114 (1,991) 9,123 1987 5 - 40 Whispering Oaks...................... 6,195 6,701 (1,369) 5,332 1978 5 - 40 Pear Orchard......................... 13,612 14,964 (2,792) 12,172 1985 5 - 40 Celery Stalk......................... 15,447 16,910 (3,044) 13,866 1978 5 - 40 Hollybrook........................... 4,769 5,174 (948) 4,226 1972 5 - 40 Green Tree Place..................... 5,686 6,225 (1,119) 5,106 1984 5 - 40 MacArthur Ridge...................... 10,946 12,077 (2,131) 9,946 1991 5 - 40 Lincoln on the Green................. 14,477 15,975 (2,782) 13,193 1988 5 - 40 Brentwood Downs...................... 11,517 12,710 (2,311) 10,399 1986 5 - 40 Shenandoah Ridge..................... 7,805 8,455 (1,628) 6,827 1982 5 - 40 Westborough Crossing................. 7,026 7,703 (1,370) 6,333 1984 5 - 40 Woodbridge at the Lake............... 6,829 7,474 (1,355) 6,119 1985 5 - 40 Lakepointe........................... 4,364 4,775 (879) 3,896 1986 5 - 40 The Mansion.......................... 7,241 7,935 (1,381) 6,554 1987 5 - 40 The Village.......................... 9,164 10,064 (1,825) 8,239 1989 5 - 40 Cypresswood Court.................... 6,116 6,693 (1,167) 5,526 1984 5 - 40 The Lodge at Timberglen.............. 9,278 10,103 (1,868) 8,235 1984 5 - 40 Calais Forest........................ 10,622 11,648 (2,058) 9,590 1987 5 - 40 The Fairways......................... 8,730 9,640 (1,629) 8,011 1992 5 - 40 Kirby Station........................ 12,654 13,802 (2,443) 11,359 1978 5 - 40 Belmere.............................. 9,397 10,248 (1,698) 8,550 1984 5 - 40 Williamsburg Village................. 5,254 5,777 (1,016) 4,761 1987 5 - 40 Fairways @ Royal Oak................. 8,299 9,113 (1,559) 7,554 1988 5 - 40 Tanglewood........................... 4,682 5,109 (860) 4,249 1980 5 - 40 Woods at Post House.................. 7,509 7,749 (1,817) 5,932 1995 5 - 40 Somerset............................. 4,988 5,465 (969) 4,496 1981 5 - 40 Highland Ridge....................... 4,810 5,292 (722) 4,570 1984 5 - 40 Spring Creek......................... 6,041 6,638 (910) 5,728 1984 5 - 40 St. Augustine........................ 8,501 11,359 (1,754) 9,605 1987 5 - 40 Cooper's Hawk........................ 8,379 9,233 (1,448) 7,785 1987 5 - 40 Marsh Oaks........................... 3,429 3,673 (630) 3,043 1986 5 - 40 Park at Hermitage.................... 16,438 17,962 (2,765) 15,197 1987 5 - 40 </TABLE> F-22
MID-AMERICA APARTMENT COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> GROSS AMOUNT CARRIED AT COST CAPITALIZED DECEMBER SUBSEQUENT TO 31, INITIAL COST ACQUISITION 1999(6) -------------------- ---------------- -------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND - ------------------------------------- ------------------------------- -------- --------- ----- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> Anatole.............................. Daytona Beach, FL $ 7,000 1,227 5,879 -- 676 1,227 The Savannahs........................ Melbourne, FL -- (5) 582 7,868 -- 1,551 582 Stassney Woods....................... Austin, TX $ 4,595 1,621 7,501 -- 1,537 1,621 Travis Station....................... Austin, TX $ 4,065 2,282 6,169 -- 1,058 2,282 Runaway Bay.......................... Mt. Pleasant, SC -- (4) 1,085 7,269 -- 849 1,085 The Township......................... Hampton, VA $ 10,800 1,509 8,189 -- 709 1,509 Lakeside............................. Jacksonville, FL -- (9) 1,431 12,883 288 2,456 1,719 Crosswinds........................... Jackson, MS -- (9) 1,535 13,826 -- 1,145 1,535 Sutton Place......................... Horn Lake, MS -- (9) 894 8,053 -- 977 894 Savannah Creek....................... Southaven, MS -- (9) 778 7,013 -- 609 778 Napa Valley.......................... Little Rock, AR -- (9) 960 8,642 -- 700 960 Altamonte Springs, Tiffany Oaks......................... FL -- (9) 1,024 9,219 -- 1,199 1,024 Lincoln on the Green II.............. Memphis, TN -- 0 6,999 -- 6,987 0 Howell Commons....................... Greenville, SC -- (9) 1,304 11,740 -- 672 1,304 Balcones Woods....................... Austin, TX $ 8,608 1,598 14,398 -- 1,635 1,598 Westside Creek I..................... Little Rock, AR -- (9) 616 5,559 -- 495 616 Fairways at Hartland................. Bowling Green, KY $ 4,552 1,038 9,342 -- 766 1,038 Woodhollow........................... Jacksonville, FL $ 9,784 1,686 15,179 -- 1,732 1,686 Hunters Ridge at Deerwood............ Jacksonville, FL -- (11) 1,533 13,835 -- 494 1,533 Austin Chase......................... Macon, GA -- (11) 1,409 12,687 -- (433) 1,409 Westside Creek II.................... Little Rock, AR $ 4,875 654 5,904 -- 237 654 Woodwinds............................ Aiken, SC $ 3,466 503 4,540 -- 389 503 Hermitage at Beechtree............... Cary, NC -- (9) 900 8,099 -- 851 900 Bradford Pointe (Sterling Ridge)..... Augusta, GA $ 4,760 772 6,949 -- 420 772 Fountain Lake........................ Brunswick, GA $ 2,929 502 4,551 -- 782 502 Hidden Lake I........................ Union City, GA $ 4,455 675 6,128 -- 348 675 Hidden Lake II....................... Union City, GA -- (9) 621 5,587 -- 224 621 High Ridge........................... Athens, GA -- (9) 884 7,958 -- 289 884 Paddock Club Columbia................ Columbia, SC -- (3) 1,840 16,560 -- 469 1,840 Paddock Club Huntsville.............. Huntsville, AL -- 830 7,470 -- 403 830 Paddock Club Jacksonville I.......... Jacksonville, FL -- (10) 963 8,739 -- 273 963 Paddock Club Lakeland................ Lakeland, FL -- (10) 2,254 20,452 -- 974 2,254 Paddock Club Tallahassee I........... Tallahassee, FL -- (3) 950 8,550 -- 270 950 Paddock Park I....................... Ocala, FL $ 6,805 901 8,177 -- 544 901 Paddock Park II...................... Ocala, FL -- (3) 1,383 12,547 -- 509 1,383 Park Place........................... Spartanburg, SC -- (9) 723 6,504 -- 812 723 Park Walk............................ College Park, GA $ 3,343 536 4,859 -- 281 536 River Trace I........................ Memphis, TN $ 5,648 881 7,996 -- 703 881 River Trace II....................... Memphis, TN $ 5,583 741 6,727 -- 303 741 Riverwind............................ Columbus, GA -- 108 979 -- 223 108 Southland Station I.................. Warner Robins, GA -- (9) 777 6,992 -- 571 777 Southland Station II................. Warner Robins, GA -- 693 6,292 -- 229 693 Three Oaks I......................... Valdosta, GA $ 2,801 462 4,188 -- 494 462 Three Oaks II........................ Valdosta, GA $ 2,885 460 4,170 -- 227 460 The Vistas........................... Macon, GA $ 4,015 595 5,403 -- 399 595 Westbury Creek....................... Augusta, GA $ 3,121 400 3,626 -- 373 400 Westbury Springs..................... Lilburn, GA $ 4,186 665 6,038 -- 441 665 Whispering Pines I................... LaGrange, GA $ 2,701 454 4,116 -- 343 454 Whispering Pines II.................. LaGrange, GA $ 2,482 370 3,354 -- 248 370 Whisperwood.......................... Columbus, GA -- (2) 2,330 20,970 -- 1,686 2,330 Whisperwood Spa I.................... Columbus, GA -- (2) 1,510 13,590 -- 474 1,510 Wildwood I........................... Thomasville, GA $ 2,034 438 3,971 -- 240 438 Wildwood II.......................... Thomasville, GA $ 1,985 372 3,372 -- 155 372 Willow Creek......................... Columbus, GA -- (9) 614 5,523 -- 678 614 LIFE USED TO COMPUTE DEPRECIATION BUILDING IN LATEST AND ACCUMULATED DATE OF INCOME PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7) - ------------------------------------- --------- --------- ----------- --------- ------------ ------------ Anatole.............................. 6,555 7,782 (1,145) 6,637 1986 5 - 40 The Savannahs........................ 9,419 10,001 (1,549) 8,452 1990 5 - 40 Stassney Woods....................... 9,038 10,659 (1,514) 9,145 1985 5 - 40 Travis Station....................... 7,227 9,509 (1,226) 8,283 1987 5 - 40 Runaway Bay.......................... 8,118 9,203 (1,345) 7,858 1988 5 - 40 The Township......................... 8,898 10,407 (1,366) 9,041 1987 5 - 40 Lakeside............................. 15,339 17,058 (2,418) 14,640 1985 5 - 40 Crosswinds........................... 14,971 16,506 (1,917) 14,589 1988/1990 5 - 40 Sutton Place......................... 9,030 9,924 (1,152) 8,772 1991 5 - 40 Savannah Creek....................... 7,622 8,400 (973) 7,427 1989 5 - 40 Napa Valley.......................... 9,342 10,302 (1,083) 9,219 1984 5 - 40 Tiffany Oaks......................... 10,418 11,442 (1,140) 10,302 1985 5 - 40 Lincoln on the Green II.............. 13,986 13,986 (1,269) 12,717 1997 5 - 40 Howell Commons....................... 12,412 13,716 (1,302) 12,414 1986/1988 5 - 40 Balcones Woods....................... 16,033 17,631 (1,653) 15,978 1983 5 - 40 Westside Creek I..................... 6,054 6,670 (612) 6,058 1984 5 - 40 Fairways at Hartland................. 10,108 11,146 (1,024) 10,122 1996 5 - 40 Woodhollow........................... 16,911 18,597 (1,752) 16,845 1986 5 - 40 Hunters Ridge at Deerwood............ 14,329 15,862 (636) 15,226 1987 5 - 40 Austin Chase......................... 12,254 13,663 (501) 13,162 1996 5 - 40 Westside Creek II.................... 6,141 6,795 (502) 6,293 1986 5 - 40 Woodwinds............................ 4,929 5,432 (398) 5,034 1988 5 - 40 Hermitage at Beechtree............... 8,950 9,850 (675) 9,175 1988 5 - 40 Bradford Pointe (Sterling Ridge)..... 7,369 8,141 (557) 7,584 1986 5 - 40 Fountain Lake........................ 5,333 5,835 (426) 5,409 1983 5 - 40 Hidden Lake I........................ 6,476 7,151 (486) 6,665 1985 5 - 40 Hidden Lake II....................... 5,811 6,432 (432) 6,000 1987 5 - 40 High Ridge........................... 8,247 9,131 (611) 8,520 1987 5 - 40 Paddock Club Columbia................ 17,029 18,869 (1,241) 17,628 1989/1995 5 - 40 Paddock Club Huntsville.............. 7,873 8,703 (577) 8,126 1989 5 - 40 Paddock Club Jacksonville I.......... 9,012 9,975 (672) 9,303 1989 5 - 40 Paddock Club Lakeland................ 21,426 23,680 (1,606) 22,074 1988/1990 5 - 40 Paddock Club Tallahassee I........... 8,820 9,770 (659) 9,111 1990 5 - 40 Paddock Park I....................... 8,721 9,622 (674) 8,948 1986 5 - 40 Paddock Park II...................... 13,056 14,439 (991) 13,448 1988 5 - 40 Park Place........................... 7,316 8,039 (550) 7,489 1987 5 - 40 Park Walk............................ 5,140 5,676 (386) 5,290 1985 5 - 40 River Trace I........................ 8,699 9,580 (654) 8,926 1981 5 - 40 River Trace II....................... 7,030 7,771 (536) 7,235 1985 5 - 40 Riverwind............................ 1,202 1,310 (89) 1,221 1983 5 - 40 Southland Station I.................. 7,563 8,340 (565) 7,775 1987 5 - 40 Southland Station II................. 6,521 7,214 (481) 6,733 1990 5 - 40 Three Oaks I......................... 4,682 5,144 (354) 4,790 1983 5 - 40 Three Oaks II........................ 4,397 4,857 (334) 4,523 1984 5 - 40 The Vistas........................... 5,802 6,397 (427) 5,970 1985 5 - 40 Westbury Creek....................... 3,999 4,399 (310) 4,089 1984 5 - 40 Westbury Springs..................... 6,479 7,144 (474) 6,670 1983 5 - 40 Whispering Pines I................... 4,459 4,913 (342) 4,571 1982 5 - 40 Whispering Pines II.................. 3,602 3,972 (268) 3,704 1984 5 - 40 Whisperwood.......................... 22,656 24,986 (1,645) 23,341 1981/1986 5 - 40 Whisperwood Spa I.................... 14,064 15,574 (1,054) 14,520 1988 5 - 40 Wildwood I........................... 4,211 4,649 (311) 4,338 1980 5 - 40 Wildwood II.......................... 3,527 3,899 (266) 3,633 1984 5 - 40 Willow Creek......................... 6,201 6,815 (473) 6,342 1971/1977 5 - 40 </TABLE> F-23
MID-AMERICA APARTMENT COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> GROSS AMOUNT CARRIED AT DECEMBER COST CAPITALIZED 31, SUBSEQUENT TO INITIAL COST ACQUISITION 1999(6) -------------------- ---------------- -------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND - ------------------------------------- ------------------------------- -------- --------- ----- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> Windridge............................ Chattanooga, TN $ 5,391 817 7,416 -- 344 817 2000 Wynnton......................... Columbus, GA -- 192 1,741 -- 197 192 Paddock Club Tallahassee II.......... Tallahassee, FL $ 4,691 530 4,805 -- 128 530 Paddock Club Jacksonville II......... Jacksonville, FL -- (10) 689 6,255 -- 56 689 Paddock Club Florence................ Florence, KY $ 9,620 1,209 10,969 -- 362 1,209 Paddock Club Greenville.............. Greenville, SC -- 1,200 10,800 -- 315 1,200 Paddock Club Brandon I............... Brandon, FL -- (3) 2,100 18,900 -- 134 2,100 Terraces at Towne Lake I............. Woodstock, GA $ 15,132 1,689 15,321 -- 51 1,689 Paddock Club Jacksonville III........ Jacksonville, FL -- (10) 642 5,756 -- 122 642 Paddock Club Huntsville II........... Huntsville, AL -- 909 10,152 -- 56 909 Paddock Club Mandarin................ Jacksonville, FL -- (3) 1,410 14,967 -- 147 1,410 Enclave at Whisperwood............... Columbus, GA -- (2) 450 8,162 -- 53 450 Terraces at Fieldstone............... Conyers, GA -- (3) 1,284 15,819 -- -- 1,284 Abbington Place at SouthPoint........ Huntsville, AL -- (3) 524 4,724 -- 741 524 Eagle Ridge.......................... Birmingham, AL $ 6,349 851 7,667 -- 636 851 Georgetown Grove..................... Savannah, GA $ 10,460 1,288 11,579 -- 210 1,288 Courtyards at Campbell............... Dallas, TX -- (2) 988 8,893 -- 680 988 Deer Run............................. Dallas, TX -- (2) 1,252 11,271 -- 1,163 1,252 Highwood............................. Plano, TX -- 864 7,783 -- 755 864 Links at Carrollwood................. Tampa, FL $ 5,704 817 7,355 -- 1,093 817 St. Simons Island, Island Retreat....................... GA $ 3,388 510 4,594 -- 435 510 ------------ -------- --------- ----- -------- -------- Total Completed Communities.......... $262,801 $110,642 $ 997,152 $ 708 $119,454 $111,350 ------------ -------- --------- ----- -------- -------- Construction of units in lease-up: - ------------------------------------- Reserve at Dexter Lake............... Memphis, TN -- (2) 1,260 16,043 -- 1,260 Paddock Club Gainesville............. Gainesville, FL -- (2) 1,800 15,879 -- 1,800 Terraces at Towne Lake II............ Woodstock, GA -- (3) 1,331 11,918 -- 1,331 Paddock Club Panama City............. Panama City, FL -- (2) 898 14,276 -- 898 Paddock Club Murfreesboro............ Murfreesboro, TN -- (2) 915 14,774 -- 915 Paddock Club Brandon II.............. Brandon, FL -- (3) 796 7,211 -- 796 Paddock Club Montgomery.............. Montgomery, AL -- (3) 965 13,190 -- 965 Grand Reserve Lexington.............. Lexington, KY -- (2) 392 18,849 -- 392 Kenwood Park......................... Katy, TX -- 109 12,275 -- 109 ------------ -------- --------- ----- -------- -------- Total Construction of units in lease-up........................... $ -- $ 8,466 $ 124,415 $-- $ -- $ 8,466 Construction of units in process: - ------------------------------------- Reserve at Dexter Lake II............ Memphis, TN -- -- -- 7,583 -- Grand View Nashville................. Nashville, TN -- (2) -- -- 11,257 -- ------------ -------- --------- ----- -------- -------- Total Construction of Units in process............................ $ -- $ -- $ -- $-- $ 18,840 $ -- ------------ -------- --------- ----- -------- -------- Total Apartments..................... $262,801 $119,108 $1,121,567 $ 708 $138,294 $119,816 ------------ -------- --------- ----- -------- -------- Land held for future developments.... Various -- 1,710 -- -- -- 1,710 Commercial properties................ Various -- 300 2,769 -- 4,229 300 ------------ -------- --------- ----- -------- -------- Total other.......................... $ -- $ 2,010 $ 2,769 $-- $ 4,229 $ 2,010 ------------ -------- --------- ----- -------- -------- Total Real Estate Assets............. $262,801 $121,118 $1,124,336 $ 708 $142,523 $121,826 ============ ======== ========= ===== ======== ======== LIFE USED TO COMPUTE DEPRECIATION BUILDING IN LATEST AND ACCUMULATED DATE OF INCOME PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7) - ------------------------------------- --------- --------- ----------- --------- ------------ ------------ Windridge............................ 7,760 8,577 (574) 8,003 1984 5 - 40 2000 Wynnton......................... 1,938 2,130 (148) 1,982 1983 5 - 40 Paddock Club Tallahassee II.......... 4,933 5,463 (366) 5,097 1995 5 - 40 Paddock Club Jacksonville II......... 6,311 7,000 (465) 6,535 1996 5 - 40 Paddock Club Florence................ 11,331 12,540 (839) 11,701 1994 5 - 40 Paddock Club Greenville.............. 11,115 12,315 (806) 11,509 1996 5 - 40 Paddock Club Brandon I............... 19,034 21,134 (1,392) 19,742 1997 5 - 40 Terraces at Towne Lake I............. 15,372 17,061 (1,127) 15,934 1997 5 - 40 Paddock Club Jacksonville III........ 5,878 6,520 (312) 6,208 1997 5 - 40 Paddock Club Huntsville II........... 10,208 11,117 (411) 10,706 1998 5 - 40 Paddock Club Mandarin................ 15,114 16,524 (612) 15,912 1998 5 - 40 Enclave at Whisperwood............... 8,215 8,665 (329) 8,336 1998 5 - 40 Terraces at Fieldstone............... 15,819 17,103 (501) 16,602 1998 5 - 40 Abbington Place at SouthPoint........ 5,465 5,989 (354) 5,635 1987 5 - 40 Eagle Ridge.......................... 8,303 9,154 (468) 8,686 1986 5 - 40 Georgetown Grove..................... 11,789 13,077 (650) 12,427 1997 5 - 40 Courtyards at Campbell............... 9,573 10,561 (458) 10,103 1986 5 - 40 Deer Run............................. 12,434 13,686 (582) 13,104 1985 5 - 40 Highwood............................. 8,538 9,402 (407) 8,995 1983 5 - 40 Links at Carrollwood................. 8,448 9,265 (459) 8,806 1980 5 - 40 Island Retreat....................... 5,029 5,539 (177) 5,362 1978 5 - 40 --------- --------- ----------- --------- Total Completed Communities.......... $1,116,606 $1,227,960 $(145,160) $1,082,800 --------- --------- ----------- --------- Construction of units in lease-up: - ------------------------------------- Reserve at Dexter Lake............... 16,043 17,303 (240) 17,063 1999 5 - 40 Paddock Club Gainesville............. 15,879 17,679 (420) 17,259 1999 5 - 40 Terraces at Towne Lake II............ 11,918 13,249 (289) 12,960 1999 5 - 40 Paddock Club Panama City............. 14,276 15,174 (364) 14,810 1999 5 - 40 Paddock Club Murfreesboro............ 14,774 15,689 (138) 15,551 1999 5 - 40 Paddock Club Brandon II.............. 7,211 8,007 -- 8,007 1999 5 - 40 Paddock Club Montgomery.............. 13,190 14,155 -- 14,155 1999 5 - 40 Grand Reserve Lexington.............. 18,849 19,241 -- 19,241 -- N/A Kenwood Park......................... 12,275 12,384 -- 12,384 -- N/A --------- --------- ----------- --------- Total Construction of units in lease-up........................... $ 124,415 $ 132,881 $ (1,451) $ 131,430 Construction of units in process: - ------------------------------------- Reserve at Dexter Lake II............ 7,583 7,583 -- 7,583 -- N/A Grand View Nashville................. 11,257 11,257 -- 11,257 -- N/A --------- --------- ----------- --------- Total Construction of Units in process............................ $ 18,840 $ 18,840 $ -- $ 18,840 --------- --------- ----------- --------- Total Apartments..................... $1,259,861 $1,379,681 $(146,611) $1,233,070 --------- --------- ----------- --------- Land held for future developments.... -- 1,710 -- 1,710 N/A N/A Commercial properties................ 6,998 7,298 (2,081) 5,217 Various 5 - 40 --------- --------- ----------- --------- Total other.......................... $ 6,998 $ 9,008 $ (2,081) $ 6,927 --------- --------- ----------- --------- Total Real Estate Assets............. $1,266,859 $1,388,689 $(148,692) $1,239,997 ========= ========= =========== ========= </TABLE> F-24
MID-AMERICA APARTMENT COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> GROSS AMOUNT CARRIED AT COST CAPITALIZED DECEMBER SUBSEQUENT TO 31, INITIAL COST ACQUISITION 1999(6) -------------------- ---------------- -------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND - ------------------------------------- ------------------------------- -------- --------- ----- -------- -------- <S> <C> <C> LIFE USED TO COMPUTE DEPRECIATION BUILDING IN LATEST AND ACCUMULATED DATE OF INCOME PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7) - ------------------------------------- --------- --------- ----------- --------- ------------ ------------ </TABLE> Note: This schedule excludes the dispositions. (1) These ten properties are encumbered by a $43.4 million note payable with an interest rate of 8.65% at December 31, 1999, maturing July 1, 2001. (2) Encumbered by the AmSouth Credit Line, with an outstanding balance of $60.2 million at December 31, 1999 and a variable interest rate of 7.15%. (3) Encumbered by the FNMA Credit Line, with an outstanding balance of $113.2 million at December 31, 1999 and a variable interest rate of 6.28%. (4) These three properties are encumbered by a $9.86 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 6.09%. (5) These three properties are encumbered by a $16.1 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 5.75%. (6) The aggregate cost for Federal income tax purposes was approximately $1,015 million at December 31, 1999. The total gross amount of real estate assets for GAAP purposes exceeds the aggregate cost for Federal income tax purposes, principally due to purchase accounting adjustments recorded under generally accepted accounting principles. (7) Depreciation is on a straight line basis over the estimated useful asset life which ranges from 8 to 40 years for land improvements and buildings and 5 years for furniture, fixtures and equipment. (8) These 3 properties, and one commercial building, are encumbered by a $35.3 million mortgage with a maturity of April 1, 2005. (9) These 26 communities are encumbered by a $142 million loan with a maturity of March 3, 2003 and an average interest rate of 6.376%. (10) These five communities are encumbered by a $47.5 million note payable with a maturity of December 15, 2004 and an interest rate of 7.04%. (11) These two properties are encumbered by a $14 million mortgage securing a tax-exempt bond amortizing over 25 years with an average interest rate of 5.281%. F-25
MID-AMERICA APARTMENT COMMUNITIES, INC. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION A summary of activity for real estate investments and accumulated depreciation is as follows: YEAR ENDED DECEMBER 31, ---------------------------------------- 1999 1998 1997 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Real estate investments: Balance at beginning of year.... $ 1,434,733 $ 1,211,693 $ 641,893 Acquisitions.................... -- 91,895 140,858 Improvements and development.... 105,940 136,933 36,298 Assets acquired from business combination................... -- -- 392,644 Disposition of real estate assets........................ (152,015) (5,788) -- Investment in and advances to real estate joint venture....................... 8,085 -- -- ------------ ------------ ------------ Balance at end of year..... $ 1,396,743 $ 1,434,733 $ 1,211,693 ============ ============ ============ Accumulated depreciation: Balance at beginning of year.... $ 117,773 $ 76,989 $ 49,558 Depreciation.................... 48,687 41,556 27,431 Disposition of real estate assets........................ (19,849) (772) -- ------------ ------------ ------------ Balance at end of year..... $ 146,611 $ 117,773 $ 76,989 ============ ============ ============ The Company's consolidated balance sheet at December 31, 1999 includes accumulated depreciation of $2,081 in the caption "Commercial properties, net". See accompanying independent auditors' report. F-26